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CT COMMUNICATIONS, INC.
2001 STOCK INCENTIVE PLAN
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TABLE OF CONTENTS
PAGE
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1. PURPOSE............................................................... 1
2. DEFINITIONS........................................................... 1
3. ADMINISTRATION OF THE PLAN............................................ 3
3.1. Board....................................................... 3
3.2. Committee................................................... 4
3.3. Terms of Awards............................................. 4
3.4. Deferral Arrangement........................................ 5
3.5. No Liability................................................ 5
4. STOCK SUBJECT TO THE PLAN............................................. 5
5. EFFECTIVE DATE, DURATION AND AMENDMENTS............................... 5
5.1. Effective Date.............................................. 5
5.2. Term........................................................ 6
5.3. Amendment and Termination of the Plan....................... 6
6. AWARD ELIGIBILITY AND LIMITATIONS..................................... 6
6.1. Company or Subsidiary Employees; Service Providers; Other
Persons..................................................... 6
6.2. Successive Awards........................................... 6
6.3. Limitation on Shares of Stock Subject to Awards and Cash
Awards...................................................... 6
6.4. Limitations on Incentive Stock Options...................... 6
6.5. Stand-Alone, Additional, Tandem, and Substitute Awards...... 6
7. AWARD AGREEMENT....................................................... 7
8. TERMS AND CONDITIONS OF OPTIONS....................................... 7
8.1. Option Price................................................ 7
8.2. Vesting..................................................... 7
8.3. Term........................................................ 7
8.4. Termination of Service...................................... 7
8.5. Limitations on Exercise of Option........................... 8
8.6. Method of Exercise.......................................... 8
8.7. Rights of Holders of Options................................ 8
8.8. Delivery of Stock Certificates.............................. 8
8.9. Reload Options.............................................. 8
9. TRANSFERABILITY OF OPTIONS............................................ 8
9.1. Transferability of Options.................................. 8
9.2. Family Transfers............................................ 8
10. STOCK APPRECIATION RIGHTS............................................. 9
10.1. Right to Payment............................................ 9
10.2. Other Terms................................................. 9
11. RESTRICTED STOCK AND STOCK UNITS...................................... 9
11.1. Grant of Restricted Stock or Stock Units.................... 9
11.2. Restrictions................................................ 9
11.3. Restricted Stock Certificates............................... 10
11.4. Rights of Holders of Restricted Stock....................... 10
11.5. Rights of Holders of Stock Units............................ 10
11.5.1. Voting and Dividend Rights.......................... 10
11.5.2. Creditor's Rights................................... 10
11.6. Termination of Service...................................... 10
11.7. Purchase of Restricted Stock................................ 10
11.8. Delivery of Stock........................................... 11
12. FORM OF PAYMENT FOR OPTIONS AND RESTRICTED STOCK...................... 11
12.1. General Rule................................................ 11
12.2. Surrender of Stock.......................................... 11
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TABLE OF CONTENTS (CONT'D)
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12.3. Cashless Exercise........................................... 11
12.4. Promissory Note............................................. 11
12.5. Other Forms of Payment...................................... 11
13. DIVIDEND EQUIVALENT RIGHTS............................................ 11
13.1. Dividend Equivalent Rights.................................. 11
13.2. Termination of Service...................................... 12
14. PERFORMANCE AND ANNUAL INCENTIVE AWARDS............................... 12
14.1. Performance Conditions...................................... 12
14.2. Performance or Annual Incentive Awards Granted to Designated
Covered Employees........................................... 12
14.2.1. Performance Goals Generally......................... 12
14.2.2. Business Criteria................................... 12
14.2.3. Timing For Establishing Performance Goals........... 13
14.2.4. Performance or Annual Incentive Award Pool.......... 13
14.2.5. Settlement of Performance or Annual Incentive
Awards; Other Terms......................................... 13
14.3. Written Determinations...................................... 13
14.4. Status of Section 14.2 Awards Under Code Section 162(m)..... 13
15. PARACHUTE LIMITATIONS................................................. 14
16. REQUIREMENTS OF LAW................................................... 14
16.1. General..................................................... 14
16.2. Rule 16b-3.................................................. 15
17. EFFECT OF CHANGES IN CAPITALIZATION................................... 15
17.1. Changes in Stock............................................ 15
17.2. Reorganization in Which the Company is the Surviving Entity
and Which Does Not Constitute a Corporate Transaction....... 15
17.3. Reorganization, Sale of Assets or Sale of Stock Which
Constitutes a Corporate Transaction......................... 16
17.4. Adjustments................................................. 16
17.5. No Limitations on Company................................... 16
18. GENERAL PROVISIONS.................................................... 17
18.1. Pooling..................................................... 17
18.2. Disclaimer of Rights........................................ 17
18.3. Nonexclusivity of the Plan.................................. 17
18.4. Withholding Taxes........................................... 17
18.5. Book Entry.................................................. 18
18.6. Captions.................................................... 18
18.7. Other Provisions............................................ 18
18.8. Number And Gender........................................... 18
18.9. Severability................................................ 18
18.10. Governing Law............................................... 18
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CT COMMUNICATIONS, INC.
2001 STOCK INCENTIVE PLAN
CT Communications, Inc., a North Carolina corporation (the "Company"), sets
forth herein the terms of its 2001 Stock Incentive Plan (the "Plan"), as
follows:
1. PURPOSE.
The Plan is intended to enhance the Company's and its Affiliates' (as
defined herein) ability to attract and retain highly qualified officers,
directors, key employees, and other persons, and to motivate such officers,
directors, key employees, and other persons to serve the Company and its
Affiliates and to expend maximum effort to improve the business results and
earnings of the Company, by providing to such officers, directors, key employees
and other persons an opportunity to acquire or increase a direct proprietary
interest in the operations and future success of the Company. To this end, the
Plan provides for the grant of stock options, stock appreciation rights,
restricted stock, stock units and dividend equivalent rights. Any of these
awards may, but need not, be made as performance incentives to reward attainment
of annual or long-term performance goals in accordance with the terms hereof.
Stock options granted under the Plan may be non-qualified stock options or
incentive stock options, as provided herein.
2. DEFINITIONS.
For purposes of interpreting the Plan and related documents (including
Award Agreements), the following definitions shall apply:
2.1. "AFFILIATE" means, with respect to the Company, any company or other
trade or business that controls, is controlled by or is under common control
with the Company within the meaning of Rule 405 of Regulation C under the
Securities Act, including, without limitation, any Subsidiary.
2.2. "ANNUAL INCENTIVE AWARD" means an Award made subject to attainment of
performance goals (as described in SECTION 14) over a performance period of up
to one year (the fiscal year, unless otherwise specified by the Committee).
2.3. "AWARD" means a grant of an Option, Stock Appreciation Right,
Restricted Stock, Stock Unit or Dividend Equivalent Rights under the Plan.
2.4. "AWARD AGREEMENT" means the written agreement between the Company and
a Grantee that evidences and sets out the terms and conditions of an Award.
2.5. "BENEFIT ARRANGEMENT" shall have the meaning set forth in SECTION 15
hereof.
2.6. "BOARD" means the Board of Directors of the Company.
2.7. "CAUSE" means, as determined by the Board and unless otherwise
provided in an applicable agreement with the Company or an Affiliate, (i) gross
negligence or willful misconduct in connection with the performance of duties;
(ii) conviction of a criminal offense (other than minor traffic offenses); or
(iii) material breach of any term of any employment, consulting or other
services, confidentiality, intellectual property or non-competition agreements,
if any, between the Service Provider or other employee and the Company or an
Affiliate.
2.8. "CORPORATE TRANSACTION" means (i) the dissolution or liquidation of
the Company or a merger, consolidation, or reorganization of the Company with
one or more other entities in which the Company is not the surviving entity,
(ii) a sale of substantially all of the assets of the Company to another person
or entity, or (iii) any transaction (including without limitation a merger or
reorganization in which the Company is the surviving entity) which results in
any person or entity (other than persons who are shareholders or Affiliates
immediately prior to the transaction) owning 50% or more of the combined voting
power of all classes of stock of the Company.
2.9. "CODE" means the Internal Revenue Code of 1986, as now in effect or as
hereafter amended.
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2.10. "COMMITTEE" means a committee of, and designated from time to time by
resolution of, the Board, which shall be constituted as provided in SECTION 3.2.
2.11. "COMPANY" means CT Communications, Inc.
2.12. "COVERED EMPLOYEE" means a Grantee who is a Covered Employee within
the meaning of Section 162(m)(3) of the Code.
2.13. "DISABILITY" means the Grantee is unable to perform each of the
essential duties of such Grantee's position by reason of a medically
determinable physical or mental impairment which is potentially permanent in
character or which can be expected to last for a continuous period of not less
than 12 months; provided, however, that, with respect to rules regarding
expiration of an Incentive Stock Option following termination of the Grantee's
Service, Disability shall mean the Grantee is unable to engage in any
substantial gainful activity by reason of a medically determinable physical or
mental impairment which can be expected to result in death or which has lasted
or can be expected to last for a continuous period of not less than 12 months.
2.14. "DIVIDEND EQUIVALENT" means a right, granted to a Grantee under
SECTION 13 hereof, to receive cash, Stock, other Awards or other property equal
in value to dividends paid with respect to a specified number of shares of
Stock, or other periodic payments.
2.15. "EFFECTIVE DATE" means March 26, 2001, the date the Plan is approved
by the Board.
2.16. "EXCHANGE ACT" means the Securities Exchange Act of 1934, as now in
effect or as hereafter amended.
2.17. "FAIR MARKET VALUE" means the value of a share of Stock, determined
as follows: if on the Grant Date or other determination date the Stock is listed
on an established national or regional stock exchange, is admitted to quotation
on The Nasdaq Stock Market, Inc. or is publicly traded on an established
securities market, the Fair Market Value of a share of Stock shall be the
closing price of the Stock on such exchange or in such market (if there is more
than one such exchange or market the Board shall determine the appropriate
exchange or market) on the Grant Date or such other determination date (or if
there is no such reported closing price, the Fair Market Value shall be the mean
between the highest bid and lowest asked prices or between the high and low sale
prices on such trading day) or, if no sale of Stock is reported for such trading
day, on the next preceding day on which any sale shall have been reported. If
the Stock is not listed on such an exchange, quoted on such system or traded on
such a market, Fair Market Value shall be the value of the Stock as determined
by the Board in good faith.
2.18. "FAMILY MEMBER" means a person who is a spouse, former spouse, child,
stepchild, grandchild, parent, stepparent, grandparent, niece, nephew,
mother-in-law, father-in-law, son-in-law, daughter-in-law, brother, sister,
brother-in-law, or sister-in-law, including adoptive relationships, of the
Grantee, any person sharing the Grantee's household (other than a tenant or
employee), a trust in which any one or more these persons have more than fifty
percent of the beneficial interest, a foundation in which any one or more of
these persons (or the Grantee) control the management of assets, and any other
entity in which one or more these persons (or the Grantee) own more than fifty
percent of the voting interests.
2.19. "GRANT DATE" means, as determined by the Board or authorized
Committee, the latest to occur of (i) the date as of which the Board approves an
Award, (ii) the date on which the recipient of an Award first becomes eligible
to receive an Award under SECTION 6 hereof, or (iii) such other date as may be
specified by the Board.
2.20. "GRANTEE" means a person who receives or holds an Award under the
Plan.
2.21. "INCENTIVE STOCK OPTION" means an "incentive stock option" within the
meaning of Section 422 of the Code, or the corresponding provision of any
subsequently enacted tax statute, as amended from time to time.
2.22. "NON-QUALIFIED STOCK OPTION" means an Option that is not an Incentive
Stock Option.
2.23. "OPTION" means an option to purchase one or more shares of Stock
pursuant to the Plan.
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2.24. "OPTION PRICE" means the purchase price for each share of Stock
subject to an Option.
2.25. "OTHER AGREEMENT" shall have the meaning set forth in SECTION 15
hereof.
2.26. "OUTSIDE DIRECTOR" means a member of the Board who is not an officer
or employee of the Company.
2.27. "PERFORMANCE AWARD" means an Award made subject to the attainment of
performance goals (as described in SECTION 14) over a performance period of up
to ten (10) years.
2.28. "PLAN" means this CT Communications, Inc. 2001 Stock Incentive Plan.
2.29. "PURCHASE PRICE" means the purchase price for each share of Stock
pursuant to a grant of Restricted Stock.
2.30. "REPORTING PERSON" means a person who is required to file reports
under Section 16(a) of the Exchange Act.
2.31. "RESTRICTED STOCK" means shares of Stock, awarded to a Grantee
pursuant to SECTION 11 hereof.
2.32. "SAR EXERCISE PRICE" means the per share exercise price of an SAR
granted to a Grantee under SECTION 10 hereof.
2.33. "SECURITIES ACT" means the Securities Act of 1933, as now in effect
or as hereafter amended.
2.34. "SERVICE" means service as an employee, officer, director or other
Service Provider of the Company or an Affiliate. Unless otherwise stated in the
applicable Award Agreement, a Grantee's change in position or duties shall not
result in interrupted or terminated Service, so long as such Grantee continues
to be an employee, officer, director or other Service Provider of the Company or
an Affiliate. Subject to the preceding sentence, whether a termination of
Service shall have occurred for purposes of the Plan shall be determined by the
Board, which determination shall be final, binding and conclusive.
2.35. "SERVICE PROVIDER" means an employee, officer or director of the
Company or an Affiliate, or a consultant or adviser currently providing services
to the Company or an Affiliate.
2.36. "STOCK" means the common stock of the Company.
2.37. "STOCK APPRECIATION RIGHT" or "SAR" means a right granted to a
Grantee under SECTION 10 hereof.
2.38. "STOCK UNIT" means a bookkeeping entry representing the equivalent of
shares of Stock, awarded to a Grantee pursuant to SECTION 11 hereof.
2.39. "SUBSIDIARY" means any "subsidiary corporation" of the Company within
the meaning of Section 424(f) of the Code.
2.40. "TERMINATION DATE" means the date upon which an Option shall
terminate or expire, as set forth in SECTION 8.3 hereof.
2.41. "TEN PERCENT SHAREHOLDER" means an individual who owns more than ten
percent (10%) of the total combined voting power of all classes of outstanding
stock of the Company, its parent or any of its Subsidiaries. In determining
stock ownership, the attribution rules of Section 424(d) of the Code shall be
applied.
3. ADMINISTRATION OF THE PLAN.
3.1. BOARD.
The Board shall have such powers and authorities related to the
administration of the Plan as are consistent with the Company's articles of
incorporation and bylaws and applicable law. The Board shall have full power and
authority to take all actions and to make all determinations required or
provided for under the Plan, any Award or any Award Agreement, and shall have
full power and authority to take all such other actions and make all such other
determinations not inconsistent with the specific terms and provisions of the
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Plan that the Board deems to be necessary or appropriate to the administration
of the Plan, any Award or any Award Agreement. All such actions and
determinations shall be by the affirmative vote of a majority of the members of
the Board present at a meeting or by unanimous consent of the Board executed in
writing in accordance with the Company's articles of incorporation and bylaws
and applicable law. The interpretation and construction by the Board of any
provision of the Plan, any Award or any Award Agreement shall be final and
conclusive.
3.2. COMMITTEE.
The Board from time to time may delegate to the Committee such powers and
authorities related to the administration and implementation of the Plan, as set
forth in SECTION 3.1 above and other applicable provisions, as the Board shall
determine, consistent with the articles of incorporation and bylaws of the
Company and applicable law.
(i) Except as provided in Subsection (ii) and except as the Board may
otherwise determine, the Committee, if any, appointed by the Board to administer
the Plan shall consist of two or more Outside Directors of the Company who: (a)
qualify as "outside directors" within the meaning of Section 162(m) of the Code
and who (b) meet such other requirements as may be established from time to time
by the Securities and Exchange Commission for plans intended to qualify for
exemption under Rule 16b-3 (or its successor) under the Exchange Act.
(ii) The Board may also appoint one or more separate committees of the
Board, each composed of one or more directors of the Company who need not be
Outside Directors, who may administer the Plan with respect to employees or
other Service Providers who are not officers or directors of the Company, may
grant Awards under the Plan to such employees or other Service Providers, and
may determine all terms of such Awards.
In the event that the Plan, any Award or any Award Agreement entered into
hereunder provides for any action to be taken by or determination to be made by
the Board, such action may be taken or such determination may be made by the
Committee if the power and authority to do so has been delegated to the
Committee by the Board as provided for in this Section. Unless otherwise
expressly determined by the Board, any such action or determination by the
Committee shall be final, binding and conclusive. To the extent permitted by
law, the Committee may delegate its authority under the Plan to a member of the
Board.
3.3. TERMS OF AWARDS.
Subject to the other terms and conditions of the Plan, the Board shall have
full and final authority:
(i) to designate Grantees,
(ii) to determine the type or types of Awards to be made to a Grantee,
(iii) to determine the number of shares of Stock to be subject to an Award,
(iv) to establish the terms and conditions of each Award (including, but
not limited to, the exercise price of any Option, the nature and duration of any
restriction or condition (or provision for lapse thereof) relating to the
vesting, exercise, transfer, or forfeiture of an Award or the shares of Stock
subject thereto, and any terms or conditions that may be necessary to qualify
Options as Incentive Stock Options),
(v) to prescribe the form of each Award Agreement evidencing an Award, and
(vi) to amend, modify, or supplement the terms of any outstanding Award.
Such authority specifically includes the authority, in order to effectuate the
purposes of the Plan but without amending the Plan, to modify Awards to eligible
individuals who are foreign nationals or are individuals who are employed
outside the United States to recognize differences in local law, tax policy, or
custom.
As a condition to any subsequent Award, the Board shall have the right, at
its discretion, to require Grantees to return to the Company Awards previously
made under the Plan. Subject to the terms and conditions of the Plan, any such
new Award shall be upon such terms and conditions as are specified by the
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Board at the time the new Award is made. The Board shall have the right, in its
discretion, to make Awards in substitution or exchange for any other award under
another plan of the Company, any Affiliate, or any business entity to be
acquired by the Company or an Affiliate. The Company may retain the right in an
Award Agreement to cause a forfeiture of the gain realized by a Grantee on
account of actions taken by the Grantee in violation or breach of or in conflict
with any non-competition agreement, any agreement prohibiting solicitation of
employees or clients of the Company or any Affiliate thereof or any
confidentiality obligation with respect to the Company or any Affiliate thereof
or otherwise in competition with the Company or any Affiliate thereof, to the
extent specified in such Award Agreement applicable to the Grantee. Furthermore,
the Company may annul an Award if the Grantee is an employee of the Company or
an Affiliate thereof and is terminated for Cause as defined in the applicable
Award Agreement or the Plan, as applicable. The grant of any Award shall be
contingent upon the Grantee executing the appropriate Award Agreement.
3.4. DEFERRAL ARRANGEMENT.
The Board may permit or require the deferral of any award payment into a
deferred compensation arrangement, subject to such rules and procedures as it
may establish, which may include provisions for the payment or crediting of
interest or dividend equivalents, including converting such credits into
deferred Stock equivalents and restricting deferrals to comply with hardship
distribution rules affecting 401(k) plans.
3.5. NO LIABILITY.
No member of the Board or of the Committee shall be liable for any action
or determination made in good faith with respect to the Plan or any Award or
Award Agreement.
4. STOCK SUBJECT TO THE PLAN.
Subject to adjustment as provided in SECTION 17 hereof, the number of
shares of Stock available for issuance under the Plan shall be the sum of one
million two hundred thousand (1,200,000) shares of Stock plus any shares of
Stock available for grant (including shares which become available due to
forfeitures of outstanding options or other awards) under the Company's Omnibus
Stock Compensation Plan. Stock issued or to be issued under the Plan shall be
authorized but unissued shares; to the extent permitted by applicable law,
issued shares that have been reacquired by the Company, or shares purchased on
the open market by the Company. If any shares covered by an Award are not
purchased or are forfeited, or if an Award otherwise terminates without delivery
of any Stock subject thereto, then the number of shares of Stock counted against
the aggregate number of shares available under the Plan with respect to such
Award shall, to the extent of any such forfeiture or termination, again be
available for making Awards under the Plan. If the exercise price of any Option
granted under the Plan, or if pursuant to SECTION 18.4 the withholding
obligation of any Grantee with respect to an Option, is satisfied by tendering
shares of Stock to the Company (by either actual delivery or by attestation) or
by withholding shares of Stock, only the number of shares of Stock issued net of
the shares of Stock tendered or withheld shall be deemed delivered for purposes
of determining the maximum number of shares of Stock available for delivery
under the Plan.
5. EFFECTIVE DATE, DURATION AND AMENDMENTS.
5.1. EFFECTIVE DATE.
The Plan shall be effective as of the Effective Date, subject to approval
of the Plan by the Company's shareholders within one year of the Effective Date.
Upon approval of the Plan by the shareholders of the Company as set forth above,
all Awards made under the Plan on or after the Effective Date shall be fully
effective as if the shareholders of the Company had approved the Plan on the
Effective Date. If the shareholders fail to approve the Plan within one year
after the Effective Date, any Awards made hereunder shall be null and void and
of no effect.
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5.2. TERM.
The Plan shall terminate automatically ten (10) years after its adoption by
the Board and may be terminated on any earlier date as provided in SECTION 5.3.
5.3. AMENDMENT AND TERMINATION OF THE PLAN.
The Board may, at any time and from time to time, amend, suspend, or
terminate the Plan as to any shares of Stock as to which Awards have not been
made. An amendment shall be contingent on approval of the Company's shareholders
to the extent stated by the Board or required by applicable law. No Awards shall
be made after termination of the Plan. No amendment, suspension, or termination
of the Plan shall, without the consent of the Grantee, impair rights or
obligations under any Award theretofore awarded under the Plan.
6. AWARD ELIGIBILITY AND LIMITATIONS.
6.1. COMPANY OR SUBSIDIARY EMPLOYEES; SERVICE PROVIDERS; OTHER PERSONS.
Subject to this SECTION 6, Awards may be made under the Plan to: (i) any
employee of, or a Service Provider to, the Company or of any Affiliate,
including any such employee or other Service Provider who is an officer or
director of the Company, or of any affiliate, as the Board shall determine and
designate from time to time, (ii) any Outside Director, and (iii) any other
individual whose participation in the Plan is determined to be in the best
interests of the Company by the Board.
6.2. SUCCESSIVE AWARDS.
An eligible person may receive more than one Award, subject to such
restrictions as are provided herein.
6.3. LIMITATION ON SHARES OF STOCK SUBJECT TO AWARDS AND CASH AWARDS.
The maximum number of shares of Stock subject to Options that can be
awarded under the Plan to any person eligible for an Award under SECTION 6
hereof is four hundred thousand (400,000) per year. The maximum number of shares
that can be awarded under the Plan, other than pursuant to an Option, is six
hundred thousand (600,000) shares; provided, that, no more than two hundred
thousand (200,000) shares may be awarded, other than pursuant to an option, per
year to an eligible person. The preceding limitations in this SECTION 6.3 are
subject to adjustment as provided in SECTION 17 hereof. The maximum amount that
may be earned as an Annual Incentive Award or other cash Award in any fiscal
year by any one Grantee shall be $1,000,000 and the maximum amount that may be
earned as a Performance Award or other cash Award in respect of a performance
period by any one Grantee shall be $3,000,000.
6.4. LIMITATIONS ON INCENTIVE STOCK OPTIONS.
An Option shall constitute an Incentive Stock Option only (i) if the
Grantee of such Option is an employee of the Company or any Subsidiary of the
Company; (ii) to the extent specifically provided in the related Award
Agreement; and (iii) to the extent that the aggregate Fair Market Value
(determined at the time the Option is granted) of the shares of Stock with
respect to which all Incentive Stock Options held by such Grantee become
exercisable for the first time during any calendar year (under the Plan and all
other plans of the Grantee's employer and its Affiliates) does not exceed
$100,000. This limitation shall be applied by taking Options into account in the
order in which they were granted.
6.5. STAND-ALONE, ADDITIONAL, TANDEM, AND SUBSTITUTE AWARDS.
Awards granted under the Plan may, in the discretion of the Board, be
granted either alone or in addition to, in tandem with, or in substitution or
exchange for, any other Award or any award granted under another plan of the
Company, any Affiliate, or any business entity to be acquired by the Company or
an Affiliate, or any other right of a Grantee to receive payment from the
Company or any Affiliate. Such additional, tandem, and substitute or exchange
Awards may be granted at any time. If an Award is granted in substitution or
exchange for another Award, the Board shall require the surrender of such other
Award in consideration for
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the grant of the new Award. In addition, Awards may be granted in lieu of cash
compensation, including in lieu of cash amounts payable under other plans of the
Company or any Affiliate, in which the value of Stock subject to the Award is
equivalent in value to the cash compensation (for example, Stock Units or
Restricted Stock), or in which the exercise price, grant price or purchase price
of the Award in the nature of a right that may be exercised is equal to the Fair
Market Value of the underlying Stock minus the value of the cash compensation
surrendered (for example, Options granted with an exercise price "discounted" by
the amount of the cash compensation surrendered).
7. AWARD AGREEMENT.
Each Award granted pursuant to the Plan shall be evidenced by an Award
Agreement, in such form or forms as the Board shall from time to time determine.
Award Agreements granted from time to time or at the same time need not contain
similar provisions but shall be consistent with the terms of the Plan. Each
Award Agreement evidencing an Award of Options shall specify whether such
Options are intended to be Non-qualified Stock Options or Incentive Stock
Options, and in the absence of such specification such options shall be deemed
Non-qualified Stock Options.
8. TERMS AND CONDITIONS OF OPTIONS.
8.1. OPTION PRICE.
The Option Price of each Option shall be fixed by the Board and stated in
the Award Agreement evidencing such Option. The Option Price of each Option
shall be at least the Fair Market Value on the Grant Date of a share of Stock;
provided, however, that in the event that a Grantee is a Ten Percent
Shareholder, the Option Price of an Option granted to such Grantee that is
intended to be an Incentive Stock Option shall be not less than 110 percent of
the Fair Market Value of a share of Stock on the Grant Date. In no case shall
the Option Price of any Option be less than the par value of a share of Stock.
8.2. VESTING.
Subject to SECTIONS 8.3 and 17.3 hereof, each Option granted under the Plan
shall become exercisable at such times and under such conditions as shall be
determined by the Board and stated in the Award Agreement. For purposes of this
SECTION 8.2, fractional numbers of shares of Stock subject to an Option shall be
rounded down to the next nearest whole number. The Board may provide, for
example, in the Award Agreement for (i) accelerated exercisability of the Option
in the event the Grantee's Service terminates on account of death, Disability,
retirement, or another event, (ii) expiration of the Option prior to its term in
the event of the termination of the Grantee's Service, (iii) immediate
forfeiture of the Option in the event the Grantee's Service is terminated for
Cause or (iv) unvested Options to be exercised subject to the Company's right of
repurchase with respect to unvested shares of Stock. No Option shall be
exercisable in whole or in part prior to the date the Plan is approved by the
Shareholders of the Company as provided in SECTION 5.1 hereof.
8.3. TERM.
Each Option granted under the Plan shall terminate, and all rights to
purchase shares of Stock thereunder shall cease, upon the expiration of ten
years from the date such Option is granted, or under such circumstances and on
such date prior thereto as is set forth in the Plan or as may be fixed by the
Board and stated in the Award Agreement relating to such Option (the
"Termination Date"); provided, however, that in the event that the Grantee is a
Ten Percent Shareholder, an Option granted to such Grantee that is intended to
be an Incentive Stock Option shall not be exercisable after the expiration of
five years from its Grant Date.
8.4. TERMINATION OF SERVICE.
Each Award Agreement shall set forth the extent to which the Grantee shall
have the right to exercise the Option following termination of the Grantee's
Service. Such provisions shall be determined in the sole discretion of the
Board, need not be uniform among all Options issued pursuant to the Plan, and
may reflect distinctions based on the reasons for termination of Service.
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8.5. LIMITATIONS ON EXERCISE OF OPTION.
Notwithstanding any other provision of the Plan, in no event may any Option
be exercised, in whole or in part, prior to the date the Plan is approved by the
shareholders of the Company as provided herein, or after ten years following the
Grant Date, or after the occurrence of an event referred to in SECTION 17 hereof
which results in termination of the Option.
8.6. METHOD OF EXERCISE.
An Option that is exercisable may be exercised by the Grantee's delivery to
the Company of written notice of exercise on any business day, at the Company's
principal office, on the form specified by the Company. Such notice shall
specify the number of shares of Stock with respect to which the Option is being
exercised and shall be accompanied by payment in full of the Option Price of the
shares for which the Option is being exercised. The minimum number of shares of
Stock with respect to which an Option may be exercised, in whole or in part, at
any time shall be the lesser of (i) 100 shares or such lesser number set forth
in the applicable Award Agreement and (ii) the maximum number of shares
available for purchase under the Option at the time of exercise.
8.7. RIGHTS OF HOLDERS OF OPTIONS.
Unless otherwise stated in the applicable Award Agreement, an individual
holding or exercising an Option shall have none of the rights of a shareholder
(for example, the right to receive cash or dividend payments or distributions
attributable to the subject shares of Stock or to direct the voting of the
subject shares of Stock) until the shares of Stock covered thereby are fully
paid and issued to him. Except as provided in SECTION 17 hereof, no adjustment
shall be made for dividends, distributions or other rights for which the record
date is prior to the date of such issuance.
8.8. DELIVERY OF STOCK CERTIFICATES.
Promptly after the exercise of an Option by a Grantee and the payment in
full of the Option Price, such Grantee shall be entitled to the issuance of a
stock certificate or certificates evidencing his or her ownership of the shares
of Stock subject to the Option.
8.9. RELOAD OPTIONS.
At the discretion of the Board and subject to such restrictions, terms and
conditions as the Board may establish, Options granted under the Plan may
include a "reload" feature pursuant to which a Grantee exercising an Option by
the delivery of a number of shares of Stock in accordance with SECTION 8.6
hereof would automatically be granted an additional Option (with an exercise
price equal to the Fair Market Value of the Stock on the date the additional
Option is granted and with such other terms as the Board may provide) to
purchase that number of shares of Stock equal to the number delivered to
exercise the original Option with an Option term equal to the remainder of the
original Option term unless the Board otherwise determines in the Option Award
Agreement for the original grant.
9. TRANSFERABILITY OF OPTIONS.
9.1. TRANSFERABILITY OF OPTIONS.
Except as provided in SECTION 9.2, during the lifetime of a Grantee, only
the Grantee (or, in the event of legal incapacity or incompetency, the Grantee's
guardian or legal representative) may exercise an Option. Except as provided in
SECTION 9.2, no Option shall be assignable or transferable by the Grantee to
whom it is granted, other than by will or the laws of descent and distribution.
9.2. FAMILY TRANSFERS.
If, and to the extent, authorized in the applicable Award Agreement, a
Grantee may transfer, not for value, all or part of an Option which is not an
Incentive Stock Option to any Family Member. For the purpose
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of this SECTION 9.2, a "not for value" transfer is a transfer which is (i) a
gift, (ii) a transfer under a domestic relations order in settlement of marital
property rights to the extent required by the court order; or (iii) a transfer
to an entity in which more than fifty percent of the voting interests are owned
by Family Members (or the Grantee) in exchange for an interest in that entity.
Following a transfer under this SECTION 9.2, any such Option shall continue to
be subject to the same terms and conditions as were applicable immediately prior
to transfer. Subsequent transfers of transferred Options are prohibited except
to Family Members of the original Grantee in accordance with this SECTION 9.2 or
by will or the laws of descent and distribution. The events of termination of
Service of SECTION 8.4 hereof shall continue to be applied with respect to the
original Grantee, following which the Option shall be exercisable by the
transferee only to the extent, and for the periods specified, in SECTION 8.4.
10. STOCK APPRECIATION RIGHTS.
The Board is authorized to grant Stock Appreciation Rights ("SARs") to
Grantees on the following terms and conditions:
10.1. RIGHT TO PAYMENT.
A SAR shall confer on the Grantee to whom it is granted a right to receive,
upon exercise thereof, the excess of (A) the Fair Market Value of one share of
Stock on the date of exercise over (B) the grant price of the SAR as determined
by the Board. The Award Agreement for an SAR shall specify the grant price of
the SAR, which may be fixed at the Fair Market Value of a share of Stock on the
date of grant or may vary in accordance with a predetermined formula while the
SAR is outstanding.
10.2. OTHER TERMS.
The Board shall determine at the date of grant or thereafter, the time or
times at which and the circumstances under which a SAR may be exercised in whole
or in part (including based on achievement of performance goals and/or future
service requirements), the time or times at which SARs shall cease to be or
become exercisable following termination of Service or upon other conditions,
the method of exercise, method of settlement, form of consideration payable in
settlement, method by or forms in which Stock will be delivered or deemed to be
delivered to Grantees, whether or not a SAR shall be in tandem or in combination
with any other Award, and any other terms and conditions of any SAR.
11. RESTRICTED STOCK AND STOCK UNITS.
11.1. GRANT OF RESTRICTED STOCK OR STOCK UNITS.
The Board may from time to time grant Restricted Stock or Stock Units to
persons eligible to receive Awards under SECTION 6 hereof, subject to such
restrictions, conditions and other terms, if any, as the Board may determine.
Awards of Restricted Stock may be made for no consideration (other than par
value of the shares which is deemed paid by Services already rendered).
11.2. RESTRICTIONS.
At the time a grant of Restricted Stock or Stock Units is made, the Board
may, in its sole discretion, establish a period of time (a "restricted period")
applicable to such Restricted Stock or Stock Units. Each Award of Restricted
Stock or Stock Units may be subject to a different restricted period. The Board
may, in its sole discretion, at the time a grant of Restricted Stock or Stock
Units is made, prescribe restrictions in addition to or other than the
expiration of the restricted period, including the satisfaction of corporate or
individual performance objectives, which may be applicable to all or any portion
of the Restricted Stock or Stock Units in accordance with SECTION 14.1 and 14.2.
Neither Restricted Stock nor Stock Units may be sold, transferred, assigned,
pledged or otherwise encumbered or disposed of during the restricted period or
prior to the satisfaction of any other restrictions prescribed by the Board with
respect to such Restricted Stock or Stock Units.
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11.3. RESTRICTED STOCK CERTIFICATES.
The Company shall issue, in the name of each Grantee to whom Restricted
Stock has been granted, stock certificates representing the total number of
shares of Restricted Stock granted to the Grantee, as soon as reasonably
practicable after the Grant Date. The Board may provide in an Award Agreement
that either (i) the Secretary of the Company shall hold such certificates for
the Grantee's benefit until such time as the Restricted Stock is forfeited to
the Company or the restrictions lapse, or (ii) such certificates shall be
delivered to the Grantee, provided, however, that such certificates shall bear a
legend or legends that comply with the applicable securities laws and
regulations and makes appropriate reference to the restrictions imposed under
the Plan and the Award Agreement.
11.4. RIGHTS OF HOLDERS OF RESTRICTED STOCK.
Unless the Board otherwise provides in an Award Agreement, holders of
Restricted Stock shall have the right to vote such Stock and the right to
receive any dividends declared or paid with respect to such Stock. The Board may
provide that any dividends paid on Restricted Stock must be reinvested in shares
of Stock, which may or may not be subject to the same vesting conditions and
restrictions applicable to such Restricted Stock. All distributions, if any,
received by a Grantee with respect to Restricted Stock as a result of any stock
split, stock dividend, combination of shares, or other similar transaction shall
be subject to the restrictions applicable to the original Grant.
11.5. RIGHTS OF HOLDERS OF STOCK UNITS.
11.5.1. VOTING AND DIVIDEND RIGHTS.
Unless the Board otherwise provides in an Award Agreement, holders of Stock
Units shall have no rights as shareholders of the Company. The Board may provide
in an Award Agreement evidencing a grant of Stock Units that the holder of such
Stock Units shall be entitled to receive, upon the Company's payment of a cash
dividend on its outstanding Stock, a cash payment for each Stock Unit held equal
to the per-share dividend paid on the Stock. Such Award Agreement may also
provide that such cash payment will be deemed reinvested in additional Stock
Units at a price per unit equal to the Fair Market Value of a share of Stock on
the date that such dividend is paid.
11.5.2. CREDITOR'S RIGHTS.
A holder of Stock Units shall have no rights other than those of a general
creditor of the Company. Stock Units represent an unfunded and unsecured
obligation of the Company, subject to the terms and conditions of the applicable
Award Agreement.
11.6. TERMINATION OF SERVICE.
Unless the Board otherwise provides in an Award Agreement or in writing
after the Award Agreement is issued, upon the termination of a Grantee's
Service, any Restricted Stock or Stock Units held by such Grantee that have not
vested, or with respect to which all applicable restrictions and conditions have
not lapsed, shall immediately be deemed forfeited. Upon forfeiture of Restricted
Stock or Stock Units, the Grantee shall have no further rights with respect to
such Award, including but not limited to any right to vote Restricted Stock or
any right to receive dividends with respect to shares of Restricted Stock or
Stock Units.
11.7. PURCHASE OF RESTRICTED STOCK.
The Grantee shall be required, to the extent required by applicable law, to
purchase the Restricted Stock from the Company at a Purchase Price equal to the
greater of (i) the aggregate par value of the shares of Stock represented by
such Restricted Stock or (ii) the Purchase Price, if any, specified in the Award
Agreement relating to such Restricted Stock. The Purchase Price shall be payable
in a form described in SECTION 12 or, in the discretion of the Board, in
consideration for past Services rendered to the Company or an Affiliate.
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11.8. DELIVERY OF STOCK.
Upon the expiration or termination of any restricted period and the
satisfaction of any other conditions prescribed by the Board, the restrictions
applicable to shares of Restricted Stock or Stock Units settled in Stock shall
lapse, and, unless otherwise provided in the Award Agreement, a stock
certificate for such shares shall be delivered, free of all such restrictions,
to the Grantee or the Grantee's beneficiary or estate, as the case may be.
12. FORM OF PAYMENT FOR OPTIONS AND RESTRICTED STOCK.
12.1. GENERAL RULE.
Payment of the Option Price for the shares purchased pursuant to the
exercise of an Option or the Purchase Price for Restricted Stock shall be made
in cash or in cash equivalents acceptable to the Company.
12.2. SURRENDER OF STOCK.
To the extent the Award Agreement so provides, payment of the Option Price
for shares purchased pursuant to the exercise of an Option or the Purchase Price
for Restricted Stock may be made all or in part through the tender to the
Company of shares of Stock, which shares, if acquired from the Company, shall
have been held for at least six months at the time of tender and which shall be
valued, for purposes of determining the extent to which the Option Price or
Purchase Price has been paid thereby, at their Fair Market Value on the date of
exercise.
12.3. CASHLESS EXERCISE.
With respect to an Option only (and not with respect to Restricted Stock),
to the extent the Award Agreement so provides, payment of the Option Price for
shares purchased pursuant to the exercise of an Option may be made all or in
part by delivery (on a form acceptable to the Board) of an irrevocable direction
to a licensed securities broker acceptable to the Company to sell shares of
Stock and to deliver all or part of the sales proceeds to the Company in payment
of the Option Price and any withholding taxes described in SECTION 18.4.
12.4. PROMISSORY NOTE.
To the extent the Award Agreement so provides, payment of the Option Price
for shares purchased pursuant to the exercise of an Option or the Purchase Price
for Restricted Stock may be made all or in part with a full recourse promissory
note executed by the Grantee. The interest rate and other terms and conditions
of such note shall be determined by the Board. The Board may require that the
Grantee pledge the Stock subject to the Award for the purpose of securing
payment of the note. Unless the Board determines otherwise, the stock
certificate(s) representing the Stock shall not be released to the Grantee until
such note is paid in full.
12.5. OTHER FORMS OF PAYMENT.
To the extent the Award Agreement so provides, payment of the Option Price
for shares purchased pursuant to exercise of an Option or the Purchase Price for
Restricted Stock may be made in any other form that is consistent with
applicable laws, regulations and rules.
13. DIVIDEND EQUIVALENT RIGHTS.
13.1. DIVIDEND EQUIVALENT RIGHTS.
A Dividend Equivalent Right is an Award entitling the recipient to receive
credits based on cash distributions that would have been paid on the shares of
Stock specified in the Dividend Equivalent Right (or other award to which it
relates) if such shares had been issued to and held by the recipient. A Dividend
Equivalent Right may be granted hereunder to any Grantee as a component of
another Award or as a freestanding award. The terms and conditions of Dividend
Equivalent Rights shall be specified in the grant.
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Dividend Equivalents credited to the holder of a Dividend Equivalent Right may
be paid currently or may be deemed to be reinvested in additional shares of
Stock, which may thereafter accrue additional equivalents. Any such reinvestment
shall be at Fair Market Value on the date of reinvestment. Dividend Equivalent
Rights may be settled in cash or Stock or a combination thereof, in a single
installment or installments, all determined in the sole discretion of the Board.
A Dividend Equivalent Right granted as a component of another Award may provide
that such Dividend Equivalent Right shall be settled upon exercise, settlement,
or payment of, or lapse of restrictions on, such other award, and that such
Dividend Equivalent Right shall expire or be forfeited or annulled under the
same conditions as such other award. A Dividend Equivalent Right granted as a
component of another Award may also contain terms and conditions different from
such other award.
13.2. TERMINATION OF SERVICE.
Except as may otherwise be provided by the Board either in the Award
Agreement or in writing after the Award Agreement is issued, a Grantee's rights
in all Dividend Equivalent Rights or interest equivalents shall automatically
terminate upon the Grantee's termination of Service for any reason.
14. PERFORMANCE AND ANNUAL INCENTIVE AWARDS.
14.1. PERFORMANCE CONDITIONS.
The right of a Grantee to exercise or receive a grant or settlement of any
Award, and the timing thereof, may be subject to such performance conditions as
may be specified by the Board. The Board may use such business criteria and
other measures of performance as it may deem appropriate in establishing any
performance conditions, and may exercise its discretion to reduce the amounts
payable under any Award subject to performance conditions, except as limited
under SECTIONS 14.2 hereof in the case of a Performance Award or Annual
Incentive Award intended to qualify under Code Section 162(m). If and to the
extent required under Code Section 162(m), any power or authority relating to a
Performance Award or Annual Incentive Award intended to qualify under Code
Section 162(m), shall be exercised by the Committee and not the Board.
14.2. PERFORMANCE OR ANNUAL INCENTIVE AWARDS GRANTED TO DESIGNATED COVERED
EMPLOYEES.
If and to the extent that the Committee determines that a Performance or
Annual Incentive Award to be granted to a Grantee who is designated by the
Committee as likely to be a Covered Employee should qualify as
"performance-based compensation" for purposes of Code Section 162(m), the grant,
exercise and/or settlement of such Performance or Annual Incentive Award shall
be contingent upon achievement of pre-established performance goals and other
terms set forth in this SECTION 14.2.
14.2.1. PERFORMANCE GOALS GENERALLY.
The performance goals for such Performance or Annual Incentive Awards shall
consist of one or more business criteria and a targeted level or levels of
performance with respect to each of such criteria, as specified by the Committee
consistent with this SECTION 14.2. Performance goals shall be objective and
shall otherwise meet the requirements of Code Section 162(m) and regulations
thereunder including the requirement that the level or levels of performance
targeted by the Committee result in the achievement of performance goals being
"substantially uncertain." The Committee may determine that such Performance or
Annual Incentive Awards shall be granted, exercised and/or settled upon
achievement of any one performance goal or that two or more of the performance
goals must be achieved as a condition to grant, exercise and/or settlement of
such Performance or Annual Incentive Awards. Performance goals may differ for
Performance or Annual Incentive Awards granted to any one Grantee or to
different Grantees.
14.2.2. BUSINESS CRITERIA.
One or more of the following business criteria for the Company, on a
consolidated basis, and/or specified subsidiaries or business units of the
Company (except with respect to the total shareholder return and earnings per
share criteria), shall be used exclusively by the Committee in establishing
performance goals for such
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Performance or Annual Incentive Awards: (1) total shareholder return; (2) such
total shareholder return as compared to total return (on a comparable basis) of
a publicly available index such as, but not limited to, the Standard & Poor's
500 Stock Index; (3) net income; (4) pretax earnings; (5) earnings before
interest expense, taxes, depreciation and amortization; (6) pretax operating
earnings after interest expense and before bonuses, service fees, and
extraordinary or special items; (7) operating margin; (8) earnings per share;
(9) return on equity; (10) return on capital; (11) return on investment; (12)
operating earnings; (13) working capital; (14) ratio of debt to shareholders'
equity, (15) revenue, (16) results of customer satisfaction surveys; (17) number
of access line additions; (18) account retention rates; (19) customer turnover;
(20) number of new accounts; and (21) market share.
14.2.3. TIMING FOR ESTABLISHING PERFORMANCE GOALS.
Performance goals shall be established not later than 90 days after the
beginning of any performance period applicable to such Performance or Annual
Incentive Awards, or at such other date as may be required or permitted for
"performance-based compensation" under Code Section 162(m).
14.2.4. PERFORMANCE OR ANNUAL INCENTIVE AWARD POOL.
The Committee may establish a Performance or Annual Incentive Award pool,
which shall be an unfunded pool, for purposes of measuring Company performance
in connection with Performance or Annual Incentive Awards.
14.2.5. SETTLEMENT OF PERFORMANCE OR ANNUAL INCENTIVE AWARDS; OTHER
TERMS.
Settlement of such Performance or Annual Incentive Awards shall be in cash,
Stock, other Awards or other property, in the discretion of the Committee. The
Committee may, in its discretion, reduce the amount of a settlement otherwise to
be made in connection with such Performance or Annual Incentive Awards. The
Committee shall specify the circumstances in which such Performance or Annual
Incentive Awards shall be paid or forfeited in the event of termination of
Service by the Grantee prior to the end of a performance period or settlement of
Performance Awards.
14.3. WRITTEN DETERMINATIONS.
All determinations by the Committee as to the establishment of performance
goals, the amount of any Performance Award pool or potential individual
Performance Awards and as to the achievement of performance goals relating to
Performance Awards, and the amount of any Annual Incentive Award pool or
potential individual Annual Incentive Awards and the amount of final Annual
Incentive Awards, shall be made in writing in the case of any Award intended to
qualify under Code Section 162(m). To the extent required to comply with Code
Section 162(m), the Committee may delegate any responsibility relating to such
Performance Awards or Annual Incentive Awards.
14.4. STATUS OF SECTION 14.2 AWARDS UNDER CODE SECTION 162(M).
It is the intent of the Company that Performance Awards and Annual
Incentive Awards under SECTION 14.2 hereof granted to persons who are designated
by the Committee as likely to be Covered Employees within the meaning of Code
Section 162(m) and regulations thereunder shall, if so designated by the
Committee, constitute "qualified performance-based compensation" within the
meaning of Code Section 162(m) and regulations thereunder. Accordingly, the
terms of SECTION 14.2, including the definitions of Covered Employee and other
terms used therein, shall be interpreted in a manner consistent with Code
Section 162(m) and regulations thereunder. The foregoing notwithstanding,
because the Committee cannot determine with certainty whether a given Grantee
will be a Covered Employee with respect to a fiscal year that has not yet been
completed, the term Covered Employee as used herein shall mean only a person
designated by the Committee, at the time of grant of Performance Awards or an
Annual Incentive Award, as likely to be a Covered Employee with respect to that
fiscal year. If any provision of the Plan or any agreement relating to such
Performance Awards or Annual Incentive Awards does not comply or is inconsistent
with the
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requirements of Code Section 162(m) or regulations thereunder, such provision
shall be construed or deemed amended to the extent necessary to conform to such
requirements.
15. PARACHUTE LIMITATIONS.
Notwithstanding any other provision of this Plan or of any other agreement,
contract, or understanding heretofore or hereafter entered into by a Grantee
with the Company or any Affiliate, except an agreement, contract, or
understanding hereafter entered into that expressly modifies or excludes
application of this paragraph (an "Other Agreement"), and notwithstanding any
formal or informal plan or other arrangement for the direct or indirect
provision of compensation to the Grantee (including groups or classes of
Grantees or beneficiaries of which the Grantee is a member), whether or not such
compensation is deferred, is in cash, or is in the form of a benefit to or for
the Grantee (a "Benefit Arrangement"), if the Grantee is a "disqualified
individual," as defined in Section 280G(c) of the Code, any Option, Restricted
Stock or Stock Unit held by that Grantee and any right to receive any payment or
other benefit under this Plan shall not become exercisable or vested (i) to the
extent that such right to exercise, vesting, payment, or benefit, taking into
account all other rights, payments, or benefits to or for the Grantee under this
Plan, all Other Agreements, and all Benefit Arrangements, would cause any
payment or benefit to the Grantee under this Plan to be considered a "parachute
payment" within the meaning of Section 280G(b)(2) of the Code as then in effect
(a "Parachute Payment") and (ii) if, as a result of receiving a Parachute
Payment, the aggregate after-tax amounts received by the Grantee from the
Company under this Plan, all Other Agreements, and all Benefit Arrangements
would be less than the maximum after-tax amount that could be received by the
Grantee without causing any such payment or benefit to be considered a Parachute
Payment. In the event that the receipt of any such right to exercise, vesting,
payment, or benefit under this Plan, in conjunction with all other rights,
payments, or benefits to or for the Grantee under any Other Agreement or any
Benefit Arrangement would cause the Grantee to be considered to have received a
Parachute Payment under this Plan that would have the effect of decreasing the
after-tax amount received by the Grantee as described in clause (ii) of the
preceding sentence, then the Grantee shall have the right, in the Grantee's sole
discretion, to designate those rights, payments, or benefits under this Plan,
any Other Agreements, and any Benefit Arrangements that should be reduced or
eliminated so as to avoid having the payment or benefit to the Grantee under
this Plan be deemed to be a Parachute Payment.
16. REQUIREMENTS OF LAW.
16.1. GENERAL.
The Company shall not be required to sell or issue any shares of Stock
under any Award if the sale or issuance of such shares would constitute a
violation by the Grantee, any other individual exercising an Option, or the
Company of any provision of any law or regulation of any governmental authority,
including without limitation any federal or state securities laws or
regulations. If at any time the Company shall determine, in its discretion, that
the listing, registration or qualification of any shares subject to an Award
upon any securities exchange or under any governmental regulatory body is
necessary or desirable as a condition of, or in connection with, the issuance or
purchase of shares hereunder, no shares of Stock may be issued or sold to the
Grantee or any other individual exercising an Option pursuant to such Award
unless such listing, registration, qualification, consent or approval shall have
been effected or obtained free of any conditions not acceptable to the Company,
and any delay caused thereby shall in no way affect the date of termination of
the Award. Specifically, in connection with the Securities Act, upon the
exercise of any Option or the delivery of any shares of Stock underlying an
Award, unless a registration statement under such Act is in effect with respect
to the shares of Stock covered by such Award, the Company shall not be required
to sell or issue such shares unless the Board has received evidence satisfactory
to it that the Grantee or any other individual exercising an Option may acquire
such shares pursuant to an exemption from registration under the Securities Act.
Any determination in this connection by the Board shall be final, binding, and
conclusive. The Company may, but shall in no event be obligated to, register any
securities covered hereby pursuant to the Securities Act. The Company shall not
be obligated to take any affirmative action in order to cause the exercise of an
Option or the issuance of shares of Stock pursuant to the Plan to comply with
any law or regulation of any governmental
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authority. As to any jurisdiction that expressly imposes the requirement that an
Option shall not be exercisable until the shares of Stock covered by such Option
are registered or are exempt from registration, the exercise of such Option
(under circumstances in which the laws of such jurisdiction apply) shall be
deemed conditioned upon the effectiveness of such registration or the
availability of such an exemption.
16.2. RULE 16B-3.
During any time when the Company has a class of equity security registered
under Section 12 of the Exchange Act, it is the intent of the Company that
Awards pursuant to the Plan and the exercise of Options granted hereunder will
qualify for the exemption provided by Rule 16b-3 under the Exchange Act. To the
extent that any provision of the Plan or action by the Board does not comply
with the requirements of Rule 16b-3, it shall be deemed inoperative to the
extent permitted by law and deemed advisable by the Board, and shall not affect
the validity of the Plan. In the event that Rule 16b-3 is revised or replaced,
the Board may exercise its discretion to modify this Plan in any respect
necessary to satisfy the requirements of, or to take advantage of any features
of, the revised exemption or its replacement.
17. EFFECT OF CHANGES IN CAPITALIZATION.
17.1. CHANGES IN STOCK.
If the number of outstanding shares of Stock is increased or decreased or
the shares of Stock are changed into or exchanged for a different number or kind
of shares or other securities of the Company on account of any recapitalization,
reclassification, stock split, reverse split, combination of shares, exchange of
shares, stock dividend or other distribution payable in capital stock, or other
increase or decrease in such shares effected without receipt of consideration by
the Company occurring after the Effective Date, the number and kinds of shares
for which grants of Options and other Awards may be made under the Plan shall be
adjusted proportionately and accordingly by the Company. In addition, the number
and kind of shares for which Awards are outstanding shall be adjusted
proportionately and accordingly so that the proportionate interest of the
Grantee immediately following such event shall, to the extent practicable, be
the same as immediately before such event. Any such adjustment in outstanding
Options or SARs shall not change the aggregate Option Price or SAR Exercise
Price payable with respect to shares that are subject to the unexercised portion
of an outstanding Option or SAR, as applicable, but shall include a
corresponding proportionate adjustment in the Option Price or SAR Exercise Price
per share. The conversion of any convertible securities of the Company or the
issuance of any shares of Stock under any Company benefit plan shall not be
treated as an increase in shares effected without receipt of consideration.
Notwithstanding the foregoing, in the event of any distribution to the Company's
shareholders of securities of any other entity or other assets (other than
dividends payable in cash or stock of the Company) without receipt of
consideration by the Company, the Company may, in such manner as the Company
deems appropriate, adjust (i) the number and kind of shares subject to
outstanding Awards and/or (ii) the exercise price of outstanding Options and
Stock Appreciation Rights to reflect such distribution.
17.2. REORGANIZATION IN WHICH THE COMPANY IS THE SURVIVING ENTITY AND WHICH
DOES NOT CONSTITUTE A CORPORATE TRANSACTION.
Subject to SECTION 17.3 hereof, if the Company shall be the surviving
entity in any reorganization, merger, or consolidation of the Company with one
or more other entities and which does not constitute a Corporate Transaction (as
defined in SECTION 2.8 above), any Option or SAR theretofore granted pursuant to
the Plan shall pertain to and apply to the securities to which a holder of the
number of shares of Stock subject to such Option or SAR would have been entitled
immediately following such reorganization, merger, or consolidation, with a
corresponding proportionate adjustment of the Option Price or SAR Exercise Price
per share so that the aggregate Option Price or SAR Exercise Price thereafter
shall be the same as the aggregate Option Price or SAR Exercise Price of the
shares remaining subject to the Option or SAR immediately prior to such
reorganization, merger, or consolidation. Subject to any contrary language in an
Award Agreement evidencing an Award, any restrictions applicable to such Award
shall apply as well to any replacement shares received by the Grantee as a
result of the reorganization, merger or consolidation.
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17.3. REORGANIZATION, SALE OF ASSETS OR SALE OF STOCK WHICH CONSTITUTES A
CORPORATE TRANSACTION.
Subject to the exceptions set forth in the last sentence of this SECTION
17.3 and the last sentence of SECTION 17.4:
(i) upon the occurrence of a Corporate Transaction (as defined in
SECTION 2.8 above), all outstanding shares of Restricted Stock shall be deemed
to have vested, and all restrictions and conditions applicable to such shares of
Restricted Stock shall be deemed to have lapsed, immediately prior to the
occurrence of such Corporate Transaction, and
(ii) either of the following two actions shall be taken:
(A) fifteen days prior to the scheduled consummation of the
Corporate Transaction, all Options and SARs outstanding hereunder shall become
immediately exercisable and shall remain exercisable for a period of fifteen
days, or
(B) the Board may elect, in its sole discretion, to cancel any
outstanding Awards of Options, Restricted Stock, and/or SARs and pay or deliver,
or cause to be paid or delivered, to the holder thereof an amount in cash or
securities having a value (as determined by the Board acting in good faith), in
the case of Restricted Stock, equal to the formula or fixed price per share paid
to holders of shares of Stock and, in the case of Options or SARs, equal to the
product of the number of shares of Stock subject to the Option or SAR (the
"Award Shares") multiplied by the amount, if any, by which (I) the formula or
fixed price per share paid to holders of shares of Stock pursuant to such
transaction exceeds (II) the Option Price or SAR Exercise Price applicable to
such Award Shares.
With respect to the Company's establishment of an exercise window, (i) any
exercise of an Option or SAR during such fifteen-day period shall be conditioned
upon the consummation of the event and shall be effective only immediately
before the consummation of the event, and (ii) upon consummation of any
Corporate Transaction, the Plan, and all outstanding but unexercised Options and
SARs shall terminate. The Board shall send written notice of an event that will
result in such a termination to all individuals who hold Options and SARs not
later than the time at which the Company gives notice thereof to its
shareholders. This SECTION 17.3 shall not apply to any Corporate Transaction to
the extent that provision is made in writing in connection with such Corporate
Transaction for the assumption or continuation of the Options, SARs and
Restricted Stock theretofore granted, or for the substitution for such Options,
SARs and Restricted Stock for new common stock options and stock appreciation
rights and new common stock restricted stock relating to the stock of a
successor entity, or a parent or subsidiary thereof, with appropriate
adjustments as to the number of shares (disregarding any consideration that is
not common stock) and option and stock appreciation right exercise prices, in
which event the Plan, Options, SARs and Restricted Stock theretofore granted
shall continue in the manner and under the terms so provided.
17.4. ADJUSTMENTS.
Adjustments under this SECTION 17 related to shares of Stock or securities
of the Company shall be made by the Board, whose determination in that respect
shall be final, binding and conclusive. No fractional shares or other securities
shall be issued pursuant to any such adjustment, and any fractions resulting
from any such adjustment shall be eliminated in each case by rounding downward
to the nearest whole share. The Board shall determine the effect of a Corporate
Transaction upon Awards other than Options, SARs, and Restricted Stock, and such
effect shall be set forth in the appropriate Award Agreement. The Board may
provide in the Award Agreements at the time of grant, or any time thereafter
with the consent of the Grantee, for different provisions to apply to an Award
in place of those described in SECTIONS 17.1, 17.2 and 17.3.
17.5. NO LIMITATIONS ON COMPANY.
The making of Awards pursuant to the Plan shall not affect or limit in any
way the right or power of the Company to make adjustments, reclassifications,
reorganizations, or changes of its capital or business structure or to merge,
consolidate, dissolve, or liquidate, or to sell or transfer all or any part of
its business or assets.
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18. GENERAL PROVISIONS.
18.1. POOLING.
In the event any provision of the Plan or the Award Agreement would prevent
the use of pooling of interests accounting in a corporate transaction involving
the Company and such transaction is contingent upon pooling of interests
accounting, then that provision shall be deemed amended or revoked to the extent
required to preserve such pooling of interests. The Company may require in an
Award Agreement that a Grantee who receives an Award under the Plan shall, upon
advice from the Company, take (or refrain from taking, as appropriate) all
actions necessary or desirable to ensure that pooling of interests accounting is
available.
18.2. DISCLAIMER OF RIGHTS.
No provision in the Plan or in any Award or Award Agreement shall be
construed to confer upon any individual the right to remain in the employ or
service of the Company or any Affiliate, or to interfere in any way with any
contractual or other right or authority of the Company either to increase or
decrease the compensation or other payments to any individual at any time, or to
terminate any employment or other relationship between any individual and the
Company. In addition, notwithstanding anything contained in the Plan to the
contrary, unless otherwise stated in the applicable Award Agreement, no Award
granted under the Plan shall be affected by any change of duties or position of
the Grantee, so long as such Grantee continues to be a director, officer,
consultant or employee of the Company or an Affiliate. The obligation of the
Company to pay any benefits pursuant to this Plan shall be interpreted as a
contractual obligation to pay only those amounts described herein, in the manner
and under the conditions prescribed herein. The Plan shall in no way be
interpreted to require the Company to transfer any amounts to a third party
trustee or otherwise hold any amounts in trust or escrow for payment to any
Grantee or beneficiary under the terms of the Plan. No Grantee shall have any of
the rights of a shareholder with respect to the shares of Stock subject to an
Option except to the extent the certificates for such shares of Stock shall have
been issued upon the exercise of the Option.
18.3. NONEXCLUSIVITY OF THE PLAN.
Neither the adoption of the Plan nor the submission of the Plan to the
shareholders of the Company for approval shall be construed as creating any
limitations upon the right and authority of the Board to adopt such other
incentive compensation arrangements (which arrangements may be applicable either
generally to a class or classes of individuals or specifically to a particular
individual or particular individuals) as the Board in its discretion determines
desirable, including, without limitation, the granting of stock options
otherwise than under the Plan.
18.4. WITHHOLDING TAXES.
The Company or an Affiliate, as the case may be, shall have the right to
deduct from payments of any kind otherwise due to a Grantee any Federal, state,
or local taxes of any kind required by law to be withheld with respect to the
vesting of or other lapse of restrictions applicable to an Award or upon the
issuance of any shares of Stock upon the exercise of an Option or pursuant to an
Award. At the time of such vesting, lapse, or exercise, the Grantee shall pay to
the Company or the Affiliate, as the case may be, any amount that the Company or
the Affiliate may reasonably determine to be necessary to satisfy such
withholding obligation. Subject to the prior approval of the Company or the
Affiliate, which may be withheld by the Company or the Affiliate, as the case
may be, in its sole discretion, the Grantee may elect to satisfy such
obligations, in whole or in part, (i) by causing the Company or the Affiliate to
withhold shares of Stock otherwise issuable to the Grantee or (ii) by delivering
to the Company or the Affiliate shares of Stock already owned by the Grantee.
The shares of Stock so delivered or withheld shall have an aggregate Fair Market
Value equal to such withholding obligations. The Fair Market Value of the shares
of Stock used to satisfy such withholding obligation shall be determined by the
Company or the Affiliate as of the date that the amount of tax to be withheld is
to be determined. A Grantee who has made an election pursuant to this SECTION
18.4 may satisfy his or her withholding obligation only with shares of Stock
that are not subject to any repurchase, forfeiture, unfulfilled vesting, or
other similar requirements.
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18.5. BOOK ENTRY.
Notwithstanding any other provision of this Plan to the contrary, the
Company may, in its discretion, use the book entry method for recording Stock
issuances in lieu of issuing stock certificates.
18.6. CAPTIONS.
The use of captions in this Plan or any Award Agreement is for the
convenience of reference only and shall not affect the meaning of any provision
of the Plan or such Award Agreement.
18.7. OTHER PROVISIONS.
Each Award granted under the Plan may contain such other terms and
conditions not inconsistent with the Plan as may be determined by the Board, in
its sole discretion.
18.8. NUMBER AND GENDER.
With respect to words used in this Plan, the singular form shall include
the plural form, the masculine gender shall include the feminine gender, etc.,
as the context requires.
18.9. SEVERABILITY.
If any provision of the Plan or any Award Agreement shall be determined to
be illegal or unenforceable by any court of law in any jurisdiction, the
remaining provisions hereof and thereof shall be severable and enforceable in
accordance with their terms, and all provisions shall remain enforceable in any
other jurisdiction.
18.10. GOVERNING LAW.
The validity and construction of this Plan and the instruments evidencing
the Award hereunder shall be governed by the laws of the State of North
Carolina, other than any conflicts or choice of law rule or principle that might
otherwise refer construction or interpretation of this Plan and the instruments
evidencing the Awards granted hereunder to the substantive laws of any other
jurisdiction.
* * *
To record adoption of the Plan by the Board as of March 26, 2001 and the
approval of the Plan by the stockholders of the Company on April 26, 2001.
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