EXECUTIVE
INCENTIVE COMPENSATION PLAN
SHARPS
COMPLIANCE CORP.
The
Compensation Committee of the Board of Directors (“Committee”) of Sharps
Compliance Corp. (the “Company”) has adopted its Executive Incentive
Compensation Plan effective for the fiscal years ended June 30, 2008 and
2009. The Executive Incentive Compensation Plan (the “Plan”) is designed
to allow eligible executive full-time employees to share in achievements based
on attainment of pre-established Company financial performance as well as
achievement of individual goals. The Plan is designed to motivate and
reward eligible participants whose performance is considered by the Committee
to
be critical and integral to the overall success of the Company.
Eligibility
and Plan Year
Plan
eligibility is determined by the Committee. For the fiscal years ending June
30,
2008 and 2009 participation in the Plan is limited to the Company’s Chief
Executive Officer and Chief Financial Officer. The Committee may, at its
sole discretion, add other Company executives as participants to the
Plan.
Elements
of the Plan
Each
eligible participant has a target bonus, calculated as a specified percentage
of
that executive’s then current annual salary. For the fiscal years ending
June 30, 2008 and 2009 the specified percentage of participant’s annual salary
is 40% for both the Chief Executive Officer and Chief Financial Officer. The
bonus amount will be computed based upon achievement of goals in three
categories: (1) positioning the Company for future growth, (2) the
achievement of fiscal year budgeted earnings and (3) achievement of fiscal
year
budgeted revenues.
Individual
Performance Element (determines 25% of target bonus)
The
computation of this portion of the target bonus will be based upon
accomplishments of the Company and the executive participants designed to
position the Company for future growth. The Committee will review
accomplishments prepared by executive participants and determine achievement
of
the goal in their sole discretion.
Earnings
Performance Element (determines 25% of target bonus)
Achievement
of this element will be based upon the Company meeting the budgeted net earnings
(from ongoing operations) goal for the respective fiscal year.
Revenue
Performance Element (determines 50% of target bonus)
Achievement
of this element will be based upon the Company meeting the budgeted revenue
(from ongoing operations) goal for the respective fiscal year.
In
addition to the above executive participants will recommend to the Committee
a
fiscal year bonus pool for non-executive employees.
Eligibility
and Payments to Participants
The
participant must be an active, full-time employee of the Company on the last
day
of the fiscal year for which the incentive award is earned to be entitled to
the
bonus.
Awards
shall be paid in cash less applicable taxes, within five (5) days of the public
release of the Company’s annual fiscal year end financial results.
The
Plan,
as set forth in this document, represents the general guidelines the Committee
presently intends to utilize to determine executive incentive
compensation. If, however, at the sole discretion of the Committee, the
Company’s best interest is served by applying different guidelines in special or
for unusual circumstances, it reserves the right to do so. The Committee
reserves the right to amend or discontinue this Plan at any time in the best
interests of the Company and its shareholders. Without in anyway limiting
the foregoing rights of the Company, should a material business event,
significant customer contract, acquisition, disposition or change in control
occur during the Plan period, the Committee reserves the right to amend or
supplement the Plan following such event in such manner as the Committee, in
its
sole discretion, deems appropriate.
The
Committee shall have full power and authority to interpret and administer the
Plan and shall be the sole arbiter of all manners of interpretation and
application of the Plan and the Committee’s determination shall be final.
Any inconsistencies that may occur between the Plan provisions and the
calculation of the incentive results will be interpreted and resolved on an
individual basis by the Committee.
SHARPS
COMPLIANCE CORP.
RESTRICTED
STOCK AWARD AGREEMENT
THIS
AGREEMENT is made as of this 9th day of June 2008, by and between Sharps
Compliance Corp., a Delaware corporation (the “Company”), and ______________
(“Director”).
The
Company, pursuant to the Sharps Compliance Corp. 1993 Stock Plan (the “Plan”)
and the Non-Employee Director Compensation Policy, hereby grants the following
stock award to Director, which award shall have the terms and conditions set
forth in this Agreement:
1.
Award
The
Company, effective as of the date of this Agreement, hereby grants to Director
a
restricted stock award of ___________ shares (the “Shares”) of common stock, par
value $.01 per share, of the Company (the “Common Stock”), subject to the terms
and conditions set forth herein.
2.
Vesting
Subject
to the terms and condition of this Agreement, the Shares shall vest as
follows: one-third (1/3) of the Shares shall vest on each of June 9, 2009,
2010 and 2011, if, and only if, Director remains as a member of the Board of
Directors of the Company from the date hereof until each respective vesting
date. Vesting of the Shares shall be accelerated to an earlier date in the
event of a Change in Control of Company (as defined in the attached Exhibit
A),
and provided that Director remains as a member of the Board of Directors of
the
Company until the effective date of such Change in Control, all unvested Shares
granted under this Agreement shall become immediately vested on the effective
date of the Change in Control;
3.
Restriction
on Transfer
Until
the
Shares vest pursuant to Section 2 hereof, none of the Shares may be sold,
assigned, transferred, pledged, hypothecated or otherwise disposed of or
encumbered, and no attempt to transfer the Shares, whether voluntary or
involuntary, by operation of law or otherwise, shall vest the transferee with
any interest or right in or with respect to the Shares.
4.
Forfeiture
If
Director ceases to be a member of the Board of Directors the Company for any
reason prior to the vesting of the Shares pursuant to Section 2 hereof,
Director’s rights to the unvested portion of the Shares shall be immediately and
irrevocably forfeited.
5.
Issuance
and Custody of Certificate
After
any
Shares vest pursuant to Section 2 hereof, the Company shall promptly cause
to be
issued a certificate or certificates evidencing such vested Shares, free of
the
legend or restrictions and shall cause such certificate or certificates to
be
delivered to Director or Director’s legal representatives, beneficiaries or
heirs.
6.
Distributions
and Adjustments
(a)
If all or any portion of the Shares vest subsequent to any change in the number
or character of Shares of Common Stock (through stock dividend,
recapitalization, stock split, reverse stock split, reorganization, merger,
consolidation, split-up, spin-off, combination, repurchase or exchange of Shares
of Common Stock or other securities of the Company, issuance of warrants or
other rights to purchase Shares of Common Stock or other securities of the
Company or other similar corporate transaction or event affecting the Shares
such that an adjustment is determined by the Compensation Committee of the
Board
of Directors (the “Committee”) to be appropriate in order to prevent dilution or
enlargement of the interest represented by the Share, Director shall then
receive upon such vesting the number and type of securities or other
consideration which he would have received if the Shares had vested prior to
the
event changing the number or character of outstanding Shares of Common
Stock.
(b)
Any additional Shares of Common Stock, any other securities of the Company
and
any other property (except for cash dividends) distributed with respect to
the
Shares prior to the date the Shares vest shall be subject to the same
restrictions, terms and conditions as the Shares. Any cash dividends
payable with respect to the Shares shall be distributed to Director at the
same
time cash dividends are distributed to shareholders of the Company
generally.
(c)
Any additional Shares of Common Stock, any securities and any other property
(except for cash dividends) distributed with respect to the Shares prior to
the
date such Shares vest shall be promptly deposited with the Secretary or the
custodian designated by the Secretary to be held in custody in accordance with
Section 5(c) hereof.
7.
Taxes
(a)
In order to provide the Company with the opportunity to claim the benefit of
any
income tax deduction which may be available to it in connection with this
restricted stock award, and in order to comply with all applicable federal
or
state tax laws or regulations, the Company may take such action as it deems
appropriate to insure that, if necessary, all applicable federal or state income
and social security taxes are withheld or collected from Director.
(b)
Should Director elect, in accordance with Section 83(b) of the Internal
Revenue Code of 1986, as amended, to recognize ordinary income in the year
of
acquisition of the Shares, the Company may require at the time of such election
an additional payment for withholding tax purposes based on the fair market
value of such Shares as of the date of the acquisition of such Shares by
Director.
8.
Miscellaneous
(a)
This Agreement is issued pursuant to the Plan and is subject to its terms.
(b)
This
Agreement shall be governed by and construed under the internal laws of the
State of Delaware, without regard for conflicts of laws principles
thereof.
IN
WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed
on
the day and year first above written.
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Sharps
Compliance Corp.
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By:
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David
P. Tusa
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Its:
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Executive
Vice
President and Chief Financial Officer
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DIRECTOR
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Exhibit
A
(i)
For purposes of this Agreement and this Exhibit A, a Change in Control” of the
Company shall mean:
(a)
a change in control of the Company of a nature that would be required to be
reported in response to Item 6(e) of Schedule 14A of Regulation 14A promulgated
under the Securities Exchange Act of 1934, as amended (the “Exchange Act”),
whether or not the Company is then subject to such reporting
requirement;
(b)
the public announcement (which, for purposes of this definition, shall include,
without limitation, a report filed pursuant to Section 13(d) of the Exchange
Act) by the Company or any “person” (as such term is used in Sections 13(d) and
14(d) of the Exchange Act) that such person has become the “beneficial owner”
(as defined in Rule 13d-3 promulgated under the Exchange Act), directly or
indirectly, of securities of the Company representing 30% or more of the
combined voting power of the Company’s then outstanding securities, determined
in accordance with Rule 13d-3, excluding, however, any securities acquired
directly from the Company (other than an acquisition by virtue of the exercise
of a conversion privilege unless the security being so converted was itself
acquired directly from the Company); however, that for purposes of this clause
the term “person” shall not include the Company, any subsidiary of the Company
or any employee benefit plan of the Company or of any subsidiary of the Company
or any entity holding shares of Common Stock organized, appointed or established
for, or pursuant to the terms of, any such plan;
(c)
the Continuing Board of Directors cease to constitute a majority of the
Company’s Board of Directors;
(d)
consummation of a reorganization, merger or consolidation of, or a sale or
other
disposition of all or substantially all of the assets of, the Company (a
“Business Combination”), in each case, unless, following such Business
Combination, (A) all or substantially all of the persons who were the beneficial
owners of the Company’s outstanding voting securities immediately prior to such
Business Combination beneficially own voting securities of the corporation
resulting from such Business Combination having more than 50% of the combined
voting power of the outstanding voting securities of such resulting Corporation
and (B) at least a majority of the members of the Board of Directors of the
corporation resulting from such Business Combination were Continuing Directors
at the time of the action of the Board of Directors of the Company approving
such Business Combination; or
(e)
approval by the shareholders of the Company of a complete liquidation or
dissolution of the Company.
(ii)
“Continuing Director” shall mean any person who is a member of the Board of
Directors of the Company, while such person is a member of the Board of
Directors, who is not an Acquiring Person (as defined below) or an Affiliate
or
Associate (as defined below) of an Acquiring Person, or a representative of
an
Acquiring Person or of any such Affiliate or Associate, and who (x) was a member
of the Board of Directors on the date of this Agreement as first written above
or (y) subsequently becomes a member of the Board of Directors, if
such person’s initial nomination for election or initial election to the
Board of Directors is recommended or approved by a majority of the Continuing
Directors. For purposes of this subparagraph (ii), “Acquiring Person”
shall mean any “person” (as such term is used in Sections 13(d) and 14(d) of the
Exchange Act) who or which, together with all Affiliates and Associates of
such
person, is the “beneficial owner” (as defined in Rule 13d-3 promulgated under
the Exchange Act), directly or indirectly, of securities of the Company
representing 20% or more of the combined voting power of the Company’s then
outstanding securities, but shall not include the Company, any subsidiary of
the
Company or any employee benefit plan of the Company or of any subsidiary of
the
Company or any entity holding shares of Common Stock organized, appointed or
established for, or pursuant to the terms of, any such plan; and “Affiliate” and
“Associate” shall have the respective meanings ascribed to such terms in Rule
12b-2 promulgated under the Exchange Act.