1998 Incentive Stock Plan - Global Water Solutions Inc.
GLOBAL WATER SOLUTIONS, INC.
1998 INCENTIVE STOCK PLAN
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1. Purpose. The GLOBAL WATER SOLUTIONS, INC. 1998 Incentive Stock Plan
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(the "Plan") is intended to provide incentives which will attract and retain
highly competent persons as officers, directors and employees of GLOBAL WATER
SOLUTIONS, INC. and any of its subsidiaries (the "Company"), by providing them
opportunities to acquire shares of Common Stock of the Company ("Common Shares")
or to receive monetary payments based on the value of such shares pursuant to
the Awards described herein.
2. Administration. The Plan will be administered by the Compensation
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Committee (the "Committee") appointed by the Board of Directors of the Company
from among its members provided, however, that if and as long as Common Shares
are registered under the Securities Exchange Act of 1934, members of the
Committee must qualify as non-employee directors within the meaning of Rule 16b-
3 of the Securities and Exchange Act of 1934, as amended, and, to the extent
necessary, Internal Revenue Code Section 162(m). The Committee is authorized,
subject to the provisions of the Plan, to establish such rules and regulations
as it deems necessary for the proper administration of the Plan and to make such
determinations and interpretations and to take such action in connection with
the Plan and any Awards granted hereunder as it deems necessary or advisable.
All determinations and interpretations made by the Committee shall be binding
and conclusive on all participants and their legal representatives. No member
of the Board, no member of the Committee and no employee of the Company shall be
liable for any act or failure to act hereunder, by any other member or employee
or by any agent to whom duties in connection with the administration of this
Plan have been delegated or, except in circumstances involving his bad faith,
gross negligence or fraud, for any act or failure to act by the member or
employee.
3. Participants. Participants will consist of such officers, directors,
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employees and consultants of the Company, as the Committee in its sole
discretion determines to be significantly responsible for the success and future
growth and profitability of the Company and whom the Committee may designate
from time to time to receive Awards under the Plan. Designation of a
participant in any year shall not require the Committee to designate such person
to receive an Award in any other year or, once designated, to receive the same
type or amount of Awards as granted to the participant in any year. The
Committee shall consider such factors as it deems pertinent in selecting
participants and in determining the type and amount of their respective Awards.
4. Types of Awards. Awards under the Plan may be granted in any one or a
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combination of (a) Stock Options, (b) Stock Appreciation Rights, (c) Stock
Awards, (d) Performance Shares, and (e) Performance Units, all as described
below (collectively "Awards").
5. Shares Reserved under the Plan. There is hereby reserved for issuance
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under the Plan an aggregate of One Million (1,000,000) Common Shares, which may
be authorized but unissued shares. Any shares subject to any form of Award
hereunder may thereafter be subject to new Awards under this Plan if there is a
lapse, expiration or termination of any such Awards prior to issuance of the
shares or the payment of the equivalent or if shares are issued under such
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Stock Options or Stock Appreciation Rights or as Stock Awards, and thereafter
are reacquired by the Company pursuant to rights reserved by the Company upon
issuance thereof.
6. Stock Options. Stock Options will consist of awards from the Company,
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in the form of agreements, which will enable the holder to purchase a specific
number of Common Shares, at set terms and at a fixed purchase price. Stock
Options may be "incentive stock options" within the meaning of Internal Revenue
Code Section 422 ("Incentive Stock Options") or Stock Options which do not
constitute Incentive Stock Options ("Nonqualified Stock Options"). The
Committee will have the authority to grant to any participant one or more
Incentive Stock Options, Nonqualified Stock Options, or both types of Stock
Options (in each case with or without Stock Appreciation Rights). Each Stock
Option shall be subject to such terms and conditions consistent with the Plan as
the Committee may impose from time to time, subject to the following
limitations:
(a) Exercise Price. Each Stock Option granted hereunder shall have
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such per-share exercise price as the Committee may determine at the date of
grant provided, however, that the per-share exercise price for Incentive Stock
Options shall not be less than 100% of the Fair Market Value of the Common
Shares on the date the option is granted and provided further that the per-share
exercise price for Nonqualified Stock Options shall not be less than 85% of the
Fair Market Value of the Common Shares on the date the option is granted.
(b) Payment of Exercise Price. The option exercise price may be paid
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by check or, in the discretion of the Committee, by the delivery (or
certification of ownership) of Common Shares of the Company then owned by the
participant; provided, however, that option agreements may provide that payment
of the exercise price by delivery of Common Shares of the Company then owned by
the participant may be made only if such payment does not result in a charge to
earnings for financial accounting purposes as determined by the Committee. In
the discretion of the Committee, if Common Shares are readily tradeable on a
national securities exchange or other market system at the time of option
exercise, payment may also be made by delivering a properly executed exercise
notice to the Company together with a copy of irrevocable instructions to a
broker to deliver promptly to the Company the amount of sale or loan proceeds to
pay the exercise price. To facilitate the foregoing, the Company may enter into
agreements for coordinated procedures with one or more brokerage firms.
(c) Exercise Period. Stock Options granted under the Plan shall be
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exercisable at such times and subject to such terms and conditions as shall be
determined by the Committee. In addition, Nonqualified Stock Options shall not
be exercisable later than fifteen (15) years after the date they are granted and
Incentive Stock Options shall not be exercisable later than ten (10) years after
the date they are granted. All Stock Options shall terminate at such earlier
times and upon such conditions or circumstances as the Committee shall in its
discretion set forth in such option at the date of grant.
(d) Limitations on Incentive Stock Options. Incentive Stock Options
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may be granted only to participants who are employees of the Company or one of
its subsidiaries (within the meaning of Internal Revenue Code Section 424(f)) at
the date of grant. The aggregate Fair Market Value (determined as of the time
the option is granted) of the Common Shares with respect to which Incentive
Stock Options are exercisable for the first time by a
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participant during any calendar year (under all option plans of the Company)
shall not exceed $100,000. Incentive Stock Options may not be granted to any
participant who, at the time of grant, owns stock possessing (after the
application of the attribution rules of Section 424(d) of the Code) more than
10% of the total combined voting power of all classes of stock of the Company,
unless the option price is fixed at not less than 110% of the Fair Market Value
of the Common Shares on the date of grant and the exercise of such option is
prohibited by its terms after the expiration of five (5) years from the date of
grant of such option.
(e) Redesignation as Nonqualified Stock Options. Options designated
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as "incentive stock options" that fail to continue to meet the requirements of
Internal Revenue Code Section 422 shall be redesignated as nonqualified options
for Federal income tax purposes automatically without further action by the
Committee on the date of such failure to continue to meet the requirements of
Section 422 of the Code.
(f) Limitation of Rights in Shares. The recipient of a Stock Option
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shall not be deemed for any purpose to be a shareholder of the Company with
respect to any of the shares subject thereto except to the extent that the Stock
Option shall have been exercised and, in addition, a certificate shall have been
issued and delivered to the participant.
7. Stock Appreciation Rights. The Committee may, in its discretion,
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grant Stock Appreciation Rights to the holders of any Stock Options granted
hereunder. In addition, Stock Appreciation Rights may be granted independently
of and without relation to options. Each Stock Appreciation Right shall be
subject to such terms and conditions consistent with the Plan as the Committee
shall impose from time to time, including the following:
(a) A Stock Appreciation Right relating to a Nonqualified Stock
Option may be made part of such option at the time of its grant or at any time
thereafter up to six months prior to its expiration, and a Stock Appreciation
Right relating to an Incentive Stock Option may be made part of such option only
at the time of its grant.
(b) Each Stock Appreciation Right will entitle the holder to elect to
receive the appreciation in the Fair Market Value of the shares subject thereto
up to the date the right is exercised. In the case of a right issued in relation
to a Stock Option, such appreciation shall be measured from not less than the
option price and in the case of a right issued independently of any Stock
Option, such appreciation shall be measured from not less than 85% of the Fair
Market Value of the Common Shares on the date the right is granted. Payment of
such appreciation shall be made in cash or in Common Shares, or a combination
thereof, as set forth in the award, but no Stock Appreciation Right shall
entitle the holder to receive, upon exercise thereof, more than the number of
Common Shares (or cash of equal value) with respect to which the right is
granted.
(C) Each Stock Appreciation Right will be exercisable at the times
and to the extent set forth therein, but no Stock Appreciation Right may be
exercisable earlier than six months after the date it was granted or later than
the earlier of (i) the term of the related option, if any, or (ii) fifteen years
after it was granted. Exercise of a Stock Appreciation Right shall reduce the
number of shares issuable under the Plan (and the related option, if any) by the
number of shares with respect to which the right is exercised.
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8. Stock Awards. Stock Awards will consist of Common Shares transferred
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to participants for a consideration equal to the Fair Market Value per share, at
a discount from Fair Market Value, or without other payment therefor as
additional compensation for services rendered to the Company. Stock Awards shall
be subject to such terms and conditions as the Committee determines appropriate,
including, without limitation, restrictions on the sale or other disposition of
such shares and rights of the Company to reacquire such shares for no
consideration upon termination of the participant's employment within specified
periods. The Committee may require the participant to deliver a duly signed
stock power, endorsed in blank, relating to the Common Shares covered by any
Stock Award. The Committee may also require that the stock certificates
evidencing such shares be held in custody until the restrictions thereon shall
have lapsed. Subject to the restrictions set forth in any such Stock Award, the
participant shall have, with respect to the Common Shares subject to a Stock
Award, all of the rights of a holder of Common Shares of the Company, including
the right to receive dividends and to vote the shares.
9. Performance Shares.
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(a) Performance Shares may be awarded either alone or in addition to
other Awards granted under this Plan and shall consist of the right to receive
Common Shares or cash of an equivalent value at the end of a specified
Performance Period. The Committee shall determine the participants to whom and
the time or times at which Performance Shares shall be awarded, the number of
Performance Shares to be awarded to any person, the duration of the period (the
"Performance Period") during which, and the conditions under which, receipt of
the Common Shares will be deferred, and the other terms and conditions of the
Award in addition to those set forth in this Section 9. The Committee may
condition the grant of Performance Shares upon the attainment of specified
performance goals or such other factors or criteria as the Committee shall
determine.
(b) Performance Shares awarded pursuant to this Section 9 shall be
subject to the following terms and conditions:
(i) Unless otherwise determined by the Committee at the time of
the grant a Performance Share Award, with respect to the Common Shares
subject to a Performance Share Award, the participant shall not have any of
the rights of a holder of Common Shares of the Company, including the right
to receive dividends or to vote the shares.
(ii) Subject to the provisions of the Performance Share Award
and this Plan, at the expiration of the Performance Period, share
certificates and/or cash of an equivalent value (as the Committee may
determine) shall be delivered to the participant, or his or her legal
representative, in a number equal to the vested shares covered by the
Performance Share Award.
(iii) Subject to the applicable provisions of the Performance
Share Award and this Plan, upon termination of a participant's employment
with the Company for any reason during the specified Performance Period,
the participant's Performance
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Shares will vest or be forfeited in accordance with the terms and
conditions established by the Committee.
10. Performance Units.
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(a) Performance Units may be awarded either alone or in addition to
other Awards granted under this Plan and shall consist of the right to receive a
fixed dollar amount, payable in cash or Common Shares or a combination of both.
The Committee shall determine the participants to whom and the time or times at
which Performance Units shall be awarded, the number of Performance Units to be
awarded to any person, the duration of the period (the "Performance Cycle")
during which, and the conditions under which, a participant's right to
Performance Units will be vested, the ability of participants to defer the
receipt of payment of such Performance Units, and the other terms and conditions
of the Award in addition to those set forth in Section 10. The Committee may
condition the vesting of Performance Units upon the attainment of specified
performance goals or such other factors or criteria as the Committee shall
determine.
(b) The Performance Units awarded pursuant to this Section 10 shall
be subject to the following terms and conditions:
(i) At the expiration of the Performance Cycle, the Committee
shall determine the extent to which the performance goals have been
achieved, and the percentage of the Performance Units of each participant
that have vested.
(ii) Subject to the applicable provisions of the Performance
Unit Award and this Plan, at the expiration of the Performance Cycle, cash
and/or share certificates of an equivalent value (as the Committee may
determine) shall be delivered to the participant, or his or her legal
representative, in payment of the vested Performance Units covered by the
Performance Unit Award.
(iii) Subject to the applicable provisions of the Performance
Unit Award and this Plan, upon termination of a participant's employment
with the Company for any reason during the Performance Cycle for a given
Performance Unit Award, the Performance Units in question will vest or be
forfeited in accordance with the terms and conditions established by the
Committee.
11. Adjustment Provisions.
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(a) If the Company shall at any time change the number of issued
Common Shares without new consideration to the Company (such as by stock
dividend, stock split, recapitalization, reorganization, exchange of shares,
liquidation, combination or other change in corporate structure affecting the
Common Shares) or make a distribution of cash or property which has a
substantial impact on the value of issued Common Shares, the total number of
shares available for Awards under this Plan shall be appropriately adjusted and
the number of shares covered by each outstanding Award and the reference price
or Fair Market Value for each outstanding Award shall be adjusted so that the
net value of such Award shall not be changed.
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(b) In the case of any sale of assets, merger, consolidation,
combination or other corporate reorganization or restructuring of the Company
with or into another corporation which results in the outstanding Common Shares
being converted into or exchanged for different securities, cash or other
property, or any combination thereof (an "Acquisition"), subject to the
provisions of this Plan and any limitation applicable to the Award:
(i) any participant to whom a Stock Option has been granted
shall have the right thereafter and during the term of the Stock Option, to
receive upon exercise thereof the Acquisition Consideration (as defined
below) receivable upon the Acquisition by a holder of the number of Common
Shares which might have been obtained upon exercise of the Stock Option or
portion thereof, as the case may be, immediately prior to the Acquisition;
(ii) any participant to whom a Stock Appreciation Right has been
granted shall have the right thereafter and during the term of such right
to receive upon exercise thereof the difference on the exercise date
between the aggregate Fair Market Value of the Acquisition Consideration
receivable upon such acquisition by a holder of the number of Common Shares
which are covered by such right and the aggregate reference price of such
right; and
(iii) any participant to whom Performance Shares or Performance
Units have been awarded shall have the right thereafter and during the term
of the Award, upon fulfillment of the terms of the Award, to receive on the
date or dates set forth in the Award, the Acquisition Consideration
receivable upon the Acquisition by a holder of the number of Common Shares
which are covered by the Award.
The term "Acquisition Consideration" shall mean the kind and amount of
securities, cash or other property or any combination thereof receivable in
respect of one Common Share upon consummation of an Acquisition.
(c) Notwithstanding any other provision of this Plan, the Committee
may authorize the issuance, continuation or assumption of Awards or provide for
other equitable adjustments after changes in the Common Shares resulting from
any other merger, consolidation, sale of assets, acquisition of property or
stock, recapitalization, reorganization or similar occurrence upon such terms
and conditions as it may deem equitable and appropriate.
(d) In the event that another corporation or business entity is being
acquired by the Company, and the Company assumes outstanding employee stock
options and/or stock appreciation rights and/or the obligation to make future
grants of options or rights to employees of the acquired entity, the aggregate
number of Common Shares available for Awards under this Plan shall be increased
accordingly.
12. Nontransferability.
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(a) Each Award granted under the Plan to a participant shall not be
transferable by him otherwise than by law or by will or the laws of descent and
distribution, and shall be exercisable, during his lifetime, only by him. In the
event of the death of a participant while the participant is rendering services
to the Company, each Stock Option or Stock
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Appreciation Right theretofore granted to him shall be exercisable during such
period after his death as the Committee shall in its discretion set forth in
such option or right at the date of grant (but not beyond the stated duration of
the option or right) and then only:
(i) By the executor or administrator of the estate of the
deceased participant or the person or persons to whom the deceased
participant's rights under the Stock Option or Stock Appreciation Right
shall pass by will or the laws of descent and distribution; and
(ii) To the extent that the deceased participant was entitled to
do so at the date of his death.
(b) Notwithstanding Section 12(a), in the discretion of the Committee,
Awards granted hereunder may be transferred to members of the participant's
immediate family (which for purposes of this Plan shall be limited to the
participant's children, grandchildren and spouse), or to one or more trusts for
the benefit of such family members or partnerships in which such family members
and/or trusts are the only partners, but only if the Award expressly so
provides.
13. Other Provisions. Awards under the Plan may also be subject to such
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other provisions (whether or not applicable to any other Awards under the Plan)
as the Committee determines appropriate, including without limitation,
provisions for the installment purchase of Common Shares under Stock Options,
provisions for the installment exercise of Stock Appreciation Rights, provisions
to assist the participant in financing the acquisition of Common Shares,
provisions for the forfeiture of, or restrictions on resale or other disposition
of Shares acquired under any form of Award, provisions for the acceleration of
exercisability or vesting of Awards in the event of a change of control of the
Company, provisions for the payment of the value of Awards to participants in
the event of a change of control of the Company, provisions for the forfeiture
of, or provisions to comply with Federal and state securities laws, or
understandings or conditions as to the participant's employment in addition to
those specifically provided for under the Plan.
14. Fair Market Value. For purposes of this Plan and any Awards
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hereunder, the Fair Market Value of Common Shares shall be the mean between the
highest and lowest sale prices for the Company's Common Shares as reported on
the Nasdaq National Market (or such other consolidated transaction reporting
system on which such Common Shares are primarily traded) on the date of
calculation (or on the next preceding trading date if Common Shares were not
traded on the date of calculation), provided, however, that if the Company's
Common Shares are not at any time readily tradeable on a national securities
exchange or other market system, Fair Market Value shall mean the amount
determined in good faith by the Committee as the fair market value of the Common
Shares of the Company.
15. Withholding. All payments or distributions made pursuant to the Plan
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shall be net of any amounts required to be withheld pursuant to applicable
federal, state and local income and/or employment tax withholding requirements.
If the Company proposes or is required to distribute Common Shares pursuant to
the Plan, it may require the recipient to remit to it an amount sufficient to
satisfy such tax withholding requirements prior to the delivery of any
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certificates for such Common Shares. The Committee may, in its discretion and
subject to such rules as it may adopt, permit an optionee or award or right
holder to pay all or a portion of the federal, state and local withholding taxes
arising in connection with (a) the exercise of a Nonqualified Stock Option or a
Stock Appreciation Right, (b) the receipt or vesting of Stock Awards, or (c) the
receipt of Common Shares upon the expiration of the Performance Period or the
Performance Cycle, respectively, with respect to any Performance Shares or
Performance Units, by electing to have the Company withhold Common Shares having
a Fair Market Value equal to the amount of taxes required to be withheld.
16. Tenure. A participant's right, if any, to continue to serve the
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Company as an officer, employee, or otherwise, shall not be enlarged or
otherwise affected by his designation as a participant under the Plan, nor shall
this Plan in any way interfere with the right of the Company, subject to the
terms of any separate employment agreement to the contrary, at any time to
terminate such employment or to increase or decrease the compensation of the
participant from the rate in existence at the time of the grant of an Award.
17. Duration, Amendment and Termination. No Award shall be granted after
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December 31, 2008; provided, however, that the terms and conditions applicable
to any Award granted prior to such date may thereafter be amended or modified by
mutual agreement between the Company and the participant or such other persons
as may then have an interest therein. Also, by mutual agreement between the
Company and a participant, under this Plan or under any other present or future
plan of the Company, Awards may be granted to such participant in substitution
and exchange for, and in cancellation of, any Awards previously granted such
participant under this Plan, or any other present or future plan of the Company.
The Board of Directors may amend the Plan from time to time or terminate the
Plan at any time, subject to any requirement of stockholder approval required by
applicable law, rule or regulation.
18. Governing Law. This Plan and actions taken in connection herewith
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shall be governed and construed in accordance with the laws of the State of
California (regardless of the law that might otherwise govern under applicable
California principles of conflict of laws).
19. Approval. The Plan was adopted by the Board of Directors and the
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shareholders of the Company on August 28, 1998.
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