Attached files
file | filename |
---|---|
8-K - PRIMARY DOCUMENT - DYNATRONICS CORP | dynt_8k.htm |
Exhibit
10.1
APPENDIX
A
|
______________________________________________________________________________
_____________________________________________________________
DYNATRONICS CORPORATION
2018 EQUITY INCENTIVE PLAN
_____________________________________________________________
______________________________________________________________________________
DYNATRONICS CORPORATION
2018 EQUITY INCENTIVE PLAN
1.1 General
Purpose. The name of this plan
is the Dynatronics Corporation 2018 Equity Incentive Plan (the
“Plan”).
The purposes of the Plan are to (a) enable Dynatronics Corporation,
a Utah corporation (the “Company”), and any Affiliate
to attract and retain the types of Employees, Consultants and
Directors who will contribute to the Company’s long range
success; (b) provide incentives that align the interests of
Employees, Consultants and Directors with those of the shareholders
of the Company; and (c) promote the success of the Company’s
business.
1.2 Eligible
Award Recipients. The persons
eligible to receive Awards are the Employees, Consultants and
Directors of the Company and its Affiliates and such other
individuals designated by the Committee who are reasonably expected
to become Employees, Consultants and Directors after the receipt of
Awards.
1.3 Available
Awards. Awards that may be
granted under the Plan include: (a) Incentive Stock Options, (b)
Non-qualified Stock Options, (c) Stock Appreciation Rights, (d)
Restricted Awards, (e) Performance Share Awards, (f) Cash Awards,
and (g) Other Equity-Based Awards.
2 Definitions.
“Affiliate”
means a corporation or other entity that, directly or through one
or more intermediaries, controls, is controlled by or is under
common control with, the Company.
“Applicable
Laws” means the
requirements related to or implicated by the administration of the
Plan under applicable state corporate law, United States federal
and state securities laws, the Code, any stock exchange or
quotation system on which the shares of Common Stock are listed or
quoted, and the applicable laws of any foreign country or
jurisdiction where Awards are granted under the
Plan.
“Award”
means any right granted under the Plan, including an Incentive
Stock Option, a Non-qualified Stock Option, a Stock Appreciation
Right, a Restricted Award, a Performance Share Award, a Cash Award,
or an Other Equity-Based Award.
“Award
Agreement” means a
written agreement, contract, certificate or other instrument or
document evidencing the terms and conditions of an individual Award
granted under the Plan which may, in the discretion of the Company,
be transmitted electronically to any Participant. Each Award
Agreement shall be subject to the terms and conditions of the
Plan.
“Board”
means the Board of Directors of the Company, as constituted at any
time.
A-1
“Cash
Award” means an Award
denominated in cash that is granted under Section 7.4
of the Plan.
“Cause”
means
(a) With
respect to any Employee or Consultant, unless the applicable Award
Agreement states otherwise:
(i) If
the Employee or Consultant is a party to an employment or service
agreement with the Company or its Affiliates and such agreement
provides for a definition of Cause, the definition contained
therein; or
(ii) If
no such agreement exists, or if such agreement does not define
Cause: (1) the commission of, or plea of guilty or no contest to, a
felony or a crime involving moral turpitude or the commission of
any other act involving willful malfeasance or material fiduciary
breach with respect to the Company or an Affiliate; (2) conduct
that results in or is reasonably likely to result in harm to the
reputation or business of the Company or any of its Affiliates; (3)
gross negligence or willful misconduct with respect to the Company
or an Affiliate; or (4) material violation of state or federal
securities laws.
(b) With
respect to any Director, unless the applicable Award Agreement
states otherwise, a determination by a majority of the
disinterested Board members that the Director has engaged in any of
the following:
(i) malfeasance
in office;
(ii) gross
misconduct or neglect;
(iii) false
or fraudulent misrepresentation inducing the director’s
appointment;
(iv) willful
conversion of corporate funds; or
(v) repeated
failure to participate in Board meetings on a regular basis despite
having received proper notice of the meetings in
advance.
The Committee, in its absolute discretion, shall determine the
effect of all matters and questions relating to whether a
Participant has been discharged for Cause.
“Change in
Control”
A-2
(a) One
Person (or more than one Person acting as a group) acquires
ownership of stock of the Company that, together with the stock
held by such person or group, constitutes more than 50% of the
total fair market value or total voting power of the stock of the
Company; provided,
that, a Change in Control shall
not occur if any Person (or more than one Person acting as a group)
owns more than 50% of the total fair market value or total voting
power of the Company’s stock and acquires additional
stock;
(b) One
Person (or more than one Person acting as a group) acquires (or has
acquired during the twelve-month period ending on the date of the
most recent acquisition) ownership of the Company’s stock
possessing 30% or more of the total voting power of the stock of
such corporation;
(c) A
majority of the members of the Board are replaced during any
twelve-month period by directors whose appointment or election is
not endorsed by a majority of the Board before the date of
appointment or election; or
(d) One
Person (or more than one Person acting as a group), acquires (or
has acquired during the twelve-month period ending on the date of
the most recent acquisition) assets from the Company that have a
total gross fair market value equal to or more than 40% of the
total gross fair market value of all of the assets of the Company
immediately before such acquisition.
“Code”
means the Internal Revenue Code of 1986, as it may be amended from
time to time. Any reference to a section of the Code shall be
deemed to include a reference to any regulations promulgated
thereunder.
“Committee”
means a committee of one or more members of the Board appointed by
the Board to administer the Plan in accordance with
Section
3.3 and Section
3.4.
“Common
Stock” means the common
stock, no par value per share, of the Company, or such other
securities of the Company as may be designated by the Committee
from time to time in substitution thereof.
“Company”
means Dynatronics Corporation a Utah corporation, and any successor
thereto.
“Consultant”
means any individual or entity which performs bona fide services to
the Company or an Affiliate, other than as an Employee or Director,
and who may be offered securities registerable pursuant to a
registration statement on Form S-8 under the Securities
Act.
“Continuous
Service” means that the
Participant’s service with the Company or an Affiliate,
whether as an Employee, Consultant or Director, is not interrupted
or terminated. The Participant’s Continuous Service shall not
be deemed to have terminated merely because of a change in the
capacity in which the Participant renders service to the Company or
an Affiliate as an Employee, Consultant or Director or a change in
the entity for which the Participant renders such service,
provided
that there is no interruption
or termination of the Participant’s Continuous
Service; provided further that
if any Award is subject to Section
409A of the Code, this sentence shall only be given effect to the
extent consistent with Section 409A of the Code. For example, a
change in status from an Employee of the Company to a Director of
an Affiliate will not constitute an interruption of Continuous
Service. The Committee or its delegate, in its sole discretion, may
determine whether Continuous Service shall be considered
interrupted in the case of any leave of absence approved by that
party, including sick leave, military leave or any other personal
or family leave of absence. The Committee or its delegate, in its
sole discretion, may determine whether a Company transaction, such
as a sale or spin-off of a division or subsidiary that employs a
Participant, shall be deemed to result in a termination of
Continuous Service for purposes of affected Awards, and such
decision shall be final, conclusive and
binding.
A-3
“Deferred Stock
Units (DSUs)”
has the meaning set forth in Section 7.2
hereof.
“Director”
means a member of the Board.
“Disability”
means, unless the applicable Award Agreement says otherwise, that
the Participant is unable to engage in any substantial gainful
activity by reason of any medically determinable physical or mental
impairment; provided, however,
for purposes of determining the term
of an Incentive Stock Option pursuant to Section 6.10
hereof, the term Disability shall have
the meaning ascribed to it under Section 22(e)(3) of the Code. The
determination of whether an individual has a Disability shall be
determined under procedures established by the Committee. Except in
situations where the Committee is determining Disability for
purposes of the term of an Incentive Stock Option pursuant
to Section 6.10
hereof within the meaning of Section
22(e)(3) of the Code, the Committee may rely on any determination
that a Participant is disabled for purposes of benefits under any
long-term disability plan maintained by the Company or any
Affiliate in which a Participant participates.
“Disqualifying
Disposition” has the
meaning set forth in Section
14.12.
“Effective
Date” shall mean the date
that the Company’s shareholders approve this Plan if such
shareholder approval occurs before the first anniversary of the
date the Plan is adopted by the Board.
“Employee”
means any person, including an Officer or Director, employed by the
Company or an Affiliate; provided, that,
for purposes of determining
eligibility to receive Incentive Stock Options, an Employee shall
mean an employee of the Company or a parent or subsidiary
corporation within the meaning of Section 424 of the Code. Mere
service as a Director or payment of a director’s fee by the
Company or an Affiliate shall not be sufficient to constitute
“employment” by the Company or an
Affiliate.
“Exchange
Act” means the Securities
Exchange Act of 1934, as amended.
“Fair Market
Value” means, as of any
date, the value of the Common Stock as determined below. If the
Common Stock is listed on any established stock exchange or a
national market system, including without limitation, the New York
Stock Exchange or the NASDAQ Stock Market, the Fair Market Value
shall be the closing price of a share of Common Stock (or if no
sales were reported the closing price on the date immediately
preceding such date) as quoted on such exchange or system on the
day of determination, as reported in the Wall Street
Journal. In the absence of an
established market for the Common Stock, the Fair Market Value
shall be determined in good faith by the Committee and such
determination shall be conclusive and binding on all
persons.
“Fiscal
Year” means the
Company’s fiscal year, ending June 30.
“Free Standing
Rights” has the meaning
set forth in Section
7.1(a).
“Good
Reason” means, unless the
applicable Award Agreement states otherwise:
A-4
(a) If
an Employee or Consultant is a party to an employment or service
agreement with the Company or its Affiliates and such agreement
provides for a definition of Good Reason, the definition contained
therein; or
(b) If
no such agreement exists or if such agreement does not define Good
Reason, the occurrence of one or more of the following without the
Participant’s express written consent, which circumstances
are not remedied by the Company within thirty (30) days of its
receipt of a written notice from the Participant describing the
applicable circumstances (which notice must be provided by the
Participant within ninety (90) days of the Participant’s
knowledge of the applicable circumstances): (i) any material,
adverse change in the Participant’s duties, responsibilities,
authority, title, status or reporting structure; (ii) a material
reduction in the Participant’s base salary or bonus
opportunity; or (iii) a geographical relocation of the
Participant’s principal office location by more than fifty
(50) miles.
“Grant
Date” means the date on
which the Committee adopts a resolution, or takes other appropriate
action, expressly granting an Award to a Participant that specifies
the key terms and conditions of the Award or, if a later date is
set forth in such resolution, then such date as is set forth in
such resolution.
“Incentive Stock
Option” means an Option
that is designated by the Committee as an incentive stock option
within the meaning of Section 422 of the Code and that meets the
requirements set out in the Plan.
“Non-Employee
Director” means a
Director who is a “non-employee director” within the
meaning of Rule 16b-3.
“Non-qualified Stock
Option” means an Option
that by its terms does not qualify or is not intended to qualify as
an Incentive Stock Option.
“Officer”
means a person who is an officer of the Company within the meaning
of Section 16 of the Exchange Act and the rules and regulations
promulgated thereunder.
“Option”
means an Incentive Stock Option or a Non-qualified Stock Option
granted pursuant to the Plan.
“Optionholder”
means a person to whom an Option is granted pursuant to the Plan
or, if applicable, such other person who holds an outstanding
Option.
“Option Exercise
Price” means the price at
which a share of Common Stock may be purchased upon the exercise of
an Option.
“Other Equity-Based
Award” means an Award
that is not an Option, Stock Appreciation Right, Restricted Stock,
Restricted Stock Unit, or Performance Share Award that is granted
under Section 7.4
and is payable by delivery of Common
Stock and/or which is measured by reference to the value of Common
Stock.
“Participant”
means an eligible person to whom an Award is granted pursuant to
the Plan or, if applicable, such other person who holds an
outstanding Award.
A-5
“Performance
Goals” means, for a
Performance Period, the one or more goals established by the
Committee for the Performance Period based upon business criteria
or other performance measures determined by the Committee in its
discretion.
“Performance
Period” means the one or
more periods of time, as the Committee may select, over which the
attainment of one or more Performance Goals will be measured for
the purpose of determining a Participant’s right to and the
payment of a Performance Share Award or a Cash
Award.
“Performance Share
Award” means any Award
granted pursuant to Section 7.3
hereof.
“Performance
Share” means the grant of
a right to receive a number of actual shares of Common Stock or
share units based upon the performance of the Company during a
Performance Period, as determined by the
Committee.
“Permitted
Transferee” means: (a) a
member of the Optionholder’s immediate family (child,
stepchild, grandchild, parent, stepparent, grandparent, spouse,
former spouse, sibling, niece, nephew, mother-in-law,
father-in-law, son-in-law, daughter-in-law, brother-in-law, or
sister-in-law, including adoptive relationships), any person
sharing the Optionholder’s household (other than a tenant or
employee), a trust in which these persons have more than 50% of the
beneficial interest, a foundation in which these persons (or the
Optionholder) control the management of assets, and any other
entity in which these persons (or the Optionholder) own more than
50% of the voting interests; (b) third parties designated by the
Committee in connection with a program established and approved by
the Committee pursuant to which Participants may receive a cash
payment or other consideration in consideration for the transfer of
a Non-qualified Stock Option; and (c) such other transferees as may
be permitted by the Committee in its sole
discretion.
“Person”
means a person as defined in Section 13(d)(3) of the Exchange
Act.
“Plan”
means this Dynatronics Corporation 2019 Equity Incentive Plan, as
amended and/or amended and restated from time to
time.
“Related
Rights” has the meaning
set forth in Section
7.1(a).
“Restricted
Award” means any Award
granted pursuant to Section
7.2(a).
“Restricted
Period” has the meaning
set forth in Section
7.2(a).
“Rule
16b-3” means Rule 16b-3
promulgated under the Exchange Act or any successor to Rule 16b-3,
as in effect from time to time.
“Securities
Act” means the Securities
Act of 1933, as amended.
A-6
“Stock Appreciation
Right” means the right
pursuant to an Award granted under Section 7.1
to receive, upon exercise, an amount
payable in cash or shares equal to the number of shares subject to
the Stock Appreciation Right that is being exercised multiplied by
the excess of (a) the Fair Market Value of a share of Common Stock
on the date the Award is exercised, over (b) the exercise price
specified in the Stock Appreciation Right Award
Agreement.
“Stock for Stock
Exchange” has the meaning
set forth in Section
6.4.
“Substitute
Award” has the meaning
set forth in Section
4.6.
“Ten Percent
Shareholder” means a
person who owns (or is deemed to own pursuant to Section 424(d) of
the Code) stock possessing more than 10% of the total combined
voting power of all classes of stock of the Company or of any of
its Affiliates.
“Total Share
Reserve” has the meaning
set forth in Section
4.1.
3 Administration.
3.1 Authority
of Committee. The Plan shall be
administered by the Committee or, in the Board’s sole
discretion, by the Board. Subject to the terms of the Plan, the
Committee’s charter and Applicable Laws, and in addition to
other express powers and authorization conferred by the Plan, the
Committee shall have the authority:
(a) to
construe and interpret the Plan and apply its
provisions;
(b) to
promulgate, amend, and rescind rules and regulations relating to
the administration of the Plan;
(c) to
authorize any person to execute, on behalf of the Company, any
instrument required to carry out the purposes of the
Plan;
(d) to
delegate its authority to one or more Officers of the Company with
respect to Awards that do not involve “insiders” within
the meaning of Section 16 of the Exchange Act;
(e) to
determine when Awards are to be granted under the Plan and the
applicable Grant Date;
(f) from
time to time to select, subject to the limitations set forth in
this Plan, those eligible Award recipients to whom Awards shall be
granted;
A-7
(g) to
determine the number of shares of Common Stock to be made subject
to each Award;
(h) to
determine whether each Option is to be an Incentive Stock Option or
a Non-qualified Stock Option;
(i) to
prescribe the terms and conditions of each Award, including,
without limitation, the exercise price and medium of payment and
vesting provisions, and to specify the provisions of the Award
Agreement relating to such grant;
(j) to
determine the target number of Performance Shares to be granted
pursuant to a Performance Share Award, the performance measures
that will be used to establish the Performance Goals, the
Performance Period(s) and the number of Performance Shares earned
by a Participant;
(k) to
amend any outstanding Awards, including for the purpose of
modifying the time or manner of vesting, or the term of any
outstanding Award; provided,
however, that if any such
amendment impairs a Participant’s rights or increases a
Participant’s obligations under his or her Award or creates
or increases a Participant’s federal income tax liability
with respect to an Award, such amendment shall also be subject to
the Participant’s consent;
(l) to
determine the duration and purpose of leaves of absences which may
be granted to a Participant without constituting termination of
their employment for purposes of the Plan, which periods shall be
no shorter than the periods generally applicable to Employees under
the Company’s employment policies;
(m) to
make decisions with respect to outstanding Awards that may become
necessary upon a change in corporate control or an event that
triggers anti-dilution adjustments;
(n) to
interpret, administer, reconcile any inconsistency in, correct any
defect in and/or supply any omission in the Plan and any instrument
or agreement relating to, or Award granted under, the Plan;
and
(o) to
exercise discretion to make any and all other determinations which
it determines to be necessary or advisable for the administration
of the Plan.
The Committee also may modify the purchase price or the exercise
price of any outstanding Award, provided that
if the modification effects a
repricing, shareholder approval shall be required before the
repricing is effective.
A-8
3.2 Committee
Decisions Final. All decisions
made by the Committee pursuant to the provisions of the Plan shall
be final and binding on the Company and the Participants, unless
such decisions are determined by a court having jurisdiction to be
arbitrary and capricious.
3.3 Delegation.
The Committee or, if no Committee has been appointed, the Board may
delegate administration of the Plan to a committee or committees of
one or more members of the Board, and the term
“Committee”
shall apply to any person or persons to whom such authority has
been delegated. The Committee shall have the power to delegate to a
subcommittee any of the administrative powers the Committee is
authorized to exercise (and references in this Plan to the Board or
the Committee shall thereafter be to the committee or
subcommittee), subject, however, to such resolutions, not
inconsistent with the provisions of the Plan, as may be adopted
from time to time by the Board. The Board may abolish the Committee
at any time and revest in the Board the administration of the Plan.
The members of the Committee shall be appointed by and serve at the
pleasure of the Board. From time to time, the Board may increase or
decrease the size of the Committee, add additional members to,
remove members (with or without cause) from, appoint new members in
substitution therefor, and fill vacancies, however caused, in the
Committee. The Committee shall act pursuant to a vote of the
majority of its members or, in the case of a Committee comprised of
only two members, the unanimous consent of its members, whether
present or not, or by the written consent of the majority of its
members and minutes shall be kept of all of its meetings and copies
thereof shall be provided to the Board. Subject to the limitations
prescribed by the Plan and the Board, the Committee may establish
and follow such rules and regulations for the conduct of its
business as it may determine to be advisable.
3.4 Committee
Composition. Except as
otherwise determined by the Board, the Committee shall consist
solely of two or more Non-Employee Directors. The Board shall have
discretion to determine whether or not it intends to comply with
the exemption requirements of Rule 16b-3. However, if the Board
intends to satisfy such exemption requirements, with respect to any
insider subject to Section 16 of the Exchange Act, the Committee
shall be a compensation committee of the Board that at all times
consists solely of two or more Non-Employee Directors. Within the
scope of such authority, the Board or the Committee may delegate to
a committee of one or more members of the Board who are not
Non-Employee Directors the authority to grant Awards to eligible
persons who are not then subject to Section 16 of the Exchange Act.
Nothing herein shall create an inference that an Award is not
validly granted under the Plan in the event Awards are granted
under the Plan by a compensation committee of the Board that does
not at all times consist solely of two or more Non-Employee
Directors.
3.5 Indemnification.
In addition to such other rights of indemnification as they may
have as Directors or members of the Committee, and to the extent
allowed by Applicable Laws, the Committee shall be indemnified by
the Company against the reasonable expenses, including
attorney’s fees, actually incurred in connection with any
action, suit or proceeding or in connection with any appeal
therein, to which the Committee may be party by reason of any
action taken or failure to act under or in connection with the Plan
or any Award granted under the Plan, and against all amounts paid
by the Committee in settlement thereof (provided,
however, that the settlement
has been approved by the Company, which approval shall not be
unreasonably withheld) or paid by the Committee in satisfaction of
a judgment in any such action, suit or proceeding, except in
relation to matters as to which it shall be adjudged in such
action, suit or proceeding that such Committee did not act in good
faith and in a manner which such person reasonably believed to be
in the best interests of the Company, or in the case of a criminal
proceeding, had no reason to believe that the conduct complained of
was unlawful; provided,
however, that within 60 days
after the institution of any such action, suit or proceeding, such
Committee shall, in writing, offer the Company the opportunity at
its own expense to handle and defend such action, suit or
proceeding.
4 Shares
Subject to the Plan.
4.1 Total
Share Reserve. Subject to
adjustment in accordance with Section
11, no more than Six Hundred
Thousand (600,000) shares of Common Stock plus the number of shares
of Common Stock underlying any award granted under the Dynatronics
Corporation 2015 Equity Incentive Award Plan (the
“Prior
Plan”) that expires,
terminates or is canceled or forfeited under the terms of the Prior
Plan shall be available for the grant of Awards under the Plan (the
“Total Share
Reserve”). Any shares of
Common Stock granted in connection with Options and Stock
Appreciation Rights shall be counted against this limit as one (1)
share for every one (1) Option or Stock Appreciation Right awarded.
Any shares of Common Stock granted in connection with Awards other
than Options and Stock Appreciation Rights shall be counted against
this limit as one (1) share of Common Stock for every one (1) share
of Common Stock granted in connection with such Award. During the
terms of the Awards, the Company shall keep available at all times
the number of shares of Common Stock required to satisfy such
Awards.
4.2 Shares
Available for Distribution.
Shares of Common Stock available for distribution under the Plan
may consist, in whole or in part, of authorized and unissued
shares, treasury shares or shares reacquired by the Company in any
manner.
4.3 Incentive
Stock Option Share Limit.
Subject to adjustment in accordance with Section
11, no more than Six Hundred
Thousand (600,000) shares of Common Stock may be issued in the
aggregate pursuant to the exercise of Incentive Stock Options (the
“ISO
Limit”).
A-9
4.4 Single
Fiscal Year Share Limit. The
maximum number of shares of Common Stock subject to Awards granted
during a single Fiscal Year to any Director, together with any cash
fees paid to such Director during the Fiscal Year shall not exceed
a total value of $300,000 (calculating the value of any Awards
based on the grant date fair value for financial reporting
purposes).
4.5 Treatment
of Canceled, Forfeited, or Terminated Award
Shares. Any shares of Common
Stock subject to an Award that expires or is canceled, forfeited,
or terminated without issuance of the full number of shares of
Common Stock to which the Award related will again be available for
issuance under the Plan. Any shares of Common Stock that again
become available for future grants pursuant to this
Section
4.5 shall be added back as one
(1) share if such shares were subject to Options or Stock
Appreciation Rights and as one (1) share if such shares were
subject to other Awards. Notwithstanding anything to the contrary
contained herein: shares subject to an Award under the Plan shall
not again be made available for issuance or delivery under the Plan
if such shares are (a) shares tendered in payment of an Option, (b)
shares delivered or withheld by the Company to satisfy any tax
withholding obligation, or (c) shares covered by a stock-settled
Stock Appreciation Right or other Awards that were not issued upon
the settlement of the Award.
4.6 Substitute
Awards. Awards may, in the sole
discretion of the Committee, be granted under the Plan in
assumption of, or in substitution for, outstanding awards
previously granted by an entity acquired by the Company or with
which the Company combines (“Substitute
Awards”). Substitute
Awards shall not be counted against the Total Share Reserve;
provided,
that, Substitute Awards issued
in connection with the assumption of, or in substitution for,
outstanding options intended to qualify as Incentive Stock Options
shall be counted against the ISO Limit. Subject to applicable stock
exchange requirements, available shares under a
shareholder-approved plan of an entity directly or indirectly
acquired by the Company or with which the Company combines (as
appropriately adjusted to reflect such acquisition or transaction)
may be used for Awards under the Plan and shall not count toward
the Total Share Limit.
5 Eligibility.
5.1 Eligibility
for Specific Awards. Incentive
Stock Options may be granted only to Employees. Awards other than
Incentive Stock Options may be granted to Employees, Consultants
and Directors and those individuals whom the Committee determines
are reasonably expected to become Employees, Consultants and
Directors following the Grant Date.
5.2 Ten
Percent Shareholders. A Ten
Percent Shareholder shall not be granted an Incentive Stock Option
unless the Option Exercise Price is at least 110% of the Fair
Market Value of the Common Stock on the Grant Date and the Option
is not exercisable after the expiration of five years from the
Grant Date.
2 Option
Provisions. Each Option granted
under the Plan shall be evidenced by an Award Agreement. Each
Option so granted shall be subject to the conditions set forth in
this Section
6, and to such other conditions
not inconsistent with the Plan as may be reflected in the
applicable Award Agreement. All Options shall be separately
designated Incentive Stock Options or Non-qualified Stock Options
at the time of grant, and, if certificates are issued, a separate
certificate or certificates will be issued for shares of Common
Stock purchased on exercise of each type of Option. Notwithstanding
the foregoing, the Company shall have no liability to any
Participant or any other person if an Option designated as an
Incentive Stock Option fails to qualify as such at any time or if
an Option is determined to constitute “nonqualified deferred
compensation” within the meaning of Section 409A of the Code
and the terms of such Option do not satisfy the requirements of
Section 409A of the Code. The provisions of separate Options need
not be identical, but each Option shall include (through
incorporation of provisions hereof by reference in the Option or
otherwise) the substance of each of the following
provisions:
6.1 Term.
Subject to the provisions of Section 5.2
regarding Ten Percent Shareholders, no
Incentive Stock Option shall be exercisable after the expiration of
10 years from the Grant Date. The term of a Non-qualified Stock
Option granted under the Plan shall be determined by the
Committee; provided,
however, no Non-qualified Stock
Option shall be exercisable after the expiration of 10 years from
the Grant Date.
A-10
6.2 Exercise
Price of an Incentive Stock Option. Subject to the provisions of Section 5.2
regarding Ten Percent Shareholders,
the Option Exercise Price of each Incentive Stock Option shall be
not less than 100% of the Fair Market Value of the Common Stock
subject to the Option on the Grant Date. Notwithstanding the
foregoing, an Incentive Stock Option may be granted with an Option
Exercise Price lower than that set forth in the preceding sentence
if such Option is granted pursuant to an assumption or substitution
for another option in a manner satisfying the provisions of Section
424(a) of the Code.
6.3 Exercise
Price of a Non-qualified Stock Option. The Option Exercise Price of each Non-qualified
Stock Option shall be not less than 100% of the Fair Market Value
of the Common Stock subject to the Option on the Grant Date.
Notwithstanding the foregoing, a Non-qualified Stock Option may be
granted with an Option Exercise Price lower than that set forth in
the preceding sentence if such Option is granted pursuant to an
assumption or substitution for another option in a manner
satisfying the provisions of Section 409A of the
Code.
6.4 Consideration.
The Option Exercise Price of Common Stock acquired pursuant to an
Option shall be paid, to the extent permitted by applicable
statutes and regulations, either (a) in cash or by certified or
bank check at the time the Option is exercised or (b) in the
discretion of the Committee, upon such terms as the Committee shall
approve, the Option Exercise Price may be paid: (i) by delivery to
the Company of other Common Stock, duly endorsed for transfer to
the Company, with a Fair Market Value on the date of delivery equal
to the Option Exercise Price (or portion thereof) due for the
number of shares being acquired, or by means of attestation whereby
the Participant identifies for delivery specific shares of Common
Stock that have an aggregate Fair Market Value on the date of
attestation equal to the Option Exercise Price (or portion thereof)
and receives a number of shares of Common Stock equal to the
difference between the number of shares thereby purchased and the
number of identified attestation shares of Common Stock (a
“Stock for Stock
Exchange”); (ii) a
“cashless” exercise program established with a broker;
(iii) by reduction in the number of shares of Common Stock
otherwise deliverable upon exercise of such Option with a Fair
Market Value equal to the aggregate Option Exercise Price at the
time of exercise; (iv) by any combination of the foregoing methods;
or (v) in any other form of legal consideration that may be
acceptable to the Committee. Unless otherwise specifically provided
in the Option, the exercise price of Common Stock acquired pursuant
to an Option that is paid by delivery (or attestation) to the
Company of other Common Stock acquired, directly or indirectly from
the Company, shall be paid only by shares of the Common Stock of
the Company that have been held for more than six months (or such
longer or shorter period of time required to avoid a charge to
earnings for financial accounting purposes). 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.
6.5 Transferability
of an Incentive Stock Option.
An Incentive Stock Option shall not be transferable except by will
or by the laws of descent and distribution and shall be exercisable
during the lifetime of the Optionholder only by the Optionholder.
Notwithstanding the foregoing, the Optionholder may, by delivering
written notice to the Company, in a form satisfactory to the
Company, designate a third party who, in the event of the death of
the Optionholder, shall thereafter be entitled to exercise the
Option.
6.6 Transferability
of a Non-qualified Stock Option. A Non-qualified Stock Option may, in the sole
discretion of the Committee, be transferable to a Permitted
Transferee, upon written approval by the Committee to the extent
provided in the Award Agreement. If the Non-qualified Stock Option
does not provide for transferability, then the Non-qualified Stock
Option shall not be transferable except by will or by the laws of
descent and distribution and shall be exercisable during the
lifetime of the Optionholder only by the Optionholder.
Notwithstanding the foregoing, the Optionholder may, by delivering
written notice to the Company, in a form satisfactory to the
Company, designate a third party who, in the event of the death of
the Optionholder, shall thereafter be entitled to exercise the
Option.
6.7 Vesting
of Options. Each Option may,
but need not, vest and therefore become exercisable in periodic
installments that may, but need not, be equal. The Option may be
subject to such other terms and conditions on the time or times
when it may be exercised (which may be based on performance or
other criteria) as the Committee may deem appropriate. The vesting
provisions of individual Options may vary. No Option may be
exercised for a fraction of a share of Common Stock. The Committee
may, but shall not be required to, provide for an acceleration of
vesting and exercisability in the terms of any Award Agreement upon
the occurrence of a specified event.
6.8 Termination
of Continuous Service. Unless
otherwise provided in an Award Agreement or in an employment
agreement the terms of which have been approved by the Committee,
in the event an Optionholder’s Continuous Service terminates
(other than upon the Optionholder’s death or Disability), the
Optionholder may exercise his or her Option (to the extent that the
Optionholder was entitled to exercise such Option as of the date of
termination) but only within such period of time ending on the
earlier of (a) the date three months following the termination of
the Optionholder’s Continuous Service or (b) the expiration
of the term of the Option as set forth in the Award
Agreement; provided
that, if the termination of
Continuous Service is by the Company for Cause, all outstanding
Options (whether or not vested) shall immediately terminate and
cease to be exercisable. If, after termination, the Optionholder
does not exercise his or her Option within the time specified in
the Award Agreement, the Option shall
terminate.
A-11
6.9 Extension
of Termination Date. An
Optionholder’s Award Agreement may also provide that if the
exercise of the Option following the termination of the
Optionholder’s Continuous Service for any reason would be
prohibited at any time because the issuance of shares of Common
Stock would violate the registration requirements under the
Securities Act or any other state or federal securities law or the
rules of any securities exchange or interdealer quotation system,
then the Option shall terminate on the earlier of (a) the
expiration of the term of the Option in accordance with
Section
6.1 or (b) the expiration of a
period after termination of the Participant’s Continuous
Service that is three months after the end of the period during
which the exercise of the Option would be in violation of such
registration or other securities law
requirements.
6.10 Disability
of Optionholder. Unless
otherwise provided in an Award Agreement, in the event that an
Optionholder’s Continuous Service terminates as a result of
the Optionholder’s Disability, the Optionholder may exercise
his or her Option (to the extent that the Optionholder was entitled
to exercise such Option as of the date of termination), but only
within such period of time ending on the earlier of (a) the date 12
months following such termination or (b) the expiration of the term
of the Option as set forth in the Award Agreement. If, after
termination, the Optionholder does not exercise his or her Option
within the time specified herein or in the Award Agreement, the
Option shall terminate.
6.11 Death
of Optionholder. Unless
otherwise provided in an Award Agreement, in the event an
Optionholder’s Continuous Service terminates as a result of
the Optionholder’s death, then the Option may be exercised
(to the extent the Optionholder was entitled to exercise such
Option as of the date of death) by the Optionholder’s estate,
by a person who acquired the right to exercise the Option by
bequest or inheritance or by a person designated to exercise the
Option upon the Optionholder’s death, but only within the
period ending on the earlier of (a) the date 12 months following
the date of death or (b) the expiration of the term of such Option
as set forth in the Award Agreement. If, after the
Optionholder’s death, the Option is not exercised within the
time specified herein or in the Award Agreement, the Option shall
terminate.
6.12 Incentive
Stock Option $100,000 Limitation. To the extent that the aggregate Fair Market
Value (determined at the time of grant) of Common Stock with
respect to which Incentive Stock Options are exercisable for the
first time by any Optionholder during any calendar year (under all
plans of the Company and its Affiliates) exceeds $100,000, the
Options or portions thereof which exceed such limit (according to
the order in which they were granted) shall be treated as
Non-qualified Stock Options.
3 Provisions
of Awards Other Than Options.
7.1 Stock
Appreciation Rights.
(a) General.
Each Stock Appreciation Right granted
under the Plan shall be evidenced by an Award Agreement. Each Stock
Appreciation Right so granted shall be subject to the conditions
set forth in this Section
7.1, and to such other
conditions not inconsistent with the Plan as may be reflected in
the applicable Award Agreement. Stock Appreciation Rights may be
granted alone (“Free Standing
Rights”) or in tandem
with an Option granted under the Plan (“Related
Rights”).
(b) Grant
Requirements.
Any Related Right that relates to a
Non-qualified Stock Option may be granted at the same time the
Option is granted or at any time thereafter but before the exercise
or expiration of the Option. Any Related Right that relates to an
Incentive Stock Option must be granted at the same time the
Incentive Stock Option is granted.
(c) Term
of Stock Appreciation Rights. The term of
a Stock Appreciation Right granted under the Plan shall be
determined by the Committee; provided,
however, no Stock Appreciation
Right shall be exercisable later than the tenth anniversary of the
Grant Date.
A-12
(d) Vesting
of Stock Appreciation Rights. Each Stock
Appreciation Right may, but need not, vest and therefore become
exercisable in periodic installments that may, but need not, be
equal. The Stock Appreciation Right may be subject to such other
terms and conditions on the time or times when it may be exercised
as the Committee may deem appropriate. The vesting provisions of
individual Stock Appreciation Rights may vary. No Stock
Appreciation Right may be exercised for a fraction of a share of
Common Stock. The Committee may, but shall not be required to,
provide for an acceleration of vesting and exercisability in the
terms of any Stock Appreciation Right upon the occurrence of a
specified event.
(e) Exercise
and Payment.
Upon exercise of a Stock Appreciation
Right, the holder shall be entitled to receive from the Company an
amount equal to the number of shares of Common Stock subject to the
Stock Appreciation Right that is being exercised multiplied by the
excess of (i) the Fair Market Value of a share of Common Stock on
the date the Award is exercised, over (ii) the exercise price
specified in the Stock Appreciation Right or related Option.
Payment with respect to the exercise of a Stock Appreciation Right
shall be made on the date of exercise. Payment shall be made in the
form of shares of Common Stock (with or without restrictions as to
substantial risk of forfeiture and transferability, as determined
by the Committee in its sole discretion), cash or a combination
thereof, as determined by the Committee.
(f) Exercise
Price. The exercise price of a Free Standing Right shall
be determined by the Committee, but shall not be less than 100% of
the Fair Market Value of one share of Common Stock on the Grant
Date of such Stock Appreciation Right. A Related Right granted
simultaneously with or subsequent to the grant of an Option and in
conjunction therewith or in the alternative thereto shall have the
same exercise price as the related Option, shall be transferable
only upon the same terms and conditions as the related Option, and
shall be exercisable only to the same extent as the related
Option; provided,
however, that a Stock
Appreciation Right, by its terms, shall be exercisable only when
the Fair Market Value per share of Common Stock subject to the
Stock Appreciation Right and related Option exceeds the exercise
price per share thereof and no Stock Appreciation Rights may be
granted in tandem with an Option unless the Committee determines
that the requirements of Section 7.1(b)
are satisfied.
(g) Reduction
in the Underlying Option Shares. Upon any
exercise of a Related Right, the number of shares of Common Stock
for which any related Option shall be exercisable shall be reduced
by the number of shares for which the Stock Appreciation Right has
been exercised. The number of shares of Common Stock for which a
Related Right shall be exercisable shall be reduced upon any
exercise of any related Option by the number of shares of Common
Stock for which such Option has been exercised.
7.2 Restricted
Awards.
(a) General.
A Restricted Award is an Award of
actual shares of Common Stock (“Restricted
Stock”) or hypothetical
Common Stock units (“Restricted Stock
Units”) having a value
equal to the Fair Market Value of an identical number of shares of
Common Stock, which may, but need not, provide that such Restricted
Award may not be sold, assigned, transferred or otherwise disposed
of, pledged or hypothecated as collateral for a loan or as security
for the performance of any obligation or for any other purpose for
such period (the “Restricted
Period”) as the Committee
shall determine. Each Restricted Award granted under the Plan shall
be evidenced by an Award Agreement. Each Restricted Award so
granted shall be subject to the conditions set forth in this
Section
7.2, and to such other
conditions not inconsistent with the Plan as may be reflected in
the applicable Award Agreement.
(b) Restricted
Stock and Restricted Stock Units.
(i) Each
Participant granted Restricted Stock shall execute and deliver to
the Company an Award Agreement with respect to the Restricted Stock
setting forth the restrictions and other terms and conditions
applicable to such Restricted Stock. If the Committee determines
that the Restricted Stock shall be held by the Company or in escrow
rather than delivered to the Participant pending the release of the
applicable restrictions, the Committee may require the Participant
to additionally execute and deliver to the Company (A) an escrow
agreement satisfactory to the Committee, if applicable and (B) the
appropriate blank stock power with respect to the Restricted Stock
covered by such agreement. If a Participant fails to execute an
agreement evidencing an Award of Restricted Stock and, if
applicable, an escrow agreement and stock power, the Award shall be
null and void. Subject to the restrictions set forth in the Award,
the Participant generally shall have the rights and privileges of a
shareholder as to such Restricted Stock, including the right to
vote such Restricted Stock and the right to receive
dividends; provided
that, any cash dividends and
stock dividends with respect to the Restricted Stock shall be
withheld by the Company for the Participant’s account, and
interest may be credited on the amount of the cash dividends
withheld at a rate and subject to such terms as determined by the
Committee. The cash dividends or stock dividends so withheld by the
Committee and attributable to any particular share of Restricted
Stock (and earnings thereon, if applicable) shall be distributed to
the Participant in cash or, at the discretion of the Committee, in
shares of Common Stock having a Fair Market Value equal to the
amount of such dividends, if applicable, upon the release of
restrictions on such share and, if such share is forfeited, the
Participant shall have no right to such
dividends.
A-13
(ii) The
terms and conditions of a grant of Restricted Stock Units shall be
reflected in an Award Agreement. No shares of Common Stock shall be
issued at the time a Restricted Stock Unit is granted, and the
Company will not be required to set aside funds for the payment of
any such Award. A Participant shall have no voting rights with
respect to any Restricted Stock Units granted hereunder. The
Committee may also grant Restricted Stock Units with a deferral
feature, whereby settlement is deferred beyond the vesting date
until the occurrence of a future payment date or event set forth in
an Award Agreement (“Deferred Stock
Units”). At the
discretion of the Committee, each Restricted Stock Unit or Deferred
Stock Unit (representing one share of Common Stock) may be credited
with an amount equal to the cash and stock dividends paid by the
Company in respect of one share of Common Stock
(“Dividend
Equivalents”). Dividend
Equivalents shall be withheld by the Company and credited to the
Participant’s account, and interest may be credited on the
amount of cash Dividend Equivalents credited to the
Participant’s account at a rate and subject to such terms as
determined by the Committee. Dividend Equivalents credited to a
Participant’s account and attributable to any particular
Restricted Stock Unit or Deferred Stock Unit (and earnings thereon,
if applicable) shall be distributed in cash or, at the discretion
of the Committee, in shares of Common Stock having a Fair Market
Value equal to the amount of such Dividend Equivalents and
earnings, if applicable, to the Participant upon settlement of such
Restricted Stock Unit or Deferred Stock Unit and, if such
Restricted Stock Unit or Deferred Stock Unit is forfeited, the
Participant shall have no right to such Dividend
Equivalents.
(c) Restrictions.
(i) Restricted
Stock awarded to a Participant shall be subject to the following
restrictions until the expiration of the Restricted Period, and to
such other terms and conditions as may be set forth in the
applicable Award Agreement: (A) if an escrow arrangement is used,
the Participant shall not be entitled to delivery of the stock
certificate; (B) the shares shall be subject to the restrictions on
transferability set forth in the Award Agreement; (C) the shares
shall be subject to forfeiture to the extent provided in the
applicable Award Agreement; and (D) to the extent such shares are
forfeited, the stock certificates shall be returned to the Company,
and all rights of the Participant to such shares and as a
shareholder with respect to such shares shall terminate without
further obligation on the part of the Company.
(ii) Restricted
Stock Units and Deferred Stock Units awarded to any Participant
shall be subject to (A) forfeiture until the expiration of the
Restricted Period, and satisfaction of any applicable Performance
Goals during such period, to the extent provided in the applicable
Award Agreement, and to the extent such Restricted Stock Units or
Deferred Stock Units are forfeited, all rights of the Participant
to such Restricted Stock Units or Deferred Stock Units shall
terminate without further obligation on the part of the Company and
(B) such other terms and conditions as may be set forth in the
applicable Award Agreement.
(iii) The
Committee shall have the authority to remove any or all of the
restrictions on the Restricted Stock, Restricted Stock Units and
Deferred Stock Units whenever it may determine that, by reason of
changes in Applicable Laws or other changes in circumstances
arising after the date the Restricted Stock or Restricted Stock
Units or Deferred Stock Units are granted, such action is
appropriate.
(d) Restricted
Period. With respect to Restricted Awards, the Restricted
Period shall commence on the Grant Date and end at the time or
times set forth on a schedule established by the Committee in the
applicable Award Agreement. No
Restricted Award may be granted or settled for a fraction of a
share of Common Stock. The Committee may, but shall not be required
to, provide for an acceleration of vesting in the terms of any
Award Agreement upon the occurrence of a specified
event.
A-14
(e) Delivery
of Restricted Stock and Settlement of Restricted Stock
Units. Upon the expiration of the Restricted Period with
respect to any shares of Restricted Stock, the restrictions set
forth in Section 7.2(c)
and the applicable Award Agreement
shall be of no further force or effect with respect to such shares,
except as set forth in the applicable Award Agreement. If an escrow
arrangement is used, upon such expiration, the Company shall
deliver to the Participant, or his or her beneficiary, without
charge, the stock certificate evidencing the shares of Restricted
Stock which have not then been forfeited and with respect to which
the Restricted Period has expired (to the nearest full share) and
any cash dividends or stock dividends credited to the
Participant’s account with respect to such Restricted Stock
and the interest thereon, if any. Upon the expiration of the
Restricted Period with respect to any outstanding Restricted Stock
Units, or at the expiration of the deferral period with respect to
any outstanding Deferred Stock Units, the Company shall deliver to
the Participant, or his or her beneficiary, without charge, one
share of Common Stock for each such outstanding vested Restricted
Stock Unit or Deferred Stock Unit (“Vested
Unit”) and cash equal to
any Dividend Equivalents credited with respect to each such Vested
Unit in accordance with Section
7.2(b)(ii) hereof and the
interest thereon or, at the discretion of the Committee, in shares
of Common Stock having a Fair Market Value equal to such Dividend
Equivalents and the interest thereon, if any; provided,
however, that, if explicitly
provided in the applicable Award Agreement, the Committee may, in
its sole discretion, elect to pay cash or part cash and part Common
Stock in lieu of delivering only shares of Common Stock for Vested
Units. If a cash payment is made in lieu of delivering shares of
Common Stock, the amount of such payment shall be equal to the Fair
Market Value of the Common Stock as of the date on which the
Restricted Period lapsed in the case of Restricted Stock Units, or
the delivery date in the case of Deferred Stock Units, with respect
to each Vested Unit.
(f) Stock
Restrictions.
Each certificate representing
Restricted Stock awarded under the Plan shall bear a legend in such
form as the Company deems appropriate.
7.3 Performance
Share Awards.
(a) Grant
of Performance Share Awards. Each
Performance Share Award granted under the Plan shall be evidenced
by an Award Agreement. Each Performance Share Award so granted
shall be subject to the conditions set forth in this
Section
7.3, and to such other
conditions not inconsistent with the Plan as may be reflected in
the applicable Award Agreement. The Committee shall have the
discretion to determine: (i) the number of shares of Common Stock
or stock-denominated units subject to a Performance Share Award
granted to any Participant; (ii) the Performance Period applicable
to any Award; (iii) the conditions that must be satisfied for a
Participant to earn an Award; and (iv) the other terms, conditions
and restrictions of the Award.
(b) Earning
Performance Share Awards. The number
of Performance Shares earned by a Participant will depend on the
extent to which the performance goals established by the Committee
are attained within the applicable Performance Period, as
determined by the Committee.
7.4 Other
Equity-Based Awards and Cash Awards. The Committee may grant Other Equity-Based
Awards, either alone or in tandem with other Awards, in such
amounts and subject to such conditions as the Committee shall
determine in its sole discretion. Each Equity-Based Award shall be
evidenced by an Award Agreement and shall be subject to such
conditions, not inconsistent with the Plan, as may be reflected in
the applicable Award Agreement. The Committee may grant Cash Awards
in such amounts and subject to such Performance Goals, other
vesting conditions, and such other terms as the Committee
determines in its discretion. Cash Awards shall be evidenced in
such form as the Committee may determine.
4 Securities
Law Compliance. Each Award
Agreement shall provide that no shares of Common Stock shall be
purchased or sold thereunder unless and until (a) any then
applicable requirements of state or federal laws and regulatory
agencies have been fully complied with to the satisfaction of the
Company and its counsel, and (b) if required to do so by the
Company, the Participant has executed and delivered to the Company
a letter of investment intent in such form and containing such
provisions as the Committee may require. The Company shall use
reasonable efforts to seek to obtain from each regulatory
commission or agency having jurisdiction over the Plan such
authority as may be required to grant Awards and to issue and sell
shares of Common Stock upon exercise of the Awards;
provided,
however, that this undertaking
shall not require the Company to register under the Securities Act
the Plan, any Award or any Common Stock issued or issuable pursuant
to any such Award. If, after reasonable efforts, the Company is
unable to obtain from any such regulatory commission or agency the
authority which counsel for the Company deems necessary for the
lawful issuance and sale of Common Stock under the Plan, the
Company shall be relieved from any liability for failure to issue
and sell Common Stock upon exercise of such Awards unless and until
such authority is obtained.
5 Use
of Proceeds from Stock.
Proceeds from the sale of Common Stock pursuant to Awards, or upon
exercise thereof, shall constitute general funds of the
Company.
A-15
6 Miscellaneous.
10.1 Acceleration
of Exercisability and Vesting.
The Committee shall have the power to accelerate the time at which
an Award may first be exercised or the time during which an Award
or any part thereof will vest in accordance with the Plan,
notwithstanding the provisions in the Award stating the time at
which it may first be exercised or the time during which it will
vest.
10.2 Shareholder
Rights. Except as provided in
the Plan or an Award Agreement, no Participant shall be deemed to
be the holder of, or to have any of the rights of a holder with
respect to, any shares of Common Stock subject to such Award unless
and until such Participant has satisfied all requirements for
exercise of the Award pursuant to its terms and no adjustment shall
be made for dividends (ordinary or extraordinary, whether in cash,
securities or other property) or distributions of other rights for
which the record date is prior to the date such Common Stock
certificate is issued, except as provided in Section 11
hereof.
10.3 No
Employment or Other Service Rights. Nothing in the Plan or any instrument executed
or Award granted pursuant thereto shall confer upon any Participant
any right to continue to serve the Company or an Affiliate in the
capacity in effect at the time the Award was granted or shall
affect the right of the Company or an Affiliate to terminate (a)
the employment of an Employee with or without notice and with or
without Cause or (b) the service of a Director pursuant to the
Bylaws of the Company or an Affiliate, and any applicable
provisions of the corporate law of the state in which the Company
or the Affiliate is incorporated, as the case may
be.
10.4 Transfer;
Approved Leave of Absence. For
purposes of the Plan, no termination of employment by an Employee
shall be deemed to result from either (a) a transfer of employment
to the Company from an Affiliate 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 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 of the
Code if the applicable Award is subject
thereto.
10.5 Withholding
Obligations. To the extent
provided by the terms of an Award Agreement and subject to the
discretion of the Committee, the Participant may satisfy any
federal, state or local tax withholding obligation relating to the
exercise or acquisition of Common Stock under an Award by any of
the following means (in addition to the Company’s right to
withhold from any compensation paid to the Participant by the
Company) or by a combination of such means: (a) tendering a cash
payment; (b) authorizing the Company to withhold shares of Common
Stock from the shares of Common Stock otherwise issuable to the
Participant as a result of the exercise or acquisition of Common
Stock under the Award, provided,
however, that no shares of
Common Stock are withheld with a value exceeding the maximum amount
of tax required to be withheld by law; or (c) delivering to the
Company previously owned and unencumbered shares of Common Stock of
the Company.
7 Adjustments
Upon Changes in Stock. 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 Stock Appreciation Rights, the
Performance Goals to which Performance Share Awards and Cash Awards
are subject, the maximum number of shares of Common Stock subject
to all Awards stated in Section 4
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
11, 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 Incentive Stock Options, ensure that any adjustments
under this Section 11
will not constitute a modification,
extension or renewal of the Incentive Stock Options within the
meaning of Section 424(h)(3) of the Code and in the case of
Non-qualified Stock Options, ensure that any adjustments under
this Section 11
will not constitute a modification of
such Non-qualified Stock Options within the meaning of Section 409A
of the Code. Any adjustments made under this Section 11
shall be made in a manner which does
not adversely affect the exemption provided pursuant to Rule 16b-3
under the Exchange Act. The Company shall give each Participant
notice of an adjustment hereunder and, upon notice, such adjustment
shall be conclusive and binding for all
purposes.
A-16
8 Effect
of Change in Control.
12.1 Unless
otherwise provided in an Award Agreement, notwithstanding any
provision of the Plan to the contrary:
(a) In
the event of a Participant’s termination of Continuous
Service without Cause or for Good Reason during the 12-month period
following a Change in Control, notwithstanding any provision of the
Plan or any applicable Award Agreement to the contrary, all
outstanding Options and Stock Appreciation Rights shall become
immediately exercisable with respect to 100% of the shares subject
to such Options or Stock Appreciation Rights, and/or the Restricted
Period shall expire immediately with respect to 100% of the
outstanding shares of Restricted Stock or Restricted Stock Units as
of the date of the Participant’s termination of Continuous
Service.
(b) With
respect to Performance Share Awards and Cash Awards, in the event
of a Change in Control, all incomplete Performance Periods in
respect of such Awards in effect on the date the Change in Control
occurs shall end on the date of such change and the Committee shall
(i) determine the extent to which Performance Goals with respect to
each such Performance Period have been met based upon such audited
or unaudited financial information then available as it deems
relevant and (ii) cause to be paid to the applicable Participant
partial or full Awards with respect to Performance Goals for each
such Performance Period based upon the Committee’s
determination of the degree of attainment of Performance Goals or,
if not determinable, assuming that the applicable
“target” levels of performance have been attained, or
on such other basis determined by the Committee.
To the extent practicable, any actions taken by the Committee under
the immediately preceding clauses (a) and (b) shall occur in a
manner and at a time which allows affected Participants the ability
to participate in the Change in Control with respect to the shares
of Common Stock subject to their Awards.
12.2 In
addition, in the event of a 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 Stock Appreciation Right
with an exercise price (or SAR Exercise Price in the case of a
Stock Appreciation Right) 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 Stock Appreciation Right
without the payment of consideration therefor.
12.3 The
obligations of the Company under the Plan shall be binding upon any
successor corporation or organization resulting from the merger,
consolidation or other reorganization of the Company, or upon any
successor corporation or organization succeeding to all or
substantially all of the assets and business of the Company and its
Affiliates, taken as a whole.
9 Amendment
of the Plan and Awards.
13.1 Amendment
of Plan. The Board at any time,
and from time to time, may amend or terminate the Plan. However,
except as provided in Section 11
relating to adjustments upon changes
in Common Stock and Section
13.3, no amendment shall be
effective unless approved by the shareholders of the Company to the
extent shareholder approval is necessary to satisfy any Applicable
Laws and the rules of any stock exchange upon which the
Company’s Common Stock may then be listed. At the time of
such amendment, the Board shall determine, upon advice from
counsel, whether such amendment will be contingent on shareholder
approval.
A-17
13.2 Shareholder
Approval. The Board may, in its
sole discretion, submit any other amendment to the Plan for
shareholder approval.
13.3 Contemplated
Amendments. It is expressly
contemplated that the Board may amend the Plan in any respect the
Board deems necessary or advisable to provide eligible Employees,
Consultants and Directors with the maximum benefits provided or to
be provided under the provisions of the Code and the regulations
promulgated thereunder relating to Incentive Stock Options or to
the nonqualified deferred compensation provisions of Section 409A
of the Code and/or to bring the Plan and/or Awards granted under it
into compliance therewith.
13.4 No
Impairment of Rights. Rights
under any Award granted before amendment of the Plan shall not be
impaired by any amendment of the Plan unless (a) the Company
requests the consent of the Participant and (b) the Participant
consents in writing.
13.5 Amendment
of Awards. The Committee at any
time, and from time to time, may amend the terms of any one or more
Awards; provided,
however, that the Committee may
not affect any amendment which would otherwise constitute an
impairment of the rights under any Award unless (a) the Company
requests the consent of the Participant and (b) the Participant
consents in writing.
10 General
Provisions.
14.1 Forfeiture
Events. The Committee may
specify in an Award Agreement that the Participant’s rights,
payments and benefits with respect to an Award shall be subject to
reduction, cancellation, forfeiture or recoupment upon the
occurrence of certain events, in addition to applicable vesting
conditions of an Award. Such events may include, without
limitation, breach of non-competition, non-solicitation,
confidentiality, or other restrictive covenants that are contained
in the Award Agreement or otherwise applicable to the Participant,
a termination of the Participant’s Continuous Service for
Cause, or other conduct by the Participant that is detrimental to
the business or reputation of the Company and/or its
Affiliates.
14.2 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).
14.3 Other
Compensation Arrangements.
Nothing contained in this Plan shall prevent the Board from
adopting other or additional compensation arrangements, subject to
shareholder approval if such approval is required; and such
arrangements may be either generally applicable or applicable only
in specific cases.
14.4 Deferral
of Awards. The Committee may
establish one or more programs under the Plan to permit selected
Participants the opportunity to elect to defer receipt of
consideration upon exercise of an Award, satisfaction of
performance criteria, or other event that absent the election would
entitle the Participant to payment or receipt of shares of Common
Stock or other consideration under an Award. The Committee may
establish the election procedures, the timing of such elections,
the mechanisms for payments of, and accrual of interest or other
earnings, if any, on amounts, shares or other consideration so
deferred, and such other terms, conditions, rules and procedures
that the Committee deems advisable for the administration of any
such deferral program.
A-18
14.5 Unfunded
Plan. The Plan shall be
unfunded. Neither the Company, the Board nor the Committee shall be
required to establish any special or separate fund or to segregate
any assets to assure the performance of its obligations under the
Plan.
14.6 Recapitalizations.
Each Award Agreement shall contain provisions required to reflect
the provisions of Section
11.
14.7 Delivery.
Upon exercise of a right granted under this Plan, the Company shall
issue Common Stock or pay any amounts due within a reasonable
period of time thereafter. Subject to any statutory or regulatory
obligations the Company may otherwise have, for purposes of this
Plan, 30 days shall be considered a reasonable period of
time.
14.8 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.
14.9 Other
Provisions. The Award
Agreements authorized under the Plan may contain such other
provisions not inconsistent with this Plan, including, without
limitation, restrictions upon the exercise of Awards, as the
Committee may deem advisable.
14.10 Section
409A. The Plan is intended to
comply with Section 409A of the Code to the extent subject thereto,
and, accordingly, to the maximum extent permitted, the Plan shall
be interpreted and administered to be in compliance therewith. Any
payments described in the Plan that are due within the
“short-term deferral period” as defined in Section 409A
of the Code shall not be treated as deferred compensation unless
Applicable Laws require otherwise. Notwithstanding anything to the
contrary in the Plan, to the extent required to avoid accelerated
taxation and tax penalties under Section 409A of the Code, amounts
that would otherwise be payable and benefits that would otherwise
be provided pursuant to the Plan during the six (6) month period
immediately following the Participant’s termination of
Continuous Service shall instead be paid on the first payroll date
after the six-month anniversary of the Participant’s
separation from service (or the Participant’s death, if
earlier). Notwithstanding the foregoing, neither the Company nor
the Committee shall have any obligation to take any action to
prevent the assessment of any additional tax or penalty on any
Participant under Section 409A of the Code and neither the Company
nor the Committee will have any liability to any Participant for
such tax or penalty.
14.11 Disqualifying
Dispositions. Any Participant
who shall make a “disposition” (as defined in Section
424 of the Code) of all or any portion of shares of Common Stock
acquired upon exercise of an Incentive Stock Option within two
years from the Grant Date of such Incentive Stock Option or within
one year after the issuance of the shares of Common Stock acquired
upon exercise of such Incentive Stock Option (a
“Disqualifying
Disposition”) shall be
required to immediately advise the Company in writing as to the
occurrence of the sale and the price realized upon the sale of such
shares of Common Stock.
14.12 Section
16. 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 Exchange Act so that Participants will be
entitled to the benefit of Rule 16b-3, or any other rule
promulgated under Section 16 of the Exchange Act, and will not be
subject to short-swing liability under Section 16 of the Exchange
Act. Accordingly, if the operation of any provision of the Plan
would conflict with the intent expressed in this
Section
14.12, such provision to the
extent possible shall be interpreted and/or deemed amended so as to
avoid such conflict.
14.13 Beneficiary
Designation. Each Participant
under the Plan may from time to time name any beneficiary or
beneficiaries by whom any right under the Plan is to be exercised
in case of such Participant’s death. Each designation will
revoke all prior designations by the same Participant, shall be in
a form reasonably prescribed by the Committee and shall be
effective only when filed by the Participant in writing with the
Company during the Participant’s
lifetime.
A-19
14.14 Expenses.
The costs of administering the Plan shall be paid by the
Company.
14.15 Severability.
If any of the provisions of the Plan or any Award Agreement is held
to be invalid, illegal or unenforceable, whether in whole or in
part, such provision shall be deemed modified to the extent, but
only to the extent, of such invalidity, illegality or
unenforceability and the remaining provisions shall not be affected
thereby.
14.16 Plan
Headings. The headings in the
Plan are for purposes of convenience only and are not intended to
define or limit the construction of the provisions
hereof.
14.17 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.
11 Effective
Date of Plan. The Plan shall
become effective as of the Effective Date, but no Award shall be
exercised (or, in the case of a stock Award, shall be granted)
unless and until the Plan has been approved by the shareholders of
the Company, which approval shall be within twelve (12) months
before or after the date the Plan is adopted by the
Board.
12 Termination
or Suspension of the Plan. The
Plan shall terminate automatically on September 10, 2028. No Award
shall be granted pursuant to the Plan after such date, but Awards
theretofore granted may extend beyond that date. The Board may
suspend or terminate the Plan at any earlier date pursuant
to Section 13.1
hereof. No Awards may be granted under
the Plan while the Plan is suspended or after it is
terminated.
13 Choice
of Law. The law of the State of
Utah shall govern all questions concerning the construction,
validity and interpretation of this Plan, without regard to such
state’s conflict of law rules.
As
adopted by the Board of Directors of Dynatronics Corporation on
September 10, 2018.
As
approved by the shareholders of Dynatronics Corporation on
___________________.
A-20