EXHIBIT 10.1
WESTWOOD HOLDINGS GROUP, INC.
STOCK INCENTIVE PLAN
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1. ESTABLISHMENT, PURPOSE AND TERM OF PLAN.
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1.1 Establishment. This Westwood Holdings Group, Inc. Stock Incentive Plan
(the "Plan") is hereby established effective as of _____________ ___,
2002.
1.2 Purpose. The purpose of the Plan is to advance the interests of the
Participating Company Group and its stockholders by providing an
incentive to attract and retain persons performing services for the
Participating Company Group and by motivating such persons to
contribute to the growth and profitability of the Participating
Company Group.
1.3 Term of Plan. The Plan shall continue in effect until the earlier of
its termination by the Board or the date on which all of the shares of
Stock available for issuance under the Plan have been issued and all
restrictions on such shares (if any) under the terms of the Plan and
the agreements evidencing the Awards granted under the Plan have
lapsed. However, all Awards shall be granted, if at all, within ten
(10) years from the earlier of the date the Plan is adopted by the
Board or the date the Plan is duly approved by the stockholders of the
Company.
2. DEFINITIONS AND CONSTRUCTION.
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2.1 Definitions. Whenever used herein, the following terms shall have
their respective meanings set forth below:
(a) "Acquiring Corporation" has the meaning given to it in Section
13.2.
(b) "Annual Incentive Award" has the meaning given to it in Section
11.1.
(c) "Award" means any form of incentive or performance award granted
under the Plan, whether singly or in combination, to a
Participant by the Board pursuant to such terms, conditions,
restrictions and/or limitations (if any) as the Board may
establish. Awards granted under the Plan may include:
(i) Options awarded pursuant to Sections 6-8;
(ii) Restricted Stock awarded pursuant to Section 9;
(iii) Purchase Rights awarded pursuant to Section 10;
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(iv) Annual Incentive Awards awarded pursuant to Section 11; and
(v) Performance-Based Awards awarded pursuant to Section 12.
(d) "Award Certificate" has the meaning given to it in Section 12.3.
(e) "Board" means the Board of Directors of the Company. If one or
more Committees have been appointed by the Board to administer
the Plan, "Board" also means such Committee(s).
(f) "Cashless Exercise" has the meaning given to it in Section
6.3(a).
(g) "Cause" shall mean any of the following: (i) the Participant's
theft of a Participating Company's property or falsification of
any Participating Company documents or records; (ii) the
Participant's improper use or disclosure of a Participating
Company's confidential or proprietary information; (iii) any
action by the Participant which has a detrimental effect on a
Participating Company's reputation or business; (iv) the
Participant's failure or inability to perform any reasonable
assigned duties after written notice from the Participating
Company Group or any Participating Company of, and a reasonable
opportunity to cure, such failure or inability; (v) any material
breach by the Participant of any employment agreement between the
Participant and the Participating Company Group or any
Participating Company, which breach is not cured pursuant to the
terms of such agreement; or (vi) the Participant's conviction
(including any plea of guilty or nolo contendere) of any felony
or any other criminal act which impairs the Participant's ability
to perform his or her duties with the Participating Company Group
or any Participating Company.
(h) "Change in Control" has the meaning given to it in Section 13.1.
(i) "Code" means the Internal Revenue Code of 1986, as amended, and
any applicable regulations promulgated thereunder.
(j) "Committee" means the Compensation Committee or other committee
of the Board duly appointed to administer the Plan and having
such powers as shall be specified by the Board. Unless the powers
of the Committee have been specifically limited, the Committee
shall have all of the powers of the Board granted herein,
including, without limitation, the power to amend or terminate
the Plan at any time, subject to the terms of the Plan and any
applicable limitations imposed by law.
(k) "Company" means Westwood Holdings Group, Inc., a Delaware
corporation, or any successor corporation thereto.
(l) "Consultant" means a person engaged to provide consulting or
advisory services (other than as an Employee or a Director) to a
Participating
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Company, provided that the identity of such person, the nature of
such services or the entity to which such services are provided
would not preclude the Company from offering or selling
securities to such person pursuant to the Plan in reliance on
either the exemption from registration provided by Rule 701 under
the Securities Act or, if the Company is required to file reports
pursuant to Section 13 or 15(d) of the Exchange Act, registration
on a Form S-8 Registration Statement under the Securities Act.
(m) "Deferred Compensation Plan" means that certain Westwood Holdings
Group, Inc. Deferred Compensation Plan, effective January 1,
2002.
(n) "Director" means a member of the Board or of the board of
directors of any other Participating Company.
(o) "Disability" means the permanent and total disability of the
Participant within the meaning of Section 22(e)(3) of the Code.
(p) "Employee" means any person treated as an employee (including an
officer or a Director who is also treated as an employee) in the
records of a Participating Company and, with respect to any
Incentive Stock Option granted to such person, who is an employee
for purposes of Section 422 of the Code; provided, however, that
neither service as a Director nor payment of a director's fee
shall be sufficient to constitute employment for purposes of the
Plan.
(q) "Exchange Act" means the Securities Exchange Act of 1934, as
amended.
(r) "Exercise Period" has the meaning given to it in Section 10.1.
(s) "Fair Market Value" means, as of any date, the value of a share
of Stock or other property as determined by the Board, in its
discretion, or by the Company, in its discretion, if such
determination is expressly allocated to the Company herein,
subject to the following:
(i) If, on such date, the Stock is listed on a national or
regional securities exchange or market system, the Fair
Market Value of a share of Stock shall be the closing price
of a share of Stock (or the mean of the closing bid and
asked prices of a share of Stock if the Stock is so quoted
instead) as quoted on the Nasdaq National Market, the Nasdaq
SmallCap Market or such other national or regional
securities exchange or market system constituting the
primary market for the Stock, as reported in The Wall Street
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Journal or such other source as the Company deems reliable.
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If the relevant date does not fall on a day on which the
Stock has traded on such securities exchange or market
system, the date on which the Fair Market Value shall be
established shall be the last day on which the Stock was so
traded prior to the relevant date, or
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such other appropriate day as shall be determined by the
Board, in its discretion.
(ii) If, on such date, the Stock is not listed on a national or
regional securities exchange or market system, the Fair
Market Value of a share of Stock shall be as determined by
the Board in good faith without regard to any restriction
other than a restriction which, by its terms, will never
lapse.
(t) "Good Reason" means a resignation occurring within ninety (90)
days following a Change in Control; (ii) the relocation of the
principal place of business of the Participating Company for
which the Participant renders Service to a location more than 100
miles from its location as of the date without the Participant's
consent; or (iii) a material reduction in the Participant's
salary or bonus opportunity, or the Participant's
responsibilities.
(u) "Incentive Stock Option" means an Option intended to be (as set
forth in the Option Agreement), and which qualifies as, an
incentive stock option within the meaning of Section 422(b) of
the Code.
(v) "Insider" means an officer or a Director of the Company or any
other person whose transactions in Stock are subject to Section
16 of the Exchange Act.
(w) "Non-Employee Director" has the meaning given to it in Article 8.
(x) "Nonstatutory Stock Option" means an Option not intended to be
(as set forth in the Option Agreement), or which does not qualify
as, an Incentive Stock Option.
(y) "Option" means a right to purchase Stock (subject to adjustment
as provided in Section 4.2) pursuant to the terms and conditions
of the Plan. An Option may be either an Incentive Stock Option or
a Nonstatutory Stock Option.
(z) "Option Agreement" means a written agreement between the Company
and a Participant setting forth the terms, conditions and
restrictions of the Option granted to the Participant and any
shares acquired upon the exercise thereof. An Option Agreement
may consist of a form of "Notice of Grant of Stock Option" and a
form of "Stock Option Agreement" incorporated therein by
reference, or such other form or forms as the Board may approve
from time to time
(aa) "Option Expiration Date" has the meaning given to it in Section
6.6(a)(i).
(bb) "Ownership Change Event" has the meaning given to it in Section
13.1.
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(cc) "Parent" means (i) any "parent corporation" as defined in Section
424(e) of the Code and any successor provisions; (ii) any other
entity that is taxed as a corporation under Section 7701(a)(3) of
the Code and is a member of the "affiliated group" as defined in
Section 1504(a) of the Code of which the Company is a common
subsidiary corporation, and (iii) any other entity as may be
permitted from time to time by the Code or the Internal Revenue
Service to be an employer of employees to whom Options may be
granted; provided, however, that in each case the Company must be
consolidated in the Parent's financial statements.
(dd) "Participant" means a person who has been granted one or more
awards pursuant to the terms and conditions of the Plan.
(ee) "Participating Company" means the Company or any Parent or
Subsidiary.
(ff) "Participating Company Group" means, at any point in time, all
corporations or other entities collectively which are then
Participating Companies.
(gg) "Performance Cycle" means (i) with respect to any Annual
Incentive Award, the twelve (12) month period beginning on
January 1, 2002 and each January 1 thereafter, and (ii) with
respect to any Performance-Based Award, the period determined by
the Committee over which the Company's level of attainment of a
Performance Measure shall be determined.
(hh) "Performance Goals" means, with respect to any Annual Incentive
Award or Performance-Based Award, one or more targets, goals or
levels of attainment required to be achieved in terms of the
specified Performance Measure during a fiscal year or specified
Performance Cycle, as applicable.
(ii) "Performance Measure" means, with respect to any Annual Incentive
Award or Performance-Based Award, the business criteria
established by the Committee to measure the level of performance
of the Company during the fiscal year or Performance Cycle, as
applicable. The Committee may select as the Performance Measure
any one or combination of financial measures, as interpreted by
the Committee, which (to the extent applicable) can be determined
either on a pro forma or GAAP basis, and either pre-tax or
after-tax, such as: earnings per share, return on equity, return
on invested capital, relative total shareholder return, revenue
growth, Stock performance, net income, return on sales, return on
assets, economic value added, cash flow and net operating income.
(jj) "Performance-Based Award" has the meaning given to it in Section
12.1.
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(kk) "Permitted Transferees" has the meaning given to it in Section
6.7.
(ll) "Plan" has the meaning given to it in Section 1.1.
(mm) "Purchase Right" means the right to purchase Stock in
accordance with the provisions of Section 10.
(nn) "Restricted Period" has the meaning given to it in Section
9.1.
(oo) "Restricted Stock" means an award of Stock made under Section
9, which is subject to vesting provisions.
(pp) "Rule 16b-3" means Rule 16b-3 under the Exchange Act, as
amended from time to time, or any successor rule or
regulation.
(qq) "Securities Act" means the Securities Act of 1933, as amended.
(rr) "Service" means a Participant's employment or service with the
Participating Company Group, whether in the capacity of an
Employee, a Director or a Consultant. A Participant's Service
shall not be deemed to have terminated merely because of a
change in the capacity in which the Participant renders
Service to the Participating Company Group or a change in the
Participating Company for which the Participant renders such
Service, provided that there is no interruption or termination
of the Participant's Service. Furthermore, a Participant's
Service with the Participating Company Group shall not be
deemed to have terminated if the Participant takes any
military leave, sick leave, or other bona fide leave of
absence approved by the Company; provided, however, that if
any such leave exceeds ninety (90) days, on the ninety-first
(91st) day of such leave the Participant's Service shall be
deemed to have terminated unless the Participant's right to
return to Service with the Participating Company Group is
guaranteed by statute or contract. Notwithstanding the
foregoing, unless otherwise designated by the Company or
required by law, a leave of absence shall not be treated as
Service for purposes of determining vesting under any Option
Agreement. The Participant's Service shall be deemed to have
terminated either upon an actual termination of Service or
upon the corporation for which the Participant performs
Service ceasing to be a Participating Company. Subject to the
foregoing, the Company, in its discretion, shall determine
whether the Participant's Service has terminated and the
effective date of such termination.
(ss) "Spin-off Date" means the date on which SWS Group, Inc., a
Delaware corporation, distributes all of the Stock that it
then holds to its stockholders.
(tt) "Stock" means the common stock of the Company, as adjusted
from time to time in accordance with Section 4.2.
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(uu) "Subsidiary" means (i) any "subsidiary corporation" of the
Company, as defined in Section 424(f) of the Code and any
successor provisions, (ii) any other entity that is taxed as a
corporation under Section 7701(a)(3) of the Code and is a
member of the "affiliated group" as defined in Section 1504(a)
of the Code of which the Company is a common parent
corporation, and (iii) any other entity as may be permitted
from time to time by the Code or the Internal Revenue Service
to be an employer of employees to whom Options may be granted;
provided, however, that in each case the subsidiary
corporation must be consolidated in the Company's financial
statements.
(vv) "Ten Percent Owner Participant" means a Participant who, at
the time an Option is granted to the Participant, owns stock
possessing more than ten percent (10%) of the total combined
voting power of all classes of stock of a Participating
Company within the meaning of Section 422(b)(6) of the Code.
(ww) "Termination After Change in Control" shall mean either of the
following events occurring within twelve (12) months after (or
as a result of) a Change in Control:
(i) termination by the Participating Company Group of the
Participant's Service with the Participating Company
Group for any reason other than for Cause; or
(ii) the Participant's resignation for Good Reason from
Service with the Participating Company Group within a
reasonable period of time following the event
constituting Good Reason.
Notwithstanding any provision herein to the contrary, Termination
After Change in Control shall not include any termination of the
Participant's Service with the Participating Company Group which (1)
is for Cause; (2) is a result of the Participant's death or
Disability; (3) is a result of the Participant's voluntary termination
of Service other than for Good Reason; or (4) occurs prior to the
effectiveness of a Change in Control (and is not directly related to a
Change in Control).
2.2 Construction. Captions and titles contained herein are for convenience
only and shall not affect the meaning or interpretation of any
provision of the Plan. Except when otherwise indicated by the context,
the singular shall include the plural and the plural shall include the
singular. Use of the term "or" is not intended to be exclusive, unless
the context clearly requires otherwise.
3. ADMINISTRATION.
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3.1 Administration by the Board. The Plan shall be administered by the
Board. All questions of interpretation of the Plan or of any Award
shall be determined by the
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Board, and such determinations shall be final and binding upon all
persons having an interest in the Plan.
3.2 Authority of Officers. Any officer of a Participating Company shall
have the authority to act on behalf of the Company with respect to any
matter, right, obligation, determination or election which is the
responsibility of or which is allocated to the Company herein,
provided the officer has apparent authority with respect to such
matter, right, obligation, determination or election.
3.3 Powers of the Board. In addition to any other powers set forth in the
Plan and subject to the provisions of the Plan, the Board shall have
the full and final power and authority, in its discretion:
(a) to determine the persons to whom, and the time or times at which,
Awards shall be granted and, if applicable, the number of shares
of Stock to be subject thereto;
(b) to designate Options as Incentive Stock Options or Nonstatutory
Stock Options;
(c) to determine the Fair Market Value of shares of Stock or other
property;
(d) to determine the terms, conditions and restrictions applicable to
each Award (which need not be identical) and, if applicable, any
shares acquired upon the exercise thereof, including, without
limitation, (i) the exercise price of an Option or Purchase
Right, (ii) the method of payment for shares purchased upon the
exercise of the Option or Purchase Right, (iii) the method for
satisfaction of any tax withholding obligation arising in
connection with the Award or such shares of Stock issued or cash
provided thereunder, including by the withholding or delivery of
shares of Stock or cash, (iv) the timing, terms and conditions of
the exercisability of the Award or the vesting of any shares
acquired upon the exercise thereof, (v) the time of the
expiration of the Award, (vi) the effect of the Participant's
termination of Service with the Participating Company Group on
any of the foregoing, and (vii) all other terms, conditions and
restrictions applicable to the Award not inconsistent with the
terms of the Plan;
(e) to approve one or more forms of Option Agreement or Award
Certificate;
(f) to amend, modify, extend, cancel or renew any Award, or to waive
any restrictions or conditions applicable to any Award or any
shares of Stock acquired upon the exercise thereof;
(g) to accelerate, continue, extend or defer the exercisability of
any Award or the vesting of any shares acquired upon the exercise
thereof, including with respect to the period following a
Participant's termination of Service with the Participating
Company Group;
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(h) to prescribe, amend or rescind rules, guidelines and policies
relating to the Plan, or to adopt supplements to, or alternative
versions of, the Plan, including, without limitation, as the
Board deems necessary or desirable to comply with the laws of, or
to accommodate the tax policy or custom of, foreign jurisdictions
whose citizens may be granted Options; and
(i) to correct any defect, supply any omission or reconcile any
inconsistency in the Plan, any Option Agreement or any Award
Certificate and to make all other determinations and take such
other actions with respect to the Plan or any Option as the Board
may deem advisable to the extent not inconsistent with the
provisions of the Plan or applicable law.
3.4 Administration with Respect to Insiders. With respect to participation
by Insiders in the Plan, at any time that any class of equity security
of the Company is registered pursuant to Section 12 of the Exchange
Act, the Plan shall be administered in compliance with the
requirements, if any, of Rule 16b-3.
3.5 Indemnification. In addition to such other rights of indemnification
as they may have as members of the Board or officers or employees of
the Participating Company Group, members of the Board and any officers
or employees of the Participating Company Group to whom authority to
act for the Board or the Company is delegated shall be indemnified by
the Company against all reasonable expenses, including attorneys'
fees, actually and necessarily incurred in connection with the defense
of any action, suit or proceeding, or in connection with any appeal
therein, to which they or any of them may be a party by reason of any
action taken or failure to act under or in connection with the Plan,
or any right granted hereunder, and against all amounts paid by them
in settlement thereof (provided such settlement is approved by
independent legal counsel selected by the Company) or paid by them in
satisfaction of a judgment in any such action, suit or proceeding,
except in relation to matters as to which it shall be adjudged in such
action, suit or proceeding that such person is liable for gross
negligence, bad faith or intentional misconduct in duties; provided,
however, that within sixty (60) days after the institution of such
action, suit or proceeding, such person shall offer to the Company, in
writing, the opportunity at its own expense to handle and defend the
same.
4. SHARES SUBJECT TO PLAN.
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4.1 Maximum Number of Shares Issuable. Subject to adjustment as provided
in Section 4.2, the maximum aggregate number of shares of Stock that
may be issued under the Plan shall be 948.35 shares, and shall consist
of authorized but unissued or reacquired shares of Stock or any
combination thereof. If an outstanding Award for any reason expires or
is terminated or canceled or if shares of Stock are acquired upon the
exercise of an Award or otherwise subject to a Company repurchase
option and are repurchased by the Company at the Participant's
exercise price, or if shares of Restricted Stock are forfeited
unvested, the shares of Stock shall again be available for issuance
under the Plan. Subject
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to adjustment as provided in Section 4.2, the maximum aggregate number
of Options for shares of Stock that may be awarded in any year to any
Participant may not exceed 316.12 shares.
4.2 Adjustments for Changes in Capital Structure. In the event of any
stock dividend, stock split, reverse stock split, recapitalization,
combination, reclassification or similar change in the capital
structure of the Company, appropriate adjustments shall be made in the
number and class of shares subject to the Plan and to any outstanding
Awards (if applicable) and in the exercise price per share of any
outstanding Awards (if applicable). If a majority of the shares which
are of the same class as the shares that are subject to outstanding
Awards are exchanged for, converted into, or otherwise become (whether
or not pursuant to an Ownership Change Event, as defined in Section
13.1) shares of another corporation (the "New Shares"), the Board may
unilaterally amend the outstanding Awards to provide that such Awards
are exercisable for New Shares. In the event of any such amendment,
the number of shares subject to, and the exercise price per share of,
the outstanding Awards shall be adjusted in a fair and equitable
manner as determined by the Board, in its discretion. Notwithstanding
the foregoing, any fractional share resulting from an adjustment
pursuant to this Section 4.2 shall be rounded down to the nearest
whole number, and in no event may the exercise price of any Award be
decreased to an amount less than the par value, if any, of the stock
subject to the Award. The adjustments determined by the Board pursuant
to this Section 4.2 shall be final, binding and conclusive.
5. ELIGIBILITY AND OPTION LIMITATIONS.
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5.1 Persons Eligible for Awards. Awards may be granted pursuant to this
Plan only to Employees, Consultants, and Directors. For purposes of
the foregoing sentence, "Employees," "Consultants" and "Directors"
shall include prospective Employees, prospective Consultants and
prospective Directors to whom Awards are granted in connection with
written offers of an employment or other service relationship with the
Participating Company Group. Eligible persons may be granted more than
one (1) Award.
5.2 Option Grant Restrictions. Any person who is not an Employee on the
effective date of the grant of an Option to such person may be granted
only a Nonstatutory Stock Option. An Incentive Stock Option granted to
a prospective Employee upon the condition that such person become an
Employee shall be deemed granted effective on the date such person
commences Service with a Participating Company, with an exercise price
determined as of such date in accordance with Section 6.1.
5.3 Fair Market Value Limitation. To the extent that Options designated as
Incentive Stock Options (granted under all stock option plans of the
Participating Company Group, including the Plan) become exercisable by
a Participant for the first time during any calendar year for Stock
having a Fair Market Value greater than One Hundred Thousand Dollars
($100,000), the portions of such Options
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which exceed such amount shall be treated as Nonstatutory Stock
Options. For purposes of this Section 5.3, options designated as
Incentive Stock Options shall be taken into account in the order
in which they were granted, and the Fair Market Value of Stock
shall be determined as of the time the Option with respect to
such Stock is granted. If the Code is amended to provide for a
different limitation from that set forth in this Section 5.3,
such different limitation shall be deemed incorporated herein
effective as of the date and with respect to such Options as
required or permitted by such amendment to the Code. If an Option
is treated as an Incentive Stock Option in part and as a
Nonstatutory Stock Option in part by reason of the limitation set
forth in this Section 5.3, the Participant may designate which
portion of such Option the Participant is exercising. In the
absence of such designation, the Participant shall be deemed to
have exercised the Incentive Stock Option portion of the Option
first. Separate certificates representing each such portion shall
be issued upon the exercise of the Option.
6. TERMS AND CONDITIONS OF OPTIONS.
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Options shall be evidenced by Option Agreements specifying the number of
shares of Stock covered thereby, in such form as the Board shall from time to
time establish. No Option or purported Option shall be a valid and binding
obligation of the Company unless evidenced by a fully executed Option Agreement.
Option Agreements may incorporate all or any of the terms of the Plan by
reference and shall comply with and be subject to the following terms and
conditions:
6.1 Exercise Price. The exercise price for each Option shall be
established in the discretion of the Board; provided, however,
that (a) the exercise price per share for an Option shall be not
less than the Fair Market Value of a share of Stock on the
effective date of grant of the Option, and (b) no Incentive Stock
Option granted to a Ten Percent Owner Participant shall have an
exercise price per share less than one hundred ten percent (110%)
of the Fair Market Value of a share of Stock on the effective
date of grant of the Option. Notwithstanding the foregoing, an
Option (whether an Incentive Stock Option or a Nonstatutory Stock
Option) may be granted with an exercise price lower than the
minimum exercise price set forth above if such Option is granted
pursuant to an assumption or substitution for another option in a
manner qualifying under the provisions of Section 424(a) of the
Code.
6.2 Exercisability and Term of Options. Options shall be exercisable
at such time or times, or upon such event or events, and subject
to such terms, conditions, performance criteria and restrictions
as shall be determined by the Board and set forth in the Option
Agreement evidencing such Option; provided, however, that (a) no
Option shall be exercisable after the expiration of ten (10)
years after the effective date of grant of such Option, (b) no
Incentive Stock Option granted to a Ten Percent Owner Participant
shall be exercisable after the expiration of five (5) years after
the effective date of grant of such Option, and (c) no Option
granted to a prospective Employee, prospective Consultant or
prospective Director may become exercisable prior to the date on
which such person commences Service
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with a Participating Company. Subject to the foregoing, unless
otherwise specified by the Board in the grant of an Option, any
Option granted hereunder shall terminate ten (10) years after the
effective date of grant of the Option, unless earlier terminated
in accordance with its provisions.
6.3 Payment of Exercise Price.
(a) Forms of Consideration Authorized. Except as otherwise
provided below, payment of the exercise price for the number
of shares of Stock being purchased pursuant to any Option
shall be made (i) in cash, by check or cash equivalent, (ii)
by tender to the Company, or attestation to the ownership,
of shares of Stock owned by the Participant having a Fair
Market Value (as determined by the Company without regard to
any restrictions on transferability applicable to such stock
by reason of federal or state securities laws or agreements
with an underwriter for the Company) not less than the
exercise price, (iii) by delivery of a properly executed
notice together with irrevocable instructions to a broker
providing for the assignment to the Company of the proceeds
of a sale or loan with respect to some or all of the shares
being acquired upon the exercise of the Option (including,
without limitation, through an exercise complying with the
provisions of Regulation T as promulgated from time to time
by the Board of Governors of the Federal Reserve System) (a
"Cashless Exercise"), (iv) provided that the Participant is
an Employee and in the Company's sole discretion at the time
the Option is exercised, by delivery of the Participant's
promissory note in a form approved by the Company for the
aggregate exercise price, provided that, if the Company is
incorporated in the State of Texas, the Participant shall
pay in cash that portion of the aggregate exercise price not
less than the par value of the shares being acquired, (v) by
such other consideration as may be approved by the Board
from time to time to the extent permitted by applicable law,
or (vi) by any combination thereof. The Board may at any
time or from time to time, by approval of or by amendment to
the standard forms of Option Agreement described in Section
7, or by other means, grant Options which do not permit all
of the foregoing forms of consideration to be used in
payment of the exercise price or which otherwise restrict
one or more forms of consideration.
(b) Limitations on Forms of Consideration.
(i) Tender of Stock. Notwithstanding the foregoing, an
Option may not be exercised by tender to the Company,
or attestation to the ownership, of shares of Stock to
the extent such tender or attestation would constitute
a violation of the provisions of any law, regulation
or agreement restricting the redemption of the
Company's stock. Unless otherwise provided by the
Board, an Option may not be by tender to the Company,
or attestation to the ownership, of shares of Stock
unless such shares
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either have been owned by the Participant for more
than six (6) months or were not acquired, directly or
indirectly, from the Company.
(ii) Cashless Exercise. The Company reserves, at any and
all times, the right, in the Company's sole and
absolute discretion, to establish, decline to approve
or terminate any program or procedures for the
exercise of Options by means of a Cashless Exercise,
(iii) Payment by Promissory Note. No promissory note shall
be permitted if the exercise of an Option using a
promissory note would be a violation of any law. Any
permitted promissory note shall be on such terms as
the Board shall determine at the time the Option is
granted. The Board shall have the authority to
permit or require the Participant to secure any
promissory note used to exercise an Option with the
shares of Stock acquired upon the exercise of the
Option or with other collateral acceptable to the
Company. Unless otherwise provided by the Board, if
the Company at any time is subject to the regulations
promulgated by the Board of Governors of the Federal
Reserve System or any other governmental entity
affecting the extension of credit in connection with
the Company's securities, any promissory note shall
comply with such applicable regulations, and the
Participant shall pay the unpaid principal and accrued
interest, if any, to the extent necessary to comply
with such applicable regulations.
6.4 Tax Withholding. The Company shall have the right, but not the
obligation, to deduct from the shares of Stock issuable upon the
exercise of an Option, or to accept from the Participant the tender
of, a number of whole shares of Stock having a Fair Market Value, as
determined by the Company, equal to all or any part of the federal,
state, local and foreign taxes, if any, required by law to be withheld
by the Participating Company Group with respect to such Option or the
shares acquired upon the exercise thereof. Alternatively or in
addition, in its discretion, the Company shall have the right to
require the Participant, through payroll withholding, cash payment or
otherwise, including by means of a Cashless Exercise, to make adequate
provision for any such tax withholding obligations of the
Participating Company Group arising in connection with the Option or
the shares acquired upon the exercise thereof the Fair Market Value of
any shares of Stock withheld or tendered to satisfy any such tax
withholding obligations shall not exceed the amount determined by the
applicable minimum statutory withholding rates, the Company shall have
no obligation to deliver shares of Stock or to release shares of Stock
from an escrow established pursuant to the Option Agreement until the
Participating Company Group's tax withholding obligations have been
satisfied by the Participant.
Page 13
6.5 Repurchase Rights. Shares issued under the Plan may be subject to a
right of first refusal, one or more repurchase options, or other
conditions and restrictions as determined by the Board in its
discretion at the time the Option is granted. The Company shall have
the right to assign at any time any repurchase right it may have,
whether or not such right is then exercisable, to one or more persons
as may be selected by the Company. Upon request by the Company, each
Participant shall execute any agreement evidencing such transfer
restrictions prior to the receipt of shares of Stock hereunder and
shall promptly present to the Company any and all certificates
representing shares of Stock acquired hereunder for the placement on
such certificates of appropriate legends evidencing any such transfer
restrictions.
6.6 Effect of Termination of Service.
(a) Option Exercisability. Subject to earlier termination of the
Option as otherwise provided herein and unless otherwise provided
by the Board in the grant of an Option and set forth in the
Option Agreement, an Option shall be exercisable after a
Participant's termination of Service only during the applicable
time period determined in accordance with this Section 6.6 and
thereafter shall terminate:
(i) Disability. If the Participant's Service with the
Participating Company Group terminates because of the
Disability of the Participant, the Option, to the
Disability exercisable on the date on which the
Disability terminated, may be exercised by the
Participant (or the Participant's guardian or legal
to the expiration of one (1) year (or such other period
of time as determined by the Board, in its discretion)
after the date on which the Participant's Service
terminated, but in any event no later than the date of
expiration of the Option's term as set forth in the
Option Agreement evidencing such Option (the
"Option Expiration Date").
(ii) Death. If the Participant's Service with the
Participating Company Group terminates because of the
death of the Participant, the Option, to the extent
unexercised and exercisable on the date on which the
Participant's Service terminated, may be exercised by
legal representative or other person who acquired the
right to exercise the Option by reason of the
Participant's death at any time prior to the expiration
of one (1) year (or such other period of time as
determined by the Board, in its discretion) after the
date on which the Participant'sService terminated, but
in any event no later than the Option Expiration Date.
The Participant's Service shall be deemed to have
terminated on account of death if theParticipant dies
within three (3) months (or such otherperiod of time as
determined by the Board, in its discretion) after the
Participant's termination of Service.
Page 14
(iii) Cause. If the Participant's Service with the
Participating Company Group is terminated for Cause,
the Option shall terminate and cease to be exercisable
immediately upon such termination of Service.
(iv) Termination After Change in Control. Except as
otherwise specified in an Option Agreement, if the
Participant's Service with the Participating Company
Group ceases as a result of Termination After Change
in Control, then (1) the Option, to the extent
unexercised and exercisable on the date on which the
Participant's Service terminated, may be exercised by
the Participant (or the Participant's guardian or
legal representative) at any time prior to the
expiration of three (3) months (or such longer period
of time as determined by the Board, in its sole
discretion) after the date on which the Participant's
Service terminated, but in any event no later than the
Option Expiration Date, and (2) any unexercisable or
unvested portion of the Option shall become fully
vested and exercisable as of the date on which the
Participant's Service terminated.
(v) Termination of Service. If the Participant's Service
with the Participating Company Group terminates for
any reason, except Disability, death or Cause, the
Option, to the extent unexercised and exercisable by
the Participant on the date on which the Participant's
Service terminated, may be exercised by the
Participant at any time prior to the expiration of
three (3) months (or such other period of time as
determined by the Board, in its discretion) after the
date on which the Participant's Service terminated,
but in any event no later than the Option Expiration
Date.
(b) Extension if Exercise Prevented by Law. Notwithstanding the
foregoing, if the exercise of an Option within the applicable
time periods set forth in Section 6.6(a) is prevented by the
provisions of Section 16 below, the Option shall remain
exercisable until three (3) months (or such longer period of
time as determined by the Board, in its discretion) after the
date the Participant is notified by the Company that the Option
is exercisable, but in any event no later than the Option
Expiration Date.
(c) Extension if Participant Subject to Section 16(b).
Notwithstanding the foregoing, if a sale within the applicable
time periods set forth in Section 6.6(a) of shares acquired upon
the exercise of the Option would subject the Participant to suit
under Section 16(b) of the Exchange Act, the Option shall
remain exercisable until the earliest to occur of (i) the tenth
(10th) day following the date on which a sale of such shares by
the Participant would no longer be subject to such suit, (ii)
the one hundred and ninetieth
Page 15
(190/th/) day after the Participant's termination of Service, or
(iii) the Option Expiration Date.
6.7 Transferability of Options. Incentive Stock Options granted under the
Plan shall not be transferable otherwise than by will or the laws of
descent and distribution, or pursuant to a qualified domestic
relations order as defined by the Code or Title I of the Employee
Retirement Income Security Act of 1974, as amended, or the rules
thereunder. Incentive Stock Options shall be exercisable during the
lifetime of the Participant only by the Participant or by the
Participant's guardian or legal representative (unless such exercise
would disqualify an Option as an Incentive Stock Option). With the
approval of the Board, the Option Agreement (other than an Incentive
Stock Option) may provide that such Option may be transferred without
consideration to one or more Permitted Transferees. Any attempted
assignment, transfer, pledge, hypothecation or other disposition of an
Option or other award contrary to the provisions hereof, or the levy
of any execution, attachment or similar process upon an Option or
other award shall be null and void and without effect. As used herein,
"Permitted Transferees" means a member of a Participant's immediate
family, trusts for the exclusive benefit of such Participant and/or
such Participant's immediate family members, and partnerships or other
entities in which the Participant and/or such immediate family members
are the only partners, provided that no consideration is provided for
the transfer. Immediate family members shall include a Participant's
spouse, descendants (children, grandchildren and more remote
descendants), spouses of descendants, and shall include step-children
and relationships arising from legal adoption.
7. STANDARD FORMS OF OPTION AGREEMENT.
----------------------------------
7.1 Option Agreement. Unless otherwise provided by the Board at the time
the Option is granted, an Option shall comply with and be subject to
the terms and conditions set forth in the form of Option Agreement
approved by the Board concurrently with its adoption of the Plan and
as amended from time to time.
7.2 Authority to Vary Terms. The Board shall have the authority from time
to time to vary the terms of any standard form of Option Agreement
described in this Section 7 either in connection with the grant or
amendment of an individual Option or in connection with the
authorization of a new standard form or forms; provided, however, that
the terms and conditions of any such new, revised or amended standard
form or forms of Option Agreement are not inconsistent with the terms
of the Plan.
8. AWARD AND DELIVERY OF OPTIONS TO NON-EMPLOYEE DIRECTORS.
-------------------------------------------------------
Notwithstanding any other provision of the Plan, each Director who is not
an Employee (a "Non-Employee Director") shall, on the Spin-off Date and upon
each date of election or re-election as a Board member, be granted a
Nonstatutory Stock Option for [______] shares of Stock. The exercise price for
any Options awarded pursuant to this Article 8 on the Spin-off
Page 16
Date shall be equal to one hundred percent (100%) of the Fair Market Value of
the shares on the Spin-off Date, and the exercise price for any Options awarded
pursuant to this Article 8 thereafter shall be equal to one hundred percent
(100%) of the Fair Market Value of the shares on the date of election or
reelection of the Non-Employee Director. Each such Option shall fully vest at
the expiration of twelve (12) months from the date of the grant. Each
Non-Employee Director Option shall have a term of ten (10) years. Expiration of
a Non-Employee Director's term of office shall not affect a Non-Employee
Director's right to exercise its Option to the extent such Option is vested at
any time prior to the expiration of the Director's term.
9. AWARD AND DELIVERY OF RESTRICTED STOCK.
--------------------------------------
9.1 Restricted Period. At the time an award of Restricted Stock is made,
the Committee shall establish a period or periods of time (each a
"Restricted Period") or such other restrictions on the vesting of the
Restricted Stock as it shall deem appropriate or applicable to such
award. Each award of Restricted Stock may have a different Restricted
Period or Restricted Periods. The Committee may, in its sole
discretion, at the time an award is made, provide for the incremental
lapse of Restricted Periods with respect to a portion or portions of
the Restricted Stock awarded, and for the lapse or termination of
restrictions upon all or any portion of the Restricted Stock upon the
satisfaction of other conditions in addition to or other than the
expiration of the applicable Restricted Period. The Committee may
also, in its sole discretion, shorten or terminate a Restricted Period
or waive any conditions for the lapse or termination of restrictions
with respect to all or any portion of the Restricted Stock.
9.2 Rights and Privileges. At the time a grant of Restricted Stock is made
to a Participant, a stock certificate representing a number of shares
of the Company's common stock equal to the number of shares of such
Restricted Stock shall be registered in the Participant's name but
shall be held in custody by the Company for such Participant's
account. The Participant shall generally have the rights and
privileges of a stockholder as to such Restricted Stock, including,
without limitation, the right to vote the Restricted Stock, except
that, subject to the earlier lapse or termination of restrictions as
herein provided, the following restrictions shall apply: (i) the
Participant shall not be entitled to delivery of the stock certificate
evidencing Restricted Stock until the expiration or termination of the
Restricted Period applicable to such shares and the satisfaction of
any other conditions prescribed by the Committee; (ii) none of the
shares then subject to a Restricted Period shall be sold, transferred,
assigned, pledged, or otherwise encumbered or disposed of during the
Restricted Period applicable to such shares and until the satisfaction
of any other conditions prescribed by the Committee; and (iii) all of
the shares then subject to a Restricted Period shall be forfeited and
all rights of the Participant to such Restricted Stock shall terminate
without further obligation on the part of the Company if the
Participant ceases to be an Employee, Consultant or Director of the
Company or any of its subsidiaries before the expiration or
termination of such Restricted Period and the satisfaction of any
other conditions prescribed by the Committee applicable to such
Restricted Stock. Dividends on Restricted Stock shall be currently
paid; provided, however,
-------- -------
Page 17
that in lieu of paying currently a dividend of shares of Common Stock
in respect of Restricted Stock, the Committee may, in its sole
discretion, register in the name of a Participant a stock certificate
representing such shares of Common Stock issued as a dividend on
Restricted Stock, and may cause the Company to hold such certificate
in custody for the Participant's account subject to the same terms and
conditions as such Restricted Stock. Upon the forfeiture of any
Restricted Stock, such forfeited Restricted Stock shall be transferred
to the Company without further action by the Participant.
9.3 Expiration of Restricted Period. Upon the expiration or termination of
the Restricted Period applicable to Restricted Stock and the
satisfaction of any other conditions prescribed by the Committee or at
such earlier time as provided for herein, the restrictions applicable
to the Restricted Stock to such Restricted Period shall lapse and a
certificate for a number of shares of Common Stock equal to the number
of shares of Restricted Stock with respect to which the restrictions
have expired or terminated shall be delivered, free of all such
restrictions, except any that may be imposed by law, to the
Participant. The Company shall not be required to deliver any
fractional share of Common Stock but shall pay to the Participant, in
lieu thereof, the product of (i) the Fair Market Value per share
(determined as of the date the restrictions expire or terminate) and
(ii) the fraction of a share to which such Participant would otherwise
be entitled.
10. AWARD AND DELIVERY OF PURCHASE RIGHTS.
-------------------------------------
10.1 Purchase Rights. At the time an award of Purchase Rights is made, the
Committee shall establish a period or periods of time during which the
Purchase Right may be exercised (each an "Exercise Period") or such
other restrictions as it shall deem appropriate and applicable to such
award. Each award of Purchase Rights may have a different Exercise
Period or Exercise Periods. Each award shall specify the method of
payment (which may include promissory notes) to purchase Stock and
shall set forth any repurchase rights or calls applicable to the
purchased Stock.
11. ANNUAL INCENTIVE AWARDS.
-----------------------
11.1 Annual Incentive Awards. The Committee may grant annual incentive
awards of Stock or cash (each an "Annual Incentive Award") to such
Participants as the Committee may from time to time recommend, in such
amounts and subject to such terms and conditions as the Committee in
its discretion may determine. The Committee shall establish the
maximum amount of Annual Incentive Awards that may be granted for each
Performance Cycle. Notwithstanding the foregoing, all Annual Incentive
Awards shall be subject to the provisions of paragraphs (a) through
(e) below:
(a) Annual Incentive Awards shall be granted in connection with a
12-month Performance Cycle, which shall be the fiscal year of the
Company. The
Page 18
first Performance Cycle under the Plan shall commence on January 1,
2002.
(b) Subject to Section 4.1, within ninety (90) days after the commencement
of a Performance Cycle, the Committee shall determine the Participants
who shall be eligible to receive an Annual Incentive Award for such
Performance Cycle.
(c) Within ninety (90) days after the commencement of a Performance Cycle,
the Committee shall fix and establish, in writing, (A) the Performance
Measure(s) that shall apply to such Performance Cycle, (B) an
objective formula for computing the amount of the Annual Incentive
Awards for such Performance Cycle, where the amount shall be based
upon the attainment of various Performance Goals for the applicable
Performance Measure(s). Notwithstanding anything to the contrary, the
Committee may, on a case by case basis and in its sole discretion,
reduce, but not increase, the Annual Incentive Award payable to any
Participant with respect to any given Performance Cycle (unless the
Participant has a vested right under applicable employment law to
receive the full Annual Incentive Award), provided, however, that no
-------- -------
such reduction shall result in an increase to any other Participant.
(d) No Annual Incentive Award shall be paid to a Participant under this
Section 11 unless and until the Committee certifies in writing the
level of attainment of the applicable Performance Goals for the
applicable Performance Cycle and Participants shall not have any right
or claim whatsoever for payment of any Annual Incentive Award until
the Committee has made such certification in writing.
(e) Annual Incentive Awards shall be paid in the form of cash, Stock
(including Restricted Stock) or any combination thereof; provided,
--------
however, that the Committee shall determine the form of payment of any
-------
Annual Incentive Awarded to a Participant within ninety (90) days
after the commencement of the applicable Performance Cycle. A portion
of any payments made in connection with an Annual Incentive Award may,
at the election of the Participant, be deferred pursuant to the
provisions of the Deferred Compensation Plan.
12. PERFORMANCE-BASED AWARDS.
------------------------
12.1 Performance-Based Awards. The Committee may grant to officers and
other key Employees of either the Company or any Subsidiary the prospective
contingent right, expressed in Units, to receive payments of Stock, cash or
any combination thereof, with each Unit equivalent in value to one share of
Stock, or equivalent to such other value or monetary amount as may be
designated or established by the Committee ("Performance-Based Awards").
Performance-Based Awards shall be earned by Participants only if
Page 19
specified Performance Goals are satisfied in the applicable Performance
Cycle. The Committee shall, in its sole discretion, determine the officers
and other key Employees eligible to receive Performance-Based Awards. At
the time each grant of a Performance-Based Award is made, the Committee
shall establish the applicable Performance Cycle, the Performance Measure
and Performance Goals in respect of such Performance-Based Award. The
number of shares of Stock and/or the amount of cash earned and payable in
settlement of a Performance-Based Award shall be determined by the
Committee at the end of the Performance Cycle.
12.2 The Committee may grant Performance-Based Awards to a Participant in
such amounts as the Committee may determine, subject to the limitations set
forth in Section 4.1.
12.3 A certificate (an "Award Certificate") for each Performance-Based
Award shall provide that, in order for a Participant to earn all or a
portion of the Units subject to such Performance-Based Award, the Company
must achieve certain Performance Goals over a designated Performance Cycle
having a minimum duration of one year. The Performance Goals and
Performance Cycle shall be established by the Committee in its sole
discretion. The Committee shall establish a Performance Measure for each
Performance Cycle for determining the portion of the Performance-Based
Award, which will be earned or forfeited, based on the extent to which the
Performance Goals are achieved or exceeded. Performance Goals may include
minimum, maximum and target levels of performance, with the size of the
Performance-Based Award based on the level attained. Once established by
the Committee and specified in the Award Certificate, and if and to the
extent provided in or required by the Award Certificate, the Performance
Goals and the Performance Measure in respect of any Performance-Based Award
shall not be changed. The Committee may, in its discretion, eliminate or
reduce (but not increase) the amount of any Performance-Based Award that
otherwise would be payable to a Participant upon attainment of the
Performance Goal(s) unless the Participant has a vested right under
applicable employment law to receive the full Performance-Based Award.
12.4 Performance-Based Awards may be made on such terms and conditions not
inconsistent with the Plan, and in such form or forms, as the Committee may
from time to time approve. Performance-Based Awards may be made alone, in
addition to in tandem with, or independent of other grants and awards under
the Plan. Subject to the terms of the Plan, the Committee shall, in its
discretion, determine the number of Units subject to each Performance Grant
made to a Participant and the Committee may impose different terms and
conditions on any particular Performance-Based Award made to any
Participant. The Performance Goals, the Performance Cycle and the
Performance Measure applicable to a Performance Grant shall be set forth in
the relevant Award Certificate.
12.5 Each Participant shall be entitled to receive payment in an amount
equal to the aggregate Fair Market Value (if the Unit is equivalent to a
share of Stock), or such other value as the Committee shall specify, of the
Units earned in respect of such Performance Award. Payment in settlement of
a Performance-Based Award may be made in Stock, in cash, or in any
combination of Stock and cash, and at such time or times, as the
Page 20
Committee, in its discretion, shall determine. A portion of any
payments made in connection with a Performance-Based Award may, at the
election of the Participant, be deferred pursuant to the provisions of
the Deferred Compensation Plan.
13. CHANGE IN CONTROL.
-----------------
13.1 Definitions.
(a) An "Ownership Change Event" shall be deemed to have occurred
if any of the following occurs with respect to the Company:
(i) the direct or indirect sale or exchange in a single or
series of related transactions by the stockholders of the
Company of more than fifty percent (50%) of the voting stock
of the Company; (ii) a merger or consolidation in which the
Company is a party; (iii) the sale, exchange, or transfer of
all or substantially all of the assets of the Company; or
(iv) a liquidation or dissolution of the Company.
(b) A "Change in Control" shall mean (i) a merger or
consolidation of the Company with or into another
corporation in which the Company shall not be the surviving
corporation (other than a merger undertaken solely in order
to reincorporate in another state) (for purposes hereof, the
Company shall not be deemed the surviving corporation in any
such transaction if, as the result thereof, it becomes a
wholly-owned subsidiary of another corporation), (ii) a
dissolution of the Company, (iii) a transfer of all or
substantially all of the assets of the Company in one
transaction or a series of related transactions to one or
more other persons or entities, (iv) a transaction or series
of transactions that results in any entity, "Person" or
"Group" (as defined below), becoming the beneficial owner,
directly or indirectly, of securities of the Company
representing more than 50% of the combined voting power of
the Company's then outstanding securities, or (v) during any
period of two (2) consecutive years commencing on or after
January 1, 2002, individuals who at the beginning of the
period constituted the Company's Board of Directors cease
for any reason to constitute at least a majority, unless the
election of each director who was not a director at the
beginning of the period has been approved in advance by
directors representing at least two-thirds (2/3) of the
directors then in office who were directors at the beginning
of the period; provided, however, that a "Change of Control"
shall not be deemed to have occurred if the ownership of 50%
or more of the combined voting power of the surviving
corporation, asset transferee or Company (as the case may
be), after giving effect to the transaction or series of
transactions, is directly or indirectly held by (A) a
trustee or other fiduciary under an employee benefit plan
maintained by the Company, (B) one or more of the "executive
officers" of the Company that held such positions prior to
the transaction or series of transactions, or any entity,
Person or Group under their control. As used herein,
"Person" and "Group" shall have the meanings set forth in
Sections 13(d)(3) and/or 14(d)(2) of the Securities Exchange
Act of 1934,
Page 21
as amended, and "executive officer" shall have the meaning set
forth in Rule 3b-7 promulgated under such Act .
13.2 Effect of Change in Control on Awards. In the event of a Change in
Control, the surviving, continuing, successor, or purchasing
corporation or Parent thereof, as the case may be (the "Acquiring
Corporation"), may either assume the Company's rights and obligations
under outstanding Awards or substitute for outstanding Awards
substantially equivalent awards, including awards for the Acquiring
Corporation's stock, if applicable. For purposes of this Section 13.2,
an Award shall be deemed assumed if, following the Change in Control,
the Award confers the right to purchase in accordance with its terms
and conditions, for each share of Stock subject to the Award
immediately prior to the Change in Control, the consideration (whether
stock, cash or other securities or property) to which a holder of a
share of Stock on the effective date of the Change in Control was
entitled. In the event the Acquiring Corporation elects not to assume
or substitute for outstanding Awards in connection with a Change in
Control, the exercisability and vesting of each outstanding Award
shall be accelerated for 12 months as of the date ten (10) days prior
to the date of the Change in Control, provided that the Participant's
Service has not terminated prior to such date. The exercise or vesting
of any Award that was permissible solely by reason of this Section
13.2 shall be conditioned upon the consummation of the Change in
Control. Any Award which is neither assumed or substituted for by the
Acquiring Corporation in connection with the Change in Control nor
exercised as of the date of the Change in Control shall terminate and
cease to be outstanding effective as of the date of the Change in
Control. Notwithstanding the foregoing, shares acquired upon exercise
of an Award prior to the Change in Control and any consideration
received pursuant to the Change in Control with respect to such shares
shall continue to be subject to all applicable provisions of the
applicable Option Agreement, Award Certificate or Stock Purchase
Agreement, except as otherwise provided therein. Furthermore,
notwithstanding the foregoing, if the Change in Control results from
an Ownership Change Event described in Section 13.1(a)(i) and the
Company is the surviving or continuing corporation and immediately
after such Change in Control less than fifty percent (50%) of the
total combined voting power of its voting stock is held by another
corporation or by other corporations that are members of an affiliated
group within the meaning of Section 1504(a) of the Code without regard
to the provisions of Section 1504(b) of the Code, the outstanding
Awards shall not terminate unless the Board otherwise provides in its
discretion.
14. PROVISION OF INFORMATION.
------------------------
Each Participant shall be given access to information concerning the
Company equivalent to that information generally made available to the Company's
common stockholders.
Page 22
15. COMPLIANCE WITH SECURITIES LAW.
------------------------------
The grant of an Award and the issuance of shares of Stock upon exercise of
an Award, if applicable, shall be subject to compliance with all applicable
requirements of federal, state and foreign law with respect to such securities.
An Award may not be exercised for shares of Stock if the issuance of such shares
would constitute a violation of any applicable federal, state or foreign
securities laws or other law or regulations or the requirements of any stock
exchange or market system upon which the Stock may then be listed. In addition,
no Award may be exercised for shares of Stock unless (a) a registration
statement under the Securities Act shall at the time of exercise of the Award be
in effect with respect to the shares of Stock issuable upon exercise of the
Award or (b) in the opinion of legal counsel to the Company, the shares of Stock
issuable upon exercise of the Award may be issued in accordance with the terms
of an applicable exemption from the registration requirements of the Securities
Act. The inability of the Company to obtain from any regulatory body having
jurisdiction the authority, if any, deemed by the Company's legal counsel to be
necessary to the lawful issuance and sale of any shares of Stock hereunder shall
relieve the Company of any liability in respect of the failure to issue or sell
such shares of Stock as to which such requisite authority shall not have been
obtained. As a condition to the exercise of any Award, the Company may require
the Participant to satisfy any qualifications that may be necessary or
appropriate, to evidence compliance with any applicable law or regulation and to
make any representation or warranty with respect thereto as may be requested by
the Company.
16. TERMINATION OR AMENDMENT OF PLAN.
--------------------------------
The Board may terminate or amend the Plan at any time. However, subject to
changes in applicable law, regulations or rules that would permit otherwise,
without the approval of the Company's stockholders, there shall be (a) no
increase in the maximum aggregate number of shares of Stock that may be issued
under the Plan (except by operation of the provisions of Section 4.2), (b) no
change in the class of persons eligible to receive Incentive Stock Options, and
(c) no other amendment of the Plan that would require approval of the Company's
stockholders under any applicable law, regulation or rule. No termination or
amendment of the Plan shall affect any then outstanding Award unless expressly
provided by the Board. In any event, no termination or amendment of the Plan may
adversely affect any then outstanding Award without the consent of the
Participant, unless such termination or amendment is required to enable an
Option designated as an Incentive Stock Option to qualify as an Incentive Stock
Option or is necessary to comply with any applicable law, regulation or rule.
17. STOCKHOLDER APPROVAL.
--------------------
Both the Plan and any increase in the maximum aggregate number of shares of
Stock issuable thereunder as provided in Section 4.1 (the "Authorized Shares")
shall be approved by the stockholders of the Company within twelve (12) months
of the date of adoption thereof by the Board. Awards granted prior to
stockholder approval of the Plan or in excess of the Authorized Shares
previously approved by the stockholders shall become exercisable no earlier than
the date of stockholder approval of the Plan or such increase in the Authorized
Shares, as the case may be.
Page 23
PLAN HISTORY
------------
February 1, 2002 Board adopts Plan, with an initial reserve of 948.35
shares.
February 8, 2002 Stockholders approve Plan, with an initial reserve of
948.35 shares.
Page 24