Exhibit 4.1
MEDTOX
RESTATED EQUITY COMPENSATION PLAN
as amended and restated effective as of May 10, 2000
ARTICLE I - GENERAL PROVISIONS
1.1 The Plan is designed, for the benefit of the Company, to attract and
retain for the Company personnel of exceptional ability; to motivate
such personnel through added incentives to make a maximum contribution
to greater profitability; to develop and maintain a highly competent
management team; and to be competitive with other companies with
respect to executive compensation.
1.2 Awards under the Plan may be made to Participants in the form of (i)
Incentive Stock Options; (ii) Nonqualified Stock Options; (iii) Stock
Appreciation Rights; (iv) Restricted Stock; (v) Deferred Stock; (vi)
Stock Awards; (vii) Performance Shares; and (viii) Other Stock-Based
Awards and other forms of equity-based compensation as may be provided
and are permissible under this Plan and the law.
1.3 The Plan, shall be effective October 26, 1993 (the "Effective Date"),
subject to the approval of shareholders of the Company on such date.
ARTICLE II - DEFINITIONS
DEFINITIONS. Except where the context otherwise indicates, the following
definitions apply:
2.1 "Acceleration Event" means the occurrence of an event defined in
Article XIII of the Plan.
2.2 "Act" means the Securities Exchange Act of 1934, as now in effect or as
hereafter amended. (All citations to sections of the Act or rules
thereunder are to such sections or rules as they may from time to time
be amended or renumbered.)
2.3 "Agreement" means the written agreement evidencing each Award granted
to a Participant under the Plan.
2.4 "Award" means an award granted to a Participant in accordance with the
provisions of the Plan, including, but not limited to, a Stock Option,
Stock Right, Restricted or Deferred Stock, Stock Awards, Performance
Shares, other Stock-Based Award, or any combination of the foregoing.
2.5 "Board" means the Board of Directors of MEDTOX SCIENTIFIC, INC.
<PAGE>
2.6 "Code" means the Internal Revenue Code of 1986, as now in effect or as
hereafter amended. (All citations to sections of the Code are to such
sections as they may from time to time be amended or renumbered.)
2.7 "Committee" means the Compensation Committee or such other committee
consisting of three or more members as may be appointed by the Board to
administer this Plan pursuant to Article III. To the extent required by
Rule 16b-3 under the Act, the Committee shall consist of individuals
who are members of the Board and Disinterested Persons. Committee
members may also be appointed for such limited purposes as may be
provided by the Board.
2.8 "Company" means MEDTOX SCIENTIFIC, INC., a Delaware corporation, and
its successors and assigns. The term "Company" shall include any
corporation which is a member of a controlled group of corporations (as
defined in Section 414(b) of the Code, as modified by Section 415(h) of
the Code) which includes the Company; any trade or business (whether or
not incorporated) which is under common control (as defined in Section
414(c) of the Code, as modified by Section 415(h) of the Code) with the
Company; any organization (whether or not incorporated) which is a
member of an affiliated service group (as defined in Section 414(m) of
the Code) which includes the Company; and any other entity required to
be aggregated with the Company pursuant to regulations under Section
414(o) of the Code. With respect to all purposes of the Plan,
including, but not limited to, the establishment, amendment,
termination, operation and administration of the Plan, MEDTOX
SCIENTIFIC, INC. shall be authorized to act on behalf of all other
entities included within the definition of Company.
2.9 "Deferred Stock" means the stock awarded under Article IX of the Plan.
2.10 "Disability" means disability as determined under procedures
established by the Committee or in any Award.
2.11 "Discount Stock Options" means the Nonqualified Stock Options which
provide for an exercise price of less than the Fair Market Value of the
Stock at the date of the Award.
2.12 "Disinterested Person" shall have the meaning set forth in Rule 16b-3
under the Act.
2.13 "Early Retirement" means retirement from active employment with the
Company, with the express consent of the Committee, pursuant to the
early retirement provisions established by the Committee or in any
Award.
2.14 "Eligible Participant" means any employee of the Company, as shall be
determined by the Committee, as well as any other person, including
directors, subject to such limitations imposed on a person designated
as a Disinterested Person, whose participation the Committee determines
is in the best interest of the Company, subject to limitations as may
be provided by the Code, the Act or the Committee.
<PAGE>
2.15 "Fair Market Value" means, with respect to any given day, the closing
price of the Stock reported on the stock exchange on which the Stock is
then listed for such day, as reported by such source as the Committee
may select, provided there was a sale of at least 100 shares of Stock
on such date. If there was not a sale of at least 100 shares of Stock
on such day, the Fair Market Value shall be determined based on the
closing price of the Stock reported on the stock exchange as of the
last date on which there was a sale of at least 100 shares of Stock.
The Committee may establish an alternative method of determining Fair
Market Value.
2.16 "Incentive Stock Option" means a Stock Option granted under Article IV
of the Plan, and as defined in Section 422 of the Code.
2.17 "Limited Stock Appreciation Rights" means a Stock Right which is
exercisable only in the event of a Change in Control and/or a Potential
Change in Control, as described in Section 6.9 of this Plan, which
provides for an amount payable solely in cash, equal to the excess of
the Stock Appreciation Right Fair Market Value of a share of Stock on
the day the Stock Right is surrendered over the price at which a
Participant could exercise a related Stock Option to purchase the share
of Stock.
2.18 "Nonqualified Stock Option" means a Stock Option granted under Article
V of the Plan.
2.19 "Normal Retirement" means retirement from active employment with the
Company on or after age 65, or pursuant to such other requirements as
may be established by the Committee or in any Award.
2.20 "Option Grant Date" means, as to any Stock Option, the latest of:
(a) the date on which the Committee grants the Stock Option by
entering into an Award Agreement with the Participant;
(b) the date the Participant receiving the Stock Option becomes
an employee of the Company, to the extent employment status is a
condition of the grant or a requirement of the Code or the Act; or
(c) such other date (later than the dates described in (i) and
(ii) above) as the Committee may designate.
2.21 "Participant" means an Eligible Participant to whom an Award of
equity-based compensation has been granted and who has entered into an
Agreement evidencing the Award.
2.22 "Performance Share" means an Award under Article XI of the Plan of a
unit valued by reference to a designated number of shares of Stock,
which value may be paid to the Participant by delivery of such property
as the Committee shall determine, including without limitation, cash or
Stock, or any combination thereof, upon achievement of such Performance
objectives during the Performance Period as the Committee shall
establish at the time of such Award or thereafter.
<PAGE>
2.23 "Plan" means the MEDTOX SCIENTIFIC, INC. Equity Compensation Plan, as
amended from time to time.
2.24 "Restricted Stock" means an Award of Stock under Article VIII of the
Plan, which Stock is issued with the restriction that the holder may
not sell, transfer, pledge, or assign such Stock and with such other
restrictions as the Committee, in its sole discretion, may impose,
including without limitation, any restriction on the right to vote such
Stock, and the right to receive any cash dividends, which restrictions
may lapse separately or in combination at such time or times, in
installments or otherwise, as the Committee may deem appropriate.
2.25 "Restriction Period" means the period commencing on the date an Award
of Restricted Stock is granted and ending on such date as the Committee
shall determine.
2.26 "Retirement" means Normal or Early Retirement.
2.27 "Stock" means shares of common stock of MEDTOX SCIENTIFIC, INC., as
may be adjusted pursuant to the provisions of Section 3.11.
2.28 "Stock Appreciation Right" means a Stock Right, as described in Article
VI of this Plan, which provides for an amount payable in Stock and/or
cash, as determined by the Committee, equal to the excess of the Fair
Market Value of a share of Stock on the day the Stock Right is
exercised over the price at which the Participant could exercise a
related Stock Option to purchase the share of Stock.
2.29 "Stock Appreciation Right Fair Market Value" means a value established
by the Committee for the exercise of a Stock Appreciation Right or a
Limited Stock Appreciation Right. If such exercise occurs during any
quarterly "window period," as specified by Rule 16b-3 under the Act,
the Committee may establish a common value for exercises during such
window period.
2.30 "Stock Award" means an Award of Stock granted in payment of
compensation, as provided in Article X of the Plan.
2.31 "Stock Option" means an Award under Article IV or V of the Plan of an
option to purchase Stock. A Stock Option may be either an Incentive
Stock Option or a Nonqualified Stock Option.
2.32 "Stock Right" means an Award under Article VI of the Plan. A Stock
Right may be either a Stock Appreciation Right or a Limited Stock
Appreciation Right.
2.33 "Termination of Employment" means the discontinuance of employment of a
Participant with the Company for any reason. The determination of
whether a Participant has discontinued employment shall be made by the
<PAGE>
Committee in its discretion. In determining whether a Termination of
Employment has occurred, the Committee may provide that service as a
consultant or service with a business enterprise in which the Company
has a significant ownership interest shall be treated as employment
with the Company. The Committee shall have the discretion, exercisable
either at the time the Award is granted or at the time the Participant
terminates employment, to establish as a provision applicable to the
exercise of one or more Awards that during the limited period of
exercisability following Termination of Employment, the Award may be
exercised not only with respect to the number of shares of Stock for
which it is exercisable at the time of the Termination of Employment
but also with respect to one or more subsequent installments for which
the Award would have become exercisable had the Termination of
Employment not occurred.
ARTICLE III - ADMINISTRATION
3.1 This Plan shall be administered by the Committee. A Committee member
who is not a Disinterested Person, with respect to action to be taken
by the Committee, shall not be able to participate in the decision to
the extent prescribed by Rule 16b-3 under the Act. The Committee, in
its discretion, may delegate to one or more of its members such of its
powers as it deems appropriate. The Committee also may limit the power
of any member to the extent necessary to comply with Rule 16b-3 under
the Act or any other law. Members of the Committee shall be appointed
originally, and as vacancies occur, by the Board, to serve at the
pleasure of the Board. The Board may serve as the Committee, if by the
terms of the Plan all Board members are otherwise eligible to serve on
the Committee.
3.2 The Committee shall meet at such times and places as it determines. A
majority of its members shall constitute a quorum, and the decision of
a majority of those present at any meeting at which a quorum is present
shall constitute the decision of the Committee. A memorandum signed by
all of its members shall constitute the decision of the Committee
without necessity, in such event, for holding an actual meeting.
3.3 The Committee shall have the exclusive right to interpret, construe and
administer the Plan, to select the persons who are eligible to receive
an Award, and to act in all matters pertaining to the granting of an
Award and the contents of the Agreement evidencing the Award, including
without limitation, the determination of the number of Stock Options,
Stock Rights, shares of Stock or Performance Shares subject to an Award
and the form, terms, conditions and duration of each Award, and any
amendment thereof consistent with the provisions of the Plan. All acts,
determinations and decisions of the Committee made or taken pursuant to
grants of authority under the Plan or with respect to any questions
arising in connection with the administration and interpretation of the
Plan, including the severability of any and all of the provisions
thereof, shall be conclusive, final and binding upon all Participants,
Eligible Participants and their beneficiaries.
3.4 The Committee may adopt such rules, regulations and procedures of
general application for the administration of this Plan, as it deems
appropriate.
<PAGE>
3.5 Without limiting the foregoing Sections 3.1, 3.2, 3.3 and 3.4, and
notwithstanding any other provisions of the Plan, the Committee is
authorized to take such action as it determines to be necessary or
advisable, and fair and equitable to Participants, with respect to an
Award in the event of an Acceleration Event as defined in Article XIII.
Such action may include, but shall not be limited to, establishing,
amending or waiving the forms, terms, conditions and duration of an
Award and the Award Agreement, so as to provide for earlier, later,
extended or additional times for exercise or payments, differing
methods for calculating payments, alternate forms and amounts of
payment, an accelerated release of restrictions or other modifications.
The Committee may take such actions pursuant to this Section 3.5 by
adopting rules and regulations of general applicability to all
Participants or to certain categories of Participants, by including,
amending or waiving terms and conditions in an Award and the Award
Agreement, or by taking action with respect to individual Participants.
3.6 The aggregate number of shares of Stock which are subject to an Award
under the Plan shall be an amount equal to sixteen percent (16%) of the
Company's Common Stock, issued and outstanding from time to time. Such
shares of Stock shall be made available from authorized and un-issued
shares of the Company. All of such shares of Stock may be subject to
Incentive Stock Option Awards pursuant to Article IV hereof.
(a) If, for any reason, any shares of Stock or Performance Shares
awarded or subject to purchase under the Plan are not
delivered or purchased, or are reacquired by the Company, for
reasons including, but not limited to, a forfeiture of
Restricted Stock or termination, expiration or cancellation of
a Stock Option, Stock Right or Performance Share, or any other
termination of an Award without payment being made in the form
of Stock, whether or not Restricted Stock, such shares of
Stock or Performance Shares shall not be charged against the
aggregate number of shares of Stock available for Awards under
the Plan, and may again be available for Award under the Plan.
(b) For all purposes under the Plan, each Performance Share
awarded shall be counted as one share of Stock subject to an
Award.
(c) To the extent a Stock Right granted in connection with a Stock
Option is exercised without payment being made in the form of
Stock, whether or not Restricted Stock, the shares of Stock
which otherwise would have been issued upon the exercise of
such related Stock Option shall not be charged against the
aggregate number of shares of Stock subject to Awards under
the Plan, and may again be available for Award under the Plan.
3.7 Each Award granted under the Plan shall be evidenced by a written Award
Agreement. Each Award Agreement shall be subject to and incorporate, by
reference or otherwise, the applicable terms and conditions of the
Plan, and any other terms and conditions, not inconsistent with the
Plan, required by the Committee.
<PAGE>
3.8 The Company shall not be required to issue or deliver any certificates
for shares of Stock prior to:
(a) the listing of such shares on any stock exchange on which the
Stock may then be listed; and
(b) the completion of any registration or qualification of such
shares of Stock under any federal or state law, or any ruling
or regulation of any government body which the Company shall,
in its discretion, determine to be necessary or advisable.
3.9 All certificates for shares of Stock delivered under the Plan shall
also be subject to such stop-transfer orders and other restrictions as
the Committee may deem advisable under the rules, regulations, and
other requirements of the Securities and Exchange Commission, any stock
exchange upon which the Stock is then listed and any applicable federal
or state laws, and the Committee may cause a legend or legends to be
placed on any such certificates to make appropriate reference to such
restrictions. In making such determination, the Committee may rely upon
an opinion of counsel for the Company.
3.10 Subject to the restrictions on Restricted Stock, as provided in Article
VIII of the Plan and in the Restricted Stock Award Agreement, each
Participant who receives an Award of Restricted Stock shall have all of
the rights of a shareholder with respect to such shares of Stock,
including the right to vote the shares to the extent, if any, such
shares possess voting rights and receive dividends and other
distributions. Except as provided otherwise in the Plan or in an Award
Agreement, no Participant awarded a Stock Option, Stock Right, Deferred
Stock, Stock Award or Performance Share shall have any right as a
shareholder with respect to any shares of Stock covered by his or her
Stock Option, Stock Right, Deferred Stock, Stock Award or Performance
Share prior to the date of issuance to him or her of a certificate or
certificates for such shares of Stock.
3.11 If any reorganization, recapitalization, reclassification, stock
split-up, stock dividend, or consolidation of shares of Stock, merger
or consolidation of the Company or sale or other disposition by the
Company of all or a portion of its assets, any other change in the
Company's corporate structure, or any distribution to shareholders
other than a cash dividend results in the outstanding shares of Stock,
or any securities exchanged therefor or received in their place, being
exchanged for a different number or class of shares of Stock or other
securities of the Company, or for shares of Stock or other securities
of any other corporation; or new, different or additional shares or
other securities of the Company or of any other corporation being
received by the holders of outstanding shares of Stock, then equitable
adjustments shall be made by the Committee in:
(a) the limitation of the aggregate number of shares of Stock that
may be awarded as set forth in Section 3.6 of the Plan;
(b) the number and class of Stock that may be subject to an Award,
and which have not been issued or transferred under an
outstanding Award;
<PAGE>
(c) the purchase price to be paid per share of Stock under
outstanding Stock Options and the number of shares of Stock to
be transferred in settlement of outstanding Stock Rights; and
(d) the terms, conditions or restrictions of any Award and Award
Agreement, including the price payable for the acquisition of
Stock; provided, however, that all adjustments made as the
result of the foregoing in respect of each Incentive Stock
Option shall be made so that such Stock Option shall continue
to be an Incentive Stock Option, as defined in Section 422 of
the Code.
3.12 In addition to such other rights of indemnification as they may have as
directors or as members of the Committee, the members of the Committee
shall be indemnified by the Company against reasonable expenses,
including attorney's fees, actually and necessarily incurred in
connection with the defense of any action, suit or proceeding, or in
connection with any appeal therein, to which they or any of them may be
a party by reason of any action taken or failure to act under or in
connection with the Plan or any Award granted thereunder, and against
all amounts paid by them in settlement thereof, provided such
settlement is approved by independent legal counsel selected by the
Company, or paid by them in satisfaction of a judgment or settlement in
any such action, suit or proceeding, except as to matters as to which
the Committee member has been negligent or engaged in misconduct in the
performance of his duties; provided, that within 60 days after
institution of any such action, suit or proceeding, a Committee member
shall in writing offer the Company the opportunity, at its own expense,
to handle and defend the same.
3.13 The Committee may require each person purchasing shares of Stock
pursuant to a Stock Option or other Award under the Plan to represent
to and agree with the Company in writing that he is acquiring the
shares of Stock without a view to distribution thereof. The
certificates for such shares of Stock may include any legend which the
Committee deems appropriate to reflect any restrictions on transfer.
3.14 The Committee shall be authorized to make adjustments in performance
based criteria or in the terms and conditions of other Awards in
recognition of unusual or nonrecurring events affecting the Company or
its financial statements or changes in applicable laws, regulations or
accounting principles. The Committee may correct any defect, supply any
omission or reconcile any inconsistency in the Plan or any Award
Agreement in the manner and to the extent it shall deem desirable to
carry it into effect. In the event the Company shall assume outstanding
employee benefit awards or the right or obligation to make future such
awards in connection with the acquisition of another corporation or
business entity, the Committee may, in its discretion, make such
adjustments in the terms of Awards under the Plan as it shall deem
appropriate.
3.15 The Committee shall have full power and authority to determine whether,
to what extent and under what circumstances, any Award shall be
canceled or suspended. In particular, but without limitation, all
outstanding Awards to any Participant may be canceled if (a) the
Participant, without the consent of the Committee, while employed by
the Company or after termination of such employment, becomes associated
<PAGE>
with, employed by, renders services to, or owns any interest in, other
than any non-substantial interest, as determined by the Committee, any
business that is in competition with the Company or with any business
in which the Company has a substantial interest as determined by the
Committee; or (b) is terminated for cause as determined by the
Committee.
ARTICLE IV - INCENTIVE STOCK OPTIONS
4.1 Each provision of this Article IV and of each Incentive Stock Option
granted hereunder shall be construed in accordance with the provisions
of Section 422 of the Code, and any provision hereof that cannot be so
construed shall be disregarded.
4.2 Incentive Stock Options shall be granted only to Eligible Participants
who are in the active employment of the Company, each of whom may be
granted one or more such Incentive Stock Options for a reason related
to his employment at such time or times determined by the Committee
following the Effective Date until October 26, 2003, subject to the
following conditions:
(a) The Incentive Stock Option price per share of Stock shall be
set in the Award Agreement, but shall not be less than 100% of
the Fair Market Value of the Stock on the Option Grant Date.
If the Optionee owns more than 10% of the outstanding Stock
(as determined pursuant to Section 424(d) of the Code) on the
Option Grant Date, the Incentive Stock Option price per share
shall not be less than 110% of the Fair Market Value of the
Stock on the Option Grant Date.
(b) The Incentive Stock Option and its related Stock Right, if any, may be
exercised in whole or in part from time to time within ten (10) years from
the Option Grant Date (five (5) years if the Optionee owns more than 10% of
the Stock on the Option Grant Date), or such shorter period as may be
specified by the Committee in the Award; provided, that in any event, the
Incentive Stock Option and related Stock Right shall lapse and cease to be
exercisable upon, or within such period following, a Termination of
Employment as shall have been determined by the Committee and as specified
in the Incentive Stock Option Award Agreement or its related Stock Right
Award Agreement; provided, however, that such period following a
Termination of Employment shall not exceed three months unless employment
shall have terminated:
(i) as a result of death or Disability, in which event,
such period shall not exceed one year after the date
of death or Disability; and
(ii) as a result of death, if death shall have occurred
following a Termination of Employment and while the
Incentive Stock Option or Stock Right was still
exercisable, in which event, such period shall not
exceed one year after the date of death; provided,
further, that such period following a Termination of
Employment shall in no event extend the original
exercise period of the Incentive Stock Option or any
related Stock Right.
<PAGE>
(c) The aggregate Fair Market Value, determined as of the Option
Grant Date, of the shares of Stock with respect to which
Incentive Stock Options are first exercisable during any
calendar year by any Eligible Participant shall not exceed
$100,000; provided, however, to the extent permitted under
Section 422 of the Code:
(i) if a Participant's employment is terminated by reason
of death, Disability or Retirement and the portion of
any Incentive Stock Option that is otherwise
exercisable during the post-termination period
applied without regard to the $100,000 limitation
contained in section 422(b)(6) of the Code is greater
than the portion of such option that is immediately
exercisable as an Incentive Stock Option during such
post-termination period under Section 422, such
excess shall be treated as a Nonqualified Stock
Option; and
(ii) if the exercise of an Incentive Stock Option is
accelerated by reason of an Acceleration Event, any
portion of such Award that is not exercisable as an
Incentive Stock Option by reason of the $100,000
limitation contained in Section 422(b)(6) of the Code
shall be treated as a Nonqualified Stock Option.
(d) The Committee may adopt any other terms and conditions which
it determines should be imposed for the Incentive Stock Option
to qualify under Section 422 of the Code, as well as any other
terms and conditions not inconsistent with this Article IV as
determined by the Committee.
4.3 The Committee may at any time offer to buy out for a payment in cash,
Stock, Deferred Stock or Restricted Stock an Incentive Stock Option
previously granted, based on such terms and conditions as the Committee
shall establish and communicate to the Participant at the time that
such offer is made.
4.4 If the Incentive Stock Option Award Agreement so provides, the
Committee may require that all or part of the shares of Stock to be
issued upon the exercise of an Incentive Stock Option shall take the
form of Deferred or Restricted Stock, which shall be valued on the date
of exercise, as determined by the Committee, on the basis of the Fair
Market Value of such Deferred Stock or Restricted Stock determined
without regard to the deferral limitations and/or forfeiture
restrictions involved.
ARTICLE V - NONQUALIFIED STOCK OPTIONS
5.1 One or more Stock Options may be granted as Nonqualified Stock Options
to Eligible Participants to purchase shares of Stock at such time or
times determined by the Committee, following the Effective Date,
subject to the terms and conditions set forth in this Article V.
<PAGE>
5.2 The Nonqualified Stock Option price per share of Stock shall be
established in the Award Agreement and may be less than 100% of the
Fair Market Value at the time of the grant, or at such later date as
the Committee shall determine.
5.3 The Nonqualified Stock Option and its related Stock Right, if any, may
be exercised in full or in part from time to time within such period as
may be specified by the Committee or in the Award Agreement; provided,
that, in any event, the Nonqualified Stock Option and the related Stock
Right shall lapse and cease to be exercisable upon, or within such
period following, Termination of Employment as shall have been
determined by the Committee and as specified in the Nonqualified Stock
Option Award Agreement or Stock Right Award Agreement; provided,
however, that such period following Termination of Employment shall not
exceed three months unless employment shall have terminated:
(a) as a result of Retirement or Disability, in which event, such
period shall not exceed one year after the date of Retirement
or Disability, or within such longer period as the Committee
may specify; and
(b) as a result of death, or if death shall have occurred
following a Termination of Employment and while the
Nonqualified Stock Option or Stock Right was still
exercisable, in which event, such period may exceed one year
after the date of death, as provided by the Committee or in
the Award Agreement.
5.4 The Nonqualified Stock Option Award Agreement may include any other
terms and conditions not inconsistent with this Article V or in Article
VII, as determined by the Committee.
ARTICLE VI - STOCK APPRECIATION RIGHTS
6.1 A Stock Appreciation Right may be granted to an Eligible Participant in
connection with an Incentive Stock Option or a Nonqualified Stock
Option granted under Article IV or Article V of this Plan, or may be
granted independent of any related Stock Option.
6.2 A related Stock Appreciation Right shall entitle a holder of a Stock
Option, within the period specified for the exercise of the Stock
Option, to surrender the unexercised Stock Option, or a portion
thereof, and to receive in exchange therefor a payment in cash or
shares of Stock having an aggregate value equal to the amount by which
the Fair Market Value of each share of Stock exceeds the Stock Option
price per share of Stock, times the number of shares of Stock under the
Stock Option, or portion thereof, which is surrendered.
6.3 Each related Stock Appreciation Right granted hereunder shall be
subject to the same terms and conditions as the related Stock Option,
including limitations on transferability, and shall be exercisable only
to the extent such Stock Option is exercisable and shall terminate or
lapse and cease to be exercisable when the related Stock Option
terminates or lapses. The grant of Stock Appreciation Rights related to
Incentive Stock Options must be concurrent with the grant of the
Incentive Stock Options. With respect to Nonqualified Stock Options,
<PAGE>
the grant either may be concurrent with the grant of the Nonqualified
Stock Options, or in connection with Nonqualified Stock Options
previously granted under Article V, which are unexercised and have not
terminated or lapsed.
6.4 The Committee shall have sole discretion to determine in each case
whether the payment with respect to the exercise of a Stock
Appreciation Right will be in the form of all cash or all Stock, or any
combination thereof. If payment is to be made in Stock, the number of
shares of Stock shall be determined based on the Fair Market Value of
the Stock on the date of exercise. If the Committee elects to make full
payment in Stock, no fractional shares of Stock shall be issued and
cash payments shall be made in lieu of fractional shares.
6.5 The Committee shall have sole discretion as to the timing of any
payment made in cash or Stock, or a combination thereof, upon exercise
of Stock Appreciation Rights. Payment may be made in a lump sum, in
annual installments or may be otherwise deferred; and the Committee
shall have sole discretion to determine whether any deferred payments
may bear amounts equivalent to interest or cash dividends.
6.6 Upon exercise of a Stock Appreciation Right, the number of shares of
Stock subject to exercise under any related Stock Option shall
automatically be reduced by the number of shares of Stock represented
by the Stock Option or portion thereof which is surrendered.
6.7 Notwithstanding any other provision of the Plan, the exercise of a
Stock Appreciation Right is required to satisfy the applicable
requirements under Rule 16b-3 of the Act.
6.8 The Committee, in its sole discretion, may also provide that, in the
event of a Change in Control and/or a Potential Change in Control, as
defined in Article XIII, the amount to be paid upon the exercise of a
Stock Appreciation Right or Limited Stock Appreciation Right shall be
based on the Change in Control Price, as defined in Section 13.9,
subject to such terms and conditions as the Committee may specify.
6.9 In its sole discretion, the Committee may grant Limited Stock
Appreciation Rights under this Article VI. Limited Stock Appreciation
Rights become exercisable only in the event of a Change in Control
and/or a Potential Change in Control, subject to such terms and
conditions as the Committee, in its sole discretion, may specify. Such
Limited Stock Appreciation Rights shall be settled solely in cash. A
Limited Stock Appreciation Right shall entitle the holder of the
related Stock Option to surrender such Stock Option, or any portion
thereof, to the extent unexercised in respect of the number of shares
of Stock as to which such Limited Stock Appreciation Right is
exercised, and to receive a cash payment equal to the difference
between (a) the Stock Appreciation Right Fair Market Value, at the date
of surrender, of a share of Stock for which the surrendered Stock
Option or portion thereof is then exercisable, and (b) the price at
which a Participant could exercise a related Stock Option to purchase
the share of Stock. Such Stock Option shall, to the extent so
surrendered, thereupon cease to be exercisable. A Limited Stock
Appreciation Right shall be subject to such further terms and
<PAGE>
conditions as the Committee shall, in its sole discretion, deem
appropriate, including any restrictions necessary to comply with
Section 16(b) of the Act.
ARTICLE VII - INCIDENTS OF STOCK OPTIONS AND STOCK RIGHTS
7.1 Each Stock Option and Stock Right shall be granted subject to such
terms and conditions, if any, not inconsistent with this Plan, as shall
be determined by the Committee, including any provisions as to
continued employment as consideration for the grant or exercise of such
Stock Option or Stock Right and any provisions which may be advisable
to comply with applicable laws, regulations or rulings of any
governmental authority.
7.2 A Stock Option or Stock Right shall not be transferable by the
Participant other than by will or by the laws of descent and
distribution, or, to the extent otherwise allowed by Rule 16b-3 under
the Act, or other applicable law, pursuant to a qualified domestic
relations order as defined by the Code or the Employee Retirement
Income Security Act, or the rules thereunder, and shall be exercisable
during the lifetime of the Participant only by him or by his guardian
or legal representative.
7.3 Shares of Stock purchased upon exercise of a Stock Option shall be paid
for in such amounts, at such times and upon such terms as shall be
determined by the Committee, subject to limitations set forth in the
Stock Option Award Agreement. Without limiting the foregoing, the
Committee may establish payment terms for the exercise of Stock Options
which permit the Participant to deliver shares of Stock, or other
evidence of ownership of Stock satisfactory to the Company, with a Fair
Market Value equal to the Stock Option price as payment.
7.4 No cash dividends shall be paid on shares of Stock subject to
unexercised Stock Options. The Committee may provide, however, that a
Participant to whom a Stock Option has been granted which is
exercisable in whole or in part at a future time for shares of Stock
shall be entitled to receive an amount per share equal in value to the
cash dividends, if any, paid per share on issued and outstanding Stock,
as of the dividend record dates occurring during the period between the
date of the grant and the time each such share of Stock is delivered
pursuant to exercise of such Stock Option or the related Stock Right.
Such amounts (herein called "dividend equivalents") may, in the
discretion of the Committee, be:
(a) paid in cash or Stock either from time to time prior to, or at
the time of the delivery of, such Stock, or upon expiration of
the Stock Option if it shall not have been fully exercised; or
(b) converted into contingently credited shares of Stock, with
respect to which dividend equivalents may accrue, in such
manner, at such value, and deliverable at such time or times,
as may be determined by the Committee.
Such Stock, whether delivered or contingently credited, shall be charged
against the limitations set forth in Section 3.6.
<PAGE>
7.5 The Committee, in its sole discretion, may authorize payment of
interest equivalents on dividend equivalents which are payable in cash
at a future time.
7.6 In the event of Disability or death, the Committee, with the consent of
the Participant or his legal representative, may authorize payment, in
cash or in Stock, or partly in cash and partly in Stock, as the
Committee may direct, of an amount equal to the difference at the time
between the Fair Market Value of the Stock subject to a Stock Option
and the option price in consideration of the surrender of the Stock
Option.
7.7 If a Participant is required to pay to the Company an amount with
respect to income and employment tax withholding obligations in
connection with exercise of a Nonqualified Stock Option, and/or with
respect to certain dispositions of Stock acquired upon the exercise of
an Incentive Stock Option, the Committee, in its discretion and subject
to such rules as it may adopt, may permit the Participant to satisfy
the obligation, in whole or in part, by making an irrevocable election
that a portion of the total Fair Market Value of the shares of Stock
subject to the Nonqualified Stock Option and/or with respect to certain
dispositions of Stock acquired upon the exercise of an Incentive Stock
Option, be paid in the form of cash in lieu of the issuance of Stock
and that such cash payment be applied to the satisfaction of the
withholding obligations. The amount to be withheld shall not exceed the
statutory minimum federal and state income and employment tax liability
arising from the Stock Option exercise transaction. Notwithstanding any
other provision of the Plan, any election under this Section 7.7 is
required to satisfy the applicable requirements under Rule 16b-3 of the
Act.
7.8 The Committee may permit the voluntary surrender of all or a portion of
any Stock Option granted under the Plan to be conditioned upon the
granting to the Participant of a new Stock Option for the same or a
different number of shares of Stock as the Stock Option surrendered, or
may require such surrender as a condition precedent to a grant of a new
Stock Option to such Participant. Subject to the provisions of the
Plan, such new Stock Option shall be exercisable at the same price,
during such period and on such other terms and conditions as are
specified by the Committee at the time the new Stock Option is granted.
Upon surrender, the Stock Options surrendered shall be canceled and the
shares of Stock previously subject to them shall be available for the
grant of other Stock Options.
ARTICLE VIII - RESTRICTED STOCK
8.1 Restricted Stock Awards may be made to certain Participants as an
incentive for the performance of future services that will contribute
materially to the successful operation of the Company. Awards of
Restricted Stock may be made either alone, in addition to or in tandem
with other Awards granted under the Plan and/or cash payments made
outside of the Plan.
8.2 With respect to Awards of Restricted Stock, the Committee shall:
<PAGE>
(a) determine the purchase price, if any, to be paid for such
Restricted Stock, which may be equal to or less than par value
and may be zero, subject to such minimum consideration as may
be required by applicable law;
(b) determine the length of the Restriction Period;
(c) determine any restrictions applicable to the Restricted Stock
such as service or performance, other than those set forth in
this Article VIII;
(d) determine if the restrictions shall lapse as to all shares of
Restricted Stock at the end of the Restriction Period or as to
a portion of the shares of Restricted Stock in installments
during the Restriction Period; and
(e) determine if dividends and other distributions on the
Restricted Stock are to be paid currently to the Participant
or paid to the Company for the account of the Participant.
8.3 Awards of Restricted Stock must be accepted within a period of 60 days,
or such shorter period as the Committee may specify, by executing a
Restricted Stock Award Agreement and paying whatever price, if any, is
required. The prospective recipient of a Restricted Stock Award shall
not have any rights with respect to such Award, unless such recipient
has executed a Restricted Stock Award Agreement and has delivered a
fully executed copy thereof to the Committee, and has otherwise
complied with the applicable terms and conditions of such Award.
8.4 Except when the Committee determines otherwise, or as otherwise
provided in the Restricted Stock Award Agreement, if a Participant
terminates employment with the Company for any reason before the
expiration of the Restriction Period, all shares of Restricted Stock
still subject to restriction shall be forfeited by the Participant and
shall be reacquired by the Company.
8.5 Except as otherwise provided in this Article VIII, no shares of
Restricted Stock received by a Participant shall be sold, exchanged,
transferred, pledged, hypothecated or otherwise disposed of during the
Restriction Period.
8.6 To the extent not otherwise provided in a Restricted Stock Award
Agreement, in cases of death, Disability or Retirement or in cases of
special circumstances, the Committee, if it finds that a waiver would
be appropriate, may elect to waive any or all remaining restrictions
with respect to such Participant's Restricted Stock.
8.7 In the event of hardship or other special circumstances of a
Participant whose employment with the Company is involuntarily
terminated, the Committee may waive in whole or in part any or all
remaining restrictions with respect to any or all of the Participant's
Restricted Stock, based on such factors and criteria as the Committee
may deem appropriate.
<PAGE>
8.8 The certificates representing shares of Restricted Stock may either:
(a) be held in custody by the Company until the Restriction Period
expires or until restrictions thereon otherwise lapse, and the
Participant shall deliver to the Company a stock power
endorsed in blank relating to the Restricted Stock; and/or
(b) be issued to the Participant and registered in the name of the
Participant, and shall bear an appropriate restrictive legend
and shall be subject to appropriate stop-transfer orders.
8.9 Except as provided in this Article VIII, a Participant receiving a
Restricted Stock Award shall have, with respect to the shares of
Restricted Stock covered by any Award, all of the rights of a
shareholder of the Company, including the right to vote the shares to
the extent, if any, such shares possess voting rights and the right to
receive any dividends; provided, however, the Committee may require
that any dividends on such shares of Restricted Stock shall be
automatically deferred and reinvested in additional Restricted Stock
subject to the same restrictions as the underlying Award, or may
require that dividends and other distributions on Restricted Stock
shall be paid to the Company for the account of the Participant. The
Committee shall determine whether interest shall be paid on such
amounts, the rate of any such interest, and the other terms applicable
to such amounts.
8.10 If and when the Restriction Period expires without a prior forfeiture
of the Restricted Stock subject to such Restriction Period,
unrestricted certificates for such shares shall be delivered to the
Participant.
8.11 In order to better ensure that Award payments actually reflect the
performance of the Company and the service of the Participant, the
Committee may provide, in its sole discretion, for a tandem
performance-based or other Award designed to guarantee a minimum value,
payable in cash or Stock to the recipient of a Restricted Stock Award,
subject to such performance, future service, deferral and other terms
and conditions as may be specified by the Committee.
ARTICLE IX - DEFERRED STOCK
9.1 Shares of Deferred Stock together with cash dividend equivalents, if so
determined by the Committee, may be issued either alone or in addition
to other Awards granted under the Plan in the discretion of the
Committee. The Committee shall determine the individuals to whom, and
the time or times at which, such Awards will be made, the number of
shares to be awarded, the price, if any, to be paid by the recipient of
a Deferred Stock Award, the time or times within which such Awards may
be subject to forfeiture, and all other conditions of the Awards. The
Committee may condition Awards of Deferred Stock upon the attainment of
specified performance goals or such other factors or criteria as the
Committee may determine.
<PAGE>
9.2 Deferred Stock Awards shall be subject to the following terms and
conditions:
(a) Subject to the provisions of this Plan and the applicable
Award Agreement, Deferred Stock Awards may not be sold,
transferred, pledged, assigned or otherwise encumbered during
the period specified by the Committee for purposes of such
Award (the "Deferral Period"). At the expiration of the
Deferral Period, or the Elective Deferral Period defined in
Section 9.3, share certificates shall be delivered to the
Participant, or his legal representative, in a number equal to
the number of shares of Stock covered by the Deferred Stock
Award.
Based on service, performance and/or such other factors or
criteria as the Committee may determine, the Committee,
however, at or after grant, may accelerate the vesting of all
or any part of any Deferred Stock Award and/or waive the
deferral limitations for all or any part of such Award.
(b) Unless otherwise determined by the Committee, amounts equal to
any dividends that would have been payable during the Deferral
Period with respect to the number of shares of Stock covered
by a Deferred Stock Award if such shares of Stock had been
outstanding shall be automatically deferred and deemed to be
reinvested in additional Deferred Stock, subject to the same
deferral limitations as the underlying Award.
(c) Except to the extent otherwise provided in this Plan or in the
applicable Award Agreement, upon Termination of Employment
during the Deferral Period for a given Award, the Deferred
Stock covered by such Award shall be forfeited by the
Participant; provided, however, the Committee may provide for
accelerated vesting in the event of Termination of Employment
due to death, Disability or Retirement, or in the event of
hardship or other special circumstances as the Committee deems
appropriate.
(d) The Committee may require that a designated percentage of the
total Fair Market Value of the shares of Deferred Stock held
by one or more Participants be paid in the form of cash in
lieu of the issuance of Stock and that such cash payment be
applied to the satisfaction of the federal and state income
and employment tax withholding obligations that arise at the
time the Deferred Stock becomes free of all restrictions. The
designated percentage shall be equal to the minimum income and
employment tax withholding rate in effect at the time under
applicable federal and state laws.
(e) The Committee may provide one or more Participants subject to
the mandatory cash payment with an election to receive an
additional percentage of the total value of the Deferred Stock
in the form of a cash payment in lieu of the issuance of
Deferred Stock. The additional percentage shall not exceed the
difference between 50% and the designated percentage cash
payment.
<PAGE>
(f) The Committee may impose such further terms and conditions on
partial cash payments with respect to Deferred Stock as it
deems appropriate, including any restrictions necessary to
comply with Section 16(b) of the Act.
9.3 A Participant may elect to further defer receipt of Deferred Stock for
a specified period or until a specified event (the "Elective Deferral
Period"), subject in each case to the Committee's approval and to such
terms as are determined by the Committee. Subject to any exceptions
adopted by the Committee, such election must generally be made at least
12 months prior to completion of the Deferral Period for the Deferred
Stock Award in question, or for the applicable installment of such an
Award.
9.4 Each Award shall be confirmed by, and subject to the terms of, a
Deferred Stock Award Agreement.
9.5 In order to better ensure that the Award actually reflects the
performance of the Company and the service of the Participant, the
Committee may provide, in its sole discretion, for a tandem
performance-based or other Award designed to guarantee a minimum value,
payable in cash or Stock to the recipient of a Deferred Stock Award,
subject to such performance, future service, deferral and other terms
and conditions as may be specified by the Committee.
ARTICLE X - STOCK AWARDS
10.1 A Stock Award shall be granted only in payment of compensation that has
been earned or as compensation to be earned, including without
limitation, compensation awarded concurrently with or prior to the
grant of the Stock Award.
10.2 For the purposes of this Plan, in determining the value of a Stock
Award, all shares of Stock subject to such Stock Award shall be valued
at not less than 100% of the Fair Market Value of such shares of Stock
on the date such Stock Award is granted, regardless of whether or when
such shares of Stock are issued or transferred to the Participant and
whether or not such shares of Stock are subject to restrictions which
affect their value.
10.3 Shares of Stock subject to a Stock Award may be issued or transferred
to the Participant at the time the Stock Award is granted, or at any
time subsequent thereto, or in installments from time to time, as the
Committee shall determine. If any such issuance or transfer shall not
be made to the Participant at the time the Stock Award is granted, the
Committee may provide for payment to such Participant, either in cash
or shares of Stock, from time to time or at the time or times such
shares of Stock shall be issued or transferred to such Participant, of
amounts not exceeding the dividends which would have been payable to
such Participant in respect of such shares of Stock, as adjusted under
Section 3.11, if such shares of Stock had been issued or transferred to
such Participant at the time such Stock Award was granted. Any issuance
payable in shares of Stock under the terms of a Stock Award, at the
discretion of the Committee, may be paid in cash on each date on which
delivery of shares of Stock would otherwise have been made, in an
<PAGE>
amount equal to the Fair Market Value on such date of the shares of
Stock which would otherwise have been delivered.
10.4 A Stock Award shall be subject to such terms and conditions, including
without limitation, restrictions on the sale or other disposition of
the Stock Award or of the shares of Stock issued or transferred
pursuant to such Stock Award, as the Committee shall determine;
provided, however, that upon the issuance or transfer of shares
pursuant to a Stock Award, the Participant, with respect to such shares
of Stock, shall be and become a shareholder of the Company fully
entitled to receive dividends, to vote to the extent, if any, such
shares possess voting rights and to exercise all other rights of a
shareholder except to the extent otherwise provided in the Stock Award.
Each Stock Award shall be evidenced by a written Award Agreement in
such form as the Committee shall determine.
ARTICLE XI - PERFORMANCE SHARES
11.1 Awards of Performance Shares may be made to certain Participants as an
incentive for the performance of future services that will contribute
materially to the successful operation of the Company. Awards of
Performance Shares may be made either alone, in addition to or in
tandem with other Awards granted under the Plan and/or cash payments
made outside of the Plan.
11.2 With respect to Awards of Performance Shares, which may be issued for
no consideration or such minimum consideration as is required by
applicable law, the Committee shall:
(a) determine and designate from time to time those Participants
to whom Awards of Performance Shares are to be made;
(b) determine the performance period (the "Performance Period")
and/or performance objectives (the "Performance Objectives")
applicable to such Awards;
(c) determine the form of settlement of a Performance Share; and
(d) generally determine the terms and conditions of each such
Award. At any date, each Performance Share shall have a value
equal to the Fair Market Value, determined as set forth in
Section 2.15.
11.3 Performance Periods may overlap, and Participants may participate
simultaneously with respect to Performance Shares for which different
Performance Periods are prescribed.
11.4 The Committee shall determine the Performance Objectives of Awards of
Performance Shares. Performance Objectives may vary from Participant to
Participant and between Awards and shall be based upon such performance
criteria or combination of factors as the Committee may deem
appropriate, including for example, but not limited to, minimum
earnings per share or return on equity. If during the course of a
Performance Period there shall occur significant events which the
Committee expects to have a substantial effect on the applicable
<PAGE>
Performance Objectives during such period, the Committee may revise
such Performance Objectives.
11.5 The Committee shall determine for each Participant the number of
Performance Shares which shall be paid to the Participant if the
applicable Performance Objectives are exceeded or met in whole or in
part.
11.6 If a Participant terminates service with the Company during a
Performance Period because of death, Disability, Retirement or under
other circumstances in which the Committee in its discretion finds that
a waiver would be appropriate, that Participant, as determined by the
Committee, may be entitled to a payment of Performance Shares at the
end of the Performance Period based upon the extent to which the
Performance Objectives were satisfied at the end of such period and pro
rated for the portion of the Performance Period during which the
Participant was employed by the Company; provided, however, the
Committee may provide for an earlier payment in settlement of such
Performance Shares in such amount and under such terms and conditions
as the Committee deems appropriate or desirable. If a Participant
terminates service with the Company during a Performance Period for any
other reason, then such Participant shall not be entitled to any
payment with respect to that Performance Period unless the Committee
shall otherwise determine.
11.7 Each Award of a Performance Share shall be paid in whole shares of
Stock, or cash, or a combination of Stock and cash as the Committee
shall determine, with payment to be made as soon as practicable after
the end of the relevant Performance Period.
11.8 The Committee shall have the authority to approve requests by
Participants to defer payment of Performance Shares on terms and
conditions approved by the Committee and set forth in a written Award
Agreement between the Participant and the Company entered into in
advance of the time of receipt or constructive receipt of payment by
the Participant.
ARTICLE XII - OTHER STOCK-BASED AWARDS
12.1 Other awards that are valued in whole or in part by reference to, or
are otherwise based on, Stock ("Other Stock-Based Awards"), including
without limitation, convertible preferred stock, convertible
debentures, exchangeable securities, phantom stock and Stock awards or
options valued by reference to book value or performance, may be
granted either alone or in addition to or in tandem with Stock Options,
Stock Rights, Restricted Stock, Deferred Stock or Stock Awards granted
under the Plan and/or cash awards made outside of the Plan.
Subject to the provisions of the Plan, the Committee shall have
authority to determine the Eligible Participants to whom and the time
or times at which such Awards shall be made, the number of shares of
Stock subject to such Awards, and all other conditions of the Awards.
The Committee also may provide for the grant of shares of Stock upon
the completion of a specified Performance Period.
<PAGE>
The provisions of Other Stock-Based Awards need not be the same with
respect to each recipient.
12.2 Other Stock-Based Awards made pursuant to this Article XII shall be
subject to the following terms and conditions:
(a) Subject to the provisions of this Plan and the Award
Agreement, shares of Stock subject to Awards made under this
Article XII may not be sold, assigned, transferred, pledged or
otherwise encumbered prior to the date on which the shares are
issued, or, if later, the date on which any applicable
restriction, performance or deferral period lapses.
(b) Subject to the provisions of this Plan and the Award Agreement
and unless otherwise determined by the Committee at the time
of the Award, the recipient of an Award under this Article XII
shall be entitled to receive, currently or on a deferred
basis, interest or dividends or interest or dividend
equivalents with respect to the number of shares covered by
the Award, as determined at the time of the Award by the
Committee, in its sole discretion, and the Committee may
provide that such amounts, if any, shall be deemed to have
been reinvested in additional Stock or otherwise reinvested.
(c) Any Award under this Article XII and any Stock covered by any
such Award shall vest or be forfeited to the extent so
provided in the Award Agreement, as determined by the
Committee, in its sole discretion.
(d) Upon the Participant's Retirement, Disability or death, or in
cases of special circumstances, the Committee may, in its sole
discretion, waive in whole or in part any or all of the
remaining limitations imposed hereunder, if any, with respect
to any or all of an Award under this Article XII.
(e) Each Award under this Article XII shall be confirmed by, and
subject to the terms of, an Award Agreement.
(f) Stock, including securities convertible into Stock, issued on
a bonus basis under this Article XII may be issued for no cash
consideration.
12.3 Other Stock-Based Awards may include a phantom stock Award, which is
subject to the following terms and conditions:
(a) The Committee shall select the Eligible Participants who may
receive phantom stock Awards. The Eligible Participant shall
be awarded a phantom stock unit, which shall be the equivalent
to a share of Stock.
<PAGE>
(b) Under an Award of phantom stock, payment shall be made on the
dates or dates as specified by the Committee or as stated in
the Award Agreement and phantom stock Awards may be settled in
cash, Stock, or some combination thereof.
(c) The Committee shall determine such other terms and conditions
of each Award as it deems necessary in its sole discretion.
ARTICLE XIII - ACCELERATION EVENTS
13.1 For the purposes of the Plan, an Acceleration Event shall occur in the
event of a "Potential Change in Control," or "Change in Control" or a
"Board-Approved Change in Control", as those terms are defined below.
13.2 A "Change in Control" shall be deemed to have occurred if:
(a) Any "Person" as defined in Section 3(a)(9) of the Act,
including a "group" (as that term is used in Sections 13(d)(3)
and 14(d)(2) of the Act), but excluding the Company and any
employee benefit plan sponsored or maintained by the Company,
including any trustee of such plan acting as trustee, who:
(i) makes a tender or exchange offer for any shares of
the Company's Stock (as defined below) pursuant to
which any shares of the Company's Stock are
purchased (an "Offer"); or
(ii) together with its "affiliates" and "associates" (as
those terms are defined in Rule 12b-2 under the Act)
becomes the "Beneficial Owner" (within the meaning of
Rule 13d-3 under the Act) of at least 20% of the
Company's Stock (an "Acquisition");
(b) The shareholders of the Company approve a definitive agreement
or plan to merge or consolidate the Company with or into
another corporation, to sell or otherwise dispose of all or
substantially all of its assets, or to liquidate the Company
(individually, a "Transaction"); or
(c) When, during any period of 24 consecutive months during the
existence of the Plan, the individuals who, at the beginning
of such period, constitute the Board (the "Incumbent
Directors") cease for any reason other than death to
constitute at least a majority thereof; provided, however,
that a director who was not a director at the beginning of
such 24 month period shall be deemed to have satisfied such 24
month requirement, and be an Incumbent Director, if such
director was elected by, or on the recommendation of or with
the approval of, at least two-thirds of the directors who then
qualified as Incumbent Directors either actually, because they
were directors at the beginning of such 24 month period, or by
prior operation of this Section 13.2(c).
<PAGE>
13.3 A "Board-Approved Change in Control" shall be deemed to have occurred
if the Offer, Acquisition or Transaction, as the case may be, is
approved by a majority of the Directors serving as members of the Board
at the time of the Potential Change in Control or Change in Control.
13.4 A "Potential Change in Control" means the happening of any one of the
following:
(a) The approval by shareholders of an agreement by the Company,
the consummation of which would result in a Change in
Control of the Company, as defined in Section 13.2; or
(b) The acquisition of Beneficial Ownership, directly or
indirectly, by any entity, person or group, other than the
Company or any Company employee benefit plan, including any
trustee of such plan acting as such trustee, of securities of
the Company representing five percent or more of the combined
voting power of the Company's outstanding securities and the
adoption by the Board of a resolution to the effect that a
Potential Change in Control of the Company has occurred for
the purposes of this Plan.
13.5 Upon the occurrence of an Acceleration Event, subject to the approval
of the Committee if the Acceleration Event results from a
Board-Approved Change in Control, all then outstanding Performance
Shares with respect to which the applicable Performance Period has not
been completed shall be paid as soon as practicable as follows:
(a) all Performance Objectives applicable to the Award of
Performance Shares shall be deemed to have been satisfied to
the extent necessary to result in payment of 100% of the
Performance Shares covered by the Award; and
(b) the applicable Performance Period shall be deemed to have
ended on the date of the Acceleration Event;
(c) the payment to the Participant shall be the amount determined
either by the Committee, in its sole discretion, or in the
manner stated in the Award Agreement. This amount shall then
be multiplied by a fraction, the numerator of which is the
number of full calendar months of the applicable Performance
Period that have elapsed prior to the date of the Acceleration
Event, and the denominator of which is the total number of
months in the original Performance Period; and
(d) upon the making of any such payment, the Award Agreement as to
which it relates shall be deemed canceled and of no further
force and effect.
13.6 Upon the occurrence of an Acceleration Event, subject to the approval
of the Committee if the Acceleration Event results from a
Board-Approved Change in Control, the Committee in its discretion may
declare any or all then outstanding Stock Options, and any or all
related Stock Rights outstanding for at least six months, not
previously exercisable and vested as immediately exercisable and fully
vested, in whole or in part.
<PAGE>
13.7 Upon the occurrence of an Acceleration Event, subject to the approval
of the Committee if the Acceleration Event results from a
Board-Approved Change in Control, the Committee in its discretion, may
declare the restrictions applicable to Awards of Restricted Stock,
Deferred Stock or Other Stock-Based Awards to have lapsed, in which
case the Company shall remove all restrictive legends and stop-transfer
orders applicable to the certificates for such shares of Stock, and
deliver such certificates to the Participants in whose names they are
registered.
13.8 The value of all outstanding Stock Options, Stock Rights, Restricted
Stock, Deferred Stock, Performance Shares, Stock Awards and Other
Stock-Based Awards, in each case to the extent vested, shall, unless
otherwise determined by the Committee in its sole discretion at or
after grant but prior to any Change in Control, be cashed out on the
basis of the "Change in Control Price," as defined in Section 13.9 as
of the date such Change in Control or such Potential Change in Control
is determined to have occurred or such other date as the Committee may
determine prior to the Change in Control.
13.9 For purposes of Section 13.8, "Change in Control Price" means the
highest price per share of Stock paid in any transaction reported on
the exchange on which the Stock is then traded, or paid or offered in
any bona fide transaction related to a Potential or actual Change in
Control of the Company at any time during the 60 day period immediately
preceding the occurrence of the Change in Control, or, where
applicable, the occurrence of the Potential Change in Control event, in
each case as determined by the Committee except that, in the case of
Incentive Stock Options and Stock Appreciation Rights, or Limited Stock
Appreciation Rights, relating to such Incentive Stock Options, such
price shall be based only on transactions reported for the date on
which the optionee exercises such Stock Appreciation Rights, or Limited
Stock Appreciation Rights.
ARTICLE XIV - AMENDMENT AND TERMINATION
14.1 The Board, upon recommendation of the Committee, or otherwise, at any
time and from time to time, may amend or terminate the Plan. To the
extent required by Rule 16b-3 under the Act, no amendment, without
approval by the Company's shareholders, shall:
(a) alter the group of persons eligible to participate in the
Plan;
(b) except as provided in Section 3.6, increase the maximum number
of shares of Stock or Stock Options or Stock Rights which are
available for Awards under the Plan;
(c) extend the period during which Incentive Stock Option Awards
may be granted beyond September 15, 2003;
(d) limit or restrict the powers of the Committee with respect to
the administration of this Plan;
<PAGE>
(e) change the definition of an Eligible Participant for the
purpose of an Incentive Stock Option or increase the limit or
the value of shares of Stock for which an Eligible Participant
may be granted an Incentive Stock Option;
(f) materially increase the benefits accruing to Participants
under this Plan;
(g) materially modify the requirements as to eligibility for
participation in this Plan; or
(h) change any of the provisions of this Article XIV.
14.2 No amendment to or discontinuance of this Plan or any provision thereof
by the Board or the shareholders of the Company shall, without the
written consent of the Participant, adversely affect, as shall be
determined by the Committee, any Award theretofore granted to such
Participant under this Plan; provided, however, the Committee retains
the right and power to:
(a) annul any Award if the Participant is terminated for cause as
determined by the Committee;
(b) provide for the forfeiture of shares of Stock or other gain
under an Award as determined by the Committee for competing
against the Company; and
(c) convert any outstanding Incentive Stock Option to a
Nonqualified Stock Option.
14.3 If an Acceleration Event has occurred, no amendment or termination
shall impair the rights of any person with respect to an outstanding
Award as provided in Article XIII.
ARTICLE XV - MISCELLANEOUS PROVISIONS
15.1 Nothing in the Plan or any Award granted hereunder shall confer upon
any Participant any right to continue in the employ of the Company, or
to serve as a director thereof, or interfere in any way with the right
of the Company to terminate his or her employment at any time. Unless
specifically provided otherwise, no Award granted under the Plan shall
be deemed salary or compensation for the purpose of computing benefits
under any employee benefit plan or other arrangement of the Company for
the benefit of its employees unless the Company shall determine
otherwise. No Participant shall have any claim to an Award until it is
actually granted under the Plan. To the extent that any person acquires
a right to receive payments from the Company under the Plan, such right
shall, except as otherwise provided by the Committee, 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 provided in Article VIII with respect to Restricted
Stock and except as otherwise provided by the Committee.
<PAGE>
15.2 The Company may make such provisions and take such steps as it may deem
necessary or appropriate for the withholding of any taxes which the
Company is required by any law or regulation of any governmental
authority, whether federal, state or local, domestic or foreign, to
withhold in connection with any Stock Option or the exercise thereof,
any Stock Right or the exercise thereof, or in connection with any
other type of equity-based compensation provided hereunder or the
exercise thereof, including, but not limited to, the withholding of
payment of all or any portion of such Award or another Award under this
Plan until the Participant reimburses the Company for the amount the
Company is required to withhold with respect to such taxes, or
canceling any portion of such Award or another Award under this Plan in
an amount sufficient to reimburse itself for the amount it is required
to so withhold, or selling any property contingently credited by the
Company for the purpose of paying such Award or another Award under
this Plan, in order to withhold or reimburse itself for the amount it
is required to so withhold.
15.3 The Plan and the grant of Awards shall be subject to all applicable
federal and state laws, rules, and regulations and to such approvals by
any United States government or regulatory agency as may be required.
Any provision herein relating to compliance with Rule 16b-3 under the
Act shall not be applicable with respect to participation in the Plan
by Participants who are not subject to Section 16(b) of the Act.
15.4 The terms of the Plan shall be binding upon the Company, and its
successors and assigns.
15.5 Neither a Stock Option, Stock Right, nor any other type of equity-based
compensation provided for hereunder, shall be transferable except as
provided for herein. Unless otherwise provided by the Committee or in
an Award Agreement, transfer restrictions shall only apply to Incentive
Stock Options as required in Article IV and to the extent otherwise
required by federal or state securities laws. If any Participant makes
such a transfer in violation hereof, any obligation of the Company
shall forthwith terminate.
15.6 This Plan and all actions taken hereunder shall be governed by the laws
of the State of Delaware, except to the extent preempted by the
Employee Retirement Income Security Act of 1974, as amended.
15.7 The Plan is intended to constitute an "unfunded" plan for incentive and
deferred compensation. With respect to any payments not yet made to a
Participant by the Company, nothing contained herein shall give any
such Participant any rights that are greater than those of a general
creditor of the Company. In its sole discretion, the Committee may
authorize the creation of trusts or other arrangements to meet the
obligations created under the Plan to deliver shares of Stock or
payments in lieu of or with respect to Awards hereunder; provided,
however, that, unless the Committee otherwise determines with the
consent of the affected Participant, the existence of such trusts or
other arrangements is consistent with the "unfunded" status of the
Plan.
15.8 Each Participant exercising an Award hereunder agrees to give the
Committee prompt written notice of any election made by such
Participant under Section 83(b) of the Code, or any similar provision
thereof.
<PAGE>
15.9 If any provision of this Plan or an Award Agreement is or becomes or is
deemed invalid, illegal or unenforceable in any jurisdiction, or would
disqualify the Plan or any Award Agreement under any law deemed
applicable by the Committee, such provision shall be construed or
deemed amended to conform to applicable laws or if it cannot be
construed or deemed amended without, in the determination of the
Committee, materially altering the intent of the Plan or the Award
Agreement, it shall be stricken and the remainder of the Plan or the
Award Agreement shall remain in full force and effect.
MEDTOX SCIENTIFIC, INC.
ATTEST: By: ______________________________
Authorized Officer
(Corporate Seal)
-----------------------------
Secretary
300996-00026
456-164050
