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EXHIBIT 4.1
ULTIMATE ELECTRONICS, INC.
2000 EQUITY INCENTIVE PLAN
SECTION 1
INTRODUCTION
1.1 ESTABLISHMENT. Ultimate Electronics, Inc., a Delaware
corporation (together with its subsidiaries, the "Company"), hereby
establishes the 2000 Equity Incentive Plan (the "Plan") for certain key
employees, non-employee directors and consultants of the Company.
1.2 PURPOSES. The purposes of the Plan are to provide Participants
with added incentives to continue in the long-term service of the Company and
to create in such persons a more direct interest in the future success of the
operations of the Company by relating incentive compensation to increases in
stockholder value. The Plan is also designed to attract key employees and to
retain and motivate key employees by providing an opportunity for investment
in the Company.
SECTION 2
DEFINITIONS
2.1 DEFINITIONS. The following terms shall have the meanings set
forth below:
(a) "AWARD" means a grant made under this Plan in the form of
Stock, Options, Restricted Stock, Performance Units or Performance
Shares.
(b) "BOARD" means the board of directors of the Company.
(c) "EFFECTIVE DATE" means the date of the adoption of the
Plan by the Board.
(d) "ELIGIBLE EMPLOYEES" means key employees (including,
without limitation, officers and directors who are also employees) of
the Company whose judgment, initiative and efforts is, or will be,
important to the successful conduct of the Company's business.
(e) "FAIR MARKET VALUE" shall be determined in good faith by
the Plan Administrator after such consultation with outside legal,
accounting and other experts as the Plan Administrator may deem
advisable.
(f) "INSIDER" means any person who is a beneficial owner,
directly or indirectly, of more than 10% of any equity securities of
the Company registered pursuant to Section 12 of the Securities
Exchange Act of 1934, as amended (the
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"1934 Act").
(g) "INCENTIVE STOCK OPTION" means any Option designated as
such and granted in accordance with the requirements of Section 422 of
the Internal Revenue Code of 1986, as amended (the "Code").
(h) "NON-EMPLOYEE DIRECTOR" means, at any time, any member of
the Board who is not also an employee of the Company.
(i) "NON-INSIDER" means any person who is not an Insider.
(j) "NON-STATUTORY OPTION" means any Option other than an
Incentive Stock Option.
(k) "OPTION" means a right to purchase Stock at a stated price
for a specified period of time.
(l) "OPTION PRICE" means the price at which Shares subject to
an Option may be purchased, determined in accordance with Section
7.3(b) of this Plan.
(m) "PARTICIPANT" means an Eligible Employee, Non-employee
Director or consultant to the Company designated by the Plan
Administrator from time to time during the term of the Plan to receive
one or more Awards under the Plan.
(n) "PERFORMANCE CYCLE" means the period of time as specified
by the Plan Administrator over which Performance Units are to be
earned.
(o) "PERFORMANCE SHARES" means an Award made pursuant to
Section 9 which entitles a Participant to receive Shares based on the
achievement of performance targets during a Performance Cycle.
(p) "PERFORMANCE UNITS" means an Award made pursuant to
Section 9 which entitles a Participant to receive cash, Shares or a
combination thereof based on the achievement of performance targets
during a Performance Cycle.
(q) "PLAN ADMINISTRATOR" shall mean the particular entity,
whether the Plan Committee or Board, that is authorized to administer
Incentive Stock Options or Non-Statutory Options to the extent such
entity is carrying out its administrative functions under those
programs with respect to the persons under its jurisdiction.
(r) "PLAN COMMITTEE" means a committee consisting of at least
two Non-employee Directors who are authorized by the Board hereunder to
take actions in the administration of the Plan. No Member of the Plan
Committee may be a person who (i) is a current employee of the Company,
(ii) is a former employee who receives compensation for prior services
(other than benefits under a tax-qualified retirement plan) during the
current Plan Year, (iii) is a former officer of the Company, or (iv)
receives remuneration, directly or indirectly, in exchange for any
goods or
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services, from the Company in any capacity other than director. The
Plan Committee shall be so constituted at all times as to permit the
Plan to comply with Rule 16b-3 or any successor rule promulgated under
the 1934 Act and Treasury Regulation Section 1.162-27(e)(3). Members of
the Plan Committee shall: (i) be appointed from time to time by the
Board and (ii) serve at the pleasure of the Board and may resign at any
time upon written notice to the Board.
(s) "PLAN YEAR" means each 12-month period beginning February
1 and ending the following January 31, except that for the first year
of the Plan it shall begin on the Effective Date and extend to January
31 of the following year.
(t) "PREDECESSOR PLAN" shall mean the Company's Employee Stock
Purchase Plan as in effect prior to the adoption of the Plan.
(u) "RESTRICTED STOCK" means Stock granted under Section 8
that is subject to restrictions imposed pursuant to said Section.
(v) "SHARE" means a share of Stock.
(w) "STOCK" means the common stock, $.01 par value, of the
Company.
2.2 GENDER AND NUMBER. Except when otherwise indicated by the
context, the masculine gender shall also include the feminine gender, and the
definition of any term herein in the singular shall also include the plural.
SECTION 3
PLAN ADMINISTRATION
3.1 GENERAL. The Plan shall be administered by the Board, which may
from time to time delegate all or part of its authority under this Plan to a
Plan Committee. If authorized by duly passed resolutions of the Board, the
Plan Committee shall have sole and exclusive authority to administer the
Incentive Stock Option grants and Non-Statutory Option grants with respect to
Insiders. The Plan Committee may also, at the Board's discretion, administer
Incentive Stock Options and Non-Statutory Stock Options to Non-Insiders.
3.2 PLAN ADMINISTRATOR'S AUTHORITY. References in this Plan to the
Plan Administrator refer to the Board or, to the extent the Board delegates
its administrative authority to the Plan Committee, to the Plan Committee. In
accordance with the provisions of the Plan, the Plan Administrator shall, in
its sole discretion, select Participants to whom Awards will be granted, the
form of each Award, the amount of each Award and any other terms and
conditions of each Award as the Plan Administrator may deem necessary or
desirable and consistent with the terms of the Plan. The Plan Administrator
shall determine the form or forms of the agreements which shall evidence the
particular provisions, terms, conditions, rights and duties of the Company
and the Participants with respect to Awards granted pursuant to the Plan,
which provisions need not be identical except as may be provided herein. The
Plan Administrator may from time to time adopt such rules and regulations for
carrying out the
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purposes of the Plan as it may deem proper and in the best interests of the
Company. The Plan Administrator may correct any defect, supply any omission
or reconcile any inconsistency in the Plan or in any agreement entered into
hereunder in the manner and to the extent it shall deem proper and in the
best interest of the Company. No member of the Plan Administrator shall be
liable for any action or determination made in good faith, and all members of
the Plan Administrator shall, in addition to their rights as directors, be
fully indemnified by the Company with respect to any such action,
determination or interpretation. The determination, interpretations and other
actions of the Plan Administrator pursuant to the provisions of the Plan
shall be binding and conclusive for all purposes and on all persons.
SECTION 4
SHARES SUBJECT TO THE PLAN
4.1 NUMBER OF SHARES. 300,000 Shares are authorized for issuance
under the Plan in accordance with the provisions of the Plan and subject to
such restrictions or other provisions as the Plan Administrator may from time
to time deem necessary. The number of Shares authorized for issuance under
the Plan shall automatically increase on the first trading day of each fiscal
year during the term of the Plan, beginning with the fiscal year 2002, by
100,000 Shares. The aggregate number of shares that may be issued under the
Plan shall not exceed 1,200,000. The Shares may be divided among the various
Plan components as the Plan Administrator shall determine.
4.2 UNUSED AND FORFEITED STOCK. Any Shares that are subject to an
Award under this Plan that are not used because the terms and conditions of
the Award are not met, including any Shares that are subject to an Option
that expires or is terminated for any reason, any Shares which are used for
full or partial payment of the purchase price of Shares with respect to which
an Option is exercised and any Shares retained by the Company pursuant to
Section 16 of this Plan, shall automatically become available for use under
the Plan. Notwithstanding the foregoing, with respect to any Shares withheld
by the Company in satisfaction of withholding taxes incurred upon the
exercise of Incentive Stock Options or as part of the purchase price of the
Shares underlying such Incentive Stock Options, the number of Shares
available for issuance under this Plan shall be reduced by the number of
Shares so withheld.
4.3 ADJUSTMENTS FOR STOCK SPLIT, STOCK DIVIDEND, ETC. If the Company
shall at any time increase or decrease the number of its outstanding Shares
or change in any way the rights and privileges of such Shares by means of the
payment of a stock dividend or any other distribution upon such Shares
payable in Shares, or through a stock split, subdivision, consolidation,
combination, reclassification or recapitalization involving the Shares, then
in relation to the Shares that are affected by one or more of the above
events, the numbers, rights and privileges of the following shall be
increased, decreased or changed in like manner as if they had been issued and
outstanding, fully paid and nonassessable at the time of such occurrence: (i)
the Shares as to which Awards may be granted under the Plan and (ii) the
Shares then included in each outstanding Option or Performance Unit granted
hereunder.
4.4 DIVIDEND PAYABLE IN STOCK OF ANOTHER CORPORATION, ETC. If the
Company shall at any time pay or make any dividend or other distribution upon
the Shares payable in
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securities of another corporation or other property (except money or Shares),
a proportionate part of such securities or other property shall be set aside
and delivered to any Participant then holding an Award for the particular
type of Shares for which the dividend or other distribution was made, upon
exercise thereof in the case of Options, and the vesting thereof in the case
of other Awards. Prior to the time that any such securities or other property
are delivered to a Participant in accordance with the foregoing, the Company
shall be the owner of such securities or other property and shall have the
right to vote the securities, receive any dividends payable on such
securities, and in all other respects shall be treated as the owner. If
securities or other property which have been set aside by the Company in
accordance with this Section 4.4 are not delivered to a Participant because
an Award is not exercised or otherwise vested, then such securities or other
property shall remain the property of the Company and shall be dealt with by
the Company as it shall determine in its sole discretion.
4.5 OTHER CHANGES IN SHARES. In the event there shall be any change,
other than as specified in Sections 4.3 and 4.4, in the number or kind of
outstanding Shares of any stock or other securities into which the Shares
shall be changed or for which it shall have been exchanged, and if the Plan
Administrator shall in its discretion determine that such change equitably
requires an adjustment in the number or kind of Shares subject to outstanding
Awards or which have been reserved for issuance pursuant to the Plan but are
not then subject to an Award, then such adjustments shall be made by the Plan
Administrator and shall be effective for all purposes of the Plan and on each
outstanding Award that involves the particular type of stock for which a
change was effected.
4.6 RIGHTS TO SUBSCRIBE. If the Company shall at any time grant to
the holders of its Shares rights to subscribe pro rata for additional Shares
thereof or for any other securities of the Company or of any other
corporation, there shall be reserved with respect to the Shares then subject
to an Award held by any Participant of the particular class of Shares
involved, the Shares or other securities which the Participant would have
been entitled to subscribe for if immediately prior to such grant the
Participant had exercised his entire Option, or otherwise vested in his
entire Award. If, upon exercise of any such Option or the vesting of any
other Award, the Participant subscribes for the additional Shares or other
securities, the Participant shall pay to the Company the price that is
payable by the Participant for such Shares or other securities.
4.7 GENERAL ADJUSTMENT RULES. If any adjustment or substitution
provided for in this Section 4 shall result in the creation of a fractional
Share under any Award, the Company shall, in lieu of selling or otherwise
issuing such fractional Share, pay to the Participant a cash sum in an amount
equal to the product of such fraction multiplied by the Fair Market Value of
a Share on the date the fractional Share would otherwise have been issued. In
the case of any such substitution or adjustment affecting an Option, the
total Option Price for the Shares then subject to an Option shall remain
unchanged but the Option Price per Share under each such Option shall be
equitably adjusted by the Plan Administrator to reflect the greater or lesser
number of Shares or other securities into which the Shares subject to the
Option may have been changed.
4.8 DETERMINATION BY THE PLAN ADMINISTRATOR. Adjustments under this
Section 4 shall be made by the Plan Administrator, whose determinations with
regard thereto shall be final
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and binding upon all parties thereto.
4.9 INDIVIDUAL LIMITATIONS ON AWARDS. The fair market value of
Performance Units (other than Performance Shares) that may be granted
pursuant to this 2000 Plan to any employee in any Plan Year shall not exceed
$100,000, Subject to Section 4.3, no more than 100,000 Shares may be issued
to any employee in any Plan Year as Performance Shares, and no Options may be
issued pursuant to this Plan in any Plan Year to any employee for the
purchase of more than 100,000 Shares.
4.10 TREATMENT OF PREDECESSOR PLAN. This 2000 Plan shall serve as
the successor to the Predecessor Plan, and no further Awards shall be made
under the Predecessor Plan after the Effective Date. Each outstanding Award
under Predecessor Plan shall continue to be governed solely by the terms of
the documents evidencing such Award, and no provision of the 2000 Plan shall
affect or otherwise modify the rights or obligations of the holder of such
Award.
SECTION 5
PARTICIPATION
Participants in the Plan shall be Non-employee Directors and those
Eligible Employees or consultants who, in the judgment of the Plan
Administrator, are performing, or during the term of their incentive
arrangement will perform, important services in the management, operation and
development of the Company, and significantly contribute, or are expected to
significantly contribute, to the achievement of long-term corporate economic
objectives. Participants may be granted from time to time one or more Awards;
provided, however, that the grant of each such Award shall be separately
approved by the Plan Administrator, and receipt of one such Award shall not
result in automatic receipt of any other Award. Written notice shall be given
to such person, specifying the terms, conditions, rights and duties related
to each Award.
SECTION 6
REORGANIZATION OR LIQUIDATION
In the event that the Company is merged or consolidated with another
corporation (other than a merger or consolidation in which the Company is the
continuing corporation and which does not result in any reclassification or
change of outstanding Shares), or if all or substantially all of the assets
or more than 50% of the outstanding voting stock of the Company is acquired
by any other corporation, business entity or person (other than a sale or
conveyance in which the Company continues as a holding company of an entity
or entities that conduct the business or businesses formerly conducted by the
Company), or in the case of a reorganization (other than a reorganization
under the United States Bankruptcy Code) or liquidation of the Company, and
if the provisions of Section 10 do not apply, the Plan Administrator, or the
board of directors of any corporation assuming the obligations of the
Company, shall have the power and discretion to prescribe the terms and
conditions for the exercise of, or modification of, any outstanding Awards
granted hereunder. By way of illustration, and not by way of limitation, the
Plan Administrator or the board of directors of the corporation assuming the
obligations of the Company may provide for the complete or
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partial acceleration of the dates of exercise of the Options, or may provide
that such Options will be exchanged or converted into options to acquire
securities of the surviving or acquiring corporation, or may provide for a
payment or distribution in respect of outstanding Options (or the portion
thereof that is currently exercisable) in cancellation thereof. The Plan
Administrator or the board of directors of the corporation assuming the
obligations of the Company may remove restrictions on Restricted Stock and
may modify the performance requirements for any other Awards. The Plan
Administrator may provide that Options or other Awards granted hereunder must
be exercised in connection with the closing of such transaction, and that if
not so exercised such Awards will expire. Any such determinations by the Plan
Administrator or the board of directors of the corporation assuming the
obligations of the Company may be made generally with respect to all
Participants, or may be made on a case-by-case basis with respect to
particular Participants. The provisions of this Section 6 shall not apply to
any transaction undertaken for the purpose of reincorporating the Company
under the laws of another jurisdiction if such transaction does not
materially affect the beneficial ownership of the Company's capital stock.
SECTION 7
STOCK OPTIONS
7.1 AUTOMATIC GRANT OF OPTIONS. Each Non-employee Director shall be
automatically granted Non-Statutory Options to purchase 4,000 Shares (subject
to adjustment pursuant to Section 7.3(j) hereof) effective as of February 1
of each year, which Options will become exercisable one year from the date of
grant.
7.2 DISCRETIONARY GRANT OF OPTIONS. The Plan Committee may make
discretionary grants of Options to Non-employee Directors, Eligible Employees
and consultants. The Plan Administrator in its sole discretion shall
designate whether an Option is to be considered an Incentive Stock Option or
a Non-Statutory Option. Notwithstanding any other provision of the Plan,
Non-employee Directors and consultants may only be awarded Non-Statutory
Options, provided, however, that the Board must approve such Award and the
interested Non-employee Director must abstain from voting on the Award.
Eligible Employees may be awarded Non-Statutory Options, Incentive Stock
Options, or both. The Plan Administrator may grant both an Incentive Stock
Option and a Non-Statutory Option to the same employee at the same time
(which Options may or may not be evidenced in the same agreement) or at
different times. Incentive Stock Options and Non-Statutory Options, whether
granted at the same or different times, shall be deemed to have been awarded
in separate grants, shall be clearly identified, and in no event shall the
exercise of one Option affect the right to exercise any other Option or
affect the number of Shares for which any other Option may be exercised.
7.3 AN OPTION AGREEMENT IS REQUIRED FOR EACH AWARD. Each Option
granted under the Plan shall be evidenced by a written stock option agreement
which shall be entered into and signed by a representative of the Company and
the Participant to whom the Option is granted (the "Option Holder"), and
which agreement shall contain the following terms and conditions, as well as
such other terms and conditions not inconsistent therewith, as the Plan
Administrator may consider appropriate in each case.
(a) NUMBER OF SHARES. Each stock option agreement shall state
that it
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covers a specified number of Shares, as determined by the Plan
Administrator. Notwithstanding any other provision of the Plan, the
aggregate Fair Market Value of the Shares relating to Incentive Stock
Options exercisable for the first time in any one calendar year by any
individual, under the Plan or otherwise, shall not exceed $100,000. For
this purpose, the Fair Market Value of the Shares shall be determined
as of the time an Option is granted.
(b) PRICE. The price at which each Share covered by an Option
may be purchased shall be determined in each case by the Plan
Administrator and set forth in the stock option agreement. In no event
shall the Option Price for each Share covered by an Option grant to an
Eligible Employee be granted at any price less than the Fair Market
Value of the Stock on the date the Option is granted. In addition, the
Option Price for each Share covered by an Incentive Stock Option
awarded to an Eligible Employee who then owns stock representing more
than 10% of the total combined voting power of all classes of stock of
the Company or any parent or subsidiary corporation of the Company must
be at least 110% of the Fair Market Value of the Stock subject to the
Incentive Stock Option on the date the Option is granted. The Option
Price for each Share covered by a Non-Statutory Option awarded to a
Non-employee Director, or a consultant may be granted at a price less
than the Fair Market Value of the Stock on the date of the grant.
(c) DURATION OF OPTIONS. Each stock option agreement shall
state the period of time, determined by the Plan Administrator, within
which the Option may be exercised by the Option Holder (the "Option
Period").
(i) The Option Period for Incentive Stock Options and
Non-Statutory Stock Options, must expire not more than ten
years from the date the Option is granted.
(ii) The Option Period of an Incentive Stock Option
granted to an Eligible Employee who then owns stock
representing more than 10% of the total combined voting power
of all classes of stock of the Company or any parent or
subsidiary corporation of the Company must expire not more
than five years from the date such an Option is granted.
(d) VESTING OPTIONS. Each stock option agreement shall also
state the periods of time, if any, as determined by the Plan
Administrator, when incremental portions of each Option shall vest.
(e) TERMINATION OF EMPLOYMENT, DEATH, DISABILITY, ETC. Except
as otherwise determined by the Plan Administrator, each stock option
agreement shall provide as follows with respect to the exercise of the
Option upon termination of the employment or the death of the Option
Holder:
(i) TERMINATION OF DIRECTORSHIP OF NON-EMPLOYEE
DIRECTORS.
(A) If a Non-employee Director's term as a
director of the
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Company shall terminate for any reason other than
death or disability, any Option held by the Option
Holder, to the extent exercisable under the
applicable stock option agreement shall remain
exercisable after termination of his director
status for a period of three months, but in no event
beyond the Option Period.
(B) If a Non-employee Director's term as a
director of the Company terminates because the
Participant dies while, or within three months after,
serving as a director, or is disabled within the
meaning of Section 22(e)(3) of the Code, any Options
then held by the Participant, to the extent then
exercisable under the applicable stock option
agreement(s), shall remain exercisable after the
termination of his directorship for a period of
twelve months, but in no event beyond the Option
Period. If the Options are not exercised during the
applicable period, they shall be deemed to have been
forfeited and of no further force or effect.
(ii) TERMINATION OF EMPLOYMENT.
(A) If the employment of the Option Holder
is terminated within the Option Period for cause, as
determined by the Company, the Option shall
thereafter be void for all purposes. As used in this
subsection 7.2(e)(ii), "cause" shall mean a gross
violation, as determined by the Board, of the
Company's established policies and procedures. The
effect of this subsection 7.2(e)(ii) shall be limited
to determining the consequences of a termination, and
nothing in this subsection 7.2(e)(ii) shall restrict
or otherwise interfere with the Company's discretion
with respect to the termination of any employee.
(B) If the Option Holder terminates his
employment with the Company in a manner determined by
the Board, in its sole discretion, to constitute
retirement (which determination shall be communicated
to the Option Holder within 10 days of such
termination), the Option may be exercised by the
Option Holder, or in the case of death, by the
persons specified in subsection 7.2(e)(ii)(C), within
three months following his or her retirement if the
Option is an Incentive Stock Option or within twelve
months following his or her retirement if the Option
is a Non-Statutory Stock Option (provided in each
case that such exercise must occur within the Option
Period), but not thereafter. In any such case, the
Option may be exercised only as to the Shares as to
which the Option had become exercisable on or before
the date of the Option Holder's termination of
employment.
(C) If the Option Holder dies, or if the
Option Holder becomes disabled (within the meaning of
Section 22(e)(3) of the Code, during the Option
Period while still employed, the Option may,
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in the case of death, be exercised by those entitled
to do so under the Option Holder's will or by the
laws of descent and distribution within twelve months
following the Option Holder's death, but not
thereafter (provided that such exercise must occur
within the Option Period). In the case of disability,
the Option may be exercised within twelve months
following the Option Holder's disability, but not
thereafter (provided that such exercise must occur
within the Option Period). In any such case, the
Option may be exercised only as to the number of
Shares exercisable on or before the date of the
Option Holder's death or disability (provided that
such exercise must occur within the Option Period).
(D) If the employment of the Option Holder
by the Company is terminated within the Option Period
for any reason other than cause, retirement as
provided in subsection 7.2(e)(ii)(B) above,
disability or the Option Holder's death, the Option
may be exercised by the Option Holder within three
months following the date of such termination
(provided that such exercise must occur within the
Option Period), but not thereafter. In any such case,
the Option may be exercised only as to the number of
Shares exercisable on or before the date of
termination of employment.
(f) TRANSFERABILITY. Each stock option agreement shall provide
that during the lifetime of the Option Holder, Incentive Stock Options
shall be exercisable only by the Option Holder and Non-Statutory
Options shall not be assignable or transferable except in the limited
circumstances as set forth in Section 12 of this Plan.
(g) EXERCISE, PAYMENTS, ETC.
(i) Each stock option agreement shall provide that
the method for exercising the Option granted therein shall be
by delivery to the Secretary of the Company (the "Secretary")
of written notice specifying the number of Shares with respect
to which such Option is exercised and payment of the Option
Price. Such notice shall be in a form satisfactory to the Plan
Administrator and shall specify the particular Option (or
portion thereof) that is being exercised and the number of
Shares with respect to which the Option is being exercised.
The exercise of the Option shall be deemed effective upon
receipt of such notice by the Secretary and payment to the
Company of the appropriate Option Price. The purchase of
Shares shall take place at the principal offices of the
Company upon delivery of such notice, at which time the Option
Price shall be paid in full by any of the methods or any
combination of the methods set forth in (ii) below. A properly
executed certificate or certificates representing the Shares
shall be issued by the Company and delivered to the Option
Holder as soon as practicable after payment of the Option
Price.
(ii) The Option Price shall be paid by any of the
following methods
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or any combination of the following methods:
(A) in cash;
(B) by cashier's check payable to the
order of the Company;
(C) by delivery to the Company of
certificates representing the number of Shares then
owned by the Option Holder, the Fair Market Value of
which equals the Option Price for the Shares to be
purchased pursuant to the Option, properly endorsed
for transfer to the Company; provided however, that
Shares used for this purpose must have been held by
the Option Holder for such minimum period of time as
may be established from time to time by the Plan
Administrator. For purposes of this Plan, the Fair
Market Value of any Shares delivered in payment of
the Option Price upon exercise of the Option shall be
the Fair Market Value as of the exercise date and the
exercise date shall be the day the delivery of the
certificates for the Shares used as payment of the
Option Price; or
(D) by delivery to the Company of a properly
executed notice of exercise together with irrevocable
instructions to a broker to deliver to the Company
promptly the amount of the proceeds of the sale of
all or a portion of the Shares or of a loan from the
broker to the Option Holder necessary to pay the
Option Price.
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(iii) In the discretion of the Plan Administrator,
the Company may provide a loan or guaranty a third-party loan
obtained by a Participant to pay part or all of the Option
Price of the Shares provided that such loan or the Company's
guaranty is properly secured by the Shares.
(h) WITHHOLDING.
(i) NON-STATUTORY OPTIONS. Each stock option
agreement covering Non-Statutory Options shall provide that,
upon exercise of the Option, the Option Holder shall make
appropriate arrangements with the Company to provide for the
amount of additional withholding required by applicable
federal and state income tax laws, including payment of such
taxes through delivery of Shares or by withholding Shares to
be issued upon the exercise of the Option, as provided in
Section 16.
(ii) INCENTIVE STOCK OPTIONS. In the event that a
Participant makes a disposition (as defined in Section 424(c)
of the Code) of any Stock acquired pursuant to the exercise of
an Incentive Stock Option prior to the expiration of two years
from the date on which the Incentive Stock Option was granted
or prior to the expiration of one year from the date on which
the Option was exercised, the Participant shall send written
notice to the Secretary at the Company's principal office in
Denver, Colorado of the date of such disposition, and any
other information relating to such disposition as the Company
may reasonably request. The Participant shall, in the event of
such a disposition, make appropriate arrangements with the
Company to provide for the amount of additional withholding,
if any, required by applicable federal and state income tax
laws.
(i) DATE OF GRANT. An Option shall be considered as having
been granted on the date specified in the grant resolution of the Plan
Administrator.
(j) ADJUSTMENT OF OPTIONS. Subject to the limitations
contained in Section 15, the Plan Administrator may make any adjustment
in the Option Price, the number of Shares subject to, or the terms of,
an outstanding Option and a subsequent granting of an Option by
amendment or by substitution of an outstanding Option. Such amendment,
substitution or re-grant may result in terms and conditions (including
Option Price, number of Shares covered, vesting schedule or exercise
period) that differ from the terms and conditions of the original
Option. The Plan Administrator may not, however, adversely affect the
rights of any Participant to previously granted Options without the
consent of such Participant.
7.4 NO RIGHTS AS A STOCKHOLDER. No Option Holder shall have any
rights as a stockholder with respect to any Shares covered by an Option until
the Option Holder becomes the holder of record of such Shares, and no
adjustments shall be made for dividends or other distributions or other
rights as to which there is a record date preceding the date such Option
Holder becomes the holder of record of such Shares, except as provided in
herein.
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SECTION 8
RESTRICTED STOCK AWARDS
8.1 AWARDS GRANTED BY THE PLAN ADMINISTRATOR. Coincident with or
following designation for participation in the Plan, a Participant may be
granted one or more Awards of Restricted Stock consisting of Shares. The
number of Shares granted as an Award of Restricted Stock shall be determined
by the Plan Administrator.
8.2 RESTRICTIONS. A Participant's right to retain an Award of
Restricted Stock granted to him under Section 8.1 shall be subject to such
restrictions, including but not limited to his continuous employment by the
Company for a certain period specified by the Plan Administrator, or the
attainment of specified performance goals and objectives, as may be
established by the Plan Administrator with respect to such Award. The Plan
Administrator may in its sole discretion require different periods of
employment or different performance goals and objectives with respect to
different Participants, to different Awards of Restricted Stock or to
separate, designated portions of the Shares constituting an Award of
Restricted Stock.
8.3 PRIVILEGES OF A STOCKHOLDER, TRANSFERABILITY. A Participant
shall have all voting, dividend, liquidation and other rights with respect to
Stock in accordance with the terms of the Award of Restricted Stock upon his
becoming the holder of record of such Restricted Stock; provided, however,
that the Participant's right to sell, encumber or otherwise transfer such
Restricted Stock shall be subject to the limitations of Section 12 hereof.
8.4 ENFORCEMENT OF RESTRICTIONS. The Plan Administrator may in its
sole discretion require one or more of the following methods of enforcing the
restrictions referred to in Section 8.2 and 8.3:
(a) Placing a legend on the stock certificates referring
to the restrictions;
(b) Requiring the Participant to keep the stock certificates,
duly endorsed, in the custody of the Company while the restrictions
remain in effect; or
(c) Requiring that the stock certificates, duly endorsed, be
held in the custody of a third party while the restrictions remain in
effect.
8.5 TERMINATION OF EMPLOYMENT, DEATH, DISABILITY, ETC. In the event
of the death or disability (within the meaning of Section 22(e)(3) of the
Code) of a Participant, or the retirement of a Participant as provided in
Section 7.3(e)(ii), all employment period and other restrictions applicable
to Awards of Restricted Stock then held by him shall lapse, and such awards
shall become fully nonforfeitable. Subject to Sections 6 and 10, in the event
of a Participant's termination of employment for any other reason, any Award
of Restricted Stock as to which the employment period or other restrictions
have not been satisfied shall be forfeited.
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SECTION 9
PERFORMANCE UNITS
9.1 PERFORMANCE RELATED AWARDS. Coincident with or following
designation for participation in the Plan, a Participant may be granted
Performance Units.
9.2 AMOUNT OF AWARD. The Plan Administrator shall establish a
maximum amount of a Participant's Award, which amount shall be denominated in
Shares or in dollars.
9.3 COMMUNICATION OF AWARD. Written notice of the maximum amount of
a Participant's Award and the Performance Cycle determined by the Plan
Administrator shall be given to a Participant as soon as practicable after
grant of the Award by the Plan Administrator.
9.4 AMOUNT OF AWARD PAYABLE. The Plan Committee shall establish
maximum and minimum performance targets to be achieved during the applicable
Performance Cycle. Performance targets established by the Plan Committee
shall relate to corporate, group, unit or individual performance and may be
established in terms of earnings, growth in earnings, ratios of earnings to
equity or assets. The Plan Committee shall establish the method for computing
the amount of an Award payable to a Participant upon satisfaction of each of
the performance targets, and shall designate the Participants who are
eligible for such Awards, within 90 days after the commencement of the
Performance Cycle to which the Awards relate or, if earlier, before 25
percent of such Performance Cycle has elapsed. Multiple performance targets
may be used and the components of multiple performance targets may be given
the same or different weight in determining the amount of an Award earned,
and may relate to absolute performance or relative performance measured
against other groups, units, individuals or entities. Each performance
target, and the methods for computing the amount of an Award to which an
employee shall be entitled as a result of the achievement of one or more
performance targets, shall be stated in terms of an objective formula or
standard. Achievement of the maximum performance target shall entitle the
Participant to payment (subject to Section 9.5) at the full or maximum amount
specified with respect to the Award; provided, however, that notwithstanding
any other provisions of this Plan, in the case of an Award of Performance
Units, the Plan Administrator in its discretion may establish an upper limit
on the amount payable (whether in cash or Shares) as a result of the
achievement of the maximum performance target. The Plan Committee may also
establish that a portion of a full or maximum amount of a Participant's Award
will be paid (subject to Section 9.5) for performance which exceeds the
minimum performance target but falls below the maximum performance target
applicable to such Award.
9.5 ADJUSTMENTS. At any time prior to payment of an Award of
Performance Units, the Plan Committee may adjust previously established
performance targets or other terms and conditions to reflect events such as
changes in laws, regulations, or accounting practice, or mergers,
acquisitions or divestitures, or such other events as the Plan Administrator
deems appropriate, in its sole discretion, provided that the Plan Committee
may not, at any time after 90 days have elapsed from the commencement of the
Performance Cycle to which the Award relates, or, if earlier, after 25
percent of the Performance Cycle to which the Award relates has elapsed,
increase the amount of any Award payable that would otherwise be due upon
attainment of one or more performance targets.
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9.6 PAYMENTS OF AWARDS. Following the conclusion of each Performance
Cycle, the Plan Committee shall determine the extent to which performance
targets have been attained, and the satisfaction of any other terms and
conditions with respect to an Award relating to such Performance Cycle. The
Plan Administrator shall certify what, if any, payment is due with respect to
an Award and whether such payment shall be made in cash, Shares or some
combination. Payment shall be made in a lump sum or installments, as
determined by the Plan Committee, commencing as promptly as practicable
following the end of the applicable Performance Cycle, subject to such terms
and conditions and in such form as may be prescribed by the Plan Committee.
9.7 TERMINATION OF EMPLOYMENT. If a Participant ceases to be a
employee before the end of a Performance Cycle by reason of his death,
permanent disability or retirement as provided in Section 7.3(e)(ii), the
Performance Cycle for such Participant for the purpose of determining the
amount of the Award payable shall end at the end of the calendar quarter
immediately preceding the date on which such Participant ceased to be an
employee. The amount of an Award payable to a Participant to whom the
preceding sentence is applicable shall be paid at the end of the Performance
Cycle and shall be that fraction of the Award computed pursuant to the
preceding sentence, the numerator of which is the number of calendar quarters
during the Performance Cycle during all of which said Participant was an
employee and the denominator of which is the number of full calendar quarters
in the Performance Cycle. Upon any other termination of employment of a
Participant during a Performance Cycle, participation in the Plan shall cease
and all outstanding Awards of Performance Units to such Participant shall be
canceled.
SECTION 10
CHANGE IN CONTROL
10.1 OPTIONS, RESTRICTED STOCK. In the event of a change in control
of the Company as defined in Section 10.3, the Board may, in its sole
discretion, without obtaining stockholder approval, to the extent permitted
in Section 15, take any or all of the following actions: (a) accelerate the
exercise dates of any outstanding Options or make all such Options fully
vested and exercisable; (b) grant a cash bonus award to any Option Holder in
an amount necessary to pay the Option Price of all or any portion of the
Options then held by such Option Holder; (c) pay cash to any or all Option
Holders in exchange for the cancellation of their outstanding Options in an
amount equal to the difference between the Option Price of such Options and
the greater of the price offered by a third party for the Common Stock or the
Fair Market Value of the Shares on the date of the cancellation of the
Options; (d) make any other adjustments or amendments to the outstanding
Options; and (e) eliminate all restrictions with respect to Restricted Stock
and deliver Shares free of restrictive legends to any Participant.
10.2 PERFORMANCE UNITS. Under the circumstances described in Section
10.1, the Board may, in its sole discretion, and without obtaining
stockholder approval, to the extent permitted in Section 15, provide for
payment of outstanding Performance Units at the maximum award level or any
percentage thereof.
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10.3 DEFINITION. For purposes of the Plan, a "change in control"
shall be deemed to have occurred if (a) any "person" or "group" (within the
meaning of Sections 13(d) and 14(d)(2) of the 1934 Act), other than William
J. Pearse, a trustee or other fiduciary holding securities under an employee
benefit plan of the Company, is or becomes the "beneficial owner" (as defined
in Rule 13d-3 under the 1934 Act), directly or indirectly, of more than 33
1/3% of the then outstanding voting stock of the Company; or (b) at any time
during any period of three consecutive years (not including any period prior
to the Effective Date), individuals who at the beginning of such period
constitute the Board (and any new director whose election by the Board or
whose nomination for election by the Company's stockholders was approved by a
vote of at least two-thirds of the directors then still in office who either
were directors at the beginning of such period or whose election or
nomination for election was previously so approved) cease for any reason to
constitute a majority thereof; or (c) the stockholders of the Company approve
a merger or consolidation of the Company with any other corporation, other
than a merger or consolidation which would result in the voting securities of
the Company outstanding immediately prior thereto continuing to represent
(either by remaining outstanding or by being converted into voting securities
of the surviving entity) at least 80% of the combined voting power of the
voting securities of the Company or such surviving entity outstanding
immediately after such merger or consolidation, or the stockholders approve a
plan of complete liquidation of the Company or an agreement for the sale or
disposition by the Company of all or substantially all of the Company's
assets.
SECTION 11
RIGHTS OF EMPLOYEES AND OTHER PARTICIPANTS
Nothing contained in the Plan or in any Award granted under the Plan
shall confer upon any Participant any right with respect to the continuation
of his or her employment by the Company, or interfere in any way with the
right of the Company, subject to the terms of any separate employment
agreement to the contrary, at any time to terminate such employment or to
increase or decrease the compensation of the Participant from the rate in
existence at the time of the grant of an Award. Whether an authorized leave
of absence or absence due to military or government service shall constitute
a termination of employment shall be determined by the Plan Administrator at
the relevant time.
SECTION 12
TRANSFERABILITY
During the lifetime of the Option Holder, Incentive Stock Options
shall be exercisable only by the Option Holder and shall not be assignable or
transferable; provided, however, that in the event of the Option Holder's
death, any Option may be exercised by the personal representative of the
Option Holder's estate, or by the person(s) to whom the option is transferred
pursuant to the Option Holder's will or in accordance with the laws of
descent and distribution. Upon the prior written consent of the Board and
subject to any conditions associated with such consent, a Non-Statutory
Option may be assigned in whole or in part during the Option Holder's
lifetime to one or more members of the Option Holder's immediate family or to
a trust established exclusively for one or more such family members. In
addition, the Board, in its sole discretion, may allow a Non-Statutory Option
to be assigned in other circumstances deemed appropriate. The terms
applicable to the assigned portion shall be the
<PAGE>
same as those in effect for the Option immediately prior to such assignment
and shall be set forth in such documents issued to the assignee as the Board
may deem appropriate.
SECTION 13
GENERAL RESTRICTIONS
13.1 INVESTMENT REPRESENTATIONS. The Company may require any person
to whom an Option or other Award is granted, as a condition of exercising
such Option or receiving Shares under the Award, to give written assurances
in substance and form satisfactory to the Company and its counsel to the
effect that such person is acquiring the Shares subject to the Option or the
Award for his own account for investment and not with any present intention
of selling or otherwise distributing the same and to such other effects as
the Company deems necessary or appropriate in order to comply with federal
and applicable state securities laws. Legends evidencing such restrictions
may be placed on the certificates evidencing the Shares.
13.2 COMPLIANCE WITH SECURITIES LAWS. Each Award shall be subject to
the requirement that, if at any time counsel to the Company shall determine
that the listing, registration or qualification of the Shares subject to such
Award upon any securities exchange or under any state or federal law, or the
consent or approval of any governmental or regulatory body, is necessary as a
condition of, or in connection with, the issuance or purchase of Shares
thereunder, such Award may not be accepted or exercised in whole or in part
unless such listing, registration, qualification, consent or approval shall
have been effected or obtained on conditions acceptable to the Plan
Administrator. Nothing herein shall be deemed to require the Company to apply
for or to obtain such listing, registration or qualification.
13.3 STOCK RESTRICTION AGREEMENT. The Plan Administrator may provide
that Shares issuable upon the exercise of an Option shall, under certain
conditions, be subject to restrictions whereby the Company has a right of
first refusal with respect to such Shares or a right or obligation to
repurchase all or a portion of such Shares, which restrictions may survive a
Participant's term of employment with the Company. The acceleration of time
or times at which an Option becomes exercisable may be conditioned upon the
Participant's agreement to such restrictions.
SECTION 14
OTHER EMPLOYEE BENEFITS
The amount of any compensation deemed to be received by a
Participant as a result of the exercise of an Option or the grant or vesting
of any other Award shall not constitute "earnings" with respect to which any
other employee benefits of such employee are determined, including without
limitation benefits under any pension, profit sharing, stock purchase, life
insurance or salary continuation plan.
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SECTION 15
PLAN AMENDMENT, MODIFICATION AND TERMINATION BY THE BOARD
15.1 BOARD'S EXCLUSIVE AUTHORITY TO TERMINATE, AMEND OR MODIFY PLAN.
The Board shall have complete and exclusive authority to terminate and from
time-to-time amend or modify the Plan in any and all respects unless and only
to the extent that stockholder approval of such amendments or modifications
is required under applicable law or, if the Company, on the advice of its
counsel, determines that stockholder approval is otherwise necessary or
desirable. No amendment, modification or termination of the Plan shall in any
manner adversely affect any Awards theretofore granted under the Plan,
without the consent of the Participant holding such Awards.
15.2 OPTIONS IN EXCESS OF THE NUMBER OF AVAILABLE SHARES. Options in
excess of the number of Shares then available for issuance may be granted
under this Plan, provided, however, that any excess Shares actually issued
under this Plan shall be held in escrow until the action that is necessary to
approve a sufficient increase in the number of Shares available for issuance
under the Plan is taken. If such further action is not obtained within 12
months after the date the first such excess grants are made, then: (i) any
unexercised Options granted on the basis of such excess Shares shall
terminate and cease to be outstanding and (ii) the Company shall promptly
refund to the Option Holders the Option Price paid for any excess Options
that were exercised or issued under the Plan and held in escrow, together
with interest on the Option Price that was held in escrow, and any such
Options and Shares shall thereupon be automatically canceled and cease to be
outstanding.
SECTION 16
WITHHOLDING
16.1 WITHHOLDING REQUIREMENT. The Company's obligations to deliver
Shares upon the exercise of an Option, or upon the vesting of any other
Award, shall be subject to the Participant's satisfaction of all applicable
federal, state and local income and other tax withholding requirements.
16.2 WITHHOLDING WITH STOCK. The Board may, in its discretion,
provide any or all holders of Non-Statutory Options with the right to use
Shares in satisfaction of all or part of the taxes incurred by such holders
in connection with the exercise of such Options. Such right may be provided
to any such holder in either or both of the following formats:
(a) The election to have the Company withhold, from the Shares
otherwise issuable upon the exercise of such Non-Statutory Option, a
portion of those Shares with an aggregate Fair Market Value less than
or equal to the amount of taxes due as designated by such holder; or
(b) The election to deliver to the Company, at the time the
Non-Statutory Option is exercised, one or more Shares previously
acquired by such holder with an aggregate Fair Market Value less than
or equal to the amount of taxes due as designated by such holder.
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SECTION 17
BROKERAGE ARRANGEMENTS
The Plan Administrator may, in its discretion, enter into
arrangements with one or more banks, brokers or other financial institutions
to facilitate the disposition of Shares acquired upon exercise of Options,
including, without limitation, arrangements for the simultaneous exercise of
Options and sale of the Shares acquired upon such exercise.
SECTION 18
NONEXCLUSIVITY OF THE PLAN
Neither the adoption of the Plan by the Board nor the submission of
the Plan to stockholders of the Company for approval shall be construed as
creating any limitations on the power or authority of the Board to adopt such
other or additional incentive or other compensation arrangements of whatever
nature as the Board may deem necessary or desirable or preclude or limit the
continuation of any other plan, practice or arrangement for the payment of
compensation or fringe benefits to employees generally, or to any class or
group of employees, which the Company or any affiliated Corporation now has
lawfully put into effect, including, without limitation, any retirement,
pension, savings and stock purchase plan, insurance, death and disability
benefits and executive short-term incentive plans.
SECTION 19
REQUIREMENTS OF LAW
19.1 REQUIREMENTS OF LAW. The issuance of Shares and the payment of
cash pursuant to the Plan shall be subject to all applicable laws, rules and
regulations.
19.2 FEDERAL SECURITIES LAW REQUIREMENTS. If a Participant is an
officer or director of the Company within the meaning of Section 16 of the
1934 Act, Awards granted hereunder shall be subject to all conditions
required under Rule 16b-3 of the 1934 Act, or any successor rule promulgated
under the 1934 Act, to qualify the Award for any exception from the
provisions of Section 16(b) of the 1934 Act available under that Rule. Such
conditions are hereby incorporated herein by reference and shall be set forth
in the agreement with the Participant which describes the Award.
19.3 CONFLICTS. If the terms of a particular stock option agreement
that evidences an Award conflict with the terms of the Plan, the terms of the
Plan will control and such Participant will be subject to the terms and
conditions of the Plan.
19.4 GOVERNING LAW. The Plan and all agreements hereunder shall be
construed in accordance with and governed by the laws of the State of
Delaware.
SECTION 20
DURATION OF THE PLAN
The Plan shall be effective on the Effective Date, provided that any
Options or Shares that may be granted or issued under the Plan prior to
shareholder approval will be granted or issued subject to the approval of the
Company's shareholders. The Plan shall terminate at such time as may be
determined by the Board, and no Award shall be granted after such
termination. If not sooner terminated under the preceding sentence, the Plan
shall fully cease and expire at midnight of the day which is ten years from
the Effective Date. Awards outstanding at the time of the Plan termination
may continue to be exercised or earned in accordance with their terms.
