Attached files
EXHIBIT (10)(xxi)
PEOPLES BANCORP OF NORTH CAROLINA, INC.
2020 OMNIBUS STOCK OWNERSHIP AND
LONG
TERM INCENTIVE PLAN
May
7, 2020
THIS IS
THE 2020 OMNIBUS STOCK OWNERSHIP AND LONG TERM INCENTIVE PLAN
(“Plan”) of Peoples Bancorp of North Carolina, Inc.
(the “Company”), a North Carolina corporation with its
principal office in Newton, Catawba County, North Carolina, under
which Incentive Stock Options and Non-Qualified Options to acquire
Shares of Common Stock, Restricted Stock, Restricted Stock Units,
Stock Appreciation Rights, and/or Performance Units may be granted
from time to time to Eligible Directors and Eligible Employees of
the Company and of any of its Subsidiaries, subject to the
following provisions.
ARTICLE
I
DEFINITIONS
The
following terms shall have the meanings set forth below. Additional
terms defined in this Plan shall have the meanings ascribed to them
when first used herein.
Award.
An award, grant or issuance of any of the Rights available under
this Plan.
Award
Agreement. The
written agreement between the Company and/or the Bank and the
Grantee that evidences and sets out the terms and conditions of an
Award, subject to the provisions of this Plan.
Bank.
Peoples Bank, Newton, North Carolina.
Board.
The Board of Directors of Peoples Bancorp of North Carolina,
Inc.
Change in
Control. Any one of
the following corporate events: (i) a Change of Ownership; (ii) a
Change in Effective Control; or (iii) a Change of Asset Ownership;
in each case, as defined herein and as further defined and
interpreted in Section 409A.
(i)
“Change of Ownership” shall mean the date one person
(or group) acquires ownership of stock of the Company that,
together with stock previously held, constitutes more than 50% of
the total fair market value or total voting power of the stock of
the Company; provided that such person (or group) did not
previously own 50% or more of the value or voting power of the
stock of the Company.
(ii)
“Change in Effective Control” means the date either (A)
one person (or group) acquires (or has acquired during the
preceding 12 months ending on the date of the most recent
acquisition) ownership of stock of the Company possessing 30% or
more of the total voting power of the Company stock or (B) a
majority of the board of directors of the Company is replaced
during any 12 month period by directors whose election is not
endorsed by a majority of the members of the board of directors of
the Company prior to the date of such appointment or
election.
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(iii)
“Change of Asset Ownership” means the date one person
(or group) acquires (or has acquired during the preceding 12 months
ending on the date of the most recent acquisition) assets from the
Company that have a total gross fair market value that is equal to
or exceeds 40% of the total gross fair market value of all the
Company’s assets immediately prior to such
acquisition.
(iv)
For purposes of determining whether the Company has undergone a
Change in Control under the Plan, the term “Company”
shall include any corporation that is a majority shareholder of the
Company within the meaning of Section 409A (i.e., owning more than
50% of the total fair market value and total voting power of the
Company).
Code.
The Internal Revenue Code of 1986, as amended. Any reference to a
section of the Code shall be deemed to include a reference to any
regulations promulgated thereunder.
Committee.
The Compensation Committee of the Board, which shall be composed
solely of two or more members of the Board who are
“non-employee directors” as described in Rule 16(b)(3)
of the Rules and Regulations under the Securities Exchange Act of
1934, as amended.
Common
Stock. The Common
Stock, no par value, of the Company.
Corporate
Transaction. Any one
or more of the following transactions:
(i)
a merger or
consolidation in which the Company is not the surviving entity,
except for a transaction the principal purpose of which is to
change the state in which the Company is incorporated;
(ii)
the sale, transfer,
or other disposition of all or substantially all of the assets of
the Company (including without limitation the capital stock of the
Company’s Subsidiaries);
(iii)
approval by the
Company’s shareholders of any plan or proposal for the
complete liquidation or dissolution of the Company;
(iv)
any reverse merger
in which the Company is the surviving entity but in which
securities possessing more than fifty (50%) percent of the total
combined voting power of the Company’s outstanding securities
are transferred to a person or entity or persons or entities
different from those that held such securities immediately prior to
such merger; or
(v)
acquisition by any
person or entity or related group of persons or entities (other
than the Company or a Company-sponsored employee benefit plan) of
beneficiary ownership (within the meaning of Rule 13d-3 of the
Exchange Act) of securities possessing more than fifty (50%)
percent of the total combined voting power of the Company’s
outstanding securities (whether or not in a transaction also
constituting a Change in Control).
Death.
The date and time of death of an Eligible Director or Eligible
Employee who has received Rights, as established by the relevant
death certificate.
Disability.
The date on which an Eligible Director or Eligible Employee who has
received Rights is:
(i)
unable to engage in
any substantial gainful activity by reason of any medically
determinable physical or mental impairment which can be expected to
result in death or can be expected to last for a continuous period
of not less than 12 months, or
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(ii)
by reason of any
medically determinable physical or mental impairment (which can be
expected to result in death or can be expected to last for a
continuous period of not less than 12 months), receiving income
replacement benefits for a period of 3 or more months under an
accident and health plan covering employees of the Company and/or
the Bank, or
(iii)
determined to be
disabled by the Social Security Administration.
Effective
Date. Pursuant to the
action of the Board adopting the Plan, the date as of which this
Plan is effective is the date it is approved by the Company’s
shareholders.
Eligible
Directors. Those
individuals who are duly elected directors of the Company or any
Subsidiary who are serving in such capacity and who have been
selected by the Committee as a person to whom a Right or Rights
shall be granted under the Plan.
Eligible
Employees. Those
individuals who meet the following eligibility
requirements:
(i)
Such individual
must be a full time employee of the Company or a Subsidiary. For
this purpose, an individual shall be considered to be an
“employee” only if there exists between the Company or
a Subsidiary and the individual the legal and bona fide
relationship of employer and employee. In determining whether such
relationship exists, the regulations of the United States Treasury
Department relating to the determination of such relationship for
the purpose of collection of income tax at the source on wages
shall be applied. Notwithstanding the foregoing, for purposes of
determining eligibility to receive ISOs, an Eligible Employee shall
mean a full time employee of the Company or a parent or subsidiary
corporation within the meaning of Section 424 of the
Code.
(ii)
If the Registration
shall not have occurred, such individual must have such knowledge
and experience in financial and business matters that he or she is
capable of evaluating the merits and risks of the investment
involved in the receipt and/or exercise of a Right.
(iii)
Such individual,
being otherwise an Eligible Employee under the foregoing items,
shall have been selected by the Committee as a person to whom a
Right or Rights shall be granted under the Plan.
Fair Market
Value. With respect
to the Company’s Common Stock, the market price per share of
such Common Stock determined by the Committee, consistent with the
requirements of Sections 409A and 422 of the Code and to the extent
consistent therewith, determined as follows, as of the date
specified in the context within which such term is
used:
(i)
When there is a
public market for the Common Stock, the Fair Market Value shall be
determined by (A) the closing price for a share on the market
trading day on the date of the determination (and if a closing
price was not reported on that date, then the arithmetic mean of
the closing bid and asked prices at the close of the market on that
date, and if these prices were not reported on that date, then the
closing price on the last trading date on which a closing price was
reported) on the stock exchange or national market system that is
the primary market for the Shares; and (B) if the shares are not
traded on such stock exchange or national market system, the
arithmetic mean of the closing bid and asked prices for a share on
the Nasdaq Stock Market for the day prior to the date of the
determination (and if these prices were not reported on that date,
then on the last date on which these prices were reported), in each
case as reported in The Wall Street Journal or such other source
that the Committee considers reliable in its exclusive
discretion.
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(ii)
If the Committee,
in its exclusive discretion, determines that the foregoing methods
do not apply or produce a reasonable valuation, then Fair Market
Value shall be determined by an independent appraisal that
satisfies the requirements of Code Section 401(a)(28)(C) as of a
date within twelve (12) months before the date of the transaction
for which the appraisal is used, e.g., the date of grant of an
Award (the “Appraisal”). If the Committee, in its
exclusive discretion, determines that the Appraisal does not
reflect information available after the date of the Appraisal that
may materially affect the value of the shares, then Fair Market
Value shall be determined by a new Appraisal.
(iii)
The Committee shall
maintain a written record of its method of determining Fair Market
Value.
Grantee.
A person who receives or holds an Award under the
Plan.
ISO.
An “incentive stock option” as defined in Section 422
of the Code.
Non-Qualified
Option. Any Option
granted under Article III whether designated by the Committee as a
Non-Qualified Option or otherwise, other than an Option designated
by the Committee as an ISO, or any Option so designated but which,
for any reason, fails to qualify as an ISO pursuant to Section 422
of the Code and the rules and regulations thereunder.
Option
Agreement. The
agreement between the Company and a Grantee with respect to Options
granted to such Grantee, including such terms and provisions as are
necessary or appropriate under Article III.
Options.
ISOs and Non-Qualified Options are collectively referred to herein
as “Options;” provided, however, whenever reference is
specifically made only to ISOs or Non-Qualified Options, such
reference shall be deemed to be made to the exclusion of the
other.
Parent.
A corporation, other than the Company, in an unbroken chain of
corporations ending with the Company, if on the date of grant of an
Award each corporation, other than the Company, owns stock
possessing at least fifty (50%) percent of the total combined
voting power of all classes of stock in one of the other
corporations in the chain.
Performance
Units. The Right of a
Grantee to receive a combination of cash and Shares under such
terms and conditions as described in Article V.
Performance Unit
Agreement. The
agreement between the Company and a Grantee with respect to the
award of Performance Units to the Grantee, including such terms and
conditions as are necessary or appropriate under Article
V.
Plan
Pool. A total of
300,000 shares of authorized but unissued Common Stock, as such
number may be adjusted from time to time in accordance with the
provisions of the Plan.
Registration.
The registration by the Company under the 1933 Act and applicable
state “Blue Sky” and securities laws of this Plan, the
offering of Rights under this Plan, the offering of Shares under
this Plan, and/or the Shares acquirable under this
Plan.
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Related
Entity. A corporation
or other entity, other than the Company, to which the Grantee
primarily provides services on the date of grant of an Award, and
any corporation or other entity, other than the Company, in an
unbroken chain of corporations or other entities beginning with the
Company in which each corporation or other entity has a controlling
interest in another corporation or other entity in the chain,
ending with the corporation or other entity that has a controlling
interest in the corporation or other entity to which the Grantee
primarily provides services on the date of grant of an Award. For a
corporation, a controlling interest means ownership of stock
possessing at least fifty (50%) percent of total combined voting
power of all classes of stock, or at least fifty (50%) percent of
the total value of all classes of stock. For a partnership or
limited liability company, a controlling interest means ownership
of at least fifty (50%) percent of the profits interest or capital
interest of the entity. In determining ownership, the rules of
Treasury Regulation §§1.414(c)-3 and 1.414(c)-4
apply.
Related Entity
Disposition. The
sale, distribution, or other disposition by the Company, Parent, or
a Subsidiary of all or substantially all of the interests of the
Company, Parent, or a Subsidiary in any Related Entity effected by
a sale, merger, consolidation, or other transaction involving that
Related Entity, or the sale of all or substantially all of the
assets of that Related Entity, other than any Related Entity
Disposition to the Company, Parent, or a Subsidiary.
Restricted
Stock. The Shares
which a Grantee shall be entitled to receive under such terms and
conditions as described in Article IV.
Restricted Stock
Agreement. The
agreement between the Company and a Grantee with respect to Rights
to receive Restricted Stock, including such terms and provisions as
are necessary or appropriate under Article IV.
Restricted Stock
Units. The Right of a
Grantee to receive cash and/or Shares under such terms and
conditions as described in Article IV.
Restricted Stock
Unit Agreement. The
agreement between the Company and a Grantee with respect to Rights
to receive the value of Shares, either in the form of cash or
Shares, including such terms and provisions as are necessary or
appropriate under Article IV.
Rights.
The rights to exercise, purchase or receive the Options, Restricted
Stock, Restricted Stock Units, Performance Units, and SARs
described herein.
SAR.
The Right of a Grantee to receive cash under such terms and
conditions as described in Article VI.
SAR
Agreement. The
agreement between the Company and a Grantee with respect to the SAR
awarded to the Grantee, including such terms and conditions as are
necessary or appropriate under Article VI.
SEC.
The Securities and Exchange Commission.
Section
409A. Internal
Revenue Code Section 409A, including guidance and regulations
issued thereunder.
Section 424
Corporate Transaction. The occurrence, in a single
transaction or a series of related transactions, of any one or more
of the following: (i) a sale or disposition of all or substantially
all of the assets of the Company and its Subsidiaries; (ii) a sale
or other disposition of more than fifty (50%) percent of the
outstanding stock of the Company; (iii) the consummation of a
merger, consolidation, or similar transaction after which the
Company is not the surviving corporation; (iv) the consummation of
a merger, consolidation, or similar transaction after which the
Company is the surviving corporation but the shares outstanding
immediately preceding the merger, consolidation, or similar
transaction are converted or exchanged by reason of the transaction
into other stock, property, or cash; or (v) a distribution by the
Company (excluding an ordinary dividend or a stock split or stock
dividend described in Treasury Regulation
§1.424-1(e)(4)(v)).
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Separation from
Service. When an
employee, director, and contractor to the Company, Bank, and all
Parents and Related Entities has a “separation from
service” within the meaning of Section 409A, including when
the Grantee dies, retires or has a termination of service in as
explained in the following provisions:
(i)
The employment
relationship is treated as continuing intact while the Grantee is
on military leave, sick leave, or other bona fide leave of absence,
if the period of leave does not exceed six (6) months or, if
longer, as long as the employee’s right to reemployment with
the Company, Bank, a Parent or a Related Entity is provided by
statute or contract. A leave of absence is bona fide only if there
is a reasonable expectation that the employee will return to
perform services for the Company, Bank, Parent, or Related Entity.
If the period of leave exceeds six (6) months and the
Grantee’s right to reemployment is not provided by statute or
contract, the employment relationship is deemed to terminate on the
first day immediately following the six (6) month
period.
(ii)
A director or
contractor has a separation from service upon the expiration of the
contract, and if there is more than one contract, all contracts,
under which the director or contractor performs services as long as
the expiration is a good faith and complete termination of the
contractual relationship.
(iii)
If a Grantee
performs services in more than one capacity, the Grantee must
separate from service in all capacities as an employee, director,
and contractor. Notwithstanding the foregoing, if a Grantee
provides services both as an employee and a director, the services
provided as a director are not taken into account in determining
whether the Grantee has a separation from service as an employee
under a nonqualified deferred compensation plan in which the
Grantee participates as an employee and that is not aggregated
under Section 409A with any plan in which the Grantee participates
as a director. In addition, if a Grantee provides services both as
an employee and a director, the services provided as an employee
are not taken into account in determining whether the Grantee has a
separation from service as a director under a nonqualified deferred
compensation plan in which the Grantee participates as a director
and that is not aggregated under Section 409A with any plan in
which the Grantee participates as an employee.
Share.
A share of Common Stock.
Specified
Employee. A
“specified employee” as defined by Section 409A. As of
the date of the adoption of this amended and restated Plan, Section
409A provides that if the Company’s Common Stock is publicly
traded on an established securities market or otherwise, then
“specified employee” means senior officers who make
$185,000 or more annually (indexed) (limited to the top 3 such
officers or, if greater (up to a maximum of 50), the top 10%)); 1%
owners whose compensation is $150,000 or more annually; and 5%
owners regardless of their compensation).
Subsidiary.
A subsidiary corporation, whether now or hereafter existing, under
Code Section 424(f).
Tax Withholding
Liability. All
federal and state income taxes, social security tax, and any other
taxes applicable to the compensation income arising from the
transaction required by applicable law to be withheld by the
Company.
Termination of
Employment. In this
Plan, all references to termination of employment mean that the
Eligible Employee or Eligible Director has had a Separation from
Service.
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Transfer.
The sale, assignment, transfer, conveyance, pledge, hypothecation,
encumbrance, loan, gift, attachment, levy upon, assignment for the
benefit of creditors, by operation of law (by will or descent and
distribution), transfer by a qualified domestic relations order, a
property settlement or maintenance agreement, transfer by result of
the bankruptcy laws or otherwise of a Share or of a
Right.
1933
Act. The Securities
Act of 1933, as amended.
1934
Act. The Securities
Exchange Act of 1934, as amended.
ARTICLE
II
GENERAL
Section
2.1. Purpose.
The purposes of this Plan are to encourage and motivate directors
and key employees to contribute to the successful performance of
the Company and its Subsidiaries and the growth of the market value
of the Common Stock; to achieve a unity of purpose among such
directors, key employees and the Company’s shareholders by
providing ownership opportunities, and a unity of interest among
such parties in the achievement of the Company’s primary long
term performance objectives; and to retain key employees by
rewarding them with potentially tax-advantageous future
compensation. These objectives will be promoted through the
granting of Rights to designated Eligible Directors and Eligible
Employees pursuant to the terms of this Plan.
Section
2.2. Administration.
(a) The
Plan shall be administered by the Committee which meets, and shall
continue to meet, the standards of Rule 16b-3(d)(1) promulgated by
the SEC under the 1934 Act. Subject to the provisions of SEC Rule
16b-3(d)(1), the Committee may designate any officers or employees
of the Company or any Subsidiary to assist in the administration of
the Plan, to execute documents on behalf of the Committee and to
perform such other ministerial duties as may be delegated to them
by the Committee.
(b)
Subject to the provisions of the Plan, the determinations and the
interpretation and construction of any provision of the Plan by the
Committee shall be final and conclusive upon all persons affected
thereby. By way of illustration and not of limitation, the
Committee shall have the discretion (a) to construe and interpret
the Plan and all Rights granted hereunder and to determine the
terms and provisions (and amendments thereof) of the Rights granted
under the Plan (which need not be identical); (b) to define the
terms used in the Plan and in the Rights granted hereunder; (c) to
prescribe, amend and rescind the rules and regulations relating to
the Plan; (d) to determine the Eligible Employees to whom and the
time or times at which such Rights shall be granted, the number of
Shares, as and when applicable, to be subject to each Right, the
exercise, other relevant purchase price or value pertaining to a
Right, and the determination of leaves of absence which may be
granted to Eligible Employees without constituting a termination of
their employment for the purposes of the Plan, provided that the
determination must be in compliance with Section 409A if Section
409A applies to the Rights; and (e) to make all other
determinations necessary or advisable for the administration of the
Plan. Provided, however, that the Committee shall administer and
interpret the Plan in a manner so as to comply with Section 409A to
the extent that Section 409A applies to any portion(s) of the Plan.
Only the full Board has the discretion to determine the Eligible
Directors to whom and the time or times at which such Rights shall
be granted, the number of Shares, as and when applicable, to be
subject to each Right, the exercise, and other relevant purchase
price or value pertaining to a Right. References to the Committee
contained in this Agreement will also mean the Board wherever
Rights of Eligible Directors are addressed.
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(c) It
shall be in the discretion of the Committee to grant Options to
purchase Shares which qualify as ISOs under the Code or which will
be given tax treatment as Non-Qualified Options. Any Options
granted which fail to satisfy the requirements for ISOs shall
become Non-Qualified Options.
(d) The
intent of the Company is to register the (i) offering of Shares
pertaining to or underlying the Rights and the offering of Rights
pursuant to this Plan, (ii) this Plan and (iii) the Rights, to the
extent required, under the 1933 Act and applicable state securities
and “Blue Sky” laws. In such event, the Company shall
make available to Eligible Directors and Eligible Employees
receiving Rights, and/or Shares in connection therewith, all
disclosure documents required under such federal and state laws. If
such Registration shall not occur, the Committee shall be
responsible for supplying the recipient of a Right, and/or Shares
in connection therewith, with such information about the Company as
is contemplated by the federal and state securities laws in
connection with exemptions from the registration requirements of
such laws, as well as providing the recipient of a Right with the
opportunity to ask questions and receive answers concerning the
Company and the terms and conditions of the Rights granted under
this Plan. In addition, if such Registration shall not occur, the
Committee shall be responsible for determining the maximum number
of Eligible Directors and Eligible Employees and the suitability of
particular persons to be Eligible Directors and Eligible Employees
in order to comply with applicable federal and state securities
statutes and regulations governing such exemptions.
(e) In
determining the Eligible Directors and Eligible Employees to whom
Rights shall be granted and the number of Shares to be covered by
each Right, the Committee shall take into account the nature of the
services rendered by such Eligible Directors and Eligible
Employees, their present and potential contributions to the success
of the Company and/or the Subsidiaries and such other factors as
the Committee shall deem relevant. An Eligible Director or Eligible
Employee who has been granted a Right under the Plan may be granted
additional Rights under the Plan if the Committee shall so
determine.
If,
pursuant to the terms of the Plan, or otherwise in connection with
the Plan, it is necessary that the percentage of stock ownership of
an Eligible Director or Eligible Employee be determined, the
ownership attribution provisions set forth in Section 424(d) of the
Code shall be controlling.
(f) The
granting of Rights pursuant to this Plan is in the exclusive
discretion of the Committee, and until the Committee acts, no
individual shall have any rights under this Plan. The terms of this
Plan shall be interpreted in accordance with this
intent.
Section
2.3. Stock
Matters.
(a)
Shares Available for
Rights. Shares shall be subject to, or underlying, grants of
Options, Restricted Stock, Restricted Stock Units, SARs,
Performance Units and Book Value Shares under this Plan. The total
number of Shares for which, or with respect to which, Rights may be
granted (including the number of Shares in respect of which
Restricted Stock, Restricted Stock Units, SARs, Performance Units
and Book Value Shares may be granted) under this Plan shall be
those designated in the Plan Pool. In the event that a Right
granted under the Plan to any Eligible Director or Eligible
Employee expires or is terminated unexercised as to any Shares
covered thereby, such Shares thereafter shall be deemed available
in the Plan Pool for the granting of Rights under this Plan;
provided, however, if the expiration or termination date of a Right
is beyond the term of the Plan as described in Section 7.3, then
any Shares covered by unexercised or terminated Rights shall not
reactivate the existence of this Plan and therefore shall not be
available for additional grants of Rights under this
Plan.
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(b)
Adjustments upon Changes
in Capitalization. In the event of changes in the
outstanding Common Stock or in the capital structure of the Company
by reason of any stock or extraordinary cash dividend, stock split,
reverse stock split, an extraordinary corporate transaction such as
any recapitalization, reorganization, merger, consolidation,
combination, exchange, or other relevant change in capitalization
occurring after the grant date of any Award, Awards granted under
the Plan and any Award Agreements, the exercise price of
Options and SARs, the performance goals to which Performance Units
are subject, the maximum number of shares of Common Stock in the
Plan Pool subject to all Awards will be equitably adjusted or
substituted, as to the number, price or kind of a share of Common
Stock or other consideration subject to such Awards to the extent
necessary to preserve the economic intent of such Award. In the
case of adjustments made pursuant to this Section 2.3(b), unless
the Committee specifically determines that such adjustment is in
the best interests of the Company or its affiliates, the Committee
shall, in the case of ISOs, ensure that any adjustments under
this Section 2.3(b) will not constitute a modification, extension
or renewal of the ISOs within the meaning of Section 424(h)(3) of
the Code and in the case of Non-qualified Options, ensure that any
adjustments under this Section 2.3(b) will not constitute a
modification of such Non-qualified Options within the meaning of
Section 409A. Any adjustments made under this Section 2.3(b) shall
be made in a manner which does not adversely affect the exemption
provided pursuant to Rule 16b-3 under the 1934 Act. The Company
shall give each affected Grantee notice of an adjustment hereunder
and, upon notice, such adjustment shall be conclusive and binding
for all purposes.
(c)
Corporate
Transactions/Changes in Control/Related Entity Dispositions.
Except as otherwise provided in an Award Agreement:
(i)
On the specified
effective date of a Corporate Transaction or Change in Control,
each Award that is at the time outstanding automatically shall
become fully vested and exercisable and be released from any
restrictions on transfer (other than transfer restrictions
applicable to ISOs) and repurchase or forfeiture rights,
immediately prior to the specified effective date of such Corporate
Transaction or Change in Control, for all the Shares at the time
represented by such Award (except to the extent that such
acceleration of exercisability would result in an “excess
parachute payment” within the meaning of Section 280G of the
Code). Notwithstanding the foregoing provisions, the Committee may,
in its exclusive discretion, provide as part of a Section 424
Corporate Transaction that any one or more of the foregoing
provisions shall not apply.
(ii)
On the specified
effective date of a Related Entity Disposition, for each Grantee
who on such specified effective date is engaged primarily in
service to the Related Entity that is the subject of the Related
Entity Disposition, each Award that is at the time outstanding
automatically shall become fully vested and exercisable and be
released from any restrictions on transfer (other than transfer
restrictions applicable to ISOs) and repurchase and forfeiture
rights, immediately prior to the specified effective date of such
Related Entity Disposition, for all the Shares at the time
represented by such Award. Notwithstanding the foregoing
provisions, the Committee may, in its exclusive discretion, provide
as part of a Section 424 Corporate Transaction that any one or more
of the foregoing provisions shall not apply.
(iii)
The Committee may
provide in any Award, Award Agreement, or as part of a Section 424
Corporate Transaction, that if the requirements of Treas. Reg.
§1.424-1 (without regard to the requirement described in
Treas. Reg. §1.424-1(a)(2) that an eligible corporation be the
employer of the optionee) would be met if the stock right were an
ISO, the substitution of a new stock right pursuant to a Section
424 Corporate Transaction for an outstanding stock right or the
assumption of an outstanding stock right pursuant to a Section 424
Corporate Transaction shall not be treated as the grant of a new
stock right or a change in the form of payment. The requirement of
Treas. Reg. §1.424-1(a)(5)(iii) is deemed satisfied if the
ratio of the exercise price to the Fair Market Value of the Shares
immediately after the substitution or assumption is not greater
than the ratio of the exercise price to the Fair Market Value of
the Shares immediately before the substitution or assumption. In
the case of a transaction described in Code Section 355 in which
the stock of the distributing corporation and the stock distributed
in the transaction are both readily tradable on an established
securities market immediately after the transaction, the
requirements of Treas. Reg. §1.424-1(a)(5) may be satisfied
by:
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(1)
using the last sale
before or the first sale after the specified date as of which such
valuation is being made, the closing price on the last trading day
before or the trading day of a specified date, the arithmetic mean
of the high and low prices on the last trading day before or the
trading day of such specified date, or any other reasonable method
using actual transactions in such stock as reported by such market
on a specified date, for the stock of the distributing corporation
and the stock distributed in the transaction, provided the
specified date is designated before such specified date, and such
specified date is not more than sixty (60) days after the
transaction;
(2)
using the
arithmetic mean of such market price on trading days during a
specified period designated before the beginning of such specified
period, when such specified period is not longer than thirty (30)
days and ends no later than sixty (60) days after the transaction;
or
(3)
using an average of
such prices during such prespecified period weighted based on the
volume of trading of such stock on each trading day during such
prespecified period.
(d)
No Limitations on Power of
Company. The grant of a Right pursuant to this Plan shall
not affect in any way the right or power of the Company to make
adjustments, reclassification, reorganizations or changes of its
capital or business structure or to merge or to consolidate or to
dissolve, liquidate or sell, or transfer all or any part of its
business or assets.
(e) No
fractional Shares shall be issued under this Plan for any
adjustment under Section 2.3(b).
(f) In
the event of a Change in Control or pending Change in Control, the
Committee may in its discretion and upon at least 10 days' advance
notice to the affected persons, cancel any outstanding Awards and
pay to the holders thereof, in cash or stock, or any combination
thereof, the value of such Awards based upon the price per share of
Common Stock received or to be received by other shareholders of
the Company in the event. In the case of any Option or SAR with an
exercise price (or SAR Exercise Price in the case of a SAR) that
equals or exceeds the price paid for a share of Common Stock in
connection with the Change in Control, the Committee may cancel the
Option or SAR without the payment of consideration
therefor.
Section
2.4. Section 409A
Matters.
The Plan and the Awards issued
hereunder are intended to fall within available exemptions from the
application of Section 409A of the Code (the incentive stock option
exemption, the exemption for certain nonqualified stock options and
stock appreciation rights issued at Fair Market Value, the
restricted property exemption, and/or the short-term deferral
exemption). Thus, it is intended that the Awards fall outside the
scope of Section 409A and are not required to comply with the
Section 409A requirements. The Plan and the Awards will be
administered and interpreted in a manner consistent with the intent
set forth herein. Notwithstanding anything to the contrary in this
Plan or in any Award Agreement, (i) this Plan and each Award
Agreement may be amended from time to time as the Committee may
determine to be necessary or appropriate in order to avoid any
grant of any Rights, this Plan, or any Award Agreement from
resulting in the inclusion of any compensation in the gross income
of any Grantee under Section 409A as amended from time to time, and
(ii) if any provision of this Plan or of any Award Agreement would
otherwise result in the inclusion of any compensation in the gross
income of any Grantee under Section 409A as amended from time to
time, then such provision shall not apply as to such Grantee and
the Committee, in its discretion, may apply in lieu thereof another
provision that (in the judgment of the Committee) accomplishes the
intent of this Plan or such Award Agreement without resulting in
such inclusion so long as such action by the Committee does not
violate Section 409A. The Company makes no representation or
warranty regarding the treatment of this Plan or the benefits
payable under this Plan or any Award Agreement under federal, state
or local income tax laws, including Section 409A.
10
Section
2.5. Amendment and
Discontinuance. The
Board may at any time alter, suspend, terminate or discontinue the
Plan, subject to Section 409A, and subject to any applicable
regulatory requirements and any required shareholder approval or
any shareholder approval which the Board may deem advisable for any
reason, such as for the purpose of obtaining or retaining any
statutory or regulatory benefits under tax, securities or other
laws or satisfying applicable stock exchange or quotation system
listing requirements. The Board may not, without the consent of the
Grantee of an Award previously granted, make any alteration which
would deprive the Grantee of his rights with respect thereto,
except to the extent an amendment is required in order for the
Award to comply with Section 409A, if applicable to the Award, or
to fall within an exemption from Section 409A.
Section
2.6. Compliance with
Rule 16b-3. It is the
intent of the Company that the Plan satisfy, and be
interpreted in a manner that satisfies, the applicable requirements
of Rule 16b-3 as promulgated under Section 16 of the 1934 Act so
that Grantees will be entitled to the benefit of Rule 16b-3, or any
other rule promulgated under Section 16 of the 1934 Act, and will
not be subject to short-swing liability under Section 16 of the
1934 Act. Accordingly, if the operation of any provision of
the Plan would conflict with the intent expressed in this
Section 2.6, such provision to the extent possible shall be
interpreted and/or deemed amended so as to avoid such
conflict.
Section 2.7. Term
and Termination of Awards other than Performance
Units.
(a) The
Committee shall determine, and each Award Agreement shall state,
the expiration date or dates of each Award, but such expiration
date shall be not later than ten (10) years after the date such
Award is granted (the “Award Period”). In the event an
ISO is granted to a shareholder who owns more than 10% of the total
combined voting power of the Company, its Parent, or its Subsidiary
(a “10% Shareholder”), the expiration date or dates of
each Award Period shall be not later than five (5) years after the
date such ISO is granted. The Committee, in its discretion, may
extend the expiration date or dates of an Award Period after such
date was originally set; provided, however, such expiration date
may not exceed the maximum expiration date described in this
Section 2.7(a). Provided further that no extension will be granted
if it would violate Section 409A to the extent that Section 409A
applies to the Award.
(b) To
the extent not previously exercised, each Award will terminate upon
the expiration of the Award Period specified in the Award
Agreement; provided, however, that each such Award will terminate
immediately as of the date that the Grantee ceases to be an
Eligible Director or Eligible Employee for any reason other than
Death or Disability. In the event the Grantee ceases to be an
Eligible Director or Eligible Employee by reason of Death or
Disability, each Award will terminate upon the earlier of: (i)
twelve (12) months after the date that the Grantee ceases to be an
Eligible Director or Eligible Employee by reason of Death or
Disability; or (ii) the expiration of the Award Period specified in
the Award Agreement. Any portions of Awards not exercised within
the foregoing periods shall terminate.
(c)
This Section 2.7 applies to all Awards other than Performance
Units.
Section
2.8. Delay of Certain
Payments upon Termination of Employment. Notwithstanding anything in the Plan
to the contrary, to the extent any Right is subject to Section
409A, and payment or exercise of such Right is on account of a
Termination of Employment, such payment or exercise shall only be
effectuated if the Grantee incurs a Separation from Service.
Payment will occur on the 60th day after the
Separation from Service. Provided, however, that if the Grantee is
a Specified Employee, payment or exercise shall be effectuated on
the first day of the seventh month following the Separation from
Service.
11
ARTICLE III
OPTIONS
Section 3.1. Grant
of Options.
(a) The
Company may grant Options to Eligible Directors and Eligible
Employees as provided in this Article III. Options will be deemed
granted pursuant to this Article III only upon (i) authorization by
the Committee, and (ii) the execution and delivery of an Option
Agreement by the Grantee and a duly authorized officer of the
Company. Options will not be deemed granted hereunder merely upon
authorization of such grant by the Committee. The aggregate number
of Shares potentially acquirable under all Options granted shall
not exceed the total number of Shares in the Plan Pool, less all
Shares potentially acquired under, or underlying, all other Rights
outstanding under this Plan.
(b) The
Committee shall designate Options at the time a grant is authorized
as either ISOs or Non-Qualified Options. The aggregate Fair Market
Value (determined as of the time an ISO is granted) of the Shares
as to which an ISO may first become exercisable by a Grantee in a
particular calendar year (pursuant to Article III and all other
plans of the Company and/or its Subsidiaries) may not exceed
$100,000 (the “$100,000 Limitation”). If a Grantee is
granted Options in excess of the $100,000 Limitation, or if such
Options otherwise become exercisable with respect to the number of
Shares which would exceed the $100,000 Limitation, such excess
Options shall be Non-Qualified Options.
Section
3.2. Exercise
Price. The exercise
price of each Option granted under the Plan (the “Exercise
Price”) shall be not less than one hundred percent (100%) of
the Fair Market Value of the Common Stock on the date of grant of
the Option. In the case of ISOs granted to a shareholder who owns
capital stock of the Company possessing more than ten percent (10%)
of the total combined voting power of all classes of the capital
stock of the Company (a “10% Shareholder”), the
Exercise Price of each Option granted under the Plan to such 10%
Shareholder shall not be less than one hundred and ten percent
(110%) of the Fair Market Value of the Common Stock on the date of
grant of the Option.
Section 3.3. Terms
and Conditions of Options.
(a) All
Options must be granted within ten (10) years of the Effective
Date.
(b) The
Committee may grant ISOs and Non-Qualified Options, either
separately or jointly, to an Eligible Employee. The Committee may
grant Non-Qualified Options to an Eligible Director but may not
grant ISOs to an Eligible Director.
(c) The
grant of Options shall be evidenced by an Option Agreement in form
and substance satisfactory to the Committee in its discretion,
consistent with the provisions of this Article III, and the Option
Agreement will fix the number of Shares subject to the
Option.
(d) At
the discretion of the Committee, a Grantee, as a condition to the
granting of the Option, must execute and deliver to the Company a
confidential information agreement approved by the
Committee.
(e)
Nothing contained in Article III, any Option Agreement or in any
other agreement executed in connection with the granting of an
Option under this Article III will confer upon any Grantee any
right with respect to the continuation of his or her status as an
employee or director of the Company or any of its
Subsidiaries.
12
(f)
Except as otherwise provided herein, each Option Agreement may
specify the period or periods of time within which each Option or
portion thereof will first become exercisable (the “Vesting
Period”) with respect to the total number of Shares
acquirable thereunder. Such Vesting Periods will be fixed by the
Committee in its discretion, and may be accelerated or shortened by
the Committee in its discretion.
(g) Not
less than one hundred (100) Shares may be purchased at any one time
through the exercise of an Option unless the number purchased is
the total number at that time purchasable under all Options granted
to the Grantee. No Option may be exercised for a fraction of a
share of Common Stock.
(h) A
Grantee shall have no rights as a shareholder of the Company with
respect to any Shares underlying such Option until payment in full
of the Exercise Price by such Grantee for the stock being
purchased. No adjustment shall be made for dividends (ordinary or
extraordinary, whether in cash, securities or other property) or
distributions or other rights for which the record date is prior to
the date such Shares is fully paid for, except as provided in
Sections 2.3(b) and 2.3(c).
(i) All
Shares obtained pursuant to an Option which is designated and
qualifies as an ISO shall be held in escrow for a period which ends
on the later of (i) two (2) years from the date of the granting of
the ISO or (ii) one (1) year after the issuance of such Shares
pursuant to the exercise of the ISO. Such Shares shall be held by
the Company or its designee. The Grantee who has exercised the ISO
shall have all rights of a shareholder, including, but not limited,
to the rights to vote, receive dividends and sell such shares. The
sole purpose of the escrow is to inform the Company of a
disqualifying disposition of the Shares acquired within the meaning
of Section 422 of the Code, and it shall be administered solely for
this purpose.
(j) When
Non-Qualified Options are transferred or exercised, the transfer or
exercise shall be subject to taxation under Code Section 83 and
Treasury Regulation §1.83-7. No Non-Qualified Option awarded
hereunder shall contain any feature for the deferral of
compensation other than the deferral of recognition of income until
the later of exercise or disposition of the Option under Treasury
Regulation §1.83-7 or the time the stock acquired pursuant to
the exercise of the option first becomes substantially vested as
defined in Treasury Regulation §1.83-3(b). Further, each
Non-Qualified Option will comply with any other applicable Section
409A requirement in order to maintain the status of the
Non-Qualified Option as exempt from the requirements of Section
409A.
Section 3.4. Exercise of
Options.
(a) A
Grantee must at all times be an Eligible Director or Eligible
Employee from the date of grant until the exercise of the Options
granted, except as provided in Section 2.7(b).
(b) An
Option may be exercised to the extent exercisable (i) by giving
written notice of exercise to the Company, specifying the number of
Shares to be purchased and, if applicable, accompanied by full
payment of the Exercise Price thereof and the amount of withholding
taxes pursuant to Section 3.4(c) below; and (ii) by giving
assurances satisfactory to the Company that the Shares to be
purchased upon such exercise are being purchased for investment and
not with a view to resale in connection with any distribution of
such Shares in violation of the 1933 Act; provided, however, that
in the event of the prior occurrence of the Registration or in the
event resale of such Shares without such Registration would
otherwise be permissible, the second condition will be inoperative
if, in the opinion of counsel for the Company, such condition is
not required under the 1933 Act or any other applicable law,
regulation or rule of any governmental agency.
13
(c) As
a condition to the issuance of the Shares upon full or partial
exercise of a Non-Qualified Option, the Grantee will pay to the
Company in cash, or in such other form as the Committee may
determine in its discretion, the amount of the Company’s Tax
Withholding Liability required in connection with such
exercise.
(d) The
Exercise Price of an Option shall be payable to the Company either
(i) in United States dollars, in cash or by check, bank draft or
money order payable to the order of the Company, or (ii) at the
discretion of the Committee, through the delivery of outstanding
shares of the Common Stock owned by the Grantee with a Fair Market
Value at the date of delivery equal to the aggregate Exercise Price
of the Option(s) being exercised, or (iii) at the discretion of the
Committee by reduction in the number of shares of Common Stock
otherwise deliverable upon exercise of such Option with a Fair
Market Value at the date of delivery equal to the aggregate
Exercise Price of the Option(s) being exercised, or (iv) at the
discretion of the Committee by a combination of (i), (ii) or (iii)
above. No Shares shall be delivered until full payment has been
made. Except as provided in Sections 2.3(b) and 2.3(c), the
Committee may not approve a reduction of such Exercise Price in any
such Option, or the cancellation of any such Options and the
regranting thereof to the same Grantee at a lower Exercise Price,
at a time when the Fair Market Value of the Common Stock is lower
than it was when such Option was granted. Notwithstanding the
foregoing, during any period for which the Common Stock is publicly
traded (i.e., the Common Stock is listed on any established stock
exchange or a national market system) an exercise by a Director or
Officer that involves or may involve a direct or indirect extension
of credit or arrangement of an extension of credit by the Company,
directly or indirectly, in violation of Section 402(a) of the
Sarbanes-Oxley Act of 2002 shall be prohibited with respect to any
Award under this Plan.
Section
3.5. Restrictions on
Transfer. An Option
granted under Article III may not be Transferred except by will or
the laws of descent and distribution and, during the lifetime of
the Grantee to whom it was granted, may be exercised only by such
Grantee.
Section
3.6. Stock
Certificates.
Certificates representing the Shares issued pursuant to the
exercise of Options will bear all legends required by law and
necessary to effectuate the provisions hereof. The Company may
place a “stop transfer” order against such Shares until
all restrictions and conditions set forth in this Article III, the
applicable Option Agreement, and in the legends referred to in this
Section 3.6 have been complied with.
14
ARTICLE IV
RESTRICTED STOCK AND RESTRICTED STOCK UNIT GRANTS
Section 4.1. Grants
of Restricted Stock.
(a) The
Company may grant Restricted Stock or Restricted Stock Units to
Eligible Directors and Eligible Employees as provided in this
Article IV. Shares of Restricted Stock or Restricted Stock Units
will be deemed granted only upon (i) authorization by the Committee
and (ii) the execution and delivery of a Restricted Stock Agreement
or Restricted Stock Unit Agreement, as applicable, by the Grantee
and a duly authorized officer of the Company. Restricted Stock and
Restricted Stock Units will not be deemed to have been granted
merely upon authorization by the Committee. The aggregate number of
Shares potentially acquirable under all Restricted Stock Agreements
and all Restricted Stock Unit Agreements shall not exceed the total
number of Shares in the Plan Pool, less all Shares potentially
acquirable under, or underlying, all other Rights outstanding under
this Plan.
(b)
Each grant of Restricted Stock or Restricted Stock Units pursuant
to this Article IV will be evidenced by a Restricted Stock
Agreement or Restricted Stock Unit Agreement, as applicable,
between the Company and the Grantee in form and substance
satisfactory to the Committee in its sole discretion, consistent
with this Article IV. Each Restricted Stock Agreement and
Restricted Stock Unit Agreement will specify the purchase price per
share (the “Purchase Price”), if any, with respect to
the Restricted Stock or Restricted Stock Units to be issued to the
Grantee thereunder. The Purchase Price will be fixed by the
Committee in its exclusive discretion. The Purchase Price will be
payable to the Company in United States dollars in cash or by check
or such other legal consideration as may be approved by the
Committee, in its exclusive discretion.
(c)
Without limiting the foregoing, each Restricted Stock Agreement and
Restricted Stock Unit Agreement shall include the following terms
and conditions:
(i)
Nothing contained
in this Article IV, any Restricted Stock Agreement, any Restricted
Stock Unit Agreement, or in any other agreement executed in
connection with the issuance of Restricted Stock or Restricted
Stock Units under this Article IV will confer upon any Grantee any
right with respect to the continuation of his or her status as an
employee or director of the Company or any of its
Subsidiaries.
(ii)
Except as otherwise
provided herein, each Restricted Stock Agreement and each
Restricted Stock Unit Agreement shall specify the period or periods
of time within which each share of Restricted Stock or Restricted
Stock Unit or portion thereof will first become exercisable (the
"Vesting Period") with respect to the total number of shares of
Restricted Stock acquirable thereunder. Such Vesting Period will be
fixed by the Committee in its discretion, but generally shall be at
least two (2) years and one day of continued service with the
Company. The Committee may, in its discretion, establish a shorter
Vesting Period by specifically providing for such shorter period in
the Restricted Stock Agreement; provided, however, that the Vesting
Period shall not be less than one (1) year and one day of continued
service with the Company after the date on which the Restricted
Stock Right is granted.
(iii)
Each Restricted
Stock Unit Agreement shall specify whether the distribution will be
in the form of cash, shares or a combination of cash and
shares.
15
(iv)
Upon
satisfaction of the Vesting Period and any other applicable
restrictions, terms and conditions, the Grantee shall be entitled
to receive his Restricted Stock or payment of his Restricted Stock
Unit(s) on or before the sixtieth (60th) day following
satisfaction of the Vesting Period as provided in the Restricted
Stock Agreement or Restricted Stock Unit Agreement, as
applicable.
Section 4.2. Restrictions on Transfer of Restricted
Stock and Restricted Stock Units.
(a)
Restricted Stock Units may not be Transferred, and shares of
Restricted Stock acquired by a Grantee may be Transferred only in
accordance with the specific limitations on the Transfer of
Restricted Stock imposed by applicable state or federal securities
laws and set forth below, and subject to certain undertakings of
the transferee set forth in Section 4.2(c). All Transfers of
Restricted Stock not meeting the conditions set forth in this
Section 4.2(a) are expressly prohibited.
(b) Any
Transfer of Restricted Stock Units and any prohibited Transfer of
Restricted Stock is void and of no effect. Should such a Transfer
purport to occur, the Company may refuse to carry out the Transfer
on its books, attempt to set aside the Transfer, enforce any
undertaking or right under this Section 4.2, or exercise any other
legal or equitable remedy.
(c) Any
Transfer of Restricted Stock that would otherwise be permitted
under the terms of this Plan is prohibited unless the transferee
executes such documents as the Company may reasonably require to
ensure the Company’s rights under a Restricted Stock
Agreement and this Article IV are adequately protected with respect
to the Restricted Stock so Transferred. Such documents may include,
without limitation, an agreement by the transferee to be bound by
all of the terms of this Plan applicable to Restricted Stock, and
of the applicable Restricted Stock Agreement, as if the transferee
were the original Grantee of such Restricted Stock.
(d) To
facilitate the enforcement of the restrictions on Transfer set
forth in this Article IV, the Committee may, at its discretion,
require the Grantee of shares of Restricted Stock to deliver the
certificate(s) for such shares with a stock power executed in blank
by the Grantee and the Grantee’s spouse, to the Secretary of
the Company or his or her designee, to hold said certificate(s) and
stock power(s) in escrow and to take all such actions and to
effectuate all such Transfers and/or releases as are in accordance
with the terms of this Plan and the Restricted Stock Agreement. The
certificates may be held in escrow so long as the shares of
Restricted Stock whose ownership they evidence are subject to any
restriction on Transfer under this Article IV or under a Restricted
Stock Agreement. Each Grantee acknowledges that the Secretary of
the Company (or his or her designee) is so appointed as the escrow
holder with the foregoing authorities as a material inducement to
the issuance of shares of Restricted Stock under this Article IV,
that the appointment is coupled with an interest, and that it
accordingly will be irrevocable. The escrow holder will not be
liable to any party to a Restricted Stock Agreement (or to any
other party) for any actions or omissions unless the escrow holder
is grossly negligent relative thereto. The escrow holder may rely
upon any letter, notice or other document executed by any signature
purported to be genuine.
Section
4.3. Compliance with
Law. Notwithstanding
any other provision of this Article IV, Restricted Stock and
Restricted Stock Units may be issued pursuant to this Article IV
only after there has been compliance with all applicable federal
and state securities laws, and such issuance will be subject to
this overriding condition. The Company may include shares of
Restricted Stock and Restricted Stock Units in a Registration, but
will not be required to register or qualify Restricted Stock or
Restricted Stock Units with the SEC or any state agency, except
that the Company will register with, or as required by local law,
file for and secure an exemption from such registration
requirements from, the applicable securities administrator and
other officials of each jurisdiction in which an Eligible Director
or Eligible Employee would be issued Restricted Stock or Restricted
Stock Units hereunder prior to such issuance.
16
Section
4.4. Stock
Certificates.
Certificates representing the Restricted Stock issued pursuant to
this Article IV will bear all legends required by law and necessary
to effectuate the provisions hereof. The Company may place a
“stop transfer” order against shares of Restricted
Stock until all restrictions and conditions set forth in this
Article IV, the applicable Restricted Stock Agreement and in the
legends referred to in this Section 4.4, have been complied
with.
Section
4.5. Market
Standoff. To the
extent requested by the Company and any underwriter of securities
of the Company in connection with a firm commitment underwriting,
no Grantee of any shares of Restricted Stock will sell or otherwise
Transfer any such shares not included in such underwriting, or not
previously registered in a Registration, during the one hundred
twenty (120) day period following the effective date of the
registration statement filed with the SEC in connection with such
offering.
Section 4.6. Rights
of Grantees of Restricted Stock or Restricted Stock
Units.
(a) A
Grantee shall have no rights as a stockholder of the Company unless
and until he receives Restricted Shares at the conclusion of the
Vesting Period.
(b) A
Grantee shall have no rights other than those of a general creditor
of the Company. Restricted Stock and Restricted Stock Units
represent an unfunded and unsecured obligation of the
Company.
(c)
Unless the Committee otherwise provides in a dividend agreement
awarded to the Grantee at the time of the Award Agreement, the
Grantee shall have no rights to dividends, whether cash or stock,
until the Restricted Stock and/or Restricted Stock Units vest and
Shares are delivered to the Grantee except as provided in Sections
2.3(b) and 2.3(c).
ARTICLE
V
PERFORMANCE
UNITS
Section 5.1. Awards
of Performance Units.
(a) The
Committee may grant awards of Performance Units to Eligible
Directors and Eligible Employees as provided in this Article V.
Performance Units will be deemed granted only upon (i)
authorization by the Committee and (ii) the execution and delivery
of a Performance Unit Agreement by the Grantee and an authorized
officer of the Company. Performance Units will not be deemed
granted merely upon authorization by the Committee. Performance
Units may be granted in such amounts and to such Grantees as the
Committee may determine in its sole discretion subject to the
limitation in Section 5.2 below.
(b)
Each grant of Performance Units pursuant to this Article V will be
evidenced by a Performance Unit Agreement between the Company and
the Grantee in form and substance satisfactory to the Committee in
its sole discretion, consistent with this Article V.
(c)
Except as otherwise provided herein, Performance Units will be
distributed only after the end of a performance period of two or
more years (“Performance Period”) beginning with the
year in which such Performance Units were awarded. The Performance
Period shall be set by the Committee for each year’s
awards.
17
(d) The
percentage of the Performance Units awarded under this Section 5.1
that will be distributed to Grantees shall depend on the levels of
financial performance and other performance objectives achieved
during each year of the Performance Period; provided, however, that
the Committee may adopt one or more performance categories or
eliminate all performance categories other than financial
performance. Financial performance shall be based on the
consolidated results of the Company and its Subsidiaries prepared
on the same basis as the financial statements published for
financial reporting purposes and determined in accordance with
Section 5.1(e) below. Other performance categories adopted by the
Committee shall be based on measurements of performance as the
Committee shall deem appropriate.
(e)
Distributions of Performance Units awarded will be based on the
Company’s financial performance with results from other
performance categories applied as a factor, not exceeding one,
against financial results. The annual financial and other
performance results will be averaged over the Performance Period
and translated into percentage factors according to graduated
criteria established by the Committee for the entire Performance
Period. The resulting percentage factors shall determine the
percentage of Units to be distributed.
No
distributions of Performance Units, based on financial performance
and other performance, shall be made if a minimum average
percentage of the applicable measurement of performance, to be
established by the Committee, is not achieved for the Performance
Period. The performance levels achieved for each Performance Period
and percentage of Performance Units to be distributed shall be
conclusively determined by the Committee.
(f) The
percentage of Performance Units awarded and which Grantees become
entitled to receive based on the levels of performance will be
determined as soon as practicable after each Performance Period and
are called “Retained Performance Units.”
(g) On
or before the 60th day after
determination of the number of Retained Performance Units, such
Retained Performance Units shall be distributed in the form of a
combination of shares and cash. The Committee, in its sole
discretion, will determine how much of the Retained Performance
Unit will be distributed in cash and how much will be distributed
in Shares. The Performance Units awarded, but which Grantees do not
become entitled to receive, shall be cancelled.
(h)
Notwithstanding any other provision in this Article V, the
Committee, if it determines in its sole discretion that it is
necessary or advisable under the circumstances, may adopt rules
pursuant to which Eligible Employees by virtue of hire, or
promotion or upgrade to a higher employee grade classification, or
special individual circumstances, may be granted the total award of
Performance Units or any portion thereof, with respect to one or
more Performance Periods that began in prior years and at the time
of the awards have not yet been completed.
Section
5.2. Limitations.
The aggregate number of Shares potentially distributable under all
Units granted shall not exceed the total number of Shares in the
Plan Pool, less all Shares potentially acquirable under, or
underlying, all other Rights outstanding under this
Plan.
Section
5.3. Terms and
Conditions.
(a) All
awards of Performance Units must be made within ten (10) years of
the original Effective Date.
(b) The
award of Performance Units shall be evidenced by a Performance Unit
Agreement in form and substance satisfactory to the Committee in
its discretion, consistent with the provisions of this Article
V.
18
(c)
Nothing contained in this Article V, any Performance Unit Agreement
or in any other agreement executed in connection with the award of
Performance Units under this Article V will confer upon any Grantee
any right with respect to the continuation of his or her status as
an employee or director of the Company or any of its
Subsidiaries.
Section 5.4. Special Distribution
Rules.
(a)
Except as otherwise provided in this Section 5.4, a Grantee must be
an Eligible Director or Eligible Employee from the date a Unit is
awarded to him or her continuously through and including the date
of distribution of such Unit.
(b) In
case of the Death or Disability of a Grantee prior to the end of
any Performance Period, whether before or after any event set forth
in Section 2.3(c), the number of Performance Units awarded to the
Grantee for such Performance Period shall be reduced pro rata based
on the number of months remaining in the Performance Period after
the month of Death or Disability. The remaining Performance Units,
reduced in the discretion of the Committee to the percentage
indicated by the levels of performance achieved prior to the date
of Death or Disability, if any, shall be distributed within a
reasonable time after Death or Disability, but in no event later
than March 15 of the year following the year of the Grantee’s
Death or Disability. All other Units awarded to the Grantee for
such Performance Period shall be cancelled.
(c) In
case of the termination of the Grantee’s status as an
Eligible Director or Eligible Employee prior to the end of any
Performance Period for any reason other than Death or Disability,
all Performance Units awarded to the Grantee with respect to any
such Performance Period shall be immediately forfeited and
cancelled.
(d)
Upon a Grantee’s promotion to a higher employee grade
classification, the Committee may award to the Grantee the total
Performance Units, or any portion thereof, which are associated
with the higher employee grade classification for the current
Performance Period.
Notwithstanding any
other provision of the Plan, the Committee may reduce or eliminate
awards to a Grantee who has been demoted to a lower employee grade
classification, and where circumstances warrant, may permit
continued participation, proration, or a combination thereof, of
awards which would otherwise be cancelled.
Section 5.5. Rights
of Grantees of Performance Units.
(a) A
Grantee shall have no rights as a stockholder of the Company unless
and until he receives Shares, if any.
(b) A
Grantee shall have no rights other than those of a general creditor
of the Company. Performance Units represent an unfunded and
unsecured obligation of the Company.
(c)
Unless the Committee otherwise provides in a dividend agreement
awarded to the Grantee at the time of the Performance Unit
Agreement, the Grantee shall have no rights to dividends, whether
cash or stock, unless and until Shares are delivered to the Grantee
except as provided in Sections 2.3(b) and 2.3(c).
Section
5.6. Extraordinary
Adjustment. In
addition to the provisions of Section 2.3(b), if an extraordinary
change occurs during a Performance Period which significantly
alters the basis upon which the performance levels were established
under Section 5.1 for that Performance Period, to avoid distortion
in the operation of this Article V, but subject to Section 5.2, the
Committee may make adjustments in such performance levels to
preserve the incentive features of this Article V, whether before
or after the end of the Performance Period, to the extent it deems
appropriate in its sole discretion, which adjustments shall be
conclusive and binding upon all parties concerned. Provided,
however, that such adjustment must comply with Section 409A. Such
changes may include, without limitation, adoption of, or changes
in, accounting practices, tax laws and regulatory or other laws or
regulations; economic changes not in the ordinary course of
business cycles; or compliance with judicial decrees or other legal
authorities. In addition, in the event of a Change in Control, the
Committee may reduce the number of outstanding Units as it deems
appropriate in its sole discretion to reflect a shorter Performance
Period, to the extent permitted by Section 409A.
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Section 5.7. Other
Conditions.
(a) No
person shall have any claim to be granted an award of Performance
Units under this Article V and there is no obligation for
uniformity of treatment of Eligible Directors, Eligible Employees
or Grantees under this Article V. Performance Units under this
Article V may not be Transferred.
(b) The
Company shall have the right to deduct from any distribution or
payment in cash under this Article V, and the Grantee or other
person receiving Shares under this Article V shall be required to
pay to the Company, any Tax Withholding Liability. The number of
Shares to be distributed to any individual Grantee may be reduced
by the number of Shares, the Fair Market Value on the Distribution
Date (as defined in Section 5.7(d) below) of which is equivalent to
the cash necessary to pay any Tax Withholding Liability, where the
cash to be distributed is not sufficient to pay such Tax
Withholding Liability or the Grantee may deliver to the Company
cash sufficient to pay such Tax Withholding Liability.
(c) Any
distribution of Shares under this Article V may be delayed until
the requirements of any applicable laws or regulations, and any
stock exchange or Nasdaq National Market requirements, are
satisfied. The Shares distributed under this Article V shall be
subject to such restrictions and conditions on disposition as
counsel for the Company shall determine to be desirable or
necessary under applicable law.
(d) For
the purpose of distribution of Performance Units in cash, the value
of a Performance Unit shall be the Fair Market Value on the
Distribution Date. The “Distribution Date” shall be the
first business day of April in the year of distribution, except
that in the case of special distributions the Distribution Date
shall be the first business day of the month following the month in
which the Committee determines the distribution.
(e)
Notwithstanding any other provision of this Article V and subject
also to Section 5.5(c), no dividends shall accrue and no
distributions of Performance Units shall be made if at the time a
dividend would otherwise have accrued or distribution would
otherwise have been made:
(i)
the
regular quarterly dividend on the Common Stock has been omitted and
not subsequently paid or there exists any default in payment of
dividends on any such outstanding shares of capital stock of the
Company;
(ii)
the
rate of dividends on the Common Stock is lower than at the time the
Performance Units to which the accrued dividend relates were
awarded, adjusted for any change of the type referred to in Section
2.3(b);
(iii)
estimated
consolidated net income of the Company for the twelve-month period
preceding the month the dividend would otherwise have accrued and
distribution would otherwise have been made is less than the sum of
the amount of the accrued dividends and Performance Units eligible
for distribution under this Article V in that month plus all
dividends applicable to such period on an accrual basis, either
paid, declared or accrued at the most recently paid rate, on all
outstanding shares of Common Stock; or
(iv)
the
dividend accrual or distribution would result in a default in any
agreement by which the Company is bound.
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(f) In
the event net income available under Section 5.7(e) above for
accrued dividends and awards eligible for distribution under this
Article V is sufficient to cover part but not all of such amounts,
the following order shall be applied in making payments: (i)
accrued dividends, and (ii) Performance Units eligible for
distribution under this Article V.
Section
5.8. Restrictions on
Transfer. Performance
Units granted under Article V may not be Transferred except by will
or the laws of descent and distribution or as otherwise provided in
Section 5.9, and during the lifetime of the Grantee to whom it was
awarded, cash and Shares receivable with respect to Performance
Units may be received only by such Grantee.
Section
5.9. Designation of
Beneficiaries. A
Grantee may designate a beneficiary or beneficiaries to receive all
or part of the Shares and/or cash to be distributed to the Grantee
under this Article V in case of Death, and such designation will
revoke all prior designations by the same Grantee. A designation of
beneficiary may be replaced by a new designation or may be revoked
by the Grantee at any time. A designation or revocation shall be on
a form to be provided for that purpose and shall be signed by the
Grantee and delivered to the Company prior to the Grantee’s
Death. In case of the Grantee’s Death, the amounts to be
distributed to the Grantee under this Article V with respect to
which a designation of beneficiary has been made (to the extent it
is valid and enforceable under applicable law) shall be distributed
in accordance with this Article V to the designated beneficiary or
beneficiaries. The amount distributable to a Grantee upon Death and
not subject to such a designation shall be distributed to the
Grantee’s estate. If there shall be any question as to the
legal right of any beneficiary to receive a distribution under this
Article V, the amount in question may be paid to the estate of the
Grantee, in which event the Company shall have no further liability
to anyone with respect to such amount.
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ARTICLE VI
STOCK APPRECIATION RIGHTS
Section 6.1.
Grants
of SARs.
(a) The
Company may grant SARs to Eligible Directors and Eligible Employees
under this Article VI. SARs will be deemed granted only upon (i)
authorization by the Committee and (ii) the execution and delivery
of a SAR Agreement by the Grantee and a duly authorized officer of
the Company. SARs will not be deemed granted merely upon
authorization by the Committee. The aggregate number of Shares
which shall underlie SARs granted hereunder shall not exceed the
total number of Shares in the Plan Pool, less all Shares
potentially acquirable under, or underlying, all other Rights
outstanding under this Plan.
(b)
Each grant of SARs pursuant to this Article VI shall be evidenced
by a SAR Agreement between the Company and the Grantee, in form and
substance satisfactory to the Committee in its sole discretion,
consistent with this Article VI.
Section 6.2.
Terms
and Conditions of SARs.
(a) All
SARs must be granted within ten (10) years of the Effective
Date.
(b)
Each SAR issued pursuant to this Article VI shall have an initial
base value (the “Base Value”) equal to the Fair Market
Value of a share of Common Stock on the date of issuance of the SAR
(the “SAR Issuance Date”).
(c)
Nothing contained in this Article VI, any SAR Agreement or in any
other agreement executed in connection with the granting of a SAR
under this Article VI will confer upon any Grantee any right with
respect to the continuation of his or her status as an employee or
director of the Company or any of its Subsidiaries.
(d)
Except as otherwise provided herein, each SAR Agreement shall
specify the number of Shares covered by the SAR and the period or
periods of time within which each SAR or portion thereof will first
become exercisable (the “SAR Vesting Period”) with
respect to the total Cash Payment (as defined in Section 6.4(b))
receivable thereunder. Such SAR Vesting Period will be fixed by the
Committee in its discretion, and may be accelerated or shortened by
the Committee in its discretion.
(e)
SARs relating to no less than one hundred (100) Shares may be
exercised at any one time unless the number exercised is the total
number at that time exercisable under all SARs granted to the
Grantee. No SAR may be exercised for a fraction of a share of
Common Stock.
(f) A
Grantee shall have no rights as a shareholder of the Company with
respect to any Shares covered by such SAR. No adjustment shall be
made to a SAR for dividends (ordinary or extraordinary, whether in
cash, securities or other property).
(g)
Notwithstanding anything in the Plan to the contrary, no SAR shall
contain any feature for the deferral of compensation other than the
right to receive compensation equal to the difference between the
Base Value on the date of grant and the Fair Market Value of the
Share on the date of Exercise.
Section 6.3.
Restrictions on
Transfer of SARs. Each SAR granted under this Article VI may
not be Transferred except by will or the laws of descent and
distribution or as otherwise provided in Section 6.5, and during
the lifetime of the Grantee to whom it was granted, may be
exercised only by such Grantee.
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Section 6.4.
Exercise of
SARs.
(a) A
Grantee, or his or her executors or administrators, or heirs or
legatees, shall exercise a SAR of the Grantee by giving written
notice of such exercise to the Company (the “SAR Exercise
Date”). SARs may be exercised only upon the completion of the
SAR Vesting Period applicable to such SAR.
(b)
Within ten (10) days of the SAR Exercise Date applicable to a SAR
exercised in accordance with Section 6.4(a), the Grantee shall be
paid in cash the difference between the Base Value of such SAR and
the Fair Market Value of the Common Stock as of the SAR Exercise
Date (the “Cash Payment”), reduced by the Tax
Withholding Liability arising from such exercise.
Section 6.5.
Designation of
Beneficiaries. A Grantee may designate a beneficiary or
beneficiaries to receive all or part of the cash to be paid to the
Grantee under this Article VI in case of Death, and such
designation will revoke all prior designations by the same Grantee.
A designation of beneficiary may be replaced by a new designation
or may be revoked by the Grantee at any time. A designation or
revocation shall be on a form to be provided for that purpose and
shall be signed by the Grantee and delivered to the Company prior
to the Grantee’s Death. In case of the Grantee’s Death,
the amounts to be distributed to the Grantee under this Article VI
with respect to which a designation of beneficiary has been made
(to the extent it is valid and enforceable under applicable law)
shall be distributed in accordance with this Article VI to the
designated beneficiary or beneficiaries. The amount distributable
to a Grantee upon Death and not subject to such a designation shall
be distributed to the Grantee’s estate. If there shall be any
question as to the legal right of any beneficiary to receive a
distribution under this Article VI, the amount in question may be
paid to the estate of the Grantee, in which event the Company shall
have no further liability to anyone with respect to such
amount.
ARTICLE
VII
MISCELLANEOUS
Section
7.1. Application of
Funds. The proceeds
received by the Company from the sale of Shares pursuant to the
exercise of Rights will be used for general corporate
purposes.
Section
7.2. No Obligation to
Exercise Right. The
granting of a Right shall impose no obligation upon the recipient
to exercise such Right.
Section
7.3. Term of
Plan. Except as
otherwise specifically provided herein, Rights may be granted
pursuant to this Plan from time to time within ten (10) years from
the Effective Date.
Section
7.4. Captions and
Headings; Gender and Number. Captions and paragraph headings used
herein are for convenience only, do not modify or affect the
meaning of any provision herein, are not a part, and shall not
serve as a basis for interpretation or construction of this Plan.
As used herein, the masculine gender shall include the feminine and
neuter, and the singular number shall include the plural, and vice
versa, whenever such meanings are appropriate.
Section
7.5. Expenses of
Administration of Plan. All costs and expenses incurred in the
operation and administration of this Plan shall be borne by the
Company or by one or more Subsidiaries. The Company shall
indemnify, defend and hold each member of the Committee harmless
against all claims, expenses and liabilities arising out of or
related to the exercise of the Committee’s powers and the
discharge of the Committee’s duties hereunder.
23
Section
7.6. Transfer; Approved
Leave of Absence. For
purposes of the Plan, no termination of employment by an
Eligible Employee shall be deemed to result from either (a) a
transfer of employment to the Company from an affiliate of the
Company, or from the Company to an affiliate, or from one affiliate
to another, or (b) an approved leave of absence for military
service or sickness, or for any other purpose approved by the
Company, if the Eligible Employee's right to reemployment is
guaranteed either by a statute or by contract or under the policy
pursuant to which the leave of absence was granted or if the
Committee otherwise so provides in writing, in either case, except
to the extent inconsistent with Section 409A if the applicable
Award is subject thereto.
Section
7.7. Clawback.
Notwithstanding any other provisions in this Plan, the Company
may cancel any Award, require reimbursement of any Award by a
Participant, and effect any other right of recoupment
of equity or other compensation provided under
the Plan in accordance with any Company policies that may
be adopted and/or modified from time to time ("Clawback Policy").
In addition, a Participant may be required to repay to the Company
previously paid compensation, whether provided pursuant to
the Plan or an Award Agreement, in accordance with the
Clawback Policy. By accepting an Award, the Participant is agreeing
to be bound by the Clawback Policy, as in effect or as may be
adopted and/or modified from time to time by the Company in its
discretion (including, without limitation, to comply with
applicable law or stock exchange listing
requirements).
Section
7.8. No Fractional
Shares. No fractional
shares of Common Stock shall be issued or delivered pursuant to
the Plan. The Committee shall determine whether cash,
additional Awards or other securities or property shall be issued
or paid in lieu of fractional shares of Common Stock or whether any
fractional shares should be rounded, forfeited or otherwise
eliminated.
Section
7.9. Non-Uniform
Treatment. The
Committee's determinations under the Plan need not be
uniform and may be made by it selectively among persons who are
eligible to receive, or actually receive, Awards. Without limiting
the generality of the foregoing, the Committee shall be entitled to
make non-uniform and selective determinations, amendments and
adjustments, and to enter into non-uniform and selective Award
Agreements.
Section
7.10. Governing
Law. Without regard
to the principles of conflicts of laws, the laws of the State of
North Carolina shall govern and control the validity,
interpretation, performance, and enforcement of this
Plan.
Section
7.11. Inspection of
Plan. A copy of this
Plan, and any amendments thereto, shall be maintained by the
Secretary of the Company and shall be shown to any proper person
making inquiry about it.
Section
7.12. Severable
Provisions. The
Company intends that the provisions of Articles III, IV, V and VI,
in each case together with Articles I, II and VII, shall each be
deemed to be effective on an independent basis, and that if one or
more of such Articles, or the operative provisions thereof, shall
be deemed invalid, void or voidable, the remainder of such Articles
shall continue in full force and effect.
As
Adopted by the Company’s Board of Directors on January 16,
2020.
As
Approved by the Company’s Shareholders on May 7,
2020.
24