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EXHIBIT 10.1
CREE, INC.
EQUITY COMPENSATION PLAN
(As amended and restated December 1, 2000)
ARTICLE I - GENERAL PROVISIONS
1.1 The Plan is designed, for the benefit of the Company, to attract
and retain for the Company personnel of exceptional ability; to motivate such
personnel through added incentives to make a maximum contribution to the
Company; to develop and maintain a highly competent management team; and to be
competitive with other companies with respect to executive compensation.
1.2 Awards under the Plan may be made to Participants in the form of
Incentive Stock Options and Nonqualified Stock Options.
1.3 The Cree, Inc. Equity Compensation Plan was initially adopted
effective August 2, 1989 and was amended and restated in the form of the Plan
effective as of July 1, 1995 (the "Effective Date").
ARTICLE II - DEFINITIONS
Except where the context otherwise indicates, the following definitions
apply:
2.1 "Act" means the Securities Exchange Act of 1934, as now in effect
or as hereafter amended. All citations to sections of the Act or rules
thereunder are to such sections or rules as they may from time to time be
amended or renumbered.
2.2 "Agreement" means the written agreement evidencing each Award
granted to a Participant under the Plan.
2.3 "Award" means an award granted to a Participant in accordance with
the provisions of the Plan, including an Incentive Stock Option or a
Nonqualified Stock Option.
2.4 "Board" means the Board of Directors of Cree, Inc.
2.5 "Change in Control" means the occurrence of an event defined in
Section 7.1 of the Plan.
2.6 "Code" means the Internal Revenue Code of 1986, as now in effect or
as hereafter amended.
2.7 "Committee" means the Compensation Committee of the Board or such
other committee consisting of two or more members of the Board as may be
appointed by the Board to administer this Plan pursuant to Article III.
Committee members may also be appointed for such limited purposes as may be
provided by the Board.
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2.8 "Company" means Cree, Inc., a North Carolina corporation, and its
successors and assigns. The term "Company" shall include any corporation which
is a member of a controlled group of corporations (as defined in Section 414(b)
of the Code, as modified by Section 415(h) of the Code) which includes the
Company; any trade or business (whether or not incorporated) which is under
common control (as defined in Section 414(c) of the Code, as modified by Section
415(h) of the Code) with the Company; any organization (whether or not
incorporated) which is a member of an affiliated service group (as defined in
Section 414(m) of the Code) which includes the Company; and any other entity
required to be aggregated with the Company pursuant to regulations under Section
414(o) of the Code. With respect to all purposes of the Plan, including, but not
limited to, the establishment, amendment, termination, operation and
administration of the Plan, Cree, Inc. shall be authorized to act on behalf of
all other entities included within the definition of "Company."
2.9 "Disability" means (i) with respect to a Participant who is
eligible to participate in the Company's program of long-term disability
insurance, a condition with respect to which the Participant is entitled to
commence benefits under such program of long-term disability insurance, and (ii)
with respect to any Participant (including a Participant who is eligible to
participate in the Company's program of long-term disability insurance), a
disability as determined under procedures established by the Committee or in any
Award.
2.10 "Early Retirement" shall mean retirement from active employment
with the Company, with the express consent of the Committee, pursuant to early
retirement provisions established by the Committee or in any Award.
2.11 "Eligible Participant" means any employee of the Company, as shall
be determined by the Committee, as well as any other person, including
directors, whose participation the Committee determines is in the best interest
of the Company, subject to limitations as may be provided by the Code, the Act
or the Committee.
2.12 "Fair Market Value" means, with respect to any given day, the
following:
(a) If the Stock is not listed for trading on a national
securities exchange but is listed on the Nasdaq National Market or The Nasdaq
Small-Cap Market of The Nasdaq Stock Market, then the Fair Market Value shall be
the last sale price of the Stock on the date of reference, as reported by the
Nasdaq-Amex Reporting Service, or such other source as the Board deems reliable.
(b) If the Stock is listed for trading on any national
securities exchange, then the Fair Market Value shall be the closing price of
the Stock on such exchange on the date of reference.
The Committee may establish an alternative method of
determining Fair Market Value.
2.13 "Incentive Stock Option" means a Stock Option granted under
Article IV of the Plan, and as defined in Section 422 of the Code.
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2.14 "Nonqualified Stock Option" means a Stock Option granted under
Article V of the Plan.
2.15 "Normal Retirement" shall mean retirement from active employment
with the Company on or after age 65, or pursuant to such other requirements as
may be established by the Committee or in any Award.
2.16 "Option Grant Date" means, as to any Stock Option, the latest of:
(a) the date on which the Committee takes action to grant the
Stock Option to the Participant;
(b) the date the Participant receiving the Stock Option
becomes an employee of the Company, to the extent employment status is a
condition of the grant or a requirement of the Code or the Act; or
(c) such other date (later than the dates described in (a) and
(b) above) as the Committee may designate.
2.17 "Participant" means an Eligible Participant to whom an Award has
been granted and who has entered into an Agreement evidencing the Award.
2.18 "Plan" means the Cree, Inc. Equity Compensation Plan as set forth
herein and as further amended or amended and restated from time to time.
2.19 "Retirement" shall mean Early Retirement or Normal Retirement.
2.20 "Stock" means shares of the Common Stock of Cree, Inc., par value
$.0025 per share, as may be adjusted pursuant to the provisions of Section 3.10.
2.21 "Stock Option" means an Award under Article IV or V of the Plan of
an option to purchase Stock. A Stock Option may be either an Incentive Stock
Option or a Nonqualified Stock Option.
2.22 "Termination of Employment" means the discontinuance of employment
of a Participant with the Company for any reason. The determination of whether a
Participant has discontinued employment shall be made by the Committee in its
discretion. In determining whether a Termination of Employment has occurred, the
Committee may provide that service as a consultant or service with a business
enterprise in which the Company has a significant ownership interest shall be
treated as employment with the Company. The Committee shall have the discretion,
exercisable either at the time the Award is granted or at the time the
Participant terminates employment, to establish as a provision applicable to the
exercise of one or more Awards that during the limited period of exercisability
following Termination of Employment, the Award may be exercised not only with
respect to the number of shares of Stock for which it is exercisable at the time
of the Termination of Employment but also with respect to one or more subsequent
installments for which the Award would have become exercisable had the
Termination of Employment not occurred.
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ARTICLE III - ADMINISTRATION
3.1 This Plan shall be administered by the Committee. The Committee, in
its discretion, may delegate to one or more of its members such of its powers as
it deems appropriate. The Committee also may limit the power of any member to
the extent necessary to comply with any law. Members of the Committee shall be
appointed originally, and as vacancies occur, by the Board, to serve at the
pleasure of the Board. The Board may serve as the Committee, if by the terms of
the Plan all Board members are otherwise eligible to serve on the Committee.
3.2 The Committee shall meet at such times and places as it determines.
A majority of its members shall constitute a quorum, and the decision of a
majority of those present at any meeting at which a quorum is present shall
constitute the decision of the Committee. A memorandum signed by all of its
members shall constitute the decision of the Committee without necessity, in
such event, for holding an actual meeting.
3.3 The Committee shall have the exclusive right to interpret, construe
and administer the Plan, to select the persons who are eligible to receive an
Award, and to act in all matters pertaining to the granting of an Award and the
contents of the Agreement evidencing the Award, including without limitation,
the determination of the number of Stock Options, shares of Stock subject to an
Award, and the form, terms, conditions and duration of each Award, and any
amendment thereof consistent with the provisions of the Plan. All acts,
determinations and decisions of the Committee made or taken pursuant to grants
of authority under the Plan or with respect to any questions arising in
connection with the administration and interpretation of the Plan, including the
severability of any and all of the provisions thereof, shall be conclusive,
final and binding upon all Participants, Eligible Participants and their
beneficiaries.
3.4 The Committee may adopt such rules, regulations and procedures of
general application for the administration of this Plan, as it deems
appropriate.
3.5 The number of shares of Stock which are available for Award under
the Plan shall be Nineteen Million Eight Hundred Nineteen Thousand Eight Hundred
(19,819,800). Such shares of Stock shall be made available from authorized and
unissued shares. If, for any reason, any shares of Stock awarded or subject to
purchase under the Plan are not delivered or purchased, or are reacquired by the
Company, for reasons including, but not limited to, a termination, expiration or
cancellation of a Stock Option, such shares of Stock shall not be charged
against the aggregate number of shares of Stock available for Awards under the
Plan, and may again be available for Award under the Plan.
3.6 Each Award granted under the Plan shall be evidenced by a written
Agreement. Each Agreement shall be subject to and incorporate, by reference or
otherwise, the applicable terms and conditions of the Plan, and any other terms
and conditions, not inconsistent with the Plan, as may be imposed by the
Committee.
3.7 The Company shall not be required to issue or deliver any
certificates for shares of Stock prior to:
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(a) the listing of such shares on any stock exchange on which
the Stock may then be listed; and
(b) the completion of any registration or qualification of
such shares of Stock under any federal or state law, or any ruling or regulation
of any government body which the Company shall, in its discretion, determine to
be necessary or advisable.
3.8 All certificates for shares of Stock delivered under the Plan shall
also be subject to such stop-transfer orders and other restrictions as the
Committee may deem advisable under the rules, regulations, and other
requirements of the Securities and Exchange Commission, any stock exchange upon
which the Stock is then listed and any applicable federal or state laws, and the
Committee may cause a legend or legends to be placed on any such certificates to
make appropriate reference to such restrictions. In making such determination,
the Committee may rely upon an opinion of counsel for the Company.
3.9 Except as provided otherwise in the Plan or in an Agreement, no
Participant awarded a Stock Option shall have any right as a shareholder with
respect to any shares of Stock covered by his or her Stock Option prior to the
date of issuance to him or her of a certificate or certificates for such shares
of Stock.
3.10 If any reorganization, recapitalization, reclassification, stock
split-up, stock dividend, or consolidation of shares of Stock, merger or
consolidation of the Company or sale or other disposition by the Company of all
or a portion of its assets, any other change in the Company's corporate
structure, or any distribution to shareholders other than a cash dividend
results in the outstanding shares of Stock, or any securities exchanged therefor
or received in their place, being exchanged for a different number or class of
shares of Stock or other securities of the Company, or for shares of Stock or
other securities of any other corporation; or new, different or additional
shares or other securities of the Company or of any other corporation being
received by the holders of outstanding shares of Stock, then equitable
adjustments shall be made by the Committee in:
(a) the limitation on the aggregate number of shares of Stock
that may be awarded as set forth in Section 3.5 of the Plan;
(b) the number and class of Stock that may be subject to an
Award, and which have not been issued or transferred under an outstanding Award;
(c) the terms, conditions or restrictions of any Award and
Agreement, including the price payable for the acquisition of Stock; provided,
however, that all adjustments made as the result of the foregoing in respect of
each Incentive Stock Option shall be made so that such Stock Option shall
continue to be an Incentive Stock Option, as defined in Section 422 of the Code;
and
(d) the limitations on grants of Stock Options set forth in
Section 6.9 of the Plan.
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3.11 In addition to such other rights of indemnification as they may
have as directors or as members of the Committee, the members of the Committee
shall be indemnified by the Company against reasonable expenses, including
attorney's fees, actually and necessarily incurred in connection with the
defense of any action, suit or proceeding, or in connection with any appeal
therein, to which they or any of them may be a party by reason of any action
taken or failure to act under or in connection with the Plan or any Award
granted thereunder, and against all amounts paid by them in settlement thereof,
provided such settlement is approved by independent legal counsel selected by
the Company, or paid by them in satisfaction of a judgment or settlement in any
such action, suit or proceeding, except as to matters as to which the Committee
member has been negligent or engaged in misconduct in the performance of his
duties; provided, that within 60 days after institution of any such action, suit
or proceeding, a Committee member shall in writing offer the Company the
opportunity, at its own expense, to handle and defend the same.
3.12 The Committee may require each person purchasing shares of Stock
pursuant to an Award under the Plan to represent to and agree with the Company
in writing that he is acquiring the shares of Stock without a view to
distribution thereof and/or that he has met such other requirements as the
Committee determines may be applicable to such purchase. The certificates for
such shares of Stock may include any legend which the Committee deems
appropriate to reflect any restrictions on transfer.
3.13 The Committee shall be authorized to make adjustments in
performance-based criteria or in the terms and conditions of other Awards in
recognition of unusual or nonrecurring events affecting the Company or its
financial statements or changes in applicable laws, regulations or accounting
principles. The Committee may correct any defect, supply any omission or
reconcile any inconsistency in the Plan or any Agreement in the manner and to
the extent it shall deem desirable to carry it into effect. In the event the
Company shall assume outstanding employee benefit awards or the right or
obligation to make future such awards in connection with the acquisition of
another corporation or business entity, the Committee may, in its discretion,
make such adjustments in the terms of Awards under the Plan as it shall deem
appropriate.
3.14 The Committee shall have full power and authority to determine
whether, to what extent and under what circumstances, any Award shall be
canceled or suspended if the Participant (a) without the consent of the
Committee, while employed by the Company or after termination of such
employment, becomes associated with, employed by, renders services to, or owns
any interest in, other than any insubstantial interest, as determined by the
Committee, any business that is in competition with the Company as determined by
the Committee in its discretion; or (b) is terminated for cause as determined by
the Committee in its discretion.
ARTICLE IV - INCENTIVE STOCK OPTIONS
4.1 Each provision of this Article IV and of each Incentive Stock
Option granted hereunder shall be construed in accordance with the provisions of
Section 422 of the Code, and any provision hereof that cannot be so construed
shall be disregarded.
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4.2 Incentive Stock Options shall be granted only to Eligible
Participants who are in the active employment of the Company, each of whom may
be granted one or more such Incentive Stock Options for a reason related to his
or her employment at such time or times determined by the Committee following
the Effective Date through the date which is ten (10) years following the
Effective Date, subject to the following conditions:
(a) The Incentive Stock Option price per share of Stock shall
be set in the Agreement, but shall not be less than 100% of the Fair Market
Value of the Stock on the Option Grant Date. If the Eligible Participant owns
more than 10% of the outstanding Stock (as determined pursuant to Section 424(d)
of the Code) on the Option Grant Date, the Incentive Stock Option price per
share shall not be less than 110% of the Fair Market Value of the Stock on the
Option Grant Date.
(b) Subject to any conditions on exercise set forth in the
corresponding Agreement, the Incentive Stock Option may be exercised in whole or
in part from time to time within ten (10) years from the Option Grant Date (five
(5) years if the Eligible Participant owns more than 10% of the Stock on the
Option Grant Date), or such shorter period as may be specified by the Committee
in the Award; provided, that in any event, the Incentive Stock Option shall
lapse and cease to be exercisable upon a Termination of Employment or within
such period following a Termination of Employment as shall have been specified
in the Incentive Stock Option Agreement, which period shall not exceed three
months unless:
(i) employment shall have terminated as a
result of death or Disability, in which event such period
shall not exceed one year after the date of death or
Disability; or
(ii) death shall have occurred following a
Termination of Employment and while the Incentive Stock Option
was still exercisable, in which event such period shall not
exceed one year after the date of death;
provided, further, that such period following a Termination of Employment shall
in no event extend the original exercise period of the Incentive Stock Option.
(c) To the extent the aggregate Fair Market Value, determined
as of the Option Grant Date, of the shares of Stock with respect to which
Incentive Stock Options (determined without regard to this subsection) are first
exercisable during any calendar year by any Eligible Participant exceeds
$100,000, such options shall be treated as Nonqualified Stock Options granted
under Article V.
(d) The Committee may adopt any other terms and conditions
which it determines should be imposed for the Incentive Stock Option to qualify
under Section 422 of the Code, as well as any other terms and conditions not
inconsistent with this Article IV as determined by the Committee. If, for any
reason, an Incentive Stock Option fails to meet the requirements of Section 422
of the Code, the Option shall automatically be deemed a Nonqualified Stock
Option granted under Article V herein.
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4.3 The Committee may at any time offer to buy out for a payment in
cash, or Stock an Incentive Stock Option previously granted, based on such terms
and conditions as the Committee shall establish and communicate to the
Participant at the time that such offer is made.
4.4 If the Incentive Stock Option Agreement so provides, the Committee
may require that all or part of the shares of Stock to be issued upon the
exercise of an Incentive Stock Option shall take the form of restricted stock,
which shall be valued on the date of exercise, as determined by the Committee,
on the basis of the Fair Market Value of such restricted stock without regard to
the limitations on transfer and forfeiture restrictions involved.
ARTICLE V - NONQUALIFIED STOCK OPTIONS
5.1 One or more Stock Options may be granted as Nonqualified Stock
Options to Eligible Participants to purchase shares of Stock at such time or
times determined by the Committee, following the Effective Date, subject to the
terms and conditions set forth in this Article V.
5.2 The Nonqualified Stock Option price per share of Stock shall be
established in the Agreement and shall not be less than 100% of the Fair Market
Value at the time of the grant.
5.3 The Nonqualified Stock Option may be exercised in full or in part
from time to time within such period as may be specified by the Committee or in
the Agreement; provided, that, in any event, the Nonqualified Stock Option shall
lapse and cease to be exercisable upon a Termination of Employment or within
such period following a Termination of Employment as shall have been specified
in the Nonqualified Stock Option Agreement, which period shall not exceed three
months unless:
(a) employment shall have terminated as a result of death or
Disability, in which event such period shall not exceed one year after the date
of death or Disability; or
(b) death shall have occurred following a Termination of
Employment and while the Nonqualified Stock Option was still exercisable, in
which event such period shall not exceed one year after the date of death; or
(c) the Committee, in its discretion at the time of the option
grant, provides for a longer period, and such longer period is specified in the
Nonqualified Stock Option Agreement;
provided, further, that such period following a Termination of Employment shall
in no event extend the original exercise period of the Nonqualified Stock
Option.
5.4 The Nonqualified Stock Option Agreement may include any other terms
and conditions not inconsistent with this Article V or in Article VI, as
determined by the Committee.
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ARTICLE VI - INCIDENTS OF STOCK OPTIONS
6.1 Each Stock Option shall be granted subject to such terms and
conditions, if any, not inconsistent with this Plan, as shall be determined by
the Committee, including any provisions as to continued employment as
consideration for the grant or exercise of such Stock Option and any provisions
which may be advisable to comply with applicable laws, regulations or rulings of
any governmental authority.
6.2 Except as provided below, a Stock Option shall be exercisable
during the lifetime of the Participant only by him or his guardian or legal
representative and shall not be transferable by the Participant other than (i)
by will or by the laws of descent and distribution, or (ii) to the extent
otherwise allowed by applicable law, pursuant to a qualified domestic relations
order as defined by the Code and the Employee Retirement Income Security Act of
1974, as amended, or the rules thereunder. However, the Committee may, in its
sole discretion, either pursuant to an Agreement or otherwise, permit a
Participant to transfer a Nonqualified Stock Option by gift or other donative
transfer without payment of consideration, conditioned upon and subject to
compliance with all applicable law (including, but not limited to, securities
law).
6.3 Shares of Stock purchased upon exercise of a Stock Option shall be
paid for in such amounts, at such times and upon such terms as shall be
determined by the Committee, subject to limitations set forth in the Stock
Option Agreement. Without limiting the foregoing, the Committee may establish
payment terms for the exercise of Stock Options which permit the Participant to
deliver shares of Stock, or other evidence of ownership of Stock satisfactory to
the Company, with a Fair Market Value equal to the Stock Option price as
payment.
6.4 No cash dividends shall be paid on shares of Stock subject to
unexercised Stock Options. The Committee may provide, however, that a
Participant to whom a Stock Option has been granted which is exercisable in
whole or in part at a future time for shares of Stock shall be entitled to
receive an amount per share equal in value to the cash dividends, if any, paid
per share on issued and outstanding Stock, as of the dividend record dates
occurring during the period between the date of the grant and the time each such
share of Stock is delivered pursuant to exercise of such Stock Option. Such
amounts (herein called "dividend equivalents") may, in the discretion of the
Committee, be:
(a) paid in cash or Stock either from time to time prior to,
or at the time of the delivery of, such Stock, or upon expiration of the Stock
Option if it shall not have been fully exercised; or
(b) converted into contingently credited shares of Stock, with
respect to which dividend equivalents may accrue, in such manner, at such value,
and deliverable at such time or times, as may be determined by the Committee.
Such Stock, whether delivered or contingently credited, shall be charged against
the limitations set forth in Sections 3.5 and 6.9 hereof.
6.5 The Committee, in its sole discretion, may authorize payment of
interest equivalents on dividend equivalents which are payable in cash at a
future time.
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6.6 In the event of Disability or death, the Committee, with the
consent of the Participant or his legal representative, may authorize payment,
in cash or in Stock, or partly in cash and partly in Stock, as the Committee may
direct, of an amount equal to the difference at the time between the Fair Market
Value of the Stock subject to a Stock Option and the option price in
consideration of the surrender of the Stock Option.
6.7 If a Participant is required to pay to the Company an amount with
respect to income and employment tax withholding obligations in connection with
exercise of a Nonqualified Stock Option, and/or with respect to certain
dispositions of Stock acquired upon the exercise of an Incentive Stock Option,
the Committee, in its discretion and subject to such rules as it may adopt, may
permit the Participant to satisfy the obligation, in whole or in part, by making
an irrevocable election that a portion of the total Fair Market Value of the
shares of Stock subject to the Nonqualified Stock Option and/or with respect to
certain dispositions of Stock acquired upon the exercise of an Incentive Stock
Option, be paid in the form of cash in lieu of the issuance of Stock and that
such cash payment be applied to the satisfaction of the withholding obligations.
The amount to be withheld shall not exceed the statutory minimum federal and
state income and employment tax liability arising from the Stock Option exercise
transaction.
6.8 The Committee may permit the voluntary surrender of all or a
portion of any Stock Option granted under the Plan to be conditioned upon the
granting to the Participant of a new Stock Option for the same or a different
number of shares of Stock as the Stock Option surrendered, or may require such
surrender as a condition precedent to a grant of a new Stock Option to such
Participant. Subject to the provisions of the Plan, such new Stock Option shall
be exercisable at such price, during such period and on such other terms and
conditions as are specified by the Committee at the time the new Stock Option is
granted. Upon surrender, the Stock Options surrendered shall be canceled and the
shares of Stock previously subject to them shall be available for the grant of
other Stock Options.
6.9 The following limitations shall apply to grants of Stock Options:
(a) No Participant shall be granted, in any fiscal year of the
Company, Options to purchase more than 400,000 Shares.
(b) In connection with his or her initial service, a
Participant may be granted Stock Options to purchase up to an additional 400,000
Shares that shall not count against the limit set forth in Section 6.9(a) above.
ARTICLE VII - CHANGE IN CONTROL
7.1 A "Change in Control" shall be deemed to have occurred upon the
happening of any of the following events:
(a) Any "Person" as defined in Section 3(a)(9) of the Act,
including a "group" (as that term is used in Sections 13(d)(3) and 14(d)(2) of
the Act), but excluding the Company
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(as defined in Section 2.8 of this Plan) and any employee benefit plan sponsored
or maintained by the Company (including any trustee of such plan acting as
trustee), who together with its "affiliates" and "associates" (as those terms
are defined in Rule 12b-2 under the Act) becomes the "Beneficial Owner" (within
the meaning of Rule 13d-3 under the Act) of 20% or more of the then-outstanding
shares of Stock or the combined voting power of the then-outstanding securities
of the Company entitled to vote generally in the election of its directors. For
purposes of calculating the number of shares or voting power held by such Person
and its affiliates and associates under this Section 7.1(a), there shall be
excluded any securities acquired by such Person or its affiliates or associates
directly from the Company.
(b) A sale or other disposition of all or substantially all of
the Company's assets is consummated, other than such a sale or disposition that
would not have constituted a Change of Control under subsection (d) below had it
been structured as a merger or consolidation.
(c) The shareholders of the Company approve a definitive
agreement or plan to liquidate the Company.
(d) A merger or consolidation of the Company with and into
another entity is consummated, unless immediately following such transaction (1)
more than 50% of the members of the governing body of the surviving entity were
Incumbent Directors (as defined in subsection (e) below) at the time of
execution of the initial agreement providing for such transaction, (2) no
"Person" (as defined in Section 7.1(a) above), together with its "affiliates"
and "associates" (as defined in Section 7.1(a) above), is the "Beneficial Owner"
(as defined in Section 7.1 (a) above), directly or indirectly, of 20% or more of
the then-outstanding equity interests of the surviving entity or the combined
voting power of the then-outstanding equity interests of the surviving entity
entitled to vote generally in the election of members of its governing body, and
(3) more than 50% of the then-outstanding equity interests of the surviving
entity and the combined voting power of the then-outstanding equity interests of
the surviving entity entitled to vote generally in the election of members of
its governing body is "Beneficially Owned", directly or indirectly, by all or
substantially all of the individuals and entities who were the "Beneficial
Owners" of the shares of Stock immediately prior to such transaction in
substantially the same proportions as their ownership immediately prior to such
transaction.
(e) During any period of 24 consecutive months during the
existence of the Plan, the individuals who, at the beginning of such period,
constitute the Board (the "Incumbent Directors") cease for any reason other than
death to constitute at least a majority thereof; provided, however, that a
director who was not a director at the beginning of such 24 month period shall
be deemed to have satisfied such 24 month requirement, and be an Incumbent
Director, if such director was elected by, or on the recommendation of or with
the approval of, at least two-thirds of the directors who then qualified as
Incumbent Directors either actually, because they were directors at the
beginning of such 24 month period, or by prior operation of this Section 7.1
(e), but excluding for this purpose any such individual whose initial assumption
of office is in connection with an actual or threatened election context subject
to Rule 14a-11 of Regulation 14A promulgated under the Act or other actual or
threatened solicitation of proxies or consents by or on behalf of a "Person" (as
defined in Section 7.1(a) above) other than the Board.
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7.2 In the event of a Change in Control: (a) any or all then
outstanding Stock Options having an Option Grant Date on or before January 31,
1999, to the extent not previously fully vested and exercisable, shall
automatically become fully vested and, except to the extent such Options are
cashed out pursuant to Section 7.3 below, exercisable effective immediately
prior to the Change in Control; and (b) outstanding Stock Options having an
Option Grant Date after January 31, 1999 shall vest and become exercisable only
to the extent and in such manner as is provided in the applicable Agreement
evidencing the Stock Option.
7.3 Upon the occurrence of a Change in Control, the Committee may in
its sole discretion and consistent with the requirements of applicable law
decide to cash-out the value of all outstanding Stock Options, in each case to
the extent vested pursuant to Sections 7.2 above or otherwise, on the basis of
the "Change in Control Price" (as defined in Section 7.4) less the exercise
price under such Award (if any) as of the date such Change in Control is
determined to have occurred or such other date prior to the Change in Control as
the Committee may determine.
7.4 For purposes of Section 7.3, "Change in Control Price" means the
highest price per share of Stock paid in any transaction reported on the
exchange on which the Stock is then traded or on the Nasdaq Stock Market, as the
case may be, or paid or offered in any bona fide transaction related to a Change
in Control, at any time during the 120 day period immediately preceding the
occurrence of the Change in Control, as determined by the Committee.
7.5 The Committee is authorized to take such actions that are not
inconsistent with Sections 7.2, 7.3 and 7.4 above as the Committee determines to
be necessary or advisable, and fair and equitable to Participants, with respect
to an Award in the event of a Change in Control. Such action may include, but
shall not be limited to, establishing, amending or waiving the forms, terms,
conditions and duration of an Award and the Agreement, so as to provide for
earlier, later, extended or additional times for exercise or payment, differing
methods for calculating payments and alternate forms and amounts of payment. The
Committee may take such actions pursuant to this Section 7.5 by adopting rules
and regulations of general applicability to all Participants or to certain
categories of Participants, by including, amending or waiving terms and
conditions in an Award and the Agreement, or by taking action with respect to
individual Participants.
ARTICLE VIII - AMENDMENT AND TERMINATION
8.1 The Board, upon recommendation of the Committee, or otherwise, at
any time and from time to time, may amend or terminate the Plan. To the extent
required by Code Section 422, no amendment, without approval by the Company's
shareholders, shall:
(a) alter the group of persons eligible to participate in the
Plan;
(b) except as provided in Section 3.5, increase the maximum
number of shares of Stock or Stock Options which are available for Awards under
the Plan;
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(c) extend the period during which Incentive Stock Option
Awards may be granted beyond the date which is ten (10) years following the
Effective Date.
(d) limit or restrict the powers of the Committee with respect
to the administration of this Plan;
(e) change the definition of an Eligible Participant for the
purpose of an Incentive Stock Option or increase the limit or the value of
shares of Stock for which an Eligible Participant may be granted an Incentive
Stock Option;
(f) materially increase the benefits accruing to Participants
under this Plan;
(g) materially modify the requirements as to eligibility for
participation in this Plan; or
(h) change any of the provisions of this Article VIII.
8.2 No amendment to or discontinuance of this Plan or any provision
thereof by the Board or the shareholders of the Company shall, without the
written consent of the Participant, adversely affect, as shall be determined by
the Committee, any Award previously granted to such Participant under this Plan;
provided, however, the Committee retains the right and power to:
(a) annul any Award if the Participant is terminated for cause
as determined by the Committee;
(b) provide for the forfeiture of shares of Stock or other
gain under an Award as determined by the Committee for competing against the
Company; and
(c) convert any outstanding Incentive Stock Option to a
Nonqualified Stock Option.
8.3 If a Change in Control has occurred, no amendment or termination
shall impair the rights of any person with respect to an outstanding Award as
provided in Article VII.
ARTICLE IX - MISCELLANEOUS PROVISIONS
9.1 Nothing in the Plan or any Award granted hereunder shall confer
upon any Participant any right to continue in the employ of the Company, or to
serve as a director thereof, or interfere in any way with the right of the
Company to terminate his or her employment at any time. Unless specifically
provided otherwise, no Award granted under the Plan shall be deemed salary or
compensation for the purpose of computing benefits under any employee benefit
plan or other arrangement of the Company for the benefit of its employees unless
the Company shall determine otherwise. No Participant shall have any claim to an
Award until it is actually granted under the Plan. To the extent that any person
acquires a right to receive payments from the Company under the Plan, such right
shall, except as otherwise provided by the Committee, be no greater than the
right of an unsecured general creditor of the Company. All payments to be made
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hereunder shall be paid from the general funds of the company, and no special or
separate fund shall be established and no segregation of assets shall be made to
assure payment of such amounts, except as otherwise provided by the Committee.
9.2 The Company may make such provisions and take such steps as it may
deem necessary or appropriate for the withholding of any taxes which the Company
is required by any law or regulation of any governmental authority, whether
federal, state or local, domestic or foreign, to withhold in connection with any
Stock Option or the exercise thereof, including, but not limited to, the
withholding of payment of all or any portion of such Award or another Award
under this Plan until the Participant reimburses the Company for the amount the
Company is required to withhold with respect to such taxes, or canceling any
portion of such Award or another Award under this Plan in an amount sufficient
to reimburse itself for the amount it is required to so withhold, or selling any
property contingently credited by the Company for the purpose of paying such
Award or another Award under this Plan, in order to withhold or reimburse itself
for the amount it is required to so withhold.
9.3 The Plan and the grant of Awards shall be subject to all applicable
federal and state laws, rules, and regulations and to such approvals by any
United States government or regulatory agency as may be required.
9.4 The terms of the Plan shall be binding upon the Company, and its
successors and assigns.
9.5 No award shall be transferable except as provided for herein.
Unless otherwise provided by the Committee or in an Agreement, transfer
restrictions shall only apply to Incentive Stock Options as required in Article
IV and to the extent otherwise required by federal or state securities laws. If
any Participant makes such a transfer in violation hereof, any obligation of the
Company shall forthwith terminate.
9.6 This Plan and all actions taken hereunder shall be governed by the
laws of the State of North Carolina.
9.7 The Plan is intended to constitute an "unfunded" plan for incentive
and deferred compensation. With respect to any payments not yet made to a
Participant by the Company, nothing contained herein shall give any such
Participant any rights that are greater than those of a general creditor of the
Company. In its sole discretion, the Committee may authorize the creation of
trusts or other arrangements to meet the obligations created under the Plan to
deliver shares of Stock or payments in lieu of or with respect to Awards
hereunder; provided, however, that, unless the Committee otherwise determines
with the consent of the affected Participant, the existence of such trusts or
other arrangements is consistent with the "unfunded" status of the Plan.
9.8 Each Participant exercising an Award hereunder agrees to give the
Committee prompt written notice of any election made by such Participant under
Section 83(b) of the Code, or any similar provision thereof.
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9.9 If any provision of this Plan or an Agreement is or becomes or is
deemed invalid, illegal or unenforceable in any jurisdiction, or would
disqualify the Plan or any Agreement under any law deemed applicable by the
Committee, such provision shall be construed or deemed amended to conform to
applicable laws or if it cannot be construed or deemed amended without, in the
determination of the Committee, materially altering the intent of the Plan or
the Agreement, it shall be stricken and the remainder of the Plan or the
Agreement shall remain in full force and effect.