Document:

Exhibit 10.4

  

 

SOURCECORP, Incorporated

 

2002 LONG-TERM INCENTIVE PLAN

 

 

1.             Purpose.  The purpose of this 2002 Long-Term Incentive

Plan (the “Plan”) of SOURCECORP, Incorporated, a Delaware

corporation (the “Company”), is to advance the interests of the Company and its

stockholders by providing a means to attract, retain, motivate and reward

present and prospective directors, officers, employees and consultants of and

service providers to the Company and its subsidiaries and to enable such

persons to acquire or increase a proprietary interest in the Company, thereby

promoting a closer identity of interests between such persons and the Company’s

stockholders.

 

2.             Definitions.  The definitions of awards under the Plan,

including Options, SARs (including Limited SARs), Restricted Stock, Deferred

Stock, Stock granted as a bonus or in lieu of other awards, Dividend

Equivalents and Other Stock–Based Awards are set forth in Section 6 of

the Plan.  Such awards, together with

any other right or interest granted to a Participant under the Plan, are termed

“Awards.”  For purposes of the Plan, the

following additional terms shall be defined as set forth below:

 

(a)           “Award Agreement” means any written

agreement, contract, notice or other instrument or document evidencing an

Award.

 

(b)           “Beneficiary” shall mean the

individuals or entities which have been designated by a Participant in his or

her most recent written beneficiary designation filed with the Committee to

receive the benefits specified under the Plan upon such Participant’s death or,

if there is no designated Beneficiary or surviving designated Beneficiary, then

the individuals or entities entitled by will or the laws of descent and

distribution to receive such benefits.

 

(c)           “Board” means the Board of Directors

of the Company.

 

(d)           A “Change in Control” shall be deemed

to have occurred:

 

(i)            when any person, other than the

Company or an employee benefit plan of the Company, acquires directly or

indirectly the Beneficial Ownership (as defined in Rule 13d-3 under the Exchange

Act) of any voting security of the Company and immediately after such

acquisition such Person is, directly or indirectly, the Beneficial Owner of

voting securities representing 30% or more of the total voting power of all of

the then-outstanding voting securities of the Company.

 

(ii)           when the individuals (A) who, as of

the effective date of the Plan, constitute the Board (the “Original Directors”)

or (B) who thereafter are elected to the Board and whose election, or

nomination for election, to the Board was approved by a vote of at least

two-thirds (2/3) of the Original Directors then still in office (such directors

becoming “Additional Original Directors” immediately following their election)

or (C) who are elected to the Board and whose election, or nomination for

election, to the 

 

 

Board was approved

by a vote of at least two-thirds (2/3) of the Original Directors and Additional

Original Directors then still in office (such directors also becoming

“Additional Original Directors” immediately following their election) (such

individuals being the “Continuing Directors”), cease for any reason to

constitute a majority of the members of the Board;

 

(iii)          upon the consummation of a merger,

consolidation, recapitalization or reorganization of the Company, a reverse

stock split of outstanding voting securities, 

other than any such transaction which would result in at least 75% of

the total voting power represented by the voting securities of the surviving

entity outstanding immediately after such transaction being Beneficially Owned

by holders of at least 75% of outstanding voting securities of the Company

immediately prior to the transaction, with the voting power of each such

continuing holder relative to other such continuing holders not substantially

altered in the transaction; or

 

(iv)            upon the consummation of a complete

liquidation of the Company or a sale or disposition by the Corporation of all

or a substantial portion of the Company’s assets (i.e., 50% or more of the

total assets of the Company).

 

(e)           “Code” means the Internal Revenue

Code of 1986, as amended from time to time. References to any provision of the

Code shall be deemed to include regulations thereunder and successor provisions

and regulations thereto.

 

(f)            “Committee” means the committee

appointed by the Board to administer the Plan, or if no committee is appointed,

the Board.

 

(g)           “Exchange Act” means the Securities

Exchange Act of 1934, as amended from time to time.  References to any provision of the Exchange Act shall be deemed to

include rules thereunder and successor provisions and rules thereto.

 

(h)           “ISO” means any Option intended to be

and designated as an incentive stock option within the meaning of Section 422

of the Code, and qualifies as such.

 

(i)            “NQSO” means any Option that is not

an ISO.

 

(j)            “Participant” means a person who, at

a time when eligible under Section 5 hereof, has been granted an Award under

the Plan.

 

(k)           “Stock” means the Common Stock, par

value $.01, of the Company and such other securities as may be substituted for

Stock or such other securities pursuant to Section 4.

 

3.             Administration.

 

(a)           Authority of the Committee.  Except as otherwise provided below, the Plan

shall be administered by the Committee. 

The Committee shall have full and final authority to take the following

actions, in each case subject to and consistent with the provisions of the

Plan:

 

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(i)            to select persons to whom Awards may

be granted;

 

(ii)           to determine the type or types of Awards

to be granted to each such person;

 

(iii)          to determine the number of Awards to

be granted, the number of shares of Stock to which an Award will relate, the

terms and conditions of any Award granted under the Plan (including, but not

limited to, any exercise price, grant price or purchase price, any restriction

or condition, any schedule for lapse of restrictions or conditions relating to

transferability or forfeiture, exercisability or settlement of an Award, and

waivers or accelerations thereof, performance conditions relating to an Award

(including performance conditions relating to Awards not intended to be

governed by Section 7(d) and waivers and modifications thereof), based in each

case on such considerations as the Committee shall determine), and all other

matters to be determined in connection with an Award;

 

(iv)          to determine whether, to what extent

and under what circumstances an Award may be settled, or the exercise price of

an Award may be paid, in cash, Stock, other Awards or other property, or an

Award may be canceled, forfeited or surrendered;

 

(v)           to determine whether, to what extent

and under what circumstances cash, Stock, other Awards or other property

payable with respect to an Award will be deferred either automatically, at the

election of the Committee or at the election of the Participant;

 

(vi)          to determine the restrictions, if any,

to which Stock received upon exercise or settlement of an Award shall be

subject (including lock–ups and other transfer restrictions), may

condition the delivery of such Stock upon the execution by the Participant of

any agreement providing for such restrictions;

 

(vii)         to prescribe the form of each Award

Agreement, which need not be identical for each Participant;

 

(viii)        to adopt, amend, suspend, waive and

rescind rules and regulations and appoint such agents as the Committee may deem

necessary or advisable to administer the Plan;

 

(ix)           to correct any defect or supply any

omission or reconcile any inconsistency in the Plan and to construe and

interpret the Plan and any Award, rules and regulations, Award Agreement or

other instrument hereunder; and

 

(x)            to make all other decisions and

determinations as may be required under the terms of the Plan or as the

Committee may deem necessary or advisable for the administration of the Plan.

 

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Other provisions

of the Plan notwithstanding, the Board (or a committee designated by the Board)

shall perform the functions of  the

Committee for purposes of granting awards to directors who serve on the

Committee, and the Board (or a committee designated by the Board) may perform

any function of the Committee under the Plan for any other purpose.  In any case in which the Board (or a committee

designated by the Board) is performing a function of the Committee under the

Plan, each reference to the Committee herein shall be deemed to refer to the

Board (or the committee designated by the Board), except where the context

otherwise requires.

 

(b)           Manner of Exercise of Committee Authority.  Any action of the Committee with respect to

the Plan shall be final, conclusive and binding on all persons, including the

Company, subsidiaries of the Company, Participants, any person claiming any

rights under the Plan from or through any Participant and stockholders, except

to the extent the Committee may subsequently modify, or take further action not

consistent with, its prior action.  If

not specified in the Plan, the time at which the Committee must or may make any

determination shall be determined by the Committee, and any such determination

may thereafter be modified by the Committee (subject to Section 8(e)).  The express grant of any specific power to

the Committee, and the taking of any action by the Committee, shall not be

construed as limiting any power or authority of the Committee. Except as

otherwise provided under Section 7(d), the Committee may delegate to officers

or managers of the Company or any subsidiary of the Company the authority,

subject to such terms as the Committee shall determine, to perform such

functions as the Committee may determine, to the extent permitted under

applicable law.

 

(c)           Limitation of Liability.  Each member of the Committee shall be

entitled to, in good faith, rely or act upon any report or other information

furnished to him by any officer or other employee of the Company or any

subsidiary, the Company’s independent certified public accountants or any

executive compensation consultant, legal counsel or other professional retained

by the Company to assist in the administration of the Plan.  No member of the Committee, or any officer

or employee of the Company acting on behalf of the Committee, shall be

personally liable for any action, determination or interpretation taken or made

in good faith with respect to the Plan, and all members of the Committee and

any officer or employee of the Company acting on its behalf shall, to the

extent permitted by law, be fully indemnified and protected by the Company with

respect to any such action, determination or interpretation.

 

4.             Stock Subject to Plan.

 

(a)           Amount of Stock Reserved.  The total number of shares of Stock that may

be subject to outstanding Awards (but determined without regard to Awards

designated pursuant to the following sentence), when added to options then

outstanding under the Company’s 1995 Stock Option Plan, in each case determined

immediately after the grant of any such Award, shall not exceed the greater of

650,000 or 16% of the total number of shares of Stock outstanding at the

effective time of such grant.  At the

time of grant of an Award, the Committee may designate that the shares of Stock

subject to such Award shall not be taken into account for purposes of the

limitation contained in the preceding sentence; provided, however,

that the total number of shares of Stock that may be subject to outstanding

Awards so designated shall not exceed 

600,000.  In no event shall the

number of shares of Stock that may be issued upon the exercise of 

 

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ISOs exceed

650,000.  For purposes of the foregoing

limits, with respect to Awards that may be settled only in cash by reference to

a specified number of shares of Stock, the number of shares so referenced shall

be treated as shares of Stock subject to outstanding Awards.  Any shares of Stock delivered pursuant to an

Award may consist, in whole or in part, of authorized and unissued shares,

treasury shares or shares acquired in the market for a Participant’s account.  For purposes of the first sentence above, an

Award shall not be treated as outstanding if the shares of Stock subject

thereto have be issued to the Participant, and such shares are not subject to a

substantial risk of forfeiture, within the meaning of Section 83(c) of the

Code, or if the Award has otherwise been exercised, settled, cancelled,

terminated or has expired.

 

(b)           Annual Per–Participant

Limitations.  During any calendar

year, no Participant may be granted Awards that may be settled by delivery of

more than 500,000 shares of Stock, or, in the case of Awards that may be

settled in cash, by payment of cash that exceeds the fair market value of

500,000 shares of Stock, determined either at the time of grant or the time of

payment, whichever is greater.

 

(c)           Adjustments.  In the event that the Committee shall

determine that any recapitalization, forward or reverse split, reorganization,

merger, consolidation, spin–off, combination, repurchase or exchange of

Stock or other securities, Stock dividend or other special, large and

non-recurring dividend or distribution (whether in the form of cash, securities

or other property), liquidation, dissolution or other similar corporate

transaction or event affects the Stock such that an adjustment is appropriate

in order to prevent dilution or enlargement of the rights of Participants under

the Plan, then the Committee shall, in such manner as it may deem equitable,

adjust any or all of (i) the number and kind of shares of Stock that may be

subject to outstanding Awards or otherwise reserved and available for issuance

pursuant to Awards under Section 4(a), (ii) the number and kind of shares of

Stock specified in the Annual Per–Participant Limitations under Section

4(b), (iii) the number and kind of shares of outstanding Restricted Stock or

other outstanding Award in connection with which shares have been issued, (iv)

the number and kind of shares that may be issued in respect of other

outstanding Awards and (v) the exercise price, grant price or purchase price

relating to any Award. In addition, the Committee is authorized to make

adjustments in the terms and conditions of, and the criteria included in,

Awards (including, without limitation, canceling an Option or other Award in

exchange for the intrinsic (i.e., in-the-money) value thereof, if any, or substitution

of an Award using securities of a successor or other entity) in recognition of

unusual or nonrecurring events (including, without limitation, events described

in the preceding sentence or a Change in Control) affecting the Company or any

subsidiary or the financial statements of the Company or any subsidiary, or in

response to changes in applicable laws, regulations or accounting principles

 

5.             Eligibility.  Directors, officers and employees of the

Company and its subsidiaries, and persons who provide consulting or other

services to the Company deemed by the Committee to be of substantial value to

the Company, are eligible to be granted Awards under the Plan.  In addition, persons who have been offered

employment by the Company or its subsidiaries, and persons employed by an

entity that the Committee reasonably expects to become a subsidiary of the

Company, are eligible to be granted an Award under the Plan.

 

6.             Specific Terms of Awards.

 

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(a)           General.  Awards may be granted on the terms and

conditions set forth in this Section 6. 

In addition, the Committee may impose on any Award or the exercise

thereof such additional terms and conditions, not inconsistent with the

provisions of the Plan, as the Committee shall determine, including terms

requiring forfeiture of Awards in the event of termination of employment or

service of the Participant.  Except as

expressly provided by the Committee (including for purposes of complying with

the requirements of the Delaware General Corporation Law relating to lawful

consideration for the issuance of shares), no consideration other than services

will be required as consideration for the grant (but not the exercise) of any

Award.

 

(b)           Options.  The Committee is authorized to grant options

to purchase Stock (including “reload” options automatically granted to offset

specified exercises of Options) on the following terms and conditions

(“Options”):

 

(i)            Exercise Price.  The exercise price per share of Stock

purchasable under an Option shall be determined by the Committee, but shall be

no less than 100% of the fair market value of a share of Stock on the date the

Option is granted.

 

(ii)           Time and Method of Exercise.  The Committee shall determine and shall set

forth in an Award Agreement, the time or times at which an Option may be

exercised in whole or in part, the methods by which such exercise price may be

paid or deemed to be paid, the form of such payment, including, without

limitation, cash, Stock, Awards or awards granted under other Company plans or

other property (including notes or other contractual obligations of

Participants to make payment on a deferred basis, such as through “cashless

exercise” arrangements, to the extent permitted by applicable law), and the methods

by which Stock will be delivered or deemed to be delivered to Participants.

 

(iii)          Termination of

Employment/Director/Consultant Status. 

Unless otherwise determined by the Committee and set forth in an Award

Agreement, upon a Participant’s termination of employment relationship,

consultant status and director status with the Company and its subsidiaries,

(i) all Options which are not then exercisable shall terminate, (ii) all

Options which are then exercisable shall remain exercisable until, and shall

terminate upon, the 91st day following the date of such termination (or, if

earlier, the end of the Option term), provided that if such termination is for

cause, as determined in the discretion of the Committee, all Options held by

the Participant shall immediately terminate. 

For this purpose, any sale of a subsidiary of the Company pursuant to

which it ceases to be a subsidiary of the Company shall be deemed to be a

termination of employment by any Participant employed by such subsidiary, or,

as applicable, termination of the non-employee directorship by any Participant

who serves on the board of such subsidiary.

 

(iv)          ISOs.  The Committee shall have the authority to grant ISOs under the

Plan. If Stock acquired by exercise of an ISO is sold or otherwise disposed of

within two years after the date of grant of the ISO or within one year after

the transfer of such Stock to the Participant, the holder of the Stock

immediately prior to the disposition shall 

 

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promptly notify

the Company in writing of the date and terms of the disposition and shall

provide such other information regarding the disposition as the Company may

reasonably require in order to secure any deduction then available against the

Company’s or any other corporation’s taxable income, or to satisfy any

withholding tax obligation.  The Company

may impose such procedures as it determines may be necessary to ensure that

such notification is made.  Each Option

granted as an ISO shall be designated as such in the Award Agreement relating

to such Option.  An option not

designated and qualified as an ISO shall be an NQSO.

 

(c)           Stock Appreciation Rights.  The Committee is authorized to grant stock

appreciation rights on the following terms and conditions (“SARs”):

 

(i)            Right to Payment.  An SAR shall confer on the Participant to

whom it is granted a right to receive, upon exercise thereof, the excess of (A)

the fair market value of one share of Stock on the date of exercise (or, if the

Committee shall so determine in the case of any such right other than one

related to an ISO, the fair market value of one share at any time during a

specified period before or after the date of exercise), over (B) the grant

price of the SAR as determined by the Committee as of the date of grant of the

SAR.

 

(ii)           Other Terms.  The Committee shall determine the time or

times at which an SAR may be exercised in whole or in part, the method of

exercise, method of settlement, form of consideration payable in settlement,

method by which Stock will be delivered or deemed to be delivered to

Participants, whether or not an SAR shall be in tandem with any other Award,

and any other terms and conditions of any SAR. 

Limited SARs that may only be exercised upon the occurrence of a Change in

Control may be granted on such terms, not inconsistent with this Section 6(c),

as the Committee may determine.  Limited

SARs may be either freestanding or in tandem with other Awards.

 

(d)           Restricted Stock.  The Committee is authorized to grant Stock

that is subject to restrictions based on continued employment on the following

terms and conditions (“Restricted Stock”):

 

(i)            Grant and Restrictions.  Restricted Stock shall be subject to such

restrictions on transferability and other restrictions, if any, as the

Committee may impose, which restrictions may lapse separately or in combination

at such times, under such circumstances, in such installments, or otherwise, as

the Committee may determine.  Except to

the extent restricted under the terms of the Plan and any Award Agreement

relating to the Restricted Stock, a Participant granted Restricted Stock shall

have all of the rights of a stockholder including, without limitation, the

right to vote Restricted Stock or the right to receive dividends thereon.

 

(ii)           Forfeiture.  Except as otherwise determined by the

Committee, upon termination of employment or service (as determined under

criteria established by the Committee) during the applicable restriction

period, any portion of Restricted Stock that is at that time subject to

restrictions shall be forfeited and reacquired by the Company; 

 

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provided, however, that the Committee may provide, by rule

or regulation or in any Award Agreement, or may determine in any individual

case, that restrictions or forfeiture conditions relating to Restricted Stock

will be waived in whole or in part in the event of termination resulting from

specified causes.

 

(iii)          Certificates for Stock.  Restricted Stock granted under the Plan may

be evidenced in such manner as the Committee shall determine.  If certificates representing Restricted

Stock are registered in the name of the Participant, such certificates may bear

an appropriate legend referring to the terms, conditions and restrictions

applicable to such Restricted Stock and the Company may retain physical

possession of the certificate, in which case the Participant shall be required

to have delivered a stock power to the Company, endorsed in blank, relating to

the Restricted Stock.

 

(iv)          Dividends.  Dividends paid on Restricted Stock shall be

either paid at the dividend payment date in cash or in shares of unrestricted

Stock having a fair market value equal to the amount of such dividends, or the

payment of such dividends shall be deferred and/or the amount or value thereof

automatically reinvested in additional Restricted Stock, other Awards, or other

investment vehicles, as the Committee shall determine or permit the Participant

to elect.  Stock distributed in

connection with a Stock split or Stock dividend, and other property distributed

as a dividend, shall be subject to restrictions and a risk of forfeiture to the

same extent as the Restricted Stock with respect to which such Stock or other

property has been distributed, unless otherwise determined by the Committee.

 

(e)           Deferred Stock.  The Committee is authorized to grant Awards

representing the right to receive Stock at a future date subject to the

following terms and conditions (“Deferred Stock”):

 

(i)            Award and Restrictions.  Delivery of Stock will occur upon expiration

of the deferral period specified for an Award of Deferred Stock by the

Committee (or, if permitted by the Committee, as elected by the Participant).  In addition, Deferred Stock shall be subject

to such restrictions as the Committee may impose, if any, which restrictions

may lapse at the expiration of the deferral period or at earlier specified

times, separately or in combination, in installments or otherwise, as the

Committee may determine.

 

(ii)           Forfeiture.  Except as otherwise determined by the

Committee, upon termination of employment or service (as determined under

criteria established by the Committee) during the applicable deferral period or

portion thereof to which forfeiture conditions apply (as provided in the Award

Agreement evidencing the Deferred Stock), the portion of all Deferred Stock

that is at that time subject to such forfeiture conditions shall be forfeited; provided,

however, that the Committee may provide, by rule or regulation or in any

Award Agreement, or may determine in any individual case, that restrictions or

forfeiture conditions relating to Deferred Stock will be waived in whole or in

part in the event of termination resulting from specified causes.

 

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(f)            Bonus Stock and Awards in Lieu of

Cash Obligations.  The Committee is

authorized to grant Stock as a bonus, or to grant Stock or other Awards in lieu

of Company obligations to pay cash under other plans or compensatory

arrangements.

 

(g)           Dividend Equivalents.  The Committee is authorized to grant awards

entitling the Participant to receive cash, Stock, other Awards or other

property equal in value to dividends paid with respect to a specified number of

shares of Stock (“Dividend Equivalents”). 

Dividend Equivalents may be awarded on a free-standing basis or in

connection with another Award.  The

Committee may provide that Dividend Equivalents shall be paid or distributed

when accrued or shall be deemed to have been reinvested in additional Stock,

Awards or other investment vehicles, and subject to such restrictions on

transferability and risks of forfeiture, as the Committee may specify.

 

(h)           Other Stock–Based Awards.  The Committee is authorized, subject to

limitations under applicable law, to grant such other Awards that may be

denominated or payable in, valued in whole or in part by reference to, or

otherwise based on, or related to, Stock and factors that may influence the

value of Stock, as deemed by the Committee to be consistent with the purposes

of the Plan, including, without limitation, convertible or exchangeable debt

securities, other rights convertible or exchangeable into Stock, purchase

rights for Stock, Awards with value and payment contingent upon performance of

the Company or any other factors designated by the Committee and Awards valued

by reference to the book value of Stock or the value of securities of or the

performance of specified subsidiaries (“Other Stock Based Awards”).  The Committee shall determine the terms and

conditions of such Awards.  Stock issued

pursuant to an Award in the nature of a purchase right granted under this

Section 6(h) shall be purchased for such consideration, paid for at such times,

by such methods, and in such forms, including, without limitation, cash, Stock,

Awards or other property, as the Committee shall determine.  Cash awards, as an element of or supplement

to any other Award under the Plan, may be granted pursuant to this Section

6(h).

 

7.             Certain Provisions Applicable to

Awards.

 

(a)           Stand-Alone, Additional, Tandem,

and Substitute Awards.  Awards

granted under the Plan may, in the discretion of the Committee, be granted

either alone or in addition to, in tandem with or in substitution for any other

Award granted under the Plan or any award granted under any other plan of the

Company, any subsidiary or any business entity to be acquired by the Company or

a subsidiary, or any other right of a Participant to receive payment from the

Company or any subsidiary.  Awards

granted in addition to or in tandem with other Awards or awards may be granted

either as of the same time as or a different time from the grant of such other

Awards or awards.  Notwithstanding

Section 6(b)(i), substitute Awards granted as Options may have an exercise

price per share of Stock that is below the fair market value of a share of

Stock on the date of grant if necessary to preserve the in-the-money value of

the option for which they are being substituted.

 

(b)           Term of Awards.  The term of each Award shall be for such

period as may be determined by the Committee; provided, however,

that in no event shall the term of any ISO or an SAR granted in tandem

therewith exceed a period of 10 years from the date of its grant (or 5 

 

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years with respect

to an ISO granted to a 10% shareholder, within the meaning of Section 422 of

the Code).

 

(c)           Loan Provisions.  With the consent of the Committee, and

subject at all times to, and only to the extent, if any, permitted under and in

accordance with, laws and regulations and other binding obligations or

provisions applicable to the Company, the Company may make, guarantee or

arrange for a loan or loans to a Participant with respect to the exercise of

any Option or other payment in connection with any Award, including the payment

by a Participant of any or all federal, state or local income or other taxes

due in connection with any Award. 

Subject to such limitations, the Committee shall have full authority to

decide whether to make a loan or loans hereunder and to determine the amount,

terms and provisions of any such loan or loans, including the interest rate to

be charged in respect of any such loan or loans, whether the loan or loans are

to be with or without recourse against the borrower, the terms on which the

loan is to be repaid and the conditions, if any, under which the loan or loans

may be forgiven.

 

(d)           Performance–Based Awards.  Other than Options or SARs that have an

exercise price or grant price equal to the fair market value of the shares of

Stock subject thereto at the time of grant, which are not subject to the

requirements of this Section 7(d), the Committee may, in its discretion,

designate any Award the exercisability or settlement of which is subject to the

achievement of performance conditions as a performance–based Award

subject to this Section 7(d), in order to qualify such Award as “qualified

performance–based compensation” within the meaning of Code Section 162(m)

and regulations thereunder.  The

performance objectives for an Award subject to this Section 7(d) shall consist

of one or more business criteria and a targeted level or levels of performance

with respect to such criteria, as specified by the Committee but subject to

this Section 7(d).  Performance objectives

shall be objective and shall otherwise meet the requirements of Section

162(m)(4)(C) of the Code.  Business

criteria used by the Committee in establishing performance objectives for

Awards subject to this Section 7(d) shall be selected from among the following:

 

(i)            Annual return on capital;

 

(ii)           Annual earnings or earnings per

share;

 

(iii)          Annual cash flow provided by

operations;

 

(iv)          Increase in stock price;

 

(v)           Changes in annual revenues; and/or

 

(vi)          Strategic business criteria,

consisting of one or more objectives based on meeting specified revenue, market

penetration, geographic business expansion goals, cost targets and goals

relating to acquisitions or divestitures.

 

The levels of

performance required with respect to such business criteria may be expressed in

absolute or relative levels. 

Performance objectives may differ for such Awards to different

Participants.  The Committee shall

specify the weighting to be given to each performance 

 

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objective for

purposes of determining the final amount payable with respect to any such

Award.  The Committee may, to the extent

set forth in an Award Agreement, reduce the amount of a payout otherwise to be

made in connection with an Award subject to this Section 7(d), but may not

exercise discretion to increase such amount, and the Committee may consider

other performance criteria in exercising such discretion.  All determinations by the Committee as to

the achievement of performance objectives shall be in writing.  The Committee may not delegate any

responsibility with respect to an Award subject to this Section 7(d).

 

(e)           Acceleration upon a Change of

Control.   Notwithstanding anything

contained herein to the contrary, except to the extent otherwise set forth in

an Award Agreement, all outstanding Options shall become fully vested and

exercisable in full, and all conditions and/or restrictions relating to the

passage of time, the continued performance of services and/or the achievement

of performance objectives with respect to the exercisability or full enjoyment

of any other outstanding Awards shall lapse, immediately prior to a Change in

Control, or such earlier time as may be necessary to enable a Participant to

exercise any right to acquire all of the shares of Stock subject to such Award

and immediately thereafter resell such shares.

 

8.             General Provisions.

 

(a)           Compliance With Laws and

Obligations.  The Company shall not

be obligated to issue or deliver Stock in connection with any Award or take any

other action under the Plan in a transaction subject to the requirements of any

applicable securities law, any requirement under any listing agreement between

the Company and any national securities exchange or automated quotation system

or any other law, regulation or contractual obligation of the Company until the

Company is satisfied that such laws, regulations and other obligations of the

Company have been complied with in full. 

Certificates representing shares of Stock issued under the Plan will be

subject to such stop–transfer orders and other restrictions as may be

applicable under such laws, regulations and other obligations of the Company,

including any requirement that a legend or legends be placed thereon.

 

(b)           Limitations on Transferability.  Awards and other rights under the Plan will

not be transferable by a Participant except by will or the laws of descent and

distribution or to a Beneficiary in the event of the Participant’s death, shall

not be pledged, mortgaged, hypothecated or otherwise encumbered, or otherwise

subject to the claims of creditors, and, in the case of ISOs and SARs in tandem

therewith, shall be exercisable during the lifetime of a Participant only by

such Participant or his guardian or legal representative; provided, however,

that such Awards and other rights (other than ISOs and SARs in tandem

therewith) may be transferred to one or more transferees during the lifetime of

the Participant to the extent and on such terms as then may be permitted by the

Committee.

 

(c)           No Right to Continued Employment

or Service.  Neither the Plan nor

any action taken hereunder shall be construed as giving any employee, director

or other person the right to be retained in the employ or service of the

Company or any of its subsidiaries, nor shall it interfere in any way with the

right of the Company or any of its subsidiaries to terminate any employee’s

employment or other person’s service at any time or with the right of the Board

or stockholders to remove any director.

 

11

 

(d)           Taxes.  The Company and any subsidiary are each

authorized to withhold from any Award granted or to be settled any delivery of

Stock in connection with an Award, any other payment relating to an Award or

any payroll or other payment to a Participant amounts of withholding and other

taxes due or potentially payable in connection with any transaction involving

an Award, and to take such other action as the Committee may deem advisable to

enable the Company and Participants to satisfy obligations for the payment of

withholding taxes and other tax obligations relating to any Award.  This authority shall include authority to

withhold or receive Stock or other property and to make cash payments in

respect thereof in satisfaction of a Participant’s tax obligations.

 

(e)           Changes to the Plan and Awards.  The Board may amend, alter, suspend,

discontinue or terminate the Plan or the Committee’s authority to grant Awards

under the Plan without the consent of stockholders or Participants, except that

any such action shall be subject to the approval of the Company’s stockholders

at or before the next annual meeting of stockholders for which the record date

is after such Board action if such stockholder approval is required by any

federal or state law or regulation or the rules of any stock exchange or

automated quotation system on which the Stock may then be listed or quoted, and

the Board may otherwise, in its discretion, determine to submit other such

changes to the Plan to stockholders for approval; provided, however,

that, without the consent of an affected Participant, no such action may

materially impair the rights of such Participant under any Award theretofore

granted to him (as such rights are set forth in the Plan and the Award Agreement).  The Committee may waive any conditions or

rights under, or amend, alter, suspend, discontinue or terminate any Award

theretofore granted and any Award Agreement relating thereto; provided, however,

that, without the consent of an affected Participant, no such action may

materially impair the rights of such Participant under such Award (as such

rights are set forth in the Plan and the Award Agreement).  Notwithstanding the foregoing, the Board or

the Committee may take any action (including actions affecting or terminating

outstanding Awards): (i) permitted by Section 4(c), or (ii) to avoid

limitations related to the availability of a tax deduction in respect of Awards

(e.g., pursuant to Code Sections 162(m) and 280G).

 

(f)            No Rights to Awards; No Stockholder

Rights.  No person shall have any

claim to be granted any Award under the Plan, and there is no obligation for

uniformity of treatment of Participants and employees.  No Award shall confer on any Participant any

of the rights of a stockholder of the Company unless and until Stock is duly

issued or transferred and delivered to the Participant in accordance with the

terms of the Award or, in the case of an Option, the Option is duly exercised.

 

(g)           Unfunded Status of Awards;

Creation of Trusts.  The Plan is

intended to constitute an “unfunded” plan for incentive and deferred

compensation.  With respect to any

payments not yet made to a Participant pursuant to an Award, nothing contained

in the Plan or any Award shall give any such Participant any rights that are

greater than those of a general creditor of the Company; provided, however,

that the Committee may authorize the creation of trusts or make other

arrangements to meet the Company’s obligations under the Plan to deliver cash,

Stock, other Awards or other property pursuant to any Award, which trusts or

other 

 

12

 

arrangements shall

be consistent with the “unfunded” status of the Plan, unless the Committee

otherwise determines with the consent of each affected Participant.

 

(h)           Nonexclusivity of the Plan.  Neither the adoption of the Plan by the

Board nor any submission of the Plan or amendments thereto to the stockholders

of the Company for approval shall be construed as creating any limitations on

the power of the Board to adopt such other compensatory arrangements as it may

deem desirable, including, without limitation, the granting of stock options

otherwise than under the Plan, and such arrangements may be either applicable

generally or only in specific cases.

 

(i)            No Fractional Shares.  No fractional shares of Stock shall be

issued or delivered pursuant to the Plan or any Award.  The Committee shall determine whether cash,

other Awards or other property shall be issued or paid in lieu of such fractional

shares or whether such fractional shares or any rights thereto shall be

forfeited or otherwise eliminated.

 

(j)            Compliance with Code Section

162(m).  It is the intent of the

Company that employee Options, SARs and other Awards designated as Awards subject

to Section 7(d) shall constitute “qualified performance-based compensation”

within the meaning of Code Section 162(m). 

Accordingly, if any provision of the Plan or any Award Agreement

relating to such an Award does not comply or is inconsistent with the

requirements of Code Section 162(m), such provision shall be construed or

deemed amended to the extent necessary to conform to such requirements, and no

provision shall be deemed to confer upon the Committee or any other person

discretion to increase the amount of compensation otherwise payable in

connection with any such Award upon attainment of the performance objectives.

 

(k)           Governing Law.  The validity, construction and effect of the

Plan, any rules and regulations relating to the Plan and any Award Agreement

shall be determined in accordance with the laws of the State of Delaware,

without giving effect to principles of conflicts of laws, and applicable

federal law.

 

(l)            Effective Date; Plan Termination.  The Plan shall become effective as of the date

of its adoption by the Board and approved by the Company’s stockholders, and

shall continue in effect until terminated by the Board.

 

 

13Exhibit 10.22

 

EXECUTION COPY

 

AMENDMENT TO THE FEI COMPANY

NON-NEGOTIABLE PROMISSORY NOTE (STOCK PURCHASE)

 

This Amendment to the Note (as defined hereafter) is

made as of June 24, 2002 by and between FEI Company, an Oregon corporation

(the “Company”), and Vahe Sarkissian, an individual (“Maker”).

 

WHEREAS, pursuant to the terms of a Restricted Stock

Purchase Agreement, dated as of June 25, 1998 (the “Agreement”), by and

between the Company and Maker, the Company issued to Maker a Non-Negotiable

Promissory Note, dated as of June 25, 1998 in the principal amount of

$1,115,530 (the “Note”);

 

WHEREAS, pursuant to the Note, the principal and all

accrued and unpaid interest on the Note is due and payable on June 24, 2002

(the “Repayment Date”);

 

WHEREAS, the Company and Maker desire to extend the

Repayment Date of the Note to June 24, 2004;

 

WHEREAS, pursuant to the Note, interest accrues on the

unpaid principal balance outstanding at a rate of five and 58/100 percent

(5.58%) per annum; and

 

WHEREAS, the Company and Maker desire to increase the

rate at which interest accrues on the unpaid balance outstanding to a current

market interest rate of five and 75/100 percent (5.75%) per annum;

 

NOW, THEREFORE, in consideration of the foregoing, and

the agreements set forth below, the parties hereby agree as follows:

 

1.             Section 1

of the Note (and only such section of the Note) is hereby amended and restated

in its entirety to read as follows:

 

“Interest. 

Interest shall accrue on the unpaid principal balance outstanding hereunder

at the rate of five and 58/100 percent (5.58%) per annum; provided, however,

that beginning as of June 25, 2002, interest shall accrue at the rate of

five and 75/100 percent (5.75%) per annum. 

Interest shall be compounded annually and shall be calculated on the

basis of a 365- or 366-day year, as applicable, for the actual number of days

elapsed.”

 

2.             Section 2

of the Note (and only such section of the Note) is hereby amended and restated

in its entirety to read as follows:

 

“Maturity.  The

principal amount of this note, together with all accrued and unpaid interest

thereon, shall be due and payable on June 24, 2005.”

 

3.             Maker

acknowledges that it is his current intention to apply a portion of the

proceeds of any sale of Company common stock (or the common stock of any

successor entity) by Maker prior to the maturity of the Note (as amended)

toward the prepayment of amounts owed under the Note (as amended).

 

 

This Amendment shall be construed in accordance with

the laws of the State of Oregon, regardless of the choice of law rules

applicable in such state.

 

This Amendment may be executed by facsimile and in two

or more counterparts, each of which shall be deemed an original, and all of

which together shall constitute one and the same instrument.

 

IN WITNESS WHEREOF, this Amendment has been executed

as of the day and year first written above.

 

 

	

   

  	

  THE COMPANY

  
	

   

  	

   

  
	

   

  	

  FEI COMPANY

  
	

   

  	

   

  
	

   

  	

   

  	

  By:

  	

  /s/ Bradley J. Thies

  	

   

  
	

   

  	

   

  	

  Bradley J. Thies

  
	

   

  	

   

  	

  Vice President and

  General Counsel

  
	

   

  	

   

  
	

   

  	

   

  
	

   

  	

  MAKER

  
	

   

  	

   

  
	

   

  	

   

  	

  /s/ Vahé A. Sarkissian

  	

   

  
	

   

  	

  Vahe Sarkissian

  
							

 

 

Signature Page to

Amendment to the FEI Company

Non-Negotiable Promissory Note (Stock Purchase)

 

2

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