EXHIBIT 10.12
NATIONAL TECHNICAL SYSTEMS, INC.
2006 LONG-TERM INCENTIVE PLAN
8. ARTICLE 1 - PURPOSE
The purpose of National Technical Systems, Inc. 2006 Long-Term Incentive
Plan is to retain the services of select employees of National Technical
Systems, Inc. and any successor thereof (the "Corporation") and to
motivate them to contribute to the growth and profits of the Corporation.
This Plan is intended to comply with the provisions of Section 409A of the
Internal Revenue Code of 1986, as amended (the "Code"), and shall be
interpreted in a manner consistent with that intention.
9. ARTICLE 2 - DEFINITIONS
For purposes hereof, unless otherwise clearly apparent from the context,
where the following terms appear as proper nouns, they shall have the
meanings indicated below.
2.1 Beneficiary: Any person or persons (including, without limitation, the
trustees of any testamentary or inter vivos trust), as designated from
time to time in writing pursuant to Article 5, to whom any benefits may be
payable upon the death of a Participant.
2.2 Cause: Behavior of a Participant which constitutes any of the following:
a. Willfully engaging in gross misconduct with regard to the
Corporation which is materially injurious to the Corporation,
b. Gross negligence in the performance of the Participant's duties and
responsibilities which is materially injurious to the Corporation,
c. Refusal to follow proper and achievable written direction of the
Board of Directors, provided that this shall not be Cause if the
Participant in good faith believed the direction to be illegal,
unethical or immoral and provides written notification of such
belief to the Board of Directors,
d. Being convicted of (or pleading nolo contendere to) a felony
involving financial impropriety (or any other crime which would
materially interfere with his service),
e. Willfully breaching any material obligations under any agreement
with the Corporation without proper justification,
f. Material fraud or dishonesty with regard to the Corporation (other
than good faith expense account disputes),
g. Refusal to attempt to perform the Participant's responsibilities and
duties after written notice, and
h. Entering into competition with the Corporation in any line of
business in which the Corporation was involved during the
Participant's employment.
2.3 Change of Control: A change in the ownership of the Corporation, a change
in the effective
control of the Corporation or a change in the ownership of a substantial
portion of the assets of the Corporation as provided under Section 409A of
the Code, as amended from time to time, and any Internal Revenue Service
guidance, including Notice 2005-1, and regulations issued in connection
with Section 409A of the Code.
2.4 Committee: The Compensation Committee of the Board of Directors of the
Corporation, or such other persons as may be selected by the Compensation
Committee or the Board of Directors to administer the Plan. The Committee
may assign some of the routine administrative functions to any department
of the Corporation or another organization as approved by the board..
2.5 Corporation: National Technical Systems, Inc., a California corporation,
and any successor thereof, including any affiliated company that adopts
this Plan with the consent of the Board of Directors of the Corporation.
2.6 Disabled or Disability: The circumstance where, by reason of any medically
determinable physical or mental impairment that can be expected to result
in death or can be expected to last for a continuous period of not less
than 12 months, the Participant is (i) unable to engage in any substantial
gainful activity, or (ii) receiving income replacement benefits for a
period of not less than three months under an accident and health plan
covering employees of the Corporation. For purposes of the Plan, the
determination of a Participant's disability shall be made by the Committee
with the Participant's participation or the participation of his legal
representative. The Committee shall make the final and conclusive
determination of disability based upon all the evidence presented to it
and after due consideration of the information presented by the
Participant or his legal representative.
2.7 Grant Date: The effective date on which the Committee grants Phantom Stock
Full-Value or Phantom Stock Appreciation-Only Shares to a Participant.
2.8 Grant Price: The Value of a share of Phantom Stock on the Grant Date.
2.9 Maturity Date: The date on which a Participant's vested Phantom Stock
Full-Value or Phantom Appreciation-Only Shares are deemed to mature under
Section 4.1(a) below.
2.10 Maturity Price: The Value of a share of Phantom Stock on the Maturity
Date.
2.11 Participant: An employee and/or officer of the Corporation designated by
the Committee to be eligible for participation in the Plan, who executes
and returns to the Committee all forms necessary for participation in the
Plan, including a related Participation Agreement if applicable.
2.12 Participation Agreement: A written award agreement executed by the
Corporation and Participant. The Board shall determine the terms and
conditions set forth in those award agreements in its sole discretion. The
Phantom Stock award agreements shall indicate the extent to which the
Phantom Stock rights are Phantom Appreciation-Only Shares or Phantom Stock
Full-Value Shares, the Grant Price of those Phantom Stock rights, the
Grant Date, and the applicable vesting schedules. The Board shall be under
no obligation to grant Phantom Stock rights on a uniform basis among
Participants.
2.13 Phantom Stock Appreciation-Only Shares: A form of Phantom Stock wherein
the Participant receives a contractual right to receive the appreciation
in the Value of a share of Phantom Stock pursuant to the Plan.
2.14 Phantom Stock: Phantom Stock represents a mere contractual right to
payment of certain compensation in the future; not actual capital stock
of, or ownership equity, in the Corporation or its assets.
2.15 Phantom Stock Full-Value Shares: A form of Phantom Stock wherein the
Participant receives a contractual right to receive the full Value of a
share of Phantom Stock pursuant to the Plan.
2.16 Plan: The National Technical Systems, Inc. 2006 Long-Term Incentive Plan
effective September 7, 2006, including any Participation Agreement, and as
from time to time amended and in effect.
2.17 Specified Employee: A person who is a specified employee as defined in the
regulations issued under Section 409A of the Code. otherwise) of a
Participant's service as an employee of the Corporation; provided that no
Termination of Service will be deemed to have occurred unless it
constitutes a "separation from service" within the meaning of Code Section
409A and the regulations thereunder.
2.19 Value: The Value of a share of Phantom Stock for any given date shall be
the diluted earnings per share of the Corporation weighted over the prior
three fiscal years, as recommended by the Committee and approved by the
board, from the books and records of the Corporation maintained in
accordance with the Corporation's customary accounting practices as of the
close of the Corporation's fiscal year that immediately precedes the
applicable Maturity Date of that Phantom Stock. The diluted earnings per
share for each year will be weighted 50% for the most recent year, 35% for
the preceding year and 15% for the second most recent year. This weighted
average is multiplied by twenty to determine the Phantom Stock Value for
the purposes of the Plan.
The Board's determination of diluted earnings per share and Value shall be
conclusive unless proven to be arbitrary and capricious. No Participant
has the right to review the Corporation's books and records beyond the
Corporation's statement of income for the relevant three years.
10. ARTICLE 3 - ELIGIBILITY, GRANT AND VESTING
3.1 Eligibility/Grant. Eligibility to commence participation in this Plan
shall be restricted to those employees and officers recommended by
management and approved by the board. s As a condition of participation,
eligible individuals shall timely complete all forms necessary for
participation in the Plan under this Section, as determined by the
Committee. A Participant shall be entitled to benefits, if any, in
accordance with this Plan.
3.2 Grant of Phantom Stock Rights. The Board, in its sole discretion, may at
any time grant to one or more Participants Phantom Stock rights on such
terms and conditions, not inconsistent with the terms of this Plan
document, as recommended by the Committee. All grants of Phantom Stock
rights shall be evidenced by a Participation Agreement. The Board shall be
under no obligation to grant Phantom Stock rights on a uniform basis among
Participants.
3.3 Vesting. The Participation Agreement shall vest as set forth in the
Participation Agreement.
Except as otherwise provided for above or in the Participation
Agreement, the Participant shall cease vesting in his or her Phantom Stock
Full-Value Shares and Phantom Appreciation-Only Shares in the event of a
Termination of Service for any reason as well as upon a Participant's
Disability, the Change of Control of the Company, or the termination of
the Plan. The Participant's unvested Phantom Stock Full-Value Shares and
Phantom Appreciation-Only Shares shall terminate on such date. No Phantom
Stock rights will be reinstated upon re-employment unless granted anew by
the Board in its sole discretion.
11. ARTICLE 4 - BENEFITS
4.1 Phantom Stock Full Value and Phantom Appreciation-Only Shares.
a) Entitlement to Benefits (Maturity). A Participant's vested Phantom
Stock Full-Value and Phantom Appreciation-Only Shares shall mature
and the Participant shall be entitled to receive the amount provided
for in Section 4.1(b) below for such vested Phantom Stock Full-Value
and Phantom Appreciation-Only Shares commencing upon the earlier of
the following dates ("Maturity Dates"): (i) the date on which the
Participant becomes Disabled; (ii) the date on which the Participant
dies; (iii) the date on which Participant has a Termination of
Service for any reason other than Cause; (iv) the specified
effective date of a Change of Control of the Corporation, and (v)
the fourth anniversary of the grant year of the Shares. In the case
of a Maturity Date described in clauses (i) through (v) above, any
unvested Phantom Stock Full-Value and Phantom Appreciation-Only
Shares and all rights to payment with respect thereto shall
terminate on such Maturity Date.
b) Payment Amount and Timing.
(i) Phantom Appreciation-Only Shares. For each vested
Phantom Appreciation-Only Share, the Participant shall
be entitled to receive an amount in cash that is equal
to the Maturity Price as of the Maturity Date less the
Grant Price of the Phantom Appreciation-Only Share.
(ii) Phantom Stock Full-Value Shares. For each vested Phantom
Stock Full-Value Share, the Participant shall be
entitled to receive an amount in cash that is equal to
the Maturity Price of the Phantom Stock Full-Value Share
as of the Maturity Date.
(iii) Form and Timing of Payment. Distributions of Phantom
Stock Full-Value Shares or Phantom Appreciation-Only
Shares will be paid in a lump sum on the 90th day
following the applicable Maturity Date or the first
business day thereafter if the 90th day is not a
business day. Notwithstanding this Section 4.1(b) to the
contrary, distributions of Phantom Stock Full-Value
Shares or Phantom Appreciation-Only Shares shall be
delayed in the event the Corporation reasonably
anticipates that the payment would constitute a
violation of applicable law. Additionally, the
Corporation shall have the authority to delay
distributions to the extent it deems necessary or
appropriate
to comply with Section 409A(a)(2)(B)(i) of the Internal
Revenue Code of 1986, as amended (relating to payments
to certain "key employees" of certain publicly-traded
companies); in such event, any distribution to which the
Participant would otherwise be entitled during the six
(6) month period following the date of the Participant's
Termination of Service will be distributed on the first
business day following the expiration of such six (6)
month period.
(iv) Termination of Service with Cause. Any provision in this
Plan to the contrary notwithstanding, if the Participant
has a Termination of Service for Cause, then all vested
and unvested Phantom Stock Full-Value and Phantom
Appreciation-Only Shares shall terminate as of the date
of Termination of Service and the Participant shall not
be entitled to receive any amount for such Phantom Stock
Full-Value or Phantom Appreciation-Only Shares.
4.2 Tax Liability. The Participant is ultimately liable and responsible for
all taxes owed by the Participant in connection with any distribution
under the Plan, regardless of any action taken by the Corporation with
respect to any tax withholding obligations that arise in connection with a
Participant's participation in the Plan.
12. ARTICLE 5 - BENEFICIARY
5.1 Designation. At the time participation in the Plan commences, or at any
later date, each Participant shall designate a Beneficiary on the
Designation Beneficiary Form (attached hereto as Exhibit A) to receive any
benefits that may become payable hereunder in the event of his or her
death (Beneficiary Designation). A Participant may change any such
Beneficiary at any time prior to his or her death upon written notice to
the Corporation.
5.2 Subsequent Beneficiary Designations. If the Participant shall have made
more than one Beneficiary Designation, the Beneficiary Designation most
recently filed with the Corporation prior to the time of the Participant's
death shall govern.
5.3 No Beneficiary Designation. If any amounts under the Plan become payable
following a Participant's death at a time when no Beneficiary Designation
is applicable or when no Beneficiary is in existence, such payments shall
be made in a lump sum to such Participant's surviving spouse, or if none,
such amounts shall be paid to such Participant's estate.
13. ARTICLE 6 - MISCELLANEOUS
6.1 Amendment and Termination. The Corporation, acting through the Committee,
reserves the right to amend, in whole or in part, in writing, or to
terminate this Plan at any time and in its sole discretion, with or
without notice; provided, however, that no such action shall reduce the
amount of a Participant's vested Termination Benefit prior to the date of
any such amendment or termination. Any provision herein to the contrary
notwithstanding, amendment or termination of the Plan shall not
accelerate, directly or indirectly, the date on which distribution of any
then vested benefit is to be paid unless such acceleration complies with
the requirements of Code Section 409A and the regulations thereunder. In
addition, notwithstanding any provision herein to the contrary, if the
Corporation determines, after a review of the final regulations issued
under Section 409A of the Code and all applicable Internal Revenue Service
guidance, that this Plan should be amended to avoid triggering the tax and
interest penalties imposed by Section 409A of the Code, the Corporation
may amend
this Plan to the extent necessary to avoid triggering the tax and interest
penalties imposed by Section 409A of the Code.
6.2 Insurance: The Corporation may purchase one or more insurance policies on
the life of a Participant, as a means of providing, in whole or in part,
for the payment of benefits hereunder. However, in such event neither such
Participant, his designated Beneficiary, nor any other beneficiary shall
have any rights whatsoever therein or in the proceeds therefrom. The
Corporation shall be the sole owner and beneficiary of any such insurance
policy and shall possess and may exercise all incidents of ownership
therein. No such policy, policies or other property shall be held in any
trust for a Participant or any other person or as collateral security for
any obligation of the Corporation hereunder. This Plan shall under no
circumstances be deemed to constitute a contract of insurance.
6.3 No Contract of Employment: The Plan shall under no circumstance be deemed
to have any effect upon the terms or conditions of employment of any
employee of the Corporation whether or not he or she is a Participant
hereunder. Neither the offering of the Plan, the payment of any expenses,
costs or benefit amounts associated with the Plan, nor any documents
published in connection with the Plan shall be construed as having created
a contract of employment between the Participant and the Corporation. Nor
shall it affect any right that the Corporation may have to terminate the
service of such person at will.
6.4 Benefits not Transferable: Benefits under this Plan shall not be subject
in any manner to anticipation, alienation, sale, transfer, assignment,
pledge or encumbrance by any Participant or Beneficiary and any attempt to
do so shall be null and void. Benefits under this Plan shall not be
subject to or liable for the debts, contracts, liabilities, engagements or
torts of any Participant or any Beneficiary, nor may the same be subject
to attachment or seizure by any creditor of any Participant or any
Beneficiary under any circumstances.
6.5 Capital Structure Adjustments. In the event of a change in the form of
entity, recapitalization, reorganization, merger, consolidation,
separation, financing, or like change in the organizational or capital
structure of the Corporation, the Committee shall make such changes to the
Plan as the Committee deems appropriate. These changes shall include, but
are not limited to, changes to the definition of "Value" and
"Corporation". The Board's determination shall be final, binding, and
conclusive. The Committee shall interpret this section in a manner it
believes (in its discretion) to be consistent with the intent to place
Participants in substantially the same economic position as they would
have had in the absence of such an organizational or capital structure
change.
The Plan shall not affect, in any way, the right or
power of the Corporation to make adjustments, re-classifications,
reorganizations, or changes of its capital or business structures, to make
distributions to its shareholders, or to merge or to consolidate or to
dissolve, liquidate or sell, or transfer all or part of its business or
assets.
6.6 No Trust: No action by the Corporation or its Board of Directors under
this Plan shall be construed as creating a trust, escrow or other secured
or segregated fund or other fiduciary relationship of any kind in favor of
any Participant or Beneficiary or any other persons otherwise entitled to
benefits under the Plan. The status of the Participant and any Beneficiary
with respect to any liabilities assumed by the Corporation hereunder shall
be solely that of unsecured creditors of the Corporation. The Plan
constitutes a mere promise by
the Corporation to make benefit payments in the future. Any insurance
policy or any other asset acquired or held by the Corporation in
connection with liabilities assumed by it hereunder, shall not be deemed
to be held under any trust, escrow or other secured or segregated fund or
other fiduciary relationship of any kind for the benefit of a Participant
or Beneficiary or to be security for the performance of the obligations of
the Corporation, but shall be and remain a general, unpledged,
unrestricted asset of the Corporation at all times subject to the claims
of general creditors of the Corporation. Notwithstanding the foregoing,
the Corporation may transfer assets.
6.7 Plan Administration: The Plan shall be administered by the Committee. The
Board and Committee shall have the exclusive authority, sole discretion
and responsibility for all matters in connection with the operation and
administration of the Plan. The Committee's powers and duties shall
include, but not be limited to, the following: (a) responsibility for the
compilation and maintenance of all records necessary in connection with
the Plan; (b) authorizing the payment of all benefits under and expenses
of the Plan; (c) authority to engage such legal, accounting and other
professional services as it may deem proper. The board shall have (a)
authority to interpret the Plan; and (b) authority to determine
eligibility for benefits under the Plan and to resolve all issues of fact
and law in connection with such determination. Decisions by the Board and
Committee shall be final and binding upon all parties.
The Committee, from time to time, may allocate to other persons or
organizations any of its rights, powers, and duties with respect to the
operation and administration of the Plan. Any such allocation shall be
reviewed from time to time by the Committee; shall, unless the Committee
specifies otherwise, carry such discretionary authority as the Committee
possesses regarding the matter; and shall be terminable upon such notice
as the Committee in its sole discretion, deems reasonable and prudent
under the circumstances.
6.8 Satisfaction of Claims: Any payment to a Participant or Beneficiary or the
legal representative of either, in accordance with the terms of this Plan
shall to the extent thereof be in full satisfaction of all claims such
person may have against the Corporation. The Corporation may require such
payee, as a condition to such payment, to execute a receipt and release
therefore in such form as shall be determined by the Corporation.
6.9 Governing Law: The Plan shall be construed, administered, and governed in
all respects in accordance with the laws of the State of California
without regard to applicable conflicts of law or choice of law principles.
By electing to participate in the Plan, each Participant on behalf of
himself and his beneficiaries irrevocably and unconditionally (a) submits
to the exclusive personal jurisdiction of the United States Federal courts
and the State of California state courts located in Los Angeles County,
California ("California Courts") with respect to any lawsuit, claim or
cause of action arising under or with respect to this Plan; (b) agrees
that the California Courts shall have exclusive subject matter
jurisdiction over any such lawsuit, claim or cause of action; (c) agrees
that venue with respect to any such lawsuit, claim or cause of action is
proper and most convenient in such California Courts; and (d) agrees not
to assert or raise any objection to jurisdiction or venue in the
California Courts. BY ELECTING TO PARTICIPATE IN THE PLAN, EACH
PARTICIPANT, ON BEHALF OF HIMSELF AND HIS BENEFICIARIES, IRREVOCABLY
WAIVES THE RIGHT TO A TRIAL BY JURY IN ANY AND ALL ACTIONS OR PROCEEDINGS
BROUGHT WITH RESPECT TO ANY PROVISION OF THIS PLAN AND/OR WITH RESPECT
TO ANY CLAIMS ARISING OUT OF, OR RELATED TO, THIS PLAN.
6.10 Gender and Number: Words used herein in the masculine, feminine or neuter
gender shall be construed as though they were also used in another gender
in all cases where they would so apply. Words used herein in the singular
or plural form shall be construed as though they were also used in the
other form in all cases where they would so apply.
6.11 Severability: In the event that a court of competent jurisdiction
determines that any provision of the Plan is in violation of any statute
or public policy, only those provisions of the Plan that violate such
statute or public policy shall be stricken. All provisions of the Plan
that do not violate any statute or public policy shall continue in full
force and effect. Further, any court order striking any provision of the
Plan shall modify the stricken terms as narrowly as possible to give as
much effect as possible to the intentions of the Corporation in
establishing the Plan.
6.12 Indemnification: The Corporation agrees to and shall indemnify and hold
harmless each Indemnified Person (as hereinafter defined), to the full
extent permitted by law and the Corporation's Articles of Incorporation
and Bylaws, from and against all claims, losses, damages, causes of
action, suits, and liability of every kind, including all expenses of
litigation, court costs and reasonable attorney's fees and expenses,
incurred in connection with the Plan. "Indemnified Person" shall mean each
director, officer, Committee member, Claims Administrator or employee of
the Corporation acting as a fiduciary of the Plan.
6.13 Expenses: The expenses of administering the Plan shall be borne by the
Corporation.
6.14 Successors and Assigns: This Plan shall be binding on and inure to the
benefit of the Corporation and the Participants and their Beneficiaries,
and their respective heirs and assigns.
6.15 Captions. The captions of this Plan are descriptive only and do not affect
the intent or interpretation of the Plan.
6.16 Notices. Any notice required or permitted to be given hereunder shall be
in writing sent by either personal delivery, overnight delivery, or United
Sates, registered or certified mail, return receipt requested, all of
which shall be properly addressed with postage or delivery charges
prepaid, to the Committee or Participant at their respective addresses
described below, or at such other addresses as either the Corporation or
Participant may hereafter designate to the other in writing:
To the Committee: National Technical Systems, Inc. 2006
Supplemental Executive Retirement Plan
24007 Ventura Blvd. Suite 200
Calabasas, California 91302
To any Participant: To the Participant's last known address as
shown in the
Corporation's Human Resource Department records
Notices sent by personal delivery shall be deemed given upon actual
receipt. Notices sent by overnight delivery shall be deemed given on
the next business day. Notices sent via United States registered or
certified mail shall be deemed given two business days from mailing.
ACKNOWLEDGED:
National Technical Systems, Inc.
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By Date