Exhibit 10.3
CLOSURE MEDICAL CORPORATION
AMENDED AND RESTATED 1996 EQUITY COMPENSATION PLAN
As Amended Effective as of March 11, 1997
The purpose of the Closure Medical Corporation 1996 Equity Compensation
Plan (the "Plan") is to provide (i) designated officers (including officers who
are also directors) and other employees of Closure Medical Corporation (the
"Company") and its subsidiaries, (ii) non-employee members of the board of
directors of the Company (the "Board"), and (iii) independent contractors and
consultants who perform valuable services for the Company or its subsidiaries,
with the opportunity to receive grants of incentive stock options, nonqualified
stock options, stock appreciation rights and restricted stock. The Company
believes that the Plan will cause the participants to contribute materially to
the growth of the Company, thereby benefitting the Company's stockholders, and
will align the economic interests of the participants with those of the
stockholders.
1. Administration
The Plan shall be administered and interpreted by a committee (the
"Committee"), which shall consist of two or more persons appointed by the Board.
The Committee may consist of "outside directors" as defined under section 162(m)
of the Internal Revenue Code of 1986, as amended (the "Code") and related
Treasury regulations, and may be "non-employee directors" as defined under Rule
16b-3 under the Securities Exchange Act of 1934 (the "Exchange Act").
The Committee shall have the sole authority to (i) determine the
individuals to whom grants shall be made under the Plan, (ii) determine the
type, size and terms of the grants to be made to each such individual, (iii)
determine the time when the grants will be made and the duration of any
applicable exercise or restriction period, including the criteria for vesting
and the acceleration of vesting and (iv) deal with any other matters arising
under the Plan.
The Committee shall have full power and authority to administer and
interpret the Plan, to make factual determinations and to adopt or amend such
rules, regulations, agreements and instruments for implementing the Plan and for
the conduct of its business as it deems necessary or advisable, in its sole
discretion. The Committee's interpretations of the Plan and all determinations
made by the Committee pursuant to the powers vested in it hereunder shall be
conclusive and binding on all persons having any interests in the Plan or in any
awards granted hereunder. All powers of the Committee shall be executed in its
sole discretion, in the best interest of the Company and in keeping with the
objectives of the Plan and need not be uniform as to similarly situated
individuals.
2. Grants
Incentives under the Plan shall consist of grants of incentive stock
options, nonqualified stock options, stock appreciation rights and restricted
stock (hereinafter collectively referred to as "Grants"). All Grants shall be
subject to the terms and conditions set forth herein and to those other terms
and conditions consistent with this Plan as the Committee deems appropriate and
as are specified in writing by the Committee to the individual (the "Grant
Letter"). The Committee shall approve the form and provisions of each Grant
Letter to an individual. Grants under a particular Section of the Plan need not
be uniform as among the grantees.
3. Shares Subject to the Plan
(a) Subject to the adjustment specified below, the aggregate number of
shares of common stock of the Company (the "Company Stock") that may be issued
or transferred under the Plan is 1,000,000 shares in the aggregate.
Notwithstanding anything in the Plan to the contrary, the maximum aggregate
number of shares of Company Stock that shall be subject to Grants made under the
Plan to any individual during any calendar year shall be 75,000 shares. The
shares may be authorized but unissued shares of Company Stock or reacquired
shares of Company Stock, including shares purchased by the Company on the open
market for purposes of the Plan. If and to the extent options or stock
appreciation rights granted under the Plan terminate, expire, or are canceled,
forfeited,
exchanged or surrendered without having been exercised or if any shares of
restricted stock are forfeited, the shares subject to such Grants shall again be
available for purposes of the Plan.
(b) If there is any change in the number or kind of shares of Company
Stock outstanding by reason of a stock dividend, recapitalization, stock split,
or combination or exchange of shares, or a merger, reorganization or
consolidation in which the Company is the surviving corporation,
reclassification or change in par value or by reason of any other extraordinary
or unusual events affecting the outstanding Company Stock as a class without the
Company's receipt of consideration, or if the value of outstanding shares of
Company Stock is substantially reduced due to the Company's payment of an
extraordinary dividend or distribution, then (i) the maximum number of shares of
Company Stock available for Grants, (ii) the maximum number of shares of Company
Stock which any one individual participating in the Plan may be granted during
the term of the Plan, (iii) the number of shares covered by outstanding Grants,
and (iv) the price per share or the applicable market value of such Grants shall
be proportionately adjusted by the Committee to reflect any increase or decrease
in the number or kind of issued shares of Company Stock to preclude the
enlargement or dilution of rights and benefits under such Grants; provided,
however, that any fractional shares resulting from such adjustment shall be
eliminated. The adjustments determined by the Committee shall be final, binding
and conclusive. Notwithstanding the foregoing, no adjustment shall be authorized
or made pursuant to this Section to the extent that such authority or adjustment
would cause any incentive stock option to fail to comply with section 422 of the
Code.
4. Eligibility for Participation
All employees of the Company and its subsidiaries ("Employees"), including
Employees who are officers or members of the Board, shall be eligible to
participate in the Plan. All members of the Board who are not employees of the
Company or any of its subsidiaries ("Non-Employee Directors") shall be eligible
only to receive nonqualified stock options pursuant to Section 6. Any
independent contractors or consultants who perform valuable services to the
Company or any of its subsidiaries ("Consultants") shall be eligible to
participate in the Plan, but shall not be eligible to receive incentive stock
options.
The Committee shall select the Employees and Consultants to receive Grants
and determine the number of shares of Company Stock subject to a particular
Grant in such manner as the Committee determines. Employees, Consultants, and
Non-Employee Directors who receive Grants under this Plan shall hereinafter be
referred to as "Grantees". Non-Employee Directors shall receive Grants only in
accordance with the terms of Section 6.
Nothing contained in this Plan shall be construed to (i) limit the right
of the Committee to make Grants under this Plan in connection with the
acquisition, by purchase, lease, merger, consolidation or otherwise, of the
business or assets of any corporation, firm or association, including options
granted to employees thereof who become Employees of the Company, or for other
proper corporate purpose, or (ii) limit the right of the Company to grant stock
options or make other awards outside of this Plan.
5. Granting of Options
(a) Number of Shares. The Committee, in its sole discretion, shall
determine the number of shares of Company Stock that will be subject to each
Grant of stock options to any Employee or Consultant.
(b) Type of Option and Price. The Committee may grant options intended to
qualify as "incentive stock options" within the meaning of section 422 of the
Code ("Incentive Stock Options") or options which are not intended to so qualify
("Nonqualified Stock Options") or any combination of Incentive Stock Options and
Nonqualified Stock Options (hereinafter collectively the "Stock Options"), all
in accordance with the terms and conditions set forth herein.
The purchase price of Company Stock subject to a Stock Option shall be
determined by the Committee and may be equal to, greater than, or less than the
Fair Market Value (as defined below) of a share of such Stock on the date such
Stock Option is granted; provided, however, that (i) the purchase price of
Company Stock subject to an Incentive Stock Option shall be equal to, or greater
than, the Fair Market Value of a share of such Stock on the date
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such Stock Option is granted and (ii) an Incentive Stock Option may not be
granted to an Employee who, at the time of grant, owns stock possessing more
than 10 percent of the total combined voting power of all classes of stock of
the Company or any parent or subsidiary of the Company, unless the option price
per share is not less than 110% of the Fair Market Value of Company Stock on the
date of grant.
If the Company Stock is traded in a public market, then the Fair Market
Value per share shall be (i) if the principal trading market for the Company
Stock is a national securities exchange or the National Market segment of the
Nasdaq Stock Market, the last reported sale price thereof on the relevant date
or (if there were no trades on that date) the latest preceding date upon which a
sale was reported, or (ii) if the Company Stock is not principally traded on
such exchange or market, the mean between the last reported "bid" and "asked"
prices thereof on the relevant date, as reported on Nasdaq, or, if not so
reported, as reported by the National Daily Quotation Bureau, Inc. or as
reported in a customary financial reporting service, as applicable and as the
Committee determines. If the Company Stock is not traded in a public market or
subject to reported transactions or "bid" or "ask" quotations as set forth
above, the Fair Market Value per share shall be as determined by the Committee.
(c) Option Term. The Committee shall determine the term of each Stock
Option. The term of any Stock Option shall not exceed ten years from the date of
grant. Notwithstanding the foregoing, an Incentive Stock Option may not be
granted to an Employee who, at the time of grant, owns stock possessing more
than 10 percent of the total combined voting power of all classes of stock of
the Company or any parent or subsidiary of the Company, unless the option term
does not exceed five years from the date of grant.
(d) Exercisability of Options. Subject to Section 6, Stock Options shall
become exercisable in accordance with the terms and conditions determined by the
Committee, in its sole discretion, and specified in the Grant Letter. The
Committee, in its sole discretion, may accelerate the exercisability of any or
all outstanding Stock Options at any time for any reason. In addition, all
outstanding Stock Options automatically shall become fully and immediately
exercisable upon a Change of Control (as defined herein) in accordance with the
provisions of Section 11, unless in cases not covered by Section 11(f), the
Committee in its sole discretion determines not to accelerate such Stock Options
upon a Change of Control. The Committee may make such determination prior to the
Change of Control or, if the Committee making such determination following a
Change of Control is comprised of the same members as served on the Committee
immediately prior to such Change of Control, within five days following such
Change of Control.
(e) Manner of Exercise. A Grantee may exercise a Stock Option which has
become exercisable, in whole or in part, by delivering a notice of exercise to
the Committee with accompanying payment of the option price in accordance with
Subsection (g) below. Such notice may instruct the Company to deliver shares of
Company Stock due upon the exercise of the Stock Option to any registered broker
or dealer designated by the Committee in lieu of delivery to the Grantee. Such
instructions must designate the account into which the shares are to be
deposited.
(f) Termination of Employment, Disability or Death.
(i) Except as provided below, a Stock Option may only be exercised
while the Grantee is employed by the Company as an Employee, Consultant or
member of the Board. In the event that a Grantee ceases to be employed by the
Company for any reason other than a "disability", death, or "termination for
cause", any Stock Option which is otherwise exercisable by the Grantee shall
terminate unless exercised within 90 days after the date on which the Grantee
ceases to be employed by the Company (or within such other period of time as may
be specified in the Grant Letter), but in any event no later than the date of
expiration of the option term. Any of the Grantee's Stock Options which are not
otherwise exercisable as of the date on which the Grantee ceases to be employed
by the Company shall terminate as of such date.
(ii) In the event the Grantee ceases to be employed by the Company
on account of a "termination for cause" by the Company, any Stock Option held by
the Grantee shall terminate as of the date the Grantee ceases to be employed by
the Company.
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(iii) In the event the Grantee ceases to be employed by the Company
because the Grantee is "disabled", any Stock Option which is otherwise
exercisable by the Grantee shall terminate unless exercised within one year
after the date on which the Grantee ceases to be employed by the Company (or
within such other period of time as may be specified in the Grant Letter), but
in any event no later than the date of expiration of the option term. Any of the
Grantee's Stock Options which are not otherwise exercisable as of the date on
which the Grantee ceases to be employed by the Company shall terminate as of
such date.
(iv) If the Grantee dies while employed by the Company or within 90
days after the date on which the Grantee ceases to be employed by the Company on
account of a termination of employment specified in Section 5(f)(i) above (or
within such other period of time as may be specified in the Grant Letter), any
Stock Option which is otherwise exercisable by the Grantee shall terminate
unless exercised within one year after the date on which the Grantee ceases to
be employed by the Company (or within such other period of time as may be
specified in the Grant Letter), but in any event no later than the date of
expiration of the option term. Any of the Grantee's Stock Options which are not
otherwise exercisable as of the date on which the Grantee ceases to be employed
by the Company shall terminate as of such date.
(v) For purposes of this Section 5(f), the term "Company" shall
include the Company's subsidiaries, and the following terms shall be defined as
follows: (A) "disability" shall mean a Grantee's becoming disabled within the
meaning of section 22(e)(3) of the Code and (B) "termination for cause" shall
mean, except to the extent otherwise provided in a Grantee's Grant Letter, a
finding by the Committee, after full consideration of the facts presented on
behalf of both the Company and the Grantee, that the Grantee has breached his or
her employment or service contract with the Company, or has been engaged in
disloyalty to the Company, including, without limitation, fraud, embezzlement,
theft, commission of a felony or proven dishonesty in the course of his or her
employment or service, or has disclosed trade secrets or confidential
information of the Company to persons not entitled to receive such information.
In such event, in addition to the immediate termination of the Stock Option, the
Grantee shall automatically forfeit all option shares for any exercised portion
of a Stock Option for which the Company has not yet delivered the share
certificates upon refund by the Company of the option price paid by the Grantee
for such shares.
(g) Satisfaction of Option Price. The Grantee shall pay the option price
specified in the Grant Letter in (i) cash, (ii) with the approval of the
Committee, by delivering shares of Company Stock owned by the Grantee (including
Company Stock acquired in connection with the exercise of a Stock Option,
subject to such restrictions as the Committee deems appropriate) and having a
Fair Market Value on the date of exercise equal to the option price or (iii)
through any combination of (i) and (ii). The Grantee shall pay the option price
and the amount of withholding tax due, if any, at the time of exercise. Shares
of Company Stock shall not be issued or transferred upon exercise of a Stock
Option until the option price is fully paid and any required withholding is
made.
(h) Limits on Incentive Stock Options. Each Incentive Stock Option shall
provide that, to the extent that the aggregate Fair Market Value of the stock on
the date of the grant with respect to which Incentive Stock Options are
exercisable for the first time by a Grantee during any calendar year under the
Plan or any other stock option plan of the Company or a parent or subsidiary
exceeds $100,000, then such option as to the excess shall be treated as a
Nonqualified Stock Option. An Incentive Stock Option shall not be granted to any
participant who is not an Employee of the Company or any parent or subsidiary
(within the meaning of section 424(f) of the Code).
6. Option Grants to Non-Employee Directors
A Non-Employee Director shall be entitled to receive Nonqualified Stock
Options in accordance with this Section 6.
(a) Initial Grant. Each Non-Employee Director who first becomes a member
of the Board on or after the initial effective date of this Plan (as specified
in Section 19) will receive a grant of a Nonqualified Stock Option to purchase
25,000 shares of Company Stock immediately upon the date he or she becomes a
member of the Board, except as provided in Section 6(b) below.
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(b) Pre-IPO Initial Grants. An initial grant made pursuant to Section 6(a)
to a Non-Employee Director who first becomes a member of the Board on or after
the initial effective date of this Plan and before the consummation of the
Company's initial public offering of Common Stock (a "Pre-IPO Initial Grant")
shall be made as of the date the Non-Employee Director first becomes a member of
the Board on or after the effective date of this Plan (which is the date of
grant) and shall become effective as of the Effective Time as defined in the
Contribution and Exchange Agreement dated as of May 30, 1996 by and among (1)
Sharpoint Development Corporation, (2) Robert V. Toni, J. Blount Swain, Jeffrey
G. Clark, Joe B. Barefoot, Jeffery C. Basham, Jeffrey C. Leung and Anthony V.
Seaber, (3) Caratec, L.L.C., (4) Cacoosing Partners, L.P., OMI Partners, L.P.,
Triangle Partners, L.P., F. W. Schmidt and Rolf D. Schmidt, and (5) the Company;
and provided, further, that if such Effective Time has not occurred on or prior
to September 30, 1996, any Pre-IPO Initial Grants shall be null, void and of no
further effect without any additional action required pursuant to the terms of
this Plan. The purchase price per share of Company Stock subject to a Stock
Option granted by a Pre-IPO Initial Grant shall be $1 less than the offering
price to the public in the Company's initial public offering.
(c) Annual Grants. On each date on which the Company holds its annual
meeting of stockholders, commencing with the 1997 calendar year, each
Non-Employee Director in office immediately after the annual election of
directors (other than directors first elected at such meeting) will receive a
grant of a Nonqualified Stock Option to purchase 7,500 shares of Company Stock.
The date of grant of such annual Grants shall be the date of such annual meeting
of stockholders.
(d) Election to Receive Annual Retainer in the Form of Stock Options.
(i) Before the beginning of each Plan Year (as defined below) that
commences on or after June 4, 1997, each Non-Employee Director may elect to
receive part or all of his or her Annual Retainer (as defined below) for the
Plan Year in the form of Nonqualified Stock Options. The election shall be made
by filing a written election with the Secretary of the Company before the
beginning of the Plan Year. The election shall be irrevocable as of the first
day of the Plan Year. If a Non-Employee Director makes no election under this
Section 6(d) for a Plan Year, the Non-Employee Director's Annual Retainer shall
be paid in cash.
(ii) The term "Annual Retainer" shall mean the annual retainer fee
paid by the Company to a Non-Employee Director for his or her services as a
director, and shall not include meeting fees. The term "Plan Year" shall mean
the approximately 12-month period beginning on the day after each annual meeting
of the Company's stockholders and ending on the date of the next following
annual meeting of the Company's stockholders.
(iii) Each Non-Employee Director at the beginning of a Plan Year who
has elected to receive Stock Options for the Plan Year pursuant to Subsection
(d)(i) above shall have his or her Annual Retainer for the Plan Year converted
into a Nonqualified Stock Option to purchase shares of Company Stock pursuant to
the formula described below. The Committee shall grant the Stock Option on the
date of the annual shareholders meeting that immediately precedes the beginning
of the Plan Year. Each Stock Option shall be evidenced by a Grant Letter in such
form as the Committee shall approve. If a Non-Employee Director elects to have
only a portion of his or her Annual Retainer for a Plan Year converted into a
Stock Option, references to the "Annual Retainer" shall be deemed to refer to
the portion of the Annual Retainer that is to be converted into a Stock Option.
The Committee shall determine the number of shares of Company Stock for which
the Non-Employee Director shall receive a Stock Option for the Plan Year based
on the following formula:
The Committee shall multiply the Annual Retainer by three and shall divide
that product by the Fair Market Value of a share of Company Stock on the
date of grant. The number of shares subject to the Stock Option shall be
rounded down to the nearest whole share. Any portion of an Annual Retainer
that is not converted into a Stock Option shall be paid in cash.
(iv) If an individual becomes a Non-Employee Director during a Plan
Year, the Non-Employee Director may elect to receive his or her Annual Retainer
for the Plan Year in the form of Stock Options by filing a written election with
the Secretary of the Company on or before the date on which the individual
becomes a Non-Employee Director. The election shall be irrevocable as of the
date on which the individual becomes a Non-
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Employee Director. If the Non-Employee Director elects to receive a Stock
Option, the Non-Employee Director shall receive such Stock Option as of the
first day on which he or she serves as a Non-Employee Director. The Committee
shall grant the Non-Employee Director a Stock Option based on the Non-Employee
Director=s Annual Retainer multiplied by a fraction, the numerator of which is
the number of days remaining in the Plan Year from and after the date the
individual becomes a Non-Employee Director and the denominator of which is the
number of days in the Plan Year. The number of shares subject to the Stock
Option shall be computed according to the formula described in Subsection
(d)(iii) above, based on the Fair Market Value of shares of Company Stock on the
date of grant.
(e) Exercisability. Stock Options granted under this Section 6 shall be
exercisable with respect to 50% of the shares on the date of grant, and an
additional 25% on each anniversary of the date of grant until such Stock Option
is fully exercisable, if the Non-Employee Director remains a member of the Board
through the applicable vesting date.
(f) Purchase Price. The purchase price per share of Company Stock subject
to a Stock Option granted under this Section 6 shall be equal to the Fair Market
Value of a share of Company Stock on the date of grant, except as provided in
Section 6(b) above.
(g) Option Term. The term of each Stock Option granted pursuant to this
Section 6 shall be ten years.
(h) Applicability of Plan Provisions. Except as otherwise provided in this
Section 6, the Nonqualified Stock Options granted to Non-Employee Directors
shall be subject to the provisions of this Plan applicable to Nonqualified Stock
Options granted to other persons, provided however that (i) with respect to the
termination of Stock Options pursuant to the provisions of Section 5(f), the
Committee shall not have discretion to modify the terms of such provisions in
the Grant Letter and (ii) in the event of a Change of Control (as defined in
Section 10), the provisions of Section 11 shall apply to Stock Options granted
pursuant to this Section 6, except that the Committee shall not have discretion
to modify the automatic acceleration provisions.
7. Restricted Stock Grants
The Committee may issue or transfer shares of Company Stock to an Employee
or Consultant under a Grant of restricted stock (a "Restricted Stock Grant"),
upon such terms as the Committee deems appropriate. The following provisions are
applicable to Restricted Stock Grants:
(a) General Requirements. Shares of Company Stock issued pursuant to
Restricted Stock Grants may be issued for consideration or for no consideration,
at the sole discretion of the Committee. The Committee shall establish
conditions under which restrictions on the transfer of shares of Company Stock
shall lapse over a period of time or according to such other criteria as the
Committee deems appropriate. The period of years during which the Restricted
Stock Grant will remain subject to restrictions will be designated in the Grant
Letter as the "Restriction Period."
(b) Number of Shares. The Committee shall grant to each Grantee a number
of shares of Company Stock pursuant to a Restricted Stock Grant in such manner
as the Committee determines.
(c) Requirement of Employment. If the Grantee ceases to be employed by the
Company (as an Employee or Consultant) during a period designated in the Grant
Letter as the Restriction Period, or if other specified conditions are not met,
the Restricted Stock Grant shall terminate as to all shares covered by the Grant
as to which restrictions on transfer have not lapsed and those shares of Company
Stock must be immediately returned to the Company. The Committee may, however,
provide for complete or partial exceptions to this requirement as it deems
equitable.
(d) Restrictions on Transfer and Legend on Stock Certificate. During the
Restriction Period, a Grantee may not sell, assign, transfer, pledge or
otherwise dispose of the shares of Company Stock to which such Restriction
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Period applies except to a Successor Grantee (as defined below) under Section 9.
Each certificate for a share issued or transferred under a Restricted Stock
Grant shall contain a legend giving appropriate notice of the restrictions in
the Grant. The Grantee shall be entitled to have the legend removed from the
stock certificate covering any of the shares subject to restrictions when all
restrictions on such shares have lapsed.
(e) Right to Vote and to Receive Dividends. During the Restriction Period,
unless the Committee determines otherwise, the Grantee shall have the right to
vote shares subject to the Restricted Stock Grant and to receive any dividends
or other distributions paid on such shares, subject to any restrictions deemed
appropriate by the Committee.
(f) Lapse of Restrictions. All restrictions imposed under the Restricted
Stock Grant shall lapse upon the expiration of the applicable Restriction Period
and the satisfaction of any conditions imposed by the Committee. The Committee
may determine, as to any or all Restricted Stock Grants, that all the
restrictions shall lapse without regard to any Restriction Period. All
restrictions under all outstanding Restricted Stock Grants shall automatically
and immediately lapse upon a Change of Control, unless, in cases not covered by
Section 10(f), the Committee in its sole discretion determines that the
restrictions shall not lapse upon a Change of Control. The Committee may make
such determination prior to the Change of Control or, if the Committee making
such determination following a Change of Control is comprised of the same
members as served on the Committee immediately prior to such Change of Control,
within five days following such Change of Control.
8. Stock Appreciation Rights
(a) General Requirements. The Committee may grant stock appreciation
rights ("SARs") to any Grantee in tandem with any Stock Option, for all or a
portion of the applicable Stock Option, either at the time the Stock Option is
granted or at any time thereafter while the Stock Option remains outstanding;
provided, however, that in the case of an Incentive Stock Option, such rights
may be granted only at the time of the Grant of such Stock Option. Unless the
Committee determines otherwise, the base price of each SAR shall be equal to the
greater of (i) the exercise price of the related Stock Option or (ii) the Fair
Market Value of a share of Company Stock as of the date of Grant of such SAR.
(b) Number of SARs. The number of SARs granted to a Grantee which shall be
exercisable during any given period of time shall not exceed the number of
shares of Company Stock which the Grantee may purchase upon the exercise of the
related Stock Option during such period of time. Upon the exercise of a Stock
Option, the SARs relating to the Company Stock covered by such Stock Option
shall terminate. Upon the exercise of the SAR's, the related Stock Option shall
terminate to the extent of an equal number of shares of Company Stock.
(c) Value of SARs. Upon a Grantee's exercise of some or all of the
Grantee's SARs, the Grantee shall receive in settlement of such SARs an amount
equal to the value of the stock appreciation for the number of SARs exercised,
payable in cash, Company Stock or a combination thereof. The stock appreciation
for an SAR is the amount by which the Fair Market Value of the underlying
Company Stock on the date of exercise of the SAR exceeds the base price of the
SAR as described in subsection (a).
(d) Form of Payment. At the time of such exercise, the Grantee shall have
the right to elect the portion of the amount to be received that shall consist
of cash and the portion that shall consist of shares of Company Stock, which for
purposes of calculating the number of shares of Company stock to be received,
shall be valued at their Fair Market Value on the date of exercise of such SARs.
The Committee shall have the right to disapprove a Grantee's election to receive
cash in full or partial settlement of the SARs exercised and to require that
shares of Company Stock be delivered in lieu of cash. If shares of Company Stock
are to be received upon exercise of an SAR, cash shall be delivered in lieu of
any fractional share.
(e) Certain Restrictions. An SAR is exercisable only during the period
when the Stock Option to which it is related is also exercisable.
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9. Transferability of Grants
Only the Grantee or his or her authorized representative may exercise
rights under a Grant. Such persons may not transfer those rights except by will
or by the laws of descent and distribution or, with respect to Grants other than
Incentive Stock Options, if permitted in any specific case by the Committee in
its sole discretion pursuant to a qualified domestic relations order (as defined
under the Code or Title I of the Employee Retirement Income Security Act of
1974, as amended, or the regulations thereunder). When a Grantee dies, the
representative or other person entitled to succeed to the rights of the Grantee
("Successor Grantee") may exercise such rights. A Successor Grantee must furnish
proof satisfactory to the Company of his or her right to receive the Grant under
the Grantee's will or under the applicable laws of descent and distribution.
Notwithstanding the foregoing, the Committee may provide, in a Grant
Letter, that a Grantee may transfer Nonqualified Stock Options to his or her
children, grandchildren or spouse or to one or more trusts for the benefit of
such family members or to partnerships in which such family members are the only
partners (a "Family Transfer"), provided that the Grantee receives no
consideration for a Family Transfer and the Grant Letters relating to
Nonqualified Stock Options transferred in a Family Transfer continue to be
subject to the same terms and conditions that were applicable to such
Nonqualified Stock Options immediately prior to the Family Transfer.
10. Change of Control of the Company
As used herein, a "Change of Control" shall be deemed to have occurred if:
(a) As a result of a tender offer, stock purchase, other stock
acquisition, merger, consolidation, recapitalization, reverse split, or sale or
transfer of assets, any person or group (as such terms are used in and under
Section 13(d) of the Exchange Act), but excluding Rolf D. Schmidt and F. William
Schmidt or any entity controlled by either or both of them, becomes the
beneficial owner (as defined in Rule 13-d under the Exchange Act), directly or
indirectly, of securities of the Company representing more than 50.1% of the
common stock of the Company or the combined voting power of the Company's then
outstanding securities;
(b) A liquidation or dissolution of the Company, or a sale
(excluding transfers to subsidiaries) of all or substantially all of the
Company's assets occurs; or
(c) During any period of two consecutive years, individuals who, at
the beginning of such period, constitute the Board cease for any reason to
constitute at least a majority thereof, unless the election, or the nomination
for election by the Company's stockholders, of at least two-thirds of the
directors who were not directors at the beginning of such period was approved by
a vote of at least two-thirds of the directors then still in office who were
either directors at the beginning of the period or who, in connection with their
election or nomination, received the foregoing two-thirds approval.
11. Consequences of a Change of Control
(a) Notice. Unless the Committee determines otherwise:
(i) If a Change of Control described in Section 10(a) or (b) will
occur, then, not later than 10 days after the approval by the stockholders of
the Company (or approval by the Board, if stockholder action is not required) of
such Change of Control, the Company shall give each Optionee with any
outstanding Stock Options written notice of such proposed Change of Control.
(ii) If a Change of Control described in Section 10(a) may occur
without approval by the stockholders (or approval by the Board) and does so
occur, or if a Change of Control described in Section 10(c) occurs, then, not
later than 10 days after such Change of Control, the Company shall give each
Optionee with any outstanding Stock Options written notice of the Change of
Control.
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(b) Election Period. In connection with the Change of Control and
effective only upon such Change of Control, unless the Committee determines
otherwise, each Grantee shall thereupon have the right, within 20 days after
such written notice is sent by the Company (the "Election Period"), to make an
election as described in Subsection (c) with respect to all of his or her
outstanding Stock Options (whether the right to exercise such Stock Options has
then accrued or the right to exercise such Stock Options will occur or has
occurred upon the Change of Control).
(c) Election Right. The Committee shall determine, in its sole discretion,
whether Grantees will have either or both of the rights described below. During
the Election Period, unless the Committee determines otherwise, each Grantee
shall have the right to elect:
(i) To exercise in full any installments of such Stock Options not
previously exercised, or
(ii) To surrender all or part of such outstanding Stock Options, in
exchange for a payment by the Company, in cash or Company Stock as determined by
the Committee, in an amount equal to the excess over the purchase price of the
then Fair Market Value of the shares of Company Stock subject to the Grantee's
outstanding Stock Options.
(d) Termination of Stock Options. If a Grantee does not make a timely
election in accordance with Subsection (c) in connection with a Change of
Control where the Company is not the surviving corporation (or survives only as
a subsidiary of another corporation), the Grantee's Stock Options shall
terminate as of the Change of Control. Notwithstanding the foregoing, a Stock
Option will not terminate if assumed by the surviving or acquiring corporation,
or its parent, upon a merger or consolidation and, with respect to an Incentive
Stock Option, the assumption of the Option occurs under circumstances which are
not deemed a modification of the Option within the meaning of sections 424(a)
and 424(h)(3)(A) of the Code.
(e) Accounting and Tax Limitations. Notwithstanding the foregoing:
(i) If the right described in Subsection (c)(ii) would make the
applicable Change of Control ineligible for pooling of interests accounting
treatment or make such Change of Control ineligible for desired tax treatment
with respect to such Change of Control and, but for those provisions, the Change
of Control would otherwise qualify for such treatment, the Grantee shall receive
shares of Company Stock with a Fair Market Value equal to the cash that would
otherwise be payable pursuant to Subsection (c)(ii) in substitution for such
cash, and
(ii) If the termination of the Stock Options described in Subsection
(d) would make the applicable Change of Control ineligible for pooling of
interests accounting treatment and, but for such provision, the Change of
Control would otherwise qualify for such treatment, each affected Grantee shall
receive a replacement or substitute stock option issued by the surviving or
acquiring corporation.
(f) Other Limitations. Notwithstanding any other provision of this Section
11, if a Change of Control described in Section 10(a) will occur, or if a Change
of Control described in Section 10(b) will occur and the Company will not be the
surviving corporation, then (i) all outstanding Stock Options shall be
exercisable, (ii) the restrictions on all outstanding Restricted Stock shall
lapse, (iii) the Committee notice required by Subsection (a) shall be mandatory
and (iv) the Grantee shall have the right to make the election called for in
Subsection (c), subject to the provisions of Subsections (d) and (e) and further
subject to the Committee's right to permit only the election under Subsection
(c)(i).
12. Amendment and Termination of the Plan
(a) Amendment. The Board may amend or terminate the Plan at any time;
provided, however, that any amendment that increases the aggregate number (or
individual limit for any single Grantee) of shares of Company Stock that may be
issued or transferred under the Plan (other than by operation of Section 3(b)),
or modifies the
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requirements as to eligibility for participation in the Plan, shall be subject
to approval by the stockholders of the Company and provided, further, that the
Board shall not amend the Plan without stockholder approval if such approval is
required by section 162(m) of the Code.
(b) Termination of Plan. The Plan shall terminate on the day immediately
preceding the tenth anniversary of its effective date unless terminated earlier
by the Board or unless extended by the Board with the approval of the
stockholders.
(c) Termination and Amendment of Outstanding Grants. A termination or
amendment of the Plan that occurs after a Grant is made shall not materially
impair the rights of a Grantee unless the Grantee consents or unless the
Committee acts under Section 20(b). The termination of the Plan shall not impair
the power and authority of the Committee with respect to an outstanding Grant.
Whether or not the Plan has terminated, an outstanding Grant may be terminated
or amended under Section 20(b) or may be amended by agreement of the Company and
the Grantee consistent with the Plan.
(d) Governing Document. The Plan shall be the controlling document. No
other statements, representations, explanatory materials or examples, oral or
written, may amend the Plan in any manner. The Plan shall be binding upon and
enforceable against the Company and its successors and assigns.
13. Funding of the Plan
This Plan shall be unfunded. The Company shall not be required to
establish any special or separate fund or to make any other segregation of
assets to assure the payment of any Grants under this Plan. In no event shall
interest be paid or accrued on any Grant, including unpaid installments of
Grants.
14. Rights of Participants
Nothing in this Plan shall entitle any Employee, Consultant or other
person to any claim or right to be granted a Grant under this Plan. Neither this
Plan nor any action taken hereunder shall be construed as giving any individual
any rights to be retained by or in the employ of the Company or any other
employment rights.
15. No Fractional Shares
No fractional shares of Company Stock shall be issued or delivered
pursuant to the Plan or any Grant. The Committee shall determine whether cash,
other awards or other property shall be issued or paid in lieu of such
fractional shares or whether such fractional shares or any rights thereto shall
be forfeited or otherwise eliminated.
16. Withholding of Taxes
(a) Required Withholding. The Company shall have the right to deduct from
all Grants paid in cash, or from other wages paid to the Grantee, any federal,
state or local taxes required by law to be withheld with respect to such cash
awards and, in the case of Grants paid in Company Stock, the Grantee or other
person receiving such shares shall be required to pay to the Company the amount
of any such taxes which the Company is required to withhold with respect to such
Grants or the Company shall have the right to deduct from other wages paid by
the Company the amount of any withholding due with respect to such Grants.
(b) Election to Withhold Shares. A Grantee may make an election to satisfy
the Company income tax withholding obligation with respect to a Stock Option,
SAR or Restricted Stock by having shares withheld up to an amount that does not
exceed the Grantee's maximum marginal tax rate for federal (including FICA),
state and local tax liabilities. Such election must be in the form and manner
prescribed by the Committee and is subject to the prior approval of the
Committee.
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17. Requirements for Issuance of Shares
No Company Stock shall be issued or transferred in connection with any
Grant hereunder unless and until all legal requirements applicable to the
issuance or transfer of such Company Stock have been complied with to the
satisfaction of the Committee. The Committee shall have the right to condition
any Grant made to any Grantee hereunder on such Grantee's undertaking in writing
to comply with such restrictions on his or her subsequent disposition of such
shares of Company Stock as the Committee shall deem necessary or advisable as a
result of any applicable law, regulation or official interpretation thereof and
certificates representing such shares may be legended to reflect any such
restrictions. Certificates representing shares of Company Stock issued under the
Plan will be subject to such stop-transfer orders and other restrictions as may
be applicable under such laws, regulations and other obligations of the Company,
including any requirement that a legend or legends be placed thereon.
18. Headings
Section headings are for reference only. In the event of a conflict
between a title and the content of a Section, the content of the Section shall
control.
19. Effective Date of the Plan.
This Plan shall be effective on May 28, 1996. The 1996 amendment and
restatement was effective as of November 1, 1996. The 1997 amendment and
restatement shall be effective as of June 4, 1997.
20. Miscellaneous
(a) Substitute Grants. The Committee may make a Grant to an employee of
another corporation who becomes an Employee by reason of a corporate merger,
consolidation, acquisition of stock or property, reorganization or liquidation
involving the Company or any of its subsidiaries in substitution for a stock
option or restricted stock grant made by such corporation ("Substituted Stock
Incentives"). The terms and conditions of the substitute grant may vary from the
terms and conditions required by the Plan and from those of the Substituted
Stock Incentives. The Committee shall prescribe the provisions of the substitute
grants.
(b) Compliance with Law. The Plan, the exercise of Stock Options and the
obligations of the Company to issue or transfer shares of Company Stock under
Grants shall be subject to all applicable laws and to approvals by any
governmental or regulatory agency as may be required. With respect to persons
subject to Section 16 of the Exchange Act, it is the intent of the Company that
the Plan and all transactions under the Plan comply with all applicable
provisions of Rule 16b-3 or its successors under the Exchange Act. The Committee
may revoke any Grant if it is contrary to law or modify a Grant to bring it into
compliance with any valid and mandatory government regulation. The Committee may
also adopt rules regarding the withholding of taxes on payments to Grantees. The
Committee may, in its sole discretion, agree to limit its authority under this
Section.
(c) Ownership of Stock. A Grantee or Successor Grantee shall have no
rights as a stockholder with respect to any shares of Company Stock covered by a
Grant until the shares are issued or transferred to the Grantee or Successor
Grantee on the stock transfer records of the Company.
(d) Governing Law. The validity, construction, interpretation and effect
of the Plan and Grant Letters issued under the Plan shall exclusively be
governed by and determined in accordance with the law of the State of Delaware.
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