Exhibit 10.6
FIRSTMERIT CORPORATION
AMENDED AND RESTATED
2002 STOCK PLAN
EFFECTIVE APRIL 22, 2004
FIRSTMERIT CORPORATION
AMENDED AND RESTATED
2002 STOCK PLAN
TABLE OF CONTENTS
I. INTRODUCTION........................................ 1
A. Purpose Of The Plan.............................. 1
B. Definitions...................................... 1
II. EMPLOYEES STOCK OPTION PROGRAM...................... 5
A. Administration................................... 5
B. Participation.................................... 5
C. Maximum Number Of Shares Available............... 5
D. Adjustments...................................... 5
E. Registration Conditions.......................... 6
F. Committee Action................................. 6
G. Stock Options.................................... 6
H. Amendment And Termination........................ 8
III. DIRECTORS STOCK OPTION PROGRAM................... 9
A. Administration................................... 9
B. Participation.................................... 9
C. Maximum Number Of Shares Available............... 9
D. Adjustments...................................... 9
E. Registration Conditions.......................... 9
F. Stock Options.................................... 10
G. Amendment And Termination........................ 10
IV. EMPLOYEES RESTRICTED STOCK PROGRAM............... 11
A. Administration................................... 11
B. Participation.................................... 11
C. Maximum Number Of Shares Available............... 12
D. Awards........................................... 12
E. Restrictions..................................... 12
F. Enforcement Of Restrictions...................... 13
G. Privileges Of Employee- Participant.............. 13
H. Non-Transferability.............................. 13
I. Withholding Taxes................................ 13
J. Lien On Shares................................... 13
K. Share Issuance And Transfer Restrictions......... 14
L. Acceleration On Change Of Control................ 14
M. Effective Date And Duration...................... 15
N. Exclusivity...................................... 15
O. Amendment And Termination........................ 15
V. DIRECTORS RESTRICTED STOCK PROGRAM.................. 15
A. Administration................................... 15
B. Participation.................................... 15
C. Maximum Number Of Shares Available............... 16
D. Awards........................................... 16
E. Restrictions..................................... 16
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F. Enforcement Of Restrictions...................... 17
G. Privileges Of Employee-Participant............... 17
H. Non-Transferability.............................. 17
I. Withholding Taxes................................ 17
J. Lien Of Shares................................... 17
K. Share Issuance And Transfer Restrictions......... 18
L. Acceleration On Change Of Control................ 18
M. Effective Date And Duration...................... 19
N. Exclusivity...................................... 19
O. Amendment And Termination........................ 19
V. GENERAL PROVISIONS.................................. 19
A. Government And Other Regulations................. 19
B. Other Compensation Plans And Programs............ 19
C. Miscellaneous Provisions......................... 19
D. Effective Date................................... 22
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FIRSTMERIT CORPORATION
AMENDED AND RESTATED
2002 STOCK PLAN
FirstMerit Corporation (the "Company") adopted the 2002 Stock Plan
("Plan"), subject to shareholder approval at the 2002 Annual Shareholders
Meeting, and amendments approved by the Board were approved by the shareholders
at the 2004 Annual Shareholders Meeting. The number of shares of "Common Stock"
approved and reserved under the Plan, subject to the actual shares available for
grant under the Plan, is 3,700,000 for the "Employees Stock Option Program" and
the "Employees Restricted Stock Program," and 300,000 for the "Directors Stock
Option Program" and the "Directors Restricted Stock Program." The maximum number
of shares of Common Stock which can be granted as part of the 3,700,000 shares
under the Employees Restricted Stock Program is 500,000. The maximum number of
shares of Common Stock which can be granted as part of the 300,000 shares under
the Directors Restricted Stock Program is 75,000. No stock option can be granted
under the Plan for less than "Fair Market Value" on the date of grant. The
maximum annual grant of options or restricted shares under the Plan to any one
individual shall not exceed one and one-half percent (1.5%) of the total
outstanding shares of Common Stock of the Company, in the aggregate, per
calendar year.
I. INTRODUCTION
A. Purpose Of The Plan
FirstMerit Corporation has established the Plan to further its long-term
financial success by creating the opportunity to employees and non-employee
Directors of the Company and its Subsidiaries to receive stock and stock-based
compensation whereby they can share in achieving and sustaining such success.
The Plan also provides a means to attract and retain the executive talent needed
to achieve the Company's long-term growth and profitability objectives.
B. Definitions
When used in the Plan, the following terms shall have the meanings set
forth below:
"Award(s)" shall mean Incentive Stock Options, Non-Qualified Stock
Options, Reload Stock Options, or Restricted Stock Awards granted under the
Plan.
"Award Agreement" shall mean an agreement which shall evidence the
particular terms, conditions, rights and duties of the Company and the
Participant with respect to an Award.
"Board" shall mean the Board of Directors of the Company.
"Change of Control" shall mean the occurrence of any one of the following
events:
(a) individuals who, on April 19, 2000, constitute the Board (the
"Incumbent Directors") cease for any reason to constitute at least a majority of
the Board, provided that any person becoming a director subsequent to April 19,
2000 whose election or nomination for election was approved by a vote of at
least 2/3rds of the Incumbent Directors then on the Board (either by a specific
vote or by approval of the proxy statement of the Company in which such person
is named as a nominee for director, without written objection to such
nomination) shall be an Incumbent Director; provided, however, that no director
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of the Company initially as a result of an actual or threatened election contest
with respect to directors or any other actual or threatened solicitation of
proxies or consents by or on behalf of any person other than the Board shall be
deemed to be an Incumbent Director;
(b) any "person" (as such term is defined in Section 3(a)(9) of the
Securities Exchange Act of 1934 (the "Exchange Act") and as used in Sections
13(d)(3) and 14(d)(2) of the Exchange Act) is or becomes a "beneficial owner"
(as defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of
securities of the Company representing 25% or more of the combined voting power
of the Company's then outstanding securities eligible to vote for the election
of the Board (the "Company Voting Securities"); provided, however, that the
event described in this paragraph (b) shall not be deemed to be a Change in
Control by virtue of any of the following acquisitions:
(i) by the Company or any Subsidiary,
(ii) by any employee benefit plan sponsored or maintained by the
Company or any Subsidiary,
(iii) by any underwriter temporarily holding securities pursuant to
an offering of such securities,
(iv) pursuant to a Non-Control Transaction (as defined in paragraph
(c)), or
(v) a transaction (other than one described in (c) below) in which
Company Voting Securities are acquired from the Company, if a majority of
the Incumbent Directors then on the Board approve a resolution providing
expressly that the acquisition pursuant to this clause (v) does not
constitute a Change in Control under this paragraph (b);
(c) the consummation of a merger, consolidation, statutory share
exchange or similar form of corporate transaction involving the Company or any
of its Subsidiaries that requires the approval of the Company's shareholders,
whether for such transaction or the issuance of securities in the transaction (a
"Business Combination"), unless immediately following such Business Combination:
(i) more than 50% of the total voting power of (x) the corporation
resulting from such Business Combination (the "Surviving Entity"), or (y)
if applicable, the ultimate parent corporation that directly or indirectly
has beneficial ownership of 100% of the voting securities eligible to
elect directors ("Total Voting Power") of the Surviving Entity (the
"Parent Entity"), is represented by Company Voting Securities that were
outstanding immediately prior to such Business Combination (or, if
applicable, shares into which such Company Voting Securities were
converted pursuant to such Business Combination), and such voting power
among the holders thereof is in substantially the same proportion as the
voting power of such Company Voting Securities among the holders thereof
immediately prior to the Business Combination,
(ii) no person (other than any employee benefit plan (or related
trusts) sponsored or maintained by the Surviving Entity or the Parent
Entity), is or becomes the beneficial owner, directly or indirectly, of
25% or more of the Total Voting Power of the outstanding voting securities
eligible to elect directors of the Parent Entity (or, if there is no
Parent Entity, the Surviving Entity), and
(iii) at least a majority of the members of the Board of Directors
of the Parent Entity (or, if there is no Parent Entity, the Surviving
Entity) following the consummation of the Business Combination were
Incumbent Directors at the time of the Board's approval of the execution
of the
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initial agreement providing for such Business Combination (any Business
Combination which satisfies all of the criteria specified in (i), (ii) and
(iii) above shall be deemed to be a "Non-Control Transaction"); or
(d) the shareholders of the Company approve a plan of complete
liquidation or dissolution of the Company.
Notwithstanding the foregoing, a Change in Control of the Company shall
not be deemed to occur solely because any person acquires beneficial ownership
of more than 25% of the Company Voting Securities as a result of the acquisition
of Company Voting Securities by the Company which reduces the number of Company
Voting Securities outstanding; provided, that if after such acquisition by the
Company such person becomes the beneficial owner of additional Company Voting
Securities that increases the percentage of outstanding Company Voting
Securities beneficially owned by such person by more than one percent, a Change
in Control of the Company shall then occur.
"Committee" shall mean the Compensation Committee of the Board, or such
other Committee of the Board which shall be designated by the Board to
administer the Plan. If the Board does not designate the Nominating Committee as
the Committee, the Committee will be composed of two (2) or more persons who are
from time to time appointed to serve by the Board. Each member of the Committee
will be a "non-employee director" within the meaning of Rule 16b-3 of the
Securities Exchange Act or any successor rule, as any such rule may be amended
from time to time and will qualify as an "outside director" within the meaning
of Code Section 162(m) ("Qualified Director"). A person may be appointed to the
Committee who does not qualify as a "non-employee director" if the Committee
adopts and follows a recusal procedure which qualifies under the Section 16
Rules.
"Company" shall mean FirstMerit Corporation and any successor in a
reorganization or similar transaction.
"Code" shall mean the Internal Revenue Code of 1986, as amended.
"Common Stock" shall mean the common stock of the Company, no par value
per share, and may be either stock previously authorized but unissued, or stock
reacquired by the Company.
"Director" shall mean a duly elected member of the Board.
"Directors Restricted Stock Program" shall mean the restricted stock
program delineated in Article V of this Plan.
"Directors Stock Option Program" shall mean the stock option program
delineated in Article III of this Plan.
"Director-Participant" shall mean a Director who is not also a full-time
employee of the Company or any of its Subsidiaries.
"Disability" shall mean the inability of an Employee-Participant to
perform the services normally rendered due to any physical or mental impairment
that can be expected to be of either permanent or indefinite duration, as
determined by the Committee on the basis of appropriate medical evidence, and
that results in the Employee-Participant's Termination of Employment; provided,
however, that with respect to any Employee-Participant who has entered into an
employment agreement with the Company or any of its Subsidiaries, the term of
which has not expired at the time a determination concerning
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Disability is to be made, Disability shall have the meaning attributed to
"permanent disability" in such employment agreement.
"Employees Restricted Stock Program" shall mean the restricted stock
program delineated in Article IV of this Plan.
"Employees Stock Option Program" shall mean the stock option program
delineated in Article II of this Plan.
"Employee-Participant" shall mean an employee (including a Director who is
also a full-time employee) of the Company or any of its Subsidiaries.
"Fair Market Value" shall mean with respect to a given day, the closing
sales price of a share of Common Stock, as reported by such responsible
reporting service as the Committee may select, or if there were no transactions
in the Common Stock on such day, then the last preceding day on which
transactions took place. The foregoing notwithstanding, the Committee may
determine the Fair Market Value in such other manner as it may deem more
appropriate for Plan purposes or as is required by applicable laws or
regulations.
"Incentive Stock Option" or "ISO" shall mean a right to purchase the
Company's Common Stock which is intended to comply with the terms and conditions
for an incentive stock option as set forth in Section 422 of the Code, or such
other sections of the Code as may be in effect from time to time.
"Nasdaq" shall mean The Nasdaq Stock Market, Inc.
"Non-Qualified Stock Option" or "NQSO" shall mean a right to purchase the
Company's Common Stock which is not intended to comply with the terms and
conditions for a tax-qualified stock option, as set forth in Section 422 of the
Code, or such other sections of the Code as may be in effect from time to time.
"Participant" shall mean an Employee-Participant or a
Director-Participant.
"Plan" shall mean the Company's 2002 Stock Plan, as set forth herein.
"Reload Stock Option" shall mean an option granted to an
Employee-Participant who has paid for shares subject to option through the
delivery of shares of Common Stock having an aggregate Fair Market Value as
determined on the date of exercise equal to the option price.
"Restricted Shares" shall mean those shares of Common Stock reserved for
issuance as Awards under the Employees Restricted Stock Program and the
Directors Restricted Stock Program, as further provided in Article IV(D) and
Article V(D).
"Retirement" shall mean an Employee-Participant's Termination of
Employment by reason of retirement at his normal retirement date, pursuant to
and in accordance with a pension, retirement or similar plan or other regular
retirement practice of the Company or any of its Subsidiaries, or in accordance
with the early retirement provision(s) thereof.
"Securities Act" shall mean the Securities Act of 1933, as amended.
"Securities Exchange Act" shall mean the Securities Exchange Act of 1934,
as amended.
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"Subsidiaries" shall mean the majority-owned subsidiaries of the Company.
"Termination of Employment" shall mean a cessation of the
employee-employer relationship between an Employee-Participant and the Company
or its Subsidiaries for any reason.
"Termination of Service" shall mean a cessation of the Director's
relationship with the Company for any reason.
II. EMPLOYEES STOCK OPTION PROGRAM
A. Administration
The Employees Stock Option Program shall be administered by the Committee,
which, subject to the express provisions of the Employees Stock Option Program,
shall have full and exclusive authority to interpret the Employees Stock Option
Program, to prescribe, amend and rescind rules and regulations relating to the
Employees Stock Option Program and to make all other determinations deemed
necessary or advisable in the implementation and administration of the Employees
Stock Option Program; provided, however, that subject to the express provisions
hereof or unless required by applicable law or regulation, no action of the
Committee shall adversely affect the terms and conditions of any Award made to,
or any rights hereunder or under any Award Agreement of, any
Employee-Participant, without such Employee-Participant's consent. The
Committee's interpretation and construction of the Employees Stock Option
Program shall be conclusive and binding on all persons, including the Company
and all Employee-Participants.
B. Participation
The Committee shall, from time to time, make recommendations to the Board
with respect to the selection of Employee-Participants and the Award or Awards
to be granted to each Employee-Participant, and thereafter grant such Award or
Awards upon the approval of a majority of the members of the Board present and
voting upon such approval, who are Qualified Directors. In making its
recommendations, the Committee may take into account the nature of the services
rendered or expected to be rendered by the respective Employee-Participants,
their present and potential contributions to the Company's success, and such
other factors as the Committee in its discretion shall deem relevant.
C. Maximum Number Of Shares Available
The maximum number of shares which may be granted under the Employees
Stock Option Program is three million seven hundred thousand (3,700,000) shares,
less shares granted under the Employees Restricted Stock Program.
No Incentive Stock Options shall be granted after January 1, 2012, or such
other period required under the Code.
D. Adjustments
In the event of stock dividends, stock splits, recapitalizations, mergers,
consolidations, combinations, exchanges of shares, spin-offs, liquidations,
reclassifications or other similar changes in the capitalization of the Company,
the number of shares of Common Stock available for grant under this Employees
Stock Option Program shall be adjusted proportionately or otherwise by the Board
and, where deemed appropriate, the number of shares covered by outstanding stock
options and the option
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price of outstanding stock options shall be similarly adjusted. No adjustment to
the exercise price of an outstanding stock option shall be made without there
having been a change in the capitalization of the Company of a type set forth
above.
E. Registration Conditions
Unless issued pursuant to a registration statement under the Securities
Act, no shares shall be issued to an Employee-Participant under the Employees
Stock Option Program unless the Employee-Participant represents to and agrees
with the Company that such shares are being acquired for investment and not with
a view to the resale or distribution thereof, or such other documentation as may
be required by the Company unless, in the opinion of counsel to the Company,
such representation, agreement or documentation is not necessary to comply with
the Securities Act.
Any restriction on the resale of shares shall be evidenced by an
appropriate legend on the stock certificate.
The Company shall not be obligated to deliver any Common Stock until it
has been listed on each securities exchange on which the Common Stock may then
be listed or until there has been qualification under or compliance with such
federal or state laws, rules or regulations as the Company may deem applicable.
The Company shall use reasonable efforts to obtain such listing,
qualification and compliance.
F. Committee Action
The Committee may, through Award Agreements, limit its discretion under
this Employees Stock Option Program. To the extent such discretion is not
specifically waived in an Award Agreement, the Committee shall retain such
discretion.
G. Stock Options
All stock options granted to Employee-Participants under the Employees
Stock Option Program shall be evidenced by Award Agreements which shall be
subject to applicable provisions of the Employees Stock Option Program, and such
other provisions as the Committee may adopt, including the following provisions:
1. PRICE. The option price per share of Non-Qualified Stock Options
("NQSOs") and the option price per share of Incentive Stock Options ("ISOs")
shall not be less than 100 percent of the Fair Market Value of a share of Common
Stock on the date of grant. If a NQSO is to meet the requirements of Section
162(m) of the Code, it shall be issued at Fair Market Value on the date of
grant.
2. PERIOD. An ISO shall not be exercisable for a term longer than ten
(10) years from date of grant. NQSOs shall have a term as established by the
Committee.
3. TIME OF EXERCISE. The Committee may prescribe the timing of the
exercise of the stock option and any minimums and installment provisions and may
accelerate the time at which a stock option becomes exercisable, provided that
with respect to ISOs, no such acceleration shall result in a violation of
Section 6 of this Paragraph G.
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4. EXERCISE PROCEDURES. A stock option, or portion thereof, shall be
exercised by delivery of a written notice of exercise to the Company and payment
of the full price of the shares being purchased.
5. PAYMENT. The price of an exercised stock option, or portion thereof,
may be paid pursuant to Paragraph VI.C.11.
6. SPECIAL RULE FOR INCENTIVE STOCK OPTIONS. If the aggregate Fair
Market Value of Common Stock with respect to which ISOs are exercisable for the
first time by an Employee-Participant during any calendar year (under this
Employees Stock Option Program and all other plans of the Company and its
Subsidiaries) exceeds One Hundred Thousand Dollars ($100,000), such ISOs shall
be treated as NQSOs to the extent of the excess. In applying the foregoing
limitation, ISOs shall be taken into account in the order in which they were
granted, and the Fair Market Value of Common Stock subject to such ISOs shall be
determined as of the date of grant. If such limit is exceeded in any calendar
year, the Company shall have the right to designate which shares of Common Stock
purchased pursuant to such ISOs shall be treated as having been acquired by the
Employee-Participant pursuant to an ISO.
7. RELOAD STOCK OPTIONS. A Reload Stock Option may be granted by the
Committee in an Award Agreement. If a Reload Stock Option has been granted, and
the stock option is exercised while the Employee-Participant is employed by the
Company and the Employee-Participant pays for the shares subject to an option
through the delivery of Common Stock having an aggregate Fair Market Value as
determined on the date of exercise equal to the option price, the
Employee-Participant will be granted a Reload Stock Option on the date of such
exercise. The Reload Stock Option Award shall equal the number of whole shares
of Common Stock used to pay the purchase price, and the exercise price of the
Reload Stock Option shall equal the then Fair Market Value of the Common Stock
on the date of grant of the Reload Stock Option. If the Company withholds shares
of Common Stock to cover applicable income and employment taxes related to the
exercise of an option, then the Reload Stock Option Award shall equal the number
of whole shares of Common Stock used to pay the purchase price less the number
of shares withheld. Shares of stock acquired upon the exercise of the stock
option where a Reload Stock Option Award has been made, may not be sold or
otherwise transferred, including, without limitation, transfers by way of gift,
for a period of six months after the date of such shares are received.
Subject to the provisions of the Employees Stock Option Program, the
Reload Stock Option may be exercised between its date of grant and the date of
expiration of the original stock option. If any of the shares of stock acquired
upon the exercise of the stock option which resulted in the grant of the Reload
Stock Option during the six-month period following the date such shares were
received, are sold or otherwise transferred, including, without limitation,
transfers by way of gift, the Reload Stock Option shall be cancelled.
A Reload Stock Option shall be evidenced by an Award Agreement containing
such other terms and conditions as the Committee approves. No Reload Stock
Option shall be granted with respect to a stock option exercised after the
Employee-Participant's Retirement, Disability, death or other Termination of
Employment.
8. EFFECT OF LEAVES OF ABSENCE. It shall not be considered a
Termination of Employment when an Employee-Participant is placed by the Company
or any of its Subsidiaries on military leave, sick leave or other bona fide
leave of absence. In case of such leave of absence, the employment relationship
for Employees Stock Option Program purposes shall be continued until the later
of the date when such leave of absence equals ninety (90) days or when the
Employee-Participant's right to reemployment with the Company or any of its
Subsidiaries shall no longer be guaranteed either by statute or contract.
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9. TERMINATION OF EMPLOYMENT. In the event of Termination of
Employment, the following provisions shall apply with respect to ISOs and NQSOs
unless waived by the Committee, or as otherwise specifically provided in the
Award Agreement.
a. TERMINATION DUE TO DEATH, DISABILITY OR RETIREMENT. NQSOs and
ISOs shall be exercisable for a period equal to the lesser of
five (5) years or the remaining option term; provided,
however, that if the Employee-Participant elects to exercise
his ISOs (i) later than three (3) months after the date of his
Termination of Employment due to Retirement or (ii) twelve
(12) months after the date of his Termination of Employment
due to Disability, such ISOs shall be treated as NQSOs under
the Code for purposes of calculating the federal income tax
applicable as a result of the exercise of such ISOs and the
subsequent disposition of the acquired shares.
b. OTHER TERMINATION. If an Employee-Participant's employment
with the Company or any of its Subsidiaries is terminated for
any reason other than death, Disability or Retirement, all
Awards under this Employees Stock Option Program shall be
immediately canceled, except that if the termination is by the
Company or any of its Subsidiaries or for any reason other
than misconduct or misfeasance, the Employee-Participant shall
have thirty (30) days thereafter within which to exercise his
options to the extent that the options are otherwise
exercisable immediately prior to such termination; and
further, if such termination is attributable to a Change of
Control, such Award shall not be canceled but shall continue
as though the Employee-Participant remained in the employ of
the Company or any of its Subsidiaries during the remaining
option term of the Award and shall vest immediately.
c. LIMITATIONS ON EXERCISE. Notwithstanding the foregoing, the
Committee may rescind the right to exercise stock options
following Termination of Employment if the
Employee-Participant has been found to be directly or
indirectly engaged in any activity which is in competition
with the Company or any of its Subsidiaries or is otherwise
adverse to, or not in the best interest of, the Company or any
of its Subsidiaries. Further, no option agreement for ISOs may
extend their exercise period beyond the time allowed by the
Code.
H. Amendment And Termination
The Board may, at any time and from time to time, suspend or terminate the
Employees Stock Option Program in whole or amend it from time to time in such
respects as the Board may deem appropriate, subject, however, to the Code, the
securities laws and the rules of Nasdaq.
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III. DIRECTORS STOCK OPTION PROGRAM
A. Administration
The Directors Stock Option Program is a self-executing grant program which
shall be administered by the Secretary of the Company. Subject to the express
provisions of the Directors Stock Option Program, the Secretary shall have full
and exclusive authority to interpret the Directors Stock Option Program, and to
make such determinations deemed necessary or advisable in the implementation and
administration of the Directors Stock Option Program; provided, however, that
subject to the express provisions hereof or unless required by applicable law or
regulation, no action of the Secretary shall adversely affect the terms and
conditions of any Award made to, or any rights hereunder or under any Award
Agreement of, any Director-Participant without such Director-Participant's
consent.
B. Participation
All Directors who are not also full-time employees of the Company or a
Subsidiary shall be Director-Participants in the Directors Stock Option Program
and shall be awarded options to purchase three thousand (3,000) shares each year
on the day following the annual shareholders meeting. The Board reserves the
right to amend the Plan from time to time to change the number of options
granted to the Directors, but in no event can the Committee increase the annual
grant to exceed options to acquire ten thousand (10,000) shares per year.
C. Maximum Number Of Shares Available
The maximum number of shares which may be granted under this Directors
Stock Option Program is three hundred thousand (300,000) shares, less shares
granted under the Directors Restricted Stock Program.
D. Adjustments
In the event of stock dividends, stock splits, recapitalizations, mergers,
consolidations, combinations, exchanges of shares, spin-offs, liquidations,
reclassifications or other similar changes in the capitalization of the Company,
the number of shares of Common Stock available for grant under this Directors
Stock Option Program shall be adjusted proportionately or otherwise by the
Board, and where deemed appropriate, the number of shares covered by outstanding
stock options and the option price of outstanding stock options shall be
similarly adjusted. No adjustment to the exercise price of an outstanding stock
option shall be made without there having been a change in the capitalization of
the Company of a type set forth above.
E. Registration Conditions
Unless issued pursuant to a registration statement under the Securities
Act, no shares shall be issued to a Director-Participant under the Directors
Stock Option Program unless the Director-Participant represents to and agrees
with the Company that such shares are being acquired for investment and not with
a view to the resale or distribution thereof, or such other documentation as may
be required by the Company unless, in the opinion of counsel to the Company,
such representation, agreement or documentation is not necessary to comply with
the Securities Act.
Any restriction on the resale of shares shall be evidenced by an
appropriate legend on the stock certificate.
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The Company shall not be obligated to deliver any Common Stock until it
has been listed on each securities exchange on which the Common Stock may then
be listed or until there has been qualification under or compliance with such
federal or state laws, rules or regulations as the Company may deem applicable.
The Company shall use reasonable efforts to obtain such listing, qualification
and compliance.
F. Stock Options
All stock options granted to Director-Participants under the Directors
Stock Option Program shall be evidenced by Award Agreements which shall be
subject to applicable provisions of the Directors Stock Option Program,
including the following provisions:
1. PRICE. The option price per share shall be 100 percent of the Fair
Market Value of a share of Common Stock on the date of grant.
2. PERIOD. Any option granted under the Directors Stock Option Program
shall be exercisable for a term of ten (10) years from the date of grant.
3. TIME OF EXERCISE. The Committee may prescribe the timing of the
exercise of the stock option and any minimums and installment provisions and may
accelerate the time at which a stock option becomes exercisable.
4. EXERCISE PROCEDURES. A stock option, or portion thereof, shall be
exercised by delivery of a written notice of exercise to the Company and payment
of the full price of the shares being purchased.
5. PAYMENT. The price of an exercised stock option, or portion thereof,
may be paid pursuant to Paragraph VI.C.11.
6. TERMINATION OF SERVICE. In the event of Termination of Service, the
following provisions shall apply:
a. DISCHARGE FOR CAUSE. All outstanding options shall be
canceled at termination if a Director's Termination of
Service is for cause.
b. TERMINATION OTHER THAN FOR CAUSE. Options shall be
exercisable for a period equal to the lesser of five (5)
years or the remaining option term if a Director is
discharged other than for Cause.
G. Amendment And Termination
The Board may, at any time and from time to time, amend, suspend or
terminate the Directors Stock Option Program, subject to the applicable
requirements and restrictions of the Code, the securities laws and the rules of
Nasdaq. The Directors Stock Option Program may not be materially amended without
shareholder approval, however, an increase in the number of shares for which an
annual option may be granted as provided in Article III, Section B, shall not be
deemed a material amendment requiring shareholder approval.
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IV. EMPLOYEES RESTRICTED STOCK PROGRAM
A. Administration
The Employees Restricted Stock Program shall be administered by the
Committee. A majority of members of the Committee shall constitute a quorum, and
all determinations of the Committee shall be made by a majority of its members.
Any determination of the Committee under the Employees Restricted Stock Program
may be made without notice or meeting, by a writing signed by a majority of the
Committee members.
In accordance with and subject to the provisions of the Employees
Restricted Stock Program, the Committee shall, from time to time, recommend to
the Board:
1. the Employee-Participants from those employees meeting the
eligibility criteria described in Paragraph B,
2. the number of shares to be subject to each Award,
3. the time at which Awards are made,
4. the duration and nature of Award restrictions,
5. such other provisions of the Awards as may be deemed necessary or
desirable, consistent with the terms of the Employees Restricted
Stock Program, and
6. the form or forms of the Award Agreements to be entered into with
Employee- Participants.
The Committee shall have the authority, subject to the provisions of the
Employees Restricted Stock Program, to establish, adopt and revise such rules
and regulations relating to the Employees Restricted Stock Program as it may
deem necessary or desirable for the administration of the Employees Restricted
Stock Program. Each determination, interpretation or other action made or taken
by the Committee pursuant to the provisions of the Employees Restricted Stock
Program shall be conclusive and binding for all purposes and on all persons,
including without limitation the Company, the stockholders of the Company, the
Committee and each of the members thereof, the Board, officers and employees of
the Company and the Employee-Participants and their respective successors in
interest.
B. Participation
Employee-Participants shall be such key employees (including officers) of
the Company and any present or future Subsidiary as the Committee, in its sole
discretion, determines to be mainly responsible for the success and future
growth and profitability of the Company and value to its stockholders and whom
the Committee may designate from time to time to receive Awards under the
Employees Restricted Stock Program. Awards may be granted under this Employees
Restricted Stock Program to persons who have previously received Awards or other
benefits under this or other plans of the Company.
The Committee shall, from time to time, make recommendations to the Board
with respect to the selection of Employee-Participants and the Award or Awards
to be granted to each Employee-Participant, and thereafter grant such Award or
Awards upon the approval of a majority of the members of the Board who are
present and voting upon such approval and who are Qualified Directors. In making
its
11
recommendations, the Committee may take into account the nature of the services
rendered or expected to be rendered by the respective Employee-Participants,
their present and potential contributions to the Company's success, and such
other factors as the Committee in its discretion shall deem relevant.
C. Maximum Number Of Shares Available
The maximum number of shares which may be granted under the Employees
Restricted Stock Program is five hundred thousand (500,000) shares, which may be
authorized but unissued or treasury shares.
Any shares subject to Awards may thereafter be subject to new Awards under
this Employees Restricted Stock Program if shares of Common Stock are issued
under such Awards and are thereafter reacquired by the Company pursuant to
rights reserved by the Company upon issuance thereof, including, without
limitation, the forfeiture of shares subject to an Award prior to the lapse of
restrictions.
If the Company shall at any time change the number of issued shares of
Common Stock without new considerations to the Company (by stock dividends,
stock splits or similar transactions), the total number of shares reserved for
issuance under the Employees Restricted Stock Program shall be adjusted
proportionately. Awards may also contain provisions for their continuation or
for other equitable adjustments after changes in the Common Stock resulting from
reorganization, sale, merger, consolidation or similar circumstances.
D. Awards
Awards may consist of grants of Restricted Shares to Employee-Participants
as a bonus for service rendered to the Company without other payment therefor or
for payment at less than Fair Market Value. In addition to the restrictions
described in Paragraph E, any Award under the Employees Restricted Stock Program
may be subject to such other provisions (whether or not applicable to an Award
to any other Employee-Participant) as the Committee deems appropriate,
including, without limitation, provisions for the forfeiture of and restrictions
on the sale, resale or other disposition of shares acquired under any Award,
provisions giving the Company the right to repurchase shares acquired under any
Award, provisions to comply with federal and state securities laws, or
understandings or conditions as to the Employee-Participant's employment in
addition to those specifically provided for under the Employees Restricted Stock
Program.
E. Restrictions
An Employee-Participant shall not have a right to retain any Restricted
Shares granted under an Award unless and until such restrictions have by their
terms lapsed. The lapsing of such restrictions is referred to herein as
"Vesting," and the shares after Vesting has occurred are referred to herein as
"Vested Shares." The restrictions which the Committee may place on the Awards
include, without limitation, the Employee-Participant's continued employment
with the Company for certain periods of time as determined by the Committee and
the attainment of various performance goals by the Employee-Participant and/or
the Company as specified by the Committee with respect to such Award. The
Committee may, in its sole discretion, require different periods of employment
or different performance goals with respect to different Employee-Participants,
with respect to different Awards or with respect to separate, designated
portions of an Award. The Committee may, in its sole discretion, terminate
restrictions on shares issued pursuant to an Award prior to the time such
restrictions otherwise would have lapsed. Any Restricted Shares granted under an
Award which have not become Vested Shares on or before the termination date, if
any, set forth in the Award Agreement shall permanently be forfeited, and shall
thereafter become available for reissuance under the Plan.
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F. Enforcement Of Restrictions
The Committee, in its sole discretion, may employ one or more methods of
enforcing the restrictions referred to in Paragraphs E, G, H and J including,
without limitation, the following:
1. placing a legend on the stock certificates referring to the
restrictions,
2. requiring the Employee-Participant to keep stock certificates, duly
endorsed, in the custody of the Company or its designated agent
while the restrictions remain in effect,
3. not issuing certificates for Restricted Shares until the shares
become Vested Shares, or
4. retaining a possessory lien in the Award Shares as provided in
Paragraph J below.
G. Privileges Of Employee Participant
Restricted Shares shall constitute issued and outstanding shares of the
Company for all corporate purposes, and the Employee-Participant shall have all
voting and (subject to any Award restrictions) all dividend, liquidation and
other rights with respect to Restricted Shares while the corresponding Award
remains in effect, as if such Employee-Participant were a holder of record of
unrestricted shares of Common Stock. Notwithstanding the foregoing, prior to the
time at which a Restricted Share becomes a Vested Share, the
Employee-Participant's right to assign or transfer such Restricted Share shall
be subject to the limitations of Paragraph H. Certificates representing
Restricted Shares shall bear a restrictive legend disclosing the restrictions,
the existence of the Employees Restricted Stock Program and the existence of the
applicable Award.
H. Non-Transferability
No right or interest of any Employee-Participant in any Award made
pursuant to the Employees Restricted Stock Program shall, prior to the
satisfaction of all restrictions applicable thereto, be assignable or
transferable, in whole or in part, during the lifetime of the
Employee-Participant, either voluntarily or involuntarily, or be made subject to
any lien (except as provided in Paragraphs F and J), directly or indirectly, by
operation of law or otherwise, including execution, levy, garnishment,
attachment, pledge or bankruptcy. In the event of an Employee-Participant's
death, his right and interest in any Award shall, to the extent provided in the
Award, be transferable by testamentary will or the laws of descent and
distribution, and the issuance of any shares subject to an Award shall be made
to the Employee-Participant's legal representatives, heirs or legatees upon
furnishing the Committee with evidence satisfactory to the Committee of such
status.
I. Withholding Taxes
The Company is entitled to withhold and deduct or take such other action
as delineated in Section VI.C.4.
J. Lien On Shares
The Company may, in its sole discretion, require that an
Employee-Participant, as a condition to the receipt of an Award, grant to the
Company a possessory lien on the Restricted Shares in order to secure retransfer
of the shares into the name of the Company, and ensure adequate provision for
any tax withholding obligations arising with respect to such Award, and to that
end, may require that certificates
13
evidencing Restricted Shares be deposited by the Employee-Participant with the
Company, together with stock powers or other instruments of assignment, each
endorsed in blank, which will permit the transfer to the Company of all or any
portion of the Restricted Shares which are forfeited or required to be retained
to satisfy the Employee-Participant's withholding obligations to the Company.
K. Share Issuance And Transfer Restrictions
1. SHARE ISSUANCE. Notwithstanding any other provision of the Employees
Restricted Stock Program or any Award Agreement entered into pursuant hereto,
the Company shall not be required to issue or deliver any certificate for shares
under this Employees Restricted Stock Program unless and until both of the
following are satisfied:
a. either:
i. there shall be in effect with respect to such shares a
registration statement under the Securities Act and any
applicable state securities laws, if the Committee, in
its sole discretion, shall have determined to file,
cause to become effective and maintain the effectiveness
of such registration statement, or
ii. if the Committee has determined not to so register the
shares, exemptions from registration under the
Securities Act and applicable state securities laws
shall be available for such issuance as determined by
counsel for the Company, and there shall have been
received from the Employee-Participant (or in the event
of death or Disability, the Employee-Participant's
heir(s) or legal representative(s)) any representations
or agreements requested by the Company in order to
permit such issuance to be made pursuant to such
exemptions, and
b. there shall have been obtained any other consent, approval or
permit from any state or federal government agency which the
Committee shall, in its sole discretion and upon the advice of
counsel, deem necessary or advisable.
2. TRANSFERS OF VESTED SHARES. Vested Shares may not be sold, assigned,
transferred, pledged, encumbered or otherwise disposed of (whether voluntarily
or involuntarily) except pursuant to registration under the Securities Act and
applicable state securities laws or pursuant to exemptions from such
registrations. The Company may condition the sale, assignment, transfer, pledge,
encumbrance or other disposition of such shares not issued pursuant to an
effective and current registration statement under the Securities Act and all
applicable state securities laws, on the receipt from the party to whom the
shares are to be so transferred of any representations or agreements requested
by the Company in order to permit such transfer to be made.
3 LEGENDS. Unless a registration under the Securities Act is in effect
with respect to the issuance or transfer of Vested Shares, each certificate
representing such shares will be endorsed with a legend in the form determined
necessary by the Committee or its counsel.
L. Acceleration On Change Of Control
The Committee may provide, in its sole discretion, in one or more Awards,
that notwithstanding the provisions of each Award which would result in a
forfeiture as a result of the Employee-Participant's
14
termination of employment with the Company prior to the Vesting of Restricted
Shares, the Restricted Shares subject to such Award shall immediately become
Vested Shares as a result of a Change of Control.
M. Effective Date And Duration
The Employees Restricted Stock Program shall continue in effect until it
is terminated by action of the Board, but such termination shall not affect the
then outstanding terms of any Award. No Award shall be granted more than ten
(10) years after the date of adoption of the Employees Restricted Stock Option
Program.
N. Exclusivity
Nothing contained in this Employees Restricted Stock Program is intended
to amend, modify or rescind any previously approved compensation plans or
programs adopted by the Company. The Employees Restricted Stock Program will be
construed to be in addition to any and all such other plans or programs.
O. Amendment And Termination
The Board may amend the Employees Restricted Stock Program from time to
time or terminate the Employees Restricted Stock Program at any time. The
Employees Restricted Stock Program may not be materially amended without
shareholder approval, although an increase in the number of shares for which an
annual Restricted Share Award may be granted as provided in Article IV, Section
B, shall not be deemed a material amendment requiring shareholder approval. In
addition, the Company may amend the terms of any Award previously granted under
this Employees Restricted Stock Program, prospectively or retroactively,
although no action authorized by this Paragraph O shall impair the rights of any
Employee-Participant without his consent.
V. DIRECTORS RESTRICTED STOCK PROGRAM
A. Administration
The Directors Restricted Stock Program is a self-executing grant program
which shall be administered by the Secretary of the Company. Subject to the
express provisions of the Directors Restricted Stock Program, the Secretary
shall have full and exclusive authority to interpret the Directors Restricted
Stock Program, and to make such determinations deemed necessary or advisable in
the implementation and administration of the Directors Restricted Stock Program;
provided, however, that subject to the express provisions hereof or unless
required by applicable law or regulation, no action of the Secretary shall
adversely affect the terms and conditions of any Award made to, or any rights
hereunder or under any Award Agreement of, any Director-Participant without such
Director-Participant's consent.
B. Participation
All Directors who are not also full-time employees of the Company or a
Subsidiary shall be Director-Participants in the Directors Restricted Stock
Program and shall be awarded 500 Restricted Shares each year on the day
following the annual shareholders meeting. In addition, each
Director-Participant shall be awarded 1,000 Restricted Shares on the date
immediately after such Director-Participant is first elected to the Board, and
each Director-Participant on April 22, 2004, shall receive on April 22, 2004, a
one-time Award of 1,000 Restricted Shares. The Board reserves the right to amend
the
15
Plan from time to time to change the number of Restricted Shares granted to the
Directors, but in no event can the Committee (i) increase the annual grant to
exceed two-thousand five hundred (2,500) shares per year or (ii) grant a
combination of Restricted Shares and options pursuant to the Directors Stock
Option Program, such that the sum of (x) four times the number of Restricted
Shares awarded under the Directors Restricted Stock Program plus (y) the number
of shares that may be purchased upon the exercise of options awarded under the
Directors Stock Option Plan, exceeds 10,000 in one year to each
Director-Participant.
C. Maximum Number Of Shares Available
The maximum number of shares which may be granted under the Directors
Restricted Stock Program is seventy-five thousand (75,000) shares, which may be
authorized but unissued or treasury shares.
Any shares subject to Awards may thereafter be subject to new Awards under
this Directors Restricted Stock Program if shares of Common Stock are issued
under such Awards and are thereafter reacquired by the Company pursuant to
rights reserved by the Company upon issuance thereof, including, without
limitation, the forfeiture of shares subject to an Award prior to the lapse of
restrictions.
If the Company shall at any time change the number of issued shares of
Common Stock without new consideration to the Company (by stock dividends, stock
splits or similar transactions), the total number of shares reserved for
issuance under the Directors Restricted Stock Program shall be adjusted
proportionately. Awards may also contain provisions for their continuation or
for other equitable adjustments after changes in the Common Stock resulting from
reorganization, sale, merger, consolidation or similar circumstances.
D. Awards
Any Award under the Directors Restricted Stock Program will be evidenced
by a written award agreement and may be subject to such provisions as the
Committee deems appropriate, including, without limitation, provisions for the
forfeiture of and restrictions on the sale, resale or other disposition of
shares acquired under any Award, provisions giving the Company the right to
repurchase shares acquired under any Award, provisions to comply with federal
and state securities laws, or understandings or conditions as to the
Director-Participant's service on the Board, in addition to those specifically
provided for under the Directors Restricted Stock Program.
E. Restrictions
A Director-Participant shall not have a right to retain any Restricted
Shares granted under an Award unless and until such restrictions have by their
terms lapsed. The lapsing of such restrictions is referred to herein as
"Vesting," and the shares after Vesting has occurred are referred to herein as
"Vested Shares." The restrictions which the Committee may place on the Awards
include, without limitation, the Director-Participant's continued service on the
Board for certain periods of time as determined by the Committee and the
attainment of various performance goals by the Company as specified by the
Committee with respect to such Award. The Committee may, in its sole discretion,
terminate restrictions on shares issued pursuant to an Award prior to the time
such restrictions otherwise would have lapsed. Any Restricted Shares granted
under an Award which have not become Vested Shares on or before the termination
date, if any, set forth in the Award Agreement shall permanently be forfeited,
and shall thereafter become available for reissuance under the Plan.
16
F. Enforcement Of Restrictions
The Committee, in its sole discretion, may employ one or more methods of
enforcing the restrictions referred to in Paragraphs E, G, H and J including,
without limitation, the following:
1. placing a legend on the stock certificates referring to the
restrictions,
2. requiring the Director-Participant to keep stock certificates, duly
endorsed, in the custody of the Company or its designated agent
while the restrictions remain in effect,
3. not issuing certificates for Restricted Shares until the shares
become Vested Shares, or
4. retaining a possessory lien in the Award Shares as provided in
Paragraph J below.
G. Privileges Of Director Participant
Restricted Shares shall constitute issued and outstanding shares of the
Company for all corporate purposes, and the Director-Participant shall have all
voting and (subject to any Award restrictions) all dividend, liquidation and
other rights with respect to Restricted Shares while the corresponding Award
remains in effect, as if such Director-Participant were a holder of record of
unrestricted shares of Common Stock. Notwithstanding the foregoing, prior to the
time at which a Restricted Share becomes a Vested Share, the
Employee-Participant's right to assign or transfer such Restricted Share shall
be subject to the limitations of Paragraph H. Certificates representing
Restricted Shares shall bear a restrictive legend disclosing the restrictions,
the existence of the Directors Restricted Stock Program and the existence of the
applicable Award.
H. Non-Transferability
No right or interest of any Director-Participant in any Award made
pursuant to the Directors Restricted Stock Program shall, prior to the
satisfaction of all restrictions applicable thereto, be assignable or
transferable, in whole or in part, during the lifetime of the
Director-Participant, either voluntarily or involuntarily, or be made subject to
any lien (except as provided in Paragraphs F and J), directly or indirectly, by
operation of law or otherwise, including execution, levy, garnishment,
attachment, pledge or bankruptcy. In the event of a Director-Participant's
death, his right and interest in any Award shall, to the extent provided in the
Award, be transferable by testamentary will or the laws of descent and
distribution, and the issuance of any shares subject to an Award shall be made
to the Director-Participant's legal representatives, heirs or legatees upon
furnishing the Committee with evidence satisfactory to the Committee of such
status.
I. Withholding Taxes
The Company is entitled to withhold and deduct or take such other action
as delineated in Section VI.C.4.
J. Lien On Shares
The Company may, in its sole discretion, require that a
Director-Participant, as a condition to the receipt of an Award, grant to the
Company a possessory lien on the Restricted Shares in order to secure retransfer
of the shares into the name of the Company, and ensure adequate provision for
any tax withholding obligations arising with respect to such Award, and to that
end, may require that certificates evidencing Restricted Shares be deposited by
the Director-Participant with the Company, together with
17
stock powers or other instruments of assignment, each endorsed in blank, which
will permit the transfer to the Company of all or any portion of the Restricted
Shares which are forfeited or required to be retained to satisfy the
Director-Participant's withholding obligations to the Company.
K. Share Issuance And Transfer Restrictions
1. SHARE ISSUANCE. Notwithstanding any other provision of the Directors
Restricted Stock Program or any Award Agreement entered into pursuant hereto,
the Company shall not be required to issue or deliver any certificate for shares
under this Directors Restricted Stock Program unless and until both of the
following are satisfied:
a. either:
i. there shall be in effect with respect to such shares a
registration statement under the Securities Act and any
applicable state securities laws, if the Committee, in
its sole discretion, shall have determined to file,
cause to become effective and maintain the effectiveness
of such registration statement, or
ii. if the Committee has determined not to so register the
shares, exemptions from registration under the
Securities Act and applicable state securities laws
shall be available for such issuance as determined by
counsel for the Company, and there shall have been
received from the Director-Participant (or in the event
of death or Disability, the Director-Participant's
heir(s) or legal representative(s)) any representations
or agreements requested by the Company in order to
permit such issuance to be made pursuant to such
exemptions, and
b. there shall have been obtained any other consent, approval or
permit from any state or federal government agency which the
Committee shall, in its sole discretion and upon the advice of
counsel, deem necessary or advisable.
2. TRANSFERS OF VESTED SHARES. Vested Shares may not be sold, assigned,
transferred, pledged, encumbered or otherwise disposed of (whether voluntarily
or involuntarily) except pursuant to registration under the Securities Act and
applicable state securities laws or pursuant to exemptions from such
registrations. The Company may condition the sale, assignment, transfer, pledge,
encumbrance or other disposition of such shares not issued pursuant to an
effective and current registration statement under the Securities Act and all
applicable state securities laws, on the receipt from the party to whom the
shares are to be so transferred of any representations or agreements requested
by the Company in order to permit such transfer to be made.
3 LEGENDS. Unless a registration under the Securities Act is in effect
with respect to the issuance or transfer of Vested Shares, each certificate
representing such shares will be endorsed with a legend in the form determined
necessary by the Committee or its counsel.
L. Acceleration On Change Of Control
All Restricted Shares subject to Awards under the Directors Restricted
Stock Program shall immediately become Vested Shares as a result of a Change of
Control.
18
M. Effective Date And Duration
The Directors Restricted Stock Program shall continue in effect until it
is terminated by action of the Board, but such termination shall not affect the
then outstanding terms of any Award. No Award shall be granted more than ten
(10) years after the date of adoption of the Directors Restricted Stock Program.
N. Exclusivity
Nothing contained in this Directors Restricted Stock Program is intended
to amend, modify or rescind any previously approved compensation plans or
programs adopted by the Company. The Directors Restricted Stock Program will be
construed to be in addition to any and all such other plans or programs.
O. Amendment And Termination
The Board may amend the Directors Restricted Stock Program from time to
time or terminate the Directors Restricted Stock Program at any time. The
Directors Restricted Stock Program may not be materially amended without
shareholder approval, although an increase in the number of shares for which an
annual Restricted Share Award may be granted as provided in Article V, Section
B, shall not be deemed a material amendment requiring shareholder approval. In
addition, the Company may amend the terms of any Award previously granted under
this Directors Restricted Stock Program, prospectively or retroactively,
although no action authorized by this Paragraph O shall impair the rights of any
Director-Participant without his consent.
VI. GENERAL PROVISIONS
A. Government And Other Regulations
The obligation of the Company to issue Awards under the Plan shall be
subject to all applicable laws, rules and regulations, and to such approvals by
any government agencies as may be required.
B. Other Compensation Plans And Programs
The Plan shall not be deemed to preclude the implementation by the Company
and its Subsidiaries of other compensation plans or programs which may be in
effect from time to time.
C. Miscellaneous Provisions
1. NO RIGHT TO CONTINUE EMPLOYMENT. Nothing in the Plan or in any Award
or Award Agreement confers upon any Employee-Participant the right to continue
in the employ of the Company or its Subsidiaries or interferes with or restricts
in any way the rights of the Company or its Subsidiaries to discharge any
Employee-Participant at any time for any reason whatsoever, with or without
cause.
2. NON-TRANSFERABILITY. Except as provided herein, no right or interest
of any Participant in any Award under the Plan shall be (a) assignable or
transferable, except by will or the laws of descent and distribution, a valid
beneficiary designation made in accordance with procedures established by the
Committee, or as expressly stated herein, or (b) liable for, or subject to, any
lien, obligation or liability. An ISO may be exercised only by the Participant
during his lifetime, by his estate or by the person who acquires the right to
exercise such option by bequest or inheritance.
19
The Board may, in its discretion, authorize all or a portion of the
options to be granted to a Participant, and may also amend outstanding options
to provide, that they include terms which permit transfer by such Participant to
(i) the spouse, children or grandchildren of the Participant (the "Immediate
Family Members"), (ii) a trust or trusts for the exclusive benefit of such
Immediate Family Members, (iii) a partnership in which such Immediate Family
Members are the only partners, (iv) a limited liability company in which such
Immediate Family Members are the only members; provided that (x) there may be no
consideration for any such transfer, (y) the stock option agreement pursuant to
which such options are granted must be approved by the Board, and must expressly
provide for transferability in a manner consistent with this Section, and (z)
subsequent transfers of transferred options shall be prohibited except those in
accordance with the section(s) herein dealing with transfers by will or the laws
of descent and distribution. Following transfer, any such options shall continue
to be subject to the same terms and conditions as were applicable immediately
prior to transfer, provided that for all purposes hereof, the term "Participant"
shall be deemed to refer to the "Transferee." The events of termination of any
option will continue to be applied with respect to the original Participant,
following which the options shall be exercisable by the transferee only to the
extent (if at all), and for the periods specified in the Program or option
agreement. The Participant in all such cases will remain subject to and liable
for the withholding taxes due or payable upon exercise by the Transferee.
The Board may also, in its discretion, pursuant to the requirements and
restrictions listed above, and except as listed in this paragraph, authorize all
or a portion of the options to be granted to a Participant, to permit a
non-conforming transfer, such as a sale to a family member or family corporation
for estate planning purposes. Nothing herein or in any action by the Board shall
be construed as an amendment to any option other than those expressly indicated
by the action of the Board.
The Company shall not have any obligation to provide notice to the
Transferee of the termination or acceleration of an option for any reason.
3. DESIGNATION OF BENEFICIARY. A Participant, in accordance with
procedures established by the Committee, may designate a person or persons to
receive, in the event of the Participant's death, (a) any payments with respect
to which the Participant would then be entitled, and (b) the right to continue
to participate in the Plan to the extent of such Participant's outstanding
Awards. Such designation shall be made upon forms supplied by and delivered to
the Company and may be revoked in writing.
4. WITHHOLDING TAXES.
The Company's obligation to deliver shares of Common Stock or cash upon
the exercise of stock options granted will be subject to the satisfaction of all
applicable federal, state and local income tax and employment tax withholding
requirements. The Committee (or plan administrator) may, in its discretion and
in accordance with any applicable tax or securities laws (including the
applicable safe-harbor provisions of Securities and Exchange Commission Rule
16b-3), provide any or all holders of a NQSOs (other than the automatic grants
made pursuant to Directors Stock Option Program) or Restricted Shares that are
not Vested Shares under the Plan, with the right to use shares of the Company's
Common Stock in satisfaction of all or part of the federal, state and local
income tax and employment tax liabilities incurred by such holders in connection
with the exercise of their options or the Vesting of their Restricted Shares
(the "Taxes"). Such right may be provided to any such option holder in either or
both of the following formats:
(a) Stock Withholding: The holder of the NQSO or Restricted Shares
may be provided with the election to have the Company
withhold, from the shares of
20
Common Stock otherwise issuable upon the exercise of such NQSO
or the Vesting of such Restricted Shares, a portion of those
shares with an aggregate fair market value not to exceed one
hundred percent (100%) of the applicable Taxes.
(b) Stock Delivery: Provide the holder of the NQSO or the
Restricted Shares with the election to deliver to the Company,
at the time the NQSO is exercised or the Vesting of such
Restricted Shares, one or more shares of Common Stock
previously acquired by such individual (other than in
connection with the option exercise or share Vesting
triggering the Taxes) with an aggregate fair market value
equal to the designated percentage (up to 100% as specified by
the option holder) of the Taxes incurred in connection with
such option exercise or share Vesting.
5. PLAN EXPENSES. Any expenses of administering the Plan shall be borne
by the Company.
6. CONSTRUCTION OF PLAN. The interpretation of the Plan and the
application of any rules implemented hereunder shall be determined solely in
accordance with the laws of the State of Ohio.
7. UNFUNDED PLAN. The Plan shall be unfunded, and the Company shall not
be required to segregate any assets which may at any time be represented by
Awards. Any liability of the Company to any person with respect to an Award
under this Plan shall be based solely upon any obligations which may be created
by this Plan; no such obligation of the Company shall be deemed to be secured by
any pledge or other encumbrance on any property of the Company.
8. BENEFIT PLAN COMPUTATIONS. Any benefits received or amounts paid to
a Participant with respect to any Award granted under the Plan shall not have
any effect on the level of benefits provided to or received by any Participant,
or the Participant's estate or beneficiary, as part of any employee benefit plan
(other than the Plan) of the Company.
9. PRONOUNS, SINGULAR AND PLURAL. The masculine may be read as
feminine, the singular as plural and the plural as singular as necessary to give
effect to the Plan.
10. MAXIMUM ANNUAL GRANT. In no event shall any one individual
participating in the Plan, be granted stock options and/or Restricted Shares for
more than one and one-half percent (1.5%) of the total outstanding shares of
Common Stock of the Company, in the aggregate, per calendar year.
11. PAYMENT. The exercise price will be payable in one of the
alternative forms specified below:
(a) full payment in cash or check made payable to the Company's
order; or
(b) full payment in shares of Common Stock held for the requisite
period necessary to avoid a charge to the Company's reported
earnings and valued at fair market value on the Exercise Date
(as such term is defined below); or
(c) full payment in a combination of shares of Common Stock held
for the requisite period necessary to avoid a charge to the
Company's reported earnings and valued at Fair Market Value on
the Exercise Date and cash or check payable to the Company's
order; or
21
(d) full payment through a sale and remittance procedure pursuant
to which the Participant will provide irrevocable written
directives to a designated brokerage firm to effect the
immediate sale of the purchased shares and remit to the
Company, out of the sale proceeds available on the settlement
date, sufficient funds to cover the aggregate exercise price
payable for the purchased shares and shall concurrently
provide written instructions to the Company to deliver the
certificates for the purchased shares directly to such
brokerage firm in order to complete the sale transaction.
For purposes of this subparagraph, the "Exercise Date" will be the date on
which written notice of the option exercise is delivered to the Company. Except
to the extent the sale and remittance procedure specified above is utilized for
the exercise of the option, payment of the option price for the purchased shares
must accompany the exercise notice.
D. Effective Date
The Plan and amendments became effective on approval by shareholders of
the Company. The Plan and all outstanding Awards shall remain in effect until
all outstanding Awards have been exercised, expired or canceled.
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