Exhibit 4.2
FOURTH AMENDED AND RESTATED
KENSEY NASH CORPORATION
EMPLOYEE INCENTIVE COMPENSATION PLAN
ARTICLE I
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ESTABLISHMENT
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1.1 PURPOSE. The Kensey Nash Corporation Fourth Amended and Restated
Employee Incentive Compensation Plan ("Plan") is hereby established by Kensey
Nash Corporation ("Company"). The purpose of the Plan is to promote the overall
financial objectives of the Company and its stockholders by motivating those
persons selected to participate in the Plan to achieve long-term growth in
stockholder equity in the Company and by retaining the association of those
individuals who are instrumental in achieving this growth. The Plan is intended
to qualify certain compensation awarded under the Plan for tax deductibility
under Section 162(m) of the Code (as defined herein) to the extent deemed
appropriate by the Committee (as defined herein). The Plan and the grant of
awards thereunder are expressly conditioned upon the Plan's approval by the
stockholders of the Company. If such approval is not obtained, then this Plan
and all Awards (as defined herein) hereunder shall be null and void ab initio.
The Plan is adopted, subject to stockholder approval, effective as of June 28,
2004.
ARTICLE II
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DEFINITIONS
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For purposes of the Plan, the following terms are defined as set forth below:
2.1 "AFFILIATE" means any individual, corporation, partnership, limited
liability company, association, joint-stock company, trust, unincorporated
association or other entity (other than the Company) that directly, or
indirectly through one or more intermediaries, controls, is controlled by, or is
under common control with, the Company including, without limitation, any member
of an affiliated group of which the Company is a common parent corporation as
provided in Section 1504 of the Code.
2.2 "AGREEMENT" or "Award Agreement" means, individually or collectively,
any agreement entered into pursuant to the Plan pursuant to which an Award is
granted to a Participant.
2.3 "AWARD" means any Option, SAR, Restricted Stock, Deferred Stock, Stock,
Dividend Equivalent, Other Stock-Based Award, Performance Award or Cash
Incentive Award, together with any other right or interest granted to a
Participant under the Plan.
2.4 "BENEFICIARY" means the person, persons, trust or trusts which have
been designated by a Participant in his or her most recent written beneficiary
designation filed with the Committee to receive the benefits specified under the
Plan upon such Participant's death or to which Awards or other rights are
transferred if and to the extent permitted hereunder. If, upon a Participant's
death, there is no designated Beneficiary or surviving designated Beneficiary,
then the term Beneficiary means the Participant's Representative.
2.5 "BOARD OF DIRECTORS" or "BOARD" means the Board of Directors of the
Company.
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2.6 "CASH INCENTIVE AWARD" means a conditional right granted to a
Participant under Section 10.4(c) hereof to receive a cash payment, unless
otherwise determined by the Committee, after the end of a specified period.
2.7 "CAUSE" shall mean, for purposes of whether and when a Participant has
incurred a Termination of Employment for Cause, any act or omission which
permits the Company to terminate the written agreement or arrangement between
the Participant and the Company or an Affiliate for "cause" as defined in such
agreement or arrangement, or in the event there is no such agreement or
arrangement or the agreement or arrangement does not define the term "cause" or
a substantially equivalent term, then Cause shall mean (a) any act or failure to
act deemed to constitute cause under the Company's established practices,
policies or guidelines applicable to the Participant or (b) the Participant's
act or omission which constitutes gross misconduct with respect to the Company
or an Affiliate in any material respect, including, without limitation, an act
or omission of a criminal nature, the result of which is detrimental to the
interests of the Company or an Affiliate, or conduct, or the omission of
conduct, which constitutes a material breach of a duty the Participant owes to
the Company or an Affiliate.
2.8 "CHANGE IN CONTROL" and "CHANGE IN CONTROL PRICE" have the meanings set
forth in Sections 12.2 and 12.3, respectively.
2.9 "CODE" or "INTERNAL REVENUE CODE" means the Internal Revenue Code of
1986, as amended, Treasury Regulations (including proposed regulations)
thereunder and any subsequent Internal Revenue Code.
2.10 "COMMISSION" means the Securities and Exchange Commission or any
successor agency.
2.11 "COMMITTEE" means the Compensation Committee of the Board or such
other Board committee as may be designated by the Board to administer the Plan;
provided, however, that on and after a Public Offering the Committee shall
consist solely of two or more directors, each of whom is a "disinterested
person" within the meaning of Rule 16b-3 under the Exchange Act and each of whom
is also an "outside director" under Section 162(m) of the Code. In the absence
of appointment, the Board (or on any after a Public Offering, the portion
thereof that are disinterested persons and outside directors) shall constitute
the Committee.
2.12 "COMMON STOCK" means the shares of the $0.01 par value common stock of
the Company, whether presently or hereafter issued, and any other stock or
security resulting from adjustment thereof as described hereinafter or the
common stock of any successor to the Company which is designated for the purpose
of the Plan.
2.13 "COMPANY" means Kensey Nash Corporation, a Delaware corporation, and
includes any successor or assignee corporation or corporations into which the
Company may be merged, changed or consolidated; any corporation for whose
securities the securities of the Company shall be exchanged; and any assignee of
or successor to substantially all of the assets of the Company.
2.14 "COVERED EMPLOYEE" means a Participant who is a "covered employee"
within the meaning of Section 162(m) of the Code.
2.15 "DEFERRED STOCK" means a right, granted to a Participant under Section
9.1 hereof, to receive Common Stock, cash or a combination thereof at the end of
a specified deferral period.
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2.16 "DISABILITY" means a mental or physical illness that entitles the
Participant to receive benefits under the long-term disability plan of the
Company or an Affiliate, or if the Participant is not covered by such a plan or
the Participant is not an employee of the Company or an Affiliate, a mental or
physical illness that renders a Participant totally and permanently incapable of
performing the Participant's duties for the Company or an Affiliate.
Notwithstanding the foregoing, a Disability shall not qualify under this Plan if
it is the result of (i) a willfully self-inflicted injury or willfully
self-induced sickness; or (ii) an injury or disease contracted, suffered, or
incurred while participating in a criminal offense. The determination of
Disability shall be made by the Committee. The determination of Disability for
purposes of this Plan shall not be construed to be an admission of disability
for any other purpose.
2.17 "DIVIDEND EQUIVALENT" means a right, granted to a Participant under
Section 10.2, to receive cash, Common Stock, other Awards or other property
equal in value to dividends paid with respect to a specified number of shares of
Common Stock.
2.18 "EFFECTIVE DATE" means June 28, 2004.
2.19 "EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended,
and the rules and regulations promulgated thereunder.
2.20 "FAIR MARKET VALUE" means:
(a) Prior to a Public Offering, the value determined on the basis of
the good faith determination of the Committee and without regard to whether
the Common Stock is restricted, illiquid or represents a minority interest,
unless expressly provided otherwise in an Agreement; and
(b) on or after a Public Offering, the value determined on the basis of
the good faith determination of the Committee, without regard to whether
the Common Stock is restricted or represents a minority interest, pursuant
to the applicable method described below:
(i) if the Common Stock is listed on a national securities
exchange or quoted on NASDAQ, the closing price of the Common Stock on
the relevant date (or, if such date is not a business day or a day on
which quotations are reported, then on the immediately preceding date
on which quotations were reported), as reported by the principal
national exchange on which such shares are traded (in the case of an
exchange) or by NASDAQ, as the case may be;
(ii) if the Common Stock is not listed on a national securities
exchange or quoted on NASDAQ, but is actively traded in the
over-the-counter market, the average of the closing bid and asked
prices for the Common Stock on the relevant date (or, if such date is
not a business day or a day on which quotations are reported, then on
the immediately preceding date on which quotations were reported), or
the most recent preceding date for which such quotations are reported;
and
(iii) if, on the relevant date, the Common Stock is not publicly
traded or reported as described in (i) or (ii), the value determined in
good faith by the Committee.
2.21 "GRANT DATE" means the date as of which an Award is granted pursuant
to the Plan.
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2.22 "INCENTIVE STOCK OPTION" means any Stock Option intended to be and
designated as an "incentive stock option" within the meaning of Section 422 of
the Code.
2.23 "KENSEY NASH ENTITIES" mean Kenneth R. Kensey ("Kensey") and John Nash
("Nash"), their respective spouses, their respective heirs, and any group
(within the meaning of Section 13(d)(3) of the Exchange Act) of which any of
Kensey, Nash, their spouses or their heirs is a member for purposes of
acquiring, holding or disposing of securities of the Company, any trust
established by or for the benefit of any of the foregoing and any other entity
controlled by or for the benefit of any of the foregoing.
2.24 "KENSEY NASH INTERESTS" mean the beneficial ownership (within the
meaning of Rule 13d-3 promulgated under the Exchange Act) or the pecuniary
interest (within the meaning of Rule 16a-1 promulgated under the Exchange Act)
of the Kensey Nash Entities in the outstanding voting securities of the Company
entitled to vote generally in the election of directors or such other securities
as may be specifically referenced.
2.25 "NASDAQ" means The Nasdaq Stock Market, including the Nasdaq National
Market.
2.26 "NONQUALIFIED STOCK OPTION" means an Option to purchase Common Stock
in the Company granted under the Plan, the taxation of which is pursuant to
Section 83 of the Code.
2.27 "OPTION PERIOD" means the period during which an Option shall be
exercisable in accordance with the related Agreement and Article VI.
2.28 "OPTION PRICE" means the price at which the Common Stock may be
purchased under an Option as provided in Section 6.3(b).
2.29 "OTHER STOCK BASED AWARDS" means Awards granted to a Participant under
Section 10.3 hereof.
2.30 "PARTICIPANT" means a person who satisfies the eligibility conditions
of Article V and to whom an Award has been granted by the Committee under the
Plan, and in the event a Representative is appointed for a Participant or
another person becomes a Representative, then the term "Participant" shall mean
such Representative. The term shall also include a trust for the benefit of the
Participant, a partnership the interest of which was held by or for the benefit
of the Participant, the Participant's parents, spouse or descendants, or a
custodian under a uniform gifts to minors act or similar statute for the benefit
of the Participant's descendants, to the extent permitted by the Committee and
not inconsistent with Rule 16b-3. Notwithstanding the foregoing, the term
"Termination of Employment" shall mean the Termination of Employment of the
person to whom the Award was originally granted.
2.31 "PERFORMANCE AWARD" means a right, granted to a Participant under
Section 10.4 hereof, to receive Awards based upon performance criteria specified
by the Committee.
2.32 "PLAN" means the Kensey Nash Corporation Employee Incentive
Compensation Plan, as herein set forth and as may be amended from time to time.
2.33 "PUBLIC OFFERING" means the initial public offering of shares of
Common Stock under the Securities Act.
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2.34 "REPRESENTATIVE" means (a) the person or entity acting as the executor
or administrator of a Participant's estate pursuant to the last will and
testament of a Participant or pursuant to the laws of the jurisdiction in which
the Participant had the Participant's primary residence at the date of the
Participant's death; (b) the person or entity acting as the guardian or
temporary guardian of a Participant; (c) the person or entity which is the
Beneficiary of the Participant upon or following the Participant's death; or (d)
any person to whom an Option has been permissibly transferred; provided that
only one of the foregoing shall be the Representative at any point in time as
determined under applicable law and recognized by the Committee.
2.35 "RESTRICTED STOCK" means Common Stock granted to a Participant under
Section 8.1 hereof, that is subject to certain restrictions and to a risk of
forfeiture.
2.36 "RETIREMENT" means the Participant's Termination of Employment after
attaining either the normal retirement age or the early retirement age as
defined in the principal (as determined by the Committee) tax-qualified plan of
the Company or an Affiliate, if the Participant is covered by such a plan, or if
the Participant is not covered by such a plan, then age 65, or age 55 with the
accrual of 10 years of service.
2.37 "RULE 16B-3"and "RULE 16A-1(C)(3)" mean Rule 16b-3 and Rule
16a-1(c)(3), as from time to time in effect and applicable to the Plan and
Participants, promulgated by the Securities and Exchange Commission under
Section 16 of the Exchange Act.
2.38 "SECURITIES ACT" means the Securities Act of 1933, as amended, and the
rules and regulations promulgated thereunder.
2.39 "STOCK APPRECIATION RIGHT" means a right granted under Article VII.
2.40 "STOCK OPTION" or "OPTION" means a right, granted to a Participant
under Section 6.1 hereof, to purchase Common Stock or other Awards at a
specified price during specified time periods.
2.41 "TERMINATION OF EMPLOYMENT" means the occurrence of any act or event,
whether pursuant to an employment agreement or otherwise, that actually or
effectively causes or results in the person's ceasing, for whatever reason, to
be an officer, independent contractor, director or employee of the Company or of
any Affiliate, or to be an officer, independent contractor, director or employee
of any entity that provides services to the Company or an Affiliate, including,
without limitation, death, Disability, dismissal, severance at the election of
the Participant, Retirement, or severance as a result of the discontinuance,
liquidation, sale or transfer by the Company or its Affiliates of all businesses
owned or operated by the Company or its Affiliates. With respect to any person
who is not an employee with respect to the Company or an Affiliate of the
Company, the Agreement shall establish what act or event shall constitute a
Termination of Employment for purposes of the Plan. A transfer of employment
from the Company to an Affiliate, or from an Affiliate to the Company, shall not
be a Termination of Employment, unless expressly determined by the Committee. A
Termination of Employment shall occur for an employee who is employed by an
Affiliate of the company if the Affiliate shall cease to be an Affiliate and the
Participant shall not immediately thereafter become an employee of the Company
or an Affiliate of the Company.
In addition, certain other terms used herein have definitions given to them in
the first place in which they are used.
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ARTICLE III
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ADMINISTRATION
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3.1 COMMITTEE STRUCTURE AND AUTHORITY. The Plan shall be administered
by the Committee. A majority of the Committee shall constitute a quorum at any
meeting thereof (including by telephone conference) and the acts of a majority
of the members present, or acts approved in writing by a majority of the entire
Committee without a meeting, shall be the acts of the Committee for purposes of
this Plan. The Committee may authorize any one or more of its members or an
officer of the Company to execute and deliver documents on behalf of the
Committee. A member of the Committee shall not exercise any discretion
respecting himself or herself under the Plan. The Board shall have the authority
to remove, replace or fill any vacancy of any member of the Committee upon
notice to the Committee and the affected member. Any member of the Committee may
resign upon notice to the Board. The Committee may allocate among one or more of
its members, or may delegate to one or more of its agents, such duties and
responsibilities as it determines.
Among other things, the Committee shall have the authority, subject to the terms
of the Plan:
(a) to select those persons to whom Awards may be granted from time
to time;
(b) to determine whether and to what extent Awards or any combination
thereof are to be granted hereunder;
(c) to determine the number of shares of Common Stock to be covered
by each stock-based Award granted hereunder;
(d) to determine the terms and conditions of any Award granted
hereunder (including, but not limited to, the Option Price, the
Option Period, any exercise restriction or limitation and any
exercise acceleration, forfeiture or waiver regarding any Award,
any shares of Common Stock relating thereto, any performance
criteria and the satisfaction of each criteria);
(e) to adjust the terms and conditions, at any time or from time to
time, of any Award, subject to the limitations of Section 13.1;
(f) to determine to what extent and under what circumstances Common
Stock and other amounts payable with respect to an Award shall be
deferred;
(g) to determine under what circumstances an Award may be settled in
cash or Common Stock;
(h) to provide for the forms of Agreements to be utilized in
connection with the Plan;
(i) to determine whether a Participant has a Disability or a
Retirement;
(j) to determine what securities law requirements are applicable to
the Plan, Awards and the issuance of shares of Common Stock under
the Plan and to require of a Participant that appropriate action
be taken with respect to such requirements;
(k) to cancel, with the consent of the Participant or as otherwise
provided in the Plan or an Agreement, outstanding Awards;
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(l) to interpret and make final determinations with respect to the
remaining number of shares of Common Stock available under this
Plan;
(m) to require, as a condition of the exercise of an Award or the
issuance or transfer of a certificate of Common Stock, the
withholding from a Participant of the amount of any Federal,
state or local taxes as may be necessary in order for the Company
or any other employer to obtain a deduction or as may be
otherwise required by law;
(n) to determine whether and with what effect a Participant has
incurred a Termination of Employment;
(o) to determine whether the Company or any other person has a right
or obligation to purchase Common Stock from a Participant and, if
so, the terms and conditions on which such Common Stock is to be
purchased;
(p) to determine the restrictions or limitations on the transfer of
Common Stock;
(q) to determine whether an Award is to be adjusted, modified or
purchased, or is to become fully exercisable, under the Plan or
the terms of an Agreement;
(r) to determine the permissible methods of Award exercise and
payment, including cashless exercise arrangements;
(s) to adopt, amend and rescind such rules and regulations as, in its
opinion, may be advisable in the administration of the Plan; and
(t) to appoint and compensate agents, counsel, auditors or other
specialists to aid it in the discharge of its duties.
The Committee shall have the authority to adopt, alter and repeal such
administrative rules, guidelines and practices governing the Plan as it shall,
from time to time, deem advisable, to interpret the terms and provisions of the
Plan and any Award issued under the Plan (and any Agreement) and to otherwise
supervise the administration of the Plan. The Committee's policies and
procedures may differ with respect to Awards granted at different times or to
different Participants.
Any determination made by the Committee pursuant to the provisions of
the Plan shall be made in its sole discretion, and in the case of any
determination relating to an Award, may be made at the time of the grant of the
Award or, unless in contravention of any express term of the Plan or an
Agreement, at any time thereafter. All decisions made by the Committee pursuant
to the provisions of the Plan shall be final and binding on all persons,
including the Company and Participants. No determination shall be subject to de
novo review if challenged in court.
ARTICLE IV
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STOCK SUBJECT TO PLAN
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4.1 NUMBER OF SHARES. Subject to the adjustment under Section 4.6, the
total number of shares of Common Stock reserved and available for distribution
pursuant to Awards under the Plan shall be 4,050,000 shares of Common Stock
authorized for issuance on the Effective Date. Such shares may consist, in whole
or in part, of authorized and unissued shares or treasury shares.
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4.2 RELEASE OF SHARES. Subject to Section 7.3(f), if any shares of Common
Stock that are subject to any Award cease to be subject to an Award or are
forfeited, if any Award otherwise terminates without issuance of shares of
Common Stock being made to the Participant, or if any shares (whether or not
restricted) of Common Stock are received by the Company in connection with the
exercise of an Award, including the satisfaction of any tax withholding
obligation, such shares, in the discretion of the Committee, may again be
available for distribution in connection with Awards under the Plan.
4.3 RESTRICTIONS ON SHARES. Shares of Common Stock issued as or in
conjunction with an Award shall be subject to the terms and conditions specified
herein and to such other terms, conditions and restrictions as the Committee in
its discretion may determine or provide in an Award Agreement. The Company shall
not be required to issue or deliver any certificates for shares of Common Stock,
cash or other property prior to (i) the listing of such shares on any stock
exchange or NASDAQ (or other public market) on which the Common Stock may then
be listed (or regularly traded), (ii) the completion of any registration or
qualification of such shares under Federal or state law, or any ruling or
regulation of any government body which the Committee determines to be necessary
or advisable, and (iii) the satisfaction of any applicable withholding
obligation in order for the Company or an Affiliate to obtain a deduction with
respect to the exercise of an Award. The Company may cause any certificate for
any share of Common Stock to be delivered to be properly marked with a legend or
other notation reflecting the limitations on transfer of such Common Stock as
provided in this Plan or as the Committee may otherwise require. The Committee
may require any person exercising an Award to make such representations and
furnish such information as it may consider appropriate in connection with the
issuance or delivery of the shares of Common Stock in compliance with applicable
law or otherwise. Fractional shares shall not be delivered, but shall be rounded
to the next lower whole number of shares.
4.4 STOCKHOLDER RIGHTS. No person shall have any rights of a stockholder as
to shares of Common Stock subject to an Award until, after proper exercise of
the Award or other action required, such shares shall have been recorded on the
Company's official stockholder records as having been issued or transferred.
Upon exercise of the Award or any portion thereof, the Company will have thirty
(30) days in which to issue the shares, and the Participant will not be treated
as a stockholder for any purpose whatsoever prior to such issuance. No
adjustment shall be made for cash dividends or other rights for which the record
date is prior to the date such shares are recorded as issued or transferred in
the Company's official stockholder records, except as provided herein or in an
Agreement.
4.5 BEST EFFORTS TO REGISTER. If there has been a Public Offering, the
Company will register under the Securities Act the Common Stock delivered or
deliverable pursuant to Awards on Commission Form S-8 if available to the
Company for this purpose (or any successor or alternate form that is
substantially similar to that form to the extent available to effect such
registration), in accordance with the rules and regulations governing such
forms, as soon after stockholder approval of the Plan as the Committee, in its
sole discretion, shall deem such registration appropriate. The Company will use
its best efforts to cause the registration statement to become effective and
will file such supplements and amendments to the registration statement as may
be necessary to keep the registration statement in effect until the earliest of
(a) one year following the expiration of the Option Period of the last Option
outstanding, (b) the date the Company is no longer a reporting company under the
Exchange Act and (c) the date all Participants have disposed of all shares
delivered pursuant to any Award. The Company may delay the foregoing obligation
if the Committee reasonably determines that any such registration would
materially and adversely affect the Company's interests or if there is no
material benefit to Participants.
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4.6 ADJUSTMENTS. In the event of any Company stock dividend, stock split,
combination or exchange of shares, recapitalization or other change in the
capital structure of the Company, corporate separation or division of the
Company (including, but not limited to, a split-up, spin-off, split-off or
distribution to Company stockholders other than a normal cash dividend), sale by
the Company of all or a substantial portion of its assets (measured on either a
stand-alone or consolidated basis), reorganization, rights offering, a partial
or complete liquidation, or any other corporate transaction, Company stock
offering or event involving the Company and having an effect similar to any of
the foregoing, then the Committee shall adjust or substitute, as the case may
be, the number of shares of Common Stock available for Awards under the Plan,
the number of shares of Common Stock covered by outstanding Awards, the exercise
price per share of outstanding Awards, and performance conditions and any other
characteristics or terms of the Awards as the Committee shall deem necessary or
appropriate to reflect equitably the effects of such changes to the
Participants; provided, however, that the Committee may limit any such
adjustment so as to maintain the deductibility of the Awards under Section
162(m) and that any fractional shares resulting from such adjustment shall be
eliminated by rounding to the next lower whole number of shares with appropriate
payment for such fractional shares as shall reasonably be determined by the
Committee.
ARTICLE V
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ELIGIBILITY
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5.1 ELIGIBILITY. Except as herein provided, the persons who shall be
eligible to participate in the Plan and be granted Awards shall be those persons
who are directors, officers, employees and consultants of the Company or any
subsidiary of the Company, who shall be in a position, in the opinion of the
Committee, to make contributions to the growth, management, protection and
success of the Company and its subsidiaries. Of those persons described in the
preceding sentence, the Committee may, from time to time, select persons to be
granted Awards and shall determine the terms and conditions with respect
thereto. In making any such selection and in determining the form of the Award,
the Committee may give consideration to the person's functions and
responsibilities, the person's contributions to the Company and its
subsidiaries, the value of the individual's service to the Company and its
subsidiaries and such other factors deemed relevant by the Committee. The
Committee may designate in writing that any person who is not eligible to
participate in the Plan if such person would otherwise be eligible to
participate in this Plan (and members of the Committee are expressly excluded
from participation in the Plan).
ARTICLE VI
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STOCK OPTIONS
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6.1 GENERAL. The Committee shall have authority to grant Stock Options
under the Plan at any time or from time to time. Stock Options may be granted
alone or in addition to other Awards and may be either Incentive Stock Options
or Nonqualified Stock Options. A Stock Option shall entitle the Participant to
receive shares of Common Stock upon exercise of such Option, subject to the
Participant's satisfaction in full of any conditions, restrictions or
limitations imposed in accordance with the Plan or an Agreement (the terms and
provisions of which may differ from other Agreements), including, without
limitation, payment of the Option Price. During any three-calendar year period,
Options for no more than 1,000,000 shares of Common Stock shall be granted to
any Participant.
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6.2 GRANT AND EXERCISE. The grant of a Stock Option shall occur as of the
date the Committee determines. Each Option granted under this Plan shall be
evidenced by an Agreement, in a form approved by the Committee, which shall
embody the terms and conditions of such Option and which shall be subject to the
express terms and conditions set forth in the Plan. Such Agreement shall become
effective upon execution by the Participant. Only a person who is a common-law
employee of the Company, any parent corporation of the Company or a subsidiary
(as such terms are defined in Section 424 of the Code) on the date of grant
shall be eligible to be granted an Option which is intended to be and is an
Incentive Stock Option. To the extent that any Stock Option is not designated as
an Incentive Stock Option or even if so designated does not qualify as an
Incentive Stock Option, it shall constitute a Nonqualified Stock Option.
Anything in the Plan to the contrary notwithstanding, no term of the Plan
relating to Incentive Stock Options shall be interpreted, amended or altered,
nor shall any discretion or authority granted under the Plan be exercised, so as
to disqualify the Plan under Section 422 of the Code or, without the consent of
the Participant affected, to disqualify any Incentive Stock Option under such
Section 422.
6.3 TERMS AND CONDITIONS. Stock Options shall be subject to such terms and
conditions as shall be determined by the Committee, including the following:
(a) OPTION PERIOD. The Option Period of each Stock Option shall be
fixed by the Committee; provided that no Stock Option shall be
exercisable more than ten (10) years after the date the Stock
Option is granted. In the case of an Incentive Stock Option
granted to an individual who owns more than ten percent (10%) of
the combined voting power of all classes of stock of the Company,
a corporation which is a parent corporation of the Company or any
subsidiary of the Company (each as defined in Section 424 of the
Code), the Option Period shall not exceed five (5) years from the
date of grant. No Option which is intended to be an Incentive
Stock Option shall be granted more than ten (10) years from the
date the Plan is adopted by the Company or the date the Plan is
approved by the stockholders of the Company, whichever is
earlier.
(b) OPTION PRICE. The Option Price per share of the Common Stock
purchasable under a Stock Option shall be determined by the
Committee; provided, however, that the Option Price per share
shall be not less than the Fair Market Value per share on the
date the Option is granted. If such Option is intended to qualify
as an Incentive Stock Option and is granted to an individual who
owns or who is deemed to own stock possessing more than ten
percent (10%) of the combined voting power of all classes of
stock of the Company, a corporation which is a parent corporation
of the Company or any subsidiary of the Company (each as defined
in Section 424 of the Code), the Option Price per share shall not
be less than one hundred ten percent (110%) of such Fair Market
Value per share.
(c) EXERCISABILITY. Subject to Section 12.1, Stock Options shall be
exercisable at such time or times and subject to such terms and
conditions as shall be determined by the Committee. If the
Committee provides that any Stock Option is exercisable only in
installments, the Committee may at any time waive such
installment exercise provisions, in whole or in part. In
addition, the Committee may at any time accelerate the
exercisability of any Stock Option. If the Committee intends that
an Option be an Incentive Stock Option, the Committee may, in its
discretion, provide that the aggregate Fair Market Value
(determined at the Grant Date) of the Common Stock as to which
such Incentive Stock Option which is exercisable for the first
time during any calendar year shall not exceed $100,000.
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(d) METHOD OF EXERCISE. Subject to the provisions of this Article VI,
a Participant may exercise Stock Options, in whole or in part, at
any time during the Option Period by the Participant's giving
written notice of exercise on a form provided by the Committee
(if available) to the Company specifying the number of shares of
Common Stock subject to the Stock Option to be purchased. Such
notice shall be accompanied by payment in full of the purchase
price by cash or check or such other form of payment as the
Company may accept. If approved by the Committee, payment in full
or in part may also be made (i) by delivering Common Stock
already owned by the Participant for a period of at least six (6)
months prior to such payment and having a total Fair Market Value
on the date of such delivery equal to the Option Price; (ii) by
the execution and delivery of a full recourse promissory note or
other full recourse evidence of indebtedness (and any security
agreement thereunder) satisfactory to the Committee and permitted
in accordance with Section 6.3(e); (iii) by authorizing the
Company to retain shares of Common Stock already owned by the
Participant for a period of at least six (6) months prior to such
payment and which would otherwise be issuable upon exercise of
the Option having a total Fair Market Value on the date of
delivery equal to the Option Price; (iv) by the delivery of cash
or the extension of credit by a broker-dealer to whom the
Participant has submitted a notice of exercise or otherwise
indicated an intent to exercise an Option (in accordance with
Part 220, Chapter II, Title 12 of the Code of Federal
Regulations, so-called "cashless" exercise); or (v) by any
combination of the foregoing. If payment of the Option Price of a
Nonqualified Stock Option is made in whole or in part in the form
of Restricted Stock or Deferred Stock, the number of shares of
Common Stock to be received upon such exercise that is equal to
the number of shares of Restricted Stock or Deferred Stock used
for payment of the Option Price shall be subject to the same
forfeiture restrictions or deferral limitations to which such
Restricted Stock or Deferred Stock was subject, unless otherwise
determined by the Committee. In the case of an Incentive Stock
Option, the right to make a payment in the form of already owned
shares of Common Stock of the same class as the Common Stock
subject to the Stock Option may be authorized only at the time
the Stock Option is granted. No shares of Common Stock shall be
issued until full payment therefor, as determined by the
Committee, has been made. Subject to any forfeiture restrictions
or deferral limitations that may apply if a Stock Option is
exercised using Restricted Stock or Deferred Stock, a Participant
shall have all of the rights of a stockholder of the Company
holding the class of Common Stock that is subject to such Stock
Option (including, if applicable, the right to vote the shares
and the right to receive dividends), when the Participant has
given written notice of exercise, has paid in full for such
shares and such shares have been recorded on the Company's
official stockholder records as having been issued or
transferred.
(e) COMPANY LOAN OR GUARANTEE. Upon the exercise of any Option and
subject to the pertinent Agreement and the discretion of the
Committee, the Company may, at the request of the Participant:
(i) lend to the Participant, on a full recourse basis, an amount
equal to such portion of the Option Price as the Committee may
determine; or
(ii) guarantee a loan obtained by the Participant on a full
recourse basis from a third-party for the purpose of tendering the
Option Price.
11
The remaining terms and conditions of any loan or guarantee, including the
interest rate and any security interest thereunder, shall be determined by
the Committee, except that (1) the term of any loan may not exceed
twenty-four (24) months and (2) no extension of credit or guarantee shall
obligate the Company for an amount to exceed the lesser of the aggregate
Fair Market Value per share of the Common Stock on the date of exercise,
less the par value of the shares of Common Stock to be purchased upon the
exercise of the Award, or the amount permitted under applicable laws or the
regulations and rules of the Federal Reserve Board and any other
governmental agency having jurisdiction.
(f) NON-TRANSFERABILITY OF OPTIONS. Except as provided herein or in
an Agreement, no Stock Option or interest therein shall be
transferable by the Participant other than by will or by the laws
of descent and distribution, and all Stock Options shall be
exercisable during the Participant's lifetime only by the
Participant. If and to the extent transferability is permitted by
Rule 16b-3 or does not result in liability to any Participant and
except as otherwise provided by an Agreement, every Option
granted hereunder shall be freely transferable, but only if such
transfer is consistent with the use of Form S-8 (or the
Committee's waiver of such condition) and consistent with an
Award's intended status as an Incentive Stock Option (as
applicable).
6.4 TERMINATION BY REASON OF DEATH. Unless otherwise provided in an
Agreement or determined by the Committee, if a Participant incurs a Termination
of Employment due to death, any unexpired and unexercised Stock Option held by
such Participant shall thereafter be fully exercisable for a period of ninety
(90) days following the date of the appointment of a Representative (or such
other period or no period as the Committee may specify) or until the expiration
of the Option Period, whichever period is the shorter.
6.5 TERMINATION BY REASON OF DISABILITY. Unless otherwise provided in an
Agreement or determined by the Committee, if a Participant incurs a Termination
of Employment due to a Disability, any unexpired and unexercised Stock Option
held by such Participant shall thereafter be fully exercisable by the
Participant for the one (1) year period (or such other period or no period as
the Committee may specify) immediately following the date of such Termination of
Employment or until the expiration of the Option Period, whichever period is
shorter, and the Participant's death at any time following such Termination of
Employment due to Disability shall not affect the foregoing. In the event of
Termination of Employment by reason of Disability, if an Incentive Stock Option
is exercised after the expiration of the exercise periods that apply for
purposes of Section 422 of the Code, such Stock Option will thereafter be
treated as a Nonqualified Stock Option.
6.6 OTHER TERMINATION. Unless otherwise provided in an Agreement or
determined by the Committee, if a Participant incurs a Termination of Employment
which is a Retirement, or the Termination of Employment is involuntary on the
part of the Participant (but is not due to death or Disability or with Cause),
any Stock Option held by such Participant shall thereupon terminate, except that
such Stock Option, to the extent then exercisable, may be exercised for the
lesser of the ninety (90) day period commencing with the date of such
Termination of Employment or until the expiration of the Option Period. If the
Participant incurs a Termination of Employment which is either (a) voluntary on
the part of the Participant (and is not a Retirement) or (b) with Cause, the
Option shall terminate immediately. The death or Disability of a Participant
after a Termination of Employment otherwise provided herein shall not extend the
time permitted to exercise an Option.
12
ARTICLE VII
-----------
STOCK APPRECIATION RIGHTS
-------------------------
7.1 GENERAL. The Committee shall have authority to grant Stock Appreciation
Rights under the Plan at any time or from time to time. Subject to the
Participant's satisfaction in full of any conditions, restrictions or
limitations imposed in accordance with the Plan or an Agreement, a Stock
Appreciation Right shall entitle the Participant to surrender to the Company the
Stock Appreciation Right and to be paid therefor in shares of the Common Stock,
cash or a combination thereof as herein provided, the amount described in
Section 7.3(b).
7.2 GRANT. Stock Appreciation Rights may be granted in conjunction with all
or part of any Stock Option granted under the Plan, in which case the exercise
of the Stock Appreciation Right shall require the cancellation of a
corresponding portion of the Stock Option, and the exercise of a Stock Option
shall result in the cancellation of a corresponding portion of the Stock
Appreciation Right. In the case of a Nonqualified Stock Option, such rights may
be granted either at or after the time of grant of such Stock Option. In the
case of an Incentive Stock Option, such rights may be granted only at the time
of grant of such Stock Option. A Stock Appreciation Right may also be granted on
a stand-alone basis. The grant of a Stock Appreciation Right shall occur as of
the date the Committee determines. Each Stock Appreciation Right granted under
this Plan shall be evidenced by an Agreement, which shall embody the terms and
conditions of such Stock Appreciation Right and which shall be subject to the
terms and conditions set forth in this Plan. During any three-calendar year
period, Stock Appreciation Rights covering no more than 1,000,000 shares of
Common Stock shall be granted to any Participant.
7.3 TERMS AND CONDITIONS. Stock Appreciation Rights shall be subject to
such terms and conditions as shall be determined by the Committee, including the
following:
(a) PERIOD AND EXERCISE. The term of a Stock Appreciation Right shall be
established by the Committee. If granted in conjunction with a Stock
Option, the Stock Appreciation Right shall have a term which is the
same as the Option Period and shall be exercisable only at such time
or times and to the extent the related Stock Options would be
exercisable in accordance with the provisions of Article VI. A Stock
Appreciation Right which is granted on a stand-alone basis shall be
for such period and shall be exercisable at such times and to the
extent provided in an Agreement. Stock Appreciation Rights shall be
exercised by the Participant's giving written notice of exercise on a
form provided by the Committee (if available) to the Company
specifying the portion of the Stock Appreciation Right to be
exercised.
(b) AMOUNT. Upon the exercise of a Stock Appreciation Right granted in
conjunction with a Stock Option, a Participant shall be entitled to
receive an amount in cash, shares of Common Stock or both as
determined by the Committee or as otherwise permitted in an Agreement
equal in value to the excess of the Fair Market Value per share of
Common Stock over the Option Price per share of Common Stock specified
in the related Agreement multiplied by the number of shares in respect
of which the Stock Appreciation Right is exercised. In the case of a
Stock Appreciation Right granted on a stand-alone basis, the Agreement
shall specify the value to be used in lieu of the Option Price per
share of Common Stock. The aggregate Fair Market Value per share of
the Common Stock shall be determined as of the date of exercise of
such Stock Appreciation Right.
(c) SPECIAL RULES. In the case of Stock Appreciation Rights relating to
Stock Options held by Participants who are actually or potentially
subject to Section 16(b) of the Exchange Act:
13
(i) The Committee may require that such Stock Appreciation Rights be
exercised only in accordance with the applicable "window period"
provisions of Rule 16b-3;
(ii) The Committee may provide that the amount to be paid upon
exercise of such Stock Appreciation Rights (other than those relating
to Incentive Stock Options) during a Rule 16b-3 "window period" shall
be based on the highest mean sales price of the Common Stock on the
principal exchange on which the Common Stock is traded, NASDAQ or
other relevant market for determining value on any day during such
"window period"; and
(iii) No Stock Appreciation Right shall be exercisable during the
first six (6) months of its term, except that this limitation shall
not apply in the event of death or Disability of the Participant prior
to the expiration of the six (6)-month period.
(d) NON-TRANSFERABILITY OF STOCK APPRECIATION RIGHTS. Stock Appreciation
Rights shall be transferable only when and to the extent that a Stock
Option would be transferable under the Plan unless otherwise provided
in an Agreement.
(e) TERMINATION. A Stock Appreciation Right shall terminate at such time
as a Stock Option would terminate under the Plan, unless otherwise
provided in an Agreement.
(f) EFFECT ON SHARES UNDER THE PLAN. To the extent required by Rule 16b-3,
upon the exercise of a Stock Appreciation Right, the Stock Option or
part thereof to which such Stock Appreciation Right is related shall
be deemed to have been exercised for the purpose of the limitation set
forth in Section 4.2 on the number of shares of Common Stock to be
issued under the Plan, but only to the extent of the number of shares
of Common Stock covered by the Stock Appreciation Right at the time of
exercise based on the value of the Stock Appreciation Right at such
time.
(g) INCENTIVE STOCK OPTION. A Stock Appreciation Right granted in tandem
with an Incentive Stock Option shall not be exercisable unless the
Fair Market Value of the Common Stock on the date of exercise exceeds
the Option Price. In no event shall any amount paid pursuant to the
Stock Appreciation Right exceed the difference between the Fair Market
Value on the date of exercise and the Option Price.
ARTICLE VIII
------------
RESTRICTED STOCK
----------------
8.1 GENERAL. The Committee shall have authority to grant Restricted Stock
under the Plan at any time or from time to time. Shares of Restricted Stock may
be awarded either alone or in addition to other Awards granted under the Plan.
The Committee shall determine the persons to whom and the time or times at which
grants of Restricted Stock will be awarded, the number of shares of Restricted
Stock to be awarded to any Participant, the time or times within which such
Awards may be subject to forfeiture and any other terms and conditions of the
Awards. Each Award shall be confirmed by, and be subject to the terms of, an
Agreement. The Committee may condition the grant of Restricted Stock upon the
attainment of specified performance goals by the Participant or by the Company
or an Affiliate (including a division or department of the Company or an
Affiliate) for or within which the Participant is primarily employed or upon
such other factors or criteria (such as length of tenure) as the Committee shall
determine. The provisions of Restricted Stock Awards need not be the same with
respect to any Participant.
14
8.2 AWARDS AND CERTIFICATES. Notwithstanding the limitations on issuance of
shares of Common Stock otherwise provided in the Plan, each Participant
receiving an Award of Restricted Stock shall be issued a certificate in respect
of such shares of Restricted Stock. Such certificate shall be registered in the
name of such Participant and shall bear an appropriate legend referring to the
terms, conditions, and restrictions applicable to such Award as determined by
the Committee. The Committee may require that the certificates evidencing such
shares be held in custody by the Company until the restrictions thereon shall
have lapsed and that, as a condition of any Award of Restricted Stock, the
Participant shall have delivered a stock power, endorsed in blank, relating to
the Common Stock covered by such Award.
8.3 TERMS AND CONDITIONS. Shares of Restricted Stock shall be subject to
the following terms and conditions:
(a) LIMITATIONS ON TRANSFERABILITY. Subject to the provisions of the Plan
and the Agreement, during a period set by the Committee commencing
with the date of such Award (the "Restriction Period"), the
Participant shall not be permitted to sell, assign, transfer, pledge
or otherwise encumber any interest in shares of Restricted Stock.
(b) RIGHTS. Except as provided in Section 8.3(a), the Participant shall
have, with respect to the shares of Restricted Stock, all of the
rights of a stockholder of the Company holding the class of Common
Stock that is the subject of the Restricted Stock, including, if
applicable, the right to vote the shares and the right to receive any
cash dividends. Unless otherwise determined by the Committee and
subject to the Plan, cash dividends on the class of Common Stock that
is the subject of the Restricted Stock shall be automatically deferred
and reinvested in additional Restricted Stock, and dividends on the
class of Common Stock that is the subject of the Restricted Stock
payable in Common Stock shall be paid in the form of Restricted Stock
of the same class as the Common Stock on which such dividend was paid.
(c) ACCELERATION. Based on service, performance by the Participant or by
the Company or an Affiliate, including any division or department for
which the Participant is employed, or such other factors or criteria
as the Committee may determine, the Committee may provide for the
lapse of restrictions in installments and may accelerate the vesting
of all or any part of any Award and waive the restrictions for all or
any part of such Award.
(d) FORFEITURE. Unless otherwise provided in an Agreement or determined by
the Committee, if the Participant incurs a Termination of Employment
during the Restriction Period due to death or Disability, the
restrictions shall lapse and the Participant shall be fully vested in
the Restricted Stock. Except to the extent otherwise provided in the
applicable Agreement and the Plan, upon a Participant's Termination of
Employment for any reason during the Restriction Period other than
death or Disability, all shares of Restricted Stock still subject to
restriction shall be forfeited by the Participant, except the
Committee shall have the discretion to waive in whole or in part any
or all remaining restrictions with respect to any or all of such
Participant's shares of Restricted Stock.
15
(e) DELIVERY. If and when the Restriction Period expires without a prior
forfeiture of the Restricted Stock subject to such Restriction Period,
unlegended certificates for such shares shall be delivered to the
Participant.
(f) ELECTION. A Participant may elect to further defer receipt of the
Restricted Stock for a specified period or until a specified event,
subject in each case to the Committee's approval and to such terms as
are determined by the Committee. Subject to any exceptions adopted by
the Committee, such election must be made one (1) year prior to
completion of the Restriction Period.
ARTICLE IX
----------
DEFERRED STOCK
--------------
9.1 GENERAL. The Committee shall have authority to grant Deferred Stock
under the Plan at any time or from time to time. Shares of Deferred Stock may be
awarded either alone or in addition to other Awards granted under the Plan. The
Committee shall determine the persons to whom and the time or times at which
Deferred Stock will be awarded, the number of shares of Deferred Stock to be
awarded to any Participant, the duration of the period (the "Deferral Period")
prior to which the Common Stock will be delivered, and the conditions under
which receipt of the Common Stock will be deferred and any other terms and
conditions of the Awards. Each Award shall be confirmed by, and be subject to
the terms of, an Agreement. The Committee may condition the grant of Deferred
Stock upon the attainment of specified performance goals by the Participant or
by the Company or an Affiliate, including a division or department of the
Company or an Affiliate for or within which the Participant is primarily
employed, or upon such other factors or criteria as the Committee shall
determine. The provisions of Deferred Stock Awards need not be the same with
respect to any Participant.
9.2 TERMS AND CONDITIONS. Deferred Stock Awards shall be subject to the
following terms and conditions:
(a) LIMITATIONS ON TRANSFERABILITY. Subject to the provisions of the Plan
and an Agreement, Deferred Stock Awards, or any interest therein, may
not be sold, assigned, transferred, pledged or otherwise encumbered
during the Deferral Period. At the expiration of the Deferral Period
(or Elective Deferral Period as defined in Section 9.2(e), where
applicable), the Committee may elect to deliver Common Stock, cash
equal to the Fair Market Value of such Common Stock or a combination
of cash and Common Stock to the Participant for the shares covered by
the Deferred Stock Award.
(b) RIGHTS. Unless otherwise determined by the Committee and subject to
the Plan, cash dividends on the Common Stock that is the subject of
the Deferred Stock Award shall be automatically deferred and
reinvested in additional Deferred Stock, and dividends on the Common
Stock that is the subject of the Deferred Stock Award payable in
Common Stock shall be paid in the form of Deferred Stock of the same
class as the Common Stock on which such dividend was paid.
(c) ACCELERATION. Based on service, performance by the Participant or by
the Company or the Affiliate, including any division or department for
which the Participant is employed, or such other factors or criteria
as the Committee may determine, the Committee may provide for the
lapse of deferral limitations in installments and may accelerate the
vesting of all or any part of any Award and waive the deferral
limitations for all or any part of such Award.
16
(d) FORFEITURE. Unless otherwise provided in an Agreement or determined by
the Committee, if the Participant incurs a Termination of Employment
during the Deferral Period due to death or Disability, the
restrictions shall lapse and the Participant shall be fully vested in
the Deferred Stock. Unless otherwise provided in an Agreement or
determined by the Committee, upon a Participant's Termination of
Employment for any reason during the Deferral Period other than death
or Disability, the rights to the shares still covered by the Award
shall be forfeited by the Participant, except the Committee shall have
the discretion to waive in whole or in part any or all remaining
deferral limitations with respect to any or all of such Participant's
Deferred Stock.
(e) ELECTION. A Participant may elect further to defer receipt of the
Deferred Stock payable under an Award (or an installment of an Award)
for a specified period or until a specified event, subject in each
case to the Committee's approval and to such terms as are determined
by the Committee. Subject to any exceptions adopted by the Committee,
such election must be made at least one (1) year prior to completion
of the Deferral Period for the Award (or of the applicable installment
thereof).
ARTICLE X
---------
OTHER AWARDS
------------
10.1 BONUS STOCK AND AWARDS IN LIEU OF OBLIGATIONS. The Committee is
authorized to grant Common Stock as a bonus, or to grant Common Stock or other
Awards in lieu of Company obligations to pay cash or deliver other property
under other plans or compensatory arrangements, provided that, in the case of
Participants subject to Section 16 of the Exchange Act, the amount of such
grants remains within the discretion of the Committee to the extent necessary to
ensure that acquisition of Common Stock or other Awards are exempt from
liability under Section 16(b) of the Exchange Act. Common Stock or Awards
granted hereunder shall be subject to such other terms as shall be determined by
the Committee.
10.2 DIVIDEND EQUIVALENTS. The Committee is authorized to grant Dividend
Equivalents to a Participant, entitling the Participant to receive cash, Common
Stock, other Awards, or other property equal in value to dividends paid with
respect to a specified number of shares of Common Stock. Dividend Equivalents
may be awarded on a free-standing basis or in connection with another Award. The
Committee may provide that Dividend Equivalents will be paid or distributed when
accrued or will be deemed to have been reinvested in additional Common Stock,
Awards, or other investment vehicles, and subject to such restrictions on
transferability and risks of forfeiture, as the Committee may specify.
10.3 OTHER STOCK-BASED AWARDS. The Committee is authorized, subject to
limitations under applicable law, to grant to Participants such other Awards
that may be denominated or payable in, valued in whole or in part by reference
to, or otherwise based on, or related to, Common Stock, as deemed by the
Committee to be consistent with the purposes of the Plan, including, without
limitation, convertible or exchangeable debt securities, other rights
convertible or exchangeable into Common Stock, purchase rights for Common Stock,
Awards with value and payment contingent upon performance of the Company or any
other factors designated by the Committee, and Awards valued by reference to the
book value of Common Stock or the value of securities of or the performance of
specified subsidiaries. The Committee shall determine the terms and conditions
of such Awards. Common Stock delivered pursuant to an Award in the nature of a
purchase right granted under this Section 10.3 shall be purchased for such
consideration, paid for at such times, by such methods, and in such forms,
including, without limitation, cash, Common Stock, other Awards, or other
property, as the Committee shall determine. Cash awards, as an element of or
supplement to any other Award under the Plan, may also be granted pursuant to
this Section 10.3.
17
10.4 PERFORMANCE AWARDS.
(a) PERFORMANCE CONDITIONS. The right of a Participant to exercise or
receive a grant or settlement of any Award, and its timing, may be
subject to performance conditions specified by the Committee. The
Committee may use business criteria and other measures of performance
it deems appropriate in establishing any performance conditions, and
may exercise its discretion to reduce or increase the amounts payable
under any Award subject to performance conditions, except as limited
under Sections 10.4(b) and 10.4(c) hereof in the case of a Performance
Award intended to qualify under Code Section 162(m).
(b) PERFORMANCE AWARDS GRANTED TO DESIGNATED COVERED EMPLOYEES. If the
Committee determines that a Performance Award to be granted to a
person the Committee regards as likely to be a Covered Employee should
qualify as "performance-based compensation" for purposes of Code
Section 162(m), the grant and/or settlement of such Performance Award
shall be contingent upon achievement of preestablished performance
goals and other terms set forth in this Section 10.4(b).
(i) PERFORMANCE GOALS GENERALLY. The performance goals for such
Performance Awards shall consist of one or more business criteria and
a targeted level or levels of performance with respect to such
criteria, as specified by the Committee consistent with this Section
10.4(b). Performance goals shall be objective and shall otherwise meet
the requirements of Code Section 162(m), including the requirement
that the level or levels of performance targeted by the Committee
result in the performance goals being "substantially uncertain." The
Committee may determine that more than one performance goal must be
achieved as a condition to settlement of such Performance Awards.
Performance goals may differ for Performance Awards granted to any one
Participant or to different Participants.
(ii) BUSINESS CRITERIA. One or more of the following business criteria
for the Company, on a consolidated basis, and/or for specified
subsidiaries or business units of the Company (except with respect to
the total stockholder return and earnings per share criteria), shall
be used exclusively by the Committee in establishing performance goals
for such Performance Awards: (1) total stockholder return; (2) such
total stockholder return as compared to total return (on a comparable
basis) of a publicly available index such as, but not limited to, the
Standard & Poor's 500 or the Nasdaq-U.S. Index; (3) net income; (4)
pre-tax earnings; (5) EBITDA or earnings before interest expense,
taxes, depreciation and amortization; or (6) pre-tax operating
earnings after interest expense and before bonuses, service fees, and
extraordinary or special items; (7) operating margin; (8) earnings per
share; (9) return on equity; (10) return on capital; (11) return on
investment; (12) operating income before payment of executive bonuses;
and (13) working capital. The foregoing business criteria shall also
be exclusively used in establishing performance goals for Cash
Incentive Awards granted under Section 10.4(c) hereof.
18
(iii) PERFORMANCE PERIOD: TIMING FOR ESTABLISHING PERFORMANCE GOALS.
Achievement of performance goals in respect of such Performance Awards
shall be measured over such periods as may be specified by the
Committee. Performance goals shall be established on or before the
dates that are required or permitted for "performance-based
compensation" under Code Section 162(m).
(iv) SETTLEMENT OF PERFORMANCE AWARDS; OTHER TERMS. Settlement of
Performance Awards may be in cash or Common Stock, or other Awards, or
other property, in the discretion of the Committee. The Committee may,
in its discretion, reduce the amount of a settlement otherwise to be
made in connection with such Performance Awards, but may not exercise
discretion to increase any such amount payable in respect of a
Performance Award subject to this Section 10.4(b). The Committee shall
specify the circumstances in which such Performance Awards shall be
forfeited or paid in the event of a Termination of Employment or a
Change in Control prior to the end of a performance period or
settlement of Performance Awards, and other terms relating to such
Performance Awards.
(c) CASH INCENTIVE AWARDS GRANTED TO DESIGNATED COVERED EMPLOYEES. The
Committee may grant Cash Incentive Awards to Participants including
those designated by the Committee as likely to be Covered Employees,
which Awards shall represent a conditional right to receive a payment
in cash, unless otherwise determined by the Committee, after the end
of a specified calendar year or calendar quarter or other period
specified by the Committee, in accordance with this Section 10.6(c).
(i) CASH INCENTIVE AWARD. The Cash Incentive Award for Participants
that the Committee regards as likely to be regarded as Covered
Employees shall be based on achievement of a performance goal or goals
based on one or more of the business criteria set forth in Section
10.4(b), and may be based on such criteria for any other Participant.
The Committee may specify the amount of the individual Cash Incentive
Award as a percentage of any such business criteria, a percentage
thereof in excess of a threshold amount, or another amount which need
not bear a strictly mathematical relationship to such relationship
criteria. The Committee may establish an Cash Incentive Award pool
that includes Participants the Committee regards likely to be regarded
as Covered Employees, which shall be an unfunded pool, for purposes of
measuring Company performance in connection with Cash Incentive
Awards. The amount of the Cash Incentive Award pool shall be based
upon the achievement of a performance goal or goals based on one or
more of the business criteria set forth in Section 10.4(b) hereof in
the given performance period, as specified by the Committee. The
Committee may specify the amount of the Cash Incentive Award pool as a
percentage of any of such business criteria, a percentage thereof in
excess of a threshold amount, or as another amount which need not bear
a strictly mathematical relationship to such business criteria.
(ii) POTENTIAL CASH INCENTIVE AWARDS. Not later than the date required
or permitted for "qualified performance-based compensation" under Code
Section 162(m), the Committee shall determine the Participants who
will potentially receive Cash Incentive Awards for the specified year,
quarter or other period, either as individual Cash Incentive Awards or
out of an Cash Incentive Award pool established by such date and the
amount or method for determining the amount of the individual Cash
Incentive Award or the amount of such Participant's portion of the
Cash Incentive Award pool or the individual Cash Incentive Award.
19
(iii) PAYOUT OF CASH INCENTIVE AWARDS. After the end of the specified
year, quarter or other period, as the case may be, the Committee shall
determine the amount, if any, of potential individual Cash Incentive
Award otherwise payable to a Participant, the Cash Incentive Award
pool and the maximum amount of potential Cash Incentive Award payable
to each Participant in the Cash Incentive Award pool. The Committee
may, in its discretion, determine that the amount payable to any
Participant as a final Cash Incentive Award shall be increased or
reduced from the amount of his or her potential Cash Incentive Award,
including a determination to make no final Award whatsoever, but may
not exercise discretion to increase any such amount in the case of an
Cash Incentive Award intended to qualify under Code Section 162(m).
The Committee shall specify the circumstances in which an Cash
Incentive Award shall be paid or forfeited in the event of Termination
of Employment by the Participant or a Change in Control prior to the
end of the period for measuring performance or the payout of such Cash
Incentive Award, and other terms relating to such Cash Incentive Award
in accordance with the Plan. Upon the completion of the measuring
period and the determination of the right to payment and the amount,
the Committee shall direct the Committee to make payment.
(d) WRITTEN DETERMINATIONS. All determinations by the Committee as to the
establishment of performance goals and the potential Performance
Awards or Cash Incentive Awards related to such performance goals and
as to the achievement of performance goals relating to such Awards,
the amount of any Cash Incentive Award pool and the amount of final
Cash Incentive Awards, shall be made in writing in the case of any
Award intended to qualify under Code Section 162(m). The Committee may
not delegate any responsibility relating to such Performance Awards or
Cash Incentive Awards.
ARTICLE XI
----------
PROVISIONS APPLICABLE TO STOCK ACQUIRED UNDER THE PLAN
------------------------------------------------------
11.1 RIGHT OF FIRST REFUSAL.
(a) GENERAL. Unless provided otherwise in an Agreement, and unless
and until there is a Public Offering, at which time this Section
11.1 shall be ineffective, a Participant may sell shares of
Common Stock acquired pursuant to an Award to any person or
organization, other than the Company, an Affiliate or an employee
benefit plan (or related trust) maintained by the Company or an
Affiliate, only after first offering to sell all such shares of
Common Stock to the Company (or, in the event the Company shall
assign its right to purchase such Common Stock, to the person to
whom the Company has assigned its right) as follows.
(b) PURCHASE PRICE AND CONDITIONS. The Participant who desires to
sell shares of Common Stock described in Section 11.1(a) shall
serve written notice upon each of the Company and the Committee,
indicating that the Participant has a bona fide offer for the
purchase of the shares and stating the name and address of the
person desiring to purchase them and the sales price and related
terms of payment, and enclosing photocopies of all written
communications regarding such sale and a statement that the
Participant intends to sell such shares at the offered price and
terms.
20
Said notice shall also contain an offer to sell the Common Stock
to the Company, upon the same terms and conditions as set forth
in the aforesaid bona fide offer of purchase. For a period of
thirty (30) days after the receipt of such notice by the Company,
the Company shall have the option to purchase any or all of the
shares of Common Stock by giving written notice thereof to the
Participant. If the Company (or the person to whom the Company
shall assign its right hereunder) elects to exercise its option
to purchase the shares of Common Stock, the sale shall be
consummated as provided in Section 11.1(d).
(c) CLOSING. The sale of shares of Common Stock to the Company shall
be consummated within fifteen (15) days after the close of the
thirty (30) day period described in Section 11.1(b), unless
another date shall be agreed upon by the Participant and the
Committee, at the principal executive offices of the Company or
such other location as the parties may mutually agree. At the
closing, the Participant shall deliver to the Company stock
certificates duly endorsed for transfer, or accompanied by duly
endorsed stock powers, representing all of the shares of Common
Stock, free and clear of all claims, liens or encumbrances (other
than the restrictions pursuant to this Plan) together with such
other documentation as legal counsel for the Company may
reasonably require. If the Committee shall determine, it may
withhold from payment to the Participant, or require the
Participant to pay, such amount as the Committee may deem
necessary to entitle the Company or an Affiliate to a current
deduction or to comply with withholding requirements.
(d) PURCHASE BY THIRD PARTY. In the event that the Company (or any
person to whom the Company may assign its rights hereunder) shall
not exercise the option to purchase, as provided herein, all of
the shares of Common Stock offered pursuant to Section 11.1(a),
the offer shall be deemed to have been rejected as to any shares
of Common Stock not purchased and the offering Participant shall
have the right to dispose of all, but not less than all, of the
remaining shares of Common Stock offered pursuant to Section
11.1(a) to the person named in the bona fide offer of purchase at
the price and upon the terms and conditions set forth in the
offer and to consummate the resulting transaction at any time
during the thirty (30) days immediately following the expiration
of the offer made to the Company. At or prior to the closing of
such transaction, the transferor and transferee shall execute and
deliver to the Company such documents as the Company reasonably
requests for compliance with state and federal securities laws,
and the transferor shall deliver to the Company such amount of
cash as the Committee may deem necessary or appropriate, or as
may be required for the Company to comply with federal, state or
local income taxes (including withholding) and the Company shall
not be required to deliver the Common Stock until such amount
shall be tendered. In the event such transaction is not
consummated within thirty (30) days following the termination of
the Company's option described herein, the shares of Common Stock
may not be sold without the Participant again complying with the
provisions of this Section. Shares of Common Stock transferred
pursuant to this Section 11.1 and the transferee thereof shall be
subject to all the terms and conditions of this Plan and the
Agreement pursuant to which the Participant acquired the Common
Stock, including, without limitation, any restrictions on
transfer of Common Stock provided in this Section 11.1, and the
transferee shall be considered for all purposes of this Plan, as
the Participant, except Termination of Employment shall mean the
Termination of Employment of the original Participant. Any
transfer of shares of Common Stock made in conflict or derogation
of the terms of this Plan shall be void.
21
11.2 PURCHASE OF STOCK SUBSEQUENT TO A TERMINATION OF EMPLOYMENT.
-----------------------------------------------------------
(a) PRIOR TO PUBLIC OFFERING. Unless provided otherwise in an
Agreement, and unless and until there is a Public Offering, at
which time this Section 11.2 shall be ineffective, if a
Participant incurs a Termination of Employment, the Company, or
such other person as the Committee may designate in writing
(provided such person accepts in writing the obligations
hereunder), shall have the right, but not the obligation, to the
extent it may lawfully do so, for a period of ninety (90)
consecutive days commencing with the date of the Termination of
Employment to purchase from the Participant, and the Participant
shall have the obligation to sell to the Company (or the person
designated by the Committee) if requested by the Company, all of
the Participant's shares of Common Stock acquired pursuant to an
Award (including any shares of Common Stock which could yet be
acquired to the extent exercisable on the date the right is
exercised under this Section 11.2 pursuant to an Option) on the
terms and conditions expressed in this Section 11.2.
(b) PRICE; PAYMENT TERMS.
(i) In the event the Company or the person designated by the
Committee shall have the right to purchase the shares of Common
Stock pursuant to this Section 11.2 upon or following a
Termination of Employment other than for Cause, the purchase
price per share of Common Stock shall be the Fair Market Value
per share of the Common Stock on the date the Company notifies
the Participant it intends to purchase the shares.
(ii) In the event the Company or person designated by the
Committee shall have the right to purchase shares of Common Stock
pursuant to this Section 11.2 upon or following a Termination of
Employment for Cause, the purchase price per share of Common
Stock shall be the lesser of the Fair Market Value per share of
the Common Stock on the date the Company notifies the Participant
it intends to purchase the shares and the price per share for the
Common Stock paid by the Participant upon the exercise of the
Award (i.e., if the Participant paid nothing to exercise the
Award, then nothing shall be paid to the Participant);
(iii) The purchase price for shares of Common Stock transferred
to the Company in accordance with this Section 11.2 shall be
paid, in the sole discretion of the Committee, in a single sum or
in such number of equal annual or monthly installments as the
Committee may determine, but not to exceed a period of five (5)
years from the Closing Date. The first installment of the
purchase price shall be paid by the Company on the last day of
the calendar quarter next following the calendar quarter in which
occurs the exercise of the Company's right to purchase the shares
of Common Stock pursuant to this Section 11.2. Subsequent
installments shall be due on the successive annual or monthly
(whichever the case) anniversary dates of the closing date.
Interest shall accrue from the closing date on the balance of the
purchase price remaining unpaid from time to time at a rate equal
to the minimum "applicable federal rate" required to be stated in
order to avoid the imputation of interest income as determined by
the Committee, and accrued interest shall be payable together
with each installment of the purchase price paid on the annual
anniversary of the closing date, including the last installment
payment. The interest rate will be set as of the closing date and
22
adjusted prospectively thereafter on the first day of each
following calendar quarter. The Company shall be entitled to
prepay all or part of the purchase price without interest,
penalty or premium.
(c) CLOSING. The Participant's Common Stock shall be transferred at a
closing at such place and time as the Committee designates. The
Committee shall give the Participant at least fifteen (15) days
prior written notice of the closing date and place of closing. At
the closing, the Participant shall deliver to the Company stock
certificate(s) duly endorsed for transfer, or accompanied by duly
endorsed stock powers, representing all of the Common Stock
acquired pursuant to an Award free and clear of all claims, liens
or encumbrances of any third parties (other than the restrictions
pursuant to this Plan) together with such other documentation as
the Company's legal counsel may reasonably require. If the
Committee shall determine, it may withhold from payment to the
Participant, or require the Participant to pay, such amount as
the Committee may deem necessary to entitle the Company or an
Affiliate to a current deduction or to comply with withholding
requirements.
(d) MAXIMUM AMOUNT. Notwithstanding any provision herein to the
contrary, subject to the discretion of the Committee, in the
event that during any fiscal year of the Company the aggregate
payments due Participants exceed ten percent (10%) of the
Company's after-tax net earnings (determined in accordance with
generally accepted accounting principles) for the immediately
preceding fiscal year of the Company, such payments shall be
reduced proportionately so that all such payments for the fiscal
year equal ten percent (10%) of the Company's after-tax net
earnings for the preceding fiscal year. The portion of any
payment to a Participant which is reduced by application of this
Section shall be credited with interest from the date the portion
of the payment is not paid until the date the payment is paid at
a rate equal to the minimum "applicable federal rate" required to
be stated in order to avoid any imputation of interest income
under the Code as determined by the Committee. The interest rate
will be set as of the date the payment is not paid and shall be
adjusted prospectively thereafter on the first day of each
following quarter. The portion of any payment and accrued
interest which is not paid as a result of an application of the
next to the preceding sentence shall be payable as part of the
installment payment(s) for the next following year of the Company
in addition to the installment payment(s) originally due in that
year, but all installment payments whether originally due on said
date or carried over by application of the preceding sentence and
accrued interest shall continue to be subject to the payment
limitations of this Section. In the event that, because of the
limitation herein, the total purchase price and any accrued
interest shall not have been paid in their entirety by the last
scheduled installment date, then the payment of any such amounts
shall be deferred for consecutive one-year periods, to a maximum
of five years, and shall be paid on successive anniversaries of
the last scheduled payment date, subject to the limitations of
this Section 11.2. The Company shall be entitled to pay all or
any part of any payment or accrued interest which is not paid
without penalty or premium. The term "Company's after-tax
earnings," as used herein, shall mean the net income, after
taxes, of the Company determined in the sole discretion of the
Committee. If, with respect to the purchase of any Common Stock
by the Company pursuant to the provisions of this Section, the
Company shall be prohibited from buying such shares as a result
of any applicable law or agreement, any other person designated
by the Committee may purchase such shares.
23
11.3 RESTRICTIONS ON PURCHASES.
(a) FINANCING AGREEMENTS. Notwithstanding any other provision of this
Agreement, the Company shall not be permitted to complete a
purchase of any shares of Common Stock under this Article if (i)
such purchase would result in a violation of the terms or
provisions of, or result in a default or an event of default
under any credit, guarantee, financing or security agreement or
document entered into in connection with the operations of the
Company or its Affiliates from time to time (such agreements and
documents, as each may be amended, modified or supplemented from
time to time, are referred to herein as the "Financing
Agreements"), in each case as the same may be amended, modified
or supplemented from time to time, or (ii) such purchase would
violate any of the terms or provisions of the Certificate of
Incorporation of the Company or (iii) the Company has no funds
legally available therefor under the General Corporation Law of
the State of Delaware.
(b) DELAY OF PURCHASE. In the event that the completion of a purchase
by the Company pursuant to the Company's election under this
Article is prevented solely by the terms of this Section, (i)
such purchase shall be postponed and shall take place without the
application of further conditions or impediments (other than as
set forth in Section 11.1 or 11.2 hereof or in this Section 11.3)
at the first opportunity thereafter when the Company has funds
legally available therefor and when such purchase will not result
in any default, event of default or violation under any of the
Financing Agreements or in a violation of any term or provision
of the Certificate of Incorporation of the Company and (ii) such
purchase obligation shall rank against other similar purchase
obligations with respect to shares of Common Stock according to
priority in time of the effective date of the event giving rise
to such purchase obligation, provided that any such purchase
obligations as to which a common date determines priority shall
be of equal priority and shall share pro rata in any repurchase
payments made pursuant to clause (i) above.
(c) PURCHASE PRICE ADJUSTMENT. In the event that a purchase of shares
of Common Stock is delayed pursuant to this Section 11.3, the
purchase price per share of Common Stock when the purchase of
such shares eventually takes place as contemplated by Section
11.3(b) shall be (i) the sum of (A) the purchase price determined
in accordance with Section 11.1 or 11.2 above, as applicable, as
of the time that the purchase of such shares would have occurred
pursuant to such provision in connection with the Company's
election to purchase the shares but for the operation of this
Section 11.3, plus (B) an amount equal to interest on such
purchase price for the period from the date on which the shares
would have been so purchased to the date on which such purchase
actually takes place pursuant to Section 11.3(b) (the "Delay
Period") at a rate equal to the weighted average cost of the
Company's bank indebtedness obligations outstanding during the
Delay Period.
11.4 TAKE-ALONG RIGHTS.
(a) TAKE-ALONG NOTICE. Unless provided otherwise in an Agreement, and
unless and until there is a Public Offering, at which time this
Section 11.4 shall be ineffective, for as long as the Kensey Nash
Entities hold at least fifty and one-tenth percent (50.1%) of the
Outstanding Company Common Stock or the Outstanding Company
Voting Securities (as such terms are defined in Section 12.2), if
the Kensey Nash Entities intend to effect a sale of all of their
shares of Common Stock to a third party ("Buyer") and elect to
exercise their rights under this Section 11.4, the Kensey Nash
Entities shall deliver written notice (a "Take-Along Notice") to
24
the Committee and to each Participant, which notice shall (a)
state (i) that the Kensey Nash Entities wish to exercise their
rights under this Section 11.4 with respect to such transfer,
(ii) the name and address of the Buyer, (iii) the per share
amount and form of consideration the Kensey Nash Entities propose
to receive for their shares of Common Stock and (iv) the terms
and conditions of payment of such consideration and all other
material terms and conditions of such transfer, (b) contain an
offer (the "Take-Along Offer") by the Buyer to purchase from a
Participant all of his shares on and subject to the same terms
and conditions offered to the Kensey Nash Entities and (c) state
the anticipated time and place of the closing of the purchase and
sale of the shares (the "Closing"), which (subject to such terms
and conditions) shall occur not fewer than ten (10) days nor more
than ninety (90) days after the date such Take-Along Notice is
delivered, provided that if such Closing shall not occur prior to
the expiration of such ninety (90) day period, the Kensey Nash
Entities shall be entitled to deliver additional Take-Along
Notices with respect to such Take-Along Offer.
(b) CONDITIONS TO TAKE-ALONG. Unless provided otherwise in an
Agreement, upon delivery of a Take-Along Notice, a Participant
shall have the obligation to transfer all of his shares of Common
Stock owned and acquired pursuant to this Plan (including any
shares of Common Stock which could yet be acquired pursuant to an
Award) pursuant to the Take-Along Offer, as the same may be
modified from time to time, provided that the Kensey Nash
Entities transfer all of their shares of Common Stock to the
Buyer at the Closing. Within ten (10) days of receipt of the
Take-Along Notice, the Participant shall (i) execute and deliver
to the Committee and to the Kensey Nash Entities a power of
attorney and a letter of transmittal and custody agreement in
favor of, and in form and substance satisfactory to, the Kensey
Nash Entities constituting one or more persons designated by the
Kensey Nash Entities (the "Custodian"), the true and lawful
attorney-in-fact and custodian for the Participant, with full
power of substitution, and authorizing the Custodian to take such
actions as the Custodian may deemed necessary or appropriate to
effect the sale and transfer of the shares of Common Stock to the
Buyer, upon receipt of the purchase price therefor at the
Closing, free and clear of all security interests, liens, claims,
encumbrances, charges, options, restrictions on transfer, proxies
and voting and other agreements of whatever nature, and to take
such other action as may be necessary or appropriate in
connection with such sale, including consenting to any
amendments, waivers, modifications or supplements to the terms of
the sale (provided that the Kensey Nash Entities also so consent,
and sell and transfer their shares of Common Stock on the same
terms as so amended, waived, modified or supplemented) and (ii)
deliver to the Kensey Nash Entities certificates representing the
shares, together with all necessary duly executed stock powers.
(c) REMEDIES. Unless provided otherwise in an Agreement, the
Participant shall acknowledge that the Kensey Nash Entities would
be irreparably damaged in the event of a breach or a threatened
breach by the Participant of any of his obligations under this
Section 11.4 and the Participant shall agree that, in the event
of a breach or a threatened breach by the Participant of any such
obligation, the Kensey Nash Entities, shall, in addition to any
other rights and remedies available to them in respect of such
breach, be entitled to an injunction from a court of competent
jurisdiction granting them specific performance by the
Participant of his obligations under this Section 11.4. In the
event that the Kensey Nash Entities shall file suit to enforce
the covenants contained in this Section 11.4 (or obtain any other
remedy in respect of any breach thereof), the prevailing party in
25
the suit shall be entitled to recover, in addition to all other
damages to which it may be entitled, the costs incurred by such
party in conducting the suit, including reasonable attorney's
fees and expenses. In the event that, following a breach or a
threatened breach by a Participant of the provisions of this
Section 11.4, the Kensey Nash Entities do not obtain an
injunction granting them specific performance of the
Participant's obligations under this Section 11.4 in connection
with such proposed sale prior to the time the Kensey Nash
Entities complete the sale of their shares of Common Stock or, in
their sole discretion, abandon such sale, then the Company shall
have the option to purchase the shares from the Participant at a
purchase price per share equal to the lesser of (i) the Fair
Market Value of such shares as of the date of the breach or
threatened breach that gives rise to the right to repurchase and
(ii) the price at which the Participant purchased such shares
from the Company.
11.5 TRANSFER OF SHARES. A Participant may at any time make a transfer of
shares of Common Stock received pursuant to the exercise of an Award to his
parents, spouse or descendants, to any trust for the benefit of the foregoing or
to a partnership the interests of which are principally for the foregoing or to
a custodian under a uniform gifts to minors act or similar statute for the
benefit of any of the Participant's descendants. Any transfer of shares received
pursuant to the exercise of an Award shall not be permitted or valid unless and
until the transferee agrees to be bound by the provisions of this Plan, and any
provision respecting Common Stock under the Agreement, provided that
"Termination of Employment" shall continue to refer to the Termination of
Employment of the Employee.
11.6 LIMITED TRANSFER DURING OFFERING. In the event there is an effective
registration statement under the Securities Act pursuant to which shares of
Common Stock shall be offered for sale in an underwritten offering, a
Participant shall not, during the period requested by the underwriters managing
the registered public offering, effect any public sale or distribution of shares
received directly or indirectly pursuant to an exercise of an Award.
11.7 COMMITTEE DISCRETION. The Committee may in its sole discretion include
in any Agreement an obligation that the Company purchase a Participant's shares
of Common Stock received upon the exercise of an Award (including the purchase
of any unexercised Awards which have not expired), or may obligate a Participant
to sell shares of Common Stock to the Company, upon such terms and conditions as
the Committee may determine and set forth in an Agreement. The provisions of
this Article XI shall be construed by the Committee in its sole discretion, and
shall be subject to such other terms and conditions as the Committee may from
time to time determine. Notwithstanding any provision herein to the contrary,
the Company may upon determination by the Committee assign its right to purchase
shares of Common Stock under this Article XI, whereupon the assignee of such
right shall have all the rights, duties and obligations of the Company with
respect to purchase of the shares of Common Stock.
11.8 NO COMPANY OBLIGATION. None of the Company, an Affiliate or the
Committee shall have any duty or obligation to disclose affirmatively to a
record or beneficial holder of Common Stock or an Award, and such holder shall
have no right to be advised of, any material information regarding the Company
or any Affiliate at any time prior to, upon or in connection with receipt or the
exercise of an Award or the Company's purchase of Common Stock or an Award from
such holder in accordance with the terms hereof.
26
ARTICLE XII
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CHANGE IN CONTROL PROVISIONS
----------------------------
12.1 IMPACT OF EVENT. Notwithstanding any other provision of the Plan to
the contrary, unless otherwise provided in an Agreement, in the event of a
Change in Control (as defined in Section 12.2):
(a) Any Stock Appreciation Rights and Stock Options outstanding as of
the date such Change in Control and not then exercisable shall
become fully exercisable to the full extent of the original
grant;
(b) The restrictions and deferral limitations applicable to any
Restricted Stock, Deferred Stock or other Award shall lapse, and
such Restricted Stock, Deferred Stock or other Award shall become
free of all restrictions and become fully vested and transferable
to the full extent of the original grant.
(c) The performance goals and other conditions with respect to any
outstanding Performance Award or Cash Incentive Award shall be
deemed to have been satisfied in full, and such Award shall be
fully distributable, if and to the extent provided by the
Committee in the Agreement relating to such Award or otherwise,
notwithstanding that the Award may not be fully deductible to the
Company under Section 162(m) of the Code.
(d) Notwithstanding any other provision of the Plan, unless the
Committee shall provide otherwise in an Agreement, any Award of
any Participant who is an officer or director of the Company
(within the meaning of Section 16(b) of the Exchange Act) for
which the Grant Date is less than six (6) months prior to the
Change in Control, shall be cancelled in exchange for a cash
payment to the Participant, at the time of the Participant's
Termination of Employment, equal to the amount which the Change
in Control Price (as defined in Section 12.3) per share of Common
Stock on the date of such election shall exceed the amount which
the Participant must pay to exercise the Award per share of
Common Stock under the Award (the "Spread") multiplied by the
number of shares of Common Stock granted under the Award, plus
interest on such amount at the prime rate as reported from time
to time in The Wall Street Journal, compounded annually and
determined from time to time.
12.2 DEFINITION OF CHANGE IN CONTROL. For purposes of the Plan, a
"Change in Control" shall mean the happening of any of the following events:
(a) An acquisition of at least twenty percent (20%) by any
individual, entity or group (within the meaning of Section
13(d)(3) or 14(d)(2) of the Exchange Act) (a "Person") of the
beneficial ownership (within the meaning of Rule 13d-3
promulgated under the Exchange Act) of the then outstanding
shares of common stock of the Company (the "Outstanding Company
Common Stock") or the combined voting power of the then
outstanding voting securities of the Company entitled to vote
generally in the election of directors (the "Outstanding Company
Voting Securities"); provided that such acquisition would result
in the Kensey Nash Entities beneficially owning (within the
meaning of Rule 13d-3 promulgated under the Exchange Act)
following the acquisition less than forty percent (40%) of the
Outstanding Company Common Stock or less than forty percent (40%)
of the Outstanding Company Voting Securities; or
27
(b) The approval by the stockholders of the Company of a
reorganization, merger, consolidation, complete liquidation or
dissolution of the Company, the sale or disposition of all or
substantially all of the assets of the Company or similar
corporate transaction (in each case referred to in this Section
12.2 as a "Corporate Transaction") or, if consummation of such
Corporate Transaction is subject, at the time of such approval by
stockholders, to the consent of any government or governmental
agency, the obtaining of such consent (either explicitly or
implicitly); or
(c) A change in the composition of the Board such that the
individuals who, as of the date of the Public Offering,
constitute the Board (such Board shall be hereinafter referred to
as the "Incumbent Board") cease for any reason to constitute at
least a majority of the Board; provided, however, for purposes of
this Section 12.2(c), that any individual who becomes a member of
the Board subsequent to the date of the Company's Public Offering
whose election, or nomination for election by the Company's
stockholders, was approved by a vote of at least a majority of
those individuals who are members of the Board and who were also
members of the Incumbent Board (or deemed to be such pursuant to
this proviso) shall be considered as though such individual were
a member of the Incumbent Board; but, provided, further, that any
such individual whose initial assumption of office occurs as a
result of either an actual or threatened election contest (as
such terms are used in Rule 14a-11 of Regulation 14A promulgated
under the Exchange Act) or other actual or threatened
solicitation of proxies or consents by or on behalf of a Person
other than the Board shall not be so considered as a member of
the Incumbent Board.
Notwithstanding the foregoing provisions of this Section, the following shall be
excluded from the events described in (a) and (b) above: (i) any acquisition by
or consummation of a or Corporate Transaction with the Company, an Affiliate or
by an employee benefit plan (or related trust) sponsored or maintained by the
Company or an Affiliate, (ii) any acquisition by or consummation of a Corporate
Transaction with a Kensey Nash Entity, (iii) the acquisition by or consummation
of a or Corporate Transaction with any Person who beneficially owned,
immediately prior to such acquisition or Corporate Transaction, directly or
indirectly, twenty percent (20%) or more of the Outstanding Company Common Stock
or Outstanding Company Voting Securities, or (iv) any acquisition or Corporate
Transaction, if more than a majority of the beneficial ownership of the entity
resulting from the acquisition or Corporate Transaction is held by Persons who
held the beneficial ownership of the Outstanding Company Voting Securities
before the acquisition or Corporate Transaction.
12.3 CHANGE IN CONTROL PRICE. For purposes of the Plan, "Change in
Control Price" means the higher of (a) the highest reported sales price of a
share of Common Stock in any transaction reported on the principal exchange on
which such shares are listed or on NASDAQ during the sixty (60)-day period prior
to and including the date of a Change in Control or (b) if the Change in Control
is the result of a tender or exchange offer or Corporate Transaction, the
highest price per share of Common Stock paid in such tender or exchange offer or
Corporate Transaction, except that, in the case of Incentive Stock Options and
Stock Appreciation Rights relating to Incentive Stock Options, such price shall
be based only on the Fair Market Value of the Common Stock on the date any such
Incentive Stock Option or Stock Appreciation Right is exercised. To the extent
that the consideration paid in any such transaction described above consists all
or in part of securities or other non-cash consideration, the value of such
securities or other non-cash consideration shall be determined in the sole
discretion of the Committee.
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ARTICLE XIII
------------
MISCELLANEOUS
-------------
13.1 AMENDMENTS AND TERMINATION. The Board may amend, alter or
discontinue the Plan at any time, but no amendment, alteration or
discontinuation shall be made which would (a) impair the rights of a Participant
under a Stock Option, Stock Appreciation Right, Restricted Stock Award or
Deferred Stock Award theretofore granted without the Participant's consent,
except such an amendment made to cause the Plan to qualify for the exemption
provided by Rule 16b-3 or (b) disqualify the Plan from the exemption provided by
Rule 16b-3. In addition, no such amendment shall be made without the approval of
the Company's stockholders to the extent such approval is required by law or
agreement.
The Committee may amend the Plan at any time provided that (a) no
amendment shall impair the rights of any Participant under any Award theretofore
granted without the Participant's consent, (b) no amendment shall disqualify the
Plan from the exemption provided by Rule 16b-3, and (c) any amendment shall be
subject to the approval or rejection of the Board.
The Committee may amend the terms of any Award or other Award
theretofore granted, prospectively or retroactively, but no such amendment shall
impair the rights of any Participant without the Participant's consent or reduce
an Option Price, except such an amendment made to cause the Plan or Award to
qualify for the exemption provided by Rule 16b-3. Notwithstanding anything in
the Plan to the contrary, neither the Board nor the Committee will be permitted
to (i) amend an Option to reduce its Option Price, (ii) cancel an Option and
regrant an Option with a lower Option Price than the original Option Price of
the cancelled Option, or (iii) take any other action (whether in the form of an
amendment, cancellation or replacement grant) that has the effect of repricing
an Option.
Subject to the above provisions, the Board shall have authority to
amend the Plan to take into account changes in law and tax and accounting rules,
as well as other developments, and to grant Awards which qualify for beneficial
treatment under such rules without stockholder approval. Notwithstanding
anything in the Plan to the contrary, if any right under this Plan would cause a
transaction to be ineligible for pooling of interest accounting that would, but
for the right hereunder, be eligible for such accounting treatment, the
Committee may modify or adjust the right so that pooling of interest accounting
shall be available, including the substitution of Common Stock having a Fair
Market Value equal to the cash otherwise payable hereunder for the right which
caused the transaction to be ineligible for pooling of interest accounting.
13.2 STAND-ALONE, ADDITIONAL, TANDEM, AND SUBSTITUTE AWARDS. Awards granted
under the Plan may, in the discretion of the Committee, be granted either alone
or in addition to, in tandem with, or in substitution or exchange for, any other
Award or any award granted under another plan of the Company, any subsidiary, or
any business entity to be acquired by the Company or a subsidiary, or any other
right of a Participant to receive payment from the Company or any subsidiary.
Such additional, tandem, and substitute or exchange Awards may be granted at any
time. If an Award is granted in substitution or exchange for another Award or
award, the Committee shall require the surrender of such other Award or award in
consideration for the grant of the new Award. In addition, Awards may be granted
in lieu of cash compensation, including in lieu of cash amounts payable under
other plans of the Company or any subsidiary, in which the Fair Market Value of
Common Stock subject to the Award is equivalent in value to the cash
compensation, or in which the exercise price, grant price or purchase price of
the Award in the nature of a right that may be exercised is equal to the Fair
Market Value of the underlying Common Stock minus the value of the cash
compensation surrendered.
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13.3 FORM AND TIMING OF PAYMENT UNDER AWARDS; DEFERRALS. Subject to the
terms of the Plan and any applicable Agreement, payments to be made by the
Company or an Affiliate upon the exercise of an Award or settlement of an Award
may be made in such forms as the Committee shall determine, including, without
limitation, cash, Common Stock, other Awards or other property, and may be made
in a single payment or transfer, in installments, or on a deferred basis. The
settlement of any Award may be accelerated, and cash paid in lieu of Common
Stock in connection with such settlement, in the discretion of the Committee or
upon occurrence of one or more specified events (in addition to a Change in
Control). Installment or deferred payments may be required by the Committee
(subject to Section 13.1 of the Plan) or permitted at the election of the
Participant. Payments may include, without limitation, provisions for the
payment or crediting of reasonable interest on installment or deferred payments
or the granting or crediting of Dividend Equivalents in respect of installment
or deferred payments denominated in Common Stock.
13.4 STATUS OF AWARDS UNDER CODE SECTION 162(M). It is the intent of the
Company that Awards granted to persons who are Covered Employees within the
meaning of Code Section 162(m) shall constitute "qualified performance-based
compensation" satisfying the requirements of Code Section 162(m). Accordingly,
the provisions of the Plan shall be interpreted in a manner consistent with Code
Section 162(m). If any provision of the Plan or any agreement relating to such
an Award does not comply or is inconsistent with the requirements of Code
Section 162(m), such provision shall be construed or deemed amended to the
extent necessary to conform to such requirements.
13.5 UNFUNDED STATUS OF PLAN; LIMITS ON TRANSFERABILITY. It is intended
that the Plan be an "unfunded" plan for incentive and deferred compensation. The
Committee may authorize the creation of trusts or other arrangements to meet the
obligations created under the Plan to deliver Common Stock or make payments;
provided, however, that, unless the Committee otherwise determines, the
existence of such trusts or other arrangements is consistent with the "unfunded"
status of the Plan. Unless otherwise provided in this Plan or in an Agreement,
no Award shall be subject to the claims of Participant's creditors and no Award
may be transferred, assigned, alienated or encumbered in any way other than by
will or the laws of descent and distribution or to a Representative upon the
death of the Participant.
13.6 GENERAL PROVISIONS.
(a) REPRESENTATION. The Committee may require each person purchasing
or receiving shares pursuant to an Award to represent to and
agree with the Company in writing that such person is acquiring
the shares without a view to the distribution thereof. The
certificates for such shares may include any legend which the
Committee deems appropriate to reflect any restrictions on
transfer.
(b) NO ADDITIONAL OBLIGATION. Nothing contained in the Plan shall
prevent the Company or an Affiliate from adopting other or
additional compensation arrangements for its employees.
(c) WITHHOLDING. No later than the date as of which an amount first
becomes includible in the gross income of the Participant for
Federal income tax purposes with respect to any Award, the
Participant shall pay to the Company (or other entity identified
30
by the Committee), or make arrangements satisfactory to the
Company or other entity identified by the Committee regarding the
payment of, any Federal, state, local or foreign taxes of any
kind required by law to be withheld with respect to such amount
required in order for the Company or an Affiliate to obtain a
current deduction. If the Participant disposes of shares of
Common Stock acquired pursuant to an Incentive Stock Option in
any transaction considered to be a disqualifying transaction
under the Code, the Participant must give written notice of such
transfer and the Company shall have the right to deduct any taxes
required by law to be withheld from any amounts otherwise payable
to the Participant. Unless otherwise determined by the Committee,
withholding obligations may be settled with Common Stock,
including Common Stock that is part of the Award that gives rise
to the withholding requirement, provided that any applicable
requirements under Section 16 of the Exchange Act are satisfied.
The obligations of the Company under the Plan shall be
conditional on such payment or arrangements, and the Company and
its Affiliates shall, to the extent permitted by law, have the
right to deduct any such taxes from any payment otherwise due to
the Participant.
(d) REINVESTMENT. The reinvestment of dividends in additional
Deferred or Restricted Stock at the time of any dividend payment
shall be permissible only if sufficient shares of Common Stock
are available under the Plan for such reinvestment (taking into
account then outstanding Options and other Awards).
(e) REPRESENTATION. The Committee shall establish such procedures as
it deems appropriate for a Participant to designate a
Representative to whom any amounts payable in the event of the
Participant's death are to be paid.
(f) CONTROLLING LAW. The Plan and all Awards made and actions taken
thereunder shall be governed by and construed in accordance with
the laws of the State of Delaware (other than its law respecting
choice of law). The Plan shall be construed to comply with all
applicable law and to avoid liability to the Company, an
Affiliate or a Participant, including, without limitation,
liability under Section 16(b) of the Exchange Act.
(g) OFFSET. Any amounts owed to the Company or an Affiliate by the
Participant of whatever nature may be offset by the Company from
the value of any shares of Common Stock, cash or other thing of
value under this Plan or an Agreement to be transferred to the
Participant, and no shares of Common Stock, cash or other thing
of value under this Plan or an Agreement shall be transferred
unless and until all disputes between the Company and the
Participant have been fully and finally resolved and the
Participant has waived all claims to such against the Company or
an Affiliate.
(h) FAIL SAFE. With respect to persons subject to Section 16 of the
Exchange Act, transactions under this Plan are intended to comply
with all applicable conditions of Rule 16b-3 or Rule 16a-1(c)(3),
as applicable. To the extent any provision of the Plan or action
by the Committee fails to so comply, it shall be deemed null and
void, to the extent permitted by law and deemed advisable by the
Committee. Moreover, in the event the Plan does not include a
provision required by Rule 16b-3 or Rule 16a-1(c)(3) to be stated
herein, such provision (other than one relating to eligibility
requirements or the price and amount of Awards) shall be deemed
to be incorporated by reference into the Plan with respect to
Participants subject to Section 16.
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13.7 MITIGATION OF EXCISE TAX. If any payment or right accruing to a
Participant under this Plan (without the application of this Section 13.7),
either alone or together with other payments or rights accruing to the
Participant from the Company or an Affiliate ("Total Payments"), would
constitute a "parachute payment" (as defined in Section 280G of the Code and
regulations thereunder), such payment or right shall be reduced to the largest
amount or greatest right that will result in no portion of the amount payable or
right accruing under the Plan being subject to an excise tax under Section 4999
of the Code or being disallowed as a deduction under Section 280G of the Code.
The determination of whether any reduction in the rights or payments under this
Plan is to apply shall be made by the Committee in good faith after consultation
with the Participant, and such determination shall be conclusive and binding on
the Participant. The Participant shall cooperate in good faith with the
Committee in making such determination and providing the necessary information
for this purpose.
13.8 NO RIGHTS WITH RESPECT TO CONTINUANCE OF EMPLOYMENT. Nothing contained
herein shall be deemed to alter the relationship between the Company or an
Affiliate and a Participant, or the contractual relationship between a
Participant and the Company or an Affiliate if there is a written contract
regarding such relationship. Nothing contained herein shall be construed to
constitute a contract of employment between the Company or an Affiliate and a
Participant. The Company or an Affiliate and each of the Participants continue
to have the right to terminate the employment or service relationship at any
time for any reason, except as provided in a written contract. The Company or an
Affiliate shall have no obligation to retain the Participant in its employ or
service as a result of this Plan. There shall be no inference as to the length
of employment or service hereby, and the Company or an Affiliate reserves the
same rights to terminate the Participant's employment or service as existed
prior to the individual's becoming a Participant in this Plan.
13.9 AWARDS IN SUBSTITUTION FOR AWARDS GRANTED BY OTHER CORPORATIONS.
Awards (including cash in respect of fractional shares) may be granted under the
Plan from time to time in substitution for awards held by employees, directors
or service providers of other corporations who are about to become officers,
directors or employees of the Company or an Affiliate as the result of a merger
or consolidation of the employing corporation with the Company or an Affiliate,
or the acquisition by the Company or an Affiliate of the assets of the employing
corporation, or the acquisition by the Company or Affiliate of the stock of the
employing corporation, as the result of which it becomes a designated employer
under the Plan. The terms and conditions of the Awards so granted may vary from
the terms and conditions set forth in this Plan at the time of such grant as the
majority of the members of the Committee may deem appropriate to conform, in
whole or in part, to the provisions of the awards in substitution for which they
are granted.
13.10 PROCEDURE FOR ADOPTION. Any Affiliate of the Company may by
resolution of such Affiliate's board of directors, with the consent of the Board
of Directors and subject to such conditions as may be imposed by the Board of
Directors, adopt the Plan for the benefit of its employees as of the date
specified in the board resolution.
13.11 PROCEDURE FOR WITHDRAWAL. Any Affiliate which has adopted the Plan
may, by resolution of the board of directors of such Affiliate, with the consent
of the Board of Directors and subject to such conditions as may be imposed by
the Board of Directors, terminate its adoption of the Plan.
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13.12 DELAY. If at the time a Participant incurs a Termination of
Employment (other than due to Cause) or if at the time of a Change in Control,
the Participant is subject to "short-swing" liability under Section 16 of the
Exchange Act, any time period provided for under the Plan or an Agreement to the
extent necessary to avoid the imposition of liability shall be suspended and
delayed during the period the Participant would be subject to such liability,
but not more than six (6) months and one (1) day and not to exceed the Option
Period, or the period for exercise of a Stock Appreciation Right as provided in
the Agreement, whichever is shorter. The Company shall have the right to suspend
or delay any time period described in the Plan or an Agreement if the Committee
shall determine that the action may constitute a violation of any law or result
in liability under any law to the Company, an Affiliate or a stockholder of the
Company until such time as the action required or permitted shall not constitute
a violation of law or result in liability to the Company, an Affiliate or a
stockholder of the Company. The Committee shall have the discretion to suspend
the application of the provisions of the Plan required solely to comply with
Rule 16b-3 if the Committee shall determine that Rule 16b-3 does not apply to
the Plan.
13.13 HEADINGS. The headings contained in this Plan are for reference
purposes only and shall not affect the meaning or interpretation of this Plan.
13.14 SEVERABILITY. If any provision of this Plan shall for any reason be
held to be invalid or unenforceable, such invalidity or unenforceability shall
not effect any other provision hereby, and this Plan shall be construed as if
such invalid or unenforceable provision were omitted.
13.15 SUCCESSORS AND ASSIGNS. This Plan shall inure to the benefit of and
be binding upon each successor and assign of the Company. All obligations
imposed upon a Participant, and all rights granted to the Company hereunder,
shall be binding upon the Participant's heirs, legal representatives and
successors.
13.16 ENTIRE AGREEMENT. This Plan and the Agreement constitute the entire
agreement with respect to the subject matter hereof and thereof, provided that
in the event of any inconsistency between the Plan and the Agreement, the terms
and conditions of this Plan shall control.
Executed on this 2nd day of June, 2004.
KENSEY NASH CORPORATION
By: /s/ Joseph W. Kaufmann
-------------------------------------------------
Title: Chief Executive Officer, President, Secretary
and Director