Document:

Exhibit 10.13

WATTS WATER TECHNOLOGIES, INC.

 

AMENDED AND RESTATED

2004 STOCK INCENTIVE PLAN

 

SECTION 1.  GENERAL PURPOSE OF THE PLAN; DEFINITIONS

 

The name of the plan is the Watts Water Technologies, Inc. 2004 Stock Incentive Plan (the “Plan”).  The purpose of the Plan is to encourage and enable the officers, employees, Non-Employee Directors and other key persons (including consultants and prospective employees) of Watts Water Technologies, Inc. (the “Company”) and its Subsidiaries upon whose judgment, initiative and efforts the Company largely depends for the successful conduct of its business to acquire a proprietary interest in the Company.  It is anticipated that providing such persons with a direct stake in the Company’s welfare will assure a closer identification of their interests with those of the Company, thereby stimulating their efforts on the Company’s behalf and strengthening their desire to remain with the Company.

 

The following terms shall be defined as set forth below:

 

“Act” means the Securities Act of 1933, as amended, and the rules and regulations thereunder.

 

“Administrator” is defined in Section 2(a).

 

“Award” or “Awards,” except where referring to a particular category of grant under the Plan, shall include Incentive Stock Options, Non-Qualified Stock Options, Stock Appreciation Rights, Deferred Stock Awards, Restricted Stock Awards, Unrestricted Stock Awards and Dividend Equivalent Rights.

 

“Board” means the Board of Directors of the Company.

 

“Code” means the Internal Revenue Code of 1986, as amended, and any successor Code, and related rules, regulations and interpretations.

 

“Committee” means the Committee of the Board referred to in Section 2.

 

“Covered Employee” means an employee who is a “Covered Employee” within the meaning of Section 162(m) of the Code.

 

“Deferred Stock Award” means Awards granted pursuant to Section 8.

 

“Dividend Equivalent Right” means Awards granted pursuant to Section 11.

 

“Effective Date” means the date on which the Plan is approved by stockholders as set forth in Section 17.

 

 

“Exchange Act” means the Securities Exchange Act of 1934, as amended, and the rules and regulations thereunder.

 

“Fair Market Value” of the Stock on any given date means the fair market value of the Stock determined in good faith by the Administrator; provided, however, that if the Stock is admitted to quotation on the National Association of Securities Dealers Automated Quotation System (“NASDAQ”), NASDAQ National System or a national securities exchange, the determination shall be made by reference to market quotations.  If there are no market quotations for such date, the determination shall be made by reference to the last date preceding such date for which there are market quotations.

 

“409A Award” is an Award that constitutes a deferral of compensation as provided in Treasury Regulation Section 1.409A-1(b)(1), including, but not limited to, (a) any Nonqualified Stock Option or Stock Appreciation Right that permits the deferral of compensation other than the deferral of recognition of income until the exercise of the Award; or (b) any other Award that either (i) provides by its terms for settlement of all or any portion of the Award on one or more dates following the Short-Term Deferral Period (as defined below), or (ii) permits or requires the grantee to elect one or more dates on which the Award will be settled.

 

“Incentive Stock Option” means any Stock Option designated and qualified as an “incentive stock option” as defined in Section 422 of the Code.

 

“Non-Employee Director” means a member of the Board who is not also an employee of the Company or any Subsidiary.

 

“Non-Qualified Stock Option” means any Stock Option that is not an Incentive Stock Option.

 

“Option” or “Stock Option” means any option to purchase shares of Stock granted pursuant to Section 5.

 

“Performance Cycle” means one or more periods of time, which may be of varying and overlapping durations, as the Administrator may select, over which the attainment of one or more performance criteria will be measured for the purpose of determining a grantee’s right to and the payment of a Restricted Stock Award or Deferred Stock Award.

 

“Restricted Stock Award” means Awards granted pursuant to Section 7.

 

“Short-Term Deferral Period” means, subject to any applicable Treasury Regulations promulgated pursuant to Section 409A of the Code or other applicable guidance, the period ending on the later of (i) the date that is two and one-half months from the end of the Company’s fiscal year in which the applicable portion of the Award is no longer subject to a Substantial Risk of Forfeiture, or (ii) the date that is two and one-half months from the end of the grantee’s taxable year in which the applicable portion of the Award is no longer subject to a Substantial Risk of Forfeiture.

 

“Specified Employee” has the meaning set forth in Treasury Regulation Section 1.409A-1(i).

 

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“Stock” means the Class A Common Stock, par value $.10 per share, of the Company, subject to adjustments pursuant to Section 3.

 

“Stock Appreciation Right” means any Award granted pursuant to Section 6.

 

“Subsidiary” means any corporation or other entity (other than the Company) in which the Company has a controlling interest, either directly or indirectly.

 

“Substantial Risk of Forfeiture,” shall have the meaning set forth in any applicable Treasury Regulations promulgated pursuant to Section 409A of the Code or other applicable guidance.

 

“Unrestricted Stock Award” means any Award granted pursuant to Section 9.

 

SECTION 2.  ADMINISTRATION OF PLAN; ADMINISTRATOR AUTHORITY TO SELECT GRANTEES AND DETERMINE AWARDS

 

(a)           Committee.  The Plan shall be administered by either the Board or a committee of not less than two Non-Employee Directors (in either case, the “Administrator”).

 

(b)           Powers of Administrator.  The Administrator shall have the power and authority to grant Awards consistent with the terms of the Plan, including the power and authority:

 

(i)            to select the individuals to whom Awards may from time to time be granted;

 

(ii)           to determine the time or times of grant, and the extent, if any, of Incentive Stock Options, Non-Qualified Stock Options, Stock Appreciation Rights, Restricted Stock Awards, Deferred Stock Awards, Unrestricted Stock Awards and Dividend Equivalent Rights, or any combination of the foregoing, granted to any one or more grantees;

 

(iii)          to determine the number of shares of Stock to be covered by any Award;

 

(iv)          to determine and modify from time to time the terms and conditions, including restrictions, of any Award, not inconsistent with the terms of the Plan or the requirements of Section 409A of the Code, which modified terms and conditions may differ among individual Awards and grantees, and to approve the form of written instruments evidencing the Awards (each a “Grant Instrument”);

 

(v)           to accelerate at any time the exercisability or vesting of all or any portion of any Award;

 

(vi)          subject to the provisions of Section 5(a)(ii), to extend at any time the period in which Stock Options may be exercised;

 

(vii)         to determine at any time whether, to what extent, and under what circumstances distribution or the receipt of Stock and other amounts payable with respect to an 

 

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Award shall be deferred either automatically or at the election of the grantee and whether and to what extent the Company shall pay or credit amounts constituting interest (at rates determined by the Administrator) or dividends or deemed dividends on such deferrals; and

 

(viii)        at any time to adopt, alter and repeal such rules, guidelines and practices for administration of the Plan and for its own acts and proceedings as it shall deem advisable; to interpret the terms and provisions of the Plan and any Award or Grant Instrument; to make all determinations it deems advisable for the administration of the Plan; to decide all disputes arising in connection with the Plan; and to otherwise supervise the administration of the Plan.

 

All decisions and interpretations of the Administrator shall be binding on all persons, including the Company and Plan grantees.

 

(c)           Delegation of Authority to Grant Awards.  The Administrator, in its discretion, may delegate to the Chief Executive Officer of the Company all or part of the Administrator’s authority and duties with respect to the granting of Awards at Fair Market Value, to individuals who are not subject to the reporting and other provisions of Section 16 of the Exchange Act or “covered employees” within the meaning of Section 162(m) of the Code.  Any such delegation by the Administrator shall include a limitation as to the amount of Awards that may be granted during the period of the delegation and shall contain guidelines as to the determination of the exercise price of any Stock Option or Stock Appreciation Right, the conversion ratio or price of other Awards and the vesting criteria.  The Administrator may revoke or amend the terms of a delegation at any time but such action shall not invalidate any prior actions of the Administrator’s delegate or delegates that were consistent with the terms of the Plan.

 

(d)           Indemnification.  Neither the Board nor the Committee, nor any member of either or any delegatee thereof, shall be liable for any act, omission, interpretation, construction or determination made in good faith in connection with the Plan, and the members of the Board and the Committee (and any delegatee thereof) shall be entitled in all cases to indemnification and reimbursement by the Company in respect of any claim, loss, damage or expense (including, without limitation, reasonable attorneys’ fees) arising or resulting therefrom to the fullest extent permitted by law and/or under any directors’ and officers’ liability insurance coverage which may be in effect from time to time.

 

SECTION 3.  STOCK ISSUABLE UNDER THE PLAN; MERGERS; SUBSTITUTION

 

(a)           Stock Issuable.  The maximum number of shares of Stock reserved and available for issuance under the Plan shall be 3,000,000 shares, subject to adjustment as provided in Section 3(b); provided that not more than 2,000,000 shares shall be issued in the form of Unrestricted Stock Awards, Restricted Stock Awards or Deferred Stock Awards (excluding for purposes of such 2,000,000 share limitation, the shares of Stock underlying any Awards granted in lieu of cash compensation or fees).  For purposes of these limitations, the shares of Stock underlying any Awards (including any awards granted pursuant to the Watts Industries, Inc. 1996 Stock Option Plan) which are forfeited, canceled, held back upon exercise of an Option or settlement of an Award to cover the exercise price or tax withholding, reacquired by the Company prior to vesting, satisfied without the issuance of Stock or otherwise terminated (other

 

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than by exercise) shall be added back to the shares of Stock available for issuance under the Plan.  Subject to such overall limitations, shares of Stock may be issued up to such maximum number pursuant to any type or types of Award; provided, however, that Stock Options or Stock Appreciation Rights with respect to no more than 300,000 shares of Stock may be granted to any one individual grantee during any one calendar year period.  The shares available for issuance under the Plan may be authorized but unissued shares of Stock or shares of Stock reacquired by the Company and held in its treasury.

 

(b)           Changes in Stock.  Subject to Section 3(c) hereof, if, as a result of any reorganization, recapitalization, reclassification, stock dividend, stock split, reverse stock split or other similar change in the Company’s capital stock, the outstanding shares of Stock are increased or decreased or are exchanged for a different number or kind of shares or other securities of the Company, or additional shares or new or different shares or other securities of the Company or other non-cash assets are distributed with respect to such shares of Stock or other securities, or, if, as a result of any merger or consolidation, sale of all or substantially all of the assets of the Company, the outstanding shares of Stock are converted into or exchanged for a different number or kind of securities of the Company or any successor entity (or a parent or subsidiary thereof), the Administrator shall make an appropriate or proportionate adjustment in (i) the maximum number of shares reserved for issuance under the Plan, including the maximum number of shares that may be issued in the form of Unrestricted Stock Awards, Restricted Stock Awards or Deferred Stock Awards, (ii) the number of Stock Options or Stock Appreciation Rights that can be granted to any one individual grantee and the maximum number of shares that may be granted under a Performance-based Award, (iii) the number and kind of shares or other securities subject to any then outstanding Awards under the Plan, (iv) the repurchase price per share subject to each outstanding Restricted Stock Award, and (v) the price for each share subject to any then outstanding Stock Options and Stock Appreciation Rights under the Plan, without changing the aggregate exercise price (i.e., the exercise price multiplied by the number of Stock Options and Stock Appreciation Rights) as to which such Stock Options and Stock Appreciation Rights remain exercisable.  The adjustment by the Administrator shall be final, binding and conclusive.  No fractional shares of Stock shall be issued under the Plan resulting from any such adjustment, but the Administrator in its discretion may make a cash payment in lieu of fractional shares.

 

The Administrator may also adjust the number of shares subject to outstanding Awards and the exercise price and the terms of outstanding Awards to take into consideration material changes in accounting practices or principles, extraordinary dividends, acquisitions or dispositions of stock or property or any other event if it is determined by the Administrator that such adjustment is appropriate to avoid distortion in the operation of the Plan, provided that no such adjustment shall be made in the case of an Incentive Stock Option, without the consent of the grantee, if it would constitute a modification, extension or renewal of the Option within the meaning of Section 424(h) of the Code.

 

(c)           Mergers and Other Transactions.  In the case of and subject to the consummation of (i) the dissolution or liquidation of the Company, (ii) the sale of all or substantially all of the assets of the Company on a consolidated basis to an unrelated person or entity, (iii) a merger, reorganization or consolidation in which the outstanding shares of Stock are converted into or exchanged for a different kind of securities of the successor entity and the holders of the

 

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Company’s outstanding voting power immediately prior to such transaction do not own a majority of the outstanding voting power of the successor entity immediately upon completion of such transaction, or (iv) the sale of all of the Stock of the Company to an unrelated person or entity (in each case, a “Sale Event”), all Options and Stock Appreciation Rights that are not exercisable immediately prior to the effective time of the Sale Event shall become fully exercisable as of the effective time of the Sale Event and all other Awards shall become fully vested and nonforfeitable as of the effective time of the Sale Event, except as the Administrator may otherwise specify with respect to particular Awards.  Upon the effective time of the Sale Event, the Plan and all outstanding Awards granted hereunder shall terminate, unless provision is made in connection with the Sale Event in the sole discretion of the parties thereto for the assumption or continuation of Awards theretofore granted by the successor entity, or the substitution of such Awards with new Awards of the successor entity or parent thereof, with appropriate adjustment as to the number and kind of shares and, if appropriate, the per share exercise prices, as such parties shall agree (after taking into account any acceleration hereunder).  In the event of such termination, each grantee shall be permitted, within a specified period of time prior to the consummation of the Sale Event as determined by the Administrator, to exercise all outstanding Options and Stock Appreciation Rights held by such grantee, including those that will become exercisable upon the consummation of the Sale Event; provided, however, that the exercise of Options and Stock Appreciation Rights not exercisable prior to the Sale Event shall be subject to the consummation of the Sale Event.

 

Notwithstanding anything to the contrary in this Section 3(c), in the event of a Sale Event pursuant to which holders of the Stock of the Company will receive upon consummation thereof a cash payment for each share surrendered in the Sale Event, the Company shall have the right, but not the obligation, to make or provide for a cash payment to the grantees holding Options and Stock Appreciation Rights, in exchange for the cancellation thereof, in an amount equal to the difference between (A) the value as determined by the Administrator of the consideration payable per share of Stock pursuant to the Sale Event (the “Sale Price”) times the number of shares of Stock subject to outstanding Options and Stock Appreciation Rights (to the extent then exercisable at prices not in excess of the Sale Price) and (B) the aggregate exercise price of all such outstanding Options and Stock Appreciation Rights.

 

(d)           Substitute Awards.  The Administrator may grant Awards under the Plan in substitution for stock and stock based awards held by employees, directors or other key persons of another corporation in connection with the merger or consolidation of the employing corporation with the Company or a Subsidiary or the acquisition by the Company or a Subsidiary of property or stock of the employing corporation.  The Administrator may direct that the substitute awards be granted on such terms and conditions as the Administrator considers appropriate in the circumstances.  Any substitute Awards granted under the Plan shall not count against the share limitation set forth in Section 3(a).

 

SECTION 4.  ELIGIBILITY

 

Grantees under the Plan will be such full or part-time officers and other employees, Non-Employee Directors and key persons (including consultants and prospective employees) of the

 

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Company and its Subsidiaries as are selected from time to time by the Administrator in its sole discretion.

 

SECTION 5.  STOCK OPTIONS

 

Any Stock Option granted under the Plan shall be in such form as the Administrator may from time to time approve.

 

Stock Options granted under the Plan may be either Incentive Stock Options or Non-Qualified Stock Options.  Incentive Stock Options may be granted only to employees of the Company or any Subsidiary that is a “subsidiary corporation” within the meaning of Section 424(f) of the Code.  To the extent that any Option does not qualify as an Incentive Stock Option, it shall be deemed a Non-Qualified Stock Option.

 

(a)           Stock Options.  Stock Options granted pursuant to this Section 5(a) shall be subject to the following terms and conditions and shall contain such additional terms and conditions, not inconsistent with the terms of the Plan, as the Administrator shall deem desirable.  If the Administrator so determines, Stock Options may be granted in lieu of cash compensation at the optionee’s election, subject to such terms and conditions as the Administrator may establish.

 

(i)            Exercise Price.  The exercise price per share for the Stock covered by a Stock Option granted pursuant to this Section 5(a) shall be determined by the Administrator at the time of grant but shall not be less than 50 percent of the Fair Market Value on the date of grant for Non-Qualified Stock Options and 100 percent of the Fair Market Value on the date of grant for Incentive Stock Options (other than options granted in lieu of cash compensation).  If an employee owns or is deemed to own (by reason of the attribution rules of Section 424(d) of the Code) more than 10 percent of the combined voting power of all classes of stock of the Company or any parent or subsidiary corporation and an Incentive Stock Option is granted to such employee, the option price of such Incentive Stock Option shall be not less than 110 percent of the Fair Market Value on the grant date.

 

(ii)           Option Term.  The term of each Stock Option shall be fixed by the Administrator, but no Stock Option shall be exercisable more than 10 years after the date the Stock Option is granted.  If an employee owns or is deemed to own (by reason of the attribution rules of Section 424(d) of the Code) more than 10 percent of the combined voting power of all classes of stock of the Company or any parent or subsidiary corporation and an Incentive Stock Option is granted to such employee, the term of such Stock Option shall be no more than five years from the date of grant.

 

(iii)          Exercisability; Rights of a Stockholder.  Stock Options shall become exercisable at such time or times, whether or not in installments, as shall be determined by the Administrator at or after the grant date.  The Administrator may at any time accelerate the exercisability of all or any portion of any Stock Option.  An optionee shall have the rights of a stockholder only as to shares acquired upon the exercise of a Stock Option and not as to unexercised Stock Options.

 

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(iv)          Method of Exercise.  Stock Options may be exercised in whole or in part, by giving written notice of exercise to the Company, specifying the number of shares to be purchased.  Payment of the purchase price may be made by one or more of the following methods to the extent provided in the Option Award agreement:

 

(A)          In cash, by certified or bank check or other instrument acceptable to the Administrator;

 

(B)           Through the delivery (or attestation to the ownership) of shares of Stock that have been purchased by the optionee on the open market or that have been beneficially owned by the optionee for at least six months and are not then subject to restrictions under any Company plan.  Such surrendered shares shall be valued at Fair Market Value on the exercise date; or

 

(C)           By the optionee delivering to the Company a properly executed exercise notice together with irrevocable instructions to a broker to promptly deliver to the Company cash or a check payable and acceptable to the Company for the purchase price; provided that in the event the optionee chooses to pay the purchase price as so provided, the optionee and the broker shall comply with such procedures and enter into such agreements of indemnity and other agreements as the Administrator shall prescribe as a condition of such payment procedure.

 

Payment instruments will be received subject to collection.  The delivery of certificates representing the shares of Stock to be purchased pursuant to the exercise of a Stock Option will be contingent upon receipt from the optionee (or a purchaser acting in his stead in accordance with the provisions of the Stock Option) by the Company of the full purchase price for such shares and the fulfillment of any other requirements contained in the Option Award agreement or applicable provisions of laws.  In the event an optionee chooses to pay the purchase price by previously-owned shares of Stock through the attestation method, the number of shares of Stock transferred to the optionee upon the exercise of the Stock Option shall be net of the number of shares attested to.

 

(v)           Annual Limit on Incentive Stock Options.  To the extent required for “incentive stock option” treatment under Section 422 of the Code, the aggregate Fair Market Value (determined as of the time of grant) of the shares of Stock with respect to which Incentive Stock Options granted under this Plan and any other plan of the Company or its parent and subsidiary corporations become exercisable for the first time by an optionee during any calendar year shall not exceed $100,000.  To the extent that any Stock Option exceeds this limit, it shall constitute a Non-Qualified Stock Option.

 

(b)           Non-transferability of Options.  No Stock Option shall be transferable by the optionee otherwise than by will or by the laws of descent and distribution and all Stock Options shall be exercisable, during the optionee’s lifetime, only by the optionee, or by the optionee’s legal representative or guardian in the event of the optionee’s incapacity.  Notwithstanding the foregoing, the Administrator, in its sole discretion, may provide in the Award agreement regarding a given Option that the optionee may transfer his Non-Qualified Stock Options to members of his immediate family, to trusts for the benefit of such family members, or to

 

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partnerships in which such family members are the only partners, provided that the transferee agrees in writing with the Company to be bound by all of the terms and conditions of this Plan and the applicable Option.

 

SECTION 6.  STOCK APPRECIATION RIGHTS

 

(a)           Nature of Stock Appreciation Rights.  A Stock Appreciation Right is an Award entitling the recipient to receive an amount in cash or shares of Stock or a combination thereof having a value equal to the excess of the Fair Market Value of the Stock on the date of exercise over the exercise price of the Stock Appreciation Right, which price shall not be less than 50 percent of the Fair Market Value of the Stock on the date of grant (or more than the option exercise price per share, if the Stock Appreciation Right was granted in tandem with a Stock Option) multiplied by the number of shares of Stock with respect to which the Stock Appreciation Right shall have been exercised, with the Administrator having the right to determine the form of payment.

 

(b)           Grant and Exercise of Stock Appreciation Rights.  Stock Appreciation Rights may be granted by the Administrator in tandem with, or independently of, any Stock Option granted pursuant to Section 5 of the Plan.  In the case of a Stock Appreciation Right granted in tandem with a Non-Qualified Stock Option, such Stock Appreciation Right may be granted either at or after the time of the grant of such Option.  In the case of a Stock Appreciation Right granted in tandem with an Incentive Stock Option, such Stock Appreciation Right may be granted only at the time of the grant of the Option.

 

A Stock Appreciation Right or applicable portion thereof granted in tandem with a Stock Option shall terminate and no longer be exercisable upon the termination or exercise of the related Option.

 

(c)           Terms and Conditions of Stock Appreciation Rights.  Stock Appreciation Rights shall be subject to such terms and conditions as shall be determined from time to time by the Administrator, subject to the following:

 

(i)            Stock Appreciation Rights granted in tandem with Options shall be exercisable at such time or times and to the extent that the related Stock Options shall be exercisable.

 

(ii)           Upon exercise of a Stock Appreciation Right, the applicable portion of any related Option shall be surrendered.

 

(iii)          All Stock Appreciation Rights shall be exercisable during the grantee’s lifetime only by the grantee or the grantee’s legal representative.

 

SECTION 7.  RESTRICTED STOCK AWARDS

 

(a)           Nature of Restricted Stock Awards.  A Restricted Stock Award is an Award entitling the recipient to acquire, at such purchase price as determined by the Administrator,

 

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shares of Stock subject to such restrictions and conditions as the Administrator may determine at the time of grant (“Restricted Stock”).  Conditions may be based on continuing employment (or other service relationship) and/or achievement of pre-established performance goals and objectives.  The grant of a Restricted Stock Award is contingent on the grantee executing the Restricted Stock Award agreement.  The terms and conditions of each such agreement shall be determined by the Administrator, and such terms and conditions may differ among individual Awards and grantees.

 

(b)           Rights as a Stockholder.  Upon execution of a Grant Instrument setting forth the Restricted Stock Award and payment of any applicable purchase price, a grantee shall have the rights of a stockholder with respect to the voting of the Restricted Stock, subject to such conditions contained in the Grant Instrument evidencing the Restricted Stock Award.  Unless the Administrator shall otherwise determine, certificates evidencing the Restricted Stock shall remain in the possession of the Company until such Restricted Stock is vested as provided in Section 7(d) below, and the grantee shall be required, as a condition of the grant, to deliver to the Company a stock power endorsed in blank.

 

(c)           Restrictions.  Restricted Stock may not be sold, assigned, transferred, pledged or otherwise encumbered or disposed of except as specifically provided herein or in the Restricted Stock Award agreement.  If a grantee’s employment (or other service relationship) with the Company and its Subsidiaries terminates for any reason, the Company shall have the right to repurchase Restricted Stock that has not vested at the time of termination at its original purchase price, from the grantee or the grantee’s legal representative.

 

(d)           Vesting of Restricted Stock.  The Administrator at the time of grant shall specify the date or dates and/or the attainment of pre-established performance goals, objectives and other conditions on which the non-transferability of the Restricted Stock and the Company’s right of repurchase or forfeiture shall lapse.  Notwithstanding the foregoing, in the event that any such Restricted Stock shall have a performance based goal, the restriction period with respect to such shares shall not be less than one year and in the event that any such Restricted Stock shall have a time based restriction, the restriction period with respect to such shares shall not be less than three years.  Subsequent to such date or dates and/or the attainment of such pre-established performance goals, objectives and other conditions, the shares on which all restrictions have lapsed shall no longer be Restricted Stock and shall be deemed “vested.”  Except as may otherwise be provided by the Administrator either in the Award agreement or, subject to Section 14 below, in writing after the Award agreement is issued, a grantee’s rights in any shares of Restricted Stock that have not vested shall automatically terminate upon the grantee’s termination of employment (or other service relationship) with the Company and its Subsidiaries and such shares shall be subject to the Company’s right of repurchase as provided in Section 7(c) above.

 

SECTION 8.  DEFERRED STOCK AWARDS

 

(a)           Nature of Deferred Stock Awards.   A Deferred Stock Award is an Award of phantom stock units to a grantee, subject to restrictions and conditions as the Administrator may determine at the time of grant.  Conditions may be based on continuing employment (or other

 

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service relationship) and/or achievement of pre-established performance goals and objectives.  The grant of a Deferred Stock Award is contingent on the grantee executing the Deferred Stock Award agreement.  The terms and conditions of each such agreement shall be determined by the Administrator, and such terms and conditions may differ among individual Awards and grantees. Notwithstanding the foregoing, in the event that the vesting of any such Deferred Stock Award is subject to attainment of a performance based goal, the vesting period with respect to such award shall not be less than one year and in the event that the vesting of any such Deferred Stock Award shall be time-based, the vesting period with respect to such award shall not be less than three years.  At the end of the deferral period, the Deferred Stock Award, to the extent vested, shall be paid to the grantee in the form of shares of Stock.

 

(b)           Election to Receive Deferred Stock Awards in Lieu of Compensation.  The Administrator may, in its sole discretion, permit a grantee to elect to receive a portion of the cash compensation or Restricted Stock Award otherwise due to such grantee in the form of a Deferred Stock Award.  Any such election shall be made in writing and shall be delivered to the Company no later than the date specified by the Administrator and in accordance with rules and procedures established by the Administrator.  The Administrator shall have the sole right to determine whether and under what circumstances to permit such elections and to impose such limitations and other terms and conditions thereon as the Administrator deems appropriate.

 

(c)           Rights as a Stockholder.  During the deferral period, a grantee shall have no rights as a stockholder; provided, however, that the grantee may be credited with Dividend Equivalent Rights with respect to the phantom stock units underlying his Deferred Stock Award, subject to such terms and conditions as the Administrator may determine.

 

(d)           Restrictions.  A Deferred Stock Award may not be sold, assigned, transferred, pledged or otherwise encumbered or disposed of during the deferral period.

 

(e)           Termination.  Except as may otherwise be provided by the Administrator either in the Award agreement or, subject to Section 14 below, in writing after the Award agreement is issued, a grantee’s right in all Deferred Stock Awards that have not vested shall automatically terminate upon the grantee’s termination of employment (or cessation of service relationship) with the Company and its Subsidiaries for any reason.

 

SECTION 9.  UNRESTRICTED STOCK AWARDS

 

Grant or Sale of Unrestricted Stock.  The Administrator may, in its sole discretion, grant (or sell at par value or such higher purchase price determined by the Administrator) an Unrestricted Stock Award to any grantee pursuant to which such grantee may receive shares of Stock free of any restrictions (“Unrestricted Stock”) under the Plan.  Unrestricted Stock Awards may be granted in respect of past services or other valid consideration, or in lieu of cash compensation due to such grantee.

 

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SECTION 10.  PERFORMANCE-BASED AWARDS TO COVERED EMPLOYEES

 

Notwithstanding anything to the contrary contained herein, if any Restricted Stock Award or Deferred Stock Award granted to a Covered Employee is intended to qualify as “Performance-based Compensation” under Section 162(m) of the Code (a “Performance-based Award”), such Award shall comply with the provisions set forth below:

 

(a)           Performance Criteria.  The performance criteria used in performance goals governing Performance-based Awards granted to Covered Employees may include any or all of the following:  (i) the Company’s return on equity, assets, capital or investment:  (ii) pre-tax or after-tax profit levels of the Company or any Subsidiary, a division, an operating unit or a business segment of the Company, or any combination of the foregoing; (iii) cash flow, funds from operations or similar measure; (iv) total shareholder return; (v) changes in the market price of the Stock; (vi) sales or market share; or (vii) earnings per share.

 

(b)           Grant of Performance-based Awards.  With respect to each Performance-based Award granted to a Covered Employee, the Committee shall select, within the first 90 days of a Performance Cycle (or, if shorter, within the maximum period allowed under Section 162(m) of the Code) the performance criteria for such grant, and the achievement targets with respect to each performance criterion (including a threshold level of performance below which no amount will become payable with respect to such Award).  Each Performance-based Award will specify the amount payable, or the formula for determining the amount payable, upon achievement of the various applicable performance targets.  The performance criteria established by the Committee may be (but need not be) different for each Performance Cycle and different goals may be applicable to Performance-based Awards to different Covered Employees.

 

(c)           Payment of Performance-based Awards.  Following the completion of a Performance Cycle, the Committee shall meet to review and certify in writing whether, and to what extent, the performance criteria for the Performance Cycle have been achieved and, if so, to also calculate and certify in writing the amount of the Performance-based Awards earned for the Performance Cycle.  The Committee shall then determine the actual size of each Covered Employee’s Performance-based Award, and, in doing so, may reduce or eliminate the amount of the Performance-based Award for a Covered Employee if, in its sole judgment, such reduction or elimination is appropriate.

 

(d)           Maximum Award Payable.  The maximum Performance-based Award payable to any one Covered Employee under the Plan for a Performance Cycle is 300,000 Shares (subject to adjustment as provided in Section 3(b) hereof).

 

SECTION 11.  DIVIDEND EQUIVALENT RIGHTS

 

(a)           Dividend Equivalent Rights.  A Dividend Equivalent Right is an Award entitling the grantee to receive credits based on cash dividends that would have been paid on the shares of Stock specified in the Dividend Equivalent Right (or other award to which it relates) if such shares had been issued to and held by the grantee.  A Dividend Equivalent Right may be granted hereunder to any grantee as a component of another Award or as a freestanding award.  The terms and conditions of Dividend Equivalent Rights shall be specified in the Award agreement.

 

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Dividend equivalents credited to the holder of a Dividend Equivalent Right may be paid currently or may be deemed to be reinvested in additional shares of Stock, which may thereafter accrue additional equivalents.  Any such reinvestment shall be at Fair Market Value on the date of reinvestment or such other price as may then apply under a dividend reinvestment plan sponsored by the Company, if any.  Dividend Equivalent Rights may be settled in cash or shares of Stock or a combination thereof, in a single installment or installments.  A Dividend Equivalent Right granted as a component of another Award may provide that such Dividend Equivalent Right shall be settled upon exercise, settlement, or payment of, or lapse of restrictions on, such other award, and that such Dividend Equivalent Right shall expire or be forfeited or annulled under the same conditions as such other award.  A Dividend Equivalent Right granted as a component of another Award may also contain terms and conditions different from such other award.

 

(b)           Interest Equivalents.  Any Award under this Plan that is settled in whole or in part in cash on a deferred basis may provide in the grant for interest equivalents to be credited with respect to such cash payment.  Interest equivalents may be compounded and shall be paid upon such terms and conditions as may be specified by the grant.

 

(c)           Termination.  Except as may otherwise be provided by the Administrator either in the Award agreement or, subject to Section 14 below, in writing after the Award agreement is issued, a grantee’s rights in all Dividend Equivalent Rights or interest equivalents shall automatically terminate upon the grantee’s termination of employment (or cessation of service relationship) with the Company and its Subsidiaries for any reason.

 

SECTION 12.  TAX WITHHOLDING

 

(a)           Payment by Grantee.  Each grantee shall, no later than the date as of which the value of an Award or of any Stock or other amounts received thereunder first becomes includable in the gross income of the grantee for Federal income tax purposes, pay to the Company, or make arrangements satisfactory to the Administrator regarding payment of, any Federal, state, or local taxes of any kind required by law to be withheld with respect to such income.  The Company and its Subsidiaries shall, to the extent permitted by law, have the right to deduct any such taxes from any payment of any kind otherwise due to the grantee.  The Company’s obligation to deliver stock certificates to any grantee is subject to and conditioned on tax obligations being satisfied by the grantee.

 

(b)           Payment in Stock.  Subject to approval by the Administrator, a grantee may elect to have the minimum required tax withholding obligation satisfied, in whole or in part, by (i) authorizing the Company to withhold from shares of Stock to be issued pursuant to any Award a number of shares with an aggregate Fair Market Value (as of the date the withholding is effected) that would satisfy the withholding amount due, or (ii) transferring to the Company shares of Stock owned by the grantee with an aggregate Fair Market Value (as of the date the withholding is effected) that would satisfy the withholding amount due.  Notwithstanding the preceding provisions of this Section 12, in the case of Restricted Stock Awards the Company shall have the right to satisfy the minimum required tax withholding obligation by withholding from shares of Stock no longer subject to repurchase or forfeiture a number of shares with an

 

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aggregate Fair Market Value (as of the date the withholding is effected) that would satisfy the withholding amount due.

 

SECTION 12A.  DEFERRED COMPENSATION.

 

(a)           Anything in the Plan to the contrary notwithstanding, the following rules shall apply to 409A Awards and shall constitute further restrictions on terms of Awards set forth elsewhere in the Plan:

 

(i)            The Administrator may permit a grantee to elect to defer an Award or to defer any payment under an Award (each, an “Election”), only if such Election is in writing and specifies the amount of the distribution in settlement of the Award being deferred, as well as the time and form of the distribution as permitted by the Plan.

 

(ii)           All Elections shall be made by the end of the grantee’s taxable year prior to the year in which services commence for which an Award may be granted to such grantee; provided, however, that if the Award qualifies as “performance-based compensation” for purposes of Section 409A of the Code, and is based on services performed over a period of at least twelve (12) months, the Election may be made no later than six (6) months prior to the end of such period.

 

(iii)          Elections shall continue in effect until a written election to revoke or change such Election is received by the Company, except that a written election to revoke or change such Election must be made prior to the last day for making an Election determined in accordance with Section 12A(a)(ii) of the Plan.

 

(b)           Any 409A Award which permits a subsequent Election to delay the distribution or change the form of a distribution in settlement of such Award shall comply with the following requirements:

 

(i)            No subsequent Election may take effect until at least twelve (12) months after the date on which the subsequent Election is made;

 

(ii)           Each subsequent Election related to a distribution in settlement of an Award not described in Section 12A(c)(ii),  (c)(iii), or (c)(vi) must result in a delay of the distribution for a period of not less than five (5) years from the date such distribution would otherwise have been made; and

 

(iii)          No subsequent Election related to a distribution pursuant to Section 12A(c)(iv) shall be made less than twelve (12) months prior to the date of the first scheduled payment under such distribution.

 

(c)           No distribution in settlement of a 409A Award may commence earlier than:

 

(i)            Separation from service (as determined pursuant to Treasury Regulations or other applicable guidance);

 

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(ii)           The date the grantee becomes Disabled (as defined below in Section 12A(f));

 

(iii)          Death;

 

(iv)          A specified time (or pursuant to a fixed schedule) that is either (i) specified by the Administrator upon the grant of an Award and set forth in the Grant Instrument, or (ii) specified by the grantee in an Election complying with the requirements of Section 12A(a) and/or 12A(b), as applicable;

 

(v)           To the extent provided by Treasury Regulations promulgated pursuant to Section 409A of the Code or other applicable guidance, a change in the ownership or effective control or the Company or in the ownership of a substantial portion of the assets of the Company; or

 

(vi)          The occurrence of an Unforeseeable Emergency (as defined below in Section 12A(e)).

 

(d)           Notwithstanding anything else herein to the contrary, to the extent that a grantee is a “Specified Employee,” no distribution pursuant to Section 12A(c)(i) in settlement of a 409A Award may be made before the date which is six (6) months after such grantee’s date of separation from service, or, if earlier, the date of the grantee’s death.  In the event any distribution is delayed pursuant to the immediately previous sentence, the 409A Award will be paid at the beginning of the seventh month following the grantee’s termination, or, in the event of the grantee’s death during such six-month period, payment will be made to the grantee’s beneficiary as soon as administratively possible following receipt by the Administrator of satisfactory notice and confirmation of the grantee’s death.

 

(e)           If a grantee establishes the occurrence of an Unforeseeable Emergency (as defined in Section 409A of the Code) to the satisfaction of the Administrator, the Administrator shall have the authority to provide for distribution in settlement of all or a portion of such Award.  In such event, the amount(s) distributed with respect to such Unforeseeable Emergency cannot exceed the amounts necessary to satisfy such Unforeseeable Emergency plus amounts necessary to pay taxes reasonably anticipated as a result of such distribution(s), after taking into account the extent to which such hardship is or may be relieved through reimbursement or compensation by insurance or otherwise or by liquidation of the grantee’s assets (to the extent the liquidation of such assets would not itself cause severe financial hardship).  All distributions with respect to an Unforeseeable Emergency shall be made in a lump sum as soon as practicable following the Administrator’s determination that an Unforeseeable Emergency has occurred.  The occurrence of an Unforeseeable Emergency shall be judged and determined by the Administrator.  The Administrator’s decision with respect to whether an Unforeseeable Emergency has occurred and the manner in which, if at all, the distribution in settlement of an Award shall be altered or modified, shall be final, conclusive, and not subject to approval or appeal.

 

(f)            The Administrator shall have the authority to provide in the Grant Instrument evidencing any Award subject to Section 409A of the Code for distribution in settlement of such

 

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Award in the event that the grantee becomes Disabled.  A grantee shall be considered “Disabled” if either:

 

(i)            The grantee is unable to engage in any substantial gainful activity by reason of any medically determinable physical or mental impairment which can be expected to result in death or can be expected to last for a continuous period of not less than twelve (12) months, or

 

(ii)           The grantee is, by reason of any medically determinable physical or mental impairment which can be expected to result in death or can be expected to last for a continuous period of not less than twelve (12) months, receiving income replacement benefits for a period of not less than three (3) months under an accident and health plan covering employees of the grantee’s employer.

 

All distributions payable by reason of a grantee becoming Disabled shall be paid in a lump sum or in periodic installments as established by the grantee’s Election, commencing as soon as practicable following the date the grantee becomes Disabled.  If the grantee has made no Election with respect to distributions upon becoming Disabled, all such distributions shall be paid in a lump sum as soon as practicable following the date the grantee becomes Disabled.

 

(g)           If a grantee dies before complete distribution of amounts payable upon settlement of a 409A Award, such undistributed amounts shall be distributed to his or her beneficiary under the distribution method for death established by the grantee’s Election as soon as administratively possible following receipt by the Administrator of satisfactory notice and confirmation of the grantee’s death.  If the grantee has made no Election with respect to distributions upon death, all such distributions shall be paid in a lump sum as soon as practicable following the date of the grantee’s death.

 

(h)           Notwithstanding anything to the contrary herein, the Administrator shall have no authority to accelerate distributions relating to 409A Awards in excess of the authority permitted under Treasury Regulation Section 1.409A-3(j).

 

(i)            The Administrator shall not amend or terminate and no amendment or termination of the Plan or a Grant Instrument pursuant to Section 14 of the Plan shall be effective with respect to 409A Awards except insofar as it complies with the requirements of Section 409A of the Code.

 

(j)            Any substitution of a new stock right, as defined in Treasury Regulation Section 1.409A-1(l), or assumption of an outstanding stock right pursuant to any changes in stock described in Section 3(b) of the Plan or pursuant to any merger and other transaction described in Section 3(d) of the Plan and any adjustment of a stock right to reflect a stock split or a stock dividend shall comply with the requirements of Treasury Regulation Sections 1.409A-1(b)(5)(v)(D) and (H), as applicable.

 

(k)           In the case of any Award providing for a distribution upon the lapse of a Substantial Risk of Forfeiture, if the timing of such distribution is not otherwise specified in the

 

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Plan or the Grant Instrument, the distribution shall be made on or after January 1 and on or before March 15 of the year following the year in which the risk of forfeiture lapsed.

 

SECTION 13.  TRANSFER, LEAVE OF ABSENCE, ETC.

 

For purposes of the Plan, the following events shall not be deemed a termination of employment:

 

(a)           a transfer to the employment of the Company from a Subsidiary or from the Company to a Subsidiary, or from one Subsidiary to another; or

 

(b)           an approved leave of absence for military service or sickness, or for any other purpose approved by the Company, if the employee’s right to re-employment is guaranteed either by a statute or by contract or under the policy pursuant to which the leave of absence was granted or if the Administrator otherwise so provides in writing.

 

SECTION 14.  AMENDMENTS AND TERMINATION

 

Subject to Section 12A(i) of the Plan, the Board may, at any time, amend or discontinue the Plan and the Administrator may, at any time, amend or cancel any outstanding Award for the purpose of satisfying changes in law or for any other lawful purpose, but no such action shall adversely affect rights under any outstanding Award without the holder’s consent.  Except as provided in Section 3(b) or 3(c), in no event may the Administrator exercise its discretion to reduce the exercise price of outstanding Stock Options or effect repricing through cancellation and re-grants.  Any material Plan amendments (other than amendments that curtail the scope of the Plan), including any Plan amendments that (i) increase the number of shares reserved for issuance under the Plan, (ii) expand the type of Awards available, materially expand the eligibility to participate or materially extend the term of the Plan, or (iii) materially change the method of determining Fair Market Value, shall be subject to approval by the Company stockholders entitled to vote at a meeting of stockholders.  In addition, to the extent determined by the Administrator to be required by the Code to ensure that Incentive Stock Options granted under the Plan are qualified under Section 422 of the Code or to ensure that compensation earned under Awards qualifies as performance-based compensation under Section 162(m) of the Code, Plan amendments shall be subject to approval by the Company stockholders entitled to vote at a meeting of stockholders.  Nothing in this Section 14 shall limit the Administrator’s authority to take any action permitted pursuant to Section 3(c).

 

SECTION 15.  STATUS OF PLAN

 

With respect to the portion of any Award that has not been exercised and any payments in cash, Stock or other consideration not received by a grantee, a grantee shall have no rights greater than those of a general creditor of the Company unless the Administrator shall otherwise expressly determine in connection with any Award or Awards.  In its sole discretion, the Administrator may authorize the creation of trusts or other arrangements to meet the Company’s

 

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obligations to deliver Stock or make payments with respect to Awards hereunder, provided that the existence of such trusts or other arrangements is consistent with the foregoing sentence.

 

SECTION 16.  GENERAL PROVISIONS

 

(a)           No Distribution; Compliance with Legal Requirements.  The Administrator may require each person acquiring Stock pursuant to an Award to represent to and agree with the Company in writing that such person is acquiring the shares without a view to distribution thereof.

 

No shares of Stock shall be issued pursuant to an Award until all applicable securities law and other legal and stock exchange or similar requirements have been satisfied.  The Administrator may require the placing of such stop-orders and restrictive legends on certificates for Stock and Awards as it deems appropriate.

 

(b)           Delivery of Stock Certificates.  Stock certificates to grantees under this Plan shall be deemed delivered for all purposes when the Company or a stock transfer agent of the Company shall have mailed such certificates in the United States mail, addressed to the grantee, at the grantee’s last known address on file with the Company.

 

(c)           Other Compensation Arrangements; No Employment Rights.  Nothing contained in this Plan shall prevent the Board from adopting other or additional compensation arrangements, including trusts, and such arrangements may be either generally applicable or applicable only in specific cases.  The adoption of this Plan and the grant of Awards do not confer upon any employee any right to continued employment with the Company or any Subsidiary.

 

(d)           Trading Policy Restrictions.  Option exercises and other Awards under the Plan shall be subject to such Company’s insider trading policy and procedures, as in effect from time to time.

 

(e)           Designation of Beneficiary.  Each grantee to whom an Award has been made under the Plan may designate a beneficiary or beneficiaries to exercise any Award or receive any payment under any Award payable on or after the grantee’s death.  Any such designation shall be on a form provided for that purpose by the Administrator and shall not be effective until received by the Administrator.  If no beneficiary has been designated by a deceased grantee, or if the designated beneficiaries have predeceased the grantee, the beneficiary shall be the grantee’s estate.

 

SECTION 17.  EFFECTIVE DATE OF PLAN

 

This Plan shall become effective upon approval by the holders of a majority of the votes cast at a meeting of stockholders at which a quorum is present.  Subject to such approval by the stockholders and to the requirement that no Stock may be issued hereunder prior to such approval, Stock Options and other Awards may be granted hereunder on and after adoption of

 

18

 

this Plan by the Board.  No grants of Stock Options and other Awards may be made hereunder after February 9, 2014.

 

SECTION 18.  GOVERNING LAW

 

This Plan and all Awards and actions taken thereunder shall be governed by, and construed in accordance with, the laws of the State of Delaware, applied without regard to conflict of law principles.

 

DATE APPROVED BY BOARD OF DIRECTORS:  February 10, 2004

 

DATE APPROVED BY STOCKHOLDERS:  May 5, 2004

 

DATE AMENDMENT TO SECTION 12 APPROVED BY BOARD OF DIRECTORS:  July 31, 2007

 

DATE ON WHICH AMENDED AND RESTATED PLAN APPROVED BY BOARD OF DIRECTORS:  November 1, 2010

 

19Exhibit 10.22

 

DATALINK CORPORATION

AMENDED AND RESTATED

2000 DIRECTOR STOCK OPTION PALN

(as amended and restated on May 15, 2007, incorporating amendments effective

April 4, 2001, May2, 2002, October 15, 2002, April 13, 2004 and May 15, 2007)

 

Section 1.  Purpose

 

The purposes of the Plan are to assist the Company in (1) promoting a greater identity of interests between the Company’s non-employee directors and its shareholders, and (2) attracting and retaining directors by affording them an opportunity to share in the future successes of the Company.

 

Section 2.  Definitions

 

“Act” shall mean the Securities Exchange Act of 1934, as amended.

 

“Board” shall mean the Board of Directors of the Company.

 

“Change of Control” shall mean the happening of any of the following events:

 

(i)         An acquisition by any individual, entity or group (within the meaning of Section 13(d)(3) or 14(d)(2) of the Act) (a “Person”) of beneficial ownership (within the meaning of Rule 13d-3 promulgated under the Act) of 20% or more of either (1) the then outstanding shares of Common Stock (the “Outstanding Company Common Stock”) or (2) the combined voting power of the then outstanding voting securities of the Company entitled to vote generally in the election of directors (the “Outstanding Company Voting Securities”); excluding, however, the following:  (1) any acquisition directly from the Company, other than an acquisition by virtue of from the Company, (2) any acquisition by the Company, (3) any acquisition by any employee benefit plan (or related trust) sponsored or maintained by the Company or any corporation controlled by the Company or (4) any acquisition by any Person pursuant to a transaction which complies with clauses (1), (2) and (3) of subsection (iii) of this definition: or

 

(ii)        A change in the composition of the Board such that the individuals who, as of the Effective Date of the Plan, constitute the Board (such Board shall be hereinafter referred to as the “Incumbent Board”) cease for any reason to constitute at least a majority of the Board; provided, however, for purposes of this definition, that any individual who becomes a member of the Board subsequent to the Effective Date, whose election, or nomination for election by the Company’s stockholders, was approved by a vote of at least a majority of those individuals who are members of the Board and who were also members of the Incumbent Board (or deemed to be such pursuant to this proviso) shall be considered as though such individual were a member of the Incumbent Board; but, provided further, that any such individual whose initial assumption of office occurs as a result of either an actual or threatened election contest (as such terms are used in Rule 14a-11 of Regulation 14A promulgated under the Act) or other actual or threatened solicitation of proxies or consents by or on behalf of a Person other than the Board shall not be so considered as a member of the Incumbent Board; or

 

 

(iii)       The approval by the stockholders of the Company of a reorganization, merger or consolidation or sale or other disposition of all or substantially all of the assets of the Company or the acquisition of assets of another corporation (“Corporate Transaction”) or, if  consummation of such Corporate Transaction is subject, at the time of such approval by stockholders, to the consent of any government or government agency, the obtaining of such consent (either explicitly or implicitly by consummation); excluding, however, such a Corporate Transaction pursuant to which (1) all or substantially all of the individuals and entities who are the beneficial owners, respectively, of the Outstanding Company Common Stock and Outstanding Company Voting Securities immediately prior to such Corporate Transaction will beneficially own, directly or indirectly, more that 60% of, respectively, the outstanding shares of common stock, and the combined voting power of the then outstanding voting securities entitled to vote generally in the election of directors, as the case may be, of the company resulting from such Corporate Transaction (including, without limitation, a corporation which as a result of such transaction owns the Company or all or substantially all of the Company’s assets either directly or through one or more subsidiaries) in substantially the same proportions as their ownership, immediately prior to such Corporate Transaction, of the Outstanding Company Common Stock and Outstanding Company Voting Securities, as the case may be, (2) no Person (other than the Company, any employee benefit plan (or related trust) sponsored or maintained by the Company or any corporation controlled by the Company or such corporation resulting from such Corporate Transaction) will beneficially own, directly or indirectly, 20% or more of, respectively, the outstanding shares of common stock of the corporation resulting from such Corporate Transaction or the combined voting power of the outstanding voting securities of such corporation entitled to vote generally in the election of directors except to the extent that such ownership exited with respect to the Company prior to the Corporate Transaction and (3) individuals who were members of the Incumbent Board will constitute at least a majority of the board of directors of the corporation resulting from such Corporate Transaction; or

 

(iv)       The approval by the stockholders of the Company of a complete liquidation or dissolution of the Company.

 

“Change of Control Price” means the higher of (i) the highest reported closing price of a share of Common stock in any transaction reported on the Nasdaq Stock Market during the 60-day period prior to and including the date of a Change of Control or (ii) if the Change of Control is the result of a tender or exchange offer or a Corporate Transaction, the highest price per share of Common Stock paid in such tender or exchange offer or Corporate Transaction; provided, however, that in the case of a Stock Option which was granted within 240 days of the Change of Control, then the Change of Control Price for such Stock Option shall be the Fair Market Value of the Common Stock on the date such Stock Option is exercised or deemed exercised.  To the extent that the consideration paid in any such transaction described above consists all or in part of securities or other noncash consideration, the value of such securities or other noncash consideration shall be determine din the sole discretion of the Committee.

 

“Code” shall mean the Internal Revenue code of 1986, as amended from time to time, and the rules and regulations thereunder.

 

“Common Stock” shall mean the common stock, $.001 par value, of the Company.

 

 

“Company” shall mean Datalink Corporation, a Minnesota corporation.

 

“Effective Date” shall mean August 11, 2000.

 

“ERISA” shall mean the Employee Retirement Income Security Act of 1974, as amended from time to time, and the rules and regulations thereunder.

 

“Fair Market Value” shall mean, as of any given date, the closing price of the Common Stock on the Nasdaq Stock Market for that date (or for the preceding trading day, if no trading occurs on such date), adjusted to the next higher cent if such closing price is not a whole number.  If there is no regular public trading market for such Common Stock, the Fair Market Value of the Common Stock shall be determined by the Committee in good faith.

 

“Fees” shall mean the cash payments described under Section 7 below or, if a Participant makes no timely election to receive these cash payments, the annual retainer Stock Options and periodic Stock Options to be granted under Section 8 below for attendance at board and committee meetings for a Participant in connection with his or her service on the Board or any committee thereof for any fiscal year of the Company.

 

“Incentive Compensation Plan” shall mean the Company’s 1999 Incentive Compensation Plan adopted as of June 11, 1999, as it may be amended from time to time.

 

“Participant” shall mean each member of the Board who is not an employee of the Company or any subsidiary of the Company.

 

“Plan” shall mean the Datalink Corporation 2000 Director Stock Plan.

 

“Retirement” shall mean the retirement by a Participant from the Board in accordance with any formal or informal policy adopted by the Company on Director retirement.

 

“Rules” shall mean the rules promulgated under the Act from time to time and the interpretations issued by Securities and Exchange Commission in respect thereof.

 

“Stock Option” shall mean a non-qualified stock option, which is further defined as any right to acquire Common Stock which does not qualify as an “incentive stock option” as defined under the Code.

 

Section 3.  Eligibility

 

Each member of the Board who is not an employee of the Company or any subsidiary of the Company shall be eligible to participate in the Plan.

 

 

Section 4.  Shares Subject to the Plan

 

The maximum number of shares of Common Stock which shall be available for use under the Plan shall by 550,000, subject to adjustment pursuant to Section 15 hereunder.  The shares issued under the Plan shall be authorized and unissued shares.

 

Section 5.  Duration of Plan

 

Unless earlier terminated pursuant to Section 11 hereof, the Plan shall automatically terminate on, and no grants or elections may be made after, the date of the tenth anniversary of the approval by stockholders of the Plan pursuant to Section 17 hereof.

 

Section 6.  Administration

 

The Plan shall be administered by the Board or any committee thereof so designated by the Board (the “Committee”), which shall have full authority to construe and interpret the Plan, to establish, amend and rescind rules and regulations relating to the Plan, and to take all such actions and make all such determinations in connection with the Plan as it may deem necessary or desirable.

 

Notwithstanding any other provision of the Plan, neither the Board nor the Committee shall be authorized to exercise any discretion with respect to the selection of Participants to receive Stock Options under the Plan or concerning the amount, timing or vesting of such Stock Options under the Plan, and no amendment or termination of the Plan shall adversely affect the interest of any Director in Stock Options previously granted to the Director without that Director’s express written consent.

 

Section 7.  Cash Fees

 

Not more often than annually, the board shall set its annual cash retainer for service on the Board and its cash payments for attendance at meetings of the Board and its audit, compensation and other committees.  Until otherwise changed, the annual retainer for Board service commending as of the annual meeting stockholders held in 2002 is $10,000, and the payment for attendance at each meeting of the Company’s audit and compensation committees is $1,000 and $500, respectively.  Each Participant who, prior to the beginning of any calendar year while the Plan is in effect, delivers to the Company written notice of an irrevocable election to receive cash Fees for such upcoming calendar year rather than grants of Stock Options as provided in Section 8 below, shall receive cash payment of Fees.  Any such written notice pursuant to this Section 7 shall remain in effect only for such calendar year and each Participant must make a new election for each future year.

 

Section 8.  Grants of Stock Options

 

(a)        Annual Retainer.  Commencing with and effective as of the annual meeting of stockholders of the Company held in 2004, and on the date of each subsequent annual meeting of stockholders occurring while this Plan is in effect, and unless a timely election is made under Section 7 above to receive cash Fees, each Participant shall receive a grant of Stock Options.  The number of these Stock Options is 90% of the annual cash retainer Fee for Board service set

 

 

out in Section 7 above.  Therefore, for 2004 and until the cash retainer Fee is changed by the Board, the number of Stock Options is 9,000.  These Stock Options shall be exercisable commencing one year after the date of grant; provided, however, that if a Participant fails to serve until the annual stockholders’ meeting immediately succeeding a grant of such Stock Options, the number of shares of Common Stock that may be purchase by such Participant shall be determined by multiplying the number of Stock Options granted (initially 9,000) by a fraction (i) the numerator of which is the number of days between the date such Stock Options were granted the date the Participant ceased serving on the Board and (ii) the denominator of which is the number days between the date such Stock Options were granted and the date of the annual stockholders’ meeting immediately succeeding the date of grant.  The exercise price of the Stock Options so granted shall be the Fair Market Value per share on the date of grant.  These Stock Options will expire ten years after the date of grant.

 

(b)        Participation in Board and Committee Meetings.  Commencing with and effective as of each meeting of the Board or a committee thereof held on or after April1, 2004, and while this Plan is in effect, and unless a timely election is made under Section 7 above to receive cash Fees, each Participant participating in such Board or committee meeting shall receive an additional grant of Stock Options.  The number of these Stock Options is 70% of the cash Fee for attendance at Board meetings and 100% of the cash fee for attendance at committee meetings set out in Section 7 above.  Therefore, until changed by the Board, for Board meetings, the number of Stock Options will be seven hundred (700) and for committee meetings, the number of Stock Options will be five hundred (500).  These Stock Options will be fully vested and exercisable immediately upon their grant, which shall be on the last day of the calendar quarter during which the Board or committee meeting takes place.  The exercise price of the Stock Options so granted shall be the Fair Market Value per share on the date of grant.  These Stock Options will expire ten years after the date of grant.

 

In addition, as to those Participants who have waived the right to receipt of Stock Options at March 31, 2004 on account of attendance at Board or committee meetings, respectively, held between January 1 and March 31, 2004, the Company shall, on a one-time basis, grant to each such Participant 700 and 500 Stock Options, respectively.   These Stock Options will be fully vested and exercisable immediately upon their grant, which shall be a date set by the Board within ten (10) days of the date of this amended and restated Plan.  The exercise price of the Stock Options so granted shall be the Fair Market Value per share on the date of grant.  These Stock Options will expire ten years after the date of grant.

 

(c)        Exercise of Stock Options.  Stock Options granted to Participants shall be exercised by the delivery of a written notice of exercise to the Company, setting for the number of shares with respect to which the Stock Option is to be exercised, accompanied by full payment for the shares.  Participants may pay the exercise price either (i) in cash or its equivalent, (ii) by tendering previously acquired shares of Common Stock having an aggregate Fair Market Value at the time of exercise equal to the total option price (provided that the Participant has held the shares tendered for at least six (6) months prior to their tender to satisfy the option price) or (iii) by a combination of (i) and (ii).  The Board also may allow cashless exercise, subject to applicable securities law restrictions, or by any other means which the Board determines to be consistent with the Plan’s purpose and applicable law.  Subject to any governing rules or regulations, as soon as practicable after receipt of a written notification of exercise and full

 

 

payment, the Company shall deliver to the Participant, in the Participant’s name, share certificates in an appropriate amount based upon the number of shares purchased under the Stock Option.

 

(d)        Option Agreements.  The Company and a Participant may, but are not required to, enter into a written agreement relating to Stock Option grants; provided, that any such agreement is not inconsistent with the provisions of the Plan.

 

Section 9.  Transferability

 

Rights and grants under the Plan may not be assigned, transferred, pledged or hypothecated, and shall not be subject to execution, attachment or similar process.  Notwithstanding the foregoing, any such right or grant constituting a “derivative security” under the Rules shall not be transferable by a Participant other than by will or by operation of applicable laws of descent and distribution or pursuant to a domestic relations order or qualified domestic relations order as such terms are defined by the Code or ERISA.

 

Section 10.  Amendment

 

The Board may from time to time make such amendments to the Plan as it may deem proper and in the best interest of the Company without further approval of the Company’s stockholders, provided that to the extent required to qualify transactions under the Plan for exemption under Rule 16b-3 promulgated under the Act (“Rule 16b-3”) no amendment to the Plan shall be adopted without further approval by the holders of at least a majority of the shares of Common Stock present, or represented, and entitled to vote at a meeting held for such purpose, and provided further, that if and to the extent required for the Plan to comply with Rule 16b-3, no amendment to the Plan shall be made more than once in any six-month period that would change the amount, price or timing of the grants of Stock Options hereunder other than to comport with changes in the Code, ERISA or the regulations thereunder.

 

Section 11.  Termination

 

The Plan may be terminated at any time by the Board or by the approval by the holders of at least a majority of the shares of Common Stock present, or represented, and entitled to vote at a meeting held for such purpose.

 

Section 12.  Effect of Change of Control

 

Notwithstanding any other provision of the Plan to the contrary, in the event of a Change of Control, any Stock Options outstanding and not then exercisable and vested as of the date such Change of Control is determined to have occurred, shall become fully exercisable and vested to the full extent of the original grant.  During the 60-day period from and after a Change of Control (the “Exercise Period”), a Participant who holds a Stock Option shall have the right, in lieu of the payment of the exercise price for the shares of Common Stock being purchased under the Stock Option, by giving notice to the Company, to elect (wining the Exercise Period) to surrender all or part of a Stock Option to the Company and to receive cash, within 30 days of  such notice, in an amount equal to the amount by which the Change of Control Price per share of

 

 

Common Stock on the date of such election shall exceed the exercise price per share of Common Stock under the Stock Option (the “Spread”) multiplied by the number of shares of Common Stock granted under the Stock Option as to which the right granted under this Section shall have been exercised; provided, however, that if the Change of Control is within six (6) months of the date of grant of a particular Stock Option held by a Participant, no such election shall be made by such Participant with respect to such Stock Option prior to six (6) months from the date of grant.  If the end of such 60-day period from and after a Change of Control is within six (6) months from the date of grant of a Stock Option, such Stock Option shall be cancelled in exchange for a cash payment to the Participant, effected on the day which is six (6) months and one day after the date of grant of such Stock Option, equal to the Spread multiplied by the number of shares of Common Stock granted under the Stock Option.

 

Section 13.  Death, Disability, Termination or Retirement of Participant

 

(a)        Death While A Director.  Notwithstanding any other provision of the Plan to the contrary, in the event of the death of a Participant while a member of the Board, any Stock Options outstanding as of the date of death and not then exercisable shall become immediately exercisable, and all outstanding Stock Options held by such Participant shall remain exercisable by the person to whom the Stock Option is transferred by will or by the laws of descent and distribution for a period of the lesser of (i) the remaining term of the Stock Option or (ii) three (3) years after the date of death.

 

(b)        Disability, Retirement or Other Termination.  Except as otherwise provided by the Plan, in the event of a Participant’s termination of membership on the Board as a result of the Participant’s disability or Retirement or for another reason other than Cause as defined below, any Stock Options outstanding as of the date of such termination and not then exercisable shall, as to annual retainer options, be adjusted in the amount to reflect the proportion earned in the final year of such Participant’s service in such year (in accordance with the operation of Section 8 of this Plan) and (ii) become exercisable on the last day of the Company’s then-current fiscal year.  All outstanding Stock Options held by such Participant shall remain exercisable for the full period contemplated by the terms of such Stock Options.  In the event of the death of a Participant subsequent to termination of membership from the Board as a result of circumstances described in the Section 13(b), any Stock Options outstanding as of the date of death and not then exercisable shall become immediately exercisable, and all outstanding Stock Options held by such Participant shall remain exercisable by the person to whom the Stock Option is transferred by will or by the laws of descent and distribution for a period of the lesser of (i) the remaining term of the Stock Option or (ii) three (3) years after the date of death.

 

Section 14.  Effect of Termination for Cause

 

If a Participant incurs a termination of membership on the Board for Cause, such Participant’s Stock Options which are not then exercisable shall be automatically cancelled immediately.  Unless otherwise determined by the Board, for purposes of the plan “Cause” shall mean (i) the conviction of the Participant for commission of a felony under Federal law or the law in the state in which such action occurred or (ii) dishonesty in the course of fulfilling the Participant’s duties as a director.

 

 

Section 15.  Adjustments Upon Changes in Capitalization

 

In the event of any change in corporate capitalization, such as a stock split or a corporate transaction, such as a any merger, consolidation, separation, including a spin off, or other distribution of stock or property of the Company, any reorganization (whether or not such reorganization comes within the definition of such term in Section 368 of the Code) or any partial or complete liquidation of the Company, the Committee or Board may make such substitution or adjustments in the aggregate number and class of shares reserved for issuance under the Plan and in the number, kind and option price of shares subject to outstanding Stock Options and/or such other equitable substitution or adjustments as it may determine to be appropriate in its sole discretion; provided, however, that the number of shares subject to any Stock Option shall always be a whole number.

 

Section 16.  Regulatory Matters

 

The Plan is intended to be construed so that participation in the Plan will be exempt from Section 16(b) of the Act, pursuant to Rule 16b-3 as promulgated thereunder, as may be further amended or interpreted by the Securities and Exchange Commission.  In the event that any provision of the Plan shall be deemed not to be in compliance with the Rules in order to enjoy the exemption from the Act, such provision shall be deemed of no force or effect and the remaining provisions of the Plan shall remain in effect.

 

Section 17.  Effectiveness of Plan

 

The Plan shall become effective as of the Effective Date.  However, the Plan shall terminate if not ratified on or before the date of the Company’s 2001 annual meeting of stockholders by the holders of at least a majority of the shares of Common Stock present, or represented, and entitled to vote at such meeting or at another stockholders’ meeting held before such date for this purpose.

 

Section 18.  Resolution of Conflict with Incentive Compensation Plan

 

Nothing in the Plan shall affect the rights or eligibility of Participants as to awards and grants made under the Incentive Compensation Plan prior to or after the Effective Date of this Plan.  However, this Plan supersedes and replaces the provisions of Section 6.8 of the Incentive Compensation Plan relating to automatic annual director stock option grants for 2001 and fiscal years thereafter that this Plan is in effect.

 

Section 19.  Governing Law

 

To the extent not preempted by Federal law, the Plan, and all agreements hereunder, shall be construed in accordance with and governed by the laws of the State of Minnesota.

 

End of Plan

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