EXHIBIT 10.22
THE AMENDED 1997 EQUITY PARTICIPATION PLAN
OF
GUITAR CENTER, INC.
Guitar Center, Inc., a Delaware corporation, has adopted The Amended
1997 Equity Participation Plan of Guitar Center, Inc. for the benefit of its
eligible employees, consultants and directors. The 1997 Equity Participation
Plan was adopted by the Board of Directors of the Company at a meeting duly held
on January 15, 1997, and was approved by the stockholders of the Company by
written consent dated as of January 24, 1997. The Amended 1997 Equity
Participation Plan was adopted by the Board of Directors of the Company at a
meeting duly held on February 26, 1998, and approved by the stockholders of the
Company at a meeting duly held on May 6, 1998. The Plan consists of two plans,
one for the benefit of key Employees (as such term is defined below) and
consultants and one for the benefit of Independent Directors (as such term is
defined below).
The purposes of this Plan are as follows:
(1) To provide an additional incentive for directors, key Employees
and consultants to further the growth, development and financial success of the
Company by personally benefiting through the ownership of Company stock and/or
rights which recognize such growth, development and financial success.
(2) To enable the Company to obtain and retain the services of
directors, key Employees and consultants considered essential to the long range
success of the Company by offering them an opportunity to own stock in the
Company and/or rights which will reflect the growth, development and financial
success of the Company.
ARTICLE I
DEFINITIONS
Wherever the following terms are used in this Plan they shall have the
meanings specified below, unless the context clearly indicates otherwise.
AWARD LIMIT. "Award Limit" shall mean 150,000 shares of Common Stock.
BOARD. "Board" shall mean the Board of Directors of the Company.
CHANGE IN CONTROL. "Change in Control" shall mean a change in
ownership or control of the Company effected through either of the following
transactions occurring after the adoption of this Plan:
(a) any person or related group of persons (other than the Company or
a person that directly or indirectly controls, is controlled by, or is
under common control with, the Company) directly or indirectly acquires
beneficial ownership (within the meaning of Rule 13d-3 under the Exchange
Act) of securities possessing more than fifty percent (50%) of the total
combined voting power of the Company's outstanding securities pursuant to a
tender or exchange offer made directly to the Company's stockholders which
the Board does not recommend such stockholders to accept; or
(b) there is a change in the composition of the Board over a period
of thirty-six (36) consecutive months (or less) such that a majority of the
Board members (rounded up to the nearest whole number) ceases, by reason of
one or more proxy contests for the election of Board members, to be
comprised of individuals who either (i) have been Board members
continuously since the beginning of such period or (ii) have been elected
or nominated for election as Board members during such period by at least a
majority of the Board members described in clause (i) who were still in
office at the time such election or nomination was approved by the Board.
CODE. "Code" shall mean the Internal Revenue Code of 1986, as
amended.
COMMITTEE. "Committee" shall mean the Compensation Committee of the
Board, or another committee of the Board, appointed as provided in Section 9.1.
COMMON STOCK. "Common Stock" shall mean the common stock of the
Company, par value $.01 per share, and any equity security of the Company issued
or authorized to be issued in the future, but excluding any preferred stock and
any warrants, options or other rights to purchase Common Stock. Debt securities
of the Company convertible into Common Stock shall be deemed equity securities
of the Company.
COMPANY. "Company" shall mean Guitar Center, Inc., a Delaware
corporation.
CORPORATE TRANSACTIONS. "Corporate Transaction" shall mean any of the
following stockholder-approved transactions occurring after the adoption of this
Plan to which the Company is a party:
(a) a merger or consolidation in which the Company is not the
surviving entity, except for a transaction the principal purpose of which
is to change the State in which the Company is incorporated, form a holding
company or effect a similar reorganization as to form whereupon this Plan
and all Options are assumed by the successor entity;
(b) the sale, transfer, exchange or other disposition of all or
substantially all of the assets of the Company, in complete liquidation or
dissolution of the Company in a transaction not covered by the exceptions
to clause (a), above; or
(c) any reverse merger in which the Company is the surviving entity
but in which securities possessing more than fifty percent (50%) of the
total combined voting power of the Company's outstanding securities are
transferred or issued to a person or persons different from those who held
such securities immediately prior to such merger.
CSAR. "CSAR" shall mean a Coupled Stock Appreciation Right.
DEFERRED STOCK. "Deferred Stock" shall mean Common Stock awarded
under Article VII of this Plan.
DIRECTOR. "Director" shall mean a member of the Board.
DIVIDEND EQUIVALENT. "Dividend Equivalent" shall mean a right to
receive the equivalent value (in cash or Common Stock) of dividends paid on
Common Stock, awarded under Article VII of this Plan.
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EMPLOYEE. "Employee" shall mean any officer or other employee (as
defined in accordance with Section 3401(c) of the Code) of the Company, or of
any corporation which is a Subsidiary.
EXCHANGE ACT. "Exchange Act" shall mean the Securities Exchange Act
of 1934, as amended.
FAIR MARKET VALUE. "Fair Market Value" of a share of Common Stock as
of a given date shall be (i) the closing price of a share of Common Stock on the
principal exchange on which shares of Common Stock are then trading, if any (or
as reported on any composite index which includes such principal exchange), on
the trading day previous to such date, or if shares were not traded on the
trading day previous to such date, then on the next preceding date on which a
trade occurred, or (ii) if Common Stock is not traded on an exchange but is
quoted on Nasdaq or a successor quotation system, the mean between the closing
representative bid and asked prices for the Common Stock on the trading day
previous to such date as reported by Nasdaq or such successor quotation system;
or (iii) if Common Stock is not publicly traded on an exchange and not quoted on
Nasdaq or a successor quotation system, the Fair Market Value of a share of
Common Stock as established by the Committee (or the Board, in the case of
Options granted to Independent Directors) acting in good faith.
GRANTEE. "Grantee" shall mean an Employee or consultant granted a
Performance Award, Dividend Equivalent, Stock Payment or Stock Appreciation
Right, or an award of Deferred Stock, under this Plan.
INCENTIVE STOCK OPTION. "Incentive Stock Option" shall mean an option
which conforms to the applicable provisions of Section 422 of the Code and which
is designated as an Incentive Stock Option by the Committee.
INDEPENDENT DIRECTOR. "Independent Director" shall mean a member of
the Board who is not an Employee of the Company.
INDEPENDENT DIRECTOR AFFILIATE. "Independent Director Affiliate"
shall mean, with respect to any Independent Director, any other person directly
or indirectly controlling or controlled by or under direct or indirect common
control with such Independent Director. For the purposes of this definition,
"control" when used with respect to any Independent Director means the power to
direct the employment, management, activities or policies of such person,
directly or indirectly, whether through an employment agreement, investment
agreement, stockholders agreement, ownership of voting securities, by contract
or otherwise.
ISAR. "ISAR" shall mean an Independent Stock Appreciation Right.
NON-QUALIFIED STOCK OPTION. "Non-Qualified Stock Option" shall mean
an Option which is not designated as an Incentive Stock Option by the Committee.
OPTION. "Option" shall mean a stock option granted under Article III
of this Plan. An Option granted under this Plan shall, as determined by the
Committee, be either a Non-Qualified Stock Option or an Incentive Stock Option;
PROVIDED, HOWEVER, that Options granted to Independent Directors and consultants
shall be Non-Qualified Stock Options.
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OPTIONEE. "Optionee" shall mean an Employee, consultant or
Independent Director granted an Option under this Plan.
PERFORMANCE AWARD. "Performance Award" shall mean a cash bonus, stock
bonus or other performance or incentive award that is paid in cash, Common Stock
or a combination of both, awarded under Article VII of this Plan.
PLAN. "Plan" shall mean The 1997 Equity Participation Plan of Guitar
Center, Inc.
QDRO. "QDRO" shall mean a qualified domestic relations order as
defined by the Code or Title I of the Employee Retirement Income Security Act of
1974, as amended, or the rules thereunder.
RESTRICTED STOCK. "Restricted Stock" shall mean Common Stock awarded
under Article VI of this Plan.
RESTRICTED STOCKHOLDER. "Restricted Stockholder" shall mean an
Employee or consultant granted an award of Restricted Stock under Article VI of
this Plan.
RULE 16B-3. "Rule 16b-3" shall mean that certain Rule 16b-3 under the
Exchange Act, as such Rule may be amended from time to time.
STOCK APPRECIATION RIGHT. "Stock Appreciation Right" shall mean a
stock appreciation right granted under Article VIII of this Plan.
STOCK PAYMENT. "Stock Payment" shall mean (i) a payment in the form
of shares of Common Stock, or (ii) an option or other right to purchase shares
of Common Stock, as part of a deferred compensation arrangement, made in lieu of
all or any portion of the compensation, including without limitation, salary,
bonuses and commissions, that would otherwise become payable to a key Employee
or consultant in cash, awarded under Article VII of this Plan.
SUBSIDIARY. "Subsidiary" shall mean any corporation in an unbroken
chain of corporations beginning with the Company if each of the corporations
other than the last corporation in the unbroken chain then owns stock possessing
50 percent or more of the total combined voting power of all classes of stock in
one of the other corporations in such chain.
TERMINATION OF CONSULTANCY. "Termination of Consultancy" shall mean
the time when the engagement of an Optionee, Grantee or Restricted Stockholder
as a consultant to the Company or a Subsidiary is terminated for any reason,
with or without cause and with or without notice, including, but not by way of
limitation, by resignation, discharge, death or retirement; but excluding
terminations where there is a simultaneous commencement of employment with the
Company or any Subsidiary. The Committee, in its absolute discretion, shall
determine the effect of all matters and questions relating to Termination of
Consultancy, including, but not by way of limitation, the question of whether a
Termination of Consultancy resulted from a discharge for good cause, and all
questions of whether particular leaves of absence constitute Terminations of
Consultancy. Notwithstanding any other provision of this Plan, the Company or
any Subsidiary has an absolute and unrestricted right to terminate a
consultant's service at any time for any reason whatsoever, with or without
cause and with or without notice, except to the extent expressly provided
otherwise in writing.
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TERMINATION OF DIRECTORSHIP. "Termination of Directorship" shall mean
the time when an Optionee who is an Independent Director ceases to be a Director
for any reason, including, but not by way of limitation, a termination by
resignation, failure to be elected, death or retirement. The Board, in its sole
and absolute discretion, shall determine the effect of all matters and questions
relating to Termination of Directorship with respect to Independent Directors.
TERMINATION OF EMPLOYMENT. "Termination of Employment" shall mean the
time when the employee-employer relationship between an Optionee, Grantee or
Restricted Stockholder and the Company or any Subsidiary is terminated for any
reason, with or without cause and with or without notice, including, but not by
way of limitation, a termination by resignation, discharge, death, disability or
retirement; but excluding (i) terminations where there is a simultaneous
reemployment or continuing employment of an Optionee, Grantee or Restricted
Stockholder by the Company or any Subsidiary, (ii) at the discretion of the
Committee, terminations which result in a temporary severance of the
employee-employer relationship, and (iii) at the discretion of the Committee,
terminations which are followed by the simultaneous establishment of a
consulting relationship by the Company or a Subsidiary with the former employee.
The Committee, in its absolute discretion, shall determine the effect of all
matters and questions relating to Termination of Employment, including, but not
by way of limitation, the question of whether a Termination of Employment
resulted from a discharge for good cause, and all questions of whether
particular leaves of absence constitute Terminations of Employment; PROVIDED,
HOWEVER, that, unless otherwise determined by the Committee in its discretion, a
leave of absence, change in status from an employee to an independent contractor
or other change in the employee-employer relationship shall constitute a
Termination of Employment if, and to the extent that, such leave of absence,
change in status or other change interrupts employment for the purposes of
Section 422(a)(2) of the Code and the then applicable regulations and revenue
rulings under said Section. Notwithstanding any other provision of this Plan,
the Company or any Subsidiary has an absolute and unrestricted right to
terminate an Employee's employment at any time for any reason whatsoever, with
or without cause and with or without notice, except to the extent expressly
provided otherwise in writing.
ARTICLE II
SHARES SUBJECT TO PLAN
2.1 SHARES SUBJECT TO PLAN.
(a) The shares of stock subject to Options, awards of Restricted
Stock, Performance Awards, Dividend Equivalents, awards of Deferred Stock, Stock
Payments or Stock Appreciation Rights shall be Common Stock, initially shares of
the Company's Common Stock, par value $.01 per share. The aggregate number of
such shares which may be issued upon exercise of such options or rights or upon
any such awards under the Plan shall not exceed One Million Three Hundred
Seventy-Five Thousand (1,375,000). The shares of Common Stock issuable upon
exercise of such options or rights or upon any such awards may be either
previously authorized but unissued shares or treasury shares.
(b) The maximum number of shares which may be subject to Options or
Stock Appreciation Rights granted under the Plan to any individual in any
calendar year shall not exceed the Award Limit. To the extent required by
Section 162(m) of the Code, shares subject to Options which are canceled
continue to be counted against the Award Limit and if, after grant of an Option,
the price of shares subject to such Option is reduced, the transaction is
treated as a cancellation of the Option and
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a grant of a new Option and both the Option deemed to be canceled and the
Option deemed to be granted are counted against the Award Limit.
Furthermore, to the extent required by Section 162(m) of the Code, if, after
grant of a Stock Appreciation Right, the base amount on which stock
appreciation is calculated is reduced to reflect a reduction in the Fair
Market Value of the Company's Common Stock, the transaction is treated as a
cancellation of the Stock Appreciation Right and a grant of a new Stock
Appreciation Right and both the Stock Appreciation Right deemed to be
canceled and the Stock Appreciation Right deemed to be granted are counted
against the Award Limit.
2.2 ADD-BACK OF OPTIONS AND OTHER RIGHTS. If any Option, or other
right to acquire shares of Common Stock under any other award under this Plan,
expires or is canceled without having been fully exercised, or is exercised in
whole or in part for cash as permitted by this Plan, the number of shares
subject to such Option or other right but as to which such Option or other right
was not exercised prior to its expiration, cancellation or exercise may again be
optioned, granted or awarded hereunder, subject to the limitations of Section
2.1. Furthermore, any shares subject to Options or other awards which are
adjusted pursuant to Section 10.3 and become exercisable with respect to shares
of stock of another corporation shall be considered cancelled and may again be
optioned, granted or awarded hereunder, subject to the limitations of Section
2.1. Shares of Common Stock which are delivered by the Optionee or Grantee or
withheld by the Company upon the exercise of any Option or other award under
this Plan, in payment of the exercise price thereof, may again be optioned,
granted or awarded hereunder, subject to the limitations of Section 2.1. If any
share of Restricted Stock is forfeited by the Grantee or repurchased by the
Company pursuant to Section 6.6 hereof, such share may again be optioned,
granted or awarded hereunder, subject to the limitations of Section 2.1.
Notwithstanding the provisions of this Section 2.2, no shares of Common Stock
may again be optioned, granted or awarded if such action would cause an
Incentive Stock Option to fail to qualify as an incentive stock option under
Section 422 of the Code.
ARTICLE III
GRANTING OF OPTIONS
3.1 ELIGIBILITY. Any Employee or consultant selected by the
Committee pursuant to Section 3.4(a)(i) shall be eligible to be granted an
Option. Each Independent Director of the Company shall be eligible to be
granted Options at the times and in the manner set forth in Section 3.4(a)(i) or
3.4(d).
3.2 DISQUALIFICATION FOR STOCK OWNERSHIP. No person may be granted
an Incentive Stock Option under this Plan if such person, at the time the
Incentive Stock Option is granted, owns stock possessing more than ten percent
(10%) of the total combined voting power of all classes of stock of the Company
or any then existing Subsidiary or parent corporation (within the meaning of
Section 422 of the Code) unless such Incentive Stock Option conforms to the
applicable provisions of Section 422 of the Code.
3.3 QUALIFICATION OF INCENTIVE STOCK OPTIONS. No Incentive Stock
Option shall be granted to any person who is not an Employee.
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3.4 GRANTING OF OPTIONS
(a) The Committee (or the Board, with respect to an Option granted to
an Independent Director) shall from time to time, in its absolute discretion,
and subject to applicable limitations of this Plan:
(i) Determine which Employees are key Employees and select from
among the key Employees or consultants (including Employees or consultants
who have previously received Options or other awards under this Plan) such
of them as in its opinion should be granted Options and determine which
Independent Directors, if any, should, in its opinion, be granted Options;
(ii) Subject to the Award Limit, determine the number of shares
to be subject to such Options granted to the selected key Employees,
consultants or Independent Directors;
(iii) Subject to Section 3.3, determine whether such Options
are to be Incentive Stock Options or Non-Qualified Stock Options and
whether such Options are to qualify as performance-based compensation as
described in Section 162(m)(4)(C) of the Code; and
(iv) Determine the terms and conditions of such Options,
consistent with this Plan; PROVIDED, HOWEVER, that the terms and conditions
of Options intended to qualify as performance-based compensation as
described in Section 162(m)(4)(C) of the Code shall include, but not be
limited to, such terms and conditions as may be necessary to meet the
applicable provisions of Section 162(m) of the Code.
(b) Upon the selection of a key Employee, consultant or Independent
Director to be granted an Option, the Committee (or the Board, with respect to
an Option granted to an Independent Director) shall instruct the Secretary of
the Company to issue the Option and may impose such conditions on the grant of
the Option as it deems appropriate. Without limiting the generality of the
preceding sentence, (x) the Board may, in its discretion and on such terms as it
deems appropriate, provide that an Option granted to any Independent Director
shall be in addition to or in lieu of an Option that may be or has been granted
to such Independent Director pursuant to Section 3.4(d) hereof, or (y) the
Committee (or the Board, with respect to an Option granted to an Independent
Director) may, in its discretion and on such terms as it deems appropriate,
require as a condition on the grant of an Option to an Employee, consultant or
Independent Director that the Employee, consultant or Independent Director
surrender for cancellation some or all of the unexercised Options, awards of
Restricted Stock or Deferred Stock, Performance Awards, Stock Appreciation
Rights, Dividend Equivalents or Stock Payments or other rights which have been
previously granted to him under this Plan or otherwise. An Option, the grant of
which is conditioned upon such surrender, may have an option price equal to or
higher (but not lower) than the exercise price of such surrendered Option or
other award, may cover the same (or a lesser or greater) number of shares as
such surrendered Option or other award, may contain such other terms as the
Committee deems appropriate, and shall be exercisable in accordance with its
terms, without regard to the number of shares, exercise period or any other term
or condition of such surrendered Option or other award; it being understood that
an Option, the grant of which is conditioned on such surrender, shall not have
an exercise price that is less than the exercise price of the Option
surrendered.
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(c) Any Incentive Stock Option granted under this Plan may be
modified by the Committee to disqualify such option from treatment as an
"incentive stock option" under Section 422 of the Code.
(d) During the term of the Plan, (i) a person who is initially
elected to the Board after the consummation of the initial public offering of
Common Stock and who is an Independent Director at the time of such initial
election automatically shall be granted an Option to purchase 15,000 shares of
Common Stock (subject to adjustment as provided in Section 10.3) on the date of
such initial election, and (ii) a person who is re-elected to the Board after
the consummation of the initial public offering of Common Stock and who is an
Independent Director at the time of such re-election automatically shall be
granted an Option to purchase 5,000 shares of Common Stock (subject to
adjustment as provided in Section 10.3) on the date of each annual meeting of
stockholders at which the Independent Director is re-elected to the Board.
Notwithstanding the first sentence of this paragraph (d), no grant shall be made
to an Independent Director pursuant to clause (i) of such sentence if: (x) an
Independent Director Affiliate of such Independent Director served on the Board
within the twelve-month period prior to the initial election of such Independent
Director and if such Independent Director Affiliate is not a member of the Board
at the time of initial election of such Independent Director, or (y) such
Independent Director is an employee of the Company who subsequently retires from
the Company and remains on the Board. Notwithstanding the first sentence of
this paragraph (d), no grant shall be made to an Independent Director pursuant
to clause (ii) of such sentence if such Independent Director was initially
elected to the Board within 120 days of such annual meeting of stockholders.
All the foregoing Option grants authorized by this Section 3.4(d) are subject to
stockholder approval of the Plan.
ARTICLE IV
TERMS OF OPTIONS
4.1 OPTION AGREEMENT. Each Option shall be evidenced by a written
Stock Option Agreement, which shall be executed by the Optionee and an
authorized officer of the Company and which shall contain such terms and
conditions as the Committee (or the Board, in the case of Options granted to
Independent Directors) shall determine, consistent with this Plan. Stock Option
Agreements evidencing Options intended to qualify as performance-based
compensation as described in Section 162(m)(4)(C) of the Code shall contain such
terms and conditions as may be necessary to meet the applicable provisions of
Section 162(m) of the Code. Stock Option Agreements evidencing Incentive Stock
Options shall contain such terms and conditions as may be necessary to meet the
applicable provisions of Section 422 of the Code.
4.2 OPTION PRICE. The price per share of the shares subject to each
Option shall be set by the Committee; PROVIDED, HOWEVER, that such price shall
be no less than 100% of the Fair Market Value of a share of Common Stock on the
date the Option is granted, and, in the case of Incentive Stock Options granted
to an individual then owning (within the meaning of Section 424(d) of the Code)
more than 10% of the total combined voting power of all classes of stock of the
Company or any Subsidiary or parent corporation thereof (within the meaning of
Section 422 of the Code) such price shall not be less than 110% of the Fair
Market Value of a share of Common Stock on the date the Option is granted.
4.3 OPTION TERM. The term of an Option shall be set by the Committee
in its discretion; PROVIDED, HOWEVER, that, (i) in the case of Options granted
to Independent Directors, the term shall be ten (10) years from the date the
Option is granted, without variation or acceleration hereunder,
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but subject to Section 5.6, (ii) in the case of Incentive Stock Options, the
term shall not be more than ten (10) years from the date the Incentive Stock
Option is granted, or five (5) years from such date if the Incentive Stock
Option is granted to an individual then owning (within the meaning of Section
424(d) of the Code) more than 10% of the total combined voting power of all
classes of stock of the Company or any Subsidiary or parent corporation
thereof (within the meaning of Section 422 of the Code), and (iii) in the
case of Non-Qualified Stock Options, the term shall not be more than ten (10)
years from the date the Non-Qualified Stock Option is granted. Except as
limited by requirements of Section 422 of the Code and regulations and
rulings thereunder applicable to Incentive Stock Options, the Committee may
extend the term of any outstanding Option in connection with any Termination
of Employment or Termination of Consultancy of the Optionee, or amend any
other term or condition of such Option relating to such a termination.
4.4 OPTION VESTING
(a) The period during which the right to exercise an Option in whole
or in part vests in the Optionee shall be set by the Committee in its sole and
absolute discretion and the Committee may determine that an Option may not be
exercised in whole or in part for a specified period after it is granted;
PROVIDED, HOWEVER, that, unless the Committee otherwise provides in the terms of
the Option or otherwise, no Option shall be exercisable by any Optionee who is
then subject to Section 16 of the Exchange Act within the period ending six
months and one day after the date the Option is granted; and PROVIDED, FURTHER,
that Options granted to Independent Directors pursuant to Section 3.4(d) shall
become exercisable in cumulative annual installments of 33-1/3% on each of the
first, second and third anniversaries of the date of Option grant, without
variation or acceleration hereunder except as provided in Section 10.3(b). At
any time after grant of an Option, the Committee may, in its sole and absolute
discretion and subject to whatever terms and conditions it selects, accelerate
the period during which an Option (except an Option granted to an Independent
Director) vests.
(b) No portion of an Option which is unexercisable at Termination of
Employment, Termination of Directorship or Termination of Consultancy, as
applicable, shall thereafter become exercisable, except as may be otherwise
provided by the Committee in the case of Options granted to Employees or
consultants either in the Stock Option Agreement or by action of the Committee
following the grant of the Option.
(c) To the extent that the aggregate Fair Market Value of stock with
respect to which "incentive stock options" (within the meaning of Section 422 of
the Code, but without regard to Section 422(d) of the Code) are exercisable for
the first time by an Optionee during any calendar year (under the Plan and all
other incentive stock option plans of the Company and any Subsidiary) exceeds
$100,000, such Options shall for all purposes be treated as Non-Qualified
Options to the extent required by Section 422 of the Code. The rule set forth
in the preceding sentence shall be applied by taking Options into account in the
order in which they were granted. For purposes of this Section 4.4(c), the Fair
Market Value of stock shall be determined as of the time the Option with respect
to such stock is granted.
4.5 CONSIDERATION. In consideration of the granting of an Option,
the Optionee shall agree, in the written Stock Option Agreement, to remain in
the employ of (or to consult for or to serve as an Independent Director of, as
applicable) the Company or any Subsidiary for a period of at least one year (or
such shorter period as may be fixed in the Stock Option Agreement or by action
of the Committee following grant of the Option) after the Option is granted (or,
in the case of an Independent Director, until the next annual meeting of
stockholders of the Company). Nothing in this Plan or in any
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Stock Option Agreement hereunder shall confer upon any Optionee any right to
continue in the employ of, or as a consultant for, the Company or any
Subsidiary, or as a director of the Company, or shall interfere with or
restrict in any way the rights of the Company and any Subsidiary, which are
hereby expressly reserved, to discharge any Optionee at any time for any
reason whatsoever, with or without cause and with or without notice.
ARTICLE V
EXERCISE OF OPTIONS
5.1 PARTIAL EXERCISE. An exercisable Option may be exercised in
whole or in part. However, an Option shall not be exercisable with respect to
fractional shares and the Committee (or the Board, in the case of Options
granted to Independent Directors) may require that, by the terms of the Option,
a partial exercise be with respect to a minimum number of shares.
5.2 MANNER OF EXERCISE. All or a portion of an exercisable Option
shall be deemed exercised upon delivery of all of the following to the Secretary
of the Company or his office:
(a) A written notice complying with the applicable rules established
by the Committee (or the Board, in the case of Options granted to Independent
Directors) stating that the Option, or a portion thereof, is exercised. The
notice shall be signed by the Optionee or other person then entitled to exercise
the Option or such portion;
(b) Such representations and documents as the Committee (or the
Board, in the case of Options granted to Independent Directors), in its absolute
discretion, deems necessary or advisable to effect compliance with all
applicable provisions of the Securities Act of 1933, as amended, and any other
federal or state securities laws or regulations. The Committee or Board may, in
its absolute discretion, also take whatever additional actions it deems
appropriate to effect such compliance including, without limitation, placing
legends on share certificates and issuing stop-transfer notices to agents and
registrars;
(c) In the event that the Option shall be exercised pursuant to
Section 10.1 by any person or persons other than the Optionee, appropriate proof
of the right of such person or persons to exercise the Option; and
(d) Full cash payment to the Secretary of the Company for the shares
with respect to which the Option, or portion thereof, is exercised. However,
the Committee (or the Board, in the case of Options granted to Independent
Directors), may in its discretion (i) allow a delay in payment up to thirty (30)
days from the date the Option, or portion thereof, is exercised; (ii) allow
payment, in whole or in part, through the delivery of shares of Common Stock
owned by the Optionee, duly endorsed for transfer to the Company with a Fair
Market Value on the date of delivery equal to the aggregate exercise price of
the Option or exercised portion thereof; (iii) allow payment, in whole or in
part, through the delivery of property of any kind which constitutes good and
valuable consideration; (iv) allow payment, in whole or in part, through the
delivery of a full recourse promissory note bearing interest (at no less than
such rate as shall then preclude the imputation of interest under the Code) and
payable upon such terms as may be prescribed by the Committee or the Board; (v)
allow payment, in whole or in part, through the delivery of a notice that the
Optionee has placed a market sell order with a broker with respect to shares of
Common Stock then issuable upon exercise of the Option, and that the broker has
been directed to pay a sufficient portion of the net proceeds of the sale to the
Company in satisfaction
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of the Option exercise price; or (vi) allow payment through any combination
of the consideration provided in the foregoing subparagraphs (ii), (iii),
(iv) and (v). In the case of a promissory note, the Committee (or the Board,
in the case of Options granted to Independent Directors) may also prescribe
the form of such note and the security to be given for such note. The Option
may not be exercised, however, by delivery of a promissory note or by a loan
from the Company when or where such loan or other extension of credit is
prohibited by law.
5.3 CONDITIONS TO ISSUANCE OF STOCK CERTIFICATES. The Company shall
not be required to issue or deliver any certificate or certificates for shares
of stock purchased upon the exercise of any Option or portion thereof prior to
fulfillment of all of the following conditions:
(a) The admission of such shares to listing on all stock exchanges or
quotation systems on which such class of stock is then listed or admitted for
quotation, as the case may be;
(b) The completion of any registration or other qualification of such
shares under any state or federal law, or under the rulings or regulations of
the Securities and Exchange Commission or any other governmental regulatory body
which the Committee or Board shall, in its absolute discretion, deem necessary
or advisable;
(c) The obtaining of any approval or other clearance from any state
or federal governmental agency which the Committee (or Board, in the case of
Options granted to Independent Directors) shall, in its absolute discretion,
determine to be necessary or advisable;
(d) The lapse of such reasonable period of time following the
exercise of the Option as the Committee (or Board, in the case of Options
granted to Independent Directors) may establish from time to time for reasons of
administrative convenience; and
(e) The receipt by the Company of full payment for such shares,
including payment of any applicable withholding tax.
5.4 RIGHTS AS STOCKHOLDERS. The holders of Options shall not be, nor
have any of the rights or privileges of, stockholders of the Company in respect
of any shares purchasable upon the exercise of any part of an Option unless and
until certificates representing such shares have been issued by the Company to
such holders.
5.5 OWNERSHIP AND TRANSFER RESTRICTIONS. The Committee (or Board, in
the case of Options granted to Independent Directors), in its absolute
discretion, may impose such restrictions on the ownership and transferability of
the shares purchasable upon the exercise of an Option as it deems appropriate.
Any such restriction shall be set forth in the respective Stock Option Agreement
and may be referred to on the certificates evidencing such shares. The
Committee may require the Employee to give the Company prompt notice of any
disposition of shares of Common Stock acquired by exercise of an Incentive Stock
Option within (i) two years from the date of granting such Option to such
Employee or (ii) one year after the transfer of such shares to such Employee.
The Committee may direct that the certificates evidencing shares acquired by
exercise of an Option refer to such requirement to give prompt notice of
disposition.
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5.6 LIMITATIONS ON EXERCISE OF OPTIONS GRANTED TO INDEPENDENT
DIRECTORS. No Option granted to an Independent Director may be exercised to
any extent by anyone after the first to occur of the following events:
(a) The expiration of twelve (12) months from the date of the
Optionee's death;
(b) the expiration of twelve (12) months from the date of the
Optionee's Termination of Directorship by reason of his permanent and total
disability (within the meaning of Section 22(e)(3) of the Code);
(c) the expiration of three (3) months from the date of the
Optionee's Termination of Directorship for any reason other than such
Optionee's death or his permanent and total disability, unless the Optionee
dies within said three-month period; or
(d) The expiration of ten years from the date the Option was granted.
ARTICLE VI
AWARD OF RESTRICTED STOCK
6.1 AWARD OF RESTRICTED STOCK
(a) The Committee may from time to time, in its absolute
discretion:
(i) Select from among the key Employees or consultants
(including Employees or consultants who have previously received other
awards under this Plan) such of them as in its opinion should be awarded
Restricted Stock; and
(ii) Determine the purchase price, if any, and other terms and
conditions applicable to such Restricted Stock, consistent with this Plan.
(b) The Committee shall establish the purchase price, if any, and
form of payment for Restricted Stock; PROVIDED, HOWEVER, that such purchase
price per share shall be no less than the par value of the Common Stock to be
purchased, unless otherwise permitted by applicable state law. In all cases,
legal consideration shall be required for each issuance of Restricted Stock.
(c) Upon the selection of a key Employee or consultant to be
awarded Restricted Stock, the Committee shall instruct the Secretary of the
Company to issue such Restricted Stock and may impose such conditions on the
issuance of such Restricted Stock as it deems appropriate.
6.2 RESTRICTED STOCK AGREEMENT. Restricted Stock shall be issued
only pursuant to a written Restricted Stock Agreement, which shall be
executed by the selected key Employee or consultant and an authorized officer
of the Company and which shall contain such terms and conditions as the
Committee shall determine, consistent with this Plan.
6.3 CONSIDERATION. As consideration for the issuance of
Restricted Stock, in addition to payment of any purchase price, the
Restricted Stockholder shall agree, in the written Restricted Stock
Agreement, to remain in the employ of, or to consult for, the Company or any
Subsidiary for a period
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of at least one year after the Restricted Stock is issued (or such shorter
period as may be fixed in the Restricted Stock Agreement or by action of the
Committee following grant of the Restricted Stock). Nothing in this Plan or
in any Restricted Stock Agreement hereunder shall confer on any Restricted
Stockholder any right to continue in the employ of, or as a consultant for,
the Company or any Subsidiary or shall interfere with or restrict in any way
the rights of the Company and any Subsidiary, which are hereby expressly
reserved, to discharge any Restricted Stockholder at any time for any reason
whatsoever, with or without cause and with or without notice.
6.4 RIGHTS AS STOCKHOLDERS. Upon delivery of the shares of
Restricted Stock to the escrow holder pursuant to Section 6.7, the Restricted
Stockholder shall have, unless otherwise provided by the Committee, all the
rights of a stockholder with respect to said shares, subject to the
restrictions in his Restricted Stock Agreement, including the right to
receive all dividends and other distributions paid or made with respect to
the shares; PROVIDED, HOWEVER, that in the discretion of the Committee, any
extraordinary distributions with respect to the Common Stock shall be subject
to the restrictions set forth in Section 6.5.
6.5 RESTRICTIONS. All shares of Restricted Stock issued under
this Plan (including any shares received by holders thereof with respect to
shares of Restricted Stock as a result of stock dividends, stock splits or
any other form of recapitalization) shall, in the terms of each individual
Restricted Stock Agreement, be subject to such restrictions as the Committee
shall provide, which restrictions may include, without limitation,
restrictions concerning voting rights and transferability and restrictions
based on duration of employment with the Company, Company performance and
individual performance; PROVIDED, HOWEVER, that, unless the Committee
otherwise provides in the terms of the Restricted Stock Agreement or
otherwise, no share of Restricted Stock granted to a person subject to
Section 16 of the Exchange Act shall be sold, assigned or otherwise
transferred until at least six months and one day have elapsed from the date
on which the Restricted Stock was issued, and PROVIDED, FURTHER, that by
action taken after the Restricted Stock is issued, the Committee may, on such
terms and conditions as it may determine to be appropriate, remove any or all
of the restrictions imposed by the terms of the Restricted Stock Agreement.
Restricted Stock may not be sold or encumbered until all restrictions are
terminated or expire. Unless provided otherwise by the Committee, if no
consideration was paid by the Restricted Stockholder upon issuance, a
Restricted Stockholder's rights in unvested Restricted Stock shall lapse upon
Termination of Employment or, if applicable, upon Termination of Consultancy
with the Company.
6.6 REPURCHASE OF RESTRICTED STOCK. The Committee shall provide
in the terms of each individual Restricted Stock Agreement that the Company
shall have the right to repurchase from the Restricted Stockholder the
Restricted Stock then subject to restrictions under the Restricted Stock
Agreement immediately upon a Termination of Employment or, if applicable,
upon a Termination of Consultancy between the Restricted Stockholder and the
Company, at a cash price per share equal to the price paid by the Restricted
Stockholder for such Restricted Stock; PROVIDED, HOWEVER, that provision may
be made that no such right of repurchase shall exist in the event of a
Termination of Employment or Termination of Consultancy without cause, or
following a change in control of the Company or because of the Restricted
Stockholder's retirement, death or disability, or otherwise.
6.7 ESCROW. The Secretary of the Company or such other escrow
holder as the Committee may appoint shall retain physical custody of each
certificate representing Restricted Stock until all of the restrictions
imposed under the Restricted Stock Agreement with respect to the shares
evidenced by such certificate expire or shall have been removed.
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6.8 LEGEND. In order to enforce the restrictions imposed upon
shares of Restricted Stock hereunder, the Committee shall cause a legend or
legends to be placed on certificates representing all shares of Restricted
Stock that are still subject to restrictions under Restricted Stock
Agreements, which legend or legends shall make appropriate reference to the
conditions imposed thereby.
ARTICLE VII
PERFORMANCE AWARDS, DIVIDEND EQUIVALENTS,
DEFERRED STOCK, STOCK PAYMENTS
7.1 PERFORMANCE AWARDS. Any key Employee or consultant selected
by the Committee may be granted one or more Performance Awards. The value of
such Performance Awards may be linked to the market value, book value, net
profits or other measure of the value of Common Stock or other specific
performance criteria determined appropriate by the Committee, in each case on
a specified date or dates or over any period or periods determined by the
Committee, or may be based upon the appreciation in the market value, book
value, net profits or other measure of the value of a specified number of
shares of Common Stock over a fixed period or periods determined by the
Committee. In making such determinations, the Committee shall consider
(among such other factors as it deems relevant in light of the specific type
of award) the contributions, responsibilities and other compensation of the
particular key Employee or consultant.
7.2 DIVIDEND EQUIVALENTS. Any key Employee or consultant selected
by the Committee may be granted Dividend Equivalents based on the dividends
declared on Common Stock, to be credited as of dividend payment dates, during
the period between the date an Option, Stock Appreciation Right, Deferred
Stock or Performance Award is granted, and the date such Option, Stock
Appreciation Right, Deferred Stock or Performance Award is exercised, vests
or expires, as determined by the Committee. Such Dividend Equivalents shall
be converted to cash or additional shares of Common Stock by such formula and
at such time and subject to such limitations as may be determined by the
Committee. With respect to Dividend Equivalents granted with respect to
Options intended to be qualified performance-based compensation for purposes
of Section 162(m) of the Code, such Dividend Equivalents shall be payable
regardless of whether such Option is exercised.
7.3 STOCK PAYMENTS. Any key Employee or consultant selected by
the Committee may receive Stock Payments in the manner determined from time
to time by the Committee. The number of shares shall be determined by the
Committee and may be based upon the Fair Market Value, book value, net
profits or other measure of the value of Common Stock or other specific
performance criteria determined appropriate by the Committee, determined on
the date such Stock Payment is made or on any date thereafter.
7.4 DEFERRED STOCK. Any key Employee or consultant selected by
the Committee may be granted an award of Deferred Stock in the manner
determined from time to time by the Committee. The number of shares of
Deferred Stock shall be determined by the Committee and may be linked to the
market value, book value, net profits or other measure of the value of Common
Stock or other specific performance criteria determined to be appropriate by
the Committee, in each case on a specified date or dates or over any period
or periods determined by the Committee. Common Stock underlying a Deferred
Stock award will not be issued until the Deferred Stock award has vested,
pursuant to a vesting schedule or performance criteria set by the Committee.
Unless otherwise provided by the Committee, a Grantee of Deferred Stock shall
have no rights as a Company stockholder with respect to
14
such Deferred Stock until such time as the award has vested and the Common
Stock underlying the award has been issued.
7.5 PERFORMANCE AWARD AGREEMENT, DIVIDEND EQUIVALENT AGREEMENT,
DEFERRED STOCK AGREEMENT, STOCK PAYMENT AGREEMENT. Each Performance Award,
Dividend Equivalent, award of Deferred Stock and/or Stock Payment shall be
evidenced by a written agreement, which shall be executed by the Grantee and
an authorized Officer of the Company and which shall contain such terms and
conditions as the Committee shall determine, consistent with this Plan.
7.6 TERM. The term of a Performance Award, Dividend Equivalent,
award of Deferred Stock and/or Stock Payment shall be set by the Committee in
its discretion.
7.7 EXERCISE UPON TERMINATION OF EMPLOYMENT. A Performance Award,
Dividend Equivalent, award of Deferred Stock and/or Stock Payment is
exercisable or payable only while the Grantee is an Employee or consultant;
PROVIDED that the Committee may determine that the Performance Award,
Dividend Equivalent, award of Deferred Stock and/or Stock Payment may be
exercised or paid subsequent to Termination of Employment or Termination of
Consultancy without cause, or following a change in control of the Company,
or because of the Grantee's retirement, death or disability, or otherwise.
7.8 PAYMENT ON EXERCISE. Payment of the amount determined under
Section 7.1 or 7.2 above shall be in cash, in Common Stock or a combination
of both, as determined by the Committee. To the extent any payment under
this Article VII is effected in Common Stock, it shall be made subject to
satisfaction of all provisions of Section 5.3.
7.9 CONSIDERATION. In consideration of the granting of a
Performance Award, Dividend Equivalent, award of Deferred Stock and/or Stock
Payment, the Grantee shall agree, in a written agreement, to remain in the
employ of, or to consult for, the Company or any Subsidiary for a period of
at least one year after such Performance Award, Dividend Equivalent, award of
Deferred Stock and/or Stock Payment is granted (or such shorter period as may
be fixed in such agreement or by action of the Committee following such
grant). Nothing in this Plan or in any agreement hereunder shall confer on
any Grantee any right to continue in the employ of, or as a consultant for,
the Company or any Subsidiary or shall interfere with or restrict in any way
the rights of the Company and any Subsidiary, which are hereby expressly
reserved, to discharge any Grantee at any time for any reason whatsoever,
with or without cause and with or without notice.
ARTICLE VIII
STOCK APPRECIATION RIGHTS
8.1 GRANT OF STOCK APPRECIATION RIGHTS. A Stock Appreciation
Right may be granted to any key Employee or consultant selected by the
Committee. A Stock Appreciation Right may be granted (i) in connection and
simultaneously with the grant of an Option, (ii) with respect to a previously
granted Option, or (iii) independent of an Option. A Stock Appreciation
Right shall be subject to such terms and conditions not inconsistent with
this Plan as the Committee shall impose and shall be evidenced by a written
Stock Appreciation Right Agreement, which shall be executed by the Grantee
and an authorized officer of the Company. The Committee, in its discretion,
may determine whether a Stock Appreciation Right is to qualify as
performance-based compensation as described in Section 162(m)(4)(C)
15
of the Code and Stock Appreciation Right Agreements evidencing Stock
Appreciation Rights intended to so qualify shall contain such terms and
conditions as may be necessary to meet the applicable provisions of Section
162(m) of the Code. Without limiting the generality of the foregoing, the
Committee may, in its discretion and on such terms as it deems appropriate,
require as a condition of the grant of a Stock Appreciation Right to an
Employee or consultant that the Employee or consultant surrender for
cancellation some or all of the unexercised Options, awards of Restricted
Stock or Deferred Stock, Performance Awards, Stock Appreciation Rights,
Dividend Equivalents or Stock Payments, or other rights which have been
previously granted to him under this Plan or otherwise. A Stock Appreciation
Right, the grant of which is conditioned upon such surrender, may have an
exercise price lower (or higher) than the exercise price of the surrendered
Option or other award, may cover the same (or a lesser or greater) number of
shares as such surrendered Option or other award, may contain such other
terms as the Committee deems appropriate, and shall be exercisable in
accordance with its terms, without regard to the number of shares, price,
exercise period or any other term or condition of such surrendered Option or
other award.
8.2 COUPLED STOCK APPRECIATION RIGHTS
(a) A CSAR shall be related to a particular Option and shall be
exercisable only when and to the extent the related Option is exercisable.
(b) A CSAR may be granted to the Grantee for no more than the
number of shares subject to the simultaneously or previously granted Option
to which it is coupled.
(c) A CSAR shall entitle the Grantee (or other person entitled to
exercise the Option pursuant to this Plan) to surrender to the Company
unexercised a portion of the Option to which the CSAR relates (to the extent
then exercisable pursuant to its terms) and to receive from the Company in
exchange therefor an amount determined by multiplying the difference obtained
by subtracting the Option exercise price from the Fair Market Value of a
share of Common Stock on the date of exercise of the CSAR by the number of
shares of Common Stock with respect to which the CSAR shall have been
exercised, subject to any limitations the Committee may impose.
8.3 INDEPENDENT STOCK APPRECIATION RIGHTS
(a) An ISAR shall be unrelated to any Option and shall have a term
set by the Committee. An ISAR shall be exercisable in such installments as
the Committee may determine. An ISAR shall cover such number of shares of
Common Stock as the Committee may determine; PROVIDED, HOWEVER, that unless
the Committee otherwise provides in the terms of the ISAR or otherwise, no
ISAR granted to a person subject to Section 16 of the Exchange Act shall be
exercisable until at least six months have elapsed from (but excluding) the
date on which the Option was granted. The exercise price per share of Common
Stock subject to each ISAR shall be set by the Committee. An ISAR is
exercisable only while the Grantee is an Employee or consultant; PROVIDED
that the Committee may determine that the ISAR may be exercised subsequent to
Termination of Employment or Termination of Consultancy without cause, or
following a change in control of the Company, or because of the Grantee's
retirement, death or disability, or otherwise.
(b) An ISAR shall entitle the Grantee (or other person entitled to
exercise the ISAR pursuant to this Plan) to exercise all or a specified
portion of the ISAR (to the extent then exercisable pursuant to its terms)
and to receive from the Company an amount determined by multiplying the
difference obtained by subtracting the exercise price per share of the ISAR
from the Fair Market Value
16
of a share of Common Stock on the date of exercise of the ISAR by the number
of shares of Common Stock with respect to which the ISAR shall have been
exercised, subject to any limitations the Committee may impose.
8.4 PAYMENT AND LIMITATIONS ON EXERCISE
(a) Payment of the amount determined under Section 8.2(c) and
8.3(b) above shall be in cash, in Common Stock (based on its Fair Market
Value as of the date the Stock Appreciation Right is exercised) or a
combination of both, as determined by the Committee. To the extent such
payment is effected in Common Stock it shall be made subject to satisfaction
of all provisions of Section 5.3 above pertaining to Options.
(b) Grantees of Stock Appreciation Rights may be required to
comply with any timing or other restrictions with respect to the settlement
or exercise of a Stock Appreciation Right, including a window-period
limitation, as may be imposed in the discretion of the Board or Committee.
8.5 CONSIDERATION. In consideration of the granting of a Stock
Appreciation Right, the Grantee shall agree, in the written Stock
Appreciation Right Agreement, to remain in the employ of, or to consult for,
the Company or any Subsidiary for a period of at least one year after the
Stock Appreciation Right is granted (or such shorter period as may be fixed
in the Stock Appreciation Right Agreement or by action of the Committee
following grant of the Restricted Stock). Nothing in this Plan or in any
Stock Appreciation Right Agreement hereunder shall confer on any Grantee any
right to continue in the employ of, or as a consultant for, the Company or
any Subsidiary or shall interfere with or restrict in any way the rights of
the Company and any Subsidiary, which are hereby expressly reserved, to
discharge any Grantee at any time for any reason whatsoever, with or without
cause and with or without notice.
ARTICLE IX
ADMINISTRATION
9.1 COMPENSATION COMMITTEE. The Compensation Committee (or
another committee or a subcommittee of the Board assuming the functions of
the Committee under this Plan) shall consist solely of two or more
Independent Directors appointed by and holding office at the pleasure of the
Board, each of whom is both a "non-employee director" as defined by Rule
16b-3 and an "outside director" for purposes of Section 162(m) of the Code.
Appointment of Committee members shall be effective upon acceptance of
appointment. Committee members may resign at any time by delivering written
notice to the Board. Vacancies in the Committee may be filled by the Board.
9.2 DUTIES AND POWERS OF COMMITTEE. It shall be the duty of the
Committee to conduct the general administration of this Plan in accordance
with its provisions. The Committee shall have the power to interpret this
Plan and the agreements pursuant to which Options, awards of Restricted Stock
or Deferred Stock, Performance Awards, Stock Appreciation Rights, Dividend
Equivalents or Stock Payments are granted or awarded, and to adopt such rules
for the administration, interpretation, and application of this Plan as are
consistent therewith and to interpret, amend or revoke any such rules.
Notwithstanding the foregoing, the full Board, acting by a majority of its
members in office, shall conduct the general administration of the Plan with
respect to Options granted to Independent Directors. Any such grant or award
under this Plan need not be the same with respect to each Optionee, Grantee
or
17
Restricted Stockholder. Any such interpretations and rules with respect to
Incentive Stock Options shall be consistent with the provisions of Section
422 of the Code. In its absolute discretion, the Board may at any time and
from time to time exercise any and all rights and duties of the Committee
under this Plan except with respect to matters which under Rule 16b-3 or
Section 162(m) of the Code, or any regulations or rules issued thereunder,
are required to be determined in the sole discretion of the Committee.
9.3 MAJORITY RULE; UNANIMOUS WRITTEN CONSENT. The Committee shall
act by a majority of its members in attendance at a meeting at which a quorum
is present or by a memorandum or other written instrument signed by all
members of the Committee.
9.4 COMPENSATION; PROFESSIONAL ASSISTANCE; GOOD FAITH ACTIONS.
Members of the Committee shall receive such compensation for their services
as members as may be determined by the Board. All expenses and liabilities
which members of the Committee incur in connection with the administration of
this Plan shall be borne by the Company. The Committee may, with the
approval of the Board, employ attorneys, consultants, accountants,
appraisers, brokers, or other persons. The Committee, the Company and the
Company's officers and Directors shall be entitled to rely upon the advice,
opinions or valuations of any such persons. All actions taken and all
interpretations and determinations made by the Committee or the Board in good
faith shall be final and binding upon all Optionees, Grantees, Restricted
Stockholders, the Company and all other interested persons. No members of
the Committee or Board shall be personally liable for any action,
determination or interpretation made in good faith with respect to this Plan,
Options, awards of Restricted Stock or Deferred Stock, Performance Awards,
Stock Appreciation Rights, Dividend Equivalents or Stock Payments, and all
members of the Committee and the Board shall be fully protected by the
Company in respect of any such action, determination or interpretation.
ARTICLE X
MISCELLANEOUS PROVISIONS
10.1 NOT TRANSFERABLE. Options, Restricted Stock awards, Deferred
Stock awards, Performance Awards, Stock Appreciation Rights, Dividend
Equivalents or Stock Payments under this Plan may not be sold, pledged,
assigned, or transferred in any manner other than by will or the laws of
descent and distribution or pursuant to a QDRO, unless and until such rights
or awards have been exercised, or the shares underlying such rights or awards
have been issued, and all restrictions applicable to such shares have lapsed.
No Option, Restricted Stock award, Deferred Stock award, Performance Award,
Stock Appreciation Right, Dividend Equivalent or Stock Payment or interest or
right therein shall be liable for the debts, contracts or engagements of the
Optionee, Grantee or Restricted Stockholder or his successors in interest or
shall be subject to disposition by transfer, alienation, anticipation,
pledge, encumbrance, assignment or any other means whether such disposition
be voluntary or involuntary or by operation of law by judgment, levy,
attachment, garnishment or any other legal or equitable proceedings
(including bankruptcy), and any attempted disposition thereof shall be null
and void and of no effect, except to the extent that such disposition is
permitted by the preceding sentence.
During the lifetime of the Optionee or Grantee, only he may
exercise an Option or other right or award (or any portion thereof) granted
to him under the Plan, unless it has been disposed of pursuant to a QDRO.
After the death of the Optionee or Grantee, any exercisable portion of an
Option or other right or award may, prior to the time when such portion
becomes unexercisable under the Plan or the applicable Stock Option Agreement
or other agreement, be exercised by his personal representative
18
or by any person empowered to do so under the deceased Optionee's or
Grantee's will or under the then applicable laws of descent and distribution.
10.2 AMENDMENT, SUSPENSION OR TERMINATION OF THIS PLAN. Except as
otherwise provided in this Section 10.2, this Plan may be wholly or partially
amended or otherwise modified, suspended or terminated at any time or from
time to time by the Board or the Committee. However, without approval of the
Company's stockholders given within twelve months before or after the action
by the Board or the Committee, no action of the Board or the Committee may,
except as provided in Section 10.3, increase the limits imposed in Section
2.1 on the maximum number of shares which may be issued under this Plan or
modify the Award Limit, and no action of the Board or the Committee may be
taken that would otherwise require stockholder approval as a matter of
applicable law, regulation or rule. No amendment, suspension or termination
of this Plan shall, without the consent of the holder of Options, Restricted
Stock awards, Deferred Stock awards, Performance Awards, Stock Appreciation
Rights, Dividend Equivalents or Stock Payments, alter or impair any rights or
obligations under any Options, Restricted Stock awards, Deferred Stock
awards, Performance Awards, Stock Appreciation Rights, Dividend Equivalents
or Stock Payments theretofore granted or awarded, unless the award itself
otherwise expressly so provides. No Options, Restricted Stock, Deferred
Stock, Performance Awards, Stock Appreciation Rights, Dividend Equivalents or
Stock Payments may be granted or awarded during any period of suspension or
after termination of this Plan, and in no event may any Incentive Stock
Option be granted under this Plan after the first to occur of the following
events:
(a) The expiration of ten years from the date the Plan is adopted
by the Board; or
(b) The expiration of ten years from the date the Plan is approved
by the Company's stockholders under Section 10.4.
10.3 CHANGES IN COMMON STOCK OR ASSETS OF THE COMPANY, ACQUISITION
OR LIQUIDATION OF THE COMPANY AND OTHER CORPORATE EVENTS.
(a) Subject to Section 10.3(d), in the event that the Committee
(or the Board, in the case of Options granted to Independent Directors)
determines that any dividend or other distribution (whether in the form of
cash, Common Stock, other securities, or other property), recapitalization,
reclassification, stock split, reverse stock split, reorganization, merger,
consolidation, split-up, spin-off, combination, repurchase, liquidation,
dissolution, or sale, transfer, exchange or other disposition of all or
substantially all of the assets of the Company (including, but not limited
to, a Corporate Transaction), or exchange of Common Stock or other securities
of the Company, issuance of warrants or other rights to purchase Common Stock
or other securities of the Company, or other similar corporate transaction or
event, in the Committee's sole discretion (or in the case of Options granted
to Independent Directors, the Board's sole discretion), affects the Common
Stock such that an adjustment is determined by the Committee to be
appropriate in order to prevent dilution or enlargement of the benefits or
potential benefits intended to be made available under the Plan or with
respect to an Option, Restricted Stock award, Performance Award, Stock
Appreciation Right, Dividend Equivalent, Deferred Stock award or Stock
Payment, then the Committee (or the Board, in the case of Options granted to
Independent Directors) shall, in such manner as it may deem equitable, adjust
any or all of
(i) the number and kind of shares of Common Stock (or other
securities or property) with respect to which Options, Performance Awards,
Stock Appreciation Rights, Dividend Equivalents or Stock Payments may be
granted under the Plan, or which may be granted as Restricted Stock or
Deferred Stock (including, but not limited to, adjustments of the
19
limitations in Section 2.1 on the maximum number and kind of shares which
may be issued and adjustments of the Award Limit),
(ii) the number and kind of shares of Common Stock (or other
securities or property) subject to outstanding Options, Performance Awards,
Stock Appreciation Rights, Dividend Equivalents, or Stock Payments, and in
the number and kind of shares of outstanding Restricted Stock or Deferred
Stock, and
(iii) the grant or exercise price with respect to any Option,
Performance Award, Stock Appreciation Right, Dividend Equivalent or Stock
Payment.
(b) Subject to Sections 10.3(b)(vii) and 10.3(d), in the event of
any Corporate Transaction or other transaction or event described in Section
10.3(a) or any unusual or nonrecurring transactions or events affecting the
Company, any affiliate of the Company, or the financial statements of the
Company or any affiliate, or of changes in applicable laws, regulations, or
accounting principles, the Committee (or the Board, in the case of Options
granted to Independent Directors) in its sole discretion is hereby authorized
to take any one or more of the following actions whenever the Committee (or
the Board, in the case of Options granted to Independent Directors)
determines that such action is appropriate in order to prevent dilution or
enlargement of the benefits or potential benefits intended to be made
available under the Plan or with respect to any option, right or other award
under this Plan, to facilitate such transactions or events or to give effect
to such changes in laws, regulations or principles:
(i) In its sole and absolute discretion, and on such terms and
conditions as it deems appropriate, the Committee (or the Board, in the
case of Options granted to Independent Directors) may provide, either by
the terms of the agreement or by action taken prior to the occurrence of
such transaction or event and either automatically or upon the optionee's
request, for either the purchase of any such Option, Performance Award,
Stock Appreciation Right, Dividend Equivalent, or Stock Payment, or any
Restricted Stock or Deferred Stock for an amount of cash equal to the
amount that could have been attained upon the exercise of such option,
right or award or realization of the optionee's rights had such option,
right or award been currently exercisable or payable or fully vested or the
replacement of such option, right or award with other rights or property
selected by the Committee (or the Board, in the case of Options granted to
Independent Directors) in its sole discretion;
(ii) In its sole and absolute discretion, the Committee (or the
Board, in the case of Options granted to Independent Directors) may
provide, either by the terms of such Option, Performance Award, Stock
Appreciation Right, Dividend Equivalent, or Stock Payment, or Restricted
Stock or Deferred Stock or by action taken prior to the occurrence of such
transaction or event that it cannot be exercised after such event;
(iii) In its sole and absolute discretion, and on such terms
and conditions as it deems appropriate, the Committee (or the Board, in the
case of Options granted to Independent Directors) may provide, either by
the terms of such Option, Performance Award, Stock Appreciation Right,
Dividend Equivalent, or Stock Payment, or Restricted Stock or Deferred
Stock or by action taken prior to the occurrence of such transaction or
event, that for a specified period of time prior to such transaction or
event, such option, right or award shall be exercisable as to all shares
covered thereby, notwithstanding anything to the contrary in (i) Section
4.4 or (ii) the provisions of such Option, Performance Award, Stock
Appreciation Right, Dividend Equivalent, or Stock Payment, or Restricted
Stock or Deferred Stock;
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(iv) In its sole and absolute discretion, and on such terms and
conditions as it deems appropriate, the Committee (or the Board, in the
case of Options granted to Independent Directors) may provide, either by
the terms of such Option, Performance Award, Stock Appreciation Right,
Dividend Equivalent, or Stock Payment, or Restricted Stock or Deferred
Stock or by action taken prior to the occurrence of such transaction or
event, that upon such event, such option, right or award shall be assumed
by the successor or survivor corporation, or a parent or subsidiary
thereof, or shall be substituted for by similar options, rights or awards
covering the stock of the successor or survivor corporation, or a parent or
subsidiary thereof, with appropriate adjustments as to the number and kind
of shares and prices;
(v) In its sole and absolute discretion, and on such terms and
conditions as it deems appropriate, the Committee (or the Board, in the
case of Options granted to Independent Directors) may make adjustments in
the number and type of shares of Common Stock (or other securities or
property) subject to outstanding Options, Performance Awards, Stock
Appreciation Rights, Dividend Equivalents, or Stock Payments, and in the
number and kind of outstanding Restricted Stock or Deferred Stock and/or in
the terms and conditions of (including the grant or exercise price), and
the criteria included in, outstanding options, rights and awards and
options, rights and awards which may be granted in the future; and
(vi) In its sole and absolute discretion, and on such terms and
conditions as it deems appropriate, the Committee may provide either by the
terms of a Restricted Stock award or Deferred Stock award or by action
taken prior to the occurrence of such event that, for a specified period of
time prior to such event, the restrictions imposed under a Restricted Stock
Agreement or a Deferred Stock Agreement upon some or all shares of
Restricted Stock or Deferred Stock may be terminated, and, in the case of
Restricted Stock, some or all shares of such Restricted Stock may cease to
be subject to repurchase under Section 6.6 or forfeiture under Section 6.5
after such event.
None of the foregoing discretionary actions taken under this Section
10.3(b) shall be permitted with respect to Options granted under Section 3.4(d)
to Independent Directors to the extent that such discretion would be
inconsistent with the applicable exemptive conditions of Rule 16b-3. In the
event of a Change in Control or a Corporate Transaction, to the extent that the
Board does not have the ability under Rule 16b-3 to take or to refrain from
taking the discretionary actions set forth in Section 10.3(b)(iii) above, each
Option granted to an Independent Director shall be exercisable as to all shares
covered thereby upon such Change in Control or during the five days immediately
preceding the consummation of such Corporate Transaction and subject to such
consummation, notwithstanding anything to the contrary in Section 4.4 or the
vesting schedule of such Options. In the event of a Corporate Transaction, to
the extent that the Board does not have the ability under Rule 16b-3 to take or
to refrain from taking the discretionary actions set forth in Section
10.3(b)(ii) above, no Option granted to an Independent Director may be exercised
following such Corporate Transaction unless such Option is, in connection with
such Corporate Transaction, either assumed by the successor or survivor
corporation (or parent or subsidiary thereof) or replaced with a comparable
right with respect to shares of the capital stock of the successor or survivor
corporation (or parent or subsidiary thereof).
In the event of any Corporate Transaction, each outstanding Option,
Performance Award, Stock Appreciation Right, Dividend Equivalent, Stock Payment,
Restricted Stock, or Deferred Stock award shall, immediately prior to the
effective date of the Corporate Transaction, automatically become fully
exercisable for all of the shares of Common Stock at the time subject to such
rights or fully vested, as applicable, and may be exercised for any or all of
those shares as fully-vested shares of Common
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Stock. However, an outstanding right shall not so accelerate if and to the
extent: (i) such right is, in connection with the Corporate Transaction,
either to be assumed by the successor or survivor corporation (or parent
thereof) or to be replaced with a comparable right with respect to shares of
the capital stock of the successor or survivor corporation (or parent
thereof) or (ii) the acceleration of exercisability of such right is subject
to other limitations imposed by the Committee (or the Board, in the case of
Options granted to Independent Directors) at the time of grant. The
determination of comparability of rights under clause (i) above shall be made
by the Committee (or the Board, in the case of Options granted to Independent
Directors), and its determination shall be final, binding and conclusive.
(c) Subject to Section 10.3(d) and 10.8, the Committee (or the
Board, in the case of Options granted to Independent Directors) may, in its
discretion, include such further provisions and limitations in any Option,
Performance Award, Stock Appreciation Right, Dividend Equivalent, or Stock
Payment, or Restricted Stock or Deferred Stock agreement or certificate, as
it may deem equitable and in the best interests of the Company.
(d) With respect to Incentive Stock Options and Options and Stock
Appreciation Rights intended to qualify as performance-based compensation
under Section 162(m), no adjustment or action described in this Section 10.3
or in any other provision of the Plan shall be authorized to the extent that
such adjustment or action would cause the Plan to violate Section 422(b)(1)
of the Code or would cause such option or stock appreciation right to fail to
so qualify under Section 162(m), as the case may be, or any successor
provisions thereto. Furthermore, no such adjustment or action shall be
authorized to the extent such adjustment or action would result in
short-swing profits liability under Section 16 or violate the exemptive
conditions of Rule 16b-3 unless the Committee (or the Board, in the case of
Options granted to Independent Directors) determines that the option or other
award is not to comply with such exemptive conditions. The number of shares
of Common Stock subject to any option, right or award shall always be rounded
to the next whole number.
10.4 APPROVAL OF PLAN BY STOCKHOLDERS. This Plan will be submitted
for the approval of the Company's stockholders within twelve months after the
date of the Board's initial adoption of this Plan. Options, Performance
Awards, Stock Appreciation Rights, Dividend Equivalents or Stock Payments may
be granted and Restricted Stock or Deferred Stock may be awarded prior to
such stockholder approval; PROVIDED that such Options, Performance Awards,
Stock Appreciation Rights, Dividend Equivalents or Stock Payments shall not
be exercisable and such Restricted Stock or Deferred Stock shall not vest
prior to the time when this Plan is approved by the stockholders, and
PROVIDED, FURTHER, that if such approval has not been obtained at the end of
said twelve-month period, all Options, Performance Awards, Stock Appreciation
Rights, Dividend Equivalents or Stock Payments previously granted and all
Restricted Stock or Deferred Stock previously awarded under this Plan shall
thereupon be canceled and become null and void.
10.5 TAX WITHHOLDING. The Company shall be entitled to require
payment in cash or deduction from other compensation payable to each
Optionee, Grantee or Restricted Stockholder of any sums required by federal,
state or local tax law to be withheld with respect to the issuance, vesting
or exercise of any Option, Restricted Stock, Deferred Stock, Performance
Award, Stock Appreciation Right, Dividend Equivalent or Stock Payment. The
Committee (or the Board, in the case of Options granted to Independent
Directors) may in its discretion and in satisfaction of the foregoing
requirement allow such Optionee, Grantee or Restricted Stockholder to elect
to return to the Company shares of Common Stock having a Fair Market Value
equal to the sums required to be withheld.
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10.6 LOANS. The Committee may, in its discretion, extend one or
more loans to key Employees in connection with the exercise or receipt of an
Option, Performance Award, Stock Appreciation Right, Dividend Equivalent or
Stock Payment granted under this Plan, or the issuance of Restricted Stock or
Deferred Stock awarded under this Plan. The terms and conditions of any such
loan shall be set by the Committee.
10.7 FORFEITURE PROVISIONS. Pursuant to its general authority to
determine the terms and conditions applicable to awards under the Plan, the
Committee (or the Board, in the case of Options granted to Independent
Directors) shall have the right (to the extent consistent with the applicable
exemptive conditions of Rule 16b-3) to provide, in the terms of Options or
other awards made under the Plan, or to require the recipient to agree by
separate written instrument, that (i) any proceeds, gains or other economic
benefit actually or constructively received by the recipient upon any receipt
or exercise of the award, or upon the receipt or resale of any Common Stock
underlying such award, must be paid to the Company, and (ii) the award shall
terminate and any unexercised portion of such award (whether or not vested)
shall be forfeited, if (a) a Termination of Employment, Termination of
Consultancy or Termination of Directorship occurs prior to a specified date,
or within a specified time period following receipt or exercise of the award,
or (b) the recipient at any time, or during a specified time period, engages
in any activity in competition with the Company, or which is inimical,
contrary or harmful to the interests of the Company, as further defined by
the Committee (or the Board, as applicable).
10.8 LIMITATIONS APPLICABLE TO SECTION 16 PERSONS AND
PERFORMANCE-BASED COMPENSATION. Notwithstanding any other provision of this
Plan, this Plan, and any Option, Performance Award, Stock Appreciation Right,
Dividend Equivalent or Stock Payment granted, or Restricted Stock or Deferred
Stock awarded, to any individual who is then subject to Section 16 of the
Exchange Act, shall be subject to any additional limitations set forth in any
applicable exemptive rule under Section 16 of the Exchange Act (including any
amendment to Rule 16b-3 of the Exchange Act) that are requirements for the
application of such exemptive rule. To the extent permitted by applicable
law, the Plan, Options, Performance Awards, Stock Appreciation Rights,
Dividend Equivalents, Stock Payments, Restricted Stock and Deferred Stock
granted or awarded hereunder shall be deemed amended to the extent necessary
to conform to such applicable exemptive rule. Furthermore, notwithstanding
any other provision of this Plan, any Option or Stock Appreciation Right
intended to qualify as performance-based compensation as described in Section
162(m)(4)(C) of the Code shall be subject to any additional limitations set
forth in Section 162(m) of the Code (including any amendment to Section
162(m) of the Code) or any regulations or rulings issued thereunder that are
requirements for qualification as performance-based compensation as described
in Section 162(m)(4)(C) of the Code, and this Plan shall be deemed amended to
the extent necessary to conform to such requirements.
10.9 EFFECT OF PLAN UPON OPTIONS AND COMPENSATION PLANS. The
adoption of this Plan shall not affect any other compensation or incentive
plans in effect for the Company or any Subsidiary. Nothing in this Plan
shall be construed to limit the right of the Company (i) to establish any
other forms of incentives or compensation for Employees, Directors or
Consultants of the Company or any Subsidiary or (ii) to grant or assume
options or other rights otherwise than under this Plan in connection with any
proper corporate purpose including but not by way of limitation, the grant or
assumption of options in connection with the acquisition by purchase, lease,
merger, consolidation or otherwise, of the business, stock or assets of any
corporation, partnership, limited liability company, firm or association.
10.10 COMPLIANCE WITH LAWS. This Plan, the granting and vesting
of Options, Restricted Stock awards, Deferred Stock awards, Performance Awards,
Stock Appreciation Rights,
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Dividend Equivalents or Stock Payments under this Plan and the issuance and
delivery of shares of Common Stock and the payment of money under this Plan
or under Options, Performance Awards, Stock Appreciation Rights, Dividend
Equivalents or Stock Payments granted or Restricted Stock or Deferred Stock
awarded hereunder are subject to compliance with all applicable federal and
state laws, rules and regulations (including but not limited to state and
federal securities law and federal margin requirements) and to such approvals
by any listing, regulatory or governmental authority as may, in the opinion
of counsel for the Company, be necessary or advisable in connection
therewith. Any securities delivered under this Plan shall be subject to such
restrictions, and the person acquiring such securities shall, if requested by
the Company, provide such assurances and representations to the Company as
the Company may deem necessary or desirable to assure compliance with all
applicable legal requirements. To the extent permitted by applicable law,
the Plan, Options, Restricted Stock awards, Deferred Stock awards,
Performance Awards, Stock Appreciation Rights, Dividend Equivalents or Stock
Payments granted or awarded hereunder shall be deemed amended to the extent
necessary to conform to such laws, rules and regulations.
10.11 TITLES. Titles are provided herein for convenience only and
are not to serve as a basis for interpretation or construction of this Plan.
10.12 GOVERNING LAW. This Plan and any agreements hereunder shall
be administered, interpreted and enforced under the internal laws of the
State of Delaware without regard to conflicts of laws thereof.
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