1
GSE SYSTEMS, INC. EXHIBIT 10.8
FORM 10-K
FOR THE YEAR ENDED DECEMBER 31, 1996
GSE SYSTEMS, INC.
1995 LONG-TERM INCENTIVE PLAN
(As Amended through February 12, 1997)
1. DEFINITIONS
In this Plan, except where the context otherwise indicates, the
following definitions apply:
1.1. "Agreement" means a written agreement implementing an Award.
1.2. "Award" means a grant of an Option or Right or an award of
Restricted Stock or Incentive Shares.
1.3. "Board" means the Board of Directors of the Corporation.
1.4. "Code" means the Internal Revenue Code of 1986, as amended.
1.5. "Committee" means the committee or subcommittee of the
Board meeting the standards of Rule 16b-3(d)(1) under the Exchange Act and
Treasury Regulations: Section 1.162-27(e)(3), or any similar successor rule or
regulation, as may be appointed by the Board to administer the Plan. Unless
otherwise determined by the Board, the Compensation Committee of the Board shall
be the Committee.
1.6. "Common Stock" means the common stock, par value $.01 per
share, of the Corporation.
1.7. "Corporation" means GSE Systems, Inc.
1.8. "Date of Exercise" means the date on which the Corporation
receives notice of the exercise of an Option or Right in accordance with the
terms of Article 9.
1.9. "Date of Grant" means the date on which an Option or Right
is granted or Restricted Stock or Incentive Shares are awarded under the Plan.
1.10. "Director" means a member of the Board of the Corporation
or any Subsidiary.
1.11. "Employee" means any employee of the Corporation or a
Subsidiary, including an Employee Director or any person who has been hired to
be an employee of the Corporation or a Subsidiary, and any consultant or
advisor to the Corporation who is not a Director and who renders bona fide
services to the Corporation or a Subsidiary other than services in connection
with the offer or sale of securities in a capital raising transaction.
1.12. "Employee Director" means a Director who is also an
Employee.
1
2
GSE SYSTEMS, INC. EXHIBIT 10.8
FORM 10-K
FOR THE YEAR ENDED DECEMBER 31, 1996
1.13. "Exchange Act" means the Securities Exchange Act of 1934,
as amended.
1.14. "Fair Market Value" means the amount equal to the closing
sales price for a Share, on the date such fair market value is to be determined
(or if there is no sale of Shares on such date, the closing sales price on the
nearest trading date preceding such date), in the principal trading market for
the Shares as reported by such source as the Committee may select, or, if such
price quotations of the Common Stock are not then reported, then the fair
market value of a Share as determined by the Committee pursuant to a reasonable
method adopted in good faith for such purpose.
1.15. "Grantee" means an Employee to whom Restricted Stock has
been awarded pursuant to Article 10 or Incentive Shares have been awarded
pursuant to Article 11.
1.16. "Incentive Shares" means Shares awarded under the Plan
pursuant to the provisions of Article 11.
1.17. "Incentive Stock Option" means an Option granted under the
Plan that qualifies as an incentive stock option under section 422 of the Code
and that the Corporation designates as such in the Agreement granting the
Option.
1.18. "Independent Director" means a Director who is not an
"Employee Director".
1.19. "Independent Director" means that portion of the Plan under
which grants are made to Independent Directors.
1.20. "Nonstatutory Stock Option" means an Option granted under
the Plan that is not an Incentive Stock Option.
1.21. "Option" means an option to purchase Shares granted under
the Plan in accordance with the terms of Article 6 or Article 7.
1.22. "Option Period" means the period during which an Option may
be exercised.
1.23. "Option Price" means the price per Share at which an Option
may be exercised. The Option Price shall be determined by the Committee and
shall not be less than the Fair Market Value determined as of the Date of
Grant, except that in the case of Nonstatutory Stock Options granted on or
prior to the thirtieth day after consummation of the Corporation's initial
public offering of Common Stock (the "IPO"), the Option Price shall not be less
than the initial public offering price of a Share in connection with the IPO.
Notwithstanding the foregoing, in the case of an Incentive Stock Option granted
to an Optionee who (applying the rules of Section 424(d) of the Code) owns
stock possessing more than ten percent of the total combined voting power of
all classes of stock of the Corporation or a Subsidiary (a "Ten-Percent
Stockholder"), the Option Price shall not be less than one hundred and ten
percent (110%) of the Fair Market Value on the Date of Grant.
2
3
GSE SYSTEMS, INC. EXHIBIT 10.8
FORM 10-K
FOR THE YEAR ENDED DECEMBER 31, 1996
1.24. "Optionee" means an Employee or Director to whom an Option
or Right has been granted.
1.25. "Performance Goals" means performance goals established by
the Committee which may be based on earnings or earnings growth, sales, return
on assets, equity or investment, regulatory compliance, satisfactory internal
or external audits, improvement of financial ratings, achievement of balance
sheet or income statement objectives, or any other objective goals established
by the Committee, and may be absolute in their terms or measured against or in
relationship to other companies comparably, similarly or otherwise situated.
Such performance standards may be particular to an employee or the department,
branch, Subsidiary or other division in which he or she works, or may be based
on the performance of the Corporation generally, and may cover such period as
may be specified by the Committee.
1.26. "Plan" means the GSE Systems, Inc. 1995 Long-Term Incentive
Plan.
1.27. "Related Option" means the Option in connection with which,
or by amendment to which, a specified Right is granted.
1.28. "Related Right" means the Right granted in connection with,
or by amendment to, a specified Option.
1.29. "Restricted Stock" means Shares awarded under the Plan
pursuant to the provisions of Article 10.
1.30. "Right" means a stock appreciation right granted under the
Plan in accordance with the terms of Article 8.
1.31. "Right Period" means the period during which a Right may be
exercised.
1.32. "Rule 16b-3" means Rule 16b-3 under Section 16 of the
Exchange Act (or any successor rule).
1.33. "Share" means a share of Common Stock.
1.34. "Subsidiary" means a corporation at least 50% of the total
combined voting power of all classes of stock of which is owned by the
Corporation, either directly or through one or more other Subsidiaries.
2. PURPOSE
The Plan is intended to assist the Corporation and its
Subsidiaries in attracting and retaining Employees and Independent Directors of
outstanding ability and to promote the identification of their interests with
those of the stockholders of the Corporation.
3
4
GSE SYSTEMS, INC. EXHIBIT 10.8
FORM 10-K
FOR THE YEAR ENDED DECEMBER 31, 1996
3. ADMINISTRATION
The Committee shall administer the Plan and shall have plenary
authority, in its discretion, to award Options, Rights, Restricted Stock and
Incentive Shares to Employees and Independent Directors, subject to the
provisions of the Plan. The Committee shall have plenary authority and
discretion, subject to the provisions of the Plan, to determine the terms of
all Awards (which terms need not be identical) to Employees, including, but not
limited to, the exercise price of Options, the time or times at which Awards
are made, the number of Shares covered by Awards, whether an Option shall be an
Incentive Stock Option or a Nonstatutory Stock Option, and the period during
which Options and Rights may be exercised and Restricted Stock shall be subject
to restrictions. In making these determinations, the Committee may take into
account the nature of the services rendered by the Award recipients, their
present and potential contributions to the success of the Corporation and its
Subsidiaries, and such other factors as the Committee in its discretion shall
deem relevant. Subject to the provisions of the Plan, the Committee shall have
plenary authority to interpret the Plan, to prescribe, amend and rescind rules
and regulations relating to it and to make all other determinations deemed
necessary or advisable for the administration of the Plan. The determinations
of the Committee on the matters referred to in this Article 3 shall be binding
and final.
4. ELIGIBILITY
Options, Rights, Restricted Stock and Incentive Shares may be
granted or awarded only to Employees, provided, however, that Independent
Directors may receive Nonstatutory Stock Options in accordance with the
provisions of Article 7.
5. STOCK SUBJECT TO THE PLAN
5.1. The maximum number of Shares that may be issued under the
Plan is 625,000 Shares. The maximum number of Shares with respect to which an
Employee may receive Awards under the Plan is 100,000.
5.2. If an Option or Right expires or terminates for any reason
(other than termination by virtue of the exercise of a Related Option or
Related Right, as the case may be) without having been fully exercised, if
Shares of Restricted Stock are forfeited or if Incentive Shares are not issued
or are forfeited, the unissued or forfeited Shares which had been subject to
the Award shall become available for the grant of additional Awards.
5.3. Upon exercise of a Right (regardless of whether the Right is
settled in cash or Shares), the number of Shares with respect to which the
Right is exercised shall be charged against the number of Shares issuable under
the Plan and shall not become available for the grant of other Awards.
4
5
GSE SYSTEMS, INC. EXHIBIT 10.8
FORM 10-K
FOR THE YEAR ENDED DECEMBER 31, 1996
6. OPTIONS
6.1. Options granted under the Plan to Employees shall be either
Incentive Stock Options or Nonstatutory Stock Options, as designated by the
Committee. Each Option granted under the Plan shall be clearly identified
either as a Nonstatutory Stock Option or an Incentive Stock Option and shall be
evidenced by an Agreement that specifies the terms and conditions of the grant.
Options granted to Employees shall be subject to the terms and conditions set
forth in this Article 6 and such other terms and conditions not inconsistent
with this Plan as the Committee may specify. All Incentive Stock Options
granted under the Plan shall comply with the provisions of the Code governing
incentive stock options and with all other applicable rules and regulations.
6.2. The Option Period for Options granted to Employees shall be
determined by the Committee and specifically set forth in the Agreement,
provided, however, that an Option shall not be exercisable after ten years
(five years in the case of an Incentive Stock Option granted to a Ten-Percent
Stockholder) from its Date of Grant.
6.3. The Committee, in its discretion, may provide in an Agreement
for the right of the Optionee to surrender to the Corporation an Option (or a
portion thereof) that has become exercisable and to receive upon such
surrender, without any payment to the Corporation (other than required tax
withholding amounts) that number of Shares (equal to the highest whole number
of Shares) having an aggregate fair market value as of the date of surrender
equal to that number of Shares subject to the Option (or portion thereof) being
surrendered multiplied by an amount equal to the excess of (i) the Fair Market
Value on the date of surrender over (ii) the Option Price, plus an amount of
cash equal to the fair market value of any fractional Share to which the
Optionee would be entitled but for the parenthetical above relating to whole
number of Shares. Any such surrender shall be treated as the exercise of the
Option (or portion thereof).
7. INDEPENDENT DIRECTOR PROGRAM
7.1. The Independent Director Program shall be a formula plan
under which Independent Directors shall be granted Nonstatutory Stock Options,
but only in accordance with the provisions set forth in this Article 7.
7.2. Nonstatutory Stock Options shall be granted to Independent
Directors as follows:
(i) Each person who becomes an Independent Director within
30 days after consummation of the IPO shall be granted on the date such person
first becomes a Director, which shall be the Date of Grant, a Nonstatutory
Stock Option to purchase 1,500 Shares at an Option Price equal to the initial
public offering price of a Share in connection with the IPO;
(ii) Each person who becomes an Independent Director after
the 30th day following
5
6
GSE SYSTEMS, INC. EXHIBIT 10.8
FORM 10-K
FOR THE YEAR ENDED DECEMBER 31, 1996
consummation of the IPO shall be granted on the date such person first becomes
an Independent Director, which shall be the Date of Grant, a Nonstatutory Stock
Option to purchase 1,500 Shares at an Option Price equal to the Fair Market
Value on the Date of Grant; and
(iii) Commencing on December 31, 1995, and on the annual
anniversary thereof, each Independent Director shall be granted a Nonstatutory
Stock Option to purchase 1,500 Shares at an Option Price equal to the Fair
Market Value on such date, which date shall be the Date of Grant; provided that
if any Independent Director has served as a Director for less than a full year
as of such Date of Grant, the Nonstatutory Stock Option granted to such
Director on such Date of Grant shall be for the number of Shares (rounded to
the nearest whole Share) equal to 1,500 multiplied by a fraction, the numerator
of which shall be the number of days such person has served as a Director and
the denominator of which shall be 365.
7.3. Nonstatutory Stock Options granted under this Article 7 shall
vest in three installments on the first, second and third annual anniversaries
of the Date of Grant with 40% thereof vesting on the first such anniversary and
30% thereof vesting on each of the second and third such anniversaries, and may
be exercised by the Optionee at any time after vesting and prior to the
termination of the Nonstatutory Stock Option. Nonstatutory Stock Options
granted pursuant to this Article 7 shall terminate upon the earlier to occur of
(i) 10 years from the Date of Grant or (ii) one year from the date on which
such Optionee ceases to be a member of the Board or, if such Optionee ceases to
be a member of the Board by reason of retirement, disability, death or removal
from such position without cause, five years from the date on which such
Optionee ceases to be a member of the Board. Nonstatutory Stock Options granted
under this Article 7 are not transferable except to the extent provided in
Article 12. Exercise of Nonstatutory Stock Options granted under this Article 7
may be made only in writing delivered to the Corporation accompanied by payment
of the Option Price in cash or Shares in accordance with Section 9.1.
7.4. If on any Date of Grant of Nonstatutory Stock Options to
Independent Directors there is an insufficient number of Shares available for
such grants to Independent Directors, the number of Shares subject to each
grant shall be reduced to the greatest whole number of Shares arrived at by
dividing the remaining Shares available for such grants by the number of
Independent Directors eligible for such grants.
7.5. Notwithstanding the provisions of Section 7.3, an Option
granted pursuant to this Article 7 may be exercised in full upon a Change of
Control. For purposes of this Section 7.5, a "Change of Control" shall be
deemed to have occurred if after the Date of Grant for such Option (i) any
person or group of persons (as defined in Section 13(d) and 14(d) of the
Exchange Act) together with its affiliates, excluding employee benefit plans of
the Corporation, becomes, directly or indirectly, the "beneficial owner" (as
defined in Rule 13d-3 under the Exchange Act) of securities of the Corporation
representing 20% or more of the combined voting power of the Corporation's then
outstanding securities; or (ii) as a result of a tender offer or exchange offer
for the purchase of securities of the Corporation (other than such an offer by
the Corporation for its own securities), or as a result of a proxy contest,
merger, consolidation or sale of assets, or as a result of any combination of
the foregoing, individuals who at the beginning of any two-year period
constitute the Board, plus new directors of the Corporation whose election or
nomination for election by the Corporation's stockholders is approved by a vote
of at least two-thirds of the Directors still in office who were Directors at
6
7
GSE SYSTEMS, INC. EXHIBIT 10.8
FORM 10-K
FOR THE YEAR ENDED DECEMBER 31, 1996
the beginning of such two-year period, cease for any reason during such
two-year period to constitute at least two-thirds of the members of the Board;
or (iii) the stockholders of the Corporation approve a merger or consolidation
of the Corporation with any other corporation or entity regardless of which
entity is the survivor, other than a merger or consolidation which would result
in the voting securities of the Corporation outstanding immediately prior
thereto continuing to represent (either by remaining outstanding or being
converted into voting securities of the surviving entity) at least 66 2/3% of
the combined voting power of the voting securities of the Corporation or such
surviving entity outstanding immediately after such merger or consolidation; or
(iv) the stockholders of the Corporation approve a plan of complete liquidation
or winding-up of the Corporation or an agreement for the sale or disposition by
the Corporation of all or substantially all of the Corporation's assets.
8. RIGHTS
8.1. Rights granted under the Plan shall be evidenced by an
Agreement specifying the terms and conditions of the grant. A Right may be
granted under the Plan:
(i) in connection with, and at the same time as, the
grant of an Option under the Plan;
(ii) by amendment of an outstanding Option granted under
the Plan; or
(iii) independently of any Option granted under the Plan.
A Right granted under clause (i) or (ii) of the preceding sentence
is a Related Right. A Related Right may, in the Committee's discretion, apply
to all or a portion of the Shares subject to the Related Option.
8.2. A Right may be exercised in whole or in part as provided in
the applicable Agreement, and, subject to the terms of the Agreement, entitles
its Optionee to receive, without payment to the Corporation (but subject to
required tax withholding), either cash or that number of Shares (equal to the
highest whole number of Shares), or a combination thereof, in an amount or
having a fair market value determined as of the Date of Exercise not to exceed
the number of Shares subject to the portion of the Right exercised multiplied
by an amount equal to the excess of (i) the Fair Market Value on the Date of
Exercise of the Right over (ii) either (A) the Fair Market Value on the Date of
Grant of the Right if it is not a Related Right, or (B) the Option Price as
provided in the Related Option if the Right is a Related Right.
8.3. The Right Period shall be determined by the Committee and
specifically set forth in the Agreement, subject to the following conditions:
(i) a Right will expire no later than the earlier of
(A) ten years from the Date of Grant, or (B) in the case of a Related Right,
the expiration of the Related Option;
(ii) a Right may be exercised only when the Fair Market
Value on the Date of Exercise
7
8
GSE SYSTEMS, INC. EXHIBIT 10.8
FORM 10-K
FOR THE YEAR ENDED DECEMBER 31, 1996
exceeds either (A) the Fair Market Value on the Date of Grant of the Right if
it is not a Related Right or (B) the Option Price of the Related Option if the
Right is a Related Right; and
(iii) a Right that is a Related Right to an Incentive
Stock Option may be exercised only when and to the extent the Related Option is
exercisable.
8.4. The exercise, in whole or in part, of a Related Right shall
cause a reduction in the number of Shares subject to the Related Option equal
to the number of Shares with respect to which the Related Right is exercised.
Similarly, the exercise, in whole or in part, of a Related Option shall cause a
reduction in the number of Shares subject to the Related Right equal to the
number of Shares with respect to which the Related Option is exercised.
8.5. To the extent provided in the Agreement, the Committee shall
have sole discretion to consent to or disapprove the election of any Optionee
to receive cash in full or partial settlement of a Right. In cases where an
election of settlement in cash must be consented to by the Committee, the
Committee may consent to, or disapprove, such election at any time after such
election, or within such period for taking action as is specified in the
election, and failure to give consent shall be disapproval. Consent may be
given in whole or as to a portion of the Right surrendered by the Optionee. If
the election to receive cash is disapproved in whole or in part, the Right
shall be deemed to have been exercised for Shares, or, if so specified in the
notice of exercise and election, not to have been exercised to the extent the
election to receive cash is disapproved.
9. EXERCISE OF OPTIONS AND RIGHTS
9.1. An Option or Right may, subject to the terms of the
applicable Agreement under which it was granted, be exercised in whole or in
part by the delivery to the Corporation of written notice of the exercise, in
such form as the Committee may prescribe, accompanied, in the case of an
Option, by full payment for the Shares with respect to which the Option is
exercised. To the extent provided in the applicable Option Agreement, payment
may be made, in whole or in part, in Shares (other than Restricted Stock)
valued at Fair Market Value on the Date of Exercise or by delivery of a
promissory note as provided in Section 9.2 hereof.
9.2. To the extent provided in an Option Agreement and permitted
by applicable law, the Committee may accept as partial payment of the Option
Price a promissory note executed by the Optionee evidencing his or her
obligation to make future cash payment thereof; provided, however, that in no
event may the Committee accept a promissory note for an amount in excess of the
difference between the aggregate Option Price and the par value of the Shares.
Promissory notes made pursuant to this Section 9.2 shall be payable upon such
terms as may be determined by the Committee, shall be secured by a pledge of
the Shares received upon exercise of the Option and shall bear interest at a
rate fixed by the Committee.
8
9
GSE SYSTEMS, INC. EXHIBIT 10.8
FORM 10-K
FOR THE YEAR ENDED DECEMBER 31, 1996
10. RESTRICTED STOCK AWARDS
10.1. Restricted Stock awards under the Plan shall consist of
Shares that are restricted against transfer, subject to forfeiture, and subject
to such other terms and conditions intended to further the purposes of the Plan
as may be determined by the Committee. Such terms and conditions may provide,
in the discretion of the Committee, for the vesting of such awards to be
contingent upon the achievement of one or more specified Performance Goals.
10.2. Restricted Stock awards under the Plan shall be evidenced by
Agreements specifying the terms and conditions of the Award. Each Agreement
evidencing an award of Restricted Stock shall contain the following:
(i) prohibitions against the sale, assignment, transfer,
exchange, pledge, hypothecation, or other encumbrance of (A) the Shares awarded
as Restricted Stock under the Plan, (B) the right to vote the Shares, and (C)
the right to receive dividends thereon, in each case during the restriction
period applicable to the Shares; provided, however, that the Grantee shall have
all the other rights of a stockholder including, but not limited to, the right
to receive dividends and the right to vote the Shares;
(ii) a requirement that each certificate representing
Shares of Restricted Stock shall be deposited with the Corporation, or its
designee, and shall bear the following legend:
"This certificate and the shares of stock represented hereby are
subject to the terms and conditions (including the risks of
forfeiture and restrictions against transfer) contained in the GSE
Systems, Inc. 1995 Long-Term Incentive Plan, and an Agreement
entered into between the registered owner and GSE Systems, Inc.
Release from such terms and conditions shall be made only in
accordance with the provisions of the Plan and the Agreement, a
copy of each of which is on file in the office of the Secretary of
GSE Systems, Inc."
(iii) the terms and conditions upon which any restrictions
applicable to Shares of Restricted Stock shall lapse and new certificates free
of the foregoing legend shall be issued to the Grantee or his or her legal
representative; and
(iv) such other terms, conditions and restrictions as the
Committee in its discretion may specify including, without limitation, terms
that condition the lapse of forfeiture and transfer restrictions upon the
achievement of Performance Goals.
10.3. The Committee may include in a Restricted Stock Agreement a
requirement that in the event of a Grantee's termination of employment for any
reason prior to the lapse of restrictions, all Shares of Restricted Stock shall
be forfeited by the Grantee to the Corporation without payment of any
consideration by the Corporation, and neither the Grantee nor any successors,
heirs, assigns or personal representatives of the Grantee shall thereafter have
any further rights or interest in the Shares or certificates.
9
10
GSE SYSTEMS, INC. EXHIBIT 10.8
FORM 10-K
FOR THE YEAR ENDED DECEMBER 31, 1996
11. INCENTIVE SHARE AWARDS
11.1. Incentive Shares awarded under the Plan shall be evidenced
by an Agreement specifying the terms and conditions of such Award. Incentive
Share awards shall provide for the issuance of Shares to a Grantee at such
times and subject to such terms and conditions as the Committee shall deem
appropriate including, but not limited to, terms that condition the issuance of
Shares upon the achievement of Performance Goals.
12. NONTRANSFERABILITY
Awards made under this Plan shall not be transferable other than
(i) by will or the laws of descent and distribution, or (ii) pursuant to a
qualified domestic relations order as defined in section 414(p) of the Code. An
Option or Right may be exercised during the Optionee's lifetime only by the
Optionee or, in the event of his or her legal disability, by his or her legal
representative. A Related Right is transferable only when the Related Option is
transferable and only with the Related Option and under the same conditions
that apply to the Related Option.
13. CAPITAL ADJUSTMENTS
In the event of any change in the outstanding Common Stock by
reason of any stock dividend, split-up, recapitalization, reclassification,
combination or exchange of shares, merger, consolidation or liquidation and the
like, the Committee may, in its discretion, provide for a substitution for or
adjustment in (i) the number and class of Shares subject to outstanding
Options, Rights, Restricted Stock and Incentive Share awards, (ii) the Option
Price of Options and the base price upon which payments under Rights that are
not Related Rights are determined, and (iii) the aggregate number and class of
Shares for which Awards thereafter may be made under the Plan and to individual
Award recipients. The adjustments made with respect to Nonstatutory Stock
Options granted pursuant to Article 7 shall be equivalent to the treatment
accorded to holders of Common Stock.
14. TERMINATION OR AMENDED
The Board may amend, alter or terminate the Plan in any respect at
any time; provided, however, that, after the Plan has been approved by the
stockholders of the Corporation, no amendment, alteration or termination of the
Plan shall be made by the Board without approval of (i) the Corporation's
stockholders to the extent stockholder approval of the amendment is required by
applicable law or regulations or the requirements of the principal exchange or
interdealer quotation system on which the Common Stock is listed or quoted, and
(ii) each affected Optionee or Grantee if such amendment, alteration or
termination would adversely affect his or her rights or obligations under any
Award made prior to the date of such amendment, alteration or termination.
10
11
GSE SYSTEMS, INC. EXHIBIT 10.8
FORM 10-K
FOR THE YEAR ENDED DECEMBER 31, 1996
15. MODIFICATION, EXTENSION AND RENEWAL OF OPTIONS, RIGHTS, RESTRICTED STOCK
AND INCENTIVE SHARES; SUBSTITUTED OPTIONS AND RIGHTS
15.1. Subject to the terms and conditions of the Plan, the
Committee may modify, extend or renew outstanding Options and Rights, or accept
the surrender of outstanding options and stock appreciation rights (to the
extent not theretofore exercised) granted under the Plan or under any other
plan of the Corporation or a Subsidiary, and authorize the granting of new
Options and Rights pursuant to the Plan in substitution therefor (to the extent
not theretofore exercised), and the substituted Options or Rights may specify a
lower exercise price than the surrendered options and stock appreciation
rights, a longer term than the surrendered options and stock appreciation
rights, or have any other provisions that are authorized by the Plan. Subject
to the terms and conditions of the Plan, the Committee may modify the terms of
any outstanding awards of Restricted Stock or Incentive Shares. Notwithstanding
the foregoing, however, no modification of an Award shall, without the consent
of the Optionee or Grantee, alter or impair any of the Optionee's or Grantee's
rights or obligations under such Award.
15.2. Anything contained herein to the contrary notwithstanding,
Options and Rights may, at the discretion of the Committee, be granted under
the Plan in substitution for stock appreciation rights and options to purchase
shares of capital stock of another corporation which is merged into,
consolidated with, or all or a substantial portion of the property or stock of
which is acquired by, the Corporation or one of its Subsidiaries. The terms and
conditions of the substitute Options and Rights so granted may vary from the
terms and conditions set forth in this Plan to such extent as the Committee may
deem appropriate (but only to the extent consistent with the requirements of
Rule 16b-3) in order to conform, in whole or part, to the provisions of the
options and stock appreciation rights in substitution for which they are
granted. Such Options and Rights shall not be counted toward the 100,000 Share
limit imposed by the second sentence of Section 5.1, except to the extent it is
determined by the Committee that the applicability of such sentence is required
in order for grants of Options and Rights hereunder to be eligible to qualify
as "performance-based compensation" within the meaning of Section 162(m) of the
Code.
16. EFFECTIVENESS OF THE PLAN
The Plan and any amendments requiring stockholder approval
pursuant to Article 14 are subject to approval by vote of the stockholders of
the Corporation within 12 months after their adoption by the Board. Subject to
that approval, the Plan and any amendments are effective on the date on which
they are adopted by the Board. Options, Rights, Restricted Stock and Incentive
Shares may be granted or awarded prior to stockholder approval of the Plan or
amendments, but each such Award shall be subject to the approval of the Plan or
amendments by the stockholders. The date on which any Option, Right, Restricted
Stock or Incentive Shares granted or awarded prior to stockholder approval of
the Plan or amendment is granted or awarded shall be the Date of Grant for all
purposes as if the Option, Right, Restricted Stock or Incentive Shares had not
been subject to approval. No Option or Right may be exercised prior to such
stockholder approval, and any Restricted Stock or Incentive Shares awarded
shall be forfeited if such stockholder approval is not obtained.
11
12
GSE SYSTEMS, INC. EXHIBIT 10.8
FORM 10-K
FOR THE YEAR ENDED DECEMBER 31, 1996
17. WITHHOLDING
The Corporation's obligation to deliver Shares or pay any amount
pursuant to the terms of any Award hereunder shall be subject to the
satisfaction of applicable federal, state and local tax withholding
requirements. To the extent provided in the applicable Agreement and in
accordance with rules prescribed by the Committee, an Optionee or Grantee may
satisfy any such withholding tax obligation by any of the following means or by
a combination of such means: (i) tendering a cash payment, (ii) authorizing the
Corporation to withhold Shares otherwise issuable to the Optionee or Grantee,
or (iii) delivering to the Corporation already owned and unencumbered Shares.
18. TERM OF THE PLAN
Unless sooner terminated by the Board pursuant to Article 14, the
Plan shall terminate on June 30, 2005, and no Options, Rights, Restricted Stock
or Incentive Shares may be granted or awarded after such date. The termination
of the Plan shall not affect the validity of any Award outstanding on the date
of termination.
19. INDEMNIFICATION OF COMMITTEE
In addition to such other rights of indemnification as they may
have as Directors or as members of the Committee, the members of the Committee
shall be indemnified by the Corporation against the reasonable expenses,
including attorneys' fees, actually and reasonably incurred in connection with
the defense of any action, suit or proceeding, or in connection with any appeal
therein, to which they or any of them may be a party by reason of any action
taken or failure to act under or in connection with the Plan or any Option,
Right, Restricted Stock or Incentive Shares granted or awarded hereunder, and
against all amounts reasonably paid by them in settlement thereof or paid by
them in satisfaction of a judgment in any such action, suit or proceeding, if
such members acted in good faith and in a manner which they believed to be in,
and not opposed to, the best interests of the Corporation.
20. GENERAL PROVISIONS
20.1. The establishment of the Plan shall not confer upon any
Employee or Independent Director any legal or equitable right against the
Corporation, any Subsidiary or the Committee, except as expressly provided in
the Plan.
20.2. The Plan does not constitute inducement or consideration for
the employment of any Employee or the service of any Independent Director, nor
is it a contract between the Corporation or any Subsidiary and any Employee or
Independent Director. Participation in the Plan shall not give an Employee or
Independent Director any right to be retained in the service of the Corporation
or any Subsidiary.
12
13
GSE SYSTEMS, INC. EXHIBIT 10.8
FORM 10-K
FOR THE YEAR ENDED DECEMBER 31, 1996
20.3. Neither the adoption of this Plan nor its submission to the
stockholders, shall be taken to impose any limitations on the powers of the
Corporation or its Subsidiaries to issue, grant, or assume options, warrants,
rights, or restricted stock, otherwise than under this Plan, or to adopt other
stock option or restricted stock plans or to impose any requirement of
stockholder approval upon the same.
20.4. The interests of any Employee or Independent Director under
the Plan are not subject to the claims of creditors and may not, in any way, be
assigned, alienated or encumbered except as provided in Article 12.
20.5. The Plan shall be governed, construed and administered in
accordance with the laws of the State of Delaware and the intention of the
Corporation that Incentive Stock Options granted under the Plan qualify as such
under section 422 of the Code.
20.6. The Committee may require each person acquiring Shares
pursuant to Awards hereunder to represent to and agree with the Corporation in
writing that such person is acquiring the Shares without a view to distribution
thereof. The certificates for such Shares may include any legend which the
Committee deems appropriate to reflect any restrictions on transfer. All
certificates for Shares issued pursuant to the Plan shall be subject to such
stock transfer orders and other restrictions as the Committee may deem
advisable under the rules, regulations and other requirements of the Securities
and Exchange Commission, any stock exchange upon which the Common Stock is then
listed, and any applicable federal or state securities laws. The Committee may
place a legend or legends on any such certificates to make appropriate
reference to such restrictions.
20.7. The Corporation shall not be required to issue any
certificate or certificates for Shares with respect to Awards under this Plan,
or record any person as a holder of record of such Shares, without obtaining,
to the complete satisfaction of the Committee, the approval of all regulatory
bodies deemed necessary by the Committee, and without complying to the
Committee's complete satisfaction, with all rules and regulations, under
federal, state or local law deemed applicable by the Committee.
13