Document:

Exhibit 10.1

 

ALDERWOODS GROUP, INC.

 

EMPLOYEE STOCK PURCHASE PLAN

 

This
Employee Stock Purchase Plan (the “Plan”) offers participants in the Plan
(each, a “Participant” and collectively, the “Participants”) an employer
contribution toward the purchase of shares of common stock, par value $.01 per
share (the “Common Shares”), of Alderwoods Group, Inc. (the “Company”).

 

1.                                       PURPOSE.  This Plan is
designed to provide Eligible Employees (as defined below) of the Company and
its subsidiaries (“Subsidiaries”) with an opportunity to purchase Common Shares
of the Company through payroll deductions and thereby to better enable the
Company and its Subsidiaries to retain and attract qualified employees and to
provide additional incentives to Eligible Employees through increased stock
ownership.

 

2.                                       ADMINISTRATION.

 

(a)                                  The
Plan will be administered by the Compensation Committee of the Board of
Directors of the Company (the “Committee”). 
The Committee will have the authority to: (i) make rules and
regulations for the administration of the Plan; (ii) designate the
employees who are eligible to participate in the Plan (the “Eligible Employees”);
and (iii) interpret the provisions of the Plan.  The Committee’s interpretations and decisions
with regard to the Plan shall be final and conclusive.

 

(b)                                 The
Committee will designate the purchasing agent for Participants in the Plan who
are residents of the United States for income tax purposes (the “U.S.
Purchasing Agent”) and the purchasing agent for Participants in the Plan who are
residents of Canada for income tax purposes (the “Canadian Purchasing Agent”
and, together with the U.S. Purchasing Agent, the “Purchasing Agent”).  References elsewhere in this Plan to the
Purchasing Agent will, when the context requires, refer to the U.S. Purchasing
Agent or the Canadian Purchasing Agent, as applicable.  The Purchasing Agent will maintain records,
send statements of account to Participants, and perform other duties relating
to the Plan.  The Purchasing Agent will
purchase the Common Shares to be offered and sold under the Plan on the open
market and the Purchasing Agent, in its sole discretion, will determine the
times and the prices on each Investment Date (as defined below) at which such
purchases will be made.  The Committee
reserves the right to replace the Purchasing Agent from time to time.

 

3.                                       ERISA.  This Plan is
not subject to any provisions of the Employee Retirement Income Security Act of
1974 and is not a qualified plan under Section 401(a) or any other
applicable Section of the Internal Revenue Code of 1986, as amended.

 

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4.                                       SHARES SUBJECT TO THE PLAN. 
The shares subject to this Plan are the Common Shares.  All Common Shares purchased under, or sold
pursuant to, the Plan will be purchased or sold, as the case may be, on the
NASDAQ National Market System or, if the Common Shares are not traded on the
NASDAQ National Market System, the principal national securities exchange upon
which the Common Shares are traded or quoted. 
The total number of Common Shares authorized for purchase under this
Plan may not exceed 1,100,000, subject to adjustment in accordance with Section 20
herein.

 

5.                                       ELIGIBLE EMPLOYEES. 
The Committee has full power and authority to designate the employees
who are Eligible Employees for purposes of the Plan.  Unless and until further action is taken by
the Committee: (a) the Eligible Employees shall be the employees holding
the following positions with the Company or a Subsidiary (the “Eligible
Positions”): Vice President and any officer senior to any Vice President,
Director, Regional General Manager, Regional Sales Manager, Geographic
Controller, Market Growth Manager, Senior Manager, Manager, General Manager,
Location Manager, Sales Manager, Regional Administrator, Market Administrator
and Support Center Manager; and (b) employees of the Company or a
Subsidiary who are hired into an Eligible Position after the effective date of
the Plan will become Eligible Employees after they have been continuously
employed in such Eligible Position for three months; provided, however, that if
such employee was previously employed by the Company or a Subsidiary and was
promoted to one of the Eligible Positions, such employee shall become an
Eligible Employee immediately upon such promotion to the Eligible Position.

 

6.                                       OFFERING OF SHARES AND CHANGING PAYROLL DEDUCTION.

 

(a)                                  The
purchase of Common Shares subject to this Plan shall be available to each
Eligible Employee who properly completes an authorization form for the Plan (“Authorization
Form”).  A completed Authorization Form should
be returned to the human resources department of the Company or a Subsidiary,
as the case may be (the “Human Resources Department”).  Authorization Forms are available from the
Human Resources Department.  The
Authorization Form will authorize a regular payroll deduction from the
Eligible Employee’s compensation, and must specify the date on which such
deduction is to commence, which may not be retroactive.  Participation in the Plan is voluntary.

 

(b)                                 Subject
to the limits set forth in Section 10 below, each annualized payroll
deduction must be a minimum of 1% of the Participant’s annual base salary (or,
in the case of Sales Managers, 1% of the Participant’s commissions earned in
each pay period) and must be in multiples of 1% of such Participant’s annual
base salary or sales commissions, as the case may be.

 

(c)                                  Subject
to the limits set forth in Section 10 below, a Participant may at any time
increase or decrease the Participant’s payroll deduction, in multiples of 1%,
by filing a new Authorization Form.  The
change may not become effective sooner than the next pay period after receipt
of the Authorization Form.  A payroll
deduction may be increased only once and reduced only once during any calendar
quarter.

 

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7.                                       PARTICIPANT ACCOUNTS. 
The payroll deductions on behalf of each Participant shall be credited,
for bookkeeping purposes, to the Participant’s payroll deduction account (the “Payroll
Deduction Account”) as of the last day of such payroll period.  No interest shall be credited to such Payroll
Deduction Account.  The funds credited to
the Payroll Deduction Accounts shall be segregated from, and not commingled
with, other funds of the Company or any Subsidiary, as the case may be.  Common Shares purchased under the Plan for
each Participant will be credited to a Plan share account for each Participant
(the “Plan Share Account”).

 

8.                                       PURCHASE OF SHARES.  Payroll deductions and the Company Contributions
(as defined in Section 14 below) will be retained in the Payroll Deduction
Accounts until the end of each calendar month. 
The Company (or the applicable Subsidiary) will promptly forward all
funds in the Payroll Deduction Accounts to the Purchasing Agent upon the
conclusion of each month, which the Purchasing Agent will invest in Common
Shares on each Investment Date.  No
interest will be paid on the funds in a Participant’s Payroll Deduction Account
pending their investment.

 

9.                                       INVESTMENT DATE.  With
respect to all payments made by the Participant under the Plan and except as
otherwise determined by the Committee, “Investment Date” means the first day
following the last day of each month on which it is administratively feasible
to invest in Common Shares.

 

10.                                 LIMITATIONS ON THE PURCHASE OF SHARES.  Each Participant is limited in the amount of
payroll deductions which may be made and credited to the Plan in any year.  Until further action by the Committee, all
payroll deductions made and credited to the Plan from any Participant may not
exceed five percent (5%) of the Participant’s annual base salary (or, in the
case of Sales Managers, 5% of the Participant’s commissions earned in each pay
period).

 

11.                                 REPORTS TO PARTICIPANTS.

 

(a)                                  Each
Participant in the Plan will receive a printed quarterly statement of
account.  These statements are a record
of the date and cost of each purchase made pursuant to the Plan and should be
retained for income tax purposes.  In
addition, each Participant will receive, from time to time, copies of all
reports, proxy statements, and other communications distributed to holders of
the Common Shares generally.

 

(b)                                 Prior
to making any purchases under the Plan, the Purchasing Agent will communicate
to the Company the total number of shares to be purchased on behalf of the
Participants, including Participants who are directors or officers of the
Company (the “Section 16 Insiders”) within the meaning of Section 16
of the Securities Exchange Act of 1934, as amended (the “Exchange Act”).  The Purchasing Agent will, with respect to
purchases made hereunder on behalf of any Section 16 Insider, send an
electronic confirmation to each Section 16 Insider, stating the number of
Common Shares purchased and the purchase price therefor before the end of the
business day on which such purchase occurred.

 

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12.                                 TERMINATION OF PARTICIPATION.  A Participant may terminate his or her
participation in the Plan by giving thirty days’ written notice to the Human
Resources Department.  Upon such notice
to terminate participation in the Plan, the Eligible Employee will cease to be
a Participant and the balance of the uninvested funds in the Participant’s
Payroll Deduction Account, if any, shall be remitted to the Participant.

 

13.                                 PURCHASE PRICE.  The
purchase price to the Participant of Common Shares purchased will be 100% of
the weighted average price paid by the Purchasing Agent in all such purchases
made on the applicable Investment Date. 
No commission or service charge is paid by a Participant in connection
with purchases under the Plan.

 

14.                                 COMPANY CONTRIBUTION. 
Subject to Section 18 below, immediately prior to forwarding funds
in each Participant’s Payroll Deduction Account pursuant to Section 8, the
Company will make a cash contribution as additional compensation (the “Company
Contribution”) to each Participant’s Payroll Deduction Account equal to 50% of
the amount of the Participant’s payroll deductions for that month, provided
that in no event will there be a Company Contribution on any payroll deductions
in excess of the permitted amounts set forth in Section 10.

 

15.                                 TERMINATION OF EMPLOYMENT. 
If a Participant’s employment with the Company or a Subsidiary is
terminated for any reason, participation in the Plan shall terminate on the
date that notice of termination is provided (or, in the event of the
Participant’s death or retirement, on the date of death or retirement, as the
case may be) and the balance of the uninvested funds in the Participant’s
Payroll Deduction Account, if any, shall be remitted to the Participant (or, in
the event of the Participant’s death, to the Participant’s estate).  As soon as is administratively feasible after
the notice of termination has been given (or after the date of death or
retirement), the Purchasing Agent will convert the Participant’s Plan Share
Account to a customer account with the Purchasing Agent, if one is available,
or will transfer the Common Shares in the Participant’s Plan Share Account to
the Participant’s personal brokerage account. 
In connection with the termination of a Participant’s account, if a
Participant (or the Participant’s estate, guardian or beneficiary, as the case
may be) requests in writing, the Purchasing Agent will sell full shares which
the Participant requests the Purchasing Agent to sell and will deliver to the
Participant (or the Participant’s estate, guardian or beneficiary, as the case
may be) the proceeds, less any brokerage fee or commission, any applicable
taxes, and any other administrative costs of sale.  A cash payment will be made in lieu of
issuance of any fraction of a Common Share held in the Participant’s Plan Share
Account.

 

16.                                 TRANSFERABILITY OF PLAN INTEREST, RIGHTS AND COMMON SHARES.  The right to purchase Common Shares under
this Plan may not be transferred by a Participant or an Eligible Employee, and
may be exercised only by the Participant or an Eligible Employee or by his or
her legal representative while an Eligible Employee of
the Company or a Subsidiary.  Common
Shares in the Plan Share Account of a Participant may not be pledged or
assigned, and any such purported pledge or assignment shall be void.  A Participant who wishes to pledge or assign
any such Common Shares in the

 

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Participant’s
Plan Share Account must first withdraw such Common Shares from the Plan Share
Account.

 

17.                                 RIGHTS OF SHAREHOLDER.

 

(a)                                  Common
Shares in a Participant’s Plan Share Account will be held in the name of the
Participant or in the Plan’s name as “nominee”. 
The number of Common Shares in a Participant’s Plan Share Account under
the Plan will be shown on the Participant’s statement of account.

 

(b)                                 If
and when any cash dividend is payable with respect to Common Shares in the Participant’s
Plan Share Account, including a pro rata dividend on fractional Common Shares,
such dividend will be re-invested in Common Shares to be credited to the
Participant’s Plan Share Account.

 

(c)                                  Any
distribution of Common Shares on account of a dividend payable in Common Shares
or a split of Common Shares attributable to Common Shares in a Participant’s
Plan Share Account will be added to such account.

 

(d)                                 For
each meeting of shareholders of the Company, each Participant will receive
proxy materials of the Company that will enable the Participant to vote the
Common Shares owned by the Participant in the Participant’s Plan Share Account.

 

18.                                 WITHDRAWAL OR SALE OF SHARES FROM PLAN ACCOUNT.  A Participant may withdraw Common Shares from
the Participant’s Plan Share Account at any time.  However, if any Common Shares are withdrawn
from the Plan Share Account, the Participant will not receive a Company
Contribution with respect to any payroll deductions made and credited to such
Participant’s Payroll Deduction Account for a period of twelve months after the
date of such withdrawal, unless otherwise determined by the Committee.  Common Shares in a Participant’s Plan Share
Account may be withdrawn by a Participant by notifying the Human Resources
Department in writing, specifying the number of
shares to be withdrawn.  Certificates for
whole Common Shares so withdrawn will be issued to and registered in the name
of the Participant, unless the Participant, by written notice to the Purchasing
Agent, requests that the Purchasing Agent sell such shares for the Participant’s
account.  If a Participant requests such
sale, the sale will be made by the Purchasing Agent for the Participant’s
account within a reasonable time after the Participant’s withdrawal is processed.  The Participant will be entitled to receive
the proceeds from any withdrawal or sale, less any brokerage fees or
commissions, any applicable taxes, and any other administrative costs of sale,
which fees and costs will either be deducted from the withdrawal or sale
proceeds or invoiced to the Participant. 
A cash payment will be made in lieu of issuance of any fraction of a
Common Share held in the Participant’s Plan Share Account.

 

19.                                 TAX CONSEQUENCES.  For
a participant who is a resident of the United States for income tax purposes,
the amounts used to purchase Common Shares under this Plan will be taxable to
the Participant as ordinary compensation. 
The amount of the Company 

 

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Contribution
attributable to purchases made under the Plan will also be treated for United
Stated federal income tax purposes as ordinary compensation to the
Participant.  In addition, commission and
brokerage fees paid by the Company in connection with purchases of Common Shares
under the Plan will be taxable income to the Participants in an amount equal to
each Participant’s pro rata share of such commission and fees and will be
reported as ordinary income for the calendar year by the Company or the
applicable Subsidiary with respect to each Participant’s Plan Share
Account.  Appropriate taxes will be
withheld from compensation otherwise payable to employees participating in the
Plan.

 

For a
participant who is a resident of Canada for income tax purposes, the portion of
the Participant’s annual base salary that the Participant designates in the
Authorization Form referred to in Section 6 will be subject to
regular income tax and other source deductions. 
The amount of the Company Contributions will be treated as a taxable
benefit from employment and will be subject to regular income tax and other
source deductions.  In addition,
commission and brokerage fees paid by the Company in connection with purchases
of Common Shares under the Plan will be taxable income to the Participants in
an amount equal to each Participant’s pro rata share of such commission and
fees and will be reported as ordinary income for the calendar year by the
Company or the applicable Subsidiary with respect to each Participant’s Plan
Share Account.  Appropriate taxes will be
withheld from compensation otherwise payable to employees participating in the
Plan.

 

Participants
are advised to consult their own tax advisors to determine the particular
federal, state, local, and foreign income tax
consequences that may result from their participation in the Plan and the
subsequent sale or other disposition of Common Shares under the Plan.  The income tax consequences vary by
jurisdiction.

 

20.                                 ADJUSTMENTS UPON CHANGE IN SHARES.  In the event of any change in the Common
Shares subject to the Plan by reason of a merger, consolidation,
reorganization, or other corporate transactions or of a stock dividend, stock
split, or other capital adjustment, the total number and class of shares that
may be offered and sold under this Plan shall be appropriately adjusted as
deemed equitable by the Board of Directors of the Company (the “Board”).  In the
event of any other change affecting the Common Shares, such adjustment shall be
made as may be deemed equitable by the Board to give proper effect to such
event.

 

21.                                 TERMINATION OR AMENDMENT OF THE PLAN.

 

(a)                                  The
Plan and all rights of Eligible Employees and Participants shall terminate:

 

(i)                                     on
the day that the Participants become entitled to purchase a number of shares
equal to or greater than the number of shares remaining available for purchase
under the Plan, unless extended by the Board; or

 

(ii)                                  at any time, at the discretion of the Board.

 

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(b)                                 If
on the day the Plan terminates, Participants are entitled to purchase a number
of Common Shares greater than the number of shares remaining available for
purchase under the Plan, the available Common Shares shall be allocated by the
Board (or the Committee) among such Participants in such manner as it deems
fair.  Upon termination of the Plan, all
cash amounts in the Payroll Deduction Accounts of the Participants shall be
carried forward into the Participant’s payroll deduction account under a
successor plan, if any, or promptly refunded.

 

(c)                                  Upon
the termination of the Plan, certificates for whole Common Shares in a
Participant’s Plan Share Account under the Plan will be issued, and a cash
payment will be made in lieu of issuance of any fraction of a Common Share.

 

(d)                                 The
Board may amend, suspend or modify the Plan at any time; provided, however,
that any amendment that must be approved by the shareholders of the Company in
order to comply with applicable law or the rules of the NASDAQ National
Market System or, if the Common Shares are not traded on the NASDAQ National
Market System, the principal national securities exchange upon which the Common
Shares are traded or quoted, shall not be effective unless and until such
approval has been obtained.  Notice of
any such amendment, suspension or modification will be sent to all
Participants.  Any such amendments,
suspensions or modifications shall conclusively be deemed to be accepted by the
Participant, unless prior to the effective date of any such amendment as set
forth in the notice, the Human Resources Department receives written notice of
termination of the Participant’s account.

 

22.                                 COMPLIANCE WITH SECURITIES LAWS.  No Common Shares may be purchased under this
Plan until the Company has taken all actions then required to comply with the
Securities Act of 1933, as amended, the Exchange Act, any applicable state or
Canadian provincial securities laws, and the rules of any exchange or
association on which the Common Shares may be listed.

 

23.                                 EFFECTIVE DATE.  The
Company’s Board of Directors adopted this Employee Stock Purchase Plan on March 15,
2005, subject to shareholder approval. 
The effective date of this Plan is April 28, 2005, the date of such
shareholder approval.

 

24.                                 ADDITIONAL INFORMATION. 
For questions regarding enrollment in the Plan and changes in payroll
deductions please contact the Human Resources Department at
1-877-707-7100.  For
all other questions regarding the Plan, please contact the Purchasing Agent at
the appropriate address provided by the Purchasing Agent.

 

7Exhibit 10.2

 

ALDERWOODS GROUP, INC.

 

2005 EQUITY INCENTIVE PLAN

 

1.                                       Purpose.  The purpose
of the 2005 Equity Incentive Plan is to attract and retain officers, Directors
and other key employees of Alderwoods Group, Inc., a Delaware corporation,
and its Subsidiaries and to provide to such persons incentives and rewards for
superior performance.

 

2.                                       Definitions.  As used
in this Plan,

 

(a)                                  “Board”
means the Board of Directors of the Company and, to the extent of any
delegation by the Board to a committee (or subcommittee thereof) pursuant to Section 12
of this Plan, such committee (or subcommittee).

 

(b)                                 “Business
Combination” will have the meaning provided in Section 8 of this Plan.

 

(c)                                  “Canadian
Tax Act” means the Income Tax Act (Canada), as amended from time to time.

 

(d)                                 “Change
in Control” will have the meaning provided in Section 8 of this Plan.

 

(e)                                  “Code”
means the Internal Revenue Code of 1986, as amended from time to time.

 

(f)                                    “Committee”
means the Compensation Committee of the Board.

 

(g)                                 “Common
Shares” means the shares of common stock, par value $0.01 per share, of the
Company or any security into which such Common Shares may be changed by reason
of any transaction or event of the type referred to in Section 7 of this
Plan.

 

(h)                                 “Company”
means Alderwoods Group, Inc., a Delaware corporation.

 

(i)                                     “Covered
Employee” means a Participant who is, or is determined by the Committee to be
likely to become, a “covered employee” within the meaning of Section 162(m)
of the Code (or any successor provision).

 

(j)                                     “Date
of Grant” means the date specified by the Committee on which a grant of Option
Rights or Restricted Stock Units will become effective (which date will not be
earlier than the date on which the Committee takes action with respect
thereto).

 

(k)                                  “Director”
means a member of the Board of Directors of the Company.

 

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(l)                                     “Evidence
of Award” means an agreement, certificate, resolution or other type or form of
writing or other evidence approved by the Committee that sets forth the terms
and conditions of the awards granted.  An
Evidence of Award may be in an electronic medium, may be limited to notation on
the books and records of the Company and, with the approval of the Committee,
need not be signed by a representative of the Company or a Participant.

 

(m)                               “Exchange
Act” means the Securities Exchange Act of 1934, as amended, and the rules and
regulations thereunder, as such law, rules and regulations may be amended
from time to time.

 

(n)                                 “Incumbent
Board” will have the meaning provided in Section 8 of this Plan.

 

(o)                                 “Management
Objectives” means, when so determined by the Committee, the measurable
performance objective or objectives established pursuant to this Plan for
Participants who have received grants of Option Rights, Restricted Stock Units
and dividend credits pursuant to this Plan. 
Management Objectives may be described in terms of Company-wide
objectives or objectives that are related to the performance of the individual
Participant or of the Subsidiary, division, department, region or function
within the Company or Subsidiary in which the Participant is employed.  The Management Objectives may be made
relative to the performance of other companies. 
The Management Objectives applicable to any award to a Covered Employee
will be based on specified levels of or growth in one or more of the following
criteria:

 

1.                                       revenues;

2.                                       earnings before interest and taxes (EBIT);

3.                                       earnings before taxes;

4.                                       net income;

5.                                       operating margins;

6.                                       operating income;

7.                                       share price;

8.                                       debt, net debt and/or debt reduction;

9.                                       EBITDA;

10.                                 EBITDA
to revenue ratio;

11.                                 EBITDA
to debt ratio;

12.                                 EBITDA
to net debt ratio;

13.                                 cash flow and/or net cash flow;

14.                                 earnings per share;

15.                                 debt to capital ratio;

16.                                 return on total capital;

17.                                 return on invested capital;

18.                                 return on equity;

19.                                 return on assets;

20.                                 total return to shareholders;

21.                                 receivables;

22.                                 inventory;

 

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23.                                 number of funeral services performed; and

24.                                 number of locations.

 

If the
Committee determines that a change in the business, operations, corporate
structure or capital structure of the Company, or the manner in which it
conducts its business, or other events or circumstances render the Management
Objectives unsuitable, the Committee may in its discretion modify such
Management Objectives or the related minimum acceptable level of achievement,
in whole or in part, as the Committee deems appropriate and equitable, except
in the case of a Covered Employee where such action would result in the loss of
the otherwise available exemption of the award under Section 162(m) of the
Code.  In such case, the Committee will
not make any modification of the Management Objectives or minimum acceptable
level of achievement with respect to such Covered Employee.

 

(p)                                 “Market
Value per Share” means, as of any particular date, (i) the closing sale
price per Common Share as reported on the NASDAQ National Market System or such
other principal exchange on which Common Shares are then trading or, if there
are no sales on such day, on the next preceding trading day during which a sale
occurred, or (ii) if the Common Shares are not then listed on any stock
exchange, as otherwise determined by the Committee.

 

(q)                                 “Non-Employee
Director” means a Director who is not an employee of the Company or any
Subsidiary.

 

(r)                                    “Optionee”
means the optionee named in an Evidence of Award evidencing an outstanding
Option Right.

 

(s)                                  “Option
Price” means the purchase price payable on exercise of an Option Right.

 

(t)                                    “Option
Right” means the right to purchase Common Shares upon exercise of an option
granted pursuant to Section 4 of this Plan.

 

(u)                                 “Participant”
means a person who is selected by the Committee to receive benefits under this
Plan and who is at the time an employee of the Company or a Subsidiary or a
Non-Employee Director.

 

(v)                                 “Person”
will have the meaning provided in Section 8 of this Plan.

 

(w)                               “Plan”
means this 2005 Equity Incentive Plan.

 

(x)                                   “Restricted
Stock Unit” means an award made pursuant to Section 5 of this Plan of the
right to receive Common Shares at the end of a specified period.

 

(y)                                 “Restriction
Period” means the period of time during which Restricted Stock Units are
subject to deferral, as provided in Section 5 of this Plan.

 

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(z)                                   “Spread”
means the excess of (i) the Market Value per Share on the date when an
Option Right is exchanged for a Tandem Appreciation Right over (ii) the
Option Price provided for in the exchanged Option Right.

 

(aa)                            “Subsidiary”
means a corporation, company or other entity (i) more than 50 percent of
whose outstanding shares or securities (representing the right to vote for the
election of directors or other managing authority), which securities entitled
the holder to elect a majority of the directors of such corporation, company or
entity, are, or (ii) which does not have outstanding shares or securities
(as may be the case in a partnership, joint venture or unincorporated
association), but more than 50 percent of whose ownership interest representing
the right generally to make decisions for such other entity is, now or
hereafter, owned or controlled, directly or indirectly, by the Company.

 

(bb)                          “Tandem
Appreciation Right” means a right that entitles a Participant to a number of
Common Shares equal in value to the Spread.

 

(cc)                            “Voting
Stock” means, at any time, securities entitled to vote generally in the
election of Directors.

 

3.                                       Shares Available Under the Plan.

 

(a)                                  Subject
to adjustment as provided in Section 3(b) and Section 7 of this
Plan, the number of Common Shares that may be issued or transferred upon the
exercise of Option Rights, as Restricted Stock Units at the end of the
Restriction Period or in payment of dividend equivalents paid with respect to
awards made under the Plan will not exceed in the aggregate 1,800,000 Common
Shares, plus any shares described in Section 3(b).  Such shares may be shares of original
issuance or treasury shares or a combination of the foregoing.

 

(b)                                 The
number of shares available in Section 3(a) above will be adjusted to
account for shares relating to awards that expire or are forfeited or are
transferred, surrendered or relinquished upon the payment of any Option Price
by the transfer to the Company of Common Shares or upon satisfaction of any
withholding amount.  Upon payment in cash
of the benefit provided by any award granted under this Plan, any shares that
were covered by that award will again be available for issue or transfer
hereunder.

 

(c)                                  Notwithstanding
anything in this Section 3, or elsewhere in this Plan, to the contrary,
and subject to adjustment as provided in Section 7 of this Plan, no
Participant will be granted Option Rights or Restricted Stock Units that
specify Management Objectives for more than 500,000 Common Shares during any
calendar year.

 

4.                                       Option Rights.  The
Committee may, from time to time and upon such terms and conditions as it may
determine, authorize the granting to Participants of options to purchase Common
Shares.  Each such grant will be subject
to all of the requirements 

 

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contained in, and may contain
such provisions as are authorized by, the following provisions:

 

(a)                                  Each
grant will specify the number of Common Shares to which it pertains subject to
the limitations set forth in Section 3 of this Plan.

 

(b)                                 Each
grant will specify an Option Price per share, which may not be less than the
Market Value per Share on the Date of Grant.

 

(c)                                  Each
grant will specify whether the Option Price will be payable (i) in cash or
by check acceptable to the Company or by wire transfer of immediately available
funds, (ii) by the actual or constructive transfer to the Company of
Common Shares owned by the Optionee for at least six months (or other
consideration authorized pursuant to Section 4(d)) having a value at the
time of exercise equal to the total Option Price, or (iii) by a
combination of such methods of payment. 
Notwithstanding the foregoing, the grant in respect of Participants who
are residents of Canada for purposes of the Canadian Tax Act will specify that
the Option Price will be payable in cash or check acceptable to the Company.

 

(d)                                 To
the extent permitted by law, any grant to a Participant may provide for
deferred payment of the Option Price from the proceeds of sale through a bank
or broker (including a short sale by a broker prior to issuance of the Common
Shares) on a date satisfactory to the Company of some or all of the shares to
which such exercise relates.

 

(e)                                  Successive
grants may be made to the same Participant whether or not any Option Rights
previously granted to such Participant remain unexercised.

 

(f)                                    Each
grant will specify when the Option Rights or installments thereof will become
exercisable; provided, however, that Option Rights may not become exercisable
by the passage of time sooner than ratably over three years and the grant may
provide for the earlier exercise of such Option Rights in the event of a Change
in Control.

 

(g)                                 Any
grant of Option Rights may specify Management Objectives that must be achieved
as a condition to the exercise of such rights. 
If the grant of Option Rights provides that Management Objectives must
be achieved to result in the exercisability (or earlier exercisability) of the
Option Rights, the Option Rights may not become exercisable sooner than one
year from the date of grant.

 

(h)                                 Any
grant of Option Rights may provide that (i) the Optionee, at any time
during the term of the Option Right, may elect immediately prior to the
exercise of an Option Right and (ii) the Committee, at the time
immediately prior to the exercise by an Optionee of an Option Right, may
require that the Optionee so elect, to exchange an Option Right for a Tandem
Appreciation Right.  Such an exchange will
require an immediate exercise of the Tandem Appreciation Right and will cause
the immediate termination of the related Option Right.  For greater 

 

5

 

certainty,
an exchange of an Option Right for a Tandem Appreciation Right may only be made
when the relevant Option Right is otherwise exercisable.

 

(i)                                     Option
Rights granted under this Plan will not be “incentive stock options” under Section 422
of the Code or any successor provision.

 

(j)                                     The
Committee may at the Date of Grant of any Option Rights, provide (other than
with respect to a grant to a Participant who is a resident of Canada for
purposes of the Canadian Tax Act) for the payment of dividend equivalents to
the Optionee on either a current or deferred or contingent basis, either in
cash or in additional Common Shares.

 

(k)                                  No
Option Right will be exercisable more than 10 years from the Date of Grant.

 

(l)                                     Each
grant of Option Rights will be evidenced by an Evidence of Award.  Each Evidence of Award shall be subject to
the Plan and shall contain such terms and provisions, consistent with this
Plan, as the Committee may approve.

 

5.                                       Restricted Stock Units. 
The Committee may also authorize the granting or sale of Restricted
Stock Units to Participants.  Each such
grant will be subject to all of the requirements contained in, and may contain
such provisions as are authorized by, the following provisions:

 

(a)                                  Each
such grant or sale will constitute the agreement by the Company to deliver
Common Shares to the Participant in the future in consideration of the
performance of services, but subject to the fulfillment of such conditions
(which may include the achievement of Management Objectives) during the
Restriction Period as the Committee may specify, consistent with Section 5(c).

 

(b)                                 Each
such grant or sale may be made without additional consideration or in
consideration of a payment by such Participant that is less than the Market
Value per Share at the Date of Grant.

 

(c)                                  Each
such grant or sale will be subject to a Restriction Period of not less than
three years, as determined by the Committee at the Date of Grant; provided,
however, that if the grant of Restricted Stock Units provides that Management
Objectives must be achieved to result in a lapse of the Restriction Period (or
the earlier lapse of the Restriction Period), the restrictions may not lapse
sooner than one year from the date of grant. 
Notwithstanding the foregoing, any grant may provide for the earlier
lapse or other modification of such Restriction Period in the event of a Change
in Control.

 

(d)                                 During
the Restriction Period, the Participant will have no right to transfer any
rights under his or her award and will have no rights of ownership in the
Restricted Stock Units and will have no right to vote the shares underlying the
Restricted Stock Units, but the Committee may (other than with respect to a
grant to a Participant who is a resident of Canada for purposes of the Canadian
Tax Act) at the Date of Grant authorize the payment of dividend equivalents on
such 

 

6

 

Restricted
Stock Units on either a current or deferred or contingent basis, either in cash
or in additional Common Shares.

 

(e)                                  Each
grant or sale of Restricted Stock Units will be evidenced by an Evidence of
Award.  Each Evidence of Award shall be
subject to the Plan and shall contain such terms and provisions, consistent
with this Plan, as the Committee may approve.

 

6.                                       Transferability.

 

(a)                                  Except
as otherwise determined by the Committee, no Option Right, Tandem Appreciation
Right or Restricted Stock Unit granted under the Plan will be transferable by a
Participant other than by will or the laws of descent and distribution.  Except as otherwise determined by the
Committee, Option Rights will be exercisable during the Optionee’s lifetime
only by him or her or by his or her guardian or legal representative.

 

(b)                                 The
Committee may specify at the Date of Grant that part or all of the Common
Shares that are to be issued or transferred by the Company upon the exercise of
Option Rights or Tandem Appreciation Rights or upon the termination of the
Restriction Period applicable to Restricted Stock Units will be subject to
further restrictions on transfer.

 

7.                                       Adjustments.  The
Board may make or provide for such adjustments in the numbers of Common Shares
covered by outstanding Option Rights and Restricted Stock Units granted
hereunder, in the Option Price, and in the kind of shares covered thereby, as
the Board, in its sole discretion, exercised in good faith, may determine is
equitably required to prevent dilution or enlargement of the rights of
Participants or Optionees that otherwise would result from (a) any stock
dividend, stock split, combination of shares, recapitalization or other change
in the capital structure of the Company, or (b) any merger, consolidation,
spin-off, split-off, spin-out, split-up, reorganization, partial or complete
liquidation or other distribution of assets, issuance of rights or warrants to
purchase securities, or (c) any other corporate transaction or event
having an effect similar to any of the foregoing.  Moreover, in the event of any such
transaction or event, the Board may, in its discretion, make such adjustments
in outstanding awards under this Plan as it, in good faith, may determine to be
equitable in the circumstances, including, without limitation, the revision,
cancellation or termination of any outstanding awards, or the change,
conversion or exchange of Common Shares under outstanding Option Rights into or
for securities or property of another corporation.  The Board may also make or provide for such
adjustments in the numbers of shares specified in Section 3 of this Plan
as the Board in its sole discretion, exercised in good faith, may determine is
appropriate to reflect any transaction or event described in this Section 7.

 

8.                                       Change in Control. 
For purposes of this Plan, a “Change in Control” will mean, with respect
to a Participant, a change in control as defined in any employment, severance
or other agreement between the Company or any Subsidiary and the Participant,
or if there 

 

7

 

is no such agreement in effect
that contains a definition of change in control, the occurrence of one or more
of the following events:

 

(a)                                  the
acquisition by any individual, entity or group (a “Person”) of beneficial
ownership of 30% or more of the combined voting power of the then outstanding
Voting Stock of the Company; provided, however, that the following acquisitions
will not constitute a Change in Control: (1) any issuance of Voting Stock
of the Company directly from the Company that is approved by the Incumbent
Board (as defined below), (2) any acquisition by the Company of Voting
Stock of the Company, (3) any acquisition of Voting Stock of the Company
by any employee benefit plan (or related trust) sponsored or maintained by the
Company or any Subsidiary, or (4) any acquisition of Voting Stock of the
Company by any Person pursuant to a Business Combination (as defined below)
that would not constitute a Change in Control;

 

(b)                                 the
consummation of a reorganization, amalgamation, merger or consolidation, a sale
or other disposition of all or substantially all of the assets of the Company,
or other transaction (each, a “Business Combination”) in which all or
substantially all of the individuals and entities who were the beneficial
owners of Voting Stock of the Company immediately prior to such Business
Combination beneficially own, directly or indirectly, immediately following
such Business Combination less than 40% of the combined voting power of the
then outstanding shares of Voting Stock of the entity resulting from such
Business Combination;

 

(c)                                  individuals
who, as of the date on which this Plan is first approved by the shareholders of
the Company, constitute the Board of Directors of the Company (the “Incumbent
Board”) cease for any reason to constitute at least a majority of the Board;
provided, however, that any individual becoming a Director subsequent to such
date whose election, or nomination for election by the Company’s shareholders,
was approved by a vote of at least two-thirds of the Directors then comprising
the Incumbent Board (either by a specific vote or by approval of the proxy
statement of the Company in which such person is named as a nominee for
Director, without objection to such nomination) will be deemed to have been a
member of the Incumbent Board, but excluding, for this purpose, any such
individual whose initial assumption of office occurs as a result of an actual
or threatened election contest with respect to the election or removal of
Directors or other actual or threatened solicitation of proxies or consents by
or on behalf of a Person other than the Board; or

 

(d)                                 the approval by the shareholders of the Company of a
complete liquidation or dissolution of the Company, except pursuant to a
Business Combination that would not constitute a Change in Control.

 

9.                                       Fractional Shares. 
The Company will not be required to issue any fractional Common Shares
pursuant to this Plan.  The Committee may
provide for the elimination of fractions or for the settlement of fractions in
cash.

 

8

 

10.                                 Withholding Taxes.  To
the extent that the Company or a Subsidiary is required to withhold federal,
state, local or foreign taxes in connection with any payment made or benefit
realized by a Participant or other person under this Plan, and the amounts
available to the Company or a Subsidiary for such withholding are insufficient,
it will be a condition to the receipt of such payment or the realization of
such benefit that the Participant or such other person make arrangements
satisfactory to the Company or a Subsidiary for payment of the balance of such
taxes required to be withheld, which arrangements may include (if so determined
by the Committee in its sole discretion) relinquishment of a portion of such
benefit.  The Company or a Subsidiary and
a Participant or such other person may also make similar arrangements with
respect to the payment of any taxes with respect to which withholding is not
required.  In no event, however, shall
the Company or a Subsidiary accept Common Stock for the payment of taxes in
excess of the required tax withholding rate, except that, in the discretion of
the Committee, a Participant or such other person may surrender Common Stock
owned for more than six months to satisfy any tax obligations resulting from
any such transaction.

 

11.                                 Foreign Employees.  In
order to facilitate the making of any grant or combination of grants under this
Plan, the Committee may provide for such special terms for awards to
Participants who are foreign nationals or who are employed by the Company or
any Subsidiary outside of the United States of America or Canada as the Committee
may consider necessary or appropriate to accommodate differences in local law,
tax policy or custom.  Moreover, the
Committee may approve such supplements to or amendments, restatements or
alternative versions of this Plan as it may consider necessary or appropriate
for such purposes, without thereby affecting the terms of this Plan as in
effect for any other purpose, and the Secretary or other appropriate officer of
the Company may certify any such document as having been approved and adopted
in the same manner as this Plan.  No such
special terms, supplements, amendments or restatements, however, will include
any provisions that are inconsistent with the terms of this Plan as then in
effect unless this Plan could have been amended to eliminate such inconsistency
without further approval by the shareholders of the Company.

 

12.                                 Administration of the Plan.

 

(a)                                  This
Plan will be administered by the Committee, which may from time to time
delegate all or any part of its authority under this Plan to a subcommittee
consisting of not less than two Non-Employee Directors appointed by the
Committee.  A majority of the Committee
(or subcommittee) will constitute a quorum, and the action of the members of
the Committee (or subcommittee) present at any meeting at which a quorum is
present, or acts unanimously approved in writing, will be the acts of the
Committee (or subcommittee).  To the
extent of any such delegation, references in this Plan to the Committee will be
deemed to be references to any such subcommittee.

 

(b)                                 The
interpretation and construction by the Committee of any provision of this Plan
or of any agreement, notification or document evidencing the grant of Option
Rights or Restricted Stock Units and any determination by the Committee
pursuant to any provision of this Plan or of any such agreement, notification
or 

 

9

 

document
will be final and conclusive.  No member
of the Committee will be liable for any such action or determination made in
good faith.

 

(c)                                  The
Committee may delegate to one or more of its members or to one or more officers
of the Company, or to one or more agents or advisors, such administrative
duties or powers as it may deem advisable, and the Committee, or any person to
whom duties or powers have been delegated as aforesaid, may employ one or more
persons to render advice with respect to any responsibility the Committee or
such person may have under the Plan.  The
Committee may, by resolution, authorize one or more officers of the Company to
do one or both of the following on the same basis as the Committee: (i) designate
employees to be recipients of awards under this Plan; and (ii) determine
the size of any such awards; provided, however, that (A) the Committee
shall not delegate such responsibilities to any such officer for awards granted
to an employee who is an officer, Director, or more than 10% beneficial owner
of any class of the Company’s equity securities that is registered pursuant to Section 12
of the Exchange Act, as determined by the Committee in accordance with Section 16
of the Exchange Act; (B) the resolution providing for such authorization
sets forth the total number of Common Shares such officer(s) may grant; and (C) the
officer(s) shall report periodically to the Committee regarding the nature and
scope of the awards granted pursuant to the authority delegated.

 

13.                                 Amendments, Etc.

 

(a)                                  The
Board may at any time and from time to time amend the Plan in whole or in part;
provided, however, that any amendment which must be approved by the
shareholders of the Company in order to comply with applicable law or the rules of
the NASDAQ National Market System or, if the Common Shares are not traded under
the NASDAQ National Market System, the principal national securities exchange
upon which the Common Shares are traded or quoted, will not be effective unless
and until such approval has been obtained.

 

(b)                                 The
Board or the Committee will not, without the further approval of the
shareholders of the Company, authorize the amendment of any outstanding Option
Right to reduce the Option Price. 
Furthermore, no Option Right will be cancelled and replaced with awards
having a lower Option Price without further approval of the shareholders of the
Company.  This Section 13(b) is
intended to prohibit the repricing of “underwater” Option Rights and will not
be construed to prohibit the adjustments provided for in Section 7 of this
Plan.

 

(c)                                  The
Committee may condition the grant of any award authorized under this Plan on
the surrender or deferral by the Participant of his or her right to receive a
cash bonus or other compensation otherwise payable by the Company or a
Subsidiary to the Participant for any future period.

 

(d)                                 To
the extent permitted under Section 409A of the Code, the Committee may, in
its sole discretion, (i) accelerate the time at which an Option Right not 

 

10

 

immediately exercisable
in full may be exercised or when the Restriction Period applicable to
Restricted Stock Units will end, (ii) accelerate the time when any
transfer restriction imposed pursuant to Section 6(b) of this Plan
will terminate, or (iii) waive any other limitation or requirement under
any award, in the case of (A) termination of the Participant’s employment
by reason of the Participant’s death or disability, (B) termination of the
Participant’s employment pursuant to an agreement between the Participant and
the Company or a Subsidiary, or (C) an unforeseeable emergency or other
special circumstances.

 

(e)                                  This
Plan will not confer upon any Participant any right with respect to continuance
of employment or other service with the Company or any Subsidiary, nor will it
interfere in any way with any right the Company or any Subsidiary would
otherwise have to terminate such Participant’s employment or other service at
any time.

 

(f)                                    The
Committee may amend the terms of any award theretofore granted under this Plan
prospectively or retroactively, but subject to Section 7 above, no such
amendment shall impair the rights of any Participant without his or her
consent.  The Board may, in its
discretion, terminate this Plan at any time. 
Termination of this Plan will not affect the rights of Participants or
their successors under any awards outstanding hereunder and not exercised in
full on the date of termination.

 

14.                                 Compliance with Section 409A of the Code.  To the extent applicable, it is intended that
this Plan and any grants made hereunder comply with the provisions of Section 409A
of the Code.  The Plan and any grants
made hereunder shall be administrated in a manner consistent with this intent,
and any provision that would cause the Plan or any grant made hereunder to fail
to satisfy Section 409A of the Code shall have no force and effect until
amended to comply with Section 409A of the Code (which amendment may be
retroactive to the extent permitted by Section 409A of the Code and may be
made by the Company without the consent of Participants).  Any reference in this Plan to Section 409A
of the Code will also include any proposed, temporary or final regulations, or
any other guidance, promulgated with respect to such Section by the U.S.
Department of the Treasury or the Internal Revenue Service.

 

15.                                 Governing Law.  The
Plan and all grants and awards and actions taken thereunder shall be governed
by and construed in accordance with the internal substantive laws of the State
of Delaware.

 

16.                                 Termination.  No grant
will be made under this Plan more than 10 years after the date on which this
Plan is first approved by the shareholders of the Company, but all grants made
on or prior to such date will continue in effect thereafter subject to the
terms thereof and of this Plan.

 

17.                                 General Provisions.

 

(a)                                  No
award under this Plan may be exercised by the holder thereof if such exercise,
and the receipt of stock thereunder, would be, in the opinion of counsel
selected 

 

11

 

by
the Board, contrary to law or the regulations of any duly constituted authority
having jurisdiction over this Plan.

 

(b)                                 Absence
on leave approved by a duly constituted officer of the Company or any of its
Subsidiaries shall not be considered interruption or termination of service of
any employee for any purposes of this Plan or awards granted hereunder, except
that no awards may be granted to an employee while he or she is absent on
leave.

 

(c)                                  No
Participant shall have any rights as a shareholder with respect to any shares
subject to awards granted to him or her under this Plan prior to the date as of
which he or she is actually recorded as the holder of such shares upon the
stock records of the Company.

 

(d)                                 If
any provision of the Plan is or becomes invalid, illegal or unenforceable in
any jurisdiction, or would disqualify the Plan or any award under any law
deemed applicable by the Committee, such provision shall be construed or deemed
amended or limited in scope to conform to applicable laws or, in the discretion
of the Committee, it shall be stricken and the remainder of the Plan shall
remain in full force and effect.

 

12

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