VERTEX
ENERGY, INC.
2009
STOCK INCENTIVE PLAN
ARTICLE
I -- PREAMBLE
1.1 This
2009 Stock Incentive Plan of Vertex Energy, Inc. (the "
Company
")
is intended to secure for the Company and its Affiliates the benefits arising
from ownership of the Company's Common Stock by the Employees, Officers,
Directors and Consultants of the Company and its Affiliates, all of whom are and
will be responsible for the Company's future growth. The Plan is
designed to help attract and retain for the Company and its Affiliates personnel
of superior ability for positions of exceptional responsibility, to reward
Employees, Officers, Directors and Consultants for their services and to
motivate such individuals through added incentives to further contribute to the
success of the Company and its Affiliates. With respect to persons subject to
Section 16 of the Act, transactions under this Plan are intended to satisfy the
requirements of Rule 16b-3 of the Act.
1.2 Awards
under the Plan may be made to an Eligible Person in the form of (i) Incentive
Stock Options (to Eligible Employees only); (ii) Nonqualified Stock Options;
(iii) Restricted Stock; (iv) Stock Awards; (v) Performance Shares; or (vi) any
combination of the foregoing.
1.3 The
Company’s board of directors adopted the Plan on July 14, 2009. The
Plan shall be effective July 14, 2009 (the "
Effective
Date
"), subject to approval by the shareholders of the Company to the
extent necessary to satisfy the requirements of the Code, the Act, or other
applicable federal or state law. Unless sooner terminated as provided
elsewhere in this Plan, this Plan shall terminate upon the close of business on
the day next preceding the tenth (10th) anniversary of the Effective
Date. Award Agreements outstanding on such date shall continue to
have force and effect in accordance with the provisions thereof.
1.4 The
Plan shall be governed by, and construed in accordance with, the laws of the
State of Texas (except its choice-of-law provisions).
1.5 Capitalized
terms shall have the meaning provided in Article II unless otherwise provided in
this Plan or any related Award Agreement.
ARTICLE
II -- DEFINITIONS
DEFINITIONS. Except where
the context otherwise indicates, the following definitions apply:
2.1 "
Act
"
means the Securities Exchange Act of 1934, as now in effect or as hereafter
amended.
2.2 "
Affiliate
"
means any parent corporation or subsidiary corporation of the Company, whether
now or hereinafter existing, as those terms are defined in Sections 424(e) and
(f), respectively, of the Code.
2.3 "
Award
"
means an award granted to a Participant in accordance with the provisions of the
Plan, including, but not limited to, Stock Options, Restricted Stock, Stock
Awards, Performance Shares, or any combination of the foregoing.
2.4 "
Award
Agreement
" means the separate written agreement evidencing each Award
granted to a Participant under the Plan.
2.5 "
Board of
Directors
" or "
Board
"
means the Board of Directors of the Company, as constituted from time to
time.
2.7 "
Change of
Control
" means (i) the adoption of a plan of merger or consolidation of
the Company with any other corporation or association as a result of which the
holders of the voting capital stock of the Company as a group would receive less
than 50% of the voting capital stock of the surviving or resulting corporation;
(ii) the approval by the Board of Directors of an agreement providing for the
sale or transfer (other than as security for obligations of the Company) of
substantially all the assets of the Company; or (iii) in the absence of a prior
expression of approval by the Board of Directors, the acquisition of more than
20% of the Company's voting capital stock by any person within the meaning of
Rule 13d-3 under the Act (other than the Company or a person that directly or
indirectly controls, is controlled by, or is under common control with, the
Company).
2.8 "
Code
"
means the Internal Revenue Code of 1986, as amended, and the regulations and
interpretations promulgated thereunder.
2.9 "
Committee
"
means a committee of two or more members of the Board appointed by the Board in
accordance with Section 3.2 of the Plan.
2.10 "
Common
Stock
" means the Company’s common stock.
2.11 "
Company
"
means Vertex Energy, Inc., a Nevada corporation.
2.12. "
Consultant
"
means any person, including an advisor engaged by the Company or an Affiliate to
render bona fide consulting or advisory services to the Company or an Affiliate,
other than as an Employee, Director or Non-Employee Director.
2.13 "
Director
"
means a member of the Board of Directors of the Company.
2.14 "
Disability
"
means the permanent and total disability of a person within the meaning of
Section 22(e)(3) of the Code.
2.15 "
Effective
Date
" shall be the date set forth in Section 1.3 of the
Plan.
2.16 "
Eligible
Employee
" means an Eligible Person who is an Employee of the Company or
any Affiliate.
2.17 "
Eligible
Person
" means any Employee, Officer, Director, Non-Employee Director or
Consultant of the Company or any Affiliate, except for instances where services
are in connection with the offer or sale of securities in a capital-raising
transaction, or they directly or indirectly promote or maintain a market for the
Company’s securities, subject to any other limitations as may be provided by the
Code, the Act, or the Board. In making such determinations, the Board
may take into account the nature of the services rendered by such person, his or
her present and potential contribution to the Company’s success, and such other
factors as the Board in its discretion shall deem relevant.
2.19 “
Employee
”
means an individual who is a common-law employee of the Company or an Affiliate
including employment as an Officer. Mere service as a Director or
payment of a director's fee by the Company or an Affiliate shall not be
sufficient to constitute "
employment
"
by the Company or an Affiliate.
2.20 "
ERISA
"
means the Employee Retirement Income Security Act of 1974, as now in effect or
as hereafter amended.
2.21 "
Fair
Market Value
" means:
(a) for
purposes of an Incentive Stock Option, if there is a market for the Company’s
stock, on a stock exchange or in an over-the-counter market, or otherwise, the
Fair Market Value shall be the mean between the highest and lowest quoted
selling prices on the valuation date of the Incentive Stock Option, or if there
were no sales of the Company’s Common Stock on the valuation date, the Fair
Market Value shall be the weighted average of the means between the highest and
lowest sales on the nearest date before and the nearest date after the valuation
date. If a valuation pursuant to this paragraph is not available, the
appropriate method described in Section 20.2031-2 of the Treasury Regulations
adopted under the Code shall be used for the Fair Market Value, and
(b) for
all other purposes, the mean between the highest and lowest quoted selling
prices of the Common Stock (if actual sales price information on such trading
day is not available, the mean between the bona fide bid and asked prices on
such trading day shall be used) on the trading day immediately prior to the date
on which a determination is being made pursuant to this Section 2.21 (the “
Mean
Selling Price
”), as reported by the National Association of Securities
Dealers Automated Quotation System (“
NASDAQ
”),
or if the Common Stock is not traded on NASDAQ, the Mean Selling Price in the
over-the-counter market; provided, however, that if the Common Stock is listed
on a stock exchange, the Fair Market Value shall be the Mean Selling Price on
such exchange; and, provided further, that if the Common Stock is not quoted or
listed by any organization, the fair value of the Common Stock, as determined by
the Board, whose determination shall be conclusive, shall be used. In
no event shall the Fair Market Value of any share of Common Stock be less than
its par value.
2.22 "
Grant
Date
" means, as to any Award, the latest of:
(a) the date on which the Board
authorizes the grant of the Award; or
(b) the date the Participant receiving
the Award becomes an Employee or a Director of the Company or its Affiliate, to
the extent employment status is a condition of the grant or a requirement of the
Code or the Act; or
(c) such
other date (later than the dates described in (a) and (b) above) as the Board
may designate and as set forth in the Participant's Award
Agreement.
2.23 "
Immediate
Family
" means any child, stepchild, grandchild, parent, stepparent,
grandparent, spouse, sibling, mother-in-law, father-in-law, son-in-law,
daughter-in-law, brother-in-law or sister-in-law and shall include adoptive
relationships.
2.24 "
Incentive
Stock Option
" means a Stock Option intended to qualify as an incentive
stock option within the meaning of Section 422 of the Code and is granted under
Article IV of the Plan and designated as an Incentive Stock Option in a
Participant's Award Agreement.
2.25 "
Non-Employee
Director
" shall have the meaning set forth in Rule 16b-3 under the
Act.
2.26 "
Nonqualified
Stock Option
" means a Stock Option not intended to qualify as an
Incentive Stock Option and is not so designated in the Participant's Award
Agreement.
2.27 “
Officer
”
means a person who is an officer of the Company within the meaning of Section 16
of the Act.
2.28 "
Option
Period
" means the period during which a Stock Option may be exercised
from time to time, as established by the Board and set forth in the Award
Agreement for each Participant who is granted a Stock Option.
2.29 "
Option
Price
" means the purchase price for a share of Common Stock subject to
purchase pursuant to a Stock Option, as established by the Board and set forth
in the Award Agreement for each Participant who is granted a Stock
Option.
2.30 “
Outside
Director
” means a Director who either (i) is not a current employee of
the Company or an "
affiliated
corporation
" (within the meaning of Treasury Regulations promulgated
under Section 162(m) of the Code), is not a former employee of the Company or an
"
affiliated
corporation
" receiving compensation for prior services (other than
benefits under a tax qualified pension plan), was not an officer of the Company
or an "
affiliated
corporation
" at any time and is not currently receiving direct or
indirect remuneration from the Company or an "
affiliated
corporation
" for services in any capacity other than as a Director or
(ii) is otherwise considered an "
outside
director
" for purposes of Section 162(m) of the Code.
2.31 "
Participant
"
means an Eligible Person to whom an Award has been granted and who has entered
into an Award Agreement evidencing the Award or, if applicable, such other
person who holds an outstanding Award.
2.32 "
Performance
Objectives
" shall have the meaning set forth in Article IX of the
Plan.
2.33 "
Performance
Period
" shall have the meaning set forth in Article IX of the
Plan.
2.34 "
Performance
Share
" means an Award under Article IX of the Plan of a unit valued by
reference to the Common Stock, the payout of which is subject to achievement of
such Performance Objectives, measured during one or more Performance Periods, as
the Board, in its sole discretion, shall establish at the time of such Award and
set forth in a Participant's Award Agreement.
2.35 "
Plan
"
means this Vertex Energy, Inc. 2009 Stock Incentive Plan, as it may be amended
from time to time.
2.36 “
Reporting
Person
” means a person required to file reports under Section 16(a) of
the Act.
2.37 "
Restricted
Stock
" means an Award under Article VII of the Plan of shares of Common
Stock that are at the time of the Award subject to restrictions or limitations
as to the Participant's ability to sell, transfer, pledge or assign such shares,
which restrictions or limitations may lapse separately or in combination at such
time or times, in installments or otherwise, as the Board, in its sole
discretion, shall determine at the time of such Award and set forth in a
Participant's Award Agreement.
2.38 "
Restriction
Period
" means the period commencing on the Grant Date with respect to
such shares of Restricted Stock and ending on such date as the Board, in its
sole discretion, shall establish and set forth in a Participant's Award
Agreement.
2.39 "
Retirement
"
means retirement as determined under procedures established by the Board or in
any Award, as set forth in a Participant's Award Agreement.
2.40 “
Rule
16b-3
” means Rule 16b-3 promulgated under the Act or any successor to
Rule 16b-3, as in effect from time to time. Those provisions of the
Plan which make express reference to Rule 16b-3, or which are required in order
for certain option transactions to qualify for exemption under Rule 16b-3, shall
apply only to a Reporting Person.
2.41 "
Stock
Award
" means an Award of shares of Common Stock under Article VIII of the
Plan.
2.42 "
Stock
Option
" means an Award under Article IV or Article V of the Plan of an
option to purchase Common Stock. A Stock Option may be either an Incentive Stock
Option or a Nonqualified Stock Option.
2.43 "
Ten
Percent Stockholder
" means an individual who owns (or is deemed to own
pursuant to Section 424(d) of the Code), at the time of grant, stock possessing
more than ten percent (10%) of the total combined voting power of all classes of
stock of the Company or any of its Affiliates.
2.44 "
Termination
of Service
" means (i) in the case of an Eligible Employee, the
discontinuance of employment of such Participant with the Company or its
Subsidiaries for any reason other than a transfer to another member of the group
consisting of the Company and its Affiliates and (ii) in the case of a Director
who is not an Employee of the Company or any Affiliate, the date such
Participant ceases to serve as a Director. The determination of whether a
Participant has discontinued service shall be made by the Board in its sole
discretion. In determining whether a Termination of Service has occurred, the
Board may provide that service as a Consultant or service with a business
enterprise in which the Company has a significant ownership interest shall be
treated as employment with the Company.
ARTICLE
III – ADMINISTRATION
3.1 The
Plan shall be administered by the Board of Directors of the
Company. The Board shall have the exclusive right to interpret and
construe the Plan, to select the Eligible Persons who shall receive an Award,
and to act in all matters pertaining to the grant of an Award and the
determination and interpretation of the provisions of the related Award
Agreement, including, without limitation, the determination of the number of
shares subject to Stock Options and the Option Period(s) and Option Price(s)
thereof, the number of shares of Restricted Stock or shares subject to Stock
Awards or Performance Shares subject to an Award, the vesting periods (if any)
and the form, terms, conditions and duration of each Award, and any amendment
thereof consistent with the provisions of the Plan. The Board may
adopt, establish, amend and rescind such rules, regulations and procedures as it
may deem appropriate for the proper administration of the Plan, make all other
determinations which are, in the Board’s judgment, necessary or desirable for
the proper administration of the Plan, amend the Plan or a Stock Award as
provided in Article XI, and terminate or suspend the Plan as provided in Article
XI. All acts, determinations and decisions of the Board made or taken
pursuant to the Plan or with respect to any questions arising in connection with
the administration and interpretation of the Plan or any Award Agreement,
including the severability of any and all of the provisions thereof, shall be
conclusive, final and binding upon all persons.
3.2 The
Board may, to the full extent permitted by and consistent with applicable law
and the Company’s Bylaws, and subject to Subparagraph 3.2(b) hereinbelow,
delegate any or all of its powers with respect to the administration of the Plan
to a Committee consisting of not fewer than two members of the Board each of
whom shall qualify (at the time of appointment to the Committee and during all
periods of service on the Committee) in all respects as a Non-Employee Director
and as an Outside Director.
(a) If
administration is delegated to a Committee, the Committee shall have, in
connection with the administration of the Plan, the powers theretofore possessed
by the Board, including the power to delegate to a subcommittee any of the
administrative powers the Committee is authorized to exercise (and references in
the Plan to the Board shall thereafter be to the Committee or subcommittee),
subject, however, to such resolutions, not consistent with the provisions of the
Plan, as may be adopted from time to time by the Board.
(b) The
Board may abolish the Committee at any time and reassume all powers and
authority previously delegated to the Committee.
(c) In
addition to, and not in limitation of, the right of any Committee so designated
by the Board to administer this Plan to grant Awards to Eligible Persons under
this Plan, the full Board of Directors may from time to time grant Awards to
Eligible Persons pursuant to the terms and conditions of this Plan, subject to
the requirements of the Code, Rule 16b-3 under the Act or any other applicable
law, rule or regulation. In connection with any such grants, the Board of
Directors shall have all of the power and authority of the Committee to
determine the Eligible Persons to whom such Awards shall be granted and the
other terms and conditions of such Awards.
3.3 Without
limiting the provisions of this Article III, and subject to the provisions of
Article X, the Board is authorized to take such action as it determines to be
necessary or advisable, and fair and equitable to Participants and to the
Company, with respect to an outstanding Award in the event of a Change of
Control as described in Article X or other similar event. Such action may
include, but shall not be limited to, establishing, amending or waiving the
form, terms, conditions and duration of an Award and the related Award
Agreement, so as to provide for earlier, later, extended or additional times for
exercise or payments, differing methods for calculating payments, alternate
forms and amounts of payment, an accelerated release of restrictions or other
modifications. The Board may take such actions pursuant to this Section 3.3 by
adopting rules and regulations of general applicability to all Participants or
to certain categories of Participants, by including, amending or waiving terms
and conditions in an Award and the related Award Agreement, or by taking action
with respect to individual Participants from time to time.
3.4 Subject
to the provisions of Section 3.9, the maximum aggregate number of shares of
Common Stock which may be issued pursuant to Awards under the Plan shall be One
Million Five Hundred Seventy-Five Thousand (1,575,000) shares. Such shares of
Common Stock shall be made available from authorized and unissued shares of the
Company.
(a) For
all purposes under the Plan, each Performance Share awarded shall be counted as
one share of Common Stock subject to an Award.
(b) If,
for any reason, any shares of Common Stock (including shares of Common Stock
subject to Performance Shares) that have been awarded or are subject to issuance
or purchase pursuant to Awards outstanding under the Plan are not delivered or
purchased, or are reacquired by the Company, for any reason, including but not
limited to a forfeiture of Restricted Stock or failure to earn Performance
Shares or the termination, expiration or cancellation of a Stock Option, or any
other termination of an Award without payment being made in the form of shares
of Common Stock (whether or not Restricted Stock), such shares of Common Stock
shall not be charged against the aggregate number of shares of Common Stock
available for Award under the Plan and shall again be available for Awards under
the Plan. In no event, however, may Common Stock that is surrendered or withheld
to pay the exercise price of a Stock Option or to satisfy tax withholding
requirements be available for future grants under the Plan.
(c) The
foregoing subsections (a) and (b) of this Section 3.4 shall be subject to any
limitations provided by the Code or by Rule 16b-3 under the Act or by any other
applicable law, rule or regulation.
3.5 Each
Award granted under the Plan shall be evidenced by a written Award Agreement,
which shall be subject to and shall incorporate (by reference or otherwise) the
applicable terms and conditions of the Plan and shall include any other terms
and conditions (not inconsistent with the Plan) required by the
Board.
3.6 The
Company shall not be required to issue or deliver any certificates for shares of
Common Stock under the Plan prior to:
(a) any
required approval of the Plan by the shareholders of the Company;
and
(b) the
completion of any registration or qualification of such shares of Common Stock
under any federal or state law, or any ruling or regulation of any governmental
body that the Company shall, in its sole discretion, determine to be necessary
or advisable.
3.7 The
Board may require any Participant acquiring shares of Common Stock pursuant to
any Award under the Plan to represent to and agree with the Company in writing
that such person is acquiring the shares of Common Stock for investment purposes
and without a view to resale or distribution thereof. Shares of
Common Stock issued and delivered under the Plan shall also be subject to such
stop-transfer orders and other restrictions as the Board may deem advisable
under the rules, regulations and other requirements of the Securities and
Exchange Commission, any stock exchange upon which the Common Stock is then
listed and any applicable federal or state laws, and the Board may cause a
legend or legends to be placed on the certificate or certificates representing
any such shares to make appropriate reference to any such restrictions. In
making such determination, the Board may rely upon an opinion of counsel for the
Company.
3.8 Except
as otherwise expressly provided in the Plan or in an Award Agreement with
respect to an Award, no Participant shall have any right as a shareholder of the
Company with respect to any shares of Common Stock subject to such Participant's
Award except to the extent that, and until, one or more certificates
representing such shares of Common Stock shall have been delivered to the
Participant. No shares shall be required to be issued, and no certificates shall
be required to be delivered, under the Plan unless and until all of the terms
and conditions applicable to such Award shall have, in the sole discretion of
the Board, been satisfied in full and any restrictions shall have lapsed in
full, and unless and until all of the requirements of law and of all regulatory
bodies having jurisdiction over the offer and sale, or issuance and delivery, of
the shares shall have been fully complied with.
3.9 The
total amount of shares with respect to which Awards may be granted under the
Plan and rights of outstanding Awards (both as to the number of shares subject
to the outstanding Awards and the Option Price(s) or other purchase price(s) of
such shares, as applicable) shall be appropriately adjusted for any increase or
decrease in the number of outstanding shares of Common Stock of the Company
resulting from payment of a stock dividend on the Common Stock, a stock split or
subdivision or combination of shares of the Common Stock, or a reorganization or
reclassification of the Common Stock, or any other change in the structure of
shares of the Common Stock. The foregoing adjustments and the manner of
application of the foregoing provisions shall be determined by the Board in its
sole discretion. Any such adjustment may provide for the elimination of any
fractional shares which might otherwise become subject to an Award. All
adjustments made as the result of the foregoing in respect of each Incentive
Stock Option shall be made so that such Incentive Stock Option shall continue to
be an Incentive Stock Option, as defined in Section 422 of the
Code.
3.10 No
director or person acting pursuant to authority delegated by the Board shall be
liable for any action or determination under the Plan made in good
faith. The members of the Board shall be entitled to indemnification
by the Company in the manner and to the extent set forth in the Company's
Articles of Incorporation, as amended, Bylaws or as otherwise provided from time
to time regarding indemnification of Directors.
3.11 The
Board shall be authorized to make adjustments in any performance based criteria
or in the other terms and conditions of outstanding Awards in recognition of
unusual or nonrecurring events affecting the Company (or any Affiliate, if
applicable) or its financial statements or changes in applicable laws,
regulations or accounting principles. The Board may correct any defect, supply
any omission or reconcile any inconsistency in the Plan or any Award Agreement
in the manner and to the extent it shall deem necessary or desirable to reflect
any such adjustment. In the event the Company (or any Affiliate, if applicable)
shall assume outstanding employee benefit awards or the right or obligation to
make future such awards in connection with the acquisition of another
corporation or business entity, the Board may, in its sole discretion, make such
adjustments in the terms of outstanding Awards under the Plan as it shall deem
appropriate.
3.12 Subject
to the express provisions of the Plan, the Board shall have full power and
authority to determine whether, to what extent and under what circumstances any
outstanding Award shall be terminated, canceled, forfeited or suspended.
Notwithstanding the foregoing or any other provision of the Plan or an Award
Agreement, all Awards to any Participant that are subject to any restriction or
have not been earned or exercised in full by the Participant shall be terminated
and canceled if the Participant is terminated for cause, as determined by the
Board in its sole discretion.
ARTICLE
IV -- INCENTIVE STOCK OPTIONS
4.1 The
Board, in its sole discretion, may from time to time on or after the Effective
Date grant Incentive Stock Options to Eligible Employees, subject to the
provisions of this Article IV and Articles III and VI and subject to the
following conditions:
(a) Incentive
Stock Options shall be granted only to Eligible Employees, each of whom may be
granted one or more of such Incentive Stock Options at such time or times
determined by the Board.
(b) The
Option Price per share of Common Stock for an Incentive Stock Option shall be
set in the Award Agreement, but shall not be less than (i) one hundred percent
(100%) of the Fair Market Value of the Common Stock at the Grant Date, or (ii)
in the case of an Incentive Stock Option granted to a Ten Percent Stockholder,
one hundred ten percent (110%) of the Fair Market Value of the Common Stock at
the Grant Date.
(c) An
Incentive Stock Option may be exercised in full or in part from time to time
within ten (10) years from the Grant Date, or such shorter period as may be
specified by the Board as the Option Period and set forth in the Award
Agreement; provided, however, that, in the case of an Incentive Stock Option
granted to a Ten Percent Stockholder, such period shall not exceed five (5)
years from the Grant Date; and further, provided that, in any event, the
Incentive Stock Option shall lapse and cease to be exercisable upon a
Termination of Service or within such period following a Termination of Service
as shall have been determined by the Board and set forth in the related Award
Agreement; and provided, further, that such period shall not exceed the period
of time ending on the date three (3) months following a Termination of Service,
unless employment shall have terminated:
(i) as
a result of Disability, in which event such period shall not exceed the period
of time ending on the date twelve (12) months following a Termination of
Service; or
(ii) as
a result of death, or if death shall have occurred following a Termination of
Service (other than as a result of Disability) and during the period that the
Incentive Stock Option was still exercisable, in which event such period may not
exceed the period of time ending on the earlier of the date twelve (12) months
after the date of death;
and
provided, further, that such period following a Termination of Service or death
shall in no event extend beyond the original Option Period of the Incentive
Stock Option.
(d) The
aggregate Fair Market Value of the shares of Common Stock with respect to which
any Incentive Stock Options (whether under this Plan or any other plan
established by the Company) are first exercisable during any calendar year by
any Eligible Employee shall not exceed one hundred thousand dollars ($100,000),
determined based on the Fair Market Value(s) of such shares as of their
respective Grant Dates; provided, however, that to the extent permitted under
Section 422 of the Code, if the aggregate Fair Market Values of the shares of
Common Stock with respect to which Stock Options intended to be Incentive Stock
Options are first exercisable by any Eligible Employee during any calendar year
(whether such Stock Options are granted under this Plan or any other plan
established by the Company) exceed one hundred thousand dollars ($100,000), the
Stock Options or portions thereof which exceed such limit (according to the
order in which they were granted) shall be treated as Nonqualified
Stock Options.
(e)
No Incentive Stock Options may be granted more than ten (10) years from the
Effective Date.
(f) The
Award Agreement for each Incentive Stock Option shall provide that the
Participant shall notify the Company if such Participant sells or otherwise
transfers any shares of Common Stock acquired upon exercise of the Incentive
Stock Option within two (2) years of the Grant Date of such Incentive Stock
Option or within one (1) year of the date such shares were acquired upon the
exercise of such Incentive Stock Option.
4.2 Subject
to the limitations of Section 3.4, the maximum aggregate number of shares of
Common Stock subject to Incentive Stock Option Awards shall be the maximum
aggregate number of shares available for Awards under the Plan.
4.3 The
Board may provide for any other terms and conditions which it determines should
be imposed for an Incentive Stock Option to qualify under Section 422 of the
Code, as well as any other terms and conditions not inconsistent with this
Article IV or Articles III or VI, as determined in its sole discretion and set
forth in the Award Agreement for such Incentive Stock Option.
4.4 Each
provision of this Article IV and of each Incentive Stock Option granted
hereunder shall be construed in accordance with the provisions of Section 422 of
the Code, and any provision hereof that cannot be so construed shall be
disregarded.
ARTICLE
V -- NONQUALIFIED STOCK OPTIONS
5.1 The
Board, in its sole discretion, may from time to time on or after the Effective
Date grant Nonqualified Stock Options to Eligible Persons, subject to the
provisions of this Article V and Articles III and VI and subject to the
following conditions:
(a) Nonqualified
Stock Options may be granted to any Eligible Person, each of whom may be granted
one or more of such Nonqualified Stock Options, at such time or times determined
by the Board.
(b) The
Option Price per share of Common Stock for a Nonqualified Stock Option shall be
set in the Award Agreement and may be less than one hundred percent (100%) of
the Fair Market Value of the Common Stock at the Grant Date; provided, however,
that the exercise price of each Nonqualified Stock Option granted under the Plan
shall in no event be less than the par value per share of the Company’s Common
Stock.
(c) A
Nonqualified Stock Option may be exercised in full or in part from time to time
within the Option Period specified by the Board and set forth in the Award
Agreement; provided, however, that, in any event, the Nonqualified Stock Option
shall lapse and cease to be exercisable upon a Termination of Service or within
such period following a Termination of Service as shall have been determined by
the Board and set forth in the related Award Agreement.
5.2 The
Board may provide for any other terms and conditions for a Nonqualified Stock
Option not inconsistent with this Article V or Articles III or VI, as determined
in its sole discretion and set forth in the Award Agreement for such
Nonqualified Stock Option.
ARTICLE
VI -- INCIDENTS OF STOCK OPTIONS
6.1 Each
Stock Option shall be granted subject to such terms and conditions, if any, not
inconsistent with this Plan, as shall be determined by the Board and set forth
in the related Award Agreement, including any provisions as to continued
employment as consideration for the grant or exercise of such Stock Option and
any provisions which may be advisable to comply with applicable laws,
regulations or rulings of any governmental authority.
6.2 Except
as hereinafter described, a Stock Option shall not be transferable by the
Participant other than by will or by the laws of descent and distribution, and
shall be exercisable during the lifetime of the Participant only by the
Participant or the Participant's guardian or legal representative. In
the event of the death of a Participant, any unexercised Stock Options may be
exercised to the extent otherwise provided herein or in such Participant's Award
Agreement by the executor or personal representative of such Participant's
estate or by any person who acquired the right to exercise such Stock Options by
bequest under the Participant's will or by inheritance. The Board, in its sole
discretion, may at any time permit a Participant to transfer a Nonqualified
Stock Option for no consideration to or for the benefit of one or more members
of the Participant's Immediate Family (including, without limitation, to a trust
for the benefit of the Participant and/or one or more members of such
Participant's Immediate Family or a corporation, partnership or limited
liability company established and controlled by the Participant and/or one or
more members of such Participant's Immediate Family), subject to such limits as
the Board may establish. The transferee of such Nonqualified Stock Option shall
remain subject to all terms and conditions applicable to such Nonqualified Stock
Option prior to such transfer. The foregoing right to transfer the Nonqualified
Stock Option, if granted by the Board shall apply to the right to consent to
amendments to the Award Agreement.
6.3 Shares
of Common Stock purchased upon exercise of a Stock Option shall be paid for in
such amounts, at such times and upon such terms as shall be determined by the
Board, subject to limitations set forth in the Stock Option Award Agreement. The
Board may, in its sole discretion, permit the exercise of a Stock Option by
payment in cash or by tendering shares of Common Stock (either by actual
delivery of such shares or by attestation), or any combination thereof, as
determined by the Board. In the sole discretion of the Board, payment in shares
of Common Stock also may be made with shares received upon the exercise or
partial exercise of the Stock Option, whether or not involving a series of
exercises or partial exercises and whether or not share certificates for such
shares surrendered have been delivered to the Participant. The Board also may,
in its sole discretion, permit the payment of the exercise price of a Stock
Option by the voluntary surrender of all or a portion of the Stock Option.
Shares of Common Stock previously held by the Participant and surrendered in
payment of the Option Price of a Stock Option shall be valued for such purpose
at the Fair Market Value thereof on the date the Stock Option is
exercised.
6.4 The
holder of a Stock Option shall have no rights as a shareholder with respect to
any shares covered by the Stock Option (including, without limitation, any
voting rights, the right to inspect or receive the Company’s balance sheets or
financial statements or any rights to receive dividends or non-cash
distributions with respect to such shares) until such time as the holder has
exercised the Stock Option and then only with respect to the number of shares
which are the subject of the exercise. No adjustment shall be made
for dividends or other rights for which the record date is prior to the date
such stock certificate is issued.
6.5 The
Board may permit the voluntary surrender of all or a portion of any Stock Option
granted under the Plan to be conditioned upon the granting to the Participant of
a new Stock Option for the same or a different number of shares of Common Stock
as the Stock Option surrendered, or may require such voluntary surrender as a
condition precedent to a grant of a new Stock Option to such Participant.
Subject to the provisions of the Plan, such new Stock Option shall be
exercisable at such Option Price, during such Option Period and on such other
terms and conditions as are specified by the Board at the time the new Stock
Option is granted. Upon surrender, the Stock Options surrendered shall be
canceled and the shares of Common Stock previously subject to them shall be
available for the grant of other Stock Options.
6.6 The
Board may at any time offer to purchase a Participant's outstanding Stock Option
for a payment equal to the value of such Stock Option payable in cash, shares of
Common Stock or Restricted Stock or other property upon surrender of the
Participant's Stock Option, based on such terms and conditions as the Board
shall establish and communicate to the Participant at the time that such offer
is made.
6.7 The
Board shall have the discretion, exercisable either at the time the Award is
granted or at the time the Participant discontinues employment, to establish as
a provision applicable to the exercise of one or more Stock Options that, during
a limited period of exercisability following a Termination of Service, the Stock
Option may be exercised not only with respect to the number of shares of Common
Stock for which it is exercisable at the time of the Termination of Service but
also with respect to one or more subsequent installments for which the Stock
Option would have become exercisable had the Termination of Service not
occurred.
ARTICLE
VII -- RESTRICTED STOCK
7.1 The
Board, in its sole discretion, may from time to time on or after the Effective
Date award shares of Restricted Stock to Eligible Persons as a reward for past
service and an incentive for the performance of future services that will
contribute materially to the successful operation of the Company an its
Affiliates, subject to the terms and conditions set forth in this Article
VII.
7.2 The
Board shall determine the terms and conditions of any Award of Restricted Stock,
which shall be set forth in the related Award Agreement, including without
limitation:
(a) the
purchase price, if any, to be paid for such Restricted Stock, which may be zero,
subject to such minimum consideration as may be required by applicable
law;
(b) the
duration of the Restriction Period or Restriction Periods with respect to such
Restricted Stock and whether any events may accelerate or delay the end of such
Restriction Period(s);
(c) the
circumstances upon which the restrictions or limitations shall lapse, and
whether such restrictions or limitations shall lapse as to all shares of
Restricted Stock at the end of the Restriction Period or as to a portion of the
shares of Restricted Stock in installments during the Restriction Period by
means of one or more vesting schedules;
(d) whether
such Restricted Stock is subject to repurchase by the Company or to a right of
first refusal at a predetermined price or if the Restricted Stock may be
forfeited entirely under certain conditions;
(e) whether
any performance goals may apply to a Restriction Period to shorten or lengthen
such period; and
(f)
whether dividends and other distributions with respect to such Restricted Stock
are to be paid currently to the Participant or withheld by the Company for the
account of the Participant.
7.3 Awards
of Restricted Stock must be accepted within a period of thirty (30) days after
the Grant Date (or such shorter or longer period as the Board may specify at
such time) by executing an Award Agreement with respect to such Restricted Stock
and tendering the purchase price, if any. A prospective recipient of an Award of
Restricted Stock shall not have any rights with respect to such Award, unless
such recipient has executed an Award Agreement with respect to such Restricted
Stock, has delivered a fully executed copy thereof to the Board and has
otherwise complied with the applicable terms and conditions of such
Award.
7.4 In
the sole discretion of the Board and as set forth in the Award Agreement for an
Award of Restricted Stock, all shares of Restricted Stock held by a Participant
and still subject to restrictions shall be forfeited by the Participant upon the
Participant's Termination of Service and shall be reacquired, canceled and
retired by the Company. Notwithstanding the foregoing, unless otherwise provided
in an Award Agreement with respect to an Award of Restricted Stock, in the event
of the death, Disability or Retirement of a Participant during the Restriction
Period, or in other cases of special circumstances (including hardship or other
special circumstances of a Participant whose employment is involuntarily
terminated), the Board may elect to waive in whole or in part any remaining
restrictions with respect to all or any part of such Participant's Restricted
Stock, if it finds that a waiver would be appropriate.
7.5 Except
as otherwise provided in this Article VII, no shares of Restricted Stock
received by a Participant shall be sold, exchanged, transferred, pledged,
hypothecated or otherwise disposed of during the Restriction
Period.
7.6 Upon
an Award of Restricted Stock to a Participant, a certificate or certificates
representing the shares of such Restricted Stock will be issued to and
registered in the name of the Participant. Unless otherwise determined by the
Board, such certificate or certificates will be held in custody by the Company
until (i) the Restriction Period expires and the restrictions or limitations
lapse, in which case one or more certificates representing such shares of
Restricted Stock that do not bear a restrictive legend (other than any legend as
required under applicable federal or state securities laws) shall be delivered
to the Participant, or (ii) a prior forfeiture by the Participant of the shares
of Restricted Stock subject to such Restriction Period, in which case the
Company shall cause such certificate or certificates to be canceled and the
shares represented thereby to be retired, all as set forth in the Participant's
Award Agreement. It shall be a condition of an Award of Restricted
Stock that the Participant deliver to the Company a stock power endorsed in
blank relating to the shares of Restricted Stock to be held in custody by the
Company.
7.7 Except
as provided in this Article VII or in the related Award Agreement, a Participant
receiving an Award of shares of Restricted Stock Award shall have, with respect
to such shares, all rights of a shareholder of the Company, including the right
to vote the shares and the right to receive any distributions, unless and until
such shares are otherwise forfeited by such Participant; provided, however, the
Board may require that any cash dividends with respect to such shares of
Restricted Stock be automatically reinvested in additional shares of Restricted
Stock subject to the same restrictions as the underlying Award, or may require
that cash dividends and other distributions on Restricted Stock be withheld by
the Company or its Affiliates for the account of the Participant. The Board
shall determine whether interest shall be paid on amounts withheld, the rate of
any such interest, and the other terms applicable to such withheld
amounts.
ARTICLE
VIII -- STOCK AWARDS
8.1 The
Board, in its sole discretion, may from time to time on or after the Effective
Date grant Stock Awards to Eligible Persons in payment of compensation that has
been earned or as compensation to be earned, including without limitation
compensation awarded or earned concurrently with or prior to the grant of the
Stock Award, subject to the terms and conditions set forth in this Article
VIII.
8.2 For
the purposes of this Plan, in determining the value of a Stock Award, all shares
of Common Stock subject to such Stock Award shall be set in the Award Agreement
and may be less than one hundred percent (100%) of the Fair Market Value of the
Common Stock at the Grant Date.
8.3 Unless
otherwise determined by the Board and set forth in the related Award Agreement,
shares of Common Stock subject to a Stock Award will be issued, and one or more
certificates representing such shares will be delivered, to the Participant as
soon as practicable following the Grant Date of such Stock Award. Upon the
issuance of such shares and the delivery of one or more certificates
representing such shares to the Participant, such Participant shall be and
become a shareholder of the Company fully entitled to receive dividends, to vote
and to exercise all other rights of a shareholder of the Company.
Notwithstanding any other provision of this Plan, unless the Board expressly
provides otherwise with respect to a Stock Award, as set forth in the related
Award Agreement, no Stock Award shall be deemed to be an outstanding Award for
purposes of the Plan.
ARTICLE
IX -- PERFORMANCE SHARES
9.1 The
Board, in its sole discretion, may from time to time on or after the Effective
Date award Performance Shares to Eligible Persons as an incentive for the
performance of future services that will contribute materially to the successful
operation of the Company and its Affiliates, subject to the terms and conditions
set forth in this Article IX.
9.2 The
Board shall determine the terms and conditions of any Award of Performance
Shares, which shall be set forth in the related Award Agreement, including
without limitation:
(a) the
purchase price, if any, to be paid for such Performance Shares, which may be
zero, subject to such minimum consideration as may be required by applicable
law;
(b) the
performance period (the "
Performance
Period
") and/or performance objectives (the "
Performance
Objectives
") applicable to such Awards;
(c) the
number of Performance Shares that shall be paid to the Participant if the
applicable Performance Objectives are exceeded or met in whole or in part;
and
(d) the
form of settlement of a Performance Share.
9.3 At
any date, each Performance Share shall have a value equal to the Fair Market
Value of a share of Common Stock.
9.4 Performance
Periods may overlap, and Participants may participate simultaneously with
respect to Performance Shares for which different Performance Periods are
prescribed.
9.5 Performance
Objectives may vary from Participant to Participant and between Awards and shall
be based upon such performance criteria or combination of factors as the Board
may deem appropriate, including, but not limited to, minimum earnings per share
or return on equity. If during the course of a Performance Period there shall
occur significant events which the Board expects to have a substantial effect on
the applicable Performance Objectives during such period, the Board may revise
such Performance Objectives.
9.6 In
the sole discretion of the Board and as set forth in the Award Agreement for an
Award of Performance Shares, all Performance Shares held by a Participant and
not earned shall be forfeited by the Participant upon the Participant's
Termination of Service. Notwithstanding the foregoing, unless otherwise provided
in an Award Agreement with respect to an Award of Performance Shares, in the
event of the death, Disability or Retirement of a Participant during the
applicable Performance Period, or in other cases of special circumstances
(including hardship or other special circumstances of a Participant whose
employment is involuntarily terminated), the Board may determine to make a
payment in settlement of such Performance Shares at the end of the Performance
Period, based upon the extent to which the Performance Objectives were satisfied
at the end of such period and pro rated for the portion of the Performance
Period during which the Participant was employed by the Company or an Affiliate;
provided, however, that the Board may provide for an earlier payment in
settlement of such Performance Shares in such amount and under such terms and
conditions as the Board deems appropriate or desirable.
9.7 The
settlement of a Performance Share shall be made in cash, whole shares of Common
Stock or a combination thereof and shall be made as soon as practicable after
the end of the applicable Performance Period. Notwithstanding the
foregoing, the Board in its sole discretion may allow a Participant to defer
payment in settlement of Performance Shares on terms and conditions approved by
the Board and set forth in the related Award Agreement entered into in advance
of the time of receipt or constructive receipt of payment by the
Participant.
9.8 Performance
Shares shall not be transferable by the Participant. The Board shall have the
authority to place additional restrictions on the Performance Shares including,
but not limited to, restrictions on transfer of any shares of Common Stock that
are delivered to a Participant in settlement of any Performance
Shares.
ARTICLE
X -- CHANGES OF CONTROL OR OTHER FUNDAMENTAL CHANGES
10.1 Upon
the occurrence of a Change of Control and unless otherwise provided in the Award
Agreement with respect to a particular Award:
(a) all
outstanding Stock Options shall become immediately exercisable in full, subject
to any appropriate adjustments in the number of shares subject to the Stock
Option and the Option Price, and shall remain exercisable for the remaining
Option Period, regardless of any provision in the related Award Agreement
limiting the exercisability of such Stock Option or any portion thereof for any
length of time;
(b) all
outstanding Performance Shares with respect to which the applicable Performance
Period has not been completed shall be paid out as soon as practicable as
follows:
(i) all
Performance Objectives applicable to the Award of Performance Shares shall be
deemed to have been satisfied to the extent necessary to earn one hundred
percent (100%) of the Performance Shares covered by the Award;
(ii) the
applicable Performance Period shall be deemed to have been completed upon
occurrence of the Change of Control;
(iii) the
payment to the Participant in settlement of the Performance Shares shall be the
amount determined by the Board, in its sole discretion, or in the manner stated
in the Award Agreement, as multiplied by a fraction, the numerator of which is
the number of full calendar months of the applicable Performance Period that
have elapsed prior to occurrence of the Change of Control, and the denominator
of which is the total number of months in the original Performance Period;
and
(iv) upon
the making of any such payment, the Award Agreement as to which it relates shall
be deemed terminated and of no further force and effect.
(c) all
outstanding shares of Restricted Stock with respect to which the restrictions
have not lapsed shall be deemed vested, and all such restrictions shall be
deemed lapsed and the Restriction Period ended.
10.2 Anything
contained herein to the contrary notwithstanding, upon the dissolution or
liquidation of the Company, each Award granted under the Plan and then
outstanding shall terminate; provided, however, that following the adoption of a
plan of dissolution or liquidation, and in any event prior to the effective date
of such dissolution or liquidation, each such outstanding Award granted
hereunder shall be exercisable in full and all restrictions shall lapse, to the
extent set forth in Section 10.1(a), (b) and (c) above.
10.3 After
the merger of one or more corporations into the Company or any Affiliate, any
merger of the Company into another corporation, any consolidation of the Company
or any Affiliate of the Company and one or more corporations, or any other
corporate reorganization of any form involving the Company as a party thereto
and involving any exchange, conversion, adjustment or other modification of the
outstanding shares of the Common Stock, each Participant shall, at no additional
cost, be entitled, upon any exercise of such Participant's Stock Option, to
receive, in lieu of the number of shares as to which such Stock Option shall
then be so exercised, the number and class of shares of stock or other
securities or such other property to which such Participant would have been
entitled to pursuant to the terms of the agreement of merger or consolidation or
reorganization, if at the time of such merger or consolidation or
reorganization, such Participant had been a holder of record of a number of
shares of Common Stock equal to the number of shares as to which such Stock
Option shall then be so exercised. Comparable rights shall accrue to each
Participant in the event of successive mergers, consolidations or
reorganizations of the character described above. The Board may, in its sole
discretion, provide for similar adjustments upon the occurrence of such events
with regard to other outstanding Awards under this Plan. The foregoing
adjustments and the manner of application of the foregoing provisions shall be
determined by the Board in its sole discretion. Any such adjustment may provide
for the elimination of any fractional shares which might otherwise become
subject to an Award. All adjustments made as the result of the foregoing in
respect of each Incentive Stock Option shall be made so that such Incentive
Stock Option shall continue to be an Incentive Stock Option, as defined in
Section 422 of the Code.
ARTICLE
XI -- AMENDMENT AND TERMINATION
11.1 Subject
to the provisions of Section 11.2, the Board of Directors at any time and from
time to time may amend or terminate the Plan as may be necessary or desirable to
implement or discontinue the Plan or any provision hereof. To the
extent required by the Act or the Code, however, no amendment, without approval
by the Company's shareholders, shall:
(a) materially
alter the group of persons eligible to participate in the Plan;
(b) except
as provided in Section 3.4, change the maximum aggregate number of shares of
Common Stock that are available for Awards under the Plan;
(c) alter
the class of individuals eligible to receive an Incentive Stock Option or
increase the limit on Incentive Stock Options set forth in Section 4.1(d) or the
value of shares of Common Stock for which an Eligible Employee may be granted an
Incentive Stock Option.
11.2 No
amendment to or discontinuance of the Plan or any provision hereof by the Board
of Directors or the shareholders of the Company shall, without the written
consent of the Participant, adversely affect (in the sole discretion of the
Board) any Award theretofore granted to such Participant under this Plan;
provided, however, that the Board retains the right and power to:
(a) annul
any Award if the Participant is terminated for cause as determined by the Board;
and
(b) convert
any outstanding Incentive Stock Option to a Nonqualified Stock
Option.
11.3 If
a Change of Control has occurred, no amendment or termination shall impair the
rights of any person with respect to an outstanding Award as provided in Article
X.
ARTICLE
XII -- MISCELLANEOUS PROVISIONS
12.1 Nothing
in the Plan or any Award granted hereunder shall confer upon any Participant any
right to continue in the employ of the Company or its Affiliates or to serve as
a Director or shall interfere in any way with the right of the Company or its
Affiliates or the shareholders of the Company, as applicable, to terminate the
employment of a Participant or to release or remove a Director at any
time. Unless specifically provided otherwise, no Award granted under
the Plan shall be deemed salary or compensation for the purpose of computing
benefits under any employee benefit plan or other arrangement of the Company or
its Affiliates for the benefit of their respective employees unless the Company
shall determine otherwise. No Participant shall have any claim to an
Award until it is actually granted under the Plan and an Award Agreement has
been executed and delivered to the Company. To the extent that any
person acquires a right to receive payments from the Company under the Plan,
such right shall, except as otherwise provided by the Board, be no greater than
the right of an unsecured general creditor of the Company. All payments to be
made hereunder shall be paid from the general funds of the Company, and no
special or separate fund shall be established and no segregation of assets shall
be made to assure payment of such amounts, except as provided in Article VII
with respect to Restricted Stock and except as otherwise provided by the
Board.
12.2 The
Plan and the grant of Awards shall be subject to all applicable federal and
state laws, rules, and regulations and to such approvals by any government or
regulatory agency as may be required. Any provision herein relating to
compliance with Rule 16b-3 under the Act shall not be applicable with respect to
participation in the Plan by Participants who are not subject to Section 16 of
the Act.
12.3 The
terms of the Plan shall be binding upon the Company, its successors and
assigns.
12.4 Neither
a Stock Option nor any other type of equity-based compensation provided for
hereunder shall be transferable except as provided for in Section 6.2. In
addition to the transfer restrictions otherwise contained herein, additional
transfer restrictions shall apply to the extent required by federal or state
securities laws. If any Participant makes such a transfer in
violation hereof, any obligation hereunder of the Company to such Participant
shall terminate immediately.
12.5 This
Plan and all actions taken hereunder shall be governed by the laws of the State
of Texas.
12.6 Each
Participant exercising an Award hereunder agrees to give the Board prompt
written notice of any election made by such Participant under Section 83(b) of
the Code, or any similar provision thereof.
12.7 If
any provision of this Plan or an Award Agreement is or becomes or is deemed
invalid, illegal or unenforceable in any jurisdiction, or would disqualify the
Plan or any Award Agreement under any law deemed applicable by the Board, such
provision shall be construed or deemed amended to conform to applicable laws, or
if it cannot be construed or deemed amended without, in the determination of the
Board, materially altering the intent of the Plan or the Award Agreement, it
shall be stricken, and the remainder of the Plan or the Award Agreement shall
remain in full force and effect.
12.8 The
grant of an Award pursuant to this Plan shall not affect in any way the right or
power of the Company or any of its Affiliates to make adjustments,
reclassification, reorganizations, or changes of its capital or business
structure, or to merge or consolidate, or to dissolve, liquidate or sell, or to
transfer all or part of its business or assets.
12.9 The
Plan is not subject to the provisions of ERISA or qualified under Section 401(a)
of the Code.
12.10 If
a Participant is required to pay to the Company an amount with respect to income
and employment tax withholding obligations in connection with (i) the exercise
of a Nonqualified Stock Option, (ii) certain dispositions of Common Stock
acquired upon the exercise of an Incentive Stock Option, or (iii) the receipt of
Common Stock pursuant to any other Award, then the issuance of Common Stock to
such Participant shall not be made (or the transfer of shares by such
Participant shall not be required to be effected, as applicable) unless such
withholding tax or other withholding liabilities shall have been satisfied in a
manner acceptable to the Company. To the extent provided by the terms
of an Award Agreement, the Participant may satisfy any federal, state or local
tax withholding obligation relating to the exercise or acquisition of Common
Stock under an Award by any of the following means (in addition to the Company's
right to withhold from any compensation paid to the Participant by the Company)
or by a combination of such means: (i) tendering a cash payment; (ii)
authorizing the Company to withhold shares of Common Stock from the shares of
Common Stock otherwise issuable to the Participant as a result of the exercise
or acquisition of Common Stock under the Award, provided, however, that no
shares of Common Stock are withheld with a value exceeding the minimum amount of
tax required to be withheld by law; or (iii) delivering to the Company owned and
unencumbered shares of Common Stock.