INTERDIGITAL COMMUNICATIONS CORPORATION
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2000 Stock Award and Incentive Plan
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INTERDIGITAL COMMUNICATIONS CORPORATION
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2000 Stock Award and Incentive Plan
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Page
1. Purpose................................................................ 1
2. Definitions............................................................ 1
3. Administration......................................................... 3
4. Stock Subject to Plan.................................................. 4
5. Eligibility; Per-Person Award Limitations ............................. 4
6. Specific Terms of Awards............................................... 5
7. Performance Awards..................................................... 8
8. Certain Provisions Applicable to Awards................................ 9
9. Change in Control...................................................... 10
10. Additional Award Forfeiture Provisions................................. 12
11. General Provisions..................................................... 13
INTERDIGITAL COMMUNICATIONS CORPORATION
2000 Stock Award and Incentive Plan
1. Purpose. The purpose of this 2000 Stock Award and Incentive Plan (the
"Plan") is to aid InterDigital Communications Corporation, a Pennsylvania
corporation (the "Company"), in attracting, retaining, motivating and rewarding
employees, non-employee directors, and other persons who provide substantial
services to the Company or its subsidiaries or affiliates, to provide for
equitable and competitive compensation opportunities, to encourage long-term
service, to recognize individual contributions and reward achievement of Company
goals, and promote the creation of long-term value for shareholders by closely
aligning the interests of Participants with those of shareholders. The Plan
authorizes stock-based and cash-based incentives for Participants.
2. Definitions. In addition to the terms defined in Section 1 above and
elsewhere in the Plan, the following capitalized terms used in the Plan have the
respective meanings set forth in this Section:
(a) "Award" means any Option, SAR, Restricted Stock, Deferred Stock,
Stock granted as a bonus or in lieu of another award, Dividend Equivalent,
Other Stock-Based Award, or Performance Award, together with any related
right or interest, granted to a Participant under the Plan.
(b) "Beneficiary" means the legal representatives of the Participant's
estate entitled by will or the laws of descent and distribution to receive
the benefits under a Participant's Award upon a Participant's death,
provided that, if and to the extent authorized by the Committee, a
Participant may be permitted to designate a Beneficiary, in which case the
"Beneficiary" instead shall be the person(s) (if any are then surviving),
trust(s) or entity(ies) which have been designated by the Participant in
his or her most recent written beneficiary designation filed with the
Committee to receive the benefits specified under the Participant's Award
upon such Participant's death.
(c) "Board" means the Company's Board of Directors.
(d) "Change in Control" and related terms have the meanings specified
in Section 9.
(e) "Code" means the Internal Revenue Code of 1986, as amended.
(f) "Committee" means a committee of two or more directors designated
by the Board to administer the Plan; provided, however, that, directors
appointed or serving as members of a Board committee designated as the
Committee shall not be employees of the Company or any subsidiary or
affiliate. In appointing members of the Committee, the Board will consider
whether a member is or will be a Qualified Member, but such members are not
required to be Qualified Members at the time of appointment or during their
term of service on the Committee. The full Board may perform any function
of the Committee hereunder, in which case the term "Committee" shall refer
to the Board. Initially, the Compensation and Stock Option Committee of the
Board of Directors will be designated as the "Committee" under the Plan.
(g) "Covered Employee" means an Eligible Person who is a Covered
Employee as specified in Section 11(j).
(h) "Deferred Stock" means a right, granted to a Participant under
Section 6(e), to receive Stock or other Awards or a combination thereof at
the end of a specified deferral period.
(i) "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 all or a specified portion of the dividends
paid with respect to a specified number of shares of Stock.
(j) "Effective Date" means the effective date specified in Section
11(r).
(k) "Eligible Person" has the meaning specified in Section 5.
(l) "Exchange Act" means the Securities Exchange Act of 1934, as
amended.
(m) "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 closing sale price reported on
the composite tape of the principal stock exchange on which the Stock is
listed on the day as of which such value is being determined or, if there
is no sale on that day, then on the last previous day on which a sale was
reported.
(n) "Incentive Stock Option" or "ISO" means any Option designated as
an incentive stock option within the meaning of Code Section 422 and
qualifying thereunder.
(o) "Non-qualified Stock Option" means any Option designated as a
non-qualified stock option and not an Incentive Stock Option within the
meaning of Code Section 422.
(p) "Option" means a right, granted to a Participant under Section
6(b), to purchase Stock or other Awards at a specified price during
specified time periods.
(q) "Other Stock-Based Awards" means Awards granted to a Participant
under Section 6(h).
(r) "Participant" means a person who has been granted an Award under
the Plan which remains outstanding, including a person who is no longer an
Eligible Person.
(s) "Performance Award" means a conditional right, granted to a
Participant under Sections 6(i) and 7, to receive cash, Stock or other
Awards or payments, as determined by the Committee, based upon performance
criteria specified by the Committee.
(t) "Preexisting Plans" mean the Company's Non-Qualified Stock Option
Plan, 1992 Non-Qualified Stock Option Plan, 1992 Employee Stock Option
Plan, 1995 Employee Stock Option Plan, 1997 Stock Option Plan for
Non-Employee Directors, and any other Company stock option plan under which
options are outstanding at the Effective Date.
(u) "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).
(v) "Restricted Stock" means Stock granted to a Participant under
Section 6(d) which is subject to certain restrictions and to a risk of
forfeiture.
(w) "Rule 16b-3" means Rule 16b-3, as from time to time in effect and
applicable to Participants, promulgated by the Securities and Exchange
Commission under Section 16 of the Exchange Act.
(x) "Stock" means the Company's Common Stock, and any other equity
securities of the Company that may be substituted or resubstituted for
Stock pursuant to Section 11(c).
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(y) "Stock Appreciation Rights" or "SAR" means a right granted to a
Participant under Section 6(c).
3. Administration.
(a) Authority of the Committee. The Plan shall be administered by the
Committee, which 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; to grant Awards; to determine the type and
number of Awards, the dates on which Awards may be exercised and on which
the risk of forfeiture or deferral period relating to Awards shall lapse or
terminate, the acceleration of any such dates, the expiration date of any
Award, whether, to what extent, and under what circumstances an Award may
be settled, or the exercise price of an Award may be paid, in cash, Stock,
other Awards, or other property, and other terms and conditions of, and all
other matters relating to, Awards; to prescribe documents evidencing or
setting terms of Awards (such Award documents need not be identical for
each Participant), amendments thereto, rules and regulations for the
administration of the Plan and amendments thereto, and standardized terms
and conditions of awards and amendments thereto (which, if so specified by
the Committee, shall be deemed to be incorporated into and a part of this
Plan); to construe and interpret the Plan and Award documents 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. Decisions of the Committee
with respect to the administration and interpretation of the Plan shall be
final, conclusive, and binding upon all persons interested in the Plan,
including Participants, Beneficiaries, transferees under Section 11(b) and
other persons claiming rights from or through a Participant, and
shareholders. The foregoing notwithstanding, the Board shall perform the
functions of the Committee for purposes of granting Awards under the Plan
to non-employee directors (authority with respect to other aspects of
non-employee director awards is not exclusive to the Board, however).
(b) Manner of Exercise of Committee Authority. At any time that a
member of the Committee is not a Qualified Member, (i) any action of the
Committee 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 by a subcommittee, designated by
the Committee or the Board, composed solely of two or more Qualified
Members, and (ii) any action 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 Company may be taken either by such a subcommittee or by the
Committee but with each such member who is not a Qualified Member
abstaining or recusing himself or herself from such action, provided that,
upon such abstention or recusal, the Committee remains composed 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.
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 Company or any subsidiary or affiliate, 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) for Awards granted
to Participants subject to Section 16 of the Exchange Act in respect of the
Company and will not cause Awards intended to qualify as "performance-based
compensation" under Code Section 162(m) to fail to so qualify.
(c) Limitation of Liability. The Committee and each member thereof,
and any person acting pursuant to authority delegated by the Committee,
shall be entitled, in good faith, to rely or act upon any report or other
information furnished by any executive officer, other officer or employee
of the Company or a subsidiary or affiliate, the Company's independent
auditors, consultants or any other agents assisting in the administration
of the Plan. Members of the Committee, any person acting pursuant to
authority delegated by the Committee, and any officer or employee of the
Company or a subsidiary or affiliate acting at the direction or on behalf
of the Committee or a delegee shall not be personally liable for any action
or determination taken or made in good faith with respect to the Plan,
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and shall, to the extent permitted by law, be fully indemnified and
protected by the Company 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 11(c), the total number of shares of
Stock reserved and available for delivery in connection with Awards under
the Plan shall be (i) 2.2 million plus (ii) the number of shares that,
immediately prior to the Effective Date, remain available for issuance
under the Preexisting Plans plus and (iii) the number of shares subject to
awards under the Preexisting Plans which become available in accordance
with Section 4(b) after the Effective Date; provided, however, that shares
carried forward from a Preexisting Plan pursuant to clause (ii) shall be
available for initial grant only before the time such Preexisting Plan
would have expired in accordance with its terms; and provided further, that
the total number of shares which may be issued and delivered in connection
with Awards other than Options and SARs shall not exceed 40% of the total
number of shares reserved under the Plan. Any shares of Stock delivered
under the Plan shall consist of authorized and unissued shares or treasury
shares.
(b) Share Counting Rules. 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. Shares subject to
an Award or an award under a Preexisting Plan that is canceled, expired,
forfeited, settled in cash or otherwise terminated without a delivery of
shares to the Participant will again be available for Awards, and shares
withheld in payment of the exercise price or taxes relating to an Award or
Preexisting Plan award and shares equal to the number surrendered in
payment of any exercise price or taxes relating to an Award or Preexisting
Plan award shall be deemed to constitute shares not delivered to the
Participant and shall be deemed again to be available for Awards under the
Plan. In addition, in the case of any Award granted in substitution for an
award of a company or business acquired by the Company or a subsidiary or
affiliate, shares issued or issuable in connection with such substitute
Award shall not be counted against the number of shares reserved under the
Plan, but shall be available under the Plan by virtue of the Company's
assumption of the plan or arrangement of the acquired company or business.
This Section 4(b) shall apply to the number of shares reserved and
available for ISOs only to the extent consistent with applicable
regulations relating to ISOs under the Code. The order in which Shares will
be deemed to be made subject to Awards under the Plan shall first be Shares
resulting from Preexisting Plans (in the order of the expiration date of
such Preexisting Plans) and then the Shares reserved under clause (i) of
Section 4(a).
5. Eligibility; Per-Person Award Limitations. Awards may be granted under
the Plan only to Eligible Persons. For purposes of the Plan, an "Eligible
Person" means an employee of the Company or any subsidiary or affiliate,
including any executive officer, a non-employee director of the Company, a
consultant or other person who provides substantial services to the Company or a
subsidiary or affiliate, and any person who has been offered employment by the
Company or a subsidiary or affiliate, provided that such prospective employee
may not receive any payment or exercise any right relating to an Award until
such person has commenced employment with the Company or a subsidiary or
affiliate. An employee on leave of absence may be considered as still in the
employ of the Company or a subsidiary or affiliate for purposes of eligibility
for participation in the Plan, if so determined by the Committee. A joint
venture in which the Company or a subsidiary has a substantial direct or
indirect equity investment may be deemed an affiliate, if so determined by the
Committee, but such determination shall be solely for purposes of this Plan. In
each calendar year during any part of which the Plan is in effect, an Eligible
Person may be granted Awards intended to qualify as "performance-based
compensation" under Code Section 162(m) under each of Section 6(b), 6(c), 6(d),
6(e), 6(f), 6(g) or 6(h) relating to up to his or her Annual Limit (such Annual
Limit to apply separately to the type of Award authorized under each specified
subsection, except that the limitation applies to Dividend Equivalents under
Section 6(g) only if such Dividend Equivalents are granted separately from and
not as a feature of another Award). A Participant's Annual Limit, in any year
during any part of which the Participant is then eligible under the Plan, shall
equal 300,000 shares plus the amount of the Participant's unused Annual Limit
relating to the same type of Award as of the close of the previous year, subject
to adjustment as provided in Section 11(c). In the case of an Award which is not
valued in a way in which the limitation set forth in the preceding sentence
would operate as an effective limitation satisfying
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Treasury Regulation 1.162-27(e)(4) (including a Performance Award under Section
7 not related to an Award specified in Section 6), an Eligible Person may not be
granted Awards authorizing the earning during any calendar year of an amount
that exceeds the Participant's Annual Limit, which for this purpose shall equal
$1.5 million plus the amount of the Participant's unused cash Annual Limit as of
the close of the previous year (this limitation is separate and not affected by
the number of Awards granted during such calendar year subject to the limitation
in the preceding sentence). For this purpose, (i) "earning" means satisfying
performance conditions so that an amount becomes payable, without regard to
whether it is to be paid currently or on a deferred basis or continues to be
subject to any service requirement or other non-performance condition, and (ii)
a Participant's Annual Limit is used to the extent an amount or number of shares
may be potentially earned or paid under an Award, regardless of whether such
amount or shares are in fact earned or paid.
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 11(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 or service 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 with respect to any term or condition of an Award
that is not mandatory under the Plan. The Committee may require payment of
consideration for an Award, except as otherwise limited by the Plan.
(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 (including both ISOs and Non-qualified
Stock Options) shall be determined by the Committee, but 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, subject to Sections 6(f) and
8(a), unless the Committee finds there to exist extraordinary
circumstances such that the grant of a Non-Qualified Stock Option with
an exercise price less than such Fair Market Value is appropriate.
(ii) Option Term; Time and Method of Exercise. The Committee
shall determine the term of each Option, provided that in no event
shall the term of any ISO or SAR in tandem therewith exceed a period
of ten years from the date of grant. 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 (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 and the
form of such payment (subject to Section 11(k)), including, without
limitation, cash, Stock, other Awards or awards granted under other
plans of the Company or any subsidiary or affiliate, or other property
(including notes and other contractual obligations of Participants to
make payment on a deferred basis, such as through "cashless exercise"
arrangements, to the extent permitted by applicable law), and the
methods by or forms in which Stock will be delivered or deemed to be
delivered in satisfaction of Options to Participants (including
deferred delivery of shares representing the Option "profit," at the
election of the Participant or as mandated by the Committee, with such
deferred shares subject to any vesting, forfeiture or other terms as
the Committee may specify).
(iii) ISOs. The terms of any ISO granted under the Plan shall
comply in all respects with the provisions of Code Section 422,
including but not limited to the requirement that no ISO shall be
granted more than ten years after the Effective Date.
(c) Stock Appreciation Rights. The Committee is authorized to grant
SAR's to Participants on the following terms and conditions:
(i) Right to Payment. An SAR shall confer on the Participant to
whom it is granted a right to receive, upon exercise thereof, the
excess of (A) the Fair Market Value of one share of Stock on the date
of exercise (or, in the case of a "Limited SAR," the Fair Market Value
determined by reference
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to the Change in Control Price, as defined under Section 9(d)
hereof) over (B) the grant price of the SAR as determined by the
Committee.
(ii) Other Terms. The Committee shall determine at the date of
grant or thereafter, the time or times at which and the circumstances
under which a SAR may be exercised in whole or in part (including
based on achievement of performance goals and/or future service
requirements), the method of exercise, method of settlement, form of
consideration payable in settlement, method by or forms in which Stock
will be delivered or deemed to be delivered to Participants, and
whether or not a SAR shall be free-standing or in tandem or
combination with any other Award. Limited SARs that may only be
exercised in connection with a Change in Control or other event as
specified by the Committee may be granted on such terms, not
inconsistent with this Section 6(c), as the Committee may determine.
(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
and under such other circumstances 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 document 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).
(ii) Forfeiture. Except as otherwise determined by the Committee,
upon termination of employment or service during the applicable
restriction period, Restricted Stock that is at that time subject to
restrictions shall be forfeited and reacquired by the Company;
provided that the Committee may provide, by rule or regulation or in
any Award document, or may determine in any individual case, that
restrictions or forfeiture conditions relating to Restricted Stock
will lapse in whole or in part, including in the event of terminations
resulting from specified causes.
(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 Company retain physical possession of the certificates, and that
the Participant deliver a stock power to the Company, 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
dividends paid on a share of Restricted Stock shall be either (A) paid
with respect to such Restricted Stock at the dividend payment date in
cash, in kind, or in a number of shares of unrestricted Stock having a
Fair Market Value equal to the amount of such dividends, or (B)
automatically reinvested in additional Restricted Stock or held in
kind, which shall be subject to the same terms as applied to the
original Restricted Stock to which it relates, or (C) deferred as to
payment, either as a cash deferral or with the amount or value thereof
automatically deemed reinvested in shares of Deferred Stock, other
Awards or other investment vehicles, subject to such terms as the
Committee shall determine or permit a Participant to elect. 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.
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(e) Deferred Stock. The Committee is authorized to grant Deferred
Stock to Participants, which are rights to receive Stock, other Awards, or
a combination thereof at the end of a specified deferral period, subject to
the following terms and conditions:
(i) Award and Restrictions. Issuance of Stock will occur upon
expiration of the deferral period specified for an Award of 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 on transferability, risk of forfeiture and other
restrictions, if any, as the Committee may impose, 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, and under such other circumstances as the
Committee may determine at the date of grant or thereafter. Deferred
Stock may be satisfied by delivery of Stock, other Awards, or a
combination thereof (subject to Section 11(k)), 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 or service during the applicable
deferral period or portion thereof to which forfeiture conditions
apply (as provided in the Award document evidencing the Deferred
Stock), all Deferred Stock that is at that time subject to such
forfeiture conditions shall be forfeited; provided that the Committee
may provide, by rule or regulation or in any Award document, or may
determine in any individual case, that restrictions or forfeiture
conditions relating to Deferred Stock will lapse in whole or in part,
including in the event of terminations resulting from specified
causes.
(iii) Dividend Equivalents. Unless otherwise determined by the
Committee, 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, either as a cash deferral or with the amount or
value thereof automatically deemed reinvested in additional Deferred
Stock, other Awards or other investment vehicles having a Fair Market
Value equal to the amount of such dividends, as the Committee shall
determine or permit a 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 of the Company or a subsidiary or affiliate to pay cash
or deliver other property under the Plan or under other plans or
compensatory arrangements, subject to such terms as shall be 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 equivalent to all or a portion
of the dividends paid with respect to a specified number of shares of
Stock. 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 restrictions on transferability, risks of
forfeiture and such other terms 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 or factors that
may influence the value of Stock, 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 Company or business units
thereof 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 or affiliates or other business
units. 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, notes,
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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).
(i) Performance Awards. Performance Awards, denominated in cash or in
Stock or other Awards, may be granted by the Committee in accordance with
Section 7.
7. Performance Awards
(a) Performance Awards Generally. The Committee is authorized to grant
Performance Awards on the terms and conditions specified in this Section 7.
Performance Awards may be denominated as a cash amount, number of shares of
Stock, or specified number of other Awards (or a combination) which may be
earned upon achievement or satisfaction of performance conditions specified by
the Committee. In addition, the Committee may specify that any other Award shall
constitute a Performance Award by conditioning the right of a Participant to
exercise the Award or have it settled, and the timing thereof, upon achievement
or satisfaction of 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 7(b) in the case of a Performance Award intended to qualify as
"performance-based compensation" under Code Section 162(m).
(b) Performance Awards Granted to 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 a preestablished performance goal and other terms set forth in
this Section 7(b).
(i) Performance Goal Generally. The performance goal 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 7(b).
The performance goal 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 Company, on a consolidated basis, and/or for specified subsidiaries
or affiliates or other business units of the Company shall be used by the
Committee in establishing performance goals for such Performance Awards:
(1) net sales; (2) earnings from operations, earnings before or after
taxes, earnings before or after interest, depreciation, amortization, or
extraordinary or special items; (3) net income or net income per common
share (basic or diluted); (4) return on assets (gross or net), return on
investment, return on capital, or return on equity; (5) cash flow, free
cash flow, cash flow return on investment (discounted or otherwise), net
cash provided by operations, or cash flow in excess of cost of capital; (6)
interest expense after taxes; (7) economic value created; (8) operating
margin or profit margin; (9) stock price or total shareholder return; (10)
average cash balance or cash position; and (11) strategic business
criteria, consisting of one or more objectives based on meeting specified
product development, strategic partnering, licensing, research and
development, market penetration, geographic business expansion goals, cost
targets, customer satisfaction, employee satisfaction, management of
employment practices and employee benefits, supervision of litigation and
information technology, and goals relating to acquisitions or divestitures
of subsidiaries, affiliates or joint ventures. The targeted level or levels
of performance with respect to such business criteria may be established at
such levels and in such terms as the Committee may determine, in its
discretion,
8
including in absolute terms, as a goal relative to performance in
prior periods, or as a goal compared to the performance of one or more
comparable companies or an index covering multiple companies.
(iii) Performance Period; Timing for Establishing Performance Goals;
Per-Person Limit. Achievement of performance goals in respect of such
Performance Awards shall be measured over a performance period of up to one
year or more than one year, as specified by the Committee. A performance
goal shall be established not later than the earlier of (A) 90 days after
the beginning of any performance period applicable to such Performance
Award or (B) the time 25% of such performance period has elapsed. In all
cases, the maximum Performance Award of any Participant shall be subject to
the limitation set forth in Section 5.
(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 Company 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 7(b)(ii) during the given performance period,
as specified by the Committee in accordance with Section 7(b)(iv). 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 not exercise
discretion to increase any such amount payable to a Covered Employee in
respect of a Performance Award subject to this Section 7(b). Any settlement
which changes the form of payment from that originally specified shall be
implemented in a manner such that the Performance Award and other related
Awards do not, solely for that reason, fail to qualify as
"performance-based compensation" for purposes of Code Section 162(m). 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 or other event (including a Change in Control) prior to the end
of a performance period or settlement of such Performance Awards.
(c) Written Determinations. Determinations by the Committee as to the
establishment of performance goals, the amount potentially payable in respect of
Performance Awards, the level of actual achievement of the specified performance
goals relating to Performance Awards and the amount of any final Performance
Award shall be recorded in writing in the case of Performance Awards intended to
qualify under Section 162(m). Specifically, the Committee shall certify in
writing, in a manner conforming to applicable regulations under Section 162(m),
prior to settlement of each such Award granted to a Covered Employee, that the
performance objective relating to the Performance Award and other material terms
of the Award upon which settlement of the Award was conditioned have been
satisfied.
8. 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 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 Company, any subsidiary or
affiliate, or any business entity to be acquired by the Company or a subsidiary
or affiliate, or any other right of a Participant to receive payment from the
Company or any subsidiary or affiliate. Awards granted in addition to or in
tandem with other Awards or awards may be granted either as of the same time as
or a different time from the grant of such other Awards or awards. Subject to
Section 11(k), the Committee may determine that, in granting a new Award, the
in-the-money value of any surrendered Award or award may be applied to reduce
the exercise price of any Option, grant price of any SAR, or purchase price of
any other Award.
(b) Term of Awards. The term of each Award shall be for such period as may
be determined by the Committee, subject to the express limitations set forth in
Section 6(b)(ii).
9
(c) Form and Timing of Payment under Awards; Deferrals. Subject to the
terms of the Plan (including Section 11(k)) and any applicable Award document,
payments to be made by the Company or a subsidiary or affiliate 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 (subject to Section 11(k)). Installment or deferred payments
may be required by the Committee (subject to Section 11(e)) 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 crediting of Dividend Equivalents or other amounts in respect of
installment or deferred payments denominated in Stock.
(d) Exemptions from Section 16(b) Liability. With respect to a Participant
who is then subject to the reporting requirements of Section 16(a) of the
Exchange Act in respect of the Company, the Committee shall use its best efforts
to implement transactions under the Plan and administer the Plan in a manner
that will ensure that each transaction with respect to such a Participant is
exempt from liability under Rule 16b-3 or otherwise not subject to liability
under Section 16(b)), except that this provision shall not limit sales by such a
Participant, and such a Participant may engage in other non-exempt transactions
under the Plan. The Committee may authorize the Company to repurchase any Award
or shares of Stock deliverable or delivered in connection with any Award
(subject to Section 11(k)) to enable a Participant who is subject to Section 16
of the Exchange Act to avoid incurring liability under Section 16(b). Unless
otherwise specified by the Participant, equity securities or derivative
securities acquired under the Plan which are disposed of by a Participant shall
be deemed to be disposed of in the order acquired by the Participant.
(e) Loan Provisions. With the consent of the Committee, and subject at all
times to, and only to the extent, if any, permitted under and in accordance
with, laws and regulations and other binding obligations or provisions
applicable to the Company, the Company may make, guarantee, or arrange for a
loan or loans to a Participant with respect to the exercise of any Option or
other payment in connection with any Award, including the payment by a
Participant of any or all federal, state, or local income or other taxes due in
connection with any Award. Subject to such limitations, the Committee shall have
full authority to decide whether to make a loan or loans hereunder and to
determine the amount, terms, and provisions of any such loan or loans, including
the interest rate, if any, to be charged in respect of any such loan or loans,
whether the loan or loans are to be with or without recourse against the
borrower, the terms on which the loan is to be repaid and conditions, if any,
under which the loan or loans may be forgiven.
9. Change in Control.
(a) Effect of "Change in Control" on Non-Performance Based Awards. In the
event of a "Change in Control," the following provisions shall apply to
non-performance based Awards, including Awards as to which performance
conditions previously have been satisfied or are deemed satisfied under Section
9(b), unless otherwise provided by the Committee in the Award document:
(i) All deferral of settlement, forfeiture conditions and other
restrictions applicable to Awards granted under the Plan shall lapse and
such Awards shall be fully payable as of the time of the Change in Control
without regard to deferral and vesting conditions, except to the extent of
any waiver by the Participant or other express election to defer beyond a
Change in Control and subject to applicable restrictions set forth in
Section 11(a);
(ii) 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 or service by the Participant other than a
termination for "cause" (as defined in any employment or severance
agreement between the Company or a subsidiary or affiliate and the
Participant then in effect or, if none, as defined by the Committee and in
effect at the time of the Change in Control), subject only to applicable
restrictions set forth in Section 11(a); and
10
(iii) The Committee may, in its discretion, determine to extend to any
Participant who holds an Option the right to elect, during the 60-day
period immediately following the Change in Control, in lieu of acquiring
the shares of Stock covered by such Option, to receive 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, and to
extend to any Participant who holds other types of Awards denominated in
shares the right to elect, during the 60-day period immediately following
the Change in Control, in lieu of receiving the shares of Stock covered by
such Award, to receive in cash the Change in Control Price multiplied by
the number of shares of Stock covered by such Award.
(b) Effect of "Change in Control" on Performance-Based Awards. In the event
of a "Change in Control," with respect to an outstanding Award subject to
achievement of performance goals and conditions, such performance goals and
conditions shall be deemed to be met or exceeded if and to the extent so
provided by the Committee in the Award document governing such Award or other
agreement with the Participant.
(c) Definition of "Change in Control." A "Change in Control" shall be
deemed to have occurred if, after the Effective Date, there shall have occurred
any of the following:
(i) Any "person," as such term is used in Section 13(d) and 14(d) of
the Exchange Act (other than the Company, any trustee or other fiduciary
holding securities under an employee benefit plan of the Company, or any
company owned, directly or indirectly, by the shareholders of the Company
in substantially the same proportions as their ownership of stock of the
Company), acquires voting securities of the Company and immediately
thereafter is a "50% Beneficial Owner." For purposes of this provision, a
"50% Beneficial Owner" shall mean a person who is the "beneficial owner"
(as defined in Rule 13d-3 under the Exchange Act), directly or indirectly,
of securities of the Company representing 50% or more of the combined
voting power of the Company's then-outstanding voting securities;
(ii) During any period of two consecutive years commencing on or after
the Effective Date, individuals who at the beginning of such period
constitute the Board, and any new director (other than a director
designated by a person (as defined above) who has entered into an agreement
with the Company to effect a transaction described in subsections (i),
(iii), (iv) or (v) of this definition) whose election by the Board or
nomination for election by the Company's shareholders was approved by a
vote of at least two-thirds (2/3) of the directors then still in office who
either were directors at the beginning of the period or whose election or
nomination for election was previously so approved (the "Continuing
Directors") cease for any reason to constitute at least a majority thereof;
(iii) The shareholders of the Company have approved a merger,
consolidation, recapitalization, or reorganization of the Company, or a
reverse stock split of any class of voting securities of the Company, or
the consummation of any such transaction if shareholder approval is not
obtained, other than any such transaction which would result in at least
50% of the combined voting power of the voting securities of the Company or
the surviving entity outstanding immediately after such transaction being
beneficially owned by the persons who were shareholders of the Company
immediately prior to the transaction in substantially the same proportion
as their ownership of the voting power immediately prior to the
transaction; provided that, for purposes of this Section 9(c)(iii), such
continuity of ownership (and preservation of relative voting power) shall
be deemed to be satisfied if the failure to meet such 50% threshold (or to
substantially preserve such relative ownership of the voting securities) is
due solely to the acquisition of voting securities by an employee benefit
plan of the Company, such surviving entity or a subsidiary thereof; and
provided further, that, if consummation of the corporate transaction
referred to in this Section 9(c)(iii) is subject, at the time of such
approval by shareholders, to the consent of any government or governmental
agency or approval of the shareholders of another entity or other material
contingency, no Change in Control shall occur until such time as such
consent and approval has been obtained and any other material contingency
has been satisfied;
(iv) The shareholders of the Company accept shares in a share exchange
in which the shareholders of the Company immediately before such share
exchange do not or will not own directly
11
or indirectly immediately following such share exchange more than 50%
of the combined voting power of the outstanding voting securities of the
corporation resulting from or surviving such share exchange in
substantially the same proportion as the ownership of the Voting Securities
outstanding immediately before such share exchange;
(v) The shareholders of the Company have approved a plan of complete
liquidation of the Company or an agreement for the sale or disposition by
the Company of all or substantially all of the Company's assets (or any
transaction having a similar effect); provided that, if consummation of the
transaction referred to in this Section 9(c)(v) is subject, at the time of
such approval by shareholders, to the consent of any government or
governmental agency or approval of the shareholders of another entity or
other material contingency, no Change in Control shall occur until such
time as such consent and approval has been obtained and any other material
contingency has been satisfied; and
(vi) any other event which the Board of Directors of the Company
determines shall constitute a Change in Control for purposes of this Plan.
(d) 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
Company, 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. Additional Award Forfeiture Provisions.
(a) Events Triggering Forfeiture. Notwithstanding any other provision of
this Plan, the forfeitures specified in Section 10(a) will be triggered if the
Participant's employment or engagement is terminated by the Company and the
Board makes a determination that the Participant (i) has engaged in any type of
disloyalty to the Company, including without limitation, insubordination, fraud,
embezzlement, theft or dishonesty in the course of his employment or engagement,
or (ii) has been convicted of a felony, or (iii) has disclosed any confidential
or proprietary information without the consent of the Company or (iv) has
breached the terms of any written confidentiality agreement or any
non-competition agreement with the Company in any material respect, all
unexercised options and awards not yet settled held by such the Participant
shall terminate upon the earlier of the date of termination of employment or
engagement for "cause" of the date of such a finding at any time during the
Participant's employment by the Company or a subsidiary or affiliate or during
the one-year period following termination of such employment.
(b) Committee Discretion. The Committee may, in its discretion, waive in
whole or in part the Company's right to forfeiture under this Section, but no
such waiver shall be effective unless evidenced by a writing signed by a duly
authorized officer of the Company. In addition, the Committee may impose
additional conditions on Awards, by inclusion of appropriate provisions in the
document evidencing or governing any such Award.
12
11. General Provisions.
(a) Compliance with Legal and Other Requirements. The Company 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 Company are listed or quoted, or
compliance with any other obligation of the Company, 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 obligations. The
foregoing notwithstanding, in connection with a Change in Control, the Company
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 Company or a subsidiary or affiliate
thereof), 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 and SARs in tandem therewith) may be transferred to one or more
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, subject to any terms and
conditions which the Committee may impose thereon (including limitations the
Committee may deem appropriate in order that offers and sales under the Plan
will meet applicable requirements of registration forms under the Securities Act
of 1933 specified by the Securities and Exchange Commission). 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 document 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 large, special and non-recurring
dividend or other distribution (whether in the form of cash or property other
than Stock), recapitalization, forward or reverse split, Stock dividend,
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, (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 or, if
deemed appropriate, the Committee may make provision for a payment of cash or
property to the holder of an outstanding Option (subject to Section 11(k)). 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 any hypothetical funding pool 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 Company, any subsidiary or
affiliate or other business unit, or the financial statements of the Company or
any subsidiary or affiliate, 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 Company, any subsidiary or affiliate 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
13
adjustment shall be authorized or made if and to the extent that the existence
of such authority (i) would cause Options, SARs, or Performance Awards granted
under Section 8 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, or (ii) would cause the Committee to be deemed to have authority to
change the targets, within the meaning of Treasury Regulation
1.162-27(e)(4)(vi), under the performance goals relating to Options or SARs
granted to Covered Employees and intended to qualify as "performance-based
compensation" under Code Section 162(m) and regulations thereunder.
(d) Tax Provisions.
(i) Withholding. The Company and any subsidiary or affiliate 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 Company 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 withholding obligations, either on a
mandatory or elective basis in the discretion of the Committee. Other
provisions of the Plan notwithstanding, only the minimum amount of Stock
deliverable in connection with an Award necessary to satisfy statutory
withholding requirements will be withheld.
(ii) Required Consent to and Notification of Code Section 83(b)
Election. No election under Section 83(b) of the Code (to include in gross
income in the year of transfer the amounts specified in Code Section 83(b))
or under a similar provision of the laws of a jurisdiction outside the
United States may be made unless expressly permitted by the terms of the
Award document or by action of the Committee in writing prior to the making
of such election. In any case in which a Participant is permitted to make
such an election in connection with an Award, the Participant shall notify
the Company of such election within ten days of filing notice of the
election with the Internal Revenue Service or other governmental authority,
in addition to any filing and notification required pursuant to regulations
issued under Code Section 83(b) or other applicable provision.
(iii) Requirement of Notification Upon Disqualifying Disposition Under
Code Section 421(b). If any Participant shall make any disposition of
shares of Stock delivered pursuant to the exercise of an Incentive Stock
Option under the circumstances described in Code Section 421(b) (relating
to certain disqualifying dispositions), such Participant shall notify the
Company of such disposition within ten days thereof.
(e) Changes to the Plan. The Board may amend, suspend or terminate the Plan
or the Committee's authority to grant Awards under the Plan without the consent
of shareholders or Participants; provided, however, that any amendment to the
Plan shall be submitted to the Company's shareholders for approval not later
than the earliest annual meeting for which the record date is after the date of
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, and the Board
may otherwise, in its discretion, determine to submit other amendments to the
Plan to shareholders for approval; and provided further, that, without the
consent of an affected Participant, no such Board action may materially and
adversely affect the rights of such Participant under any outstanding Award.
Without the approval of shareholders, the Committee will not amend or replace
previously granted Options in a transaction that constitutes a "repricing," as
such term is used in Instruction 3 to Item 402(b)(2)(iv) of Regulation S-K, as
promulgated by the Securities and Exchange Commission. With regard to other
terms of Awards, the Committee shall have no authority to waive or modify any
such Award term after the Award has been granted to the extent the waived or
modified term would be mandatory under the Plan for any Award newly granted at
the date of the waiver or modification.
14
(f) Right of Setoff. The Company or any subsidiary or affiliate may, to the
extent permitted by applicable law, deduct from and set off against any amounts
the Company or a subsidiary or affiliate may owe to the Participant from time to
time, including amounts payable in connection with any Award, owed as wages,
fringe benefits, or other compensation owed to the Participant, such amounts as
may be owed by the Participant to the Company, including but not limited to
amounts owed under Section 10(a), although the Participant shall remain liable
for any part of the Participant's payment obligation not satisfied through such
deduction and setoff. By accepting any Award granted hereunder, the Participant
agrees to any deduction or setoff under this Section 11(f).
(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 Company; 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 Company'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.
(h) Nonexclusivity of the Plan. Neither the adoption of the Plan by the
Board nor its submission to the shareholders of the Company 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, apart from the
Plan, as it may deem desirable, including incentive arrangements and awards
which do not qualify under Code Section 162(m), and such other arrangements may
be either applicable generally or only in specific cases.
(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 consideration, the Participant
shall be repaid the amount of such cash 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) Compliance with Code Section 162(m). It is the intent of the Company
that Options and SARs granted to Covered Employees and other Awards designated
as Awards to Covered Employees subject to Section 7 shall constitute qualified
"performance-based compensation" within the meaning of Code Section 162(m) and
regulations thereunder, unless otherwise determined by the Committee at the time
of allocation of an Award. Accordingly, the terms of Sections 7(b), and (c),
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 yet been completed, the term
Covered Employee as used herein shall mean only a person designated by the
Committee as likely to be a Covered Employee with respect to a specified fiscal
year. If any provision of the Plan or any Award document relating to a
Performance Award that is 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, and no
provision shall be deemed to confer upon the Committee or any other person
discretion to increase the amount of compensation otherwise payable in
connection with any such Award upon attainment of the applicable performance
objectives.
(k) Certain Limitations Relating to Accounting Treatment of Awards. Other
provisions of the Plan notwithstanding, the Committee's authority under the Plan
(including under Sections 8(c), 8(d), 11(c) and 11(d)) is limited to the extent
necessary to ensure that any Option or other Award of a type that the Committee
has intended to be subject to fixed accounting with a measurement date at the
date of grant or the date performance conditions are satisfied under APB 25
shall not become subject to "variable" accounting solely due to the existence of
such authority, unless the Committee specifically determines that the Award
shall remain outstanding despite such "variable" accounting. In addition, other
provisions of the Plan notwithstanding, (i) if any right under this Plan would
cause a transaction to be ineligible for pooling-of-
15
interests accounting that would, but for the right hereunder, be eligible for
such accounting treatment, such right shall be automatically adjusted so that
pooling-of-interests accounting shall be available, including by substituting
Stock or cash having a Fair Market Value equal to any cash or Stock otherwise
payable in respect of any right to cash which would cause the transaction to be
ineligible for pooling-of-interests accounting, and (ii) if the authority of the
Board or the Continuing Directors under Section 9(c) would cause a transaction
to be ineligible for pooling-of-interests accounting that would, but for such
authority, be eligible for such accounting treatment, such authority shall be
limited to the extent necessary so that such transaction would be eligible for
pooling-of-interests accounting.
(l) Governing Law. The validity, construction, and effect of the Plan, any
rules and regulations relating to the Plan and any Award document shall be
determined in accordance with the laws of the Commonwealth of Pennsylvania,
without giving effect to principles of conflicts of laws, and applicable
provisions of federal law.
(m) Awards to Participants Outside the United States. The Committee may
modify the terms of any Award under the Plan made to or held by a Participant
who is then resident or primarily employed outside of the United States in any
manner deemed by the Committee to be necessary or appropriate in order that such
Award shall conform to laws, regulations, and customs of the country in which
the Participant is then resident or primarily employed, or so that the value and
other benefits of the Award to the Participant, as affected by foreign tax laws
and other restrictions applicable as a result of the Participant's residence or
employment abroad shall be comparable to the value of such an Award to a
Participant who is resident or primarily employed in the United States. An Award
may be modified under this Section 11(m) in a manner that is inconsistent with
the express terms of the Plan, so long as such modifications will not contravene
any applicable law or regulation or result in actual liability under Section
16(b) for the Participant whose Award is modified.
(n) 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 Company or a subsidiary or affiliate, (ii) interfering
in any way with the right of the Company or a subsidiary or affiliate 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 Company unless and until the Participant is duly issued or
transferred shares of Stock in accordance with the terms of an Award or an
Option is duly exercised. Except as expressly provided in the Plan and an Award
document, neither the Plan nor any Award document shall confer on any person
other than the Company and the Participant any rights or remedies thereunder.
(o) Severability; Entire Agreement. If any of the provisions of this Plan
or any Award document is finally held to be invalid, illegal or unenforceable
(whether in whole or in part), such provision shall be deemed modified to the
extent, but only to the extent, of such invalidity, illegality or
unenforceability, and the remaining provisions shall not be affected thereby;
provided, that, if any of such provisions is finally held to be invalid,
illegal, or unenforceable because it exceeds the maximum scope determined to be
acceptable to permit such provision to be enforceable, such provision shall be
deemed to be modified to the minimum extent necessary to modify such scope in
order to make such provision enforceable hereunder. The Plan and any Award
documents contain the entire agreement of the parties with respect to the
subject matter thereof and supersede all prior agreements, promises, covenants,
arrangements, communications, representations and warranties between them,
whether written or oral with respect to the subject matter thereof.
(p) Awards under Preexisting Plans. Upon approval of the Plan by
shareholders of the Company as required under Section 11(r), no further awards
shall be granted under the Preexisting Plans. Outstanding awards under such
Preexisting Plans shall remain subject to the terms thereof.
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(q) References to Legal and Regulatory Provisions. References in this Plan
to any provision of law, including the Code and the Exchange Act, or rule or
regulation (including accounting principles and interpretations) shall include
subsequently adopted amendments and any successor provisions, rules or
regulations.
(r) Plan Effective Date and Termination. The Plan shall become effective
if, and at such time as, the shareholders of the Company have approved it by the
affirmative votes of the holders of a majority of the voting securities of the
Company present, or represented, and entitled to vote on the subject matter at a
duly held meeting of shareholders. Unless earlier terminated by action of the
Board of Directors, the Plan will remain in effect until such time as no Stock
remains available for delivery under the Plan and the Company has no further
rights or obligations under the Plan with respect to outstanding Awards under
the Plan.
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