KRONOS ADVANCED TECHNOLOGIES, INC.
2007 STOCK INCENTIVE PLAN
1. Establishment, Purpose and Types of Awards
Kronos Advanced Technologies, Inc., a Nevada corporation (the
"Company"), hereby establishes the KRONOS ADVANCED TECHNOLOGIES, INC. 2007 STOCK
INCENTIVE PLAN (the "Plan"). The purpose of the Plan is to promote the long-term
growth and profitability of the Company by (a) providing key people with
incentives to improve shareholder value and to contribute to the growth and
financial success of the Company, and (b) enabling the Company to attract,
retain and reward the best-available persons. The Plan permits the granting of
stock options (including incentive stock options qualifying under Code Section
422 and nonqualified stock options), stock appreciation rights, restricted or
unrestricted share awards, phantom stock, deferred share units, performance
awards, other stock-based awards, or any combination of the foregoing.
2. Definitions
Under this Plan, except where the context otherwise indicates, the
following definitions apply:
(a) "Affiliate" means any entity, whether now or hereafter existing, which
controls, is controlled by, or is under common control with, the Company
(including, but not limited to, joint ventures, limited liability companies, and
partnerships). For this purpose, "control" shall mean ownership of fifty percent
(50%) or more of the total combined voting power or value of all classes of
stock or interests of the entity.
(b) "Applicable Law" means the legal requirements relating to the administration
of options and share-based plans under applicable U.S. federal and state laws,
the Code, any applicable stock exchange or automated quotation system rules or
regulations, and the applicable laws of any other country or jurisdiction where
Awards are granted, as such laws, rules, regulations and requirements shall be
in place from time to time.
(c) "Award" means any stock option, stock appreciation right, stock award,
phantom stock award, performance award or other stock-based award.
(d) "Board" means the Board of Directors of the Company.
(e) "Cause" for termination of a Participant's Continuous Service either has the
meaning set forth in any employment-related written agreement between the
Participant and the Company, or means that the Participant is terminated from
employment or other service with the Company or an Affiliate for any of the
following reasons after receiving both a specific written notice of the conduct
that the Board considers "Cause" and a reasonable opportunity to cure such
conduct (if it is reasonably capable of being cured): (i) the Participant's
willful failure to substantially perform his or her duties and responsibilities
to the Company or deliberate violation of a material Company policy; (ii) the
Participant's commission of any material act or acts of fraud, embezzlement,
dishonesty or other willful misconduct; (iii) the Participant's material
unauthorized use or disclosure of any proprietary information or trade secrets
of the Company or any other party to whom the Participant owes an obligation of
nondisclosure as a result of his or her relationship with the Company; or (iv)
Participant's willful and material breach of any of his or her obligations under
any written agreement or covenant with the Company. The Board shall in its
discretion determine whether or not a Participant is being terminated for Cause.
The foregoing definition does not in any way limit the Company's ability to
terminate a Participant's employment or consulting relationship at any time, and
the term "Company" will be interpreted herein to include any Affiliate or
successor thereto, if appropriate.
(f) "Change in Control" means: (i) the acquisition (other than from the Company)
by any Person, as defined in this Section 2(f), of the beneficial ownership
(within the meaning of Rule 13d-3 promulgated under the Exchange Act of fifty
percent (50%) or more of (A) the then outstanding shares of the securities of
the Company; or (B) the combined voting power of the then outstanding securities
of the Company entitled to vote generally in the election of Directors (the
"Company Voting Stock"); (ii) the closing of a sale or other conveyance of all
or substantially all of the assets of the Company; or (iii) the effective time
of any merger, share exchange, consolidation, or other business combination of
the Company if immediately after such transaction persons who hold a majority of
the outstanding voting securities entitled to vote generally in the election of
directors of the surviving entity (or the entity owning one hundred percent
(100%) of such surviving entity) are not persons who, immediately prior to such
transaction, held the Company Voting Stock. For purposes of this Section 2(f), a
"Person" means any individual, entity or group within the meaning of Section
13(d)(3) or 14(d)(2) of the Exchange Act other than: employee benefit plans
sponsored or maintained by the Company and corporations controlled by the
Company. Notwithstanding the foregoing, a "Change in Control" shall not include
the consummation of the financing transaction as contemplated in the Funding
Agreement and Secured Convertible Promissory Notes with Airworks Funding LLLP,
Sands Brothers Venture Capital LLC, Sands Brothers Venture Capital II LLC, Sands
Brothers Venture Capital III LLC, Sands Brothers Venture Capital IV LLC,
Critical Capital Growth Fund LP, and RS Properties I LLC, as approved by the
Board in June 2007.
(g) "Code" means the Internal Revenue Code of 1986, as amended, and any
regulations promulgated thereunder.
(h) "Common Stock" means shares of common stock of the Company, par value $0.01
per Share.
(i) "Consultant" means any person, including an advisor, who is engaged by the
Company or any Affiliate to render services and is compensated for such
services.
(j) "Continuous Service" means the absence of any interruption or termination of
a Participant's service as an Employee, Director or Consultant. Continuous
Service shall not be considered interrupted in the case of: (i) sick leave; (ii)
military leave; (iii) any other leave of absence approved by the Committee,
provided that such leave is for a period of not more than ninety (90) days,
unless reemployment upon the expiration of such leave is guaranteed by contract
or statute, or unless provided otherwise pursuant to Company policy adopted from
time to time; (iv) changes in status from Director to advisory director or
emeritus status; or (iv) in the case of transfers between locations of the
Company or between the Company, its Affiliates or their respective successors.
Changes in status between a Participant's service as an Employee, Director and a
Consultant will not constitute an interruption of Continuous Service.
(k) "Deferred Share Units" means Awards pursuant to Section 10 of the Plan.
(l) "Director" means a member of the Board, or a member of the board of
directors of an Affiliate.
(m) "Disabled" means a condition under which a Participant:
(i) is unable to engage in any substantial gainful activity by reason of any
medically determinable physical or mental impairment which can be expected to
result in death or can be expected to last for a continuous period of not less
than twelve (12) months, or
(ii) is, by reason of any medically determinable physical or mental impairment
which can be expected to result in death or can be expected to last for a
continuous period of not less than twelve (12) months, received income
replacement benefits for a period of not less than three (3) months under an
accident or health plan covering Employees of the Company.
(n) "Eligible Person" means any Consultant, Director or Employee.
(o) "Employee" means any person whom the Company or any Affiliate classifies as
an employee (including an officer) for employment tax purposes. The payment by
the Company of a director's fee to a Director shall not be sufficient to
constitute "employment" of such Director by the Company.
(p) "Exchange Act" means the Securities Exchange Act of 1934, as amended.
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(q) "Fair Market Value" means, with respect to a share of the Common Stock for
any purpose on a particular date, the value determined by the Administrator in
good faith. However, if the Common Stock is registered under Section 12(b) or
12(g) of the Exchange Act, and listed for trading on a national exchange or
market, "Fair Market Value" means, as applicable, (i) either the closing price
or the average of the high and low sale price on the relevant date, as
determined in the Administrator's discretion, quoted on the American Stock
Exchange; (ii) the last sale price on the relevant date quoted on the Nasdaq
SmallCap Market; (iii) the closing high bid on the relevant date quoted on the
Nasdaq OTC Bulletin Board Service or by the National Quotation Bureau, Inc. or a
comparable service as determined in the Administrator's discretion; or (iv) if
the Common Stock is not quoted by any of the above, the average of the closing
bid and asked prices on the relevant date furnished by a professional market
maker for the Common Stock, or by such other source, selected by the
Administrator. If no public trading of the Common Stock occurs on the relevant
date, then Fair Market Value shall be determined as of the next preceding date
on which trading of the Common Stock does occur. For all purposes under this
Plan, the term "relevant date" as used in this Section 2(q) shall mean either
the date as of which Fair Market Value is to be determined or the next preceding
date on which public trading of the Common Stock occurs, as determined in the
Administrator's discretion.
(r) "Grant Agreement" means a written document memorializing the terms and
conditions of an Award granted pursuant to the Plan and shall incorporate the
terms of the Plan. The Committee shall determine the form or forms of documents
to be used, and may change them from time to time for any reason.
(s) "Grant Date" has the meaning set forth in Section 16 of the Plan.
(t) "ISO" means an Option intended to qualify as an incentive stock option
within the meaning of Section 422 of the Code, as designated in the applicable
Award Agreement.
(u) "Involuntary Termination" means termination of a Participant's Continuous
Service under the following circumstances occurring on or after a Change in
Control: (i) termination without Cause by the Company or an Affiliate or
successor thereto, as appropriate; or (ii) voluntary termination by the
Participant within sixty (60) days following (A) a material reduction in the
Participant's job responsibilities, provided that neither a mere change in title
alone nor reassignment to a substantially similar position shall constitute a
material reduction in job responsibilities; (B) an involuntary relocation of the
Participant's work site to a facility or location more than fifty (50) miles
from the Participant's principal work site at the time of the Change in Control;
or (C) a material reduction in Participant's total compensation other than as
part of an reduction by the same percentage amount in the compensation of all
other similarly-situated Employees, Directors or Consultants.
(v) "Nonqualified Option" means an Option not intended to qualify as an ISO, as
designated in the applicable Award Agreement.
(w) "Option" means any stock option granted pursuant to Section 7 of the Plan.
(x) "Participant" means any holder of one or more Awards, or the Shares issuable
or issued upon exercise of such Awards, under the Plan.
(y) "Performance Awards" means Performance Units and Performance Compensation
Awards granted pursuant to Section 13 of the Plan.
(z) "Performance Compensation Awards" means Awards granted pursuant to Section
13(b) of the Plan.
(aa) "Performance Unit" means Awards granted pursuant to Section 13(a) of the
Plan which may be paid in cash, in Shares, or such combination of cash and
Shares as the Committee in its sole discretion shall determine.
(bb) "Person" means any natural person, association, trust, business trust,
cooperative, corporation, general partnership, joint venture, joint-stock
company, limited partnership, limited liability company, real estate investment
trust, regulatory body, governmental agency or instrumentality, unincorporated
organization or organizational entity.
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(cc) "Phantom Stock" means Awards pursuant to Section 11 of the Plan.
(dd) "Reporting Person" means an officer, Director, or greater than ten percent
(10%) shareholder of the Company within the meaning of Rule 16a-2 under the
Exchange Act, who is required to file reports pursuant to Rule 16a-3 under the
Exchange Act.
(ee) "Restricted Shares" means Shares subject to restrictions imposed pursuant
to Section 9 of the Plan.
(ff) "Restricted Share Units" means Awards pursuant to Section 9 of the Plan.
(gg) "Rule 16b-3" means Rule 16b-3 promulgated under the Exchange Act, as
amended from time to time, or any successor provision.
(hh) "SAR" or "Share Appreciation Right" means Awards granted pursuant to
Section 8 of the Plan.
(ii) "Securities Act" means the Securities Act of 1933, as amended.
(jj) "Share" means a share of Common Stock, as adjusted in accordance with
Section 15 of the Plan.
(kk) "Ten Percent Holder" means a person who owns stock representing more than
ten percent (10%) of the combined voting power of all classes of stock of the
Company or any Affiliate.
(ll) "Unrestricted Shares" means Shares awarded pursuant to Section 9 of the
Plan.
3. Administration
(a) Administration of the Plan. The Plan shall be administered by the Board or
by such committee or committees as may be appointed by the Board from time to
time (the Board, committee or committees hereinafter referred to as the
"Administrator").
(b) Powers of the Administrator. The Administrator shall have all the powers
vested in it by the terms of the Plan, such powers to include authority, in its
sole and absolute discretion, to grant Awards under the Plan, prescribe Grant
Agreements evidencing such Awards and establish programs for granting Awards.
The Administrator shall have full power and authority to take all other
actions necessary to carry out the purpose and intent of the Plan, including,
but not limited to, the authority to: (i) determine the eligible persons to
whom, and the time or times at which Awards shall be granted; (ii) determine the
types of Awards to be granted; (iii) determine the number of shares to be
covered by or used for reference purposes for each Award; (iv) impose such
terms, limitations, restrictions and conditions upon any such Award as the
Administrator shall deem appropriate; (v) modify, amend, extend or renew
outstanding Awards, or accept the surrender of outstanding Awards and substitute
new Awards (provided however, that, except as provided in Section 7(d) of the
Plan, any modification that would materially adversely affect any outstanding
Award shall not be made without the consent of the holder); (vi) accelerate or
otherwise change the time in which an Award may be exercised or becomes payable
and to waive or accelerate the lapse, in whole or in part, of any restriction or
condition with respect to such Award, including, but not limited to, any
restriction or condition with respect to the vesting or exercisability of an
Award following termination of any grantee's employment or other relationship
with the Company; and (vii) establish objectives and conditions, if any, for
earning Awards and determining whether Awards will be paid after the end of a
performance period.
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The Administrator shall have full power and authority, in its sole and
absolute discretion, to administer and interpret the Plan and to adopt and
interpret such rules, regulations, agreements, guidelines and instruments for
the administration of the Plan and for the conduct of its business as the
Administrator deems necessary or advisable.
(c) Non-Uniform Determinations. The Administrator's determinations under the
Plan (including without limitation, determinations of the persons to receive
Awards, the form, amount and timing of such Awards, the terms and provisions of
such Awards and the Grant Agreements evidencing such Awards) need not be uniform
and may be made by the Administrator selectively among persons who receive, or
are eligible to receive, Awards under the Plan, whether or not such persons are
similarly situated. The Administrator's prior exercise of its discretionary
authority shall not obligate it to exercise its authority in a like fashion
thereafter.
(d) Limited Liability. To the maximum extent permitted by law, no member of the
Administrator shall be liable for any action taken or decision made in good
faith relating to the Plan or any Award thereunder.
(e) Indemnification. To the maximum extent permitted by law and by the Company's
charter and by-laws, the members of the Administrator shall be indemnified by
the Company in respect of all their activities under the Plan.
(f) Effect of Administrator's Decision. The Administrator shall have the
discretion to interpret or construe ambiguous, unclear, or implied (but omitted)
terms in any fashion it deems to be appropriate in its sole discretion, and to
make any findings of fact needed in the administration of the Plan or Grant
Agreements. All actions taken and decisions and determinations made by the
Administrator on all matters relating to the Plan pursuant to the powers vested
in it hereunder shall be in the Administrator's sole and absolute discretion and
shall be conclusive and binding on all parties concerned, including the Company,
its stockholders, any participants in the Plan and any other Employee,
Consultant, or Director of the Company, and their respective successors in
interest. The validity of any such interpretation, construction, decision or
finding of fact shall not be given de novo review if challenged in court, by
arbitration, or in any other forum, and shall be upheld unless clearly made in
bad faith or materially affected by fraud.
4. Shares Available for the Plan; Maximum Awards
(a) Number of Shares Issuable. The total number of shares of Common
Stock initially authorized to be issued under the Plan shall be 100,000,000. No
more than 100,000,000 shares of Common Stock may be issued under the Plan as
Incentive Stock Options. The foregoing share limits shall be subject to
adjustment in accordance with Section 15(b). The shares to be offered under the
Plan shall be authorized and unissued Common Stock, or issued Common Stock that
shall have been reacquired by the Company.
(b) Shares Subject to Terminated Awards. Common Stock covered by any
unexercised portions of terminated or forfeited Options (including canceled
Options) granted under the Plan, Common Stock underlying any other Award that is
terminated, forfeited or otherwise surrendered by the Participant without actual
issuance of the shares may again be subject to new Awards under the Plan. Shares
of Common Stock surrendered to or withheld by the Company in payment or
satisfaction of the exercise price of an Option or tax withholding obligation
with respect to an Award shall be available for the grant of new Awards under
the Plan. In the event of the exercise of Stock Appreciation Rights, whether or
not granted in tandem with Options, only the number of shares of Common Stock
actually issued in payment of such Stock Appreciation Rights shall be charged
against the number of shares of Common Stock available for the grant of Awards
hereunder.
5. Participation
Participation in the Plan shall be open to all Employees, Consultants,
advisors, sales representatives, officers and Directors of, and other
individuals providing bona fide services to or for, the Company, or of any
Affiliate of the Company, as may be selected by the Administrator from time to
time. The Administrator may also grant Awards to individuals in connection with
hiring, retention or otherwise, prior to the date the individual first performs
services for the Company or an Affiliate provided that such Awards shall not
become vested or exercisable prior to the date the individual first commences
performance of such services. A Participant who has been granted an Award may be
granted an additional Award or Awards if the Administrator shall so determine,
if such person is otherwise an Eligible Person and if otherwise in accordance
with the terms of the Plan. Notwithstanding the foregoing, nothing in this Plan
shall prevent or limit the Company's authority and ability to grant Common Stock
in the form of stock options, restricted stock, stock units or any other
applicable award to any Employee, Consultant, Director or other individual
providing services to or for the Company or any Affiliate that is not subject to
and is outside of the terms of this Plan.
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6. Awards
(a) General. The Administrator, in its sole discretion, establishes the terms of
all Awards granted under the Plan. Awards may be granted individually or in
tandem with other types of Awards. All Awards are subject to the terms and
conditions provided in the Grant Agreement. The Administrator may permit or
require a recipient of an Award to defer such individual's receipt of the
payment of cash or the delivery of Common Stock that would otherwise be due to
such individual by virtue of the exercise of, payment of, or lapse or waiver of
restrictions respecting, any Award. If any such payment deferral is required or
permitted, the Administrator shall, in its sole discretion, establish rules and
procedures for such payment deferrals.
(b) Replacement Awards. Subject to Applicable Laws (including any associated
Shareholder approval requirements), the Administrator may, in its sole
discretion and upon such terms as it deems appropriate, require as a condition
of the grant of an Award to a Participant that the Participant surrender for
cancellation some or all of the Awards that have previously been granted to the
Participant under this Plan or otherwise. An Award that is conditioned upon such
surrender may or may not be the same type of Award, may cover the same (or a
lesser or greater) number of Shares as such surrendered Award, may have other
terms that are determined without regard to the terms or conditions of such
surrendered Award, and may contain any other terms that the Administrator deems
appropriate. In the case of Options and SARs, these other terms may not involve
an exercise price that is lower than the exercise price of the surrendered
Option or SARs unless the Company's shareholders approve the grant itself or the
program under which the grant is made pursuant to the Plan.
7. Option Awards
(a) Types; Documentation. The Administrator may in its discretion grant ISOs to
any Employee and Nonqualified Options to any Eligible Person, and shall evidence
any such grants in a Grant Agreement that is delivered to the Participant. Each
Option shall be designated in the Grant Agreement as an ISO or a Nonqualified
Option, and the same Grant Agreement may grant both types of Options, provided,
however, that Awards of ISOs shall be limited to Employees of the Company or of
any current or hereafter existing "parent corporation" or "subsidiary
corporation", as defined in Code Sections 424(e) and (f), respectively, of the
Company. At the sole discretion of the Administrator, any Option may be
exercisable, in whole or in part, immediately upon the grant thereof, or only
after the occurrence of a specified event, or only in installments, which
installments may vary. Options granted under the Plan may contain such terms and
provisions not inconsistent with the Plan that the Administrator shall deem
advisable in its sole and absolute discretion.
(b) ISO $100,000 Limitation. To the extent that the aggregate Fair Market Value
of Shares with respect to which Options designated as ISOs first become
exercisable by a Participant in any calendar year (under this Plan and any other
plan of the Company or any Affiliate) exceeds $100,000, such excess Options
shall be treated as Nonqualified Options. For purposes of determining whether
the $100,000 limit is exceeded, the Fair Market Value of the Shares subject to
an ISO shall be determined as of the Grant Date. In reducing the number of
Options treated as ISOs to meet the $100,000 limit, the most recently granted
Options shall be reduced first. In the event that Section 422 of the Code is
amended to alter the limitation set forth therein, the limitation of this
Section 7(b) shall be automatically adjusted accordingly.
(c) Term of Options. Each Grant Agreement shall specify a term at the end of
which the Option automatically expires, subject to earlier termination
provisions contained in Section 7(e) hereof; provided, that, the term of any
Option may not exceed ten (10) years from the Grant Date. In the case of an ISO
granted to an Employee who is a Ten Percent Holder on the Grant Date, the term
of the ISO shall not exceed five (5) years from the Grant Date.
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(d) Exercise Price. The exercise price of an Option shall be determined by the
Administrator in its discretion and shall be set forth in the Grant Agreement,
subject to the following special rules:
(i) ISOs. If an ISO is granted to an Employee who on the Grant Date is a Ten
Percent Holder, the per Share exercise price shall not be less than one hundred
ten percent (110%) of the Fair Market Value per Share on such Grant Date. If an
ISO is granted to any other Employee, the per Share exercise price shall not be
less than one hundred percent (100%) of the Fair Market Value per Share on the
Grant Date.
(ii) Nonqualified Options. The per Share exercise price for the Shares to be
issued pursuant to the exercise of a Nonqualified Option shall not be less than
one hundred percent (100%) of the Fair Market Value per Share on the Grant Date.
(e) Termination of Continuous Service. The Administrator may establish and set
forth in the applicable Grant Agreement the terms and conditions on which an
Option shall remain exercisable, if at all, following termination of a
Participant's Continuous Service. The Administrator may waive or modify these
provisions at any time. To the extent that a Participant is not entitled to
exercise an Option at the date of his or her termination of Continuous Service,
or if the Participant (or other person entitled to exercise the Option) does not
exercise the Option to the extent so entitled within the time specified in the
Grant Agreement or below (as applicable), the Option shall terminate and the
Shares underlying the unexercised portion of the Option shall revert to the Plan
and become available for future Awards. In no event may any Option be exercised
after the expiration of the Option term as set forth in the Grant Agreement.
The following provisions shall apply to the extent a Grant Agreement
does not specify the terms and conditions upon which an Option shall terminate
when there is a termination of a Participant's Continuous Service:
(i) Termination other than Upon Disability or Death or for Cause. In the event
of termination of a Participant's Continuous Service (other than as a result of
Participant's death, disability, retirement or termination for Cause), the
Participant shall have the right to exercise an Option at any time within ninety
(90) days following such termination to the extent the Participant was entitled
to exercise such Option at the date of such termination.
(ii) Disability. In the event of termination of a Participant's Continuous
Service as a result of his or her being Disabled, the Participant shall have the
right to exercise an Option at any time within one year following such
termination to the extent the Participant was entitled to exercise such Option
at the date of such termination.
(iii) Retirement. In the event of termination of a Participant's Continuous
Service as a result of Participant's retirement, the Participant shall have the
right to exercise the Option at any time within one (1) year following such
termination to the extent the Participant was entitled to exercise such Option
at the date of such termination.
(iv) Death. In the event of the death of a Participant during the period of
Continuous Service since the Grant Date of an Option, or within thirty (30) days
following termination of the Participant's Continuous Service, the Option may be
exercised, at any time within one (1) year following the date of the
Participant's death, by the Participant's estate or by a person who acquired the
right to exercise the Option by bequest or inheritance, but only to the extent
the right to exercise the Option had vested at the date of death or, if earlier,
the date the Participant's Continuous Service terminated.
(v) Cause. If the Administrator determines that a Participant's Continuous
Service terminated due to Cause, the Participant shall immediately forfeit the
right to exercise any Option, and it shall be considered immediately null and
void.
(f) Reverse Vesting. The Administrator in its sole and absolute discretion may
allow a Participant to exercise unvested Options, in which case the Shares then
issued shall be Restricted Shares having analogous vesting restrictions to the
unvested Options.
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(g) Buyout Provisions. The Administrator may at any time offer to buy out an
Option, in exchange for a payment in cash or Shares, based on such terms and
conditions as the Administrator shall establish and communicate to the
Participant at the time that such offer is made. In addition, but subject to any
shareholder approval requirement of applicable law, if the Fair Market Value for
Shares subject to an Option is more than thirty three percent (33%) below their
exercise price for more than thirty (30) consecutive business days, the
Administrator may unilaterally terminate and cancel the Option either (i) by
paying the Participant, in cash or Shares, an amount not less than the
Black-Scholes value of the vested portion of the Option, or (ii) subject to the
approval of the shareholders of the Company, by irrevocably committing to grant
a new Option, on a designated date more than six (6) months after such
termination and cancellation of such Option (but only if the Participant's
Continuous Service has not terminated prior to such designated date), on
substantially the same terms as the cancelled Option, provided that the per
Share exercise price for the new Option shall equal the per Share Fair Market
Value of a Share on the date the new grant occurs.
8. Stock Appreciation Rights
(a) Stock Appreciation Rights. The Administrator may from time to time grant to
eligible participants Awards of Stock Appreciation Rights ("SARs"). A SAR
entitles the grantee to receive, subject to the provisions of the Plan and the
Grant Agreement, a payment having an aggregate value equal to the product of (i)
the excess of (A) the Fair Market Value on the exercise date of one (1) share of
Common Stock over (B) the base price per Share specified in the Grant Agreement,
times (ii) the number of shares specified by the SAR, or portion thereof, which
is exercised. Payment by the Company of the amount receivable upon any exercise
of a SAR may be made by the delivery of Common Stock or cash, or any combination
of Common Stock and cash, as determined in the sole discretion of the
Administrator. If upon settlement of the exercise of a SAR a grantee is to
receive a portion of such payment in Shares of Common Stock, the number of
shares shall be determined by dividing such portion by the Fair Market Value of
a share of Common Stock on the exercise date. No fractional shares shall be used
for such payment and the Administrator shall determine whether cash shall be
given in lieu of such fractional shares or whether such fractional shares shall
be eliminated.
(b) Termination of Employment or Consulting Relationship. The Administrator
shall establish and set forth in the applicable Grant Agreement the terms and
conditions on which a SAR shall remain exercisable, if at all, following
termination of a Participant's Continuous Service. The provisions of Section
7(e) above shall apply to the extent a Grant Agreement does not specify the
terms and conditions upon which a SAR shall terminate when there is a
termination of a Participant's Continuous Service.
(c) Buy-out. The Administrator has the same discretion to buy-out SARs as it has
to take such actions pursuant to Section 7(g) above with respect to Options.
9. Restricted Shares and Restricted Share Units; Unrestricted Shares
(a) Grants. The Administrator may in its discretion grant restricted shares
("Restricted Shares") to any Eligible Person and shall evidence such grant in a
Grant Agreement that is delivered to the Participant and that sets forth the
number of Restricted Shares, the purchase price for such Restricted Shares (if
any), and the terms upon which the Restricted Shares may become vested. In
addition, the Company may in its discretion grant the right to receive Shares
after certain vesting requirements are met ("Restricted Share Units") to any
Eligible Person and shall evidence such grant in a Grant Agreement that is
delivered to the Participant which sets forth the number of Shares (or formula,
that may be based on future performance or conditions, for determining the
number of Shares) that the Participant shall be entitled to receive upon vesting
and the terms upon which the Shares subject to a Restricted Share Unit may
become vested. The Administrator may condition any Award of Restricted Shares or
Restricted Share Units to a Participant on receiving from the Participant such
further assurances and documents as the Administrator may require to enforce the
restrictions. In addition, the Committee may grant Awards hereunder in the form
of unrestricted shares ("Unrestricted Shares"), which shall vest in full upon
the date of grant or such other date as the Committee may determine or which the
Committee may issue pursuant to any program under which one or more Eligible
Persons (selected by the Committee in its discretion) elect to receive
Unrestricted Shares in lieu of cash bonuses that would otherwise be paid.
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(b) Vesting and Forfeiture. The Administrator shall set forth in a Grant
Agreement granting Restricted Shares or Restricted Share Units, the terms and
conditions under which the Participant's interest in the Restricted Shares or
the Shares subject to Restricted Share Units will become vested and
non-forfeitable. Except as set forth in the applicable Grant Agreement or the
Administrator otherwise determines, upon termination of a Participant's
Continuous Service for any other reason, the Participant shall forfeit his or
her Restricted Shares and Restricted Share Units; provided that if a Participant
purchases the Restricted Shares and forfeits them for any reason, the Company
shall return the purchase price to the Participant only if and to the extent set
forth in a Grant Agreement.
(c) Issuance of Restricted Shares Prior to Vesting. The Company shall issue
stock certificates that evidence Restricted Shares pending the lapse of
applicable restrictions, and that bear a legend making appropriate reference to
such restrictions. Except as set forth in the applicable Grant Agreement or the
Administrator otherwise determines, the Company or a third party that the
Company designates shall hold such Restricted Shares and any dividends that
accrue with respect to Restricted Shares pursuant to Section 9(e) below.
(d) Issuance of Shares upon Vesting. As soon as practicable after vesting of a
Participant's Restricted Shares (or Shares underlying Restricted Share Units)
and the Participant's satisfaction of applicable tax withholding requirements,
the Company shall release to the Participant, free from the vesting
restrictions, one (1) Share for each vested Restricted Share (or issue one (1)
Share free of the vesting restriction for each vested Restricted Share Unit),
unless a Grant Agreement provides otherwise. No fractional shares shall be
distributed but shall be rounded up to the next full share at the election of
the Administrator. Notwithstanding the foregoing, if the Administrator
determines that an issuance of Shares at the time of vesting is not a
"permissible distribution event" within the meaning of Section 409A of the Code,
then the issuance of the Shares will be automatically deferred until the
earliest date on which issuance of the Shares in unrestricted form will
constitute a permissible distribution event pursuant to paragraphs (i), (ii),
(iii), (v) or (iv) of Section 409A(a)(2)(A) of the Code.
(e) Dividends Payable on Vesting. Whenever Shares are released to a Participant
or duly-authorized transferee pursuant to Section 9(d) above as a result of the
vesting of Restricted Shares or the Shares underlying Restricted Share Units are
issued to a Participant pursuant to Section 9(d) above, such Participant or
duly-authorized transferee shall also be entitled to receive (unless otherwise
provided in the Grant Agreement), with respect to each Share released or issued,
an amount equal to any cash dividends (plus, in the discretion of the
Administrator, simple interest at a rate as the Administrator may determine) and
a number of Shares equal to any stock dividends, which were declared and paid to
the holders of Shares between the Grant Date and the date such Share is released
from the vesting restrictions in the case of Restricted Shares or issued in the
case of Restricted Share Units.
(f) Section 83(b) Elections. A Participant may make an election under Section
83(b) of the Code (the "Section 83(b) Election") with respect to Restricted
Shares. If a Participant who has received Restricted Share Units provides the
Administrator with written notice of his or her intention to make Section 83(b)
Election with respect to the Shares subject to such Restricted Share Units, the
Administrator may in its discretion convert the Participant's Restricted Share
Units into Restricted Shares, on a one-for-one basis, in full satisfaction of
the Participant's Restricted Share Unit Award. The Participant may then make a
Section 83(b) Election with respect to those Restricted Shares.
Shares with respect to which a Participant makes a Section 83(b)
Election shall not be eligible for deferral pursuant to Section 10 below.
(g) Deferral Elections. At any time within the thirty (30) day period (or other
shorter or longer period that the Administrator selects) in which a Participant
who is a member of a select group of management or highly compensated employees
(within the meaning of the Code) receives an Award of either Restricted Shares
or Restricted Share Units, the Administrator may permit the Participant to
irrevocably elect, on a form provided by and acceptable to the Administrator, to
defer the receipt of all or a percentage of the Shares that would otherwise be
transferred to the Participant upon the vesting of such Award. If the
Participant makes this election, the Shares subject to the election, and any
associated dividends and interest, shall be credited to an account established
pursuant to Section 10 hereof on the date such Shares would otherwise have been
released or issued to the Participant pursuant to Section 9(d) above.
9
The Administrator may grant Awards hereunder in the form of
unrestricted shares ("Unrestricted Shares"), which shall vest in full upon the
date of grant or such other date as the Administrator may determine or which the
Administrator may issue pursuant to any program under which one or more Eligible
Persons (selected by the Administrator in its discretion) elect to receive
Unrestricted Shares in lieu of cash bonuses that would otherwise be paid.
10. Deferred Share Units
(a) Elections to Defer. The Administrator may permit any Eligible Person who is
a Director, Consultant or member of a select group of management or highly
compensated employees (within the meaning of the Code) to irrevocably elect, on
a form provided by and acceptable to the Administrator (the "Election Form"), to
forego the receipt of cash or other compensation (including the Shares
deliverable pursuant to any Award other than Restricted Shares for which a
Section 83(b) Election has been made), and in lieu thereof to have the Company
credit to an internal Plan account (the "Account") a number of deferred share
units ("Deferred Share Units") having a Fair Market Value equal to the Shares
and other compensation deferred. These credits will be made at the end of each
calendar quarter (or other period that the Administrator establishes
prospectively) during which compensation is deferred. Unless, within five (5)
business days after the Company receives an Election Form, the Company sends the
Participant a written notice explaining why it is invalid, each Election Form
shall take effect on the first day of the next calendar year (or on the first
day of the next calendar month in the case of an initial election by a
Participant who is first eligible to defer hereunder) after its delivery to the
Company, subject to Section 9(g) regarding deferral of Restricted Shares and
Restricted Share Units and to Section 13(e) regarding deferral of Performance
Awards. Notwithstanding the foregoing sentence: (i) Election Forms shall be
ineffective with respect to any compensation that a Participant earns before the
date on which the Company receives the Election Form, and (ii) the Administrator
may unilaterally make awards in the form of Deferred Share Units, regardless of
whether or not the Participant foregoes other compensation.
(b) Vesting. Unless a Grant Agreement expressly provides otherwise, each
Participant shall be one hundred percent (100%) vested at all times in any
Shares subject to Deferred Share Units.
(c) Issuances of Shares. The Company shall provide a Participant with one (1)
Share for each Deferred Share Unit in five (5) substantially equal annual
installments that are issued before the last day of each of the five (5)
calendar years that end after the date on which the Participant's Continuous
Service terminates, unless -
(i) the Participant has properly elected a different form of distribution, on a
form approved by the Administrator, that permits the Participant to select any
combination of a lump sum and annual installments that are completed within ten
(10) years following termination of the Participant's Continuous Service, and
(ii) the Company received the Participant's distribution election form at the
time the Participant elects to defer the receipt of cash or other compensation
pursuant to Section 10(a), provided that (subject to any prospective changes
that the Administrator communicates in writing to a Participant), the
Participant may change such election through any subsequent election that (i) is
delivered to the Administrator at least one (1) year before the date on which
distributions are otherwise scheduled to commence pursuant to the Participant's
election, and (ii) defers the commencement of distributions by at least five (5)
years from the originally scheduled commencement date.
Fractional shares shall not be issued and shall be rounded up to the
next full share at the election of the Administrator.
(d) Crediting of Dividends. Whenever Shares are issued to a Participant pursuant
to Section 10(c) above, such Participant shall also be entitled to receive, with
respect to each Share issued, a cash amount equal to any cash dividends (plus
simple interest at a rate of five percent (5%) per annum, or such other
reasonable rate as the Administrator may determine in a Grant Agreement), and a
number of Shares equal to any stock dividends which were declared and paid to
the holders of Shares between the Grant Date and the date such Share is issued.
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(e) Emergency Withdrawals. In the event a Participant suffers an unforeseeable
emergency within the contemplation of this Section 10 and Section 409A of the
Code, the Participant may apply to the Company for an immediate distribution of
all or a portion of the Participant's Deferred Share Units. The unforeseeable
emergency must result from a sudden and unexpected illness or accident of the
Participant, the Participant's spouse, or a dependent (within the meaning of
Section 152(a) of the Code) of the Participant, casualty loss of the
Participant's property, or other similar extraordinary and unforeseeable
conditions beyond the control of the Participant. Examples of purposes which are
not considered unforeseeable emergencies include post-secondary school expenses
or the desire to purchase a residence. In no event will a distribution be made
to the extent the unforeseeable emergency could be relieved through
reimbursement or compensation by insurance or otherwise, or by liquidation of
the Participant's nonessential assets to the extent such liquidation would not
itself cause a severe financial hardship. The amount of any distribution
hereunder shall be limited to the amount necessary to relieve the Participant's
unforeseeable emergency plus amounts necessary to pay taxes reasonably
anticipated as a result of the distribution. The Administrator shall determine
whether a Participant has a qualifying unforeseeable emergency and the amount
which qualifies for distribution, if any. The Administrator may require evidence
of the purpose and amount of the need, and may establish such application or
other procedures as it deems appropriate.
(f) Unsecured Rights to Deferred Compensation. A Participant's right to Deferred
Share Units shall at all times constitute an unsecured promise of the Company to
pay benefits as they come due. The right of the Participant or the Participant's
duly-authorized transferee to receive benefits hereunder shall be solely an
unsecured claim against the general assets of the Company. Neither the
Participant nor the Participant's duly-authorized transferee shall have any
claim against or rights in any specific assets, shares, or other funds of the
Company.
11. Phantom Stock
The Administrator may from time to time grant Awards to eligible
participants denominate in stock-equivalent units ("Phantom Stock") in such
amounts and on such terms and conditions as it shall determine. Phantom Stock
units granted to a participant shall be credited to a bookkeeping reserve
account solely for accounting purposes and shall not require a segregation of
any of the Company's assets. An Award of Phantom Stock may be settled in Common
Stock, in cash, or in a combination of Common Stock and cash, as determined in
the sole discretion of the Administrator. Except as otherwise provided in the
applicable Grant Agreement, the grantee shall not have the rights of a
stockholder with respect to any Shares of Common Stock represented by a Phantom
Stock unit solely as a result of the grant of a Phantom Stock unit to the
grantee.
12. Other Stock-Based Awards
The Administrator may from time to time grant other stock-based awards
to eligible participants in such amounts, on such terms and conditions, and for
such consideration, including no consideration or such minimum consideration as
may be required by law, as it shall determine. Other stock-based awards may be
denominated in cash, in Common Stock or other securities, in stock-equivalent
units, in stock appreciation units, in securities or debentures convertible into
Common Stock, or in any combination of the foregoing and may be paid in Common
Stock or other securities, in cash, or in a combination of Common Stock or other
securities and cash, all as determined in the sole discretion of the
Administrator.
13. Performance Awards
(a) Performance Units. Subject to the limitations set forth in paragraph (c)
hereof, the Administrator may in its discretion grant Performance Units to any
Eligible Person and shall evidence such grant in a Grant Agreement that is
delivered to the Participant which sets forth the terms and conditions of the
Award. A Performance Unit is an Award which is based on the achievement of
specific goals with respect to the Company or any Affiliate or individual
performance of the Participant, or a combination thereof, over a specified
period of time.
(b) Performance Compensation Awards. Subject to the limitations set forth in
paragraph (c) hereof, the Administrator may, at the time of grant of a
Performance Unit, designate such Award as a "Performance Compensation Award" in
order that such Award constitutes "qualified performance-based compensation"
under Code Section 162(m), in which event the Administrator shall have the power
to grant such Performance Compensation Award upon terms and conditions that
qualify it as "qualified performance-based compensation" within the meaning of
Code Section 162(m). With respect to each such Performance Compensation Award,
the Administrator shall establish, in writing within the time required under
Code Section 162(m), a "Performance Period", "Performance Measure(s)", and
"Performance Formula(e)" (each such term being hereinafter defined). Once
established for a Performance Period, the Performance Measure(s) and Performance
Formula(e) shall not be amended or otherwise modified to the extent such
amendment or modification would cause the compensation payable pursuant to the
Award to fail to constitute qualified performance-based compensation under Code
Section 162(m).
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A Participant shall be eligible to receive payment in respect of a
Performance Compensation Award only to the extent that the Performance
Measure(s) for such Award is achieved and the Performance Formula(e) as applied
against such Performance Measure(s) determines that all or some portion of such
Participant's Award has been earned for the Performance Period. As soon as
practicable after the close of each Performance Period, the Administrator shall
review and certify in writing whether, and to what extent, the Performance
Measure(s) for the Performance Period have been achieved and, if so, determine
and certify in writing the amount of the Performance Compensation Award to be
paid to the Participant and, in so doing, may use negative discretion to
decrease, but not increase, the amount of the Award otherwise payable to the
Participant based upon such performance.
(c) Limitations on Awards. The maximum Performance Unit Award and the maximum
Performance Compensation Award that any one (1) Participant may receive for any
one (1) Performance Period shall be determined from time to time by the
Administrator. The Administrator shall have the discretion to provide in any
Grant Agreement that any amounts earned in excess of any such limitations will
either be credited as Deferred Share Units, or as deferred cash compensation
under a separate plan of the Company (provided in the latter case that such
deferred compensation either bears a reasonable rate of interest or has a value
based on one (1) or more predetermined actual investments). Any amounts for
which payment to the Participant is deferred pursuant to the preceding sentence
shall be paid to the Participant in a future year or years not earlier than, and
only to the extent that, the Participant is either not receiving compensation in
excess of any such limits for a Performance Period, or is not subject to the
restrictions set forth under Section 162(b) of the Code.
(d) Definitions.
(i) "Performance Formula" means, for a Performance Period, one (1) or more
objective formulas or standards established by the Administrator for purposes of
determining whether or the extent to which an Award has been earned based on the
level of performance attained or to be attained with respect to one or more
Performance Measure(s). Performance Formulae may vary from Performance Period to
Performance Period and from Participant to Participant and may be established on
a stand-alone basis, in tandem or in the alternative.
(ii) "Performance Measure" means one (1) or more of the following selected by
the Administrator to measure Company, Affiliate, and/or business unit
performance for a Performance Period, whether in absolute or relative terms
(including, without limitation, terms relative to a peer group or index): basic,
diluted, or adjusted earnings per share; sales or revenue; earnings before
interest, taxes, and other adjustments (in total or on a per share basis); basic
or adjusted net income; returns on equity, assets, capital, revenue or similar
measure; economic value added; working capital; total shareholder return; and
product development, product market share, research, licensing, litigation,
human resources, information services, mergers, acquisitions, sales of assets of
Affiliates or business units. Each such measure shall be, to the extent
applicable, determined in accordance with generally accepted accounting
principles as consistently applied by the Company (or such other standard
applied by the Administrator) and, if so determined by the Administrator, and in
the case of a Performance Compensation Award, to the extent permitted under Code
Section 162(m), adjusted to omit the effects of extraordinary items, gain or
loss on the disposal of a business segment, unusual or infrequently occurring
events and transactions and cumulative effects of changes in accounting
principles.
Performance Measures may vary from Performance Period to Performance
Period and from Participant to Participant, and may be established on a
stand-alone basis, in tandem or in the alternative.
(iii) "Performance Period" means one (1) or more periods of time (of not less
than one (1) fiscal year of the Company), as the Administrator may designate,
over which the attainment of one (1) or more Performance Measure(s) will be
measured for the purpose of determining a Participant's rights in respect of an
Award.
12
(e) Deferral Elections. At any time prior to the date that is at least six (6)
months before the close of a Performance Period (or shorter or longer period
that the Administrator selects) with respect to an Award of either Performance
Units or Performance Compensation, the Administrator may permit a Participant
who is a member of a select group of management or highly compensated employees
(within the meaning of the Code) to irrevocably elect, on a form provided by and
acceptable to the Administrator, to defer the receipt of all or a percentage of
the cash or Shares that would otherwise be transferred to the Participant upon
the vesting of such Award. If the Participant makes this election, the cash or
Shares subject to the election, and any associated interest and dividends, shall
be credited to an account established pursuant to Section 10 hereof on the date
such cash or Shares would otherwise have been released or issued to the
Participant pursuant to Section 13(a) or Section 13(b) above.
14. Taxes
(a) General. As a condition to the issuance or distribution of Shares pursuant
to the Plan, the Participant (or in the case of the Participant's death, the
person who succeeds to the Participant's rights) shall make such arrangements as
the Company may require for the satisfaction of any applicable federal, state,
local or foreign withholding tax obligations that may arise in connection with
the Award and the issuance of Shares. The Company shall not be required to issue
any Shares until such obligations are satisfied. If the Administrator allows the
withholding or surrender of Shares to satisfy a Participant's tax withholding
obligations, the Administrator shall not allow Shares to be withheld in an
amount that exceeds the minimum statutory withholding rates for federal and
state tax purposes, including payroll taxes.
(b) Default Rule for Employees. In the absence of any other arrangement, an
Employee shall be deemed to have directed the Company to withhold or collect
from his or her cash compensation an amount sufficient to satisfy such tax
obligations from the next payroll payment otherwise payable after the date of
the exercise of an Award.
(c) Special Rules. In the case of a Participant other than an Employee (or in
the case of an Employee where the next payroll payment is not sufficient to
satisfy such tax obligations, with respect to any remaining tax obligations), in
the absence of any other arrangement and to the extent permitted under
Applicable Law, the Participant shall be deemed to have elected to have the
Company withhold from the Shares or cash to be issued pursuant to an Award that
number of Shares having a Fair Market Value determined as of the applicable Tax
Date (as defined below) or cash equal to the amount required to be withheld. For
purposes of this Section 14, the Fair Market Value of the Shares to be withheld
shall be determined on the date that the amount of tax to be withheld is to be
determined under the Applicable Law (the "Tax Date").
(d) Surrender of Shares. If permitted by the Administrator, in its discretion, a
Participant may satisfy the minimum applicable tax withholding and employment
tax obligations associated with an Award by surrendering Shares to the Company
(including Shares that would otherwise be issued pursuant to the Award) that
have a Fair Market Value determined as of the applicable Tax Date equal to the
amount required to be withheld. In the case of Shares previously acquired from
the Company that are surrendered under this Section 14, such Shares must have
been owned by the Participant for more than six months on the date of surrender
(or such longer period of time the Company may in its discretion require).
(e) Income Taxes and Deferred Compensation. Participants are solely responsible
and liable for the satisfaction of all taxes and penalties that may arise in
connection with Awards (including any taxes arising under Section 409A of the
Code), and the Company shall not have any obligation to indemnify or otherwise
hold any Participant harmless from any or all of such taxes. The Administrator
shall have the discretion to organize any deferral program, to require deferral
election forms, and to grant or to unilaterally modify any Award in a manner
that (i) conforms with the requirements of Section 409A of the Code with respect
to compensation that is deferred and that vests after December 31, 2004, (ii)
that voids any Participant election to the extent it would violate Section 409A
of the Code, and (iii) for any distribution election that would violate Section
409A of the Code, to make distributions pursuant to the Award at the earliest to
occur of a distribution event that is allowable under Section 409A of the Code
or any distribution event that is both allowable under Section 409A of the Code
and is elected by the Participant, subject to any valid second election to
defer, provided that the Administrator permits second elections to defer in
accordance with Section 409A(a)(4)(C). The Administrator shall have the sole
discretion to interpret the requirements of the Code, including Section 409A,
for purposes of the Plan and all Awards.
13
(f) Loans. The Company or its Affiliate may make or guarantee loans to grantees
to assist grantees in exercising Awards and satisfying any withholding tax
obligations.
15. Transfers, Adjustments and Change in Control Transactions
(a) Transferability. Except as otherwise determined by the Administrator, and in
any event in the case of an ISO or a Stock Appreciation Right granted with
respect to an ISO, no Award granted under the Plan shall be transferable by a
grantee otherwise than by will or the laws of descent and distribution. Unless
otherwise determined by the Administrator in accord with the provisions of the
immediately preceding sentence, an Award may be exercised during the lifetime of
the grantee, only by the grantee or, during the period the grantee is under a
legal disability, by the grantee's guardian or legal representative.
(b) Adjustments for Corporate Transactions and Other Events.
(i) Stock Dividend, Stock Split and Reverse Stock Split. In the event of a stock
dividend of, or stock split or reverse stock split affecting, the Common Stock,
(A) the maximum number of shares of such Common Stock as to which Awards may be
granted under this Plan and the maximum number of shares with respect to which
Awards may be granted during any one (1) fiscal year of the Company to any
individual, as provided in Section 4 of the Plan, and (B) the number of shares
covered by and the exercise price and other terms of outstanding Awards, shall,
without further action of the Board, be adjusted to reflect such event unless
the Board determines, at the time it approves such stock dividend, stock split
or reverse stock split, that no such adjustment shall be made. The Administrator
may make adjustments, in its discretion, to address the treatment of fractional
shares and fractional cents that arise with respect to outstanding Awards as a
result of the stock dividend, stock split or reverse stock split.
(ii) Non-Change in Control Transactions. Except with respect to the transactions
set forth in Section 15(b)(i), in the event of any change affecting the Common
Stock, the Company or its capitalization, by reason of a spin-off, split-up,
dividend, recapitalization, merger, consolidation or share exchange, other than
any such change that is part of a transaction resulting in a Change in Control
of the Company, the Administrator, in its discretion and without the consent of
the holders of the Awards, shall make (A) appropriate adjustments to the maximum
number and kind of shares reserved for issuance or with respect to which Awards
may be granted under the Plan, in the aggregate and with respect to any
individual during any one fiscal year of the Company, as provided in Section 4
of the Plan; and (B) any adjustments in outstanding Awards, including but not
limited to modifying the number, kind and price of securities subject to Awards.
(iii) Change in Control Transactions. In the event of any transaction resulting
in a Change in Control of the Company, outstanding Options and SARs under this
Plan will terminate upon the effective time of such Change in Control unless
provision is made in connection with the transaction for the continuation or
assumption of such Awards by, or for the substitution of the equivalent awards
of, the surviving or successor entity or a parent thereof. In the event of such
termination, the holders of Options and SARs under the Plan will be permitted,
for a period of at least twenty (20) days prior to the effective time of the
Change in Control, to exercise all portions of such Awards that are then
exercisable or which become exercisable upon or prior to the effective time of
the Change in Control; provided, however, that any such exercise of any portion
of such an Award which becomes exercisable as a result of such Change in Control
shall be deemed to occur immediately prior to the effective time of such Change
in Control.
(iv) Pooling of Interests Transactions. In connection with any business
combination authorized by the Board, the Administrator, in its sole discretion
and without the consent of the holders of the Awards, may make any modifications
to any Awards, including but not limited to cancellation, forfeiture, surrender
or other termination of the Awards, in whole or in part, regardless of the
vested status of the Award, but solely to the extent necessary to facilitate the
compliance of such transaction with requirements for treatment as a pooling of
interests transaction for accounting purposes under generally accepted
accounting principles.
14
(v) Unusual or Nonrecurring Events. The Administrator is authorized to make, in
its discretion and without the consent of holders of Awards, adjustments in the
terms and conditions of, and the criteria included in, Awards in recognition of
unusual or nonrecurring events affecting the Company, or the financial
statements of the Company or any Affiliate, or of changes in applicable laws,
regulations, or accounting principles, whenever the Administrator determines
that such adjustments are appropriate in order to prevent dilution or
enlargement of the benefits or potential benefits intended to be made available
under the Plan.
(c) Substitution of Awards in Mergers and Acquisitions. Awards may be granted
under the Plan from time to time in substitution for awards held by employees,
officers, consultants or directors of entities who become or are about to become
employees, officers, consultants or directors of the Company or an Affiliate as
the result of a merger or consolidation of the employing entity with the Company
or an Affiliate, or the acquisition by the Company or an Affiliate of the assets
or stock of the employing entity. The terms and conditions of any substitute
Awards so granted may vary from the terms and conditions set forth herein to the
extent that the Administrator deems appropriate at the time of grant to conform
the substitute Awards to the provisions of the awards for which they are
substituted.
16. Time of Granting of Awards
The date of grant ("Grant Date") of an Award shall be the date on which
the Administrator makes the determination granting such Award or such other date
as is determined by the Administrator, provided that in the case of an ISO, the
Grant Date shall be the later of the date on which the Administrator makes the
determination granting such ISO or the date of commencement of the Participant's
employment relationship with the Company.
17. Modification of Awards and Substitution of Options
(a) Modification, Extension and Renewal of Awards. Within the limitations of the
Plan, the Administrator may modify an Award to accelerate the rate at which an
Option or SAR may be exercised (including without limitation permitting an
Option or SAR to be exercised in full without regard to the installment or
vesting provisions of the applicable Grant Agreement or whether the Option or
SAR is at the time exercisable, to the extent it has not previously been
exercised), to accelerate the vesting of any Award, to extend or renew
outstanding Awards, or to accept the cancellation of outstanding Awards to the
extent not previously exercised either for the granting of new Awards or for
other consideration in substitution or replacement thereof. Notwithstanding the
foregoing provision, no modification of an outstanding Award shall materially
and adversely affect such Participant's rights thereunder, unless either the
Participant provides written consent or there is an express Plan provision
permitting the Administrator to act unilaterally to make the modification.
(b) Substitution of Options. Notwithstanding any inconsistent provisions or
limits under the Plan, in the event the Company or an Affiliate acquires
(whether by purchase, merger or otherwise) all or substantially all of
outstanding capital stock or assets of another corporation or in the event of
any reorganization or other transaction qualifying under Section 424 of the
Code, the Administrator may, in accordance with the provisions of that Section,
substitute Options for options under the plan of the acquired company provided
(i) the excess of the aggregate fair market value of the shares subject to an
option immediately after the substitution over the aggregate option price of
such shares is not more than the similar excess immediately before such
substitution and (ii) the new option does not give persons additional benefits,
including any extension of the exercise period.
18. Term of Plan
The Plan shall continue in effect for a term of ten (10) years from its
effective date as determined under Section 22 below, unless the Plan is sooner
terminated under Section 19 below.
15
19. Amendment and Termination of the Plan
(a) Authority to Amend or Terminate. Subject to Applicable Laws, the Board may
from time to time amend, alter, suspend, discontinue or terminate the Plan.
(b) Effect of Amendment or Termination. No amendment, suspension, or termination
of the Plan shall materially and adversely affect Awards already granted unless
either it relates to an adjustment pursuant to Section 15 above, or it is
otherwise mutually agreed between the Participant and the Administrator, which
agreement must be in writing and signed by the Participant and the Company.
Notwithstanding the foregoing, the Administrator may amend the Plan to eliminate
provisions which are no longer necessary as a result of changes in tax or
securities laws or regulations, or in the interpretation thereof.
20. Conditions Upon Issuance of Shares
Notwithstanding any other provision of the Plan or any agreement
entered into by the Company pursuant to the Plan, the Company shall not be
obligated, and shall have no liability for failure, to issue or deliver any
Shares under the Plan unless such issuance or delivery would comply with
Applicable Law, with such compliance determined by the Company in consultation
with its legal counsel.
21. Reservation of Shares
The Company, during the term of this Plan, will at all times reserve
and keep available such number of Shares as shall be sufficient to satisfy the
requirements of the Plan.
22. Effective Date
(a) Effective Date; Termination Date. This Plan shall become effective on the
date of its approval by the Board; provided that this Plan shall be submitted to
the Company's shareholders for approval, and if not approved by the shareholders
in accordance with Applicable Laws (as determined by the Administrator in its
discretion) within one (1) year from the date of approval by the Board, this
Plan and any Awards shall be null, void and of no force and effect. Awards
granted under this Plan before approval of this Plan by the shareholders shall
be granted subject to such approval, and no Shares shall be distributed before
such approval. No Award shall be granted under the Plan after the close of
business on the day immediately preceding the tenth (10th) anniversary of the
effective date of the Plan, or if earlier, the tenth (10th) anniversary of the
date this Plan is approved by the shareholders. Subject to other applicable
provisions of the Plan, all Awards made under the Plan prior to such termination
of the Plan shall remain in effect until such Awards have been satisfied or
terminated in accordance with the Plan and the terms of such Awards.
23. Governing Law
The validity, construction and effect of the Plan, of Grant Agreements
entered into pursuant to the Plan, and of any rules, regulations, determinations
or decisions made by the Administrator relating to the Plan or such Grant
Agreements, and the rights of any and all persons having or claiming to have any
interest therein or thereunder, shall be determined exclusively in accordance
with applicable federal laws and the laws of the State of Nevada, without regard
to its conflict of laws principles.
24. Other Applicable Laws And Regulations
(a) U.S. Securities Laws. This Plan, the grant of Awards, and the exercise of
Options and SARs under this Plan, and the obligation of the Company to sell or
deliver any of its securities (including, without limitation, Options,
Restricted Shares, Restricted Share Units, Deferred Share Units and Shares)
under this Plan shall be subject to all Applicable Law. In the event that the
Shares are not registered under the Securities Act, or any applicable state
securities laws prior to the delivery of such Shares, the Company may require,
as a condition to the issuance thereof, that the persons to whom Shares are to
be issued represent and warrant in writing to the Company that such Shares are
being acquired by him or her for investment for his or her own account and not
with a view to, for resale in connection with, or with an intent of
participating directly or indirectly in, any distribution of such Shares within
the meaning of the Securities Act, and a legend to that effect may be placed on
the certificates representing the Shares.
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(b) Other Jurisdictions. To facilitate the making of any grant of an Award under
this Plan, the Administrator may provide for such special terms for Awards to
Participants who are foreign nationals or who are employed by the Company or any
Affiliate outside of the United States of America as the Administrator may
consider necessary or appropriate to accommodate differences in local law, tax
policy or custom. The Company may adopt rules and procedures relating to the
operation and administration of this Plan to accommodate the specific
requirements of local laws and procedures of particular countries. Without
limiting the foregoing, the Company is specifically authorized to adopt rules
and procedures regarding the conversion of local currency, taxes, withholding
procedures and handling of stock certificates which vary with the customs and
requirements of particular countries. The Company may adopt sub-plans and
establish escrow accounts and trusts as may be appropriate or applicable to
particular locations and countries.
25. No Shareholder Rights
Neither a Participant nor any transferee of a Participant shall have
any rights as a shareholder of the Company with respect to any Shares underlying
any Award until the date of issuance of a share certificate to a Participant or
a transferee of a Participant for such Shares in accordance with the Company's
governing instruments and Applicable Law. Prior to the issuance of Shares
pursuant to an Award, a Participant shall not have the right to vote or to
receive dividends or any other rights as a shareholder with respect to the
Shares underlying the Award, notwithstanding its exercise in the case of Options
and SARs. No adjustment will be made for a dividend or other right that is
determined based on a record date prior to the date the stock certificate is
issued, except as otherwise specifically provided for in this Plan.
26. No Employment Rights
Nothing in the Plan or in any Grant Agreement thereunder shall confer
any right on an individual to continue in the service of the Company or shall
interfere in any way with the right of the Company to terminate such service at
any time with or without cause or notice and whether or not such termination
results in (i) the failure of any Award to vest; (ii) the forfeiture of any
unvested or vested portion of any Award; and/or (iii) any other adverse effect
on the individual's interests under the Plan.
27. No Trust or Fund Created
Neither the Plan nor any Award shall create or be construed to create a
trust or separate fund of any kind or a fiduciary relationship between the
Company and a grantee or any other person. To the extent that any grantee or
other person acquires a right to receive payments from the Company pursuant to
an Award, such right shall be no greater than the right of any unsecured general
creditor of the Company.
28. Compliance with Section 409A of The Code
The Company intends that all Options granted under the Plan not be
considered to provide for the deferral of compensation under Section 409A of the
Code and that any other Award that does provide for such deferral of
compensation shall comply with the requirements of Section 409A of the Code and,
accordingly, this Plan shall be so administered and construed. Further, the
Company may modify the Plan and any Award to the extent necessary to fulfill
this intent.
* * * * *
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