FURMANITE CORPORATION 1994 STOCK INCENTIVE PLAN Amendment and Restatement Effective March 4, 2009
TABLE OF CONTENTS
| Page | ||||||||
| ARTICLE I | PLAN |
1 | ||||||
| 1.1 | Purpose |
1 | ||||||
| 1.2 | Term of Plan |
1 | ||||||
| ARTICLE II | DEFINITIONS |
2 | ||||||
| 2.1 | Affiliate |
2 | ||||||
| 2.2 | Award |
2 | ||||||
| 2.3 | Board |
2 | ||||||
| 2.4 | Change of Control |
2 | ||||||
| 2.5 | Code |
3 | ||||||
| 2.6 | Committee |
3 | ||||||
| 2.7 | Company |
3 | ||||||
| 2.8 | Disability |
3 | ||||||
| 2.9 | Distribution Date |
4 | ||||||
| 2.10 | Employee Benefits Agreement |
4 | ||||||
| 2.11 | Employee |
4 | ||||||
| 2.12 | Exchange Act |
4 | ||||||
| 2.13 | Fair Market Value |
4 | ||||||
| 2.14 | Holder |
4 | ||||||
| 2.15 | Incentive Option |
4 | ||||||
| 2.16 | KSI Deferred Compensation Plans |
4 | ||||||
| 2.17 | Mature Shares |
4 | ||||||
| 2.18 | Non-Employee Director |
4 | ||||||
| 2.19 | Nonqualified Option |
4 | ||||||
| 2.20 | Option |
4 | ||||||
| 2.21 | Option Agreement |
4 | ||||||
| 2.22 | Plan |
5 | ||||||
| 2.23 | Restricted Stock |
5 | ||||||
| 2.24 | Restricted Stock Agreement |
5 | ||||||
| 2.25 | Restricted Stock Award |
5 | ||||||
| 2.26 | Retirement |
5 | ||||||
| 2.27 | Stock |
5 | ||||||
| 2.28 | Ten Percent Stockholder |
5 | ||||||
| 2.29 | Net Shares |
5 | ||||||
| 2.30 | Dividend Equivalent |
5 | ||||||
| 2.31 | Section 409A |
5 | ||||||
| ARTICLE III | ELIGIBILITY |
6 | ||||||
| ARTICLE IV | GENERAL PROVISIONS RELATING TO AWARDS |
7 | ||||||
| 4.1 | Authority to Grant Awards |
7 | ||||||
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| Page | ||||||||
| 4.2 | Dedicated Shares; Maximum Awards |
7 | ||||||
| 4.3 | Non-Transferability |
7 | ||||||
| 4.4 | Requirements of Law |
7 | ||||||
| 4.5 | Changes in the Company’s Capital Structure |
8 | ||||||
| 4.6 | Election Under Section 83(b) of the Code |
10 | ||||||
| ARTICLE V | OPTIONS |
11 | ||||||
| 5.1 | Type of Option |
11 | ||||||
| 5.2 | Exercise Price |
11 | ||||||
| 5.3 | Duration of Options |
11 | ||||||
| 5.4 | Amount Exercisable |
13 | ||||||
| 5.5 | Exercise of Options |
13 | ||||||
| 5.6 | Substitution Options |
14 | ||||||
| 5.7 | No Rights as Stockholder |
14 | ||||||
| ARTICLE VI | RESTRICTED STOCK AWARDS |
15 | ||||||
| 6.1 | Restricted Stock Awards |
15 | ||||||
| 6.2 | Holder’s Rights as Stockholder |
15 | ||||||
| ARTICLE VII | ADMINISTRATION |
16 | ||||||
| ARTICLE VIII | AMENDMENT OR TERMINATION OF PLAN |
17 | ||||||
| ARTICLE IX | MISCELLANEOUS |
18 | ||||||
| 9.1 | No Establishment of a Trust Fund |
18 | ||||||
| 9.2 | No Employment or Affiliation Obligation |
18 | ||||||
| 9.3 | Forfeiture |
18 | ||||||
| 9.4 | Tax Withholding |
18 | ||||||
| 9.5 | Written Agreement |
19 | ||||||
| 9.6 | Indemnification of the Committee |
19 | ||||||
| 9.7 | Gender |
20 | ||||||
| 9.8 | Headings |
20 | ||||||
| 9.9 | Other Compensation Plans |
20 | ||||||
| 9.10 | Other Options or Awards |
20 | ||||||
| 9.11 | Option Adjustments Pursuant to the Employee Benefits Agreement |
20 | ||||||
| 9.12 | Governing Law |
20 | ||||||
| 9.13 | Compliance with Section 409A |
20 | ||||||
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ARTICLE I
PLAN
1.1 Purpose. The Plan is intended to advance the best interests of the Company and its
stockholders by providing those persons who have substantial responsibility for the management and
growth of the Company and its Affiliates with additional 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 any of its Affiliates.
1.2 Term of Plan. No Award shall be granted under the Plan after March 4, 2019. The Plan
shall remain in effect until all Awards under the Plan have been satisfied or expired.
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ARTICLE II
DEFINITIONS
The words and phrases defined in this Article shall have the meaning set out in these
definitions 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 parent corporation and any subsidiary corporation. The term “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. The term “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 the 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.
2.2 “Award” means any Incentive Option, Nonqualified Option or Restricted Stock Award granted
under the Plan.
2.3 “Board” means the board of directors of the Company.
2.4 “Change of Control” means the occurrence of any of the following after March 4, 2009:
(a) the acquisition by any individual, entity or group (within the meaning of Section
13(d)(3) or 14(d)(2) of the Exchange Act) (a “Covered Person”) of beneficial ownership
(within the meaning of rule 13d-3 promulgated under the Exchange Act) of 20 percent or more
of either (i) the then outstanding shares of Stock (the “Outstanding Company Common Stock”)
or (ii) the combined voting power of the then outstanding voting securities of the Company
entitled to vote generally in the election of directors (the “Outstanding Company Voting
Securities”); provided, however, that for purposes of this Section 2.4(a), the following
acquisitions shall not constitute a Change in Control of the Company: (i) any acquisition by
the Company, (ii) any acquisition by any employee benefit plan (or related trust) sponsored
or maintained by the Company or any entity controlled by the Company or (iii) any
acquisition by any corporation pursuant to a transaction which complies with clauses (i),
(ii) and (iii) of Section 2.4(c);
(b) individuals who, as of March 4, 2009, constitute the Board of Directors (the
“Incumbent Board”) cease for any reason to constitute at least a majority of the Board of
Directors; provided, however, that any individual becoming a director subsequent to March 4,
2009, whose election, or nomination for election, by the Company’s stockholders, was
approved by a vote of at least a majority of the directors then comprising the Incumbent
Board shall be considered as though such individual were a member of the Incumbent Board,
but excluding, for this purpose, any such individual whose initial assumption of office
occurs as a result of an actual or threatened election contest with respect to the election
or removal of directors; or
(c) the consummation of (i) a reorganization, merger or consolidation or sale of the
Company or (ii) a disposition of all or substantially all of the assets of the Company (a
“Business Combination”), in each case, unless, following such Business Combination, (A)
all
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or substantially all of the individuals and entities who were the beneficial owners,
respectively, of the Outstanding Company Common Stock and Outstanding Company Voting
Securities immediately prior to such Business Combination beneficially own, directly or
indirectly, more than 80 percent of, respectively, the then outstanding shares of common
stock and the combined voting power of the then outstanding voting securities entitled to
vote generally in the election of directors, as the case may be, of the corporation
resulting from such Business Combination (including, without limitation, a corporation which
as a result of such transaction owns the Company or all or substantially all of the
Company’s assets either directly or through one or more subsidiaries) in substantially the
same proportions as their ownership immediately prior to such Business Combination of the
Outstanding Company Common Stock or Outstanding Company Voting Securities, as the case may
be, (B) no Covered Person (excluding any employee benefit plan (or related trust) of the
Company or such corporation resulting from such Business Combination) beneficially owns,
directly or indirectly, 80 percent or more of, respectively, the then outstanding shares of
common stock of the corporation resulting from such Business Combination or the combined
voting power of the then outstanding voting securities of such corporation, except to the
extent that such ownership existed prior to the Business Combination, and (C) at least a
majority of the members of the board of directors of the corporation resulting from such
Business Combination were members of the Incumbent Board at the time of the execution of the
initial agreement, or of the action of the Board, providing for such Business Combination;
provided, however, that any individual becoming a director subsequent to March 4, 2009 whose
election, or nomination for election by the Company’s stockholders, was approved by a vote
of at least a majority of the directors then comprising the Incumbent Board shall be
considered as though such individual were a member of the Incumbent Board, but excluding,
for this purpose, any such individual whose initial assumption of office occurs as a result
of an actual or threatened election contest with respect to the election or removal of
directors.
2.5 “Code” means the Internal Revenue Code of 1986, as amended.
2.6 “Committee” means a committee of at least two persons appointed by the Board.
2.7 “Company” means Furmanite Corporation, a Delaware corporation.
2.8 “Disability” means a medically determinable mental or physical impairment which, in the
opinion of a physician selected by the Committee, shall prevent the Holder from engaging in any
substantial gainful activity and which can be expected to result in death or which has lasted or
can be expected to last for a continuous period of not less than 12 months and which: (a) was not
contracted, suffered or incurred while the Holder was engaged in, or did not result from having
engaged in, a felonious criminal enterprise; (b) did not result from alcoholism or addiction to
narcotics; (c) did not result from an injury incurred while a member of the Armed Forces of the
United States for which the Holder receives a military pension; and (d) did not result from an
intentionally self-inflicted injury.
2.9 “Distribution Date” shall have the meaning specified in the Distribution Agreement by and
between the Company, Kaneb Services LLC and Kaneb Pipeline Partners, L.P.
2.10 “Employee Benefits Agreement” means the Employee Benefits Agreement by and between the
Company and Kaneb Services LLC, a Delaware limited liability company.
2.11 “Employee” means a person employed by the Company or any Affiliate as a common law
employee.
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2.12 “Exchange Act” means the Securities Exchange Act of 1934, as amended.
2.13 “Fair Market Value” of the Stock as of any date means the closing price of the Stock on
such date, or, if the Stock was not traded on such date, on the immediately preceding day that the
Stock was so traded. However, if the Stock is not listed on a securities exchange, the Fair Market
Value will be an amount determined by the Committee in a manner that complies with the requirements
of Section 409A.
2.14 “Holder” means a person who has been granted an Award or any person who is entitled to
receive stock under an Award.
2.15 “Incentive Option” means an Option granted under the Plan which is designated as an
“Incentive Option” and satisfies the requirements of section 422 of the Code.
2.16 “KSI Deferred Compensation Plans” means the Kaneb Services, Inc. 1996 Supplemental
Deferred Compensation Plan, the Kaneb Services, Inc. Non-Employee Directors Deferred Stock Unit
Plan, the Kaneb Services, Inc. Deferred Stock Unit Plan, and any other nonqualified deferred
compensation plans that the Company may adopt in the future.
2.17 “Mature Shares” means shares of Stock that the Holder has held for at least six months.
2.18 “Non-Employee Director” means any duly elected member of the Board who is not an
Employee.
2.19 “Nonqualified Option” means an Option granted under the Plan other than an Incentive
Option.
2.20 “Option” means either an Incentive Option or a Nonqualified Option granted under the Plan
to purchase shares of Stock.
2.21 “Option Agreement” means the written agreement which sets out the terms of an Option.
2.22 “Plan” means the Furmanite Corporation 1994 Stock Incentive Plan, as set forth in this
document and as it may be amended from time to time.
2.23 “Restricted Stock” means stock awarded or purchased under the Plan pursuant to a
Restricted Stock Agreement.
2.24 “Restricted Stock Agreement” means the written agreement which sets out the terms of a
Restricted Stock Award.
2.25 “Restricted Stock Award” means an Award of Restricted Stock.
2.26 “Retirement” means the termination of an Employee’s employment relationship with the
Company and all Affiliates after attaining the age of 55.
2.27 “Stock” means the common stock of the Company, no par value, or, in the event that the
outstanding shares of common stock are later changed into or exchanged for a different class of
stock or securities of the Company or another corporation, that other stock or security. Shares of
Stock when issued, may be represented by a certificate or by book or electronic entry.
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2.28 “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 Affiliate. 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.
2.29 “Net Shares” means the shares of Stock to be issued upon exercise of an Option reduced by
the number of unencumbered, transferable Mature Shares that would be required to be tendered to the
Company to satisfy the exercise price of the Option.
2.30 “Dividend Equivalent” means a payment equivalent in amount to dividends paid to the
Company’s stockholders.
2.31 “Section 409A” means section 409A of the Code and Department of Treasury
rules and regulations issued thereunder.
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ARTICLE III
ELIGIBILITY
The individuals who shall be eligible to receive Incentive Options shall be those key
Employees of the Company or any of its Affiliates as the Committee shall determine from time to
time. The individuals who shall be eligible to receive Awards other than Incentive Options shall
be those persons, including Employees, consultants, advisors and directors, who have substantial
responsibility for the management and growth of the Company or any of its Affiliates as the
Committee shall determine from time to time. Further, shares of Stock may be issued under the Plan
to participants and former participants in the KSI Deferred Compensation Plans in satisfaction of
the Company’s obligations thereunder.
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ARTICLE IV
GENERAL PROVISIONS RELATING TO AWARDS
4.1 Authority to Grant Awards. The Committee may grant Awards to those key Employees of the
Company or any of its Affiliates and other eligible persons as it 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 to be covered by any Award to be granted to any
person shall be as determined by the Committee.
4.2 Dedicated Shares; Maximum Awards. The aggregate number of shares of Stock with respect to
which Awards may be granted under the Plan and to current and former participants in the KSI
Deferred Compensation Plans pursuant to the terms thereof is 6,100,000. Such shares of Stock may
be treasury shares or authorized but unissued shares. The maximum number of shares of Stock with
respect to which Options may be granted under the Plan is 6,100,000 shares. The maximum number of
shares of Stock with respect to which Restricted Stock Awards may be granted under the Plan is
1,250,000 shares. The maximum number of shares with respect to which Options which may be granted
to any person under the Plan during any calendar year is 750,000 shares. If a Holder’s Option is
cancelled, the cancelled Option continues to be counted against the maximum number of shares of
Stock for which Options may be granted to the Holder under the Plan. The number of shares stated
in this Section 4.2 shall be subject to adjustment in accordance with the provisions of Section
4.5. If any outstanding Award expires or terminates for any reason or any Award is surrendered,
the shares of Stock allocable to the unexercised portion of that Award may again be subject to an
Award under the Plan.
4.3 Non-Transferability. Incentive Options shall not be transferable by the Employee other
than by will or under the laws of descent and distribution, and shall be exercisable, during the
Employee’s lifetime, only by him. Except as specified in the applicable Award agreements or in
domestic relations court orders, Awards other than Incentive Options 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. 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.
4.4 Requirements of Law. The Company shall not be required to sell or issue any shares of
Stock under any Award if issuing the 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 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 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
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affirmative action in order to cause the exercise of an Option or vesting under an 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 stock ahead of or affecting the Stock or its 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.
(a) If the Company shall effect a subdivision or consolidation of shares 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 for it in money,
services or property, then (i) the number, class or series and per share price of shares of
Stock subject to outstanding Options under this Plan shall be appropriately adjusted in such
a manner as to entitle a Holder to receive upon exercise of an Option, for the same
aggregate cash consideration, the equivalent total number and class or series of shares he
would have received had he exercised his Option in full immediately prior to the event
requiring the adjustment, and (ii) the number and class or series of shares of Stock then
reserved to be issued under the Plan shall be adjusted by substituting for the total number
and class or series of shares of Stock then reserved, that number and class or series of
shares of Stock that would have been received by the owner of an equal number of outstanding
shares of each class or series of Stock as the result of the event requiring the adjustment.
(b) If while unexercised Options remain outstanding under the Plan (i) 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), (ii) 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), (iii) the Company is to be dissolved or (iv) 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 (i), (ii) or (iii) of this
sentence (each such event is referred to herein as a “Corporate Change”), then, except as
otherwise provided in an Option Agreement or as a result of the Board’s effectuation of one
or more of the alternatives described below, there shall be no acceleration of the time at
which any Option 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 Board, 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 Options held by any individual Holder:
(A) accelerate the time at which some or all of the Options then
outstanding may be exercised so that such Options 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 Board, after which specified date all
such Options that remain unexercised and all rights of Holders thereunder
shall terminate;
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(B) require the mandatory surrender to the Company by all or selected
Holders of some or all of the then outstanding Options held by such Holders
(irrespective of whether such Options are then exercisable under the
provisions of this Plan or the Option Agreements evidencing such Options) as
of a date, before or after such Corporate Change, specified by the Board, in
which event the Board shall thereupon cancel such Options 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
Options for such shares;
(C) with respect to all or selected Holders, have some or all of their
then outstanding Options (whether vested or unvested) assumed or have a new
Option substituted for some or all of their then outstanding Options (whether
vested or unvested) by an entity which is a party to the transaction
resulting in such Corporate Change and which is then employing him, or a
parent or subsidiary of such entity, provided that (1) such assumption or
substitution is on a basis where the excess of the aggregate fair market
value of the shares subject to the Option immediately after the assumption or
substitution over the aggregate exercise price of such shares is equal to the
excess of the aggregate fair market value of all shares subject to the Option
immediately before such assumption or substitution over the aggregate
exercise price of such shares, and (2) the assumed rights under such existing
Option or the substituted rights under such new Option as the case may be
will have the same terms and conditions as the rights under the existing
Option assumed or substituted for, as the case may be;
(D) provide that the number and class or series of shares of Stock
covered by an Option (whether vested or unvested) theretofore granted shall
be adjusted so that such Option when exercised shall thereafter cover the
number and class or series of shares 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 Option; or
(E) make such adjustments to Options then outstanding as the Board deems
appropriate to reflect such Corporate Change (provided, however, that the
Board may determine in its sole and absolute discretion that no such
adjustment is necessary).
In effecting one or more of alternatives (C), (D) or (E) above, and except as otherwise may be
provided in an Option Agreement, the Board, in its sole and absolute discretion and without the
consent or approval of any Holder, may accelerate the time at which some or all Options then
outstanding may be exercised.
(c) 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 Option and not otherwise
provided for by this Section 4.5, any outstanding Options and any agreements evidencing such
Options shall be subject to adjustment by the Board in its sole and absolute discretion as
to the number
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and price of shares of Stock or other consideration subject to such Options. In the
event of any such change in the outstanding Stock, the aggregate number of shares available
under this Plan may be appropriately adjusted by the Board, whose determination shall be
conclusive.
(d) 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 the Stock was adjusted under the terms of the
agreement of merger or consolidation.
(e) The issue by the Company of shares of Stock of any class or series, or securities
convertible into shares of 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 of shares or obligations of the Company convertible into shares
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 Restricted Stock 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 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 of the
Company may, in the discretion of the Committee, forfeit any or all Awards granted to him under the
Plan.
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ARTICLE V
OPTIONS
5.1 Type of Option. The Committee shall specify in an Option Agreement whether a given Option
is an Incentive Option or a Nonqualified Option. However, notwithstanding such designation, to the
extent that the aggregate Fair Market Value (determined as of the time an Incentive Option is
granted) of the Stock with respect to which incentive stock options first become exercisable by an
Employee during any calendar year (under the Plan and any other incentive stock option plan(s) of
the Company or any Affiliate) exceeds $100,000, the Incentive Option shall be treated as a
Nonqualified Option. In making this determination, incentive stock options shall be taken into
account in the order in which they were granted.
5.2 Exercise Price. The price at which Stock may be purchased under an Option shall not be
less than 100 percent of the Fair Market Value of the shares of Stock on the date the Option is
granted. In the case of any Ten Percent Stockholder, the price at which shares of Stock may be
purchased under an Incentive Option shall not be less than 110 percent of the Fair Market Value of
the Stock on the date the Incentive Option is granted. An Option granted under the Plan may not be
granted with any Dividend Equivalents rights.
5.3 Duration of Options. An Option shall not be exercisable after the earlier of (i) the term
of the Option specified in the Option Agreement (which shall not exceed five years from the date
the Option is granted in the case of an Incentive Option granted to a Ten Percent Stockholder, or
ten years from the date the Option is granted in the case of any other Option), or (ii) the period
of time specified herein that follows the Holder’s Retirement, Disability, death or other severance
of the employment or affiliation relationship between the Holder and the Company and all
Affiliates. Except as specified in Section 9.11, unless the Holder’s Option Agreement specifies
otherwise, an Option shall not continue to vest after the severance of the employment or
affiliation relationship between the Company and all Affiliates.
(a) General Term of Option. Unless the Option Agreement specifies a shorter term, an
Option shall expire on the tenth anniversary of the date the Option is granted.
Notwithstanding the foregoing, unless the Option Agreement specifies a shorter term, in the
case of an Incentive Option granted to a Ten Percent Stockholder, the Option shall expire on
the fifth anniversary of the date the Option is granted.
(b) Early Termination of Option Due to Severance of Employment or Affiliation
Relationship (Other Than for Death, Disability or Retirement). Except as may be otherwise
expressly provided in an Option Agreement, (i) an Option that has been granted to a person
other than a Non-Employee Director and that has been in effect for at least two years shall
terminate on the earlier of the date of the expiration of the general term of the Option or
90 days after the date of the termination of the employment relationship between the Holder
and the Company and all Affiliates for any reason other than the death, Disability or
Retirement of the Holder, and (ii) an Option that has been granted to a person other than a
Non-Employee Director and that has been in effect for less than two years shall terminate on
the earlier of the date of the expiration of the general term of the Option or 30 days after
the date of the termination of the employment relationship between the Holder and the
Company and all Affiliates for any reason other than the death, Disability or Retirement of
the Holder, during which period the Holder shall be entitled to exercise the Option in
respect of the number of shares that the Holder would have been entitled to purchase had the
Holder exercised the Option on the date of such termination of employment. Whether
authorized leave of absence,
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or absence on military or government service, shall constitute a termination of the
employment relationship between the Holder and the Company and all Affiliates shall be
determined by the Committee at the time thereof.
Except as may be otherwise expressly provided in an Option Agreement, an Option that
has been granted to a Non-Employee Director shall terminate on the earlier of the date of
the expiration of the general term of the Option or 90 days after the Non-Employee Director
is no longer a director of the Company for any reason other than the death or Disability of
the Holder.
(c) Early Termination of Option Due to Death. Unless the Option Agreement specifies
otherwise, in the event of the severance of the employment or affiliation relationship
between the Holder and the Company and all Affiliates due to death before the date of
expiration of the general term of the Option, the Holder’s Option shall terminate on the
earlier of the date of expiration of the general term of the Option or 180 days after the
Holder’s death.
(d) Early Termination of Option Due to Disability. With respect to an Option granted
to a person other than a Non-Employee Director, unless the Option Agreement specifies
otherwise, in the event of the severance of the employment relationship between the Holder
and the Company and all Affiliates due to Disability before the date of the expiration of
the general term of the Option, the Option shall terminate on the earlier of the expiration
of the general term of the Option or 90 days after the termination of the employment
relationship between the Holder and the Company and all Affiliates terminates due to
Disability.
In the event his affiliation relationship is terminated as a result of Disability, a
Holder who is a Non-Employee Director may exercise an Option for a period of 180 days after
the Non-Employee Director is no longer a director of the Company or until the expiration of
the Option period, if sooner, to the extent of the Stock with respect to which the Option
could have been exercised by the Holder on the date the Non-Employee Director ceases being a
director of the Company.
(e) Early Termination of Option Due to Retirement. Unless the Option Agreement
specifies otherwise, if the Holder is an Employee and the employment relationship between
the Holder and the Company and all Affiliates terminates by reason of Retirement, the
Holder’s Option shall terminate on the earlier of the expiration of the general term of the
Option or one day less than three months after the date of the Holder’s termination of
employment due to Retirement.
After the death of the Holder, the Holder’s executors, administrators or any person or persons
to whom the Holder’s Option may be transferred by will or by the laws of descent and distribution,
shall have the right, at any time prior to the termination of the Option to exercise the Option, in
respect to the number of shares that the Holder would have been entitled to exercise if the Holder
exercised the Option prior to his death.
5.4 Amount Exercisable. Each Option may be exercised at the time, in the manner and subject
to the conditions the Committee specifies in the Option Agreement in its sole discretion. If
specified in the Option Agreement, an Option will be exercisable in full upon the occurrence of a
Change of Control.
5.5 Exercise of Options. Each Option shall be exercised by the delivery of written notice to
the Company setting forth the number of shares of Stock with respect to which the Option is to be
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exercised, together with: (a) cash, a certified check, a bank draft or a postal or express
money order payable to the order of the Company for an amount equal to the exercise price under the
Option, (b) Mature Shares with a Fair Market Value on the date of exercise equal to the exercise
price under the option, (c) an election to make a cashless exercise through a registered
broker-dealer or (d) except as specified below, any other form of payment which is acceptable to
the Committee, and specifying the address to which the certificates for the shares of Stock are to
be mailed or the information necessary for the Company to effect an electronic transfer of the
shares of Stock. If Mature Shares are used for payment by the Holder, the aggregate Fair Market
Value of the shares of Stock tendered must be equal to or less than the aggregate exercise price of
the shares of Stock being purchased upon exercise of the Option, and any difference must be paid
pursuant to (a) above. As promptly as practicable after receipt of written notification and
payment, the Company shall deliver the number of shares of Stock with respect to which the Option
has been exercised, issued as designated by the Holder. Delivery of the shares of Stock shall be
deemed effected for all purposes when the transfer agent of the Company shall have deposited the
certificates in the United States mail, to the address specified by the Holder, or when the shares
have been transferred electronically as designated by the Holder. In lieu of tendering the Mature
Shares to the Company for the exercise price pursuant to (b) above, the Company may, in its sole
discretion, accept documentation provided by the Holder that the Holder owns the Mature Shares
necessary for exercise and would be able to deliver them to the Company if requested by the
Company, in which case the Company will deliver only the Net Shares. The Company shall have sole
discretion in determining that the shares are Mature Shares and that they are unencumbered,
transferable, and acceptable by the Company for this purpose.
The delivery of certificates upon the exercise of Options is subject to the condition that the
person exercising the Option provide the Company with the information the Company might reasonably
request pertaining to exercise, sale or other disposition.
Electronic transfer of shares of Stock may be effected by the Company it is sole discretion,
in lieu of issuance of physical share certificate(s).
The Company may permit a Holder to elect to pay the exercise price upon the exercise of an
Option 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 exercise price and any applicable tax withholding resulting from such exercise.
An Option may not be exercised for a fraction of a Common Share.
5.6 Substitution Options. Options may be granted under the Plan from time to time in
substitution for stock options held by employees of other corporations who are about to become
employees of or affiliated with the Company or any Affiliate as the result of a merger or
consolidation of the employing corporation with the Company or any Affiliate, or the acquisition by
the Company or any Affiliate of the assets of the employing corporation, or the acquisition by the
Company or any Affiliate of stock of the employing corporation as the result of which it becomes an
Affiliate of the Company. The terms and conditions of the substitute Options granted may vary from
the terms and conditions set out in the Plan to the extent the Committee, at the time of grant, may
deem appropriate to conform, in whole or in part, to the provisions of the stock options in
substitution for which they are granted.
5.7 No Rights as Stockholder. No Holder shall have any rights as a Stockholder with respect
to Stock covered by his Option until the shares of Stock are delivered to him.
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ARTICLE VI
RESTRICTED STOCK AWARDS
6.1 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;
provided, however, that the minimum vesting period for any Awards of Restricted Stock should
normally be ratably over a period of three years and, in no event, less than one year. If the
Committee imposes vesting or transferability restrictions on a Holder’s rights with respect to
shares of Restricted Stock, the Committee may issue such instructions to the Company’s transfer
agent in connection therewith as it deems appropriate. The Committee may also cause the
certificate for shares 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. Each Restricted Stock Award shall
be evidenced by a Restricted Stock Award Agreement that contains any vesting, transferability
restrictions and other provisions that are not inconsistent with the Plan as the Committee may
specify.
6.2 Holder’s Rights as Stockholder. Subject to the terms and conditions of the Plan, each
Holder of Restricted Stock shall have all the rights of a shareholder with respect to the shares of
Stock included in the Restricted Stock Award during any period in which such shares are subject to
forfeiture and restrictions on transfer, including without limitation, the right to vote such
shares, if unrestricted shares of the same class have the right to vote. Dividends paid with
respect to shares of Restricted Stock in cash or property other than Stock in the Company or rights
to acquire shares of Stock in the Company shall be paid to the Holder currently. Dividends paid in
Stock in the Company or rights to acquire Stock in the Company shall be added to and become a part
of the Restricted Stock.
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ARTICLE VII
ADMINISTRATION
The Plan shall be administered by the Committee. All questions of interpretation and
application of the Plan and Awards shall be subject to the determination of the Committee. A
majority of the members of the Committee shall constitute a quorum. All determinations of the
Committee shall be made by a majority of its members. 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. The Plan shall be administered in such a
manner as to permit the Options which are designated to be Incentive Options to qualify as
Incentive Options. 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 of shares and the exercise price of Stock covered in each
Award, subject to the terms of the Plan;
(c) determine the terms, provisions and conditions of each Award, which need not be
identical;
(d) accelerate the time at which any outstanding Option may be exercised, or Restricted
Stock Award will vest; provided, however, that the Committee determines that such
acceleration of vesting is in the best interests of the Company and its shareholders;
(e) define the effect, if any, on an Award of the death, disability, retirement or
termination of employment or affiliation relationship between the Holder and the Company and
Affiliates;
(f) prescribe, amend and rescind rules and regulations relating to administration of
the Plan; and
(g) make all other determinations and take all other actions deemed necessary,
appropriate or advisable for the proper administration of the Plan.
The actions of the Committee in exercising all of the rights, powers, and authorities set out
in this Article and all other Articles of the Plan, when performed in good faith and in its sole
judgment, shall be final, conclusive and binding on all parties.
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ARTICLE VIII
AMENDMENT OR TERMINATION OF PLAN
The Board may amend, terminate or suspend the Plan at any time, in its sole and absolute
discretion; provided, however, that to the extent required to maintain the status of any Option
under the Code, no amendment that would change the aggregate number of shares of Stock which may be
issued under Options, or change the class of Employees eligible to receive Options shall be made
without the approval of the Company’s stockholders. Subject to the preceding sentence, the Board
shall have the power to make any changes in the Plan and in the regulations and administrative
provisions under it or in any outstanding Incentive Option as in the opinion of counsel for the
Company may be necessary or appropriate from time to time to enable any Incentive Option granted
under the Plan to continue to qualify as an incentive stock option or such other stock option as
may be defined under the Code so as to receive preferential federal income tax treatment.
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ARTICLE IX
MISCELLANEOUS
9.1 No Establishment of a Trust Fund. 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. All Holders shall at
all times rely solely upon the general credit of the Company for the payment of any benefit which
becomes payable under the Plan.
9.2 No Employment or Affiliation Obligation. The granting of any Option or 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 Option or Award has been granted to him.
9.3 Forfeiture. Notwithstanding any other provisions of the Plan, if the Committee finds by a
majority vote after full consideration of the facts that the Holder, before or after termination of
his employment or affiliation relationship with the Company or an Affiliate for any reason
committed or engaged in willful misconduct, gross negligence, a breach of fiduciary duty, fraud,
embezzlement, theft, a felony, a crime involving moral turpitude or proven dishonesty in the course
of his employment by the Company or an Affiliate, which conduct damaged the Company or Affiliate,
the Holder shall forfeit all outstanding Options and all outstanding Awards, and all exercised
Options if the Company has not yet delivered Stock to the Holder with respect thereto.
The decision of the Committee as to the cause of the Holder’s discharge, the damage done to
the Company or an Affiliate shall be final. No decision of the Committee, however, shall affect
the finality of the discharge of the Holder by the Company or an Affiliate in any manner.
9.4 Tax Withholding. Except with respect to each Holder who is a Non-Employee Director, 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 grant or
exercise of an Option, or lapse of restrictions on Restricted Stock. In the alternative, the
Company may require the Holder of an Award to pay such sums for taxes directly to the Company or
any Affiliate in cash or by check within ten days after the date of exercise or lapse of
restrictions. In the discretion of the Company, and with the consent of the Holder, the Company
may reduce the number of shares of Stock issued to the Holder upon his 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 held back shall not exceed the Company’s or the Affiliate’s minimum
statutory withholding tax obligations. The Company may, in its discretion, permit a Holder to
satisfy any tax withholding obligations arising upon the vesting of Restricted Stock by delivering
to the Holder of the Restricted Stock Award a reduced number of shares of Stock in the manner
specified herein. If permitted by the Company and acceptable to the Holder, at the time of vesting
of shares of Restricted Stock, the Company shall (i) calculate the amount of the Company’s or an
Affiliate’s minimum statutory tax withholding obligation on the assumption that all such vested
shares of Restricted Stock are made available for delivery, (ii) reduce the number of such shares
made available for delivery so that the Fair Market Value of the shares withheld on the vesting
date approximates the amount of tax the Company or an Affiliate is obliged to withhold and (iii) in
lieu of the withheld shares, remit cash to the United States Treasury and other applicable
governmental authorities, on behalf of the Holder, in the amount of the withholding tax due. The
Company shall withhold only whole shares of Stock to satisfy its withholding obligation. Where the
Fair Market Value of the withheld shares does not equal the Company’s withholding tax obligation,
the Company shall withhold shares with a Fair Market Value slightly less than the amount of its
withholding obligation and
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the Holder of the Restricted Stock Award must satisfy the remaining withholding obligation in
some other manner permitted under this Section 9.4. The withheld shares of Restricted Stock not
made available for delivery by the Company shall be retained as treasury stock or will be cancelled
and, in either case, the Holder’s right, title and interest in such Restricted Stock shall
terminate. The Company shall have no obligation upon exercise of any Option or lapse of
restrictions on Restricted Stock until the Company or an Affiliate has received payment sufficient
to cover all tax withholding amounts due with respect to that exercise. 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.
9.5 Written Agreement. Each Award shall be embodied in a written agreement which shall be
subject to the terms and conditions of the Plan and shall be signed by the Holder and by a member
of the Committee on behalf of the Committee and the Company or an executive officer of the Company,
other than the Holder, on behalf of the Company. The agreement may contain any other provisions
that the Committee in its discretion shall deem advisable which are not inconsistent with the terms
of the Plan.
9.6 Indemnification of the Committee. The Company shall indemnify each present and future
member of the Committee against, and each member of the Committee shall be entitled without further
act on his part to indemnity from the Company for, all expenses (including attorney’s fees, the
amount of judgments and the amount of approved settlements made with a view to the curtailment of
costs of litigation, other than amounts paid to the Company itself) reasonably incurred by him in
connection with or arising out of any action, suit or proceeding in which he may be involved by
reason of his being or having been a member of the Committee, whether or not he continues to be a
member of the Committee at the time of incurring the expenses, including, without limitation,
matters as to which he shall be finally adjudged in any action, suit or proceeding to have been
found to have been negligent in the performance of his duty as a member of the Committee. However,
this indemnity shall not include any expenses incurred by any member of the Committee in respect of
matters as to which he shall be finally adjudged in any action, suit or proceeding to have been
guilty of gross negligence or willful misconduct in the performance of his duty as a member of the
Committee. In addition, no right of indemnification under the Plan shall be available to or
enforceable by any member of the Committee unless, within 60 days after institution of any action,
suit or proceeding, he shall have offered the Company, in writing, the opportunity to handle and
defend same at its own expense. This right of indemnification shall inure to the benefit of the
heirs, executors or administrators of each member of the Committee and shall be in addition to all
other rights to which a member of the Committee may be entitled as a matter of law, contract or
otherwise.
9.7 Gender. 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.
9.8 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 of the
Plan.
9.9 Other Compensation Plans. The adoption of the Plan shall not affect any other stock
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.
9.10 Other Options or 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.
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9.11 Option Adjustments Pursuant to the Employee Benefits Agreement. Notwithstanding any
other provision of the Plan or an Option Agreement, the exercise price applicable to each
outstanding Option, to the extent that the Option has not expired or been exercised as of the
Distribution Date, shall be reduced in accordance with the formula specified in paragraph (b) of
Section 3.1 of the Employee Benefits Agreement. Notwithstanding any other provisions of the Plan
or Option Agreement, the term of each outstanding Option, to the extent that the Option has not
expired or been exercised as of the Distribution Date, shall be adjusted in the manner specified in
paragraph (e) of Section 3.1 of the Employee Benefits Agreement.
9.12
Governing Law.The provisions of the Plan shall be construed, administered and governed
under the laws of the State of Texas.
9.13 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. If the Committee determines that an Award, Award agreement, payment, distribution,
deferral election, transaction, or any other action or arrangement contemplated by the provisions
of the Plan would, if undertaken or implemented, cause a Holder to become subject to additional
taxes under Section 409A, then unless the Committee specifically provides otherwise, such Award,
Award agreement, payment, distribution, deferral election, transaction or other action or
arrangement shall not be given effect to the extent it causes such result and the related
provisions of the Plan and/or Award agreement will be deemed modified, or, if necessary, suspended
in order to comply with the requirements of Section 409A to the extent determined appropriate by
the Committee, in each case without the consent of or notice to the Holder. The exercisability of
an Option shall not be extended to the extent that such extension would subject the Holder to
additional taxes under Section 409A.
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