Exhibit 99.4
________________________________________________________________________________
HEADWATERS INCORPORATED
2002 STOCK INCENTIVE PLAN
(As Amended and Restated Effective October 25, 2002)
________________________________________________________________________________
TABLE OF CONTENTS
Page
SECTION 1. ESTABLISHMENT AND PURPOSE..................................1
SECTION 2. DEFINITIONS................................................1
(a) "Affiliate".......................................1
(b) "Award"...........................................1
(c) "Board of Directors"..............................1
(d) "Change in Control"...............................1
(e) "Code"............................................2
(f) "Committee".......................................2
(g) "Company".........................................2
(h) "Consultant"......................................2
(i) "Employee"........................................2
(j) "Exchange Act"....................................2
(k) "Exercise Price"..................................2
(l) "Fair Market Value"...............................2
(m) "Offeree".........................................3
(n) "Option"..........................................3
(o) "Optionee"........................................3
(p) "Outside Director"................................3
(q) "Parent"..........................................3
(r) "Participant".....................................3
(s) "Plan"............................................3
(t) "Purchase Price"..................................3
(u) "Restricted Share"................................3
(v) "Restricted Share Agreement"......................3
(w) "SAR".............................................4
(x) "SAR Agreement"...................................4
(y) "Service".........................................4
(z) "Share"...........................................4
(aa) "Stock"...........................................4
(bb) "Stock Option Agreement"..........................4
(cc) "Stock Purchase Agreement"........................4
(dd) "Stock Unit"......................................4
(ee) "Stock Unit Agreement"............................4
(ff) "Subsidiary"......................................4
(gg) "Total and Permanent Disability"..................4
SECTION 3. ADMINISTRATION.............................................4
(a) Committee Composition.............................4
(b) Committee for Non-Officer Grants..................4
(c) Committee Procedures..............................5
(d) Committee Responsibilities........................5
SECTION 4. ELIGIBILITY................................................6
(a) General Rule......................................6
(b) Outside Directors.................................6
SECTION 5. STOCK SUBJECT TO PLAN......................................8
(a) Basic Limitation..................................8
(b) Annual Increase in Shares.........................8
(c) Additional Shares.................................8
(d) Dividend Equivalents..............................8
SECTION 6. RESTRICTED SHARES..........................................8
(a) Restricted Share Agreement........................8
(b) Payment for Awards................................8
(c) Vesting...........................................9
(d) Voting and Dividend Rights........................9
SECTION 7. OTHER TERMS AND CONDITIONS OF AWARDS OR SALES..............9
(a) Duration of Offers and Nontransferability
of Rights.......................................9
(b) Purchase Price....................................9
(c) Withholding Taxes.................................9
(d) Restrictions on Transfer of Shares................9
SECTION 8. TERMS AND CONDITIONS OF OPTIONS...........................10
(a) Stock Option Agreement...........................10
(b) Number of Shares.................................10
(c) Exercise Price...................................10
(d) Withholding Taxes................................10
(e) Exercisability and Term..........................10
(f) Nontransferability...............................10
(g) Exercise of Options Upon Termination
of Service.....................................10
(h) Effect of Change in Control......................11
(i) Leaves of Absence................................11
(j) No Rights as a Stockholder.......................11
(k) Modification, Extension and Renewal of Options...11
(l) Restrictions on Transfer of Shares...............11
(m) Buyout Provisions................................11
SECTION 9. PAYMENT FOR SHARES........................................12
(a) General Rule.....................................12
(b) Surrender of Stock...............................12
(c) Services Rendered................................12
(d) Cashless Exercise................................12
(e) Exercise/Pledge..................................12
(f) Promissory Note..................................12
(g) Other Forms of Payment...........................12
(h) Restrictions on Forms of Payment.................12
SECTION 10. STOCK APPRECIATION RIGHTS.................................13
(a) SAR Agreement....................................13
(b) Number of Shares.................................13
(c) Exercise Price...................................13
(d) Exercisability and Term..........................13
(e) Effect of Change in Control......................13
(f) Exercise of SARs.................................13
(g) Special Holding Period...........................13
(h) Special Exercise Window..........................14
(i) Modification or Assumption of SARs...............14
SECTION 11. STOCK UNITS...............................................14
(a) Stock Unit Agreement.............................14
(b) Payment for Awards...............................14
(c) Vesting Conditions...............................14
(d) Voting and Dividend Rights.......................14
(e) Form and Time of Settlement of Stock Units.......14
(f) Death of Recipient...............................15
(g) Creditors' Rights................................15
SECTION 12. ADJUSTMENT OF SHARES......................................15
(a) Adjustments......................................15
(b) Dissolution or Liquidation.......................16
(c) Reorganizations..................................16
(d) Reservation of Rights............................16
SECTION 13. DEFERRAL OF AWARDS........................................16
SECTION 14. AWARDS UNDER OTHER PLANS..................................17
SECTION 15. PAYMENT OF DIRECTOR'S FEES IN SECURITIES..................17
(a) Effective Date...................................17
(b) Elections to Receive Options, Restricted
Shares or Stock Units..........................17
(c) Number and Terms of Options, Restricted
Shares or Stock Units..........................17
SECTION 16. LEGAL AND REGULATORY REQUIREMENTS.........................17
SECTION 17. WITHHOLDING TAXES.........................................18
(a) General..........................................18
(b) Share Withholding................................18
SECTION 18. LIMITATION ON PARACHUTE PAYMENTS..........................18
(a) Scope of Limitation..............................18
(b) Basic Rule.......................................18
(c) Reduction of Payments............................18
(d) Overpayments and Underpayments...................19
(e) Related Corporations.............................19
SECTION 19. NO EMPLOYMENT RIGHTS......................................19
SECTION 20. DURATION AND AMENDMENTS...................................19
(a) Term of the Plan.................................19
(b) Right to Amend or Terminate the Plan.............19
(c) Effect of Amendment or Termination...............19
SECTION 21. EXECUTION.................................................20
HEADWATERS INCORPORATED
2002 STOCK INCENTIVE PLAN
(As Amended and Restated Effective October ___, 2002)
SECTION 1. ESTABLISHMENT AND PURPOSE.
The Plan was adopted by the Board of Directors effective April 23, 2002
and is hereby amended and restated in its entirety effective October __, 2002.
The purpose of the Plan is to promote the long-term success of the Company and
the creation of stockholder value by (a) encouraging Employees, Outside
Directors and Consultants to focus on critical long-range objectives, (b)
encouraging the attraction and retention of Employees, Outside Directors and
Consultants with exceptional qualifications and (c) linking Employees, Outside
Directors and Consultants directly to stockholder interests through increased
stock ownership. The Plan seeks to achieve this purpose by providing for Awards
in the form of Restricted Shares, Stock Units, Options or stock appreciation
rights. The Plan is intended to be a "broad-based" plan for purposes of the
Nasdaq Listing Qualifications.
SECTION 2. DEFINITIONS.
(a) "Affiliate"shall mean any entity other than a Subsidiary, if the
Company and/or one of more Subsidiaries own not less than 50% of such entity.
(b) "Award"shall mean any award of an Option, a SAR, a Restricted Share
or a Stock Unit under the Plan.
(c) "Board of Directors"shall mean the Board of Directors of the
Company, as constituted from time to time.
(d) "Change in Control"shall mean the occurrence of either of the
following events:
(i) A change in the composition of the Board of Directors, as
a result of which fewer than one-half of the incumbent directors are
directors who either:
(A) Had been directors of the Company 24 months prior
to such change; or
(B) Were elected, or nominated for election, to the
Board of Directors with the affirmative votes of at least a
majority of the directors who had been directors of the
Company 24 months prior to such change and who were still in
office at the time of the election or nomination; or
(ii) Any "person" (as such term is used in Sections 13(d) and
14(d) of the Exchange Act) who by the acquisition or aggregation of
securities, is or becomes the beneficial owner (as defined in Rule
13d-3 under the Exchange Act), directly or indirectly, of securities of
the Company representing twenty percent (20%) or more of the combined
voting power of the Company's then outstanding securities ordinarily
(and apart from rights accruing under special circumstances) having the
right to vote at elections of directors (the "Base Capital Stock");
except that any change in the relative beneficial ownership of the
Company's securities by any person resulting solely from a reduction in
the aggregate number of outstanding shares of Base Capital Stock, and
any decrease thereafter in such person's ownership of securities, shall
be disregarded until such person increases in any manner, directly or
indirectly, such person's beneficial ownership of any securities of the
Company. For purposes of this subsection (d)(ii), the term "person"
shall exclude a trustee or other fiduciary holding securities under an
employee benefit plan maintained by the Company or a Parent or
Subsidiary.
A transaction shall not constitute a Change in Control if its sole
purpose is to change the state of the Company's incorporation or to
create a holding company that will be owned in substantially the same
proportions by the persons who held the Company's securities
immediately before such transaction.
(e) "Code"shall mean the Internal Revenue Code of 1986, as amended.
(f) "Committee"shall mean the committee designated by the Board of
Directors, which is authorized to administer the Plan, as described in Section 3
hereof.
(g) "Company"shall mean Headwaters Incorporated, a Delaware
corporation.
(h) "Consultant"shall mean a consultant or advisor who provides bona
fide services to the Company, a Parent, a Subsidiary or an Affiliate as an
independent contractor. Service as a Consultant shall be considered Service for
all purposes of the Plan.
(i) "Employee"shall mean any individual who is a common-law employee of
the Company, a Parent or a Subsidiary.
(j) "Exchange Act"shall mean the Securities Exchange Act of 1934, as
amended.
(k) "Exercise Price"shall mean, in the case of an Option, the amount
for which one Common Share may be purchased upon exercise of such Option, as
specified in the applicable Stock Option Agreement. "Exercise Price," in the
case of a SAR, shall mean an amount, as specified in the applicable SAR
Agreement, which is subtracted from the Fair Market Value of one Common Share in
determining the amount payable upon exercise of such SAR.
(l) "Fair Market Value"with respect to a Share, shall mean the market
price of one Share of Stock, determined by the Committee as follows:
(i) If the Stock was traded over-the-counter on the date in
question but was not traded on the Nasdaq Stock Market, then the Fair
Market Value shall be equal to the last transaction price quoted for
such date by the OTC Bulletin Board or, if not so quoted, shall be
equal to the mean between the last reported representative bid and
asked prices quoted for such date by the principal automated
inter-dealer quotation system on which the Stock is quoted or, if the
Stock is not quoted on any such system, by the "Pink Sheets" published
by the National Quotation Bureau, Inc.;
(ii) If the Stock was traded on The Nasdaq Stock Market, then
the Fair Market Value shall be equal to the last reported sale price
quoted for such date by The Nasdaq Stock Market;
(iii) If the Stock was traded on a United States stock
exchange on the date in question, then the Fair Market Value shall be
equal to the closing price reported for such date by the applicable
composite-transactions report; and
(iv) If none of the foregoing provisions is applicable, then
the Fair Market Value shall be determined by the Committee in good
faith on such basis as it deems appropriate.
In all cases, the determination of Fair Market Value by the Committee
shall be conclusive and binding on all persons.
(m) "Offeree"shall mean an individual to whom the Committee has offered
the right to acquire Shares under the Plan (other than upon exercise of an
Option).
(n) "Option"shall mean an option granted under the Plan and entitling
the holder to purchase Shares. Options granted under the plan are not intended
to be employee incentive stock options described in Section 422 of the Code.
(o) "Optionee"shall mean an individual or estate who holds an Option or
SAR.
(p) "Outside Director"shall mean a member of the Board of Directors who
is not a common-law employee of the Company, a Parent or a Subsidiary. Service
as an Outside Director shall be considered Service for all purposes of the Plan.
(q) "Parent"shall mean any corporation (other than the Company) in an
unbroken chain of corporations ending with the Company, if each of the
corporations other than the Company owns stock possessing 50% or more of the
total combined voting power of all classes of stock in one of the other
corporations in such chain. A corporation that attains the status of a Parent on
a date after the adoption of the Plan shall be a Parent commencing as of such
date.
(r) "Participant"shall mean an individual or estate who holds an Award.
(s) "Plan"shall mean this 2002 Stock Incentive Plan of Headwaters
Incorporated, as amended from time to time.
(t) "Purchase Price"shall mean the consideration for which one Share
may be acquired under the Plan (other than upon exercise of an Option), as
specified by the Committee.
(u) "Restricted Share"shall mean a Share awarded under the Plan.
(v) "Restricted Share Agreement"shall mean the agreement between the
Company and the recipient of a Restricted Share which contains the terms,
conditions and restrictions pertaining to such Restricted Shares.
(w) "SAR"shall mean a stock appreciation right granted under the Plan.
(x) "SAR Agreement"shall mean the agreement between the Company and an
Optionee which contains the terms, conditions and restrictions pertaining to his
or her SAR.
(y) "Service"shall mean service as an Employee, Consultant or Outside
Director.
(z) "Share"shall mean one share of Stock, as adjusted in accordance
with Section 9 (if applicable).
(aa) "Stock"shall mean the Common Stock of the Company.
(bb) "Stock Option Agreement"shall mean the agreement between the
Company and an Optionee that contains the terms, conditions and restrictions
pertaining to his or her Option.
(cc) "Stock Purchase Agreement"shall mean the agreement between the
Company and an Offeree who acquires Shares under the Plan that contains the
terms, conditions and restrictions pertaining to the acquisition of such Shares.
(dd) "Stock Unit"shall mean a bookkeeping entry representing the
equivalent of one Share, as awarded under the Plan.
(ee) "Stock Unit Agreement"shall mean the agreement between the Company
and the recipient of a Stock Unit which contains the terms, conditions and
restrictions pertaining to such Stock Unit.
(ff) "Subsidiary"shall mean any corporation, if the Company and/or one
or more other Subsidiaries own not less than 50% of the total combined voting
power of all classes of outstanding stock of such corporation. A corporation
that attains the status of a Subsidiary on a date after the adoption of the Plan
shall be considered a Subsidiary commencing as of such date.
(gg) "Total and Permanent Disability"shall mean that the Optionee is
unable to engage in any substantial gainful activity by reason of any medically
determinable physical or mental impairment that can be expected to result in
death or that has lasted, or can be expected to last, for a continuous period of
not less than 12 months.
SECTION 3. ADMINISTRATION.
(a) Committee Composition. The Plan shall be administered by the
Committee. The Committee shall consist of the Board itself or two or more
directors of the Company who shall satisfy the requirements of Rule 16b-3 (or
its successor) under the Exchange Act with respect to the grant of Awards to
persons who are officers or directors of the Company under Section 16 of the
Exchange Act.
(b) Committee for Non-Officer Grants. The Board may also appoint one or
more separate committees of the Board, each composed of one or more directors of
the Company who need not satisfy the requirements of Section 3(a), who may
administer the Plan with respect to Employees who are not considered officers or
directors of the Company under Section 16 of the Exchange Act, may grant Awards
under the Plan to such Employees and may determine all terms of such grants.
Within the limitations of the preceding sentence, any reference in the Plan to
the Committee shall include such committee or committees appointed pursuant to
the preceding sentence.
(c) Committee Procedures. The Board of Directors shall designate one of
the members of the Committee as chairperson. The Committee may hold meetings at
such times and places as it shall determine. The acts of a majority of the
Committee members present at meetings at which a quorum exists, or acts reduced
to or approved in writing by all Committee members, shall be valid acts of the
Committee.
(d) Committee Responsibilities. Subject to the provisions of the Plan,
the Committee shall have full discretionary authority to take the following
actions:
(i) To interpret the Plan and to apply its provisions;
(ii) To adopt, amend or rescind rules, procedures and forms
relating to the Plan;
(iii) To authorize any person to execute, on behalf of the
Company, any instrument required to carry out the purposes of the Plan;
(iv) To determine when Shares are to be awarded or offered for
sale and when Options are to be granted under the Plan;
(v) To select the Offerees and Optionees;
(vi) To determine the number of Shares to be offered to each
Offeree or to be made subject to each Option;
(vii) To prescribe the terms and conditions of each award or
sale of Shares, including (without limitation) the Purchase Price, the
vesting of the award (including accelerating the vesting of awards) and
to specify the provisions of the Stock Purchase Agreement relating to
such award or sale;
(viii) To prescribe the terms and conditions of each Option,
including (without limitation) the Exercise Price, the vesting or
duration of the Option (including accelerating the vesting of the
Option), and to specify the provisions of the Stock Option Agreement
relating to such Option;
(ix) To amend any outstanding Stock Purchase Agreement or
Stock Option Agreement, subject to applicable legal restrictions and to
the consent of the Offeree or Optionee who entered into such agreement;
(x) To prescribe the consideration for the grant of each
Option or other right under the Plan and to determine the sufficiency
of such consideration;
(xi) To determine the disposition of each Option or other
right under the Plan in the event of an Optionee's or Offeree's divorce
or dissolution of marriage;
(xii) To determine whether Options or other rights under the
Plan will be granted in replacement of other grants under an incentive
or other compensation plan of an acquired business;
(xiii) To correct any defect, supply any omission, or
reconcile any inconsistency in the Plan, any Stock Option Agreement or
any Stock Purchase Agreement; and
(xiv) To take any other actions deemed necessary or advisable
for the administration of the Plan.
Subject to the requirements of applicable law, the Committee may designate
persons other than members of the Committee to carry out its responsibilities
and may prescribe such conditions and limitations as it may deem appropriate,
except that the Committee may not delegate its authority with regard to the
selection for participation of or the granting of Options or other rights under
the Plan to persons subject to Section 16 of the Exchange Act. All decisions,
interpretations and other actions of the Committee shall be final and binding on
all Offerees, all Optionees, and all persons deriving their rights from an
Offeree or Optionee. No member of the Committee shall be liable for any action
that he has taken or has failed to take in good faith with respect to the Plan,
any Option, or any right to acquire Shares under the Plan.
SECTION 4. ELIGIBILITY.
(a) General Rule. All Employees, Consultants and Outside Directors
shall be eligible for the grant of Restricted Shares, Stock Units, Options or
SARs. During the first three years of the Plan and annually thereafter, at least
50% of the Shares covered by Awards under the Plan shall be made to Employees
who are not officers or directors of the Company.
(b) Outside Directors. Any other provision of the Plan notwithstanding,
the participation of Outside Directors in the Plan shall be subject to the
following restrictions:
(i) Outside Directors shall be eligible for the grant of
Restricted Shares, Stock Units, Options and SARs.
(ii) The Exercise Price of all Options granted to an Outside
Director under this Section 4(b) shall be not less than 100% of the
Fair Market Value of a Share on the date of grant, payable in one of
the forms described in Section 9(a), (b) and (d).
(iii) Unless otherwise stated in the Stock Option Agreement,
each Option granted under Section 4(b) shall become exercisable in
three equal annual installments on each of the first three
anniversaries of the date of grant. Each Option that has been
outstanding for not less than six months shall become exercisable in
full in the event that a Change in Control occurs with respect to the
Company.
(iv) Subject to Sections 4(b)(v) and (vi), all Options granted
to an Outside Director under this Section 4(b) shall terminate on the
tenth anniversary of the date of grant of such Options.
(v) If an Optionee's Service terminates for any reason other
than death, then his or her Options shall expire on the earliest of the
following occasions:
(A) The expiration date determined pursuant to
Section 4(b)(iv);
(B) The date 24 months after the termination of the
Optionee's Service, if the termination occurs because of his
or her Total and Permanent Disability; or
(C) The date six months after the termination of the
Optionee's Service for any reason other than Total and
Permanent Disability.
The Optionee may exercise all or part of his or her Options at any time
before the expiration of such Options under the preceding sentence, but
only to the extent that such Options had become exercisable before his
or her Service terminated. The balance of such Options shall lapse when
the Optionee's Service terminates. In the event that the Optionee dies
after the termination of his or her Service but before the expiration
of his or her Options, all or part of such Options may be exercised at
any time prior to their expiration by the executors or administrators
of the Optionee's estate or by any person who has acquired such Options
directly from him or her by bequest, inheritance or beneficiary
designation under the Plan, but only to the extent that such Options
had become exercisable before his or her Service terminated.
(vi) If an Optionee dies while he or she is in Service, then
his or her Options shall expire on the earlier of the following dates:
(A) The expiration date determined pursuant to
Section 4(b)(iv) above; or
(B) The date 24 months after his or her death.
All or part of the Optionee's Options may be exercised at any time
before the expiration of such Options under the preceding sentence by
the executors or administrators of his or her estate or by any person
who has acquired such Options directly from him or her by bequest,
inheritance or beneficiary designation under the Plan.
(vii) No Option shall be transferable by the Optionee other
than by will, by written beneficiary designation or by the laws of
descent and distribution. An Option may be exercised during the
lifetime of the Optionee only by the Optionee or by the Optionee's
guardian or legal representative. No Option or interest therein may be
transferred, assigned, pledged or hypothecated by the Optionee during
his or her lifetime, whether by operation of law or otherwise, or be
made subject to execution, attachment or similar process.
SECTION 5. STOCK SUBJECT TO PLAN.
(a) Basic Limitation. Shares offered under the Plan shall be authorized
but unissued Shares or treasury Shares. The maximum aggregate number of Options,
SARs, Stock Units and Restricted Shares awarded under the Plan shall not exceed
850,000 Shares, plus the additional Shares described in Sections (b) and (c),
but in no event more than 1,500,000 Shares. The limitation of this Section 5(a)
shall be subject to adjustment pursuant to Section 12.
(b) Annual Increase in Shares. As of January 1 of each year, commencing
with the year 2003, the aggregate number of Options, SARs, Stock Units and
Restricted Shares that may be awarded under the Plan shall automatically
increase by a number equal to the lesser of (i) 500,000 shares, (ii) 2% of the
outstanding shares of Stock of the Company on such date or (iii) a lesser amount
determined by the Board. The aggregate number of Shares that may be issued under
the Plan shall at all times be subject to adjustment pursuant to Section 12. The
number of Shares that are subject to Options or other rights outstanding at any
time under the Plan shall not exceed the number of Shares which then remain
available for issuance under the Plan. The Company, during the term of the Plan,
shall at all times reserve and keep available sufficient Shares to satisfy the
requirements of the Plan.
(c) Additional Shares. If Restricted Shares or Shares issued upon the
exercise of Options are forfeited, then such Shares shall again become available
for Awards under the Plan. If Stock Units, Options or SARs are forfeited or
terminate for any other reason before being exercised, then the corresponding
Shares shall again become available for Awards under the Plan. If Stock Units
are settled, then only the number of Shares (if any) actually issued in
settlement of such Stock Units shall reduce the number available under Section
5(a) and the balance shall again become available for Awards under the Plan. If
SARs are exercised, then only the number of Shares (if any) actually issued in
settlement of such SARs shall reduce the number available in Section 5(a) and
the balance shall again become available for Awards under the Plan.
(d) Dividend Equivalents. Any dividend equivalents paid or credited
under the Plan shall not be applied against the number of Restricted Shares,
Stock Units, Options or SARs available for Awards, whether or not such dividend
equivalents are converted into Stock Units.
SECTION 6. RESTRICTED SHARES
(a) Restricted Share Agreement. Each grant of Restricted Shares under
the Plan shall be evidenced by a Restricted Share Agreement between the
recipient and the Company. Such Restricted Shares shall be subject to all
applicable terms of the Plan and may be subject to any other terms that are not
inconsistent with the Plan. The provisions of the various Restricted Share
Agreements entered into under the Plan need not be identical.
(b) Payment for Awards. Subject to the following sentence, Restricted
Shares may be sold or awarded under the Plan for such consideration as the
Committee may determine, including (without limitation) cash, cash equivalents,
full-recourse promissory notes, past services and future services. To the extent
that an Award consists of newly issued Restricted Shares, the Award recipient
shall furnish consideration with a value not less than the par value of such
Restricted Shares in the form of cash, cash equivalents, or past services
rendered to the Company (or a Parent or Subsidiary), as the Committee may
determine.
(c) Vesting. Each Award of Restricted Shares may or may not be subject
to vesting. Vesting shall occur, in full or in installments, upon satisfaction
of the conditions specified in the Restricted Share Agreement. The Committee may
include among such conditions the requirement that the performance of the
Company or a business unit of the Company for a specified period of one or more
years equal or exceed a target determined in advance by the Committee. The
Committee may specify that such performance shall be determined by the Company's
independent auditors. The Committee shall determine such target not later than
the 90th day of such period. In no event shall the number of Restricted Shares
which are subject to performance based vesting conditions exceed 50% of the
Restricted Shares, subject to adjustment in accordance with Section 12. A
Restricted Share Agreement may provide for accelerated vesting in the event of
the Participant's death, disability or retirement or other events. The Committee
may determine, at the time of granting Restricted Shares or thereafter, that all
or part of such Restricted Shares shall become vested in the event that a Change
in Control occurs with respect to the Company.
(d) Voting and Dividend Rights. The holders of Restricted Shares
awarded under the Plan shall have the same voting, dividend and other rights as
the Company's other stockholders. A Restricted Share Agreement, however, may
require that the holders of Restricted Shares invest any cash dividends received
in additional Restricted Shares. Such additional Restricted Shares shall be
subject to the same conditions and restrictions as the Award with respect to
which the dividends were paid.
SECTION 7. OTHER TERMS AND CONDITIONS OF AWARDS OR SALES.
(a) Duration of Offers and Nontransferability of Rights. Any right to
acquire Shares under the Plan (other than an Option) shall automatically expire
if not exercised by the Offeree 30 days after the grant of such right was
communicated to him by the Committee. Such right shall not be transferable and
shall be exercisable only by the Offeree to whom such right was granted.
(b) Purchase Price. The Purchase Price shall be determined by the
Committee at its sole discretion. The Purchase Price shall be payable in one of
the forms described in Sections 9(a), (b) or (c).
(c) Withholding Taxes. As a condition to the purchase of Shares, the
Offeree shall make such arrangements as the Committee may require for the
satisfaction of any federal, state or local withholding tax obligations that may
arise in connection with such purchase.
(d) Restrictions on Transfer of Shares. Any Shares awarded or sold
under the Plan shall be subject to such special forfeiture conditions, rights of
repurchase, rights of first refusal and other transfer restrictions as the
Committee may determine. Such restrictions shall be set forth in the applicable
Stock Purchase Agreement and shall apply in addition to any general restrictions
that may apply to all holders of Shares.
SECTION 8. TERMS AND CONDITIONS OF OPTIONS.
(a) Stock Option Agreement. Each grant of an Option under the Plan
shall be evidenced by a Stock Option Agreement between the Optionee and the
Company. Such Option shall be subject to all applicable terms and conditions of
the Plan and may be subject to any other terms and conditions which are not
inconsistent with the Plan and which the Committee deems appropriate for
inclusion in a Stock Option Agreement. The provisions of the various Stock
Option Agreements entered into under the Plan need not be identical. Options may
be granted in consideration of a reduction in the Optionee's other compensation.
A Stock Option Agreement may provide that a new Option will be granted
automatically to the Optionee when he or she exercises a prior Option and pays
the Exercise Price in a form described in Section 9(b).
(b) Number of Shares. Each Stock Option Agreement shall specify the
number of Shares that are subject to the Option and shall provide for the
adjustment of such number in accordance with Section 12. Options granted to an
Optionee in a single fiscal year of the Company shall not cover more than
200,000 Shares (subject to adjustment in accordance with Section 12).
(c) Exercise Price. Each Stock Option Agreement shall specify the
Exercise Price. The Exercise Price under any Option shall be determined by the
Committee at its sole discretion. The Exercise Price shall be payable in one of
the forms described in Section 9.
(d) Withholding Taxes. As a condition to the exercise of an Option, the
Optionee shall make such arrangements as the Committee may require for the
satisfaction of any federal, state or local withholding tax obligations that may
arise in connection with such exercise. The Optionee shall also make such
arrangements as the Committee may require for the satisfaction of any federal,
state or local withholding tax obligations that may arise in connection with the
disposition of Shares acquired by exercising an Option.
(e) Exercisability and Term. Each Stock Option Agreement shall specify
the date when all or any installment of the Option is to become exercisable. The
Stock Option Agreement shall also specify the term of the Option. A Stock Option
Agreement may provide for accelerated exercisability in the event of the
Optionee's death, disability, or retirement or other events and may provide for
expiration prior to the end of its term in the event of the termination of the
Optionee's service. Options may be awarded in combination with SARs, and such an
Award may provide that the Options will not be exercisable unless the related
SARs are forfeited. The Committee at its sole discretion shall determine when
all or any installment of an Option is to become exercisable and when an Option
is to expire.
(f) Nontransferability. During an Optionee's lifetime, his Option(s)
shall be exercisable only by him or her and shall not be transferable by
operation of law or agreement. In the event of an Optionee's death, his or her
Option(s) shall not be transferable other than by will or by the laws of descent
and distribution.
(g) Exercise of Options Upon Termination of Service. Each Stock Option
Agreement shall set forth the extent to which the Optionee shall have the right
to exercise the Option following termination of the Optionee's Service with the
Company and its Subsidiaries, and the right to exercise the Option of any
executors or administrators of the Optionee's estate or any person who has
acquired such Option(s) directly from the Optionee by bequest or inheritance.
Such provisions shall be determined in the sole discretion of the Committee,
need not be uniform among all Options issued pursuant to the Plan, and may
reflect distinctions based on the reasons for termination of Service.
(h) Effect of Change in Control. The Committee may determine, at the
time of granting an Option or thereafter, that such Option shall become
exercisable as to all or part of the Shares subject to such Option in the event
that a Change in Control occurs with respect to the Company.
(i) Leaves of Absence. An Employee's Service shall cease when such
Employee ceases to be actively employed by, or a consultant, director or adviser
to, the Company (or any subsidiary) as determined in the sole discretion of the
Board of Directors. For purposes of Options, Service does not terminate when an
Employee goes on a bona fide leave of absence, that was approved by the Company
in writing, if the terms of the leave provide for continued service crediting,
or when continued service crediting is required by applicable law. Service
terminates in any event when the approved leave ends, unless such Employee
immediately returns to active work. The Company determines which leaves count
toward Service, and when Service terminates for all purposes under the Plan.
(j) No Rights as a Stockholder. An Optionee, or a transferee of an
Optionee, shall have no rights as a stockholder with respect to any Shares
covered by his Option until the date of the issuance of a stock certificate for
such Shares. No adjustments shall be made, except as provided in Section 12.
(k) Modification, Extension and Renewal of Options. Within the
limitations of the Plan, the Committee may modify, extend or renew outstanding
options or may accept the cancellation of outstanding options (to the extent not
previously exercised), whether or not granted hereunder, in return for the grant
of new Options for the same or a different number of Shares and at the same or a
different exercise price. The foregoing notwithstanding, no modification of an
Option shall, without the consent of the Optionee, impair his rights or increase
his obligations under such Option.
(l) Restrictions on Transfer of Shares. Any Shares issued upon exercise
of an Option shall be subject to such special forfeiture conditions, rights of
repurchase, rights of first refusal and other transfer restrictions as the
Committee may determine. Such restrictions shall be set forth in the applicable
Stock Option Agreement and shall apply in addition to any general restrictions
that may apply to all holders of Shares.
(m) Buyout Provisions. The Committee may at any time (a) offer to buy
out for a payment in cash or cash equivalents an Option previously granted or
(b) authorize an Optionee to elect to cash out an Option previously granted, in
either case at such time and based upon such terms and conditions as the
Committee shall establish.
SECTION 9. PAYMENT FOR SHARES.
(a) General Rule. The entire Exercise Price of Shares issued under the
Plan shall be payable in lawful money of the United States of America at the
time when such Shares are purchased, except as provided in Sections 9(b) through
9(g) below.
(b) Surrender of Stock. At the discretion of the Company and to the
extent that a Stock Option Agreement so provides, payment may be made all or in
part by surrendering, or attesting to the ownership of, Shares which have
already been owned by the Optionee or his representative for more than 6 months.
Such Shares shall be valued at their Fair Market Value on the date when the new
Shares are purchased under the Plan. The Optionee shall not surrender, or attest
to the ownership of, Shares in payment of the Exercise Price if such action
would cause the Company to recognize compensation expense (or additional
compensation expense) with respect to the Option for financial reporting
purposes.
(c) Services Rendered. At the discretion of the Committee, Shares may
be awarded under the Plan in consideration of services rendered to the Company
or a Subsidiary prior to the award. If Shares are awarded without the payment of
a Purchase Price in cash, the Committee shall make a determination (at the time
of the award) of the value of the services rendered by the Offeree and the
sufficiency of the consideration to meet the requirements of Section 6(b).
(d) Cashless Exercise. To the extent that a Stock Option Agreement so
provides, payment may be made all or in part by delivery (on a form prescribed
by the Committee) of an irrevocable direction to a securities broker to sell
Shares and to deliver all or part of the sale proceeds to the Company in payment
of the aggregate Exercise Price.
(e) Exercise/Pledge. To the extent that a Stock Option Agreement so
provides, payment may be made all or in part by delivery (on a form prescribed
by the Committee) of an irrevocable direction to a securities broker or lender
to pledge Shares, as security for a loan, and to deliver all or part of the loan
proceeds to the Company in payment of the aggregate Exercise Price.
(f) Promissory Note. To the extent that a Stock Option Agreement so
provides, payment may be made all or in part by delivering (on a form prescribed
by the Company) a full-recourse promissory note. However, the par value of the
Common Shares being purchased under the Plan, if newly issued, shall be paid in
cash or cash equivalents. In no event will payment by promissory note be
available to persons who are considered officers or directors of the Company
under Section 16 of the Exchange Act.
(g) Other Forms of Payment. To the extent that a Stock Option Agreement
so provides, payment may be made in any other form that is consistent with
applicable laws, regulations and rules.
(h) Restrictions on Forms of Payment. Notwithstanding anything to the
contrary in the Plan or the terms of any Award, a form of payment will not be
available if the Committee determines, in its sole discretion, that such form of
payment could violate any law or regulation.
SECTION 10. STOCK APPRECIATION RIGHTS.
(a) SAR Agreement. Each grant of a SAR under the Plan shall be
evidenced by a SAR Agreement between the Optionee and the Company. Such SAR
shall be subject to all applicable terms of the Plan and may be subject to any
other terms that are not inconsistent with the Plan. The provisions of the
various SAR Agreements entered into under the Plan need not be identical. SARs
may be granted in consideration of a reduction in the Optionee's other
compensation.
(b) Number of Shares. Each SAR Agreement shall specify the number of
Shares to which the SAR pertains and shall provide for the adjustment of such
number in accordance with Section 12. SARs granted to any Optionee in a single
calendar year shall in no event pertain to more than 200,000 Shares (subject to
adjustment in accordance with Section 12). The limitations set forth in the
preceding sentence shall be subject to adjustment in accordance with Section 12.
(c) Exercise Price. Each SAR Agreement shall specify the Exercise
Price. A SAR Agreement may specify an Exercise Price that varies in accordance
with a predetermined formula while the SAR is outstanding.
(d) Exercisability and Term. Each SAR Agreement shall specify the date
when all or any installment of the SAR is to become exercisable. The SAR
Agreement shall also specify the term of the SAR. A SAR Agreement may provide
for accelerated exercisability in the event of the Optionee's death, disability
or retirement or other events and may provide for expiration prior to the end of
its term in the event of the termination of the Optionee's service. SARs may be
awarded in combination with Options, and such an Award may provide that the SARs
will not be exercisable unless the related Options are forfeited. A SAR may be
included in an Option at the time of grant or thereafter. A SAR granted under
the Plan may provide that it will be exercisable only in the event of a Change
in Control.
(e) Effect of Change in Control. The Committee may determine, at the
time of granting a SAR or thereafter, that such SAR shall become fully
exercisable as to all Common Shares subject to such SAR in the event that a
Change in Control occurs with respect to the Company.
(f) Exercise of SARs. Upon exercise of a SAR, the Optionee (or any
person having the right to exercise the SAR after his or her death) shall
receive from the Company (a) Shares, (b) cash or (c) a combination of Shares and
cash, as the Committee shall determine. The amount of cash and/or the Fair
Market Value of Shares received upon exercise of SARs shall, in the aggregate,
be equal to the amount by which the Fair Market Value (on the date of surrender)
of the Shares subject to the SARs exceeds the Exercise Price. If, on the date
when a SAR expires, the Exercise Price under such SAR is less than the Fair
Market Value on such date but any portion of such SAR has not been exercised or
surrendered, then such SAR shall automatically be deemed to be exercised as of
such date with respect to such portion.
(g) Special Holding Period. To the extent required by Section 16 of the
Exchange Act or any rule thereunder, an SAR shall not be exercised for cash
unless both it and the related Option have been outstanding for more than six
months.
(h) Special Exercise Window. To the extent required by Section 16 of
the Exchange Act or any rule thereunder, an SAR may only be exercised for cash
during a period which (a) begins on the third business day following a date when
the Company's quarterly summary statement of sales and earnings is released to
the public and (b) ends on the third business day following such date. This
Section 10(h) shall not apply if the exercise occurs automatically on the date
when the related Option expires, and the Committee may determine that it shall
not apply to limited SARs that are exercisable only in the event of a Change in
Control.
(i) Modification or Assumption of SARs. Within the limitations of the
Plan, the Committee may modify, extend or assume outstanding SARs or may accept
the cancellation of outstanding SARs (whether granted by the Company or by
another issuer) in return for the grant of new SARs for the same or a different
number of shares and at the same or a different exercise price. The foregoing
notwithstanding, no modification of a SAR may, without the consent of the
Optionee, alter or impair his or her rights or obligations under such SAR.
SECTION 11. STOCK UNITS.
(a) Stock Unit Agreement. Each grant of Stock Units under the Plan
shall be evidenced by a Stock Unit Agreement between the recipient and the
Company. Such Stock Units shall be subject to all applicable terms of the Plan
and may be subject to any other terms that are not inconsistent with the Plan.
The provisions of the various Stock Unit Agreements entered into under the Plan
need not be identical. Stock Units may be granted in consideration of a
reduction in the recipient's other compensation.
(b) Payment for Awards. To the extent that an Award is granted in the
form of Stock Units, no cash consideration shall be required of the Award
recipients.
(c) Vesting Conditions. Each Award of Stock Units may or may not be
subject to vesting. Vesting shall occur, in full or in installments, upon
satisfaction of the conditions specified in the Stock Unit Agreement. A Stock
Unit Agreement may provide for accelerated vesting in the event of the
Participant's death, disability or retirement or other events. The Committee may
determine, at the time of granting Stock Units or thereafter, that all or part
of such Stock Units shall become vested in the event that a Change in Control
occurs with respect to the Company, except as provided in the next following
sentence.
(d) Voting and Dividend Rights. The holders of Stock Units shall have
no voting rights. Prior to settlement or forfeiture, any Stock Unit awarded
under the Plan may, at the Committee's discretion, carry with it a right to
dividend equivalents. Such right entitles the holder to be credited with an
amount equal to all cash dividends paid on one Share while the Stock Unit is
outstanding. Dividend equivalents may be converted into additional Stock Units.
Settlement of dividend equivalents may be made in the form of cash, in the form
of Shares, or in a combination of both. Prior to distribution, any dividend
equivalents which are not paid shall be subject to the same conditions and
restrictions (including without limitation, any forfeiture conditions) as the
Stock Units to which they attach.
(e) Form and Time of Settlement of Stock Units. Settlement of vested
Stock Units may be made in the form of (a) cash, (b) Shares or (c) any
combination of both, as determined by the Committee. The actual number of Stock
Units eligible for settlement may be larger or smaller than the number included
in the original Award, based on predetermined performance factors. Methods of
converting Stock Units into cash may include (without limitation) a method based
on the average Fair Market Value of Shares over a series of trading days. Vested
Stock Units may be settled in a lump sum or in installments. The distribution
may occur or commence when all vesting conditions applicable to the Stock Units
have been satisfied or have lapsed, or it may be deferred to any later date. The
amount of a deferred distribution may be increased by an interest factor or by
dividend equivalents. Until an Award of Stock Units is settled, the number of
such Stock Units shall be subject to adjustment pursuant to Section 12.
(f) Death of Recipient. Any Stock Units Award that becomes payable
after the recipient's death shall be distributed to the recipient's beneficiary
or beneficiaries. Each recipient of a Stock Units Award under the Plan shall
designate one or more beneficiaries for this purpose by filing the prescribed
form with the Company. A beneficiary designation may be changed by filing the
prescribed form with the Company at any time before the Award recipient's death.
If no beneficiary was designated or if no designated beneficiary survives the
Award recipient, then any Stock Units Award that becomes payable after the
recipient's death shall be distributed to the recipient's estate.
(g) Creditors' Rights. A holder of Stock Units shall have no rights
other than those of a general creditor of the Company. Stock Units represent an
unfunded and unsecured obligation of the Company, subject to the terms and
conditions of the applicable Stock Unit Agreement.
SECTION 12. ADJUSTMENT OF SHARES.
(a) Adjustments. In the event of a subdivision of the outstanding
Stock, a declaration of a dividend payable in Shares, a declaration of a
dividend payable in a form other than Shares in an amount that has a material
effect on the price of Shares, a combination or consolidation of the outstanding
Stock (by reclassification or otherwise) into a lesser number of Shares, a
recapitalization, a spin-off or a similar occurrence, the Committee shall make
such adjustments as it, in its sole discretion, deems appropriate in one or more
of:
(i) The number of Options, SARs, Restricted Shares and Stock
Units available for future Awards under Section 5;
(ii) The limitations set forth in Sections 8(b) and 10(b);
(iii) The number of Shares covered by each outstanding Option
and SAR;
(iv) The Exercise Price under each outstanding Option and SAR;
or
(v) The number of Stock Units included in any prior Award
which has not yet been settled.
Except as provided in this Section 12, a Participant shall have no rights by
reason of any issue by the Company of stock 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 or any other increase
or decrease in the number of shares of stock of any class.
(b) Dissolution or Liquidation. To the extent not previously exercised
or settled, Options, SARs and Stock Units shall terminate immediately prior to
the dissolution or liquidation of the Company.
(c) Reorganizations. In the event that the Company is a party to a
merger or other reorganization, outstanding Awards shall be subject to the
agreement of merger or reorganization. Such agreement shall provide for:
(i) The continuation of the outstanding Awards by the Company,
if the Company is a surviving corporation;
(ii) The assumption of the outstanding Awards by the surviving
corporation or its parent or subsidiary;
(iii) The substitution by the surviving corporation or its
parent or subsidiary of its own awards for the outstanding Awards;
(iv) Full exercisability or vesting and accelerated expiration
of the outstanding Awards; or
(v) Settlement of the full value of the outstanding Awards in
cash or cash equivalents followed by cancellation of such Awards.
(d) Reservation of Rights. Except as provided in this Section 12, an
Optionee or Offeree shall have no rights by reason of any subdivision or
consolidation of shares of stock of any class, the payment of any dividend or
any other increase or decrease in the number of shares of stock of any class.
Any issue by the Company of shares of stock of any class, or securities
convertible into shares of stock of any class, shall not affect, and no
adjustment by reason thereof shall be made with respect to, the number or
Exercise Price of Shares subject to an Option. The grant of an Option pursuant
to the Plan shall not affect in any way the right or power of the Company to
make adjustments, reclassifications, reorganizations or changes of its capital
or business structure, to merge or consolidate or to dissolve, liquidate, sell
or transfer all or any part of its business or assets.
SECTION 13. DEFERRAL OF AWARDS.
The Committee (in its sole discretion) may permit or require a
Participant to (a) have cash that otherwise would be paid to such Participant as
a result of the exercise of a SAR or the settlement of Stock Units credited to a
deferred compensation account established for such Participant by the Committee
as an entry on the Company's books; (b) have Shares that otherwise would be
delivered to such Participant as a result of the exercise of an Option or SAR
converted into an equal number of Stock Units; or (c) have Shares that otherwise
would be delivered to such Participant as a result of the exercise of an Option
or SAR or the settlement of Stock Units converted into amounts credited to a
deferred compensation account established for such Participant by the Committee
as an entry on the Company's books. Such amounts shall be determined by
reference to the Fair Market Value of such Shares as of the date when they
otherwise would have been delivered to such Participant. A deferred compensation
account established under this Section 13 may be credited with interest or other
forms of investment return, as determined by the Committee. A Participant for
whom such an account is established shall have no rights other than those of a
general creditor of the Company. Such an account shall represent an unfunded and
unsecured obligation of the Company and shall be subject to the terms and
conditions of the applicable agreement between such Participant and the Company.
If the deferral or conversion of Awards is permitted or required, the Committee
(in its sole discretion) may establish rules, procedures and forms pertaining to
such Awards, including (without limitation) the settlement of deferred
compensation accounts established under this Section 13.
SECTION 14. AWARDS UNDER OTHER PLANS.
The Company may grant awards under other plans or programs. Such awards
may be settled in the form of Shares issued under this Plan. Such Shares shall
be treated for all purposes under the Plan like Shares issued in settlement of
Stock Units and shall, when issued, reduce the number of Shares available under
Section 5.
SECTION 15. PAYMENT OF DIRECTOR'S FEES IN SECURITIES.
(a) Effective Date. No provision of this Section 15 shall be effective
unless and until the Board has determined to implement such provision.
(b) Elections to Receive Options, Restricted Shares or Stock Units. An
Outside Director may elect to receive his or her annual retainer payments and/or
meeting fees from the Company in the form of cash, Options, Restricted Shares or
Stock Units, or a combination thereof, as determined by the Board. Such Options,
Restricted Shares and Stock Units shall be issued under the Plan. An election
under this Section 15 shall be filed with the Company on the prescribed form.
(c) Number and Terms of Options, Restricted Shares or Stock Units. The
number of Options, Restricted Shares or Stock Units to be granted to Outside
Directors in lieu of annual retainers and meeting fees that would otherwise be
paid in cash shall be calculated in a manner determined by the Board. The terms
of such Options, Restricted Shares or Stock Units shall also be determined by
the Board.
SECTION 16. LEGAL AND REGULATORY REQUIREMENTS.
Shares shall not be issued under the Plan unless the issuance and
delivery of such Shares complies with (or is exempt from) all applicable
requirements of law, including (without limitation) the Securities Act of 1933,
as amended, the rules and regulations promulgated thereunder, state securities
laws and regulations and the regulations of any stock exchange on which the
Company's securities may then be listed, and the Company has obtained the
approval or favorable ruling from any governmental agency which the Company
determines is necessary or advisable.
SECTION 17. WITHHOLDING TAXES.
(a) General. To the extent required by applicable federal, state, local
or foreign law, a Participant or his or her successor shall make arrangements
satisfactory to the Company for the satisfaction of any withholding tax
obligations that arise in connection with the Plan. The Company shall not be
required to issue any Shares or make any cash payment under the Plan until such
obligations are satisfied.
(b) Share Withholding. The Committee may permit a Participant to
satisfy all or part of his or her withholding or income tax obligations by
having the Company withhold all or a portion of any Shares that otherwise would
be issued to him or her or by surrendering all or a portion of any Shares that
he or she previously acquired. Such Shares shall be valued at their Fair Market
Value on the date when taxes otherwise would be withheld in cash.
SECTION 18. LIMITATION ON PARACHUTE PAYMENTS.
(a) Scope of Limitation. This Section 18 shall apply to an Award unless
the Committee, at the time of making an Award under the Plan or at any time
thereafter, specifies in writing that such Award shall not be subject to this
Section 18. If this Section 18 applies to an Award, it shall supersede any
contrary provision of the Plan or of any Award granted under the Plan.
(b) Basic Rule. In the event that the independent auditors most
recently selected by the Board (the "Auditors") determine that any payment or
transfer by the Company under the Plan to or for the benefit of a Participant (a
"Payment") would be nondeductible by the Company for federal income tax purposes
because of the provisions concerning "excess parachute payments" in Section 280G
of the Code, then the aggregate present value of all Payments shall be reduced
(but not below zero) to the Reduced Amount. For purposes of this Section 18, the
"Reduced Amount" shall be the amount, expressed as a present value, which
maximizes the aggregate present value of the Payments without causing any
Payment to be nondeductible by the Company because of Section 280G of the Code.
(c) Reduction of Payments. If the Auditors determine that any Payment
would be nondeductible by the Company because of Section 280G of the Code, then
the Company shall promptly give the Participant notice to that effect and a copy
of the detailed calculation thereof and of the Reduced Amount, and the
Participant may then elect, in his or her sole discretion, which and how much of
the Payments shall be eliminated or reduced (as long as after such election the
aggregate present value of the Payments equals the Reduced Amount) and shall
advise the Company in writing of his or her election within 10 days of receipt
of notice. If no such election is made by the Participant within such 10-day
period, then the Company may elect which and how much of the Payments shall be
eliminated or reduced (as long as after such election the aggregate present
value of the Payments equals the Reduced Amount) and shall notify the
Participant promptly of such election. For purposes of this Section 18, present
value shall be determined in accordance with Section 280G(d)(4) of the Code. All
determinations made by the Auditors under this Section 18 shall be binding upon
the Company and the Participant and shall be made within 60 days of the date
when a Payment becomes payable or transferable. As promptly as practicable
following such determination and the elections hereunder, the Company shall pay
or transfer to or for the benefit of the Participant such amounts as are then
due to him or her under the Plan and shall promptly pay or transfer to or for
the benefit of the Participant in the future such amounts as become due to him
or her under the Plan.
(d) Overpayments and Underpayments. As a result of uncertainty in the
application of Section 280G of the Code at the time of an initial determination
by the Auditors hereunder, it is possible that Payments will have been made by
the Company that should not have been made (an "Overpayment") or that additional
Payments that will not have been made by the Company could have been made (an
"Underpayment"), consistent in each case with the calculation of the Reduced
Amount hereunder. In the event that the Auditors, based upon the assertion of a
deficiency by the Internal Revenue Service against the Company or the
Participant that the Auditors believe has a high probability of success,
determine that an Overpayment has been made, such Overpayment shall be treated
for all purposes as a loan to the Participant which he or she shall repay to the
Company, together with interest at the applicable federal rate provided in
Section 7872(f)(2) of the Code; provided, however, that no amount shall be
payable by the Participant to the Company if and to the extent that such payment
would not reduce the amount subject to taxation under Section 4999 of the Code.
In the event that the Auditors determine that an Underpayment has occurred, such
Underpayment shall promptly be paid or transferred by the Company to or for the
benefit of the Participant, together with interest at the applicable federal
rate provided in Section 7872(f)(2) of the Code.
(e) Related Corporations. For purposes of this Section 18, the term
"Company" shall include affiliated corporations to the extent determined by the
Auditors in accordance with Section 280G(d)(5) of the Code.
SECTION 19. NO EMPLOYMENT RIGHTS.
No provision of the Plan, nor any right or Option granted under the
Plan, shall be construed to give any person any right to become, to be treated
as, or to remain an Employee. The Company and its Subsidiaries reserve the right
to terminate any person's Service at any time and for any reason, with or
without notice.
SECTION 20. DURATION AND AMENDMENTS.
(a) Term of the Plan. The amended and restated Plan, as set forth
herein, shall terminate automatically on the 10th anniversary of date of Plan
and may be terminated on any earlier date pursuant to Subsection (b) below.
(b) Right to Amend or Terminate the Plan. The Board of Directors may,
at any time and for any reason, amend or terminate the Plan. Rights and
obligations under any Award granted before amendment or termination of the Plan
shall not be materially impaired by such amendment or termination, except with
consent of the person to whom the Award was granted. An amendment of the Plan
shall be subject to the approval of the Company's stockholders only to the
extent required by applicable laws, regulations or rules.
(c) Effect of Amendment or Termination. No Shares shall be issued or
sold under the Plan after the termination thereof, except upon exercise of an
Option granted prior to such termination. The termination of the Plan, or any
amendment thereof, shall not affect any Share previously issued or any Option
previously granted under the Plan.
SECTION 21. EXECUTION.
To record this amendment and restatement of the Plan by the Board of
Directors effective as of October 25, 2002, the Company has caused its
authorized officer to execute the same.
Headwaters Incorporated
By /s/ Kirk A. Benson
----------------------------
Kirk A. Benson
Chief Executive Officer