Exhibit 10.6
ENGlobal Corporation
AMENDED AND RESTATED
1998 INCENTIVE PLAN
June 8, 2006
TABLE OF CONTENTS
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Page
SECTION 1. DEFINITIONS 1
SECTION 2. SHARES OF STOCK SUBJECT TO THE PLAN 7
2.1 Maximum Number of Shares 7
2.2 Limitation of Shares 7
2.3 Description of Shares 8
2.4 Registration and Listing of Shares 9
SECTION 3. ADMINISTRATION OF THE PLAN 9
3.1 Committee 9
3.2 Duration, Removal, Etc. 9
3.3 Meetings and Actions of Committee 9
3.4 Committee's Powers 10
SECTION 4 ELIGIBILITY AND PARTICIPATION 10
4.1 Eligible Individuals 10
4.2 Grant of Awards 10
4.3 Date of Grant 11
4.4 Award Agreements 11
4.5 Limitation for Incentive Options 11
4.6 No Right to Award 11
SECTION 5. TERMS AND CONDITIONS OF OPTIONS 11
5.1 Number of Shares 12
5.2 Vesting 12
5.3 Expiration of Options 12
5.4 Exercise Price 12
5.5 Method of Exercise 12
5.6 Incentive Option Exercises 12
5.7 Medium and Time of Payment 12
5.8 Payment with Sale Proceeds 13
5.9 Payment of Taxes 13
5.10 Limitation on Aggregate Value of Shares
That May Become First Exercisable During
Any Calendar Year Under an Incentive Option 13
5.11 No Fractional Shares 14
5.12 Modification, Extension, and Renewal of Options 14
5.13 Other Agreement Provisions 14
SECTION 6 STOCK APPRECIATION RIGHTS 15
6.1 Form of Right 15
6.2 Rights Related to Options 15
(a) Exercise and Transfer 15
(b) Value of Right 15
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6.3 Right Without Option 15
(a) Number of Shares 16
(b) Vesting 16
(c) Expiration of Rights 16
(d) Value of Right 16
6.4 Limitations on Rights 16
6.5 Payment of Rights 16
6.6 Payment of Taxes 16
6.7 Other Agreement Provisions 17
SECTION 7. RESTRICTED STOCK AWARDS 17
7.1 Restrictions 17
(a) Transferability 17
(b) Conditions to Removal of Restrictions 17
(c) Legend 17
(d) Possession 17
(e) Other Conditions 18
7.2 Expiration of Restrictions 18
7.3 Rights as Shareholder 18
7.4 Payment of Taxes 18
7.5 Other Agreement Provisions 19
SECTION 8. AWARDS TO NON-EMPLOYEE DIRECTORS 19
8.1 Awards to Committee Members 19
8.2 Eligibility for Awards 19
SECTION 9. ADJUSTMENT PROVISIONS 19
9.1 Adjustment of Awards and Authorized Stock 19
9.2 Changes in Control 20
9.3 Restructuring Without Change in Control 20
9.4 Notice of Restructuring 22
SECTION 10. ADDITIONAL PROVISIONS 23
10.1 Termination of Employment 23
10.2 Other Loss of Eligibility - Non-Employees 23
10.3 Death 23
10.4 Disability 23
10.5 Leave of Absence 24
10.6 Transferability of Awards 24
10.7 Forfeiture and Restrictions on Transfer 24
10.8 Delivery of Certificates of Stock 24
10.9 Conditions to Delivery of Stock 25
10.10 Certain Directors and Officers 25
10.11 Securities Act Legend 25
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10.12 Legend for Restrictions on Transfer 26
10.13 Rights as a Shareholder 26
10.14 Furnish Information 26
10.15 Obligation to Exercise 27
10.16 Adjustments to Awards 27
10.17 Remedies 27
10.18 Information Confidential 27
10.19 Consideration 27
SECTION 11. DURATION AND AMENDMENT OF PLAN 27
11.1 Duration 27
11.2 Amendment 27
SECTION 12. GENERAL 28
12.1 Application of Funds 28
12.2 Right of the Corporation and Subsidiaries
to Terminate Employment 28
12.3 No Liability for Good Faith Determinations 28
12.4 Other Benefits 28
12.5 Exclusion From Pension and Profit-Sharing
Compensation 29
12.6 Execution of Receipts and Releases 29
12.7 Unfunded Plan 29
12.8 No Guarantee of Interests 29
12.9 Payment of Expenses 29
12.10 Corporation Records 30
12.11 Information 30
12.12 No Liability of Corporation 30
12.13 Corporation Action 30
12.14 Severability 30
12.15 Notices 30
12.16 Successors 31
12.17 Headings 31
12.18 Governing Law 31
12.19 Word Usage 31
SECTION 13. EFFECTIVENESS 31
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ENGLOBAL CORPORATION F/K/A INDUSTRIAL DATA SYSTEMS CORPORATION
AMENDED AND RESTATED
1998 INCENTIVE PLAN
SCOPE AND PURPOSE OF PLAN
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ENGlobal Corporation, a Nevada corporation f/k/a Industrial Data Systems
Corporation, (the "Corporation"), has adopted this Amended and Restated 1998
Incentive Plan (the "Plan") to provide for the granting of:
(a) Incentive Options (hereafter defined) to certain Key Employees
(hereafter defined);
(b) Nonstatutory Options (hereafter defined) to certain Key Employees,
Non-Employee Directors (hereafter defined) and other Persons;
(c) Restricted Stock Awards (hereafter defined) to certain Key Employees
and other Persons; and
(d) Stock Appreciation Rights (hereafter defined) to certain Key Employees
and other Persons.
The purpose of the Plan is to provide an incentive for Key Employees and
directors of the Corporation or its Subsidiaries (hereafter defined) to aid the
Corporation in attracting able Persons to enter the service of the Corporation
and its Subsidiaries, to extend to them the opportunity to acquire a proprietary
interest in the Corporation so that they will apply their best efforts for the
benefit of the Corporation, and to remain in the service of the Corporation or
its Subsidiaries. This Plan has been adopted by the Board of Directors and.
shareholders of the Corporation prior to the registration of any securities of
the Corporation under the Exchange Act (hereafter defined) and accordingly
amounts paid under the Plan are exempt from the provisions of Section 162(m) of
the Code (hereafter defined).
SECTION 1. DEFINITIONS
1.1 "Acquiring Person" means any Person other than the Corporation, any
Subsidiary of the Corporation, any employee benefit plan of the Corporation or
of a Subsidiary of the Corporation or of a corporation owned directly or
indirectly by the shareholders of the Corporation in substantially the same
proportions as their ownership of Stock of the Corporation, or any trustee or
other fiduciary holding securities under an employee benefit plan of the
Corporation or of a Subsidiary of the Corporation or of a corporation owned
directly or indirectly by the shareholders of the Corporation in substantially
the same proportions as their ownership of Stock of the Corporation.
1.2 "Affiliate" means (a) any Person who is directly or indirectly the
beneficial owner of at least 10% of the voting power of the Voting Securities or
(b) any Person controlling, controlled by, or under common control with the
Company or any Person contemplated in clause. (a) of this Section 1.2.
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1.3 "Award" means the grant of any form of Option, Restricted Stock Award,
or Stock Appreciation Right under the Plan, whether granted individually, in
combination, or in tandem, to a Holder pursuant to the terms, conditions, and
limitations that the Committee may establish in order to fulfill the objectives
of the Plan.
1.4 "Award Agreement" means the written agreement between the Corporation
and a Holder evidencing the terms, conditions, and limitations of the Award
granted to that Holder.
1.5 "Board of Directors" means the board of directors of the Corporation.
1.6 "Business Day" means any day other than a Saturday, a Sunday, or a day
on which banking institutions in the State of Texas are authorized or obligated
by law or executive order to close.
1.7 "Change in Control" means the event that is deemed to have occurred if:
(a) any Acquiring Person is or becomes the "beneficial owner" (as
defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of
securities of the Corporation representing fifty percent or more of the
combined voting power of the then outstanding Voting Securities of the
Corporation; provided, however, for purposes of this Section 1.7, an
Acquiring Person shall not include William A. Coskey, Hulda L. Coskey,
Alliance 2000, Ltd., or their respective affiliates or other donees or
entities formed by them for estate planning or similar purposes (The Coskey
Group); provided, further, if the Coskey Group shall cease to be the
beneficial owner, directly or indirectly, of securities of the Corporation
representing at least fifty percent of the combined voting power or the
then outstanding Voting Securities of the Corporation, then the Coskey
Group, upon reacquiring fifty percent or more of such voting power, shall
be deemed to be an Acquiring Person; or
(b) members of the Incumbent Board cease for any reason to constitute
at least a majority of the Board of Directors; or
(c) a public announcement is made of a tender or exchange offer by any
Acquiring Person for fifty percent or more of the outstanding Voting
Securities of the Corporation, and the Board of Directors approves or fails
to oppose that tender or exchange offer in its statements in Schedule 14D-9
under the Exchange Act; or
(d) the shareholders of the Corporation approve a merger or
consolidation of the Corporation with any other corporation or partnership
(or, if no such approval is required, the consummation of such a merger or
consolidation of the Corporation), other than a merger or consolidation
that would result in the Voting Securities of the Corporation outstanding
immediately before the consummation thereof continuing to represent (either
by remaining outstanding or by being converted into Voting Securities of
the surviving entity or of a parent of the surviving entity) a majority of
the combined voting power of the Voting Securities of the surviving entity
(or its parent) outstanding immediately after that merger or consolidation;
or
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(e) the shareholders of the Corporation approve a plan of complete
liquidation of the Corporation or an agreement for the sale or disposition
by the Corporation of all or substantially all the Corporation's assets
(or, if no such approval is required, the consummation of such a
liquidation, sale, or disposition in one transaction or series of related
transactions) other than a liquidation, sale, or disposition of all or
substantially all the Corporation's assets in one transaction or a series
of related transactions to a corporation owned directly or indirectly by
the shareholders of the Corporation in substantially the same proportions
as their ownership of Stock of the Corporation.
1.8 "Code" means the Internal Revenue Code of 1986, as amended.
1.9 "Committee" means the Committee, which Committee shall administer this
Plan and is further described under Section 3.
1.10 "Convertible Securities" means evidences of indebtedness, shares of
capital stock, or other securities that are convertible into or exchangeable for
shares of Stock, either immediately or upon the arrival of a specified date or
the happening of a specified event.
1.11 "Corporation" has the meaning given to it in the first paragraph under
"Scope and Purpose of Plan."
1.12 "Date of Grant" has the meaning given it in Section 4.3.
1.13 "Disability" has the meaning given it in Section 10.4.
1.14 "Effective Date" means June 8, 1998.
1.15 "Eligible Individuals" means (a) Key Employees, (b) Non-Employee
Directors only for purposes of Nonstatutory Options pursuant to Section 8, (c)
any other Person that the Committee designates as eligible for an Award (other
than for Incentive Options) because the Person performs, or has performed,
valuable services for the Corporation or any of its Subsidiaries (other than
services in connection with the offer or sale of securities in a capital-
raising transaction) and the Committee determines that the Person has a direct
and significant effect on the financial development of the Corporation or any of
its Subsidiaries, and (d) any transferee of an Award if the Award Agreement
provides for transfer of the Award and the Award is transferred in accordance
with the terms of the Award Agreement. Notwithstanding the foregoing provisions
of this Section 1.15, to ensure that the requirements of the fourth sentence of
Section 3.1 are satisfied, the Board of Directors may from time to time specify
individuals who shall not be eligible for the grant of Awards or equity
securities under any plan of the Corporation or its Affiliates. Nevertheless,
the Board of Directors may at any time determine that an individual who has been
so excluded from eligibility shall become eligible for grants of Awards and
grants of such other equity securities under any plans of the Corporation or its
Affiliates so long as that eligibility will not impair the Plan's satisfaction
of the conditions of Rule 16b-3.
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1.16 "Employee" means any employee of the Corporation or of any of its
Subsidiaries, including officers and directors of the Corporation who are also
employees of the Corporation or of any of its Subsidiaries.
1.17 "Exchange Act" means the Securities Exchange Act of 1934 and the rules
and regulations promulgated thereunder, or any successor law, as it may be
amended from time to time.
1.18 "Exercise Notice "has the meaning given it in Section 5.5.
1.19 "Exercise Price" has the meaning given it in Section 5.4.
1.20 "Fair Market Value" means, for a particular day:
(a) If shares of Stock of the same class are listed or admitted to
unlisted trading privileges on any national or regional securities exchange
at the date of determining the Fair Market Value, then the last reported
sale price, regular way, on the composite tape of that exchange on the last
Business Day before the date in question or, if no such sale takes place on
that Business Day, the average of the closing bid and asked prices, regular
way, in either case as reported in the principal consolidated transaction
reporting system with respect to securities listed or admitted to unlisted
trading privileges on that securities exchange; or
(b) If shares of Stock of the same class are not listed or admitted to
unlisted trading privileges as provided in Section 1.20(a) and sales prices
for shares of Stock of the same class in the over-the-counter market are
reported by the National Association of Securities Dealers, Inc. Automated
Quotations, Inc. ("NASDAQ") National Market System (or such other system
then in use) at the date of determining the Fair Market Value, then the
last reported sales price so reported on the last Business Day before the
date in question or, if no such sale takes place on that Business Day, the
average of the high bid and low asked prices so reported; or
(c) If shares of Stock of the same class are not listed or admitted to
unlisted trading privileges as provided in Section 1.20(a) and sales prices
for shares of Stock of the same class are not reported by the NASDAQ
National Market System (or a similar system then in use) as provided in
Section 1.20(b), and if bid and asked prices for shares of Stock of the
same class in the over-the-counter market are reported by NASDAQ (or, if
not so reported, by the National Quotation Bureau Incorporated) at the date
of determining the Fair Market Value, then the average of the high bid and
low asked prices on the last Business Day before the date in question; or
(d) If shares of Stock of the same class are not listed or admitted to
unlisted trading privileges as provided in Section 1.20(a) and sales prices
or bid and asked prices therefore are not reported by NASDAQ (or the
National Quotation Bureau Incorporated) as provided in Section 1.20(b) or
Section 1.20(c) at the date of determining the Fair Market Value, then the
value determined in good faith by the Committee, which determination shall
be conclusive for all purposes; or
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(e) If shares of Stock of the same class are listed or admitted to
unlisted trading privileges as provided in Section 1.20(a) or sales prices
or bid and asked prices therefore are reported by NASDAQ (or the National
Quotation Bureau Incorporated) as provided in Section 1.20(b) or Section
1.20(c) at the date of determining the Fair Market Value, but the volume of
trading is so low that the Board of Directors determines in good faith that
such prices are not indicative of the fair value of the Stock, then the
value determined in good faith by the Committee, which determination shall
be conclusive for all purposes notwithstanding the provisions of Sections
1.20(a), (b), or (c).
For purposes of valuing Incentive Options, the Fair Market Value of Stock shall
be determined without regard to any restriction other than one that, by its
terms, will never lapse. For purposes of the redemption provided for in Section
9.3(d)(v), Fair Market Value shall have the meaning and shall be determined as
set forth above; provided, however, that the Committee, with respect to any such
redemption, shall have the right to determine that the Fair Market Value for
purposes of the redemption should be an amount measured by the value of the
shares of Stock, other securities, cash, or property otherwise being received by
holders of shares of Stock in connection with the Restructuring and upon that
determination the Committee shall have the power and authority to determine Fair
Market Value for purposes of the redemption based upon the value of such shares
of stock, other securities, cash, or property. Any such determination by the
Committee, as evidenced by a resolution of the Committee, shall be conclusive
for all purposes.
1.21 "Fiscal Year" means the fiscal year of the Corporation ending on
December 31 of each year.
1.22 "Holder" means an Eligible Individual to whom an outstanding Award has
been granted, or, pursuant to the terms of the Award Agreement, the permitted
transferee of a Holder.
1.23 "Incumbent Board" means the individuals who, as of the Effective Date,
constitute the Board of Directors and any other individual who becomes a
director of the Corporation after that date and whose election or appointment by
the Board of Directors or nomination for election by the Corporation's
shareholders was approved by a vote of at least a majority of the directors then
comprising the Incumbent Board.
1.24 "Incentive Option" means an incentive stock option as defined under
Section 422 of the Code and regulations thereunder.
1.25 "Key Employee" means any Employee whom the Committee identifies as
having a direct and significant effect on the performance of the Corporation or
any of its Subsidiaries.
1.26 "Non-Employee Director" means a director of the Corporation who while
a director is not an Employee.
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1.27 "Nonstatutory Option" means a stock option that does not satisfy the
requirements of Section 422 of the Code or that is designated at the Date of
Grant or in the applicable Award Agreement to be an option other than an
Incentive Option.
1.28 "Non-Surviving Event" means an event of Restructuring as described in
either Section 1.35(b) or Section 1.35(c).
1.29 "Normal Retirement" means the separation of the Holder from employment
with the Corporation and its Subsidiaries with the right to receive an immediate
benefit under a retirement plan approved by the Corporation. If no such plan
exists, Normal Retirement shall mean separation of the Holder from employment
with the Corporation and its Subsidiaries at age 62 or later.
1.30 "Option" means either an Incentive Option or a Nonstatutory Option, or
both.
1.31 "Person" means any person or entity of any nature whatsoever,
specifically including (but not limited to) an individual, a firm, a company, a
corporation, a partnership, a trust, or other entity. A Person, together with
that Person's affiliates and associates (as "affiliate" and "associate" are
defined in Rule 12b-2 under the Exchange Act for purposes of this definition
only), and any Persons acting as a partnership, limited partnership, joint
venture, association, syndicate, or other group (whether or not formally
organized), or otherwise acting jointly or in concert or in a coordinated or
consciously parallel manner (whether or not pursuant to any express agreement),
for the purpose of acquiring, holding, voting, or disposing of securities of the
Corporation with that Person, shall be deemed a single "Person. "
1.32 "Plan" means the Corporation's 1998 Incentive Plan, as it may be
amended or restated from time to time.
1.33 "Restricted Stock" means Stock that is nontransferable or subject to
substantial risk of forfeiture until specific conditions are met.
1.34 "Restricted Stock Award" means the grant or purchase, on the terms and
conditions of Section 7 or that the Committee otherwise determines, of
Restricted Stock.
1.35 "Restructuring" means the occurrence of any one or more of the
following:
(a) The merger or consolidation of the Corporation with any Person,
whether effected as a single transaction or a series of related
transactions, with the Corporation remaining the continuing or surviving
entity of that merger or consolidation and the Stock remaining outstanding
and not changed into or exchanged for stock or other securities of any
other Person or of the Corporation, cash, or other property;
(b) The merger or consolidation of the Corporation with any Person,
whether effected as a single transaction or a series of related
transactions, with (i) the Corporation not being the continuing or
surviving entity of that merger or consolidation or (ii) the Corporation
remaining the continuing or surviving entity of that merger or
consolidation but all or a part of the outstanding shares of Stock are
changed into or exchanged for stock or other securities of any other Person
or the Corporation, cash, or other property; or
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(c) The transfer, directly or indirectly, of all or substantially all
of the assets of the Corporation (whether by sale, merger, consolidation,
liquidation, or otherwise) to any Person, whether effected as a single
transaction or a series of related transactions.
1.36 "Rule 16b-3" means Rule 16b-3 under Section 16(b) of the Exchange Act
as adopted in Exchange Act Release No. 34-37260 (May 31, 1996), or any successor
rule, as it may be amended from time to time.
1.37 "Securities Act" means the Securities Act of 1933 and the rules and
regulations promulgated thereunder, or any successor law, as it may be amended
from time to time.
1.38 "Stock" means the common stock, $0.001 par value per share, of the
Corporation, or any other securities that are substituted for the Stock as
provided in Section 9.
1.39 "Stock Appreciation Right" means the right to receive an amount equal
to the excess of the Fair Market Value of a share of Stock (as determined on the
date of exercise) over, as appropriate, the Exercise Price of a related Option
or the Fair Market Value of the Stock on the Date of Grant of the Stock
Appreciation Right.
1.40 "Subsidiary" means, with respect to any Person, any corporation, or
other entity of which a majority of the Voting Securities is owned, directly or
indirectly, by that Person.
1.41 "Total Shares" has the meaning given it in Section 9.2.
1.42 "Voting Securities" means any securities that are entitled to vote
generally in the election of directors, in the admission of general partners or
in the selection of any other similar governing body.
SECTION 2. SHARES OF STOCK SUBJECT TO THE PLAN
2.1 Maximum Number of Shares. Subject to the provisions of Section 2.2 and
Section 9, the aggregate number of shares of Stock that may be issued or
transferred pursuant to Awards under the Plan shall be 2,650,000.
2.2 Limitation of Shares. For purposes of the limitations specified in
Section 2.1, the following principles shall apply:
(a) the following shall count against and decrease the number of
shares of Stock that may be issued for purposes of Section 2.1: (i) shares
of Stock subject to outstanding Options, outstanding shares of Restricted
Stock, and shares subject to outstanding Stock Appreciation Rights granted
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independent of Options (based on a good faith estimate by the Corporation
or the Committee of the maximum number of shares for which the Stock
Appreciation Right may be settled (assuming payment in full in shares of
Stock)), and (ii) in the case of Options granted in tandem with Stock
Appreciation Rights, the greater of the number of shares of Stock that
would be counted if one or the other alone was outstanding (determined as
described in clause (i) above);
(b) the following shall be added back to the number of shares of Stock
that may be issued for purposes of Section 2.1: (i) shares of Stock with
respect to which Options, Stock Appreciation Rights granted independent of
Options, or Restricted Stock Awards expire, are cancelled, or otherwise
terminate without being exercised, converted, or vested, as applicable, and
(ii) in the case of Options granted in tandem with Stock Appreciation
Rights, shares of Stock as to which an Option has been surrendered in
connection with the exercise of a related ("tandem") Stock Appreciation
Right, to .the, extent the number surrendered exceeds the number issued
upon exercise of the Stock Appreciation Right; provided that, in any case,
the holder of such Awards did not receive any dividends or other benefits
of ownership with respect to the underlying shares being added back, other
than voting rights and the accumulation (but not payment) of dividends of
Stock;
(c) shares of Stock subject to Stock Appreciation Rights granted
independent of Options (calculated as provided in clause (a) above) that
are exercised and paid in cash shall be added back to the number of shares
of Stock that may be issued for purposes of Section 2.1, provided that the
Holder of such Stock Appreciation Right did not receive any dividends or
other benefits of ownership, other than voting rights and the accumulation
(but not payment) of dividends, of the shares of Stock subject to the Stock
Appreciation Right;
(d) shares of Stock that are transferred by a Holder of an Award (or
withheld by the Corporation) as full or partial payment to the Corporation
of the purchase price of shares of Stock subject to an Option or the
Corporation's or any Subsidiary's tax withholding obligations shall not be
added back to the number of shares of Stock that may be issued for purposes
of Section 2.1 and shall not again be subject to Awards; and
(e) if the number of shares of Stock counted against the number of
shares that may be issued for purposes of Section 2.1 is based upon an
estimate made by the Corporation or the Committee as provided in clause (a)
above and the actual number of shares of Stock issued pursuant to the
applicable Award is greater or less than the estimated number, then, upon
such issuance, the number of shares of Stock that may be issued pursuant to
Section 2.1 shall be further reduced by the excess issuance or increased by
the shortfall, as applicable.
Notwithstanding the provisions of this Section 2.2, no Stock shall be treated as
issuable under the Plan to Eligible Individuals subject to Section 16 of the
Exchange Act if otherwise prohibited from issuance under Rule 16b-3.
2.3 Description of Shares. The shares to be delivered under the Plan shall
be made available from (a) authorized but unissued shares of Stock, (b) Stock
held in the treasury of the Corporation, or (c) previously issued shares of
Stock reacquired by the Corporation, including shares purchased on the open
market, in each situation as the Board of Directors or the Committee may
determine from time to time at its sole option.
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2.4 Registration and Listing of Shares. From time to time, the Board of
Directors and appropriate officers of the Corporation shall and are authorized
to take whatever actions are necessary to file required documents with
governmental authorities, stock exchanges, and other appropriate Persons to make
shares of Stock available for issuance pursuant to the exercise of Awards.
SECTION 3. ADMINISTRATION OF THE PLAN
3.1 Committee. The Committee shall administer the Plan with respect to all
Eligible Individuals who are subject to Section 16(b) of the Exchange Act (other
than members of the Committee), but shall not have the power to appoint members
of the Committee or to terminate, modify, or amend the Plan. The full Board of
Directors shall administer the Plan with respect to all members of the
Committee. Except for references in Sections 3.1, 3.2 and 3.3, and unless the
context otherwise requires, references herein to the Committee shall also refer
to the Board of Directors as administrator of the Plan for members of the
Committee. The Committee shall be constituted so that, as long as Stock is
registered under Section 12 of the Exchange Act, each member of the Committee
shall be a Non-Employee Director and so that the Plan in all other applicable
respects will qualify transactions related to the Plan for the exemptions from
Section 16(b) of the Exchange Act provided by Rule 16b-3, to the extent
exemptions thereunder may be available. The number of Persons that shall
constitute the Committee shall be determined from time to time by a majority of
all the members of the Board of Directors and, unless that majority of the Board
of Directors determines otherwise or Rule 16b-3 is amended to require otherwise,
shall be no less than two Persons. The Board of Directors may designate the
Compensation Committee of the Board of Directors to serve as the Committee
hereunder. To the extent that Rule 16b-3 promulgated under the Exchange Act
requires a system of administration that is different from this Section 3.1,
this Section 3.1 shall automatically be deemed amended to the extent necessary
to cause it to be in compliance with Rule 16b-3.
3.2 Duration, Removal, Etc. The members of the Committee shall serve at the
discretion of the Board of Directors, which shall have the power, at any time
and from time to time, to remove members from or add members to the Committee.
Removal from the Committee may be with or without cause. Any individual serving
as a member of the Committee shall have the right to resign from membership in
the Committee by at least three days' written notice to the Board of Directors.
The Board of Directors, and not the remaining members of the Committee, shall
have the power and authority to fill all vacancies on the Committee. The Board
of Directors shall promptly fill any vacancy that causes the number of members
of the Committee to be below two or any other number that Rule 16b-3 may require
from time to time.
3.3 Meetings and Actions of Committee. The Board of Directors shall
designate which of the Committee members shall be the chairman of the Committee.
If the Board of Directors fails to designate a Committee chairman, the members
of the Committee shall elect one of the Committee members as chairman, who shall
act as chairman until he ceases to be a member of the Committee or until the
Board of Directors elects a new chairman. The Committee shall hold its meetings
at those times and places as the chairman of the Committee may determine. At all
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meetings of the Committee, a quorum for the transaction of business shall be
required and a quorum shall be deemed present if at least a majority of the
members of the Committee are present. At any meeting of the Committee, each
member shall have one vote. All decisions and determinations of the Committee
shall be made by the majority vote or majority decision of all of its members
present at a meeting at which a quorum is present; provided, however, that any
decision or determination reduced to writing and signed by all of the members of
the Committee shall be as fully effective as if it had been made at a meeting
that was duly called and held. The Committee may make any rules and regulations
for the conduct of its business that are not inconsistent with the provisions of
the Plan, the Articles or Certificate of Incorporation of the Corporation, the
bylaws of the Corporation, and Rule 16b-3 so long as it is applicable, as the
Committee may deem advisable.
3.4 Committee's Powers. Subject to the express provisions of the Plan and
Rule 16b-3, the Committee shall have the authority, in its sole and absolute
discretion, to (a) adopt, amend, and rescind administrative and interpretive
rules and regulations relating to the Plan; (b) determine the Eligible
Individuals to whom, and the time or times at which, Awards shall be granted;
(c) determine the amount of cash and the number of shares of Stock, Stock
Appreciation Rights, or Restricted Stock Awards, or any combination thereof,
that shall be the subject of each Award; (d) determine the terms and provisions
of each Award Agreement (which need not be identical), including provisions
defining or otherwise relating to (i) the term and the period or periods and
extent of exercisability of the Options, (ii) the extent to which the
transferability of shares of Stock issued or transferred pursuant to any Award
is restricted, (iii) the effect of termination of employment of the Holder on
the Award, and (iv) the effect of approved leaves of absence (consistent with
any applicable regulations of the Internal Revenue Service); (e) accelerate,
pursuant to Section 9, the time of exercisability of any Option that has been
granted; (f) construe the respective Award Agreements and the Plan; (g) make
determinations of the Fair Market Value of the Stock pursuant to the Plan; (h)
delegate its duties under the Plan to such agents as it may appoint from time to
time, provided that the Committee may not delegate its duties with respect to
making Awards to, or otherwise with respect to Awards granted to, Eligible
Individuals who are subject to Section 16(b) of the Exchange Act; and (i) make
all other determinations, perform all other acts, and exercise all other powers
and authority necessary or advisable for administering the Plan, including the
delegation of those ministerial acts and responsibilities as the Committee deems
appropriate. Subject to Rule 16b-3, the Committee may correct any defect, supply
any omission, or reconcile any inconsistency in the Plan, in any Award, or in
any Award Agreement in the manner and to the extent it deems necessary or
desirable to carry the Plan into effect, and the Committee shall be the sole and
final judge of that necessity or desirability. The determinations of the
Committee on the matters referred to in this Section 3.4 shall be final and
conclusive.
SECTION 4. ELIGIBILITY AND PARTICIPATION
4.1 Eligible Individuals. Awards may be granted pursuant to the Plan only
to Persons who are Eligible Individuals at the time of the grant thereof.
4.2 Grant of Awards. Subject to the express provisions of the Plan, the
Committee shall determine which Eligible Individuals shall be granted Awards
from time to time. In making grants, the Committee shall take into consideration
the contribution the potential Holder has made or may make to the success of the
10
Corporation or its Subsidiaries and such other considerations as the Board of
Directors may from time to time specify. The Committee shall also determine the
number of shares subject to each of the Awards and shall authorize and cause the
Corporation to grant Awards in accordance with those determinations.
4.3 Date of Grant. The date on which the Committee completes all action
resolving to offer an Award to an individual, including the specification of the
number of shares of Stock to be subject to the Award, shall be the date on which
the Award covered by an Award Agreement is granted (the "Date of Grant"), even
though certain terms of the Award Agreement may not be determined at that time
and even though the Award Agreement may not be executed until a later time. In
no event shall a Holder gain any rights in addition to those specified by the
Committee in its grant, regardless of the time that may pass between the grant
of the Award and the actual execution of the Award Agreement by the Corporation
and the Holder.
4.4 Award Agreements. Each Award granted under the Plan shall be evidenced
by an Award Agreement that is executed by the Corporation and the Eligible
Individual to whom the Award is granted and incorporating those terms that the
Committee shall deem necessary or desirable. More than one Award may be granted
under the Plan to the same Eligible Individual and be outstanding concurrently.
In the event an Eligible Individual is granted both one or more Incentive
Options and one or more Nonstatutory Options, those grants shall be evidenced by
separate Award Agreements, one for each of the Incentive Option grants and one
for each of the Nonstatutory Option grants.
4.5 Limitation for Incentive Options. Notwithstanding any provision
contained herein to the contrary, (a) a Person shall not be eligible to receive
an Incentive Option unless he is an Employee of the Corporation or a corporate
Subsidiary (but not a partnership Subsidiary) and (b) a Person shall not be
eligible to receive an Incentive Option if, immediately before the time the
Option is granted, that Person owns (within the meaning of Sections 422 and
424(d) of the Code) stock possessing more than ten percent of the total combined
voting power or value of all classes of outstanding stock of the Corporation or
a Subsidiary. Nevertheless, Section 4.5(b) shall not apply if, at the time the
Incentive Option is granted, the Exercise Price of the Incentive Option is at
least one hundred ten percent of Fair Market Value and the Incentive Option is
not, by its terms, exercisable after the expiration of five years from the Date
of Grant.
4.6 No Right to Award. The adoption of the Plan shall not be deemed to give
any Person a right to be granted an Award.
SECTION 5. TERMS AND CONDITIONS OF OPTIONS
All Options granted under the Plan shall comply with, and the related Award
Agreement shall be deemed to include and be subject to, the terms and conditions
set forth in this Section 5 (to the extent each term and condition applies to
the form of Option) and also to the terms and conditions set forth in Sections 9
and 10; provided, however, that the Committee may authorize an Award Agreement
that expressly contains terms and provisions that differ from the terms and
provisions set forth in Sections 9.2, 9.3, and 9.4 and any of the terms and
provisions of Section 10 (other than Sections 10.9 and 10. 10).
11
5.1 Number of Shares. Each Award Agreement shall state the total number of
shares of Stock to which it relates.
5.2 Vesting. Each Award Agreement shall state the time or periods in which,
or the conditions upon satisfaction of which, the right to exercise the Option
or a portion thereof shall vest and the number of shares of Stock for which the
right to exercise the Option shall vest at each such time, period, or
fulfillment of condition.
5.3 Expiration of Options. No Option shall be exercised after the
expiration of a period of ten years commencing on the Date of Grant of the
Option; provided, however, that any portion of a Nonstatutory Option that
pursuant to the terms of the Award Agreement under which such Nonstatutory
Option is granted shall not become exercisable until the date which is the tenth
anniversary of the Date of Grant of such Nonstatutory Option may be exercisable
for a period of 30 days following the date on which such portion becomes
exercisable.
5.4 Exercise Price. Each Award Agreement shall state the exercise price per
share of Stock (the "Exercise Price"); provided, however, that the exercise
price per share of Stock subject to an Option shall not be less than 100% of the
Fair Market Value per share of the Stock on the Date of Grant of the Option.
5.5 Method of Exercise. The Option shall be exercisable only by written
notice of exercise (the "Exercise Notice") delivered to the Corporation during
the term of the Option, which notice shall (a) state the number of shares of
Stock with respect to which the Option is being exercised, (b) be signed by the
Holder of the Option, a designated representative approved by the Committee or,
if the Holder is dead or becomes affected by a Disability, by the Person
authorized to exercise the Option pursuant to Sections 10.3 and 10.4, (c) be
accompanied by the Exercise Price for all shares of Stock for which the Option
is being exercised, and (d) include such other information, instruments, and
documents as may be required to satisfy any other condition to exercise
contained in the Award Agreement. The Option shall, not be deemed to have been
exercised unless all of the requirements of the preceding provisions of this
Section 5.5 have been satisfied.
5.6 Incentive Option Exercises. Except as otherwise provided in Section
10.4 or in the Award Agreement, during the Holder's lifetime, only the Holder or
a designated representative approved by the Committee may exercise an Incentive
Option.
5.7 Medium and Time of Payment. The Exercise Price of an Option shall be
payable in full upon the exercise of the Option (a) in cash or by an equivalent
means acceptable to the Committee, (b) on the Committee's prior consent, with
shares of Stock owned by the Holder (including shares received upon exercise of
the Option or restricted shares already held by the Holder) and having a Fair
Market Value at least equal to the aggregate Exercise Price payable in
connection with such exercise, or (c) by any combination of clauses (a) and (b).
If the Committee elects to accept shares of Stock in payment of all or any
portion of the Exercise Price, then (for purposes of payment of the Exercise
Price) those shares of Stock shall be deemed to have a cash value equal to their
aggregate Fair Market Value determined as of the date the certificate for such
shares is delivered to the Corporation. If the Committee elects to accept shares
of restricted Stock in payment of all or any portion of the Exercise Price, then
an equal number of shares issued pursuant to the exercise shall be restricted on
the same terms and for the restriction period remaining on the shares used for
payment.
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5.8 Payment with Sale Proceeds. In addition, at the request of the Holder
and to the extent permitted by applicable law, the Committee may (but shall not
be required to) approve arrangements with a brokerage firm under which that
brokerage firm, on behalf of the Holder, shall pay to the Corporation the
Exercise Price of the Option being exercised and the Corporation shall promptly
deliver the exercised shares of Stock to the brokerage firm. To accomplish this
transaction, the Holder must deliver to the Corporation an Exercise Notice
containing irrevocable instructions from the Holder to the Corporation to
deliver the Stock certificates representing the shares of Stock directly to the
broker. Upon receiving a copy of the Exercise Notice acknowledged by the
Corporation, the broker shall sell that number of shares of Stock or loan the
Holder an amount sufficient to pay the Exercise Price and any withholding
obligations due. The broker then shall deliver to the Corporation that portion
of the sale or loan proceeds necessary to cover the Exercise Price and any
withholding obligations due. The Committee shall not approve any transaction of
this nature if the Committee believes that the transaction would give rise to
the Holder's liability for short-swing profits under Section 16(b) of the
Exchange Act.
5.9 Payment of Taxes. The Committee may, in its discretion, require a
Holder to pay to the Corporation (or the Corporation's Subsidiary if the Holder
is an employee of a Subsidiary of the Corporation), at the time of the exercise
of an Option or thereafter, the amount that the Committee deems necessary to
satisfy the Corporation's or its Subsidiary's current or future obligation to
withhold federal, state, or local income or other taxes that the Holder incurs
by exercising an Option. In connection with the exercise of an Option requiring
tax withholding, a Holder may (a) direct the Corporation to withhold from the
shares of Stock to be issued to the Holder the number of shares necessary to
satisfy the Corporation's obligation to withhold taxes, that determination to be
based on the shares' Fair Market Value as of the date of exercise; (b) deliver
to the Corporation sufficient shares of Stock (based upon the Fair Market Value
as of the date of such delivery) to satisfy the Corporation's tax withholding
obligations, which tax withholding obligation is based on the shares' Fair
Market Value as of the later of the date of exercise or the date as of which the
shares of Stock issued in connection with such exercise become includible in the
income of the Holder; or (c) deliver sufficient cash to the Corporation to
satisfy its tax withholding obligations. Holders who elect to use such a Stock
withholding feature must make the election at the time and in the manner that
the Committee prescribes. The Committee may, at its sole option, deny any
Holder's request to satisfy withholding obligations through Stock instead of
cash. In the event the Committee subsequently determines that the aggregate Fair
Market Value (as determined above) of any shares of Stock withheld or delivered
as payment of any tax withholding obligation is insufficient to discharge that
tax withholding obligation, then the Holder shall pay to the Corporation,
immediately upon the Committee's request, the amount of that deficiency in the
form of payment requested by the Committee.
5.10 Limitation on Aggregate Value of Shares That May Become First
Exercisable During Any Calendar Year Under an Incentive Option. Except as is
otherwise provided in Section 9.3, with respect to any Incentive Option granted
under this Plan, the aggregate Fair Market Value of shares of Stock subject to
an Incentive Option and the aggregate Fair Market Value of shares of Stock or
stock of any Subsidiary (or a predecessor of the Corporation or a Subsidiary)
subject to any other incentive stock option (within the meaning of Section 422
13
of the Code) of the Corporation or its Subsidiaries (or a predecessor
corporation of any such corporation) that first become purchasable by a Holder
in any calendar year may not (with respect to that Holder) exceed $100,000, or
such other amount as may be prescribed under Section 422 of the Code or
applicable regulations or rulings from time to time. As used in the previous
sentence, Fair Market Value shall be determined as of the Date of Grant of the
Incentive Option. For purposes of this Section 5.10, "predecessor corporation"
means (a) a corporation that was a party to a transaction described in Section
424(a) of the Code (or which would be so described if a substitution or
assumption under that Section had been effected) with the Corporation, (b) a
corporation which, at the time the new incentive stock option (within the
meaning of Section 422 of the Code) is granted, is a Subsidiary of the
Corporation or a predecessor corporation of any such corporations, or (c) a
predecessor corporation of any such corporations. Failure to comply with this
provision shall not impair the enforceability or exercisability of any Option,
but shall cause the excess amount of shares to be reclassified in accordance
with the Code.
5.11 No Fractional Shares. The Corporation shall not in any case be
required to sell, issue, or deliver a fractional share with respect to any
Option. In lieu of the issuance of any fractional share of Stock, the
Corporation shall pay to the Holder an amount in cash equal to the same fraction
(as the fractional Stock) of the Fair Market Value of a share of Stock
determined as of the date of the applicable Exercise Notice.
5.12 Modification, Extension, and Renewal of Options. Subject to the terms
and conditions of and within the limitations of the Plan, Rule 16b-3, and any
consent required by the last sentence of this Section 5.12, the Committee may
(a) modify, extend, or renew outstanding Options granted under the Plan, (b)
accept the surrender of Options outstanding hereunder (to the extent not
previously exercised) and authorize the granting of new Options in substitution
for outstanding Options (to the extent not previously exercised), and (c) amend
the terms of an Incentive Option at any time to include provisions that have the
effect of changing the Incentive Option to a Nonstatutory Option. Nevertheless,
without the consent of the Holder, the Committee may not modify any outstanding
Options so as to specify a higher or lower Exercise Price or accept the
surrender of outstanding Incentive Options and authorize the granting of new
Options in substitution therefor specifying a higher or lower Exercise Price. In
addition, no modification of an Option granted hereunder shall, without the
consent of the Holder, alter or impair any rights or obligations under any
Option theretofore granted to such Holder under the Plan except, with respect to
Incentive Options, as may be necessary to satisfy the requirements of Section
422 of the Code or as permitted in clause (c) of this Section 5.12.
5.13 Other Agreement Provisions. The Award Agreements relating to Options
shall contain such provisions in addition to those required by the Plan
(including without limitation restrictions or the removal of restrictions upon
the exercise of the Option and the retention or transfer of shares thereby
acquired) as the Committee may deem advisable. Each Award Agreement shall
identify the Option evidenced thereby as an Incentive Option or Nonstatutory
Option, as the case may be, and no Award Agreement shall cover both an Incentive
Option and a Nonstatutory Option. Each Award Agreement relating to an Incentive
Option granted hereunder shall contain such limitations and restrictions upon
the exercise of the Incentive Option to which it relates as shall be necessary
for the Incentive Option to which such Award Agreement relates to constitute an
incentive stock option, as defined in Section 422 of the Code.
14
SECTION 6. STOCK APPRECIATION RIGHTS
All Stock Appreciation Rights granted under the Plan shall comply with, and
the related Award Agreements shall be deemed to include and be subject to, the
terms and conditions set forth in this Section 6 (to the extent each term and
condition applies to the form of Stock Appreciation Right) and also the terms
and conditions set forth in Sections 9 and 10; provided, however, that the
Committee may authorize an Award Agreement related to a Stock Appreciation Right
that expressly contains terms and provisions that differ from the terms and
provisions set forth in Sections 9.2, 9.3, and 9.4 and any of the terms and
provisions of Section 10 (other than Sections 10. 9 and 10.10).
6.1 Form of Right. A Stock Appreciation Right may be granted to an Eligible
Individual (a) in connection with an Option, either at the time of grant or at
any time during the term of the Option, or (b) independent of an Option.
6.2 Rights Related to Options. A Stock Appreciation Right granted pursuant
to an Option shall entitle the Holder, upon exercise, to surrender that Option
or any portion thereof, to the extent unexercised, and to receive payment of an
amount computed pursuant to Section 6.2(b,). That Option shall then cease to be
exercisable to the extent surrendered. Stock Appreciation Rights granted in
connection with an Option shall be subject to the terms of the Award Agreement
governing the Option, which shall comply with the following provisions in
addition to those applicable to Options:
(a) Exercise and Transfer. Subject to Section 10.9, a Stock
Appreciation Right granted in connection with an Option shall be
exercisable only at such time or times and only to the extent that the
related Option is exercisable and shall not be transferable except to the
extent that the related Option is transferable.
(b) Value of Right. Upon the exercise of a Stock Appreciation Right
related to an Option, the Holder shall be entitled to receive payment from
the Corporation of an amount determined by multiplying:
(i) The difference obtained by subtracting the Exercise Price of
a share of Stock specified in the related Option from the Fair Market
Value of a share of Stock on the date of exercise of the Stock
Appreciation Right, by
(ii) The number of shares as to which that Stock Appreciation
Right has been exercised.
6.3 Right Without Option. A Stock Appreciation Right granted independent of
an Option shall be exercisable as determined by the Committee and set forth in
the Award Agreement governing the Stock Appreciation Right, which Award
Agreement shall comply with the following provisions:
15
(a) Number of Shares. Each Award Agreement shall state the total
number of shares of Stock to which the Stock Appreciation Right relates.
(b) Vesting. Each Award Agreement shall state the time or periods in
which the right to exercise the Stock Appreciation Right or a portion
thereof shall vest and the number of shares of Stock for which the right to
exercise the Stock Appreciation Right shall vest at each such time or
period.
(c) Expiration of Rights. Each Award Agreement shall state the date at
which the Stock Appreciation Rights shall expire if not previously
exercised.
(d) Value of Right. Each Stock Appreciation Right shall entitle the
Holder, upon exercise thereof, to receive payment of an amount determined
by multiplying:
(i) The difference obtained by subtracting the Fair Market Value
of a share of Stock on the Date of Grant of the Stock Appreciation
Right from the Fair Market Value of a share of Stock on the date of
exercise of that Stock Appreciation Right, by
(ii) The number of shares as to which the Stock Appreciation
Right has been exercised.
6.4 Limitations on Rights. Notwithstanding Sections 6.2(b) and 6.3(d), the
Committee may limit the amount payable upon exercise of a Stock Appreciation
Right. Any such limitation must be determined as of the Date of Grant and be
noted on the Award Agreement evidencing the Holder's Stock Appreciation Right.
6.5 Payment of Rights. Payment of the amount determined under Section
6.2(b) or 6.3(d) and Section 6.4 may be made, in the sole discretion of the
Committee unless specifically provided otherwise in the Award Agreement, solely
in whole shares of Stock valued at Fair Market Value on the date of exercise of
the Stock Appreciation Right, solely in cash, or in a combination of cash and
whole shares of Stock. If the Committee decides to make full payment in shares
of Stock and the amount payable results in a fractional share, payment for the
fractional share shall be made in cash.
6.6 Payment of Taxes. The Committee may, in its discretion, require a
Holder to pay to the Corporation (or the Corporation's Subsidiary if the Holder
is an employee of a Subsidiary of the Corporation), at the time of the exercise
of a Stock Appreciation Right or thereafter, the amount that the Committee deems
necessary to satisfy the Corporation's or its Subsidiary's current or future
obligation to withhold federal, state, or local income or other taxes that the
Holder incurs by exercising a Stock Appreciation Right. In connection with the
exercise of a Stock Appreciation Right requiring tax withholding, a Holder may
(a) direct the Corporation to withhold from the shares of Stock to be issued to
the Holder the number of shares necessary to satisfy the Corporation's
obligation to withhold taxes, that determination to be based on the shares' Fair
Market Value as of the date of exercise; (b) deliver to the Corporation
sufficient shares of Stock (based upon the Fair Market Value as of the date of
such delivery) to satisfy the Corporation's tax withholding obligations, which
tax withholding obligation is based on the shares' Fair Market Value as of the
later of the date of exercise or the date as of which the shares of Stock issued
in connection with such exercise become includible in the income of the Holder;
or (c) deliver sufficient cash to the Corporation to satisfy its tax withholding
obligations. Holders who elect to have Stock withheld pursuant to (a) or (b)
16
above must make the election at the time and in the manner that the Committee
prescribes. The Committee may, in its sole discretion, deny any Holder's request
to satisfy withholding obligations through Stock instead of cash. In the event
the Committee subsequently determines that the aggregate Fair Market Value (as
determined above) of any shares of Stock withheld or delivered as payment of any
tax withholding obligation is insufficient to discharge that tax withholding
obligation, then the Holder shall pay to the Corporation, immediately upon the
Committee's request, the amount of that deficiency in the form of payment
requested by the Commission.
6.7 Other Agreement Provisions. The Award Agreements relating to Stock
Appreciation Rights shall contain such provisions in addition to those required
by the Plan (including without limitation restrictions or the removal of
restrictions upon the exercise of the Stock Appreciation Right and the retention
or transfer of shares thereby acquired) as the Committee may deem advisable.
SECTION 7. RESTRICTED STOCK AWARDS
All Restricted Stock Awards granted under the Plan shall comply with and be
subject to, and the related Award Agreements shall be deemed to include, the
terms and conditions set forth in this Section 7 and also to the terms and
conditions set forth in Sections 9 and 10; provided, however, that the Committee
may authorize an Award Agreement related to a Restricted Stock Award that
expressly contains terms and provisions that differ from the terms and
provisions set forth in Sections 9.2, 9.3, and 9.4 and the terms and provisions
set forth in Section 10 (other than Sections 10.9 and 10.10).
7.1 Restrictions. All shares of Restricted Stock Awards granted or sold
pursuant to the Plan shall be subject to the following conditions:
(a) Transferability. The shares may not be sold, transferred, or
otherwise alienated or hypothecated until the restrictions are removed or
expire.
(b) Conditions to Removal of Restrictions. Conditions to removal or
expiration of the restrictions may include, but are not required to be
limited to, continuing employment or service as a director, officer, or Key
Employee or achievement of performance objectives described in the Award
Agreement.
(c) Legend. Each certificate representing Restricted Stock Awards
granted pursuant to the Plan shall bear a legend making appropriate
reference to the restrictions imposed.
(d) Possession. The Committee may require the Corporation to retain
physical custody of the certificates representing Restricted Stock Awards
during the restriction period and may require the Holder of the Award to
execute stock powers in blank for those certificates and deliver those
17
stock powers to the Corporation, or the Committee may require the Holder to
enter into an escrow agreement providing that the certificates representing
Restricted Stock Awards granted or sold pursuant to the Plan shall remain
in the physical custody of an escrow holder until all restrictions are
removed or expire.
(e) Other Conditions. The Committee may impose other conditions on any
shares granted or sold as Restricted Stock Awards pursuant to the Plan as
it may deem advisable, including without limitation (i) restrictions under
the Securities Act or Exchange Act, (ii) the requirements of any securities
exchange upon which the shares or shares of the same class are then listed,
and (iii) any state securities law applicable to the shares.
7.2 Expiration of Restriction. The restrictions imposed in Section 7.1 on
Restricted Stock Awards shall lapse as determined by the Committee and set forth
in the applicable Award Agreement, and the Corporation shall promptly deliver to
the Holder of the Restricted Stock Award a certificate representing the number
of shares for which restrictions have lapsed, free of any restrictive legend
relating to the lapsed restrictions. Each Restricted Stock Award may have a
different restriction period as determined by the Committee in its sole
discretion. The Committee may, in its discretion, prospectively reduce the
restriction period applicable to a particular Restricted Stock Award.
7.3 Rights as Shareholder. Subject to the provisions of Sections 7.l and
10.10, the Committee may, in its discretion, determine what rights, if any, the
Holder shall have with respect to the Restricted Stock Awards granted or sold,
including the right to vote the shares and receive all dividends and other
distributions paid or made with respect thereto.
7.4 Payment of Taxes. The Committee may, in its discretion, require a
Holder to pay to the Corporation (or the Corporation's Subsidiary if the Holder
is an employee of a Subsidiary of the Corporation) the amount that the Committee
deems necessary to satisfy the Corporation's or its Subsidiary's current or
future obligation to withhold federal, state, or local income or other taxes
that the Holder incurs by reason of the Restricted Stock Award. The Holder may
(a) direct the Corporation to withhold from the shares of Stock to be issued to
the Holder the number of shares necessary to satisfy the Corporation's
obligation to withhold taxes, that determination to be based on the shares' Fair
Market Value as of the date on which tax withholding is to be made; (b) deliver
to the Corporation sufficient shares of Stock (based upon the Fair Market Value
as of the date of such delivery) to satisfy the Corporation's tax withholding
obligations, which tax withholding obligation is based on the shares' Fair
Market Value as of the later of the date of issuance or the date as of which the
shares of Stock issued become includible in the income of the Holder; or (c)
deliver sufficient cash to the Corporation to satisfy its tax withholding
obligations. Holders who elect to have Stock withheld pursuant to (a) or (b)
above must make the election at the time and in the manner that the Committee
prescribes. The Committee may, in its sole discretion, deny any Holder's request
to satisfy withholding obligations through Stock instead of cash. In the event
the Committee subsequently determines that the aggregate Fair Market Value (as
determined above) of any shares of Stock withheld or delivered as payment of any
tax withholding obligation is insufficient to discharge that tax withholding
obligation, then the Holder shall pay to the Corporation, immediately upon the
Committee's request, the amount of that deficiency.
18
7.5 Other Agreement Provisions. The Award Agreements relating to Restricted
Stock Awards shall contain such provisions in addition to those required by the
Plan as the Committee may deem advisable.
SECTION 8. AWARDS TO NON-EMPLOYEE DIRECTORS
8.1 Awards to Committee Members. The full Board of Directors shall
determine the number of Awards to be granted to members of the Committee, the
Exercise Price and the vesting schedule thereof.
8.2 Eligible for Awards. Non-Employee Directors shall be eligible to
receive any Awards under the Plan other than an Award of an Incentive Option.
SECTION 9. ADJUSTMENT PROVISIONS
9.1 Adjustment of Awards and Authorized Stock. The terms of an Award and
the number of shares of Stock authorized pursuant to Section 2. 1 and Section 8
for issuance under the Plan shall be subject to adjustment from time to time, in
accordance with the following provisions:
(a) If at any time, or from time to time, the Corporation shall
subdivide as a whole (by reclassification, by a Stock split, by the
issuance of a distribution on Stock payable in Stock, or otherwise) the
number of shares of Stock then outstanding into a greater number of shares
of Stock, then (i) the maximum number of shares of Stock available for the
Plan as provided in Section 2.1 shall be increased proportionately, and the
kind of shares or other securities available for the Plan shall be
appropriately, adjusted, (ii) the number of shares of Stock (or other kind
of shares or securities) that may be acquired under any Award shall be
increased proportionately, and (iii) the price (including Exercise Price)
for each share of Stock (or other kind of shares or securities) subject to
then outstanding Awards shall be reduced proportionately, without changing
the aggregate purchase price or value as to which outstanding Awards remain
exercisable or subject to restrictions.
(b) If at any time, or from time to time, the Corporation shall
consolidate as a whole (by reclassification, reverse Stock split, or
otherwise) the number of shares of Stock then outstanding into a lesser
number of shares of Stock, then (i) the maximum number of shares of Stock
available for the Plan as provided in Section 2.1 shall be decreased
proportionately, and the kind of shares or other securities available for
the Plan shall be appropriately adjusted, (ii) the number of shares of
Stock (or other kind of shares or securities) that may be acquired under
any Award shall be decreased proportionately, and (iii) the price
(including Exercise Price) for each share of Stock (or other kind of shares
or securities) subject to then outstanding Awards shall be increased
proportionately, without changing the aggregate purchase price or value as
to which outstanding Awards remain exercisable or subject to restrictions.
19
(c) Whenever the number of shares of Stock subject to outstanding
Awards and the price for each share of Stock subject to outstanding Awards
are required to be adjusted as provided in this Section 9.1, the Committee
shall promptly prepare a notice setting forth, in reasonable detail, the
event requiring adjustment, the amount of the adjustment, the method by
which such adjustment was calculated, and the change in price and the
number of shares of Stock, other securities, cash, or property purchasable
subject to each Award after giving effect to the adjustments. The Committee
shall promptly give each Holder such a notice.
(d) Adjustments under Sections 9(a) and (b) shall be made by the
Committee, and its determination as to what adjustments shall be made and
the extent thereof shall be final, binding, and conclusive. No fractional
interest shall be issued under the Plan on account of any such adjustments.
9.2 Changes in Control. Any Award Agreement may provide that, upon the
occurrence of a Change in Control, one or more of the following apply: (a) each
Holder of an Option shall immediately be granted corresponding Stock
Appreciation Rights; (b) all outstanding Stock Appreciation Rights and Options
shall immediately become fully vested and exercisable in full, including that
portion of any Stock Appreciation Right or Option that pursuant, to the terms
and provisions of the applicable Award Agreement had not yet become exercisable
(the total number of shares of Stock as to which a Stock Appreciation Right or
Option is exercisable upon the occurrence of a Change in Control is referred to
herein as the "Total Shares"); and (c) the restriction period of any Restricted
Stock Award shall immediately be accelerated and the restrictions shall expire.
An Award Agreement does not have to provide for any of the foregoing. If a
Change in Control involves a Restructuring or occurs in connection with a series
of related transactions involving a Restructuring and if such Restructuring is
in the form of a Non-Surviving Event and as a part of such Restructuring shares
of stock, other securities, cash, or property shall be issuable or deliverable
in exchange for Stock, then the Holder of an Award shall be entitled to purchase
or receive (in lieu of the Total Shares that the Holder would otherwise be
entitled to purchase or receive), as appropriate for the form of Award, the
number of shares of Stock, other securities, cash, or property to which that
number of Total Shares would have been entitled in connection with such
Restructuring (and, for Options, at an aggregate exercise price equal to the
Exercise Price that would have been payable if that number of Total Shares had
been purchased on the exercise of the Option immediately before the consummation
of the Restructuring). Nothing in this Section 9.2 shall impose on a Holder the
obligation to exercise any Award immediately before or upon the Change of
Control, or cause a Holder to forfeit the right to exercise the Award during the
remainder of the original term of the Award because of a Change in Control.
9.3 Restructuring Without Change in Control. In the event a Restructuring
shall occur at any time while there is any outstanding Award hereunder and the
Restructuring does not occur in connection with a Change in Control or a series
of related transactions involving a Change in Control, then:
20
(a) no outstanding Option or Stock Appreciation Right shall
immediately become fully vested and exercisable in full merely because of
the occurrence of the Restructuring;
(b) no Holder of an Option shall automatically be granted
corresponding Stock Appreciation Rights;
(c) the restriction period of any Restricted Stock Award shall not
immediately be accelerated and the restrictions expire merely because of
the occurrence of the Restructuring; and
(d) at the option of the Committee, the Committee may (but shall not
be required to) cause the Corporation to take any one or more of the
following actions:
(i) accelerate in whole or in part the time of the vesting and
exercisability of any one or more of the, outstanding Stock
Appreciation Rights and Options so as to provide that those Stock
Appreciation Rights and Options shall be exercisable before, upon, or
after the consummation of the Restructuring;
(ii) grant each Holder of an Option corresponding Stock
Appreciation Rights;
(iii) accelerate in whole or in part the expiration of some or
all of the restrictions on any Restricted Stock Award;
(iv) if the Restructuring is in the form of a Non-Surviving
Event, cause the surviving entity to assume in whole or in part any
one or more; of the outstanding Awards upon such terms and provisions
as the Committee deems desirable; or
(v) redeem in whole or in part any one or more of the outstanding
Awards, (whether or not then exercisable) in consideration of a cash
payment, as such payment may be reduced for tax withholding
obligations as contemplated in Sections 5.9, 6.6, or 7.4, as
applicable, in an amount equal to:
(A) for Options and Stock Appreciation Rights granted in
connection with Options, the excess of (1) the Fair Market Value,
determined as of the date immediately preceding the consummation
of the Restructuring, of the aggregate number of shares of Stock
subject, to the Award and as to which the Award is being redeemed
over (2) the Exercise Price for that number of shares of Stock;
(B) for Stock Appreciation Rights not granted in connection
with an Option, the excess of (1) the Fair Market Value,
determined as of the date immediately preceding the consummation
of the Restructuring, of the aggregate number of shares of Stock
subject to the Award and as to which the Award is being redeemed
over (2) the Fair Market Value of that number of shares of Stock
on the Date of Grant; and
21
(C) for Restricted Stock Awards, the Fair Market Value,
determined as of the date immediately preceding the consummation
of the Restructuring, of the aggregate number of shares of Stock
subject to the Award and as to which the Award is being redeemed.
The Corporation shall promptly notify each Holder of any election or action
taken by the Corporation under this Section 9.3. In the event of any election or
action taken by the Corporation pursuant to this Section 9.3 that requires the
amendment or cancellation of any Award Agreement as may be specified in any
notice to the Holder thereof, that Holder shall promptly deliver that Award
Agreement to the Corporation in order for that amendment or cancellation to be
implemented by the Corporation and the Committee. The failure of the Holder to
deliver any such Award Agreement to the Corporation as provided in the preceding
sentence shall not, in any manner affect the validity or enforceability of any
action taken by the Corporation and the Committee under this Section 9.3,
including without limitation any redemption of an Award as of the consummation
of a Restructuring. Any cash payment to be made by the Corporation pursuant to
this Section 9.3 in connection with the redemption of any outstanding Awards
shall be paid to the Holder thereof currently with the delivery to the
Corporation of the Award Agreement evidencing that Award; provided, however,
that any such redemption shall be effective upon the consummation of the
Restructuring notwithstanding that the payment of the redemption price may occur
subsequent to the consummation. If all or any portion of an outstanding Award is
to be exercised or accelerated upon or after the consummation of a Restructuring
that does not occur in connection with a Change in Control and is in the form of
a Non-Surviving Event, and as a part of that Restructuring shares of stock,
other securities, cash, or property shall be issuable or deliverable in exchange
for Stock, then the Holder of the Award shall thereafter be entitled to purchase
or receive (in lieu of the number of shares of Stock that the Holder would
otherwise be entitled to purchase or receive) the number of shares of Stock,
other securities, cash, or property to which such number of shares of Stock
would have been entitled in connection with the Restructuring (and, for Options,
upon payment of the aggregate exercise price equal to the Exercise Price that
would have been payable if that number of Total Shares had been purchased on the
exercise of the Option immediately before the consummation of the Restructuring)
and such Award shall be subject to adjustments that shall be as nearly
equivalent as may be practical to the adjustments provided for in this Section
9.
9.4 Notice of Restructuring. The Corporation shall attempt to keep all
Holders informed with respect to any Restructuring or of any potential
Restructuring to the same extent that the Corporation's shareholders are
informed by the Corporation of any such event or potential event.
SECTION 10. ADDITIONAL PROVISIONS
10.1 Termination of Employment. If a Holder is an Eligible Individual
because the Holder is an Employee and if that employment relationship is
terminated for any reason other than (a) that Holder's death or (b) that
22
Holder's Disability (hereafter defined), then any and all Awards held by such
Holder in such Holder's capacity as an Employee as of the date of the
termination that are not yet exercisable (or for which restrictions have not
lapsed) shall become null and void as of the date of such termination; provided,
however, that the portion, if any, of such Awards that are exercisable as of the
date of termination shall be exercisable for a period of the lesser of (a) the
remainder of the term of the Award or (b) the date which is 30 days following
the date of termination. Any portion of an Award not exercised upon the
expiration of the lesser of the periods specified above shall be null and void
unless the Holder dies during such period, in which case the provisions of
Section 10.3 shall govern.
10.2 Other Loss of Eligibility - Non-Employees. If a Holder is an Eligible
Individual because the Holder is serving in a capacity other than as an Employee
and if that capacity is terminated for any reason other than the Holder's death
or Disability, then that portion, if any, of any and all Awards held by the
Holder that were granted because of that capacity which are not yet exercisable
(or for which restrictions have not lapsed) as of the date of the termination
shall become null and void as of the date of the termination; provided, however,
that the portion, if any, of any and all Awards held by the Holder that are then
exercisable as of the date of the termination shall be exercisable for a period
of the lesser of (a) the remainder of the term of the Award or (b) 30 days
following the date such capacity is terminated. If a Holder is an Eligible
Individual because the Holder is serving in a capacity other than as an Employee
and if that capacity is terminated by reason of the Holder's death or
Disability, then the portion, if any, of any and all Awards held by the Holder
that are not yet exercisable (or for which restrictions have not lapsed) as of
the date of termination for death or Disability shall become exercisable (and
the restrictions thereon, if any, shall lapse) and all such Awards held by that
Holder as of the date of termination that are exercisable (either as a result of
this sentence or otherwise) shall be exercisable for a period of the lesser of
(a) the remainder of the term of the Award or (b) the date which is 30 days
following the date of termination. Any portion of an Award not exercised upon
the expiration of the periods specified in (a) or (b) of the preceding two
sentences shall be null and void upon the expiration of such period, as
applicable.
10.3 Death. Upon the death of a Holder, any and all Awards held by the
Holder that are not then exercisable (or for which restrictions have not lapsed)
shall become immediately exercisable (and any restrictions shall immediately
lapse) and such Awards shall be exercisable by that Holder's legal
representatives, heirs, legatees, or distributees for a period of 90 days
following the date of the Holder's death. Any portion of an Award not exercised
upon the expiration of such period shall be null and void. Except as expressly
provided in this Section 10.3, no Award held by a Holder shall be exercisable
after the death of that Holder.
10.4 Disability. If a Holder is an Eligible Individual because the Holder
is an Employee and if that employment relationship is terminated by reason of
the Holder's Disability, then the portion, if any, of any and all Awards held by
the Holder that are not then exercisable (or for which restrictions have not
lapsed) shall become immediately exercisable (and any restrictions shall
immediately lapse) and such Awards shall be exercisable by the Holder, his
guardian or his legal representative for a period of 180 days following the date
of such termination. Any portion of an Award not exercised upon the expiration
of such period shall be null and void unless the Holder dies during such period,
in which event the provisions of Section 10.3 shall govern. "Disability" shall
have the meaning given it in the employment agreement of the Holder; provided,
however, that if the Holder has no employment agreement, "Disability" shall
23
mean, as determined by the Board of Directors in the sole discretion exercised
in good faith of the Board of Directors, a physical or mental impairment of
sufficient severity that either the Holder is unable to continue performing the
duties he performed before such impairment or the Holder's condition entitles
him to disability benefits under any insurance or employee benefit plan of the
Corporation or its Subsidiaries and that impairment or condition is cited by the
Corporation as the reason for termination of the Holder's employment.
10.5 Leave of Absence. With respect to an Award, the Committee may, in its
sole discretion, determine that any Holder who is on leave of absence for any
reason will be considered to still be in the employ of the Corporation or any of
its Subsidiaries, as applicable, for any or all purposes of the Plan and the
Award Agreement of such Holder.
10.6 Transferability of Awards. In addition to such other terms and
conditions as may be included in a particular Award Agreement, an Award
requiring exercise shall be exercisable during a Holder's lifetime only by that
Holder or by that Holder's guardian or legal representative. An Award requiring
exercise shall not be transferable other than (i) by will or the laws of descent
and distribution, or (ii) in accordance with the terms of the Award Agreement.
10.7 Forfeiture and Restrictions on Transfer. Each Award Agreement may
contain or otherwise provide for conditions giving rise to the forfeiture of the
Stock acquired pursuant to an Award or otherwise and may also provide for those
restrictions on the transferability of shares of the Stock acquired pursuant to
an Award or otherwise that the Committee in its sole and absolute discretion may
deem proper or advisable. The conditions giving rise to forfeiture may include,
but need not be limited to, the requirement that the Holder render substantial
services to the Corporation or its Subsidiaries for a specified period of time.
The restrictions on transferability may include, but need not be limited to,
options and rights of first refusal in favor of the Corporation and shareholders
of the Corporation other than the Holder of such shares of Stock who is a party
to the particular Award Agreement or a subsequent Holder of the shares of Stock
who is bound by that Award Agreement.
10.8 Delivery of Certificates of Stock. Subject to Section 10.9, the
Corporation shall promptly issue and deliver a certificate representing the
number of shares of Stock as to which (a) an Option has been exercised after the
Corporation receives an Exercise Notice and upon receipt by the Corporation of
the Exercise Price and any tax withholding as may be requested, (b) a Stock
Appreciation Right has been exercised (to the extent the Committee determines to
pay such Stock Appreciation Right in shares of Stock pursuant to Section 6.5)
and upon receipt by the Corporation of any tax withholding as may be requested,
and (c) restrictions have lapsed with respect to a Restricted Stock Award and
upon receipt by the Corporation of any tax withholding as may be requested. The
value of the shares of Stock or cash transferable because of an Award under the
Plan shall not bear any interest owing to the passage of time, except as may be
otherwise provided in an Award Agreement. If a Holder is entitled to receive
certificates representing Stock received for more than one form of Award under
the Plan, separate Stock certificates shall be issued with respect to Incentive
Options and Nonstatutory Options.
24
10.9 Conditions to Delivery of Stock. Nothing herein or in any Award
granted hereunder or any Award Agreement shall require the Corporation to issue
any shares with respect to any Award if that issuance would, in the opinion of
counsel for the Corporation, constitute a violation of the Securities Act or any
similar or superseding statute or statutes, any other applicable statute or
regulation, or the rules of any applicable securities exchange or securities
association, as then in effect. At the time of any exercise of an Option or
Stock Appreciation Right, or at the time of any grant of a Restricted Stock
Award, the Corporation may, as a condition precedent to the exercise of such
Option or Stock Appreciation Right or vesting of any Restricted Stock Award,
require from the Holder of the Award (or in the event of his death, his legal
representatives, heirs, legatees, or distributees) such written representations,
if any, concerning the Holder's intentions with regard to the retention or
disposition of the shares of Stock being acquired pursuant to the Award and such
written covenants and agreements, if any, as to the manner of disposal of such
shares as, in the opinion of counsel to the Corporation, may be necessary to
ensure that any disposition by that Holder (or in the event of the Holder's
death, his legal representatives, heirs, legatees, or distributees) will not
involve a violation of the Securities Act or any similar or superseding statute
or statutes, any other applicable state or federal statute or regulation, or any
rule of any applicable securities exchange or securities association, as then in
effect.
10.10 Certain Directors and Officers. With respect to Holders who are
directors or officers of the Corporation or any of its Subsidiaries and who are
subject to Section 16(b) of the Exchange Act, Awards and all rights under the
Plan shall be exercisable during the Holder's lifetime only by the Holder or the
Holder's guardian or legal representative, but not for at least six months after
grant, unless (a) the Board of Directors expressly authorizes that an Award
shall be exercisable before the expiration of the six-month period or (b) the
death or Disability of the Holder occurs before the expiration of the six-month
period. In addition, no such officer or director shall exercise any Stock
Appreciation Right or have shares of Stock withheld to pay tax withholding
obligations within the first six months of the term of an Award. Any election by
any such officer or director to have tax withholding obligations satisfied by
the withholding of shares of Stock shall be irrevocable and shall be
communicated to the Committee during the period beginning on the third day
following the date of release of quarterly or annual summary statements of sales
and earnings and ending on the twelfth business day following such date (the
"Window Period") or by an irrevocable election communicated to the Committee at
least six months before the date of exercise of the Award for which such
withholding is desired. Any election by an officer or director to receive cash
in full or partial settlement of a Stock Appreciation Right, as well as any
exercise by such individual of a Stock Appreciation Right for cash, in either
case to the extent permitted under the applicable Award Agreement or otherwise
permitted by the Committee, shall be made during the Window Period or within any
other periods that the Committee shall specify from time to time.
10.11 Securities Act Legend. Certificates for shares of Stock, when issued,
may have the following legend, or statements of other applicable restrictions
(including, without limitation, restrictions required under any federal, state
or foreign law), endorsed thereon and may not be immediately transferable:
25
THE SHARES OF STOCK REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY STATE
SECURITIES LAWS. THE SHARES MAY NOT BE OFFERED FOR SALE, SOLD,
PLEDGED, TRANSFERRED, OR OTHERWISE DISPOSED OF UNTIL THE HOLDER HEREOF
PROVIDES EVIDENCE SATISFACTORY TO THE ISSUER (WHICH, IN THE DISCRETION
OF THE ISSUER, MAY INCLUDE AN OPINION OF COUNSEL SATISFACTORY TO THE
ISSUER) THAT SUCH OFFER, SALE, PLEDGE, TRANSFER, OR OTHER DISPOSITION
WILL NOT VIOLATE APPLICABLE FEDERAL OR STATE LAWS.
This legend shall not be required for shares of Stock issued pursuant to an
effective registration statement under the Securities Act.
10.12 Legend for Restrictions on Transfer. Each certificate representing
shares issued to a Holder pursuant to an Award granted under the Plan shall, if
such shares are subject to any transfer restriction, including a right of first
refusal, provided for under this Plan or an Award Agreement, bear a legend that
complies with applicable law with respect to the restrictions on transferability
contained in this Section 10. 12, such as:
THE SHARES OF STOCK REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO
RESTRICTIONS ON TRANSFERABILITY IMPOSED BY THAT CERTAIN INSTRUMENT
ENTITLED "INDUSTRIAL DATA SYSTEMS CORPORATION 1998 INCENTIVE PLAN" AS
ADOPTED BY THE CORPORATION, AND AN AGREEMENT THEREUNDER BETWEEN THE
CORPORATION AND THE INITIAL HOLDER THEREOF DATED
_______________________,____, AND MAY NOT BE TRANSFERRED, SOLD, OR
OTHERWISE DISPOSED OF EXCEPT AS THEREIN PROVIDED. THE CORPORATION WILL
FURNISH A COPY OF SUCH INSTRUMENT AND AGREEMENT TO THE RECORD HOLDER
OF THIS CERTIFICATE WITHOUT CHARGE ON REQUEST TO THE CORPORATION AT
ITS PRINCIPAL PLACE OF BUSINESS OR REGISTERED OFFICE.
10.13 Rights as a Shareholder. A Holder shall have no right as a
shareholder with respect to any shares covered by his Award until a certificate
representing those shares is issued in his name. No adjustment shall be made for
dividends (ordinary or extraordinary, whether in cash or other property) or
distributions or other rights for which the record date is before the date that
certificate is issued, except as contemplated by Section 9 hereof. Nevertheless,
dividends, dividend equivalent rights and voting rights may be extended to and
made part of any Award denominated in Stock or units of Stock, subject to such
terms, conditions and restrictions as the Committee may establish. The Committee
may also establish rules and procedures for the crediting of interest on
deferred cash payments and dividend equivalents for deferred payment denominated
in Stock or units of Stock.
10.14 Furnish Information. Each Holder shall furnish to the Corporation all
information requested by the Corporation to enable it to comply with any
reporting or other requirement imposed upon the Corporation by or under any
applicable statute or regulation.
26
10.15 Obligation to Exercise. The granting of an Award hereunder shall
impose no obligation upon the Holder to exercise the same or any part thereof.
10.16 Adjustments to Awards. Subject to the general limitations set forth
in Sections 5, 6, and 9, the Committee may make any adjustment in the Exercise
Price of, the number of shares subject to, or the terms of a Nonstatutory Option
or Stock Appreciation Right by canceling an outstanding Nonstatutory Option or
Stock Appreciation Right and regranting a Nonstatutory Option or Stock
Appreciation Right. Such adjustment shall be made by amending, substituting, or
regranting an outstanding Nonstatutory Option or Stock Appreciation Right. Such
amendment, substitution, or regrant may result in terms and conditions that
differ from the terms and conditions of the original Nonstatutory Option or
Stock Appreciation Right. The Committee may not, however, impair the rights of
any Holder of previously granted Nonstatutory Options or Stock Appreciation
Rights without that Holder's consent. If such action is effected by amendment,
such amendment shall be deemed effective as of the Date of Grant of the amended
Award.
10.17 Remedies. The Corporation shall be entitled to recover from a Holder
reasonable attorneys' fees incurred in connection with the enforcement of the
terms and provisions of the Plan and any Award Agreement whether by an action to
enforce specific performance or for damages for its breach or otherwise.
10.18 Information Confidential. As partial consideration for the granting
of each Award hereunder, the Holder shall agree with the Corporation that he
will keep confidential all information and knowledge that he has relating to the
manner and amount of his participation in the Plan; provided, however, that such
information may be disclosed as required by law and may be given in confidence
to the Holder's spouse, tax or financial advisors, or to a financial institution
to the extent that such information is necessary to secure a loan. In the event
any breach of this promise comes to the attention of the Committee, it shall
take into consideration that breach in determining whether to recommend the
grant of any future Award to that Holder, as a factor mitigating against the
advisability of granting any such future Award to that Person.
10.19 Consideration. No Option or Stock Appreciation Right shall be
exercisable and no restriction on any Restricted Stock Award shall lapse with
respect to a Holder unless and until the Holder thereof shall have paid cash or
property to, or performed services for, the Corporation or any of its
Subsidiaries that the Committee believes is equal to or greater in value than
the par value of the Stock subject to such Award.
SECTION 11. DURATION AND AMENDMENT OF PLAN
11.1 Duration. No Awards may be granted hereunder after the date that is
ten years from the earlier of (a) the date the Plan is adopted by the Board of
Directors or (b) the date the Plan is approved by the shareholders of the
Corporation.
11.2 Amendment. The Board of Directors may, insofar as permitted by law,
with respect to any shares which, at the time, are not subject to Awards,
suspend or discontinue the Plan or revise or amend it in any respect whatsoever
and may amend any provision of the Plan or any Award Agreement to make the Plan
27
or the Award Agreement, or both, comply with Section 16(b) of the Exchange Act
and the exemptions from that Section in the regulations thereunder. The Board of
Directors may also amend, modify, suspend, or terminate the Plan for the purpose
of meeting or addressing any changes in other legal requirements applicable to
the Corporation or the Plan or for any other purpose permitted by law. The Plan
may not be amended without the consent of the holders of a majority of the
shares of Stock then outstanding to (a) increase materially the aggregate number
of shares of Stock that may be issued under the Plan (except for adjustments
pursuant to Section 9 hereof), (b) increase materially the benefits accruing to
Eligible Individuals under the Plan, or (c) modify materially the requirements
about eligibility for participation in the Plan; provided, however, that such
amendments may be made without the consent of shareholders of the Corporation if
changes occur in law or other legal requirements (including Rule 16b-3) that
would permit such changes. In connection with any amendment of the Plan, the
Board of Directors shall be authorized to incorporate such provisions as shall
be necessary for amounts paid under the Plan to be exempt from Section 162(m) of
the Code.
SECTION 12. GENERAL
12.1 Application of Funds. The proceeds received by the Corporation from
the sale of shares pursuant to Awards may be used for any general corporate
purpose.
12.2 Right of the Corporation and Subsidiaries to Terminate Employment.
Nothing contained in the Plan or in any Award Agreement shall confer upon any
Holder the right to continue in the employ of the Corporation or any Subsidiary
or interfere in any way with the rights of the Corporation or any Subsidiary to
terminate the Holder's employment at any time.
12.3 No Liability for Good Faith Determinations. Neither the members of the
Board of Directors nor any member of the Committee shall be liable for any act,
omission or determination taken or made in good faith with respect to the Plan
or any Award granted under it; and members of the Board of Directors and the
Committee shall be entitled to indemnification and reimbursement by the
Corporation in respect of any claim, loss, damage, or expense (including
attorneys' fees, the costs of settling any suit, provided such settlement is
approved by independent legal counsel selected by the Corporation, and amounts
paid in satisfaction of a judgment, except a judgment based on a finding of bad
faith) arising therefrom to the full extent permitted by law and under any
directors' and officers' liability or similar insurance coverage that may from
time to time be in effect. This right to indemnification shall be in addition
to, and not a limitation on, any other indemnification rights any member of the
Board of Directors or the Committee may have.
12.4 Other Benefits. Participation in the Plan shall not preclude the
Holder from eligibility in any other stock or stock option plan of the
Corporation or any Subsidiary or any old age benefit, insurance, pension, profit
sharing retirement, bonus, or other extra compensation plans that the
Corporation or any Subsidiary has adopted, or may, at any time, adopt for the
benefit of its Employees. Neither the adoption of the Plan by the Board of
Directors nor the submission of the Plan to the shareholders of the Corporation
for approval shall be construed as creating any limitations on the power of the
Board of Directors to adopt such other incentive arrangements as it may deem
desirable, including, without limitation, the granting of stock options and the
awarding of Stock and cash otherwise than under the Plan and such arrangements
may be either generally applicable or applicable only in specific cases.
28
12.5 Exclusion From Pension and Profit-Sharing Compensation. By acceptance
of an Award (regardless of form), as applicable, each Holder shall be deemed to
have agreed that the Award is special incentive compensation that will not be
taken into account in any manner as salary, compensation, or bonus in
determining the amount of any payment under any pension, retirement, or other
employee benefit plan of the Corporation or any Subsidiary, unless any pension,
retirement, or other employee benefit plan of the Corporation or Subsidiary
expressly provides that such Award shall be so considered for purposes of
determining the amount of any payment under any such plan. In addition, each
beneficiary of a deceased Holder shall be deemed to have agreed that the Award
will not affect the amount of any life insurance coverage, if any, provided by
the Corporation or a Subsidiary on the life of the Holder that is payable to the
beneficiary under any life insurance plan covering Employees of the Corporation
or any Subsidiary.
12.6 Execution of Receipts and Releases. Any payment of cash or any
issuance or transfer of shares of Stock to the Holder, or to his legal
representative, heir, legatee, or distributes, in accordance with the provisions
hereof, shall, to the extent thereof, be in full satisfaction of all claims of
such Persons hereunder. The Committee may require any Holder, legal
representative, heir, legatee, or distributes, as a condition precedent to such
payment, to execute a release and receipt therefor in such form as it shall
determine.
12.7 Unfunded Plan. Insofar as it provides for Awards of cash and Stock,
the Plan shall be unfunded. Although bookkeeping accounts may be established
with respect to Holders who are entitled to cash, Stock, or rights thereto under
the Plan, any such accounts shall be used merely as a bookkeeping convenience.
The Corporation shall not be required to segregate any assets that may at any
time be represented by cash, Stock, or rights thereto, nor shall the Plan be
construed as providing for such segregation, nor shall the Corporation nor the
Board of Directors nor the Committee be deemed to be a trustee of any cash,
Stock, or rights thereto to be granted under the Plan. Any liability of the
Corporation to any Holder with respect to a grant of cash, Stock, or rights
thereto under the Plan shall be based solely upon any contractual obligations
that may be created by the Plan and any Award Agreement; no such obligation of
the Corporation shall be deemed to be secured by any pledge or other encumbrance
on any property of the Corporation. Neither the Corporation nor the Board of
Directors nor the Committee shall be required to give any security or bond for
the performance of any obligation that may be created by the Plan.
12.8 No Guarantee of Interests. Neither the Committee nor the Corporation
guarantees the Stock of the Corporation from loss or depreciation.
12.9 Payment of Expenses. All expenses incident to the administration,
termination, or protection of the Plan, including, but not limited to, legal and
accounting fees, shall be paid by the Corporation or its Subsidiaries; provided,
however, the Corporation or a Subsidiary may recover any and all damages, fees,
expenses, and costs arising out of any actions taken by the Corporation to
enforce its right to purchase Stock under this Plan.
29
12.10 Corporation Records. Records of the Corporation or its Subsidiaries
regarding the Holder's period of employment, termination of employment and the
reason therefore, leaves of absence, re-employment, and other matters shall be
conclusive for all purposes hereunder, unless determined by the Committee to be
incorrect.
12.11 Information. The Corporation and its Subsidiaries shall, upon request
or as may be specifically required hereunder, furnish or cause to be furnished
all of the information or documentation which is necessary or required by the
Committee to perform its duties and functions under the Plan.
12.12 No Liability of Corporation. The Corporation assumes no obligation or
responsibility to the Holder or his legal representatives, heirs, legatees, or
distributees for any act of, or failure to act on the part of, the Committee.
12.13 Corporation Action. Any action required of the Corporation shall be
by resolution of its Board of Directors or by a Person authorized to act by
resolution of the Board of Directors.
12.14 Severability. In the event that any provision of this Plan, or the
application hereof to any Person or circumstance, is held by a court of
competent jurisdiction to be invalid, illegal, or unenforceable in any respect
under present or future laws effective during the effective term of any such
provision, such invalid, illegal, or unenforceable provision shall be fully
severable; and this Plan shall then be construed and enforced as if such
invalid, illegal, or unenforceable provision had not been contained in this
Plan; and the remaining provisions of this Plan shall remain in full force and
effect and shall not be affected by the illegal, invalid, or unenforceable
provision or by its severance from this Plan. Furthermore, in lieu of each such
illegal, invalid, or unenforceable provision, there shall be added automatically
as part of this Plan a provision as similar in terms to such illegal, invalid,
or unenforceable provision as may be possible and be legal, valid, and
enforceable. If any of the terms or provisions of this Plan conflict with the
requirements of Rule 16b-3 (as those terms or provisions are applied to Eligible
Individuals who are subject to Section 16(b) of the Exchange Act), then those
conflicting terms or provisions shall be deemed inoperative to the extent they
so conflict with the requirements of Rule 16b-3 and, in lieu of such conflicting
provision, there shall be added automatically as part of this Plan a provision
as similar in terms to such conflicting provision as may be possible and not
conflict with the requirements of Rule 16b-3. If any of the terms or provisions
of this Plan conflict with the requirements of Section 422 of the Code (with
respect to Incentive Options), then those conflicting terms or provisions shall
be deemed inoperative to the extent they so conflict with the requirements of
Section 422 of the Code and, in lieu of such conflicting provision, there shall
be added automatically as part of this Plan a provision as similar in terms to
such conflicting provision as may be possible and not conflict with the
requirements of Section 422 of the Code. With respect to Incentive Options, if
this Plan does not contain any provision required to be included herein under
Section 422 of the Code, that provision shall be deemed to be incorporated
herein with the same force and effect as if that provision had been set out at
length herein; provided, however, that, to the extent any Option that is
intended to qualify as an Incentive Option cannot so qualify, that Option (to
that extent) shall be deemed a Nonstatutory Option for all purposes of the Plan.
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12.15 Notices. Whenever any notice is required or permitted hereunder, such
notice must be in writing and personally delivered or sent by mail. Any notice
required or permitted to be delivered hereunder shall be deemed to be delivered
on the date on which it is actually received by the Corporation addressed to the
attention of the Corporate Secretary at the Corporation's office as specified in
the applicable Award Agreement. The Corporation or a Holder may change, at any
time and from time to time, by written notice to the other, the address which it
or he had previously specified for receiving notices. Until changed in
accordance herewith, the Corporation and each Holder shall specify as its and
his address for receiving notices the address set forth in the Award Agreement
pertaining to the shares to which such notice relates. Any Person entitled to
notice hereunder may waive such notice.
12.16 Successors. The Plan shall be binding upon the Holder, his legal
representatives, heirs, legatees, and distributees, upon the Corporation, its
successors and assigns and upon the Committee and its successors.
12.17 Headings. The titles and headings of Sections are included for
convenience of reference only and are not to be considered in construction of
the provisions hereof.
12.18 Governing Law. All questions arising with respect to the provisions
of the Plan shall be determined by application of the laws of the State of
Texas, without giving effect to any conflict of law provisions thereof, except
to the extent Texas law is preempted by federal law. Questions arising with
respect to the provisions of an award Agreement that are matters of contract law
shall be governed by the laws of the state specified in the Award Agreement,
except to the extent that Texas corporate law subconflicts with the contract law
of such state, in which event Texas corporate law shall govern irrespective of
any conflict of law laws. The obligation of the Corporation to sell and deliver
Stock hereunder is subject to applicable federal, state and foreign laws and to
the approval of any governmental authority required in connection with the
authorization, issuance, sale, or delivery of such Stock.
12.19 Word Usage. Words used in the masculine shall apply to the feminine
where applicable, and wherever the context of this Plan dictates, the plural
shall be read as the singular and the singular as the plural.
SECTION 13 EFFECTIVENESS
The 1998 Incentive Plan was approved by stockholders on June 8, 1998, and
subsequently amended by stockholders effective December 20, 2001, June 6, 2002,
June 5, 2003, and June 16, 2005. The 1998 Incentive Plan was amended and
restated by the Board of Directors of the Company effective June 8, 2006.
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IN WITNESS WHEREOF, the Corporation, acting by and through its officers
hereunto duly authorized, has executed this Amended and Restated 1998 Incentive
Plan, to be effective as of June 8, 2006.
ENGlobal CORPORATION F/K/A
INDUSTRIAL DATA SYSTEMS CORPORATION,
a Nevada corporation
By: /S/ William A. Coskey
---------------------------------
William A. Coskey
Chairman of the Board
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