1
EXHIBIT 10.2
INSURANCE MANAGEMENT SOLUTIONS GROUP, INC.
LONG TERM INCENTIVE PLAN
ARTICLE 1:
1. ESTABLISHMENT; PURPOSE:
1.1. ESTABLISHMENT. Insurance Management Solutions Group, Inc., a Florida
corporation, (the "Company") hereby establishes an incentive
compensation plan to be known as the "Insurance Management Solutions
Group, Inc. Long Term Incentive Plan" (the "Plan").
1.2. PURPOSE. The purpose of the Plan is to (a) attract, retain and motivate
participating employees of the Company and its subsidiaries through
awards of shares of the Common Stock of the Company (the "Shares"),
options to purchase Shares (the "Options") and Stock Appreciation
Rights (the "SARs"), (b) encourage employee ownership of Shares and (c)
encourage participating employees to think and act like owners of the
Company.
1.3. MAXIMUM NUMBER OF SHARES. The maximum number of Shares that may be
issued under the Plan is 875,000, subject to adjustment as provided
in Section 9.1. Such Shares may be issued through the purchase of
either authorized and unissued Shares, or issued Shares acquired by the
Company. If an Option is surrendered or for any other reason ceases to
be exercisable in whole or in part, the Shares that are subject to such
Option, but as to which the Option has not been exercised, shall again
become available for offering under the Plan.
1.4. STATUS. It is the intention of the Company that incentive stock options
granted under the Plan qualify as "incentive stock options" under
Section 422 of the Code, and the regulations promulgated thereunder.
The provisions of the Plan with respect to ISOs, accordingly, shall be
construed in a manner consistent with such requirements. Except with
respect to ISOs, no Award under the Plan is intended to qualify for
special treatment or status under the Code.
ARTICLE 2:
2. DEFINITIONS:
2.1. DEFINITIONS. The following words and terms as used herein shall have
that meaning set forth therefor in this Article 2 unless a different
meaning is clearly required by the context.
2.1.1. "Award" shall mean any Option, Restricted Share, SAR or cash
payment granted or awarded under the Plan.
2.1.2. "Award Agreement(s)" shall mean any document, agreement or
certificate deemed by the Committee as necessary or advisable to be
entered into with or delivered to a Participant in connection with the
grant of an Award under the Plan.
2
2.1.3. "Board" or "Board of Directors" shall mean the Board of
Directors of the Company.
2.1.4. "Committee" is defined in Article 3.1.
2.1.5. "Code" shall mean the Internal Revenue Code of 1986, as amended.
Reference to a specific section of the Code shall include a reference
to any successor provision.
2.1.6. "Company" shall mean Insurance Management Solutions Group, Inc.,
a Florida corporation, and its successors.
2.1.7. "Effective Date" is defined in Section 9.7.
2.1.8. "Eligible Employee" shall mean any individual employed by the
Company, any Subsidiary who meets the eligibility requirements of
Article 4, or any individual who is employed as a consultant or advisor
by the Company that provides bona fide services not in connection with
a capital transaction.
2.1.9. "Fair Market Value" of the Shares shall mean the closing price
on the date in question (or, if no Shares are traded on such day, on
the next preceding day on which Shares were traded) of the Shares on
the principal securities exchange in the United States on which such
stock is listed, or if such Shares are not listed on a securities
exchange in the United States, the closing price on such day in the
over-the-counter market as reported by the National Association of
Security Dealers Automated Quotation System (NASDAQ), or NASDAQ's
successor, or if not reported on NASDAQ, the fair market value of such
Shares as determined by the Committee in good faith and based on all
relevant factors.
2.1.10. "ISO" shall mean an incentive stock option granted in
accordance with the provisions of Article 5 of the Plan.
2.1.11. "NSO" shall mean a nonqualified stock option granted in
accordance with the provisions of Article 6 of the Plan.
2.1.12. "Option" shall mean an ISO or an NSO.
2.1.13. "Optionee" shall mean an Eligible Employee to whom an Option is
granted under the Plan.
2.1.14. "Participant" shall mean an Eligible Employee, who in
accordance with the terms of the Plan, is approved by the Committee for
participation in the Plan as a recipient of an Award and who receives
an Award.
2.1.15. "Plan" shall mean the Insurance Management Solutions Group,
Inc. Long Term Incentive Plan, as set forth herein and as amended from
time to time.
2.1.16. "Restricted Share(s)" shall mean any Shares granted or awarded
to a Participant in accordance with the provisions of Article 8 of the
Plan.
3
2.1.17. "SAR" shall mean a Stock Appreciation Right granted in
accordance with the provisions of Article 7 of the Plan, which as to
each SAR entitles the Participant to receive payment equal to the
excess of (1) the Fair Market Value of a Share at the time of payment
or exercise over (2) a specified price or value set or established at
the time of grant of the SAR.
2.1.18. "Shares" shall mean shares of the common stock of the Company.
2.1.19. "Subsidiary" shall mean any corporation that at the time
qualifies as a subsidiary of the Company under the definition of
"subsidiary corporation" contained in Section 424(f) of the Code.
4
2.1.20. "10% Stockholder" shall mean an individual who owns more than
10% of the total combined voting power of all classes of stock of the
Company or of a parent or subsidiary corporation.
2.2. USAGE. Whenever appropriate, words used in the singular shall be deemed
to include the plural and vice versa, and the masculine gender shall be
deemed to include the feminine gender.
ARTICLE 3
3. ADMINISTRATION
3.1. COMMITTEE. This Plan shall be administered by a committee appointed by
the Board of Directors (the "Committee"). The Committee shall consist
of not less than two (2) nor more than five (5) persons, each of whom
shall be a member of the Board and none of whom shall be eligible to
participate under the Plan. The Board of Directors may from time to
time remove members from, or add members to, the Committee. Vacancies
on the Committee, howsoever caused, shall be filled by the Board of
Directors.
3.2. ORGANIZATION. The Committee shall select one of its members as
chairman, and shall hold meetings at such time and places as it may
determine. The acts of a majority of the Committee at which a quorum is
present, or acts reduced to or approved in writing by a majority of the
members of the Committee, shall be valid acts of the Committee.
3.3. POWER AND AUTHORITY. Subject to the provisions of the Plan, the
Committee shall have full authority, in its discretion: (a) to
determine from among Eligible Employees those persons who shall become
Participants; (b) to determine the nature, amount and terms and
conditions of all Awards under the Plan, in accordance with and subject
to the specific limitations and requirements set forth in the Plan; and
(c) to interpret the Plan, the terms of all Awards and Award Agreements
and any other agreement or instrument awarded, issued or entered into
under the Plan, and to prescribe, amend and rescind rules and
regulations with respect to the administration of the Plan. The
interpretation and construction by the Committee of any provision of
the Plan, any Award or any other agreement or instrument awarded,
issued or entered into under the Plan, and all other determinations and
decisions of the Committee pursuant to the provisions of the Plan,
shall be final, conclusive and binding on all Participants and other
affected persons. All actions and policies of the Committee, to the
extent they deal with ISOs, shall be consistent with the qualification
of ISOs as incentive stock options under Section 422 of the Code.
5
3.4. DISCRETIONARY AUTHORITY. The Committee's decision to authorize the
grant of an Award to an Eligible Employee at any time shall not require
the Committee to authorize the grant of an Award to that employee at
any other time or to any other employee at any time; nor shall its
determination with respect to the size, type or terms and conditions of
the Award to be granted to an Eligible Employee at any time require it
to authorize the grant of an Award of the same type or size or with the
same terms and conditions to that employee at any other time or to any
other employee at any time. The Committee shall not be precluded from
authorizing the grant of an Award to any Eligible Employee solely
because the employee previously may have been granted an Award of any
kind under the Plan.
3.5. NO LIABILITY. No member of the Committee shall be liable for any action
or determination made in good faith with respect to the Plan.
ARTICLE 4
4. EMPLOYEES ELIGIBLE TO PARTICIPATE
4.1. GENERALLY. Any person, including any officer but not a person who is
solely a director, who is in the employ of the Company or any
Subsidiary on the date of a grant of an Award shall be an Eligible
Employee, able to participate in the Plan in accordance with the terms
of the Plan. The Committee shall have the sole power to determine if
the eligibility requirements have been satisfied.
4.2. PARTICIPANT STATUS. In accordance with the provisions of Section 3.3,
the Committee, in its sole discretion, from time to time may select
from among Eligible Employees persons to become Participants in the
Plan. Any Eligible Employee so selected and who remains an Eligible
Employee shall become a Participant upon the approval of such status by
the Committee, which approval shall be conclusively evidenced by the
award or grant of an Award to a Participant.
4.3. ISO ELIGIBILITY REQUIREMENT. Notwithstanding any provision of the Plan
to the contrary, no person shall be eligible to receive any ISOs under
the Plan if such person would not be able to qualify for the benefits
of incentive stock options under Section 422 of the Code.
ARTICLE 5
5. TERMS AND CONDITIONS OF INCENTIVE STOCK OPTIONS
5.1. GRANT. Any ISO granted pursuant to the Plan shall be authorized by the
Committee and shall be evidenced by certificates or agreements in such
form as the Committee from time to time shall approve, which
certificates or agreements shall comply with and be subject to the
terms and conditions hereinafter specified. Upon the granting of any
ISO, the Committee shall promptly cause the Optionee to be notified of
the fact that such Option has been granted. The date on which the
Committee approves the grant of an ISO shall be considered to be the
date on which such Option is granted.
5.2. NUMBER OF SHARES. Each ISO shall state the number of Shares to which it
pertains.
6
5.3. OPTION PRICE. Each ISO shall state the option price, which option price
shall be determined by the Committee in its discretion. Notwithstanding
the foregoing, the option price in no event shall be less than 100% of
the Fair Market Value of the Shares on the date of grant of the Option;
or, in the case of an ISO being issued to an Eligible Employee who is a
10% Stockholder at the time an ISO is granted, 110% of the Fair Market
Value of the Shares on the date of grant.
5.4. METHOD OF EXERCISE. An Optionee may exercise an ISO during such time as
may be permitted by the Option and the Plan by providing written notice
to the Committee, tendering the purchase price in accordance with the
provisions of Section 5.5, and complying with any other exercise
requirements contained in the Option or promulgated from time to time
by the Committee.
5.5. METHOD OF PAYMENT. Payment of the option price upon the exercise of the
ISO shall be in: (a) United States dollars in cash or by check, bank
draft or money order payable to the order of the Company; (b) in the
discretion of and in the manner determined by the Committee, by the
delivery of Shares already owned by the Optionee; (c) by any other
legally permissible means acceptable to the Committee at the time of
grant of the Option (including cashless exercise as permitted under the
Federal Reserve Board's Regulation T, subject to applicable legal
restrictions); or in the discretion of the Committee, through a
combination of (a), (b) and (c) of this Section. If the option price is
paid in whole or in part through the delivery of Shares, the decision
of the Committee with respect to the Fair Market Value of such Shares
shall be final and conclusive.
5.6. TERM AND EXERCISE OF OPTIONS.
5.6.1. Unless otherwise specified in writing by the Committee at the
time of grant or in the Award Agreement, each ISO shall be
exercisable, in whole or in part, only in accordance with the
"Vesting Schedule" which is attached to and hereby made a part
of this Plan. To the extent not exercised, exercisable
installments of ISOs shall be exercisable, in whole or in
part, in any subsequent period, but not later than the
expiration date of the Option. The Committee shall determine
the expiration date of the Option at the time of the grant of
the Option; provided, however, that no ISO shall be
exercisable after the expiration of ten (10) years from the
date it is granted; or, in the case of a 10% Stockholder, no
ISO shall be exercisable after the expiration of five (5)
years from the date it is granted. Not less than one hundred
(100) Shares may be exercised at any one time unless the
number exercised is the total number at the time exercisable
under the Option.
5.6.2. Within the limits described above, the Committee may impose
additional requirements on the exercise of ISOs. When it deems
special circumstances to exist, the Committee in its
discretion may accelerate the time at which an ISO may be
exercised if, under previously established exercise terms,
such Option was not immediately exercisable in full, even if
the acceleration would permit the Option to be exercised more
rapidly than the vesting set forth in the attached Vesting
Schedule, or as otherwise specified by the Committee, would
permit.
5.7. ADDITIONAL LIMITATIONS. The aggregate Fair Market Value (determined as
of the time an ISO is granted) of the Shares with respect to which ISOs
are exercisable for the first time by any Optionee in any calendar year
under the Plan and under all other incentive stock option plans of
7
the Company and any parent and subsidiary corporations of the Company
(as those terms are defined in Section 424 of the Code) shall not
exceed $100,000.
5.8. DEATH OR OTHER TERMINATION OF EMPLOYMENT.
5.8.1. In the event that an Optionee shall cease to be employed by
the Company or a Subsidiary for any reason other than his or
her death, subject to the conditions that no ISO shall be
exercisable after its expiration date, such Optionee shall
have the right to exercise the ISO at any time within ninety
(90) days after such termination of employment to the extent
his or her right to exercise such Option had accrued pursuant
to this Article 5 at the date of such termination and had not
previously been exercised; such ninety (90) day period shall
be increased to one (1) year for any Optionee who ceases to be
employed by the Company or a Subsidiary because he is disabled
(within the meaning of Section 22(e)( 3) of the Code) or who
dies during the ninety (90) day period and the Option may be
exercised within such extended time limit by the Optionee or,
in the case of death, the personal representative of the
Optionee or by any person or persons who shall have acquired
the Option directly from the Optionee by bequest or
inheritance. Whether an authorized leave of absence or absence
for military or governmental service shall constitute
termination of employment for purposes of the Plan shall be
determined by the Committee, whose determination shall be
final and conclusive.
5.8.2. In the event that an Optionee shall die while in the employ of
the Company or a Subsidiary and shall not have fully exercised
any ISO, the ISO may be exercised, subject to the conditions
that no ISO shall be exercisable after its expiration date, to
the extent that the Optionee's right to exercise such Option
had accrued pursuant to this Article 5 at the time of his or
her death and had not previously been exercised, at any time
within one (1) year after the Optionee's death, by the
personal representative of the Optionee or by any person or
persons who shall have acquired the Option directly from the
Optionee by bequest or inheritance.
5.8.3. No ISO shall be transferable by the Optionee otherwise than by
will or the laws of descent and distribution.
5.8.4. During the lifetime of the Optionee, an ISO shall be
exercisable only by him or her and shall not be assignable or
transferable, and no other person shall acquire any rights
therein.
5.9. DELIVERY OF CERTIFICATES REPRESENTING SHARES.
5.9.1. As soon as practicable after the exercise of an ISO, the
Company shall deliver or cause to be delivered to the Optionee
exercising the ISO a certificate or certificates representing
the Shares purchased upon the exercise.
5.9.2. Certificates representing Shares to be delivered to an
Optionee will be registered in the name of the participating
employee, or if the Optionee so directs, by written notice to
the Company, and to the extent permitted by applicable law, in
the names of the Optionee and one such other person as may be
designated by the participating Optionee, as joint tenants
with rights of survivorship.
8
5.10. RIGHTS AS A STOCKHOLDER. An Optionee shall have no rights as a
stockholder with respect to any Shares covered by his or her ISO until
the date on which he or she becomes a record owner of the Shares
purchased upon the exercise of the Option (the "record ownership
date"). No adjustment shall be made for dividends (ordinary or
extraordinary, whether in cash, securities or other property),
distributions, or other rights for which the record date is prior to
the record ownership date, except as provided in Article 9.
5.11. MODIFICATION, EXTENSION AND RENEWAL OF OPTIONS. Subject to the terms
and conditions and within the limitations of the Plan, the Committee
may modify outstanding ISOs granted under the Plan, or accept the
surrender of outstanding ISOs (to the extent not theretofore exercised)
and authorize the granting of new Options in substitution therefor (to
the extent not theretofore exercised). The Committee shall not,
however, modify any outstanding ISO so as to specify a lower option
price or accept the surrender of outstanding ISOs and authorize the
granting of new Options in substitution therefor specifying a lower
option price. Notwithstanding the foregoing, however, no modification
of an ISO shall, without the consent of the Optionee, alter or impair
any of the rights or obligations under any ISO theretofore granted
under the Plan.
5.12. LISTING AND REGISTRATION OF SHARES. Each ISO shall be subject to the
requirement that if at any time the Committee shall determine, in its
discretion, that the listing, registration or qualification of the
Shares covered thereby upon any securities exchange or under any state
or federal laws, or the consent or approval of any governmental
regulatory body, is necessary or desirable as a condition of, or in
connection with, the granting of such ISO or the issuance or purchase
of Shares thereunder, such ISO may not be exercised unless and until
such listing, registration, qualification, consent or approval shall
have been effected or obtained free of any conditions not acceptable to
the Committee. Notwithstanding anything in the Plan to the contrary, if
the provisions of this Section become operative, and if, as a result
thereof, the exercise of an ISO is delayed, then and in that event, the
term of the ISO shall not be affected.
5.13. OTHER PROVISIONS. The ISO certificates or agreements authorized under
the Plan shall contain such other provisions, including, without
limitation, restrictions upon the exercise of the Option, as the
Committee shall deem advisable. Any such certificate or agreement shall
contain such limitations and restrictions upon the exercise of the ISO
as shall be necessary in order that such Option will be an incentive
stock option as defined in Section 422 of the Code, or to conform to
any change in the law.
9
ARTICLE 6
6. TERMS AND CONDITIONS OF NONQUALIFIED STOCK OPTIONS
6.1. GRANT. Any NSO granted pursuant to the Plan shall be authorized by the
Committee and shall be evidenced by certificates or agreements in such
form as the Committee from time to time shall approve, which
certificates or agreements shall comply with and be subject to the
terms and conditions hereinafter specified. Upon the granting of any
NSO, the Committee shall promptly cause the Optionee to be notified of
the fact that such Option has been granted. The date on which the
Committee approves the grant of a NSO shall be considered to be the
date on which such Option is granted.
6.2. NUMBER OF SHARES. Each NSO shall state the number of Shares to which it
pertains.
6.3. OPTION PRICE. Each NSO shall state the option price, which option price
shall be determined by the Committee in its discretion and may be equal
to, less than or greater than 100% of the Fair Market Value of the
Shares on the date of grant.
6.4. METHOD OF EXERCISE. An Optionee may exercise a NSO during such time as
may be permitted by the Option and the Plan by providing written notice
to the Committee, tendering the purchase price in accordance with the
provisions of Section 6.5, and complying with any other exercise
requirements contained in the Option or promulgated from time to time
by the Committee.
6.5. METHOD OF PAYMENT. Payment of the option price upon the exercise of the
NSO shall be: (a) in United States dollars in cash or by check, bank
draft or money order payable to the order of the Company; (b) in the
discretion of and in the manner determined by the Committee, by the
delivery of Shares already owned by the Optionee; (c) by any other
legally permissible means acceptable to the Committee at the time of
grant of the Option (including cashless exercise as permitted under the
Federal Reserve Board's Regulation T, subject to applicable legal
restrictions); or in the discretion of the Committee, through a
combination of (a), (b) and (c) of this Section. If the option price is
paid in whole or in part through the delivery of Shares, the decision
of the Committee with respect to the Fair Market Value of such Shares
shall be final and conclusive.
6.6. TERM AND EXERCISE OF OPTIONS.
6.6.1. Unless otherwise specified in writing by the Committee at the
time of grant or in the Award Agreement, each NSO shall be
exercisable, in whole or in part, only in accordance with the
attached Vesting Schedule.To the extent not exercised,
exercisable installments of NSOs shall be exercisable, in
whole or in part, in any subsequent period, but not later than
the expiration date of the Option. The Committee shall
determine the expiration date of the Option at the time of the
grant of the Option; provided, however, that no NSO shall be
exercisable after the expiration of ten (10) years from the
date it is granted. Not less than one hundred (100) Shares may
be exercised at any one time unless the number exercised is
the total number at the time exercisable under the Option.
6.6.2. Within the limits described above, the Committee may impose
additional requirements on the exercise of NSOs. When it deems
special circumstances to exist, the Committee in its
10
discretion may accelerate the time at which a NSO may be
exercised if, under previously established exercise terms,
such Option was not immediately exercisable in full, even if
the acceleration would permit the Option to be exercised more
rapidly than the vesting set forth in the attached Vesting
Schedule, or as otherwise specified by the Committee, would
permit.
6.7. DEATH OR OTHER TERMINATION OF EMPLOYMENT.
6.7.1. In the event that an Optionee shall cease to be employed by
the Company or a Subsidiary for any reason other than his or
her death, subject to the conditions that no NSO shall be
exercisable after its expiration date, such Optionee shall
have the right to exercise the NSO at any time within ninety
(90) days after such termination of employment to the extent
his or her right to exercise such Option had accrued pursuant
to this Article 6 at the date of such termination and had not
previously been exercised; such ninety (90) day period shall
be increased to one (1) year for any Optionee who ceases to be
employed by the Company or a Subsidiary because he is disabled
(within the meaning of Section 22(e)( 3) of the Code) or who
dies during the ninety (90) day period, and the Option may be
exercised within such extended time limit by the Optionee or
in the case of death, the personal representative of the
Optionee or by any person or persons who shall have acquired
the Option directly from the Optionee by bequest or
inheritance. Whether an authorized leave of absence or absence
for military or governmental service shall constitute
termination of employment for purposes of the Plan shall be
determined by the Committee, whose determination shall be
final and conclusive.
6.7.2. In the event that an Optionee shall die while in the employ of
the Company or a Subsidiary and shall not have fully exercised
any NSO, the NSO may be exercised, subject to the conditions
that no NSO shall be exercisable after its expiration date, to
the extent that the Optionee's right to exercise such Option
had accrued pursuant to this Article 6 at the time of his or
her death and had not previously been exercised, at any time
within one (1) year after the Optionee's death, by the
personal representative of the Optionee or by any person or
persons who shall have acquired the Option directly from the
Optionee by bequest or inheritance.
6.7.3. No NSO shall be transferable by the Optionee otherwise than by
will or the laws of descent and distribution.
6.7.4. During the lifetime of the Optionee, an NSO shall be
exercisable only by him or her and shall not be assignable or
transferable, and no other person shall acquire any rights
therein.
6.8. DELIVERY OF CERTIFICATES REPRESENTING SHARES.
6.8.1. As soon as practicable after the exercise of a NSO, the
Company shall deliver or cause to be delivered to the Optionee
exercising the NSO a certificate or certificates representing
the Shares purchased upon the exercise.
6.8.2. Certificates representing Shares to be delivered to an
Optionee under the Plan will be registered in the name of the
Optionee, or if the Optionee so directs, by written notice to
11
the Company, and to the extent permitted by applicable law, in
the names of the Optionee and one such other person as may be
designated by the Optionee, as joint tenants with rights of
survivorship.
6.9. RIGHTS AS A STOCKHOLDER. An Optionee shall have no rights as a
stockholder with respect to any Shares covered by his or her NSO until
the date on which he or she becomes a record owner of the Shares
purchased upon the exercise of the Option (the "record ownership
date"). No adjustment shall be made for dividends (ordinary or
extraordinary, whether in cash, securities or other property),
distributions, or other rights for which the record date is prior to
the record ownership date, except as provided in Article 9.
6.10. MODIFICATION, EXTENSION AND RENEWAL OF OPTIONS. Subject to the terms
and conditions and within the limitations of the Plan, the Committee
may modify outstanding NSOs granted under the Plan, or accept the
surrender of outstanding NSOs (to the extent not theretofore exercised)
and authorize the granting of new Options in substitution therefor (to
the extent not theretofore exercised). The Committee shall not,
however, modify any outstanding NSO so as to specify a lower option
price or accept the surrender of outstanding NSOs and authorize the
granting of new Options in substitution therefor specifying a lower
option price. Notwithstanding the foregoing, however, no modification
of an NSO shall, without the consent of the Optionee, alter or impair
any of the rights or obligations under any NSO theretofore granted
under the Plan.
6.11. LISTING AND REGISTRATION OF SHARES. Each NSO shall be subject to the
requirement that if at any time the Committee shall determine, in its
discretion, that the listing, registration or qualification of the
Shares covered thereby upon any securities exchange or under any state
or federal laws, or the consent or approval of any governmental
regulatory body, is necessary or desirable as a condition of, or in
connection with, the granting of such NSO or the issuance or purchase
of shares thereunder, such NSO may not be exercised unless and until
such listing, registration, qualification, consent or approval shall
have been effected or obtained free of any conditions not acceptable to
the Committee. Notwithstanding anything in the Plan to the contrary, if
the provisions of this Section become operative, and if, as a result
thereof, the exercise of a NSO is delayed, then and in that event, the
term of the NSO shall not be affected.
6.12. OTHER PROVISIONS. The NSO certificates or agreements authorized under
the Plan shall contain such other provisions, including, without
limitation, restrictions upon the exercise of the Option, as the
Committee shall deem advisable.
12
ARTICLE 7
7. STOCK APPRECIATION RIGHTS
7.1. GRANT. The Committee, in its sole discretion, from time to time may
authorize the grant of SARs to a Participant. An SAR may be granted in
connection with all or any portion of a previously or contemporaneously
granted Award (other than an SAR), or by itself and not in connection
with any other Award. An SAR may be granted at the time of grant of the
related Option and shall be subject to the same terms and conditions as
the related Option, except as this Article 7 may otherwise provide. The
grant of SAR shall be evidenced either by provisions in the Option to
which it relates or by a separate written agreement between the Company
and the Participant, which shall comply with and be subject to the
terms and conditions of the Plan and shall be in such form as the
Committee from time to time shall approve (an "SAR Agreement"). The SAR
Agreement may contain such additional terms, conditions or limitations,
not inconsistent with the specific provisions of the Plan, as may be
approved by the Committee in it sole discretion.
7.2. TERMS AND CONDITIONS. Each SAR granted under the Plan shall be
exercisable or payable at such time or times, or upon the occurrence of
such event or events, and in such amounts or types of consideration
(including cash or Shares) as the Committee shall specify in the SAR
Agreement. Subsequent to the grant of an SAR, the Committee, at any
time before complete termination of such SAR, may accelerate the time
or times at which such SAR may be exercised or paid in whole or in
part.
7.3. EXERCISE.
7.3.1. An SAR shall be exercised by surrendering the SAR Agreement
or, if the SAR was granted in connection with an Option, the
surrender of the related Option together with any SAR
Agreement, or the portion(s) thereof pertaining to the Shares
with respect to which the SAR is exercised, and providing the
Company with a written notice in such form and containing such
information (including the number of Shares with respect to
which the SAR is being exercised) as the SAR Agreement or the
Committee may specify. The date on which the Company receives
such surrender and notice shall be the date on which the
related Option, or portion thereof, shall be deemed
surrendered and the SAR shall be deemed exercised.
7.3.2. An SAR granted in connection with an Option shall be
exercisable only at such time or times, to such extent and by
such persons as the Option to which it relates shall be
exercisable, provided that an SAR granted in connection with
an ISO shall not be exercisable on any date on which the Fair
Market Value of a Share is less than or equal to the per share
exercise price of the ISO. An SAR shall be canceled when, and
to the extent that, any related Option is exercised, and an
Option shall be canceled when, and to the extent that, the
Option is surrendered to the Company upon the exercise of a
related SAR.
7.4. PAYMENT. To effect payment or exercise of an SAR, the Company shall
make payment to the Participant in cash or Shares (valued at their Fair
Market Value on the date of payment or exercise) or in combination of
cash and Shares as provided in the SAR Agreement. If payment is to be
made in Shares, upon such exercise, the Participant shall be entitled
to receive that number
13
of Shares which have an aggregate Fair Market Value on the exercise
date equal to the amount by which the Fair Market Value of one Share on
the exercise date exceeds the Option price per share of any related
Option or the Fair Market Value on the date of grant of the SAR, as the
case may be, multiplied by the number of Shares covered by the related
Option or the SAR, as the case may be, or portion thereof, surrendered
in connection with the exercise of the SAR.
7.5. EXPIRATION. An SAR granted in connection with or related to an Option,
unless previously exercised or canceled, shall expire upon the
expiration of the Option to which it relates. Any other SAR, unless
previously exercised or canceled, shall expire upon the tenth
anniversary of its grant. The exercise of an SAR granted in connection
with an Option shall result in a pro rata surrender or cancellation of
any related Option to the extent the SAR has been exercised.
7.6. DEATH OR OTHER TERMINATION OF EMPLOYMENT.
7.6.1. In the event that a Participant shall cease to be employed by
the Company or a Subsidiary for any reason other than his or
her death, subject to the conditions that no SAR shall be
exercisable after its expiration date, such Participant shall
have the right to exercise the SAR at any time within ninety
(90) days after such termination of employment to the extent
his or her right to exercise such SAR had accrued pursuant to
this Article 7 at the date of such termination and had not
previously been exercised; such ninety (90) day period shall
be increased to one (1) year for any Participant who ceases to
be employed by the Company or a Subsidiary because he is
disabled (within the meaning of Section 22(e)(3) of the Code)
or who dies during the ninety (90) day and the SAR may be
exercised within such extended time limit by the Participant
or, in the case of death, the personal representative of the
Participant or by any person or persons who shall have
acquired the SAR directly from the Participant by bequest or
inheritance. Whether an authorized leave of absence or absence
for military or governmental service shall constitute
termination of employment for purposes of the Plan shall be
determined by the Committee, whose determination shall be
final and conclusive.
7.6.2. In the event that a Participant shall die while in the employ
of the Company or a Subsidiary and shall not have fully
exercised any SAR, the SAR may be exercised, subject to the
conditions that no SAR shall be exercisable after its
expiration date, to the extent that a Participant's right to
exercise such SAR had accrued in accordance with the
provisions of this Article 7 at the time of his or her death
and had not previously been exercised, at any time within one
(1) year after a Participant's death, by the personal
representative of a Participant or by any person or persons
who shall have acquired the SAR directly from a Participant by
bequest or inheritance.
7.6.3. No SAR shall be transferable by a Participant otherwise than
by will or the laws of descent and distribution.
7.6.4. During the lifetime of a Participant, an SAR shall be
exercisable only by him or her and shall not be assignable or
transferable, and no other person shall acquire any rights
therein.
7.7. DELIVERY OF CERTIFICATES REPRESENTING SHARES. As soon as practicable
after the exercise or payment of an SAR payable in whole or in part in
Shares, the Company shall deliver or cause to
14
be delivered to the Participant exercising the SAR for Shares a
certificate or certificates representing the Shares issuable upon such
purchase or exercise. Certificates representing Shares to be delivered
to a Participant will be registered in the name of the Participant or
if the Participant so directs, by written notice to the Company, and to
the extent permitted by applicable law, in the names of the Participant
and one such other person as may be designated by the Participant, as
joint tenants with rights of survivorship.
7.8. LISTING AND REGISTRATION OF SHARES. Each SAR shall be subject to the
requirement that if at any time the Committee shall determine, in its
discretion, that the listing, registration or qualification of any
Shares covered thereby upon any securities exchange or under any state
or federal laws, or the consent or approval of any governmental
regulatory body, is necessary or desirable as a condition of, or in
connection with, the issuance or purchase of Shares, such SAR may not
be paid or exercised unless and until such listing, registration,
qualification, consent or approval shall have been effected or obtained
free of any conditions not acceptable to the Committee. Notwithstanding
anything in the Plan to the contrary, if the provisions of this Section
become operative, and if, as a result thereof, the exercise of an SAR
is delayed, then and in that event, the term of the SAR shall not be
affected.
7.9. RIGHTS AS A STOCKHOLDER. In general, the holder of an SAR shall have no
rights as a stockholder. The holder of an SAR under which Shares are
issuable upon payment or exercise shall have no rights as a stockholder
of the Company until the date on which he or she becomes a record owner
of the Shares issued upon the payment or exercise of the SAR (the
"record ownership date"). No adjustment shall be made for dividends
(ordinary or extraordinary, whether in cash, securities or other
property), distributions, or other rights for which the record date is
prior to the record ownership date, except as provided in Article 9.
ARTICLE 8
8. RESTRICTED SHARES
8.1. GENERAL. The Committee, in its sole discretion, from time to time may
authorize the grant of Restricted Shares to a Participant. In making
any such grant of Restricted Shares, the Committee may grant Restricted
Shares without the requirement of any cash payment or may require a
cash payment from a Participant in an amount no greater than the
aggregate Fair Market Value of the Restricted Shares as of the date of
grant in exchange for, or as a condition precedent to, the completion
of the grant and the issuance of the Restricted Shares.
8.2. RESTRICTION PERIOD. All Restricted Shares issued under Article 8 shall
be subject to certain restrictions as set forth in Section 8.3, which
restrictions shall continue in effect for such period of time as is
specified in the Award Agreement (the "Restriction Period"). The Award
Agreement may contain such additional terms, conditions or limitations,
not inconsistent with the specific provisions of the Plan, as may be
approved by the Committee in it sole discretion.
8.3. CERTAIN RESTRICTIONS. Until the expiration of the Restriction Period,
Restricted Shares shall be subject to the following restrictions: (a)
the Participant shall not be entitled to take possession of the
certificate or certificates representing the Shares; (b) the Restricted
Shares may not be sold, transferred, assigned, pledged, conveyed,
hypothecated or otherwise disposed of (other than by
15
operation of law); and (c) the Shares may be forfeited immediately as
provided in Section 8.4. In addition, the Committee, as specified in
writing at the time of grant or in the Award Agreement, may condition
the right to receive Restricted Shares upon the satisfaction of such
additional terms, conditions or limitations, including but not limited
to performance criteria, as may be approved by the Committee in its
sole discretion.
8.4. TERMINATION OF EMPLOYMENT. Unless otherwise specified by the Committee
in writing at the time of the Award or in the Award Agreement, if the
employment of a Participant is terminated for any reason other the
death or disability (within the meaning of Section 22(e)(3) of the
Code) of the Participant before the expiration of the Restriction
Period, the Restricted Shares shall be forfeited immediately and all
rights of a Participant to such Shares shall terminate immediately
without further obligation on the part of the Company. Unless otherwise
specified by the Committee in writing at the time of the Award or in
the Award Agreement, if a Participant's employment is terminated by
reason of the death or disability (within the meaning of Section
22(e)(3) of the Code) of the Participant before the expiration of the
Restriction Period, (a) the number of Restricted Shares held by the
Company for a Participant's account pursuant to Section 8.6 shall be
reduced by partial forfeiture in an amount of Restricted Shares in
proportion equal to the percentage of the total Restriction Period
remaining after a Participant's termination of employment, (b) the
restrictions on the unforfeited balance of such Restricted Shares shall
lapse on the date the Participant's employment terminated and (c) the
certificate or certificates representing the Shares upon which the
restrictions have lapsed shall be delivered to the Participant (or, in
the event of the Participant's death, to his or her legal
representative).
8.5. DISTRIBUTION OF RESTRICTED SHARES. If a Participant to whom Restricted
Shares have been issued pursuant to Article 8 remains in the continuous
employment of the Company or a Subsidiary until the expiration or
waiver by the Board of the Restriction Period and the satisfaction of
any other conditions imposed by the Award Agreement, with respect to
the Restricted Shares in question, all restrictions applicable to such
Restricted Shares shall lapse and the certificate or certificates
representing the Shares that were granted to the Participant shall be
delivered to the Participant.
8.6. DELIVERY OF CERTIFICATES REPRESENTING SHARES.
8.6.1. As soon as practicable after a grant of Restricted Shares,
unless the Award Agreement provides for a different issuance
procedure, the Company shall issue certificates representing
the Restricted Shares registered in the name of the holder of
Restricted Shares.
8.6.2. To administer the restrictions imposed on Restricted Shares
under the Plan and the Award Agreement, certificates
representing Restricted Shares (to the extent they are issued
under the Award Agreement prior to satisfaction of such
restrictions) shall not be delivered to Participants but shall
be delivered to the Company to be held by the Company as
safekeeping agent for the benefit of each Participant. A
written safekeeping receipt evidencing the Shares so held in
safekeeping, bearing the name of the Participant, indicating
the number of the certificate or certificates and the number
of Shares so represented shall be delivered promptly to each
Participant. In its capacity as safekeeping agent for
Participants, the Company shall act in accordance with
instructions received from such Participants, which
instructions are to be confirmed in writing if deemed
16
appropriate by the Company. The safekeeping agency shall not
affect the rights of Participants as owners of Restricted
Shares, nor shall such agency affect the restrictions imposed
on Restricted Shares under the Plan or the Award Agreement.
8.6.3. Upon the lapse, satisfaction or waiver of the Restriction
Period and any other restrictions imposed on Restricted Shares
under the Plan or the Award Agreement, any safekeeping agency
arrangement adopted pursuant to Section 8.6.2 shall terminate
and the certificates representing the Shares owned by
Participants, registered in the name(s) of the Participants,
shall be delivered promptly to such Participants.
8.7. WAIVER OF RESTRICTIONS. The Committee, in its sole discretion, may at
any time waive or accelerate the expiration of any or all restrictions
with respect to Restricted Shares issued pursuant to this Article 8.
8.8. RIGHTS AS A STOCKHOLDER. A Participant receiving Restricted Shares
shall have no rights as a stockholder with respect to any Restricted
Shares grant to him or her under the Plan until the date on which he or
she becomes a record owner of the Restricted Shares (the "record
ownership date"). No adjustment shall be made for dividends (ordinary
or extraordinary, whether in cash, securities or other property),
distributions, or other rights for which the record date is prior to
the record ownership date, except as provided in Article 9.
17
ARTICLE 9
9. MISCELLANEOUS
9.1. STOCK ADJUSTMENTS.
9.1.1. In the event of any increase or decrease in the number of
issued Shares resulting from a stock split or other division
or consolidation of shares or the payment of a stock dividend
(but only on Shares) or any other increase or decrease in the
number of Shares effected without any receipt of consideration
by the Company, then, in any such event, the number of Shares
that remain available under the Plan, the number of Shares
covered by each outstanding Option, the exercise price per
Share covered by each outstanding Option, the number of Shares
covered by each outstanding SAR and the price per Share and
the number and any purchase price for any Restricted Shares
granted but not yet issued, in each case, shall be
proportionately and appropriately adjusted for any such
increase or decrease.
9.1.2. Subject to any required action by the stockholders, if any
change occurs in the Shares by reason of any recapitalization,
reorganization, merger, consolidation, split-up, combination
or exchange of shares, or of any similar change affecting
Shares, then, in any such event, the number and type of Shares
then covered by each outstanding Option, the purchase price
per Share covered by each outstanding Option, the number of
Shares covered by each outstanding SAR and the exercise price
per Share and the number and any purchase price for any
Restricted Shares granted but not yet issued, in each case,
shall be proportionately and appropriately adjusted for any
such change.
9.1.3. In the event of a change in the Shares as presently
constituted that is limited to a change of all of its
authorized shares with par value into the same number of
shares with a different par value or without par value, the
shares resulting from any change shall be deemed to be Shares
within the meaning of the Plan.
9.1.4. To the extent that the foregoing adjustments relate to stock
or securities of the Company, such adjustments shall be made
by, and in the discretion of, the Committee, whose
determination in that respect shall be final, binding and
conclusive; provided, however, that any Option granted
pursuant to Article 5 shall not be adjusted in a manner that
causes such Option to fail to continue to qualify as an
incentive stock option within the meaning of Section 422 of
the Code.
18
9.1.5. Except as hereinabove expressly provided in this Section, an
Eligible Employee or a Participant shall have no rights by
reason of any division or consolidation of shares of stock of
any class or the payment of any stock dividend or any other
increase or decrease the number of shares of stock of any
class or by reason of any dissolution, liquidation, merger or
consolidation, or spin-off of assets or stock of another
corporation; and any issuance by the Company of shares of
stock of any class, securities convertible into shares of
stock of any class, or warrants or options for shares of stock
of any class shall not affect, and no adjustment by reason
thereof shall be made with respect to, the number or price of
Shares, any Option, any SAR or any Restricted Shares granted
but not yet issued.
9.1.6. The existence of the Plan, or the grant of an Option, SAR or
Restricted Shares under the Plan, shall not affect 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 or to consolidate, or to
dissolve, to liquidate, to sell, or to transfer all or any
part of its business or assets.
9.2. TAX ABSORPTION PAYMENTS. The Company may, but is not required to, make
a cash payment, either directly to any Participant or on a
Participant's behalf, in an amount that the Committee estimates to be
equal (after taking into account any federal and state taxes that the
Committee estimates to be applicable to such cash payment) to any
additional federal and state income taxes that are imposed upon a
Participant as a result of the granting of any Award under the Plan (a
"Tax Absorption Payment"). In determining the amount of any Tax
Absorption Payment, the Committee may adopt such methods and
assumptions as it considers appropriate, and it shall not be required
to examine the individual tax liability of any Participant. The
decision to make any Tax Absorption Payment shall be made by the
Committee at the same time as the grant of the Award to which it
relates.
9.3. AMENDMENT OF THE PLAN; TERMINATION. The Board shall have the right to
revise, amend or terminate the Plan at any time without notice;
provided, however, that without shareholder approval the Board may not
(a) increase the aggregate number of Shares that may be issued pursuant
to this Plan, (b) extend the period during which any Award may be
granted, (c) extend the term of the Plan, or (d) modify the
requirements as to eligibility for participation hereunder; provided,
further, that no such action may be taken, without the consent of the
Participant to whom any Award shall have been granted, that adversely
affects the rights of such Participant concerning such Award, except as
such termination or amendment of this Plan is required by statute, or
rules or regulations promulgated thereunder, or as otherwise permitted
hereunder. The foregoing prohibitions in this Section shall not be
affected by adjustments in shares and purchase price made in accordance
with the provisions of Section 9.1.
9.4. APPLICATION OF FUNDS. The proceeds received by the Company from the
sale of Shares or the exercise of Awards pursuant to the Plan will be
used for general corporate purposes.
9.5. NO IMPLIED RIGHTS TO EMPLOYEES. The existence of the Plan and the
granting of Awards under the Plan shall in no way give any employee the
right to continued employment or the right to receive any additional
Awards or any additional compensation under the Plan, or otherwise
provide any employee any rights not specifically set forth in the Plan
or in any Option, SAR or Award Agreement.
19
9.6. WITHHOLDING.
9.6.1. The Company shall have the power to withhold, or require a
Participant to remit to the Company, an amount sufficient to
satisfy any federal, state or local withholding or other tax
due from the Company with respect to any amount payable and/or
shares issuable under the Plan, and the Company may defer such
payment or issuance unless indemnified to its satisfaction.
Whenever under the Plan payments are to be made in cash, such
payments shall be made net of an amount sufficient to satisfy
any federal, state or local withholding tax liability.
9.6.2. Subject to the consent of the Committee, with respect to (i)
the exercise of an NSO, (ii) the lapse of restrictions on
Restricted Stock, or (iii) the issuance of any other stock
Award under the Plan, a Participant may make an irrevocable
election (an "Election") to (A) have shares of Common Stock
otherwise issuable under (i) withheld, or (B) tender back to
the Company shares of Common Stock received pursuant to (i),
(ii), or (iii), or (C) deliver back to the Company pursuant to
(i), (ii), or (iii) previously acquired shares of Common Stock
having a Fair Market Value sufficient to satisfy all or part
of the Participant's estimated tax obligations associated with
the transaction. Such Election must be made by a Participant
prior to the date on which the relevant tax obligation arises.
The Committee may disapprove of any Election, may suspend or
terminate the right to make Elections, or may provide with
respect to any Award under this Plan that the right to make
Elections shall not apply to such Awards.
9.6.3. CONDITIONS PRECEDENT TO EFFECTIVENESS. Subject to the approval
of the Plan by the stockholders of the Company within 12
months after its adoption by the Board of Directors, the Plan
shall become effective upon the satisfaction of all the
following conditions, with the Effective Date of the Plan
being the date that the last of the following conditions is
satisfied:
9.6.3.1. the adoption of the Plan by the Board of
Directors; and
9.6.3.2. the effectiveness of the Company's
Registration Statement on Form S-1 relating
to the Company's initial public offering, as
filed with the SEC (File No. 333-57747).
20
VESTING SCHEDULE:
----------------------------------------------------------------------------
Number of Years from Percentage of Shares
Date Option is Granted Exercisable
----------------------------------------------------------------------------
Less than 1 year 0%
----------------------------------------------------------------------------
1 year but less than 2 years 20%
----------------------------------------------------------------------------
2 years but less than 3 years 40%
----------------------------------------------------------------------------
3 years but less than 4 years 60%
----------------------------------------------------------------------------
4 years but less than 5 years 80%
----------------------------------------------------------------------------
5 years or more 100%
----------------------------------------------------------------------------