SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934
Filed by the Registrant [x]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by
Rule 14A-6(e)(2))
[x] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to 240.14a-11(c) or 240.14a-12
Netsmart Technologies, Inc.
(Name of Registrant as Specified In Its Charter)
N.A.
(Name of Person(s) Filing Proxy Statement if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[ ] $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), 14a-6(i)(2) or Item
22(a)(2) of Schedule 14A. [ ] $500 per each party to the controversy pursuant to
Exchange Act Rule 14a-6(i)(3). [ ] Fee computed on table below per Exchange Act
Rules 14a-6(i)(4) and 0-11.
1) Title of each class of securities to which transaction
applies:
...............................................................
2) Aggregate number of securities to which transaction applies:
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3) Per unit price or other underlying value of transaction
computed pursuant to Exchange Act Rule 0-11 (Set forth the
amount on which the filing fee is calculated and state how it
was determined):
...............................................................
4) Proposed maximum aggregate value of transaction:
...............................................................
5) Total fee paid:
...............................................................
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the offsetting
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statement number, or the Form or Schedule and the date of its filing.
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Netsmart Technologies, Inc.
146 Nassau Avenue
Islip, New York 11751
NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
January 9, 2003
NOTICE IS HEREBY GIVEN that a special meeting of stockholders of
Netsmart Technologies, Inc., a Delaware corporation (the "Company"), will be
held at the offices of the Company, 146 Nassau Avenue, Islip, New York 11751 on
Thursday, January 9, 2003, at10:00 A.M. local time, for the purpose of
considering and acting upon the following matters:
(1) The approval of an amendment to the 2001 Long-Term Incentive Plan;
and
(2) The approval of the selection of Marcum & Kliegman LLP as the
Company's independent certified public accountants for the year
ending December 31, 2002.
The board of directors of the Company has fixed the close of business
on November 12, 2002 as the record date for the determination of stockholders
entitled to notice of and to vote at the special meeting. A list of stockholders
eligible to vote at the special meeting will be available for inspection during
normal business hours for purposes germane to the meeting during the ten days
prior to the meeting at the offices of the Company, 146 Nassau Avenue, Islip,
New York 11751.
The enclosed proxy statement contains information pertaining to the
matters to be voted on at the special meeting. A copy of the Company's Annual
Report on Form 10-K for 2001 is being mailed with this proxy statement.
By order of the Board of Directors
Anthony F. Grisanti
Secretary
Islip, New York
November 14, 2002
THE MATTERS BEING VOTED ON AT THE SPECIAL MEETING ARE IMPORTANT TO THE COMPANY.
IN ORDER THAT YOUR VOTE IS COUNTED AT THE SPECIAL MEETING, PLEASE EXECUTE, DATE
AND PROMPTLY MAIL THE ENCLOSED PROXY CARD IN THE ENCLOSED ENVELOPE, WHICH
REQUIRES NO POSTAGE IF MAILED IN THE UNITED STATES. THE GIVING OF A PROXY WILL
NOT AFFECT YOUR RIGHT TO VOTE IN PERSON AT THE SPECIAL MEETING IF THE PROXY IS
REVOKED IN THE MANNER SET FORTH IN THE PROXY STATEMENT.
NETSMART TECHNOLOGIES, INC.
PROXY STATEMENT
Special Meeting of Stockholders
GENERAL INFORMATION
-------------------
The accompanying proxy and this proxy statement are furnished in
connection with the solicitation by the board of directors of Netsmart
Technologies, Inc., a Delaware corporation, of proxies for use at our special
meeting of stockholders to be held at our executive offices, 146 Nassau Avenue,
Islip, New York 11751 on Thursday, January 9, 2003 at 10:00 A.M. or at any
adjournment thereof. We are mailing this proxy statement and the related proxy
and a copy of our Form 10-K annual report for 2001 on or about November 14,
2002.
At the special meeting, you will be asked to (a) approve an amendment
to our 2001 Long-Term Incentive Plan and (b) approve the selection of Marcum &
Kliegman, LLP as our independent certified public accountants for the year ended
December 31, 2002. No other matters which will be voted upon at the special
meeting.
We encourage you to review the detailed discussion presented in this
proxy statement and either return the completed and executed proxy or attend the
special meeting.
Record Date; Outstanding Shares; Voting Rights and Proxies
Stockholders of record at the close of business on November 12, 2002,
which is the record date for the special meeting, are entitled to notice and to
vote at the special meeting. As of the close of business on the record date, we
had 3,877,252 shares of common stock outstanding. You are entitled to one vote
for each share you owned of record on the record date.
We require the presence in person or by proxy of holders of a majority
of the shares of common stock that were outstanding on the record date in order
to conduct the special meeting. If you file a proxy or attend the special
meeting, your shares are counted as being present at the special meeting for
purposes of determining whether there is a quorum, even if you abstain from
voting on all matters. The vote required for the election of directors and
approval of other proposals is set forth in the discussion of each proposal.
You are requested to complete, sign, date and return the enclosed proxy
without delay in order to ensure that your shares are voted at the special
meeting. If you return a signed proxy, you may still attend the special meeting
and vote in person. If you give a proxy, you have the right to revoke it at any
time before it is exercised by executing and returning a proxy bearing a later
date, by giving us written notice that you have revoked your proxy or by
attending the special meeting and voting in person. There is no required form
for a proxy revocation. If you properly execute a proxy and do not revoke it,
your shares will be voted at the special meeting in accordance with your
instructions.
If you sign and return a proxy but do not specify how you want your
shares voted with respect to any or all of the proposals listed therein, the
shares represented by your proxy will be voted for all the proposals, including
the election of directors. Abstentions and broker non-votes are not counted as
votes "for" or "against" a proposal.
Cost of Solicitation
We will bear the costs of soliciting proxies. In addition to the
solicitation of proxies by mail, our directors, officers and employees, who will
receive no compensation in addition to their regular salary, may solicit proxies
by mail, telecopier, telephone or personal interview. We will request that
brokers and other custodians, nominees and fiduciaries forward proxy material to
the beneficial holders of the common stock held of record by such persons, where
appropriate, and will, upon request, reimburse such persons for their reasonable
out-of-pocket expenses incurred in connection therewith.
BENEFICIAL OWNERSHIP OF SECURITIES AND SECURITY HOLDINGS OF MANAGEMENT
----------------------------------------------------------------------
The following table and discussion provides information as to the
shares of common stock beneficially owned on October 31, 2002 by:
* each director;
* each officer named in the summary compensation table;
* each person owning of record or known by us, based on information
provided to us by the persons named below, to own beneficially at least
5% of our common stock; and
* all officers and directors as a group.
Percent of Outstanding
----------------------
Name and Address Shares Common Stock
---------------- ------ ------------
John F. Phillips 223,472 5.7%
146 Nassau Avenue
Islip, New York 11751
R&R Opportunity Fund, L.P. 218,500 5.7%
1250 Broadway; 12th floor
New York, New York 10001
Edward D. Bright 193,172 5.1%
Gerald O. Koop 177,283 4.7%
James L. Conway 169,632 4.4%
Anthony F. Grisanti 126,875 3.3%
Joseph G. Sicinski 34,500 *
Francis J. Calcagno 2,500 *
John S.T. Gallagher 12,500 *
All directors and officers as a group 932,316 22.1%
(seven individuals)
----------
* Less than 1%.
Except as set forth in the following paragraphs, each person has the
sole voting and sole investment power and direct beneficial ownership of the
shares. Each person is deemed to beneficially own shares of common stock
issuable upon exercise of options or warrants which are exercisable on or within
60 days after the date as of which the information is provided.
The number of shares owned by our directors and officers shown in the
table includes shares of common stock which are issuable upon exercise of
options and warrants that are exercisable at October 31, 2002 or will become
exercisable within 60 days after that date. Set forth below is the number of
shares issuable upon exercise of those options and warrants for each of our
directors and the officers named in the Summary Compensation Table.
Name Number
---- ------
John F. Phillips 106,250
Edward D. Bright 91,250
Gerald O. Koop 90,000
James L. Conway 58,250
Anthony F. Grisanti 26,750
Joseph G. Sicinski 2,500
Francis J. Calcagno 2,500
John S.T. Gallagher 12,500
All officers and directors as a group 341,750
The options and warrants held by Mr. Conway include warrants,
exercisable at $12.00 per share, to purchase 34,000 shares of common stock,
which are held by Mr. Conway, and 14,250 shares of common stock which are held
by Mr. Conway's wife, as to which Mr. Conway disclaims beneficial ownership.
EXECUTIVE COMPENSATION
----------------------
Set forth below is information with respect to compensation paid or
accrued by us for 2001, 2000 and 1999 to our chief executive officer and to each
of our other officers whose salary and bonus for 2001 exceeded $100,000.
SUMMARY COMPENSATION TABLE
Long-Term
---------
Annual Compensation Compensation (Awards)
------------------- --------------------
Options, SARs
Name and Principal Position Year Salary Bonus (Number)
--------------------------- ---- ------ ----- ---------
James L. Conway, CEO 2001 $182,239 $ 61,261 --
2000 177,120 102,515 21,000
1999 172,000 107,000 --
Gerald O. Koop, president 2001 160,959 97,874 --
2000 156,480 139,269 21,000
1999 152,000 172,169 --
John F. Phillips, vice 2001 160,959 41,041 --
president 2000 156,480 83,973 18,750
1999 152,000 64,000 --
Anthony F. Grisanti, chief 2001 139,679 65,821 --
financial officer 2000 135,840 104,656 18,750
1999 132,000 100,000 --
The bonuses for Mr. Koop includes accrued commissions of $82,874 for
2001, $94,568 for 2000 and $100,169 for 1999. These commissions are being paid
in installments through 2002.
In January 2001, we entered into employment agreements with Messrs.
James L. Conway, John F. Phillips, Gerald O. Koop and Anthony F. Grisanti for a
term of three years for Messrs. Conway and Grisanti and two years for Messrs.
Koop and Phillips. We believe that these officers are vital to our business.
Each of the officers has the right to extend the term for an additional year.
Following termination of the employment term, or earlier at the discretion of
the officer, each of the officers has the right to continue as a part-time
consultant for a term of five years for annual compensation of $75,000. Pursuant
to these agreements, these officers receive the following salaries in 2002: Mr.
Conway - $178,751, Mr. Koop - $156,407, Mr. Phillips - $156,407, and Mr.
Grisanti - $134,063. The agreements provide for annual increases. The agreements
provide that the executives are eligible to participate in a bonus pool to be
determined annually by the board, based on the executive's performance. The
agreements also provide each of these officers with an automobile allowance,
which is included under "Salary," and insurance benefits. In the event of the
officer's dismissal or resignation or a material change in his duties or in the
event of a termination of employment by the executive or by us as a result of a
change of control, the officer may receive severance payments of between 30 and
36 months' compensation.
Option Exercises and Outstanding Options
The following table sets forth information concerning the exercise of
options during the year ended December 31, 2001 and the year-end value of
options held by our officers named in the Summary Compensation Table. No options
were granted during 2001 to any of our officers named in the Summary
Compensation Table. No stock appreciation rights have been granted.
Aggregate Option Exercises in Last Fiscal Year and Fiscal Year-End Option Value
(All options were fully exercisable at year end)
Number of
Securities
Underlying Value of
Unexercised Unexercised
Options at In-the-Money
Shares Acquired Value Fiscal Options at
Name Upon Exercise Realized Year End Fiscal Year End
---- ------------- -------- -------- ---------------
James L. Conway -- -- 69,250 $ 23,520
Gerald O. Koop 2,888 $3,350 101,000 162,920
John F. Phillips 9,000 7,290 98,750 160,400
Anthony F. Grisanti -- -- 23,802 28,224
The determination of "in the money" options at December 31, 2001, is
based on the closing price of the common stock on the Nasdaq SmallCap Market on
December 31, 2001, which was $2.93 per share.
The options held by Mr. Conway include warrants, exercisable at $12.00
per share, held by Mr. Conway (34,000 shares) and Mr. Conway's wife (14,250
shares). Mr. Conway disclaims beneficial interest in securities held by his
wife.
APPROVAL OF THE AMENDMENT TO THE 2001 LONG-TERM INCENTIVE PLAN
--------------------------------------------------------------
The board of directors believes that in order to attract and retain the
services of executive and other key employees, it is necessary for us to have
the ability and flexibility to provide a compensation package which compares
favorably with those offered by other companies. Accordingly, in December 4,
2001, the board of directors adopted, and on March 2, 2002, the stockholders
approved, the 2001 Long-Term Incentive Plan, covering 180,000 shares of common
stock. On October 11, 2002, the board of directors adopted, subject to
stockholder approval, an amendment to the 2001 Long-Term Incentive Plan to
increase the number of shares subject to the plan from 180,000 shares to 550,000
shares.
We presently have two other stock option plans, the 1998 and 1999
Long-Term Incentive Plans. We may grant options or other equity-based incentives
for a total of 1,085,000 shares of common stock under these prior plans. As of
October 31, 2002, we had issued a total of 527,800 shares of common stock under
these plans, 553,700 shares of common stock were subject to outstanding options,
and 3,500 shares of common stock were available for grant. In addition, any
shares which are subject to outstanding options which expire unexercised may be
subject to awards under the plans.
Our stock option plans are administered by a committee of at least two
non-employee directors appointed by the board. The compensation committee serves
as the committee under all of our stock option plans. Any member or alternate
member of the committee is not eligible to receive options or stock under these
plans except for the annual option grant and certain options grants which were
approved by the stockholders in connection with the approval of the 1998 plan.
The committee has broad discretion in determining the persons to whom stock
options or other awards are to be granted and the terms and conditions of the
award, including the type of award, the exercise price and term and restrictions
and forfeiture conditions. If no committee is appointed, the functions of the
committee are performed by the board of directors. The compensation committee
consists of Messrs. Francis J. Calcagno, John S.T. Gallagher and Joseph G.
Sicinski.
Set forth below is a summary of the 2001 plan, as amended, but this
summary is qualified in its entirety by reference to the full text of the 2001
plan, a copy of which is included as Exhibit A to this proxy statement. The
plan, which expires in December 3, 2011 unless terminated earlier by the board
of directors, gives the board of directors broad authority to modify the plan,
and, in particular, to eliminate any provisions which are not required in order
to meet the requirements of Rule 16b-3 of the Securities and Exchange Commission
pursuant with the Securities Exchange Act of 1934, as amended.
We may issue a maximum of 550,000 shares of common stock under the
amended 2001 plan, of which options to purchase 178,500 shares of common stock
have been granted. If an option under the 2001 plan expires or terminates
without being exercised in full or if shares awarded under the plan are
forfeited or otherwise terminate without a payment being made to the participant
in the form of stock, such shares will again be available for future issuance
under the plan. The plan imposes no limit on the number of officers and other
key employees to whom awards may be made.
We may make awards under the 2001 plan to key employees, including
officers and directors of us and our subsidiaries, and consultants and others
who perform services for us and our subsidiaries, except that directors who are
not employed by us or our subsidiaries or are not otherwise engaged by us are
not eligible for options under the 2001 plan, except that the 2001 plan provides
for the automatic grant to each non-employee directors of a non-qualified option
to purchase 5,000 shares of common stock on April 1st of each year, commencing
April 1, 2002. If any non-employee director is first elected to the board after
April 1st in any year, the director will receive the automatic grant on an
option to purchase 5,000 shares of common stock on the date of his or her
election. The options to non-employee directors pursuant to the annual grant or
the grant to newly-elected non-employee directors have a term of five years from
the date of grant and become exercisable as to all of the shares of common stock
subject to the option six months from the date of grant, except that they become
immediately exercisable if a change of control, as defined in the 2001 plan,
should occur and terminate seven months after termination of service if such
termination is other than as a result of his or her death or disability. Three
directors, Messrs. Francis J. Calcagno, John S.T. Gallagher and Joseph G.
Sicinski, qualified as non-employee directors. During 2002, through August 31,
2002, we granted options to purchase 188,500 shares under our plans, including
the 2001 plan (prior to the amendment of the plan) at an average exercise price
of $2.44 per share. All options are exercisable at the fair market value of our
common stock on the date of grant.
The committee has the authority to grant the following types of awards
under the 2001 plan: incentive or non-qualified stock options; stock
appreciation rights; restricted stock; deferred stock; stock purchase rights
and/or other stock-based awards. The 2001 plan is designed to provide us with
broad discretion to grant incentive stock-based rights.
Tax consequences of awards provided under the 2001 plan are dependent
upon the type of award granted. The grant of an incentive or non-qualified stock
options does not result in any taxable income to the recipient or deduction to
us. Upon exercise of a non-qualified stock option, the recipient recognizes
income in the amount by which the fair market value on the date of exercise
exceeds the exercise price of the option, and we receive a corresponding tax
deduction. In the case of an incentive stock option, no income is recognized to
the employee, and no deduction is available to us, if the stock issued upon
exercise of the option is not transferred during the two years from the date of
grant or one year from the date of exercise, whichever occurs later. However,
the exercise of an incentive stock option may result in additional taxes through
the application of the alternative minimum tax. In the event of a sale or other
disqualifying transfer of stock issued upon exercise of an incentive stock
option, the employee realizes income, and we receive a tax deduction, equal to
the amount by which the lesser of the fair market value at the date of exercise
or the proceeds from the sale exceeds the exercise price. The issuance of stock
pursuant to a stock grant results in taxable income to the recipient at the date
the rights to the stock become non-forfeitable, and we receive a deduction in
such amount. However, if the recipient of the award makes an election in
accordance with the Internal Revenue Code of 1986, as amended, the amount of his
or her income is based on the fair market value on the date of grant rather than
the fair market value on the date the rights become non-forfeitable. When
compensation is to be recognized by the employee, appropriate arrangements may
be required to be made with respect to the payment of withholding tax.
Option Grants
No options were granted to the officers named in the Summary
Compensation Table during 2001. The only options granted during 2001 to our
directors were options to purchase 5,000 shares of common stock which were
automatically granted to non-management directors. During 2002, we granted
options to purchase 178,500 shares of common stock under the 2001 plan. These
options included options to purchase 20,000 shares which were granted to each of
James L. Conway and Gerald O. Koop, an option to purchase 16,000 shares which
was granted to Anthony F. Grisanti, and an option to purchase 15,000 shares
which was granted to John F. Phillips. These options have an exercise price of
$2.50 per share, which was the fair market value on the date of grant.
Vote Required
The proposal to approve the amendment to the 2001 plan requires the
approval of a majority of the shares of common stock present and voting,
provided that a quorum is present.
The board of directors recommends a vote FOR the proposal.
SELECTION OF INDEPENDENT AUDITORS
---------------------------------
It is proposed that the stockholders approve the selection of Marcum &
Kliegman LLP as our independent public accountant for the year ending December
31, 2002. The audit committee has recommended, and the board of directors has
approved, the selection of Marcum & Kliegman LLP as our independent public
accountants. However, in the event approval of the proposal is not obtained, the
selection of the independent auditors will be reconsidered by the board of
directors.
At no time since its engagement has Marcum & Kliegman, LLP had any
direct or indirect financial interest in or any connection with us or any of our
subsidiaries other than as independent accountant.
Our financial statements for the years ended December 31, 2001 and 2000
were audited by Richard A. Eisner & Company, LLP, whose report on such financial
statements did not include any qualification, disclaimer, modification or
explanatory paragraph. There were no disagreements with Richard A. Eisner &
Company, LLP during the years ended December 31, 2001 or 2000 or during the
period subsequent to December 31, 2001 on any matter of accounting principles or
practices, financial statement disclosure or auditing scope or procedure.
On May 7, 2002, the audit committee of the board of directors
recommended, and the board of directors approved, the dismissal of the Richard
A. Eisner & Company, LLP, as our independent public accountants and the
selection of Marcum & Kliegman, LLP to serve as our independent public
accountant for the year ending December 31, 2002.
Vote Required
The proposal to approve the selection of Marcum & Kliegman, LLP as our
independent accountant requires the approval of a majority of the shares of
common stock present and voting, provided that a quorum is present.
The board of directors recommends a vote FOR the proposal.
OTHER MATTERS
A copy of our Form 10-K for the year ended December 31, 2001, without
exhibits, accompanies this proxy statement. Additional copies of our Form 10-K
for the year ended December 31, 2001 and Form 10-Q for the nine months ended
September 30, 2002, without exhibits, may be obtained without charge by writing
to Mr. Anthony F. Grisanti, Chief Financial Officer, Netsmart Technologies,
Inc., 146 Nassau Avenue, Islip, New York 11751. Exhibits will be furnished upon
request and upon payment of a handling charge of $.25 per page, which represents
our reasonable cost on furnishing such exhibits.
The board of directors does not know of any other matters to be brought
before the meeting. If any other matters are properly brought before the
meeting, the persons named in the enclosed proxy intend to vote such proxy in
accordance with their best judgment on such matters.
By Order of the Board of Directors
James L. Conway
Chief Executive Officer
November 14, 2002
NETSMART TECHNOLOGIES, INC.
---------------------------
2001 Long-Term Incentive Plan (as amended)
1. Purpose; Definitions.
The purpose of the Netsmart Technologies, Inc. 2001 Long-Term Incentive
Plan (the "Plan") is to enable Netsmart Technologies, Inc. (the "Company") to
attract, retain and reward key employees of the Company and its Subsidiaries and
Affiliates, and others who provide services to the Company and its Subsidiaries
and Affiliates, and strengthen the mutuality of interests between such key
employees and such other persons and the Company's stockholders, by offering
such key employees and such other persons incentives and/or other equity
interests or equity-based incentives in the Company, as well as
performance-based incentives payable in cash.
For purposes of the Plan, the following terms shall be defined as set
forth below:
(a) "Affiliate" means any corporation, partnership, limited liability
company, joint venture or other entity, other than the Company and its
Subsidiaries, that is designated by the Board as a participating employer under
the Plan, provided that the Company directly or indirectly owns at least 20% of
the combined voting power of all classes of stock of such entity or at least 20%
of the ownership interests in such entity.
(b) "Board" means the Board of Directors of the Company.
(c) "Book Value" means, as of any given date, on a per share basis (i) the
stockholders' equity in the Company as of the last day of the immediately
preceding fiscal year as reflected in the Company's consolidated balance sheet,
subject to such adjustments as the Committee shall specify at or after grant,
divided by (ii) the number of then outstanding shares of Stock as of such
year-end date, as adjusted by the Committee for subsequent events.
(d) "Cause" means a felony conviction of a participant, or the failure of a
participant to contest prosecution for a felony, or a participant's willful
misconduct or dishonesty, or breach of trust or other action by which the
participant obtains personal gain at the expense of or to the detriment of the
Company or, if the participant has an employment agreement with the Company, a
Subsidiary or Affiliate, an event which constitutes "cause" as defined in such
employment agreement.
(e) "Code" means the Internal Revenue Code of 1986, as amended from time to
time, and any successor thereto.
(f) "Commission" means the Securities and Exchange Commission or any
successor thereto.
(g) "Committee" means the Committee referred to in Section 2 of the Plan. If
at any time no Committee shall be in office, then the functions of the Committee
specified in the Plan shall be exercised by the Board.
(h) "Company" means Netsmart Technologies, Inc., a Delaware corporation, or
any successor corporation.
(i) "Deferred Stock" means an award made pursuant to Section 8 of the Plan
of the right to receive Stock at the end of a specified deferral period.
(j) "Disability" means disability as determined under procedures established
by the Committee for purposes of the Plan.
(k) "Early Retirement" means retirement, with the express consent for
purposes of the Plan of the Company at or before the time of such retirement,
from active employment with the Company and any Subsidiary or Affiliate pursuant
to the early retirement provisions of the applicable pension plan of such
entity.
(l) "Exchange Act" means the Securities Exchange Act of 1934, as amended,
from time to time, and any successor thereto.
(m) "Fair Market Value" means, as of any given date, the market price of the
Stock as determined by or in accordance with the policies established by the
Committee in good faith; provided, that, in the case of an Incentive Stock
Option, the Fair Market Value shall be determined in accordance with the Code
and the Treasury regulations under the Code.
(n) "Incentive Stock Option" means any Stock Option intended to be and
designated as an "Incentive Stock Option" within the meaning of Section 422 of
the Code.
(o) "Non-Employee Director" shall have the meaning set forth in Rule 16b-3
of the Commission pursuant to the Exchange Act or any successor definition
adopted by the Commission; provided that in the event that said rule (or
successor rule) shall not have such a definition, the term Non-Employee Director
shall mean a director of the Company who is not otherwise employed by the
Company or any Subsidiary or Affiliate.
(p) "Non-Qualified Stock Option" means any Stock Option that is not an
Incentive Stock Option.
(q) "Normal Retirement" means retirement from active employment with the
Company and any Subsidiary or Affiliate on or after age 65.
(r) "Other Stock-Based Award" means an award under Section 10 of the Plan
that is valued in whole or in part by reference to, or is otherwise based on,
Stock.
(s) "Plan" means this Netsmart Technologies, Inc. 2001 Long-Term Incentive
Plan, as hereinafter amended from time to time.
(t) "Restricted Stock" means an award of shares of Stock that is subject to
restrictions under Section 7 of the Plan.
(u) "Retirement" means Normal Retirement or Early Retirement.
(v) "Stock" means the Common Stock, par value $.01 per share, of the Company
or any class of common stock into which such common stock may hereafter be
converted or for which such common stock may be exchanged pursuant to the
Company's certificate of incorporation or as part of a recapitalization,
reorganization or similar transaction.
(w) "Stock Appreciation Right" means the right pursuant to an award granted
under Section 6 of the Plan to surrender to the Company all (or a portion) of a
Stock Option in exchange for an amount equal to the difference between (i) the
Fair Market Value, as of the date such award or Stock Option (or such portion
thereof) is surrendered, of the shares of Stock covered by such Stock Option (or
such portion thereof), subject, where applicable, to the pricing provisions in
Paragraph 6(b)(ii) of the Plan and (ii) the aggregate exercise price of such
Stock Option or base price with respect to such award (or the portion thereof
which is surrendered).
(x) "Stock Option" or "Option" means any option to purchase shares of Stock
(including Restricted Stock and Deferred Stock, if the Committee so determines)
granted pursuant to Section 5 of the Plan.
(y) "Stock Purchase Right" means the right to purchase Stock pursuant to
Section 9 of the Plan.
(z) "Subsidiary" means any corporation or other business association,
including a partnership (other than the Company) in an unbroken chain of
corporations or other business associations beginning with the Company if each
of the corporations or other business associations (other than the last
corporation in the unbroken chain) owns equity interests (including stock or
partnership interests) possessing 50% or more of the total combined voting power
of all classes of equity in one of the other corporations or other business
associations in the chain.
In addition, the terms "Change in Control," "Potential Change in
Control" and "Change in Control Price" shall have meanings set forth,
respectively, in Paragraphs 11(b), (c) and (d) of the Plan.
2. Administration.
(a) The Plan shall be administered by a Committee of not less than two
Non-Employee Directors, who shall be appointed by the Board and who shall serve
at the pleasure of the Board. If and to the extent that no Committee exists
which has the authority to so administer the Plan, the functions of the
Committee specified in the Plan shall be exercised by the Board. Notwithstanding
the foregoing, in the event that the Company is not subject to the Exchange Act
or in the event that the administration of the Plan by a Committee of
Non-Employee Directors is not required in order for the Plan to meet the test of
Rule 16b-3 of the Commission under the Exchange Act, or any subsequent rule,
then the Committee need not be composed of Non-Employee Directors.
(b) The Committee shall have full authority to grant, pursuant to the terms
of the Plan, to officers and other persons eligible under Section 4 of the Plan:
Stock Options, Stock Appreciation Rights, Restricted Stock, Deferred Stock,
Stock Purchase Rights and/or Other Stock-Based Awards. In particular, the
Committee shall have the authority:
(i) to select the officers and other eligible persons to whom Stock
Options, Stock Appreciation Rights, Restricted Stock, Deferred Stock, Stock
Purchase Rights and/or Other Stock-Based Awards may from time to time be granted
pursuant to the Plan;
(ii) to determine whether and to what extent Incentive Stock Options,
Non-Qualified Stock Options, Stock Appreciation Rights, Restricted Stock,
Deferred Stock, Stock Purchase Rights and/or Other Stock-Based Awards, or any
combination thereof, are to be granted pursuant to the Plan, to one or more
eligible persons;
(iii) to determine the number of shares to be covered by each such
award granted pursuant to the Plan;
(iv) to determine the terms and conditions, not inconsistent with the
terms of the Plan, of any award granted under the Plan, including, but not
limited to, the share price or exercise price and any restriction or limitation,
or any vesting, acceleration or waiver of forfeiture restrictions regarding any
Stock Option or other award and/or the shares of Stock relating thereto, based
in each case on such factors as the Committee shall, in its sole discretion,
determine;
(v) to determine whether, to what extent and under what circumstances
a Stock Option may be settled in cash, Restricted Stock and/or Deferred Stock
under Paragraph 5(b)(x) or (xi) of the Plan, as applicable, instead of Stock;
(vi) to determine whether, to what extent and under what circumstances
Option grants and/or other awards under the Plan and/or other cash awards made
by the Company are to be made, and operate, on a tandem basis with other awards
under the Plan and/or cash awards made outside of the Plan in a manner whereby
the exercise of one award precludes, in whole or in part, the exercise of
another award, or on an additive basis;
(vii) to determine whether, to what extent and under what circumstances
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,
including any provision for any determination or method of determination of the
amount (if any) deemed be earned on any deferred amount during any deferral
period;
(viii) to determine the terms and restrictions applicable to Stock
Purchase Rights and the Stock purchased by exercising such Rights; and
(ix) to determine an aggregate number of awards and the type of awards
to be granted to eligible persons employed or engaged by the Company and/or any
specific Subsidiary, Affiliate or division and grant to management the authority
to grant such awards, provided that no awards to any person subject to the
reporting and short-swing profit provisions of Section 16 of the Exchange Act
may be granted awards except by the Committee.
(c) The Committee shall have the authority to adopt, alter and repeal such
rules, guidelines and practices governing the Plan as it shall, from time to
time, deem advisable; to interpret the terms and provisions of the Plan and any
award issued under the Plan and any agreements relating thereto, and otherwise
to supervise the administration of the Plan.
(d) All decisions made by the Committee pursuant to the provisions of the
Plan shall be made in the Committee's sole discretion and shall be final and
binding on all persons, including the Company and Plan participants.
3. Stock Subject to Plan.
(a) The total number of shares of Stock reserved and available for
distribution under the Plan shall be five hundred fifty thousand (550,000)
shares of Common Stock. In the event that awards are granted in tandem such that
the exercise of one award precludes the exercise of another award then, for the
purpose of determining the number of shares of Stock as to which awards shall
have been granted, the maximum number of shares of Stock issuable pursuant to
such tandem awards shall be used.
(b) Subject to Paragraph 6(b)(v) of the Plan, if any shares of Stock that
have been optioned cease to be subject to a Stock Option, or if any such shares
of Stock that are subject to any Restricted Stock or Deferred Stock award, Stock
Purchase Right or Other Stock-Based Award granted under the Plan are forfeited
or any such award otherwise terminates without a payment being made to the
participant in the form of Stock, such shares shall again be available for
distribution in connection with future awards under the Plan.
(c) In the event of any merger, reorganization, consolidation,
recapitalization, stock dividend, stock split, stock distribution, reverse
split, combination of shares or other change in corporate structure affecting
the Stock, such substitution or adjustment shall be made in the aggregate number
of shares reserved for issuance under the Plan, in the base number of shares, in
the number and option price of shares subject to outstanding Options granted
under the Plan, in the number and purchase price of shares subject to
outstanding Stock Purchase Rights under the Plan, and in the number of shares
subject to other outstanding awards granted under the Plan as may be determined
to be appropriate by the Committee, in its sole discretion, provided that the
number of shares subject to any award shall always be a whole number. Such
adjusted option price shall also be used to determine the amount payable by the
Company upon the exercise of any Stock Appreciation Right associated with any
Stock Option.
4. Eligibility.
(a) Officers and other key employees and directors of, and consultants and
independent contractors to, the Company and its Subsidiaries and Affiliates (but
excluding, except as to Paragraph 4(b) of the Plan, Non-Employee Directors) who
are responsible for or contribute to the management, growth and/or profitability
of the business of the Company and/or its Subsidiaries and Affiliates are
eligible to be granted awards under the Plan.
(b) On each April 1 of each year, commencing April 1, 2002, each person who
is a Non-Employee Director on such date shall automatically be granted a
Non-Qualified Stock Option to purchase five thousand (5,000) shares of Common
Stock (or such lesser number of shares of Common Stock as remain available for
grant at such date under the Plan, divided by the number of Non-Employee
Directors at such date); provided, however, that with respect to the automatic
grant on April 1, 2002, in the event that the Plan shall not have been approved
by stockholders on or prior to April 1, 2002, the automatic option grant in 2002
shall be granted on the date that the Plan is approved by stockholders. Such
Stock Options shall be exercisable at a price per share equal to the greater of
the Fair Market Value on the date of grant or the par value of one share of
Common Stock. The Non-Qualified Stock Options granted pursuant to this Paragraph
4(b) and pursuant to Paragraph 4(c) of the Plan shall become exercisable as to
all of the shares subject thereto six (6) months from the date of grant, and
shall expire on the earlier of (i) five years from the date of grant, or (ii)
seven (7) months from the date such Non-Employee Director ceases to be a
director if such Non-Employee Director ceases to be a director other than as a
result of his death or Disability. The provisions of this Paragraph 4(b) and
said Paragraph 4(c) may not be amended more than one (1) time in any six (6)
month period other than to comply with changes in the Code or the Employee
Retirement Income Security Act ("ERISA") or the rules thereunder.
(c) If any Non-Employee Director is first elected to the board subsequent to
April 1 or any year, commencing April 1, 2002, such person shall automatically
be granted a Non-Qualified Stock Option to purchase five thousand (5,000) shares
of Common Stock (or such lesser number of shares of Common Stock as remain
available for grant at such date under the Plan, divided by the number of
Non-Employee Directors who are elected as directors at such date); provided,
however, that, in the event that the Plan shall not have been approved by
stockholders on or prior to the date of such director's election, the automatic
option grant shall be granted on the date that the Plan is approved by
stockholders.
5. Stock Options.
(a) Administration. Stock Options may be granted alone, in addition to or in
tandem with other awards granted under the Plan and/or cash awards made outside
of the Plan. Any Stock Option granted under the Plan shall be in such form as
the Committee may from time to time approve. Stock Options granted under the
Plan may be of two types: (i) Incentive Stock Options and (ii) Non-Qualified
Stock Options. The Committee shall have the authority to grant to any optionee
Incentive Stock Options, Non-Qualified Stock Options, or both types of Stock
Options (in each case with or without Stock Appreciation Rights).
(b) Option Grants. Options granted under the Plan shall be subject to the
following terms and conditions and shall contain such additional terms and
conditions, not inconsistent with the terms of the Plan, as the Committee, in
its sole discretion, shall deem desirable:
(i) Option Price. The option price per share of Stock purchasable
under a Stock Option shall be determined by the Committee at the time of grant.
(ii) Option Term. The term of each Stock Option shall be fixed by the
Committee, but no Stock Option shall be exercisable more than ten (10) years
after the date the Option is granted.
(iii) Exercisability. Stock Options shall be exercisable at such time
or times and subject to such terms and conditions as shall be determined by the
Committee at or after grant. If the Committee provides, in its sole discretion,
that any Stock Option is exercisable only in installments, the Committee may
waive such installment exercise provisions at any time at or after grant in
whole or in part, based on such factors as the Committee shall, in its sole
discretion, determine.
(iv) Method of Exercise.
(A) Subject to whatever installment exercise provisions apply
under Paragraph 5(b)(iii) of the Plan, Stock Options may be exercised in whole
or in part at any time during the option period, by giving written notice of
exercise to the Company specifying the number of shares to be purchased. Such
notice shall be accompanied by payment in full of the purchase price, either by
check, note or such other instrument, securities or property as the Committee
may accept. As and to the extent determined by the Committee, in its sole
discretion, at or after grant, payments in full or in part may also be made in
the form of Stock already owned by the optionee or, in the case of the exercise
of a Non-Qualified Stock Option, Restricted Stock or Deferred Stock subject to
an award hereunder (based, in each case, on the Fair Market Value of the Stock
on the date the option is exercised, as determined by the Committee).
(B) If payment of the option exercise price of a Non-Qualified
Stock Option is made in whole or in part in the form of Restricted Stock or
Deferred Stock, the Stock issuable upon such exercise (and any replacement
shares relating thereto) shall remain (or be) restricted or deferred, as the
case may be, in accordance with the original terms of the Restricted Stock award
or Deferred Stock award in question, and any additional Stock received upon the
exercise shall be subject to the same forfeiture restrictions or deferral
limitations, unless otherwise determined by the Committee, in its sole
discretion, at or after grant.
(C) No shares of Stock shall be issued until full payment therefor
has been received by the Company. In the event of any exercise by note or other
instrument, the shares of Stock shall not be issued until such note or other
instrument shall have been paid in full, and the exercising optionee shall have
no rights as a stockholder until such payment is made.
(D) Subject to Paragraph 5(b)(iv)(C) of the Plan, an optionee
shall generally have the rights to dividends or other rights of a stockholder
with respect to shares subject to the Option when the optionee has given written
notice of exercise, has paid in full for such shares, and, if requested, has
given the representation described in Paragraph 14(a) of the Plan.
(v) Non-Transferability of Options. No Stock Option shall be
transferable by the optionee otherwise than by will or by the laws of descent
and distribution, and all Stock Options shall be exercisable, during the
optionee's lifetime, only by the optionee.
(vi) Termination by Death. Subject to Paragraph 5(b)(ix) of the Plan
with respect to Incentive Stock Options, if an optionee's employment by the
Company and any Subsidiary or Affiliate terminates by reason of death, any Stock
Option held by such optionee may thereafter be exercised, to the extent such
option was exercisable at the time of death or on such accelerated basis as the
Committee may determine at or after grant (or as may be determined in accordance
with procedures established by the Committee), by the legal representative of
the estate or by the legatee of the optionee under the will of the optionee, for
a period of one year (or such other period as the Committee may specify at
grant) from the date of such death or until the expiration of the stated term of
such Stock Option, whichever period is the shorter.
(vii) Termination by Reason of Disability or Retirement. Subject to
Paragraph 5(b)(ix) of the Plan with respect to Incentive Stock Options, if an
optionee's employment by the Company and any Subsidiary or Affiliate terminates
by reason of a Disability or Normal or Early Retirement, any Stock Option held
by such optionee may thereafter be exercised by the optionee, to the extent it
was exercisable at the time of termination or on such accelerated basis as the
Committee may determine at or after grant (or as may be determined in accordance
with procedures established by the Committee), for a period of one year (or such
other period as the Committee may specify at grant) from the date of such
termination of employment or until the expiration of the stated term of such
Stock Option, whichever period is the shorter; provided, however, that, if the
optionee dies within such one-year period (or such other period as the Committee
shall specify at grant), any unexercised Stock Option held by such optionee
shall thereafter be exercisable to the extent to which it was exercisable at the
time of death for a period of one year from the date of such death or until the
expiration of the stated term of such Stock Option, whichever period is the
shorter. In the event of termination of employment by reason of Disability or
Normal or Early Retirement, if an Incentive Stock Option is exercised after the
expiration of the exercise periods that apply for purposes of Section 422 of the
Code, such Stock Option will thereafter be treated as a Non-Qualified Stock
Option.
(viii) Other Termination. Unless otherwise determined by the Committee
(or pursuant to procedures established by the Committee) at or after grant, if
an optionee's employment by the Company and any Subsidiary or Affiliate
terminates for any reason other than death, Disability or Normal or Early
Retirement, the Stock Option shall thereupon terminate; provided, however, that
if the optionee is involuntarily terminated by the Company or any Subsidiary or
Affiliate without Cause, including a termination resulting from the Subsidiary,
Affiliate or division in which the optionee is employed or engaged, ceasing, for
any reason, to be a Subsidiary, Affiliate or division of the Company, such Stock
Option may be exercised, to the extent otherwise exercisable on the date of
termination, for a period of three months (or seven months in the case of a
person subject to the reporting and short-swing profit provisions of Section 16
of the Exchange Act) from the date of such termination or until the expiration
of the stated term of such Stock Option, whichever is shorter.
(ix) Incentive Stock Options.
(A) Anything in the Plan to the contrary notwithstanding, no term
of the Plan relating to Incentive Stock Options shall be interpreted, amended or
altered, nor shall any discretion or authority granted under the Plan be so
exercised, so as to disqualify the Plan under Section 422 of the Code, or,
without the consent of the optionee(s) affected, to disqualify any Incentive
Stock Option under such Section 422.
(B) To the extent required for "incentive stock option" status
under Section 422(d) of the Code (taking into account applicable Treasury
regulations and pronouncements), the Plan shall be deemed to provide that the
aggregate Fair Market Value (determined as of the time of grant) of the Stock
with respect to which Incentive Stock Options are exercisable for the first time
by the optionee during any calendar year under the Plan and/or any other stock
option plan of the Company or any Subsidiary or parent corporation (within the
meaning of Section 425 of the Code) shall not exceed $100,000. If Section 422 is
hereafter amended to delete the requirement now in Section 422(d) that the plan
text expressly provide for the $100,000 limitation set forth in Section 422(d),
then this Paragraph 5(b)(ix)(B) shall no longer be operative and the Committee
may accelerate the dates on which the incentive stock option may be exercised.
(C) To the extent permitted under Section 422 of the Code or the
applicable regulations thereunder or any applicable Internal Revenue Service
pronouncement:
(I) If (x) a participant's employment is terminated by reason
of death, Disability or Retirement and (y) the portion of any Incentive Stock
Option that is otherwise exercisable during the post-termination period
specified under Paragraphs 5(b)(vi) and (vii) of the Plan, applied without
regard to the $100,000 limitation contained in Section 422(d) of the Code, is
greater than the portion of such option that is immediately exercisable as an
"incentive stock option" during such post-termination period under Section 422,
such excess shall be treated as a Non-Qualified Stock Option; and
(II) if the exercise of an Incentive Stock Option is
accelerated by reason of a Change in Control, any portion of such option that is
not exercisable as an Incentive Stock Option by reason of the $100,000
limitation contained in Section 422(d) of the Code shall be treated as a
Non-Qualified Stock Option.
(x) Buyout Provisions. The Committee may at any time offer to buy out
for a payment in cash, Stock, Deferred Stock or Restricted Stock an option
previously granted, based on such terms and conditions as the Committee shall
establish and communicate to the optionee at the time that such offer is made.
(xi) Settlement Provisions. If the option agreement so provides at
grant or is amended after grant and prior to exercise to so provide (with the
optionee's consent), the Committee may require that all or part of the shares to
be issued with respect to the spread value of an exercised Option take the form
of Deferred or Restricted Stock which shall be valued on the date of exercise on
the basis of the Fair Market Value (as determined by the Committee) of such
Deferred or Restricted Stock determined without regard to the deferral
limitations and/or forfeiture restrictions involved.
6. Stock Appreciation Rights.
(a) Grant and Exercise.
(i) Stock Appreciation Rights may be granted in conjunction with all
or part of any Stock Option granted under the Plan. 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 Stock Option. In the case of an Incentive Stock
Option, such rights may be granted only at the time of the grant of such Stock
Option.
(ii) A Stock Appreciation Right or applicable portion thereof granted
with respect to a given Stock Option shall terminate and no longer be
exercisable upon the termination or exercise of the related Stock Option,
subject to such provisions as the Committee may specify at grant where a Stock
Appreciation Right is granted with respect to less than the full number of
shares covered by a related Stock Option.
(iii) A Stock Appreciation Right may be exercised by an optionee,
subject to Paragraph 6(b) of the Plan, in accordance with the procedures
established by the Committee for such purpose. Upon such exercise, the optionee
shall be entitled to receive an amount determined in the manner prescribed in
said Paragraph 6(b). Stock Options relating to exercised Stock Appreciation
Rights shall no longer be exercisable to the extent that the related Stock
Appreciation Rights have been exercised.
(b) Terms and Conditions. Stock Appreciation Rights shall be subject to such
terms and conditions, not inconsistent with the provisions of the Plan, as shall
be determined from time to time by the Committee, including the following:
(i) Stock Appreciation Rights shall be exercisable only at such time
or times and to the extent that the Stock Options to which they relate shall be
exercisable in accordance with the provisions of this Section 6 and Section 5 of
the Plan; provided, however, that any Stock Appreciation Right granted to an
optionee subject to Section 16(b) of the Exchange Act subsequent to the grant of
the related Stock Option shall not be exercisable during the first six months of
its term, except that this special limitation shall not apply in the event of
death or Disability of the optionee prior to the expiration of the six-month
period. The exercise of Stock Appreciation Rights held by optionees who are
subject to Section 16(b) of the Exchange Act shall comply with Rule 16b-3
thereunder to the extent applicable.
(ii) Upon the exercise of a Stock Appreciation Right, an optionee
shall be entitled to receive an amount in cash and/or shares of Stock equal in
value to the excess of the Fair Market Value of one share of Stock over the
option price per share specified in the related Stock Option multiplied by the
number of shares in respect of which the Stock Appreciation Right shall have
been exercised, with the Committee having the right to determine the form of
payment. When payment is to be made in shares of Stock, the number of shares to
be paid shall be calculated on the basis of the Fair Market Value of the shares
on the date of exercise. When payment is to be made in cash, such amount shall
be based upon the Fair Market Value of the Stock on the date of exercise,
determined in a manner not inconsistent with Section 16(b) of the Exchange Act
and the rules of the Commission thereunder.
(iii) Stock Appreciation Rights shall be transferable only when and to
the extent that the underlying Stock Option would be transferable under
Paragraph 5(b)(v) of the Plan.
(iv) Upon the exercise of a Stock Appreciation Right, the Stock Option
or part thereof to which such Stock Appreciation Right is related shall be
deemed to have been exercised only to the extent of the number of shares issued
under the Stock Appreciation Right at the time of exercise based on the value of
the Stock Appreciation Right at such time.
(v) In its sole discretion, the Committee may grant Stock
Appreciation Rights that become exercisable only in the event of a Change in
Control and/or a Potential Change in Control, subject to such terms and
conditions as the Committee may specify at grant; provided that any such Stock
Appreciation Rights shall be settled solely in cash.
(vi) The Committee, in its sole discretion, may also provide that, in
the event of a Change in Control and/or a Potential Change in Control, the
amount to be paid upon the exercise of a Stock Appreciation Right shall be based
on the Change in Control Price, subject to such terms and conditions as the
Committee may specify at grant.
7. Restricted Stock.
(a) Administration. Shares of Restricted Stock may be issued either alone,
in addition to or in tandem with other awards granted under the Plan and/or cash
awards made outside of the Plan. The Committee shall determine the eligible
persons to whom, and the time or times at which, grants of Restricted Stock will
be made, the number of shares to be awarded, the price (if any) to be paid by
the recipient of Restricted Stock, subject to Paragraph 7(b) of the Plan, the
time or times within which such awards may be subject to forfeiture, and all
other terms and conditions of the awards. The Committee may condition the grant
of Restricted Stock upon the attainment of specified performance goals or such
other factors as the Committee may, in its sole discretion, determine. The
provisions of Restricted Stock awards need not be the same with respect to each
recipient.
(b) Awards and Certificates.
(i) The prospective recipient of a Restricted Stock award shall not
have any rights with respect to such award unless and until such recipient has
executed an agreement evidencing the award and has delivered a fully executed
copy thereof to the Company, and has otherwise complied with the applicable
terms and conditions of such award.
(ii) The purchase price for shares of Restricted Stock may be equal to
or less than their par value and may be zero.
(iii) Awards of Restricted Stock must be accepted within a period of 60
days (or such shorter period as the Committee may specify at grant) after the
award date, by executing a Restricted Stock Award Agreement and paying the
price, if any, required under Paragraph 7(b)(ii).
(iv) Each participant receiving a Restricted Stock award shall be
issued a stock certificate in respect of such shares of Restricted Stock. Such
certificate shall be registered in the name of such participant, and shall bear
an appropriate legend referring to the terms, conditions, and restrictions
applicable to such award.
(v) The Committee shall require that (A) the stock certificates
evidencing shares of Restricted Stock be held in the custody of the Company
until the restrictions thereon shall have lapsed, and (B) as a condition of any
Restricted Stock award, the participant shall have delivered a stock power,
endorsed in blank, relating to the Restricted Stock covered by such award.
(c) Restrictions and Conditions. The shares of Restricted Stock awarded
pursuant to this Section 7 shall be subject to the following restrictions and
conditions:
(i) Subject to the provisions of the Plan and the award agreement,
during a period set by the Committee commencing with the date of such award (the
"Restriction Period"), the participant shall not be permitted to sell, transfer,
pledge or assign shares of Restricted Stock awarded under the Plan. Within these
limits, the Committee, in its sole discretion, may provide for the lapse of such
restrictions in installments and may accelerate or waive such restrictions in
whole or in part, based on service, performance and/or such other factors or
criteria as the Committee may determine, in its sole discretion.
(ii) Except as provided in this paragraph 7(c)(ii) and Paragraph 7(c)
(i) of the Plan, the participant shall have, with respect to the shares of
Restricted Stock, all of the rights of a stockholder of the Company, including
the right to vote the shares and the right to receive any regular cash dividends
paid out of current earnings. The Committee, in its sole discretion, as
determined at the time of award, may permit or require the payment of cash
dividends to be deferred and, if the Committee so determines, reinvested,
subject to Paragraph 14(e) of the Plan, in additional Restricted Stock to the
extent shares are available under Section 3 of the Plan, or otherwise
reinvested. Stock dividends, splits and distributions issued with respect to
Restricted Stock shall be treated as additional shares of Restricted Stock that
are subject to the same restrictions and other terms and conditions that apply
to the shares with respect to which such dividends are issued, and the Committee
may require the participant to deliver an additional stock power covering the
shares issuable pursuant to such stock dividend, split or distribution. Any
other dividends or property distributed with regard to Restricted Stock, other
than regular dividends payable and paid out of current earnings, shall be held
by the Company subject to the same restrictions as the Restricted Stock.
(iii) Subject to the applicable provisions of the award agreement and
this Section 7, upon termination of a participant's employment with the Company
and any Subsidiary or Affiliate for any reason during the Restriction Period,
all shares still subject to restriction will vest, or be forfeited, in
accordance with the terms and conditions established by the Committee at or
after grant.
(iv) If and when the Restriction Period expires without a prior
forfeiture of the Restricted Stock subject to such Restriction Period,
certificates for an appropriate number of unrestricted shares, and other
property held by the Company with respect to such Restricted Shares, shall be
delivered to the participant promptly.
(d) Minimum Value Provisions. In order to better ensure that award payments
actually reflect the performance of the Company and service of the participant,
the Committee may provide, in its sole discretion, for a tandem Stock Option or
performance-based or other award designed to guarantee a minimum value, payable
in cash or Stock to the recipient of a Restricted Stock award, subject to such
performance, future service, deferral and other terms and conditions as may be
specified by the Committee.
8. Deferred Stock.
(a) Administration. Deferred Stock may be awarded either alone, in addition
to or in tandem with other awards granted under the Plan and/or cash awards made
outside of the Plan. The Committee shall determine the eligible persons to whom
and the time or times at which Deferred Stock shall be awarded, the number of
shares of Deferred Stock to be awarded to any person, the duration of the period
(the "Deferral Period") during which, and the conditions under which, receipt of
the Stock will be deferred, and the other terms and conditions of the award in
addition to those set forth in Paragraph 8(b). The Committee may condition the
grant of Deferred Stock upon the attainment of specified performance goals or
such other factors or criteria as the Committee shall, in its sole discretion,
determine. The provisions of Deferred Stock awards need not be the same with
respect to each recipient.
(b) Terms and Conditions. The shares of Deferred Stock awarded pursuant to
this Section 8 shall be subject to the following terms and conditions:
(i) Subject to the provisions of the Plan and the award agreement
referred to in Paragraph 8(b)(vi) of the Plan, Deferred Stock awards may not be
sold, assigned, transferred, pledged or otherwise encumbered during the Deferral
Period. At the expiration of the Deferral Period (or the Elective Deferral
Period referred to in Paragraph 8(b)(v) of the Plan, where applicable), share
certificates representing the shares covered by the Deferred Stock award shall
be delivered to the participant or his legal representative.
(ii) Unless otherwise determined by the Committee at grant, amounts
equal to any dividends declared during the Deferral Period with respect to the
number of shares covered by a Deferred Stock award will be paid to the
participant currently, or deferred and deemed to be reinvested in additional
Deferred Stock, or otherwise reinvested, all as determined at or after the time
of the award by the Committee, in its sole discretion.
(iii) Subject to the provisions of the award agreement and this Section
8, upon termination of a participant's employment with the Company and any
Subsidiary or Affiliate for any reason during the Deferral Period for a given
award, the Deferred Stock in question will vest, or be forfeited, in accordance
with the terms and conditions established by the Committee at or after grant.
(iv) Based on service, performance and/or such other factors or
criteria as the Committee may determine, the Committee may, at or after grant,
accelerate the vesting of all or any part of any Deferred Stock award and/or
waive the deferral limitations for all or any part of such award.
(v) A participant may elect to further defer receipt of an award (or
an installment of an award) for a specified period or until a specified event
(the "Elective Deferral Period"), subject in each case to the Committee's
approval and to such terms as are determined by the Committee, all in its sole
discretion. Subject to any exceptions adopted by the Committee, such election
must generally be made at least twelve months prior to completion of the
Deferral Period for such Deferred Stock award (or such installment).
(vi) Each award shall be confirmed by, and subject to the terms of, a
Deferred Stock agreement executed by the Company and the participant.
(c) Minimum Value Provisions. In order to better ensure that award payments
actually reflect the performance of the Company and service of the participant,
the Committee may provide, in its sole discretion, for a tandem Stock Option or
performance-based or other award designed to guarantee a minimum value, payable
in cash or Stock to the recipient of a deferred stock award, subject to such
performance, future service, deferral and other terms and conditions as may be
specified by the Committee.
9. Stock Purchase Rights.
(a) Awards and Administration. The Committee may grant eligible participants
Stock Purchase Rights which shall enable such participants to purchase Stock
(including Deferred Stock and Restricted Stock):
(i) at its Fair Market Value on the date of grant;
(ii) at a percentage of such Fair Market Value on such date, such
percentage to be determined by the Committee in its sole discretion;
(iii) at an amount equal to Book Value on such date; or
(iv) at an amount equal to the par value of such Stock on such date.
The Committee shall also impose such deferral, forfeiture and/or other
terms and conditions as it shall determine, in its sole discretion, on such
Stock Purchase Rights or the exercise thereof. The terms of Stock Purchase
Rights awards need not be the same with respect to each participant. Each Stock
Purchase Right award shall be confirmed by, and be subject to the terms of, a
Stock Purchase Rights Agreement.
(b) Exercisability. Stock Purchase Rights shall generally be
exercisable for such period after grant as is determined by the Committee not to
exceed sixty (60) days. However, the Committee may provide, in its sole
discretion, that the Stock Purchase Rights of persons potentially subject to
Section 16(b) of the Exchange Act shall not become exercisable until six months
and one day after the grant date, and shall then be exercisable for ten trading
days at the purchase price specified by the Committee in accordance with
Paragraph 9(a) of the Plan.
10. Other Stock-Based Awards.
(a) Administration.
(i) Other awards of Stock and other awards that are valued in whole
or in part by reference to, or are otherwise based on, Stock ("Other Stock-Based
Awards"), including, without limitation, performance shares, convertible
preferred stock (to the extent a series of preferred stock has been or may be
created by, or in accordance with a procedure set forth in, the Company's
certificate of incorporation), convertible debentures, warrants, exchangeable
securities and Stock awards or options valued by reference to Fair Market Value,
Book Value or performance of the Company or any Subsidiary, Affiliate or
division, may be granted either alone or in addition to or in tandem with Stock
Options, Stock Appreciation Rights, Restricted Stock, Deferred Stock or Stock
Purchase Rights granted under the Plan and/or cash awards made outside of the
Plan.
(ii) Subject to the provisions of the Plan, the Committee shall have
authority to determine the persons to whom and the time or times at which such
award shall be made, the number of shares of Stock to be awarded pursuant to
such awards, and all other conditions of the awards. The Committee may also
provide for the grant of Stock upon the completion of a specified performance
period. The provisions of Other Stock-Based Awards need not be the same with
respect to each recipient.
(b) Terms and Conditions. Other Stock-Based Awards made pursuant to this
Section 10 shall be subject to the following terms and conditions:
(i) Subject to the provisions of the Plan and the award agreement
referred to in Paragraph 10(b)(v) of the Plan, shares of Stock subject to awards
made under this Section 10 may not be sold, assigned, transferred, pledged or
otherwise encumbered 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.
(ii) Subject to the provisions of the Plan and the award agreement and
unless otherwise determined by the Committee at grant, the recipient of an award
under this Section 10 shall be entitled to receive, currently or on a deferred
basis, interest or dividends or interest or dividend equivalents with respect to
the number of shares covered by the award, as determined at the time of the
award by the Committee, in its sole discretion, and the Committee may provide
that such amounts (if any) shall be deemed to have been reinvested in additional
Stock or otherwise reinvested.
(iii) Any award under Section 10 and any 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.
(iv) In the event of the participant's Retirement, 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 remaining limitations
(if any) imposed with respect to any or all of an award pursuant to this Section
10.
(v) Each award under this Section 10 shall be confirmed by, and
subject to the terms of, an agreement or other instrument by the Company and by
the participant.
(vi) Stock (including securities convertible into Stock) issued on a
bonus basis under this Section 10 may be issued for no cash consideration.
11. Change in Control Provisions.
(a) Impact of Event. In the event of a "Change in Control," as defined in
Paragraph 11(b) of the Plan, or a "Potential Change in Control," as defined in
Paragraph 11(c) of the Plan, except to the extent otherwise determined by the
Committee or the Board at or after grant (subject to any right of approval
expressly reserved by the Committee or the Board at the time of such
determination), the following acceleration and valuation provisions shall apply:
(i) Any Stock Appreciation Rights outstanding for at least six months
and any Stock Options awarded under the Plan not previously exercisable and
vested shall become fully exercisable and vested, regardless of whether the
amendment to the Plan pursuant to which such Stock Options shall have been
granted shall have been approved by stockholders; provided, however, that if
such stockholder approval shall not have been obtained prior to a Change of
Control or a Potential Change of Control, any Incentive Stock Options may, with
the consent of the holders thereof, be treated as Non-Qualified Stock Options.
(ii) The restrictions and deferral limitations applicable to any
Restricted Stock, Deferred Stock, Stock Purchase rights and Other Stock-Based
Awards, in each case to the extent not already vested under the Plan, shall
lapse and such shares and awards shall be deemed fully vested, regardless of
whether the amendment to the Plan pursuant to which such Stock Options shall
have been granted shall have been approved by stockholders.
(iii) The value of all outstanding Stock Options, Stock Appreciation
Rights, Restricted Stock, Deferred Stock, Stock Purchase Rights and Other
Stock-Based Awards, in each case to the extent vested (including such rights
which shall have become vested pursuant to Paragraphs 11(a)(i) and (ii) of the
Plan), shall be purchased by the Company ("cashout") in a manner determined by
the Committee, in its sole discretion, on the basis of the "Change in Control
Price" as defined in Paragraph 11(d) of the Plan as of the date such Change in
Control or such Potential Change in Control is determined to have occurred or
such other date as the Committee may determine prior to the Change in Control,
unless the Committee shall, contemporaneously with or prior to any particular
Change of Control or Potential Change of Control, determine that this Paragraph
11(a)(iii) shall not be applicable to such Change in Control or Potential Change
in Control.
(b) Definition of "Change in Control." For purposes of Paragraph 11(a) of
the Plan, a "Change in Control" means the happening of any of the following:
(i) When any "person" (as defined in Section 3(a)(9) of the Exchange
Act and as used in Sections 13(d) and 14(d) of the Exchange Act, including a
"group" as defined in Section 13(d) of the Exchange Act, but excluding the
Company and any Subsidiary and any employee benefit plan sponsored or maintained
by the Company or any Subsidiary and any trustee of such plan acting as trustee)
directly or indirectly becomes the "beneficial owner" (as defined in Rule 13d-3
under the Exchange Act, as amended from time to time), of securities of the
Company representing twenty-five percent or more of the combined voting power of
the Company's then outstanding securities; provided, however, that a Change of
Control shall not arise if such acquisition is approved by the board of
directors or if the board of directors or the Committee determines that such
acquisition is not a Change of Control or if the board of directors authorizes
the issuance of the shares of Common Stock (or securities convertible into
Common Stock or upon the exercise of which shares of Common Stock may be issued)
to such persons; or
(ii) When, during any period of twenty-four consecutive months during
the existence of the Plan, the individuals who, at the beginning of such period,
constitute the Board (the "Incumbent Directors") cease for any reason other than
death, Disability or Retirement to constitute at least a majority thereof,
provided, however, that a director who was not a director at the beginning of
such 24-month period shall be deemed to have satisfied such 24-month requirement
(and be an Incumbent Director) if such director was elected by, or on the
recommendation of, or with the approval of, at least two-thirds of the directors
who then qualified as Incumbent Directors either actually (because they were
directors at the beginning of such 24-month period) or by prior operation of
this Paragraph 11(b)(ii); or
(iii) The occurrence of a transaction requiring stockholder approval
for the acquisition of the Company by an entity other than the Company or a
Subsidiary through purchase of assets, or by merger, or otherwise.
(c) Definition of Potential Change in Control. For purposes of Paragraph 11
(a) of the Plan, a "Potential Change in Control" means the happening of any one
of the following:
(i) The approval by stockholders of an agreement by the Company, the
consummation of which would result in a Change in Control of the Company as
defined in Section 11(b) of the Plan; or
(ii) The acquisition of beneficial ownership, directly or indirectly,
by any entity, person or group (other than the Company or a Subsidiary or any
Company employee benefit plan or any trustee of such plan acting as such
trustee) of securities of the Company representing five percent or more of the
combined voting power of the Company's outstanding securities and the adoption
by the Board of Directors of a resolution to the effect that a Potential Change
in Control of the Company has occurred for purposes of the Plan.
(d) Change in Control Price. For purposes of this Section 11, "Change in
Control Price" means the highest price per share paid in any transaction
reported on the principal stock exchange on which the Stock is traded or the
average of the highest bid and asked prices as reported by NASDAQ, or paid or
offered in any bona fide transaction related to a potential or actual Change in
Control of the Company at any time during the sixty-day period immediately
preceding the occurrence of the Change in Control (or, where applicable, the
occurrence of the Potential Change in Control event), in each case as determined
by the Committee except that, in the case of Incentive Stock Options and Stock
Appreciation Rights relating to Incentive Stock Options, such price shall be
based only on transactions reported for the date on which the optionee exercises
such Stock Appreciation Rights or, where applicable, the date on which a cashout
occurs under Paragraph 11(a)(iii).
12. Amendments and Termination.
(a) The Board may amend, alter, or discontinue the Plan, but no amendment,
alteration, or discontinuation shall be made which would impair the rights of an
optionee or participant under a Stock Option, Stock Appreciation Right (or
Limited Stock Appreciation Right), Restricted or Deferred Stock award, Stock
Purchase Right or Other Stock-Based Award theretofore granted, without the
optionee's or participant's consent, and no amendment will be made without
approval of the stockholders if such amendment requires stockholder approval
under state law or if stockholder approval is necessary in order that the Plan
comply with Rule 16b-3 of the Commission under the Exchange Act or any
substitute or successor rule or if stockholder approval is necessary in order to
enable the grant pursuant to the Plan of options or other awards intended to
confer tax benefits upon the recipients thereof.
(b) The Committee may amend the terms of any Stock Option or other award
theretofore granted, prospectively or retroactively, but no such amendment shall
impair the rights or any holder without the holder's consent. The Committee may
also substitute new Stock Options for previously granted Stock Options (on a one
for one or other basis), including previously granted Stock Options having
higher option exercise prices.
(c) Subject to the provisions of Paragraphs 12(a) and (b) of the Plan, the
Board shall have broad authority to amend the Plan to take into account changes
in applicable securities and tax laws and accounting rules, as well as other
developments, and, in particular, without limiting in any way the generality of
the foregoing, to eliminate any provisions which are not required to included as
a result of any amendment to Rule 16b-3 of the Commission pursuant to the
Exchange Act.
13. Unfunded Status of Plan.
The Plan is intended to constitute an "unfunded" plan for incentive and
deferred compensation. With respect to any payments not yet made to a
participant or optionee by the Company, nothing contained in this Plan shall
give any such participant or optionee any rights that are greater than those of
a general creditor of the Company. In its sole discretion, the Committee may
authorize the creation of trusts or other arrangements to meet the obligations
created under the Plan to deliver Stock or payments in lieu of or with respect
to awards under this Plan; provided, however, that, unless the Committee
otherwise determines with the consent of the affected participant, the existence
of such trusts or other arrangements shall be consistent with the "unfunded"
status of the Plan.
14. General Provisions.
(a) The Committee may require each person purchasing shares pursuant to a
Stock Option or other award under the Plan to represent to and agree with the
Company in writing that the optionee or participant is acquiring the shares
without a view to distribution thereof. The certificates for such shares may
include any legend which the Committee deems appropriate to reflect any
restrictions on transfer. All certificates or shares of Stock or other
securities delivered under the Plan shall be subject to such stock-transfer
orders and other restrictions as the Committee may deem advisable under the
rules, regulations, and other requirements of the Commission, any stock exchange
upon which the Stock is then listed, and any applicable Federal or state
securities law, and the Committee may cause a legend or legends to be put on any
such certificates to make appropriate reference to such restrictions.
(b) 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.
(c) Neither the adoption of the Plan nor the grant of any award pursuant to
the Plan shall confer upon any employee of the Company or any Subsidiary or
Affiliate any right to continued employment with the Company or a Subsidiary or
Affiliate, as the case may be, nor shall it interfere in any way with the right
of the Company or a Subsidiary or Affiliate to terminate the employment of any
of its employees at any time.
(d) No later than the date as of which an amount first becomes includible in
the gross income of the participant for Federal income tax purposes with respect
to any award under the Plan, the participant shall pay to the Company, or make
arrangements satisfactory to the Committee regarding the payment of, any
Federal, state, or local taxes of any kind required by law to be withheld with
respect to such amount. Unless otherwise determined by the Committee,
withholding obligations may be settled with Stock, including Stock that is part
of the award that gives rise to the withholding requirement. The obligations of
the Company under the Plan shall be conditional on such payment or arrangements
and the Company and its Subsidiaries or Affiliates shall, to the extent
permitted by law, have the right to deduct any such taxes from any payment of
any kind otherwise due to the participant.
(e) The actual or deemed reinvestment of dividends or dividend equivalents
in additional Restricted Stock (or in Deferred Stock or other types of Plan
awards) at the time of any dividend payment shall only be permissible if
sufficient shares of Stock are available under Section 3 of the Plan for such
reinvestment (taking into account then outstanding Stock Options, Stock Purchase
Rights and other Plan awards).
15. Effective Date of Plan.
The Plan shall be effective as of the date the Plan is approved by the
Board, subject to the approval of the Plan by a majority of the votes cast by
the holders of the Company's Common Stock at the next annual or special meeting
of stockholders. Any grants made under the Plan prior to such approval shall be
effective when made (unless otherwise specified by the Committee at the time of
grant), but shall be conditioned on, and subject to, such approval of the Plan
by such stockholders.
16. Term of Plan.
Stock Option, Stock Appreciation Right, Restricted Stock award,
Deferred Stock award, Stock Purchase Right or Other Stock-Based Award may be
granted pursuant to the Plan, until ten (10) years from the date the Plan was
approved by the Board, unless the Plan shall be terminated by the Board, in its
discretion, prior to such date, but awards granted prior to such termination may
extend beyond that date.