Community Health Systems, Inc.
2000 STOCK OPTION AND AWARD PLAN
(As Amended and Restated February 25, 2003 and February 23,2005)
The purpose of this Planis to strengthen Community Health Systems, Inc., a Delaware corporation (the Company),and its Subsidiaries by providing an incentive to its and their employees,officers, consultants and directors and thereby encouraging them to devotetheir abilities and industry to the success of the Companys and itsSubsidiaries business enterprises. Itis intended that this purpose be achieved by extending to employees (includingfuture employees who have received a formal written offer of employment),officers, consultants and directors of the Company and its Subsidiaries anadded long-term incentive for high levels of performance and unusual effortsthrough the grant of Incentive Stock Options, Nonqualified Stock Options, StockAppreciation Rights, Performance Units, Performance Shares, Share Awards,Phantom Stock and Restricted Stock (as each term is herein defined).
Forpurposes of the Plan:
2.1 Affiliate means any entity, directly orindirectly, controlled by, controlling or under common control with the Companyor any corporation or other entity acquiring, directly or indirectly, all orsubstantially all the assets and business of the Company, whether by operationof law or otherwise.
2.2 Agreement means the written agreementbetween the Company and an Optionee or Grantee evidencing the grant of anOption or Award and setting forth the terms and conditions thereof.
2.3 Award means a grant of RestrictedStock, Phantom Stock, a Stock Appreciation Right, a Performance Award, a ShareAward or any or all of them.
2.4 Board means the Board of Directors ofthe Company.
2.5 Cause means, except as otherwise setforth herein,
(a) in the case of an Optionee or Granteewhose employment with the Company or a Subsidiary is subject to the terms of anemployment agreement between such Optionee or Grantee and the Company orSubsidiary, which employment agreement includes a definition of Cause, theterm Cause as used in this Plan or any Agreement shall have the meaning setforth in such employment agreement during the period that such employmentagreement remains in effect; and
(b) in all other cases, (i) intentionalfailure to perform reasonably assigned duties, (ii) dishonesty or willfulmisconduct in the performance of duties, (iii) involvement in atransaction in connection with the performance of duties to the Company or anyof its Subsidiaries which transaction is adverse to the interests of theCompany or any of its Subsidiaries and which is engaged in for personal profitor (iv) willful violation of any law, rule or regulation in connectionwith the performance of duties (other than traffic violations or similaroffenses); provided, however, that following aChange in Control clause (i) of this Section 2.5(b) shall not constitute Cause.
2.6 Change in Capitalization means anyincrease or reduction in the number of Shares, or any change (including, butnot limited to, in the case of a spin-off, dividend or other distribution inrespect of Shares, a change in value) in the Shares or exchange of Shares for adifferent number or kind of shares or other securities of the Company oranother corporation, by reason of a reclassification, recapitalization, merger,consolidation, reorganization, spin-off, split-up, issuance of warrants orrights or debentures, stock dividend, stock split or reverse stock split, cashdividend, property dividend, combination or exchange of shares, repurchase ofshares, change in corporate structure or otherwise.
2.7 A Change in Control shall mean theoccurrence of any of the following:
(a) An acquisition (other than directly from theCompany) of any voting securities of the Company (the Voting Securities) byany Person (as the term person is used for purposes of Section 13(d) or14(d) of the Exchange Act), immediately after which such Person has BeneficialOwnership (within the meaning of Rule 13d-3 promulgated under the ExchangeAct) of more than fifty percent (50%) of the then outstanding Shares or thecombined voting power of the Companys then outstanding Voting Securities; provided, however, that in determining whether a Change inControl has occurred pursuant to this Section 2.7(a), Shares or VotingSecurities which are acquired in a Non-Control Acquisition (as hereinafterdefined) shall not constitute an acquisition which would cause a Change inControl. A Non-Control Acquisitionshall mean an acquisition by (i) an employee benefit plan (or a trust forming apart thereof) maintained by (A) the Company or (B) any corporation or otherPerson the majority of the voting power, voting equity securities or equityinterest of which is owned, directly or indirectly, by the Company (forpurposes of this definition, a Related Entity), (ii) the Company or anyRelated Entity, or (iii) any Person in connection with a Non-ControlTransaction (as hereinafter defined);
(b) The individuals who, as of February 23,2005, are members of the Board (the Incumbent Board), cease for any reason toconstitute at least a majority of the members of the Board or, following aMerger (as hereinafter defined) which results in a Parent Corporation (ashereinafter defined), the board of directors of the ultimate ParentCorporation; provided, however, that if theelection, or nomination for election by the Companys common stockholders, ofany new director was approved by a vote of at least two-thirds of the IncumbentBoard, such new director shall, for purposes of this Plan, be considered amember of the Incumbent Board; provided further, however,that no individual shall be considered a member of the Incumbent Board if suchindividual initially assumed office as a result of the actual or threatenedsolicitation of proxies or consents by or on behalf of a Person other than theBoard (a Proxy Contest) including by reason of any agreement intended toavoid or settle any Proxy Contest; or
(c) The consummation of:
(i) A merger, consolidation or reorganizationwith or into the Company or in which securities of the Company are issued (a Merger),unless such Merger is a Non-Control Transaction. A Non-Control Transaction shall mean aMerger where:
(A) the stockholders of the Companyimmediately before such Merger own directly or indirectly immediately followingsuch Merger at least fifty percent (50%) of the combined voting power of theoutstanding voting securities of (x) the corporation resulting from such Merger(the Surviving Corporation), if fifty percent (50%) or more of the combinedvoting power of the then outstanding voting securities of the Surviving
A – 2
Corporation is notBeneficially Owned, directly or indirectly, by another Person (a ParentCorporation), or (y) if there is one or more than one Parent Corporation, theultimate Parent Corporation; and
(B) the individuals who were members of theIncumbent Board immediately prior to the execution of the agreement providingfor such Merger constitute at least a majority of the members of the board ofdirectors of (x) the Surviving Corporation, if there is no ParentCorporation, or (y) if there is one or more than one Parent Corporation, theultimate Parent Corporation;
(ii) A complete liquidation or dissolution ofthe Company; or
(iii) The sale or other disposition of all orsubstantially all of the assets of the Company to any Person (other than atransfer to a Related Entity or under conditions that would constitute aNon-Control Transaction with the disposition of assets being regarded as aMerger for this purpose or the distribution to the Companys stockholders ofthe stock of a Related Entity or any other assets).
Notwithstandingthe foregoing, a Change in Control shall not be deemed to occur solely becauseany Person (the Subject Person) acquired Beneficial Ownership of more thanthe permitted amount of the then outstanding Shares or Voting Securities as aresult of the acquisition of Shares or Voting Securities by the Company which,by reducing the number of Shares or Voting Securities then outstanding,increases the proportional number of shares Beneficially Owned by the SubjectPersons, provided that if a Change in Control would occur (but for theoperation of this sentence) as a result of the acquisition of Shares or VotingSecurities by the Company, and after such share acquisition by the Company, theSubject Person becomes the Beneficial Owner of any additional Shares or VotingSecurities which increases the percentage of the then outstanding Shares orVoting Securities Beneficially Owned by the Subject Person, then a Change inControl shall occur.
If anEligible Individuals employment is terminated by the Company without Causeprior to the date of a Change in Control but the Eligible Individual reasonablydemonstrates that the termination (A) was at the request of a third party whohas indicated an intention or taken steps reasonably calculated to effect achange in control or (B) otherwise arose in connection with, or in anticipationof, a Change in Control which has been threatened or proposed, such terminationshall be deemed to have occurred after a Change in Control for purposes of thisPlan provided a Change in Control shall actually have occurred.
2.8 Code means the Internal Revenue Code of1986, as amended.
2.9 Committee means a committee, asdescribed in Section 3.1, appointed by the Board from time to time toadminister the Plan and to perform the functions set forth herein.
2.10 Company means Community Health Systems,Inc.
2.11 Director means a director of theCompany.
2.12 Disability means:
(a) in the case of an Optionee or Granteewhose employment with the Company or a Subsidiary is subject to the terms of anemployment agreement between such Optionee or Grantee and the Company orSubsidiary, which employment agreement includes a
A – 3
definition of Disability,the term Disability as used in this Plan or any Agreement shall have themeaning set forth in such employment agreement during the period that suchemployment agreement remains in effect;
(b) in the case of an Optionee or Grantee towhom Section 2.12(a) does not apply and who participates in the Companyslong-term disability plan, if any, the term Disability as used in such plan;or
(c) in all other cases, a physical or mentalinfirmity which impairs the Optionees or Grantees ability to performsubstantially his or her duties for a period of ninety-one (91) consecutivedays.
2.13 Division means any of the operatingunits or divisions of the Company designated as a Division by the Committee.
2.14 Dividend Equivalent Right means a rightto receive all or some portion of the cash dividends that are or would bepayable with respect to Shares.
2.15 Eligible Individual means any of thefollowing individuals who is designated by the Committee as eligible to receiveOptions or Awards subject to the conditions set forth herein: (a) any director, officer or employee of theCompany or a Subsidiary, (b) any individual to whom the Company or a Subsidiaryhas extended a formal, written offer of employment, or (c) any consultant oradvisor of the Company or a Subsidiary.
2.16 Exchange Act means the SecuritiesExchange Act of 1934, as amended.
2.17 Fair Market Value on any date means theclosing sales prices of the Shares on such date on the principal nationalsecurities exchange on which such Shares are listed or admitted to trading, or,if such Shares are not so listed or admitted to trading, the closing salesprices of the Shares as reported by The Nasdaq Stock Market at the close of theprimary trading session on such dates and, in either case, if the Shares werenot traded on such date, on the next preceding day on which the Shares weretraded. In the event that Fair MarketValue cannot be determined in a manner described above, the Fair Market Valueshall be the value established by the Board in good faith and, in the case ofan Incentive Stock Option, in accordance with Section 422 of the Code.
2.18 Formula Option means a NonqualifiedStock Option granted pursuant to Section 6.
2.19 Grantee means a person to whom an Awardhas been granted under the Plan.
2.20 Incentive Stock Option means an Optionsatisfying the requirements of Section 422 of the Code and designated bythe Committee as an Incentive Stock Option.
2.21 Non-employee Director means a directorof the Company who is a non-employee director within the meaning of Rule16b-3 promulgated under the Exchange Act.
2.22 Nonqualified Stock Option means anOption which is not an Incentive Stock Option.
A – 4
2.23 Option means a Nonqualified StockOption, an Incentive Stock Option, a Formula Option, or any or all of them.
2.24 Optionee means a person to whom anOption has been granted under the Plan.
2.25 Outside Director means a director ofthe Company who is an outside director within the meaning of Section 162(m)of the Code and the regulations promulgated thereunder.
2.26 Parent means any corporation which is aparent corporation within the meaning of Section 424(e) of the Code withrespect to the Company.
2.27 Performance Awards means PerformanceUnits, Performance Shares or either or both of them.
2.28 Performance-Based Compensation meansany Option or Award that is intended to constitute performance basedcompensation within the meaning of Section 162(m)(4)(C) of the Code andthe regulations promulgated thereunder.
2.29 Performance Cycle means the time periodspecified by the Committee at the time Performance Awards are granted duringwhich the performance of the Company, a Subsidiary or a Division will bemeasured.
2.30 Performance Objectives has the meaningset forth in Section 9.
2.31 Performance Shares means Shares issuedor transferred to an Eligible Individual under Section 9.
2.32 Performance Units means performanceunits granted to an Eligible Individual under Section 9.
2.33 Phantom Stock means a right granted toan Eligible Individual under Section 10 representing a number ofhypothetical Shares.
2.34 Plan means Community Health Systems,Inc. 2000 Stock Option and Award Plan, as amended and restated from time to time.
2.35 Restricted Stock means Shares issued ortransferred to an Eligible Individual pursuant to Section 8.
2.36 Share Award means an Award of Sharesgranted pursuant to Section 10.
2.37 Shares means shares of the Common Stockof the Company, par value $.01 per share, and any other securities into whichsuch shares are changed or for which such shares are exchanged.
2.38 Stock Appreciation Right means a rightto receive all or some portion of the increase in the value of the Shares asprovided in Section 7 hereof.
A – 5
2.39 Subsidiary means (i) except as providedin subsection (ii) below, any corporation which is a subsidiarycorporation within the meaning of Section 424(f) of the Code with respectto the Company, and (ii) in relation to the eligibility to receive Options orAwards other than Incentive Stock Options and continued employment for purposesof Options and Awards (unless the Committee determines otherwise), any entity,whether or not incorporated, in which the Company directly or indirectly owns50% or more of the outstanding equity or other ownership interests.
2.40 Successor Corporation means acorporation, or a Parent or Subsidiary thereof within the meaning of Section 424(a)of the Code, which issues or assumes a stock option in a transaction to which Section 424(a)of the Code applies.
2.41 Ten-Percent Stockholder means anEligible Individual, who, at the time an Incentive Stock Option is to begranted to him or her, owns (within the meaning of Section 422(b)(6) ofthe Code) stock possessing more than ten percent (10%) of the total combinedvoting power of all classes of stock of the Company, a Parent or a Subsidiary.
3.1 The Plan shall be administered by theCommittee, which shall hold meetings at such times as may be necessary for theproper administration of the Plan. TheCommittee shall keep minutes of its meetings. If the Committee consists of more than one (1) member, a quorum shallconsist of not fewer than two (2) members of the Committee and a majority of aquorum may authorize any action. Anydecision or determination reduced to writing and signed by a majority of all ofthe members of the Committee shall be as fully effective as if made by a majorityvote at a meeting duly called and held. The Committee shall consist of at least one (1) Director and may consistof the entire Board; provided, however,that (A) with respect to any Option or Award granted to an Eligible Individualwho is subject to Section 16 of the Exchange Act, the Committee shallconsist of at least two (2) Directors each of whom shall be a Non-employeeDirector and (B) to the extent necessary for any Option or Award intended toqualify as Performance-Based Compensation to so qualify, the Committee shallconsist of at least two (2) Directors, each of whom shall be an OutsideDirector. For purposes of the precedingsentence, if any member of the Committee is neither a Non-employee Director noran Outside Director but recuses himself or herself or abstains from voting withrespect to a particular action taken by the Committee, then the Committee, withrespect to that action, shall be deemed to consist only of the members of theCommittee who have not recused themselves or abstained from voting. Subject to applicable law, the Committee maydelegate its authority under the Plan to any other person or persons.
3.2 No member of the Committee shall beliable for any action, failure to act, determination or interpretation made ingood faith with respect to this Plan or any transaction hereunder. The Company hereby agrees to indemnify eachmember of the Committee for all costs and expenses and, to the extent permittedby applicable law, any liability incurred in connection with defending against,responding to, negotiating for the settlement of or otherwise dealing with anyclaim, cause of action or dispute of any kind arising in connection with anyactions in administering this Plan or in authorizing or denying authorizationto any transaction hereunder.
3.3 Subject to the express terms andconditions set forth herein, the Committee shall have the power from time totime to:
A – 6
(a) determine those Eligible Individuals towhom Options shall be granted under the Plan and the number of such Options tobe granted, prescribe the terms and conditions (which need not be identical) ofeach such Option, including the exercise price per Share, the vesting schedule andthe duration of each Option, and make any amendment or modification to anyOption Agreement consistent with the terms of the Plan;
(b) select those Eligible Individuals to whomAwards shall be granted under the Plan, determine the number of Shares inrespect of which each Award is granted, the terms and conditions (which neednot be identical) of each such Award, and make any amendment or modification toany Award Agreement consistent with the terms of the Plan;
(c) construe and interpret the Plan and theOptions and Awards granted hereunder, establish, amend and revoke rules andregulations for the administration of the Plan, including, but not limited to,correcting any defect or supplying any omission, or reconciling anyinconsistency in the Plan or in any Agreement, in the manner and to theextent it shall deem necessary or advisable, including so that the Plan and theoperation of the Plan comply with Rule 16b-3 under the Exchange Act, theCode to the extent applicable and other applicable law, and otherwise make thePlan fully effective. All decisions anddeterminations by the Committee in the exercise of this power shall be final,binding and conclusive upon the Company, its Subsidiaries, the Optionees andGrantees, and all other persons having any interest therein;
(d) determine the duration and purposes forleaves of absence which may be granted to an Optionee or Grantee on anindividual basis without constituting a termination of employment or servicefor purposes of the Plan;
(e) exercise its discretion with respect to thepowers and rights granted to it as set forth in the Plan; and
(f) generally, exercise such powers andperform such acts as are deemed necessary or advisable to promote the bestinterests of the Company with respect to the Plan.
3.4 TheCommittee may delegate to one or more officers of the Company the authority togrant Options or Awards to Eligible Individuals (other than to himself orherself) and/or determine the number of Shares subject to each Option or Award(by resolution that specifies the total number of Shares subject to the Optionsor Awards that may be awarded by the officer and the terms of any such Optionsor Awards, including the exercise price), provided that such delegation is madein accordance with the Delaware General Corporation Law and with respect toOptions and Awards that are not intended to qualify as Performance-BasedCompensation.
4. StockSubject to the Plan; Grant Limitations.
4.1 The maximum number of Shares that may bemade the subject of Options and Awards granted under the Plan is 17,062,791; provided, however, that (i) in any calendar year, (a) noEligible Individual may be granted Options or Awards in the aggregate inrespect of more than 1,000,000 Shares, and (b) the dollar amount of cash orFair Market Value of Shares that any Eligible Individual may receive in respectof Performance Units denominated in dollars may not exceed $250,000, (ii) in noevent shall the aggregate number of shares of Restricted Stock, PerformanceAwards (including Shares issued in respect to Performance
A – 7
Awards), Phantom Stock,and other Awards that are granted as full value awards granted under the Planexceed 4,500,000, and (iii) in no event shall more than an aggregate of 30,000Shares be issued upon the exercise of Incentive Stock Options granted under thePlan. The Company shall reserve for thepurposes of the Plan, out of its authorized but unissued Shares or out ofShares held in the Companys treasury, or partly out of each, such number ofShares as shall be determined by the Board.
4.2 Upon the granting of an Option or anAward, the number of Shares available under Section 4.1 for the grantingof further Options and Awards shall be reduced as follows:
(a) In connection with the granting of anOption or an Award (other than the granting of a Performance Unit denominatedin dollars), the number of Shares shall be reduced by the number of Shares inrespect of which the Option or Award is granted or denominated.
(b) In connection with the granting of aPerformance Unit denominated in dollars, the number of Shares shall be reducedby an amount equal to the quotient of (i) the dollar amount in which thePerformance Unit is denominated, divided by (ii) the Fair Market Value of aShare on the date the Performance Unit is granted.
4.3 Whenever any outstanding Option or Awardor portion thereof expires, is canceled, is forfeited, is settled in cash(including the settlement of tax withholding obligations using Shares) or isotherwise terminated for any reason without having been exercised or paymenthaving been made in respect of the entire Option or Award, the Shares allocableto the expired, canceled, forfeited, settled or otherwise terminated portion ofthe Option or Award may again be the subject of Options or Awards grantedhereunder.
5. Option Grantsfor Eligible Individuals.
5.1 Authority of Committee. Subject to the provisions of the Plan, the Committee shall have full andfinal authority to select those Eligible Individuals who will receive Options,and the terms and conditions of the grant to such Eligible Individuals shall beset forth in an Agreement. IncentiveStock Options may be granted only to Eligible Individuals who are employees ofthe Company or any Subsidiary.
5.2 Exercise Price. The purchase price or the manner in which the exercise price is to bedetermined for Shares under each Option shall be determined by the Committeeand set forth in the Agreement; provided, however,that the exercise price per Share under each Nonqualified Stock Option and eachIncentive Stock Option shall not be less than 100% of the Fair Market Value ofa Share on the date the Option is granted (110% in the case of an IncentiveStock Option granted to a Ten-Percent Stockholder).
5.3 Maximum Duration. Options granted hereunder shall be for such term as the Committee shalldetermine, provided that an Incentive Stock Option shall not be exercisableafter the expiration of ten (10) years from the date it is granted (five (5)years in the case of an Incentive Stock Option granted to a Ten-PercentStockholder) and a Nonqualified Stock Option shall not be exercisable after theexpiration of ten (10) years from the date it is granted; provided,however, that unless the Committee provides otherwise, an Option(other than an Incentive Stock Option) may, upon the death of the Optioneeprior to the expiration of the Option, be exercised for up to one (1) yearfollowing the date of the Optionees death even if
A – 8
such period extendsbeyond ten (10) years from the date the Option is granted. The Committee may, subsequent to the grantingof any Option, extend the term thereof, but in no event shall the term as soextended exceed the maximum term provided for in the preceding sentence.
5.4 Vesting. Subject to Section 5.10,each Option shall become exercisable in such installments (which need not beequal) and at such times as may be designated by the Committee and set forth inthe Agreement. To the extent notexercised, installments shall accumulate and be exercisable, in whole or inpart, at any time after becoming exercisable, but not later than the date theOption expires. The Committee mayaccelerate the exercisability of any Option or portion thereof at any time.
5.5 Deferred Delivery of Option Shares. The Committee may, in its discretion, permit Optionees to elect to deferthe issuance of Shares upon the exercise of one or more Nonqualified StockOptions granted pursuant to the Plan. The terms and conditions of such deferral shall be determined at thetime of the grant of the Option or thereafter and shall be set forth in theAgreement evidencing the Option.
5.6 Limitationson Incentive Stock Options. To theextent that the aggregate Fair Market Value (determined as of the date of thegrant) of Shares with respect to which Incentive Stock Options granted underthe Plan and incentive stock options (within the meaning of Section 422of the Code) granted under all other plans of the Company or its Subsidiaries(in either case determined without regard to this Section 5.6) areexercisable by an Optionee for the first time during any calendar year exceeds$100,000, such Incentive Stock Options shall be treated as Nonqualified StockOptions. In applying the limitation inthe preceding sentence in the case of multiple Option grants, Options whichwere intended to be Incentive Stock Options shall be treated as NonqualifiedStock Options according to the order in which they were granted such that the mostrecently granted Options are first treated as Nonqualified Stock Options.
5.7 Non-Transferability. No Option shall be transferable by the Optionee otherwise than by willor by the laws of descent and distribution or, in the case of an Option otherthan an Incentive Stock Option, pursuant to a domestic relations order (withinthe meaning of Rule 16a-12 promulgated under the Exchange Act), and an Optionshall be exercisable during the lifetime of such Optionee only by the Optioneeor his or her guardian or legal representative. Notwithstanding the foregoing, the Committee may set forth in theAgreement evidencing an Option (other than an Incentive Stock Option), at thetime of grant or thereafter, that the Option may be transferred to members ofthe Optionees immediate family, to trusts solely for the benefit of suchimmediate family members and to partnerships in which such family membersand/or trusts are the only partners, and for purposes of this Plan, atransferee of an Option shall be deemed to be the Optionee. For this purpose, immediate family means theOptionees spouse, parents, children, stepchildren and grandchildren and thespouses of such parents, children, stepchildren and grandchildren. The terms of an Option shall be final,binding and conclusive upon the beneficiaries, executors, administrators, heirsand successors of the Optionee.
5.8 Method of Exercise. The exercise of an Option shall be made only by a written noticedelivered in person or by mail to the Secretary of the Company at the Companysprincipal executive office, specifying the number of Shares to be exercisedand, to the extent applicable, accompanied by payment therefor and otherwise inaccordance with the Agreement pursuant to which the Option was granted; provided, however, that Options may not be exercised by anOptionee following a hardship distribution to the Optionee to the extent such
A – 9
exercise is prohibitedunder the Community Health Systems, Inc. 401(k) Plan or Treasury Regulation § 1.401(k)-1(d)(2)(iv)(B)(4). The exercise price for any Shares purchasedpursuant to the exercise of an Option shall be paid in either of the followingforms (or any combination thereof): (a) cash or (b) the transfer, either actuallyor by attestation, to the Company of Shares that have been held by the Optioneefor at least six (6) months (or such lesser period as may be permitted by theCommittee) prior to the exercise of the Option, such transfer to be upon suchterms and conditions as determined by the Committee or (c) a combination ofcash and the transfer of Shares; provided, however,that the Committee may determine that the exercise price shall be paid only incash. In addition, Options may beexercised through a registered broker-dealer pursuant to such cashless exerciseprocedures which are, from time to time, deemed acceptable by theCommittee. Any Shares transferred to theCompany as payment of the exercise price under an Option shall be valued attheir Fair Market Value on the day of exercise of such Option. If requested by the Committee, the Optioneeshall deliver the Agreement evidencing the Option to the Secretary of theCompany who shall endorse thereon a notation of such exercise and return suchAgreement to the Optionee. No fractionalShares (or cash in lieu thereof) shall be issued upon exercise of an Option andthe number of Shares that may be purchased upon exercise shall be rounded tothe nearest number of whole Shares.
5.9 Rights of Optionees. No Optionee shall be deemed for any purpose to be the owner of anyShares subject to any Option unless and until (a) the Option shall have beenexercised pursuant to the terms thereof, (b) the Company shall have issued anddelivered Shares to the Optionee, and (c) the Optionees name shall have beenentered as a stockholder of record on the books of the Company. Thereupon, the Optionee shall have fullvoting, dividend and other ownership rights with respect to such Shares,subject to such terms and conditions as may be set forth in the applicableAgreement.
5.10 Effect of Change in Control. In the event of a Change in Control, each Option held by the Optionee asof the date of the Change in Control shall become immediately and fullyexercisable and shall, notwithstanding any shorter period set forth in theAgreement evidencing the Option, remain exercisable for a period ending notbefore the earlier of (x) the six (6) month anniversary of the termination ofthe Change in Control or (y) the expiration of the stated term of theOption. In addition, the Agreementevidencing the grant of an Option may provide for any other treatment of theOption in the event of a Change in Control.
6. [OptionGrants for Non-employee Directors.
6.1 Grant. FormulaOptions shall be granted to Non-employee Directors as follows:
(a) Initial Grant. Each Non-employee Director shall, upon becoming a Director, be granted aFormula Option in respect of 10,000 Shares.
(b) Annual Grant. Each Non-employee Director shall be granted a Formula Option in respectof 5,000 Shares on the first business day after January 1st of eachcalendar year that the Plan is in effect provided that the Non-employeeDirector is a Director on such date; provided further, however,that, if the Initial Grant to a Non-employee Director is made after June 30thof any calendar year, the first Annual Grant to be made to the Non-employeeDirector shall be made on the first business day after January 1st of thesecond calendar year following the year in which the Initial Grant was madeprovided that the Non-employee Director is a Director on such date.
A – 10
All Formula Options shallbe evidenced by an Agreement containing such other terms and conditions notinconsistent with the provisions of this Plan as determined by the Committee; provided, however, that such terms shall not vary the price,amount or timing of Formula Options provided under this Section 6,including provisions dealing with vesting, forfeiture and termination of suchFormula Options.
6.2 Purchase Price. The purchase price for Shares under each Formula Option granted pursuantto Section 6.1(a) or 6.1(b) shall be equal to 100% of the Fair MarketValue of such Shares on the date the Formula Option is granted.
6.3 Vesting and Exercisability. Subject to Sections 6.4 and 6.5, each Formula Option shall becomefully vested with respect to 50% of the Shares subject thereto on each of thefirst and second anniversaries of the date of grant; provided,however, that the Optionee continues to serve as a Director as ofsuch date; provided further, however, that if aDirector dies prior to such date and while a Director, the Formula Option shallbecome fully vested and exercisable with respect to 100% of the Shares on thatdate. If an Optionee ceases to serve asa Director for any reason, the Optionee shall have no rights with respect toany Formula Option which has not then vested pursuant to the precedingsentence, and the Optionee shall automatically forfeit any Formula Option whichremains unvested.
6.4 Duration. Each FormulaOption shall terminate on the date which is the tenth anniversary of the dateof grant (or if later, the first anniversary of the date of the Directorsdeath if such death occurs prior to such tenth anniversary), unless terminatedearlier as follows:
(a) Other than Disability, Death or Cause. Except as provided in Section 6.5 below, if an Optionees serviceas a Director terminates for any reason other than Disability, death or Cause,the Optionee may, for a period of six (6) months after the termination of theOptionees service, but in no event after the expiration of the stated term ofthe Formula Option, exercise his or her Formula Option to the extent, and onlyto the extent, that such Formula Option or portion thereof was vested as of thedate the Optionees service as a Director terminated, after which time theFormula Option shall automatically terminate in full.
(b) Disability. If anOptionees service as a Director terminates by reason of the Optioneesresignation or removal from the Board due to Disability, the Optionee may, fora period of one (1) year after the termination of the Optionees service, butin no event after the expiration of the stated term of the Formula Option, exercisehis or her Formula Option to the extent, and only to the extent, that suchFormula Option or portion thereof was vested as of the date the Optioneesservice as a Director terminated, after which time the Formula Option shallautomatically terminate in full.
(c) Cause. If anOptionees service as a Director terminates for Cause, any unexercised portionof the Formula Option granted to the Optionee hereunder shall immediatelyterminate in full and no rights thereunder may be exercised. For this purpose, Cause means (1) any actof (A) fraud or intentional misrepresentation, or (B) embezzlement,misappropriation or conversion of assets or opportunities of the Company or anydirect or indirect majority-owned subsidiary of the Company, or (2) willful violationof any law, rule or regulation in connection with the performance of anOptionees duties (other than traffic violations or similar offenses).
(d) Death. If anOptionee dies while a Director or within the exercise period described inclause (a) or (b) of this Section 6.4 or referred to in Section 6.5hereof, the
A – 11
Formula Option granted tothe Optionee may be exercised at any time within one (1) year after theOptionees death, but in no event after the expiration of the stated term ofthe Formula Option, by the person or persons to whom such rights under theFormula Option shall pass by will, or by the laws of descent or distribution,to the extent, and only to the extent, that such Formula Option or portionthereof was vested as of the date of the Optionees death or earliertermination (as applicable), after which time the Formula Option shallautomatically terminate in full.
6.5. Effectof Change in Control. The provisionsin Section 5.10 shall apply to any Formula Options granted pursuant tothis Section 6.]
7. StockAppreciation Rights.
TheCommittee may in its discretion, either alone or in connection with the grantof an Option, grant Stock Appreciation Rights in accordance with the Plan, theterms and conditions of which shall be set forth in an Agreement. If granted in connection with an Option, aStock Appreciation Right shall cover the same Shares covered by the Option (orsuch lesser number of Shares as the Committee may determine) and shall, exceptas provided in this Section 7, be subject to the same terms and conditionsas the related Option.
7.1 Time of Grant. A Stock Appreciation Right may be granted (a) at any time ifunrelated to an Option, or (b) if related to an Option, either at the time ofgrant or at any time thereafter during the term of the Option.
7.2 Stock Appreciation Right Related to anOption.
(a) Exercise. A StockAppreciation Right granted in connection with an Option shall be exercisable atsuch time or times and only to the extent that the related Option isexercisable, and will not be transferable except to the extent the relatedOption may be transferable. A StockAppreciation Right granted in connection with an Incentive Stock Option shallbe exercisable only if the Fair Market Value of a Share on the date of exerciseexceeds the exercise price specified in the related Incentive Stock OptionAgreement.
(b) Amount Payable. Upon the exercise of a Stock Appreciation Right related to an Option,the Grantee shall be entitled to receive an amount determined by multiplying(i) the excess of the Fair Market Value of a Share on the date of exercise ofsuch Stock Appreciation Right over the per Share exercise price under therelated Option, by (ii) the number of Shares as to which such StockAppreciation Right is being exercised. Notwithstanding the foregoing, the Committee may limit in any manner theamount payable with respect to any Stock Appreciation Right by including such alimit in the Agreement evidencing the Stock Appreciation Right at the time itis granted.
(c) Treatment of Related Options and StockAppreciation Rights Upon Exercise. Upon theexercise of a Stock Appreciation Right granted in connection with an Option,the Option shall be canceled to the extent of the number of Shares as to whichthe Stock Appreciation Right is exercised, and upon the exercise of an Optiongranted in connection with a Stock Appreciation Right, the Stock AppreciationRight shall be canceled to the extent of the number of Shares as to which theOption is exercised or surrendered.
7.3 Stock Appreciation Right Unrelated to anOption. The Committee may grant to EligibleIndividuals Stock Appreciation Rights unrelated to Options. Stock Appreciation
A – 12
Rights unrelated toOptions shall contain such terms and conditions as to exercisability (subjectto Section 7.7), vesting and duration as the Committee shall determine,but in no event shall they have a term of greater than ten (10) years; provided, however, that the Committee may provide that aStock Appreciation Right may, upon the death of the Grantee, be exercised forup to one (1) year following the date of the Grantees death even if suchperiod extends beyond ten (10) years from the date the Stock Appreciation Rightis granted. Upon exercise of a StockAppreciation Right unrelated to an Option, the Grantee shall be entitled toreceive an amount determined by multiplying (a) the excess of the Fair MarketValue of a Share on the date of exercise of such Stock Appreciation Right overthe Fair Market Value of a Share on the date the Stock Appreciation Right wasgranted, by (b) the number of Shares as to which the Stock Appreciation Rightis being exercised. Notwithstanding theforegoing, the Committee may limit in any manner the amount payable withrespect to any Stock Appreciation Right by including such a limit in theAgreement evidencing the Stock Appreciation Right at the time it is granted.
7.4 Non-Transferability. No Stock Appreciation Right shall be transferable by the Granteeotherwise than by will or by the laws of descent and distribution or pursuantto a domestic relations order (within the meaning of Rule 16a-12 promulgatedunder the Exchange Act), and such Stock Appreciation Right shall be exercisableduring the lifetime of such Grantee only by the Grantee or his or her guardianor legal representative. The terms ofsuch Stock Appreciation Right shall be final, binding and conclusive upon thebeneficiaries, executors, administrators, heirs and successors of the Grantee.
7.5 Method of Exercise. Stock Appreciation Rights shall be exercised by a Grantee only by awritten notice delivered in person or by mail to the Secretary of the Companyat the Companys principal executive office, specifying the number of Shareswith respect to which the Stock Appreciation Right is being exercised. If requested by the Committee, the Granteeshall deliver the Agreement evidencing the Stock Appreciation Right beingexercised and the Agreement evidencing any related Option to the Secretary ofthe Company who shall endorse thereon a notation of such exercise and returnsuch Agreement to the Grantee.
7.6 Form of Payment. Payment of the amount determined under Sections 7.2(b) or 7.3 may bemade in the discretion of the Committee solely in whole Shares in a numberdetermined at their Fair Market Value on the date of exercise of the StockAppreciation Right, or solely in cash, or in a combination of cash and Shares. If the Committee decides to make full paymentin Shares and the amount payable results in a fractional Share, payment for thefractional Share will be made in cash.
7.7 Effect of Change in Control. In the event of a Change in Control, each Stock Appreciation Right heldby the Grantee shall become immediately and fully exercisable and shall,notwithstanding any shorter period set forth in the Agreement evidencing theStock Appreciation Right, remain exercisable for a period ending not before theearlier of the six (6) month anniversary of (x) the Change in Control or(y) the expiration of the stated term of the Stock AppreciationRight. In addition, the Agreementevidencing the grant of a Stock Appreciation Right unrelated to an Option mayprovide for any other treatment of such Stock Appreciation Right in the eventof a Change in Control.
8.1 Grant. The Committeemay grant Awards to Eligible Individuals of Restricted Stock, which shall beevidenced by an Agreement between the Company and the Grantee. Each Agreement shall contain suchrestrictions, terms and conditions as the
A – 13
Committee may, in itsdiscretion, determine and (without limiting the generality of the foregoing)such Agreements may require that an appropriate legend be placed on Sharecertificates. Awards of Restricted Stockshall be subject to the terms and provisions set forth below in this Section 8.
8.2 Rights of Grantee. Shares of Restricted Stock granted pursuant to an Award hereunder shallbe issued in the name of the Grantee as soon as reasonably practicable afterthe Award is granted provided that the Grantee has executed an Agreementevidencing the Award, the appropriate blank stock powers and, in the discretionof the Committee, an escrow agreement and any other documents which theCommittee may require as a condition to the issuance of such Shares. If a Grantee shall fail to execute theAgreement evidencing a Restricted Stock Award, or any documents which theCommittee may require within the time period prescribed by the Committee at thetime the Award is granted, the Award shall be null and void. At the discretion of the Committee, Sharesissued in connection with a Restricted Stock Award shall be deposited togetherwith the stock powers with an escrow agent (which may be the Company)designated by the Committee. Unless theCommittee determines otherwise and as set forth in the Agreement, upon deliveryof the Shares to the escrow agent, the Grantee shall have all of the rights ofa stockholder with respect to such Shares, including the right to vote theShares and to receive all dividends or other distributions paid or made withrespect to the Shares.
8.3 Non-transferability. Until all restrictions upon the Shares of Restricted Stock awarded to aGrantee shall have lapsed in the manner set forth in Section 8.4, suchShares shall not be sold, transferred or otherwise disposed of and shall not bepledged or otherwise hypothecated.
8.4 Lapse of Restrictions.
(a) Generally. Restrictionsupon Shares of Restricted Stock awarded hereunder shall lapse at such time ortimes and on such terms and conditions as the Committee may determine. The Agreement evidencing the Award shall setforth any such restrictions.
(b) Effect of Change in Control. The Committee may determine at the time of the grant of an Award ofRestricted Stock the extent to which the restrictions upon Shares of RestrictedStock shall lapse upon a Change in Control. The Agreement evidencing the Award shall set forth any such provisions.
8.5 Treatment of Dividends. At the time an Award of Shares of Restricted Stock is granted, theCommittee may, in its discretion, determine that the payment to the Grantee ofdividends, or a specified portion thereof, declared or paid on such Shares bythe Company shall be (a) deferred until the lapsing of the restrictions imposedupon such Shares and (b) held by the Company for the account of the Granteeuntil such time. In the event thatdividends are to be deferred, the Committee shall determine whether suchdividends are to be reinvested in Shares (which shall be held as additionalShares of Restricted Stock) or held in cash. If deferred dividends are to be held in cash, there may be credited atthe end of each year (or portion thereof) interest on the amount of the accountat the beginning of the year at a rate per annum as the Committee, in itsdiscretion, may determine. Payment ofdeferred dividends in respect of Shares of Restricted Stock (whether held incash or as additional Shares of Restricted Stock), together with interestaccrued thereon, if any, shall be made upon the lapsing of restrictions imposedon the Shares in respect of which the deferred dividends were
A – 14
paid, and any dividendsdeferred (together with any interest accrued thereon) in respect of any Sharesof Restricted Stock shall be forfeited upon the forfeiture of such Shares.
8.6 Delivery of Shares. Upon the lapse of the restrictions on Shares of Restricted Stock, theCommittee shall cause a stock certificate to be delivered to the Grantee withrespect to such Shares, free of all restrictions hereunder.
9.1 Performance Units. The Committee, in its discretion, may grant Awards of Performance Unitsto Eligible Individuals, the terms and conditions of which shall be set forthin an Agreement between the Company and the Grantee. Performance Units may be denominated inShares or a specified dollar amount and, contingent upon the attainment ofspecified Performance Objectives within the Performance Cycle, represent theright to receive payment as provided in Section 9.1(b) of (i) in the caseof Share-denominated Performance Units, the Fair Market Value of a Share on thedate the Performance Unit was granted, the date the Performance Unit becamevested or any other date specified by the Committee, (ii) in the case ofdollar-denominated Performance Units, the specified dollar amount or (iii) apercentage (which may be more than 100%) of the amount described in clause (i)or (ii) depending on the level of Performance Objective attainment; provided, however, that the Committee may at the time aPerformance Unit is granted specify a maximum amount payable in respect of avested Performance Unit. Each Agreementshall specify the number of Performance Units to which it relates, thePerformance Objectives which must be satisfied in order for the PerformanceUnits to vest and the Performance Cycle within which such Performance Objectivesmust be satisfied.
(a) Vesting and Forfeiture. Subject to Sections 9.3(c) and 9.4, a Grantee shall become vested withrespect to the Performance Units to the extent that the Performance Objectivesset forth in the Agreement are satisfied for the Performance Cycle.
(b) Payment of Awards. Subject to Section 9.3(c), payment to Grantees in respect of vestedPerformance Units shall be made as soon as practicable after the last day ofthe Performance Cycle to which such Award relates unless the Agreement evidencingthe Award provides for the deferral of payment, in which event the terms andconditions of the deferral shall be set forth in the Agreement. Subject to Section 9.4, such paymentsmay be made entirely in Shares valued at their Fair Market Value, entirely incash, or in such combination of Shares and cash as the Committee in itsdiscretion shall determine at any time prior to such payment; provided, however, that if the Committee in its discretiondetermines to make such payment entirely or partially in Shares of RestrictedStock, the Committee must determine the extent to which such payment will be inShares of Restricted Stock and the terms of such Restricted Stock at the timethe Award is granted.
9.2 Performance Shares. The Committee, in its discretion, may grant Awards of Performance Sharesto Eligible Individuals, the terms and conditions of which shall be set forthin an Agreement between the Company and the Grantee. Each Agreement may require that an appropriatelegend be placed on Share certificates. Awards of Performance Shares shall be subject to the following terms andprovisions:
(a) Rights of Grantee. The Committee shall provide at the time an Award of Performance Sharesis made the time or times at which the actual Shares represented by such Awardshall be issued in the name of the Grantee; provided, however,that no Performance Shares shall be issued until the Grantee has executed anAgreement evidencing
A – 15
the Award, the appropriateblank stock powers and, in the discretion of the Committee, an escrow agreementand any other documents which the Committee may require as a condition to theissuance of such Performance Shares. Ifa Grantee shall fail to execute the Agreement evidencing an Award ofPerformance Shares, the appropriate blank stock powers and, in the discretionof the Committee, an escrow agreement and any other documents which theCommittee may require within the time period prescribed by the Committee at thetime the Award is granted, the Award shall be null and void. At the discretion of the Committee, Sharesissued in connection with an Award of Performance Shares shall be depositedtogether with the stock powers with an escrow agent (which may be the Company)designated by the Committee. Except asrestricted by the terms of the Agreement, upon delivery of the Shares to theescrow agent, the Grantee shall have, in the discretion of the Committee, allof the rights of a stockholder with respect to such Shares, including the rightto vote the Shares and to receive all dividends or other distributions paid ormade with respect to the Shares.
(b) Non-transferability. Until any restrictions upon the Performance Shares awarded to a Granteeshall have lapsed in the manner set forth in Section 9.2(c) or 9.4, suchPerformance Shares shall not be sold, transferred or otherwise disposed of andshall not be pledged or otherwise hypothecated, nor shall they be delivered tothe Grantee. The Committee may also imposesuch other restrictions and conditions on the Performance Shares, if any, as itdeems appropriate.
(c) Lapse of Restrictions. Subject to Sections 9.3(c) and 9.4, restrictions upon Performance Sharesawarded hereunder shall lapse and such Performance Shares shall become vestedat such time or times and on such terms, conditions and satisfaction ofPerformance Objectives as the Committee may, in its discretion, determine atthe time an Award is granted.
(d) Treatment of Dividends. At the time the Award of Performance Shares is granted, the Committeemay, in its discretion, determine that the payment to the Grantee of dividends,or a specified portion thereof, declared or paid on Shares represented by suchAward which have been issued by the Company to the Grantee shall be(i) deferred until the lapsing of the restrictions imposed upon suchPerformance Shares and (ii) held by the Company for the account of theGrantee until such time. In the eventthat dividends are to be deferred, the Committee shall determine whether suchdividends are to be reinvested in shares of Stock (which shall be held asadditional Performance Shares) or held in cash. If deferred dividends are to be held in cash, there may be credited atthe end of each year (or portion thereof) interest on the amount of the accountat the beginning of the year at a rate per annum as the Committee, in itsdiscretion, may determine. Payment ofdeferred dividends in respect of Performance Shares (whether held in cash or inadditional Performance Shares), together with interest accrued thereon, if any,shall be made upon the lapsing of restrictions imposed on the PerformanceShares in respect of which the deferred dividends were paid, and any dividendsdeferred (together with any interest accrued thereon) in respect of anyPerformance Shares shall be forfeited upon the forfeiture of such PerformanceShares.
(e) Delivery of Shares. Upon the lapse of the restrictions on Performance Shares awardedhereunder, the Committee shall cause a stock certificate to be delivered to theGrantee with respect to such Shares, free of all restrictions hereunder.
A – 16
9.3 Performance Objectives.
(a) Establishment. Performance Objectives for Performance Awards may be expressed in termsof (i) earnings per Share, (ii) Share price, (iii) pre-tax profits,(iv) net earnings, (v) return on equity or assets, (vi) sales or(vii) any combination of the foregoing. Performance Objectives may be in respect of the performance of theCompany, any of its Subsidiaries, any of its Divisions or any combinationthereof. Performance Objectives may beabsolute or relative (to prior performance of the Company or to the performanceof one or more other entities or external indices) and may be expressed interms of a progression within a specified range. The Performance Objectives with respect to aPerformance Cycle shall be established in writing by the Committee by theearlier of (x) the date on which a quarter of the Performance Cycle has elapsedor (y) the date which is ninety (90) days after the commencement of thePerformance Cycle, and in any event while the performance relating to thePerformance Objectives remain substantially uncertain.
(b) Effect of Certain Events. At the time of the granting of a Performance Award, or at any timethereafter, in either case to the extent permitted under Section 162(m) ofthe Code and the regulations thereunder without adversely affecting thetreatment of the Performance Award as Performance-Based Compensation, theCommittee may provide for the manner in which performance will be measuredagainst the Performance Objectives (or may adjust the Performance Objectives)to reflect the impact of specified corporate transactions, accounting or taxlaw changes and other extraordinary or nonrecurring events.
(c) Determination of Performance. Prior to the vesting, payment, settlement or lapsing of any restrictionswith respect to any Performance Award that is intended to constitutePerformance-Based Compensation made to a Grantee who is subject to Section 162(m)of the Code, the Committee shall certify in writing that the applicablePerformance Objectives have been satisfied to the extent necessary for suchAward to qualify as Performance Based Compensation.
9.4 Effect of Change in Control. The Agreements evidencing Performance Shares and Performance Units mayprovide for the treatment of such Awards (or portions thereof) in the event ofa Change in Control, including, but not limited to, provisions for theadjustment of applicable Performance Objectives.
9.5 Non-transferability. Until the vesting of Performance Units or the lapsing of anyrestrictions on Performance Shares, as the case may be, such Performance Unitsor Performance Shares shall not be sold, transferred or otherwise disposed ofand shall not be pledged or otherwise hypothecated.
10. Other Share Based Awards.
10.1 Share Awards. The Committee may grant a Share Award to any Eligible Individual on suchterms and conditions as the Committee may determine in its solediscretion. Share Awards may be made asadditional compensation for services rendered by the Eligible Individual or maybe in lieu of cash or other compensation to which the Eligible Individual isentitled from the Company.
A – 17
10.2 Phantom Stock Awards.
(a) Grant. The Committeemay, in its discretion, grant shares of Phantom Stock to any EligibleIndividuals. Such Phantom Stock shall besubject to the terms and conditions established by the Committee and set forthin the applicable Agreement.
(b) Payment of Awards. Upon the vesting of a Phantom Stock Award, the Grantee shall be entitledto receive a cash payment in respect of each share of Phantom Stock which shallbe equal to the Fair Market Value of a Share as of the date the Phantom StockAward was granted, or such other date as determined by the Committee at thetime the Phantom Stock Award was granted. The Committee may, at the time a Phantom Stock Award is granted, providea limitation on the amount payable in respect of each share of PhantomStock. In lieu of a cash payment, theCommittee may settle Phantom Stock Awards with Shares having a Fair MarketValue equal to the cash payment to which the Grantee has become entitled.
11. Effectof a Termination of Employment.
TheAgreement evidencing the grant of each Option and each Award shall set forththe terms and conditions applicable to such Option or Award upon a terminationor change in the status of the employment of the Optionee or Grantee by theCompany, a Subsidiary or a Division (including a termination or change byreason of the sale of a Subsidiary or a Division), which, except for FormulaOptions, shall be as the Committee may, in its discretion, determine at thetime the Option or Award is granted or thereafter.
12. AdjustmentUpon Changes in Capitalization.
(a) In the event of a Change inCapitalization, the Committee shall conclusively determine the appropriateadjustments, if any, to (i) the maximum number and class of Shares or otherstock or securities with respect to which Options or Awards may be grantedunder the Plan, (ii) the number and class of Shares or other stock orsecurities which are subject to outstanding Options or Awards granted under thePlan and the exercise price therefor, if applicable, (iii) the number and classof Shares or other securities in respect of which Formula Options are to begranted under Section 6 and (iv) the Performance Objectives.
(b) Any such adjustment in the Shares orother stock or securities (i) subject to outstanding Incentive Stock Options(including any adjustments in the exercise price) shall be made in such manneras not to constitute a modification as defined by Section 424(h)(3) of theCode and only to the extent otherwise permitted by Sections 422 and 424 of theCode, or (ii) subject to outstanding Options or Awards that are intended toqualify as Performance-Based Compensation shall be made in such a manner as notto adversely affect the treatment of the Option or Award as Performance-BasedCompensation.
(c) If, by reason of a Change inCapitalization, a Grantee of an Award shall be entitled to, or an Optioneeshall be entitled to exercise an Option with respect to, new, additional ordifferent shares of stock or securities of the Company or any othercorporation, such new, additional or different shares shall thereupon besubject to all of the conditions, restrictions and performance criteria whichwere applicable to the Shares subject to the Award or Option, as the case maybe, prior to such Change in Capitalization.
A – 18
13. Effectof Certain Transactions.
Subjectto Sections 5.10, 6.5, 7.7, 8.4(b) and 9.4 or as otherwise provided in anAgreement, in the event of (a) the liquidation or dissolution of the Company or(b) a merger or consolidation of the Company (a Transaction), the Plan andthe Options and Awards issued hereunder shall continue in effect in accordancewith their respective terms, except that following a Transaction either (i)each outstanding Option or Award shall be treated as provided for in theagreement entered into in connection with the Transaction or (ii) if not soprovided in such agreement, each Optionee and Grantee shall be entitled to receivein respect of each Share subject to any outstanding Options or Awards, as thecase may be, upon exercise of any Option or payment or transfer in respect ofany Award, the same number and kind of stock, securities, cash, property orother consideration that each holder of a Share was entitled to receive in theTransaction in respect of a Share; provided, however,that such stock, securities, cash, property, or other consideration shallremain subject to all of the conditions, restrictions and performance criteriawhich were applicable to the Options and Awards prior to such Transaction. The treatment of any Option or Award asprovided in this Section 13 shall be conclusively presumed to beappropriate for purposes of Section 12.
Followingthe required registration of any equity security of the Company pursuant to Section 12of the Exchange Act:
(a) The Plan is intended to comply with Rule16b-3 promulgated under the Exchange Act and the Committee shall interpret andadminister the provisions of the Plan or any Agreement in a manner consistenttherewith. Any provisions inconsistentwith such Rule shall be inoperative and shall not affect the validity of thePlan.
(b) Unless otherwise expressly stated in therelevant Agreement, each Option, Stock Appreciation Right and Performance Awardgranted under the Plan is intended to be Performance-Based Compensation. The Committee shall not be entitled toexercise any discretion otherwise authorized hereunder with respect to suchOptions or Awards if the ability to exercise such discretion or the exercise ofsuch discretion itself would cause the compensation attributable to suchOptions or Awards to fail to qualify as Performance-Based Compensation.
(c) To the extent that any legal requirementof Section 16 of the Exchange Act or Section 162(m) of the Code asset forth in the Plan ceases to be required under Section 16 of theExchange Act or Section 162(m) of the Code, that Plan provision shallcease to apply.
15. Terminationand Amendment of the Plan or Modification of Options and Awards.
15.1 PlanAmendment or Termination. The Planshall terminate on the day preceding the tenth anniversary of the date of itsadoption by the Board and no Option or Award may be granted thereafter. The Board may sooner terminate the Plan andthe Board may at any time and from time to time amend, modify or suspend thePlan; provided, however, that:
(a) no such amendment, modification,suspension or termination shall impair or adversely alter any Options or Awardstheretofore granted under the Plan, except with
A – 19
the consent of theOptionee or Grantee, nor shall any amendment, modification, suspension ortermination deprive any Optionee or Grantee of any Shares which he or she mayhave acquired through or as a result of the Plan; and
(b) to the extent necessary under anyapplicable law, regulation or exchange requirement no amendment shall beeffective unless approved by the stockholders of the Company in accordance withapplicable law, regulation or exchange requirement.
15.2 Modification of Options and Awards. No modification of an Option or Award shall adversely alter or impairany rights or obligations under the Option or Award without the consent of theOptionee or Grantee, as the case may be.
16. Non-Exclusivityof the Plan.
Theadoption of the Plan by the Board shall not be construed as amending, modifyingor rescinding any previously approved incentive arrangement or as creating anylimitations on the power of the Board to adopt such other incentivearrangements as it may deem desirable, including, without limitation, thegranting of stock options otherwise than under the Plan, and such arrangementsmay be either applicable generally or only in specific cases.
17. Limitationof Liability.
Asillustrative of the limitations of liability of the Company, but not intendedto be exhaustive thereof, nothing in the Plan shall be construed to:
(a) give any person any right to be grantedan Option or Award other than at the sole discretion of the Committee;
(b) give any person any rights whatsoeverwith respect to Shares except as specifically provided in the Plan;
(c) limit in any way the right of the Companyor any Subsidiary to terminate the employment of any person at any time; or
(d) be evidence of any agreement orunderstanding, expressed or implied, that the Company will employ any person atany particular rate of compensation or for any particular period of time.
18. Regulationsand Other Approvals; Governing Law.
18.1 Except as to matters of federal law, thePlan and the rights of all persons claiming hereunder shall be construed anddetermined in accordance with the laws of the State of Delaware without givingeffect to conflicts of laws principles thereof.
18.2 The obligation of the Company to sell ordeliver Shares with respect to Options and Awards granted under the Plan shallbe subject to all applicable laws, rules and regulations, including allapplicable federal and state securities laws, and the obtaining of all suchapprovals by governmental agencies as may be deemed necessary or appropriate bythe Committee.
A – 20
18.3 The Board may make such changes as may benecessary or appropriate to comply with the rules and regulations of anygovernment authority, or to obtain for Eligible Individuals granted IncentiveStock Options the tax benefits under the applicable provisions of the Code andregulations promulgated thereunder.
18.4 Each Option and Award is subject to therequirement that, if at any time the Committee determines, in its discretion,that the listing, registration or qualification of Shares issuable pursuant tothe Plan is required by any securities exchange or under any state or federallaw, or the consent or approval of any governmental regulatory body isnecessary or desirable as a condition of, or in connection with, the grant ofan Option or Award or the issuance of Shares, no Options or Awards shall begranted or payment made or Shares issued, in whole or in part, unless listing,registration, qualification, consent or approval has been effected or obtainedfree of any conditions as acceptable to the Committee.
18.5 Notwithstanding anything contained in thePlan or any Agreement to the contrary, in the event that the disposition ofShares acquired pursuant to the Plan is not covered by a then currentregistration statement under the Securities Act of 1933, as amended (the SecuritiesAct), and is not otherwise exempt from such registration, such Shares shall berestricted against transfer to the extent required by the Securities Act andRule 144 or other regulations thereunder. The Committee may require any individual receiving Shares pursuant to anOption or Award granted under the Plan, as a condition precedent to receipt ofsuch Shares, to represent and warrant to the Company in writing that the Sharesacquired by such individual are acquired without a view to any distributionthereof and will not be sold or transferred other than pursuant to an effectiveregistration thereof under the Securities Act or pursuant to an exemptionapplicable under the Securities Act or the rules and regulations promulgatedthereunder. The certificates evidencingany such Shares shall be appropriately amended or have an appropriate legendplaced thereon to reflect their status as restricted securities as aforesaid.
19.1 Multiple Agreements. The terms of each Option or Award may differ from other Options orAwards granted under the Plan at the same time or at some other time. The Committee may also grant more than oneOption or Award to a given Eligible Individual during the term of the Plan,either in addition to, or in substitution for, one or more Options or Awardspreviously granted to that Eligible Individual.
19.2 Withholding of Taxes.
(a) At such times as an Optionee or Granteerecognizes taxable income in connection with the receipt of Shares or cashhereunder (a Taxable Event), the Optionee or Grantee shall pay to the Companyan amount equal to the federal, state and local income taxes and other amountsas may be required by law to be withheld by the Company in connection with theTaxable Event (the Withholding Taxes) prior to the issuance, or releasefrom escrow, of such Shares or the payment of such cash. The Company shall have the right to deductfrom any payment of cash to an Optionee or Grantee an amount equal to theWithholding Taxes in satisfaction of the obligation to pay WithholdingTaxes. The Committee may provide in anAgreement evidencing an Option or Award at the time of grant or thereafter thatthe Optionee or Grantee, in satisfaction of the obligation to pay WithholdingTaxes to the Company, may elect to have withheld a portion of the Shares issuableto him or her pursuant to the Option or Award having an aggregate Fair MarketValue equal to the Withholding Taxes.
A – 21
(b) If an Optionee makes a disposition,within the meaning of Section 424(c) of the Code and regulationspromulgated thereunder, of any Share or Shares issued to such Optionee pursuantto the exercise of an Incentive Stock Option within the two-year periodcommencing on the day after the date of the grant or within the one-year periodcommencing on the day after the date of transfer of such Share or Shares to theOptionee pursuant to such exercise, the Optionee shall, within ten (10) days ofsuch disposition, notify the Company thereof, by delivery of written notice tothe Company at its principal executive office.
19.3 Effective Date. The effective date of this Plan shall be asdetermined by the Board, subject only to the approval by the holders of amajority of the securities of the Company entitled to vote thereon, inaccordance with the applicable laws, within twelve (12) months of the adoptionof the Plan by the Board.
A – 22