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Exhibit 10.37
BTU INTERNATIONAL, INC.
1993 EQUITY INCENTIVE PLAN
1. PURPOSE
The purpose of this 1993 Equity Incentive Plan (the "Plan") is to advance
the interests of BTU International, Inc. (the "Company") by enhancing its
ability to attract and retain employees and other persons or entities who are in
a position to make significant contributions to the success of the Company and
its subsidiaries through ownership of shares of the Company's common stock
("Stock").
The Plan is intended to accomplish these goals by enabling the Company to
grant Awards in the form of Options, Stock Appreciation Rights, Restricted Stock
or Unrestricted Stock Awards, Deferred Stock Awards, Performance Awards, Loans
or Supplement Grants, or combinations thereof, all as more fully described
below.
2. ADMINISTRATION
The administrator of the Plan (the "Administrator") will be the Board of
Directors of the Company (the "Board") or a committee of the Board. The
Administrator will have authority, not inconsistent with the express provisions
of the Plan and in addition to other authority granted under the Plan, to (a)
grant Awards at such time or times as it may choose; (b) determine the size of
each Award, including the number of shares of Stock subject to the Award; (c)
determine the type or types of each Award; (d) determine the terms and
conditions of each Award; (e) waive compliance by a Participant (as defined
below) with any obligations to be performed by the Participant under an Award
and waive any term or condition of an Award; (f) amend or cancel an existing
Award in whole or in part (and if an award if canceled, grant another Award in
its place on such terms as the Administrator shall specify), except that the
Administrator may not, without the consent of the holder of an Award, take any
action under this clause with respect to such Award if such action would
adversely affect the rights of such holder; (g) prescribe the form or forms of
instruments that are required or deemed appropriate under the Plan, including
any written notices and elections required of Participants, and change such
forms from time to time; (h) adopt, amend and rescind rules and regulations for
the administration of the Plan; and (i) interpret the Plan and decide any
questions and settle all controversies and disputes that may arise in connection
with the Plan. Such
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determinations and actions of the Administrator, and all other determinations
and actions of the Administrator made or taken under authority granted by any
provision of the Plan, will be conclusive and will bind all parties. Nothing in
this paragraph shall be construed as limiting the power of the Administrator to
make adjustments under Section 7.3 or Section 8.6.
The Administrator may, in its discretion, delegate some or all of its
powers with respect to the Plan to a committee (the "Committee"), in which
event all references (as appropriate) to the Administrator hereunder shall be
deemed to refer to the Committee. The Committee, if one is appointed, shall
consist of at least two directors. A majority of the members of the Committee
shall constitute a quorum, and all determinations of the Committee shall be made
by a majority of its members. Any determination of the Committee under the Plan
may be made without notice or meeting of the Committee by a writing signed by a
majority of the Committee members. On and after registration of the Stock under
the Securities Exchange Act of 1934 (the "1934 Act"), the Administrator shall
delegate the power to select directors and officers to receive Awards under the
Plan and the timing, pricing and amount of such Awards to a committee of two or
more directors, all members of which shall be disinterested persons within the
meaning of Rule 16b-3 promulgated under Section 16 of the 1934 Act.
3. EFFECTIVE DATE AND TERM OF PLAN
The Plan will become effective on the date on which it is approved by the
stockholders of the Company. Grants of Awards under the plan may be made prior
to that date (but after Board adoption of the Plan), subject to such approval of
the Plan.
No Award may be granted under the Plan after February 1, 2003, but Awards
previously granted may extend beyond that date.
4. SHARES SUBJECT TO THE PLAN
Subject to the adjustment as provided in Section 8.6 below, the aggregate
number of shares of Stock that may be delivered under the Plan will be 541,183.
If any Award requiring exercise by the Participant for delivery of Stock
terminates without having been exercised in full, or if any Award payable in
Stock or cash is satisfied in cash rather than Stock, the number of shares of
Stock as to which such Award was not exercised or for which cash was substituted
will be available for future grants.
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Stock delivered under the Plan may be either authorized but unissued Stock
or previously issued Stock acquired by the Company and held in treasury. No
fractional shares of Stock will be delivered under the Plan.
The Administrator shall establish the maximum number of Awards that may be
granted as cash-only Awards intended to qualify under Rule 16a-1(c)(3)(i)
promulgated under Section 16 of the 1934 Act prior to the issuance of any such
Awards.
5. ELIGIBILITY AND PARTICIPATION
Those eligible to receive Awards under the Plan ("Participants") will be
persons in the employ of the Company or any of its subsidiaries ("Employees")
and other persons or entities (including without limitation non-Employee
directors of the Company or a subsidiary of the Company) who, in the opinion of
the Administrator, are in a position to make a significant contribution to the
success of the Company or its subsidiaries. A "subsidiary" for purposes of the
Plan will be a corporation in which the Company owns, directly or indirectly,
stock possessing 50% or more of the total combined voting power of all classes
of stock.
6. TYPES OF AWARDS
6.1. OPTIONS
(a) Nature of Options. An Option is an Award entitling the recipient on
exercise thereof to purchase Stock at a specified exercise price.
Both "incentive stock options," as defined in Section 422 of the Internal
Revenue Code of 1986, as amended (the "Code") (any Option intended to qualify as
an incentive stock option being hereinafter referred to as an "ISO"), and
Options that are not incentive stock options, may be granted under the Plan.
ISOs shall be awarded only to Employees.
(b) Exercise Price. The exercise price of an Option will be determined by
the Administrator subject to the following:
(1) The exercise price of an ISO shall not be less than 100% (110% in
the case of an ISO granted to a ten-percent shareholder) of the fair market
value of the Stock subject to the Option, determined as of the time the
Option is granted. A "ten-percent shareholder" is any person who at the
time of grant owns, directly or indirectly, or is deemed to own by reason
of the attribution rules of section 424(d) of the Code, stock possessing
more than 10% of the
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total combined voting power of all classes of stock of the Company or of
any of its subsidiaries.
(2) In no case may the exercise price paid for Stock which is part of
an original issue of authorized Stock be less than the par value per share
of the Stock.
(3) The Administrator may reduce the exercise price of an Option at
any time after the time of grant, but in the case of an Option originally
awarded as an ISO, only with the consent of the Participant.
(c) Duration of Options. The latest date on which an Option may be
exercised will be the tenth anniversary (fifth anniversary, in the case of an
ISO granted to a ten-percent shareholder) of the day immediately preceding the
date the Option was granted, or such earlier date as may have been specified by
the Administrator at the time the Option was granted.
(d) Exercise of Options. Options granted under any single Award will become
exercisable at such time or times, and on such conditions, as the Administrator
may specify. The Administrator may at any time and from time to time accelerate
the time at which all or any part of the Option may be exercised.
Any exercise of an Option must be in writing, signed by the proper person
and delivered or mailed to the Company, accompanied by (1) any documents
required by the Administrator and (2) payment in full in accordance with
paragraph (e) below for the number of shares for which the Option is exercised.
(e) Payment for Stock. Stock purchased on exercise of an Option must be
paid for as follows: (1) in cash or by check (acceptable to the Company in
accordance with guidelines established for this purpose), bank draft or money
order payable to the order of the Company or (2) if so provided by the
Administrator (not later than the time of grant, in the case of an ISO) (i)
through the delivery of shares of Stock which have been outstanding for at least
six months (unless the Administrator expressly approves a shorter period) and
which have a fair market value on the last business day preceding the date of
exercise equal to the exercise price, or (ii) by delivery of a promissory note
of the Option holder to the Company, payable on such terms as are specified by
the Administrator, or (iii) by delivery of an unconditional and irrevocable
undertaking by a broker to deliver promptly to the Company sufficient funds to
pay the exercise price, or (iv) by any combination of the permissible forms of
payment; provided, that if the Stock delivered upon exercise of the Option is
an original issue of authorized Stock, at least so much of the exercise price as
represents the par value of such Stock must be paid other than by the Option
holder's promissory note or personal check.
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(f) Discretionary Payments. If the fair market value of shares of Stock
subject to an Option (other than an Option which is in tandem with a Stock
Appreciation Right as described in Section 6.2 below) exceeds the exercise price
of the Option at the time of its exercise, the Administrator may cancel the
Option and cause the Company to pay in cash or in shares of Common Stock (at a
price per share equal to the fair market value per share) to the person
exercising the Option an amount equal to the difference between the fair market
value of the Stock which would have been purchased pursuant to the exercise
(determined on the date the Option is cancelled) and the aggregate exercise
price which would have been paid. The Administrator may exercise its discretion
to take such action only if it has received a written request from the person
exercising the Option, but such a request will not be binding on the
Administrator.
6.2. Stock Appreciation Rights.
(a) Nature of Stock Appreciation Rights. A Stock Appreciation Right is an
Award entitling the recipient on exercise of the Right to receive an amount, in
cash or Stock or a combination thereof (such form to be determined by the
Administrator), determined in whole or in part by reference to appreciation in
Stock value.
In general, a Stock Appreciation Right entitles the Participant to receive,
with respect to each share of Stock as to which the Right is exercised, the
excess of the share's fair market value on the date of exercise over its fair
market value on the date the Right was granted. However, the Administrator may
provide at the time of grant that the amount the recipient is entitled to
receive will be adjusted upward or downward under rules established by the
Administrator to take into account the performance of the Stock in comparison
with the performance of other stocks or an index or indices of other stocks. The
Administrator may also grant Stock Appreciation Rights providing that following
a change in control of the Company, as determined by the Administrator, the
holder of such Right will be entitled to receive, with respect to each share of
Stock subject to the Right, an amount equal to the excess of a specified value
(which may include an average of values) for a share of Stock during a period
preceding such change in control over the fair market value of a share of Stock
on the date the Right was granted.
(b) Grant of Stock Appreciation Riqhts. Stock Appreciation Rights may be
granted in tandem with, or independently of, Options granted under the Plan. A
Stock Appreciation Right granted in tandem with an Option which is not an ISO
may be granted either at or after the time the Option is granted. A Stock
Appreciation Right granted in tandem with an ISO may be granted only at the time
the Option is granted.
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(c) Rules Applicable to Tandem Awards. When Stock Appreciation Rights are
granted in tandem with Options, the following will apply:
(1) The Stock Appreciation Right will be exercisable only at such time
or times, and to the extent, that the related Option is exercisable and
will be exercisable in accordance with the procedure required for exercise
of the related Option.
(2) The Stock Appreciation Right will terminate and no longer be
exercisable upon the termination or exercise of the related Option, except
that a Stock Appreciation Right granted with respect to less than the full
number of shares covered by an Option will not be reduced until the number
of shares as to which the related Option has been exercised or has
terminated exceeds the number of shares not covered by the Stock
Appreciation Right.
(3) The Option will terminate and no longer be exercisable upon the
exercise of the related Stock Appreciation Right.
(4) The Stock Appreciation Right will be transferable only with the
related Option.
(5) A Stock Appreciation Right granted in tandem with an ISO may be
exercised only when the fair market value of the Stock subject to the
Option exceeds the exercise price of such option.
(d) Exercise of Independent Stock Appreciation Rights. A Stock Appreciation
Right not granted in tandem with an Option will become exercisable at such time
or times, and on such conditions, as the Administrator may specify. The
Administrator may at any time accelerate the time at which all or any part of
the Right may be exercised.
Any exercise of an independent Stock Appreciation Right must be in writing,
signed by the proper person and delivered or mailed to the Company, accompanied
by any other documents required by the Administrator.
6.3. Restricted and Unrestricted Stock.
(a) Nature of Restricted Stock Award. A Restricted Stock Award entitles the
recipient to acquire, for a purchase price equal to at least par value, shares
of Stock subject to the restrictions described in paragraph (d) below
("Restricted Stock").
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(b) Acceptance of Award. A Participant who is granted a Restricted Stock
Award will have no rights with respect to such Award unless the Participant
accepts the Award by written instrument delivered or mailed to the Company
accompanied by payment in full of the specified purchase price, if any, of the
shares covered by the Award. Payment may be by certified or bank check or other
instrument acceptable to the Administrator.
(c) Rights as a Stockholder. A Participant who receives Restricted Stock
will have all the rights of a stockholder with respect to the Stock, including
voting and dividend rights, subject to the restrictions described in paragraph
(d) below and any other conditions imposed by the Administrator at the time of
grant. Unless the Administrator otherwise determines, certificates evidencing
shares of Restricted Stock will remain in the possession of the Company until
such shares are free of all restrictions under the Plan.
(d) Restrictions. Except as otherwise specifically provided by the Plan,
Restricted Stock may not be sold, assigned, transferred, pledged or otherwise
encumbered or disposed of, and if the Participant ceases to be a Participant by
reason of death or otherwise suffers a Status Change (as defined at Section 7.2
below) for any reason, must be offered to the Company for purchase for the
amount of cash paid for the Stock, or forfeited to the Company if no cash was
paid. These restrictions will lapse at such time or times, and on such
conditions, as the Administrator may specify. The Administrator may at any time
accelerate the time at which the restrictions on all or any part of the shares
will lapse.
(e) Notice of Election. Any Participant making an election under Section
83(b) of the Code with respect to Restricted Stock must provide a copy thereof
to the Company within 10 days of the filing of such election with the Internal
Revenue Service.
(f) Other Awards Settled with Restricted Stock. The Administrator may, at
the time any Award described in this Section 6 is granted, provide that any or
all the Stock delivered pursuant to the Award will be Restricted Stock.
(g) Unrestricted Stock. The Administrator may, in its sole discretion,
approve the sale to any Participant of shares of Stock free of restrictions
under the Plan for a price which is not less than the par value of the Stock.
6.4. Deferred Stock.
A Deferred Stock Award entitles the recipient to receive shares of Stock to
be delivered in the future. Delivery of the Stock will take place at such time
or times, and on such conditions, as the Administrator may specify. The
Administrator
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may at any time accelerate the time at which delivery of all or any part of the
Stock will take place. At the time any Award described in this Section 6 is
granted, the Administrator may provide that, at the time Stock would otherwise
be delivered pursuant to the Award, the Participant will instead receive an
instrument evidencing the Participant's right to future delivery of Deferred
Stock.
6.5. Performance Awards; Performance Goals.
(a) Nature of Performance Awards. A Performance Award entitles the
recipient to receive, without payment, an amount in cash or Stock or a
combination thereof (such form to be determined by the Administrator) following
the attainment of Performance Goals. Performance Goals may be related to
personal performance, corporate performance, departmental performance or any
other category of performance deemed by the Administrator to be important to the
success of the Company. The Administrator will determine the Performance Goals,
the period or period during which performance is to be measured and all other
terms and conditions applicable to the Award.
(b) Other Awards Subject to Performance Condition. The Administrator may,
at the time any Award described in this Section 6 is granted, impose the
condition (in addition to any conditions specified or authorized in this Section
6 or any other provision of the Plan) that Performance Goals be met prior to the
Participant's realization of any payment or benefit under the Award.
6.6. Loans and Supplemental Grants.
(a) Loans. The Company may make a loan to a Participant ("Loan"), either on
the date of or after the grant of any Award to the Participant. A Loan may be
made either in connection with the purchase of Stock under the Award or with the
payment of any Federal, state or local income tax with respect to income
recognized as a result of the Award. The Administrator will have full authority
to decide whether to make a Loan and to determine the amount, terms and
conditions of the Loan, including the interest rate (which may be zero), whether
the Loan is to be secured or unsecured or with or without recourse against the
borrower, the terms on which the Loan is to be repaid and the conditions, if
any, under which it may be forgiven.
(b) Supplemental Grants. In connection with any Award, the Administrator
may at the time such Award is made or at a later date, provide for and grant a
cash award to the Participant ("Supplemental Grant") not to exceed an amount
equal to (1) the amount of any federal, state and local income tax on income for
which the Participant may be liable with respect to the Award, determined by
assuming taxation at the highest marginal rate,
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plus (2) an additional amount on a grossed-up basis intended to make the
Participant whole on an after-tax basis after discharging all the Participant's
income tax liabilities arising from all payments under this Section 6. Any
payments under this subsection (b) will be made at the time the Participant
incurs Federal income tax liability with respect to the Award.
7. EVENTS AFFECTING OUTSTANDING AWARDS
7.1. Death.
If a Participant dies, the following will apply:
(a) All Options and Stock Appreciation Rights held by the Participant
immediately prior to death, to the extent then exercisable, may be exercised by
the Participant's executor or administrator or the person or persons to whom the
Option or Right is transferred by will or the applicable laws of descent and
distribution, at any time within the one year-period ending with the first
anniversary of the Participant's death (or such shorter or longer period as the
Administrator may determine), and shall thereupon terminate. In no event,
however, shall an Option or Stock Appreciation Right remain exercisable beyond
the latest date on which it could have been exercised without regard to this
Section 7. Except as otherwise determined by the Administrator, all Options and
Stock Appreciation Rights held by a Participant immediately prior to death that
are not then exercisable shall terminate at death.
(b) Except as otherwise determined by the Administrator, all Restricted
Stock held by the Participant must be transferred to the Company (and, in the
event the certificates representing such Restricted Stock are held by the
Company, such Restricted Stock will be so transferred without any further action
by the Participant) in accordance with Section 6.3 above.
(c) Any payment or benefit under a Deferred Stock Award, Performance Award,
or Supplemental Grant to which the Participant was not irrevocably entitled
prior to death will be forfeited and the Award canceled as of the time of death,
unless otherwise determined the Administrator.
7.2. Termination of Service (Other Than By Death).
If a Participant who is an Employee ceases to be an Employee for any reason
other than death, or if there is a termination (other than by reason of death)
of the consulting, service or similar relationship in respect of which a
non-Employee Participant was granted an Award hereunder (such termination of the
employment or other relationship being hereinafter referred to as a "Status
Change"), the following will apply:
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(a) Except as otherwise determined by the Administrator, all Options and
Stock Appreciation Rights held by the Participant that were not exercisable
immediately prior to the Status Change shall terminate at the time of the Status
Change. Any Options or Rights that were exercisable immediately prior to the
Status Change will continue to be exercisable for a period of three months (or
such shorter or longer period as the Administrator may determine), and shall
thereupon terminate, unless the Award provides by its terms for immediate
termination in the event of a Status Change or unless the Status Change results
from a discharge for cause which in the opinion of the Administrator casts such
discredit on the Participant as to justify immediate termination of the Award.
In no event, however, shall an Option or Stock Appreciation Right remain
exercisable beyond the latest date on which it could have been exercised without
regard to this Section 7. For purposes of this paragraph, in the case of a
Participant who is an Employee, a Status Change shall not be deemed to have
resulted by reason of (i) a sick leave or other bona fide leave of absence
approved for purposes of the Plan by the Administrator, so long as the
Employee's right to reemployment is guaranteed either by statute or by contract,
or (ii) a transfer of employment between the Company and a subsidiary or between
subsidiary, or to the employment of a corporation (or a parent or subsidiary
corporation of such corporation) issuing or assuming an option in a transaction
to which section 424(a) of the Code applies.
(b) Except as otherwise determined by the Administrator, all Restricted
Stock held by the Participant at the time of the Status Change must be
transferred to the Company (and, in the event the certificates representing such
Restricted Stock are held by the Company, such Restricted Stock will be so
transferred without any further action by the Participant) in accordance with
Section 6.3 above.
(c) Any payment or benefit under a Deferred Stock Award, Performance Award,
or Supplemental Grant to which the Participant was not irrevocably entitled
prior to the Status Change will be forfeited and the Award cancelled as of the
date of such Status Change unless otherwise determined by the Administrator.
7.3. Certain Corporate Transactions.
In the event of a consolidation or merger in which the Company is not the
surviving corporation or which results in the acquisition of substantially all
the Company's outstanding Stock by a single person or entity or by a group of
persons and/or entities acting in concert, or in the event of the sale or
transfer of substantially all the Company's assets or a dissolution or
liquidation of the Company (a "covered transaction"), all outstanding Awards
will terminate as of the
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effective date of the covered transaction. Prior to the effective date of the
covered transaction, the Administrator in its sole discretion may, with respect
to any or all Awards (or any portion thereof) then outstanding:
(a) (1) in the case of Options and Stock Appreciation Rights, make them
exercisable in full, (2) remove the restrictions from shares of Restricted
Stock, (3) cause the Company to make payment and provide benefits, in whole or
in part, under Deferred Stock Awards, Performance Awards, and Supplemental
Grants which would have been made or provided with the passage of time had the
transaction not occurred and the Participant not suffered a Status Change (or
died), (4) remove any performance-related or other conditions, and (5) forgive
all or any portion of the principal of or interest on a Loan; or
(b) with respect to an outstanding Award held by a Participant who,
following the covered transaction, will be employed by or otherwise providing
services to a corporation which is a surviving or acquiring corporation in such
transaction or an affiliate of such a corporation, arrange to have such
surviving or acquiring corporation or affiliate grant to the Participant a
replacement award which, in the judgment of the Administrator, is substantially
equivalent to the Award;
provided, that nothing in this Section 7.3 shall be construed as obligating the
Administrator to take any action under either (a) or (b) above.
8. GENERAL PROVISIONS
8.1. Documentation of Awards.
Awards will be evidenced by such written instruments, if any, as may be
prescribed by the Administrator from time to time. Such instruments may be in
the form of agreements to be executed by both the Participant and the Company,
or certificates, letters or similar instruments, which need not be executed by
the Participant but acceptance of which will evidence agreement to the terms
thereof.
8.2. Rights as a Stockholder, Dividend Equivalents.
Except as specifically provided by the Plan, the receipt of an Award will
not give a Participant rights as a stockholder; the participant will obtain such
rights, subject to any limitations imposed by the Plan or the instrument
evidencing the Award, upon actual receipt of Stock. However, the Administrator
may, on such conditions as it deems appropriate, provide that a Participant will
receive a benefit in lieu of cash dividends that would have been payable on any
or all Stock subject to the Participant's
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Award had such Stock been outstanding. Without limitation, the Administrator may
provide for payment to the Participant of amounts representing such dividends,
either currently or in the future, or for the investment of such amounts on
behalf of the Participant.
8.3. Conditions or Delivery of Stock.
The Company will not be obligated to deliver any shares of Stock pursuant
to the Plan or to remove restriction from shares previously delivered under the
Plan (a) until all conditions of the Award have been satisfied or removed, (b)
until, in the opinion of the Company's counsel, all applicable federal and state
laws and regulations have been complied with, (c) if the outstanding Stock is at
the time listed on any stock exchange or national market system, until the
shares to be delivered have been listed or authorized to be listed on such
exchange or system upon official notice of notice of issuance, and (d) until all
other legal matters in connection with the issuance and delivery of such shares
have been approved by the Company's counsel. If the sale of Stock has not been
registered under the Securities Act of 1933, as amended, the Company may
require, as a condition to exercise of the Award, such representations or
agreements as counsel for the Company may consider appropriate to avoid
violation of such Act and may require that the certificates evidencing such
Stock bear an appropriate legend restricting transfer.
If an Award is exercised by the Participant's legal representative, the
Company will be under no obligation to deliver Stock pursuant to such exercise
until the Company is satisfied as to the authority of such representative.
8.4. Tax Withholding.
The Company will withhold from any cash payment made pursuant to an Award
an amount sufficient to satisfy all federal, state and local withholding tax
requirements (the "withholding requirements").
In the case of an Award pursuant to which Stock may be delivered, the
Administrator will have the right to require that the Participant or other
appropriate person remit to the Company an amount sufficient to satisfy the
withholding requirements, or make other arrangements satisfactory to the
Administrator with regard to such requirements, prior to the delivery of any
Stock. If and to the extent that such withholding is required, the Administrator
may permit the Participant or such other person to elect at such time and in
such manner as the Administrator provides to have the Company hold back from the
shares to be delivered, or to deliver to the Company, Stock having a value
calculated to satisfy the withholding requirement. In the
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alternative, the Administrator may, at the time of grant of any such Award,
require that the Company withhold from any shares to be delivered Stock with a
value calculated to satisfy applicable tax withholding requirements.
If at the time an ISO is exercised the Administrator determines that the
Company could be liable for withholding requirements with respect to a
disposition of the Stock received upon exercise, the Administrator may require
as a condition of exercise that the person exercising the ISO agree (a) to
inform the Company promptly of any disposition (within the meaning of section
424(c) of the Code) of Stock received upon exercise, and (b) to give such
security as the Administrator deems adequate to meet the potential liability of
the Company for the withholding requirements and to augment such security from
time to time in any amount reasonably deemed necessary by the Administrator to
preserve the adequacy of such security.
8.5. Nontransferability of Awards.
No Award (other than an Award in the form of an outright transfer of cash
or Unrestricted Stock) may be transferred other than by will or by the laws of
descent and distribution, and during an employee's lifetime an Award requiring
exercise may be exercised only by the Participant (or in the event of the
Participant's incapacity, the person or persons legally appointed to act on the
Participant's behalf).
8.6. Adjustments in the Event of Certain Transactions.
(a) In the event of a stock dividend, stock split or combination of shares,
recapitalization or other change in the Company's capitalization after the
effective date of the Plan, the Administrator will make appropriate adjustments
to the maximum number of shares that may be delivered under the Plan under
Section 4 above, and will also make appropriate adjustments to the number and
kind of shares of stock or securities subject to Awards then outstanding or
subsequently granted, any exercise prices relating to Awards and any other
provision of Awards affected by such change.
(b) The Administrator may also make adjustments of the type described in
paragraph (a) above to take into account material changes in law or in
accounting practices or principles, distributions to common stockholders other
than stock dividends or normal cash dividends, mergers, consolidations,
acquisitions, dispositions or similar corporate transactions, or any other
event, if the Administrator determines that adjustments are appropriate to avoid
distortion in the operation of the Plan.
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8.7. EMPLOYMENT RIGHTS, ETC.
Neither the adoption of the Plan nor the grant of Awards will confer upon
any person any right to continued retention by the Company or any subsidiary as
an Employee or otherwise, or affect in any way the right of the Company or
subsidiary to terminate an employment, service or similar relationship at any
time. Except as specifically provided by the Administrator in any particular
case, the loss of existing or potential profit in Awards granted under the Plan
will not constitute an element of damages in the event of termination of an
employment, service or similar relationship even if the termination is in
violation of an obligation of the Company to the Participant.
8.8. DEFERRAL OF PAYMENTS.
The Administrator may agree at any time, upon request of the Participant,
to defer the date on which any payment under an Award will be made.
8.9. PAST SERVICES AS CONSIDERATION.
Where a Participant purchases Stock under an Award for a price equal to the
par value of the Stock the Administrator may determine that such price has been
satisfied by past services rendered by the Participant.
9. EFFECT, DISCONTINUANCE, CANCELLATION, AMENDMENT AND TERMINATION
Neither adoption of the Plan nor the grant of Awards to a Participant will
affect the Company's right to grant to such Participant awards that are not
subject to the Plan, to issue to such Participant Stock as a bonus or otherwise,
or to adopt other plans or arrangements under which Stock be issued to
Employees.
The Administrator may at any time or times amend the Plan or any
outstanding Award for any purpose which may at the time be permitted by law, or
may at any time terminate the Plan as to any further grants of Awards, provided
that (except to the extent expressly required or permitted by the Plan) no such
amendment will, without the approval of the stockholders of the Company,
effectuate a change for which stockholder approval is required in order for the
Plan to continue to qualify for the award of ISOs under section 422 of the Code
and to continue to qualify under Rule 16b-3 promulgated under Section 16 of the
1934 Act.
-14-
15
APPROVAL OF AMENDMENT NO. 1 TO THE 1993 EQUITY INCENTIVE PLAN
The 1993 Equity Incentive Plan (the "Incentive Plan") is administered
by the Compensation Committee and is designed to advance the Company's interests
by enhancing its ability to attract and retain employees and others in a
position to make significant contributions to the success of the Company through
ownership of shares of Common Stock. A total of 541,183 shares of Common Stock
which became available due to the expiration of the previous 1982 Stock Option
Plan, have been reserved for issuance under the Incentive Plan, subject to
adjustment for stock dividends and similar events. As of April 7, 1997 there
were 324,053 shares of Common Stock available for award. The closing price of
the Common Stock on that date was $ 2.75.
The Incentive Plan was adopted by the Board of Directors on February
22, 1993. Stockholders approved the Incentive Plan at the Annual Meeting of
Stockholders held on May 14. 1993. On April 23, 1997, the Board of Directors
adopted Amendment No. 1 to the Incentive Plan (the "Amendment") which provides
for per-individual limitations on the number of shares of Common Stock issuable
upon exercise of options and stock appreciation rights ("SARs") under the
Incentive Plan in order to comply with Section 162(m) of the Internal Revenue
Code. Stockholders are being requested to approve the Amendment at the Annual
Meeting. If the Amendment is not approved by the Stockholders, no additional
grants of options or SARs under the Incentive Plan will be permitted to be made
to the Named Executive Officers. The following summary, of the Incentive Plan
and the Amendment is qualified in its entirety by the full text of the Incentive
Plan and the Amendment which are available without charge upon request to Thomas
P. Kealy. Vice President, Corporate Controller and Chief Accounting Officer.
GENERAL
Under the Incentive Plan, the Compensation Committee may grant stock
options (both incentive stock options and nonstatutory options), stock
appreciation rights, restricted stock, unrestricted stock, deterred stock
grants, and performance awards, as well as loans in connection with such grants
and awards and cash payments intended to offset income taxes due with respect to
any such grant or award. Awards under the Incentive Plan may also include
provision for the payment of dividend equivalents with respect to the shares
subject to the awards. Employees of the Company and its subsidiaries and other
persons or entities who, in the Compensation Committee's opinion, are in a
position to make a significant contribution to the success of the Company are
eligible to receive awards under the Incentive Plan. The Amendment provides that
(i) the maximum number of shares of Common Stock for which options may be
granted to any individual in any year of the Incentive Plan shall be 250.000 and
(ii) the maximum number of shares of Common Stock subject to stock appreciation
rights granted to an individual in any year of the Incentive Plan shall likewise
be 250,000. These per-individual limitations are intended to be construed and
applied consistent with the rules and regulations under Section 162(m) of the
Internal Revenue Code.
Stock Options. The exercise price of an incentive stock option granted
under the Incentive Plan may not be less than 100% (1 l 0% in the case of ten
percent shareholders) of the fair market value of the Common Stock at the time
of grant. The exercise price of a nonstatutory option granted under the
Incentive Plan is determined by the Compensation Committee. The Compensation
Committee sets the term of each option, which cannot exceed ten years from grant
(five years from grant in the case of an incentive stock option granted to a
ten percent shareholder), and specifies the time or times each option will be
exercisable. The exercise price may be paid in cash or check acceptable to the
Company. Subject to certain additional limitations, the Compensation Committee
may also permit the exercise price to be paid by tendering shares of Common
Stock, by using a promissory note, by delivering to the Company an undertaking
by a broker to deliver promptly sufficient funds to pay the exercise price, or a
combination of the foregoing.
Stock Appreciation Rights (SARs). SARs may be granted either alone or
in tandem with stock option grants. Each SAP, entitles the participant, in
general, to receive upon exercise the excess of a share's fair market value at
the date of exercise over the share's fair market value on the date the SAP, was
granted. The Incentive Plan also provides for SARs entitling the participant,
upon exercise, to receive an amount based on certain other measures, including
SARs that entitle the recipient to receive, following a change in control or
the Company as determined by the Compensation Committee, an amount measured by
specified values or averages of values prior to the change in control. If an SAR
is granted in tandem with an option, the SAR will be exercisable only to the
extent the option is exercisable. To the extent the option is exercised, the
accompanying SAR will cease to be exercisable, and vice versa.
16
Stock Awards. The Incentive Plan provides for awards of nontransferable
shares of restricted Common Stock subject to forfeiture as well as of
unrestricted shares of Common Stock. Restricted Common Stock must be forfeited
to the Company if the participant ceases to be an employee before the
restriction lapse. Other awards under the Incentive Plan may also be settled
with restricted Common Stock.
The Incentive Plan also provides for deferred grants entitling the
recipient to receive shares of Common Stock in the future at such times and on
such conditions as the Compensation Committee may specify and performance awards
entitling the recipient to receive cash or Common Stock following the attainment
of performance goals determined by the Compensation Committee. Performance
conditions and provisions for deferred stock may also be attached to other
awards under the Incentive Plan.
The Compensation Committee may approve loans from the Company in
connection with the purchase of Common Stock under an award or the payment of
taxes in connection with an award, and may provide for outright cash grants to
make participants whole for certain taxes. A loan under the Incentive Plan will
have such provision as the Compensation Committee determines but may not have a
term exceeding ten years.
Except as otherwise provided by the Compensation Committee, if a
participant dies, options and SARs exercisable immediately prior to death may be
exercised by the participant's executor, administrator or transferee during a
period of one year following such death (or for the remainder of the original
term, if less). Options and SARs not exercisable at a participant's death
terminate. Outstanding awards of Restricted Stock must be transferred to the
Company upon a participant's death and, similarly, Deferred Stock grants,
performance awards and supplemental awards to which a participant is not
irrevocably entitled will be forfeited unless otherwise provided.
In the case of termination of a participant's association with the
Company for reasons other than death, options and SARs remain exercisable, to
the extent they were exercisable immediately prior to termination, for three
months (or for the remainder of their original term. if less), shares of
Restricted Stock must be resold to the Company and other awards terminate,
except as otherwise provided.
In the case of certain mergers, consolidations or other transactions in
which the Company is acquired or is liquidated, all outstanding awards will
terminate. The Compensation Committee may, however, in its discretion cause
unvested awards to vest or become exercisable, remove performance or other
conditions on the exercise of or vested right to an award, or in certain
circumstances provide for replacement awards.
FEDERAL TAX EFFECTS
The following discussion summarizes certain federal income tax
consequences of the exercise and receipt of options under the Incentive Plan.
The summary does not purport to cover federal employment tax or other federal
tax consequences that may be associated with the plans, nor does it cover state,
local or non-U.S., taxes.
Incentive Stock Options. In general, an optionee realizes no taxable
income upon the grant or exercise of an incentive stock oration ("ISO").
However, the exercise of an ISO may result in an alternative 'minimum tax
liability to the optionee. With certain exceptions, a disposition of shares
purchased under an ISO within two years from the date of grant or within one
year after exercise produces ordinary income to the optionee (and a deduction to
the Company) equal to the value of the shares at the time of exercise less the
exercise price. Any additional gain recognized in the disposition is treated as
a capital gain for which the Company is not entitled to a deduction. If the
optionee does not dispose of the shares until after the expiration of these
one-and two-year holding periods, any gain or loss recognized upon a subsequent
sale is treated as a long-term capital gain or loss for which the Company is not
entitled to a deduction.
17
Nonstatutory Options. In general, in the case of a nonstatutory option,
the optionee has no taxable income at the time of grant but realizes income in
connection with exercise of the option in an amount equal to the excess (at time
of exercise) of the fair market value of the shares acquired upon exercise over
the exercise price; a corresponding deduction is available to the Company; and
upon a subsequent sale or exchange of the shares, appreciation and depreciation
after the date of exercise is treated as capital gain or loss for which the
Company is not entitled to a deduction.
In general, an ISO that is exercised more than three months after
termination of employment (other than termination by reason of death) is treated
as a nonstatutory option. ISOs granted after 1986 are also treated as
nonstatutory options to the extent they first become exercisable by an
individual in any calendar year for shares having a fair market value
(determined as of the date of grant) in excess of $100,000.
Under the so-called "golden parachute" provisions of the Internal
Revenue Code, options that vest in connection with a change in control of the
Company may be required to be valued and taken into account in determining
whether the participant has received payments in the nature of compensation that
are contingent on the change in control ("parachute payments") equal to or
greater than three tunes the participant's average compensation for the five
years ended prior to the year in which the change in control occurs. If this
limit is exceeded, the excess of the participant's parachute payments over one
times the five-year average base amount may be subject to an additional 20%
federal tax and may be nondeductible to the Company.