Annual Report — Form 10-K Filing Table of Contents
Document/ExhibitDescriptionPagesSize
1: 10-K Annual Report -- kci10k2007 HTML 1.85M
3: EX-10.22 2008 Compensation Policy for Outside Directors HTML 22K
4: EX-10.25 Executive Retention Agreement HTML 33K
5: EX-10.26 Executive Retention Agreement HTML 33K
6: EX-10.32 Contract of Employment HTML 37K
7: EX-10.33 Executive Retention Agreement HTML 34K
8: EX-10.34 2003 Non-Employee Directors Stock Plan HTML 79K
9: EX-10.35 2004 Equity Plan International Stock Option HTML 60K
Agreement
10: EX-10.36 2004 Equity Plan Restricted Stock Unit Award HTML 38K
Agreement
11: EX-10.37 2004 Equity Plan International Restricted Stock HTML 56K
Unit Award Agreement
12: EX-10.38 2004 Equity Plan Nonqualified Stock Option HTML 41K
Agreement
13: EX-10.39 2004 Equity Plan Restricted Stock Award Agreement HTML 40K
2: EX-10.6 Toll Manufacturing Agreement HTML 130K
14: EX-21.1 Subsidiaries of Registrant HTML 24K
15: EX-23.1 Exhibit 23.1 - Consent of Independent Auditor HTML 10K
16: EX-31.1 Exhibit 31.1 - 302 Certification of CEO HTML 14K
17: EX-31.2 Exhibit 31.2 - 302 Certification of CFO HTML 14K
18: EX-32.1 Exhibit 32.1 - 906 Certification of CEO and CFO HTML 11K
1.1
Affiliate. A
corporate parent, corporate subsidiary, limited liability company, partnership
or other business entity that is wholly-owned, controlled by, or controls the
Company through the beneficial ownership of greater than 50% of the outstanding
capital stock of the Company, as determined in accordance with Rule 13d-3 under
the Exchange Act.
1.2
Affiliated
Participant. A Participant who is (i) receiving a management
fee from the Company, or (ii) a principal of, or a non-employee Board member
appointed by, a shareholder of the Company which is receiving a management
fee
from the Company.
1.3
Agreement. A
written agreement (including any amendment or supplement thereto) between the
Company or an Affiliate of the Company and a Participant specifying the terms
and conditions of an Option or a Restricted Stock Award, as the case may be,
granted to such Participant.
1.5
Code. The
Internal Revenue Code of 1986, as amended.
1.6
Committee. A
committee that is designated by the Board to serve as the administrator of
the
Plan. The Committee shall be composed of at least two individuals who
are members of the Board and are not employees of the Company or an Affiliate,
and who are designated by the Board as the "compensation committee" or are
otherwise designated to administer the Plan. In the absence of a
designation of a Committee by the Board, the Board shall be the
Committee.
1.7
Company. Kinetic
Concepts, Inc. and its successors.
1.8
Date of
Exercise. The date that the Participant tenders the exercise
price of an Option.
1.9
Effective
Date. The effective date of the Plan, which is May 28,2003.
1.10 Exchange
Act. The Securities Exchange Act of 1934, as
amended.
1.11 Fair
Market
Value. On any given date, Fair Market Value shall be
determined by the applicable method described below:
(a)
If the Stock is traded on a trading exchange (e.g., the New York Stock Exchange)
or is reported on the NASDAQ National Market System or another NASDAQ automated
quotation system or the OTC Bulletin Board System, Fair Market Value shall
be
the closing selling price of the Stock on such exchange or system with respect
to the date for which Fair Market Value is being determined. If there is no
closing selling price for the Stock on the date in question, then the Fair
Market Value shall be the closing selling price on the last preceding date
for
which such a quotation exists.
(b)
If the Stock is not traded on a recognized exchange or automated trading system,
Fair Market Value shall be the value determined in good faith by the
Committee.
1.12 Grant
Date. The date set forth herein in Article IV as the date of
grant for an Option or Stock Award, notwithstanding that an Agreement with
respect thereto may be executed or delivered thereafter.
1.13. Non-Affiliated
Participant. A Participant who is not an Affiliated
Participant.
1.14 Option. The
right that is granted hereunder to a Participant to purchase from the Company
a
stated number of shares of Stock at the price set forth in an
Agreement.
1.15 Participant. A
member of the Board who is not employed by the Company or an Affiliate of the
Company and who otherwise satisfies the criteria for being a Participant, as
established from time to time by the Board.
1.16 Plan. The
Kinetic Concepts, Inc. 2003 Non-Employee Directors Stock Plan, as amended and
restated.
1.17 Restricted
Stock
Award. An award of shares of Stock granted under the Plan and
subject to the restrictions set forth herein and in the Agreement executed
in
connection therewith.
1.18 Restriction
Period. The period of time during which restrictions apply to
a Restricted Stock Award.
1.19 Stock. The
common stock, par value $0.001 per share, of the Company or any successor
security.
1.20 Stock
Award. A Restricted Stock Award or an Unrestricted Stock Award
granted under the Plan, as applicable.
1.21 Underwriting
Agreement. The agreement between the Company and the
underwriter or underwriters managing the initial public offering of the
Stock.
1.22 Underwriting
Date. The date on which the Underwriting Agreement is executed
and priced in connection with the initial public offering of the Common
Stock.
1.23 Unrestricted
Stock
Award. An award of shares of Stock granted under the Plan
which is not subject to vesting requirements or transferability restrictions
(other than those required under Article IX, applicable law and any Company
policy restricting the trading of shares of Stock by directors and
officers).
ARTICLE
II. PURPOSE OF PLAN
The
purpose of the Plan is to provide
an incentive to enable the Company to attract and retain experienced and
highly-qualified individuals to serve as directors of the Company, and to
encourage stock ownership by such directors so that their interests are aligned
with the interests of the Company and its shareholders. It is
intended that Participants may acquire and maintain equity interests in the
Company to align their interests with the Company's shareholders.
ARTICLE
III. ADMINISTRATION
3.1
Administration of
Plan. The Plan shall be administered by the
Committee. The express grant in the Plan of any specific power to the
Committee shall not be construed as limiting any power or authority of the
Committee. Any decision made or action taken by the Committee to
administer the Plan shall be final and conclusive. No member of the
Committee shall be liable for any act done in good faith with respect to this
Plan or any Agreement, Option or Stock Award. The Company shall bear
all expenses of Plan administration. In addition to all other
authority vested in the Committee under the Plan, the Committee shall have
complete authority to:
(a)
Interpret all provisions of the Plan;
(b)
Prescribe the form of any Agreement and notice and manner for executing or
giving the same;
(c)
Make amendments to all Agreements;
(d)
Adopt, amend and rescind rules for Plan administration;
(e)
Make all determinations it deems advisable for the administration of the
Plan;
(f)
Amend the terms of outstanding Options and impose terms and conditions on the
shares of Stock issued pursuant to Stock Awards or upon the exercise of
Options;
(g)
Either at the time an Option or Stock Award is granted, or by subsequent action,
to impose such restrictions, conditions, or limitations as it determines
appropriate as to the timing and manner of any resales including, but not
limited to restrictions under an insider trading policy, restrictions designed
to delay and/or coordinate the timing and manner of sales by Participants,
and
restrictions as to the use of specific brokerage firms for any resales or
transfers. Notwithstanding the foregoing, an amendment, restriction, condition
or limitation that would have a material adverse effect on the rights of a
Participant under an outstanding Option or Stock Award shall not be valid with
respect to such Option or Stock Award without the Participant’s
consent;
(h)
Waive conditions to and/or accelerate the exercisability or vesting of an Option
or Stock Award, either automatically or upon the occurrence of specified events
or otherwise in its discretion; and
(i)
Determine the extent to which a leave of absence for military or government
service, illness, temporary or permanent disability, or other reasons shall
be
treated as a termination, disability or interruption of service as a member
of
the Board.
3.2
Section
16(b). Notwithstanding anything in the Plan to the contrary,
the Committee, in its absolute discretion, may restrict, limit or condition
the
use of any provision of the Plan in order to ensure compliance with Section
16(b) of the Exchange Act and the rules promulgated thereunder.
ARTICLE
IV. ELIGIBILITY AND LIMITATIONS ON GRANTS
4.1
Option
Grants. Options shall be granted automatically as
follows:
(a)
Number.
(i)
Effective for all periods prior to January 1, 2005, each Participant shall
automatically be granted an Option on a yearly basis to purchase a number of
shares of Stock equal to $50,000 divided by the Fair Market Value of the Stock
as of the Grant Date. The initial Grant Date for each Non-Affiliated Participant
shall be on the earlier to occur of (i) the Effective Date, if the Participant
is serving as a Board member on such date, or (ii) the first date after the
Effective Date that such Participant is elected by the shareholders of the
Company to serve as a Board member. The initial Grant Date for each Affiliated
Participant shall be on the earlier of occur of (x): the Underwriting Date,
or
(y) the date on which the agreement pursuant to which a management fee is
required to be paid, paid by the Company to the Affiliated Participant or the
Affiliated Participant’s employer shall be terminated. Each year
thereafter, each Participant shall be granted an additional Option to purchase
a
number of shares of Stock equal to $50,000 divided by the Fair Market Value
of
the Stock on the date the Board ratifies such grant, provided that he or she
is
serving as a Board member on each such date.
(ii)
Effective for the period beginning on January 1, 2006 and ending on December31,2006, as of the date of the annual meeting of shareholders, each Participant
that is serving as a Board member immediately following the annual meeting
of
shareholders shall automatically be granted an Option to purchase 4,500 shares
of Stock. In addition to the foregoing, unless the Board unanimously determines
otherwise, if an individual first becomes a Participant at any time during
this
period other than at an annual meeting of shareholders, then that Participant
shall receive an initial Option grant to purchase 4,500 shares of Stock at
such
time as he or she first becomes a Participant.
(iii)
Effective for the period beginning on January 1, 2007 and ending on December31,2007, as of the date of each annual meeting of shareholders, each Participant
(other than the Chairperson of the Board) that is serving as a Board member
immediately following the annual meeting of shareholders shall automatically
be
granted an Option to purchase a number of shares of Stock approximately equal
to
the Company's then current Black-Scholes calculation value of $90,000 ($180,000
for the Chairperson of the Board). In addition to the foregoing, unless the
Board unanimously determines otherwise, if an individual first becomes a
Participant at any time other than at an annual meeting of shareholders, then
that Participant shall receive an initial Option grant to purchase a number
of
shares of Stock approximately equal to the Company's then current Black-Scholes
calculation value of $90,000 at such time as he or she first becomes a
Participant. The actual number of shares subject to the Option shall
conclusively be determined by the Company's Chief Financial Officer and set
forth in the stock option award agreement.
(iv)
Effective for all periods from and following January 1, 2008, as of the date
of
each annual meeting of shareholders, commencing with the 2008 annual meeting
of
shareholders, each Participant (other than the Chairperson of the Board) that
is
serving as a Board member immediately following the annual meeting of
shareholders shall automatically be granted an Option to purchase a number
of
shares of Stock approximately equal to the Company's then current Black-Scholes
calculation value of $100,000 ($200,000 for the Chairperson of the Board).
In
addition to the foregoing, unless the Board unanimously determines otherwise,
if
an individual first becomes a Participant at any time other than at an annual
meeting of shareholders, then that Participant shall receive an initial Option
grant to purchase a number of shares of Stock approximately equal to the
Company's then current Black-Scholes calculation value of $100,000 at such
time
as he or she first becomes a Participant. The actual number of shares subject
to
the Option shall conclusively be determined by the Company's Chief Financial
Officer and set forth in the stock option award agreement.
(b)
Price. The
exercise price of each share of Stock subject to an Option shall be the Fair
Market Value of Stock on the Grant Date of such Option.
(c)
Option
Period. Each Option granted to a Participant will vest and
become exercisable incrementally over a period of three years with one-twelfth
(1/12) of the number of the shares of Stock subject to the Option vesting and
becoming exercisable on the date which is three calendar months following the
Grant Date, provided that the Participant remains a Board member on each such
date. The right to exercise an Option shall terminate seven (7) years
after the Grant Date, unless terminated sooner pursuant to any of the
following:
(i)
If a Participant is terminated as a Board member on account of fraud, dishonesty
or other acts detrimental to the interests of the Company, the Option, including
any portion of the Option which has vested or is otherwise exercisable by the
Participant, shall terminate as of the date of such termination.
(ii)
Upon the death or disability (as defined in Section 22(e)(3) of the Code) of
a
Participant, the Option shall fully vest on the date thereof and may be
exercised within twelve (12) months after such death or disability. In the
event
a participant fails to be re-elected to serve as a Board member, the Option
may
be exercised, to the extent the Option had vested as of the Participant’s last
day of service as a member of the Board, within twelve (12) months of such
an
event. Thereafter, the Option shall terminate and no longer be
exercisable.
(iii)
If a Participant is terminated as a Board member for any reason other than
the
circumstances described in subparagraphs (i) or (ii) above, the Option may
be
exercised, to the extent the Option had vested as of the date of termination
of
his directorship, within three (3) months after the effective date of such
termination. Thereafter, the Option shall terminate and no longer be
exercisable. Notwithstanding the foregoing, if the Participant becomes an
employee of the Company or an Affiliate upon the termination of his
directorship, the Option shall expire after the termination of his employment
in
a manner that is consistent with this subparagraph (iii).
(d)
Rights of
Participant. No Participant shall have any rights as a
shareholder of the Company with respect to shares of Stock subject to Options
prior to the date of exercise of such Option.
4.2
Restricted Stock
Awards. Restricted Stock Awards shall be granted automatically
as follows:
(a)
Number.
(i)
Effective for all periods prior to January 1, 2005, each Participant shall
automatically be granted at no cost to the Participant a Restricted Stock Award
with respect to a number of shares of Stock equal to $50,000 divided by the
Fair
Market Value of the Stock as of the Grant Date on a yearly basis. The initial
Grant Date for each Non-Affiliated Participant shall be on the earlier to occur
of (i) the Effective Date, if the Participant is serving as a Board member
on such date, or (ii) the first date after the Effective Date that such
Participant is elected by the shareholders of the Company to serve as a Board
member. The initial Grant Date for each Affiliated Participant shall
be in the earlier to occur of: (x) the Underwriting Date or (y) such earlier
date on which the management fee paid to the Participant or the Participant’s
employer is terminated. Each year thereafter, each Participant shall
be granted an additional Restricted Stock Award with respect to a number of
shares of Stock equal to $50,000 divided by the Fair Market Value of the Stock
on the date the Board ratifies such grant, provided that he or she is serving
as
a Board member on each such date.
(ii)
Effective for the period beginning on January 1, 2006 and ending on December31,2006, as of the date of the annual meeting of shareholders, each Participant
that is serving as a Board member immediately following the annual meeting
of
shareholders shall automatically be granted at no cost to the Participant a
Restricted Stock Award with respect to 1,600 shares of Stock. In addition to
the
foregoing, unless the Board unanimously determines otherwise, if an individual
first becomes a Participant at any time during this period other than at an
annual meeting of shareholders, then that Participant shall receive an initial
Restricted Stock Award with respect to 1,600 shares of Stock at such time as
he
or she first becomes a Participant.
(iii)
Effective for the period beginning on January 1, 2007 and ending on December31,2007, as of the date of each annual meeting of shareholders, each Participant
(other than the Chairperson of the Board) that is serving as a Board member
immediately following the annual meeting of shareholders shall automatically
be
granted at no cost to the Participant a Restricted Stock Award covering a number
of shares of Stock approximately equal to $90,000 ($180,000 for the Chairperson
of the Board) divided by the Fair Market Value of the Stock as of the Grant
Date. In addition to the foregoing, unless the Board unanimously determines
otherwise, if an individual first becomes a Participant at any time other than
at an annual meeting of shareholders, then that Participant shall receive at
no
cost to the Participant a Restricted Stock Award covering a number of shares
of
Stock approximately equal to $90,000 divided by the Fair Market Value of the
Stock as of the Grant Date at such time as he or she first becomes a
Participant. The actual number of shares subject to the Restricted Stock Award
shall conclusively be determined by the Company's Chief Financial Officer and
set forth in the Restricted Stock award agreement.
(iv)
Effective for all periods from and following January 1, 2008, as of the date
of
each annual meeting of shareholders, commencing with the 2008 annual meeting
of
shareholders, each Participant (other than the Chairperson of the Board) that
is
serving as a Board member immediately following the annual meeting of
shareholders shall automatically be granted at no cost to the Participant a
Restricted Stock Award covering a number of shares of Stock approximately equal
to $100,000 ($200,000 for the Chairperson of the Board) divided by the Fair
Market Value of the Stock as of the Grant Date. In addition to the foregoing,
unless the Board unanimously determines otherwise, if an individual first
becomes a Participant at any time other than at an annual meeting of
shareholders, then that Participant shall receive at no cost to the Participant
a Restricted Stock Award covering a number of shares of Stock approximately
equal to $100,000 divided by the Fair Market Value of the Stock as of the Grant
Date at such time as he or she first becomes a Participant. The actual number
of
shares subject to the Restricted Stock Award shall conclusively be determined
by
the Company's Chief Financial Officer and set forth in the Restricted Stock
award agreement.
(b)
Restrictions. The
Restricted Stock Award shall be granted to a Participant only pursuant to an
Agreement, which shall set forth such terms and conditions of the Restricted
Stock Award as may be determined by the Committee to be consistent with the
Plan, and which may include additional provisions and restrictions that are
not
inconsistent with the Plan. During the Restriction Period, a
Participant may not sell, assign, transfer, pledge, or otherwise dispose of
the
shares of Stock subject to the Restricted Stock Award except in accordance
with
Article VI hereof. Except for any restrictions under applicable law
or pursuant to any Company policy restricting the trading of shares of Stock
by
directors and officers, all restrictions imposed under the Restricted Stock
Award shall lapse (i) upon the expiration of the Restriction Period, subject
to
the provisions of subparagraph (c) below or (ii) as provided under Section
8.3.
(c)
Restriction
Period. The rights of a Participant in respect of a Restricted
Stock Award shall be subject to a Restriction Period commencing on the Grant
Date and ending on the third anniversary of the Grant Date provided
that:
(i)
If during the Restriction Period, the Participant is terminated as a Board
member by death or disability (as defined in Section 22(e)(3) of the Code),
or
in the event the Participant fails to be re-elected to serve as a Board member,
then for each full year such Participant served as a Board member during the
Restriction Period, one-third (1/3) of the shares of Stock subject to the
applicable Restricted Stock Award shall be deemed fully vested, and the
restrictions with respect such vested shares shall lapse on the date of
termination. Upon any such termination, if any portion of the
Restricted Stock Award remains unvested pursuant to this subparagraph (i),
Participant shall immediately return the share certificates for the Stock
granted under the Restricted Stock Award to the Company and the Company will
re-issue share certificates to Participant representing the vested portion
of
the Restricted Stock Award.
(ii)
If during the Restriction Period, a Participant is terminated as a Board member
for any reason other than the circumstances described in subparagraph (i) above,
the Restricted Stock Award shall terminate and Participant shall immediately
return the share certificates for the Stock granted under the Restricted Stock
Award to the Company.
(d)
Rights of
Participant. The Participant shall be entitled to delivery of
certificates representing the shares of Stock granted under the Restricted
Stock
Award. Upon the grant of a Restricted Stock Award, the Participant
receiving the grant shall be entitled to vote the shares of Stock and to receive
any dividends paid thereon.
(e)
Stock
Certificates. A stock certificate registered in the name of
each Participant receiving a Restricted Stock Award (or in the name of a trustee
for the benefit of each Participant) shall be issued in respect of the shares
of
Stock issuable pursuant to such Restricted Stock Award. Such
certificate shall bear whatever appropriate legend referring to the terms,
conditions, and restrictions applicable to such award as the Board or the
Committee shall determine.
4.3
Unrestricted Stock
Awards. Effective for all periods prior to January 1, 2005,
unrestricted Stock Awards shall be granted automatically as
follows:
(a)
Number. Each
Participant shall automatically be granted an Unrestricted Stock Award on a
yearly basis with respect to a number of shares of Stock equal to $10,000
divided by the Fair Market Value of the Stock as of the Grant
Date. The initial Grant Date for each Non-Affiliated Participant
shall be the earlier to occur of (i) the Effective Date, if the Participant
is serving as a Board member on such date, or (ii) the first date after the
Effective Date that such Participant is elected by the shareholders of the
Company to serve as a Board member. The initial Grant Date for each
Affiliated Participant shall be on the earlier to occur of: (x) the Underwriting
Date, or (y) the date on which the agreement pursuant to which a management
fee
is required to be paid by the Company to the Affiliated Participant or the
Affiliated Participant’s employer shall be terminated. Each year
thereafter, each Participant shall automatically be granted an additional
Unrestricted Stock Award with respect to a number of shares of Stock equal
to
$10,000 divided by the Fair Market Value of the Stock on the anniversary date
of
the initial Unrestricted Stock Award grant to such Participant, provided he
or
she is serving as a Board member on such date.
(b)
Rights of
Participant. Ownership of shares under an Unrestricted Stock
Award shall vest in the Participant immediately upon the Grant
Date. The Participant shall be entitled to delivery of stock
certificates representing the shares of Stock granted under the Unrestricted
Stock Award. Upon the grant of an Unrestricted Stock Award, the
Participant receiving the grant shall be entitled to all the rights of a
shareholder of the Company.
ARTICLE
V. STOCK SUBJECT TO PLAN
5.1
Source of
Shares. Upon the grant of a Stock Award or the exercise of an
Option, the Company shall transfer to the Participant authorized but previously
unissued shares of Stock or, if determined by the Board, shares of Stock that
are held in treasury.
5.2
Maximum Number of
Shares. The maximum aggregate number of shares of Stock
(including shares issuable upon exercise of all Options) that may be issued
pursuant to this Plan is 400,000 shares, subject to increases and adjustments
as
provided in Article VIII. Should the exercise price of an Option
under the Plan be paid with shares of Stock or should shares of Stock otherwise
issuable under the Plan be withheld by the Company in satisfaction of the
withholding taxes incurred in connection with the exercise of an Option or
the
grant of a Stock Award, then the number of shares of Stock issuable under the
Plan shall be reduced by the gross number of shares of Stock for which the
Option is exercised, and not by the net number of shares of Stock issued to
the
Participant. If, on any Grant Date, there are not sufficient shares
of Stock that remain available pursuant to this Section 5.2 to provide the
grant
on such date, then the number of shares of Stock subject to the grant on that
date shall be determined on a pro-rata basis, with fractional shares rounded
down to the nearest number of whole shares. All references to numbers
of shares of Stock subject to grants under Article IV are subject to adjustment
in accordance with Article VIII.
5.3
Forfeitures. If
any Option or Restricted Stock Award granted hereunder is forfeited, expires
or
terminates for any reason, in part or whole, the shares of Stock subject thereto
which are thus forfeited shall again be available for issuance under the
Plan.
ARTICLE
VI. TRANSFERABILITY OF OPTIONS AND
RESTRICTED
STOCK AWARDS
Any
Option or Restricted Stock Award
granted under this Plan shall not be transferable except by will or by the
laws
of descent and distribution, and shall be exercisable during the lifetime of
the
Participant only by the Participant; provided, however, that an Option or
Restricted Stock Award may be transferable to the extent provided in an
Agreement. No right or interest of a Participant in any Option or
Restricted Stock Award shall subject to any lien, obligation or liability of
such Participant.
ARTICLE
VII. METHOD OF EXERCISE OF OPTIONS
7.1
Exercise. An
Option granted hereunder shall be deemed to have been exercised on the Date
of
Exercise. Subject to the provisions of Articles VI and IX, an Option
may be exercised in whole or in compliance with such requirements as the
Committee shall determine, but in no event sooner than six months from the
date
of grant.
7.2
Payment. Except
as otherwise provided by the Option Agreement, payment of the exercise price
of
an Option shall be made (i) in cash, (ii) where the Stock is publicly traded
on
a recognized exchange or automated trading system, in actual or constructive
delivery of Stock that was acquired at least six months prior to the exercise
of
the Option, or such shorter or longer period, if any, as is required by the
Company’s accountants to avoid a charge to the Company’s earnings for financial
reporting purposes, (iii) where the Stock is publicly traded on a recognized
exchange or automated trading system, through a special sale and remittance
procedure pursuant to which a Participant shall concurrently provide irrevocable
instructions to (a) a Company-designated brokerage firm to effect the immediate
sale of the purchased shares and remit to the Company, out of the sale proceeds
available on the settlement date, sufficient funds to cover the aggregate
exercise price payable for the purchased shares plus all applicable income
and
employment taxes required to be withheld by the Company by reason of such
exercise and (b) the Company to deliver the certificates for the purchased
shares directly to such brokerage firm in order to complete the sale, (iv)
in
other consideration acceptable to the Committee, or (v) in a combination
thereof; provided, however, that a form of payment other than cash is only
acceptable to the extent that the same is approved by the Committee. Payment
of
the exercise price must include payment of tax withholding, as described in
Section 7.3, in cash unless the Company consents to alternative arrangements
for
withholding.
7.3
Withholding Tax
Requirements. Upon exercise of an Option, the Participant
shall, upon notification of the amount due and prior to or concurrently with
the
delivery of the certificates representing the shares, pay to the Company amounts
necessary to satisfy applicable federal, state and local withholding tax
requirements or shall otherwise make arrangements satisfactory to the Company
for such requirements, but only to the extent that the Company is required
by
law to withhold such amounts or that the Participant voluntarily elects for
such
withholding.
7.4
Issuance and Delivery
of Shares. Shares of Stock issued pursuant to the exercise of
Options hereunder shall be delivered to Participants by the Company (or its
transfer agent) as soon as administratively feasible after a Participant
exercises an Option hereunder and executes any applicable shareholder agreement
or agreement described in Section 9.2 that the Company requires at the time
of
exercise.
7.5
Fractional
Shares. Only whole shares of Stock may be issued pursuant to a
Stock Award or upon exercise of an Option. Any fractional shares
resulting from the calculations under Sections 4.1, 4.2 and 4.3 shall be rounded
down to the nearest whole share. Any amounts tendered in the exercise
of an Option remaining after the maximum number of whole shares of Stock have
been purchased will be returned to the Participant in the form of
cash.
ARTICLE
VIII. ADJUSTMENT UPON CORPORATE CHANGES
8.1
Adjustments to
Shares. The maximum number of shares of Stock with respect to
which Options or Stock Awards hereunder may be granted, the number of shares
of
Stock which are the subject of outstanding Options or Stock Awards, and the
exercise price of Options, shall be equitably and appropriately adjusted by
the
Committee, in the event that:
(a)
the Company effects one or more Stock dividends, Stock splits, reverse Stock
splits, subdivisions, consolidations or other similar events;
(b)
the Company engages in a transaction which is described in section 424(a) of
the
Code; or
(c)
there occurs any other recapitalization or reorganization event which
necessitates such action; provided, however, adjustments to the limit on Options
or Stock Awards specified in Section 5.2 shall be proportionate to the
modifications of the Stock that are on account of such corporate changes.
Notwithstanding the foregoing, the Committee may not modify the Plan or the
terms of any Options or Stock Awards then outstanding or to be granted hereunder
to provide for the issuance under the Plan of a different class of stock or
kind
of securities. If an event described in paragraph (a), (b) or (c) occurs, the
number of shares of Stock subject to each Option grant to be granted following
such event pursuant to Section 4.1(a) shall not be adjusted to reflect such
event unless the Board (in its sole discretion) determines
otherwise.
8.2
Substitution of
Options on Merger or Acquisition. The Committee may grant
Options or Stock Awards in substitution for stock awards, stock options, stock
appreciation rights or similar awards held by an individual who becomes a
director of the Company in connection with a transaction to which section 424(a)
of the Code applies. The terms of such substituted Options or Stock
Awards shall be determined by the Committee in its sole discretion, subject
only
to the limitations of Article V.
8.3
Effect of Certain
Transactions. The provisions of this Section 8.3 shall apply
to the extent that an Agreement does not otherwise expressly address the matters
contained herein. If the Company experiences an event which results
in a "Change in Control," as defined in Section 8.3(a), then, whether or not
the
vesting requirements set forth in any Agreement have been satisfied, (i) all
Options that are outstanding at the time of the Change in Control shall become
fully vested and exercisable immediately prior to the Change in Control event,
and (ii) the Restriction Period on an outstanding Restricted Stock Award shall
automatically expire and all restrictions imposed under such Restricted Stock
Award shall immediately lapse.
(a)
A Change in Control will be deemed to have occurred for purposes hereof if
(1)
any "person" as such term is used in Sections 13(d) and 14(d) of the Exchange
Act, other than an individual who is a shareholder on the date of the adoption
of the Plan by the Board, becomes the "beneficial owner" (as defined in Rule
13d-3 under said Act), directly or indirectly, of securities of the Company
representing more than 50% of the total voting power represented by the
Company’s then outstanding Voting Securities (as defined below), or (2) the
shareholders of the Company approve a merger or consolidation of the Company
with any other entity, other than a merger or consolidation which would result
in the Voting Securities of the Company outstanding immediately prior thereto
continuing to represent (either by remaining outstanding or by being converted
into Voting Securities of the surviving entity) more than 50% of the total
voting power represented by the Voting Securities of the Company or such
surviving entity outstanding immediately after such merger or consolidation,
or
(3) the shareholders of the Company approve a plan of complete liquidation
of
the Company or an agreement for the sale or disposition by the Company of all
or
substantially all of its assets. For purposes of this Section 8.3(a), "Voting
Securities" of an entity shall mean any securities of the entity which vote
generally in the election of its directors.
(b)
In the event of a Change in Control, the Committee may provide, in its
discretion and on such terms and conditions as it deems appropriate, either
by
the terms of the Agreement or by a resolution adopted prior to the occurrence
of
the Change in Control, that:
(i)
any outstanding Option shall be assumed by the surviving
corporation or any successor corporation to the Company, or a parent or
subsidiary thereof, or other corporation that is a party to the transaction
resulting in the Change in Control, in which event, (1) the shares of the Stock
subject to such Option shall be substituted with the number and class of
securities of the successor, surviving or other corporation that would have
been
issued to the Participant in exchange for shares of the Stock pursuant to the
Change in Control transaction had the Option been exercised prior to such
transaction, (2) notwithstanding Section 8.3(b)(i)(1) hereof, the number of
such
securities of the successor, surviving or other corporation that is made subject
to such Option shall be adjusted as necessary so that the aggregate value of
such securities shall be equal to the aggregate value of the consideration
that
would have been paid or issued to the Participant in exchange for the shares
of
Stock pursuant to the Change in Control transaction had the Option been
exercised immediately prior to such transaction, and (3) the exercise price
payable per share of Stock subject to such Option shall be appropriately
adjusted provided, however, that the aggregate exercise price for such Option
shall remain the same;
(ii)
any outstanding Option shall be converted into a right to receive cash on or
following the closing date or expiration date of the Change in Control
transaction in an amount equal to the aggregate value of the consideration
that
would have been paid or issued to the Participant in exchange for shares of
the
Stock pursuant to the Change in Control transaction had the Option been
exercised immediately prior to such transaction less the aggregate exercise
price of such Option;
(iii)
any outstanding Option cannot be exercised after such a Change in Control;
or
(iv)
any outstanding Option may be dealt with in any other manner determined in
the
discretion of the Committee.
(c)
Notwithstanding the foregoing, a portion of the acceleration of vesting
described in this Section shall not occur with respect to an Option to the
extent such acceleration of vesting would cause the Participant or holder of
such Option to realize less income, net of taxes, after deducting the amount
of
excise taxes that would be imposed pursuant to section 4999 of the Code, than
if
accelerated vesting of that portion of the Option did not occur. This limitation
shall not apply (i) to the extent that the Company, an Affiliate or the acquirer
are obligated to indemnify the Participant or holder for such excise tax
liability under an enforceable "golden parachute" indemnification agreement,
or
(ii) to the extent applicable, the shareholder approval described in Q&A 7
of Prop. Treas. Reg. ss. 1.280G-1 issued under section 280G of the Code is
obtained to permit the acceleration of vesting described in this Section
(applied as if the shareholder approval date was the date of the Change in
Control).
(d)
Notwithstanding anything to the contrary contained herein, a change in ownership
that occurs as a result of a public offering of the Company’s equity securities
that is approved by the Board shall not constitute a Change in
Control.
8.4
No Adjustment upon
Certain Transactions. The issuance by the Company of shares of
stock of any class, or securities convertible into shares of stock of any class,
for cash or property, or for labor or services rendered, either upon direct
sale
or upon the exercise of rights or warrants to subscribe therefor, or upon
conversion of shares or obligations of the Company convertible into such shares
or other securities, shall not affect, and no adjustment by reason thereof
shall
be made with respect to, outstanding Options or Stock Awards.
ARTICLE
IX. COMPLIANCE WITH LAW AND REGULATORY APPROVAL
9.1
General. No
Option shall be exercisable, no shares of Stock shall be issued, no certificates
for shares of Stock shall be delivered, and no payment shall be made under
this
Plan except in compliance with all federal, state and local laws and regulations
including, without limitation, withholding tax requirements, federal and state
securities laws and regulations and the rules and regulations of any government
or regulatory agency or body and in compliance with the rules of all securities
exchanges or self-regulatory organizations on which the Company’s shares may be
listed, which the Committee shall, in its discretion, determine to be necessary
or applicable, in all respects. The Company shall have the right to rely on
an
opinion of its counsel as to such compliance. Any certificate issued
to evidence shares of Stock for which an Option is exercised or a Stock Award
is
granted may bear such legends and statements as the Committee upon advice of
counsel may deem advisable to assure compliance with federal or state laws
and
regulations.
9.2
Representations
by
Participants. As a condition to the exercise of an Option or
issuance of a Stock Award, the Company may require a Participant to represent
and warrant at the time of any such exercise or grant that the shares are being
acquired only for investment and without any present intention to sell or
distribute such shares, if, in the opinion of counsel for the Company, such
representation is required by any relevant provision of the laws referred to
in
Section 9.1. At the option of the Company, a stop transfer order
against any shares of Stock may be placed on the official stock books and
records of the Company, and a legend indicating that the Stock may not be
pledged, sold or otherwise transferred unless an opinion of counsel was provided
(concurred in by counsel for the Company) and stating that such transfer is
not
in violation of any applicable law or regulation may be stamped on the stock
certificate in order to assure exemption from registration. The
Committee may also require such other action or agreement by the Participants
as
may from time to time be necessary to comply with federal or state securities
laws. This provision shall not obligate the Company or any Affiliate
to undertake registration of Options or Stock hereunder.
ARTICLE
X. GENERAL PROVISIONS
10.1 Unfunded
Plan. The Plan, insofar as it provides for grants, shall be
unfunded, and the Company shall not be required to segregate any assets that
may
at any time be represented by grants under this Plan. Any liability
of the Company to any person with respect to any grant under this Plan shall
be
based solely upon contractual obligations that may be created
hereunder. No such obligation of the Company shall be deemed to be
secured by any pledge of, or other encumbrance on, any property of the
Company.
10.2 Rules
of
Construction. Headings are given to the articles and sections
of this Plan solely as a convenience to facilitate reference. The
masculine gender when used herein refers to both masculine and
feminine. The reference to any statute, regulation or other provision
of law shall be construed to refer to any amendment to or successor of such
provision of law.
10.3 Governing
Law. The internal laws of the State of Texas (without regard
to choice of law) shall apply to all matters arising under this Plan, to the
extent that federal law does not apply.
10.4 Compliance
with Section 16
of the Exchange Act. Transactions under this Plan are intended
to comply with all applicable conditions of Rule 16b-3 (or successor provisions)
promulgated under the Exchange Act. To the extent any provision of
this Plan or action by Committee fails to so comply, it shall be deemed null
and
void to the extent permitted by law and deemed advisable by the
Committee.
10.5 Amendment. The
Board may amend or terminate this Plan at any time; provided, however, an
amendment that would have a material adverse effect on the rights of a
Participant under an outstanding Option or Stock Award is not valid with respect
thereto without the Participant’s consent; and provided, further, that the
shareholders of the Company must approve, in general meeting, any amendment
that
changes the number of shares in the aggregate which may be issued pursuant
to
Options or Stock Awards granted under the Plan. Such amendment must be approved
coincident with or prior to the date Options or Stock Awards are granted with
respect to such shares.
10.6 Disputes
and Dispute
Resolution.
(a)
Any and all claims arising out of or relating to the Plan, or the Committee’s
administration or interpretation of the Plan with respect to any Participant,
shall be resolved by binding arbitration which shall be the sole and exclusive
method of resolving such disputes or claims and shall be in lieu of any trial
before a court of jury. The Committee, in offering an option grant
under this Plan, and a Participant, in accepting any option grant under the
Plan, expressly waive any and all rights to a trial before a court or jury
regarding any disputes and claims which arise from or relate to the Plan, and
any option grant made under the Plan.
(b)
Arbitration shall be conducted within Bexar County, Texas before a single
neutral arbitrator selected jointly by the Committee and the Participant in
accordance with the rules of the American Arbitration Association ("AAA") rules
and applicable law then in effect. However, the standard of review to be applied
by the Arbitrator shall be whether the Committee’s disputed act, omission or
decision with respect to the Participant was contrary to any Plan provision
or
otherwise arbitrary and capricious.
(c)
To the extent that any of the provisions of this Section 10.6 or the AAA Rules
conflicts with applicable law for the arbitration of contract disputes, the
provisions or procedures required by applicable law shall
govern.
Dates Referenced Herein and Documents Incorporated by Reference
