Exhibit (d)(3)
KTI, INC.
1994 LONG-TERM INCENTIVE AWARD PLAN
1. DEFINITIONS
In this Plan, except where the context otherwise indicates, the
following definitions apply:
1.1 "Agreement" means a written agreement implementing a grant of an
Option, Right or an award of Incentive Shares.
1.2 "Board" means the Board of Directors of the Corporation.
1.3 "Code" means the Internal Revenue Code of 1986, as amended, and the
rules and regulations promulgated thereunder.
1.4 "Committee" means the committee of two of more members appointed by
the Board to administer the Plan, all of the members of which shall be
"disinterested persons" as defined in Rule 16b-3(c)(2)(i) under the Exchange Act
or any similar successor rule.
1.5 "Common Stock" means the common stock of the Corporation.
1.6 "Corporation" means KTI, Inc., a New Jersey Corporation.
1.7 "Date of Exercise" means the date on which the Corporation receives
notice of the exercise of an Option or Right in accordance with the terms of
Article 8, except that when an Optionee elects to receive cash upon exercise of
a Right granted in connection with a Nonstatutory Stock Option and the Optionee
further elects to have the "Date of Exercise" determined in accordance with the
following and the Committee consents thereto, "Date of Exercise" shall mean the
date on which the Common Stock has its highest Fair Market Value during the
period specified in Rule 16b-3(e)(3) under the Exchange Act in which the Right
is exercised.
1.8 "Date of Grant" means the date on which an Option or Right is
granted or Incentive Shares are awarded by the Committee or such later date as
may be specified by the Committee in authorizing the grant or award.
1.9 "Exchange Act" means the Securities Exchange Act of 1934, as
amended, and the rules and regulations promulgated thereunder.
1.10 "Fair market Value" of a Share means the amount equal to the fair
market value of a Share as determined pursuant to a reasonable method adopted by
the Committee in good faith for such purpose.
1.11 "Grantee" means a Key Employee to whom Incentive Shares have been
awarded pursuant to Article 10.
1.12 "Incentive Shares" means Shares awarded pursuant to the provisions
of Article 10.
1.13 "Incentive Stock Option" means an Option granted under the Plan
that qualified as an incentive stock option under Section 422 of the Code and
that the Corporation designates as such in the Agreement granting the Option.
1.14 "Key Employee" means an employee or officer of the Corporation or
one or more of its Subsidiaries designated as "Key Employee" by the Committee.
1.15 "Nonstatutory Stock Option" means an Option granted under the Plan
that is not an Incentive Stock Option.
1.16 "Option" means an option to purchase Shares granted under the Plan
in accordance with the terms of Article 6.
1.17 "Option Period" means the period during which an Option may be
exercised.
1.18 "Option Price" means the price per share at which an Option may be
exercised. The Option Price shall be determined by the Committee, but unless
otherwise determined by the Committee pursuant to Section 3.7, in no event shall
the Option Price be less than the Fair Market Value per Share determined as of
the Date of Grant.
1.19 "Optionee" means a Key Employee to whom an Option or Right has
been granted.
1.20 "Performance Period" means the period or periods during which each
performance standard of an Incentive Share will be measured against the
performance standards established by the Committee and specified in the
Agreement relating thereto.
1.21 "Related Option" means an Option granted in connection with a
specified Right.
1.22 "Related Right" means a Right granted in connection with a
specified Option.
1.23 "Right" means a stock appreciation right granted under the Plan in
accordance with the terms of Article 7.
1.24 "Right Period" means the period during which a Right may be
exercised.
1.25 "Share" means a share of authorized but unissued Common Stock or a
reacquired share of Common Stock.
1.26 "Subsidiary" means a corporation at least 80% of the total
combined voting power of all classes of stock of which is owned by the
Corporation, either directly or through one or more other Subsidiaries.
2. PURPOSE
The Plan is intended to assist in attracting, retaining, and motivating
Key Employees of outstanding ability and to promote the identification of their
interests with those of the shareholders of the Corporation.
3. ADMINISTRATION
The Plan shall be administered by the Committee. In addition to any
other powers granted to the Committee, it shall have the following powers,
subject to the express provisions of the Plan:
3.1 To determine in its discretion the Key Employees to whom Options or
Rights shall be granted and to whom Incentive Shares shall be awarded, the
number of Shares to be subject to each Option or Right or Incentive Share award,
and the terms upon which Options or Rights may be acquired and exercised and the
terms and conditions of Incentive Share awards;
3.2 To determine all other terms and provisions of each Agreement,
which need not be identical;
3.3 Without limiting the generality of the foregoing, to provide in its
discretion in an Agreement:
(i) for an agreement by the Optionee or Grantee to render services
to the Corporation or a Subsidiary upon such terms and conditions as may be
specified in the Agreement, provided that the Committee shall not have the power
under the Plan to commit the Corporation or any Subsidiary to employ or
otherwise retain any Optionee or Grantee;
(ii) for restrictions on the transfer, sale or other disposition
of Shares issued to the Optionee upon the exercise of an Option or right or for
conditions with respect to the issuance of Incentive Shares;
(iii) for an agreement by the Optionee or Grantee to resell to the
Corporation, under specified conditions, Shares issued upon the exercise of an
Option or Right or awarded as Incentive Shares;
(iv) for the payment of the Option Price upon the exercise of an
Option otherwise than in cash, including without limitation by delivery of
Shares valued at Fair Market Value on the Date of Exercise of the Option or a
combination of cash and Shares;
3.4 To construe and interpret the Agreements and the Plan;
3.5 To require, whether or not provided for in the pertinent Agreement,
of any person exercising an Option or Right or acquiring Incentive Shares, at
the time of such exercise or acquisition, the making of any representations or
agreements which the Committee may deem necessary or advisable in order to
comply with applicable securities laws;
3.6 To provide for satisfaction of an Optionee's or Grantee's tax
liabilities arising in connection with the Plan through, without limitation,
retention by the Corporation of shares of Common Stock otherwise issuable on the
exercise of a Nonstatutory Stock Option or Right or pursuant to an award of
Incentive Shares or through delivery of Common Stock to the Corporation by the
Optionee or Grantee under such terms and conditions as the Committee deems
appropriate;
3.7 To determine that the Option Price of an Option or the base price
for determining the amount payable on exercise of a Right which is not a Related
Right shall be less than the Fair Market Value per Share on the Date of Grant of
the Option or Right if (i) such Option or right is granted in substitution for
an outstanding Option or Right, (ii) the number of Shares subject to the new
Option or Right is not in excess of the number of Shares subject to the
outstanding Option or Right for which it is substituted, and (iii) the Option
Price or base price of the new Option or Right is not less than the Option Price
or base price of the outstanding Option or Right for which it is substituted (as
previously determined by the Committee). Subject to the foregoing, an Option
(with or without a Related Right) may be substituted either for an outstanding
Option (including any Related Right) or for an outstanding Right which is not a
Related Right, a Right which is not a Related Right may be substituted either
for another such Right or for an outstanding Option (including any Related
Right) and a Related Right may be Substituted for another Related Right;
3.8 To make all other determinations and take all other actions
necessary or advisable for the administration of the Plan; and
3.9 To delegate to officers or managers of the Corporation or any
Subsidiary the authority to perform administrative functions under the Plan.
Any determinations or actions made or taken by the Committee pursuant
to this Article shall be binding and final.
4. ELIGIBILITY
Options, Rights and Incentive Shares may be granted or awarded only to
Key Employees; PROVIDED, HOWEVER, that the members of the Committee are not
eligible to receive Options, Rights or Incentive Shares; and provided, further,
that except for Options issued on the effective date of the acquisition of
Convergent Solutions, Inc., a Delaware corporation, by the Corporation, no
person who is a full time employee of DataFocus Incorporated, a Delaware
corporation, may be designated as a Key Employee. A person may not receive a
grant of an Option, Right or award of Incentive Shares under this Plan and the
KTI, Inc. 1994 DataFocus Incorporated Long-Term Incentive Award Plan in the Same
fiscal year of the Corporation.
5. STOCK SUBJECT TO THE PLAN
5.1 Except as provided in Article 11, the maximum number of Shares that
may be issued or as to which grants or awards may be made under the Plan shall
not exceed 1,150,000 Shares.
5.2 If an Option or Right expires or terminates for any reason (other
than termination by virtue of the exercise of a Related Option or Related Right,
as the case may be) without having been fully exercised, or if Incentive Shares
are not issued or are forfeited (unless during the period such Incentive Shares
were outstanding the Optionee shall have received dividends or other "benefits
of ownership" from such Shares), the unissued or forfeited Shares which had been
subject to the Agreement relating thereto shall again become available for the
grant of other Options or Rights or for the award of additional Incentive
Shares.
5.3 The Shares issued upon the exercise of a Right (or if cash is
payable in connection with such exercise, that number of Shares having a Fair
Market Value equal to the cash payable upon such exercise), shall be charged
against the number of Shares issuable under the Plan and shall not become
available for the grant of other Options or Rights or for the award of Incentive
Shares. If the Right referred to in the preceding sentence is a Related Right,
the Shares subject to the Related Option, to the extent not charged against the
number of Shares subject to the Plan in accordance with this Section 5.3, shall
again become available for the grant of other Options or Rights or for the award
of additional Incentive Shares.
5.4 The number of Shares covered by Rights (excluding Related Rights),
Options and awards of Incentive Shares granted to a Key Employee in any one
fiscal year of the Corporation shall not exceed 25,000 Shares; PROVIDED,
however, that in the year ended December 31, 1994, Options exceeding this
limitation may be granted by the Committee to former or present officers,
directors or employees of Convergent Solutions, Inc., a Delaware corporation, or
any of its subsidiaries upon consummation of the acquisition of Convergent
Solutions, Inc. by the Corporation.
6. 0PTIONS
6.1 The Committee is hereby authorized to grant Nonstatutory Stock
Options and Incentive Stock Options to Key Employees.
6.2 All Agreements granting Options shall contain a statement that the
Option is intended to be either (i) a Nonstatutory Stock Option or (ii) an
Incentive Stock Option.
6.3 The Option Period shall be determined by the Committee and
specifically set forth in the Agreement, provided, HOWEVER, that an Option shall
not be exercisable until the expiration of at least six months from the Date of
Grant (except that this limitation need not apply in the event of the death or
disability of the Optionee, or in the event of Options issued in 1994 to former
or present officers,
directors or employees of Convergent Solutions, Inc. or any of its subsidiaries
upon consummation of the acquisition of Convergent Solutions, Inc. by the
Corporation) or after ten years from the Date of Grant.
6.4 All Incentive Stock Options granted under the Plan shall comply
with the provisions of the Code governing incentive stock options and with all
other applicable rules and regulations.
6.5 All other terms of Options granted under the Plan shall be
determined by the Committee in its sole discretion.
7. RIGHTS
7.1 The Committee is hereby authorized to grant Rights to Key
Employees.
7.2 A Right may be granted under the Plan:
(i) in connection with, and at the same time as, the grant of an
Option to a Key Employee;
(ii) by amendment of an outstanding Nonstatutory Stock Option
granted under the Plan to a Key Employee; or
(iii) independently of any Option granted under the Plan.
A Right granted under clause (i) or (ii) of the preceding sentence is a
Related Right. A Related Right may, in the Committee's discretion, apply to all
or a portion of the Shares subject to the Related Option.
7.3 A Right may be exercised in whole or in part as provided in the
Agreement, and, subject to the provisions of the Agreement, entitles its
Optionee to receive, without any payment to the Corporation (other than required
tax withholding amounts), either cash or that number of shares (equal to the
highest whole number of Shares), or a combination thereof, in an amount or
having a Fair Market Value determined as of the Date of Exercise not to exceed
the number of Shares subject to the portion of the Right exercised multiplied by
an amount equal to the excess of the Fair Market Value per Share on the Date of
Exercise of the Right over either (i) the Fair Market Value per Share on the
Date of Grant of the Right or the base price determined by the Committee
pursuant to Section 3.7 if the Right is not a Related Right, or (ii) the Option
Price as provided in the Related Option if the Right is a Related Right.
7.4 The Right Period shall be determined by the Committee and
specifically set forth in the Agreement, PROVIDED, HOWEVER:
(i) a Right may not be exercised until the expiration of at least
six months from the Date of Grant (except that this limitation need not apply in
the event of the death or disability of the Optionee);
(ii) a Right will expire no later than the earlier of (A) ten
years from the Date of Grant, or (B) in the case of a Related Right, the
expiration of the Related Option;
(iii) a Right may be exercised only when the Fair Market Value of
a Share exceeds either (A) the Fair market Value per Share on the Date of Grant
of the Right or the base price determined by the Committee pursuant to Section
3.7 if the Right is not a Related Right, or (B) the Option Price as provided in
the Related Option if the right is a Related Right; and
(iv) a Right that is a Related Right may be exercised only when
and to the extent the Related Option is exercisable.
7.5 The exercise, in whole or in part, of a Related Right shall cause a
reduction in the number of Shares subject to the Related Option equal to the
number of Shares with respect to which the Related Right is exercised.
Similarly, the exercise, in whole or in part, of a Related Option shall cause a
reduction in the number of Shares subject to the Related Right equal to the
number of Shares with respect to which the Related Option is exercised.
7.6 If on the Date of Exercise the Optionee is subject to Section 16 of
the Exchange Act or if so provided in the Agreement, the Committee shall have
the sole discretion to consent to or disapprove the election of any Optionee to
receive cash in full or partial settlement of a Right. In cases where an
election of settlement in cash must be consented to by the Committee, the
Committee may consent to, or disapprove, such election at any time after such
election, or within such period for taking action as is specified in the
election, and failure to give consent shall constitute disapproval. Consent may
be given in whole or as to a portion of the Right surrendered by the Optionee.
If the election to receive cash is disapproved of in whole or in part, the Right
shall be deemed to have been exercised for Shares, or, if so specified in the
notice of exercise and election, not to have been exercised to the extent the
election to receive cash is disapproved.
8. EXERCISE; PAYMENT OF WITHHOLDING TAXES
An Option or Right may, subject to the provisions of the Agreement
under which it was granted, be exercised in whole or in part by the delivery to
the Corporation of written notice of the exercise, in such form as the Committee
may prescribe, accompanied, in the case of an Option, by full payment for the
Shares with respect to which the Option is exercised, and in the case of an
Option or Right, full payment for related withholding taxes, if any. The receipt
of Incentive Shares shall be subject to full payment by the Grantee of any
withholding taxes then required to be paid.
9. NONTRANSFERABILITY
Options or Rights granted under the Plan shall not be transferable
otherwise than by will or the laws of descent and distribution, and an Option or
Right may be exercised during his or her lifetime only by the Optionee or, in
the event of his or her legal disability, by his or her legal representative. A
Related Right is transferable only when the Related Option is transferable and
only with the Related Opinion and under the same conditions.
10. INCENTIVE SHARE AWARDS
10.1 The Committee is hereby authorized to grant Incentive Shares to
Key Employees.
10.2 Incentive Shares may be issued as provided in the Agreement,
without any payment to the Corporation (other than required tax withholding
amounts), based solely upon the degree to which objective performance standards
established by the Committee at the time of grant and specified in the Agreement
have been achieved. Prior to the issuance of Incentive Shares, the Committee
must certify in writing or through approved minutes of the meeting in which
certification is made that the applicable performance standards were in fact
satisfied. During the Performance Period, such performance standards may be
related to the particular performance of a Key Employee or the department,
branch, Subsidiary or other unit in which he or she works, or may be based on
the performance of the Corporation generally. The performance standards may be
based on earnings or earnings growth; return on assets, equity or investment;
specified improvement of financial ratings; achievement of specified balance
sheet or income statement objectives; or stock price; sales; or market share,
and may be based on the absolute changes in such factors or measured against or
in relationship to the same objective factors of other companies comparably or
similarly situated.
11. CAPITAL ADJUSTMENTS
The number and class of Shares subject to each outstanding Option or
Right or Incentive Share award, the Option Price, the aggregate number and class
of shares for which grants or awards thereafter may be made and the maximum
number of Shares granted to a Key Employee under the Plan in any fiscal year of
the Corporation shall be subject to such adjustment, if any, as the Committee in
its sole discretion deems appropriate to reflect such events as stock dividends,
stock splits, recapitalizations, mergers, consolidations or reorganizations of
or by the Corporation.
12. TERMINATION OR AMENDMENT
The Board shall have the power to terminate the Plan in whole or in
part and to amend it in any respect, provided that, the Board may not, without
the approval of the Shareholders of the corporation, amend the Plan so as to
increase materially the aggregate number of Shares that may be issued under the
Plan (except as provided in Article 11), to modify materially the requirements
as to eligibility to receive Options, Rights or Incentive Shares or to increase
materially the benefits accruing to participants or the number of Shares (except
as provided in Article 11) which may be granted to a participant in a fiscal
year of the Corporation as Incentive Shares, Options or rights under the Plan.
No termination or amendment of the Plan shall, without his or her consent,
adversely affect the rights or obligations of any Optionee or Grantee with
respect to grants or awards previously made.
13. MODIFICATION, EXTENSION AND RENEWAL OF OPTIONS AND RIGHTS
Subject to the terms and conditions and within the limitations of the
Plan, the Committee may modify, extend or renew outstanding Options or Rights or
accept the surrender of outstanding Options or rights (to the extent not
theretofore exercised) granted under the Plan or under any other plan of the
Corporation, a Subsidiary or a company or similar entity acquired by the
Corporation or a Subsidiary, and authorize the granting of new Options and
Rights pursuant to the Plan in substitution therefor (to the extent not
theretofore exercised), and the substituted Options and Rights may specify a
longer term than the surrendered Options and Rights or have any other provisions
that are authorized by the Plan; PROVIDED, HOWEVER, that the substituted Options
and Rights may not specify a lower exercise price than the surrendered Options
and Rights. Subject to the terms and conditions and within the limitations of
the Plan, the Committee may modify the terms of any outstanding Agreement
providing for awards of Incentive Shares. Notwithstanding the foregoing,
however, no modification of an Option or Right granted under the Plan, or an
award of Incentive Shares, shall, without the consent of the Optionee or
Grantee, adversely affect the rights or obligations of the Optionee or Grantee.
14. EFFECTIVENESS OF THE PLAN AND AMENDMENTS
The effective date of the Plan was July 6, 1994. Any amendments to the
Plan requiring shareholder approval pursuant to Article 12 are subject to
approval by vote of the shareholders of the Corporation within 12 months after
their adoption by the Board. Subject to that approval, any amendments are
effective on the date on which they are adopted by the Board. Options, Rights or
Incentive Shares may be granted or awarded prior to shareholder approval of
amendments, but each Option, Right or Incentive Share grant or award requiring
such amendments shall be subject to the approval of the amendments by the
shareholders. The date on which any Option, Right or Incentive Shares granted or
awarded prior to shareholder approval of the amendment is granted or awarded
shall be the Date of Grant for all purposes of the Plan as if the Option, Right
or Incentive Shares had not been subject to approval. No Option or Right granted
subject to shareholder approval of an amendment may be exercised prior to such
shareholder approval, and any Incentive Shares awarded subject to shareholder
approval of an amendment and any dividends payable thereon are subject to
forfeiture if such shareholder approval is not obtained.
15. TERM OF THE PLAN
Unless sooner terminated by the Board pursuant to Article 13, the Plan
shall terminate on July 6, 2004, and no Options, Rights or Incentive Shares may
be granted or awarded after termination. The termination shall not affect the
validity of any Option, Right or Incentive Shares outstanding on the date of
termination.
16. INDEMNIFICATION OF CONMITTEE
In addition to such other rights of indemnification as they may have as
directors or as members of the Committee, the members of the Committee shall be
indemnified by the Corporation against the reasonable expenses, including
attorney's fees, actually and reasonably incurred in connection with the defense
of any action, suit or proceeding, or in connection with any appeal therein, to
which they or any of them may be a party by reason of any action taken or
failure to act under or in connection with the Plan or any Option, Right or
Incentive Shares granted or awarded hereunder, and against all amounts
reasonably paid by them in settlement thereof or paid by them in satisfaction of
a judgment in any such action, suit or proceeding, if such members acted in good
faith and in a manner which they believed to be in, and not opposed to, the best
interests of the Corporation.
17. GENERAL PROVISIONS
17.1 The establishment of the Plan shall not confer upon any Key
Employee any legal or equitable right against the Corporation, any Subsidiary or
the Committee, except as expressly provided in the Plan.
17.2 The Plan does not constitute inducement or consideration for the
employment of any Key Employee, nor is it a contract between the Corporation or
any Subsidiary and any Key Employee. Participation in the Plan shall not give a
Key Employee any right to be retained in the service of the Corporation or any
Subsidiary.
17.3 The Corporation and its Subsidiaries may assume options, warrants,
or rights to purchase stock issued or granted by other corporations whose stock
or assets shall be acquired by the Corporation or its Subsidiaries, or which
shall be merged into or consolidated with the Corporation or its Subsidiaries.
Neither the adoption of this Plan, nor its submission to the shareholders, shall
be taken to impose any limitations on the powers of the Corporation or its
affiliates to issue, grant, or assume options, warrants, or rights, otherwise
than under this Plan, or to adopt other stock option or restricted stock plans
or to impose any requirement of shareholder approval upon the same.
17.4 The interests of any Key Employee under the Plan are not subject
to the claims of creditors and may not, in any way, be assigned, alienated or
encumbered.
17.5 The Plan shall be governed, construed and administered in
accordance with the laws of the State of New Jersey, and it is the intention of
the Corporation that Incentive Stock Options granted under the Plan qualify as
such under Section 422 of the Code.
