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EXHIBIT 4.3
THE EXPLORATION COMPANY
1995 FLEXIBLE INCENTIVE PLAN
Section 1. PURPOSE OF THE PLAN
The purposes of The Exploration Company 1995 Flexible Incentive Plan
(the "Plan") are to promote the interests of The Exploration Company (together
with any successor thereto, the "Company") and its stockholders by enabling the
Company to attract, motivate and retain key employees by offering such key
employees performance-based stock incentives and other equity interests in the
Company and other incentive awards that recognize the creation of value for the
stockholders of the Company and promote the Company's long-term growth and
success. To achieve these purposes, eligible persons may receive stock
options, Stock Appreciation Rights, Restricted Stock, Performance Awards,
performance stock, Dividend Equivalent Rights and any other Awards, or any
combination thereof.
Section 2. DEFINITIONS
As used in the Plan, the following terms shall have the meanings set
forth below unless the content otherwise requires:
2.1 "Award" shall mean the grant of a stock
option, a Stock Appreciation Right, a Restricted Stock, a
Performance Award, performance stock, a Dividend Equivalent
Right or any other award under the Plan.
2.2 "Board" shall mean the Board of Directors of
the Company, as the same may be constituted from time to time.
2.3 "Change in Control" shall mean, after the
effective date of the Plan, (i) the occurrence of an event of
a nature that would be required to be reported in response to
Item I or Item 2 of a Form 8-K Current Report of the Company
promulgated pursuant to Sections 13 and 15(d) of the Exchange
Act; provided that, without limitation, such a Change in
Control shall be deemed to have occurred if (a) any "person",
as such term is used in Sections 13(d) and 14(d) of the
Exchange Act (other than the Company, any trustee or other
fiduciary holding securities under any employee benefit plan
of the Company, or any company owned, directly or indirectly,
by the stockholders of the Company in substantially the same
proportions as their ownership of stock of the Company), is or
becomes the "beneficial owner" (as defined in Rule 13d-3 under
the Exchange Act), directly or indirectly, of securities of
the Company representing twenty-five percent (25%) or more of
the combined voting power of the Company's then outstanding
securities or (b) during any period of two consecutive years,
individuals who at
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the beginning of such period constitute the Board cease for
any reason to constitute at least a majority thereof unless
the election by the Board or the nomination for election by
the Company's stockholders was approved by a vote of at least
two-thirds (2/3) of the directors then still in office who
either were directors at the beginning of the two-year period
or whose election or nomination for election was previously so
approved; (ii) the stockholders of the Company approve a
merger or consolidation of the Company with any other
corporation, other than a merger or consolidation that would
result in the voting securities of the Company outstanding
immediately prior thereto continuing to represent (either by
remaining outstanding or by being. converted into voting
securities of the surviving entity) more than eighty percent
(80%) of the combined voting power of the voting securities of
the surviving entity outstanding immediately after such merger
or consolidation; provided, however, that a merger or
consolidation effected to implement a reorganization or
recapitalization of the Company, or a similar transaction
(collectively, a "Reorganization"), in which no "person"
acquires more than twenty percent (20%) of the combined voting
power of the Company's then outstanding securities shall not
constitute a Change in Control of the Company; or (iii) the
stockholders of the Company approve a plan of complete
liquidation of the Company or an agreement for the sale or
disposition by the Company of all or substantially all of the
Company's assets.
2.4 "Code" shall mean the Internal Revenue Code
of 1986, as amended from time to time.
2.5 "Committee" shall mean the Stock Option and
Compensation Committee, if such a separate committee is
appointed by the Board, or, until such time as a separate
committee is appointed, it shall mean the Board. If a
separate committee is appointed, the Committee shall meet the
applicable requirements for "disinterested administration"
within the requirements of Rule 16b-3 promulgated under the
Exchange Act and any successor thereunder promulgated during
the duration of the Plan. The Board may amend the Plan to
modify the definition of Committee within the limits of Rule
16b-3 to assure that the Plan is administered in compliance
with Rule 16b-3. Initially, the Committee will consist of not
less than three (3) members of the Board who are appointed by,
and serve at the pleasure of the Board and who are (i)
"disinterested" within the meaning of Rule 16b-3 and (ii)
"outside directors," as required under Section 162(m) of the
Code and such Treasury Regulations as may be promulgated
thereunder. The Board does not meet the applicable
requirements of Rule 16b-3.
2.6 "Common Stock" shall mean the Common Stock,
par value $.01 per share, of the Company.
2.7 "Designated Beneficiary" shall mean the
beneficiary designated by a Participant in a manner determined
by the Committee, to exercise rights of the
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Participant in the event of the Participant's death. In the
absence of an effective designation by a Participant the
Designated Beneficiary shall be the Participant's estate.
2.8 "Disability" shall mean permanent and total
inability to engage in any substantial gainful activity by
reason of any medically determinable physical or mental
impairment which can be expected to result in death or which
has lasted or can be expected to last for a continuous period
of not less than twelve (12) months, as determined in the sole
and absolute discretion of the Committee.
2.9 "Dividend Equivalent Right" shall mean the
right of the holder thereof to receive credits based on the
cash dividends that would have been paid on the Shares
specified in an Award granting Dividend Equivalent Rights if
the Shares subject to such Award were held by the person to
whom the Award is made.
2.10 "Exchange Act" shall mean the Securities
Exchange Act of 1934, as amended from time to time.
2.11 "Fair Market Value" shall mean with respect
to the Shares, as of any date, (i) the last reported sales
price on any stock exchange on which the Common Stock is
traded or, if not reported on such exchange, on the composite
tape, or, in case no such sale takes place on such day, the
average of the reported closing bid and asked quotations on
such exchange; (ii) if the Common Stock is not listed on a
stock exchange or no such quotations are available, the
closing price of the Common Stock as reported by the National
Market System of the National Association of Securities
Dealers, Inc., or, if no such quotations are available, the
average of the high bid and low asked quotations in the
over-the-counter market as reported by the National Quotation
Bureau Incorporated, or similar organization; or (iii) in the
event that there shall be no public market for the Common
Stock, the fair market value of the Common Stock as determined
(which determination shall be conclusive) in good faith by the
Committee, based upon the value of the Company as a going
concern, as if such Common Stock were publicly owned stock,
but without any discount with respect to minority ownership.
2.12 "Incentive Stock Option" shall mean any stock
option awarded under the Plan which qualifies as an "Incentive
Stock Option" under Section 422 of the Code or any successor
provision.
2.13 "Non-Tandem Stock Appreciation Right" shall
mean any Stock Appreciation Right granted alone and not in
connection with an Award which is a stock option.
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2.14 "Non-Qualified Stock Option" shall mean any
stock option awarded under the Plan that does not qualify, as
an Incentive Stock Option.
2.15 "Option" shall mean any person who has been
granted a stock option under the Plan and who has executed a
written stock option agreement with the Company reflecting the
terms of such grant.
2.16 "Performance Award" shall mean any Award
thereunder of Shares, units or rights based upon, payable in,
or otherwise related to, Shares (including Restricted Stock),
or cash of an equivalent value, as die Committee may
determine, at the end of a specified performance period
established by the Committee.
2.17 "Plan" shall mean The Exploration Company 1995
Flexible Incentive Plan set forth herein.
2.18 "Reload Option" shall mean a stock option as
deemed in subsection 6.6(b) herein.
2.19 "Restricted Stock" shall mean any Award of
Shares under the Plan that are subject to restrictions or risk
of forfeiture.
2.20 "Retirement" shall mean termination of
employment other than discharge for cause, after age 65 or on
or before age 65 if pursuant to the terms of any retirement
plan maintained by the Company or any of its Subsidiaries in
which such person participates.
2.21 "Shares" shall mean shares of the Company's
Common Stock and any shares of capital stock or other
securities of the Company hereafter issued or issuable upon,
in respect of or in substitution or exchange for such Shares.
2.22 "Stock Appreciation Right" shall mean the
right of the holder thereof to receive an amount in cash or
Shares equal to the excess of the Fair Market Value of a Share
on the date of exercise over the Fair Market Value of a Share
on the date of the grant (or such other value as may be
specified in the agreement granting the Stock Appreciation
Right).
2.23 "Subsidiary" shall mean a subsidiary
corporation of the Company, as defined in Section 424(f) of
the Code.
2.24 "Tandem Stock Appreciation Right" shall mean
a Stock Appreciation Right granted in connection with an Award
which is a stock option.
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Section 3. ADMINISTRATION OF THE PLAN
3.1 Committee. The Plan shall be administered
and interpreted by the Committee.
3.2 Awards. Subject to the provisions of the
Plan and directions from the Board, the Committee is
authorized to:
(a) determine the persons to whom Awards are to
be granted;
(b) determine the types and combinations of
Awards to be granted, the number of Shares to be
covered by the Award, the pricing of the Award, the
time or times when the Award shall be granted and may
be exercised, the terms, performance criteria or
other conditions, vesting periods or any restrictions
for an Award, any restrictions on Shares acquired
pursuant to the exercise of an Award and any other
terms and conditions of an Award;
(c) conclusively interpret the provisions of the
Plan;
(d) prescribe, amend and rescind rules and
regulations relating to the Plan or make individual
decisions as questions arise, or both;
(e) determine whether, to what extent and under
what circumstances to provide loans from the Company
to participants to purchase Shares subject to Awards
under the Plan, and the terms and conditions of such
loans;
(f) rely upon employees of the Company for such
clerical and recordkeeping duties as may be necessary
in connection with the administration of the Plan;
and
(g) make all other determinations and take all
other actions necessary or advisable for the
administration of the Plan.
3.3 Procedures. A majority of the Committee
members shall constitute a quorum. All determinations of the
Committee shall be made by a majority of its members. All
questions of interpretation and application of the Plan or
pertaining to any question of fact or Award granted thereunder
shall be decided by the Committee, whose decision shall be
final, conclusive and binding upon the Company and each other
affected party.
Section 4. SHARES SUBJECT TO PLAN
4.1 Limitations. The maximum number of Shares that may
be issued with respect to Awards under the Plan shall not exceed
400,000 unless such maximum shall
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be increased or decreased by reason of changes in capitalization of
the Company as hereinafter provided. The Shares issued pursuant to
the Plan may be authorized but unissued Shares, or may be issued
Shares which have been reacquired by the Company.
4.2 Changes. To the extent that any Award under the
Plan, or any stock option or performance award granted under any prior
incentive plan of the Company, shall be forfeited, shall expire or
shall be canceled, in whole or in part then the number of Shares
covered by the Award or stock option so forfeited, expired or canceled
may again be awarded pursuant to the provisions of the Plan. In the
event that Shares are delivered to the Company in full or partial
payment of the exercise price for the exercise of a stock option
granted under the Plan or any prior incentive plan of the Company, the
number of Shares available for future Awards under the Plan shall be
reduced only by the net number of Shares issued upon the exercise of
the option. Awards that may be satisfied either by the issuance of
Shares or by cash or other consideration shall, until the form of
consideration to be paid is finally determined, be counted against the
maximum number of Shares that may be issued under the Plan. If the
Award is ultimately satisfied by the payment of consideration other
than Shares, as, for example, a stock option granted in tandem with a
Stock Appreciation Right that is settled by a cash payment of the
stock appreciation, such Shares may again be made the subject of an
Award under the Plan. Awards will not reduce the number of Shares
that may be issued pursuant to the Plan if the settlement of the Award
will not require the issuance of Shares, as, for example, a Stock
Appreciation Right that can be satisfied only by the payment of cash.
Section 5. ELIGIBILITY
Eligibility for participation in the Plan shall be confined to those
persons who are employed by the Company, and who are officers or directors of
the Company, or who are in managerial or other key positions within the
Company. In making any determination as to persons to whom Awards shall be
granted, the type of Award, and/or the number of Shares to be covered by the
Award, the Committee shall consider the position and responsibilities of the
person, his or her importance to the Company, the duties of such person, his or
her past, present and potential contributions to the growth and success of the
Company, and such other factors as the Committee shall deem relevant in
connection with accomplishing the purposes of the Plan.
Section 6. STOCK OPTIONS
6.1 Grants. The Committee may grant stock options alone
or in addition to other Awards granted under the Plan to any eligible
officer, director or other key employee. Each person so selected
shall be offered an option to purchase the number of Shares determined
by the Committee. The Committee shall specify whether such option is
an Incentive Stock Option or Non-Qualified Stock Option and any other
terms and conditions relating to such Award. To the extent that any
stock option does not qualify as an Incentive Stock Option (whether
because of its provisions or the time or manner of its exercise or
otherwise), such stock option or the portion thereof which does not
qualify
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shall constitute a separate Non-Qualified Stock Option. Each such
person so selected shall have a reasonable period of time within which
to accept or reject the offered option. Failure to accept within the
period so fixed by the Committee may be treated as a rejection. Each
person who accepts an option shall enter into a written agreement with
the Company, in such form as the Committee may prescribe, setting
forth the terms and conditions of the option, consistent with the
provisions of the Plan. The Option and the Company shall enter into
option agreements for Incentive Stock Options and NonQualified Stock
Options. At any time and from time to time, the Option and the
Company may agree to modify an option agreement so that an incentive
Stock Option may be converted to a Non-Qualified Stock Option.
The Committee may require that an Option meet certain conditions
before the option or a portion thereof may vest or be exercised, as, for
example, that the Option remain in the employ of the Company for a stated
period or periods of time before the option, or stated portions thereof may
vest or be exercised.
6.2 Option Price. The option exercise price of the
Shares covered by each stock option shall be determined by the
Committee; provided, however, that the option exercise price of an
Incentive Stock Option shall not be less than one hundred percent
(100%) of the Fair Market Value of Shares on the date of the grant of
such Incentive Stock Option.
6.3 Incentive Stock Options Limitations.
(a) In no event shall any person be granted
Incentive Stock Options to the extent that the Shares covered
by any Incentive Stock Options (and any incentive stock
options granted under any other plans of the Company and its
Subsidiaries) that may be exercised for the first time by such
person in any calendar year have an aggregate Fair Market
Value in excess of $100,000. For this purpose, the Fair
Market Value of the Shares shall be determined as of the dates
on which the Incentive Stock Options are granted. It is
intended that the limitation on Incentive Stock Options
provided in this subsection 6.3(a) be the maximum limitation
on options which may be considered Incentive Stock Options
under the Code.
(b) Notwithstanding anything herein to the
contrary, in no event shall any employee owning more than ten
percent (10%) of the total combined voting power of the
Company or any Subsidiary be granted an Incentive Stock Option
thereunder unless the option exercise price shall be at least
one hundred ten percent (110%) of the Fair Market Value of the
Shares subject to such Incentive Stock Option at the time that
the Incentive Stock Option is granted and the term of such
Incentive Stock Option shall not exceed five (5) years.
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6.4 Option Term. Subject to subsection 6.3(b) hereof,
the term of a stock option shall be for such period of months or years
from the date of its grant as may be determined by the Committee;
provided, however, that no Incentive Stock Option shall be exercisable
later than ten (10) years from the date of its grant. Furthermore, no
Incentive Stock Option may be exercised unless, at the time of such
exercise, the Option is, and has been continuously since the date of
grant of his or her Incentive Stock Option, employed by the Company,
except that:
(a) An Incentive Stock Option may, to the extent
vested, be exercised within the period of three months after
the date the Participant ceases to be an employee of the
Company (or within such lesser period as may be specified in
the applicable option agreement), provided that the option
agreement may designate a longer exercise period and that the
exercise after such three-month period shall be treated as the
exercise of a Non-Qualified Stock Option under the Plan;
(b) If the Option dies while in the employ of the
Company, or within three months after the Option ceases to be
such an employee, the Incentive Stock Option may, to the
extent vested, be exercised by the Optionee's Designated
Beneficiary within the period of one year after the date of
death (or within such lesser period as may be specified in the
applicable option agreement); and
(c) If the Option ceases to be an employee of the
Company by reason of the Optionee's Disability, the Incentive
Stock Option may be exercised within the period of one year
after the date of Disability (or within such lesser period as
maybe specified in the applicable option agreement).
6.5 Vesting of Stock Options.
(a) Each stock option granted thereunder may only
be exercised to the extent that the Option is vested in such
option. Each stock option shall vest separately in accordance
with the option vesting schedule, if any, determined by the
Committee in its sole discretion, which will be incorporated
in the stock option agreement entered into between the Company
and each Option. The option vesting schedule will be
accelerated if, in the sole discretion of the Committee, the
Committee determines that acceleration of the option vesting
schedule would be desirable for the Company.
(b) In the event of the dissolution or
liquidation of the Company, each stock option granted under
the Plan shall terminate as of a date to be fixed by the
Board; provided, however, that not less than thirty (30) days'
written notice of the date so fixed shall be given to each
Option and each such Option shall be fully vested in and shall
have the right during such period to exercise the option, even
though such option would not otherwise be exercisable under
the option vesting
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schedule. At the end of such period, any unexercised option
shall terminate and be of no other effect.
(c) In the event of a Reorganization (as defined
in Section 2.3 hereof):
(1) If there is no plan or agreement
respecting the Reorganization, or if such plan or
agreement does not specifically provide for the
change, conversion or exchange of the Shares under
outstanding and unexercised stock options for other
securities thin the provisions of subsection 6.5(b)
shall apply as if the Company had dissolved or been
liquidated on the effective date of the
Reorganization; or
(2) If there is a plan or agreement
respecting the Reorganization, and if such plan or
agreement specifically provides for the change,
conversion or exchange of the Shares under
outstanding and unexercised stock options for
securities of another corporation, then the Board
shall adjust the Shares under such outstanding and
unexercised stock options (and shall adjust the
Shares remaining under the Plan which are then
available to be awarded under the Plan, if such plan
or agreement makes no specific provision therefor) in
a manner not inconsistent with the provisions of such
plan or agreement for the adjustment change,
conversion or exchange of such Shares and such
options.
(d) In the event of a Change in Control of the
Company, all stock options and any associated Stock
Appreciation Rights shall become fully vested and immediately
exercisable and the vesting of all performance-based stock
options shall be determined as if the performance period or
cycle applicable to such stock options had ended immediately
upon such Change in Control; provided, however, that if in the
opinion of counsel to the Company the immediate exercisability
of options when taken into consideration with all other
"parachute payments" as defined in Section 28OG of the Code,
as amended, would result in an "excess parachute payment" as
defined in such section as well as an exercise tax imposed by
Section 4999 of the Code, such options and any associated
Stock Appreciation Rights shall become fully vested and
immediately exercisable, except as and to the extent the
Committee, in its sole discretion, shall otherwise determine,
and which determination by the Committee shall be based solely
upon maximizing the after-tax benefits to be received by any
such Option.
6.6 Exercise of Stock Options.
(a) Stock options may be exercised as to Shares
only in amounts and at intervals of time specified in the
written option agreement between the Company and the Option.
Each exercise of a stock option, or any part thereof, shall be
evidenced by a notice in writing to the Company. The purchase
price of
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the Shares as to which an option shall be exercised shall be
paid in full at the time of exercise, and may be paid to the
Company either:
(1) in cash (including check, bank draft
or money order); or
(2) by the delivery of Shares having a
Fair Market Value equal to the aggregate option rate;
(3) by a combination of cash and Shares;
or
(4) by other consideration deemed
acceptable by the Committee in its sole discretion.
(b) If an Option delivers Shares (including
Shares of Restricted Stock) already owned by him or her in
full or partial payment of the exercise price for any stock
option granted under the Plan or any prior incentive plan of
the Company, or if the Option elects to have the Company
reflect that number of Shares out of the Shares being acquired
through the exercise of the option having a Fair Market Value
equal to the exercise price of the stock option being
exercised, the Committee may authorize the automatic grant of
a new option (a "Reload Option") for that number of Shares as
shall equal the number of already owned Shares surrendered
(including Shares of Restricted Stock) or newly acquired
Shares being retained in payment of the option exercise price
of the underlying stock option being exercised. The grant of
a Reload Option will become effective upon the exercise of the
underlying stock option. The option exercise price of the
Reload Option shall be the Fair Market Value of a Share on the
effective date of the grant of the Reload Option. Each Reload
Option shall be exercisable no earlier than six (6) months
from the date of its grant and no later than the time when the
underlying stock option being exercised could be last
exercised. The Committee may also specify additional terms,
conditions and restrictions for the Reload Option and the
Shares to be acquired upon the exercise thereof.
(c) The amount, as determined by the Committee,
of any federal, state or local tax required to be withheld by
the Company due to the exercise of a stock option shall be
satisfied by payment by the Option to the Company of the
amount of such withholding obligation in cash or other
consideration acceptable to the Committee in its sole
discretion.
(d) An Option shall not have any of the rights of
a stockholder of the Company with respect to the Shares
covered by a stock option except to the extent that one or
more certificates representing such Shares shall have been
delivered to the Option, or the Option has been determined to
be a stockholder of record by the Company's transfer agent,
upon due exercise of the option.
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6.7 Date of a Stock Option Grant. The granting of a
stock option shall take place only upon the execution and delivery by
the Company and an optionee of an option agreement. Neither any
action taken by the Board nor anything contained in the Plan or in any
resolution adopted or to be adopted by the Board or the stockholders
of the Company shall constitute the granting of a stock option under
the Plan.
Section 7. STOCK APPRECIATION RIGHTS
7.1 Grants. The Committee may grant to any eligible
employee either Non-Tandem Stock Appreciation Rights or Tandem Stock
Appreciation Rights. Stock Appreciation Rights shall be subject to
such terms and conditions as the Committee shall impose. The grant of
the Stock Appreciation Right may provide that the holder may be paid
for the value of the Stock Appreciation Right either in cash or in
Shares, or a combination thereof, at the discretion of the Committee.
In the event of the exercise of a Stock Appreciation Right payable in
Shares, the holder of the Stock Appreciation Right shall receive that
number of whole Shares of stock of the Company having an aggregate
Fair Market Value on the date of exercise equal to the value obtained
by multiplying (i) either (a) in the case of a Tandem Stock
Appreciation Right, the difference between the Fair Market Value of a
Share on the date of exercise over the per share exercise price of the
related option, or (b) in the case of a Non-Tandem Stock Appreciation
Right the difference between the Fair Market Value of a Share on the
date of exercise over the Fair Market Value on the date of the grant
by (ii) the number of Shares as to which the Stock Appreciation Right
is exercised. However, notwithstanding the foregoing, the Committee,
in its sole discretion, may place a ceiling on the amount payable upon
exercise of a Stock Appreciation Right but any such limitation shall
be specified at the time that the Stock Appreciation Right is granted.
7.2 Exercisability. A Tandem Stock Appreciation Right
may be granted at the time of the grant of the related stock option
or, if the related stock option is a Non-Qualified Stock Option, at
any time thereafter during the term of the stock option. A Tandem
Stock Appreciation Right granted in connection with an Incentive Stock
Option (i) may be exercised at, and only at, the times and to the
extent the related Incentive Plan Stock Option is exercisable, (ii)
expires upon the termination of the related Incentive Stock Option,
(iii) may not exceed 100% of the difference between the exercise price
of the related Incentive Stock Option and the market price of the
Shares subject to the related Incentive Stock Option at the time the
Tandem Stock Appreciation Right is exercised and (iv) may be exercised
at, and only at, such times as the market price of the Shares subject
to the related Incentive Stock Option exceeds the exercise price of
the related Incentive Stock Option. The Tandem Stock Appreciation
Right may be transferred at, and only at, the times and to the extent
the related stock option is transferable. If a Tandem Stock
Appreciation Right is granted, there shall be surrendered and canceled
from the related option at the time of exercise of the Tandem Stock
Appreciation Right, in lieu of exercise under the related option, that
number of Shares as shall equal the number of Shares as to which the
Tandem Stock Appreciation Right shall have been exercised.
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7.3 Certain Limitations on Non-Tandem Stock Appreciation
Rights. A Non-Tandem Stock Appreciation Right will be exercisable as
provided by the Committee and will have such other terms and
conditions as the Committee may determine. A Non-Tandem Stock
Appreciation Right is subject to acceleration of vesting or immediate
termination in certain circumstances in the same manner as stock
options pursuant to subsections 6.4 and 6.5 of the Plan.
7.4 Limited Stock Appreciation Rights. The Committee is
also authorized to grant "limited stock appreciation rights," either
as Tandem Stock Appreciation Rights or Non-Tandem Stock Appreciation
Rights. Limited stock appreciation rights would become exercisable
only upon the occurrence of a Change in Control or such other event as
the Committee may designate at the time of grant or thereafter.
Section 8. RESTRICTED STOCK
8.1 Grants. The Committee may grant Awards of Restricted
Stock for no cash consideration, for such minimum consideration as may
be required by applicable law, or for such other consideration as may
be specified by the grant. The terms and conditions of the Restricted
Stock shall be specified by the grant agreement. The Committee, in
its sole discretion, may specify any particular rights which the
person to whom an Award of Restricted Stock is made shall have in the
Restricted Stock during the restriction period and the restrictions
applicable to the particular Award, the vesting schedule (which may be
based on service, performance or other factors) and rights to
acceleration of vesting (including, without limitation, whether
non-vested Shares are forfeited or vested upon termination of
employment). Further, the Committee may award performance-based
Restricted Stock by conditioning the grant, or vesting or such other
factors, such as the release, expiration or lapse of restrictions upon
any such Award (including the acceleration of any such conditions or
terms) of such Restricted Stock upon the attainment of specified
performance goals or such other factors as the Committee may
determine. The Committee shall also determine when the restrictions
shall lapse or expire and the conditions, if any, under which the
Restricted Stock will be forfeited or sold back to the Company. Each
Award of Restricted Stock may have different restrictions and
conditions. The Committee, in its discretion, may prospectively
change the restriction period and the restrictions applicable to any
particular Award of Restricted Stock. Unless otherwise set forth in
the Plan, Restricted Stock may not be disposed of by the recipient
until the restrictions specified in the Award expire.
8.2 Awards. and Certificates. Any Restricted Stock
issued hereunder may be evidenced such manner as the Committee, in its
sole discretion, shall deem appropriate including, without limitation,
book-entry registration or issuance of a stock certificate or
certificates. In the event any stock certificate is issued in respect
of Shares of Restricted Stock awarded hereunder, such certificate
shall bear an appropriate legend with respect to the restrictions
applicable to such Award. The Company may retain, at its option, the
physical custody of any stock certificate representing any awards of
Restricted Stock
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during the restriction period or require that the Restricted Stock be
placed in escrow or trust, along with a stock power endorsed in blank,
until all restrictions are removed or expire.
Section 9. PERFORMANCE AWARDS
9.1 Grants. A Performance Award may consist of either or
both, as the Committee may determine, of (i) "Performance Shares" or
the right to receive Shares, Restricted Stock or cash of an equivalent
value, or any combination thereof as the Committee may determine, or
(ii) "Performance Units," or the right to receive a fixed dollar
amount payable in cash, Common Stock, Restricted Stock or any
combination thereof, as the Committee may determine. The Committee
may grant Performance Awards to any eligible employee, for no cash
consideration, for such minimum consideration as may be required by
applicable law or for such other consideration as may be specified at
the time of the grant. The terms and conditions of Performance Awards
shall be specified at the time of the grant and may include provisions
establishing the performance period, the performance criteria to be
achieved during a performance period the criteria used to determine
vesting (including the acceleration thereof), whether Performance
Awards are forfeited or vest upon termination of employment during a
performance period and the maximum or minimum settlement values. Each
Performance Award shall have its own terms and conditions, which shall
be determined in the discretion of the Committee. If the Committee
determines, in its sole discretion, that the established performance
measures or objectives are no longer suitable because of a change in
the Company's business, operations, corporate structure or for other
reasons that the Committee deems satisfactory, the Committee may
modify the performance measures or objectives and/or the performance
period.
9.2 Terms and Conditions. Performance Awards may be
valued by reference to the Fair Market Value of a Share or according
to any formula or method deemed appropriate by the Committee, in its
sole discretion, including, but not limited to, achievement of
specific financial, production, sales, cost or earnings performance
objectives that the Committee believes to be relevant to the Company's
business and for remaining in the employ of the Company for a
specified period of time, or the Company's performance or the
performance of its Common Stock measured against the performance of
the market the Company's industry segment or its direct competitors.
Performance Awards may be paid in cash, Shares (including Restricted
Stock) or other consideration, or any combination thereof If payable
in Shares, the consideration for the issuance of the Shares may be the
achievement of the performance objective established at the time of
the grant of the Performance Award. Performance Awards may be payable
in a single payment or in installments and may be payable at a
specified date or dates or upon attaining the performance objective,
all at the Committee's discretion. The extent to which any applicable
performance objective has been achieved shall be conclusively
determined by the Committee.
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Section 10. DIVIDEND EQUIVALENT RIGHTS
The Committee may grant a Dividend Equivalent Right either as a
component of another Award or as a separate Award, and, in general, each such
holder of a Dividend Equivalent Right that is outstanding on a dividend record
date for the Company's Common Stock shall be credited with an amount equal to
the cash or stock dividends or other distributions that would have been
received had the Shares covered by the Award been issued and outstanding on the
dividend record date. The terms and conditions of the Dividend Equivalent
Right shall be specified by the grant. Dividend equivalents credited to the
holder of a Dividend Equivalent Right may be paid currently or may be deemed to
be reinvested in additional Shares (which may thereafter accrue additional
Dividend Equivalent Rights). Any such reinvestment shall be at the Fair Market
Value at the time thereof. Dividend Equivalent Rights may be settled in cash
or Shares, or a combination thereof, in a single payment or in installments. A
Dividend Equivalent Right granted as a component of another Award may provide
that such Dividend Equivalent Right shall be settled upon exercise, settlement
or payment for or lapse of restrictions on such other Award, and that such
Dividend Equivalent Right shall expire or be forfeited or annulled under the
same conditions as such other Award. A Dividend Equivalent Right granted as a
component of another Award may also contain terms a conditions different from
such other Award.
Section 11. OTHER AWARDS
The Committee may grant to any eligible employee other forms of Awards
based upon, payable in or otherwise related to, in whole or in part, Shares if
the Committee, in its sole discretion, determines that such other form of Award
is consistent with the purposes and restrictions of the Plan. The terms and
conditions of such other form of Award shall be specified by the grant
including, but not limited to, the price, if any, and the vesting schedule, if
any. Such Awards may be granted for no cash consideration, for such minimum
consideration as may be required by applicable law or for such other
consideration as may be specified by the grant.
Section 12. COMPLIANCE WITH SECURITIES AND OTHER LAWS
In no event shall the Company be required to sell or issue Shares
under any Award if the sale or issuance thereof would constitute a violation of
applicable federal or state securities laws or regulations or a violation of
any other law or regulation of any governmental or regulatory agency or
authority or any national securities exchange. As a condition to any sale or
issuance of Shares, the Company may place legends on Shares, issue stop
transfer orders and require such agreements or undertakings as the Company may
deem necessary or advisable to assure compliance with any such laws or
regulations, including, if the Company or its counsel deems it appropriate,
representations from the person to whom an Award is granted that he or she is
acquiring the Shares solely for investment and not with a view to distribution
and that no distribution of the Shares will be made unless registered pursuant
to applicable federal and state securities laws, or in the opinion of counsel
of the Company, such registration is unnecessary.
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Section 13. ADJUSTMENTS UPON CHANGES IN CAPITALIZATION OR REORGANIZATION
The value of an Award in Shares shall be adjusted from time to time as
follows:
(a) Subject to any required action by stockholders, the
number of Shares covered by each outstanding Award, and the exercise
price, shall be proportionately adjusted for any increase or decrease
in the number of issued Shares of the Company resulting from a
subdivision or consolidation of Shares or the payment of a stock
dividend (but only in Shares) or any other increase or decrease in the
number of Shares affected without receipt of consideration by the
Company.
(b) Subject to any required action by stockholders, if
the Company shall be the surviving corporation in any Reorganization,
merger or consolidation, each outstanding Award shall pertain to and
apply to the securities to which a holder of the number of Shares
subject to the Award would have been entitled, and if a plan or
agreement reflecting any such event is in effect that specifically
provides for the change, conversion or exchange of Shares, then any
adjustment to Shares relating to an Award hereunder shall not be
inconsistent with the terms of any such plan or agreement.
(c) In the event of a change in the Shares of the Company
as presently constituted, which is limited to a change of par value
into the same number of Shares with a different par value or without
par value, the Shares resulting from any such change shall be deemed
to be the Shares within the meaning of the Plan.
To the extent that the foregoing adjustments relate to stock
or securities of the Company, such adjustments shall be made by the
Board, whose determination shall be final, binding and conclusive.
Except as hereinbefore expressly provided in the Plan, any
person to whom an Award is granted shall have no rights by reason of
any subdivision or consolidation of stock of any class or the payment
of any stock dividend or any other increase or decrease in the number
of shares of stock of any class or by reason of any dissolution,
liquidation, reorganization, merger or consolidation, or spin-off of
assets or stock of another corporation, and any issue by the Company
of shares of stock of any class, or securities convertible into shares
of stock of any class, shall not affect and no adjustment by reason
thereof shall be made with respect to, the number or exercise price of
Shares subject to an Award.
The grant of an Award pursuant to the Plan shall not affect in
any way the right or power of the Company to make adjustments,
reclassifications, Reorganizations or changes of its capital or
business structure or to merge or to consolidate or to dissolve,
liquidate or sell or transfer all or any part of its business or
assets.
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Section 14. AMENDMENT OR TERMINATION OF THE PLAN
14.1 Amendment of the Plan. Notwithstanding anything
contained in the Plan to the contrary, all provisions of the Plan may
at any time or from time to time be modified or amended by the Board;
provided, however, that no Award at any time outstanding under the
Plan may be modified, unpaired or canceled adversely to the holder of
the Award without the consent of such holder; and provided, further,
that the Plan may not be amended without approval by the holders of a
majority of the Shares of the Company represented and voted at a
meeting of the stockholders (a) to increase the maximum number of
Shares subject to the Plan, (b) to materially modify the requirements
as to eligibility for participation in the Plan, (c) to decrease the
minimum exercise price for options, (d) to otherwise materially
increase the benefits accruing to persons to whom Awards may be made
under the Plan, as amended, or (e) if such approval is otherwise
necessary, to comply with Rule 16b-3 promulgated under the Exchange
Act as amended, or to comply with any other applicable laws,
regulations or listing requirements, or to qualify for an exemption or
characterization that is deemed desirable by the Board.
14.2 Termination of the Plan. The Board may suspend or
terminate the Plan at any time, and such suspension or termination may
be retroactive or prospective. However, no Award may be granted on or
after the tenth anniversary of the adoption of the Plan. Termination
of the Plan shall not impair or affect any Award previously granted
hereunder and the rights of the holder of the Award shall remain in
effect until the Award has been exercised in its entirety or has
expired or otherwise has been terminated by the terms of such Award.
Section 15. AMENDMENTS AND ADJUSTMENTS TO AWARDS
The Committee may amend, modify or terminate any outstanding Award
with the Participants consent at any time prior to payment or exercise in any
manner not inconsistent with the terms of the Plan, including, without
limitation, (i) to change the date or dates as of which (A) an option becomes
exercisable or (B) a performance-based Award is deemed earned, (ii) to amend
the terms of any outstanding Award to provide an exercise price per share which
is higher or lower than the then current exercise price per share of such
outstanding Award or (iii) to cancel an Award and grant a new Award in
substitution therefor under such different terms and conditions as it
determines in its sole and complete discretion to be appropriate including, but
not limited to, having an exercise price per share which may be higher or lower
than the exercise price per share of the canceled Award. The Committee is also
authorized to make adjustments in the terms and conditions of, and the criteria
included in, Awards in recognition of unusual or nonrecurring events
(including, without limitation, the events described in Section 13 hereof
affecting the Company, or the financial statements of the Company or any
Affiliate, or of changes in applicable laws, regulations or accounting
principles, whenever the Committee determines that such adjustments are
appropriate in order to prevent reduction or enlargement of the benefits or
potential benefits intended to be made available under the Plan. Any provision
of the Plan or any agreement regarding an Award to the contrary
notwithstanding, the Committee may cause any
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Award granted to be canceled in consideration of a cash payment or alternative
Award made to the holder of such canceled Award equal in value to the Fair
Market Value of such canceled Award. The determinations of value under this
Section 15 shall be made by the Committee in its sole discretion.
Section 16. GENERAL PROVISIONS
16.1 No Limit on Other Compensation Arrangements. Nothing
contained in the Plan shall prevent the Company from adopting or
continuing in effect other compensation arrangements, and such
arrangements may be either generally applicable or applicable only in
specific cases.
16.2 No Right to Employment. Nothing in the Plan or in
any Award, nor the grant of any Award, shall confer upon or be
construed as giving any recipient of an Award any right to remain in
the employ of the Company. Further, the Company may at any time
dismiss a participant in the Plan from employment, free from any
liability or any claim under the Plan, unless otherwise expressly
provided in the Plan or in any Award agreement. No employee,
participant or other person shall have any claim to be granted any
Award, and there is no obligation for uniformity or treatment of
employees, participants or holders or beneficiaries of Awards.
16.3 GOVERNING LAW. THE VALIDITY, CONSTRUCTION AND EFFECT
OF THE PLAN AND ANY RULES AND REGULATIONS RELATING TO THE PLAN SHALL
BE DETERMINED IN ACCORDANCE WITH THE LAWS OF THE STATE OF TEXAS.
16.4 Severability. If any provision of the Plan or any
Award is or becomes or is deemed to be invalid, illegal or
unenforceable in any jurisdiction or as to any person or Award, or
would disqualify the Plan or any Award under any law deemed applicable
by the Committee, such provision shall be construed or deemed amended
to conform to applicable laws, or if it cannot be construed or deemed
amended without in the sole determination of the Committee, materially
altering the intent of the Plan or the Award, such provision shall be
stricken as to such jurisdiction, person or Award and the remainder of
the Plan and any such Award shall remain in full force and effect.
16.5 No Fractional Shares. No fractional Shares shall be
issued or delivered pursuant to the Plan or any Award, and the
Committee shall determine whether cash, other securities or other
property shall be paid or transferred in lieu of any fractional Shares
or whether such fractional Shares or any rights thereto shall be
canceled, terminated or otherwise eliminated.
16.6 Headings. Headings are given to the subsections of
the Plan solely as a convenience to facilitate reference. Such
headings shall not be deemed in any way
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material or relevant to the construction or interpretation of the Plan
or any provision thereof.
16.7 Effective Date. The Plan shall be effective as of
the date of its approval by the holders of a majority of the Shares of
the Company represented and voting at the next Annual Meeting of
Stockholders. If the Plan is not approved by the stockholders at the
1994 Annual Meeting, after such date, the Plan and all Awards granted
hereunder, if any, shall be void.
16.8 Non-Transferability of Awards. Awards shall not be
transferable otherwise than by will or the laws of descent and
distribution, and Awards may be exercised, during the lifetime of the
holder, only by the holder; provided, however, that with the approval
of the Committee, Awards other than Incentive Stock Options may be
transferred as directed under a qualified domestic relations order.
Any attempted assignment, transfer, pledge, hypothecation or other
disposition of an Award contrary to the provisions hereof, or the levy
of any execution, attachment or similar process upon an Award shall be
null and void and without effect.
Section 17. NAMED EXECUTIVE OFFICERS
17.1 Applicability of Section 17. The provisions of this
Section 17 shall apply only to those executive officers (i) whose
compensation is required to be reported in the Company's proxy
statement pursuant to Item 402(a)(3)(i) and (ii) of Regulation S-K
under the general rules and regulations under the Exchange Act, as
amended, and (ii) whose total compensation, including estimated
Awards, is determined by the Committee to possibly be subject to the
limitations on deductions imposed by Section 162(m) of the Code
("Named Executive Officers"). In the event of any inconsistencies
between this Section 17 and the other Plan provisions as they pertain
to Named Executive Officers, the provisions of this Section 17 shall
control.
17.2 Establishment of Performance Goals. Awards for Named
Executive Officers, other than stock options and Stock Appreciation
Rights, shall be based on the attainment of certain performance goals.
No later than the earlier of (i) ninety (90) days after the
commencement of the applicable fiscal year or such other award period
as may be established by the Committee ("Award Period") and (ii) the
completion of twenty-five percent (25%) of such Award Period, the
Committee shall establish, in writing, the performance goals
applicable to each such Award for Named Executive Officers. At the
time the performance goals are established by the Committee, their
outcome must be substantially uncertain. In addition, the performance
goal must state, in terms of an objective formula or standard, the
method for computing the amount of compensation payable to the Named
Executive Officer if the goal is obtained. Such formula or standard
shall be sufficiently objective so that a third party with knowledge
of the relevant performance results could calculate the amount to be
paid to the subject Named Executive Officer. The material terms of
the performance goals for Named Executive Officers and
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the compensation payable thereunder shall be submitted to the
shareholders of the Company for their review and approval.
Shareholder approval shall be obtained for such performance goals
prior to any Award being paid to such Named Executive Officer. If the
shareholders do not approve such performance goals, no amount shall be
paid to such Named Executive Officer for such applicable Award Period
under the Plan. The disclosure of the "material terms" of a
performance goal and the compensation payable thereunder shall be
determined under the guidelines set forth under Section 162(m) of the
Code, and the Treasury Regulations thereunder.
17.3 Components of Awards. Each Award of a Named
Executive Officer, other than stock options and Stock Appreciation
Rights, shall be based on performance goals which are sufficiently
objective so that a third party having knowledge of the relevant facts
could determine whether the goal was met. Except as provided in
subsection 17.8 herein, performance measures which may serve as
determinants of Named Executive Officers Awards shall be limited to
the following measures: earnings per share; return on assets; return
on equity; return on capital; net profit after taxes; net profit
before taxes; economic value added; operating profits; stock price;
market share; and sales or expenses. Within ninety (90) days
following the end of each Award Period, the Committee shall certify in
writing that the performance goals, and any other material terms were
satisfied. Thereafter, Awards shall be made for each named Executive
Officer as determined by the Committee. The Awards may not vary from
the preestablished amount based on the level of achievement.
17.4 No Mid-Year Change in Awards. Except as provided in
subsections 17.8 and 17.9 herein, each Named Executive Officers Awards
shall be based exclusively on the performance measures established by
the Committee pursuant to subsection 17.2.
17.5 No Partial Award Period Participation. A Named
Executive Officer who becomes eligible to participate in the Plan
after performance goals have been established in an Award Period
pursuant to subsection 17.2 may not participation in the Plan prior to
the next succeeding Award Period, except with respect to Awards which
are stock options or Stock Appreciation Rights.
17.6 Performance Goals. Except as provided in subsection
17.8 herein, performance goals shall not be changed following their
establishment, and Named Executive Officers shall not receive any
payout, except with respect to Awards which are stock options or Stock
Appreciation Rights, when the minimum performance goals are not met or
exceeded.
17.7 Individual Performance and Discretionary Adjustments.
Except as provided in subsection 17.8 herein, subjective evaluations
of individual performance of Named Executive Officers shall not be
reflected in their Awards, other than Awards which are stock options
or Stock Appreciation Rights. The payment of such Awards shall be
entirely dependent upon the attainment of the preestablished
performance goals.
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17.8 Amendments. No amendment of the Plan with respect to
any Named Executive Officer may be made which would (i) increase the
maximum amount that can be paid to any one Participant under the Plan,
(ii) change the specified performance goal for payment of Awards, or
(iii) modify the requirements as to eligibility for participation in
the Plan, unless the Company's shareholders have first approved such
amendment in a manner which would permit the deduction under Section
162(m) of the Code of such payment in the fiscal year it is paid. The
Committee shall amend this Section 17 and such other provisions as it
deems appropriate, to cause amounts payable to Named Executive
Officers to satisfy the requirements of Section 162(m) and the
Treasury Regulations promulgated thereunder.
17.9 Stock Options and Stock Appreciation Rights.
Notwithstanding any provision of the Plan (including the provisions of
this Section 17) to the contrary, the amount of compensation which a
Named Executive Officer may receive with respect to stock options and
Stock Appreciation Rights which are granted hereunder is based solely
on an increase in the value of the applicable Shares after the date of
grant of such Award. Thus, no stock option may be granted hereunder
to a Named Executive Officer with an exercise price less than the Fair
Market Value of Shares on the date of grant. Furthermore, the maximum
number of Shares (or cash equivalent value) with respect to which
stock options or Stock Appreciation Rights may be granted hereunder to
any Named Executive Officer during any calendar year may not exceed
80,000 Shares, subject to adjustment as provided in Section 13
hereunder.
17.10 Maximum Amount of Compensation. The maximum amount
of compensation payable as an Award (other than an Award which is a
stock option or Stock Appreciation Right) to any Named Executive
Officer during any calendar year may not exceed $1,000,000.
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