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TABLE OF
CONTENTS
NOTICE
OF ANNUAL MEETING OF STOCKHOLDERS
3
PROXY
STATEMENT
4
PROPOSAL
1 – ELECTION OF DIRECTORS
5
EXECUTIVE
OFFICERS
7
CORPORATE
GOVERNANCE
7
AUDIT
COMMITTEE REPORT
11
INDEPENDENT
PUBLIC ACCOUNTANT
12
COMPENSATION
COMMITTEE REPORT
13
COMPENSATION
DISCUSSION AND ANALYSIS
13
EXECUTIVE
COMPENSATION
16
DIRECTOR
COMPENSATION
17
SECURITY
OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
18
PROPOSAL
2 – ADOPTION OF 2009 EQUITY INCENTIVE PLAN
19
STOCKHOLDER
PROPOSALS
23
ANNUAL
REPORT ON FORM 10-K
23
OTHER
MATTERS
23
2
RINO
INTERNATIONAL CORPORATION
11
Youquan Road, Zhanqian Street, Jinzhou District
To the
Stockholders of RINO International Corporation:
You are
cordially invited to attend the Annual Meeting of Stockholders of RINO
International Corporation, a Nevada corporation (the “Company”), to be held at
the offices of the Company, 11 Youquan Road, Zhanqian Street, Jinzhou District,
Dalian, People’s Republic of China 116100 on Friday October 8, 2010,
at 10:00 A.M. local time, for the following purposes:
1.
To
elect five (5) persons to the Board of Directors of the Company to serve
until their respective successors are elected and
qualified;
2.
To
approve the RINO International Corporation 2009 Stock Incentive Plan;
and
3.
To
transact such other business as may properly come before the meeting or
any adjournment thereof.
Only
stockholders of record at the close of business on August 23, 2010 (the “Record
Date”) are entitled to notice of, and to vote at the meeting and any
adjournment or postponement thereof.
It
is important that your shares are represented at the Annual Meeting. We
urge you to review the attached Proxy Statement and, whether or not you plan to
attend the Annual Meeting in person, please vote your shares promptly by casting
your vote via the Internet or, if you receive a full set of proxy materials by
mail or request one be mailed to you, and prefer to mail your proxy or voter
instructions, please complete, sign, date, and return your proxy or voter
instructions card in the pre-addressed envelope provided, which requires no
additional postage if mailed in the United States. You may revoke your
vote by submitting a subsequent vote over the Internet or by mail before the
Annual Meeting, or by voting in person at the Annual Meeting.
If you
plan to attend the meeting, please notify us of your intentions. This will
assist us with meeting preparations. If your shares are not registered in
your own name and you would like to attend the Annual Meeting, please follow the
instructions contained in the Notice of Internet Availability of Proxy Materials
and any other information forwarded to you by your broker, trust, bank, or other
holder of record to obtain a valid proxy from it. This will enable you to
gain admission to the Annual Meeting and vote in person.
Important Notice Regarding the
Availability of Proxy Materials for the Annual Meeting of Shareholders to be
held on October 8, 2010: The Proxy Statement and the Annual Report to
Shareholders for the fiscal year ended December 31, 2009 are also available free
of charge at http://www.shareholdervote.info.
The Board
of Directors of RINO International Corporation, a Nevada corporation (the
“Company,”“we” or “us”), is soliciting the enclosed proxy for the annual
meeting of stockholders (the “Annual Meeting”) to be held on October 8, 2010, at
10:00 A.M. local time, at 11 Youquan Road, Zhanqian Street, Jinzhou
District, Dalian, People’s Republic of China 116100, or any continuation or
adjournment thereof. At the Annual Meeting, the stockholders will be asked to
vote on one or more proposals, which are listed below and described in more
detail in this proxy statement.
This
proxy statement, the enclosed proxy card and our 2009 Annual Report on Form 10-K
are first being mailed on or about September 9, 2010, to all stockholders
entitled to vote at the meeting. The Annual Report does not constitute
“soliciting material” and is not to be deemed “filed” with the Securities and
Exchange Commission (the “SEC”).
At the
meeting, our stockholders will be asked:
1.
To
elect five (5) persons to the Board of Directors of the Company to serve
until their respective successors are elected and
qualified;
2.
To
approve the RINO International Corporation 2009 Stock Incentive Plan;
and
3.
To
transact such other business as may properly come before the meeting or
any adjournment thereof.
Record
Date; Outstanding Shares
Only
stockholders of record at the close of business on August 23, 2010 (the “Record
Date”) are entitled to receive notice of, and vote at, the Annual Meeting.
As of the Record Date, the only class of stock entitled to vote at the meeting,
and the number of shares of such class outstanding as of the Record
Date were 28,605,321 shares of common stock, par value $0.0001 per
share (the “Common Stock”). Each share of our Common Stock is entitled to one
vote on all matters.
Expenses
of Soliciting Proxies
We will
pay the expenses of soliciting proxies to be voted at the Annual Meeting.
Following the original mailing of the proxies and other proxy materials, we or
our agents may supplement the solicitation of proxies by mail, telephone,
internet, telegraph or in person. Following the original mailing of the proxies
and other proxy materials, we will request that brokers, custodians, nominees
and other record holders of our common stock forward copies of the proxy and
other annual meeting materials to persons for whom they hold shares of common
stock and request authority for the exercise of proxies. In these cases, we will
reimburse such record holders for their reasonable expenses if requested to do
so.
Revocability
of Proxies
If you
attend the meeting, you may vote in person, regardless of whether you have
submitted a proxy card. Any person giving a proxy designation in the form
accompanying this proxy statement may revoke it at any time before it is voted.
A proxy designation may be revoked by (i) written notice of revocation or
submission of a new proxy card sent to our Corporate Secretary at 11 Youquan
Road, Zhanqian Street, Jinzhou District, Dalian, People’s Republic of China
116100, or (ii) attending the Annual Meeting and voting in
person.
4
Voting
and Votes Required for Approval
Every
common stockholder of record is entitled to one vote for each share held on each
proposal or item that comes before the meeting. There are no cumulative voting
rights. By submitting your proxy card, you authorize Mr. Dejun Zou, or any
person designated as his substitute, to represent you and vote your shares at
the Annual Meeting in accordance with your instructions. If the Annual Meeting
is adjourned, Mr. Zou or his substitute will be authorized to vote your shares
at any adjournment or postponement of the Annual Meeting. There are
no statutory or contractual rights of appraisal or similar remedies available to
those stockholders who dissent from any matter to be acted on at the Annual
Meeting.
To vote
by mail, please sign, date and complete the enclosed proxy and return it in the
enclosed self-addressed envelope, to Securities Transfer Corporation, 2591
Dallas Parkway Suite 102, Frisco, Texas75034. If you hold your shares through a
bank, broker or other nominee, it will give you separate instructions for voting
your shares.
In
addition to solicitations by mail, we may solicit proxies in person, by
telephone, facsimile or e-mail. In the event that additional solicitation
materials are used, such materials will be filed with the SEC prior to their
use.
Tabulation
of Votes
The votes
received by proxy will be tabulated and certified by our transfer agent,
Securities Transfer Corporation. All other votes will be tabulated by an
inspector of election at the meeting.
Voting
by Street Name Holders
If you
are the beneficial owner of shares held in “street name” by a broker, the
broker, as the record holder of the shares, is required to vote those shares in
accordance with your instructions. If you do not give instructions to the
broker, the broker will nevertheless be entitled to vote the shares with respect
to “discretionary” items but will not be permitted to vote the shares with
respect to “non-discretionary” items (in which case, the shares will be treated
as “broker non-votes”).
Quorum;
Abstentions; Broker Non-Votes
The
required quorum for the transaction of business at the Annual Meeting is a
majority of the outstanding shares of common stock, at the Annual Meeting, in
person or by proxy. Shares that are voted “FOR,”“AGAINST” or “WITHHELD FROM” a
matter are treated as being present at the meeting for purposes of establishing
a quorum and are also treated as shares represented and voting the votes cast at
the Annual Meeting with respect to such matter.
Shares as
to which a stockholder withholds voting authority in the election of directors
and broker non-votes will not be counted as voting thereon and therefore will
not affect the election of the nominees receiving a plurality of the votes cast.
However, those shares will be counted for purposes of determining whether there
is a quorum. For each other item to be acted upon at the Annual Meeting, the
item will be approved if the number of votes cast in favor of the item by the
stockholders entitled to vote exceeds the number of votes cast in opposition to
the item. Abstentions and broker non-votes will not be counted as voting on an
item and therefore will not affect the outcome of these proposals, although they
are counted for purposes of determining whether there is a quorum.
Delivery
of Proxy Materials to Households
Only one
copy of the Company’s 2009 Annual Report, this Proxy Statement, and/or Notice of
Internet Availability of Proxy Materials, as applicable, will be delivered to an
address where two or more stockholders reside with the same last name or whom
otherwise reasonably appear to be members of the same family based on the
stockholders’ prior express or implied consent.
We will
deliver promptly upon written or oral request a separate copy of the 2009 Annual
Report, this Proxy Statement, and/or Notice of Internet Availability of Proxy
Materials, as applicable, upon such request. If you share an address with
at least one other stockholder, currently receive one copy of our annual report,
proxy statement, and/or Notice of Internet Availability of Proxy Materials at
your residence, and would like to receive a separate copy of our annual report,
proxy statement, and Notice of Internet Availability of Proxy Materials for
future stockholder meetings of the Company, please follow the instructions for
requesting materials indicated on the Notice of Internet Availability of Proxy
Materials sent to your residence and specify this preference in your
request.
Interest
of Officers and Directors in Matters to Be Acted Upon
None of
our officers or directors has any interest in any of the matters to be acted
upon at the Annual Meeting.
PROPOSALS
TO STOCKHOLDERS
PROPOSAL
NO. 1
ELECTION
OF DIRECTORS
Our
Bylaws provide that our board of directors shall consist of one (1) or more to a
maximum of seven (7) members, and directors shall be elected annually at the
annual meeting of stockholders. Our Board of Directors is currently comprised of
five (5) directors and will be comprised of five (5) directors effective
immediately following the election if all the nominees are
elected.
5
The Board
of Directors has nominated for election five (5) persons as directors. Each
nominee currently serves as a Company director. All of the nominees have
consented to serve as directors. If a nominee should not be available for
election as contemplated, the proxy holders will vote for a substitute
designated by the current Board of Directors. We are not aware of any nominee
who will be unable or who will decline to serve as a director.
Unless
you instruct us otherwise, the designated proxy will exercise discretion to vote
your proxies for the nominees named
below. In the event that any nominee is unable to or declines to serve as a
director at the time of the Annual Meeting, the proxy cards will be voted for
any nominee who shall be designated by the current Board of Directors to fill
the vacancy. The term of office of each person elected as a director will
continue until the next annual meeting of stockholders or until a successor has
been duly elected and qualified or until his or her earlier resignation, removal
from office, death or incapacity.
Directors Nominees
Position/Title
Age
Jianping
Qiu
Chairman
of the Board of Directors
43
Dejun
Zou
Director
and CEO
49
Kennith
C. Johnson, CPA
Director
56
Chairman
of the Audit Committee
Nominating
Committee Member
Compensation
Committee Member
Xie
Quan
Director
48
Chairman
of the Compensation Committee
Audit
Committee Member
Nominating
Committee Member
Zejin
Li
Director
46
Director Not Standing For
Re-Election
Position/Title
Age
Weiguo
Zhang
Director
52
Chairman
of the Nominating Committee
Compensation
Committee Member
Audit
Committee Member
The
following information with respect to the principal occupation or employment of
the nominees, the name and principal business of the corporation or other
organization in which such occupation or employment is carried on and other
affiliations and business experience during the past five years has been
furnished to us by the respective nominees:
Mr. Zou Dejun has been a Director and
the Chief Executive Officer of the Company since October 2007. Mr. Zou is the
founder of Dalian Rino Environment Engineering Science and Technology Co., Ltd.
(“Dalian Rino”) and has been a Director and its Chief Executive Officer since
2003. He has also been a Director and the Chief Executive Officer of Dalian
Innomind Environment Engineering Co., Ltd. (“Dalian Innomind”) since July
2007. Prior to founding Dalian Rino, from 1993 until 1996 Mr. Zou served as Vice
President of Yingkou Special Valve Manufacturing Co., and from 1996 until 2003
he served as the chief executive officer of Dalian Yingkun Energy and
Environmental Engineering, Ltd. Mr. Zou graduated from Liaoning Broadcast
University, majoring in Electronic Automation.
Ms. Jianping Qiu has been the Chairman of
the Board of the Company since March 2008. Ms. Qiu has been a Director and
Chairman of the Board of Dalian Rino since 2003. Ms. Qiu is also a Director and
Chairman of the Board of Dalian Innomind since July 2007. From 1988 to
1994, Ms. Qiu was the Director of the Finance Department of the Water &
Electricity No. 5 Engineering Bureau. From 1994 through 1996 Ms. Qiu was engaged
in studies at the Dalian University of Foreign Languages, and from 1996 to 2003,
she served as the Chairman of the Board of Dalian Yingkun Energy and
Environmental Engineering, Ltd. Ms. Qiu has won the prestigious ‘Entrepreneur of
the Year’ award in the Jinzhou District of Dalian and is the holder of three
patents. She currently chairs the Association of Industry and Commerce
in Dalian.
Professor Xie Quan has been a Director of
the Company since March 2008. Prof. Quan is the Director of the Institute for
Environmental and Life Sciences of Dalian University of Technology (DUT).
Professor Quan began lecturing at DUT in 1986 and has participated in visiting
scholar programs at major universities and research centers in Germany, Austria,
and England. He is a Senior Fellow of the China Society of Environmental Science
and has authored and co-authored over 200 papers in his career. Prof. Quan
earned his doctorate in chemistry from Karl-Franzens University in Graz,
Austria.
6
Mr. Kennith Johnson, CPA, has
been a Director of the Company since March 2008. Mr. Johnson’s career in public
and corporate accounting stretches back to the mid-1970’s when he worked for
Arthur Andersen’s New York audit practice. Since 2005, Mr. Johnson has served as
Senior Vice President - CFO of Fairfax/MFX, an insurance and financial
conglomerate. From 2001 to 2005 he served as Principal - Management Consultant
at Johnson & Scanlon Associates. Beginning in 2004 through 2008, Mr.
Johnson served as Chairman of the Audit and Compensation Committee of Interpharm
Holdings, an AMEX listed company. Mr. Johnson holds an MBA in International
Corporate Finance from the Stern School of Management.
Mr. Zejin Li is currently a
Senior Partner of DaCheng Law Firms in China and a Senior Partner at Insighter
Capital Group, a Chinese fund and capital management company. During years 1998
through 2001, Mr. Li was CEO and Chairman of the Board of Directors of Shanghai
Goyeah Group, which provides strategic and
mission critical IT development and system implementation for the China energy
resources industry. In year 1997, Mr. Li worked as the Executive Deputy General
Manager of Industrial and Commercial Bank Corporation (HK) Financial Services,
Ltd. Prior to that, he was the Chairman of China National Petroleum Corporation
(Papua New Guinea) Company Ltd. from 1994 through 1995 and the General Manager
of Hainan Goban Enterprises Ltd. from 1991 through 1993, focusing on the
petrol pipes fabrication, oil refinery and real estate development. Mr. Li
graduated from the Biology Department of Jiangxi University with a Bachelor
degree of Science with honor in 1983. He attended an advanced program of
business administration at University of California, Berkeley from 2001 through
2005.
Vote
Required and Board of Directors’ Recommendation
Assuming
a quorum is present, the affirmative vote of a plurality of the votes cast at
the Annual Meeting, either in person or by proxy, is required for the election
of a director. For purposes of the election of directors, abstentions and broker
non-votes will have no effect on the result of the vote.
THE BOARD
OF DIRECTORS RECOMMENDS THAT THE STOCKHOLDERS VOTE “FOR” THE ELECTION AS A
DIRECTOR OF EACH OF THE NOMINEES SET FORTH ABOVE. PROXIES SOLICITED HEREBY WILL
BE VOTED “FOR”
EACH DIRECTOR NAMED ABOVE UNLESS A VOTE AGAINST A NOMINEE OR AN ABSTENTION IS
SPECIFICALLY INDICATED.
EXECUTIVE
OFFICERS
The
following table sets forth the names and ages of all our current executive
officers along with their current positions. Officers are appointed to serve
until the meeting of the Board of Directors following the next annual meeting of
stockholders and until their successors have been duly elected and
qualified.
Name
Age
Position
Dejun
Zou
49
Chief
Executive Officer and Director
Ben
Wang
37
Chief
Financial Officer
Li
Yu
51
Chief
Accounting Officer
Dejun Zou’s biographical
information is set forth under “Election of Directors.”
Ben Wang has served as our
Chief Financial Officer since April 27, 2010. He worked as Chief Financial
Officer of China Prosperous Clean Energy Co., Ltd., an OTCBB listed company
engaged in the sale of liquefied petroleum natural gas, from February 2009 to
April 2010. From April 2007 to February 2009, Mr. Wang was Chief Financial
Officer of New Oriental Energy & Chemical Co., Ltd., a NASDAQ Global Market
listed company engaging in the sale of alternative energy products. From May
2006 to April 2007, he was an equity research analyst for Brean Murray Carret
Co., Ltd., an investment banking firm. From April 2005 to May 2006 he was an
associate in Risk Solutions Consulting for Standard & Poor’s. Mr. Wang has a
B.E. in electronic engineering from University of Electronic Science &
Technology of China, an M.E. in electrical engineering from Tsinghua University
in Beijing, PRC and a Ph.D. from the Department of Decisions, Risk &
Operations Management of Columbia Business School, New York.
Li Yu was appointed as
our Chief Accounting Officer since November 2009 and has been the Company’s
accounting manager since its inception. She graduated from Northeast Financial
and Economic University in year 2008. Ms. Yu received a CFO Qualification
Certificate issued by China Enterprise Confederation in January
2008.
CORPORATE
GOVERNANCE
Board
Meetings
In the
fiscal year ended December 31, 2009, the Board of Directors unanimously approved
six written consents. The Board of Directors however, did not hold any meetings
during the fiscal year ended December 31, 2009.
7
During
the fiscal year 2009, the Audit Committee unanimously approved one written
consent on the adoption of the Audit Committee Charter and the approval of Audit
Committee Procedures. In connection with reviewing the financial statements to
be included in the Company’s Annual Report for the fiscal year ended December31, 2009, the Audit Committee held two meetings via telephone on March 30 and
March 31, 2010 respectively. All members of the Audit Committee were present at
both meetings.
During
the fiscal year 2009, the Compensation Committee unanimously approved one
written consent on the adoption of the Compensation Committee Charter. In
addition, the members of the Compensation Committee held several informal
meetings, either in person or by telephone, to discuss and resolve on the
matters that are in connection with the hiring of Jenny (Yi) Liu and the
increase of the base salary compensation for Dejun Zou and Jianping
Qiu.
Each director attended at least 75% of
the meetings of the committees of the Board of Directors of which he is a
member. We do not have a formal policy regarding attendance by members of the
Board of Directors at an annual meeting of stockholders, but we strongly
encourage all members of the Board of Directors to attend the Meeting and expect
such attendance except in the event of extraordinary circumstances.
Director
Independence
Each of Messrs. Xie Quan, Kennith
Johnson and Weiguo Zhang is an “independent director” under the Rules of NASDAQ,
Marketplace Rule 4200(a)(15).
Board
Leadership Structure and Risk Oversight by the Board of Directors
Our Board
of Directors is responsible for overseeing the business, property and affairs of
the Company. Members of our Board of Directors are kept informed of our business
through discussions with our Chief Financial Officer and other officers, by
reviewing materials provided to them and by participating in meetings of our
Board of Directors and its committees.
Our Board
of Directors is currently comprised of Dejun Zou, who serves as our President
and Chief Executive Officer, Jianping Qiu, who serves as Chairman of our Board
of Directors and three other independent directors, namely Kennith Johnson, Xie
Quan and Weiguo Zhang. Our Board of Directors does not have a policy regarding
the separation of the roles of a Director and Chief Executive Officer because
our Board of Directors believes that the determination of whether to separate
the roles depends largely upon the identity of the Chief Executive Officer and
the membership of the Board of Directors from time to time and that there is no
single best organizational model that is the most effective in all circumstances
and that the shareholders’ interests are best served by allowing the Board of
Directors to retain the flexibility to determine the optimal organizational
structure for the Company at a given time. Currently, these roles are separate,
although in years past, including 2009, they have been combined.
We
believe that we, like many U.S. companies, are currently best served by having
different people serve as our Chief Executive Officer and Chairman of our Board
of Directors. Our Board of Directors believes that through this leadership
structure, both Dejun Zou and Jianping Qiu are able to draw on their intimate
knowledge and expertise of the daily operations of the Company and its business
and employment relationships to provide our Board of Directors with leadership
in setting its agenda and properly focusing its discussions.
The Board
of Directors plays an active role, as a whole and also at the committee level,
in overseeing the management of the Company’s risks. To date, the Board
has not regularly reviewed reports from members of senior management and
committees on areas of material risk to the Company, including operational,
financial, legal, strategic and regulatory risks. However, the Board
intends to implement such a policy during 2010.
Board
Committees
Committee
Membership
The
following table shows the current membership on the Company’s standing
committees of the Board of Directors:
Name
Audit Committee
Compensation
Committee
Nominating Committee
Kennith
Johnson
Chair
Member
Member
Xie
Quan
Member
Chair
Member
Weiguo
Zhang
Member
Member
Chair
Audit
Committee of the Board of Directors
Our board of directors established an
Audit Committee on April 4, 2008 and appointed Messrs. Xie Quan, Kennith Johnson
and Weiguo Zhang as our audit committee members. Mr. Johnson was appointed
as the Chairman of our audit committee. Each of our audit committee members is
determined by our Board of Directors to be “independent” under the Rules of
NASDAQ, Marketplace Rule 4200(a)(15). Our Audit Committee adopted a charter
on July 15, 2008. A copy of the Audit Committee charter is available to our
securities holders on the Company’s website at: www.rinogroup.com.
8
Audit Committee Financial
Expert
Our board of directors had determined
that our Chairman of the Audit Committee, Mr. Kennith Johnson, qualifies as an
“audit committee financial expert” as defined in Item 407(d) of Regulation S-K
and is “independent” as the term is used in Item 7(d)(3)(iv) of Schedule 14A
under the Securities Exchange Act.
The Audit Committee assists the Board
in fulfilling its oversight responsibilities relating to:
· our
auditing, accounting and reporting practices;
· the
adequacy of our systems of internal controls;
· and the
quality and integrity of publicly reported financial disclosures.
In this role, the Audit Committee
appoints the independent auditors and reviews and approves the scope of the
audit, the financial statements and the independent auditors’ fees.
The Audit Committee exercises the
powers of the Board of Directors in connection with our accounting and financial
reporting practices, and provides a channel of communication between the Board
of Directors and independent registered public accountants.
Nominating
Committee of the Board of Directors
Our board of directors established a
Nominating Committee on July 15, 2008 and appointed Messrs. Xie Quan, Kennith
Johnson and Weiguo Zhang as our Nominating Committee members. Mr.
Weiguo Zhang was appointed as the Chairman of our Nominating Committee.
Each of our nominating committee members is determined by our Board of Directors
to be “independent” under the Rules of NASDAQ, Marketplace Rule
4200(a)(15).
Our Nominating Committee adopted a
charter on July 15, 2008. A copy of the Nominating Committee charter is
available to our securities holders on the Company’s website at: www.rinogroup.com.
The Nominating Committee identifies and considers candidates for board
membership. The Nominating Committee has the power and authority to review
candidates proposed by our stockholders for nomination to the Board of
Directors, and to conduct appropriate inquiries into the background and
qualifications of any such candidates. In connection with the private placement
that we completed on October 5, 2007, Blue Ridge Investments LLC., an investor
in the private placement, had the right to designate one member of the board of
directors of the Company (or at their election, the board of directors of Dalian
Innomind or Dalian Rino). On July 14, 2009, Blue Ridge Investments LLC entered
into a letter agreement with the Company whereby it waived and relinquished such
board designation right. As of the date of this Proxy Statement, Blue Ridge
Investments LLC has not designated any member of the Board.
Compensation
Committee of the Board of Directors
Our board of directors established a
Compensation Committee on July 15, 2008 and appointed Messrs. Xie Quan, Kennith
Johnson and Weiguo Zhang as our Compensation Committee members. Mr. Xie Quan was
appointed as the Chairman of our Compensation Committee. Each of our
Compensation Committee members is determined by our Board of Directors to be
“independent” under the Rules of NASDAQ, Marketplace Rule
4200(a)(15).
Our Compensation Committee oversees and
administers our executive compensation programs. The Compensation Committee
seeks to ensure that the total compensation paid to our named executive officers
is fair, reasonable and competitive. The Compensation Committee’s complete roles
and responsibilities are set forth in the written charter adopted by the Board
of Directors on July 15, 2008. A copy of the Compensation Committee charter is
available to our securities holders on the Company’s website at: www.rinogroup.com.
Nomination
of Directors by Security Holders
We do not currently have procedures by
which our security holders may recommend nominees to our Board of
Directors. In connection with the private placement that we completed on
October 5, 2007, Blue Ridge Investments LLC, an investor in the private
placement, used to retain the right to designate one member of the Company’s (or
at their election, Dalian Innomind’s or Dalian Rino’s) Board of Directors. On
July 14, 2009, Blue Ridge Investments LLC entered into a letter agreement with
the Company whereby it waived and relinquished such board designation
right.
Section 16(a) of the Exchange Act
requires the Company’s directors, executive officers and persons who own more
than 10% of the Company’s Common Stock to file reports of ownership and changes
in ownership on Forms 3, 4 and 5 with the SEC. Directors, executive officers and
greater than 10% stockholders are required by SEC rules to furnish the Company
with copies of Section 16(a) forms they file. Based upon a review of the
filings made on their behalf during the fiscal year ended December 31, 2009, as
well as an examination of the SEC’s EDGAR system Form 3, 4, and 5 filings and
the Company’s records, the following table sets forth exceptions to timely
filings:
Name
Date of Event Requiring
Filing of Form 3
Yi
(Jenny) Liu
06/01/2009
(1)
Li
Yu
11/14/2009
(1)
9
(1) Date
of appointment as an officer and/ or a director of the Company.
Family
Relationships
There are no family relationships among
our directors or executive officers, except that Mr. Dejun Zou and Ms. Jianping
Qiu are married to each other.
Legal
Proceedings
To our knowledge, during the last ten
years, none of our directors, nominees for director or executive officers
(including those of our subsidiaries) has:
·
Had
a bankruptcy petition filed by or against any business of which such
person was a general partner or executive officer either at the time of
the bankruptcy or within two years prior to that
time.
·
Been
convicted in a criminal proceeding or been subject to a pending criminal
proceeding, excluding traffic violations and other minor
offenses.
·
Been
subject to any order, judgment or decree, not subsequently reversed,
suspended or vacated, of any court of competent jurisdiction, permanently
or temporarily enjoining, barring, suspending or otherwise limiting his
involvement in any type of business, securities or banking
activities.
·
Been
found by a court of competent jurisdiction (in a civil action), the SEC,
or the Commodities Futures Trading Commission to have violated a federal
or state securities or commodities law, and the judgment has not been
reversed, suspended or vacated.
·
Been
the subject of, or a party to, any Federal or State judicial or
administrative order, judgment, decree, or finding, not subsequently
reversed, suspended or vacated, relating to an alleged violation
of:
(1) Any
Federal or State securities or commodities law or regulation; or
(2)Any
law or regulation respecting financial institutions or insurance companies
including, but not limited to, a temporary
or permanent injunction, order of disgorgement or restitution, civil money
penalty or temporary or permanent cease-and-desist order, or removal or
prohibition order; or
(3)Any
law or regulation prohibiting mail or wire fraud or fraud in connection with any
business entity;
·
Been
the subject of, or a party to, any sanction or order, not subsequently
reversed, suspended or vacated, of any self-regulatory organization (as
defined in Section 3(a)(26) of the Exchange Act (15 U.S.C. 78c(a)(26))),
any registered entity (as defined in Section 1(a)(29) of the Commodity
Exchange Act (7 U.S.C. 1(a)(29))), or any equivalent exchange,
association, entity or organization that has disciplinary authority over
its members or persons associated with a
member.
Transactions
with Related Persons
Restructuring
Agreements
Our CEO, Mr. Dejun Zou, and our
Chairman of Board of Directors, Ms. Jianping Qiu, own 90% and 10%, respectively,
of the ownership interests in Dalian Rino, our controlled variable interest
entity. On October 5, 2007, Mr. Zou, Ms. Qiu, Dalian Innomind and Dalian Rino
entered into a series of agreements on October 3, 2007, where Dalian Innomind
assumed the control of Dalian Rino (the “Restructuring Agreements”). For more
details of the Restructuring Agreements, please refer to “Our History” under
Item 1 of our Annual Report on Form 10-K for the fiscal year ended December 31,2009. We, however, do not have procedures to resolve the potential conflicts of
interest in performance and enforcement of the Restructuring
Agreements.
Loans
from Related Party
The Company owed $535,895 and $ 494,614
to Mr. Dejun Zou, our CEO and director, as of June 30, 2010 and December 31,2009, respectively, for advances made on an unsecured basis, payable on demand
and interest free. Imputed interest is charged per annum on the amount with loan
in nature due at 0% and 5.24 % for the six months periods ended June 30, 2010
and 2009, respectively. Total imputed interest recorded as additional paid-in
capital amounted to $0 and $13,557 for the six months ended June 30,2010 and 2009, respectively. There was no written loan agreement entered into by
the parties regarding the foregoing.
Loans
to Related Party
On December 7, 2009, the Company made a
loan of approximately $3,500,000 to Mr. Dejun Zou and Ms. Jianping Qiu on an
unsecured and interest free basis. As of the date of this Proxy Statement,
$300,000 has been repaid. Mr. Zou and Mrs. Qiu are directors and officers of the
Company.
10
On March 31, 2010, the Company entered
into a loan agreement with Mr. Dejun Zou and Ms. Jianping Qiu evidencing the
terms of a loan made to them in a principal sum of $3.5 million at an annual
interest rate of 5.25%. Pursuant to the loan agreement evidencing such loan, Mr.
Zou and Ms. Qiu also issued a secured promissory note to the Company due on May10, 2010. Mr. Zou and Ms. Qiu are directors and officers of the Company. The
loan, with principal and accrued interest totaling approximately $3.577 million,
was fully repaid on May 10, 2010.
The making of this loan and the
continuation of such indebtedness thereafter until it is fully repaid create a
contingent liability for a possible violation of Section 13(k) of the Exchange
Act (Section 402(a) of the Sarbanes-Oxley Act of 2002). Section 13(k) provides
that it is unlawful for a company, such as the Company, which has a class of
securities registered under Section 12 of the Exchange Act, to directly or
indirectly, including through any subsidiary, extend or maintain credit in the
form of a personal loan to or for any director or executive officer of the
Company.
Issuers violating Section 13(k) of the
Exchange Act may be subject to civil sanctions, including injunctive remedies
and monetary penalties, as well as criminal sanctions. The imposition of any of
such sanctions on the Company may have a material adverse effect on our
financial position, results of operations or cash flows.
Code
of Ethics
The Company does not permit activities
that give rise to conflicts of interest by directors, executive officers or
employees. In this regard, the Company adopted a Code of Ethics in March 2008, a
copy of which was previously filed as Exhibit 14.1 to our Annual Report on Form
10-K for the fiscal year ended December 31, 2007. The Code of Ethics is
also available at our website: www.rinogroup.com.
Our Code of Ethics applies to
Directors, our Chief Executive Officer, Chief Financial Officer and all of the
other employees. Our Code of Ethics include standards that are reasonably
designed to deter wrongdoing and to promote (i) honest and ethical conduct, (ii)
full, fair, accurate, timely, and understandable disclosure in reports and
documents that we file or submit to the SEC and in our other public
communications, (iii) compliance with applicable governmental laws, rules and
regulations, (iv) the prompt internal reporting of violation of the code to an
appropriate person or person identified in the code, and (v) accountability for
adherence to the code.
Stockholders
Communication
We
encourage stockholder communications to the Board of Directors and/or individual
directors. Stockholders who wish to communicate with the Board of Directors or
an individual director should send their communications to the care of Ms. Bin
Luan, Corporate Secretary, RINO International Corporation, 11 Youquan Road,
Zhanqian Street, Jinzhou District, Dalian, People’s Republic of China 116100.
Communications regarding financial or accounting policies should be sent to the
attention of the Chairman of the Audit Committee.
AUDIT
COMMITTEE REPORT
The Audit
Committee oversees the Company’s financial reporting process on behalf of the
Board of Directors. The Committee is comprised of three directors and operates
under a written charter adopted by the Board of Directors. All of the audit
committee members are independent as defined by the rules of the NASDAQ Stock
Market, and as that term is defined in Section 10A of the Securities Act of
1934, as amended. Management has the primary responsibility for the financial
statements and the reporting process, including the Company’s systems of
internal control. In fulfilling its responsibilities, the Committee reviewed the
audited financial statements in the Annual Report with management, the quality
and acceptability of the Company’s financial reporting and
controls.
The
Committee reviewed with the independent auditors, who are responsible for
expressing an opinion on the conformity of those audited financial statements
with generally accepted accounting standards, their judgments as to the quality
and acceptability of the Company’s financial reporting and such other matters as
are required to be discussed with the Committee under generally accepted
auditing standards, including the matters required to be discussed by SAS 114
(Communication with Audit Committees). In addition, the Committee has discussed
with the independent auditors the auditors’ independence from management and the
Company, including the matters in the auditors’ written disclosures required by
applicable requirements of the Public Company Accounting Oversight Board
regarding the independent accountant's communications with the audit committee
concerning independence. Furthermore, the Audit Committee has considered whether
the provision of non-audit services by the independent auditors for the fiscal
year ended December 31, 2009 is compatible with maintaining their
independence.
In
reliance on the reviews and discussions referred to above, the Committee
recommended to the Board of Directors that the audited financial statements for
the fiscal year ended December 31, 2009 be included in the Company’s Annual
Report on Form 10-K for the fiscal year ended December 31, 2009, for filing with
the SEC.
Management
is responsible for the Company’s financial reporting process, including its
systems of internal control, and for the preparation of consolidated financial
statements in accordance with generally accepted accounting principles. The
Company’s independent auditors are responsible for auditing those financial
statements. Our responsibility is to monitor and review these processes. It is
not the Committee’s duty or responsibility to conduct auditing or accounting
reviews or procedures. The Committee has relied, without independent
verification, on management’s representation that the financial statements have
been prepared with integrity and objectivity and in conformity with accounting
principles generally accepted in the United States of America and on the
independent auditors’ report on the Company’s financial
statements.
11
The
Committee’s oversight does not provide it with an independent basis to determine
that management has maintained appropriate accounting and financial reporting
principles or policies, or appropriate internal controls and procedures designed
to assure compliance with accounting standards and applicable laws and
regulations. Furthermore, the Committee’s considerations and discussions with
management and the independent auditors do not assure that the Company’s
financial statements are presented in accordance with generally accepted
accounting principles, that the audit of the Company’s financial statements has
been carried out in accordance with generally accepted auditing standards or
that the Company’s independent accountants are in fact
“independent.”
The Audit
Committee is pleased to submit this report to the stockholders with regard to
the above matters.
/s/
Kennith Johnson (Chairman)
/s/ Xie
Quan
/s/
Weiguo Zhang
The
foregoing Audit Committee Report does not constitute soliciting material and
shall not be deemed filed or incorporated by reference into any other Company
filing under the Securities Act or the Exchange Act, except to the extent that
we specifically incorporate this Audit Committee Report by reference
therein.
INDEPENDENT
PUBLIC ACCOUTANT
On April29, 2008, our board of directors approved our termination of Jimmy C.H. Cheung
& Co. CPAs as our independent auditors. At the same time, Moore, Stephens
Wurth Frazer and Torbet, LLP (“MSWFT”), located at 135 South State College
Blvd., Suite 300, Brea, CA92821 was approved by our audit committee and
board of directors to be our new independent accountant. Effective on
January 1, 2010, certain partners of MSWFT and Frost, PLLC (“Frost”) formed
Frazer Frost, LLP, which became the Company’s new independent accounting
firm.
Fees
and Services of Independent Public Accountants
1. Jimmy C.H. Cheung &
Co.
Fiscal Year Ended
December 31, 2008
Audit
Fees*
$
1,200
Audit
Related Fees
-
Tax
Fees
-
All
Other Fees
-
Total
$
1,200
* The
$1,200 audit fee was incurred in connection with the issuance of the audit
report by Jimmy C. H. Cheung & Co. on the Company’s annual financial
statements for fiscal year 2007.
2. Frazer Frost (successor entity of
Moore Stephens Wurth Frazer and Torbet, LLP)
** The
$190,000 and $190,000audit fee was incurred in connection with the audit of the
Company’s annual financial statements and review of the financial statements
included in the Company’s Form 10-K and 10-Qs for fiscal
years 2009 and 2008.
In the
event that we should require substantial non-audit services, the Audit Committee
of the Board of Directors would approve such services and the fees
therefore.
12
All of
the above services were pre-approved by the Company’s Audit
Committee.
COMPENSATION
COMMITTEE REPORT
The
Compensation Committee has reviewed and discussed with management the
Compensation Discussion and Analysis set forth below required by Item 402(b) of
Regulation S-K with management. Based on such review and discussions, the
Compensation Committee recommended to the Board of Directors that the
Compensation Discussion and Analysis be included in this Proxy Statement on
Schedule 14A.
Compensation
Committee
/s/ Xie
Quan (Chairman)
/s/
Kennith Johnson
/s/
Weiguo Zhang
COMPENSATION
DISCUSSION AND ANALYSIS
Overview
We intend to provide our named
executive officers (as defined in Item 402 of Regulation S-K) with a competitive
base salary that is in line with their roles and responsibilities when compared
to peer companies of comparable size in similar locations.
It is not uncommon for PRC private
companies in northeastern China to have base salaries as the sole form of
compensation. The base salary level is established and reviewed based on the
level of responsibilities, the experience and tenure of the individual and the
current and potential contributions of the individual. The base salary is
compared to the list of similar positions within comparable peer companies
and consideration is given to the executive’s relative experience in his or her
position. Base salaries are reviewed periodically and at the time of
promotion or other changes in responsibilities.
In July 2008, our board of directors
established a compensation committee comprised of independent directors. The
Compensation Committee will perform periodically a strategic review of the
compensation program for our executive officers to determine whether it provides
adequate incentives and motivation to our executive officers and whether it
adequately compensates our executive officers relative to comparable officers in
other companies with which we compete for executives. Those companies may
or may not be public companies or companies located in the PRC or even, in
all cases, companies in a similar business.
General
design philosophy of the Company’s compensation policies and
practices.
Compensation programs for the Company’s
employees generally are designed to attract, retain and motivate employees who
contribute to the achievement of corporate goals and objectives. Elements of
employee compensation presently consist of base salaries, an annual cash
incentive plan and equity compensation, such as stock options, in order to
achieve a balance between cash and other compensation. Our compensation
program for the employees is designed and implemented to maximize value for
shareholders over the long term by aligning incentive criteria with that of the
long-term goals of the Company. We believe that the quality of the
Company’s employees is a key driver of long-term stockholder value. Establishing
and maintaining employees’ long-term commitment to us is critical to the
development of our system production, as development of new systems often takes
years, and time to market is critical to our business success.
The primary actions by the Compensation
Committee in fiscal year 2009 were to insure that employees were provided
incentives to meet the Company’s goals, increase profitability, and maximize
value for shareholders over the long term. The Company strove to provide
competitive employee compensation programs that would help to attract highly
qualified individuals necessary to continue to grow the Company. The Committee
has implemented an annual cash and stock incentive plan in order to accomplish
its goals and to ensure that the employee compensation program is consistent
with its directions, stated vision and culture.
Competitive incentive compensation was
based upon the achievement of expected performance targets, with substantial
upside potential tied to exceptional contribution and goal attainment, resulting
in above-market compensation.
Incentive
considerations in structuring its compensation policies and practices or in
awarding and paying compensation.
The Compensation Committee believes
that an effective compensation program should provide base annual compensation
that is reasonable in relation to an individual employee’s job responsibilities
and reward the achievement of both annual and long-term strategic goals of our
company.
13
In structuring its compensation
policies and practices the Compensation Committee takes into account incentive
factors it deems relevant to the specific compensation component being
considered, including: compensation paid by other business organizations of
comparable size in the same industry and related industries; profitability; the
attainment of annual individual and business objectives; an assessment of
individual contributions and performance relative to others; and historic
compensation awards. Any decision is made by members of the Compensation
Committee jointly and such authority is not delegated to anyone.
The specific items of corporate
performance can be grouped into the categories listed below. The Company’s
performance levels for determining compensation differ by individual based on
the individual’s roles, functions and responsibility within the
Company.
O
Financial —
we evaluate measures of Company financial performance, including revenue
growth, gross margins, operating margins and other measures such as
expense management.
O
Strategic —
we monitor the success of our executive team and employees in furthering
the strategic success of the Company, including the development of the
Company’s product pipeline.
O
Operational —
we include operational measures in our determination of success, including
our production capacity and capability, the timeliness and effectiveness
of new product launches, the execution of important internal Company
initiatives and customer growth and
retention.
The Committee considered the totality
of the information presented (including external competitiveness, the
performance review, Company performance, progress towards strategic objectives
and internal equity) and applied its knowledge and discretion to determine the
compensation for each executive officer and employee. The Committee may reassess
the proper level of equity and cash compensation in light of the company’s
improved profitability and shareholder value creation. Based on the foregoing
objectives, the Committee has structured the Company’s annual cash and
incentive-based cash and non-cash executive and employee compensation to
motivate executives and other employees to achieve the business goals set by the
Company, to reward the executives and other employees for achieving such goals,
and to retain the executives and other qualified employees.
Compensation
Elements
Each of the elements serve an important
role in supporting the Company’s pay-for-performance philosophy and in
realizing our compensation program objectives:
Base
Compensation
The Company provides named executive
officers and other employees with a base salary to compensate them for services
rendered during the fiscal year. Base salary ranges for the named executive
officers are determined for each executive based on his or her position and
responsibility.
During its review of base salaries for
executives and other employees, the Compensation Committee primarily
considers:
·
the
negotiated terms of each employee employment
agreement;
·
internal
review of the employee compensation, both individually and relative to
other employees; and
·
individual
performance of the employee.
Salary levels are typically considered
annually as part of the Company’s performance review process, as well as upon a
change in job responsibility. The Compensation Committee considers the facts
presented by each individual case including, but not limited to, the employee’s
longevity with the Company, his or her educational background and experience,
the particular responsibilities of his or her position, the compensation of
others with similar background credentials and responsibilities, and his or her
past level of performance, as well as prospective assumptions. It is
important for the Company to remain competitive with not only its domestic
competition, but also its competitors participating in world markets.
Therefore, the Company attempts at all levels of management and operations to
control costs such that the Company can strive for a relatively low-cost
structure. Merit-based increases to salaries are based on the Compensation
Committee’s assessment of the individual’s performance. This element is
important because, in our experience, prospective employees view salary levels
as the most important determinant of where they choose to work. In order
to maintain an advantageous cost structure, it is necessary that the Company
provide enhancement to base compensation when certain levels of profitability
are achieved.
Long-Term Equity
Incentives
The Compensation Committee believes
that performance criteria under annual and long-term incentive plans include
measures of performance and measures of the quality of that performance, this
dual approach mitigates the potential that executives and general employees will
aim to achieve increases in measures such as sales or growth while not focusing
on the value creation or sustainability of such performance.
14
Annual incentive program, such as stock
incentive program does not make up a disproportionate share of the total annual
executive compensation opportunity therefore jeopardizing long-term performance.
As compared to the performance of the Company’s peer group, the range of
performance, and corresponding payouts, is within a realistic range of results.
Also, the annual incentive plan has limited total payouts to a reasonable level
as determined by the compensation committee, to avoid encouraging decisions that
maximize short-term earnings opportunities.
The relationship between performance
criteria and payouts under the annual incentive award are consistent with
targeted performance under the long-term incentive awards. Both types of awards
are intended to encourage consistent contribution to the sales and marketing of
our products and sustainable performance in the various positions held by
executive officers and general employees.
The Compensation Committee believes the
long-term incentive performance measures are based on the Company’s current and
probable future growth thus does not require excessively risky behavior to
realize target or above target payouts. It is the Compensation Committee’s view
that specific mix of annual compensation, stock incentive plan and long term
equity awards serve the best interests of the shareholders and the
Company.
The Compensation Committee is obligated
to meet with the Company’s principal financial officer prior to approving
financial incentive criteria and meet with him periodically to facilitate a
complete understanding of how the Company’s financial performance interacts with
its strategy on compensation programs. For all the above reasons the
Compensation Committee believes the incentive designs implemented by the Company
effectively mitigate or avoid excessive risk-taking behavior by the Company’s
executives and general employees.
In July 2009, our Board of Directors
adopted RINO International Corporation 2009 Stock Incentive Plan (the “Plan”)
to enhance the
profitability and value of the Company for the benefit of its shareholders by
enabling the Company to offer certain eligible employees, consultants and
non-employee directors cash and stock-based incentives in the Company to
attract, retain and reward such individuals and strengthen the mutuality of
interests between such individuals and the Company’s shareholders.
The aggregate number of shares of our
Common Stock that may be issued under the Plan is 2,500,000 shares, subject to
adjustment under the Plan.
Outstanding Equity
Awards
The following table provides
information on all restricted stock and stock option awards held by our named
executive officers as of June 30, 2009.
Outstanding
Equity Awards at Fiscal Year End
Option Awards
Stock Awards
Name
Number of
Securities
Underlying
Unexercised
Options (#)
Exercisable
Number of
Securities
Underlying
Unexercised
Options
(#)
Unexercisable
Equity
Incentive
Plan
Awards:
Number of
Securities
Underlying
Unexercised
Unearned
Options
(#)
Option
Exercise
Price
($)
Option
Expiration
Date
Number
of
Shares
or Units
of
Stock
That
Have
Not
Vested
(#)
Market
Value
of
Shares
or
Units
of
Stock
That
Have
Not
Vested
($)
Equity
Incentive
Plan
Awards:
Number
of
Unearned
Shares,
Units or
Other
Rights
That
Have Not
Vested
(#)
Equity
Incentive
Plan
Awards:
Market
or Payout
Value of
Unearned
Shares,
Units or
Other
Rights
That
Have Not
Vested
($)
Yi
(Jenny) Liu
Former
Chief Financial
Officer
—
50,000
(1)
—
$
6.15
(2
)
—
—
—
—
(1) As
of December 31, 2009, Ms. Yi (Jenny) Liu had options to purchase
50,000 shares of the Company’s common stock at an exercise price of $6.15
per share, to vest in 3 equal annual installments beginning on June 30, 2010.
However, on August 12, 2010, the Company entered into a Separation Agreement
with Yi (Jenny) Liu (the “Separation Agreement”), who resigned as the Company’s
former CFO on April 27, 2010. The Separation Agreement, which amended Section
5(B) of her original employment agreement with the Company dated June 30, 2009,
provided that Ms. Liu shall receive options to purchase 10,000 shares of the
Common Stock, rather than 50,000 shares, at the exercise price of $6.15 per
share, vesting immediately upon the execution of the Separation Agreement. Such
options to purchase 10,000 shares of Common Stock will expire in three years
from the vesting date.
(2) The
options to purchase 50,000 shares (which were replaced with the options to
purchase 10,000 shares referred to in footnote (1)) were to expire on the third
anniversary after each installment of options were vested.
15
Compensation
Committee Interlocks and Insider Participation
None of
the Compensation Committee members is, or was ever, an officer or employee of
the Company or any of its subsidiaries, nor did any of the Compensation
Committee members have any relationship requiring disclosure by the Company
under any subsection of Item 404 of Regulation S-K promulgated by the SEC.
During the last fiscal year, none of the executive officers of the Company
served on the Board of Directors or on the compensation committee of any other
entity, any of whose executive officers served on the Board.
EXECUTIVE
COMPENSATION
Summary
of Executive Compensation
The following table sets forth
information concerning the compensation of the named executive officers for each
of the fiscal years ended December 31, 2008 and December 31, 2009:
Name and
principal
position
Year
Salary
($)
Bonus
($)
Stock
awards
($)
Option
awards ($)
Non-equity
incentive plan
compensation
($)
Change in
pension
value and
nonqualified
compensation
earnings ($)
All other
compensation
(4)
Total
($)
Zou
Dejun (1)
2008
69,192
-
15,748,992
-
-
-
-
15,818,184
2009
99,192
-
-
-
-
-
-
99,192
Qiu
Jianping (1)(2)
2008
69,192
-
1,749,888
-
-
-
-
1,819,080
2009
99,178
-
-
-
-
-
99,178
Jenny Liu
(3)
2008
0
-
0
(3
)
-
-
-
-
2009
70,000
-
0
(3
)
-
-
70,000
Li
Yu (4)
2008
7,941
21,972
-
-
-
-
-
29,913
2009
7,941
29,281
-
-
-
-
-
37,222
Bruce
Richardson (5)
2008
155,682
-
0
-
-
-
-
155,682
2009
-
-
-
-
-
-
Notes to
“Summary Compensation
Table”
(1)
Escrowed Share Arrangement
Pursuant
to the Securities Purchase Agreement, dated October 5, 2007, 5,580,000 shares of
our common stock beneficially owned by our founders, Zou Dejun and Qiu Jianping,
who, through The Innomind Trust, were required to be deposited into an escrow
account in order to secure our obligation under the Securities Purchase
Agreement and Make Good Escrow Agreement, dated October 5, 2007, among the
Company and certain investors (respectively, the “Security Purchase
Agreement” and the “Make Good Escrow Agreement”), where we were required to
deliver to such investors the shares in the escrow account in the event we fail
to achieve certain after-tax net income targets for fiscal years 2007 and
2008. If any Make Good Escrow Shares, as defined under the Make Good Escrow
Agreement, are released to the company management or employees, the value of
such shares at the time of release will be recorded as compensation expense with
a corresponding offset to additional paid-in capital in accordance with SFAS
123(R) paragraph 11.
As a
result of us achieving the 2007 earnings targets, presently, there are 3,906,000
shares remaining in escrow. For fiscal year 2008, the earnings targets
were $28.0million in after-tax net income and $1.12 in earnings per share on a
fully diluted basis. We met these earnings targets for fiscal year 2008,
and as a result, the 3,906,000 shares then in escrow were released to the
Innomind Trust with Mr. Zou and Ms. Qiu as the sole beneficiaries. Under
U.S. generally accepted accounting principles, the release of any of such escrow
shares to any of our employees based on our fulfillment of stated performance
thresholds constitutes a compensatory plan to such employees, which requires us
to record a corresponding compensation expense in our financial
statements. The key provisions of SFAS-123R require that share-based
compensation awards to employees be measured at the grant-date fair value
and the cost recognized over the period during which the employee is required to
provide service in exchange for the award. The grant date of the escrowed share
agreement is October 5, 2007 and the grant date fair value is $4.48 per share.
The 3,515,400 shares of our Common Stock were released to the Innomind Trust,
which are deemed as beneficially owned by Mr. Zou were recognized as a stock
award to him in 2008 with a value of $15,748,992. The 390,600 shares of our
Common Stock were released to the Innomind Trust, which are deemed beneficially
held by Ms. Qiu were recognized as a stock award to her in 2008 with a value of
$1,749,888.
(2)
Chairman of the Board is an executive officer position in Dalian Rino and Dalian
Innomind.
(3) Yi
(Jenny) Liu was the CFO of the Company from June 30, 2009 through April 27,2010. On August 12, 2010, the Company entered into a Separation Agreement with
Yi (Jenny) Liu (the “Separation Agreement”), who resigned as the Company’s
former CFO on April 27, 2010. The Separation Agreement, which amended Section
5(B) of her original employment agreement with the Company dated June 30, 2009,
provided that Ms. Liu shall receive options to purchase 10,000 shares of the
Common Stock, rather than 50,000 shares, at the exercise price of $6.15 per
share, vesting immediately upon the execution of the Separation Agreement. Such
option to purchase 10,000 shares of Common Stock will expire in three years from
the vesting date.
(4)
Pursuant to that certain employment agreement dated February 28, 2010, Yu Li is
employed by Dalian Rino as its Chief Accounting Officer at
an annual compensation of $7,941 with annual bonus of
$29,281.
We have
not used a compensation consultant to determine or recommend the amount or form
of executive or director compensation, but we believe that our executive officer
compensation package is comparable to similar businesses in our location of
operations.
We have
employment agreements with each of our executive officers, which are summarized
below.
·
Dejun
Zou. Pursuant to an employment agreement dated August 1, 2007, Zou
Dejun is employed by Dalian Innomind as its Manager at a monthly salary of
40,000 RMB (approx. $5,230). The employment agreement expires on December31, 2010. Under the agreement, Mr. Zou’s salary is subject to adjustment
commensurate with Dalian Innomind’s revenues, but in no event less than
the lowest standard salary prescribed by the Dalian city government. In
addition, Mr. Zou is entitled to annual vacation in compliance with PRC
rules pertaining to the same. The agreement is terminable by Dalian
Innomind for cause, on 30 days
notice.
Mr. Zou
has also signed a non-competition/non-disclosure agreement with the
Company.
·
Jianping
Qiu. Pursuant to an employment agreement dated August 1, 2007, Qiu
Jianping is employed by Dalian Innomind as its Chairman of the Board at a
monthly salary of 40,000 RMB (approx. $5,230). In the PRC, this position
is an executive officer position, instead of a directorship. The
employment agreement expires on December 31, 2010. Under the agreement,
Ms. Qiu’s salary is subject to adjustment commensurate with Dalian
Innomind’s revenues, but in no event less than the lowest standard salary
prescribed by the Dalian city government. In addition, Ms. Qiu is
entitled to annual vacation in compliance with PRC rules pertaining to the
same. The agreement is terminable by Dalian Innomind for cause, on 30 days
notice.
Ms. Qiu
has also signed a non-competition/non-disclosure agreement with the
Company.
·
Ben
Wang. Pursuant to an employment agreement dated August 12, 2010,
Ben Wang is employed by RINO International Corporation as the Company’s
Chief Financial Officer for a term of 3 years, which commenced on April27, 2010. Mr. Wang’s base salary is RMB 1,000,000 per annum after tax, or
RMB 83,333 per month, payable monthly in arrears on the 10th
day of each month. Pursuant to such employment agreement, the Company also
entered into a Non-Qualified Stock Option Agreement with Mr. Wang, where
Mr. Wang was granted 150,000 options to purchase our Common Stock at an
exercise price of $20 per share, vesting in 3 equal annual installments
beginning on April 19, 2011. Each installment of options, once vested,
will expire on the fifth anniversary of its vesting date. Under this
employment agreement, Mr. Wang is entitled to four weeks of paid vacation
per year. The employment agreement is terminable on 30 days notice, and
contains non-competition and non-disclosure
covenants.
·
Li
Yu. Pursuant to employment agreements dated September 11, 2008 and
February 28, 2010, Yu Li is employed by Dalian Rino as the its Chief
Accounting Officer at an annual compensation of
$7,941. Under the employment agreements, Ms. Yu Li is entitled to 20
days of paid vacation per year. The agreements are terminable on 30 days
notice, and contain non-competition and non-disclosure covenants. During
the fiscal year ended December 31, 2009, Ms. Yu also received a bonus of
$29,281. Ms. Yu also has signed a confidentiality agreement with the
Company.
DIRECTOR
COMPENSATION
Commencing in 2008, each of our
independent directors is paid a $2,000 cash retainer per quarter and $500 for
each board meeting or committee meeting attended. We also reimburse our
directors for actual, reasonable and customary expenses incurred in connection
with the performance of their duties as board members. Set forth below is
information concerning the compensation of the directors for fiscal
years 2009 and 2008.
SECURITY
OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The
following table sets forth certain information with respect to the beneficial
ownership of our common stock as of August 27, 2010 by (i) any person or
group with more than 5% of our voting securities, (ii) each director, (iii) each
executive officer and (iv) all executive officers and directors as a
group.
As of
August 27, 2010, we had 28,605,321 shares of common stock outstanding. In
determining the percent of common stock owned by a stockholder on August 27,2010, (a) the numerator is the number of shares of common stock beneficially
owned by such stockholder, including shares the beneficial ownership of which
may be acquired, within 60 days upon the conversion of convertible securities or
the exercise of warrants held by such stockholder, and (b) the denominator is
the sum of (i) 28,605,321, the number of shares outstanding on August 27, 2010,
and (ii) the total number of shares underlying the convertible securities and
warrants, which such stockholder has the right to acquire within 60 days
following August 27, 2010.
Unless
otherwise stated, each beneficial owner has sole power to vote and dispose of
the shares and the address of such person is c/o the Company, at 11 Youquan
Road, Zhanqian Street, Jinzhou District, Dalian, People’s Republic of China
116100.
Title of Class
Name and Address of
Beneficial Owner
Amount and
Nature of
Beneficial
Ownership
Percent of
Class
Common
Stock
Dejun
Zou, Director and CEO
16,109,679
(1)(2)
56.32
%
Common
Stock
Jianping
Qiu, Director and Chairman
of
the Board
1,789,964
(1)(2)
6.26
%
Common
Stock
Xie
Quan, Director
0
0
%
Common
Stock
Kennith
C. Johnson, Director
4,000
(3)
*
%
Common
Stock
Weiguo
Zhang, Director
0
0
%
Common
Stock
Ben
Wang, CFO
0
(4)
0
%
Common
Stock
Li
Yu, Controller
0
0
%
Common
Stock
All
Directors and Officers of the
Company
as a group (3 people )
17,903,643
62.59
%
18
* Less
than 1%
(1)
17,899,643 shares of our common stock are owned of record by the Innomind Trust,
a British Virgin Islands trust, of which Zou Dejun, the Company’s Chief
Executive Officer, is the beneficiary of 16,109,679 shares (the “Zou Shares” ),
and Qiu Jianping, the Company’s Chairman of the Board, is the beneficiary of
1,789,964 shares (the “Qiu Shares”). Each retains voting and investment power
over his/her respective shares. Mr. Zou and Ms. Qiu are married. Mr. Zou
disclaims beneficial ownership of the Qiu Shares, and Ms. Qiu disclaims
beneficial ownership of the Zou Shares.
(2) As a
closing condition to the private placement completed on October 5, 2007, Zou
Dejun and Qiu Jianping agreed to place in escrow for the benefit of the private
placement investors 5,580,000 shares of common stock, some or all of which were
distributable to the investors in the event the Company failed to attain
specified financial performance milestones. During the fiscal year ended
December 31, 2009, 3,906,000 shares were released to the Innomind
Trust because the Company has achieved the earnings threshold for 2008
required under the securities purchase agreement related to such private
placement transaction. As of the date of this Proxy Statement, all 5,580,000
shares in escrow have been released to the Innomind Trust.
(3) On
May 13, 2009, Mr. Johnson received a grant of 2,000 shares of the Company’s
Common Stock as compensation for his services as Chairman of the Company’s Audit
Committee in the fiscal year ended December 31, 2008. On June 21, 2010, Mr.
Johnson received another grant of 2,000 shares of the Company’s Common Stock as
compensation for his services as Chairman of the Company’s Audit Committee in
fiscal year ended December 31, 2009.
(4) Does
not include an aggregate of 150,000 shares of our Common Stock issuable to
Mr. Wang upon exercise of options at an exercise price of $20 per
share. Such options are not exercisable within the next 60
days.
Changes
in Control
We do not currently have any
arrangements which if consummated may result in a change of control of our
Company.
PROPOSAL
2
2009
RINO STOCK INCENTIVE PLAN
On July1, 2009, the Board of Directors of the Company adopted the RINO International
Corporation 2009 Stock Incentive Plan (the “Plan”) to enhance the
profitability and value of the Company for the benefit of its shareholders by
enabling the Company to offer certain eligible employees, consultants and
non-employee directors cash and stock-based incentives in the Company to
attract, retain and reward such individuals and strengthen the mutuality of
interests between such individuals and the Company’s shareholders.
The
aggregate number of shares of our Common Stock that may be issued under the Plan
is 2,500,000 shares, subject to adjustment under the Plan.
The
following description of the Plan is a summary and is qualified in its entirety
by reference to the Plan, a copy of which is attached hereto Annex
A.
Summary
Administration.
The Plan is administered by a committee, which consists of two or more
non-employee directors, each of whom will be, to the extent required, a
non-employee director as defined in Rule 16b-3 of the Exchange Act, an outside
director as defined under Section 162(m) of the Internal Revenue Code and an
independent director as defined under FINRA Rule 4200(a)(15) (the “Plan Committee”); provided that with
respect to the application of the Plan to non-employee directors, the Plan will
be administered by the Board of Directors (and references to the Plan Committee
include the Board of Directors for this purpose). Currently, the Compensation
Committee serves as the Plan Committee under the Plan.
19
The Plan
Committee has full authority to administer and interpret the Plan, to grant
discretionary awards under the Plan, to determine the persons to whom awards
will be granted, to determine the types of awards to be granted, to determine
the terms and conditions of each award, to determine, in accordance with the
terms of the Plan, the number of shares of Common Stock to be covered by each
award and to make all other determinations in connection with the Plan and the
awards thereunder as the Committee, in its sole discretion, deems necessary or
desirable. The terms and conditions of individual awards will be set forth in
written agreements that are consistent with the terms of the Plan. Awards under
the Plan may not be made on or after the tenth anniversary of the Plan’s
adoption by the Board of Directors, except that awards (other than stock options
or stock appreciation rights) that are intended to be “performance-based” under
Section 162(m) of the Code will not be made after the fifth anniversary of the
Plan’s approval by the Company’s stockholders unless the performance goals are
re-approved by the stockholders.
Eligibility and
Types of Awards. All of our employees, consultants and non-employee
directors are eligible to be granted nonqualified stock options, stock
appreciation rights, performance shares, restricted stock and other stock-based
awards. In addition, our employees and employees of our affiliates that qualify
as subsidiaries or parent corporations (as defined under Section 424 of the
Internal Revenue Code) are eligible to be granted incentive stock options under
the Plan.
Available
Shares. The aggregate number of shares of Common Stock which may be
issued or used for reference purposes under the Plan or with respect to which
awards may be granted may not exceed 2,500,000 shares, which may be either
authorized and unissued Common Stock or Common Stock held in or acquired for the
treasury of the Company. The number of shares of Common Stock which may be
issued under the Plan shall be increased ant the end of each fiscal year in the
same proportion as the issued and outstanding Common Stock increased during such
fiscal year, subject to a 10% maximum. In general, if awards under the Plan are
for any reason cancelled, or expire or terminate unexercised, the shares covered
by such awards will again be available for the grant of awards under the
Plan.
The
maximum number of shares of Common Stock with respect to which any stock option,
stock appreciation right or shares of restricted stock that are subject to the
attainment of specified performance goals and intended to satisfy Section 162(m)
of the Internal Revenue Code and may be granted under the Plan during any fiscal
year to any eligible employee or consultant will be such number of shares as
determined by the Committee from time to time. The total number of shares of
Common Stock with respect to all awards that may be granted under the Plan
during any fiscal year to any eligible employee or consultant will be such
number of shares as determined by the Committee from time to time. There are no
annual limits on the number of shares of Common Stock with respect to an award
of restricted stock that are not subject to the attainment of specified
performance goals to eligible employees or consultants. The maximum number of
shares of Common Stock with respect to any award of performance shares to an
eligible employee or consultant during any fiscal year shall be such number of
shares as determined by the Committee from time to time. The maximum number of
shares of Common Stock with respect to which any stock option (other than
incentive stock options), stock appreciation right, performance share or other
stock-based award that may be granted under the Plan during any fiscal year to
any non-employee director will be such number of shares as determined by the
Committee from time to time. The total number of shares of Common Stock with
respect to all awards that may be granted under the Plan during any fiscal year
to any non-employee director will be such number of shares as determined by the
Committee from time to time.
The Plan
Committee will adjust the above individual maximum share limitations, the
aggregate number of shares of Common Stock available for the grant of awards and
the exercise price of an award to reflect certain changes in our capital
structure or business by reason of certain corporate transactions or
events.
Awards
Under the Plan
The
following types of awards are available under the Plan:
Stock
Options. The Committee may grant nonqualified stock options and incentive
stock options (only to eligible employees) to purchase shares of Common Stock.
The Committee will determine the number of shares of Common Stock subject to
each option, the term of each option (which may not exceed 10 years (or five
years in the case of an incentive stock option granted to a 10% stockholder)),
the exercise price, the vesting schedule (if any), and the other material terms
of each option. No incentive stock option or nonqualified stock option may have
an exercise price less than the fair market value of the Common Stock at the
time of grant (or, in the case of an incentive stock option granted to a 10%
stockholder, 110% of fair market value).
Options
will be exercisable at such time or times and subject to such terms and
conditions as determined by the Committee at grant and the exercisability of
such options may be accelerated by the Committee in its sole discretion. Upon
the exercise of an option, the participant must make payment of the full
exercise price, either (i) in cash, check, bank draft or money order; (ii)
solely to the extent permitted by law, through the delivery of irrevocable
instructions to a broker reasonably acceptable to the Company to deliver
promptly to the Company an amount equal to the purchase price; or (iii) on such
other terms and conditions as a may be acceptable to the Committee, including,
without limitation, surrender of stock options for cashless exercise or by
payment in full o in part in the form of Common Stock.
Stock
Appreciation Rights. The Committee may grant stock appreciation rights
(“SARs”) either with a stock
option which may be exercised only at such times and to the extent the related
option is exercisable (“Tandem SAR”) or independent of a stock
option (“Non-Tandem
SARs”). An SAR is a
right to receive a payment in Common Stock or cash (as determined by the Plan
Committee) equal in value to the excess of the fair market value of one share of
Common Stock on the date of exercise over the exercise price per share
established in connection with the grant of the SAR. The exercise price per
share covered by a SAR will be the exercise price per share of the related
option in the case of a Tandem SAR and will be the fair market value of the
Common Stock on the date of grant in the case of a Non-Tandem SAR. The Plan
Committee may also grant “limited SARs,” either as
Tandem SARs or Non-Tandem SARs, which may become exercisable only upon the
occurrence of a change in control (as defined in the Plan) or such other event
as the Plan Committee may, in its sole discretion, designate at the time of
grant or thereafter.
20
Restricted
Stock. The Plan Committee may award shares of restricted stock. Except as
otherwise provided by the Plan Committee upon the award of restricted stock, the
recipient generally has the rights of a stockholder with respect to the shares,
including the right to receive dividends, the right to vote the shares of
restricted stock and, conditioned upon full vesting of shares of restricted
stock, the right to tender such shares, subject to the conditions and
restrictions generally applicable to restricted stock or specifically set forth
in the recipient’s restricted stock agreement. The Plan Committee may determine
at the time of award that the payment of dividends, if any, will be deferred
until the expiration of the applicable restriction period.
Recipients
of restricted stock are required to enter into a restricted stock agreement with
the Company which states the restrictions to which the shares are subject, which
may include satisfaction of pre-established performance goals, and the criteria
or date or dates on which such restrictions will lapse.
If the
grant of restricted stock or the lapse of the relevant restrictions is based on
the attainment of performance goals, the Plan Committee will establish for each
recipient the applicable performance goals, formulae or standards and the
applicable vesting percentages with reference to the attainment of such
goals or satisfaction of such formulas or standards while the outcome of the
performance goals are substantially uncertain. Such performance goals may
incorporate provisions for disregarding (or adjusting for) changes in accounting
methods, corporate transactions (including, without limitation, dispositions and
acquisitions) and other similar events or circumstances. Section 162(m) of the
Internal Revenue Code requires that performance awards be based upon objective
performance measures. The performance goals for performance-based restricted
stock will be as determined by the Plan Committee from time to
time.
Performance
Shares. The Plan Committee may award performance shares. A performance
share is the equivalent of one share of Common Stock. The recipient of a grant
of performance shares will specify one or more performance criteria to meet
within a specified period determined by the Plan Committee at the time of grant.
The performance goals for performance shares will be as determined by the Plan
Committee from time to time. A minimum level of acceptable achievement will also
be established by the Plan Committee. If, by the end of the performance period,
the recipient has achieved the specified performance goals, he or she will be
deemed to have fully earned the performance shares. To the extent earned, the
performance shares will be paid to the recipient at the time and in the manner
determined by the Plan Committee in cash, shares of Common Stock or any
combination thereof.
Other
Stock-Based Awards. The Plan Committee may, subject to limitations under
applicable law, make a grant of such other stock-based awards (including,
without limitation, performance units, dividend equivalent units, stock
equivalent units, restricted stock units and deferred stock units) under the
Plan that are payable in cash or denominated or payable in or valued by shares
of Common Stock or factors that influence the value of such shares. The Plan
Committee shall determine the terms and conditions of any such other awards,
which may include the achievement of certain minimum performance goals for
purposes of compliance with Section 162(m) of the Internal Revenue Code and/or a
minimum vesting period. The performance goals for performance-based other
stock-based awards will be as determined by the Committee from time to
time
Performance
Goals. The Plan Committee may grant awards of restricted stock,
performance shares, and other stock-based awards that are intended to qualify as
“performance-based compensation” for purposes of Section 162(m) of the Internal
Revenue Code. These awards may be granted, vest and be paid based on attainment
of specified performance goals established by the Committee. Performance goals
may also be based on individual participant performance goals, as determined by
the Plan Committee, in its sole discretion.
In
addition, all performance goals may be based upon the attainment of specified
levels of Company (or subsidiary, division or other operational unit of the
Company) performance under one or more of the measures described above relative
to the performance of other corporations. The Plan Committee may designate
additional business criteria on which the performance goals may be based or
adjust, modify or amend those criteria.
Change in
Control. Unless otherwise determined by the Plan Committee at the time of
grant or in a written employment agreement, awards subject to vesting and/or
restrictions will accelerate and vest, or restrictions will lapse, upon a change
in control (as defined in the Plan) of the Company. In addition, such awards
will be, in the discretion of the Plan Committee, (i) assumed and continued or
substituted in accordance with applicable law, (ii) purchased by the Company for
an amount equal to the excess of the price of the Company’s Common Stock paid in
a change in control over the exercise price of the award(s) (or cancelled and
extinguished pursuant to the terms of a merger or other purchase agreement), or
(iii) cancelled if the price of the Company’s Common Stock paid in a change in
control is less than the exercise price of the award. The Plan Committee may
also, in its sole discretion, provide for accelerated vesting or lapse of
restrictions of an award at any time.
Amendment and
Termination. Notwithstanding any other provision of the Plan, the Board
of Directors may at any time amend any or all of the provisions of the Plan, or
suspend or terminate it entirely, retroactively or otherwise; provided, however,
that, unless otherwise required by law or specifically provided in the Plan, the
rights of a participant with respect to awards granted prior to such amendment,
suspension or termination may not be adversely affected without the consent of
such participant and, provided further that the approval of our stockholders
will be obtained to the extend required by Nevada law, Sections 162(m) and 422
of the Internal Revenue Code, The Nasdaq Global Market or the rules of such
other applicable stock exchange, as specified in the Plan.
21
Miscellaneous.
Awards granted under the Plan are generally nontransferable (other than by will
or the laws of descent and distribution), except that the Committee may provide
for the transferability of nonqualified stock options at the time of grant or
thereafter to certain family members.
Certain U.S. Federal Income Tax
Consequences.
The rules
concerning the federal income tax consequences with respect to options granted
and to be granted pursuant to the Plan are quite technical. Moreover, the
applicable statutory provisions are subject to change, as are their
interpretations and applications which may vary in individual circumstances.
Therefore, the following is designed to provide a general understanding of the
federal income tax consequences. In addition, the following discussion does not
set forth any gift, estate, social security or state or local tax consequences
that may be applicable and is limited to the U.S. federal income tax
consequences to individuals who are citizens or residents of the U.S., other
than those individuals who are taxed on a residence basis in a foreign
country.
Incentive Stock
Options. In general, an employee will not realize taxable income upon
either the grant or the exercise of an incentive stock option and the Company
will not realize an income tax deduction at either such time. In general,
however, for purposes of the alternative minimum tax, the excess of the fair
market value of the shares of Common Stock acquired upon exercise of an
incentive stock option (determined at the time of exercise) over the exercise
price of the incentive stock option will be considered income. If the recipient
was continuously employed on the date of grant until the date three months prior
to the date of exercise and such recipient does not sell the Common Stock
received pursuant to the exercise of the incentive stock option within either
(i) two years after the date of the grant of the incentive stock option or (ii)
one year after the date of exercise, a subsequent sale of the Common Stock will
result in long-term capital gain or loss to the recipient and will not result in
a tax deduction to the Company.
If the
recipient is not continuously employed on the date of grant until the date three
months prior to the date of exercise or such recipient disposes of the Common
Stock acquired upon exercise of the incentive stock option within either of the
above mentioned time periods, the recipient will generally realize as ordinary
income an amount equal to the lesser of (i) the fair market value of the Common
Stock on the date of exercise over the exercise price, and (ii) the amount
realized upon disposition over the exercise price. In such event, subject to the
limitations under Section 162(m) and 280G of the Internal Revenue Code (as
described below), we generally will be entitled to an income tax deduction equal
to the amount recognized as ordinary income. Any gain in excess of such amount
realized by the recipient as ordinary income would be taxed at the rates
applicable to short-term or long-term capital gains (depending on the holding
period).
Nonqualified
Stock Options. A recipient will not realize any taxable income upon the
grant of a nonqualified stock option and the Company will not receive a
deduction at the time of such grant unless such option has a readily
ascertainable fair market value (as determined under applicable tax law) at the
time of grant. Upon exercise of a nonqualified stock option, the recipient
generally will realize ordinary income in an amount equal to the excess of the
fair market value of the Common Stock on the date of exercise over the exercise
price. Upon a subsequent sale of the Common Stock by the recipient, the
recipient will recognize short-term or long-term capital gain or loss depending
upon his or her holding period for the Common Stock. Subject to the limitations
under Section 162(m) and 280G of the Internal Revenue Code (as described below),
we will generally be allowed a deduction equal to the amount recognized by the
recipient as ordinary income.
All
Options. With regard to both incentive stock options and nonqualified
stock options, the following also apply: (i) any of our officers and directors
subject to Section 16(b) of the Securities Exchange Act of 1934, as amended (the
“Exchange Act”), may be subject to special tax rules regarding the income tax
consequences concerning their stock options, (ii) any entitlement to a tax
deduction on the part of the Company is subject to the applicable tax rules
(including, without limitation, Section 162(m) of the Internal Revenue Code
regarding the $1,000,000 limitation on deductible compensation), and (iii) in
the event that the exercisability or vesting of any award is accelerated because
of a change in control, payments relating to the awards (or a portion thereof),
either alone or together with certain other payments, may constitute parachute
payments under Section 280G of the Internal Revenue Code, which excess amounts
may be subject to excise taxes and may be nondeductible by the
Company.
In
general, Section 162(m) of the Internal Revenue Code denies a publicly held
corporation a deduction for federal income tax purposes for compensation in
excess of $1,000,000 per year per person to its chief executive officer and four
other executive officers whose compensation is disclosed in its information
statement, subject to certain exceptions. Options will generally qualify under
one of these exceptions if they are granted under a plan that states the maximum
number of shares with respect to which options may be granted to any recipient
during a specified period of the plan under which the options are granted is
approved by stockholders and is administered by a committee comprised of outside
directors. The Plan is intended to satisfy these requirements with respect to
options.
The Plan
is not subject to any of the requirements of the Employee Retirement Income
Security Act of 1974, as amended. The Plan is not, nor is it intended to be,
qualified under Section 401(a) of the Internal Revenue Code.
Future Plan
Awards. No equity-based awards have been approved at this time to any
employee, officer, non-employee director or consultant pursuant to the
Plan.
22
New Plan Benefits
The Plan
Committee, in its sole discretion, will determine the number and types of awards
that will be granted under the Stock Incentive Plan. Accordingly, it is not
possible to determine the benefits that will be received by eligible
participants if the Stock Incentive Plan is approved by our
shareholders.
Equity
Compensation Plan Information
The
following table sets forth the number of shares of Common Stock subject to
option grants made under the Plan from inception through the date of this Proxy
Statement, together with the weighted average exercise price per share in effect
for such option grants made. No other grants have been made under the Plan since
the Plan’s inception.
Name and title
Number of Shares
Underlying Options
Granted
(#)
Weighted Average
Exercise Price Per
Share
($)
Ben
Wang, Chief Financial Officer
150,000
$
20
Yi
(Jenny) Liu, former Chief Financial Officer
10,000
$
6.15
Vote
Required and Board of Directors’ Recommendation
Assuming
a quorum is present, the affirmative vote of a majority of the shares present at
the Annual Meeting and entitled to vote, either in person or by proxy, is
required for approval of Proposal No. 2. For purposes of the approval of
the Plan, abstentions will have the same effect as a vote against this proposal
and broker non-votes will have no effect on the result of the vote.
THE BOARD
OF DIRECTORS RECOMMENDS THAT THE STOCKHOLDERS VOTE “FOR” PROPOSAL 2 SET
FORTH ABOVE. PROXIES SOLICITED HEREBY WILL BE VOTED “FOR” PROPOSAL 2
UNLESS A VOTE AGAINST IT OR AN ABSTENTION IS SPECIFICALLY
INDICATED.
STOCKHOLDER
PROPOSALS
Proposals
of stockholders intended for presentation at next year’s annual meeting of
stockholders and intended to be included in our proxy statement and form of
proxy relating to that meeting must be received at our executive office by April29, 2011 and comply with the requirements of Rule 14a-8(e) promulgated under the
Exchange Act. If a stockholder intends to submit a proposal at next year’s
annual meeting of stockholders, which proposal is not intended to be included in
the our proxy statement and form of proxy relating to that meeting, the
stockholder must provide appropriate notice to us not later than July 12, 2011
in order to be considered timely submitted within the meaning of Rule 14a-4(c)
of the Exchange Act. As to all such matters which we do not have
notice on or prior to July 12, 2010, discretionary authority shall be granted to
the persons designated in our proxy related to the 2011 annual meeting of
stockholders to vote on such proposal.
GENERAL
Unless
contrary instructions are indicated on the proxy card, all shares of Common
Stock represented by valid proxies received pursuant to this solicitation (and
not revoked before they are voted) will be voted FOR Proposal No. 1 and Proposal
No. 2.
ANNUAL
REPORT ON FORM 10-K
We will
furnish without charge to each person whose proxy is being solicited, upon the
request of such person, a copy of our Annual Report on Form 10-K for the
fiscal year ended December 31, 2009, including the financial statements and
schedules thereto. Requests for copies of such report should be directed to Mr.
Ben Wang, c/o the Company at 11 Youquan Road, Zhanqian Street, Jinzhou District,
Dalian, People’s Republic of China 116100.
OTHER
BUSINESS
The Board
of Directors knows of no business other than that set forth above to be
transacted at the meeting, but if other matters requiring a vote of the
stockholders arise, the persons designated as proxies will vote the shares of
Common Stock represented by the proxies in accordance with their judgment on
such matters. If a stockholder specifies a different choice on the proxy card,
his or her shares of common stock will be voted in accordance with the
specification so made.
23
IT IS
IMPORTANT THAT PROXY CARDS BE RETURNED PROMPTLY. WE URGE YOU TO FILL IN, SIGN
AND RETURN THE FORM OF PROXY IN THE PREPAID ENVELOPE PROVIDED, NO MATTER HOW
LARGE OR SMALL YOUR HOLDINGS MAY BE.
The
purpose of this Plan is to enhance the profitability and value of the Company
for the benefit of its stockholders by enabling the Company to offer Eligible
Employees, Consultants and Non-Employee Directors cash and stock-based
incentives in the Company to attract, retain and reward such individuals and
strengthen the mutuality of interests between such individuals and the Company’s
stockholders.
ARTICLE
II
DEFINITIONS
For
purposes of this Plan, the following terms shall have the following
meanings:
2.1
“Acquisition
Event” means a
merger or consolidation in which the Company is not the surviving entity, any
transaction that results in the acquisition of all or substantially all of the
Company’s outstanding Common Stock by a single person or entity or by a group of
persons and/or entities acting in concert, or the sale or transfer of all or
substantially all of the Company’s assets.
2.2 “Affiliate” means each of the following:
(a) any Subsidiary; (b) any Parent; (c) any corporation, trade or
business (including, without limitation, a partnership or limited liability
company) which is directly or indirectly controlled 50% or more (whether by
ownership of stock, assets or an equivalent ownership interest or voting
interest) by the Company; (d) any corporation, trade or business (including,
without limitation, a partnership or limited liability company) which directly
or indirectly controls 50% or more (whether by ownership of stock, assets or an
equivalent ownership interest or voting interest) of the Company; and
(e) any other entity in which the Company or any of its Affiliates has a
material equity interest and which is designated as an “Affiliate” by resolution
of the Committee; provided that the Common Stock subject to any Award
constitutes “service recipient stock” for purposes of Section 409A of the Code
or otherwise does not subject the Award to Section 409A of the Code. For
purposes of this Plan, Dalian RINO Environment Engineering Science and
Technology Co., Ltd., and its current and future Affiliate, shall each be deemed
an “Affiliate” of the Company.
2.3
“Appreciation
Award” means any
Award under this Plan of any Stock Option, Stock Appreciation Right or Other
Stock-Based Award, provided that such Other Stock-Based Award is based on the
appreciation in value of a share of Common Stock in excess of an amount equal to
at least the Fair Market Value of the Common Stock on the date such Other
Stock-Based Award is granted.
2.4
“Award” means any award under this
Plan of any Stock Option, Stock Appreciation Right, Restricted Stock,
Performance Share, Other Stock-Based Award or Performance-Based Cash Awards. All
Awards shall be granted by, confirmed by, and subject to the terms of, a written
agreement executed by the Company and the Participant.
2.5
“Board” means the Board of Directors
of the Company.
2.6
“Cause” means with respect to a
Participant’s Termination of Employment or Termination of Consultancy from and
after the date hereof, the following: (a) in the case where there is no
employment agreement, consulting agreement, change in control agreement or
similar agreement in effect between the Company or an Affiliate and the
Participant at the time of the grant of the Award (or where there is such an
agreement but it does not define “cause” (or words of like import)), termination
due to: (i) a Participant’s conviction of, or plea of guilty or nolo contendere
to, a felony; (ii) perpetration by a Participant of an illegal act, or fraud
which could cause significant economic injury to the Company; (iii) continuing
willful and deliberate failure by the Participant to perform the Participant’s
duties in any material respect, provided that the Participant is given notice
and an opportunity to effectuate a cure as determined by the Committee; or (iv)
a Participant’s willful misconduct with regard to the Company that could have a
material adverse effect on the Company; or (b) in the case where there is an
employment agreement, consulting agreement, change in control agreement or
similar agreement in effect between the Company or an Affiliate and the
Participant at the time of the grant of the Award that defines “cause” (or words
of like import), “cause” as defined under such agreement; provided, however,
that with regard to any agreement under which the definition of “cause” only
applies on occurrence of a change in control, such definition of “cause” shall
not apply until a change in control actually takes place and then only with
regard to a termination thereafter. With respect to a Participant’s Termination
of Directorship, “cause” means an act or failure to act that constitutes cause
for removal of a director under applicable Nevada law.
2.7 “Change in
Control” has the
meaning set forth in Section 13.2.
2.8
“Change in
Control Price”
has the meaning set forth in Section 13.1.
2.9
“Code” means the Internal Revenue
Code of 1986, as amended. Any reference to any section of the Code shall also be
a reference to any successor provision and any Treasury Regulation promulgated
thereunder.
2.10
“Committee”
means: (a) with respect to the application of this Plan to Eligible
Employees and Consultants, a committee or subcommittee of the Board appointed
from time to time by the Board, which committee or subcommittee shall consist of
two or more non-employee directors, each of whom shall be (i) a “non-employee
director” as defined in Rule 16b-3; (ii) to the extent required by Section
162(m) of the Code, an “outside director” as defined under Section 162(m) of the
Code; and (iii) an “independent director” for purposes of the applicable stock
exchange rules; and (b) with respect to the application of this Plan to
Non-Employee Directors, the Board. To the extent that no Committee exists that
has the authority to administer this Plan, the functions of the Committee shall
be exercised by the Board. If for any reason the appointed Committee does not
meet the requirements of Rule 16b-3 or Section 162(m) of the Code, such
noncompliance shall not affect the validity of Awards, grants, interpretations
or other actions of the Committee.
2.11
“Common
Stock” means the
common stock, $0.0001 par value per share, of the Company.
2.12
“Company” means RINO International
Corporation, a Nevada corporation, and its successors by operation of
law.
2.13
“Consultant” means any individual or
entity who provides bona fide consulting or advisory services to the Company or
its Affiliates pursuant to a written agreement, which are not in connection with
the offer and sale of securities in a capital-raising transaction.
2.14
“Disability” means with respect to a
Participant’s Termination, a permanent and total disability as defined in
Section 22(e)(3) of the Code. A Disability shall only be deemed to occur at the
time of the determination by the Committee of the Disability. Notwithstanding
the foregoing, for Awards that are subject to Section 409A of the Code,
Disability shall mean that a Participant is disabled under Section
409A(a)(2)(C)(i) or (ii) of the Code.
2.15
“Effective
Date” means the
effective date of this Plan as defined in Article XVII.
2.16
“Eligible
Employees” means
each employee of the Company or an Affiliate.
2.17
“Exchange
Act” means the
Securities Exchange Act of 1934, as amended. Any references to any section of
the Exchange Act shall also be a reference to any successor
provision.
2.18
“Fair
Market Value”
means, unless otherwise required by any applicable provision of the Code or any
regulations issued thereunder, as of any date and except as provided below, the
last sales price reported for the Common Stock on the applicable date: (a) as
reported on the principal national securities exchange in the United States on
which it is then traded, or (b) if the Common Stock is not traded, listed or
otherwise reported or quoted, the Committee shall determine in good faith the
Fair Market Value in whatever manner it considers appropriate taking into
account the requirements of Section 409A of the Code. For purposes of the grant
of any Award, the applicable date shall be the trading day immediately prior to
the date on which the Award is granted. For purposes of the exercise of any
Award, the applicable date shall be the date a notice of exercise is received by
the Committee or, if not a day on which the applicable market is open, the next
day that it is open.
2.19
“Family
Member” means
“family member” as defined in Section A.1.(5) of the general instructions of
Form S-8.
2.20
“GAAP” has the meaning set forth in
Section 11.2(c)(ii).
2.21
“Incentive
Stock Option”
means any Stock Option awarded to an Eligible Employee of the Company, its
Subsidiaries and its Parent (if any) under this Plan intended to be and
designated as an “Incentive Stock Option” within the meaning of Section 422 of
the Code.
2.22
“Non-Employee
Director” means a
director of the Company who is not an active employee of the Company or an
Affiliate.
2.23
“Non-Qualified
Stock Option”
means any Stock Option awarded under this Plan that is not an Incentive Stock
Option.
2.24
“Other
Stock-Based Award” means an Award under Article
X of this Plan that is valued in whole or in part by reference to, or is payable
in or otherwise based on, Common Stock, including, without limitation, a
restricted stock unit or an Award valued by reference to an
Affiliate.
2.25
“Parent” means any parent corporation
of the Company within the meaning of Section 424(e) of the Code.
2.26
“Participant” means an Eligible Employee,
Non-Employee Director or Consultant to whom an Award has been granted pursuant
to this Plan.
2.27 “Performance
Goals” means, for
purposes of the grant or vesting of Awards of Restricted Stock, Other
Stock-Based Awards, Performance Shares and/or Performance-Based Cash Awards,
each intended to be “performance-based” under Section 162(m) of the Code, shall
be based on the attainment of certain target levels of, or a specified increase
or decrease (as applicable) of the performance goals established by the
Committee.
2.28 “Performance-Based
Cash Award” means
a cash Award under Article XI of this Plan that is payable or otherwise based on
the attainment of certain pre-established performance goals during a Performance
Period.
2.29
“Performance
Period” means the
duration of the period during which receipt of an Award is subject to the
satisfaction of performance criteria, such period as determined by the Committee
in its sole discretion.
2.30
“Performance
Share” means an
Award made pursuant to Article IX of this Plan of the right to receive Common
Stock or cash of an equivalent value at the end of a specified Performance
Period.
2.31 “Person” means any individual,
corporation, partnership, limited liability company, firm, joint venture,
association, joint-stock company, trust, incorporated organization, governmental
or regulatory or other entity.
2.32 “Plan” means this RINO
International Corporation 2009 Stock Incentive Plan, as amended from time to
time.
2.33 “Reference
Stock Option” has
the meaning set forth in Section 7.1.
2.34 “Restricted
Stock” means an
Award of shares of Common Stock under this Plan that is subject to restrictions
under Article VIII.
2.35 “Restriction
Period” has the
meaning set forth in Subsection 8.3(a).
2.36
“Rule
16b-3” means Rule
16b-3 under Section 16(b) of the Exchange Act as then in effect or any successor
provision.
2.37
“Section
162(m) of the Code” means the exception for
performance-based compensation under Section 162(m) of the Code and any
applicable Treasury regulations thereunder.
2.38 “Section
409A of the Code”
means the nonqualified deferred compensation rules under Section 409A of the
Code and any applicable Treasury regulations thereunder.
2.39
“Securities
Act” means the
Securities Act of 1933, as amended and all rules and regulations promulgated
thereunder. Any reference to any section of the Securities Act shall also be a
reference to any successor provision.
2.40
“Stock
Appreciation Right” means the right pursuant to
an Award granted under Article VII. A Tandem Stock Appreciation Right shall mean
the right to surrender to the Company all (or a portion) of a Stock Option in
exchange for cash or a number of shares of Common Stock (as determined by the
Committee, in its sole discretion, on the date of grant) equal to the difference
between (a) the Fair Market Value on the date such Stock Option (or such
portion thereof) is surrendered, of the Common Stock covered by such Stock
Option (or such portion thereof), and (b) the aggregate exercise price of
such Stock Option (or such portion thereof). A Non-Tandem Stock Appreciation
Right shall mean the right to receive cash or a number of shares of Common Stock
(as determined by the Committee, in its sole discretion, on the date of grant)
equal to the difference between (i) the Fair Market Value of a share of
Common Stock on the date such right is exercised, and (ii) the aggregate
exercise price of such right, otherwise than on surrender of a Stock
Option.
2.41 “Stock
Option” or “Option” means any option to purchase
shares of Common Stock granted to Eligible Employees, Non-Employee Directors or
Consultants granted pursuant to Article VI.
2.42
“Subsidiary” means any subsidiary
corporation of the Company within the meaning of Section 424(f) of the
Code.
2.43
“Ten
Percent Stockholder” means a person owning stock
possessing more than 10% of the total combined voting power of all classes of
stock of the Company, its Subsidiaries or its Parent.
2.44
“Termination” means a Termination of
Consultancy, Termination of Directorship or Termination of Employment, as
applicable.
2.45
“Termination
of Consultancy”
means: (a) that the Consultant is no longer acting as a consultant to the
Company or an Affiliate; or (b) when an entity which is retaining a Participant
as a Consultant ceases to be an Affiliate unless the Participant otherwise is,
or thereupon becomes, a Consultant to the Company or another Affiliate at the
time the entity ceases to be an Affiliate. In the event that a Consultant
becomes an Eligible Employee or a Non-Employee Director upon the termination of
his or her consultancy, unless otherwise determined by the Committee, in its
sole discretion, no Termination of Consultancy shall be deemed to occur until
such time as such Consultant is no longer a Consultant, an Eligible Employee or
a Non-Employee Director. Notwithstanding the foregoing, the Committee may, in
its sole discretion, otherwise define Termination of Consultancy in the Award
agreement or, if no rights of a Participant are reduced, may otherwise define
Termination of Consultancy thereafter.
2.46 “Termination
of Directorship”
means that the Non-Employee Director has ceased to be a director of the Company;
except that if a Non-Employee Director becomes an Eligible Employee or a
Consultant upon the termination of his or her directorship, his or her ceasing
to be a director of the Company shall not be treated as a Termination of
Directorship unless and until the Participant has a Termination of Employment or
Termination of Consultancy, as the case may be.
2.47
“Termination
of Employment”
means: (a) a termination of employment (for reasons other than a military
or personal leave of absence granted by the Company) of a Participant from the
Company and its Affiliates; or (b) when an entity which is employing a
Participant ceases to be an Affiliate, unless the Participant otherwise is, or
thereupon becomes, employed by the Company or another Affiliate at the time the
entity ceases to be an Affiliate. In the event that an Eligible Employee becomes
a Consultant or a Non-Employee Director upon the termination of his or her
employment, unless otherwise determined by the Committee, in its sole
discretion, no Termination of Employment shall be deemed to occur until such
time as such Eligible Employee is no longer an Eligible Employee, a Consultant
or a Non-Employee Director. Notwithstanding the foregoing, the Committee may, in
its sole discretion, otherwise define Termination of Employment in the Award
agreement or, if no rights of a Participant are reduced, may otherwise define
Termination of Employment thereafter.
2.48
“Transfer” means: (a) when used as a
noun, any direct or indirect transfer, sale, assignment, pledge, hypothecation,
encumbrance or other disposition (including the issuance of equity in a Person),
whether for value or no value and whether voluntary or involuntary (including by
operation of law), and (b) when used as a verb, to directly or indirectly
transfer, sell, assign, pledge, encumber, charge, hypothecate or otherwise
dispose of (including the issuance of equity in a Person) whether for value or
for no value and whether voluntarily or involuntarily (including by operation of
law). “Transferred” and “Transferrable” shall have a correlative
meaning.
ARTICLE
III
ADMINISTRATION
3.1
The
Committee. The
Plan shall be administered and interpreted by the Committee.
3.2 Grants of
Awards. The Committee shall have full authority to grant, pursuant to the
terms of this Plan, to Eligible Employees, Consultants and Non-Employee
Directors: (i) Stock Options, (ii) Stock Appreciation Rights,
(iii) Restricted Stock, (iv) Performance Shares; (v) Other
Stock-Based Awards, and (vi) Performance-Based Cash Awards. In particular, the
Committee shall have the authority:
(a)
to select the Eligible Employees,
Consultants and Non-Employee Directors to whom Awards may from time to
time be granted hereunder;
(b)
to determine whether and to what
extent Awards, or any combination thereof, are to be granted hereunder to
one or more Eligible Employees, Consultants or Non-Employee
Directors;
(c)
to determine the number of shares
of Common Stock to be covered by each Award granted
hereunder;
(d)
to determine the terms and
conditions, not inconsistent with the terms of this Plan, of any Award
granted hereunder (including, but not limited to, the exercise or purchase
price (if any), any restriction or limitation, any vesting schedule or
acceleration thereof, or any forfeiture restrictions or waiver thereof,
regarding any Award and the shares of Common Stock relating thereto, based
on such factors, if any, as the Committee shall determine, in its sole
discretion);
(e)
to determine whether, to what
extent and under what circumstances grants of Options and other Awards
under this Plan are to operate on a tandem basis and/or in conjunction
with or apart from other awards made by the Company outside of this
Plan;
(f)
to determine whether and under
what circumstances a Stock Option may be settled in cash, Common Stock
and/or Restricted Stock under
Section 6.3(d);
(g)
to determine whether, to what
extent and under what circumstances Common Stock and other amounts payable
with respect to an Award under this Plan shall be deferred either
automatically or at the election of the Participant in any case, subject
to, and in accordance with, Section 409A of the
Code;
(h)
to determine whether a Stock
Option is an Incentive Stock Option or Non-Qualified Stock Option;
and
(i)
to determine whether to require a
Participant, as a condition of the granting of any Award, to not sell or
otherwise dispose of shares acquired pursuant to the exercise of an Award
for a period of time as determined by the Committee, in its sole
discretion, following the date of the acquisition of such
Award.
3.3
Guidelines.
Subject to Article XIV hereof, the Committee shall, in its sole discretion, have
the authority to adopt, alter and repeal such administrative rules, guidelines
and practices governing this Plan and perform all acts, including the delegation
of its responsibilities (to the extent permitted by applicable law and
applicable stock exchange rules), as it shall, from time to time, deem
advisable; to construe and interpret the terms and provisions of this Plan and
any Award issued under this Plan (and any agreements relating thereto); and to
otherwise supervise the administration of this Plan. The Committee may, in its
sole discretion, correct any defect, supply any omission or reconcile any
inconsistency in this Plan or in any agreement relating thereto in the manner
and to the extent it shall deem necessary to effectuate the purpose and intent
of this Plan. The Committee may, in its sole discretion, adopt special
guidelines and provisions for persons who are residing in or employed in, or
subject to, the taxes of, any domestic or foreign jurisdictions to comply with
applicable tax and securities laws of such domestic or foreign jurisdictions.
This Plan is intended to comply with the applicable requirements of Rule 16b-3
and with respect to Awards intended to be “performance-based,” the applicable
provisions of Section 162(m) of the Code, and this Plan shall be limited,
construed and interpreted in a manner so as to comply therewith.
3.4
Decisions
Final. Any decision, interpretation or other action made or taken in good
faith by or at the direction of the Company, the Board or the Committee (or any
of its members) arising out of or in connection with this Plan shall be within
the absolute discretion of all and each of them, as the case may be, and shall
be final, binding and conclusive on the Company and all employees and
Participants and their respective heirs, executors, administrators, successors
and assigns.
3.5 Procedures.
If the Committee is appointed, the Board shall designate one of the members of
the Committee as chairman and the Committee shall hold meetings, subject to the
By-Laws of the Company, at such times and places as it shall deem advisable,
including, without limitation, by telephone conference or by written consent to
the extent permitted by applicable law. A majority of the Committee members
shall constitute a quorum. All determinations of the Committee shall be made by
a majority of its members. Any decision or determination reduced to writing and
signed by all the Committee members in accordance with the By-Laws of the
Company shall be fully effective as if it had been made by a vote at a meeting
duly called and held. The Committee shall keep minutes of its meetings and shall
make such rules and regulations for the conduct of its business as it shall deem
advisable.
3.6 Designation
of Consultants/Liability.
(a)
The Committee may, in its sole
discretion, designate employees of the Company and professional advisors
to assist the Committee in the administration of this Plan and (to the
extent permitted by applicable law and applicable exchange rules) may
grant authority to officers to grant Awards and/or execute agreements or
other documents on behalf of the
Committee.
(b)
The Committee may, in its sole
discretion, employ such legal counsel, consultants and agents as it may
deem desirable for the administration of this Plan and may rely upon any
opinion received from any such counsel or consultant and any computation
received from any such consultant or agent. Expenses incurred by the
Committee or the Board in the engagement of any such counsel, consultant
or agent shall be paid by the Company. The Committee, its members and any
person designated pursuant to sub-section (a) above shall not be liable
for any action or determination made in good faith with respect to this
Plan. To the maximum extent permitted by applicable law, no officer of the
Company or member or former member of the Committee or of the Board shall
be liable for any action or determination made in good faith with respect
to this Plan or any Award granted under
it.
3.7 Indemnification.
To the maximum extent permitted by applicable law and the Certificate of
Incorporation and By-Laws of the Company and to the extent not covered by
insurance directly insuring such person, each officer or employee of the Company
or any Affiliate and member or former member of the Committee or the Board shall
be indemnified and held harmless by the Company against any cost or expense
(including reasonable fees of counsel reasonably acceptable to the Committee) or
liability (including any sum paid in settlement of a claim with the approval of
the Committee), and advanced amounts necessary to pay the foregoing at the
earliest time and to the fullest extent permitted, arising out of any act or
omission to act in connection with the administration of this Plan, except to
the extent arising out of such officer’s, employee’s, member’s or former
member’s fraud. Such indemnification shall be in addition to any rights of
indemnification the officers, employees, directors or members or former
officers, directors or members may have under applicable law or under the
Certificate of Incorporation or By-Laws of the Company or any Affiliate.
Notwithstanding anything else herein, this indemnification will not apply to the
actions or determinations made by an individual with regard to Awards granted to
him or her under this Plan.
ARTICLE
IV
SHARE
LIMITATION
4.1 Shares.
(a)
General
Limitations. The aggregate number of shares of Common Stock that
may be issued or used for reference purposes or with respect to which
Awards may be granted under this Plan shall not exceed 2,500,000 shares
(subject to any increase or decrease pursuant to Section 4.2), which may
be either authorized and unissued Common Stock or Common Stock held in or
acquired for the treasury of the Company or both; provided, however, that
such number shall be increased at the end of each fiscal year of the
Company in the same proportion as the issued and outstanding stock of the
Company during such fiscal year; subject to a maximum of 10% of the issued and
outstanding stock of the Company. If any Award granted under this Plan
expires, terminates, is canceled or is forfeited for any reason, the
number of shares of Common Stock underlying any such Award shall again be
available for the purpose of Awards under the Plan, as provided in this
Section 4.1(a). If a Tandem Stock Appreciation Right or a Limited Stock
Appreciation Right is granted in tandem with an Option, such grant shall
only apply once against the maximum number of shares of Common Stock which
may be issued under this Plan. Notwithstanding anything herein to the
contrary, other than with respect to Incentive Stock Options, any share of
Common Stock subject to an Award that again becomes available for grant
pursuant to this Section 4.1(a) shall be added back to the aggregate
maximum limit.
(b)
Individual
Participant Limitations.
(i)
The maximum number of shares of Common Stock subject to any Award of
Stock Options, Stock Appreciation Rights or shares of Restricted Stock for which
the grant of such Award or the lapse of the relevant Restriction Period is
subject to the attainment of Performance Goals in accordance with Section
8.3(a)(ii) herein which may be granted under this Plan during any fiscal year of
the Company to each Eligible Employee or Consultant shall be such number of
shares per type of Award (which shall be subject to any further increase or
decrease pursuant to Section 4.2) as determined by the Committee, provided that
the maximum number of shares of Common Stock for all types of Awards does not
exceed such number of shares as determined by the Committee (which shall be
subject to any further increase or decrease pursuant to Section 4.2) with
respect to any fiscal year of the Company. If a Tandem Stock Appreciation Right
is granted or a Limited Stock Appreciation Right is granted in tandem with a
Stock Option, it shall apply against the Eligible Employee's or Consultant's
individual share limitations for both Stock Appreciation Rights and Stock
Options.
(ii)
The maximum number of shares of Common Stock subject to any Award of Stock
Options (other than Incentive Stock Options), Stock Appreciation Rights,
Performance Shares or Other Stock-Based Awards which may be granted under this
Plan during any fiscal year of the Company to each Non-Employee Director shall
be such number of shares per type of Award (which shall be subject to any
further increase or decrease pursuant to Section 4.2) as determined by the
Committee, provided that the maximum number of shares of Common Stock for all
types of Awards does not exceed such number of shares as determined by the
Committee (which shall be subject to any further increase or decrease pursuant
to Section 4.2) with respect to any fiscal year of the Company. If a Tandem
Stock Appreciation Right is granted or a Limited Stock Appreciation Right is
granted in tandem with a Stock Option, it shall apply against the Non-Employee
Director's individual share limitations for both Stock Appreciation Rights and
Stock Options.
(iii)
There are no annual individual Eligible Employee or Consultant share limitations
on Restricted Stock for which the grant of such Award or the lapse of the
relevant Restriction Period is not subject to attainment of Performance Goals in
accordance with Section 8.3(a)(ii) hereof.
(iv)
The maximum number of shares of Common Stock subject to any Award of Performance
Shares which may be granted under this Plan during any fiscal year of the
Company to each Eligible Employee or Consultant shall be such number of shares
(which shall be subject to any further increase or decrease pursuant to Section
4.2) as determined by the Committee with respect to any fiscal year of the
Company. Each Performance Share shall be referenced to one share of Common Stock
and shall be charged against the available shares under this Plan at the time
the unit value measurement is converted to a referenced number of shares of
Common Stock in accordance with Section 9.1.
(v)
The maximum payment under any Performance-Based Cash Award payable with respect
to any fiscal year of the Company and for which the grant of such Award is
subject to the attainment of Performance Goals in accordance with Section
11.2(c) herein which may be granted under this Plan with respect to any fiscal
year of the Company to each Eligible Employee or Consultant shall be as
determined by the Committee.
(vi)
The individual Participant limitations set forth in this Section 4.1(b) shall be
cumulative; that is, to the extent that shares of Common Stock for which Awards
are permitted to be granted to an Eligible Employee or a Consultant during a
fiscal year are not covered by an Award to such Eligible Employee or Consultant
in a fiscal year, the number of shares of Common Stock available for Awards to
such Eligible Employee or Consultant shall automatically increase in the
subsequent fiscal years during the term of the Plan until used.
4.2 Changes.
(a)
The existence of this Plan and
the Awards granted hereunder shall not affect in any way the right or
power of the Board or the stockholders of the Company to make or authorize
(i) any adjustment, recapitalization, reorganization or other change in
the Company’s capital structure or its business, (ii) any merger or
consolidation of the Company or any Affiliate, (iii) any issuance of
bonds, debentures, preferred or prior preference stock ahead of or
affecting the Common Stock, (iv) the dissolution or liquidation of the
Company or any Affiliate, (v) any sale or transfer of all or part of the
assets or business of the Company or any Affiliate or (vi) any other
corporate act or
proceeding.
(b)
Subject to the provisions of
Section 4.2(d), if there shall occur any such change in the capital
structure of the Company by reason of any stock split, reverse stock
split, stock dividend, subdivision, combination or reclassification of
shares that may be issued under the Plan, any recapitalization, any
merger, any consolidation, any spin off, any reorganization or any partial
or complete liquidation, or any other corporate transaction or event
having an effect similar to any of the foregoing (a “Section
4.2 Event”), then
(i) the aggregate number and/or kind of shares that thereafter may be
issued under the Plan, (ii) the number and/or kind of shares or other
property (including cash) to be issued upon exercise of an outstanding
Award or under other Awards granted under the Plan, (iii) the purchase
price thereof, and/or (iv) the individual Participant limitations set
forth in Section 4.1(b) (other than those based on cash limitations) shall
be appropriately adjusted. In addition, subject to Section 4.2(d), if
there shall occur any change in the capital structure or the business of
the Company that is not a Section 4.2 Event (an “Other
Extraordinary Event”), including by reason of any
extraordinary dividend (whether cash or stock), any conversion, any
adjustment, any issuance of any class of securities convertible or
exercisable into, or exercisable for, any class of stock, or any sale or
transfer of all or substantially all the Company’s assets or business,
then the Committee, in its sole discretion, may adjust any Award and make
such other adjustments to the Plan. Any adjustment pursuant to this
Section 4.2 shall be consistent with the applicable Section 4.2 Event or
the applicable Other Extraordinary Event, as the case may be, and in such
manner as the Committee may, in its sole discretion, deem appropriate and
equitable to prevent substantial dilution or enlargement of the rights
granted to, or available for, Participants under the Plan. Any such
adjustment determined by the Committee shall be final, binding and
conclusive on the Company and all Participants and their respective heirs,
executors, administrators, successors and permitted assigns. Except as
expressly provided in this Section 4.2 or in the applicable Award
agreement, a Participant shall have no rights by reason of any Section 4.2
Event or any Other Extraordinary
Event.
(c)
Fractional shares of Common Stock
resulting from any adjustment in Awards pursuant to Section 4.2(a) or (b)
shall be aggregated until, and eliminated at, the time of exercise by
rounding-down for fractions less than one-half and rounding-up for
fractions equal to or greater than one-half. No cash settlements shall be
made with respect to fractional shares eliminated by rounding. Notice of
any adjustment shall be given by the Committee to each Participant whose
Award has been adjusted and such adjustment (whether or not such notice is
given) shall be effective and binding for all purposes of this
Plan.
(d)
In the event of an Acquisition
Event, the Committee may, in its sole discretion, terminate all
outstanding and unexercised Stock Options or Stock Appreciation Rights or
any Other Stock Based Award that provides for a Participant elected
exercise effective as of the date of the Acquisition Event, by delivering
notice of termination to each Participant at least 20 days prior to the
date of consummation of the Acquisition Event, in which case during the
period from the date on which such notice of termination is delivered to
the consummation of the Acquisition Event, each such Participant shall
have the right to exercise in full all of his or her Stock Options or
Stock Appreciation Rights that are then outstanding (without regard to any
limitations on exercisability otherwise contained in the Award
agreements), but any such exercise shall be contingent on the occurrence
of the Acquisition Event, and, provided that, if the Acquisition Event
does not take place within a specified period after giving such notice for
any reason whatsoever, the notice and exercise pursuant thereto shall be
null and void.
If an
Acquisition Event occurs but the Committee does not terminate the outstanding
Awards pursuant to this Section 4.2(d), then the provisions of Section 4.2(b)
and Article XIII shall apply.
4.3
Minimum
Purchase Price. Notwithstanding any provision of this Plan to the
contrary, if authorized but previously unissued shares of Common Stock are
issued under this Plan, such shares shall not be issued for a consideration that
is less than as permitted under applicable law.
ARTICLE
V
ELIGIBILITY –
GENERAL REQUIREMENTS FOR AWARDS
5.1 General
Eligibility. All Eligible Employees, Consultants, Non-Employee Directors
and prospective employees and consultants are eligible to be granted Awards,
subject to the terms and conditions of this Plan. Eligibility for the grant of
Awards and actual participation in this Plan shall be determined by the
Committee in its sole discretion.
5.2 Incentive
Stock Options. Notwithstanding anything herein to the contrary, only
Eligible Employees of the Company, its Subsidiaries and its Parent (if any) are
eligible to be granted Incentive Stock Options under this Plan. Eligibility for
the grant of an Incentive Stock Option and actual participation in this Plan
shall be determined by the Committee in its sole discretion.
5.3 General
Requirement. The vesting and exercise of Awards granted to a prospective
employee, consultant or non-employee director are conditioned upon such
individual actually becoming an Eligible Employee or Consultant, or Non-Employee
Director.
5.4 Minimum
Vesting Requirement.
Except as determined by the Committee as evidenced in writing by an
Award, no Award granted hereunder shall vest and become exercisable prior to the
first year anniversary of the date that the Award was granted; provided,
however, that the foregoing minimum vesting requirement shall not apply in the
case of the death or Disability of a Participant or upon the occurrence of a
Change in Control.
ARTICLE
VI
STOCK
OPTIONS
6.1 Options.
Stock Options may be granted alone or in addition to other Awards granted under
this Plan. Each Stock Option granted under this Plan shall be of one of two
types: (a) an Incentive Stock Option or (b) a Non-Qualified Stock
Option.
6.2 Grants.
The Committee shall, in its sole discretion, have the authority to grant to any
Eligible Employee (subject to Section 5.2) Incentive Stock Options,
Non-Qualified Stock Options, or both types of Stock Options. The Committee
shall, in its sole discretion, have the authority to grant any Consultant or
Non-Employee Director Non-Qualified Stock Options. To the extent that any Stock
Option does not qualify as an Incentive Stock Option (whether because of its
provisions or the time or manner of its exercise or otherwise), such Stock
Option or the portion thereof which does not qualify shall constitute a separate
Non-Qualified Stock Option.
6.3 Terms of
Options. Options granted under this Plan shall be subject to the
following terms and conditions and shall be in such form and contain such
additional terms and conditions, not inconsistent with the terms of this Plan,
as the Committee, in its sole discretion, shall deem desirable:
(a)
Exercise
Price. The exercise
price per share of Common Stock subject to a Stock Option shall be
determined by the Committee at the time of grant, provided that the per
share exercise price of a Stock Option shall not be less than 100% (or, in
the case of an Incentive Stock Option granted to a Ten Percent
Stockholder, 110%) of the Fair Market Value of the Common Stock at the
time of grant.
(b)
Stock
Option Term. The
term of each Stock Option shall be fixed by the Committee, provided that
no Stock Option shall be exercisable more than 10 years after the date the
Option is granted; and provided further that the term of an Incentive
Stock Option granted to a Ten Percent Stockholder shall not exceed five
years.
(c)
Exercisability. Stock Options shall be
exercisable at such time or times and subject to such terms and conditions
or as shall be determined by the Committee at grant. If the Committee
provides, in its sole discretion, that any Stock Option is exercisable
subject to certain limitations (including, without limitation, that such
Stock Option is exercisable only in installments or within certain time
periods), the Committee may waive such limitations on the exercisability
at any time at or after grant in whole or in part (including, without
limitation, waiver of the installment exercise provisions or acceleration
of the time at which such Stock Option may be exercised), based on such
factors, if any, as the Committee shall determine, in its sole discretion.
In the event that a written employment agreement between the Company and a
Participant provides for a vesting schedule that is more favorable than
the vesting schedule provided in the form of Award agreement, the vesting
schedule in such employment agreement shall govern, provided that such
agreement is in effect on the date of grant and applicable to the specific
Award.
(d)
Method
of Exercise. Subject
to whatever installment exercise and waiting period provisions applicable
under subsection (c) above, to the extent vested, Stock Options may be
exercised in whole or in part at any time during the Option term, by
giving written notice of exercise to the Company specifying the number of
shares of Common Stock to be purchased. Such notice shall be accompanied
by payment in full of the purchase price as follows: (i) in cash or by
check, bank draft or money order payable to the order of the Company; (ii)
solely to the extent permitted by applicable law, if the Committee
authorizes, through a procedure whereby the Participant delivers
irrevocable instructions to a broker reasonably acceptable to the
Committee to deliver promptly to the Company an amount equal to the
purchase price; or (iii) on such other terms and conditions as may be
acceptable to the Committee (including, without limitation, the
relinquishment of Stock Options or by payment in full or in part in the
form of Common Stock owned by the Participant based on the Fair Market
Value of the Common Stock on the payment date as determined by the
Committee, in its sole discretion). No shares of Common Stock shall be
issued until payment therefor, as provided herein, has been made or
provided for.
(e)
Non-Transferability
of Options. No Stock
Option shall be Transferable by the Participant otherwise than by will or
by the laws of descent and distribution, and all Stock Options shall be
exercisable, during the Participant’s lifetime, only by the Participant.
Notwithstanding the foregoing, the Committee may determine, in its sole
discretion, at the time of grant or thereafter that a Non-Qualified Stock
Option that is otherwise not Transferable pursuant to this Section is
Transferable to a Family Member in whole or in part and in such
circumstances, and under such conditions, as determined by the Committee,
in its sole discretion. A Non-Qualified Stock Option that is Transferred
to a Family Member pursuant to the preceding sentence (i) may not be
subsequently Transferred otherwise than by will or by the laws of descent
and distribution and (ii) remains subject to the terms of this Plan and
the applicable Award agreement. Any shares of Common Stock acquired upon
the exercise of a Non-Qualified Stock Option by a permissible transferee
of such Non-Qualified Stock Option or a permissible transferee pursuant to
a Transfer after the exercise of such Non-Qualified Stock Option shall be
subject to the terms of this Plan and the applicable Award
agreement.
(f)
Incentive
Stock Option Limitations. To the extent that the
aggregate Fair Market Value (determined as of the time of grant) of the
Common Stock with respect to which Incentive Stock Options are exercisable
for the first time by an Eligible Employee during any calendar year under
this Plan and/or any other stock option plan of the Company, any
Subsidiary or any Parent exceeds $100,000, such Options shall be treated
as Non-Qualified Stock Options. Should any provision of this Plan not be
necessary in order for the Stock Options to qualify as Incentive Stock
Options, or should any additional provisions be required, the Committee
may, in its sole discretion, amend this Plan accordingly, without the
necessity of obtaining the approval of the stockholders of the
Company.
(g)
Form,
Modification, Extension and Renewal of Stock Options. Subject to the terms and
conditions and within the limitations of this Plan, Stock Options shall be
evidenced by such form of agreement or grant as is approved by the
Committee, and the Committee may, in its sole discretion (i) modify,
extend or renew outstanding Stock Options granted under this Plan
(provided that the rights of a Participant are not reduced without his or
her consent and provided further that such action does not subject the
Stock Options to Section 409A of the Code), and (ii) accept the surrender
of outstanding Stock Options (up to the extent not theretofore exercised)
and authorize the granting of new Stock Options in substitution therefor
(to the extent not theretofore exercised). Notwithstanding the foregoing,
an outstanding Option may not be modified to reduce the exercise price
thereof nor may a new Option at a lower price be substituted for a
surrendered Option (other than adjustments or substitutions in accordance
with Section 4.2), unless such action is approved by the stockholders of
the Company.
(h)
Early
Exercise. The
Committee may provide that a Stock Option include a provision whereby the
Participant may elect at any time before the Participant’s Termination to
exercise the Stock Option as to any part or all of the shares of Common
Stock subject to the Stock Option prior to the full vesting of the Stock
Option and such shares shall be subject to the provisions of Article VIII
and treated as Restricted Stock. Any unvested shares of Common Stock so
purchased may be subject to a repurchase option in favor of the Company or
to any other restriction the Committee determines to be
appropriate.
(i)
Other
Terms and Conditions. Stock Options may contain such
other provisions, which shall not be inconsistent with any of the terms of
this Plan, as the Committee shall, in its sole discretion, deem
appropriate.
ARTICLE
VII
STOCK
APPRECIATION RIGHTS
7.1 Tandem
Stock Appreciation Rights. Stock Appreciation Rights may be granted in
conjunction with all or part of any Stock Option (a “Reference Stock
Option”) granted under this Plan (“Tandem Stock Appreciation
Rights”). In the case of a Non-Qualified Stock Option, such rights may be
granted either at or after the time of the grant of such Reference Stock Option.
In the case of an Incentive Stock Option, such rights may be granted only at the
time of the grant of such Reference Stock Option.
7.2 Terms and
Conditions of Tandem Stock Appreciation Rights. Tandem Stock Appreciation
Rights granted hereunder shall be subject to such terms and conditions, not
inconsistent with the provisions of this Plan, as shall be determined from time
to time by the Committee in its sole discretion, and the following:
(a)
Exercise
Price. The exercise
price per share of Common Stock subject to a Tandem Stock Appreciation
Right shall be determined by the Committee at the time of grant, provided
that the per share exercise price of a Tandem Stock Appreciation Right
shall not be less than 100% of the Fair Market Value of the Common Stock
at the time of grant.
(b)
Term. A Tandem Stock Appreciation
Right or applicable portion thereof granted with respect to a Reference
Stock Option shall terminate and no longer be exercisable upon the
termination or exercise of the Reference Stock Option, except that, unless
otherwise determined by the Committee, in its sole discretion, at the time
of grant, a Tandem Stock Appreciation Right granted with respect to less
than the full number of shares covered by the Reference Stock Option shall
not be reduced until and then only to the extent the exercise or
termination of the Reference Stock Option causes the number of shares
covered by the Tandem Stock Appreciation Right to exceed the number of
shares remaining available and unexercised under the Reference Stock
Option.
(c)
Exercisability. Tandem Stock Appreciation
Rights shall be exercisable only at such time or times and to the extent
that the Reference Stock Options to which they relate shall be exercisable
in accordance with the provisions of Article VI, and shall be subject to
the provisions of Section
6.3(c).
(d)
Method
of Exercise. A
Tandem Stock Appreciation Right may be exercised by the Participant by
surrendering the applicable portion of the Reference Stock Option. Upon
such exercise and surrender, the Participant shall be entitled to receive
an amount determined in the manner prescribed in this Section 7.2. Stock
Options which have been so surrendered, in whole or in part, shall no
longer be exercisable to the extent the related Tandem Stock Appreciation
Rights have been exercised.
(e)
Payment. Upon the exercise of a Tandem
Stock Appreciation Right, a Participant shall be entitled to receive up
to, but no more than, an amount in cash or a number of shares of Common
Stock (as determined by the Committee, in its sole discretion, on the date
of grant) equal in value to the excess of the Fair Market Value of one
share of Common Stock over the Option exercise price per share specified
in the Reference Stock Option agreement, multiplied by the number of
shares in respect of which the Tandem Stock Appreciation Right shall have
been exercised.
(f)
Deemed
Exercise of Reference Stock Option. Upon the exercise of a Tandem
Stock Appreciation Right, the Reference Stock Option or part thereof to
which such Stock Appreciation Right is related shall be deemed to have
been exercised for the purpose of the limitation set forth in Article IV
of the Plan on the number of shares of Common Stock to be issued under the
Plan.
(g)
Non-Transferability. Tandem Stock Appreciation
Rights shall be Transferable only when and to the extent that the
underlying Stock Option would be Transferable under Section 6.3(e) of the
Plan.
7.3 Non-Tandem
Stock Appreciation Rights. Non-Tandem Stock Appreciation Rights may also
be granted without reference to any Stock Options granted under this
Plan.
7.4
Terms and
Conditions of Non-Tandem Stock Appreciation Rights. Non-Tandem Stock
Appreciation Rights granted hereunder shall be subject to such terms and
conditions, not inconsistent with the provisions of this Plan, as shall be
determined from time to time by the Committee in its sole discretion, and the
following:
(a)
Exercise
Price. The exercise
price per share of Common Stock subject to a Non-Tandem Stock Appreciation
Right shall be determined by the Committee at the time of grant, provided
that the per share exercise price of a Non-Tandem Stock Appreciation Right
shall not be less than 100% of the Fair Market Value of the Common Stock
at the time of grant.
(b)
Term. The term of each Non-Tandem
Stock Appreciation Right shall be fixed by the Committee, but shall not be
greater than 10 years after the date the right is
granted.
(c)
Exercisability. Non-Tandem Stock Appreciation
Rights shall be exercisable at such time or times and subject to such
terms and conditions as shall be determined by the Committee at grant. If
the Committee provides, in its discretion, that any such right is
exercisable subject to certain limitations (including, without limitation,
that it is exercisable only in installments or within certain time
periods), the Committee may waive such limitations on the exercisability
at any time at or after grant in whole or in part (including, without
limitation, waiver of the installment exercise provisions or acceleration
of the time at which such right may be exercised), based on such factors,
if any, as the Committee shall determine, in its sole discretion. In the
event that a written employment agreement between the Company and a
Participant provides for a vesting schedule that is more favorable than
the vesting schedule provided in the form of Award agreement, the vesting
schedule in such employment agreement shall govern, provided that such
agreement is in effect on the date of grant and applicable to the specific
Award.
(d)
Method
of Exercise. Subject
to whatever installment exercise and waiting period provisions applicable
under subsection (c) above, Non-Tandem Stock Appreciation Rights may be
exercised in whole or in part at any time in accordance with the
applicable Award agreement, by giving written notice of exercise to the
Company specifying the number of Non-Tandem Stock Appreciation Rights to
be exercised.
(e)
Payment. Upon the exercise of a
Non-Tandem Stock Appreciation Right a Participant shall be entitled to
receive, for each right exercised, up to, but no more than, an amount in
cash or a number of shares of Common Stock (as determined by the
Committee, in its sole discretion, on the date of grant) equal in value to
the excess of the Fair Market Value of one share of Common Stock on the
date the right is exercised over the Fair Market Value of one share of
Common Stock on the date the right was awarded to the
Participant.
(f)
Non-Transferability. No Non-Tandem Stock
Appreciation Rights shall be Transferable by the Participant otherwise
than by will or by the laws of descent and distribution, and all such
rights shall be exercisable, during the Participant’s lifetime, only by
the Participant.
7.5
Limited
Stock Appreciation Rights. The Committee may, in its sole discretion,
grant Tandem and Non-Tandem Stock Appreciation Rights either as a general Stock
Appreciation Right or as a Limited Stock Appreciation Right. Limited Stock
Appreciation Rights may be exercised only upon the occurrence of a Change in
Control or such other event as the Committee may, in its sole discretion,
designate at the time of grant or thereafter. Upon the exercise of Limited Stock
Appreciation Rights, except as otherwise provided in an Award agreement, the
Participant shall receive in cash or Common Stock, as determined by the
Committee, an amount equal to the amount (a) set forth in Section 7.2(e)
with respect to Tandem Stock Appreciation Rights, or (b) set forth in
Section 7.4(e) with respect to Non-Tandem Stock Appreciation Rights, as
applicable.
ARTICLE
VIII
RESTRICTED
STOCK
8.1
Awards of
Restricted Stock. Shares of Restricted Stock may be issued either alone
or in addition to other Awards granted under the Plan. The Committee shall, in
its sole discretion, determine the Eligible Employees, Consultants and
Non-Employee Directors, to whom, and the time or times at which, grants of
Restricted Stock shall be made, the number of shares to be awarded, the price
(if any) to be paid by the Participant (subject to Section 8.2), the time or
times within which such Awards may be subject to forfeiture, the vesting
schedule and rights to acceleration thereof, and all other terms and conditions
of the Awards. The Committee may condition the grant or vesting of Restricted
Stock upon the attainment of specified performance targets or such other factors
as the Committee may determine, in its sole discretion, including compliance
with the requirements of Section 162(m) of the Code.
8.2 Awards
and Certificates. Eligible Employees, Consultants and Non-Employee
Directors selected to receive Restricted Stock shall not have any rights with
respect to such Award, unless and until such Participant has delivered a fully
executed copy of the agreement evidencing the Award to the Company and has
otherwise complied with the applicable terms and conditions of such Award.
Further, such Award shall be subject to the following conditions:
(a)
Purchase
Price. The purchase
price of Restricted Stock shall be fixed by the Committee. Subject to
Section 4.3, the purchase price for shares of Restricted Stock may be zero
to the extent permitted by applicable law, and, to the extent not so
permitted, such purchase price may not be less than par
value.
(b)
Acceptance. Awards of Restricted Stock must
be accepted within a period of 60 days (or such other period as the
Committee may specify) after the grant date, by executing a Restricted
Stock agreement and by paying whatever price (if any) the Committee has
designated thereunder.
(c)
Legend. Each Participant receiving
Restricted Stock shall be issued a stock certificate in respect of such
shares of Restricted Stock, unless the Committee elects to use another
system, such as book entries by the transfer agent, as evidencing
ownership of shares of Restricted Stock. Such certificate shall be
registered in the name of such Participant, and shall, in addition to such
legends required by applicable securities laws, bear an appropriate legend
referring to the terms, conditions, and restrictions applicable to such
Award, substantially in the following
form:
“The
anticipation, alienation, attachment, sale, transfer, assignment, pledge,
encumbrance or charge of the shares of stock represented hereby are subject to
the terms and conditions (including forfeiture) of the RINO International
Corporation (the “Company”) 2009 Stock Incentive Plan (the “Plan”) and an
agreement entered into between the registered owner and the Company dated
__________. Copies of such Plan and agreement are on file at the principal
office of the Company.”
(d)
Custody. If stock certificates are
issued in respect of shares of Restricted Stock, the Committee may require
that any stock certificates evidencing such shares be held in custody by
the Company until the restrictions thereon shall have lapsed, and that, as
a condition of any grant of Restricted Stock, the Participant shall have
delivered a duly signed stock power, endorsed in blank, relating to the
Common Stock covered by such
Award.
8.3
Restrictions
and Conditions. The shares of Restricted Stock awarded pursuant to this
Plan shall be subject to the following restrictions and conditions:
(a)
Restriction
Period. (1) The
Participant shall not be permitted to Transfer shares of Restricted Stock
awarded under this Plan during the period or periods set by the Committee
(the “Restriction
Period”) commencing
on the date of such Award, as set forth in a Restricted Stock Award
agreement and such agreement shall set forth a vesting schedule and any
events which would accelerate vesting of the shares of Restricted Stock.
Within these limits, based on service, attainment of performance goals
pursuant to Section 8.3(a)(ii) below and/or such other factors or criteria
as the Committee may determine in its sole discretion, the Committee may
condition the grant or provide for the lapse of such restrictions in
installments in whole or in part, or may accelerate the vesting of all or
any part of any Restricted Stock Award and/or waive the deferral
limitations for all or any part of any Restricted Stock Award. In the
event that a written employment agreement between the Company and a
Participant provides for a vesting schedule that is more favorable than
the vesting schedule provided in the form of Award agreement, the vesting
schedule in such employment agreement shall govern, provided that such
agreement is in effect on the date of grant and applicable to the specific
Award.
(ii)
Objective Performance Goals,
Formulae or Standards. If the grant of shares of Restricted Stock or the
lapse of restrictions is based on the attainment of Performance Goals, the
Committee shall establish the Performance Goals and the applicable vesting
percentage of the Restricted Stock Award applicable to each Participant or class
of Participants in writing prior to the beginning of the applicable fiscal year
or at such later date as otherwise determined by the Committee and while the
outcome of the Performance Goals are substantially uncertain. Such Performance
Goals may incorporate provisions for disregarding (or adjusting for) changes in
accounting methods, corporate transactions (including, without limitation,
dispositions and acquisitions) and other similar type events or circumstances.
With regard to a Restricted Stock Award that is intended to comply with Section
162(m) of the Code, to the extent any such provision would create impermissible
discretion under Section 162(m) of the Code or otherwise violate Section 162(m)
of the Code, such provision shall be of no force or effect. The applicable
Performance Goals shall be based on one or more of the performance criteria set
forth in Exhibit A hereto.
(b)
Rights
as a Stockholder.
Except as provided in this subsection (b) and subsection (a) above and as
otherwise determined by the Committee, the Participant shall have, with
respect to the shares of Restricted Stock, all of the rights of a holder
of shares of Common Stock of the Company including, without limitation,
the right to receive any dividends, the right to vote such shares and,
subject to and conditioned upon the full vesting of shares of Restricted
Stock, the right to tender such shares. The Committee may, in its sole
discretion, determine at the time of grant that the payment of dividends
shall be deferred until, and conditioned upon, the expiration of the
applicable Restriction
Period.
(c)
Lapse
of Restrictions. If
and when the Restriction Period expires without a prior forfeiture of the
Restricted Stock, the certificates for such shares shall be delivered to
the Participant. All legends shall be removed from said certificates at
the time of delivery to the Participant, except as otherwise required by
applicable law or other limitations imposed by the
Committee.
ARTICLE
IX
PERFORMANCE
SHARES
9.1
Award of
Performance Shares. Performance Shares may be awarded either alone or in
addition to other Awards granted under this Plan. The Committee shall, in its
sole discretion, determine the Eligible Employees, Consultants and Non-Employee
Directors, to whom, and the time or times at which, Performance Shares shall be
awarded, the number of Performance Shares to be awarded to any person, the
Performance Period during which, and the conditions under which, receipt of the
Shares will be deferred, and the other terms and conditions of the Award in
addition to those set forth in Section 9.2.
Except as
otherwise provided herein, the Committee shall condition the right to payment of
any Performance Share upon the attainment of objective performance goals
established pursuant to Section 9.2(c) below.
9.2 Terms and
Conditions. Performance Shares awarded pursuant to this Article IX shall
be subject to the following terms and conditions:
(a)
Earning
of Performance Share Award. At the expiration of the
applicable Performance Period, the Committee shall determine the extent to
which the performance goals established pursuant to Section 9.2(c) are
achieved and the percentage of each Performance Share Award that has been
earned.
(b)
Non-Transferability. Subject to the applicable
provisions of the Award agreement and this Plan, Performance Shares may
not be Transferred during the Performance
Period.
(c)
Objective
Performance Goals, Formulae or Standards. The Committee shall establish
the objective Performance Goals for the earning of Performance Shares
based on a Performance Period applicable to each Participant or class of
Participants in writing prior to the beginning of the applicable
Performance Period or at such later date as permitted under Section 162(m)
of the Code and while the outcome of the Performance Goals are
substantially uncertain. Such Performance Goals may incorporate, if and
only to the extent permitted under Section 162(m) of the Code, provisions
for disregarding (or adjusting for) changes in accounting methods,
corporate transactions (including, without limitation, dispositions and
acquisitions) and other similar type events or circumstances. To the
extent any such provision would create impermissible discretion under
Section 162(m) of the Code or otherwise violate Section 162(m) of the
Code, such provision shall be of no force or effect. The applicable
Performance Goals shall be based on one or more of the performance
criteria set forth in Exhibit A
hereto.
(d)
Dividends. Unless otherwise determined by
the Committee at the time of grant, amounts equal to any dividends
declared during the Performance Period with respect to the number of
shares of Common Stock covered by a Performance Share will not be paid to
the Participant.
(e)
Payment. Following the Committee’s
determination in accordance with subsection (a) above, shares of Common
Stock or, as determined by the Committee in its sole discretion, the cash
equivalent of such shares shall be delivered to the Eligible Employee,
Consultant or Non-Employee Director, or his legal representative, in an
amount equal to such individual’s earned Performance Share.
Notwithstanding the foregoing, the Committee may, in its sole discretion,
award an amount less than the earned Performance Share and/or subject the
payment of all or part of any Performance Share to additional vesting,
forfeiture and deferral conditions as it deems
appropriate.
(f)
Accelerated
Vesting. Based on
service, performance and/or such other factors or criteria, if any, as the
Committee may determine, the Committee may, in its sole discretion, at or
after grant, accelerate the vesting of all or any part of any Performance
Share Award and/or waive the deferral limitations for all or any part of
such Award.
ARTICLE
X
OTHER
STOCK-BASED AWARDS
10.1 Other
Awards. The Committee, in its sole discretion, is authorized to grant to
Eligible Employees, Consultants and Non-Employee Directors Other Stock-Based
Awards that are payable in, valued in whole or in part by reference to, or
otherwise based on or related to shares of Common Stock, including, but not
limited to, shares of Common Stock awarded purely as a bonus and not subject to
any restrictions or conditions, shares of Common Stock in payment of the amounts
due under an incentive or performance plan sponsored or maintained by the
Company or an Affiliate, performance units, dividend equivalent units, stock
equivalent units, restricted stock units and deferred stock units. To the extent
permitted by law, the Committee may, in its sole discretion, permit Eligible
Employees and/or Non-Employee Directors to defer all or a portion of their cash
compensation in the form of Other Stock-Based Awards granted under this Plan,
subject to the terms and conditions of any deferred compensation arrangement
established by the Company, which shall be intended to comply with Section 409A
of the Code. Other Stock-Based Awards may be granted either alone or in addition
to or in tandem with other Awards granted under the Plan.
Subject
to the provisions of this Plan, the Committee shall, in its sole discretion,
have authority to determine the Eligible Employees, Consultants and Non-Employee
Directors, to whom, and the time or times at which, such Awards shall be made,
the number of shares of Common Stock to be awarded pursuant to such Awards, and
all other conditions of the Awards. The Committee may also provide for the grant
of Common Stock under such Awards upon the completion of a specified performance
period.
The
Committee may condition the grant or vesting of Other Stock-Based Awards upon
the attainment of specified Performance Goals set forth on Exhibit A as the
Committee may determine, in its sole discretion; provided that to the extent
that such Other Stock-Based Awards are intended to comply with Section 162(m) of
the Code, the Committee shall establish the objective Performance Goals for the
vesting of such Other Stock-Based Awards based on a performance period
applicable to each Participant or class of Participants in writing prior to the
beginning of the applicable performance period or at such later date as
permitted under Section 162(m) of the Code and while the outcome of the
Performance Goals are substantially uncertain. Such Performance Goals may
incorporate, if and only to the extent permitted under Section 162(m) of the
Code, provisions for disregarding (or adjusting for) changes in accounting
methods, corporate transactions (including, without limitation, dispositions and
acquisitions) and other similar type events or circumstances. To the extent any
such provision would create impermissible discretion under Section 162(m) of the
Code or otherwise violate Section 162(m) of the Code, such provision shall be of
no force or effect. The applicable Performance Goals shall be based on one or
more of the performance criteria set forth in Exhibit A hereto.
10.2 Terms and
Conditions. Other Stock-Based Awards made pursuant to this Article X
shall be subject to the following terms and conditions:
(a)
Non-Transferability. Subject to the applicable
provisions of the Award agreement and this Plan, shares of Common Stock
subject to Awards made under this Article X may not be Transferred prior
to the date on which the shares are issued, or, if later, the date on
which any applicable restriction, performance or deferral period
lapses.
(b)
Dividends. Unless otherwise determined by
the Committee at the time of Award, subject to the provisions of the Award
agreement and this Plan, the recipient of an Award under this Article X
shall not be entitled to receive, currently or on a deferred basis,
dividends or dividend equivalents with respect to the number of shares of
Common Stock covered by the
Award.
(c)
Vesting. Any Award under this Article X
and any Common Stock covered by any such Award shall vest or be forfeited
to the extent so provided in the Award agreement, as determined by the
Committee, in its sole discretion. In the event that a written employment
agreement between the Company and a Participant provides for a vesting
schedule that is more favorable than the vesting schedule provided in the
form of Award agreement, the vesting schedule in such employment agreement
shall govern, provided that such agreement is in effect on the date of
grant and applicable to the specific
Award.
(d)
Price. Common Stock issued on a bonus
basis under this Article X may be issued for no cash consideration; Common
Stock purchased pursuant to a purchase right awarded under this Article X
shall be priced, as determined by the Committee in its sole
discretion.
(e)
Payment. Form of payment for the Other
Stock-Based Award shall be specified in the Award
agreement.
ARTICLE
XI
PERFORMANCE-BASED
CASH AWARDS
11.1 Performance-Based
Cash Awards. Performance-Based Cash Awards may be granted either alone or
in addition to or in tandem with Stock Options, Stock Appreciation Rights, or
Restricted Stock. Subject to the provisions of this Plan, the Committee shall,
in its sole discretion, have authority to determine the Eligible Employees,
Consultants and Non-Employee Directors to whom, and the time or times at which,
such Awards shall be made, the dollar amount to be awarded pursuant to such
Awards, and all other conditions of the Awards. The Committee may also provide
for the payment of a dollar amount under such Awards upon the completion of a
specified Performance Period.
For each
Participant, the Committee may specify a targeted performance award. The
individual target award may be expressed, at the Committee’s discretion, as a
fixed dollar amount, a percentage of base pay or total pay (excluding payments
made under the Plan), or an amount determined pursuant to an objective formula
or standard. Establishment of an individual target award for a Participant for a
calendar year shall not imply or require that the same level individual target
award (if any such award is established by the Committee for the relevant
Participant) be set for any subsequent calendar year. At the time the
Performance Goals are established, the Committee shall prescribe a formula to
determine the percentages (which may be greater than 100%) of the individual
target award which may be payable based upon the degree of attainment of the
Performance Goals during the calendar year. Notwithstanding anything else
herein, the Committee may, in its sole discretion, elect to pay a Participant an
amount that is less than the Participant’s individual target award (or attained
percentage thereof) regardless of the degree of attainment of the Performance
Goals; provided that no such discretion to reduce an Award earned based on
achievement of the applicable Performance Goals shall be permitted for the
calendar year in which a Change in Control of the Company occurs, or during such
calendar year with regard to the prior calendar year if the Awards for the prior
calendar year have not been made by the time of the Change in Control of the
Company, with regard to individuals who were Participants at the time of the
Change in Control of the Company.
11.2 Terms and
Conditions. Performance-Based Awards made pursuant to this Article XI
shall be subject to the following terms and conditions:
(a)
Vesting
of Performance-Based Cash Award. At the expiration of the
applicable Performance Period, the Committee shall determine and certify
in writing the extent to which the Performance Goals established pursuant
to Section 11.2(c) are achieved and the percentage of the Participant’s
individual target award has been vested and
earned.
(b)
Waiver
of Limitation. In
the event of the Participant’s Disability or death, or in cases of special
circumstances, the Committee may, in its sole discretion, waive in whole
or in part any or all of the limitations imposed hereunder (if any) with
respect to any or all of an Award under this Article
XI.
(c)
Objective
Performance Goals, Formulae or Standards.
(i)
The Committee shall establish the objective Performance Goals and the individual
target award (if any) applicable to each Participant or class of Participants in
writing prior to the beginning of the applicable Performance Period or at such
later date as permitted under Section 162(m) of the Code and while the outcome
of the Performance Goals are substantially uncertain. Such Performance Goals may
incorporate, if and only to the extent permitted under Section 162(m) of the
Code, provisions for disregarding (or adjusting for) changes in accounting
methods, corporate transactions (including, without limitation, dispositions and
acquisitions) and other similar type events or circumstances. To the extent any
Performance-Based Award is intended to comply with the provisions of Section
162(m) of the Code, if any provision would create impermissible discretion under
Section 162(m) of the Code or otherwise violate Section 162(m) of the Code, such
provision shall be of no force or effect. The applicable Performance Goals shall
be based on one or more of the performance criteria set forth in Exhibit A
hereto.
(ii) The
measurements used in Performance Goals set under the Plan shall be determined in
accordance with Generally Accepted Accounting Principles (“GAAP”), except, to
the extent that any objective Performance Goals are used, if any measurements
require deviation from GAAP, such deviation shall be at the discretion of the
Committee at the time the Performance Goals are set or at such later time to the
extent permitted under Section 162(m) of the Code.
(d)
Payment. Following the Committee’s
determination and certification in accordance with subsection (a) above,
the Performance-Based Cash Award amount shall be delivered to the Eligible
Employee, Consultant or Non-Employee Director, or his legal
representative, in accordance with the terms and conditions of the Award
agreement.
ARTICLE
XII
TERMINATION
12.1 Termination. The
following rules apply with regard to the Termination of a
Participant.
(a)
Rules
Applicable to Stock Option and Stock Appreciation Rights. Unless otherwise determined by
the Committee at grant (or, if no rights of the Participant are reduced,
thereafter):
(i)
Termination by Reason of Death
or Disability. If a Participant’s Termination is by reason of death or
Disability, all Stock Options or Stock Appreciation Rights that are held by such
Participant that are vested and exercisable at the time of the Participant’s
Termination may be exercised by the Participant (or, in the case of death, by
the legal representative of the Participant’s estate) at any time within a
one-year period from the date of such Termination, but in no event beyond the
expiration of the stated term of such Stock Options or Stock Appreciation
Rights; provided, however, if the Participant dies within such exercise period,
all unexercised Stock Options or Stock Appreciation Rights held by such
Participant shall thereafter be exercisable, to the extent to which they were
exercisable at the time of death, for a period of one year from the date of such
death, but in no event beyond the expiration of the stated term of such Stock
Options or Stock Appreciation Rights.
(ii) Involuntary Termination Without
Cause. If a Participant’s Termination is by involuntary termination
without Cause, all Stock Options or Stock Appreciation Rights that are held by
such Participant that are vested and exercisable at the time of the
Participant’s Termination may be exercised by the Participant at any time within
a period of 90 days from the date of such Termination, but in no event beyond
the expiration of the stated term of such Stock Options or Stock Appreciation
Rights.
(iii) Voluntary Termination. If a
Participant’s Termination is voluntary (other than a voluntary termination
described in Section 12.2(a)(iv)(2) below), all Stock Options or Stock
Appreciation Rights that are held by such Participant that are vested and
exercisable at the time of the Participant’s Termination may be exercised by the
Participant at any time within a period of 30 days from the date of such
Termination, but in no event beyond the expiration of the stated terms of such
Stock Options or Stock Appreciation Rights.
(iv) Termination for Cause. If a
Participant’s Termination: (1) is for Cause or (2) is a voluntary Termination
(as provided in sub-section (iii) above) after the occurrence of an event that
would be grounds for a Termination for Cause, all Stock Options or Stock
Appreciation Rights, whether vested or not vested, that are held by such
Participant shall thereupon terminate and expire as of the date of such
Termination.
(v) Unvested Stock Options and Stock
Appreciation Rights. Stock Options or Stock Appreciation Rights that are
not vested as of the date of a Participant’s Termination for any reason shall
terminate and expire as of the date of such Termination.
(b)
Rules
Applicable to Restricted Stock, Performance Shares, Other Stock-Based
Awards and Performance-Based Cash Awards. Unless otherwise determined by
the Committee at grant or thereafter, upon a Participant’s Termination for
any reason: (i) during the relevant Restriction Period, all
Restricted Stock still subject to restriction shall be forfeited; and
(ii) any unvested Performance Shares, Other Stock-Based Awards or
Performance-Based Cash Awards shall be
forfeited
ARTICLE
XIII
CHANGE IN
CONTROL PROVISIONS
13.1 Benefits.
In the event of a Change in Control of the Company, and except as otherwise
provided by the Committee in an Award agreement or in a written employment
agreement between the Company and a Participant, a Participant’s unvested Award
shall vest and a Participant’s Award shall be treated in accordance with one of
the following methods as determined by the Committee in its sole
discretion:
(a)
Awards, whether or not then
vested, shall be continued, assumed, have new rights substituted therefor
or be treated in accordance with Section 4.2(d) hereof, as determined by
the Committee in its sole discretion, and restrictions to which any shares
of Restricted Stock or any other Award granted prior to the Change in
Control are subject shall not lapse upon a Change in Control and the
Restricted Stock or other Award shall, where appropriate in the sole
discretion of the Committee, receive the same distribution as other Common
Stock on such terms as determined by the Committee; provided that, the
Committee may, in its sole discretion, decide to award additional
Restricted Stock or other Award in lieu of any cash distribution.
Notwithstanding anything to the contrary herein, for purposes of Incentive
Stock Options, any assumed or substituted Stock Option shall comply with
the requirements of Treasury Regulation § 1.424-1 (and any
amendments thereto).
(b)
The Committee, in its sole
discretion, may provide for the purchase of any Awards by the Company or
an Affiliate for an amount of cash equal to the excess of the Change in
Control Price (as defined below) of the shares of Common Stock covered by
such Awards, over the aggregate exercise price of such Awards. For
purposes of this Section 13.1, “Change
in Control Price”
shall mean the highest price per share of Common Stock paid in any
transaction related to a Change in Control of the
Company.
(c)
The Committee may, in its sole
discretion, provide for the cancellation of any Awards without payment, if
the Change in Control Price is less than the Fair Market Value of such
Award on the date of grant.
(d)
Notwithstanding anything else
herein, the Committee may, in its sole discretion, provide for accelerated
vesting or lapse of restrictions, of an Award at the time of grant or at
any time thereafter.
13.2 Change in
Control. Unless otherwise determined by the Committee in the applicable
Award agreement (or other written agreement approved by the Committee including,
without limitation, an employment agreement), a “Change in Control”
shall be deemed to occur on the occurrence of any of the
following:
(a)
An acquisition of any common
stock or other voting securities of the Company entitled to vote generally
for the election of directors (the "Voting
Securities") by any
“Person” or “Group” (as each such term is used for purposes of Section
13(d) or 14(d) of the Exchange Act), immediately after which such Person
or Group, as the case may be, has “Beneficial
Ownership” (within
the meaning of Rule 13d-3 promulgated under the Exchange Act) of more than
20% of the then outstanding shares of Common Stock or the combined voting
power of the Company’s then outstanding Voting Securities; provided, however, that in determining whether a
“Change in Control” has occurred, shares of Common Stock or Voting
Securities that are acquired in a Non-Control Acquisition (as defined
below) shall not constitute an acquisition which would cause a Change in
Control. A “Non-Control
Acquisition” shall
mean an acquisition by (i) the Company, (ii) any Subsidiary or (iii) any
employee benefit plan maintained by the Company or any Subsidiary,
including a trust forming part of any such plan (an “Employee
Benefit Plan”);
(b)
During any 2-year period,
individuals who, at the beginning of such 2-year period, constitute the
Board (the “Incumbent
Board of Directors”), cease for any reason to
constitute at least 50% of the members of the Board; provided, however,
that (i) if the election or nomination for election by the Company’s
shareholders of any new director was approved by a vote of at least
two-thirds of the Incumbent Board of Directors, such new director shall,
for purposes hereof, be deemed to be a member of the Incumbent Board of
Directors, and (ii) no individual shall be deemed to be a member of the
Incumbent Board of Directors if such individual initially assumed office
as a result of either an actual or threatened “Election
Contest” (as
described in Rule 14a-12 promulgated under the Exchange Act) or other
actual or threatened solicitation of proxies or consents by or on behalf
of a Person or Group other than the Board of Directors (a “Proxy
Contest”) including
by reason of any agreement intended to avoid or settle any Election
Contest or Proxy Contest;
(c)
The consummation of a merger,
consolidation or reorganization involving the Company or any Subsidiary,
unless the merger, consolidation or reorganization is a Non-Control
Transaction. A “Non-Control
Transaction” shall
mean a merger, consolidation or reorganization of the Company or any
Subsidiary where: (A) the shareholders of the Company (or such Subsidiary,
as the case may be) who immediately prior to the merger, consolidation or
reorganization owned, directly or indirectly, at least 50% of the combined
voting power of the outstanding Voting Securities of the Company or such
Subsidiary immediately following such merger, consolidation or
reorganization, own at least 50% of the combined voting power of the
outstanding voting securities of the corporation resulting from such
merger, consolidation or reorganization (the "Surviving
Corporation"); (B)
the individuals who were members of the Incumbent Board of Directors
immediately prior to the execution of the agreement providing for the
merger, consolidation or reorganization constitute at least 50% of the
members of the board of directors of the Surviving Corporation, or a
corporation beneficially owning, directly or indirectly, a majority of the
outstanding voting securities of the Surviving Corporation, or (C) no
Person or Group, other than (1) the Company, (2) any Subsidiary, (3) any
Employee Benefit Plan or (4) any other Person or Group who, immediately
prior to the merger, consolidation or reorganization, had Beneficial
Ownership of not less than 20% of the outstanding Voting Securities or
Common Stock, has Beneficial Ownership of 20% or more of the combined
voting power of the Surviving Corporation's outstanding voting securities
or common stock;
(d)
A complete liquidation or
dissolution of the Company;
or
(e)
The sale or other disposition of
all or substantially all of the assets of the Company to any Person (other
than a transfer to a
Subsidiary).
Notwithstanding
the foregoing, a “Change in Control” shall not be deemed to have occurred solely
because any Person or Group (the “Subject Person”)
acquired Beneficial Ownership of more than the permitted amount of the then
outstanding Voting Securities or Common Stock of the Company as a result of an
acquisition of Voting Securities or Common Stock by the Company, which, by
reducing the number of shares of Voting Securities or Common Stock then
outstanding, increases the proportional number of shares beneficially owned by
the Subject Person; provided, however, that if a Change in Control would have
occurred (but for the operation of this sentence) as a result of the acquisition
of Voting Securities or common stock by the Company, and after such acquisition
by the Company, the Subject Person becomes the beneficial owner of any
additional shares of Voting Securities or Common Stock, which increases the
percentage of the then outstanding shares of Voting Securities or Common Stock
beneficially owned by the Subject Person, then a Change in Control shall be
deemed to have occurred. In addition, notwithstanding the foregoing, the
acquisition or ownership of any Common Stock or Voting Securities by Applied
Digital Solutions, Inc. and its Affiliates (determined as if it was the Company)
shall not cause or result in a Change in Control.
ARTICLE
XIV
TERMINATION
OR AMENDMENT OF PLAN
14.1 Termination
or Amendment. Notwithstanding any other provision of this Plan, the Board
or the Committee may at any time, and from time to time, amend, in whole or in
part, any or all of the provisions of this Plan (including any amendment deemed
necessary to ensure that the Company may comply with any regulatory requirement
referred to in Article XVI), or suspend or terminate it entirely, retroactively
or otherwise; provided, however, that, unless otherwise required by law or
specifically provided herein, the rights of a Participant with respect to Awards
granted prior to such amendment, suspension or termination, may not be impaired
without the consent of such Participant and, provided further, without the
approval of the stockholders of the Company, to the extent required by the
applicable laws of the State of Nevada, the applicable provisions of Rule 16b-3
or Section 162(m) of the Code, pursuant to the requirements of any applicable
stock exchange rule, or, to the extent applicable to Incentive Stock Options,
Section 422 of the Code, no amendment may be made which would:
(a)
increase the aggregate number of
shares of Common Stock that may be issued under this Plan pursuant to
Section 4.1 (except by operation of Section
4.2);
(b)
increase the maximum individual
Participant limitations for a fiscal year under Section 4.1(b) (except by
operation of Section 4.2);
(c)
change the classification of
Eligible Employees or Consultants eligible to receive Awards under this
Plan;
(d)
decrease the minimum option price
of any Stock Option or Stock Appreciation
Right;
(e)
extend the maximum option period
under Section 6.3;
(f)
alter the Performance Goals for
the Award of Restricted Stock, Performance Shares or Other Stock-Based
Awards subject to satisfaction of Performance
Goals;
(g)
award any Stock Option or Stock
Appreciation Right in replacement of a canceled Stock Option or Stock
Appreciation Right with a higher exercise price, except in accordance with
Section 6.3(g); or
(h)
require stockholder approval in
order for this Plan to continue to comply with the applicable provisions
of Section 162(m) of the Code or, to the extent applicable to Incentive
Stock Options, Section 422 of the Code. In no event may this Plan be
amended without the approval of the stockholders of the Company, to the
extent required by the applicable laws of the State of Nevada, to increase
the aggregate number of shares of Common Stock that may be issued under
this Plan, decrease the minimum exercise price of any Stock Option or
Stock Appreciation Right, or to make any other amendment that would
require stockholder approval under any applicable rule of any exchange or
system on which the Company's securities are listed or traded at the
request of the Company.
The
Committee may amend the terms of any Award theretofore granted, prospectively or
retroactively, but, subject to Article IV above or as otherwise specifically
provided herein, no such amendment or other action by the Committee shall impair
the rights of any holder without the holder's consent.
ARTICLE
XV
UNFUNDED
PLAN
15.1 Unfunded
Status of Plan. This Plan is an “unfunded” plan for incentive and
deferred compensation. With respect to any payments as to which a Participant
has a fixed and vested interest but that are not yet made to a Participant by
the Company, nothing contained herein shall give any such Participant any rights
that are greater than those of a general unsecured creditor of the
Company.
ARTICLE
XVI
GENERAL
PROVISIONS
16.1 Legend.
The Committee may require each person receiving shares of Common Stock pursuant
to a Stock Option or other Award under the Plan to represent to and agree with
the Company in writing that the Participant is acquiring the shares without a
view to distribution thereof. In addition to any legend required by this Plan,
the certificates for such shares may include any legend that the Committee, in
its sole discretion, deems appropriate to reflect any restrictions on
Transfer.
All
certificates for shares of Common Stock delivered under the Plan shall be
subject to such stop transfer orders and other restrictions as the Committee
may, in its sole discretion, deem advisable under the rules, regulations and
other requirements of the Securities and Exchange Commission, any national
securities exchange system upon whose system the Common Stock is then quoted,
any applicable Federal or state securities law, and any applicable corporate
law, and the Committee may cause a legend or legends to be put on any such
certificates to make appropriate reference to such restrictions.
16.2 Other
Plans. Nothing contained in this Plan shall prevent the Board from
adopting other or additional compensation arrangements, subject to stockholder
approval if such approval is required, and such arrangements may be either
generally applicable or applicable only in specific cases.
16.3 No Right
to Employment/Directorship/Consultancy. Neither this Plan nor the grant
of any Option or other Award hereunder shall give any Participant or other
employee, Consultant or Non-Employee Director any right with respect to
continuance of employment, consultancy or directorship by the Company or any
Affiliate, nor shall they be a limitation in any way on the right of the Company
or any Affiliate by which an employee is employed or a Consultant or
Non-Employee Director is retained to terminate his or her employment,
consultancy or directorship at any time.
16.4 Withholding
of Taxes. The Company shall have the right to deduct from any payment to
be made pursuant to this Plan, or to otherwise require, prior to the issuance or
delivery of any shares of Common Stock or the payment of any cash hereunder,
payment by the Participant of, any Federal, state or local taxes required by law
to be withheld. Upon the vesting of Restricted Stock (or other Award that is
taxable upon vesting), or upon making an election under Section 83(b) of the
Code, a Participant shall pay all required withholding to the Company. Any
statutorily required withholding obligation with regard to any Participant may
be satisfied, subject to the advance consent of the Committee, by reducing the
number of shares of Common Stock otherwise deliverable or by delivering shares
of Common Stock already owned. Any fraction of a share of Common Stock required
to satisfy such tax obligations shall be disregarded and the amount due shall be
paid instead in cash by the Participant.
16.5 No
Assignment of Benefits. No Award or other benefit payable under this Plan
shall, except as otherwise specifically provided by law or permitted by the
Committee, be Transferable in any manner, and any attempt to Transfer any such
benefit shall be void, and any such benefit shall not in any manner be liable
for or subject to the debts, contracts, liabilities, engagements or torts of any
person who shall be entitled to such benefit, nor shall it be subject to
attachment or legal process for or against such person.
16.6 Listing
and Other Conditions.
(a)
Unless otherwise determined by
the Committee, as long as the Common Stock is listed on a national
securities exchange or system sponsored by a national securities
association, the issue of any shares of Common Stock pursuant to an Award
shall be conditioned upon such shares being listed on such exchange or
system. The Company shall have no obligation to issue such shares unless
and until such shares are so listed, and the right to exercise any Option
or other Award with respect to such shares shall be suspended until such
listing has been effected.
(b)
If at any time counsel to the
Company shall be of the opinion that any sale or delivery of shares of
Common Stock pursuant to an Option or other Award is or may in the
circumstances be unlawful or result in the imposition of excise taxes on
the Company under the statutes, rules or regulations of any applicable
jurisdiction, the Company shall have no obligation to make such sale or
delivery, or to make any application or to effect or to maintain any
qualification or registration under the Securities Act or otherwise, with
respect to shares of Common Stock or Awards, and the right to exercise any
Option or other Award shall be suspended until, in the opinion of said
counsel, such sale or delivery shall be lawful or will not result in the
imposition of excise taxes on the
Company.
(c)
Upon termination of any period of
suspension under this Section 16.6, any Award affected by such suspension
which shall not then have expired or terminated shall be reinstated as to
all shares available before such suspension and as to shares which would
otherwise have become available during the period of such suspension, but
no such suspension shall extend the term of any
Award.
(d)
A Participant shall be required
to supply the Company with any certificates, representations and
information that the Company requests and otherwise cooperate with the
Company in obtaining any listing, registration, qualification, exemption,
consent or approval the Company deems necessary or
appropriate.
16.7 Governing
Law. This Plan and actions taken in connection herewith shall be governed
and construed in accordance with the laws of the State of Nevada (regardless of
the law that might otherwise govern under applicable Nevada principles of
conflict of laws).
16.8 Construction.
Wherever any words are used in this Plan in the masculine gender they shall be
construed as though they were also used in the feminine gender in all cases
where they would so apply, and wherever any words are used herein in the
singular form they shall be construed as though they were also used in the
plural form in all cases where they would so apply.
16.9 Other
Benefits. No Award granted or paid out under this Plan shall be deemed
compensation for purposes of computing benefits under any retirement plan of the
Company or its Affiliates nor affect any benefits under any other benefit plan
now or subsequently in effect under which the availability or amount of benefits
is related to the level of compensation.
16.10 Costs.
The Company shall bear all expenses associated with administering this Plan,
including expenses of issuing Common Stock pursuant to any Awards
hereunder.
16.11 No Right
to Same Benefits. The provisions of Awards need not be the same with
respect to each Participant, and such Awards to individual Participants need not
be the same in subsequent years.
16.12 Death/Disability. The Committee may in its
sole discretion require the transferee of a Participant to supply it with
written notice of the Participant’s death or Disability and to supply it with a
copy of the will (in the case of the Participant’s death) or such other evidence
as the Committee deems necessary to establish the validity of the transfer of an
Award. The Committee may, in its discretion, also require the agreement of the
transferee to be bound by all of the terms and conditions of the
Plan.
16.13 Section
16(b) of the Exchange Act. All elections and transactions under this Plan
by persons subject to Section 16 of the Exchange Act involving shares of Common
Stock are intended to comply with any applicable exemptive condition under
Rule 16b-3. The Committee may, in its sole discretion, establish and adopt
written administrative guidelines, designed to facilitate compliance with
Section 16(b) of the Exchange Act, as it may deem necessary or proper for the
administration and operation of this Plan and the transaction of business
thereunder.
16.14 Section
409A of the Code. The Plan is intended to comply with the applicable
requirements of Section 409A of the Code and shall be limited, construed and
interpreted in accordance with such intent. To the extent that any Award is
subject to Section 409A of the Code, it shall be paid in a manner that will
comply with Section 409A of the Code, including proposed, temporary or final
regulations or any other guidance issued by the Secretary of the Treasury and
the Internal Revenue Service with respect thereto. Notwithstanding anything
herein to the contrary, any provision in the Plan that is inconsistent with
Section 409A of the Code shall be deemed to be amended to comply with Section
409A of the Code and to the extent such provision cannot be amended to comply
therewith, such provision shall be null and void.
16.15 Successor
and Assigns. The Plan shall be binding on all successors and permitted
assigns of a Participant, including, without limitation, the estate of such
Participant and the executor, administrator or trustee of such
estate.
16.16 Severability
of Provisions. If any provision of the Plan shall be held invalid or
unenforceable, such invalidity or unenforceability shall not affect any other
provisions hereof, and the Plan shall be construed and enforced as if such
provisions had not been included.
16.17 Payments
to Minors, Etc.
Any benefit payable to or for the benefit of a minor, an incompetent person or
other person incapable of receipt thereof shall be deemed paid when paid to such
person’s guardian or to the party providing or reasonably appearing to provide
for the care of such person, and such payment shall fully discharge the
Committee, the Board, the Company, its Affiliates and their employees, agents
and representatives with respect thereto.
16.18 Headings
and Captions. The headings and captions herein are provided for reference
and convenience only, shall not be considered part of the Plan, and shall not be
employed in the construction of the Plan.
ARTICLE
XVII
EFFECTIVE
DATE OF PLAN
The Plan
shall become effective upon the date specified by the Board in its resolution
adopting the Plan, subject to the approval of the Plan by the stockholders of
the Company in accordance with the requirements of the laws of the State of
Nevada.
ARTICLE
XVIII
TERM OF
PLAN
No Award
shall be granted pursuant to the Plan on or after the tenth anniversary of the
earlier of the date the Plan is adopted or the date of stockholder approval, but
Awards granted prior to such tenth anniversary may extend beyond that date;
provided that no Award (other than a Stock Option or Stock Appreciation Right)
that is intended to be “performance-based” under Section 162(m) of the Code
shall be granted on or after the fifth anniversary of the stockholder approval
of the Plan unless the Performance Goals set forth on Exhibit A are reapproved
(or other designated performance goals are approved) by the stockholders no
later than the first stockholder meeting that occurs in the fifth year following
the year in which stockholders approve the Performance Goals set forth on
Exhibit A.
ARTICLE
XIX
NAME OF
PLAN
This Plan
shall be known as “The RINO International Corporation 2009 Stock Incentive
Plan.”
NON-QUALIFIED STOCK OPTION
AGREEMENT
Under
The
RINO
International Corporation 2009 Stock Incentive Plan
AGREEMENT
(“Agreement”),
dated _________ __, 20__ by and between RINO International Corporation, a Nevada
corporation (the “Company”), and
_______________ (the “Participant”).
Preliminary
Statement
The Board
of Directors of the Company (the “Board”) has appointed
a committee (the “Committee”) to
administer the RINO International Corporation 2009 Stock Incentive Plan (the
“Plan”), has
authorized this grant of a non-qualified stock option (the “Option”) on _______,
20__ (the “Grant
Date”) to purchase the number of shares of the Company’s common stock,
par value $0.0001 per share (the “Common Stock”) set
forth below to the Participant, as a Eligible Employee of the Company or an
Affiliate (collectively, the Company and all Subsidiaries and Parents of the
Company shall be referred to as the “Employer”).
Unless
otherwise indicated, any capitalized term used but not defined herein shall have
the meaning ascribed to such term in the Plan. For the convenience of the
Participant, capitalized terms used but not defined herein and defined in the
Plan have been set forth hereto in Schedule A. A copy of
the Plan has been delivered to the Participant. By signing and returning this
Agreement, the Participant (i) acknowledges having received and read a copy of
the Plan and this Agreement, (ii) agrees to comply with the Plan, this Agreement
and all applicable laws and regulations, (iii) acknowledges that the Company has
not provided any tax advice to the Participant regarding the grant or future
exercise of the Option or the subsequent sale or transfer of shares of Common
Stock issuable hereunder, and (iv) understands that the Participant should
consult with the Participant’s personal financial, accounting and tax advisors
regarding the same to the extent the Participant deems necessary.
Accordingly,
the parties hereto agree as follows:
1. Grant of
Option. The
Company hereby grants to Optionee, an Option to purchase _________shares
(“Shares”) of its Common Stock in the manner and subject to the conditions
provided hereinafter.
2.
Vesting and
Exercise.
(a) The
Shares underlying the Option shall vest at the time of and shall have an
exercise price (the “Option Exercise Price”) as set forth in Exhibit A attached
hereto, which is the Fair Market Value or higher of a share of Common Stock on
the Grant Date. The Option shall vest proportionately in the periods prior to
each vesting date. To the extent that such portion of the Option has become
vested and is exercisable as provided herein, the Option may thereafter be
exercised by the Participant, in whole or in part, at any time or from time to
time prior to the expiration of the Option as provided herein and in accordance
with Sections 6.3(c) and 6.3(d) of the Plan, including, without limitation, by
the filing of any written form of exercise notice as may be required by the
Committee and payment in full of the Option Exercise Price multiplied by the
number of shares of Common Stock underlying the portion of the Option exercised.
Upon expiration of the Option, the Option shall be canceled and no longer
exercisable.
(b) (i) At
the election of the Optionee and with the approval of the Committee, all or any
part of the Option that has vested and have not been earlier terminated may be
exercised in lieu of making the cash payment to the Company of the aggregate
Option Exercise Price by electing instead to receive upon such exercise the
“Net Number” of shares
of Common Stock determined according to the following formula (“Cashless
Exercise”):
Net
Number = (A x (B - C))/B
(ii) For
purposes of the foregoing formula:
A= the
total number shares with respect to which the Option is then being
exercised.
B= the
last reported sale price (as reported by Bloomberg) of the Common Stock on the
trading day immediately preceding the date of the date of receipt by the Company
of the exercise representation letter attached hereto as Exhibit B (the
“Exercise Representation Letter”).
C= the
Option Exercise Price then in effect at the time of such exercise.
3.
Time of Exercise of
Option. Any
portion of the Option which has vested may be exercised; provided, however, no portion
of the Option may be exercised ______ years after their respective date of
vesting (“Vesting Expiration Date”) and any portion of the Option that has not
been exercised on or prior to the Vesting Expiration Date shall be automatically
forfeited and of no further effect without any action by the Company or the
Committee (a “Vesting Expiration”).
4.
Method of
Exercise. All or a
portion of the Option may be exercised by payment of the Option Exercise Price
in cash or Cashless Exercise by the Optionee, unless another form of payment is
authorized by the Committee. In the event of payment of the Option Exercise
Price by check, the Option shall not be considered exercised until receipt of
cleared funds by the Company upon deposit of the check.
5.
Restrictions on
Exercise and Delivery.
Exercise of the Option, or any portion thereof, shall be subject to
the conditions set forth below as determined by the Committee in its sole and
absolute discretion:
(a)
the satisfaction of any withholding tax or other withholding
liabilities, is necessary or desirable as a condition of, or in connection with,
such exercise or the delivery or purchase of Shares pursuant
thereto,
(b)
the listing, registration, or qualification of any Shares deliverable upon
such exercise is desirable or necessary, under any state or federal law, as a
condition of, or in connection with, such exercise or the delivery or purchase
of Shares pursuant thereto, or
(c) the
consent or approval of any regulatory body is necessary or desirable as a
condition of, or in connection with, such exercise or the delivery or purchase
of any Shares pursuant thereto,
then in
any such event, such exercise shall not be effective unless such withholding,
listing, registration, qualification, consent or approval shall have been
effected or obtained free of any conditions not acceptable to the Committee.
Optionee shall execute such documents and take such other actions as are
required by the Committee to enable it to effect or obtain such withholding,
listing, registration, qualification, consent or approval. Neither the Company
nor any officer or director, or member of the Committee, shall have any
liability with respect to the non-issuance of any portion of the Shares on
exercise or failure to sell any Shares as the result of any suspensions of
exercisability imposed pursuant to this Section.
6.
Expiration of
Option. Except
as otherwise provided in this Agreement, to the extent not previously exercised,
the Option (or the relevant portion thereof) shall terminate upon the first to
occur of any of the following events (the “Expiration Date”):
(a)
the dissolution or liquidation of the Company;
(b)
at the time of a breach by Optionee of any material provision of the Optionee’s
Employment Agreement with the Company or any other written agreement between the
Optionee and the Company; or
(c)
any portion of the Option that terminate pursuant to a Vesting
Expiration.
7.
Termination of
Service. If the Optionee’s employment terminates, any portion of the
Option which has vested shall expire on the earliest of the following occasions
(or such later date as the Committee may determine):
(a)
the Expiration Date;
(b) the
date three (3) months after the termination of the Optionee’s employment for any
reason other than for Cause (including Disability (as defined in Section
22(e)(3) of the Internal Revenue Code), death and retirement);
(c) the
date of the Optionee’s termination of employment for Cause (as such term is
defined in the Optionee’s Employment Agreement with the Company).
After the
date Optionee’s employment terminates, the Optionee (or in the case of the
Optionee’s death or Disability, the Optionee’s representative) may exercise all
or any portion of the Option which has vested at any time before its (i)
expiration under the preceding sentence or (ii) termination by operation of any
of the events in paragraph 5 hereof. When the Optionee’s employment terminates,
any portion of this Option which has not vested shall expire immediately without
any further action by the Committee or the Company.
8.
Assignability.
This Option may not be sold, pledged, assigned or transferred (except by will or
the laws of descent and distribution) unless with the written consent of the
Company.
9.
Representation
Letter.
Upon exercise of all or any part of the Option, the Optionee will deliver to the
Company the Exercise Representation Letter substantially the same as the one set
forth on Exhibit B hereto, as such Exhibit may be amended by the Committee from
time to time. Optionee also agrees to make such other representations as are
deemed necessary or appropriate by the Company and its counsel.
10.
Rights as
Shareholder. Neither
Optionee nor his or her executor, administrator, heirs or legatees, shall be, or
have any rights or privileges of a shareholder of the Company in respect of the
Shares unless and until certificates representing such Shares shall have been
issued in Optionee's name.
11.
No Right of
Employment.
Neither the grant nor exercise of any Option nor anything in the Plan or this
Agreement shall impose upon the Company any obligation to employ or continue to
employ any Optionee. The right of the Company to terminate any employee shall
not be diminished or affected because an Option has been granted to such
employee.
12. Mandatory
Arbitration.
In the event of any dispute between the Company and Optionee regarding this
Agreement, the dispute and any issue as to the arbitrability of such dispute,
shall be settled to the exclusion of a court of law, by arbitration in New York
City, New York by a panel of three arbitrators (each party shall choose one
arbitrator and the third shall be chosen by the two arbitrators so selected) in
accordance with the Commercial Arbitration Rules of the American Arbitration
Association then in effect. The decision of a majority of the arbitrators shall
be final and binding upon the parties. All costs of the arbitration and the fees
of the arbitrators shall be allocated between the parties as determined by a
majority of the arbitrators, it being the intention of the parties that the
prevailing party in such a proceeding be made whole with respect to its
expenses.
13. The Company’s Rights.
The existence of the Option shall not affect in any way the right or power of
the Company or its stockholders to make or authorize any or all adjustments,
recapitalizations, reorganizations or other changes in the Company's capital
structure or its business, or any merger or consolidation of the Company, or any
issue of bonds, debentures, preferred or other stocks with preference ahead of
or convertible into, or otherwise affecting the Common Stock or the rights
thereof, or the dissolution or liquidation of the Company, or any sale or
transfer of all or any part of the Company's assets or business, or any other
corporate act or proceeding, whether of a similar character or
otherwise.
14. Optionee. Whenever
the word “Optionee” is used in any provision of this Agreement under
circumstances where the provision should logically be construed, as determined
by the Committee, to apply to the estate, personal representative, beneficiary
to whom the Option or Shares may be transferred by will or by the laws of
descent and distribution, or another permitted transferee, the word “Optionee”
shall be deemed to include such person.
15. Conformity with Plan.
This Agreement is intended to conform in all respects with, and is subject to
all applicable provisions of, the Plan. Inconsistencies between this Agreement
and the Plan shall be resolved in accordance with the terms of the Plan. In the
event of any ambiguity in this Agreement or any matters as to which this
Agreement is silent, the Plan shall govern. A copy of the Plan is provided
to Optionee with this Agreement as Exhibit C.
16. Section
409A Compliance. To the extent applicable, the Board or the Committee may at any
time and from time to time amend, in whole or in part, any or all of the
provisions of this Agreement (in a manner determined by the Board or Committee
in its sole discretion) solely to comply with Section 409A of the Code and the
regulations promulgated thereunder, subject to the terms and conditions of the
Plan.
17. Notices. All notices
and other communications made or given pursuant to this Agreement shall be in
writing and shall be sufficiently made or given if hand delivered or mailed by
certified mail, addressed to the Optionee at the address contained in the
records of the Company, or addressed to the Committee, care of the Company to
the attention of its Corporate Secretary at its principal office or, if the
receiving party consents in advance, transmitted and received via telecopy or
via such other electronic transmission mechanism as may be available to the
parties.
18. Binding Effect. This
Agreement shall be binding upon and inure to the benefit of Optionee, his heirs
and successors, and of the Company, its successors and assigns.
19. Governing Law. This
Agreement shall be governed by the laws of the State of New York, without giving
effect to principles of conflicts of laws.
20. Descriptive
Headings.
Titles to Sections are solely for informational purposes.
IN
WITNESS WHEREOF, this Agreement is effective as of, and the date of grant shall
be _______ __, 20__.
RINO
INTERNATIONAL
CORPORATION
a
Nevada corporation
By:
Its:
OPTIONEE
Print
Name
EXHIBIT
A
VESTING
SCHEDULE AND OPTION EXERCISE PRICE
Number of Shares
Vesting Date
Exercise Price per
Share
EXHIBIT
B
______________,
20___
RINO
International Corporation
Re:
Stock Option Exercise
To Whom
It May Concern:
I (the
“Optionee”) hereby exercise my right to purchase ________ shares of common stock
(the “Shares”) of RINO International Corporation, a Nevada Company (the
“Company”), pursuant to, and in accordance with, an option agreement dated
_______________, 20__ (the “Agreement”). As provided in such Agreement, I
deliver herewith payment as set forth in the Agreement in the amount of the
aggregate option exercise price. Please deliver to me at my address as set forth
above stock certificates representing the subject shares registered in my
name.
The
Optionee hereby represents and agrees as follows:
1.
The Optionee acknowledges receipt of a copy of the Agreement. The Optionee has
carefully reviewed the Agreement.
2. The
Optionee is a resident of __________.
3.
The Optionee represents and agrees that if the Optionee is an
“affiliate” (as defined in Rule 144 under the Securities Act of 1933) of the
Company at the time the Optionee desires to sell any of the Shares, the Optionee
will be subject to certain restrictions under, and will comply with all of the
requirements of, applicable federal and state securities laws.
The
foregoing representations and warranties are given on ________ at
_____________________.
___
Optionee encloses a check in the amount of $ ______________ for the payment of
the aggregate amount of the Option Exercise Price.
___
Optionee elects a Cashless Exercise for __________Option Shares.
OPTIONEE:
Exhibit
C
RINO
International 2009 Stock Incentive Plan
SCHEDULE
A
The
following terms used but not defined in the Agreement and defined in the Plan
have been provided below for the convenience of the Participant but are
qualified in their entirety by the full text of such terms in the
Plan.
A.
“Acquisition
Event” means a
merger or consolidation in which the Company is not the surviving entity, any
transaction that results in the acquisition of all or substantially all of the
Company’s outstanding Common Stock by a single person or entity or by a group of
persons and/or entities acting in concert, or the sale or transfer of all or
substantially all of the Company’s assets.
B.
“Affiliate” means each of the following:
(a) any Subsidiary; (b) any Parent; (c) any corporation, trade or
business (including, without limitation, a partnership or limited liability
company) which is directly or indirectly controlled 50% or more (whether by
ownership of stock, assets or an equivalent ownership interest or voting
interest) by the Company; (d) any corporation, trade or business (including,
without limitation, a partnership or limited liability company) which directly
or indirectly controls 50% or more (whether by ownership of stock, assets or an
equivalent ownership interest or voting interest) of the Company; and
(e) any other entity in which the Company or any of its Affiliates has a
material equity interest and which is designated as an “Affiliate” by resolution
of the Committee; provided that the Common Stock subject to any Award
constitutes “service recipient stock” for purposes of Section 409A of the Code
or otherwise does not subject the Award to Section 409A of the
Code.
C. “Appreciation
Award” means any
Award under this Plan of any Stock Option, Stock Appreciation Right or Other
Stock-Based Award, provided that such Other Stock-Based Award is based on the
appreciation in value of a share of Common Stock in excess of an amount equal to
at least the Fair Market Value of the Common Stock on the date such Other
Stock-Based Award is granted.
D.
“Award” means any award under this
Plan of any Stock Option, Stock Appreciation Right, Restricted Stock,
Performance Share, Other Stock-Based Award or Performance-Based Cash Awards. All
Awards shall be granted by, confirmed by, and subject to the terms of, a written
agreement executed by the Company and the Participant.
E. “Board” means the Board of Directors
of the Company.
F.
“Cause” means with respect to a
Participant’s Termination of Employment or Termination of Consultancy from and
after the date hereof, the following: (a) in the case where there is no
employment agreement, consulting agreement, change in control agreement or
similar agreement in effect between the Company or an Affiliate and the
Participant at the time of the grant of the Award (or where there is such an
agreement but it does not define “cause” (or words of like import)), termination
due to: (i) a Participant’s conviction of, or plea of guilty or nolo contendere
to, a felony; (ii) perpetration by a Participant of an illegal act, or fraud
which could cause significant economic injury to the Company; (iii) continuing
willful and deliberate failure by the Participant to perform the Participant’s
duties in any material respect, provided that the Participant is given notice
and an opportunity to effectuate a cure as determined by the Committee; or (iv)
a Participant’s willful misconduct with regard to the Company that could have a
material adverse effect on the Company; or (b) in the case where there is an
employment agreement, consulting agreement, change in control agreement or
similar agreement in effect between the Company or an Affiliate and the
Participant at the time of the grant of the Award that defines “cause” (or words
of like import), “cause” as defined under such agreement; provided, however,
that with regard to any agreement under which the definition of “cause” only
applies on occurrence of a change in control, such definition of “cause” shall
not apply until a change in control actually takes place and then only with
regard to a termination thereafter. With respect to a Participant’s Termination
of Directorship, “cause” means an act or failure to act that constitutes cause
for removal of a director under applicable Nevada law.
G.
“Change in
Control” has the
meaning set forth in Section 13.2 of the Plan.
H.
“Change in
Control Price”
has the meaning set forth in Section 13.1 of the Plan.
I.
“Code” means the Internal Revenue
Code of 1986, as amended. Any reference to any section of the Code shall also be
a reference to any successor provision and any Treasury Regulation promulgated
thereunder.
J.
“Committee”
means: (a) with respect to the application of this Plan to Eligible
Employees and Consultants, a committee or subcommittee of the Board appointed
from time to time by the Board, which committee or subcommittee shall consist of
two or more non-employee directors, each of whom shall be (i) a “non-employee
director” as defined in Rule 16b-3; (ii) to the extent required by Section
162(m) of the Code, an “outside director” as defined under Section 162(m) of the
Code; and (iii) an “independent director” for purposes of the applicable stock
exchange rules; and (b) with respect to the application of this Plan to
Non-Employee Directors, the Board. To the extent that no Committee exists that
has the authority to administer this Plan, the functions of the Committee shall
be exercised by the Board. If for any reason the appointed Committee does not
meet the requirements of Rule 16b-3 or Section 162(m) of the Code, such
noncompliance shall not affect the validity of Awards, grants, interpretations
or other actions of the Committee.
K.
“Common
Stock” means the
common stock, $0.0001 par value per share, of the Company.
L.
“Company” means RINO International
Corporation, a Nevada Corporation, and its successors by operation of
law.
M.
“Consultant” means any individual or
entity who provides bona fide consulting or advisory services to the Company or
its Affiliates pursuant to a written agreement, which are not in connection with
the offer and sale of securities in a capital-raising transaction.
N. “Disability” means with respect to a
Participant’s Termination, a permanent and total disability as defined in
Section 22(e)(3) of the Code. A Disability shall only be deemed to occur at the
time of the determination by the Committee of the Disability. Notwithstanding
the foregoing, for Awards that are subject to Section 409A of the Code,
Disability shall mean that a Participant is disabled under Section
409A(a)(2)(C)(i) or (ii) of the Code.
O.
“Effective
Date” means the
effective date of this Plan as defined in Article XVII.
P. “Eligible
Employees” means
each employee of the Company or an Affiliate.
Q.
“Exchange
Act” means the
Securities Exchange Act of 1934, as amended. Any references to any section of
the Exchange Act shall also be a reference to any successor
provision.
R.
“Fair
Market Value”
means, unless otherwise required by any applicable provision of the Code or any
regulations issued thereunder, as of any date and except as provided below, the
last sales price reported for the Common Stock on the applicable date: (a) as
reported on the principal national securities exchange in the United States on
which it is then traded, or (b) if the Common Stock is not traded, listed or
otherwise reported or quoted, the Committee shall determine in good faith the
Fair Market Value in whatever manner it considers appropriate taking into
account the requirements of Section 409A of the Code. For purposes of the grant
of any Award, the applicable date shall be the trading day immediately prior to
the date on which the Award is granted. For purposes of the exercise of any
Award, the applicable date shall be the date a notice of exercise is received by
the Committee or, if not a day on which the applicable market is open, the next
day that it is open.
S.
“Family
Member” means
“family member” as defined in Section A.1.(5) of the general instructions of
Form S-8.
T.
“GAAP” has the meaning set forth in
Section 11.2(c)(ii).
U.
“Incentive
Stock Option”
means any Stock Option awarded to an Eligible Employee of the Company, its
Subsidiaries and its Parent (if any) under this Plan intended to be and
designated as an “Incentive Stock Option” within the meaning of Section 422 of
the Code.
V.
“Non-Employee
Director” means a
director of the Company who is not an active employee of the Company or an
Affiliate.
W.
“Non-Qualified
Stock Option”
means any Stock Option awarded under this Plan that is not an Incentive Stock
Option.
X.
“Other
Stock-Based Award” means an Award under Article
X of this Plan that is valued in whole or in part by reference to, or is payable
in or otherwise based on, Common Stock, including, without limitation, a
restricted stock unit or an Award valued by reference to an
Affiliate.
Y.
“Parent” means any parent corporation
of the Company within the meaning of Section 424(e) of the Code.
Z.
“Participant” means an Eligible Employee,
Non-Employee Director or Consultant to whom an Award has been granted pursuant
to the Plan.
AA. “Performance-Based
Cash Award” means
a cash Award under Article XI of this Plan that is payable or otherwise based on
the attainment of certain pre-established performance goals during a Performance
Period.
BB.
“Performance
Goals” mean such performance goals as determined in writing by the
Committee.
CC.
“Performance
Period” means the
duration of the period during which receipt of an Award is subject to the
satisfaction of performance criteria, such period as determined by the Committee
in its sole discretion.
DD.
“Performance
Share” means an
Award made pursuant to Article IX of this Plan of the right to receive Common
Stock or cash of an equivalent value at the end of a specified Performance
Period.
EE.
“Person” means any individual,
corporation, partnership, limited liability company, firm, joint venture,
association, joint-stock company, trust, incorporated organization, governmental
or regulatory or other entity.
FF.
“Plan” means this RINO
International Corporation 2009 Stock Incentive Plan, as amended from time to
time.
GG.
“Reference
Stock Option” has
the meaning set forth in Section 7.1 of the Plan.
HH. “Restricted
Stock” means an
Award of shares of Common Stock under this Plan that is subject to restrictions
under Article VIII.
II.
“Restriction
Period” has the
meaning set forth in Subsection 8.3(a) of the Plan.
JJ.
“Rule
16b-3” means Rule
16b-3 under Section 16(b) of the Exchange Act as then in effect or any successor
provision.
KK.
“Section
162(m) of the Code” means the exception for
performance-based compensation under Section 162(m) of the Code and any
applicable Treasury regulations thereunder.
LL.
“Section
409A of the Code”
means the nonqualified deferred compensation rules under Section 409A of the
Code and any applicable Treasury regulations thereunder.
MM. “Securities
Act” means the
Securities Act of 1933, as amended and all rules and regulations promulgated
thereunder. Any reference to any section of the Securities Act shall also be a
reference to any successor provision.
NN.
“Stock
Appreciation Right” means the right pursuant to
an Award granted under Article VII. A Tandem Stock Appreciation Right shall mean
the right to surrender to the Company all (or a portion) of a Stock Option in
exchange for cash or a number of shares of Common Stock (as determined by the
Committee, in its sole discretion, on the date of grant) equal to the difference
between (a) the Fair Market Value on the date such Stock Option (or such
portion thereof) is surrendered, of the Common Stock covered by such Stock
Option (or such portion thereof), and (b) the aggregate exercise price of
such Stock Option (or such portion thereof). A Non-Tandem Stock Appreciation
Right shall mean the right to receive cash or a number of shares of Common Stock
(as determined by the Committee, in its sole discretion, on the date of grant)
equal to the difference between (i) the Fair Market Value of a share of
Common Stock on the date such right is exercised, and (ii) the aggregate
exercise price of such right, otherwise than on surrender of a Stock
Option.
OO. “Stock
Option” or “Option” means any option to purchase
shares of Common Stock granted to Eligible Employees, Non-Employee Directors or
Consultants granted pursuant to Article VI of the Plan.
PP.
“Subsidiary” means any subsidiary
corporation of the Company within the meaning of Section 424(f) of the
Code.
QQ. “Ten
Percent Stockholder” means a person owning stock
possessing more than 10% of the total combined voting power of all classes of
stock of the Company, its Subsidiaries or its Parent.
RR. “Termination” means a Termination of
Consultancy, Termination of Directorship or Termination of Employment, as
applicable.
SS.
“Termination
of Consultancy”
means: (a) that the Consultant is no longer acting as a consultant to the
Company or an Affiliate; or (b) when an entity which is retaining a Participant
as a Consultant ceases to be an Affiliate unless the Participant otherwise is,
or thereupon becomes, a Consultant to the Company or another Affiliate at the
time the entity ceases to be an Affiliate. In the event that a Consultant
becomes an Eligible Employee or a Non-Employee Director upon the termination of
his or her consultancy, unless otherwise determined by the Committee, in its
sole discretion, no Termination of Consultancy shall be deemed to occur until
such time as such Consultant is no longer a Consultant, an Eligible Employee or
a Non-Employee Director. Notwithstanding the foregoing, the Committee may, in
its sole discretion, otherwise define Termination of Consultancy in the Award
agreement or, if no rights of a Participant are reduced, may otherwise define
Termination of Consultancy thereafter.
TT.
“Termination
of Directorship”
means that the Non-Employee Director has ceased to be a director of the Company;
except that if a Non-Employee Director becomes an Eligible Employee or a
Consultant upon the termination of his or her directorship, his or her ceasing
to be a director of the Company shall not be treated as a Termination of
Directorship unless and until the Participant has a Termination of Employment or
Termination of Consultancy, as the case may be.
UU.
“Termination
of Employment”
means: (a) a termination of employment (for reasons other than a military
or personal leave of absence granted by the Company) of a Participant from the
Company and its Affiliates; or (b) when an entity which is employing a
Participant ceases to be an Affiliate, unless the Participant otherwise is, or
thereupon becomes, employed by the Company or another Affiliate at the time the
entity ceases to be an Affiliate. In the event that an Eligible Employee becomes
a Consultant or a Non-Employee Director upon the termination of his or her
employment, unless otherwise determined by the Committee, in its sole
discretion, no Termination of Employment shall be deemed to occur until such
time as such Eligible Employee is no longer an Eligible Employee, a Consultant
or a Non-Employee Director. Notwithstanding the foregoing, the Committee may, in
its sole discretion, otherwise define Termination of Employment in the Award
agreement or, if no rights of a Participant are reduced, may otherwise define
Termination of Employment thereafter.
VV.
“Transfer” means: (a) when used as a
noun, any direct or indirect transfer, sale, assignment, pledge, hypothecation,
encumbrance or other disposition (including the issuance of equity in a Person),
whether for value or no value and whether voluntary or involuntary (including by
operation of law), and (b) when used as a verb, to directly or indirectly
transfer, sell, assign, pledge, encumber, charge, hypothecate or otherwise
dispose of (including the issuance of equity in a Person) whether for value or
for no value and whether voluntarily or involuntarily (including by operation of
law). “Transferred” and “Transferrable” shall have a correlative
meaning
QUALIFIED STOCK OPTION
AGREEMENT
Under
The
RINO
International Corporation 2009 Stock Incentive Plan
AGREEMENT
(“Agreement”),
dated ______ __, 20__ by and between RINO International Corporation, a Nevada
corporation (the “Company”), and
_______________ (the “Participant”).
Preliminary
Statement
The Board
of Directors of the Company (the “Board”) has appointed
a committee (the “Committee”) to
administer the RINO International Corporation 2009 Stock Incentive Plan (the
“Plan”), has
authorized this grant of a qualified stock option (the “Option”) on _______,
20__ (the “Grant
Date”) to purchase the number of shares of the Company’s common stock,
par value $0.0001 per share (the “Common Stock”) set
forth below to the Participant, as a Eligible Employee of the Company
(collectively, the Company and all Subsidiaries and Parents of the Company shall
be referred to as the “Employer”).
Unless
otherwise indicated, any capitalized term used but not defined herein shall have
the meaning ascribed to such term in the Plan. For the convenience of the
Participant, capitalized terms used but not defined herein and defined in the
Plan have been set forth hereto in Schedule A. A copy of
the Plan has been delivered to the Participant. By signing and returning this
Agreement, the Participant (i) acknowledges having received and read a copy of
the Plan and this Agreement, (ii) agrees to comply with the Plan, this Agreement
and all applicable laws and regulations, (iii) acknowledges that the Company has
not provided any tax advice to the Participant regarding the grant or future
exercise of the Option or the subsequent sale or transfer of shares of Common
Stock issuable hereunder, and (iv) understands that the Participant should
consult with the Participant’s personal financial, accounting and tax advisors
regarding the same to the extent the Participant deems necessary.
Accordingly,
the parties hereto agree as follows:
1.
Grant of
Option.
The Company hereby grants to Optionee, an Option to purchase _________shares
(“Shares”) of its Common Stock in the manner and subject to the conditions
provided hereinafter. This Option is intended to qualify as an Incentive Stock
Option.
2. Vesting and
Exercise.
(a) The
Shares underlying the Option shall vest at the time of and shall have an
exercise price (the “Option Exercise Price”) as set forth in Exhibit A attached
hereto, which is the Fair Market Value or higher of a share of Common Stock on
the Grant Date, or 110% of such Fair Market Value in the case of a Ten Percent
Stockholder as provided in Code Section 422. The Option shall vest
proportionately in the periods prior to each vesting date. To the extent that
the Option has become vested and is exercisable as provided herein, the Option
may thereafter be exercised by the Participant, in whole or in part, at any time
or from time to time prior to the expiration of the Option as provided herein
and in accordance with Sections 6.3(c) and 6.3(d) of the Plan, including,
without limitation, by the filing of any written form of exercise notice as may
be required by the Committee and payment in full of the Option Exercise Price
multiplied by the number of shares of Common Stock underlying the portion of the
Option exercised. Upon expiration of the Option, the Option shall be canceled
and no longer exercisable.
(b) (i) At the election of
the Optionee and with the approval of the Committee, all or any part of the
Option that has vested and have not been earlier terminated may be exercised in
lieu of making the cash payment to the Company of the aggregate Option Exercise
Price by electing instead to receive upon such exercise the “Net Number” of shares of
Common Stock determined according to the following formula (“Cashless
Exercise”):
Net
Number = (A x (B - C))/B
(ii)
For purposes of the foregoing formula:
A= the
total number shares with respect to which the Option is then being
exercised.
B= the
last reported sale price (as reported by Bloomberg) of the Common Stock on the
trading day immediately preceding the date of the date of receipt by the Company
of the exercise representation letter attached hereto as Exhibit B (the
“Exercise Representation Letter”).
C= the
Option Exercise Price then in effect at the time of such exercise.
3. Time of Exercise of
Option. Any
portion of the Option which has vested may be exercised; provided, however, no portion
of the Option may be exercised ______ years after their respective date of
vesting (“Vesting Expiration Date”) and any portion of the Option that has not
been exercised on or prior to the Vesting Expiration Date shall be automatically
forfeited and of no further effect without any action by the Company or the
Committee (a “Vesting Expiration”).
4. Method of
Exercise. All
or a portion of the Option may be exercised by payment of the Option Exercise
Price in cash or Cashless Exercise by the Optionee, unless another form of
payment is authorized by the Committee. In the event of payment of the Option
Exercise Price by check, the Option shall not be considered exercised until
receipt of cleared funds by the Company upon deposit of the check.
5. Restrictions on Exercise and
Delivery. Exercise
of the Option, or any portion thereof, shall be subject to the conditions set
forth below as determined by the Committee in its sole and absolute
discretion:
(a)
the satisfaction of any withholding tax or other withholding liabilities,
is necessary or desirable as a condition of, or in connection with, such
exercise or the delivery or purchase of Shares pursuant thereto,
(b) the
listing, registration, or qualification of any Shares deliverable upon such
exercise is desirable or necessary, under any state or federal law, as a
condition of, or in connection with, such exercise or the delivery or purchase
of Shares pursuant thereto, or
(c) the
consent or approval of any regulatory body is necessary or desirable as a
condition of, or in connection with, such exercise or the delivery or purchase
of any Shares pursuant thereto,
then in
any such event, such exercise shall not be effective unless such withholding,
listing, registration, qualification, consent or approval shall have been
effected or obtained free of any conditions not acceptable to the Committee.
Optionee shall execute such documents and take such other actions as are
required by the Committee to enable it to effect or obtain such withholding,
listing, registration, qualification, consent or approval. Neither the Company
nor any officer or director, or member of the Committee, shall have any
liability with respect to the non-issuance of any portion of the Shares on
exercise or failure to sell any Shares as the result of any suspensions of
exercisability imposed pursuant to this Section.
6.
Expiration
of
Option. Except
as otherwise provided in this Agreement, to the extent not previously exercised,
the Option (or the relevant portion thereof) shall terminate upon the first to
occur of any of the following events (the “Expiration Date”):
(a)
the
dissolution or liquidation of the
Company;
(b)
the date immediately preceding
the tenth (10th) anniversary of the Grant date,
in the case of the Ten Percent Stockholder as provide in code Section
422;
(c)
at the time of a breach by
Optionee of any material provision of the Optionee’s Employment Agreement
with the Company or any other written agreement between the Optionee and
the Company; or
(d)
any portion of the Option that
terminate pursuant to a Vesting
Expiration.
7. Termination of
Service. If the Optionee’s employment terminates, any portion of the
Option which has vested shall expire on the earliest of the following occasions
(or such later date as the Committee may determine):
(a)
the Expiration Date;
(b)
the date three (3) months after the termination of the Optionee’s employment for
any reason other than for Cause (including Disability (as defined in Section
22(e)(3) of the Internal Revenue Code), death and retirement);
(c)
the date of the Optionee’s termination of employment for Cause (as such
term is defined in the Optionee’s Employment Agreement with the
Company).
After the
date Optionee’s employment terminates, the Optionee (or in the case of the
Optionee’s death or Disability, the Optionee’s representative) may exercise all
or any portion of the Option which has vested at any time before its (i)
expiration under the preceding sentence or (ii) termination by operation of any
of the events in paragraph 5 hereof. When the Optionee’s employment terminates,
any portion of this Option which have not vested shall expire immediately
without any further action by the Committee or the Company.
8.
Assignability. This
Option may not be sold, pledged, assigned or transferred (except by will or the
laws of descent and distribution) unless with the written consent of the
Company.
9.
Representation
Letter. Upon
exercise of all or any part of the Option, the Optionee will deliver to the
Company the Exercise Representation Letter substantially the same as the one set
forth on Exhibit B hereto, as such Exhibit may be amended by the Committee from
time to time. Optionee also agrees to make such other representations as are
deemed necessary or appropriate by the Company and its counsel.
10. Rights as
Shareholder. Neither
Optionee nor his or her executor, administrator, heirs or legatees, shall be, or
have any rights or privileges of a shareholder of the Company in respect of the
Shares unless and until certificates representing such Shares shall have been
issued in Optionee's name.
11.
No Right of
Employment.
Neither the grant nor exercise of any Option nor anything in the Plan or this
Agreement shall impose upon the Company any obligation to employ or continue to
employ any Optionee. The right of the Company to terminate any employee shall
not be diminished or affected because an Option has been granted to such
employee.
12. Mandatory
Arbitration. In
the event of any dispute between the Company and Optionee regarding this
Agreement, the dispute and any issue as to the arbitrability of such dispute,
shall be settled to the exclusion of a court of law, by arbitration in New York
City, New York by a panel of three arbitrators (each party shall choose one
arbitrator and the third shall be chosen by the two arbitrators so selected) in
accordance with the Commercial Arbitration Rules of the American Arbitration
Association then in effect. The decision of a majority of the arbitrators shall
be final and binding upon the parties. All costs of the arbitration and the fees
of the arbitrators shall be allocated between the parties as determined by a
majority of the arbitrators, it being the intention of the parties that the
prevailing party in such a proceeding be made whole with respect to its
expenses.
13. The Company’s Rights.
The existence of the Option shall not affect in any way the right or power of
the Company or its stockholders to make or authorize any or all adjustments,
recapitalizations, reorganizations or other changes in the Company's capital
structure or its business, or any merger or consolidation of the Company, or any
issue of bonds, debentures, preferred or other stocks with preference ahead of
or convertible into, or otherwise affecting the Common Stock or the rights
thereof, or the dissolution or liquidation of the Company, or any sale or
transfer of all or any part of the Company's assets or business, or any other
corporate act or proceeding, whether of a similar character or
otherwise.
14. Optionee. Whenever
the word “Optionee” is used in any provision of this Agreement under
circumstances where the provision should logically be construed, as determined
by the Committee, to apply to the estate, personal representative, beneficiary
to whom the Option or Shares may be transferred by will or by the laws of
descent and distribution, or another permitted transferee, the word “Optionee”
shall be deemed to include such person.
15.
Conformity with
Plan. This Agreement is intended to conform in all respects with, and is
subject to all applicable provisions of, the Plan. Inconsistencies between this
Agreement and the Plan shall be resolved in accordance with the terms of the
Plan. In the event of any ambiguity in this Agreement or any matters as to which
this Agreement is silent, the Plan shall govern. A copy of the Plan is provided
to Optionee with this Agreement as Exhibit C.
16.
Section 409A
Compliance. To the extent applicable, the Board or the Committee may at
any time and from time to time amend, in whole or in part, any or all of the
provisions of this Agreement (in a manner determined by the Board or Committee
in its sole discretion) solely to comply with Section 409A of the Code and the
regulations promulgated thereunder, subject to the terms and conditions of the
Plan.
17. Incentive Stock
Option. Subject to the provisions of the Plan, this Option is an
Incentive Stock Option. To the extent the number of Shares exceeds the limit set
forth in Section 6.3 of the Plan, such Shares shall be deemed granted pursuant
to a Nonqualified Stock Option. Unless otherwise indicated by the Participant in
the notice of exercise, upon any exercise of this Option, the number of
exercised Shares that shall be deemed to be exercised pursuant to an Incentive
Stock Option shall equal the total number of Shares so exercised multiplied by a
fraction, (i) the numerator of which is the number of unexercised Shares that
could then be exercised pursuant to an Incentive Stock Option and (ii) the
denominator of which is the then total number of unexercised
Shares.
18. Disqualifying
Disposition. In the event that Common Stock acquired upon exercise of
this Option is disposed of by the Participant in a “Disqualifying Disposition,”
such Participant shall notify the Company in writing within thirty (30) days
after such disposition of the date and terms of such disposition. For purposes
hereof, “Disqualifying Disposition” shall mean a disposition of Common Stock
that is acquired upon the exercise of this Option (and that is not deemed
granted pursuant to a Nonqualified Stock Option under Section 17 hereof ) prior
to the expiration of either two years from the Grant Date of this Option or one
year from the transfer of shares to the Participant pursuant to the exercise of
this Option.
19. Notices. All notices
and other communications made or given pursuant to this Agreement shall be in
writing and shall be sufficiently made or given if hand delivered or mailed by
certified mail, addressed to the Optionee at the address contained in the
records of the Company, or addressed to the Committee, care of the Company to
the attention of its Corporate Secretary at its principal office or, if the
receiving party consents in advance, transmitted and received via telecopy or
via such other electronic transmission mechanism as may be available to the
parties.
20. Binding Effect. This
Agreement shall be binding upon and inure to the benefit of Optionee, his heirs
and successors, and of the Company, its successors and assigns.
21. Governing Law. This
Agreement shall be governed by the laws of the State of New York, without giving
effect to principles of conflicts of laws.
22. Descriptive
Headings. Titles
to Sections are solely for informational purposes.
IN
WITNESS WHEREOF, this Agreement is effective as of, and the date of grant shall
be _______ __, 20__.
RINO
INTERNATIONAL CORPORATION
a
Nevada corporation
By:
Its:
OPTIONEE
Print
Name
EXHIBIT
A
VESTING
SCHEDULE AND OPTION EXERCISE PRICE
Number of Shares
Vesting Date
Exercise Price per Share
EXHIBIT
B
______________,
20___
RINO
International Corporation
Re: Stock
Option Exercise
To Whom
It May Concern:
I (the
“Optionee”) hereby exercise my right to purchase ________ shares of common stock
(the “Shares”) of RINO International Corporation, a Nevada Company (the
“Company”), pursuant to, and in accordance with, an option agreement dated
_______________, 20__ (the “Agreement”). As provided in such Agreement, I
deliver herewith payment as set forth in the Agreement in the amount of the
aggregate option exercise price. Please deliver to me at my address as set forth
above stock certificates representing the subject shares registered in my
name.
The
Optionee hereby represents and agrees as follows:
1. The
Optionee acknowledges receipt of a copy of the Agreement. The Optionee has
carefully reviewed the Agreement.
2. The
Optionee is a resident of __________.
3. The
Optionee represents and agrees that if the Optionee is an “affiliate” (as
defined in Rule 144 under the Securities Act of 1933) of the Company at the time
the Optionee desires to sell any of the Shares, the Optionee will be subject to
certain restrictions under, and will comply with all of the requirements of,
applicable federal and state securities laws.
The
foregoing representations and warranties are given on ________ at
_____________________.
___
Optionee encloses a check in the amount of $ ______________ for the payment of
the aggregate amount of the Option Exercise Price.
___
Optionee elects a Cashless Exercise for __________Option Shares.
OPTIONEE:
_____________________________
Exhibit
C
RINO
International Corporation 2009 Stock Incentive Plan
SCHEDULE
A
The
following terms used but not defined in the Agreement and defined in the Plan
have been provided below for the convenience of the Participant but are
qualified in their entirety by the full text of such terms in the
Plan.
A.
“Acquisition
Event” means a
merger or consolidation in which the Company is not the surviving entity, any
transaction that results in the acquisition of all or substantially all of the
Company’s outstanding Common Stock by a single person or entity or by a group of
persons and/or entities acting in concert, or the sale or transfer of all or
substantially all of the Company’s assets.
B.
“Affiliate” means each of the following:
(a) any Subsidiary; (b) any Parent; (c) any corporation, trade or
business (including, without limitation, a partnership or limited liability
company) which is directly or indirectly controlled 50% or more (whether by
ownership of stock, assets or an equivalent ownership interest or voting
interest) by the Company; (d) any corporation, trade or business (including,
without limitation, a partnership or limited liability company) which directly
or indirectly controls 50% or more (whether by ownership of stock, assets or an
equivalent ownership interest or voting interest) of the Company; and
(e) any other entity in which the Company or any of its Affiliates has a
material equity interest and which is designated as an “Affiliate” by resolution
of the Committee; provided that the Common Stock subject to any Award
constitutes “service recipient stock” for purposes of Section 409A of the Code
or otherwise does not subject the Award to Section 409A of the
Code.
C.
“Appreciation
Award” means any
Award under this Plan of any Stock Option, Stock Appreciation Right or Other
Stock-Based Award, provided that such Other Stock-Based Award is based on the
appreciation in value of a share of Common Stock in excess of an amount equal to
at least the Fair Market Value of the Common Stock on the date such Other
Stock-Based Award is granted.
D.
“Award” means any award under this
Plan of any Stock Option, Stock Appreciation Right, Restricted Stock,
Performance Share, Other Stock-Based Award or Performance-Based Cash Awards. All
Awards shall be granted by, confirmed by, and subject to the terms of, a written
agreement executed by the Company and the Participant.
E.
“Board” means the Board of Directors
of the Company.
F.
“Cause” means with respect to a
Participant’s Termination of Employment or Termination of Consultancy from and
after the date hereof, the following: (a) in the case where there is no
employment agreement, consulting agreement, change in control agreement or
similar agreement in effect between the Company or an Affiliate and the
Participant at the time of the grant of the Award (or where there is such an
agreement but it does not define “cause” (or words of like import)), termination
due to: (i) a Participant’s conviction of, or plea of guilty or nolo contendere
to, a felony; (ii) perpetration by a Participant of an illegal act, or fraud
which could cause significant economic injury to the Company; (iii) continuing
willful and deliberate failure by the Participant to perform the Participant’s
duties in any material respect, provided that the Participant is given notice
and an opportunity to effectuate a cure as determined by the Committee; or (iv)
a Participant’s willful misconduct with regard to the Company that could have a
material adverse effect on the Company; or (b) in the case where there is an
employment agreement, consulting agreement, change in control agreement or
similar agreement in effect between the Company or an Affiliate and the
Participant at the time of the grant of the Award that defines “cause” (or words
of like import), “cause” as defined under such agreement; provided, however,
that with regard to any agreement under which the definition of “cause” only
applies on occurrence of a change in control, such definition of “cause” shall
not apply until a change in control actually takes place and then only with
regard to a termination thereafter. With respect to a Participant’s Termination
of Directorship, “cause” means an act or failure to act that constitutes cause
for removal of a director under applicable Nevada law.
G.
“Change in
Control” has the
meaning set forth in Section 13.2 of the Plan.
H.
“Change in
Control Price”
has the meaning set forth in Section 13.1 of the Plan.
I.
“Code” means the Internal Revenue
Code of 1986, as amended. Any reference to any section of the Code shall also be
a reference to any successor provision and any Treasury Regulation promulgated
thereunder.
J.
“Committee”
means: (a) with respect to the application of this Plan to Eligible
Employees and Consultants, a committee or subcommittee of the Board appointed
from time to time by the Board, which committee or subcommittee shall consist of
two or more non-employee directors, each of whom shall be (i) a “non-employee
director” as defined in Rule 16b-3; (ii) to the extent required by Section
162(m) of the Code, an “outside director” as defined under Section 162(m) of the
Code; and (iii) an “independent director” for purposes of the applicable stock
exchange rules; and (b) with respect to the application of this Plan to
Non-Employee Directors, the Board. To the extent that no Committee exists that
has the authority to administer this Plan, the functions of the Committee shall
be exercised by the Board. If for any reason the appointed Committee does not
meet the requirements of Rule 16b-3 or Section 162(m) of the Code, such
noncompliance shall not affect the validity of Awards, grants, interpretations
or other actions of the Committee.
K.
“Common
Stock” means the
common stock, $0.0001 par value per share, of the Company.
L.
“Company” means RINO International
Corporation, a Nevada Corporation, and its successors by operation of
law.
M.
“Consultant” means any individual or
entity who provides bona fide consulting or advisory services to the Company or
its Affiliates pursuant to a written agreement, which are not in connection with
the offer and sale of securities in a capital-raising transaction.
N.
“Disability” means with respect to a
Participant’s Termination, a permanent and total disability as defined in
Section 22(e)(3) of the Code. A Disability shall only be deemed to occur at the
time of the determination by the Committee of the Disability. Notwithstanding
the foregoing, for Awards that are subject to Section 409A of the Code,
Disability shall mean that a Participant is disabled under Section
409A(a)(2)(C)(i) or (ii) of the Code.
O.
“Effective
Date” means the
effective date of this Plan as defined in Article XVII.
P.
“Eligible
Employees” means
each employee of the Company or an Affiliate.
Q.
“Exchange
Act” means the
Securities Exchange Act of 1934, as amended. Any references to any section of
the Exchange Act shall also be a reference to any successor
provision.
R.
“Fair
Market Value”
means, unless otherwise required by any applicable provision of the Code or any
regulations issued thereunder, as of any date and except as provided below, the
last sales price reported for the Common Stock on the applicable date: (a) as
reported on the principal national securities exchange in the United States on
which it is then traded, or (b) if the Common Stock is not traded, listed or
otherwise reported or quoted, the Committee shall determine in good faith the
Fair Market Value in whatever manner it considers appropriate taking into
account the requirements of Section 409A of the Code. For purposes of the grant
of any Award, the applicable date shall be the trading day immediately prior to
the date on which the Award is granted. For purposes of the exercise of any
Award, the applicable date shall be the date a notice of exercise is received by
the Committee or, if not a day on which the applicable market is open, the next
day that it is open.
S.
“Family
Member” means
“family member” as defined in Section A.1.(5) of the general instructions of
Form S-8.
T.
“GAAP” has the meaning set forth in
Section 11.2(c)(ii).
U.
“Incentive
Stock Option”
means any Stock Option awarded to an Eligible Employee of the Company, its
Subsidiaries and its Parent (if any) under this Plan intended to be and
designated as an “Incentive Stock Option” within the meaning of Section 422 of
the Code.
V.
“Non-Employee
Director” means a
director of the Company who is not an active employee of the Company or an
Affiliate.
W. “Non-Qualified
Stock Option”
means any Stock Option awarded under this Plan that is not an Incentive Stock
Option.
X.
“Other
Stock-Based Award” means an Award under Article
X of this Plan that is valued in whole or in part by reference to, or is payable
in or otherwise based on, Common Stock, including, without limitation, a
restricted stock unit or an Award valued by reference to an
Affiliate.
Y.
“Parent” means any parent corporation
of the Company within the meaning of Section 424(e) of the Code.
Z.
“Participant” means an Eligible Employee,
Non-Employee Director or Consultant to whom an Award has been granted pursuant
to the Plan.
AA.
“Performance-Based
Cash Award” means
a cash Award under Article XI of this Plan that is payable or otherwise based on
the attainment of certain pre-established performance goals during a Performance
Period.
BB.
“Performance
Goals” mean such performance goals as determined in writing by the
Committee.
CC.
“Performance
Period” means the
duration of the period during which receipt of an Award is subject to the
satisfaction of performance criteria, such period as determined by the Committee
in its sole discretion.
DD.
“Performance
Share” means an
Award made pursuant to Article IX of this Plan of the right to receive Common
Stock or cash of an equivalent value at the end of a specified Performance
Period.
EE.
“Person” means any individual,
corporation, partnership, limited liability company, firm, joint venture,
association, joint-stock company, trust, incorporated organization, governmental
or regulatory or other entity.
FF.
“Plan” means this RINO
International Corporation 2009 Stock Incentive Plan, as amended from time to
time.
GG.
“Reference
Stock Option” has
the meaning set forth in Section 7.1 of the Plan.
HH. “Restricted
Stock” means an
Award of shares of Common Stock under this Plan that is subject to restrictions
under Article VIII.
II.
“Restriction
Period” has the
meaning set forth in Subsection 8.3(a) of the Plan.
JJ.
“Rule
16b-3” means Rule
16b-3 under Section 16(b) of the Exchange Act as then in effect or any successor
provision.
KK.
“Section
162(m) of the Code” means the exception for
performance-based compensation under Section 162(m) of the Code and any
applicable Treasury regulations thereunder.
LL.
“Section
409A of the Code”
means the nonqualified deferred compensation rules under Section 409A of the
Code and any applicable Treasury regulations thereunder.
MM. “Securities
Act” means the
Securities Act of 1933, as amended and all rules and regulations promulgated
thereunder. Any reference to any section of the Securities Act shall also be a
reference to any successor provision.
NN.
“Stock
Appreciation Right” means the right pursuant to
an Award granted under Article VII. A Tandem Stock Appreciation Right shall mean
the right to surrender to the Company all (or a portion) of a Stock Option in
exchange for cash or a number of shares of Common Stock (as determined by the
Committee, in its sole discretion, on the date of grant) equal to the difference
between (a) the Fair Market Value on the date such Stock Option (or such
portion thereof) is surrendered, of the Common Stock covered by such Stock
Option (or such portion thereof), and (b) the aggregate exercise price of
such Stock Option (or such portion thereof). A Non-Tandem Stock Appreciation
Right shall mean the right to receive cash or a number of shares of Common Stock
(as determined by the Committee, in its sole discretion, on the date of grant)
equal to the difference between (i) the Fair Market Value of a share of
Common Stock on the date such right is exercised, and (ii) the aggregate
exercise price of such right, otherwise than on surrender of a Stock
Option.
OO.
“Stock
Option” or “Option” means any option to purchase
shares of Common Stock granted to Eligible Employees, Non-Employee Directors or
Consultants granted pursuant to Article VI of the Plan.
PP.
“Subsidiary” means any subsidiary
corporation of the Company within the meaning of Section 424(f) of the
Code.
QQ.
“Ten
Percent Stockholder” means a person owning stock
possessing more than 10% of the total combined voting power of all classes of
stock of the Company, its Subsidiaries or its Parent.
RR. “Termination” means a Termination of
Consultancy, Termination of Directorship or Termination of Employment, as
applicable.
SS. “Termination
of Consultancy”
means: (a) that the Consultant is no longer acting as a consultant to the
Company or an Affiliate; or (b) when an entity which is retaining a Participant
as a Consultant ceases to be an Affiliate unless the Participant otherwise is,
or thereupon becomes, a Consultant to the Company or another Affiliate at the
time the entity ceases to be an Affiliate. In the event that a Consultant
becomes an Eligible Employee or a Non-Employee Director upon the termination of
his or her consultancy, unless otherwise determined by the Committee, in its
sole discretion, no Termination of Consultancy shall be deemed to occur until
such time as such Consultant is no longer a Consultant, an Eligible Employee or
a Non-Employee Director. Notwithstanding the foregoing, the Committee may, in
its sole discretion, otherwise define Termination of Consultancy in the Award
agreement or, if no rights of a Participant are reduced, may otherwise define
Termination of Consultancy thereafter.
TT. “Termination
of Directorship”
means that the Non-Employee Director has ceased to be a director of the Company;
except that if a Non-Employee Director becomes an Eligible Employee or a
Consultant upon the termination of his or her directorship, his or her ceasing
to be a director of the Company shall not be treated as a Termination of
Directorship unless and until the Participant has a Termination of Employment or
Termination of Consultancy, as the case may be.
UU. “Termination
of Employment”
means: (a) a termination of employment (for reasons other than a military
or personal leave of absence granted by the Company) of a Participant from the
Company and its Affiliates; or (b) when an entity which is employing a
Participant ceases to be an Affiliate, unless the Participant otherwise is, or
thereupon becomes, employed by the Company or another Affiliate at the time the
entity ceases to be an Affiliate. In the event that an Eligible Employee becomes
a Consultant or a Non-Employee Director upon the termination of his or her
employment, unless otherwise determined by the Committee, in its sole
discretion, no Termination of Employment shall be deemed to occur until such
time as such Eligible Employee is no longer an Eligible Employee, a Consultant
or a Non-Employee Director. Notwithstanding the foregoing, the Committee may, in
its sole discretion, otherwise define Termination of Employment in the Award
agreement or, if no rights of a Participant are reduced, may otherwise define
Termination of Employment thereafter.
VV. “Transfer” means: (a) when used as a
noun, any direct or indirect transfer, sale, assignment, pledge, hypothecation,
encumbrance or other disposition (including the issuance of equity in a Person),
whether for value or no value and whether voluntary or involuntary (including by
operation of law), and (b) when used as a verb, to directly or indirectly
transfer, sell, assign, pledge, encumber, charge, hypothecate or otherwise
dispose of (including the issuance of equity in a Person) whether for value or
for no value and whether voluntarily or involuntarily (including by operation of
law). “Transferred” and “Transferrable” shall have a correlative
meaning.
Dates Referenced Herein and Documents Incorporated by Reference
