Exhibit 10.1
GRANITE CONSTRUCTION INCORPORATED
1999 EQUITY INCENTIVE PLAN
AS AMENDED AND RESTATED THROUGH SEPTEMBER 25, 2003
TABLE OF CONTENTS
Page
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SECTION 1. ESTABLISHMENT, PURPOSE, AND TERM OF PLAN......................................... 1
1.1 Establishment.................................................................. 1
1.2 Purpose........................................................................ 1
1.3 Term of Plan................................................................... 1
SECTION 2. DEFINITIONS AND CONSTRUCTION..................................................... 1
2.1 Definitions.................................................................... 1
2.2 Construction................................................................... 5
SECTION 3. ELIGIBILITY AND AWARD LIMITATIONS................................................ 5
3.1 Persons Eligible for Incentive Stock Options................................... 5
3.2 Persons Eligible for Other Awards.............................................. 5
3.3 Section 162(m) Award Limits.................................................... 5
SECTION 4. ADMINISTRATION................................................................... 6
4.1 Administration by Committee.................................................... 6
4.2 Authority of Officers.......................................................... 6
4.3 Administration with Respect to Insiders........................................ 6
4.4 Committee Complying with Section 162(m)........................................ 6
4.5 Powers of the Committee........................................................ 6
SECTION 5. STOCK SUBJECT TO PLAN............................................................ 7
5.1 Maximum Number of Shares Issuable.............................................. 7
5.2 Lapsed Awards.................................................................. 7
5.3 Adjustment in Capitalization................................................... 8
SECTION 6. STOCK OPTIONS.................................................................... 8
6.1 Grant of Options............................................................... 8
6.2 Exercise Price................................................................. 8
6.3 Exercise Period................................................................ 9
6.4 Payment of Exercise Price...................................................... 9
6.5 Effect of Termination of Service............................................... 10
6.6 Transferability of Options..................................................... 12
SECTION 7. RESTRICTED STOCK................................................................. 12
7.1 Grant of Restricted Stock...................................................... 12
7.2 Nontransferability During Period of Restriction................................ 12
7.3 Other Restrictions............................................................. 12
7.4 Voting Rights.................................................................. 12
7.5 Dividends and Other Distribution............................................... 12
7.6 Effect of Termination of Service............................................... 13
SECTION 8. PERFORMANCE SHARES AND PERFORMANCE UNITS......................................... 13
8.1 Grant of Performance Shares or Performance Units............................... 13
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TABLE OF CONTENTS
(Continued)
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8.2 Value of Performance Shares and Performance Units.............................. 13
8.3 Establishment of Performance Goals and Performance Period...................... 14
8.4 Measurement of Performance Goals............................................... 14
8.5 Determination of Value of Performance Shares and Performance Units............. 14
8.6 Dividend Equivalents........................................................... 15
8.7 Form and Timing of Payment..................................................... 15
8.8 Restrictions Applicable to Payment in Shares................................... 15
8.9 Effect of Termination of Service............................................... 15
8.10 Nontransferability............................................................. 16
SECTION 9. DIRECTOR FEE AWARDS.............................................................. 16
9.1 Effective Date and Duration of this Section.................................... 16
9.2 Mandatory and Elective Director Fee Awards..................................... 16
9.3 Time and Manner of Election.................................................... 17
9.4 Automatic Grant of Director Fee Awards......................................... 17
9.5 Option Payment................................................................. 18
9.6 Stock Units Payment............................................................ 19
9.7 Fractional Shares.............................................................. 21
SECTION 10. CHANGE IN CONTROL............................................................... 21
10.1 Effect of Change in Control.................................................... 21
10.2 Termination of Service After a Change in Control............................... 22
10.3 Definition..................................................................... 22
SECTION 11. REQUIREMENTS OF LAW............................................................. 23
11.1 Compliance with Securities Law................................................. 23
11.2 Governing Law.................................................................. 23
SECTION 12. TAX WITHHOLDING................................................................. 23
12.1 Tax Withholding In General..................................................... 23
12.2 Withholding of Shares.......................................................... 23
SECTION 13. AMENDMENT AND TERMINATION OF PLAN............................................... 23
13.1 Amendment and Termination of Plan.............................................. 23
13.2 Effect of Amendment or Termination............................................. 24
SECTION 14. MISCELLANEOUS PROVISIONS........................................................ 24
14.1 Beneficiary Designation........................................................ 24
14.2 Rights as an Employee or Director.............................................. 24
14.3 Rights as a Stockholder........................................................ 24
14.4 Provision of Information....................................................... 24
14.5 Unfunded Obligation............................................................ 24
14.6 Indemnification................................................................ 25
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GRANITE CONSTRUCTION INCORPORATED
1999 EQUITY INCENTIVE PLAN
AS AMENDED AND RESTATED THROUGH SEPTEMBER 25, 2003
SECTION 1. ESTABLISHMENT, PURPOSE, AND TERM OF PLAN
1.1 ESTABLISHMENT. Granite Construction Incorporated, a Delaware
corporation, hereby establishes the Granite Construction Incorporated 1999
Equity Incentive Plan (the "PLAN") effective as of the date of its approval by
the stockholders of the Company, which occurred on May 24, 1999 (the "EFFECTIVE
DATE").
1.2 PURPOSE. The purpose of the Plan is to advance the interests
of the Company, by encouraging and providing for the acquisition of an equity
interest in the success of the Company by Employee and Directors, by providing
additional incentives and motivation toward superior performance of the Company,
and by enabling the Company to attract and retain the services of Employees and
Directors upon whose judgment, interest, and special effort the successful
conduct of its operations is largely dependent. The Plan seeks to achieve this
purpose by providing for Awards in the form of Options, Restricted Stock,
Performance Units and Performance Shares, by providing Nonemployee Directors
with the opportunity to receive Options or Stock Units in lieu of compensation
otherwise payable in cash, and by providing for payments in the form of shares
of Stock or cash.
1.3 TERM OF PLAN. The Plan shall remain in effect until the
earlier of (i) its termination by the Committee pursuant to Section 13 or (ii)
the date on which all of the shares of Stock available for issuance under the
Plan have been issued and all restrictions on such shares under the terms of the
Plan and the agreements evidencing Awards granted under the Plan have lapsed.
However, all Awards shall be granted, if at all, within five (5) years from the
Effective Date.
SECTION 2. DEFINITIONS AND CONSTRUCTION
2.1 DEFINITIONS. Whenever used herein, the following terms shall
have their respective meanings set forth below:
(a) "AWARD" means any Option, Restricted Stock,
Performance Unit, Performance Share or Director Fee Award granted under the
Plan.
(b) "AWARD AGREEMENT" means a written agreement between
the Company and a Participant setting forth the terms, conditions and
restrictions of the Award granted to the Participant. An Award Agreement may be
an "Option Agreement," a "Restricted Stock Agreement," a "Performance Share
Agreement," a "Performance Unit Agreement," a "Nonemployee Director Option
Agreement," or a "Stock Units Agreement."
(c) "BOARD" means the Board of Directors of the Company.
(d) "CODE" means the Internal Revenue Code of 1986, as
amended, and any applicable regulations promulgated thereunder.
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(e) "COMMITTEE" means the Compensation Committee or other
committee of the Board duly appointed to administer the Plan and having such
powers as shall be specified by the Board. If no committee of the Board has been
appointed to administer the Plan, the Board shall exercise all of the powers of
the Committee granted herein, and, in any event, the Board may in its discretion
exercise any or all of such powers.
(f) "COMPANY" means Granite Construction Incorporated, a
Delaware corporation, or any successor corporation thereto.
(g) "DIRECTOR" means a member of the Board.
(h) "DIRECTOR FEE AWARD" means any Nonemployee Director
Option or Stock Unit granted pursuant to Section 9.
(i) "DISABILITY" means a permanent and total disability
as defined under the Company's Long Term Disability Plan or any successor plan,
regardless of whether the Participant is covered by such Long Term Disability
Plan.
(j) "DIVIDEND EQUIVALENT" means a credit, made at the
discretion of the Committee or as otherwise provided by the Plan, to the account
of a Participant in an amount equal to the cash dividends paid on one share of
Stock for each share of Stock represented by an Award of Performance Shares or
Stock Units held by such Participant.
(k) "EMPLOYEE" means any person treated as an employee
(including an officer or a Director who is also treated as an employee) in the
records of a Participating Company and, with respect to any Incentive Stock
Option granted to such person, who is an employee for purposes of Section 422 of
the Code; provided, however, that neither service as a Director nor payment of a
director's fee shall be sufficient to constitute employment for purposes of the
Plan.
(l) "EXCHANGE ACT" means the Securities Exchange Act of
1934, as amended.
(m) "FAIR MARKET VALUE" means, as of any relevant date,
the closing sale price of a share of Stock (or the mean of the closing bid and
asked prices if the Stock is so quoted instead) on the relevant date on the New
York Stock Exchange or such other national or regional securities exchange or
market system constituting the primary market for the Stock, as reported in the
Wall Street Journal or such other source as the Company deems reliable. If the
relevant date does not fall on a day on which the Stock has traded on such
securities exchange or market system, the date on which the Fair Market Value
shall be established shall be the last day on which the Stock was so traded
prior to the relevant date, or such other appropriate day as shall be determined
by the Committee, in its discretion. If, on such date, there is no public market
for the Stock, the Fair Market Value of a share of Stock shall be as determined
by the Committee.
(n) "INCENTIVE STOCK OPTION" means an Option intended to
be (as set forth in the Option Agreement) and which qualifies as an incentive
stock option within the meaning of Section 422(b) of the Code.
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(o) "INSIDER" means an officer or a Director of the
Company or any other person whose transactions in Stock are subject to Section
16 of the Exchange Act.
(p) "NONEMPLOYEE DIRECTOR" means a Director of the
Company who is not an Employee.
(q) "NONEMPLOYEE DIRECTOR OPTION" means a Director Fee
Award in the form of Nonstatutory Stock Option granted pursuant to the terms and
conditions of Section 9.
(r) "NONSTATUTORY STOCK OPTION" means an Option not
intended to be (as set forth in the Option Agreement) or which does not qualify
as an Incentive Stock Option.
(s) "OPTION" means the right to purchase Stock at a
stated price for a specified period of time pursuant to the terms and conditions
of the Plan. An Option may be either an Incentive Stock Option or a Nonstatutory
Stock Option.
(t) "PARENT CORPORATION" means any present or future
"parent corporation" of the Company, as defined in Section 424(e) of the Code.
(u) "PARTICIPANT" means any eligible person who has been
granted one or more Awards.
(v) "PARTICIPATING COMPANY" means the Company or any
Parent Corporation or Subsidiary Corporation.
(w) "PARTICIPATING COMPANY GROUP" means, at any point in
time, all corporations collectively which are then Participating Companies.
(x) "PERFORMANCE GOAL" means a performance goal
established by the Committee pursuant to Section 8.3.
(y) "PERFORMANCE PERIOD" means a period established by
the Committee pursuant to Section 8.3 at the end of which one or more
Performance Goals are to be measured.
(z) "PERFORMANCE SHARE" means a bookkeeping entry
representing a right granted to a Participant pursuant to the terms and
conditions of Section 8 to receive a payment equal to the value of a Performance
Share, as determined by the Committee, based on performance.
(aa) "PERFORMANCE UNIT" means a bookkeeping entry
representing a right granted to a Participant pursuant to the terms and
conditions of Section 8 to receive a payment equal to the value of a Performance
Unit, as determined by the Committee, based upon performance.
(bb) "PERIOD OF RESTRICTION" means the period during which
shares of Restricted Stock are subject to restriction as set forth in Section
7.2.
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(cc) "RESTRICTED STOCK" means Stock granted to a
Participant pursuant to the terms and conditions of Section 7.
(dd) "RETIREMENT" means (i) with respect to an Employee,
termination of employment for retirement under the terms of the Company's
defined contribution plans, and (ii) with respect to a Nonemployee Director,
resignation from Service on the Board after attaining the age of 55 and after at
least ten years of Service on the Board.
(ee) "RULE 16b-3" means Rule 16b-3 under the Exchange Act,
as amended from time to time, or any successor rule or regulation.
(ff) "SECTION 162(m)" means Section 162(m) of the Code.
(gg) "SECURITIES ACT" means the Securities Act of 1933, as
amended.
(hh) "SERVICE" means a Participant's employment or service
with the Participating Company Group, whether in the capacity of an Employee or
a Director. A Participant's Service shall not be deemed to have terminated
merely because of a change in the capacity in which the Participant renders
Service to the Participating Company Group or a change in the Participating
Company for which the Participant renders such Service, provided that there is
no interruption or termination of the Participant's Service. Furthermore, a
Participant's Service with the Participating Company Group shall not be deemed
to have terminated if the Participant takes any military leave, sick leave, or
other bona fide leave of absence approved by the Company; provided, however,
that if any such leave exceeds ninety (90) days, on the one hundred eighty-first
(181st) day following the commencement of such leave any Incentive Stock Option
held by the Participant shall cease to be treated as an Incentive Stock Option
and instead shall be treated thereafter as a Nonstatutory Stock Option unless
the Participant's right to return to Service with the Participating Company
Group is guaranteed by statute or contract. Notwithstanding the foregoing,
unless otherwise designated by the Company or required by law, a leave of
absence shall not be treated as Service for purposes of determining vesting
under the Participant's Award Agreement. A Participant's Service shall be deemed
to have terminated either upon an actual termination of Service or upon the
corporation for which the Participant performs Service ceasing to be a
Participating Company. Subject to the foregoing, the Company, in its discretion,
shall determine whether a Participant's Service has terminated and the effective
date of such termination.
(ii) "STOCK" means the Common Stock of the Company, as
adjusted from time to time in accordance with Section 5.3.
(jj) "STOCK UNIT" means a Director Fee Award in the form
of a bookkeeping entry representing a right granted to a Participant pursuant to
the terms and conditions of Section 9 to receive payment of one (1) share of
Stock.
(kk) "SUBSIDIARY CORPORATION" means any present or future
"subsidiary corporation" of the Company, as defined in section 424(f) of the
Code.
(ll) "TEN PERCENT OWNER" means a Participant who, at the
time an Option is granted to the Participant, owns stock possessing more than
ten percent (10%) of the total
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combined voting power of all classes of stock of a Participating Company within
the meaning of Section 422(b)(6) of the Code.
2.2 CONSTRUCTION. Captions and titles contained herein are for
convenience only and shall not affect the meaning or interpretation of any
provision of the Plan. Except when otherwise indicated by the context, words in
the masculine gender, when used in the Plan shall include the feminine gender,
the singular shall include the plural, and the plural shall include the
singular. Use of the term "or" is not intended to be exclusive, unless the
context clearly requires otherwise.
SECTION 3. ELIGIBILITY AND AWARD LIMITATIONS
3.1 PERSONS ELIGIBLE FOR INCENTIVE STOCK OPTIONS. Incentive Stock
Options may be granted only to Employees. For purposes of the foregoing
sentence, the term "Employees" shall include prospective Employees to whom
Options are granted in connection with written offers of employment with the
Participating Company Group, provided that any such Option shall be deemed
granted effective on the date that the Participant commences Service as an
Employee, with an exercise price determined as of such date in accordance with
Section 6.2.
3.2 PERSONS ELIGIBLE FOR OTHER AWARDS. Awards other than Incentive
Stock Options may be granted only to Employees and Directors. For purposes of
the foregoing sentence, the terms "Employees" and "Directors" shall include
prospective Employees and prospective Directors to whom Awards are granted in
connection with written offers of employment or service as a Director with the
Participating Company Group, provided that no Stock subject to any such Award
shall vest, become exercisable or be issued prior to the date on which the
Participant commences Service. A Director Fee Award may be granted only to a
person who, at the time of grant, is a Nonemployee Director. Eligible persons
may be granted more than one (1) Award.
3.3 SECTION 162(m) AWARD LIMITS. The following limitations (the
"SECTION 162(m) AWARD LIMITS") shall apply to the grant of any Award if, at the
time of grant, the Company is a "publicly held corporation" within the meaning
of Section 162(m).
(a) STOCK OPTIONS. Subject to adjustment as provided in
Section 5.3, no Employee shall be granted one or more Options within any fiscal
year of the Company which in the aggregate are for the purchase of more than one
hundred thousand (100,000) shares; provided, however, that the Company may make
an additional one-time grant to any newly-hired Employee of an Option for the
purchase of up to two hundred fifty thousand (250,000) shares. An Option which
is canceled in the same fiscal year of the Company in which it was granted shall
continue to be counted against the limits described in this subsection for such
period.
(b) RESTRICTED STOCK. Subject to adjustment as provided
in Section 5.3, no Employee may be granted within any fiscal year of the Company
more than one hundred thousand (100,000) shares of Restricted Stock, provided
that such limit shall apply only to Awards of Restricted Stock which are granted
or with respect to which the Period of Restriction lapses contingent upon the
attainment of Performance Goals.
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(c) PERFORMANCE SHARES AND PERFORMANCE UNITS. Subject to
adjustment as provided in Section 5.3, no Employee may be granted (i)
Performance Shares which could result in such Employee receiving more than one
hundred thousand (100,000) shares of Stock for each full fiscal year of the
Company contained in the Performance Period for such Award, or (ii) Performance
Units which could result in such Employee receiving more than one million five
hundred thousand dollars ($1,500,000) for each full fiscal year of the Company
contained in the Performance Period for such Award. No Participant may be
granted more than one Performance Share Award or one Performance Unit Award (but
not both such Awards) for the same Performance Period.
SECTION 4. ADMINISTRATION
4.1 ADMINISTRATION BY COMMITTEE. The Plan shall be administered by
the Committee. All questions of interpretation of the Plan or of any Award shall
be determined by the Committee, and such determinations shall be final, binding
and conclusive for all purposes and upon all persons whomsoever.
4.2 AUTHORITY OF OFFICERS. Any officer of a Participating Company
shall have the authority to act on behalf of the Company with respect to any
matter, right, obligation, determination or election which is the responsibility
of or which is allocated to the Company herein, provided the officer has
apparent authority with respect to such matter, right, obligation, determination
or election.
4.3 ADMINISTRATION WITH RESPECT TO INSIDERS. With respect to
participation by Insiders in the Plan, at any time that any class of equity
security of the Company is registered pursuant to Section 12 of the Exchange
Act, the Plan shall be administered in compliance with the requirements, if any,
of Rule 16b-3.
4.4 COMMITTEE COMPLYING WITH SECTION 162(m). If the Company is a
"publicly held corporation" within the meaning of Section 162(m), the Board may
establish a Committee of "outside directors" within the meaning of Section
162(m) to approve the grant of any Award which might reasonably be anticipated
to result in the payment of employee remuneration that would otherwise exceed
the limit on employee remuneration deductible for income tax purposes pursuant
to Section 162(m).
4.5 POWERS OF THE COMMITTEE. In addition to any other powers set
forth in the Plan and subject to the provisions of the Plan, the Committee shall
have the full and final power and authority, in its discretion:
(a) to determine the persons to whom, and the time or
times at which, Awards shall be granted and the number of shares of Stock or
units to be subject to each Award and the value of a unit;
(b) to determine the type of Award granted and to
designate Options as Incentive Stock Options or Nonstatutory Stock Options;
(c) to determine the Fair Market Value of shares of Stock
or other property;
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(d) to determine the terms, conditions and restrictions
applicable to each Award (which need not be identical) and any shares acquired
pursuant thereto, including, without limitation, (i) the exercise price of any
Option, (ii) the method of payment for shares purchased upon the exercise of any
Option, (iii) the method for satisfaction of any tax withholding obligation
arising in connection with any Award, including by the withholding or delivery
of shares of stock, (iv) the timing, terms and conditions of the exercisability
or vesting of any Award or any shares acquired pursuant thereto, (v) the
Performance Goals applicable to any Award and the extent to which such
Performance Goals have been attained, (vi) the time of the expiration of any
Award, (vii) the effect of the Participant's termination of Service on any of
the foregoing, and (viii) all other terms, conditions and restrictions
applicable to the Award or shares acquired pursuant thereto not inconsistent
with the terms of the Plan;
(e) to determine whether an Award of Performance Shares
or Performance Units will be settled in shares of Stock, cash, or in any
combination thereof;
(f) to approve one or more forms of Award Agreement;
(g) to amend, modify, extend, cancel, renew, or grant a
new Award in substitution for, any Award or to waive any restrictions or
conditions applicable to any Award or any shares acquired pursuant thereto;
(h) to accelerate, continue, extend or defer the
exercisability or vesting of any Award or any shares acquired pursuant thereto,
including with respect to the period following a Participant's termination of
Service;
(i) to prescribe, amend or rescind rules, guidelines and
policies relating to the Plan, or to adopt supplements to, or alternative
versions of, the Plan, including, without limitation, as the Committee deems
necessary or desirable to comply with the laws of, or to accommodate the tax
policy or custom of, foreign jurisdictions whose citizens may be granted Awards;
and
(j) to correct any defect, supply any omission or
reconcile any inconsistency in the Plan or any Award Agreement and to make all
other determinations and take such other actions with respect to the Plan or any
Award as the Committee may deem advisable to the extent consistent with the Plan
and applicable law.
SECTION 5. STOCK SUBJECT TO PLAN
5.1 MAXIMUM NUMBER OF SHARES ISSUABLE. Subject to adjustment as
provided in Section 5.3, the maximum aggregate number of shares of Stock that
may be issued under the Plan shall be two million five hundred thousand
(2,500,000) and shall consist of authorized but unissued or reacquired shares of
Stock not reserved for any other purpose, or any combination thereof.
5.2 LAPSED AWARDS. If any Award granted under the Plan terminates,
expires or lapses for any reason without having been exercised or settled in
full, or if shares are reacquired pursuant to withholding, or if shares subject
to forfeiture or repurchase are forfeited or
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repurchased by the Company, any shares reacquired or subject to such lapsed
Award again shall be available for issuance under the Plan.
5.3 ADJUSTMENT IN CAPITALIZATION. In the event of any stock
dividend, stock split, reverse stock split, recapitalization, merger,
combination, exchange of shares, reclassification or similar change in the
capital structure of the Company, appropriate adjustments shall be made in the
number and class of shares subject to the Plan and to any outstanding Awards, in
the Section 162(m) Award Limits set forth in Section 3.3, and in the exercise
price per share of any outstanding Options. If a majority of the shares which
are of the same class as the shares that are subject to outstanding Awards are
exchanged for, converted into, or otherwise become (whether or not pursuant to a
Change in Control, as defined in Section 10.3) shares of another corporation
(the "NEW SHARES"), the Committee may unilaterally amend the outstanding Awards
to provide that such Awards are for New Shares. In the event of any such
amendment, the number of shares subject to outstanding Awards and the exercise
price per share of outstanding Options shall be adjusted in a fair and equitable
manner as determined by the Committee, in its discretion. Notwithstanding the
foregoing, any fractional share resulting from an adjustment pursuant to this
Section 5.3 shall be rounded down to the nearest whole number, and in no event
may the exercise price of any Option be decreased to an amount less than the par
value, if any, of the stock subject to the Option. The adjustments determined by
the Committee pursuant to this Section 5.3 shall be final, binding and
conclusive.
SECTION 6. STOCK OPTIONS
6.1 GRANT OF OPTIONS. Subject to the provisions of Sections 1.3
and 5, Options (other than pursuant to a Director Fee Award) may be granted to
Participants at any time and from time to time as shall be determined by the
Committee. Each Option shall be evidenced by an Option Agreement that shall
specify the type of Option granted, the exercise price, the duration of the
Option, the number of shares of Stock to which the Option pertains, and such
other provisions as the Committee shall determine. No Option or purported Option
shall be a valid and binding obligation of the Company unless evidenced by a
fully executed Option Agreement. Option Agreements may incorporate all or any of
the terms of the Plan by reference and, except as otherwise set forth in Section
9 with respect to a Nonemployee Director Option, shall comply with and be
subject to the terms and conditions set forth in Sections 6.2 through 6.6 below.
6.2 EXERCISE PRICE. The exercise price for each Option shall be
established in the discretion of the Committee; provided, however, that (a) the
exercise price per share for an Incentive Stock Option shall be not less than
the Fair Market Value of a share of Stock on the effective date of grant of the
Option, (b) the exercise price per share for a Nonstatutory Stock Option shall
be not less than eighty-five percent (85%) of the Fair Market Value of a share
of Stock on the effective date of grant of the Option, and (c) no Incentive
Stock Option granted to a Ten Percent Owner shall have an exercise price per
share less than one hundred ten percent (110%) of the Fair Market Value of a
share of Stock on the effective date of grant of the Option. Notwithstanding the
foregoing, an Option (whether an Incentive Stock Option or a Nonstatutory Stock
Option) may be granted with an exercise price lower than the minimum exercise
price set forth above if such Option is granted pursuant to an assumption or
substitution for another option in a manner qualifying under the provisions of
Section 424(a) of the Code.
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6.3 EXERCISE PERIOD. Options shall be exercisable at such time or
times, or upon such event or events, and subject to such terms, conditions,
performance criteria and restrictions as shall be determined by the Committee
and set forth in the Option Agreement evidencing such Option; provided, however,
that (a) no Option shall be exercisable after the expiration of ten (10) years
after the effective date of grant of such Option, (b) no Incentive Stock Option
granted to a Ten Percent Owner shall be exercisable after the expiration of five
(5) years after the effective date of grant of such Option, and (c) no Option
granted to a prospective Employee or prospective Director may become exercisable
prior to the date on which such person commences Service. Subject to the
foregoing, unless otherwise specified by the Committee in the grant of an
Option, any Option granted hereunder shall have a term of ten (10) years from
the effective date of grant of the Option.
6.4 PAYMENT OF EXERCISE PRICE. The purchase price of Stock upon
exercise of any Option shall be paid in full by such methods as shall be
permitted by the Committee or as provided in a Participant's Option Agreement,
which need not be the same for all Participants, and subject to the following:
(a) FORMS OF CONSIDERATION AUTHORIZED. Except as
otherwise provided below, payment of the exercise price for the number of shares
of Stock being purchased pursuant to any Option shall be made (i) in cash, by
check, or cash equivalent, (ii) by tender to the Company, or attestation to the
ownership, of shares of Stock owned by the Participant having a Fair Market
Value not less than the exercise price, (iii) by delivery of a properly executed
notice together with irrevocable instructions to a broker providing for the
assignment to the Company of the proceeds of a sale or loan with respect to some
or all of the shares being acquired upon the exercise of the Option (including,
without limitation, through an exercise complying with the provisions of
Regulation T as promulgated from time to time by the Board of Governors of the
Federal Reserve System) (a "CASHLESS EXERCISE"), (iv) provided that the
Participant is an Employee, by cash for a portion of the aggregate exercise
price not less than the par value of the shares being acquired and the
Participant's promissory note in a form approved by the Company for the balance
of the aggregate exercise price, (v) by such other consideration as may be
approved by the Committee from time to time to the extent permitted by
applicable law, or (vi) by any combination thereof. The Committee may at any
time or from time to time grant Options which do not permit all of the foregoing
forms of consideration to be used in payment of the exercise price or which
otherwise restrict one or more forms of consideration. The proceeds from payment
of the Option exercise prices shall be added to the general funds of the Company
and shall be used for general corporate purposes.
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(b) LIMITATIONS ON FORMS OF CONSIDERATION.
(i) TENDER OF STOCK. Notwithstanding the
foregoing, an Option may not be exercised by tender to the Company, or
attestation to the ownership, of shares of Stock to the extent such tender or
attestation would constitute a violation of the provisions of any law,
regulation or agreement restricting the redemption of the Company's stock.
Unless otherwise provided by the Committee, an Option may not be exercised by
tender to the Company, or attestation to the ownership, of shares of Stock
unless such shares either have been owned by the Optionee for more than six (6)
months or were not acquired, directly or indirectly, from the Company.
(ii) CASHLESS EXERCISE. The Company reserves, at
any and all times, the right, in the Company's sole and absolute discretion, to
establish, decline to approve or terminate any program or procedures for the
exercise of Options by means of a Cashless Exercise.
(iii) PAYMENT BY PROMISSORY NOTE. No promissory
note shall be permitted if the exercise of an Option using a promissory note
would be a violation of any law. Any permitted promissory note shall be on such
terms as the Committee shall determine at the time the Option is granted. The
Committee shall have the authority to permit or require the Optionee to secure
any promissory note used to exercise an Option with the shares of Stock acquired
upon the exercise of the Option or with other collateral acceptable to the
Company. Unless otherwise provided by the Committee, if the Company at any time
is subject to the regulations promulgated by the Board of Governors of the
Federal Reserve System or any other governmental entity affecting the extension
of credit in connection with the Company's securities, any promissory note shall
comply with such applicable regulations, and the Optionee shall pay the unpaid
principal and accrued interest, if any, to the extent necessary to comply with
such applicable regulations.
6.5 EFFECT OF TERMINATION OF SERVICE.
(a) OPTION EXERCISABILITY. Subject to earlier termination
of the Option as otherwise provided herein and unless otherwise provided by the
Committee in the grant of an Option and set forth in the Option Agreement, an
Option shall be exercisable after a Participant's termination of Service as
follows:
(i) DEATH OR DISABILITY. If the Participant's
Service is terminated by reason of the death or Disability of the Participant,
the Option, to the extent unexercised and exercisable on the date on which the
Participant's Service terminated, may be exercised by the Participant (or the
Participant's guardian or legal representative or other person who acquired the
right to exercise the Option by reason of the Participant's death) at any time
prior to the expiration of six (6) months (or such longer period of time as
determined by the Committee, in its discretion) after the date on which the
Participant's Service terminated, but in any event no later than the date of
expiration of the Option's term as set forth in the Option Agreement evidencing
such Option (the "OPTION EXPIRATION DATE"). If an Option intended to be an
Incentive Stock Option is exercised by a Participant more than three (3) months
following the Participant's termination of Service by reason of a Disability
which is not a "permanent and total
10
disability" as defined in Section 22(e)(3) of the Code, such exercise will be
treated as the exercise of a Nonstatutory Stock Option to the extent required by
Section 422 of the Code. The Participant's Service shall be deemed to have
terminated on account of death if the Participant dies within three (3) months
after the Participant's termination of Service.
(ii) RETIREMENT. If the Participant's Service is
terminated by reason of the Retirement of the Participant, the Option may be
exercised at such time (but in any event no later than the Option Expiration
Date) and in such amounts as shall be determined by the Committee at the time of
grant of the Option and set forth in the Option Agreement.
(iii) TERMINATION FOR CAUSE. Notwithstanding any
other provision of the Plan to the contrary, if the Participant's Service is
terminated for Cause, as defined below, the Option shall terminate and cease to
be exercisable immediately upon such termination of Service. For purposes of
this subsection, "CAUSE" shall mean any of the following: (1) the Participant's
theft, dishonesty, or falsification of any Participating Company documents or
records; (2) the Participant's repeated failure to report to work during normal
hours, other than for customarily excused absences for personal illness or other
reasonable cause; (3) the Participant's conviction (including any plea of guilty
or nolo contendere) of theft or felony; (4) the Participant's wrongful
disclosure of a Participating Company's trade secrets or other proprietary
information; (5) any other dishonest or intentional action by the Participant
which has a detrimental effect on a Participating Company; or (6) the
Participant's habitual and repeated nonperformance of the Participant's duties.
(iv) OTHER TERMINATION OF SERVICE. If the
Participant's Service terminates for any reason, except death, Disability,
Retirement or termination for Cause, the Option, to the extent unexercised and
exercisable by the Participant on the date on which the Participant's Service
terminated, may be exercised by the Participant within thirty (30) days (or such
longer period of time as determined by the Committee, in its discretion) after
the date on which the Participant's Service terminated, but in any event no
later than the Option Expiration Date.
(b) EXTENSION IF EXERCISE PREVENTED BY LAW.
Notwithstanding the foregoing (except Section 6.5(a)(iii)), if the exercise of
an Option within the applicable time periods set forth in Section 6.5(a) is
prevented by the provisions of Section 11.1 below regarding compliance with
securities laws, the Option shall remain exercisable until thirty (30) days
after the date the Participant is notified by the Company that the Option is
exercisable, but in any event no later than the Option Expiration Date.
(c) EXTENSION IF OPTIONEE SUBJECT TO SECTION 16(b).
Notwithstanding the foregoing (except Section 6.5(a)(iii)), if a sale within the
applicable time periods set forth in Section 6.5(a) of shares acquired upon the
exercise of the Option would subject the Participant to suit under Section 16(b)
of the Exchange Act, the Option shall remain exercisable until the earliest to
occur of (i) the tenth (10th) day following the date on which a sale of such
shares by the Participant would no longer be subject to such suit, (ii) the one
hundred and ninetieth (190th) day after the Participant's termination of
Service, or (iii) the Option Expiration Date.
11
6.6 TRANSFERABILITY OF OPTIONS. During the lifetime of the
Participant, an Option shall be exercisable only by the Participant or the
Participant's guardian or legal representative. No Option shall be assignable or
transferable by the Participant, except by will or by the laws of descent and
distribution. Notwithstanding the foregoing, a Nonstatutory Stock Option shall
be assignable or transferable to the extent permitted by the Committee and set
forth in the Option Agreement evidencing such Option.
SECTION 7. RESTRICTED STOCK
7.1 GRANT OF RESTRICTED STOCK. Subject to the provisions of
Sections 1.3 and 5, Awards of Restricted Stock may be granted to Participants at
any time and from time to time as shall be determined by the Committee,
including, without limitation, upon the attainment of one or more Performance
Goals as described in Section 8.4. If either the grant of Restricted Stock or
the lapsing of the Period of Restriction is to be contingent upon the attainment
of one or more Performance Goals, the Committee shall follow procedures
substantially equivalent to those set forth in Sections 8.3 through 8.5. Shares
of Restricted Stock shall be issued for no consideration other than services
rendered. Each grant of Restricted Stock shall be evidenced by a Restricted
Stock Agreement that shall specify the number of shares of Stock subject to and
the other terms, conditions and restrictions of such Award as the Committee
shall determine. No Restricted Stock Award or purported Restricted Stock Award
shall be a valid and binding obligation of the Company unless evidenced by a
fully executed Restricted Stock Agreement. Restricted Stock Agreements may
incorporate all or any of the terms of the Plan by reference and shall comply
with and be subject to the terms and conditions set forth in Sections 7.2
through 7.6 below.
7.2 NONTRANSFERABILITY DURING PERIOD OF RESTRICTION. During such
period beginning on the date of grant of a Restricted Stock Award as may be
established by the Committee (the "PERIOD OF RESTRICTION"), no shares of such
Restricted Stock may be sold, transferred, pledged, assigned, or otherwise
alienated or hypothecated, except by will or the laws or descent and
distribution. The Committee, in its discretion, may provide for the lapse of the
Period of Restriction, in full or in installments, at such time or times, upon
such event or events, or upon satisfaction of such conditions or performance
criteria (including, without limitation, Performance Goals as described in
Section 8.4) as the Committee may establish and set forth in the Restricted
Stock Agreement evidencing the Award. All rights with respect to Restricted
Stock granted to a Participant hereunder shall be exercisable during his or her
lifetime only by such Participant.
7.3 OTHER RESTRICTIONS. The Committee may impose such other
restrictions on any shares of Restricted Stock granted hereunder as it may deem
advisable, including, without limitation, restrictions under applicable Federal
securities law and under any blue sky or state securities laws applicable to
such shares, and may legend the certificates representing the Restricted Stock
to give appropriate notice of such restrictions.
7.4 VOTING RIGHTS. During the Period of Restriction, Participants
holding shares of Restricted Stock granted hereunder may exercise full voting
rights with respect to those shares.
7.5 DIVIDENDS AND OTHER DISTRIBUTION. During the Period of
Restriction, Participants holding shares of Restricted Stock granted hereunder
shall be entitled to receive all
12
dividends and other distributions paid with respect to those shares while they
are so held. If any such dividends or distributions are paid in shares of stock,
the shares shall be subject to the same restrictions on transferability pursuant
to Section 7.2 as the shares of Restricted Stock with respect to which they were
paid.
7.6 EFFECT OF TERMINATION OF SERVICE. Unless otherwise provided by
the Committee in the grant of a Restricted Stock Award and set forth in the
Restricted Stock Agreement, the effect of a Participant's termination of Service
on his or her Restricted Stock Award shall be as follows:
(a) DEATH OR DISABILITY. If the Participant's Service is
terminated by reason of the death or Disability of the Participant during the
Period of Restriction, the restrictions applicable to the shares of Restricted
Stock pursuant to Section 7.2 shall terminate automatically with respect to all
such shares.
(b) OTHER TERMINATION OF SERVICE. If the Participant's
Service terminates during the Period of Restriction for any reason except death
or Disability, any shares of Restricted Stock still subject to restrictions
pursuant to Section 7.2 at the date of such termination shall be forfeited and
automatically reacquired by the Company; provided, however, that, in the event
of an involuntary termination of the Participant's Service, the Committee, in
its sole discretion, may waive the automatic forfeiture of any or all such
shares and/or add such new restrictions to such shares of Restricted Stock as it
deems appropriate.
SECTION 8. PERFORMANCE SHARES AND PERFORMANCE UNITS
8.1 GRANT OF PERFORMANCE SHARES OR PERFORMANCE UNITS. Subject to
the provisions of Sections 1.3 and 5, the Committee, at any time and from time
to time, may grant Awards of Performance Shares or Performance Units to such
Participants and in such amounts as it shall determine. Each grant of a
Performance Share or Performance Unit Award shall be evidenced by a Performance
Share Agreement or a Performance Unit Agreement that shall specify the number of
Performance Shares or Performance Units subject thereto, the value of each
Performance Share or Performance Unit, the Performance Goals and Performance
Period applicable to the Award, and the other terms, conditions and restrictions
of the Award as the Committee shall determine. No Performance Share or
Performance Unit Award or purported Award shall be a valid and binding
obligation of the Company unless evidenced by a fully executed Award Agreement.
Performance Share and Performance Unit Agreements may incorporate all or any of
the terms of the Plan by reference and shall comply with and be subject to the
terms and conditions set forth in Sections 8.2 through 8.10 below.
8.2 VALUE OF PERFORMANCE SHARES AND PERFORMANCE UNITS. Unless
otherwise provided by the Committee in granting an Award, each Performance Share
shall have an initial value equal to the Fair Market Value of a share of Stock
on the effective date of grant of the Performance Share and each Performance
Unit shall have an initial value of one hundred dollars ($100). The ultimate
value of a Performance Share or Performance Unit to the Participant will depend
on the extent to which Performance Goals established by the Committee are
attained within the applicable Performance Period established by the Committee.
13
8.3 ESTABLISHMENT OF PERFORMANCE GOALS AND PERFORMANCE PERIOD. The
Committee, in its discretion, shall establish the Performance Period applicable
to each Performance Share or Performance Unit Award. Prior to the commencement
of the applicable Performance Period, or such later date as may be permitted
with respect to "performance-based compensation" under Section 162(m), the
Committee shall establish one or more Performance Goals which, when measured at
the end of the Performance Period, shall determine the ultimate value of the
Award to be paid to the Participant. Once established, the Performance Goals
shall not be changed during the Performance Period.
8.4 MEASUREMENT OF PERFORMANCE GOALS. Performance Goals shall be
established by the Committee on the basis of targets to be attained
("PERFORMANCE TARGETS") with respect one or more measures of business or
financial performance (each, a "PERFORMANCE MEASURE"). Performance Measures
shall have the same meanings as used in the Company's financial statements, or
if such terms are not used in the Company's financial statements, they shall
have the meaning applied pursuant to generally accepted accounting principles,
or as used generally in the Company's industry. Performance Targets may include
a minimum, maximum, target level and intermediate levels of performance, with
the ultimate value of a Performance Share or Performance Unit Award determined
by the level attained. Performance Targets may be absolute or relative to a
standard selected by the Committee. Performance Measures shall be calculated
with respect to the Company and each Parent Corporation and Subsidiary
Corporation consolidated therewith for financial reporting purposes or such
division or other business unit thereof as may be selected by the Committee. For
purposes of the Plan, the Performance Measures applicable to an Award shall be
calculated before the effect of changes in accounting standards, restructuring
charges and similar extraordinary items, determined according to criteria
established by the Committee, occurring after the establishment of the
Performance Goals applicable to an Award. Performance Measures may be one or
more of the following as determined by the Committee: (a) revenue, (b) operating
income, (c) pre-tax profit, (d) net income, (e) gross margin, (f) operating
margin, (g) earnings per share, (h) return on stockholder equity, (i) return on
capital, (j) return on net assets, (k) economic value added and (l) cash flow.
8.5 DETERMINATION OF VALUE OF PERFORMANCE SHARES AND PERFORMANCE
UNITS. As soon as practicable following the completion of the Performance Period
for each Performance Share and Performance Unit Award, the Committee shall
certify in writing the extent to which the applicable Performance Goals have
been attained and the resulting value of the Award earned by the Participant and
to be paid upon its settlement in accordance with the terms of the Award
Agreement. The Committee shall have no discretion to increase the value of an
Award payable upon its settlement in excess of the amount called for by the
terms of the Award Agreement on the basis of the degree of attainment of the
Performance Goals as certified by the Committee. However, notwithstanding the
attainment of any Performance Goal, if permitted under a Participant's Award
Agreement evidencing a Performance Share or Performance Unit Award, the
Committee shall have the discretion, on the basis of such criteria as may be
established by the Committee, to reduce some or all of the value of an Award
that would otherwise be paid upon its settlement. No such reduction may result
in an increase in the amount payable upon settlement of another Participant's
Award. As soon as practicable following the Committee's certification, the
Company shall notify the Participant of the determination of the Committee.
14
8.6 DIVIDEND EQUIVALENTS. The Committee may, in its discretion,
provide that any Performance Share shall include a right to Dividend Equivalents
with respect to cash dividends paid on Stock for which the record date is prior
to the date on which the Performance Share is settled or forfeited. Dividend
Equivalents may be paid currently or may be accumulated and paid to the extent
that Performance Shares become nonforfeitable, as determined by the Committee.
Settlement of Dividend Equivalents may be in cash, shares of Stock, or a
combination thereof as determined by the Committee, and may be paid on the same
basis as settlement of the related Performance Share as provided in Section 8.7.
Dividend Equivalents shall not be paid with respect to Performance Units.
8.7 FORM AND TIMING OF PAYMENT. Payment of the ultimate value of a
Performance Share or Performance Unit Award earned by a Participant as
determined following the completion of the applicable Performance Period
pursuant to Sections 8.5 and 8.6 may be made in cash, shares of Stock, or a
combination thereof as determined by the Committee. Payments in shares of Stock
shall be determined by the Fair Market Value of a share of Stock on the last day
of such Performance Period. Payment may be made in a lump sum or installments as
prescribed by the Committee. If any payment is to be made on a deferred basis,
the Committee may, but shall not be obligated to, provide for the payment of
Dividend Equivalents or interest during the deferral period.
8.8 RESTRICTIONS APPLICABLE TO PAYMENT IN SHARES. Shares of Stock
issued in payment of any Performance Share or Performance Unit Award may be
fully vested and freely transferable shares or may be shares of Restricted Stock
subject to a Period of Restriction as provided in Section 7.2. Any such shares
of Restricted Stock shall be evidenced by a Restricted Stock Agreement and shall
be subject to the terms and conditions set forth in Sections 7.2 through 7.6
above.
8.9 EFFECT OF TERMINATION OF SERVICE. Unless otherwise provided by
the Committee in the grant of a Performance Share or Performance Unit Award and
set forth in the Award Agreement, the effect of a Participant's termination of
Service on his or her Performance Share or Performance Unit Award shall be as
follows:
(a) DEATH, DISABILITY OR RETIREMENT. If the Participant's
Service is terminated by reason of the death, Disability or Retirement of the
Participant while he or she is the holder of a Performance Share or Performance
Unit Award but before the completion of the applicable Performance Period, the
value of the Participant's Award shall be determined by the extent to which the
applicable Performance Goals have been attained with respect to the entire
Performance Period and shall be prorated based on the number of months of the
Participant's Service during the Performance Period. Payment shall be made
following the end of the Performance Period in any manner permitted by Section
8.7.
(b) OTHER TERMINATION OF SERVICE. If the Participant's
Service terminates for any reason except death, Disability or Retirement before
the completion of the Performance Period applicable to a Performance Share or
Performance Unit Award held by such Participant, such Award shall be forfeited
in its entirety; provided, however, that in the event of an involuntary
termination of the Participant's Service, the Committee, in its sole discretion,
may waive the automatic forfeiture of all or any portion of any such Award and
provide for payment
15
of such Award or portion thereof on the same basis as if the Participant's
Service had terminated by reason of Retirement.
8.10 NONTRANSFERABILITY. No Performance Shares or Performance Units
may be sold, transferred, pledged, assigned, or otherwise alienated or
hypothecated, otherwise than by will or by the laws of descent and distribution
until the termination of the applicable Performance Period. All rights with
respect to Performance Shares and Performance Units granted to a Participant
hereunder shall be exercisable during his or her lifetime only by such
Participant.
SECTION 9. DIRECTOR FEE AWARDS
9.1 EFFECTIVE DATE AND DURATION OF THIS SECTION. This Section 9
shall become effective on the first day (the "SECTION 9 EFFECTIVE DATE") of the
first calendar quarter beginning after the Effective Date, provided that
elections pursuant to Section 9.2 may be made prior to the Section 9 Effective
Date. This Section 9 shall continue in effect for the remainder of the calendar
year commencing on the Section 9 Effective Date (the "INITIAL PLAN YEAR") and
for each subsequent calendar year commencing during the term (as provided in
Section 1.3) of the Plan (a "PLAN YEAR"). Notwithstanding any Participant's
prior election pursuant to Section 9.2, no Director Fee Award shall be granted
after termination of the Plan, and all Director Fees (as defined below) with
respect to which Director Fee Awards have not been granted prior to termination
of the Plan shall thereafter be paid in cash in accordance with the Company's
normal Director Fee payment procedures. However, subject to compliance with
applicable law as provided in Section 11, all Director Fee Awards granted prior
to termination of the Plan shall continue to be governed by and may be exercised
or settled in accordance with the terms of the Plan and the Award Agreement
evidencing such Director Fee Award.
9.2 MANDATORY AND ELECTIVE DIRECTOR FEE AWARDS. Except as
otherwise provided below, each Nonemployee Director shall be granted one or more
Director Fee Awards in lieu of payment in cash of fifty percent (50%) of such
Participant's annual retainer fee, meeting fees and other compensation payable
with respect to such Participant's service as a Director ("DIRECTOR FEES")
during the Initial Plan Year and each subsequent Plan Year (or the portion of
such Plan Year following an individual's initial appointment or election as a
Nonemployee Director). In addition, each Participant may elect to receive
Director Fee Awards in lieu of payment in cash of all or any portion of the
remaining fifty percent (50%) of such Participant's Director Fees for the
Initial Plan Year and each subsequent Plan Year or applicable portion thereof.
For the Initial Plan Year and each subsequent Plan Year or applicable portion
thereof, a Participant shall be entitled to elect one of the following
alternative forms of payment of the value of the Participant's Director Fees:
(a) OPTION PAYMENT. A minimum of fifty percent (50%),
together with such additional portion, if any, elected by the Participant up to
a maximum of one hundred percent (100%), of the Participant's Director Fees will
be paid in the form of a Nonemployee Director Option (an "OPTION PAYMENT") and
the balance will be paid in cash in accordance with the Company's normal
Director Fee payment procedures.
(b) STOCK UNITS PAYMENT. A minimum of fifty percent
(50%), together with such additional portion, if any, elected by the Participant
up to a maximum of one hundred
16
percent (100%), of the Participant's Director Fees will be paid in the form of
Stock Units (a "STOCK UNITS PAYMENT") and the balance will be paid in cash in
accordance with the Company's normal Director Fee payment procedures. In
connection with an election to receive a Stock Units Payment, the Participant
may elect an "Early Settlement Date" (as defined below) upon which the Stock
Units will be settled in accordance with Section 9.6(d); provided, however, that
upon termination of the Participant's Service as a Director prior to the Early
Settlement Date, settlement shall be made as provided in Section 9.6(d). Any
"EARLY SETTLEMENT DATE" elected by the Participant shall become irrevocable as
provided in Section 9.3(b) and shall be December 1 of the third Plan Year
following the Plan Year of the Stock Units Payment or December 1 of any
subsequent Plan Year.
9.3 TIME AND MANNER OF ELECTION.
(a) TIME OF ELECTION. Each Nonemployee Director shall
make an election pursuant to Section 9.2:
(i) for the Initial Plan Year: prior to the
earlier of (1) the date thirty (30) days following the Effective Date or (2) the
Section 9 Effective Date;
(ii) for each subsequent Plan Year: prior to the
first day of such Plan Year; and
(iii) in the case of a newly appointed or elected
Nonemployee Director: on the date of such appointment or election for the
remainder of the Initial Plan Year or subsequent Plan Year of appointment or
election, as the case may be.
(b) ELECTION IRREVOCABLE. An election pursuant to Section
9.2 shall become irrevocable as of the commencement of the Plan Year or portion
thereof to which it applies.
(c) FAILURE TO TIMELY ELECT. Any Nonemployee Director who
fails to make an election in accordance with this Section for any Plan Year (or
the Initial Plan Year, as the case may be) shall be deemed to have elected
pursuant to Section 9.2 to receive Option Payments for fifty (50%) of the value
of such Participant's Director Fees earned during such Plan Year (or Initial
Plan Year) and to receive the balance of such Participant's Director Fees in
cash in accordance with the Company's normal Director Fee payment procedures.
(d) MANNER OF ELECTION. Each election in accordance with
this Section shall be made on a form prescribed by the Company for this purpose
and filed with the Chief Financial Officer of the Company.
9.4 AUTOMATIC GRANT OF DIRECTOR FEE AWARDS. Subject to the
provisions of Sections 1.3 and 5, effective as of the last day of each quarter
during any Plan Year (or the Initial Plan Year, as the case may be), each
Nonemployee Director shall be granted automatically and without further action
of the Committee a Director Fee Award in lieu of that portion of the Director
Fees earned by the Participant during such quarter and specified by the
Participant's election under Section 9.2 for such Plan Year (or Initial Plan
Year) and any fractional share amount carried over from the prior quarter as
provided in Section 9.7 (the "QUARTERLY DIRECTOR FEES"). In accordance with the
Participant's election under Section 9.2 for the Plan Year (or
17
Initial Plan Year), the Director Fee Award shall be either in the form of an
Option Payment pursuant to Section 9.5 or a Stock Units Payment pursuant to
Section 9.6.
9.5 OPTION PAYMENT. Each Option Payment shall be in the form of a
Nonemployee Director Option and shall be evidenced by a Nonemployee Director
Option Agreement that shall specify the exercise price, the duration of the
Nonemployee Director Option, the number of shares of Stock to which the
Nonemployee Director Option pertains, and such other provisions as the Committee
shall determine. No such Nonemployee Director Option or purported Nonemployee
Director Option shall be a valid and binding obligation of the Company unless
evidenced by a fully executed Nonemployee Director Option Agreement. Nonemployee
Director Option Agreements may incorporate all or any of the terms of the Plan
by reference and shall comply with and be subject to the terms and conditions of
Section 6 to the extent not inconsistent with this Section and the terms and
conditions set forth in Sections 9.5(a) through 9.5(d) below:
(a) EXERCISE PRICE. The exercise price per share for each
Nonemployee Director Option shall be fifty percent (50%) of the average of the
Fair Market Values of a share of Stock for the ten (10) trading days preceding
the effective date of grant of the Nonemployee Director Option.
(b) NUMBER OF SHARES SUBJECT TO NONEMPLOYEE DIRECTOR
OPTION. The number of shares of Stock subject to a Nonemployee Director Option
shall be determined by the following formula (with any resulting fractional
share being disregarded):
X = A / (B x 50%)
where,
X is the number of shares subject to the
Nonemployee Director Option;
A is the amount of Quarterly Director Fees
in lieu of which the Option Payment is made;
and
B is the average of the Fair Market Values
of a share of Stock for the ten (10) trading
days preceding the effective date of grant
of the Nonemployee Director Option.
(c) EXERCISE PERIOD. Each Nonemployee Director Option
shall be vested and exercisable on and after the date of grant of the
Nonemployee Director Option and shall terminate and cease to be exercisable on
the date ten (10) years after the date of grant of the Nonemployee Director
Option, unless earlier terminated pursuant to the terms of the Plan or the
Nonemployee Director Option Agreement.
(d) EFFECT OF TERMINATION OF SERVICE.
(i) NONEMPLOYEE DIRECTOR OPTION GRANT. No
Participant shall be granted a Nonemployee Director Option following the date on
which such
18
Participant's Service as a Director terminates for any reason. All of such
Participant's Director Fees with respect to which Director Fee Awards have not
been granted prior to the Participant's termination of Service as a Director
shall be paid in cash in accordance with the Company's normal Director Fee
payment procedures.
(ii) NONEMPLOYEE DIRECTOR OPTION EXERCISABILITY.
Subject to earlier termination as otherwise provided herein, a Nonemployee
Director Option shall remain exercisable after a Participant's termination of
Service at any time prior to the expiration of thirty-six (36) months after the
date on which the Participant's Service terminated, but in any event no later
than the Option Expiration Date.
(iii) EXTENSION IF EXERCISE PREVENTED BY LAW.
Notwithstanding the foregoing, if the exercise of a Nonemployee Director Option
within the applicable time period set forth in Section 9.5(d)(ii) is prevented
by the provisions of Section 11.1 below, the Nonemployee Director Option shall
remain exercisable until thirty (30) days after the date the Participant is
notified by the Company that the Nonemployee Director Option is exercisable, but
in any event no later than the Option Expiration Date.
(iv) EXTENSION IF PARTICIPANT SUBJECT TO SECTION
16(b). Notwithstanding the foregoing, if a sale within the applicable time
period set forth in Section 9.5(d)(ii) of shares acquired upon the exercise of
the Nonemployee Director Option would subject the Participant to suit under
Section 16(b) of the Exchange Act, the Option shall remain exercisable until the
earliest to occur of (i) the tenth (10th) day following the date on which a sale
of such shares by the Participant would no longer be subject to such suit, (ii)
the one hundred and ninetieth (190th) day after the Participant's termination of
Service, or (iii) the Option Expiration Date.
9.6 STOCK UNITS PAYMENT. Each Stock Units Payment shall be
evidenced by a Stock Units Agreement that shall specify the number of Stock
Units to which such agreement pertains, the form and time of settlement of such
Stock Units and such other provisions as the Committee shall determine. No such
Stock Units Award or purported Stock Units Award shall be a valid and binding
obligation of the Company unless evidenced by a fully executed Stock Units
Agreement. Stock Units Agreements may incorporate all or any of the terms of the
Plan by reference and shall comply with and be subject to the terms and
conditions set forth in Sections 9.6(a) through 9.6(f) below:
(a) PAYMENT. No additional cash consideration shall be
required upon settlement of a Stock Units Award.
(b) NUMBER OF STOCK UNITS SUBJECT TO STOCK UNITS AWARD.
The number of Stock Units subject to a Stock Units Award shall be determined by
the following formula (with any resulting fractional Stock Unit being
disregarded):
X = A / B
where,
19
X is the number of Stock Units subject to
the Stock Units Award;
A is the amount of Quarterly Director Fees
in lieu of which the Stock Units Payment is
made; and
B is the average of the Fair Market Values
of a share of Stock for the ten (10) trading
days preceding the effective date of grant
of the Stock Units Award.
(c) VOTING AND DIVIDEND EQUIVALENT RIGHTS. Participants
shall have no voting rights with respect to shares of Stock represented by Stock
Units until the date of the issuance of a certificate for such shares (as
evidenced by the appropriate entry on the books of the Company or of a duly
authorized transfer agent of the Company). Prior to settlement of a Stock Units
Award, such Award shall include the right to Dividend Equivalents, pursuant to
which the Participant shall be credited with additional whole and/or fractional
Stock Units as of the record date of any payment of cash dividends with respect
to the Stock occurring prior to such settlement date. Such additional Stock
Units shall be subject to the same terms and conditions and shall be settled in
the same manner and at the same time as the Stock Units originally subject to
the Stock Units Award. The number of such whole and/or fractional Stock Units to
be credited with respect to any Stock Units Award on the record date of any cash
dividend paid on the Stock shall be determined by the following formula:
X = (A x B) / C
where,
X is the number of whole and/or fractional
Stock Units to be credited with respect to
the Stock Units Award;
A is the amount of cash dividends paid on
one share of Stock;
B is the number of whole and fractional
Stock Units subject to the Stock Units Award
as of the cash dividend record date; and
C is the Fair Market Value of a share of
Stock on the cash dividend record date.
(d) SETTLEMENT OF STOCK UNITS. Subject to the provisions
of Section 11.1 below, the Company shall issue to the Participant, within thirty
(30) days following the earlier of (i) the Early Settlement Date elected by the
Participant with respect to the Stock Units Award or (ii) the date of
termination of the Participant's Service as a Director, a number of whole shares
of Stock equal to the number of whole Stock Units subject to the Stock Units
Award. Such shares of Stock shall not be subject to any restriction on transfer
other than any such restriction as may be required pursuant to Section 11.1 or
any applicable law, rule or regulation. On the same settlement date, the Company
shall pay to the Participant cash in lieu of any fractional Stock Unit subject
to the Stock Units Award in an amount equal to the Fair Market Value on the
settlement date of such fractional share of Stock.
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(e) EFFECT OF TERMINATION OF SERVICE. No Participant
shall be granted a Stock Units Award following the date on which such
Participant's Service as a Director terminates for any reason. All of such
Participant's Director Fees with respect to which Director Fee Awards have not
been granted prior to the Participant's termination of Service as a Director
shall be paid in cash in accordance with the Company's normal Director Fee
payment procedures.
(f) NONTRANSFERABILITY OF STOCK UNITS. Prior to their
settlement pursuant to Section 9.6(d), no Stock Units granted to a Participant
shall be subject in any manner to anticipation, alienation, sale, transfer,
assignment, pledge, encumbrance, or garnishment by creditors of the Participant
or the Participant's beneficiary, except by will or by the laws of descent and
distribution.
9.7 FRACTIONAL SHARES. No fractional shares of Stock shall be
issued upon the exercise of any Nonemployee Director Option or settlement of any
Stock Units. Any portion of a Participant's Quarterly Director Fees subject to
the Participant's election under Section 9.2 representing a fractional share
amount that would otherwise be paid in the form of an Option Payment or a Stock
Units Payment shall instead be carried over and combined with the Quarterly
Director Fees for the following quarter of the Plan Year (or Initial Plan year,
as the case may be) or the subsequent Plan Year. Any such fractional share
amount remaining upon termination of a Participant's Service as a Director shall
be paid to the Participant in cash, without interest.
SECTION 10. CHANGE IN CONTROL
10.1 EFFECT OF CHANGE IN CONTROL. In the event of a Change in
Control of the Company as defined in Section 10.3 below, the surviving,
continuing, successor, or purchasing corporation or parent corporation thereof,
as the case may be (the "ACQUIRING CORPORATION"), shall either assume all
outstanding Awards or substitute new Awards having an equivalent value for such
outstanding Awards. In the event the Acquiring Corporation elects not to assume
or substitute for such outstanding Awards, and provided that the Participant's
Service has not terminated prior to the effective date of the Change in Control
(unless, with respect to Performance Shares or Performance Units, the
Participant's Service terminated by reason of the death, Disability or
Retirement of the Participant), all unexercisable, unvested or unpaid portions
of such outstanding Awards shall become immediately exercisable, immediately
payable and vested in full immediately prior to the effective date of the Change
in Control. For purposes of the preceding sentence:
(a) the value of Performance Shares and Performance Units
shall be determined and paid based upon the greater of (i) the extent to which
the applicable Performance Goals have been attained during the Performance
Period up to the effective date of the Change in Control or (ii) the
pre-established 100% of target level with respect to each Performance Target
comprising the applicable Performance Goals;
(b) any outstanding Stock Units Award not assumed or
substituted for by the Acquiring Corporation shall be settled in accordance with
Section 9.6(d) immediately prior to the effective date of the Change in Control;
and
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(c) any Director Fees with respect to which the Company
has not made either an Option Payment or a Stock Units Payment pursuant to
Section 9 prior to the effective date of the Change in Control shall be paid in
cash immediately prior to such effective date.
Any Options which are neither assumed or substituted for by the Acquiring
Corporation nor exercised as of the date of the Change in Control shall
terminate as of the effective date of the Change in Control.
10.2 TERMINATION OF SERVICE AFTER A CHANGE IN CONTROL. The
Committee may, in its discretion, provide in any Award Agreement that if the
Participant's Service is terminated within twelve (12) months (or such other
period specified by the Committee) following a Change in Control by reason of
(a) the involuntary termination by the Participating Company Group of the
Participant's Service for any reason other than "Cause" (as such term is defined
in the Award Agreement) or the Participant's death or Disability, or (b) the
Participant's resignation for "Good Reason" (as such term is defined in the
Award Agreement) from all capacities in which the Participant is then rendering
Service to the Participating Company Group, then (i) the exercisability, vesting
and payment of the outstanding Award held by such Participant shall be
accelerated effective as of the date on which the Participant's Service
terminated to such extent, if any, as shall have been specified by the Committee
and set forth in the Award Agreement, and (ii) the outstanding Option held by
such Participant, to the extent unexercised and exercisable on the date on which
the Participant's Service terminated, may be exercised by the Participant (or
the Participant's guardian or legal representative) at any time prior to the
expiration of six (6) months (or such other period of time specified by the
Committee) after the date on which the Participant's Service terminated, but in
any event no later than the Option Expiration Date.
10.3 DEFINITION. A "CHANGE IN CONTROL" shall be deemed to have
occurred in the event of:
(a) an acquisition, consolidation, or merger of the
Company with or into any other corporation or corporations, unless the
stockholders of the Company retain, directly or indirectly, at least a majority
of the beneficial interest in the voting stock of the surviving or acquiring
corporation or corporations; or
(b) the sale, exchange, or transfer of all or
substantially all of the assets of the Company to a transferee other than a
corporation or partnership controlled by the Company or the stockholders of the
Company; or
(c) a transaction or series of related transactions in
which stock of the Company representing more than thirty percent (30%) of the
outstanding voting power of the Company is sold, exchanged, or transferred to
any single person or affiliated persons leading to a change of a majority of the
members of the Board.
The Board shall have final authority to determine whether multiple
transactions are related and the exact date on which a Change in Control has
been deemed to have occurred under subsections (a), (b), and (c) above.
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SECTION 11. REQUIREMENTS OF LAW
11.1 COMPLIANCE WITH SECURITIES LAW. The granting of Awards and the
issuance of shares of Stock pursuant to any Award shall be subject to compliance
with all applicable laws, rules, and regulations, and to such approvals by any
governmental agencies, securities exchanges or market systems as may be
required. In addition, no Option may be exercised unless (a) a registration
statement under the Securities Act shall at the time of exercise of the Option
be in effect with respect to the shares issuable upon exercise of the Option or
(b) in the opinion of legal counsel to the Company, the shares issuable upon
exercise of the Option may be issued in accordance with the terms of an
applicable exemption from the registration requirements of the Securities Act.
The inability of the Company to obtain from any regulatory body having
jurisdiction the authority, if any, deemed by the Company's legal counsel to be
necessary to the lawful issuance and sale of any shares hereunder shall relieve
the Company of any liability in respect of the failure to issue or sell such
shares as to which such requisite authority shall not have been obtained. As a
condition to the issuance of any Stock, the Company may require the Participant
to satisfy any qualifications that may be necessary or appropriate, to evidence
compliance with any applicable law or regulation and to make any representation
or warranty with respect thereto as may be requested by the Company.
11.2 GOVERNING LAW. The Plan, and all agreements hereunder, shall
be construed in accordance with and governed by the laws of the State of
California.
SECTION 12. TAX WITHHOLDING
12.1 TAX WITHHOLDING IN GENERAL. The Company shall have the power
to withhold, or require a Participant to remit to the Company, an amount
sufficient to satisfy the Federal, state, local and foreign tax withholding
obligations, if any, of any Participating Company with respect to any Award. The
Company shall have no obligation to deliver shares of Stock or make any payment
of cash under the Plan until such tax withholding obligations have been
satisfied.
12.2 WITHHOLDING OF SHARES. To the extent permissible under
applicable tax, securities, and other laws, the Company may, in its sole
discretion, permit a Participant to satisfy all or a part of his or her tax
withholding requirement by directing the Company to apply shares of Stock to
which the Participant is entitled as a result of the exercise of an Option or
the lapse of a Period of Restriction with respect to a Restricted Stock Award
(including, for this purpose, the filing of an election under section 83(b) of
the Code), or which would otherwise be issued to the Participant pursuant to an
Award, to satisfy such requirement. Shares of Stock so applied shall be valued
at their Fair Market Value on the date when the taxes otherwise would be
withheld in cash.
SECTION 13. AMENDMENT AND TERMINATION OF PLAN
13.1 AMENDMENT AND TERMINATION OF PLAN. The Committee at any time
may terminate, and from time to time, may amend, the Plan; provided, however,
that no such amendment may be made without approval of the stockholders of the
Company to the extent that the Committee deems such stockholder approval to be
necessary or advisable for compliance with applicable tax and securities laws or
other regulatory requirements, including the requirements of any stock exchange
or market system on which the Stock is then listed.
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13.2 EFFECT OF AMENDMENT OR TERMINATION. No termination or
amendment of the Plan shall affect any then outstanding Award unless expressly
provided by the Committee. In any event, no termination or amendment of the Plan
shall in any manner adversely affect any Award theretofore granted under the
Plan, without the consent of the Participant, unless such termination or
amendment is necessary to comply with any applicable law, regulation or rule.
SECTION 14. MISCELLANEOUS PROVISIONS
14.1 BENEFICIARY DESIGNATION. Each Participant may name, from time
to time, any beneficiary or beneficiaries (who may be named contingently or
successively) to whom any benefit under the Plan is to be paid in case of such
Participant's death before he or she receives any or all of such benefit. Each
designation will revoke all prior designations by the same Participant, shall be
in a form prescribed by the Company, and will be effective only when filed by
the Participant in writing with the Company during the Participant's lifetime.
In the absence of any such designation, benefits remaining unpaid at the
Participant's death shall be paid to his or her estate.
14.2 RIGHTS AS AN EMPLOYEE OR DIRECTOR. No individual, even though
eligible pursuant to Section 3, shall have a right to be selected as a
Participant, or, having been so selected, to be selected again as a Participant.
Nothing in the Plan or any Award granted under the Plan shall confer on any
Participant a right to remain an Employee or Director, or interfere with or
limit in any way the right of a Participating Company to terminate the
Participant's Service at any time.
14.3 RIGHTS AS A STOCKHOLDER. A Participant shall have no rights as
a stockholder with respect to any shares covered by an Award until the date of
the issuance of a certificate for such shares (as evidenced by the appropriate
entry on the books of the Company or of a duly authorized transfer agent of the
Company). No adjustment shall be made for dividends, distributions or other
rights for which the record date is prior to the date such certificate is
issued, except as provided in Section 5.3 or another provision of the Plan.
14.4 PROVISION OF INFORMATION. Each Participant shall be given
access to information concerning the Company equivalent to that information
generally made available to the Company's common stockholders.
14.5 UNFUNDED OBLIGATION. Any amounts payable to Participants
pursuant to the Plan shall be unfunded obligations for all purposes, including,
without limitation, Title I of the Employee Retirement Income Security Act of
1974. No Participating Company shall be required to segregate any monies from
its general funds, or to create any trusts, or establish any special accounts
with respect to such obligations. The Company shall retain at all times
beneficial ownership of any investments, including trust investments, which the
Company may make to fulfill its payment obligations hereunder. Any investments
or the creation or maintenance of any trust or any Participant account shall not
create or constitute a trust or fiduciary relationship between the Committee or
any Participating Company and a Participant, or otherwise create any vested or
beneficial interest in any Participant or the Participant's creditors in any
assets of any Participating Company. The Participants shall have no claim
against any Participating Company
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for any changes in the value of any assets which may be invested or reinvested
by the Company with respect to the Plan.
14.6 INDEMNIFICATION. In addition to such other rights of
indemnification as they may have as members of the Committee or officers or
employees of the Participating Company Group, members of the Committee and any
officers or employees of the Participating Company Group to whom authority to
act for the Committee or the Company is delegated shall be indemnified by the
Company against all reasonable expenses, including attorneys' fees, actually and
necessarily incurred in connection with the defense of any action, suit or
proceeding, or in connection with any appeal therein, to which they or any of
them may be a party by reason of any action taken or failure to act under or in
connection with the Plan, or any right granted hereunder, and against all
amounts paid by them in settlement thereof (provided such settlement is approved
by independent legal counsel selected by the Company) or paid by them in
satisfaction of a judgment in any such action, suit or proceeding, except in
relation to matters as to which it shall be adjudged in such action, suit or
proceeding that such person is liable for gross negligence, bad faith or
intentional misconduct in duties; provided, however, that within sixty (60) days
after the institution of such action, suit or proceeding, such person shall
offer to the Company, in writing, the opportunity at its own expense to handle
and defend the same.
IN WITNESS WHEREOF, the undersigned Secretary of the Company certifies
that the foregoing sets forth the Granite Construction Incorporated 1999 Equity
Incentive Plan as duly adopted by the Board on March 17, 1999 and amended
through September 25, 2003.
GRANITE CONSTRUCTION INCORPORATED
/s/ Michael Futch
---------------------------------
Michael Futch, Secretary
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