EXHIBIT 4.2
2005 EQUITY COMPENSATION PLAN
1. PURPOSE OF THE PLAN
The purpose of the Plan is to aid the Company, its Subsidiaries and
Affiliates, as may be applicable, in recruiting and retaining key individuals of
outstanding ability and to motivate such individuals to exert their best efforts
on behalf of the Company, its Subsidiaries and Affiliates by providing
incentives through the granting of Awards. The Company expects that it will
benefit from the added interest which such key individuals will have in the
welfare of the Company as a result of their proprietary interest in the
Company's success.
2. DEFINITIONS
The following capitalized terms used in the Plan have the respective
meanings set forth in this Section:
(a) Act: The Securities Exchange Act of 1934, as amended, or any
successor thereto.
(b) Affiliate: With respect to the Company, any company directly or
indirectly controlling, controlled by, or under common control
with, the Company or any other entity designated by the Board of
Directors of the Company in which the Company has an interest.
(c) Award: An Option or Stock-Based
Award granted pursuant to the Plan. (d) Beneficial Owner: A
"beneficial owner", as such term is defined in Rule 13d-3 under
the Act (or any successor rule thereto).
(d) Beneficial Owner: A "beneficial owner" as such term is defined in
Rule 13d-3 under the Act (or any successor rule thereto)
(e) Board: The Board of Directors of the Company.
(f) Board Change: Within the twenty-four consecutive month period
following the occurrence of any of the events set forth in Section
2(v)(i), individuals who immediately prior to the occurrence of
any of such events constitute the Board cease for any reason to
constitute at least a majority thereof (other than in the event of
a director's death or Disability).
(g) Cause: In the event that a Participant is a party to an employment
agreement with the Company, the Parent, a Subsidiary or an
Affiliate at the date an Award is granted, "Cause" shall have the
same meaning ascribed to such term in such employment agreement.
In the event that a Participant is not party to any such
employment agreement or there is no
(h) such definition, "Cause" shall be defined as follows:
(i) a Participant's continued failure substantially to perform the
Participant's duties (other than as a result of total or
partial incapacity due to physical or mental illness) for a
period of 10 days following written notice by the Company to
the Participant of such failure; or
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(ii)dishonesty in the performance of, or willful malfeasance or
willful misconduct in connection with, a Participant's duties;
or
(iii) an act or acts on a Participant's part constituting (x) a
felony under the laws of the United States or any state thereof
or (y) a misdemeanor involving moral turpitude; or
(iv)any act or omission of a Participant which is materially
injurious to the financial condition or business reputation of
Parent, the Company or any of its Subsidiaries or Affiliates;
or
(v) a Participant's breach of any restrictive covenants contained
in any agreement with the Company or any of its Subsidiaries or
Affiliates to which Participant is a party.
(i) Change in Control: The occurrence of any of the following events:
(i) any Person, other than the Company, any trustee or other
fiduciary holding securities under an employee benefit plan
of the Company, or any company owned, directly or
indirectly, by the shareholders of the Company in
substantially the same proportions as their ownership of
Stock of the Company, becomes the Beneficial Owner, directly
or indirectly, of securities of the Company, (a)
representing a greater percentage of the combined voting
power of the Company's then-outstanding securities than the
percentage of the combined voting power of the Company's
then-outstanding securities held by Parent and its
Affiliates and (b) representing 30% or more of the combined
voting power of the Company's then-outstanding securities;
or
(ii) during any period of twenty-four months (not including any
period prior to the Effective Date), individuals who at the
beginning of such period constitute the Board, and any new
director (other than (A) a director nominated by a Person who
has entered into an agreement with the Company to effect a
transaction described in Sections 2(h)(i), (iii) or (iv) of
the Plan, (B) a director nominated by any Person (including
the Company) who publicly announces an intention to take or
to consider taking actions (including, but not limited to, an
actual or threatened proxy contest) which if consummated
would constitute a Change in Control or (C) a director
nominated by any Person, other than Parent and its
Affiliates, who is the Beneficial Owner, directly or
indirectly, of securities of the Company representing 10% or
more of the combined voting power of the Company's
securities) whose election by the Board or nomination for
election by the Company's shareholders was approved in
advance by a vote of at least two-thirds ( 2/3) of the
directors then still in office who either were directors at
the beginning of the period or whose election or nomination
for election was previously so approved, cease for any reason
to constitute at least a majority thereof; or
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(iii)the Company is merged or consolidated with any other company,
other than a merger or consolidation which would result in the
shareholders of the Company immediately prior thereto
continuing to own (either by remaining outstanding or by being
converted into voting securities of the surviving entity) more
than 50% of the combined voting power of the voting securities
of the Company or such surviving entity outstanding
immediately after such merger or consolidation; or
(iv) the complete liquidation of the Company or the sale or
disposition by the Company of all or substantially all of the
Company's assets, other than a liquidation of the Company or
sale of its assets to an Affiliate into a wholly-owned
subsidiary.
(j) Code: The Internal Revenue Code of 1986, as amended, or any
successor thereto.
(k) Committee: The Board of Directors of the Company, the
Compensation Committee of the Board, or, if applicable, the
subcommittee to which such Committee delegates its duties and
powers.
(l) Company: Time Lending, California, Inc.
(m) Disability: Inability to engage in any substantial gainful
activity by reason of a medically determinable physical or mental
impairment which constitutes a permanent and total disability, as
defined in Section 22(f)(3) of the Code (or any successor section
thereto). The determination whether a Participant has suffered a
Disability shall be made by the Committee based upon such
evidence as it deems necessary and appropriate. A Participant
shall not be considered disabled unless he or she furnishes such
medical or other evidence of the existence of the Disability as
the Committee, in its sole discretion, may require.
(n) Effective Date: The date set by the Company's Board of Directors.
(o) Employer: The Company, a Subsidiary or an Affiliate, as
applicable, which employs any given Participant.
(p) Fair Market Value: on a given date, the closing price of the
Shares as reported on such date on the Composite Tape of the
principal national securities exchange on which such Shares are
listed or admitted to trading, or, if no Composite Tape exists
for such national securities exchange on such date, then on the
principal national securities exchange on which such Shares are
listed or admitted to trading, or, if the Shares are not listed
or admitted on a national securities exchange, the per Share
closing bid price on such date as quoted on the National
Association of Securities Dealers Automated Quotation System (or
such market in which such prices are regularly quoted), or, if
there is no market on which the Shares are regularly quoted, the
Fair Market Value shall be the value established by the Committee
in good faith;
If no sale of Shares shall have been reported on such Composite
Tape or such national securities exchange on such date or quoted
on the National Association of Securities Dealer Automated
Quotation System on such date, then the immediately preceding
date on which sales of the Shares have been so reported or quoted
shall be used.
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(q) ISO: An Option that is also an incentive stock option granted
pursuant to Section 6(d) of the Plan.
(r) Stock-Based Awards: Awards granted pursuant to Section 8 of the
Plan. Option: A stock option granted pursuant to Section 6 of the
Plan. Option Price: The purchase price per Share of an Option, as
determined pursuant to Section 6(a) of the Plan.
(w) Participant: An employee or director of the Company, its Parent,
Subsidiary or Affiliate, or an individual who is not such an
employee or director but who otherwise performs services for the
Company, its Parent, Subsidiary or Affiliate, and in any case,
who is selected by the Committee to participate in the Plan.
(x) Performance-Based Awards: Certain Other Stock-Based Awards
granted pursuant to Section 8(b) of the Plan.
(y) Person: A "person", as such term is used for purposes of Section
13(d) or 14(d) of the Act (or any successor section thereto).
(z) Plan: Time Lending, California, Inc. 2005 Equity Compensation
Plan.
(aa) Public Offering: A sale of shares of the Company's common stock
to the public pursuant to a registration statement under the
Securities Act of 1933, as amended, that has been declared
effective by the Securities and Exchange Commission (other than a
registration statement on Form S-4 or Form S-8, or any other
successor or other forms promulgated for similar purposes, or a
registration statement in connection with an offering to
employees of the Company and its Subsidiaries) that results in an
active trading market in the Company's common stock; provided,
that there shall be deemed to be an "active trading market" if
the Company's common stock is listed or quoted on a national
stock exchange or the NASDAQ National Market.
(bb) Shares: Shares of Common Stock of the Company, $0.001 par value
per Share.
(cc) Subsidiary: A subsidiary corporation, as defined in Section
424(f) of the Code (or any successor section thereto).
3. SHARES SUBJECT TO THE PLAN
The total number of Shares which may be issued under the Plan is less than
15% of the total Shares outstanding, which shall not exceed 500,000 Shares. The
Shares may consist, in whole or in part, of unissued Shares or treasury Shares.
The issuance of Shares or the payment of cash upon the exercise of an Award
shall reduce the total number of Shares available under the Plan, as applicable.
Shares which are subject to Awards which terminate or lapse may be granted again
under the Plan.
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4. ADMINISTRATION
The Plan shall be administered by the Board of Directors or the Committee,
which may delegate its duties and powers in whole or in part to any subcommittee
thereof consisting solely of at least two individuals who are intended to
qualify as "non-employee directors" within the meaning of Rule 16b-3 under the
Act (or any successor rule thereto) and "outside directors" within the meaning
of Section 162(m) of the Code (or any successor section thereto). Awards may, in
the discretion of the Committee, be made under the Plan in assumption of, or in
substitution for, outstanding awards previously granted by the Company or its
affiliates or a company acquired by the Company or with which the Company
combines. The number of Shares underlying such substitute awards shall be
counted against the aggregate number of Shares available for Awards under the
Plan. The Committee is authorized to interpret the Plan, to establish, amend and
rescind any rules and regulations relating to the Plan, and to make any other
determinations that it deems necessary or desirable for the administration of
the Plan. The Committee may correct any defect or supply any omission or
reconcile any inconsistency in the Plan in the manner and to the extent the
Committee deems necessary or desirable. Any decision of the Committee in the
interpretation and administration of the Plan, as described herein, shall lie
within its sole and absolute discretion and shall be final, conclusive and
binding on all parties concerned (including, but not limited to, Participants
and their beneficiaries or successors). The Committee shall have the full power
and authority to establish the terms and conditions of any Award consistent with
the provisions of the Plan and to waive any such terms and conditions at any
time (including, without limitation, accelerating or waiving any vesting
conditions). The Committee shall require payment of any amount it may determine
to be necessary to withhold for federal, state, local or other taxes as a result
of the exercise of an Award. Unless the Committee specifies otherwise, the
Participant may elect to pay a portion or all of such withholding taxes by (a)
delivery in Shares or (b) having Shares withheld by the Company from any Shares
that would have otherwise been received by the Participant.
5. LIMITATIONS
No Award may be granted under the Plan after the tenth anniversary of the
Effective Date, but Awards theretofore granted may extend beyond that date.
6. TERMS AND CONDITIONS OF OPTIONS
Options granted under the Plan shall be, as determined by the Committee,
nonqualified or incentive stock options for federal income tax purposes, as
evidenced by the related Award agreements, and shall be subject to the foregoing
and the following terms and conditions and to such other terms and conditions,
not inconsistent therewith, as the Committee shall determine:
(a) Option Price. The Option Price per Share shall be determined by
the Committee.
(b) Exercisability. Options granted under the Plan shall be
exercisable at such time and upon such terms and conditions as may
be determined by the Committee, but in no event shall an Option be
exercisable more than ten years after the date it is granted.
(c) Exercise of Options. Except as otherwise provided in the Plan or
in an Award agreement, an Option may be exercised for all, or from
time to time any part, of the Shares for which it is then
exercisable. For purposes of Section 6 of the Plan, the exercise
date of an Option shall be the later of the date a notice of
exercise is received by the Company and, if applicable, the date
payment is received by the Company pursuant to clauses (i), (ii)
or (iii) in the following sentence. The purchase price for the
Shares as to which an Option is exercised shall be paid to
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the Company in full at the time of exercise at the election of the
Participant (i) in cash or its equivalent (e.g., by check); (ii)
in Shares having a Fair Market Value equal to the aggregate Option
Price for the Shares being purchased and satisfying such other
requirements as may be imposed by the Committee; provided, that
such Shares have been held by the Participant for no less than six
months (or such other period as established from time to time by
the Committee or generally accepted accounting principles); (iii)
partly in cash and partly in such Shares; or (iv) through the
delivery of irrevocable instruments to a broker to deliver
promptly to the Company an amount equal to the aggregate Option
price for the shares being purchased. No Participant shall have
any rights to dividends or other rights of a stockholder with
respect to Shares subject to an Option until the Participant has
given written notice of exercise of the Option, paid in full for
such Shares and, if applicable, has satisfied any other conditions
imposed by the Committee pursuant to the Plan.
(d) ISOs. The Committee may grant to employees Options under the Plan
that are intended to be ISOs. Such ISOs shall comply with the
requirements of Section 422 of the Code (or any successor section
thereto), including, without limitation the requirement that the
Option Price per Share subject to an ISO shall not be less than
100% of the Fair Market Value of the Shares on the date an ISO is
granted.. No ISO may be granted to any Participant who at the time
of such grant, owns more than ten percent of the total combined
voting power of all classes of stock of the Company or of any
Subsidiary, unless (i) the Option Price for such ISO is at least
110% of the Fair Market Value of a Share on the date the ISO is
granted and (ii) the date on which such ISO terminates is a date
not later than the day preceding the fifth anniversary of the date
on which the ISO is granted. Any Participant who disposes of
Shares acquired upon the exercise of an ISO either (i) within two
years after the date of grant of such ISO or (ii) within one year
after the transfer of such Shares to the Participant, shall notify
the Company of such disposition and of the amount realized upon
such disposition.
(e) Attestation. Wherever in this Plan or any agreement evidencing an
Award a Participant is permitted to pay the exercise price of an
Option or taxes relating to the exercise of an Option by
delivering Shares, the Participant may, subject to procedures
satisfactory to the Committee, satisfy such delivery requirement
by presenting proof of beneficial ownership of such Shares, in
which case the Company shall treat the Option as exercised without
further payment and shall withhold such number of Shares from the
Shares acquired by the exercise of the Option.
7. STOCK-BASED AWARDS
(a) Generally. The Committee, in its sole discretion, may grant Awards of
Shares, Awards of restricted Shares and Awards that are valued in whole
or in part by reference to, or are otherwise based on the Fair Market
Value of, Shares ("Stock-Based Awards"). Such Stock-Based Awards shall
be in such form, and dependent on such conditions, as the Committee
shall determine, including, without limitation, the right to receive
one or more Shares (or the equivalent cash value of such Shares) upon
the completion of a specified period of service, the occurrence of an
event and/or the attainment of performance objectives. Stock-Based
Awards may be granted alone or in addition to any
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other Awards granted under the Plan. Subject to the provisions of the
Plan, the Committee shall determine to whom and when other Stock-Based
Awards will be made, the number of Shares to be awarded under (or
otherwise related to) such Stock-Based Awards; whether such Stock-Based
Awards shall be settled in cash, Shares or a combination of cash and
Shares; and all other terms and conditions of such Awards (including,
without limitation, the vesting provisions thereof and provisions
ensuring that all Shares so awarded and issued shall be fully paid and
non-assessable).
(b) Performance-Based Awards. Notwithstanding anything to the contrary
herein, certain Stock-Based Awards granted under this Section 8 may be
granted in a manner which is deductible by the Company under Section
162(m) of the Code (or any successor section thereto)
("Performance-Based Awards"). A Participant's Performance-Based Award
shall be determined based on the attainment of written performance
goals approved by the Committee for a performance period established by
the Committee (i) while the outcome for that performance period is
substantially uncertain and (ii) no more than 90 days after the
commencement of the performance period to which the performance goal
relates or, if less, the number of days which is equal to 25 percent of
the relevant performance period. The performance goals, which must be
objective, shall be based upon one or more of the following criteria:
(i) consolidated earnings before or after taxes (including earnings
before interest, taxes, depreciation and amortization); (ii) net
income; (iii) operating income; (iv) earnings per Share; (v) book value
per Share; (vi) return on shareholders' equity; (vii) expense
management; (viii) return on investment; (ix) improvements in capital
structure; (x) profitability of an identifiable business unit or
product; (xi) maintenance or improvement of profit margins; (xii) stock
price; (xiii) market share; (xiv) revenues or sales; (xv) costs; (xvi)
cash flow; (xvii) working capital and (xviii) return on assets. The
foregoing criteria may relate to the Company, one or more of its
Subsidiaries or one or more of its divisions or units, or any
combination of the foregoing, and may be applied on an absolute basis
and/or be relative to one or more peer group companies or indices, or
any combination thereof, all as the Committee shall determine. In
addition, to the degree consistent with Section 162(m) of the Code (or
any successor section thereto), the performance goals may be calculated
without regard to extraordinary items. The Committee shall determine
whether, with respect to a performance period, the applicable
performance goals have been met with respect to a given Participant
and, if they have, to so certify and ascertain the amount of the
applicable Performance Based Award. No Performance-Based Awards will be
paid for such performance period until such certification is made by
the Committee. The amount of the Performance-Based Award actually paid
to a given Participant may be less than the amount determined by the
applicable performance goal formula, at the discretion of the
Committee. The amount of the Performance-Based Award determined by the
Committee for a performance period shall be paid to the Participant at
such time as determined by the Committee in its sole discretion after
the end of such performance period; provided, however, that a
Participant may, if and to the extent permitted by the Committee and
consistent with the provisions of Section 162(m) of the Code, elect to
defer payment of a Performance-Based Award.
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8. ADJUSTMENTS UPON CERTAIN EVENTS
Notwithstanding any other provisions in the Plan to the contrary, the
following provisions shall apply to all Awards granted under the Plan:
(a) Generally. In the event of any change in the outstanding Shares
after the Effective Date by reason of any Share dividend or split,
reorganization, recapitalization, merger, consolidation, spin-off,
combination or exchange of Shares or other corporate exchange, or
any distribution to shareholders of Shares other than regular cash
dividends or any transactions similar to the foregoing, the
Committee in its sole discretion and without liability to any
person may make such substitution or adjustment, if any, as it
deems to be equitable, as to (i) the number or kind of Shares or
other securities issued or reserved for issuance pursuant to the
Plan or pursuant to outstanding Awards, (ii) the Option Price
and/or (iii) any other affected terms of such Awards.
(b) Change in Control. Except as otherwise provided in an Award
agreement or an employment, severance or change in control
agreement, in the event of a Change in Control or a Parent
Triggering Event, the Committee in its sole discretion and without
liability to any person may take such actions, if any, as it deems
necessary or desirable with respect to any Award (including,
without limitation, (i) the acceleration of an Award, (ii) the
payment of a cash amount in exchange for the cancellation of an
Award and/or (iii) the requiring of the issuance of substitute
Awards that will substantially preserve the value, rights and
benefits of any affected Awards previously granted hereunder) as
of the date of the consummation of the Change in Control.
9. NO RIGHT TO EMPLOYMENT OR AWARDS
The granting of an Award under the Plan shall impose no obligation on the
Company or any Subsidiary to continue the employment or service or consulting
relationship of a Participant and shall not lessen or affect the Company's or
Subsidiary's right to terminate the employment or service or consulting
relationship of such Participant. No Participant or other Person shall have any
claim to be granted any Award, and there is no obligation for uniformity of
treatment of Participants, or holders or beneficiaries of Awards. The terms and
conditions of Awards and the Committee's determinations and interpretations with
respect thereto need not be the same with respect to each Participant (whether
or not such Participants are similarly situated).
10. SUCCESSORS AND ASSIGNS
The Plan shall be binding on all successors and assigns of the Company and
a Participant, including without limitation, the estate of such Participant and
the executor, administrator or trustee of such estate, or any receiver or
trustee in bankruptcy or representative of the Participant's creditors.
11. NONTRANSFERABILITY AWARDS
Unless otherwise determined by the Committee or as hereinafter provided, an
Award shall not be transferable or assignable by the Participant otherwise than
by will or by the laws of descent and distribution. An Award exercisable after
the death of a Participant may be exercised by the legatees, personal
representatives or distributees of the Participant. However, unless the Award
agreement provides otherwise, a Participant may transfer his or her rights under
a nonqualified Option agreement, by assignment, satisfactory in form and
substance to the Committee, to a trust or similar entity established solely for
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the benefit of the Participant's lineal descendants; provided, that such
assignee must first agree to be bound by the same terms and conditions as the
Participant with respect to such Option; and provided, further, that the rights
of such assignee shall not themselves be transferable.
12. AMENDMENTS OR TERMINATION
The Board may amend, alter or discontinue the Plan, but no amendment,
alteration or discontinuation shall be made which, (a) without the approval of
the shareholders of the Company, would (except as is provided in Section 9 of
the Plan), increase the total number of Shares reserved for the purposes of the
Plan or change the maximum number of Shares for which Awards may be granted to
any Participant or (b) without the consent of a Participant, would impair any of
the rights or obligations under any Award theretofore granted to such
Participant under the Plan; provided, however, that the Committee may amend the
Plan in such manner as it deems necessary to permit the granting of Awards
meeting the requirements of the Code or other applicable laws. Notwithstanding
anything to the contrary herein, the Board may not amend, alter or discontinue
the provisions relating to Section 8(b) of the Plan after the occurrence of a
Change in Control.
13. INTERNATIONAL PARTICIPANTS
With respect to Participants who reside or work outside the United States
of America and who are not (and who are not expected to be) "covered employees"
within the meaning of Section 162(m) of the Code, the Committee may, in its sole
discretion, amend the terms of the Plan or Awards with respect to such
Participants in order to conform such terms with the requirements of local law.
14. CHOICE OF LAW
The Plan shall be governed by and construed in accordance with the laws of
the State of California, without regard to conflicts of laws.
15. EFFECTIVENESS OF THE PLAN
The Plan shall be effective as of the Effective Date.
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