UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
-------------------
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of Earliest Event Reported): September 29, 2005
FREQUENCY ELECTRONICS, INC.
(Exact name of registrant as specified in its charter)
Delaware 1-8061 11-1986657
(State or other jurisdiction (Commission (I.R.S. Employer
of incorporation) File Number) Identification No.)
55 Charles Lindbergh Blvd., Mitchel Field, NY 11553
(Address of principal executive offices) (Zip Code)
(516) 794-4500
(Registrant's telephone number, including area code)
NONE
(Former name, address and fiscal year, if changed since last report)
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Check the appropriate box below if the Form 8-K filing is intended to
simultaneously satisfy the filing obligation of the registrant under any of the
following provisions (see General Instruction A.2. below):
|_| Written communications pursuant to Rule 425 under the Securities Act (17
CFR 230.425)
|_| Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR
240.14a-12)
|_| Pre-commencement communications pursuant to Rule 14d-2(b) under the
Exchange Act (17 CFR 240.14d-2(b))
|_| Pre-commencement communications pursuant to Rule 13e-4(c) under the
Exchange Act (17 CFR 240.13e-4(c))
Page 1 of 22 pages
ITEM 1.01. ENTRY INTO A MATERIAL DEFINITIVE AGREEMENT
On September 29, 2005, the Stockholders of Frequency Electronics, Inc. (the
"Company") approved the Frequency Electronics, Inc. 2005 Stock Award Plan (the
"Plan"). The plan became effective as of June 23, 2005 and will remain in effect
for no more than ten years from the date of the later of (i) the Effective Date
and (ii) the date an increase in the number of shares reserved for issuance
under the Plan is approved by the Company's Board of Directors (the "Board").
The Board has full discretion and authority to determine the employees and
directors eligible to participate in the Plan and the times and types of awards
to be granted. Under the Plan, the Board may grant awards of non-qualified stock
options, incentive stock options, stock appreciation rights, restricted stock,
stock units, stock granted as a bonus or in lieu of another award, dividend
equivalent, or other stock-based or performance awards. A total of 400,000
shares of the Company's common stock have been reserved for issuance under the
Plan, as may be adjusted by the terms of the Plan.
Following stockholder approval of the Plan, the Plan was amended to
prohibit the repricing of any options, other than in connection with a
capitalization adjustment, unless stockholder approval is obtained.
A copy of the Plan, as amended, is attached hereto as Exhibit 10.1 and is
incorporated herein by reference. Additional information about the Plan can also
be found in the Company's definitive proxy statement on Schedule 14A for the
Annual Meeting of Stockholders, as filed with the Securities and Exchange
Commission on August 26, 2005, in the section of the proxy statement entitled
"Approval of the Frequency Electronics, Inc. 2005 Stock Award Plan."
ITEM 9.01 (c) EXHIBITS.
10.1 Frequency Electronics, Inc. 2005 Stock Award Plan, as amended
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
FREQUENCY ELECTRONICS, INC.
By: /s/ Alan Miller
---------------
Alan Miller
Chief Financial Officer
and Treasurer
Dated: October 4, 2005
Exhibit 10.1
Frequency Electronics, Inc.
2005 Stock Award Plan
1. Purpose. The purpose of this 2005 Stock Award Plan (the "Plan") is to
assist Frequency Electronics, Inc., a Delaware corporation (the "Company") and
its Related Entities in attracting, motivating, retaining and rewarding
high-quality Employees, officers, Directors and Consultants by enabling such
persons to acquire or increase a proprietary interest in the Company in order to
strengthen the mutuality of interests between such persons and the Company's
shareholders, and providing such persons with annual and long-term performance
incentives to expend their maximum efforts in the creation of shareholder value.
The Plan is intended to qualify certain compensation awarded under the Plan for
tax deductibility under Section 162(m) of the Code (as hereafter defined) to the
extent deemed appropriate by the Committee (or any successor committee) of the
Board.
2. Definitions. For purposes of the Plan, the following terms shall be
defined as set forth below, in addition to such terms defined in Section 1
hereof.
(a) "Applicable Laws" means the requirements relating to the
administration of equity compensation plans under U.S. state corporate
laws, U.S. federal and state securities laws, the Code, the rules and
regulations of any stock exchange upon which the Common Stock is listed and
the applicable laws of any foreign country or jurisdiction where Awards are
granted under the Plan.
(b) "Award" means any award granted pursuant to the terms of this Plan
including, an Option, Stock Appreciation Right, Restricted Stock, Stock
Units, Stock granted as a bonus or in lieu of another award, Dividend
Equivalent, Other Stock-Based Award or Performance Award, together with any
other right or interest, granted to a Participant under the Plan.
(c) "Beneficiary" means the person, persons, trust or trusts which
have been designated by a Participant in his or her most recent written
beneficiary designation filed with the Committee to receive the benefits
specified under the Plan upon such Participant's death or to which Awards
or other rights are transferred if and to the extent permitted under
Section 10(b) hereof. If, upon a Participant's death, there is no
designated Beneficiary or surviving designated Beneficiary, then the term
Beneficiary means the person, persons, trust or trusts entitled by will or
the laws of descent and distribution to receive such benefits.
(d) "Beneficial Owner", "Beneficially Owning" and "Beneficial
Ownership" shall have the meanings ascribed to such terms in Rule 13d3
under the Exchange Act and any successor to such Rule.
(e) "Board" means the Company's Board of Directors.
(f) "Cause" shall, with respect to any Participant, have the
equivalent meaning (or the same meaning as "cause" or "for cause") set
forth in any employment agreement between the Participant and the Company
or a Related Entity or, in the absence of any such agreement, such term
shall mean (i) the failure by the Participant to perform his or her duties
as assigned by the Company (or a Related Entity) in a reasonable manner,
(ii) any violation or breach by the Participant of his or her employment
agreement with the Company (or a Related Entity), if any, (iii) any
violation or breach by the Participant of his or her confidential
information and invention assignment agreement with the Company (or a
Related Entity), if any, (iv) any act by the Participant of dishonesty or
bad faith with respect to the Company (or a Related Entity), (v) any
material violation or breach by the Participant of the Company's or a
Related Entity's policy for employee conduct, if any, (vi) any act by the
Participant of dishonesty or bad faith with respect to the Company (or a
Related Entity), (vii) use of alcohol, drugs or other similar substances
affecting the Participant's work performance, or (viii) the commission by
the Participant of any act, misdemeanor, or crime reflecting unfavorably
upon the Participant or the Company. The good faith determination by the
Committee of whether the Participant's Continuous Service was terminated by
the Company for "Cause" shall be final and binding for all purposes
hereunder.
(g) "Change in Control" means and shall be deemed to have occurred on
the earliest of the following dates:
(i) the date on which any "person" (as such term is used in
Sections 13(d) and 14(d) of the Exchange Act) obtains "beneficial
ownership" (as defined in Rule 13d-3 of the Exchange Act) or a
pecuniary interest fifty percent (50%) or more of the combined voting
power of the Company's then outstanding securities ("Voting Stock");
(ii) the consummation of a merger, consolidation, reorganization
or similar transaction other than a transaction: (1) (a) in which
substantially all of the holders of Company's Voting Stock hold or
receive directly or indirectly fifty percent (50%)or more of the
voting stock of the resulting entity or a parent company thereof, in
substantially the same proportions as their ownership of the Company
immediately prior to the transaction; or (2) in which the holders of
Company's capital stock immediately before such transaction will,
immediately after such transaction, hold as a group on a fully diluted
basis the ability to elect at least a majority of the directors of the
surviving corporation (or a parent company);
(iii) there is consummated a sale, lease, exclusive license or
other disposition of all or substantially all of the consolidated
assets of the Company and its Subsidiaries, other than a sale, lease,
license or other disposition of all or substantially all of the
consolidated assets of the Company and its Subsidiaries to an entity,
fifty percent (50%) or more of the combined voting power of the voting
securities of which are owned by shareholders of the Company in
substantially the same proportions as their ownership of the Company
immediately prior to such sale, lease, license or other disposition;
or
(iv) individuals who, on the date this Plan is adopted by the
Board, are Directors (the "Incumbent Board") cease for any reason to
constitute at least a majority of the Directors; provided, however,
that if the appointment or election (or nomination for election) of
any new Director 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.
For purposes of determining whether a Change in Control has occurred, a
transaction includes all transactions in a series of related transactions, and
terms used in this definition but not defined are used as defined in the Plan.
The term Change in Control shall not include a sale of assets, merger or other
transaction effected exclusively for the purpose of changing the domicile of the
Company.
Notwithstanding the foregoing or any other provision of this Plan, the
definition of Change in Control (or any analogous term) in an individual written
agreement between the Company and the Participant shall supersede the foregoing
definition with respect to 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).
(h) "Code" means the Internal Revenue Code of 1986, as amended from
time to time, including regulations thereunder and successor provisions and
regulations thereto.
(i) "Committee" means a committee designated by the Board to
administer the Plan with respect to at least a group of Employees,
Directors or Consultants.
(j) "Consultant" means any person (other than an Employee or a
Director, solely with respect to rendering services in such person's
capacity as a director) who is engaged by the Company or any Related Entity
to render consulting or advisory services to the Company or such Related
Entity.
(k) "Continuous Service" means uninterrupted provision of services to
the Company as an Employee, a Director, or a Consultant. Continuous Service
shall not be considered to be interrupted in the case of (i) any approved
leave of absence, (ii) transfers among the Company, any Related Entities,
or any successor entities, as either an Employee, a Director, or a
Consultant, or (iii) any change in status as long as the individual remains
in the service of the Company or a Related Entity as either an Employee, a
Director, or a Consultant (except as otherwise provided in the Option
Agreement). An approved leave of absence shall include sick leave, military
leave, or any other authorized personal leave.
(l) "Corporate Transaction" means the occurrence, in a single
transaction or in a series of related transactions, of any one or more of
the following events:
(i) a sale, lease, exclusive license or other disposition of all
or substantially all, as determined by the Board in its discretion, of
the consolidated assets of the Company and its Subsidiaries;
(ii) a sale or other disposition of more than twenty percent
(20%) of the outstanding securities of the Company; or
(iii) a merger, consolidation, reorganization or similar
transaction, whether or not the Company is the surviving corporation.
(m) "Covered Employee" means an Eligible Person who is a Covered
Employee as specified in Section 7(d) of the Plan.
(n) "Director" means a member of the Board or the board of directors
of any Related Entity.
(o) "Disability" means a permanent and total disability (within the
meaning of Section 22(e) of the Code), as determined by a medical doctor
satisfactory to the Committee.
(p) "Dividend Equivalent" means a right, granted to a Participant
under Section 6(g) hereof, to receive cash, Stock, other Awards or other
property equal in value to dividends paid with respect to a specified
number of Shares, or other periodic payments.
(q) "Effective Date" means the effective date of this Plan, which
shall be the date this Plan is adopted by the Board, subject to the
approval of the shareholders of the Company.
(r) "Eligible Person" means all Employees (including officers),
Directors and Consultants of the Company or of any Related Entity. The
foregoing notwithstanding, only employees of the Company, the Parent, or
any Subsidiary shall be Eligible Persons for purposes of receiving any
Incentive Stock Options. An Employee on leave of absence may be considered
as still in the employ of the Company or a Related Entity for purposes of
eligibility for participation in the Plan.
(s) "Employee" means any person, including an officer or Director, who
is an employee of the Company or any Related Entity. The Payment of a
director's fee by the Company or a Related Entity shall not be sufficient
to constitute "employment" by the Company.
(t) "Exchange Act" means the Securities Exchange Act of 1934, as
amended from time to time, including rules thereunder and successor
provisions and rules thereto.
(u) "Executive Officer" means an executive officer of the Company as
defined under the Exchange Act.
(v) "Fair Market Value" means the fair market value of Stock, Awards
or other property as determined by the Plan Administrator, or under
procedures established by the Plan Administrator. Unless otherwise
determined by the Plan Administrator, the Fair Market Value of Stock as of
any given date, after which the Stock is publicly traded on a stock
exchange or market, shall be the closing sale price per share reported on a
consolidated basis for stock listed on the principal stock exchange or
market on which Stock is traded on the date as of which such value is being
determined or, if there is no sale on that date, then on the last previous
day on which a sale was reported.
(w) "Good Reason" shall, with respect to any Participant, have the
equivalent meaning (or the same meaning as "good reason" or "for good
reason") set forth in any employment agreement between the Participant and
the Company or a Related Entity or, in the absence of any such agreement,
such term shall mean (i) the assignment to the Participant of any duties
inconsistent in any respect with the Participant's position (including
status, offices, titles and reporting requirements), authority, duties or
responsibilities as assigned by the Company (or a Related Entity), or any
other action by the Company (or a Related Entity) which results in a
diminution in such position, authority, duties or responsibilities,
excluding for this purpose an isolated, insubstantial and inadvertent
action not taken in bad faith and which is remedied by the Company (or a
Related Entity) promptly after receipt of notice thereof given by the
Participant; (ii) any failure by the Company (or a Related Entity) to
comply with its obligations to the Participant as agreed upon, other than
an isolated, insubstantial and inadvertent failure not occurring in bad
faith and which is remedied by the Company (or a Related Entity) promptly
after receipt of notice thereof given by the Participant; (iii) the
Company's (or Related Entity's) requiring the Participant to be based at
any office or location more than fifty miles from the location of
employment as of the date of Award, except for travel reasonably required
in the performance of the Participant's responsibilities; (iv) any
purported termination by the Company (or a Related Entity) of the
Participant's Continuous Service otherwise than for Cause as defined in
Section 2(f), or by reason of the Participant's Disability as defined in
Section 2(o), prior to the Expiration Date; or (v) any reduction in the
Participant's base salary.
(x) "Incentive Stock Option" means any Option intended to be
designated as an incentive stock option within the meaning of Section 422
of the Code or any successor provision thereto.
(y) "Non-Employee Director" means a Director of the Company who is not
an Employee.
(z) "Option" means a right granted to a Participant under Section 6(b)
hereof, to purchase Stock or other Awards at a specified price during
specified time periods.
(aa) "Other Stock-Based Awards" means Awards granted to a Participant
pursuant to Section 6(h) hereof.
(bb) "Parent" means any corporation (other than the Company), whether
now or hereafter existing, in an unbroken chain of corporations ending with
the Company, if each of the corporations in the chain (other than the
Company) owns stock possessing 50 percent or more of the combined voting
power of all classes of stock in one of the other corporations in the
chain.
(cc) "Participant" means a person who has been granted an Award under
the Plan which remains outstanding, including a person who is no longer an
Eligible Person.
(dd) "Performance Award" means a right, granted to an Eligible Person
under Section 7 hereof, to receive Awards based upon performance criteria
specified by the Plan Administrator. (ee) "Person" has the meaning ascribed
to such term in Section 3(a)(9) of the Exchange Act and used in Sections
13(d) and 14(d) thereof, and shall include a "group" as defined in Section
12(d) thereof.
(ff) "Plan Administrator" means the Board or any Committee delegated
by the Board to administer the Plan.
(gg) "Prior Stock Plans" means all prior equity compensation plans of
the Company, excluding all of the Company's qualified retirement plans,
including, but not limited to, the 2001 Incentive Stock Option Plan, the
Senior Executive Stock Option Plan, the Restricted Stock Plan, the 1997
Independent Contractor Stock Option Plan, the 1993 Non-Statutory Stock
Option Plan and the 1987 Incentive Stock Plan.
(hh) "Related Entity" means any Parent, Subsidiary and any business,
corporation, partnership, limited liability company or other entity in
which the Company, a Parent or a Subsidiary, directly or indirectly, holds
a substantial ownership interest.
(ii) "Restricted Stock" means Stock granted to a Participant under
Section 6(d) hereof, that is subject to certain restrictions and to a risk
of forfeiture.
(jj) "Rule 16b-3" and "Rule 16a-1(c)(3)" means Rule 16b-3 and Rule
16a-1(c)(3), as from time to time in effect and applicable to the Plan and
Participants, promulgated by the Securities and Exchange Commission under
Section 16 of the Exchange Act.
(kk) "Shares" means the shares of the Company's Common Stock, and the
shares of such other securities as may be substituted (or resubstituted)
for Stock pursuant to Section 10(c) hereof.
(ll) "Stock" means the Company's Common Stock, and such other
securities as may be substituted (or resubstituted) for the Company's
Common Stock pursuant to Section 10(c) hereof.
(mm) "Stock Appreciation Right" means a right granted to a Participant
pursuant to Section 6(c) hereof.
(nn) "Stock Unit" means a right, granted to a Participant pursuant to
Section 6(e) hereof, to receive Shares, cash or a combination thereof at
the end of a specified period of time.
(oo) "Subsidiary" means any corporation (other than the Company),
whether now or hereafter existing, in an unbroken chain of corporations
beginning with the Company, if each of the corporations other than the last
corporation in the unbroken chain owns stock possessing 50 percent or more
of the total combined voting power of all classes of stock in one of the
other corporations in such chain.
3. Administration.
(a) Administration by Board. The Board shall administer the Plan
unless and until the Board delegates administration to a Committee, as
provided in Section 3(c).
(b) Powers of Board. The Board shall have the power, subject to, and
within the limitations of, the express provisions of the Plan:
(i) To determine from time to time which of the persons eligible
under the Plan shall be granted Awards; when and how each Award shall
be granted; what type or combination of types of Award shall be
granted; the provisions of each Award granted (which need not be
identical), including the time or times when a person shall be
permitted to receive Shares pursuant to an Award; and the number of
Shares with respect to which an Award shall be granted to each such
person.
(ii) To construe and interpret the Plan and Awards granted under
it, and to establish, amend and revoke rules and regulations for its
administration. The Board, in the exercise of this power, may correct
any defect, omission or inconsistency in the Plan or in any Stock
Award Agreement, in a manner and to the extent it shall deem necessary
or expedient to make the Plan fully effective.
(iii) To amend the Plan or an Award as provided in Section 10(e).
(iv) To terminate or suspend the Plan as provided in Section
10(e).
(v) Generally, to exercise such powers and to perform such acts
as the Board deems necessary or appropriate to promote the best
interests of the Company and that are not in conflict with the
provisions of the Plan.
(c) Delegation to Committee.
(i) General. The Board may delegate administration of the Plan to
a Committee or Committees of two (2) or more members of the Board, and
the term "Committee" shall apply to any person or persons to whom such
authority has been delegated. If administration is delegated to a
Committee, the Committee shall have, in connection with the
administration of the Plan, the powers theretofore possessed by the
Board, including the power to delegate to a subcommittee any of the
administrative powers the Committee is authorized to exercise (and
references in this Plan to the Board shall thereafter be to the
Committee or subcommittee), subject, however, to such resolutions, not
inconsistent with the provisions of the Plan, as may be adopted from
time to time by the Board. The Board may abolish the Committee at any
time and revest in the Board the administration of the Plan.
(ii) Section 162(m) and Rule 16b-3 Compliance. In the discretion
of the Board, the Committee may 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. In addition, the Board or the Committee may delegate to a
committee of two or more members of the Board the authority to grant
Awards to eligible persons who are either (a) not then Covered
Employees and are not expected to be Covered Employees at the time of
recognition of income resulting from such Award, (b) not persons with
respect to whom the Company wishes to comply with Section 162(m) of
the Code, or (c) not then subject to Section 16 of the Exchange Act.
(d) Effect of Board's Decision. All determinations, interpretations
and constructions made by the Board in good faith shall not be subject to
review by any person and shall be final, binding and conclusive on all
persons.
(e) Arbitration. Any dispute or claim concerning any Award granted (or
not granted) pursuant to the Plan or any disputes or claims relating to or
arising out of the Plan shall be fully, finally and exclusively resolved by
binding and confidential arbitration conducted pursuant to the rules of
Judicial Arbitration and Mediation Services, Inc. ("JAMS") in Nassau
County, New York. The Company shall pay all arbitration fees. In addition
to any other relief, the arbitrator may award to the prevailing party
recovery of its attorneys' fees and costs. By accepting an Award, the
Participant and the Company waive their respective rights to have any such
disputes or claims tried by a judge or jury.
(f) Limitation of Liability. The Committee and the Board, and each
member thereof, shall be entitled to, in good faith, rely or act upon any
report or other information furnished to him or her by any officer or
Employee, the Company's independent auditors, Consultants or any other
agents assisting in the administration of the Plan. Members of the
Committee and the Board, and any officer or Employee acting at the
direction or on behalf of the Plan Administrator, shall not be personally
liable for any action or determination taken or made in good faith with
respect to the Plan, and shall, to the extent permitted by law, be fully
indemnified and protected by the Company with respect to any such action or
determination.
4. Stock Subject to Plan.
(a) Limitation on Overall Number of Shares Subject to Awards. Subject
to adjustment as provided in Section 10(c) hereof, the total number of
Shares reserved and available for delivery in connection with Awards under
the Plan shall be 400,000 Shares. Any Shares delivered under the Plan may
consist, in whole or in part, of authorized and unissued shares or treasury
shares.
(b) Availability of Shares Not Delivered under Awards.
(i) If any Shares subject to an Award are forfeited, expire or
otherwise terminate without issuance of such Shares, or any Award is
settled for cash or otherwise does not result in the issuance of all
or a portion of the Shares subject to such Award, the Shares shall, to
the extent of such forfeiture, expiration, termination, cash
settlement or non-issuance, again be available for Awards under the
Plan, subject to Section 4(b)(iv) below. If any Shares subject to an
award under the Prior Stock Plans are forfeited, expire or otherwise
terminate without issuance of such Shares, or any award under the
Prior Stock Plans is settled for cash or otherwise does not result in
the issuance of all or a portion of the Shares subject to such award,
the Shares shall, to the extent of such forfeiture, expiration,
termination, cash settlement or non-issuance, be available for Awards
under the Plan, subject to Section 4(b)(iv) below.
(ii) If any Shares issued pursuant to an Award are forfeited back
to or repurchased by the Company, including, but not limited to, any
repurchase or forfeiture caused by the failure to meet a contingency
or condition required for the vesting of such shares, then the Shares
not acquired under such Award shall revert to and again become
available for issuance under the Plan, subject to Section 4(b)(iv)
below. If any Shares issued pursuant to an award under the Prior Stock
Plans are forfeited back to or repurchased by the Company, including,
but not limited to, any repurchase or forfeiture caused by the failure
to meet a contingency or condition required for the vesting of such
shares, then the Shares not acquired under such award shall become
available for issuance under the Plan, subject to Section 4(b)(iv)
below.
(iii) In the event that any Option or other Award is exercised
through the tendering of Shares (either actually or by attestation) or
by the withholding of Shares by the Company, or withholding tax
liabilities arising from such Option or other Award are satisfied by
the tendering of Shares (either actually or by attestation) or by the
withholding of Shares by the Company, then only the number of Shares
issued net of the Shares tendered or withheld shall be counted for
purposes of determining the maximum number of Shares available for
grant under the Plan, subject to Section 4(b)(iv) below. In the event
that any award granted under the Prior Plans is exercised through the
tendering of Shares (either actually or by attestation) or by the
withholding of Shares by the Company, or withholding tax liabilities
arising from such award granted under the Prior Plans are satisfied by
the tendering of Shares (either actually or by attestation) or by the
withholding of Shares by the Company, then the number of Shares
tendered or withheld shall become available for issuance under the
Plan, subject to Section 4(b)(iv) below.
(iv) Notwithstanding anything in this Section 4(b) to the
contrary and solely for purposes of determining whether Shares are
available for the grant of Incentive Stock Options, the maximum
aggregate number of shares that may be granted under this Plan shall
be determined without regard to any Shares restored pursuant to this
Section 4(b) that, if taken into account, would cause the Plan, for
purposes of the grant of Incentive Stock Options, to fail the
requirement under Code Section 422 that the Plan designate a maximum
aggregate number of shares that may be issued.
(c) Application of Limitations. The limitation contained in this
Section 4 shall apply not only to Awards that are settled by the delivery
of Shares but also to Awards relating to Shares but settled only in cash
(such as cash-only Stock Appreciation Rights). The Plan Administrator may
adopt reasonable counting procedures to ensure appropriate counting, avoid
double counting (as, for example, in the case of tandem or substitute
awards) and make adjustments if the number of Shares actually delivered
differs from the number of shares previously counted in connection with an
Award.
5. Eligibility; Per-Person Award Limitations. Awards may be granted under
the Plan only to Eligible Persons. In each fiscal year during any part of which
the Plan is in effect, an Eligible Person may not be granted an Award under
which more than 200,000 Shares could be received by the Participant, subject to
adjustment as provided in Section 10(c). In addition, the maximum amount that
may be earned as a Performance Award (payable in cash) or other Award (payable
or settled in cash) by any one Participant shall be $1,000,000 for each year of
the performance period.
6. Terms of Awards.
(a) General. Awards may be granted on the terms and conditions set
forth in this Section 6. In addition, the Plan Administrator may impose on
any Award or the exercise thereof, at the date of grant or thereafter
(subject to Section 10(e)), such additional terms and conditions, not
inconsistent with the provisions of the Plan, as the Plan Administrator
shall determine, including terms requiring forfeiture of Awards in the
event of termination of Continuous Service by the Participant and terms
permitting a Participant to make elections relating to his or her Award.
The Plan Administrator shall retain full power and discretion to
accelerate, waive or modify, at any time, any term or condition of an Award
that is not mandatory under the Plan.
(b) Options. The Plan Administrator is authorized to grant Options to
Participants on the following terms and conditions:
(i) Stock Option Agreement. Each grant of an Option shall be
evidenced by a Stock Option Agreement. Such Stock Option Agreement
shall be subject to all applicable terms and conditions of the Plan
and may be subject to any other terms and conditions which are not
inconsistent with the Plan and which the Plan Administrator deems
appropriate for inclusion in a Stock Option Agreement. The provisions
of the various Stock Option Agreements entered into under the Plan
need not be identical.
(ii) Number of Shares. Each Stock Option Agreement shall specify
the number of Shares that are subject to the Option and shall provide
for the adjustment of such number in accordance with Section 10(c)
hereof. The Stock Option Agreement shall also specify whether the
Stock Option is an Incentive Stock Option or a Non-Qualified Stock
Option.
(iii) Exercise Price.
(A) In General. Each Stock Option Agreement shall state the
price at which Shares subject to the Option may be purchased (the
"Exercise Price"), which shall be, with respect to Incentive
Stock Options, not less than 100% of the Fair Market Value of the
Stock on the date of grant. In the case of Non-Qualified Stock
Options, the Exercise Price shall be determined in the sole
discretion of the Plan Administrator; provided, however, that
notwithstanding any other provision of the Plan, any
Non-Qualified Stock Option granted with an exercise price less
than the per Share Fair Market Value on the date of grant shall
be structured to avoid the imposition of any excise tax under
Section 409A of the Code, unless otherwise specifically
determined by the Plan Administrator.
(B) Ten Percent Shareholder. If a Participant owns or is
deemed to own (by reason of the attribution rules applicable
under Section 424(d) of the Code) more than 10% of the combined
voting power of all classes of stock of the Company or any
Related Entity, any Incentive Stock Option granted to such
Participant must have an Exercise Price per share of at least
110% of the Fair Market Value of a share of Stock on the date of
grant.
(iv) Time and Method of Exercise. The Plan Administrator shall
determine the time or times at which or the circumstances under which
an Option may be exercised in whole or in part (including based on
achievement of performance goals and/or future service requirements).
The Plan Administrator may also determine the time or times at which
Options shall cease to be or become exercisable following termination
of Continuous Service or upon other conditions. The Board or the
Committee may determine the methods by which such exercise price may
be paid or deemed to be paid (including, in the discretion of the Plan
Administrator, a cashless exercise procedure), the form of such
payment, including, without limitation, cash, Stock, net exercise,
other Awards or awards granted under other plans of the Company or a
Related Entity, other property (including notes or other contractual
obligations of Participants to make payment on a deferred basis) or
any other form of consideration legally permissible, and the methods
by or forms in which Stock will be delivered or deemed to be delivered
to Participants.
(v) Incentive Stock Options. The terms of any Incentive Stock
Option granted under the Plan shall comply in all respects with the
provisions of Section 422 of the Code. Anything in the Plan to the
contrary notwithstanding, no term of the Plan relating to Incentive
Stock Options (including any Stock Appreciation Rights in tandem
therewith) shall be interpreted, amended or altered, nor shall any
discretion or authority granted under the Plan be exercised, so as to
disqualify either the Plan or any Incentive Stock Option under Section
422 of the Code, unless the Participant has consented in writing to
the change that will result in such disqualification. If and to the
extent required to comply with Section 422 of the Code, Options
granted as Incentive Stock Options shall be subject to the following
special terms and conditions:
(1) the Option shall not be exercisable more than ten years
after the date such Incentive Stock Option is granted; provided,
however, that if a Participant owns or is deemed to own (by
reason of the attribution rules of Section 424(d) of the Code)
more than 10% of the combined voting power of all classes of
stock of the Company or any Parent Corporation and the Incentive
Stock Option is granted to such Participant, the term of the
Incentive Stock Option shall be (to the extent required by the
Code at the time of the grant) for no more than five years from
the date of grant; and
(2) If the aggregate Fair Market Value (determined as of the
date the Incentive Stock Option is granted) of the Shares with
respect to which Incentive Stock Options granted under the Plan
and all other option plans of the Company, its Parent or any
Subsidiary are exercisable for the first time by a Participant
during any calendar year exceeds $100,000, then such
Participant's Incentive Stock Option(s) or portions thereof that
exceed such $100,000 limit shall be treated as Nonstatutory Stock
Options (in the reverse order in which they were granted, so that
the last Incentive Stock Option will be the first treated as a
Nonstatutory Stock Option). This paragraph shall only apply to
the extent such limitation is applicable under the Code at the
time of the grant.
(vi) Repurchase Rights. The Committee and the Board shall have
the discretion to grant Options that are exercisable for unvested
shares of Common Stock. Should the Participant's Continuous Service
cease while holding such unvested shares, the Company shall have the
right to repurchase any or all of those unvested shares, at either (a)
the exercise price paid per share, (b) the fair market value or (c)
the lower of the exercise price paid per share and the fair market
value. The terms upon which such repurchase right shall be exercisable
(including the period and procedure for exercise and the appropriate
vesting schedule for the purchased shares) shall be established by the
Plan Administrator and set forth in the document evidencing such
repurchase right.
(vii) Prohibition on Repricing. Other than pursuant to a
capitalization adjustment under Section 10(c), without approval of the
Company's shareholders, the Plan Administrator shall not be permitted
to (A) lower the exercise price per Share of an Option after it is
granted, (B) cancel an Option when the exercise price per Share
exceeds the Fair Market Value of the underlying Shares in exchange for
(x) another Award or (y) cash, or (C) take any other action with
respect to an Option that may be treated as a repricing.
(c) Stock Appreciation Rights. The Plan Administrator is authorized to
grant Stock Appreciation Rights to Participants on the following terms and
conditions:
(i) Right to Payment. A Stock Appreciation Right shall confer on
the Participant to whom it is granted a right to receive, upon
exercise thereof, the excess of (A) the Fair Market Value of one share
of stock on the date of exercise over (B) the grant price of the Stock
Appreciation Right as determined by the Plan Administrator.
(ii) Other Terms. The Plan Administrator shall determine at the
date of grant or thereafter, the time or times at which and the
circumstances under which a Stock Appreciation Right may be exercised
in whole or in part (including based on achievement of performance
goals and/or future service requirements), the time or times at which
Stock Appreciation Rights shall cease to be or become exercisable
following termination of Continuous Service or upon other conditions,
the method of exercise, method of settlement, form of consideration
payable in settlement, method by or forms in which Stock will be
delivered or deemed to be delivered to Participants, whether or not a
Stock Appreciation Right shall be in tandem or in combination with any
other Award, and any other terms and conditions of any Stock
Appreciation Right. Stock Appreciation Rights may be either
freestanding or in tandem with other Awards. Notwithstanding any other
provision of the Plan, unless otherwise exempt from Section 409A of
the Code or otherwise specifically determined by the Plan
Administrator, each Stock Appreciation Right shall be structured to
avoid the imposition of any excise tax under Section 409A of the Code.
(d) Restricted Stock. The Plan Administrator is authorized to grant
Restricted Stock to Participants on the following terms and conditions:
(i) Grant and Restrictions. Restricted Stock shall be subject to
such restrictions on transferability, risk of forfeiture and other
restrictions, if any, as the Plan Administrator may impose, or as
otherwise provided in this Plan. The restrictions may lapse separately
or in combination at such times, under such circumstances (including
based on achievement of performance goals and/or future service
requirements), in such installments or otherwise, as the Plan
Administrator may determine at the date of grant or thereafter. Except
to the extent restricted under the terms of the Plan and any Award
agreement relating to the Restricted Stock, a Participant granted
Restricted Stock shall have all of the rights of a shareholder,
including the right to vote the Restricted Stock and the right to
receive dividends thereon (subject to any mandatory reinvestment or
other requirement imposed by the Plan Administrator). During the
restricted period applicable to the Restricted Stock, subject to
Section 10(b) below, the Restricted Stock may not be sold,
transferred, pledged, hypothecated, margined or otherwise encumbered
by the Participant.
(ii) Forfeiture. Except as otherwise determined by the Plan
Administrator at the time of the Award, upon termination of a
Participant's Continuous Service during the applicable restriction
period, the Participant's Restricted Stock that is at that time
subject to restrictions shall be forfeited and reacquired by the
Company; provided that the Plan Administrator may provide, by rule or
regulation or in any Award agreement, or may determine in any
individual case, that restrictions or forfeiture conditions relating
to Restricted Stock shall be waived in whole or in part in the event
of terminations resulting from specified causes, and the Plan
Administrator may in other cases waive in whole or in part the
forfeiture of Restricted Stock.
(iii) Certificates for Stock. Restricted Stock granted under the
Plan may be evidenced in such manner, as the Plan Administrator shall
determine. If certificates representing Restricted Stock are
registered in the name of the Participant, the Plan Administrator may
require that such certificates bear an appropriate legend referring to
the terms, conditions and restrictions applicable to such Restricted
Stock, that the Company retain physical possession of the
certificates, that the certificates be kept with an escrow agent and
that the Participant deliver a stock power to the Company, endorsed in
blank, relating to the Restricted Stock.
(iv) Dividends and Splits. As a condition to the grant of an
Award of Restricted Stock, the Plan Administrator may require that any
cash dividends paid on a share of Restricted Stock be automatically
reinvested in additional shares of Restricted Stock or applied to the
purchase of additional Awards under the Plan. Unless otherwise
determined by the Plan Administrator, Stock distributed in connection
with a Stock split or Stock dividend, and other property distributed
as a dividend, shall be subject to restrictions and a risk of
forfeiture to the same extent as the Restricted Stock with respect to
which such Stock or other property has been distributed.
(e) Stock Units. The Plan Administrator is authorized to grant Stock
Units to Participants, which are rights to receive Stock, cash, or a
combination thereof at the end of a specified time period, subject to the
following terms and conditions:
(i) Award and Restrictions. Satisfaction of an Award of Stock
Units shall occur upon expiration of the time period specified for
such Stock Units by the Plan Administrator (or, if permitted by the
Plan Administrator, as elected by the Participant). In addition, Stock
Units shall be subject to such restrictions (which may include a risk
of forfeiture) as the Plan Administrator may impose, if any, which
restrictions may lapse at the expiration of the time period or at
earlier specified times (including based on achievement of performance
goals and/or future service requirements), separately or in
combination, in installments or otherwise, as the Plan Administrator
may determine. Stock Units may be satisfied by delivery of Stock, cash
equal to the Fair Market Value of the specified number of Shares
covered by the Stock Units, or a combination thereof, as determined by
the Plan Administrator at the date of grant or thereafter. Prior to
satisfaction of an Award of Stock Units, an Award of Stock Units
carries no voting or dividend or other rights associated with share
ownership. Notwithstanding any other provision of the Plan, unless
otherwise exempt from Section 409A of the Code or otherwise
specifically determined by the Plan Administrator, each Stock Unit
shall be structured to avoid the imposition of any excise tax under
Section 409A of the Code.
(ii) Forfeiture. Except as otherwise determined by the Plan
Administrator, upon termination of a Participant's Continuous Service
during the applicable time period thereof to which forfeiture
conditions apply (as provided in the Award agreement evidencing the
Stock Units), the Participant's Stock Units (other than those Stock
Units subject to deferral at the election of the Participant) shall be
forfeited; provided that the Plan Administrator may provide, by rule
or regulation or in any Award agreement, or may determine in any
individual case, that restrictions or forfeiture conditions relating
to Stock Units shall be waived in whole or in part in the event of
terminations resulting from specified causes, and the Plan
Administrator may in other cases waive in whole or in part the
forfeiture of Stock Units.
(iii) Dividend Equivalents. Unless otherwise determined by the
Plan Administrator at date of grant, any Dividend Equivalents that are
granted with respect to any Award of Stock Units shall be either (A)
paid with respect to such Stock Units at the dividend payment date in
cash or in shares of unrestricted Stock having a Fair Market Value
equal to the amount of such dividends, or (B) deferred with respect to
such Stock Units and the amount or value thereof automatically deemed
reinvested in additional Stock Units, other Awards or other investment
vehicles, as the Plan Administrator shall determine or permit the
Participant to elect.
(f) Bonus Stock and Awards in Lieu of Obligations. The Plan
Administrator is authorized to grant Stock as a bonus, or to grant Stock or
other Awards in lieu of Company obligations to pay cash or deliver other
property under the Plan or under other plans or compensatory arrangements,
provided that, in the case of Participants subject to Section 16 of the
Exchange Act, the amount of such grants remains within the discretion of
the Committee to the extent necessary to ensure that acquisitions of Stock
or other Awards are exempt from liability under Section 16(b) of the
Exchange Act. Stock or Awards granted hereunder shall be subject to such
other terms as shall be determined by the Plan Administrator.
(g) Dividend Equivalents. The Plan Administrator is authorized to
grant Dividend Equivalents to a Participant entitling the Participant to
receive cash, Stock, other Awards, or other property equal in value to
dividends paid with respect to a specified number of Shares, or other
periodic payments. Dividend Equivalents may be awarded on a free-standing
basis or in connection with another Award. The Plan Administrator may
provide that Dividend Equivalents shall be paid or distributed when accrued
or shall be deemed to have been reinvested in additional Stock, Awards, or
other investment vehicles, and subject to such restrictions on
transferability and risks of forfeiture, as the Plan Administrator may
specify. Notwithstanding any other provision of the Plan, unless otherwise
exempt from Section 409A of the Code or otherwise specifically determined
by the Plan Administrator, each Stock Unit shall be structured to avoid the
imposition of any excise tax under Section 409A of the Code.
(h) Other Stock-Based Awards. The Plan Administrator is authorized,
subject to limitations under applicable law, to grant to Participants such
other Awards that may be denominated or payable in, valued in whole or in
part by reference to, or otherwise based on, or related to, Stock, as
deemed by the Plan Administrator to be consistent with the purposes of the
Plan, including, without limitation, convertible or exchangeable debt
securities, other rights convertible or exchangeable into Stock, purchase
rights for Stock, Awards with value and payment contingent upon performance
of the Company or any other factors designated by the Plan Administrator,
and Awards valued by reference to the book value of Stock or the value of
securities of or the performance of specified Related Entities or business
units. The Plan Administrator shall determine the terms and conditions of
such Awards. Stock delivered pursuant to an Award in the nature of a
purchase right granted under this Section 6(h) shall be purchased for such
consideration (including without limitation loans from the Company or a
Related Entity), paid for at such times, by such methods, and in such
forms, including, without limitation, cash, Stock, other Awards or other
property, as the Plan Administrator shall determine. The Plan Administrator
shall have the discretion to grant such other Awards which are exercisable
for unvested shares of Common Stock. Should the Participant's Continuous
Service cease while holding such unvested shares, the Company shall have
the right to repurchase, at a price determined by the Administrator at the
time of grant, any or all of those unvested shares. The terms upon which
such repurchase right shall be exercisable (including the period and
procedure for exercise and the appropriate vesting schedule for the
purchased shares) shall be established by the Plan Administrator and set
forth in the document evidencing such repurchase right. Cash awards, as an
element of or supplement to any other Award under the Plan, may also be
granted pursuant to this Section 6(h). Notwithstanding any other provision
of the Plan, unless otherwise exempt from Section 409A of the Code or
otherwise specifically determined by the Plan Administrator, each Stock
Unit shall be structured to avoid the imposition of any excise tax under
Section 409A of the Code.
7. Tax Qualified Performance Awards.
(a) Covered Employees. A Committee, composed in compliance with the
requirements of Section 162(m) of the Code, in its discretion, may
determine at the time an Award is granted to an Eligible Person who is, or
is likely to be, as of the end of the tax year in which the Company would
claim a tax deduction in connection with such Award, a Covered Employee,
that the provisions of this Section 7 shall be applicable to such Award.
(b) Performance Criteria. If an Award is subject to this Section 7,
then the lapsing of restrictions thereon and the distribution of cash,
Shares or other property pursuant thereto, as applicable, shall be
contingent upon achievement of one or more objective performance goals.
Performance goals shall be objective and shall otherwise meet the
requirements of Section 162(m) of the Code and regulations thereunder
including the requirement that the level or levels of performance targeted
by the Committee result in the achievement of performance goals being
"substantially uncertain." One or more of the following business criteria
for the Company, on a consolidated basis, and/or for Related Entities, or
for business or geographical units of the Company (except with respect to
the total stockholder return and earnings per share criteria), shall be
used by the Committee in establishing performance goals for such Awards:
(1) earnings per share; (2) revenues or margins; (3) cash flow; (4)
operating margin; (5) return on net assets, investment, capital, or equity;
(6) economic value added; (7) direct contribution; (8) net income; pretax
earnings; earnings before interest and taxes; earnings before interest,
taxes, depreciation and amortization; earnings after interest expense and
before extraordinary or special items; operating income; income before
interest income or expense, unusual items and income taxes, local, state or
federal and excluding budgeted and actual bonuses which might be paid under
any ongoing bonus plans of the Company; (9) working capital; (10)
management of fixed costs or variable costs; (11) identification or
consummation of investment opportunities or completion of specified
projects in accordance with corporate business plans, including strategic
mergers, acquisitions or divestitures; (12) total stockholder return; and
(13) debt reduction. Any of the above goals may be determined on an
absolute or relative basis or as compared to the performance of a published
or special index deemed applicable by the Committee including, but not
limited to, the Standard & Poor's 500 Stock Index or a group of companies
that are comparable to the Company. The Committee shall exclude the impact
of an event or occurrence which the Committee determines should
appropriately be excluded, including without limitation (i) restructurings,
discontinued operations, extraordinary items, and other unusual or
non-recurring charges, (ii) an event either not directly related to the
operations of the Company or not within the reasonable control of the
Company's management, or (iii) a change in accounting standards required by
generally accepted accounting principles.
(c) Performance Period; Timing For Establishing Performance Goals.
Achievement of performance goals in respect of such Performance Awards
shall be measured over a Performance Period no shorter than twelve (12)
months and no longer than five (5) years, as specified by the Committee.
Performance goals shall be established not later than ninety (90) days
after the beginning of any Performance Period applicable to such
Performance Awards, or at such other date as may be required or permitted
for "performance-based compensation" under Section 162(m) of the Code.
(d) Adjustments. The Committee may, in its discretion, reduce the
amount of a settlement otherwise to be made in connection with Awards
subject to this Section 7, but may not exercise discretion to increase any
such amount payable to a Covered Employee in respect of an Award subject to
this Section 7. The Committee shall specify the circumstances in which such
Awards shall be paid or forfeited in the event of termination of Continuous
Service by the Participant prior to the end of a Performance Period or
settlement of Awards.
(e) Committee Certification. No Participant shall receive any payment
under the Plan unless the Committee has certified, by resolution or other
appropriate action in writing, that the performance criteria and any other
material terms previously established by the Committee or set forth in the
Plan, have been satisfied to the extent necessary to qualify as
"performance based compensation" under Section 162(m) of the Code.
8. Certain Provisions Applicable to Awards or Sales.
(a) Stand-Alone, Additional, Tandem, and Substitute Awards. Awards
granted under the Plan may, in the discretion of the Plan Administrator, be
granted either alone or in addition to, in tandem with, or in substitution
or exchange for, any other Award or any award granted under another plan of
the Company, any Related Entity, or any business entity to be acquired by
the Company or a Related Entity, or any other right of a Participant to
receive payment from the Company or any Related Entity. Such additional,
tandem, and substitute or exchange Awards may be granted at any time. If an
Award is granted in substitution or exchange for another Award or award,
the Plan Administrator shall require the surrender of such other Award or
award in consideration for the grant of the new Award. In addition, Awards
may be granted in lieu of cash compensation, including in lieu of cash
amounts payable under other plans of the Company or any Related Entity.
(b) Form and Timing of Payment Under Awards; Deferrals. Subject to the
terms of the Plan and any applicable Award agreement, payments to be made
by the Company or a Related Entity upon the exercise of an Option or other
Award or settlement of an Award may be made in such forms as the Plan
Administrator shall determine, including, without limitation, cash, other
Awards or other property, and may be made in a single payment or transfer,
in installments, or on a deferred basis. The settlement of any Award may be
accelerated, and cash paid in lieu of Stock in connection with such
settlement, in the discretion of the Plan Administrator or upon occurrence
of one or more specified events (in addition to a Change in Control).
Installment or deferred payments may be required by the Plan Administrator
(subject to Section 10(g) of the Plan) or permitted at the election of the
Participant on terms and conditions established by the Plan Administrator.
Payments may include, without limitation, provisions for the payment or
crediting of a reasonable interest rate on installment or deferred payments
or the grant or crediting of Dividend Equivalents or other amounts in
respect of installment or deferred payments denominated in Stock.
(c) Exemptions from Section 16(b) Liability. It is the intent of the
Company that this Plan comply in all respects with applicable provisions of
Rule 16b-3 or Rule 16a-1(c)(3) to the extent necessary to ensure that
neither the grant of any Awards to nor other transaction by a Participant
who is subject to Section 16 of the Exchange Act is subject to liability
under Section 16(b) thereof (except for transactions acknowledged in
writing to be non-exempt by such Participant). Accordingly, if any
provision of this Plan or any Award agreement does not comply with the
requirements of Rule 16b-3 or Rule 16a-1(c)(3) as then applicable to any
such transaction, such provision will be construed or deemed amended to the
extent necessary to conform to the applicable requirements of Rule 16b-3 or
Rule 16a-1(c)(3) so that such Participant shall avoid liability under
Section 16(b).
9. Change in Control; Corporate Transaction.
(a) Change in Control.
(i) The Plan Administrator may, in its discretion, accelerate the
vesting, exercisability, lapsing of restrictions, or expiration of
deferral of any Award, including if we undergo a Change in Control. In
addition, the Plan Administrator may provide in an Award agreement
that the performance goals relating to any Award will be deemed to
have been met upon the occurrence of any Change in Control.
(ii) In addition to the terms of Sections 9(a)(i) above, the
effect of a "change in control," may be provided (1) in an employment,
compensation, or severance agreement, if any, between the Company or
any Related Entity and the Participant, relating to the Participant's
employment, compensation, or severance with or from the Company or
such Related Entity, or (2) in the agreement evidencing the Award.
(b) Corporate Transactions. In the event of a Corporate Transaction,
any surviving corporation or acquiring corporation may either (i) assume or
continue any or all Awards outstanding under the Plan or (ii) substitute
similar stock awards for outstanding Awards (it being understood that
similar awards include, but are not limited to, awards to acquire the same
consideration paid to the shareholders or the Company, as the case may be,
pursuant to the Corporate Transaction). In the event that any surviving
corporation or acquiring corporation does not assume or continue any or all
such outstanding Awards or substitute similar stock awards for such
outstanding Awards, then with respect to Awards that have been not assumed,
continued or substituted, then such Awards shall terminate if not exercised
(if applicable) at or prior to such effective time (contingent upon the
effectiveness of the Corporate Transaction). The Administrator, in its
discretion and without the consent of any Participant, may (but is not
obligated to) either (i) accelerate the vesting of all Awards (and, if
applicable, the time at which such Awards may be exercised) in full or as
to some percentage of the Award to a date prior to the effective time of
such Corporate Transaction as the Administrator shall determine (contingent
upon the effectiveness of each Corporate Transaction) or (ii) provide for a
cash payment in exchange for the termination of an Award or any portion
thereof where such cash payment is equal to the Fair Market Value of the
Shares that the Participant would receive if the Award were fully vested
and exercised (if applicable) as of such date (less any applicable exercise
price). The Administrator, in its sole discretion, shall determine whether
each Award is assumed, continued, substituted or terminated.
With respect to Restricted Stock and any other Award granted under the
Plan that the Company has any reacquisition or repurchase rights, the
reacquisition or repurchase rights for such Awards may be assigned by the
Company to the successor of the Company (or the successor's parent company)
in connection with such Corporate Transaction. In addition, the
Administrator, in its discretion, may (but is not obligated to) provide
that any reacquisition or repurchase rights held by the Company with
respect to such Awards shall lapse in whole or in part (contingent upon the
effectiveness of the Corporate Transaction).
(c) Dissolution or Liquidation. In the event of a dissolution or
liquidation of the Company, then all outstanding Awards shall terminate
immediately prior to the completion of such dissolution or liquidation, and
shares of Common Stock subject to the Company's repurchase option may be
repurchased by the Company notwithstanding the fact that the holder of such
stock is still in Continuous Service.
10. General Provisions.
(a) Compliance With Legal and Other Requirements. The Company may, to
the extent deemed necessary or advisable by the Plan Administrator,
postpone the issuance or delivery of Stock or payment of other benefits
under any Award until completion of such registration or qualification of
such Stock or other required action under any federal or state law, rule or
regulation, listing or other required action with respect to any stock
exchange or automated quotation system upon which the Stock or other
Company securities are listed or quoted, or compliance with any other
obligation of the Company, as the Plan Administrator, may consider
appropriate, and may require any Participant to make such representations,
furnish such information and comply with or be subject to such other
conditions as it may consider appropriate in connection with the issuance
or delivery of Stock or payment of other benefits in compliance with
applicable laws, rules, and regulations, listing requirements, or other
obligations. The foregoing notwithstanding, in connection with a Change in
Control, the Company shall take or cause to be taken no action, and shall
undertake or permit to arise no legal or contractual obligation, that
results or would result in any postponement of the issuance or delivery of
Stock or payment of benefits under any Award or the imposition of any other
conditions on such issuance, delivery or payment, to the extent that such
postponement or other condition would represent a greater burden on a
Participant than existed on the 90th day preceding the Change in Control.
(b) Limits on Transferability; Beneficiaries.
(i) General. Except as provided in the Award agreement, a
Participant may not assign, sell, transfer, or otherwise encumber or
subject to any lien any Award or other right or interest granted under
this Plan, in whole or in part, other than by will or by operation of
the laws of descent and distribution, and such Awards or rights that
may be exercisable shall be exercised during the lifetime of the
Participant only by the Participant or his or her guardian or legal
representative.
(ii) Permitted Transfer of Option. The Plan Administrator, in its
sole discretion, may permit the transfer of an Option (but not an
Incentive Stock Option, or any other right to purchase Stock other
than an Option) as follows: (A) by gift to a member of the
Participant's Immediate Family or (B) by transfer by instrument to a
trust providing that the Option is to be passed to beneficiaries upon
death of the Participant. For purposes of this Section 10(b)(ii),
"Immediate Family" shall mean the Participant's spouse (including a
former spouse subject to terms of a domestic relations order); child,
stepchild, grandchild, child-in-law; parent, stepparent, grandparent,
parent-in-law; sibling and sibling-in-law, and shall include adoptive
relationships. If a determination is made by counsel for the Company
that the restrictions contained in this Section 10(b)(ii) are not
required by applicable federal or state securities laws under the
circumstances, then the Committee or the Board, in its sole
discretion, may permit the transfer of Awards (other than Incentive
Stock Options and Stock Appreciation Rights in tandem therewith) to
one or more Beneficiaries or other transferees during the lifetime of
the Participant, which may be exercised by such transferees in
accordance with the terms of such Award, but only if and to the extent
permitted by the Plan Administrator pursuant to the express terms of
an Award agreement (subject to any terms and conditions which the Plan
Administrator may impose thereon, and further subject to any
prohibitions and restrictions on such transfers pursuant to Rule
16b-3). A Beneficiary, transferee, or other person claiming any rights
under the Plan from or through any Participant shall be subject to all
terms and conditions of the Plan and any Award agreement applicable to
such Participant, except as otherwise determined by the Plan
Administrator, and to any additional terms and conditions deemed
necessary or appropriate by the Plan Administrator.
(c) Adjustments.
(i) Adjustments to Awards. In the event that any dividend or
other distribution (whether in the form of cash, Stock, or other
property), recapitalization, forward or reverse split, reorganization,
merger, consolidation, spin-off, combination, repurchase, share
exchange, liquidation, dissolution or other similar corporate
transaction or event affects the Stock and/or such other securities of
the Company or any other issuer such that a substitution, exchange, or
adjustment is determined by the Plan Administrator to be appropriate,
then the Plan Administrator shall, in such manner as it may deem
equitable, substitute, exchange, or adjust any or all of (A) the
number and kind of Shares which may be delivered in connection with
Awards granted thereafter, (B) the number and kind of Shares by which
annual per-person Award limitations are measured under Section 5
hereof, (C) the number and kind of Shares subject to or deliverable in
respect of outstanding Awards, (D) the exercise price, grant price or
purchase price relating to any Award and/or make provision for payment
of cash or other property in respect of any outstanding Award, and (E)
any other aspect of any Award that the Plan Administrator determines
to be appropriate.
(ii) Other Adjustments. The Committee (and the Board if and only
to the extent such authority is not required to be exercised by the
Committee to comply with Code Section 162(m)) is authorized to make
adjustments in the terms and conditions of, and the criteria included
in, Awards (including Awards subject to performance goals) in
recognition of unusual or nonrecurring events (including, without
limitation, acquisitions and dispositions of businesses and assets)
affecting the Company, any Related Entity or any business unit, or the
financial statements of the Company or any Related Entity, or in
response to changes in applicable laws, regulations, accounting
principles, tax rates and regulations or business conditions or in
view of the Committee's assessment of the business strategy of the
Company, any Related Entity or business unit thereof, performance of
comparable organizations, economic and business conditions, personal
performance of a Participant, and any other circumstances deemed
relevant; provided that no such adjustment shall be authorized or made
if and to the extent that such authority or the making of such
adjustment would cause Options, Stock Appreciation Rights or
Performance Awards granted to Participants designated by the Committee
as Covered Employees and intended to qualify as "performance-based
compensation" under Code Section 162(m) and the regulations thereunder
to otherwise fail to qualify as "performance-based compensation" under
Code Section 162(m) and regulations thereunder.
(d) Taxes. The Company and any Related Entity are authorized to
withhold from any Award granted, any payment relating to an Award under the
Plan, including from a distribution of Stock, or any payroll or other
payment to a Participant, amounts of withholding and other taxes due or
potentially payable in connection with any transaction involving an Award,
and to take such other action as the Plan Administrator may deem advisable
to enable the Company and Participants to satisfy obligations for the
payment of withholding taxes and other tax obligations relating to any
Award. This authority shall include authority to withhold or receive Stock
or other property and to make cash payments in respect thereof in
satisfaction of a Participant's tax obligations, either on a mandatory or
elective basis in the discretion of the Committee.
(e) Changes to the Plan and Awards. The Board may amend, alter,
suspend, discontinue or terminate the Plan, or the Committee's authority to
grant Awards under the Plan, without the consent of shareholders or
Participants. Any amendment or alteration to the Plan shall be subject to
the approval of the Company's shareholders if such shareholder approval is
deemed necessary and advisable by the Board. However, without the consent
of an affected Participant, no such amendment, alteration, suspension,
discontinuance or termination of the Plan may materially and adversely
affect the rights of such Participant under any previously granted and
outstanding Award. The Plan Administrator may waive any conditions or
rights under, or amend, alter, suspend, discontinue or terminate any Award
theretofore granted and any Award agreement relating thereto, except as
otherwise provided in the Plan; provided that, without the consent of an
affected Participant, no such action may materially and adversely affect
the rights of such Participant under such Award.
(f) Limitation on Rights Conferred Under Plan. Neither the Plan nor
any action taken hereunder shall be construed as (i) giving any Eligible
Person or Participant the right to continue as an Eligible Person or
Participant or in the employ of the Company or a Related Entity; (ii)
interfering in any way with the right of the Company or a Related Entity to
terminate any Eligible Person's or Participant's Continuous Service at any
time, (iii) giving an Eligible Person or Participant any claim to be
granted any Award under the Plan or to be treated uniformly with other
Participants and Employees, or (iv) conferring on a Participant any of the
rights of a shareholder of the Company unless and until the Participant is
duly issued or transferred Shares in accordance with the terms of an Award.
(g) Unfunded Status of Awards; Creation of Trusts. The Plan is
intended to constitute an "unfunded" plan for incentive and deferred
compensation. With respect to any payments not yet made to a Participant or
obligations to deliver Stock pursuant to an Award, nothing contained in the
Plan or any Award shall give any such Participant any rights that are
greater than those of a general creditor of the Company; provided that the
Committee may authorize the creation of trusts and deposit therein cash,
Stock, other Awards or other property, or make other arrangements to meet
the Company's obligations under the Plan. Such trusts or other arrangements
shall be consistent with the "unfunded" status of the Plan unless the
Committee otherwise determines with the consent of each affected
Participant. The trustee of such trusts may be authorized to dispose of
trust assets and reinvest the proceeds in alternative investments, subject
to such terms and conditions as the Plan Administrator may specify and in
accordance with applicable law.
(h) Nonexclusivity of the Plan. Neither the adoption of the Plan by
the Board nor its submission to the shareholders of the Company for
approval shall be construed as creating any limitations on the power of the
Board or a committee thereof to adopt such other incentive arrangements as
it may deem desirable including incentive arrangements and awards which do
not qualify under Code Section 162(m).
(i) Fractional Shares. No fractional Shares shall be issued or
delivered pursuant to the Plan or any Award. The Plan Administrator shall
determine whether cash, other Awards or other property shall be issued or
paid in lieu of such fractional shares or whether such fractional shares or
any rights thereto shall be forfeited or otherwise eliminated.
(j) Governing Law. The validity, construction and effect of the Plan,
any rules and regulations under the Plan, and any Award agreement shall be
determined in accordance with the laws of the State of New York without
giving effect to principles of conflicts of laws, and applicable federal
law.
(k) Plan Effective Date and Shareholder Approval; Termination of Plan.
The Plan shall become effective on the Effective Date, subject to
subsequent approval within twelve (12) months of its adoption by the Board
by shareholders of the Company eligible to vote in the election of
directors, by a vote sufficient to meet the requirements of Code Sections
162(m) (if applicable) and 422, Rule 16b-3 under the Exchange Act (if
applicable), applicable Nasdaq requirements, and other laws, regulations,
and obligations of the Company applicable to the Plan. Awards may be
granted subject to shareholder approval, but may not be exercised or
otherwise settled in the event shareholder approval is not obtained. The
Plan shall terminate no later than ten (10) years from the date of the
later of (x) the Effective Date and (y) the date an increase in the number
of shares reserved for issuance under the Plan is approved by the Board (so
long as such increase is also approved by the shareholders).
EXHIBIT A
Plan History
1. Plan adopted by the board of directors on June 23, 2005.
2. Plan approved by the shareholders on September 29, 2005.
3. Plan amended to prohibit repricings (Section 6(b)(vii)) on September 29,
2005.