EXHIBIT 10.1
HAWTHORNE FINANCIAL CORPORATION
2001 STOCK INCENTIVE PLAN
(AS AMENDED ON MAY 21, 2001)
ARTICLE ONE
GENERAL PROVISIONS
I. PURPOSE OF THE PLAN
This 2001 Stock Incentive Plan is intended to promote the interests of
Hawthorne Financial Corporation, a Delaware corporation (the "Corporation"), by
providing eligible persons with the opportunity to acquire a proprietary
interest, or otherwise increase their proprietary interest, in the Corporation
as an incentive for them to remain in the Service of the Corporation.
Capitalized terms shall have the meanings assigned to such terms in the
attached Appendix.
II. STRUCTURE OF THE PLAN
A. The Plan shall be divided into two separate equity programs:
- the Discretionary Option Grant Program under which eligible
persons may, at the discretion of the Plan Administrator,
be granted options to purchase shares of Common Stock and
stock appreciation rights; and
- the Stock Issuance Program under which eligible persons
may, at the discretion of the Plan Administrator, be issued
shares of Common Stock directly, either through the
immediate purchase of such shares, as a bonus for services
rendered the Corporation (or any Parent or Subsidiary), or
pursuant to share right awards which entitle Participants
to receive shares upon the attainment of designated
performance goals or Service requirements.
B. The provisions of Articles One and Four shall apply to all equity
programs under the Plan and shall govern the interests of all persons under the
Plan.
III. ADMINISTRATION OF THE PLAN
A. The Plan shall be administered by the Board or one or more committees
appointed by the Board, provided that with respect to Section 16 Insiders (i)
the Board may administer the Plan in compliance with Rule 16b-3 of the 1934 Act,
or (ii) the Primary Committee may, at the Board's discretion, administer the
Plan. Administration of the Plan may otherwise, at the Board's discretion, be
vested in the Primary Committee or a Secondary Committee. Any discretionary
option grants or stock issuances to members of the Board or the Primary
Committee must be authorized and approved by a disinterested majority of the
Board.
B. Members of the Primary Committee or any Secondary Committee shall
serve for such period of time as the Board may determine and may be removed by
the Board at any time. The Board
may also at any time terminate the functions of the Primary Committee or any
Secondary Committee and reassume all powers and authority previously delegated
to such committee.
C. Each Plan Administrator shall, within the scope of its administrative
functions under the Plan, have full power and authority (subject to the
provisions of the Plan) to establish such rules and regulations as it may deem
appropriate for proper administration of the Discretionary Option Grant and
Stock Issuance Programs and to make such determinations under, and issue such
interpretations of, the provisions of such programs and any outstanding options
or stock issuances thereunder as it may deem necessary or advisable. Decisions
of the Plan Administrator within the scope of its administrative functions under
the Plan shall be final and binding on all parties who have an interest in the
Discretionary Option Grant and Stock Issuance Programs under its jurisdiction or
any option or stock issuance thereunder.
D. Each Plan Administrator shall, within the scope of its administrative
jurisdiction under the Plan, have full authority to determine: (i) with respect
to the option grants or stock appreciation rights under the Discretionary Option
Grant Program, which eligible persons are to receive grants, the time or times
when such grants are to be made, the number of shares to be covered by each such
grant, the status of a granted option as either an Incentive Option or a
Non-Statutory Option, the time or times when each option is to become
exercisable, the vesting schedule (if any) applicable to the option shares and
the maximum term for which the option is to remain outstanding; and (ii) with
respect to stock issuances under the Stock Issuance Program, which eligible
persons are to receive stock issuances, the time or times when such issuances
are to be made, the number of shares to be issued to each Participant, the
vesting schedule applicable to the issued shares and the consideration for such
shares.
E. The Plan Administrator shall have the absolute discretion either to
grant options or stock appreciation rights in accordance with the Discretionary
Option Grant Program or to effect stock issuances in accordance with the Stock
Issuance Program.
F. Service on the Primary Committee or any Secondary Committee shall
constitute service as a Board member, and members of each such committee shall
accordingly be entitled to full indemnification and reimbursement as Board
members for their service on such committee. No member of the Primary Committee
or any Secondary Committee shall be liable for any act or omission made in good
faith with respect to the Plan or any option grants or stock issuances under the
Plan.
IV. ELIGIBILITY
The persons eligible to participate in the Discretionary Option Grant and
Stock Issuance Programs are as follows:
(i) Employees,
(ii) non-employee members of the Board or the board of
directors of any Parent or Subsidiary, and
(iii) consultants and other independent advisors who
provide services to the Corporation (or any Parent or Subsidiary).
V. STOCK SUBJECT TO THE PLAN
A. The stock issuable under the Plan shall be shares of authorized but
unissued or reacquired Common Stock, including shares repurchased by the
Corporation on the open market. The maximum
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number of shares of Common Stock initially reserved for issuance over the term
of the Plan shall not exceed One Million Eighteen Thousand Nine Hundred
(1,018,900) shares. Such authorized reserve consists of (i) the number of shares
which remain available for issuance, as of the Plan Effective Date, under the
Predecessor Plans, (768,900 shares), consisting of the maximum aggregate number
of shares originally reserved for issuance under the Predecessor Plans
(1,300,000 shares), less the aggregate number of shares issued upon the exercise
of options under the Predecessor Plans as of the Plan Effective Date (531,100
shares), plus (ii) an increase of 250,000 shares authorized by the Board but
subject to stockholder approval. No one person participating in the Plan may
receive stock options, direct stock issuances and share right awards for more
than One Million Eighteen Thousand Nine Hundred (1,018,900) shares of Common
Stock in the aggregate per calendar year.
B. Shares of Common Stock subject to outstanding options (including
options incorporated into this Plan from the Predecessor Plans) shall be
available for subsequent issuance under the Plan to the extent (i) those options
expire or terminate for any reason prior to exercise in full or (ii) the options
are cancelled in accordance with the cancellation-regrant provisions of Article
Two. Unvested shares issued under the Plan and subsequently cancelled or
repurchased by the Corporation at the original exercise or issue price paid per
share, pursuant to the Corporation's repurchase rights under the Plan, shall be
added back to the number of shares of Common Stock reserved for issuance under
the Plan and shall accordingly be available for reissuance through one or more
subsequent option grants or direct stock issuances under the Plan. In addition,
should the exercise price of an option under the Plan be paid with shares of
Common Stock or should shares of Common Stock otherwise issuable under the Plan
be withheld by the Corporation in satisfaction of the withholding taxes incurred
in connection with the exercise of an option or the vesting of a stock issuance
under the Plan, then the number of shares of Common Stock available for issuance
under the Plan shall be reduced only by the net number of shares of Common Stock
issued to the holder of such option or stock issuance, and not by the gross
number of shares for which the option is exercised or which vest under the stock
issuance. However, shares of Common Stock underlying one or more stock
appreciation rights exercised under Section V of Article Two of the Plan shall
not be available for subsequent issuance under the Plan.
C. If any change is made to the Common Stock by reason of any stock
split, stock dividend, recapitalization, combination of shares, exchange of
shares or other change affecting the outstanding Common Stock as a class without
the Corporation's receipt of consideration, appropriate adjustments shall be
made to: (i) the maximum number and/or class of securities issuable under the
Plan; (ii) the number and/or class of securities for which any one person may be
granted stock options, direct stock issuances and share right awards under this
Plan per calendar year; (iii) the number and/or class of securities and the
exercise price per share in effect under each outstanding option under the Plan;
(iv) the number and/or class of securities and exercise price per share in
effect under each outstanding option incorporated into this Plan from the
Predecessor Plans; and (v) the maximum number and/or class of securities which
may be added to the Plan through the forfeiture, surrender, cancellation or
termination of shares issued under the Predecessor Plans. Such adjustments to
the outstanding options are to be effected in a manner which shall preclude the
enlargement or dilution of rights and benefits under such options. The
adjustments determined by the Plan Administrator shall be final, binding and
conclusive.
ARTICLE TWO
DISCRETIONARY OPTION GRANT PROGRAM
I. OPTION TERMS
Each option shall be evidenced by one or more documents in the form
approved by the Plan Administrator; provided, however, that each such document
shall comply with the terms specified below.
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Each document evidencing an Incentive Option shall, in addition, be subject to
the provisions of the Plan applicable to such option.
A. EXERCISE PRICE.
1. The exercise price per share shall be fixed by the Plan
Administrator but shall not be less than one hundred percent (100%) of the Fair
Market Value per share of Common Stock on the option grant date; provided,
however, that the Plan Administrator may, in its discretion, fix the exercise
price per share for one or more option grants at less than one hundred percent
(100%) of the Fair Market Value per share of Common Stock on the option grant
date if (i) the number of shares of Common Stock underlying the Below Fair
Market Value Options to be granted under such one or more grants will not cause
the limitation set forth in Section VI of this Article Two to be exceeded, or
(ii) the Plan Administrator determines at the time of the granting of the
option, and the Optionee agrees in writing, under terms and conditions
satisfactory to the Plan Administrator, that cash compensation which the
Optionee would otherwise receive from the Corporation or any Parent or
Subsidiary shall be reduced dollar-for-dollar by the difference between the
aggregate exercise price for the shares of Common Stock subject to such Below
Fair Market Value Option and the aggregate Fair Market Value of such shares on
the grant date of such Below Fair Market Option. Notwithstanding the foregoing,
(i) in no event, shall the Plan Administrator grant options with an exercise
price per share of less than eighty-five percent (85%) of the Fair Market Value
per share of Common Stock on the option grant date and (ii) if a Below Fair
Market Value Option is canceled and re-granted pursuant to Section III of this
Article Two, the grant of the new option shall not be considered to be the grant
of an additional Below Fair Market Option (for purposes of the limitation set
forth in Section VI of this Article Two) so long as the percentage of Fair
Market Value per share of Common Stock on the new grant date which is used to
determine the exercise price for the new option is equal to or greater than the
percentage of Fair Market Value per share of Common Stock which was used to
determine the exercise price for the canceled option.
2. The exercise price shall become immediately due upon exercise
of the option and may, subject to the provisions of Section I of Article Four
and the documents evidencing the option, be payable in one or more of the forms
specified below:
(i) cash or certified check made payable to the
Corporation,
(ii) shares of Common Stock held for the requisite period
necessary to avoid a charge to the Corporation's earnings for financial
reporting purposes and valued at Fair Market Value on the Exercise Date,
or
(iii) to the extent the sale complies with all applicable
laws relating to the regulation and sale of securities, through a special
sale and remittance procedure pursuant to which the Optionee shall
concurrently provide irrevocable written instructions to: (a) a brokerage
firm to effect the immediate sale of the purchased shares and remit to
the Corporation, out of the sale proceeds available on the settlement
date, sufficient funds to cover the aggregate exercise price payable for
the purchased shares plus all applicable Federal, state and local income
and employment taxes required to be withheld by the Corporation by reason
of such exercise; and (b) the Corporation to deliver the certificates for
the purchased shares directly to such brokerage firm in order to complete
the sale.
Except to the extent such sale and remittance procedure is utilized,
payment of the exercise price for the purchased shares must be made on the
Exercise Date.
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B. EXERCISE AND TERM OF OPTIONS. Each option shall be exercisable at such
time or times, during such period and for such number of shares as shall be
determined by the Plan Administrator and set forth in the documents evidencing
the option. However, no option shall have a term in excess of ten (10) years
measured from the option grant date.
C. EFFECT OF TERMINATION OF SERVICE.
1. The following provisions shall govern the exercise of any
options held by the Optionee at the time of cessation of Service or death:
(i) Any option outstanding at the time of the Optionee's
cessation of Service for any reason shall remain exercisable for such
period of time thereafter as shall be determined by the Plan
Administrator and set forth in the documents evidencing the option.
(ii) Any option held by the Optionee at the time of death
and exercisable in whole or in part at that time may be subsequently
exercised by the personal representative of the Optionee's estate or by
the person or persons to whom the option is transferred pursuant to the
Optionee's will or in accordance with the laws of descent and
distribution or by the Optionee's designated beneficiary or beneficiaries
of that option.
(iii) Except as otherwise determined in the discretion of
the Plan Administrator either at the time an option is granted or at any
time the option remains outstanding, should the Optionee's Service be
terminated for Misconduct or should the Optionee otherwise engage in
Misconduct while holding one or more outstanding options under this
Article Two, then all those options shall terminate immediately and cease
to be outstanding.
(iv) During the applicable post-Service exercise period,
the option may not be exercised in the aggregate for more than the number
of vested shares for which the option is exercisable on the date of the
Optionee's cessation of Service. Upon the expiration of the applicable
exercise period or (if earlier) upon the expiration of the option term,
the option shall terminate and cease to be outstanding for any vested
shares for which the option has not been exercised. However, the option
shall, immediately upon the Optionee's cessation of Service, terminate
and cease to be outstanding to the extent the option is not otherwise at
that time exercisable for vested shares.
2. The Plan Administrator shall have complete discretion, either
at the time an option is granted or at any time while the option remains
outstanding, to:
(i) extend the period of time for which the option is to
remain exercisable following the Optionee's cessation of Service from the
limited exercise period otherwise in effect for that option to such
greater period of time as the Plan Administrator shall deem appropriate,
but in no event beyond the expiration of the option term, and/or
(ii) permit the option to be exercised, during the
applicable post-Service exercise period, not only with respect to the
number of vested shares of Common Stock for which such option is
exercisable at the time of the Optionee's cessation of Service but also
with respect to one or more additional installments in which the Optionee
would have vested had the Optionee continued in Service.
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D. STOCKHOLDER RIGHTS. The holder of an option shall have no stockholder
rights with respect to the shares subject to the option until such person shall
have exercised the option, paid the exercise price and become a holder of record
of the purchased shares.
E. REPURCHASE RIGHTS. The Plan Administrator shall have the discretion to
grant options which are exercisable for unvested shares of Common Stock. Should
the Optionee cease Service while holding such unvested shares, the Corporation
shall have the right to repurchase, at the exercise price paid per share, any or
all of those unvested shares. The terms upon which such repurchase right shall
be exercisable (including the period and procedure for exercise and the
appropriate vesting schedule for the purchased shares) shall be established by
the Plan Administrator and set forth in the document evidencing such repurchase
right.
F. LIMITED TRANSFERABILITY OF OPTIONS. During the lifetime of the
Optionee, Incentive Options shall be exercisable only by the Optionee and shall
not be assignable or transferable other than by will or by the laws of descent
and distribution following the Optionee's death. Non-Statutory Options shall be
subject to the same limitation, except that a Non-Statutory Option may be
assigned in whole or in part during Optionee's lifetime to one or more members
of the Optionee's Immediate Family or to a trust established for the exclusive
benefit of one or more members of the Optionee's Immediate Family or the
Optionee's former spouse, to the extent such assignment is in connection with
Optionee's estate plan or pursuant to a domestic relations order. The assigned
portion shall be exercisable only by the person or persons who acquire a
proprietary interest in the option pursuant to such assignment. The terms
applicable to the assigned portion shall be the same as those in effect for this
option immediately prior to such assignment and shall be set forth in such
documents issued to the assignee as the Plan Administrator may deem appropriate.
Notwithstanding the foregoing, the Optionee may also designate one or more
persons as the beneficiary or beneficiaries of his or her outstanding options
under this Article Two, and those options shall, in accordance with such
designation, automatically be transferred to such beneficiary or beneficiaries
upon the Optionee's death while holding those options. Such beneficiary or
beneficiaries shall take the transferred option subject to all the terms and
conditions of this Agreement, including (without limitation) the limited time
period during which the option may be exercised following the Optionee's death.
II. INCENTIVE OPTIONS
The terms specified below shall be applicable to all Incentive Options.
Except as modified by the provisions of this Section II, all the provisions of
Articles One, Two and Four shall be applicable to Incentive Options. Options
which are specifically designated as Non-Statutory Options when issued under the
Plan shall NOT be subject to the terms of this Section II.
A. ELIGIBILITY. Incentive Options may only be granted to Employees.
B. EXERCISE PRICE. The exercise price per share shall not be less than
one hundred percent (100%) of the Fair Market Value per share of Common Stock on
the option grant date.
C. DOLLAR LIMITATION. The aggregate Fair Market Value of the shares of
Common Stock (determined as of the respective date or dates of grant) for which
one or more options granted to any Employee under the Plan (or any other option
plan of the Corporation or any Parent or Subsidiary) may for the first time
become exercisable as Incentive Options during any one calendar year shall not
exceed the sum of One Hundred Thousand Dollars ($100,000). To the extent the
Employee holds two (2) or more such options which become exercisable for the
first time in the same calendar year, the foregoing limitation on the
exercisability of such options as Incentive Options shall be applied on the
basis of the order in which such options are granted.
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D. FAILURE TO QUALIFY AS INCENTIVE OPTION. To the extent that any option
governed by this Plan does not qualify as an Incentive Option by reason of the
dollar limitation described in Section II.C of this Article Two or for any other
reason, such option shall be exercisable as a Non-Statutory Option under the
Federal tax laws.
E. 10% STOCKHOLDER. If any Employee to whom an Incentive Option is
granted is a 10% Stockholder, then the exercise price per share shall not be
less than one hundred ten percent (110%) of the Fair Market Value per share of
Common Stock on the option grant date, and the option term shall not exceed five
(5) years measured from the option grant date.
III. CANCELLATION AND REGRANT OF OPTIONS
Subject to the limitations set forth below in this Section III, the Plan
Administrator shall have the authority to effect, at any time and from time to
time, with the consent of the affected option holders, the cancellation of
outstanding options under the Discretionary Option Grant Program (including
outstanding options incorporated from the Predecessor Plans) and to grant in
substitution new options covering the same or different number of shares of
Common Stock but with an exercise price per share based on the Fair Market Value
per share of Common Stock on the new grant date. The Plan Administrator shall be
permitted to exercise its authority under this Section III only if the
cancellation of outstanding options and substitution of new options in each case
(i) is authorized by the Plan Administrator, (ii) will fulfill a legitimate
corporate purpose as determined by the Plan Administrator, and (iii) will not
cause the limitation set forth in Section VI of this Article Two to be exceeded.
IV. CHANGE IN CONTROL/HOSTILE TAKE-OVER
A. No option outstanding at the time of a Change in Control shall become
exercisable on an accelerated basis if and to the extent: (i) that option is, in
connection with the Change in Control, assumed by the successor corporation (or
parent thereof) or otherwise continued in full force and effect pursuant to the
terms of the Change in Control transaction, (ii) such option is replaced with a
cash incentive program of the successor corporation which preserves the spread
existing at the time of the Change in Control on the shares of Common Stock for
which the option is not otherwise at that time exercisable and provides for
subsequent payout in accordance with the same exercise/vesting schedule
applicable to those option shares or (iii) the acceleration of such option is
subject to other limitations imposed by the Plan Administrator at the time of
the option grant. However, if none of the foregoing conditions are satisfied,
then each option outstanding at the time of the Change in Control but not
otherwise exercisable for all the shares of Common Stock at that time subject to
such option shall automatically accelerate so that each such option shall,
immediately prior to the effective date of the Change in Control, become
exercisable for all the shares of Common Stock at the time subject to such
option and may be exercised for any or all of those shares as fully vested
shares of Common Stock.
B. All of the Corporation's outstanding repurchase rights under the
Discretionary Option Grant Program shall also terminate automatically, and the
shares of Common Stock subject to those terminated rights shall immediately vest
in full, in the event of any Change in Control, except to the extent: (i) those
repurchase rights are assigned to the successor corporation (or parent thereof)
or otherwise continued in full force and effect pursuant to the terms of the
Change in Control transaction or (ii) such accelerated vesting is precluded by
other limitations imposed by the Plan Administrator at the time the repurchase
right is issued.
C. Immediately following the consummation of the Change in Control, all
outstanding options shall terminate and cease to be outstanding, except to the
extent assumed by the successor
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corporation (or parent thereof) or otherwise expressly continued in full force
and effect pursuant to the terms of the Change in Control transaction.
D. Each option which is assumed in connection with a Change in Control or
otherwise continued in effect shall be appropriately adjusted, immediately after
such Change in Control, to apply to the number and class of securities which
would have been issuable to the Optionee in consummation of such Change in
Control had the option been exercised immediately prior to such Change in
Control. Appropriate adjustments to reflect such Change in Control shall also be
made to: (i) the exercise price payable per share under each outstanding option
(including options incorporated into this Plan from the Predecessor Plans),
provided the aggregate exercise price payable for such securities shall remain
the same; (ii) the maximum number and/or class of securities available for
issuance over the remaining term of the Plan; (iii) the maximum number and/or
class of securities for which any one person may be granted options, direct
stock issuances and share right awards under the Plan per calendar year; and
(iv) the maximum number and class of securities which may be added to the Plan
through the repurchase of shares issued under the Predecessor Plans. To the
extent the actual holders of the Corporation's outstanding Common Stock receive
cash consideration for their Common Stock in consummation of the Change in
Control transaction, the successor corporation may, in connection with the
assumption of the outstanding options under the Discretionary Option Grant
Program, substitute one or more shares of its own common stock with a fair
market value equivalent to the cash consideration paid per share of Common Stock
in such Change in Control transaction.
E. The Plan Administrator shall have the discretionary authority to
structure one or more outstanding options under the Discretionary Option Grant
Program so that those options shall, immediately prior to the effective date of
a Change in Control, become exercisable for all the shares of Common Stock at
that time subject to such options on an accelerated basis and may be exercised
for any or all of such shares as fully vested shares of Common Stock, whether or
not those options are to be assumed or otherwise continued in full force and
effect or replaced with a cash incentive program pursuant to the express terms
of the Change in Control transaction. In addition, the Plan Administrator shall
have the discretionary authority to structure one or more of the Corporation's
repurchase rights under the Discretionary Option Grant Program so that those
rights shall immediately terminate at the time of such Change in Control and
shall not be assignable to the successor corporation (or parent thereof), and
the shares subject to those terminated rights shall accordingly vest in full at
the time of such Change in Control.
F. The Plan Administrator shall have full power and authority to
structure one or more outstanding options under the Discretionary Option Grant
Program so that those options shall vest and become exercisable for all the
shares of Common Stock at that time subject to such options on an accelerated
basis in the event the Optionee's Service is subsequently terminated by reason
of an Involuntary Termination within a designated period (not to exceed eighteen
(18) months) following the effective date of any Change in Control in which
those options do not otherwise accelerate. Any options so accelerated shall
remain exercisable for fully vested shares of Common Stock until the expiration
or sooner termination of the option term. In addition, the Plan Administrator
may structure one or more of the Corporation's repurchase rights under the
Discretionary Option Grant Program so that those rights shall immediately
terminate with respect to any shares of Common Stock held by the Optionee at the
time of his or her Involuntary Termination, and the shares subject to those
terminated repurchase rights shall accordingly vest in full at that time.
G. The Plan Administrator shall have the discretionary authority to
structure one or more outstanding options under the Discretionary Option Grant
Program so that those options shall, immediately prior to the effective date of
a Hostile Take-Over, vest and become exercisable for all the shares of Common
Stock at that time subject to such options on an accelerated basis and may be
exercised
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for any or all of such shares as fully vested shares of Common Stock. In
addition, the Plan Administrator shall have the discretionary authority to
structure one or more of the Corporation's repurchase rights under the
Discretionary Option Grant Program so that those rights shall terminate
automatically upon the consummation of such Hostile Take-Over, and the shares
subject to those terminated rights shall thereupon immediately vest in full.
Alternatively, the Plan Administrator may condition the automatic acceleration
of one or more outstanding options under the Discretionary Option Grant Program
and the termination of one or more of the Corporation's outstanding repurchase
rights under such program upon the Involuntary Termination of the Optionee's
Service within a designated period (not to exceed eighteen (18) months)
following the effective date of such Hostile Take-Over. Each option so
accelerated shall remain exercisable for fully vested shares of Common Stock
until the expiration or sooner termination of the option term.
H. The portion of any Incentive Option accelerated in connection with a
Change in Control or Hostile Take-Over shall remain exercisable as an Incentive
Option only to the extent the applicable One Hundred Thousand Dollar ($100,000)
limitation is not exceeded. To the extent such dollar limitation is exceeded,
the accelerated portion of such option shall be exercisable as a Non-Statutory
Option under the Federal tax laws.
I. The grant of options under the Discretionary Option Grant Program
shall in no way affect the right of the Corporation to adjust, reclassify,
reorganize or otherwise change its capital or business structure or to merge,
consolidate, dissolve, liquidate or sell or transfer all or any part of its
business or assets.
V. STOCK APPRECIATION RIGHTS
A. The Plan Administrator shall have full power and authority to grant to
selected Optionees tandem stock appreciation rights and/or limited stock
appreciation rights.
B. The following terms shall govern the grant and exercise of tandem
stock appreciation rights:
(i) One or more Optionees may be granted the right,
exercisable upon such terms as the Plan Administrator may establish, to
elect between the exercise of the underlying option for shares of Common
Stock and the surrender of that option in exchange for a payment from the
Corporation in an amount equal to the excess of (a) the Fair Market Value
(on the option surrender date) of the number of shares in which the
Optionee is at the time vested under the surrendered option (or
surrendered portion thereof) over (b) the aggregate exercise price
payable for such shares.
(ii) No such option surrender shall be effective unless it
is approved by the Plan Administrator, either at the time of the actual
option surrender or at any earlier time. If the surrender is so approved,
then the payment to which the Optionee shall be entitled may be made in
shares of Common Stock valued at Fair Market Value on the option
surrender date, in cash, or partly in shares and partly in cash, as the
Plan Administrator shall in its sole discretion deem appropriate.
(iii) If the surrender of an option is not approved by the
Plan Administrator, then the Optionee shall retain whatever rights the
Optionee had under the surrendered option (or surrendered portion
thereof) on the option surrender date and may exercise such rights at any
time prior to the later of (a) five (5) business days after the receipt
of the rejection notice or (b) the last day on which the option is
otherwise exercisable in accordance with the terms of the documents
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evidencing such option, but in no event may such rights be exercised more
than five (5) years after the option grant date with respect to an
Incentive Option held by a 10% Stockholder and not more than ten (10)
years after the option grant date with respect to all other options.
C. The following terms shall govern the grant and exercise of limited
stock appreciation rights:
(i) One or more Section 16 Insiders may be granted limited
stock appreciation rights with respect to their outstanding options.
(ii) Upon the occurrence of a Hostile Take-Over, each
individual holding one or more options with such a limited stock
appreciation right shall have the unconditional right (exercisable for a
thirty (30)-day period following such Hostile Take-Over) to surrender
each such option (or any portion thereof) to the Corporation. In return
for the surrendered option, the Optionee shall receive a cash payment
from the Corporation in an amount equal to the excess of (A) the
Take-Over Price of the shares of Common Stock at the time subject to such
option (whether or not the option is otherwise vested and exercisable for
those shares) over (B) the aggregate exercise price payable for those
shares. Such cash payment shall be paid within five (5) days following
the option surrender date.
(iii) At the time such limited stock appreciation right is
granted, the Plan Administrator shall pre-approve any subsequent exercise
of that right in accordance with the terms of this Paragraph C.
Accordingly, no further approval of the Plan Administrator or the Board
shall be required at the time of the actual option surrender and cash
payment.
(iv) The balance of the option (if any) shall remain
outstanding and exercisable in accordance with the documents evidencing
such option.
VI. LIMITATION ON NUMBER OF BELOW FAIR MARKET VALUE OPTIONS AND CANCELLATION AND
REGRANT OF OPTIONS
Notwithstanding any other provision of the Plan, the combined number of
shares of Common Stock underlying (i) all Below Fair Market Value Options
granted pursuant to clause (i) of Section I.A.1 of this Article Two and (ii) all
options cancelled in exchange for the substitution of new options pursuant to
Section III of this Article Two shall not exceed, in the aggregate, ten percent
(10%) of the maximum number of shares of Common Stock reserved for issuance over
the term of the Plan under Section V.A of Article One of the Plan (as such
maximum number may be adjusted under Section V.C of Article One of the Plan).
The foregoing provisions of this Section VI shall not apply to any Below Fair
Market Value Option granted to an Optionee pursuant to clause (ii) of Section
I.A.1 of this Article Two.
ARTICLE THREE
STOCK ISSUANCE PROGRAM
I. STOCK ISSUANCES
Shares of Common Stock may be issued under the Stock Issuance Program
through direct and immediate issuances without any intervening option grants.
Each such stock issuance shall be evidenced by a Stock Issuance Agreement which
complies with the terms specified below. Shares of Common Stock may also be
issued under the Stock Issuance Program pursuant to share right awards which
entitle
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the recipients to receive those shares upon the attainment of designated
performance goals or Service requirements.
II. STOCK ISSUANCE TERMS
A. PURCHASE PRICE.
1. The purchase price per share shall be fixed by the Plan
Administrator, but shall not be less than one hundred percent (100%) of the Fair
Market Value per share of Common Stock on the issuance date.
2. Subject to the provisions of Section I of Article Four, shares
of Common Stock may be issued under the Stock Issuance Program for any of the
following items of consideration which the Plan Administrator may deem
appropriate in each individual instance:
(i) cash or certified check made payable to the
Corporation, or
(ii) past services rendered to the Corporation (or any
Parent or Subsidiary).
B. VESTING PROVISIONS.
1. Shares of Common Stock issued under the Stock Issuance Program
shall vest in one or more installments over the Participant's period of Service
or upon attainment of specified performance objectives. The elements of the
vesting schedule applicable to shares of Common Stock issued under the Stock
Issuance Program shall be determined by the Plan Administrator and incorporated
into the Stock Issuance Agreement; provided, however, in no event, shall such
shares of Common Stock vest over a period of less than three (3) years from the
effective date of the Stock Issuance Agreement, regardless of whether vesting is
conditioned on the Participant's period of Service or the attainment of
specified performance objectives. Shares of Common Stock may also be issued
under the Stock Issuance Program pursuant to share right awards which entitle
the recipients to receive those shares upon the attainment of designated
performance goals or Service requirements. Upon the attainment of such
performance goals or Service requirements, fully vested shares of Common Stock
shall be issued upon satisfaction of those share right awards; provided,
however, in no event shall shares of Common Stock be issued to a Participant
pursuant to any such share right award before one (1) year after the date on
which the share right award was granted to such Participant, regardless of
whether the vesting or issuance of the shares is conditioned on the attainment
of performance goals or Service requirements.
2. Any new, substituted or additional securities or other property
(including money paid other than as a regular cash dividend) which the
Participant may have the right to receive with respect to the Participant's
unvested shares of Common Stock by reason of any stock dividend, stock split,
recapitalization, combination of shares, exchange of shares or other change
affecting the outstanding Common Stock as a class without the Corporation's
receipt of consideration shall be issued subject to: (i) the same vesting
requirements applicable to the Participant's unvested shares of Common Stock;
and (ii) such escrow arrangements as the Plan Administrator shall deem
appropriate.
3. The Participant shall have full stockholder rights with respect
to any shares of Common Stock issued to the Participant under the Stock Issuance
Program, whether or not the Participant's interest in those shares is vested.
Accordingly, the Participant shall have the right to vote such shares and to
receive any regular cash dividends paid on such shares. The holder of a share
right award shall have no stockholder rights with respect to such award until
shares of Common Stock have been issued to such Participant in satisfaction of
such award.
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4. Should the Participant cease to remain in Service while holding
one or more unvested shares of Common Stock issued under the Stock Issuance
Program or should the performance objectives not be attained with respect to one
or more such unvested shares of Common Stock, then those shares shall be
immediately surrendered to the Corporation for cancellation, and the Participant
shall have no further stockholder rights with respect to those shares. To the
extent the surrendered shares were previously issued to the Participant for
consideration paid in cash or cash equivalent (including the Participant's
purchase-money indebtedness), the Corporation shall repay to the Participant the
cash consideration paid for the surrendered shares and shall cancel the unpaid
principal balance of any outstanding purchase-money note of the Participant
attributable to the surrendered shares.
5. Except as provided in Section III of this Article III, the Plan
Administrator shall have no discretionary authority to waive the surrender and
cancellation of one or more unvested shares of Common Stock which shall occur
upon the cessation of the Participant's Service or the non-attainment of the
performance objectives applicable to those shares.
6. Outstanding share right awards under the Stock Issuance Program
shall automatically terminate, and no shares of Common Stock shall actually be
issued in satisfaction of those awards, if the performance goals or Service
requirements established for such awards are not attained. The Plan
Administrator shall have no discretionary authority to issue shares of Common
Stock under one or more outstanding share right awards as to which the
designated performance goals or Service requirements have not been attained.
III. CHANGE IN CONTROL/HOSTILE TAKE-OVER
A. All of the Corporation's outstanding repurchase rights under the Stock
Issuance Program shall terminate automatically, and all the shares of Common
Stock subject to those terminated rights shall immediately vest in full, in the
event of any Change in Control, except to the extent (i) those repurchase rights
are assigned to the successor corporation (or parent thereof) or otherwise
continued in full force and effect pursuant to the express terms of the Change
in Control transaction or (ii) such accelerated vesting is precluded by other
limitations imposed in the Stock Issuance Agreement.
B. The Plan Administrator shall have the discretionary authority to
structure one or more of the Corporation's repurchase rights under the Stock
Issuance Program so that those rights shall automatically terminate in whole or
in part upon the occurrence of a Change in Control and shall not be assignable
to the successor corporation (or parent thereof), and the shares of Common Stock
subject to those terminated rights shall immediately vest in full at the time of
such Change in Control.
C. The Plan Administrator shall also have the discretionary authority to
structure one or more of the Corporation's repurchase rights under the Stock
Issuance Program so that those rights shall automatically terminate in whole or
in part, and the shares of Common Stock subject to those terminated rights shall
immediately vest in full, upon the Involuntary Termination of the Participant's
Service within a designated period (not to exceed eighteen (18) months)
following the effective date of any Change in Control in which those repurchase
rights do not otherwise terminate.
D. The Plan Administrator shall also have the discretionary authority to
structure one or more of the Corporation's repurchase rights under the Stock
Issuance Program so that those rights shall automatically terminate in whole or
in part upon the occurrence of a Hostile Take-Over, and the shares of Common
Stock subject to those terminated rights shall immediately vest in full at the
time of such Hostile Take-Over.
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ARTICLE FOUR
MISCELLANEOUS
I. FINANCING
The Plan Administrator may permit any Optionee or Participant to pay the
option exercise price under the Discretionary Option Grant Program or the
purchase price of shares issued under the Stock Issuance Program by delivering a
full-recourse, interest bearing promissory note payable in one or more
installments. The terms of any such promissory note (including the interest rate
and the terms of repayment) shall be established by the Plan Administrator in
its sole discretion. In no event may the maximum credit available to the
Optionee or Participant exceed the sum of (i) the aggregate option exercise
price or purchase price payable for the purchased shares plus (ii) any Federal,
state and local income and employment tax liability incurred by the Optionee or
the Participant in connection with the option exercise or share purchase.
II. SHARE ESCROW/LEGENDS
Unvested shares issued under the Plan may, in the Plan Administrator's
discretion, be held in escrow by the Corporation until the Participant's
interest in such shares vests or may be issued directly to the Participant with
restrictive legends on the certificates evidencing those unvested shares.
III. TAX WITHHOLDING
A. The Corporation's obligation to deliver shares of Common Stock upon
the exercise of options or the issuance or vesting of such shares under the Plan
shall be subject to the satisfaction of all applicable Federal, state and local
income and employment tax withholding requirements.
B. The Plan Administrator may, in its discretion, provide any or all
holders of Non-Statutory Options or unvested shares of Common Stock under the
Plan with the right to use shares of Common Stock in satisfaction of all or part
of the Taxes incurred by such holders in connection with the exercise of their
options or the vesting of their shares. Such right may be provided to any such
holder in either or both of the following formats:
1. Stock Withholding: The election to have the Corporation
withhold, from the shares of Common Stock otherwise issuable upon the exercise
of such Non-Statutory Option or the vesting of such shares, a portion of those
shares with an aggregate Fair Market Value equal to the amount of the Taxes (not
to exceed one hundred percent (100%) of such Taxes) to be satisfied in such
manner as designated by the holder in writing; or
2. Stock Delivery: The election to deliver to the Corporation, at
the time the Non-Statutory Option is exercised or the shares vest, one or more
shares of Common Stock previously acquired by such holder (other than in
connection with the option exercise or share vesting triggering the Taxes) with
an aggregate Fair Market Value equal to the amount of the Taxes (not to exceed
one hundred percent (100%) of such Taxes) to be satisfied in such manner as
designated by the holder in writing.
IV. EFFECTIVE DATE AND TERM OF THE PLAN
A. The Plan shall become effective immediately upon the Plan Effective
Date. Options may be granted under the Discretionary Option Grant at any time on
or after the Plan Effective Date. However, no options granted under the Plan may
be exercised, and no shares shall be issued under the
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Plan, until the Plan is approved by the Corporation's stockholders. If such
stockholder approval is not obtained within twelve (12) months after the Plan
Effective Date, then all options previously granted under this Plan shall
terminate and cease to be outstanding, and no further options shall be granted
and no shares shall be issued under the Plan.
B. The Plan shall serve as the successor to the Predecessor Plans, and no
further option grants or direct stock issuances shall be made under the
Predecessor Plans after the Plan Effective Date. All options outstanding under
the Predecessor Plans on the Plan Effective Date shall be incorporated into the
Plan at that time and shall be treated as outstanding options under the Plan.
However, each outstanding option so incorporated shall continue to be governed
solely by the terms of the documents evidencing such option, and no provision of
the Plan shall be deemed to affect or otherwise modify the rights or obligations
of the holders of such incorporated options with respect to their acquisition of
shares of Common Stock.
C. One or more provisions of the Plan, including (without limitation) the
option/vesting acceleration provisions of Article Two relating to Changes in
Control and Hostile Take-Overs, may, in the Plan Administrator's discretion, be
extended to one or more options incorporated from the Predecessor Plans which do
not otherwise contain such provisions.
D. The Plan shall terminate upon the EARLIEST of (i) the tenth
anniversary of the Plan Effective Date, (ii) the date on which all shares
available for issuance under the Plan shall have been issued as fully-vested
shares or (iii) the termination of all outstanding options in connection with a
Change in Control. Upon such plan termination, all outstanding option grants and
unvested stock issuances shall thereafter continue to have force and effect in
accordance with the provisions of the documents evidencing such grants or
issuances.
V. AMENDMENT OF THE PLAN
A. The Board shall have complete and exclusive power and authority to
amend or modify the Plan in any or all respects. However, no such amendment or
modification shall adversely affect the rights and obligations with respect to
stock options or unvested stock issuances at the time outstanding under the Plan
unless the Optionee or the Participant consents to such amendment or
modification. In addition, an amendment or modification of the Plan must be
approved by the Corporation's stockholders if such amendment or modification
would:
1. Increase the number of shares of Common Stock reserved for
issuance over the term of the Plan under Section V.A of Article One of the Plan
(other than increases pursuant to Section V.C of Article One of the Plan);
2. Change the number of shares of Common Stock for which any one
person participating in the Plan may receive stock options, direct stock
issuances and share right awards in the aggregate per calendar year under
Section V.A of Article One of the Plan;
3. Change the persons or class of persons eligible to participate
in the Plan under Section IV of Article One of the Plan; or
4. Materially increase or enlarge the rights or benefits available
to persons participating in the Plan.
B. Options to purchase shares of Common Stock may be granted under the
Discretionary Option Grant Program and shares of Common Stock may be issued
under the Stock Issuance Program
-14-
that are in each instance in excess of the number of shares then available for
issuance under the Plan, provided any excess shares actually issued under those
programs shall be held in escrow until there is obtained any required approval
of an amendment sufficiently increasing the number of shares of Common Stock
available for issuance under the Plan. If such approval is not obtained within
twelve (12) months after the date the first such excess issuances are made, then
(i) any unexercised options granted on the basis of such excess shares shall
terminate and cease to be outstanding and (ii) the Corporation shall promptly
refund to the Optionees and the Participants the exercise or purchase price paid
for any excess shares issued under the Plan and held in escrow, together with
interest (at the applicable Short Term Federal Rate) for the period the shares
were held in escrow, and such shares shall thereupon be automatically cancelled
and cease to be outstanding.
VI. USE OF PROCEEDS
Any cash proceeds received by the Corporation from the sale of shares of
Common Stock under the Plan shall be used for general corporate purposes.
VII. REGULATORY APPROVALS
A. The implementation of the Plan, the granting of any stock option under
the Plan and the issuance of any shares of Common Stock (i) upon the exercise of
any granted option or (ii) under the Stock Issuance Program shall be subject to
the Corporation's procurement of all approvals and permits required by
regulatory authorities having jurisdiction over the Plan, the stock options
granted under it and the shares of Common Stock issued pursuant to it.
B. No shares of Common Stock or other assets shall be issued or delivered
under the Plan unless and until there shall have been compliance with all
applicable requirements of Federal and state securities laws, including the
filing and effectiveness of the Form S-8 registration statement for the shares
of Common Stock issuable under the Plan, and all applicable listing requirements
of any stock exchange (or the Nasdaq National Market, if applicable) on which
Common Stock is then listed for trading.
VIII. NO EMPLOYMENT/SERVICE RIGHTS
Nothing in the Plan shall confer upon the Optionee or the Participant any
right to continue in Service for any period of specific duration or interfere
with or otherwise restrict in any way the rights of the Corporation (or any
Parent or Subsidiary employing or retaining such person) or of the Optionee or
the Participant, which rights are hereby expressly reserved by each, to
terminate such person's Service at any time for any reason, with or without
cause.
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APPENDIX
The following definitions shall be in effect under the Plan:
A. BELOW FAIR MARKET VALUE OPTION shall mean an option granted pursuant
to the Plan Administrator's discretionary authority under Section I.A.1 of
Article Two of the Plan with an exercise price per share less than one hundred
percent (100%) of the Fair Market Value per share of Common Stock on the option
grant date.
B. BOARD shall mean the Corporation's Board of Directors.
C. CHANGE IN CONTROL shall mean a change in ownership or control of the
Corporation effected through any of the following transactions:
(i) a stockholder-approved merger or consolidation in which
securities possessing more than fifty percent (50%) of the total combined voting
power of the Corporation's outstanding securities are transferred to a person or
persons different from the persons holding those securities immediately prior to
such transaction;
(ii) a sale, transfer or other disposition of all or substantially
all of the Corporation's assets; or
(iii) the acquisition, directly or indirectly by any person or
related group of persons (other than the Corporation or a person that directly
or indirectly controls, is controlled by, or is under common control with, the
Corporation), of beneficial ownership (within the meaning of Rule 13d-3 of the
1934 Act) of securities possessing more than fifty percent (50%) of the total
combined voting power of the Corporation's outstanding securities pursuant to a
tender or exchange offer made directly to the Corporation's stockholders which
the Board recommends such stockholders accept.
D. CODE shall mean the Internal Revenue Code of 1986, as amended.
E. COMMON STOCK shall mean the Corporation's common stock.
F. CORPORATION shall mean Hawthorne Financial Corporation, a Delaware
corporation, and its successors.
G. DISCRETIONARY OPTION GRANT PROGRAM shall mean the discretionary option
grant program in effect under the Plan.
H. EMPLOYEE shall mean an "employee" of the Corporation (or any Parent or
Subsidiary) within the meaning of Section 3401(c) of the Code and the
regulations thereunder.
I. EXERCISE DATE shall mean the date on which the Corporation shall have
received written notice of the option exercise.
J. FAIR MARKET VALUE per share of Common Stock on any relevant date shall
be determined in accordance with the following provisions:
(i) If the Common Stock is at the time traded on the Nasdaq
National Market, then the Fair Market Value shall be deemed equal to the closing
selling price per share of Common Stock on the date in question, as such price
is reported on the Nasdaq National Market or any successor system. If
APPENDIX
-1-
there is no closing selling price for the Common Stock on the date in question,
then the Fair Market Value shall be the closing selling price on the last
preceding date for which such quotation exists.
(ii) If the Common Stock is at the time listed on any Stock
Exchange, then the Fair Market Value shall be deemed equal to the closing
selling price per share of Common Stock on the date in question on the Stock
Exchange determined by the Plan Administrator to be the primary market for the
Common Stock, as such price is officially quoted in the composite tape of
transactions on such exchange. If there is no closing selling price for the
Common Stock on the date in question, then the Fair Market Value shall be the
closing selling price on the last preceding date for which such quotation
exists.
K. HOSTILE TAKE-OVER shall mean:
(i) the acquisition, directly or indirectly, by any person or
related group of persons (other than the Corporation or a person that directly
or indirectly controls, is controlled by, or is under common control with, the
Corporation) of beneficial ownership (within the meaning of Rule 13d-3 of the
1934 Act) of securities possessing more than twenty-five percent (25%) of the
total combined voting power of the Corporation's outstanding securities pursuant
to a tender or exchange offer made directly to the Corporation's stockholders
which the Board does not recommend such stockholders to accept; or
(ii) a change in the composition of the Board over a period of
thirty-six (36) consecutive months or less such that a majority of the Board
members ceases, by reason of one or more contested elections for Board
membership, to be comprised of individuals who either: (a) have been Board
members continuously since the beginning of such period; or (b) have been
elected or nominated for election as Board members during such period by at
least a majority of the Board members described in clause (a) who were still in
office at the time the Board approved such election or nomination.
L. IMMEDIATE FAMILY shall mean any child, stepchild, grandchild, parent,
stepparent, grandparent, spouse, sibling, mother-in-law, father-in-law,
son-in-law, daughter-in-law, brother-in-law, or sister-in-law, and shall include
adoptive relationships.
M. INCENTIVE OPTION shall mean an option which satisfies the requirements
of Code Section 422.
N. INVOLUNTARY TERMINATION shall mean the termination of the Service of
any individual which occurs by reason of:
(i) such individual's involuntary dismissal or discharge by the
Corporation for reasons other than Misconduct, or
(ii) such individual's voluntary resignation following (A) a
change in his or her position with the Corporation which materially reduces his
or her level of responsibility or the level of management to which Optionee
reports, (B) a reduction in his or her level of compensation (including base
salary, fringe benefits and participation in any corporate-performance based
bonus or incentive programs) by more than fifteen percent (15%) or (C) a
relocation of such individual's place of employment by more than fifty (50)
miles, provided and only if such change, reduction or relocation is effected by
the Corporation without the individual's consent.
O. MISCONDUCT shall mean the commission of any act of fraud, embezzlement
or dishonesty by the Optionee or Participant, any unauthorized use or disclosure
by such person of confidential information or trade secrets of the Corporation
(or any Parent or Subsidiary), or any other intentional misconduct by such
person adversely affecting the business or affairs of the Corporation (or
APPENDIX
-2-
any Parent or Subsidiary) in a material manner. The foregoing definition shall
not be deemed to be inclusive of all the acts or omissions which the Corporation
(or any Parent or Subsidiary) may consider as grounds for the dismissal or
discharge of any Optionee, Participant or other person in the Service of the
Corporation (or any Parent or Subsidiary).
P. 1934 ACT shall mean the Securities Exchange Act of 1934, as amended.
Q. NON-STATUTORY OPTION shall mean an option not intended to satisfy the
requirements of Code Section 422.
R. OPTIONEE shall mean any person to whom an option is granted under the
Discretionary Option Grant Program.
S. PARENT shall mean any corporation (other than the Corporation) in an
unbroken chain of corporations ending with the Corporation, provided each
corporation in the unbroken chain (other than the Corporation) owns, at the time
of the determination, stock possessing fifty percent (50%) or more of the total
combined voting power of all classes of stock in one of the other corporations
in such chain.
T. PARTICIPANT shall mean any person who is issued shares of Common Stock
or a share right award under the Stock Issuance Program.
U. PLAN shall mean the Corporation's 2001 Stock Incentive Plan, as set
forth in this document.
V. PLAN ADMINISTRATOR shall mean the particular entity, whether the
Board, the Primary Committee or the Secondary Committee, which is authorized to
administer the Discretionary Option Grant and Stock Issuance Programs with
respect to one or more classes of eligible persons, to the extent such entity is
carrying out its administrative functions under those programs with respect to
the persons under its jurisdiction.
W. PLAN EFFECTIVE DATE shall mean the date on which the Plan was adopted
by the Board.
X. PREDECESSOR PLANS shall collectively mean the Corporation's 1994 Stock
Option Plan and the Corporation's 1995 Stock Option Plan, as in effect
immediately prior to the Plan Effective Date hereunder.
Y. PRIMARY COMMITTEE shall mean a committee of two (2) or more Board
members appointed by the Board to administer the Plan with respect to Section 16
Insiders, which shall be constituted in such a manner as to permit grants under
the Plan in compliance with Rule 16b-3 of the 1934 Act.
Z. SECONDARY COMMITTEE shall mean a committee of two (2) or more Board
members appointed by the Board to administer any aspect of Plan not administered
by the Primary Committee. The members of the Secondary Committee may be Board
members who are Employees eligible to receive discretionary option grants or
direct stock issuances under the Plan or any other stock option, stock
appreciation, stock bonus or other stock plan of the Corporation (or any Parent
or Subsidiary).
AA. SECTION 16 INSIDER shall mean an officer or director of the
Corporation subject to the short-swing profit liabilities of Section 16 of the
1934 Act.
APPENDIX
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BB. SERVICE shall mean the performance of services for the Corporation
(or any Parent or Subsidiary) by a person in the capacity of an Employee, a
non-employee member of the board of directors or a consultant or independent
advisor, except to the extent otherwise specifically provided in the documents
evidencing the option grant or stock issuance.
CC. SHORT TERM FEDERAL RATE shall mean the federal short-term rate in
effect under Section 1274(d) of the Code for the period the shares were held in
escrow.
DD. STOCK EXCHANGE shall mean either the American Stock Exchange or the
New York Stock Exchange.
EE. STOCK ISSUANCE AGREEMENT shall mean the agreement entered into by the
Corporation and the Participant at the time of issuance of shares of Common
Stock under the Stock Issuance Program.
FF. STOCK ISSUANCE PROGRAM shall mean the stock issuance program in
effect under the Plan.
GG. SUBSIDIARY shall mean any corporation (other than the Corporation) in
an unbroken chain of corporations beginning with the Corporation, provided each
corporation (other than the last corporation) in the unbroken chain owns, at the
time of the determination, stock possessing fifty percent (50%) or more of the
total combined voting power of all classes of stock in one of the other
corporations in such chain.
HH. TAKE-OVER PRICE shall mean the greater of (i) the Fair Market Value
per share of Common Stock on the date the option is surrendered to the
Corporation in connection with a Hostile Take-Over or, if applicable, (ii) the
highest reported price per share of Common Stock paid by the tender offeror in
effecting the Hostile Take-Over through the acquisition of such Common Stock.
However, if the surrendered option is an Incentive Option, the Take-Over Price
shall not exceed the price per share described in clause (i) above.
II. TAXES shall mean the Federal, state and local income and employment
tax liabilities incurred by the holder of Non-Statutory Options or unvested
shares of Common Stock in connection with the exercise of those options or the
vesting of those shares.
JJ. 10% STOCKHOLDER shall mean the owner of stock (as determined under
Code Section 424(d)) possessing more than ten percent (10%) of the total
combined voting power of all classes of stock of the Corporation (or any Parent
or Subsidiary).
APPENDIX
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2001 Stock Incentive Plan
Recommendation for
Amendments
1. Article Two, Section I(A) shall be amended to provide that the minimum
exercise price of options granted under the Plan will be 100% of fair
market value on the date of the grant; provided, however, that the Board
may grant discounted options in an amount that does not exceed 10% of the
shares reserved for issuance under the Plan, in the aggregate, unless the
discount is expressly granted in lieu of cash compensation. In any event,
the minimum exercise price will be 85% of fair market value on the date
of the grant.
2. Article Two, Section III shall be amended to provide that outstanding
options may not be repriced or exchanged, except in limited circumstances
authorized by the compensation committee to fulfill a legitimate
corporate purpose and, in any event, in an amount that does not exceed
10% of the shares reserved for issuance under the Plan, in the aggregate.
3. Article Three, Section II(B) shall provide:
a. that any restricted share grants made under the Plan will have a
vesting period of at least three years, and shall not be subject
to discretionary lapse or waiver.
b. any performance share units granted under the Plan will have a
performance period of at least one year, which shall not be
subject to discretionary lapse or waiver.
4. Article Four, Section V shall provide that the Plan may not be amended
without shareholder approval if such amendment would (a) increase the
number of shares reserved under the Plan, (b) modify the eligibility
requirements or (c) materially increase the benefits to participants.
NOTE: The limitations set forth in paragraphs 1 and 2 are in the aggregate
(i.e., no more than 10% of the reserved shares may be used either for discounted
options or repriced options.)