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EXHIBIT 10.4
FARO TECHNOLOGIES, INC.
1997 NON-EMPLOYEE DIRECTORS' FEE PLAN
1. ESTABLISHMENT. FARO Technologies, Inc. (the "Company") hereby
establishes a plan for the members of its Board of Directors who are
not employees of (i) the Company, or (ii) any of its subsidiaries
("Non-Employee Directors"), as described herein, which shall be known
as the FARO TECHNOLOGIES, INC. 1997 NON-EMPLOYEE DIRECTORS' FEE PLAN
(the "Plan").
2. PURPOSE. The purpose of the Plan is to advance the Company's growth and
success, and to advance its interests by attracting and retaining
well-qualified Non-Employee Directors upon whose judgment the Company
is largely dependent for the successful conduct of its operations and
by providing such individuals with incentives to put forth maximum
efforts for the long-term success of the Company's business.
3. EFFECTIVE DATE OF THE PLAN. The effective date of the Plan (the
"Effective Date") is the later of (i) the date of its approval by the
shareholders of the Company, or (ii) the effective date of any
registration statement with respect to the common stock of the Company
("Common Stock") under the Securities Exchange Act of 1934, as amended.
4. STOCK SUBJECT TO THE PLAN. Subject to adjustment in accordance with
the provisions of paragraph 8, the total number of shares of Common
Stock available for awards during the term of this Plan shall be
250,000 shares. Shares of Common Stock to be delivered under the Plan
shall be made available from presently authorized but unissued Common
Stock or authorized and issued shares of Common Stock reacquired and
held as treasury shares, or a combination thereof. In no event shall
the Company be required to issue fractional shares of Common Stock
under the Plan. Whenever under the terms of the Plan a fractional
share of Common Stock would otherwise be required to be issued, there
shall be issued in lieu thereof one full share of Common Stock.
5. ADMINISTRATION.
(a) The Plan shall be administered by a committee (the
"Committee") appointed from time to time by the Board of
Directors consisting of not less than two members of the Board
of Directors who do not qualify as Non-Employee Directors.
(b) Subject to the express provisions of the Plan, the Committee
shall have authority to interpret the Plan, to the extent
provided by law.
(c) Neither the Committee nor any member thereof shall be liable
for any act, omission, interpretation, construction or
determination made in connection with the Plan in good faith.
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6. ELECTION TO RECEIVE ANNUAL RETAINER FEES IN SHARES.
(a) Share Election. Subject to paragraph 7, each Non-Employee
Director may elect (a "Share Election") to receive all or any
portion of any annual retainer fee, committee fees, or meeting
fees earned in each calendar year for services on the Board of
Directors (collectively, the "Retainer Fees"), in the form of
Common Stock. A Share Election, or a modification or
revocation of a Share Election by a subsequent Share Election,
shall be effective with respect to Retainer Fees earned
commencing on the first day of the calendar month following
the date that the election is delivered. A Share Election
(including a modification or revocation of a Share Election by
a subsequent Share Election) must be in writing and delivered
to the Secretary of the Company as specified in the preceding
sentence, except that (A) a Share Election with respect to
Retainer Fees to be earned in 1997 may be made at any time
until the date 30 days after the Effective date of the Plan
and (B) any Non-Employee Director who commences his or her
directorship subsequent to January 1 of a calendar year (a
"New Director") may make a Share Election during the 30-day
period immediately following the commencement of his or her
directorship. A Share Election, once made, shall remain in
effect, and be irrevocable, unless modified or revoked by a
subsequent Share Election in accordance with the provisions
hereof.
(b) Transfer of Shares. Shares of Common Stock issuable to a
Non-Employee Director with respect to a Share Election shall
be transferred to such Non- Employee Director effective as of
the last business day of each fiscal quarter in which the
Retainer Fees are earned. The total number of shares of Common
Stock to be so transferred shall be determined by dividing
one-quarter of the annual Retainer Fees by the Fair Market
Value of a share of Common Stock. For purposes of this Plan,
"Fair Market Value" means if the Common Stock is then listed
and traded on a registered national or regional securities
exchange, or quoted on The National Association of Securities
Dealers' Automated Quotation System (including The Nasdaq
Stock Market's National Market), the average closing price of
a share on such exchange or quotation system for the five
trading days immediately preceding the last business day of
the applicable quarter (or such other relevant date as may be
specifically set forth herein). If the Common Stock is not
traded on a registered securities exchange or quoted on such a
quotation system, the Committee shall determine the Fair
Market Value of a share. The Retainer Fees payable for a
quarter shall be proportionately adjusted for a Non-Employee
Director who does not serve as a director for the entire
quarter.
7. DEFERRAL ELECTION.
(a) Deferral Election. Each Non-Employee Director may elect (a
"Deferral Election") to not currently receive all or any
portion of the shares of Common Stock that would otherwise be
transferred pursuant to paragraph 6, or any of his or her
Retainer Fees that would otherwise be payable in cash. A
Deferral Election must be in
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writing and delivered to the Secretary of the Company prior to
the calendar year in which the Retainer Fees to which the
Deferral Election relates are earned, except that (A) a
Deferral Election with respect to 1997 may be made at any time
until the date 30 days after the Effective Date of the Plan
and (B) any New Director may make a Deferral Election during
the 30-day period immediately following the commencement of
his or her directorship. A Deferral Election once made shall
be irrevocable for the calendar year with respect to which it
is made and shall remain in effect, and be irrevocable, for
future calendar years unless modified or revoked by a
subsequent Deferral Election in accordance with the provisions
hereof.
(b) Notional Accounts. A Non-Employee Director who makes a
Deferral Election with respect to a Share Election shall have
the number of deferred shares of Common Stock (including
fractions of a share) credited to a "Notional Share Account"
for the Non- Employee Director in the form of "Notional Share
Units." A Non-Employee Director who makes a Deferral Election
with respect to Retainer Fees that are not subject to a Share
Election shall have the amount of deferred Retainer Fees
credited to a "Notional Cash Account" for the Non-Employee
Director. Collectively, the amounts deferred in a
Non-Employee Director's Notional Share Account and Notional
Cash Account shall hereafter be referred to as the "Deferred
Amounts."
(c) Cash Dividends. A Non-Employee Director who makes a Deferral
Election with respect to a Share Election shall have no
rights or other entitlements with respect to any regular cash
dividends which are paid by the Company on outstanding Common
Stock. Notwithstanding the foregoing, in the event that any
Extraordinary Dividends (as hereinafter defined) are paid by
the Company on outstanding Common Stock, on the payment date
therefor, there shall be credited to the Non-Employee
Director's Notional Share Account a number of additional
Notional Share Units equal to (i) the aggregate Extraordinary
Dividends that would be payable on the outstanding shares of
Common Stock equal to the number of Notional Share Units
credited to such Notional Share Account on the record date
for the Extraordinary Dividend, divided by (ii) the Fair
Market Value of a share of Common Stock as of the last
business day immediately preceeding the date of payment of the
dividend. For these purposes, an "Extraordinary Dividend"
shall mean a dividend or distribution consisting of cash
and/or other property (other than securities of a type
described in Section 8 hereof) which exceeds ten percent
(10%), on an annualized basis, of the average of the closing
prices of the Common Stock for the ten (10) trading days
immediately prior to the date of declaration of such
dividend.
(d) Notional Cash Accounts. At the election of a Non-Employee
Director, a Director's Notional Cash Account shall be (i)
credited with interest at an annual rate equal to the sum of
the daily interest earned at a rate equal to the yield from
time to time on U.S. Treasury obligations maturing in seven
years as reported in The Wall Street Journal (Eastern
Edition) and compounded monthly, or such other rate specified
by the Committee, or (ii) credited or debited with the annual
investment returns relating to such investment vehicle or
vehicles as may be made available by the Committee from time
to time, if any, and selected by the Non-Employee Director,
or such combination of (i) and (ii) as the Non-Employee
Director designates by written notice to the Secretary of the
Company.
(e) Distributions. Subject to subsection 7.(k), a Non-Employee
Director's Deferred Amounts shall become payable as soon as
practicable following the earliest of (i) the date irrevocably
selected by the Non-Employee Director in his or her Deferral
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Election, (ii) the Non-Employee Director's death or (iii) the
Non-Employee Director's total and permanent disability, as
determined by the Committee.
(f) Form of Payments. All payments from a Notional Share
Account shall be made in shares of Common Stock by issuing
Common Stock for Notional Share Units on a one-for-one basis.
All payments from a Notional Cash Account shall be made in
cash.
(g) Manner of Payments. Subject to subsection 7.(k), in his or her
Deferral Election, each Non-Employee Director shall elect to
receive payment of his or her Deferred Amounts either in a
lump sum or in two to fifteen substantially equal annual
installments. In the event of a Non-Employee Director's death,
payment of the remaining portion of the Director's Deferred
Amounts will be made to the director's beneficiary in a lump
sum as soon as practicable following the director's death.
(h) Hardship Distribution. Notwithstanding any Deferral Election,
in the event of severe financial hardship to a Non-Employee
Director resulting from a sudden and unexpected illness,
accident or disability of the Non-Employee Director or other
similar extraordinary and unforeseeable circumstances arising
as a result of events beyond the control of the
Non-Employee Director, all as determined by the Committee, a
Non-Employee Director may withdraw a portion of the Notional
Share Units in his or her Notional Share Account and/or cash
in his or her Notional Cash Account by providing written
notice to the Secretary of the Company. Withdrawals of
amounts shall only be permitted to the extent reasonably
necessary to meet the emergency need due to the severe
financial hardship.
(i) Designation of Beneficiary. Each Non-Employee Director or
former Non- Employee Director entitled to payment of Deferred
Amounts hereunder from time to time may designate any
beneficiary or beneficiaries (who may be designated
concurrently, contingently, or successively) to whom any such
Deferred Amounts are to be paid in case of the Non-Employee
Director's death before receipt of any or all of such Deferred
Amounts. Any designation will revoke all prior designations by
the Non-Employee Director or former Non-Employee Director,
shall be in a form prescribed by the Company and will be
effective only when filed by the Non-Employee Director or
former Non-Employee Director, during his or her lifetime, in
writing with the Secretary of the Company. References in this
Plan to a director's "beneficiary" at any date shall include
such persons designated as concurrent beneficiaries on the
director's beneficiary designation form then in effect. In the
absence of any such designation, any balance remaining in a
Non-Employee Director's or former Non-Employee Director's
Notional Share Account and/or Notional Cash Account at the
time of the director's death shall be paid to such
director's estate in a lump sum.
(j) No Account Transfers. A Non-Employee Director may not transfer
or convert a Notional Share Account to a Notional Cash
Account or vice versa.
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(k) Changes With Respect to Distributions. With the consent of the
Company, a Non-Employee Director may (i) postpone the date on
which Deferred Amounts are to become payable pursuant to
subsection 7.(e)(i), or (ii) change the manner in which the
Deferred Amounts are to be paid pursuant to subsection
7.(g), provided in each case that any such change is made
prior to the calendar year in which such payments are to
commence.
(l) No Assets. No stock, cash or other property will be
deliverable to a Non- Employee Director in respect of the
Non-Employee Director's Deferred Amounts until the date or
dates identified pursuant to this Section 7, and all Deferred
Amounts shall be reflected in one or more unfunded accounts
established for the Non-Employee Director by the Company.
Payment of the Company's obligation will be from general
funds, and no special assets (stock, cash or otherwise) have
been or will be set aside as security for this obligation.
(m) No Transfers. A Non-Employee Director's rights to payments
under this Section 7 are not subject in any manner to
anticipation, alienation, sale, transfer, assignment, pledge,
encumbrance, or garnishment by a Non-Employee Director's
creditors or the creditors of his or her beneficiaries,
whether by operation of law or otherwise, and any attempted
sale, transfer, assignment, pledge, or encumbrance with
respect to such payment shall be null and void, and shall be
without legal effect and shall not be recognized by the
Company.
(n) Unsecured Creditor. The right of a Non-Employee Director to
receive payments under this Section 7 is that of a general,
unsecured creditor of the Company, and the obligation of the
Company to make payments constitutes a mere promise by the
Company to pay such benefits in the future. Further, the
arrangements contemplated by this Section are intended to be
unfunded for tax purposes and for purposes of Title I of
ERISA.
8. ADJUSTMENT PROVISIONS. If the number of outstanding shares of Common
Stock is increased or decreased or changed into or exchanged for a
different number or kind of shares or other securities of the Company
by reason of any merger, consolidation, recapitalization,
reclassification, stock 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, a proportionate and appropriate
adjustment shall be made by the Company in the number and kind of
shares reserved for issuance under the Plan and in the number of
Notional Share Units credited to each Non-Employee Director's Notional
Share Account as is necessary to preserve, without exceeding, the
value reflected by the Non-Employee Director's Notional Share Account.
9. TERMINATION AND AMENDMENT OF PLAN. The Plan shall terminate ten (10)
years from the date that it is adopted by the Board of Directors,
unless sooner terminated as hereinafter provided. The Board of
Directors may at any time terminate the Plan. The Board of Directors
may amend the Plan as it shall deem advisable including (without
limiting the
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generality of the foregoing) any amendments deemed by the Board of
Directors to be necessary or advisable to assure conformity of the Plan
with any requirements of state and federal laws or regulations now or
hereafter in effect; provided, however, that (a) the Board of Directors
may not, without further approval by the shareholders of the Company,
make any modifications which, under Rule 16b-3, require such approval
and (b) no amendment shall affect adversely any of the rights of any
Non- Employee Director, without such Non-Employee Director's consent,
under any election theretofore in effect under the Plan.
10. RIGHTS AS A SHAREHOLDER. A Non-Employee Director shall have no rights
as a shareholder with respect to Common Stock of the Company
until the date of issuance of the stock certificate to him. Except as
provided in paragraph 8, no adjustment will be made for dividends or
other rights for which the record date is prior to the date such Common
Stock is issued. The shares of Common Stock granted to each
Non-Employee Director are not transferable by the recipient for a
period of six months after the Grant Date (or, for a director elected
between Grant Dates, the date of the director's election), except in
the event of the death or disability of the recipient. All certificates
evidencing shares granted to a Non-Employee Director shall bear an
appropriate legend evidencing such transfer restrictions.
11. GOVERNING LAW. The Plan, all awards hereunder, and all determinations
made and actions taken pursuant to the Plan shall be governed by the
internal laws of the state in which the Company is incorporated, to the
extent not otherwise governed by the Internal Revenue Code or the laws
of the United States.
12. UNFUNDED PLAN. This Plan shall be unfunded. No person shall have any
rights greater than those of a general creditor of the Company.
13. WITHHOLDING. The Company shall have the right to deduct from all
amounts deferred pursuant to a Deferral Election and/or payments made
under the Plan any federal, state, or local income taxes or FICA
required to be withheld with respect to such compensation. Each
Non-Employee Director shall be entitled to irrevocably elect, at least
six months prior to the date shares of Common Stock would otherwise be
delivered hereunder, to have the Company withhold shares of Common
Stock having an aggregate Fair Market Value as of such date equal to
the amount required to be withheld.
14. CHANGE OF CONTROL. Anything in this Plan to the contrary
notwithstanding, upon the occurrence of a Change of Control: (a) all
Notional Share Units credited to any Non-Employee Director's Share
Account shall be converted into Common Stock and together with all
Deferred Amounts credited to a Notional Cash Account shall be
transferred as soon as practicable in a lump sum to each Non-Employee
Director; and (b) any Retainer Fees earned in respect of the fiscal
quarter in which the Change of Control occurs shall be paid in cash as
soon as practicable. For purposes of the Plan, a "Change of Control"
means: (i) the adoption of a plan of reorganization, merger, share
exchange or consolidation of the Company with one or more other
corporations or other entities as a result of which the holders of
Common Stock as a group would receive less than fifty percent (50%) of
the
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voting power of the capital stock or other interests of the surviving
or resulting corporation or entity; (ii) the adoption of a plan of
liquidation or the approval of the dissolution of the Company; (iii)
the approval by the Board of Directors of an agreement providing for
the sale or transfer of the assets of the Company; or (iv) the
acquisition of more than twenty percent (20%) of the outstanding shares
by any person within the meaning of Rule 13(d)(3) under the Securities
Exchange Act of 1934 if such acquisition is not preceded by a prior
expression of approval by the Board.
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