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Exhibit
10.3
VAUGHAN FOODS, INC.
2006 EQUITY INCENTIVE PLAN
1. Purpose; Types of Awards;
Construction.
The purpose of the Vaughan Foods, Inc. 2006 Equity
Incentive Plan (the "Plan") is to align the interests of officers,
other key employees, consultants and nonemployee directors of
Vaughan Foods, Inc. (the "Company") and its affiliates with those
of the stockholders of the Company, to afford an incentive to such
officers, employees, consultants and directors to continue as such,
to increase their efforts on behalf of the Company and to promote
the success of the Company's business. To further such purposes,
the Committee may grant options to purchase shares of the Company's
common stock. The provisions of the Plan are intended to satisfy
the requirements of Section 16(b) of the Securities Exchange Act of
1934 and of Section 162(m) of the Internal Revenue Code of 1986, as
amended, and shall be interpreted in a manner consistent with the
requirements thereof, as now or hereafter construed, interpreted
and applied by regulations, rulings and cases.
2. Definitions.
As used in this Plan, the following words and
phrases shall have the meanings indicated below:
(a) "Agreement" shall mean a written agreement
entered into between the Company and an Optionee in connection with
an award under the Plan.
(b) "Board" shall mean the Board of Directors of the
Company.
(c) "Cause," when used in connection with the
termination of an Optionee's employment by the Company or the
cessation of an Optionee's service as a consultant or a member of
the Board, shall mean (i) the conviction of the Optionee for the
commission of a felony, or (ii) the willful and continued failure
by the Optionee substantially to perform his duties and obligations
to the Company or a Subsidiary (other than any such failure
resulting from his incapacity due to physical or mental illness),
or (iii) the willful engaging by the Optionee in misconduct that is
demonstrably injurious to the Company or a Subsidiary. For purposes
of this Section 2(c), no act, or failure to act, on an Optionee's
part shall be considered "willful" unless done, or omitted to be
done, by the Optionee in bad faith and without reasonable belief
that his action or omission was in the best interest of the
Company. The Committee shall determine whether a termination of
employment is for Cause for purposes of the Plan.
(d) "Change in Control" shall mean the occurrence of
the event set forth in any of the following paragraphs:
(i) any Person (as defined below) is or becomes the
beneficial owner (as defined in Rule 13d-3 under the Securities
Exchange Act of 1934, as amended), directly or indirectly, of
securities of the Company (not including in the securities
beneficially owned by such Person any securities acquired directly
from the Company or its subsidiaries) representing 50% or more of
the combined voting power of the Company's then outstanding
securities; or
(ii) the following individuals cease for any reason
to constitute a majority of the number of directors then serving:
individuals who, on the date hereof, constitute the Board and any
new director (other than a director whose initial assumption of
office is in connection with an actual or threatened election
contest, including but not limited to a consent solicitation,
relating to the election of directors of the Company) whose
appointment or election by the Board or nomination for election by
the Company's stockholders was approved or recommended by a vote of
at least two-thirds (2/3) of the directors then still in office who
either were directors on the date hereof or whose appointment,
election or nomination for election was previously so approved or
recommended; or
(iii) there is consummated a merger or consolidation
of the Company or a direct or indirect subsidiary thereof with any
other corporation, other than (A) a merger or consolidation which
would result in the voting securities of the Company outstanding
immediately prior to such merger or consolidation
continuing
to represent (either by remaining outstanding or by
being converted into voting securities of the surviving entity or
any parent thereof), in combination with the ownership of any
trustee or other fiduciary holding securities under an employee
benefit plan of the Company, at least 50% of the combined voting
power of the securities of the Company or such surviving entity or
any parent thereof outstanding immediately after such merger or
consolidation, or (B) a merger or consolidation effected to
implement a recapitalization of the Company (or similar
transaction) in which no Person is or becomes the beneficial owner,
directly or indirectly, of securities of the Company (not including
in the securities beneficially owned by such Person any securities
acquired directly from the Company or its subsidiaries)
representing 50% or more of the combined voting power of the
Company's then outstanding securities; or
(iv) the stockholders of the Company approve a plan
of complete liquidation or dissolution of the Company or there is
consummated an agreement for the sale or disposition by the Company
of all or substantially all of the Company's assets, other than a
sale or disposition by the Company of all or substantially all of
the Company's assets to an entity, at least 50% of the combined
voting power of the voting securities of which are owned by Persons
in substantially the same proportions as their ownership of the
Company immediately prior to such sale.
For purposes of this Section 2(d), "Person" shall
have the meaning given in Section 3(a)(9) of the Exchange Act, as
modified and used in Sections 13(d) and 14(d) thereof, except that
such term shall not include (i) the Company or any of its
subsidiaries, (ii) a trustee or other fiduciary holding securities
under an employee benefit plan of the Company or any of its
subsidiaries, (iii) an underwriter temporarily holding securities
pursuant to an offering of such securities, or (iv) a corporation
owned, directly or indirectly, by the stockholders of the Company
in substantially the same proportions as their ownership of stock
of the Company.
(e) "Code" shall mean the Internal Revenue Code of
1986, as amended from time to time.
(f) "Committee" shall mean a committee established
by the Board to administer the Plan.
(g) "Common Stock" shall mean shares of common
stock, no par value, of the Company.
(h) "Company" shall mean Vaughan Foods, Inc., a
corporation organized under the laws of the State of Oklahoma, or
any successor corporation.
(i) "Disability" shall mean an Optionee's inability
to perform his duties with the Company or on the Board by reason of
any medically determinable physical or mental impairment, as
determined by a physician selected by the Optionee and acceptable
to the Company.
(j) "Exchange Act" shall mean the Securities
Exchange Act of 1934, as amended from time to time, and as now or
hereafter construed, interpreted and applied by regulations,
rulings and cases.
(k) "Fair Market Value" per share as of a particular
date shall mean (i) if the shares of Common Stock are then listed
on a national securities exchange, the closing sales price per
share of Common Stock on the national securities exchange on which
the Common Stock is principally traded for the last preceding date
on which there was a sale of such Common Stock on such exchange, or
(ii) if the shares of Common Stock are then traded in an
over-the-counter market, the closing bid price for the shares of
Common Stock in such over-the-counter market for the last preceding
date on which there was a sale of such Common Stock in such market,
or (iii) if the shares of Common Stock are not then listed on a
national securities exchange or traded in an over-the-counter
market, such value as the Committee, in its sole discretion, shall
determine.
(l) "Incentive Stock Option" shall mean any option
intended to be and designated as an incentive stock option within
the meaning of Section 422 of the Code.
(m) "Nonemployee Director" shall mean a member of
the Board who is not an employee of the Company.
(n) "Nonqualified Option" shall mean an Option that
is not an Incentive Stock Option.
(o) "Option" shall mean the right, granted
hereunder, to purchase shares of Common Stock. Options granted by
the Committee pursuant to the Plan may constitute either Incentive
Stock Options or Nonqualified Stock Options.
(p) "Optionee" shall mean a person who receives a
grant of an Option.
(q) "Option Price" shall mean the exercise price of
the shares of Common Stock covered by an Option.
(r) "Parent" shall mean any company (other than the
Company) in an unbroken chain of companies ending with the Company
if, at the time of granting an Option, each of the companies other
than the Company owns stock possessing fifty percent (50%) or more
of the total combined voting power of all classes of stock in one
of the other companies in such chain.
(s) "Plan" shall mean this Vaughan Foods, Inc. 2006
Equity Incentive Plan.
(t) "Rule 16b-3" shall mean Rule 16b-3, as from time
to time in effect, promulgated by the Securities and Exchange
Commission under Section 16 of the Exchange Act, including any
successor to such Rule.
(u) "Subsidiary" shall mean any company (other than
the Company) in an unbroken chain of companies beginning with the
Company if, at the time of granting an Option, each of the
companies other than the last company in the unbroken chain owns
stock possessing fifty percent (50%) or more of the total combined
voting power of all classes of stock in one of the other companies
in such chain.
(v) "Ten Percent Stockholder" shall mean an Optionee
who, at the time an Incentive Stock Option is granted, owns (or is
deemed to own pursuant to the attribution rules of Section 424(d)
of the Code) stock possessing more than ten percent (10%) of the
total combined voting power of all classes of stock of the Company
or any Parent or Subsidiary.
3. Administration.
The Plan, except as may otherwise be determined by
the Board, shall be administered by the Committee, the members of
which shall be "nonemployee directors" under Rule 16b-3 and
"outside directors" under Section 162(m) of the Code.
The Committee shall have the authority in its
discretion, subject to and not inconsistent with the express
provisions of the Plan, to administer the Plan and to exercise all
the powers and authorities either specifically granted to it under
the Plan or necessary or advisable in the administration of the
Plan, including, without limitation, the authority to grant
Options; to determine which Options shall constitute Incentive
Stock Options and whi
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