EXHIBIT 10.1
1997 Incentive Compensation Plan
As Amended Through
April 2001
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1. Purpose 1
2. Definitions 1
3. Administration 3
(a) Authority of the Committee 3
(b) Manner of Exercise of Committee Authority 3
(c) Limitation of Liability 4
4. Stock Subject to Plan 4
(a) Overall Number of Shares Available for Delivery 4
(b) Application of Limitation to Grants of Awards 4
(c) Availability of Shares Not Delivered under Awards 5
5. Eligibility; Per-Person Award Limitations 5
6. Specific Terms of Awards 5
(a) General 5
(b) Options 5
(c) Stock Appreciation Rights 6
(d) Restricted Stock 6
(e) Deferred Stock 7
(f) Bonus Stock and Awards in Lieu of Obligations 7
(g) Dividend Equivalents 7
(h) Other Stock-Based Awards 8
7. Certain Provisions Applicable to Awards 8
(a) Stand-Alone, Additional, Tandem, and Substitute Awards 8
(b) Term of Awards 8
(c) Form and Timing of Payment under Awards; Deferrals 8
(d) Exemptions from Section 16(b) Liability 9
(e) Cancellation and Rescission of Awards 9
(f) Limitations on Vesting of Certain Awards 10
8. Performance and Annual Incentive Awards 10
(a) Performance Conditions 10
(b) Performance Awards Granted to Designated Covered Employees 10
(c) Annual Incentive Awards Granted to Designated Covered Employees 11
(d) Written Determinations 12
(e) Status of Section 8(b) and 8(c) Awards under Code Section 162(m) 12
(i)
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9. Change in Control 13
(a) Effect of "Change in Control" 13
(b) Definition of "Change in Control" 13
(c) Definition of "Change in Control Price" 14
10. General Provisions 14
(a) Compliance with Legal and Other Requirements 14
(b) Limits on Transferability; Beneficiaries 15
(c) Adjustments 15
(d) Taxes 16
(e) Changes to the Plan and Awards 16
(f) Limitation on Rights Conferred under Plan 16
(g) Unfunded Status of Awards; Creation of Trusts 16
(h) Non-exclusivity of the Plan 17
(i) Payments in the Event of Forfeitures; Fractional Shares 17
(j) Governing Law 17
(k) Awards under Preexisting Plans 17
(l) Plan Effective Date and Shareholder Approval 17
(ii)
CVS CORPORATION
1997 INCENTIVE COMPENSATION PLAN
AS AMENDED AND RESTATED
1. PURPOSE. The purpose of this 1997 Incentive Compensation Plan (the
"Plan") is to assist CVS Corporation, a Delaware corporation (the
"Corporation"), and its subsidiaries in attracting, retaining, and rewarding
high-quality executives, employees, and other persons who provide services to
the Corporation and/or its subsidiaries, enabling such persons to acquire or
increase a proprietary interest in the Corporation in order to strengthen the
mutuality of interests between such persons and the Corporation's shareholders,
and providing such persons with annual and long-term performance incentives to
expend their maximum efforts in the creation of shareholder value. The Plan is
also intended to qualify certain compensation awarded under the Plan for tax
deductibility under Code Section 162(m) (as hereafter defined) to the extent
deemed appropriate by the Committee (or any successor committee) of the Board of
Directors of the Corporation.
2. DEFINITIONS. For purposes of the Plan, the following terms shall be
defined as set forth below, in addition to such terms defined in Section 1
hereof:
(a) "Annual Incentive Award" means a conditional right granted
to a Participant under Section 8(c) hereof to receive a cash payment,
Stock or other Award, unless otherwise determined by the Committee,
after the end of a specified fiscal year.
(b) "Award" means any Option, Restricted Stock, Deferred
Stock, Stock granted as a bonus or in lieu of another award, Dividend
Equivalent, Other Stock-Based Award, Performance Award or Annual
Incentive Award, together with any other right or interest granted to a
Participant under the Plan.
(c) "Beneficiary" means the person, persons, trust or trusts
which have been designated by a Participant in his or her most recent
written beneficiary designation filed with the Committee to receive the
benefits specified under the Plan upon such Participant's death or to
which Awards or other rights are transferred if and to the extent
permitted under Section 10(b) hereof. If, upon a Participant's death,
there is no designated Beneficiary or surviving designated Beneficiary,
then the term Beneficiary means person, persons, trust or trusts
entitled by will or the laws of descent and distribution to receive
such benefits.
(d) "Beneficial Owner" shall have the meaning ascribed to such
term in Rule 13d-3 under the Exchange Act and any successor to such
Rule.
(e) "Board" means the Corporation's Board of Directors.
(f) "Change in Control" means Change in Control as defined
with related terms in Section 9 of the Plan.
(g) "Change in Control Price" means the amount calculated in
accordance with Section 9(c) of the Plan.
h) "Code" means the Internal Revenue Code of 1986, as amended
from time to time, including regulations thereunder and successor
provisions and regulations thereto.
(i) "Committee" means a committee of two or more directors
designated by the Board to administer the Plan; provided, however,
that, unless otherwise determined by the Board, the Committee shall
consist solely of two or more directors, each of whom shall be (i) a
"non-employee director" within the meaning of Rule 16b-3 under the
Exchange Act, unless administration of the Plan by "non-employee
directors" is not then required in order for exemptions under Rule
16b-3 to apply to transactions under the Plan, and (ii) an "outside
director" as defined under Code Section 162(m), unless administration
of the Plan by "outside directors" is not then required in order to
qualify for tax deductibility under Code Section 162(m).
(j) "Covered Employee" means an Eligible Person who is a
Covered Employee as specified in Section 8(e) of the Plan.
(k) "Deferred Stock" means a right, granted to a Participant
under Section 6(e) hereof, to receive Stock, cash or a combination
thereof at the end of a specified deferral period.
(l) "Dividend Equivalent" means a right, granted to a
Participant under Section 6(g), to receive cash, Stock, other Awards or
other property equal in value to dividends paid with respect to a
specified number of shares of Stock, or other periodic payments.
(m) "Effective Date" means January 8, 1997.
(n) "Eligible Person" means each Executive Officer and other
officers and employees of the Corporation or of any subsidiary,
including such persons who may also be directors of the Corporation. An
employee on leave of absence may be considered as still in the employ
of the Corporation or a subsidiary for purposes of eligibility for
participation in the Plan.
(o) "Exchange Act" means the Securities Exchange Act of 1934,
as amended from time to time, including rules thereunder and successor
provisions and rules thereto.
(p) "Executive Officer" means an executive officer of the
Corporation as defined under the Exchange Act.
(q) "Fair Market Value" means the fair market value of Stock,
Awards or other property as determined by the Committee or under
procedures established by the Committee. Unless otherwise determined by
the Committee, the Fair Market Value of Stock shall be the average of
the highest and lowest prices of a share of Stock, as quoted on the
composite transactions table on the New York Stock Exchange, on the
last trading day prior to the date on which the determination of fair
market value is being made.
(r) "Incentive Stock Option" or "ISO" means any Option
intended to be and designated as an incentive stock option within the
meaning of Code Section 422 or any successor provision thereto.
(s) "Limited SAR" means a right granted to a Participant under
Section 6(c) hereof.
(t) "Option" means a right, granted to a Participant under
Section 6(b) hereof, to purchase Stock or other Awards at a specified
price during specified time periods.
(u) "Other Stock Based Awards" means Awards granted to a
Participant under Section 6(h) hereof.
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(v) "Participant" means a person who has been granted an Award
under the Plan that remains outstanding, including a person who is no
longer an Eligible Person.
(w) "Performance Award" means a right, granted to a
Participant under Section 8 hereof, to receive Awards based upon
performance criteria specified by the Committee.
(x) "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, and shall include a "group" as defined in Section 13(d)
thereof.
(y) "Preexisting Plans" mean the CVS Corporation Omnibus Stock
Incentive Plan, the CVS Corporation 1987 Stock Option Plan, and the CVS
Corporation 1973 Stock Option Plan.
(z) "Qualified Member" means a member of the Committee who is
a "Non-Employee Director" within the meaning of Rule 16b-3(b)(3) and an
"outside director" within the meaning of Regulation 1.162-27 under Code
Section 162(m).
(aa) "Restricted Stock" means Stock granted to a Participant
under Section 6(d) hereof, that is subject to certain restrictions and
to a risk of forfeiture.
(bb) "Rule 16b-3" means Rule 16b-3, as from time to time in
effect and applicable to the Plan and Participants, promulgated by the
Securities and Exchange Commission under Section 16 of the Exchange
Act.
(cc) "Stock" means the Corporation's Common Stock, and such
other securities as may be substituted (or resubstituted) for Stock
pursuant to Section 10(c) hereof.
(dd) "Stock Appreciation Rights" or "SAR" means a right
granted to a Participant under Section 6(c) hereof.
3. ADMINISTRATION.
(a) AUTHORITY OF THE COMMITTEE. The Plan shall be administered
by the Committee, except to the extent the Board elects to administer
the Plan, in which case references herein to the "Committee" shall be
deemed to include references to the "Board". The Committee shall have
full and final authority, in each case subject to and consistent with
the provisions of the Plan, to select Eligible Persons to become
Participants, grant Awards, determine the type, number and other terms
and conditions of, and all other matters relating to, Awards, prescribe
Award agreements (which need not be identical for each Participant) and
rules and regulations for the administration of the Plan, construe and
interpret the Plan and Award agreements and correct defects, supply
omissions or reconcile inconsistencies therein, and to make all other
decisions and determinations as the Committee may deem necessary or
advisable for the administration of the Plan.
(b) MANNER OF EXERCISE OF COMMITTEE AUTHORITY. At any time
that a member of the Committee is not a Qualified Member, any action of
the Committee relating to an Award granted or to be granted to a
Participant who is then subject to Section 16 of the Exchange Act in
respect of the Corporation, or relating to an Award intended by the
Committee to qualify as "performance-based compensation" within the
meaning of Code Section 162(m) and regulations thereunder, may be taken
either (i) by a subcommittee, designated by the Committee, composed
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solely of two or more Qualified Members, or (ii) by the Committee but
with each such member who is not a Qualified Member abstaining or
recusing himself or herself from such action; provided, however, that,
upon such abstention or recusal, the Committee remains composed solely
of two or more Qualified Members. Such action, authorized by such a
subcommittee or by the Committee upon the abstention or recusal of such
non-Qualified Member(s), shall be the action of the Committee for
purposes of the Plan. Any action of the Committee shall be final,
conclusive and binding on all persons, including the Corporation, its
subsidiaries, Participants, Beneficiaries, transferees under Section
10(b) hereof or other persons claiming rights from or through a
Participant, and shareholders. The express grant of any specific power
to the Committee, and the taking of any action by the Committee, shall
not be construed as limiting any power or authority of the Committee.
The Committee may delegate to officers or managers of the Corporation
or any subsidiary, or committees thereof, the authority, subject to
such terms as the Committee shall determine, to perform such functions,
including administrative functions, as the Committee may determine, to
the extent that such delegation will not result in the loss of an
exemption under Rule 16b-3(d)(1) for Awards granted to Participants
subject to Section 16 of the Exchange Act in respect of the Corporation
and will not cause Awards intended to qualify as "performance-based
compensation" under Code Section 162(m) to fail to so qualify. The
Committee may appoint agents to assist it in administering the Plan.
(c) LIMITATION OF LIABILITY. The Committee and each member
thereof shall be entitled to, in good faith, rely or act upon any
report or other information furnished to him or her by any executive
officer, other officer or employee of the Corporation or a subsidiary,
the Corporation's independent auditors, consultants or any other agents
assisting in the administration of the Plan. Members of the Committee
and any officer or employee of the Corporation or a subsidiary acting
at the direction or on behalf of the Committee shall not be personally
liable for any action or determination taken or made in good faith with
respect to the Plan, and shall, to the extent permitted by law, be
fully indemnified and protected by the Corporation with respect to any
such action or determination.
4. STOCK SUBJECT TO PLAN.
(a) OVERALL NUMBER OF SHARES AVAILABLE FOR DELIVERY. Subject
to adjustment as provided in Section 10(c) hereof, the total number of
shares of Stock reserved and available for delivery in connection with
Awards under the Plan shall be (i) 24.5 million, plus (ii) the number
of shares of Stock remaining available under Preexisting Plans
immediately prior to the date on which shareholders of the Corporation
originally approved the adoption of the Plan, plus (iii) the number of
shares of Stock subject to awards under Preexisting Plans which become
available in accordance with Section 4(c) hereof after the date on
which shareholders of the Corporation originally approved the adoption
of the Plan, plus (iv) 9.4% of the number of shares of Stock issued or
delivered by the Corporation during the term of the Plan (excluding any
issuance or delivery in connection with Awards, or any other
compensation or benefit plan of the Corporation); provided, however,
that the total number of shares of Stock with respect to which ISOs may
be granted shall not exceed 4 million and the total number of shares of
Restricted Stock, Deferred Stock, Stock awarded as a bonus or in lieu
of an obligation, and Other Stock-Based Awards awarded under the Plan
shall not exceed 9.0 million. Any shares of Stock delivered under the
Plan shall consist of authorized and unissued shares or treasury
shares.
(b) APPLICATION OF LIMITATION TO GRANTS OF AWARDS. No Award
may be granted if the number of shares of Stock to be delivered in
connection with such Award or, in the case of an Award relating to
shares of Stock but settleable only in cash, the number of shares to
which such Award relates, exceeds the number of shares of Stock
remaining available under the Plan minus
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the number of shares of Stock issuable in settlement of or relating to
then-outstanding Awards. The Committee may adopt reasonable counting
procedures to ensure appropriate counting, avoid double counting (as,
for example, in the case of tandem or substitute awards) and make
adjustments if the number of shares of Stock actually delivered differs
from the number of shares previously counted in connection with an
Award.
(c) AVAILABILITY OF SHARES Not Delivered under Awards. Shares
of Stock subject to an Award under the Plan or award under a
Preexisting Plan that is canceled, expired, forfeited, settled in cash
or otherwise terminated without a delivery of shares to the
Participant, including (i) the number of shares withheld in payment of
any exercise or purchase price of an Award or award or taxes relating
to Awards or awards, and (ii) the number of shares surrendered in
payment of any exercise or purchase price of an Award or award or taxes
relating to any Award or award, will again be available for Awards
under the Plan, except that if any such shares could not again be
available for Awards to a particular Participant under any applicable
law or regulation, such shares shall be available exclusively for
Awards to Participants who are not subject to such limitation.
5. ELIGIBILITY; PER-PERSON AWARD LIMITATIONS. Awards may be granted
under the Plan only to Eligible Persons. In each fiscal year during any part of
which the Plan is in effect, an Eligible Person may not be granted Awards
relating to more than 1.5 million shares of Stock, subject to adjustment as
provided in Section 10(c), under each of Sections 6(b), 6(c), 6(d), 6(e), 6(f),
6(g), 6(h), 8(b) and 8(c). In addition, the maximum cash amount that may be
earned under the Plan as a final Annual Incentive Award or other cash annual
Award in respect of any fiscal year by any one Participant shall be $5 million,
and the maximum cash amount that may be earned under the Plan as a final
Performance Award or other cash Award in respect of a performance period other
than an annual period by any one Participant on an annualized basis shall be $5
million.
6. SPECIFIC TERMS OF AWARDS.
(a) GENERAL. Awards may be granted on the terms and conditions set
forth in this Section 6. In addition, the Committee may impose on any Award or
the exercise thereof, at the date of grant or thereafter (subject to Section
10(e)), such additional terms and conditions, not inconsistent with the
provisions of the Plan, as the Committee shall determine, including terms
requiring forfeiture of Awards in the event of termination of employment by the
Participant and terms permitting a Participant to make elections relating to his
or her Award. The Committee shall retain full power and discretion to
accelerate, waive or modify, at any time, any term or condition of an Award that
is not mandatory under the Plan. Except in cases in which the Committee is
authorized to require other forms of consideration under the Plan, or to the
extent other forms of consideration must by paid to satisfy the requirements of
the Delaware General Corporation Law, no consideration other than services may
be required for the grant (but not the exercise) of any Award.
(b) OPTIONS. The Committee is authorized to grant Options to
Participants on the following terms and conditions:
(i) EXERCISE PRICE. The exercise price per share of Stock
purchasable under an Option shall be determined by the Committee,
provided that such exercise price shall be not less than the Fair
Market Value of a share of Stock on the date of grant of such Option
except as provided under the first sentence of Section 7(a) hereof.
(ii) TIME AND METHOD OF EXERCISE. The Committee shall
determine the time or times at which or the circumstances under which
an Option may be exercised in whole or in part
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(including based on achievement of performance goals and/or future
service requirements), the methods by which such exercise price may be
paid or deemed to be paid, the form of such payment, including, without
limitation, cash, Stock, other Awards or awards granted under other
plans of the Corporation or any subsidiary, or other property
(including notes or other contractual obligations of Participants to
make payment on a deferred basis), and the methods by or forms in which
Stock will be delivered or deemed to be delivered to Participants.
(iii) ISOS. The terms of any ISO granted under the Plan shall
comply in all respects with the provisions of Code Section 422.
Anything in the Plan to the contrary notwithstanding, no term of the
Plan relating to ISOs shall be interpreted, amended or altered, nor
shall any discretion or authority granted under the Plan be exercised,
so as to disqualify either the Plan or any ISO under Code Section 422,
unless the Participant has first requested the change that will result
in such disqualification.
(c) STOCK APPRECIATION RIGHTS. Effective April 18, 2001, the Committee
shall not be authorized to grant SARs or Limited SARs to Participants under the
Plan.
(d) RESTRICTED STOCK. The Committee is authorized to grant Restricted
Stock to Participants on the following terms and conditions:
(i) GRANT AND RESTRICTIONS. Restricted Stock shall be subject
to such restrictions on transferability, risk of forfeiture and other
restrictions, if any, as the Committee may impose, which restrictions
may lapse separately or in combination at such times, under such
circumstances (including based on achievement of performance goals
and/or future service requirements), in such installments or otherwise,
as the Committee may determine at the date of grant or thereafter.
Except to the extent restricted under the terms of the Plan and any
Award agreement relating to the Restricted Stock, a Participant granted
Restricted Stock shall have all of the rights of a shareholder,
including the right to vote the Restricted Stock and the right to
receive dividends thereon (subject to any mandatory reinvestment or
other requirement imposed by the Committee). During the restricted
period applicable to the Restricted Stock, subject to Section 10(b)
below, the Restricted Stock may not be sold, transferred, pledged,
hypothecated, margined or otherwise encumbered by the Participant.
(ii) FORFEITURE. Except as otherwise determined by the
Committee, upon termination of employment during the applicable
restriction period, Restricted Stock that is at that time subject to
restrictions shall be forfeited and reacquired by the Corporation;
provided that the Committee may provide, by rule or regulation or in
any Award agreement, or may determine in any individual case, that
restrictions or forfeiture conditions relating to Restricted Stock
shall be waived in whole or in part in the event of terminations
resulting from specified causes, and the Committee may in other cases
waive in whole or in part the forfeiture of Restricted Stock.
(iii) CERTIFICATES FOR STOCK. Restricted Stock granted under
the Plan may be evidenced in such manner as the Committee shall
determine. If certificates representing Restricted Stock are registered
in the name of the Participant, the Committee may require that such
certificates bear an appropriate legend referring to the terms,
conditions and restrictions applicable to such Restricted Stock, that
the Corporation retain physical possession of the certificates, and
that the Participant deliver a stock power to the Corporation, endorsed
in blank, relating to the Restricted Stock.
(iv) DIVIDENDS AND SPLITS. As a condition to the grant of an
Award of Restricted Stock, the Committee may require that any cash
dividends paid on a share of Restricted Stock be automatically
reinvested in additional shares of Restricted Stock or applied to the
purchase of
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additional Awards under the Plan. Unless otherwise determined by the
Committee, Stock distributed in connection with a Stock split or Stock
dividend, and other property distributed as a dividend, shall be
subject to restrictions and a risk of forfeiture to the same extent as
the Restricted Stock with respect to which such Stock or other property
has been distributed.
(e) DEFERRED STOCK. The Committee is authorized to grant Deferred Stock
to Participants, which are rights to receive Stock, cash, or a combination
thereof at the end of a specified deferral period, subject to the following
terms and conditions:
(i) AWARD AND RESTRICTIONS. Satisfaction of an Award of
Deferred Stock shall occur upon expiration of the deferral period
specified for such Deferred Stock by the Committee (or, if permitted by
the Committee, as elected by the Participant). In addition, Deferred
Stock shall be subject to such restrictions (which may include a risk
of forfeiture) as the Committee may impose, if any, which restrictions
may lapse at the expiration of the deferral period or at earlier
specified times (including based on achievement of performance goals
and/or future service requirements), separately or in combination, in
installments or otherwise, as the Committee may determine. Deferred
Stock may be satisfied by delivery of Stock, cash equal to the Fair
Market Value of the specified number of shares of Stock covered by the
Deferred Stock, or a combination thereof, as determined by the
Committee at the date of grant or thereafter.
(ii) FORFEITURE. Except as otherwise determined by the
Committee, upon termination of employment during the applicable
deferral period or portion thereof to which forfeiture conditions apply
(as provided in the Award agreement evidencing the Deferred Stock), all
Deferred Stock that is at that time subject to deferral (other than a
deferral at the election of the Participant) shall be forfeited;
provided that the Committee may provide, by rule or regulation or in
any Award agreement, or may determine in any individual case, that
restrictions or forfeiture conditions relating to Deferred Stock shall
be waived in whole or in part in the event of terminations resulting
from specified causes, and the Committee may in other cases waive in
whole or in part the forfeiture of Deferred Stock.
(iii) DIVIDEND EQUIVALENTS. Unless otherwise determined by the
Committee at date of grant, Dividend Equivalents on the specified
number of shares of Stock covered by an Award of Deferred Stock shall
be either (A) paid with respect to such Deferred Stock at the dividend
payment date in cash or in shares of unrestricted Stock having a Fair
Market Value equal to the amount of such dividends, or (B) deferred
with respect to such Deferred Stock and the amount or value thereof
automatically deemed reinvested in additional Deferred Stock, other
Awards or other investment vehicles, as the Committee shall determine
or permit the Participant to elect.
(f) BONUS STOCK AND AWARDS IN LIEU OF OBLIGATIONS. The Committee is
authorized to grant Stock as a bonus, or to grant Stock or other Awards in lieu
of obligations to pay cash or deliver other property under the Plan or under
other plans or compensatory arrangements, provided that, in the case of
Participants subject to Section 16 of the Exchange Act, the amount of such
grants remains within the discretion of the Committee to the extent necessary to
ensure that acquisitions of Stock or other Awards are exempt from liability
under Section 16(b) of the Exchange Act. Stock or Awards granted hereunder shall
be subject to such other terms as shall be determined by the Committee. In the
case of any grant of Stock to an officer of the Corporation in lieu of salary or
other cash compensation, the number of shares granted in place of such
compensation shall be reasonable, as determined by the Committee.
(g) DIVIDEND EQUIVALENTS. The Committee is authorized to grant Dividend
Equivalents to a Participant, entitling the Participant to receive cash, Stock,
other Awards, or other property equal in value to dividends paid with respect to
a specified number of shares of Stock, or other periodic payments.
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Dividend Equivalents may be awarded on a free-standing basis or in connection
with another Award. The Committee may provide that Dividend Equivalents shall be
paid or distributed when accrued or shall be deemed to have been reinvested in
additional Stock, Awards, or other investment vehicles, and subject to such
restrictions on transferability and risks of forfeiture, as the Committee may
specify.
(h) OTHER STOCK-BASED AWARDS. The Committee is authorized, subject to
limitations under applicable law, to grant to Participants such other Awards
that may be denominated or payable in, valued in whole or in part by reference
to, or otherwise based on, or related to, Stock, as deemed by the Committee to
be consistent with the purposes of the Plan, including, without limitation,
convertible or exchangeable debt securities, other rights convertible or
exchangeable into Stock, purchase rights for Stock, Awards with value and
payment contingent upon performance of the Corporation or any other factors
designated by the Committee, and Awards valued by reference to the book value of
Stock or the value of securities of or the performance of specified
subsidiaries. The Committee shall determine the terms and conditions of such
Awards. Stock delivered pursuant to an Award in the nature of a purchase right
granted under this Section 6(h) shall be purchased for such consideration, paid
for at such times, by such methods, and in such forms, including, without
limitation, cash, Stock, other Awards, or other property, as the Committee shall
determine. Cash awards, as an element of or supplement to any other Award under
the Plan, may also be granted pursuant to this Section 6(h).
7. CERTAIN PROVISIONS APPLICABLE TO AWARDS.
(a) STAND-ALONE, ADDITIONAL, TANDEM, AND SUBSTITUTE AWARDS. Awards
granted under the Plan may, in the discretion of the Committee, be granted at
any time, either alone or in addition to, in tandem with, or in substitution or
exchange for, any other Award or any award granted under another plan of the
Corporation, any subsidiary, or any business entity to be acquired by the
Corporation or a subsidiary, or any other right of a Participant to receive
payment from the Corporation or any subsidiary, but if an Award is granted in
substitution or exchange for another Award or award, the Committee shall require
the surrender of such other Award or award in consideration for the grant of the
new Award. In addition, Awards may be granted in lieu of cash compensation,
including in lieu of cash amounts payable under other plans of the Corporation
or any subsidiary, in which the value of Stock subject to the Award (for
example, Deferred Stock or Restricted Stock) is equivalent in value to the cash
compensation, provided, however, that any such Award that is an Option shall
have an exercise price that is at least 100% of the Fair Market Value of a share
of Stock on the date of grant of such Option.
(b) TERM OF AWARDS. The term of each Award shall be for such period as
may be determined by the Committee; provided that in no event shall the term of
any Option exceed a period of ten years (or such shorter term as may be required
in respect of an ISO under Code Section 422).
(c) FORM AND TIMING OF PAYMENT UNDER AWARDS; DEFERRALS. Subject to the
terms of the Plan and any applicable Award agreement, payments to be made by the
Corporation or a subsidiary upon the exercise of an Option or other Award or
settlement of an Award may be made in such forms as the Committee shall
determine, including, without limitation, cash, Stock, other Awards or other
property, and may be made in a single payment or transfer, in installments, or
on a deferred basis. The settlement of any Award may be accelerated, and cash
paid in lieu of Stock in connection with such settlement, in the discretion of
the Committee or upon occurrence of one or more specified events (in addition to
a Change in Control). Installment or deferred payments may be required by the
Committee (subject to Section 10(e) of the Plan, including the consent
provisions thereof in the case of any deferral of an outstanding Award not
provided for in the original Award agreement) or permitted at the election of
the Participant on terms and conditions established by the Committee. Payments
may include, without limitation, provisions for the payment or crediting of
reasonable interest on installment or deferred payments or the grant or
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crediting of Dividend Equivalents or other amounts in respect of installment or
deferred payments denominated in Stock.
(d) EXEMPTIONS FROM SECTION 16(b) LIABILITY. It is the intent of the
Corporation that the grant of any Awards to or other transaction by a
Participant who is subject to Section 16 of the Exchange Act shall be exempt
under Rule 16b-3 (except for transactions acknowledged in writing to be
non-exempt by such Participant). Accordingly, if any provision of this Plan or
any Award agreement does not comply with the requirements of Rule 16b-3 as then
applicable to any such transaction, such provision shall be construed or deemed
amended to the extent necessary to conform to the applicable requirements of
Rule 16b-3 so that such Participant shall avoid liability under Section 16(b).
(e) CANCELLATION AND RESCISSION OF AWARDS. Unless the Award agreement
specifies otherwise, the Committee may cancel any unexpired, unpaid, or deferred
Awards at any time, and the Corporation shall have the additional rights set
forth in Section 7(e)(iv) below, if the Participant is not in compliance with
all applicable provisions of the Award agreement and the Plan including the
following conditions:
(i) A Participant shall not render services for any
organization or engage directly or indirectly in any business that, in
the judgment of the Chief Executive Officer of the Corporation or other
senior officer designated by the Committee, is or becomes competitive
with the Corporation. For Participants whose employment has terminated,
the judgment of the Chief Executive Officer or other senior officer
designated by the Committee shall be based on the Participant's
position and responsibilities while employed by the Corporation, the
Participant's post-employment responsibilities and position with the
other organization or business, the extent of past, current and
potential competition or conflict between the Corporation and the other
organization or business, the effect on the Corporation's shareholders,
customers, suppliers and competitors of the Participant assuming the
post-employment position and such other considerations as are deemed
relevant given the applicable facts and circumstances. A Participant
who has terminated employment shall be free, however, to purchase as an
investment or otherwise, stock or other securities of such organization
or business so long as they are listed upon a recognized securities
exchange or traded over-the-counter, and such investment does not
represent a greater than five percent equity interest in the
organization or business.
(ii) A Participant shall not, without prior written
authorization from the Corporation, disclose to anyone outside the
Corporation, or use in other than the Corporation's business, any
confidential information or material relating to the business of the
Corporation that is acquired by the Participant either during or after
employment with the Corporation.
(iii) A Participant shall disclose promptly and assign to the
Corporation all right, title, and interest in any invention or idea,
patentable or not, made or conceived by the Participant during
employment by the Corporation, relating in any manner to the actual or
anticipated business, research or development work of the Corporation
and shall do anything reasonably necessary to enable the Corporation to
secure a patent where appropriate in the United States and in foreign
countries.
(iv) Upon exercise, settlement, payment or delivery pursuant
to an Award, the Participant shall certify on a form acceptable to the
Committee that he or she is in compliance with the terms and conditions
of the Plan. Failure to comply with the provisions of this Section 7(e)
prior to, or during the six months after, any exercise, payment or
delivery pursuant to an Award shall cause such exercise, payment or
delivery to be rescinded. The Corporation shall notify the Participant
in writing of any such rescission within two years after such exercise,
9
payment or delivery. Within ten days after receiving such a notice from
the Corporation, the Participant shall pay to the Corporation the
amount of any gain realized or payment received as a result of the
rescinded exercise, payment or delivery pursuant to an Award. Such
payment shall be made either in cash or by returning to the Corporation
the number of shares of Stock that the Participant received in
connection with the rescinded exercise, payment or delivery.
(f) LIMITATION OF VESTING OF CERTAIN AWARDS. Restricted Stock, Deferred
Stock, and Other Stock-Based Awards, as described in Section 6(d), 6(e) and 6(h)
of the Plan, respectively, generally will vest over a minimum period of three
years, except in the event of a Participant's death, disability, or retirement,
or in the event of a Change in Control or other special circumstances. The
foregoing notwithstanding, (i) Restricted Stock, Deferred Stock, and Other
Stock-Based Awards as to which either the grant or the vesting is based on the
achievement of one or more performance conditions generally will vest over a
minimum period of one year except in the vent of a Participant's death,
disability, or retirement, or in the event of a Change in Control or other
special circumstances, and (ii) up to 5% of the shares of Stock authorized under
the Plan may be granted as Restricted Stock, Deferred Stock, or Other
Stock-Based Awards without any minimum vesting requirements. For purposes of
this Section 7(f), vesting over a three-year period or one-year period will
include periodic vesting over such period if the rate of such vesting is
proportional throughout such period.
8. PERFORMANCE AND ANNUAL INCENTIVE AWARDS.
(a) PERFORMANCE CONDITIONS. The right of a Participant to exercise or
receive a grant or settlement of any Award, and the timing thereof, may be
subject to such performance conditions as may be specified by the Committee. The
Committee may use such business criteria and other measures of performance as it
may deem appropriate in establishing any performance conditions, and may
exercise its discretion to reduce or increase the amounts payable under any
Award subject to performance conditions, except as limited under Sections 8(b)
and 8(c) hereof in the case of a Performance Award or Annual Incentive Award
intended to qualify under Code Section 162(m).
(b) PERFORMANCE AWARDS GRANTED TO DESIGNATED COVERED EMPLOYEES. If the
Committee determines that a Performance Award to be granted to an Eligible
Person who is designated by the Committee as likely to be a Covered Employee
should qualify as "performance-based compensation" for purposes of Code Section
162(m), the grant, exercise and/or settlement of such Performance Award shall be
contingent upon achievement of pre-established performance goals and other terms
set forth in this Section 8(b).
(i) PERFORMANCE GOALS GENERALLY. The performance goals for
such Performance Awards shall consist of one or more business criteria
and a targeted level or levels of performance with respect to each of
such criteria, as specified by the Committee consistent with this
Section 8(b). Performance goals shall be objective and shall otherwise
meet the requirements of Code Section 162(m) and regulations thereunder
(including Regulation 1.162-27 and successor regulations thereto),
including the requirement that the level or levels of performance
targeted by the Committee result in the achievement of performance
goals being "substantially uncertain." The Committee may determine that
such Performance Awards shall be granted, exercised and/or settled upon
achievement of any one performance goal or that two or more of the
performance goals must be achieved as a condition to grant, exercise
and/or settlement of such Performance Awards. Performance goals may
differ for Performance Awards granted to any one Participant or to
different Participants.
(ii) BUSINESS CRITERIA. One or more of the following business
criteria for the Corporation, on a consolidated basis, and/or for
specified subsidiaries or business units of the
10
Corporation (except with respect to the total shareholder return and
earnings per share criteria), shall be used by the Committee in
establishing performance goals for such Performance Awards: (1)
earnings per share; (2) revenues; (3) cash flow; (4) cash flow return
on investment; (5) return on net assets, return on assets, return on
investment, return on capital, return on equity; (6) economic value
added; (7) operating margin; (8) net income; pretax earnings; pretax
earnings before interest, depreciation and amortization; pretax
operating earnings after interest expense and before incentives,
service fees, and extraordinary or special items; operating earnings;
(9) total shareholder return; and (10) any of the above goals as
compared to the performance of a published or special index deemed
applicable by the Committee including, but not limited to, the Standard
& Poor's 500 Stock Index or a group of comparator companies. One or
more of the foregoing business criteria shall also be exclusively used
in establishing performance goals for Annual Incentive Awards granted
to a Covered Employee under Section 8(c) hereof.
(iii) PERFORMANCE PERIOD; TIMING FOR ESTABLISHING PERFORMANCE
GOALS. Achievement of performance goals in respect of such Performance
Awards shall be measured over a performance period of up to ten years,
as specified by the Committee. Performance goals shall be established
not later than 90 days after the beginning of any performance period
applicable to such Performance Awards, or at such other date as may be
required or permitted for "performance-based compensation" under Code
Section 162(m).
(iv) PERFORMANCE AWARD POOL. The Committee may establish a
Performance Award pool, which shall be an unfunded pool, for purposes
of measuring performance of the Corporation in connection with
Performance Awards. The amount of such Performance Award pool shall be
based upon the achievement of a performance goal or goals based on one
or more of the business criteria set forth in Section 8(b)(ii) hereof
during the given performance period, as specified by the Committee in
accordance with Section 8(b)(iii) hereof. The Committee may specify the
amount of the Performance Award pool as a percentage of any of such
business criteria, a percentage thereof in excess of a threshold
amount, or as another amount which need not bear a strictly
mathematical relationship to such business criteria.
(v) SETTLEMENT OF PERFORMANCE AWARDS; OTHER TERMS. Settlement
of such Performance Awards shall be in cash, Stock, other Awards or
other property, in the discretion of the Committee. The Committee may,
in its discretion, reduce the amount of a settlement otherwise to be
made in connection with such Performance Awards, but may not exercise
discretion to increase any such amount payable to a Covered Employee in
respect of a Performance Award subject to this Section 8(b). The
Committee shall specify the circumstances in which such Performance
Awards shall be paid or forfeited in the event of termination of
employment by the Participant prior to the end of a performance period
or settlement of Performance Awards.
(c) ANNUAL INCENTIVE AWARDS GRANTED TO DESIGNATED COVERED EMPLOYEES. If
the Committee determines that an Annual Incentive Award to be granted to an
Eligible Person who is designated by the Committee as likely to be a Covered
Employee should qualify as "performance-based compensation" for purposes of Code
Section 162(m), the grant, exercise and/or settlement of such Annual Incentive
Award shall be contingent upon achievement of pre-established performance goals
and other terms set forth in this Section 8(c).
(i) ANNUAL INCENTIVE AWARD POOL. The Committee may establish
an Annual Incentive Award pool, which shall be an unfunded pool, for
purposes of measuring performance of the Corporation in connection with
Annual Incentive Awards. The amount of such Annual Incentive Award pool
shall be based upon the achievement of a performance goal or goals
based
11
on one or more of the business criteria set forth in Section 8(b)(ii)
hereof during the given performance period, as specified by the
Committee in accordance with Section 8(b)(iii) hereof. The Committee
may specify the amount of the Annual Incentive Award pool as a
percentage of any of such business criteria, a percentage thereof in
excess of a threshold amount, or as another amount which need not bear
a strictly mathematical relationship to such business criteria.
(ii) POTENTIAL ANNUAL INCENTIVE AWARDS. Not later than the end
of the 90th day of each fiscal year, or at such other date as may be
required or permitted in the case of Awards intended to be
"performance-based compensation" under Code Section 162(m), the
Committee shall determine the Eligible Persons who will potentially
receive Annual Incentive Awards, and the amounts potentially payable
thereunder, for that fiscal year, either out of an Annual Incentive
Award pool established by such date under Section 8(c)(i) hereof or as
individual Annual Incentive Awards. In the case of individual Annual
Incentive Awards intended to qualify under Code Section 162(m), the
amount potentially payable shall be based upon the achievement of a
performance goal or goals based on one or more of the business criteria
set forth in Section 8(b)(ii) hereof in the given performance year, as
specified by the Committee; in other cases, such amount shall be based
on such criteria as shall be established by the Committee. In all
cases, the maximum Annual Incentive Award of any Participant shall be
subject to the limitation set forth in Section 5 hereof.
(iii) PAYOUT OF ANNUAL INCENTIVE AWARDS. After the end of each
fiscal year, the Committee shall determine the amount, if any, of (A)
the Annual Incentive Award pool, and the maximum amount of potential
Annual Incentive Award payable to each Participant in the Annual
Incentive Award pool, or (B) the amount of potential Annual Incentive
Award otherwise payable to each Participant. The Committee may, in its
discretion, determine that the amount payable to any Participant as a
final Annual Incentive Award shall be increased or reduced from the
amount of his or her potential Annual Incentive Award, including a
determination to make no final Award whatsoever, but may not exercise
discretion to increase any such amount in the case of an Annual
Incentive Award intended to qualify under Code Section 162(m). The
Committee shall specify the circumstances in which an Annual Incentive
Award shall be paid or forfeited in the event of termination of
employment by the Participant prior to the end of a fiscal year or
settlement of such Annual Incentive Award.
(d) WRITTEN DETERMINATIONS. All determinations by the Committee as to
the establishment of performance goals, the amount of any Performance Award pool
or potential individual Performance Awards and as to the achievement of
performance goals relating to Performance Awards under Section 8(b), and the
amount of any Annual Incentive Award pool or potential individual Annual
Incentive Awards and the amount of final Annual Incentive Awards under Section
8(c), shall be made in writing in the case of any Award intended to qualify
under Code Section 162(m). The Committee may not delegate any responsibility
relating to such Performance Awards or Annual Incentive Awards.
(e) STATUS OF SECTION 8(B) AND SECTION 8(C) AWARDS UNDER CODE SECTION
162(M). It is the intent of the Corporation that Performance Awards and Annual
Incentive Awards under Sections 8(b) and 8(c) hereof granted to persons who are
designated by the Committee as likely to be Covered Employees within the meaning
of Code Section 162(m) and regulations thereunder (including Regulation 1.162-27
and successor regulations thereto) shall, if so designated by the Committee,
constitute "performance-based compensation" within the meaning of Code Section
162(m) and regulations thereunder. Accordingly, the terms of Sections 8(b), (c),
(d) and (e), including the definitions of Covered Employee and other terms used
therein, shall be interpreted in a manner consistent with Code Section 162(m)
and regulations thereunder. The foregoing notwithstanding, because the Committee
cannot determine with certainty whether a given Participant will be a Covered
Employee with respect to a fiscal year that has not
12
yet been completed, the term Covered Employee as used herein shall mean only a
person designated by the Committee, at the time of grant of Performance Awards
or an Annual Incentive Award, as likely to be a Covered Employee with respect to
that fiscal year. If any provision of the Plan as in effect on the date of
adoption or any agreements relating to Performance Awards or Annual Incentive
Awards that are designated as intended to comply with Code Section 162(m) does
not comply or is inconsistent with the requirements of Code Section 162(m) or
regulations thereunder, such provision shall be construed or deemed amended to
the extent necessary to conform to such requirements.
9. CHANGE IN CONTROL.
(a) EFFECT OF "CHANGE IN CONTROL." In the event of a "Change in
Control," the following provisions shall apply unless otherwise provided in the
Award agreement:
(i) Any Award carrying a right to exercise that was not
previously exercisable and vested shall become fully exercisable and
vested as of the time of the Change in Control and shall remain
exercisable and vested for the balance of the stated term of such Award
without regard to any termination of employment by the Participant,
subject only to applicable restrictions set forth in Section 10(a)
hereof;
(ii) Any optionee who holds an Option shall be entitled to
elect, during the 60-day period immediately following a Change in
Control, in lieu of acquiring the shares of Stock covered by such
Option, to receive, and the Corporation shall be obligated to pay, in
cash the excess of the Change in Control Price over the exercise price
of such Option, multiplied by the number of shares of Stock covered by
such Option;
(iii) The restrictions, deferral of settlement, and forfeiture
conditions applicable to any other Award granted under the Plan shall
lapse and such Awards shall be deemed fully vested as of the time of
the Change in Control, except to the extent of any waiver by the
Participant and subject to applicable restrictions set forth in Section
10(a) hereof; and
(iv) With respect to any outstanding Award subject to
achievement of performance goals and conditions under the Plan, such
performance goals and other conditions will be deemed to be met if and
to the extent so provided by the Committee in the Award agreement
relating to such Award.
(b) DEFINITION OF "CHANGE IN CONTROL." A "Change in Control"
shall be deemed to have occurred if:
(i) any Person (other than the Company, any trustee or other
fiduciary holding securities under any employee benefit plan of the
Company, or any company owned, directly or indirectly, by the
stockholders of the Company immediately prior to the occurrence with
respect to which the evaluation is being made in substantially the same
proportions as their ownership of the common stock of the Company)
becomes the Beneficial Owner (except that a Person shall be deemed to
be the Beneficial Owner of all shares that any such Person has the
right to acquire pursuant to any agreement or arrangement or upon
exercise of conversion rights, warrants or options or otherwise,
without regard to the sixty day period referred to in Rule 13d-3 under
the Exchange Act), directly or indirectly, of securities of the Company
or any Significant Subsidiary (as defined below), representing 25% or
more of the combined voting power of the Company's or such subsidiary's
then outstanding securities;
13
(ii) during any period of two consecutive years, individuals
who at the beginning of such period constitute the Board, and any new
director (other than a director designated by a person who has entered
into an agreement with the Company to effect a transaction described in
clause (i), (iii), or (iv) of this paragraph) whose election by the
Board or nomination for election by the Company's stockholders was
approved by a vote of at least two-thirds of the directors then still
in office who either were directors at the beginning of the two-year
period or whose election or nomination for election was previously so
approved but excluding for this purpose any such new director whose
initial assumption of office occurs as a result of either an actual or
threatened election contest (as such terms are used in Rule 14a-11 of
Regulation 14A promulgated under the Exchange Act) or other actual or
threatened solicitation of proxies or consents by or on behalf of an
individual, corporation, partnership, group, associate or other entity
or Person other than the Board, cease for any reason to constitute at
least a majority of the Board;
(iii) the consummation of a merger or consolidation of the
Company or any subsidiary owning directly or indirectly all or
substantially all of the consolidated assets of the Company (a
"Significant Subsidiary") with any other entity, other than a merger or
consolidation which would result in the voting securities of the
Company or a Significant Subsidiary outstanding immediately prior
thereto continuing to represent (either by remaining outstanding or by
being converted into voting securities of the surviving or resulting
entity) more than 50% of the combined voting power of the surviving or
resulting entity outstanding immediately after such merger or
consolidation;
(iv) the stockholders of the Company approve a plan or
agreement for the sale or disposition of all or substantially all of
the consolidated assets of the Company (other than such a sale or
disposition immediately after which such assets will be owned directly
or indirectly by the stockholders of the Company in substantially the
same proportions as their ownership of the common stock of the Company
immediately prior to such sale or disposition) in which case the Board
shall determine the effective date of the Change in Control resulting
therefrom; or
(v) any other event occurs which the Board determines, in its
discretion, would materially alter the structure of the Company or its
ownership.
(c) DEFINITION OF "CHANGE IN CONTROL PRICE." The "Change in Control
Price" means an amount in cash equal to the higher of (i) the amount of cash and
fair market value of property that is the highest price per share paid
(including extraordinary dividends) in any transaction triggering the Change in
Control or any liquidation of shares following a sale of substantially all
assets of the Corporation, or (ii) the highest Fair Market Value per share at
any time during the 60-day period preceding and 60-day period following the
Change in Control.
10. GENERAL PROVISIONS.
(a) COMPLIANCE WITH LEGAL AND OTHER REQUIREMENTS. The Corporation may,
to the extent deemed necessary or advisable by the Committee, postpone the
issuance or delivery of Stock or payment of other benefits under any Award until
completion of such registration or qualification of such Stock or other required
action under any federal or state law, rule or regulation, listing or other
required action with respect to any stock exchange or automated quotation system
upon which the Stock or other securities of the Corporation are listed or
quoted, or compliance with any other obligation of the Corporation, as the
Committee may consider appropriate, and may require any Participant to make such
representations, furnish such information and comply with or be subject to such
other conditions as it may consider appropriate in connection with the issuance
or delivery of Stock or payment of other benefits in compliance with applicable
laws, rules, and regulations, listing requirements, or other
14
obligations. The foregoing notwithstanding, in connection with a Change in
Control, the Corporation shall take or cause to be taken no action, and shall
undertake or permit to arise no legal or contractual obligation, that results or
would result in any postponement of the issuance or delivery of Stock or payment
of benefits under any Award or the imposition of any other conditions on such
issuance, delivery or payment, to the extent that such postponement or other
condition would represent a greater burden on a Participant than existed on the
90th day preceding the Change in Control.
(b) LIMITS ON TRANSFERABILITY; BENEFICIARIES. No Award or other right
or interest of a Participant under the Plan shall be pledged, hypothecated or
otherwise encumbered or subject to any lien, obligation or liability of such
Participant to any party (other than the Corporation or a subsidiary), or
assigned or transferred by such Participant otherwise than by will or the laws
of descent and distribution or to a Beneficiary upon the death of a Participant,
and such Awards or rights that may be exercisable shall be exercised during the
lifetime of the Participant only by the Participant or his or her guardian or
legal representative, except that Awards and other rights (other than ISOs in
tandem therewith) may be transferred to one or more Beneficiaries or other
transferees during the lifetime of the Participant, and may be exercised by such
transferees in accordance with the terms of such Award, but only if and to the
extent such transfers are permitted by the Committee pursuant to the express
terms of an Award agreement (subject to any terms and conditions which the
Committee may impose thereon). A Beneficiary, transferee, or other person
claiming any rights under the Plan from or through any Participant shall be
subject to all terms and conditions of the Plan and any Award agreement
applicable to such Participant, except as otherwise determined by the Committee,
and to any additional terms and conditions deemed necessary or appropriate by
the Committee.
(c) ADJUSTMENTS. In the event that any dividend or other distribution
(whether in the form of cash, Stock, or other property), recapitalization,
forward or reverse split, reorganization, merger, consolidation, spin-off,
combination, repurchase, share exchange, liquidation, dissolution or other
similar corporate transaction or event affects the Stock such that an adjustment
is determined by the Committee to be appropriate under the Plan, then the
Committee shall, in such manner as it may deem equitable, adjust any or all of
(i) the number and kind of shares of Stock which may be delivered in connection
with Awards granted thereafter, (ii) the number and kind of shares of Stock by
which annual per-person Award limitations are measured under Section 5 hereof,
(iii) the number and kind of shares of Stock subject to or deliverable in
respect of outstanding Awards and (iv) the exercise price, grant price or
purchase price relating to any Award and/or make provision for payment of cash
or other property in respect of any outstanding Award. In addition, the
Committee is authorized to make adjustments in the terms and conditions of, and
the criteria included in, Awards (including Performance Awards and performance
goals, and Annual Incentive Awards and any Annual Incentive Award pool or
performance goals relating thereto) in recognition of unusual or nonrecurring
events (including, without limitation, events described in the preceding
sentence, as well as acquisitions and dispositions of businesses and assets)
affecting the Corporation, any subsidiary or any business unit, or the financial
statements of the Corporation or any subsidiary, or in response to changes in
applicable laws, regulations, accounting principles, tax rates and regulations
or business conditions or in view of the Committee's assessment of the business
strategy of the Corporation, any subsidiary or business unit thereof,
performance of comparable organizations, economic and business conditions,
personal performance of a Participant, and any other circumstances deemed
relevant; provided that no such adjustment shall be authorized or made if and to
the extent that such authority or the making of such adjustment would cause
Options, Performance Awards granted under Section 8(b) hereof or Annual
Incentive Awards granted under Section 8(c) hereof to Participants designated by
the Committee as Covered Employees and intended to qualify as "performance-based
compensation" under Code Section 162(m) and regulations thereunder to otherwise
fail to qualify as "performance-based compensation" under Code Section 162(m)
and regulations thereunder.
15
(d) TAXES. The Corporation and any subsidiary is authorized to withhold
from any Award granted, any payment relating to an Award under the Plan,
including from a distribution of Stock, or any payroll or other payment to a
Participant, amounts of withholding and other taxes due or potentially payable
in connection with any transaction involving an Award, and to take such other
action as the Committee may deem advisable to enable the Corporation and
Participants to satisfy obligations for the payment of withholding taxes and
other tax obligations relating to any Award. This authority shall include
authority to withhold or receive Stock or other property and to make cash
payments in respect thereof in satisfaction of a Participant's tax obligations,
either on a mandatory or elective basis in the discretion of the Committee.
(e) CHANGES TO THE PLAN AND AWARDS. The Board may amend, alter,
suspend, discontinue or terminate the Plan or the Committee's authority to grant
Awards under the Plan without the consent of shareholders or Participants,
except that any amendment or alteration to the Plan shall be subject to the
approval of the Corporation's shareholders not later than the annual meeting
next following such Board action if such shareholder approval is required by any
federal or state law or regulation or the rules of any stock exchange or
automated quotation system on which the Stock may then be listed or quoted, or
if the amendment increases the number of shares of Stock reserved and available
for delivery in connection with Awards, materially modifies the requirements as
to eligibility for participation in the Plan, or materially increases the
benefits accruing to Participants, and the Board may otherwise, in its
discretion, determine to submit other such changes to the Plan to shareholders
for approval; provided that, without the consent of an affected Participant, no
such Board action may materially and adversely affect the rights of such
Participant under any previously granted and outstanding Award. The Committee
may waive any conditions or rights under, or amend, alter, suspend, discontinue
or terminate any Award theretofore granted and any Award agreement relating
thereto, except as otherwise provided in the Plan; provided that, without the
consent of an affected Participant, no such Committee action may materially and
adversely affect the rights of such Participant under such Award.
Notwithstanding anything in the Plan to the contrary, if any right under this
Plan would cause a transaction to be ineligible for pooling of interest
accounting that would, but for the right hereunder, be eligible for such
accounting treatment, the Committee may modify or adjust the right so that
pooling of interest accounting shall be available, including the substitution of
Stock having a Fair Market Value equal to the cash otherwise payable hereunder
for the right which caused the transaction to be ineligible for pooling of
interest accounting.
(f) LIMITATION ON RIGHTS CONFERRED UNDER PLAN. Neither the Plan nor any
action taken hereunder shall be construed as (i) giving any Eligible Person or
Participant the right to continue as an Eligible Person or Participant or in the
employ or service of the Corporation or a subsidiary, (ii) interfering in any
way with the right of the Corporation or a subsidiary to terminate any Eligible
Person's or Participant's employment or service at any time, (iii) giving an
Eligible Person or Participant any claim to be granted any Award under the Plan
or to be treated uniformly with other Participants and employees, or (iv)
conferring on a Participant any of the rights of a shareholder of the
Corporation unless and until the Participant is duly issued or transferred
shares of Stock in accordance with the terms of an Award.
(g) UNFUNDED STATUS OF AWARDS; CREATION OF TRUSTS. The Plan is intended
to constitute an "unfunded" plan for incentive and deferred compensation. With
respect to any payments not yet made to a Participant or obligation to deliver
Stock pursuant to an Award, nothing contained in the Plan or any Award shall
give any such Participant any rights that are greater than those of a general
creditor of the Corporation; provided that the Committee may authorize the
creation of trusts and deposit therein cash, Stock, other Awards or other
property, or make other arrangements to meet the Corporation's obligations under
the Plan. Such trusts or other arrangements shall be consistent with the
"unfunded" status of the Plan unless the Committee otherwise determines with the
consent of each affected Participant. The trustee of such trusts may be
authorized to dispose of trust assets and reinvest the proceeds in alternative
16
investments, subject to such terms and conditions as the Committee may specify
and in accordance with applicable law.
(h) NON-EXCLUSIVITY OF THE PLAN. Neither the adoption of the Plan by
the Board nor its submission to the shareholders of the Corporation for approval
shall be construed as creating any limitations on the power of the Board or a
committee thereof to adopt such other incentive arrangements as it may deem
desirable including incentive arrangements and awards which do not qualify under
Code Section 162(m).
(i) PAYMENTS IN THE EVENT OF FORFEITURES; FRACTIONAL SHARES. Unless
otherwise determined by the Committee, in the event of a forfeiture of an Award
with respect to which a Participant paid cash or other consideration, the
Participant shall be repaid the amount of such cash or other consideration. No
fractional shares of Stock shall be issued or delivered pursuant to the Plan or
any Award. The Committee shall determine whether cash, other Awards or other
property shall be issued or paid in lieu of such fractional shares or whether
such fractional shares or any rights thereto shall be forfeited or otherwise
eliminated.
(j) GOVERNING LAW. The validity, construction and effect of the Plan,
any rules and regulations under the Plan, and any Award agreement shall be
determined in accordance with the Delaware General Corporation Law, without
giving effect to principles of conflicts of laws, and applicable federal law.
(k) AWARDS UNDER PREEXISTING PLANS. Upon approval of the Plan by
shareholders of the Corporation as required under Section 10(l) hereof, no
further awards shall be granted under the Preexisting Plans.
(l) PLAN EFFECTIVE DATE AND SHAREHOLDER APPROVAL. The Plan has been
adopted by the Board effective January 8, 1997, subject to approval by the
shareholders of the Corporation. The Plan has been amended and restated
effective January 14, 1998 and further amended effective April 18, 2001.
17