EXHIBIT 4.1
XINYINHAI TECHNLOGY LTD.
2006 Equity Incentive Plan
Article 1. Establishment and Purpose
1.1 Establishment of the Plan. Xinyinhai Technology, Ltd., a Utah
corporation (the "Company" or "Xinyinhai"), hereby establishes an
incentive compensation plan (the "Plan"), as set forth in this document.
1.2 Purpose of the Plan. The purpose of the Plan is to promote the
success and enhance the value of the Company by linking the personal interests
of Participants to those of the Company's shareholders, and by providing
Participants with an incentive for outstanding performance. The Plan is further
intended to attract and retain the services of Participants upon whose judgment,
interest, and special efforts the successful operation of Xinyinhai and its
subsidiaries is dependent.
1.3 Effective Date of the Plan. The Plan shall become effective on
October 6, 2006.
Article 2. Definitions
Whenever used in the Plan, the following terms shall have the meanings
set forth below and, when the meaning is intended, the initial letter of the
word is capitalized:
(a) "Award" means, individually or collectively, a grant under this
Plan of Stock, Stock Options, or Restricted Stock.
(b) "Award Agreement" means an agreement which may be entered into by
each Participant and the Company, setting forth the terms and provisions
applicable to Awards granted to Participants under this Plan.
(c) "Board" or "Board of Directors" means the Company's Board of
Directors.
(d) "Cause" shall mean willful and gross misconduct on the part of an
Eligible Person that is materially and demonstrably detrimental to the Company
or any Subsidiary as determined by the Committee in its sole discretion.
(e) "Change in Control" shall be deemed to have occurred if (i) any
"person" (as such term is used in Sections 13(d) and 14(d) of the Exchange Act),
other than (A) a person who on October 6, 2006 was the beneficial owner of
more than 25% of the outstanding Shares, (B) a trustee or other fiduciary
holding securities under an employee benefit plan of the Company or (C) a
corporation owned directly or indirectly by the shareholders of the Company in
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substantially the same proportions as their ownership of stock of the Company,
is or becomes the "beneficial owner" (as defined in Rule 13d-3 under said Act),
directly or indirectly, of securities of the Company representing fifty percent
(50%) or more of the total voting power represented by the Company's then
outstanding voting securities, or (ii) during any period of two (2) consecutive
years, individuals who at the beginning of such period constitute the Board of
Directors of the Company and any new Director whose election by the Board of
Directors or nomination for election by the Company's shareholders was approved
by a vote of at least two-thirds (2/3) of the Directors then still in office who
either were Directors at the beginning of the period or whose election or
nomination for election was previously so approved, cease for any reason to
constitute a majority thereof, or (iii) the shareholders of the Company approve
a merger or consolidation of the Company with any other corporation, other than
a merger or consolidation which would result in the voting securities of the
Company outstanding immediately prior thereto continuing to represent (either by
remaining outstanding or by being converted into voting securities of the
surviving entity) at least fifty-five percent (55%) of the total voting power
represented by the voting securities of the Company or such surviving entity
outstanding immediately after such merger or consolidation, or the shareholders
of the Company approve a plan of complete liquidation of the Company or an
agreement for the sale or disposition by the Company of all or substantially all
the Company's assets.
(f) "Code" means the Internal Revenue Code of 1986, as amended from
time to time.
(g) "Committee" means the committee or committees, as specified in
Article 3, appointed by the Board to administer the Plan with respect to grants
of Awards.
(h) "Consultant" means a natural person under contract with the Company
to provide bona fide services to the Company which are not in connection with
the offer or sale of securities in a capital-raising transaction and do not
directly or indirectly promote or maintain a market for the Company's
securities.
(i) "Director" means any individual who is a member of the Xinyinhai
Board of Directors.
(j) "Disability" shall mean the Participant's inability to perform the
Participant's normal Employment functions due to any medically determinable
physical or mental disability, which can last or has lasted 12 months or is
expected to result in death.
(k) "Eligible Person" means an Employee, Director or Consultant.
(l) "Employee" means any officer or employee of the Company or of one
of the Company's Subsidiaries. Directors who are not otherwise employed by the
Company shall not be considered Employees under this Plan.
(m) "Employment," with reference to an Employee, means the condition of
being an officer or employee of the Company or one of its Subsidiaries.
"Employment," with reference to a Consultant, means the condition of being a
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Consultant. "Employment," with reference to a Director, means the condition of
being a Director. The change in status of an Eligible Person among the
categories of Employee, Director and Consultant shall not be deemed a
termination of Employment.
(n) "Exchange Act" means the Securities Exchange Act of 1934, as
amended from time to time, or any successor Act thereto.
(o) "Exercise Price" means the price at which a Share may be purchased
by a Participant pursuant to an Option, as determined by the Committee.
(p) "Insider" shall mean an Eligible Person who is, on the relevant
date, an officer, director, or ten percent (10%) beneficial owner of the
Company, as those terms are defined under Section 16 of the Exchange Act.
(q) "Option" or "Stock Option" shall mean an option to purchase Shares
granted hereunder.
(r) "Participant" means a person who holds an outstanding Award granted
under the Plan.
(s) "Plan" means this 2006 Equity Incentive Plan.
(t) "Restricted Stock" means an Award of Stock granted to an Eligible
Person pursuant to Article 7 herein.
(u) "Restriction Period" means the period during which Shares of
Restricted Stock are subject to restrictions or conditions under Article 7.
(v) "Shares" or "Stock" means the shares of common stock of the
Company.
(w) "Subsidiary" shall mean any corporation in which the Company owns
directly, or indirectly through subsidiaries, more than fifty percent (50%) of
the total combined voting power of all classes of Stock, or any other entity
(including, but not limited to, partnerships and joint ventures) in which the
Company owns more than fifty percent (50%) of the combined equity thereof.
Article 3. Administration
3.1 The Committee. The Plan and all Awards hereunder shall be
administered by one or more Committees of the Board as may be appointed by the
Board for this purpose. The Board may appoint a Committee specifically
responsible for Awards to Insiders (the "Disinterested Committee") where each
Director on such Disinterested Committee is a "Non-Employee Director" (or any
successor designation for determining who may administer plans, transactions or
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awards exempt under Section 16(b) of the Exchange Act), as that term is used in
Rule 16b-3 under the Exchange Act, as that rule may be modified from time to
time. If no specific Committee is appointed by the Board, then the Board in its
entirety shall be the Committee. Any Committee may be replaced by the Board at
any time.
3.2 Authority of the Committee. The Committee shall have full power,
except as limited by law and subject to the provisions herein, to select the
recipients of Awards; to determine the size and types of Awards; to determine
the terms and conditions of such Awards in a manner consistent with the Plan; to
construe and interpret the Plan and any agreement or instrument entered into
under the Plan; to establish, amend, or waive rules and regulations for the
Plan's administration; and to amend the terms and conditions of any outstanding
Award to the extent such terms and conditions are within the discretion of the
Committee as provided in the Plan. Further, the Committee shall make all other
determinations which may be necessary or advisable for the administration of the
Plan.
No Award may be made under the Plan after December 31, 2014.
All determinations and decisions made by the Committee pursuant to the
provisions of the Plan and all related orders or resolutions of the Board shall
be final, conclusive, and binding on all persons, including the Company, its
stockholders, Eligible Persons, Participants, and their estates and
beneficiaries.
Subject to the terms of this Plan, the Committee is authorized, and
shall not be limited in its discretion, to use any of the Performance Criteria
specified herein in its determination of Awards under this Plan.
Article 4. Shares Subject to the Plan
4.1 Number of Shares. Subject to adjustment as provided in Section 4.3
herein, the number of Shares available for grant under the Plan shall not exceed
six million (6,000,000) Shares. The Shares granted under this Plan may be either
authorized but unissued or reacquired Shares.
4.2 Lapsed Awards. If any Award granted under this Plan is canceled,
terminates, expires, or lapses for any reason, Shares subject to such Award
shall be again available for the grant of an Award under the Plan.
4.3 Adjustments in Authorized Plan Shares. In the event of any merger,
reorganization, consolidation, recapitalization, separation, liquidation, Stock
dividend, split-up, Share combination, or other change in the corporate
structure of the Company affecting the Shares, an adjustment shall be made in
the number and class of Shares which may be delivered under the Plan, and in the
number and class of and/or price of Shares subject to outstanding Awards granted
under the Plan, and/or the number of outstanding Options and Shares of
Restricted Stock constituting outstanding Awards, as may be determined to be
appropriate and equitable by the Committee, in its sole discretion, to prevent
dilution or enlargement of rights.
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Article 5. Stock Grant
5.1 Grant of Stock. Subject to the terms and provisions of the Plan,
the Board of Directors, at any time and from time to time, may grant Shares of
Stock to Eligible Persons in such amounts and upon such terms and conditions as
the Board of Directors shall determine.
Article 6. Stock Options
6.1 Grant of Options. Subject to the terms and provisions of the Plan,
Options may be granted to Eligible Persons at any time and from time to time,
and under such terms and conditions, as shall be determined by the Committee.
The Committee shall have discretion in determining the number of Shares subject
to Options granted to each Eligible Person.
6.2 Form of Issuance. Each Option grant may be issued in the form of an
Award Agreement and/or may be recorded on the books and records of the Company
for the account of the Participant. If an Option is not issued in the form of an
Award Agreement, then the Option shall be deemed granted as determined by the
Committee. The terms and conditions of an Option shall be set forth in the Award
Agreement, in the notice of the issuance of the grant, or in such other
documents as the Committee shall determine. Such terms and conditions shall
include the Exercise Price, the duration of the Option, the number of Shares to
which an Option pertains (unless otherwise provided by the Committee, each
Option may be exercised to purchase one Share), and such other provisions as the
Committee shall determine.
6.3 Exercise Price. The Exercise Price of an Option shall be determined
by the Committee in its sole discretion.
6.4 Duration of Options. Each Option shall expire at such time as the
Committee shall determine at the time of grant (which duration may be extended
by the Committee); provided, however, that no Option shall be exercisable later
than the tenth (10th) anniversary date of its grant. If, however, the Eligible
Person owns stock possessing more than ten percent (10%) of the total combined
voting power of all classes of stock of the Company or of its parent or
subsidiary corporations, then no Option shall be exercisable later than the
fifth (5th) anniversary date of its grant.
6.5 Vesting of Options. Options shall vest at such times and under such
terms and conditions as determined by the Committee; provided, however, unless a
different vesting period is provided by the Committee at or before the grant of
an Option, the Options will vest on the first anniversary of the grant.
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6.6 Exercise of Options. Options granted under the Plan shall be
exercisable at such times and be subject to such restrictions and conditions as
the Committee shall in each instance approve, which need not be the same for
each grant or for each Participant.
Options shall be exercised by delivery of a written notice (including
e-mail and telecopies) to the Secretary of the Company (or, if so provided by
the Company, to its designated agent), which notice shall be irrevocable,
setting forth the exact number of Shares with respect to which the Option is
being exercised and including with such notice payment of the Exercise Price.
When Options have been transferred, the Company or its designated agent may
require appropriate documentation that the person or persons exercising the
Option, if other than the Participant, has the right to exercise the Option. No
Option may be exercised with respect to a fraction of a Share.
6.7 Termination of Employment. Unless otherwise provided by the
Committee, the following limitations on exercise of Options shall apply upon
termination of Employment:
(a) Termination by Death or Disability. In the event the Employment of
a Participant shall terminate by reason of death or Disability, all outstanding
Options granted to that Participant shall immediately vest as of the date of
termination of Employment and may be exercised, if at all, no more than three
(3) years from the date of the termination of Employment, unless the Options, by
their terms, expire earlier.
(b) Termination for Cause. If the Employment of a Participant shall be
terminated by the Company for Cause, all outstanding Options held by the
Participant shall immediately be forfeited to the Company and no additional
exercise period shall be allowed, regardless of the vested status of the
Options.
(c) Retirement or Other Termination of Employment. If the Employment of
a Participant shall terminate for any reason other than the reasons set forth in
(a) or (b) above, all outstanding Options which are vested as of the effective
date of termination of Employment may be exercised, if at all, no more than
thirty (30) days from the date of termination of Employment, unless the Options,
by their terms, expire earlier. In the event of the death of the Participant
after termination of Employment, this paragraph (c) shall still apply and not
paragraph (a), above.
(d) Options not Vested at Termination. Except as provided in paragraph
(a) above, all Options held by the Participant which are not vested on or before
the effective date of termination of Employment shall immediately be forfeited
to the Company (and shall once again become available for grant under the Plan).
(e) Notwithstanding the foregoing, the Committee may, in its sole
discretion, establish different terms and conditions pertaining to the effect of
termination of Employment, but no such modification shall shorten the terms of
Options issued prior to such modification.
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6.9 Restrictions on Exercise and Transfer of Options. Unless otherwise
provided by the Committee:
(a) During the Participant's lifetime, the Participant's Options shall
be exercisable only by the Participant or by the Participant's guardian or legal
representative. After the death of the Participant, an Option shall only be
exercised by the holder thereof (including, but not limited to, an executor or
administrator of a decedent's estate) or his guardian or legal representative.
(b) No Option shall be transferable except: (i) in the case of the
Participant, only upon the Participant's death; and (ii) in the case of any
holder after the Participant's death, only by will or by the laws of descent and
distribution.
6.10 Competition. Notwithstanding anything in this Article 6 to the
contrary, in the event the Committee determines, in its sole discretion, that a
Participant is engaging in activity competitive with the Company, any
Subsidiary, or any business in which any of the foregoing have a substantial
interest (the "Xinyinhai Businesses"), the Committee may cancel any
Option granted to such Participant, whether or not vested, in whole or in part.
Such cancellation shall be effective as of the date specified by the Committee.
Competitive activity shall mean any business or activity if a substantially
similar business activity is being carried on by a Xinyinhai Business,
including, but not limited to, representing or providing consulting
services to any person or entity that is engaged in competition with a Xinyinhai
Business or that takes a position adverse to a Xinyinhai Business. However,
competitive activity shall not include, among other things, owning a non-
substantial interest as a shareholder in a competing business.
Article 7. Restricted Stock
7.1 Grant of Restricted Stock. Subject to the terms and provisions of
the Plan, the Committee, at any time and from time to time, may grant Shares of
Restricted Stock to Eligible Persons in such amounts and upon such terms and
conditions as the Committee shall determine.
7.2 Restricted Stock Agreement. The Committee may require, as a
condition to an Award, that a recipient of a Restricted Stock Award enter into a
Restricted Stock Award Agreement, setting forth the terms and conditions of the
Award. In lieu of a Restricted Stock Award Agreement, the Committee may provide
the terms and conditions of an Award in a notice to the Participant of the
Award, on the Stock certificate representing the Restricted Stock, in the
resolution approving the Award, or in such other manner as it deems appropriate.
7.3 Transferability. Except as otherwise provided in this Article 7,
the Shares of Restricted Stock granted herein may not be sold, transferred,
pledged, assigned, or otherwise alienated or hypothecated until the end of the
applicable Restriction Period established by the Committee, if any.
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7.4 Other Restrictions. The Committee may impose such other conditions
and/or restrictions on any Shares of Restricted Stock granted pursuant to the
Plan as it may deem advisable including, without limitation, a requirement that
Participants pay a stipulated purchase price for each Share of Restricted Stock
and/or restrictions under applicable Federal or state securities laws; and may
legend the certificates representing Restricted Stock to give appropriate notice
of such restrictions.
The Company shall also have the right to retain the certificates
representing Shares of Restricted Stock in the Company's possession until such
time as all conditions and/or restrictions applicable to such Shares have been
satisfied.
7.5 Removal of Restrictions. Except as otherwise provided in this
Article 7, Shares of Restricted Stock covered by each Restricted Stock grant
made under the Plan shall become freely transferable by the Participant after
the last day of the Restriction Period and completion of all conditions to
vesting, if any. However, unless otherwise provided by the Committee, the
Committee, in its sole discretion, shall have the right to immediately waive all
or part of the restrictions and conditions with regard to all or part of the
Shares held by any Participant at any time.
7.6 Voting Rights, Dividends and Other Distributions. During the
Restriction Period, Participants holding Shares of Restricted Stock granted
hereunder may exercise full voting rights and shall receive all regular cash
dividends paid with respect to such Shares. Except as provided in the following
sentence, in the sole discretion of the Committee, other cash dividends and
other distributions paid to Participants with respect to Shares of Restricted
Stock may be subject to the same restrictions and conditions as the Shares of
Restricted Stock with respect to which they were paid. If any such dividends or
distributions are paid in Shares, the Shares shall be subject to the same
restrictions and conditions as the Shares of Restricted Stock with respect to
which they were paid.
7.7 Termination of Employment Due to Death or Disability. In the event
the Employment of a Participant shall terminate by reason of death or
Disability, unless otherwise provided by the Committee prior to or at the time
of the Award, all Restriction Periods and all restrictions imposed on
outstanding Shares of Restricted Stock held by the Participant shall immediately
lapse and the Restricted Stock shall immediately become fully vested as of the
date of termination of Employment.
7.8 Termination of Employment for Other Reasons. If the Employment of a
Participant shall terminate for any reason other than those specifically set
forth in Section 7.7 herein, all Shares of Restricted Stock held by the
Participant which are not vested as of the effective date of termination of
Employment immediately shall be forfeited and returned to the Company.
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Article 8. Employee Matters
8.1 Employment Not Guaranteed. Nothing in the Plan shall interfere with
or limit in any way the right of the Company or any Subsidiary to terminate any
Participant's Employment at any time, nor confer upon any Participant any right
to continue in the employ of the Company or one of its Subsidiaries.
8.2 Participation. No Eligible Person shall have the right to be
selected to receive an Award under this Plan, or, having been so selected, to be
selected to receive a future Award.
8.3 Claims and Appeals. Any claim under the Plan by a Participant or
anyone claiming through a Participant shall be presented to the Committee. Any
person whose claim under the Plan has been denied may, within sixty (60) days
after receipt of notice of denial, submit to the Committee a written request for
review of the decision denying the claim. The Committee shall determine
conclusively for all parties all questions arising in the administration of the
Plan.
Article 9. Amendment, Modification, and Termination
9.1 Amendment, Modification, and Termination. The Board of Directors
alone shall have the right to alter, amend or revoke the Plan or any part
thereof at any time and from time to time, provided, however, that the Board of
Directors may not, without the approval of the holders of a majority of the
voting Shares, make any alteration or amendment to the Plan which changes the
aggregate number of shares of Common Stock which may be issued under the Plan,
extend the term of the Plan, or change the employees or class of employees
eligible to receive Awards thereunder. The Board may at any time suspend or
terminate the Plan in whole or in part.
9.2 Awards Previously Granted. No termination, amendment, or
modification of the Plan shall adversely affect in any material way any Award
previously granted under the Plan, without the written consent of the
Participant holding such Award.
Article 10. Change in Control
Upon the occurrence of a Change in Control:
(a) Any and all Options granted hereunder immediately shall become
vested and exercisable;
(b) Any Restriction Periods and all restrictions imposed on Restricted
Shares shall lapse and they shall immediately become fully vested.
Article 11 Withholding
11 1 Tax Withholding. The Company shall deduct or withhold an amount
sufficient to satisfy Federal, state, and local taxes (including the
Participant's employment tax obligations) required by law to be withheld with
respect to any taxable event arising or as a result of this Plan ("Withholding
Taxes").
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11.2 Share Withholding. With respect to withholding required upon the
exercise of Options, upon the lapse of restrictions on Restricted Stock, or upon
any other taxable event hereunder involving the transfer of Stock to a
Participant, the Company shall withhold Stock having a Fair Market Value on the
date the tax is to be determined in an amount equal to the Withholding Taxes on
such Stock. Any fractional Share remaining after the withholding shall be
withheld as additional Federal withholding.
11.3 Payment In Lieu of Share Withholding. In any situation in which
the Company would be required to withhold Stock pursuant to Sec 11.2 above, the
Participant may, in lieu of all or part of such withholding, remit to the
Company an amount in cash sufficient to satisfy the federal, state and local
withholding tax requirements or may direct the Company to withhold from other
amounts payable to the Participant, including salary.
Article 12. Successors
All obligations of the Company under the Plan, with respect to Awards
granted hereunder, shall be binding on any successor to the Company, whether the
existence of such successor is the result of a direct or indirect purchase,
merger, consolidation, or otherwise, of all or substantially all of the business
and/or assets of the Company.
Article 13. Legal Construction
13.1 Severability. In the event any provision of the Plan shall be held
illegal or invalid for any reason, the illegality or invalidity shall not affect
the remaining parts of the Plan, and the Plan shall be construed and enforced as
if the illegal or invalid provision had not been included.
13.2 Requirements of Law. The granting of Awards and the issuance of
Shares under the Plan shall be subject to all applicable laws, rules, and
regulations, and to such approvals by any governmental agencies or national
securities exchanges as may be required.
13.3 Securities Law Compliance. With respect to Insiders, transactions
under this Plan are intended to comply with all applicable conditions of Rule
16b-3 or its successors under the Exchange Act. To the extent any provision of
the plan or action by the Committee fails to comply with a condition of Rule
16b-3 or its successors, it shall not apply to the Insiders or transactions
thereby.
13.4 Governing Law. To the extent not preempted by Federal law, the
Plan, and all agreements hereunder, shall be construed in accordance with and
governed by the laws of the State of Utah.
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