BOROUGH CORPORATION
STOCK INCENTIVE PLAN
BOROUGH CORPORATION
SECTION I.
1. PURPOSE
The purpose of this Borough Corporation Stock Incentive Plan is to
enhance the Company's profitability and value for the benefit of its
shareholders by enabling the Company to offer Eligible Employees,
Consultants and Non-Employee Directors of the Company and its
Affiliates stock-based incentives in the Company, thereby creating a
means to raise the level of stock ownership by such individuals in order
to attract, retain and reward such individuals and strengthen the mutuality
of interests between such individuals and the Company's shareholders.
SECTION II. DEFINITIONS
For purposes of this Plan, the following terms shall have the following
meanings:
2.1 Acquisition Events has the meaning set forth in Section 4.2(d).
2.2 Affiliate means each of the following: (a) any Subsidiary; (b) any
Parent; (c) any corporation, trade or business (including, without
limitation, a partnership or limited liability company) which is directly or
indirectly controlled 50% or more (whether by ownership of stock, assets
or an equivalent ownership interest or voting interest) by the Company or
one of its Affiliates; and (d) any other entity in which the Company or
any of its Affiliates has a material equity interest and which is designated
as an Affiliate by resolution of the Committee.
2.3 Award means any award under this Plan of a Stock Option or
Restricted Stock.
2.4 Board means the Company's Board of Directors.
2.5 Cause means, with respect to a Participant's Termination of
Employment or Termination of Consultancy: (a) in the case where there
is no employment agreement, consulting agreement, change in control
agreement or similar agreement in effect between the Company or an
Affiliate and the Participant at the time of the grant of the Award (or
where there is such an agreement but it does not define cause (or words
of like import)), termination due to a Participant's insubordination,
dishonesty, fraud, incompetence, moral turpitude, misconduct, violation
of any proprietary rights agreement, engaging in Detrimental Activity,
refusal to perform his or her duties or responsibilities for any reason
other than illness or incapacity or materially unsatisfactory performance
of his or her duties for the Company or an Affiliate, as determined by the
Committee in its sole discretion; or (b) in the case where there is an
employment agreement, consulting agreement, change in control
agreement or similar agreement in effect between the Company or an
Affiliate and the Participant at the time of the grant of the Award that
defines cause (or words of like import), cause as defined under such
agreement; provided, however, that with regard to any agreement that
conditions cause on occurrence of a Change in Control, such definition of
cause shall not apply until a Change in Control actually takes place and
then only with regard to a termination thereafter.
With respect to a Participant's Termination of Directorship, cause shall
mean an act or failure to act that constitutes cause for removal of a
director under applicable Delaware law.
2.6 Change in Control has the meaning set forth in Article IX.
2.7 Change in Control Price has the meaning set forth in Section 9.1(b).
2.8 Code means the Internal Revenue Code of 1986, as amended. Any
reference to any section of the Code shall also be a reference to any
successor provision and any Treasury Regulations promulgated
thereunder.
2.9 Committee means (a) with respect to the application of this Plan to
Eligible Employees and Consultants, a committee of the Board appointed
from time to time by the Board, which committee shall be intended to
consist of two or more Non-Employee Directors, each of whom shall be
(i) to the extent required by Rule 16b-3, a non-employee director as
defined in Rule 16b-3 and (ii) to the extent required by Section 162(m) of
the Code, an outside director as defined under Section 162(m) of the
Code and (b) with respect to the application of this Plan to Non-
Employee Directors, the Board. Notwithstanding the foregoing, if and to
the extent that no Committee exists which has the authority to administer
the Plan, the functions of the Committee shall be exercised by the Board
and all references herein to the Committee shall be deemed to be
references to the Board. If for any reason the appointed Committee does
not meet the requirements of Rule 16b-3 or Section 162(m) of the Code,
such noncompliance with the requirements of Rule 16b-3 or Section
162(m) of the Code shall not affect the validity of the Awards, grants,
interpretations or other actions of the Committee.
2.10 Common Stock means the Company's common stock, $.0001 par
value per share, of the Company.
2.11 Company means Borough Corporation, a Delaware Corporation,
and its successors by operation of law.
2.12 Consultant means any Person who is an advisor or consultant to the
Company or its Affiliates.
2.13 Detrimental Activity means (a) the disclosure to anyone outside the
Company or its Affiliates, or the use in any manner other than in the
furtherance of the Company's or its Affiliate's business, without written
authorization from the Company, of any confidential information or
proprietary information, relating to the business of the Company or its
Affiliates, acquired by a Participant prior to the Participant's Termination;
(b) activity while employed or performing services that results, or if
known could result, in the Participant's Termination that is classified by
the Company as a Termination for Cause; (c) any attempt, directly or
indirectly, to solicit, induce or hire (or the identification for solicitation,
inducement or hire) any non-clerical employee of the Company or its
Affiliates to be employed by, or to perform services for, the Participant
or any Person with which the Participant is associated (including, but not
limited to, due to the Participant's employment by, consultancy for,
equity interest in, or creditor relationship with such Person) or any
Person or entity from which the Participant receives direct or indirect
compensation or fees as a result of such solicitation, inducement or hire
(or the identification for solicitation, inducement or hire) without, in all
cases, written authorization from the Company; (d) any attempt, directly
or indirectly, to solicit in a competitive manner any current or prospective
customer of the Company or its Affiliates without, in all cases, written
authorization from the Company; (e) the Participant's Disparagement, or
inducement of others to do so, of the Company or its Affiliates or their
past and present officers, directors, employees or products; (f) without
written authorization from the Company, the rendering of services for
any organization, or engaging, directly or indirectly, in any business,
which is competitive with the Company or its Affiliates, or which
organization or business, or the rendering of services to such
organization or business, is otherwise prejudicial to or in conflict with the
interests of the Company or its Affiliates, or (g) any other conduct or act
determined by the Committee, in its sole discretion, to be injurious,
detrimental or prejudicial to any interest of the Company or its Affiliates.
Unless otherwise determined by the Committee at grant, Detrimental
Activity shall not be deemed to occur after the end of the one-year period
following the Participant's Termination. For purposes of subparagraphs
(a), (c), (c) and (f) above, the Chief Executive Officer and the General
Counsel of the Company shall each have authority to provide the
Participant with written authorization to engage in the activities
contemplated thereby and no other person shall have authority to provide
the Participant with such authorization.
2.14 Disability means with respect to a Participant's Termination, (a) in
the case where there is no employment agreement, consulting agreement,
change in control agreement or similar agreement in effect between the
Company or an Affiliate and the Participant at the time of the grant of the
Award (or where
there is such an agreement but it does not define disability (or words of
like import), total and permanent disability, as defined in Section 22(e)(3)
of the Code, as determined by the Committee in its sole discretion; or (b)
in the case where there is an employment agreement, consulting
agreement, change in control agreement or other similar agreement
between the Company or an Affiliate and the Participant at the time of
the grant of the Award that defines disability (or words of like import),
disability as defined under such agreement at the time of the grant of the
Award, as determined by the Committee in its sole discretion. A
Disability shall only be deemed to occur at the time of the determination
by the Committee of the Disability.
2.15 Disparagement means making comments, whether orally or in
writing, or statements to the press, employees, consultants, vendors or
customers of the Company or those of its Affiliates or to any other
Person which is negative in nature or which could adversely affect: (a)
the conduct of the business of the Company or its Affiliates (including,
without limitation, any products, services or business plans or prospects),
or (b) the reputation or quality of the products or services of the
Company or its Affiliates, or those of any of their employees, consultants,
shareholders, directors or officers, past or present, or the manner in
which any of them conducts their respective businesses.
2.16 Effective Date means the effective date of this Plan as defined in
Section XIV.
2.17 Eligible Employee means each employee of the Company or an
Affiliate.
2.18 Exchange Act means the Securities Exchange Act of 1934, as
amended. Any references to any section of the Exchange Act shall also be
a reference to any successor provision.
2.19 Fair Market Value means, for purposes of this Plan, unless
otherwise required by any applicable provision of the Code or any
Treasury Regulations promulgated thereunder, as of any date, the last
closing price reported for the Common Stock on the applicable date: 1.
as reported by the principal national securities exchange in the United
States on which it is then traded or The Nasdaq Stock Market, Inc. or 2.
if not traded on any such national securities exchange or The Nasdaq
Stock Market, Inc. as quoted on an automated quotation system
sponsored by the National Association of Securities Dealers, Inc. or if the
Common Stock shall not have been reported or quoted on such date, on
the first day prior thereto on which the Common Stock was reported or
quoted; provided, that the Committee may modify the definition of Fair
Market Value to reflect any changes in the trading practices of any
exchange on which the Common Stock is listed or traded. If the
Common Stock is not readily tradable on a national securities exchange,
The Nasdaq Stock Market, Inc. or any automated quotation system
sponsored by the National Association of Securities Dealers, Inc., its Fair
Market Value shall be set in good faith by the Committee.
Notwithstanding anything herein to the contrary, for purposes of granting
Incentive Stock Options, Fair Market Value means the price for Common
Stock set by the Committee in good faith based on reasonable methods
set forth under Section 422 of the Code and the Treasury Regulations
promulgated thereunder including, without limitation, a method utilizing
the average of prices of the Common Stock reported on the principal
national securities exchange on which it is then traded during a
reasonable period designated by the Committee. For purposes of the
grant of any Stock Option, the applicable date shall be the date for which
the last sales price is available at the time of grant.
2.20 Family Member means, solely to the extent provided for in
Securities Act Form S-8, any child, stepchild, grandchild, parent,
stepparent, grandparent, spouse, former spouse, sibling, niece, nephew,
mother-in-law, father-in-law, son-in-law, daughter-in-law, brother-in-law,
or sister-in-law, including adoptive relationships, any person sharing the
employee's household (other than a tenant or employee), a trust in which
these persons have more than 50% of the beneficial interest, a foundation
in which these persons (or the employee) control the management of
assets, and any other entity in which these persons (or the employee) own
more than 50% of the voting interests or as otherwise defined in
Securities Act Form S-8.
2.21 Incentive Stock Option means any Stock Option awarded to an
Eligible Employee under this Plan intended to be and designated as an
Incentive Stock Option within the meaning of Section 422 of the Code.
2.22 Non-Employee Director means a member of the Board of the
Company who is not an active employee of the Company or an Affiliate.
2.23 Non-Qualified Stock Option means any Stock Option awarded
under this Plan that is not an Incentive Stock Option.
2.24 Parent means any parent corporation of the Company within the
meaning of Section 424(e) of the Code.
2.25 Participant means any Eligible Employee, Consultant or Non-
Employee Director to whom an Award has been granted under this Plan;
provided, however, that a Non-Employee Director shall be a Participant
for purposes of the Plan solely with respect to awards of Stock Options
pursuant to Section XI.
2.26 Performance Criteria has the meaning set forth in Appendix A.
2.27 Performance Goal means the objective performance goals
established by the Committee in accordance with Section 162(m) of the
Code and based on one or more Performance Criteria.
2.28 Person means any individual, corporation, partnership, limited
liability company, firm, joint venture, association, joint-stock company,
trust, incorporated organization, governmental or regulatory or other
entity.
2.29 Plan means this 2002 Borough Corporation Stock Incentive Plan, as
amended from time to time.
2.30 Restricted Stock means an Award of shares of Common Stock
under this Plan that is subject to the restrictions under Section VII.
2.31 Restriction Period has the meaning set forth in Section 7.3 with
respect to Restricted Stock.
2.32 Retirement means a Termination of Employment or Termination of
Consultancy without Cause by a Participant on or after age 65 or such
earlier date after age 50 as may be approved by the Committee with
regard to such Participant. With respect to a Participant's Termination of
Directorship, Retirement means the failure to stand for reelection or the
failure to be reelected at or after a Participant has attained age 65 or,
with the consent of the Board, before age 65 but after age 50.
2.33 Rule 16b-3 means Rule 16b-3 under Section 16(b) of the Exchange
Act as then in effect or any successor provisions.
2.34 Section 162(m) of the Code means the exception for performance-
based compensation under Section 162(m) of the Code and any Treasury
Regulations promulgated thereunder.
2.35 Securities Act means the Securities Act of 1933, as amended, and
all rules and regulations promulgated thereunder. Any reference to any
section of the Securities Act shall also be a reference to any successor
provision.
2.36 Stock Option or Option means any option to purchase shares of
Common Stock granted to Eligible Employees or Consultants under
Section VI or to Non-Employee Directors under Section XI.
2.37 Subsidiary means any subsidiary corporation of the Company within
the meaning of Section 424(f) of the Code.
2.38 Ten Percent Shareholder means a person owning stock possessing
more than 10% of the total combined voting power of all classes of stock
of the Company, its Subsidiaries or its Parent.
2.39 Termination means a Termination of Consultancy, Termination of
Directorship or Termination of Employment, as the case may be.
2.40 Termination of Consultancy means (a) that the Consultant is no
longer acting as a consultant to the Company or an Affiliate; or (b) when
an entity which is retaining a Participant as a Consultant ceases to be an
Affiliate unless the Participant otherwise is, or thereupon becomes, a
Consultant to the Company or another Affiliate at the time the entity
ceases to be an Affiliate. In the event that a Consultant becomes an
Eligible Employee or a Non-Employee Director upon the termination of
his consultancy, unless otherwise determined by the Committee, in its
sole discretion, may determine that no Termination of Consultancy shall
be deemed to occur until such time as such Consultant is no longer a
Consultant, an Eligible Employee or a Non-Employee Director.
Notwithstanding the foregoing, the Committee may otherwise define
Termination of Consultancy in the Award agreement or, if no rights of a
Participant are reduced, may otherwise define Termination of
Consultancy thereafter.
2.41 Termination of Directorship means that the Non-Employee Director
has ceased to be a director of the Company; except that if a Non-
Employee Director becomes an Eligible Employee or a Consultant upon
the termination of his directorship, the date he ceased to be a director of
the Company and becomes an Eligible Employee or Consultant shall not
be treated as a Termination of Directorship unless and until the
Participant has a Termination of Employment or Termination of
Consultancy, as the case may be.
2.42 Termination of Employment means: (a) a termination of
employment (for reasons other than a military or personal leave of
absence granted by the Company) of a Participant from the Company and
its Affiliates; or (b) when an entity which is employing a Participant
ceases to be an Affiliate, unless the Participant otherwise is, or thereupon
becomes, employed by the Company or another Affiliate at the time the
entity ceases to be an Affiliate. In the event that an Eligible Employee
becomes a Consultant or Non-Employee Director upon the termination
of his employment, the Committee, in its sole discretion, may determine
that no Termination of Employment shall be deemed to occur until such
time as such Eligible Employee is no longer an Eligible Employee, a
Consultant or a Non-Employee Director. Notwithstanding the foregoing,
the Committee may otherwise define Termination of Employment in the
Award agreement or, if no rights of a Participant are reduced, may
otherwise define Termination of Employment thereafter.
2.43 Transfer means (a) when used as a noun, any direct or indirect
transfer, sale, assignment, pledge, hypothecation, encumbrance or other
disposition (including the issuance of equity in a Person), whether for
value or no value and whether voluntary or involuntary (including by
operation of law), and (b) when used as a verb, to directly or indirectly
transfer, sell, assign, pledge, hypothecate, encumber, or otherwise
dispose of (including the issuance of equity in a Person), whether for
value or no value and whether voluntarily or involuntarily (including by
operation of law. Transferred, Transferable and Transferability shall have
a correlative meaning.
SECTION III.
ADMINISTRATION
3.1 Committee. The Plan shall be administered and interpreted by the
Committee.
3.2 Grants of Awards. The Committee shall have full authority to grant
Stock Options and Restricted Stock to Eligible Employees and
Consultants and the Board shall have full authority to grant Stock
Options to Non-Employee Directors pursuant to the terms of this Plan.
All Awards shall be granted by, confirmed by, and subject to the terms
of, a written agreement executed by the Company and the Participant. In
particular, the Committee (and, the Board, with respect to Non-
Employee Directors) shall have the authority:
(a) to select the Eligible Employees and Consultants to whom Awards
may from time to time be granted hereunder;
(b) to determine whether and to what extent Awards, or any combination
thereof, are to be granted hereunder to one or more Eligible Employees
or Consultants;
(c) to determine, in accordance with the terms of this Plan, the number of
shares of Common Stock to be covered by each Award granted
hereunder;
(d) to determine the terms and conditions, not inconsistent with the terms
of this Plan, of any Award granted hereunder (including, but not limited
to, the exercise or purchase price (if any), any restriction or limitation,
any vesting schedule or acceleration thereof and any forfeiture
restrictions or waiver thereof, regarding any Award and the shares of
Common Stock relating thereto, based on such factors, if any, as the
Committee shall determine, in its sole discretion);
(e) to determine whether and under what circumstances a Stock Option
may be settled in cash, Common Stock and/or Restricted Stock under
Section 6.3(d) or, with respect to Stock Options granted to Non-
Employee Directors, under Section 11.3(d);
(f) to determine whether, to what extent and under what circumstances to
provide loans (which shall be on a recourse basis and bear interest at the
rate the Committee shall provide) to Eligible Employees and Consultants
in order to exercise Stock Options or to purchase Awards under this Plan
(including shares of Common Stock);
(g) to determine whether a Stock Option is an Incentive Stock Option or
Non-Qualified Stock Option or whether an Award is intended to satisfy
Section 162(m) of the Code;
(h) to determine whether to require an Eligible Employee or Consultant,
as a condition of the granting of any Award, not to sell or otherwise
dispose of shares of Common Stock acquired pursuant to the exercise of
an Option or vesting of an Award for a period of time as determined by
the Committee, in its sole discretion, following the date of the acquisition
of such Option or Award;
(i) to modify, extend or renew an Award, subject to Section X herein,
provided, however, that if an Award is modified, extended or renewed
and thereby deemed to be the issuance of a new Award under the Code
or the applicable accounting rules, the exercise price of an Award may
continue to be the original exercise price even if less than the Fair Market
Value of the Common Stock at the time of such modification, extension
or renewal; and
(j) to offer to buy out an Option previously granted, based on such terms
and conditions as the Committee shall establish and communicate to the
Participant at the time such offer is made.
3.3 Guidelines. Subject to Section X hereof, the Committee shall have
the authority to adopt, alter and repeal such administrative rules,
guidelines and practices governing this Plan and perform all acts,
including the delegation of its administrative responsibilities, as it shall,
from time to time, deem advisable; to construe and interpret the terms
and provisions of this Plan and any Award issued under this Plan (and
any agreements relating thereto); and to otherwise supervise the
administration of this Plan. The Committee may correct any defect,
supply any omission or reconcile any inconsistency in this Plan or in any
Award agreement relating thereto in the manner and to the extent it shall
deem necessary to effectuate the purpose and intent of this Plan. The
Committee may adopt special guidelines and provisions for persons who
are residing in or employed in, or subject to, the taxes of, foreign
jurisdictions to comply with applicable tax and securities laws and may
impose any limitations and restrictions that it deems necessary to comply
with the applicable tax and securities laws of such foreign jurisdictions.
To the extent applicable, this Plan is intended to comply with the
applicable requirements of Rule 16b-3 and with regard to Options and
certain other Awards, the applicable provisions of Section 162(m) of the
Code and shall be limited, construed and interpreted in a manner so as to
comply therewith.
3.4 Decisions Final. Any decision, interpretation or other action made or
taken in good faith by or at the direction of the Company, the Board or
the Committee (or any of its members) arising out of or in connection
with this Plan shall be within the sole discretion of all and each of them,
as the case may be, and shall be final, binding and conclusive on the
Company and all employees and Participants and their respective heirs,
executors, administrators, successors and assigns.
3.5 Procedures. If the Committee is appointed, the Board shall designate
one of the members of the Committee as chairman and the Committee
shall hold meetings, subject to the By-Laws of the Company, at such
times and places as it shall deem advisable, including, without limitation,
by telephone conference or by written consent to the extent permitted by
applicable law. A majority of the Committee members shall constitute a
quorum. All determinations of the Committee shall be made by a majority
of its members. Any decision or determination reduced to writing and
signed by all the Committee members in accordance with the By-Laws of
the Company, shall be fully as effective as if it had been made by a vote at
a meeting duly called and held. The Committee shall keep minutes of its
meetings and shall make such rules and regulations for the conduct of its
business as it shall deem advisable.
3.6 Designation of Consultants/Liability.
(a) The Committee may designate employees of the Company and
professional advisors to assist the Committee in the administration of this
Plan and may grant authority to officers to execute agreements or other
documents on behalf of the Committee.
(b) The Committee may employ such legal counsel, consultants and
agents as it may deem desirable for the administration of this Plan and
may rely upon any opinion received from any such counsel or consultant
and any computation received from any such consultant or agent.
Expenses incurred by the Committee or the Board in the engagement of
any such counsel, consultant or agent shall be paid by the Company. The
Committee, its members and any person designated pursuant to
paragraph (a) above shall not be liable for any action or determination
made in good faith with respect to this Plan. To the maximum extent
permitted by applicable law, no officer of the Company or member or
former member of the Committee or of the Board shall be liable for any
action or determination made in good faith with respect to this Plan or
any Award granted under it.
3.7 Indemnification. To the maximum extent permitted by applicable law
and the Certificate of Incorporation and By-Laws of the Company and to
the extent not covered by insurance directly insuring such person or any
independent contractual right of indemnification, each officer or former
officer and member or former member of the Committee or the Board
shall be indemnified and held harmless by the Company against any cost
or expense (including reasonable fees of counsel reasonably acceptable to
the Company) or liability (including any sum paid in settlement of a claim
with the approval of the Company), and advanced amounts necessary to
pay the foregoing at the earliest time and to the fullest extent permitted,
arising out of any act or omission to act in connection with the
administration of this Plan, except to the extent arising out of such
officer's, former officer's, member's, or former member's own fraud or
bad faith. Such indemnification shall be in addition to any rights of
indemnification the employees, officers, directors or members or former
officers, directors or members may have under applicable law or under
the Certificate of Incorporation or By-Laws of the Company or any
Affiliate. Notwithstanding anything else herein, this indemnification will
not apply to the actions or determinations made by an individual with
regard to Awards granted to him or her under this Plan.
SECTION IV.
SHARE AND OTHER LIMITATIONS
4.1 Shares.
(a) General Limitation. The aggregate number of shares of Common
Stock, which may be issued or used for reference purposes under this
Plan or with respect to which Awards may be granted under this Plan,
shall not shall not exceed 1100,000 shares of Common Stock (subject to
any increase or decrease pursuant to Section (4.2) with respect to
Awards. The shares of Common Stock available under this Plan may be
either authorized and unissued Common Stock or Common Stock held in
or acquired for the treasury of the Company or both. If any Stock Option
granted under this Plan expires, terminates or is canceled for any reason
without having been exercised in full or the Company repurchases any
Stock Option, the number of shares of Common Stock underlying such
unexercised or repurchased Stock Option shall again be available for the
purposes of Awards under this Plan. If any shares of Restricted Stock
awarded under this Plan to a Participant are forfeited, repurchased,
terminated or canceled by the Company for any reason the number of
forfeited, repurchased, terminated or canceled shares of Restricted Stock
shall again be available for the purposes of Awards under this Plan. In
addition, in determining the number of shares of Common Stock available
for Awards other than Awards of Incentive Stock Options, if Common
Stock has been delivered or exchanged by a Participant as full or partial
payment to the Company for payment of the exercise price, or for
payment of withholding taxes, or if the number shares of Common Stock
otherwise deliverable has been reduced for payment of the exercise price
or for payment of withholding taxes, the number of shares of Common
Stock exchanged as payment in connection with the exercise or for
withholding or reduced shall again be available for purposes of Awards
under this Plan.
(b) Individual Participant Limitations.
1. The maximum number of shares of Common Stock subject to any
Award of Stock Options or shares of Restricted Stock for which the
grant of such Award or the lapse of the relevant Restriction Period is
subject to the attainment of Performance Goals in accordance with
Section 7.3 herein which may be granted under this Plan during any fiscal
year of the Company to each Eligible Employee or Consultant shall be
100,000 shares (subject to any increase or decrease pursuant to Section
4.2).
2. There are no annual individual Eligible Employee or Consultant share
limitations on Restricted Stock for which the grant of such Award or the
lapse of the relevant Restriction Period is not subject to attainment of
Performance Goals in accordance with Section 7.3(a)(ii) hereof.
3. The individual Participant limitations set forth in this Section 4.1(b)
shall be cumulative; that is, to the extent that shares of Common Stock
for which Awards are permitted to be granted to an Eligible Employee or
a Consultant during a fiscal year are not covered by an Award to such
Eligible Employee or Consultant in a fiscal year, the number of shares of
Common Stock available for Awards to such Eligible Employee or
Consultant shall automatically increase in the subsequent fiscal years
during the term of the Plan until used.
4.2 Changes.
(a) The existence of this Plan and the Awards granted hereunder shall not
affect in any way the right or power of the Board or the shareholders of
the Company to make or authorize 1. any adjustment, recapitalization,
reorganization or other change in the Company's capital structure or its
business, 2. any merger or consolidation of the Company or any Affiliate,
3. any issuance of bonds, debentures, preferred or prior preference stock
ahead of or affecting Common Stock, the dissolution or liquidation of the
Company or any Affiliate, 4. any sale or transfer of all or part of the
assets or business of the Company or any Affiliate or any other corporate
act or proceeding.
(b) Subject to the provisions of Section 4.2(d), in the event of any such
change in the capital structure or business of the Company by reason of
any stock split, reverse stock split, stock dividend, combination or
reclassification of shares, recapitalization, or other change in the capital
structure of the Company, merger, consolidation, spin-off,
reorganization, partial or complete liquidation, issuance of rights or
warrants to purchase any Common Stock or securities convertible into
Common Stock, any sale or transfer of all or part of the Company's
assets or business, or any other corporate transaction or event having an
effect similar to any of the foregoing and effected without receipt of
consideration by the Company, then the aggregate number and kind of
shares which thereafter may be issued under this Plan, the number and
kind of shares or other property (including cash) to be issued upon
exercise of an outstanding Stock Option or other Awards granted under
this Plan and the purchase price thereof shall be appropriately adjusted
consistent with such change in such manner as the Committee may deem
equitable to prevent substantial dilution or enlargement of the rights
granted to, or available for, Participants under this Plan, and any such
adjustment determined by the Committee in good faith shall be final,
binding and conclusive on the Company and all Participants and
employees and their respective heirs, executors, administrators,
successors and assigns. Except as provided in this Section 4.2, a
Participant shall have no rights by reason of any issuance by the
Company of any class or securities convertible into stock of any class,
any subdivision or consolidation of shares of stock of any class, the
payment of any stock dividend, any other increase or decrease in the
number of shares of stock of any class, any sale or transfer of all or part
of the Company's assets or business or any other change affecting the
Company's capital structure or business.
(c) Fractional shares of Common Stock resulting from any adjustment in
Awards pursuant to Section 4.2(a) or (b) shall be aggregated until, and
eliminated at, the time of exercise by rounding-down for fractions less
than one-half and rounding-up for fractions equal to or greater than one-
half. No cash settlements shall be made with respect to fractional shares
eliminated by rounding. Notice of any adjustment shall be given by the
Committee to each Participant whose Award has been adjusted and such
adjustment (whether or not such notice is given) shall be effective and
binding for all purposes of this Plan.
(d) In the event of a merger or consolidation in which the Company is not
the surviving entity or in the event of any transaction that results in the
acquisition of substantially all of the Company's outstanding Common
Stock by a single person or entity or by a group of persons and/or entities
acting in concert, or in the event of the sale or transfer of all or
substantially all of the Company's assets (all of the foregoing being
referred to as Acquisition Events), then the Committee may, in its sole
discretion, terminate all outstanding Stock Options, effective as of the
date of the Acquisition Event, by delivering notice of termination to each
Participant at least 20 days prior to the date of consummation of the
Acquisition Event, in which case during the period from the date on
which such notice of termination is delivered to the consummation of the
Acquisition Event, each such Participant shall have the right to exercise
in full all of his or her Stock Options that are then outstanding (without
regard to any limitations on exercisability otherwise contained in the
Stock Option), but any such exercise shall be contingent upon and
subject to the occurrence of the Acquisition Event, and, provided that, if
the Acquisition Event does not take place within a specified period after
giving such notice for any reason whatsoever, the notice and exercise
pursuant thereto shall be null and void. If an Acquisition Event occurs
but the Committee does not terminate the outstanding Stock Options
pursuant to this Section 4.2(d), then the provisions of Section 4.2(b) shall
apply.
4.3 Minimum Purchase Price. Notwithstanding any provision of this Plan
to the contrary, if authorized but previously unissued shares of Common
Stock are issued under this Plan, such shares shall not be issued for a
consideration which is less than as permitted under applicable law.
SECTION V.
ELIGIBILITY
5.1 General Eligibility. All Eligible Employees and Consultants and
prospective employees of and Consultants to the Company and its
Affiliates are eligible to be granted Non-Qualified Stock Options and
Restricted Stock. Eligibility for Awards and actual participation in this
Plan shall be determined by the Committee in its sole discretion. The
vesting and exercise of Awards granted to a prospective employee or
Consultant are conditioned upon such individual actually becoming an
Eligible Employee or Consultant.
5.2 Incentive Stock Options. All Eligible Employees of the Company, its
Subsidiaries and its Parent (if any) are eligible to be granted Incentive
Stock Options under this Plan. Eligibility for the grant of an Incentive
Stock Option and actual participation in this Plan shall be determined by
the Committee in its sole discretion.
5.3 Non-Employee Directors. Non-Employee Directors are only eligible
to receive an Award of Stock Options in accordance with Article XI of
the Plan.
SECTION VI.
STOCK OPTIONS
6.1 Stock Options. Each Stock Option granted hereunder shall be one of
two types: 1. an Incentive Stock Option intended to satisfy the
requirements of Section 422 of the Code; or 2. a Non-Qualified Stock
Option.
6.2 Grants. Subject to the provisions of Section V, the Committee shall
have the authority to grant to any Eligible Employee one or more
Incentive Stock Options, Non-Qualified Stock Options or both types of
Stock Options. Subject to the provisions of Section 6.3(e) below, to the
extent that any Stock Option does not qualify as an Incentive Stock
Option (whether because of its provisions or the time or manner of its
exercise or otherwise), such Stock Option or the portion thereof which
does not qualify, shall constitute a separate Non-Qualified Stock Option.
The Committee shall have the authority to grant any Consultant or Non-
Employee Director one or more Non-Qualified Stock Options.
Notwithstanding any other provision of this Plan to the contrary or any
provision in an agreement evidencing the grant of a Stock Option to the
contrary, any Stock Option granted to an Eligible Employee of an
Affiliate (other than an Affiliate which is a Parent or a Subsidiary) shall
be a Non-Qualified Stock Option.
6.3 Terms of Stock Options. Stock Options granted under this Plan shall
be subject to the following terms and conditions, and shall be in such
form and contain such additional terms and conditions, not inconsistent
with the terms of this Plan, as the Committee shall deem desirable:
(a) Exercise Price. The exercise price per share of Common Stock
subject to an Incentive Stock Option or a Stock Option intended to be
performance-based for purposes of Section 162(m) of the Code shall be
determined by the Committee at the time of grant but shall not be less
than 100% of the Fair Market Value of the share of Common Stock at
the time of grant; provided, however, that if an Incentive Stock Option is
granted to a Ten Percent Shareholder, the exercise price shall be no less
than 110% of the Fair Market Value of the Common Stock. The exercise
price per share of Common Stock subject to a Non-Qualified Stock
Option shall be determined by the Committee.
(b) Stock Option Term. The term of each Stock Option shall be fixed by
the Committee; provided, however, that no Stock Option shall be
exercisable more than ten years after the date such Stock Option is
granted; and further provided that the term of an Incentive Stock Option
granted to a Ten Percent Shareholder shall not exceed five years.
(c) Exercisability. Stock Options shall be exercisable at such time or
times and subject to such terms and conditions as shall be determined by
the Committee at grant. If the Committee provides, in its discretion, that
any Stock Option is exercisable subject to certain limitations (including,
without limitation, that such Stock Option is exercisable only in
installments or within certain time periods), the Committee may waive
such limitations on the exercisability at any time at or after grant in whole
or in part (including, without limitation, waiver of the installment exercise
provisions or acceleration of the time at which such Stock Option may be
exercised), based on such factors, if any, as the Committee shall
determine, in its sole discretion.
Unless otherwise determined by the Committee at grant, the grant shall
provide that (i) in the event the Participant engages in Detrimental
Activity prior to any exercise of the Stock Option, all Stock Options held
by the Participant shall thereupon terminate and expire, (ii) as a condition
of the exercise of a Stock Option, the Participant shall be required to
certify at the time of exercise in a manner acceptable to the Company that
the Participant is in compliance with the terms and conditions of the Plan
and that the Participant has not engaged in, and does not intend to
engage in, any Detrimental Activity, (iii) in the event the Participant
engages in Detrimental Activity, the Company shall be entitled to receive
from the Participant at any time within one year after such exercise, and
the Participant shall pay over to the Company, an amount equal to any
gain realized as a result of the exercise (whether at the time of exercise or
thereafter). If, at any time, the provisions of this paragraph shall be
deemed unenforceable under applicable law, the Stock Option shall be
immediately canceled, retroactively or prospectively. The foregoing
provisions described in (i), (ii) and (iii) shall cease to apply upon a
Change in Control.
(d) Method of Exercise. Subject to whatever installment exercise and
waiting period and vesting provisions apply under subparagraph (c)
above, Stock Options may be exercised in whole or in part at any time
and from time to time during the Stock Option term by giving written
notice of exercise to the Committee specifying the number of shares to be
purchased. Such notice shall be accompanied by payment in full of the
purchase price as follows: (i) in cash or by check, bank draft or money
order payable to the order of the Company; (ii) if the Common Stock is
traded on a national securities exchange, The Nasdaq Stock Market, Inc.
or quoted on a national quotation system sponsored by the National
Association of Securities Dealers, and the Committee authorizes, through
a cashless exercise procedure whereby the Participant delivers irrevocable
instructions to a broker approved by the Committee to deliver promptly
to the Company an amount equal to the purchase price; or (iii) on such
other terms and conditions as may be acceptable to the Committee
(including, without limitation, the relinquishment of Stock Options or by
payment in full or in part in the form of Common Stock owned by the
Participant for a period of at least six months or such other period
necessary to avoid a charge, for accounting purposes, against the
Company's earnings as reported in the Company's financial statements
(and for which the Participant has good title free and clear of any liens
and encumbrances) based on the Fair Market Value of the Common
Stock on the payment date as determined by the Committee). No shares
of Common Stock shall be issued until payment therefor, as provided
herein, has been made or provided for and the conditions of Section 13.5
are satisfied.
(e) Incentive Stock Option Limitations. To the extent that the aggregate
Fair Market Value (determined as of the time of grant) of the Common
Stock with respect to which Incentive Stock Options are exercisable for
the first time by an Eligible Employee during any calendar year under this
Plan and/or any other stock option plan of the Company, any Subsidiary
or any Parent exceeds $100,000, such Options shall be treated as Non-
Qualified Stock Options. In addition, if an Eligible Employee does not
remain employed by the Company, any Subsidiary or any Parent at all
times from the time an Incentive Stock Option is granted until three
months prior to the date of exercise thereof (or such other period as
required by applicable law), such Stock Option shall be treated as a Non-
Qualified Stock Option. Should any provision of this Plan not be
necessary in order for the Stock Options to qualify as Incentive Stock
Options, or should any additional provisions be required, the Committee
may amend this Plan accordingly, without the necessity of obtaining the
approval of the shareholders of the Company.
(f) Form, Modification, Extension and Renewal of Stock Options.
Subject to the terms and conditions and within the limitations of this
Plan, Stock Options shall be evidenced by such form of agreement or
grant as is approved by the Committee, and the Committee may (i)
modify, extend or renew outstanding Stock Options granted under this
Plan (provided that the rights of a Participant are not reduced without his
or her consent), and (ii) accept the surrender of outstanding Stock
Options (up to the extent not theretofore exercised) and authorize the
granting of new Stock Options in substitution therefor (to the extent not
theretofore exercised). Notwithstanding the foregoing, an outstanding
Stock Option may not be modified to reduce the exercise price thereof
nor may a new Stock Option at a lower exercise price be substituted for a
surrendered Stock Option, provided that the foregoing shall not apply to
adjustments or substitutions made in accordance with Section 4.2 hereof.
(g) Deferred Delivery of Common Shares. The Committee may in its
discretion permit Participants to defer delivery of Common Stock
acquired pursuant to a Participant's exercise of an Option in accordance
with the terms and conditions established by the Committee.
(h) Early Exercise. The Committee may provide that a Stock Option
include a provision whereby the Participant may elect at any time before
the Participant's Termination to exercise the Stock Option as to any part
or all of the shares of Common Stock subject to the Stock Option prior
to the full vesting of the Stock Option and such shares shall be subject to
the provisions of Section VII and treated as Restricted Stock. Any
unvested shares of Common Stock so purchased may be subject to a
repurchase option in favor of the Company or to any other restriction the
Committee determines to be appropriate.
(i) Other Terms and Conditions. Stock Options may contain such other
provisions, which shall not be inconsistent with any of the terms of this
Plan, as the Committee shall deem appropriate including, without
limitation, permitting reloads such that the same number of Stock
Options are granted as the number of Stock Options exercised, shares
used to pay for the exercise price of Stock Options or shares used to pay
withholding taxes (Reloads). With respect to Reloads, the exercise price
of the new Stock Option shall be the Fair Market Value on the date of
the reload and the term of the Stock Option shall be the same as the
remaining term of the Stock Options that are exercised, if applicable, or
such other exercise price and term as determined by the Committee.
SECTION VII.
RESTRICTED STOCK
7.1 Awards of Restricted Stock. Shares of Restricted Stock may be
issued to Eligible Employees or Consultants either alone or in addition to
other Awards granted under this Plan. The Committee shall determine the
eligible persons to whom, and the time or times at which, grants of
Restricted Stock will be made, the number of shares to be awarded, the
price (if any) to be paid by the recipient (subject to Section 7.2), the time
or times within which such Awards may be subject to forfeiture, the
vesting schedule and rights to acceleration thereof, and all other terms
and conditions of the Awards.
Unless otherwise determined by the Committee at grant, each Award of
Restricted Stock shall provide that in the event the Participant engages in
Detrimental Activity prior to, or during the one year period after, any
vesting of Restricted Stock, the Committee may direct (at any time
within two years thereafter) that all unvested Restricted Stock shall be
immediately forfeited to the Company and that the Participant shall pay
over to the Company an amount equal to the Fair Market Value at the
time of vesting of any Restricted Stock which had vested in the period
referred to above. The foregoing provision shall cease to apply upon a
Change in Control.
The Committee may condition the grant or vesting of Restricted Stock
upon the attainment of specified performance goals, including established
Performance Goals in accordance with Section 162(m) of the Code, or
such other factors as the Committee may determine, in its sole discretion.
7.2 Awards and Certificates. An Eligible Employee or Consultant
selected to receive Restricted Stock shall not have any rights with respect
to such Award, unless and until such Participant has delivered to the
Company a fully executed copy of the applicable Award agreement
relating thereto and has otherwise complied with the applicable terms and
conditions of such Award. Further, such Award shall be subject to the
following conditions:
(a) Purchase Price. The purchase price of Restricted Stock shall be fixed
by the Committee. Subject to Section 4.3, the purchase price for shares
of Restricted Stock may be zero to the extent permitted by applicable
law, and, to the extent not so permitted, such purchase price may not be
less than par value.
(b) Acceptance. Awards of Restricted Stock must be accepted within a
period of 90 days (or such shorter period as the Committee may specify
at grant) after the Award date by executing a Restricted Stock Award
agreement and by paying whatever price (if any) the Committee has
designated thereunder.
(c) Legend. Each Participant receiving shares of Restricted Stock shall be
issued a stock certificate in respect of such shares of Restricted Stock,
unless the Committee elects to use another system, such as book entries
by the transfer agent, as evidencing ownership of shares of Restricted
Stock. Such certificate shall be registered in the name of such Participant,
and shall bear an appropriate legend referring to the terms, conditions,
and restrictions applicable to such Award, substantially in the following
form:
The anticipation, alienation, attachment, sale, transfer, assignment,
pledge, encumbrance or charge of the shares of stock represented hereby
are subject to the terms and conditions (including forfeiture) of Borough
Corporation (the Company) Stock Incentive Plan (the Plan) and an
Agreement entered into between the registered owner and the Company
dated ____________. Copies of such Plan and Agreement are on file at
the principal office of the Company.
(d) Custody. If stock certificates are issued in respect of shares of
Restricted Stock, the Committee may require that any stock certificates
evidencing such shares be held in custody by the Company until the
restrictions thereon shall have lapsed and that, as a condition to the grant
of such Award of Restricted Stock, the Participant shall have delivered a
duly signed stock power, endorsed in blank, relating to the Common
Stock covered by such Award.
7.3 Restrictions and Conditions on Restricted Stock Awards. Shares of
Restricted Stock awarded pursuant to this Plan shall be subject to Article
VIII and the following restrictions and conditions:
(a) Restriction Period;
(i) Vesting and Acceleration of Vesting. The Participant shall not be
permitted to Transfer shares of Restricted Stock awarded under this Plan
during the period or periods set by the Committee (the Restriction
Period) commencing on the date of such Award, as set forth in the
Restricted Stock Award agreement and such agreement shall set forth a
vesting schedule and any events which would accelerate vesting of the
shares of Restricted Stock. Within these limits, based on service,
attainment of Performance Goals pursuant to Section 7.3(a)(ii) below
and/or such other factors or criteria as the Committee may determine in
its sole discretion, the Committee may provide for the lapse of such
restrictions in installments in whole or in part, or may accelerate the
vesting of all or any part of any Restricted Stock Award and/or waive the
deferral limitations for all or any part of any Restricted Stock Award.
(ii) Objective Performance Goals, Formulae or Standards. If the grant of
shares of Restricted Stock or the lapse of restrictions is based on the
attainment of Performance Goals, the Committee shall establish the
Performance Goals and the applicable vesting percentage of the
Restricted Stock Award applicable to each Participant or class of
Participants in writing prior to the beginning of the applicable fiscal year
or at such later date as otherwise determined by the Committee and while
the outcome of the Performance Goals are substantially uncertain. Such
Performance Goals may incorporate provisions for disregarding (or
adjusting for) changes in accounting methods, corporate transactions
(including, without limitation, dispositions and acquisitions) and other
similar type events or circumstances. With regard to a Restricted Stock
Award that is intended to comply with Section 162(m) of the Code, to
the extent any such provision would create impermissible discretion
under Section 162(m) of the Code or otherwise violate Section 162(m)
of the Code, such provision shall be of no force or effect. The applicable
Performance Goals shall be based on one or more of the Performance
Criteria set forth in Appendix A hereto.
(b) Rights as Shareholder. Except as provided in this subparagraph (b)
and subparagraph (a) above and as otherwise determined by the
Committee, the Participant shall have, with respect to the shares of
Restricted Stock, all of the rights of a holder of shares of Common Stock
of the Company including, without limitation, the right to receive any
dividends, the right to vote such shares and, subject to and conditioned
upon the full vesting of shares of Restricted Stock, the right to tender
such shares. The Committee may, in its sole discretion, determine at the
time of grant that the payment of dividends shall be deferred until, and
conditioned upon, the expiration of the applicable Restriction Period.
(c) Lapse of Restrictions. If and when the Restriction Period expires
without a prior forfeiture of the Restricted Stock subject to such
Restriction Period, the certificates for such shares shall be delivered to
the Participant. All legends shall be removed from said certificates at the
time of delivery to the Participant except as otherwise required by
applicable law or other limitations imposed by the Committee.
SECTION VIII.
NON-TRANSFERABILITY AND TERMINATION OF
EMPLOYMENT/CONSULTANCY/DIRECTORSHIP
8.1 Non-Transferability. Except as otherwise specifically provided herein,
no Stock Option or Common Stock acquired pursuant to the exercise of
a Stock Option shall be Transferable by the Participant otherwise than by
will or by the laws of descent and distribution. All Stock Options shall be
exercisable, during the Participant's lifetime, only by the Participant.
Except as otherwise specifically provided herein, shares of Restricted
Stock under Section VII or Common Stock issued on account of such
shares of Restricted Stock may not be Transferred prior to the date on
which such shares are issued, or if later, the date on which any applicable
restriction, performance or deferral period lapses. No Award shall,
except as otherwise specifically provided by law or herein, be
Transferable in any manner, and any attempt to Transfer any such Award
except as otherwise specifically provided herein, shall be void, and no
such Award shall in any manner be liable for or subject to the debts,
contracts, liabilities, engagements or torts of any person who shall be
entitled to such Award, nor shall it be subject to attachment or legal
process for or against such person. Notwithstanding the foregoing, the
Committee may determine at the time of grant or thereafter that a Non-
Qualified Stock Option (other than a Non-Qualified Stock Option
granted to a Non-Employee Director) that is otherwise not Transferable
pursuant to this Section 8.1 is Transferable to a Family Member in whole
or in part and in such circumstances, and under such conditions, as
specified by the Committee. A Non-Qualified Stock Option that is
Transferred to a Family Member pursuant to the preceding sentence (i)
may not be subsequently Transferred otherwise than by will or by the
laws of descent and distribution and (ii) remains subject to the terms of
this Plan and the Stock Option agreement.
8.2 Termination of Employment and Termination of Consultancy. The
following rules apply with regard to the Termination of a Participant.
Unless otherwise determined by the Committee at grant or, if no rights of
the Participant are reduced, thereafter:
(a) Rules Applicable to Stock Options. Unless otherwise determined by
the Committee at grant or, if no rights of the Participant are reduced,
thereafter:
(1) Termination by Reason of Death, Disability or Retirement. If a
Participant's Termination is by reason of death, Disability or Retirement,
all Stock Options held by such Participant may be exercised, to the extent
exercisable at the time of the Participant's Termination, by the Participant
(or, in the case of death, by the legal representative of the Participant's
estate) at any time within a period of one year from the date of such
Termination, but in no event beyond the expiration of the stated terms of
such Stock Options; provided, however, that, in the case of Retirement,
if the Participant dies within such exercise period, all unexercised Stock
Options held by such Participant shall thereafter be exercisable, to the
extent to which they were exercisable at the time of death, for a period of
one year from the date of such death, but in no event beyond the
expiration of the stated term of such Stock Options.
(2) Involuntary Termination Without Cause. If a Participant's
Termination is by involuntary termination without Cause, all Stock
Options held by such Participant may be exercised, to the extent
exercisable at the time of a Participant's Termination, by the Participant
at any time within a period of 90 days from the date of such Termination,
but in no event beyond the expiration of the stated term of such Stock
Options.
(3) Voluntary Termination. If a Participant's Termination is voluntary
(other than a voluntary termination described in Section 8.2(a)(iv)(B)
below) all Stock Options held by such Participant may be exercised, to
the extent exercisable at the time of a Participant's Termination, by the
Participant at any time within a period of 30 days from the date of such
Termination, but in no event beyond the expiration of the stated terms of
such Stock Options.
(4) Termination for Cause. If a Participant's Termination (A) is for Cause
or (B) is a voluntary termination (as provided in subsection (iii) above)
within 90 days after an event which would be grounds for a Termination
for Cause, all Stock Options, even if vested, held by such Participant shall
thereupon terminate and expire as of the date of such Termination.
(5) Unvested Stock Options. Stock Options that are not vested as of the
date of a Participant's Termination for any reason shall terminate and
expire as of the date of such Termination.
(b) Rules Applicable to Restricted Stock. Subject to the applicable
provisions of the Restricted Stock Award agreement and this Plan, upon
a Participant's Termination for any reason during the relevant Restriction
Period, all Restricted Stock still subject to restriction will vest or be
forfeited in accordance with the terms and conditions established by the
Committee at grant or thereafter.
SECTION IX.
CHANGE IN CONTROL PROVISIONS
9.1 Benefits. In the event of a Change in Control of the Company, except
as otherwise provided by the Committee upon the grant of an Award, the
Participant shall be entitled to the following benefits:
(a) Except to the extent provided in the applicable Award agreement, the
Participant's employment agreement with the Company or an Affiliate, as
approved by the Committee, or other written agreement approved by the
Committee (as such agreement may be amended from time to time), (i)
Awards granted and not previously exercisable shall become exercisable
upon a Change in Control and (ii) restrictions to which any shares of
Restricted Stock granted prior to the Change in Control are subject shall
lapse upon a Change in Control.
(b) In the event Section 4.2(d) of the Plan becomes applicable, the
Committee, in its sole discretion, may provide for the purchase of any
Stock Option by the Company or an Affiliate for an amount of cash equal
to the excess of the Change in Control Price of the shares of Common
Stock covered by such Stock Options, over the aggregate exercise price
of such Stock Options. For purposes of this Section 9.1, Change in
Control Price shall mean the higher of (i) the highest price per share of
Common Stock paid in any transaction related to a Change in Control of
the Company, or (ii) the highest Fair Market Value per share of Common
Stock at any time during the 60 day period preceding a Change in
Control.
(c) Notwithstanding anything to the contrary herein, unless the
Committee provides otherwise at the time a Stock Option is granted
hereunder or thereafter, a Participant's Stock Options granted and not
previously exercisable shall become fully exercisable and vested upon a
Change in Control if the Committee reasonably determines in good faith,
prior to the occurrence of the Change in Control, that the Stock Options
shall not be honored or assumed, or new rights substituted therefor (each
such honored, assumed or substituted stock option hereinafter called an
Alternative Option), by a Participant's employer (or the parent or a
subsidiary of such employer) immediately following the Change in
Control. A Stock Option shall not be Alternative Option unless the
Committee determines, in good faith, that it meets the following criteria:
(1) the Alternative Option must be based on stock which is traded on an
established securities market, or which will be so traded within 30 days of
the Change in Control;
(2) the Alternative Option must provide such Participant with rights and
entitlements substantially equivalent to or better than the rights, terms
and conditions applicable under such Stock Option, including, but not
limited to, an identical or better exercise schedule; and
(3) the Alternative Option must have economic value substantially
equivalent to the value of such Stock Option (determined at the time of
the Change in Control). For purposes of Incentive Stock Options, any
assumed or substituted Stock Option shall comply with the requirements
of Treasury Regulations. 1.425-1 (and any amendments thereto).
(d) Notwithstanding anything else herein, the Committee may, in its sole
discretion, provide for accelerated vesting of an Award or accelerated
lapsing of restrictions on shares of Restricted Stock at any time.
(e) If the Company and the other party to a transaction constituting a
Change in Control agree that such transaction shall be treated as a
pooling of interests for financial reporting purposes, and if the transaction
is in fact so treated, then the acceleration of exercisability, vesting or
lapse of the applicable Restriction Period shall not occur to the extent
that the Company's independent public accountants determine in good
faith that such acceleration would preclude pooling of interests
accounting.
9.2 Change in Control. A Change in Control shall be deemed to have
occurred:
(a) upon any person as such term is used in Sections 13(d) and 14(d) of
the Exchange Act (other than the Company, any trustee or other
fiduciary holding securities under any 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 Common Stock of the Company), becoming the
beneficial owner (as defined in Rule 13d-3 under the Exchange Act),
directly or indirectly, of securities of the Company representing 50% or
more of the combined voting power of the Company's then outstanding
securities; provided, however, that if any person becomes the beneficial
owner of such securities but does not become entitled to the voting
power of such securities, such person's acquisition of such securities shall
not constitute a Change in Control of the Company;
(b) during any period of two consecutive years, individuals who at the
beginning of such period constitute the Board, and any new director
(other than a director designated by a person who has entered into an
agreement with the Company to effect a transaction described in
paragraph (a), (c), or (d) of this Section or a director whose initial
assumption of office occurs as a result of either an actual or threatened
election contest (as such term is used in Rule 14a-11 of Regulation 14A
promulgated under the Exchange Act) or other actual or threatened
solicitation of proxies or consents by or on behalf of a person other than
the Board) whose election by the Board or nomination for election by the
Company's shareholders was approved by a vote of at least two-thirds of
the directors then still in office who either were directors at the beginning
of the two-year period or whose election or nomination for election was
previously so approved, cease for any reason to constitute at least a
majority of the Board;
(c) a merger or consolidation of the Company with any other
corporation, other than a merger or consolidation which would result in
the voting securities of the Company outstanding immediately prior
thereto continuing to represent (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; provided, however, that a merger or
consolidation effected to implement a recapitalization of the Company
(or similar transaction) in which no person (other than those covered by
the exceptions in (a) above) acquires more than 50% of the combined
voting power of the Company's then outstanding securities shall not
constitute a Change in Control of the Company; or
(d) upon the shareholders of the Company approval of a plan of complete
liquidation of the Company or an agreement for the sale or disposition by
the Company of all or substantially all of the Company's assets other than
the sale or disposition of all or substantially all of the assets of the
Company to a person or persons who beneficially own, directly or
indirectly, at least 50% or more of the combined voting power of the
outstanding voting securities of the Company at the time of the sale.
SECTION X.
TERMINATION OR AMENDMENT OF PLAN
Notwithstanding any other provision of this Plan, the Board or the
Committee may at any time, and from time to time, amend, in whole or in
part, any or all of the provisions of this Plan (including any amendment
deemed necessary to ensure that the Company may comply with any
regulatory requirement referred to in
Section XIII), or suspend or terminate it entirely, retroactively or
otherwise; provided, however, that, unless otherwise required by law or
specifically provided herein, the rights of a Participant with respect to
Awards granted prior to such amendment, suspension or termination,
may not be impaired without the consent of such Participant and,
provided further, without the approval of the shareholders of the
Company in accordance with the laws of the State of Delaware, solely to
the extent required by the applicable provisions of Rule 16b-3 or Section
162(m), or, solely to the extent applicable to Incentive Stock Options,
Section 422 of the Code, no amendment may be made which would (i)
increase the aggregate number of shares of Common Stock that may be
issued under this Plan; (ii) increase the maximum individual Participant
limitations for a fiscal year under Section 4.1(b); (iii) change the
classification of employees, Consultants or Non-Employee Directors
eligible to receive Awards under this Plan; (iv) decrease the minimum
option price of any Stock Option; (v) extend the maximum Stock Option
period under Section 6.3; or (vi) materially alter the Performance Criteria
for the Award of Restricted Stock as set forth in Appendix A. In no
event may this Plan be amended without the approval of the shareholders
of the Company in accordance with the applicable laws of the State of
Delaware to increase the aggregate number of shares of Common Stock
that may be issued under this Plan, decrease the minimum exercise price
of any Stock Option, or to make any other amendment that would
require shareholder approval under the rules of any exchange or system
on which the Company's securities are listed or traded at the request of
the Company.
The Committee may amend the terms of any Award theretofore granted,
prospectively or retroactively, but, subject to Article IV above or as
otherwise specifically provided herein, no such amendment or other
action by the Committee shall impair the rights of any holder without the
holder's consent.
SECTION XI.
STOCK OPTION GRANT FOR NON-EMPLOYEE DIRECTORS
11.1 Stock Options. The terms of this Article XI shall apply only to
Stock Options granted to Non Employee Directors.
11.2 Grants for Non-Employee Directors. Without further action by the
Board or the shareholders of the Company, each Non-Employee Director
shall, subject to the terms of the Plan, be granted Stock Options to
purchase 50,000 shares of Common Stock as of the later of (i) the date
the Non-Employee Director begins service as a Non-Employee Director
or (ii) the Effective Date.
11.3 Terms of Stock Options. Stock Options granted under this Section
XI shall be subject to the following terms and conditions, and shall be in
such form and contain such additional terms and conditions, not
inconsistent with the terms of this Plan, as the Board shall deem
desirable:
(a) Exercise Price. The exercise price per share of Common Stock shall
be determined by the Board but shall not be less than 100% of the Fair
Market Value of the share of Common Stock at the time of grant.
(b) Stock Option Term. The term of each Stock Option granted under
this Article XI shall be 10 years.
(c) Exercisability. Stock Options granted under this Section XI shall be
50% vested and exercisable on the date such Stock Option is granted and
50% vested and exercisable on the first anniversary of the date of grant
(the Vesting Date).
(d) Method of Exercise. Subject to whatever installment exercise and
waiting period and vesting provisions apply under subparagraph (c)
above, Stock Options may be exercised in whole or in part at any time
and from time to time during the Stock Option term by giving written
notice of exercise to the Board specifying the number of shares to be
purchased. Such notice shall be accompanied by payment in full of the
purchase price as follows: (i) in cash or by check, bank draft or money
order payable to the order of the Company; (ii) if the Common Stock is
traded on a national securities exchange, The Nasdaq Stock Market, Inc.
or quoted on a national quotation system sponsored by the National
Association of Securities Dealers, and the Board authorizes, through a
cashless exercise procedure whereby the Non-Employee Director delivers
irrevocable instructions to a broker approved by the Board to deliver
promptly to the Company an amount equal to the exercise price; or (iii)
on such other terms and conditions as may be acceptable to the Board
(including, without limitation, the relinquishment of Stock Options or by
payment in full or in part in the form of Common Stock owned by the
Participant for a period of at least six months or such other period
necessary to avoid a charge, for accounting purposes, against the
Company's earnings as reported in the Company's financial statements
(and for which the Participant has good title free and clear of any liens
and encumbrances) based on the Fair Market Value of the Common
Stock on the payment date as determined by the Board). No shares of
Common Stock shall be issued until payment therefor, as provided
herein, has been made or provided for.
(e) Form, Modification, Extension and Renewal of Stock Options.
Subject to the terms and conditions and within the limitations of the Plan,
a Stock Option shall be evidenced by such form of agreement or grant as
is approved by the Board, and the Board may modify, extend or renew
outstanding Stock Options granted under the Plan (provided that the
rights of a Non-Employee Director are not reduced without his or her
consent).
11.4 Termination of Directorship. The following rules apply with regard
to Options upon a Termination of Directorship:
(a) Termination of Directorship. Except as otherwise provided herein,
upon the Termination of Directorship for any reason, all outstanding
Stock Options then exercisable and not exercised by the Non-Employee
Director prior to such Termination of Directorship shall remain
exercisable, to the extent exercisable at the Termination of Directorship,
by the Non-Employee Director, or, in the case of death, by the Non-
Employee Director's estate or by the person given authority to exercise
such Stock Options by his or her will or by operation of law, for a three
(3) year period commencing on the date of the Termination of
Directorship, provided that such three (3) year period shall not extend
beyond the stated term of such Stock Options.
(b) Cancellation of Stock Options. Except as otherwise provided herein,
no Stock Options that were not exercisable during the period such person
serves as a Director shall thereafter become exercisable upon a
Termination of Directorship for any reason or no reason whatsoever, and
such Stock Options shall terminate and become null and void upon a
Termination of Directorship.
11.5 Acceleration of Exercisability.
(a) Death or Disability. All Stock Options granted to Non-Employee
Directors under this Article XI and not previously exercisable shall
become fully exercisable immediately upon a Termination of Directorship
due to a Non-Employee Director's death or Disability.
(b) Change in Control. All Stock Options granted to Non-Employee
Directors under this Article XI and not previously exercisable shall
become fully exercisable immediately upon a Change in Control.
11.6 Changes. The Awards to a Non-Employee Director shall be subject
to Sections 4.2(a), (b) and (c) of the Plan and this Section 11.6, but shall
not be subject to Section 4.2(d) of the Plan.
11.7 Amendment. The provisions of this Article XI shall not be amended
more than once in any six month period, other than to comply with
changes in the Code, the Employee Retirement Income Security Act of
1974, as amended, or other applicable federal or state law.
SECTION XII.
UNFUNDED PLAN
This Plan is intended to constitute an un-funded plan for incentive and
deferred compensation. With respect to any payments as to which a
Participant has a fixed and vested interest but which are not yet made to a
Participant by the Company, nothing contained herein shall give any such
Participant any rights that are greater than those of a general unsecured
creditor of the Company.
SECTION XIII.
GENERAL PROVISIONS
13.1 Legend. The Committee may require each person receiving shares
pursuant to an Award under this Plan to represent to and agree with the
Company in writing that the Participant is acquiring the shares without a
view to distribution thereof and such other securities law related
representations as the Committee shall request. In addition to any legend
required by this Plan, the certificates for such shares may include any
legend, which the Committee deems appropriate to reflect any
restrictions on Transfer.
All certificates for shares of Common Stock delivered under this Plan
shall be subject to such stock transfer orders and other restrictions as the
Committee may deem advisable under the rules, regulations and other
requirements of the Securities and Exchange Commission, any stock
exchange upon which the Common Stock is then listed or any national
securities association system upon whose system the Common Stock is
then quoted, any applicable Federal or state securities law, and any
applicable corporate law, and the Committee may cause a legend or
legends to be put on any such certificates to make appropriate reference
to such restrictions. Each certificate for shares of Common Stock
delivered under this Plan shall include a legend substantially in the
following form:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE
NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED (THE SECURITIES ACT) OR QUALIFIED
UNDER ANY APPLICABLE STATE SECURITIES LAWS (THE
STATE ACTS), HAVE BEEN ACQUIRED FOR INVESTMENT AND
MAY NOT BE SOLD, PLEDGED, HYPOTHECATED OR
OTHERWISE TRANSFERRED EXCEPT PURSUANT TO A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT
AND QUALIFICATION UNDER THE STATE ACTS OR
EXEMPTIONS FROM SUCH REGISTRATION OR
QUALIFICATION REQUIREMENTS (INCLUDING, IN THE CASE
OF THE SECURITIES ACT, THE EXEMPTION AFFORDED BY
RULE 144). UNLESS WAIVED BY THE ISSUER, THE ISSUER
SHALL BE FURNISHED WITH AN OPINION OF COUNSEL
OPINING AS TO THE AVAILABILITY OF EXEMPTIONS FROM
SUCH REGISTRATION AND QUALIFICATION AS A
PRECONDITION TO ANY SUCH TRANSFER
13.2 Other Plans. Nothing contained in this Plan shall prevent the Board
from adopting other or additional compensation arrangements, subject to
shareholder approval if such approval is required; and such arrangements
may be either generally applicable or applicable only in specific cases. In
the event of any conflict between the provisions of this Plan and any
agreement (including any Stock Option agreement) approved by the
Board or the Committee, between the Company and any Eligible
Employee, Consultant or Non-Employee Director, the provisions of such
agreement shall govern.
13.3 No Right to Employment/Consultancy/Directorship. Neither this
Plan nor the grant of any Award hereunder shall give any Participant or
other employee, Consultant or Non- Employee Director any right with
respect to continuance of employment, consultancy or directorship by the
Company or any Affiliate, nor shall they be a limitation in any way on the
right of the Company or any Affiliate by which an employee is employed
or a Consultant or Non- Employee Director is retained to terminate his or
her employment or consultancy at any time.
13.4 Withholding of Taxes. The Company shall have the right to deduct
from any payment to be made to a Participant, or to otherwise require,
prior to the issuance or delivery of any shares of Common Stock or the
payment of any cash hereunder, payment by the Participant of, any
Federal, state or local taxes required by law to be withheld. Upon the
vesting of Restricted Stock, or upon making an election under Section
83(b) of the Code, a Participant shall pay all required withholding to the
Company.
Any statutorily required withholding obligation with regard to any
Eligible Employee may be satisfied, subject to the consent of the
Committee, by reducing the number of shares of Common Stock
otherwise deliverable or by delivering shares of Common Stock already
owned. Any fraction of a share of Common Stock required to satisfy
such tax obligations shall be disregarded and the amount due shall be paid
instead in cash by the Participant.
13.5 Listing and Other Conditions.
(a) As long as the Common Stock is listed on a national securities
exchange or system sponsored by a national securities association, the
issue of any shares of Common Stock pursuant to an Award shall be
conditioned upon such shares being listed on such exchange or system.
The Company shall have no obligation to issue such shares unless and
until such shares are so listed, and the right to exercise any Stock Option
with respect to such shares shall be suspended until such listing has been
effected.
(b) If at any time counsel to the Company shall be of the opinion that any
sale or delivery of shares of Common Stock pursuant to an Award is or
may in the circumstances be unlawful or result in the imposition of excise
taxes on the Company under the statutes, rules or regulations of any
applicable jurisdiction, the Company shall have no obligation to make
such sale or delivery, or to make any application or to effect or to
maintain any qualification or registration under the Securities Act or
otherwise with respect to shares of Common Stock or Awards, and the
right to exercise any Stock Option shall be suspended until, in the opinion
of said counsel, such sale or delivery shall be lawful and will not result in
the imposition of excise taxes on the Company.
(1) Upon termination of any period of suspension under this Section
13.5, an Award affected by such suspension which shall not then have
expired or terminated shall be reinstated as to all shares available before
such suspension and as to shares which would otherwise have become
available during the period of such suspension, but no such suspension
shall extend the term of any Stock Option.
(2) A Participant shall be required to supply the Company with any
certificates, representations and information that the Company requests
and otherwise cooperate with the Company in obtaining any listing,
registration, qualification, exemption, consent or approval the Company
deems necessary or appropriate.
13.6 Governing Law. This Plan shall be governed and construed in
accordance with the laws of the State of Delaware (regardless of the law
that might otherwise govern under applicable Delaware principles of
conflict of laws).
13.7 Construction. Wherever any words are used in this Plan in the
masculine gender they shall be construed as though they were also used
in the feminine gender in all cases where they would so apply, and
wherever any words are used herein in the singular form they shall be
construed as though they were also used in the plural form in all cases
where they would so apply. To the extent applicable, this Plan shall be
limited, construed and interpreted in a manner so as to comply with the
applicable requirements of Rule 16b-3; however, noncompliance with
Rule 16b-3 shall have no impact on the effectiveness of an Award under
this Plan.
13.8 Other Benefits. No Award payment under this Plan shall be deemed
compensation for purposes of computing benefits under any retirement
plan of the Company or its subsidiaries nor affect any benefits under any
other benefit plan now or subsequently in effect under which the
availability or amount of benefits is related to the level of compensation.
13.9 Costs. The Company shall bear all expenses included in
administering this Plan, including expenses of issuing Common Stock
pursuant to any Awards hereunder.
13.10 No Right to Same Benefits. The provisions of Awards need not be
the same with respect to each Participant, and such Awards to individual
Participants need not be the same in subsequent years.
13.11 Death/Disability. The Committee may in its discretion require the
transferee of a Participant to supply it with written notice of the
Participant's death or Disability and to supply it with a copy of the will (in
the case of the Participant's death) or such other evidence as the
Committee deems necessary to establish the validity of the Transfer of an
Award. The Committee may also require that the agreement of the
transferee to be bound by all of the terms and conditions of this Plan.
13.12 Section 16(b) of the Exchange Act. All elections and transactions
under this Plan by persons subject to Section 16 of the Exchange Act
involving shares of Common Stock are intended to comply with any
applicable exemptive condition under Rule 16b-3. The Committee may
establish and adopt written administrative guidelines, designed to
facilitate compliance with Section 16(b) of the Exchange Act, as it may
deem necessary or proper for the administration and operation of this
Plan and the transaction of business thereunder.
13.13 Successors and Assigns. The Plan shall be binding on all successors
and permitted assigns of a Participant, including, without limitation, the
estate of such Participant and the executor, administrator or trustee of
such estate.
13.14 Severability of Provisions. If any provision of this Plan shall be
held invalid or unenforceable, such invalidity or unenforceability shall not
affect any other provisions hereof, and this Plan shall be construed and
enforced as if such provisions had not been included.
13.15 Headings and Captions. The headings and captions herein are
provided for reference and convenience only, shall not be considered part
of this Plan, and shall not be employed in the construction of this Plan.
13.16 Payment to Minors, Etc. Any benefit payable to or for the benefit
of a minor, an incompetent person or other person incapable of receipt
thereof shall be deemed paid when paid to such person's guardian or to
the party providing or reasonably appearing to provide for the care of
such person, and such payment shall fully discharge the Committee, the
Board, the Company, its Affiliates and their employees, agents and
representatives with respect thereto.
SECTION XIV.
EFFECTIVE DATE OF PLAN
The Plan shall become effective upon (i) adoption by the Board (i)
approval of this Plan by the shareholders of the Company in accordance
with the requirements of the laws of the State of Delaware, and (iii) Dupe
from p.4of 5k.
SECTION XV.
TERM OF PLAN
No Award shall be granted pursuant to this Plan on or after the tenth
anniversary of the earlier of the date this Plan is adopted or the date of
shareholder approval, but Awards granted prior to such tenth anniversary
may, and the Committee's authority to administer the terms of such Stock
Options shall, extend beyond that date.
APPENDIX A
PERFORMANCE CRITERIA
Performance Goals established for purposes of conditioning the grant of
an Award of Restricted Stock based on performance or the vesting of
performance-based Awards of Restricted Stock, Performance Units
and/or Performance Shares shall be based on one or more of the
following performance criteria (Performance Criteria): (i) the attainment
of certain target levels of, or a specified percentage increase in, revenues,
income before income taxes and extraordinary items, net income,
earnings before income tax, earnings before interest, taxes, depreciation
and amortization, funds from operation of real estate investments or a
combination of any or all of the foregoing; (ii) the attainment of certain
target levels of, or a percentage increase in, after-tax or pre-tax profits
including, without limitation, that attributable to continuing and/or other
operations; (iii) the attainment of certain target levels of, or a specified
increase in, operational cash flow; (iv) the achievement of a certain level
of, reduction of, or other specified objectives with regard to limiting the
level of increase in, all or a portion of, the Company's bank debt or other
long-term or short-term public or private debt or other similar financial
obligations of the Company, which may be calculated net of such cash
balances and/or other offsets and adjustments as may be established by
the Committee; (v) the attainment of a specified percentage increase in
earnings per share or earnings per share from continuing operations; (vi)
the attainment of certain target levels of, or a specified increase in return
on capital employed or return on invested capital; (vii) the attainment of
certain target levels of, or a percentage increase in, after-tax or pre-tax
return on shareholders' equity; (viii) the attainment of certain target levels
of, or a specified increase in, economic value added targets based on a
cash flow return on investment formula; (ix) the attainment of certain
target levels in the fair market value of the shares of the Company's
common stock; (x) the growth in the value of an investment in the
Company's common stock assuming the reinvestment of dividends; and
(xi) reducing costs of the Company, as evidenced by meeting or reducing
budgeted expenses established by the Company. For purposes of item (i)
above, extraordinary items shall mean all items of gain, loss or expense
for the fiscal year determined to be extraordinary or unusual in nature or
infrequent in occurrence or related to a corporate transaction (including,
without limitation, a disposition or acquisition) or related to a change in
accounting principle, all as determined in accordance with standards
established by Opinion No. 30 of the Accounting Principles Board.
In addition, such Performance Criteria may be based upon the attainment
of specified levels of Company (or subsidiary, division or other
operational unit of the Company) performance under one or more of the
measures described above relative to the performance of other
corporations. To the extent permitted under Code Section 162(m), but
only to the extent permitted under Code Section 162(m) (including,
without limitation, compliance with any requirements for shareholder
approval), the Committee may: (i) designate additional business criteria
on which the Performance Criteria may be based or (ii) adjust, modify or
amend the aforementioned business criteria.