Exhibit 10.1
USANA HEALTH SCIENCES, INC.
2006 EQUITY INCENTIVE AWARD PLAN
ARTICLE 1
PURPOSE
The purposes of the USANA Health Sciences, Inc. 2006 Equity Incentive Award
Plan (the "Plan") are to:
(1) Closely associate the interests of management, employees,
directors and consultants of USANA Health Sciences, Inc., a Utah
corporation (the "Company"), with the shareholders of the Company by
reinforcing the relationship between participants' rewards and
shareholder gains;
(2) Provide management and employees with an equity ownership in the
Company commensurate with Company performance, as reflected in
increased shareholder value;
(3) Maintain competitive compensation levels; and
(4) Provide an incentive to management and employees to remain in
continuing employment with the Company and to put forth maximum
efforts for the success of its business.
The Plan is further intended to provide flexibility to the Company in its
ability to motivate, attract, and retain the services of members of the Board,
Employees and Consultants upon whose judgment, interest, and special effort the
successful conduct of the Company's operation is largely dependent.
ARTICLE 2
DEFINITIONS AND CONSTRUCTION
Wherever the following terms are used in the Plan they shall have the
meanings specified below, unless the context clearly indicates otherwise. The
singular pronoun shall include the plural where the context so indicates.
2.1 "Award" means an Option, a Restricted Stock award, a Stock Appreciation
Right award, a Performance Share award, a Performance Unit award, a Dividend
Equivalents award, a Stock Payment award, a Deferred Stock award, a Restricted
Stock Unit award, an Other Stock-Based Award, or a Performance-Based Award
granted to a Participant pursuant to the Plan.
2.2 "Award Agreement" means any written agreement, contract, or other
instrument or document evidencing an Award.
2.3 "Board" means the Board of Directors of the Company.
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2.4 "Change in Control" means the occurrence of any of the following in one
or a series of related transactions: (i) an acquisition after the date hereof by
an individual or legal entity or "group" (as described in Rule 13d-5(b)(1) under
the Exchange Act) of more than thirty percent (30%) of the voting rights or
equity interests in the Company; (ii) a replacement, during a 24-month period,
of more than one-half of the members of the Board that is not approved by those
individuals who are members of the Board on the date hereof (or other directors
previously approved by such individuals); (iii) consummation of a merger or
consolidation of the Company or any Subsidiary or a sale of more than one-half
of the assets of the Company in one or a series of related transactions, unless
following such transaction or series of transactions, the holders of the
Company's securities prior to the first such transaction continue to hold at
least one-half of the voting rights and equity interests of the surviving entity
or acquirer of such assets; (iv) a recapitalization, reorganization or other
transaction involving the Company or any Subsidiary that constitutes or results
in a transfer of more than one-half of the voting rights or equity interests in
the Company; or (v) consummation of a "Rule 13e-3 transaction" as defined in
Rule 13e-3 under the Exchange Act with respect to the Company.
2.5 "Code" means the Internal Revenue Code of 1986, as amended.
2.6 "Committee" means the committee of the Board described in Article 12.
2.7 "Consultant" means any consultant or adviser if:
(a) The consultant or adviser renders bona fide services to the Company;
(b) The services rendered by the consultant or adviser are not in
connection with the offer or sale of securities in a capital-raising transaction
and do not directly or indirectly promote or maintain a market for the Company's
securities; and
(c) The consultant or adviser is a natural person who has contracted
directly with the Company to render such services.
2.8 "Covered Employee" means an Employee who is, or may be, as determined
by the Committee, a "covered employee" within the meaning of Section 162(m) of
the Code.
2.9 "Deferred Stock" means a right to receive a specified number of shares
of Stock during specified time periods pursuant to Article 8.
2.10 "Disability" means that the Participant qualifies to receive long-term
disability payments under the Company's long-term disability insurance program,
as it may be amended from time to time.
2.11 "Dividend Equivalents" means a right granted to a Participant pursuant
to Article 8 to receive the equivalent value (in cash or Stock) of dividends
paid on Stock.
2.12 "Effective Date" shall have the meaning set forth in Section 13.1.
2.13 "Eligible Individual" means any person who is an Employee, a
Consultant or a member of the Board, as determined by the Committee.
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2.14 "Employee" means any officer or other employee (as defined in
accordance with Section 3401(c) of the Code) of the Company or any Subsidiary.
2.15 "Exchange Act" means the Securities Exchange Act of 1934, as amended.
2.16 "Fair Market Value" means, as of any given date, the fair market value
of a share of Stock on the date determined by such methods or procedures as may
be established from time to time by the Committee. Unless otherwise determined
by the Committee, the Fair Market Value of a share of Stock as of any date shall
be (i) the mean between the highest and lowest selling price of a share of
Common Stock on the principal exchange on which shares of Common Stock are then
trading, if any, on such date, or if shares were not traded on such date, then
on the closest preceding date on which a trade occurred; or (ii) if Common Stock
is not traded on an exchange, the mean between the closing representative bid
and asked prices for the Common Stock on such date as reported by NASDAQ or, if
NASDAQ is not then in existence, by its successor quotation system; or (iii) if
Common Stock is not publicly traded, the Fair Market Value of a share of Common
Stock as established by the Committee acting in good faith.
2.17 "Incentive Stock Option" means an Option that is intended to meet the
requirements of Section 422 of the Code or any successor provision thereto.
2.18 "Independent Director" means a member of the Board who is not an
Employee of the Company.
2.19 "Non-Employee Director" means a member of the Board who qualifies as a
"Non-Employee Director" as defined in Rule 16b-3(b)(3) of the Exchange Act, or
any successor definition adopted by the Board.
2.20 "Non-Qualified Stock Option" means an Option that is not intended to
be an Incentive Stock Option.
2.21 "Option" means a right granted to a Participant pursuant to Article 5
of the Plan to purchase a specified number of shares of Stock at a specified
price during specified time periods. An Option may be either an Incentive Stock
Option or a Non-Qualified Stock Option.
2.22 "Other Stock-Based Award" means an Award granted or denominated in
Stock or units of Stock pursuant to Section 8.7 of the Plan.
2.23 "Participant" means any Eligible Individual who, as a member of the
Board or Employee or Consultant, has been granted an Award pursuant to the Plan.
2.24 "Performance-Based Award" means an Award granted to selected Covered
Employees pursuant to Articles 6 and 8, but which is subject to the terms and
conditions set forth in Article 9. All Performance-Based Awards are intended to
qualify as Qualified Performance-Based Compensation.
2.25 "Performance Criteria" means the criteria that the Committee selects
for purposes of establishing the Performance Goal or Performance Goals for a
Participant for a Performance Period. The Performance Criteria that will be used
to establish Performance Goals are limited to the following: net earnings
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(either before or after interest, taxes, depreciation and amortization),
economic value-added (as determined by the Committee), sales or revenue, net
income (either before or after taxes), operating earnings, cash flow (including,
but not limited to, operating cash flow and free cash flow), cash flow return on
capital, return on net assets, return on stockholders' equity, return on assets,
return on capital, stockholder returns, return on sales, gross or net profit
margin, productivity, expense, margins, operating efficiency, customer
satisfaction, working capital, earnings per share, price per share of Stock, and
market share, any of which may be measured either in absolute terms or as
compared to any incremental increase or as compared to results of a peer group.
The Committee shall, within the time prescribed by Section 162(m) of the Code,
define in an objective fashion the manner of calculating the Performance
Criteria it selects to use for such Performance Period for such Participant.
2.26 "Performance Goals" means, for a Performance Period, the goals
established in writing by the Committee for the Performance Period based upon
the Performance Criteria. Depending on the Performance Criteria used to
establish such Performance Goals, the Performance Goals may be expressed in
terms of overall Company performance or the performance of a division, business
unit, or an individual. The Committee, in its discretion, may, adjust or modify
the calculation of Performance Goals for such Performance Period in order to
prevent the dilution or enlargement of the rights of Participants (a) in the
event of, or in anticipation of, any unusual or extraordinary corporate item,
transaction, event, or development, or (b) in recognition of, or in anticipation
of, any other unusual or nonrecurring events affecting the Company, or the
financial statements of the Company, or in response to, or in anticipation of,
changes in applicable laws, regulations, accounting principles, or business
conditions.
2.27 "Performance Period" means the one or more periods of time, which may
be of varying and overlapping durations, as the Committee may select, over which
the attainment of one or more Performance Goals will be measured for the purpose
of determining a Participant's right to, and the payment of, a Performance-Based
Award.
2.28 "Performance Share" means a right granted to a Participant pursuant to
Article 8, to receive Stock, the payment of which is contingent upon achieving
certain Performance Goals or other performance-based targets established by the
Committee.
2.29 "Performance Unit" means a right granted to a Participant pursuant to
Article 8, to receive units of value, including dollar value of shares of Stock,
the payment of which is contingent upon achieving certain Performance Goals or
other performance-based targets established by the Committee.
2.30 "Plan" means this USANA Health Sciences, Inc. 2006 Equity Incentive
Award Plan, as it may be amended from time to time.
2.31 "Qualified Performance-Based Compensation" means any compensation that
is intended to qualify as "qualified performance-based compensation" as
described in Section 162(m)(4)(C) of the Code.
2.32 "Restricted Stock" means Stock awarded to a Participant pursuant to
Article 6 that is subject to certain restrictions and may be subject to risk of
forfeiture.
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2.33 "Restricted Stock Unit" means an Award granted pursuant to Section
8.6.
2.34 "Section 409A Award" shall have the meaning set forth in Section 15.1.
2.35 "Securities Act" shall mean the Securities Act of 1933, as amended.
2.36 "Stock" means the common stock of the Company, par value $.001 per
share, and such other securities of the Company that may be substituted for
Stock pursuant to Article 11.
2.37 "Stock Appreciation Right" or "SAR" means a right granted pursuant to
Article 7 to receive a payment equal to the excess of the Fair Market Value of a
specified number of shares of Stock on the date the SAR is exercised over the
Fair Market Value on the date the SAR was granted as set forth in the applicable
Award Agreement.
2.38 "Stock Payment" means (a) a payment in the form of shares of Stock, or
(b) an option or other right to purchase shares of Stock, as part of any bonus,
deferred compensation or other arrangement, made in lieu of all or any portion
of the compensation, granted pursuant to Article 8.
2.39 "Subsidiary" means any "subsidiary corporation" as defined in Section
424(f) of the Code and any applicable regulations promulgated thereunder or any
other entity of which a majority of the outstanding voting stock or voting power
is beneficially owned directly or indirectly by the Company.
ARTICLE 3
SHARES SUBJECT TO THE PLAN
3.1 Number of Shares.
(a) Subject to Article 11 and Section 3.1(b), the aggregate number of
shares of Stock which may be issued, transferred or reserved for issuance
pursuant to Awards under the Plan shall be five million (5,000,000) shares. In
order that the applicable regulations under the Code relating to Incentive Stock
Options be satisfied, the maximum number of shares of Stock that may be
delivered upon exercise of Incentive Stock Options shall be the number specified
in this Section 3.1(a). Shares of stock that may be issued upon exercise of
Options under the Plan shall be authorized and unissued shares of Common Stock,
par value $.001 per share, of the Company ("Common Stock"). In the absence of an
effective registration statement under the Securities Act of 1933 (the "Act"),
all Options granted and shares of Common Stock subject to their exercise will be
restricted as to subsequent resale or transfer, pursuant to the provisions of
Rule 144, promulgated under the Act.
(b) To the extent that an Award terminates, expires, or lapses for any
reason, any shares of Stock subject to the Award shall again be available for
the grant of an Award pursuant to the Plan. Additionally, any shares of Stock
tendered or withheld to satisfy the grant or exercise price or tax withholding
obligation pursuant to any Award shall again be available for the grant of an
Award pursuant to the Plan. To the extent permitted by applicable law or any
exchange rule, shares of Stock issued in assumption of, or in substitution for,
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any outstanding awards of any entity acquired in any form of combination by the
Company or any Subsidiary shall not be counted against shares of Stock available
for grant pursuant to this Plan. The payment of Dividend Equivalents in
conjunction with any outstanding Awards shall not be counted against the shares
available for issuance under the Plan.
3.2 Stock Distributed. Any Stock distributed pursuant to an Award may
consist, in whole or in part, of authorized and unissued Stock, treasury Stock
or Stock purchased on the open market.
3.3 Limitation on Number of Shares Subject to Awards. Notwithstanding any
provision in the Plan to the contrary, and subject to Article 11, (a) the
maximum number of shares of Stock with respect to one or more Awards that may be
granted to any one Participant during a one-year period (measured from the date
of any grant) shall be 500,000, and (b) the maximum dollar value payable to any
one Participant during a one-year period with respect to awards of Performance
Units shall be $500,000.
ARTICLE 4
ELIGIBILITY AND PARTICIPATION
4.1 Eligibility. Each Eligible Individual shall be eligible to be granted
one or more Awards pursuant to the Plan.
4.2 Participation. Subject to the provisions of the Plan, the Committee
may, from time to time, select from among all Eligible Individuals, those to
whom Awards shall be granted and shall determine the nature and amount of each
Award. No Eligible Individual shall have any right to be granted an Award
pursuant to this Plan.
4.3 Foreign Participants. In order to assure the viability of Awards
granted to Participants employed in foreign countries, the Committee may provide
for such special terms as it may consider necessary or appropriate to
accommodate differences in local law, tax policy, or custom. Moreover, the
Committee may approve such supplements to, or amendments, restatements, or
alternative versions of, the Plan as it may consider necessary or appropriate
for such purposes without thereby affecting the terms of the Plan as in effect
for any other purpose; provided, however, that no such supplements, amendments,
restatements, or alternative versions shall increase the share limitations
contained in Sections 3.1 and 3.3 [see comment above regarding Section 3.3] of
the Plan.
ARTICLE 5
STOCK OPTIONS
5.1 General. The Committee is authorized to grant Options to Participants
on the following terms and conditions:
(a) Exercise Price. The exercise price per share of Stock subject to an
Option shall be not less than 100% of the Fair Market Value of a share of Stock
on the date of the grant.
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(b) Time and Conditions of Exercise. Each Option shall be fully
exercisable at any time within the period beginning not earlier than six months
after the date of the option grant and ending not later than ten years after the
date of such grant (the "Option Term"), unless the Committee specifies
otherwise. In no event, however, shall the Option Term extend beyond ten years
after the date of the grant. No Option shall be exercisable after the expiration
of the Option Term. The Committee shall also determine the performance or other
conditions, if any, that must be satisfied before all or part of an Option may
be exercised.
(c) Payment The Committee shall determine the methods by which the
exercise price of an Option may be paid, the form of payment, including, without
limitation: (i) cash, (ii) promissory note bearing interest at no less than such
rate as shall preclude the imputation of interest under the Code, (iii) shares
of Stock having a Fair Market Value on the date of delivery equal to the
aggregate exercise price of the Option or exercised portion thereof, or (iv)
other property acceptable to the Committee (including through the delivery of a
notice that the Participant has placed a market sell order with a broker with
respect to shares of Stock then issuable upon exercise of the Option, and that
the broker has been directed to pay a sufficient portion of the net proceeds of
the sale to the Company in satisfaction of the Option exercise price; provided
that payment of such proceeds is then made to the Company upon settlement of
such sale), and the methods by which shares of Stock shall be delivered or
deemed to be delivered to Participants. Notwithstanding any other provision of
the Plan to the contrary, no Participant who is a member of the Board or an
"executive officer" of the Company within the meaning of Section 13(k) of the
Exchange Act shall be permitted to pay the exercise price of an Option by means
of a personal loan or other credit extended by the Company or in any other
method which would violate Section 13(k) of the Exchange Act.
(d) Evidence of Grant. All Options shall be evidenced by a written Award
Agreement between the Company and the Participant. The Award Agreement shall
include the number of shares of Common Stock subject to the Option, the exercise
date, the Option Term, and such additional provisions as may be specified by the
Committee.
5.2 Incentive Stock Options. The terms of any Incentive Stock Options
granted pursuant to the Plan must comply with the conditions and limitations
contained Section 13.2 and this Section 5.2.
(a) Eligibility. The Committee may grant one or more Incentive Stock
Options to employees of the Company or any "subsidiary corporation" thereof
(within the meaning of Section 424(f) of the Code and the applicable regulations
promulgated thereunder). The date an Incentive Stock Option is granted shall
mean the date selected by the Committee as of which the Committee shall allot a
specific number of shares to a participant pursuant to the Plan.
(b) Individual Dollar Limitation. The aggregate Fair Market Value
(determined as of the time the Option is granted) of all shares of Stock with
respect to which Incentive Stock Options are first exercisable by a Participant
in any calendar year may not exceed $100,000 or such other limitation as imposed
by Section 422(d) of the Code, or any successor provision. Multiple Incentive
Stock Options may be granted to an Optionee in any calendar year.
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(c) Ten Percent Owners. The Committee may determine to grant an
Incentive Stock Option to an employee who is also an individual who owns, at the
date of grant, directly or indirectly according to the stock ownership
attribution rules of Section 424(d) of the Code, stock possessing more than ten
percent of the total combined voting power of all classes of Stock of the
Company. However, the exercise price of such Option granted shall not be less
than 110% of Fair Market Value on the date of grant. Furthermore, the Option may
be exercisable for no more than five years from the date of grant.
(d) Notice of Disposition. The Participant shall give the Company prompt
notice of any disposition of shares of Stock acquired by exercise of an
Incentive Stock Option within (i) two years from the date of grant of such
Incentive Stock Option or (ii) one year after the transfer of such shares of
Stock to the Participant. In order to obtain the favorable tax treatment
available for Incentive Stock Options under Section 422 of the Code, the
Optionee is prohibited from the sale, exchange, transfer, pledge, hypothecation,
gift or other disposition of the shares of Common Stock underlying the Incentive
Stock Options until the later of either two (2) years after the date of grant of
the Incentive Stock Option, or one (1) year after the transfer to the Optionee
of such underlying Common Stock after the Optionee's exercise of such Incentive
Stock Option. Should Optionee choose to make a premature disposition of such
underlying Common Stock contrary to such restrictions, the Options related to
such Common Stock shall be treated as Non-qualified Stock Options pursuant to
the terms of the Plan.
(e) Right to Exercise. During a Participant's lifetime, an Incentive
Stock Option may be exercised only by the Participant.
5.3 Substitution of Stock Appreciation Rights. The Committee may provide in
the Award Agreement evidencing the grant of an Option that the Committee, in its
sole discretion, shall have the right to substitute a Stock Appreciation Right
for such Option at any time prior to or upon exercise of such Option, subject to
the provisions of Section 7.2 hereof; provided that such Stock Appreciation
Right shall be exercisable with respect to the same number of shares of Stock
for which such substituted Option would have been exercisable.
5.4 Paperless Exercise. In the event that the Company establishes, for
itself or using the services of a third party, an automated system for the
exercise of Options, such as a system using an internet website or interactive
voice response, then the paperless exercise of Options by a Participant may be
permitted through the use of such an automated system.
5.5 Granting of Options to Independent Directors. The Board may from time
to time, in its sole discretion, and subject to the limitations of the Plan:
(a) Select from among the Independent Directors (including Independent
Directors who have previously been granted Options under the Plan) such of them
as in its opinion should be granted Options;
(b) Subject to Section 3.3, determine the number of shares of Stock that
may be purchased upon exercise of the Options granted to such selected
Independent Directors; and
(c) Subject to the provisions of this Article 5, determine the terms and
conditions of such Options, consistent with the Plan.
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Options granted to Independent Directors shall be Non-Qualified Stock Options.
ARTICLE 6
RESTRICTED STOCK AWARDS
6.1 Grant of Restricted Stock. The Committee is authorized to make Awards
of Restricted Stock to any Participant selected by the Committee in such amounts
and subject to such terms and conditions as determined by the Committee. All
Awards of Restricted Stock shall be evidenced by a written Restricted Stock
Award Agreement.
6.2 Issuance and Restrictions. Restricted Stock shall be subject to such
restrictions on transferability and other restrictions as the Committee may
impose (including, without limitation, limitations on the right to vote
Restricted Stock or the right to receive dividends on the Restricted Stock).
These restrictions may lapse separately or in combination at such times,
pursuant to such circumstances, in such installments, or otherwise, as the
Committee determines at the time of the grant of the Award or thereafter.
6.3 Forfeiture. Except as otherwise determined by the Committee at the time
of the grant of the Award or thereafter, upon termination of employment or
service during the applicable restriction period, Restricted Stock that is at
that time subject to restrictions shall be forfeited; provided, however, that
the Committee may (a) provide in any Restricted Stock Award Agreement that
restrictions or forfeiture conditions relating to Restricted Stock will be
waived in whole or in part in the event of terminations resulting from specified
causes, and (b) in other cases waive in whole or in part restrictions or
forfeiture conditions relating to Restricted Stock.
6.4 Certificates for Restricted Stock. Restricted Stock granted pursuant to
the Plan may be evidenced in such manner as the Committee shall determine. If
certificates representing shares of Restricted Stock are registered in the name
of the Participant, certificates must bear an appropriate legend referring to
the terms, conditions, and restrictions applicable to such Restricted Stock, and
the Company may, at its discretion, retain physical possession of the
certificate until such time as all applicable restrictions lapse.
ARTICLE 7
STOCK APPRECIATION RIGHTS
7.1 Grant of Stock Appreciation Rights. A Stock Appreciation Right may be
granted to any Participant selected by the Committee. A Stock Appreciation Right
may be granted (a) in connection and simultaneously with the grant of an Option,
(b) with respect to a previously granted Option, or (c) independent of an
Option. A Stock Appreciation Right shall be subject to such terms and conditions
not inconsistent with the Plan as the Committee shall impose and shall be
evidenced by an Award Agreement.
7.2 Coupled Stock Appreciation Rights.
(a) A Coupled Stock Appreciation Right ("CSAR") shall be related to a
particular Option and shall be exercisable only when and to the extent the
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related Option is exercisable, provided, however, that the exercise price for
any CSAR shall not be less than 100% of the Fair Market Value on the date of
grant; and provided, further, that, the Committee in its sole and absolute
discretion may provide that the CSAR may be exercised subsequent to a
termination of employment or service, as applicable, or following a Change in
Control of the Company, or because of the Participant's retirement, death or
disability, or otherwise.
(b) A CSAR may be granted to a Participant for no more than the number
of shares subject to the simultaneously or previously granted Option to which it
is coupled.
(c) A CSAR shall entitle the Participant (or other person entitled to
exercise the Option pursuant to the Plan) to surrender to the Company the
unexercised portion of the Option to which the CSAR relates (to the extent then
exercisable pursuant to its terms) and to receive from the Company in exchange
therefor an amount determined by multiplying the difference obtained by
subtracting the Option exercise price from the Fair Market Value of a share of
Stock on the date of exercise of the CSAR by the number of shares of Stock with
respect to which the CSAR shall have been exercised, subject to any limitations
the Committee may impose.
7.3 Independent Stock Appreciation Rights.
(a) An Independent Stock Appreciation Right ("ISAR") shall be unrelated
to any Option and shall have a term set by the Committee. An ISAR shall be
exercisable in such installments as the Committee may determine. An ISAR shall
cover such number of shares of Stock as the Committee may determine. The
exercise price per share of Stock subject to each ISAR shall be set by the
Committee; provided, however, that the exercise price for any ISAR shall not be
less than 100% of the Fair Market Value on the date of grant; and provided,
further, that, the Committee in its sole and absolute discretion may provide
that the ISAR may be exercised subsequent to a termination of employment or
service, as applicable, or following a Change in Control of the Company, or
because of the Participant's retirement, death or disability, or otherwise.
(b) An ISAR shall entitle the Participant (or other person entitled to
exercise the ISAR pursuant to the Plan) to exercise all or a specified portion
of the ISAR (to the extent then exercisable pursuant to its terms) and to
receive from the Company an amount determined by multiplying the difference
obtained by subtracting the exercise price per share of the ISAR from the Fair
Market Value of a share of Stock on the date of exercise of the ISAR by the
number of shares of Stock with respect to which the ISAR shall have been
exercised, subject to any limitations the Committee may impose.
7.4 Payment and Limitations on Exercise.
(a) Subject to Section 7.4(b) and (c), payment of the amounts determined
under Sections 7.2(c) and 7.3(b) above shall be in cash, in Stock (based on its
Fair Market Value as of the date the Stock Appreciation Right is exercised) or a
combination of both, as determined by the Committee.
(b) To the extent payment for a Stock Appreciation Right is to be made
in cash, the Award Agreement shall, to the extent necessary to comply with the
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requirements of Section 409A of the Code, specify the date of payment, which may
be different than the date of exercise of the Stock Appreciation Right. If the
date of payment for a Stock Appreciation Right is later than the date of
exercise, the Award Agreement may specify that the Participant be entitled to
earnings on such amount until paid.
(c) To the extent any payment under Section 7.2(c) or 7.3(b) is effected
in Stock it shall be made subject to satisfaction of any applicable provisions
of Article 5 above pertaining to Options.
ARTICLE 8
OTHER TYPES OF AWARDS
8.1 Performance Share Awards. Any Participant selected by the Committee may
be granted one or more Performance Share awards which shall be denominated in a
number of shares of Stock and which may be linked to any one or more of the
Performance Criteria or other specific performance criteria determined
appropriate by the Committee, in each case on a specified date or dates or over
any period or periods determined by the Committee. In making such
determinations, the Committee shall consider (among such other factors as it
deems relevant in light of the specific type of award) the contributions,
responsibilities and other compensation of the particular Participant.
8.2 Performance Units. Any Participant selected by the Committee may be
granted one or more Performance Unit awards which shall be denominated in units
of value, including dollar value of shares of Stock, and which may be linked to
any one or more of the Performance Criteria or other specific performance
criteria determined appropriate by the Committee, in each case on a specified
date or dates or over any period or periods determined by the Committee. In
making such determinations, the Committee shall consider (among such other
factors as it deems relevant in light of the specific type of award) the
contributions, responsibilities and other compensation of the particular
Participant.
8.3 Dividend Equivalents.
(a) Any Participant selected by the Committee may be granted Dividend
Equivalents based on the dividends declared on the shares of Stock that are
subject to any Award, to be credited as of dividend payment dates, during the
period between the date the Award is granted and the date the Award is
exercised, vests or expires, as determined by the Committee. Such Dividend
Equivalents shall be converted to cash or additional shares of Stock by such
formula and at such time and subject to such limitations as may be determined by
the Committee. Note that paying dividend equivalents on exercise of Options or
SARs may result in the treatment of the Option or SAR as deferred compensation
under IRC 409A.
(b) Dividend Equivalents granted with respect to Options or SARs that
are intended to be Qualified Performance-Based Compensation shall be payable,
with respect to pre-exercise periods, regardless of whether such Option or SAR
is subsequently exercised.
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8.4 Stock Payments. Any Participant selected by the Committee may receive
Stock Payments in the manner determined from time to time by the Committee. The
number of shares shall be determined by the Committee and may be based upon the
Performance Criteria or other specific performance criteria determined
appropriate by the Committee, determined on the date such Stock Payment is made
or on any date thereafter.
8.5 Deferred Stock. Any Participant selected by the Committee may be
granted an award of Deferred Stock in the manner determined from time to time by
the Committee. The number of shares of Deferred Stock shall be determined by the
Committee and may be linked to the Performance Criteria or other specific
performance criteria determined to be appropriate by the Committee, in each case
on a specified date or dates or over any period or periods determined by the
Committee. Stock underlying a Deferred Stock award will not be issued until the
Deferred Stock award has vested, pursuant to a vesting schedule or performance
criteria set by the Committee. Unless otherwise provided by the Committee, a
Participant awarded Deferred Stock shall have no rights as a Company stockholder
with respect to such Deferred Stock until such time as the Deferred Stock Award
has vested and the Stock underlying the Deferred Stock Award has been issued.
8.6 Restricted Stock Units. The Committee is authorized to make Awards of
Restricted Stock Units to any Participant selected by the Committee in such
amounts and subject to such terms and conditions as determined by the Committee.
At the time of grant, the Committee shall specify the date or dates on which the
Restricted Stock Units shall become fully vested and nonforfeitable, and may
specify such conditions to vesting as it deems appropriate. At the time of
grant, the Committee shall specify the maturity date applicable to each grant of
Restricted Stock Units which shall be no earlier than the vesting date or dates
of the Award and may be determined at the election of the grantee. On the
maturity date, the Company shall, subject to Section 10.5(b), transfer to the
Participant one unrestricted, fully transferable share of Stock for each
Restricted Stock Unit scheduled to be paid out on such date and not previously
forfeited. The Committee shall specify the purchase price, if any, to be paid by
the grantee to the Company for such shares of Stock.
8.7 Other Stock-Based Awards. Any Participant selected by the Committee may
be granted one or more Awards that provide Participants with shares of Stock or
the right to purchase shares of Stock or that have a value derived from the
value of, or an exercise or conversion privilege at a price related to, or that
are otherwise payable in shares of Stock and which may be linked to any one or
more of the Performance Criteria or other specific performance criteria
determined appropriate by the Committee, in each case on a specified date or
dates or over any period or periods determined by the Committee. In making such
determinations, the Committee shall consider (among such other factors as it
deems relevant in light of the specific type of Award) the contributions,
responsibilities and other compensation of the particular Participant.
8.8 Term. Except as otherwise provided herein, the term of any Award of
Performance Shares, Performance Units, Dividend Equivalents, Stock Payments,
Deferred Stock, Restricted Stock Units or Other Stock-Based Award shall be set
by the Committee in its discretion.
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8.9 Exercise or Purchase Price. The Committee may establish the exercise or
purchase price, if any, of any Award of Performance Shares, Performance Units,
Deferred Stock, Stock Payments, Restricted Stock Units or Other Stock-Based
Award; provided, however, that such price shall not be less than the par value
of a share of Stock on the date of grant, unless otherwise permitted by
applicable state law.
8.10 Exercise Upon Termination of Employment or Service. An Award of
Performance Shares, Performance Units, Dividend Equivalents, Deferred Stock,
Stock Payments, Restricted Stock Units and Other Stock-Based Award shall only be
exercisable or payable while the Participant is an Employee, a Consultant, or a
member of the Board, as applicable; provided, however, that the Committee in its
sole and absolute discretion may provide that an Award of Performance Shares,
Performance Units, Dividend Equivalents, Stock Payments, Deferred Stock,
Restricted Stock Units or Other Stock-Based Award may be exercised or paid
subsequent to a termination of employment or service, as applicable, or
following a Change in Control of the Company, or because of the Participant's
retirement, death or disability, or otherwise; provided, however, that any such
provision with respect to Performance Shares or Performance Units shall be
subject to the requirements of Section 162(m) of the Code that apply to
Qualified Performance-Based Compensation.
8.11 Form of Payment. Payments with respect to any Awards granted under
this Article 8 shall be made in cash, in Stock or a combination of both, as
determined by the Committee.
8.12 Award Agreement. All Awards under this Article 8 shall be subject to
such additional terms and conditions as determined by the Committee and shall be
evidenced by a written Award Agreement.
ARTICLE 9
PERFORMANCE-BASED AWARDS
9.1 Purpose. The purpose of this Article 9 is to provide the Committee the
ability to qualify Awards other than Options and SARs and that are granted
pursuant to Articles 6 and 8 as Qualified Performance-Based Compensation. If the
Committee, in its discretion, decides to grant a Performance-Based Award to a
Covered Employee, the provisions of this Article 9 shall control over any
contrary provision contained in Articles 6 or 8; provided, however, that the
Committee may in its discretion grant Awards to Covered Employees that are based
on Performance Criteria or Performance Goals but that do not satisfy the
requirements of this Article 9.
9.2 Applicability. This Article 9 shall apply only to those Covered
Employees selected by the Committee to receive Performance-Based Awards. The
designation of a Covered Employee as a Participant for a Performance Period
shall not in any manner entitle the Participant to receive an Award for the
period. Moreover, designation of a Covered Employee as a Participant for a
particular Performance Period shall not require designation of such Covered
Employee as a Participant in any subsequent Performance Period and designation
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of one Covered Employee as a Participant shall not require designation of any
other Covered Employees as a Participant in such period or in any other period.
9.3 Procedures with Respect to Performance-Based Awards. To the extent
necessary to comply with the Qualified Performance-Based Compensation
requirements of Section 162(m)(4)(C) of the Code, with respect to any Award
granted under Articles 6 and 8 which may be granted to one or more Covered
Employees, no later than ninety (90) days following the commencement of any
fiscal year in question or any other designated fiscal period or period of
service (or such other time as may be required or permitted by Section 162(m) of
the Code), the Committee shall, in writing, (a) designate one or more Covered
Employees, (b) select the Performance Criteria applicable to the Performance
Period, (c) establish the Performance Goals, and amounts of such Awards, as
applicable, which may be earned for such Performance Period, and (d) specify the
relationship between Performance Criteria and the Performance Goals and the
amounts of such Awards, as applicable, to be earned by each Covered Employee for
such Performance Period. Following the completion of each Performance Period,
the Committee shall certify in writing whether the applicable Performance Goals
have been achieved for such Performance Period. In determining the amount earned
by a Covered Employee, the Committee shall have the right to reduce or eliminate
(but not to increase) the amount payable at a given level of performance to take
into account additional factors that the Committee may deem relevant to the
assessment of individual or corporate performance for the Performance Period.
9.4 Payment of Performance-Based Awards. Unless otherwise provided in the
applicable Award Agreement, a Participant must be employed by the Company or a
Subsidiary on the day a Performance-Based Award for such Performance Period is
paid to the Participant. Furthermore, a Participant shall be eligible to receive
payment pursuant to a Performance-Based Award for a Performance Period only if
the Performance Goals for such period are achieved.
9.5 Additional Limitations. Notwithstanding any other provision of the
Plan, any Award which is granted to a Covered Employee and is intended to
constitute Qualified Performance-Based Compensation shall be subject to any
additional limitations set forth in Section 162(m) of the Code (including any
amendment to Section 162(m) of the Code) or any regulations or rulings issued
thereunder that are requirements for qualification as qualified
performance-based compensation as described in Section 162(m)(4)(C) of the Code,
and the Plan shall be deemed amended to the extent necessary to conform to such
requirements.
ARTICLE 10
PROVISIONS APPLICABLE TO AWARDS
10.1 Stand-Alone and Tandem Awards. Awards granted pursuant to the Plan
may, in the discretion of the Committee, be granted either alone, in addition
to, or in tandem with, any other Award granted pursuant to the Plan. Awards
granted in addition to or in tandem with other Awards may be granted either at
the same time as or at a different time from the grant of such other Awards.
10.2 Award Agreement. Awards under the Plan shall be evidenced by written
Award Agreements that shall set forth the terms, conditions, limitations and
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award type for each Award which may include the term of an Award, the provisions
applicable in the event the Participant's employment or service terminates, and
the Company's authority to unilaterally or bilaterally amend, modify, suspend,
cancel or rescind an Award.
10.3 Limits on Transfer. Except as otherwise provided by the Committee, no
right or interest of a Participant in any Award may be pledged, encumbered, or
hypothecated to or in favor of any party other than the Company or a Subsidiary,
or shall be subject to any lien, obligation, or liability of such Participant to
any other party other than the Company or a Subsidiary. Except as otherwise
provided by the Committee, during the life of the recipient, such award shall be
exercisable only by such person or by such person's guardian or legal
representative.
10.4 Death of Optionee.
(a) Options. Notwithstanding Section 10.3, upon the death of the
Optionee while either in the Company's employ or within six months after
termination of Optionee's employment, any rights to the extent exercisable on
the date of death may be exercised by the Optionee's estate, or by a person who
acquires the right to exercise such Option by bequest or inheritance or by
reason of the death of the Optionee, provided that such exercise occurs within
both the remaining effective term of the Option and one year after the
Optionee's death. A beneficiary, legal guardian, legal representative, or other
person claiming any rights pursuant to the Plan is subject to all terms and
conditions of the Plan and any Award Agreement applicable to the Participant,
except to the extent the Plan and Award Agreement otherwise provide, and to any
additional restrictions deemed necessary or appropriate by the Committee. If no
beneficiary has been designated or survives the Participant, payment shall be
made to the person entitled thereto pursuant to the Participant's will or the
laws of descent and distribution. Subject to the foregoing, a beneficiary
designation may be changed or revoked by a Participant at any time provided the
change or revocation is filed with the Committee.
(b) Incentive Stock Options. Upon the death of the Optionee while in the
Company's employ or within not more than 90 days after termination of Optionee's
employment, any Incentive Stock Option exercisable on the date of death may be
exercised by the Optionee's estate or by a person who acquires the right to
exercise such Incentive Stock Option by bequest or inheritance or by reason of
the death of the Optionee, provided that such exercise occurs within both the
remaining Option Term of the Incentive Stock Option and one year after the
Optionee's death.
10.5 Retirement or Disability.
(a) Options. Upon termination of the Optionee's employment by reason of
retirement or permanent disability, the Optionee may, within 36 months from the
date of termination, exercise any Options to the extent such Options are
exercisable during such 36-month period.
(b) Incentive Stock Options. Upon termination of the Optionee's
employment by reason of retirement or permanent disability, the Optionee may,
within 36 months from the date of termination, exercise any Incentive Stock
Options to the extent such Incentive Stock Options are exercisable during such
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36-month period. However, the tax treatment available pursuant to Section 422 of
the Code will not be available to an Optionee who exercises any Incentive Stock
Option more than (i) 12 months after the date of termination of employment due
to permanent disability, or (ii) three months after the date of termination of
employment due to retirement.
10.6 Termination for Other Reasons. Except as provided herein or except as
otherwise determined by the Committee, all Options shall terminate ninety (90)
days after the termination of the Optionee's employment with the Company.
10.7 Leaves of Absence and Performance Targets. The Committee shall be
entitled to make such rules, regulations and determinations as it deems
appropriate under the Plan in respect of any leave of absence taken by the
recipient of any award. Without limiting the generality of the foregoing, the
Committee shall be entitled to determine (i) whether or not any such leave of
absence shall constitute a termination of employment within the meaning of the
Plan and (ii) the impact, if any, of such leave of absence on awards under the
Plan theretofore made to any recipient who takes such leave of absence. The
Committee shall also be entitled to make such determination of performance
targets, if any, as it deems appropriate.
10.8 Newly Eligible Employees. The Committee shall be entitled to make such
rules, regulations, determinations and awards as it deems appropriate in respect
of any employee who becomes eligible to participate in the Plan or any portion
thereof, after the commencement of an award or incentive period.
10.9 Stock Certificates; Book Entry Procedures. As soon as practicable
after receipt of payment, the Company shall deliver to the Optionee a
certificate(s) for such shares of Common Stock. Upon receipt of such
certificate(s), the Optionee shall become a shareholder of the Company with
respect to Common Stock represented by share certificates so issued and as such
shall be fully entitled to receive dividends, to vote and to exercise all other
rights of a shareholder. All Stock certificates delivered pursuant to the Plan
are subject to any stop-transfer orders and other restrictions as the Committee
deems necessary or advisable to comply with federal, state, or foreign
jurisdiction, securities or other laws, rules and regulations and the rules of
any national securities exchange or automated quotation system on which the
Stock is listed, quoted, or traded. The Committee may place legends on any Stock
certificate to reference restrictions applicable to the Stock. In addition to
the terms and conditions provided herein, the Board may require that a
Participant make such reasonable covenants, agreements, and representations as
the Board, in its discretion, deems advisable in order to comply with any such
laws, regulations, or requirements. The Committee shall have the right to
require any Participant to comply with any timing or other restrictions with
respect to the settlement or exercise of any Award, including a window-period
limitation, as may be imposed in the discretion of the Committee.
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ARTICLE 11
CHANGES IN CAPITAL STRUCTURE
11.1 Adjustments.
(a) In the event of any stock dividend, stock split, combination or
exchange of shares, merger, consolidation, spin-off, recapitalization,
distribution of Company assets to stockholders (other than normal cash
dividends), or any other corporate event affecting the Stock or the share price
of the Stock, the Committee may make such proportionate adjustments, if any, as
the Committee in its discretion may deem appropriate to reflect such changes
with respect to (i) the aggregate number and type of shares that may be issued
under the Plan (including, but not limited to, adjustments of the limitations in
Sections 3.1 and 3.3); (ii) the terms and conditions of any outstanding Awards
(including, without limitation, any applicable performance targets or criteria
with respect thereto); and (iii) the grant or exercise price per share for any
outstanding Awards under the Plan. Any adjustment affecting an Award intended as
Qualified Performance-Based Compensation shall be made consistent with the
requirements of Section 162(m) of the Code.
(b) In the event of any transaction or event described in Section
11.1(a) or any unusual or nonrecurring transactions or events affecting the
Company, any affiliate of the Company, or the financial statements of the
Company or any affiliate (including without limitation any Change in Control),
or of changes in applicable laws, regulations or accounting principles, and
whenever the Committee determines that action is appropriate in order to prevent
the dilution or enlargement of the benefits or potential benefits intended to be
made available under the Plan or with respect to any Award under the Plan, to
facilitate such transactions or events or to give effect to such changes in
laws, regulations or principles, the Committee, in its sole discretion and on
such terms and conditions as it deems appropriate, either by amendment of the
terms of any outstanding Awards or by action taken prior to the occurrence of
such transaction or event and either automatically or upon the Participant's
request, is hereby authorized to take any one or more of the following actions:
(i) To provide for either (A) termination of any such Award in
exchange for an amount of cash and/or other property, if any, equal to the
amount that would have been attained upon the exercise of such Award or
realization of the Participant's rights (and, for the avoidance of doubt, if as
of the date of the occurrence of the transaction or event described in this
Section 11.1(b) the Committee determines in good faith that no amount would have
been attained upon the exercise of such Award or realization of the
Participant's rights, then such Award may be terminated by the Company without
payment) or (B) the replacement of such Award with other rights or property
selected by the Committee in its sole discretion;
(ii) To provide that such Award be assumed by the successor or
survivor corporation, or a parent or subsidiary thereof, or shall be substituted
for by similar options, rights or awards covering the stock of the successor or
survivor corporation, or a parent or subsidiary thereof, with appropriate
adjustments as to the number and kind of shares and prices; and
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(iii) To make adjustments in the number and type of shares of
Stock (or other securities or property) subject to outstanding Awards, and in
the number and kind of outstanding Restricted Stock or Deferred Stock and/or in
the terms and conditions of (including the grant or exercise price), and the
criteria included in, outstanding options, rights and awards and options, rights
and awards which may be granted in the future;
(iv) To provide that such Award shall be exercisable or payable
or fully vested with respect to all shares covered thereby, notwithstanding
anything to the contrary in the Plan or the applicable Award Agreement; and
(v) To provide that the Award cannot vest, be exercised or
become payable after such event.
11.2 Outstanding Awards - Other Changes. In the event of any other change
in the capitalization of the Company or corporate change other than those
specifically referred to in this Article 11, the Committee may, in its absolute
discretion, make such adjustments in the number and kind of shares or other
securities subject to Awards outstanding on the date on which such change occurs
and in the per share grant or exercise price of each Award as the Committee may
consider appropriate to prevent dilution or enlargement of rights.
11.3 No Other Rights. Except as expressly provided in the Plan, no
Participant shall have any rights by reason of any subdivision or consolidation
of shares of stock of any class, the payment of any dividend, any increase or
decrease in the number of shares of stock of any class or any dissolution,
liquidation, merger, or consolidation of the Company or any other corporation.
Except as expressly provided in the Plan or pursuant to action of the Committee
under the Plan, no issuance by the Company of shares of stock of any class, or
securities convertible into shares of stock of any class, shall affect, and no
adjustment by reason thereof shall be made with respect to, the number of shares
of Stock subject to an Award or the grant or exercise price of any Award.
ARTICLE 12
ADMINISTRATION
12.1 Committee. Pursuant to Utah Code Annotated Section 16-10a-624, and
consistent with the provisions of Section 12.3 below, the Board may appoint a
Committee consisting of two or more Non-Employee Directors to administer the
Plan, as constituted from time to time.
12.2 Committee Appointee Duration. Once appointed, the Committee shall
continue to serve until otherwise directed by the Board. From time to time, the
Board may increase or change the size of the Committee, and appoint new members
thereof, remove members (with or without cause) and appoint new members in
substitution, fill vacancies, however caused, or remove all members of the
Committee; provided, however, that at no time shall any person administer the
Plan who is not otherwise a Non-Employee Director.
12.3 Action by the Board. Unless and until the Board delegates
administration of the Plan to a Committee as set forth below, the Plan shall be
administered by the full Board, and for such purposes the term "Committee" as
used in this Plan shall be deemed to refer to the Board. The Board, at its
discretion or as
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otherwise necessary to comply with the requirements of Section 162(m) of the
Code, Rule 16b-3 promulgated under the Exchange Act or to the extent required by
any other applicable rule or regulation, shall delegate administration of the
Plan to a Committee. The Committee shall consist solely of two or more members
of the Board each of whom is both an "outside director," within the meaning of
Section 162(m) of the Code and any other applicable rules and regulations, and a
Non-Employee Director. Notwithstanding the foregoing: (a) the full Board, acting
by a majority of its members in office, shall conduct the general administration
of the Plan with respect to all Awards granted to Independent Directors and, for
purposes of such Awards, the term "Committee" as used in this Plan shall be
deemed to refer to the Board and (b) the Committee may delegate its authority
hereunder to the extent permitted by Section 12.5. Appointment of Committee
members shall be effective upon acceptance of appointment. The Board may abolish
the Committee at any time and revest in the Board the administration of the
Plan. Committee members may resign at any time by delivering written notice to
the Board. Vacancies in the Committee may only be filled by the Board.
12.4 Action by the Committee. A majority of the Committee shall constitute
a quorum. The acts of a majority of the members present at any meeting at which
a quorum is present, and acts approved in writing by a majority of the Committee
in lieu of a meeting, shall be deemed the acts of the Committee. Each member of
the Committee is entitled to, in good faith, rely or act upon any report or
other information furnished to that member by any officer or other employee of
the Company or any Subsidiary, the Company's independent certified public
accountants, or any executive compensation consultant or other professional
retained by the Company to assist in the administration of the Plan.
12.5 Authority of Committee. Subject to any specific designation in the
Plan, the Committee has the exclusive power, authority and discretion to:
(a) Designate Participants to receive Awards;
(b) Determine the type or types of Awards to be granted to each
Participant;
(c) Determine the number of Awards to be granted and the number of
shares of Stock to which an Award will relate;
(d) Determine the terms and conditions of any Award granted pursuant to
the Plan, including, but not limited to, the exercise price, grant price, or
purchase price, any reload provision, any restrictions or limitations on the
Award, any schedule for lapse of forfeiture restrictions or restrictions on the
exercisability of an Award, and accelerations or waivers thereof, any provisions
related to non-competition and recapture of gain on an Award, based in each case
on such considerations as the Committee in its sole discretion determines;
(e) Determine whether, to what extent, and pursuant to what
circumstances an Award may be settled in, or the exercise price of an Award may
be paid in, cash, Stock, other Awards, or other property, or an Award may be
canceled, forfeited, or surrendered;
(f) Prescribe the form of each Award Agreement, which need not be
identical for each Participant;
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(g) Decide all other matters that must be determined in connection with
an Award;
(h) Establish, adopt, or revise any rules and regulations as it may deem
necessary or advisable to administer the Plan;
(i) Interpret the terms of, and any matter arising pursuant to, the Plan
or any Award Agreement; and
(j) Make all other decisions and determinations that may be required
pursuant to the Plan or as the Committee deems necessary or advisable to
administer the Plan.
The Committee may delegate to one or more of its members or to one or more
agents such administrative duties as it may deem advisable.
12.6 Decisions Binding. The Committee's interpretation of the Plan, any
Awards granted pursuant to the Plan, any Award Agreement and all decisions and
determinations by the Committee with respect to the Plan are final, binding, and
conclusive on all parties.
12.7 Delegation of Authority. To the extent permitted by applicable law,
the Committee may from time to time delegate to a committee of one or more
members of the Committee or the Board or one or more officers of the Company the
authority to grant or amend Awards to Participants other than (a) senior
executives of the Company who are subject to Section 16 of the Exchange Act, (b)
Covered Employees, or (c) officers of the Company (or members of the Board) to
whom authority to grant or amend Awards has been delegated hereunder. Any
delegation hereunder shall be subject to the restrictions and limits that the
Committee specifies at the time of such delegation, and the Committee may at any
time rescind the authority so delegated or appoint a new delegatee. At all
times, the delegatee appointed under this Section 12.5 shall serve in such
capacity at the pleasure of the Committee.
12.8 Committee Administration. One member of the Committee shall be elected
by the Board as chairman. The Committee shall hold its meetings at such times
and places as it shall deem advisable. The Committee may appoint a secretary and
make such rules and regulations for the conduct of its business as it shall deem
advisable, and shall keep minutes of its meetings.
12.9 Liability. No member of the Board or Committee shall be liable for any
action taken or decision or determination made in good faith with respect to any
Option, the Plan, or any award thereunder.
ARTICLE 13
EFFECTIVE AND EXPIRATION DATE
13.1 Effective Date. The Plan is effective as of the date the Plan is
approved by a majority of the Board (the "Effective Date"). The Plan, however,
shall be subject to approval by the stockholders. The Plan will be deemed to be
approved by the stockholders if it receives the affirmative vote of the holders
of a majority of the shares of stock of the Company present or represented and
entitled to vote at a meeting duly held in accordance with the applicable
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provisions of the Company's Bylaws, but, in any event, held no later than 12
months after adoption on the Effective Date.
13.2 Expiration Date. The Plan will expire on, and no Incentive Stock
Option or other Award may be granted pursuant to the Plan after, the tenth
anniversary of the Effective Date. Any Awards that are outstanding on the tenth
anniversary of the Effective Date shall remain in force according to the terms
of the Plan and the applicable Award Agreement.
ARTICLE 14
AMENDMENT, MODIFICATION, AND TERMINATION
14.1 Amendment, Modification, And Termination. The Committee may at any
time and from time to time terminate or modify or amend the Plan in any respect,
except that (a) to the extent necessary and desirable to comply with any
applicable law, regulation, or stock exchange rule, the Company shall obtain
shareholder approval of any Plan amendment or any modification of any Options
that would be deemed a re-pricing under applicable rules, in such a manner and
to such a degree as required, and (b) without shareholder approval the Committee
may not (i) increase the maximum number of shares of Common Stock which may be
issued under the Plan (other than increases pursuant to Section 4.10), (ii)
extend the period during which any Award may be granted or exercised, (iii)
amend to the Plan to permit the Committee to grant Options with an exercise
price that is below Fair Market Value on the date of grant, or (iv) extend the
term of the Plan. The termination or any modification or amendment of the Plan,
except as provided in subsection (a), shall not without the consent of a
participant, affect his or her other rights under an award previously granted to
him or her.
14.2 Awards Previously Granted. No termination, amendment, or modification
of the Plan shall adversely affect in any material way any Award previously
granted pursuant to the Plan without the prior written consent of the
Participant.
ARTICLE 15
COMPLIANCE WITH SECTION 409A OF THE CODE
15.1 Awards subject to Code Section 409A. Any Award that constitutes, or
provides for, a deferral of compensation subject to Section 409A of the Code (a
"Section 409A Award") shall satisfy the requirements of Section 409A of the Code
and this Article 15, to the extent applicable. The Award Agreement with respect
to a Section 409A Award shall incorporate the terms and conditions required by
Section 409A of the Code and this Article 15.
15.2 Distributions under a Section 409A Award.
(a) Subject to subsection (b), any shares of Stock or other property or
amounts to be paid or distributed upon the grant, issuance, vesting, exercise or
payment of a Section 409A Award shall be distributed in accordance with the
requirements of Section 409A(a)(2) of the Code, and shall not be distributed
earlier than:
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(i) the Participant's separation from service, as determined by
the Secretary of the Treasury;
(ii) the date the Participant becomes disabled;
(iii) the Participant's death;
(iv) a specified time (or pursuant to a fixed schedule)
specified under the Award Agreement at the date of the deferral compensation;
(v) to the extent provided by the Secretary of the Treasury, a
change in the ownership or effective control of the Company or a Parent or
Subsidiary, or in the ownership of a substantial portion of the assets of the
Company or a Parent or Subsidiary; or
(vi) the occurrence of an unforeseeable emergency with respect
to the Participant.
(b) In the case of a Participant who is a "specified employee," the
requirement of paragraph (a)(i) shall be met only if the distributions with
respect to the Section 409A Award may not be made before the date which is six
months after the Participant's separation from service (or, if earlier, the date
of the Participant's death). For purposes of this subsection (b), a Participant
shall be a "specified employee" if such Participant is a key employee (as
defined in Section 416(i) of the Code without regard to paragraph (5) thereof)
of a corporation any stock of which is publicly traded on an established
securities market or otherwise, as determined under Section 409A(a)(2)(B)(i) of
the Code and the Treasury Regulations thereunder.
(c) The requirement of paragraph (a)(vi) shall be met only if, as
determined under Treasury Regulations under Section 409A(a)(2)(B)(ii) of the
Code, the amounts distributed with respect to the unforeseeable emergency do not
exceed the amounts necessary to satisfy such unforeseeable emergency plus
amounts necessary to pay taxes reasonably anticipated as a result of the
distribution, after taking into account the extent to which such unforeseeable
emergency is or may be relieved through reimbursement or compensation by
insurance or otherwise or by liquidation of the Participant's assets (to the
extent the liquidation of such assets would not itself cause severe financial
hardship).
(d) For purposes of this Section, the terms specified therein shall have
the respective meanings ascribed thereto under Section 409A of the Code and the
Treasury Regulations thereunder.
15.3 Prohibition on Acceleration of Benefits. The time or schedule of any
distribution or payment of any shares of Stock or other property or amounts
under a Section 409A Award shall not be accelerated, except as otherwise
permitted under Section 409A(a)(3) of the Code and the Treasury Regulations
thereunder.
15.4 Elections under Section 409A Awards.
(a) Any deferral election provided under or with respect to an Award to
any Eligible Individual, or to the Participant holding a Section 409A Award,
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shall satisfy the requirements of Section 409A(a)(4)(B) of the Code, to the
extent applicable, and, except as otherwise permitted under paragraph (i) or
(ii) below, any such deferral election with respect to compensation for services
performed during a taxable year shall be made not later than the close of the
preceding taxable year, or at such other time as provided in Treasury
Regulations.
(i) In the case of the first year in which an Eligible
Individual or a Participant holding a Section 409A Award, becomes eligible to
participate in the Plan, any such deferral election may be made with respect to
services to be performed subsequent to the election with thirty days after the
date the Eligible Individual, or the Participant holding a Section 409A Award,
becomes eligible to participate in the Plan, as provided under Section
409A(a)(4)(B)(ii) of the Code.
(ii) In the case of any performance-based compensation based on
services performed by an Eligible Individual, or the Participant holding a
Section 409A Award, over a period of at least twelve months, any such deferral
election may be made no later than six months before the end of the period, as
provided under Section 409A(a)(4)(B)(iii) of the Code.
(b) In the event that a Section 409A Award permits, under a subsequent
election by the Participant holding such Section 409A Award, a delay in a
distribution or payment of any shares of Stock or other property or amounts
under such Section 409A Award, or a change in the form of distribution or
payment, such subsequent election shall satisfy the requirements of Section
409A(a)(4)(C) of the Code, and:
(i) such subsequent election may not take effect until at least
twelve months after the date on which the election is made,
(ii) in the case such subsequent election relates to a
distribution or payment not described in Section 10.2(a)(ii), (iii) or (vi), the
first payment with respect to such election may be deferred for a period of not
less than five years from the date such distribution or payment otherwise would
have been made, and
(iii) in the case such subsequent election relates to a
distribution or payment described in Section 10.2(a)(iv), such election may not
be made less than twelve months prior to the date of the first scheduled
distribution or payment under Section 10.2(a)(iv).
15.5 Compliance in Form and Operation. A Section 409A Award, and any
election under or with respect to such Section 409A Award, shall comply in form
and operation with the requirements of Section 409A of the Code and the Treasury
Regulations thereunder.
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ARTICLE 16
GENERAL PROVISIONS
16.1 No Rights to Awards. No Eligible Individual or other person shall have
any claim to be granted any Award pursuant to the Plan, and neither the Company
nor the Committee is obligated to treat Eligible Individuals, Participants or
any other persons uniformly.
16.2 No Stockholders Rights. The recipient of any award under the Plan
shall have no rights as a shareholder with respect thereto unless and until
certificates for shares of Common Stock are issued to him or her.
16.3 Withholding. The Company or any Subsidiary shall have the authority
and the right to deduct or withhold, or require a Participant to remit to the
Company, an amount sufficient to satisfy federal, state, local and foreign taxes
(including the Participant's FICA obligation) required by law to be withheld
with respect to any taxable event concerning a Participant arising as a result
of this Plan. The Committee may in its discretion and in satisfaction of the
foregoing requirement allow a Participant to elect to have the Company withhold
shares of Stock otherwise issuable under an Award (or allow the return of shares
of Stock) having a Fair Market Value equal to the sums required to be withheld.
Notwithstanding any other provision of the Plan, the number of shares of Stock
which may be withheld with respect to the issuance, vesting, exercise or payment
of any Award (or which may be repurchased from the Participant of such Award
within six months (or such other period as may be determined by the Committee)
after such shares of Stock were acquired by the Participant from the Company) in
order to satisfy the Participant's federal, state, local and foreign income and
payroll tax liabilities with respect to the issuance, vesting, exercise or
payment of the Award shall be limited to the number of shares which have a Fair
Market Value on the date of withholding or repurchase equal to the aggregate
amount of such liabilities based on the minimum statutory withholding rates for
federal, state, local and foreign income tax and payroll tax purposes that are
applicable to such supplemental taxable income.
16.4 No Right to Employment or Services. Nothing in the Plan or any Award
Agreement shall interfere with or limit in any way the right of the Company or
any Subsidiary to terminate any Participant's employment or services at any
time, nor confer upon any Participant any right to continue in the employ or
service of the Company or any Subsidiary.
16.5 Unfunded Status of Awards. The Plan is intended to be an "unfunded"
plan for incentive compensation. With respect to any payments not yet made to a
Participant pursuant to an Award, nothing contained in the Plan or any Award
Agreement shall give the Participant any rights that are greater than those of a
general creditor of the Company or any Subsidiary.
16.6 Indemnification. To the extent allowable pursuant to applicable law,
each member of the Committee or of the Board shall be indemnified and held
harmless by the Company from any loss, cost, liability, or expense that may be
imposed upon or reasonably incurred by such member in connection with or
resulting from any claim, action, suit, or proceeding to which he or she may be
a party or in which he or she may be involved by reason of any action or failure
to act pursuant to the Plan and against and from any and all amounts paid by him
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or her in satisfaction of judgment in such action, suit, or proceeding against
him or her; provided he or she gives the Company an opportunity, at its own
expense, to handle and defend the same before he or she undertakes to handle and
defend it on his or her own behalf. The foregoing right of indemnification shall
not be exclusive of any other rights of indemnification to which such persons
may be entitled pursuant to the Company's Certificate of Incorporation or
Bylaws, as a matter of law, or otherwise, or any power that the Company may have
to indemnify them or hold them harmless.
16.7 Relationship to other Benefits. No payment pursuant to the Plan shall
be taken into account in determining any benefits pursuant to any pension,
retirement, savings, profit sharing, group insurance, welfare or other benefit
plan of the Company or any Subsidiary except to the extent otherwise expressly
provided in writing in such other plan or an agreement thereunder.
16.8 Expenses. The expenses of administering the Plan shall be borne by the
Company and its Subsidiaries.
16.9 Titles and Headings. The titles and headings of the Sections in the
Plan are for convenience of reference only and, in the event of any conflict,
the text of the Plan, rather than such titles or headings, shall control.
16.10 Fractional Shares. No fractional shares of Stock shall be issued and
the Committee shall determine, in its discretion, whether cash shall be given in
lieu of fractional shares or whether such fractional shares shall be eliminated
by rounding up or down as appropriate.
16.11 Limitations Applicable to Section 16 Persons. Notwithstanding any
other provision of the Plan, the Plan, and any Award granted or awarded to any
Participant who is then subject to Section 16 of the Exchange Act, shall be
subject to any additional limitations set forth in any applicable exemptive rule
under Section 16 of the Exchange Act (including any amendment to Rule 16b-3 of
the Exchange Act) that are requirements for the application of such exemptive
rule. To the extent permitted by applicable law, the Plan and Awards granted or
awarded hereunder shall be deemed amended to the extent necessary to conform to
such applicable exemptive rule.
16.12 Government and Other Regulations. The obligation of the Company to
make payment of awards in Stock or otherwise shall be subject to all applicable
laws, rules, and regulations, and to such approvals by government agencies as
may be required. The Company shall be under no obligation to register pursuant
to the Securities Act of 1933, as amended, any of the shares of Stock paid
pursuant to the Plan. If the shares paid pursuant to the Plan may in certain
circumstances be exempt from registration pursuant to the Securities Act of
1933, as amended, the Company may restrict the transfer of such shares in such
manner as it deems advisable to ensure the availability of any such exemption.
16.13 Governing Law. The Plan and all Award Agreements shall be construed
in accordance with and governed by the laws of the State of Utah.
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* * * * *
I hereby certify that the foregoing Plan was duly adopted by the Board
of Directors of USANA Health Sciences, Inc. on_______________, 2006.
* * * * *
I hereby certify that the foregoing Plan was approved by the
stockholders of USANA Health Sciences, Inc. on _______________, 2006.
Executed on this ____ day of _______________, 2006.
-----------------------------------
Corporate Secretary
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