EXHIBIT 5
---------------------------------------
XETHANOL CORPORATION
2005 INCENTIVE COMPENSATION PLAN
----------------------------------------
XETHANOL CORPORATION
2005 INCENTIVE COMPENSATION PLAN
1. Purpose..................................................................1
2. Definitions..............................................................1
3. Administration...........................................................6
(a) Authority of the Committee.......................................6
(b) Manner of Exercise of Committee Authority........................6
(c) Limitation of Liability..........................................6
4. Shares Subject to Plan...................................................6
(a) Limitation on Overall Number of Shares Available for
Delivery Under Plan............................................6
(b) Application of Limitation to Grants of Award.....................7
(c) Availability of Shares Not Delivered under Awards
and Adjustments to Limits......................................7
5. Eligibility; Per-Person Award Limitations................................8
6. Specific Terms of Awards.................................................8
(a) General..........................................................8
(b) Options..........................................................8
(c) Stock Appreciation Rights........................................9
(d) Restricted Stock Awards.........................................10
(e) Deferred Stock Award............................................11
(f) Bonus Stock and Awards in Lieu of Obligations...................11
(g) Dividend Equivalents............................................12
(h) Performance Awards..............................................12
(i) Other Stock-Based Awards........................................12
7. Certain Provisions Applicable to Awards.................................12
(a) Stand-Alone, Additional, Tandem, and Substitute Awards..........12
(b) Term of Awards..................................................13
(c) Form and Timing of Payment Under Awards; Deferrals..............13
(d) Exemptions from Section 16(b) Liability.........................13
8. Code Section 162(m) Provisions..........................................13
(a) Covered Employees...............................................13
(b) Performance Criteria............................................14
(c) Performance Period; Timing for Establishing
Performance Goals.............................................14
(d) Adjustments.....................................................14
(d) Committee Certification.........................................14
9. Change in Control.......................................................14
(a) Effect of Change in Control.....................................15
(b) Definition of Change in Control.................................15
(i)
10. General Provisions......................................................16
(a) Compliance With Legal and Other Requirements....................17
(b) Limits on Transferability; Beneficiaries........................17
(c) Adjustments.....................................................17
(d) Taxes...........................................................18
(e) Changes to the Plan and Awards..................................18
(f) Limitation on Rights Conferred Under Plan.......................19
(g) Unfunded Status of Awards; Creation of Trusts...................19
(h) Nonexclusivity of the Plan......................................19
(i) Payments in the Event of Forfeitures; Fractional Shares.........19
(j) Governing Law...................................................19
(k) Non-U.S. Laws...................................................19
(l) Plan Effective Date and Shareholder Approval;
Termination of Plan............................................19
(ii)
XETHANOL CORPORATION
2005 INCENTIVE COMPENSATION PLAN
1. Purpose. The purpose of this XETHANOL CORPORATION 2005 INCENTIVE
COMPENSATION PLAN (the "Plan") is to assist Xethanol Corporation (formerly Zen
Pottery Equipment, Inc.), a Colorado corporation (the "Company") and its Related
Entities (as hereinafter defined) in attracting, motivating, retaining and
rewarding high-quality executives and other employees, officers, directors,
consultants and other persons who provide services to the Company or its Related
Entities by enabling such persons to acquire or increase a proprietary interest
in the Company in order to strengthen the mutuality of interests between such
persons and the Company's shareholders, and providing such persons with
performance incentives to expend their maximum efforts in the creation of
shareholder value.
2. Definitions. For purposes of the Plan, the following terms shall be
defined as set forth below, in addition to such terms defined in Section 1
hereof.
(a) "Award" means any Option, Stock Appreciation Right, Restricted
Stock Award, Deferred Stock Award, Share granted as a bonus or in lieu of
another award, Dividend Equivalent, Other Stock-Based Award or Performance
Award, together with any other right or interest, granted to a Participant under
the Plan.
(b) "Award Agreement" means any written agreement, contract or other
instrument or document evidencing any Award granted by the Committee hereunder.
(c) "Beneficiary" means the person, persons, trust or trusts that
have been designated by a Participant in his or her most recent written
beneficiary designation filed with the Committee to receive the benefits
specified under the Plan upon such Participant's death or to which Awards or
other rights are transferred if and to the extent permitted under Section 10(b)
hereof. If, upon a Participant's death, there is no designated Beneficiary or
surviving designated Beneficiary, then the term Beneficiary means the person,
persons, trust or trusts entitled by will or the laws of descent and
distribution to receive such benefits.
(d) "Beneficial Owner" shall have the meaning ascribed to such term
in Rule 13d-3 under the Exchange Act and any successor to such Rule.
(e) "Board" means the Company's Board of Directors.
(f) "Cause" shall, with respect to any Participant have the meaning
specified in the Award Agreement. In the absence of any definition in the Award
Agreement, "Cause" shall have the equivalent meaning or the same meaning as
"cause" or "for cause" set forth in any employment, consulting, or other
agreement for the performance of services between the Participant and the
Company or a Related Entity or, in the absence of any such agreement or any such
definition in such agreement, such term shall mean (i) the failure by the
Participant to perform, in a reasonable manner, his or her duties as assigned by
the Company or a Related Entity, (ii) any violation or breach by the Participant
of his or her employment, consulting or other similar agreement with the Company
or a Related Entity, if any, (iii) any violation or breach by the Participant of
any non-competition, non-solicitation, non-disclosure and/or other similar
agreement with the Company or a Related Entity, (iv) any act by the Participant
of dishonesty or bad faith with respect to the Company or a Related Entity, (v)
use of alcohol, drugs or other similar substances in a manner that adversely
affects the Participant's work performance, or (vi) the commission by the
Participant of any act, misdemeanor, or crime reflecting unfavorably upon the
Participant or the Company or any Related Entity. The good faith determination
by the Committee of whether the Participant's Continuous Service was terminated
by the Company for "Cause" shall be final and binding for all purposes
hereunder.
(g) "Change in Control" means a Change in Control as defined with
related terms in Section 9(b) of the Plan.
(h) "Code" means the Internal Revenue Code of 1986, as amended from
time to time, including regulations thereunder and successor provisions and
regulations thereto.
(i) "Committee" means a committee designated by the Board to
administer the Plan; provided, however, that if the Board fails to designate a
committee or if there are no longer any members on the committee so designated
by the Board, then the Board shall serve as the Committee. The Committee shall
consist of at least two directors, and each member of the Committee shall be (i)
a "non-employee director" within the meaning of Rule 16b-3 (or any successor
rule) under the Exchange Act, unless administration of the Plan by "non-employee
directors" is not then required in order for exemptions under Rule 16b-3 to
apply to transactions under the Plan, (ii) an "outside director" within the
meaning of Section 162(m) of the Code, and (iii) "Independent."
(j) "Consultant" means any person (other than an Employee or a
Director, solely with respect to rendering services in such person's capacity as
a director) who is engaged by the Company or any Related Entity to render
consulting or advisory services to the Company or such Related Entity.
(k) "Continuous Service" means the uninterrupted provision of
services to the Company or any Related Entity in any capacity of Employee,
Director, Consultant or other service provider. Continuous Service shall not be
considered to be interrupted in the case of (i) any approved leave of absence,
(ii) transfers among the Company, any Related Entities, or any successor
entities, in any capacity of Employee, Director, Consultant or other service
provider, or (iii) any change in status as long as the individual remains in the
service of the Company or a Related Entity in any capacity of Employee,
Director, Consultant or other service provider (except as otherwise provided in
the Award Agreement). An approved leave of absence shall include sick leave,
military leave, or any other authorized personal leave.
(l) "Covered Employee" means an Eligible Person who is a "covered
employee" within the meaning of Section 162(m)(3) of the Code, or any successor
provision thereto.
(m) "Deferred Stock" means a right to receive Shares, including
Restricted Stock, cash or a combination thereof, at the end of a specified
deferral period.
(n) "Deferred Stock Award" means an Award of Deferred Stock granted
to a Participant under Section 6(e) hereof.
(o) "Director" means a member of the Board or the board of directors
of any Related Entity.
(p) "Disability" means a permanent and total disability (within the
meaning of Section 22(e) of the Code), as determined by a medical doctor
satisfactory to the Committee.
2
(q) "Discounted Option" means any Option awarded under Section 6(b)
hereof with an exercise price that is less than the Fair Market Value of a Share
on the date of grant.
(r) "Discounted Stock Appreciation Right" means any Stock
Appreciation Right awarded under Section 6(c) hereof with an exercise price that
is less than the Fair Market Value of a Share on the date of grant.
(s) "Dividend Equivalent" means a right, granted to a Participant
under Section 6(g) hereof, to receive cash, Shares, other Awards or other
property equal in value to dividends paid with respect to a specified number of
Shares, or other periodic payments.
(t) "Effective Date" means the effective date of the Plan, which
shall be February 2, 2005.
(u) "Eligible Person" means each officer, Director, Employee,
Consultant and other person who provides services to the Company or any Related
Entity. The foregoing notwithstanding, only employees of the Company, or any
parent corporation or subsidiary corporation of the Company (as those terms are
defined in Sections 424(e) and (f) of the Code, respectively), shall be Eligible
Persons for purposes of receiving any Incentive Stock Options. An Employee on
leave of absence may be considered as still in the employ of the Company or a
Related Entity for purposes of eligibility for participation in the Plan.
(v) "Employee" means any person, including an officer or Director,
who is an employee of the Company or any Related Entity. The payment of a
director's fee by the Company or a Related Entity shall not be sufficient to
constitute "employment" by the Company.
(w) "Exchange Act" means the Securities Exchange Act of 1934, as
amended from time to time, including rules thereunder and successor provisions
and rules thereto.
(x) "Fair Market Value" means the fair market value of Shares,
Awards or other property as determined by the Committee, or under procedures
established by the Committee. Unless otherwise determined by the Committee, the
Fair Market Value of a Share as of any given date shall be the closing sale
price per Share reported on a consolidated basis for stock listed on the
principal stock exchange or market on which Shares are traded on the date as of
which such value is being determined or, if there is no sale on that date, then
on the last previous day on which a sale was reported.
(y) "Good Reason" shall, with respect to any Participant, have the
meaning specified in the Award Agreement. In the absence of any definition in
the Award Agreement, "Good Reason" shall have the equivalent meaning or the same
meaning as "good reason" or "for good reason" set forth in any employment,
consulting or other agreement for the performance of services between the
Participant and the Company or a Related Entity or, in the absence of any such
agreement or any such definition in such agreement, such term shall mean (i) the
assignment to the Participant of any duties inconsistent in any material respect
with the Participant's position, authority, duties or responsibilities as
assigned by the Company or a Related Entity, or any other action by the Company
or a Related Entity which results in a material diminution in such position,
authority, duties or responsibilities, excluding for this purpose any action not
taken in bad faith and which is remedied by the Company or a Related Entity
promptly after receipt of notice thereof given by the Participant, or any action
taken with the consent of the Participant; or (ii) any material failure by the
Company or a Related Entity to comply with its obligations to the Participant as
agreed upon, other than any failure not occurring in bad faith and which is
remedied by the Company or a Related Entity promptly after receipt of notice
thereof given by the Participant.
3
(z) "Incentive Stock Option" means any Option intended to be
designated as an incentive stock option within the meaning of Section 422 of the
Code or any successor provision thereto.
(aa) "Independent," when referring to either the Board or members of
the Committee, shall have the same meaning as used in the rules of the Nasdaq
Stock Market or any national securities exchange on which any securities of the
Company are listed for trading, and if not listed for trading, by the rules of
the Nasdaq Stock Market.
(bb) "Incumbent Board" means the Incumbent Board as defined in
Section 9(b)(ii) of the Plan.
(cc) "Option" means a right granted to a Participant under Section
6(b) hereof, to purchase Shares or other Awards at a specified price during
specified time periods.
(dd) "Optionee" means a person to whom an Option is granted under
this Plan or any person who succeeds to the rights of such person under this
Plan.
(ee) "Option Proceeds" means the cash actually received by the
Company for the exercise price in connection with the exercise of Options that
are exercised after the Effective Date of the Plan, plus the maximum tax benefit
that could be realized by the Company as a result of the exercise of such
Options, which tax benefit shall be determined by multiplying (i) the amount
that is deductible for Federal income tax purposes as a result of any such
option exercise (currently, equal to the amount upon which the Participant's
withholding tax obligation is calculated), times (ii) the maximum Federal
corporate income tax rate for the year of exercise. With respect to Options, to
the extent that a Participant pays the exercise price and/or withholding taxes
with Shares, Option Proceeds shall not be calculated with respect to the amounts
so paid in Shares.
(ff) "Other Stock-Based Awards" means Awards granted to a
Participant under Section 6(i) hereof.
(gg) "Outside Director" means a member of the Board who is not an
Employee.
(hh) "Participant" means a person who has been granted an Award
under the Plan which remains outstanding, including a person who is no longer an
Eligible Person.
(ii) "Performance Award" shall mean any Award of Performance Shares
or Performance Units granted pursuant to Section 6(h).
(jj) "Performance Period" means that period established by the
Committee at the time any Performance Award is granted or at any time thereafter
during which any performance goals specified by the Committee with respect to
such Award are to be measured.
(kk) "Performance Share" means any grant pursuant to Section 6(h) of
a unit valued by reference to a designated number of Shares, which value may be
paid to the Participant by delivery of such property as the Committee shall
determine, including cash, Shares, other property, or any combination thereof,
upon achievement of such performance goals during the Performance Period as the
Committee shall establish at the time of such grant or thereafter.
(ll) "Performance Unit" means any grant pursuant to Section 6(h) of
a unit valued by reference to a designated amount of property (including cash)
other than Shares, which value may be paid to the Participant by delivery of
such property as the Committee shall determine, including cash, Shares, other
property, or any combination thereof, upon achievement of such performance goals
during the Performance Period as the Committee shall establish at the time of
such grant or thereafter.
4
(mm) "Person" shall have the meaning ascribed to such term in
Section 3(a)(9) of the Exchange Act and used in Sections 13(d) and 14(d)
thereof, and shall include a "group" as defined in Section 13(d) thereof.
(nn) "Related Entity" means any Subsidiary, and any business,
corporation, partnership, limited liability company or other entity designated
by Board in which the Company or a Subsidiary holds a substantial ownership
interest, directly or indirectly.
(oo) "Restricted Stock" means any Share issued with the restriction
that the holder may not sell, transfer, pledge or assign such Share and with
such risks of forfeiture and other restrictions as the Committee, in its sole
discretion, may impose (including any restriction on the right to vote such
Share and the right to receive any dividends), which restrictions may lapse
separately or in combination at such time or times, in installments or
otherwise, as the Committee may deem appropriate.
(pp) "Restricted Stock Award" means an Award granted to a
Participant under Section 6(d) hereof.
(qq) "Rule 16b-3" means Rule 16b-3, as from time to time in effect
and applicable to the Plan and Participants, promulgated by the Securities and
Exchange Commission under Section 16 of the Exchange Act.
(rr) "Shareholder Approval Date" means the date on which this Plan
is approved shareholders of the Company eligible to vote in the election of
directors, by a vote sufficient to meet the requirements of Code Sections 162(m)
(if applicable) and 422, Rule 16b-3 under the Exchange Act (if applicable),
applicable requirements under the rules of any stock exchange or automated
quotation system on which the Shares may be listed on quoted, and other laws,
regulations and obligations of the Company applicable to the Plan.
(ss) "Shares" means the shares of common stock of the Company, par
value $.001 per share, and such other securities as may be substituted (or
resubstituted) for Shares pursuant to Section 10(c) hereof.
(tt) "Stock Appreciation Right" means a right granted to a
Participant under Section 6(c) hereof.
(uu) "Subsidiary" means any corporation or other entity in which the
Company has a direct or indirect ownership interest of 50% or more of the total
combined voting power of the then outstanding securities or interests of such
corporation or other entity entitled to vote generally in the election of
directors or in which the Company has the right to receive 50% or more of the
distribution of profits or 50% or more of the assets on liquidation or
dissolution.
(vv) "Substitute Awards" shall mean Awards granted or Shares issued
by the Company in assumption of, or in substitution or exchange for, awards
previously granted, or the right or obligation to make future awards, by a
company acquired by the Company or any Related Entity or with which the Company
or any Related Entity combines.
5
3. Administration.
(a) Authority of the Committee. The Plan shall be administered by
the Committee, except to the extent the Board elects to administer the Plan, in
which case the Plan shall be administered by only those directors who are
Independent Directors, in which case references herein to the "Committee" shall
be deemed to include references to the Independent members of the Board. The
Committee shall have full and final authority, subject to and consistent with
the provisions of the Plan, to select Eligible Persons to become Participants,
grant Awards, determine the type, number and other terms and conditions of, and
all other matters relating to, Awards, prescribe Award Agreements (which need
not be identical for each Participant) and rules and regulations for the
administration of the Plan, construe and interpret the Plan and Award Agreements
and correct defects, supply omissions or reconcile inconsistencies therein, and
to make all other decisions and determinations as the Committee may deem
necessary or advisable for the administration of the Plan. In exercising any
discretion granted to the Committee under the Plan or pursuant to any Award, the
Committee shall not be required to follow past practices, act in a manner
consistent with past practices, or treat any Eligible Person or Participant in a
manner consistent with the treatment of other Eligible Persons or Participants.
(b) Manner of Exercise of Committee Authority. The Committee, and
not the Board, shall exercise sole and exclusive discretion on any matter
relating to a Participant then subject to Section 16 of the Exchange Act with
respect to the Company to the extent necessary in order that transactions by
such Participant shall be exempt under Rule 16b-3 under the Exchange Act. Any
action of the Committee shall be final, conclusive and binding on all persons,
including the Company, its Related Entities, Participants, Beneficiaries,
transferees under Section 10(b) hereof or other persons claiming rights from or
through a Participant, and shareholders. The express grant of any specific power
to the Committee, and the taking of any action by the Committee, shall not be
construed as limiting any power or authority of the Committee. The Committee may
delegate to officers or managers of the Company or any Related Entity, or
committees thereof, the authority, subject to such terms as the Committee shall
determine, to perform such functions, including administrative functions as the
Committee may determine to the extent that such delegation will not result in
the loss of an exemption under Rule 16b-3(d)(1) for Awards granted to
Participants subject to Section 16 of the Exchange Act in respect of the Company
and will not cause Awards intended to qualify as "performance-based
compensation" under Code Section 162(m) to fail to so qualify. The Committee may
appoint agents to assist it in administering the Plan.
(c) Limitation of Liability. The Committee and the Board, and each
member thereof, shall be entitled to, in good faith, rely or act upon any report
or other information furnished to him or her by any officer or Employee, the
Company's independent auditors, Consultants or any other agents assisting in the
administration of the Plan. Members of the Committee and the Board, and any
officer or Employee acting at the direction or on behalf of the Committee or the
Board, shall not be personally liable for any action or determination taken or
made in good faith with respect to the Plan, and shall, to the extent permitted
by law, be fully indemnified and protected by the Company with respect to any
such action or determination.
4. Shares Subject to Plan.
(a) Limitation on Overall Number of Shares Available for Delivery
Under Plan. Subject to adjustment as provided in Section 10(c) hereof, the total
number of Shares reserved and available for delivery under the Plan shall be
2,000,000. Any Shares delivered under the Plan may consist, in whole or in part,
of authorized and unissued shares or treasury shares.
6
(b) Application of Limitation to Grants of Award. No Award may be
granted if the number of Shares to be delivered in connection with such an Award
or, in the case of an Award relating to Shares but settled only in cash (such as
cash-only Stock Appreciation Rights), the number of Shares to which such Award
relates, exceeds the number of Shares remaining available for delivery under the
Plan, minus the number of Shares deliverable in settlement of or relating to
then outstanding Awards. The Committee may adopt reasonable counting procedures
to ensure appropriate counting, avoid double counting (as, for example, in the
case of tandem or substitute awards) and make adjustments if the number of
Shares actually delivered differs from the number of Shares previously counted
in connection with an Award.
(c) Availability of Shares Not Delivered under Awards and
Adjustments to Limits.
(i) If any Shares subject to an Award are forfeited, expire or
otherwise terminate without issuance of such Shares, or any Award is settled for
cash or otherwise does not result in the issuance of all or a portion of the
Shares subject to such Award or award, the Shares shall, to the extent of such
forfeiture, expiration, termination, cash settlement or non-issuance, again be
available for Awards under the Plan, subject to Section 4(c)(v) below.
(ii) In the event that any Option or other Award granted
hereunder is exercised through the tendering of Shares (either actually or by
attestation) or by the withholding of Shares by the Company, or withholding tax
liabilities arising from such option or other award are satisfied by the
tendering of Shares (either actually or by attestation) or by the withholding of
Shares by the Company, then only the number of Shares issued net of the Shares
tendered or withheld shall be counted for purposes of determining the maximum
number of Shares available for grant under the Plan.
(iii) Shares reacquired by the Company on the open market
using Option Proceeds shall be available for Awards under the Plan. The increase
in Shares available pursuant to the repurchase of Shares with Option Proceeds
shall not be greater than the amount of such proceeds divided by the Fair Market
Value of a Share on the date of exercise of the Option giving rise to such
Option Proceeds.
(iv) Substitute Awards shall not reduce the Shares authorized
for grant under the Plan or authorized for grant to a Participant in any period.
Additionally, in the event that a company acquired by the Company or any Related
Entity or with which the Company or any Related Entity combines has shares
available under a pre-existing plan approved by shareholders and not adopted in
contemplation of such acquisition or combination, the shares available for
delivery pursuant to the terms of such pre-existing plan (as adjusted, to the
extent appropriate, using the exchange ratio or other adjustment or valuation
ratio or formula used in such acquisition or combination to determine the
consideration payable to the holders of common stock of the entities party to
such acquisition or combination) may be used for Awards under the Plan and shall
not reduce the Shares authorized for delivery under the Plan; provided that
Awards using such available shares shall not be made after the date awards or
grants could have been made under the terms of the pre-existing plan, absent the
acquisition or combination, and shall only be made to individuals who were not
Employees or Directors prior to such acquisition or combination.
(v) Any Shares that again become available for delivery
pursuant to this Section 4(c) shall be added back as one (1) Share.
(vi) Notwithstanding anything in this Section 4(c) to the
contrary and solely for purposes of determining whether Shares are available for
the delivery of Incentive Stock Options, the maximum aggregate number of shares
that may be granted under this Plan shall be determined without regard to any
Shares restored pursuant to this Section 4(c) that, if taken into account, would
cause the Plan to fail the requirement under Code Section 422 that the Plan
designate a maximum aggregate number of shares that may be issued.
7
5. Eligibility; Per-Person Award Limitations. Awards may be granted under
the Plan only to Eligible Persons. Subject to adjustment as provided in Section
10(c), in any fiscal year of the Company during any part of which the Plan is in
effect, no Participant may be granted (i) Options or Stock Appreciation Rights
with respect to more than 250,000 Shares or (ii) Restricted Stock, Deferred
Stock, Performance Shares and/or Other Stock-Based Awards with respect to more
than 250,000 Shares. In addition, the maximum dollar value payable to any one
Participant with respect to Performance Units is (x) $1,000,000 with respect to
any 12 month Performance Period, and (y) with respect to any Performance Period
that is more than 12 months, $1,000,000 multiplied by the number of full years
in the Performance Period.
6. Specific Terms of Awards.
(a) General. Awards may be granted on the terms and conditions set
forth in this Section 6. In addition, the Committee may impose on any Award or
the exercise thereof, at the date of grant or thereafter (subject to Section
10(e)), such additional terms and conditions, not inconsistent with the
provisions of the Plan, as the Committee shall determine, including terms
requiring forfeiture of Awards in the event of termination of the Participant's
Continuous Service and terms permitting a Participant to make elections relating
to his or her Award. The Committee shall retain full power and discretion to
accelerate, waive or modify, at any time, any term or condition of an Award that
is not mandatory under the Plan. Except in cases in which the Committee is
authorized to require other forms of consideration under the Plan, or to the
extent other forms of consideration must be paid to satisfy the requirements of
applicable law, no consideration other than services may be required for the
grant (but not the exercise) of any Award.
(b) Options. The Committee is authorized to grant Options to any
Eligible Person on the following terms and conditions:
(i) Exercise Price. Other than in connection with Substitute
Awards, the exercise price per Share purchasable under an Option shall be
determined by the Committee, provided that such exercise price shall not, in the
case of Incentive Stock Options, be less than 100% of the Fair Market Value of a
Share on the date of grant of the Option and shall not, in any event, be less
than the par value of a Share on the date of grant of the Option. If an Employee
owns or is deemed to own (by reason of the attribution rules applicable under
Section 424(d) of the Code) more than 10% of the combined voting power of all
classes of stock of the Company (or any parent corporation or subsidiary
corporation of the Company, as those terms are defined in Sections 424(e) and
(f) of the Code, respectively) and an Incentive Stock Option is granted to such
employee, the exercise price of such Incentive Stock Option (to the extent
required by the Code at the time of grant) shall be no less than 110% of the
Fair Market Value a Share on the date such Incentive Stock Option is granted.
(ii) Time and Method of Exercise. The Committee shall
determine the time or times at which or the circumstances under which an Option
may be exercised in whole or in part (including based on achievement of
performance goals and/or future service requirements), the time or times at
which Options shall cease to be or become exercisable following termination of
Continuous Service or upon other conditions, the methods by which the exercise
price may be paid or deemed to be paid (including in the discretion of the
Committee a cashless exercise procedure), the form of such payment, including,
without limitation, cash, Shares, other Awards or awards granted under other
plans of the Company or a Related Entity, or other property (including notes or
other contractual obligations of Participants to make payment on a deferred
basis provided that such deferred payments are not in violation of the
Sarbanes-Oxley Act of 2002, or any rule or regulation adopted thereunder or any
other applicable law), and the methods by or forms in which Shares will be
delivered or deemed to be delivered to Participants.
8
(iii) Incentive Stock Options. The terms of any Incentive
Stock Option granted under the Plan shall comply in all respects with the
provisions of Section 422 of the Code. Anything in the Plan to the contrary
notwithstanding, no term of the Plan relating to Incentive Stock Options
(including any Stock Appreciation Right issued in tandem therewith) shall be
interpreted, amended or altered, nor shall any discretion or authority granted
under the Plan be exercised, so as to disqualify either the Plan or any
Incentive Stock Option under Section 422 of the Code, unless the Participant has
first requested, or consents to, the change that will result in such
disqualification. Thus, if and to the extent required to comply with Section 422
of the Code, Options granted as Incentive Stock Options shall be subject to the
following special terms and conditions:
(A) the Option shall not be exercisable more than ten
years after the date such Incentive Stock Option is granted; provided, however,
that if a Participant owns or is deemed to own (by reason of the attribution
rules of Section 424(d) of the Code) more than 10% of the combined voting power
of all classes of stock of the Company (or any parent corporation or subsidiary
corporation of the Company, as those terms are defined in Sections 424(e) and
(f) of the Code, respectively) and the Incentive Stock Option is granted to such
Participant, the term of the Incentive Stock Option shall be (to the extent
required by the Code at the time of the grant) for no more than five years from
the date of grant; and
(B) The aggregate Fair Market Value (determined as of
the date the Incentive Stock Option is granted) of the Shares with respect to
which Incentive Stock Options granted under the Plan and all other option plans
of the Company (and any parent corporation or subsidiary corporation of the
Company, as those terms are defined in Sections 424(e) and (f) of the Code,
respectively) during any calendar year exercisable for the first time by the
Participant during any calendar year shall not (to the extent required by the
Code at the time of the grant) exceed $100,000.
(c) Stock Appreciation Rights. The Committee may grant Stock
Appreciation Rights to any Eligible Person in conjunction with all or part of
any Option granted under the Plan or at any subsequent time during the term of
such Option (a "Tandem Stock Appreciation Right"), or without regard to any
Option (a "Freestanding Stock Appreciation Right"), in each case upon such terms
and conditions as the Committee may establish in its sole discretion, not
inconsistent with the provisions of the Plan, including the following:
(i) Right to Payment. A Stock Appreciation Right shall confer
on the Participant to whom it is granted a right to receive, upon exercise
thereof, the excess of (A) the Fair Market Value of one Share on the date of
exercise over (B) the grant price of the Stock Appreciation Right as determined
by the Committee. The grant price of a Stock Appreciation Right shall not be
less than 100% of the Fair Market Value of a Share on the date of grant, in the
case of a Freestanding Stock Appreciation Right, or less than the associated
Option exercise price, in the case of a Tandem Stock Appreciation Right.
(ii) Other Terms. The Committee shall determine at the date of
grant or thereafter, the time or times at which and the circumstances under
which a Stock Appreciation Right may be exercised in whole or in part (including
based on achievement of performance goals and/or future service requirements),
the time or times at which Stock Appreciation Rights shall cease to be or become
exercisable following termination of Continuous Service or upon other
conditions, the method of exercise, method of settlement, form of consideration
payable in settlement, method by or forms in which Shares will be delivered or
deemed to be delivered to Participants, whether or not a Stock Appreciation
Right shall be in tandem or in combination with any other Award, and any other
terms and conditions of any Stock Appreciation Right.
9
(iii) Tandem Stock Appreciation Rights. Any Tandem Stock
Appreciation Right may be granted at the same time as the related Option is
granted or, for Options that are not Incentive Stock Options, at any time
thereafter before exercise or expiration of such Option. Any Tandem Stock
Appreciation Right related to an Option may be exercised only when the related
Option would be exercisable and the Fair Market Value of the Shares subject to
the related Option exceeds the exercise price at which Shares can be acquired
pursuant to the Option. In addition, if a Tandem Stock Appreciation Right exists
with respect to less than the full number of Shares covered by a related Option,
then an exercise or termination of such Option shall not reduce the number of
Shares to which the Tandem Stock Appreciation Right applies until the number of
Shares then exercisable under such Option equals the number of Shares to which
the Tandem Stock Appreciation Right applies. Any Option related to a Tandem
Stock Appreciation Right shall no longer be exercisable to the extent the Tandem
Stock Appreciation Right has been exercised, and any Tandem Stock Appreciation
Right shall no longer be exercisable to the extent the related Option has been
exercised.
(d) Restricted Stock Awards. The Committee is authorized to grant
Restricted Stock Awards to any Eligible Person on the following terms and
conditions:
(i) Grant and Restrictions. Restricted Stock Awards shall be
subject to such restrictions on transferability, risk of forfeiture and other
restrictions, if any, as the Committee may impose, or as otherwise provided in
this Plan, covering a period of time specified by the Committee (the
"Restriction Period"). The terms of any Restricted Stock Award granted under the
Plan shall be set forth in a written Award Agreement which shall contain
provisions determined by the Committee and not inconsistent with the Plan. The
restrictions may lapse separately or in combination at such times, under such
circumstances (including based on achievement of performance goals and/or future
service requirements), in such installments or otherwise, as the Committee may
determine at the date of grant or thereafter. Except to the extent restricted
under the terms of the Plan and any Award Agreement relating to a Restricted
Stock Award, a Participant granted Restricted Stock shall have all of the rights
of a shareholder, including the right to vote the Restricted Stock and the right
to receive dividends thereon (subject to any mandatory reinvestment or other
requirement imposed by the Committee). During the Restriction Period, subject to
Section 10(b) below, the Restricted Stock may not be sold, transferred, pledged,
hypothecated, margined or otherwise encumbered by the Participant.
(ii) Forfeiture. Except as otherwise determined by the
Committee, upon termination of a Participant's Continuous Service during the
applicable Restriction Period, the Participant's Restricted Stock that is at
that time subject to a risk of forfeiture that has not lapsed or otherwise been
satisfied shall be forfeited and reacquired by the Company; provided that the
Committee may provide, by rule or regulation or in any Award Agreement, or may
determine in any individual case, that forfeiture conditions relating to
Restricted Stock Awards shall be waived in whole or in part in the event of
terminations resulting from specified causes.
(iii) Certificates for Stock. Restricted Stock granted under
the Plan may be evidenced in such manner as the Committee shall determine. If
certificates representing Restricted Stock are registered in the name of the
Participant, the Committee may require that such certificates bear an
appropriate legend referring to the terms, conditions and restrictions
applicable to such Restricted Stock, that the Company retain physical possession
of the certificates, and that the Participant deliver a stock power to the
Company, endorsed in blank, relating to the Restricted Stock.
10
(iv) Dividends and Splits. As a condition to the grant of a
Restricted Stock Award, the Committee may require or permit a Participant to
elect that any cash dividends paid on a Share of Restricted Stock be
automatically reinvested in additional Shares of Restricted Stock or applied to
the purchase of additional Awards under the Plan. Unless otherwise determined by
the Committee, Shares distributed in connection with a stock split or stock
dividend, and other property distributed as a dividend, shall be subject to
restrictions and a risk of forfeiture to the same extent as the Restricted Stock
with respect to which such Shares or other property have been distributed.
(e) Deferred Stock Award. The Committee is authorized to grant
Deferred Stock Awards to any Eligible Person on the following terms and
conditions:
(i) Award and Restrictions. Satisfaction of a Deferred Stock
Award shall occur upon expiration of the deferral period specified for such
Deferred Stock Award by the Committee (or, if permitted by the Committee, as
elected by the Participant). In addition, a Deferred Stock Award shall be
subject to such restrictions (which may include a risk of forfeiture) as the
Committee may impose, if any, which restrictions may lapse at the expiration of
the deferral period or at earlier specified times (including based on
achievement of performance goals and/or future service requirements), separately
or in combination, in installments or otherwise, as the Committee may determine.
A Deferred Stock Award may be satisfied by delivery of Shares, cash equal to the
Fair Market Value of the specified number of Shares covered by the Deferred
Stock, or a combination thereof, as determined by the Committee at the date of
grant or thereafter. Prior to satisfaction of a Deferred Stock Award, a Deferred
Stock Award carries no voting or dividend or other rights associated with Share
ownership.
(ii) Forfeiture. Except as otherwise determined by the
Committee, upon termination of a Participant's Continuous Service during the
applicable deferral period or portion thereof to which forfeiture conditions
apply (as provided in the Award Agreement evidencing the Deferred Stock Award),
the Participant's Deferred Stock Award that is at that time subject to a risk of
forfeiture that has not lapsed or otherwise been satisfied shall be forfeited;
provided that the Committee may provide, by rule or regulation or in any Award
Agreement, or may determine in any individual case, that forfeiture conditions
relating to a Deferred Stock Award shall be waived in whole or in part in the
event of terminations resulting from specified causes, and the Committee may in
other cases waive in whole or in part the forfeiture of any Deferred Stock
Award.
(iii) Dividend Equivalents. Unless otherwise determined by the
Committee at date of grant, any Dividend Equivalents that are granted with
respect to any Deferred Stock Award shall be either (A) paid with respect to
such Deferred Stock Award at the dividend payment date in cash or in Shares of
unrestricted stock having a Fair Market Value equal to the amount of such
dividends, or (B) deferred with respect to such Deferred Stock Award and the
amount or value thereof automatically deemed reinvested in additional Deferred
Stock, other Awards or other investment vehicles, as the Committee shall
determine or permit the Participant to elect.
(f) Bonus Stock and Awards in Lieu of Obligations. The Committee is
authorized to grant Shares to any Eligible Persons as a bonus, or to grant
Shares or other Awards in lieu of obligations to pay cash or deliver other
property under the Plan or under other plans or compensatory arrangements,
provided that, in the case of Eligible Persons subject to Section 16 of the
Exchange Act, the amount of such grants remains within the discretion of the
Committee to the extent necessary to ensure that acquisitions of Shares or other
Awards are exempt from liability under Section 16(b) of the Exchange Act. Shares
or Awards granted hereunder shall be subject to such other terms as shall be
determined by the Committee.
11
(g) Dividend Equivalents. The Committee is authorized to grant
Dividend Equivalents to any Eligible Person entitling the Eligible Person to
receive cash, Shares, other Awards, or other property equal in value to the
dividends paid with respect to a specified number of Shares, or other periodic
payments. Dividend Equivalents may be awarded on a free-standing basis or in
connection with another Award. The Committee may provide that Dividend
Equivalents shall be paid or distributed when accrued or shall be deemed to have
been reinvested in additional Shares, Awards, or other investment vehicles, and
subject to such restrictions on transferability and risks of forfeiture, as the
Committee may specify.
(h) Performance Awards. The Committee is authorized to grant
Performance Awards to any Eligible Person payable in cash, Shares, or other
Awards, on terms and conditions established by the Committee, subject to the
provisions of Section 8 if and to the extent that the Committee shall, in its
sole discretion, determine that an Award shall be subject to those provisions.
The performance criteria to be achieved during any Performance Period and the
length of the Performance Period shall be determined by the Committee upon the
grant of each Performance Award; provided, however, that a Performance Period
shall not be shorter than 12 months nor longer than five years. Except as
provided in Section 9 or as may be provided in an Award Agreement, Performance
Awards will be distributed only after the end of the relevant Performance
Period. The performance goals to be achieved for each Performance Period shall
be conclusively determined by the Committee and may be based upon the criteria
set forth in Section 8(b), or in the case of an Award that the Committee
determines shall not be subject to Section 8 hereof, any other criteria that the
Committee, in its sole discretion, shall determine should be used for that
purpose. The amount of the Award to be distributed shall be conclusively
determined by the Committee. Performance Awards may be paid in a lump sum or in
installments following the close of the Performance Period or, in accordance
with procedures established by the Committee, on a deferred basis.
(i) Other Stock-Based Awards. The Committee is authorized,
subject to limitations under applicable law, to grant to any Eligible Person
such other Awards that may be denominated or payable in, valued in whole or in
part by reference to, or otherwise based on, or related to, Shares, as deemed by
the Committee to be consistent with the purposes of the Plan. Other Stock-Based
Awards may be granted to Participants either alone or in addition to other
Awards granted under the Plan, and such Other Stock-Based Awards shall also be
available as a form of payment in the settlement of other Awards granted under
the Plan. The Committee shall determine the terms and conditions of such Awards.
Shares delivered pursuant to an Award in the nature of a purchase right granted
under this Section 6(i) shall be purchased for such consideration (including,
without limitation, loans from the Company or a Related Entity provided that
such loans are not in violation of the Sarbanes Oxley Act of 2002, or any rule
or regulation adopted thereunder or any other applicable law) paid for at such
times, by such methods, and in such forms, including, without limitation, cash,
Shares, other Awards or other property, as the Committee shall determine.
7. Certain Provisions Applicable to Awards.
(a) Stand-Alone, Additional, Tandem and Substitute Awards. Awards
granted under the Plan may, in the discretion of the Committee, be granted
either alone or in addition to, in tandem with, or in substitution or exchange
for, any other Award or any award granted under another plan of the Company, any
Related Entity, or any business entity to be acquired by the Company or a
Related Entity, or any other right of a Participant to receive payment from the
Company or any Related Entity. Such additional, tandem, and substitute or
exchange Awards may be granted at any time. If an Award is granted in
substitution or exchange for another Award or award, the Committee shall require
the surrender of such other Award or award in consideration for the grant of the
new Award. In addition, Awards may be granted in lieu of cash compensation,
including in lieu of cash amounts payable under other plans of the Company or
any Related Entity, in which the value of Stock subject to the Award is
equivalent in value to the cash compensation (for example, Deferred Stock or
Restricted Stock), or in which the exercise price, grant price or purchase price
of the Award in the nature of a right that may be exercised is equal to the Fair
Market Value of the underlying Stock minus the value of the cash compensation
surrendered (for example, Options or Stock Appreciation Right granted with an
exercise price or grant price "discounted" by the amount of the cash
compensation surrendered).
12
(b) Term of Awards. The term of each Award shall be for such period
as may be determined by the Committee; provided that in no event shall the term
of any Option or Stock Appreciation Right exceed a period of ten years (or in
the case of an Incentive Stock Option such shorter term as may be required under
Section 422 of the Code).
(c) Form and Timing of Payment Under Awards; Deferrals. Subject to
the terms of the Plan and any applicable Award Agreement, payments to be made by
the Company or a Related Entity upon the exercise of an Option or other Award or
settlement of an Award may be made in such forms as the Committee shall
determine, including, without limitation, cash, Shares, other Awards or other
property, and may be made in a single payment or transfer, in installments, or
on a deferred basis. Any installment or deferral provided for in the preceding
sentence shall, however, be subject to the Company's compliance with the
provisions of the Sarbanes-Oxley Act of 2002, the rules and regulations adopted
by the U.S. Securities and Exchange Commission thereunder, and all applicable
rules of the Nasdaq Stock Market or any national securities exchange on which
the Company's securities are listed for trading and, if not listed for trading
on either the Nasdaq Stock Market or a national securities exchange, then the
rules of the Nasdaq Stock Market. The settlement of any Award may be
accelerated, and cash paid in lieu of Shares in connection with such settlement,
in the discretion of the Committee or upon occurrence of one or more specified
events (in addition to a Change in Control). Installment or deferred payments
may be required by the Committee (subject to Section 10(e) of the Plan,
including the consent provisions thereof in the case of any deferral of an
outstanding Award not provided for in the original Award Agreement) or permitted
at the election of the Participant on terms and conditions established by the
Committee. Payments may include, without limitation, provisions for the payment
or crediting of a reasonable interest rate on installment or deferred payments
or the grant or crediting of Dividend Equivalents or other amounts in respect of
installment or deferred payments denominated in Shares.
(d) Exemptions from Section 16(b) Liability. It is the intent of the
Company that the grant of any Awards to or other transaction by a Participant
who is subject to Section 16 of the Exchange Act shall be exempt from Section 16
pursuant to an applicable exemption (except for transactions acknowledged in
writing to be non-exempt by such Participant). Accordingly, if any provision of
this Plan or any Award Agreement does not comply with the requirements of Rule
16b-3 then applicable to any such transaction, such provision shall be construed
or deemed amended to the extent necessary to conform to the applicable
requirements of Rule 16b-3 so that such Participant shall avoid liability under
Section 16(b).
8. Code Section 162(m) Provisions.
(a) Covered Employees. The Committee, in its discretion, may
determine at the time an Award is granted to an Eligible Person who is, or is
likely to be, as of the end of the tax year in which the Company would claim a
tax deduction in connection with such Award, a Covered Employee, that the
provisions of this Section 8 shall be applicable to such Award.
(b) Performance Criteria. If an Award is subject to this Section 8,
then the lapsing of restrictions thereon and the distribution of cash, Shares or
other property pursuant thereto, as applicable, shall be contingent upon
achievement of one or more objective performance goals.
13
Performance goals shall be objective and shall otherwise meet the requirements
of Section 162(m) of the Code and regulations thereunder including the
requirement that the level or levels of performance targeted by the Committee
result in the achievement of performance goals being "substantially uncertain."
One or more of the following business criteria for the Company, on a
consolidated basis, and/or for Related Entities, or for business or geographical
units of the Company and/or a Related Entity (except with respect to the total
shareholder return and earnings per share criteria), shall be used by the
Committee in establishing performance goals for such Awards: (1) earnings per
share; (2) revenues or margins; (3) cash flow; (4) operating margin; (5) return
on net assets, investment, capital, or equity; (6) economic value added; (7)
direct contribution; (8) net income; pretax earnings; earnings before interest
and taxes; earnings before interest, taxes, depreciation and amortization;
earnings after interest expense and before extraordinary or special items;
operating income; income before interest income or expense, unusual items and
income taxes, local, state or federal and excluding budgeted and actual bonuses
which might be paid under any ongoing bonus plans of the Company; (9) working
capital; (10) management of fixed costs or variable costs; (11) identification
or consummation of investment opportunities or completion of specified projects
in accordance with corporate business plans, including strategic mergers,
acquisitions or divestitures; (12) total shareholder return; and (13) debt
reduction. Any of the above goals may be determined on an absolute or relative
basis or as compared to the performance of a published or special index deemed
applicable by the Committee including, but not limited to, the Standard & Poor's
500 Stock Index or a group of companies that are comparable to the Company. The
Committee may exclude the impact of an event or occurrence which the Committee
determines should appropriately be excluded, including without limitation (i)
restructurings, discontinued operations, extraordinary items, and other unusual
or non-recurring charges, (ii) an event either not directly related to the
operations of the Company or not within the reasonable control of the Company's
management, or (iii) a change in accounting standards required by generally
accepted accounting principles.
(c) Performance Period; Timing For Establishing Performance Goals.
Achievement of performance goals in respect of such Performance Awards shall be
measured over a Performance Period no shorter than 12 months and no longer than
five years, as specified by the Committee. Performance goals shall be
established not later than 90 days after the beginning of any Performance Period
applicable to such Performance Awards, or at such other date as may be required
or permitted for "performance-based compensation" under Code Section 162(m).
(d) Adjustments. The Committee may, in its discretion, reduce the
amount of a settlement otherwise to be made in connection with Awards subject to
this Section 8, but may not exercise discretion to increase any such amount
payable to a Covered Employee in respect of an Award subject to this Section 8.
The Committee shall specify the circumstances in which such Awards shall be paid
or forfeited in the event of termination of Continuous Service by the
Participant prior to the end of a Performance Period or settlement of Awards.
(e) Committee Certification. No Participant shall receive any
payment under the Plan unless the Committee has certified, by resolution or
other appropriate action in writing, that the performance criteria and any other
material terms previously established by the Committee or set forth in the Plan,
have been satisfied to the extent necessary to qualify as "performance based
compensation" under Code Section 162(m).
9. Change in Control.
(a) Effect of "Change in Control." Subject to Section 9(a)(iv), and
if and only to the extent provided in the Award Agreement, or to the extent
otherwise determined by the Committee, upon the occurrence of a "Change in
Control," as defined in Section 9(b):
14
(i) Any Option or Stock Appreciation Right that was not
previously vested and exercisable as of the time of the Change in Control, shall
become immediately vested and exercisable, subject to applicable restrictions
set forth in Section 10(a) hereof.
(ii) Any restrictions, deferral of settlement, and forfeiture
conditions applicable to a Restricted Stock Award, Deferred Stock Award or an
Other Stock-Based Award subject only to future service requirements granted
under the Plan shall lapse and such Awards shall be deemed fully vested as of
the time of the Change in Control, except to the extent of any waiver by the
Participant and subject to applicable restrictions set forth in Section 10(a)
hereof.
(iii) With respect to any outstanding Award subject to
achievement of performance goals and conditions under the Plan, the Committee
may, in its discretion, deem such performance goals and conditions as having
been met as of the date of the Change in Control.
(iv) Notwithstanding the foregoing, if in the event of a
Change in Control the successor company assumes or substitutes for an Option,
Stock Appreciation Right, Restricted Stock Award, Deferred Stock Award or Other
Stock-Based Award, then each outstanding Option, Stock Appreciation Right,
Restricted Stock Award, Deferred Stock Award or Other Stock-Based Award shall
not be accelerated as described in Sections 9(a)(i), (ii) and (iii). For the
purposes of this Section 9(a)(iv), an Option, Stock Appreciation Right,
Restricted Stock Award, Deferred Stock Award or Other Stock-Based Award shall be
considered assumed or substituted for if following the Change in Control the
award confers the right to purchase or receive, for each Share subject to the
Option, Stock Appreciation Right, Restricted Stock Award, Deferred Stock Award
or Other Stock-Based Award immediately prior to the Change in Control, the
consideration (whether stock, cash or other securities or property) received in
the transaction constituting a Change in Control by holders of Shares for each
Share held on the effective date of such transaction (and if holders were
offered a choice of consideration, the type of consideration chosen by the
holders of a majority of the outstanding shares); provided, however, that if
such consideration received in the transaction constituting a Change in Control
is not solely common stock of the successor company or its parent or subsidiary,
the Committee may, with the consent of the successor company or its parent or
subsidiary, provide that the consideration to be received upon the exercise or
vesting of an Option, Stock Appreciation Right, Restricted Stock Award, Deferred
Stock Award or Other Stock-Based Award, for each Share subject thereto, will be
solely common stock of the successor company or its parent or subsidiary
substantially equal in fair market value to the per share consideration received
by holders of Shares in the transaction constituting a Change in Control. The
determination of such substantial equality of value of consideration shall be
made by the Committee in its sole discretion and its determination shall be
conclusive and binding.
(b) Definition of "Change in Control." Unless otherwise specified in
an Award Agreement, a "Change in Control" shall mean the occurrence of any of
the following:
(i) The acquisition by any Person of Beneficial Ownership
(within the meaning of Rule 13d-3 promulgated under the Exchange Act) of more
than fifty percent (50%) of either (A) the then outstanding shares of common
stock of the Company (the "Outstanding Company Common Stock") or (B) the
combined voting power of the then outstanding voting securities of the Company
entitled to vote generally in the election of directors (the "Outstanding
Company Voting Securities) (the foregoing Beneficial Ownership hereinafter being
referred to as a "Controlling Interest"); provided, however, that for purposes
of this Section 9(b), the following acquisitions shall not constitute or result
in a Change of Control: (v) any acquisition directly from the Company; (w) any
acquisition by the Company; (x) any acquisition by any Person that as of the
Effective Date owns Beneficial Ownership of a Controlling Interest; (y) any
acquisition by any employee benefit plan (or related trust) sponsored or
maintained by the Company or any Subsidiary; or (z) any acquisition by any
corporation pursuant to a transaction which complies with clauses (A), (B) and
(C) of subsection (iii) below; or
15
(ii) During any period of two (2) consecutive years (not
including any period prior to the Effective Date) individuals who constitute the
Board on the Effective Date (the "Incumbent Board") cease for any reason to
constitute at least a majority of the Board; provided, however, that any
individual becoming a director subsequent to the Effective Date whose election,
or nomination for election by the Company's shareholders, was approved by a vote
of at least a majority of the directors then comprising the Incumbent Board
shall be considered as though such individual were a member of the Incumbent
Board, but excluding, for this purpose, any such individual whose initial
assumption of office occurs as a result of an actual or threatened election
contest with respect to the election or removal of directors or other actual or
threatened solicitation of proxies or consents by or on behalf of a Person other
than the Board; or
(iii) Consummation of a reorganization, merger, statutory
share exchange or consolidation or similar corporate transaction involving the
Company or any of its Subsidiaries, a sale or other disposition of all or
substantially all of the assets of the Company, or the acquisition of assets or
stock of another entity by the Company or any of its Subsidiaries (each a
"Business Combination"), in each case, unless, following such Business
Combination, (A) all or substantially all of the individuals and entities who
were the Beneficial Owners, respectively, of the Outstanding Company Common
Stock and Outstanding Company Voting Securities immediately prior to such
Business Combination beneficially own, directly or indirectly, more than fifty
percent (50%) of the then outstanding shares of common stock and the combined
voting power of the then outstanding voting securities entitled to vote
generally in the election of directors, as the case may be, of the corporation
resulting from such Business Combination (including, without limitation, a
corporation which as a result of such transaction owns the Company or all or
substantially all of the Company's assets either directly or through one or more
subsidiaries) in substantially the same proportions as their ownership,
immediately prior to such Business Combination, of the Outstanding Company
Common Stock and Outstanding Company Voting Securities, as the case may be, (B)
no Person (excluding any employee benefit plan (or related trust) of the Company
or such corporation resulting from such Business Combination or any Person that
as of the Effective Date owns Beneficial Ownership of a Controlling Interest)
beneficially owns, directly or indirectly, fifty percent (50%) or more of the
then outstanding shares of common stock of the corporation resulting from such
Business Combination or the combined voting power of the then outstanding voting
securities of such corporation except to the extent that such ownership existed
prior to the Business Combination and (C) at least a majority of the members of
the Board of Directors of the corporation resulting from such Business
Combination were members of the Incumbent Board at the time of the execution of
the initial agreement, or of the action of the Board, providing for such
Business Combination; or
(iv) Approval by the shareholders of the Company of a complete
liquidation or dissolution of the Company.
10. General Provisions.
(a) Compliance With Legal and Other Requirements. The Company may,
to the extent deemed necessary or advisable by the Committee, postpone the
issuance or delivery of Shares or payment of other benefits under any Award
until completion of such registration or qualification of such Shares or other
required action under any federal or state law, rule or regulation, listing or
other required action with respect to any stock exchange or automated quotation
system upon which the Shares or other Company securities are listed or quoted,
or compliance with any other obligation of the Company, as the Committee, may
consider appropriate, and may require any Participant to make such
representations, furnish such information and comply with or be subject to such
other conditions as it may consider appropriate in connection with the issuance
or delivery of Shares or payment of other benefits in compliance with applicable
laws, rules, and regulations, listing requirements, or other obligations.
16
(b) Limits on Transferability; Beneficiaries. No Award or other
right or interest granted under the Plan shall be pledged, hypothecated or
otherwise encumbered or subject to any lien, obligation or liability of such
Participant to any party, or assigned or transferred by such Participant
otherwise than by will or the laws of descent and distribution or to a
Beneficiary upon the death of a Participant, and such Awards or rights that may
be exercisable shall be exercised during the lifetime of the Participant only by
the Participant or his or her guardian or legal representative, except that
Awards and other rights (other than Incentive Stock Options and Stock
Appreciation Rights in tandem therewith) may be transferred to one or more
Beneficiaries or other transferees during the lifetime of the Participant, and
may be exercised by such transferees in accordance with the terms of such Award,
but only if and to the extent such transfers are permitted by the Committee
pursuant to the express terms of an Award Agreement (subject to any terms and
conditions which the Committee may impose thereon). A Beneficiary, transferee,
or other person claiming any rights under the Plan from or through any
Participant shall be subject to all terms and conditions of the Plan and any
Award Agreement applicable to such Participant, except as otherwise determined
by the Committee, and to any additional terms and conditions deemed necessary or
appropriate by the Committee.
(c) Adjustments.
(i) Adjustments to Awards. In the event that any extraordinary
dividend or other distribution (whether in the form of cash, Shares, or other
property), recapitalization, forward or reverse split, reorganization, merger,
consolidation, spin-off, combination, repurchase, share exchange, liquidation,
dissolution or other similar corporate transaction or event affects the Shares
and/or such other securities of the Company or any other issuer such that a
substitution, exchange, or adjustment is determined by the Committee to be
appropriate, then the Committee shall, in such manner as it may deem equitable,
substitute, exchange or adjust any or all of (A) the number and kind of Shares
which may be delivered in connection with Awards granted thereafter, (B) the
number and kind of Shares by which annual per-person Award limitations are
measured under Section 5 hereof, (C) the number and kind of Shares subject to or
deliverable in respect of outstanding Awards, (D) the exercise price, grant
price or purchase price relating to any Award and/or make provision for payment
of cash or other property in respect of any outstanding Award, and (E) any other
aspect of any Award that the Committee determines to be appropriate.
(ii) Adjustments in Case of Certain Corporate Transactions. In
the event of any merger, consolidation or other reorganization in which the
Company does not survive, or in the event of any Change in Control, any
outstanding Awards may be dealt with in accordance with any of the following
approaches, as determined by the agreement effectuating the transaction or, if
and to the extent not so determined, as determined by the Committee: (a) the
continuation of the outstanding Awards by the Company, if the Company is a
surviving corporation, (b) the assumption or substitution for, as those terms
are defined in Section 9(b)(iv) hereof, the outstanding Awards by the surviving
corporation or its parent or subsidiary, (c) full exercisability or vesting and
accelerated expiration of the outstanding Awards, or (d) settlement of the value
of the outstanding Awards in cash or cash equivalents or other property followed
by cancellation of such Awards (which value, in the case of Options or Stock
Appreciation Rights, shall be measured by the amount, if any, by which the Fair
Market Value of a Share exceeds the exercise or grant price of the Option or
Stock Appreciation Right as of the effective date of the transaction). The
Committee shall give written notice of any proposed transaction referred to in
this Section 10(c)(ii) a reasonable period of time prior to the closing date for
such transaction (which notice may be given either before or after the approval
of such transaction), in order that Participants may have a reasonable period of
time prior to the closing date of such transaction within which to exercise any
Awards that are then exercisable (including any Awards that may become
exercisable upon the closing date of such transaction). A Participant may
condition his exercise of any Awards upon the consummation of the transaction.
17
(iii) Other Adjustments. The Committee (and the Board if and
only to the extent such authority is not required to be exercised by the
Committee to comply with Section 162(m) of the Code) is authorized to make
adjustments in the terms and conditions of, and the criteria included in, Awards
(including Performance Awards, or performance goals relating thereto) in
recognition of unusual or nonrecurring events (including, without limitation,
acquisitions and dispositions of businesses and assets) affecting the Company,
any Related Entity or any business unit, or the financial statements of the
Company or any Related Entity, or in response to changes in applicable laws,
regulations, accounting principles, tax rates and regulations or business
conditions or in view of the Committee's assessment of the business strategy of
the Company, any Related Entity or business unit thereof, performance of
comparable organizations, economic and business conditions, personal performance
of a Participant, and any other circumstances deemed relevant; provided that no
such adjustment shall be authorized or made if and to the extent that such
authority or the making of such adjustment would cause Options, Stock
Appreciation Rights, Performance Awards granted pursuant to Section 8(b) hereof
to Participants designated by the Committee as Covered Employees and intended to
qualify as "performance-based compensation" under Code Section 162(m) and the
regulations thereunder to otherwise fail to qualify as "performance-based
compensation" under Code Section 162(m) and regulations thereunder.
(d) Taxes. The Company and any Related Entity are authorized to
withhold from any Award granted, any payment relating to an Award under the
Plan, including from a distribution of Shares, or any payroll or other payment
to a Participant, amounts of withholding and other taxes due or potentially
payable in connection with any transaction involving an Award, and to take such
other action as the Committee may deem advisable to enable the Company or any
Related Entity and Participants to satisfy obligations for the payment of
withholding taxes and other tax obligations relating to any Award. This
authority shall include authority to withhold or receive Shares or other
property and to make cash payments in respect thereof in satisfaction of a
Participant's tax obligations, either on a mandatory or elective basis in the
discretion of the Committee.
(e) Changes to the Plan and Awards. The Board may amend, alter,
suspend, discontinue or terminate the Plan, or the Committee's authority to
grant Awards under the Plan, without the consent of shareholders or
Participants, except that any amendment or alteration to the Plan shall be
subject to the approval of the Company's shareholders not later than the annual
meeting next following such Board action if such shareholder approval is
required by any federal or state law or regulation (including, without
limitation, Rule 16b-3 or Code Section 162(m)) or the rules of any stock
exchange or automated quotation system on which the Shares may then be listed or
quoted), and the Board may otherwise, in its discretion, determine to submit
other such changes to the Plan to shareholders for approval; provided that,
without the consent of an affected Participant, no such Board action may
materially and adversely affect the rights of such Participant under any
previously granted and outstanding Award. The Committee may waive any conditions
or rights under, or amend, alter, suspend, discontinue or terminate any Award
theretofore granted and any Award Agreement relating thereto, except as
otherwise provided in the Plan; provided that, without the consent of an
affected Participant, no such Committee or the Board action may materially and
adversely affect the rights of such Participant under such Award.
(f) Limitation on Rights Conferred Under Plan. Neither the Plan nor
any action taken hereunder shall be construed as (i) giving any Eligible Person
or Participant the right to continue as an Eligible Person or Participant or in
the employ or service of the Company or a Related Entity; (ii) interfering in
any way with the right of the Company or a Related Entity to terminate any
Eligible Person's or Participant's Continuous Service at any time, (iii) giving
an Eligible Person or Participant any claim to be granted any Award under the
Plan or to be treated uniformly with other Participants and Employees, or (iv)
conferring on a Participant any of the rights of a shareholder of the Company
unless and until the Participant is duly issued or transferred Shares in
accordance with the terms of an Award.
18
(g) Unfunded Status of Awards; Creation of Trusts. The Plan is
intended to constitute an "unfunded" plan for incentive and deferred
compensation. With respect to any payments not yet made to a Participant or
obligation to deliver Shares pursuant to an Award, nothing contained in the Plan
or any Award shall give any such Participant any rights that are greater than
those of a general creditor of the Company; provided that the Committee may
authorize the creation of trusts and deposit therein cash, Shares, other Awards
or other property, or make other arrangements to meet the Company's obligations
under the Plan. Such trusts or other arrangements shall be consistent with the
"unfunded" status of the Plan unless the Committee otherwise determines with the
consent of each affected Participant. The trustee of such trusts may be
authorized to dispose of trust assets and reinvest the proceeds in alternative
investments, subject to such terms and conditions as the Committee may specify
and in accordance with applicable law.
(h) Nonexclusivity of the Plan. Neither the adoption of the Plan by
the Board nor its submission to the shareholders of the Company for approval
shall be construed as creating any limitations on the power of the Board or a
committee thereof to adopt such other incentive arrangements as it may deem
desirable including incentive arrangements and awards which do not qualify under
Section 162(m) of the Code.
(i) Payments in the Event of Forfeitures; Fractional Shares. Unless
otherwise determined by the Committee, in the event of a forfeiture of an Award
with respect to which a Participant paid cash or other consideration, the
Participant shall be repaid the amount of such cash or other consideration. No
fractional Shares shall be issued or delivered pursuant to the Plan or any
Award. The Committee shall determine whether cash, other Awards or other
property shall be issued or paid in lieu of such fractional shares or whether
such fractional shares or any rights thereto shall be forfeited or otherwise
eliminated.
(j) Governing Law. The validity, construction and effect of the
Plan, any rules and regulations under the Plan, and any Award Agreement shall be
determined in accordance with the laws of the State of Delaware without giving
effect to principles of conflict of laws, and applicable federal law.
(k) Non-U.S. Laws. The Committee shall have the authority to adopt
such modifications, procedures, and subplans as may be necessary or desirable to
comply with provisions of the laws of foreign countries in which the Company or
its Subsidiaries may operate to assure the viability of the benefits from Awards
granted to Participants performing services in such countries and to meet the
objectives of the Plan.
(l) Plan Effective Date and Shareholder Approval; Termination of
Plan. The Plan shall become effective on the Effective Date, subject to
subsequent approval, within 12 months of its adoption by the Board, by
shareholders of the Company eligible to vote in the election of directors, by a
vote sufficient to meet the requirements of Code Sections 162(m) (if applicable)
and 422, Rule 16b-3 under the Exchange Act (if applicable), applicable
requirements under the rules of any stock exchange or automated quotation system
on which the Shares may be listed or quoted, and other laws, regulations, and
obligations of the Company applicable to the Plan. Awards may be granted subject
to shareholder approval, but may not be exercised or otherwise settled in the
event the shareholder approval is not obtained. The Plan shall terminate at the
earliest of (a) such time as no Shares remain available for issuance under the
Plan, (b) termination of this Plan by the Board, or (c) the tenth anniversary of
the Effective Date. Awards outstanding upon expiration of the Plan shall remain
in effect until they have been exercised or terminated, or have expired.
19