DEER
VALLEY CORPORATION
2007
LONG TERM INCENTIVE PLAN
SECTION
1
GENERAL
1.1 Purpose. The
Deer Valley Corporation 2007 Long Term Incentive Plan (the
“Plan”) has been established by Deer Valley Corporation (the
“Company”) to (i) attract and retain key management employees
who are expected to make significant contributions to the success of the
Company; (ii) motivate such key employees, by means of appropriate incentives,
to achieve the Company’s long-range goals; (iii) provide incentive compensation
opportunities that are competitive with those of other similar companies;
(iv)
provide incentive awards to its directors; and (v) further align such key
employees’ and directors’ interests with those of the Company’s other
shareholders, and thereby promote the long-term financial interests of the
Company, including the growth in value of the Company’s equity and enhancement
of long-term shareholder return. Unless otherwise defined herein, all
capitalized terms are defined in Section 8 herein.
1.2 Participation. Subject
to the terms and conditions of the Plan, the Committee shall determine and
designate, from time to time, from among the Eligible Employees or Eligible
Directors or Consultants, those persons who will be granted one or more Awards
under the Plan, and thereby become “Participants” or a
“Participant” in the Plan. In the discretion of the
Committee, a Participant may be granted any Award permitted under the provisions
of the Plan and more than one Award may be granted to each
Participant. Awards may be granted as alternatives to or replacement
of awards outstanding under the Plan, or any other plan or arrangement of
the
Company or a Related Company (including a plan or arrangement of a business
or
entity, all or a portion of which is acquired by the Company or a Related
Company).
Incentive
Stock Option grants must be
restricted to employees of the Company. A Consultant shall not be
eligible for the grant of a Stock Award if, at the time of grant, the Company
concludes that a Form S-8 Registration Statement is not available to register
the offer or sale of the Company’s securities to such Consultant under the
Securities Act due to the nature of the services that the Consultant is
providing to the Company, or because of any other rule governing the use
of Form
S-8.
1.3 Name
of Plan. The name of this Plan shall be
known as the Deer Valley Corporation 2007 Long Term Incentive Plan.
1.4 Administration.
(a) Board
Authority. Although the Board has ultimate
responsibility for administering the Plan, the Board has delegated the tasks
of
operating, administering and performing its duties under the Plan to the
Committee. Where this Plan specifies that an action is to be taken by
the Board, only the Board may take that action or make that
determination. Where the Plan specifies that action is to be taken by
the Committee, only the Committee may take that action or make that
determination; provided that, if the Committee cannot act or make a
determination, then the Board shall also be entitled to take such action
or make
such determination. Only the Board or Committee may approve grants of
Awards to executive officers or a Covered Employee.
(b) Authority
of Committee. Subject to the express provisions of the
Plan, the Committee has the authority to interpret the Plan; determine
eligibility for and grant Awards; determine what type or combination of types
of
Awards may be granted; determine, modify or waive the terms and conditions
of
any Award (which need not be identical); determine the time or times at and
which the conditions upon which the Awards may be exercised or become vested;
prescribe forms, rules and procedures (which it may modify or waive); determine
the times Awards are granted; provide Awards to employees of subsidiary
corporations or non-U.S. citizens that are employed by the Company or a Related
Company; determine whether, to what extent and under what circumstances Awards
may be settled, paid or exercised in cash, shares, other securities, or other
methods of payments that may be used to purchase shares or other property,
or
cancelled, forfeited or suspended; determine whether a transaction or event
should be treated as a Change of Control, as well as the effect of a Change
of
Control; and otherwise do all things necessary to implement the
Plan.
Once
a written agreement evidencing an
Award hereunder has been executed by the Participant and approved by the
Committee, the Committee may not, without the Participant’s consent, alter the
terms of the Award so as to affect adversely the Participant’s rights under the
Award, unless the Committee expressly reserved the right to do so in writing
at
the time of such delivery. Subject to the rights under any existing
Award, the Committee may modify, change, amend or cancel any Award to correct
an
administrative error. The Board, in the exercise of this power, may
correct any defect, omission or inconsistency in the Plan or in any Stock
Award,
in a manner and to the extent it shall deem necessary or expedient to make
the
Plan fully effective.
In
the case of any Award intended to be
eligible for the performance-based compensation exception under Section 162(m)
of the Code, the Board may modify the terms of the Plan or may create one
or
more subplans, in each case on such terms as it deems necessary or appropriate;
provided, however, that no such action by the Board shall increase the total
number of Shares issuable hereunder. Except for the power to amend
the Plan and except for determinations regarding Participants who are subject
to
Section 16 of the Exchange Act, and except as may otherwise be required under
applicable listing standards for an exchange on which the Company’s common stock
may be listed, the Board may delegate any or all of its duties, powers and
authority under the Plan, pursuant to such conditions or limitations as the
Board may establish to any officer or officers of the Company.
1.5 Conditions
on Awards. The Committee shall have the discretion with
respect to any Award granted under the Plan to establish upon its grant
conditions under which (i) the Award may be later forfeited, canceled,
rescinded, suspended, withheld or otherwise limited or restricted; or (ii)
gains
realized by the grantee in connection with an Award or an Award’s exercise may
be recovered; provided that such conditions and their consequences
are:
(a) clearly
set forth in the grant agreement or other grant document; and
(b) fully
comply with applicable laws.
The
Committee shall also be authorized to impose conditions that include, without
limitation, refraining from undertaking actions which constitute a conflict
of
interest with the Company, or are prejudicial to the Company’s interests, or are
in violation of any non-compete agreement or obligation, any confidentiality
agreement or obligation, the Company’s applicable policies, its code
of
ethics (as in effect from time to time), or the terms and conditions of
employment under an applicable employment or contractor
agreement.
The
Committee shall also be authorized
to impose such restrictions, conditions or limitations as it determines
appropriate as to the timing and manner of any resales by a Participant or
other
subsequent transfers by the Participant of any shares of common stock issued
as
a result of or under a Stock Award, including, without limitation, (i)
restrictions under an insider trading policy and (ii) restrictions as to
the use
of a specified brokerage firm for such resales or other transfers.
1.6 Effect
of Committee’s Decision. All
determinations, interpretations and constructions made by the Committee in
good
faith shall not be subject to review by any person and shall be final, binding
and conclusive on all persons. In carrying out the administration of
the Plan, the Committee shall be authorized to designate Awards as an Incentive
Stock Option or Non-Qualified Stock Option and whether the terms and conditions
of an Award have been met and whether the Award or shares are subject to
forfeiture or cancellation. The Committee shall also be authorized to
determine the form of any Award, agreement or other document related to this
Plan and whether that document, including signatures, may be in electronic
form.
1.7 Composition
of Committee. So long as the Company has
registered and outstanding a class of equity securities under Section 12
of the
Exchange Act, the Committee shall consist solely of two or more Outside
Directors, in accordance with Section 162(m) of the Code and/or solely of
two or
more Non-Employee Directors, in accordance with Rule 16b-3 of the Exchange
Act. If the Company’s shares are listed on a stock exchange, the
Company shall appoint Committee members that comply with the listing rules
and
regulations of such stock exchange.
1.8 Non-exclusivity
of this Plan. This Plan shall not limit
the power of the Company or any Related Company to adopt other incentive
arrangements including, for example, the grant or issuance of stock options,
stock or other equity-based rights under other plans or compensation
arrangements approved by the Company.
1.9 Unfunded
Plan. This Plan shall be
unfunded. Although bookkeeping accounts may be established with
respect to Participants, any such accounts will be used merely as a
convenience. The Company shall not be required to segregate any
assets on account of this Plan, the grant of Awards, or the issuance of
Shares. The Company shall not be deemed to be a trustee of stock or
cash to be awarded under this Plan. Any obligations of the Company to
any Participant shall be based solely upon contracts entered into under this
Plan, such as an Award Agreement or Option Agreement. No such
obligations shall be deemed to be secured by any pledge or other encumbrance
on
any assets of the Company. Neither the Company nor the Committee
shall be required to give any security or bond for the performance of any
such
obligations.
2.1 Definitions. The
grant of an “Option” entitles the Participant to purchase
Shares at an exercise price established by the Committee. Options
granted under this Section 2 may be either Incentive Stock Options or
Non-Qualified Stock Options, as determined in the discretion of the Committee
and as designated at the time of grant. An “Incentive Stock
Option” is an Option that is intended to satisfy the requirements
applicable to an “incentive stock option” described in Section 422(b) of the
Code. A “Non-Qualified Option” is an Option that is
not intended to be an “incentive stock option”, as that term is described in
Section 422 (b) of the Code.
2.2 Exercise
Price. The “Exercise
Price” of each Option granted under this Section 2 shall be established
by the Committee or shall be determined by a method established by the Committee
at the time the Option is granted; provided that the Exercise Price for any
Incentive Stock Option shall not be less than ONE HUNDRED PERCENT (100%)
of the
Fair Market Value of a Share as of the Pricing Date (or, in the case of a
Ten
Percent Shareholder, the exercise price shall not be less than ONE HUNDRED
TEN
PERCENT (110%) of the Fair Market Value of a Share as of the Pricing
Date). For purposes of the preceding sentence, the “Pricing
Date” shall be the date on which the Option is granted, except that the
Committee may provide that: (i) the Pricing Date is the date on which the
Committee specifies in the future will be the Pricing Date or the date on
which
a condition is satisfied if the Award is subject to the satisfaction of such
condition; and (ii) if an Option is granted in tandem with, or in substitution
for, an outstanding Award, the Pricing Date shall be the date of grant of
such
outstanding Award.
2.3 Expiration
Date. The “Expiration
Date” with respect to an Option means the date the Option is deemed to
expire, as determined by the Committee at the time of the grant; provided,
however, that the Expiration Date with respect to any Incentive Stock Option
shall not be later than the earliest to occur of:
(a) the
ten-year anniversary of the date on which the Option is granted;
(b) if
the Participant’s date of termination occurs by reason of death or disability,
the one-year anniversary of such date of termination;
(c) if
the Participant’s date of termination occurs by reason of retirement, the one
year anniversary of such date of termination;
(d) if
the Participant’s date of termination occurs for reasons other than retirement,
death or disability, the 90-day anniversary of such date of termination;
subject, however, to the terms of the applicable option agreement approved
by
the Committee;
(e) if
the Participant dies while the Option is otherwise exercisable, the Expiration
Date may be later than the dates set forth above, provided that it is not
later
than the first anniversary of the date of death; and
(f) For
any Incentive Stock Option that is granted to a Ten Percent Shareholder,
the
term of the Option may not exceed five years.
2.4 Award
Limits. Although Incentive Stock Options may be granted
only to employees, Non-Qualified Stock Options may be granted to directors,
employees and consultants of the Company.
2.5 Other
Restrictions. Incentive Stock Options
and Non-Qualified Stock Options may be granted under the Plan in such numbers,
at such prices and on such terms and conditions as the Committee shall
determine, including the cancellation of existing options and issuance of
a
replacement option, provided that such options shall comply with and be subject
to the following terms and conditions:
(a) Annual
Grant Limitation. No Participant shall be granted an
Incentive Stock Option to the extent that the aggregate Fair Market Value
of
Shares made subject to such option (determined as of the date such option
is
granted) which are exercisable for the first time by an option holder during
any
one calendar year exceeds the sum of ONE HUNDRED THOUSAND DOLLARS ($100,000),
or
such other limit as may be set by applicable law (the “Limitation
Amount”). Incentive Stock Options granted under the Plan and
all other plans of the Company or affiliated entity shall be aggregated for
purposes of determining whether the Limitation Amount has been
exceeded. The Committee may impose such conditions as it deems
appropriate on an Incentive Stock Option to ensure that the foregoing
requirement is met. If any Incentive Stock Options that are granted
under the Plan have an aggregate Fair Market Value that exceeds the Limitation
Amount, the excess Options (according to the order in which they were granted)
will be treated as Non-Qualified Stock Options to the extent permitted by
law.
(b) Option
Agreement. All options granted under the Plan shall be
evidenced by a written option agreement stating the number of Shares capable
of
being purchased upon its exercise and otherwise in such form as the Committee
may periodically approve and containing such terms and conditions, including
the
period of exercise and whether in installments or otherwise, as shall be
contained therein, which need not be the same for all options.
(c) Date
of Grant. The date on which an option grant is approved
by the Committee shall be considered the date on which such option is granted
(the “Date of Grant”), and shall be reflected in the option
agreement. All options under this Plan shall be granted within 10
years of the date this Plan is adopted.
(d) Exercise
Price. Each option agreement shall state the purchase
price of each Share capable of being acquired upon exercise of the option,
which
price shall be determined by the Committee with respect to each Option granted;
provided that for any Incentive Stock Options granted under the Plan, the
exercise price shall not be less than ONE HUNDRED PERCENT (100%) of the Fair
Market Value of each such Share on the Date of Grant (or, in the case of
any
optionholder owning more than ten percent of the voting power of all classes
of
stock of the Company, not less than ONE HUNDRED AND TEN PERCENT (110%) of
the
Fair Market Value of the Shares on the Date of Grant). In the event
that Share prices are not published for the Date of Grant, such value shall
be
determined in accordance with such rules as may be established by the
Committee.
(e) Option
Exercise. All options granted under the Plan become
exercisable at such times and in such installments (which may be cumulative)
as
the Committee shall provide in the terms of each individual
option. All Options that have become exercisable from time to time
may be exercised in whole or in part in accordance with the terms of the
applicable option agreement; provided, however, that the Committee shall
be
authorized to require that any partial
exercise be with respect to a minimum number of Shares. No Option may
have an expiration date that is more than ten years after its date of
grant.
(f) Forfeiture
or Exercise of Option. In the event that a Participant
receiving Incentive Stock Options ceases his or her continuous service with
the
Company due to retirement, death, disability or other reason, all options
shall
be forfeited or exercised, as follows:
(1) In
the event of a Participant’s termination of continuous service for reasons other
than retirement, death or disability, any options that are not vested will
be
forfeited immediately in accordance with the terms of each option agreement
and
any Vested Option must be exercised before the 90-day anniversary of the
date of
termination (or such period of exercise that the terms of the applicable
option
agreement may permit).
(2) Upon
the disability of a Participant, the Participant’s Vested Options shall be
exercisable within one year (or such shorter period as the Code or the period
of
exercise that the terms of the applicable option agreement may permit) of
the
Participant’s date of disability.
(3) If
the Participant dies while in the continuous service of the Company, the
Participant’s estate, personal representative, or designated beneficiary shall
have the right to exercise such Vested Options within one year of the
Participant’s death (or such shorter period as the Code or period of exercise
that the terms of the applicable option agreement may permit).
(4) Upon
the retirement of a Participant, the Participant’s Vested Options must be
exercised within one year (or such shorter period as the Code or period of
exercise that the terms of the applicable option agreement may permit) of
the
Participant’s date of retirement.
(5) If
the Participant is granted an Incentive Stock Option and changes his or her
status to a Consultant, the Option will become a Non-Qualified Stock Option
if
the Option is not exercised within the three-month period beginning with
the
date of termination of employment with the Company for any reason other than
death or disability (as defined in Section 22(e) of the Code).
(g) Mechanics
of Exercise. A person entitled to exercise any portion
of an option granted under the Plan may exercise the same at anytime, either
in
whole or in part, by delivering written notice of exercise to the office
of the
Secretary of the Company or to such other location as may be designated by
the
Committee, specifying therein the number of Shares with respect to which
the
option is being exercised, which notice shall be accompanied by payment in
full
of the purchase price of the Shares being acquired. If any adjustment
has been effected so as to establish a right by an optionholder to acquire
a
fractional share, such fraction shall be rounded upward to the next whole
number.
(h) Payment
of Exercise Price. The Committee may determine, in its
sole discretion, the required or permitted forms of payment to purchase Shares
upon exercise of an Option, subject to the following: (i) payment may be
made
wholly or partly in cash; (ii) through the delivery of Shares which have
been
outstanding for at least six months (unless the Committee approves a shorter
period) and which have a Fair Market Value equal to the exercise price at
the
time
of
exercise; (iii) by delivery of an unconditional and irrevocable undertaking
by a
licensed broker-dealer to deliver promptly to the Company sufficient funds
to
pay the exercise price and any tax withholding resulting from such exercise
through a “cashless exercise” arrangement which permits the Participant to
simultaneously exercise an option and sell the Shares thereby acquired and
enable the third party to use the proceeds from such sale as payment for
the
exercise price of such option to the extent permitted by law; or (iv) by
any
combination of the foregoing permissible forms of payment.
In
no
event shall a promissory note or other form of deferred consideration constitute
a permissible form of payment. If the Company extends or arranges for
the extension of credit to a Participant under a cashless exercise procedure,
no
officer or director may participate in that cashless exercise
procedure.
(i) Investment
Purpose. Unless the Committee chooses to register or
qualify the Shares under the Securities Act of 1933, as amended (the
“Act”), each option is granted on the express condition that
the purchase of Shares upon an exercise thereof shall be made for investment
purposes only and not with a view to their resale or further distribution
unless
such Shares, at the time of their issuance and delivery, are registered under
the Act, or, alternatively, at some time following such issuance their resale
is
determined by counsel for the Company to be exempt from the registration
requirements of the Act and of any other applicable law, regulation or
ruling. Any Shares so registered shall be promptly listed with each
securities exchange through which any class of the Company’s capital stock or
other securities are traded.
(j) Legal
Conditions on Delivery of Shares. The Company will not
be obligated to deliver any Shares pursuant to the Plan or to remove any
restrictions from Shares previously delivered under the Plan until the Company’s
counsel has approved all legal matters in connection with the issuance and
delivery of such Shares; if the Company’s Shares are at the time of delivery
listed on any stock exchange or national market system, the Shares to be
delivered have been listed or authorized to be listed on such exchange or
system
upon official notice of issuance; and all conditions of the Award have been
satisfied or waived. If the sale of Shares has not been registered
under the Act, the Company may require, as a condition to exercise of the
Award,
such representations or agreements as counsel for the Company may consider
appropriate to avoid violation of such Act. The Company may require
that any certificates evidencing Shares issued under the Plan bear an
appropriate legend reflecting any restriction on transfer applicable to such
Shares.
(k) Vesting. Each
Option shall vest and become exercisable in accordance with the terms of
the
applicable option agreement. All Incentive Stock Options granted
under this Plan may not vest at a rate of not more than $100,000 in Fair
Market
Value of the Company’s shares (measured on the date of grant) during any
calendar year. For any Options that exceed this limitation, the
excess options shall be treated as a Non-Qualified Stock Option. The
Committee shall be authorized to accelerate the exercise date of all or any
part
of the options granted to a Participant under the Plan.
SECTION
3
OTHER
STOCK AWARDS
3.1 Definition. A
Stock Award is a grant of a right to receive Shares in the future, subject
to
the terms and conditions, including a risk of forfeiture, established by
the
Committee and shall be exercised in accordance with this Plan and the Award
Agreement under which it is granted.
3.2 Restricted
Stock Awards. Each Stock Award shall be subject to such
conditions, restrictions and contingencies as the Committee shall
determine. These may include minimum vesting or service requirements
and/or the achievement of certain Performance Measures. The Committee
may designate a single goal criterion or multiple goal standard for
performance measurement purposes, with the measurement based on individual
or
Company performance as compared with that of competitive companies, all at
the
discretion of the Committee. Each such grant or sale may constitute
an immediate transfer of the ownership of shares to the Participant in
consideration of the performance of services, entitling such participant
to
voting, dividend and other ownership rights, but subject to the substantial
risk
of forfeiture and restrictions on transfer hereinafter referred to.
3.3 Other
Terms and Conditions for Stock Awards. If determined by
the Committee, any Shares granted to a Participant under a Stock Award shall
be
represented by a stock certificate registered in the name of the Participant;
provided, however, that:
(a) the
Participant shall not be entitled to delivery of the stock certificate until
any
applicable vesting period during which certain restrictions established by
the
Committee shall have expired;
(b) the
Company may either issue Shares subject to such restrictive legends and/or
stop-transfer instructions as it deems appropriate or provide for retention
of
custody of the Shares during the applicable restriction period or vesting
period
imposed by the Committee under an Award;
(c) the
Participant may not sell, transfer, pledge, exchange, hypothecate or otherwise
dispose of the Shares during the applicable restriction period or vesting
period, except that it may be transferred by assignment by the Participant
to
the extent provided in the applicable stock award agreement;
(d) a
breach of the terms and conditions established by the Committee with respect
to
the Stock Award shall cause a forfeiture of the Stock Award, and any dividends
withheld thereon;
(e) notwithstanding
the foregoing, the Committee may provide in the applicable Award that no
Shares
be issued until the vesting or restriction period has lapsed and further
determine whether the Shares will be issued in escrow and/or be legended
and
subject to restrictions including the forfeiture of all or a part of the
Shares;
(f) Each
such grant will provide that the Stock Award covered by such grant or sale
will
be subject to a “substantial risk of forfeiture” within the meaning of Section
83 of the Code for a period of not less than one year to be determined by
the
Committee at the date of grant and may provide for the earlier lapse of such
substantial risk of forfeiture in the event of a Change in Control;
(g) Each
such grant will provide that during the period for which such substantial
risk
of forfeiture is to continue, the transferability of the Stock Award will
be
prohibited or restricted in the manner and to the extent prescribed by the
Committee at the date of grant (which restrictions may include, without
limitation, rights of repurchase or first refusal in the Company or provisions
subjecting the Stock Award to a continuing substantial risk of forfeiture
in the
hands of any transferee);
(h) Any
Stock Award may specify management objectives that, if achieved, will result
in
termination or early termination of the restrictions applicable to such Stock
Award. Each grant may specify in respect of such management
objectives a minimum acceptable level of achievement and may set forth a
formula
for determining the number of shares on which restrictions will terminate
if
performance is at or above the minimum level, but fails short of full
achievement of the specified management objectives;
(i) Any
such grant of Shares may require that any or all dividends or other
distributions paid thereon during the period of such restrictions be
automatically deferred and reinvested in additional Shares, which may be
subject
to the same restrictions as the underlying award; and
(j) Each
grant of restricted stock will be evidenced by an evidence of award and will
contain such terms and provisions, consistent with this Plan, as the Committee
may approve. Unless otherwise directed by the Committee, all
certificates representing shares of restricted stock will be held in custody
by
the Company until all restrictions thereon will have lapsed, together with
a
stock power or powers executed by the Participant in whose name such
certificates are registered, endorsed in blank and covering such
Shares.
3.4 Payment
for Stock Award. A Participant shall not be required to
make any payment for a Stock Award unless the Committee so
requires.
3.5 Forfeiture
Provisions. In the event that a Participant terminates
employment before the vesting period or restriction period has been met or
has
lapsed, such Stock Award will be forfeited; provided, however, that the
Committee may provide for the proration or full payout of a Stock Award in
the
event of:
(a) a
termination of employment because of normal retirement;
(b) with
the consent of the Committee;
(c) death;
(d) total
and permanent disability, as determined by the Committee; or
(e) a
Change of Control has occurred, all subject to any other conditions as the
Committee may determine or provide in an applicable Stock Award
agreement.
3.6 Acceleration. The
Committee shall have the discretionary power to accelerate the date on which
restrictions lapse with respect to any Stock Award that has been outstanding
for
at least one year.
3.7 Performance
Shares. The Committee may also
authorize the granting of Performance Shares that will become payable to
a
Participant upon achievement of specified management objectives. Each
such grant may utilize any or all of the authorizations, and will be subject
to
all of the requirements, contained in the following provisions:
(a) Number
of Shares. Each grant will specify the
number of Performance Shares to which it pertains, which number may be subject
to adjustment to reflect changes in compensation or other factors; provided,
however, that no such adjustment will be made in the case of a Participant
where
such action would result in the loss of the otherwise available exemption
of the
award under Section 162(m) of the Code.
(b) Performance
Period. The performance period with
respect to each Performance Share will be such period of time (not less than
two
years), commencing with the date of grant as will be determined by the Committee
at the time of grant which may be subject to earlier lapse or other
modifications in the event of a Change in Control.
(c) Performance
Measures. Any grant of Performance
Shares will specify management objectives which, if achieved, will result
in
payment or early payment of the award, and each grant may specify in respect
of
such specified management objectives a minimum acceptable level of achievement
and will set forth a formula for determining the number of Performance Shares
that will be earned if performance is at or above the minimum level, but
falls
short of full achievement of the specified management objectives. The
grant of Performance Shares will specify that, before the Performance Shares
will be earned and paid, the Committee must certify that the management
objectives have been satisfied.
(d) Payment
of Award. Each grant will specify the
time and manner of payment of Performance Shares that have been
granted. Any grant may specify that the amount payable with respect
thereto may be paid by the Company in cash, in common shares or in any
combination thereof and may either grant to the Participant or retain in
the
Committee the right to elect among those alternatives.
(e) Maximum
Award. Any grant of Performance Shares
may specify that the amount payable with respect thereto may not exceed a
maximum specified by the Committee on the date of grant.
(f) Dividend
Payments. The Committee may, at or
after the date of grant of Performance Shares, provide for the payment of
dividend equivalents to the holder thereof on either a current or deferred
or
contingent basis, either in cash or in additional Shares.
(g) Award
Agreement. Each grant of Performance
Shares will be evidenced by an evidence of award and will contain such other
terms and provisions, consistent with this Plan, as the Committee may
approve.
3.8 Other
Awards.
(a) Discretionary
Awards. The Committee may, subject to
limitations under applicable law, grant to any Participant 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, the Company’s Shares or factors that
may influence the value of such Shares, including, without limitation, convertible
or exchangeable debt securities, other rights convertible or exchangeable
into
Shares, purchase rights for Shares, awards with value and payment contingent
upon performance of the Company or specified subsidiaries, affiliates or
other
business units thereof or any other factors designated by the Committee,
and
awards valued by reference to the book value of Shares or the value of
securities of, or the performance of specified subsidiaries or affiliates
or
other business units of the Company. The Committee shall determine
the terms and conditions of such awards. Shares delivered pursuant to
an award in the nature of a purchase right granted under this Section 3.8
shall
be purchased for such consideration, paid for at such time, by such methods,
and
in such forms, including, without limitation, cash, common shares, other
awards,
notes or other property, as the Committee may determine.
(b) Cash
Awards. Cash awards, as an element of
or supplement to any other award granted under this Plan, may also be granted
pursuant to this Section of this Plan.
(c) Bonus
or Other Awards. The Committee may
grant Shares as a bonus, or may grant other awards in lieu of obligations
of the
Company or a subsidiary to pay cash or deliver other property under this
Plan or
under other plans or compensatory arrangements, subject to such terms as
shall
be determined by the Committee.
(d) Annual
Grant to Non-Employee
Directors. Consistent with the terms of
this Plan and as reflected in individual Award agreements, the Board may
establish annual grant Awards or other Awards to Non-Employee Directors on
such
terms and conditions as it determines, including providing for director fee
or
retainer payments through the issuance of Awards and establish the timing
of the
effectiveness of such Awards. Such Awards may also be made by
establishing automatic annual grants that are made effective as of the election
of directors after each annual shareholder meeting, in such amounts as the
Board
may determine from time to time. To the extent that the Board amends,
suspends or terminates such annual or periodic grants for Non-Employee
Directors, no approval or consent of such Non-Employee Director shall be
necessary to take such action with respect to Awards that have not yet been
granted.
3.9 Escrow
of Stock Certificates. To enforce any restrictions on
Award Shares, the Committee may require their holder to deposit the certificates
representing Award Shares, with stock powers or other transfer instruments
approved by the Committee endorsed in blank, with the Company or an agent
of the
Company to hold in escrow until the restrictions have lapsed or
terminated. The Committee may also cause a legend or legends
referencing the restrictions to be placed on the certificates.
3.10 Repurchase
Rights.
(a) General. If
a Stock Award is subject to vesting or other forfeiture conditions, the Company
shall have the right, during such period after the Participant’s separation from
service with the Company as is specified by the Committee in an Award Agreement
to repurchase any or all of the Award Shares that were otherwise subject
to
forfeiture as of the date of that separation of service. The
repurchase price shall be such price as is determined by the Committee and
set
forth in the Award Agreement. The repurchase price shall be paid in
cash.
(b) Procedure. The
Company or its assignee may choose to give the Participant a written notice
of
exercise of its repurchase rights under this Section 3.10. However,
the Company’s failure to give such a notice shall not affect its rights to
repurchase any Award Shares. The Company must, however, tender the
repurchase price during the period specified in the applicable Award Agreement
in order to exercise such rights.
SECTION
4
OPERATION
AND ADMINISTRATION
4.1 Effective
Date. This Plan shall be effective as of July 1,
2007, subject to approval of the Company’s shareholders at its next annual
meeting (the “Effective Date”). No awards or grants
may be made after the ten year anniversary of date that the shareholders
of the
Company approve this Plan, including any subsequent amendments or restatement
of
this Plan, unless terminated sooner by the Company’s Board of Directors pursuant
to Section 7 herein. Any Awards granted prior to the date of the
termination of the Plan shall remain in effect as long as any Awards under
it
are outstanding; provided, however, that, to the extent required by the Code,
no
Incentive Stock Options may be granted under the Plan on a date that is more
than ten years from the date the Plan is adopted or, if earlier, the date
the
Plan is approved by the Company’s shareholders.
4.2 Limits
on Award Under the Plan.
(a) Number
of Shares. Subject to adjustments provided for in
Section 4.2(f) below relating to changes in the capitalization of the Company,
a
maximum of one million eight hundred thousand (1,800,000) Shares may be
delivered in satisfaction of Awards under the Plan and, of that amount not
more
than one million (1,000,000) Shares may be issued as Incentive Stock
Options. For purposes of the preceding sentence, Shares that have
expired, canceled in accordance with the terms of the applicable Award, or
repurchased, and any Shares tendered in satisfaction of the exercise price
or
withheld by the Company to satisfy tax withholding requirements shall not
be
considered to have been delivered under the Plan. If a Participant
pays the exercise or purchase price of an Award through withholding of Shares
or
tender of Shares, or if Shares are withheld from the Award, the number of
Shares
so tendered or withheld shall become available for re-grant or re-issuance
thereafter under the Plan following such tender or withholding of
Shares.
Any
Shares covered by an Award granted under the Plan shall not be counted as
used
unless and until they are actually issued and delivered to a
Participant. If any Shares or Awards are repurchased by the Company
prior to vesting, the Shares under such Award shall revert to and again become
available for issuance under the Plan.
(b) Type
of Shares. Shares delivered by the Company under the
Plan may be authorized but unissued Shares or previously issued Shares acquired
by the Company and held in treasury. No fractional Shares will be
delivered under the Plan.
(c) Forfeiture
of Options. Any Shares granted under the Plan that are
forfeited because of the failure to meet an Award contingency or performance
condition shall again be available for delivery pursuant to new Awards granted
under the Plan. To the extent any Shares covered by an Award are not
delivered to a Participant or beneficiary because the
Award
is
forfeited or canceled, such Shares shall not be deemed to have been delivered
for purposes of determining the maximum number of Shares available for delivery
under the Plan.
(d) Use
of Shares as Payment. If the exercise price of any stock
option granted under the Plan is satisfied by tendering Shares to the Company
(by either actual delivery or by attestation), only the number of Shares
issued
net of the Shares tendered shall be deemed delivered for purposes of determining
the maximum number of Shares available for delivery under the Plan.
(e) Substitution
of Shares. Shares delivered under the Plan in
settlement, assumption or substitution of outstanding awards (or obligations
to
grant future awards) under the plans or arrangements of another entity shall
not
reduce the maximum number of Shares available for delivery under the Plan,
to
the extent that such settlement, assumption or substitution results from
the
Company or a Related Company acquiring another entity (or an interest in
another
entity).
(f) Adjustment
of Number of Shares. In the event of a corporate
transaction involving the Company (including, without limitation, any stock
dividend, forward or reverse stock split, extraordinary cash dividend,
recapitalization, reorganization, merger, consolidation, split-up, spin-off,
combination or exchange of Shares), then (A) the number of Shares reserved
for
issuance under this Plan, (B) the exercise price, base price or redemption
price
applicable to outstanding Awards, and (C) the number of Shares subject to
outstanding Awards shall be proportionately adjusted, subject to any required
action by the Board or the stockholders of the Company and compliance with
applicable law. Fractions of a Share will not be issued but will be
paid in cash at the fair market value of such fraction of a share or will
be
rounded down to the nearest whole share, as determined by the Committee in
its
sole discretion. Action by the Committee may include adjustment of:
(i) the number and kind of Shares which may be delivered under the Plan;
(ii)
the number and kind of Shares subject to outstanding Awards; and (iii) the
exercise price of outstanding Options; as well as any other adjustments that
the
Committee determines to be equitable.
In
the
event of any change in the Shares subject to the Plan, or subject to or
underlying any Award, by reason of any reorganization, recapitalization,
merger,
consolidation, spin-off, combination, exchange of shares or other corporate
exchange, any distribution to stockholders of common stock other than regular
cash dividends, or any transaction similar to the foregoing (but not including
either a stock dividend or a stock split, which shall be addressed under
Section
4.2(f) above), the Committee in its sole discretion and without liability
to any
person may make such substitution or adjustment, if any, as it deems to be
equitable to (i) the type, class(es) and maximum number of securities subject
to
the Plan pursuant to Section 4.2(a), (ii) the exercise price, base price
or
redemption price applicable to outstanding Awards, (iii) the type, class(es)
and
number of securities subject to outstanding Awards, or (iv) any other affected
terms of any outstanding Awards.
(g) Vesting. Without
limiting the generality of Section 1.4, the Committee may determine the time
or
times at which an Award will vest (i.e., become free of forfeiture restrictions)
or become exercisable and the terms on which an Award requiring exercise
will
remain exercisable.
Unless
the Committee expressly provided otherwise, a Participant’s “employment or other
service relationship with the Company and any Related Company” will be deemed to
have ceased when the individual is no longer employed by or in a service
relationship with the Company or any Related Company. Except as the
Committee otherwise determines, with respect to a Participant who is an employee
of the Company or any Related Company, such Participant’s employment or other
service relationship with the Company and any Related Company will not be
deemed
to have ceased during a military, sick or other bona fide leave of absence
if
such absence does not exceed 90 days or, if longer, so long as the Participant
retains a right by statute or by contract to return to employment or other
service relationship with the Company or any Related Company. Unless
the Committee determines otherwise, vesting of any Award under this Plan
will be
suspended during any unpaid leave of absence.
4.3 Limit
on Distribution. Distribution of Shares or other amounts
under the Plan shall be subject to the following:
(a) Compliance
with Securities Laws. Notwithstanding any other
provision of the Plan, the Company shall have no liability to deliver any
Shares
under the Plan or make any other distribution of benefits under the Plan
unless
such delivery or distribution would comply with all applicable laws (including,
without limitation, the requirements of the Act, and the applicable requirements
of any securities exchange or similar entity).
(b) Issuance
Without Certificates. To the extent that the Plan
provides for issuance of stock certificates to reflect the issuance of Shares,
the issuance may be effected on a non-certificated basis, to the extent not
prohibited by applicable law or the applicable rules of any stock
exchange.
4.4 Time
of Exercise. Options and Stock Awards
shall be considered exercised when the Company (or its authorized agent)
receives: (a) written (including electronic) notice of exercise from the
person
entitled to exercise the Option or Stock Award, (b) full payment, or provision
for payment, in a form and method approved by the Administrator, for the
Shares
for which the Option or Stock Award is being exercised, and (c) if applicable,
payment, or provision for payment, in a form approved by the Administrator,
of
all applicable withholding taxes due upon exercise. An Award may not be
exercised for a fraction of a Share.
4.5 Payment
Shares. Subject to the overall limitation on the number of Shares
that may be delivered under the Plan, the Committee may use available Shares
as
the form of payment for compensation, grants or rights earned or due under
any
other compensation plans or arrangements of the Company or a Related Company,
including the plans and arrangements of the Company or a Related Company
acquiring another entity (or an interest in another entity).
4.6 Transferability.
Except as otherwise provided by the Committee, Awards under the Plan are
not
transferable except (i) as designated by the Participant by will or by the
laws
of descent and distribution; or (ii) pursuant to a Domestic Relations Order
entered by a court of competent jurisdiction or a court appointed guardian
or
that is appointed to act on behalf of the
Participant. Notwithstanding anything in this Section to the
contrary, the Participant may transfer an option granted under this Plan
to or
for the benefit of his or her family members (including, without limitation,
to
a trust for the benefit of the Participant’s family members or to a partnership
or limited family partnership or other entity established for the benefit
of one
or more members of the Participant’s family), subject to such limits as the
Committee may establish. Each
transferee shall remain subject to all the terms and conditions applicable
to
the option prior to such transfer. No Incentive Stock Option
may be transferred by a Participant, unless such transfer is permitted under
the
provisions of Section 422 of the Code or any successor provision in the Code
and
approved by the Committee.
4.7 Form
and Time of Elections. Unless otherwise specified herein, each
election required or permitted to be made by any Participant or other person
entitled to exercise an option under the Plan, and any permitted modification,
or revocation thereof, shall be in writing filed with the Committee at such
times, in such form, and subject to such restrictions and limitations, not
inconsistent with the terms of the Plan, as the Committee shall
require.
4.8 Agreement
With Company. At the time of an Award to a Participant under the
Plan, the Committee may require a Participant to enter into an agreement
with
the Company (the “Agreement”) in a form specified by the
Committee, agreeing to the terms and conditions of the Plan and to such
additional terms and conditions, not inconsistent with the Plan, as the
Committee may, in its sole discretion, prescribe. The Committee need
not require the execution of any such agreement by a Participant in which
case
acceptance of the Award by the Participant will constitute agreement to the
terms of the Award.
4.9 Documentation. The
Committee may also choose to document the evidence of its approval of an
Award
in the form of an agreement, certificate, resolution or other type or form
of
writing or other evidence approved by the Committee that sets forth the terms
and conditions of the Award. Evidence of an Award may also be
delivered in an electronic medium and may be limited to a notation on the
books
and records of the Company and may include electronic signatures if approved
by
the Committee. The Company may deliver by email or other electronic
means (including posting on a web site maintained by the Company or by a
third
party under contract with the Company) all documents relating to the Plan
or any
Award thereunder (including without limitation, prospectuses required by
the
SEC) and all other documents that the Company is required to deliver to its
security holders (including without limitation, annual reports and proxy
statements). Evidence required of Participant under the Plan may be
by certificate, affidavit, document or other information which the person
acting
on it considers pertinent and reliable, and signed, made or presented by
the
proper party or parties.
4.10 Limitation
of Implied Rights.
(a) No
Collateral or Secured Interest. Neither a Participant
nor any other person shall, by reason of the Plan, acquire any right in or
title
to any assets, funds or property of the Company or any Related Company
whatsoever, including, without limitation, any specific funds, assets, or
other
property which the Company or any Related Company, in their sole discretion,
may
set aside in anticipation of a liability under the Plan. Each Participant
shall
have only a contractual right to the stock payable under the Plan, unsecured
by
any assets of the Company or any Related Company. Nothing contained in the
Plan
shall constitute a guarantee that the assets of such companies shall be
sufficient to pay any benefits to any person.
(b) No
Guarantee of Employment. The Plan does not constitute a
contract of employment, and the receipt of any Award or option grant will
not
give any employee the right to be retained in the employ of the Company or
any
Related Company, nor any right or claim to any benefit under the Plan, unless
such right or claim has specifically accrued under the terms of the Plan.
Except
as otherwise provided in the Plan, no Award under the Plan shall confer
upon the holder thereof any right as a shareholder of the Company prior to
the
date on which the individual fulfills all conditions for receipt of such
rights.
4.11 Action
by Company or Related Company. Any action required or
permitted to be taken by the Company or any Related Company shall be by
resolution of its Board, or by action of one or more members of the Board
(including a committee of the Board) who are duly authorized to act for the
Board, or (except to the extent prohibited by applicable law or applicable
rules
of any stock exchange) by a duly authorized officer of the Company.
4.12 Change
of Control. Unless otherwise set forth in an applicable
option agreement or Award agreement, upon a Change in Control the Committee
may,
in its discretion, revise, alter, amend or modify any option agreement or
Award
in any manner it deems appropriate.
4.13 Leave
of Absence. A Participant will not
cease to be an employee in the case of any leave of absence approved by the
Company. For an Incentive Stock Option, no such leave may exceed 90
days unless reemployment upon expiration of such leave is guaranteed by statute
or contract. If reemployment upon expiration of a leave of absence
approved by the Company is not so guaranteed, then three (3) months following
the 91st day of such leave any Incentive Stock Option held by the Participant
will cease to be treated as an Incentive Stock Option and will be treated
for
tax purposes as a Non-Qualified Stock Option.
SECTION
5
TAXES
5.1 Withholding.
(a) General.
Regardless of any action the Company takes with respect to
any or
all income tax, social security, payroll tax, payment on account, other
tax-related withholding or information reporting (“Tax-Related
Items”), the Participant acknowledges and agrees that the ultimate
liability for all Tax-Related Items legally due remains the Participant’s
responsibility and that the Company (i) makes no representations nor
undertakings regarding the treatment of any Tax-Related Items in connection
with
any aspect of an Award; and (ii) does not commit to structure the terms or
any
aspect of an Award granted hereunder to reduce or eliminate the Participant’s
liability for Tax-Related Items. The Company shall have no obligation
to deliver Award Shares or release Award Shares from an escrow or permit
a
transfer of Award Shares until the Participant has satisfied those tax
withholding obligations. The Participant accepts this requirement as a condition
of her or her receipt of the Award. To the extent any payment in satisfaction
of
Awards is made in cash, the payment will be reduced by an amount sufficient
to
satisfy all tax withholding requirements.
(b) Method
of
Payment. The
Participant shall pay any required withholding using the forms of consideration
described in Section 2.5(h). If the Committee permits Shares to be
withheld from the Award to satisfy applicable withholding obligations, the
Fair
Market Value of the Shares withheld, as determined as of the date of
withholding, shall not exceed the amount determined by the applicable minimum
statutory withholding rates to the extent the Committee determines such limit
is
necessary or advisable in light of generally accepted accounting
principles.
5.2 Reporting
of Dispositions. Any Participant that acquires
Shares under an Incentive Stock Option shall promptly notify the Committee,
following such procedures as the Committee may require, of the sale or other
disposition of any of those Option Shares if the disposition occurs during:
(a)
the longer of two years after the grant date of the Incentive Stock Option
and
one year after the date the Incentive Stock Option was exercised, or (b)
such
other period as the Administrator has established.
5.3 Compliance
with Code Section 409A. Notwithstanding any provision of
this Agreement to the contrary, if one or more of the payments or benefits
received or to be received by a Participant pursuant to an Award would
constitute deferred compensation subject to Section 409A of the Code and
would
cause the Participant to incur any penalty tax or interest under Section
409A of
the Code or any regulations or Treasury guidance promulgated thereunder,
the
Company may reform such provision to maintain to the maximum extent practicable
the original intent of the applicable provision without violating the provisions
of Section 409A of the Code. If no reasonably practicable reformation
would avoid the imposition of any penalty tax or interest under Section 409A
of
the Code, no payment or benefit will be provided under the Award and the
Award
will be deemed null, void and of no force and effect, and the Company shall
have
no further obligation with respect to the Award or the failure to issue any
Shares or other compensation hereunder.
SECTION
6
COMMITTEE
6.1 Administration.
The authority to control and manage the operation and administration of the
Plan
shall be vested in a committee of the members of the Board who are “independent
directors”, as determined under Rule 16b-3 of the Securities Exchange Act of
1934 or any successor rule, Section 162(m) of the Code, and any rules and
regulations of the stock exchange on which the Company’s Shares are
listed. The Board of Directors of the Company has designated the
Compensation Committee of the Board, comprised of not less than two (2) members,
to be responsible for administering the Plan.
6.2 Selection
of Committee. The Committee shall be selected by
the Board.
6.3 Powers
of Committee. The authority to manage and control the operation and
administration of the Plan shall be vested in the Committee, subject to the
following:
(a) Grant
of Awards. Subject to the provisions of the Plan, the
Committee will have the authority and discretion to select from among the
Eligible Employees or Eligible Directors those persons who shall receive
Awards,
to determine the time or times of receipt, to determine the types of Awards
and
the number of Shares covered by the Awards, to establish the terms, conditions,
performance criteria, restrictions, and other provisions of such Awards,
and to
cancel or suspend Awards. In making such Award determinations, the Committee
may
take into account the nature of services rendered by the individual, the
individual’s present and potential contribution to the Company’s success and
such other factors as the Committee deems relevant.
(b) Section
162(m) Limits. Subject to the provisions of the Plan,
the Committee will have the authority and discretion to determine the extent
to
which Awards under the Plan will be structured to conform to the requirements
applicable to performance-based compensation as described in Section 162(m)
of
the Code and to take such action, establish such procedures
and impose such restrictions at the time such Awards are granted as the
Committee determines to be necessary or appropriate to conform to such
requirements.
(c) Interpretation
of Plan. The Committee will have the authority and
discretion to interpret the Plan, to establish, amend, and rescind any rules
and
regulations relating to the Plan, to determine the terms and provisions of
any
agreements made pursuant to the Plan and to make all other determinations
that
may be necessary or advisable for the administration of the Plan.
(d) Final
Authority. Any interpretation of the Plan by the
Committee and any decision made by it under the Plan is final and
binding.
(e) Time
of Grant. Except as otherwise expressly provided in the
Plan, where the Committee is authorized to make a determination with respect
to
any Award, such determination shall be made at the time the Award is made,
except that the Committee may reserve the authority to have such determination
made by the Committee in the future (but only if such reservation is made
at the
time the Award is granted and is expressly stated in the Agreement reflecting
the Award).
(f) Action
by Committee. In controlling and managing the operation
and administration of the Plan, the Committee shall act by a majority of
its
then members, by meeting or by writing filed without a meeting. The Committee
shall maintain and keep adequate records concerning the Plan and concerning
its
proceedings and acts in such form and detail as the Committee may
decide.
(g) Delegation
by Committee. Except to the extent prohibited by applicable law or
the applicable rules of a stock exchange, the Committee may allocate all
or any
portion of its responsibilities and powers to any one or more of its members
and
may delegate all or any part of its responsibilities and powers to any person
or
persons selected by it. Any such allocation or delegation may be revoked
by the
Committee at any time.
Notwithstanding
anything to the
contrary herein, if the Committee cannot act or make a determination, then
the
Board shall also be entitled to take such action or make such
determination.
6.4 Information
to be Furnished to Committee. The Company and Related
Companies shall furnish the Committee with such data and information as may
be
required for it to discharge its duties. The records of the Company and Related
Companies as to an employee’s or Participant’s employment, termination of
employment, leave of absence, reemployment and compensation shall be conclusive
on all persons unless determined to be incorrect. Participants and other
persons
entitled to benefits under the Plan must furnish the Committee such evidence,
data or information as the Committee considers desirable to carry out the
terms
of the Plan.
SECTION
7
AMENDMENT
AND TERMINATION
7.1 Amendment
and Termination. The Board may at any time amend,
suspend, or terminate this Plan.
7.2 Stockholder
Approval. The Company shall obtain the approval of the
Company’s shareholders for any amendment to this Plan if shareholder approval is
necessary to comply with any applicable law or with the requirements applicable
to the grant of Awards intended to be Incentive Stock Options. For
Stock Awards to continue to be eligible to qualify as “performance-based
compensation” under Code Section 162(m), the Company’s shareholders must
re-approve the material terms of the performance goals included in the Plan
by
the date of the first stockholder meeting that occurs in the fifth year
following the year in which the shareholders first approved the
Plan. The Board may also, but need not, require that the Company’s
shareholders approve any other amendments to this Plan.
7.3 Effect. No
amendment, suspension, or termination of this Plan, and no modification of
any
Award even in the absence of an amendment, suspension, or termination of
this
Plan, shall impair any existing contractual rights of any Participant unless
the
affected Participant consents to the amendment, suspension, termination,
or
modification. Notwithstanding anything herein to the contrary, no
such consent shall be required if the Committee determines, in its sole and
absolute discretion, that the amendment, suspension, termination, or
modification: (a) is required or advisable in order for the Company,
this Plan or the Award to satisfy applicable law, to meet the requirements
of
any accounting standard or to avoid any adverse accounting treatment, or
(b) in
connection with any transaction or event described in Section 4.2, is in
the
best interests of the Company or its shareholders.
The
Committee may, but need not, take
the tax or accounting consequences to affected Participants into consideration
in acting under this Section 7.3. Those decisions shall be final,
binding and conclusive. Termination of this Plan shall not affect the
Committee’s ability to exercise the powers granted to it under this Plan with
respect to Awards granted before the termination of Shares issued under such
Awards even if those Shares are issued after the termination.
SECTION
8
DEFINED
TERMS
For
purposes of the Plan, the terms listed below shall be defined as
follows:
(a) Award.
The term “Award” or “Awards” shall mean any award or benefit granted to any
Participant made by the Committee under the Plan, including, without limitation,
the grant of Options or Stock Awards. The Committee shall determine
the type or types of Awards to be made to each Participant under the Plan
and
shall approve the terms and conditions governing such Awards. Awards
may be granted singly, in compensation or in tandem so that the settlement
or
payment of one automatically reduces or cancels the other. Awards may
also be made in combination or in tandem with, in replacement of, as
alternatives to, or as the payment form for, grants or rights under any other
employee or compensation plan of the Company, including the Plan of any acquired
entity. Nothing in this Plan shall authorize the Committee to grant
an automatic reload option that provides for the automatic award of additional
stock options upon the exercise of such Awards.
(b) Board.
The term “Board” shall mean the Board of Directors of the
Company.
(c) Change
of Control. The term “Change of Control”
means in the event that:
(1) Any
person (as such term is used in Section 13 of the Exchange Act and the rules
and
regulations thereunder and including any affiliate or associate of such person,
as defined in Rule 12b-2 under said Exchange Act, and any person acting in
concert with such person) directly or indirectly acquires or otherwise becomes
entitled to vote more than fifty-five percent (50%) of the voting power entitled
to be cast at elections for directors (“Voting Power”) of the
Company; or
(2) There
occurs any merger or consolidation of the Company, or any sale, lease or
exchange of all or any substantial part of the consolidated assets of the
Company and its subsidiaries to any other person or, in the case of a merger
or
consolidation, the holders of outstanding stock of the Company entitled to
vote
in elections of directors immediately before such merger or consolidation
(excluding any affiliate) hold less than fifty percent (50%) of the Voting
Power
of the survivor of such merger or consolidation or its parent; or in the
case of
any such sale, lease or exchange, the Company does not own at least 50% of
the
Voting Power of the acquiring entity or person; or
(3) Individuals
who, on the date this Plan is adopted by the Board, are members of the Board
(the “Incumbent Board”) cease for any reason to constitute at
least a majority of the members of the Board; provided, however, that
if the appointment or election (or nomination for election) of any new Board
member was approved or recommended by a majority vote of the members of the
Incumbent Board then still in office, such new member shall, for purposes
of
this Plan, be considered as a member of the Incumbent Board.
The
term
Change in Control shall not include a sale of assets, merger or other
transaction effective exclusively for the purpose of changing the domicile
of
the Company.
Notwithstanding
the foregoing or any other provisions in this Plan, the definition of Change
in
Control (or any analogous term) in an individual written agreement between
the
Company or any Affiliate and the Participant shall supersede the foregoing
definition with respect to Stock Awards subject to such agreement (it being
understood, however, that if no definition of Change in Control or any analogous
term is set forth in such an individual written agreement, the foregoing
definition shall apply.
(d) Code. The
term “Code” means the Internal Revenue Code of 1986, as
amended. A reference to any provision of the Code shall include reference
to any
successor provision of the Code.
(e) Covered
Employee. The term “Covered Employee”
means any person who is a covered employee
within the meaning of Section
162(m)(3) of the Code.
(f) Committee. The
term “Committee” shall mean the members of the duly constituted
Compensation Committee of the Company, consisting of independent members
of the
Board that satisfy the provisions of Rule 16b-3 of the Exchange Act and,
if
applicable, Section 162(m) of the Code, and any rules and regulations of
the
stock exchange on which the Company’s Shares are listed.
(g) Consultant. The
term “Consultant” means any person, including an advisor
engaged by the Company or a Related Party to render consulting or advisory
services and who is compensated for such services. However, the term
“Consultant” shall not include directors who are not compensated by the Company
for their service as a director, and the payment of a director’s fee by the
Company for services as a director shall not cause a director to be considered
a
“Consultant” for purposes of the Plan.
(h) Disability. The
term “Disability” shall mean the inability of a Participant to
engage in any substantial, gainful activity by reason of any medically
determinable physical or mental impairment within the meaning of Section
22(e)(3) of the Code.
(i) Domestic
Relations Order. The term “Domestic Relations
Order” means a “domestic relations order” as defined in, and otherwise
meeting the requirements of, Section 414(p) of the Code, except that reference
to a “plan” in that definition shall be to this Plan.
(j) Effective
Date. The term “Effective Date” means
the date the shareholders of the Company approve the Plan. In the
event the shareholders do not approve the Plan, the Plan shall be null and
void
and no terms of the Plan shall take effect.
(k) Eligible
Employee or Eligible Director. The term
“Eligible Employee” or “Eligible Director”
shall mean any employee
or director of the Company or a Related Company that
performs key services for such Company or a Related Company. For any
incentive stock options granted under the Plan, Eligible Employee must be
deemed
to be a key executive or management employee of the Company or a Related
Company.
(l) Exchange
Act. The term “Exchange Act” means the
Securities Exchange Act of 1934, as amended.
(m) Fair
Market Value. For purposes of determining the “Fair Market
Value” of a share of Stock, the following rules shall
apply:
(1) Listed
Stock. If the Shares are traded on any established stock
exchange or quoted on a national market system, Fair Market Value shall be
the
closing sales price for the Shares as quoted on that stock exchange or system
for the date the value is to be determined (the “Pricing Date”)
as reported in The Wall Street Journal or a similar
publication. If no sales are reported as having occurred on the
Pricing Date, Fair Market Value shall be that closing sales price for the
last
preceding trading day on which sales of Shares are reported as having
occurred. If no sales are reported as having occurred during the five
trading days before the Pricing Date, Fair Market Value shall be the closing
bid
for Shares on the Pricing Date (or on the last preceding date on which a
closing
bid for the Shares was made). If Shares are listed on multiple
exchanges or systems, Fair Market Value shall be based on sales or bid prices
on
the primary exchange or system on which Shares are traded or
quoted.
(2) Stock
Quoted by Securities Dealer. If Shares are regularly
quoted by a recognized securities dealer but selling prices are not reported
on
any established stock exchange or quoted on a national market system, Fair
Market Value shall be the mean between the high bid and low asked prices
on the
Pricing Date. If no prices are quoted for the Pricing
Date, Fair Market Value shall be the mean between the high bid and low asked
prices on the last preceding trading day on which any bid and asked prices
were
quoted.
(3) No
Established Market. If Shares are not traded on any
established stock exchange or quoted on a national market system and are
not
quoted by a recognized securities dealer, and unless otherwise required by
applicable law, the Committee (following guidelines established by the Board
or
Committee) will determine Fair Market Value in good faith using any reasonable
valuation method. The Committee will consider the following factors,
and any others it considers significant, in determining Fair Market
Value: (i) the price at which other securities of the Company have
been issued to purchasers other than employees, directors, or consultants;
(ii)
the Company’s stockholder’s equity, prospective earning power, dividend-paying
capacity, present value of future cash flows, and value of tangible and
intangible assets, if any; and (iii) any other relevant factors, including
the
economic outlook for the Company and the Company’s industry, the Company’s
position in that industry, the Company’s goodwill and other intellectual
property, and the values of securities of other businesses in the same
industry.
(n) Non-Employee
Director. The term “Non-Employee
Director” means a Director who either (i) is not currently an employee
or officer of the Company or its parent or a subsidiary, does not receive
compensation, either directly or indirectly, from the Company or its parent
or a
subsidiary, for services rendered as a consultant or in any capacity other
than
as a Director (except for an amount as to which disclosure would not be required
under Item 404(a) of Regulation S-K promulgated pursuant to the Securities
Act
(“Regulation S-K”)), does not possess an interest in any other transaction for
which disclosure would be required under Item 404(a) of Regulation S-K, and
is
not engaged in a business relationship for which disclosure would be required
pursuant to Item 404(b) of Regulation S-K; or (ii) is otherwise considered
a
“non-employee director” for purposes of Rule 16b-3.
(o) Option
Agreement. The term “Option Agreement”
means a written agreement between the Company
and an Optionholder evidencing the
terms and conditions of an individual Option grant. Each Option
Agreement shall be subject to the terms and conditions of the Plan.
(p) Outside
Director. The term “Outside Director”
means a Director who either (i) is not a current
employee of the Company or an
“affiliated corporation” (within the meaning of Treasury Regulations promulgated
under Section 162(m) of the Code), is not a former employee of the Company
or an
“affiliated corporation” who receives compensation for prior services (other
than benefits under a tax-qualified retirement plan) during the taxable year,
has not been an officer of the Company or an “affiliated corporation”, and does
not receive remuneration from the Company or an “affiliated corporation,” either
directly or indirectly, in any capacity other than as a Director or (ii)
is
otherwise considered an “outside director” for purposes of Section 162(m) of the
Code.
(q) Participant. The
term “Participant” means those persons that have been granted
an Option or Award by the Committee under the terms of the Plan.
(r) Performance
Measures. The term “Performance
Measures” means those criteria established by the Committee to measure
individual or Company performance, including
relevant standards imposed to compare Company performance against the results
of
comparable companies and any individually designed and measurement standards
selected by the Company.
(s) Related
Company or Related Companies. For purposes of this Agreement, the
term “Related Company” means (i) any corporation, partnership, joint venture or
other entity during any period in which it owns, directly or indirectly,
at
least fifty percent (50%) of the voting power of all classes of stock of
the
Company (or successor to the Company) entitled to vote; and (ii) any
corporation, partnership, joint venture or other entity during any period
in
which at least a fifty percent voting or profits interest is owned, directly
or
indirectly, by the Company, by any entity that is a successor to the Company,
or
by any entity that is a Related Company by reason of clause (i) next
above.
(t) Retirement. The
term “Retirement” means the age or years of service
requirements established by the Committee to be used in determining the
exercisability of any Option and vesting of such Option.
(u) Stock
or Shares. The term “Stock” or
“Shares” shall mean Shares of common
stock of the
Company.
(v) Stock
Award. The term “Stock Award” is an
award made in stock or denominated in units of stock. All or part of
any Stock Award may be subject to conditions established by the Committee,
and
set forth in the Award Agreement, which may include, but is not limited to,
continuous service with the Company, achievement of specific business
objectives, and other measurement of individual, business unit, or Company
performance.
(w) Ten
Percent Shareholder. The term
“Ten Percent Shareholder” means is any person who,
directly or
by attribution under Section 424(d) of the Code, own shares possessing more
than
ten percent of the total combined voting power of all classes of stock of
the
Company or any Related Company on the date of grant.
(x) Vested
Option. The term “Vested Option” means
an option that is not subject to forfeiture and may be exercised by the
Participant in accordance with its terms. For purposes of the Plan, a
Vested Option may vest over a period of time in incremental amounts as
determined on the basis of performance measures or completion of a period
of
service.