CUNO INCORPORATED
NON-EMPLOYEE DIRECTORS' STOCK OPTION PLAN
Effective July ___, 1996
CUNO INCORPORATED
NON-EMPLOYEE DIRECTORS' STOCK OPTION PLAN
TABLE OF CONTENTS
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ARTICLE I
ESTABLISHMENT......................................................... 1
1.1 Purpose.................................................... 1
ARTICLE II
DEFINITIONS ......................................................... 1
2.1 "Affiliate"................................................ 1
2.2 "Agreement" or "Award Agreement"........................... 1
2.3 "Award".................................................... 1
2.4 "Beneficiary".............................................. 1
2.5 "Board of Directors" or "Board"............................ 1
2.6 "Change in Control"........................................ 2
2.7 "Code" or "Internal Revenue Code".......................... 3
2.8 "Commission"............................................... 3
2.9 "Committee"................................................ 3
2.10 "Common Stock"............................................. 3
2.11 "Company".................................................. 3
2.12 "Conversion Election" or "Election"........................ 3
2.13 "Deferred Stock"........................................... 4
2.14 "Director"................................................. 4
2.15 "Disability"............................................... 4
2.16 "Effective Date"........................................... 4
2.17 "Exchange Act"............................................. 4
2.18 "Fair Market Value"........................................ 4
2.19 "Grant Date"............................................... 4
2.20 "NASDAQ"................................................... 5
2.21 "Notice Date".............................................. 5
2.22 "Option" or "Stock Option"................................. 5
2.23 "Option Period"............................................ 5
2.24 "Option Price"............................................. 5
2.25 "Participant".............................................. 5
2.26 "Performance Shares"....................................... 5
2.27 "Plan"..................................................... 5
2.28 "Representative"........................................... 5
2.29 "Retainer"................................................. 6
2.30 "Rule 16b-3" or "Rule 16a-1(c)(3)"......................... 6
2.31 "Securities Act"........................................... 6
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2.32 "Valuation Date".......................................... 6
ARTICLE III
ADMINISTRATION ..................................................... 6
3.1 Committee Structure and Authority......................... 6
ARTICLE IV
STOCK SUBJECT TO PLAN............................................... 7
4.1 Number of Shares......................................... 7
4.2 Release of Shares........................................ 7
4.3 Restrictions on Shares................................... 7
4.4 Reasonable Efforts To Register........................... 8
4.5 Adjustments.............................................. 8
4.6 Limited Transfer During Offering......................... 8
ARTICLE V
OPTIONS............................................................. 9
5.1 Eligibility............................................... 9
5.2 Grant and Exercise........................................ 9
5.3 Terms and Conditions...................................... 9
5.4 Termination............................................... 11
ARTICLE VI
RETAINER ELECTION................................................... 11
6.1 Right to Elect............................................ 11
6.2 Election Procedures....................................... 11
ARTICLE VII
PERFORMANCE SHARES.................................................. 12
7.1 General................................................... 12
7.2 Price..................................................... 12
7.3 Performance Share Agreement............................... 12
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7.4 Performance Periods....................................... 12
7.5 Performance Goals......................................... 12
7.6 Earning of Performance Shares............................. 13
7.7 Termination or Service as.................................
7.8 Nontransferability........................................ 13
ARTICLE VIII
DEFERRED STOCK...................................................... 14
8.1 General................................................... 14
8.2 Terms and Conditions...................................... 14
ARTICLE IX
MISCELLANEOUS........................................................ 15
9.1 Amendments and Termination................................. 15
9.2 General Provisions......................................... 16
9.3 Special Provisions Regarding a Change in Control........... 17
9.7 Headings................................................... 18
9.8 Severability............................................... 18
9.9 Successors and Assigns..................................... 18
9.10 Entire Agreement........................................... 18
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CUNO INCORPORATED
NON-EMPLOYEE DIRECTORS' STOCK OPTION PLAN
ARTICLE I
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ESTABLISHMENT
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1.1 Purpose. The CUNO Incorporated Non-Employee Directors' Stock Option
Plan ("Plan") is hereby established by CUNO Incorporated ("Company"), effective
July 24, 1996 ("Effective Date"). The purpose of the Plan is to promote the
overall financial objectives of the Company and its stockholders by motivating
directors of the Company who are not employees, to further align the interests
of such directors with those of the stockholders of the Company and to achieve
long-term growth and performance of the Company. The Plan is adopted effective
as of July 24, 1996.
ARTICLE II
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DEFINITIONS
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For purposes of the Plan, the following terms are defined as set forth
below:
2.1 "Affiliate" means any individual, corporation, partnership, limited
liability company, association, joint-stock company, trust, unincorporated
association or other entity (other than the Company) that directly, or
indirectly through one or more intermediaries, controls, is controlled by, or is
under common control with, the Company, including, without limitation, any
member of an affiliated group of which the Company is a common parent
corporation as provided in Section 1504 of the Code.
2.2 "Agreement" or "Award Agreement" means, individually or collectively,
any agreement entered into pursuant to this Plan pursuant to which an Award is
granted to a Participant.
2.3 "Award" means any Stock Option, Performance Shares or Deferred Stock
granted pursuant to the Plan.
2.4 "Beneficiary" means the person, persons, trust or trusts which have
been designated by a Participant in his or her most recent written beneficiary
designation filed with the Committee to receive the benefit specified under the
Plan to the extent permitted. If there is no designated beneficiary, then the
term means the person or persons, trust or trusts entitled by will or the laws
of descent and distribution to receive such benefits.
2.5 "Board of Directors" or "Board" means the Board of Directors of the
Company.
2.6 "Change in Control" means
(a) The acquisition by any individual, entity or group (within the
meaning of Section 13(d)(3) or 14(d)(2) of the Exchange Act (a "Person") of
beneficial ownership (within the meaning of Rule 13d-3 promulgated under
the Exchange Act) of twenty percent (20%) or more of either (i) the then-
outstanding shares of common stock of the Company (the "Outstanding Company
Common Stock") or (ii) the combined voting power of the then-outstanding
voting securities of the Company entitled to vote generally in the election
of directors (the "Outstanding Company Voting Securities"); provided,
however, that for purposes of this subsection (a), the following
acquisitions shall not constitute a Change of Control: (i) any acquisition
directly from the Company, (ii) any acquisition by the Company, (iii) any
acquisition by any employee benefit plan (or related trust) sponsored or
maintained by the Company or any corporation controlled by the Company,
(iv) any acquisition by a lender to the Company pursuant to a debt
restructuring of the Company, or (v) any acquisition by any corporation
pursuant to a transaction which complies with clauses (i), (ii) and (iii)
of subsection (c) of this Section 2.6;
(b) Individuals who, as of the date hereof, constitute the Board (the
"Incumbent Board") cease for any reason to constitute at least a majority
of the Board; provided, however, that any individual becoming a director
subsequent to the date hereof whose election, or nomination for election by
the Company's shareholders, was approved by a vote of at least a majority
of the directors then comprising the Incumbent Board shall be considered as
though such individual were a member of the Incumbent Board, but excluding,
for this purpose, any such individual whose initial assumption of office
occurs as a result of an actual or threatened election contest with respect
to the election or removal of directors or other actual or threatened
solicitation of proxies or consents by or on behalf of a Person other than
the Board.
(c) Consummation of a reorganization, merger or consolidation or sale
or other disposition of all or substantially all of the assets of the
Company (a "Business Combination"), in each case, unless, following such
Business Combination, (i) all or substantially all of the individuals and
entities who were the beneficial owners, respectively, of the Outstanding
Company Common Stock and Outstanding Company Voting Securities immediately
prior to such Business Combination beneficially own, directly or
indirectly, more than twenty percent (20%) of, respectively, the then-
outstanding shares of common stock and the combined voting power of the
then outstanding voting securities entitled to vote generally in the
election of directors, as the case may be, of the corporation resulting
from such Business Combination (including, without limitation, a
corporation which as a result of such transaction owns the Company or all
or substantially all of the Company's assets either directly or through one
or more subsidiaries) in substantially the same proportions as their
ownership, immediately prior to such Business Combination of the
Outstanding Company Common Stock and Outstanding Company Voting Securities,
as the case may
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be, (ii) no Person (excluding any corporation resulting from such Business
Combination or any employee benefit plan (or related trust) of the Company
or such corporation resulting from such Business Combination) beneficially
owns, directly or indirectly, twenty percent (20%) or more of,
respectively, the then outstanding shares of common stock of the
corporation resulting from such Business Combination, or the combined
voting power of the then outstanding voting securities of such corporation
except to the extent that such ownership existed prior to the Business
Combination and (iii) at least a majority of the members of the board of
directors of the corporation resulting from such Business Combination were
members of the Incumbent Board at the time of the execution of the initial
agreement, or of the action of the Board, providing for such Business
Combination; or
(d) Approval by the shareholders of the Company of a complete
liquidation or dissolution of the Company.
2.7 "Code" or "Internal Revenue Code" means the Internal Revenue Code of
1986, as amended, Treasury Regulations (including proposed regulations)
thereunder and any subsequent Internal Revenue Code.
2.8 "Commission" means the Securities and Exchange Commission or any
successor agency.
2.9 "Committee" means the person or persons appointed by the Board of
Directors to administer the Plan, as further described in the Plan.
2.10 "Common Stock" means the shares of the common stock, par value $.001
per share, of the Company, whether presently or hereafter issued, and any other
stock or security resulting from adjustment thereof as described hereinafter or
the common stock of any successor to the Company which is designated for the
purpose of the Plan.
2.11 "Company" means CUNO Incorporated, a Delaware corporation, and
includes any successor or assignee corporation or corporations into which the
Company may be merged, changed or consolidated; any corporation for whose
securities all or substantially all of the securities of the Company shall be
exchanged; and any assignee of or successor to substantially all of the assets
of the Company.
2.12 "Conversion Election" or "Election" means an election by a Director to
(a) either receive all of his or her Retainer on a current basis or (b) to
reduce his or her Retainer by an amount or percentage specified in the Election
and to receive a right to Deferred Stock. The Committee may require that an
Election shall be effective only with respect to a Notice Date that is at least
six months prior to the transaction to which the Election relates and is
irrevocable for such period as the Committee may determine.
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2.13 "Deferred Stock" means an award to receive Commmon Stock at the end of
a specified period in exchange for a Participant's reduction of the Retainer
otherwise payable to the Participant.
2.14 "Director" means each and any director who serves on the Board and who
is not an officer or employee of the Company or any of its Affiliates.
2.15 "Disability" means a mental or physical illness that renders a
Participant totally and permanently incapable of performing the Participant's
duties for the Company or an Affiliate. Notwithstanding the foregoing, a
Disability shall not qualify under the Plan if it is the result of (i) a
willfully self-inflicted injury or willfully self-induced sickness; or (ii) an
injury or disease contracted, suffered, or incurred, while participating in a
criminal offense. The determination of Disability shall be made by the
Committee. The determination of Disability for purposes of the Plan shall not be
construed to be an admission of disability for any other purpose.
2.16 "Effective Date" means July 24, 1996.
2.17 "Exchange Act" means the Securities Exchange Act of 1934, as amended,
and the rules and regulations promulgated thereunder.
2.18 "Fair Market Value" means the value determined on the basis of the
good faith determination of the Committee, without regard to whether the Common
Stock is restricted or represents a minority interest, pursuant to the
applicable method described below:
(a) if the Common Stock is listed on a national securities exchange or
quoted on NASDAQ, the closing price of the Common Stock on the relevant
date (or, if such date is not a business day or a day on which quotations
are reported, then on the immediately preceding date on which quotations
were reported), as reported by the principal national exchange on which
such shares are traded (in the case of an exchange) or by NASDAQ, as the
case may be;
(b) if the Common Stock is not listed on a national securities
exchange or quoted on NASDAQ, but is actively traded in the over-the-
counter market, the average of the closing bid and asked prices for the
Common Stock on the relevant date (or, if such date is not a business day
or a day on which quotations are reported, then on the immediately
preceding date on which quotations were reported), or the most recent
preceding date for which such quotations are reported; and
(c) if, on the relevant date, the Common Stock is not publicly traded
or reported as described in (a) or (b), the value determined in good faith
by the Committee.
2.19 "Grant Date" means the date as of which an Award is granted pursuant
to the Plan.
2.20 "NASDAQ" means The Nasdaq Stock Market, including the Nasdaq National
Market.
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2.21 "Notice Date" means the date established by the Committee as the
deadline for it to receive an Election or any other notification with respect to
an administrative matter in order to be effective under this Plan.
2.22 "Option" or "Stock Option" means the right to purchase the number of
shares of Common Stock specified by the Plan at a price and for a term fixed by
the Plan, and subject to such other limitations and restrictions as the Plan and
the Committee imposes.
2.23 "Option Period" means the period during which the Option shall be
exercisable in accordance with the Agreement and Article V.
2.24 "Option Price" means the price at which the Common Stock may be
purchased under an Option as provided in Section 5.3.
2.25 "Participant" means a Director to whom an Award has been granted under
the Plan, and in the event a Representative is appointed for a Participant or
another person becomes a Representative, then the term "Participant" shall mean
such appointed Representative. The term shall also include a trust for the
benefit of the Participant, the Participant's parents, spouse or descendants; a
partnership the interests in which are for the benefit of the Participant, the
Participant's parents, spouse or descendants; or a custodian under a uniform
gifts to minors act or similar statute for the benefit of the Participant's
descendants, to the extent permitted by the Committee and not inconsistent with
an application of Rule 16b-3. Notwithstanding the foregoing, the term
"Termination of Directorship" shall mean the Termination of Directorship of the
Director.
2.26 "Performance Shares" means an Award granted under Article VII.
2.27 "Plan" means CUNO Incorporated Non-Employee Directors' Stock Incentive
Plan, as herein set forth and as may be amended from time to time.
2.28 "Representative" means (a) the person or entity acting as the executor
or administrator of a Participant's estate pursuant to the last will and
testament of a Participant or pursuant to the laws of the jurisdiction in which
the Participant had the Participant's primary residence at the date of the
Participant's death; (b) the person or entity acting as the guardian or
temporary guardian of a Participant; (c) the person or entity which is the
Beneficiary of the Participant upon or following the Participant's death; or (d)
any person to whom an Option has been permissibly transferred by the Committee
or by operation of law; provided that only one of the foregoing shall be the
Representative at any point in time as determined under applicable law and
recognized by the Committee.
2.29 "Retainer" means the retainer provided to the Participant for services
rendered as a Director, including service on a committee or attendance at
meetings, but not the reimbursement of expenses, in his or her capacity as a
Director.
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2.30 "Rule 16b-3" or "Rule 16a-1(c)(3)" mean Rule 16b-3 and Rule 16a-
1(c)(3), as promulgated under the Exchange Act, as amended from time to time, or
any successor thereto, in effect and applicable to the Plan and Participants.
2.31 "Securities Act" means the Securities Act of 1933, as amended, and the
rules and regulations promulgated thereunder.
2.32 "Valuation Date" means the date or dates designated by the Committee
for converting the Retainer to Deferred Stock pursuant to an Election.
In addition, certain other terms used herein have definitions given to them
in the first place in which they are used.
ARTICLE III
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ADMINISTRATION
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3.1 Committee Structure and Authority. The Plan shall be administered by
the Committee which, except as provided herein, shall be comprised of one or
more persons. The Committee shall be the Compensation Committee of the Board of
Directors, unless such committee does not exist or the Board establishes another
committee whose purpose is the administration of the Plan. In the absence of an
appointment, the Board shall be the Committee; provided that only those members
of the Compensation Committee of the Board who participate in the decision
relative to Options under the Plan shall be deemed to be part of the "Committee"
for purposes of the Plan. A majority of the Committee shall constitute a quorum
at any meeting thereof (including telephone conference) and the acts of a
majority of the members present, or acts approved in writing by a majority of
the entire Committee without a meeting, shall be the acts of the Committee for
purposes of the Plan. The Committee may authorize any one or more of its members
or an officer of the Company to execute and deliver documents on behalf of the
Committee. A member of the Committee shall not exercise any discretion
respecting himself or herself under the Plan. The Board shall have the authority
to remove, replace or fill any vacancy of any member of the Committee upon
notice to the Committee and the affected member. Any member of the Committee may
resign upon notice to the Board. The Committee may allocate among one or more of
its members, or may delegate to one or more of its agents, such duties and
responsibilities as it determines.
The Committee shall have the authority, subject to (i) the terms of the
Plan and (ii) the limitations of Rule 16b-3(c)(2)(ii), to adopt, alter and
repeal such administrative rules, guidelines and practices governing the Plan as
it shall, from time to time, deem advisable, to interpret the terms and
provisions of the Plan and any Option issued under the Plan and to otherwise
supervise the administration of the Plan. The
6
Committee's policies and procedures may differ with respect to Awards granted at
different times or to different Participants.
Any determination made by the Committee pursuant to the provisions of the
Plan shall be made in its sole discretion. All decisions made by the Committee
pursuant to the provisions of the Plan shall be final and binding on all
persons, including the Company and Participants. Any determination shall not be
subject to de novo review if challenged in court.
ARTICLE IV
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STOCK SUBJECT TO PLAN
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4.1 Number of Shares. Subject to the adjustment under Section 4.5, the
total number of shares of Common Stock reserved and available for issuance
pursuant to Awards under the Plan shall be 200,000 shares of Common Stock
authorized for issuance on the Effective Date, plus any unused Shares under, or
shares allocated by the Committee from, the Company's 1996 Stock Incentive Plan.
Such shares may consist, in whole or in part, of authorized and unissued shares
or treasury shares.
4.2 Release of Shares. The Committee shall have full authority to
determine the number of shares of Common Stock available for Awards, and in its
discretion may include (without limitation) as available for distribution any
shares of Common Stock that have ceased to be subject to Awards, any shares of
Common Stock subject to any Awards that are forfeited, any Awards that otherwise
terminate without issuance of shares of Common Stock being made to the
Participant, or any shares (whether or not restricted) of Common Stock that are
received by the Company in connection with the exercise of an Award, including
the satisfaction of any tax liability or the satisfaction of a tax withholding
obligation. If any shares could not again be available for Awards to a
particular Participant under applicable law, such shares shall be available
exclusively for Awards to Participants who are not subject to such limitations.
4.3 Restrictions on Shares. Shares of Common Stock issued upon exercise of
an Award shall be subject to the terms and conditions specified herein and to
such other terms, conditions and restrictions as the Committee in its discretion
may determine or provide in the Agreement. The Company shall not be required to
issue or deliver any certificates for shares of Common Stock, cash or other
property prior to (i) the listing of such shares on any stock exchange, NASDAQ
or other public market on which the Common Stock may then be listed (or
regularly traded), (ii) the completion of any registration or qualification of
such shares under federal or state law, or any ruling or regulation of any
government body which the Committee determines to be necessary or advisable, and
(iii) the satisfaction of any applicable withholding obligation in order for the
Company or an Affiliate to obtain a deduction with respect to an Award. The
Company may cause any certificate for any share of Common Stock to be delivered
to be properly marked with a legend or other notation reflecting the limitations
on transfer of such Common Stock as provided in the Plan or as the Committee may
otherwise require. The Committee may require any person
7
receiving Common Stock to make such representations and furnish such information
as it may consider appropriate in connection with the issuance or delivery of
the shares of Common Stock in compliance with applicable law or otherwise.
Fractional shares shall not be delivered, but shall be rounded to the next lower
whole number of shares.
4.4 Reasonable Efforts To Register. The Company will register under the
Securities Act the Common Stock delivered or deliverable pursuant to Awards on
Commission Form S-8 if available to the Company for this purpose (or any
successor or alternate form that is substantially similar to that form to the
extent available to effect such registration), in accordance with the rules and
regulations governing such forms, as soon as such forms are available for
registration to the Company for this purpose. The Company will use its
reasonable efforts to cause the registration statement to become effective as
soon as possible and will file such supplements and amendments to the
registration statement as may be necessary to keep the registration statement in
effect until the earliest of (a) one year following the expiration of the
relevant period of the last Award outstanding, (b) the date the Company is no
longer a reporting company under the Exchange Act and (c) the date all
Participants have disposed of all shares delivered pursuant to any Award. The
Company may delay the foregoing obligation if the Committee reasonably
determines that any such registration would materially and adversely affect the
Company's interests or if there is no material benefit to Participants.
4.5 Adjustments. In the event of a stock dividend, stock split,
combination or exchange of shares, recapitalization or other change in the
capital structure of the Company, corporate separation or division of the
Company (including, but not limited to, a split-up, spin-off, split-off or
distribution to Company stockholders other than a normal cash dividend), sale by
the Company of all or a substantial portion of its assets (measured on either a
stand-alone or consolidated basis), reorganization, rights offering, a partial
or complete liquidation, or any other corporate transaction, Company stock
offering or event involving the Company and having an effect similar to any of
the foregoing, then the Committee may adjust or substitute, as the case may be,
the number of shares of Common Stock available for Awards under the Plan, the
number of shares of Common Stock covered by outstanding Awards, the exercise
price per share of outstanding Options, and any other characteristics or terms
of the Awards as the Committee shall deem necessary or appropriate to reflect
equitably the effects of such changes to the Participants; provided, however,
that any fractional shares resulting from such adjustment shall be eliminated by
rounding to the next lower whole number of shares with appropriate payment for
such fractional share as shall reasonably be determined by the Committee.
4.6 Limited Transfer During Offering. In the event there is an effective
registration statement under the Securities Act pursuant to which shares of
Common Stock shall be offered for sale in an underwritten offering, a
Participant shall not, during the period requested by the underwriters managing
the registered public offering, effect any public sale or distribution of shares
received directly or indirectly pursuant to an Award.
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ARTICLE V
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OPTIONS
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5.1 Eligibility. Each Director shall be granted Options to purchase
shares of Common Stock as provided herein.
5.2 Grant and Exercise. Each person who is elected as a Director shall
become a Participant and shall, on his or her date of initial election and on
each subsequent annual stockholders' meeting (or such other annual date as
selected by the Committee) for as long as such person remains a Director,
without further action by the Board or the Committee, be granted an Option to
purchase 1,000 shares of Common Stock. If any Director is required to retire
pursuant to the policies of the Board during the 12-month period beginning on
any Grant Date, or if the Director has notified the Board that he or she intends
to resign for any reason during the 12-month period beginning on any Grant Date,
said Director shall instead be granted on the relevant Grant Date an Option to
purchase the number of shares of Common Stock equal to (i) 1,000 multiplied by
(ii) a fraction, the numerator of which is the number of full calendar months
the Director will serve during the period beginning on the Grant Date and ending
on the Director's last date of service and the denominator of which is 12. If
after 1996, a Director is appointed to the Board effective on any date other
than the date of the annual stockholders' meeting, said Director shall
automatically be granted on the Grant Date he or she joined the Board an Option
to purchase the number of shares of Common Stock equal to (i) 1,000, multiplied
by (ii) a fraction, the numerator of which is the number of full months such
Director will serve on the Board during the period beginning on the date he or
she joins the Board and ending on the date of the next following annual
stockholders' meeting and the denominator of which is 12. If the number of
shares of Common Stock available to grant under the Plan on a scheduled date of
grant is insufficient to make all automatic grants required to be made pursuant
to the Plan on such date, then each eligible Director shall receive an Option to
purchase a pro rata number of the remaining shares of Common Stock available
under the Plan; provided further, however, that if such proration results in
fractional shares of Common Stock, then such Option shall be rounded down to the
nearest number of whole shares of Common Stock. If there is no whole number of
shares remaining to be granted, then no grants shall be made under the Plan.
Each Option granted under the Plan shall be evidenced by an Agreement, in a form
approved by the Committee, which shall embody the terms and conditions of such
Option and which shall be subject to the express terms and conditions set forth
in the Plan. Such Agreement shall become effective upon execution by the
Participant.
5.3 Terms and Conditions. Options shall be subject to such terms and
conditions as shall be determined by the Committee, including in each case the
following:
(a) Option Period. The Option Period of each Option shall be ten (10)
years unless otherwise provided by the Committee.
(b) Option Price. The Option Price per share of the Common Stock
purchasable under an Option shall be the Fair Market Value as of the Grant
Date.
(c) Exercisability. Unless otherwise specified in an Agreement, and
subject to the provisions of Section 9.3, Options granted thereafter shall
become exercisable on the first anniversary of the Grant Date. An Option
only shall be exercisable during the Option Period.
(d) Method of Exercise. Subject to the provisions of this Article V,
a Participant may exercise Stock Options, in whole or in part, at any time
during the Option Period by the Participant's giving written notice of
exercise on a form provided by the Committee (if available) to the Company
specifying the number of shares of Common Stock subject to the Stock Option
to be purchased. Except when waived by the Committee, such notice shall be
9
accompanied by payment in full of the purchase price by cash or check or
such other form of payment as the Company may accept. If approved by the
Committee (including approval at the time of exercise), payment in full or
in part may also be made (i) by delivering Common Stock already owned by
the Participant having a total Fair Market Value on the date of such
delivery equal to the Option Price; (ii) by the execution and delivery of a
note or other evidence of indebtedness (and any security agreement
thereunder) satisfactory to the Committee; (iii) by authorizing the Company
to retain shares of Common Stock which would otherwise be issuable upon
exercise of the Option having a total Fair Market Value on the date of
delivery equal to the Option Price; (iv) by the delivery of cash or the
extension of credit by a broker-dealer to whom the Participant has
submitted a notice of exercise or otherwise indicated an intent to exercise
an Option (in accordance with Part 220, Chapter II, Title 12 of the Code of
Federal Regulations, so-called "cashless" exercise); (v) by certifying
ownership of shares of Common Stock owned by the Participant to the
satisfaction of the Committee for later delivery to the Company as
specified by the Committee; or (vi) by any combination of the foregoing or
by any other method permitted by the Committee.
(e) Nontransferability of Options. Except as provided herein or in an
Agreement, no Option or interest therein shall be transferable by the
Participant other than by will or by the laws of descent and distribution,
and all Options shall be exercisable during the Participant's lifetime only
by the Participant. If and to the extent transferability is permitted by
Rule 16b-3 and except as otherwise provided herein or by an Agreement,
every Option granted hereunder shall be freely transferable, but only if
such transfer does not result in liability under Section 16 of the Exchange
Act to the Participant or other Participants and is consistent with
registration of the Option and sale of Common Stock on Form S-8 (or a
successor form) or the Committee's waiver of such condition.
5.4 Termination. Unless otherwise provided in an Agreement or determined
by the Committee, if a Participant ceases to be a Director due to death, any
unexpired and unexercised Stock Option held by such Participant shall thereafter
be fully exercisable for a period of one (1) year following the date of the
appointment of a Representative (or such other period or no period as the
Committee may specify) or until the expiration of the Option Period, whichever
period is the shorter. Unless otherwise provided in an Agreement or determined
by the Committee, if a Participant ceases to be a Director for any reason other
than death, any unexpired and unexercised Stock Option held by such Participant
shall thereafter be fully exercisable by the Participant for the period of one
(1) year (or such other period or no period as the Committee may specify)
immediately following the date the Participant ceases to be a Director or until
the expiration of the Option Period, whichever period is shorter, and the
Participant's death at any time following the date the Participant ceases to be
a Director shall not affect the foregoing.
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ARTICLE VI
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RETAINER ELECTION
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6.1 Right to Elect
(a) A Director may have all or a portion of his or her Retainer
credited as Deferred Stock on his or her behalf. A director who desires to
receive all or a portion of his or her Retainer in the form of Deferred
Stock shall file an Election by the relevant Notice Date pursuant to the
procedures of the Committee authorizing his or her Retainer otherwise
payable to be reduced and to be distributed in the form of Deferred Stock.
(b) As of the relevant Valuation Date determined by the Committee, the
number of shares of Deferred Stock shall equal (1) the value of Retainer
subject to the Conversion Election multiplied by 1.20, divided by (2) the
Fair Market Value per share of the Common Stock on the effective date of
the Conversion Election.
6.2 Election Procedures. If properly executed and received by the
Committee, an Election shall be effective only with respect to a Retainer paid
in the period to which the Election applies and only with respect to a Retainer
paid after the Notice Date for the Election. The Election shall be effective
only if received on or prior to the Notice Date to which the Election relates
and, shall only be revocable to the extent determined by the Committee. An
Election may be deemed to be continuing and applicable to calendar years after
the year in which the Election is filed, and may be continuing for such period
of time as determined by the Committee. The Committee may establish rules and
procedures governing when an Election will be effective and what Retainer will
be subject to the Election.
ARTICLE VII
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PERFORMANCE SHARES
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7.1 General. Subject to the terms and conditions described below,
Performance Shares may be granted to Participants at any time and from time to
time as determined by the Committee. Each Director on the date of the Company's
Initial public offering shall receive an Award for 5,000 Performance Shares; and
each Director shall thereafter receive an Award for 1,000 Performance Shares on
the date of every other (i.e., biannual) annual stockholders' meeting (or such
other annual date selected by the Committee) beginning with calendar year 1997
(or such later year as determined by the Committee).
7.2 Price. The purchase price for Performance Shares shall be zero unless
otherwise specified by the Committee.
7.3 Performance Share Agreement. Prior to the beginning of the applicable
Performance Period (as defined below), subject to the provisions of this Plan,
all the terms and conditions of an award of Performance Shares shall be
determined by the Committee in its discretion and shall be confirmed by a
Performance Share Award Agreement which shall be executed by the Company and the
Participant.
7.4 Performance Periods. Unless otherwise determined by the Committee,
any time period (the "Performance Period") relating to a Performance Share award
shall be at least two years in length.
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7.5 Performance Goals. Performance Shares shall be earned based upon the
financial performance of the Company or an operating group of the Company during
a Performance Period. Prior to the beginning of the applicable Performance
Period, the Committee will establish in writing targets for the Company (and/or
an operating group of the Company, if applicable) over the Performance Period
("Performance Goals"), which shall be based on any of the following performance
criteria, either alone or in any combination, and on either a consolidated or
business unit level, as the Committee may determine; sales, net asset turnover,
earnings per share, cash flow, cash flow from operations, operating profit or
income, net income, operating margin, net income margin, return on net assets,
return on total assets, return on common equity, return on total capital, and
total shareholder return. The foregoing criteria shall have any reasonable
definitions that the Committee may specify, which may include or exclude any or
all of the following items as the Committee may specify; extraordinary, unusual
or nonrecurring items; effects of accounting changes; effects of financing
activities (e.g., effect on earnings per share of issuance of convertible debt
securities); expenses for restructuring or productivity initiatives; other
nonoperating items; spending for acquisitions; effects of divestitures; and
effects of litigation activities and settlements. Any such performance
criterion or combination of such criteria may apply to the Participant's Award
opportunity in its entirety or to any designated portion or portions of the
Award opportunity, as the Committee may specify. Unless the Committee
determines otherwise for any Performance Period, extraordinary items, such as
capital gains and losses, which affect any performance criterion applicable to
the Award (including but not limited to the criterion of net income) shall be
excluded or included in determining the extent to which the corresponding
performance goal has been achieved, whichever will produce the greater Award.
The Performance Goals may vary for different Performance Periods and need not be
the same for each Participant receiving an Award for a Performance Period. The
Committee may, in its discretion, vary the terms and conditions of any
Performance Share Award, including, without limitation, the Performance Period
and Performance Goals.
7.6 Earning of Performance Shares. After the applicable Performance
Period shall have ended, the Committee shall determine the extent to which the
established Performance Goals have been achieved. Subsequently, each recipient
of Performance Shares shall be entitled to receive the number of Performance
Shares under the Award, if any, earned by the Participant over the Performance
Period.
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A Participant may earn more or less than the number of Performance Shares
originally awarded, or no Performance Shares at all. Performance Shares shall
be paid in the form of Company Stock. Unrestricted certificates representing
such number of shares of Stock as equals the number of Performance Shares earned
under the Award shall be delivered to the Participant as soon as practicable
after the end of the applicable Performance Period. Participants shall also be
entitled to any dividends or other distributions that would have been paid or
earned in respect of such shares of Common Stock had such shares been
outstanding during the period from the initial Award date to the final payout on
the Performance Shares. Unless otherwise provided, in its discretion, by the
Committee, any such dividends or other distributions shall not bear interest.
7.7 Termination or Service as a Director, unless otherwise determined by
the Committee, in the event the status of a Participant as a Director is
terminated by reason of death or Disability during a Performance Period, the
Participant shall receive a prorated payout with respect to the Performance
Shares relating to such Performance Period. The prorated payout shall be
determined by the Committee, in its sole discretion, and shall be based upon the
length of time that the Participant held the Performance Shares during the
Performance Period and based upon the achievement of the established Performance
Goals. Distribution of earned Performance Shares shall be made at the same time
payments are made to Participants whose service as a Director does not terminate
during the applicable Performance Period. In the event that a Participant ceases
to be a Director for any reason other than death or Disability, all Performance
Shares shall be forfeited by the Participant to the Company, unless otherwise
determined by the Committee.
7.8 Nontransferability. Except as provided in an Agreement Performance
Shares may not be sold, transferred, pledged, assigned or otherwise alienated or
hypothecated, other than by will or by the laws of descent and distribution.
Further, a Participant's rights under the Plan shall be exercisable during the
Participant's lifetime only by the Participant or the Participant's legal
Representative.
ARTICLE VIII
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DEFERRED STOCK
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8.1 General. The Committee shall have authority to grant Deferred Stock
under this Plan at any time or from time to time, including in connection with a
Conversion Election. Shares of Deferred Stock may be awarded either alone or in
addition to other Awards granted under this Plan. The Committee shall determine
the persons to whom and the time or times at which Deferred Stock will be
awarded, the number of shares of Deferred Stock to be awarded to any
Participant, the duration of the period (the "Deferral Period") prior to which
the Common Stock will be delivered, and the conditions under which receipt of
the Common Stock will be deferred and any other terms and conditions of the
Awards. Each Award shall be confirmed by, and be subject to the terms of, an
Agreement. The Committee may condition the grant of Deferred Stock upon the
attainment of specified performance goals by the Participant or by the Company
or an Affiliate, including a division or department of the Company or an
Affiliate for or within which the Participant is primarily employed or upon such
other factors or criteria as the Committee shall determine. The provisions of
Deferred Stock Awards need not be the same with respect to any Participant.
8.2 Terms and Conditions. Deferred Stock Awards shall be subject to the
following terms and conditions:
(a) Limitations on Transferability. Subject to the provisions of this
Plan and except as may otherwise be provided in an Agreement, neither
Deferred Stock Awards, nor any interest therein, may be sold, assigned,
margined, transferred, pledged or otherwise encumbered during the Deferral
Period. At the expiration of the Deferral Period (or Elective Deferral
Period as defined in Section 8.2(e), where applicable), the Committee shall
deliver Common Stock to the Participant for the shares covered by the
Deferred Stock Award.
(b) Rights. Unless otherwise determined by the Committee and subject
to this Plan, cash dividends on the Common Stock that is the subject of the
Deferred Stock Award shall be automatically deferred and reinvested in
additional Deferred Stock, and dividends on the Common Stock that is the
subject of the Deferred Stock Award payable in Common Stock shall be paid
in the form of Deferred Stock of the same class as the Common Stock on
which such dividend was paid.
(c) Criteria. Based on service, performance by the Participant or by
the Company or the Affiliate, including any division or department for
which the Participant is employed or such other factors or criteria as the
Committee may determine, the Committee may provide for the lapse of
deferral limitations in installments and may accelerate the vesting of all
or any part of any Award and waive the deferral limitations for all or any
part of such Award.
(d) Forfeiture. Unless otherwise provided in an Agreement or
determined by the Committee, if the Participant ceases to be a Director
during the Deferral Period due to death or Disability, the restrictions
shall lapse and the Participant shall be fully vested in the Deferred Stock
and shares of Common Stock shall be delivered to the Participant. Unless
otherwise provided in an Agreement or determined by the Committee, upon a
Participant's ceasing to be a Director for any reason during the Deferral
Period other than death or Disability, the rights to the shares still
covered by the Award shall be forfeited by the Participant, except the
Committee shall have the discretion to waive in whole or in part any or all
remaining deferral limitations with respect to any or all of such
Participant's Deferred Stock.
(e) Election. A Participant may elect to further defer receipt of the
Deferred Stock payable under an Award (or an installment of an Award) for a
specified period or until a specified event, subject in each case to the
Committee's approval and to such terms as are determined by the Committee.
Subject to any exceptions adopted by the Committee, such election must be
made at one (1) year prior to completion of the Deferral Period for the
Award.
ARTICLE IX
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MISCELLANEOUS
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9.1 Amendments and Termination. The Board may amend, alter or discontinue
the Plan at any time, but no amendment, alteration or discontinuation shall be
made which would impair the rights of a Participant under an Award, theretofore
granted without the Participant's consent, except such an amendment (a) made to
avoid an expense charge to the Company or an Affiliate, (b) made to cause the
Plan to qualify for the exemption provided by Rule 16b-3, or (c) made to permit
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the Company or an Affiliate a deduction under the Code. In addition, no such
amendment shall be made without the approval of the Company's stockholders to
the extent such approval is required by law or agreement. To the extent
required by law and notwithstanding the foregoing, the Plan may not be amended
more than once every six (6) months to change the Plan provisions listed in
section (c)(2)(ii)(A) of Rule 16b-3, other than to comport with changes in the
Code or Rule 16b-3.
The Committee may amend, alter or discontinue the Plan or an Award at any
time on the same conditions and limitations (and exceptions to limitations) as
applies to the Board's authority to amend the Plan and further subject to any
approval or limitations the Board may impose.
The Board shall have authority to amend the Plan to take into account
changes in law and tax and accounting rules, as well as other developments, and
to grant Awards which qualify for beneficial treatment under such rules without
stockholder approval. Notwithstanding anything in the Plan to the contrary, if
any right under this Plan would cause a transaction to be ineligible for pooling
of interest accounting that would, but for the right hereunder, be eligible for
such accounting treatment, the Board or the Committee may modify or adjust the
right so that pooling of interest accounting is available.
9.2 General Provisions.
(a) Representation. The Committee may require each person purchasing
or receiving shares pursuant to an Award to represent to and agree with the
Company in writing that such person is acquiring the shares without a view
to the distribution thereof in violation of the Securities Act. The
certificates for such shares may include any legend which the Committee
deems appropriate to reflect any restrictions on transfer.
(b) Withholding. If determined to be required to protect the Company,
no later than the date as of which an amount first becomes includable in
the gross income of the Participant for Federal income tax purposes with
respect to any Option, the Participant shall pay to the Company (or other
entity identified by the Committee), or make arrangements satisfactory to
the Company or other entity identified by the Committee regarding the
payment of, any Federal, state, local or foreign taxes of any kind required
by law to be withheld with respect to such amount. Unless otherwise
determined by the Committee, withholding obligations may be settled with
Common Stock, including Common Stock that is part of the Option that gives
rise to the
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withholding requirement, provided that any applicable requirements under
Section 16 of the Exchange Act are satisfied. The obligations of the
Company under the Plan shall be conditional on such payment or
arrangements, and the Company and its Affiliates shall, to the extent
permitted by law, have the right to deduct any such taxes from any payment
otherwise due to the Participant.
(c) Controlling Law. The Plan and all Awards made and actions taken
thereunder shall be governed by and construed in accordance with the laws
of the State of Delaware (other than its law respecting choice of law).
The Plan shall be construed to comply with all applicable law, and to avoid
liability to the Company, an Affiliate or a Participant, including, without
limitation, liability under Section 16(b) of the Exchange Act.
(d) Offset. Any amounts owed to the Company or an Affiliate by the
Participant of whatever nature may be offset by the Company from the value
of any shares of Common Stock, cash or other thing of value under the Plan
or an Agreement to be transferred to the Participant, and no shares of
Common Stock, cash or other thing of value under the Plan or an Agreement
shall be transferred unless and until all disputes between the Company and
the Participant have been fully and finally resolved and the Participant
has waived all claims to such against the Company or an Affiliate.
(e) Fail-Safe. With respect to persons subject to Section 16 of the
Exchange Act, transactions under this Plan are intended to comply with all
applicable conditions of Rule 16b-3 or Rule 16a-1(c)(3). To the extent any
provision of the Plan or action by the Committee fails to so comply, it
shall be deemed null and void, to the extent permitted by law and deemed
advisable by the Committee. Moreover, in the event the Plan does not
include a provision required by Rule 16b-3 or Rule 16a-1(c)(3) to be stated
therein, such provision shall be deemed to be incorporated by reference
into the Plan with respect to Participants subject to Section 16.
9.3 Special Provisions Regarding a Change in Control. Notwithstanding any
other provision of the Plan to the contrary, unless otherwise provided in an
Agreement, in the event of a Change in Control or a Potential Change of Control:
(a) Any Stock Options outstanding as of the date of such Change in
Control and not then exercisable shall become fully exercisable to the full
extent of the original grant;
(b) Any restrictions or deferrals applicable to Deferred Stock shall
lapse, and such Award shall become free of all restrictions and become
fully vested and transferable to the full extent of the original grant;
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(c) Any Performance Goal or other condition with respect to any
Performance Shares shall be deemed to have been satisfied in full, and the
Award shall be fully distributable;
(d) The Committee shall have full discretion, notwithstanding anything
herein or in an Agreement to the contrary, to do any or all of the
following with respect to an outstanding Award:
(1) To cause any Award to be cancelled, provided notice
of at least 15 days thereof is provided before the date of
cancellation;
(2) To provide that the securities of another entity be
substituted hereunder for the Common Stock and to make
equitable adjustment with respect thereto;
(3) To grant the Participant by giving notice during a pre-set
period to surrender all or part of an Award to the Company
and to receive cash in an amount equal to the amount by
which the "Change Control Price" (as defined in Section
9.4(c)) per share of Common Stock on the date of such
election shall exceed the amount which the Participant must
pay to exercise the Award per share of Common Stock under
the Award (the "Spread") multiplied by the number of shares
of Common Stock granted under the Award;
(4) To require the assumption of the obligation of the Company
under the Plan subject to appropriate adjustment; and
(5) To take any other action the Committee determines to take.
9.4 For purposes of this Section, "Change in Control Price" means
(i) the highest reported sales price of a share of Common Stock in any
transaction reported on the principal exchange on which such shares are listed
or on NASDAQ during the sixty (60)-day period prior to and including the date of
a Change in Control, or (ii) if the Change in Control is the result of a
corporate transaction, the highest price per share of Common Stock paid in such
tender or exchange offer or a corporate transaction. To the extent that the
consideration paid in any such transaction described above consists all or in
part of securities or other non-cash consideration, the value of such securities
or other non-cash consideration shall be determined in the sole discretion of
the Committee.
9.5 Awards in Substitution for Awards Granted by Other Corporations.
Awards may be granted under this Plan from time to time in substitution for
awards held by Directors in respect of other plans of other entities. The terms
and conditions of the Awards so granted may vary from the terms and conditions
set forth in this
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Plan at the time of such grant as the majority of the members of the Committee
may deem appropriate to conform, in whole or in part, to the provisions of the
awards in substitution for which they are granted.
9.6 Delay. If at the time, the Participant is subject to "short-swing"
liability under Section 16 of the Exchange Act, any time period provided for
under the Plan, to the extent necessary to avoid the imposition of liability,
shall be suspended and delayed during the period the Participant would be
subject to such liability.
9.7 Headings. The headings contained in the Plan are for reference
purposes only and shall not affect the meaning or interpretation of the Plan.
9.8 Severability. If any provision of the Plan shall for any reason be
held to be invalid or unenforceable, such invalidity or unenforceability shall
not effect any other provision hereby, and the Plan shall be construed as if
such invalid or unenforceable provision were omitted.
9.9 Successors and Assigns. The Plan shall inure to the benefit of and
be binding upon each successor and assign of the Company. All obligations
imposed upon a Participant, and all rights granted to the Company hereunder,
shall be binding upon the Participant's heirs, legal representatives and
successors.
9.10 Entire Agreement. The Plan and the Agreement constitute the entire
agreement with respect to the subject matter hereof and thereof, provided that
in the event of any inconsistency between the Plan and the Agreement, the terms
and conditions of the Plan shall control.
Executed on this ____ day of July, 1996.
CUNO INCORPORATED
By: ___________________________________
NAME
Title: ____________________________
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