Kansas City Southern Industries, Inc.
1991 Amended and Restated Stock Option
and Performance Award Plan
(as amended and restated effective as of May 6, 1999)
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Table of Contents
Article Page
1. Amendment and Restatement, Effective Date, Objectives and Duration.........1
2. Definitions................................................................1
3. Administration.............................................................8
4. Shares Subject to the Plan and Maximum Awards.............................10
5. Eligibility and General Conditions of Awards..............................11
6. Stock Options.............................................................15
7. Stock Appreciation Rights and Limited Stock Appreciation Rights...........17
8. Restricted Shares.........................................................19
9. Performance Units and Performance Shares..................................20
10. Bonus Shares.............................................................21
11. Beneficiary Designation..................................................21
12. Deferrals................................................................21
13. Rights of Employees/Directors/Consultants................................21
14. Change of Control........................................................22
15. Amendment, Modification, and Termination.................................23
16. Withholding..............................................................23
17. Successors...............................................................24
18. Additional Provisions....................................................25
KANSAS CITY SOUTHERN INDUSTRIES, INC.
1991 AMENDED AND RESTATED STOCK OPTION
AND PERFORMANCE AWARD PLAN
(AS AMENDED AND RESTATED EFFECTIVE AS OF MAY 6, 1999)
Article I. Amendment and Restatement, Effective Date, Objectives and Duration
1.1 Amendment and Restatement of the Plan. Kansas City Southern
Industries, Inc., a Delaware corporation (the "Company"), hereby amends,
restates and combines the Kansas City Southern Industries, Inc. 1991 Amended and
Restated Stock Option and Performance Award Plan (as amended through September
18, 1997), the Kansas City Southern Industries, Inc. 1993 Directors' Stock
Option Plan (the "1993 Plan"), the Kansas City Southern Industries, Inc. 1987
Stock Option Plan (as amended September 26, 1996) (the "1987 Plan") and the
Kansas City Southern Industries, Inc. 1983 Stock Option Plan (as amended
September 26, 1996) (the "1983 Plan"), as set forth herein, and as the same may
be amended from time to time (the "Plan"). The Plan, as so amended, restated and
combined, has been adopted by the Board of Directors of the Company (the
"Board") and approved by the stockholders of the Company, and shall be effective
as of July 15, 1998 (the "Effective Date").
1.2 Objectives of the Plan. The Plan is intended to allow employees,
directors and consultants of the Company and its Subsidiaries to acquire or
increase equity ownership in the Company, thereby strengthening their commitment
to the success of the Company and stimulating their efforts on behalf of the
Company, and to assist the Company and its Subsidiaries in attracting new
employees, directors and consultants and retaining existing employees, directors
and consultants. The Plan also is intended to optimize the profitability and
growth of the Company through incentives which are consistent with the Company's
goals; to provide employees, directors and consultants with an incentive for
excellence in individual performance; and to promote teamwork among employees,
directors and consultants.
1.3 Duration of the Plan. The Plan shall remain in effect, subject to
the right of the Board to amend or terminate the Plan at any time pursuant to
Article 15 hereof, until all Shares subject to it shall have been purchased or
acquired according to the Plan's provisions. However, in no event may an
Incentive Stock Option be granted under the Plan on or after the date 10 years
following the earlier of (i) the date the Plan was adopted and (ii) the date the
Plan was approved by the stockholders of the Company.
Article 2. Definitions
Whenever used in the Plan, the following terms shall have the meanings
set forth below:
2.1 "Article" means an Article of the Plan.
2.2 "Award" means Options (including Incentive Stock Options),
Restricted Shares, Bonus Shares, stock appreciation rights (SARs), limited stock
appreciation rights (LSARs), Performance Units or Performance Shares granted
under the Plan.
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2.3 "Award Agreement" means the written agreement by which an Award
shall be evidenced.
2.4 "Board" has the meaning set forth in Section 1.1.
2.5 "Bonus Shares" means Shares that are awarded to a Grantee without
cost and without restrictions in recognition of past performance (whether
determined by reference to another employee benefit plan of the Company or
otherwise) or as an incentive to become an employee, director or consultant of
the Company or a Subsidiary.
2.6 "Cause" means, unless otherwise defined in an Award Agreement,
(i) before the occurrence of a Change of Control, any one or more
of the following, as determined by the Committee:
(A) a Grantee's commission of a crime which, in the
judgment of the Committee, resulted or is likely to result in damage or
injury to the Company or a Subsidiary;
(B) the material violation by the Grantee of written
policies of the Company or a Subsidiary;
(C) the habitual neglect or failure by the Grantee in the
performance of his or her duties to the Company or a Subsidiary (but
only if such neglect or failure is not remedied within a reasonable
remedial period after Grantee's receipt of written notice from the
Company which describes such neglect or failure in reasonable detail and
specifies the remedial period); or
(D) action or inaction by the Grantee in connection with
his or her duties to the Company or a Subsidiary resulting, in the
judgment of the Committee, in material injury to the Company or a
Subsidiary; and
(ii) from and after the occurrence of a Change of Control, the
occurrence of any one or more of the following, as determined in the good faith
and reasonable judgment of the Committee:
(A) Grantee's conviction for committing an act of fraud,
embezzlement, theft, or any other act constituting a felony involving
moral turpitude or causing material damage or injury, financial or
otherwise, to the Company;
(B) a demonstrably willful and deliberate act or failure
to act which is committed in bad faith, without reasonable belief that
such action or inaction is in the best interests of the Company, which
causes material damage or injury, financial or otherwise, to the Company
(but only if such act or inaction is not remedied within 15 business
days of
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Grantee's receipt of written notice from the Company which
describes the act or inaction in reasonable detail); or
(C) the consistent gross neglect of duties or consistent
wanton negligence by the Grantee in the performance of the Grantee's
duties (but only if such neglect or negligence is not remedied within a
reasonable remedial period after Grantee's receipt of written notice
from the Company which describes such neglect or negligence in
reasonable detail and specifies the remedial period).
2.7 "Change of Control" means, unless otherwise defined in an Award
Agreement, any one or more of the following:
(i) the acquisition or holding by any person, entity or "group"
(within the meaning of Section 13(d)(3) or 14(d)(2) of the 1934 Act), other than
by the Company or any Subsidiary or any employee benefit plan of the Company or
a Subsidiary, of beneficial ownership (within the meaning of Rule 13d-3 under
the 1934 Act) of 20% or more of the then-outstanding Common Stock or the
then-outstanding Voting Power of the Company; provided, however, that no Change
of Control shall occur solely by reason of any such acquisition by a corporation
with respect to which, after such acquisition, more than 60% of both the
then-outstanding common shares and the then-outstanding Voting Power of such
corporation are then beneficially owned, directly or indirectly, by the persons
who were the beneficial owners of the then-outstanding Common Stock and Voting
Power of the Company immediately before such acquisition, in substantially the
same proportions as their respective ownership, immediately before such
acquisition, of the then-outstanding Common Stock and Voting Power of the
Company; or
(ii) individuals who, as of the Effective Date, constitute the
Board (the "Incumbent Board") cease for any reason to constitute at least 75% of
the Board; provided that any individual who becomes a director after the
Effective Date whose election or nomination for election by the Company's
stockholders was approved by at least 75% of the Incumbent Board (other than an
election or nomination of an individual whose initial assumption of office is in
connection with an actual or threatened "election contest" relating to the
election of the directors of the Company (as such terms are used in Rule 14a-11
under the 1934 Act) or "tender offer" (as such term is used in Section 14(d) of
the 1934 Act) or a proposed Extraordinary Transaction (as defined below)) shall
be deemed to be a member of the Incumbent Board; or
(iii) approval by the stockholders of the Company of any one or
more of the following:
(A) a merger, reorganization, consolidation or similar
transaction (any of the foregoing, an "Extraordinary Transaction") with respect
to which persons who were the respective beneficial owners of the then-
outstanding Common Stock and Voting Power of the Company immediately before
such Extraordinary Transaction would not, if such Extraordinary
Transaction were to be consummated immediately after such stockholder
approval (but otherwise in accordance with the terms presented in writing to the
stockholders of the Company for their
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approval), beneficially own, directly or indirectly, more than 60% of both the
then-outstanding common shares and the then-outstanding Voting Power of the
corporation resulting from such Extraordinary Transaction, in substantially the
same proportions as their respective ownership, immediately before such
Extraordinary Transaction, of the then-outstanding Common Stock and Voting Power
of the Company,
(B) a liquidation or dissolution of the Company, or
(C) the sale or other disposition of all or substantially
all of the assets of the Company in one transaction or a series of related
transactions.
2.8 "Change of Control Value" means the Fair Market Value of a Share
on the date of a Change of Control.
2.9 "Code" means the Internal Revenue Code of 1986, as amended from time
to time, and regulations and rulings thereunder. References to a particular
section of the Code include references to successor provisions of the Code or
any successor code.
2.10 "Committee," "Plan Committee" and "Management Committee" have the
meaning set forth in Article 3.
2.11 "Common Stock" means the common stock, $.01 par value, of the
Company.
2.12 "Company" has the meaning set forth in Section 1.1.
2.13 "Covered Employee" means a Grantee who, as of the date that the
value of an Award is recognizable as taxable income, is one of the group of
"covered employees," within the meaning of Code Section 162(m).
2.14 "Disability" means, unless otherwise defined in an Award Agreement,
for purposes of the exercise of an Incentive Stock Option after Termination of
Affiliation, a disability within the meaning of Section 22(e)(3) of the Code,
and for all other purposes, means total disability as determined for purposes of
the long term disability plan of KCSI or any Subsidiary or other employer of the
Grantee and disability shall be deemed to occur for purposes of the Plan on the
date such determination of disability is made.
2.15 "Disqualifying Disposition" has the meaning set forth in Section
6.4.
2.16 "Effective Date" has the meaning set forth in Section 1.1.
2.17 "Eligible Person" means (i) any employee (including any officer) of
the Company or any Subsidiary, including any such employee who is on an approved
leave of absence, layoff, or has been subject to a disability which does not
qualify as a Disability, (ii) any director of the Company or any Subsidiary and
(iii) any person performing services for the Company or a
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Subsidiary in the capacity of a consultant.
2.18 "Exchange Act" means the Securities Exchange Act of 1934, as
amended from time to time. References to a particular section of the Exchange
Act include references to successor provisions.
2.19 "Extraordinary Transaction" has the meaning set forth in Section
2.7.
2.20 "Fair Market Value" means (A) with respect to any property other
than Shares, the fair market value of such property determined by such methods
or procedures as shall be established from time to time by the Committee, and
(B) with respect to Shares, unless otherwise determined by the Committee, as of
any date, (i) the average of the high and low trading prices on the date of
determination on the New York Stock Exchange (or, if no sale of Shares was
reported for such date, on the next preceding date on which a sale of Shares was
reported); (ii) if the Shares are not listed on the New York Stock Exchange, the
average of the high and low trading prices of the Shares on such other national
exchange on which the Shares are principally traded or as reported by the
National Market System, or similar organization, or if no such quotations are
available, the average of the high bid and low asked quotations in the
over-the-counter market as reported by the National Quotation Bureau
Incorporated or similar organizations; or (iii) in the event that there shall be
no public market for the Shares, the fair market value of the Shares as
determined by the Committee.
2.21 "Freestanding SAR" means an SAR that is granted independently of
any other Award.
2.22 "Good Reason" means, unless otherwise defined in an Award
Agreement, the occurrence after a Change of Control, without a Grantee's prior
written consent, of any one or more of the following:
(i) the assignment to the Grantee of any duties which result in a
material adverse change in the Grantee's position (including status,
offices, titles, and reporting requirements), authority, duties, or
other responsibilities with the Company, or any other action of the
Company which results in a material adverse change in such position,
authority, duties, or responsibilities, other than an insubstantial and
inadvertent action which is remedied by the Company promptly after
receipt of notice thereof given by the Grantee,
(ii) any relocation of the Grantee of more than 40 miles from
the place where the Grantee was located at the time of the Change of
Control, or
(iii) a material reduction or elimination of any component of the
Grantee's rate of compensation, including (x) base salary, (y) any
incentive payment or (z) benefits or perquisites which the Grantee was
receiving immediately prior to a Change of Control.
2.23 "Grant Date" has the meaning set forth in Section 5.2.
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2.24 "Grantee" means an individual who has been granted an Award.
2.25 "Incentive Stock Option" means an option granted under Article 6 of
the Plan that is intended to meet the requirements of Section 422 of the Code or
any successor provisions thereto.
2.26 "including" or "includes" means "including, without limitation," or
"includes, without limitation," respectively.
2.27 "LSAR" means a limited stock appreciation right.
2.28 "Mature Shares" means Shares for which the holder thereof has good
title, free and clear of all liens and encumbrances, and which such holder
either (i) has held for at least six months or (ii) has purchased on the open
market.
2.29 "Minimum Consideration" means $.01 per Share or such other amount
that is from time to time considered to be capital for purposes of Section 154
of the Delaware General Corporation Law.
2.30 "Option" means an option granted under Article 6 of the Plan.
2.31 "Option Price" means the price at which a Share may be purchased
by a Grantee pursuant to an Option.
2.32 "Option Term" means the period beginning on the Grant Date of an
Option and ending on the expiration date of such Option, as specified in the
Award Agreement for such Option and as may, consistent with the provisions of
the Plan, be extended from time to time by the Committee prior to the expiration
date of such Option then in effect.
2.33 "Outside Director" means a member of the Board who is not an
employee of the Company or any Subsidiary.
2.34 "Performance-Based Exception" means the performance-based exception
from the tax deductibility limitations of Code Section 162(m).
2.35 "Performance Period" has the meaning set forth in Section 9.2.
2.36 "Performance Share" or "Performance Unit" has the meaning set forth
in Article 9.
2.37 "Period of Restriction" means the period during which the transfer
of Restricted Shares is limited in some way (the length of the period being
based on the passage of time, the achievement of performance goals, or upon the
occurrence of other events as determined by the Committee), and the Shares are
subject to a substantial risk of forfeiture, as provided in
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Article 8.
2.38 "Person" shall have the meaning ascribed to such term in Section
3(a)(9) of the Exchange Act and used in Sections 13(d) and 14(d) thereof,
including a "group" as defined in Section 13(d) thereof.
2.39 "Plan" has the meaning set forth in Section 1.1.
2.40 "Required Withholding" has the meaning set forth in Article 16.
2.41 "Restricted Shares" means Shares that are subject to forfeiture if
the Grantee does not satisfy the conditions specified in the Award Agreement
applicable to such Shares.
2.42 "Retirement" means for any Grantee who is an employee, Termination
of Affiliation by the Grantee upon either (i) having both attained age
fifty-five (55) and completed at least ten (10) years of service with the
Company or a Subsidiary or (ii) meeting such other requirements as may be
specified by the Committee.
2.43 "Rule 16b-3" means Rule 16b-3 promulgated by the SEC under the
Exchange Act, as amended from time to time, together with any successor rule, as
in effect from time to time.
2.44 "SAR" means a stock appreciation right.
2.45 "SEC" means the United States Securities and Exchange Commission,
or any successor thereto.
2.46 "Section" means, unless the context otherwise requires, a Section
of the Plan.
2.47 "Section 16 Person" means a person who is subject to potential
liability under Section 16(b) of the 1934 Act with respect to transactions
involving equity securities of the Company.
2.48 "Share" means a share of Common Stock.
2.49 "Strike Price" of any SAR shall equal, for any Tandem SAR (whether
such Tandem SAR is granted at the same time as or after the grant of the related
Option), the Option Price of such Option, or for any other SAR, 100% of the Fair
Market Value of a Share on the Grant Date of such SAR; provided that the
Committee may specify a higher Strike Price in the Award Agreement.
2.50 "Subsidiary" means, for purposes of grants of Incentive Stock
Options, a corporation as defined in Section 424(f) of the Code (with the
Company being treated as the employer corporation for purposes of this
definition) and, for all other purposes, a United States or foreign corporation
with respect to which the Company owns, directly or indirectly, 50% (or such
lesser
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percentage as the Committee may specify, which percentage may be changed from
time to time and may be different for different entities) or more of the Voting
Power of such corporation.
2.51 "Tandem SAR" means an SAR that is granted in connection with a
related Option, the exercise of which shall require cancellation of the right to
purchase a Share under the related Option (and when a Share is purchased under
the related Option, the Tandem SAR shall similarly be canceled).
2.52 "Termination of Affiliation" occurs on the first day on which an
individual is for any reason no longer providing services to the Company or any
Subsidiary in the capacity of an employee, director or consultant, or with
respect to an individual who is an employee or director of, or consultant to, a
corporation which is a Subsidiary, the first day on which such corporation
ceases to be a Subsidiary.
2.53 "10% Owner" means a person who owns capital stock (including stock
treated as owned under Section 424(d) of the Code) possessing more than 10% of
the total combined voting power of all classes of capital stock of the Company
or any Subsidiary.
2.54 "Voting Power" means the combined voting power of the
then-outstanding securities of a corporation entitled to vote generally in the
election of directors.
Article 3. Administration
3.1 Committee.
(a) Subject to Article 15, and to Section 3.2, the Plan shall be
administered by the Board, or a committee appointed by the Board to administer
the Plan ("Plan Committee"). To the extent the Board considers it desirable to
comply with or qualify under Rule 16b-3 or meet the Performance-Based Exception,
the Plan Committee shall consist of two or more directors of the Company, all of
whom qualify as "outside directors" as defined for purposes of the regulations
under Code Section 162(m) and "non-employee directors" within the meaning of
Rule 16b-3. The number of members of the Plan Committee shall from time to time
be increased or decreased, and shall be subject to such conditions, in each case
as the Board deems appropriate to permit transactions in Shares pursuant to the
Plan to satisfy such conditions of Rule 16b-3 and the Performance-Based
Exception as then in effect.
(b) The Board or the Plan Committee may appoint and delegate to
another committee ("Management Committee") any or all of the authority of the
Board or the Plan Committee, as applicable, with respect to Awards to Grantees
other than Grantees who are Section 16 Persons at the time any such delegated
authority is exercised.
(c) Any references herein to "Committee" are references to the
Board, or the Plan Committee or the Management Committee, as applicable.
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3.2 Powers of Committee. Subject to the express provisions of the Plan,
the Committee has full and final authority and sole discretion as follows:
(i) to determine when, to whom and in what types and amounts
Awards should be granted and the terms and conditions applicable to each Award,
including the benefit payable under any SAR, Performance Unit or Performance
Share, and whether or not specific Awards shall be granted in connection with
other specific Awards, and if so whether they shall be exercisable cumulatively
with, or alternatively to, such other specific Awards;
(ii) to determine the amount, if any, that a Grantee shall pay
for Restricted Shares, whether to permit or require the payment of cash
dividends thereon to be deferred and the terms related thereto, when Restricted
Shares (including Restricted Shares acquired upon the exercise of an Option)
shall be forfeited and whether such shares shall be held in escrow;
(iii) to construe and interpret the Plan and to make all
determinations necessary or advisable for the administration of the Plan;
(iv) to make, amend, and rescind rules relating to the Plan,
including rules with respect to the exercisability and nonforfeitability of
Awards upon the Termination of Affiliation of a Grantee;
(v) to determine the terms and conditions of all Award Agreements
(which need not be identical) and, with the consent of the Grantee, to amend any
such Award Agreement at any time, among other things, to permit transfers of
such Awards to the extent permitted by the Plan; provided that the consent of
the Grantee shall not be required for any amendment which (A) does not adversely
affect the rights of the Grantee, or (B) is necessary or advisable (as
determined by the Committee) to carry out the purpose of the Award as a result
of any new or change in existing applicable law;
(vi) to cancel, with the consent of the Grantee, outstanding
Awards and to grant new Awards in substitution therefor;
(vii) to accelerate the exercisability (including exercisability
within a period of less than six months after the Grant Date) of, and to
accelerate or waive any or all of the terms and conditions applicable to, any
Award or any group of Awards for any reason and at any time, including in
connection with a Termination of Affiliation;
(viii) subject to Sections 1.3 and 5.3, to extend the time
during which any Award or group of Awards may be exercised;
(ix) to make such adjustments or modifications to Awards to
Grantees working outside the United States as are advisable to fulfill the
purposes of the Plan or to comply with applicable local law;
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(x) to impose such additional terms and conditions upon the
grant, exercise or retention of Awards as the Committee may, before or
concurrently with the grant thereof, deem appropriate, including limiting the
percentage of Awards which may from time to time be exercised by a Grantee; and
(xi) to take any other action with respect to any matters
relating to the Plan for which it is responsible.
All determinations on all matters relating to the Plan or any Award
Agreement may be made in the sole and absolute discretion of the Committee, and
all such determinations of the Committee shall be final, conclusive and binding
on all Persons. No member of the Committee shall be liable for any action or
determination made with respect to the Plan or any Award.
Article 4. Shares Subject to the Plan and Maximum Awards
4.1 Number of Shares Available for Grants. Subject to adjustment as
provided in Section 4.2, the number of Shares hereby reserved for issuance under
the Plan shall be equal to the sum of (i) 25,200,000 and (ii) the total number
of Shares subject to Awards granted under the 1993 Plan, 1987 Plan and 1983 Plan
that are outstanding as of the Effective Date; and the number of Shares for
which Awards may be granted to any Grantee on any Grant Date, when aggregated
with the number of Shares for which Awards have previously been granted to such
Grantee in the same calendar year, shall not exceed the greater of (i) one
percent (1%) of the total Shares outstanding as of such Grant Date or (ii)
1,300,000; provided, however, that the total number of Shares for which Awards
may be granted to any Grantee in any calendar year shall not exceed 2,000,000.
If any Shares subject to an Award granted hereunder are forfeited or such Award
otherwise terminates without the issuance of such Shares or of other
consideration in lieu of such Shares, the Shares subject to such Award, to the
extent of any such forfeiture or termination shall again be available for grant
under the Plan. If any Shares (whether subject to or received pursuant to an
Award granted hereunder, purchased on the open market, or otherwise obtained)
are withheld, applied as payment, or sold pursuant to procedures approved by the
Committee and the proceeds thereof applied as payment in connection with the
exercise of an Award or the withholding of taxes related thereto, such Shares,
to the extent of any such withholding or payment, shall again be available or
shall increase the number of Shares available, as applicable, for grant under
the Plan. The Committee may from time to time determine the appropriate
methodology for calculating the number of Shares issued pursuant to the Plan.
Shares issued pursuant to the Plan may be treasury Shares or newly-issued
Shares.
4.2 Adjustments in Authorized Shares. In the event that the Committee
determines that any dividend or other distribution (whether in the form of cash,
Shares, other securities, or other property), recapitalization, stock split,
reverse stock split, subdivision, consolidation or reduction of capital,
reorganization, merger, scheme of arrangement, split-up, spin-off or combination
involving the Company or repurchase or exchange of Shares or other rights to
purchase Shares or other securities of the Company, or other similar corporate
transaction or event affects the Shares such that any adjustment is determined
by the Committee to be appropriate in order to
11
prevent dilution or enlargement of the benefits or potential benefits intended
to be made available under the Plan, then the Committee shall, in such manner as
it may deem equitable, adjust any or all of (i) the number and type of Shares
(or other securities or property) with respect to which Awards may be granted,
(ii) the number and type of Shares (or other securities or property) subject to
outstanding Awards, and (iii) the grant or exercise price with respect to any
Award or, if deemed appropriate, make provision for a cash payment to the holder
of an outstanding Award or the substitution of other property for Shares subject
to an outstanding Award; provided, in each case that with respect to Awards of
Incentive Stock Options no such adjustment shall be authorized to the extent
that such adjustment would cause the Plan to violate Section 422(b)(1) of the
Code or any successor provision thereto; and provided further, that the number
of Shares subject to any Award denominated in Shares shall always be a whole
number.
Article 5. Eligibility and General Conditions of Awards
5.1 Eligibility. The Committee may grant Awards to any Eligible Person,
whether or not he or she has previously received an Award.
5.2 Grant Date. The Grant Date of an Award shall be the date on which
the Committee grants the Award or such later date as specified by the Committee.
5.3 Maximum Term. The Option Term or other period during which an Award
may be outstanding shall under no circumstances extend more than 10 years after
the Grant Date, and shall be subject to earlier termination as herein provided;
provided, however, that any deferral of a cash payment or of the delivery of
Shares that is permitted or required by the Committee pursuant to Article 12
may, if so permitted or required by the Committee, extend more than 10 years
after the Grant Date of the Award to which the deferral relates.
5.4 Award Agreement. To the extent not set forth in the Plan, the terms
and conditions of each Award (which need not be the same for each grant or for
each Grantee) shall be set forth in an Award Agreement.
5.5 Restrictions on Share Transferability. The Committee may impose such
restrictions on any Shares acquired pursuant to the exercise or vesting of an
Award as it may deem advisable, including restrictions under applicable federal
securities laws.
5.6 Termination of Affiliation. Except as otherwise provided in an Award
Agreement, and subject to the provisions of Section 14.1, the extent to which
the Grantee shall have the right to exercise, vest in, or receive payment in
respect of an Award following Termination of Affiliation shall be determined in
accordance with the following provisions of this Section 5.6.
(a) For Cause. If a Grantee has a Termination of Affiliation for
Cause, (i) the Grantee's Restricted Shares that are forfeitable shall thereupon
be forfeited, subject to the provisions of Section 8.4 regarding repayment of
certain amounts to the Grantee; and (ii) any unexercised Option, LSAR or SAR,
and any Performance Share or Performance Unit with
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respect to which the Performance Period has not ended as of the date of such
Termination of Affiliation, shall terminate effective immediately upon such
Termination of Affiliation.
(b) On Account of Death or Disability. If a Grantee has a
Termination of Affiliation on account of death or Disability, then:
(i) the Grantee's Restricted Shares that were forfeitable
shall thereupon become nonforfeitable;
(ii) any unexercised Option or SAR, whether or not
exercisable on the date of such Termination of Affiliation, may be exercised, in
whole or in part, within the first 12 months after such Termination of
Affiliation (but only during the Option Term) by the Grantee or, after his or
her death, by (A) his or her personal representative or the person to whom the
Option or SAR, as applicable, is transferred by will or the applicable laws of
descent and distribution, or (B) the Grantee's beneficiary designated in
accordance with Article 11; and
(iii) the benefit payable with respect to any Performance
Share or Performance Unit with respect to which the
Performance Period has not ended as of the date of such Termination of
Affiliation on account of death or Disability shall be equal to the product of
the Fair Market Value of a Share as of the date of such Termination of
Affiliation or the value of the Performance Unit specified in the Award
Agreement (determined as of the date of such Termination of Affiliation), as
applicable, multiplied successively by each of the following:
(1) a fraction, the numerator of which is the
number of months (including as a whole month any partial month) that have
elapsed since the beginning of such Performance Period until the date of such
Termination of Affiliation and the denominator of which is the number of months
(including as a whole month any partial month) in the Performance Period; and
(2) a percentage determined by the Committee that
would be earned under the terms of the applicable Award Agreement assuming that
the rate at which the performance goals have been achieved as of the date of
such Termination of Affiliation would continue until the end of the Performance
Period, or, if the Committee elects to compute the benefit after the end of the
Performance Period, the Performance Percentage, as determined by the Committee,
attained during the Performance Period.
(c) On Account of Retirement. If a Grantee has a Termination of
Affiliation on account of Retirement, then:
(i) the Grantee's Restricted Shares that were forfeitable
shall thereupon become nonforfeitable;
(ii) any unexercised Option or SAR, whether or not
exercisable on the date of such Termination of Affiliation, may be exercised, in
whole or in part, within the first five years
13
after such Termination of Affiliation (but only during the Option Term) by the
Grantee or, after his or her death, by (A) his or her personal representative or
the person to whom the Option or SAR, as applicable, is transferred by will or
the applicable laws of descent and distribution, or (B) the Grantee's
beneficiary designated in accordance with Article 11; and
(iii) the benefit payable with respect to any Performance
Share or Performance Unit with respect to which the Performance Period has not
ended as of the date of such Termination of Affiliation on account of Retirement
shall be equal to the product of the Fair Market Value of a Share as of the date
of such Termination of Affiliation or the value of the Performance Unit
specified in the Award Agreement (determined as of the date of such Termination
of Affiliation), as applicable, multiplied successively by each of the
following:
(1) a fraction, the numerator of which is the
number of months (including as a whole month any partial month) that have
elapsed since the beginning of such Performance Period until the date of such
Termination of Affiliation and the denominator of which is the number of months
(including as a whole month any partial month) in the Performance Period; and
(2) a percentage determined by the Committee that
would be earned under the terms of the applicable Award Agreement assuming that
the rate at which the performance goals have been achieved as of the date of
such Termination of Affiliation would continue until the end of the Performance
Period, or, if the Committee elects to compute the benefit after the end of the
Performance Period, the Performance Percentage, as determined by the Committee,
attained during the Performance Period.
(d) Any Other Reason. If a Grantee has a Termination of
Affiliation for any reason other than for Cause, death, Disability or
Retirement, then:
(i) the Grantee's Restricted Shares, to the extent
forfeitable on the date of the Grantee's Termination of Affiliation, shall be
forfeited on such date;
(ii) any unexercised Option or SAR, to the extent
exercisable immediately before the Grantee's Termination of Affiliation, may be
exercised in whole or in part, not later than three months after such
Termination of Affiliation (but only during the Option Term) by the Grantee or,
after his or her death, by (A) his or her personal representative or the person
to whom the Option or SAR, as applicable, is transferred by will or the
applicable laws of descent and distribution, or (B) the Grantee's beneficiary
designated in accordance with Article 11; and
(iii) any Performance Shares or Performance Units with
respect to which the Performance Period has not ended as
of the date of such Termination of Affiliation shall terminate immediately upon
such Termination of Affiliation.
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5.7 Nontransferability of Awards.
(a) Except as provided in Section 5.7(c) below, each Award, and
each right under any Award, shall be exercisable only by the Grantee during the
Grantee's lifetime, or, if permissible under applicable law, by the Grantee's
guardian or legal representative or by a transferee receiving such Award
pursuant to a qualified domestic relations order (a "QDRO") as defined in the
Code or Title I of the Employee Retirement Income Security Act of 1974, as
amended ("ERISA"), or the rules thereunder.
(b) Except as provided in Section 5.7(c) below, no Award (prior
to the time, if applicable, Shares are issued in respect of such Award), and no
right under any Award, may be assigned, alienated, pledged, attached, sold or
otherwise transferred or encumbered by a Grantee otherwise than by will or by
the laws of descent and distribution (or in the case of Restricted Shares, to
the Company) or pursuant to a QDRO, and any such purported assignment,
alienation, pledge, attachment, sale, transfer or encumbrance shall be void and
unenforceable against the Company or any Subsidiary; provided, that the
designation of a beneficiary shall not constitute an assignment, alienation,
pledge, attachment, sale, transfer or encumbrance.
(c) To the extent and in the manner permitted by the Committee,
and subject to such terms, conditions, restrictions or limitations that may be
prescribed by the Committee, a Grantee may transfer an Award (other than an
Incentive Stock Option) to (i) a spouse, sibling, parent, child (including an
adopted child) or grandchild (any of which, an "Immediate Family Member") of the
Grantee; (ii) a trust, the primary beneficiaries of which consist exclusively of
the Grantee or Immediate Family Members of the Grantee; or (iii) a corporation,
partnership or similar entity, the owners of which consist exclusively of the
Grantee or Immediate Family Members of the Grantee.
5.8 Cancellation and Rescission of Awards. Unless the Award Agreement
specifies otherwise, the Committee may cancel, rescind, suspend, withhold, or
otherwise limit or restrict any unexercised Award at any time if the Grantee is
not in compliance with all applicable provisions of the Award Agreement and the
Plan or if the Grantee has a Termination of Affiliation for Cause.
5.9 Loans and Guarantees. The Committee may, subject to applicable law,
(i) allow a Grantee to defer payment to the Company of all or any portion of the
Option Price of an Option or the purchase price of Restricted Shares, or (ii)
cause the Company to loan to the Grantee, or guarantee a loan from a third party
to the Grantee for, all or any portion of the Option Price of an Option or the
purchase price of Restricted Shares or all or any portion of any taxes
associated with the exercise of, nonforfeitability of, or payment of benefits in
connection with, an Award. Any such payment deferral, loan or guarantee by the
Company shall be on such terms and conditions as the Committee may determine.
15
Article 6. Stock Options
6.1 Grant of Options. Subject to the terms and provisions of the Plan,
Options may be granted to any Eligible Person in such number, and upon such
terms, and at any time and from time to time as shall be determined by the
Committee. Without in any manner limiting the generality of the foregoing, the
Committee may grant to any Eligible Person, or permit any Eligible Person to
elect to receive, an Option in lieu of or in substitution for any other
compensation (whether payable currently or on a deferred basis, and whether
payable under this Plan or otherwise) which such Eligible Person may be eligible
to receive from the Company or a Subsidiary.
6.2 Award Agreement. Each Option grant shall be evidenced by an Award
Agreement that shall specify the Option Price, the Option Term, the number of
shares to which the Option pertains, the time or times at which such Option
shall be exercisable and such other provisions as the Committee shall determine.
6.3 Option Price. The Option Price of an Option under this Plan shall be
determined by the Committee, and shall be equal to or more than 100% of the Fair
Market Value of a Share on the Grant Date; provided, however, that any Option
that is (x) granted to a Grantee in connection with the acquisition
("Acquisition"), however effected, by the Company of another corporation or
entity ("Acquired Entity") or the assets thereof, (y) associated with an option
to purchase shares of stock of the Acquired Entity or an affiliate thereof
("Acquired Entity Option") held by such Grantee immediately prior to such
Acquisition, and (z) intended to preserve for the Grantee the economic value of
all or a portion of such Acquired Entity Option ("Substitute Option") may, to
the extent necessary to achieve such preservation of economic value, be granted
with an Option Price that is less than 100% of the Fair Market Value of a Share
on the Grant Date.
6.4 Grant of Incentive Stock Options. At the time of the grant of any
Option, the Committee may designate that such Option shall be made subject to
additional restrictions to permit it to qualify as an "incentive stock option"
under the requirements of Section 422 of the Code. Any Option designated as an
Incentive Stock Option shall, to the extent required by Section 422 of the Code:
(i) if granted to a 10% Owner, have an Option Price not less
than 110% of the Fair Market Value of a Share on its Grant Date;
(ii) be exercisable for a period of not more than 10 years (five
years in the case of an Incentive Stock Option granted to a 10% Owner) from its
Grant Date, and be subject to earlier termination as provided herein or in the
applicable Award Agreement;
(iii) not have an aggregate Fair Market Value (as of the Grant
Date of each Incentive Stock Option) of the Shares with respect to which
Incentive Stock Options (whether granted under the Plan or any other stock
option plan of the Grantee's employer or any parent or Subsidiary thereof
("Other Plans")) are exercisable for the first time by such Grantee during any
16
calendar year, determined in accordance with the provisions of Section 422 of
the Code, which exceeds $100,000 (the "$100,000 Limit");
(iv) if the aggregate Fair Market Value of the Shares (determined
on the Grant Date) with respect to the portion of such grant which is
exercisable for the first time during any calendar year ("Current Grant") and
all Incentive Stock Options previously granted under the Plan and any Other
Plans which are exercisable for the first time during the same calendar year
("Prior Grants") would exceed the $100,000 Limit be exercisable as follows:
(A) the portion of the Current Grant which would, when
added to any Prior Grants, be exercisable with respect to Shares which
would have an aggregate Fair Market Value (determined as of the
respective Grant Date for such options) in excess of the $100,000 Limit
shall, notwithstanding the terms of the Current Grant, be exercisable
for the first time by the Grantee in the first subsequent calendar year
or years in which it could be exercisable for the first time by the
Grantee when added to all Prior Grants without exceeding the $100,000
Limit; and
(B) if, viewed as of the date of the Current Grant, any
portion of a Current Grant could not be exercised under the preceding
provisions of this Section during any calendar year commencing with the
calendar year in which it is first exercisable through and including the
last calendar year in which it may by its terms be exercised, such
portion of the Current Grant shall not be an Incentive Stock Option, but
shall be exercisable as an Option which is not an Incentive Stock Option
at such date or dates as are provided in the Current Grant;
(v) be granted within 10 years from the earlier of the date
the Plan is adopted or the date the Plan is approved by the stockholders of the
Company; and
(vi) by its terms not be assignable or transferable other than by
will or the laws of descent and distribution and may be exercised, during the
Grantee's lifetime, only by the Grantee; provided, however, that the Grantee
may, in any manner permitted by the Plan and specified by the Committee,
designate in writing a beneficiary to exercise his or her Incentive Stock Option
after the Grantee's death.
Any Option designated as an Incentive Stock Option shall also require
the Grantee to notify the Committee of any disposition of any Shares issued
pursuant to the exercise of the Incentive Stock Option under the circumstances
described in Section 421(b) of the Code (relating to certain disqualifying
dispositions) (any such circumstance, a "Disqualifying Disposition"), within 10
days of such Disqualifying Disposition.
Notwithstanding the foregoing and Section 3.2(v), the Committee may,
without the consent of the Grantee, at any time before the exercise of an Option
(whether or not an Incentive Stock Option), take any action necessary to prevent
such Option from being treated as an Incentive Stock Option.
17
6.5 Payment. Options granted under this Article 6 shall be exercised by
the delivery of a written notice of exercise to the Company, setting forth the
number of Shares with respect to which the Option is to be exercised,
accompanied by full payment for the Shares made by any one or more of the
following means subject to the approval of the Committee:
(a) cash, personal check or wire transfer;
(b) Mature Shares, valued at their Fair Market Value on the date
of exercise;
(c) Restricted Shares held by the Grantee for at least six months
prior to the exercise of the Option, each such Share valued at the Fair Market
Value of a Share on the date of exercise;
(d) subject to applicable law, pursuant to procedures approved by
the Committee, through the sale of the Shares acquired on exercise of the Option
through a broker-dealer to whom the Grantee has submitted an irrevocable notice
of exercise and irrevocable instructions to deliver promptly to the Company the
amount of sale or loan proceeds sufficient to pay for such Shares, together
with, if requested by the Company, the amount of federal, state, local or
foreign withholding taxes payable by Grantee by reason of such exercise; or
(e) when permitted by the Committee, payment may also be made in
accordance with Section 5.9.
If any Restricted Shares ("Tendered Restricted Shares") are used to pay the
Option Price, a number of Shares acquired on exercise of the Option equal to the
number of Tendered Restricted Shares shall be subject to the same restrictions
as the Tendered Restricted Shares, determined as of the date of exercise of the
Option.
Article 7. Stock Appreciation Rights and Limited Stock Appreciation Rights
7.1 Grant of SARs. Subject to the terms and conditions of the Plan, SARs
may be granted to any Eligible Person at any time and from time to time as shall
be determined by the Committee. The Committee may grant Freestanding SARs,
Tandem SARs, or any combination thereof.
The Committee shall determine the number of SARs granted to each Grantee
(subject to Article 4), the Strike Price thereof, and, consistent with Section
7.2 and the other provisions of the Plan, the other terms and conditions
pertaining to such SARs.
7.2 Exercise of Tandem SARs. Tandem SARs may be exercised for all or
part of the Shares subject to the related Award upon the surrender of the right
to exercise the equivalent portion of the related Award. A Tandem SAR may be
exercised only with respect to the Shares for which its related Award is then
exercisable.
18
Notwithstanding any other provision of this Plan to the contrary, with
respect to a Tandem SAR, (i) the Tandem SAR will expire no later than the
expiration of the underlying Option; (ii) the value of the payout with respect
to the Tandem SAR may be for no more than 100% of the difference between the
Option Price of the underlying Option and the Fair Market Value of the Shares
subject to the underlying Option at the time the Tandem SAR is exercised; and
(iii) the Tandem SAR may be exercised only when the Fair Market Value of the
Shares subject to the Option exceeds the Option Price of the Option.
7.3 Payment of SAR Amount. Upon exercise of an SAR, the Grantee shall be
entitled to receive payment from the Company in an amount determined by
multiplying:
(a) the excess of the Fair Market Value of a Share on the date of
exercise over the Strike Price;
by
(b) the number of Shares with respect to which the SAR is
exercised;
provided that the Committee may provide in the Award Agreement that the benefit
payable on exercise of an SAR shall not exceed such percentage of the Fair
Market Value of a Share on the Grant Date as the Committee shall specify. As
determined by the Committee, the payment upon SAR exercise may be in cash, in
Shares which have an aggregate Fair Market Value (as of the date of exercise of
the SAR) equal to the amount of the payment, or in some combination thereof, as
set forth in the Award Agreement.
7.4 Grant of LSARs. Subject to the terms and conditions of the Plan,
LSARs may be granted to any Eligible Person at any time and from time to time as
shall be determined by the Committee. Each LSAR shall be identified with a Share
subject to an Option or SAR held by the Grantee, which may include an Option or
SAR previously granted under the Plan. Upon the exercise, expiration,
termination, forfeiture or cancellation of the Option or SAR with which an LSAR
is identified, such LSAR shall terminate.
7.5 Exercise of LSARs. Each LSAR shall automatically be exercised upon a
Change of Control which has not been approved by the Incumbent Board. The
exercise of an LSAR shall result in the cancellation of the Option or SAR with
which such LSAR is identified, to the extent of such exercise.
7.6 Payment of LSAR Amount. Within 10 business days after the exercise
of an LSAR, the Company shall pay to the Grantee, in cash, an amount equal to
the difference between:
(a) the greatest of (i) the Change of Control Value, (ii) the
Fair Market Value of a Share on the date occurring during
the 180-day period immediately preceding the date of the
Change of Control on which such Fair Market Value is the
19
greatest, or (iii) such other valuation amount, if any, as
may be determined pursuant to the provisions of the
applicable Award Agreement;
minus
(b) either (i) in the case of an LSAR identified with an
Option, the Option Price of such Option or (ii) in the
case of an LSAR identified with an SAR, the Strike Price
of such SAR.
Article 8. Restricted Shares
8.1 Grant of Restricted Shares. Subject to the terms and provisions of
the Plan, the Committee, at any time and from time to time, may grant Restricted
Shares to any Eligible Person in such amounts as the Committee shall determine.
8.2 Award Agreement. Each grant of Restricted Shares shall be evidenced
by an Award Agreement that shall specify the Period(s) of Restriction, the
number of Restricted Shares granted, and such other provisions as the Committee
shall determine. The Committee may impose such conditions and/or restrictions on
any Restricted Shares granted pursuant to the Plan as it may deem advisable,
including restrictions based upon the achievement of specific performance goals
(Company-wide, divisional, Subsidiary and/or individual), time-based
restrictions on vesting, and/or restrictions under applicable securities laws.
8.3 Consideration. The Committee shall determine the amount, if any,
that a Grantee shall pay for Restricted Shares, which shall be (except with
respect to Restricted Shares that are treasury shares) at least the Minimum
Consideration for each Restricted Share. Such payment shall be made in full by
the Grantee before the delivery of the shares and in any event no later than 10
business days after the Grant Date for such shares.
8.4 Effect of Forfeiture. If Restricted Shares are forfeited, and if the
Grantee was required to pay for such shares or acquired such Restricted Shares
upon the exercise of an Option, the Grantee shall be deemed to have resold such
Restricted Shares to the Company at a price equal to the lesser of (x) the
amount paid by the Grantee for such Restricted Shares, or (y) the Fair Market
Value of a Share on the date of such forfeiture. The Company shall pay to the
Grantee the required amount as soon as is administratively practical. Such
Restricted Shares shall cease to be outstanding, and shall no longer confer on
the Grantee thereof any rights as a stockholder of the Company, from and after
the date of the event causing the forfeiture, whether or not the Grantee accepts
the Company's tender of payment for such Restricted Shares.
8.5 Escrow; Legends. The Committee may provide that the certificates for
any Restricted Shares (x) shall be held (together with a stock power executed in
blank by the Grantee) in escrow by the Secretary of the Company until such
Restricted Shares become nonforfeitable or are forfeited and/or (y) shall bear
an appropriate legend restricting the transfer of such Restricted Shares. If any
Restricted Shares become nonforfeitable, the Company shall
20
cause certificates for such shares to be issued without such legend.
Article 9. Performance Units and Performance Shares
9.1 Grant of Performance Units and Performance Shares. Subject to the
terms of the Plan, Performance Units or Performance Shares may be granted to any
Eligible Person in such amounts and upon such terms, and at any time and from
time to time, as shall be determined by the Committee.
9.2 Value/Performance Goals. Each Performance Unit shall have an initial
value that is established by the Committee at the time of grant. Each
Performance Share shall have an initial value equal to the Fair Market Value of
a Share on the date of grant. The Committee shall set performance goals which,
depending on the extent to which they are met, will determine the number or
value of Performance Units or Performance Shares that will be paid out to the
Grantee. For purposes of this Article 9, the time period during which the
performance goals must be met shall be called a "Performance Period."
9.3 Earning of Performance Units and Performance Shares. Subject to the
terms of this Plan, after the applicable Performance Period has ended, the
holder of Performance Units or Performance Shares shall be entitled to receive a
payout based on the number and value of Performance Units or Performance Shares
earned by the Grantee over the Performance Period, to be determined as a
function of the extent to which the corresponding performance goals have been
achieved.
If a Grantee is promoted, demoted or transferred to a different business
unit of the Company during a Performance Period, then, to the extent the
Committee determines the performance goals or Performance Period are no longer
appropriate, the Committee may adjust, change or eliminate the performance goals
or the applicable Performance Period as it deems appropriate in order to make
them appropriate and comparable to the initial performance goals or Performance
Period.
9.4 Form and Timing of Payment of Performance Units and Performance
Shares. Payment of earned Performance Units or Performance Shares shall be made
in a lump sum following the close of the applicable Performance Period. The
Committee may pay earned Performance Units or Performance Shares in the form of
cash or in Shares (or in a combination thereof) which have an aggregate Fair
Market Value equal to the value of the earned Performance Units or Performance
Shares at the close of the applicable Performance Period. Such Shares may be
granted subject to any restrictions deemed appropriate by the Committee. The
form of payout of such Awards shall be set forth in the Award Agreement
pertaining to the grant of the Award.
As determined by the Committee, a Grantee may be entitled to receive any
dividends declared with respect to Shares which have been earned in connection
with grants of Performance Units or Performance Shares but not yet distributed
to the Grantee. In addition, a
21
Grantee may, as determined by the Committee, be entitled to exercise his or her
voting rights with respect to such Shares.
Article 10. Bonus Shares
Subject to the terms of the Plan, the Committee may grant Bonus Shares
to any Eligible Person, in such amount and upon such terms and at any time and
from time to time as shall be determined by the Committee. The terms of such
Bonus Shares shall be set forth in the Award Agreement pertaining to the grant
of the Award.
Article 11. Beneficiary Designation
Each Grantee under the Plan may, from time to time, name any beneficiary
or beneficiaries (who may be named contingently or successively) to whom any
benefit under the Plan is to be paid in case of his or her death before he or
she receives any or all of such benefit. Each such designation shall revoke all
prior designations by the same Grantee, shall be in a form prescribed by the
Company, and will be effective only when filed by the Grantee in writing with
the Company during the Grantee's lifetime. In the absence of any such
designation, benefits remaining unpaid at the Grantee's death shall be paid to
the Grantee's estate.
Article 12. Deferrals
The Committee may permit or require a Grantee to defer receipt of the
payment of cash or the delivery of Shares that would otherwise be due by virtue
of the exercise of an Option or SAR, the lapse or waiver of restrictions with
respect to Restricted Shares, the satisfaction of any requirements or goals with
respect to Performance Units or Performance Shares, or the grant of Bonus
Shares. If any such deferral is required or permitted, the Committee shall
establish rules and procedures for such deferrals. Except as otherwise provided
in an Award Agreement, any payment or any Shares that are subject to such
deferral shall be made or delivered to the Grantee upon the Grantee's
Termination of Affiliation.
Article 13. Rights of Employees/Directors/Consultants
13.1 Employment. Nothing in the Plan shall interfere with or limit in
any way the right of the Company to terminate any Grantee's employment,
directorship or consultancy at any time, nor confer upon any Grantee the right
to continue in the employ or as a director or consultant of the Company.
13.2 Participation. No employee, director or consultant shall have the
right to be selected to receive an Award under the Plan, or, having been so
selected, to be selected to receive a future Award.
22
Article 14. Change of Control
14.1 Change of Control. Except as otherwise provided in an Award
Agreement, if a Change of Control occurs, then:
(i) the Grantee's Restricted Shares that were forfeitable shall
thereupon become nonforfeitable;
(ii) any unexercised Option or SAR, whether or not exercisable on
the date of such Change of Control, shall thereupon be fully exercisable and may
be exercised, in whole or in part; and
(iii) the Company shall immediately pay to the Grantee, with
respect to any Performance Share or Performance Unit with respect to which the
Performance Period has not ended as of the date of such Change of Control, a
cash payment equal to the product of (A) in the case of a Performance Share, the
Change of Control Value or (B) in the case of a Performance Unit, the value of
the Performance Unit specified in the Award Agreement, as applicable, multiplied
successively by each of the following:
(1) a fraction, the numerator of which is the number of
whole and partial months that have elapsed between the beginning of such
Performance Period and the date of such Change of Control and the denominator of
which is the number of whole and partial months in the Performance Period; and
(2) a percentage equal to a greater of (x) the target
percentage, if any, specified in the applicable Award Agreement or (y) the
maximum percentage, if any, that would be earned under the terms of the
applicable Award Agreement assuming that the rate at which the performance goals
have been achieved as of the date of such Change of Control would continue until
the end of the Performance Period.
14.2 Pooling of Interests Accounting. If the Committee determines, prior
to a sale or merger of the Company that the Committee determines is reasonably
likely to occur, that the grant or exercise of Options, SARs or LSARs would
preclude the use of pooling of interests accounting ("pooling") after the
consummation of such sale or merger and that such preclusion of pooling would
have a material adverse effect on such sale or merger, the Committee may (a)
make any adjustments in such Options, SARs or LSARs prior to the sale or merger
that will permit pooling after the consummation of such sale or merger or (b)
cause the Company to pay the benefits attributable to such Options, SARs or
LSARs (including for this purpose not only the spread between the then Fair
Market Value of the Shares subject to such Options, SARs or LSARs and the Option
Price or Strike Price applicable thereto, but also the additional value of such
Options, SARs, or LSARs in excess of such spread, as determined by the
Committee) in the form of Shares if such payment would not cause the transaction
to remain or become ineligible for pooling; provided, however, no such
adjustment or payment may be made that would adversely affect in any material
way any such Options, SARs or LSARs without the consent of
23
the affected Grantee.
Article 15. Amendment, Modification, and Termination
15.1 Amendment, Modification, and Termination. Subject to the terms of
the Plan, the Board may at any time and from time to time, alter, amend, suspend
or terminate the Plan in whole or in part without the approval of the Company's
stockholders. The Board may delegate to the Plan Committee any or all of the
authority of the Board under Section 15.1 to alter, amend suspend or terminate
the Plan.
15.2 Adjustment of Awards Upon the Occurrence of Certain Unusual or
Nonrecurring Events. The Committee may make adjustments in the terms and
conditions of, and the criteria included in, Awards in recognition of unusual or
nonrecurring events (including the events described in Section 4.2) affecting
the Company or the financial statements of the Company or of changes in
applicable laws, regulations, or accounting principles, whenever the Committee
determines that such adjustments are appropriate in order to prevent dilution or
enlargement of the benefits or potential benefits intended to be made available
under the Plan; provided that no such adjustment shall be authorized to the
extent that such authority would be inconsistent with the Plan's meeting the
requirements of the Performance-Based Exception.
15.3 Awards Previously Granted. Notwithstanding any other provision of
the Plan to the contrary, no termination, amendment, or modification of the Plan
shall adversely affect in any material way any Award previously granted under
the Plan, without the written consent of the Grantee of such Award.
Article 16. Withholding
16.1 Withholding
(a) Mandatory Tax Withholding.
(1) Whenever under the Plan, Shares are to be delivered
upon exercise or payment of an Award or upon Restricted Shares
becoming nonforfeitable, or any other event with respect to
rights and benefits hereunder, the Company shall be entitled to
require (i) that the Grantee remit an amount in cash, or if
determined by the Committee, Mature Shares, sufficient to satisfy
all federal, state, local and foreign tax withholding
requirements related thereto ("Required Withholding"), (ii) the
withholding of such Required Withholding from compensation
otherwise due to the Grantee or from any Shares or other payment
due to the Grantee under the Plan or (iii) any combination of the
foregoing.
24
(2) Any Grantee who makes a Disqualifying Disposition or
an election under Section 83(b) of the Code shall remit to the
Company an amount sufficient to satisfy all resulting Required
Withholding; provided that, in lieu of or in addition to the
foregoing, the Company shall have the right to withhold such
Required Withholding from compensation otherwise due to the
Grantee or from any Shares or other payment due to the Grantee
under the Plan.
(b) Elective Share Withholding.
(1) Subject to subsection 16.1(b)(2), a Grantee may elect
the withholding ("Share Withholding") by the Company of a portion
of the Shares subject to an Award upon the exercise of such Award
or upon Restricted Shares becoming non-forfeitable or upon making
an election under Section 83(b) of the Code (each, a "Taxable
Event") having a Fair Market Value equal to (i) the minimum
amount necessary to satisfy Required Withholding liability
attributable to the Taxable Event; or (ii) with the Committee's
prior approval, a greater amount, not to exceed the estimated
total amount of such Grantee's tax liability with respect to the
Taxable Event.
(2) Each Share Withholding election shall be subject to
the following conditions:
(A) any Grantee's election shall be subject to the
Committee's discretion to revoke the Grantee's right to elect Share Withholding
at any time before the Grantee's election if the Committee has reserved the
right to do so in the Award Agreement;
(B) the Grantee's election must be made before the
date (the "Tax Date") on which the amount of tax to be withheld is determined;
and
(C) the Grantee's election shall be irrevocable.
16.2 Notification Under Code Section 83(b). If the Grantee, in
connection with the exercise of any Option, or the grant of Restricted Shares,
makes the election permitted under Section 83(b) of the Code to include in such
Grantee's gross income in the year of transfer the amounts specified in Section
83(b) of the Code, then such Grantee shall notify the Company of such election
within 10 days of filing the notice of the election with the Internal Revenue
Service, in addition to any filing and notification required pursuant to
regulations issued under Section 83(b) of the Code. The Committee may, in
connection with the grant of an Award or at any time thereafter prior to such an
election being made, prohibit a Grantee from making the election described
above.
Article 17. Successors
All obligations of the Company under the Plan with respect to Awards
granted hereunder
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shall be binding on any successor to the Company, whether the existence of such
successor is the result of a direct or indirect purchase, merger, consolidation,
or otherwise of all or substantially all of the business and/or assets of the
Company.
Article 18. Additional Provisions
18.1 Gender and Number. Except where otherwise indicated by the context,
any masculine term used herein also shall include the feminine, the plural shall
include the singular and the singular shall include the plural.
18.2 Severability. If any part of the Plan is declared by any court or
governmental authority to be unlawful or invalid, such unlawfulness or
invalidity shall not invalidate any other part of the Plan. Any Section or part
of a Section so declared to be unlawful or invalid shall, if possible, be
construed in a manner which will give effect to the terms of such Section or
part of a Section to the fullest extent possible while remaining lawful and
valid.
18.3 Requirements of Law. The granting of Awards and the issuance of
Shares under the Plan shall be subject to all applicable laws, rules, and
regulations, and to such approvals by any governmental agencies or stock
exchanges as may be required. Notwithstanding any provision of the Plan or any
Award, Grantees shall not be entitled to exercise, or receive benefits under,
any Award, and the Company shall not be obligated to deliver any Shares or other
benefits to a Grantee, if such exercise or delivery would constitute a violation
by the Grantee or the Company of any applicable law or regulation.
18.4 Securities Law Compliance.
(a) If the Committee deems it necessary to comply with any
applicable securities law, or the requirements of any stock exchange upon which
Shares may be listed, the Committee may impose any restriction on Shares
acquired pursuant to Awards under the Plan as it may deem advisable. All
certificates for Shares delivered under the Plan pursuant to any Award or the
exercise thereof shall be subject to such stop transfer orders and other
restrictions as the Committee may deem advisable under the rules, regulations
and other requirements of the SEC, any stock exchange upon which Shares are then
listed, any applicable securities law, and the Committee may cause a legend or
legends to be put on any such certificates to make appropriate reference to such
restrictions. If so requested by the Company, the Grantee shall make a written
representation to the Company that he or she will not sell or offer to sell any
Shares unless a registration statement shall be in effect with respect to such
Shares under the Securities Act of 1993, as amended, and any applicable state
securities law or unless he or she shall have furnished to the Company evidence
satisfactory to the Company that such registration is not required.
(b) If the Committee determines that the exercise or
nonforfeitability of, or delivery of benefits pursuant to, any Award would
violate any applicable provision of securities laws or the listing requirements
of any stock exchange upon which any of the Company's equity
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securities are listed, then the Committee may postpone any such exercise,
nonforfeitability or delivery, as applicable, but the Company shall use all
reasonable efforts to cause such exercise, nonforfeitability or delivery to
comply with all such provisions at the earliest practicable date.
18.5 No Rights as a Stockholder. A Grantee shall not have any rights as
a stockholder of the Company with respect to the Shares (other than Restricted
Shares) which may be deliverable upon exercise or payment of such Award until
such shares have been delivered to him or her. Restricted Shares, whether held
by a Grantee or in escrow by the Secretary of the Company, shall confer on the
Grantee all rights of a stockholder of the Company, except as otherwise provided
in the Plan or Award Agreement. At the time of a grant of Restricted Shares, the
Committee may require the payment of cash dividends thereon to be deferred and,
if the Committee so determines, reinvested in additional Restricted Shares.
Stock dividends and deferred cash dividends issued with respect to Restricted
Shares shall be subject to the same restrictions and other terms as apply to the
Restricted Shares with respect to which such dividends are issued. The Committee
may provide for payment of interest on deferred cash dividends.
18.6 Nature of Payments. Awards shall be special incentive payments to
the Grantee and shall not be taken into account in computing the amount of
salary or compensation of the Grantee for purposes of determining any pension,
retirement, death or other benefit under (a) any pension, retirement,
profit-sharing, bonus, insurance or other employee benefit plan of the Company
or any Subsidiary or (b) any agreement between (i) the Company or any Subsidiary
and (ii) the Grantee, except as such plan or agreement shall otherwise expressly
provide.
18.7 Performance Measures. Unless and until the Committee proposes for
stockholder vote and stockholders approve a change in the general performance
measures set forth in this Section 18.7, the performance measure(s) to be used
for purposes of such Awards shall be chosen from among the following:
(a) Earnings (either in the aggregate or on a per-share basis);
(b) Net income (before or after taxes);
(c) Operating income;
(d) Cash flow;
(e) Return measures (including return on assets, equity, or sales);
(f) Earnings before or after either, or any combination of, taxes,
interest or depreciation and amortization;
(g) Gross revenues;
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(h) Share price (including growth measures and stockholder return or
attainment by the Shares of a specified value for a specified
period of time);
(i) Reductions in expense levels in each case, where applicable,
determined either on a Company-wide basis or in respect of any
one or more business units;
(j) Net economic value; or
(k) Market share.
Any of the foregoing performance measures may be applied, as determined
by the Committee, on the basis of the Company as a whole, or in respect of any
one or more Subsidiaries or divisions of the Company or any part of a Subsidiary
or division of the Company that is specified by the Committee.
The Committee may adjust the determinations of the degree of attainment
of the preestablished performance goals; provided, however, that Awards which
are designed to qualify for the Performance-Based Exception may not be adjusted
upward without the approval of the Company's stockholders (the Committee may
adjust such Awards downward).
In the event that applicable tax and/or securities laws change to permit
Committee discretion to alter the governing performance measures without
obtaining stockholder approval of such changes, and still qualify for the
Performance-Based Exception, the Committee shall have sole discretion to make
such changes without obtaining stockholder approval.
18.8 Governing Law. The Plan, and all agreements hereunder, shall be
construed in accordance with and governed by the laws of the State of Delaware
other than its laws respecting choice of law.