DEFINITIVE INFORMATION STATEMENT
SCHEDULE 14C
(Rule 14c-101)
INFORMATION REQUIRED IN INFORMATION STATEMENT
SCHEDULE 14C INFORMATION
Information Statement Pursuant to Section 14(c) of the
Securities Exchange Act of 1934
Check the appropriate box:
[ ] Preliminary information statement [ ] Confidential, for use of the
Commission only (as permitted by
Rule 14c-5(d)(2))
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[X] Definitive information statement
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CHESHIRE DISTRIBUTORS, INC.
(Name of Registrant as Specified in Its Charter)
Payment of Filing Fee (Check the appropriate box):
[x] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14-c5(g) and 0-11.
(1) Title of each class of securities to which transaction applies:
Common Stock, $.001 Par Value
(2) Aggregate number of securities to which transaction applies: N/A
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined): N/A
(4) Proposed maximum aggregate value of transaction: N/A
(5) Total fee paid: N/A
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the offsetting
fee was paid previously. Identify the previous filing by registration
statement number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid: N/A
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(2) Form, Schedule or Registration Statement No.: Schedule 14C
(3) Filing Party: Cheshire Distributors, Inc.
(4) Date Filed: May 5, 2000
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CHESHIRE DISTRIBUTORS, INC.
1599 Post Road East
Westport, Connecticut 06880
May 5, 2000
DEFINITIVE INFORMATION STATEMENT
This Information Statement is being mailed to the stockholders of Cheshire
Distributors, Inc. (the "Company") commencing on or about May 5, 2000, in
connection with the previous approval of the corporate actions referred to below
by the majority stockholder of the Company. Accordingly, all necessary corporate
approvals in connection with the matters referred to herein have been obtained,
and this Information Statement is furnished solely for the purpose of informing
stockholders, in the manner required under the Securities Exchange Act of 1934,
as amended (the "Exchange Act"), of these corporate actions before they take
effect. The record date for determining stockholders entitled to receive this
Information Statement has been established as the close of business on May 3,
2000. WE ARE NOT ASKING YOU FOR A PROXY AND YOU ARE REQUESTED NOT TO SEND US A
PROXY.
ACTIONS TAKEN
On May 3, 2000, Lev Greenberg (the "Majority Stockholder"), as the holder
of 8,472,979 shares of common stock of the Company, par value $.001 per share
(the "Common Stock"), representing approximately 81.74% of the total shares of
common stock entitled to vote on the matters described herein, consented in
writing without a meeting to the matters described herein. As a result, the
corporate actions were approved by a majority of the shares of common stock as
required by law and no further votes will be needed. As of May 3, 2000, the
Company had approximately 10,365,000 shares of Common Stock outstanding. The
corporate action described in this Information Statement will not afford to
stockholders the opportunity to dissent from the actions described herein or to
receive an agreed or judicially appraised value for their shares.
The Majority Stockholder has approved the following corporate actions:
1. The adoption of the Company's 2000 Omnibus Stock Incentive Plan; and
2. The ratification of the appointment of BDO Seidman LLP, as independent
auditors of the Company for fiscal year 2000.
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APPROVAL OF 2000 STOCK INCENTIVE PLAN
The Board of Directors of the Company by unanimous written consent in lieu
of a meeting on May 3, 2000, and the Majority Stockholder by written consent in
lieu of a meeting on May 3, 2000, have adopted and approved the Company's 2000
Omnibus Stock Incentive Plan (the "Plan"). The Plan is attached hereto as
Exhibit A and will become effective on the Effective Date. The terms of the Plan
are summarized below. Capitalized terms used in this description will, unless
otherwise defined in this Information Statement, have the meanings given to them
in the Plan.
GENERAL
The Plan is intended to promote the interests of the Company and the
stockholders of the Company by providing officers, directors, consultants and
other key employees of the Company with appropriate incentives and rewards to
encourage them to enter into and/or to continue in the service of the Company
and to acquire a proprietary interest in the long-term success of the Company.
The Plan is intended to comply with the requirements of Rule 16b-3 under
the Securities Exchange Act of 1934. In addition, the Plan is intended in
general to provide performance-based compensation to the Executive Officers of
the Company as required under Section 162(m) ("Section 162(m)") of the Internal
Revenue Code of 1986, as amended (the "Code") in order to assure deductibility
of such compensation by the Company for federal income tax purposes.
Section 162(m) denies a deduction by a publicly traded corporation for
certain compensation in excess of $1 million per year paid by such corporation
to the following individuals who are employed by the corporation at the end of
its taxable year ("Covered Employees"): the chief executive officer and the four
most highly compensated executive officers (other than the chief executive
officer) for whom compensation disclosure is required under the proxy rules.
Certain compensation, including compensation based on the attainment of
performance goals, is excluded from this deduction limit if certain requirements
are met. Among the requirements for compensation to qualify for this exception
is that the material terms pursuant to which the compensation is to be paid are
disclosed to, and approved by, the stockholders of the corporation in a separate
vote prior to the payment. Approval by the stockholders of the Company of the
Plan constitutes such approval based on the provisions of the Plan and
applicable regulations under the Code. Accordingly, since the Plan has been
approved by Majority Stockholder and the other conditions of Section 162(m)
relating to performance-based compensation are satisfied, compensation paid to
Covered Employees pursuant to the Plan will not be subject to the deduction
limit of Section 162(m) or to further approval by the stockholders of the
Company.
SUMMARY OF THE TERMS OF THE PLAN
The Board of Directors (or other committee appointed in accordance with the
terms of the Plan) (the "Committee") would be authorized to make certain types
of awards (collectively, "Incentive Awards"). Incentive Awards can be of
different types: incentive stock options, nonqualified stock options, stock
appreciation rights granted in
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tandem with options, stand-alone stock appreciation rights, restricted stock
awards, phantom stock awards or bonuses payable in stock. Each of these types of
awards is described in greater detail below.
The Plan authorizes an aggregate of 1,000,000 shares of the Company's
Common Stock that may be subject to Incentive Awards. This number is subject to
adjustment under certain circumstances described below. Shares delivered under
the Plan may be authorized and unissued shares, treasury shares or shares
acquired by the Company for purposes of the Plan. Generally, shares subject to
an Incentive Award will again become available for purposes of the Plan to the
extent that the Incentive Award terminates without the intended benefit having
been paid or distributed to the participant.
In the event that the Committee determines that any dividend (other than a
regular cash dividend paid in accordance with the Company's dividend policy as
in effect from time to time) or other distribution, stock split,
recapitalization, reorganization, merger or other similar corporate transaction
or event affects the Common Stock such that an adjustment is appropriate in
order to prevent dilution or enlargement of the rights of participants under the
Plan, then the Committee will make such equitable changes or adjustments as it
deems necessary to the aggregate number of shares available under the Plan, the
limit on individual Incentive Awards, the number of shares subject to each
Incentive Award then outstanding, and the exercise price of each outstanding
Option or the Reference Value of each stock appreciation right.
The Committee shall, at all times, consist of two or more persons each of
whom is an "outside director" within the meaning of Section 162(m) and a
Non-Employee Director within the meaning of Rule 16b-3; provided, however, that
if the Company does not have two or more "outside directors", the Board of
Directors shall serve as the Committee until the shareholders duly elect two or
more such outside directors. The Committee is authorized, among other things, to
construe, interpret and implement the provisions of the Plan, to select the
persons to whom awards will be granted, to determine the terms and conditions of
such awards including terms and conditions as to vesting, and to make all other
determinations deemed necessary or desirable for the administration of the Plan.
The Board of Directors of the Company may suspend, discontinue, revise,
terminate or amend the Plan at any time, provided, however, that shareholder
approval will be obtained if and to the extent that the Board deems it
appropriate to satisfy Section 162(m), if such approval is required by the rules
of any exchange on which the Common Stock is then listed or if such approval is
required by the rules of the National Association of Securities Dealers, Inc. if
the Common Stock is then authorized for quotation on The Nasdaq Stock Market.
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INCENTIVE AWARDS UNDER THE PLAN
Incentive Stock Options and Nonqualified Stock Options
The Committee will determine the time for exercise of each option and each
option's expiration date; provided that no incentive stock option may be
exercised more than ten years after the date of grant and no incentive stock
option granted to a 10% Stockholder may be exercised more than five years after
the date of grant. For these purposes, a "10% Stockholder" is any individual
who, at the time of grant, owns stock possessing more than 10% of the total
combined voting power of all classes of stock of the Company. The purchase price
per share payable upon the exercise of an option (the "option exercise price")
will be established by the Committee.
The option exercise price is payable by one or a combination of the
following means: (i) in cash, (ii) by delivering a properly executed exercise
notice to the Company together with a copy of irrevocable instructions to a
broker to deliver promptly to the Company the amount of sale or loan proceeds to
pay the full amount of the option exercise price for the shares as to which the
option is being exercised, (iii) by delivering shares of Common Stock owned by
the participant with appropriate stock powers or (iv) by electing to have the
Company retain shares of Common Stock which would otherwise be issued on the
exercise of the option. For these purposes, the value of shares delivered to, or
retained by, the Company shall be valued by the Committee at their Fair Market
Value as of the exercise date.
Stand-alone and Tandem Stock Appreciation Rights
Stock appreciation rights may be granted in connection with all or any part
of, or independently of, any option granted under the Plan. A stock appreciation
right granted independently of any option may, at the election of the Committee,
be subject to such vesting terms and conditions as determined by the Committee.
A stock appreciation right granted in tandem with a stock option will be
exercisable only when, and to the extent, the option to which it relates is
exercisable. A participant receiving a stock appreciation right has the right to
surrender the stock appreciation right and receive a cash payment from the
Company. In the case of a stock appreciation right granted in tandem with an
option, the cash payment would equal the excess of the Fair Market Value of a
share of Common Stock on the date of exercise over the option exercise price for
each share of Common Stock in respect of which the stock appreciation right is
being exercised. In the case of a stock appreciation right granted independently
of an option, the cash payment would equal the excess of the Fair Market Value
of a share of Common Stock on the date of exercise over the Reference Value for
each share of Common Stock in respect of which such stock appreciation right is
being exercised. (For these purposes, "Reference Value" is the amount
established by the Committee at the time the stock appreciation right is granted
provided that the Reference Value may not be less than the Fair Market Value of
a share of Common Stock on the date of grant of the stock appreciation right.)
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Restricted Stock
The Committee may grant restricted shares of Common Stock to such persons,
in such amounts, and subject to such terms and conditions (including the
attainment of performance goals) as the Committee shall determine in its sole
discretion. If the requirements specified by the Committee are met, the grantee
of an award of restricted stock will be entitled to keep such stock (or the
portion of it with respect to which the conditions are satisfied). Awards of
Restricted Stock granted to Executive Officers will be contingent on the
attainment by the Company of one or more pre-established performance goals (the
"Performance Goals") established by the Committee. The Performance Goals may be
based on the attainment by the Company (and/or its subsidiaries or divisions, if
applicable) of any one or more of the following criteria: (i) a specified
percentage return on total shareholder equity of the Company; (ii) a specified
percentage increase in earnings per share of Common Stock; (iii) a specified
percentage increase in revenues or net income of the Company; and (iv) a
specified percentage increase in profit before taxation of the Company.
Phantom Stock
The Committee may grant shares of Phantom Stock to such persons, in such
amounts, and subject to such terms and conditions (including the attainment of
performance goals) as the Committee shall determine in its discretion. If the
requirements specified by the Committee are met, the grantee of a Phantom Stock
award will receive a cash payment equal to the Fair Market Value of the shares
as to which the conditions are met as of the date such conditions are met plus
the dividends that would have been paid on such shares had they actually been
outstanding following the grant date. Awards of Phantom Stock granted to
Executive Officers of the Company will be contingent on the attainment by the
Company of any one or more of the Performance Goals.
Stock Bonus
The Committee may grant bonuses consisting of shares of Common Stock free
of restrictions to such persons and in such amounts as the Committee shall
determine in its discretion. No stock bonus may be granted to an Executive
Officer if the value thereof would not be deductible by the Company for federal
income tax purposes because of the limits contained in Section 162(m).
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
The following discussion is a brief summary of the principal United States
federal income tax consequences under current federal income tax laws relating
to awards under the Plan. This summary is not intended to be exhaustive and,
among other things, does not describe state, local or foreign income and other
tax consequences.
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Nonqualified Stock Options
An optionee will not recognize any taxable income upon the grant of a
Nonqualified Stock Option. The Company will not be entitled to a tax deduction
with respect to the grant of a Nonqualified Stock Option. Upon the exercise of a
Nonqualified Stock Option, the excess of the Fair Market Value of the Common
Stock on the exercise date over the option exercise price will be taxable as
compensation income to the optionee and will be subject to applicable
withholding taxes. The Company will generally be entitled to a tax deduction at
such time in the amount of such compensation income. The Optionee's tax basis
for the Common Stock received upon the exercise of a Nonqualified Stock Option
will equal the sum of the compensation income recognized and the option exercise
price.
In the event of a sale of the Common Stock received upon the exercise of a
Nonqualified Stock Option, any appreciation or depreciation after the exercise
date generally will be taxed as capital gain or loss and will be long-term
capital gain or loss if the holding period for such Common Stock is more than
one year from the date of exercise.
Incentive Stock Options
An optionee will not recognize any taxable income at the time of grant or
exercise of an Incentive Stock Option, and the Company will not be entitled to a
tax deduction with respect to such grant or exercise. Exercise of an Incentive
Stock Option may, however, give rise to taxable compensation income subject to
applicable withholding taxes, and a tax deduction to the Company, if the
optionee subsequently engages in a "disqualifying disposition," as described
below.
A sale or exchange by an optionee of shares acquired upon the exercise of
an Incentive Stock Option more than one year after the transfer of the shares to
such optionee and more than two years after the date of grant of the Incentive
Stock Option will result in any difference between the net sale proceeds and the
exercise price being treated as long-term capital gain (or loss) to the
optionee. If such sale or exchange takes place within two years after the date
of grant of the Incentive Stock Option or within one year from the date of
exercise, such sale or exchange will generally constitute a "disqualifying
disposition" of such shares. A disqualifying disposition will have the following
results: any excess of (i) the lesser of (a) the Fair Market Value of the shares
at the time of exercise of the Incentive Stock Option and (b) the amount
realized on such disqualifying disposition of the shares over (ii) the option
exercise price of such shares will be ordinary income to the optionee, subject
to applicable withholding taxes, and the Company will be entitled to a tax
deduction in the amount of such income.
Any gain or loss after the date of exercise generally will qualify as
capital gain or loss and will not result in any deduction by the Company.
Restricted Stock
A grantee will not recognize any income upon the receipt of Restricted
Stock unless the holder elects under Section 83(b) of the Code, within 30 days
of such receipt,
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to recognize ordinary income in an amount equal to the Fair Market Value of the
Restricted Stock, at the time of receipt. If the election is made, the holder
will not be allowed a deduction for amounts subsequently required to be returned
to the Company. If the election is not made, the holder will generally recognize
ordinary income, on the date that the restrictions to which the shares of
Restricted Stock are removed, in an amount equal to the Fair Market Value of
such shares on such date. At the time the holder recognizes ordinary income, the
Company generally will be entitled to a deduction in the same amount.
Generally, upon a sale or other disposition of Restricted Stock with
respect to which the holder has recognized ordinary income (i.e., a Section
83(b) election was previously made or the restrictions were previously removed),
the holder will recognize capital gain or loss in an amount equal to the
difference between the amount realized on such sale or other disposition and the
holder's basis in such shares. Such gain or loss will be long-term capital gain
or loss if the holding period for such shares is more than one year.
Other Awards
The grant of a stock appreciation right or a Phantom Stock award will not
result in income for the grantee or in a tax deduction for the Company. Upon the
settlement of such a stock appreciation right or a Phantom Stock award, the
grantee will recognize ordinary income equal to the aggregate value of the
payment received, and the Company generally will be entitled to a tax deduction
in the same amount. A Stock Bonus generally will result in compensation income
for the grantee and a tax deduction for the Company equal to the Fair Market
Value of the shares of Common Stock granted.
NEW PLAN BENEFITS
Inasmuch as Incentive Awards under the Plan will be granted at the sole
discretion of the Committee and that performance goal criteria may vary from
year to year and from participant to participant, benefits under the Plan are
not determinable.
INTEREST OF CERTAIN PERSONS IN THE ACTIONS DESCRIBED HEREIN
The directors and executive officers of the Company may be deemed to have a
substantial interest in the approval of the Plan because the Plan creates a
number of shares reserved for issuance following grant of options and other
awards under the Plan and the persons eligible for the awards include the
directors and executive officers of the Company.
STOCKHOLDER APPROVAL PREVIOUSLY OBTAINED
The Company has approximately 10,365,000 issued and outstanding shares of
Common Stock as of May 3, 2000, each of which is entitled to one vote on any
matter
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brought to a vote of the Company's stockholders. The Majority Stockholder owns
8,472,979 shares, representing 81.74% of all issued and authorized shares of the
Company's Common Stock. By written consent in lieu of a meeting, dated May 3,
2000, the Majority Stockholder approved the adoption and implementation of the
Plan and the ratification of the appointment of BDO Seidman LLP, as independent
auditors of the Company for fiscal 2000, such actions to take effect 20 days
following the mailing of this Information Statement to stockholders. Such action
by written consent is sufficient to satisfy (i) the requirements of the Plan
that it be approved by the stockholders, and (iii) the By-Laws that the
independent auditor of the Company be approved by the stockholders. Accordingly,
the stockholders will not be asked to take further action on these corporate
actions at any future meeting. However, since stockholder approval of these
corporation actions was obtained by written consent rather than at a
stockholders' meeting, the Exchange Act will not permit the actions to become
effective until the expiration of 20 calendar days from the date hereof, which
is the date this Information Statement is being mailed to shareholders. Upon the
expiration of such 20 day period, the actions will become effective
automatically.
The Company believes that these corporate actions will not have any adverse
effect on its business and operations, and expects to continue such business and
operations as they are currently being conducted.
SIGNATURE
Pursuant to the requirements of the Securities Act of 1934, the Registrant
has duly caused this report to be signed on its behalf by the undersigned
hereunto authorized.
May 5, 2000 CHESHIRE DISTRIBUTORS, INC.
By: /s/ Willem Oost-Lievense
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Willem Oost-Lievense,
Chief Executive Officer
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EXHIBIT A
CHESHIRE DISTRIBUTORS, INC.
2000 OMNIBUS STOCK INCENTIVE PLAN
I. Establishment and Purpose.
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The Cheshire Distributors, Inc. 2000 Omnibus Stock Incentive Plan (the
"Plan") is intended to promote the interests of the Company and the stockholders
of the Company by providing officers, directors, consultants and other employees
of the Company and of its Subsidiaries with appropriate incentives and rewards
to encourage them to enter into and continue in the employ of the Company and to
acquire a proprietary interest in the long-term success of the Company, thereby
aligning their interest more closely to the interest of stockholders.
II. Definitions.
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As used in the Plan, the following definitions apply to the terms indicated
below:
(a) "Award Agreement" shall mean the written agreement between the
Company and a Participant evidencing an Incentive Award.
(b) "Board of Directors" shall mean the Board of Directors of the
Company.
(c) "Cause," when used in connection with the termination of a
Participant's employment by the Company, shall mean (i) the willful and
continued failure by the Participant substantially to perform his duties and
obligations to the Company (other than any such failure resulting from his
incapacity due to physical or mental illness) or (ii) the willful engaging by
the Participant in misconduct which is materially injurious to the Company or
any of its Subsidiaries. For purposes of this Section 2(c), no act, or failure
to act, on a Participant's part shall be considered "willful" unless done, or
omitted to be done, by the Participant in bad faith and without reasonable
belief that the Participant's action or omission was in the best interest of the
Company. The Committee shall determine whether a termination of employment is
for Cause, and any such determination by the Committee shall be binding on the
Participant, the Company and its Subsidiaries.
(d) "Code" shall mean the Internal Revenue Code of 1986, as amended
from time to time.
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(e) "Committee" shall mean the Compensation Committee of the Board of
Directors. The Committee shall consist of two or more persons each of whom is an
"outside director" within the meaning of Section 162(m) of the Code and a
"Non-Employee Director" within the meaning of Rule 16b-3 under the Exchange Act
(or who satisfies any other criteria for administering employee benefit plans as
may be specified by the Securities and Exchange Commission in order for
transactions under such plan to be exempt from the provisions of Section 16(b)
of the Exchange Act); provided, however, that if the Company does not have two
or more "outside directors", the Board of Directors shall serve as the Committee
until the shareholders duly elect two or more such outside directors.
(f) "Company" shall mean Cheshire Distributors, Inc., a Delaware
corporation.
(g) "Company Stock" shall mean the common stock of the Company, par
value $0.001 per share.
(h) "Delivery Date" shall mean the date established by the Company on
which certificates representing shares of Restricted Stock shall be issued by
the Company pursuant to the terms of Section l0(e) of the Plan.
(i) "Disability" shall mean: (i) any physical or mental condition that
would qualify a Participant for a disability benefit under the long-term
disability plan maintained by the Company or a Subsidiary of the Company and
applicable to such Participant or (ii) when used in connection with the exercise
of an Incentive Stock Option following termination of employment, disability
within the meaning of Section 22(e)(3) of the Code.
(j) "Effective Date" shall mean the date upon which this Plan is
adopted by the Board of Directors.
(k) "Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended from time to time.
(l) "Executive Officer" shall have the meaning set forth in Rule 3b-7
promulgated under the Exchange Act.
(m) "Exercise Date" shall mean the date on which a Participant may
exercise an Incentive Award.
(n) "Fair Market Value" of a share of Company Stock, as of a date of
determination, shall mean (i) the closing sales price per share of Company Stock
on the national securities exchange on which such stock is principally traded
for the last preceding date on which there was a sale of such stock on such
exchange, or (ii) if the shares of Company Stock are not listed or admitted to
trading on any such exchange, the closing price as reported by The Nasdaq Stock
Market, Inc. for the last preceding date on which there was a sale of such stock
on such exchange, or (iii) if the shares of Company Stock are not then listed on
The Nasdaq Stock Market, Inc., the average of the highest
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reported bid and lowest reported asked prices for the shares of Company Stock as
reported by the National Association of Securities Dealers, Inc. Automated
Quotations System for the last preceding date on which bid and asked prices for
the Common Stock were so reported or (iv) if the shares of Company Stock are not
then listed on a national securities exchange or traded in an over-the-counter
market, such value as determined by the Committee in good faith.
(o) "Incentive Award" shall mean an Option, Tandem SAR, Stand-Alone
SAR, Restricted Stock grant, Phantom Stock grant or Stock Bonus granted pursuant
to the terms of the Plan.
(p) "Incentive Stock Option" shall mean an Option that is an "incentive
stock option" within the meaning of Section 422 of the Code.
(q) "Non-Qualified Stock Option" shall mean an Option that is not an
Incentive Stock Option.
(r) "Option" shall mean an option to purchase shares of Company Stock
granted pursuant to Section 7 of the Plan.
(s) "Participant" shall mean an employee of the Company or a subsidiary
of the Company to whom an Incentive Award is granted pursuant to the Plan, and,
upon his death, his successors, heirs, executors and administrators, as the case
may be.
(t) "Phantom Stock" shall mean the right, granted pursuant to Section
11 of the Plan, to receive in cash the Fair Market Value of a share of Company
Stock.
(u) "Plan" shall mean this 2000 Omnibus Stock Incentive Plan, as
amended from time to time.
(v) "Reference Value" shall mean the value determined by the Committee
pursuant to Section 9(a) of the Plan.
(w) "Restricted Stock" shall mean a share of Common Stock which is
granted pursuant to the terms of Section 10 hereof and which is subject to the
restrictions set forth in Section 10 of the Plan and the applicable Award
Agreement.
(x) "Rule 16b-3" shall mean the Rule 16b-3 promulgated under the
Exchange Act.
(y) "Section 162(m)" shall mean Section 162(m) of the Code and the
regulations promulgated thereunder.
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(z) "Securities Act" shall mean the Securities Act of 1933, as amended
from time to time.
(aa) "Stand-Alone SAR" shall mean a stock appreciation right granted
pursuant to Section 9 of the Plan which is not related to any Option.
(bb) "Stock Bonus" shall mean a bonus payable in shares of Company
Stock granted pursuant to Section 12 of the Plan.
(cc) "Subsidiary" shall mean a "subsidiary corporation" within the
meaning of Section 424(f) of the Code.
(dd) "Tandem SAR" shall mean a stock appreciation right granted
pursuant to Section 8 of the Plan which is related to an option.
(ee) "Vesting Date" shall mean the date established by the Committee on
which a share of Restricted Stock or Phantom Stock may vest or an Option,
Tandem-SAR or Stand-Alone SAR may vest, as the case may be.
III. Stock Subject to the Plan
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(a) Shares Available for Awards.
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The maximum number of shares of Company Stock reserved for issuance under
the Plan shall be One Million (1,000,000) shares (subject to adjustment as
provided herein). Such shares may be authorized but unissued Company Stock or
authorized and issued Common Stock held in the Company's treasury or acquired by
the Company for the purposes of the Plan. The Committee may direct that any
stock certificate evidencing shares issued pursuant to the Plan shall bear a
legend setting forth such restrictions on transferability as may apply to such
shares pursuant to the Plan.
The grant of a Tandem SAR shall not reduce the number of shares of Company
Stock with respect to which Incentive Awards may be granted pursuant to the
Plan.
(b) Individual Limitation.
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The total number of shares of Common Stock subject to Incentive Awards
(including Incentive Awards payable in cash but denominated as shares of Common
Stock, i.e., Stand-Alone SAR's and Phantom Stock), awarded to any one recipient
during any tax year of the Company, shall not exceed four hundred thousand
(400,000) shares. Determinations under the preceding sentence shall be made in a
manner that is consistent with Section 162(m) of the Code.
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(c) Adjustment for Change in Capitalization.
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In the event that the Committee shall determine that any dividend (other
than regular cash dividends payable in accordance with the Company's policies as
in effect from time to time) or other distribution (whether in the form of cash,
Company Stock, or other property), recapitalization, stock split, reverse stock
split, reorganization, merger, consolidation, spin-off, combination, repurchase,
or share exchange, or other similar corporate transaction or event, affects the
Company Stock (or the class of stock then subject to issuance under the Plan if
not the Company Stock) such that an adjustment is appropriate in order to
prevent dilution or enlargement of the rights of Participants under the Plan,
then the Committee shall make such equitable changes or adjustments as it deems
necessary or appropriate to any or all of (i) the number and kind of shares of
stock which may thereafter be issued in connection with Incentive Awards, (ii)
the number and kind of shares of stock issued or issuable in respect of
outstanding Incentive Awards, and (iii) the exercise price, grant price, or
Reference Value relating to any Incentive Award; provided that, with respect to
Incentive Stock Options, such adjustment shall be made in accordance with
Section 424 of the Code and with respect to all Incentive Awards, such
adjustment shall be made in accordance with Section 162(m) of the Code.
(d) Re-use of Shares.
----------------
The following shares of Company Stock shall again become available for
Incentive Awards: (i) any shares subject to an Option that remain unissued upon
the cancellation, surrender, exchange or termination of such Option for any
reason whatsoever (other than the cancellation of an Option resulting from the
exercise of a Tandem SAR related to such Option); (ii) any shares subject to a
Stand-Alone SAR that remain not settled for cash upon cancellation, surrender,
exchange or termination of such Stand-Alone SAR for any reason whatsoever; (iii)
any Restricted Stock which is forfeited by a Participant; and (iv) any shares
subject to a Phantom Stock grant that remain not settled for cash upon
cancellation, surrender, exchange or termination of such Phantom Stock grant for
any reason whatsoever. If an Option of a Participant is canceled, the shares
subject to the canceled Option continue to be counted against the maximum number
of shares for which Options may be granted to the Participant under the Plan.
IV. Administration of the Plan.
--------------------------
The Plan shall be administered by the Committee. The Committee shall have
the authority in its sole discretion, subject to and not inconsistent with the
express provisions of the Plan, to administer the Plan and to exercise all the
powers and authorities either specifically granted to it under the Plan or
necessary or advisable in the administration of the Plan, including, without
limitation, the authority to grant Incentive Awards; to determine the persons to
whom and the time or times at which Incentive Awards shall be granted; to
determine the type and number of Incentive Awards to be granted, the number of
shares of Company Stock to which an Award may relate and the
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terms, conditions, restrictions and performance criteria relating to any
Incentive Award; to determine whether, to what extent, and under what
circumstances an Incentive Award may be settled, canceled, forfeited, exchanged,
or surrendered (provided that in no event shall the foregoing be construed to
permit the repricing of an Option, Tandem SAR or Stand-Alone SAR (whether by
amendment, cancellation and regrant or otherwise) to a lower exercise price or
Reference Value other than in compliance with Section 162(m) of the Code); to
make adjustments in the performance goals in recognition of unusual or
non-recurring events affecting the Company or the financial statements of the
Company (to the extent in accordance with Section 162(m) of the Code, if
applicable, with respect to an Executive Officer), or in response to changes in
applicable laws, regulations, or accounting principles; to construe and
interpret the Plan and any Incentive Award; to prescribe, amend and rescind
rules and regulations relating to the Plan; to determine the terms and
provisions of Award Agreements; and to make all other determinations deemed
necessary or advisable for the administration of the Plan.
The Committee may, in its absolute discretion, without amendment to the
Plan, (i) accelerate the date on which any Option, Tandem SAR, Stand-Alone SAR
or Incentive Award relating to Phantom Stock granted under the Plan becomes
exercisable, waive or amend the operation of Plan provisions respecting exercise
after termination of employment or otherwise adjust any of the terms of such
Option, Tandem SAR, Stand-Alone SAR or Phantom Stock grant, and (ii) accelerate
the Delivery Date, or waive any condition imposed hereunder, with respect to any
share of Restricted Stock or otherwise adjust any of the terms applicable to
such share.
No member of the Committee shall be liable for any action, omission or
determination relating to the Plan, and the Company shall indemnify and hold
harmless each member of the Committee and each other director or employee of the
Company to whom any duty or power relating to the administration or
interpretation of the Plan has been delegated against any cost or expense
(including counsel fees) or liability (including any sum paid in settlement of a
claim with the approval of the Committee) arising out of any action, omission or
determination relating to the Plan, if, in either case, such action, omission or
determination was taken or made by such member, director or employee in good
faith and in a manner such member, director or employee reasonably believes to
be in or not opposed to the best interests of the Company.
V. Eligibility.
-----------
The persons who shall be eligible to receive Incentive Awards pursuant to
the Plan shall be such employees, officers, directors, consultants and advisors
of the Company or its Subsidiaries as the Committee shall select from time to
time.
VI. Awards Under the Plan; Award Agreement.
--------------------------------------
The Committee may grant Options, Tandem SAR's, Stand-Alone SAR's, shares of
Restricted Stock, shares of Phantom Stock and Stock Bonuses, in such amounts
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<PAGE>
and with such terms and conditions as the Committee shall determine, subject to
the provisions of the Plan.
Each Incentive Award granted under the Plan (except an unconditional Stock
Bonus) shall be evidenced by an Award Agreement which shall contain such
provisions as the Committee may in its sole discretion deem necessary or
desirable. By accepting an Incentive Award, a Participant thereby agrees that
the award shall be subject to all of the terms and provisions of the Plan and
the applicable Award Agreement.
VII. Options.
-------
(a) Identification of Options.
-------------------------
Each Option shall be clearly identified in the applicable
Award Agreement as either an Incentive Stock Option or a Non-Qualified Stock
Option.
(b) Exercise Price.
--------------
Each Award Agreement with respect to an Option shall set forth the amount
(the "option exercise price") payable by the Participant to the Company upon
exercise of the Option. The option exercise price per share shall be determined
by the Committee but shall in no event be less than the Fair Market Value of a
share of Common Stock on the date the Option is granted provided however, that
the option exercise price of Non-Qualified Stock Options may be less than such
value provided the exercise of any such Non-Qualified Stock Option shall comply
with the provisions of Section 162(m) of the Code.
(c) Term and Exercise of Options.
----------------------------
(i) An Option shall become exercisable in accordance with the terms
of the applicable Award Agreement. The Committee shall determine the expiration
date of each option; provided, however, that no Incentive Stock Option shall be
exercisable more than ten (10) years after the date of grant.
(ii) An Option may be exercised for all or any portion of the shares
as to which it is exercisable, provided, that no partial exercise of an Option
shall be for an aggregate exercise price of less than $1,000. The partial
exercise of an Option shall not cause the expiration, termination or
cancellation of the remaining portion thereof.
(iii) An Option shall be exercised by delivering notice to the
Company's principal office, to the attention of its Secretary. Such notice shall
be accompanied by a copy of the applicable Award Agreement, shall specify the
number of shares of Company Stock with respect to which the Option is being
exercised and shall be signed by the Participant or other person then having the
right to exercise the Option. Payment for shares of Common Stock purchased upon
the exercise of an Option shall
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<PAGE>
also accompany the exercise notice and be provided by one or a combination of
the following means: (i) in cash, by certified check, bank cashier's check or
wire transfer; (ii) by delivering a properly executed exercise notice to the
Company together with a copy of irrevocable instructions to a broker to deliver
promptly to the Company the amount of sale or loan proceeds to pay the full
amount of the option exercise price for the shares as to which the Option is
being exercised, (iii) by delivering shares of Company Stock owned by the
Participant with appropriate stock powers, or (iv) by electing to have the
Company retain shares of Company Stock which would otherwise be issued on the
exercise of the Option. In determining the number of shares of Company Stock
necessary to be delivered to or retained by the Company, such shares shall be
valued by the Committee at their Fair Market Value as of the exercise date. An
Option shall be deemed to be exercised on the date on which the above conditions
to exercise have been satisfied.
(iv) Certificates for shares of Company Stock purchased upon the
exercise of an Option (net of any shares retained by the Company in accordance
with Section 7(c)(3)(iv) of the Plan) shall be issued in the name of the
Participant or other person entitled to receive such shares, and delivered to
the Participant or such other person as soon as practicable following the date
on which the Option is exercised.
(d) Limitations on Incentive Stock Options.
--------------------------------------
(i) To the extent that the aggregate Fair Market Value of shares of
Company Stock with respect to which Incentive Stock Options are exercisable for
the first time by a Participant during any calendar year under the Plan and any
other stock option plan of the Company (or any Subsidiary of the Company) shall
exceed $100,000, or such higher value as may be permitted under Section 422 of
the Code, such Options shall be treated as Non-Qualified Stock Options. Such
Fair Market Value shall be determined as of the date on which each such
Incentive Stock Option is granted.
(ii) No Incentive Stock Option may be granted to an individual if,
at the time of the grant, such individual owns stock possessing more than ten
percent of the total combined voting power of all classes of stock of the
Company unless (i) the exercise price per share of such Incentive Stock Option
is at least one hundred ten percent (110%) of the Fair Market Value of a share
of Common Stock at the time such Incentive Stock Option is granted and (ii) such
Incentive Stock Option is not exercisable after the expiration of five years
from the date such Incentive Stock Option is granted.
(e) Effect of Termination of Employment.
-----------------------------------
(i) Unless the applicable Award Agreement provides otherwise, in the
event that the employment of a Participant with the Company or a
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<PAGE>
Subsidiary of the Company shall terminate for any reason other than death,
Disability or Cause, (i) Options granted to such Participant, to the extent that
they are exercisable at the time of such termination, shall remain exercisable
until the date that is three (3) months after such termination, on which date
they shall expire, and (ii) Options granted to such Participant, to the extent
that they were not exercisable at the time of such termination, shall expire at
the close of business on the date of such termination. Notwithstanding the
foregoing, no Option shall be exercisable after the expiration of its term.
(ii) Unless the applicable Award Agreement provides otherwise, in
the event that the employment of a Participant with the Company or a Subsidiary
of the Company shall terminate on account of the Disability or death of the
Participant: (i) Options granted to such Participant, to the extent that they
were exercisable at the time of such termination, shall remain exercisable until
the first anniversary of such termination, on which date they shall expire, and
(ii) Options granted to such Participant, to the extent that they were not
exercisable at the time of such termination shall expire at the close of
business on the date of such termination. Notwithstanding the foregoing, no
Option shall be exercisable after the expiration of its term.
(iii) If a Participant's employment with the Company or a Subsidiary
of the Company is terminated for Cause, all outstanding Options granted to such
Participant shall expire at the commencement of business on the date of such
termination.
(f) Conditions to Vesting.
---------------------
At the time of the grant of Options, the Committee may impose such
restrictions or conditions to the vesting of such shares as it, in its absolute
discretion, deems appropriate.
VIII. Tandem SAR's.
------------
The Committee may grant in connection with any Option granted hereunder one
or more Tandem SAR's relating to a number of shares of Common Stock less than or
equal to the number of shares of Company Stock subject to the related Option. A
Tandem SAR may be granted at the same time as or, in the case of a Non-Qualified
Stock Option, subsequent to the time that, its related Option is granted.
(a) Benefit Upon Exercise.
---------------------
The exercise of a Tandem SAR with respect to any number of shares of
Company Stock shall entitle the Participant to a cash payment, for each such
share, equal to the excess of (i) the Fair Market Value of a share of Company
Stock on the exercise date over (ii) the option exercise price per share of the
related Option. Such payment shall be made as soon as practicable after the
effective date of such exercise.
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<PAGE>
(b) Term and Exercise of Tandem SAR.
-------------------------------
(i) A Tandem SAR shall be exercisable only if and to the extent that
its related Option is exercisable.
(ii) The exercise of a Tandem SAR with respect to a number of shares
of Company Stock shall cause the immediate and automatic cancellation of its
related Option with respect to an equal number of shares. The exercise of an
Option, or the cancellation, termination or expiration of an Option (other than
pursuant to this Section 8(b)(2)), with respect to a number of shares of Company
Stock shall cause the automatic and immediate cancellation of any related Tandem
SAR's to the extent that the number of shares of Company Stock remaining subject
to such Option is less than the number of shares then subject to such Tandem
SAR. Such Tandem SAR's shall be canceled in the order in which they become
exercisable.
(iii) A Tandem SAR may be exercised for all or any portion of the
shares as to which the related Option is exercisable; provided, that no partial
exercise of a Tandem SAR shall be for less than a number of shares having an
aggregate option exercise price of less than $1,000. The partial exercise of a
Tandem SAR shall not cause the expiration, termination or cancellation of the
remaining portion thereof.
(iv) No Tandem SAR shall be assignable or transferable otherwise
than together with its related Option, and any such transfer or assignment will
be subject to the provisions of Section 20 of the Plan.
(v) A Tandem SAR shall be exercised by delivering notice to the
Company's principal office, to the attention of its Secretary. Such notice shall
be accompanied by a copy of the applicable Award Agreement, shall specify the
number of shares of Company Stock with respect to which the Tandem SAR is being
exercised and shall be signed by the Participant or other person then having the
right to exercise the Option to which the Tandem SAR is related. A Tandem SAR
shall be deemed to be exercised on the date on which the above conditions to
exercise have been satisfied.
(c) Conditions to Vesting.
---------------------
At the time of the grant of a Tandem SAR, the Committee may impose such
restrictions or conditions to the vesting of such Tandem SAR as it, in its
absolute discretion, deems appropriate.
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<PAGE>
IX. Stand-Alone SAR's.
-----------------
(a) Reference Value.
---------------
The Reference Value per share of a Stand-Alone SAR shall be determined by
the Committee at the time of grant, but shall in no event be less than the Fair
Market Value of a share of Company Stock on the date of grant.
(b) Benefit Upon Exercise.
---------------------
The exercise of a Stand-Alone SAR with respect to any number of shares of
Company Stock shall entitle the Participant to a cash payment, for each such
share, equal to the excess of (i) the Fair Market Value of a share of Company
Stock on the exercise date over (ii) the reference value of the Stand-Alone SAR.
Such payments shall be made as soon as practicable after the effective date of
such exercise.
(c) Term and Exercise of Stand-Alone SAR's.
--------------------------------------
(i) The Committee shall determine the expiration date of each
Stand-Alone SAR.
(ii) A Stand-Alone SAR may be exercised for all or any portion of
the shares as to which it is exercisable; provided, that no partial exercise of
a Stand-Alone SAR shall be for an aggregate reference value of less than $1,000.
The partial exercise of a Stand-Alone SAR shall not cause the expiration,
termination or cancellation of the remaining portion thereof.
(iii) A Stand-Alone SAR shall be exercised by delivering notice to
the Company's principal office, to the attention of its Secretary, no less than
one business day in advance of the effective date of the proposed exercise. Such
notice shall be accompanied by a copy of the applicable Award Agreement, shall
specify the number of shares of Company Stock with respect to which the
Stand-Alone SAR is being exercised, and shall be signed by the Participant. A
Stand-Alone SAR shall be deemed to be exercised on the date on which the above
conditions to exercise have been satisfied
(d) Effect of Termination of Employment.
-----------------------------------
The provisions set forth in Section 7(e) with respect to the exercise of
Options following termination of employment shall apply as well to the exercise
of Stand-Alone SAR's.
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<PAGE>
(e) Conditions to Vesting.
---------------------
At the time of the grant of a Stand-Alone SAR, the Committee may impose
such restrictions or conditions to the vesting of such Stand-Alone SAR as it, in
its absolute discretion, deems appropriate.
X. Restricted Stock.
----------------
(a) Delivery Date and Vesting Date.
------------------------------
At the time of the grant of shares of Restricted Stock, the Committee shall
establish a Delivery Date or Delivery Dates and a Vesting Date or Vesting Dates
with respect to such shares. The Committee may divide such shares into classes
and assign a different Delivery Date and/or Vesting Date for each class. If the
Participant is employed by the Company or a Subsidiary of the Company on a
Delivery Date (which may be the date of grant), the specified number of shares
of Restricted Stock shall be issued in accordance with the provisions of Section
l0(e) of the Plan. Provided that all conditions to the vesting of a share of
Restricted Stock imposed pursuant to Section l0(b) of the Plan are satisfied,
and except as provided in Section l0(g) of the Plan, upon the occurrence of the
Vesting Date with respect to a share of Restricted Stock, such share shall vest
and the restrictions of Section l0(c) of the Plan shall lapse.
(b) Conditions to Vesting.
---------------------
At the time of the grant of shares of Restricted Stock, the Committee may
impose such restrictions or conditions to the vesting of such shares as it, in
its absolute discretion, deems appropriate.
(c) Restrictions on Transfer Prior to Vesting.
-----------------------------------------
Prior to the vesting of a share of Restricted Stock, no transfer of a
Participant's rights with respect to such share, whether voluntary or
involuntary, by operation of law or otherwise, shall be permitted. Immediately
upon any attempt to transfer such rights, such share, and all of the rights
related thereto, shall be forfeited by the Participant.
(d) Dividends on Restricted Stock.
-----------------------------
The Committee in its discretion may require that any dividends paid on
shares of Restricted Stock shall be held in escrow until all restrictions on
such shares have lapsed.
(e) Issuance of Certificates.
------------------------
(i) Reasonably promptly after the Delivery Date with respect to
shares of Restricted Stock, the Company shall cause to be issued a stock
certificate, registered in the name of the Participant to whom such shares were
granted, evidencing such shares; provided, that the Company shall not cause such
a stock
A-12
<PAGE>
certificate to be issued unless it has received a stock power duly endorsed in
blank with respect to such shares. Each such stock certificate shall bear the
following legend:
The transferability of this certificate and the
shares of stock represented hereby are subject to the
restrictions, terms and conditions (including
forfeiture provisions and restrictions against
transfer) contained in the 2000 Omnibus Stock
Incentive Plan of Cheshire Distributors, Inc. and an
Award Agreement entered into between the registered
owner of such shares and Cheshire Distributors, Inc.
A copy of such Plan and Award Agreement is on file in
the office of the Secretary of Cheshire Distributors,
Inc., 1599 Post Road East, Westport, Connecticut
06880.
Such legend shall not be removed until such shares vest pursuant to the
terms of the applicable Award Agreement.
(ii) Each certificate issued pursuant to this Section l0(e),
together with the stock powers relating to the shares of Restricted Stock
evidenced by such certificate, shall be held by the Company unless the Committee
determines otherwise.
(f) Consequences of Vesting.
-----------------------
Upon the vesting of a share of Restricted Stock pursuant to the terms of
the applicable Award Agreement, the restrictions of Section 10(c) of the Plan
shall lapse. Reasonably promptly after a share of Restricted Stock vests, the
Company shall cause to be delivered to the Participant to whom such shares were
granted, a certificate evidencing such share, free of the legend set forth in
Section 10(e) of the Plan.
(g) Effect of Termination of Employment.
-----------------------------------
(i) Subject to such other provision as the Committee may set forth
in the applicable Award Agreement, and to the Committee's amendment authority
pursuant to Section 4 of the Plan, upon the termination of a Participant's
employment by the Company or any Subsidiary of the Company for any reason other
than Cause, any and all shares to which restrictions on transferability apply
shall be immediately forfeited by the Participant and transferred to the
Company; provided that if the Committee, in its sole and absolute discretion and
within thirty (30) days after such termination of employment notifies the
Participant in writing of its decision not to terminate the Participant's rights
in such shares, then the Participant shall continue to be the owner of such
shares subject to such continuing restrictions as the Committee may prescribe in
such notice. If shares of Restricted Stock are forfeited in accordance with the
provisions of this Section 10, the Company shall also have the right to require
the return
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<PAGE>
of all dividends paid on such shares, whether by termination of any escrow
arrangement under which such dividends are held or otherwise.
(ii) In the event of the termination of a Participant's employment
for Cause, all shares of Restricted Stock granted to such Participant which have
not vested as of the date of such termination shall immediately be forfeited to
the Company, together with any dividends paid on such shares.
(h) Special Provisions Regarding Restricted Stock Awards to Executive
Officers.
-------------------------------------------------------------------
Notwithstanding anything to the contrary contained herein, the lapse of
restrictions on Restricted Stock granted pursuant to this Section 10 to
Executive Officers shall be based on the attainment by the Company (or a
Subsidiary or division of the Company if applicable) of performance goals
pre-established by the Committee, based on one or more of the following criteria
and such other or alternative criteria as may be established from time to time
under Section 162(m) of the Code: (i) the attainment of a specified percentage
return on total stockholder equity of the Company; (ii) the attainment of a
specified percentage increase in earnings per share of Common Stock; (iii) the
attainment of a specified percentage increase in net income of the Company; and
(iv) the attainment of a specified percentage increase in profit before taxation
of the Company (or a Subsidiary or division of the Company if applicable).
Attainment of any such performance criteria shall be determined in accordance
with generally accepted accounting principles as in effect from time to time.
Such shares of Restricted Stock shall be released from restrictions only after
the attainment of such performance measures have been certified by the Committee
in accordance with the requirements of Section 162(m) of the Code.
XI. Phantom Stock.
-------------
(a) Vesting Date.
------------
At the time of the grant of shares of Phantom Stock, the Committee shall
establish a Vesting Date or Vesting Dates with respect to such shares. The
Committee may divide such shares into classes and assign a different Vesting
Date for each class. Provided that all conditions to the vesting of a share of
Phantom Stock imposed pursuant to Section 11(c) of the Plan are satisfied, and
except as provided in Section 11(d) of the Plan, upon the occurrence of the
Vesting Date with respect to a share of Phantom Stock, such share shall vest.
(b) Benefit Upon Vesting.
--------------------
Upon the vesting of a share of Phantom Stock, the Participant shall be
entitled to receive in cash, within thirty (30) days of the Vesting Date of such
share, an amount equal to the sum of (i) the Fair Market Value of a share of
Common Stock on the date on which such share of Phantom Stock vests and (ii) the
aggregate amount of cash dividends paid with respect to a share of Common Stock
during the period commencing
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<PAGE>
on the date on which the share of Phantom Stock was granted and terminating on
the Vesting Date of such share.
(c) Conditions to Vesting.
---------------------
At the time of the grant of shares of Phantom Stock, the Committee may
impose such restrictions or conditions to the vesting of such shares as it, in
its absolute discretion, deems appropriate.
(d) Effect of Termination of Employment.
-----------------------------------
Subject to such other provision as the Committee may set forth in the
applicable Award Agreement, and to the Committee's amendment authority pursuant
to Section 4 of the Plan, shares of Phantom Stock that have not vested, together
with any dividends credited on such shares, shall be forfeited upon the
Participant's termination of employment for any reason.
(e) Special Provisions Regarding Phantom Stock Awards.
-------------------------------------------------
Notwithstanding anything to the contrary contained herein, the vesting of
Phantom Stock granted pursuant to this Section 11 to Executive Officers shall be
based on the attainment by the Company (or a Subsidiary or division of the
Company if applicable) of performance goals pre-established by the Committee,
based on one or more of the following criteria and such other or alternative
criteria as may be established from time to time under Section 162(m) of the
Code: (i) the attainment of a specified percentage return on total stockholder
equity of the Company; (ii) the attainment of a specified percentage increase in
earnings per share of Common Stock from continuing operations; (iii) the
attainment of a specified percentage increase in net income of the Company; and
(iv) the attainment of a specified percentage increase in profit before taxation
of the Company (or a Subsidiary or division of the Company if applicable).
Attainment of any such performance criteria shall be determined in accordance
with generally accepted accounting principles is in effect from time to time. No
cash payment in respect of any Phantom Stock award will be paid to an Executive
Officer until the attainment of the respective performance measures have been
certified by the Committee in accordance with the requirements of Section 162(m)
of the Code.
XII. Stock Bonuses.
-------------
In the event that the Committee grants a Stock Bonus, a certificate for the
shares of Company Stock comprising such Stock Bonus shall be issued in the name
of the Participant to whom such grant was made and delivered to such Participant
as soon as practicable after the date on which such Stock Bonus is payable.
XIII. Rights as a Stockholder.
-----------------------
No Participant shall have any rights as a stockholder with respect to any
shares of Company Stock covered by or relating to any Incentive Award until the
date of issuance
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<PAGE>
of a stock certificate with respect to such shares. Except as otherwise
expressly provided in Section 3(c) of the Plan, no adjustment to any Incentive
Award shall be made for dividends or other rights for which the record date
occurs prior to the date such stock certificate is issued.
XIV. No Special Employment Rights; No Right to Incentive Award.
---------------------------------------------------------
Nothing contained in the Plan or any Award Agreement shall confer upon any
Participant any right with respect to the continuation of employment by the
Company or any Subsidiary of the Company or interfere in any way with the right
of the Company or any Subsidiary of the Company, subject to the terms of any
separate employment agreement to the contrary, at any time to terminate such
employment or to increase or decrease the compensation of the Participant.
No person shall have any claim or right to receive an Incentive Award
hereunder. The Committee's granting of an Incentive Award to a Participant at
any time shall neither require the Committee to grant any other Incentive Award
to such Participant or other person at any time or preclude the Committee from
making subsequent grants to such Participant or any other person.
XV. Securities Matters.
------------------
(a) The Company shall be under no obligation to effect the registration
pursuant to the Securities Act of any interests in the Plan or any shares of
Company Stock to be issued hereunder or to effect similar compliance under any
state laws. Notwithstanding anything herein to the contrary, the Company shall
not be obligated to cause to be issued or delivered any certificates evidencing
shares of Company Stock pursuant to the Plan unless and until the Company is
advised by its counsel that the issuance and delivery of such certificates is in
compliance with all applicable laws, regulations of governmental authorities and
the requirements of any securities exchange on which shares of Company Stock are
traded. The Committee may require, as a condition of the issuance and delivery
of certificates evidencing shares of Company Stock pursuant to the terms of the
Plan, that the recipient of such shares make such covenants, agreements and
representations, and that such certificates bear such legends, as the Committee,
in its sole discretion, deems necessary or desirable.
(b) The transfer of any shares of Company Stock hereunder shall be
effective only at such time as counsel to the Company shall have determined that
the transfer of such shares is in compliance with all applicable laws,
regulations of governmental authorities and the requirements of any securities
exchange on which shares of Common Stock are traded. The Committee may, in its
sole discretion, defer the effectiveness of any transfer of shares of Company
Stock hereunder in order to allow the transfer of such shares to be made
pursuant to registration or an exemption from registration or other methods for
compliance available under federal or state securities laws. The Committee shall
inform the Participant in writing of its decision to defer the effectiveness of
a transfer. During the period of such deferral in connection with the
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<PAGE>
exercise of an Option, the Participant may, by written notice, withdraw such
exercise and obtain the refund of any amount paid with respect thereto.
XVI. Withholding Taxes.
-----------------
Whenever cash is to be paid pursuant to an Incentive Award, the Company
shall have the right to deduct therefrom an amount sufficient to satisfy any
federal, state and local withholding tax requirements related thereto.
Whenever shares of Common Stock are to be delivered pursuant to an
Incentive Award, the Company shall have the right to require the Participant to
remit to the Company in cash an amount sufficient to satisfy any federal, state
and local withholding tax requirements related thereto. With the approval of the
Committee, a Participant may satisfy the foregoing requirement by electing to
have the Company withhold from delivery shares of Company Stock having a Fair
Market Value equal to the amount of tax to be withheld. Such shares shall be
valued at the Fair Market Value on the date on which the amount of tax to be
withheld is determined (the "Tax Date"). Fractional share amounts shall be
settled in cash. Such a withholding election may be made with respect to all or
any portion of the shares to be delivered pursuant to an Incentive Award.
XVII. Notification of Election Under Section 83(b) of the Code.
--------------------------------------------------------
If any Participant shall, in connection with the acquisition of shares of
Company Stock under the Plan, make the election permitted under Section 83(b) of
the Code (i.e., an election to include in gross income in the year of transfer
the amounts specified in Section 83(b)), such Participant shall notify the
Company of such election within ten (10) days of filing notice of the election
with the Internal Revenue Service, in addition to any filing and notification
required pursuant to regulations issued under the authority of Code Section
83(b).
XVIII. Notification Upon Disqualifying Disposition Under Section 421(b) of the
Code.
-----------------------------------------------------------------------
Each Award Agreement with respect to an Incentive Stock Option shall
require the Participant to notify the Company of any disposition of shares of
Common Stock delivered upon the exercise of such Option under the circumstances
described in Section 421(b) of the Code (relating to certain disqualifying
dispositions), within ten (10) days of such disposition.
XIX. Amendment or Termination of the Plan.
------------------------------------
The Board of Directors may, at any time, suspend or terminate the Plan or
revise or amend it in any respect whatsoever; provided, however, that
stockholder approval shall be required if and to the extent the Board of
Directors determines that such approval is appropriate for purposes of
satisfying Section 162(m) or 422 of the Code or to
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<PAGE>
the extent such approval is required by the rules of any stock exchange on which
the Common Stock is listed. Nothing herein shall restrict the Committee's
ability to exercise its discretionary authority pursuant to Section 4 of the
Plan, which discretion may be exercised without amendment to the Plan. No action
hereunder may, without the consent of a Participant, reduce the Participant's
rights under any outstanding Incentive Award.
XX. Transfers Upon Death; Nonassignability.
--------------------------------------
Upon the death of a Participant, outstanding Incentive Awards granted to
such Participant may be exercised only by the executor or administrator of the
Particip0ant's estate or by a person who shall have acquired the right to such
exercise by will or by the laws of descent and distribution. No transfer of an
Incentive Award by will or the laws of descent and distribution shall be
effective to bind the Company unless the Committee shall have been furnished
with (a) written notice thereof and with a copy of the will and/or such evidence
as the Committee may deem necessary to establish the validity of the transfer
and (b) an agreement by the transferee to comply with all the terms and
conditions of the Incentive Award that are or would have been applicable to the
Participant and to be bound by the acknowledgments made by the Participant in
connection with the grant of the Incentive Award.
During a Participant's lifetime, the Committee may permit the transfer,
assignment or other encumbrance of an outstanding Option or outstanding shares
of Restricted Stock unless such Option is an Incentive Stock Option and the
Committee and the Participant intend that it shall retain such status.
Notwithstanding the foregoing, but subject to any conditions as the Committee
may prescribe, a Participant may, upon providing written notice to the Secretary
of the Company, elect to transfer any or all Options granted to such Participant
pursuant to the Plan to members of his or her immediate family, including, but
not limited to, children, grandchildren and spouse or to trusts for the benefit
of such immediate family members or to partnerships in which such family members
or trusts are the only partners; provided, however, that no such transfer by any
Participant may be made in exchange for consideration and each such transferee
agrees to comply with all applicable provisions of the relevant Award Agreement.
XXI. Expenses and Receipts.
---------------------
The expenses of the Plan shall be paid by the Company. Any proceeds
received by the Company in connection with any Incentive Award will be used for
general corporate purposes.
XXII. Failure to Comply.
-----------------
In addition to the remedies of the Company elsewhere provided for herein,
failure by a Participant (or beneficiary or transferee) to comply with any of
the terms and conditions of the Plan or the applicable Award Agreement, unless
such failure is remedied by such Participant (or beneficiary or transferee)
within ten (10) days after notice of such failure by the Committee, shall be
grounds for the cancellation and
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forfeiture of such Incentive Award, in whole or in part, as the Committee, in
its absolute discretion, may determine.
XXIII. Effective Date and Term of Plan.
-------------------------------
The Plan became effective on the Effective Date, but the Plan (and any
grants of Incentive Awards made prior to stockholder approval of the Plan) shall
be subject to the requisite approval of the stockholders of the Company. In the
absence of such approval, such Incentive Awards shall be null and void. Unless
earlier terminated by the Board of Directors, the right to grant Incentive
Awards under the Plan will terminate on the tenth anniversary of the Effective
Date. Incentive Awards outstanding at Plan termination will remain in effect
according to their terms and the provisions of the Plan.
XXIV. Applicable Law.
--------------
Except to the extent preempted by any applicable federal law, the Plan will
be construed and administered in accordance with the laws of the State of
Delaware, without reference to the principles of conflicts of law.
XXV. Participant Rights.
------------------
No Participant shall have any claim to be granted any Incentive Award under
the Plan, and there is no obligation for uniformity of treatment for
Participants. Except as provided specifically herein, a Participant or a
transferee of an Incentive Award shall have no rights as a stockholder with
respect to any shares covered by any award until the date of the delivery of a
Company Stock certificate to him for such shares.
XXVI. Unfunded Status of Awards.
-------------------------
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 pursuant to an Incentive Award, nothing contained in the Plan or any
Award Agreement shall give any such Participant any rights that are greater than
those of a general creditor of the Company.
XXVII. No Fractional Shares.
--------------------
No fractional shares of Company Stock shall be issued or delivered pursuant
to the Plan. The Committee shall determine whether cash, other Incentive 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.
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XXVIII. Beneficiary.
-----------
A Participant may file with the Committee a written designation of a
beneficiary on such form as may be prescribed by the Committee and may, from
time to time, amend or revoke such designation. If no designated beneficiary
survives the Participant, the executor or administrator of the Participant's
estate shall be deemed to be the Participant's beneficiary.
XXIX. Interpretation.
--------------
The Plan is designed and intended to comply with Rule 16b-3 promulgated
under the Exchange Act and, with Section 162(m) of the Code, and all provisions
hereof shall be construed in a manner to so comply.
