EXHIBIT 4.1
COMMUNICATIONS SYSTEMS, INC.
STOCK PLAN
(as
amended through May 20, 2004)
SECTION
1. General Purpose of Plan;
Definitions.
The name of this plan is the
Communications Systems, Inc. Stock Plan (the Plan). The purpose of the Plan
is to enable Communications Systems, Inc. (the Company) and its Subsidiaries
to retain and attract executives and other key employees who contribute to the
Companys success by their ability, ingenuity and industry, and to enable such
individuals to participate in the long-term success and growth of the Company
by giving them a proprietary interest in the Company.
For purposes of the Plan,
the following terms shall be defined as set forth below:
(a) Board means the Board of Directors of the Company.
(b) Cause means a felony conviction of a participant or
the failure of a participant to contest prosecution for a felony, or a
participants willful misconduct or dishonesty, any of which is directly and
materially harmful to the business or reputation of the Company.
(c) Code means the Internal Revenue Code of 1986, as
amended.
(d) Committee means the Committee referred to in
Section 2 of the Plan. If at any time no
Committee shall be in office, then the functions of the Committee specified in
the Plan shall be exercised by the Board.
(e) Company means Communications Systems, Inc., a
corporation organized under the laws of the State of Minnesota (or any
successor corporation).
(f) Continuing Directors means (i) individuals who
on the effective date of the Plan constituted the Board of Directors of the
Company, and (ii) any new director who subsequent to the effective date of
the Plan is elected or nominated for election by a majority of the directors
who held such office immediately prior to any of the events involving a change
in ownership or control described in Sections 5(c) and 7(c)(v).
(g) Deferred Stock means an award made pursuant to
Section 8 below of the right to receive Stock at the end of a specified
deferral period.
(h) Disability means permanent and total disability as
determined by the Committee.
(i) Disinterested Director shall have the meaning set
forth in Rule 16b-3(c)(2) as promulgated by the Securities and Exchange
Commission under the Securities Exchange Act of 1934, or any successor definition
adopted by the Commission.
(j) Early Retirement means retirement, with consent of
the Committee at the time of retirement, from active employment with the
Company and any Subsidiary or Parent Corporation of the Company.
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(k) Fair Market Value means the value of the Stock on a
given date as determined by the Committee in accordance with Section 422 of the
Code and any applicable Treasury Department regulations with respect to
incentive stock options.
(l) Incentive Stock Option means any Stock Option
intended to be and designated as an Incentive Stock Option within the meaning
of Section 422 of the Code.
(m) Non-Qualified Stock Option means any Stock Option
that is not an Incentive Stock Option, and is intended to be and is designated
as a Non-Qualified Stock Option.
(n) Normal Retirement means retirement from active
employment with the Company and any Subsidiary or Parent Corporation of the
Company on or after age 65.
(o) Ownership Change means an ownership change as
defined in Section 382(g) of the Code determined without regard to Section
382(i)(3) of the Code.
(p) Parent Corporation means any corporation (other
than the Company) in an unbroken chain of corporations ending with the Company
if each of the corporations (other than the Company) owns stock possessing 50%
or more of the total combined voting power of all classes of stock in one of
the other corporations in the chain.
(q) Restricted Stock means an award of shares of Stock
that are subject to restrictions under Section 7 below.
(r) Retirement means Normal Retirement or Early
Retirement.
(s) Stock means the Common Stock, $.05 par value per
share, of the Company.
(t) Stock Appreciation Right means the right pursuant
to an award granted under Section 6 below to surrender to the Company all or a
portion of a Stock Option in exchange for an amount equal to the difference
between (i) the Fair Market Value, as of the date such Stock Option or
such portion thereof is surrendered, of the shares of Stock covered by such
Stock Option or such portion thereof, and (ii) the aggregate exercise
price of such Stock Option or such portion thereof.
(u) Stock Option means any option to purchase shares of
Stock granted pursuant to Section 5 below.
(v) Subsidiary means any corporation (other than the
Company) in an unbroken chain of corporations beginning with the Company if
each of the corporations (other than the last corporation in the unbroken
chain) owns stock possessing 50% or more of the total combined voting power of
all classes of stock in one of the other corporations in the chain.
SECTION
2. Administration.
The Plan shall be
administered by the Board of Directors or by a Committee of not less than three
Disinterested Directors, who shall be appointed by the Board of Directors of
the Company and who shall serve at the pleasure of the Board. If the Plan is administered by the Board,
each member of the Board shall be a Disinterested Director.
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The Committee shall have the
power and authority to grant to eligible employees, pursuant to the terms of
the Plan: (i) Stock Options,
(ii) Stock Appreciation Rights, (iii) Restricted Stock, and (iv) Deferred
Stock awards.
In particular, the Committee
shall have the authority:
(i) to select the officers and other key employees of the
Company and its Subsidiaries to whom Stock Options, Stock Appreciation Rights,
Restricted Stock and/or Deferred Stock awards may from time to time be granted
hereunder;
(ii) to determine whether and to what extent Incentive Stock
Options, Non-Qualified Stock Options, Stock Appreciation Rights, Restricted
Stock or Deferred Stock awards, or a combination of the foregoing, are to be
granted hereunder;
(iii) to determine the number of shares to be covered by each such
award granted hereunder;
(iv) to determine the terms and conditions, not inconsistent with
the terms of the Plan, of any award granted hereunder (including, but not
limited to, any restriction on any Stock Option or other award and/or the
shares of Stock relating thereto); and
(v) to determine whether, to what extent and under what
circumstances Stock and other amounts payable with respect to an award under
this Plan shall be deferred either automatically or at the election of the
participant.
The Committee shall have the
authority to adopt, alter and repeal such administrative rules, guidelines and
practices governing the Plan as it shall, from time to time, deem advisable; to
interpret the terms and provisions of the Plan and any award issued under the
Plan (and any agreements relating thereto); and to otherwise supervise the
administration of the Plan. The
Committee may delegate its authority to officers of the Company for the purpose
of selecting employees who are not officers of the Company for purposes of (i)
above.
All decisions made by the
Committee pursuant to the provisions of the Plan shall be final and binding on
all persons, including the Company and Plan participants.
SECTION
3. Stock Subject to Plan.
The total number of shares
of Stock reserved and available for distribution under the Plan shall be
2,500,000. (1) Such shares may consist,
in whole or in part, of authorized and unissued shares.
Subject to paragraph (b)(iv)
of Section 6 below, if any shares that have been optioned cease to be subject
to Stock Options, or if any shares subject to any Restricted Stock or Deferred
Stock award granted hereunder are forfeited or such award otherwise terminates
without a payment being made to the participant, such shares shall again be
available for distribution in connection with future awards under the Plan.
(1) Amended by Board and Shareholder action in 1995 to increase
authorized shares to 900,000 shares, in 1998 to increase authorized shares to
1,400,000, in 1999 to increase authorized shares to 1,900,000 and in 2004 to
increase authorized shares to 2,500,000.
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In the event of any merger,
reorganization, consolidation, recapitalization, stock dividend, other change
in corporate structure affecting the Stock, or spin-off or other distribution
of assets to shareholders, such substitution or adjustment shall be made in the
aggregate number of shares reserved for issuance under the Plan, in the number
and option price of shares subject to outstanding options granted under the
Plan, and in the number of shares subject to Restricted Stock or Deferred Stock
awards granted under the Plan as may be determined to be appropriate by the
Committee, in its sole discretion, provided that the number of shares subject
to any award shall always be a whole number.
Such adjusted option price shall also be used to determine the amount
payable by the Company upon the exercise of any Stock Appreciation Right associated
with any Stock Option.
SECTION
4. Eligibility.
Officers and other key
employees of the Company and its Subsidiaries who are responsible for or
contribute to the management, growth and/or profitability of the business of
the Company and its Subsidiaries are eligible to be granted Stock Options,
Stock Appreciation Rights, Restricted Stock or Deferred Stock awards under the
Plan. The optionees and participants
under the Plan shall be selected from time to time by the Committee, in its
sole discretion, from among those eligible, and the Committee shall determine,
in its sole discretion, the number of shares covered by each award.
SECTION
5. Stock Options.
Any Stock Option granted
under the Plan shall be in such form as the Committee may from time to time
approve.
The Stock Options granted
under the Plan may be of two types:
(i) Incentive Stock Options and (ii) Non-Qualified Stock
Options.
The Committee shall have the
authority to grant any optionee Incentive Stock Options, Non-Qualified Stock
Options, or both types of options in each case with or without Stock
Appreciation Rights. To the extent that
any option does not qualify as an Incentive Stock Option, it shall constitute a
separate Non-Qualified Stock Option.
Anything in the Plan to the
contrary notwithstanding, no term of this Plan relating to Incentive Stock
Options shall be interpreted, amended or altered, nor shall any discretion or
authority granted under the Plan be so exercised, so as to disqualify either
the Plan or any Incentive Stock Option under Section 422 of the Code. The preceding sentence shall not preclude any
modification or amendment to an outstanding Incentive Stock Option, whether or
not such modification or amendment results in disqualification of such Stock
Option as an Incentive Stock Option, provided the optionee consents in writing
to the modification or amendment.
Stock Options granted under
the Plan shall be subject to the following terms and conditions and shall
contain such additional terms and conditions, not inconsistent with the terms
of the Plan, as the Committee shall deem desirable.
(a) Option Price. The option price per share of Stock
purchasable under a Stock Option shall be determined by the Committee at the
time of grant and may, except as provided in this paragraph, be less than the
Fair Market Value of the Stock on the date the Stock Option is granted. In the event that the Committee does not
determine the exercise price per share of Stock purchasable under a Stock Option,
the exercise price shall be the Fair Market Value of the Stock on the date the
Stock Option is granted except as otherwise required in this paragraph. In no event shall the Stock Option price per
share of Stock purchasable under an Incentive Stock Option or a Non-Qualified
Stock Option be less than 100% or
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50%, respectively, of the Fair Market
Value of the Stock on the date the Stock Option is granted. If an employee owns or is deemed to own (by
reason of the attribution rules applicable under Section 424(d) of the Code)
more than 10% of the combined voting power of all classes of stock of the
Company or any Parent Corporation or Subsidiary and an Incentive Stock Option
is granted to such employee, the exercise price shall be no less than 110% of
the Fair Market Value of the Stock on the date the Stock Option is granted.
(b) Option Term. The term of each Stock Option shall be fixed
by the Committee, but no Incentive Stock Option shall be exercisable more than
ten years after the date the Stock Option is granted. In the event that the Committee does not fix
the term of a Stock Option, the term shall be ten years from the date the Stock
Option is granted. Notwithstanding the
foregoing, if an employee owns or is deemed to own (by reason of the
attribution rules of Section 424(d) of the Code) more than 10% of the combined
voting power of all classes of stock of the Company or any Parent Corporation
or Subsidiary and an Incentive Stock Option is granted to such employee, the
term of such Stock Option shall be no more than five years from the date of
grant.
(c) Exercisability. Stock Options shall be exercisable at such
time or times as determined by the Committee at or after grant. In the event that the Committee does not
determine the time at which a Stock Option shall be exercisable, such Stock
Option shall be exercisable one year after the date of grant. If the Committee provides, in its discretion,
that any Stock Option is exercisable only in installments, the Committee may
waive such installment exercise provisions at any time.
Notwithstanding the
foregoing, unless the Stock Option Agreement provides otherwise, any Stock
Option granted under this Plan shall be exercisable in full, without regard to
any installment exercise provisions, for a period specified by the Company, but
not to exceed sixty (60) days, prior to the occurrence of any of the following
events: (i) dissolution or
liquidation of the Company other than in conjunction with a bankruptcy of the
Company or any similar occurrence, (ii) any merger, consolidation,
acquisition, separation, reorganization, or similar occurrence, where the
Company will not be the surviving entity, (iii) the transfer of
substantially all of the assets of the Company, (iv) a direct or indirect
acquisition or series of acquisitions of shares of stock of the Company, by any
person, corporation or other entity, including but not limited to acquisitions
by reason of merger, consolidation or tender offer, which results in an
Ownership Change, or (v) a majority of the Board of Directors ceases to be
composed of individuals who are Continuing Directors or any other event shall
occur which would be required to be reported as a change in control in response
to Item 6(e) of Schedule 14A of Regulation 14A promulgated under the Securities
Exchange Act of 1934, as amended, whether or not the Company is then subject to
such reporting requirements.
(d) Method of Exercise. Stock Options may be exercised in whole or in
part at any time during the option period by giving written notice of exercise
to the Company specifying the number of shares to be purchased. Such notice shall be accompanied by payment
in full of the purchase price, either by certified or bank check, or by any other
form of legal consideration deemed sufficient by the Committee and consistent
with the Plans purpose and applicable law, including promissory notes or a
properly executed exercise notice together with irrevocable instructions to a
broker acceptable to the Company to promptly deliver to the Company the amount
of sale or loan proceeds to pay the exercise price. As determined by the Committee, in its sole
discretion, payment in full or in part may also be made in the form of
unrestricted Stock already owned by the optionee or, in the case of the
exercise of a Non-Qualified Stock Option, Restricted Stock or Deferred Stock
subject
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to an award hereunder (based, in each
case, on the Fair Market Value of the Stock on the date the option is exercised,
as determined by the Committee), provided, however, that, in the case of an
Incentive Stock Option, the right to make a payment in the form of already
owned shares may be authorized only at the time the option is granted, and
provided further that in the event payment is made in the form of shares of
Restricted Stock or a Deferred Stock award, the optionee will receive a portion
of the option shares in the form of, and in an amount equal to, the Restricted
Stock or Deferred Stock award tendered as payment by the optionee. If the terms of a Stock Option so permit, an
optionee may elect to pay all or part of the exercise price by having the
Company withhold from the shares of Stock that would otherwise be issued upon
exercise that number of shares of Stock having a Fair Market Value equal to the
aggregate exercise price for the shares with respect to which such election is
made. No shares of Stock shall be issued
until full payment therefore has been made.
An optionee shall generally have the rights to dividends and other
rights of a shareholder with respect to shares subject to the option when the
optionee has given written notice of exercise, has paid in full for such
shares, and, if requested, has given the representation described in paragraph
(a) of Section 12.
(e) Non-Transferability of Options. No Stock Option
shall be transferable by the optionee otherwise than by will or by the laws of
descent and distribution, and all Stock Options shall be exercisable, during
the optionees lifetime, only by the optionee.
(f) Termination by Death. If an optionees employment by the Company
and any Subsidiary or Parent Corporation terminates by reason of death, the
Stock Option may thereafter be immediately exercised, to the extent then
exercisable (or on such accelerated basis as the Committee shall determine at
or after grant), by the legal representative of the estate or by the legatee of
the optionee under the will of the optionee, for a period of three years (or
such shorter period as the Committee shall specify at grant) from the date of
such death or until the expiration of the stated term of the option, whichever
period is shorter.
(g) Termination by Reason of Disability. If an optionees
employment by the Company and any Subsidiary or Parent Corporation terminates
by reason of Disability, any Stock Option held by such optionee may thereafter
be exercised, to the extent it was exercisable at the time of termination due
to Disability (or on such accelerated basis as the Committee shall determine at
or after grant), but may not be exercised after three years (or such shorter
period as the Committee shall specify at grant) from the date of such
termination of employment or the expiration of the stated term of the option,
whichever period is shorter. In the event
of termination of employment by reason of Disability, if an Incentive Stock
Option is exercised after the expiration of the exercise periods that apply for
purposes of Section 422 of the Code, the option will thereafter be treated as a
Non-Qualified Stock Option.
(h) Termination by Reason of Retirement. If an optionees
employment by the Company and any Subsidiary or Parent Corporation terminates
by reason of Retirement, any Stock Option held by such optionee may thereafter
be exercised to the extent it was exercisable at the time of such Retirement,
but may not be exercised after three years (or such shorter period as Committee
shall specify at grant) from the date of such termination of employment or the
expiration of the stated term of the option, whichever period is shorter. In the event of termination of employment by
reason of Retirement, if an Incentive Stock Option is exercised after the
expiration of the exercise periods that apply for purposes of Section 422 of
the Code, the option will thereafter be treated as a Non-Qualified Stock
Option.
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(i) Other Termination. Unless otherwise determined by the Committee,
if an optionees employment by the Company and any Subsidiary or Parent
Corporation terminates for any reason other than death, Disability or
Retirement, the Stock Option shall thereupon terminate, except that the option
may be exercised to the extent it was exercisable at such termination for the
lesser of three months or the balance of the options term if the optionee is
involuntarily terminated without Cause by the Company and any Subsidiary or
Parent Corporation.
(j) Annual Limit on Incentive Stock Options. The aggregate Fair
Market Value (determined as of the time the Stock Option is granted) of the
Common Stock with respect to which an Incentive Stock Option under this Plan or
any other plan of the Company and any Subsidiary or Parent Corporation is
exercisable for the first time by an optionee during any calendar year shall
not exceed $100,000.
SECTION
6. Stock Appreciation Rights.
(a) Grant and Exercise. Stock Appreciation Rights may be granted in
conjunction with all or part of any Stock Option granted under the Plan. In the case of a Non-Qualified Stock Option,
such rights may be granted either at or after the time of the grant of such
Option. In the case of an Incentive
Stock Option, such rights may be granted only at the time of the grant of the
Stock Option.
A Stock Appreciation Right
or applicable portion thereof granted with respect to a given Stock Option
shall terminate and no longer be exercisable upon the termination or exercise
of the related Stock Option, except that a Stock Appreciation Right granted
with respect to less than the full number of shares covered by a related Stock
Option shall not be reduced until the exercise or termination of the related
Stock Option exceeds the number of shares not covered by the Stock Appreciation
Right.
A Stock Appreciation Right
may be exercised by an optionee, in accordance with paragraph (b) of this
Section, by surrendering the applicable portion of the related Stock
Option. Upon such exercise and
surrender, the optionee shall be entitled to receive an amount determined in
the manner prescribed in paragraph (b) of this Section. Stock Options which have been so surrendered,
in whole or in part, shall no longer be exercisable to the extent the related
Stock Appreciation Rights have been exercised.
(b) Terms and Conditions. Stock Appreciation Rights shall be subject to
such terms and conditions, not inconsistent with the provisions of the Plan, as
shall be determined from time to time by the Committee, including the
following:
(i) Stock Appreciation Rights shall be exercisable only at such
time or times and to the extent that the Stock Options to which they relate
shall be exercisable in accordance with the provisions of Section 5 and this
Section of the Plan.
(ii) Upon the exercise of a Stock Appreciation Right, an optionee
shall be entitled to receive up to, but not more than, an amount in cash or
shares of Stock equal in value to the excess of the Fair Market Value of one
share of Stock over the exercise price per share specified in the related
option multiplied by the number of shares in respect of which the Stock
Appreciation Right shall have been exercised, with the Committee having the
right to determine the form of payment.
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(iii) Stock Appreciation Rights shall be transferable only when
and to the extent that the underlying Stock Option would be transferable under
Section 5 of the Plan.
(iv) Upon the exercise of a Stock Appreciation Right, the Stock
Option or part thereof to which such Stock Appreciation Right is related shall
be deemed to have been exercised for the purpose of the limitation set forth in
Section 3 of the Plan on the number of shares of Stock to be issued under the
Plan, but only to the extent of the number of shares issued or issuable under
the Stock Appreciation Right at the time of exercise based on the value of the
Stock Appreciation Right at such time.
(v) A Stock Appreciation Right granted in connection with an
Incentive Stock Option may be exercised only if and when the market price of
the Stock subject to the Incentive Stock Option exceeds the exercise price of
such Option.
SECTION
7. Restricted Stock.
(a) Administration. Shares of Restricted Stock may be issued
either alone or in addition to other awards granted under the Plan. The Committee shall determine the officers
and key employees of the Company and Subsidiaries to whom, and the time or
times at which, grants of Restricted Stock will be made, the number of shares
to be awarded, the time or times within which such awards may be subject to
forfeiture, and all other conditions of the awards. The Committee may also condition the grant of
Restricted Stock upon the attainment of specified performance goals. The provisions of Restricted Stock awards
need not be the same with respect to each recipient.
(b) Awards and Certificates. The prospective recipient of an award of
shares of Restricted Stock shall not have any rights with respect to such
award, unless and until such recipient has executed an agreement evidencing the
award and has delivered a fully executed copy thereof to the Company, and has
otherwise complied with the then applicable terms and conditions.
(i) Each participant shall be issued a stock certificate in
respect of shares of Restricted Stock awarded under the Plan. Such certificate shall be registered in the
name of the participant, and shall bear an appropriate legend referring to the
terms, conditions, and restrictions applicable to such award, substantially in
the following form:
The transferability of this
certificate and the shares of stock represented hereby are subject to the terms
and conditions (including forfeiture) of the Communications Systems, Inc. 1992
Stock Plan and an Agreement entered into between the registered owner and
Communications Systems, Inc. Copies of
such Plan and Agreement are on file in the offices of Communications Systems,
Inc., P.O. Box 777, Hector, MN 55342.
(ii) The Committee shall require that the stock certificates
evidencing such shares be held in custody by the Company until the restrictions
thereon shall have lapsed, and that, as a condition of any Restricted Stock
award, the participant shall have delivered a stock power, endorsed in blank,
relating to the Stock covered by such award.
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(c) Restrictions and Conditions. The shares of Restricted Stock awarded
pursuant to the Plan shall be subject to the following restrictions and
conditions:
(i) Subject to the provisions of this Plan and the award
agreement, during a period set by the Committee commencing with the date of
such award (the Restriction Period), the participant shall not be permitted
to sell, transfer, pledge or assign shares of Restricted Stock awarded under
the Plan. In no event shall the
Restriction Period be less than one (1) year.
Within these limits, the Committee may provide for the lapse of such
restrictions in installments where deemed appropriate.
(ii) Except as provided in paragraph (c)(i) of this Section, the
participant shall have, with respect to the shares of Restricted Stock, all of
the rights of a shareholder of the Company, including the right to vote the
shares and the right to receive any cash dividends. The Committee, in its sole discretion, may
permit or require the payment of cash dividends to be deferred and, if the
Committee so determines, reinvested in additional shares of Restricted Stock
(to the extent shares are available under Section 3 and subject to paragraph
(f) of Section 12). Certificates for
shares of unrestricted Stock shall be delivered to the grantee promptly after,
and only after, the period of forfeiture shall have expired without forfeiture
in respect of such shares of Restricted Stock.
(iii) Subject to the provisions of the award agreement and
paragraph (c)(iv) of this Section, upon termination of employment for any
reason during the Restriction Period, all shares still subject to restriction
shall be forfeited by the participant.
(iv) In the event of special hardship circumstances of a
participant whose employment is terminated (other than for Cause), including
death, Disability or Retirement, or in the event of an unforeseeable emergency
of a participant still in service, the Committee may, in its sole discretion,
when it finds that a waiver would be in the best interest of the Company, waive
in whole or in part any or all remaining restrictions with respect to such
participants shares of Restricted Stock.
(v) Notwithstanding the foregoing, all restrictions with respect
to any participants shares of Restricted Stock shall lapse, on the date
determined by the Committee, prior to, but in no event more than sixty (60)
days prior to, the occurrence of any of the following events: (i) dissolution
or liquidation of the Company, other than in conjunction with a bankruptcy of
the Company or any similar occurrence, (ii) any merger, consolidation,
acquisition, separation, reorganization, or similar occurrence, where the
Company will not be the surviving entity, (iii) the transfer of substantially
all of the assets of the Company, (iv) a direct or indirect acquisition or
series of acquisitions of shares of stock of the Company, by any person,
corporation or other entity, included but not limited to acquisitions by reason
of merger, consolidation or tender offer, which results in an Ownership Change,
or (v) a majority of the Board of Directors ceases to be composed of
individuals who are Continuing Directors or any other event shall occur which
would be required to be reported as a change in control in response to Item
6(e) of Schedule 14A of Regulation 14A promulgated under the Securities Exchange
Act of 1934, as amended, whether or not the Company is then subject to such
reporting requirements.
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SECTION
8. Deferred Stock Awards.
(a) Administration. Deferred Stock may be awarded either alone or
in addition to other awards granted under the Plan. The Committee shall determine the officers
and key employees of the Company and Subsidiaries to whom and the time or times
at which Deferred Stock shall be awarded, the number of Shares of Deferred Stock
to be awarded to any participant or group of participants, the duration of the
period (the Deferral Period) during which, and the conditions under which,
receipt of the Stock will be deferred, and the terms and conditions of the
award in addition to those contained in paragraph (b) of this Section. The Committee may also condition the grant of
Deferred Stock upon the attainment of specified performance goals. The provisions of Deferred Stock awards need
not be the same with respect to each recipient.
(b) Terms and Conditions.
(i) Subject to the provisions of this Plan and the award
agreement, Deferred Stock awards may not be sold, assigned, transferred,
pledged or otherwise encumbered during the Deferral Period. In no event shall the Deferral Period be less
than one (1) year. At the expiration of
the Deferral Period (or Elective Deferral Period, where applicable), share
certificates shall be delivered to the participant, or his legal
representative, in a number equal to the shares covered by the Deferred Stock
award.
(ii) Amounts equal to any dividends declared during the Deferral
Period with respect to the number of shares covered by a Deferred Stock award
will be paid to the participant currently or deferred and deemed to be
reinvested in additional Deferred Stock or otherwise reinvested, all as
determined at the time of the award by the Committee, in its sole discretion.
(iii) Subject to the provisions of the award agreement and
paragraph (b)(iv) of this Section, upon termination of employment for any
reason during the Deferral Period for a given award, the Deferred Stock in
question shall be forfeited by the participant.
(iv) In the event of special hardship circumstances of a
participant whose employment is terminated (other than for Cause) including
death, Disability or Retirement, or in the event of an unforeseeable emergency
of a participant still in service, the Committee may, in its sole discretion,
when it finds that a waiver would be in the best interest of the Company, waive
in whole or in part any or all of the remaining deferral limitations imposed
hereunder with respect to any or all of the participants Deferred Stock.
(v) A participant may elect to further defer receipt of the
award for a specified period or until a specified event (the Elective Deferral
Period), subject in each case to the Committees approval and to such terms as
are determined by the Committee, all in its sole discretion. Subject to any exceptions adopted by the
Committee, such election must generally be made prior to completion of one half
of the Deferral Period for a Deferred Stock award (or for an installment of
such an award).
(vi) Each award shall be confirmed by, and subject to the terms
of, a Deferred Stock agreement executed by the Company and the participant.
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SECTION
9. Transfer, Leave of
Absence, Etc.
For purposes of the Plan,
the following events shall not be deemed a termination of employment:
(a) a transfer of an employee from the Company to a Parent
Corporation or Subsidiary, or from a Parent Corporation or Subsidiary to the
Company, or from one Subsidiary to another;
(b) a leave of absence, approved in writing by the Committee,
for military service or sickness, or for any other purpose approved by the
Company if the period of such leave does not exceed ninety (90) days (or such
longer period as the Committee may approve, in its sole discretion); and
(c) a leave of absence in excess of ninety (90) days, approved
in writing by the Committee, but only if the employees right to reemployment
is guaranteed either by a statute or by contract, and provided that, in the
case of any leave of absence, the employee returns to work within 30 days after
the end of such leave.
SECTION
10. Amendments and Termination.
The Board may amend, alter,
or discontinue the Plan, but no amendment, alteration, or discontinuation shall
be made (i) which would impair the rights of an optionee or participant
under a Stock Option, Stock Appreciation Right, Restricted Stock, Deferred
Stock or other Stock-based award theretofore granted, without the optionees or
participants consent, or (ii) which, without the approval of the
stockholders of the Company, would cause the Plan to no longer comply with Rule
16b-3 under the Securities Exchange Act of 1934, Section 422 of the Code, or
any other regulatory requirements.
The Committee may amend the
terms of any award or option theretofore granted, prospectively or
retroactively, but, subject to Section 3 above, no such amendment shall impair
the rights of any holder without his consent.
The Committee may also substitute new Stock Options for previously
granted stock options, including previously granted stock options having higher
exercise prices.
Amendment of the first
paragraph of Section 3 of this Plan to increase the total number of shares of
Stock reserved and available for distribution under the Plan shall be deemed to
be the adoption of a new Plan with respect to the total number of shares
reserved and available for distribution under the Plan after the date such
amendment is approved by a vote of the holders of a majority of the stock
present and entitled to vote at a meeting of the Companys shareholders.(2)
SECTION
11. Unfunded Status of Plan.
The Plan is intended to
constitute an unfunded plan for incentive and deferred compensation. With respect to any payments not yet made to
a participant or optionee by the Company, nothing contained herein shall give
any such participant or optionee any rights that are greater than those of a
general creditor of the Company. In its
sole discretion, the Committee may authorize the creation of trusts or other
arrangements to meet the obligations created under the Plan to deliver Stock or
payments in lieu of or with respect to awards hereunder, provided, however,
that the existence of such trusts or other arrangements is consistent with the
unfunded status of the Plan.
SECTION
12. General Provisions.
(a) The Committee may require each person purchasing shares
pursuant to a Stock Option under the Plan to represent to and agree with the
Company in writing that the optionee is
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acquiring the shares without a view to
distribution thereof. The certificates
for such shares may include any legend which the Committee deems appropriate to
reflect any restrictions on transfer.
All certificates for shares
of Stock delivered under the Plan pursuant to any Restricted Stock, Deferred
Stock or other Stock-based award shall be subject to such stock-transfer orders
and other restrictions as the Committee may deem advisable under the rules,
regulations, and other requirements of the Securities and Exchange Commission,
any stock exchange upon which the Stock is then listed, and any applicable
federal or state securities laws, and the Committee may cause a legend or
legends to be put on any such certificates to make appropriate reference to
such restrictions.
(b) Subject to paragraph (d) below, recipients of Restricted
Stock, Deferred Stock and other Stock-based awards under the Plan (other than
Stock Options) are not required to make any payment or provide consideration
other than the rendering of services.
(c) Nothing contained in this Plan shall prevent the Board of
Directors from adopting other or additional compensation arrangements, subject
to stockholder approval if such approval is required; and such arrangements may
be either generally applicable or applicable only in specific cases. The adoption of the Plan shall not confer
upon any employee of the Company or any Subsidiary any right to continued
employment with the Company or a Subsidiary, as the case may be, nor shall it
interfere in any way with the right of the Company or a Subsidiary to terminate
the employment of any of its employees at any time.
(d) Each participant shall, no later than the date as of which
any part of the value of an award first becomes includable as compensation in
the gross income of the participant for federal income tax purposes, pay to the
Company, or make arrangements satisfactory to the Committee regarding payment
of, any federal, state, or local taxes of any kind required by law to be
withheld with respect to the award. The
obligations of the Company under the Plan shall be conditional on such payment
or arrangements and the Company and Subsidiaries shall, to the extent permitted
by law, have the right to deduct any such taxes from any payment of any kind
otherwise due to the participant. With
respect to any award under the Plan, if the terms of such award so permit, a
participant may elect by written notice to the Company to satisfy part or all
of the withholding tax requirements associated with the award by (i)
authorizing the Company to retain from the number of shares of Stock that would
otherwise be deliverable to the participant, or (ii) delivering to the Company
from shares of Stock already owned by the participant, that number of shares
having an aggregate Fair Market Value equal to part or all of the tax payable
by the participant under this Section.
Any such election shall be in accordance with, and subject to,
applicable tax and securities laws, regulations and rulings.
(e) At the time of grant, the Committee may provide in
connection with any grant made under this Plan that the shares of Stock
received as a result of such grant shall be subject to a repurchase right in
favor of the Company, pursuant to which the participant shall be required to
offer to the Company upon termination of employment for any reason any shares
that the participant acquired under the Plan, with the price being the then
Fair Market Value of the Stock or, in the case of a termination for Cause, an
amount equal to the cash consideration paid for the Stock, subject to such
other terms and conditions as the Committee may specify at the time of grant. The Committee may, at the time of the grant
of an award under the Plan, provide the Company with the right to repurchase,
or require the forfeiture of, shares of Stock acquired pursuant to the Plan by
any participant
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who, at any time within two years after
termination of employment with the Company, directly or indirectly competes
with, or is employed by a competitor of, the Company.
(f) The reinvestment of dividends in additional Restricted Stock
(or in Deferred Stock or other types of Plan awards) at the time of any
dividend payment shall only be permissible if the Committee (or the Companys
chief executive or chief financial officer) certifies in writing that under
Section 3 sufficient shares are available for such reinvestment (taking into
account then outstanding Stock Options and other Plan awards).
SECTION
13. Effective Date of Plan.
The Plan shall be effective
on the date it is approved by a vote of the holders of a majority of the Stock present
and entitled to vote at a meeting of the Companys shareholders.
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