<DESCRIPTION>2003 STOCK INCENTIVE PLAN
UNIVERSAL TECHNICAL INSTITUTE, INC.
2003 STOCK INCENTIVE PLAN
1.1 GENERAL. The purpose of the Universal Technical Institute,
Inc. 2003 Stock Incentive Plan (the "Plan") is to promote the success and
enhance the value of Universal Technical Institute, Inc. (the "Company") by
linking the personal interests of its Board members, employees, officers, and
executives of, and consultants and advisors to, the Company to those of Company
shareholders and by providing such individuals with an incentive for outstanding
performance to generate superior returns to shareholders of the Company. The
Plan is also intended to provide flexibility to the Company in its ability to
motivate, attract, and retain the services of Board members, employees,
officers, and executives of, and consultants and advisors to, the Company upon
whose judgment, interest, and special effort the successful conduct of the
Company's operation is largely dependent.
2.1 EFFECTIVE DATE. The Plan is effective as of the date the Plan
is approved by the Board (the "Effective Date"). The Plan must be approved by
the Company's shareholders within 12 months after the Effective Date. The Plan
will be considered approved by the Company's shareholders if it receives the
affirmative vote of the holders of a majority of the shares of Company's stock
present or represented and entitled to vote at a meeting duly held in accordance
with the Company's Bylaws or by written consent of a majority of the Company's
shareholders in lieu of a meeting. Any Awards granted under the Plan prior to
shareholder approval are effective when made (unless the Committee specifies
otherwise at the time of grant), but no Award may be exercised or settled and no
restrictions relating to any Award may lapse before the Plan is approved by the
Company's shareholders. If the Company's shareholders do not approve the Plan
within 12 months after the Effective Date, any Award previously made is
automatically canceled without any further act.
3.1 DEFINITIONS. When a word or phrase appears in this Plan with
the initial letter capitalized, and the word or phrase does not begin a
sentence, the word or phrase will be given the meaning in this Section or in
Sections 1.1 or 2.1 unless otherwise indicated. The following words and phrases
will have the following meanings:
(a) "AWARD" means any Option, Stock Appreciation Right,
Restricted Stock Award, Performance Share Award, Performance-Based Award, or IPO
Award granted to a Participant under the Plan.
(b) "AWARD AGREEMENT" means any written agreement,
contract, or other instrument or document evidencing an Award.
(c) "BOARD" means the Board of Directors of the Company.
(d) "CAUSE" means (except as otherwise provided in an
Award Agreement) if the Committee, in its reasonable and good faith discretion,
determines that the Participant (i) fails to substantially perform his duties
(other than as a result of Disability), after the Board or the individual to
whom the Participant reports delivers to the Participant a written demand for
substantial performance that specifically identifies the manner in which the
Participant has not substantially performed his or her duties; (ii) engages in
willful misconduct or gross negligence that is materially injurious to the
Company or a Subsidiary; (iii) breaches his or her duty of loyalty to the
Company or a Subsidiary; or (iv) commits a felony or a serious crime involving
Any rights the Company or any of its Subsidiaries has to
determine the existence of events giving rise to Cause are in addition to the
rights the Company or any of its Subsidiaries may have under any other agreement
with the Participant or at law or in equity. If, after a Participant's
termination of employment or services, the Company discovers that the
Participant's employment or services could have been terminated for Cause, the
Participant's employment or services will, in the Board's sole discretion, be
deemed to have been terminated for Cause retroactively to the date the events
giving rise to Cause occurred.
(e) "CHANGE OF CONTROL" means: (i) any sale, lease,
exchange, or other transfer (in one transaction or series of related
transactions) of all or substantially all the Company's assets to any person or
group of related persons under Section 13(d) of the Exchange Act ("Group"); (ii)
the Company's shareholders approve and complete any plan or proposal for the
liquidation or dissolution of the Company; (iii) any person or Group becomes the
beneficial owner, directly or indirectly, of shares representing more than 25%
of the aggregate voting power of the issued and outstanding stock entitled to
vote in the election of directors of the Company ("Voting Stock") and such
person or Group has the power and authority to vote such shares; (iv) if a
majority of the individual Board members are replaced over a two-year period and
such replacement is not approved by a vote of majority of the Board then still
in office who either were members of such Board at the beginning of such
two-year period or were appointed by such Board members; (v) any person or Group
acquires sufficient shares of Voting Stock to elect a majority of the members of
the Board; or (vi) the completion of a merger or consolidation of the Company
with another entity in which holders of the Stock immediately before the
completion of the transaction hold, directly or indirectly, immediately after
the transaction, 50% or less of the common equity interest in the surviving
corporation in the transaction. Notwithstanding the foregoing, in no event will
a Change of Control be deemed to have occurred as a result of an initial public
offering of the Stock.
(f) "CODE" means the Internal Revenue Code of 1986, as
(g) "COMMITTEE" means the committee of the Board
described in Article 4.
(h) "COVERED EMPLOYEE" means an Employee who is a
"covered employee" within the meaning of Section 162(m) of the Code.
(i) "DISABILITY" means (unless otherwise defined in an
employment agreement between the Company or any of its Subsidiaries and the
Participant or in the Participant's Award Agreement) any illness or other
physical or mental condition of a Participant that renders the Participant
incapable of performing his customary and usual duties for the Company or
Subsidiary, or any medically determinable illness or other physical or mental
condition resulting from a bodily injury, disease or mental disorder, which in
the Committee's sole judgment is permanent and continuous in nature. The
Committee may require such medical or other evidence as it deems necessary to
judge the nature and permanency of the Participant's condition.
(j) "EXCHANGE ACT" means the Securities Exchange Act of
1934, as amended.
(k) "FAIR MARKET VALUE" means, as of any given date, the
fair market value of Stock on a particular date determined by such methods or
procedures established by the Committee. Unless otherwise determined by the
Committee the Fair Market Value of Stock as of any date is the closing price for
the Stock as reported on the New York Stock Exchange (or on any national
securities exchange on which the Stock is then listed) for that date or, if no
closing price is reported for that date, the closing price on the next preceding
date for which a closing price was reported. For purposes of IPO Awards and
Awards effective as of the effective date of the Company's initial public
offering, fair market value of Stock shall be the price at which the Company's
Stock is offered to the public in its initial public offering.
(l) "INCENTIVE STOCK OPTION" means an Option that is
intended to meet the requirements of Section 422 of the Code or any successor
(m) "IPO AWARD" means the Option granted to each eligible
Participant pursuant to Article 12.
(n) "NON-EMPLOYEE DIRECTOR" means a member of the Board
who qualifies as a "Non-Employee Director" as defined in Rule 16b-3(b)(3) of the
Exchange Act, or any successor provision.
(o) "NON-QUALIFIED STOCK OPTION" means an Option that is
not intended to be an Incentive Stock Option.
(p) "OPTION" means a right granted to a Participant under
Article 7 or Article 12 of the Plan to purchase Stock at a specified price
during specified time periods. An Option may be either an Incentive Stock Option
or a Non-Qualified Stock Option.
(q) "PARTICIPANT" means a person who, as a Board member,
employee, officer, or executive of, or consultant or advisor providing services
to, the Company or any Subsidiary, has been granted an Award under the Plan.
(r) "PERFORMANCE-BASED AWARDS" means the Performance
Share Awards and Restricted Stock Awards granted to select Covered Employees
pursuant to Articles 9 and 10, and are subject to the terms and conditions in
Article 11. All Performance-Based Awards are intended to qualify as
"performance-based compensation" under Section 162(m) of the Code.
(s) "PERFORMANCE CRITERIA" means the criteria that the
Committee selects for purposes of establishing the Performance Goal or
Performance Goals for a Participant for a Performance Period. The Performance
Criteria used to establish Performance Goals are limited to: pre- or after-tax
net earnings, sales growth, operating earnings, operating cash flow, return on
net assets, return on stockholders' equity, return on assets, return on capital,
Stock price growth, stockholder returns, gross or net profit margin, earnings
per share, price per share of Stock, and market share, any of which may be
measured either in absolute terms or as compared to any incremental increase or
as compared to results of a peer group. The Committee will, within the time
prescribed by Section 162(m) of the Code, objectively define the manner of
calculating the Performance Criteria it selects to use for such Performance
Period for such Participant.
(t) "PERFORMANCE GOALS" means, for a Performance Period,
the written goals established by the Committee for the Performance Period based
upon the Performance Criteria. Depending on the Performance Criteria used to
establish such Performance Goals, the Performance Goals may be expressed in
terms of overall Company performance or the performance of a division, business
unit, Subsidiary, or an individual. The Committee, in its discretion, may,
within the time prescribed by Section 162(m) of the Code, adjust or modify the
calculation of Performance Goals for such Performance Period to prevent the
dilution or enlargement of the rights of Participants (i) in the event of, or in
anticipation of, any unusual or extraordinary corporate item, transaction,
event, or development, or (ii) in recognition of, or in anticipation of, any
other unusual or nonrecurring events affecting the Company, or the financial
statements of the Company, or in response to, or in anticipation of, changes in
applicable laws, regulations, accounting principles, or business conditions.
(u) "PERFORMANCE PERIOD" means the one or more periods of
time, which may be of varying and overlapping durations, selected by the
Committee, over which the attainment of one or more Performance Goals will be
measured for purposes of determining a Participant's right to, and the payment
of, a Performance-Based Award.
(v) "PERFORMANCE SHARE" means a right granted to a
Participant under Article 9, to receive cash, Stock, or other Awards, the
payment of which is contingent on achieving certain Performance Goals
established by the Committee.
(w) "PLAN" means the Universal Technical Institute, Inc.
2003 Stock Incentive Plan, as amended.
(x) "RESTRICTED STOCK AWARD" means Stock granted to a
Participant under Article 10 that is subject to certain restrictions and to risk
(y) "STOCK" means the common stock of the Company and
such other securities of the Company that may be substituted for Stock pursuant
to Article 14.
(z) "STOCK APPRECIATION RIGHT" or "SAR" means a right
granted to a Participant under Article 8 to receive a cash, Stock, or other
Awards, , all as determined pursuant to Article 8.
(aa) "SUBSIDIARY" means any corporation or other entity of
which the Company owns, directly or indirectly, a majority of the outstanding
voting stock or voting power.
4.1 COMMITTEE. The Plan will be administered by the Board or a
Committee appointed by, and which serves at the discretion of, the Board. If the
Board appoints a Committee, the Committee will consist of at least two
individuals, each of whom qualifies as (i) a Non-Employee Director, and (ii) an
"outside director" under Code Section 162(m) and the regulations issued
thereunder. Reference to the Committee in this Plan will refer to the Board if
the Board does not appoint a Committee.
4.2 ACTION BY THE COMMITTEE. A majority of the Committee will
constitute a quorum. The acts of a majority of the members present at any
meeting at which a quorum is present, and acts approved in writing by a majority
of the Committee in lieu of a meeting, will be deemed the acts of the Committee.
Each member of the Committee is entitled to, in good faith, rely or act upon any
report or other information furnished to that member by any officer or other
employee of the Company or any Subsidiary, the Company's independent certified
public accountants, any executive compensation consultant or other professional
retained by the Company to assist in the Plan's administration.
4.3 AUTHORITY OF COMMITTEE. Subject to any specific designation in
the Plan, the Committee has the exclusive power, authority and discretion to:
(a) Designate Participants to receive Awards;
(b) Determine the type of Awards granted to each
(c) Determine the number of Awards granted and the number
of shares of Stock to which an Award will relate;
(d) Except as otherwise provided in the Plan, determine
the terms and conditions of any Award granted under the Plan including but not
limited to, the exercise price, grant price, or purchase price, any restrictions
or limitations on the Award, any schedule for lapse of forfeiture restrictions
or restrictions on the exercisability of an Award, and accelerations or waivers
thereof, based in each case on such considerations as the Committee in its sole
discretion determines; provided, however, that the Committee will not have the
authority to accelerate the vesting or waive the forfeiture of any
(e) Amend, modify, or terminate any outstanding Award,
with the Participant's consent unless the Committee has the authority to amend,
modify, or terminate an Award without the Participant's consent under any other
provision of the Plan;
(f) Determine whether, to what extent, and under what
circumstances an Award may be settled in, or the exercise price of an Award may
be paid in, cash, Stock, other Awards, or other property, or an Award may be
canceled, forfeited, or surrendered;
(g) Prescribe the form of each Award Agreement, which
need not be identical for each Participant;
(h) Decide all other matters that must be determined in
connection with an Award;
(i) Establish, adopt, or revise any rules and regulations
as it may deem necessary or advisable to administer the Plan;
(j) Interpret the terms of, and any matter arising under,
the Plan or any Award Agreement; and
(k) Make all other decisions and determinations that may
be required under the Plan or as the Committee deems necessary or advisable to
administer the Plan.
4.4 DECISIONS BINDING. The Committee's interpretation of the Plan,
any Awards granted under the Plan, any Award Agreement and all decisions and
determinations by the Committee with respect to the Plan are final, binding, and
conclusive on all parties.
SHARES SUBJECT TO THE PLAN
5.1 NUMBER OF SHARES. Subject to adjustment provided in Section
14.1, the aggregate number of shares of Stock reserved and available for grant
under the Plan will be 5,250,000.
5.2 LAPSED AWARDS. To the extent that an Award terminates,
expires, or lapses for any reason, any shares of Stock subject to the Award will
again be available to the Committee to grant Awards under the Plan.
5.3 STOCK DISTRIBUTED. Any Stock distributed pursuant to an Award
may consist, in whole or in part, of authorized and unissued Stock, treasury
Stock or Stock purchased on the open market.
5.4 LIMITATION ON NUMBER OF SHARES SUBJECT TO AWARDS.
Notwithstanding any provision in the Plan to the contrary, and subject to the
adjustment in Section 14.1, the maximum number of shares of Stock with respect
to one or more Awards that may be granted to any one Participant during any
fiscal year of the Company is 1,000,000
ELIGIBILITY AND PARTICIPATION
(a) GENERAL. Persons eligible to participate in this Plan
include all Board members, employees, officers, and executives of, and
consultants and advisors to, the Company or a Subsidiary, as determined by the
(b) FOREIGN PARTICIPANTS. To assure the viability of
Awards granted to Participants employed in foreign countries, the Committee is
authorized to provide for any special terms it considers necessary or
appropriate to accommodate differences in local law, tax policy, or custom.
Moreover, the Committee may approve any supplements to, or amendments,
restatements, or alternative versions of the Plan as it considers necessary or
appropriate for such purposes without affecting the terms of the Plan as in
effect for any other purpose; provided, however, that no such supplements,
amendments, restatements, or alternative versions may increase the share
limitations contained in Section 5.1 of the Plan.
6.2 ACTUAL PARTICIPATION. Subject to the provisions of the Plan,
the Committee may, from time to time, select from among all eligible
individuals, those to whom Awards will be granted and will determine the nature
and amount of each Award. No individual will have any right to be granted an
Award under this Plan.
7.1 GENERAL. The Committee is authorized to grant Options to
Participants on the following terms and conditions:
(a) EXERCISE PRICE. The exercise price per share of Stock
under an Option will be determined by the Committee and set forth in the Award
Agreement. The Committee may, in its discretion, grant Options (other than
Options that are intended to be Incentive Stock Options or Options that are
intended to qualify as "performance-based compensation" under Code Section
162(m)) with an exercise price of less than Fair Market Value on the date of
(b) TIME AND CONDITIONS OF EXERCISE. The Committee will
determine the time or times at which an Option may be exercised in whole or in
part. The Committee will also determine the performance or other conditions, if
any, that must be satisfied before all or part of an Option may be exercised.
Unless otherwise provided in an Award Agreement, an Option will lapse
immediately if a Participant's employment or services are terminated for Cause.
(c) PAYMENT. The Committee will determine the methods by
which the exercise price of an Option may be paid, the form of payment,
including, without limitation, cash, promissory note, shares of Stock (through
actual tender or by attestation), or other property (including broker-assisted
"cashless exercise" arrangements), and the methods by which shares of Stock will
be delivered or deemed to be delivered to Participants.
(d) EVIDENCE OF GRANT. All Options will be evidenced by a
written Award Agreement, which Agreement will include such provisions as
determined by the Committee.
7.2 INCENTIVE STOCK OPTIONS. Incentive Stock Options will be
granted only to employees and the terms of any Incentive Stock Options granted
under the Plan must comply with the following additional rules:
(a) EXERCISE PRICE. The per share exercise price for any
Incentive Stock Option may not be less than the Fair Market Value as of the date
of the grant.
(b) EXERCISE. No Incentive Stock Option may be
exercisable for more than ten years after the date of its grant.
(c) LAPSE OF OPTION. An Incentive Stock Option will lapse
under the following circumstances.
(1) The Incentive Stock Option will lapse ten
years from the date it is granted, unless it lapses earlier under the Award
(2) Unless otherwise provided in the Award
Agreement, an Incentive Stock Option will lapse upon a Participant's termination
of employment for Cause or for any other reason (other than the death or
(3) If the Participant terminates employment
because of Disability or death before the Option lapses pursuant to paragraph
(1) or (2) above, the Incentive Stock Option will lapse, unless it is sooner
exercised, on the earlier of (i) the date on which the Option would have lapsed
had the Participant not become Disabled or lived and had remain employed; or
(ii) 12 months after the date of the Participant's termination of employment
because of Disability or death. Upon the Participant's Disability or death, any
Incentive Stock Option exercisable at the Participant's Disability or death may
be exercised by the Participant's legal representative, by the person or persons
entitled to do so under the Participant's last will and testament, or, if the
Participant fails to make testamentary disposition of such Incentive Stock
Option or dies intestate, by the person or persons entitled to receive the
Incentive Stock Option under the applicable laws of descent and distribution.
(d) INDIVIDUAL DOLLAR LIMITATION. The aggregate Fair
Market Value (determined as of the grant date) of all shares of Stock with
respect to which Incentive Stock Options are first exercisable by a Participant
in any calendar year may not exceed $100,000.00 or such other limitation as
imposed by Section 422(d) of the Code, or any successor provision. To the extent
that Incentive Stock Options are first exercisable by a Participant in excess of
such limitation, the excess will be considered Non-Qualified Stock Options.
(e) TEN PERCENT OWNERS. An Incentive Stock Option will be
granted to any individual who, at the date of grant, owns stock possessing more
than ten percent of the total combined voting power of all classes of Stock only
if such Option is granted at a price that is not less than 110% of Fair Market
Value on the grant date and the Option is exercisable for no more than five
years from the grant date.
(f) EXPIRATION OF INCENTIVE STOCK OPTIONS. No Award of an
Incentive Stock Option may be made pursuant to this Plan after the tenth
anniversary of the Effective Date.
(g) RIGHT TO EXERCISE. An Incentive Stock Option may be
exercised only by the Participant during his or her lifetime,.
STOCK APPRECIATION RIGHTS
8.1 GRANT OF SARs. The Committee is authorized to grant SARs to
Participants on the following terms and conditions:
(a) RIGHT TO PAYMENT. Upon the exercise of a SAR, the
Participant to whom it is granted has the right to receive the excess, if any,
(1) The Fair Market Value of a share of Stock on
the date of exercise; over
(2) The grant price of the SAR as determined by
the Committee, which will not be less than the Fair Market Value of a share of
Stock on the date of grant in the case of any SAR related to any Incentive Stock
(b) OTHER TERMS. All SARs grants will be evidenced by an
Award Agreement. The terms, methods of exercise, methods of settlement, form of
consideration payable in settlement, and any other terms and conditions of any
SAR will be determined by the Committee at the time of the grant of the Award
and as set forth in the Award Agreement.
9.1 GRANT OF PERFORMANCE SHARES. The Committee is authorized to
grant Performance Shares to Participants on such terms and conditions as
determined by the Committee. The Committee has the discretion to determine the
number of Performance Shares granted to each Participant and such other terms
and conditions of such grant, all as set forth in the Award Agreement.
9.2 RIGHT TO PAYMENT. A grant of Performance Shares gives the
Participant rights, valued as determined by the Committee, and payable to, or
exercisable by, the Participant to whom the Performance Shares are granted, in
whole or in part, as the Committee will establishes at grant or thereafter.
Subject to the terms of the Plan, the Committee will set performance goals and
other terms or conditions to payment of the Performance Shares in its discretion
which, depending on the extent to which they are met, will determine the number
and value of Performance Shares that will be paid to the Participant.
9.3 OTHER TERMS. Performance Shares may be payable in cash, Stock,
or other property, and have such other terms and conditions as determined by the
Committee and as set forth in the Award Agreement.
RESTRICTED STOCK AWARDS
10.1 GRANT OF RESTRICTED STOCK. The Committee is authorized to make
Awards of Restricted Stock to Participants in such amounts and subject to such
terms and conditions as determined by the Committee, all as set forth in the
10.2 ISSUANCE AND RESTRICTIONS. Restricted Stock will be subject to
such restrictions on transferability and other restrictions as the Committee may
impose (including, without limitation, limitations on the right to vote
Restricted Stock or the right to receive dividends on the Restricted Stock).
These restrictions may lapse separately or in combination at such times, under
such circumstances, in such installments, or otherwise, as the Committee
determines at the time of the grant of the Award or thereafter.
10.3 FORFEITURE. Except as otherwise determined by the Committee at
the time of the grant of the Award or thereafter, upon termination of employment
or service during the applicable restriction period, Restricted Stock that is at
that time subject to restrictions will be forfeited, provided, however, that the
Committee may provide in any Restricted Stock Award Agreement that restrictions
or forfeiture conditions relating to Restricted Stock will be waived in whole or
in part in the event of terminations resulting from specified causes, and the
Committee may in other cases waive in whole or in part restrictions or
forfeiture conditions relating to Restricted Stock.
10.4 CERTIFICATES FOR RESTRICTED STOCK. Restricted Stock granted
under the Plan may be evidenced as determined by the Committee. If certificates
representing shares of Restricted Stock are registered in the name of the
Participant, the certificates must bear an appropriate legend referring to the
terms, conditions, and restrictions applicable to such Restricted Stock, and the
Company may, at its discretion, retain physical possession of the certificate
until such time as all applicable restrictions lapse.
11.1 PURPOSE. The purpose of this Article 11 is to provide the
Committee the ability to qualify the Performance Share Awards under Article 9
and the Restricted Stock Awards under Article 10 as "performance-based
compensation" under Section 162(m) of the Code. If the Committee, in its
discretion, decides to grant a Performance-Based Award to a Covered Employee,
the provisions of this Article 11 will control over any contrary provision
contained in Articles 9 or 10.
11.2 APPLICABILITY. This Article 11 will apply only to those
Covered Employees selected by the Committee to receive Performance-Based Awards.
The Committee may, in its discretion, grant Restricted Stock Awards or
Performance Share Awards to Covered Employees that do not satisfy the
requirements of this Article 11. The designation of a Covered Employee as a
Participant for a Performance Period does not entitle the Participant to receive
an Award for the period. Moreover, designation of a Covered Employee as a
Participant for a particular Performance Period will not require designation of
such Covered Employee as a Participant in
any subsequent Performance Period and designation of one Covered Employee as a
Participant will not require designation of any other Covered Employees as a
Participant in such period or in any other Performance Period.
11.3 DISCRETION OF COMMITTEE WITH RESPECT TO PERFORMANCE AWARDS.
With regard to a particular Performance Period, the Committee will have full
discretion to select the length of such Performance Period, the type of
Performance-Based Awards to be issued, the kind and/or level of the Performance
Goal, and whether the Performance Goal is to apply to the Company, a Subsidiary
or any division or business unit or to the individual.
11.4 PAYMENT OF PERFORMANCE AWARDS. Unless otherwise provided in
the Award Agreement, a Participant must be employed by the Company or a
Subsidiary on the last day of the Performance Period to be eligible for a
Performance Award for such Performance Period. Furthermore, a Participant will
be eligible to receive payment under a Performance-Based Award for a Performance
Period only if the Performance Goals for such period are achieved. In
determining the actual size of an individual Performance-Based Award, the
Committee may reduce or eliminate the amount of the Performance-Based Award
earned for the Performance Period, if in its sole and absolute discretion, such
reduction or elimination is appropriate.
11.5 MAXIMUM AWARD PAYABLE. The maximum Performance-Based Award
payable to any one Participant under the Plan for a Performance Period is
1,000,000 shares of Stock, or if the Performance-Based Award is paid in cash,
the maximum Performance-Based Award is determined by multiplying 1,000,000 by
the Fair Market Value of the Stock as of the date the Performance-Based Award is
12.1 IPO AWARDS. IPO Awards will be awarded to Participants
selected by the Committee and will be subject to the following terms and
(a) EFFECTIVE DATE OF AWARDS. The effective date of the
IPO Awards will be the date of the Company's initial public offering of Stock.
(b) EXERCISE PRICE FOR AWARDS. Notwithstanding anything
in the Plan to the contrary, the exercise price per share of Stock under the IPO
Awards will be the price at which the Company's Stock is offered to the public
in its initial public offering of Stock ("IPO Price").
(c) AMOUNT OF THE IPO AWARDS. Each Participant selected
to receive an IPO Award and who became an employee by the Company on or after
_______, 1999, will be entitled to receive an Option to purchase 50 shares of
Stock. Each Participant selected to receive an IPO Award and who became an
employee by the Company before _______, 1999, will be entitled to receive an
Option to purchase 100 shares of Stock. Such Option will be designated as a
Non-Qualified Stock Option.
(d) TIME AND CONDITIONS OF EXERCISE. The IPO Awards will
become fully exercisable on the first anniversary of the date of grant. Unless
otherwise provided in the Award Agreement, the IPO Award will lapse upon a
Participant's termination of employment or service with the Company or a
Subsidiary for any reason, and will include such other provisions as may be
specified by the Committee.
(e) PAYMENT. The Committee will determine the methods by
which the exercise price of the IPO Awards may be paid, the form of payment,
including, without limitation, cash, promissory note, shares of Stock (through
actual tender or by attestation), or other property (including broker-assisted
"cashless exercise" arrangements), and the methods by which shares of Stock will
be delivered or deemed to be delivered to Participants.
(f) EVIDENCE OF GRANT. All IPO Awards will be evidenced
by an Award Agreement.
PROVISIONS APPLICABLE TO AWARDS
13.1 STAND-ALONE AND TANDEM AWARDS. Awards granted under the Plan
may, in the discretion of the Committee, be granted either alone, in addition
to, or in tandem with, any other Award granted under the Plan. Awards granted in
addition to or in tandem with other Awards may be granted either at the same
time as or at a different time from the grant of such other Awards.
13.2 EXCHANGE PROVISIONS. The Committee may at any time offer to
exchange or buy out any previously granted Award for a payment in cash, Stock,
or another Award, based on the terms and conditions the Committee determines and
communicates to the Participant at the time the offer is made.
13.3 TERM OF AWARD. The term of each Award will be for the period
as determined by the Committee, provided that in no event will the term of any
Incentive Stock Option or a Stock Appreciation Right granted in tandem with the
Incentive Stock Option exceed a period of ten years from the date of its grant.
13.4 FORM OF PAYMENT FOR AWARDS. Subject to the terms of the Plan
and any applicable law or Award Agreement, payments or transfers to be made by
the Company or a Subsidiary on the grant or exercise of an Award may be made in
such forms as the Committee determines at or after the time of grant, including
without limitation, cash, promissory note, Stock, other Awards, or other
property, or any combination, and may be made in a single payment or transfer,
in installments, or on a deferred basis, in each case determined in accordance
with rules adopted by, and at the discretion of, the Committee.
13.5 LIMITS ON TRANSFER. No right or interest of a Participant in
any Award may be pledged, encumbered, or hypothecated to or in favor of any
party other than the Company or a Subsidiary, or will be subject to any lien,
obligation, or liability of such Participant to any other party other than the
Company or a Subsidiary. Except as otherwise provided by the Committee, no Award
will be assignable or transferable by a Participant other than by will or the
laws of descent and distribution.
13.6 BENEFICIARIES. Notwithstanding Section 13.5, a Participant
may, in the manner determined by the Committee, designate a beneficiary to
exercise the rights of the Participant and to receive any distribution with
respect to any Award upon the Participant's death. A beneficiary, legal
guardian, legal representative, or other person claiming any rights under the
Plan is subject to all terms and conditions of the Plan and any Award Agreement
applicable to the Participant, except to the extent the Plan and Award Agreement
otherwise provide, and to any additional restrictions deemed necessary or
appropriate by the Committee. If the Participant is married, a designation of a
person other than the Participant's spouse as his beneficiary with respect to
more than 50% of the Participant's interest in the Award will not be effective
without the written consent of the Participant's spouse. If no beneficiary has
been designated or survives the Participant, payment will be made to the person
entitled thereto under the Participant's will or the laws of descent and
distribution. Subject to the foregoing, a beneficiary designation may be changed
or revoked by a Participant at any time provided the change or revocation is
filed with the Committee.
13.7 STOCK CERTIFICATES. Notwithstanding anything herein to the
contrary, the Company will not be required to issue or deliver any certificates
evidencing shares of Stock pursuant to the exercise of any Awards, unless and
until the Board has determined, with advice of counsel, that the issuance and
delivery of such certificates is in compliance with all applicable laws,
regulations of governmental authorities and, if applicable, the requirements of
any exchange on which the shares of Stock are listed or traded. All Stock
certificates delivered under the Plan are subject to any stop-transfer orders
and other restrictions as the Committee deems necessary or advisable to comply
with Federal, state, or foreign jurisdiction, securities or other laws, rules
and regulations and the rules of any national securities exchange or automated
quotation system on which the Stock is listed, quoted, or traded. The Committee
may place legends on any Stock certificate to reference restrictions applicable
to the Stock. In addition to the terms and conditions provided herein, the Board
may require that a Participant make such reasonable covenants, agreements, and
representations as the Board, in its discretion, deems advisable in order to
comply with any such laws, regulations, or requirements.
13.8 ACCELERATION UPON A CHANGE OF CONTROL. If a Change of Control
occurs, all outstanding Options, Stock Appreciation Rights, and other Awards
will become fully exercisable and all restrictions on outstanding Awards will
lapse. To the extent that this provision causes Incentive Stock Options to
exceed the dollar limitation set forth in Section 7.2(d), the excess Options
will be deemed to be Non-Qualified Stock Options. Upon, or in anticipation of,
such an event, the Committee may cause every Award outstanding hereunder to
terminate at a specific time in the future and will give each Participant the
right to exercise Awards during a period of time as the Committee, in its sole
and absolute discretion, will determine.
CHANGES IN CAPITAL STRUCTURE
(a) SHARES AVAILABLE FOR GRANT. If there is any change in
the number of shares of Stock outstanding by reason of any stock dividend or
merger, consolidation, combination or exchange of shares or similar corporate
change, the maximum aggregate number of shares of Stock with respect to which
the Committee may grant Awards will be appropriately adjusted by the Committee.
If there is any change in the number of shares of Stock outstanding by reason of
any other event or transaction, the Committee may, but need not, make such
adjustments in the number and class of shares of Stock with respect to which
Awards may be granted as the Committee may deem appropriate.
(b) OUTSTANDING AWARDS - INCREASE OR DECREASE IN ISSUED
SHARES WITHOUT CONSIDERATION. Subject to any required action by the shareholders
of the Company, if there is any increase or decrease in the number of issued
shares of Stock resulting from a subdivision or consolidation of shares of Stock
or the payment of a stock dividend (but only on the shares of Stock), or any
other increase or decrease in the number of such shares effected without receipt
or payment of consideration by the Company, the Committee will proportionally
adjust the number of shares of Stock subject to each outstanding Award and the
exercise price per share of Stock of each such Award.
(c) OUTSTANDING AWARDS - CERTAIN MERGERS. Subject to any
required action by the shareholders of the Company, if the Company is the
surviving corporation in any merger or consolidation (except a merger or
consolidation as a result of which the holders of shares of Stock receive
securities of another corporation), each Award outstanding on the date of such
merger or consolidation will pertain to and apply to the securities which a
holder of the number of shares of Stock subject to such Award would have
received in such merger or consolidation.
(d) OUTSTANDING AWARDS - OTHER CHANGES. If any other
change in the capitalization of the Company or corporate change other than those
specifically referred to in Article 14, the Committee may, in its absolute
discretion, make such adjustments in the number and class of shares subject to
Awards outstanding on the date on which such change occurs and in the per share
exercise price of each Award as the Committee may consider appropriate to
prevent dilution or enlargement of rights.
(e) NO OTHER RIGHTS. Except as expressly provided in the
Plan, no Participant will have any rights by reason of any subdivision or
consolidation of shares of stock of any class, the payment of any dividend, any
increase or decrease in the number of shares of stock of any class or any
dissolution, liquidation, merger, or consolidation of the Company or any other
corporation. Except as expressly provided in the Plan, no issuance by the
Company of shares of stock of any class, or securities convertible into shares
of stock of any class, will affect, and no adjustment by reason thereof will be
made with respect to, the number of shares of Stock subject to an Award or the
exercise price of any Award.
AMENDMENT, MODIFICATION, AND TERMINATION
15.1 AMENDMENT, MODIFICATION, AND TERMINATION. With the approval of
the Board, at any time and from time to time, the Committee may terminate, amend
or modify the Plan; provided, however, that to the extent necessary and
desirable to comply with
any applicable law, regulation, or stock exchange rule, the Company will obtain
shareholder approval of any Plan amendment in such a manner and to such a degree
15.2 AWARDS PREVIOUSLY GRANTED. Except as otherwise provided in the
Plan, including without limitation, the provisions of Article 14, no
termination, amendment, or modification of the Plan will adversely affect in any
material way any Award previously granted under the Plan, without the written
consent of the Participant.
16.1 NO RIGHTS TO AWARDS. No Participant, employee, or other person
will have any claim to be granted any Award under the Plan, and neither the
Company nor the Committee is obligated to treat Participants, employees, and
other persons uniformly.
16.2 NO STOCKHOLDERS RIGHTS. No Award gives the Participant any of
the rights of a stockholder of the Company unless and until shares of Stock are
in fact issued to such person in connection with such Award.
16.3 WITHHOLDING. The Company or any Subsidiary has the authority
and the right to deduct or withhold, or require a Participant to remit to the
Company, an amount sufficient to satisfy Federal, state, and local taxes
(including the Participant's FICA obligation) required by law to be withheld
with respect to any taxable event arising as a result of this Plan. With the
Committee's consent, a Participant may elect to have the Company withhold from
those shares of Stock that would otherwise be received upon the exercise of any
Option, a number of shares having a Fair Market Value equal to the minimum
statutory amount necessary to satisfy the Company's applicable federal, state,
local and foreign income and employment tax withholding obligations.
16.4 NO RIGHT TO EMPLOYMENT OR SERVICES. Nothing in the Plan or any
Award Agreement will interfere with or limit in any way the right of the Company
or any Subsidiary to terminate any Participant's employment or services at any
time, nor confer upon any Participant any right to continue in the employ or
service of the Company or any Subsidiary.
16.5 UNFUNDED STATUS OF AWARDS. The Plan is intended to be an
"unfunded" plan for incentive compensation. With respect to any payments not yet
made to a Participant pursuant to an Award, nothing contained in the Plan or any
Award Agreement will give the Participant any rights that are greater than those
of a general creditor of the Company or any Subsidiary.
16.6 INDEMNIFICATION. To the extent allowable under applicable law,
each member of the Committee or the Board will be indemnified and held harmless
by the Company from any loss, cost, liability, or expense that may be imposed
upon or reasonably incurred by such member in connection with or resulting from
any claim, action, suit, or proceeding to which he or she may be a party or in
which he or she may be involved by reason of any action or failure to act under
the Plan and against and from any and all amounts paid by him or her in
satisfaction of judgment in such action, suit, or proceeding against him or her
provided he or she gives the Company an opportunity, at its own expense, to
handle and defend the same before he or she
undertakes to handle and defend it on his or her own behalf. The foregoing right
of indemnification is in addition to any other rights of indemnification to
which such persons may be entitled under the Company's Articles of Incorporation
or Bylaws, as a matter of law, or otherwise, or any power that the Company may
have to indemnify them or hold them harmless.
16.7 RELATIONSHIP TO OTHER BENEFITS. No payment under the Plan will
be taken into account in determining any benefits under any pension, retirement,
savings, profit sharing, group insurance, welfare or other benefit plan of the
Company or any Subsidiary.
16.8 EXPENSES. The Company and its Subsidiaries will pay the
expenses of administering the Plan.
16.9 TITLES AND HEADINGS. The titles and headings of the Sections
in the Plan are for convenience of reference only, and if there is any conflict,
the text of the Plan, rather than such titles or headings, will control.
16.10 FRACTIONAL SHARES. No fractional shares of stock will be
issued and the Committee will determine, in its discretion, whether cash will be
given in lieu of fractional shares or whether such fractional shares will be
eliminated by rounding up or down as appropriate.
16.11 SECURITIES LAW COMPLIANCE. With respect to any person who is,
on the relevant date, obligated to file reports under Section 16 of the Exchange
Act, transactions under this Plan are intended to comply with all applicable
conditions of Rule 16b-3 or its successors under the Exchange Act. To the extent
any provision of the Plan or action by the Committee fails to so comply, it will
be void to the extent permitted by law and voidable as deemed advisable by the
16.12 GOVERNMENT AND OTHER REGULATIONS. The obligation of the
Company to make payment of awards in Stock or otherwise will be subject to all
applicable laws, rules, and regulations, and to such approvals by government
agencies as may be required. The Company will be under no obligation to register
under the Securities Act of 1933, as amended, any of the shares of Stock paid
under the Plan. If the shares paid under the Plan may in certain circumstances
be exempt from registration under the Securities Act of 1933, as amended, the
Company may restrict the transfer of such shares in such manner as it deems
advisable to ensure the availability of any such exemption.
16.13 GOVERNING LAW. The Plan and all Award Agreements will be
construed in accordance with and governed by the laws of the State of Arizona.