Cellular Technical Services Company, Inc.
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14C
Information Statement Pursuant to Section
14(c) of the Securities
Exchange Act of 1934 (Amendment No.
)
Check the appropriate box:
|
|
|
o
Preliminary Information Statement
|
|
|
o
Confidential, for Use of the Commission Only (as
permitted by Rule 14c-5(d)(2))
|
x
Definitive Information Statement
|
|
|
CELLULAR TECHNICAL SERVICES COMPANY, INC.
(Name of Registrant As Specified In Its Charter)
Payment of Filing Fee (Check the appropriate box):
|
|
x |
No fee required
|
|
o |
Fee computed on table below per Exchange Act
Rules 14c-5(g) and 0-11
|
|
|
(1) |
Title of each class of securities to which
transaction applies:
|
|
|
(2) |
Aggregate number of securities to which
transaction applies:
|
|
|
(3) |
Per unit price or other underlying value of
transaction computed pursuant to Exchange Act Rule 0-11
(set forth the amount on which the filing fee is calculated and
state how it was determined):
|
|
|
(4) |
Proposed maximum aggregate value of transaction:
|
|
|
o |
Fee paid previously with preliminary materials.
|
|
o |
Check box if any part of the fee is offset as
provided by Exchange Act Rule 0-11(a)(2) and identify the
filing for which the offsetting fee was paid previously.
Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
|
|
|
(1) |
Amount Previously Paid:
|
|
|
(2) |
Form, Schedule or Registration Statement No.:
|
CELLULAR
TECHNICAL SERVICES COMPANY, INC
4400 Biscayne Blvd.
Suite 980
Miami, Florida 33137
Dear Stockholders:
We are writing to advise you that we intend to amend our
Restated Certificate of Incorporation to (i) change our
name to SafeStitch Medical, Inc., (ii) increase the number
of authorized shares of all classes of our capital stock,
(iii) eliminate the classification and staggering of our
Board of Directors, (iv) delete the provision restricting
our ability to acquire common stock from certain of our
stockholders holding 5% or more of our outstanding voting
securities, (v) delete all supermajority voting
requirements, (vi) delete the provision setting forth
compromise procedures in the event of insolvency and
(vii) delete immaterial provisions. Additionally, we are
terminating our 1996 Stock Option Plan, as amended, and adopting
the SafeStitch Medical, Inc. 2007 Incentive Compensation Plan.
The foregoing actions were approved on November 13, 2007 by
our Board of Directors. In addition, the amendment to our
Restated Certificate of Incorporation and the SafeStitch
Medical, Inc. 2007 Incentive Compensation Plan were approved by
the holders of approximately 79% of our issued and outstanding
common stock. Approval of the amendment to our Restated
Certificate of Incorporation required the approval of an
aggregate of greater than two-thirds of our issued and
outstanding common stock, and approval of the SafeStitch
Medical, Inc. 2007 Incentive Compensation Plan required the
approval of an aggregate of greater than one-half of our issued
and outstanding common stock, each of which were approved on
November 13, 2007 by a written consent in lieu of a special
meeting of the stockholders in accordance with the relevant
sections of the Delaware General Corporation Law. We will file
the Certificate of Amendment to our Restated Certificate of
Incorporation, a copy of which is attached hereto as
Annex A, with the Secretary of State of Delaware on or
about January 2, 2008. The SafeStitch Medical, Inc. 2007
Incentive Compensation Plan has been named such in anticipation
of the change of our name to SafeStitch Medical,
Inc. pursuant to the stockholder approval discussed herein.
The actions described in this Information Statement were taken
shortly after the consummation of that certain Share Transfer,
Exchange and Contribution Agreement (the Exchange
Agreement), dated as of July 25, 2007, by and
among the Company, SafeStitch LLC, a Virginia limited liability
company (SafeStitch), and all of the members
of SafeStitch (the SafeStitch Members), who
collectively held 100% of the membership interests (the
Membership Interests) in SafeStitch. Pursuant
to the terms of the Exchange Agreement, the SafeStitch Members
have transferred all of their Membership Interests to the
Company in exchange for an aggregate of 11,256,369 newly issued
shares of the Companys common stock, par value $0.001 per
share.
WE ARE NOT ASKING YOU FOR A PROXY AND YOU ARE REQUESTED NOT
TO SEND US A PROXY.
No action is required by you. The accompanying Information
Statement is furnished only to inform our stockholders of the
actions described above before they take place in accordance
with
Rule 14c-2
of the Securities Exchange Act of 1934, as amended. This
Information Statement is first mailed to you on or about
December 13, 2007.
Please feel free to call us at
(305) 575-6000
should you have any questions on the enclosed Information
Statement. We thank you for your continued interest in Cellular
Technical Services Company, Inc.
For the Board of Directors of
Cellular Technical Services Company, Inc.
|
|
|
|
By:
|
/s/ Jane
H. Hsiao, Ph.D., MBA
|
Jane H. Hsiao, Ph.D., MBA
Chairman
TABLE OF CONTENTS
CELLULAR
TECHNICAL SERVICES COMPANY, INC.
4400 Biscayne Blvd.
Suite 980
Miami, Florida 33137
INFORMATION
STATEMENT REGARDING
ACTION TAKEN BY WRITTEN CONSENT OF
MAJORITY STOCKHOLDERS
IN LIEU OF A SPECIAL MEETING
WE ARE
NOT ASKING YOU FOR A PROXY,
AND YOU ARE REQUESTED NOT TO SEND US A PROXY.
GENERAL
This Information Statement is being furnished to the
stockholders of Cellular Technical Services Company, Inc., a
Delaware corporation (the Company or
CTSC), in connection with the adoption of our
Amended and Restated Certificate of Incorporation by written
consent of our Board of Directors and the holders of a
two-thirds majority of our issued and outstanding common stock
in lieu of a special meeting. On November 13, 2007, our
Board of Directors approved an Amendment to our Restated
Certificate of Incorporation to (i) change our name to
SafeStitch Medical, Inc., (ii) increase the number of
authorized shares of all classes of our capital stock,
(iii) eliminate the classification and staggering of our
Board of Directors, (iv) delete the provision restricting
our ability to acquire common stock from certain of our
stockholders holding 5% or more of our outstanding voting
securities, (v) delete all supermajority voting
requirements, (vi) delete the provision setting forth
compromise procedures in the event of insolvency and
(vii) delete immaterial provisions (collectively, the
Amendment). This action will become effective
on the date of filing the Amendment with the Delaware Secretary
of State in accordance with the written consent of our directors
and the holders of approximately 79% of our issued and
outstanding common stock, which is in excess of the two-thirds
majority of our issued and outstanding common stock required in
accordance with the relevant sections of the Delaware General
Corporation Law.
Additionally, on November 13, 2007, our Board of Directors
adopted the SafeStitch Medical, Inc. 2007 Incentive Compensation
Plan (the 2007 Plan). This action was
approved by written consent on the same date by the holders of
approximately 79% of our issued and outstanding common stock,
which is in excess of the majority of our issued and outstanding
voting securities required. As of November 13, 2007, there
are no options outstanding under our existing 1996 Stock Option
Plan, and we have concluded that it is preferable to adopt a new
incentive plan rather than amend our 1996 Stock Option Plan,
which will be terminated on or about January 2, 2008.
As of October 2, 2007, there were 16,093,027 shares of
our common stock issued and outstanding and each such share is
entitled to one vote upon any matter submitted to our
stockholders. We have never issued any preferred stock. The
following stockholders who as of such date collectively owned
approximately 79% of our outstanding common stock, which was in
excess of the required majority of outstanding voting securities
necessary for the adoption of this action, have executed a
written consent approving the Amendment and the 2007 Plan.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Percentage of
|
|
|
|
|
|
|
Outstanding Common
|
|
Name and Address of Stockholder
|
|
Number of Shares
|
|
|
Shares
|
|
|
Frost Gamma Investments Trust
|
|
|
4,028,065
|
|
|
|
25
|
%
|
4400 Biscayne Boulevard
Suite 1500
Miami, Florida 33137
|
|
|
|
|
|
|
|
|
Dr. Jane H. Hsiao, Ph.D., MBA
|
|
|
2,803,965
|
|
|
|
17.4
|
%
|
4400 Biscayne Boulevard
Suite 1500
Miami, Florida 33137
|
|
|
|
|
|
|
|
|
Dr. Charles Filipi
|
|
|
2,814,092
|
|
|
|
17.5
|
%
|
12370 Rose Lane
Omaha, Nebraska 68154
|
|
|
|
|
|
|
|
|
Jeffrey G. Spragens
|
|
|
1,689,456
|
|
|
|
10.5
|
%
|
4400 Biscayne Boulevard
Suite 1500
Miami, Florida 33137
|
|
|
|
|
|
|
|
|
Joy F. Spragens Family Trust
|
|
|
562,818
|
|
|
|
3.5
|
%
|
Dated November 18, 2003
c/o Kathleen
Flannigan Norris
4841 Rodman Street, N.W.
Washington, DC 20016
|
|
|
|
|
|
|
|
|
RSLS Investments LLC
|
|
|
562,818
|
|
|
|
3.5
|
%
|
c/o Judy
Gibson
Mint Management Company
1125-A Inman Avenue
Edison, NJ 08820
|
|
|
|
|
|
|
|
|
Steven D. Rubin
|
|
|
240,128
|
|
|
|
1.5
|
%
|
4400 Biscayne Boulevard
Suite 1500
Miami, Florida 33137
|
|
|
|
|
|
|
|
|
The elimination of the need for a meeting of stockholders to
approve the actions described in this Information Statement is
made possible by Section 228 of the Delaware General
Corporation Law, which provides that the written consent of the
holders of outstanding shares of voting stock, having not less
than the minimum number of votes that would be necessary to
authorize or take such action at a meeting at which all shares
entitled to vote thereon were present and voted, may be
substituted for such a meeting. In order to eliminate the costs
involved in holding a special meeting, our Board of Directors
elected to utilize the written consent of the holders of in
excess of a two-thirds majority in interest of our voting
securities.
Our Board of Directors unanimously approved the Exchange
Agreement, for which, as permitted by applicable Delaware law,
we did not obtain and are not soliciting stockholder approval.
Delaware law requires, however, that we obtain stockholder
approval to amend our Restated Certificate of Incorporation to
(i) change our name to SafeStitch Medical, Inc.,
(ii) increase the number of authorized shares of all
classes of our capital stock, (iii) eliminate the
classification and staggering of our Board of Directors,
(iv) delete the provision restricting our ability to
acquire common stock from those of our stockholders holding 5%
or more of our outstanding voting securities, (v) delete
all supermajority voting requirements, (vi) delete the
provision setting forth compromise procedures in the event of
insolvency and (vii) delete immaterial provisions.
Additionally, applicable tax law and Securities and Exchange
Commission rules require that we obtain stockholder approval of
the 2007 Plan. Accordingly, we have obtained the written consent
of at least two-thirds of our stockholders approving these
actions and are mailing to our remaining stockholders this
Information Statement disclosing that we have obtained such
consent. Also, the transactions pursuant to the Exchange
Agreement resulted in a change of a majority of our directors
and, accordingly, we have mailed an information statement
disclosing this change to our stockholders.
2
Pursuant to Section 228 of the Delaware General Corporation
Law, we are required to provide prompt notice of the taking of
those actions described above without a meeting of stockholders
to all stockholders who did not consent in writing to such
action. This Information Statement serves as this notice. This
Information Statement will be mailed on or about
December 13, 2007 to stockholders of record, and is being
delivered to inform you of the corporate actions described
herein before they take effect in accordance with
Rule 14c-2
of the Securities Exchange Act of 1934, as amended.
The entire cost of furnishing this Information Statement will be
borne by the Company. We will request brokerage houses,
nominees, custodians, fiduciaries and other like parties to
forward this Information Statement to the beneficial owners of
our voting securities held of record by them, and we will
reimburse such persons for out-of-pocket expenses incurred in
forwarding such material.
No
Dissenters Rights
No dissenters rights are afforded to our stockholders
under Delaware law as a result of the adoption of the Amendment
or the 2007 Plan.
OUR
PRINCIPAL STOCKHOLDERS
Our voting securities are composed of our common stock, par
value $0.001 per share, of which 16,093,027 shares were
outstanding on October 2, 2007. The holders of our common
stock are entitled to one vote for each outstanding share on all
matters submitted to our stockholders. We have never issued any
preferred stock. The following table contains information
regarding record ownership of our common stock as of
December 7, 2007 held by:
|
|
|
|
|
persons who own beneficially more than 5% of our outstanding
voting securities;
|
|
|
|
our directors;
|
|
|
|
named executive officers; and
|
|
|
|
all of our directors and officers as a group.
|
|
|
|
|
|
|
|
|
|
|
|
Number of
|
|
|
Percentage of
|
|
|
|
Outstanding
|
|
|
Outstanding
|
|
|
|
Shares
|
|
|
Shares
|
|
|
|
Beneficially
|
|
|
of Common
|
|
Name and Title of Beneficial Owner
|
|
Owned(1)
|
|
|
Stock
|
|
|
Phillip Frost
|
|
|
4,813,448
|
(2)
|
|
|
28.5
|
%
|
4400 Biscayne Boulevard
Suite 1500
Miami, Florida 33137
|
|
|
|
|
|
|
|
|
Frost Gamma Investments Trust
|
|
|
4,813,448
|
(2)
|
|
|
28.5
|
%
|
4400 Biscayne Boulevard
Suite 1500
Miami, Florida 33137
|
|
|
|
|
|
|
|
|
Jane H. Hsiao, Ph.D., MBA, Chairman of the Board
|
|
|
3,589,348
|
(3)
|
|
|
21.3
|
%
|
4400 Biscayne Boulevard
Suite 1500
Miami, Florida 33137
|
|
|
|
|
|
|
|
|
Jeffrey G. Spragens, Chief Executive Officer, President
|
|
|
2,834,7.30
|
(4)
|
|
|
17.6
|
%
|
and Director
4400 Biscayne Boulevard
Suite 1500
Miami, Florida 33137
|
|
|
|
|
|
|
|
|
Dr. Charles Filipi, Medical Director and Director
|
|
|
2,814,092
|
|
|
|
17.5
|
%
|
12370 Rose Lane
|
|
|
|
|
|
|
|
|
Omaha, Nebraska 68154
|
|
|
|
|
|
|
|
|
3
|
|
|
|
|
|
|
|
|
|
|
Number of
|
|
|
Percentage of
|
|
|
|
Outstanding
|
|
|
Outstanding
|
|
|
|
Shares
|
|
|
Shares
|
|
|
|
Beneficially
|
|
|
of Common
|
|
Name and Title of Beneficial Owner
|
|
Owned(1)
|
|
|
Stock
|
|
|
Dr. Stewart B. Davis, Chief Operating Officer and Secretary
|
|
|
22,167
|
(5)
|
|
|
|
*
|
4400 Biscayne Boulevard
Suite 1500
Miami, Florida 33137
|
|
|
|
|
|
|
|
|
Kenneth Block, Chief Financial Officer
|
|
|
7,500
|
|
|
|
|
*
|
20 East Sunrise Highway
Valley Stream, New York 11581
|
|
|
|
|
|
|
|
|
Dr. Kenneth Heithoff, Director
|
|
|
0
|
|
|
|
|
*
|
5775 Wayzata Boulevard
Suite 190
Minneapolis, Minnesota 55416
|
|
|
|
|
|
|
|
|
Richard Pfenniger, Jr., Director
|
|
|
115,000
|
|
|
|
|
*
|
7200 Corporate Center Drive
Suite 600
Miami, Florida 33426
|
|
|
|
|
|
|
|
|
Steven D. Rubin, Director
|
|
|
1,025,511
|
(6)
|
|
|
6.1
|
%
|
4400 Biscayne Boulevard
Suite 1500
Miami, Florida 33137
|
|
|
|
|
|
|
|
|
Kevin Wayne, Director
|
|
|
0
|
|
|
|
|
*
|
24 Pine Tree Lane
Lowell, Massachusetts 01854
|
|
|
|
|
|
|
|
|
Stephen Katz, Former Chairman of the Board of Directors
|
|
|
318,103
|
(7)
|
|
|
2.0
|
%
|
Former Chief Executive Officer and Former President
20 East Sunrise Highway
Valley Stream, New York 11581
|
|
|
|
|
|
|
|
|
|
|
|
* |
|
less than 1%. |
|
(1) |
|
All shares beneficially owned represent solely shares of common
stock unless otherwise indicated. |
|
|
|
(2) |
|
Frost Gamma Investments Trust holds 4,028,065 shares of the
Companys common stock. Dr. Phillip Frost is the
trustee and Frost Gamma, Limited Partnership is the sole and
exclusive beneficiary of Frost Gamma Investments Trust.
Dr. Frost is one of two limited partners of Frost Gamma,
Limited Partnership. The general partner of Frost Gamma Limited
Partnership is Frost Gamma Inc. and the sole shareholder of
Frost Gamma, Inc. is Frost-Nevada Corporation. Dr. Frost is
also the sole shareholder of Frost-Nevada Corporation. The
number of shares included above also includes warrants to
purchase 785,383 shares of the Companys common stock
owned directly by The Frost Group, LLC. Frost Gamma Investments
Trust is a principal member of The Frost Group, LLC.
Dr. Frost and the Frost Gamma Investments Trust disclaims
beneficial ownership of these warrants to purchase common stock,
except to the extent of any pecuniary interest therein. |
|
|
|
(3) |
|
Includes warrants to purchase 785,383 shares of CTSC common
stock held by The Frost Group, LLC. Dr. Hsiao is a member
of The Frost Group, LLC. Dr. Hsiao disclaims beneficial
ownership of the securities held by The Frost Group, LLC, except
to the extent of her pecuniary interest therein. |
|
(4) |
|
Includes 562,818 shares owned by each of the Joy Fowler
Spragens Family Trust, and RSLS Investments LLC. The Trust is an
irrevocable trust established by Joy Fowler Spragens, the spouse
of Mr. Spragens, for the benefit of her descendants and
relatives who are unrelated to Mr. Spragens. Although
Mr. Spragens is the manager of RSLS Investments LLC, the
LLC is 100% owned by his adult children. Accordingly,
Mr. Spragens disclaims any beneficial ownership of the
shares held by the Joy Fowler Spragens Family Trust and RSLS
Investment LLC. Includes warrants held by Mr. Spragens to
purchase 20,138 shares of CTSC common stock. |
4
|
|
|
(5) |
|
Includes options to purchase 22,167 shares of CTSC common
stock. Dr. Davis holds options to purchase an additional
66,500 shares of CTSC common stock, 1/3 of which become
exercisable on September 11th of each of 2008, 2009 and
2010. |
|
(6) |
|
Includes warrants to purchase 785,383 shares of CTSC common
stock held by The Frost Group, LLC. Mr. Rubin is a member
of The Frost Group, LLC. Mr. Rubin disclaims beneficial
ownership of the securities held by The Frost Group, LLC, except
to the extent of his pecuniary interest therein. |
|
(7) |
|
Includes 41,273 shares held by a partnership controlled by
Mr. Katz. |
Change of
Control
On September 4, 2007, we completed the acquisition of
SafeStitch LLC, a privately-held Virginia limited liability
company (SafeStitch), pursuant to a Share Transfer,
Exchange and Contribution Agreement, dated as of July 25,
2007 (the Share Exchange Agreement), by and among
us, SafeStitch and the members of SafeStitch (the
SafeStitch Members) holding 100% of the outstanding
membership interests in SafeStitch (the Membership
Interests). In accordance with the Share Exchange
Agreement, we acquired the Membership Interests in exchange for
11,256,369 shares of our common stock (the Share
Exchange).
Additionally, we granted warrants to purchase a total of
805,521 shares of our common stock (the
Warrants) to The Frost Group, LLC and Jeffrey G.
Spragens in connection with a line of credit of up to
$4 million that was provided to us by The Frost Group, LLC
and Jeffrey G. Spragens simultaneously with the closing of the
Share Exchange. The Warrants have a ten year term and an assumed
exercise price of $0.25 per share of common stock.
Dr. Phillip Frost has a controlling interest in The Frost
Group, LLC and is the largest beneficial holder of our common
stock. Dr. Jane Hsiao and Steven D. Rubin, two of our
directors, are members of The Frost Group, LLC. Jeffrey G.
Spragens is our Chief Executive Officer, President and a
director. Frost Gamma Investments Trust, Dr. Phillip Frost,
Dr. Jane Hsiao, Steven D. Rubin and Jeffrey G. Spragens
were beneficial owners of membership interests in SafeStitch
prior to the consummation of the Share Exchange.
Prior to the Share Exchange, Frost Gamma Investments Trust and
Dr. Phillip Frost each beneficially owned (as such term is
defined in
Rule 13d-3
of the Exchange Act of 1934, as amended) 1,425,000 shares
of our common stock, representing 29.5% of our then-outstanding
voting securities, and Dr. Jane Hsiao beneficially owned
215,000 shares of our common stock, representing 4.5% of
our then-outstanding voting securities. Immediately following
the Share Exchange, Frost Gamma Investments Trust and
Dr. Phillip Frost beneficially owned 4,799,348 shares
of our common stock, and Dr. Jane Hsiao beneficially owned
3,589,348 shares of common stock, representing 28.4% and
21.3%, respectively, of our then outstanding voting securities.
In addition, Dr. Charles Filipi and Jeffrey G. Spragens,
who previously did not own any shares of our common stock,
beneficially owned 2,814,092 and 2,834,230 shares of common
stock, respectively, or 17.5% and 17.6%, respectively, of our
then outstanding voting securities.
5
THE
AMENDMENT
We originally incorporated as NCS Ventures Corp. in 1988 and
changed our name to Cellular Technical Services Company, Inc. in
May 1991 when we entered the business of developing and
providing real-time information processing and information
management systems for the wireless communications industry.
Following the consummation of the transactions contemplated by
the Exchange Agreement, we decided to change our name to
SafeStitch Medical, Inc.
Furthermore, the Amendment will increase the aggregate number of
shares of all classes of capital stock that the Company may
issue from 35,000,000 to 250,000,000, which is composed of
225,000,000 shares of common stock, par value $0.001 per
share, and 25,000,000 shares of preferred stock, par value
$0.01 per share. This increase in authorized share capital does
not affect the number of shares of stock presently outstanding,
nor does it affect the number of shares that you own; however,
our issuance of additional shares may dilute your percentage
ownership of the Company.
Our Board of Directors is presently divided into three classes,
and the terms of the directors in each such class expire in
three consecutive years. At each annual meeting of stockholders,
the successors to the class of directors whose terms then expire
are elected to hold office for new three-year terms and until
their successors have been elected and qualified. The Amendment
eliminates this staggered arrangement with the effect that all
directors on the board comprise a single class; therefore, all
positions on the Board of Directors may be subject to an
election in any given year.
Any vacancy occurring in the board of directors, including any
vacancy created by reason of an increase in the number of
directors, shall be filled for the unexpired term by the
concurring vote of a majority of the directors then in office,
whether or not a quorum, and any director so chosen shall hold
office for the remainder of the full term of the director whose
departure caused the vacancy and until such directors
successor shall have been elected and qualified.
In order that we have maximum flexibility to acquire our own
capital stock, the Amendment eliminates the restrictive
provision in our Restated Certificate of Incorporation that
requires the affirmative vote of the holders of a majority of
the total number of the outstanding shares of our common stock
prior to our purchase of any common stock from (i) any
person who or which is the beneficial owner, directly or
indirectly, of five percent (5%) or more of the voting power of
our outstanding common stock and (ii) who or which has
beneficially owned such common stock for less than two years.
Also, the Amendment eliminates all supermajority voting
provisions contained in our Restated Certificate of
Incorporation, which require a two-thirds vote of stockholders
to change the structure of the Board of Directors, remove a
Director, amend our bylaws or amend those provisions set forth
in our Certificate of Incorporation which require such
supermajority approval. Pursuant to the Amendment, a simple
majority will be sufficient to take the foregoing actions.
In an attempt to address instances of financial hardship, our
Restated Certificate of Incorporation contains a provision
providing for certain compromise procedures in the event it
became necessary for us to reorganize or restructure. This
provision, which involves the intervention of a Delaware court
of equity, could potentially bind the Company or otherwise limit
our options in the event of financial difficulty. The Amendment
deletes this provision, which allows us maximum flexibility
should financial hardship ever arise.
Finally, the Amendment deletes non-material provisions from our
Certificate of Incorporation, including the name of our original
incorporator.
Overall, we believe that the Amendment, including the
authorization of additional share capital, will enhance our
ability to grow our business and respond to potential mergers
and acquisitions; we cannot assure you, however, that this
Amendment will result in our effecting a merger or acquisition
or otherwise make our Company more attractive to acquisition
candidates or potential investors.
6
COMPENSATION
OF DIRECTORS AND EXECUTIVE OFFICERS
Executive
Compensation. Compensation Discussion and Analysis
The primary goals of our board of directors with respect to
executive compensation will be to attract and retain talented
and dedicated executives, to tie annual and long-term cash and
stock incentives to achievement of specified performance
objectives, and to create incentives which will result in
stockholder value creation. To achieve these goals, we plan to
form a compensation committee to recommend executive
compensation packages to our board of directors that are
generally based on a mix of salary, discretionary bonus and
equity awards. Although we have not adopted any formal
guidelines for allocating total compensation between equity
compensation and cash compensation, we intend to implement and
maintain compensation plans that tie a substantial portion of
our executives overall compensation to achievement of
corporate goals.
Benchmarking
of Cash and Equity Compensation
We have not retained a compensation consultant to review our
policies and procedures with respect to executive compensation.
We may retain the services of third-party executive compensation
specialists from time to time in connection with the
establishment of cash and equity compensation and related
policies and we intend to take into account input from other
independent members of our board of directors and publicly
available data relating to the compensation practices and
policies of other companies within and outside our industry.
Elements
of Compensation
We will evaluate individual executive performance with a goal of
setting compensation at levels the board of directors or any
applicable committee thereof believes are comparable with
executives in other companies of similar size and stage of
development while taking into account our relative performance
and our own strategic goals. The compensation received by our
executive officers consists of the following elements:
Base Salary. Base salaries for our executives
are established based on the scope of their responsibilities and
individual experience, taking into account competitive market
compensation paid by other companies for similar positions
within the pharmaceutical industry. Our medical director has
been with SafeStitch since inception and has a base salary of
$150,000. Our current chief operating officer was hired in May
2007 at an annual base salary of $130,000. Our current chief
financial officer has been with CTSC since 2005 and has an
annual base salary of $40,000.
Discretionary Annual Bonus. In addition to
base salaries, our compensation committee has the authority to
award discretionary annual bonuses to our executive officers.
The annual incentive bonuses are intended to compensate officers
for achieving corporate goals and value-creating milestones.
Each executive officer is eligible for a discretionary annual
bonus up to an amount equal to a specified percentage of such
executive officers salary.
Long-Term Incentive Program. We believe that
long-term performance is achieved through an ownership culture
that encourages such performance by our executive officers
through the use of stock and stock-based awards. We believe that
the use of equity and equity-based awards offers the best
approach to achieving our compensation goals. We have not
adopted formal stock ownership guidelines.
We have just adopted, subject to the effectiveness of the Board
and stockholder actions described earlier in this Information
Statement, the SafeStitch Medical, Inc. 2007 Incentive
Compensation Plan, pursuant to which we may grant stock-based
incentive compensation.
Severance and
Change-in-Control
Benefits. None of our executive officers are
presently entitled to severance or change of control benefits.
We believe that severance and
change-in-control
benefits may become an essential element of our executive
compensation package in the future and assist us in recruiting
and retaining talented individuals.
Restricted Stock Grants or Awards. We have not
granted any restricted stock or restricted stock awards pursuant
to our equity benefit plans to any of our executive officers.
However, our compensation committee, in its discretion, may in
the future elect to make such grants to our executive officers
if it deems it advisable.
7
Other Compensation. We intend to continue to
maintain the current benefits and perquisites for our executive
officers; which are nominal, however, our compensation
committee, in its discretion, may in the future revise, amend or
add to the benefits and perquisites of any executive officer if
it deems it advisable.
The following table sets forth information concerning
compensation, paid or accrued, for the Named Executive Officers
(as said term is defined in Item 402 of
Regulation S-B)
for services in all capacities to CTSC during the fiscal years
ended December 31, 2006 and 2005.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Option Awards
|
|
|
Stock Awards
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Incentive
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity
|
|
|
Plan
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Incentive
|
|
|
Awards:
|
|
|
|
|
|
|
|
|
|
|
|
|
Incentive
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Plan
|
|
|
Market
|
|
|
|
|
|
|
|
|
|
|
|
|
Plan
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Awards:
|
|
|
or Payout
|
|
|
|
|
|
|
|
|
|
|
|
|
Awards:
|
|
|
|
|
|
|
|
|
|
|
|
Market
|
|
|
Number of
|
|
|
Value of
|
|
|
|
|
|
|
|
|
|
|
|
|
Number
|
|
|
|
|
|
|
|
|
Number of
|
|
|
Value of
|
|
|
Unearned
|
|
|
Unearned
|
|
|
|
|
|
|
Number Of
|
|
|
Number of
|
|
|
of Securities
|
|
|
|
|
|
|
|
|
Shares or
|
|
|
Shares
|
|
|
Shares,
|
|
|
Shares,
|
|
|
|
|
|
|
Securities
|
|
|
Securities
|
|
|
Underlying
|
|
|
|
|
|
|
|
|
Units of
|
|
|
or Units
|
|
|
Units,
|
|
|
Units, or
|
|
|
|
|
|
|
Underlying
|
|
|
Underlying
|
|
|
Unexercised
|
|
|
Option
|
|
|
|
|
|
Stock
|
|
|
of Stock
|
|
|
or Other
|
|
|
Other
|
|
|
|
Option
|
|
|
Unexercised
|
|
|
Unexercised
|
|
|
Unearned
|
|
|
Exercise
|
|
|
Option
|
|
|
That
|
|
|
That
|
|
|
Rights
|
|
|
Rights
|
|
|
|
Grant
|
|
|
Options
|
|
|
Options
|
|
|
Options
|
|
|
Price
|
|
|
Expiration
|
|
|
Have not
|
|
|
Have not
|
|
|
That Have
|
|
|
That Have
|
|
Name
|
|
Date
|
|
|
(#) Exercisable
|
|
|
(#) Unexercisable
|
|
|
(#)
|
|
|
($/Share)
|
|
|
Date
|
|
|
Vested (#)
|
|
|
Vested ($)
|
|
|
Not Vested (#)
|
|
|
Not Vested (#)
|
|
|
Stephen Katz
|
|
|
6/10/2004
|
|
|
|
15,000
|
|
|
|
0
|
|
|
|
0
|
|
|
$
|
0.730000
|
|
|
|
6/10/2014
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
9/23/2002
|
|
|
|
4,000
|
|
|
|
1,000
|
|
|
|
|
|
|
$
|
0.990000
|
|
|
|
9/23/2012
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
9/23/2002
|
|
|
|
5,000
|
|
|
|
0
|
|
|
|
|
|
|
$
|
0.990000
|
|
|
|
9/23/2012
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
9/10/2001
|
|
|
|
3,750
|
|
|
|
0
|
|
|
|
|
|
|
$
|
2.745000
|
|
|
|
9/10/2011
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
|
9/10/2001
|
|
|
|
11,250
|
|
|
|
0
|
|
|
|
|
|
|
$
|
2.745000
|
|
|
|
9/10/2011
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
6/14/1999
|
|
|
|
3,400
|
|
|
|
0
|
|
|
|
|
|
|
$
|
3.281250
|
|
|
|
6/14/2009
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
6/21/2000
|
|
|
|
41,794
|
|
|
|
0
|
|
|
|
|
|
|
$
|
8.000000
|
|
|
|
6/21/2010
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
6/21/2000
|
|
|
|
23,206
|
|
|
|
0
|
|
|
|
|
|
|
$
|
8.000000
|
|
|
|
6/21/2010
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3/22/2000
|
|
|
|
5,000
|
|
|
|
0
|
|
|
|
|
|
|
$
|
11.344000
|
|
|
|
3/22/2010
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Kenneth Block
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
|
|
SUMMARY
COMPENSATION TABLE
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-Equity
|
|
|
Nonqualified
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Incentive
|
|
|
Deferred
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock
|
|
|
Option
|
|
|
Plan
|
|
|
Compensation
|
|
|
All Other
|
|
|
|
|
|
|
Year
|
|
|
Salary
|
|
|
Bonus
|
|
|
Awards
|
|
|
Awards
|
|
|
Compensation
|
|
|
Earnings
|
|
|
Compensation
|
|
|
Total
|
|
|
Stephen Katz
|
|
|
2006
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
|
0
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
0
|
|
Chairman of the Board of Directors and
|
|
|
2005
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
|
0
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
0
|
|
Chief Executive Officer
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Kenneth Block
|
|
|
2006
|
|
|
$
|
40,000
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
|
0
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
40,000
|
|
Chief Financial Officer
|
|
|
2005
|
|
|
$
|
40,000
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
|
0
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
40,000
|
|
Stephen Katz, former Chairman of the Board of Directors and
Chief Executive Officer of CTSC, served without cash
compensation. He received a stock grant (73,000 shares) in
August 2007.
Kenneth Block, Chief Financial Officer, was and is employed by
CTSC on a part-time, as needed basis, and has received the
compensation as indicated in the Summary Compensation
Table. He also received a stock grant (2,500 shares)
in August 2007.
Aggregated
Option Exercises in 2006 and Year-End Option Values
The following table sets forth information with respect to the
Outstanding Equity Awards as of December 31, 2006 for the
Named Executive Officers.
Since December 31, 2006, no additional options were
granted. In connection with the Share Exchange, Stephen Katz
agreed to the cancellation of certain outstanding stock options
held by him in exchange for the grant of 2,000 shares of
our common stock, resulting in the cancellation of 88,400 stock
options held by him upon the issuance of such shares. Such
disposition was approved by the board of directors of CTSC in
advance and in accordance with
Rules 16b-3(e)
and
16b-3(d)(1)
promulgated under the Exchange Act, for the purpose of exempting
the dispositions under
Rule 16b-3
of the Exchange Act. Mr. Block also received a grant of
2,500 shares of our common stock in August 2007 for his
services as an officer, for services performed in connection
with the Share Exchange and for prior merger and acquisition
services over the past several years.
8
Director
Compensation
The following table sets forth information with respect to
compensation of directors of CTSC during fiscal year 2006.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fees
|
|
|
|
|
|
|
|
|
Non-Equity
|
|
|
Nonqualified
|
|
|
|
|
|
|
|
|
|
Earned
|
|
|
|
|
|
|
|
|
Incentive
|
|
|
Deferred
|
|
|
|
|
|
|
|
|
|
or Paid
|
|
|
Stock
|
|
|
Option
|
|
|
Plan
|
|
|
Compensation
|
|
|
All Other
|
|
|
|
|
Name
|
|
in Cash ($)
|
|
|
Awards ($)(1)
|
|
|
Awards ($)(2)
|
|
|
Compensation ($)
|
|
|
Earnings ($)
|
|
|
Compensation ($)
|
|
|
Total ($)
|
|
|
Joshua J. Angel
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
Dr. Phillip Frost
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
Dr. Jane Hsiao
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
Stephen Katz
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
Richard Pfenniger
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
Lawrence Schoenberg
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
|
(1) |
|
In 2007, existing and now-former directors received the
following grants of Company common stock in consideration for
their services on CTSCs board of directors and as
officers, if applicable, and for services performed in
connection with the Share Exchange and for prior merger and
acquisition services performed by such persons over the past
several years: Stephen Katz 71,000 shares,
Lawrence Schoenberg 26,500 shares, Joshua J.
Angel 26,500 shares, Dr. Phillip Frost
(issued to Frost Gamma Investments Trust)
15,000 shares, Dr. Jane Hsiao
15,000 shares, Richard Pfenniger
15,000 shares, Steven D. Rubin
15,000 shares. Additionally, in connection with the Share
Exchange, Messrs. Angel and Schoenberg agreed to the
cancellation of certain outstanding stock options held by each
of them in exchange for the grant of 2,000 shares of our
common stock to each of them, resulting in the cancellation of
3,200 and 20,000 stock options held by Messrs. Angel and
Schoenberg, respectively, upon the issuance of such shares. Such
dispositions were approved by the board of directors of CTSC in
advance and in accordance with
Rules 16b-3(c)
and 16b-3(d)(1), promulgated under the Exchange Act, for the
purpose of exempting the dispositions under
Rule 16b-3
of the Exchange Act. See also Item 7. Certain Relationships
and Related Transactions and Director Independence for
information on other grants. |
|
(2) |
|
At December 31, 2006, we had outstanding options to
purchase 172,600 shares of our common stock. Prior to the
closing of the Share Exchange, 111,600 of the options, which
were cancelled, had exercise prices greater than the fair market
value of CTSCs common stock at such time. The 59,800
options remaining were held by Messrs. Angel (17,400), Katz
(25,000) and Schoenberg (17,400) and had weighted average
exercise prices of $0.73, $0.83 and $0.73, respectively.
Messrs. Angel and Katz have subsequently exercised all of
their options. |
We are currently considering compensation policies for directors
of CTSC. In the future, we may adopt a policy of paying
independent directors an annual retainer and a fee for
attendance at board of directors and committee meetings. We
anticipate reimbursing each director for reasonable travel
expenses related to such directors attendance at board of
directors and committee meetings.
Stock
Option Plans
Immediately prior to the closing of the Share Exchange, CTSC had
options to purchase 59,800 shares of common stock
outstanding under its existing option plan and no options were
outstanding to purchase shares of SafeStitch.
New
Incentive Compensation Plan
We have just adopted, subject to the effectiveness of the Board
and stockholder actions described earlier in this Information
Statement, the SafeStitch Medical, Inc. 2007 Incentive
Compensation Plan, pursuant to which we may grant stock-based
incentive compensation.
Employment
Agreement
SafeStitch entered into a letter agreement with Dr. Stewart
B. Davis on May 16, 2007, pursuant to which he became Chief
Operating Officer of SafeStitch. The letter agreement has a term
of one year. The letter agreement provides for a salary of
$130,000 per year, the award of options to purchase
50,000 shares of common stock at an
9
exercise price of $2.60 per share, vesting 25% per year, and
eligibility for yearly bonuses in cash or stock based on
performance. In accordance with the letter agreement and in
consideration for Dr. Davis continued services as
Chief Operating Officer of the Company, we have granted
Dr. Davis an aggregate of 88,667 options to purchase CTSC
common stock, which vest in accordance with the letter agreement.
Corporate
Governance
CTSCs common stock is currently quoted on the National
Association of Securities Dealers, Inc.s, OTC Bulletin
board, or OTCBB. Accordingly, we are not required to
have an audit, compensation or nominating committee. However, we
plan to submit a listing application to list our shares on the
American Stock Exchange (AMEX). We cannot assure you
that we will be successful in listing our shares with the AMEX.
We currently monitor developments in the area of corporate
governance to ensure we will be in compliance with the standards
and regulations required by the AMEX. A summary of our corporate
governance measures follows:
Independent
Directors
We believe a majority of the members of our board of directors
are independent from management. When making determinations from
time to time regarding independence, the board of directors will
reference the listing standards adopted by the AMEX as well as
the independence standards set forth in the Sarbanes-Oxley Act
of 2002 and the rules and regulations promulgated by the SEC
under that Act. In particular, our audit committee will
periodically evaluate and report to the board of directors on
the independence of each member of the board of directors. Our
audit committee will analyze whether a director is independent
by evaluating, among other factors, the following:
1. Whether the member of the board of directors has any
material relationship with us, either directly, or as a partner,
member, manager, stockholder or officer of an organization that
has a relationship with us;
2. Whether the member of the board of directors is a
current employee of our company or our subsidiaries or was an
employee of our company or our subsidiaries within three years
preceding the date of determination;
3. Whether the member of the board of directors is, or in
the three years preceding the date of determination has been,
affiliated with or employed by (i) any of our present
internal or external auditors or any affiliate of such auditor,
or (ii) any of our former internal or external auditors or
any affiliate of such auditor, which performed services for us
within three years preceding the date of determination;
4. Whether the member of the board of directors is, or in
the three years preceding the date of determination has been,
part of an interlocking directorate, in which any of our
executive officers serve on the compensation committee of
another company that concurrently employs the member as an
executive officer;
5. Whether the member of the board of directors receives
any compensation from us, other than fees or compensation for
service as a member of the board of directors and any committee
of the board of directors and reimbursement for reasonable
expenses incurred in connection with such service and for
reasonable educational expenses associated with board of
directors or committee membership matters;
6. Whether an immediate family member of the member of the
board of directors is currently or was an executive officer of
ours within three years preceding the date of determination;
7. Whether an immediate family member of the member of the
board of directors is, or in the three years preceding the date
of determination has been, affiliated with or employed in a
professional capacity by (i) any of our present internal or
external auditors, or (ii) any of our former internal or
external auditors which performed services for us within three
years preceding the date of determination; and
8. Whether an immediate family member of the member of the
board of directors is, or in the three years preceding the date
of determination has been, part of an interlocking directorate,
in which any of our executive officers serve on the compensation
committee of another company that concurrently employs the
immediate family member of the member of the board of directors
as an executive officer.
10
The above list is not exhaustive and we anticipate that the
audit committee will consider all other factors which could
assist it in its determination that a director will have no
material relationship with us that could compromise that
directors independence.
Our non-management directors will hold formal meetings, separate
from management, at least two times per year.
We have no formal policy regarding attendance by our directors
at annual stockholders meetings, although we encourage such
attendance and anticipate most of our directors will attend
these meetings.
Steven D. Rubin has participated in discussions with our
executive officers regarding their compensation.
Personal
Loans to Executive Officers and Directors
We currently prohibit extensions of credit in the form of
personal loans from us to our directors and executive officers.
Communications
with the Board of Directors
Anyone who has a concern about our conduct, including
accounting, internal accounting controls or audit matters, may
communicate directly with the audit committee, when established,
and until then, with any member of our board of directors. These
communications may be confidential or anonymous, and may be
mailed,
e-mailed,
submitted in writing or reported by phone. All of these concerns
will be forwarded to the appropriate directors for their review.
COMPENSATION
PLANS
Our Board of Directors and a majority of our stockholders
approved our 2007 Plan on November 13, 2007. We have
reserved 2,000,000 shares of our common stock for issuance,
in the aggregate, under the 2007 Plan, subject to adjustment for
a stock split, or any future stock dividend or other similar
change in our common stock or our capital structure. No options
to purchase shares of common stock have been granted under the
2007 Plan.
The following is a summary of the material provisions of the
2007 Plan. This summary is qualified in its entirety by
reference to full text of the 2007 Plan, which is attached to
this Information Statement as Annex B and is hereby
incorporated by reference herein. You are urged to read the full
text of the 2007 Plan.
Background and Purpose. On November 13,
2007, our board of directors adopted the companys 2007
Plan, which was approved on the same date by a written consent
of the holders of a majority of our issued and outstanding
voting securities in lieu of a special meeting of the
stockholders in accordance with the relevant sections of the
Delaware General Corporation Law.
Purpose. The purpose of the 2007 Plan is to
assist our company and its subsidiaries and affiliates in
attracting, motivating, retaining and rewarding high-quality
executives and other employees, officers, directors, consultants
and other persons who provide services to our company and its
subsidiaries and affiliates. The 2007 Plan is intended to enable
those persons to acquire or increase a proprietary interest in
our company in order to strengthen the mutuality of interests
between them and our stockholders, and to provide those such
persons with performance incentives to expend their maximum
efforts in the creation of stockholder value.
The effective date of the 2007 Plan is November 13, 2007.
As of the date of this Information Statement, no awards have
been granted under the 2007 Plan.
Stockholder approval of the 2007 Plan is required (i) to
comply with certain exclusions from the limitations of
Section 162(m) of the Internal Revenue Code of 1986, which
we refer to as the Code, as described below, (ii) to comply
with the incentive stock options rules under Section 422 of
the Code and (iii) for purposes of complying with the
stockholder approval requirements for the listing of shares on
the American Stock Exchange, upon which we intend to apply for
listing.
11
Shares Available for Awards; Annual Per-Person
Limitations. Under the 2007 Plan,
2,000,000 shares of our companys common stock are
reserved and available for delivery under the 2007 Plan. If any
shares subject to an award are forfeited, expire or otherwise
terminate without issuance of shares, or are settled for cash or
otherwise do not result in the issuance of shares, then the
shares subject to such forfeiture, expiration, termination, cash
settlement or non-issuance will again become available for
awards under the 2007 Plan. If any option or other award is
exercised through the tendering of shares (either actually or by
attestation) or withheld upon exercise of an award to pay the
exercise price or any tax withholding requirements, then only
the net of the shares tendered or withheld will count towards
the limit. Awards issued in substitution for awards previously
granted by a company acquired by our company or one of our
subsidiaries or affiliates, or with which our company or one of
our subsidiaries or affiliates combines, do not reduce the limit
on grants of awards under the 2007 Plan. The maximum number of
shares of our common stock that may be issued under the 2007
Plan as a result of the exercise of incentive stock options is
2,000,000, subject to the adjustments described above.
No additional awards will be made under our 1996 Stock Option
Plan.
The 2007 Plan imposes individual limitations on the amount of
certain awards in part to comply with Code Section 162(m).
Under these limitations, during any
12-month
period, no eligible person may be granted (i) stock options
or stock appreciation rights with respect to more than
1,000,000 shares of our common stock, or (ii) shares
of restricted stock, shares of deferred stock, performance
shares and other stock based-awards with respect to more than
500,000 shares of our common stock, in each case, subject
to adjustment in certain circumstances. The maximum amount that
may be paid out as performance units (which are described below)
with respect to any
12-month
performance period is $2,000,000 (pro-rated for any
12-month
performance period that is less than 12 months), and for
any performance period that is more than 12 months, is
2,000,000 multiplied by the number of full months that are in
the performance period.
The committee that administers the 2007 Plan is authorized to
adjust the limitations described above and is authorized to
adjust outstanding awards (including adjustments to exercise
prices of options and other affected terms of awards) in the
event that a dividend or other distribution (whether in cash,
shares of common stock or other property), recapitalization,
forward or reverse split, reorganization, merger, consolidation,
spin-off, combination, repurchase, share exchange or other
similar corporate transaction or event affects our common stock
so that an adjustment is appropriate. The committee is also
authorized to adjust performance conditions and other terms of
awards in response to these kinds of events or in response to
changes in applicable laws, regulations or accounting principles.
Eligibility. The persons eligible to receive
awards under the 2007 Plan are the officers, directors,
employees, consultants and other persons who provide services to
our company or any of its subsidiaries or affiliates. An
employee on leave of absence may be considered as still in our
employ for purposes of eligibility for participation in the 2007
Plan.
Administration. The 2007 Plan is to be
administered by a committee designated by our board of directors
consisting of not less than two directors; provided, however,
that except as otherwise expressly provided in the 2007 Plan,
our board of directors may exercise any power or authority
granted to the committee under the 2007 Plan. Subject to the
terms of the 2007 Plan, the committee is authorized to select
eligible persons to receive awards, determine the type, number
and other terms and conditions of, and all other matters
relating to, awards, prescribe award agreements (which need not
be identical for each participant), and the rules and
regulations for the administration of the 2007 Plan, construe
and interpret the 2007 Plan and award agreements, correct
defects, supply omissions or reconcile inconsistencies therein,
and make all other decisions and determinations as the committee
may deem necessary or advisable for the administration of the
2007 Plan.
Stock Options and Stock Appreciation
Rights. The committee is authorized to grant
stock options, including both incentive stock options, which we
refer to as ISOs, which can result in potentially
favorable tax treatment to the recipient, and non-qualified
stock options, and stock appreciation rights entitling the
recipient to receive the amount by which the fair market value
of a share of our common stock on the date of exercise exceeds
the grant price of the stock appreciation right. The exercise
price per share subject to an option and the grant price of a
stock appreciation right are determined by the committee, but
may not be less than the fair market value of a share of our
common stock on the date of grant. For purposes of the 2007
Plan, the term fair market value means the fair
12
market value of our common stock, awards or other property as
determined by the committee or under procedures established by
the committee. Unless otherwise determined by the committee, the
fair market value of a share of our common stock as of any given
date is the closing sales price per share as reported on the
principal stock exchange or market on which our common stock is
traded on the date as of which such value is being determined
or, if there is no sale on that date, then on the last previous
day on which a sale was reported. The maximum term of each
option or stock appreciation right, the times at which each
option or stock appreciation right will be exercisable, and
provisions requiring forfeiture of unexercised options or stock
appreciation rights at or following termination of employment
generally are fixed by the committee, except that no option or
stock appreciation right may have a term exceeding ten years.
Methods of exercise and settlement and other terms of the stock
appreciation right are determined by the committee. The
committee, thus, may permit the exercise price of options
awarded under the 2007 Plan to be paid in cash, shares, other
awards or other property (including loans). Options may be
exercised by payment of the exercise price in cash, shares of
our common stock, outstanding awards or other property having a
fair market value equal to the exercise price, as the committee
may determine from time to time.
Restricted and Deferred Stock. The committee
is authorized to grant restricted stock and deferred stock.
Restricted stock is a grant of shares of our common stock which
may not be sold or disposed of, and which will be subject to any
risks of forfeiture and other restrictions as the committee may
impose. An eligible person granted restricted stock generally
has all of the rights of a stockholder of our company, unless
otherwise determined by the committee. An award of deferred
stock confers upon the recipient the right to receive shares of
our common stock at the end of a specified deferral period,
subject to any risks of forfeiture and other restrictions as the
committee may impose. Prior to settlement, an award of deferred
stock carries no voting or dividend rights or other rights
associated with share ownership, although dividend equivalents
may be granted, as discussed below.
Dividend Equivalents. The committee is
authorized to grant dividend equivalents conferring on
recipients the right to receive, currently or on a deferred
basis, cash, shares of our common stock, other awards or other
property equal in value to dividends paid on a specific number
of shares of our common stock or other periodic payments.
Dividend equivalents may be granted alone or in connection with
another award, may be paid currently or on a deferred basis and,
if deferred, may be deemed to have been reinvested in additional
shares of our common stock, awards or otherwise as specified by
the committee.
Bonus Stock and Awards in Lieu of Cash
Obligations. The committee is authorized to grant
shares of our common stock as a bonus free of restrictions, or
to grant shares of common stock or other awards in lieu of
obligations of our company to pay cash under the 2007 Plan or
other plans or compensatory arrangements, subject to any terms
that the committee may specify.
Other Stock-Based Awards. The committee is
authorized to grant awards that are denominated or payable in,
valued by reference to, or otherwise based on or related to
shares of our common stock. The committee determines the terms
and conditions of those awards.
Performance Awards. The committee is
authorized to grant performance awards to eligible persons on
terms and conditions established by the committee. The
performance criteria to be achieved during any performance
period and the length of the performance period is determined by
the committee upon the grant of the performance award.
Performance awards may be valued by reference to a designated
number of shares of our common stock (in which case they are
referred to as performance shares) or by reference to a
designated amount of property including cash (in which case they
are referred to as performance units). Performance awards may be
settled by delivery of cash, shares or other property, or any
combination of those things, as determined by the committee.
Performance awards granted to persons whom the committee expects
will, for the year in which a deduction arises, be covered
employees (as defined below) will, if and to the extent
intended by the committee, be subject to provisions that should
qualify those awards as performance-based
compensation not subject to the limitation on tax
deductibility by our company under Code Section 162(m). For
purposes of Section 162(m), the term covered
employee means our companys chief executive officer
and each other person whose compensation is required to be
disclosed in the companys filings with the SEC by reason
of the employee being among our 4 highest compensated officers
for the taxable year (other than our chief executive officer).
If and to the extent required under Section 162(m) of the
Code, any power or authority relating to a performance award
intended to qualify under Section 162(m) of the Code is to
be exercised by the committee and not our board of directors.
13
If and to the extent that the committee determines that these
provisions of the 2007 Plan are to be applicable to any award,
one or more of the following business criteria for our company
and its subsidiaries, on a consolidated basis,
and/or for
any of our subsidiaries or affiliates, or for business or
geographical units of our company
and/or any
of our subsidiaries or affiliates (except with respect to the
total stockholder return and earnings per share criteria), will
be used by the committee in establishing performance goals for
awards under the 2007 Plan: (1) earnings per share;
(2) revenues or margins; (3) cash flow;
(4) operating margin; (5) return on assets, net
assets, investment, capital, operating revenue or equity;
(6) economic value added; (7) direct contribution;
(8) income; net income; pretax income; earnings before
interest and taxes; earnings before interest, taxes,
depreciation and amortization; earnings after interest expense
and before extraordinary or special items; operating income; net
operating income; income before interest income or expense,
unusual items and income taxes, local, state or federal and
excluding budgeted and actual bonuses which might be paid under
any ongoing bonus plans of the company; (9) working capital
or working capital management, including inventory turnover and
days sales outstanding; (10) management of fixed costs or
variable costs; (11) identification or consummation of
investment opportunities or completion of specified projects in
accordance with corporate business plans, including strategic
mergers, acquisitions or divestitures; (12) total
stockholder return; (13) debt reduction; (14) market
share; (15) entry into new markets, either geographically
or by business unit; (16) customer retention and
satisfaction; (17) strategic plan development and
implementation, including turnaround plans; and (18) stock
price. Any of the above goals may be determined on an absolute
or relative basis (e.g. growth in earnings per share) or as
compared to the performance of a published or special index
deemed applicable by the committee including, but not limited
to, the Standard & Poors 500 Stock Index or a
group of companies that are comparable to our company. The
committee will exclude the impact of an event or occurrence
which the committee determines should appropriately be excluded,
including without limitation (i) restructurings,
discontinued operations, extraordinary items, and other unusual
or non-recurring charges, (ii) an event either not directly
related to the operations of our company or not within the
reasonable control of our companys management, or
(iii) a change in accounting standards required by
generally accepted accounting principles.
The committee may, in its discretion, determine that the amount
payable as a performance award will be reduced from the amount
of any potential award.
Other Terms of Awards. Awards may be settled
in the form of cash, shares of our common stock, other awards or
other property, in the discretion of the committee. The
committee may require or permit participants to defer the
settlement of all or part of an award in accordance with any
terms and conditions that the committee may establish, including
payment or crediting of interest or dividend equivalents on
deferred amounts, and the crediting of earnings, gains and
losses based on deemed investment of deferred amounts in
specified investment vehicles. The committee is authorized to
place cash, shares of our common stock or other property in
trusts or make other arrangements to provide for payment of our
companys obligations under the 2007 Plan. The committee
may condition any payment relating to an award on the
withholding of taxes and may provide that a portion of any
shares of our common stock or other property to be distributed
will be withheld (or previously acquired shares of our common
stock or other property be surrendered by the participant) to
satisfy withholding and other tax obligations. Awards granted
under the 2007 Plan generally may not be pledged or otherwise
encumbered and are not transferable except by will or by the
laws of descent and distribution, or to a designated beneficiary
upon the participants death, except that the committee
may, in its discretion, permit transfers for estate planning or
other purposes subject to any applicable restrictions under
Rule 16b-3.
Awards under the 2007 Plan are generally granted without a
requirement that the recipient pay consideration in the form of
cash or property for the grant (as distinguished from the
exercise), except to the extent required by law. The committee
may, however, grant awards in exchange for other awards under
the 2007 Plan, awards under other company plans, or other rights
to payment from the company, and may grant awards in addition to
and in tandem with other awards, rights or other awards.
Acceleration of Vesting; Change in
Control. The committee may provide in an award
agreement, or otherwise determine, that upon a change in
control as defined in the 2007 Plan, (i) options and
stock appreciation rights that previously were not vested or
exercisable become immediately exercisable, or (ii) that
any restrictions applicable to restricted stock, deferred stock,
or other stock based awards immediately lapse. In addition, the
14
committee may provide in an award agreement that the performance
goals relating to any performance award will be deemed to have
been met upon the occurrence of any change in
control.
Amendment and Termination. Our board of
directors may amend, alter, suspend, discontinue or terminate
the 2007 Plan or the committees authority to grant awards
without further stockholder approval, except that stockholder
approval must be obtained for any amendment or alteration if
that approval is required by law or regulation or under the
rules of any stock exchange or quotation system on which our
shares of common stock are then listed or quoted. Thus,
stockholder approval may not necessarily be required for every
amendment to the 2007 Plan which might increase the cost of the
2007 Plan or alter the eligibility of persons to receive awards.
Stockholder approval will not be deemed to be required under
laws or regulations, such as those relating to ISOs, that
condition favorable treatment of participants on such approval,
although our board of directors may, in its discretion, seek
stockholder approval in any circumstance in which it deems such
approval advisable. Unless earlier terminated by our board of
directors, the 2007 Plan will terminate at the earlier of
(a) when no shares of common stock remain available for
issuance under the 2007 Plan, or (b) termination of the
2007 Plan by our board of directors. Awards outstanding upon
expiration of the 2007 Plan will remain in effect until they
have been exercised or terminated, or have expired.
Federal Income Tax Consequences of Awards. The
2007 Plan is not qualified under the provisions of
section 401(a) of the Code and is not subject to any of the
provisions of the Employee Retirement Income Security Act of
1974.
Nonqualified Stock Options. On exercise of a
nonqualified stock option granted under the 2007 Plan, an
optionee will recognize ordinary income equal to the excess, if
any, of the fair market value on the date of exercise of the
shares of stock acquired on exercise of the option over the
exercise price. If the optionee is an employee of our company or
any of our subsidiaries or affiliates, that income will be
subject to the withholding of Federal income tax. The
optionees tax basis in those shares will be equal to their
fair market value on the date of exercise of the option, and his
holding period for those shares will begin on that date.
If an optionee pays for shares of stock on exercise of an option
by delivering shares of our companys stock, the optionee
will not recognize gain or loss on the shares delivered, even if
their fair market value at the time of exercise differs from the
optionees tax basis in them. The optionee, however,
otherwise will be taxed on the exercise of the option in the
manner described above as if he had paid the exercise price in
cash. If a separate identifiable stock certificate is issued for
that number of shares equal to the number of shares delivered on
exercise of the option, the optionees tax basis in the
shares represented by that certificate will be equal to his tax
basis in the shares delivered, and his holding period for those
shares will include his holding period for the shares delivered.
The optionees tax basis and holding period for the
additional shares received on exercise of the option will be the
same as if the optionee had exercised the option solely in
exchange for cash.
Our company will be entitled to a deduction for Federal income
tax purposes equal to the amount of ordinary income taxable to
the optionee, provided that amount constitutes an ordinary and
necessary business expense for our company and is reasonable in
amount, and either the employee includes that amount in income
or our company timely satisfies its reporting requirements with
respect to that amount.
Incentive Stock Options. The 2007 Plan
provides for the grant of stock options that qualify as
incentive stock options as defined in
section 422 of the Code, which we refer to as ISOs. Under
the Code, an optionee generally is not subject to tax upon the
grant or exercise of an ISO. In addition, if the optionee holds
a share received on exercise of an ISO for at least two years
from the date the option was granted and at least one year from
the date the option was exercised, which we refer to as the
required holding period, the difference, if any, between the
amount realized on a sale or other taxable disposition of that
share and the holders tax basis in that share will be
long-term capital gain or loss.
If, however, an optionee disposes of a share acquired on
exercise of an ISO before the end of the required holding
period, which we refer to as a disqualifying disposition, the
optionee generally will recognize ordinary income in the year of
the disqualifying disposition equal to the excess, if any, of
the fair market value of the share on the date the ISO was
exercised over the exercise price. If, however, the
disqualifying disposition is a sale or exchange on which a loss,
if realized, would be recognized for Federal income tax
purposes, and if the sales
15
proceeds are less than the fair market value of the share on the
date of exercise of the option, the amount of ordinary income
recognized by the optionee will not exceed the gain, if any,
realized on the sale. If the amount realized on a disqualifying
disposition exceeds the fair market value of the share on the
date of exercise of the option, that excess will be short-term
or long-term capital gain, depending on whether the holding
period for the share exceeds one year.
An optionee who exercises an ISO by delivering shares of stock
acquired previously pursuant to the exercise of an ISO before
the expiration of the required holding period for those shares
is treated as making a disqualifying disposition of those
shares. This rule prevents pyramiding on the
exercise of an ISO (that is, exercising an ISO for one share and
using that share, and others so acquired, to exercise successive
ISOs) without the imposition of current income tax.
For purposes of the alternative minimum tax, the amount by which
the fair market value of a share of stock acquired on exercise
of an ISO exceeds the exercise price of that option generally
will be an adjustment included in the optionees
alternative minimum taxable income for the year in which the
option is exercised. If, however, there is a disqualifying
disposition of the share in the year in which the option is
exercised, there will be no adjustment with respect to that
share. If there is a disqualifying disposition in a later year,
no income with respect to the disqualifying disposition is
included in the optionees alternative minimum taxable
income for that year. In computing alternative minimum taxable
income, the tax basis of a share acquired on exercise of an ISO
is increased by the amount of the adjustment taken into account
with respect to that share for alternative minimum tax purposes
in the year the option is exercised.
Our company is not allowed an income tax deduction with respect
to the grant or exercise of an incentive stock option or the
disposition of a share acquired on exercise of an incentive
stock option after the required holding period. However, if
there is a disqualifying disposition of a share, our company is
allowed a deduction in an amount equal to the ordinary income
includible in income by the optionee, provided that amount
constitutes an ordinary and necessary business expense for our
company and is reasonable in amount, and either the employee
includes that amount in income or our company timely satisfies
its reporting requirements with respect to that amount.
Stock Awards. Generally, the recipient of a
stock award will recognize ordinary compensation income at the
time the stock is received equal to the excess, if any, of the
fair market value of the stock received over any amount paid by
the recipient in exchange for the stock. If, however, the stock
is not vested when it is received under the 2007 Plan (for
example, if the employee is required to work for a period of
time in order to have the right to sell the stock), the
recipient generally will not recognize income until the stock
becomes vested, at which time the recipient will recognize
ordinary compensation income equal to the excess, if any, of the
fair market value of the stock on the date it becomes vested
over any amount paid by the recipient in exchange for the stock.
A recipient may, however, file an election with the Internal
Revenue Service, within 30 days of his or her receipt of
the stock award, to recognize ordinary compensation income, as
of the date the recipient receives the award, equal to the
excess, if any, of the fair market value of the stock on the
date the award is granted over any amount paid by the recipient
in exchange for the stock.
The recipients basis for the determination of gain or loss
upon the subsequent disposition of shares acquired as stock
awards will be the amount paid for such shares plus any ordinary
income recognized either when the stock is received or when the
stock becomes vested. Upon the disposition of any stock received
as a stock award under the 2007 Plan, the difference between the
sales price and the recipients basis in the shares will be
treated as a capital gain or loss and generally will be
characterized as long-term capital gain or loss if the shares
have been held for more than one year from the date as of which
he or she would be required to recognize any compensation income.
Stock Appreciation Rights. Our company may
grant stock appreciation rights, which we refer to as
SARs, separate from any other award, or in tandem
with options under the 2007 Plan. Generally, the recipient of an
SAR will not recognize any taxable income at the time the SAR is
granted.
When the SAR is exercised, the recipient receives the
appreciation inherent in the SARs in cash, the cash will be
taxable as ordinary compensation income to the recipient at the
time that the cash is received. If the recipient receives the
appreciation inherent in the SARs in shares of stock, the
recipient will recognize ordinary
16
compensation income equal to the excess of the fair market value
of the stock on the day it is received over any amounts paid by
the recipient for the stock.
SARs may be issued in tandem with a stock
option. Under this type of arrangement, the
exercise of an SAR will result in the cancellation of an option,
and the exercise of an option will result in a cancellation of
an SAR. If the recipient of a tandem SAR elects to surrender the
underlying option in exchange for cash or shares of stock equal
to the appreciation inherent in the underlying option, the tax
consequences to the recipient will be the same as discussed
above relating to the SARs. If the recipient elects to exercise
the underlying option, the holder will be taxed at the time of
exercise as if he or she had exercised a nonqualified stock
option (discussed above). As a result, the recipient will
recognize ordinary income for federal tax purposes measured by
the excess of the then fair market value of the shares of stock
over the exercise price.
In general, there will be no Federal income tax deduction
allowed to our company upon the grant or termination of SARs.
Upon the exercise of an SAR, however, our company will be
entitled to a deduction for federal income tax purposes equal to
the amount of ordinary income that the employee is required to
recognize as a result of the exercise, provided that the
deduction is not otherwise disallowed under the Code.
Dividend Equivalents. Generally, the recipient
of a dividend equivalent award will recognize ordinary
compensation income at the time the dividend equivalent award is
received equal to the fair market value dividend equivalent
award received. The company generally will be entitled to a
deduction for Federal income tax purposes equal to the amount of
ordinary income that the employee is required to recognize as a
result of the dividend equivalent award, provided that the
deduction is not otherwise disallowed under the Code.
Section 409A of the Code. The 2007 Plan
is also intended to comply with Section 409A of the Code
and all provisions of the 2007 Plan are to be interpreted in a
manner consistent with the applicable requirements of
Section 409A of the Code. Section 409A of the Code
governs the taxation of deferred compensation. Any participant
that is granted an award that does not comply with
section 409A could be subject to immediate taxation on the
award (even if the award is not exercisable) and an additional
20% tax on the award.
Section 162
Limitations. Section 162(m) to the Code,
generally disallows a public companys tax deduction for
compensation to covered employees in excess of $1 million
in any tax year beginning on or after January 1, 1994.
Compensation that qualifies as performance-based
compensation is excluded from the $1 million
deductibility cap, and therefore remains fully deductible by the
company that pays it. We intend that awards granted to employees
under the 2007 Plan whom the committee expects to be covered
employees at the time a deduction arises in connection with such
options, may, if and to the extent so intended by the committee,
be granted in a manner that will qualify as such
performance-based compensation, so that such awards
would not be subject to the Section 162(m) deductibility
cap of $1 million. Future changes in Section 162(m) or
the regulations thereunder may adversely affect our ability to
ensure that awards under the 2007 Plan will qualify as
performance-based compensation that are fully
deductible by us under Section 162(m).
Importance of Consulting Tax Adviser. The
information set forth above is a summary only and does not
purport to be complete. In addition, the information is based
upon current Federal income tax rules and therefore is subject
to change when those rules change. Moreover, because the tax
consequences to any recipient may depend on his particular
situation, each recipient should consult his tax adviser as to
the Federal, state, local and other tax consequences of the
grant or exercise of an award or the disposition of stock
acquired as a result of an award.
WHERE YOU
CAN OBTAIN ADDITIONAL INFORMATION
We are required to file annual, quarterly and special reports,
proxy statements and other information with the SEC. You may
read and copy any document we file at the SECs public
reference rooms at 100 F Street, N.E,
Washington, D.C. 20549. You may also obtain copies of the
documents at prescribed rates by writing to the Public Reference
Section of the SEC at 100 F Street, N.E.,
Room 1580, Washington, D.C. 20549. Please call the SEC
at
1-800-SEC-0330
for more information on the operation of the public reference
rooms. Copies of our SEC filings are also available to the
public from the SECs web site at www.sec.gov.
17
ANNEX A
AMENDED
AND RESTATED CERTIFICATE OF INCORPORATION
OF
CELLULAR
TECHNICAL SERVICES COMPANY,
INC.
Cellular Technical Services Company, Inc., a corporation
organized and existing under the laws of the State of Delaware,
hereby certifies as follows:
1. The name of the corporation is Cellular Technical
Services Company, Inc. The date of the filing of its original
certificate of incorporation with the Secretary of State was
August 19, 1988.
2. This Amended and Restated Certificate of Incorporation
restates and amends the Restated Certificate of Incorporation by
(i) changing the Corporations name,
(ii) increasing the number of authorized shares,
(iii) eliminating the staggered structure of the board of
directors, (iv) deleting the provision requiring
stockholder approval prior to the Corporations acquisition
of Common Stock from those of our stockholders holding 5% or
more of the Corporations outstanding voting securities,
(v) deleting all supermajority voting requirements,
(vi) deleting the provision setting forth compromise
procedures in the event of insolvency and (vii) deleting
immaterial provisions.
3. The text of the Certificate of Incorporation is hereby
amended and restated to read in full as follows:
FIRST: The name of the Corporation is
SafeStitch Medical, Inc.
SECOND: The address, including street, number,
city, and county, of the registered office of the Corporation in
the State of Delaware is Corporation Trust Center, 1209
Orange Street, Wilmington, DE 19801; and the name of the
registered agent of the Corporation in the State of Delaware at
such address is Corporate Trust Corporation System.
THIRD: The purpose of the Corporation is to
engage in any lawful act or activity for which corporations may
be organized under the General Corporation Law of the State of
Delaware.
FOURTH: The aggregate number of shares of all
classes of capital stock which the Corporation shall have
authority to issue is 250,000,000, of which 225,000,000 shall be
common stock, par value $.001 per share, and 25,000,000 shall be
preferred stock, par value $.01 per share. The board of
directors of the Corporation may determine the times when, the
terms under which and the consideration for which the
Corporation shall issue, dispose of or receive subscriptions for
its shares, including treasury shares, or acquire its own
shares. The consideration for the issuance of the shares shall
be paid in full before their issuance and shall not be less than
the par value per share. Upon payment of such consideration,
such shares shall be deemed to be fully paid and nonassessable
by the corporation.
A description of the different classes and series of the
Corporations capital stock and a statement of the powers,
designations, preferences, limitations and relative rights of
the shares of each class of and series of capital stock are as
follows:
A. Common Stock. Except as provided in
this Article (or in any resolution or resolutions adopted by the
board of directors pursuant hereto) the holders of the common
stock shall exclusively possess all voting power. Each holder of
shares of common stock shall be entitled to one vote for each
share held by such holder. There shall be no cumulative voting
rights in the election of directors. Each share of common stock
shall have the same relative rights as and be identical in all
respects with all shares of common stock.
Whenever there shall have been paid, or declared and set aside
for payment, to the holders of the outstanding shares of any
class of stock having preference over the common stock as to the
payment of dividends, the full amount of dividends and or
sinking fund or other retirement payments, if any, to which such
holders are respectively entitled in preference to the common
stock, then dividends may be paid on the common stock and on any
class or series of stock entitled to participate therewith as to
dividends, out of any assets legally available for the payment
of dividends but only when and as declared by the board of
directors.
A-1
In the event of any liquidation, dissolution or winding up of
the Corporation, after there shall have been paid to or set
aside for the holders of any class having preferences over the
common stock in the event of liquidation, dissolution or winding
up of the full preferential amounts to which they are
respectively entitled, the holders of the common stock, and of
any class or series of stock entitled to participate therewith,
in whole or in part, as to distribution of assets, shall be
entitled after payment or provision for payment of all debts and
liabilities of the Corporation, to receive the remaining assets
of the Corporation available for distribution, in cash or in
kind.
B. Preferred Stock. The board of
directors of the Corporation is authorized, subject to
limitations prescribed by law and the provisions of this
Article, to provide by resolution for the issuance of preferred
stock in series, including convertible preferred stock, to
establish from time to time the number of shares to be included
in each such series, and to fix the designations, powers,
preferences and relative, participating, optional and other
special rights of the shares of each such series and the
qualifications, limitations or restrictions thereof.
The authority of the board of directors with respect to each
series shall include, but not be limited to, determination of
the following:
(a) The number of shares constituting that series and the
distinctive designation of that series;
(b) The dividend rate on the shares of that series, whether
dividends shall be cumulative, and, if so, from which date or
dates, and the relative rights of priority, if any, of payment
of dividends on shares of that series;
(c) Whether that series shall have voting rights, in
addition to the voting rights provided by law, and, if so, the
terms of such rights;
(d) Whether that series shall have conversion privileges,
and, if so, the terms and conditions of such conversion,
including provision for adjustment of the conversion rate in
such events as the board of directors shall determine;
(e) Whether or not the shares of that series shall be
redeemable, and, if so, the terms and conditions of such
redemption, including the date or dates after which they shall
be redeemable, and the amounts per share payable in case of
redemption, which amounts may vary under different conditions
and at different redemption dates;
(f) Whether the series shall have a sinking fund for the
redemption or purchase of shares of that series, and, if so, the
terms and amounts of such sinking fund;
(g) The rights of the shares of that series in the event of
voluntary or involuntary liquidation, dissolution, or winding up
of the Corporation, and the relative rights of priority, if any,
of payment of shares of that series; and
(h) Any other relative rights, preferences and limitations
of that series.
No holder of any of the shares of any class of the Corporation
shall be entitled as of right to subscribe for, purchase or
otherwise acquire any shares of any class of the Corporation
which the Corporation proposes to issue or any rights or options
which the Corporation proposes to grant for the purchase of
shares of any class of the Corporation or for the purchase of
any shares, bonds, securities or obligations of the Corporation
which are convertible into or exchangeable for, or which carry
any rights, to subscribe for, purchase or otherwise acquire
shares of any class of the Corporation; and any and all of such
shares, bonds, securities or obligations of the Corporation,
whether now or hereafter authorized or created, may be issued,
or may be reissued or transferred if the same have been
reacquired and have treasury status, and any and all of such
rights and options may be granted by the board of directors to
such persons, firms, corporations and associations, and for such
lawful consideration, and on such terms, as the board of
directors in its discretion may determine, without first
offering the same, or any thereof, to any said holder.
FIFTH: The Corporation shall be under the
direction of a board of directors. The board of directors shall
consist of not less than three directors nor more than fifteen
directors. The number of directors within this range shall be as
stated in the Corporations by-laws, as may be amended from
time to time.
A-2
The terms, classifications, qualifications and election of the
board of directors and the filling of vacancies thereon shall be
as provided herein and in the by-laws.
At each annual meeting of stockholders, the successors to the
directors shall be elected to hold office until the next
succeeding annual meeting of stockholders or until their
successors shall be elected and qualified.
Any vacancy occurring in the board of directors, including any
vacancy created by reason of an increase in the number of
directors, shall be filled for the unexpired term by the
concurring vote of a majority of the directors then in office,
whether or not a quorum, and any director so chosen shall hold
office for the remainder of the full term of the director whose
departure caused the vacancy and until such directors
successor shall have been elected and qualified.
Any director may be removed with or without cause by an
affirmative vote of at least a majority of the total votes
eligible to be cast by stockholders at a duly constituted
meeting of stockholders called expressly for that purpose. At
least 30 but not more than 60 days prior to such meeting of
stockholders, written notice shall be sent to the director or
directors whose removal will be considered at such meeting.
SIXTH: The board of directors shall have the
power to amend from time to time the by-laws of the Corporation.
Such action by the board of directors shall require the
affirmative vote of at least a majority of directors then in
office at a duly constituted meeting of the board of directors
called for such purpose. The stockholders may amend by-laws made
by the board of directors. Such action by the stockholders shall
require the affirmative vote of at least a majority of the total
votes eligible to be cast at a duly constituted meeting of
stockholders called for such purpose.
SEVENTH: Except as otherwise permitted by
Delaware General Corporation Law, no amendment of any provision
of the Corporations Certificate of Incorporation shall be
made unless such amendment has been approved both by the board
of directors of the Corporation and by the stockholders of the
Corporation by the affirmative vote of the holders of at least a
majority of the shares entitled to vote thereon at a duly called
annual or special meeting.
EIGHTH: The following provisions are inserted
to limit the liability of directors and officers of the
Corporation to the full extent of the law allowable and for the
conduct of the affairs of the Corporation, and it is expressly
provided that they are intended to be in furtherance and not in
limitation or exclusion of the powers conferred by law.
(a) No director shall be personally liable to the
Corporation or its stockholders for monetary damages for breach
of his or her fiduciary duty as a director, except (i) for
any breach of the directors duty of loyalty to the
Corporation or its stockholders; (ii) for acts or omissions
not in good faith or which involve intentional misconduct or a
knowing violation of law, (iii) for paying a dividend or
approving a stock repurchase which was illegal under
section 174 of Title 8 of the Delaware Code relating
to the Delaware General Corporation Law; or (iv) for any
transaction from which the director derived an improper personal
benefit.
(b) The Corporation may indemnify each person who was or is
a party or is threatened to be made a party to any threatened,
pending or completed action, suit or proceeding, whether civil,
criminal, administrative or investigative {other than an action
by or in the right of the Corporation) by reason of the fact
that he is or was serving at the request of the Corporation as a
director, officer, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise, against
expenses (including attorneys fees), judgments, fines and
amounts paid in settlement actually and reasonably incurred by
him in connection with such action, suit or proceeding if he
acted in good faith in a manner he reasonably believed to be in
or not opposed to the best interest of the Corporation, and with
respect to any criminal action or proceeding, had no reasonable
cause to believe his conduct was unlawful. The termination of
any action, suit or proceeding by judgment, order, settlement,
conviction or upon plea of nolo contender or its equivalent,
shall not, of itself, create a presumption that the person did
not act in good faith and in a manner which he reasonably
believed to be in or not opposed to the best interests of the
Corporation, and with respect to any criminal action or
proceeding, had no reasonable cause to believe his conduct was
unlawful.
A-3
(c) The Corporation may indemnify each person who was or is
a party or is threatened to be made a party to any threatened,
pending or completed action or suit by or in the right of the
Corporation to procure a judgment in its favor by reason of the
fact that he is or was a director, officer, employee or agent of
the Corporation, or is or as serving at the request of the
Corporation, as a director, officer, employee or agent of the
Corporation, partnership, joint venture, trust or other
enterprise against expenses (including attorneys fees)
actually and reasonably incurred by him in connection with the
defense or settlement of such action or suit if he acted in good
faith and in a manner he reasonably believed to be in or not
opposed to the best interests of the Corporation, except that no
indemnification shall be made in respect of any claim, issue or
matter as to which such person shall have been adjudged to be
liable to the Corporation unless and only to the extent that the
Court in which such action or suit was brought shall determine
upon application, that despite the adjudication of liability but
in view of all the circumstances of the case, such person is
fairly and reasonably entitled to indemnity for such expenses
which the Court of Chancery or such other Court shall deem
proper.
(d) To the extent that a director, officer, employee or
agent of the Corporation has been successful on the merits or
otherwise in defense of any action, suit or proceeding referred
to herein or in defense of any claim, issue or matter therein,
he shall be indemnified against expenses (including
attorneys fees) actually and reasonably incurred by him in
connection therewith.
(e) Any indemnification under paragraphs herein (unless
ordered by a Court) shall be made by the Corporation upon a
determination that indemnification of the director, officer,
employee or agent is proper in the circumstances because he has
met the applicable standard of conduct set forth in said
paragraphs. Such determination shall be made (1) by the
board of directors by a majority vote of a quorum consisting of
directors who were not parties to such action, suit or
proceeding, or (2) if such a quorum of disinterested
directors so directs, by independent legal counsel in a written
opinion, or (3) by the stockholders.
(f) The Corporation may pay expenses incurred by defending
a civil or criminal action, suit or proceeding in advance of the
final disposition of such action, suit or proceeding in the
manner provided herein upon receipt of an undertaking by or on
behalf of the director, office, employee or agent to repay such
amount if it shall be ultimately determined that he is not
entitled to be indemnified by the Corporation as authorized in
this Article.
The indemnification and advancement of expenses provided for
herein shall, unless otherwise provided when authorized or
ratified, continue as to a person who has ceased to be a
director, officer, employee or agent and shall inure to the
benefit of the heirs, executors and administrators of such a
person.
(g) The indemnification and advancement of expenses
provided herein or granted pursuant to this provision shall not
be deemed exclusive of any other rights to which those seeking
indemnification or advancement of expenses may be entitled under
any by-law, agreement, vote of stockholders or of any
disinterested directors or otherwise, both as to action in his
official capacity and as to action in another capacity while
holding such office.
(h) The Corporation may purchase and maintain insurance on
behalf of any person who is or was serving the Corporation in
any capacity referred to hereinabove against any liability
asserted against him and incurred by him in such capacity, or
arising out of his status as such, whether or not the
Corporation would have the power to indemnify him against such
liability under the provisions herein.
(i) The provisions herein shall be applicable to all
claims, actions, suits, or proceedings made or commenced after
the adoption hereof, whether arising from acts or omissions to
act occurring before or after the adoption hereof.
NINTH: The Corporation reserves the right to
amend, alter, change or repeal any provision contained in this
Certificate of Incorporation, in the manner now or hereafter
prescribed by statute, and all rights conferred upon
stockholders herein are granted subject to this reservation.
4. This Amended and Restated Certificate of Incorporation
was duly adopted by the Board of Directors in accordance with
Section 245 of the General Corporation Law of the State of
Delaware and by the written consent of the stockholders in
accordance with the applicable provisions of Sections 228,
242 and 245 of the General Corporation Law of the State of
Delaware and written notice of the adoption of this Amended and
A-4
Restated Certificate of Incorporation has been given as provided
by Section 228 of the General Corporation Law of the State
of Delaware to every stockholder entitled to such notice.
[Signatures
follow on next page]
A-5
IN WITNESS WHEREOF, Cellular Technical Services Company, Inc.
has caused this Certificate to be signed by Jeffrey G. Spragens,
its President, and Dr. Stewart B. Davis, its Secretary
this
day
of ,
2008.
Cellular Technical Services Company, Inc.
Jeffrey Spragens, Chief Executive Officer
and President
Attest:
Dr. Stewart B. Davis,
Secretary
A-6
ANNEX B
SAFESTITCH
MEDICAL, INC.
2007
INCENTIVE COMPENSATION PLAN
B-1
2007 INCENTIVE COMPENSATION PLAN
|
|
|
|
|
|
|
|
|
|
1.
|
|
|
Purpose
|
|
|
B-3
|
|
|
|
|
|
|
|
|
|
|
|
2.
|
|
|
Definitions
|
|
|
B-3
|
|
|
|
|
|
|
|
|
|
|
|
3.
|
|
|
Administration
|
|
|
B-6
|
|
|
|
|
|
|
|
|
|
|
|
4.
|
|
|
Shares Subject to Plan
|
|
|
B-7
|
|
|
|
|
|
|
|
|
|
|
|
5.
|
|
|
Eligibility; Per-Person Award Limitations
|
|
|
B-8
|
|
|
|
|
|
|
|
|
|
|
|
6.
|
|
|
Specific Terms of Awards
|
|
|
B-8
|
|
|
|
|
|
|
|
|
|
|
|
7.
|
|
|
Certain Provisions Applicable to Awards
|
|
|
B-12
|
|
|
|
|
|
|
|
|
|
|
|
8.
|
|
|
Code Section 162(m) Provisions
|
|
|
B-14
|
|
|
|
|
|
|
|
|
|
|
|
9.
|
|
|
Change in Control
|
|
|
B-15
|
|
|
|
|
|
|
|
|
|
|
|
10.
|
|
|
General Provisions
|
|
|
B-17
|
|
B-2
SAFESTITCH
MEDICAL,
INC.
2007 INCENTIVE COMPENSATION PLAN
1. Purpose. The purpose of this 2007
INCENTIVE COMPENSATION PLAN (the Plan) is to
assist SAFESTITCH MEDICAL, INC., a Delaware corporation (the
Company) and its Related Entities (as
hereinafter defined) in attracting, motivating, retaining and
rewarding high-quality executives and other employees, officers,
directors, consultants and other persons who provide services to
the Company or its Related Entities by enabling such persons to
acquire or increase a proprietary interest in the Company in
order to strengthen the mutuality of interests between such
persons and the Companys shareholders, and providing such
persons with performance incentives to expend their maximum
efforts in the creation of shareholder value.
2. Definitions. For purposes of the Plan, the
following terms shall be defined as set forth below, in addition
to such terms defined in Section 1 hereof and elsewhere
herein.
(a) Award means any Option, Stock
Appreciation Right, Restricted Stock Award, Deferred Stock
Award, Share granted as a bonus or in lieu of another Award,
Dividend Equivalent, Other Stock-Based Award or Performance
Award, together with any other right or interest, granted to a
Participant under the Plan.
(b) Award Agreement means any
written agreement, contract or other instrument or document
evidencing any Award granted by the Committee hereunder.
(c) Beneficiary and Beneficial
Ownership means the person, persons, trust or
trusts that have been designated by a Participant in his or her
most recent written beneficiary designation filed with the
Committee to receive the benefits specified under the Plan upon
such Participants death or to which Awards or other rights
are transferred if and to the extent permitted under
Section 10(b) hereof. If, upon a Participants death,
there is no designated Beneficiary or surviving designated
Beneficiary, then the term Beneficiary means the person,
persons, trust or trusts entitled by will or the laws of descent
and distribution to receive such benefits.
(d) Beneficial Owner shall have
the meaning ascribed to such term in
Rule 13d-3
under the Exchange Act and any successor to such Rule.
(e) Board means the
Companys Board of Directors.
(f) Cause shall, with respect to
any Participant, have the meaning specified in the Award
Agreement. In the absence of any definition in the Award
Agreement, Cause shall have the equivalent meaning
or the same meaning as cause or for
cause set forth in any employment, consulting, or other
agreement for the performance of services between the
Participant and the Company or a Related Entity or, in the
absence of any such agreement or any such definition in such
agreement, such term shall mean (i) the failure by the
Participant to perform, in a reasonable manner, his or her
duties as assigned by the Company or a Related Entity,
(ii) any violation or breach by the Participant of his or
her employment, consulting or other similar agreement with the
Company or a Related Entity, if any, (iii) any violation or
breach by the Participant of any non-competition,
non-solicitation, non-disclosure
and/or other
similar agreement with the Company or a Related Entity,
(iv) any act by the Participant of dishonesty or bad faith
with respect to the Company or a Related Entity, (v) use of
alcohol, drugs or other similar substances in a manner that
adversely affects the Participants work performance, or
(vi) the commission by the Participant of any act,
misdemeanor, or crime reflecting unfavorably upon the
Participant or the Company or any Related Entity. The good faith
determination by the Committee of whether the Participants
Continuous Service was terminated by the Company for
Cause shall be final and binding for all purposes
hereunder.
(g) Change in Control means a
Change in Control as defined in Section 9(b) of the Plan.
(h) Code means the Internal
Revenue Code of 1986, as amended from time to time, including
regulations thereunder and successor provisions and regulations
thereto.
(i) Committee means a committee
designated by the Board to administer the Plan; provided,
however, that if the Board fails to designate a committee or if
there are no longer any members on the committee so designated
by the Board, then the Board shall serve as the Committee. The
Committee shall consist of at least two directors, and each
member of the Committee shall be (i) a non-employee
director within the meaning of
B-3
Rule 16b-3
(or any successor rule) under the Exchange Act, unless
administration of the Plan by non-employee directors
is not then required in order for exemptions under
Rule 16b-3
to apply to transactions under the Plan, (ii) an
outside director within the meaning of
Section 162(m) of the Code, and
(iii) Independent.
(j) Consultant means any person
(other than an Employee or a Director, solely with respect to
rendering services in such persons capacity as a director)
who is engaged by the Company or any Related Entity to render
consulting or advisory services to the Company or such Related
Entity.
(k) Continuous Service means the
uninterrupted provision of services to the Company or any
Related Entity in any capacity of Employee, Director, Consultant
or other service provider. Continuous Service shall not be
considered to be interrupted in the case of (i) any
approved leave of absence, (ii) transfers among the
Company, any Related Entities, or any successor entities, in any
capacity of Employee, Director, Consultant or other service
provider, or (iii) any change in status as long as the
individual remains in the service of the Company or a Related
Entity in any capacity of Employee, Director, Consultant or
other service provider (except as otherwise provided in the
Award Agreement). An approved leave of absence shall include
sick leave, military leave, or any other authorized personal
leave.
(l) Covered Employee means the
Person who, as of the end of the taxable year, either is the
principal executive officer of the Company or is serving as the
acting principal executive officer of the Company, and each
other Person whose compensation is required to be disclosed in
the Companys filings with the Securities and Exchange
Commission by reason of that person being among the three
highest compensated officers of the Company as of the end of a
taxable year, or such other person as shall be considered a
covered employee for purposes of Section 162(m)
of the Code.
(m) Deferred Stock means a right
to receive Shares, including Restricted Stock, cash measured
based upon the value of Shares or a combination thereof, at the
end of a specified deferral period.
(n) Deferred Stock Award means an
Award of Deferred Stock granted to a Participant under
Section 6(e) hereof.
(o) Director means a member of
the Board or the board of directors of any Related Entity.
(p) Disability means a permanent
and total disability (within the meaning of Section 22(e)
of the Code), as determined by a medical doctor satisfactory to
the Committee.
(q) Discounted Option means any
Option Awarded under Section 6(b) hereof with an exercise
price that is less than the Fair Market Value of a Share on the
date of grant.
(r) Discounted Stock Appreciation
Right means any Stock Appreciation Right Awarded
under Section 6(c) hereof with an exercise price that is
less than the Fair Market Value of a Share on the date of grant.
(s) Dividend Equivalent means a
right, granted to a Participant under Section 6(g) hereof,
to receive cash, Shares, other Awards or other property equal in
value to dividends paid with respect to a specified number of
Shares, or other periodic payments.
(t) Effective Date means the
effective date of the Plan, which shall be the Shareholder
Approval Date.
(u) Eligible Person means each
officer, Director, Employee, Consultant and other person who
provides services to the Company or any Related Entity. The
foregoing notwithstanding, only employees of the Company, or any
parent corporation or subsidiary corporation of the Company (as
those terms are defined in Sections 424(e) and (f) of
the Code, respectively), shall be Eligible Persons for purposes
of receiving any Incentive Stock Options. An Employee on leave
of absence may be considered as still in the employ of the
Company or a Related Entity for purposes of eligibility for
participation in the Plan.
(v) Employee means any person,
including an officer or Director, who is an employee of the
Company or any Related Entity. The payment of a directors
fee by the Company or a Related Entity shall not be sufficient
to constitute employment by the Company.
B-4
(w) Exchange Act means the
Securities Exchange Act of 1934, as amended from time to time,
including rules thereunder and successor provisions and rules
thereto.
(x) Fair Market Value means the
fair market value of Shares, Awards or other property as
determined by the Committee, or under procedures established by
the Committee. Unless otherwise determined by the Committee, the
Fair Market Value of a Share as of any given date shall be the
closing sale price per Share reported on a consolidated basis
for stock listed on the principal stock exchange or market on
which Shares are traded on the date as of which such value is
being determined or, if there is no sale on that date, then on
the last previous day on which a sale was reported.
(y) Good Reason shall, with
respect to any Participant, have the meaning specified in the
Award Agreement. In the absence of any definition in the Award
Agreement, Good Reason shall have the equivalent
meaning or the same meaning as good reason or
for good reason set forth in any employment,
consulting or other agreement for the performance of services
between the Participant and the Company or a Related Entity or,
in the absence of any such agreement or any such definition in
such agreement, such term shall mean (i) the assignment to
the Participant of any duties inconsistent in any material
respect with the Participants duties or responsibilities
as assigned by the Company or a Related Entity, or any other
action by the Company or a Related Entity which results in a
material diminution in such duties or responsibilities,
excluding for this purpose an isolated, insubstantial and
inadvertent action not taken in bad faith and which is remedied
by the Company or a Related Entity promptly after receipt of
notice thereof given by the Participant or (ii) any
material failure by the Company or a Related Entity to comply
with its obligations to the Participant as agreed upon, other
than an isolated, insubstantial and inadvertent failure not
occurring in bad faith and which is remedied by the Company or a
Related Entity promptly after receipt of notice thereof given by
the Participant; or (iii) the Companys or Related
Entitys requiring the Participant to be based at any
office or location outside of fifty miles from the location of
employment or service as of the date of Award, except for travel
reasonably required in the performance of the Participants
responsibilities.
(z) Incentive Stock Option means
any Option intended to be designated as an incentive stock
option within the meaning of Section 422 of the Code or any
successor provision thereto.
(aa) Independent, when referring
to either the Board or members of the Committee, shall have the
same meaning as used in the rules of the American Stock Exchange
or any national securities exchange on which any securities of
the Company are listed for trading, and if not listed for
trading, by the rules of the American Stock Exchange.
(bb) Incumbent Board means the
Incumbent Board as defined in Section 9(b)(ii) of the Plan.
(cc) Option means a right granted
to a Participant under Section 6(b) hereof, to purchase
Shares or other Awards at a specified price during specified
time periods.
(dd) Optionee means a person to
whom an Option is granted under this Plan or any person who
succeeds to the rights of such person under this Plan.
(ee) Other Stock-Based Awards
means Awards granted to a Participant under Section 6(i)
hereof.
(ff) Participant means a person
who has been granted an Award under the Plan which remains
outstanding, including a person who is no longer an Eligible
Person.
(gg) Performance Award shall mean
any Award of Performance Shares or Performance Units granted
pursuant to Section 6(h).
(hh) Performance Period means
that period established by the Committee at the time any
Performance Award is granted or at any time thereafter during
which any performance goals specified by the Committee with
respect to such Award are to be measured.
(ii) Performance Share means any
grant pursuant to Section 6(h) of a unit valued by
reference to a designated number of Shares, which value may be
paid to the Participant by delivery of such property as the
Committee shall determine, including cash, Shares, other
property, or any combination thereof, upon
B-5
achievement of such performance goals during the Performance
Period as the Committee shall establish at the time of such
grant or thereafter.
(jj) Performance Unit means any
grant pursuant to Section 6(h) of a unit valued by
reference to a designated amount of property (including cash)
other than Shares, which value may be paid to the Participant by
delivery of such property as the Committee shall determine,
including cash, Shares, other property, or any combination
thereof, upon achievement of such performance goals during the
Performance Period as the Committee shall establish at the time
of such grant or thereafter.
(kk) Person shall have the
meaning ascribed to such term in Section 3(a)(9) of the
Exchange Act and used in Sections 13(d) and 14(d) thereof,
and shall include a group as defined in
Section 13(d) thereof.
(ll) Prior Plan means the 1996
Stock Option Plan of Cellular Technical Services Company, Inc.,
as amended.
(mm) Related Entity means any
Subsidiary, and any business, corporation, partnership, limited
liability company or other entity designated by the Board, in
which the Company or a Subsidiary holds a substantial ownership
interest, directly or indirectly.
(nn) Restricted Stock means any
Share issued with the restriction that the holder may not sell,
transfer, pledge or assign such Share and with such risks of
forfeiture and other restrictions as the Committee, in its sole
discretion, may impose (including any restriction on the right
to vote such Share and the right to receive any dividends),
which restrictions may lapse separately or in combination at
such time or times, in installments or otherwise, as the
Committee may deem appropriate.
(oo) Restricted Stock Award means
an Award granted to a Participant under Section 6(d) hereof.
(pp) Rule 16b-3
means
Rule 16b-3,
as from time to time in effect and applicable to the Plan and
Participants, promulgated by the Securities and Exchange
Commission under Section 16 of the Exchange Act.
(qq) Shareholder Approval Date
means the date on which this Plan is approved shareholders of
the Company eligible to vote in the election of directors, by a
vote sufficient to meet the requirements of Code
Sections 162(m) (if applicable) and 422,
Rule 16b-3
under the Exchange Act (if applicable), applicable requirements
under the rules of any stock exchange or automated quotation
system on which the Shares may be listed on quoted, and other
laws, regulations and obligations of the Company applicable to
the Plan.
(rr) Shares means the shares of
common stock of the Company, par value $0.01 per share, and such
other securities as may be substituted (or resubstituted) for
Shares pursuant to Section 10(c) hereof.
(ss) Stock Appreciation Right
means a right granted to a Participant under Section 6(c)
hereof.
(tt) Subsidiary means any
corporation or other entity in which the Company has a direct or
indirect ownership interest of 50% or more of the total combined
voting power of the then outstanding securities or interests of
such corporation or other entity entitled to vote generally in
the election of directors or in which the Company has the right
to receive 50% or more of the distribution of profits or 50% or
more of the assets on liquidation or dissolution.
(uu) Substitute Awards means
Awards granted or Shares issued by the Company in assumption of,
or in substitution or exchange for, Awards previously granted,
or the right or obligation to make future Awards, by a company
acquired by the Company or any Related Entity or with which the
Company or any Related Entity combines.
3. Administration.
(a) Authority of the
Committee. The Plan shall be administered by
the Committee, except to the extent the Board elects to
administer the Plan, in which case the Plan shall be
administered by only those directors who are Independent
Directors, in which case references herein to the
Committee shall be deemed to include references to
the Independent members of the Board. The Committee shall have
full and final authority, subject to and consistent with the
provisions of the Plan, to select Eligible Persons to become
Participants, grant Awards, determine the type, number and other
terms and conditions of, and all other matters relating to,
B-6
Awards, prescribe Award Agreements (which need not be identical
for each Participant) and rules and regulations for the
administration of the Plan, construe and interpret the Plan and
Award Agreements and correct defects, supply omissions or
reconcile inconsistencies therein, and to make all other
decisions and determinations as the Committee may deem necessary
or advisable for the administration of the Plan. In exercising
any discretion granted to the Committee under the Plan or
pursuant to any Award, the Committee shall not be required to
follow past practices, act in a manner consistent with past
practices, or treat any Eligible Person or Participant in a
manner consistent with the treatment of other Eligible Persons
or Participants.
Manner of Exercise of Committee
Authority. The Committee, and not the Board,
shall exercise sole and exclusive discretion on any matter
relating to a Participant then subject to Section 16 of the
Exchange Act with respect to the Company to the extent necessary
in order that transactions by such Participant shall be exempt
under
Rule 16b-3
under the Exchange Act. Any action of the Committee shall be
final, conclusive and binding on all persons, including the
Company, its Related Entities, Eligible Persons, Participants,
Beneficiaries, transferees under Section 10(b) hereof or
other persons claiming rights from or through a Participant, and
shareholders. The express grant of any specific power to the
Committee, and the taking of any action by the Committee, shall
not be construed as limiting any power or authority of the
Committee. The Committee may delegate to officers or managers of
the Company or any Related Entity, or committees thereof, the
authority, subject to such terms as the Committee shall
determine, to perform such functions, including administrative
functions as the Committee may determine to the extent that such
delegation will not result in the loss of an exemption under
Rule 16b-3(d)(1)
for Awards granted to Participants subject to Section 16 of
the Exchange Act in respect of the Company and will not cause
Awards intended to qualify as performance-based
compensation under Code Section 162(m) to fail to so
qualify. The Committee may appoint agents to assist it in
administering the Plan.
(b) Limitation of Liability. The
Committee and the Board, and each member thereof, shall be
entitled to, in good faith, rely or act upon any report or other
information furnished to him or her by any officer or Employee,
the Companys independent auditors, Consultants or any
other agents assisting in the administration of the Plan.
Members of the Committee and the Board, and any officer or
Employee acting at the direction or on behalf of the Committee
or the Board, shall not be personally liable for any action or
determination taken or made in good faith with respect to the
Plan, and shall, to the extent permitted by law, be fully
indemnified and protected by the Company with respect to any
such action or determination.
4. Shares Subject to Plan.
(a) Limitation on Overall Number of Shares Available
for Delivery Under Plan. Subject to
adjustment as provided in Section 10(c) hereof, the total
number of Shares reserved and available for delivery under the
Plan shall be two million (2,000,000). Any Shares that are
subject to Awards of Options or Stock Appreciation Rights shall
be counted against this limit as one(1) Share for every one
(1) Share granted. Any Shares that are subject to Awards
other than Options or Stock Appreciation Rights shall be counted
against this limit as one and one-half (1.5) Shares for every
one (1) Share granted. Any Shares delivered under the Plan
may consist, in whole or in part, of authorized and unissued
shares or treasury shares.
(b) Application of Limitation to Grants of
Award. No Award may be granted if the number
of Shares to be delivered in connection with such an Award or,
in the case of an Award relating to Shares but settled only in
cash (such as cash-only Stock Appreciation Rights), the number
of Shares to which such Award relates, exceeds the number of
Shares remaining available for delivery under the Plan, minus
the number of Shares deliverable in settlement of or relating to
then outstanding Awards. The Committee may adopt reasonable
counting procedures to ensure appropriate counting, avoid double
counting (as, for example, in the case of tandem or substitute
awards) and make adjustments if the number of Shares actually
delivered differs from the number of Shares previously counted
in connection with an Award.
(c) Availability of Shares Not Delivered under Awards
and Adjustments to Limits.
(i) If any Shares subject to an Award are forfeited, expire
or otherwise terminate without issuance of such Shares, or any
Award is settled for cash or otherwise does not result in the
issuance of all or a portion
B-7
of the Shares subject to such Award, the Shares shall, to the
extent of such forfeiture, expiration, termination, cash
settlement or non-issuance, again be available for Awards under
the Plan, subject to Section 4(c)(v) below.
(ii) In the event that any Option or other Award granted
hereunder is exercised through the tendering of Shares (either
actually or by attestation) or by the withholding of Shares by
the Company, or withholding tax liabilities arising from such
option or other award are satisfied by the tendering of Shares
(either actually or by attestation) or by the withholding of
Shares by the Company, then only the number of Shares issued net
of the Shares tendered or withheld shall be counted for purposes
of determining the maximum number of Shares available for grant
under the Plan.
(iii) Substitute Awards shall not reduce the Shares
authorized for grant under the Plan or authorized for grant to a
Participant in any period. Additionally, in the event that a
company acquired by the Company or any Related Entity or with
which the Company or any Related Entity combines has shares
available under a pre-existing plan approved by shareholders and
not adopted in contemplation of such acquisition or combination,
the shares available for delivery pursuant to the terms of such
pre-existing plan (as adjusted, to the extent appropriate, using
the exchange ratio or other adjustment or valuation ratio or
formula used in such acquisition or combination to determine the
consideration payable to the holders of common stock of the
entities party to such acquisition or combination) may be used
for Awards under the Plan and shall not reduce the Shares
authorized for delivery under the Plan; provided that Awards
using such available shares shall not be made after the date
awards or grants could have been made under the terms of the
pre-existing plan, absent the acquisition or combination, and
shall only be made to individuals who were not Employees or
Directors prior to such acquisition or combination.
(iv) Any Share that again become available for delivery
pursuant to this Section 4(c) shall be added back as one
(1) Share if such Shares were subject to Options or Stock
Appreciation Rights granted under the Plan or options or stock
appreciation rights granted under the Prior Plan, and as one and
one-half (1.5) Shares if such Shares were subject to Awards
other than Options or Stock Appreciation Rights granted under
the Plan.
(v) Notwithstanding anything in this Section 4(c) to
the contrary but subject to adjustment as provided in
Section 10(c) hereof, the maximum aggregate number of
Shares that may be issued under the Plan as a result of the
exercise of the Incentive Stock Options shall be two million
(2,000,000) shares.
(d) No Further Awards Under Prior
Plan. In light of the adoption of this Plan,
no further Awards shall be made under the Prior Plan after the
Effective Date.
5. Eligibility; Per-Person Award
Limitations. Awards may be granted under the
Plan only to Eligible Persons. Subject to adjustment as provided
in Section 10(c), in any fiscal year of the Company during
any part of which the Plan is in effect, no Participant may be
granted (i) Options or Stock Appreciation Rights with
respect to more than one million (1,000,000) Shares or
(ii) Restricted Stock, Deferred Stock, Performance Shares
and/or Other
Stock-Based Awards with respect to more than five-hundred
thousand (500,000) Shares. In addition, the maximum dollar value
payable to any one Participant with respect to Performance Units
is (x) two million dollars ($2,000,000) with respect to any
12 month Performance Period (pro-rated for any Performance
Period that is less than 12 months based upon the ratio of
the number of days in the Performance Period as compared to
365), and (y) with respect to any Performance Period that
is more than 12 months, two million dollars ($2,000,000)
multiplied by the number of full 12 months periods that are
in the Performance Period.
6. Specific Terms of Awards.
(a) General. Awards may be granted
on the terms and conditions set forth in this Section 6. In
addition, the Committee may impose on any Award or the exercise
thereof, at the date of grant or thereafter (subject to
Section 10(e)), such additional terms and conditions, not
inconsistent with the provisions of the Plan, as the Committee
shall determine, including terms requiring forfeiture of Awards
in the event of termination of the Participants Continuous
Service and terms permitting a Participant to make elections
relating to his or her Award. The Committee shall retain full
power and discretion to accelerate, waive or modify, at any
time, any term or condition of an Award that is not mandatory
under the Plan. Except in cases in which the Committee is
B-8
authorized to require other forms of consideration under the
Plan, or to the extent other forms of consideration must be paid
to satisfy the requirements of Delaware law, no consideration
other than services may be required for the grant (as opposed to
the exercise) of any Award.
(b) Options. The Committee is
authorized to grant Options to any Eligible Person on the
following terms and conditions:
(i) Exercise Price. Other than in
connection with Substitute Awards, the exercise price per Share
purchasable under an Option shall be determined by the
Committee, provided that such exercise price shall not, in the
case of Incentive Stock Options, be less than 100% of the Fair
Market Value of a Share on the date of grant of the Option and
shall not, in any event, be less than the par value of a Share
on the date of grant of the Option. If an Employee owns or is
deemed to own (by reason of the attribution rules applicable
under Section 424(d) of the Code) more than 10% of the
combined voting power of all classes of stock of the Company (or
any parent corporation or subsidiary corporation of the Company,
as those terms are defined in Sections 424(e) and
(f) of the Code, respectively) and an Incentive Stock
Option is granted to such employee, the exercise price of such
Incentive Stock Option (to the extent required by the Code at
the time of grant) shall be no less than 110% of the Fair Market
Value of a Share on the date such Incentive Stock Option is
granted.
(ii) Time and Method of
Exercise. The Committee shall determine the
time or times at which or the circumstances under which an
Option may be exercised in whole or in part (including based on
achievement of performance goals
and/or
future service requirements), the time or times at which Options
shall cease to be or become exercisable following termination of
Continuous Service or upon other conditions, the methods by
which the exercise price may be paid or deemed to be paid
(including in the discretion of the Committee a cashless
exercise procedure), the form of such payment, including,
without limitation, cash, Shares (including without limitation
the withholding of Shares otherwise deliverable pursuant to the
Award), other Awards or awards granted under other plans of the
Company or a Related Entity, or other property (including notes
or other contractual obligations of Participants to make payment
on a deferred basis provided that such deferred payments are not
in violation of the Sarbanes-Oxley Act of 2002, or any rule or
regulation adopted thereunder or any other applicable law), and
the methods by or forms in which Shares will be delivered or
deemed to be delivered to Participants.
(iii) Incentive Stock Options. The
terms of any Incentive Stock Option granted under the Plan shall
comply in all respects with the provisions of Section 422
of the Code. Anything in the Plan to the contrary
notwithstanding, no term of the Plan relating to Incentive Stock
Options (including any Stock Appreciation Right issued in tandem
therewith) shall be interpreted, amended or altered, nor shall
any discretion or authority granted under the Plan be exercised,
so as to disqualify either the Plan or any Incentive Stock
Option under Section 422 of the Code, unless the
Participant has first requested, or consents to, the change that
will result in such disqualification. Thus, if and to the extent
required to comply with Section 422 of the Code, Options
granted as Incentive Stock Options shall be subject to the
following special terms and conditions:
(A) the Option shall not be exercisable for more than ten
years after the date such Incentive Stock Option is granted;
provided, however, that if a Participant owns or is deemed to
own (by reason of the attribution rules of Section 424(d)
of the Code) more than 10% of the combined voting power of all
classes of stock of the Company (or any parent corporation or
subsidiary corporation of the Company, as those terms are
defined in Sections 424(e) and (f) of the Code,
respectively) and the Incentive Stock Option is granted to such
Participant, the term of the Incentive Stock Option shall be (to
the extent required by the Code at the time of the grant) for no
more than five years from the date of grant; and
(B) The aggregate Fair Market Value (determined as of the
date the Incentive Stock Option is granted) of the Shares with
respect to which Incentive Stock Options granted under the Plan
and all other option plans of the Company (and any parent
corporation or subsidiary corporation of the Company, as those
terms are defined in Sections 424(e) and (f) of the
Code, respectively) that
B-9
become exercisable for the first time by the Participant during
any calendar year shall not (to the extent required by the Code
at the time of the grant) exceed $100,000.
(c) Stock Appreciation Rights. The
Committee may grant Stock Appreciation Rights to any Eligible
Person in conjunction with all or part of any Option granted
under the Plan or at any subsequent time during the term of such
Option (a Tandem Stock Appreciation Right), or
without regard to any Option (a Freestanding Stock
Appreciation Right), in each case upon such terms and
conditions as the Committee may establish in its sole
discretion, not inconsistent with the provisions of the Plan,
including the following:
(i) Right to Payment. A Stock
Appreciation Right shall confer on the Participant to whom it is
granted a right to receive, upon exercise thereof, the excess of
(A) the Fair Market Value of one Share on the date of
exercise over (B) the grant price of the Stock Appreciation
Right as determined by the Committee. The grant price of a Stock
Appreciation Right shall not be less than 100% of the Fair
Market Value of a Share on the date of grant, in the case of a
Freestanding Stock Appreciation Right, or less than the
associated Option exercise price, in the case of a Tandem Stock
Appreciation Right.
(ii) Other Terms. The Committee
shall determine at the date of grant or thereafter, the time or
times at which and the circumstances under which a Stock
Appreciation Right may be exercised in whole or in part
(including based on achievement of performance goals
and/or
future service requirements), the time or times at which Stock
Appreciation Rights shall cease to be or become exercisable
following termination of Continuous Service or upon other
conditions, the method of exercise, method of settlement, form
of consideration payable in settlement, method by or forms in
which Shares will be delivered or deemed to be delivered to
Participants, whether or not a Stock Appreciation Right shall be
in tandem or in combination with any other Award, and any other
terms and conditions of any Stock Appreciation Right.
(iii) Tandem Stock Appreciation
Rights. Any Tandem Stock Appreciation Right
may be granted at the same time as the related Option is granted
or, for Options that are not Incentive Stock Options, at any
time thereafter before exercise or expiration of such Option.
Any Tandem Stock Appreciation Right related to an Option may be
exercised only when the related Option would be exercisable and
the Fair Market Value of the Shares subject to the related
Option exceeds the exercise price at which Shares can be
acquired pursuant to the Option. In addition, if a Tandem Stock
Appreciation Right exists with respect to less than the full
number of Shares covered by a related Option, then an exercise
or termination of such Option shall not reduce the number of
Shares to which the Tandem Stock Appreciation Right applies
until the number of Shares then exercisable under such Option
equals the number of Shares to which the Tandem Stock
Appreciation Right applies. Any Option related to a Tandem Stock
Appreciation Right shall no longer be exercisable to the extent
the Tandem Stock Appreciation Right has been exercised, and any
Tandem Stock Appreciation Right shall no longer be exercisable
to the extent the related Option has been exercised.
(d) Restricted Stock Awards. The
Committee is authorized to grant Restricted Stock Awards to any
Eligible Person on the following terms and conditions:
(i) Grant and
Restrictions. Restricted Stock Awards shall
be subject to such restrictions on transferability, risk of
forfeiture and other restrictions, if any, as the Committee may
impose, or as otherwise provided in this Plan, covering a period
of time specified by the Committee (the Restriction
Period). The terms of any Restricted Stock Award granted
under the Plan shall be set forth in a written Award Agreement
which shall contain provisions determined by the Committee and
not inconsistent with the Plan. The restrictions may lapse
separately or in combination at such times, under such
circumstances (including based on achievement of performance
goals and/or
future service requirements), in such installments or otherwise,
as the Committee may determine at the date of grant or
thereafter. Except to the extent restricted under the terms of
the Plan and any Award Agreement relating to a Restricted Stock
Award, a Participant granted Restricted Stock shall have all of
the rights of a shareholder, including the right to vote the
Restricted Stock and the right to receive dividends thereon
(subject to any mandatory reinvestment or other requirement
imposed by the Committee). During the Restriction Period,
subject to
B-10
Section 10(b) below, the Restricted Stock may not be sold,
transferred, pledged, hypothecated, margined or otherwise
encumbered by the Participant.
(ii) Forfeiture. Except as
otherwise determined by the Committee, upon termination of a
Participants Continuous Service during the applicable
Restriction Period, the Participants Restricted Stock that
is at that time subject to a risk of forfeiture that has not
lapsed or otherwise been satisfied shall be forfeited and
reacquired by the Company; provided that the Committee may
provide, by rule or regulation or in any Award Agreement, or may
determine in any individual case, that forfeiture conditions
relating to Restricted Stock Awards shall be waived in whole or
in part in the event of terminations resulting from specified
causes.
(iii) Certificates for
Stock. Restricted Stock granted under the
Plan may be evidenced in such manner as the Committee shall
determine. If certificates representing Restricted Stock are
registered in the name of the Participant, the Committee may
require that such certificates bear an appropriate legend
referring to the terms, conditions and restrictions applicable
to such Restricted Stock, that the Company retain physical
possession of the certificates, and that the Participant deliver
a stock power to the Company, endorsed in blank, relating to the
Restricted Stock.
(iv) Dividends and Splits. As a
condition to the grant of a Restricted Stock Award, the
Committee may require or permit a Participant to elect that any
cash dividends paid on a Share of Restricted Stock be
automatically reinvested in additional Shares of Restricted
Stock or applied to the purchase of additional Awards under the
Plan. Unless otherwise determined by the Committee, Shares
distributed in connection with a stock split or stock dividend,
and other property distributed as a dividend, shall be subject
to restrictions and a risk of forfeiture to the same extent as
the Restricted Stock with respect to which such Shares or other
property have been distributed.
(e) Deferred Stock Award. The
Committee is authorized to grant Deferred Stock Awards to any
Eligible Person on the following terms and conditions:
(i) Award and
Restrictions. Satisfaction of a Deferred
Stock Award shall occur upon expiration of the deferral period
specified for such Deferred Stock Award by the Committee (or, if
permitted by the Committee, as elected by the Participant). In
addition, a Deferred Stock Award shall be subject to such
restrictions (which may include a risk of forfeiture) as the
Committee may impose, if any, which restrictions may lapse at
the expiration of the deferral period or at earlier specified
times (including based on achievement of performance goals
and/or
future service requirements), separately or in combination, in
installments or otherwise, as the Committee may determine. A
Deferred Stock Award may be satisfied by delivery of Shares,
cash equal to the Fair Market Value of the specified number of
Shares covered by the Deferred Stock, or a combination thereof,
as determined by the Committee at the date of grant or
thereafter. Prior to satisfaction of a Deferred Stock Award, a
Deferred Stock Award carries no voting or dividend or other
rights associated with Share ownership.
(ii) Forfeiture. Except as
otherwise determined by the Committee, upon termination of a
Participants Continuous Service during the applicable
deferral period or portion thereof to which forfeiture
conditions apply (as provided in the Award Agreement evidencing
the Deferred Stock Award), the Participants Deferred Stock
Award that is at that time subject to a risk of forfeiture that
has not lapsed or otherwise been satisfied shall be forfeited;
provided that the Committee may provide, by rule or regulation
or in any Award Agreement, or may determine in any individual
case, that forfeiture conditions relating to a Deferred Stock
Award shall 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 the forfeiture of
any Deferred Stock Award.
(iii) Dividend Equivalents. Unless
otherwise determined by the Committee at date of grant, any
Dividend Equivalents that are granted with respect to any
Deferred Stock Award shall be either (A) paid with respect
to such Deferred Stock Award at the dividend payment date in
cash or in Shares of unrestricted stock having a Fair Market
Value equal to the amount of such dividends, or
(B) deferred with respect to such Deferred Stock Award and
the amount or value thereof automatically deemed reinvested
B-11
in additional Deferred Stock, other Awards or other investment
vehicles, as the Committee shall determine or permit the
Participant to elect.
(f) Bonus Stock and Awards in Lieu of
Obligations. The Committee is authorized to
grant Shares to any Eligible Persons as a bonus, or to grant
Shares or other Awards in lieu of obligations to pay cash or
deliver other property under the Plan or under other plans or
compensatory arrangements, provided that, in the case of
Eligible Persons subject to Section 16 of the Exchange Act,
the amount of such grants remains within the discretion of the
Committee to the extent necessary to ensure that acquisitions of
Shares or other Awards are exempt from liability under
Section 16(b) of the Exchange Act. Shares or Awards granted
hereunder shall be subject to such other terms as shall be
determined by the Committee.
(g) Dividend Equivalents. The
Committee is authorized to grant Dividend Equivalents to any
Eligible Person entitling the Eligible Person to receive cash,
Shares, other Awards, or other property equal in value to the
regular dividends paid with respect to a specified number of
Shares, or other periodic payments. [Dividend Equivalents may be
awarded on a free-standing basis or in connection with another
Award. The Committee may provide that Dividend Equivalents shall
be paid or distributed when accrued or shall be deemed to have
been reinvested in additional Shares, Awards, or other
investment vehicles, and subject to such restrictions on
transferability and risks of forfeiture, as the Committee may
specify.
(h) Performance Awards. The
Committee is authorized to grant Performance Awards to any
Eligible Person payable in cash, Shares or other Awards, on
terms and conditions established by the Committee, subject to
the provisions of Section 8 if and to the extent that the
Committee shall, in its sole discretion, determine that an Award
shall be subject to those provisions. The performance criteria
to be achieved during any Performance Period and the length of
the Performance Period shall be determined by the Committee upon
the grant of each Performance Award. Except as provided in
Section 9 or as may be provided in an Award Agreement,
Performance Awards will be distributed only after the end of the
relevant Performance Period. The performance goals to be
achieved for each Performance Period shall be conclusively
determined by the Committee and may be based upon the criteria
set forth in Section 8(b), or in the case of an Award that
the Committee determines shall not be subject to Section 8
hereof, any other criteria that the Committee, in its sole
discretion, shall determine should be used for that purpose. The
amount of the Award to be distributed shall be conclusively
determined by the Committee. Performance Awards may be paid in a
lump sum or in installments following the close of the
Performance Period or, in accordance with procedures established
by the Committee, on a deferred basis.
(i) Other Stock-Based Awards. The
Committee is authorized, subject to limitations under applicable
law, to grant to any Eligible Person such other Awards that may
be denominated or payable in, valued in whole or in part by
reference to, or otherwise based on, or related to, Shares, as
deemed by the Committee to be consistent with the purposes of
the Plan. Other Stock-Based Awards may be granted to
Participants either alone or in addition to other Awards granted
under the Plan, and such Other Stock-Based Awards shall also be
available as a form of payment in the settlement of other Awards
granted under the Plan. The Committee shall determine the terms
and conditions of such Awards. Shares delivered pursuant to an
Award in the nature of a purchase right granted under this
Section 6(i) shall be purchased for such consideration,
(including without limitation loans from the Company or a
Related Entity provided that such loans are not in violation of
the Sarbanes Oxley Act of 2002, or any rule or regulation
adopted thereunder or any other applicable law) paid for at such
times, by such methods, and in such forms, including, without
limitation, cash, Shares, other Awards or other property, as the
Committee shall determine.
7. Certain Provisions Applicable to Awards.
(a) Stand-Alone, Additional, Tandem, and Substitute
Awards. Awards granted under the Plan may, in
the discretion of the Committee, be granted either alone or in
addition to, in tandem with, or in substitution or exchange for,
any other Award or any award granted under another plan of the
Company, any Related Entity, or any business entity to be
acquired by the Company or a Related Entity, or any other right
of a Participant to receive payment from the Company or any
Related Entity. Such additional, tandem, and substitute or
exchange Awards may be granted at any time. If an Award is
granted in substitution or exchange for another Award or award,
the Committee shall require the surrender of such other Award or
award in consideration for the grant of
B-12
the new Award. In addition, Awards may be granted in lieu of
cash compensation, including in lieu of cash amounts payable
under other plans of the Company or any Related Entity, in which
the value of Stock subject to the Award is equivalent in value
to the cash compensation (for example, Deferred Stock or
Restricted Stock), or in which the exercise price, grant price
or purchase price of the Award in the nature of a right that may
be exercised is equal to the Fair Market Value of the underlying
Stock minus the value of the cash compensation surrendered (for
example, Options or Stock Appreciation Right granted with an
exercise price or grant price discounted by the
amount of the cash compensation surrendered).
(b) Term of Awards. The term of
each Award shall be for such period as may be determined by the
Committee; provided that in no event shall the term of any
Option or Stock Appreciation Right exceed a period of ten years
(or in the case of an Incentive Stock Option such shorter term
as may be required under Section 422 of the Code).
(c) Form and Timing of Payment Under Awards;
Deferrals. Subject to the terms of the Plan
and any applicable Award Agreement, payments to be made by the
Company or a Related Entity upon the exercise of an Option or
other Award or settlement of an Award may be made in such forms
as the Committee shall determine, including, without limitation,
cash, Shares, other Awards or other property, and may be made in
a single payment or transfer, in installments, or on a deferred
basis. Any installment or deferral provided for in the preceding
sentence shall, however, be subject to the Companys
compliance with the provisions of the Sarbanes-Oxley Act of
2002, the rules and regulations adopted by the Securities and
Exchange Commission thereunder, and all applicable rules of the
American Stock Exchange or any national securities exchange on
which the Companys securities are listed for trading and,
if not listed for trading on either the American Stock Exchange
or other national securities exchange, then the rules of the
American Stock Exchange. The settlement of any Award may be
accelerated, and cash paid in lieu of Shares in connection with
such settlement, in the discretion of the Committee or upon
occurrence of one or more specified events (in addition to a
Change in Control). Installment or deferred payments may be
required by the Committee (subject to Section 10(e) of the
Plan, including the consent provisions thereof in the case of
any deferral of an outstanding Award not provided for in the
original Award Agreement) or permitted at the election of the
Participant on terms and conditions established by the
Committee. The Committee may, without limitation, make provision
for the payment or crediting of a reasonable interest rate on
installment or deferred payments or the grant or crediting of
Dividend Equivalents or other amounts in respect of installment
or deferred payments denominated in Shares.
Exemptions from Section 16(b)
Liability. It is the intent of the Company
that the grant of any Awards to or other transaction by a
Participant who is subject to Section 16 of the Exchange
Act shall be exempt from Section 16 pursuant to an
applicable exemption (except for transactions acknowledged in
writing to be non-exempt by such Participant). Accordingly, if
any provision of this Plan or any Award Agreement does not
comply with the requirements of
Rule 16b-3
then applicable to any such transaction, such provision shall be
construed or deemed amended to the extent necessary to conform
to the applicable requirements of
Rule 16b-3
so that such Participant shall avoid liability under
Section 16(b).
(d) Code Section 409A.
(i) If any Award constitutes a nonqualified deferred
compensation plan under Section 409A of the Code (a
Section 409A Plan), then the Award shall be
subject to the following additional requirements, if and to the
extent required to comply with Section 409A of the Code:
(A) Payments under the Section 409A Plan may not be
made earlier than (u) the Participants separation
from service, (v) the date the Participant becomes
disabled, (w) the Participants death, (x) a
specified time (or pursuant to a fixed schedule) specified in
the Award Agreement at the date of the deferral of such
compensation, (y) a change in the ownership or effective
control of the corporation, or in the ownership of a substantial
portion of the assets of the corporation, or (z) the
occurrence of an unforeseeable emergency;
B-13
(B) The time or schedule for any payment of the deferred
compensation may not be accelerated, except to the extent
provided in applicable Treasury Regulations or other applicable
guidance issued by the Internal Revenue Service;
(C) Any elections with respect to the deferral of such
compensation or the time and form of distribution of such
deferred compensation shall comply with the requirements of
Section 409A(a)(4) of the Code; and
(D) In the case of any Participant who is specified
employee, a distribution on account of a separation from service
may not be made before the date which is six months after the
date of the Participants separation from service (or, if
earlier, the date of the Participants death).
For purposes of the foregoing, the terms separation from
service, disabled and specified
employee all shall be defined in the same manner as those
terms are defined for purposes of Section 409A of the Code,
and the limitations set forth herein shall be applied in such
manner (and only to the extent) as shall be necessary to comply
with any requirements of Section 409A of the Code that are
applicable to the Award.
(ii) The Award Agreement for any Award that the Committee
reasonably determines to constitute a Section 409A Plan,
and the provisions of the Plan applicable to that Award, shall
be construed in a manner consistent with the applicable
requirements of Section 409A, and the Committee, in its
sole discretion and without the consent of any Participant, may
amend any Award Agreement (and the provisions of the Plan
applicable thereto) if and to the extent that the Committee
determines that such amendment is necessary or appropriate to
comply with the requirements of Section 409A of the Code.
8. Code Section 162(m) Provisions.
Covered Employees. The Committee, in
its discretion, may determine at the time an Award is granted to
an Eligible Person who is, or is likely to be, as of the end of
the tax year in which the Company would claim a tax deduction in
connection with such Award, a Covered Employee, that the
provisions of this Section 8 shall be applicable to such
Award.
(a) Performance Criteria. If an
Award is subject to this Section 8, then the lapsing of
restrictions thereon and the distribution of cash, Shares or
other property pursuant thereto, as applicable, shall be
contingent upon achievement of one or more objective performance
goals. Performance goals shall be objective and shall otherwise
meet the requirements of Section 162(m) of the Code and
regulations thereunder including the requirement that the level
or levels of performance targeted by the Committee result in the
achievement of performance goals being substantially
uncertain. One or more of the following business criteria
for the Company, on a consolidated basis,
and/or for
Related Entities, or for business or geographical units of the
Company
and/or a
Related Entity (except with respect to the total shareholder
return and earnings per share criteria), shall be used by the
Committee in establishing performance goals for such Awards:
(1) earnings per share; (2) revenues or margins;
(3) cash flow; (4) operating margin; (5) return
on net assets, investment, capital, or equity; (6) economic
value added; (7) direct contribution; (8) net income;
pretax earnings; earnings before interest and taxes; earnings
before interest, taxes, depreciation and amortization; earnings
after interest expense and before extraordinary or special
items; operating income; income before interest income or
expense, unusual items and income taxes, local, state or federal
and excluding budgeted and actual bonuses which might be paid
under any ongoing bonus plans of the Company; (9) working
capital; (10) management of fixed costs or variable costs;
(11) identification or consummation of investment
opportunities or completion of specified projects in accordance
with corporate business plans, including strategic mergers,
acquisitions or divestitures; (12) total shareholder
return; (13) debt reduction; (14) market share;
(15) entry into new markets, either geographically or by
business unit; (16) customer retention and satisfaction;
(17) strategic plan development and implementation,
including turnaround plans;
and/or
(18) the Fair Market Value of a Share. Any of the above
goals may be determined on an absolute or relative basis or as
compared to the performance of a published or special index
deemed applicable by the Committee including, but not limited
to, the Standard & Poors 500 Stock Index or a
group of companies that are comparable to the Company. The
Committee shall exclude the impact of an event or occurrence
which the Committee determines should appropriately be excluded,
including without limitation (i) restructurings,
discontinued operations,
B-14
extraordinary items, and other unusual or non-recurring charges,
(ii) an event either not directly related to the operations
of the Company or not within the reasonable control of the
Companys management, or (iii) a change in accounting
standards required by generally accepted accounting principles.
(b) Performance Period; Timing For Establishing
Performance Goals. Achievement of performance
goals in respect of Performance Awards shall be measured over a
Performance Period as specified by the Committee. Performance
goals shall be established not later than 90 days after the
beginning of any Performance Period applicable to such
Performance Awards, or at such other date as may be required or
permitted for performance-based compensation under
Code Section 162(m).
(c) Adjustments. The Committee
may, in its discretion, reduce the amount of a settlement
otherwise to be made in connection with Awards subject to this
Section 8, but may not exercise discretion to increase any
such amount payable to a Covered Employee in respect of an Award
subject to this Section 8. The Committee shall specify the
circumstances in which such Awards shall be paid or forfeited in
the event of termination of Continuous Service by the
Participant prior to the end of a Performance Period or
settlement of Awards.
(d) Committee Certification. No
Participant shall receive any payment under the Plan that is
subject to this Section 8 unless the Committee has
certified, by resolution or other appropriate action in writing,
that the performance criteria and any other material terms
previously established by the Committee or set forth in the
Plan, have been satisfied to the extent necessary to qualify as
performance based compensation under Code
Section 162(m).
9. Change in Control.
(a) Effect of Change in
Control. Subject to
Section 9(a)(iv), and if and only to the extent provided in
the Award Agreement, or to the extent otherwise determined by
the Committee, upon the occurrence of a Change in
Control, as defined in Section 9(b):
(i) Any Option or Stock Appreciation Right that was not
previously vested and exercisable as of the time of the Change
in Control, shall become immediately vested and exercisable,
subject to applicable restrictions set forth in
Section 10(a) hereof.
(ii) Any restrictions, deferral of settlement, and
forfeiture conditions applicable to a Restricted Stock Award,
Deferred Stock Award or an Other Stock-Based Award subject only
to future service requirements granted under the Plan shall
lapse and such Awards shall be deemed fully vested as of the
time of the Change in Control, except to the extent of any
waiver by the Participant and subject to applicable restrictions
set forth in Section 10(a) hereof.
(iii) With respect to any outstanding Award subject to
achievement of performance goals and conditions under the Plan,
the Committee may, in its discretion, deem such performance
goals and conditions as having been met as of the date of the
Change in Control.
(iv) Notwithstanding the foregoing or any provision in any
Award Agreement to the contrary, but subject to the absolute
discretion and approval of the Committee, if in the event of a
Change in Control the successor company assumes or substitutes
for an Option, Stock Appreciation Right, Restricted Stock Award,
Deferred Stock Award or Other Stock-Based Award, then each such
outstanding Option, Stock Appreciation Right, Restricted Stock
Award, Deferred Stock Award or Other Stock-Based Award shall not
be accelerated as described in Sections 9(a)(i),
(ii) and (iii). For the purposes of this
Section 9(a)(iv), an Option, Stock Appreciation Right,
Restricted Stock Award, Deferred Stock Award or Other
Stock-Based Award shall be considered assumed or substituted for
if following the Change in Control the Award confers the right
to purchase or receive, for each Share subject to the Option,
Stock Appreciation Right, Restricted Stock Award, Deferred Stock
Award or Other Stock-Based Award immediately prior to the Change
in Control, the consideration (whether stock, cash or other
securities or property) received in the transaction constituting
a Change in Control by holders of Shares for each Share held on
the effective date of such transaction (and if holders were
offered a choice of consideration, the type of consideration
chosen by the holders of a majority of the outstanding shares);
provided, however, that if such consideration received in the
transaction constituting a Change in Control is not solely
common stock
B-15
of the successor company or its parent or subsidiary, the
Committee may, with the consent of the successor company or its
parent or subsidiary, provide that the consideration to be
received upon the exercise or vesting of an Option, Stock
Appreciation Right, Restricted Stock Award, Deferred Stock Award
or Other Stock-Based Award, for each Share subject thereto, will
be solely common stock of the successor company or its parent or
subsidiary substantially equal in fair market value to the per
share consideration received by holders of Shares in the
transaction constituting a Change in Control. The determination
of such substantial equality of value of consideration shall be
made by the Committee in its sole discretion and its
determination shall be conclusive and binding.
(b) Definition of Change in
Control. Unless otherwise specified in
an Award Agreement, a Change in Control shall mean
the occurrence of any of the following:
(i) The acquisition by any Person of Beneficial Ownership
(within the meaning of
Rule 13d-3
promulgated under the Exchange Act) of more than fifty percent
(50%) of either (A) the then outstanding shares of common
stock of the Company (the Outstanding Company Common
Stock) or (B) the combined voting power of the then
outstanding voting securities of the Company entitled to vote
generally in the election of directors (the Outstanding
Company Voting Securities) (the foregoing Beneficial Ownership
hereinafter being referred to as a Controlling
Interest); provided, however, that for purposes of this
Section 9(b), the following acquisitions shall not
constitute or result in a Change in Control: (u) any
acquisition directly from the Company; (v) any acquisition
by the Company; (w) any acquisition by any Person that as
of the Effective Date owns Beneficial Ownership of a Controlling
Interest; (x) any acquisition by any employee benefit plan
(or related trust) sponsored or maintained by the Company or any
Related Entity; (y) any acquisition by Dr. Phillip
Frost or by any Person controlled by Dr. Phillip Frost,
including, but not limited to, the Frost Gamma Investments Trust
or (z) any acquisition by any entity pursuant to a
transaction which complies with clauses (A), (B) and
(C) of subsection (iii) below; or
(ii) During any period of two (2) consecutive years
(not including any period prior to the Effective Date)
individuals who constitute the Board on the Effective Date (the
Incumbent Board) cease for any reason to constitute
at least a majority of the Board; provided, however, that any
individual becoming a director subsequent to the Effective Date
whose election, or nomination for election by the Companys
shareholders, was approved by a vote of at least a majority of
the directors then comprising the Incumbent Board shall be
considered as though such individual were a member of the
Incumbent Board, but excluding, for this purpose, any such
individual whose initial assumption of office occurs as a result
of an actual or threatened election contest with respect to the
election or removal of directors or other actual or threatened
solicitation of proxies or consents by or on behalf of a Person
other than the Board; or
(iii) Consummation of a reorganization, merger, statutory
share exchange or consolidation or similar transaction involving
the Company or any of its Related Entities, a sale or other
disposition of all or substantially all of the assets of the
Company, or the acquisition of assets or equity of another
entity by the Company or any of its Related Entities (each a
Business Combination), in each case, unless,
following such Business Combination, (A) all or
substantially all of the individuals and entities who were the
Beneficial Owners, respectively, of the Outstanding Company
Common Stock and Outstanding Company Voting Securities
immediately prior to such Business Combination beneficially own,
directly or indirectly, more than fifty percent (50%) of the
value of the then outstanding equity securities and the combined
voting power of the then outstanding voting securities entitled
to vote generally in the election of members of the board of
directors (or comparable governing body of an entity that does
not have such a board), as the case may be, of the entity
resulting from such Business Combination (including, without
limitation, an entity which as a result of such transaction owns
the Company or all or substantially all of the Companys
assets either directly or through one or more subsidiaries) in
substantially the same proportions as their ownership,
immediately prior to such Business Combination of the
Outstanding Company Common Stock and Outstanding Company Voting
Securities, as the case may be, (B) no Person (excluding
any employee benefit plan (or related trust) of the Company or
such entity resulting from such Business Combination or any
Person that as of the Effective Date owns Beneficial Ownership
of a Controlling Interest) beneficially owns, directly or
indirectly, fifty percent (50%) or more of the value of
B-16
the then outstanding equity securities of the entity resulting
from such Business Combination or the combined voting power of
the then outstanding voting securities of such entity except to
the extent that such ownership existed prior to the Business
Combination and (C) at least a majority of the members of
the Board of Directors or other governing body of the entity
resulting from such Business Combination were members of the
Incumbent Board at the time of the execution of the initial
agreement, or of the action of the Board, providing for such
Business Combination; or
(iv) Approval by the shareholders of the Company of a
complete liquidation or dissolution of the Company.
10. General Provisions.
(a) Compliance With Legal and Other
Requirements. The Company may, to the extent
deemed necessary or advisable by the Committee, postpone the
issuance or delivery of Shares or payment of other benefits
under any Award until completion of such registration or
qualification of such Shares or other required action under any
federal or state law, rule or regulation, listing or other
required action with respect to any stock exchange or automated
quotation system upon which the Shares or other Company
securities are listed or quoted, or compliance with any other
obligation of the Company, as the Committee, may consider
appropriate, and may require any Participant to make such
representations, furnish such information and comply with or be
subject to such other conditions as it may consider appropriate
in connection with the issuance or delivery of Shares or payment
of other benefits in compliance with applicable laws, rules, and
regulations, listing requirements, or other obligations.
(b) Limits on Transferability;
Beneficiaries. No Award or other right or
interest granted under the Plan shall be pledged, hypothecated
or otherwise encumbered or subject to any lien, obligation or
liability of such Participant to any party, or assigned or
transferred by such Participant otherwise than by will or the
laws of descent and distribution or to a Beneficiary upon the
death of a Participant, and such Awards or rights that may be
exercisable shall be exercised during the lifetime of the
Participant only by the Participant or his or her guardian or
legal representative, except that Awards and other rights (other
than Incentive Stock Options and Stock Appreciation Rights in
tandem therewith) may be transferred to one or more
Beneficiaries or other transferees during the lifetime of the
Participant, and may be exercised by such transferees in
accordance with the terms of such Award, but only if and to the
extent such transfers are permitted by the Committee pursuant to
the express terms of an Award Agreement (subject to any terms
and conditions which the Committee may impose thereon). A
Beneficiary, transferee, or other person claiming any rights
under the Plan from or through any Participant shall be subject
to all terms and conditions of the Plan and any Award Agreement
applicable to such Participant, except as otherwise determined
by the Committee, and to any additional terms and conditions
deemed necessary or appropriate by the Committee.
(c) Adjustments.
(i) Adjustments to Awards. In the
event that any extraordinary dividend or other distribution
(whether in the form of cash, Shares, or other property),
recapitalization, forward or reverse split, reorganization,
merger, consolidation, spin-off, combination, repurchase, share
exchange, liquidation, dissolution or other similar corporate
transaction or event affects the Shares
and/or such
other securities of the Company or any other issuer such that a
substitution, exchange, or adjustment is determined by the
Committee to be appropriate, then the Committee shall, in such
manner as it may deem equitable, substitute, exchange or adjust
any or all of (A) the number and kind of Shares which may
be delivered in connection with Awards granted thereafter,
(B) the number and kind of Shares by which annual
per-person Award limitations are measured under Section 5
hereof, (C) the number and kind of Shares subject to or
deliverable in respect of outstanding Awards, (D) the
exercise price, grant price or purchase price relating to any
Award and/or
make provision for payment of cash or other property in respect
of any outstanding Award, and (E) any other aspect of any
Award that the Committee determines to be appropriate.
(ii) Adjustments in Case of Certain
Transactions. In the event of any merger,
consolidation or other reorganization in which the Company does
not survive, or in the event of any Change in Control, any
B-17
outstanding Awards may be dealt with in accordance with any of
the following approaches, as determined by the agreement
effectuating the transaction or, if and to the extent not so
determined, as determined by the Committee: (a) the
continuation of the outstanding Awards by the Company, if the
Company is a surviving entity, (b) the assumption or
substitution for, as those terms are defined in
Section 9(b)(iv) hereof, the outstanding Awards by the
surviving entity or its parent or subsidiary, (c) full
exercisability or vesting and accelerated expiration of the
outstanding Awards, or (d) settlement of the value of the
outstanding Awards in cash or cash equivalents or other property
followed by cancellation of such Awards (which value, in the
case of Options or Stock Appreciation Rights, shall be measured
by the amount, if any, by which the Fair Market Value of a Share
exceeds the exercise or grant price of the Option or Stock
Appreciation Right as of the effective date of the transaction).
The Committee shall give written notice of any proposed
transaction referred to in this Section 10(c)(ii) a
reasonable period of time prior to the closing date for such
transaction (which notice may be given either before or after
the approval of such transaction), in order that Participants
may have a reasonable period of time prior to the closing date
of such transaction within which to exercise any Awards that are
then exercisable (including any Awards that may become
exercisable upon the closing date of such transaction). A
Participant may condition his exercise of any Awards upon the
consummation of the transaction.
(iii) Other Adjustments. The
Committee (and the Board if and only to the extent such
authority is not required to be exercised by the Committee to
comply with Section 162(m) of the Code) is authorized to
make adjustments in the terms and conditions of, and the
criteria included in, Awards (including Performance Awards, or
performance goals relating thereto) in recognition of unusual or
nonrecurring events (including, without limitation, acquisitions
and dispositions of businesses and assets) affecting the
Company, any Related Entity or any business unit, or the
financial statements of the Company or any Related Entity, or in
response to changes in applicable laws, regulations, accounting
principles, tax rates and regulations or business conditions or
in view of the Committees assessment of the business
strategy of the Company, any Related Entity or business unit
thereof, performance of comparable organizations, economic and
business conditions, personal performance of a Participant, and
any other circumstances deemed relevant; provided that no such
adjustment shall be authorized or made if and to the extent that
such authority or the making of such adjustment would cause
Options, Stock Appreciation Rights, Performance Awards granted
pursuant to Section 8(b) hereof to Participants designated
by the Committee as Covered Employees and intended to qualify as
performance-based compensation under Code
Section 162(m) and the regulations thereunder to otherwise
fail to qualify as performance-based compensation
under Code Section 162(m) and regulations thereunder.
(d) Taxes. The Company and any
Related Entity are authorized to withhold from any Award
granted, any payment relating to an Award under the Plan,
including from a distribution of Shares, or any payroll or other
payment to a Participant, amounts of withholding and other taxes
due or potentially payable in connection with any transaction
involving an Award, and to take such other action as the
Committee may deem advisable to enable the Company or any
Related Entity and Participants to satisfy obligations for the
payment of withholding taxes and other tax obligations relating
to any Award. This authority shall include authority to withhold
or receive Shares or other property and to make cash payments in
respect thereof in satisfaction of a Participants tax
obligations, either on a mandatory or elective basis in the
discretion of the Committee.
(e) Changes to the Plan and
Awards. The Board may amend, alter, suspend,
discontinue or terminate the Plan, or the Committees
authority to grant Awards under the Plan, without the consent of
shareholders or Participants, except that any amendment or
alteration to the Plan shall be subject to the approval of the
Companys shareholders not later than the annual meeting
next following such Board action if such shareholder approval is
required by any federal or state law or regulation (including,
without limitation,
Rule 16b-3
or Code Section 162(m)) or the rules of any stock exchange
or automated quotation system on which the Shares may then be
listed or quoted, and the Board may otherwise, in its
discretion, determine to submit other such changes to the Plan
to shareholders for approval; provided that, without the consent
of an affected Participant, no such Board action may materially
and adversely affect the rights of such Participant under any
previously granted and outstanding Award. The Committee may
waive any conditions or rights under, or amend, alter, suspend,
discontinue or terminate any Award theretofore granted and any
Award
B-18
Agreement relating thereto, except as otherwise provided in the
Plan; provided that, without the consent of an affected
Participant, no such Committee or the Board action may
materially and adversely affect the rights of such Participant
under such Award. Notwithstanding anything to the contrary, the
Committee shall be authorized to amend any outstanding Option
and/or Stock
Appreciation Right to reduce the exercise price or grant price
without the prior approval of the shareholders of the Company.
In addition, the Committee shall be authorized to cancel
outstanding Options
and/or Stock
Appreciation Rights replaced with Awards having a lower exercise
price without the prior approval of the shareholders of the
Company.
(f) Limitation on Rights Conferred Under
Plan. Neither the Plan nor any action taken
hereunder or under any Award shall be construed as
(i) giving any Eligible Person or Participant the right to
continue as an Eligible Person or Participant or in the employ
or service of the Company or a Related Entity;
(ii) interfering in any way with the right of the Company
or a Related Entity to terminate any Eligible Persons or
Participants Continuous Service at any time,
(iii) giving an Eligible Person or Participant any claim to
be granted any Award under the Plan or to be treated uniformly
with other Participants and Employees, or (iv) conferring
on a Participant any of the rights of a shareholder of the
Company including, without limitation, any right to receive
dividends or distributions, any right to vote or act by written
consent, any right to attend meetings of shareholders or any
right to receive any information concerning the Companys
business, financial condition, results of operation or
prospects, unless and until such time as the Participant is duly
issued Shares on the stock books of the Company in accordance
with the terms of an Award. None of the Company, its officers or
its directors shall have any fiduciary obligation to the
Participant with respect to any Awards unless and until the
Participant is duly issued Shares pursuant to the Award on the
stock books of the Company in accordance with the terms of an
Award. Neither the Company nor any of the Companys
officers, directors, representatives or agents are granting any
rights under the Plan to the Participant whatsoever, oral or
written, express or implied, other than those rights expressly
set forth in this Plan or the Award Agreement.
(g) Unfunded Status of Awards; Creation of
Trusts. The Plan is intended to constitute an
unfunded plan for incentive and deferred
compensation. With respect to any payments not yet made to a
Participant or obligation to deliver Shares pursuant to an
Award, nothing contained in the Plan or any Award shall give any
such Participant any rights that are greater than those of a
general creditor of the Company; provided that the Committee may
authorize the creation of trusts and deposit therein cash,
Shares, other Awards or other property, or make other
arrangements to meet the Companys obligations under the
Plan. Such trusts or other arrangements shall be consistent with
the unfunded status of the Plan unless the Committee
otherwise determines with the consent of each affected
Participant. The trustee of such trusts may be authorized to
dispose of trust assets and reinvest the proceeds in alternative
investments, subject to such terms and conditions as the
Committee may specify and in accordance with applicable law.
(h) Nonexclusivity of the
Plan. Neither the adoption of the Plan by the
Board nor its submission to the shareholders of the Company for
approval shall be construed as creating any limitations on the
power of the Board or a committee thereof to adopt such other
incentive arrangements as it may deem desirable including
incentive arrangements and awards which do not qualify under
Section 162(m) of the Code.
(i) Payments in the Event of Forfeitures; Fractional
Shares. Unless otherwise determined by the
Committee, in the event of a forfeiture of an Award with respect
to which a Participant paid cash or other consideration, the
Participant shall be repaid the amount of such cash or other
consideration. No fractional Shares shall be issued or delivered
pursuant to the Plan or any Award. The Committee shall determine
whether cash, other Awards or other property shall be issued or
paid in lieu of such fractional shares or whether such
fractional shares or any rights thereto shall be forfeited or
otherwise eliminated.
(j) Governing Law. The validity,
construction and effect of the Plan, any rules and regulations
under the Plan, and any Award Agreement shall be determined in
accordance with the laws of the State of Delaware without giving
effect to principles of conflict of laws, and applicable federal
law.
(k) Non-U.S. Laws. The
Committee shall have the authority to adopt such modifications,
procedures, and subplans as may be necessary or desirable to
comply with provisions of the laws of foreign countries in which
the Company or its Related Entities may operate to assure the
viability of the benefits from Awards granted to Participants
performing services in such countries and to meet the objectives
of the Plan.
B-19
(l) Plan Effective Date and Shareholder Approval;
Termination of Plan. The Plan shall become
effective on the Effective Date, subject to subsequent approval,
within 12 months of its adoption by the Board, by
shareholders of the Company eligible to vote in the election of
directors, by a vote sufficient to meet the requirements of Code
Sections 162(m) (if applicable) and 422,
Rule 16b-3
under the Exchange Act (if applicable), applicable requirements
under the rules of any stock exchange or automated quotation
system on which the Shares may be listed or quoted, and other
laws, regulations, and obligations of the Company applicable to
the Plan. Awards may be granted subject to shareholder approval,
but may not be exercised or otherwise settled in the event the
shareholder approval is not obtained. The Plan shall terminate
at the earliest of (a) such time as no Shares remain
available for issuance under the Plan, (b) termination of
this Plan by the Board, or (c) the tenth anniversary of the
Effective Date. Awards outstanding upon expiration of the Plan
shall remain in effect until they have been exercised or
terminated, or have expired.
B-20