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Exhibit 10.7
RESTATED
(As of January 15, 1998)
UGLY DUCKLING CORPORATION
LONG-TERM INCENTIVE PLAN
ARTICLE 1 PURPOSE
1.1. GENERAL. The purpose of the Ugly Duckling Corporation Long-Term
Incentive Plan (the "Plan") is to promote the success, and enhance the value, of
Ugly Duckling Corporation and its subsidiaries (collectively, the "Company") by
linking the personal interests of its employees, consultants and advisors to
those of Company shareholders and by providing its employees, consultants and
advisors with an incentive for outstanding performance. The Plan is further
intended to provide flexibility to the Company in its ability to motivate,
attract, and retain the services of employees, consultants and advisors upon
whose judgment, interest, and special effort the successful conduct of the
Company's operation is largely dependent. Accordingly, the Plan permits the
grant of incentive awards from time to time to selected employees, consultants
and advisors of the Company and any Subsidiary.
ARTICLE 2 EFFECTIVE DATE
2.1. EFFECTIVE DATE. The Plan is effective as of June 30, 1995 (the
"Effective Date). Within one year after the Effective Date, the Plan shall be
submitted to the shareholders of the Company for their approval. The Plan will
be deemed to be approved by the shareholders if it receives the affirmative vote
of the holders of a majority of the shares of stock of the Company present, or
represented, and entitled to vote at a meeting duly held (or by the written
consent of the holders of a majority of the shares of stock of the Company
entitled to vote) in accordance with the applicable provisions of the Arizona
General Corporation Law and the Company's Bylaws and Articles of Incorporation.
Any Awards granted under the Plan prior to shareholder approval are effective
when made (unless the Committee specifies otherwise at the time of grant), but
no Award may be exercised or settled and no restrictions relating to any Award
may lapse before shareholder approval. If the shareholders fail to approve the
Plan, any Award previously made shall be automatically canceled without any
further act.
ARTICLE 3 DEFINITIONS AND CONSTRUCTION.
3.1. DEFINITIONS. When a word or phrase appears in this Plan with the
initial letter capitalized, and the word or phrase does not commence a sentence,
the word or phrase shall generally be given the meaning ascribed to it in this
Section or in Sections 1.1
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or 2.1 unless a clearly different meaning is required by the context. The
following words and phrases shall have the following meanings:
(a) "Award" means any option, Stock Appreciation Right,
Restricted Stock Award, Performance Share Award, Dividend Equivalent
Award, or Performance-Based Award, or any other right or interest
relating to Stock or cash, granted to a Participant under the Plan.
(b) "Award Agreement" means any written agreement, contract,
or other instrument or document evidencing an Award.
(c) "Board" means the Board of Directors of the Company or a
Committee thereof formed under Section 4, as the case may be.
(d) "Cause" means (except as otherwise provided in an Award
Agreement) if the Board, in its reasonable and good faith discretion,
determines that the employee, consultant or advisor (i) has developed
or pursued interests substantially adverse to the Company, (ii)
materially breached any employment, engagement or confidentiality
agreement or otherwise failed to satisfactorily discharge his or her
duties, (iii) has not devoted all or substantially all of his or her
business time, effort and attention to the affairs of the Company (or
such lesser amount as has been agreed to in writing by the Company),
(iv) is convicted of a felony involving moral turpitude, or (v) has
engaged in activities or omissions that are detrimental to the
well-being of the Company.
(e) "Change of Control" means and includes each of the
following (except as otherwise provided in an Award Agreement):
(1) there shall be consummated any consolidation or
merger of the Company in which the Company is not the
continuing or surviving entity, or pursuant to which
Stock would be converted into cash, securities or
other property, other than a merger of the Company in
which the holders of the Company's Stock immediately
prior to the merger have the same proportionate
ownership of beneficial interest of common stock or
other voting securities of the surviving entity
immediately after the merger;
(2) there shall be consummated any sale, lease,
exchange or other transfer (in one transaction or a
series of related transactions) of assets or earning
power aggregating more than 40% of the assets or
earning power of the Company and its subsidiaries
(taken as a whole), other than pursuant to a
sale-leaseback, structured finance or other form of
financing transaction;
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(3) the shareholders of the Company shall approve any
plan or proposal for liquidation or dissolution of
the Company;
(4) any person (as such term is used in Section 13(d)
and 14(d)(2) of the Exchange Act), other than any
current shareholder of the Company or affiliate
thereof or any employee benefit plan of the Company
or any subsidiary of the Company or any entity
holding shares of capital stock of the Company for or
pursuant to the terms of any such employee benefit
plan in its role as an agent or trustee for such
plan, shall become the beneficial owner (within the
meaning of Rule 13d-3 under the Exchange Act) of 20%
or more of the Company's outstanding Stock; or
(5) during any period of two consecutive years,
individuals who at the beginning of such period shall
fail to constitute a majority thereof, unless the
election, or the nomination for election by the
Company's shareholders, of each new director was
approved by a vote of at least two-thirds of the
directors then still in office who were directors at
the beginning of the period.
(f) "Code" means the Internal Revenue Code of 1986, as amended
from time to time.
(g) "Committee" means the committee of the Board described in
Article 4.
(h) "Covered Employee" means an Employee who is a "covered
employee" within the meaning of Section 162(m) of the Code.
(i) "Disability" shall mean any illness or other physical or
mental condition of a Participant which renders the Participant
incapable of performing his customary and usual duties for the Company,
or any medically determinable illness or other physical or mental
condition resulting from a bodily injury, disease or mental disorder
which in the judgment of the Committee is permanent and continuous in
nature. The Committee may require such medical or other evidence as it
deems necessary to judge the nature and permanency of the Participant's
condition.
(j) "Dividend Equivalent" means a right granted to a
Participant under Article 11.
(k) "Exchange Act" shall mean the Securities Exchange Act of
1934, as amended from time to time.
(l) "Fair Market Value" means with respect to Stock or any
other property, the fair market value of such Stock or other property
as determined by the Board in
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its discretion, under one of the following methods: (i) the closing
price for the Stock as reported on any national securities exchange on
which the Stock is then listed (which shall include the Nasdaq National
Market) for that date or, if no price is so reported for that date,
such price on the next preceding date for which the closing price was
reported; or (ii) the price as determined by such methods or procedures
as may be established from time to time by the Board.
(m) "Incentive Stock Option" means an Option that is intended
to meet the requirements of Section 422 of the Code or any successor
provision thereto.
(n) "Non-Employee Director" means a member of the Board who
qualifies as a "Non-Employee Director" as defined in Rule 16b-3(b)(3)
of the Exchange Act, or any successor definition adopted by the Board.
(o) "Non-Qualified Stock Option" means an Option that is not
intended to be an Incentive Stock Option.
(p) "Option" means a right granted to a Participant under
Article 7 of the Plan to purchase Stock at a specified price during
specified time periods. An Option may be either an Incentive Stock
Option or a Non-Qualified Stock Option.
(q) "Participant" means a person who, as an employee of or
consultant or advisor to the Company or any Subsidiary, has been
granted an Award under the Plan. A "Participant" shall not include any
Director of the Company or any Subsidiary who is not also an employee
of or consultant to the Company or any Subsidiary.
(r) "Performance-Based Awards" means the Performance Share
Awards and Restricted Stock Awards granted to selected Covered
Employees pursuant to Articles 9 and 10, but which are subject to the
terms and conditions set forth in Article 12. All Performance-Based
Awards are intended to qualify as "performance-based compensation"
under Section 162(m) of the Code.
(s) "Performance Criteria" means the criteria that the
Committee selects for purposes of establishing the Performance Goal or
Performance Goals for a Participant for a Performance Period. The
Performance Criteria that will be used to establish Performance Goals
are limited to the following: pre- or after-tax net earnings, sales
growth, operating earnings, operating cash flow, return on net assets,
return on stockholders' equity, return on assets, return on capital,
Stock price growth, stockholder returns, gross or net profit margin,
earnings per share, price per share of Stock, and market share, any of
which may be measured either in absolute terms or as compared to any
incremental increase or as compared to results of a peer group. The
Committee shall, within the time prescribed by Section 162(m) of the
Code, define in an objective fashion the manner of calculating the
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Performance Criteria it selects to use for such Performance Period for
such Participant.
(t) "Performance Goals" means, for a Performance Period, the
goals established in writing by the Committee for the Performance
Period based upon the Performance Criteria. Depending on the
Performance Criteria used to establish such Performance Goals, the
Performance Goals may be expressed in terms of overall Company
performance or the performance of a division, business unit or an
individual. The Committee, in its discretion, may, within the time
prescribed by Section 162(m) of the Code, adjust or modify the
calculation of Performance Goals for such Performance Period in order
to prevent the dilution or enlargement of the rights of Participants,
(i) in the event of, or in anticipation of, any unusual or
extraordinary corporate item, transaction, event, or development; or
(ii) in recognition of, or in anticipation of, any other unusual or
nonrecurring events affecting the Company, or the financial statements
of the Company, or in response to, or in anticipation of, changes in
applicable laws, regulations, accounting principles, or business
conditions.
(u) "Performance Period" means the one or more periods of
time, which may be of varying and overlapping durations, as the
Committee may select, over which the attainment of one or more
Performance Goals will be measured for the purpose of determining a
Participant's right to, and the payment of, a Performance-Based Award.
(v) "Performance Share" means a right granted to a Participant
under Article 9, to receive cash, Stock, or other Awards, the payment
of which is contingent upon achieving certain performance goals
established by the Committee.
(w) "Plan" means the Ugly Duckling Corporation Long-Term
Incentive Plan, as amended from time to time.
(x) "Restricted Stock Award" means Stock granted to a
Participant under Article 10 that is subject to certain restrictions
and to risk of forfeiture.
(y) "Stock" means the common stock of the Company and such
other securities of the Company that may be substituted for Stock
pursuant to Article 13.
(z) "Stock Appreciation Right" or "SAR" means a right granted
to a Participant under Article 8 to receive a payment equal to the
difference between the Fair Market Value of a share of Stock as of the
date of exercise of the SAR over the grant price of the SAR, all as
determined pursuant to Article 8.
(aa) "Subsidiary" means any corporation, domestic or foreign,
of which a majority of the outstanding voting stock or voting power is
beneficially owned directly or indirectly by the Company.
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ARTICLE 4 ADMINISTRATION
4.1. BOARD/COMMITTEE. The Plan shall be administered by the Board of
Directors or a Committee that is appointed by, and serves at the discretion of,
the Board. Any Committee shall consist of at least two individuals, each of whom
qualifies as (i) a Non-Employee Director, and (ii) an "outside director" under
Code Section 162(m) and the regulations issued thereunder. For purposes of this
Plan, the "Board" shall mean the Board of Directors or the Committee, as the
case may be.
4.2. ACTION BY THE BOARD. A majority of the Board shall constitute a
quorum. The acts of a majority of the members present at any meeting at which a
quorum is present and acts approved in writing by a majority of the Board in
lieu of a meeting shall be deemed the acts of the Board. Each member of the
Board is entitled to, in good faith, rely or act upon any report or other
information furnished to that member by any officer or other employee of the
Company or any Subsidiary, the Company's independent certified public
accountants, or any executive compensation consultant or other professional
retained by the Company to assist in the administration of the Plan.
4.3. AUTHORITY OF BOARD. The Board shall have the full and, except as
otherwise provided below, exclusive power to interpret the Plan and to adopt
such rules, regulations, and guidelines for carrying out the Plan as may be
necessary or proper, all of which power shall be executed in the best interests
of the Company and in keeping with the objectives of the Plan. This power
includes, but is not limited to, the following:
(a) Designate Participants;
(b) Determine the type or types of Awards to be granted to
each Participant;
(c) Determine the number of Awards to be granted and the
number of shares of Stock to which an Award will relate;
(d) Determine the terms and conditions of any Award granted
under the Plan including but not limited to, the exercise price, grant
price, or purchase price, any restrictions or limitations on the Award,
any schedule for lapse of forfeiture restrictions or restrictions on
the exercisability of an Award, and accelerations or waivers thereof,
based in each case on such considerations as the Board in its sole
discretion determines ; provided, however, that the Committee shall not
have the authority to accelerate the vesting, or waive the forfeiture,
of any Performance-Based Awards;
(e) Determine whether, to what extent, and under what
circumstances an Award may be settled in, or the exercise price of an
Award may be paid in, cash,
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Stock, other Awards, or other property, or an Award may be canceled,
forfeited, or surrendered;
(f) Prescribe the form of each Award Agreement, which need not
be identical for each Participant;
(g) Decide all other matters that must be determined in
connection with an Award;
(h) Establish, adopt or revise any rules and regulations as it
may deem necessary or advisable to administer the Plan; and
(i) Make all other decisions and determinations that may be
required under the Plan or as the Board deems necessary or advisable to
administer the Plan.
Notwithstanding the above or anything else in the Plan to the contrary, the
Chief Executive officer and the President of the Company, acting together, also
have the authority, subject to the terms, conditions, and parameters set forth
by the Board from time to time, to select Award recipients and establish the
terms and conditions of Awards, provided, however, that any such Award recipient
must not be a person who, at the time the Award is granted, is subject to the
restrictions imposed by Section 16 of the Exchange Act or a person who is a
Covered Employee.
4.4. DECISIONS BINDING. The Board's interpretation of the Plan, any
Awards granted under the Plan, any Award Agreement and all decisions and
determinations by the Board with respect to the Plan are final, binding, and
conclusive on all parties.
ARTICLE 5 SHARES SUBJECT TO THE PLAN
5.1. NUMBER OF SHARES. Subject to adjustment provided in Section 14.1,
the aggregate number of shares of Stock reserved and available for Awards or
which may be used to provide a basis of measurement for or to determine the
value of an Award (such as with a Stock Appreciation Right or Performance Share
Award) shall be 1,800,000.
5.2. LAPSED AWARDS. To the extent that an Award terminates, expires or
lapses for any reason, any shares of Stock subject to the Award will again be
available for the grant of an Award under the Plan and shares subject to SARs or
other Awards settled in cash will be available for the grant of an Award under
the Plan.
5.3. STOCK DISTRIBUTED. Any Stock distributed pursuant to an Award may
consist, in whole or in part, of authorized and unissued Stock, treasury Stock
or Stock purchased on the open market.
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5.4. LIMITATIONS ON AWARDS TO ANY SINGLE PARTICIPANT. No single
Participant may receive Awards covering in the aggregate more than 250,000
shares of Stock during any single calendar year.
ARTICLE 6 ELIGIBILITY
6.1. GENERAL. Awards may be granted only to individuals who are
employees (including employees who also are directors or officers) of the
Company or a Subsidiary or to consultants or advisors thereto, as determined by
the Board.
ARTICLE 7 STOCK OPTIONS
7.1. GENERAL. The Board is authorized to grant Options to Participants
on the following terms and conditions:
(a) EXERCISE PRICE. The exercise price per share of Stock
under an Option shall be determined by the Committee and set forth in
the Award Agreement. It is the intention under the Plan that the
exercise price for any Option shall not be less than the Fair Market
Value as of the date of grant; provided, however that the Committee
may, in its discretion, grant Options (other than Options that are
intended to be Incentive Stock Options or Options that are intended to
qualify as "performance-based compensation" under Code Section 162(m))
with an exercise price of less than Fair Market Value on the date of
grant.
(b) TIME AND CONDITIONS OF EXERCISE. The Board shall determine
the time or times at which an Option may be exercised in whole or in
part. The Board also shall determine the performance or other
conditions, if any, that must be satisfied before all or part of an
Option may be exercised.
(c) PAYMENT. The Board shall determine the methods by which
the exercise price of an Option may be paid, the form of payment,
including, without limitation, cash, shares of Stock, or other property
(including broker-assisted "cashless exercise" arrangements), and the
methods by which shares of Stock shall be delivered or deemed to be
delivered to Participants.
(d) EVIDENCE OF GRANT. All Options shall be evidenced by a
written Award Agreement between the Company and the Participant. The
Award Agreement shall include such provisions as may be specified by
the Board.
7.2 INCENTIVE STOCK OPTIONS. The terms of any Incentive Stock Options
granted under the Plan must comply with the following additional rules:
(a) EXERCISE PRICE. The exercise price per share of Stock
shall be set by the Board, provided that the exercise price for any
Incentive Stock Option may not be less than the Fair Market Value as of
the date of the grant.
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(b) EXERCISE. In no event, may any Incentive Stock Option be
exercisable for more than ten years from the date of its grant.
(c) LAPSE OF OPTION. An Incentive Stock Option shall lapse
under the following circumstances:
(1) The Incentive Stock Option shall lapse ten (10)
years after it is granted, unless an earlier time is set in the Award
Agreement.
(2) The Incentive Stock Option shall lapse upon
termination of employment for Cause or for any other reason, other than
the Participant's death or Disability, unless the Committee determines
in its discretion to extend the exercise period for no more than ninety
(90) days after the Participant's termination of employment.
(3) In the case of the Participant's termination of
employment due to Disability or death, the Incentive Stock Option shall
lapse upon termination of employment, unless the Committee determines
in its discretion to extend the exercise period of the Incentive Stock
Option for no more than twelve (12) months after the date the
Participant terminates employment. Upon the Participant's death, any
vested and otherwise exercisable Incentive Stock Options may be
exercised by the Participant's legal representative or representatives,
by the person or persons entitled to do so under the Participant's last
will and testament, or, if the Participant shall fail to make
testamentary disposition of such Incentive Stock Option or shall die
intestate, by the person or persons entitled to receive said Incentive
Stock Option under the applicable laws of descent and distribution.
(d) INDIVIDUAL DOLLAR LIMITATION. The aggregate Fair Market
Value (determined as of the time an Award is made) of all shares of
Stock with respect to which Incentive Stock Options are first
exercisable by a Participant in any calendar year may not exceed one
Hundred Thousand Dollars ($100,000.00).
(e) TEN PERCENT OWNERS. An Incentive Stock Option shall be
granted to any individual who, at the date of grant, owns stock
possessing more than ten percent (10%) of the total combined voting
power of all classes of Stock of the Company only if, at the time such
Option is granted, the Option price is at least one hundred ten percent
(110%) of the Fair Market Value of the Stock and such Option by its
terms is not exercisable after the expiration of five (5) years from
the date the Option is granted.
(f) EXPIRATION OF INCENTIVE STOCK OPTIONS. No Award of an
Incentive Stock Option may be made pursuant to this Plan after the
tenth anniversary of the Effective Date.
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(g) RIGHT TO EXERCISE. During a Participant's lifetime, an
Incentive Stock Option may be exercised only by the Participant.
(h) EMPLOYEES ONLY. Incentive Stock Options may be granted
only to Participants who are employees of the Company or any
Subsidiary.
ARTICLE 8 STOCK APPRECIATION RIGHTS
8.1. GRANT OF SARs. The Board is authorized to grant SARs to
Participants on the following terms and conditions:
(a) RIGHT TO PAYMENT. Upon the exercise of a Stock
Appreciation Right, the Participant to whom it is granted has the right
to receive the excess, if any, of:
(1) The Fair Market Value of one share of Stock on
the date of exercise; over
(2) The grant price of the Stock Appreciation Right
as determined by the Board, which shall not be less than the Fair
Market Value of one share of Stock on the date of grant in the case of
any SAR related to any Incentive Stock Option.
(b) OTHER TERMS. All awards of Stock Appreciation Rights shall
be evidenced by an Award Agreement. The terms, methods of exercise,
methods of settlement, form of consideration payable in settlement, and
any other terms and conditions of any Stock Appreciation Right shall be
determined by the Board at the time of the grant of the Award and shall
be reflected in the Award Agreement.
ARTICLE 9 PERFORMANCE SHARES
9.1. GRANT OF PERFORMANCE SHARES. The Board is authorized to grant
Performance Shares to Participants on such terms and conditions as may be
selected by the Board. The Board shall have the complete discretion to determine
the number of Performance Shares granted to each Participant. All Awards of
Performance Shares shall be evidenced by an Award Agreement.
9.2. RIGHT TO PAYMENT. A grant of Performance Shares gives the
Participant rights, valued as determined by the Board, and payable to, or
exercisable by, the Participant to whom the Performance Shares are granted, in
whole or in part, as the Board shall establish at grant or thereafter. The Board
shall set performance goals and other terms or conditions to payment of the
Performance Shares in its discretion which, depending on the extent to which
they are met, will determine the number and value of Performance Shares that
will be paid to the Participant.
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9.3. OTHER TERMS. Performance Shares may be payable in cash, Stock, or
other property, and have such other terms and conditions as determined by the
Board and reflected in the Award Agreement.
ARTICLE 10 RESTRICTED STOCK AWARDS
10.1. GRANT OF RESTRICTED STOCK. The Board is authorized to make Awards
of Restricted Stock to Participants in such amounts and subject to such terms
and conditions as may be selected by the Board. All Awards of Restricted Stock
shall be evidenced by an Award Agreement.
10.2. ISSUANCE AND RESTRICTIONS. Restricted Stock shall be subject to
such restrictions on transferability and other restrictions as the Board may
impose (including, without limitation, limitations on the right to vote
Restricted Stock or the right to receive dividends on the Restricted Stock).
These restrictions may lapse separately or in combination at such times, under
such circumstances, in such installments, or otherwise, as the Board determines
at the time of the grant of the Award or thereafter.
10.3. FORFEITURE. Except as otherwise determined by the Board at the
time of the grant of the Award or thereafter, upon termination of employment
during the applicable restriction period, Restricted Stock that is at that time
subject to restrictions shall be forfeited and reacquired by the Company,
provided, however, that the Board may provide in any Award Agreement that
restrictions or forfeiture conditions relating to Restricted Stock will be
waived in whole or in part in the event of terminations resulting from specified
causes, and the Board may in other cases waive in whole or in part restrictions
or forfeiture conditions relating to Restricted Stock.
10.4. CERTIFICATES FOR RESTRICTED STOCK. Restricted Stock granted under
the Plan may be evidenced in such manner as the Board shall determine. If
certificates representing shares of Restricted Stock are registered in the name
of the Participant, certificates must bear an appropriate legend referring to
the terms, conditions, and restrictions applicable to such Restricted Stock, and
the Company may, at its sole and absolute discretion, retain physical possession
of the certificate until such time as all applicable restrictions lapse.
ARTICLE 11 DIVIDEND EQUIVALENTS
11.1. GRANT OF DIVIDEND EQUIVALENTS. The Board is authorized to grant
Dividend Equivalents to Participants subject to such terms and conditions as may
be selected by the Board. Dividend Equivalents shall entitle the Participant to
receive payments equal to dividends with respect to all or a portion of the
number of shares of Stock subject to an Option Award or SAR Award, as determined
by the Board. The Board may provide that Dividend Equivalents be paid or
distributed when accrued or be deemed to have been reinvested in additional
shares of Stock, or otherwise reinvested.
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ARTICLE 12 PERFORMANCE-BASED AWARDS
12.1. PURPOSE. The purpose of this Article 12 is to provide the
Committee the ability to qualify the Restricted Stock Awards under Article 10
and the Performance Share Awards under Article 9 as "performance-based
compensation" under Section 162(m) of the Code. If the Committee, in its
discretion, decides to grant a Performance-Based Award to a Covered Employee,
the provisions of this Article 12 shall control over any contrary provision
contained in Articles 9 or 10.
12.2. APPLICABILITY. This Article 12 shall apply only to those Covered
Employees selected by the Committee to receive Performance-Based Awards. The
Committee may, in its discretion, grant Restricted Stock Awards or Performance
Share Awards to Covered Employees that do not satisfy the requirements of this
Article 12. The designation of a Covered Employee as a Participant for a
Performance Period shall not in any manner entitle the Participant to receive an
Award for the period. Moreover, designation of a Covered Employee as a
Participant for a particular Performance Period shall not require designation of
such Covered Employee as a Participant in any subsequent Performance Period and
designation of one Covered Employee as a Participant shall not require
designation of any other Covered Employees as a Participant in such period or in
any other period.
12.3. DISCRETION OF COMMITTEE WITH RESPECT TO PERFORMANCE AWARDS. With
regard to a particular Performance Period, the Committee shall have full
discretion to select the length of such Performance Period, the type of
Performance-Based Awards to be issued, the kind and/or level of the Performance
Goal, and whether the Performance Goal is to apply to the Company, a Subsidiary
or any division or business unit thereof or the individual.
12.4. PAYMENT OF PERFORMANCE AWARDS. Unless otherwise provided in the
relevant Award Agreement, a Participant must be employed by the Company or a
Subsidiary on the last day of the Performance Period to be eligible for a
Performance Award for such Performance Period. Furthermore, a Participant shall
be eligible to receive payment under a Performance-Based Award for a Performance
Period only if the Performance Goals for such period are achieved.
In determining the actual size of an individual Performance-Based
Award, the Committee may reduce or eliminate the amount of the Performance-Based
Award earned for the Performance Period, if in its sole and absolute discretion,
such reduction or elimination is appropriate.
12.5. MAXIMUM AWARD PAYABLE. Notwithstanding any provision contained in
the Plan to the contrary, the maximum Performance-Based Award payable to any one
Participant under the Plan for a Performance Period is 250,000 shares of Stock,
or in the event the Performance-Based Award is paid in cash, such maximum
Performance-Based
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Award shall be determined by multiplying 250,000 by the Fair Market Value of one
share of Stock as of the date of grant of the Performance-Based Award.
ARTICLE 13 PROVISIONS APPLICABLE TO AWARDS
13.1. STAND-ALONE, TANDEM, AND SUBSTITUTE AWARDS. Awards granted under
the Plan may, in the discretion of the Board, be granted either alone or in
addition to, in tandem with, or in substitution for, any other Award granted
under the Plan. If an Award is granted in substitution for another Award, the
Board may require the surrender of such other Award in consideration of the
grant of the new Award. Awards granted in addition to or in tandem with other
Awards may be granted either at the same time as or at a different time from the
grant of such other Awards.
13.2. EXCHANGE PROVISIONS. The Board may at any time offer to exchange
or buy out any previously granted Award for a payment in cash, Stock, or another
Award (subject to Section 13.1), based on the terms and conditions the Board
determines and communicates to the Participant at the time the offer is made.
13.3. TERM OF AWARD. The term of each Award shall be for the period as
determined by the Board, provided that in no event shall the term of any
Incentive Stock Option or a Stock Appreciation Right granted in tandem with the
Incentive Stock Option exceed a period of ten years from the date of its grant.
13.4. FORM OF PAYMENT FOR AWARDS. Subject to the terms of the Plan and
any applicable law or Award Agreement, payments or transfers to be made by the
Company or a Subsidiary on the grant or exercise of an Award may be made in such
forms as the Board determines at or after the time of grant, including without
limitation, cash, Stock, other Awards, or other property, or any combination,
and may be made in a single payment or transfer, in installments, or on a
deferred basis, in each case determined in accordance with rules adopted by, and
at the discretion of, the Board. The Board may also authorize payment in the
exercise of an Option by net issuance or other cashless exercise methods.
13.5. LIMITS ON TRANSFER. No right or interest of a Participant in any
Award may be pledged, encumbered, or hypothecated to or in favor of any party
other than the Company or a Subsidiary, or shall be subject to any lien,
obligation, or liability of such Participant to any other party other than the
Company or a Subsidiary. Except as otherwise provided by the Board or the
Committee, no Award shall be assignable or transferable by a Participant other
than by will or the laws of descent and distribution.
13.6 BENEFICIARIES. Notwithstanding Section 13.5, a Participant may, in
the manner determined by the Board, designate a beneficiary to exercise the
rights of the Participant and to receive any distribution with respect to any
Award upon the Participant's death. A beneficiary, legal guardian, legal
representative, or other person claiming any rights under the Plan is subject to
all terms and conditions of the Plan and any Award
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Agreement applicable to the Participant, except to the extent the Plan and Award
Agreement otherwise provide, and to any additional restrictions deemed necessary
or appropriate by the Board. If the Participant is married and resides in a
jurisdiction in which community property laws apply, a designation of a person
other than the Participant's spouse as his beneficiary with respect to more than
50 percent of the Participant's interest in the Award shall not be effective
without the written consent of the Participant's spouse. If no beneficiary has
been designated or survives the Participant, payment shall be made to the person
entitled thereto under the Participant's will or the laws of descent and
distribution. Subject to the foregoing, a beneficiary designation may be changed
or revoked by a Participant at any time provided the change or revocation is
filed with the Board.
13.7. STOCK CERTIFICATES. All Stock certificates delivered under the
Plan are subject to any stop-transfer orders and other restrictions as the Board
deems necessary or advisable to comply with federal or state securities laws,
rules and regulations and the rules of any national securities exchange or
automated quotation system on which the Stock is listed, quoted, or traded. The
Board may place legends on any Stock certificate to reference restrictions
applicable to the Stock.
13.8. TENDER OFFERS. In the event of a public tender for all or any
portion of the Stock, or in the event that a proposal to merge, consolidate, or
otherwise combine with another company is submitted for shareholder approval,
the Board may in its sole discretion declare previously granted Options to be
immediately exercisable. To the extent that this provision causes Incentive
Stock Options to exceed the dollar limitation set forth in Section 7.2(d), the
excess Options shall be deemed to be Non-Qualified Stock Options.
13.9. CHANGE OF CONTROL. A Change of Control shall, in the sole
discretion of the Board:
(a) Cause every Award outstanding hereunder to become fully
exercisable and all restrictions on outstanding Awards to lapse and
allow each Participant the right to exercise Awards prior to the
occurrence of the event otherwise terminating the Awards over such
period as the Board, in its sole and absolute discretion, shall
determine. To the extent that this provision causes Incentive Stock
Options to exceed the dollar limitation set forth in Section 7.2(d),
the excess Options shall be deemed to be Non-Qualified Stock Options;
or
(b) Cause every Award outstanding hereunder to terminate,
provided that the surviving or resulting corporation shall tender an
option or options to purchase its shares or exercise such rights on
terms and conditions, as to the number of shares, rights or otherwise,
which shall substantially preserve the rights and benefits of any Award
then outstanding hereunder.
ARTICLE 14 CHANGES IN CAPITAL STRUCTURE
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14.1. GENERAL. In the event a stock dividend is declared upon the
Stock, the shares of Stock then subject to each Award (and the number of shares
subject thereto) shall be increased proportionately without any change in the
aggregate purchase price therefor. Subject to Section 13.9, in the event the
Stock shall be changed into or exchanged for a different number or class of
shares of Stock or of shares of another corporation, whether through
reorganization, recapitalization, stock split-up or combination of shares, there
shall be substituted for each such share of Stock then subject to each Award
(and for each share of Stock then subject thereto) the number and class of
shares of Stock into which each outstanding share of Stock shall be so
exchanged, all without any change in the aggregate purchase price for the shares
then subject to each Award.
ARTICLE 15 AMENDMENT, MODIFICATION AND TERMINATION
15.1. AMENDMENT MODIFICATION AND TERMINATION. The Board may terminate,
amend or modify the Plan at any time and from time to time. However, the Board
may not amend, modify or terminate the Plan without shareholder approval if
shareholder approval is required under applicable law or by any national
securities exchange or system on which the Stock is then listed or reported.
15.2. AWARDS PREVIOUSLY GRANTED. No termination, amendment, or
modification of the Plan shall adversely affect in any material way any Award
previously granted under the Plan, without the written consent of the
Participant.
ARTICLE 16 GENERAL PROVISIONS
16.1. NO RIGHTS TO AWARDS. No Participant or employee or consultant
shall have any claim to be granted any Award under the Plan, and neither the
Company nor the Board is obligated to treat Participants and employees or
consultants uniformly.
16.2. NO STOCKHOLDERS RIGHTS. No Award gives the Participant any of the
rights of a shareholder of the Company unless and until shares of Stock are in
fact issued to such person in connection with such Award.
16.3. WITHHOLDING. The Company or any Subsidiary shall have the
authority and the right to deduct or withhold, or require a Participant to remit
to the Company, an amount sufficient to satisfy United States Federal, state,
and local taxes (including the Participant's FICA obligation and any withholding
obligation imposed by any country other than the United States in which the
Participant resides) required by law to be withheld with respect to any taxable
event arising as a result of this Plan. With respect to withholding required
upon any taxable event under the Plan, Participants may elect, subject to the
Board's approval, to satisfy the withholding requirement, in whole or in part,
by having the Company or any Subsidiary withhold shares of Stock having a Fair
Market Value on the date of withholding equal to the amount to be withheld for
tax purposes in accordance with such procedures as the Board establishes. The
Board may, at the time any Award is
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granted, require that any and all applicable tax withholding requirements be
satisfied by the withholding of shares of Stock as set forth above.
16.4. NO RIGHT TO EMPLOYMENT. Nothing in the Plan or any Award
Agreement shall interfere with or limit in any way the right of the Company or
any Subsidiary to terminate any Participant's employment at any time, nor confer
upon any Participant any right to continue in the employ of the Company or any
Subsidiary.
16.5. UNFUNDED STATUS OF AWARDS. The Plan is intended to be an
"unfunded" plan for incentive and deferred compensation. With respect to any
payments not yet made to a Participant pursuant to an Award, nothing contained
in the Plan or any Award Agreement shall give the Participant any rights that
are greater than those of a general creditor of the Company or any Subsidiary.
16.6. INDEMNIFICATION. To the extent allowable under applicable law,
each member of the Committee or of the Board shall be indemnified and held
harmless by the Company from any loss, cost, liability, or expense that may be
imposed upon or reasonably incurred by such member in connection with or
resulting from any claim, action, suit, or proceeding to which he or she may be
a party or in which he or she may be involved by reason of any action or failure
to act under the Plan and against and from any and all amounts paid by him or
her in satisfaction of judgment in such action, suit, or proceeding against him
or her provided he or she gives the Company an opportunity, at its own expense,
to handle and defend the same before he or she undertakes to handle and defend
it on his or her own behalf. The foregoing right of indemnification shall not be
exclusive of any other rights of indemnification to which such persons may be
entitled under the Company's Articles of Incorporation or By-Laws, as a matter
of law, or otherwise, or any power that the Company may have to indemnify them
or hold them harmless.
16.7. RELATIONSHIP TO OTHER BENEFITS. No payment under the Plan shall
be taken into account in determining any benefits under any pension, retirement,
savings, profit sharing, group insurance, welfare or other benefit plan of the
Company or any Subsidiary.
16.8. EXPENSES. The expenses of administering the Plan shall be borne
by the Company and its Subsidiaries.
16.9. TITLES AND HEADINGS. The titles and headings of the Sections in
the Plan are for convenience of reference only, and in the event of any
conflict, the text of the Plan, rather than such titles or headings, shall
control.
16.10. FRACTIONAL SHARES. No fractional shares of stock shall be issued
and the Board shall determine, in its discretion, whether cash shall be given in
lieu of fractional shares or whether such fractional shares shall be eliminated
by rounding up.
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16.11. SECURITIES LAW COMPLIANCE. With respect to any person who is, on
the relevant date, obligated to file reports under Section 16 of the Exchange
Act, transactions under this Plan are intended to comply with all applicable
conditions of Rule 16b-3 or its successors under the Exchange Act. To the extent
any provision of the Plan or action by the Board fails to so comply, it shall be
void to the extent permitted by law and voidable as deemed advisable by the
Board, and such provision or action shall be deemed to be modified so as to
comply with Rule 16b-3.
16.12. GOVERNMENT AND OTHER REGULATIONS. The obligation of the Company
to make payment of awards in Stock or otherwise shall be subject to all
applicable laws, rules, and regulations, and to such approvals by government
agencies as may be required. The Company shall be under no obligation to
register under the Securities Act of 1933, as amended, any of the shares of
Stock paid under the Plan. If the shares paid under the Plan may in certain
circumstances be exempt from registration under such act, the Company may
restrict the transfer of such shares in such manner as it deems advisable to
ensure the availability of any such exemption.
16.13. GOVERNING LAW. The Plan and all Award Agreements shall be
construed in accordance with and governed by the laws of the State of Arizona.