Linens 'n Things, Inc. 2000 Stock Award and Incentive Plan
LINENS 'N THINGS. INC.
2000 Stock Award and Incentive Plan
1. Purpose. The purpose of this 2000 Stock Award and Incentive
Plan (the "Plan") is to aid Linens 'n Things, Inc., a Delaware corporation (the
"Company"), in attracting, retaining, motivating and rewarding employees,
non-employee directors, and other persons who provide substantial services to
the Company or its subsidiaries or affiliates, to provide for equitable and
competitive compensation opportunities, to recognize individual contributions
and reward achievement of Company goals, and promote the creation of long-term
value for stockholders by closely aligning the interests of Participants with
those of stockholders. The Plan authorizes stock-based and cash-based incentives
for Participants.
2. Definitions. In addition to the terms defined in Section 1
above and elsewhere in the Plan, the following capitalized terms used in the
Plan have the respective meanings set forth in this Section:
(a) "Annual Incentive Award" means a type of Performance Award
granted to a Participant under Section 7(c) representing a conditional right to
receive cash, Stock or other Awards or payments, as determined by the Committee,
based on performance in a performance period of one fiscal year or a portion
thereof.
(b) "Award" means any Option, SAR, Restricted Stock, Deferred
Stock, Stock granted as a bonus or in lieu of another award, Dividend
Equivalent, Other Stock-Based Award, Performance Award or Annual Incentive
Award, together with any related right or interest, granted to a Participant
under the Plan.
(c) "Beneficiary" means the legal representatives of the
Participant's estate entitled by will or the laws of descent and distribution to
receive the benefits under a Participant's Award upon a Participant's death,
provided that, if and to the extent authorized by the Committee, a Participant
may be permitted to designate a Beneficiary, in which case the "Beneficiary"
instead will be the person, persons, trust or trusts (if any are then surviving)
which have been designated by the Participant in his or her most recent written
beneficiary designation filed with the Committee to receive the benefits
specified under the Participant's Award upon such Participant's death. Unless
otherwise determined by the Committee, any designation of a Beneficiary other
than a Participant's spouse shall be subject to the written consent of such
spouse.
(d) "Board" means the Company's Board of Directors.
(e) "Change in Control" and related terms have the meanings
specified in Section 9.
(f) "Code" means the Internal Revenue Code of 1986, as
amended. References to any provision of the Code or regulation (including a
proposed regulation) thereunder shall include any successor provisions and
regulations.
(g) "Committee" means a committee of two or more directors
designated by the Board to administer the Plan; provided, however, that,
directors appointed or serving as members of a Board committee designated as the
Committee shall not be employees of the Company or any subsidiary or affiliate.
In appointing members of the Committee, the Board will consider whether a member
is or will be a Qualified Member, but such members are not required to be
Qualified Members at the time of appointment or during their term of service on
the Committee. The full Board may perform any function of the Committee
hereunder, in which case the term "Committee" shall refer to the Board.
(h) "Covered Employee" means an Eligible Person who is a
Covered Employee as specified in Section 11(j).
(i) "Deferred Stock" means a right, granted to a Participant
under Section 6(e), to receive Stock or other Awards or a combination thereof at
the end of a specified deferral period.
(j) "Dividend Equivalent" means a right, granted to a
Participant under Section 6(g), to receive cash, Stock, other Awards or other
property equal in value to all or a specified portion of the dividends paid with
respect to a specified number of shares of Stock.
(k) "Effective Date" means the effective date specified in
Section 11(p).
(l) "Eligible Person" has the meaning specified in Section 5.
(m) "Exchange Act" means the Securities Exchange Act of 1934,
as amended. References to any provision of the Exchange Act or rule (including a
proposed rule) thereunder shall include any successor provisions and rules.
(n) "Fair Market Value" means the fair market value of Stock,
Awards or other property as determined by the Committee or under procedures
established by the Committee. Unless otherwise determined by the Committee, the
Fair Market Value of Stock as of any given date shall be the closing sale price
per share of Stock reported on a consolidated basis for securities listed on the
principal stock exchange or market on which Stock is traded on the date as of
which such value is being determined or, if there is no sale on that day, then
on the last previous day on which a sale was reported.
(o) "Incentive Stock Option" or "ISO" means any Option
designated as an incentive stock option within the meaning of Code Section 422
or any successor provision thereto and qualifying thereunder.
(p) "Option" means a right, granted to a Participant under
Section 6(b), to purchase Stock or other Awards at a specified price during
specified time periods.
(q) "Other Stock-Based Awards" means Awards granted to a
Participant under Section 6(h).
(r) "Participant" means a person who has been granted an Award
under the Plan which remains outstanding, including a person who is no longer an
Eligible Person.
(s) "Performance Award" means a conditional right, granted to
a Participant under Sections 6(i) and 7, to receive cash, Stock or other Awards
or payments, as determined by the Committee, based upon performance criteria
specified by the Committee.
(t) "Preexisting Plans" means the Company's 1996 Incentive
Compensation Plan and 1996 Non-Employee Director Stock Plan.
(u) "Qualified Member" means a member of the Committee who is
a "Non-Employee Director" within the meaning of Rule 16b-3(b)(3) and an "outside
director" within the meaning of Regulation 1.162-27 under Code Section 162(m).
(v) "Restricted Stock" means Stock granted to a Participant
under Section 6(d) which is subject to certain restrictions and to a risk of
forfeiture.
(w) "Rule l6b-3" means Rule 16b-3, as from time to time in
effect and applicable to Participants, promulgated by the Securities and
Exchange Commission under Section 16 of the Exchange Act.
(x) "Stock" means the Company's Common Stock, and any other
equity securities of the Company that may be substituted or resubstituted for
Stock pursuant to Section 11(c).
(y) "Stock Appreciation Rights" or "SAR" means a right granted
to a Participant under Section 6(c).
3. Administration.
(a) Authority of the Committee. The Plan shall be administered
by the Committee, which shall have full and final authority, in each case
subject to and consistent with the provisions of the Plan, to select Eligible
Persons to become Participants; to grant Awards; to determine the type and
number of Awards, the dates on which Awards may be exercised and on which the
risk of forfeiture or deferral period relating to Awards shall lapse or
terminate, the acceleration of any such dates, the expiration date of any Award,
whether, to what extent, and under what circumstances an Award may be settled,
or the exercise price of an Award may be paid, in cash, Stock, other Awards, or
other property, and other terms and conditions of, and all other matters
relating to, Awards; to prescribe documents evidencing or setting terms of
Awards (such Award documents need not be identical for each Participant),
amendments thereto, and rules and regulations for the administration of the Plan
and amendments thereto; to construe and interpret the Plan and Award documents
and correct defects, supply omissions or reconcile inconsistencies therein; and
to make all other decisions and determinations as the Committee may deem
necessary or advisable for the administration of the Plan. Decisions of the
Committee with respect to the administration and interpretation of the Plan
shall be final, conclusive, and binding upon all persons interested in the Plan,
including Participants, Beneficiaries, transferees under Section 11(b) and other
persons claiming rights from or through a Participant, and stockholders. The
foregoing notwithstanding, the Board shall perform the functions of the
Committee for purposes of granting Awards under the Plan to non-employee
directors (authority with respect to other aspects of non-employee director
awards is not exclusive to the Board, however).
(b) Manner of Exercise of Committee Authority. At anytime that
a member of the Committee is not a Qualified Member, (i) any action of the
Committee relating to an Award intended by the Committee to qualify as
"performance-based compensation" within the meaning of Code Section 162(m) and
regulations thereunder may be taken by a subcommittee, designated by the
Committee or the Board, composed solely of two or more Qualified Members, and
(ii) any action relating to an Award granted or to be granted to a Participant
who is then subject to Section 16 of the Exchange Act in respect of the Company
may be taken either by such a subcommittee or by the Committee but with each
such member who is not a Qualified Member abstaining or recusing himself or
herself from such action, provided that, upon such abstention or recusal, the
Committee remains composed of two or more Qualified Members. Such action,
authorized by such a subcommittee or by the Committee upon the abstention or
recusal of such non-Qualified Member(s), shall be the action of the Committee
for purposes of the Plan. The express grant of any specific power to the
Committee, and the taking of any action by the Committee, shall not be construed
as limiting any power or authority of the Committee. The Committee may delegate
to officers or managers of the Company or any subsidiary or affiliate, or
committees thereof, the authority, subject to such terms as the Committee shall
determine, to perform such functions, including administrative functions, as the
Committee may determine, to the extent that such delegation will not result in
the loss of an exemption under Rule 16b-3(d) for Awards granted to Participants
subject to Section 16 of the Exchange Act in respect of the Company and will not
cause Awards intended to qualify as "performance-based compensation" under Code
Section 162(m) to fail to so qualify.
(c) Limitation of Liability. The Committee and each member
thereof, and any person acting pursuant to authority delegated by the Committee,
shall be entitled, in good faith, to rely or act upon any report or other
information furnished by any executive officer, other officer or employee of the
Company or a subsidiary or affiliate, the Company's independent auditors,
consultants or any other agents assisting in the administration of the Plan.
Members of the Committee, any person acting pursuant to authority delegated by
the Committee, and any officer or employee of the Company or a subsidiary or
affiliate acting at the direction or on behalf of the Committee or a delegee
shall not be personally liable for any action or determination taken or made in
good faith with respect to the Plan, and shall, to the extent permitted by law,
be fully indemnified and protected by the Company with respect to any such
action or determination.
4. Stock Subject to Plan.
(a) Overall Number of Shares Available for Delivery. Subject
to adjustment as provided in Section 11(c), the total number of shares of Stock
reserved and available for delivery in connection with Awards under the Plan
shall be (i) 2,000,000 plus (ii) the number of shares subject to Awards under
the Plan or awards under the Preexisting Plans which become available in
accordance with Section 4(b) after the Effective Date; provided, however, that
the total number of shares with respect to which ISOs may be granted shall not
exceed the number specified under clause (i) above; and provided further, that
the total number of shares which may be issued and delivered in connection with
Awards other than Options shall not exceed 200,000 shares reserved under the
Plan, subject to adjustment as provided in Section 11(c). Any shares of Stock
delivered under the Plan shall consist of authorized and unissued shares or
treasury shares.
(b) Share Counting Rides. The Committee may adopt reasonable
counting procedures to ensure appropriate counting, avoid double counting (as,
for example, in the case of tandem or substitute awards) and make adjustments if
the number of shares of Stock actually delivered differs from the number of
shares previously counted in connection with an Award. Shares subject to an
Award under the Plan or an award under any Preexisting Plan that is canceled,
expired, forfeited, settled in cash or otherwise terminated without a delivery
of shares to the Participant will again be available for Awards, and shares
withheld in payment of the exercise price or taxes relating to an Award or
Preexisting Plan award and shares equal to the number surrendered in payment of
any exercise price or taxes relating to an Award or Preexisting Plan award shall
be deemed to constitute shares not delivered to the Participant and shall be
deemed to be available for Awards under the Plan. In addition, in the case of
any Award granted in substitution for an award of a company or business acquired
by the Company or a subsidiary or affiliate, shares issued or issuable in
connection with such substitute Award shall not be counted against the number of
shares reserved under the Plan, but shall be available under the Plan by virtue
of the Company's assumption of the plan or arrangement of the acquired company
or business. This Section 4(b) shall apply to the number of shares reserved and
available for ISOs only to the extent consistent with applicable regulations
relating to ISOs under the Code.
5. Eligibility; Per-Person Award Limitations. Awards may be
granted under the Plan only to Eligible Persons. For purposes of the Plan, an
"Eligible Person" means an employee of the Company or any subsidiary or
affiliate, including any executive officer, a non-employee director of the
Company, a consultant or other person who provides substantial services to the
Company or a subsidiary or affiliate, and any person who has been offered
employment by the Company or a subsidiary or affiliate, provided that such
prospective employee may not receive any payment or exercise any right relating
to an Award until such person has commenced employment with the Company or a
subsidiary or affiliate. An employee on leave of absence may be considered as
still in the employ of the Company or a subsidiary or affiliate for purposes of
eligibility for participation in the Plan. For purposes of the Plan, a joint
venture in which the Company or a subsidiary has a substantial direct or
indirect equity investment shall be deemed an affiliate, if so determined by the
Committee. In each calendar year during any part of which the Plan is in effect,
an Eligible Person may be granted Awards intended to qualify as
"performance-based compensation" under Code Section 162(m) under each of Section
6(b), 6(c), 6(d), 6(e), 6(f), 6(g) or 6(h) relating to up to his or her Annual
Limit (such Annual Limit to apply separately to the type of Award authorized
under each specified subsection, except that the limitation applies to Dividend
Equivalents under Section 6(g) only if such Dividend Equivalents are granted
separately from and not as a feature of another Award). Subject to Section 4(a),
a Participant's Annual Limit, in any year during any part of which the
Participant is then eligible under the Plan, shall equal one million shares plus
the amount of the Participant's unused Annual Limit relating to the same type of
Award as of the close of the previous year, subject to adjustment as provided in
Section 11(c). In the case of an Award which is not valued in a way in which the
limitation set forth in the preceding sentence would operate as an effective
limitation satisfying Treasury Regulation 1.162-27(e)(4) (including a
Performance Award under Section 7 not related to an Award specified in Section
6), an Eligible Person may not be granted Awards authorizing the earning during
any calendar year of an amount that exceeds the Participant's Annual Limit,
which for this purpose shall equal $5 million plus the amount of the
Participant's unused cash Annual Limit as of the close of the previous year
(this limitation is separate and not affected by the number of Awards granted
during such calendar year subject to the limitation in the preceding sentence).
For this purpose, (i) "earning" means satisfying performance conditions so that
an amount becomes payable, without regard to whether it is to be paid currently
or on a deferred basis or continues to be subject to any service requirement or
other non-performance condition, and (ii) a Participant's Annual Limit is used
to the extent an amount or number of shares may he potentially earned or paid
under an Award, regardless of whether such amount or shares are in fact earned
or paid.
6. Specific Terms of Awards.
(a) General. Awards may be granted on the terms and conditions
set forth in this Section 6. In addition, the Committee may impose on any Award
or the exercise thereof, at the date of grant or thereafter (subject to Section
11(e)), such additional terms and conditions, not inconsistent with the
provisions of the Plan, as the Committee shall determine, including terms
requiring forfeiture of Awards in the event of termination of employment or
service by the Participant and terms permitting a Participant to make elections
relating to his or her Award. The Committee shall retain full power and
discretion with respect to any term or condition of an Award that is not
mandatory under the Plan. The Committee shall require the payment of lawful
consideration for an Award to the extent necessary to satisfy the requirements
of the Delaware General Corporation Law, and may otherwise require payment of
consideration for an Award except as limited by the Plan.
(b) Options. The Committee is authorized to grant Options to
Participants on the following terms and conditions:
(i) Exercise Price. The exercise price per share of
Stock purchasable under an Option (including both ISOs and
non-qualified Options) shall be determined by the Committee, provided
that such exercise price shall be not less than the Fair Market Value
of a share of Stock on the date of grant of such Option, subject to
Sections 6(f) and 8(a).
(ii) Option Term; Time and Method of Exercise. The
Committee shall determine the term of each Option, provided that in no
event shall the term of any ISO or SAR in tandem therewith exceed a
period of ten years from the date of grant. The Committee shall
determine the time or times at which or the circumstances under which
an Option may be exercised in whole or in part (including based on
achievement of performance goals and/or future service requirements),
the methods by which such exercise price may be paid or deemed to be
paid and the form of such payment (subject to Section 11(k)),
including, without limitation, cash, Stock, other Awards or awards
granted under other plans of the Company or any subsidiary or
affiliate, or other property (including notes and other contractual
obligations of Participants to make payment on a deferred basis, such
as through "cashless exercise" arrangements, to the extent permitted by
applicable law), and the methods by or forms in which Stock will be
delivered or deemed to be delivered in satisfaction of Options to
Participants (including deferred delivery of shares representing the
Option "profit," at the election of the Participant or as mandated by
the Committee, with such deferred shares subject to any vesting,
forfeiture or other terms as the Committee may specify).
(iii) ISOs. The terms of any ISO granted under the
Plan shall comply in all respects with the provisions of Code Section
422, including but not limited to the requirement that no ISO shall be
granted more than ten years after the Effective Date.
(c) Stock Appreciation Rights. The Committee is authorized to
grant SARs to Participants on the following terms and conditions:
(i) Right to Payment. A SAR shall confer on the
Participant to whom it is granted a right to receive, upon exercise
thereof, the excess of (A) the Fair Market Value of one share of Stock
on the date of exercise (or, in the case of a "Limited SAR," the Fair
Market Value determined by reference to the Change in Control Price, as
defined under Section 9(c) hereof) over (B) the grant price of the SAR
as determined by the Committee.
(ii) Other Terms. The Committee shall determine at
the date of grant or thereafter, the time or times at which and the
circumstances under which a SAR may be exercised in whole or in part
(including based on achievement of performance goals and/or future
service requirements), the method of exercise, method of settlement,
form of consideration payable in settlement, method by or forms in
which Stock will be delivered or deemed to be delivered to
Participants, and whether or not a SAR shall be free-standing or in
tandem or combination with any other Award. Limited SARs that may only
be exercised in connection with a Change in Control or other event as
specified by the Committee may be granted on such terms, not
inconsistent with this Section 6(c), as the Committee may determine.
(d) Restricted Stock. The Committee is authorized to grant
Restricted Stock to Participants on the following terms and conditions:
(i) Grant and Restrictions. Restricted Stock shall be
subject to such restrictions on transferability, risk of forfeiture and
other restrictions, if any, as the Committee may impose, which
restrictions may lapse separately or in combination at such times,
under such circumstances (including based on achievement of performance
goals and/or future service requirements), in such installments or
otherwise and under such other circumstances as the Committee may
determine at the date of grant or thereafter. Except to the extent
restricted under the terms of the Plan and any Award document relating
to the Restricted Stock, a Participant granted Restricted Stock shall
have all of the rights of a stockholder, including the right to vote
the Restricted Stock and the right to receive dividends thereon
(subject to any mandatory reinvestment or other requirement imposed by
the Committee).
(ii) Forfeiture. Except as otherwise determined by
the Committee, upon termination of employment or service during the
applicable restriction period, Restricted Stock that is at that time
subject to restrictions shall be forfeited and reacquired by the
Company; provided that the Committee may provide, by rule or regulation
or in any Award document, or may determine in any individual case, that
restrictions or forfeiture conditions relating to Restricted Stock will
lapse in whole or in part, including in the event of terminations
resulting from specified causes.
(iii) Certificates for Stock. Restricted Stock
granted under the Plan may be evidenced in such manner as the Committee
shall determine. If certificates representing Restricted Stock are
registered in the name of the Participant, the Committee may require
that such certificates bear an appropriate legend referring to the
terms, conditions and restrictions applicable to such Restricted Stock,
that the Company retain physical possession of the certificates, and
that the Participant deliver a stock power to the Company, endorsed in
blank, relating to the Restricted Stock.
(iv) Dividends and Splits. As a condition to the
grant of an Award of Restricted Stock, the Committee may require that
any dividends paid on a share of Restricted Stock shall be either (A)
paid with respect to such Restricted Stock at the dividend payment date
in cash, in kind, or in a number of shares of unrestricted Stock having
a Fair Market Value equal to the amount of such dividends, or (B)
automatically reinvested in additional Restricted Stock or held in
kind, which shall be subject to the same terms as applied to the
original Restricted Stock to which it relates, or (C) deferred as to
payment, either as a cash deferral or with the amount or value thereof
automatically deemed reinvested in shares of Deferred Stock, other
Awards or other investment vehicles, subject to such terms as the
Committee shall determine or permit a Participant to elect. Unless
otherwise determined by the Committee, Stock distributed in connection
with a Stock split or Stock dividend, and other property distributed as
a dividend, shall be subject to restrictions and a risk of forfeiture
to the same extent as the Restricted Stock with respect to which such
Stock or other property has been distributed.
(e) Deferred Stock. The Committee is authorized to grant
Deferred Stock to Participants, which are rights to receive Stock, other Awards,
or a combination thereof at the end of a specified deferral period, subject to
the following terms and conditions:
(i) Award and Restrictions. Issuance of Stock will
occur upon expiration of the deferral period specified for an Award of
Deferred Stock by the Committee (or, if permitted by the Committee, as
elected by the Participant). In addition, Deferred Stock shall be
subject to such restrictions on transferability, risk of forfeiture and
other restrictions, if any, as the Committee may impose, which
restrictions may lapse at the expiration of the deferral period or at
earlier specified times (including based on achievement of performance
goals and/or future service requirements), separately or in
combination, in installments or otherwise, and under such other
circumstances as the Committee may determine at the date of grant or
thereafter. Deferred Stock may be satisfied by delivery of Stock, other
Awards, or a combination thereof (subject to Section 11(k)), as
determined by the Committee at the date of grant or thereafter.
(ii) Forfeiture. Except as otherwise determined by
the Committee, upon termination of employment or service during the
applicable deferral period or portion thereof to which forfeiture
conditions apply (as provided in the Award document evidencing the
Deferred Stock), all Deferred Stock that is at that time subject to
such forfeiture conditions shall be forfeited; provided that the
Committee may provide, by rule or regulation or in any Award document,
or may determine in any individual case, that restrictions or
forfeiture conditions relating to Deferred Stock will lapse in whole or
in part, including in the event of terminations resulting from
specified causes.
(iii) Dividend Equivalents. Unless otherwise
determined by the Committee, Dividend Equivalents on the specified
number of shares of Stock covered by an Award of Deferred Stock shall
be either (A) paid with respect to such Deferred Stock at the dividend
payment date in cash or in shares of unrestricted Stock having a Fair
Market Value equal to the amount of such dividends, or (B) deferred
with respect to such Deferred Stock, either as a cash deferral or with
the amount or value thereof automatically deemed reinvested in
additional Deferred Stock, other Awards or other investment vehicles
having a Fair Market Value equal to the amount of such dividends, as
the Committee shall determine or permit a Participant to elect.
(f) Bonus Stock and Awards in Lieu of Obligations. The
Committee is authorized to grant Stock as a bonus, or to grant Stock or other
Awards in lieu of obligations of the Company or a subsidiary or affiliate to pay
cash or deliver other property under the Plan or under other plans or
compensatory arrangements, subject to such terms as shall be determined by the
Committee.
(g) Dividend Equivalents. The Committee is authorized to grant
Dividend Equivalents to a Participant, entitling the Participant to receive
cash, Stock, other Awards, or other property equivalent to all or a portion of
the dividends paid with respect to a specified number of shares of Stock.
Dividend Equivalents may be awarded on a free-standing basis or in connection
with another Award. The Committee may provide that Dividend Equivalents shall be
paid or distributed when accrued or shall be deemed to have been reinvested in
additional Stock, Awards, or other investment vehicles, and subject to
restrictions on transferability, risks of forfeiture and such other terms as the
Committee may specify.
(h) Other Stock-Based Awards. The Committee is authorized,
subject to limitations under applicable law, to grant to Participants such other
Awards that may be denominated or payable in, valued in whole or in part by
reference to, or otherwise based on, or related to, Stock or factors that may
influence the value of Stock, including, without limitation, convertible or
exchangeable debt securities, other rights convertible or exchangeable into
Stock, purchase rights for Stock, Awards with value and payment contingent upon
performance of the Company or business units thereof or any other factors
designated by the Committee, and Awards valued by reference to the book value of
Stock or the value of securities of or the performance of specified subsidiaries
or affiliates or other business units. The Committee shall determine the terms
and conditions of such Awards. Stock delivered pursuant to an Award in the
nature of a purchase right granted under this Section 6(h) shall be purchased
for such consideration, paid for at such times, by such methods, and in such
forms, including, without limitation, cash, Stock, other Awards, notes, or other
property, as the Committee shall determine. Cash awards, as an element of or
supplement to any other Award under the Plan, may also be granted pursuant to
this Section 6(h).
(i) Performance Awards. Performance Awards, denominated in
cash or in Stock or other Awards, may be granted by the Committee in accordance
with Section 7.
7. Performance Awards, Including Annual Incentive Awards.
(a) Performance Awards Generally. The Committee is authorized
to grant Performance Awards on the terms and conditions specified in this
Section 7. Performance Awards may be denominated as a cash amount, number of
shares of Stock, or specified number of other Awards (or a combination) which
may be earned upon achievement or satisfaction of performance conditions
specified by the Committee. In addition, the Committee may specify that any
other Award shall constitute a Performance Award by conditioning the right of a
Participant to exercise the Award or have it settled, and the timing thereof,
upon achievement or satisfaction of such performance conditions as may be
specified by the Committee. The Committee may use such business criteria and
other measures of performance as it may deem appropriate in establishing any
performance conditions, and may exercise its discretion to reduce or increase
the amounts payable under any Award subject to performance conditions, except as
limited under Sections 7(b) and 7(c) in the case of a Performance Award intended
to qualify as "performance-based compensation" under Code Section 162(m).
(b) Performance Awards Granted to Covered Employees. If the
Committee determines that a Performance Award to be granted to an Eligible
Person who is designated by the Committee as likely to be a Covered Employee
should qualify as "performance-based compensation" for purposes of Code Section
162(m), the grant, exercise and/or settlement of such Performance Award shall be
contingent upon achievement of a preestablished performance goal and other terms
set forth in this Section 7(b).
(i) Performance Goal Generally. The performance goal
for such Performance Awards shall consist of one or more business
criteria and a targeted level or levels of performance with respect to
each of such criteria, as specified by the Committee consistent with
this Section 7(b). The performance goal shall be objective and shall
otherwise meet the requirements of Code Section 162(m) and regulations
thereunder (including Regulation 1.162-27 and successor regulations
thereto), including the requirement that the level or levels of
performance targeted by the Committee result in the achievement of
performance goals being "substantially uncertain." The Committee may
determine that such Performance Awards shall be granted, exercised
and/or settled upon achievement of any one performance goal or that two
or more of the performance goals must be achieved as a condition to
grant, exercise and/or settlement of such Performance Awards.
Performance goals may differ for Performance Awards granted to any one
Participant or to different Participants.
(ii) Business Criteria. One or more of the following
business criteria for the Company, on a consolidated basis, and/or for
specified subsidiaries or affiliates or other business units of the
Company, shall he used by the Committee in establishing performance
goals for such Performance Awards: (1) net sales; (2) earnings from
operations. earnings before or after taxes, earnings before or after
interest, depreciation, amortization, incentives, service fees or
extraordinary or special items; (3) net income or net income per common
share (basic or diluted); (4) return on assets, return on investment,
return on capital, or return on equity; (5) cash flow, free cash flow,
cash flow return on investment, or net cash provided by operations; (6)
economic value created; (7) operating margin or profit margin; (8)
stock price or total stockholder return; and (9) strategic business
criteria, consisting of one or more objectives based on meeting
specified market penetration, geographic business expansion goals, cost
targets, customer satisfaction, employee satisfaction, management of
employment practices and employee benefits, supervision of litigation
and information technology, and goals relating to acquisitions or
divestitures of subsidiaries, affiliates or joint ventures. The
targeted level or levels of performance with respect to such business
criteria may be established at such levels and in such terms as the
Committee may determine, in its discretion, including in absolute
terms, as a goal relative to performance in prior periods, or as a goal
compared to the performance of one or more comparable companies or an
index covering multiple companies.
(iii) Performance Period; Timing for Establishing
Performance Goals. Achievement of performance goals in respect of such
Performance Awards shall be measured over a performance period of up to
one year or more than one year, as specified by the Committee. A
performance goal shall be established not later than the earlier of (A)
90 days after the beginning of any performance period applicable to
such Performance Award or (B) the time 25% of such performance period
has elapsed.
(iv) Performance Award Pool. The Committee may
establish a Performance Award pool, which shall be an unfunded pool,
for purposes of measuring performance of the Company in connection with
Performance Awards. The amount of such Performance Award pool shall be
based upon the achievement of a performance goal or goals based on one
or more of the business criteria set forth in Section 7(b)(ii) during
the given performance period, as specified by the Committee in
accordance with Section 7(b)(iv). The Committee may specify the amount
of the Performance Award pool as a percentage of any of such business
criteria, a percentage thereof in excess of a threshold amount, or as
another amount which need not bear a strictly mathematical relationship
to such business criteria.
(v) Settlement of Performance Awards; Other Terms.
Settlement of such Performance Awards shall be in cash, Stock, other
Awards or other property, in the discretion of the Committee. The
Committee may, in its discretion, increase or reduce the amount of a
settlement otherwise to be made in connection with such Performance
Awards, but may not exercise discretion to increase any such amount
payable to a Covered Employee in respect of a Performance Award subject
to this Section 7(b). Any settlement which changes the form of payment
from that originally specified shall be implemented in a manner such
that the Performance Award and other related Awards do not, solely for
that reason, fail to qualify as "performance-based compensation" for
purposes of Code Section 162(m). The Committee shall specify the
circumstances in which such Performance Awards shall be paid or
forfeited in the event of termination of employment by the Participant
or other event (including a Change in Control) prior to the end of a
performance period or settlement of such Performance Awards.
(c) Annual Incentive Awards Granted to Designated Covered
Employees. The Committee may grant an Annual Incentive Award to an Eligible
Person who is designated by the Committee as likely to be a Covered Employee.
Such Annual Incentive Award will be intended to qualify as "performance-based
compensation" for purposes of Code Section 162(m), and therefore its grant,
exercise and/or settlement shall be contingent upon achievement of
preestablished performance goals and other terms set forth in this Section 7(c).
(i) Grant of Annual Incentive Awards. Not later than
the earlier of 90 days after the beginning of any performance period
applicable to such Annual Incentive Award or the time 25% of such
performance period has elapsed, the Committee shall determine the
Covered Employees who will potentially receive Annual Incentive Awards,
and the amount(s) potentially payable thereunder, for that performance
period. The amount(s) potentially payable shall be based upon the
achievement of a performance goal or goals based on one or more of the
business criteria set forth in Section 7(b)(ii) in the given
performance period, as specified by the Committee. The Committee may
designate an annual incentive award pool as the means by which Annual
Incentive Awards will be measured, which pool shall conform to the
provisions of Section 7(b)(iv). In such case. the portion of the Annual
Incentive Award pool potentially payable to each Covered Employee shall
be preestablished by the Committee. In all cases, the maximum Annual
Incentive Award of any Participant shall be subject to the limitation
set forth in Section 5.
(ii) Payout of Annual Incentive Awards. After the end
of each performance period, the Committee shall determine the amount,
if any, of the Annual Incentive Award for that performance period
payable to each Participant. The Committee may, in its discretion,
determine that the amount payable to any Participant as a final Annual
Incentive Award shall be reduced from the amount of his or her
potential Annual Incentive Award, including a determination to make no
final Award whatsoever, but may not exercise discretion to increase any
such amount. The Committee shall specify the circumstances in which an
Annual Incentive Award shall be paid or forfeited in the event of
termination of employment by the Participant or other event (including
a Change in Control) prior to the end of a performance period or
settlement of such Annual Incentive Award.
(d) Written Determinations. Determinations by the Committee as
to the establishment of performance goals, the amount potentially payable in
respect of Performance Awards and Annual Incentive Awards, the level of actual
achievement of the specified performance goals relating to Performance Awards
and Annual Incentive Awards, and the amount of any final Performance Award and
Annual Incentive Award shall be recorded in writing in the case of Performance
Awards intended to qualify under Section 162(m). Specifically, the Committee
shall certify in writing, in a manner conforming to applicable regulations under
Section 162(m), prior to settlement of each such Award granted to a Covered
Employee, that the performance objective relating to the Performance Award and
other material terms of the Award upon which settlement of the Award was
conditioned have been satisfied.
8. Certain Provisions Applicable to Awards.
(a) Stand-Alone, Additional, Tandem, and Substitute Awards.
Awards granted under the Plan may, in the discretion of the Committee, be
granted either alone or in addition to, in tandem with, or in substitution or
exchange for, any other Award or any award granted under another plan of the
Company, any subsidiary or affiliate, or any business entity to be acquired by
the Company or a subsidiary or affiliate, or any other right of a Participant to
receive payment from the Company or any subsidiary or affiliate. Awards granted
in addition to or in tandem with other Awards or awards may be granted either as
of the same time as or a different time from the grant of such other Awards or
awards. Subject to Section 11(k), the Committee may determine that, in granting
a new Award, the in-the-money value of any surrendered Award or award may be
applied to reduce the exercise price of any Option, grant price of any SAR, or
purchase price of any other Award.
(b) Term of Awards. The term of each Award shall be for such
period as may be determined by the Committee, subject to the express limitations
set forth in Section 6(b)(ii).
(c) Form and Timing of Payment under Awards; Deferrals.
Subject to the terms of the Plan (including Section 11(k)) and any applicable
Award document, payments to be made by the Company or a subsidiary or affiliate
upon the exercise of an Option or other Award or settlement of an Award may be
made in such forms as the Committee shall determine, including, without
limitation, cash, Stock, other Awards or other property. and may be made in it
single payment or transfer, in installments, or on a deferred basis. The
settlement of any Award may be accelerated, and cash paid in lieu of Stock in
connection with such settlement, in the discretion of the Committee or upon
occurrence of one or more specified events (subject to Section 11(k)).
Installment or deferred payments may be required by the Committee (subject to
Section 11(e)) or permitted at the election of the Participant on terms and
conditions established by the Committee. Payments may include, without
limitation, provisions for the payment or crediting of reasonable interest oil
installment or deferred payments or the grant or crediting of Dividend
Equivalents or other amounts in respect of installment or deferred payments
denominated in Stock.
(d) Exemptions from Section 16(b) Liability. With respect to a
Participant who is then subject to the reporting requirements of Section 16(a)
of the Exchange Act in respect of the Company, the Committee shall implement
transactions under the Plan and administer the Plan in a manner that will ensure
that each transaction with respect to such a Participant is exempt from
liability under Rule 16b-3 or otherwise not subject to liability under Section
16(b)), except that this provision shall not limit sales by such a Participant,
and such a Participant may engage in other non-exempt transactions under the
Plan. The Committee may authorize the Company to repurchase any Award or shares
of Stock deliverable or delivered in connection with any Award (subject to
Section 11(k)) in order to avoid a Participant who is subject to Section 16 of
the Exchange Act incurring liability under Section 16(b). Unless otherwise
specified by the Participant, equity securities or derivative securities
acquired under the Plan which are disposed of by a Participant shall be deemed
to be disposed of in the order acquired by the Participant.
(e) Loan Provisions. With the consent of the Committee, and
subject at all times to, and only to the extent, if any, permitted under and in
accordance with, laws and regulations and other binding obligations or
provisions applicable to the Company, the Company may make, guarantee, or
arrange for a loan or loans to a Participant with respect to the exercise of any
Option or other payment in connection with any Award, including the payment by a
Participant of any or all federal, state, or local income or other taxes due in
connection with any Award. Subject to such limitations, the Committee shall have
full authority to decide whether to make a loan or loans hereunder and to
determine the amount, terms, and provisions of any such loan or loans, including
the interest rate, if any, to be charged in respect of any such loan or loans,
whether the loan or loans are to be with or without recourse against the
borrower, the terms on which the loan is to be repaid and conditions, if any,
under which the loan or loans may be forgiven.
(f) Limitation on Vesting of Certain Awards. Restricted Stock
will vest over a minimum period of three years except in the event of a
Participant's death, disability, or retirement, or in the event of a Change in
Control or other special circumstances. The foregoing notwithstanding, (i)
Restricted Stock as to which either the grant or vesting is based on, among
other things, the achievement of one or more performance conditions generally
will vest over a minimum period of one year except in the event of a
Participant's death, disability, or retirement, or in the event of a Change in
Control or other special circumstances, and (ii) up to 5% of the shares of Stock
authorized under the Plan may be granted as Restricted Stock without any minimum
vesting requirements. For purposes of this Section 8(f), vesting over a
three-year period or one-year period will include periodic vesting over such
period if the rate of such vesting is proportional throughout such period.
9. Change in Control.
(a) Effect of "Change in Control" on Non-Performance Based
Awards. In the event of a "Change in Control," the following provisions shall
apply to non-performance based Awards, including Awards as to which performance
conditions previously have been satisfied or are deemed satisfied under Section
9(b), unless otherwise provided by the Committee in the Award document:
(i) All deferral of settlement, forfeiture conditions
and other restrictions applicable to Awards granted under the Plan
shall lapse and such Awards shall be fully payable its of the time of
the Change in Control without regard to deferral and vesting
conditions, except to the extent of any waiver by the Participant or
other express election to defer beyond it Change in Control and subject
to applicable restrictions set forth in Section 11(a);
(ii) Any Award carrying a right to exercise that was
not previously exercisable and vested shall become fully exercisable
and vested as of the time of the Change in Control and shall remain
exercisable and vested for the balance of the stated term of such Award
without regard to any termination of employment or service by the
Participant other than a termination for "cause" (as defined in any
employment or severance agreement between the Company or it subsidiary
or affiliate and the Participant then in effect or, if none, as defined
by the Committee and in effect at the time of the Change in Control),
subject only to applicable restrictions set forth in Section 11(a); and
(iii) The Committee may, in its discretion, determine
to extend to any Participant who holds an Option the right to elect,
during the 60-day period immediately following the Change in Control,
in lieu of acquiring the shares of Stock covered by such Option, to
receive in cash the excess of the Change in Control Price over the
exercise price of such Option, multiplied by the number of shares of
Stock covered by such Option, and to extend to any Participant who
holds other types of Awards denominated in shares the right to elect,
during the 60-day period immediately following the Change in Control,
in lieu of receiving the shares of Stock covered by such Award, to
receive in cash the Change in Control Price multiplied by the number of
shares of Stock covered by such Award.
(b) Effect of "Change in Control" on Performance-Based Awards.
In the event of a "Change in Control," with respect to an outstanding Award
subject to achievement of performance goals and conditions, such performance
goals and conditions shall be deemed to be met or exceeded if and to the extent
so provided by the Committee in the Award document governing such Award or other
agreement with the Participant.
(c) Definition of "Change in Control." A "Change in Control"
shall be deemed to have occurred if, after the Effective Date, there shall have
occurred any of the following:
(i) any Person (other than the Company, any trustee
or other fiduciary holding securities under any employee benefit plan
of the Company, or any company owned, directly or indirectly, by the
stockholders of the Company in substantially the same proportions as
their ownership of the common stock of the Company) becomes the
beneficial owner (except that a Person shall be deemed to be the
beneficial owner of all shares that any such Person has the right to
acquire pursuant to any agreement or arrangement or upon exercise of
conversion rights, warrants or options or otherwise, without regard to
the sixty day period referred to in Rule 13d-3 under the Exchange Act),
directly or indirectly, of securities of the Company or any Significant
Subsidiary (as defined below), representing 25% or more of the combined
voting power of the Company's or such subsidiary's then outstanding
securities;
(ii) during any period of two consecutive years (not
including any period prior to the adoption of the Plan), individuals
who at the beginning of such period constitute the Board, and any new
director (other than a director designated by a person who has entered
into an agreement with the Company to effect a transaction described in
clause (i), (iii), or (iv) of this paragraph) whose election by the
Board or nomination for election by the Company's stockholders was
approved by a vote of at least two-thirds of the directors then still
in office who either were directors at the beginning of the two-year
period or whose election or nomination for election was previously so
approved but excluding for this purpose any such new director whose
initial assumption of office occurs as a result of either an actual or
threatened election contest (as such terms are used in Rule 14a-11 of
Regulation 14A promulgated under the Exchange Act) or other actual or
threatened solicitation of proxies or consents by or on behalf of an
individual, corporation, partnership, group, associate or other entity
or Person other than the Board, cease for any reason to constitute at
least a majority of the Board,
(iii) the consummation of a merger or consolidation
of the Company or any subsidiary owning directly or indirectly all or
substantially all of the consolidated assets of the Company (a
"Significant Subsidiary") with any other corporation, other than a
merger or consolidation which would result in the voting securities of
the Company or a Significant Subsidiary outstanding immediately prior
thereto continuing to represent (either by remaining outstanding or by
being converted into voting securities of the surviving or resulting
entity) more than 50% of the combined voting power of the surviving or
resulting entity outstanding immediately after such merger or
consolidation;
(iv) the stockholders of the Company or any affiliate
approve a plan or agreement for the sale or disposition of all or
substantially all of the consolidated assets of the Company (other than
such a sale or disposition immediately after which such assets will be
owned directly or indirectly by the stockholders of the Company in
substantially the same proportions as their ownership of the common
stock of the Company immediately prior to such sale or disposition) in
which case the Board shall determine the effective date of the Change
in Control resulting therefrom; or
(v) any other event occurs which the Board
determines, in its discretion, would materially alter the structure of
the Company or its ownership.
(d) Definition of "Change in Control Price." The "Change in
Control Price" means an amount in cash equal to the higher of (i) the amount of
cash and fair market value of property that is the highest price per share paid
(including extraordinary dividends) in any transaction triggering the Change in
Control or any liquidation of shares following a sale of substantially all
assets of the Company, or (ii) the highest Fair Market Value per share at any
time during the 60-day period preceding and 60-day period following the Change
in Control.
10. Additional Award Forfeiture Provisions.
(a) Forfeiture of Options and Other Awards and Gains Realized
Upon Prior Option Exercises or Award Settlements. Unless otherwise determined by
the Committee, each Award granted hereunder shall be subject to the following
additional forfeiture conditions, to which the Participant, by accepting an
Award hereunder, agrees. If any of the events specified in Section 10(b)(i),
(ii), or (iii) occurs (a "Forfeiture Event"), all of the following forfeitures
will result:
(i) The unexercised portion of the Option, whether or
not vested, and any other Award not then settled (except for an Award
that has not been settled solely due to an elective deferral by the
Participant and otherwise is not forfeitable in the event of any
termination of service of the Participant) will be immediately
forfeited and canceled upon the occurrence of the Forfeiture Event; and
(ii) The Participant will be obligated to repay to
the Company, in cash, within five business days after demand is made
therefor by the Company, the total amount of Award Gain (as defined
herein) realized by the Participant upon each exercise of an Option or
settlement of an Award (regardless of any elective deferral) that
occurred on or after (A) the date that is six months prior to the
occurrence of the Forfeiture Event, if the Forfeiture Event occurred
while the Participant was employed by the Company or a subsidiary or
affiliate, or (B) the date that is six months prior to the date the
Participant's employment by the Company or a subsidiary or affiliate
terminated, if the Forfeiture Event occurred after the Participant
ceased to be so employed. For purposes of this Section, the term "Award
Gain" shall mean (i) in respect of a given Option exercise, the product
of (X) the Fair Market Value per share of Stock at the date of such
exercise (without regard to any subsequent change in the market price
of shares) minus the exercise price times (Y) the number of shares as
to which the Option was exercised at that date, and (ii) in respect of
any other settlement of an Award granted to the Participant, the Fair
Market Value of the cash or Stock paid or payable to Participant
(regardless of any elective deferral) less any cash or the Fair Market
Value of any Stock or property (other than an Award or award which
would have itself then been forfeitable hereunder and excluding any
payment of tax withholding) paid by tile Participant to the Company as
a condition of or in connection with such settlement.
(b) Events Triggering Forfeiture. The forfeitures specified in
Section 10(a) will be triggered upon the occurrence of any one of the following
Forfeiture Events at any time during the Participant's employment by the Company
or a subsidiary or affiliate or during the one-year period following termination
of such employment:
(i) The Participant, acting alone or with others,
directly or indirectly, prior to a Change in Control, (A) engages,
either as employee, employer, consultant, advisor, or director, or as
an owner, investor, partner, or stockholder unless the Participant's
interest is insubstantial, in any business in an area or region in
which the Company conducts business at the date the event occurs, which
is directly in competition with a business then conducted by the
Company or a subsidiary or affiliate; (B) induces any customer or
supplier of the Company or a subsidiary or affiliate, or other company
with which the Company or a subsidiary or affiliate has a business
relationship, to curtail, cancel, not renew, or not continue his or her
or its business with the Company or any subsidiary or affiliate; or (C)
induces, or attempts to influence, any employee of or service provider
to the Company or a subsidiary or affiliate to terminate such
employment or service. The Committee shall, in its discretion,
determine which lines of business the Company conducts on any
particular date and which third parties may reasonably be deemed to be
in competition with the Company. For purposes of this Section 10(b)(i),
a Participant's interest as a stockholder is insubstantial if it
represents beneficial ownership of less than five percent of the
outstanding class of stock, and a Participant's interest as an owner,
investor, or partner is insubstantial if it represents ownership, as
determined by the Committee in its discretion, of less than five
percent of the outstanding equity of the entity;
(ii) The Participant discloses, uses, sells, or
otherwise transfers, except in the course of employment with or other
service to the Company or any subsidiary or affiliate, any confidential
or proprietary information of the Company or any subsidiary or
affiliate, including but not limited to information regarding the
Company's current and potential customers, organization, employees,
finances, and methods of operations and investments, so long as such
information has not otherwise been disclosed to the public or is not
otherwise in the public domain, except as required by law or pursuant
to legal process, or the Participant makes statements or
representations, or otherwise communicates, directly or indirectly, in
writing, orally, or otherwise, or takes any other action which may,
directly or indirectly, disparage or be damaging to the Company or any
of its subsidiaries or affiliates or their respective officers,
directors, employees, advisors, businesses or reputations, except as
required by law or pursuant to legal process; or
(iii) The Participant fails to cooperate with the
Company or any subsidiary or affiliate by making himself or herself
available to testify on behalf of the Company or such subsidiary or
affiliate in any action, suit, or proceeding, whether civil, criminal,
administrative, or investigative, or otherwise fails to assist the
Company or any subsidiary or affiliate in any such action, suit, or
proceeding by providing information and meeting and consulting with
members of management of, other representatives of, or counsel to, the
Company or such subsidiary or affiliate, as reasonably requested.
(c) Agreement Does Not Prohibit Competition or Other
Participant Activities. Although the conditions set forth in this Section 10
shall be deemed to be incorporated into an Award, a Participant is not thereby
prohibited from engaging in any activity, including but not limited to
competition with the Company and its subsidiaries and affiliates. Rather, the
non-occurrence of the Forfeiture Events set forth in Section 10(b) is a
condition to the Participant's right to realize and retain value from his or her
compensatory Options and Awards, and the consequence under the Plan if the
Participant engages in an activity giving rise to any such Forfeiture Event are
the forfeitures specified herein. The Company and the Participant shall not be
precluded by this provision or otherwise from entering into other agreements
concerning the subject matter of Section 10(a) and 10(b).
(d) Committee Discretion. The Committee may, in its
discretion, waive in whole or in part the Company's right to forfeiture under
this Section, but no such waiver shall be effective unless evidenced by a
writing signed by a duly authorized officer of the Company. In addition, the
Committee may impose additional conditions on Awards, by inclusion of
appropriate provisions in the document evidencing or governing any such Award.
11. General Provisions.
(a) Compliance with Legal and Other Requirements. The Company
may, to the extent deemed necessary or advisable by the Committee, postpone the
issuance or delivery of Stock or payment of other benefits under any Award until
completion of such registration or qualification of such Stock or other required
action under any federal or state law, rule or regulation, listing or other
required action with respect to any stock exchange or automated quotation system
upon which the Stock or other securities of the Company are listed or quoted, or
compliance with any other obligation of the Company, as the Committee may
consider appropriate, and may require any Participant to make such
representations, furnish such information and comply with or be subject to such
other conditions as it may consider appropriate in connection with the issuance
or delivery of Stock or payment of other benefits in compliance with applicable
laws, rules, and regulations, listing requirements, or other obligations. The
foregoing notwithstanding, in connection with a Change in Control, the Company
shall take or cause to be taken no action, and shall undertake or permit to
arise no legal or contractual obligation, that results or would result in any
postponement of the issuance or delivery of Stock or payment of benefits under
any Award or the imposition of any other conditions on such issuance, delivery
or payment, to the extent that such postponement or other condition would
represent a greater burden on a Participant than existed on the 90th day
preceding the Change in Control.
(b) Limits on Transferability; Beneficiaries. No Award or
other right or interest of a Participant under the Plan shall be pledged,
hypothecated or otherwise encumbered or subject to any lien, obligation or
liability of such Participant to any party (other than the Company or a
subsidiary or affiliate thereof), or assigned or transferred by such Participant
otherwise than by will or the laws of descent and distribution or to a
Beneficiary upon the death of a Participant, and such Awards or rights that may
be exercisable shall be exercised during the lifetime of the Participant only by
the Participant or his or her guardian or legal representative, except that
Awards and other rights (other than ISOs and SARs in tandem therewith) may be
transferred to one or more transferees during the lifetime of the Participant,
and may be exercised by such transferees in accordance with the terms of such
Award, but only if and to the extent such transfers are permitted by the
Committee, subject to any terms and conditions which the Committee may impose
thereon (including limitations the Committee may deem appropriate in order that
offers and sales under the Plan will meet applicable requirements of
registration forms under the Securities Act of 1933 specified by the Securities
and Exchange Commission). A Beneficiary, transferee, or other person claiming
any rights under the Plan from or through any Participant shall be subject to
all terms and conditions of the Plan and any Award document applicable to such
Participant, except as otherwise determined by the Committee, and to any
additional terms and conditions deemed necessary or appropriate by the
Committee.
(c) Adjustments. In the event that any large, special and
non-recurring dividend or other distribution (whether in the form of cash or
property other than Stock), recapitalization, forward or reverse split, Stock
dividend, reorganization, merger. consolidation, spin-off, combination.
repurchase. share exchange, liquidation. dissolution or other similar corporate
transaction or event affects the Stock such that an adjustment is determined by
the Committee to be appropriate under the Plan, then the Committee shall, in
such manner as it may deem equitable, adjust any or all of (i) the number and
kind of shares of Stock which may be delivered in connection with Awards granted
thereafter, (ii) the number and kind of shares of Stock by which annual
per-person Award limitations are Measured under Section 5, (iii) the number and
kind of shares of Stock subject to or deliverable in respect of outstanding
Awards and (iv) the exercise price, grant price or purchase price relating to
any Award or, if deemed appropriate, the Committee may make provision for a
payment of cash or property to the holder of an outstanding Option (subject to
Section 11(k)). In addition, the Committee is authorized to make adjustments in
the terms and conditions of, and the criteria included in, Awards (including
Performance Awards and performance goals and any hypothetical funding pool
relating thereto) in recognition of unusual or nonrecurring events (including,
without limitation, events described in the preceding sentence, as well as
acquisitions and dispositions of businesses and assets) affecting the Company,
any subsidiary or affiliate or other business unit, or the financial statements
of the Company or any subsidiary or affiliate, or in response to changes in
applicable laws. regulations, accounting principles, tax rates and regulations
or business conditions or in view of the Committee's assessment of the business
strategy of the Company, any subsidiary or affiliate or business unit thereof,
performance of comparable organizations, economic and business conditions,
personal performance of a Participant, and any other circumstances deemed
relevant; provided that no such adjustment shall be authorized or made if and to
the extent that the existence of such authority (i) would cause Options, SARs,
or Performance Awards granted under Section 8 to Participants designated by the
Committee as Covered Employees and intended to qualify as "performance-based
compensation" under Code Section 162(m) and regulations thereunder to otherwise
fail to qualify as "performance-based compensation" under Code Section 162(m)
and regulations thereunder, or (ii) would cause the Committee to be deemed to
have authority to change the targets, within the meaning of Treasury Regulation
1.162-27(e)(4)(vi), under the performance goals relating to Options or SARs
granted to Covered Employees and intended to qualify as "performance-based
compensation" under Code Section 162(m) and regulations thereunder.
(d) Tax Provisions.
(i) Withholding. The Company and any subsidiary or
affiliate is authorized to withhold from any Award granted, any payment
relating to an Award under the Plan, including from a distribution of
Stock, or any payroll or other payment to a Participant, amounts of
withholding and other taxes due or potentially payable in connection
with any transaction involving an Award, and to take such other action
as the Committee may deem advisable to enable the Company and
Participants to satisfy obligations for the payment of withholding
taxes and other tax obligations relating to any Award. This authority
shall include authority to withhold or receive Stock or other property
and to make cash payments in respect thereof in satisfaction of a
Participant's withholding obligations, either on a mandatory or
elective basis in the discretion of the Committee. Other provisions of
the Plan notwithstanding, only the minimum amount of Stock deliverable
in connection with an Award necessary to satisfy statutory withholding
requirements will be withheld.
(ii) Required Consent to and Notification of Code
Section 83(b) Election. No election under Section 83(b) of the Code (to
include in gross income in the year of transfer the amounts specified
in Code Section 83(b)) or under a similar provision of the laws of a
jurisdiction outside the United States may be made unless expressly
permitted by the terms of the Award document or by action of the
Committee in writing prior to the making of such election. In any case
in which a Participant is permitted to make such an election in
connection with an Award, the Participant shall notify the Company of
such election within ten days of filing notice of the election with the
Internal Revenue Service or other governmental authority, in addition
to any filing and notification required pursuant to regulations issued
under Code Section 83(b) or other applicable provision.
(iii) Requirement of Notification Upon Disqualifying
Disposition Under Code Section 421(b). If any Participant shall make
any disposition of shares of Stock delivered pursuant to the exercise
of all Incentive Stock Option under the circumstances described in Code
Section 421(b) (relating to certain disqualifying dispositions), such
Participant shall notify the Company of such disposition within ten
days thereof.
(e) Changes to the Plan. The Board may amend, suspend or
terminate the Plan or the Committee's authority to grant Awards under the Plan
without the consent of stockholders or Participants; provided, however, that any
amendment to the Plan shall be submitted to the Company's stockholders for
approval not later than the earliest annual meeting for which the record date is
after the date of such Board action if such stockholder approval is required by
any federal or state law or regulation or the rules of any stock exchange or
automated quotation system on which the Stock may then be listed or quoted, and
the Board may otherwise, in its discretion, determine to submit other amendments
to the Plan to stockholders for approval and provided further, that, without the
consent of an affected Participant, no such Board action may materially and
adversely affect the rights of such Participant under any outstanding Award.
Without the approval of stockholders, the Committee will not amend or replace
previously granted Options in a transaction that constitutes it "repricing," as
such term is used in Instruction 3 to Item 402(b)(2)(iv) of Regulation S-K, as
promulgated by the Securities and Exchange Commission.
(f) Right of Setoff. The Company or any subsidiary or
affiliate may, to the extent permitted by applicable law, deduct from and set
off against any amounts the Company or it subsidiary or affiliate may owe to the
Participant from time to time, including amounts payable in connection with any
Award, owed as wages, fringe benefits, or other compensation owed to the
Participant. Such amounts as may be owed by the Participant to the Company,
including but not limited to amounts owed under Section 10(a), although the
Participant shall remain liable for any part of the Participant's payment
obligation not satisfied through such deduction and setoff. By accepting any
Award granted hereunder, the Participant agrees to any deduction or setoff under
this Section 11(f).
(g) Unfunded Status of Awards; Creation of Trusts. 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
obligation to deliver Stock pursuant to an Award, nothing contained in the Plan
or any Award shall give any such Participant any rights that are greater than
those of a general creditor of the Company; provided that the Committee may
authorize the creation of trusts and deposit therein cash, Stock, other Awards
or other property, or make other arrangements to meet the Company's obligations
under the Plan. Such trusts or other arrangements shall be consistent with the
"unfunded" status of the Plan unless the Committee otherwise determines with the
consent of each affected Participant.
(h) Nonexclusivity of the Plan. Neither the adoption of the
Plan by the Board nor its submission to the stockholders of the Company for
approval shall be construed as creating any limitations on the power of the
Board or a committee thereof to adopt such other incentive arrangements, apart
from the Plan, as it may deem desirable, including incentive arrangements and
awards which do not qualify under Code Section 162(m), and such other
arrangements may be either applicable generally or only in specific cases.
(i) Payments in the Event of Forfeitures; Fractional Shares.
Unless otherwise determined by the Committee, in the event of a forfeiture of an
Award with respect to which a Participant paid cash consideration, the
Participant shall be repaid the amount of such cash consideration. No fractional
shares of Stock shall be issued or delivered pursuant to the Plan or any Award.
The Committee shall determine whether cash, other Awards or other property shall
be issued or paid in lieu of such fractional shares or whether such fractional
shares or any rights thereto shall be forfeited or otherwise eliminated.
(j) Compliance with Code Section 162(m). It is the intent of
the Company that Options and SARs granted to Covered Employees and other Awards
designated as Awards to Covered Employees subject to Section 7 shall constitute
qualified "performance-based compensation" within the meaning of Code Section
162(m) and regulations thereunder, unless otherwise determined by the Committee
at the time of allocation of an Award. Accordingly, the terms of Sections 7(b),
(c), and (d), including the definitions of Covered Employee and other terms used
therein, shall be interpreted in a manner consistent with Code Section 162(m)
and regulations thereunder. The foregoing notwithstanding, because the Committee
cannot determine with certainty whether a given Participant will be a Covered
Employee with respect to a fiscal year that has not yet been completed, the term
Covered Employee as used herein shall mean only a person designated by the
Committee as likely to be a Covered Employee with respect to a specified fiscal
year. If any provision of the Plan or any Award document relating to a
Performance Award that is designated as intended to comply with Code Section
162(m) does not comply or is inconsistent with the requirements of Code Section
162(m) or regulations thereunder, such provision shall be construed or deemed
amended to the extent necessary to conform to such requirements, and no
provision shall be deemed to confer upon the Committee or any other person
discretion to increase the amount of compensation otherwise payable in
connection with any such Award upon attainment of the applicable performance
objectives.
(k) Certain Limitations Relating to Accounting Treatment of
Awards. Other provisions of the Plan notwithstanding, the Committee's authority
under the Plan (including under Sections 8(c), 8(d), 11(c) and 11(d)) is limited
to the extent necessary to ensure that any Option or other Award of a type that
the Committee has intended to be subject to fixed accounting with a measurement
date at the date of grant or the date performance conditions are satisfied under
APB 25 shall not become subject to "variable" accounting solely due to the
existence of such authority, unless the Committee specifically determines that
the Award shall remain outstanding despite such "variable" accounting. In
addition, other provisions of the Plan notwithstanding, (i) if any right under
this Plan would cause a transaction to be ineligible for pooling-of-interests
accounting that would, but for the right hereunder, be eligible for such
accounting treatment, such right shall be automatically adjusted so that
pooling-of-interests accounting shall be available, including by substituting
Stock or cash having a Fair Market Value equal to any cash or Stock otherwise
payable in respect of any right to cash which would cause the transaction to be
ineligible for pooling-of-interests accounting, and (ii) if the authority of the
Continuing Directors to determine that an event shall not constitute a Change in
Control or other authority under Section 9(c) would cause a transaction to be
ineligible for pooling-of-interests accounting that would, but for such
authority, be eligible for such accounting treatment, such authority shall be
limited to the extent necessary so that such transaction would be eligible for
pooling-of-interests accounting.
(l) Governing Law. The validity, construction, and effect of
the Plan, any rules and regulations relating to the Plan and any Award document
shall be determined in accordance with the laws of the State of Delaware,
without giving effect to principles of conflicts of laws, and applicable
provisions of federal law.
(m) Awards to Participants Outside the United States. The
Committee may modify the terms of any Award under the Plan made to or held by a
Participant who is then resident or primarily employed outside of the United
States in any manner deemed by the Committee to be necessary or appropriate in
order that such Award shall conform to laws, regulations, and customs of the
country in which the Participant is then resident or primarily employed, or so
that the value and other benefits of the Award to the Participant, as affected
by foreign tax laws and other restrictions applicable as a result of the
Participant's residence or employment abroad shall be comparable to the value of
such an Award to a Participant who is resident or primarily employed in the
United States. An Award may be modified under this Section 11(m) in a manner
that is inconsistent with the express terms of the Plan, so long as such
modifications will not contravene any applicable law or regulation or result in
actual liability under Section 16(b) for the Participant whose Award is
modified.
(n) Limitation on Rights Conferred under Plan. Neither the
Plan nor any action taken hereunder shall be construed as (i) giving any
Eligible Person or Participant the right to continue as an Eligible Person or
Participant or in the employ or service of the Company or a subsidiary or
affiliate, (ii) interfering in any way with the right of the Company or a
subsidiary or affiliate to terminate any Eligible Person's or Participant's
employment or service at any time, (iii) giving an Eligible Person or
Participant any claim to be granted any Award under the Plan or to be treated
uniformly with other Participants and employees, or (iv) conferring on a
Participant any of the rights of a stockholder of the Company unless and until
the Participant is duly issued or transferred shares of Stock in accordance with
the terms of an Award or an Option is duly exercised. Except as expressly
provided in the Plan and an Award document, neither the Plan nor any Award
document shall confer on any person other than the Company and the Participant
any rights or remedies thereunder.
(o) Severability; Entire Agreement. If any of the provisions
of this Plan or any Award document is finally held to be invalid, illegal or
unenforceable (whether in whole or in part), such provision shall be deemed
modified to the extent, but only to the extent, of such invalidity, illegality
or unenforceability, and the remaining provisions shall not be affected thereby;
provided, that, if any of such provisions is finally held to be invalid,
illegal, or unenforceable because it exceeds the maximum scope determined to be
acceptable to permit such provision to be enforceable, such provision shall be
deemed to be modified to the minimum extent necessary to modify such scope in
order to make such provision enforceable hereunder. The Plan and any Award
documents contain the entire agreement of the parties with respect to the
subject matter thereof and supersede all prior agreements, promises, covenants,
arrangements, communications, representations and warranties between them,
whether written or oral with respect to the subject matter thereof.
(p) Plan Effective Date and Termination. The Plan shall become
effective if, and at such time as, the stockholders of the Company have approved
it by the affirmative votes of the holders of a majority of the voting
securities of the Company cast in person or by proxy and entitled to vote on the
subject matter at a duly held meeting of stockholders at which a quorum is
present. Unless earlier terminated by action of the Board of Directors, the Plan
will remain in effect until such time as no Stock remains available for delivery
under the Plan and the Company has no further rights or obligations under the
Plan with respect to outstanding Awards under the Plan.
