ClearOne
Communications, Inc.
2007
EQUITY INCENTIVE PLAN
1.
Purpose
The
purpose of the ClearOne Communications, Inc. 2007 Equity Incentive Plan (the
“Plan”) is to advance the interests of the ClearOne Communications, Inc. (the
“Company”) by stimulating the efforts of employees, officers, nonemployee
directors and other service providers, in each case who are selected to be
participants, by heightening the desire of such persons to continue in working
toward and contributing to the success and progress of the Company. The Plan
provides for the grant of Incentive and Nonqualified Stock Options, Stock
Appreciation Rights, Restricted Stock and Restricted Stock Units, any of which
may be performance-based, as determined by the Administrator.
2.
Definitions
As used in the Plan, the following terms shall have the meanings set
forth below:
(a)
“Administrator”
means the Administrator of the Plan in accordance with Section 17.
(b)
“Award”
means an Incentive Stock Option, Nonqualified Stock Option, Stock Appreciation
Right, Restricted Stock or Restricted Stock Unit granted to a Participant
pursuant to the provisions of the Plan, any of which the Administrator may
structure to qualify in whole or in part as a Performance Award.
(c)
“Award
Agreement” means a written agreement or other instrument as may be approved from
time to time by the Administrator implementing the grant of each Award. An
Agreement may be in the form of an agreement to be executed by both the
Participant and the Company (or an authorized representative of the Company)
or
certificates, notices or similar instruments as approved by the
Administrator.
(d)
“Board”
means the board of directors of the Company.
(e)
“Cause”
means the commission of an act of fraud or theft against the Company; conviction
(including a guilty plea or plea of nolo contendere) for any felony; conviction
(including a guilty plea or plea of nolo contendere) for any misdemeanor
involving moral turpitude which might, in the Company’s opinion, cause
embarrassment to the Company; significant violation of any material Company
policy; willful or repeated nonperformance or substandard performance of
material duties which is not cured within thirty (30) days after written notice
thereof to the Optionee; or violation of any material state or federal laws,
rules or regulations in connection with or during performance of the Optionee’s
work which, if such violation is curable, is not cured within thirty (30) days
after notice thereof to the Optionee.
(f)
“Code”
means the Internal Revenue Code of 1986, as amended from time to time, and
the
rulings and regulations issues thereunder.
(g)
“Company”
means ClearOne Communications, Inc., a Utah corporation.
(h)
“Incentive
Bonus” means a bonus opportunity awarded under Section 9 pursuant to which a
Participant may become entitled to receive an amount based on satisfaction
of
such performance criteria as are specified in the Award Agreement.
(i)
“Incentive
Stock Option” means a stock option that is intended to qualify as an “incentive
stock option” within the meaning of Section 422 of the Code.
(j)
“Nonemployee
Director” means each person who is, or is elected to be, a member of the Board
and who is not an employee of the Company or any Subsidiary.
(k)
“Nonqualified
Stock Option” means a stock option that is not intended to qualify as an
“incentive stock option” within the meaning of Section 422 of the
Code.
(l)
“Option”
means an Incentive Stock Option and/or a Nonqualified Stock Option granted
pursuant to Section 6 of the Plan.
(m)
“Participant”
means any individual described in Section 3 to whom Awards have been granted
from time to time by the Administrator and any authorized transferee of such
individual.
(n)
“Performance
Award” means an Award, the grant, issuance, retention, vesting or settlement of
which is subject to satisfaction of one or more performance criteria pursuant
to
Section 12.
(o)
“Plan”
means the ClearOne Communications, Inc. 2007 Equity Incentive Plan as set forth
herein and as amended from time to time.
(p)
“Qualifying
Performance Criteria” has the meaning set forth in Section 13(b).
(q)
“Restricted
Stock” means Shares granted pursuant to Section 8 of the Plan.
(r)
“Restricted
Stock Unit” means an Award granted to a Participant pursuant to Section 8
pursuant to which Shares or cash in lieu thereof may be issued in the
future.
(s)
“Retirement”
has the meaning specified by the Administrator in the terms of an Award
Agreement or, in the absence of any such term, for Participants other than
Nonemployee Directors shall mean retirement from active employment with the
Company and its Subsidiaries (i) at or after age [55] and with the approval
of
the Administrator or (ii) at or after age [65]. The determination of the
Administrator as to an individual’s Retirement shall be conclusive on all
parties.
(t)
“Share”
means a share of the Company’s common stock, par value $.001, subject to
adjustment as provided in Section 11.
(u)
“Stock
Appreciation Right” means a right granted pursuant to Section 7 of the Plan that
entitles the Participant to receive, in cash or Shares or a combination thereof,
as determined by the Administrator, value equal to or otherwise based on the
excess of (i) the market price of a specified number of Shares at the time
of
exercise over (ii) the exercise price of the right, as established by the
Administrator on the date of grant.
(v)
“Subsidiary”
means any corporation (other than the Company) in an unbroken chain of
corporations beginning with the Company where each of the corporations in the
unbroken chain other than the last corporation owns stock possessing at least
50
percent or more of the total combined voting power of all classes of stock
in
one of the other corporations in the chain, and if specifically determined
by
the Administrator in the context other than with respect to Incentive Stock
Options, may include an entity in which the Company has a significant ownership
interest or that is directly or indirectly controlled by the
Company.
(w)
“Termination
of employment” means ceasing to serve as a full-time employee of the Company and
its Subsidiaries or, with respect to a service provider, ceasing to serve as
such for the Company, except that with respect to all or any Awards held by
a
Participant (i) the Administrator may determine, subject to Section 6(d), that
an approved leave of absence or approved employment on a less than full-time
basis is not considered a “termination of employment,” (ii) the Administrator
may determine that a transition of employment to service with a partnership,
joint venture or corporation not meeting the requirements of a Subsidiary in
which the Company or a Subsidiary is a party is not considered a “termination of
employment,” (iii) service as a member of the Board shall constitute continued
employment with respect to Awards granted to a Participant while he or she
served as an employee and (iv) service as an employee of the Company or a
Subsidiary shall constitute continued employment with respect to Awards granted
to a Participant while he or she served as a member of the Board. The
Administrator shall determine whether any corporate transaction, such as a
sale
or spin-off of a division or subsidiary that employs a Participant, shall be
deemed to result in a termination of employment with the Company and its
Subsidiaries for purposes of any affected Participant’s Options, and the
Administrator’s decision shall be final and binding.
(x)
“Total
and Permanent Disablement” has the meaning specified by the Administrator in the
terms of an Award Agreement or, in the absence of any such term or in the case
of an Option intending to qualify as an Incentive Stock Option, the inability
to
engage in any substantial gainful activity by reason of any medically
determinable physical or mental impairment which can be expected to result
in
death or which has lasted or can be expected to last for a continuous period
of
not less than 12 months. The determination of the Administrator as to an
individual’s Total and Permanent Disablement shall be conclusive on all
parties.
3.
Eligibility
Any
person who is a current or prospective officer or employee (including any
director who is also an employee, in his or her capacity as such) of the Company
or of any Subsidiary shall be eligible for selection by the Administrator for
the grant of Awards hereunder. To the extent provided by Section 5(d), any
Nonemployee Director shall be eligible for the grant of Awards hereunder as
determined by the Administrator. In addition any service provider who has been
retained to provide consulting, advisory or other services to the Company or
to
any Subsidiary shall be eligible for selection by the Administrator for the
grant of Awards hereunder. Options intending to qualify as Incentive Stock
Options may only be granted to employees of the Company or any Subsidiary within
the meaning of the Code, as selected by the Administrator. For purposes of
this
Plan, the Chairman of the Board’s status as an employee shall be determined by
the Administrator.
4.
Effective
Date and Termination of Plan
This
Plan
became effective on November 20, 2007 (the “Effective Date”), the date on which
the Plan was approved by the Company’s shareholders and adopted by the Board of
Directors. All Awards granted under this Plan are subject to, and may not be
exercised before, the approval of this Plan by the shareholders prior to the
first anniversary date of the effective date of the Plan, by the affirmative
vote of the holders of a majority of the outstanding Shares of the Company
present, or represented by proxy, and entitled to vote, at a meeting of the
Company’s shareholders or by written consent in accordance with the laws of the
State of Utah; provided that if such approval by the shareholders of the Company
is not forthcoming, all Awards previously granted under this Plan shall be
void.
The Plan shall remain available for the grant of Awards until the tenth (10th)
anniversary of the Effective Date. Notwithstanding the foregoing, the Plan
may
be terminated at such earlier time as the Board may determine. Termination
of
the Plan will not affect the rights and obligations of the Participants and
the
Company arising under Awards theretofore granted and then in
effect.
5.
Shares
Subject to the Plan and to Awards
(a)
Aggregate
Limits.
The aggregate number of Shares issuable pursuant to all Awards
under this Plan shall not exceed 1,000,000; provided that any Shares granted
after the Effective Date under Options or Stock Appreciation Rights shall be
counted against this limit on a one-for-one basis and any Shares granted as
Awards other than Options or Stock Appreciation Rights shall be counted against
this limit as two (2) Shares for every one (1) Share subject to such Award.
The
aggregate number of Shares available for grant under this Plan and the number
of
Shares subject to outstanding Awards shall be subject to adjustment as provided
in Section 12. The Shares issued pursuant to Awards granted under this Plan
may
be shares that are authorized and unissued or shares that were reacquired by
the
Company, including shares purchased in the open market.
(b)
Issuance
of Shares.
For purposes of Section 5(a), the aggregate number of Shares
issued under this Plan at any time shall equal only the number of Shares
actually issued upon exercise or settlement of an Award under this Plan.
Notwithstanding the foregoing, Shares subject to an Award under this Plan may
not again be made available for issuance under this Plan
if
such
shares are: (i) shares that were subject to a stock-settled Stock Appreciation
Right and were not issued upon the net settlement or net exercise of such Stock
Appreciation Right,
(ii)
shares used to pay the exercise price of an Option, (iii) shares delivered
to or
withheld by the Company to pay the withholding taxes related to an Option or
a
Stock Appreciation Right, or (iv) shares repurchased on the open market with
the
proceeds of an Option exercise. Shares subject to Awards that have been
canceled, expired, forfeited or otherwise not issued under an Award and shares
subject to Awards settled in cash shall not count as shares issued under this
Plan.
6.
Options
(a)
Option
Awards.
Options may be granted at any time and from time to time prior to
the termination of the Plan to Participants as determined by the Administrator.
No Participant shall have any rights as a shareholder with respect to any Shares
subject to Option hereunder until said Shares have been issued, except that
the
Administrator may authorize dividend equivalent accruals with respect to such
Shares. Each Option shall be evidenced by an Award Agreement. Options granted
pursuant to the Plan need not be identical but each Option must contain and
be
subject to the terms and conditions set forth below.
(b)
Price.
The Administrator will establish the exercise price per Share under each
Option, which, in no event will be less than the fair market value of the Shares
on the date of grant; provided, however, that the exercise price per Share
with
respect to an Option that is granted in connection with a merger or other
acquisition as a substitute or replacement award for options held by optionees
of the acquired entity may be less than 100% of the market price of the Shares
on the date such Option is granted if such exercise price is based on a formula
set forth in the terms of the options held by such optionees or in the terms
of
the agreement providing for such merger or other acquisition. The exercise
price
of any Option may be paid in Shares, cash or a combination thereof, as
determined by the Administrator, including an irrevocable commitment by a broker
to pay over such amount from a sale of the Shares issuable under an Option,
the
delivery of previously owned Shares and withholding of Shares deliverable upon
exercise.
(c)
No
Repricing.
Other than in connection with a change in the Company’s
capitalization (as described in Section 12) the exercise price of an Option
may
not be reduced without shareholder approval (including canceling previously
awarded Options and regranting them with a lower exercise price).
(d)
Provisions
Applicable to Options.
The date on which Options become exercisable shall
be determined at the sole discretion of the Administrator and set forth in
an
Award Agreement. Unless provided otherwise in the applicable Award Agreement,
to
the extent that the Administrator determines that an approved leave of absence
or employment on a less than full-time basis is not a termination of employment,
the vesting period and/or exercisability of an Option shall be adjusted by
the
Administrator during or to reflect the effects of any period during which the
Participant is on an approved leave of absence or is employed on a less than
full-time basis.
(e)
Term
of Options and Termination of Employment.
The Administrator shall establish
the term of each Option, which in no case shall exceed a period of ten (10)
years from the date of grant. Unless an Option earlier expires upon the
expiration date established pursuant to the foregoing sentence, upon the
termination of the Participant’s employment, his or her rights to exercise an
Option then held shall be only as follows, unless the Administrator specifies
otherwise:
(1)
Death.
Upon the
death of a Participant while in the employ of the Company or any Subsidiary
or
while serving as a member of the Board, the Participant’s Options then held
shall be exercisable by his or her estate, heir or beneficiary at any time
during the one (1) year period commencing on the date of death to the extent
that the Options are exercisable as of that date. Any and all of the deceased
Participant’s Options that are not exercised during the one (1) year commencing
on the date of death shall terminate as of the end of such one (1) year period.
To the extent that any Option is not exercisable as of the date of death, such
portion of the Option shall remain unexercisable and shall terminate as of
such
date.
If
a
Participant should die within thirty (30) days of his or her termination of
employment with the Company and its Subsidiaries, an Option shall be exercisable
by his or her estate, heir or beneficiary at any time during the one (1) year
period commencing on the date of termination, but only to the extent of the
number of Shares as to which such Option was exercisable as of the date of
such
termination. Any and all of the deceased Participant’s Options that are not
exercised during the one (1) year period commencing on the date of termination
shall terminate as of the end of such one (1) year period. A Participant’s
estate shall mean his or her legal representative or other person who so
acquires the right to exercise the Option by bequest or inheritance or by reason
of the death of the Participant.
(2)
Total
and Permanent Disablement.
Upon termination of employment as a result of
the Total and Permanent Disablement of any Participant, the Participant’s
Options then held shall be exercisable during the one (1) year period commencing
on the date of termination to the extent that the Options are exercisable as
of
that date. Any and all Options that are not exercised during the one (1) year
period commencing on the date of termination shall terminate as of the end
of
such one (1) year period. To the extent that any Option is not exercisable
as of
the date of termination, such portion of the Option shall remain unexercisable
and shall terminate as of such date.
(3)
Retirement.
Upon Retirement of a Participant, the Participant’s Options then held shall
be exercisable during the one (1) year period commencing on the date of
Retirement. The number of Shares with respect to which the Options shall be
exercisable shall equal the total number of Shares that were exercisable under
the Participant’s Option on the date of his or her Retirement. Any and all
Options that are not exercised during the one (1) year period commencing on
the
date of termination shall terminate as of the end of such one (1) year period.
To the extent that any Option is not exercisable as of his or her Retirement,
such portion of the Option shall remain unexercisable and shall terminate as
of
such date.
(4)
Cause.
Upon the date of a termination of a Participant’s employment for Cause, any
Option that is unexercised prior to the date of termination shall terminate
as
of such date.
(5)
Other
Reasons.
Upon the date of a termination of a Participant’s employment for
any reason other than those stated above in Sections 6(e)(1), (e)(2), (e)(3)
and
(e)(4) or as described in Section 15, (A) to the extent that any Option is
not
exercisable as of such termination date, such portion of the Option shall remain
unexercisable and shall terminate as of such date, and (B) to the extent that
any Option is exercisable as of such termination date, such portion of the
Option shall expire on the earlier of (i) ninety (90) days following such date
and (ii) the expiration date of such Option.
(f)
Incentive
Stock Options.
Notwithstanding anything to the contrary in this Section 6,
in the case of the grant of an Option intending to qualify as an Incentive
Stock
Option: (i) if the Participant owns stock possessing more than 10 percent of
the
combined voting power of all classes of stock of the Company (a “10%
Shareholder”), the exercise price of such Option must be at least 110 percent of
the fair market value of the Shares on the date of grant and the Option must
expire within a period of not more than five (5) years from the date of grant,
and (ii) termination of employment will occur when the person to whom an Award
was granted ceases to be an employee (as determined in accordance with Section
3401(c) of the Code and the regulations promulgated thereunder) of the Company
and its Subsidiaries. Notwithstanding anything in this Section 6 to the
contrary, options designated as Incentive Stock Options shall not be eligible
for treatment under the Code as Incentive Stock Options (and will be deemed
to
be Nonqualified Stock Options) to the extent that either (a) the aggregate
fair
market value of Shares (determined as of the time of grant) with respect to
which such Options are exercisable for the first time by the Participant during
any calendar year (under all plans of the Company and any Subsidiary) exceeds
$100,000, taking Options into account in the order in which they were granted,
or (b) such Options otherwise remain exercisable but are not exercised within
three (3) months of Termination of employment (or such other period of time
provided in Section 422 of the Code).
7.
Stock
Appreciation Rights
Stock
Appreciation Rights may be granted to Participants from time to time either
in
tandem with or as a component of other Awards granted under the Plan (“tandem
SARs”) or not in conjunction with other Awards (“freestanding SARs”) and may,
but need not, relate to a specific Option granted under Section 6. The
provisions of Stock Appreciation Rights need not be the same with respect to
each grant or each recipient. Any Stock Appreciation Right granted in tandem
with an Award may be granted at the same time such Award is granted or at any
time thereafter before exercise or expiration of such Award. All freestanding
SARs shall be granted subject to the same terms and conditions applicable to
Options as set forth in Section 6 and all tandem SARs shall have the same
exercise price, vesting, exercisability, forfeiture and termination provisions
as the Award to which they relate. Subject to the provisions of Section 6 and
the immediately preceding sentence, the Administrator may impose such other
conditions or restrictions on any Stock Appreciation Right as it shall deem
appropriate. Stock Appreciation Rights may be settled in Shares, cash or a
combination thereof, as determined by the Administrator and set forth in the
applicable Award Agreement. Other than in connection with a change in the
Company’s capitalization (as described in Section 12) the exercise price of
Stock Appreciation Rights may not be reduced without shareholder approval
(including canceling previously awarded Stock Appreciation Rights and regranting
them with a lower exercise price).
8.
Restricted
Stock and Restricted Stock Units
(a)
Restricted
Stock and Restricted Stock Unit Awards.
Restricted Stock and Restricted
Stock Units may be granted at any time and from time to time prior to the
termination of the Plan to Participants as determined by the Administrator.
Restricted Stock is an award or issuance of Shares the grant, issuance,
retention, vesting and/or transferability of which is subject during specified
periods of time to such conditions (including continued employment or
performance conditions) and terms as the Administrator deems appropriate.
Restricted Stock Units are Awards denominated in units of Shares under which
the
issuance of Shares is subject to such conditions (including continued employment
or performance conditions) and terms as the Administrator deems appropriate.
Each grant of Restricted Stock and Restricted Stock Units shall be evidenced
by
an Award Agreement. Unless determined otherwise by the Administrator, each
Restricted Stock Unit will be equal to one Share and will entitle a Participant
to either the issuance of Shares or payment of an amount of cash determined
with
reference to the value of Shares. To the extent determined by the Administrator,
Restricted Stock and Restricted Stock Units may be satisfied or settled in
Shares, cash or a combination thereof. Restricted Stock and Restricted Stock
Units granted pursuant to the Plan need not be identical but each grant of
Restricted Stock and Restricted Stock Units must contain and be subject to
the
terms and conditions set forth below.
(b)
Contents
of Agreement.
Each Award Agreement shall contain provisions regarding (i)
the number of Shares or Restricted Stock Units subject to such Award or a
formula for determining such number, (ii) the purchase price of the Shares,
if
any, and the means of payment, (iii) the performance criteria, if any, and
level
of achievement versus these criteria that shall determine the number of Shares
or Restricted Stock Units granted, issued, retainable and/or vested, (iv) such
terms and conditions on the grant, issuance, vesting and/or forfeiture of the
Shares or Restricted Stock Units as may be determined from time to time by
the
Administrator, (v) the term of the performance period, if any, as to which
performance will be measured for determining the number of such Shares or
Restricted Stock Units, and (vi) restrictions on the transferability of the
Shares or Restricted Stock Units. Shares issued under a Restricted Stock Award
may be issued in the name of the Participant and held by the Participant or
held
by the Company, in each case as the Administrator may provide.
(c)
Vesting
and Performance Criteria.
The grant, issuance, retention, vesting and/or
settlement of shares of Restricted Stock and Restricted Stock Units will occur
when and in such installments as the Administrator determines or under criteria
the Administrator establishes, which may include Qualifying Performance
Criteria. The grant, issuance, retention, vesting and/or settlement of Shares
under any such Award that is based on performance criteria and level of
achievement versus such criteria will be subject to a performance period of
not
less than six months, except that the Administrator may provide for the
satisfaction and/or lapse of all conditions under any such Award in the event
of
the Participant’s death, disability, retirement or in connection with a change
of control, and the Administrator may provide that any such restriction or
limitation will not apply in the case of a Restricted Stock or Restricted Stock
Unit Award that is issued in payment or settlement of compensation that has
been
earned by the Participant. Notwithstanding anything in this Plan to the
contrary, the performance criteria for any Restricted Stock or Restricted Stock
Unit that is intended to satisfy the requirements for “performance-based
compensation” under Section 162(m) of the Code will be a measure based on one or
more Qualifying Performance Criteria selected by the Administrator and specified
when the Award is granted.
(d)
Discretionary
Adjustments and Limits.
Subject to the limits imposed under Section 162(m)
of the Code for Awards that are intended to qualify as “performance based
compensation,” notwithstanding the satisfaction of any performance goals, the
number of Shares granted, issued, retainable and/or vested under an Award of
Restricted Stock or Restricted Stock Units on account of either financial
performance or personal performance evaluations may, to the extent specified
in
the Award Agreement, be reduced by the Administrator on the basis of such
further considerations as the Administrator shall determine.
(e)
Voting
Rights.
Unless otherwise determined by the Administrator, Participants
holding shares of Restricted Stock granted hereunder may exercise full voting
rights with respect to those shares during the period of restriction.
Participants shall have no voting rights with respect to Shares underlying
Restricted Stock Units unless and until such Shares are reflected as issued
and
outstanding shares on the Company’s stock ledger.
(f)
Dividends
and Distributions.
Participants in whose name Restricted Stock is granted
shall be entitled to receive all dividends and other distributions paid with
respect to those Shares, unless determined otherwise by the Administrator.
The
Administrator will determine whether any such dividends or distributions will
be
automatically reinvested in additional shares of Restricted Stock and subject
to
the same restrictions on transferability as the Restricted Stock with respect
to
which they were distributed or whether such dividends or distributions will
be
paid in cash. Shares underlying Restricted Stock Units shall be entitled to
dividends or dividend equivalents only to the extent provided by the
Administrator.
9. Deferral
of Gains
The
Administrator may, in an Award Agreement or otherwise, provide for the deferred
delivery of Shares upon settlement, vesting or other events with respect to
Restricted Stock or Restricted Stock Units, or in payment or satisfaction of
an
Incentive Bonus. Notwithstanding anything herein to the contrary, in no event
will any deferral of the delivery of Shares or any other payment with respect
to
any Award be allowed if the Administrator determines, in its sole discretion,
that the deferral would result in the imposition of the additional tax under
Section 409A(a)(1)(B) of the Code.
10.
Conditions
and Restrictions Upon Securities Subject to Awards
The
Administrator may provide that the Shares issued upon exercise of an Option
or
Stock Appreciation Right or otherwise subject to or issued under an Award shall
be subject to such further agreements, restrictions, conditions or limitations
as the Administrator in its discretion may specify prior to the exercise of
such
Option or Stock Appreciation Right or the grant, vesting or settlement of such
Award, including without limitation, conditions on vesting or transferability,
forfeiture or repurchase provisions and method of payment for the Shares issued
upon exercise, vesting or settlement of such Award (including the actual or
constructive surrender of Shares already owned by the Participant) or payment
of
taxes arising in connection with an Award. Without limiting the foregoing,
such
restrictions may address the timing and manner of any resales by the Participant
or other subsequent transfers by the Participant of any Shares issued under
an
Award, including without limitation (i) restrictions under an insider trading
policy or pursuant to applicable law, (ii) restrictions designed to delay and/or
coordinate the timing and manner of sales by Participant and holders of other
Company equity compensation arrangements, (iii) restrictions as to the use
of a
specified brokerage firm for such resales or other transfers, and (iv)
provisions requiring Shares to be sold on the open market or to the Company
in
order to satisfy tax withholding or other obligations.
11.
Adjustment
of and Changes in the Stock
The
number and kind of Shares available for issuance under this Plan (including
under any Awards then outstanding), and the number and kind of Shares subject
to
the individual limits set forth in Section 5 of this Plan, shall be adjusted
by
the Administrator as it determines appropriate to reflect any reorganization,
reclassification, combination of shares, stock split, reverse stock split,
spin-off, dividend or distribution of securities, property or cash (other than
regular, quarterly cash dividends), or any other event or transaction that
affects the number or kind of Shares of the Company outstanding. Such adjustment
may be designed to comply with Section 425 of the Code or, except as otherwise
expressly provided in Section 5(c) of this Plan, may be designed to treat the
Shares available under the Plan and subject to Awards as if they were all
outstanding on the record date for such event or transaction or to increase
the
number of such Shares to reflect a deemed reinvestment in Shares of the amount
distributed to the Company’s security holders. The terms of any outstanding
Award may also be adjusted by the Administrator as to price, number or kind
of
Shares subject to such Award, vesting, and other terms to reflect the foregoing
events, which adjustments need not be uniform as between different Awards or
different types of Awards.
In
the
event there shall be any other change in the number or kind of outstanding
Shares, or any stock or other securities into which such Shares shall have
been
changed, or for which it shall have been exchanged, by reason of a change of
control, other merger, consolidation or otherwise, then the Administrator shall,
in its sole discretion, determine the appropriate adjustment, if any, to be
effected. In addition, in the event a change in control or of such other change
described in this paragraph, the Administrator may accelerate the time or times
at which any Award may be exercised and may provide for cancellation of such
accelerated Awards that are not exercised within a time prescribed by the
Administrator in its sole discretion.
No
right
to purchase fractional shares shall result from any adjustment in Awards
pursuant to this Section 12. In case of any such adjustment, the Shares subject
to the Award shall be rounded down to the nearest whole share. The Company
shall
notify Participants holding Awards subject to any adjustments pursuant to this
Section 12 of such adjustment, but (whether or not notice is given) such
adjustment shall be effective and binding for all purposes of the
Plan.
12.
Qualifying
Performance-Based Compensation
(a)
General.
The Administrator may establish performance criteria and level of
achievement versus such criteria that shall determine the number of Shares
or
units to be granted, retained, vested, issued or issuable pursuant to an Award,
which criteria may be based on Qualifying Performance Criteria or other
standards of financial performance and/or personal performance evaluations.
A
Performance Award may be identified as “Performance Share”, “Performance
Equity”, “Performance Unit” or other such term as chosen by the Administrator.
In addition, the Administrator may specify that an Award or a portion of an
Award is intended to satisfy the requirements for “performance-based
compensation” under Section 162(m) of the Code, provided that the performance
criteria for such Award or portion of an Award that is intended by the
Administrator to satisfy the requirements for “performance-based compensation”
under Section 162(m) of the Code shall be a measure based on one or more
Qualifying Performance Criteria selected by the Administrator and specified
at
the time the Award is granted. The Administrator shall certify the extent to
which any Qualifying Performance Criteria has been satisfied, and the amount
payable as a result thereof, prior to payment, settlement or vesting of any
Award that is intended to satisfy the requirements for “performance-based
compensation” under Section 162(m) of the Code. Notwithstanding satisfaction of
any performance goals, the number of Shares issued under or the amount paid
under an award may, to the extent specified in the Award Agreement, be reduced
by the Administrator on the basis of such further considerations as the
Administrator in its sole discretion shall determine.
(b)
Qualifying
Performance Criteria.
For purposes of this Plan, the term “Qualifying
Performance Criteria” shall mean any one or more of the following performance
criteria, either individually, alternatively or in any combination, applied
to
either the Company as a whole or to a business unit or Subsidiary, either
individually, alternatively or in any combination, and measured either annually
or cumulatively over a period of years, on an absolute basis or relative to
a
preestablished target, to previous years’ results or to a designated comparison
group, in each case as specified by the Administrator: (i) cash flow (before
or
after dividends), (ii) earning or earnings per share (including earnings before
interest, taxes, depreciation and amortization), (iii) stock price, (iv) return
on equity, (v) total shareholder return, (vi) return on capital or investment
(including return on total capital, return on invested capital, or return on
investment), (vii) return on assets or net assets, (viii) market capitalization,
(ix) economic value added, (x) debt leverage (debt to capital), (xi) revenue,
(xii) income or net income, (xiii) operating income, (xiv) operating profit
or
net operating profit, (xv) operating margin or profit margin, (xvi) return
on
operating revenue, (xvii) cash from operations, (xviii) operating ratio, (xix)
operating revenue, (xx) NSR and/or Total backlog, (xxi) days sales outstanding,
or (xxii) customer service. To the extent consistent with Section 162(m) of
the
Code, the Administrator (A) shall appropriately adjust any evaluation of
performance under Qualifying Performance Criteria to eliminate the effects
of
charges for restructurings, discontinued operations, extraordinary items and
all
items of gain, loss or expense determined to be extraordinary or unusual in
nature or related to the acquisition or disposal of a segment of a business
or
related to a change in accounting principle all as determined in accordance
with
standards established by opinion No. 30 of the Accounting Principles Board
(APA
Opinion No. 30) or other applicable or successor accounting provisions, as
well
as the cumulative effect of accounting changes, in each case as determined
in
accordance with generally accepted accounting principles or identified in the
Company’s financial statements or notes to the financial statements, and (B) may
appropriately adjust any evaluation of performance under Qualifying Performance
Criteria to exclude any of the following events that occur during a performance
period: (i) asset write-downs, (ii) litigation, claims, judgments or
settlements, (iii) the effect of changes in tax law or other such laws or
provisions affecting reported results, (iv) accruals for reorganization and
restructuring programs and (v) accruals of any amounts for payment under this
Plan or any other compensation arrangement maintained by the
Company.
13. Transferability
Each
Award may not be sold, transferred, pledged, assigned, or otherwise alienated
or
hypothecated by a Participant other than by will or the laws of descent and
distribution, and each Option or Stock Appreciation Right shall be exercisable
only by the Participant during his or her lifetime. Notwithstanding the
foregoing, to the extent permitted by the Administrator, the person to whom
an
Award is initially granted (the “Grantee”) may transfer an Award to any “family
member” of the Grantee (as such term is defined in Section 1 (a)(5) of the
General Instructions to Form S-8 under the Securities Act of 1933, as amended
(“Form S-8”)), to trusts solely for the benefit of such family members and to
partnerships in which such family members and/or trusts are the only partners;
provided that, (i) as a condition thereof, the transferor and the transferee
must execute a written agreement containing such terms as specified by the
Administrator, and (ii) the transfer is pursuant to a gift or a domestic
relations order to the extent permitted under the General Instructions to Form
S-8. Except to the extent specified otherwise in the agreement the Administrator
provides for the Grantee and transferee to execute, all vesting, exercisability
and forfeiture provisions that are conditioned on the Grantee’s continued
employment or service shall continue to be determined with reference to the
Grantee’s employment or service (and not to the status of the transferee) after
any transfer of an Award pursuant to this Section 14, and the
responsibility
to pay any taxes in connection with an Award shall remain with the Grantee
notwithstanding any transfer other than by will or intestate
succession.
14. Suspension
or Termination of Awards
Except
as
otherwise provided by the Administrator, if at any time (including after a
notice of exercise has been delivered or an award has vested) the Chief
Executive Officer or any other person designated by the Administrator (each
such
person, an “Authorized Officer”) reasonably believes that a Participant may have
committed an Act of Misconduct as described in this Section 15, the Authorized
Officer, Administrator or the Board may suspend the Participant’s rights to
exercise any Option, to vest in an Award, and/or to receive payment for or
receive Shares in settlement of an Award pending a determination of whether
an
Act of Misconduct has been committed.
If
the
Administrator or an Authorized Officer determines a Participant has committed
an
act of embezzlement, fraud, dishonesty, nonpayment of any obligation owed to
the
Company or any Subsidiary, breach of fiduciary duty, violation of Company ethics
policy or code of conduct, or deliberate disregard of the Company or Subsidiary
rules resulting in loss, damage or injury to the Company or any Subsidiary,
or
if a Participant makes an unauthorized disclosure of any Company or Subsidiary
trade secret or confidential information, solicits any employee or service
provider to leave the employ or cease providing services to the Company or
any
Subsidiary, breaches any intellectual property or assignment of inventions
covenant, engages in any conduct constituting unfair competition, breaches
any
non-competition agreement, induces any Company or Subsidiary customer to breach
a contract with the Company or any Subsidiary or to cease doing business with
the Company or any Subsidiary, or induces any principal for whom the Company
or
any Subsidiary acts as agent to terminate such agency relationship (any of
the
foregoing acts, an “Act of Misconduct”), then except as otherwise provided by
the Administrator, (i) neither the Participant nor his or her estate nor
transferee shall be entitled to exercise any Option or Stock Appreciation Right
whatsoever, vest in or have the restrictions on an Award lapse, or otherwise
receive payment of an Award, (ii) the Participant will forfeit all outstanding
Awards and (iii) the Participant may be required, at the Administrator’s sole
discretion, to return and/or repay to the Company any then unvested Shares
previously issued under the Plan. In making such determination, the
Administrator or an Authorized Officer shall give the Participant an opportunity
to appear and present evidence on his or her behalf at a hearing before the
Administrator or its designee or an opportunity to submit written comments,
documents, information and arguments to be considered by the Administrator.
Any
dispute by a Participant or other person as to the determination of the
Administrator shall be resolved pursuant to Section 23 of the Plan.
15.
Compliance
with Laws and Regulations
This
Plan, the grant, issuance, vesting, exercise and settlement of Awards
thereunder, and the obligation of the Company to sell, issue or deliver Shares
under such Awards, shall be subject to all applicable foreign, federal, state
and local laws, rules and regulations, stock exchange rules and regulations,
and
to such approvals by any governmental or regulatory agency as may be required.
The Company shall not be required to register in a Participant’s name or deliver
any Shares prior to the completion of any registration or qualification of
such
shares under any foreign, federal, state or local law or any ruling or
regulation of any government body which the Administrator shall determine to
be
necessary or advisable. To the extent the Company is unable to or the
Administrator deems it infeasible to obtain authority from any regulatory body
having jurisdiction, which authority is deemed by the Company’s counsel to be
necessary to the lawful issuance and sale of any Shares hereunder, the Company
and its Subsidiaries shall be relieved of any liability with respect to the
failure to issue or sell such Shares as to which such requisite authority shall
not have been obtained. No Option shall be exercisable and no Shares shall
be
issued and/or transferable under any other Award unless a registration statement
with respect to the Shares underlying such Option is effective and current
or
the Company has determined that such registration is unnecessary.
In
the
event an Award is granted to or held by a Participant who is employed or
providing services outside the United States, the Administrator may, in its
sole
discretion, modify the provisions of the Plan or of such Award as they pertain
to such individual to comply with applicable foreign law or to recognize
differences in local law, currency or tax policy. The Administrator may also
impose conditions on the grant, issuance, exercise, vesting, settlement or
retention of Awards in order to comply with such foreign law and/or to minimize
the Company’s obligations with respect to tax equalization for Participants
employed outside their home country.
16. Withholding
To
the
extent required by applicable federal, state, local or foreign law, a
Participant shall be required to satisfy, in a manner satisfactory to the
Company, any withholding tax obligations that arise by reason of an Option
exercise, disposition of Shares issued under an Incentive Stock Option, the
vesting of or settlement of an Award, an election pursuant to Section 83(b)
of
the Code or otherwise with respect to an Award. The Company and its Subsidiaries
shall not be required to issue Shares, make any payment or to recognize the
transfer or disposition of Shares until such obligations are satisfied. The
Administrator may provide for or permit the minimum statutory withholding
obligations to be satisfied through the mandatory or elective sale of Shares
and/or by having the Company withhold a portion of the Shares that otherwise
would be issued to him or her upon exercise of the Option or the vesting or
settlement of an Award, or by tendering Shares previously acquired.
17.
Administration
of the Plan
(a)
Administrator
of the Plan.
The Plan shall be administered by the Administrator who shall
be the Compensation Committee of the Board or, in the absence of a Compensation
Committee, a properly constituted Compensation Committee or the Board itself.
Any power of the Administrator may also be exercised by the Board, except to
the
extent that the grant or exercise of such authority would cause any Award or
transaction to become subject to (or lose an exemption under) the short-swing
profit recovery provisions of Section 16 of the Securities Exchange Act of
1934
or cause an Award designated as a Performance Award not to qualify for treatment
as performance-based compensation under Section 162(m) of the Code. To the
extent that any permitted action taken by the Board conflicts with action taken
by the Administrator, the Board action shall control. The Compensation Committee
may by resolution authorize one or more officers of the Company to perform
any
or all things that the Administrator is authorized and empowered to do or
perform under the Plan, and for all purposes under this Plan, such officer
or
officers shall be treated as the Administrator; provided, however, that the
resolution so authorizing such officer or officers shall specify the total
number of Awards (if any) such officer or officers may award pursuant to such
delegated authority, and any such Award shall be subject to the form of Option
agreement theretofore approved by the Compensation and Organization Committee.
No such officer shall designate himself or herself as a recipient of any Awards
granted under authority delegated to such officer. In addition, the Compensation
Committee may delegate any or all aspects of the day-to-day administration
of
the Plan to one or more officers or employees of the Company or any Subsidiary,
and/or to one or more agents.
(b)
Powers
of Administrator.
Subject to the express provisions of this Plan, the
Administrator shall be authorized and empowered to do all things that it
determines to be necessary or appropriate in connection with the administration
of this Plan, including, without limitation: (i) to prescribe, amend and rescind
rules and regulations relating to this Plan and to define terms not otherwise
defined herein; (ii) to determine which persons are Participants, to which
of
such Participants, if any, Awards shall be granted hereunder and the timing
of
any such Awards; (iii) to grant Awards to Participants and determine the terms
and conditions thereof, including the number of Shares subject to Awards and
the
exercise or purchase price of such Shares and the circumstances under which
Awards become exercisable or vested or are forfeited or expire, which terms
may
but need not be conditioned upon the passage of time, continued employment,
the
satisfaction of performance criteria, the occurrence of certain events
(including events which constitute a change of control), or other factors;
(iv)
to establish and verify the extent of satisfaction of any performance goals
or
other conditions applicable to the grant, issuance, exercisability, vesting
and/or ability to retain any Award; (v) to prescribe and amend the terms of
the
agreements or other documents evidencing Awards made under this Plan (which
need
not be identical) and the terms of or form of any document or notice required
to
be delivered to the Company by Participants under this Plan; (vi) to determine
whether, and the extent to which, adjustments are required pursuant to Section
12; (vii) to interpret and construe this Plan, any rules and regulations under
this Plan and the terms and conditions of any Award granted hereunder, and
to
make exceptions to any such provisions in good faith and for the benefit of
the
Company; and (viii) to make all other determinations deemed necessary or
advisable for the administration of this Plan.
(c)
Determinations
by the Administrator.
All decisions, determinations and interpretations by
the Administrator regarding the Plan, any rules and regulations under the Plan
and the terms and conditions of or operation of any Award granted hereunder,
shall be final and binding on all Participants, beneficiaries, heirs, assigns
or
other persons holding or claiming rights under the Plan or any Award. The
Administrator shall consider such factors as it deems relevant, in its sole
and
absolute discretion, to making such decisions, determinations and
interpretations including, without limitation, the recommendations or advice
of
any officer or other employee of the Company and such attorneys, consultants
and
accountants as it may select.
(d)
Subsidiary
Awards.
In the case of a grant of an Award to any Participant employed by a
Subsidiary, such grant may, if the Administrator so directs, be implemented
by
the Company issuing any subject Shares to the Subsidiary, for such lawful
consideration as the Administrator may determine, upon the condition or
understanding that the Subsidiary will transfer the Shares to the Participant
in
accordance with the terms of the Award specified by the
Administrator
pursuant to the provisions of the Plan. Notwithstanding any other provision
hereof, such Award may be issued by and in the name of the Subsidiary and shall
be deemed granted on such date as the Administrator shall
determine.
18. Amendment
of the Plan or Awards
The
Board
may amend, alter or discontinue this Plan and the Administrator may amend,
or
alter any agreement or other document evidencing an Award made under this Plan
but, except as provided pursuant to the provisions of Section 12, no such
amendment shall, without the approval of the shareholders of the
Company:
(a) increase
the maximum number of Shares for which Awards may be granted under this
Plan;
(b) reduce
the price at which Options may be granted below the price provided for in
Section 6(a);
(c) reduce
the exercise price of outstanding Options;
(d) extend
the term of this Plan;
(e)
change
the class of persons eligible to be Participants;
(f)
otherwise
amend the Plan in any manner requiring shareholder approval by law or under
the
Nasdaq listing requirements; or
(g)
increase
the individual maximum limits in Sections 5(c) and (d).
No
amendment or alteration to the Plan or an Award or Award Agreement shall be
made
which would impair the rights of the holder of an Award, without such holder’s
consent, provided that no such consent shall be required if the Administrator
determines in its sole discretion and prior to the date of any change of control
that such amendment or alteration either is required or advisable in order
for
the Company, the Plan or the Award to satisfy any law or regulation or to meet
the requirements of or avoid adverse financial accounting consequences under
any
accounting standard.
19. No
Liability of Company
The
Company and any Subsidiary or affiliate which is in existence or hereafter
comes
into existence shall not be liable to a Participant or any other person as
to:
(i) the non-issuance or sale of Shares as to which the Company has been unable
to obtain from any regulatory body having jurisdiction or the authority deemed
by the Company’s counsel to be necessary to the lawful issuance and sale of any
Shares hereunder; and (ii) any tax consequence expected, but not realized,
by
any Participant or other person due to the receipt, exercise or settlement
of
any Award granted hereunder.
20. Non-Exclusivity
of Plan
Neither
the adoption of this Plan by the Board nor the submission of this Plan to the
shareholders of the Company for approval shall be construed as creating any
limitations to the power of the Board or the Administrator to adopt such other
incentive arrangements as either may deem desirable, including without
limitation, the granting of restricted stock or stock options otherwise than
under this Plan or an arrangement not intended to qualify under Code Section
162(m), and such arrangements may be either generally applicable or applicable
only in specific cases.
21.
Governing
Law
This
Plan
and any agreements or other documents hereunder shall be interpreted and
construed in accordance with the laws of the State of Utah and applicable
federal law. Any reference in this Plan or in the agreement or other document
evidencing any Awards to a provision of law or to a rule or regulation shall
be
deemed to include any successor law, rule or regulation of similar effect or
applicability.
22.
No
Right to Employment, Reelection or Continued Service
Nothing
in this Plan or an Award Agreement shall interfere with or limit in any way
the
right of the Company, its Subsidiaries and/or its affiliates to terminate any
Participant’s employment, service on the Board or service for the Company at any
time or for any reason not prohibited by law, nor shall this Plan or an Award
itself confer upon any Participant any right to continue his or her employment
or service for any specified period of time. Neither an Award nor any benefits
arising under this Plan shall constitute an employment contract with the
Company, any Subsidiary and/or its affiliates. Subject to Sections 4 and 19,
this Plan and the benefits hereunder may be terminated at any time in the sole
and exclusive discretion of the Board without giving rise to any liability
on
the part of the Company, its Subsidiaries and/or its affiliates.
23.
Market
Standoff
To
the extent requested by the Company
and any underwriter of securities of the Company in connection with a firm
commitment underwriting, no holder of any Shares received as part of an Award
will sell or otherwise transfer any such Shares not included in such
underwriting, or not previously registered pursuant to a registration statement
filed under the Securities Act of 1933, during the one hundred eighty (180)
day
period following the effective date of the registration statement filed with
the
Securities and Exchange Commission in connection with such offering, which
period may be reduced in the sole discretion of the Company.
24.
Unfunded
Plan
The
Plan
is intended to be an unfunded plan. Participants are and shall at all times
be
general creditors of the Company with respect to their Awards. If the
Administrator or the Company chooses to set aside funds in a trust or otherwise
for the payment of Awards under the Plan, such funds shall at all times be
subject to the claims of the creditors of the Company in the event of its
bankruptcy or insolvency.
14