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EXHIBIT 10.1
INDEX, INC.
LONG-TERM INCENTIVE PLAN
ARTICLE I: GENERAL
SECTION 1.1 Purpose of the Plan. The Long-Term Incentive Plan (the
"Plan") of Index, Inc. (the "Company") is intended to advance the best
interests of the Company, its subsidiaries and its shareholders in order to
attract, retain and motivate key employees by providing them with additional
incentives through (i) the grant of options ("Options") to purchase shares of
Common Stock, par value $.01 per share, of the Company ("Common Stock"), (ii)
the grant of stock appreciation rights ("Stock Appreciation Rights"), (iii) the
award of shares of restricted Common Stock ("Restricted Stock") and (iv) the
award of units payable in cash or shares of Common Stock based on performance
("Performance Awards"), thereby increasing the personal stake of such key
employees in the continued success and growth of the Company.
SECTION 1.2 Administration of the Plan. (a) The Plan shall be
administered by the Board of Directors of the Company or the compensation
committee of the Board of Directors or other designated committee of the Board
of Directors of the Company (the "Board of Directors") which shall consist of
at least two Outside Directors (the Board of Directors or such committee being
hereinafter referred to as the "Committee"). The Committee shall have
authority to interpret conclusively the provisions of the Plan, to adopt such
rules and regulations for carrying out the Plan as it may deem advisable, to
decide conclusively all questions of fact arising in the application of the
Plan, to establish performance criteria in respect of Awards (as defined
herein) under the Plan, to certify that Plan requirements have been met for any
participant in the Plan, to submit such matters as it may deem advisable to the
Company's shareholders for their approval, and to make all other determinations
and take all other actions necessary or desirable for the administration of the
Plan. The Committee is expressly authorized to adopt rules and regulations
limiting or eliminating its discretion in respect of certain matters as it may
deem advisable to comply with or obtain preferential treatment under any
applicable tax or other law rule, or regulation. All decisions and acts of the
Committee shall be final and binding upon all affected Plan participants.
For purposes of this Plan, "Outside Director" shall mean a nonemployee
director of the Company who is a "Non-Employee Director" within the meaning of
Rule 16b-3 under the Securities Exchange Act of 1934, as amended (the "Exchange
Act").
(b) The Committee shall designate the eligible employees, if any,
to be granted Awards and the type and amount of such Awards and the time when
Awards will be granted. All Awards granted under the Plan shall be on the
terms and subject to the conditions determined by the Committee consistent with
the Plan.
SECTION 1.3 Eligible Participants. Key employees, including
officers, of the Company and its subsidiaries (all such subsidiaries being
referred to as "Subsidiaries") shall be eligible for Awards under the Plan.
SECTION 1.4 Awards Under the Plan. Awards to key employees may be in
the form of (i) Options, (ii) Stock Appreciation Rights, which may be issued
independent of or in tandem
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with Options, (iii) shares of Restricted Stock, (iv) Performance Awards, or (v)
any combination of the foregoing (collectively, "Awards").
SECTION 1.5 Shares Subject to the Plan. Initially, the aggregate
number of shares of Common Stock that may be issued under the Plan shall be
800,000. In addition, as of January 1 of each year the Plan is in effect, if
the total number of shares of Common Stock issued and outstanding, not
including any shares issued under the Plan, exceeds the total number of shares
of Common Stock issued and outstanding as of January 1 of the preceding year
(or, for 1996, as of the effective date of the merger (the "Effective Date") of
a wholly owned subsidiary of the Company with SEPCO Industries, Inc. (the
"Sepco Merger") assuming all shares issued pursuant to the Sepco Merger and the
proposed merger of a subsidiary of the Company with and into Newman
Communications, Inc are issued), the number of shares available will be
increased by an amount such that the total number of shares that may be issued
under the Plan shall be increased by an amount such that the total number of
shares of Common Stock available for issuance under the Plan equals 5% of the
total number of shares of Common Stock outstanding, not including any shares
issued under the Plan. Shares distributed pursuant to the Plan may consist of
authorized but unissued shares or treasury shares of the Company, as shall be
determined from time to time by the Board of Directors.
If any Award under the Plan shall expire, terminate or be cancelled
(including cancellation upon an Option holder's exercise of a related Stock
Appreciation Right) for any reason without having been exercised in full, or if
any Award shall be forfeited to the Company, the unexercised or forfeited Award
shall not count against the above limits and shall again become available for
Awards under the Plan (unless the holder of such Award received dividends or
other economic benefits with respect to such Award, which dividends or other
economic benefits are not forfeited, in which case the Award shall count
against the above limits). Shares of Common Stock equal in number to the
shares surrendered in payment of the option price, and shares of Common Stock
which are withheld in order to satisfy Federal, state or local tax liability,
shall count against the above limits. Only the number of shares of Common
Stock actually issued upon exercise of a Stock Appreciation Right shall count
against the above limits, and any shares which were estimated to be used for
such purposes and were not in fact so used shall again become available for
Awards under the Plan. Cash exercises of Stock Appreciation Rights and cash
settlement of other Awards will not count against the above limits.
The aggregate number of shares of Common Stock subject to Options or
Stock Appreciation Rights that may be granted to any one participant in any one
year under the Plan shall be 400,000. The aggregate number of shares of Common
Stock that may be granted to any one participant in any one year in respect of
Restricted Stock shall be 400,000. The aggregate number of shares of Common
Stock that may be received by any one participant in any one year in respect of
a Performance Award shall be 400,000 and the aggregate amount of cash that may
be received by any one participant in any one year in respect to a Performance
Award shall be $500,000.
The total number of Awards (or portions thereof) settled in cash under
the Plan, based on the number of shares covered by such Awards (e.g., 100
shares for a Stock Appreciation Right with respect to 100 shares), shall not
exceed a number equal to (i) the number of shares initially available for
issuance under the Plan plus (ii) the number of shares that have become
available for issuance under the Plan pursuant to the first paragraph of this
Section 1.5.
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The aggregate number of shares of Common Stock that are available
under the Plan for Options granted in accordance with Section 2.4(i) ("ISOs")
is 800,000, subject to adjustments as provided in Section 5.2 of the Plan.
SECTION 1.6 Other Compensation Programs. Nothing contained in the
Plan shall be construed to preempt or limit the authority of the Board of
Directors to exercise its corporate rights and powers, including, but not by
way of limitation, the right of the Board of Directors (i) to grant incentive
awards for proper corporate purposes otherwise than under the Plan to any
employee, officer, director or other person or entity or (ii) to grant
incentive awards to, or assume incentive awards of, any person or entity in
connection with the acquisition (whether by purchase, lease, merger,
consolidation or otherwise) of the business or assets (in whole or in part) of
any person or entity.
ARTICLE II: STOCK OPTIONS AND STOCK APPRECIATION RIGHTS
SECTION 2.1 Terms and Conditions of Options. Subject to the
following provisions, all Options granted under the Plan to employees of the
Company and its Subsidiaries shall be in such form and shall have such terms
and conditions as the Committee, in its discretion, may from time to time
determine consistent with the Plan.
(a) Option Price. The option price per share shall be determined
by the Committee, except that in the case of an Option granted in accordance
with Section 2.4(i) the option price per share shall not be less than the fair
market value of a share of Common Stock (as determined by the Committee) on the
date the Option is granted (other than in the case of substitute or assumed
Options to the extent required to qualify such Options for preferential tax
treatment under the Code as in effect at the time of such grant).
(b) Term of Option. The term of an Option shall be determined by
the Committee, except that in the case of an ISO the term of the Option shall
not exceed ten years from the date of grant, and, notwithstanding any other
provision of this Plan, no Option shall be exercised after the expiration of
its term.
(c) Exercise of Options. Options shall be exercisable at such
time or times and subject to such terms and conditions as the Committee shall
specify in the Option grant. Unless the Option grant specifies otherwise, the
Committee shall have discretion at any time to accelerate such time or times
and otherwise waive or amend any conditions in respect of all or any portion of
the Options held by any optionee. An Option may be exercised in accordance
with its terms as to any or all shares purchasable thereunder.
(d) Payment for Shares. The Committee may authorize payment for
shares as to which an Option is exercised to be made in cash, shares of Common
Stock, a combination thereof, by "cashless exercise" or in such other manner as
the Committee in its discretion may provide.
(e) Shareholder Rights. The holder of an Option shall, as such,
have none of the rights of a shareholder.
(f) Termination of Employment. The Committee shall have
discretion to specify in the Option grant, or, with the consent of the
optionee, an amendment thereof, provisions
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with respect to the period, not extending beyond the term of the Option, during
which the Option may be exercised following the optionee's termination of
employment.
SECTION 2.2 Stock Appreciation Rights in Tandem with Options. (a)
The Committee may, either at the time of grant of an Option or at any time
during the term of the Option, grant Stock Appreciation Rights ("Tandem SARs")
with respect to all or any portion of the shares of Common Stock covered by
such Option. A Tandem SAR may be exercised at any time the Option to which it
relates is then exercisable, but only to the extent the Option to which it
relates is exercisable, and shall be subject to the conditions applicable to
such Option. When a Tandem SAR is exercised, the Option to which it relates
shall cease to be exercisable to the extent of the number of shares with
respect to which the Tandem SAR is exercised. Similarly, when an Option is
exercised, the Tandem SARs relating to the shares covered by such Option
exercise shall terminate. Any Tandem SAR which is outstanding on the last day
of the term of the related Option (as determined pursuant to Section 2.1(b))
shall be automatically exercised on such date for cash without any action by
the optionee.
(b) Upon exercise of a Tandem SAR, the holder shall receive, for
each share with respect to which the Tandem SAR is exercised, an amount (the
"Appreciation") equal to the difference between the option price per share of
the Option to which the Tandem SAR relates and the fair market value (as
determined by the Committee) of a share of Common Stock on the date of exercise
of the Tandem SAR. The Appreciation shall be payable in cash, Common Stock, or
a combination of both, at the option of the Committee, and shall be paid within
30 days of the exercise of the Tandem SAR.
SECTION 2.3 Stock Appreciation Rights Independent of Options.
Subject to the following provisions, all Stock Appreciation Rights granted
independent of Options ("Independent SARs") under the Plan to employees of the
Company and its Subsidiaries shall be in such form and shall have such terms
and conditions as the Committee, in its discretion, may from time to time
determine consistent with the Plan.
(a) Exercise Price. The exercise price per share shall be
determined by the Committee on the date the Independent SAR is granted.
(b) Term of Independent SAR. The term of an Independent SAR shall
be determined by the Committee, and, notwithstanding any other provision of
this Plan, no Independent SAR shall be exercised after the expiration of its
term.
(c) Exercise of Independent SARs. Independent SARs shall be
exercisable at such time or times and subject to such terms and conditions as
the Committee shall specify in the Independent SAR grant. Unless the
Independent SAR grant specifies otherwise, the Committee shall have discretion
at any time to accelerate such time or times and otherwise waive or amend any
conditions in respect of all or any portion of the Independent SARs held by any
participant. Upon exercise of an Independent SAR, the holder shall receive,
for each share specified in the Independent SAR grant, an amount (the
"Appreciation") equal to the difference between the exercise price per share
specified in the Independent SAR grant and the fair market value (as determined
by the Committee) of a share of Common Stock on the date of exercise of the
Independent SAR. The Appreciation shall be payable in cash, Common Stock, or a
combination of both, at the option of the Committee, and shall be paid within
30 days of the exercise of the Independent SAR.
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(d) Shareholder Rights. The holder of an Independent SAR shall,
as such, have none of the rights of a shareholder.
(e) Termination of Employment. The Committee shall have
discretion to specify in the Independent SAR grant, or, with the consent of the
holder, an amendment thereof, provisions with respect to the period, not
extending beyond the term of the Independent SAR, during which the Independent
SAR may be exercised following the holder's termination of employment.
SECTION 2.4 Statutory Options. Subject to the limitations on Option
terms set forth in Section 2.1, the Committee shall have the authority to grant
(i) ISOs within the meaning of Section 422 of the Internal Revenue Code of
1986, as amended (the "Code"), and (ii) Options containing such terms and
conditions as shall be required to qualify such Options for preferential tax
treatment under the Code as in effect at the time of such grant, including, if
then applicable, limits with respect to minimum exercise price, duration and
amounts and special limitations applicable to any individual who, at the time
the Option is granted, owns stock possessing more than 10% of the total
combined voting power of all classes of stock of the Company or any affiliate.
Options granted pursuant to this Section 2.4 may contain such other terms and
conditions permitted by Article II of this Plan as the Committee, in its
discretion, may from time to time determine (including, without limitation,
provision for Stock Appreciation Rights), to the extent that such terms and
conditions do not cause the Options to lose their preferential tax treatment.
If an Option intended to be an ISO ceases or is otherwise not eligible to be an
ISO, such Option (or portion thereof necessary to maintain the status of the
remaining portion of the Option as an ISO) shall remain valid but be treated as
an Option other than an ISO.
SECTION 2.5 Change of Control. Notwithstanding the exercisability
schedule governing any Option or Stock Appreciation Right, upon the occurrence
of a Change of Control (as defined in Section 5.9) all Options and Stock
Appreciation Rights outstanding at the time of such Change of Control and held
by participants who are employees of the Company or its subsidiaries at the
time of such Change of Control shall (unless specifically provided otherwise in
the grant thereof) become immediately exercisable and, unless the participant
agrees otherwise in writing, remain exercisable for three years (but not beyond
the term of the Option or Stock Appreciation Right) after the employee's
termination of employment for any reason other than termination by the Company
or a subsidiary of the Company for dishonesty, conviction of a felony, wilful
unauthorized disclosure of confidential information or wilful refusal to
perform the duties of such employee's position or positions with the Company or
such subsidiary (termination for "cause"); provided that this Section 2.5 shall
not apply to Awards granted to a participant if, in connection with a Change of
Control pursuant to clause (1) of Section 5.9, such participant is the Person
or forms part of the Person specified in such clause (1).
ARTICLE III: RESTRICTED STOCK
SECTION 3.1 Terms and Conditions of Restricted Stock Awards. Subject
to the following provisions, all Awards of Restricted Stock under the Plan to
employees of the Company and its Subsidiaries shall be in such form and shall
have such terms and conditions as the Committee, in its discretion, may from
time to time determine consistent with the Plan.
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(a) Restricted Stock Award. The Restricted Stock Award shall
specify the number of shares of Restricted Stock to be awarded, the price, if
any, to be paid by the recipient of the Restricted Stock, and the date or dates
on which the Restricted Stock will vest. The vesting and number of shares of
Restricted Stock may be conditioned upon the completion of a specified period
of service with the Company or its Subsidiaries, upon the attainment of
specified performance objectives, or upon such other criteria as the Committee
may determine in accordance with the provisions hereof. Performance objectives
will be based on increases in share prices, operating income, margin, sales
increases on a Company wide, division, product line or other basis, net income
before or after taxes or before or after extraordinary charges, completions of
successful acquisitions, implementation of strategic expansions, net income or
cash flow thresholds, return on common equity or any combination of the
foregoing.
(b) Restrictions on Transfer. Stock certificates representing the
Restricted Stock granted to an employee may be registered in the employee's
name or held by the Company prior to the achievement of certain criteria. Such
certificates shall either be held by the Company on behalf of the employee, or
delivered to the employee bearing a legend to restrict transfer of the
certificate until the Restricted Stock has vested, as determined by the
Committee. The Committee shall determine whether the employee shall have the
right to vote and/or receive dividends on the Restricted Stock before it has
vested. No share of Restricted Stock may be sold, transferred, assigned, or
pledged by the employee until such share has vested in accordance with the
terms of the Restricted Stock Award. Unless the grant of a Restricted Stock
Award specifies otherwise, in the event of an employee's termination of
employment before all the employee's Restricted Stock has vested, or in the
event other conditions to the vesting of Restricted Stock have not been
satisfied prior to any deadline for the satisfaction of such conditions set
forth in the Award, the shares of Restricted Stock that have not vested shall
be forfeited and any purchase price paid by the employee shall be returned to
the employee. At the time Restricted Stock vests (and, if the employee has
been issued legended certificates of Restricted Stock, upon the return of such
certificates to the Company), a certificate for such vested shares shall be
delivered to the employee or the employee's estate, free of all restrictions.
(c) Accelerated Vesting. Notwithstanding the vesting conditions
set forth in the Restricted Stock Award, (i) unless the Restricted Stock grant
specifies otherwise, the Committee may in its discretion at any time accelerate
the vesting of Restricted Stock or otherwise waive or amend any conditions of a
grant of Restricted Stock, and (ii) all shares of Restricted Stock shall vest
upon a Change of Control of the Company; provided that clause (ii) above shall
not apply to Awards granted to a participant if, in connection with a Change of
Control pursuant to clause (1) of Section 5.9, such participant is the Person
or forms part of the Person specified in such clause (1).
ARTICLE IV: PERFORMANCE AWARDS
SECTION 4.1 Terms and Conditions of Performance Awards. The
Committee shall be authorized to grant Performance Awards, which are payable in
stock, cash or a combination thereof, at the discretion of the Committee.
(a) Performance Period. The Committee shall establish with
respect to each Performance Award a performance period over which the
performance goal of such Performance Award shall be measured. The performance
period for a Performance Award shall
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be established prior to the time such Performance Award is granted and may
overlap with performance periods relating to other Performance Awards granted
hereunder to the same employee.
(b) Performance Objectives. The Committee shall establish a
minimum level of acceptable achievement for the holder at the time of each
Award. Each Performance Award shall be contingent upon future performances and
achievement of objectives described either in terms of Company-wide performance
or in terms that are related to performance of the employee or of the division,
subsidiary, department or function within the Company in which the employee is
employed. The Committee shall have the authority to establish the specific
performance objectives and measures applicable to such objectives. Such
objectives, however, shall be based on increases in share prices, operating
income, margin, sales increases on a Company wide, division, product line or
other basis, net income before or after taxes or before or after extraordinary
charges, completions of successful acquisitions, implementation of strategic
expansions, net income or cash flow thresholds, return on common equity or any
combination of the foregoing.
(c) Size, Frequency and Vesting. The Committee shall have the
authority to determine at the time of the Award the maximum value of a
Performance Award, the frequency of Awards and the date or dates when Awards
vest.
(d) Payment. Following the end of each performance period, the
holder of each Performance Award will be entitled to receive payment of an
amount, not exceeding the maximum value of the Performance Award, based on the
achievement of the performance measures for such performance period, as
determined by the Committee. If at the end of the performance period the
specified objectives have been attained, the employee shall be deemed to have
fully earned the Performance Award. If the employee exceeds the specified
minimum level of acceptable achievement but does not fully attain such
objectives, the employee shall be deemed to have partly earned the Performance
Award, and shall become entitled to receive a portion of the total Award, as
determined by the Committee. If a Performance Award is granted after the start
of a performance period, the Award shall be reduced to reflect the portion of
the performance period during which the Award was in effect. Unless the Award
specifies otherwise, including restrictions in order to satisfy the conditions
under Section 162(m) of the Code, the Committee may adjust the payment of
Awards or the performance objectives if events occur or circumstances arise
which would cause a particular payment or set of performance objectives to be
inappropriate, as determined by the Committee.
(e) Termination of Employment. A recipient of a Performance Award
who, by reason of death, disability or retirement, terminates employment before
the end of the applicable performance period shall be entitled to receive, to
the extent earned, a portion of the Award which is proportional to the portion
of the performance period during which the employee was employed. A recipient
of a Performance Award who terminates employment for any other reason shall not
be entitled to any part of the Award unless the Committee determines otherwise;
however, the Committee may in no event pay the employee more than that portion
of the Award which is proportional to his or her period of actual service.
(f) Accelerated Vesting. Notwithstanding the vesting conditions
set forth in a Performance Award, (i) unless the Award specifies otherwise, the
Committee may in its discretion at any time accelerate vesting of the Award or
otherwise waive or amend any conditions (including but not limited to
performance objectives) in respect of a Performance
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Award, and (ii) all Performance Awards shall vest upon a Change of Control of
the Company. In addition, each participant in the Plan shall receive the
maximum Performance Award he or she could have earned for the proportionate
part of the performance period prior to the Change of Control, and shall retain
the right to earn any additional portion of his or her Award if he or she
remains in the Company's employ. However, clause (ii) above shall not apply to
Awards granted to a participant if, in connection with a Change of Control
pursuant to clause (1) of Section 5.9, such participant is the Person or forms
part of the Person specified in such clause (1).
(g) Shareholder Rights. The holder of a Performance Award shall,
as such, have none of the rights of a shareholder.
ARTICLE V: ADDITIONAL PROVISIONS
SECTION 5.1 General Restrictions. Each Award under the Plan shall be
subject to the requirement that, if at any time the Committee shall determine
that (i) the listing, registration or qualification of the shares of Common
Stock subject or related thereto upon any securities exchange or under any
state or Federal law, or (ii) the consent or approval of any government
regulatory body, or (iii) an agreement by the recipient of an Award with
respect to the disposition of shares of Common Stock, is necessary or desirable
(in connection with any requirement or interpretation of any Federal or state
securities law, rule or regulation) as a condition of, or in connection with,
the granting of such Award or the issuance, purchase or delivery of shares of
Common Stock thereunder, such Award may not be consummated in whole or in part
unless such listing, registration, qualification, consent, approval or
agreement shall have been effected or obtained free of any conditions not
acceptable to the Committee.
SECTION 5.2 Adjustments for Changes in Capitalization. In the event
of any stock dividends, stock splits, recapitalizations, combinations,
exchanges of shares, mergers, consolidation, liquidations, split-ups,
split-offs, spin-offs, or other similar changes in capitalization, or any
distribution to shareholders, including a rights offering, other than regular
cash dividends, changes in the outstanding stock of the Company by reason of
any increase or decrease in the number of issued shares of Common Stock
resulting from a split-up or consolidation of shares or any similar capital
adjustment or the payment of any stock dividend, any share repurchase at a
price in excess of the market price of the Common Stock at the time such
repurchase is announced or other increase or decrease in the number of such
shares, the Committee shall make appropriate adjustment in the number and kind
of shares authorized by the Plan (including shares available for ISOs), in the
number, price or kind of shares covered by the Awards and in any outstanding
Awards under the Plan; provided, however, that no such adjustment shall
increase the aggregate value of any outstanding Award.
In the event of any adjustment in the number of shares covered by any
Award, any fractional shares resulting from such adjustment shall be
disregarded and each such Award shall cover only the number of full shares
resulting from such adjustment.
SECTION 5.3 Amendments. (a) The Board of Directors may at any time
and from time to time and in any respect amend or modify the Plan.
(b) The Committee shall have the authority to amend any Award to
include any provision which, at the time of such amendment, is authorized under
the terms of the Plan;
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however, no outstanding Award may be revoked or altered in a manner unfavorable
to the holder without the written consent of the holder.
SECTION 5.4 Cancellation of Awards. Any Award granted under the Plan
may be cancelled at any time with the consent of the holder and a new Award may
be granted to such holder in lieu thereof, which Award may, in the discretion
of the Committee, be on more favorable terms and conditions than the cancelled
Award.
SECTION 5.5 Withholding. Whenever the Company proposes or is
required to issue or transfer shares of Common Stock under the Plan, the
Company shall have the right to require the holder to pay an amount in cash or
to retain or sell without notice, or demand surrender of, shares of Common
Stock in value sufficient to satisfy any Federal, state or local withholding
tax liability ("Withholding Tax") prior to the delivery of any certificate for
such shares (or remainder of shares if Common Stock is retained to satisfy such
tax liability). Whenever under the Plan payments are to be made in cash, such
payments shall be net of an amount sufficient to satisfy any Federal, state or
local withholding tax liability.
Whenever Common Stock is so retained or surrendered to satisfy
Withholding Tax, the value of shares of Common Stock so retained or surrendered
shall be determined by the Committee, and the value of shares of Common Stock
so sold shall be the net proceeds (after deduction of commissions) received by
the Company from such sale, as determined by the Committee.
SECTION 5.6 Non-assignability. Except as expressly provided in the
Plan, no Award under the Plan shall be assignable or transferable by the holder
thereof except by will or by the laws of descent and distribution. During the
life of the holder, Awards under the Plan shall be exercisable only by such
holder or by the guardian or legal representative of such holder.
SECTION 5.7 Non-uniform Determinations. Determinations by the
Committee under the Plan (including, without limitation, determinations of the
persons to receive Awards; the form, amount and timing of such Awards; the
terms and provisions of such Awards and the agreements evidencing same; and
provisions with respect to termination of employment) need not be uniform and
may be made by it selectively among persons who receive, or are eligible to
receive, Awards under the Plan, whether or not such persons are similarly
situated.
SECTION 5.8 No Guarantee of Employment. The grant of an Award under
the Plan shall not constitute an assurance of continued employment for any
period or any obligation of the Board of Directors to nominate any director for
reelection by the Company's shareholders.
SECTION 5.9 Change of Control. A "Change of Control" shall be deemed
to have occurred if:
(1) any Person (as defined below), other than a
Designated Person, is or becomes the Beneficial Owner (as defined
below) of securities of the Company representing 35% or more of the
Voting Power (as defined below);
(2) there shall occur a change in the composition of a
majority of the Board of Directors within any period of four
consecutive years which change shall not have
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been approved by a majority of the Board of Directors as constituted
immediately prior to the commencement of such period;
(3) at any meeting of the shareholders of the Company
called for the purpose of electing directors, more than one of the
persons nominated by the Board of Directors for election as directors
shall fail to be elected; or
(4) the shareholders of the Company approve a merger,
consolidation, sale of substantially all assets or other
reorganization of the Company, other than a reincorporation, in which
the Company does not survive.
For purposes of this Section 5.9, (i) "Person" shall have the meaning
set forth in Sections 3(a)(9) and 13(d)(3) of the Securities Exchange Act of
1934, as in effect on August 15, 1996, (ii) "Beneficial Owner" shall have the
meaning set forth in Rules 13d-3 and 13d-5 promulgated under the Exchange Act
on August 15, 1996; (iii) "Voting Power" shall mean the voting power of the
outstanding securities of the Company having the right under ordinary
circumstances to vote at an election of the Board of Directors; and (iv)
"Designated Person" shall mean any Person who at the Effective Date is a
Beneficial Owner of 10% or more of the Common Stock or whose Beneficial
Ownership of securities is solely the result of such Person acquiring
securities as an underwriter in an underwritten public offering of such
securities.
SECTION 5.10 Duration and Termination. (a) The Plan shall be of
unlimited duration. Notwithstanding the foregoing, no ISO (within the meaning
of Section 422 of the Code) shall be granted under the Plan ten (10) years
after the effective date of the Plan, but Awards granted prior to such date may
extend beyond such date, and the terms of this Plan shall continue to apply to
all Awards granted hereunder.
(b) The Board of Directors may suspend, discontinue or terminate
the Plan at any time. Such action shall not impair any of the rights of any
holder of any Award outstanding on the date of the Plan's suspension,
discontinuance or termination without the holder's written consent.
SECTION 5.11 Effective Date. The Plan shall be effective as of
_____________ subject to the consummation of the Sepco Merger.
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