EXHIBIT 10.2
IPG PHOTONICS CORPORATION
2006 INCENTIVE COMPENSATION PLAN
(As adopted February 28, 2006)
IPG Photonics Corporation, USA, Inc. (the "Company") hereby establishes the IPG
Photonics Corporation 2006 Incentive Compensation Plan for the benefit of its
eligible Participants (as hereinafter defined) for the purposes hereinafter set
forth. The Plan permits the award of Stock Options, Restricted Stock,
Performance Shares, Performance Units, Stock Units, Cash, and SARs.
1. DEFINITIONS
The following terms shall have the following meanings unless the context
indicates otherwise:
1.1. "Affiliate" shall mean a corporation that, for purposes of Section 422 of
the Code, is a Parent or Subsidiary of the Company within the meaning of
Sections 424(e) and 424(f) of the Code.
1.2. "Award" shall mean a Stock Option, a SAR, a Restricted Stock Award, a Stock
Unit, a Performance Share, a Performance Unit, or a Cash Award.
1.3. "Award Agreement" shall mean a written agreement between the Company and a
Participant that establishes the terms, conditions, restrictions and/or
limitations applicable to an Award, in addition to those established by the
Plan and by the Committee.
1.4. "Board" shall mean the Board of Directors of the Company.
1.5. "Cash Award" shall mean a grant by the Committee to a Participant of an
award of cash as described in Section 11 below.
1.6. "Cause" shall have the meaning set forth in any employment, consulting, or
other written agreement between the Participant and the Company, a Group
Company or Affiliate. If there is no employment, consulting, or other
written agreement between the Participant and the Company, a Group Company
or Affiliate, or if such agreement does not define "Cause," then "Cause"
shall have the meaning specified in the Award Agreement; provided, that if
the Award Agreement does not so specify, "Cause" shall mean, as determined
by the Committee in its sole discretion, the Participant: (i) engages in
conduct that cause financial or reputational injury to the Company a Group
Company or Affiliate; (ii) engages in any act of dishonesty or misconduct
that results in damage to the Company, a Group Company or Affiliate, or
their business or reputation or that the Committee determines to adversely
affect the value, reliability or performance of the Participant to the
Company, a Group Company or Affiliate; (iii) refuses or fails to
substantially comply with the human resources rules, policies, directions
and/or restrictions relating to harassment and/or discrimination, or with
compliance or risk management rules, policies, directions and/or
restrictions of the Company, a Group Company or Affiliate; (iv) fails to
cooperate with the Company, a Group Company or Affiliate in any internal
investigation or administrative, regulatory or judicial proceeding; or (v)
continuously fails to perform his or her duties to the Company, a Group
Company or Affiliate (which may include any sustained and unexcused absence
of the Participant from the performance of such duties, which absence has
not been certified in writing as due to physical or mental
illness or Disability), after a written demand for performance has been
delivered to the Participant identifying the manner in which the
Participant has failed to substantially perform his or her duties. If any
part of the definition of Cause set forth in clauses (i) through (v) above
is deemed applicable to a Participant, this shall not preclude or prevent
the reliance by the Company or the Committee on any other part of the
preceding sentence that also may be applicable. Unless otherwise defined in
the Participant's employment or other agreement, an act or omission is
"willful" for this purpose if it was knowingly done, or knowingly omitted
to be done, by the Participant not in good faith and without reasonable
belief that the act or omission was in the best interest of the Company.
1.7. "Change in Control" shall mean the occurrence of any one or more of the
following:
(a) Any "person" (as such term is defined in Section 3(a)(9) of the
Exchange Act and as used in Sections 13(d)(3) and 14(d)(2) of the
Exchange Act), including a "group" (as defined in Section 13(d)(3) of
the Exchange Act), other than (i) the Company, (ii) any wholly-owned
subsidiary of the Company, or (iii) any employee benefit plan (or
related trust) sponsored or maintained by the Company or any
Affiliate, becomes a "beneficial owner" (as defined in Rule 13d-3
under the Exchange Act), directly or indirectly, of securities of the
Company having fifty percent (50%) or more of the combined voting
power of the then-outstanding securities of the Company that may be
cast for the election of directors of the Company (other than as a
result of an issuance of securities initiated by the Company in the
ordinary course of business) (the "Company Voting Securities");
provided, however, that the event described in this paragraph (a)
shall not be deemed to be a Change in Control by virtue of any
underwriter temporarily holding securities pursuant to an offering of
such securities;
(b) During any period of two consecutive years, individuals who at the
beginning of any such period constitute the Board (the "Incumbent
Directors") cease for any reason to constitute at least a majority of
the Board, unless the election, or the nomination for election by the
stockholders of the Company, of each new director of the Company
during such period was approved by a vote of at least two-thirds of
the Incumbent Directors then still in office;
(c) As the result of, or in connection with, any cash tender or exchange
offer, merger or other business combination, sale of all or
substantially all of the assets or contested election, or any
combination of the foregoing transactions, less than a majority of the
combined voting power of the then-outstanding securities of the
Company or any successor corporation or entity entitled to vote
generally in the election of the directors of the Company or such
other corporation or entity after such transaction is held in the
aggregate by the holders of the securities of the Company entitled to
vote generally in the election of directors of the Company immediately
prior to such transaction; or
(d) The shareholders of the Company approve a plan of complete liquidation
of the Company.
Notwithstanding the foregoing, a Change in Control shall not be deemed to
occur solely because any person acquires beneficial ownership of more than
fifty percent (50%) of the Company Voting Securities as a result of the
2
acquisition of Company Voting Securities by the Company which reduces the
number of Company Voting Securities outstanding; provided, however, that if
after such acquisition by the Company such person becomes the beneficial
owner of additional Company Voting Securities that increases the percentage
of outstanding Company Voting Securities beneficially owned by such person,
a Change in Control transaction shall then occur.
1.8. "Code" shall mean the Internal Revenue Code of 1986, as amended from time
to time.
1.9. "Committee" shall mean (i) the Board or (ii) a committee or subcommittee of
the Board appointed by the Board from among its members. The Committee may
be the Board's Compensation Committee. Unless the Board determines
otherwise, the Committee shall be comprised solely of not less than two
members who each shall qualify as:
(a) a "Non-Employee Director" within the meaning of Rule 16b-3(b)(3) (or
any successor rule) under the Exchange Act, and
(b) an "outside director" within the meaning of Code Section 162(m) and
the Treasury Regulations thereunder.
1.10. "Common Stock" shall mean the voting, common stock, $0.0001 par value per
share, of the Company.
1.11. "Company" shall mean IPG Photonics Corporation USA, a Delaware
corporation.
1.12. "Disability" means the total and permanent disability of a Participant
(incurred while in the active service of the Company, an Affiliate or a
Group Company) based on proof satisfactory to the Committee. Total and
permanent disability shall be as defined in the Company's long-term
disability plan, if any, or as otherwise provided by the Company.
Notwithstanding the foregoing, for purposes of determining the period of
time after termination of Service during which a Participant may exercise
an ISO, "Disability" will have the meaning set forth in Code Section
22(e)(3), which is, generally, that the Participant is unable to engage in
any substantial gainful activity by reason of a medically determinable
physical or mental impairment that can be expected to result in death or
that has lasted or can be expected to last for a continuous period of at
least twelve months.
1.13. "Dividend Equivalent Right" shall mean the right to receive an amount
equal to the amount of any dividend paid with respect to a share of Common
Stock multiplied by the number of shares of Common Stock underlying or with
respect to a Stock Option, a SAR, a Stock Unit or a Performance Unit, and
which shall be payable in cash, in Common Stock, in the form of Stock Units
or Performance Units, or a combination of any or all of the foregoing.
1.14. "Effective Date" shall mean the date on which the Board adopts the Plan.
1.15. "Employee" shall mean an employee of the Company or any Affiliate, as
described in Treasury Regulation Section 1.421-1(h).
1.16. "Exchange Act" shall mean the Securities Exchange Act of 1934, as amended
from time to time, including applicable regulations thereunder.
3
1.17. "Exercise Price" shall mean the price at which each share of Common Stock
covered by a Stock Option may be purchased.
1.18. "Fair Market Value" shall mean:
(a) if the Common Stock is readily tradable on a national securities
exchange or other market system, the closing price of the Common Stock
on the date of calculation (or on the last preceding trading date if
Common Stock was not traded on such date), or
(b) if the Common Stock is not readily tradable on a national securities
exchange or other market system, the value as determined by the
reasonable and consistent application of a reasonable valuation
method, in good faith by the Board.
1.19. "Group Company" shall mean any business entity deemed by the Board to be a
member of the IPG Group, including, but not limited to, any business entity
that has a significant financial interest in the Company and any business
entity in which the Company has a significant financial interest, such
entities to be referred to collectively as the "Group Companies".
1.20. "Group Employee" shall mean any employee of a Group Company who is not an
Employee.
1.21. "Independent Contractor" shall mean a person (other than a person who is
an Employee, Group Employee or a Nonemployee Director) or an entity that
renders services to the Company, an Affiliate or a Group Company.
1.22. "IPO" shall mean the first date that the Common Stock is registered under
the Securities Act of 1934 and offered for sale to the public.
1.23. "ISO" shall mean a right to purchase a specified number of shares of
Common Stock at a specified price, which is intended to comply with the
terms and conditions as an "incentive stock option" as set forth in Code
Section 422, as such section may be in effect from time to time.
1.24. "Leave of Absence" means any leave of absence approved by the Company.
1.25. "Nonemployee Director" shall mean a member of the Board who is not an
Employee.
1.26. "Nonqualified Stock Option" shall mean a Stock Option to purchase a
specified number of shares of Common Stock at a specified price, which does
not qualify as an ISO.
1.27. "Nonvoting Stock" shall mean the capital stock of any class or classes
having no voting power to elect the directors of a corporation.
1.28. "Parent" shall mean a corporation or any other business entity that
directly or indirectly has an ownership interest of 50 percent or more of
the Voting Stock of the Company.
1.29. "Participant" shall mean any Employee, Group Employee, Nonemployee
Director or Independent Contractor to whom an Award has been granted by the
Committee under the Plan.
1.30. "Performance-Based Award" shall mean an Award subject to the achievement
of certain performance goals as described in Section 12 below.
4
1.31. "Performance Share" shall mean the grant by the Committee to a Participant
of an Award of shares of Common Stock subject to restrictions on
transferability, a risk of forfeiture, and certain other terms and
conditions under the Plan or specified by the Committee, as described in
Section 10.1 below.
1.32. "Performance Unit" shall mean the grant by the Committee to a Participant
of an Award of a hypothetical share of the value of the Company,
represented by a notional account that shall be established and maintained
(or caused to be established or maintained) by the Company for such
Participant, as described in Section 10.2 below.
1.33. "Plan" shall mean the IPG Photonics 2006 Incentive Compensation Plan.
1.34. "Prior Plan" shall mean the IPG Photonics 2000 Incentive Compensation
Plan.
1.35. "Recapitalization" shall mean any stock split, stock dividend,
recapitalization, combination of shares, exchange of shares or other change
affecting the Company's outstanding shares of capital stock as a class
without the Company's receipt of consideration.
1.36. "Reorganization" shall mean any of the following: (a) a merger or
consolidation in which the Company is not the surviving entity; (b) a sale,
transfer or other disposition of all or substantially all of the Company's
assets; (c) a reverse merger in which the Company is the surviving entity
but in which the Company's outstanding voting securities are transferred in
whole or in part to a person or persons different from the persons holding
those securities immediately prior to the merger; or (d) any transaction
effected primarily to change the state in which the Company is incorporated
or to create a holding company structure.
1.37. "Restricted Stock Award" shall mean a grant by the Committee to a
Participant of an Award of shares of Common Stock subject to restrictions
on transferability, a risk of forfeiture, and certain other terms and
conditions under the Plan or specified by the Committee, as described in
Section 9.1 below.
1.38. "Retirement" means retirement from active employment or other Service with
the Company pursuant to the normal or early retirement policy and
procedures of the Company.
1.39. "Stock Appreciation Right" or "SAR" shall mean a grant by the Committee to
a Participant of a the contingent right to receive Common Stock or cash, as
specified in the Award Agreement, in the future, based on the value, or the
appreciation in the value, of Common Stock, as described in Section 8
below.
1.40. "Service" means the provision of services to the Company, an Affiliate or
a Group Company in the capacity of (i) an Employee, (ii) a Group Employee,
(iii) a Nonemployee Director, or (iv) an Independent Contractor.
1.41. "Stock Option" shall mean a grant by the Committee to a Participant of an
option or right to purchase a specified number of shares of Common Stock at
a specified price, as described in Section 7 below.
1.42. "Stock Unit" shall mean a grant by the Committee to a Participant of an
Award of a hypothetical share of Common Stock represented by a notional
5
account established and maintained (or caused to be established or
maintained) by the Company for such Participant, as described in Section
9.2 below.
1.43. "Subsidiary" shall mean a corporation of which the Company directly or
indirectly owns 50 percent or more of the Voting Stock or any other
business entity in which the Company directly or indirectly has an
ownership interest of 50 percent or more.
1.44. "Treasury Regulations" shall mean the regulations promulgated under the
Code by the United States Department of the Treasury, as amended from time
to time.
1.45. "Vest" shall mean:
(a) with respect to Stock Options and SARs, when the Stock Option or SAR
(or a portion of such Stock Option or SAR) first becomes exercisable
and remains exercisable subject to the terms and conditions of such
Stock Option or SAR; or
(b) with respect to Awards other than Stock Options and SARs, when the
Participant has:
(i) an unrestricted right, title and interest to receive the
compensation (whether payable in Common Stock, cash or a
combination of both) attributable to an Award (or a portion of
such Award) or to otherwise enjoy the benefits underlying such
Award; and
(ii) a right to transfer an Award subject to no Company-imposed
restrictions or limitations other than restrictions and/or
limitations imposed by Section 14 below.
1.46. "Vesting Date" shall mean the date or dates on which an Award Vests, at
which time the Award shall be deemed "Vested."
1.47. "Voting Stock" shall mean the capital stock of any class or classes having
general voting power under ordinary circumstances, in the absence of
contingencies, to elect the directors of a corporation.
2. PURPOSE AND TERM OF PLAN
2.1. Purpose. The purpose of the Plan is to motivate certain Employees, Group
Employees, Nonemployee Directors and Independent Contractors to put forth
maximum efforts toward the growth, profitability, and success of the
Company, Affiliates and Group Companies by providing incentives to such
Employees, Group Employees, Nonemployee Directors and Independent
Contractors through cash payments and/or through the ownership and
performance of the Common Stock. In addition, the Plan is intended to
provide incentives that will attract and retain highly qualified
individuals as Employees, Group Employees and Nonemployee Directors and to
assist in aligning the interests of such Employees, Group Employees and
Nonemployee Directors with those of the Company's shareholders.
2.2. Term. The Plan shall be effective as of the Effective Date; provided,
however, that the Plan shall be approved by the shareholders of the Company
at an annual meeting or any special meeting of shareholders of the Company
within 12 months before or after the Effective Date. The
6
Committee may not award ISOs before the date the Company's shareholders
approve the Plan. The Plan shall terminate on the 10th anniversary of the
Effective Date, unless sooner terminated by the Board under Section 16.1
below.
3. ELIGIBILITY AND PARTICIPATION
3.1. Eligibility. All Employees, Group Employees, Nonemployee Directors and
Independent Contractors shall be eligible to participate in the Plan and to
receive Awards.
3.2. Participation. Participants shall consist of such Employees, Group
Employees, Nonemployee Directors and Independent Contractors as the
Committee in its sole discretion designates to receive Awards under the
Plan. Awards under the Plan shall be made on a one time basis for
Participants and designation of a Participant in any year shall not require
the Committee to designate such person or entity to receive an Award in any
other year or, once designated, to receive the same type or amount of Award
as granted to the Participant in any other year. The Committee shall
consider such factors as it deems pertinent in selecting Participants and
in determining the type and amount of their respective Awards.
4. ADMINISTRATION
4.1. Responsibility. The Committee will administer the Plan. The Committee shall
have the responsibility, in its sole discretion, to control, operate,
manage and administer the Plan in accordance with its terms.
4.2. Award Agreement. Each Award granted under the Plan shall be evidenced by an
Award Agreement that shall be signed by the Committee and the Participant;
provided, however, that in the event of any conflict between a provision of
the Plan and any provision of an Award Agreement, the provision of the Plan
shall prevail.
4.3. Authority of the Committee. The Committee shall have all the discretionary
authority that may be necessary or desirable to enable it to discharge its
responsibilities with respect to the Plan, including but not limited to the
following:
(a) to determine eligibility for participation in the Plan;
(b) to determine eligibility for and the type and size of an Award granted
under the Plan;
(c) to supply any omission, correct any defect, interpret any provision or
reconcile any inconsistency in the Plan in such manner and to such
extent as it shall deem appropriate in its sole discretion to carry
the same into effect;
(d) to issue administrative guidelines as an aid to administer the Plan
and make changes in such guidelines as it, from time to time, deems
proper;
(e) to make rules for carrying out and administering the Plan and make
changes in such rules as it, from time to time, deems proper;
7
(f) to the extent permitted under the Plan, grant waivers of Plan terms,
conditions, restrictions, and limitations;
(g) to accelerate the Vesting of any Award when such action or actions
would be in the best interest of the Company;
(h) to grant an Award in replacement of Awards previously granted under
this Plan or any other executive compensation plan of the Company; and
(i) to take any and all other actions it deems necessary or desirable for
the proper operation or administration of the Plan.
4.4. Action by the Committee. The Committee may act only by a majority of its
members. A determination of the Committee may be made, without a meeting,
by a writing signed by all members of the Committee. In addition, the
Committee may authorize any one or more of its members to execute and
deliver documents on behalf of the Committee. Meetings of the Committee may
be held telephonically or via videoconference, and participation via
telephone or videoconference shall have the same force and effect as
physical presence at any Committee meeting.
4.5. Delegation of Authority. The Committee may delegate to one or more of its
members, or to one or more agents, such administrative duties as it may
deem advisable; provided, however, that any such delegation shall be in
writing. In addition, the Committee, or any person to whom it has delegated
duties under this Section 4.5, may employ one or more persons to render
advice with respect to any responsibility the Committee or such person may
have under the Plan. The Committee may employ such legal or other counsel,
consultants and agents as it may deem desirable for the administration of
the Plan and may rely upon any opinion or computation received from any
such counsel, consultant or agent. Expenses incurred by the Committee in
the engagement of such counsel, consultant or agent shall be paid by the
Company, or the Affiliate or Group Company whose employees have benefited
from the Plan, as determined by the Committee.
The Board may delegate authority to the Company's Chief Executive Officer
to grant specified numbers of Options (as determined by the Board from time
to time and during such time periods determined by the Board) to existing
or prospective Employees (other than those individuals who are subject to
Section 16(a) of the Exchange Act at the time of the grant) as the Chief
Executive Officer determines appropriate without further action of the
Board, but subject to rules and guidelines established by the Board or the
Committee.
4.6. Determinations and Interpretations by the Committee. All determinations and
interpretations made by the Committee shall be binding and conclusive on
all Participants and their heirs, successors, and legal representatives.
4.7. Liability. No member of the Board, no member of the Committee and no
Employee or Group Employee shall be liable for any act or failure to act
hereunder, except in circumstances involving his or her bad faith, gross
negligence or willful misconduct, or for any act or failure to act
hereunder by any other member or employee or by any agent to whom duties in
connection with the administration of the Plan have been delegated.
8
4.8. Indemnification. Each person who is or has been a member of the Committee
or the Board, and any individual or individuals to whom the Committee has
delegated authority under this Section 4, will be indemnified and held
harmless by the Company, Group Company and Affiliates from and against any
loss, cost, liability, or expense that may be imposed upon or reasonably
incurred by him or her in connection with or as a result of any claim,
action, suit or proceeding to which he or she may be a party or in which he
or she may be involved by reason of any action taken, or failure to act,
under the Plan, except in circumstances involving such person's bad faith,
gross negligence or willful misconduct. Each such person will also be
indemnified and held harmless by the Company Group Company and Affiliates
from and against any and all amounts paid by him or her in a settlement
approved by the Company, or paid by him or her in satisfaction of any
judgment, of or in a claim, action, suit or proceeding against him or her
and described in the previous sentence, so long as he or she gives the
Company an opportunity, at its own expense, to handle and defend the claim,
action, suit or proceeding before he or she undertakes to handle and defend
it. The foregoing right of indemnification will not be exclusive of any
other rights of indemnification to which a person who is or has been a
member of the Committee or the Board may be entitled under the Articles of
Incorporation or By-Laws of the Company, Group Company or Affiliate, as a
matter of law, agreement or otherwise, or any power that the Company may
have to indemnify him or her or hold him or her harmless.
5. SHARES SUBJECT TO PLAN
5.1. Available Shares. The aggregate number of shares of Common Stock that shall
be available under the Plan during its term shall be 6,000,000 shares,
subject to any adjustments made in accordance with Section 5.2 below. Such
shares of Common Stock may be either authorized but unissued shares, shares
of issued stock held in the Company's treasury, or a combination of both,
at the discretion of the Company. Any shares of Common Stock (i) underlying
an Award under the Plan or the Prior Plan which expires without being
exercised, or are forfeited, canceled, settled or otherwise terminated
without a distribution of Common Stock to the Participant; (ii) that are
delivered (either actually or by attestation) to or withheld by the Company
in connection with the exercise of a Stock Option awarded under the Plan or
the Prior Plan, or in payment of any required income tax withholding for
the exercise of a Stock Option or the vesting of Restricted Stock awarded
under the Plan or the Prior Plan, shall again be available under the Plan.
Awards that are payable only in cash are not subject to this Section 5.1.
(a) The total number of shares of Common Stock that may be issued in
connection with the awards of Restricted Stock under the Plan shall
not exceed [3,500,000]. Except as contemplated by the provisions of
Section 5.2 hereof, the Committee shall not increase the number of
shares of Common Stock available for issuance in connection with
Awards under the Plan or to any one individual as set forth above. In
no event shall Awards be outstanding at any one time that have
resulted or could result in the issuance of a number of shares of
Common Stock in excess of the number then remaining reserved and
available for issuance under the Plan.
(b) The maximum number of shares of Common Stock that may be issued to
Participants in the aggregate under the Plan as ISOs is 1,250,000.
9
(c) Notwithstanding the foregoing, Awards granted through the assumption
of, or in substitution or exchange for, similar awards in connection
with the acquisition of another corporation or business entity shall
not be counted for purposes of applying the above limitations on
numbers of shares available for Awards generally or any particular
kind of Award under the Plan.
5.2. Adjustment to Shares. If there is any change in the Common Stock of the
Company, through merger, consolidation, Reorganization, recapitalization,
stock dividend, stock split, reverse stock split, split-up, split-off,
spin-off, combination of shares, exchange of shares, dividend in kind or
other like change in capital structure or distribution (other than normal
cash dividends) to shareholders of the Company, an adjustment shall be made
to each outstanding Award so that each such Award shall thereafter be with
respect to or exercisable for such securities, cash and/or other property
as would have been received in respect of the Common Stock subject to such
Award had such Award been paid, distributed or exercised in full
immediately prior to such change or distribution. Such adjustment shall be
made successively each time any such change or distribution shall occur. In
addition, in the event of any such change or distribution, in order to
prevent dilution or enlargement of Participants' rights under the Plan, the
Committee shall have the authority to adjust, in an equitable manner, the
number and kind of shares that may be issued under the Plan, the number and
kind of shares subject to outstanding Awards, the Exercise Price applicable
to outstanding Stock Options, and the Fair Market Value of the Common Stock
and other value determinations applicable to outstanding Awards.
Appropriate adjustments may also be made by the Committee in the terms of
any Awards granted under the Plan to reflect such changes or distributions
and to modify any other terms of outstanding Awards on an equitable basis,
including modifications of performance goals and changes in the length of
performance periods; provided, however, that any such modifications and/or
changes to Performance-Based Awards does not disqualify compensation
attributable to such Awards as "performance-based compensation" under Code
Section 162(m). In addition, the Committee is authorized to make
adjustments to the terms and conditions of, and the criteria included in,
Awards in recognition of unusual or nonrecurring events affecting the
Company or the financial statements of the Company, or in response to
changes in applicable laws, regulations, or accounting principles.
Notwithstanding anything contained in the Plan, any adjustment with respect
to an ISO due to a change or distribution described in this Section 5.2
shall comply with the rules of Code Section 424(a), and in no event shall
any adjustment be made which would render any ISO granted hereunder to be
disqualified as an incentive stock option for purposes of Code Section 422.
6. MAXIMUM INDIVIDUAL AWARDS
6.1. Maximum Aggregate Number of Shares Underlying Stock-Based Awards Granted
Under the Plan to Any Single Participant in Any Calendar Year. The maximum
aggregate number of shares of Common Stock underlying all Awards measured
in shares of Common Stock (whether payable in Common Stock, cash or a
combination of both) that may be granted to any single Participant in any
calendar year shall be [2,500,000] shares, subject to adjustment as
provided in Section 5.2 above. For purposes of the preceding sentence, such
Awards that are cancelled or repriced shall continue to be counted in
determining such maximum aggregate number of shares of Common Stock that
may be granted to any single Participant in any calendar year. The
10
maximum aggregate number of shares of Common Stock underlying Awards that
may be granted to any single Participant in any calendar year as ISOs shall
be 200,000
7. STOCK OPTIONS
7.1. In General. The Committee may, in its sole discretion, grant Stock Options
to Employees, Group Employees, Nonemployee Directors and/or Independent
Contractors on or after the Effective Date. The Committee shall, in its
sole discretion, determine the Employees, Group Employees, Nonemployee
Directors and Independent Contractors who will receive Stock Options and
the number of shares of Common Stock underlying each Stock Option. With
respect to Employees who become Participants, the Committee may grant such
Participants ISOs or Nonqualified Stock Options or a combination of both.
With respect to Group Employees, Nonemployee Directors and Independent
Contractors who become Participants, the Committee may grant such
Participants only Nonqualified Stock Options. Each Stock Option shall be
subject to such terms and conditions consistent with the Plan as the
Committee may impose from time to time and set forth in the Award
Agreement. In addition, each Stock Option shall be subject to the terms and
conditions set forth in Sections 7.2 through 7.8 below.
7.2. Exercise Price. The Committee shall specify the Exercise Price of each
Stock Option in the Award Agreement; provided, however, that (i) the
Exercise Price of an ISO shall not be less than 100 percent of the Fair
Market Value of the Common Stock on the date of grant, and (ii) the
Exercise Price of a Nonqualified Stock Option shall not be less than 100
percent of the Fair Market Value of the Common Stock on the date of grant
unless the Committee in its sole discretion and due to special
circumstances determines otherwise on the date of grant.
7.3. Term of Stock Option. The Committee shall specify the term of each Stock
Option in the Award Agreement; provided, however, that (i) no ISO shall be
exercisable after the 10th anniversary of the date of grant of such ISO and
(ii) no Nonqualified Stock Option shall be exercisable after the 10th
anniversary of the date of grant of such Nonqualified Stock Option. Each
Stock Option shall terminate at such earlier times and upon such conditions
or circumstances as the Committee shall, in its sole discretion, set forth
in the Award Agreement on the date of grant.
7.4. Vesting Date. The Committee shall specify in the Award Agreement the
Vesting Date for each Stock Option. The Committee may grant Stock Options
that are Vested, either in whole or in part, on the date of grant. If the
Committee fails to specify a Vesting Date in the Award Agreement,
twenty-five percent (25%) of such Stock Option shall become exercisable on
each of the first four (4) one-year anniversaries of the date of grant and
shall remain exercisable following such anniversary date until the Stock
Option expires in accordance with its terms under the Award Agreement or
under the terms of the Plan. The Vesting of a Stock Option may be subject
to such other terms and conditions as shall be determined by the Committee
and set forth in the Award Agreement, including, without limitation,
accelerating the Vesting if certain performance goals are achieved or a
Change in Control of the Company occurs.
7.5. Exercise of Stock Options. The Stock Option Exercise Price may be paid in
cash or, in the sole discretion of the Committee, by delivery to the
Company of shares of Common Stock then owned by the Participant, or by the
11
Company's withholding a portion of the shares of Common Stock for which the
Stock Option is exercisable, or by a combination of these methods. If the
Common Stock is readily tradable on a national securities exchange or other
market system, payment may also be made by delivering a properly executed
exercise notice to the Company and delivering a copy of irrevocable
instructions to a broker directing the broker to promptly deliver to the
Company the amount of sale or loan proceeds to pay the Exercise Price. To
facilitate the foregoing, the Company may enter into agreements for
coordinated procedures with one or more brokerage firms. The Committee may
prescribe any other method of paying the Exercise Price that it determines
to be consistent with applicable law and the purpose of the Plan,
including, without limitation, in lieu of the delivery to the Company of
shares of Common Stock then owned by the Participant, providing the Company
with a notarized statement attesting to the number of shares owned by the
Participant, where, upon verification by the Company, the Company would
issue to the Participant only the number of incremental shares to which the
Participant is entitled upon exercise of the Stock Option. In determining
which methods a Participant may utilize to pay the Exercise Price, the
Committee may consider such factors as it determines are appropriate;
provided, however, that with respect to ISOs, all such discretionary
determinations shall be made by the Committee at the time of grant and
specified in the Award Agreement.
7.6. Restrictions Relating to ISOs. In addition to being subject to the terms
and conditions of this Section 7, ISOs shall comply with all other
requirements under Code Section 422. Accordingly, ISOs may be granted only
to Participants who are employees (as described in Treasury Regulation
Section 1.421-1(h)) of the Company or of any "Parent Corporation" (as
defined in Code Section 424(e)) or of any "Subsidiary Corporation" (as
defined in Code Section 424(f)) on the date of grant. The aggregate market
value (determined as of the time the ISO is granted) of the Common Stock
with respect to which ISOs (under all option plans of the Company and of
any Parent Corporation and of any Subsidiary Corporation) are exercisable
for the first time by a Participant during any calendar year shall not
exceed $100,000. For purposes of the preceding sentence, (i) ISOs shall be
taken into account in the order in which they are granted and (ii) ISOs
granted before 1987 shall not be taken into account. ISOs shall not be
transferable by the Participant other than by will or the laws of descent
and distribution and shall be exercisable, during the Participant's
lifetime, only by such Participant. The Committee shall not grant ISOs to
any Employee who, at the time the ISO is granted, owns stock possessing
(after the application of the attribution rules of Code Section 424(d))
more than 10 percent of the total combined voting power of all classes of
stock of the Company or of any Parent Corporation or of any Subsidiary
Corporation unless the Exercise Price of the ISO is fixed at not less than
110 percent of the Fair Market Value of the Common Stock on the date of
grant and the exercise of such ISO is prohibited by its terms after the 5th
anniversary of the ISO's date of grant.
7.7. Conversion Stock Options. The Committee may, in its sole discretion, grant
a Stock Option to any holder of an option (hereinafter referred to as an
"Original Option") to purchase shares of stock of any corporation:
(a) the stock or assets of which were acquired, directly or indirectly, by
the Company, an Affiliate or Group Company, or
12
(b) which was merged with and into the Company, an Affiliate or Group
Company,
so that the Original Option is converted into a Stock Option (hereinafter
referred to as a "Conversion Stock Option"); provided, however, that such
Conversion Stock Option as of the date of its grant (the "Conversion Stock
Option Grant Date") shall have the same economic value as the Original
Option as of the Conversion Stock Option Grant Date. In addition, unless
the Committee, in its sole discretion determines otherwise, a Conversion
Stock Option that is converting an Original Option intended to qualify as
an ISO shall have the same terms and conditions as applicable to the
Original Option in accordance with Code Section 424 and the Treasury
Regulations thereunder so that the conversion (x) is treated as the
issuance or assumption of a stock option under Code Section 424(a) and (y)
is not treated as a modification, extension or renewal of a stock option
under Code Section 424(h).
7.8. Right to Call Stock Options or Common Stock. Notwithstanding any other
provision of this Plan and without regard to the completion of an IPO, any
Stock Option granted under this Plan shall be subject to a right of call by
the Committee in the event of termination of the Plan due to merger or
acquisition of the Company. Prior to an IPO, any Stock held by a
Participant as a result of an Award under this Plan shall be subject to a
right of call by the Committee in the event of termination of the Plan due
to merger or acquisition of the Company or upon the occurrence of Change in
Control of the Company, whether or not the Plan is terminated. If the
Committee exercises the right to call the Common Stock, the Participant
must return the shares of Common Stock to the Company within seven (7) days
of the call notice.
(a) Upon the call of Common Stock, the owner of the Common Stock shall,
unless otherwise determined by the Committee pursuant to subsection
(b) below, be entitled to receive from the Company an amount equal to
the Fair Market Value of the returned Common Stock.
(b) Upon the call of a Stock Option, the Committee shall pay the optionee
an amount equal to the excess of (i) the Fair Market Value the number
of shares of Common Stock subject to the Option, over (y) the Exercise
Price of such shares of Common Stock.
(c) The Company shall have the right to defer payment of the proceeds
under this Section 7.9, and make such payment in the form of single
lump sum or in installments over such periods as the Committee may
determine in its discretion, subject to Code Section 409A.
8. SARS
8.1. In General. The Committee may, in its sole discretion, grant SARs to
Employees, Group Employees, Nonemployee Directors, and/or Independent
Contractors. A SAR is a right to receive a payment in cash, Common Stock or
a combination of both, in an amount equal to the excess of (x) the Fair
Market Value of a specified number of shares of Common Stock on the date
the SAR is exercised over (y) the Fair Market Value of such shares of
Common Stock on the date the SAR is granted, all as determined and set
forth in the Award Agreement by the Committee; provided, however, that if a
SAR is granted retroactively in tandem with or in substitution for a Stock
Option, the designated Fair Market Value of the Common Stock in the
13
Award Agreement may be the Fair Market Value of the Common Stock on the
date such Stock Option was granted. Each SAR shall be subject to the terms
of the Plan and to such terms and conditions, including, but not limited
to, the Vesting Date, an expiration date and a provision that automatically
converts a SAR into a Stock Option on a conversion date specified at the
time of grant, as the Committee shall impose from time to time in its sole
discretion and set forth in the Award Agreement.
9. RESTRICTED STOCK AWARDS AND STOCK UNITS
9.1. Restricted Stock Awards. The Committee may, in its sole discretion, grant
Restricted Stock Awards to Employees, Group Employees, Nonemployee
Directors, and/or Independent Contractors as additional compensation or in
lieu of other compensation for services to the Company, an Affiliate or a
Group Company. A Restricted Stock Award shall consist of shares of Common
Stock that are subject to such terms and conditions as the Committee in its
sole discretion determines appropriate and sets forth in the Award
Agreement including, without limitation, restrictions on the sale or other
disposition of such shares, the Vesting Date with respect to such shares,
and the right of the Company to reacquire such shares for no consideration
upon termination of the Participant's Service within specified periods. The
Committee may require the Participant to deliver a duly signed stock power,
endorsed in blank, relating to the Common Stock covered by such Restricted
Stock Award and/or that the stock certificates evidencing such shares be
held in custody or bear restrictive legends until the restrictions thereon
shall have lapsed. With respect to shares of Common Stock subject to a
Restricted Stock Award, the Participant shall have all of the rights of a
holder of shares of Common Stock, including the right to receive dividends
and to vote the shares, unless the Committee determines otherwise on the
date of grant.
9.2. Stock Units. The Committee may, in its sole discretion, grant Stock Units
to Employees, Group Employees, Nonemployee Directors, and Independent
Contractors as additional compensation or in lieu of other compensation for
services to the Company, an Affiliate or a Group Company. A Stock Unit is a
hypothetical share of Common Stock represented by a notional account
established and maintained (or caused to be established or maintained) by
the Company for such Participant who receives a grant of Stock Units. Stock
Units shall be subject to such terms and conditions as the Committee, in
its sole discretion, determines appropriate and sets forth in the Award
Agreement including, without limitation, determinations of the Vesting Date
with respect to such Stock Units and the criteria for the Vesting of such
Stock Units. Subject to Section 9.3, a Stock Unit granted by the Committee
shall provide for payment in shares of Common Stock at such time or times
as the Award Agreement shall specify. The Committee shall determine whether
a Participant who has been granted a Stock Unit shall also be entitled to a
Dividend Equivalent Right.
9.3. Payout of Stock Units. Subject to a Participant's election to defer in
accordance with Section 17.4 below, upon the Vesting Date of a Stock Unit,
the shares of Common Stock representing the Stock Unit shall be distributed
to the Participant, unless the Committee, in its sole discretion, provides
for the payment of the Stock Unit in cash (or partly in cash and partly in
shares of Common Stock) equal to the value of the shares of Common Stock
which would otherwise be distributed to the Participant.
14
10. PERFORMANCE SHARES AND PERFORMANCE UNITS
10.1. Performance Shares. The Committee may, in its sole discretion, grant
Performance Shares to Employees, Group Employees, Nonemployee Directors,
and/or Independent Contractors as additional compensation or in lieu of
other compensation for services to the Company, an Affiliate or a Group
Company. A Performance Share shall consist of a share or shares of Common
Stock that are subject to such terms and conditions as the Committee, in
its sole discretion, determines appropriate and sets forth in the Award
Agreement including, without limitation, determining the performance goal
or goals that, depending on the extent to which such goals are met, will
determine the number and/or value of the Performance Shares that will be
paid out or distributed to the Participant and any other Vesting Date
criteria. Performance goals may be based on, without limitation,
Company-wide, divisional and/or individual performance, as the Committee,
in its sole discretion, may determine, and may be based on the performance
measures listed in Section 12.3 below.
10.2. Performance Units. The Committee may, in its sole discretion, grant
Performance Units to Employees, Group Employees, Nonemployee Directors,
and/or Independent Contractors as additional compensation or in lieu of
other compensation for services to the Company, an Affiliate or Group
Company. A Performance Unit is a hypothetical share of the value of the
Company, represented by a notional account that the Company shall establish
and maintain (or caused to be established or maintained) for such
Participant who receives a grant of Performance Units. Performance Units
shall be subject to such terms and conditions as the Committee, in its sole
discretion, determines appropriate and sets forth in the Award Agreement
including, without limitation, determining the performance goal or goals
that, depending on the extent to which such goals are met, will determine
the number and/or value of the Performance Units that will accrue to the
Participant and any other Vesting Date criteria. Performance goals may be
based on, without limitation, Company-wide, divisional and/or individual
performance, as the Committee, in its sole discretion, may determine, and
may be based on the performance measures listed in Section 12.3 below.
10.3. Adjustment of Performance Goals. With respect to any Performance Shares or
Performance Units that are not intended to qualify as Performance-Based
Awards (as described in Section 12 below), the Committee shall have the
authority at any time to adjust, as it deems necessary or desirable, the
performance goals for any outstanding Performance Shares or Performance
Units unless, at the time of establishment of such performance goals, the
Committee precludes its authority to make such adjustments.
10.4. Payout of Performance Shares or Performance Units. Subject to a
Participant's election to defer distribution in accordance with Section
17.4 below, upon the Vesting of a Performance Share or a Performance Unit,
the shares of Common Stock representing the Performance Share or the cash
value of the Performance Unit shall be distributed to the Participant,
unless the Committee, in its sole discretion, determines to make the
payment for the Performance Share in cash, or the Performance Unit in
shares of Common Stock (or partly in cash and partly in shares of Common
Stock) equal to the value of the shares of Common Stock or cash that would
otherwise be distributed to the Participant.
15
11. CASH AWARDS
11.1. In General. The Committee may, in its sole discretion, grant Cash Awards
to Employees, Group Employees, Nonemployee Directors, and/or Independent
Contractors as additional compensation or in lieu of other compensation for
services to the Company, an Affiliate or Group Company. A Cash Award shall
be subject to such terms and conditions as the Committee, in its sole
discretion, determines appropriate and sets forth in the Award Agreement
including, without limitation, determining the Vesting Date with respect to
such Cash Award, the criteria for the Vesting of such Cash Award, and the
right of the Company to require the Participant to repay the Cash Award
(with or without interest) upon termination of the Participant's Service
within specified periods.
12. PERFORMANCE-BASED AWARDS
12.1. In General. The Committee, in its sole discretion, may designate Awards
granted under the Plan as Performance-Based Awards (as defined below). An
Award granted under the Plan may be granted in such a manner that the
compensation attributable to such Award is intended by the Committee to
qualify as "performance-based compensation" (as such term is used in Code
Section 162(m) and the Treasury Regulations thereunder) and thus be exempt
from the deduction limitation imposed by Code Section 162(m)
("Performance-Based Awards").
12.2. Qualification of Performance-Based Awards. Awards shall qualify as
Performance-Based Awards under the Plan only if:
(a) at the time of grant the Committee is comprised solely of two or more
"outside directors" (as such term is used in Code Section 162(m) and
the Treasury Regulations thereunder);
(b) with respect to either the granting or Vesting of an Award (other than
(i) a Nonqualified Stock Option or (ii) a SAR, which are granted with
an Exercise Price at or above the Fair Market Value of the Common
Stock on the date of grant), such Award is subject to the achievement
of a performance goal or goals based on one or more of the performance
measures specified in Section 12.3 below;
(c) the Committee establishes in writing (i) the objective
performance-based goals applicable to a given performance period, and
(ii) the individual employees or class of employees to which such
performance-based goals apply no later than 90 days after the
commencement of such performance period (but in no event after 25
percent of such performance period has elapsed);
(d) no compensation attributable to a Performance-Based Award will be paid
to or otherwise received by a Participant until the Committee
certifies in writing that the performance goal or goals (and any other
material terms) applicable to such performance period have been
satisfied; and
(e) after the establishment of a performance goal, the Committee shall not
revise such performance goal (unless such revision will not disqualify
compensation attributable to the Award as "performance-based
compensation" under Code Section 162(m)) or
16
increase the amount of compensation payable with respect to such Award
upon the attainment of such performance goal.
12.3. Performance Measures. The Committee may use the following performance
measures (either individually or in any combination) to set performance
goals with respect to Awards intended to qualify as Performance-Based
Awards: net sales; pretax income before allocation of corporate overhead
and bonus; budget; cash flow; earnings per share; net income; division,
group or corporate financial goals; return on shareholders' equity; return
on assets; attainment of strategic and operational initiatives;
appreciation in and/or maintenance of the price of the Common Stock or any
other publicly-traded securities of the Company; market share; gross
profits; earnings before interest and taxes; earnings before interest,
taxes, depreciation and amortization; economic value-added models;
comparisons with various stock market indices; increase in number of
customers; revenue backlog; margins realized on delivered goods or
services; and/or reductions in costs.
12.4. Shareholder Reapproval. As required by Treasury Regulation Section
1.162-27(e)(vi), the material terms of performance goals as described in
this Section 12 shall be disclosed to and reapproved by the Company's
shareholders no later than the first shareholder meeting that occurs in the
5th year following the year in which the Company's shareholders previously
approved such performance goals.
13. CHANGE IN CONTROL
13.1. Accelerated Vesting. Notwithstanding any other provision of this Plan to
the contrary, if there is a Change in Control of the Company, the
Committee, in its sole discretion, may take such actions as it deems
appropriate with respect to outstanding Awards, including, without
limitation, accelerating the Vesting Date and/or payout of such Awards;
provided, however, that such action shall not conflict with any provision
contained in an Award Agreement unless such provision is amended in
accordance with Section 16.3 below.
13.2. Cashout. The Committee, in its sole discretion, may determine that, upon
the occurrence of a Change in Control of the Company, all or a portion of
certain outstanding Awards shall terminate within a specified number of
days after notice to the holders, and each such holder shall receive an
amount equal to the value of such Award on the date of the Change in
Control, and with respect to each share of Common Stock subject to a Stock
Option or SAR, an amount equal to the excess of the Fair Market Value of
such shares of Common Stock immediately prior to the occurrence of such
Change in Control of the Company over the Exercise Price per share of such
Stock Option or SAR. Such amount shall be payable in cash, in one or more
kinds of property (including the property, if any, payable in the
transaction) or in a combination thereof, as the Committee, in its sole
discretion, shall determine.
13.3. Assumption or Substitution of Awards. Notwithstanding anything contained
in the Plan to the contrary, the Committee may, in its sole discretion,
provide that an Award may be assumed by any entity which acquires control
of the Company or may be substituted by a similar award under such entity's
compensation plans.
17
14. TERMINATION OF SERVICE
14.1. Termination of Service Due to Death or Disability. Subject to any written
agreement between the Company, an Affiliate or a Group Company and a
Participant, if a Participant's Service is terminated due to death or
Disability:
(a) all non-Vested portions of Awards held by the Participant on the date
of the Participant's death or Disability shall immediately Vest; and
(b) all Vested portions of Stock Options and SARs held by the Participant
on the date of the Participant's death or Disability shall remain
exercisable until the earlier of:
(i) the end of the 12-month period following the date of the
Participant's death or Disability, or
(ii) the date the Stock Option or SAR would otherwise expire.
14.2. Termination of Service for Cause. Subject to any written agreement between
the Company, an Affiliate or Group Company and a Participant, if a
Participant's Service is terminated by the Company, the Affiliate or the
Group Company, as the case may be, for Cause, all Awards held by the
Participant on the date of the termination of Service, whether Vested or
non-Vested, shall immediately be forfeited by the Participant as of such
date, and, in the event a Participant's Service is terminated by the
Company, an Affiliate or Group Company for Cause prior to an IPO, the
Company shall have the right to call any shares of Common Stock received by
the Participant as a result of the exercise of Stock Options under the Plan
and the Participant shall be entitled to receive from the Company an amount
equal to the Exercise Price paid for such shares. A Participant's Service
shall be deemed to have terminated for Cause if, after the Participant's
Service has terminated, facts and circumstances are discovered that would
have justified a termination for Cause.
14.3. Other Terminations of Service. Subject to any written agreement between
the Company, an Affiliate or Group Company and a Participant, if a
Participant's Service is terminated for any reason other than for Cause or
other than due to death or Disability:
(a) all non-Vested portions of Awards held by the Participant on the date
of the termination of his or her Service shall immediately be
forfeited by such Participant as of such date; and
(b) all Vested portions of Stock Options and/or SARs held by the
Participant on the date of the termination of his or her Service shall
remain exercisable until the earlier of (i) the end of the 90-day
period following the date of the termination of the Participant's
Service or (ii) the date the Stock Option or SAR would otherwise
expire.
Notwithstanding the foregoing, the Vesting, expiration and forfeiture of
any Stock Options and/or SARs Awarded to a Independent Contractor shall be
governed by the terms of the written Award Agreement.
14.4. ISOs. Notwithstanding anything contained in the Plan to the contrary, (i)
the provisions contained in this Section 14 shall be applied to an ISO
18
only if the application of such provision maintains the treatment of such
ISO as an ISO.
14.5. Leave of Absence. A Participant shall not cease to be an Employee for
purposes of this Plan solely on account of a Leave of Absence. For purposes
of ISOs, no such leave may exceed ninety (90) days, unless reemployment
upon expiration of such leave is guaranteed by statute or contract. If
reemployment upon expiration of a leave of absence approved by the Company
is not so guaranteed, on the one hundred eighty-first (181st) day of such
leave any ISO held by the Participant shall cease to be treated as an ISO
and shall be treated for tax purposes as a Nonqualified Stock Option.
Notwithstanding anything in the Plan to the contrary, the Committee, in its
sole discretion, reserves the right to designate a Participant's leave of
absence as "Personal Leave;" provided that military leaves and approved
family or medical leaves shall not be considered Personal Leave. No Awards
shall be made to a Participant during Personal Leave. A Participant's
un-Vested Awards shall remain un-Vested during such Personal Leave and the
time spent on such Personal Leave shall not count towards the vesting of
such Awards. A Participant's Vested Stock Options that may be exercised
shall remain exercisable upon commencement of Personal Leave until the
earlier of (i) a period of one year from the date of commencement of such
Personal Leave; or (ii) the remaining exercise period of such Stock
Options. Notwithstanding the foregoing, if a Participant returns to the
Company from a Personal Leave of less than one year and the Participant's
Stock Options have not lapsed, the Stock Options shall remain exercisable
for the remaining exercise period as provided at the time of grant and
subject to the conditions contained herein.
15. TAXES
15.1. Withholding Taxes. With respect to Employees and Group Employees, the
Company, or the applicable Affiliate or Group Company, may require a
Participant who has Vested in his or her Restricted Stock Award, Stock
Unit, Performance Share or Performance Unit granted hereunder, or who
exercises a Stock Option or SAR granted hereunder, to reimburse the
corporation that employs such Employee or Group Employee for any taxes
required by any governmental regulatory authority to be withheld or
otherwise deducted and paid by such corporation or entity in respect of the
issuance or disposition of such shares or the payment of any amounts. In
lieu thereof, the corporation that employs such Employee or Group Employee
shall have the right to withhold the amount of such taxes from any other
sums due or to become due from such corporation to the Employee or Group
Employee upon such terms and conditions as the Committee shall prescribe.
The corporation that employs the Employee or Group Employee may, in its
discretion, hold the stock certificate to which such Employee or Group
Employee is entitled upon the vesting of a Restricted Stock Award, Stock
Unit, Performance Share or Performance Unit or the exercise of a Stock
Option or SAR as security for the payment of such withholding tax
liability, until cash sufficient to pay that liability has been
accumulated.
15.2. Use of Common Stock to Satisfy Withholding Obligation. With respect to
Employees and Group Employees, at any time that the Company or an Affiliate
or Group Company that employs such Employee or Group Employee becomes
subject to a withholding obligation under applicable law with respect to
the vesting of a Restricted Stock Award, Stock Unit,
19
Performance Share or Performance Unit or the exercise of a Nonqualified
Stock Option (the "Tax Date"), except as set forth below, a holder of such
Award may elect to satisfy, in whole or in part, the holder's related
personal tax liabilities (an "Election") by (i) directing the Company, the
Affiliate or the Group Company that employs such Employee or Group Employee
to withhold from shares issuable in the related vesting or exercise either
a specified number of shares, or shares of Common Stock having a specified
value in each case equal to the related minimum statutory personal
withholding tax liabilities with respect to the applicable taxing
jurisdiction, (ii) tendering shares of Common Stock previously issued
pursuant to the exercise of a Stock Option or other shares of the Common
Stock owned by the holder, or (iii) combining any or all of the foregoing
Elections in any fashion. An Election shall be irrevocable. The withheld
shares and other shares of Common Stock tendered in payment shall be valued
at their Fair Market Value of the Common Stock on the Tax Date. The
Committee may disapprove any Election, suspend or terminate the right to
make Elections or provide that the right to make Elections shall not apply
to particular shares or exercises. The Committee may impose any additional
conditions or restrictions on the right to make an Election as it shall
deem appropriate, including conditions or restrictions with respect to
Section 16 of the Exchange Act.
15.3. No Guarantee of Tax Consequences. No person connected with the Plan in any
capacity, including, but not limited to, the Company, an Affiliate or a
Group Company and their directors, officers, agents and employees makes any
representation, commitment, or guarantee that any tax treatment, including,
but not limited to, federal, state and local income, estate and gift tax
treatment, will be applicable with respect to amounts deferred under the
Plan, or paid to or for the benefit of a Participant under the Plan, or
that such tax treatment will apply to or be available to a Participant on
account of participation in the Plan.
16. AMENDMENT AND TERMINATION
16.1. Termination of Plan. The Board may suspend or terminate the Plan at any
time with or without prior notice; provided, however, that no action
authorized by this Section 16.1 shall reduce the amount of any outstanding
Award or change the terms and conditions thereof without the Participants'
consent, except as expressly provided herein.
16.2. Amendment of Plan. The Board may amend the Plan at any time with or
without prior notice; provided, however, that no action authorized by this
Section 16.2 shall reduce the amount of any outstanding Award or change the
terms and conditions thereof without the Participants' consent, except as
expressly provided herein. No amendment of the Plan shall, without the
approval of the shareholders of the Company:
(a) increase the total number of shares of Common Stock that may be issued
under the Plan;
(b) increase the maximum number of shares with respect to all Awards
measured in Common Stock that may be granted to any individual under
the Plan;
(c) increase the maximum dollar amount that may be paid with respect to
all Awards measured in cash; or
(d) modify the requirements as to eligibility for Awards under the Plan.
20
In addition, the Plan shall not be amended without the approval of such
amendment by the Company's shareholders if such amendment (i) is required
under the rules and regulations of the stock exchange or national market
system on which the Common Stock is listed or (ii) will disqualify any ISO
granted hereunder.
16.3. Amendment or Cancellation of Award Agreements. The Committee may amend or
modify any Award Agreement at any time by mutual agreement between the
Committee and the Participant or such other persons as may then have an
interest therein. In addition, by mutual agreement between the Committee
and a Participant or such other persons as may then have an interest
therein, Awards may be granted to an Employee, Group Employee, Nonemployee
Director or Independent Contractor in substitution and exchange for, and in
cancellation of, any Awards previously granted to such Employee, Group
Employee, Nonemployee Director or Independent Contractor under the Plan, or
any award previously granted to such Employee, Group Employee, Nonemployee
Director or Independent Contractor under any other present or future plan
of the Company or any present or future plan of an entity which (i) is
purchased by the Company, (ii) purchases the Company, or (iii) merges into
or with the Company.
17. MISCELLANEOUS
17.1. Other Provisions. Awards granted under the Plan may also be subject to
such other provisions (whether or not applicable to an Award granted to any
other Participant) as the Committee determines on the date of grant to be
appropriate, including, without limitation, for the installment purchase of
Common Stock under Stock Options, to assist the Participant in financing
the acquisition of Common Stock, for the forfeiture of, or restrictions on
resale or other disposition of, Common Stock acquired under any Stock
Option, for the acceleration of Vesting of Awards in the event of a Change
in Control of the Company, for the payment of the value of Awards to
Participants in the event of a Change in Control of the Company, or to
comply with federal and state securities laws, or understandings or
conditions as to the Participant's Service in addition to those
specifically provided for under the Plan.
17.2. Restrictive Covenants and Other Terms and Conditions. The Committee may
provide, by way of the Award Agreement or otherwise, that, notwithstanding
any other provision of this Plan to the contrary, if the Participant
breaches the non-compete, non-solicitation, non-disclosure or other terms,
conditions, restrictions and/or limitations of the Award Agreement, whether
during or after termination of Service, in addition to any other penalties
or restrictions that may apply under any employment agreement, state law,
or otherwise, the Participant will forfeit:
(a) any and all Awards granted to him or her under the Plan, including
Awards that have become Vested and exercisable; and/or
(b) forfeit the profit the Participant has realized on the exercise of any
Stock Options, which is the difference between the Stock Options'
Exercise Price and the Fair Market Value of any Stock Option the
Participant exercised after terminating Service and within the six
month period immediately preceding the Participant's termination of
Service (the Participant may be required to repay such difference to
the Company).
21
17.3. Transferability. Each Award granted under the Plan to a Participant shall
not be transferable otherwise than by will or the laws of descent and
distribution, and Stock Options and SARs shall be exercisable, during the
Participant's lifetime, only by the Participant. In the event of the death
of a Participant, each Stock Option or SAR theretofore granted to him or
her shall be exercisable during such period after his or her death as the
Committee shall, in its sole discretion, set forth in the Award Agreement
on the date of grant and then only by the executor or administrator of the
estate of the deceased Participant or the person or persons to whom the
deceased Participant's rights under the Stock Option or SAR shall pass by
will or the laws of descent and distribution. Notwithstanding the
foregoing, the Committee, in its sole discretion, may permit the
transferability of a Stock Option (other than an ISO) by a Participant
solely to members of the Participant's immediate family or trusts or family
partnerships or other similar entities for the benefit of such persons, and
subject to such terms, conditions, restrictions and/or limitations, if any,
as the Committee may establish and include in the Award Agreement.
17.4. Election to Defer Compensation Attributable to Award. The Committee may,
in its sole discretion and subject to Code Section 409A, allow a
Participant to elect to defer the receipt of any compensation attributable
to an Award under guidelines and procedures to be established by the
Committee after taking into account the advice of the Company's tax
counsel.
17.5. Listing of Shares and Related Matters. If at any time the Committee shall
determine that the listing, registration or qualification of the shares of
Common Stock subject to an Award on any securities exchange or under any
applicable law, or the consent or approval of any governmental regulatory
authority, is necessary or desirable as a condition of, or in connection
with, the granting of an Award or the issuance of shares of Common Stock
thereunder, such Award may not be exercised, distributed or paid out, as
the case may be, in whole or in part, unless such listing, registration,
qualification, consent or approval shall have been effected or obtained
free of any conditions not acceptable to the Committee.
17.6. No Right, Title, or Interest in Company Assets. Participants shall have no
right, title, or interest whatsoever in or to any investments which the
Company may make to aid it in meeting its obligations under the Plan.
Nothing contained in the Plan, and no action taken pursuant to its
provisions, shall create or be construed to create a trust of any kind, or
a fiduciary relationship between the Company and any Participant,
beneficiary, legal representative or any other person. To the extent that
any person acquires a right to receive payments from the Company under the
Plan, such right shall be no greater than the right of an unsecured general
creditor of the Company. All payments to be made hereunder shall be paid
from the general funds of the Company, no special or separate fund shall be
established, and no segregation of assets shall be made to assure payment
of such amounts except as expressly set forth in the Plan. The Plan is not
intended to be subject to the Employee Retirement Income Security Act of
1974, as amended.
17.7. No Right to Continued Employment or Service or to Grants. A Participant's
rights, if any, to continue to serve the Company, an Affiliate or a Group
Company as a director, officer, employee, independent contractor or
otherwise, shall not be enlarged or otherwise affected by his or her
22
designation as a Participant under the Plan, and the Company, the Affiliate
and the Group Company reserve the right to terminate the employment or
Service of any Employee or Group Employee or the services of any
Independent Contractor or director at any time. The adoption of the Plan
shall not be deemed to give any Employee, Group Employee, Nonemployee
Director, Independent Contractor or any other individual any right to be
selected as a Participant or to be granted an Award.
17.8. Awards Subject to Foreign Laws. The Committee may grant Awards to
individual Participants who are subject to the tax laws of nations other
than the United States, and such Awards may have terms and conditions as
determined by the Committee as necessary to comply with applicable foreign
laws. The Committee may take any action that it deems advisable to obtain
approval of such Awards by the appropriate foreign governmental entity;
provided, however, that no such Awards may be granted pursuant to this
Section and no action may be taken which would result in a violation of the
Exchange Act or any other applicable law.
17.9. Governing Law. The Plan, all Awards granted hereunder, and all actions
taken in connection herewith shall be governed by and construed in
accordance with the laws of the State of Delaware without reference to
principles of conflict of laws, except as superseded by applicable federal
law. Participants, the Company, a Group Company and Affiliate each submit
and consent to the jurisdiction of the courts in the Commonwealth of
Massachusetts, County of Worcester, including the Federal Courts located
therein, should Federal jurisdiction requirements exist in any action
brought to enforce (or otherwise relating to) this Plan or an Award
Agreement.
17.10. Other Benefits. No Award granted under the Plan shall be considered
compensation for purposes of computing benefits under any retirement plan
of the Company, an Affiliate or a Group Company nor affect any benefits or
compensation under any other benefit or compensation plan of the Company,
and Affiliate or a Group Company, now or subsequently in effect.
17.11. No Fractional Shares. No fractional shares of Common Stock shall be
issued or delivered pursuant to the Plan or any Award. The Committee shall
determine whether cash, Common Stock, Stock Options, or other property
shall be issued or paid in lieu of fractional shares or whether such
fractional shares or any rights thereto shall be forfeited or otherwise
eliminated.
17.12. Compliance With Code Section 409A. Any provision of the Plan that becomes
subject to Code Section 409A, will be interpreted and applied consistent
with that Section and the applicable Treasury Regulations.
23