EXHIBIT 10.2
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UNITED EMPLOYEES PERFORMANCE INCENTIVE PLAN
I. PURPOSE
A. General. In an effort to maintain a position of leadership
in the fast-growing and highly competitive business segments in
which UAL Corporation (the "Company") competes, it is necessary
to promote the financial interests of the Company and its
Subsidiaries, including its growth, by attracting and retaining
certain highly qualified employees possessing outstanding
ability, motivating such employees by means of performance
related incentives, and providing incentive compensation
opportunities which are competitive with those of major
corporations. The United Employees Performance Incentive Plan
(the "Plan") hereinafter described is designed to assist the
Company in attaining these objectives.
B. Performance-Based Compensation. With respect to Covered
Awards, the Plan is intended to constitute a qualified
performance-based compensation plan under Section 162(m)(4)(C) of
the Code and shall be construed and administered so as to ensure
such compliance.
C. Deferred Awards. With respect to the Plan as it relates to
the payment of Incentive Awards on a deferred basis pursuant to
Paragraph VI(B), such portion of the Plan is intended to be (and
shall be construed and administered as) an employee pension
benefit plan that is unfunded and is maintained by the Company
for a select group of management or highly compensated employees
within the meaning of ERISA.
D. Cash Bonus Plan. With respect to the Plan as it relates to
the current payment of Incentive Awards pursuant to Paragraph
VI(A), such cash bonus portion of the Plan is not intended to be
(and shall not be construed and administered as) an employee
benefit plan within the meaning of ERISA. Incentive Awards under
this Plan are intended to be discretionary and shall not
constitute a part of an employee's regular rate of pay.
II. PLAN ADMINISTRATION
A. Plan Administration. The Company or its delegate has the
authority and responsibility to manage and control the general
administration of the Plan, except as to matters expressly
reserved in this Plan to either the Compensation Committee or the
Compensation Administration Committee of the Board of Directors
of the Company (as applicable, the "Committee"). This Plan is
not intended to modify or limit the powers, duties or
responsibilities of either the Board or the Committees as set
forth under the UAL Corporation Restated Certificate of
Incorporation. Determinations, decisions and actions of the
Company or, if applicable, the Committee, in connection with the
construction, interpretation, administration, or application of
the Plan will be final, conclusive, and binding upon any
Participant and any person claiming under or through the
Participant. No employee of an Employer, any member of the
Board, any delegate of the Board, or any member of the Committee
will be liable for any determination, decision, or action made in
good faith with respect to the Plan or any Incentive Award made
under the Plan.
B. Compensation Committee. The Compensation Committee shall
have the sole authority and responsibility to review annually
management's recommendations for the Selected Performance
Objectives and Selected Performance Factors under the Plan, to
select the Selected Performance Objectives and Selected
Performance Factors for an Award Year; and to otherwise
administer Incentive Awards (other than Covered Awards) payable
to Officers.
C. Compensation Administration Committee. The Compensation
Administration Committee shall have the sole authority and
responsibility under the Plan to establish and administer any
Covered Award under the Plan, including establishment of the
Selected Performance Objectives and Selected Performance Factors
for an Award Year.
D. Non-Assignability. A Participant's rights and interests in
and to payment of any Incentive Award under the Plan may not be
assigned, transferred, encumbered or pledged other than by will
or the laws of descent and distribution; and are not subject to
attachment, garnishment, execution or other creditor's processes.
E. Amendment or Termination. Subject to the UAL Corporation
Restated Certificate of Incorporation, the Plan may at any time
be amended, modified, or terminated, as the Board in its
discretion determines. Such amendment, modification, or
termination of the Plan will not require the consent,
ratification, or approval of any party, including any
Participant. The Board or the Compensation Committee (and the
Compensation Administration Committee in the case of a Covered
Award) may amend the Selected Performance Objectives and/or the
Selected Performance Factors as well as any Incentive Award
(including increasing, decreasing or eliminating any or all
Incentive Awards for an Award Year) prior to the payment of the
Award (or the date payment would have been made but for a
Participant's election to defer receipt) to the extent it deems
appropriate for any reason, including compliance with applicable
securities laws, local laws outside the U.S. if and to the extent
international employees are Participants, the requirements of
Section 162(m) of the Code and the pooling of interests
requirements in connection with a merger. Notwithstanding the
foregoing, to the extent the Compensation Administration
Committee has expressly designated an Incentive Award as a
Covered Award, the Compensation Administration Committee will not
have any authority to amend or modify the terms of any Covered
Award in any manner which would impair its deductibility under
Section 162(m) of the Code.
F. No Contract of Employment. Neither the Plan, nor any
Incentive Award, constitutes a contract of employment, and
participation in the Plan will not give any employee the right to
be retained in the service of the Company or any Subsidiary or
continue in any position or at any level of compensation.
G. Controlling Law. This Plan and all determinations made and
actions taken pursuant hereto to the extent not preempted by
ERISA or other federal laws, will be governed and construed by
the internal laws of the State of Illinois, except its laws with
respect to choice of law.
H. Beneficiary Upon Death. An Incentive Award which has been
deferred pursuant to the provisions of Paragraph VI(B) shall be
transferable at the Participant's death to the beneficiary
designated by the Participant on forms prescribed by and filed
with the Company. If no designation of a beneficiary has been
made or is in effect, an Incentive Award payable to a Participant
following his or her death shall be paid to the Participant's
legal representative and shall be transferable by will or
pursuant to the laws of descent and distribution.
I. Compliance with Section 162(m) of the Code. To the extent
any provision of the Plan or an Incentive Award or any action of
the Compensation Committee or the Company as it relates to a
Covered Award, may result in the application of Section 162(m)(1)
of the Code to compensation payable to a Covered Employee, such
provision or action shall be deemed null and void to the extent
permitted by law and deemed advisable to the Compensation
Administration Committee.
J. Unfunded, Unsecured Obligation. A Participant's only
interest under the Plan shall be the right to receive either a
cash or Stock payment for an Incentive Award pursuant to the
terms of the Incentive Award and the Plan. No portion of the
amount payable to a Participant under this Plan shall be held by
the Company or any Subsidiary in trust or escrow or any other
form of asset segregation. To the extent that a Participant
acquires a right to receive a cash or Stock payment under the
Plan, such right shall be no greater than the right of any
unsecured, general creditor of the Company, and no trust in favor
of any Participant will be implied.
K. International Employees. The Company may in its sole
discretion extend participation in the Plan to international
employees who do not satisfy the definition of Administrative
Employee or Management Employee under this Plan. The terms of
the Plan as applied to such employees shall be as set forth in an
Exhibit to this Plan.
III. DEFINITIONS
Unless the context requires otherwise, the following terms when
used with initial capitalization have the following meanings:
A. Account -- A bookkeeping account maintained by the Company
in the name of each Participant, which account shall consist of
two subaccounts, one known as the "Cash Subaccount" and the other
as the "Company Stock Subaccount."
B. Administrative Employee -- An individual (i) who is
classified by an Employer (without regard to any retroactive
judicial or administrative reclassification of such individual)
as an Administrative Employee (on other than a temporary
reclassification basis), (ii) whose employment is for an
indefinite period, (iii) who is employed in an Employer
established job classification not covered by a collective
bargaining agreement, and (iv) who is on the Employer's U.S.
payroll and working regularly in the U.S.
C. Award Year -- The calendar year for which Incentive Awards,
if any, are calculated under the Plan.
D. Board -- The Board of Directors of the Company.
E. Code -- The Internal Revenue Code of 1986, as from time to
time amended including any related regulations.
F. Committee - Committee means separately or collectively as
applicable the Compensation Administration Committee and the
Compensation Committee.
G. Company -- UAL Corporation.
H. Compensation -- Compensation means:
1. With respect to a Participant who is not a Key and Senior
Management Employee, the amount of a Participant's taxable wages
for the Award Year, increased by the amount of his or her pre-tax
elective contributions under any qualified Code Section 401(k)
plan or Code Section 125 cafeteria plan (including any HMO
premium deductions) for the Award Year, and decreased by any
Incentive Award received under the Plan or comparable incentive
compensation plan and the amount of any extraordinary payments
such as moving expense reimbursements, Pride Awards and Code
Section 125 cafeteria plan taxable reimbursements for the Award
Year.
2. With respect to a Key and Senior Management Employee, such
Participant's annual base salary actually received for the Award
Year, increased by the amount of his or her pre-tax elective
contributions under any qualified Code Section 401(k) Plan or
Code Section 125 cafeteria plan (including any HMO premium
deductions), prorated for a partial year's participation.
I. Compensation Administration Committee -- The Compensation
Administration Committee is the Compensation Administration
Committee of the Board as set forth in the UAL Corporation
Restated Certificate of Incorporation, or such other committee
appointed by the Board, in accordance with the requirements of
the UAL Corporation Restated Certificate of Incorporation, to
exercise the powers and perform the duties assigned to the
Compensation Administration Committee under this Plan.
J. Compensation Committee - The Compensation Committee is the
Compensation Committee of the Board as set forth in the UAL
Corporation Restated Certificate of Incorporation, or such other
committee appointed by the Board, in accordance with the
requirements of the UAL Corporation Restated Certificate of
Incorporation, to exercise the powers and perform the duties
assigned to the Compensation Committee under this Plan.
K. Covered Award -- An Incentive Award (i) which will be paid
to a Covered Employee, (ii) which the Compensation Administration
Committee expressly designates as performance-based compensation
intends to be fully deductible under Section 162(m) of the Code,
and (iii) which will be paid following the shareholder approval
required by Section 162(m)(4)(C)(ii) of the Code.
L. Covered Employee -- An individual who is a "covered
employee" within the meaning of Section 162(m)(3) of the Code.
M. Employer -- The Company, United Air Lines, Inc., and any
other Subsidiary which, with the approval of the Chief Executive
Officer of the Company, has adopted this Plan.
N. ERISA -- The Employee Retirement Income Security Act of
1974, as from time to time amended, including any related
regulations.
O. Fair Market Value. The Fair Market Value of a share of
Stock on any date shall be equal to the five-day average of the
average of the high and low prices of a share of Stock reported
for New York Stock Exchange Composite Transactions for the
applicable date or, if there are no such reported trades for such
date, for the last previous date for which trades were reported,
and the four previous dates for which trades were reported.
P. Incentive Award -- The dollar value of an award made to a
Participant as determined under the Plan.
Q. Incentive Opportunity -- The amount, stated as a percentage
of a Participant's Compensation, determined with respect to an
Award Year (or partial Award Year in the case of participation
for a partial year), that will be included in a Participant's
Incentive Award formula under Paragraph V(A) of the Plan. If a
Participant held more than one eligible position during the Award
Year, his or her Incentive Opportunity will be separately
determined based on each corresponding period of participation.
The Incentive Opportunity for Participants who are Officers will
be determined by the Compensation Committee, subject to the
requirement under Paragraph IX(A) that the Compensation
Administration Committee establish the Incentive Opportunity upon
which a Covered Award is based.
R. Individual Performance Goal -- The performance criteria or
objectives established for a Participant for an Award Year for
purposes of assisting the Company or the Compensation Committee
in determining whether and to what extent an Incentive Award has
been earned by such Participant for such Award Year.
S. Individual Performance Modifier -- The numerical modifier
(expressed as a percentage) determined for a Participant with
respect to an Award Year, as follows:
1. In the case of a Participant other than a Key and Senior
Management Employee, the Individual Performance Modifier shall be
100%, provided the Company may reduce such Individual Performance
Modifier based upon an evaluation of the Participant's
performance during the Award Year.
2. In the case of a Participant who is a Key and Senior
Management Employee other than an Officer, the Individual
Performance Modifier shall be determined by the Company and may
be based, in whole or in part, upon an evaluation of the extent
to which such Participant achieved his or her Individual
Performance Goals established for that Award Year.
3. In the case of a Participant who is an Officer other than an
Officer who is to receive a Covered Award, the Individual
Performance Modifier shall be determined by the Compensation
Committee and may be based, in whole or in part, upon an
evaluation of the extent to which such Participant achieved his
or her Individual Performance Goals established for that Award
Year.
4. In the case of a Participant who is to receive a Covered
Award, the Individual Performance Modifier shall in all cases be
120%, subject to the Compensation Administration Committee's
discretionary authority under Paragraph IX(C) to reduce the
amount of a Covered Award.
A Participant's evaluation under Paragraphs III(S)(l),
III(S)(2) and III(S)(3) above is wholly discretionary
and subjective on the part of the Company or the
Compensation Committee as applicable.
T. Key and Senior Management Employee - Each Covered Employee,
each Officer and each Management Employee who is designated by
the Company as a Key and Senior Management Employee with respect
to the Plan for an Award Year. Designation as a Key and Senior
Management Employee will apply only for the Award Year for which
the designation is made.
U. Management Employee -- An individual (i) who is classified
by the Employer (without regard to any retroactive judicial or
administrative reclassification of such individual) as a
Management Employee (on other than a temporary reclassification
basis), (ii) whose employment is for an indefinite period, (iii)
who is employed in an Employer established job classification not
covered by a collective bargaining agreement, and (iv) who is on
the Employer's U.S. payroll and working regularly in the U.S.
V. Officer - Each officer of the Company, each officer of
United Airlines Inc. reporting directly to the Chairman and Chief
Executive Officer of the Company, and each senior officer of the
Company's Subsidiaries designated by the Board.
W. Participant -- Each Administrative Employee, Management
Employee or other international employee of an Employer who is
designated as a Participant for an Award Year by the Company or
the Committee.
X. Performance Objectives - One or more objectively
determinable measures established at the beginning of an Award
Year related to specified levels of growth in, or peer company
performance in, or relating to, customer satisfaction as measured
by a Company sponsored customer survey; employee engagement or
employee relations as measured by a Company sponsored employee
survey; employee safety; employee diversity; financial
performance as measured by sales, net income, profits (pre- and
after-tax), adjusted pre-tax margin, earnings before interest and
taxes, cash flow, earnings per share, reduction of fixed costs,
economic value added, return on assets, return on capital, return
on equity, shareholder return, cost of capital, debt reduction,
productivity improvements; and operational performance as
measured by load factor, passenger yield management, lost time
incidents, baggage handling performance, or on-time performance.
Performance Objectives may be described in terms of Company,
Subsidiary, major business segments, division or departmental
performance. Performance Objectives shall be stated in terms of
Threshold, Target and Maximum levels. For other than Covered
Awards, the Company may add other Performance Objectives not
specifically listed above.
Y. Plan -- The United Employees Performance Incentive Plan, as
evidenced by this written instrument as may be amended from time
to time.
Z. Pre-Tax Earnings -- UAL Corporation's pre-tax earnings as
determined under generally accepted accounting principles
adjusted to exclude any items (whether gains or losses) otherwise
included therein relating to (i) the UAL Corporation Employee
Stock Ownership Plan, the UAL Corporation Supplemental ESOP, or
the trusts relating thereto, (ii) the Company's 1988 and 1998
Restricted Stock Plans, (iii) for those Award Years in which the
Company enters into labor contracts with ALPA or the IAM to
replace contracts becoming amendable in 2000, any differential
between the projected labor costs to the Company attributable to
such contract(s) as determined by the Company prior to such Award
Year and the actual labor costs to the Company attributable to
such labor contract(s) and (iv) any event or occurrence that the
Committee determines to be either not directly related to the
operations of the Company or not within the reasonable control of
the Company's management, but only to the extent such
determination would not cause a Covered Award to not be
deductible under Code Section 162(m).
AA. Pre-Tax Profit Margin -- Pre-Tax Earnings divided by UAL
Corporation's gross revenues as determined under generally
accepted accounting principles adjusted to exclude any items
otherwise included therein relating to any event or occurrence
that the Committee determines to be either not directly related
to the operations of the Company or not within the reasonable
control of the Company's management, but only to the extent such
determination would not cause a Covered Award to not be
deductible under Code Section 162(m).
BB. Selected Performance Factors -- The numerical factors
(expressed as a percentage) established by the Company relating
to the Plan's Selected Performance Objectives for the Award Year
and which correspond to the actual achievement of the Threshold,
Target and Maximum Selected Performance Objectives for such Award
Year. Subject to the provisions of Article IX with respect to a
Covered Award, the Selected Performance Factors as they relate to
Officers shall be established by the Compensation Committee. If
the actual achievement of the Selected Performance Objective for
an Award Year, as determined by the Company (or by the
Compensation Administration Committee in the case of a Covered
Award and the Compensation Committee as it relates to the
Incentive Awards for Officers other than with respect to a
Covered Award) shortly after the Award Year, is between the
Threshold and Target or Target and Maximum Objectives, the
Selected Performance Factor will be the amount determined by
linear interpolation between the two corresponding Threshold,
Target or Maximum Selected Performance Factors.
CC. Selected Performance Objectives - One or more Performance
Objectives selected for an Award Year. Subject to the provisions
of Article IX with respect to a Covered Award, the Compensation
Committee shall establish at the beginning of an Award Year the
Selected Performance Objectives, including the Threshold, Target
and Maximum levels for Officers, other than with respect to a
Covered Award.
DD. Stock -- Shares of Common Stock of the Company par value
$.01 per share, or any shares into which such shares are changed
as contemplated in Paragraph VI(E)(2)(b).
EE. Subsidiary -- Any entity, corporate or otherwise, in which
the Company, directly or indirectly, owns or controls a greater
than 50% interest.
IV. PARTICIPATION
A. Participants. Participants will be determined annually by
the Company or the Committee from among the Management Employees,
Administrative Employees, and other international employees of an
Employer. Designation as a Participant will apply only for the
Award Year for which the designation is made and may include a
partial year.
B. Termination of Employment. In order to be entitled to
receive an Incentive Award for an Award Year, a Participant must
be actively employed at the time the Incentive Award is paid or,
in the case of a deferred Incentive Award, at the time such Award
would have been paid but for the Participant's election to defer
receipt of the Award; however, the Company (or the Committee, if
applicable) may in its sole discretion pay an Incentive Award to
a Participant who has terminated employment.
V. COMPUTATION OF INCENTIVE AWARDS
A. Formula. Subject to Paragraph B, a Participant's Incentive
Award for an Award Year will be an amount equal to the Base
Incentive Award under (1) and, if applicable, the Match Incentive
Award under (2):
1. Base Incentive Award. The Participant's Base Incentive
Award is equal to the product of the following:
(a) The Participant's Incentive Opportunity;
(b) The Participant's Compensation;
(c) The sum of the Selected Performance Factors for the
Award Year; and
(d) The Participant's Individual Performance Modifier.
2. Match Incentive Award. For any portion of an Incentive
Award, the receipt of which has been deferred pursuant to
Paragraph VI(B) for a period of at least five years following
the Award Year and which is payable in the form of Stock, the
Participant's Incentive Award will include a Match Incentive
Award equal to 20% of such portion of the Participant's Base
Incentive Award determined under (1) above.
B. Covered Awards. A Covered Award shall be the greater of the
Incentive Award determined under Paragraph A or an Incentive
Award determined solely on the basis of a formula and one or more
financial Performance Objectives as established by the
Compensation Administration Committee prior to the Award Year (or
at such later date as may be permissible under Code Section
162(m)), subject to the Compensation Administration Committee's
discretionary authority under Paragraph IX(C) to reduce the
amount of a Covered Award.
C. Classification Changes. Appropriate adjustments and
computations, including computations for a partial Award Year,
may be made to reflect changes in a Participant's job
classification, Individual Performance Modifier, or Selected
Performance Factors during an Award Year. Subject to the
provisions of Article IX with respect to Covered Awards, the
Compensation Committee shall determine all such adjustments and
computations relating to Incentive Awards for Officers.
D. Threshold Limit. With respect to each Award Year, the
Compensation Committee will determine before such Award Year a
threshold level of Pre-Tax Profit Margin which must be obtained
before any Incentive Award (other than a Covered Award) may be
made to any Participant for such Award Year. The Compensation
Administration Committee will establish such threshold level of
Pre-Tax Profit Margin which must be obtained before any Covered
Award may be made to a Covered Employee for such Award Year.
VI. PAYMENT OF INCENTIVE AWARDS
A. Cash Payment. Subject to Paragraph B below, payment of
Incentive Awards will be made in cash as soon as practicable
following the end of the Award Year, without interest.
B. Election to Defer. A Participant who is a Key and Senior
Management Employee and who is determined by the Company to be
member of a select group of management or highly compensated
employees ("top-hat group") as such group is determined under
Sections 201(2), 301(a)(3) and 401(a)(1) of ERISA may make an
irrevocable election, on or before the earlier of a date
established by the Company or June 30 of the Award Year, to defer
receipt of all or any portion of his or her Incentive Award to a
subsequent calendar year. A Participant's deferred Incentive
Award will be credited to his or her Account as of the date it
would otherwise have been paid in cash and will be adjusted as
provided in Paragraph E below. A Participant's election to defer
will include an election to receive payment of all or a portion
of such deferred Incentive Award in the form of cash or shares of
Stock. If the Company reasonably determines that a Participant
no longer qualifies as a member of a "top-hat group," the Company
shall have the right, in its sole discretion, to (i) terminate
any future deferrals by such Participant under this Plan, and/or
(ii) immediately distribute the Participant's Account balance
under the Plan.
C. Time for Payment of Deferred Incentive Award. A
Participant who has made an election to defer his or her
Incentive Award will receive payment of his or her entire Account
balance (except as limited by (3) below) on the earliest of the
following:
1. In the calendar year selected by the Participant in his or
her irrevocable written election.
2. As soon as practicable in the calendar year after the
Participant's termination of employment with the Company and its
Subsidiaries for any reason or no reason, provided that a
transfer of employment among the Company or its Subsidiaries will
not be considered a termination of employment.
3. At the Participant's request and upon the occurrence of an
"Unforeseeable Emergency", provided that a distribution pursuant
to this clause shall not exceed the amount reasonably needed to
satisfy the emergency need. For purposes of this paragraph,
"Unforeseeable Emergency" shall mean a severe financial hardship
to the Participant resulting from a sudden and unexpected illness
or accident of the Participant or of his or her dependent (as
defined in Section 152(a) of the Code), loss of the Participant's
property due to casualty, or other similar extraordinary and
unforeseeable circumstances arising as a result of events beyond
the control of the Participant. The circumstances that will
constitute an Unforeseeable Emergency will depend upon the facts
of each case, but in no case will payment be made to the extent
that such hardship is or may be relieved (i) through
reimbursement or compensation by insurance or otherwise, (ii) by
liquidation of the Participant's assets, to the extent the
liquidation of such assets would not itself cause severe
financial hardship, or (iii) by cessation of deferrals under the
Plan.
4. Any other time elected by the Participant, provided that
upon making such an election, the Participant shall be entitled
to receive only 90% of the amounts then credited to his or her
Account under the Plan and shall forfeit the remaining 10% of
such amount.
D. Modification of Time and Manner of Payment.
Notwithstanding anything herein to the contrary and subject to
the provisions of Article IX with respect to a Covered Award, the
Compensation Committee shall have the right, in its discretion,
to vary the manner (including payment in cash in lieu of shares
of Stock) and time for making the distributions provided in
Paragraph C above (but not defer any amount otherwise due), and
may make such distributions in a lump sum or other payment method
as it may deem appropriate, taking into account the Participant's
or any beneficiary's age, health, physical or mental condition,
dependents or lack of dependents, other sources of income or lack
of same, and any other factors deemed relevant, provided,
however, that such accelerated payment is not detrimental to the
Participant. Nothing herein shall be construed to grant the
Participant or any beneficiary the right to elect a modification
of the time for receiving payments hereunder.
E. Crediting and Adjustment of Account Balance. The amount of
any Incentive Award a Participant has elected to defer and has
elected to receive in shares of Stock shall be credited to his or
her Company Stock Subaccount by crediting a number of stock units
equal to such amount of the Incentive Award divided by the Fair
Market Value of a share of Stock on the date the Incentive Award
would otherwise have been paid in cash. The balance of the
amount of the deferred Incentive Award shall be credited to his
or her Cash Subaccount. A Participant's Account shall be
adjusted as follows:
1. As of the last day of each calendar quarter (each such date
referred to herein as an "Accounting Date"), the Participant's
Cash Subaccount shall be adjusted as follows:
(a) first, the amount of any distributions made since the last
preceding Accounting Date and attributable to the Cash
Subaccount shall be charged to the Cash Subaccount;
(b) next, the balance of the Cash Subaccount after adjustment in
accordance with subparagraph (a) above, shall be credited
with interest for the period since the last preceding
Accounting Date computed at the prime rate as reported by The
Wall Street Journal in effect at the end of each calendar
quarter during the deferral period ending on the current
Accounting Date, or if such date is not a business day, for
the next preceding business day, except that, any credit which
occurs after the Accounting Date shall be credited with
interest for only the period following the credit.
2. The Participant's Company Stock Subaccount shall be adjusted
as follows:
(a) as of the date on which shares of Stock are distributed to
the Participant, the Company Stock Subaccount shall be charged
with an equal number of stock units; and
(b) as of the payment date for any dividend paid on Stock, the
Company Stock Subaccount shall be credited with that number
of additional stock units which is equal to the number
obtained by multiplying the number of stock units credited
to the Company Stock Subaccount on the dividend record date
by the amount of the cash dividend or the fair market value
(as determined by the Board of Directors) of any dividend
in kind payable on a share of Stock and dividing that
product by the then Fair Market Value of a share of Stock.
In the event of any merger, consolidation, reorganization,
recapitalization, liquidation, reclassification, divestiture
(including spinoff), stock split, reverse stock split,
combination of shares, rights offering, exchange, or any
other similar change in the corporate structure or
capitalization of the Company affecting the Stock, each
Participant's Company Stock Subaccount shall be equitably
adjusted in such manner as the Committee shall determine
in its sole judgment. In determining what adjustment, if any,
is appropriate the Committee may rely on the advice of such
experts as it deems appropriate, including counsel, investment
bankers and the accountants of the Company.
3. A Participant entitled to a Match Incentive Award under
Paragraph V(A)(2) will receive a credit to his or her Company
Stock Subaccount equal to such Match Incentive Award, but only if
actual receipt of the related Base Incentive Award is deferred
for a period of at least five years following the Award Year.
Such credit will be effective as of the date the related Base
Incentive Award is credited to the Participant's Company Stock
Subaccount and will be paid to the Participant in the manner and
at the time provided under Paragraph F below.
F. Payment of Account Balance. Except as otherwise provided in
Paragraphs II(D) or VI(D), and subject to Article VIII, the
Participant's Account shall be payable to the Participant, as
follows:
1. The cash portion of the Participant's payment shall be equal
to the balance of the Cash Subaccount.
2. The Stock portion of the Participant's payment shall be a
number of shares of Stock equal to the number of Stock units then
credited to the Participant's Company Stock Subaccount, provided
that the Fair Market Value of any fractional share of Stock shall
be paid to the Participant in cash.
G. Claim Procedure. For deferred Incentive Awards payable
under the Plan, the Compensation Committee shall establish a
claims procedure consistent with the requirements of ERISA.
H. Limitation on Actions. Unless ERISA specifically provides
otherwise, no civil action arising out of or relating to the
payment of Incentive Awards under this Plan may be commenced by a
Participant or beneficiary after three years from the occurrence
of the facts or circumstances that give rise to, or form the
basis for, such action.
VII. PAYMENT IN SHARES OF STOCK
A. Source of Shares of Stock. The shares of Stock which shall
be available for payment to Participants pursuant to the Plan
shall be treasury shares (including, in the discretion of the
Company, shares purchased in the open market).
B. Compliance with Applicable Laws. Notwithstanding any other
provision of the Plan, the Company shall have no obligation to
deliver any shares of Stock under the Plan unless such delivery
would comply with all applicable laws and the applicable
requirements of any securities exchange or similar entity, and,
in such event, payment shall be made in the form of cash. Prior
to the delivery of any shares of Stock under the Plan, the
Company may require, among other things, a written statement that
the recipient is acquiring the shares for investment and not for
the purpose of, or with the intention of, distributing the
shares. If the redistribution of shares of Stock is restricted
pursuant to this Paragraph B, the certificates representing such
shares may bear a legend referring to such restrictions.
C. No Shareholder Rights. The election to defer receipt of an
Incentive Award and to receive payment in the form of shares of
Stock does not entitle a Participant to any rights (including,
without limitation, voting, transfer and rights to distributions)
of an owner of shares of Stock which relate to the stock units
credited to the Participant's Company Stock Subaccount.
VIII. WITHHOLDING TAXES
Notwithstanding any of the foregoing provisions hereof, an
Employer shall withhold from any payment to be made
hereunder such amounts as it reasonably determines it may be
required to withhold under any applicable federal, state or
other law, and transmit such withheld amounts to the
appropriate authorities. If cash payments under this Plan
are not available to meet the withholding requirement, the
Participant shall make available sufficient funds to meet
the requirements of such withholding, and the Employer shall
be entitled and authorized to take such steps as it may deem
advisable, including but not limited to, withholding out of
any funds or property due or to become due to the
Participant, in order to have such funds made available to
the Employer.
IX. SPECIAL RULES FOR COVERED AWARDS
Notwithstanding any other provision of this Plan to the
contrary, the following provisions shall control with
respect to any Covered Award:
A. Preestablished Incentive Opportunity and Performance
Objectives. The Selected Performance Factors, Selected
Performance Objectives, Incentive Opportunity, and the Threshold
Limit under Paragraph V(D) upon which a Covered Award is based or
subject shall be established by the Compensation Administration
Committee in writing not later than 90 days after the
commencement of the Award Year (or period of service as the case
may be), provided that the outcome is substantially uncertain at
the time the Compensation Administration Committee actually
establishes such factors and the objectives upon which they are
based (or at such earlier time as may be required or such later
time as may be permissible under Section 162(m) of the Code).
The Compensation Administration Committee shall not make Covered
Awards based on Selected Performance Objectives not specifically
provided under this Plan if it determines that use of such
Performance Objectives would cause a Covered Award to not be
deductible under Code Section 162(m).
B. Certification of Performance Objectives. The Compensation
Administration Committee shall determine and certify in writing
prior to the payment or deferral of a Covered Award whether and
to what extent the Selected Performance Objectives referred to in
Paragraph A have been satisfied.
C. Discretionary Reduction of Covered Award. Notwithstanding
the foregoing, the Compensation Administration Committee may, in
its sole discretion, reduce a Covered Award otherwise determined
pursuant to the Plan.
D. Limited Adjustments of Selected Performance Objectives. In
the event of (a) any merger, consolidation, reorganization,
recapitalization, liquidation, reclassification, stock dividend,
stock split, reverse stock split, combination of shares, rights
offering, extraordinary dividend or divestiture (including a spin-
off), exchange, or any other similar change in the corporate
structure or capitalization of the Company affecting the Stock,
or (b) any purchase, acquisition, sale or disposition of a
significant amount of assets or a significant business, in each
case with respect to the Company or any other entity whose
performance is relevant to the achievement of any Selected
Performance Objective included in a Covered Award, the
Compensation Administration Committee (or, if the Company is not
the surviving corporation in any such transaction, a committee of
the board of directors of the surviving corporation consisting
solely of two or more "outside directors" within the meaning of
Section 162(m)(4)(C)(i) of the Code) may, without the consent of
any affected Participant, amend or modify the terms of any
outstanding Award that includes any Selected Performance
Objectives based in whole or in part on the financial performance
of the Company (or any Subsidiary or division thereof) or such
other entity so as equitably to reflect such event, such that the
criteria for evaluating such financial performance of the Company
or such other entity (and the achievement of the corresponding
Selected Performance Objectives) will be substantially the same
(as determined by the Compensation Administration Committee or
such committee of the board of directors of the surviving
corporation) following such event as prior to such event;
provided, however, that any such change to any outstanding
Covered Award pursuant to this Paragraph D must be made in such a
manner that it is independently determinable by a hypothetical
third party having knowledge of the relevant facts, and the
Compensation Administration Committee shall take no action
pursuant to this Paragraph D which would constitute an
impermissible exercise of discretion within the meaning of
Section 162(m) of the Code, or would otherwise cause the Covered
Award to not be deductible under Section 162(m) of the Code.
E. Changes Affecting Timing. No change shall be made to
accelerate the payment of a Covered Award unless the amount of
the Covered Award is discounted to reasonably reflect the time
value of money. Further, no change shall be made to defer the
payment of a Covered Award unless an increase in the amount paid
with respect to such award is based on a reasonable rate of
interest or on the actual returns on one or more predetermined
actual investments (whether or not assets associated with the
amount originally owed are actually invested therein).
F. Maximum Amount. The maximum amount of any Covered Award,
including the Match Incentive Award under Paragraph (V)(A)(2),
payable to any Covered Employee with respect to an Award Year
determined as of the time the Covered Award is paid or would have
been paid absent an election to defer receipt, shall not exceed
$3,000,000.
