Document:

Exhibit 10.2

 

FEI COMPANY

1995 STOCK
INCENTIVE PLAN, AS AMENDED

 

As
amended effective October 19, 2005

 

1.             Purpose. The purpose of this Stock Incentive Plan
(the “Plan”) is to enable FEI Company (the “Company”) to attract and retain the
services of (1) selected employees, officers and directors of the Company
or of any subsidiary of the Company and (2) selected nonemployee agents,
consultants, advisors, persons involved in the sale or distribution of the
Company’s products and independent contractors of the Company or any
subsidiary.

 

2.             Shares Subject to the Plan. Subject to adjustment as provided below and
in paragraph 14, the shares to be offered under the Plan shall consist of
Common Stock of the Company, and the total number of shares of Common Stock that
may be issued under the Plan shall not exceed 8,000,0000 shares.  The shares issued under the Plan may be
authorized and unissued shares or reacquired shares.  If an option, stock appreciation right,
restricted stock unit or performance unit granted under the Plan expires,
terminates or is canceled, the unissued shares subject to such option, stock
appreciation right, restricted stock unit or performance unit shall again be
available under the Plan.  If shares sold
or awarded as a bonus under the Plan are forfeited to the Company or
repurchased by the Company, the number of shares forfeited or repurchased shall
again be available under the Plan.

 

3.             Effective Date and Duration of
Plan.

 

(a)           Effective Date.  The
Plan shall become effective as of April 21, 1995.  No option, stock appreciation right,
restricted stock unit or performance unit granted under the Plan shall become
exercisable, however, until the Plan is approved by the affirmative vote of the
holders of a majority of the shares of Common Stock represented at a
shareholders meeting at which a quorum is present and any such awards under the
Plan prior to such approval shall be conditioned on and subject to such
approval.  Subject to this limitation,
options, stock appreciation rights, restricted stock units and performance
units may be granted and shares may be awarded as bonuses or sold under the
Plan at any time after the effective date and before termination of the Plan.

 

(b)           Duration.  The
Plan shall continue in effect until all shares available for issuance under the
Plan have been issued and all restrictions on such shares have lapsed.  The Board of Directors may suspend or
terminate the Plan at any time except with respect to options, performance
units, restricted stock units and shares subject to restrictions then
outstanding under the Plan.  Termination
shall not affect any outstanding options, any right of the Company to
repurchase shares or the forfeitability of shares issued under the Plan.

 

4.             Administration.

 

(a)           Board of Directors.  The Plan
shall be administered by the Board of Directors of the Company, which shall
determine and designate from time to time the individuals to whom awards shall
be made, the amount of the awards and the other terms and conditions of the
awards.  Subject to the provisions of the
Plan, the Board of Directors may from time to time adopt and amend rules and
regulations relating to administration of the Plan, advance the lapse of any
waiting period, accelerate any exercise date, waive or modify any restriction
applicable to shares (except those restrictions imposed by law) and make all
other determinations in the judgment of the Board of Directors necessary or
desirable for the administration of the 

 

 

Plan. 
The interpretation and construction of the provisions of the Plan and
related agreements by the Board of Directors shall be final and
conclusive.  The Board of Directors may
correct any defect or supply any omission or reconcile any inconsistency in the
Plan or in any related agreement in the manner and to the extent it shall deem
expedient to carry the Plan into effect, and it shall be the sole and final
judge of such expediency.

 

(b)           Committee.  The
Board of Directors may delegate to a committee of the Board of Directors or
specified officers of the Company, or both (the ”Committee”) any or all
authority for administration of the Plan. 
If authority is delegated to a Committee, all references to the Board of
Directors in the Plan shall mean and relate to the Committee except (i) as
otherwise provided by the Board of Directors, (ii) that only the Board of
Directors may amend or terminate the Plan as provided in paragraphs 3 and
15 and (iii) that a Committee including officers of the Company shall not
be permitted to grant options to persons who are officers of the Company.

 

5.             Types of Awards; Eligibility.  The
Board of Directors may, from time to time, take the following action,
separately or in combination, under the Plan: 
(i) grant Incentive Stock Options, as defined in section 422
of the Internal Revenue Code of 1986, as amended (the “Code”), as provided in
paragraphs 6(a) and 6(b); (ii) grant options other than Incentive
Stock Options (“Non-Statutory Stock Options”) as provided in paragraphs 6(a) and
6(c); (iii) award stock bonuses as provided in paragraph 7; (iv) sell
shares subject to restrictions as provided in paragraph 8; (v) grant
stock appreciation rights as provided in paragraph 9; (vi) grant cash
bonus rights as provided in paragraph 10; (vii) grant performance
units as provided in paragraph 11; (viii) grant foreign qualified
awards as provided in paragraph 12; and (ix) grant restricted stock
units as provided in paragraph 13.  Any
such awards may be made to employees, including employees who are officers or
directors, and to other individuals described in paragraph 1 who the Board of
Directors believes have made or will make an important contribution to the
Company or any subsidiary of the Company; provided, however, that only
employees of the Company shall be eligible to receive Incentive Stock Options
under the Plan.  The Board of Directors
shall select the individuals to whom awards shall be made and shall specify the
action taken with respect to each individual to whom an award is made.  At the discretion of the Board of Directors,
an individual may be given an election to surrender an award in exchange for
the grant of a new award.  No employee
may be granted options or stock appreciation rights under the Plan for more
than an aggregate of 200,000 shares of Common Stock in connection with the hiring
of the employee or 250,000 shares of Common Stock otherwise in each calendar
year thereafter.

 

6.             Option Grants.

 

(a)           General Rules Relating to
Options.

 

(i)            Terms of Grant.  The
Board of Directors may grant options under the Plan.  With respect to each option grant, the Board
of Directors shall determine the number of shares subject to the option, the
option price, the period of the option, the time or times at which the option
may be exercised and whether the option is an Incentive Stock Option or a Non-Statutory
Stock Option.  At the time of the grant
of an option or at any time thereafter, the Board of Directors may provide that
an optionee who exercised an option with Common Stock of the Company shall
automatically receive a new option to purchase additional shares equal to the
number of shares surrendered and may specify the terms and conditions of such
new options.

 

(ii)           Exercise of Options. 
Except as provided in paragraph 6(a) (iv) or as
determined by the Board of Directors, no option granted under the Plan may be
exercised unless at the time of

 

 

such exercise the optionee is employed by or
in the service of the Company or any subsidiary of the Company and shall have
been so employed or provided such service continuously since the date such option
was granted.  Absence on leave or on
account of illness or disability under rules established by the Board of
Directors shall not, however, be deemed an interruption of employment or
service for this purpose.  Unless
otherwise determined by the Board of Directors, vesting of options shall not
continue during an absence on leave (including an extended illness) or on
account of disability.  Except as
provided in paragraphs 6(a) (iv) and 14, options granted under
the Plan may be exercised from time to time over the period stated in each
option in such amounts and at such times as shall be prescribed by the Board of
Directors, provided that options shall not be exercised for fractional
shares.  Unless otherwise determined by
the Board of Directors, if the optionee does not exercise an option in any one
year with respect to the full number of shares to which the optionee is
entitled in that year, the optionee’s rights shall be cumulative and the
optionee may purchase those shares in any subsequent year during the term of
the option.

 

(iii)          Nontransferability.  Each
Incentive Stock Option and, unless otherwise determined by the Board of
Directors, each other option granted under the Plan by its terms shall be
nonassignable and nontransferable by the optionee, either voluntarily or by
operation of law, except by will or by the laws of descent and distribution of
the state or country of the optionee’s domicile at the time of death.

 

(iv)          Termination of Employment or Service.

 

(A)          General Rule. 
Unless otherwise determined by the Board of Directors, in the event the
employment or service of the optionee with the Company or a subsidiary
terminates for any reason other than because of physical disability or death as
provided in subparagraphs 6(a)(iv)(B) and (C), the option may be exercised
at any time prior to the expiration date of the option or the expiration of
30 days after the date of such termination, whichever is the shorter
period, but only if and to the extent the optionee was entitled to exercise the
option at the date of such termination.

 

(B)           Termination Because of Total Disability. 
Unless otherwise determined by the Board of Directors, in the event
of the termination of employment or service because of total disability, the
option may be exercised at any time prior to the expiration date of the option
or the expiration of 12 months after the date of such termination,
whichever is the shorter period, but only if and to the extent the optionee was
entitled to exercise the option at the date of such termination.  The term “total disability” means a
medically determinable mental or physical impairment which is expected to
result in death or which has lasted or is expected to last for a continuous
period of 12 months or more and which causes the optionee to be unable, in the
opinion of the Company and two independent physicians, to perform his or her
duties as an employee, director, officer or consultant of the Company and to be
engaged in any substantial gainful activity. 
Total disability shall be deemed to have occurred on the first day after
the Company and the two independent physicians have furnished their opinion of
total disability to the Company.

 

(C)           Termination Because of Death. 
Unless otherwise determined by the Board of Directors, in the event of
the death of an optionee while employed by or providing service to the Company
or a subsidiary, the option may be exercised at any time prior to the
expiration date of the option or the expiration of 12 months after the date of
death, whichever is the shorter period, for any portion of the option
exercisable as of the date of death and any outstanding unvested portion of the
option, which shall become fully vested and immediately exercisable as of the
date of death, and only by the person or persons to whom such optionee’s rights
under the option shall pass by the optionee’s will or by the laws of descent
and distribution of the state or country of domicile at the time of death.

 

 

(D)          Amendment of Exercise Period Applicable to
Termination.  The Board of Directors, at the time of grant
or, with respect to an option that is not an Incentive Stock Option, at any
time thereafter, may extend the 30-day and 12-month exercise periods any length
of time not longer than the original expiration date of the option, and may
increase the portion of an option that is exercisable, subject to such terms
and conditions as the Board of Directors may determine.

 

(E)           Failure to Exercise Option.  To
the extent that the option of any deceased optionee or of any optionee whose
employment or service terminates is not exercised within the applicable period,
all further rights to purchase shares pursuant to such option shall cease and
terminate.

 

(v)           Purchase of Shares. 
Unless the Board of Directors determines otherwise, shares may be acquired
pursuant to an option granted under the Plan only upon receipt by the Company
of notice in writing from the optionee of the optionee’s intention to exercise,
specifying the number of shares as to which the optionee desires to exercise
the option and the date on which the optionee desires to complete the
transaction, and if required in order to comply with the Securities Act of
1933, as amended, containing a representation that it is the optionee’s present
intention to acquire the shares for investment and not with a view to
distribution.  Unless the Board of
Directors determines otherwise, on or before the date specified for completion
of the purchase of shares pursuant to an option, the optionee must have paid the
Company the full purchase price of such shares in cash (including, with the
consent of the Board of Directors, cash that may be the proceeds of a loan from
the Company (provided that, with respect to an Incentive Stock Option, such
loan is approved at the time of option grant)) or, with the consent of the
Board of Directors, in whole or in part, in Common Stock of the Company valued
at fair market value, restricted stock, performance units or other contingent
awards denominated in either stock or cash, promissory notes and other forms of
consideration.  The fair market value of
Common Stock provided in payment of the purchase price shall be determined by
the Board of Directors.  If the Common
Stock of the Company is not publicly traded on the date the option is
exercised, the Board of Directors may consider any valuation methods it deems
appropriate and may, but is not required to, obtain one or more independent
appraisals of the Company.  If the Common
Stock of the Company is publicly traded on the date the option is exercised,
the fair market value of Common Stock provided in payment of the purchase price
shall be the closing price of the Common Stock as reported in The Wall Street Journal on the last trading day preceding
the date the option is exercised, or such other reported value of the Common
Stock as shall be specified by the Board of Directors.  No shares shall be issued until full
payment for the shares has been made. 
With the consent of the Board of Directors (which, in the case of
an Incentive Stock Option, shall be given only at the time of option grant), an
optionee may request the Company to apply automatically the shares to be
received upon the exercise of a portion of a stock option (even though stock
certificates have not yet been issued) to satisfy the purchase price for additional
portions of the option. 
Each optionee who has exercised an option shall immediately upon
notification of the amount due, if any, pay to the Company in cash amounts
necessary to satisfy any applicable federal, state and local tax withholding
requirements.  If additional
withholding is or becomes required beyond any amount deposited before delivery
of the certificates, the optionee shall pay such amount to the Company on
demand.  If the optionee fails to pay the
amount demanded, the Company may withhold that amount from other amounts
payable by the Company to the optionee, including salary, subject to applicable
law.  With the consent of the Board
of Directors an optionee may satisfy this obligation, in whole or in part, by
having the Company withhold from the shares to be issued upon the exercise that
number of shares that would satisfy the withholding amount due or by delivering
to the Company Common Stock to satisfy the withholding amount.  Upon the exercise of an option, the number of
shares reserved for issuance under the Plan shall be reduced by the number of
shares issued upon exercise of the option.

 

(b)           Incentive Stock Options. 
Incentive Stock Options shall be subject to the following

 

 

additional terms and conditions:

 

(i)            Limitation on Amount of Grants.  No
employee may be granted Incentive Stock Options under the Plan if the aggregate
fair market value, on the date of grant, of the Common Stock with respect to
which Incentive Stock Options are exercisable for the first time by that
employee during any calendar year under the Plan and under all incentive stock
option plans (within the meaning of section 422 of the Code) of the
Company or any parent or subsidiary of the Company exceeds $100,000.

 

(ii)           Limitations on Grants to 10 Percent Shareholders. 
An Incentive Stock Option may be granted under the Plan to an
employee possessing more than 10 percent of the total combined voting
power of all classes of stock of the Company or of any parent or subsidiary of
the Company only if the option price is at least 110 percent of the fair
market value, as described in paragraph 6(b)(iv), of the Common Stock
subject to the option on the date it is granted and the option by its terms is
not exercisable after the expiration of five years from the date it is granted.

 

(iii)          Duration of Options. 
Subject to paragraphs 6(a) (ii) and 6(b) (ii),
Incentive Stock Options granted under the Plan shall continue in effect for the
period fixed by the Board of Directors, except that no Incentive Stock Option
shall be exercisable after the expiration of 10 years from the date it is
granted.

 

(iv)          Option Price.  The
option price per share shall be determined by the Board of Directors at the
time of grant.  Except as provided in
paragraph 6(b) (ii), the option price shall not be less than
100 percent of the fair market value of the Common Stock covered by the
Incentive Stock Option at the date the option is granted.  The fair market value shall be determined by
the Board of Directors.  If the Common
Stock of the Company is not publicly traded on the date the option is granted,
the Board of Directors may consider any valuation methods it deems appropriate
and may, but is not required to, obtain one or more independent appraisals of
the Company.  If the Common Stock of the
Company is publicly traded on the date the option is exercised, the fair market
value shall be deemed to be the closing price of the Common Stock as reported
in The Wall Street Journal on the day
preceding the date the option is granted, or, if there has been no sale on that
date, on the last preceding date on which a sale occurred or such other value
of the Common Stock as shall be specified by the Board of Directors.

 

(v)           Limitation on Time of Grant.  No
Incentive Stock Option shall be granted on or after the tenth anniversary of
the effective date of the Plan.

 

(vi)          Conversion of Incentive Stock Options.  The
Board of Directors may at any time without the consent of the optionee convert
an Incentive Stock Option to a Non-Statutory Stock Option.

 

(c)           Non-Statutory Stock Options. 
Non-Statutory Stock Options shall be subject to the following terms and
conditions in addition to those set forth in Section 6(a) above:

 

(i)            Option Price.  The
option price for Non-Statutory Stock Options shall be determined by the Board
of Directors at the time of grant and may be any amount determined by the Board
of Directors.

 

(ii)           Duration of Options. 
Non-Statutory Stock Options granted under the Plan shall continue in
effect for the period fixed by the Board of Directors.

 

 

7.             Stock Bonuses.  The
Board of Directors may award shares under the Plan as stock bonuses.  Shares awarded as a bonus shall be subject to
the terms, conditions, and restrictions determined by the Board of
Directors.  The restrictions may include
restrictions concerning transferability and forfeiture of the shares awarded,
together with such other restrictions as may be determined by the Board of
Directors.  If shares are subject to
forfeiture, all dividends or other distributions paid by the Company with
respect to the shares shall be retained by the Company until the shares are no
longer subject to forfeiture, at which time all accumulated amounts shall be
paid to the recipient.  The Board of
Directors may require the recipient to sign an agreement as a condition of the
award, but may not require the recipient to pay any monetary consideration
other than amounts necessary to satisfy tax withholding requirements.  The agreement may contain any terms,
conditions, restrictions, representations and warranties required by the Board
of Directors.  The certificates
representing the shares awarded shall bear any legends required by the Board of
Directors. The Company may require any recipient of a stock bonus to pay to the
Company in cash upon demand amounts necessary to satisfy any applicable
federal, state or local tax withholding requirements.  If the recipient fails to pay the amount
demanded, the Company may withhold that amount from other amounts payable by
the Company to the recipient, including salary or fees for services, subject to
applicable law.  With the consent of the
Board of Directors, a recipient may deliver Common Stock to the Company to
satisfy this withholding obligation.  Upon
the issuance of a stock bonus, the number of shares reserved for issuance under
the Plan shall be reduced by the number of shares issued.

 

8.             Restricted Stock.  The
Board of Directors may issue shares under the Plan for such consideration
(including promissory notes and services) as determined by the Board of
Directors.  Shares issued under the Plan
shall be subject to the terms, conditions and restrictions determined by the
Board of Directors.  The restrictions may
include restrictions concerning transferability, repurchase by the Company and
forfeiture of the shares issued, together with such other restrictions as may
be determined by the Board of Directors. 
If shares are subject to forfeiture or repurchase by the Company, all
dividends or other distributions paid by the Company with respect to the shares
shall be retained by the Company until the shares are no longer subject to
forfeiture or repurchase, at which time all accumulated amounts shall be paid
to the recipient.  All Common Stock
issued pursuant to this paragraph 8 shall be subject to a purchase agreement,
which shall be executed by the Company and the prospective recipient of the
shares prior to the delivery of certificates representing such shares to the
recipient.  The purchase agreement may
contain any terms, conditions, restrictions, representations and warranties required
by the Board of Directors.  The
certificates representing the shares shall bear any legends required by the
Board of Directors.  The Company may
require any purchaser of restricted stock to pay to the Company in cash upon
demand amounts necessary to satisfy any applicable federal, state or local tax
withholding requirements.  If the
purchaser fails to pay the amount demanded, the Company may withhold that
amount from other amounts payable by the Company to the purchaser, including
salary, subject to applicable law.  With
the consent of the Board of Directors, a purchaser may deliver Common Stock to
the Company to satisfy this withholding obligation.  Upon the issuance of restricted stock, the
number of shares reserved for issuance under the Plan shall be reduced by the
number of shares issued.

 

9.             Stock Appreciation Rights.

 

(a)           Grant.  Stock
appreciation rights may be granted under the Plan by the Board of Directors,
subject to such rules, terms, and conditions as the Board of Directors
prescribes.

 

(b)           Exercise.

 

(i)            Each stock appreciation right shall entitle
the holder, upon exercise, to receive from the Company in exchange therefore an
amount equal in value to the excess of the fair market

 

 

value on the date of exercise of one share of
Common Stock of the Company over its fair market value on the date of grant
(or, in the case of a stock appreciation right granted in connection with an
option, the excess of the fair market value of one share of Common Stock of the
Company over the option price per share under the option to which the stock
appreciation right relates), multiplied by the number of shares covered by the
stock appreciation right or the option, or portion thereof, that is
surrendered.  No stock appreciation
right shall be exercisable at a time that the amount determined under this
subparagraph is negative.  Payment by the
Company upon exercise of a stock appreciation right may be made in Common Stock
valued at fair market value, in cash, or partly in Common Stock and partly in
cash, all as determined by the Board of Directors.

 

(ii)           A stock appreciation right shall be
exercisable only at the time or times established by the Board of
Directors.  If a stock appreciation right
is granted in connection with an option, the following rules shall
apply:  (1) the stock appreciation
right shall be exercisable only to the extent and on the same conditions that
the related option could be exercised; (2) the stock appreciation rights
shall be exercisable only when the fair market value of the stock exceeds the
option price of the related option; (3) the stock appreciation right shall
be for no more than 100 percent of the excess of the fair market value of the
stock at the time of exercise over the option price; (4) upon exercise of
the stock appreciation right, the option or portion thereof to which the stock
appreciation right relates terminates; and (5) upon exercise of the
option, the related stock appreciation right or portion thereof terminates.

 

(iii)          The Board of Directors may withdraw any stock
appreciation right granted under the Plan at any time and may impose any
conditions upon the exercise of a stock appreciation right or adopt rules and
regulations from time to time affecting the rights of holders of stock
appreciation rights.  Such rules and
regulations may govern the right to exercise stock appreciation rights granted
prior to adoption or amendment of such rules and regulations as well as
stock appreciation rights granted thereafter.

 

(iv)          For purposes of this paragraph 9, the
fair market value of the Common Stock shall be determined as of the date the
stock appreciation right is exercised, under the methods set forth in paragraph
6(b) (iv).

 

(v)           No fractional shares shall be issued upon
exercise of a stock appreciation right. 
In lieu thereof, cash may be paid in an amount equal to the value of the
fraction or, if the Board of Directors shall determine, the number of shares
may be rounded downward to the next whole share.

 

(vi)          Each stock appreciation right granted in
connection with an Incentive Stock Option, and unless otherwise determined by
the Board of Directors, each other stock appreciation right granted under the
Plan by its terms shall be nonassignable and nontransferable by the holder,
either voluntarily or by operation of law, except by will or by the laws of
descent and distribution of the state or country of the holder’s domicile at
the time of death, and each stock appreciation right by its terms shall be
exercisable during the holder’s lifetime only by the holder.

 

(vii)         Each participant who has exercised a stock
appreciation right shall, upon notification of the amount due, pay to the
Company in cash amounts necessary to satisfy any applicable federal, state and
local tax withholding requirements.  If
the participant fails to pay the amount demanded, the Company may withhold that
amount from other amounts payable by the Company to the participant including
salary, subject to applicable law.  With
the consent of the Board of Directors a participant may satisfy this
obligation, in whole or in part, by having the Company withhold from any shares
to be issued upon the exercise that number of shares that would satisfy the
withholding amount due or by delivering Common Stock to the Company to satisfy
the withholding amount.

 

 

(viii)        Upon the exercise of a stock appreciation
right for shares, the number of shares reserved for issuance under the Plan
shall be reduced by the number of shares issued.  Cash payments of stock appreciation rights
shall not reduce the number of shares of Common Stock reserved for issuance
under the Plan.

 

10.  Cash Bonus Rights.

 

(a)           Grant.  The
Board of Directors may grant cash bonus rights under the Plan in connection
with (i) options granted or previously granted, (ii) stock
appreciation rights granted or previously granted, (iii) stock bonuses
awarded or previously awarded and (iv) shares sold or previously sold
under the Plan.  Cash bonus rights
will be subject to rules, terms and conditions as the Board of Directors may
prescribe.  Unless otherwise determined
by the Board of Directors, each cash bonus right granted under the Plan by its
terms shall be nonassignable and nontransferable by the holder, either
voluntarily or by operation of law, except by will or by the laws of descent
and distribution of the state or country of the holder’s domicile at the time
of death.  The payment of a cash bonus
shall not reduce the number of shares of Common Stock reserved for issuance
under the Plan.

 

(b)           Cash Bonus Rights in Connection
With Options.  A cash bonus right granted in connection with
an option will entitle an optionee to a cash bonus when the related option is
exercised (or terminates in connection with the exercise of a stock
appreciation right related to the option) in whole or in part if, in the sole discretion
of the Board of Directors, the bonus right will result in a tax deduction that
the Company has sufficient taxable income to use.  If an optionee purchases shares upon exercise
of an option and does not exercise a related stock appreciation right, the
amount of the bonus, if any, shall be determined by multiplying the excess of
the total fair market value of the shares to be acquired upon the exercise over
the total option price for the shares by the applicable bonus percentage.  If the optionee exercises a related stock
appreciation right in connection with the termination of an option, the amount
of the bonus, if any, shall be determined by multiplying the total fair market
value of the shares and cash received pursuant to the exercise of the stock appreciation
right by the applicable bonus percentage. 
The bonus percentage applicable to a bonus right, including a previously
granted bonus right, may be changed from time to time at the sole discretion of
the Board of Directors but shall in no event exceed 75 percent.

 

(c)           Cash Bonus Rights in Connection
With Stock Bonus.  A cash bonus right granted in connection with
a stock bonus will entitle the recipient to a cash bonus payable when the stock
bonus is awarded or restrictions, if any, to which the stock is subject
lapse.  If bonus stock awarded is subject
to restrictions and is repurchased by the Company or forfeited by the holder,
the cash bonus right granted in connection with the stock bonus shall terminate
and may not be exercised.  The amount and
timing of payment of a cash bonus shall be determined by the Board of
Directors.

 

(d)           Cash Bonus Rights in Connection
With Stock Purchases.  A cash bonus right granted in connection with
the purchase of stock pursuant to paragraph 8 will entitle the recipient to a
cash bonus when the shares are purchased or restrictions, if any, to which the
stock is subject lapse.  Any cash bonus
right granted in connection with shares purchased pursuant to paragraph 8 shall
terminate and may not be exercised in the event the shares are repurchased by
the Company or forfeited by the holder pursuant to applicable
restrictions.  The amount of any
cash bonus to be awarded and timing of payment of a cash bonus shall be
determined by the Board of Directors.

 

(e)           Taxes.  The
Company shall withhold from any cash bonus paid pursuant to

 

 

paragraph 10 the amount necessary to
satisfy any applicable federal, state and local withholding requirements.

 

11.           Performance Units.  The
Board of Directors may grant performance units consisting of monetary units
which may be earned in whole or in part if the Company achieves certain goals
established by the Board of Directors over a designated period of time, but not
in any event more than 10 years.  The
goals established by the Board of Directors may include earnings per share,
return on shareholders’ equity, return on invested capital, and such other
goals as may be established by the Board of Directors.  In the event that the minimum performance
goal established by the Board of Directors is not achieved at the conclusion of
a period, no payment shall be made to the participants.  In the event the maximum corporate goal is
achieved, 100 percent of the monetary value of the performance units shall be
paid to or vested in the participants. 
Partial achievement of the maximum goal may result in a payment or
vesting corresponding to the degree of achievement as determined by the Board
of Directors.  Payment of an award earned
may be in cash or in Common Stock or in a combination of both, and may be made
when earned, or vested and deferred, as the Board of Directors determines.  Deferred awards shall earn interest on the
terms and at a rate determined by the Board of Directors.  Unless otherwise determined by the Board of
Directors, each performance unit granted under the Plan by its terms shall be
nonassignable and nontransferable by the holder, either voluntarily or by
operation of law, except by will or by the laws of descent and distribution of
the state or country of the holder’s domicile at the time of death.  Each participant who has been awarded a
performance unit shall, upon notification of the amount due, pay to the Company
in cash amounts necessary to satisfy any applicable federal, state and local
tax withholding requirements.  If the
participant fails to pay the amount demanded, the Company may withhold that
amount from other amounts payable by the Company to the participant, including
salary or fees for services, subject to applicable law.  With the consent of the Board of Directors a
participant may satisfy this obligation, in whole or in part, by having the
Company withhold from any shares to be issued that number of shares that would
satisfy the withholding amount due or by delivering Common Stock to the Company
to satisfy the withholding amount.  The
payment of a performance unit in cash shall not reduce the number of shares of
Common Stock reserved for issuance under the Plan.  The number of shares reserved for issuance
under the Plan shall be reduced by the number of shares issued upon payment of
an award.

 

12.           Foreign Qualified Grants. 
Awards under the Plan may be granted to such officers and employees of
the Company and its subsidiaries and such other persons described in
paragraph 1 residing in foreign jurisdictions as the Board of Directors
may determine from time to time.  The
Board of Directors may adopt such supplements to the Plan as may be necessary
to comply with the applicable laws of such foreign jurisdictions and to afford
participants favorable treatment under such laws; provided, however, that no
award shall be granted under any such supplement with terms which are more
beneficial to the participants than the terms permitted by the Plan.

 

13.           Restricted Stock Units.

 

(a)           Grant. 
Restricted stock units may be granted at any time and from time to time
as determined by the Board of Directors. 
For this purpose, a restricted stock unit shall mean a bookkeeping entry
representing an amount equal to the fair market value of one share of Common
Stock, granted pursuant to this paragraph 13.  Each restricted stock unit represents an
unfunded and unsecured obligation of the Company.  Each restricted stock unit grant will be
evidenced by an agreement that will specify such other terms and conditions as
the Board of Directors, in its sole discretion, will determine, including all
terms, conditions, and restrictions related to the grant, the number of
restricted stock units and the form of payout, which, subject to
paragraph 13(d), may be left to the discretion of the Board of Directors.

 

 

(b)           Vesting Criteria and Other Terms.  The
Board of Directors will set vesting criteria in its discretion, which,
depending on the extent to which the criteria are met, will determine the
number of restricted stock units that will be paid out to the participant.  The Board of Directors may set vesting
criteria based upon the achievement of Company-wide, business unit, or
individual goals (including, but not limited to, continued employment), or any
other basis determined by the Board of Directors in its discretion.

 

(c)           Earning Restricted Stock Units.  Upon
meeting the applicable vesting criteria, the participant will be entitled to
receive a payout as specified in the award agreement.  Notwithstanding the foregoing, at any time
after the grant of restricted stock units, the Board of Directors, in its sole
discretion, may reduce or waive any vesting criteria that must be met to
receive a payout.

 

(d)           Form and Timing of Payment. 
Payment of earned restricted stock units will be made as soon as
practicable after the date(s) set forth in the award agreement.  The Board of Directors, in its sole
discretion, may pay earned restricted stock units in cash, shares of Common
Stock, or a combination thereof.  Shares
of Common Stock represented by restricted stock units that are fully paid in
cash again will be available for grant under the Plan.

 

(e)           Cancellation.  On
the date set forth in the award agreement, all unearned restricted stock units
will be forfeited to the Company.

 

(f)            Transferability. 
Unless otherwise determined by the Board of Directors, each restricted
stock unit granted under the Plan by its terms shall be nonassignable and
nontransferable by the holder, either voluntarily or by operation of law,
except by will or by the laws of descent and distribution of the state or
country of the holder’s domicile at the time of death.

 

14.           Changes in Capital Structure.

 

(a)           Stock Splits; Stock Dividends.  If
the outstanding Common Stock of the Company is hereafter increased or decreased
or changed into or exchanged for a different number or kind of shares or other
securities of the Company by reason of any stock split, combination of shares
or dividend payable in shares, recapitalization or reclassification appropriate
adjustment shall be made by the Board of Directors in the number and kind of
shares available for grants under the Plan. 
In addition, the Board of Directors shall make appropriate adjustment in
the number and kind of shares as to which outstanding options, or portions
thereof then unexercised, shall be exercisable, so that the optionee’s
proportionate interest before and after the occurrence of the event is
maintained.  Notwithstanding the
foregoing, the Board of Directors shall have no obligation to effect any
adjustment that would or might result in the issuance of fractional shares, and
any fractional shares resulting from any adjustment may be disregarded or
provided for in any manner determined by the Board of Directors.  Any such adjustments made by the Board
of Directors shall be conclusive.

 

(b)           Mergers, Reorganizations, Etc.  In
the event of a merger, consolidation, plan of exchange, acquisition of property
or stock, separation, reorganization or liquidation to which the Company or a
subsidiary is a party or a sale of all or substantially all of the Company’s
assets (each, a “Transaction”), the Board of Directors shall, in its sole
discretion and to the extent possible under the structure of the Transaction,
select one of the following alternatives for treating outstanding options under
the Plan:

 

(i)            Outstanding options shall remain in effect in
accordance with their terms.

 

(ii)           Outstanding options shall be converted into
options to purchase stock in the 

 

 

corporation that is the surviving or
acquiring corporation in the Transaction. 
The amount, type of securities subject thereto and exercise price of the
converted options shall be determined by the Board of Directors of the Company,
taking into account the relative values of the companies involved in the
Transaction and the exchange rate, if any, used in determining shares of the
surviving corporation to be issued to holders of shares of the Company.  Unless otherwise determined by the Board of
Directors, the converted options shall be vested only to the extent that the
vesting requirements relating to options granted hereunder have been satisfied.

 

(iii)          The Board of Directors shall provide a 30-day
period prior to the consummation of the Transaction during which outstanding
options may be exercised to the extent then exercisable, and upon the
expiration of such 30-day period, all unexercised options shall immediately
terminate.  The Board of Directors may,
in its sole discretion, accelerate the exercisability of options so that they
are exercisable in full during such 30-day period.

 

(c)           Dissolution of the Company.  In
the event of the dissolution of the Company, options shall be treated in
accordance with paragraph 14(b) (iii).

 

(d)           Rights Issued by Another
Corporation.  The
Board of Directors may also grant options, stock appreciation rights,
performance units, stock bonuses and cash bonuses and issue restricted stock
under the Plan having terms, conditions and provisions that vary from those
specified in this Plan provided that any such awards are granted in
substitution for, or in connection with the assumption of, existing options,
stock appreciation rights, stock bonuses, cash bonuses, restricted stock and
performance units granted, awarded or issued by another corporation and assumed
or otherwise agreed to be provided for by the Company pursuant to or by reason
of a Transaction.

 

15.           Amendment of Plan.  The
Board of Directors may at any time, and from time to time, modify or amend the
Plan in such respects as it shall deem advisable because of changes in the law
while the Plan is in effect or for any other reason.  Except as provided in
paragraphs 6(a)(iv), 9, 10 and 14, however, no change in an award already
granted shall be made without the written consent of the holder of such award.

 

16.           Approvals.  The
obligations of the Company under the Plan are subject to the approval of state
and federal authorities or agencies with jurisdiction in the matter.  The Company will use its best efforts to take
steps required by state or federal law or applicable regulations, including rules and
regulations of the Securities and Exchange Commission and any stock exchange on
which the Company’s shares may then be listed, in connection with the grants
under the Plan.  The foregoing
notwithstanding, the Company shall not be obligated to issue or deliver Common
Stock under the Plan if such issuance or delivery would violate applicable
state or federal securities laws.

 

17.           Employment and Service Rights.  Nothing in the Plan or any
award pursuant to the Plan shall (i) confer upon any employee any right to
be continued in the employment of the Company or any subsidiary or interfere in
any way with the right of the Company or any subsidiary by whom such employee
is employed to terminate such employee’s employment at any time, for any
reason, with or without cause, or to decrease such employee’s compensation or
benefits, or (ii) confer upon any person engaged by the Company any right
to be retained or employed by the Company or to the continuation, extension,
renewal, or modification of any compensation, contract, or arrangement with or
by the Company.

 

18.           Rights as a Shareholder.  The
recipient of any award under the Plan shall have no rights as a shareholder
with respect to any Common Stock until the date of issue to the recipient of a
stock certificate for

 

 

such shares. 
Except as otherwise expressly provided in the Plan, no adjustment shall
be made for dividends or other rights for which the record date occurs prior to
the date such stock certificate is issued.

 

19.           Option Grants to Non-Employee
Directors.

 

(a)           Initial Board Grants.  Each
person who is Director when the Plan is adopted or who becomes a Non-Employee
Director thereafter shall be automatically granted an option to purchase 15,000
shares of Common Stock on the date the Plan is approved by the shareholders of
the Company or when he or she becomes a Non-Employee Director.  A “Non-Employee Director” is a director who
is not an officer or employee of the Company or any of its subsidiaries.

 

(b)           Additional Grants.  Each
Non-Employee Director shall be automatically granted an option to purchase
additional shares of Common Stock in each calendar year subsequent to the year
in which such Non-Employee Director was granted an option pursuant to paragraph
19(a), such option to be granted as of the date of the Company’s annual meeting
of shareholders held in such calendar year, provided that the Non-Employee
Director continues to serve in such capacity as of such date.  The number of shares subject to each
additional grant shall be 7,500 shares for each Non-Employee Director.

 

(c)           Exercise Price.  The
exercise price of all options granted pursuant to this paragraph 19 shall be
equal to 100 percent of the fair market value of the Common Stock determined
pursuant to paragraph 6(b) (iv).

 

(d)           Term of Option.  The
term of each option granted pursuant to this paragraph 19 shall be 10 years
from the date of grant.

 

(e)           Exercisability. 
Until an option expires or is terminated and except as provided in
paragraphs 19(f) and 14, an option granted under this paragraph 19 shall
be exercisable according to the following schedule:  2.78% for each complete month of continuous
service after the date of grant, rounded up to the next full share, until fully
vested.  For purposes of this paragraph
19(e), a complete month shall be deemed to be the period which starts on the
day of grant and ends on the same day of the following calendar month, so that
each successive “complete month” ends on the same day of each successive
calendar month (or, in respect of any calendar month which does not include
such a day, that “complete month” shall end on the first day of the next
following calendar month).

 

 (f)           Termination As a Director.  If
an optionee ceases to be a director of the Company for any reason, including
death, the option may be exercised at any time prior to the expiration date of
the option or the expiration of 30 days (or 12 months in the event of death)
after the last day the optionee served as a director, whichever is the shorter
period, but only if and to the extent the optionee was entitled to exercise the
option as of the last day the optionee served as a director, provided, however,
that in the event of death, any outstanding unvested portion of the option
shall become fully vested and immediately exercisable as of the date of death.

 

(g)           Nontransferability.  Each
option by its terms shall be nonassignable and nontransferable by the optionee,
either voluntarily or by operation of law, except by will or by the laws of
descent and distribution of the state or country of the optionee’s domicile at
the time of death, and each option by its terms shall be exercisable during the
optionee’s lifetime only by the optionee.

 

(h)           Exercise of Options. 
Options may be exercised upon payment of cash or shares of

 

1

 

Common Stock of the Company in accordance
with paragraph 6(a) (v).

 

Adopted:          April 21, 1995

Approved by Shareholders:  May 5, 1995

 

Amendments approved by Shareholders:

 

May 15, 1996

May 15, 1997

May 21, 1998

June 10, 1999

May 18, 2000

October 18, 2001

May 16, 2002

May 15,
2003

May 20,
2004

May 19,
2005Exhibit 10.1

 

To: All Qwest Nonemployee Board Members

From: Teresa Taylor

Re: Qwest Nonemployee Board Compensation Plan Effective October 1,
2005

 

The board voted to change the compensation program for nonemployee
directors.  These changes are described
in more detail below.

 

Initial Equity Grant for New Nonemployee Directors:

On October 20, 2005, each director appointed in 2005 received an
initial stock option grant worth $120,000 based on a Black-Scholes value.

•                  The
new members received 48,000 stock options, with a strike price of $4.15, which
is Qwest’s closing price on October 20, 2005.

•                  Options
will vest after a four year period on October 20, 2009.

 

Annual Equity Grant for All Nonemployee Directors:

On the first business day of each calendar year each director will
receive a stock option grant worth $100,000, based on a Black-Scholes value.

•                  The
first grant will be 40,000 stock options issued on January 2, 2006, with a
strike price to be determined by Qwest’s closing price on January 2, 2006.

•                  Options
will vest over a four year period.

•                  For
the 2006 grant, 10,000 options will vest each year on the anniversary of the
grant date, beginning January 2, 2007.

 

Annual Cash Retainer:

Each nonemployee director will receive an annual cash retainer of
$50,000 paid quarterly, which means that each nonemployee director will receive
$12,500 (1/4 of $50,000) for the fourth quarter of 2005 and each following
quarter.

 

Meeting
Fees:

Board and committee meeting fees will be eliminated except the
following fees will be paid for each board meeting in excess of 12 during a
calendar year and for each committee meeting, on a per committee basis, that
meets in excess of 12 times per calendar year:

•                  $1,500
for each face-to-face meeting and $750 for each telephonic meeting, with a
maximum of $25,000 per year.

•                  Consistent
with prior practice, informational conference calls are not considered
meetings.

•                  This
amount will be paid out quarterly in cash and can be deferred.

 

 

Committee Chairperson Fees:

In addition, each chairperson or lead director will receive the
following:

•                  Audit
Chairperson will receive $20,000 per year.

•                  Lead
Director will receive $20,000 per year.

•                  Other
Committee Chairs get $10,000 per year.

•                  If
a nonemployee director serves on more than one committee, each is counted
separately.

•                  The
committee chairperson retainers will be paid quarterly in cash and can be
deferred; however, there is no match.

 

Deferred Compensation:

Although future deferrals will not receive a match, the deferred
compensation plan continues to exist for the cash compensation only.

•                  Current
elections remain in effect for 2005.

•                  If
a nonemployee director elected to defer the cash payment, a pay stub showing
the amount deferred will be issued.

•                  Distribution
elections will remain in effect.

•                  As
in previous years, deferral elections will be solicited in December for
any of the 2006 cash payments.

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