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EXHIBIT 4.39
FOCAL COMMUNICATIONS CORPORATION
Amended and Restated 1998 Equity and Performance Incentive Plan
1. Purpose. The purpose of the Amended and Restated 1998 Equity and
Performance Incentive Plan is to attract and retain consultants, officers and
other key employees of Focal Communications Corporation, a Delaware
corporation, and its Subsidiaries and to provide to such persons incentives and
rewards for superior performance.
2. Definitions. As used in this Plan,
"Appreciation Right" means a right granted pursuant to Section 5 of this
Plan and includes both Tandem Appreciation Rights and Free-Standing
Appreciation Rights.
"Base Price" means the price to be used as the basis for determining the
Spread upon the exercise of a Free-Standing Appreciation Right and a Tandem
Appreciation Right.
"Board" means the Board of Directors of the Company and, to the extent of
any delegation by the Board to a committee (or subcommittee thereof) pursuant
to Section 15 of this Plan, such committee (or subcommittee).
"Change in Control" shall have the meaning ascribed thereto in Section 11 of
this Plan.
"Code" means the Internal Revenue Code of 1986, as amended from time to
time.
"Common Shares" means the shares of Class A Common Stock, par value $.01 per
share, of the Company or any security into which such Common Shares may be
converted or exchanged by reason of any transaction or event of the type
referred to in Section 10 of this Plan.
"Company" means Focal Communications Corporation, a Delaware corporation.
"Covered Employee" means a Participant who is, or is determined by the Board
to be likely to become, a "covered employee" within the meaning of Section
162(m) of the Code (or any successor provision).
"Date of Grant" means the date specified by the Board on which a grant of
Option Rights, Appreciation Rights, Performance Shares or Performance Units or
a grant or sale of Restricted Shares or Deferred Shares shall become effective
(which shall not be earlier than the date on which the Board takes action with
respect thereto).
"Deferral Period" means the period of time during which Deferred Shares are
subject to deferral limitations under Section 7 of this Plan.
"Deferred Shares" means an award pursuant to Section 7 of this Plan of the
right to receive Common Shares at the end of a specified Deferral Period.
"Director" means a member of the Board of Directors of the Company.
"Eligible Transferee" means one or more (i) one or more members of the
Participant's immediate family (as the term "immediate family" is defined in
Rule 16a-1(e) promulgated under Section 16(a) of the Exchange Act (or any
successor rule to the same effect), as in effect from time to time), (ii) one
or more trusts established solely for the benefit of one or more members of the
Participant's immediate family, (iii) one or more corporations or limited
liability companies in which the only equity holders are members of the
Participant's immediate family or (iv) one or more partnerships in which the
only partners are members of the Participant's immediate family.
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"Exchange Act" means the Securities Exchange Act of 1934, as amended, and
the rules and regulations thereunder, as such statute, rules and regulations
may be amended from time to time.
"Free-Standing Appreciation Right" means an Appreciation Right granted
pursuant to Section 5 of this Plan that is not granted in tandem with an Option
Right.
"Incentive Stock Options" means Option Rights that are intended to qualify
as "incentive stock options" under Section 422 of the Code or any successor
provision.
"Initial Public Offering" means the initial underwritten offering of equity
securities of the Company to the general public pursuant to a registration
statement filed with, and declared effective by, the Securities and Exchange
Commission pursuant to the Securities Act; provided that neither of the
following shall constitute an Initial Public Offering (i) any issuance of
Common Shares as consideration or financing for a merger or acquisition, or
(ii) any issuance of Common Shares or rights to acquire Common Shares to
employees of the Company as part of an incentive or compensation plan.
"Management Objectives" means the measurable performance objective or
objectives established pursuant to this Plan for Participants who have received
grants of Performance Shares or Performance Units (or, when so determined by
the Board, Option Rights, Appreciation Rights, Restricted Shares and dividend
credits) under this Plan. Management Objectives may be described in terms of
Company-wide objectives or objectives that are related to the performance of
the individual Participant or the Subsidiary, division, department, region or
function within the Company or Subsidiary in which the Participant is employed.
The Management Objectives may be made relative to the performance of other
corporations. The Management Objectives applicable to any award to a Covered
Employee shall be based on specified levels of or growth in one or more of the
following criteria:
(i) market value;
(ii) book value;
(iii) market share;
(iv) operating profit;
(v) net income;
(vi) cash flow;
(vii) earnings, including earnings before interest, taxes, depreciation
and other non-cash items;
(viii) debt/capital ratio;
(ix) return on capital;
(x) return on equity;
(xi) costs or expenses;
(xii) net assets;
(xiii) return on assets;
(xiv) margins;
(xv) earnings per share growth;
(xvi) revenue growth;
(xvii) product volume growth, including growth in lines in service or
minutes of use; and
(xix) total return to shareholders.
If the Committee determines that a change in the business, operations,
corporate structure or capital structure of the Company, or the manner in which
the Company conducts its business, or other events or circumstances render the
Management Objectives unsuitable, the Committee may in its discretion modify
such
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Management Objectives or the related minimum acceptable level of achievement,
in whole or in part, as the Committee deems appropriate and equitable;
provided, however, the Committee shall not make any modification of the
Management Objectives or minimum acceptable level of achievement in the case of
a Covered Employee where such action would result in the loss of the otherwise
available exemption of the award under Section 162(m) of the Code.
"MDCP" means Madison Dearborn Capital Partners, L.P., a Delaware limited
partnership.
"Market Value per Share" means, as of any particular date, (i) the closing
sale price per Common Share as reported on the principal exchange on which
Common shares are then trading, if any, or, if applicable, the NASDAQ National
Market System, on the Date of Grant, or if there are no sales on such day, on
the next preceding trading day during which a sale occurred, or (ii) if clause
(i) does not apply, the fair market value of the Common Shares as determined by
the Board.
"Non-Employee Director" means a person who is a "non-employee director" of
the Company within the meaning of Rule 16b-3.
"Optionee" means the optionee named in an agreement evidencing an
outstanding Option Right.
"Option Price" means the purchase price payable upon exercise of an Option
Right.
"Option Right" means the right to purchase Common Shares upon exercise of an
option granted pursuant to Section 4 of this Plan.
"Outside Director" means a person who is an "outside director" of the
Company within the meaning of Section 162(m) of the Code.
"Participant" means a person who is selected by the Board to receive
benefits under this Plan and who is at the time a consultant, an officer or
other key employee of the Company or any one or more of its Subsidiaries or who
has agreed to commence serving in any of such capacities.
"Performance Period" means, in respect of a Performance Share or Performance
Unit, a period of time established pursuant to Section 8 of this Plan within
which the Management Objectives relating to such Performance Share or
Performance Unit are to be achieved.
"Performance Share" means a bookkeeping entry that records the equivalent of
one Common Share awarded pursuant to Section 8 of this Plan.
"Performance Unit" means a bookkeeping entry that records a unit equivalent
to $1.00 awarded pursuant to Section 8 of this Plan.
"Plan" means this Focal Communications Corporation Amended and Restated 1998
Equity and Performance Incentive Plan.
"Reload Option Rights" means additional Option Rights granted automatically
to an Optionee upon the exercise of Option Rights pursuant to Section 4(g) of
this Plan.
"Restricted Shares" means Common Shares granted or sold pursuant to Section
6 of this Plan as to which neither the substantial risk of forfeiture nor the
restrictions on transfer referred to in Section 6 of this Plan have expired.
"Rule 16b-3" means Rule 16b-3 promulgated under the Exchange Act (or any
successor rule to the same effect), as in effect from time to time.
"Securities Act" means the Securities Act of 1933, and the rules and
regulations promulgated thereunder, as amended from time to time.
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"Spread" means the excess of the Market Value per Share on the date when an
Appreciation Right is exercised, or on the date when Option Rights are
surrendered in payment of the Option Price of other Option Rights, over the
Option Price or Base Price provided for in the related Option Right or Free-
Standing Appreciation Right, respectively.
"Subsidiary" means a corporation, company or other entity (i) more than 50
percent of whose outstanding shares or securities (representing the right to
vote for the election of directors or other managing authority) are, or (ii)
which does not have outstanding shares or securities (as may be the case in a
partnership, joint venture or unincorporated association) but more than 50
percent of whose ownership interest representing the right generally to make
decisions for such other entity is, now or hereafter, owned or controlled,
directly or indirectly, by the Company except that, for the purposes of
determining whether any person may be a Participant for the purposes of any
grant of Incentive Stock Options, "Subsidiary" means any corporation in which
the Company at the time of grant, owns or controls, directly or indirectly,
more than 50 percent of the total combined voting power represented by all
classes of stock issued by such corporation.
"Tandem Appreciation Right" means an Appreciation Right granted pursuant to
Section 5 of this Plan that is granted in tandem with an Option Right.
"Tax-Qualified Option" means an Option Right that is intended to qualify
under particular provisions of the Code, including but not limited to an
Incentive Stock Option.
"Termination Date" means the tenth anniversary of the date on which this
Plan is first approved by the stockholders of the Company.
"Voting Power" means at any time, the total votes relating to the then-
outstanding securities entitled to vote generally in the election of Directors.
3. Shares Available Under the Plan. (a) Subject to adjustment as provided in
Section 3(b) and Section 10 of this Plan, the number of Common Shares that may
be issued or transferred (i) upon the exercise of Option Rights or Appreciation
Rights, (ii) as Restricted Shares and subsequently released from substantial
risks of forfeiture, (iii) as Deferred Shares, (iv) in payment of Performance
Shares or Performance Units that have been earned, or (v) in payment of
dividend equivalents paid with respect to awards made under this Plan, shall
not in the aggregate exceed a number of Common Shares equal to 12,050,000
Common Shares, plus (z) any Common Shares described in Section 3(b). Such
Common Shares may be shares of original issuance or treasury shares or a
combination thereof.
(b) The number of Common Shares available in Section 3(a) above shall be
adjusted to account for Common Shares relating to awards that expire, are
forfeited or are transferred, surrendered or relinquished upon the payment of
any Option Price by the transfer to the Company of Common Shares or upon
satisfaction of any withholding amount. Upon payment in cash of the benefit
provided by any award granted under this Plan, any Common Shares that were
covered by that award shall again be available for issuance or transfer
hereunder.
(c) Notwithstanding anything in this Section 3 or elsewhere in this Plan to
the contrary and subject to adjustment as provided in Section 10 of this Plan,
(i) the aggregate number of Common Shares actually issued or transferred by the
Company upon the exercise of Incentive Stock Options shall not exceed 2,500,000
Common Shares; (ii) no Participant shall be granted Option Rights and
Appreciation Rights for more than an aggregate of 500,000 Common Shares during
any calendar year; and (iii) the number of Common Shares issued as Restricted
Shares shall not in the aggregate exceed 1,250,000.
(d) Notwithstanding any other provision of this Plan to the contrary, in no
event shall any Participant in any calendar year receive an award of
Performance Shares or Performance Units having an aggregate maximum value as of
their respective Dates of Grant in excess of $5,000,000.
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4. Option Rights. The Board may from time to time authorize grants to
Participants of options to purchase Common Shares. Each such grant may utilize
any or all of the authorizations, and shall be subject to all of the
requirements, contained in the following provisions:
(a) Each grant shall specify the number of Common Shares to which it
pertains, subject to the limitations set forth in Section 3 of this Plan.
(b) Each grant shall specify an Option Price per share, which may not be
less than the Market Value per Share on the Date of Grant.
(c) Each grant shall specify the form of consideration to be paid in
satisfaction of the Option Price and the manner of payment of such
consideration, which may include (i) cash in the form of currency or check
or other cash equivalent acceptable to the Company, (ii) by the tender to
the Company of Common Shares owned by the Participant and registered in the
name of the Participant having an aggregate fair market value on the date
of exercise equal to the total Option Price, such fair market value to be
determined based on the Market Value per Share on the date of exercise,
(iii) by delivery of irrevocable instructions to a financial institution or
broker to deliver promptly to the Company sale or loan proceeds with
respect to the Common Shares sufficient to pay the total Option Price, (iv)
through the written election of the Optionee to have Common Shares withheld
by the Company from the Common Shares otherwise to be received, with such
withheld shares having an aggregate fair market value on the date of
exercise equal to the total Option Price of the shares being purchased, and
(v) any combination of the foregoing methods of payment.
(d) The Board may determine, at or after the Date of Grant, that payment
of the Option Price of any Option Right (other than an Incentive Stock
Option) may also be made in whole or in part in the form of Restricted
Shares or other Common Shares that are forfeitable or subject to
restrictions on transfer, Deferred Shares, Performance Shares (based, in
each case, on the Market Value per Share on the date of exercise), other
Option Rights (based on the Spread on the date of exercise) or Performance
Units. Unless otherwise determined by the Board at or after the Date of
Grant, whenever any Option Price is paid in whole or in part by means of
any of the forms of consideration specified in this Section 4(d), the
Common Shares received upon the exercise of the Option Rights shall be
subject to such risks of forfeiture or restrictions on transfer as may
correspond to any that apply to the consideration surrendered, but only to
the extent determined with respect to the consideration surrendered, of (i)
the number of shares or Performance Shares, (ii) the Spread of any
unexercisable portion of Option Rights, or (iii) the stated value of
Performance Units.
(e) Any grant may provide for deferred payment of the Option Price from
the proceeds of sale through a broker on a date satisfactory to the Company
of some or all of the Common Shares to which such exercise relates.
(f) Any grant may provide for payment of the Option Price, at the
election of the Optionee, in installments (with or without interest) upon
terms determined by the Board.
(g) On or after the Date of Grant of any Option Rights, the Board may
provide for the automatic grant of Reload Option Rights to an Optionee upon
the exercise of Option Rights (including Reload Option Rights) using Common
Shares or other consideration specified in Section 4(d). Reload Option
Rights shall cover up to the number of Common Shares, Deferred Shares,
Option Rights or Performance Shares (or the number of Common Shares having
a value equal to the value of any Performance Units) surrendered to the
Company upon any such exercise in payment of the Option Price or to meet
any withholding obligations. Reload Options may have an Option Price that
is less than the applicable Market Value per Share at the time of exercise
and shall be on such other terms as may be specified by the Directors,
which may be the same as or different from those of the original Option
Rights.
(h) Successive grants may be made to the same Participant regardless of
whether any Option Rights previously granted to such Participant remain
unexercised.
(i) Each grant shall specify the period or periods of continuous service
by the Optionee with the Company or any Subsidiary or shall specify such
different or additional conditions as the Board may determine (including
the achievement of Management Objectives), that must be satisfied before
the Option
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Rights or installments thereof will become exercisable and may provide for
the earlier exercise of such Option Rights in the event of a Change in
Control or other events.
(j) Option Rights granted under this Plan may be (i) options, including,
without limitation, Incentive Stock Options, that are intended to qualify
under particular provisions of the Code, (ii) options that are not intended
so to qualify, or (iii) combinations of the foregoing.
(k) On or after the Date of Grant of any Option Rights (other than
Incentive Stock Options), the Board may provide for the payment of dividend
equivalents to the Optionee on a current, deferred or contingent basis or
may provide that any such equivalents shall be credited against the Option
Price.
(l) The exercise of an Option Right shall result in the cancellation on
a share-for-share basis of any Tandem Appreciation Right authorized under
Section 5 of this Plan.
(m) No Option Right shall be exercisable more than 10 years from the
Date of Grant.
(n) Each grant of Option Rights shall be evidenced by an agreement
executed on behalf of the Company by an officer thereof and delivered to
the Optionee and containing such terms and provisions as the Board may
approve consistent with this Plan.
5. Appreciation Rights. (a) The Board may authorize the granting of (i)
Tandem Appreciation Rights to any Optionee in respect of Option Rights granted
under this Plan, and (ii) Free-Standing Appreciation Rights to any
Participant. A Tandem Appreciation Right shall be a right of the Optionee,
exercisable by surrender of the related Option Right, to receive from the
Company an amount determined by the Board, which shall be expressed as a
percentage of the Spread (not exceeding 100 percent) at the time of exercise.
Tandem Appreciation Rights may be granted at any time prior to the exercise or
termination of the related Option Rights; provided, however, that a Tandem
Appreciation Right awarded in respect of an Incentive Stock Option must be
granted concurrently with the Incentive Stock Option. A Free-Standing
Appreciation Right shall be a right of the Participant to receive from the
Company an amount determined by the Board, which shall be expressed as a
percentage of the Spread (not exceeding 100 percent) at the time of exercise.
(b) Each grant of Appreciation Rights may utilize any or all of the
authorizations, and shall be subject to all of the requirements, contained in
the following provisions:
(i) Any grant may specify that the amount payable upon exercise of an
Appreciation Right may be paid by the Company in cash, in Common Shares or
in any combination thereof and may either grant to the Participant or
retain in the Board the right to elect among those alternatives.
(ii) Any grant may specify that the amount payable upon exercise of an
Appreciation Right may not exceed a maximum specified by the Board at the
Date of Grant.
(iii) Any grant may specify waiting periods before exercise and
permissible exercise dates or periods.
(iv) Any grant may specify that the Appreciation Right may be exercised
only in the event of, or earlier in the event of, a Change in Control.
(v) Any grant may provide for the payment to the Participant of dividend
equivalents thereon in cash or Common Shares on a current, deferred or
contingent basis.
(vi) Any grant may specify Management Objectives that must be achieved
as a condition of the exercise of the subject Appreciation Rights.
(vii) Each grant of Appreciation Rights shall be evidenced by an
agreement executed on behalf of the Company by an officer thereof and
delivered to the Participant, which agreement shall describe such
Appreciation Rights, identify any related Option Rights, state that such
Appreciation Rights are subject to all of the terms and conditions of this
Plan, and contain such other terms and provisions as the Board may approve
consistent with this Plan.
(c) Any grant of Tandem Appreciation Rights shall provide that the Tandem
Appreciation Rights may be exercised only at a time when the related Option
Rights are also exercisable and the Spread is positive and by surrender of the
related Option Rights for cancellation.
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(d) Regarding Free-Standing Appreciation Rights only:
(i) Each grant shall specify in respect of each Free-Standing
Appreciation Right a Base Price, which shall be equal to or greater or less
than the Market Value per Share on the Date of Grant;
(ii) Successive grants may be made to the same Participant regardless of
whether any Free-Standing Appreciation Rights previously granted to the
Participant remain unexercised; and
(iii) No Free-Standing Appreciation Right granted under this Plan may be
exercised more than 10 years from the Date of Grant.
6. Restricted Shares. The Board may authorize the granting or sale of
Restricted Shares to Participants. Each such grant or sale may utilize any or
all of the authorizations, and shall be subject to all of the requirements,
contained in the following provisions:
(a) Each such grant or sale shall constitute an immediate transfer of
the ownership of Common Shares to the Participant in consideration of the
performance of services, entitling such Participant to voting, dividend and
other ownership rights, subject in each case to the substantial risk of
forfeiture and restrictions on transfer hereinafter referred to.
(b) Each such grant or sale may be made without additional consideration
or in consideration of a payment by such Participant that is less than
Market Value per Share at the Date of Grant.
(c) Each such grant or sale shall provide that the Restricted Shares
covered by such grant or sale shall be subject to a "substantial risk of
forfeiture" within the meaning of Section 83 of the Code for a period to be
determined by the Board at the Date of Grant and may provide for the
earlier lapse of such substantial risk of forfeiture in the event of a
Change in Control or other events.
(d) Each such grant or sale of Restricted Shares shall provide that
during the period for which such substantial risk of forfeiture is to
continue, the transferability of the Restricted Shares shall be prohibited
or restricted in the manner and to the extent prescribed by the Board at
the Date of Grant (which restrictions may include, but shall not be limited
to, rights of repurchase or first refusal in the Company or provisions
subjecting the Restricted Shares to a continuing substantial risk of
forfeiture in the hands of any transferee).
(e) Any grant of Restricted Shares may specify Management Objectives
that, if achieved, will result in termination or early termination of the
risk of forfeiture and restrictions on transfer applicable to the subject
Restricted Shares. Each grant may specify in respect of any such Management
Objectives a minimum acceptable level of achievement and may set forth a
formula for determining the number of Restricted Shares on which
restrictions will terminate if performance is at or above such minimum
level but falls short of full achievement of the specified Management
Objectives.
(f) Any such grant or sale of Restricted Shares may require that any or
all dividends or other distributions paid on the Restricted Shares during
the period of a risk of forfeiture and restrictions on transfer be
automatically deferred and reinvested in additional Restricted Shares,
which may be subject to the same restrictions as the underlying award.
(g) Each grant or sale of Restricted Shares shall be evidenced by an
agreement executed on behalf of the Company by any officer and delivered to
the Participant and shall contain such terms and provisions as the Board
may approve consistent with this Plan. Unless otherwise directed by the
Board, all certificates representing Restricted Shares shall be held in
custody by the Company, together with a stock power or powers endorsed in
blank by the Participant in whose name such certificates are registered,
until all restrictions thereon shall have lapsed.
7. Deferred Shares. The Board may authorize the granting or sale of Deferred
Shares to Participants. Each such grant or sale may utilize any or all of the
authorizations, and shall be subject to all of the requirements, contained in
the following provisions:
(a) Each such grant or sale shall constitute the agreement by the
Company to deliver Common Shares to the Participant in the future in
consideration of the performance of services and subject to the fulfillment
of such conditions during the Deferral Period as the Board may specify.
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(b) Each such grant or sale may be made without additional consideration
or in consideration of a payment by the Participant that is less than the
Market Value per Share at the Date of Grant.
(c) Each such grant or sale shall be subject to a Deferral Period as
determined by the Board at the Date of Grant, and may provide for the
earlier lapse or other modification of such Deferral Period in the event of
a Change in Control or other event.
(d) During the Deferral Period, a Participant shall not have any rights
of ownership in the Deferred Shares, shall not have any right to vote the
Deferred Shares and, except as provided in Section 9(c) of this Plan, shall
not have any right to transfer any rights under his or her award, but at or
after the Date of Grant, the Board may authorize the payment of dividend
equivalents on the Deferred Shares on a current, deferred or contingent
basis, in either cash or additional Common Shares.
(e) Each grant or sale of Deferred Shares shall be evidenced by an
agreement executed on behalf of the Company by any officer and delivered to
the Participant and shall contain such terms and provisions as the Board
may approve consistent with this Plan.
8. Performance Shares and Performance Units. The Board may authorize the
granting of Performance Shares and Performance Units that will become payable
to a Participant upon achievement of specified Management Objectives. Each such
grant may utilize any or all of the authorizations, and shall be subject to all
of the requirements, contained in the following provisions:
(a) Each grant shall specify the number of Performance Shares or
Performance Units to which it pertains, which may be subject to adjustment
to reflect changes in compensation or other factors; provided, however,
that no such adjustment shall be made in the case of a Covered Employee
where such action would result in the loss of the otherwise available
exemption of the award under Section 162(m) of the Code.
(b) The Performance Period with respect to each Performance Share or
Performance Unit shall be such period of time commencing with the Date of
Grant, as shall be determined by the Board at the time of grant, which may
be subject to earlier lapse or other modification in the event of a Change
in Control or other events as set forth in the agreement specified in
Section 8(g).
(c) Each grant shall specify Management Objectives that, if achieved,
will result in payment or early payment of the award, and each grant may
specify in respect of the specified Management Objectives a minimum
acceptable level of achievement and shall set forth a formula for
determining the number of Performance Shares or Performance Units that will
be earned if performance is at or above the minimum level but falls short
of full achievement of the specified Management Objectives. The grant shall
specify that, before the Performance Shares or Performance Units shall be
earned and paid, the Board must certify that the specified Management
Objectives have been satisfied.
(d) Each grant shall specify the time and manner of payment of
Performance Shares or Performance Units that have been earned. Any grant
may specify that the amount payable with respect thereto may be paid by the
Company in cash or Common Shares or any combination thereof and may either
grant to the Participant or retain in the Board the right to elect among
those alternatives.
(e) Any grant of Performance Shares may specify that the amount payable
with respect thereto may not exceed a maximum specified by the Board at the
Date of Grant. Any grant of Performance Units may specify that the amount
payable or the number of Common Shares issuable or transferable with
respect thereto may not exceed maximums specified by the Board at the Date
of Grant.
(f) At or after the Date of Grant of Performance Shares, the Board may
provide for the payment of dividend equivalents to the holder thereof on a
current, deferred or contingent basis, in either cash or additional Common
Shares.
(g) Each grant of Performance Shares or Performance Units shall be
evidenced by an agreement executed on behalf of the Company by any officer
and delivered to the Participant, which agreement shall state that such
Performance Shares or Performance Units are subject to all the terms and
conditions of this Plan and shall contain such other terms and provisions
as the Board may approve consistent with this Plan.
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9. Transferability. (a) Except as otherwise determined by the Board, but
subject to Section 9(c), no Option Right, Appreciation Right or other
derivative security granted under the Plan shall be transferable by a
Participant other than by will or the laws of descent and distribution. Except
as otherwise determined by the Board, Option Rights and Appreciation Rights
shall be exercisable during the Optionee's lifetime only by him or her or by
his or her guardian or legal representative.
(b) The Board may specify at the Date of Grant that part or all of the
Common Shares that are to be issued or transferred by the Company upon the
exercise of Option Rights or Appreciation Rights, upon the termination of the
Deferral Period applicable to Deferred Shares or upon payment under any grant
of Performance Shares or Performance Units or are no longer subject to the
substantial risk of forfeiture and restrictions on transfer referred to in
Section 6 of this Plan, shall be subject to further restrictions on transfer.
(c) Notwithstanding the provisions of Section 9(a), but subject to prior
authorization by the Board, Option Rights (other than Incentive Stock Options),
Appreciation Rights, Restricted Shares, Deferred Shares, Performance Shares and
Performance Units shall be transferable by a Participant to an Eligible
Transferee, without payment of consideration therefor; provided, however, that
(i) no such transfer shall be effective unless reasonable prior notice thereof
is delivered to the Company and such transfer is thereafter effected in
accordance with any terms and conditions that shall have been made applicable
thereto by the Company or the Board and (ii) any such transferee shall be
subject to the same terms and conditions hereunder as the Participant.
10. Adjustments. The Board shall make or provide for such adjustments in the
numbers of Common Shares covered by outstanding Option Rights, Appreciation
Rights, Deferred Shares, and Performance Shares granted hereunder, in the
Option Price and Base Price provided in outstanding Option Rights and
Appreciation Rights, and in the kind of shares or other securities covered
thereby, as the Board, in its sole discretion, exercised in good faith, may
determine is equitably required to prevent dilution or expansion of the rights
of Participants or Optionees that otherwise would result from (a) any stock
dividend, stock split, combination of shares, recapitalization or other change
in the capital structure of the Company, or (b) any merger, consolidation,
spin-off, split-off, spin-out, split-up, reorganization, partial or complete
liquidation or other distribution of assets, issuance of rights or warrants to
purchase securities, or (c) any other corporate transaction or event having an
effect similar to any of the foregoing. In the event of any such transaction or
event, the Board, in its discretion, may provide in substitution for any or all
outstanding awards under this Plan such alternative consideration as it, in
good faith, may determine to be equitable in the circumstances and may require
in connection therewith the surrender of all awards so replaced. The Board
shall also make or provide for such adjustments in the numbers of shares
specified in Section 3 of this Plan as the Board in its sole discretion,
exercised in good faith, may determine is appropriate to reflect any
transaction or event described in this Section 10; provided, however, that any
such adjustment to the number specified in Section 3(c)(i) shall be made only
if and to the extent that such adjustment would not cause any Option Right
intended to qualify as an Incentive Stock Option to fail so to qualify.
11. Change in Control. For the purposes of this Plan, except as may be
otherwise prescribed by the Board in an agreement evidencing a grant or award
made under the Plan, a "Change in Control" shall mean if at any time any of the
following events shall have occurred:
(a) The Company is merged or consolidated or reorganized with or into
another corporation or other legal person, and as a result of such merger,
consolidation or reorganization less than a majority of the combined voting
power of the then-outstanding securities of such corporation or person
immediately after such transaction are held in the aggregate by the holders
of securities entitled to vote generally in the election of Directors
immediately prior to such transaction;
(b) The Company sells or otherwise transfers all or substantially all of
its assets to any other corporation or other legal person, and less than a
majority of the combined voting power of the then-outstanding securities of
such corporation or person immediately after such sale or transfer is held
in the aggregate by the holders of Common Stock immediately prior to such
sale or transfer;
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(c) There is a report filed on Schedule 13D or Schedule 14D-1 (or any
successor schedule, form or report), as promulgated in each case pursuant
to the Exchange Act, disclosing that any person (as the term "person" is
used in Section 13(d)(3) or Section 14(d)(2) of the Exchange Act) has
become the beneficial owner (as the term "beneficial owner" is defined in
Rule 13d-3 promulgated under the Exchange Act or any successor rule or
regulation promulgated thereunder) of securities representing 50% or more
of the Voting Power; or
(d) If during any period of two consecutive years, individuals who at
the beginning of any such period constitute the Directors and any new
Directors whose election or nomination for election by the Company's
stockholders was approved by a vote of at least two-thirds of the Directors
then still in office who either were Directors at the beginning of the
period or whose election was previously so approved cease for any reason to
constitute a majority of the Directors.
Notwithstanding the provisions of subparagraph (c) above, a "Change in
Control" shall not be deemed to have occurred for the purposes of this
Agreement (i) solely because MDCP either files or becomes obligated to file a
report on Schedule 13D (or any successor schedule or report), as promulgated
pursuant to the Exchange Act, disclosing beneficial ownership by it of
securities representing 50% or more of the Voting Power, (ii) solely because
the Company or any Company-sponsored employee stock ownership plan or other
employee benefit plan of the Company either files or becomes obligated to file
a report or proxy statement under or in response to Schedule 13D, Schedule 14D-
1, Form 8-K or Schedule 14A (or any successor schedule, form or report or item
therein), as promulgated in each case pursuant to the Exchange Act, disclosing
beneficial ownership by it of securities representing 50% or more of the Voting
Power or otherwise, or because the Company reports that a change in control of
the Company has or may have occurred or will or may occur in the future by
reason of such beneficial ownership or (iii) solely because of a change in
control of any subsidiary (as the term "subsidiary" is defined in Section
424(f) of the Code) of the Company.
12. Fractional Shares. The Company shall not be required to issue any
fractional Common Shares pursuant to this Plan. The Board may provide for the
elimination of fractions or for the settlement of fractions in cash.
13. Withholding Taxes. To the extent that the Company is required to
withhold federal, state, local or foreign taxes in connection with any payment
made or benefit realized by a Participant or other person under this Plan, and
the amounts available to the Company for such withholding are insufficient, it
shall be a condition to the receipt of such payment or the realization of such
benefit that the Participant or such other person make arrangements
satisfactory to the Company for payment of the balance of such taxes required
to be withheld, which arrangements (in the discretion of the Board) may include
relinquishment of a portion of such benefit. The Company and a Participant or
such other person may also make similar arrangements with respect to the
payment of any taxes with respect to which withholding is not required.
14. Foreign Employees. In order to facilitate the making of any grant or
combination of grants under this Plan, the Board may provide for such special
terms for awards to Participants who are foreign nationals or who are employed
by the Company or any Subsidiary outside of the United States of America as the
Board may consider necessary or appropriate to accommodate differences in local
law, tax policy or custom. Moreover, the Board may approve such supplements to
or amendments, restatements or alternative versions of this Plan as it may
consider necessary or appropriate for such purposes, without thereby affecting
the terms of this Plan as in effect for any other purpose, and the Secretary or
other appropriate officer of the Company may certify any such document as
having been approved and adopted in the same manner as this Plan. No such
special terms, supplements, amendments or restatements, however, shall include
any provisions that are inconsistent with the terms of this Plan as then in
effect unless this Plan could have been amended to eliminate such inconsistency
without further approval by the stockholders of the Company.
15. Administration of the Plan. (a) (i) Subject to subsection (ii) of this
Section 15(a), this Plan shall be administered by the Board, which may from
time to time delegate all or any part of its authority under this Plan
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to a committee of the Board (or subcommittee thereof) consisting of not less
than two Non-Employee Directors appointed by the Board.
(ii) Awards of Option Rights and Appreciation Rights are, and certain awards
of Restricted Shares, Performance Shares and Performance Units may be, intended
to qualify as performance-based compensation under Section 162(m) of the Code.
The grant of such awards, and the administration thereof and any determinations
to be made in connection therewith, shall be carried out only by a committee of
the Board (or subcommittee thereof) consisting of not less than two Outside
Directors appointed by the Board. Such committee shall grant such awards in a
manner consistent with the rules governing performance-based compensation under
Section 162(m) of the Code.
(b) To the extent of any such delegation, references in this Plan to the
Board shall be deemed to be references to any such committee (or subcommittee).
The interpretation and construction by the Board of any provision of this Plan
or of any agreement, notification or document evidencing the grant of Option
Rights, Appreciation Rights, Restricted Shares, Deferred Shares, Performance
Shares or Performance Units and any determination by the Board pursuant to any
provision of this Plan or of any such agreement, notification or document shall
be final and conclusive. No member of the Board shall be liable for any such
action or determination made in good faith.
16. Amendments, Etc. (a) The Board may at any time and from time to time
amend this Plan in whole or in part; provided, however, any amendment that must
be approved by the stockholders of the Corporation in order to comply with
applicable law or the rules of the principal exchange on which the Common
Shares are then trading (or, if applicable, the NASDAQ National Market System)
shall not be effective unless and until such approval shall have been obtained.
The submission of this Plan or any amendment hereto for stockholder approval
shall not be construed to limit the Company's authority to offer similar or
dissimilar benefits under other plans without stockholder approval.
(b) With the concurrence of the affected Optionee, the Board may cancel any
agreement evidencing Option Rights granted under this Plan. In the event of any
such cancellation, the Board may authorize the granting of new Option Rights
hereunder, which may or may not cover the same number of Common Shares as had
been covered by the canceled Option Rights, at such Option Price, in such
manner and subject to such other terms, conditions and discretion as would have
been permitted under this Plan had the canceled Option Rights not been granted.
(c) The Board also may permit Participants to elect to defer the issuance of
Common Shares or the settlement of awards in cash under the Plan pursuant to
such rules, procedures or programs as it may establish for the purposes of this
Plan. The Board may also provide that deferred issuances and settlements
include the payment or crediting of dividend equivalents or interest on the
deferral amounts.
(d) The Board may condition the grant of any award or combination of awards
authorized under this Plan on the surrender or deferral by the Participant of
his or her right to receive a cash bonus or other compensation otherwise
payable by the Company or a Subsidiary to the Participant.
(e) In the event of termination of employment by reason of death, disability
or normal or early retirement, or in the case of hardship or other special
circumstances, of a Participant who holds an Option Right or Appreciation Right
not immediately and fully exercisable, or any Restricted Shares as to which the
substantial risk of forfeiture or the restrictions on transfer have not lapsed,
or any Deferred Shares as to which the Deferral Period has not been completed,
or any Performance Shares or Performance Units that have not been fully earned,
or who holds Common Shares subject to any transfer restriction imposed pursuant
to Section 9(b) of this Plan, the Board may in its sole discretion accelerate
the time at which such Option Right or Appreciation Right may be exercised or
the time at which such substantial risk of forfeiture or restrictions on
transfer will lapse or the time when such Deferral Period will end or the time
at which such Performance Shares or
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Performance Units will be deemed to have been fully earned or the time when
such transfer restriction will terminate or may waive any other limitation or
requirement under any such award.
(f) This Plan shall not confer upon any Participant any right with respect
to continuance of employment or other service with the Company or any
Subsidiary and shall not interfere in any way with any right the Company or any
Subsidiary would otherwise have to terminate any Participant's employment or
other service at any time.
(g) To the extent that any provision of this Plan would prevent any Option
Right that was intended to qualify as an Incentive Stock Option from qualifying
as such, such provision shall be null and void with respect to such Option
Right; provided, however, that such provision shall remain in effect for other
Option Rights, and there shall be no further effect on any provision of this
Plan.
17. Effective Date and Termination. (a) The effective date of this Plan
shall be the date immediately prior to the date on which the Company
consummates its Initial Public Offering.
(b) No grant shall be made under this Plan after the Termination Date, but
all grants made on or before the Termination Date shall continue in effect
thereafter subject to the terms thereof and the terms of this Plan.
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