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Exhibit 10.1
IPG PHOTONICS
2000 INCENTIVE COMPENSATION PLAN
1. DEFINITIONS
The following terms shall have the following meanings unless the context
indicates otherwise:
1.1. "Affiliate" shall mean a corporation which, for purposes of Section
422 of the Code, is a Parent or Subsidiary of the Company within the
meaning of Sections 424(e) and 424(f) of the Code
1.2. "Award" shall mean a Stock Option, a SAR, a Stock Award, a Stock Unit,
a Performance Share, a Performance Unit, or a Cash Award.
1.3. "Award Agreement" shall mean a written agreement between the Company
and a Participant that establishes the terms, conditions, restrictions
and/or limitations applicable to an Award, in addition to those
established by the Plan and by the Committee.
1.4. "Board" shall mean the Board of Directors of the Company.
1.5. "Cash Award" shall mean a grant by the Committee to a Participant of
an award of cash as described in Section 11 below.
1.6. "Cause" shall include, but may not be limited to any termination by
the Company or by an Affiliate or Group Company for willful breach of
duty in the course of employment or habitual neglect of duty or
continued incapacity to perform such duty, and also misconduct
(whether or not in the course of employment) deemed by the Board to be
detrimental to the Company, an Affiliate or a Group Company or to the
reputation of such entities, whether or not such misconduct is
criminal in nature.
1.7. "Change in Control of the Company" shall occur when following (a) an
IPO, or (b) a merger with or acquisition by a company, any person
becomes the beneficial owner, directly or indirectly, in the aggregate
of securities of the Company representing more than fifty percent
(50%) of the total combined voting power of all classes of the
Company's then outstanding securities and who did not at the time of
such IPO or merger or acquisition have such beneficial ownership.
1.8. "Code" shall mean the Internal Revenue Code of 1986, as amended from
time to time.
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1.9. "Committee" shall mean (i) the Board or (ii) a committee or
subcommittee of the Board appointed by the Board from among its
members. The Committee may be the Board's Compensation Committee.
Unless the Board determines otherwise, the Committee shall be
comprised solely of not less than two members who each shall qualify
as:
(a) a "Non-Employee Director" within the meaning of Rule 16b-3(b)(3)
(or any successor rule) under the Exchange Act, and
(b) an "outside director" within the meaning of Code Section 162(m)
and the Treasury Regulations thereunder.
1.10. "Common Stock" shall mean the voting, common stock, $0.0001 par value
per share, of the Company.
1.11. "Company" shall mean IPG Photonics Corporation USA, a Delaware
corporation.
1.12. "Disability" means the total and permanent disability of a
Participant (incurred while in the active service of the Company, an
Affiliate or a Group Company) based on proof satisfactory to the
Committee. Total and permanent disability shall be as defined in the
Company's long-term disability plan, if any, or as otherwise provided
by the Company.
1.13. "Dividend Equivalent Right" shall mean the right to receive an amount
equal to the amount of any dividend paid with respect to a share of
Common Stock multiplied by the number of shares of Common Stock
underlying or with respect to a Stock Option, a SAR, a Stock Unit or
a Performance Unit, and which shall be payable in cash, in Common
Stock, in the form of Stock Units or Performance Units, or a
combination of any or all of the foregoing.
1.14. "Effective Date" shall mean the date on which the Plan is adopted by
the Board.
1.15. "Employee" shall mean an employee of the Company or any Affiliate, as
described in Treasury Regulation Section 1.421-7(h).
1.16. "Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended from time to time, including applicable regulations
thereunder.
1.17. "Fair Market Value of the Common Stock" shall mean:
(a) if the Common Stock is readily tradeable on a national securities
exchange or other market system, the closing price of the Common
Stock on the date of calculation (or on the last preceding
trading date if Common Stock was not traded on such date), or
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(b) if the Common Stock is not readily tradeable on a national
securities exchange or other market system, the value as
determined in good faith by the Board.
1.18. "Group Company" shall mean any business entity deemed by the Board to
be a member of the IPG Group, including, but not limited to, any
business entity that has a significant financial interest in the
Company and any business entity in which the Company has a
significant financial interest, such entities to be referred to
collectively as the "Group Companies".
1.19. "Group Employee" shall mean any employee of a Group Company who is
not an Employee.
1.20. "Independent Contractor" shall mean a person (other than a person who
is an Employee, Group Employee or a Nonemployee Director) or an
entity that renders services to the Company, an Affiliate or a Group
Company.
1.21. "IPO" shall mean the first date that the Common Stock is registered
under the Securities Act of 1934 and offered for sale to the public.
1.22. "ISO" shall mean an "incentive stock option" as such term is used in
Section 422 of the Code.
1.23. "Nonemployee Director" shall mean a member of the Board who is not an
Employee.
1.24. "Nonqualified Stock Option" shall mean a Stock Option that does not
qualify as an ISO.
1.25. "Nonvoting Stock" shall mean the capital stock of any class or
classes having no voting power to elect the directors of a
corporation.
1.26. "Parent" shall mean a corporation or any other business entity which
directly or indirectly has an ownership interest of 50 percent or
more of the Voting Stock of the Company.
1.27. "Participant" shall mean any Employee, Group Employee, Nonemployee
Director or Independent Contractor to whom an Award has been granted
by the Committee under the Plan.
1.28. "Performance-Based Award" shall mean an Award subject to the
achievement of certain performance goals as described in Section 12
below.
1.29. "Performance Share" shall mean the grant by the Committee to a
Participant of an Award as described in Section 10.1 below.
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1.30. "Performance Unit" shall mean the grant by the Committee to a
Participant of an Award as described in Section 10.2 below.
1.31. "Plan" shall mean the IPG Photonics 2000 Incentive Compensation Plan.
1.32. "Recapitalization" shall mean any stock split, stock dividend,
recapitalization, combination of shares, exchange of shares or other
change affecting the Company's outstanding shares of capital stock as
a class without the Company's receipt of consideration.
1.33. "Reorganization" shall mean any of the following: (a) a merger or
consolidation in which the Company is not the surviving entity; (b) a
sale, transfer or other disposition of all or substantially all of
the Company's assets; (c) a reverse merger in which the Company is
the surviving entity but in which the Company's outstanding voting
securities are transferred in whole or in part to a person or persons
different from the persons holding those securities immediately prior
to the merger; or (d) any transaction effected primarily to change
the state in which the Company is incorporated or to create a holding
company structure.
1.34. "Retirement" means retirement from active employment or other service
with the Company pursuant to the normal or early retirement policy
and procedures of the Company.
1.35. "SAR" shall mean a grant by the Committee to a Participant of a stock
appreciation right as described in Section 8 below.
1.36. "Stock" shall mean the shares of capital stock of the Company.
1.37. "Stock Award" shall mean a grant by the Committee to a Participant of
an Award of Common Stock as described in Section 9.1 below.
1.38. "Stock Option" shall mean a grant by the Committee to a Participant
of an option to purchase Common Stock as described in Section 7
below.
1.39. "Stock Unit" shall mean a grant by the Committee to a Participant of
an Award as described in Section 9.2 below.
1.40. "Subsidiary" shall mean a corporation of which the Company directly
or indirectly owns 50 percent or more of the Voting Stock or any
other business entity in which the Company directly or indirectly has
an ownership interest of 50 percent or more.
1.41. "Treasury Regulations" shall mean the regulations promulgated under
the Code by the United States Department of the Treasury, as amended
from time to time.
1.42. "Vest" shall mean:
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(a) with respect to Stock Options and SARs, when the Stock Option or
SAR (or a portion of such Stock Option or SAR) first becomes
exercisable and remains exercisable subject to the terms and
conditions of such Stock Option or SAR; or
(b) with respect to Awards other than Stock Options and SARs, when
the Participant has:
(i) an unrestricted right, title and interest to receive the
compensation (whether payable in Common Stock, cash or a
combination of both) attributable to an Award (or a portion
of such Award) or to otherwise enjoy the benefits underlying
such Award; and
(ii) a right to transfer an Award subject to no Company-imposed
restrictions or limitations other than restrictions and/or
limitations imposed by Section 14 below.
1.43. "Vesting Date" shall mean the date or dates on which an Award Vests.
1.44. "Voting Stock" shall mean the capital stock of any class or classes
having general voting power under ordinary circumstances, in the
absence of contingencies, to elect the directors of a corporation.
2. PURPOSE AND TERM OF PLAN
2.1. Purpose. The purpose of the Plan is to motivate certain Employees,
Group Employees, Nonemployee Directors and Independent Contractors to
put forth maximum efforts toward the growth, profitability, and
success of the Company, Affiliates and Group Companies by providing
incentives to such Employees, Group Employees, Nonemployee Directors
and Independent Contractors through cash payments and/or through the
ownership and performance of the Common Stock. In addition, the Plan
is intended to provide incentives which will attract and retain
highly qualified individuals as Employees, Group Employees and
Nonemployee Directors and to assist in aligning the interests of such
Employees, Group Employees and Nonemployee Directors with those of
the Company's stockholders.
2.2. Term. The Plan shall be effective as of the Effective Date; provided,
however, that the Plan shall be approved by the stockholders of the
Company at an annual meeting or any special meeting of stockholders
of the Company within 12 months before or after the Effective Date,
and such approval by the stockholders of the Company shall be a
condition to the right of each Participant to receive Awards
hereunder. Any Award granted under the Plan prior to the approval by
the stockholders of the Company shall be effective as of the date of
grant (unless the Committee specifies otherwise at the time of
grant), but no such Award may Vest,
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be paid out, or otherwise be disposed of prior to such stockholder
approval. If the stockholders of the Company fail to approve the Plan
in accordance with this Section 2.2, any Award granted under the Plan
shall be cancelled. The Plan shall terminate on the 10th anniversary
of the Effective Date, unless sooner terminated by the Board under
Section 16.1 below.
3. ELIGIBILITY AND PARTICIPATION
3.1. Eligibility. All Employees, Group Employees, Nonemployee Directors and
Independent Contractors shall be eligible to participate in the Plan
and to receive Awards.
3.2. Participation. Participants shall consist of such Employees, Group
Employees, Nonemployee Directors and Independent Contractors as the
Committee in its sole discretion designates to receive Awards under
the Plan. Awards under the Plan shall be made on a one time basis for
Participants and designation of a Participant in any year shall not
require the Committee to designate such person or entity to receive an
Award in any other year or, once designated, to receive the same type
or amount of Award as granted to the Participant in any other year.
The Committee shall consider such factors as it deems pertinent in
selecting Participants and in determining the type and amount of their
respective Awards.
4. ADMINISTRATION
4.1. Responsibility. The Committee shall have the responsibility, in its
sole discretion, to control, operate, manage and administer the Plan
in accordance with its terms.
4.2. Award Agreement. Each Award granted under the Plan shall be evidenced
by an Award Agreement which shall be signed by the Committee and the
Participant; provided, however, that in the event of any conflict
between a provision of the Plan and any provision of an Award
Agreement, the provision of the Plan shall prevail.
4.3. Authority of the Committee. The Committee shall have all the
discretionary authority that may be necessary or desirable to enable
it to discharge its responsibilities with respect to the Plan,
including but not limited to the following:
(a) to determine eligibility for participation in the Plan;
(b) to determine eligibility for and the type and size of an Award
granted under the Plan;
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(c) to supply any omission, correct any defect, or reconcile any
inconsistency in the Plan in such manner and to such extent as it
shall deem appropriate in its sole discretion to carry the same
into effect;
(d) to issue administrative guidelines as an aid to administer the
Plan and make changes in such guidelines as it, from time to
time, deems proper;
(e) to make rules for carrying out and administering the Plan and
make changes in such rules as it, from time to time, deems
proper;
(f) to the extent permitted under the Plan, grant waivers of Plan
terms, conditions, restrictions, and limitations;
(g) to accelerate the Vesting of any Award when such action or
actions would be in the best interest of the Company;
(h) to grant an Award in replacement of Awards previously granted
under this Plan or any other executive compensation plan of the
Company; and
(i) to take any and all other actions it deems necessary or desirable
for the proper operation or administration of the Plan.
4.4. Action by the Committee. The Committee may act only by a majority of
its members. A determination of the Committee may be made, without a
meeting, by a writing signed by all members of the Committee. In
addition, the Committee may authorize any one or more of its members
to execute and deliver documents on behalf of the Committee. Meetings
of the Committee may be held telephonically or via video conference,
and participation via telephone or video conference shall have the
same force and effect as physical presence at any Committee meeting.
4.5. Delegation of Authority. The Committee may delegate to one or more of
its members, or to one or more agents, such administrative duties as
it may deem advisable; provided, however, that any such delegation
shall be in writing. In addition, the Committee, or any person to whom
it has delegated duties under this Section 4.5, may employ one or more
persons to render advice with respect to any responsibility the
Committee or such person may have under the Plan. The Committee may
employ such legal or other counsel, consultants and agents as it may
deem desirable for the administration of the Plan and may rely upon
any opinion or computation received from any such counsel, consultant
or agent. Expenses incurred by the Committee in the engagement of such
counsel, consultant or agent shall be paid by the Company, or the
Affiliate or Group Company whose employees have benefited from the
Plan, as determined by the Committee.
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4.6. Determinations and Interpretations by the Committee. All
determinations and interpretations made by the Committee shall be
binding and conclusive on all Participants and their heirs,
successors, and legal representatives.
4.7. Liability. No member of the Board, no member of the Committee and no
Employee or Group Employee shall be liable for any act or failure to
act hereunder, except in circumstances involving his or her bad faith,
gross negligence or willful misconduct, or for any act or failure to
act hereunder by any other member or employee or by any agent to whom
duties in connection with the administration of the Plan have been
delegated.
4.8. Indemnification. The Company shall indemnify members of the Committee
and any agent of the Committee who is an Employee or Group Employee,
against any and all liabilities or expenses to which they may be
subjected by reason of any act or failure to act with respect to their
duties on behalf of the Plan, except in circumstances involving such
person's bad faith, gross negligence or willful misconduct.
5. SHARES SUBJECT TO PLAN
5.1. Available Shares. The aggregate number of shares of Common Stock which
shall be available under the Plan during its term shall be 7,500,000
shares, subject to any adjustments made in accordance with Section 5.2
below. Such shares of Common Stock may be either authorized but
unissued shares, shares of issued stock held in the Company's
treasury, or a combination of both, at the discretion of the Company.
Any shares of Common Stock underlying an Award which terminate by
expiration, forfeiture, cancellation or otherwise without the issuance
of such shares shall again be available under the Plan. Awards that
are payable only in cash are not subject to this Section 5.1.
5.2. Adjustment to Shares. If there is any change in the Common Stock of
the Company, through merger, consolidation, Reorganization,
recapitalization, stock dividend, stock split, reverse stock split,
split-up, split-off, spin-off, combination of shares, exchange of
shares, dividend in kind or other like change in capital structure or
distribution (other than normal cash dividends) to stockholders of the
Company, an adjustment shall be made to each outstanding Award so that
each such Award shall thereafter be with respect to or exercisable for
such securities, cash and/or other property as would have been
received in respect of the Common Stock subject to such Award had such
Award been paid, distributed or exercised in full immediately prior to
such change or distribution. Such adjustment shall be made
successively each time any such change or distribution shall occur. In
addition, in the event of any such change or distribution, in order to
prevent dilution or enlargement of Participants' rights under the
Plan, the Committee shall have the authority to adjust, in an
equitable manner, the number and kind of shares that may be issued
under the Plan, the number and kind of shares subject to
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outstanding Awards, the exercise price applicable to outstanding Stock
Options, and the Fair Market Value of the Common Stock and other value
determinations applicable to outstanding Awards. Appropriate
adjustments may also be made by the Committee in the terms of any
Awards granted under the Plan to reflect such changes or distributions
and to modify any other terms of outstanding Awards on an equitable
basis, including modifications of performance goals and changes in the
length of performance periods; provided, however, that any such
modifications and/or changes to Performance-Based Awards does not
disqualify compensation attributable to such Awards as "performance-
based compensation" under Code Section 162(m). In addition, the
Committee is authorized to make adjustments to the terms and
conditions of, and the criteria included in, Awards in recognition of
unusual or nonrecurring events affecting the Company or the financial
statements of the Company, or in response to changes in applicable
laws, regulations, or accounting principles. Notwithstanding anything
contained in the Plan, any adjustment with respect to an ISO due to a
change or distribution described in this Section 5.2 shall comply with
the rules of Code Section 424(a), and in no event shall any adjustment
be made which would render any ISO granted hereunder to be
disqualified as an incentive stock option for purposes of Code Section
422.
6. MAXIMUM INDIVIDUAL AWARDS
6.1. Maximum Aggregate Number of Shares Underlying Stock-Based Awards
Granted Under the Plan to Any Single Participant in Any Calendar Year.
The maximum aggregate number of shares of Common Stock underlying all
Awards measured in shares of Common Stock (whether payable in Common
Stock, cash or a combination of both) that may be granted to any
single Participant in any calendar year shall be 2,000,000 shares,
subject to adjustment as provided in Section 5.2 above. For purposes
of the preceding sentence, such Awards that are cancelled or repriced
shall continue to be counted in determining such maximum aggregate
number of shares of Common Stock that may be granted to any single
Participant in any calendar year.
7. STOCK OPTIONS
7.1. In General. The Committee may, in its sole discretion, grant Stock
Options to Employees, Group Employees, Nonemployee Directors and/or
Independent Contractors on or after the Effective Date. The Committee
shall, in its sole discretion, determine the Employees, Group
Employees, Nonemployee Directors and Independent Contractors who will
receive Stock Options and the number of shares of Common Stock
underlying each Stock Option. With respect to Employees who become
Participants, the Committee may grant such Participants ISOs or
Nonqualified Stock Options or a combination of both. With respect to
Group Employees, Nonemployee Directors and Independent Contractors who
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become Participants, the Committee may grant such Participants only
Nonqualified Stock Options. Each Stock Option shall be subject to such
terms and conditions consistent with the Plan as the Committee may
impose from time to time. In addition, each Stock Option shall be
subject to the terms and conditions set forth in Sections 7.2 through
7.8 below.
7.2. Exercise Price. The Committee shall specify the exercise price of each
Stock Option in the Award Agreement; provided, however, that (i) the
exercise price of an ISO shall not be less than 100 percent of the Fair
Market Value of the Common Stock on the date of grant, and (ii) the
exercise price of a Nonqualified Stock Option shall not be less than
100 percent of the Fair Market Value of the Common Stock on the date of
grant unless the Committee in its sole discretion and due to special
circumstances determines otherwise on the date of grant.
7.3. Term of Stock Option. The Committee shall specify the term of each
Stock Option in the Award Agreement; provided, however, that (i) no ISO
shall be exercisable after the 10th anniversary of the date of grant of
such ISO and (ii) no Nonqualified Stock Option shall be exercisable
after the 10th anniversary of the date of grant of such Nonqualified
Stock Option. Each Stock Option shall terminate at such earlier times
and upon such conditions or circumstances as the Committee shall, in
its sole discretion, set forth in the Award Agreement on the date of
grant.
7.4. Vesting Date. The Committee shall specify in the Award Agreement the
Vesting Date for each Stock Option. The Committee may grant Stock
Options that are Vested, either in whole or in part, on the date of
grant. If the Committee fails to specify a Vesting Date in the Award
Agreement, 25 percent of such Stock Option shall become exercisable on
each of the first 4 anniversaries of the date of grant and shall remain
exercisable following such anniversary date until the Stock Option
expires in accordance with its terms under the Award Agreement or under
the terms of the Plan. The Vesting of a Stock Option may be subject to
such other terms and conditions as shall be determined by the
Committee, including, without limitation, accelerating the Vesting if
certain performance goals are achieved.
7.5. Exercise of Stock Options. The Stock Option exercise price may be paid
in cash or, in the sole discretion of the Committee, by delivery to the
Company of shares of Common Stock then owned by the Participant, or by
the Company's withholding a portion of the shares of Common Stock for
which the Stock Option is exercisable, or by a combination of these
methods. If the Common Stock is readily tradeable on a national
securities exchange or other market system, payment may also be made by
delivering a properly executed exercise notice to the Company and
delivering a copy of irrevocable instructions to a broker directing the
broker to promptly deliver to the Company the amount of sale or loan
proceeds to pay the exercise price. To facilitate the foregoing, the
Company may enter into agreements for coordinated procedures with one
or more brokerage
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firms. The Committee may prescribe any other method of paying the
exercise price that it determines to be consistent with applicable law
and the purpose of the Plan, including, without limitation, in lieu of
the delivery to the Company of shares of Common Stock then owned by the
Participant, providing the Company with a notarized statement attesting
to the number of shares owned by the Participant, where, upon
verification by the Company, the Company would issue to the Participant
only the number of incremental shares to which the Participant is
entitled upon exercise of the Stock Option. In determining which methods
a Participant may utilize to pay the exercise price, the Committee may
consider such factors as it determines are appropriate; provided,
however, that with respect to ISOs, all such discretionary
determinations shall be made by the Committee at the time of grant and
specified in the Award Agreement.
7.6. Restrictions Relating to ISOs. In addition to being subject to the terms
and conditions of this Section 7, ISOs shall comply with all other
requirements under Code Section 422. Accordingly, ISOs may be granted
only to Participants who are employees (as described in Treasury
Regulation Section 1.421-7(h)) of the Company or of any "Parent
Corporation" (as defined in Code Section 424(e)) or of any "Subsidiary
Corporation" (as defined in Code Section 424(f)) on the date of grant.
The aggregate market value (determined as of the time the ISO is
granted) of the Common Stock with respect to which ISOs (under all
option plans of the Company and of any Parent Corporation and of any
Subsidiary Corporation) are exercisable for the first time by a
Participant during any calendar year shall not exceed $100,000. For
purposes of the preceding sentence, (i) ISOs shall be taken into account
in the order in which they are granted and (ii) ISOs granted before 1987
shall not be taken into account. ISOs shall not be transferable by the
Participant other than by will or the laws of descent and distribution
and shall be exercisable, during the Participant's lifetime, only by
such Participant. The Committee shall not grant ISOs to any Employee
who, at the time the ISO is granted, owns stock possessing (after the
application of the attribution rules of Code Section 424(d)) more than
10 percent of the total combined voting power of all classes of stock of
the Company or of any Parent Corporation or of any Subsidiary
Corporation unless the exercise price of the ISO is fixed at not less
than 110 percent of the Fair Market Value of the Common Stock on the
date of grant and the exercise of such ISO is prohibited by its terms
after the 5th anniversary of the ISO's date of grant. In addition, no
ISO shall be issued to a Participant in tandem with a Nonqualified Stock
Option issued to such Participant in accordance with Treasury Regulation
Section 14a.422A-1, Q/A-39.
7.7. Additional Terms and Conditions. The Committee may, by way of the Award
Agreements or otherwise, establish such other terms, conditions,
restrictions and/or limitations, if any, of any Stock Option, provided
they are not inconsistent with the Plan, including, without limitation,
the requirement that the Participant not engage in competition with the
Company, an Affiliate or a Group Company.
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7.8. Conversion Stock Options. The Committee may, in its sole discretion,
grant a Stock Option to any holder of an option (hereinafter referred to
as an "Original Option") to purchase shares of the stock of any
corporation:
(a) the stock or assets of which were acquired, directly or indirectly,
by the Company, an Affiliate or Group Company, or
(b) which was merged with and into the Company, an Affiliate or Group
Company,
so that the Original Option is converted into a Stock Option (hereinafter
referred to as a "Conversion Stock Option"); provided, however, that such
Conversion Stock Option as of the date of its grant (the "Conversion
Stock Option Grant Date") shall have the same economic value as the
Original Option as of the Conversion Stock Option Grant Date. In
addition, unless the Committee, in its sole discretion determines
otherwise, a Conversion Stock Option which is converting an Original
Option intended to qualify as an ISO shall have the same terms and
conditions as applicable to the Original Option in accordance with Code
Section 424 and the Treasury Regulations thereunder so that the
conversion (x) is treated as the issuance or assumption of a stock option
under Code Section 424(a) and (y) is not treated as a modification,
extension or renewal of a stock option under Code Section 424(h).
7.9. Right to Call Options or Stock. Notwithstanding any other provision of
this Plan and without regard to the completion of an IPO, any Stock
Option granted under this Plan or any Stock received as a result of the
exercise of Stock Options under this Plan, may be subject to a right of
call by the Committee in the event of termination of the Plan due to
merger or acquisition of the Company, or prior to an IPO, upon the
occurrence of Change in Control, whether or not the Plan is terminated.
If the right to call the Stock is exercised by the Committee, the shares
of Stock must be returned to the Company within seven (7) days of the
call notice.
(i) Upon the call of Stock, the owner of Stock shall, unless
otherwise determined by the Committee pursuant to subsection (ii)
below, be entitled to receive from the Company an amount equal to
the Fair Market Value of the returned Stock. Upon the call of a
Stock Option, the Committee shall determine, in good faith, the
price to be paid to the optionee.
(ii) The Company shall have the right to defer payment of the proceeds
under this Section 7.9, and make such payment in the form of
single lump sum or in installments over such periods as the
Committee may determine in its discretion.
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8. SARS
8.1. In General. The Committee may, in its sole discretion, grant SARs to
Employees, Group Employees, Nonemployee Directors, and/or Independent
Contractors. A SAR is a right to receive a payment in cash, Common
Stock or a combination of both, in an amount equal to the excess of
(x) the Fair Market Value of the Common Stock, or other specified
valuation, of a specified number of shares of Common Stock on the date
the SAR is exercised over (y) the Fair Market Value of the Common
Stock, or other specified valuation (which shall be no less than the
Fair Market Value of the Common Stock), of such shares of Common Stock
on the date the SAR is granted, all as determined by the Committee;
provided, however, that if a SAR is granted retroactively in tandem
with or in substitution for a Stock Option, the designated Fair Market
Value of the Common Stock in the Award Agreement may be the Fair
Market Value of the Common Stock on the date such Stock Option was
granted. Each SAR shall be subject to such terms and conditions,
including, but not limited to, a provision that automatically converts
a SAR into a Stock Option on a conversion date specified at the time
of grant, as the Committee shall impose from time to time in its sole
discretion and subject to the terms of the Plan.
9. STOCK AWARDS AND STOCK UNITS
9.1. Stock Awards. The Committee may, in its sole discretion, grant Stock
Awards to Employees, Group Employees, Nonemployee Directors, and/or
Independent Contractors as additional compensation or in lieu of other
compensation for services to the Company, an Affiliate or a Group
Company. A Stock Award shall consist of shares of Common Stock which
shall be subject to such terms and conditions as the Committee in its
sole discretion determines appropriate including, without limitation,
restrictions on the sale or other disposition of such shares, the
Vesting Date with respect to such shares, and the right of the Company
to reacquire such shares for no consideration upon termination of the
Participant's employment within specified periods. The Committee may
require the Participant to deliver a duly signed stock power, endorsed
in blank, relating to the Common Stock covered by such Stock Award
and/or that the stock certificates evidencing such shares be held in
custody or bear restrictive legends until the restrictions thereon
shall have lapsed. With respect to shares of Common Stock subject to a
Stock Award, the Participant shall have all of the rights of a holder
of shares of Common Stock, including the right to receive dividends
and to vote the shares, unless the Committee determines otherwise on
the date of grant.
9.2. Stock Units. The Committee may, in its sole discretion, grant Stock
Units to Employees, Group Employees, Nonemployee Directors, and
Independent Contractors as additional compensation or in lieu of other
compensation for services to the Company, an Affiliate or a Group
Company. A Stock Unit is a
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hypothetical share of Common Stock represented by a notional account
established and maintained (or caused to be established or maintained)
by the Company for such Participant who receives a grant of Stock
Units. Stock Units shall be subject to such terms and conditions as the
Committee, in its sole discretion, determines appropriate including,
without limitation, determinations of the Vesting Date with respect to
such Stock Units and the criteria for the Vesting of such Stock Units.
Subject to Section 9.3, a Stock Unit granted by the Committee shall
provide for payment in shares of Common Stock at such time or times as
the Award Agreement shall specify. The Committee shall determine
whether a Participant who has been granted a Stock Unit shall also be
entitled to a Dividend Equivalent Right.
9.3. Payout of Stock Units. Subject to a Participant's election to defer in
accordance with Section 17.3 below, upon the Vesting of a Stock Unit,
the shares of Common Stock representing the Stock Unit shall be
distributed to the Participant, unless the Committee, in its sole
discretion, provides for the payment of the Stock Unit in cash (or
partly in cash and partly in shares of Common Stock) equal to the value
of the shares of Common Stock which would otherwise be distributed to
the Participant.
10. PERFORMANCE SHARES AND PERFORMANCE UNITS
10.1. Performance Shares. The Committee may, in its sole discretion, grant
Performance Shares to Employees, Group Employees, Nonemployee
Directors, and/or Independent Contractors as additional compensation or
in lieu of other compensation for services to the Company, an Affiliate
or a Group Company. A Performance Share shall consist of a share or
shares of Common Stock which shall be subject to such terms and
conditions as the Committee, in its sole discretion, determines
appropriate including, without limitation, determining the performance
goal or goals which, depending on the extent to which such goals are
met, will determine the number and/or value of the Performance Shares
that will be paid out or distributed to the Participant granted
Performance Shares. Performance goals may be based on, without
limitation, Company-wide, divisional and/or individual performance, as
the Committee, in its sole discretion, may determine, and may be based
on the performance measures listed in Section 12.3 below.
10.2. Performance Units. The Committee may, in its sole discretion, grant
Performance Units to Employees, Group Employees, Nonemployee Directors,
and/or Independent Contractors as additional compensation or in lieu of
other compensation for services to the Company, an Affiliate or Group
Company. A Performance Unit is a hypothetical share of the value of the
Company, represented by a notional account which shall be established
and maintained (or caused to be established or maintained) by the
Company for such Participant who
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receives a grant of Performance Units. Performance Units shall be
subject to such terms and conditions as the Committee, in its sole
discretion, determines appropriate including, without limitation,
determining the performance goal or goals which, depending on the
extent to which such goals are met, will determine the number and/or
value of the Performance Units that will accrue to the Participant
who has been granted Performance Units. Performance goals may be
based on, without limitation, Company-wide, divisional and/or
individual performance, as the Committee, in its sole discretion, may
determine, and may be based on the performance measures listed in
Section 12.3 below.
10.3. Adjustment of Performance Goals. With respect to any Performance
Shares or Performance Units that are not intended to qualify as
Performance-Based Awards (as described in Section 12 below), the
Committee shall have the authority at any time to adjust, as it deems
necessary or desirable, the performance goals for any outstanding
Performance Shares or Performance Units unless, at the time of
establishment of such performance goals, the Committee precludes its
authority to make such adjustments.
10.4. Payout of Performance Shares or Performance Units. Subject to a
Participant's election to defer distribution in accordance with
Section 17.3 below, upon the Vesting of a Performance Share or a
Performance Unit, the shares of Common Stock representing the
Performance Share or the cash value of the Performance Unit shall be
distributed to the Participant, unless the Committee, in its sole
discretion, determines to make the payment for the Performance Share
in cash, or the Performance Unit in shares of Common Stock (or partly
in cash and partly in shares of Common Stock) equal to the value of
the shares of Common Stock or cash which would otherwise be
distributed to the Participant.
11. CASH AWARDS
11.1. In General. The Committee may, in its sole discretion, grant Cash
Awards to Employees, Group Employees, Nonemployee Directors, and/or
Independent Contractors as additional compensation or in lieu of
other compensation for services to the Company, an Affiliate or Group
Company. A Cash Award shall be subject to such terms and conditions
as the Committee, in its sole discretion, determines appropriate
including, without limitation, determining the Vesting Date with
respect to such Cash Award, the criteria for the Vesting of such Cash
Award, and the right of the Company to require the Participant to
repay the Cash Award (with or without interest) upon termination of
the Participant's employment within specified periods.
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12. PERFORMANCE-BASED AWARDS
12.1. In General. The Committee, in its sole discretion, may designate
Awards granted under the Plan as Performance-Based Awards (as defined
below) if it determines that such compensation might not be tax
deductible by the Company due to the deduction limitation imposed by
Code Section 162(m). Accordingly, an Award granted under the Plan may
be granted in such a manner that the compensation attributable to
such Award is intended by the Committee to qualify as "performance-
based compensation" (as such term is used in Code Section 162(m) and
the Treasury Regulations thereunder) and thus be exempt from the
deduction limitation imposed by Code Section 162(m) ("Performance-
Based Awards").
12.2. Qualification of Performance-Based Awards. Awards shall qualify as
Performance-Based Awards under the Plan only if:
(a) at the time of grant the Committee is comprised solely of two or
more "outside directors" (as such term is used in Code Section
162(m) and the Treasury Regulations thereunder);
(b) with respect to either the granting or Vesting of an Award
(other than (i) a Nonqualified Stock Option or (ii) a SAR, which
are granted with an exercise price at or above the Fair Market
Value of the Common Stock on the date of grant), such Award is
subject to the achievement of a performance goal or goals based
on one or more of the performance measures specified in Section
12.3 below;
(c) the Committee establishes in writing (i) the objective
performance-based goals applicable to a given performance
period, and (ii) the individual employees or class of employees
to which such performance-based goals apply no later than 90
days after the commencement of such performance period (but in
no event after 25 percent of such performance period has
elapsed);
(d) no compensation attributable to a Performance-Based Award will
be paid to or otherwise received by a Participant until the
Committee certifies in writing that the performance goal or
goals (and any other material terms) applicable to such
performance period have been satisfied; and
(e) after the establishment of a performance goal, the Committee
shall not revise such performance goal (unless such revision
will not disqualify compensation attributable to the Award as
"performance-based compensation" under Code Section 162(m)) or
increase the amount of compensation payable with respect to such
Award upon the attainment of such performance goal.
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12.3. Performance Measures. The Committee may use the following performance
measures (either individually or in any combination) to set
performance goals with respect to Awards intended to qualify as
Performance-Based Awards: net sales; pretax income before allocation
of corporate overhead and bonus; budget; cash flow; earnings per
share; net income; division, group or corporate financial goals;
return on stockholders' equity; return on assets; attainment of
strategic and operational initiatives; appreciation in and/or
maintenance of the price of the Common Stock or any other publicly-
traded securities of the Company; market share; gross profits;
earnings before interest and taxes; earnings before interest, taxes,
depreciation and amortization; economic value-added models;
comparisons with various stock market indices; increase in number of
customers; and/or reductions in costs.
12.4. Stockholder Reapproval. As required by Treasury Regulation Section
1.162-27(e)(vi), the material terms of performance goals as described
in this Section 12 shall be disclosed to and reapproved by the
Company's stockholders no later than the first stockholder meeting
that occurs in the 5th year following the year in which the Company's
stockholders previously approved such performance goals.
13. CHANGE IN CONTROL
13.1. Accelerated Vesting. Notwithstanding any other provision of this Plan
to the contrary, if there is a Change in Control of the Company, the
Committee, in its sole discretion, may take such actions as it deems
appropriate with respect to outstanding Awards, including, without
limitation, accelerating the Vesting Date and/or payout of such
Awards; provided, however, that such action shall not conflict with
any provision contained in an Award Agreement unless such provision
is amended in accordance with Section 16.3 below.
13.2. Cashout. The Committee, in its sole discretion, may determine that,
upon the occurrence of a Change in Control of the Company, all or a
portion of certain outstanding Awards shall terminate within a
specified number of days after notice to the holders, and each such
holder shall receive an amount equal to the value of such Award on
the date of the Change in Control, and with respect to each share of
Common Stock subject to a Stock Option or SAR, an amount equal to the
excess of the Fair Market Value of such shares of Common Stock
immediately prior to the occurrence of such Change in Control of the
Company over the exercise price per share of such Stock Option or
SAR. Such amount shall be payable in cash, in one or more kinds of
property (including the property, if any, payable in the transaction)
or in a combination thereof, as the Committee, in its sole
discretion, shall determine.
13.3. Assumption or Substitution of Awards. Notwithstanding anything
contained in the Plan to the contrary, the Committee may, in its sole
discretion, provide that an
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Award may be assumed by any entity which acquires control of the
Company or may be substituted by a similar award under such entity's
compensation plans.
14. TERMINATION OF EMPLOYMENT
14.1. Termination of Employment Due to Death or Disability. Subject to any
written agreement between the Company, an Affiliate or a Group
Company and a Participant, if a Participant's employment is
terminated due to death or disability:
(a) all non-Vested portions of Awards held by the Participant on the
date of the Participant's death or the date of the termination
of his or her employment, as the case may be, shall immediately
become vested; and
(b) all Vested portions of Stock Options and SARs held by the
Participant on the date of the Participant's death or the date
of the termination of his or her employment, as the case may be,
shall remain exercisable until the earlier of:
(i) the end of the 12-month period following the date of the
Participant's death or the date of the termination of his
or her employment, as the case may be, or
(ii) the date the Stock Option or SAR would otherwise expire.
14.2. Termination of Employment for Cause. Subject to any written agreement
between the Company, an Affiliate or Group Company and a Participant,
if a Participant's employment is terminated by the Company, the
Affiliate or the Group Company, as the case may be, for Cause, all
Awards held by the Participant on the date of the termination of
employment, whether Vested or non-Vested, shall immediately be
forfeited by the Participant as of such date, and, in the event a
Participant's employment is terminated by the Company, an Affiliate
or Group Company for Cause prior to an IPO, the Company shall have
the right to call any Stock received by the Participant as a result
of the exercise of Stock Options under the Plan and the Participant
shall be entitled to receive from the Company an amount equal to the
exercise price paid for such Stock.
14.3. Other Terminations of Employment. Subject to any written agreement
between the Company, an Affiliate or Group Company and a Participant,
if a Participant's employment is terminated for any reason other than
for Cause or other than due to death or disability:
(a) all non-Vested portions of Awards held by the Participant on the
date of the termination of his or her employment shall
immediately be forfeited by such Participant as of such date;
and
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(b) all Vested portions of Stock Options and/or SARs held by the
Participant on the date of the termination of his or her
employment shall remain exercisable until the earlier of (i) the
end of the 90-day period following the date of the termination
of the Participant's employment or (ii) the date the Stock
Option or SAR would otherwise expire.
14.4. ISOs. Notwithstanding anything contained in the Plan to the contrary,
(i) the provisions contained in this Section 14 shall be applied to
an ISO only if the application of such provision maintains the
treatment of such ISO as an ISO and (ii) the exercise period of an
ISO in the event of a termination of the Participant's employment due
to disability provided in Section 14.1 above shall be applied only if
the Participant is "permanently and totally disabled" (as such term
is defined in Code Section 22(e)(3)).
15. TAXES
15.1. Withholding Taxes. With respect to Employees and Group Employees, the
Company, or the applicable Affiliate or Group Company, may require a
Participant who has become vested in his or her Stock Award, Stock
Unit, Performance Share or Performance Unit granted hereunder, or who
exercises a Stock Option or SAR granted hereunder, to reimburse the
corporation which employs such Employee or Group Employee for any
taxes required by any governmental regulatory authority to be
withheld or otherwise deducted and paid by such corporation or entity
in respect of the issuance or disposition of such shares or the
payment of any amounts. In lieu thereof, the corporation which
employs such Employee or Group Employee shall have the right to
withhold the amount of such taxes from any other sums due or to
become due from such corporation to the Employee or Group Employee
upon such terms and conditions as the Committee shall prescribe. The
corporation that employs the Employee or Group Employee may, in its
discretion, hold the stock certificate to which such Employee or
Group Employee is entitled upon the vesting of a Stock Award, Stock
Unit, Performance Share or Performance Unit or the exercise of a
Stock Option or SAR as security for the payment of such withholding
tax liability, until cash sufficient to pay that liability has been
accumulated.
15.2. Use of Common Stock to Satisfy Withholding Obligation. With respect
to Employees and Group Employees, at any time that the Company or an
Affiliate or Group Company that employs such Employee or Group
Employee becomes subject to a withholding obligation under applicable
law with respect to the vesting of a Stock Award, Stock Unit,
Performance Share or Performance Unit or the exercise of a
Nonqualified Stock Option (the "Tax Date"), except as set forth
below, a holder of such Award may elect to satisfy, in whole or in
part, the holder's related personal tax liabilities (an "Election")
by (i) directing the Company, the Affiliate or the Group Company that
employs such Employee or
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Group Employee to withhold from shares issuable in the related
vesting or exercise either a specified number of shares, or shares of
Common Stock having a specified value (in each case equal to the
related minimum statutory personal withholding tax liabilities with
respect to the applicable taxing jurisdiction in order to comply with
the requirements for a "fixed plan" under Accounting Principles Board
Opinion No. 25), (ii) tendering shares of Common Stock previously
issued pursuant to the exercise of a Stock Option or other shares of
the Common Stock owned by the holder, or (iii) combining any or all
of the foregoing Elections in any fashion. An Election shall be
irrevocable. The withheld shares and other shares of Common Stock
tendered in payment shall be valued at their Fair Market Value of the
Common Stock on the Tax Date. The Committee may disapprove any
Election, suspend or terminate the right to make Elections or provide
that the right to make Elections shall not apply to particular shares
or exercises. The Committee may impose any additional conditions or
restrictions on the right to make an Election as it shall deem
appropriate, including conditions or restrictions with respect to
Section 16 of the Exchange Act.
15.3. No Guarantee of Tax Consequences. No person connected with the Plan
in any capacity, including, but not limited to, the Company, an
Affiliate or a Group Company and their directors, officers, agents
and employees makes any representation, commitment, or guarantee that
any tax treatment, including, but not limited to, federal, state and
local income, estate and gift tax treatment, will be applicable with
respect to amounts deferred under the Plan, or paid to or for the
benefit of a Participant under the Plan, or that such tax treatment
will apply to or be available to a Participant on account of
participation in the Plan.
16. AMENDMENT AND TERMINATION
16.1. Termination of Plan. The Board may suspend or terminate the Plan at
any time with or without prior notice; provided, however, that no
action authorized by this Section 16.1 shall reduce the amount of any
outstanding Award or change the terms and conditions thereof without
the Participants' consent.
16.2. Amendment of Plan. The Board may amend the Plan at any time with or
without prior notice; provided, however, that no action authorized by
this Section 16.2 shall reduce the amount of any outstanding Award or
change the terms and conditions thereof without the Participants'
consent. No amendment of the Plan shall, without the approval of the
stockholders of the Company:
(a) increase the total number of shares which may be issued under
the Plan;
(b) increase the maximum number of shares with respect to all Awards
measured in Common Stock that may be granted to any individual
under the Plan;
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(c) increase the maximum dollar amount that may be paid with respect
to all Awards measured in cash; or
(d) modify the requirements as to eligibility for Awards under the
Plan.
In addition, the Plan shall not be amended without the approval of
such amendment by the Company's stockholders if such amendment (i) is
required under the rules and regulations of the stock exchange or
national market system on which the Common Stock is listed or (ii)
will disqualify any ISO granted hereunder.
16.3. Amendment or Cancellation of Award Agreements. The Committee may
amend or modify any Award Agreement at any time by mutual agreement
between the Committee and the Participant or such other persons as
may then have an interest therein. In addition, by mutual agreement
between the Committee and a Participant or such other persons as may
then have an interest therein, Awards may be granted to an Employee,
Group Employee, Nonemployee Director or Independent Contractor in
substitution and exchange for, and in cancellation of, any Awards
previously granted to such Employee, Group Employee, Nonemployee
Director or Independent Contractor under the Plan, or any award
previously granted to such Employee, Group Employee, Nonemployee
Director or Independent Contractor under any other present or future
plan of the Company or any present or future plan of an entity which
(i) is purchased by the Company, (ii) purchases the Company, or (iii)
merges into or with the Company.
17. MISCELLANEOUS
17.1. Other Provisions. Awards granted under the Plan may also be subject
to such other provisions (whether or not applicable to an Award
granted to any other Participant) as the Committee determines on the
date of grant to be appropriate, including, without limitation, for
the installment purchase of Common Stock under Stock Options, to
assist the Participant in financing the acquisition of Common Stock,
for the forfeiture of, or restrictions on resale or other disposition
of, Common Stock acquired under any Stock Option, for the
acceleration of Vesting of Awards in the event of a Change in Control
of the Company, for the payment of the value of Awards to
Participants in the event of a Change in Control of the Company, or
to comply with federal and state securities laws, or understandings
or conditions as to the Participant's employment in addition to those
specifically provided for under the Plan.
17.2. Transferability. Each Award granted under the Plan to a Participant
shall not be transferable otherwise than by will or the laws of
descent and distribution, and Stock Options and SARs shall be
exercisable, during the Participant's lifetime, only by the
Participant. In the event of the death of a Participant, each Stock
Option or SAR theretofore granted to him or her shall be exercisable
during such
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period after his or her death as the Committee shall, in its sole
discretion, set forth in the Award Agreement on the date of grant and
then only by the executor or administrator of the estate of the
deceased Participant or the person or persons to whom the deceased
Participant's rights under the Stock Option or SAR shall pass by will
or the laws of descent and distribution. Notwithstanding the
foregoing, the Committee, in its sole discretion, may permit the
transferability of a Stock Option (other than an ISO) by a
Participant solely to members of the Participant's immediate family
or trusts or family partnerships or other similar entities for the
benefit of such persons, and subject to such terms, conditions,
restrictions and/or limitations, if any, as the Committee may
establish and include in the Award Agreement.
17.3. Election to Defer Compensation Attributable to Award. The Committee
may, in its sole discretion, allow a Participant to elect to defer
the receipt of any compensation attributable to an Award under
guidelines and procedures to be established by the Committee after
taking into account the advice of the Company's tax counsel.
17.4. Listing of Shares and Related Matters. If at any time the Committee
shall determine that the listing, registration or qualification of
the shares of Common Stock subject to an Award on any securities
exchange or under any applicable law, or the consent or approval of
any governmental regulatory authority, is necessary or desirable as a
condition of, or in connection with, the granting of an Award or the
issuance of shares of Common Stock thereunder, such Award may not be
exercised, distributed or paid out, as the case may be, in whole or
in part, unless such listing, registration, qualification, consent or
approval shall have been effected or obtained free of any conditions
not acceptable to the Committee.
17.5. No Right, Title, or Interest in Company Assets. Participants shall
have no right, title, or interest whatsoever in or to any investments
which the Company may make to aid it in meeting its obligations under
the Plan. Nothing contained in the Plan, and no action taken pursuant
to its provisions, shall create or be construed to create a trust of
any kind, or a fiduciary relationship between the Company and any
Participant, beneficiary, legal representative or any other person.
To the extent that any person acquires a right to receive payments
from the Company under the Plan, such right shall be no greater than
the right of an unsecured general creditor of the Company. All
payments to be made hereunder shall be paid from the general funds of
the Company and no special or separate fund shall be established and
no segregation of assets shall be made to assure payment of such
amounts except as expressly set forth in the Plan. The Plan is not
intended to be subject to the Employee Retirement Income Security Act
of 1974, as amended.
17.6. No Right to Continued Employment or Service or to Grants. A
Participant's rights, if any, to continue to serve the Company, an
Affiliate or a Group Company
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as a director, officer, employee, independent contractor or
otherwise, shall not be enlarged or otherwise affected by his or her
designation as a Participant under the Plan, and the Company, the
Affiliate and the Group Company reserve the right to terminate the
employment of any Employee or Group Employee or the services of any
Independent Contractor or director at any time. The adoption of the
Plan shall not be deemed to give any Employee, Group Employee,
Nonemployee Director, Independent Contractor or any other individual
any right to be selected as a Participant or to be granted an Award.
17.7. Awards Subject to Foreign Laws. The Committee may grant Awards to
individual Participants who are subject to the tax laws of nations
other than the United States, and such Awards may have terms and
conditions as determined by the Committee as necessary to comply with
applicable foreign laws. The Committee may take any action which it
deems advisable to obtain approval of such Awards by the appropriate
foreign governmental entity; provided, however, that no such Awards
may be granted pursuant to this Section 17.7 and no action may be
taken which would result in a violation of the Exchange Act or any
other applicable law.
17.8. Governing Law. The Plan, all Awards granted hereunder, and all
actions taken in connection herewith shall be governed by and
construed in accordance with the laws of the State of Delaware
without reference to principles of conflict of laws, except as
superseded by applicable federal law.
17.9. Other Benefits. No Award granted under the Plan shall be considered
compensation for purposes of computing benefits under any retirement
plan of the Company, an Affiliate or a Group Company nor affect any
benefits or compensation under any other benefit or compensation plan
of the Company, and Affiliate or a Group Company, now or subsequently
in effect.
17.10. No Fractional Shares. No fractional shares of Common Stock shall be
issued or delivered pursuant to the Plan or any Award. The Committee
shall determine whether cash, Common Stock, Stock Options, or other
property shall be issued or paid in lieu of fractional shares or
whether such fractional shares or any rights thereto shall be
forfeited or otherwise eliminated.
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