GRANT PRIDECO, INC. 2006 LONG-TERM INCENTIVE PLAN
ARTICLE I ESTABLISHMENT, PURPOSE AND DURATION |
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1.1 Establishment |
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1.2 Purpose of the Plan |
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1.3 Duration of Plan |
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ARTICLE II DEFINITIONS |
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2.1 Affiliate |
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2.2 Award |
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2.3 Award Agreement |
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2.4 Board |
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2.5 Cash-Based Award |
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2.6 Code |
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2.7 Committee |
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2.8 Company |
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2.9 Corporate Change |
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2.10 Director |
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2.11 Disability |
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2.12 Dividend Equivalent |
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2.13 Employee |
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2.14 Exchange Act |
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2.15 Fair Market Value |
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2.16 Fiscal Year |
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2.17 Holder |
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2.18 ISO |
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2.19 Minimum Statutory Tax Withholding Obligation |
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2.20 NSO |
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2.21 Option |
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2.22 Option Price |
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2.23 Other Stock-Based Award |
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2.24 Parent Corporation |
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2.25 Performance Goals |
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2.26 Performance Cash Award |
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2.27 Performance Stock Award |
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2.28 Performance Unit Award |
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2.29 Period of Restriction |
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2.30 Plan |
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2.31 Restricted Stock |
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2.32 Restricted Stock Award |
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2.33 RSU |
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2.34 RSU Award |
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2.35 SAR |
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2.36 Section 409A |
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2.37 Stock |
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2.38 Subsidiary Corporation |
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2.39 Substantial Risk of Forfeiture |
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2.40 Ten Percent Stockholder |
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2.41 Termination of Employment |
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ARTICLE III ELIGIBILITY AND PARTICIPATION |
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3.1 Eligibility |
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3.2 Participation |
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ARTICLE IV GENERAL PROVISIONS RELATING TO AWARDS |
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4.1 Authority to Grant Awards |
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4.2 Dedicated Shares |
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4.3 Non-Transferability |
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4.4 Requirements of Law
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4.5 Changes in the Company’s Capital Structure |
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4.6 Election Under Section 83(b) of the Code |
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4.7 Forfeiture Events |
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4.8 Award Agreements |
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4.9 Amendments of Award Agreements |
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4.10 Rights as Stockholder |
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4.11 Issuance of Shares of Stock |
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4.12 Restrictions on Stock Received |
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4.13 Compliance With Section 409A |
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ARTICLE V OPTIONS |
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5.1 Authority to Grant Options |
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5.2 Type of Options Available |
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5.3 Option Agreement |
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5.4 Option Price |
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5.5 Duration of Option |
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5.6 Amount Exercisable |
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5.7 Exercise of Option |
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5.8 Notification of Disqualifying Disposition |
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5.9 No Rights as Stockholder |
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5.10 $100,000 Limitation on ISOs |
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ARTICLE VI STOCK APPRECIATION RIGHTS |
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6.1 Authority to Grant SAR Awards |
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6.2 General Terms |
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6.3 SAR Agreement |
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6.4 Term of SAR |
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6.5 Exercise of SAR |
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6.6 Payment of SAR Amount |
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6.7 Termination of Employment |
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ARTICLE VII RESTRICTED STOCK AWARDS |
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7.1 Restricted Stock Awards |
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7.2 Restricted Stock Award Agreement |
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7.3 Holder’s Rights as Stockholder |
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ARTICLE VIII RESTRICTED STOCK UNIT AWARDS |
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8.1 Authority to Grant RSU Awards |
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8.2 RSU Award |
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8.3 RSU Award Agreement |
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8.4 Dividend Equivalents |
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8.5 Form of Payment Under RSU Award |
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8.6 Time of Payment Under RSU Award |
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ARTICLE IX PERFORMANCE CASH AWARDS. PERFORMANCE STOCK AWARDS AND PERFORMANCE UNIT AWARDS |
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9.1 Authority to Grant Performance Cash Awards, Performance Stock Awards
and Performance Unit Awards |
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9.2 Performance Goals |
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9.3 Time of Establishment of Performance Goals |
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9.4 Written Agreement |
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9.5 Form of Payment Under Performance Cash Award or Performance Unit Award |
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9.6 Time of Payment Under Performance Cash Award or Performance Unit Award |
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9.7 Holder’s Rights as Stockholder With Respect to a Performance Stock Award |
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9.8 Increases Prohibited |
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9.9 Stockholder Approval |
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ARTICLE X OTHER STOCK BASED AWARDS |
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10.1 Authority to Grant Other Stock-Based Awards |
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10.2 Value of Other Stock-Based Award |
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10.3 Payment of Other Stock-Based Award |
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10.4 Termination of Employment |
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ARTICLE XI CASH-BASED AWARDS |
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11.1 Authority to Grant Cash-Based Awards |
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11.2 Value of Cash-Based Award |
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11.3 Payment of Cash-Based Award |
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11.4 Termination of Employment |
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ARTICLE XII SUBSTITUTION AWARDS |
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ARTICLE XIII ADMINISTRATION |
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13.1 Awards |
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13.2 Authority of the Committee |
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13.3 Decisions Binding |
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13.4 No Liability |
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ARTICLE XIV AMENDMENT OR TERMINATION OF PLAN |
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14.1 Amendment, Modification, Suspension, and Termination |
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14.2 Awards Previously Granted |
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ARTICLE XV MISCELLANEOUS |
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15.1 Unfunded Plan/No Establishment of a Trust Fund |
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15.2 No Employment Obligation |
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15.3 Tax Withholding |
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15.4 Gender and Number |
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15.5 Severability |
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15.6 Headings |
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15.7 Other Compensation Plans |
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15.8 Other Awards |
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15.9 Successors |
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15.10 Law Limitations/Governmental Approvals |
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15.11 Delivery of Title |
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15.12 Inability to Obtain Authority |
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15.13 Investment Representations |
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15.14 Persons Residing Outside of the United States |
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15.15 Governing Law |
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ARTICLE I
ESTABLISHMENT, PURPOSE AND DURATION
1.1 Establishment. The Company hereby establishes an incentive compensation plan,
to be known as the “Grant Prideco, Inc. 2006 Long-Term Incentive Plan,” as set forth in this
document. The Plan permits the grant of Options, SARs, Restricted Stock, RSUs, Performance Stock
Awards, Performance Unit Awards, Cash-Based Awards and Other Stock-Based Awards. The Plan shall
become effective on the later of (a) the date the Plan is approved by the Board and (b) the date
the Plan is approved by the stockholders of the Company (the “Effective Date”).
1.2 Purpose of the Plan. The Plan is intended to advance the best interests of the
Company, its Affiliates and its stockholders by providing those persons who have substantial
responsibility for the management and growth of the Company and its Affiliates with additional
performance incentives and an opportunity to obtain or increase their proprietary interest in the
Company, thereby encouraging them to continue in their employment or affiliation with the Company
or its Affiliates.
1.3 Duration of Plan. The Plan shall continue indefinitely until it is terminated
pursuant to Section 14.1. No ISOs may be granted under the Plan on or after the tenth anniversary
of the Effective Date. The applicable provisions of the Plan will continue in effect with respect
to an Award granted under the Plan for as long as such Award remains outstanding.
ARTICLE II
DEFINITIONS
The words and phrases defined in this Article shall have the meaning set out below throughout
the Plan, unless the context in which any such word or phrase appears reasonably requires a
broader, narrower or different meaning.
2.1 “Affiliate” means any corporation, partnership, limited liability company or
association, trust or other entity or organization which, directly or indirectly, controls, is
controlled by, or is under common control with, the Company. For purposes of the preceding
sentence, “control” (including, with correlative meanings, the terms “controlled by” and “under
common control with”), as used with respect to any entity or organization, shall mean the
possession, directly or indirectly, of the power (a) to vote more than fifty percent (50%) of the
securities having ordinary voting power for the election of directors of the controlled entity or
organization, or (ii) to direct or cause the direction of the management and policies of the
controlled entity or organization, whether through the ownership of voting securities or by
contract or otherwise.
2.2 “Award” means, individually or collectively, a grant under the Plan of Options,
SARs, Restricted Stock, RSUs, Performance Cash Awards, Performance Stock Awards, Performance Unit
Awards, Other Stock-Based Awards and Cash-Based Awards, in each case subject to the terms and
provisions of the Plan.
2.3 “Award Agreement” means an agreement that sets forth the terms and conditions
applicable to an Award granted under the Plan.
2.4 “Board” means the board of directors of the Company.
2.5 “Cash-Based Award” means an Award granted pursuant to Article XI.
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2.6 “Code” means the United States Internal Revenue Code of 1986, as amended from
time to time.
2.7 “Committee” means a committee of at least two persons, who are members of the
Compensation Committee of the Board and are appointed by the Compensation Committee of the Board,
or, to the extent it chooses to operate as the Committee, the Compensation Committee of the Board.
Each member of the Committee in respect of his or her participation in any decision with respect to
an Award intended to satisfy the requirements of section 162(m) of the Code must satisfy the
requirements of “outside director” status within the meaning of section 162(m) of the Code;
provided, however, that the failure to satisfy such requirement shall not affect the validity of
the action of any committee otherwise duly authorized and acting in the matter. As to Awards,
grants or other transactions that are authorized by the Committee and that are intended to be
exempt under Rule 16b-3 under the Exchange Act, the requirements of Rule 16b-3(d)(1) under the
Exchange Act with respect to committee action must also be satisfied. For all purposes under the
Plan, the Chief Executive Officer of the Company shall be deemed to be the “Committee” with respect
to Awards granted by him pursuant to Section 4.1.
2.8 “Company” means Grant Prideco, Inc., a Delaware corporation, or any successor
(by reincorporation, merger or otherwise).
2.9 “Corporate Change” shall have the meaning ascribed to that term in Section
4.5(c).
2.10 “Director” means a director of the Company who is not an Employee.
2.11 “Disability” means as determined by the Committee in its discretion exercised
in good faith, a physical or mental condition of the Holder that would entitle him to payment of
disability income payments under the Company’s long-term disability insurance policy or plan for
Employees as then in effect; or in the event that the Holder is not covered, for whatever reason,
under the Company’s long-term disability insurance policy or plan for Employees or in the event the
Company does not maintain such a long-term disability insurance policy, “Disability” means a
permanent and total disability as defined in section 22(e)(3) of the Code. A determination of
Disability may be made by a physician selected or approved by the Committee and, in this respect,
the Holder shall submit to an examination by such physician upon request by the Committee.
2.12 “Dividend Equivalent” means a payment equivalent in amount to dividends paid
to the Company’s stockholders.
2.13 “Employee” means a person employed by the Company or any Affiliate as a common
law employee.
2.14 “Exchange Act” means the United States Securities Exchange Act of 1934, as
amended from time to time.
2.15 “Fair Market Value” of the Stock as of any particular date means (1) if the
Stock is traded on a stock exchange, the closing sale price of the Stock on that date as reported
on the principal securities exchange on which the Stock is traded, or (2) if the Stock is traded in
the over-the-counter market, the average between the high bid and low asked price on that date as
reported in such over-the-counter market; provided that (a) if the Stock is not so traded, (b) if
no closing price or bid and asked prices for the stock was so reported on that date or (c) if, in
the discretion of the Committee, another means of determining the fair market value of a share of
Stock at such date shall be necessary or advisable, the Committee may provide for another means for
determining such fair market value.
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2.16 “Fiscal Year” means the Company’s fiscal year.
2.17 “Holder” means a person who has been granted an Award or any person who is
entitled to receive shares of Stock or cash under an Award.
2.18 “ISO” means an Option that is intended to be an “incentive stock option” that
satisfies the requirements of section 422 of the Code.
2.19 “Minimum Statutory Tax Withholding Obligation” means, with respect to an
Award, the amount the Company or an Affiliate is required to withhold for federal, state and local
taxes based upon the applicable minimum statutory withholding rates required by the relevant tax
authorities.
2.20 “NSO” means an Option that is intended to be a “nonqualified stock option”
that does not satisfy the requirements of section 422 of the Code.
2.21 “Option” means an adoption to purchase Stock granted pursuant to Article V.
2.22 “Option Price” shall have the meaning ascribed to that term in Section 5.4.
2.23 “Other Stock-Based Award” means an equity-based or equity-related Award not
otherwise described by the terms and provisions of the Plan that is granted pursuant to Article X.
2.24 “Parent Corporation” means any corporation (other than the Company) in an
unbroken chain of corporations ending with the Company if, at the time of the action or
transaction, each of the corporations other than the Company owns stock possessing 50 percent or
more of the total combined voting power of all classes of stock in one of the other corporations in
the chain.
2.25 “Performance Goals” means one or more of the criteria described in Section 9.2
on which the performance goals applicable to an Award are based.
2.26 “Performance Cash Award” means an Award designated as a performance cash award
granted to a Holder pursuant to Article IX.
2.27 “Performance Stock Award” means an Award designated as a performance stock
award granted to a Holder pursuant to Article IX.
2.28 “Performance Unit Award” means an Award designated as a performance unit award
granted to a Holder pursuant to Article IX.
2.29 “Period of Restriction” means the period during which Restricted Stock is
subject to a substantial risk of forfeiture (based on the passage of time, the achievement of
performance goals, or upon the occurrence of other events as determined by the Committee, in its
discretion), as provided in Article VII.
2.30 “Plan” means the Grant Prideco, Inc. 2006 Long-Term Incentive Plan, as set
forth in this document as it may be amended from time to time.
2.31 “Restricted Stock” means shares of restricted Stock issued or granted under the
Plan pursuant to Article VII.
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2.32 “Restricted Stock Award” means an authorization by the Committee to issue or
transfer Restricted Stock to a Holder.
2.33 “RSU” means a restricted stock unit credited to a Xxxxxx’s ledger account
maintained by the Company pursuant to Article VIII.
2.34 “RSU Award” means an Award granted pursuant to Article VIII.
2.35 “SAR” means a stock appreciation right granted under the Plan pursuant to
Article VI.
2.36 “Section 409A” means section 409A of the Code and Department of Treasury rules
and regulations issued thereunder.
2.37 “Stock” means the common stock of the Company, $0.1666 par value per share (or
such other par value as may be designated by act of the Company’s stockholders).
2.38 “Subsidiary Corporation” means any corporation (other than the Company) in an
unbroken chain of corporations beginning with the Company if, at the time of the action or
transaction, each of the corporations other than the last corporation in an unbroken chain owns
stock possessing 50 percent or more of the total combined voting power of all classes of stock in
one of the other corporations in the chain.
2.39 “Substantial Risk of Forfeiture” shall have the meaning ascribed to that term
in section 409A of the Code and Department of Treasury guidance issued thereunder.
2.40 “Ten Percent Stockholder” means an individual who, at the time the Option is
granted, owns stock possessing more than ten percent of the total combined voting power of all
classes of stock or series of the Company or of any Parent Corporation or Subsidiary Corporation.
An individual shall be considered as owning the stock owned, directly or indirectly, by or for his
brothers and sisters (whether by the whole or half blood), spouse, ancestors and lineal
descendants; and stock owned, directly or indirectly, by or for a corporation, partnership, estate
or trust, shall be considered as being owned proportionately by or for its stockholders, partners
or beneficiaries.
2.41 “Termination of Employment” means, in the case of an Award other than an ISO,
the termination of the Award recipient’s employment relationship with the Company and all
Affiliates. “Termination of Employment” means, in the case of an ISO, the termination of the
Optionee’s employment relationship with all of the Company, any Parent Corporation, any Subsidiary
Corporation and any parent or subsidiary corporation (within the meaning of section 422(a)(2) of
the Code) of any such corporation that issues or assumes an ISO in a transaction to which section
424(a) of the Code applies.
ARTICLE III
ELIGIBILITY AND PARTICIPATION
3.1 Eligibility. Except as otherwise specified in this Section 3.1, the persons who
are eligible to receive Awards under the Plan are Employees, Directors and consultants of the
Company or an Affiliate. Awards other than ISOs, Performance Stock Awards, or Performance Units
Awards may also be granted to a person who is expected to become an Employee within six months or
who is a consultant of the Company or an Affiliate. In no event will an ISO be granted to any
person other than a key Employee.
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3.2 Participation. Subject to the terms and provisions of the Plan, the Committee
may, from time to time, select the persons to whom Awards shall be granted and shall determine the
nature and amount of each Award.
ARTICLE IV
GENERAL PROVISIONS RELATING TO AWARDS
4.1 Authority to Grant Awards. The Committee may grant Awards to those eligible
persons as the Committee shall from time to time determine, under the terms and conditions of the
Plan. Subject only to any applicable limitations set out in the Plan, the number of shares of
Stock or other value to be covered by any Award to be granted under the Plan shall be as determined
by the Committee in its sole discretion. The Chief Executive Officer of the Company is authorized
to grant Awards (other than Awards pursuant to Article IX) as inducements to hire prospective
Employees who will not be officers of the Company subject to Section 16 of the Exchange Act, but
such awards shall not exceed 100,000 shares of Stock per Fiscal Year. On an annual basis, the
Committee also may delegate to the Chief Executive Officer of the Company the ability to grant
Awards (other than Awards pursuant to Article IX) to eligible persons who are not officers of the
Company subject to the provisions of Section 16 of the Exchange Act.
4.2 Dedicated Shares. The aggregate number of shares of Stock with respect to which
Awards may be granted under the Plan is 3,500,000. The number of shares of Stock stated in this
Section 4.2 shall also be increased by such number of shares of Stock as become subject to
substitute Awards granted pursuant to Article XII; provided, however, that such increase shall be
conditioned upon the approval of the stockholders of the Company to the extent stockholder approval
is required by law or applicable stock exchange rules. If shares of Stock are withheld from
payment of an Award to satisfy tax obligations with respect to the Award, such shares of Stock will
count against the aggregate number of shares of Stock with respect to which Awards may be granted
under the Plan. If shares of Stock are tendered in payment of an Option Price of an Option, such
shares of Stock will not be added to the aggregate number of shares of Stock with respect to which
Awards may be granted under the Plan. To the extent that any outstanding Award is forfeited or
cancelled for any reason or is settled in cash in lieu of shares of Stock, the shares of Stock
allocable to such portion of the Award may again be subject to an Award granted under the Plan.
When a SAR is settled in shares of Stock, the number of shares of Stock subject to the SAR under
the SAR Award Agreement will be counted against the aggregate number of shares of Stock with
respect to which Awards may be granted under the Plan as one share for every share subject to the
SAR, regardless of the number of shares used to settle the SAR upon exercise.
4.3 Non-Transferability. Except as specified in the applicable Award Agreements or
in domestic relations court orders, an Award shall not be transferable by the Holder other than by
will or under the laws of descent and distribution, and shall be exercisable, during the Holder’s
lifetime, only by him or her. Any attempted assignment of an Award in violation of this Section
4.3 shall be null and void. In the discretion of the Committee, any attempt to transfer an Award
other than under the terms of the Plan and the applicable Award Agreement may terminate the Award.
No ISO granted under the Plan may be sold, transferred, pledged, assigned or otherwise alienated or
hypothecated, other than by will or by the laws of descent and distribution. Further, all ISOs
granted to an Employee under the Plan shall be exercisable during his or her lifetime only by the
Employee, and after that time, by the Employee’s heirs or estate.
4.4 Requirements of Law. The Company shall not be required to sell or issue any
shares of Stock under any Award if issuing those shares of Stock would constitute or result in a
violation by the Holder or the Company of any provision of any law, statute or regulation of any
governmental authority. Specifically, in connection with any applicable statute or regulation
relating to the registration of securities, upon exercise of any
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Option or pursuant to any other Award, the Company shall not be required to issue any shares
of Stock unless the Committee has received evidence satisfactory to it to the effect that the
Holder will not transfer the shares of Stock except in accordance with applicable law, including
receipt of an opinion of counsel satisfactory to the Company to the effect that any proposed
transfer complies with applicable law. The determination by the Committee on this matter shall be
final, binding and conclusive. The Company may, but shall in no event be obligated to, register any
shares of Stock covered by the Plan pursuant to applicable securities laws of any country or any
political subdivision. In the event the shares of Stock issuable on exercise of an Option or
pursuant to any other Award are not registered, the Company may imprint on the certificate
evidencing the shares of Stock any legend that counsel for the Company considers necessary or
advisable to comply with applicable law, or, should the shares of Stock be represented by book or
electronic entry rather than a certificate, the Company may take such steps to restrict transfer of
the shares of Stock as counsel for the Company considers necessary or advisable to comply with
applicable law. The Company shall not be obligated to take any other affirmative action in order
to cause or enable the exercise of an Option or any other Award, or the issuance of shares of Stock
pursuant thereto, to comply with any law or regulation of any governmental authority.
4.5 Changes in the Company’s Capital Structure.
(a) The existence of outstanding Awards shall not affect in any way the right
or power of the Company or its stockholders to make or authorize any or all adjustments,
recapitalizations, reorganizations or other changes in the Company’s capital structure or
its business, any merger or consolidation of the Company, any issue of bonds, debentures,
preferred or prior preference shares ahead of or affecting the Stock or Stock rights, the
dissolution or liquidation of the Company, any sale or transfer of all or any part of its
assets or business or any other corporate act or proceeding, whether of a similar character
or otherwise.
(b) If the Company shall effect a subdivision or consolidation of Stock or
other capital readjustment, the payment of a Stock dividend, or other increase or reduction
of the number of shares of Stock outstanding, without receiving compensation therefor in
money, services or property, then (1) the number, class or series and per share price of
Stock subject to outstanding Options or other Awards under the Plan shall be appropriately
adjusted in such a manner as to entitle a Holder to receive upon exercise of an Option or
other Award, for the same aggregate cash consideration, the equivalent total number and
class or series of Stock the Holder would have received had the Holder exercised his or her
Option or other Award in full immediately prior to the event requiring the adjustment, (2)
the number and class or series of Stock then reserved to be issued under the Plan shall be
adjusted by substituting for the total number and class or series of Stock then reserved,
that number and class or series of Stock that would have been received by the owner of an
equal number of outstanding shares of Stock of each class or series of Stock as the result
of the event requiring the adjustment, and (3) all other share amounts included in the Plan,
including those contained in Sections 4.1, 5.1, 6.1 and 9.1 shall be adjusted using the same
principles as described in (2) above relating to the number and class of stock reserved to
be issued under the Plan.
(c) If while unexercised Options or other Awards remain outstanding under the
Plan (1) the Company shall not be the surviving entity in any merger, consolidation or other
reorganization (or survives only as a subsidiary of an entity other than an entity that was
wholly-owned by the Company immediately prior to such merger, consolidation or other
reorganization), (2) the Company sells, leases or exchanges or agrees to sell, lease or
exchange all or substantially all of its assets to any other person or entity (other than an
entity wholly-owned by the Company), (3) the Company is to be dissolved or (4) the Company
is a party to any other corporate transaction (as defined under section 424(a) of the Code
and applicable Department of Treasury regulations) that is not described in clauses (1), (2)
or (3) of this
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sentence (each such event is referred to herein as a “Corporate Change”), then, except
as otherwise provided in an Award Agreement, employment or change of control agreement, or
another agreement between the Holder and the Company (provided that such exceptions shall
not apply in the case of a reincorporation merger), or as a result of the Committee’s
effectuation of one or more of the alternatives described below, there shall be no
acceleration of the time at which any Award then outstanding may be exercised, and no later
than ten days after the approval by the stockholders of the Company of such Corporate
Change, the Committee, acting in its sole and absolute discretion without the consent or
approval of any Holder, shall act to effect one or more of the following alternatives, which
may vary among individual Holders and which may vary among Awards held by any individual
Holder (provided that, with respect to a reincorporation merger in which Holders of the
Company’s ordinary shares will receive one ordinary share of the successor corporation for
each ordinary share of the Company, none of such alternatives shall apply and, without
Committee action, each Award shall automatically convert into a similar award of the
successor corporation exercisable for the same number of ordinary shares of the successor as
the Award was exercisable for ordinary shares of Stock of the Company):
(1) accelerate the time at which some or all of the Awards
then outstanding may be exercised so that such Awards may be exercised in
full for a limited period of time on or before a specified date (before or
after such Corporate Change) fixed by the Committee, after which specified
date all such Awards that remain unexercised and all rights of Holders
thereunder shall terminate;
(2) require the mandatory surrender to the Company by all or
selected Holders of some or all of the then outstanding Awards held by such
Holders (irrespective of whether such Awards are then exercisable under the
provisions of the Plan or the applicable Award Agreement evidencing such
Award) as of a date, before or after such Corporate Change, specified by the
Committee, in which event the Committee shall thereupon cancel such Award and
the Company shall pay to each such Holder an amount of cash per share equal
to the excess, if any, of the per share price offered to stockholders of the
Company in connection with such Corporate Change over the exercise prices
under such Award for such shares;
(3) with respect to all or selected Holders, have some or all
of their then outstanding Awards (whether vested or unvested) assumed or have
a new award of a similar nature substituted for some or all of their then
outstanding Awards under the Plan (whether vested or unvested) by an entity
which is a party to the transaction resulting in such Corporate Change and
which is then employing such Holder or which is affiliated or associated with
such Holder in the same or a substantially similar manner as the Company
prior to the Corporate Change, or a parent or subsidiary of such entity,
provided that (A) such assumption or substitution is on a basis where the
excess of the aggregate fair market value of the Stock subject to the Award
immediately after the assumption or substitution over the aggregate exercise
price of such Stock is equal to the excess of the aggregate fair market value
of all Stock subject to the Award immediately before such assumption or
substitution over the aggregate exercise price of such Stock, and (B) the
assumed rights under such existing Award or the substituted rights under such
new Award, as the case may be, will have the same terms and conditions as the
rights under the existing Award assumed or substituted for, as the case may
be;
(4) provide that the number and class or series of Stock
covered by an Award (whether vested or unvested) theretofore granted shall be
adjusted so that such
7
Award when exercised shall thereafter cover the number and class or
series of Stock or other securities or property (including, without
limitation, cash) to which the Holder would have been entitled pursuant to
the terms of the agreement or plan relating to such Corporate Change if,
immediately prior to such Corporate Change, the Holder had been the holder of
record of the number of shares of Stock then covered by such Award; or
(5) make such adjustments to Awards then outstanding as the
Committee deems appropriate to reflect such Corporate Change (provided,
however, that the Committee may determine in its sole and absolute discretion
that no such adjustment is necessary).
In effecting one or more of the alternatives set out in paragraphs (3), (4) or (5)
immediately above, and except as otherwise may be provided in an Award Agreement, the
Committee, in its sole and absolute discretion and without the consent or approval of any
Holder, may accelerate the time at which some or all Awards then outstanding may be
exercised.
(d) In the event of changes in the outstanding Stock by reason of
recapitalizations, reorganizations, mergers, consolidations, combinations, exchanges or
other relevant changes in capitalization occurring after the date of the grant of any Award
and not otherwise provided for by this Section 4.5, any outstanding Award and any Award
Agreement evidencing such Award shall be subject to adjustment by the Committee in its sole
and absolute discretion as to the number and price of Stock or other consideration subject
to such Award. In the event of any such change in the outstanding Stock, the aggregate
number of shares of Stock available under the Plan may be appropriately adjusted by the
Committee, whose determination shall be conclusive.
(e) After a merger of one or more corporations into the Company or after a
consolidation of the Company and one or more corporations in which the Company shall be the
surviving corporation, each Holder shall be entitled to have his Restricted Stock
appropriately adjusted based on the manner in which the shares of Stock were adjusted under
the terms of the agreement of merger or consolidation.
(f) The issuance by the Company of stock of any class or series, or
securities convertible into, or exchangeable for, stock of any class or series, for cash or
property, or for labor or services either upon direct sale or upon the exercise of rights or
warrants to subscribe for them, or upon conversion or exchange of stock or obligations of
the Company convertible into, or exchangeable for, stock or other securities, shall not
affect, and no adjustment by reason of such issuance shall be made with respect to, the
number, class or series, or price of shares of Stock then subject to outstanding Options or
other Awards.
4.6 Election Under Section 83(b) of the Code. No Holder shall exercise the election
permitted under section 83(b) of the Code with respect to any Award without the written approval of
the Chief Financial Officer or General Counsel of the Company. Any Holder who makes an election
under section 83(b) of the Code with respect to any Award without the written approval of the Chief
Financial Officer or General Counsel of the Company may, in the discretion of the Committee,
forfeit any or all Awards granted to him or her under the Plan.
4.7 Forfeiture Events. The Committee may specify in an Award Agreement that the
Holder’s rights, payments, and benefits with respect to an Award shall be subject to reduction,
cancellation, forfeiture, or recoupment upon the occurrence of certain specified events, in
addition to any otherwise applicable vesting or performance conditions of an Award. Such events
may include, but shall not be limited to, Termination of
8
Employment for cause, termination of the Holder’s provision of services to the Company or its
Affiliates, violation of material policies of the Company and its Affiliates, breach of
noncompetition, confidentiality, or other restrictive covenants that may apply to the Holder, or
other conduct by the Holder that is detrimental to the business or reputation of the Company and
its Affiliates.
4.8 Award Agreements. Each Award shall be embodied in a written agreement that
shall be subject to the terms and conditions of the Plan. The Award Agreement shall be signed by
an executive officer of the Company, other than the Holder, on behalf of the Company, and may be
signed by the Holder to the extent required by the Committee. The Award Agreement may specify the
effect of a change in control on the Award. The Award Agreement may contain any other provisions
that the Committee in its discretion shall deem advisable which are not inconsistent with the terms
and provisions of the Plan.
4.9 Amendments of Award Agreements. The terms of any outstanding Award under the
Plan may be amended from time to time by the Committee in its discretion in any manner that it
deems appropriate and that is consistent with the terms of the Plan. However, no such amendment
shall adversely affect in a material manner any right of a Holder without his or her written
consent. Except as specified in Section 4.5(b), the Committee may not directly or indirectly lower
the exercise price of a previously granted Option or the xxxxx xxxxx of a previously granted SAR.
4.10 Rights as Stockholder. A Holder shall not have any rights as a stockholder
with respect to Stock covered by an Option, a SAR, an RSU, a Performance Stock Unit, or an Other
Stock-Based Award until the date, if any, such Stock is issued by the Company; and, except as
otherwise provided in Section 4.5, no adjustment for dividends, or otherwise, shall be made if the
record date therefor is prior to the date of issuance of such Stock.
4.11 Issuance of Shares of Stock. Shares of Stock, when issued, may be represented
by a certificate or by book or electronic entry.
4.12 Restrictions on Stock Received. The Committee may impose such conditions
and/or restrictions on any shares of Stock issued pursuant to an Award as it may deem advisable or
desirable. These restrictions may include, but shall not be limited to, a requirement that the
Holder hold the shares of Stock for a specified period of time.
4.13 Compliance With Section 409A. Awards shall be designed, granted and
administered in such a manner that they are either exempt from the application of, or comply with,
the requirements of Section 409A.
ARTICLE V
OPTIONS
5.1 Authority to Grant Options. Subject to the terms and provisions of the Plan,
the Committee, at any time, and from time to time, may grant Options under the Plan to eligible
persons in such number and upon such terms as the Committee shall determine. The aggregate number
of shares of Stock with respect to Options may be granted under the Plan is 3,500,000 and the
aggregate number of shares of stock with respect to which ISOs may be granted under the Plan is
200,000. The maximum number of shares of Stock with respect to which Options may be granted to an
Employee during the year a Fiscal Year is 1,000,000.
5.2 Type of Options Available. Options granted under the Plan may be NSOs or ISOs.
9
5.3 Option Agreement. Each Option grant under the Plan shall be evidenced by an
Award Agreement that shall specify (a) whether the Option is intended to be an ISO or an NSO, (b)
the Option Price, (c) the duration of the Option, (d) the number of shares of Stock to which the
Option pertains, (e) the exercise restrictions applicable to the Option and (f) such other
provisions as the Committee shall determine that are not inconsistent with the terms and provisions
of the Plan. Notwithstanding the designation of an Option as an ISO in the applicable Option
Agreement, to the extent the limitations of Section 5.10 of the Plan are exceeded with respect to
the Option, the portion of the Option in excess of the limitation shall be treated as a NSO.
5.4 Option Price. The price at which shares of Stock may be purchased under an
Option (the “Option Price”) shall not be less than 100 percent (100%) of the Fair Market Value of
the shares of Stock on the date the Option is granted. However, in the case of a Ten Percent
Stockholder, the Option Price for an ISO shall not be less than 110 percent (110%) of the Fair
Market Value of the shares of Stock on the date the ISO is granted. Subject to the limitations set
forth in the preceding sentences of this Section 5.4, the Committee shall determine the Option
Price for each grant of an Option under the Plan.
5.5 Duration of Option. An Option shall not be exercisable after the earlier of (i)
the general term of the Option specified in the applicable Award Agreement (which shall not exceed
ten years) or (ii) the period of time specified in the applicable Award Agreement that follows the
Holder’s Termination of Employment or severance of affiliation relationship with the Company.
Unless the applicable Award Agreement specifies a shorter term, in the case of an ISO granted to a
Ten Percent Stockholder, the Option shall expire on the fifth anniversary of the date the Option is
granted.
5.6 Amount Exercisable. Each Option may be exercised at the time, in the manner and
subject to the conditions the Committee specifies in the Award Agreement in its sole discretion.
5.7 Exercise of Option.
(a) General Method of Exercise. Subject to the terms and provisions of the
Plan and the applicable Award Agreement, Options may be exercised in whole or in part from
time to time by the delivery of written notice in the manner designated by the Committee
stating (1) that the Holder wishes to exercise such Option on the date such notice is so
delivered, (2) the number of shares of Stock with respect to which the Option is to be
exercised and (3) the address to which any certificate representing such shares of Stock
should be mailed. Except in the case of exercise by a third party broker as provided below,
in order for the notice to be effective the notice must be accompanied by payment of the
Option Price by any combination of the following: (a) cash, certified check, bank draft or
postal or express money order for an amount equal to the Option Price under the Option, (b)
an election to make a cashless exercise through a registered broker-dealer (if approved in
advance by the Committee or an executive officer of the Company) or (c) any other form of
payment which is acceptable to the Committee.
(b) Exercise Through Third-Party Broker. The Committee may permit a Holder
to elect to pay the Option Price and any applicable tax withholding resulting from such
exercise by authorizing a third-party broker to sell all or a portion of the shares of Stock
acquired upon exercise of the Option and remit to the Company a sufficient portion of the
sale proceeds to pay the Option Price and any applicable tax withholding resulting from such
exercise.
5.8 Notification of Disqualifying Disposition. If any Optionee shall make any
disposition of shares of Stock issued pursuant to the exercise of an ISO under the circumstances
described in section 421(b) of the Code (relating to certain disqualifying dispositions), such
Optionee shall notify the Company of such disposition within ten (10) days thereof.
10
5.9 No Rights as Stockholder. An Optionee shall not have any rights as a
stockholder with respect to Stock covered by an Option until the date a stock certificate for such
Stock is issued by the Company; and, except as otherwise provided in Section 4.5, no adjustment for
dividends, or otherwise, shall be made if the record date therefor is prior to the date of issuance
of such certificate.
5.10 $100,000 Limitation on ISOs. To the extent that the aggregate Fair Market
Value of Stock with respect to which ISOs first become exercisable by a Holder in any calendar year
exceeds $100,000, taking into account both shares of Stock subject to ISOs under the Plan and Stock
subject to ISOs under all other plans of the Company, such Options shall be treated as NSOs. For
this purpose, the “Fair Market Value” of the Stock subject to Options shall be determined as of the
date the Options were awarded. In reducing the number of Options treated as ISOs to meet the
$100,000 limit, the most recently granted Options shall be reduced first. To the extent a
reduction of simultaneously granted Options is necessary to meet the $100,000 limit, the Committee
may, in the manner and to the extent permitted by law, designate which shares of Stock are to be
treated as shares acquired pursuant to the exercise of an ISO.
ARTICLE VI
STOCK APPRECIATION RIGHTS
6.1 Authority to Grant SAR Awards. Subject to the terms and provisions of the Plan,
the Committee, at any time, and from time to time, may grant SARs under the Plan to eligible
persons in such number and upon such terms as the Committee shall determine. Subject to the terms
and conditions of the Plan, the Committee shall have complete discretion in determining the number
of SARs granted to each Holder and, consistent with the provisions of the Plan, in determining the
terms and conditions pertaining to such SARs. The maximum number of shares with respect to which
SARs may be granted to an Employee during a Fiscal Year is 1,000,000.
6.2 General Terms. Subject to the terms and conditions of the Plan, a SAR granted
under the Plan shall confer on the recipient a right to receive, upon exercise thereof, an amount
equal to the excess of (a) the Fair Market Value of one share of the Stock on the date of exercise
over (b) the xxxxx xxxxx of the SAR, which shall not be less than one hundred percent (100%) of the
Fair Market Value of one share of the Stock on the date of grant of the SAR.
6.3 SAR Agreement. Each Award of SARs granted under the Plan shall be evidenced by
an Award Agreement that shall specify (a) the xxxxx xxxxx of the SAR, (b) the term of the SAR, (c)
the vesting and termination provisions of the SAR and (d) such other provisions as the Committee
shall determine that are not inconsistent with the terms and provisions of the Plan. The Committee
may impose such additional conditions or restrictions on the exercise of any SAR as it may deem
appropriate.
6.4 Term of SAR. The term of a SAR granted under the Plan shall be determined by
the Committee, in its sole discretion; provided that no SAR shall be exercisable on or after the
tenth anniversary date of its grant.
6.5 Exercise of SAR. A SAR may be exercised upon whatever terms and conditions the
Committee, in its sole discretion, imposes.
6.6 Payment of SAR Amount. Upon the exercise of a SAR, a Holder shall be entitled
to receive payment from the Company in an amount determined by multiplying the excess of the Fair
Market Value of a share of Stock on the date of exercise over the xxxxx xxxxx of the SAR by the
number of shares of Stock with respect to which the SAR is exercised. At the discretion of the
Committee, the payment upon SAR exercise may
11
be in cash, in Stock of equivalent value, in some combination thereof or in any other manner
approved by the Committee in its sole discretion. The Committee’s determination regarding the form
of SAR payout shall be set forth in the Award Agreement pertaining to the grant of the SAR.
6.7 Termination of Employment. Each Award Agreement shall set forth the extent to
which the Holder of a SAR shall have the right to exercise the SAR following the Holder’s
Termination of Employment. Such provisions shall be determined in the sole discretion of the
Committee, may be included in the Award Agreement entered into with the Holder, need not be uniform
among all SARs issued pursuant to the Plan, and may reflect distinctions based on the reasons for
termination.
ARTICLE VII
RESTRICTED STOCK AWARDS
7.1 Restricted Stock Awards. The Committee may make Awards of Restricted Stock to
eligible persons selected by it. The amount of, the vesting and the transferability restrictions
applicable to any Restricted Stock Award shall be determined by the Committee in its sole
discretion. If the Committee imposes vesting or transferability restrictions on a Holder’s rights
with respect to Restricted Stock, the Committee may issue such instructions to the Company’s share
transfer agent in connection therewith as it deems appropriate. The Committee may also cause the
certificate for shares of Stock issued pursuant to a Restricted Stock Award to be imprinted with
any legend which counsel for the Company considers advisable with respect to the restrictions or,
should the shares of Stock be represented by book or electronic entry rather than a certificate,
the Company may take such steps to restrict transfer of the shares of Stock as counsel for the
Company considers necessary or advisable to comply with applicable law.
7.2 Restricted Stock Award Agreement. Each Restricted Stock Award shall be
evidenced by an Award Agreement that contains any vesting, transferability restrictions and other
provisions not inconsistent with the Plan as the Committee may specify.
7.3 Holder’s Rights as Stockholder. Subject to the terms and conditions of the
Plan, each recipient of a Restricted Stock Award shall have all the rights of a stockholder with
respect to the shares of Restricted Stock included in the Restricted Stock Award during the Period
of Restriction established for the Restricted Stock Award. Dividends paid with respect to
Restricted Stock in cash or property other than shares of Stock or rights to acquire shares of
Stock shall be paid to the recipient of the Restricted Stock Award currently. Dividends paid in
shares of Stock or rights to acquire shares of Stock shall be added to and become a part of the
Restricted Stock. During the Period of Restriction, certificates representing the Restricted Stock
shall be registered in the Holder’s name and bear a restrictive legend to the effect that ownership
of such Restricted Stock, and the enjoyment of all rights appurtenant thereto, are subject to the
restrictions, terms, and conditions provided in the Plan and the applicable Award Agreement. Such
certificates shall be deposited by the recipient with the Secretary of the Company or such other
officer of the Company as may be designated by the Committee, together with all stock powers or
other instruments of assignment, each endorsed in blank, which will permit transfer to the Company
of all or any portion of the Restricted Stock which shall be forfeited in accordance with the Plan
and the applicable Award Agreement.
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ARTICLE VIII
RESTRICTED STOCK UNIT AWARDS
8.1 Authority to Grant RSU Awards. Subject to the terms and provisions of the Plan,
the Committee, at any time, and from time to time, may grant RSU Awards under the Plan to eligible
persons in such amounts and upon such terms as the Committee shall determine. The amount of, the
vesting and the transferability restrictions applicable to any RSU Award shall be determined by the
Committee in its sole discretion. The Committee shall maintain a bookkeeping ledger account which
reflects the number of RSUs credited under the Plan for the benefit of a Holder.
8.2 RSU Award. An RSU Award shall be similar in nature to a Restricted Stock Award
except that no shares of Stock are actually transferred to the Holder until a later date specified
in the applicable Award Agreement. Each RSU shall have a value equal to the Fair Market Value of a
share of Stock.
8.3 RSU Award Agreement. Each RSU Award shall be evidenced by an Award Agreement
that contains any Substantial Risk of Forfeiture, transferability restrictions, form and time of
payment provisions and other provisions not inconsistent with the Plan as the Committee may
specify.
8.4 Dividend Equivalents. An Award Agreement for an RSU Award may specify that the
Holder shall be entitled to the payment of Dividend Equivalents under the Award.
8.5 Form of Payment Under RSU Award. Payment under an RSU Award shall be made in
either cash or shares of Stock as specified in the applicable Award Agreement.
8.6 Time of Payment Under RSU Award. A Holder’s payment under an RSU Award shall be
made at such time as is specified in the applicable Award Agreement. The Award Agreement shall
specify that the payment will be made (1) by a date that is no later than the date that is two and
one-half (2 1/2) months after the end of the Fiscal Year in which the RSU Award payment is no
longer subject to a Substantial Risk of Forfeiture or (2) at a time that is permissible under
Section 409A.
ARTICLE IX
PERFORMANCE CASH AWARDS. PERFORMANCE STOCK AWARDS AND PERFORMANCE UNIT
AWARDS
9.1 Authority to Grant Performance Cash Awards, Performance Stock Awards and
Performance Unit Awards. Subject to the terms and provisions of the Plan, the Committee, at any
time, and from time to time, may grant Performance Cash Awards, Performance Stock Awards and
Performance Unit Awards under the Plan to eligible persons in such amounts and upon such terms as
the Committee shall determine. The amount of, the vesting and the transferability restrictions
applicable to any Performance Cash Award, Performance Stock Award or Performance Unit Award shall
be based upon the attainment of such Performance Goals as the Committee may determine. If the
Committee imposes vesting or transferability restrictions on a Holder’s rights with respect to
Performance Stock or Performance Unit Awards, the Committee may issue such instructions to the
Company’s share transfer agent in connection therewith as it deems appropriate. The Committee may
also cause the certificate for shares of Stock issued pursuant to a Performance Stock or
Performance Unit Award to be imprinted with any legend which counsel for the Company considers
advisable with respect to the restrictions or, should the shares of Stock be represented by book or
electronic entry rather than a certificate, the Company may take such steps to restrict transfer of
the shares of Stock as counsel for
13
the Company considers necessary or advisable to comply with applicable law. The maximum
number of shares of Stock with respect to which Performance Stock Awards may be granted to an
employee during a Fiscal Year is 1,000,000, the maximum number of shares of Stock with respect to
which Performance Unit Awards payable in stock may be granted to an employee during a Fiscal Year
is 1,000,000, the maximum value of cash with respect to a Performance Unit Awards payable in cash
may be granted to an Employee during a Fiscal year, determined as of the date of grant of the
Performance Unit Award, is $10,000,000, and the maximum value of cash with respect to a Performance
Cash Award that may be granted to an Employee during a Fiscal Year is $10,000,000.
9.2 Performance Goals. A Performance Goal must be objective such that a third party
having knowledge of the relevant facts could determine whether the goal is met. Such a Performance
Goal may be based on one or more business criteria that apply to the Holder, one or more business
units of the Company, or the Company as a whole, with reference to one or more of the following:
earnings per share, total shareholder return, cash return on capitalization, increased revenue,
revenue ratios, net income, stock price, market share, return on equity, return on assets, return
on capital, value-added profits, return on capital compared to cost of capital, return on capital
employed, return on invested capital, shareholder value, net cash flow, operating income, earnings
before interest and taxes, cash flow, cash flow from operations, cost reductions and cost ratios.
Goals may also be based on performance relative to a peer group of companies. Unless otherwise
stated, such a Performance Goal need not be based upon an increase or positive result under a
particular business criterion and could include, for example, maintaining the status quo or
limiting economic losses (measured, in each case, by reference to specific business criteria).
Performance Goals may be determined by including or excluding, in the Committee’s discretion, items
that are determined to be extraordinary, unusual in nature, infrequent in occurrence, related to
the disposal or acquisition of a segment of a business, or related to a change in accounting
principal, in each case, based on Opinion No. 30 of the Accounting Principles Board (APB Opinion
No. 30) or other applicable accounting rules, or consistent with Company accounting policies and
practices in effect on the date the Performance Goal is established. In interpreting Plan
provisions applicable to Performance Goals and Performance Stock or Performance Unit Awards, it is
intended that the Plan will conform with the standards of section 162(m) of the Code and Treasury
Regulations § 1.162-27(e)(2)(i), and the Committee in establishing such goals and interpreting the
Plan shall be guided by such provisions. Prior to the payment of any compensation based on the
achievement of Performance Goals, the Committee must certify in writing that applicable Performance
Goals and any of the material terms thereof were, in fact, satisfied. Subject to the foregoing
provisions, the terms, conditions and limitations applicable to any Performance Stock or
Performance Unit Awards made pursuant to the Plan shall be determined by the Committee.
9.3 Time of Establishment of Performance Goals. A Performance Goal for a particular
Performance Cash Award, Performance Stock Award or Performance Unit Award must be established by
the Committee prior to the earlier to occur of (a) 90 days after the commencement of the period of
service to which the Performance Goal relates or (b) the lapse of 25 percent of the period of
service, and in any event while the outcome is substantially uncertain.
9.4 Written Agreement. Each Performance Cash Award, Performance Stock Award or
Performance Unit Award shall be evidenced by an Award Agreement that contains any vesting,
transferability restrictions and other provisions not inconsistent with the Plan as the Committee
may specify.
9.5 Form of Payment Under Performance Cash Award or Performance Unit Award.
Payments under a Performance Cash Award must be made in cash. Payment under a Performance Unit
Award shall be made in cash and/or shares of Stock as specified in the Holder’s Award Agreement.
9.6 Time of Payment Under Performance Cash Award or Performance Unit Award. A
Holder’s payment under a Performance Cash Award or Performance Unit Award shall be made at such
time as is specified
14
in the applicable Award Agreement. The Award Agreement shall specify that the payment will be
made (1) by a date that is no later than the date that is two and one-half (2 1/2) months after the
end of the calendar year in which the Performance Unit Award payment is no longer subject to a
Substantial Risk of Forfeiture or (2) at a time that is permissible under Section 409A.
9.7 Holder’s Rights as Stockholder With Respect to a Performance Stock Award.
Subject to the terms and conditions of the Plan, each Holder of a Performance Stock Award shall
have all the rights of a stockholder with respect to the shares of Stock issued to the Holder
pursuant to the Award during any period in which such issued shares of Stock are subject to
forfeiture and restrictions on transfer, including without limitation, the right to vote such
shares of Stock.
9.8 Increases Prohibited. None of the Committee or the Board may increase the
amount of compensation payable under a Performance Cash, Performance Stock or Performance Unit
Award. If the time at which a Performance Cash, Performance Stock or Performance Unit Award will
vest or be paid is accelerated for any reason, the number of shares of Stock subject to, or the
amount payable under, the Performance Cash, Performance Stock or Performance Unit Award shall be
reduced pursuant to Department of Treasury Regulation section 1.162-27(e)(2)(iii) to reasonably
reflect the time value of money.
9.9 Stockholder Approval. No payments of Stock or cash will be made pursuant to
this Article IX unless the stockholder approval requirements of Department of Treasury Regulation
section 1.162-27(e)(4) are satisfied.
ARTICLE X
OTHER STOCK-BASED AWARDS
10.1 Authority to Grant Other Stock-Based Awards. The Committee may grant to
eligible persons other types of equity-based or equity-related Awards not otherwise described by
the terms and provisions of the Plan (including the grant or offer for sale of unrestricted shares
of Stock) in such amounts and subject to such terms and conditions, as the Committee shall
determine. Such Awards may involve the transfer of actual shares of Stock to Holders, or payment in
cash or otherwise of amounts based on the value of shares of Stock and may include, without
limitation, Awards designed to comply with or take advantage of the applicable local laws of
jurisdictions other than the United States.
10.2 Value of Other Stock-Based Award. Each Other Stock-Based Award shall be
expressed in terms of shares of Stock or units based on shares of Stock, as determined by the
Committee.
10.3 Payment of Other Stock-Based Award. Payment, if any, with respect to an Other
Stock-Based Award shall be made in accordance with the terms of the Award, in cash or shares of
Stock as the Committee determines.
10.4 Termination of Employment. The Committee shall determine the extent to which a
Holder’s rights with respect to Other Stock-Based Awards shall be affected by the Holder’s
Termination of Employment. Such provisions shall be determined in the sole discretion of the
Committee and need not be uniform among all Other Stock-Based Awards issued pursuant to the Plan
15
ARTICLE XI
CASH-BASED AWARDS
11.1 Authority to Grant Cash-Based Awards. Subject to the terms and provisions of
the Plan, the Committee, at any time, and from time to time, may grant Cash-Based Awards under the
Plan to eligible persons in such amounts and upon such terms as the Committee shall determine.
11.2 Value of Cash-Based Award. Each Cash-Based Award shall specify a payment
amount or payment range as determined by the Committee.
11.3 Payment of Cash-Based Award. Payment, if any, with respect to a Cash-Based
Award shall be made in accordance with the terms of the Award, in cash.
11.4 Termination of Employment. The Committee shall determine the extent to which a
Holder’s rights with respect to Cash-Based Awards shall be affected by the Holder’s Termination of
Employment. Such provisions shall be determined in the sole discretion of the Committee and need
not be uniform among all Cash-Based Awards issued pursuant to the Plan.
ARTICLE XII
SUBSTITUTION AWARDS
Awards may be granted under the Plan from time to time in substitution for stock options and
other awards held by employees of other entities who are about to become Employees, or whose
employer is about to become an Affiliate as the result of a merger or consolidation of the Company
with another corporation, or the acquisition by the Company of substantially all the assets of
another corporation, or the acquisition by the Company of at least fifty percent (50%) of the
issued and outstanding stock of another corporation as the result of which such other corporation
will become a subsidiary of the Company. The terms and conditions of the substitute Awards so
granted may vary from the terms and conditions set forth in the Plan to such extent as the Board at
the time of grant may deem appropriate to conform, in whole or in part, to the provisions of the
Award in substitution for which they are granted.
ARTICLE XIII
ADMINISTRATION
13.1 Awards. The Plan shall be administered by the Committee or, in the absence of
the Committee, the Plan shall be administered by the Board. The members of the Committee shall
serve at the discretion of the Board. The Committee shall have full and exclusive power and
authority to administer the Plan and to take all actions that the Plan expressly contemplates or
are necessary or appropriate in connection with the administration of the Plan with respect to
Awards granted under the Plan.
13.2 Authority of the Committee. The Committee shall have full and exclusive power
to interpret and apply the terms and provisions of the Plan and Awards made under the Plan, and to
adopt such rules, regulations and guidelines for implementing the Plan as the Committee may deem
necessary or proper, all of which powers shall be exercised in the best interests of the Company
and in keeping with the objectives of the Plan. A majority of the members of the Committee shall
constitute a quorum for the transaction of business, and the vote of a majority of those members
present at any meeting shall decide any question brought before that
16
meeting. Any decision or determination reduced to writing and signed by a majority of the
members shall be as effective as if it had been made by a majority vote at a meeting properly
called and held. All questions of interpretation and application of the Plan, or as to Awards
granted under the Plan, shall be subject to the determination, which shall be final and binding, of
a majority of the whole Committee. No member of the Committee shall be liable for any act or
omission of any other member of the Committee or for any act or omission on his own part, including
but not limited to the exercise of any power or discretion given to him under the Plan, except
those resulting from his own gross negligence or willful misconduct. In carrying out its authority
under the Plan, the Committee shall have full and final authority and discretion, including but not
limited to the following rights, powers and authorities to (a) determine the persons to whom and
the time or times at which Awards will be made; (b) determine the number and exercise price of
shares of Stock covered in each Award subject to the terms and provisions of the Plan; (c)
determine the terms, provisions and conditions of each Award, which need not be identical and need
not match the default terms set forth in the Plan; (d) accelerate the time at which any outstanding
Award will vest; (e) prescribe, amend and rescind rules and regulations relating to administration
of the Plan; and (f) make all other determinations and take all other actions deemed necessary,
appropriate or advisable for the proper administration of the Plan.
The Committee may correct any defect or supply any omission or reconcile any inconsistency in
the Plan or in any Award to a Holder in the manner and to the extent the Committee deems necessary
or desirable to further the Plan’s objectives. Further, the Committee shall make all other
determinations that may be necessary or advisable for the administration of the Plan. As permitted
by law and the terms and provisions of the Plan, the Committee may delegate its authority as
identified in this Section 13.2. The Committee may employ attorneys, consultants, accountants,
agents, and other persons, any of whom may be an Employee, and the Committee, the Company, and its
officers and Board shall be entitled to rely upon the advice, opinions, or valuations of any such
persons.
13.3 Decisions Binding. All determinations and decisions made by the Committee or
the Board, as the case may be, pursuant to the provisions of the Plan and all related orders and
resolutions of the Committee or the Board, as the case may be, shall be final, conclusive and
binding on all persons, including the Company, its stockholders, Holders and the estates and
beneficiaries of Holders.
13.4 No Liability. Under no circumstances shall the Company, the Board or the
Committee incur liability for any indirect, incidental, consequential or special damages (including
lost profits) of any form incurred by any person, whether or not foreseeable and regardless of the
form of the act in which such a claim may be brought, with respect to the Plan or the Company’s,
the Committee’s or the Board’s roles in connection with the Plan.
ARTICLE XIV
AMENDMENT OR TERMINATION OF PLAN
14.1 Amendment, Modification, Suspension, and Termination. Subject to Section 14.2,
the Committee may, at any time and from time to time, alter, amend, modify, suspend, or terminate
the Plan and any Award Agreement in whole or in part; provided, however, that, without the prior
approval of the Company’s stockholders and except as provided in Section 4.5, the Committee shall
not directly or indirectly lower the Option Price of a previously granted Option, and no amendment
of the Plan shall be made without stockholder approval if stockholder approval is required by
applicable law or stock exchange rules.
14.2 Awards Previously Granted. Notwithstanding any other provision of the Plan to
the contrary, no termination, amendment, suspension, or modification of the Plan or an Award
Agreement shall adversely
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affect in any material way any Award previously granted under the Plan, without the written
consent of the Holder holding such Award.
ARTICLE XV
MISCELLANEOUS
15.1 Unfunded Plan/No Establishment of a Trust Fund. Holders shall have no right,
title, or interest whatsoever in or to any investments that the Company or any of its Affiliates
may make to aid in meeting obligations under the Plan. Nothing contained in the Plan, and no
action taken pursuant to its provisions, shall create or be construed to create a trust of any
kind, or a fiduciary relationship between the Company and any Holder, beneficiary, legal
representative, or any other person. To the extent that any person acquires a right to receive
payments from the Company under the Plan, such right shall be no greater than the right of an
unsecured general creditor of the Company. All payments to be made hereunder shall be paid from
the general funds of the Company and no special or separate fund shall be established and no
segregation of assets shall be made to assure payment of such amounts, except as expressly set
forth in the Plan. No property shall be set aside nor shall a trust fund of any kind be
established to secure the rights of any Holder under the Plan. The Plan is not intended to be
subject to the Employee Retirement Income Security Act of 1974, as amended.
15.2 No Employment Obligation. The granting of any Award shall not constitute an
employment contract, express or implied, nor impose upon the Company or any Affiliate any
obligation to employ or continue to employ, or utilize the services of, any Holder. The right of
the Company or any Affiliate to terminate the employment of any person shall not be diminished or
affected by reason of the fact that an Award has been granted to him, and nothing in the Plan or an
Award Agreement shall interfere with or limit in any way the right of the Company or its Affiliates
to terminate any Holder’s employment at any time or for any reason not prohibited by law.
15.3 Tax Withholding. The Company or any Affiliate shall be entitled to deduct from
other compensation payable to each Holder any sums required by federal, state or local tax law to
be withheld with respect to the vesting or exercise of an Award or lapse of restrictions on an
Award. In the alternative, the Company may require the Holder (or other person validly exercising
the Award) to pay such sums for taxes directly to the Company or any Affiliate in cash or by check
within one day after the date of vesting, exercise or lapse of restrictions. In the discretion of
the Committee, and with the consent of the Holder, the Company may reduce the number of shares of
Stock issued to the Holder upon such Xxxxxx’s exercise of an Option to satisfy the tax withholding
obligations of the Company or an Affiliate; provided that the Fair Market Value of the shares of
Stock held back shall not exceed the Company’s or the Affiliate’s Minimum Statutory Tax Withholding
Obligation. The Committee may, in its discretion, permit a Holder to satisfy any Minimum Statutory
Tax Withholding Obligation arising upon the vesting of an Award by delivering to the Holder a
reduced number of shares of Stock in the manner specified herein. If permitted by the Committee
and acceptable to the Holder, at the time of vesting of shares under the Award, the Company shall
(a) calculate the amount of the Company’s or an Affiliate’s Minimum Statutory Tax Withholding
Obligation on the assumption that all such shares of Stock vested under the Award are made
available for delivery, (b) reduce the number of such shares of Stock made available for delivery
so that the Fair Market Value of the shares of Stock withheld on the vesting date approximates the
Company’s or an Affiliate’s Minimum Statutory Tax Withholding Obligation and (c) in lieu of the
withheld shares of Stock, remit cash to the United States Treasury and/or other applicable
governmental authorities, on behalf of the Holder, in the amount of the Minimum Statutory Tax
Withholding Obligation. The Company shall withhold only whole shares of Stock to satisfy its
Minimum Statutory Tax Withholding Obligation. Where the Fair Market Value of the withheld shares
of Stock does not equal the amount of the Minimum Statutory Tax Withholding Obligation, the Company
shall withhold shares of Stock with a Fair Market Value slightly less than
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the amount of the Minimum Statutory Tax Withholding Obligation and the Holder must satisfy the
remaining minimum withholding obligation in some other manner permitted under this Section 15.3.
The withheld shares of Stock not made available for delivery by the Company shall be retained as
treasury shares or will be cancelled and the Holder’s right, title and interest in such shares of
Stock shall terminate. The Company shall have no obligation upon vesting or exercise of any Award
or lapse of restrictions on an Award until the Company or an Affiliate has received payment
sufficient to cover the Minimum Statutory Tax Withholding Obligation with respect to that vesting,
exercise or lapse of restrictions. Neither the Company nor any Affiliate shall be obligated to
advise a Holder of the existence of the tax or the amount which it will be required to withhold.
15.4 Gender and Number. If the context requires, words of one gender when used in
the Plan shall include the other and words used in the singular or plural shall include the other.
15.5 Severability. In the event any provision of the Plan shall be held illegal or
invalid for any reason, the illegality or invalidity shall not affect the remaining parts of the
Plan, and the Plan shall be construed and enforced as if the illegal or invalid provision had not
been included.
15.6 Headings. Headings of Articles and Sections are included for convenience of
reference only and do not constitute part of the Plan and shall not be used in construing the terms
and provisions of the Plan.
15.7 Other Compensation Plans. The adoption of the Plan shall not affect any other
option, incentive or other compensation or benefit plans in effect for the Company or any
Affiliate, nor shall the Plan preclude the Company from establishing any other forms of incentive
compensation arrangements for Employees or Directors.
15.8 Other Awards. The grant of an Award shall not confer upon the Holder the right
to receive any future or other Awards under the Plan, whether or not Awards may be granted to
similarly situated Holders, or the right to receive future Awards upon the same terms or conditions
as previously granted.
15.9 Successors. All obligations of the Company under the Plan with respect to
Awards granted hereunder shall be binding on any successor to the Company, whether the existence of
such successor is the result of a direct or indirect purchase, merger, consolidation, or otherwise,
of all or substantially all of the business and/or assets of the Company.
15.10 Law Limitations/Governmental Approvals. The granting of Awards and the
issuance of shares of Stock under the Plan shall be subject to all applicable laws, rules, and
regulations, and to such approvals by any governmental agencies or national securities exchanges as
may be required.
15.11 Delivery of Title. The Company shall have no obligation to issue or deliver
evidence of title for shares of Stock issued under the Plan prior to (a)obtaining any approvals
from governmental agencies that the Company determines are necessary or advisable; and
(b)completion of any registration or other qualification of the Stock under any applicable national
or foreign law or ruling of any governmental body that the Company determines to be necessary or
advisable.
15.12 Inability to Obtain Authority. The inability of the Company to obtain
authority from any regulatory body having jurisdiction, which authority is deemed by the Company’s
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.
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15.13 Investment Representations. The Committee may require any person receiving
Stock pursuant to an Award under the Plan to represent and warrant in writing that the person is
acquiring the shares of Stock for investment and without any present intention to sell or
distribute such Stock.
15.14 Persons Residing Outside of the United States. Notwithstanding any provision
of the Plan to the contrary, in order to comply with the laws in other countries in which the
Company or any of its Affiliates operates or has Employees, the Committee, in its sole discretion,
shall have the power and authority to (a) determine which Affiliates shall be covered by the Plan;
(b) determine which persons employed outside the United States are eligible to participate in the
Plan; (c) amend or vary the terms and provisions of the Plan and the terms and conditions of any
Award granted to persons who reside outside the United States; (d) establish subplans and modify
exercise procedures and other terms and procedures to the extent such actions may be necessary or
advisable — any subplans and modifications to Plan terms and procedures established under this
Section 15.14 by the Committee shall be attached to the Plan document as Appendices; and (e) take
any action, before or after an Award is made, that it deems advisable to obtain or comply with any
necessary local government regulatory exemptions or approvals. Notwithstanding the above, the
Committee may not take any actions hereunder, and no Awards shall be granted, that would violate
the Securities Exchange Act of 1934, as amended, the Code, any securities law or governing statute
or any other applicable law.
15.15 Governing Law. The provisions of the Plan and the rights of all persons
claiming thereunder shall be construed, administered and governed under the laws of the State of
Texas.
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