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EXHIBIT 10.2 
 
TESCO CORPORATION 
EMPLOYEE STOCK SAVINGS PLAN 
 
Effective Date: July 1, 1994 
Amended and Restated Effective: May 18, 2007 
 
ARTICLE 1- PURPOSE OF THE PLAN 1.01        The purpose of the Tesco Corporation Employee Stock Savings Plan (the "Plan") is to allow the Employees of the Corporation to participate in the growth of the Corporation by the regular purchase of the common shares of the Corporation. 
1.02        The Plan was initially established as of July 1, 1994 and amended and restated, effective as of July 1, 2001. The Plan is hereby amended and restated, effective as of May 18, 2007. 
1.03        The Plan hereby authorizes the creation of sub-plans or special rules designed to achieve desired tax or other objectives in particular locations or guidelines or to achieve other business objectives in the determination of the Board, which sub-plans or special rules shall not be required to comply with the requirements or the specific provisions of the Plan. 
ARTICLE 2- DEFINITIONS 
For the purpose of this Plan, including this Article, unless the context shall require a different meaning, the following terms shall have the meanings attributed to them in this Article 2. 
2.01        "Administrative Agent" means one or more trust companies or depositories that are appointed as Administrative Agent of the Fund pursuant to an Agency Agreement. The Corporation may appoint separate Administrative Agents for its Canadian and its U.S. Employees. Unless prohibited by Applicable Law and Rules and except for RRSP Accounts, the Corporation may act as Administrative Agent with respect to any or all of the accounts of Members. 
2.02        "Agency Agreement" means an agreement between the Corporation and an Administrative Agent, as established and modified from time to time for purposes of the Plan. 
2.03        "Applicable Law and Rules" means the legal requirements relating to the administration of this Plan under applicable U.S. state corporate laws, U.S. federal and applicable state securities laws (including the Exchange Act and the Securities Act), the Code, any Stock Exchange rules or regulations and the Applicable Law and Rules of any other country or jurisdiction, as such laws, rules, regulations and requirements shall be in place from time to time. 
2.04        "Board" means the board of directors of the Corporation. 
2.05        "Business Day" means a day on which all Stock Exchanges are open for trading and the Shares are being publicly traded on one or more of such markets. 
2.06        "Canadian Employees" or "Canadian Members" mean Employees or Members, as the case may be, who are residents of Canada for the purposes of the ITA. 
2.07        "Code" means the Internal Revenue Code of 1986 (U.S.) and any regulations issued thereunder, as amended from time to time. 
2.08        "Commencement Date" means the date that a particular Employee becomes a Member of the Plan as specified in 
2.09        "Committee" means the committee described and defined in Section 3.01. 
2.10        "Contribution" means a Matching Contribution or a Voluntary Contribution or both, as the context requires. 
 
2.11        "Corporation" means Tesco Corporation and its subsidiaries. 
2.12        "Earnings" means: 
        (a)        The remuneration received in cash by a Member from the Corporation for services rendered thereto, as evidenced by the Corporation's payroll records; plus 
        (b)        Any amounts contributed by the Corporation pursuant to compensation reduction agreements, which are excludable from the Member's gross income under Section 125, 401 (k), 408(h) or 409A of the Code or similar provisions of the ITA; minus 
        (c)        Overtime, change of control payments, severance benefits or settlements, income realized from participation in other stock based or equity incentive plans, expense allowances, and retirement allowances or payments. 
            
The Board shall have the authority to determine what elements will be included or excluded from the foregoing. 
2.13        "Effective Date" means May 18, 2007, except that such term as to transactions pursuant to the plan in effect on July 1, 1994 and as amended July 1, 2001, shall have mean such earlier dates as applicable. 
2.14        "Election" means the election described and defined in Section 4.01(a). 
2.15        "Election Period" means the period described and defined in Section 4.01(a). 
2.16        "Employee" means an individual, including an officer, who is in permanent full-time or permanent part-time employment with the Corporation. Individuals classified as independent contractors, consultants, advisers, or members of the Board are not considered "Employees." 
2.17        "Exchange Act" means the Securities Exchange Act of 1934, as amended from time to time, and any reference to a section of the Exchange Act shall include any successor provision of the Exchange Act. 
2.18        "Executive Employee" means an Employee (a) who is designated as an executive officer by the Board and is therefore subject to the restrictions on short-term trading under Section 16(b) of the Securities Exchange of 1934 and any regulations issued thereunder, as amended from time to time and (b) with respect to sections 3.05 and 4.04(a) and to the extent not covered by 2.17(a) above, any other Employee that would be required to be considered an "insider" under the applicable rules of the TSX as long as the Corporation has Shares listed for trading on the TSX. 
2.19        "Executive Member" means an Executive Employee that is a Member. 
2.20        "Fund" means all assets held by an Administrative Agent under the terms of the Plan and the related Agency Agreement, including Shares and uninvested cash. 
2.21        "Investment Dealer" means one or more investment dealers, who appointed from time to time by the Corporation to advise on and execute purchases of Shares for the Plan via an Administrative Agent. With respect to RRSP Accounts or transactions executed on the TSX such Investment Dealer shall be a member of a recognized Canadian Stock Exchange. 
2.22        "ITA" means the Income Tax Act (Canada) and any regulations issued thereunder, as amended from time to time. 
 
2.23        "Long Term Leave" means a period of leave approved by the Corporation, which is longer than six months. 
2.24        "Market Value" means, with respect to a Share as of a Business Day, the higher of 
        (a)        as long as Shares are listed on the TSX, the closing trading price per Share on the TSX on the last trading day prior to such Business Day; and 
        (b)        as long as the Shares are listed on an U.S. Exchange, the average of the high and low prices of Shares traded in U.S. dollars on the U.S Exchange. 
            
If on the relevant day there is no trading in the Shares on a Stock Exchange, as applicable, then, for the purpose of application of the immediately preceding sentence, the Market Value of a Share on a Stock Exchange, as applicable, shall be determined by reference to the weighted average trading price for Shares traded on the Stock Exchange, as applicable, for the five trading days (or the actual number of trading days if there are less than five trading days but more than one trading day) ending on such day on which Shares did trade within 30 days before the relevant day. If the immediately preceding sentence cannot be applied due to an insufficient number of trading days within the 30-day period described therein, then the Market Value of a Share on the Stock Exchange, as applicable, shall be the closing price of a Share on the date on which Shares were last traded on the applicable Stock Exchange prior to the relevant day. If such shares are not publicly traded at the time a determination of its fair market value is required to be made hereunder, the determination of fair market value shall be made in good faith by the Board using any fair and reasonable means selected in the Board's discretion. 
2.25        "Matching Contribution" means a contribution by the Corporation described in Section 4.02. 
2.26        "Member" means any Employee who has made an Election under the Plan. 
2.27        "Member Account" means an account established by the Corporation or its Administrative Agent for each Member in accordance with the Plan and administered by the Administrative Agent hereunder. A Member Account may be a Standard Account or, as to Canadian Employees, a RRSP Account, as applicable. 
2.28        "Non-Executive Member" means a Member other than an Executive Employee. 
2.29        "Person" means, unless the context otherwise requires or unless and to the extent otherwise limited or required by Applicable Law and Rules, any natural person, firm, partnership, limited liability company, association, corporation, company, trust, business trust, governmental authority or other entity. 
2.30        "Plan" means the Tesco Corporation Employee Stock Savings Plan, as amended for time to time. 
2.31        "Purchase Date" means the purchase date described and defined in Section 4.04. 
2.32        "Purchase Price" means the purchase price described and defined in Section 4.04. 
2.33        "Release Date" means the release date described and defined in Section 4.01. 
2.34        "RRSP Account" means a Canadian Member's account in the Group Registered Retirement Savings Plan established in accordance with the Plan for Canadian Members whose Earnings are taxable under the ITA and administered by the Trustee. 
2.35        "Securities Act" means the U.S. Securities Act of 1933, as amended from time to time, and any reference to a section of the Securities Act shall include any successor provision of the Securities Act. 
 
2.36        "Shares" means common shares in the capital of the Corporation. 
2.37        "Short Term Leave" means a period of leave approved by the Corporation no longer than six months. 
2.38        "Standard Account" means a Member Account that is not an RRSP Account. 
2.39        "Stock Exchange" means the exchanges on which the Shares are then listed and traded. As of the date hereof, the TSX and the NASDAQ Stock Market are the Stock Exchanges where the Shares are listed and traded. "TSX" means The Toronto Stock Exchange. "U.S. Exchange" shall mean or such other national securities exchange or trading system on which the Shares are listed. 
2.40        "Subscription Period" means the subscription period described and defined in Section 4.01(b). 
2.41        "Trustee" means a trust company incorporated under the laws of Canada or a Province of Canada appointed as Trustee of the Fund for the RRSP Account. 
2.42        "Voluntary Contribution" means a contribution by a Member from the Earnings of such Member. 
ARTICLE 3- OVERSIGHT, ELIGIBILITY AND SHARES SUBJECT TO THE PLAN 
3.01        Subject to and consistent with the terms of the Plan and the Applicable Law and Rules, the Board will have the general power to administer the Plan in accordance with its terms and make all determinations required or permitted to be made; provided, however, that the Board may delegate all or any portion of such powers to its Compensation Committee or to other committees (the "Committee"), which if appointed shall consist of two or more individuals, each of whom qualifies as (a) an "independent director," within the meaning of the rules of the Stock Exchanges and other applicable securities regulatory requirements and (b) a "non-employee director" within the meaning of Rule 16b-3 under the Exchange Act. To the extent of any such delegation, any references to the "Board" shall instead refer to the Committee. The chair and each other member of the Committee shall be appointed by the Board. No member of the Board (or any Committee thereof) shall be liable for any action or determination made in good faith pursuant to the Plan. To the fullest extent permitted by law, the Corporation shall indemnify and save harmless, and shall advance and reimburse the expenses of, each Person made, or threatened to be made, a party to any action or proceeding in respect of the Plan by reason of the fact that such Person is or was a member of the Board (or Committee thereof) in respect of any claim, loss, damage or expense (including legal fees) arising therefrom. 
3.02        Each Employee will become eligible to become a Member on and after the first day of the Election Period commencing after the Employee's completion of three months of service. Eligibility to participate ceases upon termination of employment for any reason. The Board may, in its sole discretion, waive the foregoing eligibility qualification periods. 
3.03        Unless sooner terminated by the Corporation as provided in Section 8.02, this Plan shall have a term commencing on the Effective Date and ending on the tenth anniversary of such date. The Board may suspend Contributions at any time for any reason (subject to Applicable Law and Rules and without prejudice to any contract rights) without thereby terminating the Plan. 
3.04        With respect to Non-Executive Members, the number of Shares covered by the Plan will be solely based on the Voluntary Contributions and Matching Contributions made as provided in Article 4. The Corporation will not issue any Shares to Non-Executive Members through this Plan. Rather, purchases of Shares will be made through the Investment Dealer as described herein. 
3.05        With respect to the Executive Members, the number of Shares covered by the Plan will be based on the Voluntary Contributions and Matching Contributions made as provided in Article 4, but in no event in excess of 500,000 Shares (subject to adjustment as provided below in this Section 3.05). Moreover, for as long as the Shares are listed for trading on the TSX and the standards with respect to security holder approval and with respect to security based compensation arrangements apply to the Corporation, the number of Shares that can be issued to Executive Members (including associates if required by TSX rules) within any one year period, and issuable to Executive Members, at any time, under this Plan and all other Corporation security-based compensation arrangements (as determined under the rules of the TSX), shall not exceed 10% of the issued and outstanding Shares at any given date of determination. For the purposes of determining compliance with the above restrictions, the Corporation will take into account Shares reserved or issued pursuant to options together with Shares reserved or issued pursuant to all of the Corporation's security-based compensation arrangements to the extent required by TSX rules. In the event that (a) a dividend shall be declared upon the Shares or other securities of the Corporation payable in Shares or other securities of the Corporation, (b) the outstanding Shares shall be changed into or exchanged for a different number or kind of shares or other securities of the Corporation or of another corporation or entity, whether through an arrangement, plan of arrangement, amalgamation or other similar statutory procedure or a share recapitalization, subdivision, consolidation or otherwise, (c) there shall be any change, other than those specified in (a) or (b) above, in the number or kind of outstanding Shares or of any securities into which such Shares shall have been changed or for which they shall have been exchanged, or (d) there shall be a distribution of assets or shares to shareholders of the Corporation out of the ordinary course of business, then, the Board shall determine whether an adjustment in the number or kind of Shares theretofore authorized but not yet issued to Executive Members, in the number or kind of Shares theretofore subject to issuance, in the number or kind of Shares generally available for issuance to Executive Members under this Plan or available in any calendar year under the Plan and/or such other adjustment as may be appropriate should be made, in order to ensure that, after any such event, the Shares subject to the Plan and each Executive Member's proportionate interest shall be maintained substantially as before the occurrence of the event, and if the Board determines that an adjustment should be made, such adjustment shall be made and be effective and binding for all purposes. 
ARTICLE 4- CONTRIBUTIONS AND INVESTMENTS 
4.01        Subject to Section 4.05, during an Election Period a Member may elect to make Voluntary Contributions to the Plan through payroll deductions of up to 7.5 percent of such Member's Earnings (the "Election") during a Subscription Period. Such Election shall be in such form required by the Corporation and shall give the Corporation authority to deduct and remit a designated percentage of Earnings in respect of each pay period. For these purposes, 
        (a)        an "Election Period" shall commence as of the beginning of the third Business Day following the public earnings release with respect to a quarter or year (the "Release Date") and end with the last day of the calendar month during which such Release Date occurs; 
        (b)        an Election shall initially be in effect with respect to the three-calendar month period commencing on first day of the calendar month immediately following the Release Date. Such three month period and each other three-calendar month period after an Election Period shall be referred to as a "Subscription Period." A new Election may be made (including modifications to the prior Election or termination of participation) during any following Election Period. However, unless and until such new Election is made, an Election shall remain in force and apply to all Subscription Periods If a new Election is made during an Election Period, the new Election shall remain in effect unless and until a new Election during a subsequent Election Period, and so forth. With respect to Executive Members, the Board may fix Election Periods and Subscription Periods at longer (but not shorter) periods than described above; 
        (c)        an Election may range from 0% to 7.5% of Earnings during a Subscription Period. However, with respect to Executive Members, the total number of Shares that may be issued under this Plan shall be subject to the limitations set forth in Section 3.05. 
 
4.02        The Board may establish procedures from time to time for matching such Voluntary Contributions (the "Matching Contributions") subject to the following: 
        (a)        The Matching Contributions for any given Member during a Subscription Period shall not exceed the Voluntary Contributions by such Member (and such Matching Contributions may be set at a lower percentage or amount of the Member's Earnings as is designated from time to time by the Board). 
        (b)        The Board has the discretion to limit eligibility for Matching Contributions to certain Members (such as Non-Executive Members or Executive Members) and to set special limitations (such as contribution levels or purchase restrictions) as to some or all Members. 
4.03        All Contributions with respect to each calendar month included in a Subscription Period will be credited to a bookkeeping account of the Corporation as of the end of such calendar month. Such credited amounts will not accrue interest or earnings. Such bookkeeping account shall not be considered a part of the Member Account or establish a trust, fiduciary or other similar relationship between the Corporation and a Member. 
4.04        The only eligible investments for the Fund shall be Shares. Such investments will be made as follows: 
        (a)        With respect to Executive Members, 
                (i)        Subject to the limitations in Section 3.05, on each Purchase Date, all Contributions credited to each Executive Member's bookkeeping account and available for the purchase of Shares as of such Purchase Date shall be used to purchase directly from the Corporation the maximum whole-number of Shares that may be purchased at the Purchase Price. 
                (ii)        The "Purchase Date" shall be the tenth Business Day following a calendar month and the "Purchase Price" will be the Market Value of Shares on such date. 
                (iii)        Any remaining Contributions insufficient to purchase a whole Share shall be retained and credited to a bookkeeping account for the affected Executive Member that shall not be credited with interest or other earnings. Such remaining Contributions shall be applied to purchase Shares on a first-in first-out basis on the next succeeding Purchase Date and any such Contributions that are not so applied on such next succeeding Purchase Date shall be distributed to the affected Executive Member. 
                (iv)        Within 10 Business Days following each Purchase Date, the Corporation shall cause the purchased Shares to be issued and to be delivered to the Administrative Agent, which will hold such Shares in Member Accounts established for the affected Executive Member. 
       (b)        With respect to Non-Executive Members, 
                (i)        The Corporation will remit to the Administrative Agent, in cash, Contributions accrued with respect to a calendar month within 10 Business Days after the end of such month. Such remittance will be accompanied by a report summarizing the Contributions made with respect to each Non-Executive Member. Any such remitted Contributions shall be allocated to the Member Accounts of the respective Non-Executive Members and held by the Administrative Agent until used to purchase Shares.  
                (ii)        Such allocated Contributions shall be invested and held as follows: 
                        (A)    The Investment Dealer will be directed to purchase Shares through the facilities of the Stock Exchanges in such a way that the Contributions are fully invested in Shares during the four week period following the remittance of Contributions, subject to market conditions. 
                        (B)    The Investment Dealer shall report to the Administrative Agent (with a copy to the Corporation) the number of Shares purchased during a calendar month and shall deliver to the Administrative Agent certificates representing the Shares purchased within 20 days after such purchases are made. 
                        (C)    With respect to Shares so purchased pursuant to the provisions of this Section 4.04(b), the Administrative Agent shall use its good faith efforts to allocate Shares on a first in-first out basis to each Non-Executive Member's Account(s) in proportion to the cash balance of Contributions remitted to it. The Administrative Agent shall maintain a record of the Shares held for each Non-Executive Member and the cash balance held over until the next Share purchase. Allocations of Shares shall be effective as of the last day of calendar month. 
               (iii)        A list of such Member Account balances as of the end of a calendar month shall be supplied to the Corporation as soon as practicable after such month. Within 30 days of the last day of each of March, June, September and December the Administrative Agent shall supply each Member with a statement of his Member Account balance and the transactions made on his behalf since the last statement including his Voluntary Contribution, the Matching Contribution, the Shares purchased for and withdrawn from his Member Account and the balance of Shares in his Member Account at the end of the period. 
4.05        Notwithstanding any other provision contained in this Plan, the Board may establish such limitations or rules on Contributions, the purchase of Shares, or the disposition of Shares (including Shares withdrawn in accordance with Article 6) with respect to all or any Members that it may deem, in good faith, necessary or appropriate to prevent the use of material non-public information, the violation (or potential violation) of Applicable Law or Rules, or the potential disruption of trading after the completion of a public offering by the Corporation. Such limitations or rules may include, without limitation, blackout periods and restrictions with respect to the disposition of Shares withdrawn by an Executive Member. 
ARTICLE 5 - RRSP ACCOUNTS 
5.01        Effective his particular Commencement Date, a Canadian Member shall be eligible to establish an RRSP Account administered by the Trustee in conjunction with the Plan. A Member whose Earnings are taxable under the Code may not establish an RRSP Account. Investments of the RRSP Account shall be restricted to Shares of the Corporation. 
 
5.02        A Canadian Member may hold either or both of a Standard Account and a RRSP Account. For administrative simplicity, the Canadian Member described in the immediately preceding sentence may allocate his Contributions only as follows: 
 
                
                                 Standard        RRSP
                                Account                Account
                Option 1        100%                0%
                Option 2        50%                50%
                Option 3        0%                100%
            
The Canadian Member who is eligible under the Plan to hold either or both of a Standard Account and an RRSP Account may change his allocation option only once per calendar year. 
ARTICLE 6- VESTING, TERMINATION AND WITHDRAWAL 
6.01        All Contributions to the Plan as of and after a Member's Commencement Date shall immediately vest to the benefit of the Member. As of the purchase of Shares from the Corporation on a Purchase Date pursuant to Section 4.04(a) or allocation of Shares as of the end of a calendar month pursuant to Section 4.04(b), the Member shall be deemed and shall be treated as the beneficial owner of the Shares, subject to the limitations set forth in this Plan. Shares held by the Administrative Agent under the Plan shall be registered in the name of the Administrative Agent or such other name as the Administrative Agent determines. Whole shares allocated to a Member's Account will be voted by the Administrative Agent in accordance with the directions, if any, of the Member. 
6.02        Subject to the winding up provisions of this Section 6.02, a Member's participation in the Plan shall cease in the event of the Member's termination of employment for any reason except Short Term Leave or other approved leave. A Member who commences Long Term Leave shall be deemed to have terminated participation in the Plan and shall provide a written withdrawal request to the Corporation within 60 days of such commencement. 
        (a)        The Corporation shall provide the Administrative Agent with notice of such termination. After the Administrative Agent receives such notice, no further purchases for such Member hereunder shall be executed (though the Administrative Agent and Investment Dealer may complete any purchases based on orders it placed prior to such notice). 
        (b)        Within 60 days after such termination, a Member's interest in the Fund will be disposed of as follows (unless the Corporation and the Member otherwise agree and instruct the Administrative Agent): 
                (i)        Standard Account.    All whole Shares allocated to the Member's Standard Account will be transferred to the Member. Any cash remaining in the Standard Account that had not been applied to the purchase of Shares will be paid to the Member in cash without interest. 
                (ii)        RRSP Account.    All whole Shares allocated to the Member's RRSP Account will be transferred to the Member's individual RRSP in his name which shall not be connected with the Plan. Any cash remaining in the RRSP Account that had not been applied to the purchase of Shares will be paid in cash to the Members' individual RRSP. Where a Member who has an RRSP Account ceases to participate in the Plan and has no individual RRSP in his name which is not connected with the Plan, the Trustee will forward his Shares to the Investment Dealer for sale through the facilities of the Stock Exchanges and shall remit the net proceeds of sale net of applicable tax withholdings to the Member. 
 
Notwithstanding the foregoing, the Corporation may establish alternative procedures for the disposition of Shares in Member Accounts of Executive Members to prevent the violation of the Exchange Act. 
6.03        A Member may once per calendar year withdraw all or any portion of the Shares held in his Member Account(s) without penalty or additional transaction fees/charges. The Corporation may, but shall not be obligated to permit additional withdrawals, but the Member shall pay all transaction fees and the Corporation will, effective on the first pay period after the additional withdrawal has been made, cease to make Matching Contributions to the Fund on behalf of such Member who has made an additional withdrawal during the a suspension period computed in accordance with the following table: 
 
        
               Proportion of Shares Withdrawn                        Matching Contribution Suspension Period
               less than or equal to 50% of the balance         6 months
               greater than 50% of the balance                        12 months
            A Member may continue to make Voluntary Contributions during the suspension period. 
            Notwithstanding the other provisions of this Section 6.03, the Corporation may impose restrictions pursuant to Section 4.05. 
ARTICLE 7- RIGHTS OF THE MEMBERS 
7.01        The Member shall have the right to designate, by written notice given to the Corporation (or its delegate), a person or persons to be the beneficiary to receive any proceeds of disposition that may be made as a result of the death of the Member. Such written notice may be altered or revoked from time to time by written notice to the Corporation (or its delegate). 
7.02        If, on the death of the Member, there is no designated and surviving beneficiary, any Shares or proceeds of disposition will be delivered to the Member's estate in accordance with Applicable Law and Rules. 
ARTICLE 8- RIGHTS OF THE CORPORATION 
8.01        The provisions of the Plan may be amended by the Corporation in its sole discretion without shareholder approval, provided that no such amendment shall reduce the then current balances (including allocated or purchased Shares) of any Member's Account, notwithstanding that such amendment may affect the contribution limits of Members or the Corporation, or other aspects of the Plan, after the date of the amendment. However, notwithstanding the foregoing, if and to the extent Applicable Law or Rules require that an amendment to a provision contained in this Plan cannot be made without shareholder approval, such amendment shall not be effective until such required shareholder approval has been obtained. 
8.02        The Corporation may, in its sole discretion, suspend the operation of the Plan at any time and, on 30 days notice to the Members, terminate the Plan at any time. In the event of the termination of the Plan, the Administrative Agent shall transfer the Members' interests in the Plan to the Members in accordance with Section 6.02 as if the Members had terminated their employment on the date the Corporation terminated the Plan. 
8.03        The operation of this Plan shall at no time interfere with the Corporation's right to terminate the employment of any Member with or without just cause. 
8.04        The Corporation shall have the right to terminate the Agency Agreement with any particular Administrative Agent and appoint a successor Administrative Agent at any time subject only to any notice period that may be in the Agency Agreement. 
8.05        In the event of any conflict between a Member and the Corporation arising in connection with this Plan, the Corporation shall have sole responsibility for the interpretation of the Plan. 
 
ARTICLE 9 - ADMINISTRATION AND OTHER 
9.01        The Corporation shall administer the Plan and shall make and enforce such procedures as it may deem suitable, and shall have the powers necessary to carry out the administration of the Plan, including the authorization of disbursements made by the Administrative Agent and the Investment Dealer and the resolution of questions involving the interpretation and application of the provisions of the Plan. 
9.02        The Corporation shall adopt such regulations as may be deemed necessary or proper for the efficient administration of the Plan and may amend same from time to time subject to the provisions of Section 8.01. The Corporation shall notify the Administrative Agent in writing of such amendments. 
9.03        All reasonable expenses incurred in connection with the administration of the Plan shall be paid by the Corporation. Costs of purchase or sale of Shares, including commissions, fees and applicable taxes, shall be deemed to be part of the cost of the Shares and shall be paid for from Contributions to the Plan. 
9.04        The Corporation shall provide or cause to be provided notice in writing to each Employee of the Corporation who is eligible to participate in the Plan of his participation and of their rights thereunder. 
9.05        The Corporation may file a registration statement with respect to the purchase and disposition of Shares pursuant to the terms hereof. It shall pay all the costs associated with such registration. 
9.06        The Corporation shall be responsible for selection of the Investment Dealer. 
9.07        The Plan shall be construed, regulated and administered according to the laws of the Province of Alberta. 
9.08        When the context of the Plan requires it, the masculine gender shall include the feminine and the singular shall include the plural. 
9.09        Members' RRSP Accounts are subject to the provisions of the ITA. The ITA imposes certain limits on the amounts individuals may contribute to RRSPs and the amount which may be claimed as deductions. Members may make separate contributions to other personal RRSPs outside the Plan. It is the responsibility of each Member to ensure that such Member does not over contribute and the Corporation accepts no responsibility or liability for over contributions. 
9.10        If the Corporation disposes of any division or subsidiary, the Employees shall not be entitled to any compensation in respect of the termination of their right to participate in the Plan except for the right to receive the balance of their Member's Account(s). 
9.11        Dividends on the Shares shall be reinvested in Shares and such Shares shall be allocated to Members' Accounts in the proportion of Shares held in each Member's Account at the end of the month prior to receipt of the dividend. 
9.12        Where applicable the Corporation's Matching Contribution is a taxable benefit and shall be reported accordingly. 
9.13        The Corporation may establish brokerage or other similar arrangements to facilitate the transfer or disposition of Shares; any brokerage or other similar commissions or charges by any broker with respect to specific trades or dispositions by a Member shall be borne solely by such Member.2004 Rayonier Incentive Stock and Management Bonus Plan

2004 Rayonier Incentive Stock and Management Bonus Plan 
1.PURPOSE 

The purposes of the 2004 Rayonier Incentive Stock and Management Bonus Plan are (a) to motivate and reward superior performance on the part of employees of Rayonier and its subsidiaries and to thereby attract and retain employees of superior ability and (b) to assist the Company in attracting and retaining outside directors with the requisite experience and ability. In addition, the Plan is intended to further opportunities for stock ownership by such employees and directors in order to increase their proprietary interest in Rayonier and, as a result, their interest in the success of the Company. Awards will be made, in the discretion of the Committee, to Key Employees (including officers and directors who are also employees) whose responsibilities and decisions directly affect the performance of any Participating Company and its subsidiaries. Such incentive awards may consist of stock options, stock appreciation rights payable in stock or cash, performance shares, restricted stock, performance bonus awards or any combination of the foregoing, as the Committee may determine. Awards of stock options or restricted stock or any combination thereof will be made to non-employee directors by the Board in its discretion. 
2.DEFINITIONS 

When used herein, the following terms shall have the following meanings: 

"Act" means the Securities Exchange Act of 1934. 

"Award" means an award granted to any Key Employee in accordance with the provisions of the Plan in the form of Options, Rights, Performance Shares, Restricted Stock or Performance Bonus Awards, or any combination of the foregoing. 

"Award Agreement" means the written agreement evidencing each Award, other than Performance Bonus Awards, granted to a Key Employee under the Plan. 

"Beneficiary" means the estate of a Key Employee or such other beneficiary or beneficiaries lawfully designated pursuant to Section 11 to receive the amount, if any, payable under the Plan upon the death of a Key Employee. 

"Board" means the Board of Directors of the Company. 

"Change in Control" has the meaning specified in the Retirement Plan. 

"Code" means the Internal Revenue Code of 1986, as now in effect or as hereafter amended. (All citations to sections of the Code are to such sections as they may from time to time be amended or renumbered.) 

"Committee" means the Compensation and Management Development Committee of the Board or such other committee as may be designated by the Board to administer the Plan. 

"Company" means Rayonier Inc. and its successors and assigns. 

"Fair Market Value", unless otherwise indicated in the provisions of this Plan, means, as of any date, the composite closing price for one share of Stock on the New York Stock Exchange for the most recently completed trading day or, if no sales of Stock have taken place on such date, the composite closing price on the most recent date on which selling prices were quoted, the determination to be made in the discretion of the Committee. 

"GAAP" means U.S. Generally Accepted Accounting Principles. 

"Incentive Stock Option" means a stock option qualified under Section 422 of the Code. 

 

"Key Employee" means an employee (including any officer or director who is also an employee) of any Participating Company whose responsibilities and decisions, in the judgment of the Committee, directly affect the performance of the Company and its subsidiaries. References to the term "Key Employees" shall be read to include "Non-employee Directors" in the application of Sections 3, 5, 7, 8, and 10 through 17 of the Plan as the context may require in relationship to Awards to Non-employee Directors hereunder. Except as otherwise may be determined by the Board, a Non-employee Director's ceasing to be a director of the Company shall be treated in the same manner as a voluntary termination of employment by a Key Employee on such date. 

"Limited Stock Appreciation Right" means a stock appreciation right that shall become exercisable automatically upon the occurrence of a Change in Control as described in Section 10 of the Plan. 

"Non-employee Director" means a member of the Board who is not otherwise an employee of the Company. 

"Option" means an option awarded under Section 5 of the Plan to purchase Stock of the Company, which option may be an Incentive Stock Option or a nonqualified stock option. 

"Participating Company" means the Company or any subsidiary or other affiliate of the Company; provided, however, for Incentive Stock Options only, "Participating Company" means the Company or any corporation that at the time such Option is granted qualifies as a "subsidiary" of the Company under Section 425(f) of the Code. 

"Participant" means each Key Employee of the Participating Company selected by the Committee as eligible for a Performance Bonus Award who could potentially be described in Section 162(m)(3) of the Code, as well as, in the discretion of the Committee, the President and Chief Executive Officer and any Key Employee reporting directly to the President and Chief Executive Officer. 

"Performance Bonus Award" means the right of a Participant to receive cash following the completion of a Performance Period based upon performance in respect of one or more of the Performance Goals during such Performance Period, as specified in Section 9. 

"Performance Goals" means or may be expressed in terms of any, but not limited to, of the following business criteria: (i) net income, (ii) earnings per share, (iii) operating income, (iv) operating cash flow, (v) earnings before income taxes and depreciation, (vi) earnings before interest, taxes, depreciation and amortization, (vii) operating margins (viii) reductions in operating expenses, (ix) sales or return on sales, (x) total stockholder return, (xi) return on equity, (xii) return on total capital, (xiii) return on invested capital, (xiv) return on assets, (xv) economic value added, (xvi) cost reductions and savings, (xvii) increase in surplus, (xviii) productivity improvements, and (xix) an executive's attainment of personal objectives with respect to any of the foregoing criteria or other criteria such as growth and profitability, customer satisfaction, leadership effectiveness, business development, negotiating transactions and sales or developing long term business goals. A Performance Goal may be measured over a Performance Period on a periodic, annual, cumulative or average basis and may be established on a corporate-wide basis or established with respect to one or more operating units, divisions, subsidiaries, acquired businesses, minority investments, partnerships or joint ventures. Unless otherwise determined by the Committee, the Performance Goals will be determined using GAAP consistently applied during a Performance Period by no later than the earlier of the date that is ninety days after the commencement of the Performance Period or the day prior to the date on which twenty-five percent of the Performance Period has elapsed. 

"Performance Objective" means the level or levels of performance required to be attained with respect to specified Performance Goals in order that a Key Employee shall become entitled to specified rights in connection with a Performance Share or Performance Bonus Award. 

"Performance Period" means the calendar year, or such other shorter or longer period designated by the Committee, during which performance will be measured in order to determine a Key Employee's entitlement to receive payment of a Performance Share or Performance Bonus Award, respectively. 

 

"Performance Share" means a performance share awarded under Section 6 of the Plan. 

"Plan" means the 2004 Rayonier Incentive Stock and Management Bonus Plan, as the same may be amended, administered or interpreted from time to time. 

"Plan Year" means the calendar year. 

"Retirement" means eligibility to receive immediate retirement benefits under a Participating Company pension plan. 

"Restricted Stock" means Stock awarded under Section 7 of the Plan subject to such restrictions as the Committee deems appropriate or desirable. 

"Restricted Stock Unit" has the meaning set forth in Section 6 of the Plan. 

"Retirement Plan" means the Retirement Plan for Salaried Employees of Rayonier Inc., as amended effective July 18, 1997, and as the same may be thereafter amended from time to time prior to the occurrence of a Change in Control. 

"Right" means a stock appreciation right awarded in connection with an option under Section 5 of the Plan. 

"Share Limit" has the meaning set forth in Section 3. 

"Stock" means the common shares of the Company. 

"Total Disability" means the complete and permanent inability of a Key Employee to perform all of his or her duties under the terms of his or her employment with any Participating Company, as determined by the Committee upon the basis of such evidence, including independent medical reports and data, as the Committee deems appropriate or necessary. 

"Voting Securities" means any securities of the Company that vote generally in the election of directors. 
3.SHARES SUBJECT TO THE PLAN 

The aggregate number of shares of Stock that may be awarded under the Plan is 4.5 million. 

No more than 2.66 million shares of Stock shall be available for Restricted Stock, Performance Share Awards, Performance Bonus Awards or settlement of Rights. In no event shall more than one million (1,000,000) shares of Stock be cumulatively available for Awards of incentive stock options under the Plan. For any Plan Year, no individual employee may receive an Award of Options, Performance Shares, Restricted Stock or Rights for more than four percent (4%) of the total number of shares authorized under the Plan (with respect to any Key Employee, his or her "Share Limit"). The number of shares available in each category hereunder shall be subject to adjustment as provided in Section 14 in connection with a Stock split, Stock dividend, or other extraordinary transaction affecting the Stock. 

Subject to the above limitations, shares of Stock to be issued under the Plan may be made available from the authorized but unissued shares, or from shares purchased in the open market. For the purpose of computing the total number of shares of Stock available for Awards under the Plan, there shall be counted against the foregoing limitations the number of shares of Stock that equal the maximum number of Performance Share Awards issuable in any outstanding grant, in each case determined as at the dates on which such Awards are granted. If any Awards under the Plan are forfeited, terminated, expire unexercised, are settled in cash in lieu of Stock or are exchanged for other Awards, the shares of Stock that were theretofore subject to such Awards shall again be available for Awards under the Plan to the extent of such forfeiture or expiration of such Awards. Further, any shares that are exchanged (either actually or constructively) by optionees as full or partial payment to the Company of the purchase price of shares being acquired through the exercise of a stock option granted under the Plan will not be available for subsequent Awards. 
4.GRANT OF AWARDS AND AWARD AGREEMENTS 

(a) Subject to the provisions of the Plan, the Committee shall (i) determine and designate from time to time those Key Employees or groups of Key Employees to whom Awards are to be granted; (ii) determine the form or forms of Award to be granted to any Key Employee; (iii) determine the amount or number of shares of Stock subject to each Award; and (iv) determine the terms and conditions of each Award. 

(b) The Board shall serve to administer and interpret the Plan with respect to any grants of Awards made to Non-employee Directors. Non-employee Directors shall only be eligible for Stock Options pursuant to Section 5 and/or Restricted Stock under Section 7. Non-employee Directors shall not be entitled to receive any Rights. Any such Awards, and all duties, powers and authority given to the Committee in this Plan, including those provided for in this Section 4, in Section 12 and elsewhere in the Plan, in connection with Awards to Participants shall be deemed to be given to the Board in its sole discretion in connection with Awards to Non-employee Directors. The Board may request of the Committee, its Nominating and Corporate Governance Committee or of any other Board committee comprised of independent directors, its recommendation on the level of Awards for this purpose. Except as may be specifically provided by the Board at the time of grant or in the applicable Award Agreement, the provisions of Sections 10, 15 and 16 shall not apply in respect of Awards made to Non-employee Directors. 

(c) Each Award, other than Performance Bonus Awards, granted under the Plan shall be evidenced by a written Award Agreement. Such agreement shall be subject to and incorporate the express terms and conditions, if any, required under the Plan or required by the Committee. 
5.STOCK OPTIONS AND RIGHTS 

(a) With respect to Options and Rights, the Committee shall (i) authorize the granting of Incentive Stock Options, nonqualified stock options, or a combination of Incentive Stock Options and nonqualified stock options; (ii) authorize the granting of Rights that may be granted in connection with all or part of any Option granted under this Plan, either concurrently with the grant of the Option or at any time thereafter during the term of the Option; (iii) determine the number of shares of Stock subject to each Option or the number of shares of Stock that shall be used to determine the value of a Right; and (iv) determine the time or times when and the manner in which each Option or Right shall be exercisable and the duration of the exercise period. 

(b) Any Option issued hereunder that is intended to qualify as an Incentive Stock Option shall be subject to such limitations or requirements as may be necessary for the purposes of Section 422 of the Code or any regulations and rulings thereunder to the extent and in such form as determined by the Committee in its discretion. 

(c) Rights may be granted only to Key Employees who may be considered directors or officers of the Company for purposes of Section 16 of the Act. 

(d) The exercise period for a nonqualified stock option and any related Right shall not exceed ten years from the date of grant, and the exercise period for an Incentive Stock Option and any related Right shall not exceed ten years from the date of grant. 

(e) The Option price per share shall be determined by the Committee at the time any Option is granted and shall be not less than the Fair Market Value of one share of Stock on the date the Option is granted. 

(f) No part of any Option or Right may be exercised until the Key Employee who has been granted the Award shall have remained in the employ of a Participating Company for such period after the date of grant as the Committee may specify, if any, and the Committee may further require exercisability in installments; provided, however, the period during which a Right is exercisable shall commence no earlier than six months following the date the Option or Right is granted. 

(g) The purchase price of the shares as to which an Option shall be exercised shall be paid to the Company at the time of exercise either in cash or Stock already owned by the optionee having a total Fair Market Value equal to the purchase price, or a combination of cash and Stock having a total fair market value, as so determined, equal to the purchase price. The Committee shall determine acceptable methods for tendering Stock as payment upon exercise of an Option and may impose such limitations and prohibitions on the use of Stock to exercise an Option as it deems appropriate. 

(h) Unless Section 10 shall provide otherwise, Rights granted to a director or officer shall terminate when such person ceases to be considered a director or officer of the Company subject to Section 16 of the Act. 

(i) In case of termination of employment, the following provisions shall apply: 
(A) If a Key Employee who has been granted an Option shall die before such Option has expired, his or her Option may be exercised in full by the person or persons to whom the Key Employee's rights under the Option pass by will, or if no such person has such right, by his or her executors or administrators, at any time, or from time to time, within five years after the date of the Key Employee's death or within such other period, and subject to such terms and conditions as the Committee may specify, but not later than the expiration date specified in Section 5(d) above. 

(B) If the Key Employee's employment by any Participating Company terminates because of his or her Retirement or Total Disability, he or she may exercise his or her Options in full at any time, or from time to time, within five years after the date of the termination of his or her employment or within such other period, and subject to such terms and conditions as the Committee may specify, but not later than the expiration date specified in Section 5(d) above. Any such Options not fully exercisable immediately prior to such optionee's Retirement shall become fully exercisable upon such Retirement unless the Committee, in its sole discretion, shall otherwise determine. 

(C) Except as provided in Section 10, if the Key Employee shall voluntarily resign before eligibility for Retirement or he or she is terminated for cause as determined by the Committee, the Options shall be cancelled coincident with the effective date of the termination of employment. 

(D) If the Key Employee's employment terminates for any other reason, he or she may exercise his or her Options, to the extent that he or she shall have been entitled to do so at the date of the termination of his or her employment, at any time, or from time to time, within three months after the date of the termination of his or her employment or within such other period, and subject to such terms and conditions as the Committee may specify, but not later than the expiration date specified in Section 5(d) above. 

(j) No Option or Right granted under the Plan shall be transferable other than by will or by the laws of descent and distribution. During the lifetime of the optionee, an Option or Right shall be exercisable only by the Key Employee to whom the Option or Right is granted. 

(k) With respect to an Incentive Stock Option, the Committee shall specify such terms and provisions as the Committee may determine to be necessary or desirable in order to qualify such Option as an "incentive stock option" within the meaning of Section 422 of the Code. 

(l) With respect to the exercisability and settlement of Rights: 
(i) Upon exercise of a Right, the Key Employee shall be entitled, subject to such terms and conditions as the Committee may specify, to receive upon exercise thereof all or a portion of the excess of (A) the Fair Market Value of a specified number of shares of Stock at the time of exercise, as determined by the Committee, over (B) a specified amount that shall not, subject to Section 5(e), be less than the Fair Market Value of such specified number of shares of Stock at the time the Right is granted. Upon exercise of a Right, payment of such excess shall be made as the Committee shall specify in cash, the issuance or transfer to the Key Employee of whole shares of Stock with a Fair Market Value at such time equal to any excess, or a combination of cash and shares of Stock with a combined Fair Market Value at such time equal to any such excess, all as determined by the Committee. The Company will not issue a fractional share of Stock and, if a fractional share would otherwise be issuable, the Company shall pay cash equal to the Fair Market Value of the fractional share of Stock at such time. 

(ii) For the purposes of Subsection (i) of this Section 5(l), in the case of any such Right or portion thereof, other than a Right related to an Incentive Stock Option, exercised for cash during a "window period" specified by Rule 16b-3 under the Act, the Fair Market Value of the Stock at the time of such exercise shall be the highest composite daily closing price of the Stock during such window period. 

(iii) In the event of the exercise of such Right, the Company's obligation in respect of any related Option or such portion thereof will be discharged by payment of the Right so exercised. 

6.PERFORMANCE SHARES 

(a) Subject to the provisions of the Plan, the Committee shall (i) determine and designate from time to time those Key Employees or groups of Key Employees to whom Awards of Performance Shares are to be made, (ii) determine the Performance Period and Performance Objectives applicable to such Awards, (iii) determine the form of settlement of a Performance Share and (iv) generally determine the terms and conditions of each such Award. At any date, each Performance Share shall have a value equal to the Fair Market Value of a share of Stock at such date; provided that the Committee may limit the aggregate amount payable upon the settlement of any Award. 

(b) The Committee shall determine a Performance Period of not less than two nor more than five years with respect to the award of Performance Shares. Performance Periods may overlap and Key Employees may participate simultaneously with respect to Performance Shares for which different Performance Periods are prescribed. 

(c) The Committee shall determine the Performance Objectives of Awards of Performance Shares. Performance Objectives may vary from Key Employee to Key Employee and between groups of Key Employees and shall be based upon such Performance Goals as the Committee may deem appropriate. The Performance Objective shall be established by the Committee prior to, or reasonably promptly following the inception of, a Performance Period but, to the extent required by Section 162(m) of the Code, by no later than the earlier of the date that is ninety days after the commencement of the Performance Period or the day prior to the date on which twenty-five percent of the Performance Period has elapsed. 

(d) Following the completion of each Performance Period, the Committee shall certify in writing, in accordance with the requirements of Section 162(m) of the Code to the extent applicable, whether the Performance Objective and other material terms for paying amounts in respect of each Performance Share Award related to that Performance Period have been achieved or met. Unless the Committee determines otherwise, Performance Share Awards shall not be settled until the Committee has made the certification specified under this Section 6(d). 

(e) The Committee is authorized at any time during or after a Performance Period to reduce or eliminate the Performance Share Award of any Key Employee for any reason, including, without limitation, changes in the position or duties of any Key Employee with the Participating Company during or after a Performance Period, whether due to any termination of employment (including death, disability, retirement, voluntary termination or termination with or without cause) or otherwise. In addition, to the extent necessary to preserve the intended economic effects of the Plan to the Participating Company and the Key Employee, the Committee shall adjust Performance Objectives, the Performance Share Awards or both to take into account: (i) a change in corporate capitalization, (ii) a corporate transaction, such as any merger of the Company or any subsidiary into another corporation, any consolidation of the Company or any subsidiary into another corporation, any separation of the Company or any subsidiary (including a spin-off or the distribution of stock or property of the Company or any subsidiary), any reorganization of the Company or any subsidiary or a large, special and non-recurring dividend paid or distributed by the Company (whether or not such reorganization comes within the definition of Section 368 of the Code), (iii) any partial or complete liquidation of the Company or any subsidiary or (iv) a change in accounting or other relevant rules or regulations (any adjustment pursuant to this Clause (iv) shall be subject to the timing requirements of the last sentence of the definition of Performance Goal set forth in Section 2 of the Plan); provided, however, that no adjustment hereunder shall be authorized or made if and to the extent that the Committee determines that such authority or the making of such adjustment would cause the Performance Bonus Awards to fail to qualify as "qualified performance-based compensation" under Section 162(m) of the Code with respect to a particular Key Employee. 

(f) At the beginning of a Performance Period, the Committee shall determine for each Key Employee or group of Key Employees the number of Performance Shares or the percentage of Performance Shares that shall be paid to the Key Employee or member of the group of Key Employees if Performance Objectives are met in whole or in part. 

(g) If a Key Employee terminates service with all Participating Companies during a Performance Period because of death, Total Disability, Retirement, or under other circumstances where the Committee in its sole discretion finds that a waiver would be in the best interests of the Company, that Key Employee may, as determined by the Committee, be entitled to an Award of Performance Shares at the end of the Performance Period based upon the extent to which the Performance Objectives were satisfied at the end of such period, which Award, in the discretion of the Committee, may be maintained without change or reduced and prorated for the portion of the Performance Period during which the Key Employee was employed by any Participating Company; provided, however, the Committee may provide for an earlier payment in settlement of such Performance Shares in such amount and under such terms and conditions as the Committee deems appropriate or desirable, but only to the extent consistent with the requirements of Section 162(m) of the Code to the extent applicable in respect of such Key Employee. If a Key Employee terminates service with all Participating Companies during a Performance Period for any other reason, then such Key Employee shall not be entitled to any Award with respect to that Performance Period unless the Committee shall otherwise determine. 

(h) Each Award of a Performance Share shall be paid in whole shares of Stock, or cash, or a combination of Stock and cash either as a lump sum payment or in annual installments, all as the Committee shall determine, with payment to commence as soon as practicable after the end of the relevant Performance Period but no earlier than following the determination made in Section 6(d) hereof. Subject to the terms of the applicable program, the Award may also be paid in shares of Stock or Restricted Stock. 

(i) With respect to Performance Shares that may be settled through the grant of Stock, a Key Employee shall not be granted Performance Shares for all of the Performance Periods commencing in a calendar year that permit the Key Employee to earn Stock covering more than the Share Limit in respect of such Key Employee. In addition, separate and apart from the limit in the previous sentence, with respect to Performance Share Awards to be settled in cash, a Key Employee shall not be granted Performance Share Awards for all of the Performance Periods commencing in a calendar year that permit the Key Employee in the aggregate to earn a cash payment in excess of the Fair Market Value of the Share Limit as of the first day of the first Performance Period commencing in such calendar year. 

(j) Performance Share Awards may be structured in the form of Restricted Stock Units or any substantially similar instrument evidencing the right to receive a share of Stock, or a cash payment equal to the Fair Market Value of a share of Stock, at some future date upon the lapse of the applicable restrictions established by the Committee or upon the satisfaction of any applicable Performance Goals established by the Committee hereunder. To the extent provided for by the Committee, the rules of Section 7 shall apply to Restricted Stock Units payable in Stock. 
7.RESTRICTED STOCK 

(a) Restricted Stock shall be subject to a restriction period (after which restrictions will lapse), which shall mean a period commencing on the date the Award is granted and ending on such date as the Committee shall determine (the "Restriction Period"). The Committee may provide for the lapse of restrictions in installments where deemed appropriate. 

(b) Except when the Committee determines otherwise pursuant to Section 7(d), if a Key Employee terminates employment with all Participating Companies for any reason before the expiration of the Restriction Period, all shares of Restricted Stock still subject to restriction shall be forfeited by the Key Employee and shall be reacquired by the Company. 

(c) Except as otherwise provided in this Section 7, no shares of Restricted Stock received by a Key Employee shall be sold, exchanged, transferred, pledged, hypothecated or otherwise disposed of during the Restriction Period. 

(d) In cases of death, Total Disability or Retirement or in cases of special circumstances, the Committee may, in its sole discretion when it finds that a waiver would be in the best interests of the Company, elect to waive any or all remaining restrictions with respect to such Key Employee's Restricted Stock. 

(e) The Committee may require, under such terms and conditions as it deems appropriate or desirable, that the certificates for Stock delivered under the Plan may be held in custody by a bank or other institution, or that the Company may itself hold such shares in custody until the Restriction Period expires or until restrictions thereon otherwise lapse, and may require, as a condition of any Award of Restricted Stock that the Key Employee shall have delivered a stock power endorsed in blank relating to the Restricted Stock. 

(f) Nothing in this Section 7 shall preclude a Key Employee from exchanging any shares of Restricted Stock subject to the restrictions contained herein for any other shares of Stock that are similarly restricted. 

(g) Subject to Section 7(e) and Section 8, each Key Employee entitled to receive Restricted Stock under the Plan shall be issued a certificate for the shares of Stock. Such certificate shall be registered in the name of the Key Employee, and shall bear an appropriate legend reciting the terms, conditions and restrictions, if any, applicable to such Award and shall be subject to appropriate stop-transfer orders. 
8.CERTIFICATES FOR AWARDS OF STOCK 

(a) The Company shall not be required to issue or deliver any certificates for shares of Stock prior to (i) the listing of such shares on any stock exchange on which the Stock may then be listed and (ii) the completion of any registration or qualification of such shares under any federal or state law, or any ruling or regulation of any government body that the Company shall, in its sole discretion, determine to be necessary or advisable. 

(b) All certificates for shares of Stock delivered under the Plan shall also be subject to such stop-transfer orders and other restrictions as the Committee may deem advisable under the rules, regulations, and other requirements of the Securities and Exchange Commission, any stock exchange upon which the Stock is then listed and any applicable federal or state securities laws, and the Committee may cause a legend or legends to be placed on any such certificates to make appropriate reference to such restrictions. The foregoing provisions of this Section 8(b) shall not be effective if and to the extent that the shares of Stock delivered under the Plan are covered by an effective and current registration statement under the Securities Act of 1933, or if and so long as the Committee determines that application of such provisions is no longer required or desirable. In making such determination, the Committee may rely upon an opinion of counsel for the Company. 

(c) Except for the restrictions on Restricted Stock under Section 7, each Key Employee who receives Stock in settlement of an Award of Stock, shall have all of the rights of a shareholder with respect to such shares, including the right to vote the shares and receive dividends and other distributions. No Key Employee awarded an Option, a Right or Performance Share shall have any right as a shareholder with respect to any shares covered by his or her Option, Right or Performance Share prior to the date of issuance to him or her of a certificate or certificates for such shares. 
9.MANAGEMENT PERFORMANCE BONUS AWARDS 

(a) Form of Award.    The Committee is authorized to grant Awards pursuant to this Section 9. An Award shall represent the conditional right of the Participant to receive cash, or at the discretion of the Committee (and subject to the limitations in Section 3), in whole or in part in shares of stock, based upon achievement of one or more pre-established Performance Objectives during a Performance Period, subject to the terms of this Section 9 and the other applicable terms of the Plan. Awards shall be subject to such conditions, including deferral of settlement, risks of forfeiture, restrictions on transferability and other terms and conditions as shall be specified by the Committee. The Performance Bonus Award hereunder may take the form of a percentage of a bonus pool the magnitude of which shall be determined in a manner consistent with the determination of individual Performance Bonus Awards based on individual Performance Objectives hereunder for all of the members in the pool, with the time period for establishing the magnitude of the pool and the fixing of the applicable percentage available to any individual determined in accordance with the requirements of Section 162(m) of the Code applicable to any such individuals in the pool. 

(b) Performance Objectives.    The Committee shall establish the Performance Objective for each Performance Bonus Award, consisting of one or more business criteria permitted as Performance Goals hereunder, one or more levels of performance with respect to each such criteria, and the amount or amounts payable or other rights that the Participant will be entitled to upon achievement of such levels of performance. The Performance Objective shall be established by the Committee prior to, or reasonably promptly following the inception of, a Performance Period but, to the extent required by Section 162(m) of the Code, by no later than the earlier of the date that is ninety days after the commencement of the Performance Period or the day prior to the date on which twenty-five percent of the Performance Period has elapsed. 

(c) Additional Provisions Applicable to Performance Bonus Awards.    More than one Performance Goal may be incorporated in a Performance Objective, in which case achievement with respect to each Performance Goal may be assessed individually or in combination with each other. The Committee may, in connection with the establishment of Performance Objectives for a Performance Period, establish a matrix setting forth the relationship between performance on two or more Performance Goals and the amount of the Performance Bonus Award payable for that Performance Period. The level or levels of performance specified with respect to a Performance Goal may be established in absolute terms, as objectives relative to performance in prior periods, as an objective compared to the performance of one or more comparable companies or an index covering multiple companies, or otherwise as the Committee may determine. Performance Objectives shall be objective and shall otherwise meet the requirements of Section 162(m) of the Code. Performance Objectives may differ for Performance Bonus Awards granted to any one Participant or to different Participants. 

(d) Duration of the Performance Period.    The Committee shall establish the duration of each Performance Period at the time that it sets the Performance Objectives applicable to that Performance Period. The Committee shall be authorized to permit overlapping or consecutive Performance Periods. 

(e) Certification.    Following the completion of each Performance Period, the Committee shall certify in writing, in accordance with the requirements of Section 162(m) of the Code, whether the Performance Objective and other material terms for paying amounts in respect of each Performance Bonus Award related to that Performance Period have been achieved or met. Unless the Committee determines otherwise, Performance Bonus Awards shall not be settled until the Committee has made the certification specified under this Section 9(e). 

(f) Adjustment.    The Committee is authorized at any time during or after a Performance Period to reduce or eliminate the Performance Bonus Award of any Participant for any reason, including, without limitation, changes in the position or duties of any Participant with the Participating Company during or after a Performance Period, whether due to any termination of employment (including death, disability, Retirement, voluntary termination or termination with or without cause) or otherwise. In addition, to the extent necessary to preserve the intended economic effects of the Plan to the Participating Company and the Participants, the Committee shall adjust Performance Objectives, the Performance Bonus Awards or both to take into account: (i) a change in corporate capitalization, (ii) a corporate transaction, such as any merger of the Company or any subsidiary into another corporation, any consolidation of the Company or any subsidiary into another corporation, any separation of the Company or any subsidiary (including a spin-off or the distribution of stock or property of the Company or any subsidiary), any reorganization of the Company or any subsidiary or a large, special and non-recurring dividend paid or distributed by the Company (whether or not such reorganization comes within the definition of Section 368 of the Code), (iii) any partial or complete liquidation of the Company or any subsidiary or (iv) a change in accounting or other relevant rules or regulations (any adjustment pursuant to this Clause (iv) shall be subject to the timing requirements of the last sentence of the definition of Performance Goal set forth in Section 2 of the Plan); provided, however, that no adjustment hereunder shall be authorized or made if and to the extent that the Committee determines that such authority or the making of such adjustment would cause the Performance Bonus Awards to fail to qualify as "qualified performance-based compensation" under Section 162(m) of the Code. 

(g) Timing of Payment.    Except as provided below, any amounts payable in respect of Performance Bonus Awards for a Performance Period will generally be paid as soon as practicable following the determination in respect thereof made pursuant to Section 9(e). 

(h) Deferral of Payments.    Subject to such terms, conditions and administrative guidelines as the Committee shall specify from time to time, a Participant shall have the right to elect to defer receipt of part or all of any payment due with respect to a Performance Bonus Award. 

(i) Maximum Amount Payable Per Participant Under This Section 9.    A Participant shall not be granted Performance Bonus Awards for all of the Performance Periods commencing in a calendar year that permit the Participant in the aggregate to earn a payment in excess of 200% of the Participant's base salary in effect at the beginning of such calendar year. 

(j) Termination of Employment.    In the event a Participant terminates employment for any reason during a Performance Period or prior to the Performance Bonus Award payment, he or she (or his or her Beneficiary, in the case of death) shall not be entitled to receive any Performance Bonus Award for such Performance Period unless the Committee, in its sole and absolute discretion, elects to pay all or any part of a Performance Bonus Award to such Participant. 
10.CHANGE IN CONTROL 

Notwithstanding any provisions in this Plan to the contrary: 

(a) Each outstanding Option granted under the Plan shall become immediately exercisable in full for the aggregate number of shares covered thereby and all related Rights shall also become exercisable upon the occurrence of a Change in Control and shall continue to be exercisable in full for cash for a period of 60 calendar days beginning on the date that such Change in Control occurs and ending on the 60th calendar day following that date; provided, however, that no Option or Right shall be exercisable beyond the expiration date of its original term. 

(b) Options and Rights shall not terminate and shall continue to be fully exercisable for a period of seven months following the occurrence of a Change in Control in the case of an employee who is terminated other than for just cause or who voluntarily terminates his or her employment because he or she in good faith believes that as a result of such Change in Control he or she is unable effectively to discharge the duties of the position he or she occupied just prior to the occurrence of such Change in Control. For purposes of Section 10 only, termination shall be for "just cause" only if such termination is based on fraud, misappropriation or embezzlement on the part of the employee that results in a final conviction of a felony. Under no circumstances, however, shall any Option or Right be exercised beyond the expiration date of its original term. 

(c) Any Right or portion thereof may be exercised for cash within the 60-calendar-day period following the occurrence of a Change in Control with settlement, except in the case of a Right related to an Incentive Stock Option, based on the "Formula Price" that shall be the highest of (A) the highest composite daily closing price of the Stock during the period beginning on the 60th calendar day prior to the date on which the Right is exercised and ending on the date such Right is exercised, (B) the highest gross price paid for the Stock during the same period of time, as reported in a report on Schedule 13D filed with the Securities and Exchange Commission or (C) the highest gross price paid or to be paid for a share of Stock (whether by way of exchange, conversion, distribution upon merger, liquidation or otherwise) in any of the transactions set forth in the definition of "Change in Control" in the Retirement Plan. 

(d) Upon the occurrence of a Change in Control, Limited Stock Appreciation Rights shall automatically be granted as to any Option with respect to which Rights are not then outstanding; provided, however, that Limited Stock Appreciation Rights shall be provided at the time of grant of any Incentive Stock Option subject to exercisability upon the occurrence of a Change in Control. Limited Stock Appreciation Rights shall entitle the holder thereof, upon exercise of such rights and surrender of the related Option or any portion thereof, to receive, without payment to the Company (except for applicable withholding taxes), an amount in cash equal to the excess, if any, of the Formula Price as that term is defined in Section 10 over the exercise price of the Stock as provided in such Option; provided that in the case of the exercise of any such Limited Stock Appreciation Right or portion thereof related to an Incentive Stock Option, the Fair Market Value of the Stock at the time of such exercise shall be substituted for the Formula Price. Each such Limited Stock Appreciation Right shall be exercisable only during the period beginning on the first business day following the occurrence of such Change in Control and ending on the 60th calendar day following such date and only to the same extent the related Option is exercisable. Upon exercise of a Limited Stock Appreciation Right and surrender of the related Option, or portion thereof, such Option, to the extent surrendered, shall not thereafter be exercisable. 

(e) The restrictions applicable to Awards of Restricted Stock issued pursuant to Section 7 shall lapse upon the occurrence of a Change in Control and the Company shall issue stock certificates without a restrictive legend. Key Employees holding Restricted Stock on the date of a Change in Control may tender such Restricted Stock to the Company that shall pay the Formula Price as that term is defined in Section 10; provided, such Restricted Stock must be tendered to the Company within 60 calendar days of the Change in Control. 

(f) If a Change in Control occurs during the course of a Performance Period applicable to an Award of Performance Shares pursuant to Section 6, then the Key Employee shall be deemed to have satisfied the Performance Objectives and settlement of such Performance Shares shall be based on the Formula Price, as defined in this Section 10. 
11.BENEFICIARY 

The Beneficiary of a Key Employee shall be the Key Employee's estate, which shall be entitled to receive the Award, if any, payable under the Plan upon his or her death. A Key Employee may file with the Company a written designation of one or more persons as a Beneficiary in lieu of his or her estate, who shall be entitled to receive the Award, if any, payable under the Plan upon his or her death, subject to the enforceability of the designation under applicable law at that time. A Key Employee may from time-to-time revoke or change his or her Beneficiary designation, with or without the consent of any prior Beneficiary as required by applicable law, by filing a new designation with the Company. Subject to the foregoing, the last such designation received by the Company shall be controlling; provided, however, that no designation, or change or revocation thereof, shall be effective unless received by the Company prior to the Key Employee's death, and in no event shall it be effective as of a date prior to such receipt. If the Committee is in doubt as to the right of any person to receive such Award, the Company may retain such Award, without liability for any interest thereon, until the Committee determines the rights thereto, or the Company may pay such Award into any court of appropriate jurisdiction and such payment shall be a complete discharge of the liability of the Company therefore. 
12.ADMINISTRATION OF THE PLAN 

(a) Each member of the Committee shall be both a member of the Board, a "non-employee director" within the meaning of Rule 16b-3(b)(3)(i) under the Act or successor rule or regulation and an "outside director" within the meaning of Section 162(m) of the Code. 

(b) All decisions, determinations or actions of the Committee made or taken pursuant to grants of authority under the Plan shall be made or taken in the sole discretion of the Committee and shall be final, conclusive and binding on all persons for all purposes. 

(c) The Committee shall have full power, discretion and authority to interpret, construe and administer the Plan and any part thereof, and its interpretations and constructions thereof and actions taken thereunder shall be, except as otherwise determined by the Board, final, conclusive and binding on all persons for all purposes. 

(d) The Committee's decisions and determinations under the Plan need not be uniform and may be made selectively among Key Employees, whether or not such Key Employees are similarly situated. 

(e) The Committee may, in its sole discretion, delegate such of its powers as it deems appropriate; provided, however, that the Committee may not delegate its responsibility (i) to make Awards to executive officers of the Company; (ii) to make Awards that are intended to constitute "qualified performance-based compensation" under Section 162(m) of the Code; or (iii) to certify the satisfaction of Performance Objectives pursuant to Sections 6(d) or 9(e) in accordance with Section 162(m) of the Code. The Committee may also appoint agents to assist in the day-to-day administration of the Plan and may delegate the authority to execute documents under the Plan to one or more members of the Committee or to one or more officers of the Company. 

(f) If a Change in Control has not occurred and if the Committee determines that a Key Employee has taken action inimical to the best interests of any Participating Company, the Committee may, in its sole discretion, terminate in whole or in part such portion of any Option (including any related Right) as has not yet become exercisable at the time of termination, terminate any Performance Share Award for which the Performance Period has not been completed or terminate any Award of Restricted Stock for which the Restriction Period has not lapsed. 
13.AMENDMENT, EXTENSION OR TERMINATION 

The Board may, at any time, amend or terminate the Plan and, specifically, may make such modifications to the Plan as it deems necessary to avoid the application of Section 162(m) of the Code and the Treasury regulations issued thereunder. However, no amendment shall, without approval by a majority of the Company's stockholders, (a) alter the group of persons eligible to participate in the Plan, (b) except as provided in Section 14 increase the maximum number of shares of Stock that are available for Awards under the Plan, or (c) except for adjustments pursuant to Section 14 or as otherwise provided for in the Plan, decrease the Option price for any outstanding Option after the date the Option is granted or accept the surrender of any outstanding Option as consideration for the grant of a new Option with a lower price than the Option being surrendered. If a Change in Control has occurred, no amendment or termination shall impair the rights of any person with respect to a prior Award. 
14.ADJUSTMENTS IN EVENT OF CHANGE IN COMMON STOCK 

In the event of any recapitalization, reclassification, split-up or consolidation of shares of Stock or stock dividend, merger or consolidation of the Company or sale by the Company of all or a portion of its assets, the Committee may make such adjustments in the Stock subject to Awards, including Stock subject to purchase by an Option, or the terms, conditions or restrictions on Stock or Awards, including the price payable upon the exercise of such Option, as the Committee deems equitable. With respect to Awards intended to qualify as "performance-based compensation" under Section 162(m) of the Code, such adjustments shall be made only to the extent that the Committee determines that such adjustments may be made without a loss of deductibility for such Awards under Section 162(m) of the Code. 
15.FORFEITURE OF GAINS ON EXERCISE 

Except following a Change in Control, if the Key Employee terminates employment in breach of any covenants and conditions subsequent set forth in Section 16 and becomes employed by a competitor of the Company within one year after the date of exercise of any Option or the receipt of any Award, the Key Employee shall pay to the Company an amount equal to any gain from the exercise of the Option or the value of the Award other than Options, in each case measured by the amount reported as taxable compensation to the Key Employee by the Company for federal income tax purposes and in the case of Options that are incentive stock options, in an amount equal to the amount that would have been reported as taxable income were such Options not incentive stock options, and in each case without regard to any subsequent fluctuation in the market price of the shares of common stock of the Company. Any such amount due hereunder shall be paid by the Key Employee within thirty days of becoming employed by a competitor. By accepting an Option or other Award hereunder, the Key Employee is authorizing the Company to withhold, to the extent permitted by law, the amount owed to the Company hereunder from any amounts that the Company may owe to the Key Employee in any capacity whatsoever. 
16.CONDITIONS SUBSEQUENT 

Except after a Change in Control, the exercise of any Option or Right and the receipt of any Award shall be subject to the satisfaction of the following conditions subsequent: (i) that Key Employee refrain from engaging in any activity that in the opinion of the Committee is competitive with any activity of the Company or any Subsidiary, excluding any activity undertaken upon the written approval or request of the Company, (ii) that Key Employee refrain from otherwise acting in a manner inimical or in any way contrary to the best interests of the Company, and (iii) that the Key Employee furnish the Company such information with respect to the satisfaction of the foregoing conditions subsequent as the Committee shall reasonably request. In addition, except as may otherwise be excused by action of the Committee, the Key Employee by the exercise of the Option or the receipt of the Award agrees to remain in the employ of the Company, unless earlier terminated by the Company or by the Key Employee by reason of his or her death, disability or retirement. 
17.MISCELLANEOUS 

(a) Except as provided in Section 10, nothing in this Plan or any Award granted hereunder shall confer upon any employee any right to continue in the employ of any Participating Company or interfere in any way with the right of any Participating Company to terminate his or her employment at any time. No Award payable under the Plan shall be deemed salary or compensation for the purpose of computing benefits under any employee benefit plan or other arrangement of any Participating Company for the benefit of its employees unless the Company shall determine otherwise. No Key Employee shall have any claim to an Award until it is actually granted under the Plan. To the extent that any person acquires a right to receive payments from the Company under this Plan, such right shall be no greater than the right of an unsecured general creditor of the Company. All payments to be made hereunder shall be paid from the general funds of the Company and no special or separate fund shall be established and no segregation of assets shall be made to assure payment of such amounts except as provided in Section 7(e) with respect to Restricted Stock. 

(b) The Committee may cause to be made, as a condition precedent to the payment of any Award, or otherwise, appropriate arrangements with the Key Employee or his or her Beneficiary, for the withholding of any federal, state, local or foreign taxes. 

 

            (c) The Plan and the grant of Awards shall be subject to all applicable federal and state laws, rules, and regulations and to such approvals by any government or regulatory agency as may be required. 

(d) The terms of the Plan shall be binding upon the Company and its successors and assigns. 

(e) Captions preceding the sections hereof are inserted solely as a matter of convenience and in no way define or limit the scope or intent of any provision hereof. 

(f) To the extent Awards issued under the Plan are intended to be exempt from the application of Section 162(m) of the Code, which restricts under certain circumstances the Federal income tax deduction for compensation paid by a public company to named executives in excess of $1 million per year, the Committee may, without stockholder approval, amend the Plan retroactively or prospectively to the extent it determines necessary in order to comply with any subsequent clarification of Section 162(m) of the Code required to preserve the Company's Federal income tax deduction for compensation paid pursuant to the Plan. 
18.EFFECTIVE DATE, TERM OF PLAN AND SHAREHOLDER APPROVAL 

The effective date of the Plan is January 1, 2004. The Plan will continue in effect for existing Awards as long as any such Award is outstanding. Unless the Company determines otherwise, Sections 6 and 9 of the Plan and the definition of "Performance Goal" shall be submitted to the Company's stockholders at the first stockholder meeting that occurs in the fifth year following the year in which the Plan was last approved by stockholders (or any earlier meeting designated by the Board), in accordance with the requirements of Section 162(m) of the Code.

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