Document:

exhibit10-17.htm

    Vishay Precision Group Inc. 2010 Stock
Incentive Program 

     

    1. Purpose 

     

    The Vishay Precision
Group Inc. 2010 Stock Incentive Program (the “Program”) provides for the grant
of stock options, restricted stock and stock units to executive officers, key
employees and directors of Vishay Precision Group Inc. (the “Company”) and its
subsidiaries. The purpose of the Program is to enhance the long-term performance
of the Company and to provide the selected individuals with an incentive to
improve the growth and profitability of the Company by acquiring a proprietary
interest in the success of the Company. 

     

    2. Definitions 

     

    Whenever used in the
Program, the masculine pronoun shall be deemed to include the feminine, the
singular to include the plural, unless the context clearly indicates otherwise,
and the following capitalized words and phrases shall have the meaning set forth
below unless the context plainly requires a different meaning: 

     

    
      	      	(a)	      	“Agreement” means the written agreement between the Company and a
      Participant, or other documentation, evidencing an Award.
	
            	 
	
            	(b)	
            	“Award” means a Stock Option, Restricted Stock, Unrestricted Stock
      or Stock Unit.
	
            	 
	
            	(c)	
            	“Board” means the Board of Directors of the Company.
	
            	 
	
            	(d)	
            	“Cause” means conduct by a Participant amounting to (1) fraud or
      dishonesty against the Company, (2) willful misconduct, repeated refusal
      to follow the reasonable directions of the Board of Directors of the
      Company, or knowing violation of law in the course of performance of the
      duties of Participant's employment with the Company, (3) repeated absences
      from work without a reasonable excuse, (4) intoxication with alcohol or
      drugs while on the Company's premises during regular business hours, (5) a
      conviction or plea of guilty or no contest to a felony or a crime
      involving dishonesty, or (6) a breach or violation of any Company policies
      regarding employee conduct, or a breach or violation of the terms of any
      employment or other agreement between Participant and the
    Company.
	
            	 
	
            	(e)	
            	“Class
      B Common Stock” means the Class B common stock, $0.10 par value per share,
      of the Company.
	
            	 
	
            	(f)	
            	“Code”
      means the Internal Revenue Code of 1986, as amended.
	
            	 
	
            	(g)	
            	“Committee” means the Compensation Committee of the Board of
      Directors of the Company.
	
            	 

    

    

    
    

    
      	      	(h)	      	“Common Stock” means the common stock, par value $0.10 per share of
      the Company, other than Class B Common Stock.
	
            	 
	
            	(i)	
            	“Company” means Vishay Precision Group Inc. a Delaware corporation,
      or any successor organization.
	
            	 
	
            	(j)	
            	“Consent” has the meaning prescribed in Section 13
  below.
	
            	 
	
            	(k)	
            	“Disability” means a physical or mental condition which, in the
      judgment of the Committee, permanently prevents a Participant from
      performing his usual duties for the Company or such other position or job
      which the Company makes available to him and for which the Participant is
      qualified by reason of his education, training and experience. In making
      its determination, the Committee may, but is not required to, rely on
      advice of a physician competent in the area to which such Disability
      relates. The Committee may make the determination in its sole discretion
      and any decision of the Committee shall be binding on all
    parties.
	
            	 
	
            	(l)	
            	“Employee” means a full-time, nonunion, salaried employee, as that
      term is understood under the common law, of the Company.
	
            	 
	
            	(m)	
            	“Exercise Price” means the price per share at which Common Stock
      may be purchased upon exercise of a Stock Option.
	
            	 
	
            	(n)	
            	“Expiration Date” means the last date upon which a Stock Option can
      be exercised, as described in Section 6(b).
	
            	 
	
            	(o)	
            	“Fair
      Market Value” means, for any particular date, the last sale price of the
      Common Stock on the New York Stock Exchange or, if no reported sales take
      place on the applicable date, the average of the high bid and low asked
      price of the Common Stock as reported for such date or, if no such
      quotation is made on such date, on the next preceding day on which there
      were quotations, provided that such quotations shall have been made within
      the ten (10) business days preceding the applicable date. In the event
      that the Fair Market Value cannot be thus determined, it shall be
      determined in good faith by the Committee.
	
            	 
	
            	(p)	
            	“Involuntary Termination” means a Termination of Employment but
      does not include a Termination of Employment for Cause or a Voluntary
      Resignation.
	
            	 
	
            	(q)	
            	“Participant” means an individual to whom an Award is granted
      pursuant to the Program.
	
            	 
	
            	(r)	
            	“Program” means the 2010 Vishay Precision Group Inc. Stock
      Incentive Program.
	
            	 
	
            	(s)	
            	“Program Action” has the meaning prescribed in Section 13
      below.
	
            	 
	
            	(t)	
            	“Restricted Stock” means restricted shares of Common Stock that,
      until vested, may not be transferred and are forfeitable.
	
            	 

    

    -2- 

     

    

    
    

    
      	
            	(u)	
            	“Retirement” means a Termination of Employment from the Company or
      a Subsidiary, with the consent of the Company, on or after the earliest
      “normal retirement age”
      defined under any tax qualified retirement plan maintained by the
      Company. 
	
            	 
	
            	(v)	
            	“Stock Option” or “Option” means a right to purchase shares of
      Common Stock granted pursuant to Section 6 of this Program, which shall
      not be treated as an incentive stock option under section 422 of the
      Code.
	
            	 
	
            	(w)	
            	“Stock Unit” means the right to receive a share of Common Stock on
      a date determined by the Committee and set forth in the applicable
      Agreement.
	
            	 
	
            	(x)	
            	“Subsidiary” means any corporation (other than the Company) in an
      unbroken chain of corporations beginning with the Company if, at the time
      of the granting of the Award, each of the corporations other than the last
      corporation in the unbroken chain owns stock equal to 50% or more of the
      total combined voting power of all classes of stock in one of the other
      corporations in the chain.
	
            	 
	      	(y)	      	“Termination of Employment” means the termination of the
      employee-employer relationship between an Employee and the Company or a
      Subsidiary, or the termination of service as a member of the Board,
      regardless of the fact that severance or similar payments are made to the
      Participant, for any reason, including, but not limited to, a Voluntary
      Resignation, Involuntary Termination, termination for Cause, death,
      Disability or Retirement. The Committee shall, in its absolute discretion,
      determine the effect of all matters and questions relating to a Termination of Employment, including,
      but not by way of limitation, the question of whether a leave of absence
      constitutes a Termination of Employment, or whether a Termination of
      Employment is for Cause. If a Participant is both an Employee and a member
      of the Board or if a Participant ceases to be an Employee or Board member
      and immediately commences service in the other capacity, then a Termination of Employment shall occur
      when the Participant` is neither an Employee nor a member of the
      Board.
	
            	 
	
            	(z)	
            	“Unrestricted Stock” means unrestricted shares of Common
      Stock.
	
            	 
	
            	(aa)	
            	“Voluntary Resignation” means a Termination of Employment as a
      result of the Participant's resignation.
	
            	  

    

    3.Administration

     

         a) The Program shall be
administered by the Committee, which shall consist of at least two directors who
are not Employees of the Company or a Subsidiary. The members of the Committee
shall be appointed by, and serve at the pleasure of, the Board. To the extent
required for transactions under the Program to qualify for the exemptions
available under Rule 16b-3 

     

    -3- 

     

    

    
    

    promulgated under the
Securities Exchange Act of 1934, the members of the Committee shall be
“non-employee directors” within the meaning of Rule 16b-3. To the extent
required for compensation realized from Awards to be deductible by the Company
pursuant to section 162(m) of the Code, the members of the Committee shall be
“outside directors” within the meaning of section 162(m). Notwithstanding the
foregoing, no grant of an Award shall be invalidated if the Committee is not so
constituted. If the Committee does not exist, or for any other reason determined
by the Board, the Board may take any action under the Program that would
otherwise be the responsibility of the Committee. 

     

         b) The Committee shall have full authority, in
its discretion, (a) to determine the Employees of the Company or any Subsidiary
to whom Awards shall be granted and the terms and provisions of each Award,
subject to the provisions of this Program, (b) to exercise all of the powers
granted to it under this Program, (c) to construe, interpret and implement the
Program and any Agreement, (d) to prescribe, amend and rescind rules and
regulations relating to this Program, including rules governing its own
operations, (e) to determine the terms and provisions of the respective
Agreement with each Participant, (f) to make all determinations necessary or
advisable in administering the Program, and (g) to correct any defect, supply
any omission and reconcile any inconsistency in the Program. The Committee's
determinations under the Program need not be uniform and may be made by it
selectively among persons who receive, or are eligible to receive, Awards under
the Program (whether or not such persons are similarly situated). The
Committee's decisions shall be final and binding on all Participants.

     

         c) Action of the Committee shall be taken by the
vote of a majority of its members. The determination of the Committee on all
matters relating to the Program or any Agreement (including, without limitation,
the determination as to whether an event has occurred resulting in a forfeiture
or a termination or reduction of the Company's obligations in accordance with
the terms of this Program) shall be final, binding and conclusive. No member of
the Committee shall be liable for any action or determination made in good faith
with respect to the Program or any award thereunder. 

     

         d) Notwithstanding any other provision of the
Program, the Committee (or the Board acting instead of the Committee), may
delegate to one or more officers of the Company the authority to designate the
individuals (other than such officer(s) or any member of the Board), among those
eligible to receive awards pursuant to the terms of the Program, who will
receive Awards and the size of each such grant, to the fullest extent permitted
by Section 157 of the Delaware General Corporation Law (or any successor
provision thereto). 

     

         e) With respect to Awards granted to members of
the Board who are not employees of the Company, the Program shall be
administered (as otherwise set forth in this Section 3), including determining
which individuals shall receive Awards and the terms of any such Awards, solely
by the Board. 

     

    4. Shares Available 

     

         a) Subject to adjustment in accordance with
Section 4(b), the number of shares of Common Stock for which Awards may be
granted under this Program is 500,000, which may consist of treasury shares or
authorized but unissued shares. The maximum number of shares of 

     

    -4- 

     

    

    
    

    Common Stock subject to
Awards granted under this Program to any participating Employee for any year
shall not exceed 250,000 shares, subject to adjustment in accordance with
Section 4(b), below. To the extent permitted by law, any shares of Common Stock
attributable to the unexercised or otherwise unsettled portion of any Award that
is forfeited, canceled, expires or terminates for any reason without being
exercised or otherwise settled in full shall again be available for the grant of
Awards under this Program, and any shares of Common Stock tendered to the
Company in payment of the Exercise Price of a Stock Option shall also be
available for the grant of Awards under this Program, provided that no more than
500,000 shares of Common Stock cumulatively shall be available under this
Program at any time. 

     

         b) If there is any change in the outstanding
shares of Common Stock by reason of a stock dividend or distribution, or stock
split-up, or by reason of any merger, consolidation, spinoff or other corporate
reorganization in which the Company is the surviving corporation, the number of
shares that may be delivered under the Program and the number of shares subject
to each outstanding Award, and, if appropriate, the Exercise Price under each
such Option, shall be equitably adjusted by the Committee, whose determination
shall be final, binding and conclusive. After any adjustment made pursuant to
this Section 4(b), the number of shares subject to each outstanding Award shall
be rounded down to the nearest whole number. 

     

    5. Eligibility 

     

    Officers, other
Employees of the Company or a Subsidiary, and members of the Board, who are
responsible for or contribute to the management, growth, and profitability of
the business of the Company or a Subsidiary are eligible for participation in
this Program. The selection of individuals for participation in the Program
shall be made by the Committee, based on a subjective evaluation of each
individual's performance and expected future contribution to the Company and its
Subsidiaries, and may take into account the recommendations of the Chief
Executive Officer of the Company. 

     

    6. Granting of Stock Options 

     

         a) Grant of Stock Options. The Committee, in its discretion, may grant
Stock Options during any year that this Program is in effect to any eligible
Employee. The terms of each Stock Option shall be contained in an Agreement,
which shall contain the number of shares of Common Stock covered by the Option,
the period during which the Option may be exercised, the Exercise Price, and any
additional terms and conditions not inconsistent with this Program that the
Committee deems to be appropriate. The Committee shall have complete discretion
in determining the number of shares of Common Stock subject to each Option grant
(subject to the share limitations set forth in Section 4(a)) and, consistent
with the provisions of this Program, the terms, conditions and limitations
pertaining to each Option. The terms of Options need not be uniform among
Participants. By accepting a Stock Option, a Participant thereby agrees that the
Option shall be subject to all of the terms and conditions of this Program and
the applicable Agreement. 

     

         b) Option Term. The duration of each Option shall be
specified in the Agreement and shall not exceed ten (10) years. 

     

    -5- 

     

    

    
    

         c) Option Price. The Exercise Price of the Common Stock
purchasable under any Stock Option shall be determined by the Committee and set
forth in each Agreement, subject to adjustment in accordance with Section 4(b).
The Exercise Price shall not be less than the Fair Market Value of a share of
Common Stock on the date the Option is granted. 

     

         d) Exercise of Stock Options. Each Agreement shall contain a vesting
schedule, which shall specify when the Stock Option shall become vested and thus
exercisable; provided, however, that subsequent to the grant of an Option, the
Committee, at any time before complete termination of such Option, may
accelerate the time or times at which such Option may be exercised in whole or
in part, and may permit the Participant or any other designated person acting
for the benefit of the Participant to exercise all or any part of the Option
during all or part of the remaining Option term specified in Section 6(a),
notwithstanding any provision of the Agreement to the contrary. 

     

         e) Termination of Employment. 

     

              (i) Death or Disability. If a Participant has a Termination of
Employment as a result of death or Disability, the time at which the unexercised
portion of any Option becomes exercisable may be accelerated, including to make
the Option immediately exercisable in full. Except as otherwise provided in an
applicable Agreement, the Option, to the extent that it is not exercisable on
the date of termination, shall expire and terminate on such date of termination
and the Option, to the extent that it is exercisable (including after any
acceleration of vesting) on such date of termination, shall expire and terminate
on the earlier of the Expiration Date or first anniversary of the Participant's
death or disability. Any exercise of an Option following a Participant's death
shall be made only by the Participant's executor or administrator, unless the
Participant's will specifically disposes of such award, in which case such
exercise shall be made only by the recipient of such specific disposition. If a
Participant's personal representative or the recipient of a specific disposition
shall be entitled to exercise an Option pursuant to the preceding sentence, such
representative or recipient shall be bound by all the terms and conditions of
the Program and the applicable Agreement which would have applied to the
Participant. 

     

              (ii) Retirement. If a Participant has a Termination of
Employment due to Retirement, the time at which the unexercised portion of an
Option becomes exercisable may be accelerated, including to make the Option
immediately exercisable in full. Except as otherwise provided in an applicable
Agreement, the Option, to the extent that it is not exercisable on the date of
Retirement, shall expire and terminate on such date of Retirement and the
Option, to the extent that it is exercisable (including after any acceleration
of vesting) on such date of retirement, shall expire and terminate on the
earlier of the Expiration Date of the Option term or the first anniversary of
the Participant's Retirement. 

     

              (iii) Other Termination. Except as otherwise provided in an
applicable Agreement, if a Participant has a Termination of Employment for
reasons other than as provided in subsections (i) and (ii) above, the Option, to
the extent that it is not exercisable on the date of termination, shall expire
and terminate on such date of termination and the Option, to the extent that it
is exercisable (including after any acceleration of vesting) on such date of
termination, shall expire and terminate on the earlier of the Expiration Date of
the Option or on the 60th day 

     

    -6- 

     

    

    
    

    after the Participant's
termination; provided, however, that the unexercised portion of any Option
(including any vested portion) shall expire and terminate immediately upon a
Termination of Employment for Cause.

     

              (iv) In the event that the Company in its sole discretion determines that the
Participant has, at any time during the 12-month period following Termination of
Employment violated the terms of any agreement with the Company or a Subsidiary
regarding (i) engaging in a business that competes with the business of the
Company or any Subsidiary, (ii) interfering in any material respect with any
contractual or business relationship of the Company or any Subsidiary, or (iii)
soliciting the employment of any person who was during such 12-month period, a
director, officer, partner, Employee, agent or consultant of the Company or a
Subsidiary, then (x) all outstanding unexercised Stock Options issued to the
holder pursuant to the Program shall be forfeited and (y) upon written request
from the Company, the Participant shall pay to the Company any gain realized
upon the exercise of an Option within the 12-month period preceding the
violation or such other period as may be set forth in the applicable Agreement.

     

         f) Transfer of Option. Unless the Committee determines otherwise at
the time an Option is granted, no Option granted under the Program shall be
assignable or transferable other than by will or by the laws of descent and
distribution, and all Options shall be exercisable during the life of the
Participant only by the Participant or his legal representative. 

     

         g) Substituted Options. Notwithstanding anything to the contrary in
this Section 6, any Option issued in substitution for an option previously
issued by another entity, which substitution occurs in connection with a
transaction to which Code section 424(a) is applicable, may provide for an
exercise price computed in accordance with such Code section and the regulations
thereunder and may contain such other terms and conditions as the Committee may
prescribe to cause such substitute Option to contain as nearly as possible the
same terms and conditions (including the applicable vesting and termination
provisions) as those contained in the previously issued option being replaced
thereby. 

     

    7. Exercise of Stock Options 

     

    A Stock Option shall be
exercised by the delivery of a written notice of exercise to the Vice President
and Secretary of the Company, or such other person specified by the Committee,
setting forth the number of shares of Common Stock with respect to which the
Option is to be exercised, accompanied by full payment of the Exercise Price
and, pursuant to Section 16, any required withholding taxes. Payment of the
Exercise Price for the shares of Common Stock being purchased shall be made: (a)
by certified or official bank check (or the equivalent thereof acceptable to the
Company), or (b) at the discretion of the Committee and to the extent permitted
by law, by such other provision as the Committee may from time to time
prescribe. The Committee may allow exercises to be made by means of a “brokered
cashless exercise,” with the delivery of payment as permitted under Federal
Reserve Board Regulation T, subject to applicable securities law restrictions,
or by any other means which the Committee determines to be consistent with the
Program's purpose and applicable law. Payment shall be made on the date that the
Option or any part thereof is exercised, and no shares shall be issued or
delivered upon exercise of an Option until full payment has been made by the
Participant. Promptly after 

     

    -7- 

     

    

    
    

    receiving payment of the
full Exercise Price, the Company shall, subject to the provisions of Section 13,
deliver to the Participant, or to such other person as may then have the right
to exercise the Option, a certificate for the shares of Common Stock for which
the Option has been exercised. 

     

    8. Employees Based Outside of the United
States 

     

    Notwithstanding any
provision of this Program to the contrary, in order to foster and promote the
achievement of the purposes of the Program, or to comply with these provisions
in other countries in which the Company or any Subsidiary operates or has
Employees, the Committee, in its sole discretion, shall have the power and
authority to (i) determine which Employees employed outside the United States
are eligible to participate in the Program, (ii) modify the terms and conditions
of any options granted to Employees who are employed outside the United States
(including the grant of stock appreciation rights, as described in the following
paragraph, in lieu of Stock Options), and (iii) establish subprograms, modified
Option exercise procedures and other terms and procedures to the extent such
actions may be necessary or advisable. 

     

    The Committee in its
discretion may grant stock appreciation rights in lieu of Stock Options to
Employees employed outside the United States. A stock appreciation right shall
provide an Employee the right to receive in cash the difference between the Fair
Market Value of a share of Common Stock on the grant date and the exercise date,
and otherwise shall have the same terms and conditions as a Stock Option granted
hereunder. Stock appreciation rights granted under this Section 8 shall be
considered as Stock Options for the application of the limitations in Section
4(a) of the Program.

     

    9. No Rights as a Stockholder 

     

    No Participant (or other
person having the right to exercise an Option) shall have any of the rights of a
stockholder of the Company with respect to shares subject to an Option until the
issuance of a stock certificate to such person for such shares or the
establishment of an account evidencing ownership of such shares in
uncertificated form, except as otherwise provided in Section 4(b). 

     

    10. Restricted Stock 

     

         a) Restricted Stock Grants. The Committee may grant Restricted Stock to
such key persons, in such amounts, and subject to such vesting and forfeiture
provisions and other terms and conditions as the Committee shall determine in
its sole discretion, subject to the provisions of the Program. The terms of a
grant of Restricted Stock shall be contained in an Agreement, which shall
contain the number of shares of Restricted Stock granted, when the Restricted
Stock vests and any additional terms and conditions not inconsistent with this
Program that the Committee deems to be appropriate If the Restricted Stock is
newly issued by the Company, the Participant must make payment to the Company or
its exchange agent in an amount at least equal 

     

    -8- 

     

    

    
    

    to the par value of the
shares as required by the Committee and in accordance with the Delaware General
Corporation Law. 

     

         b) Issuance of Stock
Certificate(s). Promptly
after the Committee grants Restricted Stock to a Participant, the Company or its
exchange agent shall issue to the Participant a stock certificate or stock
certificates for the shares of Common Stock covered by the Award or shall
establish an account evidencing ownership of the stock in uncertificated form.
Upon the issuance of such stock certificate(s) or establishment of such account,
the Participant shall have the rights of a stockholder with respect to the
restricted stock, subject to: (i) the nontransferability restrictions and
forfeiture provision described in Sections 10(d) and 10(e); (ii) in the
Committee’s discretion, a requirement that any dividends paid on such shares
shall be held in escrow until all restrictions on such shares have lapsed; and
(iii) any other restrictions and conditions contained in the applicable
Agreement. 

     

         c) Custody of Stock
Certificate(s). Unless the
Committee shall otherwise determine, any stock certificates issued evidencing
shares of restricted stock shall remain in the possession of the Company until
such shares are free of any restrictions specified in the applicable Agreement.
The Committee may direct that such stock certificate(s) bear a legend setting
forth the applicable restrictions on transferability or, if the Restricted Stock
is in book entry form, that such book entry or account be subject to electronic
coding or stop order indicating that such shares of Restricted Stock are
restricted by the terms of the Program. Such legend, electronic coding or stop
order shall not be removed until such shares of Restricted Stock vest.

     

         d) Nontransferability. Restricted Stock may not be sold, assigned,
transferred, pledged or otherwise encumbered or disposed of except as otherwise
specifically provided in this Program or the applicable Agreement. The Committee
at the time of grant shall specify the date or dates (which may depend upon or
be related to a period of continued employment with the Company, the attainment
of performance goals or other conditions or a combination of such conditions) on
which the nontransferability of the restricted stock shall laps. 

     

         e) Termination of Employment. Except as may otherwise be provided by the
Committee at any time prior to a Participant’s Termination of Employment, a
Participant’s Termination of Employment for any reason (including death) shall
cause the immediate forfeiture of all Restricted Stock that has not yet vested
as of the date of such Termination of Employment. Unless the Board or the
Committee determines otherwise, all dividends paid on such shares also shall be
forfeited, whether by termination of any escrow arrangement under which such
dividends are held, by the Participant’s repayment of dividends received
directly, or otherwise. 

     

    11. Unrestricted Stock 

     

    The Committee may grant
(or sell at a purchase price at least equal to par value) shares of Common Stock
free of restrictions under the Program, to such key persons and in such amounts
as the Committee shall determine in its sole discretion. Shares may be thus
granted or sold in respect of past services or other valid consideration.

     

    -9- 

     

    

    
    

    12. Stock Units 

     

         a) Stock Unit Grants. The Committee may grant Stock Units to such
key persons, in such amounts, and subject to such terms and conditions as the
Committee shall determine in its discretion, subject to the provisions of the
Program. The terms of a grant of Stock Units shall be contained in an Agreement,
which shall contain the number of Stock Units granted, whether the Stock Unit is
subject to vesting and, to the extent applicable, when the Stock Units vest,
when the shares of Common Stock will be issued and any additional terms and
conditions not inconsistent with this Program that the Committee deems to be
appropriate. Unless the applicable Agreement provides otherwise, a share of
Common Stock will be issued immediately upon vesting of a Stock Unit. Stock
Units may be awarded independently of or in connection with any other Award
under the Program. 

     

         b) Nontransferability. Stock Units may not be sold, assigned,
transferred, pledged or otherwise encumbered or disposed of except as otherwise
specifically provided in this Program or the applicable Agreement.

     

         c) Vesting. Stock Units may be granted fully vested or
subject to vesting. If a Stock Units is subject to vesting, the Committee at the
time of grant shall specify the date or dates (which may depend upon or be
related to a period of continued employment with the Company, the attainment of
performance goals or other conditions or a combination of such conditions) on
which the Stock Units shall vest. 

     

         d) Termination of Employment. Except as may otherwise be provided by the
Committee at any time prior to a Participant’s Termination of Employment, a
Participant’s termination of employment for any reason (including death) shall
cause the immediate forfeiture of all Stock Units that have not yet vested as of
the date of such Termination of Employment. 

     

    13. Consents and Approvals 

     

    If the Committee shall
at any time determine that any Consent (as hereinafter defined) is necessary or
desirable as a condition of, or in connection with, the issuance of shares under
the Program or the taking of any other action thereunder (each such action being
hereinafter referred to as a “Program Action”), then such Program Action shall
not be taken, in whole or in part, unless and until such Consent shall have been
effected or obtained to the full satisfaction of the Committee. The term
“Consent” as used herein with respect to any Program Action means (a) any and
all listings, registrations or qualifications in respect thereof upon any
securities exchange or under any federal, state or local law, rule or
regulation, (b) any and all written agreements and representations by the
Participant with respect to the disposition of shares, or with respect to any
other matter, which the Committee shall deem necessary or desirable to comply
with the terms of any such listing, registration or qualification or to obtain
an exemption from the requirement that any such listing, qualification or
registration be made and (c) any and all consents, clearances and approvals in
respect of a Program Action by any governmental or other regulatory bodies.

     

    -10- 

     

    

    
    

    14. Change in Control 

     

         a) Change in Control Defined. A “Change in Control” shall be deemed to
have occurred at such time as: 

     

              (i) a “person” or “group” within the meaning of Section 13(d) of the
Securities Exchange Act of 1934 (the “Exchange Act”) (other than the Company or
any of its Subsidiaries or any employee benefit plans of the Company or any of
its Subsidiaries or any Permitted Holders) becomes the direct or indirect
“beneficial owner”, as defined in Rule 13d-3 under the Exchange Act, of 50% or
more, in the aggregate, of the voting power of the (x) Common Stock and Class B
Common Stock then outstanding or (y) other capital stock into which the Common
Stock or Class B Common Stock is reclassified or changed; 

     

              (ii) the consummation of any share exchange, consolidation or merger of the
Company pursuant to which the Common Stock will be converted into cash,
securities or other property or any sale, lease or other transfer in one
transaction or a series of transactions of all or substantially all of the
consolidated assets of the Company and its Subsidiaries, taken as a whole, to
any person other than to a Subsidiary of the Company; provided, however, that a
transaction where the holders of the Common Stock and the Class B Common Stock
immediately prior to such transaction own, directly or indirectly, more than 50%
of aggregate voting power of all classes of common equity of the continuing or
surviving corporation or transferee entitled to vote generally in the election
of directors immediately after such event shall not be a Change in Control;

     

              (iii) the Continuing Directors cease to constitute at least a majority of the
Company’s board of directors; or 

     

              (iv) the stockholders of the Company approve any plan or proposal for the
liquidation or dissolution of the Company. 

     

         “Permitted Holder” means each of Dr. Felix Zandman or his wife, children
or lineal descendants, the Estate of Mrs. Luella B. Slaner or her children or
lineal descendants, any trust established for the benefit of such persons, or
any “person” (as such term is used in Section 13(d) or 14(d) of the Exchange
Act), directly or indirectly, controlling, controlled by or under common control
with any such person mentioned in this paragraph or any trust established for
the benefit of such persons or any charitable trust or non-profit entry
established by a Permitted Holder, or any group in which such Permitted Holders
hold more than a majority of the voting power of the Common Stock and Class B
Common Stock deemed to be beneficially owned by such group. 

     

         “Continuing Director” means a director who either was a member of the
Board of Directors on April 1, 2008 or who becomes a member of the Board of
Directors subsequent to that date and whose election, appointment or nomination
for election by the stockholders of the Company is duly approved by a majority
of the Continuing Directors on the Board of Directors at the time of such
approval, either by a specific vote or by approval of the proxy statement issued
by the Company on behalf of the Board of Directors in which such individual is
named as nominee for director. 

     

    -11- 

     

    

    
    

          b) Effect of a Change in
Control.

     

               (i) Upon the occurrence of a Change in Control, the Committee may cause all
or some of the Awards outstanding under the Program to be fully vested as of the
effective date of the Change in Control. 

     

               (ii) Upon the occurrence of a Change in Control that results in (i) a
dissolution or liquidation of the Company, (ii) a sale of all or substantially
all of the Company’s assets, (iii) a merger or consolidation involving the
Company in which the Company is not the surviving corporation or (iv) a merger
or consolidation involving the Company in which the Company is the surviving
corporation but the holders of shares of Common Stock receive securities of
another corporation and/or other property, including cash, the Committee shall,
in its absolute discretion (which may include not treating all Options
uniformly), elect to either: 

     

    
      	           
    	1.	      	amend
      each Stock Option so that it becomes exercisable in full at least two
      weeks before the occurrence of such event and expires upon the occurrence
      of such event;
	
            	 
	
            	2.	
            	cancel, effective immediately prior to the occurrence of such
      event, each Stock Option outstanding immediately prior to such event
      (whether or not then exercisable), and, in full consideration of such
      cancellation, pay to the Participant an amount in cash, for each share of
      Common Stock subject to such Stock Option equal to the excess of (x) the
      value, as determined by the Committee in its absolute discretion, of the
      property (including cash) received by the holder of a share of Common
      Stock as a result of such event over (y) the exercise price of such Stock
      Option; or
	
            	 
	
            	3.	
            	provide for the exchange of each Stock Option outstanding
      immediately prior to such event (whether or not then exercisable) for an
      option on some or all of the property which a holder of the number of
      shares of Common Stock subject to such Stock Option would have received
      and, incident thereto, make an equitable adjustment as determined by the
      Committee in its absolute discretion in the exercise price of the Stock
      Option, or the number of shares or amount of property subject to the Stock
      Option or, if appropriate, provide for a cash payment to the Participant
      in partial consideration for the exchange of the Stock
  Option.

    

     

               (iii) The Committee shall appropriately adjust outstanding grants of Stock
Units to reflect any dividend, stock split, reverse stock split,
recapitalization, merger, consolidation, combination, exchange of shares or
similar corporate change in order to prevent the enlargement or dilution of
rights of Participants. 

     

    15. Limitations Imposed by Section
162(m) 

     

         a) Qualified Performance-Based
Compensation. The
Committee may make the granting and/or vesting of an Award subject to the
attainment of one or more pre-established objective performance goals during a
performance period, as set forth below. It is intended that 

     

    -12- 

     

    

    
    

    the compensation
realized by the Participant from such Awards would qualify as “qualified
performance-based compensation” within the meaning of Code section 162(m).

     

              (i) Performance Goals. Prior to the ninety-first (91st) day of the
applicable performance period or during such other period as may be permitted
under section 162(m) of the Code, the Committee shall establish one or more
objective performance goals with respect to such performance period. Such
performance goals shall be expressed in terms of one or more of the following
criteria: (a) earnings (either in the aggregate or on a per-share basis,
reflecting dilution of shares as the Committee deems appropriate and, if the
Committee so determines, net of or including dividends); (b) adjusted net income
(meaning net income, excluding specified items of income, expense, gain or loss,
including, without limitation, any or all of restructuring and related severance
costs, fixed asset or inventory write-downs and related purchase commitment
charges, impairment charges for goodwill or indefinite-lived intangible assets,
and individually material one-time gains or charges); (c) adjusted operating
income (meaning operating income, excluding specified items of income, expense,
gain or loss, including, without limitation, any or all of restructuring and
related severance costs, fixed asset or inventory write-downs and related
purchase commitment charges, impairment charges for goodwill or indefinite-lived
intangible assets, and individually material one-time gains or charges), (d)
gross or net sales; (e) cash flow(s) (including either operating or net cash
flows); (f) financial return ratios; (g) total shareholder return, shareholder
return based on growth measures or the attainment by the shares of a specified
value for a specified period of time, share price or share price appreciation;
(h) value of assets, return or net return on assets, net assets or capital
(including invested capital); (i) adjusted pre-tax margin; (j) margins, profits
and expense levels; (k) dividends; (l) market share, market penetration or other
performance measures with respect to specific designated products or product
groups and/or specific geographic areas; (m) reduction of losses, loss ratios or
expense ratios; (n) reduction in fixed costs; (o) operating cost management; (p)
cost of capital; (q) debt reduction; (r) productivity improvements; (s)
inventory turnover measurements; or (t) customer satisfaction based on specified
objective goals or a Company-sponsored customer survey. Each such performance
goal (A) may be expressed (1) with respect to the Company as a whole or with
respect to one or more divisions or business units, (2) on a pre-tax or
after-tax basis, (3) on an absolute and/or relative basis, and (B) may employ
comparisons with past performance of the Company (including one or more
divisions) and/or the current or past performance of other companies, and in the
case of earnings-based, net income-based or operating income-based measures, may
employ comparisons to net revenues, capital, stockholders' equity and shares
outstanding. 

     

    To the extent
applicable, the measures used in performance goals set under the Program shall
be determined in accordance with generally accepted accounting principles
(“GAAP”) and in a manner consistent with the methods used in the Company's
regular reports on Forms 10-K and 10-Q, without regard to any of the following,
unless otherwise determined by the Committee consistent with the requirements of
section 162(m)(4)(C) and the regulations thereunder: 

     

    
      	          	1.	     	all
      items of gain, loss or expense for a fiscal year that are related to
      special, unusual or non-recurring items, events or circumstances affecting
      the Company or the financial statements of the
  Company;

    

    -13- 

     

    

    
    

    
      	           
    	2.	      	all
      items of gain, loss or expense for a fiscal year that are related to (i)
      the disposal of a business or discontinued operations or (ii) the
      operations of any business acquired by Company during the fiscal year;
      and
	
            	 
	
            	3.	
            	all
      items of gain, loss or expense for a fiscal year that are related to
      changes in accounting principles or to changes in applicable law or
      regulations.
	
            	 
	
            	4.	
            	To the
      extent any objective performance goals are expressed using any earnings or
      sales-based measures that require deviations from GAAP, such deviations
      shall be at the discretion of the Committee and established at the time
      the applicable performance goals are
established.

    

     

               (ii) Performance Period. The Committee in its sole discretion shall
determine the length of each performance period. 

     

         b) Nonqualified Deferred
Compensation.
Notwithstanding any other provision hereunder, if and to the extent that the
Committee determines the Company’s federal tax deduction in respect of an Award
may be limited as a result of section 162(m) of the Code, the Committee may take
the following actions: 

     

               (i) With respect to Options, the Committee may delay the exercise or payment,
as the case may be, in respect of such Options until a date that is within 30
days after the date that compensation paid to the grantee no longer is subject
to the deduction limitation under section 162(m) of the Code. In the event that
a Participant exercises an Option at a time when the grantee is a 162(m) covered
employee, and the Committee determines to delay the exercise or payment, as the
case may be, in respect of such Option, the Committee shall credit a cash amount
equal to the Fair Market Value of the Common Stock payable to the Participant to
a book account. The amount credited to the book account shall be paid to the
Participant within 30 days after the date that compensation paid to the grantee
no longer is subject to the deduction limitation under section 162(m) of the
Code. The Participant shall have no rights in respect of such book account and
the amount credited thereto shall not be transferable by the Participant other
than by will or laws of descent and distribution. The Committee may credit
additional amounts to such book account as it may determine in its sole
discretion. Any book account created hereunder shall represent only an unfunded,
unsecured promise by the Company to pay the amount credited thereto to the
Participant in the future. 

     

               (ii) With respect to Restricted Stock or Stock Units, the Committee may
require the Participant to surrender to the Committee any certificates with
respect to Restricted Stock and agreements with respect to Stock Units, in order
to cancel the awards of such Restricted Stock or Stock Units. In exchange for
such cancellation, the Committee shall credit to a book account a cash amount
equal to the Fair Market Value of the shares of Common Stock subject to such
Awards. The amount credited to the book account shall be paid to the Participant
within 30 days after the date that compensation paid to the grantee no longer is
subject to the deduction limitation under section 162(m) of the Code. The
Participant shall have no rights in respect of such book account and the amount
credited thereto shall not be transferable by the Participant other than by will
or laws of descent and distribution. The Committee may credit 

     

    -14- 

     

    

    
    

    additional amounts to
such book account as it may determine in its sole discretion. Any book account
created hereunder shall represent only an unfunded, unsecured promise by the
Company to pay the amount credited thereto to the Participant in the future.

     

    16. Tax Withholding 

     

    The Company shall
withhold any taxes required to be withheld by federal, state or local government
in connection with an Award. The Company shall have the right to require a
Participant to remit to the Company an amount sufficient to satisfy any federal,
state and local withholding tax requirements prior to the delivery of any
certificate or certificates for shares. A Participant may pay the withholding
tax in cash, or, if the Agreement provides, a Participant may also elect to have
the number of shares of Common Stock he is to receive reduced by the smallest
number of whole shares of Common Stock which, when multiplied by the Fair Market
Value of the shares determined as of the date on which the amount of tax to be
withheld is determined, is sufficient to satisfy federal, state and local, if
any, withholding taxes arising from the Award. Any such election must be made on
or before the date on which the amount of tax required to be withheld is
determined. 

     

    17. Right of Discharge Reserved 

     

    Nothing in the Program
or in any Agreement shall confer upon any Participant the right to continue as
an Employee or executive officer of the Company or any Subsidiary, or affect any
right which the Company may have to terminate such Employee or executive
officer. 

     

    18. Amendment 

     

    The Board may amend the
Program, and the Committee may amend any outstanding Agreement, in any respect
whatsoever, except that, other than pursuant to Section 14(b), no amendment to
an outstanding Agreement shall materially impair any rights or materially
increase any obligations of any Participant under any Award without the consent
of the Participant (or, after the Participant's death, the person succeeding to
the Participant’s interests with respect to the Award). An amendment shall be
subject to stockholder approval to the extent necessary for compliance with Code
section 162(m) and other applicable law or regulation. 

     

    19. Term of the Program 

     

    This Program shall be
effective as of [July 6, 2010], subject to approval by the stockholders of the
Company. The Program shall terminate upon the earlier of (i) the date on which
all Common Stock available under this Program have been issued, (ii) the tenth
anniversary of the effective date, or (iii) the termination of this Program by
the Committee subject to approval of the Board of Directors of the Company. No
Award may be granted after the termination of the Program. Any outstanding
Awards as of the date the Program terminates shall remain in full force and
effect, subject to the terms of the Program and the relevant Agreement relating
to such Award. 

     

    20. Indemnification 

     

    Each person who is or
shall have been a member of the Committee, or of the Board of Directors, shall
be indemnified and held harmless by the Company from and against any loss, cost,
liability 

     

    -15- 

     

    

    
    

    or expense that may be
imposed upon or reasonably incurred by such person in connection with or
resulting from any claim, action, suit or proceeding to which such person may be
a party or in which such person may be involved by reason of any action taken or
failure to act under the Program and against and from any and all amounts paid
by such person in settlement thereof with the Company's approval, or paid by
such person in satisfaction of any judgment in any such action, suit or
proceeding against such person, provided such person shall give the Company an
opportunity, at its own expense, to handle and defend the same before such
person undertakes to handle and defend it on such person's own behalf. The
foregoing right of indemnification shall not be exclusive of any other rights of
indemnification to which such persons may be entitled from the Company, as a
matter of law, or otherwise. 

     

    21. Successors 

     

    All obligations of the
Company under the Program, with respect to any Award granted hereunder, shall be
binding on any successor to the Company, whether the existence of such successor
is the result of a direct or indirect purchase, merger consolidation or
otherwise, of all or substantially all of the business and/or assets of the
Company. 

     

    22. Severability 

     

    In the event any
provision of the Program shall be held illegal or invalid for any reason, such
illegality or invalidity shall not affect the remaining parts of the Program,
and the Program shall be construed and enforced as if the illegal or invalid
provision had not been included. 

     

    23. Governing Law 

     

    This Program and any
grant of Awards made and any action taken hereunder shall be subject to and
construed and interpreted in accordance with the laws of the State of Delaware,
without giving effect to principles of conflict of laws. 

     

    -16-f8k062910ex10i_keyuan.htm

 

Exhibit 10.1

 

KEYUAN PETROCHEMICALS, INC.

 

INDEPENDENT DIRECTOR AGREEMENT

 

This INDEPENDENT DIRECTOR AGREEMENT (the “Agreement”) is made and entered into as of this 1st day of July, 2010, effective as of date upon D&O Insurance (as defined in Section 14 below) becomes binding (the “Effective Date”), by and between Keyuan Petrochemicals, Inc., a Nevada corporation (the “Company”), and Gerry Goldberg, a citizen of Canada, with a permanent residence at ______________________ (the “Independent Director”).

 

WHEREAS, the Company desires to engage the Independent Director, and the Independent Director desires to serve, as a non-employee director of the Company, subject to the terms and conditions contained in this Agreement.

 

NOW, THEREFORE, in consideration of the mutual promises and covenants contained herein, the receipt of which is hereby acknowledged, the Company and the Independent Director, intending to be legally bound, hereby agree as follows:

 

1.           DEFINITIONS.

 

(a)           “Corporate Status” describes the capacity of the Independent Director with respect to the Company and the services performed by the Independent Director in that capacity.

 

(b)           “Entity” shall mean any corporation, partnership, limited liability company, joint venture, trust, foundation, association, organization or other legal entity.

 

(c)           “Proceeding” shall mean any threatened, pending or completed claim, action, suit, arbitration, alternate dispute resolution process, investigation, administrative hearing, appeal, or any other proceeding, whether civil, criminal, administrative or investigative, whether formal or informal, including a proceeding initiated by the Independent Director pursuant to Section 12 of this Agreement to enforce the Independent Director’s rights hereunder.

 

(d)           “Expenses” shall mean all reasonable fees, costs and expenses, approved by the Company in advance and reasonably incurred in connection with any Proceeding, including, without limitation, attorneys’ fees, disbursements and retainers, fees and disbursements of expert witnesses, private investigators, professional advisors (including, without limitation, accountants and investment bankers), court costs, transcript costs, fees of experts, travel expenses, duplicating, printing and binding costs, telephone and fax transmission charges, postage, delivery services, secretarial services, and other disbursements and expenses.

 

(e)           “Liabilities” shall mean judgments, damages, liabilities, losses, penalties, excise taxes, fines and amounts paid in settlement.

 

 

  

1

  

 

 

(f)           “Parent” shall mean any corporation or other entity (other than the Company) in any unbroken chain of corporations or other entities ending with the Company, if each of the corporations or entities, other than the Company, owns stock or other interests possessing 50% or more of the economic interest or the total combined voting power of all classes of stock or other interests in one of the other corporations or entities in the chain.

 

(g)           “Subsidiary” shall mean any corporation or other entity (other than the Company) in any unbroken chain of corporations or other entities beginning with the Company, if each of the corporations or entities, other than the last corporation or entity in the unbroken chain, owns stock or other interests possessing 50% or more of the economic interest or the total combined voting power of all classes of stock or other interests in one of the other corporations or entities in the chain.

 

2.           SERVICES OF INDEPENDENT DIRECTOR. While this Agreement is in effect, the Independent Director shall perform duties as an independent director and/or a member of the committees of the Board, be compensated for such and be reimbursed expenses in accordance with the Schedule A attached to this Agreement, subject to the following.

 

(a)           The Independent Director will perform services as is consistent with Independent Director’s position with the Company, as required and authorized by the By-Laws and Articles of Incorporation of the Company, and in accordance with high professional and ethical standards and all applicable laws and rules and regulations pertaining to the Independent Director’s performance hereunder, including without limitation, laws, rules and regulations relating to a public company.

 

(b)           The Independent Director is solely responsible for taxes arising out of any compensation paid by the Company to the Independent Director under this Agreement, and the Independent Director understands that he/she will be issued a U.S. Treasury form 1099 for any compensation paid to him/her by the Company.  The Independent Director acknowledges and agrees that because he is not an employee of the Company the Company will not withhold any amounts for taxes from any of his payments under the Agreement.

 

(c)           The Company may offset any and all monies payable to the Independent Director to the extent of any monies owing to the Company from the Independent Director.

 

(d)           The rules and regulations of the Company notified to the Independent Director in writing, from time to time, apply to the Independent Director. Such rules and regulations are subject to change by the Company in its sole discretion. Notwithstanding the foregoing, in the event of any conflict or inconsistency between the terms and conditions of this Agreement and rules and regulations of the Company, the terms of this Agreement control.

 

3.           REQUIREMENTS OF INDEPENDENT DIRECTOR. During the term of the Independent Director’s services to the Company hereunder, Independent Director shall observe all applicable laws and regulations relating to independent directors of a public company as promulgated from to time, and shall not: (1) be an employee of the Company or any Parent or Subsidiary; (2) accept, directly or indirectly, any consulting, advisory, or other compensatory fee from the Company other than as a director and/or a member of a committee of the Board; (3) be an affiliated person of the Company or any Parent or Subsidiary, as the term “affiliate” is defined in 17 CFR 240.10A-3(e)(1), other than in his capacity as a director and/or a member of a committee of the Board; (4) possess an interest in any transaction with the Company or any Parent or Subsidiary, for which disclosure would be required pursuant to 17 CFR 229.404(a), other than in his capacity as a director and/or a member of a committee of the Board committees; (5) be engaged in a business relationship with the Company or any Parent or Subsidiary, for which disclosure would be required pursuant to 17 CFR 229.404(b), except that the required beneficial interest therein shall be modified to be 5% hereby.

 

 

  

2

  

 

4.           REPORT OBLIGATION. While this Agreement is in effect, the Independent Director shall immediately report to the Company in the event: (1) the Independent Director knows or has reason to know or should have known that any of the requirements specified in Section 3 hereof is not satisfied or is not going to be satisfied; and (2) the Independent Director simultaneously serves on an audit committee of any other public company.

 

5.           TERM AND TERMINATION. The term of this Agreement and the Independent Director’s services hereunder shall be for one (1) year from the Effective Date and will automatically renew for successive one year term upon the Independent Director’s re-election, unless terminated as provided for in this Section 5, This Agreement and the Independent Director’s services hereunder shall terminate upon the earlier of the following:

 

(a)           Removal of the Independent Director as a director of the Company, upon proper Board or stockholder action in accordance with the By-Laws and Articles of Incorporation of the Company and applicable law;

 

(b)           Resignation of the Independent Director as a director of the Company upon written notice to the Board of Directors of the Company; or

 

(c)           Termination of this Agreement by the Company, in the event any of the requirements specified in Section 3 hereof is not satisfied, as determined by the Company in its sole discretion.

 

6.           LIMITATION OF LIABILITY. In no event shall the Independent Director be individually liable to the Company or its shareholders for any damages for breach of fiduciary duty as an independent director of the Company, unless the Independent Director’s act or failure to act involves intentional misconduct, fraud or a knowing violation of law.

 

7.           AGREEMENT OF INDEMNITY. The Company agrees to indemnify the Independent Director as follows:

 

(a)           Subject to the exceptions contained in Section 8(a) below, if the Independent Director was or is a party or is threatened to be made a party to any Proceeding (other than an action by or in the right of the Company) by reason of the Independent Director’s Corporate Status, the Independent Director shall be indemnified by the Company against all Expenses and Liabilities incurred or paid by the Independent Director in connection with such Proceeding (referred to herein as “INDEMNIFIABLE EXPENSES” and “INDEMNIFIABLE LIABILITIES,” respectively, and collectively as “INDEMNIFIABLE AMOUNTS”).

 

 

  

3

  

 

(b)           Subject to the exceptions contained in Section 8(b) below, if the Independent Director was or is a party or is threatened to be made a party to any Proceeding by or in the right of the Company, to procure a judgment in its favor by reason of the Independent Director’s Corporate Status, the Independent Director shall be indemnified by the Company against all Indemnifiable Expenses.

 

(c)           For purposes of this Agreement, the Independent Director shall be deemed to have acted in good faith in conducting the Company’s affairs as an independent director of the Company and/or a member of a committee of the Board of the Company, if the Independent Director: (i) exercised or used the same degree of diligence, care, and skill as an ordinarily prudent man would have exercised or used under the circumstances in the conduct of his own affairs; or (ii) took, or omitted to take, an action in reliance upon advise of counsels or other professional advisors for the Company, or upon statements made or information furnished by other directors, officers or employees of the Company, or upon a financial statement of the Company provided by a person in charge of its accounts or certified by a public accountant or a firm of public accountants, which the Independent Director had reasonable grounds to believe to be true.

 

8.           EXCEPTIONS TO INDEMNIFICATION. Director shall be entitled to indemnification under Sections 7(a) and 7(b) above in all circumstances other than the following:

 

(a)           If indemnification is requested under Section 7(a) and it has been adjudicated finally by a court or arbitral body of competent jurisdiction that, in connection with the subject of the Proceeding out of which the claim for indemnification has arisen, (i) the Independent Director failed to act in good faith and in a manner the Independent Director reasonably believed to be in or not opposed to the best interests of the Company, (ii) the Independent Director had reasonable cause to believe that the Independent Director’s conduct was unlawful, or (iii) the Independent Director’s conduct constituted willful misconduct, fraud or knowing violation of law, then the Independent Director shall not be entitled to payment of Indemnifiable Amounts hereunder.

 

(b)           If indemnification is requested under Section 7(b) and

 

(i)           it has been adjudicated finally by a court or arbitral body of competent jurisdiction that, in connection with the subject of the Proceeding out of which the claim for indemnification has arisen, the Independent Director failed to act in good faith and in a manner the Independent Director reasonably believed to be in or not opposed to the best interests of the Company, including without limitation, the breach of Section 4 hereof by the Independent Director, the Independent Director shall not be entitled to payment of Indemnifiable Expenses hereunder; or

 

(ii)           it has been adjudicated finally by a court or arbitral body of competent jurisdiction that the Independent Director is liable to the Company with respect to any claim, issue or matter involved in the Proceeding out of which the claim for indemnification has arisen, including, without limitation, a claim that the Independent Director received an improper benefit or improperly took advantage of a corporate opportunity, the Independent Director shall not be entitled to payment of Indemnifiable Expenses hereunder with respect to such claim, issue or matter.

 

 

  

4

  

 

9.           WHOLLY OR PARTLY SUCCESSFUL. Notwithstanding any other provision of this Agreement, and without limiting any such provision, to the extent that the Independent Director is, by reason of the Independent Director’s Corporate Status, a party to and is successful, on the merits or otherwise, in any Proceeding, the Independent Director shall be indemnified in connection therewith. If the Independent Director is not wholly successful in such Proceeding but is successful, on the merits or otherwise, as to one or more but less than all claims, issues or matters in such Proceeding, the Company shall indemnify the Independent Director against those Expenses reasonably incurred by the Independent Director or on the Independent Director’s behalf in connection with each successfully resolved claim, issue or matter. For purposes of this section, the termination of any claim, issue or matter in such a Proceeding by dismissal, with or without prejudice, shall be deemed to be a successful result as to such claim, issue or matter.

 

10.           ADVANCES AND INTERIM EXPENSES. The Company shall pay to the Independent Director all Indemnifiable Expenses incurred by the Independent Director in connection with any Proceeding, including a Proceeding by or in the right of the Company, in advance of the final disposition of such Proceeding, if the Independent Director furnishes the Company with a written undertaking, to the satisfaction of the Company, to repay the amount of such Indemnifiable Expenses advanced to the Independent Director in the event it is finally determined by a court or arbitral body of competent jurisdiction that the Independent Director is not entitled under this Agreement to indemnification with respect to such Indemnifiable Expenses.

 

11.           PROCEDURE FOR PAYMENT OF INDEMNIFIABLE AMOUNTS. The Independent Director shall submit to the Company a written request specifying the Indemnifiable Amounts, for which the Independent Director seeks payment under Section 7 hereof and the Proceeding of which has been previously notified to the Company and approved by the Company for indemnification hereunder. At the request of the Company, the Independent Director shall furnish such documentation and information as are reasonably available to the Independent Director and necessary to establish that the Independent Director is entitled to indemnification hereunder. The Company shall pay such Indeminfiable Amounts within thirty (30) days of receipt of all required documents.

 

12.           REMEDIES OF INDEPENDENT DIRECTOR.

 

(a)           RIGHT TO PETITION COURT. In the event that the Independent Director makes a request for payment of Indemnifiable Amounts under Sections 7, 9-11 above, and the Company fails to make such payment or advancement in a timely manner pursuant to the terms of this Agreement, the Independent Director may petition the appropriate judicial authority to enforce the Company’s obligations under this Agreement.

 

(b)           BURDEN OF PROOF. In any judicial proceeding brought under Section 12 (a) above, the Company shall have the burden of proving that the Independent Director is not entitled to payment of Indemnifiable Amounts hereunder.

 

  

5

  

 

 

 

(c)           EXPENSES. The Company agrees to reimburse the Independent Director in full for any Expenses incurred by the Independent Director in connection with investigating, preparing for, litigating, defending or settling any action brought by the Independent Director under Section 12 (a) above, or in connection with any claim or counterclaim brought by the Company in connection therewith.

 

(d)           VALIDITY OF AGREEMENT. The Company shall be precluded from asserting in any Proceeding, including, without limitation, an action under Section 12 (a) above, that the provisions of this Agreement are not valid, binding and enforceable or that there is insufficient consideration for this Agreement and shall stipulate in court that the Company is bound by all the provisions of this Agreement.

 

(e)           FAILURE TO ACT NOT A DEFENSE. The failure of the Company (including its Board of Directors or any committee thereof, independent legal counsel, or stockholders) to make a determination concerning the permissibility of the payment of Indemnifiable Amounts or the advancement of Indemnifiable Expenses under this Agreement shall not be a defense in any action brought under Section 12 (a) above.

 

13.           PROCEEDINGS AGAINST COMPANY. Except as otherwise provided in this Agreement, the Independent Director shall not be entitled to payment of Indemnifiable Amounts or advancement of Indemnifiable Expenses with respect to any Proceeding brought by the Independent Director against the Company, any Entity which it controls, any director or officer thereof, or any third party, unless the Company has consented to the initiation of such Proceeding. This section shall not apply to counterclaims or affirmative defenses asserted by the Independent Director in an action brought against the Independent Director.

 

14.           INSURANCE. The Company shall obtain and maintain a policy or policies of director and officer liability insurance during the whole period when the Independent Director is on board, in an amount not less than $5,000,000, of which the Independent Director will be named as an insured, providing the Independent Director with coverage for Indemnifiable Amounts and/or Indemnifiable Expenses in accordance with said insurance policy or policies (“D&O INSURANCE”); provided that:

 

(a)           The Independent Director agrees that, while the Company has valid and effective D&O Insurance, and except as provided in (c) of this section, Sections 7-13 of this Agreement shall not apply, and the Company’s indemnification obligation to the Independent Director under this Agreement shall be deemed fulfilled by virtue of purchasing and maintaining such insurance policy or policies, in accordance with the terms and conditions thereof and subject to exclusions stated thereon. The Independent Director agrees that the Company shall have no obligation to challenge the decisions made by the insurance carrier(s) (“INSURANCE CARRIER”) relating to any claims made under such insurance policy or policies;

 

 

  

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(b)           The Independent Director agrees that the Company’s indemnification obligation to the Independent Director under (a) of this section shall be deemed discharged and terminated, in the event the Insurance Carrier refused payment for any Proceedings against the Independent Director due to the acts or omissions of the Independent Director, provided that the Independent Director’s rights to challenge such a refusal in a court or arbitral body of competent jurisdiction shall not in any way be abrogated and provided further that the Company shall cooperate with the Independent Director in making any such claim and securing such rights, including the execution of such documents as are necessary to enable the Independent Director to bring suit to enforce such rights;

 

(c)           While the D&O Insurance is valid and effective, the Company agrees that it shall indemnify the Independent Director for the Indemnifiable Amounts and Indemnifiable Expenses, to the extent that any Proceedings are coverable by D&O Insurance, but in excess of the policy amount, in accordance with Sections 7-13 of this Agreement; and

 

(d)           While the D&O Insurance is valid and effective, this Section 14 states the entire and exclusive remedy of the Independent Director with respect to the indemnification obligation of the Company to the Independent Director under this Agreement.

 

15.           SUBROGATION. In the event of any payment of Indemnifiable Amounts under this Agreement or the D&O Insurance, the Company or its Insurance Carrier, as the case may be, shall be subrogated to the extent of such payment to all of the rights of contribution or recovery of the Independent Director against other persons, and the Independent Director shall take, at the request of the Company, all reasonable action necessary to secure such rights, including the execution of such documents as are necessary to enable the Company to bring suit to enforce such rights.

 

16.           AUTHORITY. Each party has all necessary power and authority to enter into, and be bound by the terms of, this Agreement, and the execution, delivery and performance of the undertakings contemplated by this Agreement have been duly authorized by each party hereto:

 

17.           SUCCESSORS AND ASSIGNMENT. This Agreement shall (a) be binding upon and inure to the benefit of all successors and assigns of the Company (including any transferee of all or a substantial portion of the business, stock and/or assets of the Company and any direct or indirect successor by merger or consolidation or otherwise by operation of law), and (b) be binding on and shall inure to the benefit of the heirs, personal representatives, executors and administrators of the Independent Director. The Independent Director has no power to assign this Agreement or any rights and obligations hereunder.

 

18.           CHANGE IN LAW. To the extent that a change in applicable law (whether by statute or judicial decision) shall mandate broader or narrower indemnification than is provided hereunder, the Independent Director shall be subject to such broader or narrower indemnification and this Agreement shall be deemed to be amended to such extent.

 

19.           SEVERABILITY. Whenever possible, each provision of this Agreement shall be interpreted in such a manner as to be effective and valid under applicable law, but if any provision of this Agreement, or any clause thereof, shall be determined by a court of competent jurisdiction to be illegal, invalid or unenforceable, in whole or in part, such provision or clause shall be limited or modified in its application to the minimum extent necessary to make such provision or clause valid, legal and enforceable, and the remaining provisions and clauses of this Agreement shall remain fully enforceable and binding on the parties.

 

 

  

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20.           MODIFICATIONS AND WAIVER. Except as provided in Section 18 hereof with respect to changes in applicable law which broaden or narrow the right of the Independent Director to be indemnified by the Company, no supplement, modification or amendment of this Agreement shall be binding unless executed in writing by each of the parties hereto. No delay in exercise or non-exercise by the Company of any right under this Agreement shall operate as a current or future waiver by it as to its same or different rights under this Agreement or otherwise.

 

21.           NOTICES. All notices, requests, demands and other communications hereunder shall be in writing and shall be deemed to have been duly given (a) when delivered by hand, (b) when transmitted by facsimile and receipt is acknowledged, or (c) if mailed by certified or registered mail with postage prepaid, on the third business day after the date en which it is so mailed:

 

If to Independent Director, to: _________________________.

If to the Company, to: Chunfeng Tao, CEO, Keyuan Petrochemicals, Inc., Qingshi Industrial Park, Ningbo Economic and Technological Development Zone, Ningbo, Zhejiang Province, PRC 315803, China or to such other address as may have been furnished in the same manner by any party to the others.

 

22.           GOVERNING LAW. This Agreement shall be governed by and construed and enforced under the laws of the State of New York, United States.

 

23.           CONSENT TO JURISDICTION. The parties hereby consent to the jurisdiction of the courts having jurisdiction over matters arising in New York County, New York for any proceeding arising out of or relating to this Agreement. The parties agree that in any such proceeding, each party shall waive, if applicable, inconvenience of forum and right to a jury.

 

24.           AGREEMENT GOVERNS. This Agreement is to be deemed consistent wherever possible with relevant provisions of the By-Laws and Articles of Incorporation of the Company; however, in the event of a conflict between this Agreement and such provisions, the provisions of this Agreement shall control.

 

25.           INDEPENDENT CONTRACTOR. The parties understand, acknowledge and agree that the Independent Director’s relationship with the Company is that of an independent contractor and nothing in this Agreement is intended to or should be construed to create a relationship other than that of independent contractor. Nothing in this Agreement shall be construed as a contract of employment/engagement between the Independent Director and the Company or as a commitment on the part of the Company to retain the Independent Director in any capacity, for any period of time or under any specific terms or conditions, or to continue the Independent Director’s service to the Company beyond any period.

 

 

  

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26.           ENTIRE AGREEMENT. This Agreement constitutes the entire agreement between the Company and the Independent Director with respect to the subject matter hereof, and supersedes all prior understandings and agreements with respect to such subject matter.

 

IN WITNESS WHEREOF, the parties hereto have executed this Independent Director Agreement as of the day and year first above written.

 

	  	 	  
	
AGREED

	 	
AGREED

	  	 	  
	
Keyuan Petrochemicals, Inc.

	 	
Independent Director

	  	 	  
	
/s/ Chunfeng Tao

	 	
/s/ Gerry Goldberg

	
Name:  Chunfeng Tao

	 	
Name: Gerry Goldberg

	
Title:   CEO

	 	  

 

 

  

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SCHEDULE A

 

I           POSITION:

 

INDEPENDENT DIRECTOR.

 

II.           COMPENSATION:

FEES. For all services rendered by the Independent Director pursuant to this Agreement, both during and outside of normal working hours, including but not limited to, attending in person or telephonically all required meetings of the Board or applicable committees thereof, executive sessions of the independent directors, reviewing filing reports and other corporate documents as requested by the Company, providing comments and opinions as to business matters as requested by the Company, the Company agrees to pay to the Independent Director a fee in cash of $3,000 per month during the Term (the “Base Fee”).  In addition to the Base Fee, the Company agrees to pay the Independent Director a fee in cash of $1,000 per month (the Audit Committee Fee”), as long the Independent Director remains Chairman of the Audit Committee of the Company. The Base Fee and the Audit Committee Fee shall be paid in cash to the Independent Director on a monthly basis in equal installments on the last day of each calendar month.

 

STOCK. During the term of the Independent Director’s service as a director or member of any committee of the Board, the Independent Director shall be granted an option to purchase 40,000 shares of common stock of the Company on the date of execution of this Agreement, with an exercise price equal to the fair market value of a share of the Company’s common stock on the date of the grant of the option. 50% of the option shall vest at the end of 12 months  of the Effective Date.  The remainder of the option shall vest at the end of 24 months of the Effective Date, provided that the Independent Director is re-elected for successive one year terms at the end of 12 months of the Effective Date. Any such stock grant shall be in accordance with the equity incentive plans as may be adopted by the Company, from time to time and shall expire 5 years from the date of the grant. The Independent Director’s rights in respect to any grant shall be determined solely by the Compensation Committee of the Company and are subject to execution by Independent Director of any applicable agreements as established and requested by the Company pursuant to the equity incentive plans.

 

EXPENSES. During the term of the Independent Director’s service as a director of the Company, the Company shall promptly reimburse the Independent Director for all expenses incurred by him/her in connection with attending (a) all meetings of the Board or applicable committees thereof, (b) executive sessions of the independent directors, and (c) stockholder meetings, as a director or a member of any committee of the Board , provided that any such expenses over $1,000 shall be approved by the Company in writing in advance.  The Independent Director shall be allowed to travel Business Class or better on all flights from the United States and/or Canada  to overseas destinations with the Company prior written consent. In addition, the Independent Director shall rely on the Company to arrange all hotel accommodations in connection with any such meetings the Independent Director must attend. The amount of such expenses eligible for reimbursement by the Company during a calendar year shall not affect such expenses eligible for reimbursement by the Company in any other calendar year, and the reimbursement of any such eligible expenses shall be made within 30 days of receipt of the Independent Director’s expense report, including supporting receipts for such expense..

 

 

 

  

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NO OTHER BENEFITS OR COMPENSATION. The Independent Director acknowledges and agrees that he/she is not granted and is not entitled to any other benefits or compensation from the Company for the services provided under this Agreement except expressly provided for in this Schedule A.

 

 

	
AGREED

	 	
AGREED

	  	 	  
	
Keyuan Petrochemicals., Inc.

	 	
Independent Director

	  	 	  
	
/s/ Chunfeng Tao

	 	
/s/ Gerry Goldberg

	  	 	  
	
Name:  Chunfeng Tao

	 	
Name: Gerry Goldberg

 

 

 

 

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