Document:

a50485754ex101.htm

 

Exhibit 10.1

 

November 20, 2012

Fixed Dollar Accelerated Share Repurchase Transaction

Calgon Carbon Corporation

400 Calgon Carbon Drive

Pittsburgh, PA 15230-0717

Dear Sir/Madam:

The purpose of this letter agreement (this “Confirmation”) is to confirm the terms and conditions of the Transaction entered into between Morgan Stanley & Co. LLC (“MSCO”) and Calgon Carbon Corporation (“Issuer”) on the Trade Date specified below (the “Transaction”).  This confirmation constitutes a “Confirmation” as referred to in the Agreement specified below.

The definitions and provisions contained in the 2002 ISDA Equity Derivatives Definitions (as published by the International Swaps and Derivatives Association, Inc. (“ISDA”)) (the “Equity Definitions”) are incorporated into this Confirmation.  The Transaction is a Share Forward Transaction for purposes of the Equity Definitions.  Any reference to a currency shall have the meaning contained in Section 1.7 of the 2006 ISDA Definitions, as published by ISDA.

1.  This Confirmation evidences a complete and binding agreement between MSCO and Issuer as to the terms of the Transaction to which this Confirmation relates and shall supersede all prior or contemporaneous written or oral communications with respect thereto.  This Confirmation shall be subject to an agreement (the “Agreement”) in the form of the 2002 ISDA Master Agreement as if MSCO and Issuer had executed an agreement in such form without any Schedule but with the elections set forth in this Confirmation (and the election of USD as the Termination Currency).

The Transaction shall be the only transaction under the Agreement.  If there exists any ISDA Master Agreement between MSCO and Issuer or any confirmation or other agreement between MSCO and Issuer pursuant to which an ISDA Master Agreement is deemed to exist between MSCO and Issuer, then, notwithstanding anything to the contrary in such ISDA Master Agreement, such confirmation or agreement or any other agreement to which MSCO and Issuer are parties, the Transaction shall not be considered a transaction under, or otherwise governed by, such existing or deemed to be existing ISDA Master Agreement.

If there is any inconsistency between the Agreement, this Confirmation and the Equity Definitions, the following will prevail for purposes of the Transaction in the order of precedence indicated: (i) this Confirmation; (ii) the Equity Definitions; and (iii) the Agreement.

2.  The terms of the particular Transaction to which this Confirmation relates are as follows:

GENERAL TERMS:

	
Trade Date:

	
As specified in Schedule I

	
Buyer:

	
Issuer

 

  

  

  

 

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Seller:

	
MSCO

	
Shares:

	
Common Stock, par value USD 0.01 per share, of Issuer (Ticker: CCC)

	
Tranches:

	
The Transaction will be divided into multiple Tranches, each with the terms set forth in this Confirmation, and in particular with the Prepayment Amount, Observation Dates, the Scheduled Valuation Date and the Lock-Out Date set forth in Schedule I.  The payments and deliveries to be made upon settlement of the Transaction will be determined separately for each Tranche as if each Tranche were a separate Transaction under the Agreement.

	
Forward Price:

	
A price per Share (as determined by the Calculation Agent) equal to (i) the arithmetic mean (not a weighted average) of the 10b-18 VWAP on each Observation Date that is a Trading Day during the Calculation Period minus (ii) the Discount.

	  	  
	
Discount:

	
As specified in Schedule I

	  	  
	
10b-18 VWAP:

	
For each Observation Date that is a Trading Day, a price per Share equal to the volume-weighted average price of the Rule 10b-18 eligible trades in the Shares for the entirety of such Trading Day as determined by the Calculation Agent by reference to the screen entitled “CCC UN <Equity> AQR SEC” or any successor page as reported by Bloomberg L.P. or any successor (without regard to pre-open or after-hours trading outside of any regular trading session for such Trading Day or block trades (as defined in Rule 10b-18(b)(5) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) on such Trading Day) or, if the price (i) is not reported on such Bloomberg page or successor page or (ii) is determined by the Calculation Agent to have been reported incorrectly, the price determined by the Calculation in a commercially reasonable manner to substitute for the unreported or erroneous price on such day.

	  	  
	
Observation Dates:

	
As specified in Schedule I

	
Calculation Period:

	
The period from, and including, the first Observation Date that is a Trading Day that occurs on or after the Prepayment Date to, but excluding, the relevant Valuation Date; provided, however, that if the Valuation Date is the Scheduled Valuation Date, then the Valuation Date shall be included in the Calculation Period.

	
Trading Day:

	
Any Exchange Business Day that is not a Disrupted Day in whole

	
Initial Shares:

	
As specified in Schedule I

	  	  
	
Initial Share Delivery Date:

	
One Exchange Business Day following the Trade Date.  On the Initial Share Delivery Date, Seller shall deliver to Buyer a number of Shares equal to the Initial Shares in accordance with Section 9.4 of the Equity Definitions, with the Initial Share Delivery Date being deemed to be a “Settlement Date” for purposes of such Section 9.4.

 

  

  

  

 

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Prepayment:

	
Applicable

	
Prepayment Amount:

	
As specified in Schedule I

	  	  
	
Commission Amount:

	
As specified in Schedule I

	  	  
	
Adjustment Amount:

	
As specified in Schedule I

	  	  
	
Structuring Fee:

	
As specified in Schedule I

	
Prepayment Date:

	
One Exchange Business Day following the Trade Date.  On the Prepayment Date, Buyer shall pay to Seller the Prepayment Amount, the Commission Amount, the Adjustment Amount and the Structuring Fee.

	
Exchange:

	
New York Stock Exchange

	
Related Exchange:

	
All Exchanges

	
Market Disruption Event:

	
The definition of “Market Disruption Event” in Section 6.3(a) of the Equity Definitions is hereby amended by deleting the words “at any time during the one-hour period that ends at the relevant Valuation Time, Latest Exercise Time, Knock-in Valuation Time or Knock-out Valuation Time, as the case may be,” starting in the third line thereof.

	 	 
	 	
Section 6.3(d) of the Equity Definitions is hereby amended by deleting the remainder of the provision following the term “Scheduled Closing Time” in the fourth line thereof.

	 	 
	 	
Notwithstanding anything to the contrary in the Equity Definitions, if any Observation Date in the Calculation Period is a Disrupted Day, the Calculation Agent shall have the option in its sole discretion either (i) to determine the weighting of each Rule 10b-18 eligible transaction in the Shares on the relevant Disrupted Day using its commercially reasonable judgment for purposes of calculating the Forward Price, as applicable, (ii) to elect to extend the Calculation Period by a number of Observation Dates equal to the number of Disrupted Days during the Calculation Period or (iii) to suspend the Calculation Period until the circumstances giving rise to such suspension have ceased.  For the avoidance of doubt, if Calculation Agent elects the option described in clause (i) above, then such Disrupted Day shall be deemed to be a Trading Day for purposes of calculating the Forward Price.

	 	 
	 	
If a Disrupted Day occurs during the  Calculation Period and each of the nine immediately following Scheduled Trading Days is a Disrupted Day, then the Calculation Agent may, in its good faith and commercially reasonable discretion, deem such ninth Scheduled Trading Day to be an Exchange Business Day that is not a Disrupted Day and determine the VWAP Price for such ninth Scheduled Trading Day using its good faith and commercially reasonable estimate of the value of the Shares on such ninth Scheduled Trading Day based on the volume, historical trading patterns and price of the Shares and such other factors as it deems appropriate.

 

  

  

  

 

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	VALUATION:	 
	 	 
	
Valuation Date:

	
The earlier of (i) the Scheduled Valuation Date and (ii) any earlier accelerated Valuation Date as a result of MSCO’s election in accordance with the immediately succeeding paragraph.

	 	 
	 	
MSCO shall have the right, in its absolute discretion but subject to the limitation set forth in the immediately succeeding paragraph, to accelerate the Valuation Date, in whole or in part, to any Exchange Business Day that is on or after the Lock-Out Date and prior to the Scheduled Valuation Date by notice (each such notice, an “Acceleration Notice”) to Issuer by 9:00 p.m., New York City time, on the Exchange Business Day immediately following the accelerated Valuation Date.

	 	 
	 	
MSCO shall specify in each Acceleration Notice the portion of the Prepayment Amount that is subject to acceleration (which may be less than the full Prepayment Amount, but only so long as such portion is not less than USD $5,000,000).  If the portion of the Prepayment Amount that is subject to acceleration is less than the full Prepayment Amount, then the Calculation Agent shall adjust the terms of the Transaction as appropriate in order to take into account the occurrence of such accelerated Valuation Date (including cumulative adjustments to take into account all prior accelerated Valuation Dates).

	 	 
	 	
On each Valuation Date, the Calculation Agent shall calculate the Settlement Amount.

	  	  
	
Scheduled Valuation Date:

	
As specified in Schedule I, subject to postponement in accordance with “Market Disruption Event” above

	  	  
	
Lock-Out Date:

	
As specified in Schedule I

 

	
SETTLEMENT TERMS:

	 
	 	 
	
Physical Settlement:

	
Applicable.

	 	 
	 	
On the Settlement Date, Seller shall deliver to Buyer a number of Shares equal to (a) (i) the Prepayment Amount  divided by (ii) the Forward Price, minus (b) the Initial Shares (such number of Shares, the “Settlement Amount”), rounded to the nearest whole number of Shares; provided, however, that if the Settlement Amount is less than zero, the terms of the Buyer Settlement Provisions in Annex A shall apply.

 

  

  

  

 

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Settlement Currency:

	
USD

	  	  
	
Settlement Date:

	
The date that falls one Settlement Cycle after the relevant Valuation Date

	 	 
	
Other Applicable Provisions:

	
The last sentence of Section 9.2, Sections 9.8, 9.9, 9.10 and 9.11 (except that the Representation and Agreement contained in Section 9.11 of the Equity Definitions shall be modified by excluding any representations therein relating to restrictions, obligations, limitations or requirements under applicable securities laws arising as a result of the fact that Buyer is the issuer of the Shares) and Section 9.12 of the Equity Definitions will be applicable to the Transaction.

 

	
SHARE ADJUSTMENTS:

	 
	 	 
	
Potential Adjustment Event:

	
Notwithstanding anything to the contrary in Section 11.2(e) of the Equity Definitions, an Extraordinary Dividend shall not constitute a Potential Adjustment Event.

	 	 
	 	
It shall constitute a Potential Adjustment Event if a Disrupted Day occurs or, pursuant to Section 10 below, is deemed to occur (in whole or in part) on any Trading Day on or prior to the Valuation Date.

	  	  
	
Extraordinary Dividend:

	
Any dividend or distribution on the Shares with an ex-dividend date occurring during the period from, and including, the Trade Date to, and including, the last day of the Calculation Period (other than any dividend or distribution of the type described in Section 11.2(e)(i), Section 11.2(e)(ii)(A) or Section 11.2(e)(ii)(B) of the Equity Definitions).

	
Method of Adjustment:

	
Calculation Agent Adjustment

EXTRAORDINARY EVENTS:

Consequences of Merger Events:

	
Share-for-Share:

	
Modified Calculation Agent Adjustment

	
Share-for-Other:

	
Cancellation and Payment on that portion of the Other Consideration that consists of cash; Modified Calculation Agent Adjustment on the remainder of the Other Consideration

	
Share-for-Combined:

	
Component Adjustment

	  	  
	
Tender Offer:

	
Applicable

 

  

  

  

 

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Consequences of Tender Offers:

	
Share-for-Share:

	
Modified Calculation Agent Adjustment

	
Share-for-Other:

	
Modified Calculation Agent Adjustment

	
Share-for-Combined:

	
Modified Calculation Agent Adjustment

	  	  
	
New Shares:

	
In the definition of New Shares in Section 12.1(i) of the Equity Definitions, the text in clause (i) thereof shall be deleted in its entirety (including the word “and” following such clause (i)) and replaced with “publicly quoted, traded or listed on any of the New York Stock Exchange, The NASDAQ Global Select Market or The NASDAQ Global Market (or their respective successors)”.

For purposes of the Transaction,

(i)           the definition of Merger Date in Section 12.1(c) of the Equity Definitions shall be amended to read, “Merger Date shall mean the Announcement Date.”;

(ii)          the definition of Tender Offer Date in Section 12.1(e) of the Equity Definitions shall be amended to read, “Tender Offer Date shall mean the Announcement Date.”;

(iii)         the definition of “Announcement Date” in Section 12.1(l) of the Equity Definitions is hereby amended by (a) replacing the words “a firm” with the word “any” in the second and fourth lines thereof, (b) replacing the word “leads to the” with the words “, if completed, would lead to a” in the third and the fifth lines thereof, (c) replacing the words “voting shares” with the word “Shares” in the fifth line thereof, (d) inserting the words “by any entity” after the word “announcement” in the second and the fourth lines thereof, (e) inserting the words “or to explore the possibility of engaging in” after the words “engage in” in the second line thereof and (f) inserting the words “or to explore the possibility of purchasing or otherwise obtaining” after the word “obtain” in the fourth line thereof;

(iv)         Section 12.2 of the Equity Definitions is hereby amended by inserting the words “Announcement Date in respect of any Merger Event or any potential” before the words “Merger Event” in the final line thereof;

 

	
Composition of Combined Consideration:

	
Not Applicable

	  	  
	

Nationalization, Insolvency or Delisting:

	

Cancellation and Payment; provided that in addition to the provisions of Section 12.6(a)(iii) of the Equity Definitions, it shall constitute a Delisting if the Exchange is located in the United States and the Shares are not immediately re-listed, re-traded or re-quoted on any of the New York Stock Exchange, The NASDAQ Global Market or The NASDAQ Global Select Market (or their respective successors); if the Shares are immediately re-listed, re-traded or re-quoted on any such exchange or quotation system, such exchange or quotation system shall thereafter be deemed to be the Exchange.

 

Additional Disruption Events:

	
Change in Law:

	
Applicable; provided that (i) any determination as to whether (A) the adoption of or any change in any applicable law or regulation (including, for the avoidance of doubt and without limitation, (x) any tax law or (y) adoption or promulgation of new regulations authorized or mandated by existing statute) or (B) the promulgation of or any change in the interpretation by any court, tribunal or regulatory authority with competent jurisdiction of any applicable law or regulation (including any action taken by a taxing authority), in each case, constitutes a “Change in Law” shall be made without regard to Section 739 of the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 or any similar legal certainty provision in any legislation enacted, or rule or regulation promulgated, on or after the Trade Date, and (ii) Section 12.9(a)(ii) of the Equity Definitions is hereby amended by replacing the parenthetical beginning after the word “regulation” in the second line thereof the words “(including, for the avoidance of doubt and without limitation, (x) any tax law or (y) adoption or promulgation of new regulations authorized or mandated by existing statute)”.

 

 

  

  

  

 

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Failure to Deliver:

	
Applicable

	
Insolvency Filing:

	
Applicable

	
Hedging Disruption:

	
Applicable; provided that Section 12.9(a)(v) of the Equity Definitions is amended by adding the following: “provided that However, any such inability that occurs solely due to the deterioration of the creditworthiness of the Hedging Party shall not be a Hedging Disruption.”

	
Increased Cost of Hedging:

	
Applicable; provided that Section 12.9(a)(vi) of the Equity Definitions is amended by adding the following: “provided that any such materially increased amount that is incurred solely as a result of the deterioration of the creditworthiness of the Hedging Party shall not be an Increased Cost of Hedging.”

	  	  
	
Loss of Stock Borrow:

	
Applicable

	  	  
	
Maximum Stock Loan Rate:

	
200 bps

	
Increased Cost of Stock Borrow:

	
Applicable

	  	  
	
Initial Stock Loan Rate:

	
50 bps

	
Determining Party:

	
For all applicable events, MSCO; provided that following any determination hereunder and upon written request by Issuer, the Determining Party shall provide Issuer with a reasonably detailed explanation in writing of its determination including, where applicable, a description of the methodology and the basis for such determination.

	
Hedging Party:

	
For all applicable events, MSCO

	
Non-Reliance:

	
Applicable

 

  

  

  

 

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Agreements and Acknowledgements Regarding Hedging Activities:

	
Applicable

	
Additional Acknowledgments:

	
Applicable

	
3.  Calculation Agent:

	
MSCO

4.  Account Details and Notices:

(a)           Account for delivery of Shares to Issuer:

Transfer Agent:  Registrar and Transfer Company

Method:  Deposit/Withdrawal At Custodian

Account:  DTC #2783

(b)           Account for payments to Issuer:

Bank First National Bank

Pittsburgh, PA 15212

ABA#: 043-318092

Deposit to: Calgon Carbon Corporation

Account # 95030837

(c)           Account for payments to MSCO:

Citibank, NY

ABA # 021000089

Morgan Stanley & Co.

Account # 38890774

Calgon Carbon Corporation

Account # 023- 05159

(d)           For purposes of this Confirmation:

(i)           Address for notices or communications to Issuer:

Calgon Carbon Corporation

400 Calgon Carbon Drive

P.O. Box 717

Pittsburgh, PA  15230-0717

Attn:  General Counsel

With a copy to:  Treasurer

Telephone:  (412) 787-6700

Facsimile: (412) 787-6676

(ii)           Address for notices or communications to MSCO:

Morgan Stanley & Co. LLC

1585 Broadway

New York, New York 10036-8293

Attention: Brian Lehman

Telephone: (212) 761-8101

Facsimile: 212 507-2714

Email: Brian.Lehman@morganstanley.com

 

  

  

  

 

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With a copy to:

Morgan Stanley & Co. LLC

1585 Broadway

5th Floor

New York, NY 10036

Attention: Anthony Cicia

Telephone: 212-762-4828

Facsimile: 212-507-4338

Email: Anthony.Cicia@morganstanley.com

5.  Amendments to the Equity Definitions.

(a)           Section 9.2(a)(iii) of the Equity Definitions is hereby amended by deleting the words “the Excess Dividend Amount, if any, and”.

(b)           Section 11.2(a) of the Equity Definitions is hereby amended by deleting the words “a diluting or concentrative effect on the theoretical value of the relevant Shares” and replacing them with the words “, in the commercially reasonable judgment of the Calculation Agent, a material economic effect on the relevant Transaction”.

(c)           The first sentence of Section 11.2(c) of the Equity Definitions, prior to clause (A) thereof, is hereby amended to read as follows: ‘(c) If “Calculation Agent Adjustment” is specified as the Method of Adjustment in the related Confirmation of a Share Option Transaction or Share Forward Transaction, then, following the announcement or occurrence of any Potential Adjustment Event, the Calculation Agent will determine whether such Potential Adjustment Event has an economic effect on the Transaction and, if so, will (i) make appropriate adjustment(s), if any, to any one or more of:’ and the portion of such sentence immediately preceding clause (ii) thereof is hereby amended by deleting the words “diluting or concentrative” and the words “(provided that no adjustments will be made to account solely for changes in volatility, expected dividends, stock loan rate or liquidity relative to the relevant Share)” and replacing such latter phrase with the words “(including adjustments to account for changes in volatility, stock loan rate or liquidity relevant to the Shares or to the Transaction)”.

(d)           Section 11.2(e)(vii) of the Equity Definitions is hereby amended by deleting the words “diluting or concentrative effect on the theoretical value of the relevant Shares” and replacing them with the words “, in the commercially reasonable judgment of the Calculation Agent, a material economic effect on the relevant Transaction”.

(e)           Section 12.6(c)(ii) of the Equity Definitions is hereby amended by replacing the words “the Transaction will be cancelled,” in the first line with the words “MSCO will have the right to cancel the Transaction,”.

(f)           Section 12.9(b)(iv) of the Equity Definitions is hereby amended by (A) deleting (1) subsection (A) in its entirety, (2) the phrase “or (B)” following subsection (A) and (3) the phrase “in each case” in subsection (B); and (B) deleting the phrase “neither the Non-Hedging Party nor the Lending Party lends Shares in the amount of the Hedging Shares or” in the penultimate sentence.

(g)           Section 12.9(b)(v) of the Equity Definitions is hereby amended by (A) adding the word “or” immediately before subsection “(B)” and deleting the comma at the end of subsection (A); and (B)(1) deleting subsection (C) in its entirety, (2) deleting the word “or” immediately preceding subsection (C) and (3) replacing in the penultimate sentence the words “either party” with “the Hedging Party” and (4) deleting clause (X) in the final sentence.

  

  

  

 

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6.  Certain Payments and Deliveries by MSCO.

 

Notwithstanding anything to the contrary herein, or in the Equity Definitions, if at any time (i) an Early Termination Date occurs and MSCO would be required to make a payment pursuant to Section 6 of the Agreement or (ii) an Extraordinary Event occurs and MSCO would be required to make a payment pursuant to Article 12 of the Equity Definitions (the amount of any such payment obligation described in Section 6(i) or (ii) above, an “MSCO Payment Amount”), then Issuer shall have the option to require MSCO to settle such payment obligation in Shares in lieu of cash.  If Issuer elects for MSCO to settle an MSCO Payment Amount in Shares, then on such date such MSCO Payment Amount is due, MSCO will deliver a number of Shares with a market value, as determined by the Calculation Agent, equal to all or a portion (which portion may be zero) of the MSCO Payment Amount.  If the market value of such Shares equals a portion, but not all, of the MSCO Payment Amount, then, on the date such MSCO Payment Amount is due, a notional balance (the “Settlement Balance”) shall be established equal to the remaining portion of the MSCO Payment Amount, and MSCO shall commence purchasing Shares for delivery to Issuer.  At the end of each Trading Day on which MSCO purchases Shares pursuant to this Section 6, MSCO shall reduce the Settlement Balance by the amount paid by MSCO to purchase the Shares purchased on such Trading Day; provided, however, that if the amount paid by MSCO to purchase Shares exceeds the 10b-18 VWAP for that Trading Day, MSCO shall reduce the Settlement Balance by the amount equal to the product of (i) the number of Shares purchased on that Trading Day, and (ii) the 10b-18 VWAP.  MSCO shall deliver any Shares purchased on a Trading Day pursuant to this Section 6 to Issuer on the third Exchange Business Day following such Trading Day.  MSCO shall continue so purchasing and delivering Shares until the Settlement Balance has been reduced to zero.  In making any purchases of Shares contemplated by this Section 6, MSCO shall use commercially reasonable efforts to purchase such Shares in a manner that would qualify for the safe harbor provided by Rule 10b-18 if such purchases were made by or on behalf of Issuer.  The period until the Settlement Balance is reduced to zero shall be considered to be part of the Calculation Period for purposes of the representations, warranties and covenants and other provisions herein as the context requires.

7.  Certain Payments and Deliveries by Issuer.

Notwithstanding anything to the contrary herein, or in the Equity Definitions, if at any time (i) an Early Termination Date occurs and Issuer would be required to make a payment pursuant to Section 6 of the Agreement or (ii) an Extraordinary Event occurs and Issuer would be required to make a payment pursuant to Article 12 of the Equity Definitions (any such payment described in Section 7(i) or (ii) above, an “Early Settlement Payment”), then Issuer shall have the option in lieu of making such cash payment, to settle such payment obligation in Shares (such Shares, “Early Settlement Shares”).  In order to elect to deliver Early Settlement Shares, (i) Issuer must notify MSCO of its election by no later than 4:00 p.m., New York City time, on the date that is three Exchange Business Days before the date that the Early Settlement Payment is due, (ii) Issuer must specify whether such Early Settlement Shares are to be sold by means of a registered offering or by means of a private placement and (iii) Issuer must comply with Annex A below.

8.   Special Provisions for Merger Transactions.

Notwithstanding anything to the contrary herein or in the Equity Definitions, Issuer agrees that:

(i)           It will not during the term of the Transaction make, or, to the extent within its control, permit to be made, any public announcement (as defined in Rule 165(f) under the Securities Act) of any Merger Transaction or potential Merger Transaction unless such public announcement is made prior to the open or after the close of the regular trading session on the Exchange for the Shares.

(ii)           To the extent that an announcement of a potential Merger Transaction occurs during the term of the Transaction and such announcement does not cause the Transaction to be cancelled or terminated in whole pursuant to “Extraordinary Events” in Section 2 above, then as soon as practicable following such announcement (but in any event prior to the next opening of the regular trading session on the Exchange), Issuer shall provide MSCO with written notice of such announcement; promptly (but in any event prior to the next opening of the regular trading session on the Exchange), Issuer shall provide MSCO with written notice specifying (x) Issuer’s average daily “Rule 10b-18 purchases” (as defined in Rule 10b-18) during the three full calendar months immediately preceding the Announcement Date that were not effected through MSCO or its affiliates and (y) the number of Shares purchased pursuant to the block purchase proviso in Rule 10b-18(b)(4) under the Exchange Act for the three full calendar months preceding the Announcement Date.  Such written notice shall be deemed to be a certification by Issuer to MSCO that such information is true and correct.  Issuer understands that MSCO will use this information in calculating the trading volume for purposes of Rule 10b-18.  In addition, Issuer shall promptly notify MSCO of the earlier to occur of the completion of such transaction and the completion of the vote by target shareholders.  Issuer acknowledges that any such public announcement may trigger the provision set forth in Section 10 below.  Accordingly, Issuer acknowledges that its actions in relation to any such announcement or transaction must comply with the standards set forth in Section 12(b) below.

 

  

  

  

 

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“Merger Transaction” means any merger, acquisition or similar transaction involving a recapitalization of Issuer as contemplated by Rule 10b-18(a)(13)(iv) under the Exchange Act.

9.  Special Provisions for Acquisition Transaction Announcements.

(a)           If an Acquisition Transaction Announcement occurs on or prior to the final Valuation Date, then the Forward Price shall be determined as if the words “minus (ii) the Discount” were deleted from the definition thereof. If an Acquisition Transaction Announcement occurs after the Trade Date but prior to the Lock-Out Date, the Lock-Out Date shall be deemed to be the date of such Acquisition Transaction Announcement.

(b)           “Acquisition Transaction Announcement” means (i) the announcement of an Acquisition Transaction other than a Hostile Tender Offer, (ii) an announcement that Issuer or any of its subsidiaries has entered into an agreement, a letter of intent or an understanding designed to result in an Acquisition Transaction, (iii) the announcement of the intention to solicit or enter into, or to explore strategic alternatives or other similar undertaking that may include, an Acquisition Transaction, (iv) any other announcement that in the reasonable judgment of the Calculation Agent may result in an Acquisition Transaction or (v) any announcement subsequent to an Acquisition Transaction Announcement relating to an amendment, extension, withdrawal or other change to the subject matter of the previous Acquisition Transaction Announcement.

(c)           “Acquisition Transaction” means (i) any Merger Event (for purposes of this definition, the definition of Merger Event shall be read with the references therein to “100%” being replaced by “20%” and to “50%” by “75%” and without reference to the clause beginning immediately following the definition of Reverse Merger therein to the end of such definition), Tender Offer or Merger Transaction or any other transaction involving the merger of Issuer with or into any third party, (ii) the sale or transfer of all or substantially all of the assets or liabilities of Issuer, (iii) a recapitalization, reclassification, binding share exchange or other similar transaction, (iv) any acquisition, lease, exchange, transfer, disposition (including by way of spin-off or distribution) of assets or liabilities (including any capital stock or other ownership interests in subsidiaries) or other similar event by Issuer or any of its subsidiaries where the consideration transferable or receivable by or to Issuer or its subsidiaries in respect of each transaction exceeds 50% of the market capitalization of Issuer and (v) any transaction with respect to which Issuer or its board of directors has a legal obligation to make a recommendation to its shareholders in respect of such transaction (whether pursuant to Rule 14e-2 under the Exchange Act or otherwise); provided, however, that notwithstanding anything to the contrary herein, a Hostile Tender Offer shall be excluded from the foregoing definition and shall not constitute an Acquisition Transaction.

  

  

  

 

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(d)           “Hostile Tender Offer” means the announcement by any person or entity of any intention to purchase or otherwise obtain the requisite number of Shares (whether or not subsequently amended) that, if completed, would lead to a Tender Offer, where such transaction has not been initiated, approved by, agreed to, recommended by or otherwise consented to by Company or its board of directors, or negotiated by Company or any authorized representative of Company. Company agrees to immediately notify Dealer on any date (each, a “Reference Date”) after the occurrence of a Hostile Tender Offer on which Company or its board of directors approves, agrees to, recommends or otherwise consents to such transaction, or Company or an authorized representative of Company negotiates such transaction, or Company or its board of directors has a legal obligation to make a recommendation to Company’s shareholders in respect of such transaction and does not recommend the rejection thereof. Immediately following the occurrence of a Reference Date in respect of any Hostile Tender Offer, such transaction shall cease to constitute, and shall no longer be treated as, a Hostile Tender Offer for purposes of  this section.

10.  MSCO Adjustments.

In the event that MSCO reasonably determines, in its commercially reasonable discretion upon the advice of counsel,  that it is appropriate with regard to any legal, regulatory or self-regulatory requirements or related policies and procedures (whether or not such requirements, policies or procedures are imposed by law or have been voluntarily adopted by MSCO, and including, without limitation, Rule 10b-18, Rule 10b-5, Regulations 13D-G and Regulations 14 D-E under the Exchange Act, but provided that such requirements, policies or procedures are generally applicable in similar situations and applied to the relevant Transaction in a non-discriminatory manner), for MSCO to refrain from purchasing Shares or engaging in other market activity or to purchase fewer than the number of Shares or to engage in fewer or smaller other market transactions MSCO would otherwise purchase or engage in on any Trading Day on or prior to the last day of the Calculation Period, then MSCO may, in its discretion, elect that a Market Disruption shall be deemed to have occurred on such Trading Day. MSCO shall notify Issuer upon the exercise of MSCO’s rights pursuant to this Section 10 and shall subsequently notify Issuer on the day MSCO believes that the circumstances giving rise to such exercise have changed.

11.  Covenants.

Issuer covenants and agrees that:

(a)           Until the end of the Potential Purchase Period (as defined below), neither it nor any of its affiliated purchasers (as defined in Rule 10b-18 under the Exchange Act) shall directly or indirectly (which shall be deemed to include the writing or purchase of any cash-settled or other derivative or structured Share repurchase transaction with a hedging period, calculation period or settlement valuation period or similar period that overlaps with the Transaction) purchase, offer to purchase, place any bid or limit order relating to a purchase of or commence any tender offer relating to Shares (or any security convertible into or exchangeable for Shares) without the prior written approval of MSCO or take any other action that would cause the purchase by MSCO of any Shares in connection with this Agreement not to qualify for the safe harbor provided in Rule 10b-18 under the Exchange Act (assuming for the purposes of this paragraph that such safe harbor were otherwise available for such purchases).  “Potential Purchase Period” means the period from, and including, the Trade Date to, and including, the latest of (i) the last day of the Calculation Period, (ii) the earlier of (A) the date ten Exchange Business Days immediately following the last day of the Calculation Period and (B) the Scheduled Valuation Date and (iii) if an Early Termination Date occurs or the Transaction is cancelled pursuant to Article 12 of the Equity Definitions, a date determined by MSCO in its commercially reasonable discretion and communicated to Issuer no later than the Exchange Business Day immediately following such date.

(b)           It will comply with all laws, rules and regulations applicable to it (including, without limitation, the Securities Act and the Exchange Act) in connection with the transactions contemplated by this Confirmation.

  

  

  

 

Page 13

 

 

(c)           Without limiting the generality of Section 13.1 of the Equity Definitions, it is not relying, and has not relied, upon MSCO or any of its representatives or advisors with respect to the legal, accounting, tax or other implications of this Agreement and that it has conducted its own analyses of the legal, accounting, tax and other implications of this Agreement, and that MSCO and its affiliates may from time to time effect transactions for their own account or the account of customers and hold positions in securities or options on securities of Issuer and that MSCO and its affiliates may continue to conduct such transactions during the term of this Agreement.  Without limiting the generality of the foregoing, Issuer acknowledges that MSCO is not making any representations or warranties or taking any position or expressing any view with respect to the treatment of the Transaction under any accounting standards including ASC Topic 260, Earnings Per Share, ASC Topic 815, Derivatives and Hedging, or ASC Topic 480, Distinguishing Liabilities from Equity and ASC 815-40, Derivatives and Hedging – Contracts in Entity’s Own Equity (or any successor issue statements) or under FASB’s Liabilities & Equity Project.

(d)           Neither it nor any affiliates shall take any action that would cause a restricted period (as defined in Regulation M under the Exchange Act (“Regulation M”)) to be applicable to any purchases of Shares, or of any security for which Shares is a reference security (as defined in Regulation M), by Issuer or any affiliated purchasers (as defined in Regulation M) of Issuer during the Potential Purchase Period.

(e)           It will not make any election or take any other action in connection with the Transaction while aware of any material nonpublic information regarding Issuer or the Shares.

(f)           It shall not declare or pay any Extraordinary Dividend until the earlier of (i) the Scheduled Valuation Date or (ii) the date ten Exchange Business Days immediately following the Valuation Date.

12.  Representations, Warranties and Acknowledgments.

(a)           Issuer hereby represents and warrants to MSCO on the date hereof and on and as of the Initial Share Delivery Date that:

(i)           (A) None of Issuer and its officers and directors is aware of any material nonpublic information regarding Issuer or the Shares, and is entering into the Transaction in good faith and not as part of a plan or scheme to evade the prohibitions of federal securities laws, including, without limitation, Rule 10b-5 under the Exchange Act and (B) Issuer agrees not to alter or deviate from the terms of the Agreement or enter into or alter a corresponding or hedging transaction or position with respect to the Shares (including, without limitation, with respect to any securities convertible or exchangeable into the Shares) during the term of the Agreement.  Without limiting the generality of the foregoing, all reports and other documents filed by Issuer with the Securities and Exchange Commission pursuant to the Exchange Act when considered as a whole (with the more recent such reports and documents deemed to amend inconsistent statements contained in any earlier such reports and documents) do not contain any untrue statement of a material fact or any omission of a material fact required to be stated therein or necessary to make the statements therein, in the light of the circumstances in which they were made, not misleading.

(ii)           The transactions contemplated by this Confirmation have been authorized under Issuer’s publicly announced program to repurchase Shares and, prior to the Trade Date, MSCO shall deliver to Issuer a resolution of Issuer’s board of directors authorizing the Transaction and such other certificate or certificates as MSCO shall reasonably request.

(iii)           Issuer is not entering into this Agreement to facilitate a distribution of the Shares (or any security convertible into or exchangeable for Shares) or in connection with a future issuance of securities.

(iv)           Issuer is not entering into this Agreement to create actual or apparent trading activity in the Shares (or any security convertible into or exchangeable for Shares) or to raise or depress the price of the Shares (or any security convertible into or exchangeable for Shares) in violation of the federal securities laws.

  

  

  

 

Page 14

 

 

(v)           There have been no purchases of Shares in Rule 10b-18 purchases of blocks pursuant to the once-a-week block exception contained in Rule 10b-18(b)(4) by or for Issuer or any of its affiliated purchasers during each of the four calendar weeks preceding the Trade Date and during the calendar week in which the Trade Date occurs (“Rule 10b-18 purchase”, “blocks” and “affiliated purchaser” each being used as defined in Rule 10b-18).

(vi)           Issuer is as of the date hereof, and after giving effect to the transactions contemplated hereby will be, Solvent.  As used in this paragraph, the term “Solvent” means, with respect to a particular date, that on such date (A) the present fair market value (or present fair saleable value) of the assets of Issuer is not less than the total amount required to pay the liabilities of Issuer on its total existing debts and liabilities (including contingent liabilities) as they become absolute and matured, (B) Issuer is able to realize upon its assets and pay its debts and other liabilities, contingent obligations and commitments as they mature and become due in the normal course of business, (C) assuming consummation of the transactions as contemplated by this Agreement, Issuer is not incurring debts or liabilities beyond its ability to pay as such debts and liabilities mature, (D) Issuer is not engaged in any business or transaction, and does not propose to engage in any business or transaction, for which its property would constitute unreasonably small capital after giving due consideration to the prevailing practice in the industry in which Issuer is engaged, (E) Issuer is not a defendant in any civil action that could reasonably be expected to result in a judgment that Issuer is or would become unable to satisfy, (F) Issuer is not “insolvent” (as such term is defined under Section 101(32) of the U.S. Bankruptcy Code (Title 11 of the United States Code) (the “Bankruptcy Code”)) and (G) Issuer would be able to purchase Shares with an aggregate purchase price equal to the Prepayment Amount in compliance with the corporate laws of the jurisdiction of its incorporation.

(vii)           Issuer is not, and after giving effect to the transactions contemplated hereby will not be, required to register as an “investment company” as such term is defined in the Investment Company Act of 1940, as amended.

(viii)           No state or local (including non-U.S. jurisdictions) law, rule, regulation or regulatory order applicable to the Shares would give rise to any reporting, consent, registration or other requirement (including without limitation a requirement to obtain prior approval from any person or entity) as a result of MSCO or its affiliates owning or holding (however defined) Shares.

(b)           Issuer acknowledges and agrees that the Initial Shares may be sold short to Issuer. Issuer further acknowledges and agrees that MSCO may purchase Shares in connection with the Transaction, which Shares may be used to cover all or a portion of such short sale or may be delivered to Issuer.  Such purchases and any other market activity by MSCO will be conducted independently of Issuer by MSCO as principal for its own account.  All of the actions to be taken by MSCO in connection with the Transaction shall be taken by MSCO independently and without any advance or subsequent consultation with Issuer.  It is the intent of the parties that the Transaction comply with the requirements of Rule 10b5-1(c)(1)(i)(B) of the Exchange Act, and the parties agree that this Confirmation shall be interpreted to comply with the requirements of such Rule, and Issuer shall not take any action that results in the Transaction not so complying with such requirements.  Without limiting the generality of the preceding sentence, Issuer acknowledges and agrees that (A) Issuer does not have, and shall not attempt to exercise, any influence over how, when or whether MSCO effects any market transactions in connection with the Transaction and (B) neither Issuer nor its officers or employees shall, directly or indirectly, communicate any information regarding Issuer or the Shares to any employee of MSCO or its Affiliates, other than employees identified by MSCO to Issuer in writing as employees not responsible for executing market transactions in connection with the Transaction.  Issuer also acknowledges and agrees that any amendment, modification, waiver or termination of this Confirmation must be effected in accordance with the requirements for the amendment or termination of a “plan” as defined in Rule 10b5-1(c) under the Exchange Act.  Without limiting the generality of the foregoing, any such amendment, modification, waiver or termination shall be made in good faith and not as part of a plan or scheme to evade the prohibitions of Rule 10b-5 under the Exchange Act, and no such amendment, modification or waiver shall be made at any time at which Issuer or any officer or director of Issuer is aware of any material nonpublic information regarding Issuer or the Shares.

  

  

  

 

Page 15

 

 

(c)           Each of Issuer and MSCO represents and warrants to the other that it is an “eligible contract participant” as defined in Section 1a(12) of the U.S. Commodity Exchange Act, as amended.

(d)           Each of Issuer and MSCO acknowledges that the offer and sale of the Transaction to it is intended to be exempt from registration under the Securities Act by virtue of Section 4(2) thereof.  Accordingly, it represents and warrants to the other party that (i) it has the financial ability to bear the economic risk of its investment in the Transaction and is able to bear a total loss of its investment, (ii) it is an “accredited investor” as that term is defined in Regulation D as promulgated under the Securities Act, (iii) it is entering into the Transaction for its own account and without a view to the distribution or resale thereof and (iv) the assignment, transfer or other disposition of the Transaction has not been and will not be registered under the Securities Act and is restricted under this Confirmation, the Securities Act and state securities laws.

13.  Acknowledgements of Issuer Regarding Hedging and Market Activity.

Issuer agrees, understands and acknowledges that:

(a)            during the period from (and including) the Trade Date to (and including) the Settlement Date, MSCO and its Affiliates may buy or sell Shares or other securities or buy or sell options or futures contracts or enter into swaps or other derivative transactions in order to adjust its Hedge Position with respect to the Transaction;

(b)            MSCO and its Affiliates also may be active in the market for the Shares or options, futures contracts, swaps or other derivative transactions relating to the Shares other than in connection with hedging activities in relation to the Transaction;

(c)            MSCO shall make its own determination as to whether, when and in what manner any hedging or market activities in Issuer’s securities or other securities or transactions shall be conducted and shall do so in a manner that it deems appropriate to hedge its price and market risk with respect to the Transaction; and

(d)            any such market activities of MSCO and its Affiliates may affect the market price and volatility of the Shares, including the 10b-18 VWAP and the Forward Price, each in a manner that may be adverse to Issuer.

14.  Other Provisions.

(a)            Issuer agrees and acknowledges that MSCO is a “financial institution” and “financial participant” within the meaning of Sections 101(22) and 101(22A) of the Bankruptcy Code.  The parties hereto further agree and acknowledge that it is the intent of the parties that (A) this Confirmation is a “securities contract,” as such term is defined in Section 741(7) of the Bankruptcy Code, with respect to which each payment and delivery hereunder or in connection herewith is a “termination value,” “payment amount” or “other transfer obligation” within the meaning of Section 362 of the Bankruptcy Code and a “settlement payment,” within the meaning of Section 546 of the Bankruptcy Code, and (B) MSCO is entitled to the protections afforded by, among other sections, Sections 362(b)(6), 362(b)(17), 362(o), 546(e), 555 and 561 of the Bankruptcy Code.

(b)            MSCO and Issuer hereby agree and acknowledge that MSCO has authorized Issuer to disclose the Transaction to any and all persons, and there are no express or implied agreements, arrangements or understandings to the contrary, and authorizes Issuer to use any information that Issuer receives or has received with respect to the Transaction in any manner.

  

  

  

 

Page 16

 

 

(c)            In the event Issuer becomes the subject of proceedings (“Bankruptcy Proceedings”) under the Bankruptcy Code or any other applicable bankruptcy or insolvency statute, any rights or claims of MSCO hereunder in respect of the Transaction shall rank for all purposes no higher than, but on a parity with, the rights or claims of holders of Shares, and MSCO hereby agrees that its rights and claims hereunder shall be subordinated to those of all parties with claims or rights against Issuer (other than common stockholders) to the extent necessary to assure such ranking. Without limiting the generality of the foregoing, after the commencement of Bankruptcy Proceedings, the claims of MSCO hereunder shall for all purposes have rights equivalent to the rights of a holder of a percentage of the Shares equal to the aggregate amount of such claims (the “Claim Amount”) taken as a percentage of the sum of (i) the Claim Amount and (ii) the aggregate fair market value of all outstanding Shares on the record date for distributions made to the holders of such Shares in the related Bankruptcy Proceedings.  Notwithstanding any right it might otherwise have to assert a higher priority claim in any such Bankruptcy Proceedings, MSCO shall be entitled to receive a distribution solely to the extent and only in the form that a holder of such percentage of the Shares would be entitled to receive in such Bankruptcy Proceedings, and, from and after the commencement of such Bankruptcy Proceedings, MSCO expressly waives (i) any other rights or distributions to which it might otherwise be entitled in such Bankruptcy Proceedings in respect of its rights and claims hereunder and (ii) any rights of setoff it might otherwise be entitled to assert in respect of such rights and claims.

(d)            Notwithstanding any provision of this Confirmation or any other agreement between the parties to the contrary, neither the obligations of Issuer nor the obligations of MSCO hereunder are secured by any collateral, security interest, pledge or lien.

(e)            Each party waives any and all rights it may have to set off obligations arising under the Agreement and the Transaction against other obligations between the parties, whether arising under any other agreement, applicable law or otherwise.

(f)            Notwithstanding anything to the contrary herein, MSCO may, by prior notice to Issuer, satisfy its obligation to deliver any Shares or other securities on any date due (an “Original Delivery Date”) by making separate deliveries of Shares or such securities, as the case may be, at more than one time on or prior to such Original Delivery Date, so long as the aggregate number of Shares and other securities so delivered on or prior to such Original Delivery Date is equal to the number required to be delivered on such Original Delivery Date.

(g)            It shall constitute an Additional Termination Event with respect to which the Transaction is the sole Affected Transaction and Issuer is the sole Affected Party and MSCO shall be the party entitled to designate an Early Termination Date pursuant to Section 6(b) of the Agreement if, at any time on or prior to the Valuation Date, the price per Share on the Exchange, as determined by the Calculation Agent, is at or below the Threshold Price (as specified in Schedule I).

15.  Share Cap.

Notwithstanding any other provision of this Confirmation or the Agreement to the contrary, in no event shall Issuer be required to deliver to MSCO in the aggregate a number of Shares that exceeds the Share Cap as of the date of delivery (as specified in Schedule I).

16.  Transfer and Assignment.

MSCO may transfer or assign its rights and obligations hereunder and under the Agreement, in whole or in part, to any of its Affiliates of equivalent credit quality (or whose obligations are guaranteed by an entity of equivalent credit quality) without the consent of Issuer.

 

  

  

  

 

Page 17

 

17.  Governing Law; Jurisdiction; Waiver.

THIS CONFIRMATION AND ANY CLAIM, CONTROVERSY OR DISPUTE ARISING UNDER OR RELATED TO THIS CONFIRMATION SHALL BE GOVERNED BY THE LAWS OF THE STATE OF NEW YORK.  THE PARTIES HERETO IRREVOCABLY SUBMIT TO THE EXCLUSIVE JURISDICTION OF THE COURTS OF THE STATE OF NEW YORK AND THE UNITED STATES COURT FOR THE SOUTHERN DISTRICT OF NEW YORK IN CONNECTION WITH ALL MATTERS RELATING HERETO AND WAIVE ANY OBJECTION TO THE LAYING OF VENUE IN, AND ANY CLAIM OF INCONVENIENT FORUM WITH RESPECT TO, THESE COURTS.

EACH PARTY HEREBY IRREVOCABLY WAIVES (ON ITS OWN BEHALF AND, TO THE EXTENT PERMITTED BY APPLICABLE LAW, ON BEHALF OF ITS STOCKHOLDERS) ALL RIGHT TO TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM (WHETHER BASED ON CONTRACT, TORT OR OTHERWISE) ARISING OUT OF OR RELATING TO THE TRANSACTION OR THE ACTIONS OF ISSUER OR ITS AFFILIATES IN THE NEGOTIATION, PERFORMANCE OR ENFORCEMENT HEREOF.

Remainder of Page Intentionally Blank

 

 

 

 

  

  

  

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Please confirm that the foregoing correctly sets forth the terms of our agreement by executing this Confirmation and returning it to us by facsimile to the number provided on the attached facsimile cover page.

Confirmed as of the date first written above:

	
CALGON CARBON CORPORATION

	
MORGAN STANLEY & CO. LLC

	 	 	 	 	 
	 	 	 	 	 
	
By:

	/s/ Richard D. Rose	 	
By:

	/s/ Serkan Savasoglu	 
	 	
Name:  Richard D. Rose

	 	 	
Name: Serkan Savasoglu

	 
	 	
Title: Senior Vice President, General

	 	 	
Title:  Managing Director

	 
	 	Counsel and Secretary	 	 	 	 

  

  

  

 

ANNEX A

 

BUYER SETTLEMENT PROVISIONS

 

1.           The following Buyer Settlement Provisions shall apply to the extent indicated under the Confirmation:

 

	 	
Settlement Currency:

	
USD

	 	 	 
	 	
Settlement Method Election:

	
Applicable; provided that (i) Section 7.1 of the Equity Definitions is hereby amended by deleting the word “Physical” in the sixth line thereof and replacing it with the words “Net Share” and (ii) the Electing Party may make a settlement method election only if the Electing Party represents and warrants to Seller in writing on the date it notifies Seller of its election that, as of such date, the Electing Party is not aware of any material non-public information concerning Buyer or the Shares and is electing the settlement method in good faith and not as part of a plan or scheme to evade compliance with the federal securities laws.

	 	 	 
	 	
Electing Party:

	
Buyer

	 	 	 
	 	

Settlement Method Election Date:

	
The earlier of (i) the Scheduled Valuation Date and (ii) the second Scheduled Trading Day immediately following the Valuation Date (if different than the Scheduled Valuation Date), in which case the election under Section 7.1 of the Equity Definitions shall be made no later than 10 minutes prior to the open of trading on the Exchange on such second Scheduled Trading Day), as the case may be.

	 	 	 
	 	

Default Settlement Method:

	
Cash Settlement

	 	  	  
	 	

Forward Cash Settlement Amount:

	
The Settlement Amount multiplied by the Settlement Price.

	 	  	  
	 	
Settlement Price:

	
The arithmetic mean of the 10b-18 VWAP for the Scheduled Trading Days in the Settlement Valuation Period, subject to Valuation Disruption as specified in the Confirmation.

	 	 	 
	 	

Settlement Valuation Period:

	

A number of Scheduled Trading Days selected by the Calculation Seller in its commercially reasonable discretion, beginning on the Scheduled Trading Day immediately following the Settlement Method Election Date.

	 	 	 
	 	
Cash Settlement:

	
If Cash Settlement is applicable, then Buyer shall pay to Seller the absolute value of the Forward Cash Settlement Amount on the Cash Settlement Payment Date.

	 	 	 
	 	

Cash Settlement Payment Date:

	
The date one Settlement Cycle following the last day of the Settlement Valuation Period.

	 	 	 
	 	

Net Share Settlement Procedures:

	
If Net Share Settlement is applicable, Net Share Settlement shall be made in accordance with paragraphs 2 through 7 below.

 

  

  

  

 

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2.           Net Share Settlement shall be made by delivery on the Cash Settlement Payment Date of a number of Shares satisfying the conditions set forth in paragraph 3 below (the “Registered Settlement Shares”), or a number of Shares not satisfying such conditions (the “Unregistered Settlement Shares”), in either case with a value equal to the absolute value of the Forward Cash Settlement Amount, with such Shares’ value based on the value thereof to Seller (which value shall, in the case of Unregistered Settlement Shares, take into account a commercially reasonable illiquidity discount not to exceed [  %]), in each case as determined by the Calculation Seller in its commercially reasonable judgment acting in good faith.

 

3.           Buyer may only deliver Registered Settlement Shares pursuant to paragraph 2 above if:

 

(a)           a registration statement covering public resale of the Registered Settlement Shares by Seller (the “Registration Statement”) shall have been filed with the Securities and Exchange Commission under the Securities Act and been declared or otherwise become effective on or prior to the date of delivery, and no stop order shall be in effect with respect to the Registration Statement; a printed prospectus relating to the Registered Settlement Shares (including any prospectus supplement thereto, the “Prospectus”) shall have been delivered to Seller, in such quantities as Seller shall reasonably have requested, on or prior to the date of delivery;

 

(b)           the form and content of the Registration Statement and the Prospectus (including, without limitation, any sections describing the plan of distribution) shall be satisfactory to Seller;

 

(c)           as of or prior to the date of delivery, Seller and its Sellers shall have been afforded a reasonable opportunity to conduct a due diligence investigation with respect to Buyer customary in scope for underwritten offerings of equity securities and the results of such investigation are satisfactory to Seller, in its discretion; and

 

(d)           as of the date of delivery, an agreement (the “Underwriting Agreement”) shall have been entered into with Seller in connection with the public resale of the Registered Settlement Shares by Seller substantially similar to underwriting agreements customary for underwritten offerings of equity securities, in form and substance commercially reasonably satisfactory to Seller and Buyer, which Underwriting Agreement shall include, without limitation, provisions substantially similar to those contained in such underwriting agreements of a publicly traded company relating, without limitation, to the customary indemnification of, and contribution in connection with the liability of, Seller and its affiliates and the provision of customary opinions, accountants’ comfort letters and lawyers’ negative assurance letters.

 

4.           If Buyer delivers Unregistered Settlement Shares pursuant to paragraph 2 above:

 

(a)           all Unregistered Settlement Shares shall be delivered to Seller (or any affiliate of Seller designated by Seller) pursuant to the exemption from the registration requirements of the Securities Act provided by Section 4(2) thereof;

 

(b)           as of or prior to the date of delivery, Seller and any potential purchaser of any such Shares from Seller (or any affiliate of Seller designated by Seller) identified by Seller shall be afforded a commercially reasonable opportunity to conduct a due diligence investigation with respect to Buyer customary in scope for private placements of equity securities (including, without limitation, the right to have made available to them for inspection all financial and other records, pertinent corporate documents and other information reasonably requested by them);

 

(c)           as of the date of delivery, Buyer shall enter into an agreement (a “Private Placement Agreement”) with Seller (or any affiliate of Seller designated by Seller) in connection with the private placement of such shares by Buyer to Seller (or any such affiliate) and the private resale of such shares by Seller (or any such affiliate), substantially similar to private placement purchase agreements customary for private placements of equity securities, in form and substance commercially reasonably satisfactory to Seller and Buyer, which Private Placement Agreement shall include, without limitation, provisions substantially similar to those contained in such private placement purchase agreements relating  to the customary indemnification of, and contribution in connection with the liability of, Seller and its affiliates and the provision of customary opinions, accountants’ comfort letters and lawyers’ negative assurance letters, and shall provide for the payment by Buyer of all fees and expenses in connection with such resale, including all fees and expenses of counsel for Seller, and shall contain representations, warranties, covenants and agreements of Buyer reasonably necessary or advisable to establish and maintain the availability of an exemption from the registration requirements of the Securities Act for such resales; and

 

  

  

  

 

Page 21

 

 

(d)           in connection with the private placement of such shares by Buyer to Seller (or any such affiliate) and the private resale of such shares by Seller (or any such affiliate), Buyer shall, if so requested by Seller, prepare, in cooperation with Seller, a private placement memorandum in form and substance reasonably satisfactory to Seller and Buyer.

 

5.           Seller, itself or through an affiliate (the “Selling Seller”) or any underwriter(s), will sell all, or such lesser portion as may be required hereunder, of the Registered Settlement Shares or Unregistered Settlement Shares and any Make-whole Shares (as defined below) (together, the “Settlement Shares”) delivered by Buyer to Seller pursuant to paragraph 6 below commencing on the Cash Settlement Payment Date and continuing until the date on which the aggregate Net Proceeds (as such term is defined below) of such sales, as determined by Seller, is equal to the absolute value of the Forward Cash Settlement Amount (such date, the “Final Resale Date”).  If the proceeds of any sale(s) made by Seller, the Selling Seller or any underwriter(s), net of any fees and commissions (including, without limitation, underwriting or placement fees) customary for similar transactions under the circumstances at the time of the offering, together with carrying charges and expenses incurred in connection with the offer and sale of the Shares (including, but without limitation to, the covering of any over-allotment or short position (syndicate or otherwise)) (the “Net Proceeds”) exceed the absolute value of the Forward Cash Settlement Amount, Seller will refund, in USD, such excess to Buyer on the date that is three (3) Currency Business Days following the Final Resale Date, and, if any portion of the Settlement Shares remains unsold, Seller shall return to Buyer on that date such unsold Shares.

 

6.           If the Calculation Seller determines that the Net Proceeds received from the sale of the Registered Settlement Shares or Unregistered Settlement Shares or any Make-whole Shares, if any, pursuant to this paragraph 6 are less than the absolute value of the Forward Cash Settlement Amount (the amount in USD by which the Net Proceeds are less than the absolute value of the Forward Cash Settlement Amount being the “Shortfall”), Buyer shall, on the Exchange Business Day next succeeding the day on which such Shortfall is established (the “Make-whole Notice Date”), deliver to Seller a notice of Buyer’s election that Buyer shall either (i) pay an amount in cash equal to the Shortfall on the day that is one (1) Currency Business Day after the Make-whole Notice Date, or (ii) deliver additional Shares.  If Buyer elects to deliver to Seller additional Shares, then Buyer shall deliver additional Shares in compliance with the terms and conditions of paragraph 3 or paragraph 4 above, as the case may be (the “Make-whole Shares”), on the first Clearance System Business Day which is also an Exchange Business Day following the Make-whole Notice Date in such number as the Calculation Seller reasonably believes would have a market value on that Exchange Business Day equal to the Shortfall.  Such Make-whole Shares shall be sold by Seller in accordance with the provisions above; provided that if the sum of the Net Proceeds from the sale of the originally delivered Shares and the Net Proceeds from the sale of any Make-whole Shares is less than the absolute value of the Forward Cash Settlement Amount then Buyer shall, at its election, either make such cash payment or deliver to Seller further Make-whole Shares until such Shortfall has been reduced to zero.

 

7.           Notwithstanding the foregoing, in no event shall the aggregate number of Settlement Shares and Make-whole Shares be greater than the Reserved Shares minus the amount of any Shares actually delivered by Buyer under any other Transaction(s) under this Confirmation (the result of such calculation, the “Capped Number”).  Buyer represents and warrants (which shall be deemed to be repeated on each day that a Transaction is outstanding) that the Capped Number is equal to or less than the number of Shares determined according to the following formula:

 

  

  

  

 

Page 22

 

 

A – B

 

	
  

	
Where

	
A = the number of authorized but unissued shares of the Buyer that are not reserved for future issuance on the date of the determination of the Capped Number; and

 

	
  

	
B = the maximum number of Shares required to be delivered to third parties if Buyer elected Net Share Settlement of all transactions in the Shares (other than Transactions in the Shares under this Confirmation) with all third parties that are then currently outstanding and unexercised.

 

“Reserved Shares” means [          ] Shares.EXHIBIT 10.2

--------------------------------------------------------------------------------
                              IN MEDIA CORPORATION
                   AMENDED AND RESTATED 2010 STOCK OPTION PLAN
--------------------------------------------------------------------------------

1. Purpose. The purpose of this Plan is to advance the interests of In Media
Corporation (the "Company"), by providing an additional incentive to attract,
retain and motivate highly qualified and competent persons who are key to the
Company, including key employees, consultants, independent contractors, Officers
and Directors, and upon whose efforts and judgment the success of the Company
and its Subsidiaries is largely dependent, by authorizing the grant of options
to purchase Common Stock of the Company and other related benefits to persons
who are eligible to participate hereunder, thereby encouraging stock ownership
in the Company by such persons, all upon and subject to the terms and conditions
of this Plan.

2. Definitions. As used herein, the following terms shall have the meanings
indicated:

     (a)  "Board" shall mean the Board of Directors of the Company.

     (b)  "Cause" shall mean any of the following:

          (i) a determination by the Company that there has been a willful,
reckless or grossly negligent failure by the Optionee to perform his or her
duties as an employee of the Company;

          (ii) a determination by the Company that there has been a willful
breach by the Optionee of any of the material terms or provisions of any
employment agreement between such Optionee and the Company;

          (iii) any conduct by the Optionee that either results in his or her
conviction of a felony under the laws of the United States of America or any
state thereof, or of an equivalent crime under the laws of any other
jurisdiction;

          (iv) a determination by the Company that the Optionee has committed an
act or acts involving fraud, embezzlement, misappropriation, theft, breach of
fiduciary duty or material dishonesty against the Company, its properties or
personnel;

          (v) any act by the Optionee that the Company determines to be in
willful or wanton disregard of the Company's best interests, or which results,
or is intended to result, directly or indirectly, in improper gain or personal
enrichment of the Optionee at the expense of the Company;

          (vi) a determination by the Company that there has been a willful,
reckless or grossly negligent failure by the Optionee to comply with any rules,
regulations, policies or procedures of the Company, or that the Optionee has
engaged in any act, behavior or conduct demonstrating a deliberate and material
violation or disregard of standards of behavior that the Company has a right to
expect of its employees; or

          (vii) if the Optionee, while employed by the Company and for two years
thereafter, violates a confidentiality and/or noncompete agreement with the
Company, or fails to safeguard, divulges, communicates, uses to the detriment of
the Company or for the benefit of any person or persons, or misuses in any way,
any Confidential Information; PROVIDED, HOWEVER, that, if the Optionee has
<PAGE>
entered into a written employment agreement with the Company which remains
effective and which expressly provides for a termination of such Optionee's
employment for "cause," the term "Cause" as used herein shall have the meaning
as set forth in the Optionee's employment agreement in lieu of the definition of
"Cause" set forth in this Section 2(b).

     (c) "Change of Control" shall mean the acquisition by any person or group
(as that term is defined in the Exchange Act, and the rules promulgated pursuant
to that act) in a single transaction or a series of transactions of thirty
percent (30%) or more in voting power of the outstanding stock of the Company
and a change of the composition of the Board of Directors so that, within two
years after the acquisition took place, a majority of the members of the Board
of Directors of the Company, or of any corporation with which the Company may be
consolidated or merged, are persons who were not directors or officers of the
Company or one of its Subsidiaries immediately prior to the acquisition, or to
the first of a series of transactions which resulted in the acquisition of
thirty percent (30%) or more in voting power of the outstanding stock of the
Company.

     (d) "Code" shall mean the Internal Revenue Code of 1986, as amended.

     (e) "Committee" shall mean the stock option committee appointed by the
Board or, if not appointed, the Board.

     (f) "Common Stock" shall mean the Company's Common Stock, par value $.001
per share.

     (g) "Director" shall mean a member of the Board.

     (h) "Employee" shall mean any person, including officers, directors,
consultants and independent contractors employed by the Company or any parent or
Subsidiary of the Company within the meaning of Section 3401(c) of the
regulators promulgated thereunder.

     (i) "Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended.

     (j) "Fair Market Value" of a Share on any date of reference shall be the
Closing Price of a share of Common Stock on the business day immediately
preceding such date, unless the Committee in its sole discretion shall determine
otherwise in a fair and uniform manner. For this purpose, the "Closing Price" of
the Common Stock on any business day shall be (i) if the Common Stock is listed
or admitted for trading on any United States national securities exchange, or if
actual transactions are otherwise reported on a consolidated transaction
reporting system, the last reported sale price of the Common Stock on such
exchange or reporting system, as reported in any newspaper of general
circulation, (ii) if the Common Stock is quoted on The Nasdaq Stock Market
("Nasdaq"), or any similar system of automated dissemination of quotations of
securities prices in common use, the mean between the closing high bid and low
asked quotations for such day of the Common Stock on such system, or (iii) if
neither clause (i) nor (ii) is applicable, the mean between the high bid and low
asked quotations for the Common Stock as reported by the National Quotation
Bureau, Incorporated if at least two securities dealers have inserted both bid
and asked quotations for the Common Stock on at least five of the 10 preceding
days. If the information set forth in clauses (i) through (iii) above is
unavailable or inapplicable to the Company (e.g., if the Company's Common Stock
is not then publicly traded or quoted), then the "Fair Market Value" of a Share
shall be the fair market value (i.e., the price at which a willing seller would
sell a Share to a willing buyer when neither is acting under compulsion and when

                                       2
<PAGE>
both have reasonable knowledge of all relevant facts) of a share of the Common
Stock on the business day immediately preceding such date as the Committee in
its sole and absolute discretion shall determine in a fair and uniform manner.

     (k) "Incentive Stock Option" shall mean an incentive stock option as
defined in Section 422 of the Code.

     (l) "Non-Statutory Stock Option" or "Nonqualified Stock Option" shall mean
an Option which is not an Incentive Stock Option.

     (m) "Officer" shall mean the Company's chairman, president, principal
financial officer, principal accounting officer (or, if there is no such
accounting officer, the controller), any vice-president of the Company in charge
of a principal business unit, division or function (such as sales,
administration or finance), any other officer who performs a policy-making
function, or any other person who performs similar policy-making functions for
the Company. Officers of Subsidiaries shall be deemed Officers of the Company if
they perform such policy-making functions for the Company. As used in this
paragraph, the phrase "policy-making function" does not include policy-making
functions that are not significant. Unless specified otherwise in a resolution
by the Board, an "executive officer" pursuant to Item 401(b) of Regulation S-K
(17 C.F.R. ss. 229.401(b)) shall be only such person designated as an "Officer"
pursuant to the foregoing provisions of this paragraph.

     (n) "Option" (when capitalized) shall mean any stock option granted under
this Plan.

     (o) "Optionee" shall mean a person to whom an Option is granted under this
Plan or any person who succeeds to the rights of such person under this Plan by
reason of the death of such person.

     (p) "Plan" shall mean this 2010 Stock Option Plan of the Company, which
Plan shall be effective upon approval by the Board, subject to approval, within
12 months of the date thereof by holders of a majority of the Company's issued
and outstanding Common Stock of the Company.

     (q) "Share" or "Shares" shall mean a share or shares, as the case may be,
of the Common Stock, as adjusted in accordance with Section 10 of this Plan.

     (r) "Subsidiary" shall mean any corporation (other than the Company) in any
unbroken chain of corporations beginning with the Company if, at the time of the
granting of the Option, each of the corporations other than the last corporation
in the unbroken chain owns stock possessing 50 percent or more of the total
combined voting power of all classes of stock in one of the other corporations
in such chain.

3. Shares and Options. Subject to adjustment in accordance with Section 10
hereof, the Company may issue up to five million (5,000,000) Shares from Shares
held in the Company's treasury or from authorized and unissued Shares through
the exercise of Options issued pursuant to the provisions of this Plan. If any
Option granted under this Plan shall terminate, expire, or be canceled,
forfeited or surrendered as to any Shares, the Shares relating to such lapsed
Option shall be available for issuance pursuant to new Options subsequently
granted under this Plan. Upon the grant of any Option hereunder, the authorized
and unissued Shares to which such Option relates shall be reserved for issuance
to permit exercise under this Plan. Subject to the provisions of Section 14
hereof, an Option granted hereunder shall be either an Incentive Stock Option or
a Non-Statutory Stock Option as determined by the Committee at the time of grant

                                       3
<PAGE>
of such Option and shall clearly state whether it is an Incentive Stock Option
or Non-Statutory Stock Option. All Incentive Stock Options shall be granted
within 10 years from the effective date of this Plan.

4. Limitations. Options otherwise qualifying as Incentive Stock Options
hereunder will not be treated as Incentive Stock Options to the extent that the
aggregate Fair Market Value (determined at the time the Option is granted) of
the Shares, with respect to which Options meeting the requirements of Code
Section 422(b) are exercisable for the first time by any individual during any
calendar year (under all stock option or similar plans of the Company and any
Subsidiary), exceeds $100,000.

5. Conditions for Grant of Options.

     (a) Each Option shall be evidenced by an option agreement that may contain
any term deemed necessary or desirable by the Committee, provided such terms are
not inconsistent with this Plan or any applicable law. Optionees shall be those
persons selected by the Committee from the class of all regular Employees of the
Company or its Subsidiaries, including Employee Directors and Officers who are
regular or former regular employees of the Company, Directors who are not
regular employees of the Company, as well as consultants to the Company. Any
person who files with the Committee, in a form satisfactory to the Committee, a
written waiver of eligibility to receive any Option under this Plan shall not be
eligible to receive any Option under this Plan for the duration of such waiver.

     (b) In granting Options, the Committee shall take into consideration the
contribution the person has made, or is expected to make, to the success of the
Company or its Subsidiaries and such other factors as the Committee shall
determine. The Committee shall also have the authority to consult with and
receive recommendations from Officers and other personnel of the Company and its
Subsidiaries with regard to these matters. The Committee may from time to time
in granting Options under this Plan prescribe such terms and conditions
concerning such Options as it deems appropriate, provided that such terms and
conditions are not more favorable to an Optionee than those expressly permitted
herein; provided further, however, that to the extent not cancelled pursuant to
Section 9(b) hereof, upon a Change in Control, any Options that have not yet
vested, may, in the sole discretion of the Committee, vest upon such Change in
Control.

     (c) The Options granted to employees under this Plan shall be in addition
to regular salaries, pension, life insurance or other benefits related to their
employment with the Company or its Subsidiaries. Neither this Plan nor any
Option granted under this Plan shall confer upon any person any right to
employment or continuance of employment (or related salary and benefits) by the
Company or its Subsidiaries.

6. Exercise Price. The exercise price per Share of any Option shall be any price
determined by the Committee but in no event shall the exercise price per Share
of any Option be less than the Fair Market Value of the Shares underlying such
Option on the date such Option is granted and, in the case of an Incentive Stock
Option granted to a 10% stockholder, the per Share exercise price will not be
less than 110% of the Fair Market Value. Re-granted Options, or Options which
are canceled and then re-granted covering such canceled Options, will, for
purposes of this Section 6, be deemed to have been granted on the date of the
re-granting.

                                       4
<PAGE>
7. Exercise of Options.

     (a) An Option shall be deemed exercised when (i) the Company has received
written notice of such exercise in accordance with the terms of the Option, (ii)
full payment of the aggregate option price of the Shares as to which the Option
is exercised has been made, (iii) the Optionee has agreed to be bound by the
terms, provisions and conditions of any applicable stockholders' agreement, and
(iv) arrangements that are satisfactory to the Committee in its sole discretion
have been made for the Optionee's payment to the Company of the amount that is
necessary for the Company or the Subsidiary employing the Optionee to withhold
in accordance with applicable Federal or state tax withholding requirements.
Unless further limited by the Committee in any Option, the exercise price of any
Shares purchased pursuant to the exercise of such Option shall be paid in cash,
by certified or official bank check, by money order, with Shares or by a
combination of the above; provided, however, that the Committee in its sole
discretion may accept a personal check in full or partial payment of any Shares.
The Company in its sole discretion may, on an individual basis or pursuant to a
general program established by the Committee in connection with this Plan, lend
money to an Optionee to exercise all or a portion of the Option granted
hereunder. If the exercise price is paid in whole or part with the Optionee's
promissory note, such note shall (i) provide for full recourse to the maker,
(ii) be collateralized by the pledge of the Shares that the Optionee purchases
upon exercise of such Option, (iii) bear interest at a rate no less than the
rate of interest payable by the Company to its principal lender, and (iv)
contain such other terms as the Committee in its sole discretion shall require.

     (b) No Optionee shall be deemed to be a holder of any Shares subject to an
Option unless and until a stock certificate or certificates for such Shares are
issued to such person(s) under the terms of this Plan. No adjustment shall be
made for dividends (ordinary or extraordinary, whether in cash, securities or
other property) or distributions or other rights for which the record date is
prior to the date such stock certificate is issued, except as expressly provided
in Section 10 hereof.

     (c) Any Option may, in the discretion of the Committee, be exercised
pursuant to a "cashless" or "net issue" exercise. In lieu of exercising the
Option as specified in subsection (a) above, the Optionee may pay in whole or in
part with Shares, the number of which shall be determined by dividing (a) the
aggregate Fair Value of such Shares otherwise issuable upon exercise of the
Option minus the aggregate Exercise Price of such Option by (b) the Fair Value
of one such Share, or the Optionee may pay in whole or in part through a
reduction in the number of Shares received through the exercise of the Option
equal to the quotient of the (a) aggregate Fair Value of all the Shares issuable
upon exercise of the Option minus the aggregate Exercise Price of such Option
(b) divided by the Fair Value of one such share. If the exercise price is paid
in whole or in part with Shares, the value of the Shares surrendered shall be
their Fair Market Value on the date the Option is exercised.

8. Exercisability of Options. Any Option shall become exercisable in such
amounts, at such intervals, upon such events or occurrences and upon such other
terms and conditions as shall be provided in an individual Option agreement
evidencing such Option, except as otherwise provided in Section 5(b) or this
Section 8.

     (a) The expiration date(s) of an Option shall be determined by the
Committee at the time of grant, but in no event shall an Option be exercisable
after the expiration of 10 years from the date of grant of the Option.

     (b) Unless otherwise expressly provided in any Option as approved by the
Committee, notwithstanding the exercise schedule set forth in any Option, each
outstanding Option, may, in the sole discretion of the Committee, become fully
exercisable upon the date of the occurrence of any Change of Control, but,
unless otherwise expressly provided in any Option, no earlier than six months
after the date of grant, and if and only if Optionee is in the employ of the
Company on such date.

                                       5
<PAGE>
     (c) The Committee may in its sole discretion accelerate the date on which
any Option may be exercised and may accelerate the vesting of any Shares subject
to any Option or previously acquired by the exercise of any Option.

9. Termination of Option Period.

     (a) Unless otherwise expressly provided in any Option, the unexercised
portion of any Option shall automatically and without notice immediately
terminate and become forfeited, null and void at the time of the earliest to
occur of the following:

          (i) three months after the date on which the Optionee's employment is
terminated for any reason other than by reason of (A) Cause, (B) the termination
of the Optionee's employment with the Company by such Optionee following less
than 60 days' prior written notice to the Company of such termination (an
"Improper Termination"), (C) a mental or physical disability (within the meaning
of Section 22(e) of the Code) as determined by a medical doctor satisfactory to
the Committee, or (D) death;

          (ii) immediately upon (A) the termination by the Company of the
Optionee's employment for Cause, or (B) an Improper Termination;

          (iii) one year after the date on which the Optionee's employment is
terminated by reason of a mental or physical disability (within the meaning of
Code Section 22(e)) as determined by a medical doctor satisfactory to the
Committee or the later of three months after the date on which the Optionee
shall die if such death shall occur during the one-year period specified herein;
or

          (iv) the later of (a) one year after the date of termination of the
Optionee's employment by reason of death of the employee, or (b) three months
after the date on which the Optionee shall die if such death shall occur during
the one year period specified in Subsection 9(a)(iii) hereof.

     (b) The Committee in its sole discretion may, by giving written notice
("cancellation notice"), cancel effective upon the date of the consummation of
any corporate transaction described in Subsection 10(d) hereof, any Option that
remains unexercised on such date. Such cancellation notice shall be given a
reasonable period of time prior to the proposed date of such cancellation and
may be given either before or after approval of such corporate transaction.

     (c) Upon termination of Optionee's employment as described in this Section
9, or otherwise, any Option (or portion thereof) not previously vested or not
yet exercisable pursuant to Section 8 of this Plan or the vesting schedule set
forth in such Option shall be immediately canceled.

10. Adjustment of Shares.

     (a) If at any time while this Plan is in effect or unexercised Options are
outstanding, there shall be any increase or decrease in the number of issued and
outstanding Shares through the declaration of a stock dividend or through any
recapitalization resulting in a stock split, combination or exchange of Shares

                                       6
<PAGE>
(other than any such exchange or issuance of Shares through which Shares are
issued to effect an acquisition of another business or entity or the Company's
purchase of Shares to exercise a "call" purchase option), then and in such
event:

          (i) appropriate adjustment shall be made in the maximum number of
Shares available for grant under this Plan, so that the same percentage of the
Company's issued and outstanding Shares shall continue to be subject to being so
optioned;

          (ii) appropriate adjustment shall be made in the number of Shares and
the exercise price per Share thereof then subject to any outstanding Option, so
that the same percentage of the Company's issued and outstanding Shares shall
remain subject to purchase at the same aggregate exercise price; and

          (iii) such adjustments shall be made by the Committee, whose
determination in that respect shall be final, binding and conclusive.

     (b) Subject to the specific terms of any Option, the Committee may change
the terms of Options outstanding under this Plan, with respect to the option
price or the number of Shares subject to the Options, or both, when, in the
Committee's sole discretion, such adjustments become appropriate by reason of a
corporate transaction described in Subsection 10(d) hereof, or otherwise.

     (c) Except as otherwise expressly provided herein, the issuance by the
Company of shares of its capital stock of any class, or securities convertible
into or exchangeable for shares of its capital stock of any class, either in
connection with a direct or underwritten sale, or upon the exercise of rights or
warrants to subscribe therefor or purchase such Shares, or upon conversion of
obligations of the Company into such Shares or other securities, shall not
affect, and no adjustment by reason thereof shall be made with respect to, the
number of or exercise price of Shares then subject to outstanding Options
granted under this Plan.

     (d) Without limiting the generality of the foregoing, the existence of
outstanding Options granted under this Plan shall not affect in any manner the
right or power of the Company to make, authorize or consummate (i) any or all
adjustments, reclassifications, recapitalizations, reorganizations or other
changes in the Company's capital structure or its business; (ii) any merger or
consolidation of the Company or to which the Company is a party; (iii) any
issuance by the Company of debt securities, or preferred or preference stock
that would rank senior to or above the Shares subject to outstanding Options;
(iv) any purchase or issuance by the Company of Shares or other classes of
common stock or common equity securities; (v) the dissolution or liquidation of
the Company; (vi) any sale, transfer, encumbrance, pledge or assignment of all
or any part of the assets or business of the Company; or (vii) any other
corporate act or proceeding, whether of a similar character or otherwise.

     (e) The Optionee shall receive written notice within a reasonable time
prior to the consummation of such action advising the Optionee of any of the
foregoing. The Committee may, in the exercise of its sole discretion, in such
instances declare that any Option shall terminate as of a date fixed by the
Board and give each Optionee the right to exercise his or her Option.

11. Transferability. No Option or stock appreciation right granted hereunder
shall be sold, pledged, assigned, hypothecated, disposed or otherwise
transferred by the Optionee other than by will or the laws of descent and
distribution, unless otherwise authorized by the Board, and no Option or stock
appreciation right shall be exercisable during the Optionee's lifetime by any
person other than the Optionee.

                                       7
<PAGE>
12. Issuance of Shares. As a condition of any sale or issuance of Shares upon
exercise of any Option, the Committee may require such agreements or
undertakings, if any, as the Committee may deem necessary or advisable to assure
compliance with any such law or regulation including, but not limited to, the
following:

     (i) a representation and warranty by the Optionee to the Company, at the
time any Option is exercised, that he is acquiring the Shares to be issued to
him for investment and not with a view to, or for sale in connection with, the
distribution of any such Shares; and

     (ii) an agreement and undertaking to comply with all of the terms,
restrictions and provisions set forth in any then applicable stockholders'
agreement relating to the Shares, including, without limitation, any
restrictions on transferability, any rights of first refusal and any option of
the Company to "call" or purchase such Shares under then applicable agreements,
and

     (iii) any restrictive legend or legends, to be embossed or imprinted on
Share certificates, that are, in the discretion of the Committee, necessary or
appropriate to comply with the provisions of any securities law or other
restriction applicable to the issuance of the Shares.

13. Stock Appreciation Rights. The Committee may grant stock appreciation rights
to Employees, either or tandem with Options that have been or are granted under
the Plan or with respect to a number of Shares on which an Option is not
granted. A stock appreciation right shall entitle the holder to receive, with
respect to each Share as to which the right is exercised, payment in an amount
equal to the excess of the Share's Fair Market Value on the date the right is
exercised over its Fair Market Value on the date the right was granted. Such
payment may be made in cash or in Shares valued at the Fair Market Value as of
the date of surrender, or partly in cash and partly in Shares, as determined by
the Committee in its sole discretion. The Committee may establish a maximum
appreciation value payable for stock appreciation rights.

14. Restricted Stock Awards. The Committee may grant restricted stock awards
under the Plan in Shares or denominated in units of Shares. The Committee, in
its sole discretion, may make such awards subject to conditions and
restrictions, as set forth in the instrument evidencing the award, which may be
based on continuous service with the Company or the attainment of certain
performance goals related to profits, profit growth, cash-flow or shareholder
returns, where such goals may be stated in absolute terms or relative to
comparison companies or indices to be achieved during a period of time.

15. Administration of this Plan.

     (a) This Plan shall be administered by the Committee, which shall consist
of not less than two Directors. The Committee shall have all of the powers of
the Board with respect to this Plan. Any member of the Committee may be removed
at any time, with or without cause, by resolution of the Board and any vacancy
occurring in the membership of the Committee may be filled by appointment by the
Board.

     (b) Subject to the provisions of this Plan, the Committee shall have the
authority, in its sole discretion, to: (i) grant Options, (ii) determine the
exercise price per Share at which Options may be exercised, (iii) determine the
Optionees to whom, and time or times at which, Options shall be granted, (iv)
determine the number of Shares to be represented by each Option, (v) determine

                                       8
<PAGE>
the terms, conditions and provisions of each Option granted (which need not be
identical) and, with the consent of the holder thereof, modify or amend each
Option, (vi) defer (with the consent of the Optionee) or accelerate the exercise
date of any Option, and (vii) make all other determinations deemed necessary or
advisable for the administration of this Plan, including re-pricing, canceling
and regranting Options.

     (c) The Committee, from time to time, may adopt rules and regulations for
carrying out the purposes of this Plan. The Committee's determinations and its
interpretation and construction of any provision of this Plan shall be final,
conclusive and binding upon all Optionees and any holders of any Options granted
under this Plan.

     (d) Any and all decisions or determinations of the Committee shall be made
either (i) by a majority vote of the members of the Committee at a meeting of
the Committee or (ii) without a meeting by the unanimous written approval of the
members of the Committee.

     (e) No member of the Committee, or any Officer or Director of the Company
or its Subsidiaries, shall be personally liable for any act or omission made in
good faith in connection with this Plan.

16. Incentive Options for 10% Stockholders. Notwithstanding any other provisions
of this Plan to the contrary, an Incentive Stock Option shall not be granted to
any person owning directly or indirectly (through attribution under Section
424(d) of the Code) at the date of grant, stock possessing more than 10% of the
total combined voting power of all classes of stock of the Company (or of its
Subsidiary) at the date of grant unless the exercise price of such Option is at
least 110% of the Fair Market Value of the Shares subject to such Option on the
date the Option is granted, and such Option by its terms is not exercisable
after the expiration of 10 years from the date such Option is granted.

17. Interpretation.

     (a) This Plan shall be administered and interpreted so that all Incentive
Stock Options granted under this Plan will qualify as Incentive Stock Options
under Section 422 of the Code. If any provision of this Plan should be held
invalid for the granting of Incentive Stock Options or illegal for any reason,
such determination shall not affect the remaining provisions hereof, and this
Plan shall be construed and enforced as if such provision had never been
included in this Plan.

     (b) This Plan shall be governed by the laws of the State of Nevada.

     (c) Headings contained in this Plan are for convenience only and shall in
no manner be construed as part of this Plan or affect the meaning or
interpretation of any part of this Plan.

     (d) Any reference to the masculine, feminine, or neuter gender shall be a
reference to such other gender as is appropriate.

     (e) Time shall be of the essence with respect to all time periods specified
for the giving of notices to the company hereunder, as well as all time periods
for the expiration and termination of Options in accordance with Section 9
hereof (or as otherwise set forth in an option agreement).

                                       9
<PAGE>
18. Amendment and Discontinuation of this Plan. Either the Board or the
Committee may from time to time amend this Plan or any Option without the
consent or approval of the stockholders of the Company; provided, however, that,
except to the extent provided in Section 9, no amendment or suspension of this
Plan or any Option issued hereunder shall substantially impair any Option
previously granted to any Optionee without the consent of such Optionee.

19. Termination Date. This Plan shall terminate ten years after the date of
adoption by the Board of Directors

                                       10

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