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Exhibit 12
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BENJAMIN MOORE & CO.
1998 STOCK INCENTIVE PLAN
1. Purpose.
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The purpose of this Plan is to strengthen Benjamin Moore & Co. (the
"Company") by providing an incentive to its employees, officers and directors
and thereby encouraging them to devote their abilities and industry to the
success of the Company's business enterprise. It is intended that this purpose
be achieved by extending to employees, officers and directors of the Company and
its Subsidiaries an added long-term incentive for high levels of performance and
unusual efforts through the grant of Incentive Stock Options, Nonqualified Stock
Options, Stock Appreciation Rights, Performance Awards and Restricted Stock (as
each term is herein defined).
2. Definitions.
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For purposes of the Plan:
2.1 "Adjusted Fair Market Value" means, in the event of a Change of
Control, the greater of (a) the highest price per Share paid to holders of the
Shares in any transaction (or series of transactions) constituting or resulting
in a Change of Control or (b) the highest Fair Market Value of a Share during
the ninety (90) day period ending on the date of a Change of Control.
2.2 "Affiliate" means any entity, directly or indirectly, controlled
by, controlling or under common control with the Company or any corporation or
other entity acquiring, directly or indirectly, all or substantially all the
assets and business of the Company, whether by operation of law or otherwise.
2.3 "Agreement" means the written agreement between the Company and
an Optionee or Grantee evidencing the grant of an Option or Award and setting
forth the terms and conditions thereof.
2.4 "Award" means a grant of Restricted Stock, a Stock Appreciation
Right, a Performance Award or any or all of them.
2.5 "Board" means the Board of Directors of the Company.
2.6 "Cause" means:
(a) for purposes of Section 6.4, the commission of an act of
fraud or intentional misrepresentation or an act of embezzlement,
misappropriation or conversion of assets or opportunities of the Company or any
of its Subsidiaries; and
(b) in all other cases, (i) intentional failure to per-form
reasonably assigned duties, (ii) dishonesty or willful misconduct in the
performance of duties, (iii) involvement in a transaction in connection with the
performance of duties to the Company or any
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of its Subsidiaries which transaction is adverse to the interests of the Company
or any of its Subsidiaries and which is engaged in for personal profit or (iv)
willful violation of any law, rule or regulation in connection with the
performance of duties (other than traffic violations or similar offenses).
2.7 "Change in Capitalization" means any increase or reduction in the
number of Shares, or any change (including, but not limited to, a change in
value) in the Shares or exchange of Shares for a different number or kind of
shares or other securities of the Company or another corporation, by reason of a
reclassification, recapitalization, merger, consolidation, reorganization, spin-
off, split-up, issuance of warrants or rights or debentures, stock dividend,
stock split or reverse stock split, cash dividend, property dividend,
combination or exchange of shares, repurchase of shares, change in corporate
structure or otherwise.
2.8 A "Change of Control" means the occurrence of any of the
following:
(a) An acquisition (other than directly from the Company) of any
voting securities of the Company (the "Voting Securities") by any "Person" (as
the term person is used for purposes of Section 13(d) or 14(d) of the Exchange
Act) immediately after which such Person has "Beneficial Ownership" (within the
meaning of Rule 13d-3 promulgated under the Exchange Act) of twenty-five percent
(25%) or more of the combined voting power of the Company's then outstanding
Voting Securities; provided, however, in determining whether a Change of Control
has occurred, Voting Securities which are acquired in a "Non-Control
Acquisition" (as hereinafter defined) shall not constitute an acquisition which
would cause a Change of Control. A "Non-Control Acquisition" shall mean an
acquisition by (i) an employee benefit plan (or a trust forming a part thereof)
maintained by (A) the Company or (B) any corporation or other Person of which a
majority of its voting power or its voting equity securities or equity interest
is owned, directly or indirectly, by the Company (for purposes of this
definition, a "Subsidiary"), (ii) the Company or its Subsidiaries, (iii) any
Person in connection with a "Non-Control Transaction" (as hereinafter defined),
or (iv) any individual who is a member of the Incumbent Board or a relative of
any such individual, or a group (within the meaning of Rule 13(d)-5(b)(1)
promulgated under the Exchange Act) of which any such individual is a member.
(b) A situation in which the individuals who, as of February 9,
1998 are members of the Board of Directors (the "Incumbent Board"), cease for
any reason to constitute at least two-thirds of the members of the Board;
provided, however, that if the election, or nomination for election by the
Company's common shareholders, of any new director was approved by a vote of at
least two-thirds of the Incumbent Board, such new director shall, for purposes
of this Plan, be considered as a member of the Incumbent Board; provided
further, however, that no individual shall be considered a member of the
Incumbent Board if such individual initially assumed office as a result of
either an actual or threatened "Election Contest" (as described in Rule 14a-1 1
promulgated under the Exchange Act) or other actual or threatened solicitation
of proxies or consents by or on behalf of a Person other than the Board (a
"Proxy Contest") including by reason of any agreement intended to avoid or
settle any Election Contest or Proxy Contest; or
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(c) The consummation of:
(i) A merger, consolidation or reorganization with or into the Company
or in which securities of the Company are issued, unless such merger,
consolidation or reorganization is a "Non-Control Transaction." A "Non-Control
Transaction" shall mean a merger, consolidation or reorganization with or into
the Company or in which securities of the Company are issued where:
(A) the shareholders of the Company, immediately before such
merger, consolidation or reorganization, own directly or indirectly
immediately following such merger, consolidation or reorganization,
at least sixty percent (60%) of the combined voting power of the
outstanding voting securities of the corporation resulting from such
merger or consolidation or reorganization (the "Surviving
Corporation") in substantially the same proportion as their
ownership of the Voting Securities immediately before such merger,
consolidation or reorganization, and
(B) the individuals who were members of the Incumbent Board
immediately prior to the execution of the agreement providing for
such merger, consolidation or reorganization constitute at least
two-thirds of the members of the board of directors of the Surviving
Corporation, or a corporation beneficially owning directly or
indirectly fifty-one percent (51 %) or more of the Voting Securities
of the Surviving Corporation, and
(C) no Person other than (1) the Company, (2) any Subsidiary,
(3) any employee benefit plan (or any trust forming a part thereof)
maintained immediately prior to such merger, consolidation or
reorganization by the Company or any Subsidiary, or (4) any Person
who, immediately prior to such merger, consolidation or
reorganization had Beneficial Ownership of twenty-five percent (25%)
or more of the then outstanding Voting Securities, owns, directly or
indirectly, twenty-five percent (25%) or more of the combined voting
power of the Surviving Corporation's then outstanding voting
securities;
(ii) A complete liquidation or dissolution of the Company; or
(iii) The sale or other disposition of all or substantially all of
the assets of the Company to any Person (other than a transfer to a Subsidiary).
Notwithstanding the foregoing, a Change of Control shall not be deemed
to occur solely because any Person (the "Subject Person") acquired Beneficial
Ownership of more than the permitted amount of the then outstanding Voting
Securities as a result of the acquisition of Voting Securities by the Company
which, by reducing the number of Voting Securities then outstanding, increases
the proportional number of shares Beneficially Owned by the Subject Persons,
provided that if a Change of Control would occur (but for the operation of this
sentence) as a result of the acquisition of Voting Securities by the Company,
and after such share acquisition by the Company, the Subject Person becomes the
Beneficial Owner of any additional
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Voting Securities which increases the percentage of the then-outstanding Voting
Securities Beneficially Owned by the Subject Person, then a Change of Control
shall occur.
2.9 "Code" means the Internal Revenue Code of 1986, as amended.
2.10 "Committee" means a committee, as described in Section 3.1,
appointed by the Board from time to time to administer the Plan and to perform
the functions set forth herein.
2.11 "Company" means Benjamin Moore & Co.
2.12 "Director" means a director of the Company.
2.13 "Director Option" means an Option granted pursuant to Section 6.
2.14 "Disability" means:
(a) in the case of an Optionee or Grantee whose employment with
the Company or a Subsidiary is subject to the terms of an employment agreement
between such Optionee or Grantee and the Company or Subsidiary, which employment
agreement includes a definition of "Disability", the term "Disability" as used
in this Plan or any Agreement shall have the meaning set forth in such
employment agreement during the period that such employment agreement remains in
effect; and
(b) in all other cases, the term "Disability" as used in this
Plan or any Agreement shall mean a physical or mental infirmity which impairs
the Optionee's or Grantee's ability to perform substantially his or her duties
for a period of one hundred eighty (180) consecutive days.
2.15 "Division" means any of the operating units, regions or
divisions of the Company designated as a Division by the Committee.
2.16 "Eligible Director" means a director of the Company who is not
an employee of the Company or any Subsidiary.
2.17 "Eligible Individual" means any director (other than an Eligible
Director), officer or employee of the Company or a Subsidiary designated by the
Committee as eligible to receive Options or Awards subject to the conditions set
forth herein.
2.18 "Employee Option" means an Option granted pursuant to Section 5.
2.19 "Exchange Act" means the Securities Exchange Act of 1934, as
amended.
2.20 "Fair Market Value" on any date means the closing sales price of
the Shares on such date on the principal national securities exchange on which
such Shares are listed or admitted to trading, or, if such Shares are not so
listed or admitted to trading, the average of the per Share closing bid price
and per Share closing asked price on such date as quoted on the National
Association of Securities Dealers Automated Quotation System or such other
market in
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which such prices are regularly quoted, or, if there have been no published bid
or asked quotations with respect to Shares on such date, the Fair Market Value
shall be the value established by the Board in good faith and, in the case of an
Incentive Stock Option, in accordance with Section 422 of the Code.
2.21 "Grantee" means a person to whom an Award has been granted under
the Plan.
2.22 "Incentive Stock Option" means an Option satisfying the
requirements of Section 422 of the Code and designated by the Committee as an
Incentive Stock Option.
2.23 "Nonemployee Director" means a director of the Company who is a
"nonemployee director" within the meaning of Rule 16b-3 promulgated under the
Exchange Act.
2.24 "Nonqualified Stock Option" means an Option which is not an
Incentive Stock Option.
2.25 "Option" means a Nonqualified Stock Option, an Incentive Stock
Option, a Director Option, or any or all of them.
2.26 "Optionee" means a person to whom an Option has been granted
under the Plan.
2.27 "Outside Director" means a director of the Company who is an
"outside director" within the meaning of Section 162(m) of the Code and the
regulations promulgated thereunder.
2.28 "Parent" means any corporation which is a parent corporation
(within the meaning of Section 424(e) of the Code) with respect to the Company.
2.29 "Performance Awards" means Performance Units, Performance Shares
or either or both of them.
2.30 "Performance-Based Compensation" means any Option or Award that
is intended to constitute "performance based compensation" within the meaning of
Section 162(m)(4)(C) of the Code and the regulations promulgated thereunder.
2.31 "Performance Cycle" means the time period specified by the
Committee at the time Performance Awards are granted during which the
performance of the Company, a Subsidiary or a Division will be measured.
2.32 "Performance Objectives" has the meaning set forth in Section
10.
2.33 "Performance Shares" means Shares issued or transferred 'to an
Eligible Individual under Section 10.
2.34 "Performance Units" means Performance Units granted to an
Eligible Individual under Section 10.
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2.35 "Plan" means the Benjamin Moore & Co. 1998 Stock Incentive Plan,
as amended and restated from time to time.
2.36 "Pooling Transaction" means an acquisition of the Company in a
transaction which is intended to be treated as a "pooling of interests" under
generally accepted accounting principles.
2.37 "Restricted Stock" means Shares issued or transferred to an
Eligible Individual pursuant to Section 9.
2.38 "Shares" means the common stock, par value $10.00 per share, of
the Company.
2.39 "Stock Appreciation Right" means a right to receive all or some
portion of the increase in the value of the Shares as provided in Section 8
hereof.
2.40 "Subsidiary" means any corporation which is a subsidiary
corporation (within the meaning of Section 424(f) of the Code) with respect to
the Company.
2.41 "Successor Corporation" means a corporation, or a parent or
subsidiary thereof within the meaning of Section 424(a) of the Code, which
issues or assumes a stock option in a transaction to which Section 424(a) of the
Code applies.
2.42 "Ten-Percent Stockholder" means an Eligible Individual, who, at
the time an Incentive Stock Option is to be granted to him or her, owns (within
the meaning of Section 422(b)(6) of the Code) stock possessing more than ten
percent (10%) of the total combined voting power of all classes of stock of the
Company, or of a Parent or a Subsidiary.
3. Administration.
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3.1 The Plan shall be administered by the Committee, which shall hold
meetings at such times as may be necessary for the proper administration of the
Plan. The Committee shall keep minutes of its meetings. A quorum shall consist
of not fewer than two (2) members of the Committee and a majority of a quorum
may authorize any action. Any decision or determination reduced to writing and
signed by all of the members of the Committee shall be as fully effective as if
made by a majority vote at a meeting duly called and held. The Committee shall
consist of at least three (3) Directors of the Company and may consist of the
entire Board; provided, however, that (a) if the Committee consists of less than
the entire Board, each member shall be a Nonemployee Director and (b) to the
extent necessary for any Option or Award intended to qualify as performance-
based compensation under Section 162(m) of the Code to so qualify, each member
of the Committee, whether or not it consists of the entire Board, shall be an
Outside Director. No member of the Committee shall be liable for any action,
failure to act, determination or interpretation made in good faith with respect
to this Plan or any transaction hereunder, except for liability arising from his
or her own willful misfeasance, gross negligence or reckless disregard of his or
her duties. The Company hereby agrees to indemnify each member of the Committee
for all costs and expenses and, to the extent permitted by applicable law, any
liability incurred in connection with defending against, responding to,
negotiating for the settlement of or otherwise dealing with any claim, cause of
action or dispute of any kind arising
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in connection with any actions in administering this Plan or in authorizing or
denying authorization to any transaction hereunder.
3.2 Subject to the express terms and conditions set forth herein, the
Committee shall have the power from time to time to-.
(a) determine those Eligible Individuals to whom Employee Options
shall be granted under the Plan and the number of such Employee Options to be
granted and to prescribe the terms and conditions (which need not be identical)
of each such Employee Option, including the purchase price Per Share subject to
each Employee Option, and make any amendment or modification to any Option
Agreement consistent with the terms of the Plan;
(b) select those Eligible Individuals to whom Awards shall be
granted under the Plan and to determine the number of Stock Appreciation Rights,
Performance Awards and/or Shares of Restricted Stock to be granted pursuant to
each Award, the terms and conditions of each Award, including the restrictions
or Performance Objectives relating to Performance Awards, the maximum value of
each Performance Award and make any amendment or modification to any Award
Agreement consistent with the terms of the Plan;
(c) to construe and interpret the Plan and the Options and Awards
granted hereunder and to establish, amend and revoke rules and regulations for
the administration of the Plan, including, but not' limited to, correcting any
defect or supplying any omission, or reconciling any inconsistency in the Plan
or in any Agreement, in the manner and to the extent it shall deem necessary or
advisable so that the Plan complies with applicable law including Rule 16b-3
under the Exchange Act and the Code to the extent applicable, and otherwise to
make the Plan fully effective. All decisions and determinations by the Committee
in the exercise of this power shall be final, binding and conclusive upon the
Company, its Subsidiaries, the Optionees and Grantees, and all other persons
having any interest therein;
(d) to determine the duration and purposes for leaves of absence
which may be granted to an Optionee or Grantee on an individual basis without
constituting a termination of employment or service for purposes of the Plan;
(e) to exercise its discretion with respect to the powers and
rights granted to it as set forth in the Plan; and
(f) generally, to exercise such powers and to perform such acts
as are deemed necessary or advisable to promote the best interests of the
Company with respect to the Plan.
4. Stock Subject to the Plan; Grant Limitations.
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4.1 The maximum number of Shares that may be made the subject of
Options and Awards granted under the Plan is 400,000; provided, however, that in
the aggregate, not more than one third of the number of allotted Shares may be
made the subject of Restricted Stock Awards under Section 9 of the Plan (other
than shares of Restricted Stock made in settlement of Performance Units pursuant
to Section 10.1(b)). The maximum number of Shares that an Eligible Individual
may receive in respect of Options and Awards granted in any calendar
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year may not exceed 50,000 Shares. The maximum dollar amount of cash or the Fair
Market Value of Shares that any Eligible Individual may receive in any calendar
year in respect of Performance Units denominated in dollars may not exceed
$1,000,000. Upon a Change in Capitalization, the maximum number of Shares
referred to in the first two sentences of this Section 4.1 shall be adjusted in
number and kind pursuant to Section 12. The Company shall reserve for the
purposes of the Plan, out of its authorized but unissued Shares or out of Shares
held in the Company's treasury, or partly out of each, such number of Shares as
shall be determined by the Board.
4.2 Upon the granting of an Option or an Award, the number of Shares
available under Section 4.1 for the granting of further Options and Awards shall
be reduced as follows:
(a) In connection with the granting of an Option or an Award
(other than the granting of a Performance Unit denominated in dollars), the
number of Shares shall be reduced by the number of Shares in respect of which
the Option or Award is granted or denominated.
(b) In connection with the granting of a Performance Unit
denominated in dollars, the number of Shares shall be reduced by an amount equal
to the quotient of (i) the dollar amount in which the Performance Unit is
denominated, divided by (ii) the Fair Market Value of a Share on the date the
Performance Unit is granted.
4.3 Whenever any outstanding Option or Award or portion thereof
expires, is canceled or is otherwise terminated for any reason without having
been exercised or payment having been made in respect of the entire Option or
Award, the Shares allocable to the expired, canceled or otherwise terminated
portion of the Option or Award may again be the subject of Options or Awards
granted hereunder.
5. Option Grants for Eligible Individuals.
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5.1 Authority of Committee. Subject to the provisions of the
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Plan, the Committee shall have full and final authority to select those Eligible
Individuals who will receive Employee Options, and the terms and conditions of
the grant to such Eligible Individuals shall be set forth in an Agreement.
5.2 Purchase Price. The purchase price or the manner in which the
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purchase price is to be determined for Shares under each Employee Option shall
be determined by the Committee and set forth in the Agreement; provided,
however, that the purchase price per Share under each Incentive Stock Option
shall not be less than 100% of the Fair Market Value of a Share on the date the
Incentive Stock Option is granted (110% in the case of an Incentive Stock Option
granted to a Ten-Percent Stockholder).
5.3 Maximum Duration. Employee Options granted hereunder shall be for
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such term as the Committee shall determine, provided that an Incentive Stock
Option shall not be exercisable after the expiration of ten (10) years from the
date it is granted (five (5) years in the case of an Incentive Stock Option
granted to a Ten-Percent Stockholder) and a Nonqualified Stock Option shall not
be exercisable after the expiration of ten (10) years from the date it is
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granted; provided, however, that the Committee may provide that an Option (other
than an Incentive Stock Option) may, upon the death of the Optionee, be
exercised for up to one (1) year following the date of the Optionee's death even
if such period extends beyond ten (10) years from the date the Option is
granted. The Committee may, subsequent to the granting of any Employee Option,
extend the term thereof, but in no event shall the term as so extended exceed
the maximum term provided for in the preceding sentence.
5.4 Vesting. Subject to Section 7.4, each Employee Option shall
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become exercisable in such installments (which need not be equal) and at such
times as may be designated by the Committee and set forth in the Agreement. To
the extent not exercised, installments shall accumulate and be exercisable, in
whole or in part, at any time after becoming exercisable, but not later than the
date the Employee Option expires. The Committee may accelerate the
exercisability of any Employee Option or portion thereof at any time.
6. Option Grants for Nonemployee Directors.
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6.1 Grant. Each Eligible Director shall be granted a Director
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Option in respect of 1,000 Shares on the first business day after the annual
meeting of the shareholders of the Company in 1998 and each year thereafter
during which the Plan is in effect, provided that the Eligible Director is a
Director on such date.
All Director Options shall be evidenced by an Agreement containing
such other terms and conditions not inconsistent with the provisions of this
Plan as determined by the Board; provided, however, that such terms shall not
vary the price, amount or timing of Director Options provided under this Section
6, including provisions dealing with vesting, forfeiture and termination of such
Director Options.
6.2 Purchase Price. The purchase price for Shares under each Director
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Option shall be equal to 100% of the Fair Market Value of such Shares on the
date the Director Option is granted.
6.3 Vesting. Subject to Sections 6.4 and 7.4, each Director Option
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shall become fully vested and exercisable with respect to 100% of the Shares
subject thereto on the date of the annual meeting of shareholders next following
the date of grant; provided, however, the at the Optionee continues to serve as
a Director as of such date (but whether or not the Director is reelected at the
annual meeting on such date); provided, further, that if a Director dies while a
Director prior to such date, the Director Option shall become fully vested and
exercisable with respect to 100% of the Shares subject thereto. If an Optionee
ceases to serve as a Director for any reason other than death, the Optionee
shall have no rights with respect to any Director Option which has not then
vested pursuant to the preceding sentence and the Optionee shall automatically
forfeit any Director Option which remains unvested.
6.4 Duration. Subject to Section 7.4, each Director Option shall
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terminate on the date which is the tenth anniversary of the date of grant (or if
later, the first anniversary of the date of the Director's death if such death
occurs prior to such tenth anniversary), unless terminated earlier as follows:
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(a) If an Optionee's service as a Director terminates for any reason
other than Disability, death or Cause, the Optionee may for a period of three
(3) months after such termination exercise his or her Option to the extent, and
only to the extent, that such Option or portion thereof was vested and
exercisable as of the date the Optionee's service as a Director terminated,
after which time the Option shall automatically terminate in full.
(b) If an Optionee's service as a Director terminates by reason of the
Optionee's resignation or removal from the Board due to Disability, the Optionee
may, for a period of one (1) year after such termination, exercise his or her
Option to the extent, and only to the extent, that such Option or portion
thereof was vested and exercisable, as of the date the Optionee's service as
Director terminated, after which time the Option shall automatically terminate
in full.
(c) If an Optionee's service as a Director terminates for Cause, the
Option granted to the Optionee hereunder shall immediately terminate in full and
no rights thereunder may be exercised.
(d) If an Optionee dies while a Director or within three (3) months
after termination of service as a Director as described in clause (a) of this
Section 6.4 or within twelve (12) months after termination of service as a
Director as described in clause (b) of this Section 6.4, the Option granted to
the Optionee may be exercised at any time within twelve (12) months after the
Optionee's death by the person or persons to whom such rights under the Option
shall pass by will, or by the laws of descent or distribution, after which time
the Option shall terminate in full; provided, however, that an Option may be
exercised to the extent, and only to the extent, that the Option or portion
thereof was exercisable on the date of death or earlier termination of the
Optionee's services as a Director.
7. Terms and Conditions Applicable to Al Options.
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7.1 Non-Transferability. An Option granted hereunder shall not
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be transferable by the Optionee to whom granted except by will or the laws of
descent and distribution or, in the case of an Option other than an Incentive
Stock Option, pursuant to a domestic relations order (within the meaning of Rule
16a-12 promulgated under the Exchange Act), and an Incentive Stock Option may be
exercised during the lifetime of such Optionee only by the Optionee or his or
her guardian or legal representative. Notwithstanding the foregoing, the
Committee may set forth in the Agreement at the time of grant or thereafter,
that the Option (other than an Incentive Stock Option) may be transferred to
members of the Optionee's immediate family, to trusts solely for the benefit of
such immediate family members and to partnerships in which such family members
and/or trusts are the only partners. For this purpose, immediate family means
the Optionee's spouse, parents, children, stepchildren and grandchildren and the
spouses of such parents, children, stepchildren and grandchildren. The terms of
such Option shall be final, binding and conclusive upon the beneficiaries,
executors, administrators, heirs and successors of the Optionee.
7.2 Method of Exercise. The exercise of an Option shall be made only
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by a written notice delivered in person or by mail to the Secretary of the
Company at the Company's principal -executive office, specifying the number of
Shares to be purchased and accompanied by
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payment therefor and otherwise in accordance with the Agreement pursuant to
which the Option was granted. The purchase price for any Shares purchased
pursuant to the exercise of an Option shall be paid, as determined by the
Committee in its discretion, in either of the following forms (or any
combination thereof): (a) cash, (b) the transfer of Shares to the Company upon
such terms and conditions as determined by the Committee or (c) the delivery of
a promissory note or other evidence of indebtedness upon such terms and
conditions as determined by the Committee. In addition, both Employee Options
and Director Options may be exercised through a registered broker-dealer
pursuant to such cashless exercise procedures (other than Share withholding)
which are, from time to time, deemed acceptable by the Committee. Any Shares
transferred to the Company as payment of the purchase price under an Option
shall be valued at their Fair Market Value on the day preceding the date of
exercise of such Option. The Optionee shall deliver the Agreement evidencing the
Option to the Secretary of the Company who shall endorse thereon a notation of
such exercise and return such Agreement to the Optionee. No fractional Shares
(or cash in lieu thereof) shall be issued upon exercise of an Option and the
number of Shares that may be purchased upon exercise shall be rounded to the
nearest number of whole Shares.
7.3 Rights of Optionees. No Optionee shall be deemed for any purpose
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to be the owner of any Shares subject to any Option unless and until (a) the
Option shall have been exercised pursuant to the terms thereof, (b) the Company
shall have issued and delivered Shares to the Optionee, and (c) the Optionee's
name shall have been entered as a shareholder of record on the books of the
Company. Thereupon, the Optionee shall have full voting, dividend and other
ownership rights with respect to such Shares, subject to such terms and
conditions as may be set forth in the applicable Agreement.
7.4 Effect of Change of Control. In the event of a Change of
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Control, all Options outstanding on the date of such Change of Control shall
become immediately and fully exercisable. In addition, to the extent set forth
in an Agreement evidencing the grant of an Employee Option, an Optionee will be
permitted to surrender to the Company for cancellation within sixty (60) days
after such Change of Control any Employee Option or portion of an Employee
Option to the extent not yet exercised and the Optionee will be entitled to
receive a cash payment in an amount equal to the excess, if any, of (a) (i) in
the case of a Nonqualified Stock Option, the greater of (A) the Fair Market
Value, on the date preceding the date of surrender, of the Shares subject to the
Employee Option or portion thereof surrendered or (B) the Adjusted Fair Market
Value of the Shares subject to the Employee Option or portion thereof
surrendered or (ii) in the case of an Incentive Stock Option, the Fair Market
Value, on the date preceding the date of surrender, of the Shares subject to the
Employee Option or portion thereof surrendered. In the event an Optionee's
employment with, or service as a Director of, the Company and its Subsidiaries
terminates following a Change of Control, each Option held by the Optionee that
was exercisable as of the date of termination of the Optionee's employment or
service shall remain exercisable for a period ending not before the earlier of
(x) the first anniversary of the termination of the Optionee's employment or
service or (y) the expiration of the stated term of the Option.
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8. Stock Appreciation Rights.
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The Committee may in its discretion, either alone or in connection
with the grant of an Employee Option, grant Stock Appreciation Rights in
accordance with the Plan, the terms and conditions of which shall be set forth
in an Agreement. If granted in connection with an Option, a Stock Appreciation
Right shall cover the same Shares covered by the Option (or such lesser number
of Shares as the Committee may determine) and shall, except as provided in this
Section 8, be subject to the same terms and conditions as the related Option.
8.1 Time of Grant. A Stock Appreciation Right may be granted (a) at
-------------
any time if unrelated to an Option, or (b) if related to an Option, either at
the time of grant, or at any time thereafter during the term of the Option.
8.2 Stock Appreciation Right Related to an Option.
---------------------------------------------
(a) Exercise. A Stock Appreciation Right granted in connection
--------
with an Option shall be exercisable at such time or times and only to the extent
that the related Options are exercisable, and will not be transferable except to
the extent the related Option may be transferable. A Stock Appreciation Right
granted in connection with an Incentive Stock Option shall be exercisable only
if the Fair Market Value of a Share on the date of exercise exceeds the purchase
price specified in the related Incentive Stock Option Agreement.
(b) Amount Payable. Upon the exercise of a Stock Appreciation
--------------
Right related to an Option, the Grantee shall be entitled to receive an amount
determined by multiplying (i) the excess of the Fair Market Value of a Share on
the date preceding the date of exercise of such Stock Appreciation Right over
the per Share purchase price under the related Option, by (ii) the number of
Shares as to which such Stock Appreciation Right is being exercised.
Notwithstanding the foregoing, the Committee may limit in any manner the amount
payable with respect to any Stock Appreciation Right by including such a limit
in the Agreement evidencing the Stock Appreciation Right at the time it is
granted.
(c) Treatment of Related Options and Stock Appreciation Rights
----------------------------------------------------------
Upon Exercise. Upon the exercise of a Stock Appreciation Right granted in
-------------
connection with an Option, the Option shall be canceled to the extent of the
number of Shares as to which the Stock Appreciation Right is exercised, and upon
the exercise of an Option granted in connection with a Stock Appreciation Right,
the Stock Appreciation Right shall be canceled to the extent of the number of
Shares as to which the Option is exercised.
8.3 Stock Appreciation Right Unrelated to an Option. The Committee
-----------------------------------------------
may grant to Eligible Individuals Stock Appreciation Rights unrelated to
Options. Stock Appreciation Rights unrelated to Options shall contain such terms
and conditions as to exercisability (subject to Section 8.6), vesting and
duration as the Committee shall determine, but in no event shall they have a
term of greater than ten (10) years. Upon exercise of a Stock Appreciation Right
unrelated to an Option, the Grantee shall be entitled to receive an amount
determined by multiplying (a) the excess of the Fair Market Value of a Share on
the date preceding the date of exercise of such Stock Appreciation Right over
the Fair Market Value of a Share on the date the Stock Appreciation Right was
granted, by (b) the number of Shares as to which the Stock Appreciation
12
<PAGE>
Right is being exercised. Notwithstanding the foregoing, the Committee may limit
in any manner the amount payable with respect to any Stock Appreciation Right by
including such a limit in the Agreement evidencing the Stock Appreciation Right
at the time it is granted.
8.4 Method of Exercise. Stock Appreciation Rights shall be exercised
------------------
by a Grantee only by a written notice delivered in person or by mail to the
Secretary of the Company at the Company's principal executive office, specifying
the number of Shares with respect to which the Stock Appreciation Right is being
exercised. If requested by the Committee, the Grantee shall deliver the
Agreement evidencing the Stock Appreciation Right being exercised and the
Agreement evidencing any related Option to the Secretary of the Company who
shall endorse thereon a notation of such exercise and return such Agreement to
the Grantee.
8.5 Form of Payment. Payment of the amount determined under Sections
---------------
8.2(b) or 8.3 may be made in the discretion of the Committee solely in whole
Shares in a number determined at their Fair Market Value on the date preceding
the date of exercise of the Stock Appreciation Right, or solely in cash, or in a
combination of cash and Shares. If the Committee decides to make full payment in
Shares and the amount payable results in a fractional Share, payment for the
fractional Share will be made in cash.
8.6 Effect of Change of Control. In the event of a Change of Control,
--- ---------------------------
all Stock Appreciation Rights shall become immediately and fully exercisable. In
addition, to the extent set forth in an Agreement evidencing the grant of a
Stock Appreciation Right unrelated to an Option, a Grantee will be entitled to
receive a payment from the Company in cash or stock, in either case, with a
value equal to the excess, if any, of (a) the greater of (i) the Fair Market
Value, on the date preceding the date of exercise, of the underlying Shares
subject to the Stock Appreciation Right or portion thereof exercised and (ii)
the Adjusted Fair Market Value, on the date preceding the date of exercise, of
the Shares over (b) the aggregate Fair Market Value, on the date the Stock
Appreciation Right was granted, of the Shares subject to the Stock Appreciation
Right or portion thereof exercised. In the event a Grantee's employment with the
Company terminates following a Change of Control, each Stock Appreciation Right
held by the Grantee that was exercisable as of the date of termination of the
Grantee's employment shall remain exercisable for a period ending not before the
earlier of the first anniversary of (x) the termination of the Grantee's
employment or (y) the expiration of the stated term of the Stock Appreciation
Right.
9. Restricted Stock.
----------------------
9.1 Grant. The Committee may grant Awards to Eligible
-----
Individuals of Restricted Stock, which shall be evidenced by an Agreement
between the Company and the Grantee. Each Agreement shall contain such
restrictions, terms and conditions as the Committee may, in its discretion,
determine and (without limiting the generality of the foregoing) such Agreements
may require that an appropriate legend be placed on Share certificates. Awards
of Restricted Stock shall be subject to the terms and provisions set forth below
in this Section 9.
9.2 Rights of Grantee. Shares of Restricted Stock granted pursuant to
--- -----------------
an Award hereunder shall be issued in the name of the Grantee as soon as
reasonably practicable after the Award is granted provided that the Grantee has
executed an Agreement evidencing the
13
<PAGE>
Award, the appropriate blank stock powers and, in the discretion of the
Committee, an escrow agreement and any other documents which the Committee may
require as a condition to the issuance of such Shares. If a Grantee shall fail
to execute the Agreement evidencing a Restricted Stock Award, the appropriate
blank stock powers and, in the discretion of the Committee, an escrow agreement
and any other documents which the Committee may require within the time period
prescribed by the Committee at the time the Award is granted, the Award shall be
null and void. At the discretion of the Committee, Shares issued in connection
with a Restricted Stock Award shall be deposited together with the stock powers
with an escrow agent (which may be the Company) designated by the Committee.
Unless the Committee determines otherwise and as set forth in the Agreement,
upon delivery of the Shares to the escrow agent, the Grantee shall have all of
the rights of a shareholder with respect to such Shares, including the right to
vote the Shares and to receive all dividends or other distributions paid or made
with respect to the Shares.
9.3 Non-transferability. Until all restrictions upon the Shares of
-------------------
Restricted Stock awarded to a Grantee shall have lapsed in the manner set forth
in Section 9.4, such Shares shall not be sold, transferred or otherwise disposed
of and shall not be pledged or otherwise hypothecated, nor shall they be
delivered to the Grantee.
9.4 Lapse of Restrictions.
---------------------
(a) General. Restrictions upon Shares of Restricted Stock awarded
-------
hereunder shall lapse at such time or times and on such terms and conditions as
the Committee may determine. The Agreement evidencing the Award shall set forth
any such restrictions.
(b) Effect of Change of Control. Unless the Committee shall
---------------------------
determine otherwise at the time of the grant of an Award of Restricted Stock,
the restrictions upon Shares of Restricted Stock shall lapse upon a Change of
Control. The Agreement evidencing the Award shall set forth any such provisions.
(c) Treatment of Dividends. At the time an Award of Shares of
----------------------
Restricted Stock is granted, the Committee may, in its discretion, determine
that the payment to the Grantee of dividends, or a specified portion thereof,
declared or paid on such Shares by the Company shall be (a) deferred until the
lapsing of the restrictions imposed upon such Shares and (b) held by the Company
for the account of the Grantee until such time. In the event that dividends are
to be deferred, the Committee shall determine whether such dividends are to be
reinvested in shares of Stock (which shall be held as additional Shares of
Restricted Stock) or held in cash. If deferred dividends are to be held in cash,
there may be credited at the end of each year (or portion thereof interest on
the amount of the account at the beginning of the year at a rate per annum as
the Committee, in its discretion, may determine. Payment of deferred dividends
in respect of Shares of Restricted Stock (whether held in cash or as additional
Shares of Restricted Stock), together with interest accrued thereon, if any,
shall be made upon the lapsing of restrictions imposed on the Shares in respect
of which the deferred dividends were paid, and any dividends deferred (together
with any interest accrued thereon) in respect of any Shares of Restricted Stock
shall be forfeited upon the forfeiture of such Shares.
14
<PAGE>
9.5 Delivery of Shares. Upon the lapse of the restrictions on Shares
------------------
of Restricted Stock, the Committee shall cause a stock certificate to be
delivered to the Grantee with respect to such Shares, free of all restrictions
hereunder.
10. Performance Awards.
-------------------
10.1 Performance Units. The Committee, in its discretion, may grant
-----------------
Awards of Performance Units to Eligible Individuals, the terms and conditions of
which shall be set forth in an Agreement between the Company and the Grantee.
Performance Units may be denominated in Shares or a specified dollar amount and,
contingent upon the attainment of specified Performance Objectives within the
Performance Cycle, represent the right to receive payment as provided in Section
10.1 (b) of (i) in the case of Share-denominated Performance Units, the Fair
Market Value of a Share on the date the Performance Unit was granted, the date
the Performance Unit became vested or any other date specified by the Committee,
(ii) in the case of dollar-denominated Performance Units, the specified dollar
amount or (iii) a percentage (which may be more than 100%) of the amount
described in clause (i) or (ii) depending on the level of Performance Objective
attainment; provided, however, that, the Committee may at the time a Performance
Unit is granted specify a maximum amount payable in respect of a vested
Performance Unit. Each Agreement shall specify the number of Performance Units
to which it relates, the Performance Objectives which must be satisfied in order
for the Performance Units to vest and the Performance Cycle within which such
Performance Objectives must be satisfied.
(a) Vesting and Forfeiture. Subject to Sections 10.3(c) and
----------------------
10.4, a Grantee shall become vested with respect to the Performance Units to the
extent that the Performance Objectives set forth in the Agreement are satisfied
for the Performance Cycle.
(b) Payment of Awards. Subject to Section 10.3(c), payment to
-----------------
Grantees in respect of vested Performance Units shall be made as soon as
practicable after the last day of the Performance Cycle to which such Award
relates unless the Agreement evidencing the Award provides for the deferral of
payment, in which event the terms and conditions of the deferral shall be set
forth in the Agreement. Subject to Section 10.4, such payments may be made
entirely in Shares valued at their Fair Market Value as of the day preceding the
date of payment or such other date specified by the Committee, entirely in cash,
or in such combination of Shares and cash as the Committee in its discretion
shall determine at any time prior to such payment; provided, however, that if
the Committee in its discretion determines to make such payment entirely or
partially in Shares of Restricted Stock, the Committee must determine the extent
to which such payment will be in Shares of Restricted Stock and the terms of
such Restricted Stock at the time the Award is granted.
10.2 Performance Shares. The Committee, in its discretion, may grant
------------------
Awards of Performance Shares to Eligible Individuals, the terms and conditions
of which shall be set forth in an Agreement between the Company and the Grantee.
Each Agreement may require that an appropriate legend be placed on Share
certificates. Awards of Performance Shares shall be subject to the following
terms and provisions:
(a) Rights of Grantee. The Committee shall provide at the time an
-----------------
Award of Performance Shares is made the time or times at which the actual Shares
represented
15
<PAGE>
by such Award shall be issued in the name of the Grantee; provided, however,
that no Performance Shares shall be issued until the Grantee has executed an
Agreement evidencing the Award, the appropriate blank stock powers and, in the
discretion of the Committee, an escrow agreement and any other documents which
the Committee may require as a condition to the issuance of such Performance
Shares. If a Grantee shall fail to execute the Agreement evidencing an Award of
Performance Shares, the appropriate blank stock powers and, in the discretion of
the Committee, an escrow agreement and any other documents which the Committee
may require within the time period prescribed by the Committee at the time the
Award is granted, the Award shall be null and void. At the discretion of the
Committee, Shares issued in connection with an Award of Performance Shares shall
be deposited together with the stock powers with an escrow agent (which may be
the Company) designated by the Committee. Except as restricted by the terms of
the Agreement, upon delivery of the Shares to the escrow agent, the Grantee
shall have, in the discretion of the Committee, all of the rights of a
shareholder with respect to such Shares, including the right to vote the Shares
and to receive all dividends or other distributions paid or made with respect to
the Shares.
(b) Non-transferability. Until any restrictions upon the Performance
-------------------
Shares awarded to a Grantee shall have lapsed in the manner set forth in
Sections 10.2(c) or 10.4, such Performance Shares shall not be sold, transferred
or otherwise disposed of and shall not be pledged or otherwise hypothecated, nor
shall they be delivered to the Grantee. The Committee may also impose such other
restrictions and conditions on the Performance Shares, if any, as it deems
appropriate.
(c) Lapse of Restrictions. Subject to Sections 10.3(c) and 10.4,
---------------------
restrictions upon Performance Shares awarded hereunder shall lapse and such
Performance Shares shall become vested at such time or times and on such terms,
conditions and satisfaction of Performance Objectives as the Committee may, in
its discretion, determine at the time an Award is granted.
(d) Treatment of Dividends. At the time the Award of Performance
----------------------
Shares is granted, the Committee may, in its discretion, determine that the
payment to the Grantee of dividends, or a specified portion thereof, declared or
paid on Shares represented by such Award which have been issued by the Company
to the Grantee shall be (i) deferred until the lapsing of the restrictions
imposed upon such Performance Shares and (ii) held by the Company for the
account of the Grantee until such time. In the event that dividends are to be
deferred, the Committee shall determine whether such dividends are to be
reinvested in shares of stock (which shall be held as additional Performance
Shares) or held in cash. If deferred dividends are to be held in cash, there may
be credited at the end of each year (or portion thereof) interest on the amount
of the account at the beginning of the year at a rate per annum as the
Committee, in its discretion, may determine. Payment of deferred dividends in
respect of Performance Shares (whether held in cash or in additional Performance
Shares), together with interest accrued thereon, if any, shall be made upon the
lapsing of restrictions imposed on the Performance Shares in respect of which
the deferred dividends were paid, and any dividends deferred (together with any
interest accrued thereon) in respect of any Performance, Shares shall be
forfeited upon the forfeiture of such Performance Shares.
16
<PAGE>
(e) Delivery of Shares. Upon the lapse of the restrictions on
------------------
Performance Shares awarded hereunder, the Committee shall cause a stock
certificate to be delivered to the Grantee with respect to such Shares, free of
all restrictions hereunder.
10.3 (a) Performance Objectives. Performance Objectives for
----------------------
Performance Awards may be expressed in terms of (i) earnings per Share, (ii)
Share price, (iii) pre-tax profits, (iv) net earnings, (v) return on equity or
assets, (vi) revenues, (vii) EBITDA, (viii) cash flow or growth in cash flow or
(ix) any combination of the foregoing. Performance Objectives may be in respect
of the performance of the Company, any of its Subsidiaries, any of its Divisions
or any combination thereof. Performance Objectives may be absolute or relative
(either to the Company's prior performance or to the performance of one or more
other companies, peer groups or indices) and may be expressed in terms of a
progression within a specified range. The Performance Objectives with respect to
a Performance Cycle shall be established in writing by the Committee by the
earlier of (x) the date on which a quarter of the Performance Cycle has elapsed
or (y) the date which is ninety (90) days after the commencement of the
Performance Cycle, and in any event while the performance relating to the
Performance Objectives remain substantially uncertain.
(b) At the time of the granting of a Performance Award or
thereafter, in either case to the extent permitted under Section 162(m) of the
Code and the regulations thereunder without adversely affecting the treatment of
the Performance Award as Performance-Based Compensation, the Committee may
provide for the manner in which performance will be measured against the
Performance Objectives (or may adjust the Performance Objectives) to reflect the
impact of specified corporate transactions, extraordinary or nonrecurring
events, accounting changes and other similar events.
(c) Determination of Performance. Prior to the vesting, payment,
----------------------------
settlement or lapsing of any restrictions with respect to any Performance Award
that is intended to constitute Performance-Based Compensation and that is made
to a Grantee who is subject to Section 162(m) of the Code, the Committee shall
certify in writing that the applicable Performance Objectives have been
satisfied.
10.4 Effect of Change of Control. In the event of a Change of Control:
---------------------------
(a) With respect to Performance Units, the Grantee shall (i)
become vested in all or a portion of the Performance Units as determined by the
Committee at the time of the Award of such Performance Units and as set forth in
the Agreement and (ii) be entitled to receive in respect of all Performance
Units which become vested as a result of a Change of Control a cash payment
within ten (10) days after such Change of Control in an amount as determined by
the Committee at the time of the Award of such Performance Unit and as set forth
in the Agreement.
(b) With respect to Performance Shares, all or a portion of any
unissued Performance Shares shall be issued, and restrictions shall lapse
immediately on all or a portion of the Performance Shares in each case as
determined by the Committee at the time of the Award of such Performance Shares
and as set forth in the Agreement.
17
<PAGE>
(c) The Agreements evidencing Performance Shares and Performance
Units shall provide for the treatment of such Awards (or portions thereof) which
do not become vested as the result of a Change of Control, including, but not
limited to, provisions for the adjustment of applicable Performance Objectives.
11. Effect of a Termination of Employment.
-------------------------------------------
The Agreement evidencing the grant of each Option and each Award shall
set forth the terms and conditions applicable to such Option or Award upon a
termination or change in the status of the employment of the Optionee or Grantee
by the Company, a Subsidiary or a Division (including a termination or change by
reason of the sale of a Subsidiary or a Division), which, except for Director
Options, shall be as the Committee may, in its discretion, determine at the time
the Option or Award is granted or thereafter.
12. Adjustment Upon Changes in Capitalization.
-----------------------------------------------
(a) In the event of a Change in Capitalization, the Committee shall
conclusively determine the appropriate adjustments, if any, to (i) the maximum
number and class of Shares or other stock or securities with respect to which
Options or Awards may be granted under the Plan, (ii) the maximum number and
class of Shares or other stock or securities with respect to which Options or
Awards may be granted to any Eligible Individual during any calendar year, (iii)
the number and class of Shares or other stock or securities which are subject to
outstanding Options or Awards granted under the Plan and the purchase price
therefor, if applicable, (iv) the number and class of Shares or other securities
in respect of which Director Options are to be granted under Section 6 and (v)
the Performance Objectives.
(b) Any such adjustment in the Shares or other stock or securities
subject to outstanding Incentive Stock Options (including any adjustments in the
purchase price) shall be made in such manner as not to constitute a modification
as defined by Section 424(h)(3) of the Code and only to the extent otherwise
permitted by Sections 422 and 424 of the Code.
(c) If, by reason of a Change in Capitalization, a Grantee of an Award
shall be entitled to, or an Optionee shall be entitled to exercise an Option
with respect to, new, additional or different shares of stock or securities,
such new, additional or different shares shall thereupon be subject to all of
the conditions, restrictions and performance criteria which were applicable to
the Shares subject to the Award or Option, as the case may be, prior to such
Change in Capitalization.
13. Effect of Certain Transactions.
------------------------------------
Subject to Sections 7.4, 8.6, 9.4(b) and 10.4 or as otherwise provided
in an Agreement, in the event of (a) the liquidation or dissolution of the
Company or (b) a merger or consolidation of the Company (a "Transaction"), the
Plan and the Options and Awards issued hereunder shall continue in effect in
accordance with their respective terms, except that following a Transaction each
Optionee and Grantee shall be entitled to receive in respect of each Share
subject to any outstanding Options or Awards, as the case may be, upon exercise
of any Option or payment or transfer in respect of any Award, the same number
and kind of stock, securities, cash, property or other consideration that each
holder of a Share was entitled to receive in the Transaction in respect of a
Share; provided, however, that such stock, securities, cash, property, or other
18
<PAGE>
consideration shall remain subject to all of the conditions, restrictions and
performance criteria which were applicable to the Options and Awards prior to
such Transaction.
14. Interpretation.
--------------------
(a) The Plan is intended to comply with Rule 16b-3 promulgated
under the Exchange Act and the Committee shall interpret and administer the
provisions of the Plan or any Agreement in a manner consistent therewith. Any
provisions inconsistent with such Rule shall be inoperative and shall not affect
the validity of the Plan.
(b) Unless otherwise expressly stated in the relevant Agreement,
each Option, Stock Appreciation Right and Performance Award granted under the
Plan is intended to be Performance-Based Compensation within the meaning of
Section 162(m)(4)(C) of the Code. The Committee shall not be entitled to
exercise any discretion otherwise authorized hereunder with respect to such
Options or Awards if the ability to exercise such discretion or the exercise of
such discretion itself would cause the compensation attributable to such Options
or Awards to fail to qualify as Performance-Based Compensation.
15. Pooling Transactions.
--------------------------
Notwithstanding anything contained in the Plan or any Agreement to the
contrary, in the event of a Change of Control which is also intended to
constitute a Pooling Transaction, the Committee shall take such actions, if any,
as are specifically recommended by an independent accounting firm retained by
the Company to the extent reasonably necessary in order to assure that the
Pooling Transaction will qualify as such, including but not limited to (a)
deferring the vesting, exercise, payment, settlement or lapsing of restrictions
with respect to any Option or Award, (b) providing that the payment or
settlement in respect of any Option or Award be made in the form of cash, Shares
or securities of a successor or acquirer of the Company, or a combination of the
foregoing, and (c) providing for the extension of the term of any Option or
Award to the extent necessary to accommodate the foregoing, but not beyond the
maximum term permitted for any Option or Award.
16. Termination and Amendment of the Plan.
-------------------------------------------
The Plan shall terminate on the day preceding the tenth anniversary of
the date of its adoption by the Compensation and Stock Option Plan Committee of
the Board and no Option or Award may be granted thereafter. The Board or the
Compensation and Stock Option Plan Committee of the Board may sooner terminate
the Plan and the Board or the Compensation and Stock Option Plan Committee of
the Board may at any time and from time to time amend, modify or suspend the
Plan; provided, however, that:
(a) no such amendment, modification, suspension or termination
shall impair or adversely alter any Options or Awards theretofore granted under
the Plan, except with the consent of the Optionee or Grantee, nor shall any
amendment, modification, suspension or termination deprive any Optionee or
Grantee of any Shares which he or she may have acquired through or as a result
of the Plan; and
19
<PAGE>
(b) to the extent necessary under any applicable law,
regulation or exchange requirement, no amendment shall be effective unless
approved by the shareholders of the Company in accordance with any applicable
law, regulation or exchange requirement.
17. Non-Exclusivity of the Plan.
---------------------------------
The adoption of the Plan by the Compensation and Stock Option Plan
Committee of the Board shall not be construed as amending, modifying or
rescinding any previously approved incentive arrangement or as creating any
limitations on the power of the Board to adopt such other incentive arrangements
as it may deem desirable, including, without limitation, the granting of stock
options otherwise than under the Plan, and such arrangements may be either
applicable generally or only in specific cases.
18. Limitation of Liability.
-----------------------------
As illustrative of the limitations of liability of the Company, but
not intended to be exhaustive thereof, nothing in the Plan shall be construed
to:
(a) give any person any right to be granted an Option or
Award other than at the sole discretion of the Committee;
(b) give any person any rights whatsoever with respect to
Shares except as specifically provided in the Plan;
(c) limit in any way the right of the Company or any
Subsidiary to terminate the employment of any person at any time,- or
(d) be evidence of any agreement or understanding, expressed
or implied, that the Company will employ any person at any particular rate of
compensation or for any particular period of time.
19. Regulations and Other Approvals; Governing Law.
----------------------------------------------------
19.1 Except as to matters of federal law, the Plan and the
rights of all persons claiming hereunder shall be construed and determined in
accordance with the laws of the State of New Jersey without giving effect to
conflicts of laws principles thereof.
19.2 The obligation of the Company to sell or deliver Shares
with respect to Options and Awards granted under the Plan shall be subject to
all applicable laws, rules and regulations, including all applicable federal and
state securities laws, and the obtaining of all such approvals by governmental
agencies as may be deemed necessary or appropriate by the Committee.
19.3 The Board may make such changes as may be necessary or
appropriate to comply with the rules and regulations of any government
authority, or to obtain for Eligible Individuals granted Incentive Stock Options
the tax benefits under the applicable provisions of the Code and regulations
promulgated thereunder.
20
<PAGE>
19.4 Each Option and Award is subject to the requirement that,
if at any time the Committee determines, in its discretion, that the listing,
registration or qualification of Shares issuable pursuant to the Plan is
required by any securities exchange or under any state or federal law, or the
consent or approval of any governmental regulatory body is necessary or
desirable as a condition of, or in connection with, the grant of an Option or
Award or the issuance of Shares, no Options or Awards shall be granted or
payment made or Shares issued, in whole or in par? unless listing, registration,
qualification, consent or approval has been effected or obtained free of any
conditions as acceptable to the Committee.
19.5 Notwithstanding anything contained in the Plan or any
Agreement to the contrary, in the event that the disposition of Shares acquired
pursuant to the Plan is not covered by a then current registration statement
under the Securities Act of 1933, as amended (the "Securities Act"), and is not
otherwise exempt from such registration, such Shares shall be restricted against
transfer to the extent required by the Securities Act and Rule 144 or other
regulations thereunder. The Committee may require any individual receiving
Shares pursuant to an Option or Award granted under the Plan, as a condition
precedent to receipt of such Shares, to represent and warrant to the Company in
writing that the Shares acquired by such individual are acquired without a view
to any distribution thereof and will not be sold or transferred other than
pursuant to an effective registration thereof under said Act or pursuant to an
exemption applicable under the Securities Act or the rules and regulations
promulgated thereunder. The certificates evidencing any of such Shares shall be
appropriately amended to reflect their status as restricted securities as
aforesaid.
20. Right of First Refusal.
----------------------------
Upon such terms and conditions as determined by the Committee in its
discretion, the Committee at the time of grant of an Option or Award may provide
a right of first refusal in favor of the Company with respect to any proposed
sale by an Optionee or Grantee of Shares subject to an Option or Award.
21. Miscellaneous.
-------------------
21.1 Multiple Agreements. The terms of each Option or Award
-------------------
may differ from other Options or Awards granted under the Plan at the same time,
or at some other time. The Committee may also grant more than one Option or
Award to a given Eligible Individual during the term of the Plan, either in
addition to, or in substitution for, one or more Options or Awards previously
granted to that Eligible Individual.
21.2 Withholding of Taxes.
--------------------
(a) At such times as an Optionee or Grantee recognizes
taxable income in connection with the receipt of Shares or cash hereunder (a
"Taxable Event"), the Optionee or Grantee shall pay to the Company an amount
equal to the federal, state and local income taxes and other amounts as may be
required by law to be withheld by the Company in connection with the Taxable
Event (the "Withholding Taxes") prior to the issuance, or release from escrow,
of such Shares or the payment of such cash. The Company shall have the right to
deduct from any payment of cash to an Optionee or Grantee an amount equal to the
Withholding
21
<PAGE>
Taxes in satisfaction of the obligation to pay Withholding Taxes. In
satisfaction of the obligation to pay Withholding Taxes to the Company, the
Optionee or Grantee may make a written election (the "Tax Election"), provided
that it is permitted in the terms of the Agreement at the time of the grant or
thereafter, to have withheld a portion of the Shares then issuable to him or her
having an aggregate Fair Market Value equal to the Withholding Taxes.
(b) If an Optionee makes a disposition, within the meaning of
Section 424(c) of the Code and regulations promulgated thereunder, of any Share
or Shares issued to such Optionee pursuant to the exercise of an Incentive Stock
Option within the two-year period commencing on the day after the date of the
grant or within the one-year period commencing on the day after the date of
transfer of such Share or Shares to the Optionee pursuant to such exercise, the
Optionee shall, within ten (10) days of such disposition, notify the Company
thereof, by delivery of written notice to the Company at its principal executive
office.
21.3 Effective Date. The effective date of this Plan shall be as
determined by the Compensation and Stock Option Plan Committee of the Board,
subject only to the approval by the affirmative vote of the holders of a
majority of the securities of the Company present, or represented, and entitled
to vote at a meeting of shareholders duly held in accordance with the applicable
laws of the State of New Jersey within twelve (12) months of the adoption of the
Plan by the Compensation and Stock Option Plan Committee of the Board.
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