EXHIBIT 10.34
Catalina Lighting, Inc.
STOCK INCENTIVE PLAN
1. Purpose of the Plan.
The purpose of the Catalina Lighting, Inc. Stock Incentive Plan (the
"Plan") is to promote the interests of Catalina Lighting, Inc. (the "Company"),
its subsidiaries and its shareholders by (i) attracting and retaining employees,
officers, directors, consultants and advisors of outstanding ability, (ii)
motivating such persons, by means of performance-related incentives, to achieve
long-range performance goals, and (iii) enabling such persons to participate in
the long-term growth and financial success of the Company and its subsidiaries.
For purposes of this Plan, "subsidiary" shall mean any company (whether a
corporation, partnership, joint venture or other form of entity) in which the
Company, or a corporation in which the Company owns a majority of the shares of
capital stock, directly or indirectly, owns an equity interest of more than
fifty percent (50%), except that solely with respect to determining whether
options issued to employees of a subsidiary may be Incentive Stock Options (as
defined in Section 3) the term "subsidiary" shall have the same meaning as the
term "subsidiary corporation" as defined in Section 424(f) of the Internal
Revenue Code of 1986, as amended (the "Code").
2. Administration.
(a) Subject to the following paragraphs, the Plan shall be administered by
the Company's Board of Directors (the "Board") or by a Compensation Committee of
the Board (the "Compensation Committee"). If the Board delegates to the
Compensation Committee the authority to administer the Plan, the Compensation
Committee shall be empowered to take all actions reserved to the Board under the
Plan. The Board is authorized to interpret the Plan, to prescribe, amend and
rescind rules and regulations to further the purposes of the Plan, and to make
all other determinations necessary for the administration of the Plan. All such
actions by the Board shall be conclusive, final and binding on all recipients of
grants hereunder ("participants").
(b) For so long as the Company's common stock ("Common Stock") is
registered under Section 12 of the Securities Exchange Act of 1934, as amended
(the "Exchange Act"), any Compensation Committee to which Plan administration is
delegated shall consist solely of Board members who qualify as (i) "Non-Employee
Directors" as defined under Rule 16b-3 under the Exchange Act and (ii) "outside
directors" as defined under Section 162(m) or any successor provision of the
Code and applicable Treasury regulations thereunder, if and to the extent such
qualification is necessary so that grants made under the Plan or the exercise of
rights thereunder will qualify for any tax or other material benefit to
participants or the Company and its subsidiaries under applicable law.
(c) Notwithstanding the foregoing, the Board may, subject to any
limitations or restrictions the Board may impose from time to time, delegate to
the Chief Executive Officer the authority to administer the Plan, including the
authority to grant Options (as defined in Section 3) to employees (other than
the Chief Executive Officer), consultants or advisors of the Company and its
subsidiaries who are not subject, by reason of their position with the Company
or its subsidiaries, to the requirements of Section 16 of the Exchange Act and
who are not expected to be subject to the limitations of Code Section 162(m).
3. Grants.
Grants under the Plan may be in the form of options which qualify as
"incentive stock options" within the meaning of Code Section 422 or any
successor provision ("Incentive Stock Options") and options which do not so
qualify ("Nonqualified Options" and, collectively with Incentive Stock Options,
"Options"). Incentive Stock Options may be granted only to employees of the
Company or its subsidiaries. Each grant of an Option shall be designated in the
applicable "Grant Instrument" (as defined in Section 5) as an Incentive Stock
Option or a Nonqualified Option, as appropriate. If, notwithstanding its
designation as an Incentive Stock Option, all or a portion of any Option grant
does not qualify under the Code as an Incentive Stock Option, the portion which
does not so qualify shall be treated for all purposes hereunder as a
Nonqualified Option.
4. Shares Subject to the Plan.
Subject to adjustment as provided in Section 8, the maximum aggregate
number of shares of Common Stock that may be subject to grants made under the
Plan is 2,250,000. The Common Stock to be offered under the Plan shall be
authorized and unissued Common Stock or issued Common Stock that shall have been
reacquired by the Company and held in its treasury. The Common Stock covered by
any unexercised portion of terminated stock options granted under the Plan may
again be subject to new grants under the Plan. In the event the purchase price
of an Option is paid in whole or in part through the delivery of Common Stock,
only the net number of shares of Common Stock issuable in connection with the
exercise of the Option shall be counted against the number of shares remaining
available for grant under the Plan. No participant shall receive grants in
respect of more than 1,000,000 shares of Common Stock in any calendar year
(subject to adjustment as provided in Section 8).
5. Participants.
The Board shall determine and designate from time to time those employees,
directors, consultants and advisors of the Company or its subsidiaries who shall
be granted Options under the Plan and the number of shares of Common Stock to be
covered by each such Option grant; provided, that any such consultants or
advisors who receive grants under the Plan render bona fide services to the
Company or its subsidiaries that are not in connection with the offer or sale of
securities in a capital-raising transaction. In making its determinations, the
Board shall take into account the present and potential contributions of the
respective individuals to the success of the Company and its subsidiaries and
such other factors as the Board shall deem relevant in connection with
accomplishing the purposes of the Plan. Each grant shall be evidenced by a
written Option agreement or grant form ("Grant Instrument") as the Board shall
approve from time to time.
6. Fair Market Value.
For all purposes under the Plan, the term "Fair Market Value" shall mean,
as of any applicable date: (i) if the principal securities market on which the
Common Stock is traded is a national securities exchange or The Nasdaq National
Market ("NNM"), the closing price of the Common Stock on such exchange or NNM,
as the case may be, or if no sale of the Common Stock shall have occurred on
such date, on the next preceding date on which there was a reported sale; (ii)
if the Common Stock is not traded on a national securities exchange or NNM, the
closing price on such date as reported by The Nasdaq SmallCap Market, or if no
sale of the Common Stock shall have occurred on such date, on the next preceding
date on which there was a reported sale; (iii) if the principal securities
market on which the Common Stock is traded is not a national securities
exchange, NNM or The Nasdaq SmallCap Market, the average of the bid and asked
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prices reported by the National Quotation Bureau, Inc.; (iv) if not reported by
the National Quotation Board, the closing price of a share of Common Stock on
the date of grant as reported on the OTC Bulletin Board; or (v) if the price of
the Common Stock is not so reported, the Fair Market Value of the Common Stock
as determined in good faith by the Board.
7. Grants of Options.
(a) Exercise Price of Options. Incentive Stock Options shall be granted at
an exercise price of not less than 100% of the Fair Market Value on the date of
grant; provided, however, that Incentive Stock Options granted to a participant
who at the time of such grant owns (within the meaning of Code Section 424(d))
more than 10% of the voting power of all classes of stock of the Company (a "10%
Holder") shall be granted at an exercise price of not less than 110% of the Fair
Market Value on the date of grant. Nonqualified Options shall be granted at an
exercise price as determined in each case by the Board.
(b) Term and Termination of Options.
(1) The Board shall determine the term within which each Option may
be exercised, in whole or in part, provided that (i) such term shall not exceed
10 years from the date of grant, (ii) the term of an Incentive Stock Option
granted to a 10% Holder shall not exceed 5 years from the date of grant, and
(iii) the aggregate Fair Market Value (determined on the date of grant) of
Common Stock with respect to which Incentive Stock Options granted to a
participant under the Plan or any other plan of the Company and its subsidiaries
become exercisable for the first time in any single calendar year shall not
exceed $100,000.
(2) Unless otherwise determined by the Board, all rights to exercise
Options shall terminate on the first to occur of (i) the scheduled expiration
date as set forth in the applicable Grant Instrument, (ii) 60 days following the
date of termination of employment for any reason other than the participant's
death or permanent disability (as defined in Code Section 22(e)(3)), (iii) 1
year following the date of termination of employment or provision of services by
reason of the participant's death or permanent disability (as defined in Code
Section 22(e)(3)), or (iv) as may be otherwise provided in the event of a Change
of Control as defined in Section 9; provided, however, that in the event that a
participant ceases to be employed by or to provide services to the Company and
its subsidiaries due to a termination for "cause" (as defined in Section
7(b)(3)), all rights to exercise Options held by such participant shall
terminate immediately as of the date such participant ceases to be employed by
or to provide services to the Company or its subsidiaries. Unless otherwise
determined by the Board, vesting of Options ceases immediately upon termination
of employment or provision of services for any reason, and any portion of an
Option that has not vested on or before the date of such termination is
forfeited on such date.
(3) As used in this Plan, the term "cause" shall mean (i) "cause" as
defined in any applicable employment or services agreement between the Company
and a participant for purposes of determining whether a termination of such
agreement is for cause or (ii) in the absence of such agreement, a determination
by the Board that the participant has engaged in conduct injurious to the
Company or any of its subsidiaries, including, without limitation, embezzlement,
theft, destruction of property, unethical business conduct, commission of a
felony or any other crime of moral turpitude, dishonesty in the course of his or
her employment or service, the disclosure of trade secrets or confidential
information of the Company or its subsidiaries to persons not entitled to
receive such information, violation of any rule or policy of the Company that is
not cured within 15 days after the participant is given notice of such
violation, breach of any noncompetition or nonsolicitation covenant or any other
agreement between the participant and the Company or a subsidiary, or any other
conduct that is injurious to the Company or any of its subsidiaries.
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(c) Payment for Shares. Full payment for shares purchased upon exercise of
Options granted under the Plan shall be made at the time the Options are
exercised in whole or in part. Payment of the purchase price shall be made in
cash or in such other form as the Board may approve, including, without
limitation, (i) by the participant's delivery to the Company of a promissory
note containing such terms as the Board may determine, (ii) by the participant's
delivery to the Company of shares of Common Stock that have been held by the
participant for at least six months prior to exercise of the Options, valued at
the Fair Market Value of such shares on the date of exercise, or (iii) if the
Common Stock is publicly traded, pursuant to a cashless exercise arrangement
with a broker on such terms as the Board may determine; provided, however, that
if payment is made pursuant to clause (i), the then par value of the purchased
shares shall be paid in cash if required by applicable law or otherwise deemed
appropriate by the Board. No shares of Common Stock shall be issued to the
participant until such payment has been made, and a participant shall have none
of the rights of a shareholder with respect to Options held by such participant.
(d) Other Terms and Conditions. The Board shall have the discretion to
determine terms and conditions, consistent with the Plan, that will be
applicable to Options, including, without limitation, performance-based criteria
for acceleration of the date on which certain Options shall become exercisable.
Options granted to the same or different participants, or at the same or
different times, need not contain similar provisions.
(e) Substitution of Options. Options may be granted under the Plan from
time to time in substitution for stock options of other entities ("Acquired
Companies") in connection with the merger or consolidation of an Acquired
Company with the Company or its subsidiaries, the acquisition by the Company or
by its subsidiaries of all or a portion of the assets of an Acquired Company, or
the acquisition of stock of an Acquired Company such that the Acquired Company
becomes a subsidiary of the Company.
8. Adjustments to Reflect Capital Changes.
The number and kind of shares subject to outstanding Option grants, the
exercise price applicable to Options previously granted, and the number and kind
of shares available subsequently to be granted under the Plan shall be
appropriately adjusted to reflect any stock dividend, stock split, combination
or exchange of shares or other change in capitalization with a similar
substantive effect upon the shares of capital stock subject to the Plan or to
Options granted under the Plan. The Board shall have the sole power and
discretion to determine the nature and amount of the adjustment to be made in
each case. The adjustment so made shall be final and binding on all
participants.
9. Definition of Change of Control.
For purposes of this Plan, a "Change of Control" shall mean the occurrence
of any of the following events:
(a) the acquisition, other than solely from the Company, by any
individual, entity or group (within the meaning of Section 13(d)(3) or Section
14(d)(2) of the Exchange Act), other than the Company or an employee benefit
plan of the Company, of beneficial ownership (within the meaning of Rule 13d-3
promulgated under the Exchange Act) of more than 50% of the combined voting
power of the then outstanding voting securities of the Company entitled to vote
generally in the election of directors (the "Voting Securities"); or
(b) a reorganization, merger, consolidation or recapitalization of the
Company (a "Business Combination"), other than a Business Combination in which
more than 50% of the combined voting power
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of the outstanding voting securities of the surviving or resulting entity
immediately following the Business Combination is held by the persons who,
immediately prior to the Business Combination, were the holders of the Voting
Securities; or
(c) a complete liquidation or dissolution of the Company, or a sale of all
or substantially all of the Company's assets.
10. Consequences of a Change of Control.
(a) Unless otherwise determined by the Board, immediately prior to a
Change of Control that is, in the Board's determination, primarily for cash, all
outstanding Options which have been granted under the Plan and which are not
exercisable as of the effective date of the Change of Control shall
automatically accelerate and become exercisable upon the effective date of the
Change of Control; provided, that any exercise of such accelerated Options shall
be contingent upon the actual consummation of the Change of Control.
(b) Unless otherwise determined by the Board, upon a Change of Control
that the Board determines is not primarily for cash as described in subsection
(a) above, each outstanding Option shall be assumed by the Acquiring Corporation
(as defined below) or parent thereof or replaced with a comparable option or
right to purchase shares of the capital stock, or equity equivalent instrument,
of the Acquiring Corporation or parent thereof, or other comparable rights (such
assumed and comparable options and rights, together, the "Replacement Options");
provided, however, that if the Acquiring Corporation or parent thereof does not
intend to grant Replacement Options, then unless otherwise determined by the
Board all outstanding Options which have been granted under the Plan and which
are not exercisable as of the effective date of the Change of Control shall
automatically accelerate and become exercisable immediately prior to the
effective date of the Change of Control; provided, that any exercise of such
accelerated Options shall be contingent upon the actual consummation of the
Change of Control. The term "Acquiring Corporation" means the surviving,
continuing, successor or purchasing corporation, as the case may be.
Notwithstanding anything in the Plan to the contrary, the Board shall have
discretion, in the applicable Grant Instrument or an amendment thereof, to
provide for the acceleration of Options upon a Change of Control. The Board may
determine in its discretion (but shall not be obligated to do so) that in lieu
of the issuance of Replacement Options, all holders of outstanding Options which
are exercisable immediately prior to a Change of Control (including those that
become exercisable under Section 10(a) or this Section 10(b)) will be required
to surrender them in exchange for a payment, in cash or Common Stock as
determined by the Board, of an amount equal to the amount (if any) by which the
then Fair Market Value of Common Stock subject to unexercised Options exceeds
the exercise price of those Options, with such payment to take place as of the
date of the Change of Control or such other date as the Board may prescribe.
(c) Any Options that are not assumed or replaced by Replacement Options,
exercised or cashed out prior to or concurrent with a Change of Control will
terminate effective upon the Change of Control or at such other time as the
Board deems appropriate, unless otherwise expressly provided in any applicable
Grant Instrument.
(d) Notwithstanding anything in the Plan to the contrary, in the event of
a Change of Control, no action described in the Plan shall be taken (including,
without limitation, actions described in subsections (a), (b) and (c) above) if
such actions would make the Change of Control ineligible for desired accounting
or tax treatment and if, in the absence of such actions, the Change of Control
would qualify for such treatment and the Company intends to use such treatment
with respect to such Change of Control.
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11. Transferability of Options.
Unless otherwise determined by the Board with respect to Nonqualified
Options, Options granted under the Plan shall not be transferable other than by
will or the laws of descent and distribution and are exercisable during a
participant's lifetime only by the participant.
12. Right to Repurchase and Right to Recover
(a) In the case of any participant whose employment or service terminates
for any reason (including, without limitation, death, disability, retirement,
voluntary resignation or termination, or involuntary termination with or without
cause), except as otherwise provided in any Grant Instrument, the Company shall
have a right, exercisable at any time and from time to time after such
termination, to repurchase from the participant (or any successor in interest by
purchase, gift or other mode of transfer) any shares of Common Stock issued to
such terminated participant under the Plan and still held by the participant
upon the participant's termination of employment or service. Such repurchase
shall be made at the Fair Market Value of the shares of Common Stock at the time
of repurchase unless the participant's employment or service was terminated for
cause (as that term is defined in Section 7(b)(3)) or, in the Board's
determination, the participant has taken any action prior to or following his
termination of employment or service which would have constituted grounds for a
termination for cause, in either of which case such repurchase shall be made at
the lower of the Fair Market Value of the shares of Common Stock at the time of
repurchase or the purchase price paid by the participant for such shares of
Common Stock. With respect to shares of Common Stock previously issued to a
terminated participant under the Plan and no longer held by the participant upon
the participant's termination of employment or service, to the extent that such
participant is terminated for cause or, in the Board's determination, the
participant has taken any action prior to or following his termination of
employment or service which would have constituted grounds for a termination for
cause, in either of which case, the Company shall be entitled to recover from
the participant, a dollar amount equal to the difference between the exercise
price paid by the participant for such shares of Common Stock and the sale price
realized by the participant upon the disposition of for such shares of Common
Stock. This right to repurchase shares of Common Stock or to recover amounts
from a participant shall be exercisable by the Company in accordance with terms
and conditions established by the Board.
(b) The rights of repurchase and recovery under this Section 12 shall be
exercisable by the Company only during the 180-day period following a
participant's termination of employment or service.
13. Withholding.
The Company shall have the right to deduct any taxes required by law to be
withheld in respect of grants under the Plan from amounts paid to a participant
in cash as salary, bonus or other compensation. In the Board's discretion, a
participant may be permitted to elect to have withheld from the shares otherwise
issuable to the participant, or to tender to the Company, a number of shares of
Common Stock the aggregate Fair Market Value of which does not exceed the
minimum required withholding rate for federal (including FICA), state and local
tax liabilities. Any such election must be in a form and manner prescribed by
the Board.
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14. Construction of the Plan.
The validity, construction, interpretation, administration and effect of
the Plan and of its rules and regulations, and rights relating to the Plan,
shall be determined solely by the Board. Any determination by the Board shall be
final and binding on all participants. The Plan shall be governed in accordance
with the laws of the State of Florida, without regard to the conflict of law
provisions of such laws.
15. No Right to Grant; No Right to Employment.
No person shall have any claim of right to be granted an Option under the
Plan. Neither the Plan nor any action taken hereunder shall be construed as
giving any employee any right to be retained in the employ of the Company or any
of its subsidiaries or as giving any consultant, advisor or director of the
Company or any of its subsidiaries any right to continue to serve in such
capacity.
16. Grants Not Includable for Benefit Purposes.
Income recognized by a participant pursuant to the provisions of the Plan
shall not be included in the determination of benefits under any employee
pension benefit plan (as such term is defined in Section 3(2) of the Employee
Retirement Income Security Act of 1974) or group insurance or other benefit
plans applicable to the participant which are maintained by the Company or any
of its subsidiaries, except as may be provided under the terms of such plans or
determined by resolution of the Board.
17. No Strict Construction.
No rule of strict construction shall be implied against the Company, the
Board or any other person in the interpretation of any of the terms of the Plan,
any grant made under the Plan or any rule or procedure established by the Board.
18. Captions.
All Section headings used in the Plan are for convenience only, do not
constitute a part of the Plan, and shall not be deemed to limit, characterize or
affect in any way any provisions of the Plan, and all provisions of the Plan
shall be construed as if no captions had been used in the Plan.
19. Severability.
Whenever possible, each provision in the Plan and every grant under the
Plan shall be interpreted in such a manner as to be effective and valid under
applicable law, but if any provision of the Plan or any grant under the Plan
shall be held to be prohibited by or invalid under applicable law, then such
provision shall be deemed amended to accomplish the objectives of the provision
as originally written to the fullest extent permitted by law, and all other
provisions of the Plan and every other grant under the Plan shall remain in full
force and effect.
20. Legends.
All certificates for Common Stock delivered under the Plan shall be
subject to such transfer and other restrictions as the Board may deem advisable
under the rules, regulations and other requirements of the Securities and
Exchange Commission, any stock exchange or quotation system upon which the
Common Stock is then listed or quoted and any applicable federal or state
securities laws, and the Board may cause a legend or legends to be put on any
such certificates to make appropriate references to such restrictions.
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21. Amendment.
The Board may, by resolution, amend or revise the Plan, except that such
action shall not be effective without shareholder approval if such shareholder
approval is required to maintain the compliance of the Plan and/or grants made
to directors, executive officers or other persons with Rule 16b-3 promulgated
under the Exchange Act or any successor rule. The Board may not modify any
Options previously granted under the Plan in a manner adverse to the holders
thereof without the consent of such holders, except in accordance with the
provisions of Sections 8, 10 or 22.
22. Modification for Grants Outside the U.S.
The Board may, without amending the Plan, determine the terms and
conditions applicable to grants of Options to participants who are foreign
nationals or employed outside the United States in a manner otherwise
inconsistent with the Plan if the Board deems such terms and conditions
necessary in order to recognize differences in local law or regulations, tax
policies or customs.
23. Effective Date; Termination of Plan.
Upon approval by the Company's shareholders, the Plan shall be effective
as of September 7, 2001, the date the Plan was adopted by the Board. The Plan
shall terminate on September 6, 2011, unless it is earlier terminated by the
Board. Termination of the Plan shall not affect previous grants under the Plan.
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