Exhibit 10.1
GRIFFON CORPORATION
2006 EQUITY INCENTIVE PLAN
1. Purpose. The purpose of the Griffon Corporation 2006 Equity Incentive Plan
(the "Plan") is to attract and retain employees, consultants and non-employee
directors for Griffon Corporation and its subsidiaries and to provide such
persons with incentives and rewards for superior performance.
2. Definitions. As used in this Plan, the following terms shall be defined as
set forth below:
2.1. "Award" means any Performance Shares, Performance Units, Options,
Stock Appreciation Rights, Restricted Shares or Deferred Shares granted under
the Plan.
2.2. "Award Agreement" means an agreement, certificate, resolution or other
form of writing or other evidence approved by the Committee that sets forth the
terms and conditions of an Award. An Award Agreement may be in an electronic
medium, or may be limited to a notation on the Company's books or records, but
shall be signed by a representative of the Company and the Participant unless
otherwise approved by the Committee.
2.3. "Base Price" means the price used as the basis for determining the
Spread upon the exercise of Stock Appreciation Right.
2.4. "Board" means the Board of Directors of the Company.
2.5. "Cause" means, (a) if the applicable Participant is party to an
effective employment, consulting, severance or similar agreement with the
Company or any of its
Subsidiaries, "Cause" shall have the same meaning as such term is defined
therein; (b) if the applicable Participant is not a party to an effective
employment, consulting, severance or similar agreement or if no definition of
"Cause" is set forth in the applicable employment, consulting, severance or
similar agreement, "Cause" shall have the same meaning as such term is defined
in the applicable Award Agreement; and (c) if the applicable Participant is not
a party to any effective employment, consulting, severance or similar agreement
or no definition of "Cause is set forth in the applicable employment,
consulting, severance or similar agreement, and no definition of "Cause" is set
forth in the applicable Award Agreement, the existence of "Cause" shall be
determined in good faith by the Committee from time to time as circumstances
dictate; provided that the Committee shall provide notice to the Participant of
such determination and an opportunity for the Participant to cure such event (if
the Committee determines such event is reasonably curable).
2.6. "Change in Control" means, after the effective date of the Plan:
(i) the acquisition, directly or indirectly, by a "person" (within the
meaning of Section 13(d)(3) of the Exchange Act) (a "Person") of beneficial
ownership (within the meaning of Rule 13d-3 promulgated under the Exchange
Act) of more than 20% of the combined voting power of the voting securities
of the Company entitled to vote generally in the election of directors (the
"Voting Securities"); provided, however, that the following acquisitions
shall not constitute a Change in Control: (a) any acquisition by or from
the Company or any Subsidiary, or by any employee benefit plan (or related
trust) sponsored or maintained by the Company or any Subsidiary, (b) any
acquisition by an
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individual who as of the effective date of the Plan is a member of the
Board, (c) any acquisition by any underwriter in any firm commitment
underwriting of securities to be issued by the Company, or (d) any
acquisition by any corporation (or other entity) if, immediately following
such acquisition, 65% or more of the then outstanding shares of common
stock (or other equity unit) of such corporation (or other entity) and the
combined voting power of the then outstanding voting securities of such
corporation (or other entity), are beneficially owned, directly or
indirectly, by all or substantially all of the individuals or entities who,
immediately prior to such acquisition, were the beneficial owners of the
then outstanding Shares and the Voting Securities in substantially the same
proportions, respectively, as their ownership immediately prior to the
acquisition of the Stock and Voting Securities; or
(ii) the consummation of the sale or other disposition of all or
substantially all of the assets of the Company, other than to a
wholly-owned Subsidiary or to a holding company of which the Company is a
direct or indirect wholly owned subsidiary prior to such transaction; or
(iii) the approval by stockholders of the Company of a reorganization,
merger or consolidation of the Company, other than a reorganization, merger
or consolidation, which would result in the Voting Securities outstanding
immediately prior to the transaction continuing to represent (whether by
remaining outstanding or by being converted to voting securities of the
surviving entity) 65% or more of the Voting Securities or the voting power
of the voting securities of such surviving entity outstanding immediately
after such transaction;
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or the approval by stockholders of the Company of a plan of complete
liquidation or substantial dissolution of the Company; or
(iv) the following individuals cease for any reason to constitute a
majority of the Board: individuals who, as of the effective date of the
Plan, constitute the Board and any new director (other than a director
whose initial assumption of office is in connection with an actual or
threatened election contest, including, but not limited to, a consent
solicitation relating to the election of directors of the Company) whose
appointment or election by the Board or nomination for election by the
Company's stockholders was approved and recommended by a vote of at least
two-thirds of the directors then still in office who either were directors
on the effective date of the Plan or whose appointment, election or
nomination for election was previously so approved or recommended; or
(v) the sale, transfer, assignment, distribution or other disposition
by the Company and/or one of its Subsidiaries, in one transaction, or in a
series of related transactions within any period of 18 consecutive calendar
months (including, without limitation, by means of the sale, transfer,
assignment, distribution or other disposition of the capital stock of any
Subsidiary or Subsidiaries), of assets which account for an aggregate of
50% or more of the consolidated revenues of the Company and its
Subsidiaries, as determined in accordance with U.S. generally accepted
accounting principles, for the fiscal year most recently ended prior to the
date of such transaction (or, in the case of a series of transactions as
described above, the first such transaction); provided, however,
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that no such transaction shall be taken into account if substantially all
the proceeds thereof (whether in cash or in kind) are used after such
transaction in the ongoing conduct by the Company and/or its Subsidiaries
of the business conducted by the Company and/or its Subsidiaries prior to
such transaction; or
(vi) notwithstanding Sections 2.6(i) through 2.6(vi) above, in the
case of a distribution under the Plan of an amount which is subject to
section 409A of the Code, an event which constitutes a "change in control
event" as defined under Section 409A of the Code.
2.7. "Code" means the Internal Revenue Code of 1986, as amended from time
to time and the regulations and other guidance issued thereunder.
2.8. "Committee" means the Compensation Committee of the Board. The
Committee shall have at least two members, each of whom shall be a "non-employee
director" as defined in Rule 16b-3 under the Exchange Act and an "outside
director" as defined in Section 162(m) of the Code and the regulations
thereunder, and, if applicable meet the independence requirements of the
applicable stock exchange, quotation system or other self-regulatory
organization on which the Shares are traded.
2.9. "Company" means Griffon Corporation., a Delaware corporation, or any
successor corporation.
2.10. "Consultant" means an individual (other than an Employee or a
Nonemployee Director) who renders services to the Company or a Subsidiary,
including an independent contractor or an advisor.
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2.11. "Deferral Period" means the period of time during which Deferred
Shares are subject to deferral limitations under Section 9.
2.12. "Deferred Shares" means an Award pursuant to Section 9 of the right
to receive Shares at the end of a specified Deferral Period.
2.13. "Employee" means any person, including an officer, employed by the
Company or a Subsidiary.
2.14. "Exchange Act" means the Securities Exchange Act of 1934, as amended
from time to time, including rules thereunder and successor provisions and rules
thereto.
2.15. "Fair Market Value" means, on any given date, unless otherwise
determined by the Committee, the closing sale prices reported as having occurred
on the New York Stock Exchange (or other principal exchange or market on which
the Shares are traded or listed) on such date, or, if no sale was made on such
date on such principal exchange or market, on the last proceeding day on which
the Shares were traded or listed.
2.16. "Grant Date" means the date specified by the Committee on which a
grant of an Award shall become effective, which shall not be earlier than the
date on which the Committee takes action with respect thereto.
2.17. "Incentive Stock Option" means any Option which meets the
requirements of Section 422 of the Code and which is designated as an Incentive
Stock Option by the Committee.
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2.18. "Nonemployee Director" means a member of the Board who is not an
Employee.
2.19. "Nonqualified Stock Option" means an Option that is not intended to
qualify as an Incentive Stock Option, and designated as a Nonqualified Stock
Option by the Committee.
2.20. "Option" means any option to purchase Shares granted under Section 6.
2.21. "Optionee" means the person so designated in an agreement evidencing
an outstanding Option.
2.22. "Option Price" means the purchase price payable upon the exercise of
an Option.
2.23. "Participant" means an Employee, Nonemployee Director or Consultant
who is selected by the Committee to receive Awards, provided that only Employees
may receive grants of Incentive Stock Options.
2.24. "Performance Objectives" means the performance objectives established
in the sole discretion of the Committee for Participants who are eligible to
receive Awards under the Plan. Performance Objectives may be described in terms
of Company-wide objectives or objectives that are related to the performance of
the individual Participant or the Subsidiary, division, department or function
within the Company or Subsidiary in which the Participant is employed.
Performance Objectives may be measured on an absolute or relative basis.
Relative performance may be measured by a group of peer companies or by a
financial market index. Any Performance Objectives
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applicable to a Qualified Performance-Based Award shall be limited to: specified
levels of or increases in the Company's, a division's or a Subsidiary's return
on capital, equity or assets; earnings measures/ratios (on a gross, net, pre-tax
or post-tax basis), including basic earnings per share, diluted earnings per
share, total earnings, operating earnings, earnings growth, earnings before
interest and taxes and earnings before interest, taxes, depreciation and
amortization; net economic profit (which is operating earnings minus a charge to
capital); net income; operating income; sales; sales growth; gross margin;
direct margin; Share price (including but not limited to growth measures and
total stockholder return); operating profit; per period or cumulative cash flow
(including but not limited to operating cash flow and free cash flow) or cash
flow return on investment (which equals net cash flow divided by total capital);
inventory turns; financial return ratios; market share; balance sheet
measurements such as receivable turnover; improvement in or attainment of
expense levels; improvement in or attainment of working capital levels; debt
reduction; strategic innovation; customer or employee satisfaction; individual
objectives; and any combination of the foregoing. If the Committee determines
that a change in the business, operations, corporate structure or capital
structure of the Company, or the manner in which it conducts its business, or
other events or circumstances render the Performance Objectives unsuitable, the
Committee may modify such Performance Objectives or the related minimum
acceptable level of achievement, in whole or in part, as the Committee deems
appropriate and equitable.
2.25. "Performance Period" means a period of time established under Section
5 within which the Performance Objectives relating to Awards are to be achieved.
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2.26. "Performance Share" means a bookkeeping entry that records the
equivalent of one Share awarded pursuant to Section 5.
2.27. "Performance Unit" means a bookkeeping entry that records a unit
equivalent to $1.00 awarded pursuant to Section 5.
2.28. "Qualified Performance-Based Award" means an Award or portion of an
Award that is intended to satisfy the requirements for "qualified
performance-based compensation" under Code Section 162(m). The Committee shall
designate any Qualified Performance-Based Award as such at the time of grant.
2.29. "Restricted Shares" mean Shares granted under Section 8 subject to a
substantial risk of forfeiture.
2.30. "Shares" means shares of the Common Stock of the Company, $.25 par
value, or any security into which Shares may be converted by reason of any
transaction or event of the type referred to in Section 14.
2.31. "Spread" means, in the case of a Stock Appreciation Right, the amount
by which the Fair Market Value on the date when any such right is exercised
exceeds the Base Price specified in such right.
2.32. "Stock Appreciation Right" means a right granted under Section 7.
2.33. "Subsidiary" means a corporation or other entity in which the Company
owns or controls directly or indirectly at least 50 percent of the total
combined voting power represented by all classes of stock issued by such
corporation, or in the case of a
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noncorporate entity, at least 50% of the profits or capital interest in such
entity, at the time of such grant.
3. Shares Available Under the Plan.
3.1. Reserved Shares. Subject to adjustment as provided in Section 14, the
maximum number of Shares that may be (a) issued upon the exercise of Options or
Stock Appreciation Rights, (b) issued as Restricted Shares and released from
substantial risk of forfeiture, or (c) issued in payment of Deferred Shares or
Performance Shares, shall not in the aggregate exceed 1,700,000 Shares. Such
Shares may be Shares of original issuance, Shares held in Treasury, or Shares
that have been reacquired by the Company. In addition:
(i) To the extent any Shares covered by an Award are not issued to a
Participant (or, if applicable, his heir, legatee or permitted transferee)
because the Award is forfeited or canceled, such Shares shall not be deemed
to have been issued for purposes of determining the maximum number of
Shares available for issuance under the Plan.
(ii) Shares issued under the Plan in settlement, assumption or
substitution of outstanding awards (or obligations to grant future awards)
under the plans or arrangements of another entity shall not reduce the
maximum number of Shares available for issuance under the Plan, to the
extent that such settlement, assumption or substitution is a result of the
Company acquiring another entity (or an interest in another entity).
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3.2. Reduction Ratio. For purposes of Section 3.1, each Share issued
pursuant to an Award other than an Option shall reduce the number of Shares
available for issuance under the Plan by two Shares. For example, if all Awards
under the Plan are in the form of Restricted Shares, 850,000 Shares are
available for issuance, subject to adjustment as provided in Section 14.
3.3. ISO Maximum. In no event shall the number of Shares issued upon the
exercise of Incentive Stock Options exceed 600,000 Shares, subject to adjustment
as provided in Section 14.
3.4. Maximum Annual Award. No Participant my receive Awards (including
performance-based Awards) representing more than 500,000 Shares underlying
Option grants (or 250,000 Shares underlying any Award, except for Options) in
any one fiscal year, subject to adjustment as provided in Section 14. The
maximum Qualified Performance-Based Award that may be granted to a Participant
in any one Performance Period is 250,000 Shares (subject to adjustment as
provided in Section 14).
4. Plan Administration.
4.1. Committee Administration. This Plan shall be administered by the
Committee. The interpretation and construction by the Committee of any provision
of this Plan or of any Award Agreement and any determination by the Committee
pursuant to any provision of this Plan or any such agreement, notification or
document, shall be final and conclusive. No member of the Committee shall be
liable to any person for any such action taken or determination, other than one
made in bad faith.
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4.2. Committee Powers. The Committee shall have full authority to interpret
the Plan; to establish and amend rules and regulations relating to the Plan; to
select the Participants and determine the type of Awards to be made to
Participants, the number of shares subject to Awards and the terms, conditions,
restrictions and limitations of Awards; and to make all other determinations as
are necessary or advisable for the administration of the Plan.
4.3. Committee Delegation. The Committee may delegate to one or more
officers of the Company the authority to grant Awards to Participants who are
not subject to the requirements of Section 16 of the Exchange Act or Section
162(m) of the Code and the rules and regulations thereunder, provided that the
Committee shall have fixed the total number of Shares subject to such grants.
Any such delegation shall be subject to the limitations of Section 157(c) of the
Delaware General Corporation Law. The Committee may revoke any such allocation
or delegation at any time for any reason with or without prior notice.
5. Performance Shares and Performance Units. The Committee may authorize
grants of Performance Shares and Performance Units, which shall vest and become
payable to the Participant upon the achievement of specified Performance
Objectives during a specified Performance Period, upon such terms and conditions
as the Committee may determine in accordance with the following provisions:
5.1. Terms and Conditions of Performance Share/Performance Unit Awards.
Each grant shall specify the number of Performance Shares or Performance Units
to which it pertains. The Performance Period with respect to each Performance
Share or
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Performance Unit shall commence on the Grant Date and may be subject to earlier
termination in the event of a Change in Control or other similar transaction or
event. Each grant shall specify the Performance Objectives that are to be
achieved by the Participant. Each grant may specify in respect of the specified
Performance Objectives a minimum acceptable level of achievement below which no
payment will be made and may set forth a formula for determining the amount of
any payment to be made if performance is at or above such minimum acceptable
level but falls short of the maximum achievement of the specified Performance
Objectives.
5.2. Payment of Performance Shares and Units. Each grant shall specify the
time and manner of payment of Performance Shares or Performance Units that shall
have been earned, and shall be paid by the Company in Shares.
5.3. Maximum Payment. Subject to Section 3.4 of the Plan, any grant of
Performance Shares may specify that the Shares payable with respect thereto may
not exceed a maximum specified by the Committee on the Grant Date. Any grant of
Performance Units may specify the number of Shares issued, with respect thereto
may not exceed maximums specified by the Committee on the Grant Date.
5.4. Adjustment of Performance Objectives. The Committee may adjust
Performance Objectives and the related minimum acceptable level of achievement
if, in the sole judgment of the Committee, events or transactions have occurred
after the Grant Date that are unrelated to the performance of the Participant
and result in distortion of the Performance Objectives or the related minimum
acceptable level of achievement.
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5.5. Qualified Performance-Based Awards. In the case of a Qualified
Performance-Based Award the following provisions shall apply in addition to, and
where necessary, in lieu of other provisions of the Plan, including the
provisions of Sections 5.1 through 5.4:
(i) Only Employees who are "Covered Employees" within the meaning of
Section 162(m) of the Code shall be eligible to receive Qualified
Performance-Based Awards. The Committee shall designate in its sole
discretion which Covered Employees will be Participants for a Performance
Period within the earlier of the (a) first 90 days of a Performance Period
and (b) the lapse of 25% of the Performance Period.
(ii) The Committee shall establish in writing within the earlier of
the (a) first 90 days of a Performance Period and (b) the lapse of 25% of
the Performance Period, and in any event, while the outcome is
substantially uncertain, (x) Performance Objectives for the Performance
Period, and (y) in respect of such Performance Objectives, a minimum
acceptable level of achievement below which no Award will be made, and an
objective formula or other method for determining the Award to be made if
performance is at or above such minimum acceptable level but falls short of
the maximum achievement of the specified Performance Objectives.
(iii) Following the completion of a Performance Period, the Committee
shall review and certify in writing whether, and to what extent, the
Performance Objectives for the Performance Period have been achieved and,
if so, to also
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calculate and certify in writing the amount of the Qualified Performance-
Based Awards earned for the period based upon the Performance Objectives
and the related formulas or methods as determined pursuant to Section
5.5(ii). The Committee shall then determine the actual number of Shares
issuable under each Participant's Award for the Performance Period, and, in
doing so, may reduce or eliminate, unless otherwise and/or to the extent
provided in the Award Agreement, the amount of the Award. In no event shall
the Committee have the authority to increase Award amounts to any Covered
Employee.
(iv) Subject to Section 20.2, Awards granted for a Performance Period
shall be made to Participants within a reasonable time after completion of
the certification described in Section 5.5(iii).
5.6. Other Awards. Any grant of an Award under Sections 6, 7, 8 or 9,
and/or the vesting or exercise thereof, may be further conditioned upon the
attainment of Performance Objectives established by the Committee in accordance
with the applicable provisions of this Section 5 regarding Performance Shares
and Performance Units.
6. Options. The Committee may from time to time authorize grants of Options to
Participants upon such terms and conditions as the Committee may determine in
accordance with the following provisions:
6.1. Number of Shares. Each grant shall specify the number of Shares to
which it pertains.
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6.2. Option Price. Each grant shall specify an Option Price per Share,
which shall be equal to or greater than the Fair Market Value per Share on the
Grant Date; provided that in the case of any Incentive Stock Option granted to a
person who on any given date owns, either directly or indirectly (taking into
account the attribution rules contained in Section 424(d) of the Code), stock
possessing more than 10 percent of the total combined voting power of all
classes of stock of the Company or any Subsidiary, the Option Price shall not be
less than 110% of the Fair Market Value of a Share on the date of grant.
6.3. Consideration. Each grant shall specify the form of consideration to
be paid in satisfaction of the Option Price and the manner of payment of such
consideration, which may include (i) cash in the form of currency or check or
other cash equivalent, in each such case as is acceptable to the Company, (ii)
subject to approval by the Committee, nonforfeitable, unrestricted Shares owned
by the Optionee, (iii) any other legal consideration that the Committee may deem
appropriate, including without limitation any form of consideration authorized
under Section 6.4, on such basis as the Committee may determine in accordance
with this Plan, or (iv) any combination of the foregoing.
6.4. Payment of Option Price in Restricted Shares. On or after the Grant
Date of any Option other than an Incentive Stock Option, the Committee may
determine that payment of the Option Price may also be made in whole or in part
in the form of Restricted Shares or other Shares that are subject to risk of
forfeiture or restrictions on transfer. Unless otherwise determined by the
Committee, whenever any Option Price is paid in whole or in part by means of any
of the forms of consideration specified in this
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Section 6.4, the Shares received by the Optionee upon the exercise of the
Options shall be subject to the same risks of forfeiture or restrictions on
transfer as those that applied to the consideration surrendered by the Optionee,
provided that such risks of forfeiture and restrictions on transfer shall apply
only to the same number of Shares received by the Optionee as applied to the
forfeitable or restricted Shares surrendered by the Optionee.
6.5. Broker Assisted Exercise. To the extent such program is permitted by
the Company and permitted by applicable law, rule or regulations, the Option
Price may be satisfied from the proceeds of a sale through a bank or broker on
the date of exercise of some or all of the Shares to which the exercise relates
pursuant to a broker assisted exercise program provided by such bank or broker.
6.6. Exercise Period. No Option granted may be exercised more than ten
years after the Grant Date; provided that in the case of any Incentive Stock
Option granted to a person who on any given date owns, either directly or
indirectly (taking into account the attribution rules contained in Section
424(d) of the Code), stock possessing more than 10 percent of the total combined
voting power of all classes of stock of the Company or any Subsidiary, such
Option shall be exercised within five years after the Grant Date.
6.7. Disqualifying Dispositions of ISOs. Each Participant awarded an
Incentive Stock Option under the Plan shall notify the Company in writing
immediately after the date he or she makes a disqualifying disposition (as
defined in Section 421(b) of the Code) of any Shares acquired pursuant to the
exercise of such Incentive Stock Option. The Company may, if determined by the
Committee and in accordance with procedures established by it, retain possession
of any Shares acquired pursuant to the exercise of an
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Incentive Stock Option as agent for the applicable Participant until the end of
the period described in the preceding sentence, subject to complying with any
instructions from such Participant as to the sale of such Shares.
7. Stock Appreciation Rights. The Committee may also authorize grants to
Participants of Stock Appreciation Rights. A Stock Appreciation Right is the
right of the Participant to receive from the Company an amount, which, shall be
determined by the Committee and shall be expressed as a percentage (not
exceeding 100 percent) of the Spread at the time of the exercise of such right.
Any grant of Stock Appreciation Rights shall be upon such terms and conditions
as the Committee may determine in accordance with the following provisions:
7.1. Payment in Shares. Any amount payable upon the exercise of a Stock
Appreciation Right shall be paid by the Company in Shares. Any grant may specify
that the Shares payable upon the exercise of a Stock Appreciation Right shall
not exceed a maximum specified by the Committee on the Grant Date.
7.2. Exercise Period. Any grant may specify (a) a waiting period or periods
before Stock Appreciation Rights shall become exercisable and (b) permissible
dates or periods on or during which Stock Appreciation Rights shall be
exercisable; provided that no Stock Appreciation Right granted may be exercised
more than ten years after the Grant Date. A grant may specify that a Stock
Appreciation Right may be exercised only in the event of a Change in Control or
other similar transaction or event.
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7.3. Base Price. Each grant shall specify in respect of each Stock
Appreciation Right a Base Price per Share, which shall be equal to or greater
than the Fair Market Value on the Grant Date.
7.4. Deemed Exercise. The Committee may provide that a Stock Appreciation
Right shall be deemed to be exercised at the close of business on the scheduled
expiration date of such Stock Appreciation Right if at such time the Stock
Appreciation Right by its terms remains exercisable and, if so exercised, would
result in a payment of Shares to the holder of such Stock Appreciation Right.
8. Restricted Shares. The Committee may also authorize grants to Participants
of Restricted Shares upon such terms and conditions as the Committee may
determine in accordance with the following provisions:
8.1. Transfer of Shares. Each grant shall constitute an immediate transfer
of the ownership of Shares to the Participant in consideration of the
performance of services, subject to the substantial risk of forfeiture and
restrictions on transfer referred to in Section 10. Each grant may be made
without additional consideration from the Participant or in consideration of a
payment by the Participant that is less than the Fair Market Value on the Grant
Date.
8.2. Dividends. Any grant may require that any or all dividends or other
distributions paid on the Restricted Shares during the period of such
restrictions be reinvested in additional Shares or held in cash, which
additional Shares or cash, as the case may be, may be subject to the same
restrictions as the underlying Award or such other restrictions as the Committee
may determine.
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9. Deferred Shares. The Committee may authorize grants of Deferred Shares to
Participants upon such terms and conditions as the Committee may determine in
accordance with the following provisions:
9.1. Deferred Transfer of Shares. Each grant shall constitute the agreement
by the Company to issue or transfer Shares to the Participant in the future in
consideration of the performance of services, subject to the fulfillment during
the Deferral Period of such conditions as the Committee may specify.
9.2. Consideration. Each grant may be made without additional consideration
from the Participant or in consideration of a payment by the Participant that is
less than the Fair Market Value on the Grant Date.
10. Vesting.
10.1. In General. Each grant of Options and Stock Appreciation Rights shall
specify the period of continuous employment by the Company or any Subsidiary, or
service to the Company or any Subsidiary (and in the case of a Nonemployee
Director, service on the Board), of the Participant that is necessary before
such Options or Stock Appreciation Rights, or installments thereof, shall become
exercisable. Each grant of Restricted Shares shall specify the period during
which such Restricted Shares shall be subject to a "substantial risk of
forfeiture" within the meaning of Code Section 83, and each grant of Deferred
Shares shall specify the Deferral Period to which such Deferred Shares shall be
subject. Each grant of such Award may provide for the earlier exercise of
rights, termination of a risk of forfeiture or termination of a Deferral Period
in the event of a Change in Control or similar transaction or event.
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10.2. Restrictions on Transfer of Restricted Shares. Each grant of
Restricted Shares shall provide that, during the period for which a substantial
risk of forfeiture is to continue, the transferability of the Restricted Shares
shall be prohibited or restricted in the manner and to the extent prescribed by
the Committee on the Grant Date. Such restrictions may include, without
limitation, rights of repurchase or first refusal in the Company or provisions
subjecting the Restricted Shares to a continuing substantial risk of forfeiture
in the hands of any transferee.
11. Dividends and Other Ownership Rights.
11.1. Restricted Shares. Unless otherwise determined by the Committee, an
Award of Restricted Shares shall entitle the Participant to dividend, voting and
other ownership rights during the period for which a substantial risk of
forfeiture is to continue.
11.2. Deferred Shares. Unless otherwise determined by the Committee, during
the Deferral Period, the Participant shall not have any right to transfer any
rights under an Award of Deferred Shares, shall not have any rights of ownership
in the Deferred Shares and shall not have any right to vote such Shares.
12. Transferability.
12.1. Transfer Restrictions. Except as provided in Section 12.2, no Award
granted shall be transferable by a Participant other than by will or the laws of
descent and distribution, and Options and Stock Appreciation Rights shall be
exercisable during a Participant's lifetime only by the Participant or, in the
event of the Participant's legal
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incapacity, by his or her guardian or legal representative acting in a fiduciary
capacity on behalf of the Participant under state law. Any attempt to transfer
an Award in violation of this Plan shall render such Award null and void.
12.2. Limited Transfer Rights. The Committee may expressly provide in an
Award Agreement (or an amendment to an Award Agreement) that a Participant may
transfer such Award (other than an Incentive Stock Option), in whole or in part,
to a spouse or lineal descendant (a "Family Member"), a trust for the exclusive
benefit of Family Members, a partnership or other entity in which all the
beneficial owners are Family Members, or any other entity affiliated with the
Participant that may be approved by the Committee. Subsequent transfers of
Awards shall be prohibited except in accordance with this Section 12.2. All
terms and conditions of the Award, including without limitation provisions
relating to termination of the Participant's employment or service with the
Company or a Subsidiary, shall continue to apply following a transfer made in
accordance with this Section 12.2. In order for a transfer to be effective, a
Participant must agree in writing prior to the transfer on a form provided by
the Company to pay any and all payroll and withholding taxes due upon exercise
of the transferred Option. In addition, prior to the exercise of a transferred
Option by a transferee, arrangements must be made by the Participant with the
Company for the payment of all payroll and withholding taxes. Finally, the
Company shall be under no obligation to provide a transferee with any notice
regarding the transferred Awards held by the transferee upon forfeiture or any
other circumstance.
12.3. Restrictions on Transfer. Any Award granted may provide that all or
any part of the Shares that are (a) to be issued or transferred by the Company
upon the
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exercise of Options or Stock Appreciation Rights, upon termination of the
Deferral Period applicable to Deferred Shares or upon payment under any grant of
Performance Shares or Performance Units, or (b) no longer subject to the
substantial risk of forfeiture and restrictions on transfer referred to in
Section 10, shall be subject to further restrictions upon transfer, including
restrictions relating to any minimum Share ownership requirements imposed by the
Company with respect to a Participant.
13. Award Agreement. Each grant under the Plan shall be evidenced by an Award
Agreement, which shall describe the subject Award, state that the Award is
subject to all of the terms and conditions of this Plan and contain such other
terms and provisions as the Committee may determine consistent with this Plan.
14. Adjustments. The Committee shall make or provide for appropriate
adjustments in the (a) number of Shares covered by outstanding Options, Stock
Appreciation Rights, Deferred Shares, Restricted Shares and Performance Shares
granted hereunder, (b) prices per Share applicable to such Options and Stock
Appreciation Rights, and (c) kind of Shares covered thereby (including Shares of
another issuer), as the Committee in its sole discretion may in good faith
determine to be equitably required in order to prevent dilution or enlargement
of the rights of Participants that otherwise would result from (x) any stock
dividend, stock split, combination or exchange of Shares, recapitalization or
other change in the capital structure of the Company, (y) any merger,
consolidation, spin-off, spin-out, split-off, split-up, reorganization, partial
or complete liquidation or other distribution of assets (other than a normal
cash dividend), issuance of rights or warrants to purchase securities, or (z)
any other corporate transaction or event having an effect similar to any of the
foregoing. Moreover, in the event of any such transaction or event,
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the Committee may provide in substitution for any or all outstanding Awards such
alternative consideration as it may in good faith determine to be equitable
under the circumstances and may require in connection therewith the surrender of
all Awards so replaced. The Committee may also make or provide for such
adjustments in each of the limitations specified in Section 3 as the Committee
in its sole discretion may in good faith determine to be appropriate in order to
reflect any transaction or event described in this Section 14. The Company shall
give each Participant notice of an adjustment hereunder and, upon notice, such
adjustment shall be conclusive and binding for all purposes.
15. Fractional Shares. The Company shall not be required to issue any
fractional Shares pursuant to this Plan. The Committee may provide for the
elimination of fractions or for the settlement thereof in cash.
16. Withholding Taxes. The Company shall be entitled to deduct from any
payment under the Plan, regardless of the form of such payment, the amount of
all applicable income and employment taxes required by law to be withheld with
respect to such payment or may require the Participant to pay to it such tax
prior to and as a condition of the making of such payment. In accordance with
any applicable administrative guidelines it establishes, the Committee may allow
a Participant to pay the amount of taxes required by law to be withheld from an
Award by withholding from any payment of Shares due as a result of such Award,
or by permitting the Participant to deliver to the Company Shares having a Fair
Market Value, as determined by the Committee, equal to the minimum amount of
such required withholding taxes.
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17. Certain Terminations of Employment, Hardship and Approved Leaves of
Absence. In the event of termination of employment by reason of death,
disability, normal retirement, early retirement with the consent of the
Committee, other termination of employment or a leave of absence that is
approved by the Committee, or in the event of hardship or other special
circumstances that are approved by the Committee, of a Participant who holds an
Option or Stock Appreciation Right that is not immediately and fully
exercisable, any Restricted Shares as to which the substantial risk of
forfeiture or the prohibition or restriction on transfer has not lapsed, any
Deferred Shares as to which the Deferral Period is not complete, any Performance
Shares or Performance Units that have not been fully earned, or any Shares that
are subject to any transfer restriction pursuant to Section 12.3, the Committee
may, in its sole discretion, take any action that it deems to be equitable under
the circumstances or in the best interests of the Company, including without
limitation waiving or modifying any limitation or requirement with respect to
any Award and providing for post-termination exercise periods with respect to
any Option or Stock Appreciation Right.
18. Termination for Cause. A Participant who is terminated for Cause shall,
unless otherwise determined by the Committee, immediately forfeit, effective as
of the date the Participant engages in such conduct, all unexercised, unearned,
and/or unpaid Awards, including, but not by way of limitation, Awards earned but
not yet paid or exercised, all unpaid dividends and all interest, if any,
accrued on the foregoing.
19. Foreign Participants. In order to facilitate the making of any grant or
combination of grants under this Plan, the Committee may provide for such
special terms for Awards to Participants who are foreign nationals, or who are
employed by or perform
25
services for the Company or any Subsidiary outside of the United States of
America, as the Committee may consider necessary or appropriate to accommodate
differences in local law, tax policy or custom. Moreover, the Committee may
approve such supplements to, or amendments, restatements or alternative versions
of, this Plan as it may consider necessary or appropriate for such purposes
without thereby affecting the terms of this Plan as in effect for any other
purpose, provided that no such supplements, amendments, restatements or
alternative versions shall include any provisions that are inconsistent with the
terms of this Plan, as then in effect, unless this Plan could have been amended
to eliminate such inconsistency without further approval by the stockholders of
the Company.
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20. Amendments and Other Matters.
20.1. Plan Amendments. This Plan may be amended from time to time by the
Board, but no such amendment shall: (a) increase any of the limitations
specified in Section 3, other than to reflect an adjustment made in accordance
with Section 14, (b) change the class of persons eligible to receive grants of
Awards or the types of Awards available under the Plan, or (c) increase the
benefits to Participants under the Plan, in any such case without the further
approval of the stockholders of the Company. The Board will also condition any
amendment on the approval of the stockholders of the Company if such approval is
necessary with respect to the applicable listing or other requirements of a
national securities exchange or other applicable laws, policies or regulations,
and the Board may condition any amendment on the approval of the stockholders of
the Company if such approval is deemed advisable to comply with such
requirements.
20.2. Award Deferrals. An Award Agreement may provide that payment of any
Award, dividend, or any portion thereof, may be deferred by a Participant until
such time as the Committee may establish. All such deferrals shall be
accomplished by the delivery of a written, irrevocable election by the
Participant prior to the time established by the Committee for such purpose, on
a form provided by the Company. Deferred Awards may also be credited with
interest, at such rates to be determined by the Committee.
20.3. Conditional Awards. The Committee may condition the grant of any
Award or combination of Awards on the surrender or deferral by the Participant
of his or her right to receive a cash bonus or other compensation otherwise
payable by the Company or any Subsidiary to the Participant.
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20.4. Repricing Prohibited. No Award may be repriced, replaced, regranted
through cancellation, or modified, directly or indirectly, without the approval
of the stockholders of the Company, provided that nothing herein shall prevent
the Committee from taking any action provided for in Section 14.
20.5. Amendments to Awards. Subject to the requirements of Section 20.4,
the Committee may at any time unilaterally amend any unexercised, unearned, or
unpaid Award, including, but not by way of limitation, Awards earned but not yet
paid, to the extent it deems appropriate (including for the purposes of
compliance with local laws and regulations or to avoid costly government
filings); provided, however, that except to the extent that the Committee
determines that an amendment is necessary to avoid a penalty tax under Section
409A of the Code, any such amendment which, in the opinion of the Committee, is
adverse to the Participant shall require the Participant's consent.
20.6. No Employment Right. This Plan shall not confer upon any Participant
any right with respect to continuance of employment or other service with the
Company or any Subsidiary and shall not interfere in any way with any right that
the Company or any Subsidiary would otherwise have to terminate any
Participant's employment or other service at any time.
20.7. Compliance with Section 409A of the Code. Notwithstanding any other
provision of the Plan to the contrary, (a) to the extent that any payment of or
in connection with an Award constitutes a payment under a "non-qualified
deferred compensation plan," as defined in Section 409A of the Code, such
payment shall be made in compliance with Section 409A of the Code and (b) any
adjustment of Shares or prices
28
per Share or substitution of Awards pursuant to Section 14 and any modification
of Awards pursuant to Section 17 shall not cause the affected Award to violate
the requirements of Section 409A of the Code.
21. Change in Control. Except as otherwise provided at the time of grant in an
Award Agreement relating to a particular Award and subject to the requirements
of Section 14, if a Change in Control occurs, then:
21.1. The Participant's Restricted Shares, Deferred Shares, Performance
Shares, Performance Units or other Share-based Awards that were forfeitable
shall, unless otherwise determined by the Committee prior to the occurrence of
the Change in Control, become nonforfeitable and, to the extent applicable,
shall be converted into Shares.
21.2. Any unexercised Option or Stock Appreciation Right, whether or not
exercisable on the date of such Change in Control, shall thereupon be fully
exercisable and may be exercised, in whole or in part.
21.3. Notwithstanding Sections 21.1 and 21.2, in the event of a Change in
Control, the Committee may in its discretion cancel any outstanding Awards and
(a) pay to the holders thereof, in cash or stock, or any combination thereof,
the value of such Awards based upon the price per share of Stock received or to
be received by other stockholders of the Company in the event or (b) arrange for
fully vested substitute awards to be granted to the holders thereof, denominated
in the equity of the acquirer or an affiliate thereof, provided such substitute
awards substantially preserve the value of the substituted Awards.
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21.4. If a Change in Control occurs during the term of one or more
Performance Periods for which the Committee has granted performance-based Awards
pursuant to the provisions of Section 5, the term of each such Performance
Period (hereinafter a "current Performance Period") shall immediately terminate
upon the occurrence of such Change in Control. Upon a Change in Control, for
each current Performance Period and each completed Performance Period for which
the Committee has not on or before such date made a determination as to whether
and to what degree the Performance Objectives for such period have been attained
(hereinafter a "completed Performance Period"), it shall be assumed that the
Performance Objectives have been attained at a level of one hundred percent
(100%) or the equivalent thereof. A Participant in one or more current
Performance Periods shall be considered to have earned and, therefore, be
entitled to receive, a prorated portion of the Award previously granted to him
for each such current Performance Period. Such prorated portion shall be
determined by multiplying the number of Performance Shares or Performance Units
(or other performance-based Awards), as the case may be, granted to the
Participant by a fraction, the numerator of which is the total number of days
that have elapsed since the beginning of the current Performance Period, and the
denominator of which is the total number of days in such current Performance
Period. A Participant in one or more completed Performance Periods shall be
considered to have earned and, therefore, be entitled to receive all the
Performance Shares or Performance Units (or other performance-based Awards), as
the case may be, previously granted to him during each such completed
Performance Period.
21.5. Unless otherwise provided by the Committee, at any time, upon a
Change in Control, any Awards deferred by a Participant under Section 20.2, but
for which he or
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she has not received payment as of such date, shall be paid by the 90th day
following the Change in Control.
22. Effective Date. This Plan shall become effective upon its approval by the
stockholders of the Company.
23. Termination. This Plan shall terminate on the tenth anniversary of the
date upon which it is approved by the stockholders of the Company, and no Award
shall be granted after that date.
24. Arbitration of Disputes. Any and all disputes arising out of or relating
to the Plan or any Award Agreement (or breach thereof) shall be resolved
exclusively through binding arbitration in the State of New York in accordance
with the rules of the American Arbitration Association then in effect.
25. Regulatory Approvals and Listings. Notwithstanding anything contained in
this Plan to the contrary, the Company shall have no obligation to issue or
deliver certificates of Shares evidencing Awards or any other Award resulting in
the payment of Shares prior to (i) the obtaining of any approval from any
governmental agency which the Company shall, in its sole discretion, determine
to be necessary or advisable, (ii) the admission of such Shares to listing on
the stock exchange or market on which the Shares may be listed, and (iii) the
completion of any registration or other qualification of said Shares under any
state or federal law or ruling of any governmental body which the Company shall,
in its sole discretion, determine to be necessary or advisable. The Committee
may, from time to time, impose additional restrictions upon an Award, including
but not limited to,
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restrictions regarding tax withholdings and restrictions regarding the
Participant's ability to exercise Awards under the Company's broker-assisted
stock option exercise program.
26. No Right, Title, or Interest in Company Assets. No Participant shall have
any rights as a stockholder of the Company as a result of participation in the
Plan until the date of issuance of a stock certificate in his or her name, and,
in the case of Restricted Shares, such rights are granted to the Participant
under the Plan. To the extent any person acquires a right to receive payments
from the Company under the Plan, such rights shall be no greater than the rights
of an unsecured creditor of the Company and the Participant shall not have any
rights in or against any specific assets of the Company. All of the Awards
granted under the Plan shall be unfunded.
27. No Guarantee of Tax Consequences. Notwithstanding any other provision of
the Plan, no person connected with the Plan in any capacity, including, but not
limited to, the Company and its directors, officers, agents and employees, makes
any representation, commitment, or guarantee that any tax treatment, including,
but not limited to, federal, state and local income, estate and gift tax
treatment, will be applicable with respect to the tax treatment of any Award,
any amounts deferred under the Plan, or paid to or for the benefit of a
Participant under the Plan, or that such tax treatment will apply to or be
available to a Participant on account of participation in the Plan, or that any
of the foregoing amounts will not be subject to the 20% penalty tax and interest
under Section 409A of the Code.
28. Governing Law. The validity, construction and effect of this Plan and any
Award hereunder will be determined in accordance with the laws of the State of
Delaware.
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