2001 Key Employee Stock Incentive Plan - Warren Resources Inc.
WARREN RESOURCES, INC.
2001 KEY EMPLOYEE STOCK INCENTIVE PLAN
1. PURPOSE.
This 2001 Key Employee Stock Incentive Plan (the "Plan") is intended as an
incentive to encourage stock ownership by certain key employees (including
officers) of WARREN RESOURCES, INC. (the "Company"), or of its subsidiary
corporations (the "Subsidiaries," as that term is defined in Section 424(f) of
the Internal Revenue Code of 1986, as amended from time to time), so that they
may acquire or increase their proprietary interest in the success of the Company
and the Subsidiaries, and to encourage them to remain in the employ of the
Company or of the Subsidiaries. The Plan is designed to meet this intent by
offering performance-based stock and cash incentives and other equity based
incentive awards, thereby providing a proprietary interest in pursuing the
long-term growth, profitability and financial success of the Company.
2. DEFINITIONS.
For purposes of this Plan, the following terms shall have the meanings set
forth below:
(a) "Award" or "Awards" means an award or grant made to a Participant under
Sections 6 through 8, inclusive, of the Plan.
(b) "Board" means the Board of Directors of the Company.
(c) "Code" means the Internal Revenue Code of 1986, as amended, together
with the regulations promulgated thereunder.
(d) "Committee" means the Compensation Committee of the Board, or any
committee of the Board performing similar functions, constituted as provided in
Section 3 of the Plan.
(e) "Common Stock" means the Common Stock of the Company or any security of
the Company issued in substitution, exchange or lieu thereof.
(f) "Company" means Warren Resources, Inc., a New York corporation, or any
successor corporation.
(g) "Deferred Compensation Stock Option" means any Stock Option granted
pursuant to the provisions of Section 6 of the Plan that is specifically
designated as such.
(h) "Disability" means a total and permanent disability as defined in the
Company's long-term disability plan, or if the Company has no long-term
disability plan in effect at the time of a Participant's disability,
"disability" shall have the meaning provided in Section 22(e)(3) of the Code.
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(i) "Exchange Act" means the Securities Exchange Act of 1934, as amended
and in effect from time to time, or any successor statute.
(j) "Fair Market Value" means at any given time on any given date (i) the
closing price of the Common Stock on any established national exchange or
exchanges for the immediately prior trading day on which there was a sale of
such stock, or (ii) if the Common Stock is not listed on an established stock
exchange, the closing bid price of the Common Stock in the New York
over-the-counter market as reported by the National Association of Securities
Dealers, Inc. for such trading date. For example, prior to closing of the market
on any given business day, Fair Market Value would be the closing price on the
preceding trading day on which there was a trade. After closing of the market on
any given business day, Fair Market Value would be the closing price on that
same day if there was a trade.
(k) "Immediate Family Member" means the spouse, children or grandchildren
of a Participant.
(l) "Incentive Stock Option" means any Stock Option (as defined below) that
is intended to be and is specifically designated as an "incentive stock option"
within the meaning of Section 422 of the Code.
(m) "Nonqualified Stock Option" means any Stock Option granted pursuant to
the provisions of Section 6 of the Plan that is not an Incentive Stock Option.
(n) "Participant" means a key employee (including an officer) of the
Company or a Subsidiary, who from time to time shall be designated by the
Committee and in all such cases who is also granted an Award under the Plan. No
member of the Committee shall be eligible to be a Participant.
(o) "Plan" means this Warren Resources, Inc. 2001 Key Employee Stock
Incentive Plan as set forth herein and as it may be hereafter amended.
(p) "Restricted Award" means an Award granted pursuant to the provisions of
Section 8 of the Plan.
(q) "Restricted Stock Grant" means an Award of shares of Common Stock
granted pursuant to the provisions of Section 8 of the Plan.
(r) "Restricted Unit Grant" means an Award of units representing shares of
Common Stock granted pursuant to the provisions of Section 8 of the Plan.
(s) "Stock Appreciation Right" means an Award to benefit from the
appreciation of Common Stock granted pursuant to the provisions of Section 7 of
the Plan.
(t) "Stock Option" means an Award to purchase shares of Common Stock
granted pursuant to the provisions of Section 6 of the Plan.
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(u) "Subsidiary" means a "subsidiary corporation" within the meaning of
Section 424(f) of the Code.
(v) "Ten Percent Shareholder" means a person who owns (or is considered to
own after taking into account the attribution of ownership rules of Section
424(d) of the Code) more than ten percent (10%) of the total combined voting
power of all classes of stock of the Company or any of its Subsidiaries.
3. ADMINISTRATION.
(a) The Plan shall be administered by the Committee, as appointed from time
to time by the Board. The Board may from time to time remove members from, or
add members to, the Committee. The Committee shall be comprised solely of two or
more members of the Board who are "non-employee directors" as defined in Rule
16b-3 ("Rule 16b-3") promulgated by the Securities and Exchange Commission
("SEC") under the Exchange Act as it may be amended from time to time, or any
successor rule, and who are "outside directors" within the meaning of Treasury
Regulation Section 1.162-27(e)(3) and the delegation of powers to the Committee
shall be consistent with applicable laws and regulations (including, without
limitation, applicable state law and Rule 16b-3).
(b) Unless otherwise provided in the By-Laws of the Company, by resolution
of the Board of Directors or applicable law, a majority of the members of the
Committee shall constitute a quorum for the transaction of business and action
approved in writing by a majority of the members of the Committee then serving
shall be as effective as if the action had been taken by unanimous vote at a
meeting duly called and held.
(c) The Committee is authorized to construe and interpret the Plan, to
promulgate, amend, and rescind rules and procedures relating to the
implementation of the Plan, and to make all other determinations necessary or
advisable for the administration of the Plan. Any determination, decision, or
action of the Committee in connection with the construction, interpretation,
administration, or application of the Plan shall be binding upon all
Participants and any person validly claiming under or through any Participant
and any Award under this Plan will be made only if the Committee decides in its
sole and absolute discretion that the Participant or any persons validly
claiming through any Participant is entitled to such award. In the event of a
disagreement as to the interpretation of the Plan or any agreements issued
hereunder as to any right or obligation arising from or related to the Plan, the
decision of the Committee shall be final and binding.
(d) The Committee may designate persons other than members of the Committee
to carry out its responsibilities under such conditions and limitations as it
may prescribe, except that the Committee may not delegate its authority to grant
Awards to persons subject to Section 16 of the Exchange Act. The Committee is
specifically authorized to give authority to the Company's chief executive
officer within specified written limits to grant Awards to new employees of the
Company in connection with their hiring, which written limits may be changed
from time to time by the Committee in its sole discretion.
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(e) The Committee is expressly authorized to make modifications to the Plan
as necessary to effectuate the intent of the Plan as a result of any changes in
the tax, accounting, or securities laws treatment of Participants and the Plan,
subject to those restrictions that are set forth in Section 13 below.
(f) The Company shall effect the granting of Awards under the Plan, in
accordance with the determinations made by the Committee by execution of
instruments in writing as specified in Section 14(d) below in such form as
approved by the Committee.
4. ELIGIBILITY.
Persons eligible for Awards under the Plan shall consist of key employees
(including officers) of the Company or its Subsidiaries. Such Awards shall cover
such numbers of shares of Common Stock as the Committee may determine in its
sole discretion; provided, however that if on the date of grant of an Award, any
class of Common stock of the Company (including without limitation the Common
Stock) is required to be registered under Section 12 of the Exchange Act, the
maximum number of shares subject to an Award that may be granted to a
Participant during any calendar year under the Plan shall be 750,000 shares (the
"Section 162 Maximum").
5. DURATION OF AND COMMON STOCK SUBJECT TO PLAN.
(a) Term. The Plan was adopted by the Board on September 6, 2001. Subject
to Section 13 below, the Plan shall terminate on September 5, 2011, except with
respect to Awards then outstanding, including Reload Options on Awards then
outstanding, and no Award may be granted under the Plan after that date.
(b) Shares of Common Stock Subject to Plan. The maximum number of shares of
Common Stock in respect of which Awards may be granted under the Plan (the "Plan
Maximum") shall be 2,500,000, subject to adjustment as provided in Section 11
below. Common Stock issued under the Plan may be either authorized and unissued
shares or treasury shares. The following terms and conditions shall apply to
Common Stock subject to the Plan:
(i) In no event shall more than the Plan Maximum be cumulatively
available for Awards under the Plan;
(ii) For the purpose of computing the total number of shares of Common
Stock available for Awards under the Plan, there shall be counted against
the foregoing limitations (A) the number of shares of Common Stock subject
to issuance upon exercise or settlement of Awards (regardless of vesting),
and (B) the number of shares of Common Stock which equal the value of
Restricted Unit Grants or Stock Appreciation Rights determined at the dates
on which such Awards are granted;
(iii) If any Awards are forfeited, terminated, expire unexercised,
settled in cash in lieu of stock or exchanged for other Awards, the shares
of Common Stock which were previously subject to the Awards shall again be
available for Awards under the Plan to the extent of such forfeiture,
termination, expiration, cash settlement or exchange; and
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(iv) Any shares of Common Stock which are used as full or partial
payment to the Company by a Participant of the purchase price of shares of
Common Stock upon exercise of a Stock Option shall again be available for
Awards under the Plan.
6. STOCK OPTIONS.
Stock Options granted under the Plan may be in the form of Incentive Stock
Options, Non-Qualified Stock Options or Deferred Compensation Stock Options.
Stock Options shall be subject to the following terms and conditions, and each
Stock Option shall contain such additional terms and conditions, not
inconsistent with the express provisions of the Plan, as the Committee shall
deem desirable:
(a) Grant. Stock Options shall be granted separately. In no event will
Stock Options or Awards be issued in tandem whereby the exercise of one affects
the right to exercise the other.
(b) Stock Option Price. The exercise price per share of Common Stock
purchasable under a Stock Option shall be determined by the Committee at the
time of grant, provided that in no event shall the exercise price of an
Incentive Stock Option, or of any option intended to comply with the
performance-based compensation exemption to the deduction limitations of Section
162(m) of the Code, be less than one hundred percent (100%) of the Fair Market
Value of the Common Stock on the date of the grant of the Stock Option. In the
case of a Ten Percent Shareholder, the exercise price of an Incentive Stock
Option shall be not less than one hundred ten percent (110%) of the Fair Market
Value of the Common Stock on the date of the grant.
(c) Option Term. The term of each Stock Option, other than an Incentive
Stock Option, shall be fixed by the Committee. The term of Incentive Stock
Options shall not exceed ten (10) years after the date the Incentive Stock
Option is granted, and the term of any Incentive Stock Options granted to Ten
Percent Shareholders shall not exceed five (5) years after the date of the
grant.
(d) Exercisability.
(i) Incentive Stock Options and Nonqualified Stock Options shall be
exercisable in installments as determined by the Committee in its sole
discretion, and shall be subject to such other terms and conditions as the
Committee shall determine at the date of grant; provided that if not
otherwise determined by the Committee, Incentive Stock Options and
Nonqualified Stock Options may be exercised as to twenty-five percent (25%)
of the shares covered thereby beginning on the first anniversary date of
the date of grant (hereinafter, an "Anniversary Date") and thereafter an
additional fifty percent (50%) on the second Anniversary Date, and an
additional twenty-five percent (25%) on the third Anniversary Date, except
as otherwise provided in Sections 9 and 12.
(ii) Reload Options shall become exercisable in accordance with
Section 6(i)(iii) hereof.
(iii) Deferred Compensation Stock Options shall become exercisable in
accordance with the terms of the grant thereof as established by the
Committee.
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(e) Method of Exercise. Subject to applicable exercise restrictions set
forth in Section 6(d) above, a Stock Option may be exercised, in whole or in
part, by giving written notice of exercise to the Company specifying the number
of shares to be purchased. The notice shall be accompanied by payment in full of
the purchase price. The purchase price may be paid by any of the following
methods, subject to the restrictions set forth in Section 6(f) hereof:
(i) in cash, by certified or cashier's check, by money order or by
personal check (if approved by the Committee) of an amount equal to the
aggregate purchase price of the shares of Common Stock to which such
exercise relates; or
(ii) if acceptable to the Committee, by delivery of shares of Common
Stock already owned by the Participant and held by the Participant for a
minimum of six months, which shares, including any cash tendered therewith,
have an aggregate Fair Market Value equal to the aggregate purchase price
of the shares of Common Stock to which such exercise relates; or
(iii) the Committee may, in its sole discretion, permit payment of
this exercise price by delivery by the Participant of a properly executed
notice, together with a copy of the Participant's irrevocable instruction
to a broker acceptable to the Committee to deliver promptly to the Company
the amount of sale or loan proceeds sufficient to pay such exercise price.
In connection therewith, the Company may enter into agreements for
coordinated procedures with one or more brokerage firms.
In no case may a fraction of a share of Common Stock be purchased or issued
under the Plan.
(f) Restrictions on Method and Timing of Exercise. Notwithstanding the
foregoing provisions, the Committee, in granting Stock Options pursuant to the
Plan, may limit the timing or methods by which a Stock Option may be exercised
by any person or waive all or any portion of such limits on timing or methods,
and, in processing any purported exercise of a Stock Option granted pursuant to
the Plan, may refuse to recognize the timing or methods of exercise selected by
the Participant if, in the opinion of counsel to the Company, there is a
substantial risk that such exercise could result in the violation of any then
applicable rules or regulations, including federal or state securities laws.
Furthermore, no Incentive Stock Option may be exercised in accordance with the
method of exercise set forth in subsections 6(e)(ii) and 6(e)(iii) above unless,
in the opinion of counsel to the Company, such exercise would not have a
material adverse effect upon the incentive stock option tax treatment of any
outstanding Incentive Stock Options or Incentive Stock Options (other than the
particular option or options then exercised in accordance with such subsection
6(e)(ii)) which may be granted pursuant to the Plan in the future.
(g) Transferability of Nonqualified Stock Options. The Committee may, in
its discretion, authorize all or a portion of any Nonqualified Stock Option to
be on terms which permit transfer by the Participant to (i) Immediate Family
Members, (ii) a trust or trusts for the exclusive benefit of Immediate Family
Members, (iii) a charitable trust or trusts created or controlled by the
Participant, or (iv) a partnership in which Immediate Family Members are the
only partners, provided that (x) there may be no consideration for any such
transfer, (y) the transfer must be approved by the Committee in a manner
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consistent with this Section, and (z) subsequent transfers of transferred
Options shall be prohibited except to a transferee to whom the Participant could
have transferred the Option pursuant to this Section 6(g) or by will or the laws
of descent and distribution, after which assignment, Section 9 hereof shall
apply to exercise of the Option by the assignee. Following transfer, any such
Options shall continue to be subject to the same terms and conditions as were
applicable immediately prior to transfer, provided that for all purposes hereof
the term Participant shall be deemed to refer to the transferee. The events of
termination of employment of Section 9 hereof shall continue to be applied with
respect to the original Participant, following which events the Options shall be
exercisable by the transferee only to the extent, and for the periods specified
in Section 9.
(h) Tax Withholding. In addition to the alternative methods of exercise set
forth in Section 6(e), holders of Nonqualified Stock Options, subject to the
discretion of the Committee, may be entitled to elect at or prior to the time
the exercise notice is delivered to the Company, to have the Company withhold
from the shares of Common Stock to be delivered upon exercise of the
Nonqualified Stock Option the number of shares of Common Stock (determined based
on the Fair Market Value) that is necessary to satisfy any withholding taxes
attributable to the exercise of the Nonqualified Stock Option so long as the
amount withheld does not exceed the Company's minimum statutory tax withholding
attributable to the underlying transaction. If withholding is made in shares of
Common Stock pursuant to the method set forth above, the Committee, in its
discretion, may grant "Reload Options" (as defined and on the terms specified in
Section 6(i) below) for the number of shares so withheld. Notwithstanding the
foregoing provisions, a holder of a Nonqualified Stock Option may not elect to
satisfy his or her withholding tax obligation in respect of any exercise as
contemplated above if, in the opinion of counsel to the Company, there is
substantial risk that such election could result in a violation of any then
applicable rules or regulations, including federal or state securities law, or
such withholding would have an adverse tax or accounting effect on the Company.
(i) Grant of Reload Options. Whenever the Participant holding any Incentive
Stock Option or Nonqualified Stock Option (the "Original Option") outstanding
under this Plan (including any "Reload Options" granted under the provisions of
this Section 6(i)) exercises the Original Option and makes payment of the option
price by tendering shares of the Common Stock previously held by him or her
pursuant to Section 6(e)(ii) hereof, then the Committee may grant a reload
option (the "Reload Options") for that number of additional shares of Common
Stock which is equal to the number of shares tendered by the Participant in
payment of the option price for the Original Option being exercised. All such
Reload Options granted hereunder shall be on the following terms and conditions:
(i) The Reload Option price per share shall be an amount equal to the
then current Fair Market Value per share of the Common Stock, determined as
of the time and date of the Company's receipt of the exercise notice for
the Original Option;
(ii) The option exercise period shall expire, and the Reload Option
shall no longer be exercisable, on the expiration of the option period of
the Original Option or two (2) years from the date of the grant of the
Reload Option, whichever is later;
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(iii) Any Reload Option granted under this Section 6(i) shall vest and
first become exercisable one (1) year following the date of exercise of the
Original Option; and
(iv) All other terms of Reload Options granted hereunder shall be
identical to the terms and conditions of the Original Option, the exercise
of which gives rise to the grant of the Reload Option.
(j) Special Rule for Incentive Stock Options. With respect to Incentive
Stock Options granted under the Plan, the aggregate Fair Market Value of the
Common Stock with respect to which Incentive Stock Options are exercisable for
the first time by a Participant during any calendar year under all stock option
plans of the Company or its Subsidiaries shall not exceed one hundred thousand
dollars ($100,000). The Fair Market Value of any Common Stock shall be
determined as of the time the option with respect to such stock is granted or
such other time as may be required by Section 422(d) of the Code, as such
section of the Code may be amended from time to time.
(k) Deferred Compensation Stock Options. Deferred Compensation Stock
Options are intended to provide a means by which compensation payments can be
deferred to future dates. The number of shares of Common Stock subject to a
Deferred Compensation Stock Option shall be determined by the Committee, in its
sole discretion, in accordance with the following formula:
Amount of Compensation to be Deferred = Number of Shares
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Fair Market Value - Stock Option Exercise Price
Amounts of compensation deferred may include amounts earned under Awards granted
under the Plan or under any other compensation plan, program, or arrangement of
the Company as permitted by the Committee.
(l) Incentive Stock Options. Notwithstanding anything in the Plan to the
contrary, no term of this Plan relating to Incentive Stock Options shall be
interpreted, amended, or altered, nor shall any discretion or authority granted
under the Plan be so exercised, so as to disqualify the Plan under Section 422
of the Code. To the extent permitted under Section 422 of the Code or applicable
regulations thereunder or any applicable Internal Revenue Service
pronouncements:
(i) to the extent that any portion of any Incentive Stock Option that
first becomes exercisable during any calendar year exceeds the $100,000
limitation contained in Section 422(d) of the Code set forth in Section
6(j) above, such excess portion shall be treated as a Nonqualified Stock
Option; and
(ii) if the vesting period or exercisability of an Incentive Stock
Option is accelerated, any portion of such Option that exceeds the $100,000
limitation set forth in Section 6(j) above shall be treated as a
Nonqualified Stock Option.
Even if the shares of Common Stock which are issued upon exercise of any
Incentive Stock Option are sold or exchanged within one year following the
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exercise of that Incentive Stock Option such that the sale constitutes a
disqualifying disposition for Incentive Stock Option treatment under the Code,
no provision of this Plan shall be construed as prohibiting such a sale.
7. STOCK APPRECIATION RIGHTS.
The grant of Stock Appreciation Rights under the Plan shall be subject to
the following terms and conditions, and shall contain such additional terms and
conditions, not inconsistent with the express terms of the Plan, as the
Committee shall deem desirable:
(a) Stock Appreciation Rights. A Stock Appreciation Right is an Award
entitling a Participant to receive an amount equal to (or if the Committee shall
determine at the time of grant, less than) the excess of the Fair Market Value
of a share of Common Stock on the date of exercise over the Fair Market Value of
a share of Common Stock on the date of grant of the Stock Appreciation Right,
multiplied by the number of shares of Common Stock with respect to which the
Stock Appreciation Right shall have been exercised.
(b) Grant. A Stock Appreciation Right shall be granted separately. In no
event will Stock Appreciation Rights and other Awards be issued in tandem
whereby the exercise of one such Award affects the right to exercise the other.
(c) Exercise. A Stock Appreciation Right may be exercised by a Participant
in accordance with procedures established by the Committee, except that in no
event shall a Stock Appreciation Right be exercisable prior to the first
Anniversary Date of the date of grant. To the extent, in the opinion of counsel,
it would not subject such Participant to a substantial risk of liability under
Section 16 of the Exchange Act, the Committee, in its discretion, may provide
that a Stock Appreciation Right shall be automatically exercised on one or more
specified dates, or that a Stock Appreciation Right may be exercised during only
limited time periods.
(d) Form of Payment. Payment to a Participant upon exercise of a Stock
Appreciation Right may be made (i) in cash, by certified or cashier's check, by
money order or by personal check (if approved by the Committee) (ii) in shares
of Common Stock, (iii) in the form of a Deferred Compensation Stock Option, or
(iv) any combination of the above, as the Committee shall determine. The
Committee may elect to make this determination either at the time the Stock
Appreciation Right is granted, or with respect to payments contemplated in
clauses (i) and (ii) above, at the time of the exercise.
8. STOCK GRANTS AND RESTRICTED AWARDS
Restricted Awards granted under the Plan may be in the form of either
Restricted Stock Grants or Restricted Unit Grants. Restricted Awards shall be
subject to the following terms and conditions, and may contain such additional
terms and conditions, not inconsistent with the express provisions of the Plan,
as the Committee shall deem desirable.
(a) Restricted Stock Grants. A Restricted Stock Grant is an Award of shares
of Common Stock transferred to a Participant subject to such terms and
conditions as the Committee deems appropriate, as set forth in Section 8 (d)
below. As a condition to the grant of Restricted Stock to any Participant who,
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at the date of grant, has not been employed by the Company and has not performed
services for the Company, the Committee shall require such Participant to pay at
least an amount equal to the par value of the shares of Common Stock subject to
the Restricted Stock Grant within thirty (30) days of the date of the grant, and
failure to pay such amount shall result in an automatic termination of the
Restricted Stock Grant.
(b) Restricted Unit Grants. A Restricted Unit Grant is an Award of units
granted to a Participant subject to such terms and conditions as the Committee
deems appropriate, including, without limitation, the requirement that such
Participant forfeit such units upon termination of employment for specified
reasons within a specified period of time, and restrictions on the sale,
assignment, transfer or other disposition of the units. Subject to the
discretion of the Committee at the time a Restricted Unit Grant is awarded to a
Participant, a unit will have a value (i) equivalent to one share of Common
Stock, or (ii) equivalent to the excess of the Fair Market Value of a share of
Common Stock on the date the restriction lapses over the Fair Market Value of a
share of Common Stock on the date of the grant of the Restricted Unit Grant (or
over such other value as the Committee determines at the time of the grant).
(c) Grant of Awards. Restricted Awards shall be granted separately under
the Plan in such form and on such terms and conditions as the Committee may from
time to time approve. Restricted Awards, however, may not be granted in tandem
with other Awards whereby the exercise of one such Award affects the right to
exercise the other. Subject to the terms of the Plan, the Committee shall
determine the number of Restricted Awards to be granted to a Participant and the
Committee may impose different terms and conditions on any particular Restricted
Award made to any Participant. Each Participant receiving a Restricted Stock
Grant shall be issued a stock certificate in respect of the shares of Common
Stock. The certificate shall be registered in the name of the Participant, shall
be accompanied by a stock power duly executed by the Participant, and shall bear
an appropriate legend referring to the terms, conditions and restrictions
applicable to the Award. The certificate evidencing the shares shall be held in
custody by the Company until the restrictions imposed thereon shall have lapsed
or been removed.
(d) Restriction Period. Restricted Awards shall provide that, in order for
a Participant to vest in the Awards, the Participant must continuously provide
services for the Company or its Subsidiaries, subject to relief for specified
reasons, for a period of not less than two (2) years (or one year if the
Restricted Award is performance based) commencing on the date of the Award and
ending on such later date or dates as the Committee may designate at the time of
the Award ("Restriction Period"). During the Restriction Period, a Participant
may not sell, assign, transfer, pledge, encumber, or otherwise dispose of shares
of Common Stock received under a Restricted Stock Grant. Upon expiration of the
applicable Restriction Period (or lapse of restrictions during the Restriction
Period where the restrictions lapse in installments), the Participant shall be
entitled to receive his or her Restricted Award or the applicable portion
thereof, as the case may be, along with a return of the stock power executed by
the Participant once the restriction has fully lapsed. Upon termination of a
Participant's employment with the Company or any Subsidiary for any reason
during the Restriction Period, all or a portion of the shares or units, as
applicable, that are still subject to a restriction may vest or be forfeited, in
accordance with the terms and conditions established by the Committee at or
after grant.
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(e) Payment of Awards. A Participant shall be entitled to receive
payment for a Restricted Unit Grant (or portion thereof) in an amount equal to
the aggregate Fair Market Value of the units covered by the Award upon the
expiration of the applicable Restriction Period. Payment in settlement of a
Restricted Unit Grant shall be made as soon as practicable following the
conclusion of the respective Restriction Period (i) in cash, by certified or
cashier's check, by money order or by personal check (if approved by the
Committee), (ii) in shares of Common Stock equal to the number of units granted
under the Restricted Unit Grant with respect to which such payment is made,
(iii) in the form of a Deferred Compensation Stock Option, or (iv) in any
combination of the above, as the Committee shall determine. The Committee may
elect to make this determination either at the time the Award is granted, or
with respect to payments contemplated in clause (i) and (ii) above, at the time
the Award is settled.
(f) Rights as a Shareholder. A Participant shall have, with respect to the
shares of Common Stock received under a Restricted Stock Grant, all of the
rights of a shareholder of the Company, including the right to vote the shares,
and the right to receive any cash dividends. Stock dividends issued with respect
to the shares covered by a Restricted Stock Grant shall be treated as additional
shares under the Restricted Stock Grant and shall be subject to the same
restrictions and other terms and conditions that apply to shares under the
Restricted Stock Grant with respect to which the dividends are issued.
(g) Grants of Shares of Common Stock. The Committee may, in its discretion,
grant shares of Common Stock to a Participant under this Plan, with or without
restrictions, vesting requirements and/or conditions, such direct grants of
shares to come from the Company's authorized but unissued shares or treasury
shares available from time to time. As a condition to the grant of shares of
Common Stock to any Participant who at the date of grant has not been employed
by the Company and has not performed services for the Company, the Committee
shall require such Participant to pay at least an amount equal to the par value
of the shares of Common Stock to be granted that Participant.
9. TERMINATION OF EMPLOYMENT.
The terms and conditions under which an Award may be exercised after a
Participant's termination of employment shall be determined by the Committee,
except as otherwise provided herein. The conditions under which such
post-termination exercises shall be permitted with respect to Incentive Stock
Options shall be determined in accordance with the provisions of Section 422 of
the Code and as otherwise provided in Section 6 above, provided that the
Committee, in its sole discretion, may change, by any agreement approved by the
Committee, the post-termination rights of a Participant, including accelerating
the dates upon which all or a portion of any outstanding unexercised Stock
Option held by a Participant may become vested or be exercised following such
termination of employment.
(a) Termination by Death. Subject to Section 6(l), if a Participant's
employment by the Company or any Subsidiary terminates by reason of the
Participant's death or if the Participant's death occurs within three months
after the termination of his or her employment, any Award held by such
Participant immediately prior to the date of his or her death may thereafter be
exercised, to the extent such Award otherwise was exercisable by the Participant
immediately prior to the date of his or her death, by the legal representative
of the Participant's estate or by any person who acquired the Award by will or
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the laws of descent and distribution, for a period of one year from the date of
his or her death or until the expiration of the stated term of the Award,
whichever period is the shorter, provided, however, that the Committee, in its
discretion may specifically provide, either in any agreement providing for an
Award or in any employment contract or any other agreement approved by the
Committee, for the acceleration of the vesting and/or right of exercise under
any Award held by a Participant immediately prior to the date of his or her
death. Any right of exercise under an Award held by the Participant that after
termination by reason of the Participant's death is not then vested and
exercisable, or as a result thereof becomes vested and exercisable, shall be
terminated and extinguished.
(b) Termination by Reason of Disability. Subject to Section 6(l), if a
Participant's employment by the Company or any Subsidiary terminates by reason
of Disability, any Award held by such Participant immediately prior to the date
of his or her Disability may thereafter be exercised by the Participant, to the
extent such Award otherwise was exercisable by the Participant immediately prior
to the date of his or her Disability for a period of one year from the date of
such termination of employment by reason of Disability, or until the expiration
of the stated term of such Award, whichever period is shorter; provided,
however, that if the Participant dies within such one-year period, any
unexercised Award held by such Participant shall thereafter be exercisable to
the extent to which it was exercisable immediately prior to the date of such
death for a period of one year from the date of his or her death or until the
expiration of the stated term of such Award, whichever period is shorter; and
provided further, that the Committee may, in its discretion specifically
provide, either in any agreement providing for an Award or in any employment
contract or any other agreement approved by the Committee for the acceleration
of the vesting and/or right of exercise under an Award held by a Participant
immediately prior to the time of termination of employment by reason of his or
her Disability. Any right of exercise under an Award held by the Participant
that, after termination by reason of Participant's Disability is not then vested
and exercisable, or as a result thereof becomes vested and exercisable, shall be
terminated and extinguished.
(c) Other Termination. Subject to Section 6(l), if a Participant's
employment by the Company or any Subsidiary is terminated for any reason other
than death or Disability, any Award held by the Participant immediately prior to
the date of his or her termination shall be exercisable, to the extent otherwise
then exercisable, for the lesser period of three (3) months from the date of
such termination or the balance of the term of the Award, and any right of
exercise under any Award held by a Participant immediately prior to the time of
his or her termination that is not vested immediately after such date of
termination, shall be terminated and extinguished; provided, however, that the
Committee, in its discretion may specifically provide that, for Awards held
prior to the termination, vesting and/or exercise may be accelerated at or prior
to the time of termination, either in any agreement providing for an Award, or
in any employment contract or any other agreement approved by the Committee;
provided, however, that upon termination of employment upon retirement, if the
Participant continues to serve, or commences serving, as a director of the
Company, then in such event any Awards may continue to be held by the
Participant under the original terms thereof, with such modifications as the
Committee may determine in its discretion, with any Incentive Stock Options held
by such Participant to henceforth be treated as Nonqualified Stock Options.
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(d) General Provisions. Unless otherwise specifically provided herein, the
Committee shall have the following discretion regarding the treatment of
outstanding Stock Options upon termination of employment:
(i) Any Stock Option outstanding at the time of a Participant's
retirement, termination of employment, Disability or death shall remain
exercisable for such period of time thereafter as shall be determined by
the Committee and set forth in the documents evidencing the grant of any
Stock Option or in an employment or other agreement with such Participant,
provided that no Stock Option shall be exercisable more than ten (10) years
from the date of grant of the Original Option;
(ii) The Committee shall have complete discretion, exercisable either
at the time a Stock Option is granted or any time while the Stock Option
remains outstanding, to extend the period of time for which the Stock
Option is to remain exercisable following a Participant's termination of
employment from the limited exercise period otherwise in effect for that
Stock Option to such greater period of time as the Committee shall deem
appropriate, but in no event to a date which is more than ten (10) years
from the date of grant of the Original Option;
(iii) The Committee shall have the complete discretion to permit a
Stock Option to be exercised following a Participant's retirement,
termination of employment, Disability or death not only with respect to the
number of Stock Options which are then fully vested but also with respect
to one or more additional installments in which the Participant would have
vested had the Participant continued in the Company's employment.
10. NON-TRANSFERABILITY OF INCENTIVE STOCK OPTIONS.
No Incentive Stock Option under the Plan, and no rights or interest
therein, shall be assignable or transferable by a Participant except by will or
the laws of descent and distribution, after which assignment Section 9 hereof
shall apply to exercise of the Incentive Stock Option by the assignee. During
the lifetime of a Participant, Incentive Stock Options are exercisable only by
such Participant or his or her legal representative.
11. ADJUSTMENTS UPON CHANGES IN CAPITALIZATION, ETC.
(a) The existence of the Plan and the Awards granted hereunder shall not
affect or restrict in any way the right or power of the Board or the
shareholders of the Company to make or authorize any adjustment,
recapitalization, reorganization or other change in the Company's capital
structure or its business, any merger or consolidation of the Company, any issue
of bonds, debentures, Common Stock, preferred or prior preference stocks ahead
of or affecting the Company's Common Stock or the rights thereof, the
dissolution or liquidation of the Company, or any sale or transfer of all or any
part of its assets or business, or any other corporate act or proceeding.
(b) In the event of any change in capitalization affecting the Common Stock
of the Company, such as a stock dividend, stock split, recapitalization, merger,
consolidation, split-up, combination, exchange of shares, other form of
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reorganization, or any other change affecting the Common Stock, the Board, in
its discretion, may make proportionate adjustments it deems appropriate to
reflect such change with respect to (i) the maximum number of shares of Common
Stock which may be sold or awarded to any Participant, (ii) the number of shares
of Common Stock covered by each outstanding Award, and (iii) the price per share
in respect of the outstanding Awards.
(c) The Committee may also make such adjustments in the number of shares
covered by, and the price or other value of any outstanding Awards in the event
of a spin-off or other distribution (other than normal cash dividends) of
Company assets to shareholders.
12. CHANGE OF CONTROL.
(a) Liquidation or Dissolution. In the event of a proposed liquidation or
dissolution of the Company, the Committee shall upon written notice to the
Participants provide that all then unexercised Options will (i) become
exercisable in full as of a specified time at least 10 business days prior to
the effective date of such liquidation or dissolution and (ii) terminate
effective upon such liquidation or dissolution, except to the extent exercised
before such effective date. The Board may specify the effect of a liquidation or
dissolution on any other Award granted under the Plan at the time of the grant
of such Award.
(b) Acquisition and Change in Control Events
(i) Definitions
(A) An "Acquisition Event" shall mean:
(1) any merger or consolidation of the Company with or into
another entity as a result of which the Common Stock is converted
into or exchanged for the right to receive cash, securities or
other property of the other entity; or
(2) any exchange of shares of the Company for cash,
securities or other property in connection with an exchange
transaction.
(B) A "Change in Control Event" shall mean:
(1) a sale of all or substantially all of the assets of the
Company;
(2) the acquisition by an individual, entity or group
(within the meaning of Section 13(d)(3) or 14(d)(2) of the
Exchange Act) (a "Person") of beneficial ownership of any capital
stock of the Company if, after such acquisition, such Person
beneficially owns (within the meaning of Rule 13d-3 promulgated
under the Exchange Act) 50% or more of either (a) the
then-outstanding shares of common stock of the Company (the
"Outstanding Company Common Stock") or (b) the combined voting
power of the then-outstanding securities of the Company entitled
to vote generally in the election of directors (the "Outstanding
Company Voting Securities"); provided, however, that for purposes
of this subsection (2), the following acquisitions shall not
constitute a Change in Control Event: (c) any acquisition
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directly from the Company (excluding an acquisition pursuant to
the exercise, conversion or exchange of any security exercisable
for, convertible into or exchangeable for common stock or voting
securities of the Company, unless the Person exercising,
converting or exchanging such security acquired such security
directly from the Company or an underwriter or agent of the
Company), (d) any acquisition by any employee benefit plan (or
related trust) sponsored or maintained by the Company or any
corporation controlled by the Company; or (e) a Business
Combination (as defined below); or
(3) the consummation of a merger, consolidation,
reorganization, recapitalization or share exchange involving the
Company (a "Business Combination") if Persons who were not
shareholders of the Company immediately prior to such Business
Combination beneficially own (within the meaning of Rule 13d-3
promulgated under the Exchange Act) immediately after such
Business Combination 50% or more of either the Outstanding Common
Stock or the Outstanding Company Voting Securities.
(C) "Good Reason" shall mean any significant diminution in the
Participant's title, authority, or responsibilities from and after
such Acquisition Event or Change in Control Event, as the case may be,
or any reduction in the annual cash compensation payable to the
Participant from and after such Acquisition Event or Change in Control
Event, as the case may be, or the relocation of the place of business
at which the Participant is principally located to a location that is
greater than 50 miles from the then current site.
(D) "Cause" shall mean in connection with the termination of a
Participant (1) "cause," as such term (or any similar term, such as
"with cause") is defined in any employment, consulting or other
applicable agreement for services between the Company and such
Participant, or (2) in the absence of such an agreement, "cause" as
such term is defined in the Award Agreement (as defined in Section
14(d) below) executed by the Company and such Participant, or (3) in
the absence of both of the foregoing, (a) conviction of such
Participant for any felony or the entering by him of a plea of guilty
or nolo contendere with respect thereto, (b) willful and repeated
failures in any material respect of such Participant to perform any of
the Participant's reasonable duties and responsibilities assigned to
him and the failure of the Participant to cure such failures hereunder
within thirty (30) days after written notice thereof from the Company,
(c) the commission of any act or failure to act by such Participant
that involves moral turpitude, dishonesty, theft, destruction of
property, fraud, embezzlement or unethical business conduct, or that
is otherwise injurious to the Company, or any of its Subsidiaries or
any other affiliate of the Company (or its or their respective
employees), whether financially or otherwise, or (d) any material
violation by such Participant of the requirements of such Award
Agreement, any other contract or agreement between the Company and
such Participant or this Plan (as in effect from time to time) and the
failure of the Participant to cure such violation within thirty (30)
days after written notice thereof from the Company; in each case, with
respect to subsections (a) through (d), as determined by the Board of
Directors.
(ii) Effect on Options
(A) Acquisition Event. Upon the occurrence of an Acquisition
Event (regardless of whether such event also constitutes a Change in
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Control Event), or the execution by the Company of any agreement with
respect to an Acquisition Event (regardless of whether such event will
result in a Change in Control Event), the Board shall provide that all
outstanding Stock Options shall be assumed, or equivalent options
shall be substituted, by the acquiring or succeeding corporation (or
an affiliate thereof); provided that if such Acquisition Event also
constitutes a Change in Control Event, except to the extent
specifically provided to the contrary in the instrument evidencing any
Stock Option or any other agreement between a Participant and the
Company, the outstanding Stock Options shall continue to vest in
accordance with the provisions of Section 12(b)(ii)(B). For purposes
hereof, a Stock Option shall be considered to be assumed if, following
consummation of the Acquisition Event, the Stock Option confers the
right to purchase, for each share of Common Stock subject to the Stock
Option immediately prior to the consummation of the Acquisition Event,
the consideration (whether cash, securities or other property)
received as a result of the Acquisition Event by holders of Common
Stock for each share of Common Stock held immediately prior to the
consummation of the Acquisition Event (and if holders were offered a
choice of consideration, the type of consideration chosen by the
holders of a majority of the outstanding shares of Common Stock);
provided, however, that if the consideration received as a result of
the Acquisition Event is not solely common stock of the acquiring or
succeeding corporation (or an affiliate thereof), the Company may,
with the consent of the acquiring or succeeding corporation, provide
for the consideration to be received upon the exercise of Stock
Options to consist solely of common stock of the acquiring or
succeeding corporation (or an affiliate thereof) equivalent in fair
market value to the per share consideration received by holders of
outstanding shares of Common Stock as a result of the Acquisition
Event.
Notwithstanding the foregoing, if the acquiring or succeeding
corporation (or an affiliate thereof) does not agree to assume, or
substitute for, such Stock Options, then the Board shall, upon written
notice to the Participants, provide that all then unexercised Stock
Options will become exercisable in full as of a specified time prior
to the Acquisition Event and will terminate immediately prior to the
consummation of such Acquisition Event, except to the extent exercised
by the Participants before the consummation of such Acquisition Event;
provided, however, that in the event of an Acquisition Event under the
terms of which holders of Common Stock will receive upon consummation
thereof a cash payment for each share of Common Stock surrendered
pursuant to such Acquisition Event (the "Acquisition Price"), then the
Board may instead provide that all outstanding Stock Options shall
terminate upon consummation of such Acquisition Event and that each
Participant shall receive, in exchange therefor, a cash payment equal
to the amount (if any) by which (1) the Acquisition Price multiplied
by the number of shares of Common Stock subject to such outstanding
Stock Options (whether or not then exercisable), exceeds (2) the
aggregate exercise price of such Stock Options.
(B) Change in Control Event. Upon the occurrence of a Change in
Control Event, except to the extent specifically provided to the
contrary in the instrument evidencing any Stock Option or any other
agreement between a Participant and the Company, the vesting schedule
of such Stock Option shall be accelerated in part so that one-half of
the number of shares that would otherwise have first become vested on
any date after the date of the Change in Control Event shall
immediately become exercisable. The remaining one-half of such number
of shares shall continue to become vested in accordance with the
original vesting schedule set forth in such Stock Option, with
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one-half of the number of shares that would otherwise have first
become vested becoming so vested on each subsequent vesting date in
accordance with the original schedule; provided, however, that each
such Stock Option shall be immediately exercisable in full if, on or
prior to the first anniversary of the date of the consummation of the
Change in Control Event, the Participant's employment with the Company
or the acquiring or succeeding corporation is terminated for Good
Reason by the Participant or is terminated without Cause by the
Company or the acquiring or succeeding corporation.
(iii) Effect on Other Awards
(A) Acquisition Event that is not a Change in Control Event.
The Board shall specify the effect of an Acquisition Event that
is not a Change in Control Event on any other Award granted under
the Plan at the time of the grant of such Award.
(B) Change in Control Event. Upon the occurrence of a Change
in Control Event (regardless of whether such event also
constitutes an Acquisition Event), except to the extent
specifically provided to the contrary in the Award Agreement or
any other agreement between a Participant and the Company, the
vesting schedule of all other Awards shall be accelerated in part
so that one-half of the number of shares that would otherwise
have first become exercisable, realizable, vested or free from
conditions or restrictions on any date after the date of the
Change in Control Event shall immediately become exercisable,
realizable, vested or free from conditions or restrictions.
Subject to the following sentence, the remaining one-half of such
number of shares shall continue to become exercisable,
realizable, vested or free from conditions or restrictions in
accordance with the original schedule set forth in such Award,
with one-half of the number of shares that would otherwise have
first become exercisable, realizable, vested or free from
conditions or restrictions becoming so exercisable, realizable,
vested or free from conditions or restrictions on each subsequent
vesting date in accordance with the original schedule. In
addition, each such Award shall immediately become fully
exercisable, realizable, vested or free from conditions or
restrictions if, on or prior to the first anniversary of the date
of the consummation of the Change in Control Event, the
Participant's employment with the Company or the acquiring or
succeeding corporation is terminated for Good Reason by the
Participant or is terminated without Cause by the Company or the
acquiring or succeeding corporation.
13. AMENDMENT AND TERMINATION.
The Board of Directors, without further approval of the Company's
stockholders, may at any time suspend or terminate the Plan, in whole or in
part, or amend it from time to time in such respects as it may deem advisable,
including without limitation, in order that Incentive Stock Options granted
hereunder meet the requirements for "incentive stock options" under the Code, or
to comply with the provisions of Rule 16b-3 of the Exchange Act or Section
162(m) of the Code or any change in applicable laws or regulations, ruling or
interpretation of any governmental agency or regulatory body; provided, however,
that no amendment shall be effective, without the requisite prior or subsequent
stockholder approval, which would (a) except as contemplated in Paragraph 11,
increase the maximum number of shares of Common Stock for which any Awards may
be granted under the Plan or change the Section 162 Maximum, (b) change the
eligibility requirements for individuals entitled to receive Awards hereunder,
or (c) make any change which is required to be approved by the stockholders
under any law, rule or regulation or any rules for listed companies promulgated
by any national stock exchange on which the Company's stock is traded, (d)
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result in the repricing of options issued under the Plan by lowering the
exercise price of a previously granted Award, or by cancellation of outstanding
Awards with subsequent replacement, or by regranting Awards with lower exercise
prices, or (e) allow the creation of additional types of Awards under the Plan.
No termination, suspension or amendment of the Plan shall adversely affect the
rights of a Participant under any Award granted under the Plan without such
Participant's consent. The power of the Committee to construe and administer any
Award granted under the Plan prior to the termination or suspension of the Plan
shall continue after such termination or during such suspension.
14. MISCELLANEOUS MATTERS.
(a) Tax Withholding. In addition to the authority set forth in Section 6(h)
above, the Company shall have the right to deduct from a Participant's wages or
from any settlement, including the delivery of shares, made under the Plan any
federal, state, or local taxes of any kind required by law to be withheld with
respect to such payments, or to take such other action as may be necessary in
the opinion of the Company to satisfy all obligations for the payment of such
taxes.
(b) No Right to Employment. Neither the adoption of the Plan nor the
granting of any Award shall confer upon any Participant any right to continue
employment with the Company or any Subsidiary, as the case may be, nor shall it
interfere in any way with the right of the Company or a Subsidiary to terminate
the employment of any Participant at any time, with or without cause.
(c) Securities Law Restrictions. No shares of Common Stock shall be issued
under the Plan unless counsel for the Company shall be satisfied that such
issuance will be in compliance with applicable Federal and state securities
laws. Certificates for shares of Common Stock delivered under the Plan may be
subject to such stock-transfer orders and other restrictions as the Committee
may deem advisable under the rules, regulations, and other requirements of the
Securities and Exchange Commission, any stock exchange upon which the Common
Stock is then listed, and any applicable Federal or state securities law. The
Committee may cause a legend or legends to be put on any such certificates to
refer to those restrictions.
(d) Award Agreement. Each Participant receiving an Award under the Plan
shall enter into an agreement with the Company in a form specified by the
Committee agreeing to the terms and conditions of the Award and such related
matters as the Committee, in its sole discretion, shall determine (the "Award
Agreement").
(e) Costs of Plan. The costs and expenses of administering the Plan shall
be borne by the Company.
(f) Governing Law. The Plan and all actions taken thereunder shall be
governed by and construed in accordance with the laws of the State of Delaware.
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