Exhibit 4.3
QUAKER FABRIC CORPORATION
2004 STOCK INCENTIVE PLAN
ARTICLE I
PURPOSE
The purpose of this Quaker Fabric Corporation 2004 Stock Incentive Plan is
to enhance the profitability and value of the Company and its Affiliates for the
benefit of its stockholders by enabling the Company to offer stock-based
incentives and other equity interests in the Company to selected employees of
the Company and its Affiliates, Non-Employee Directors and Consultants, thereby
creating a means to raise the level of stock ownership by such individuals in
order to attract, retain and reward such individuals and strengthen the
mutuality of interests between such individuals and the Company's stockholders.
ARTICLE II
DEFINITIONS
For purposes of the Plan, the following terms shall have the following
meanings:
2.1. "Acquisition Event" shall have the meaning set forth in Section
4.2(d).
2.2. "Affiliate" shall mean, other than the Company, each of the following:
(i) any Subsidiary; (ii) any Parent; (iii) any corporation, trade or business
(including, without limitation, a partnership or limited liability company) that
is directly or indirectly controlled 50% or more (whether by ownership of stock,
assets or an equivalent ownership interest or voting interest) by the Company;
or (iv) any other entity, approved by the Committee as an Affiliate under the
Plan, in which the Company directly or indirectly has a material equity
interest.
2.3. "Award" shall mean any award under the Plan of any Stock Option,
Restricted Stock, Stock Appreciation Right, Performance-Based Award or Other
Stock-Based Award. All Awards shall be granted by, confirmed by and subject to
the terms of, a written agreement executed by the Company and the Participant or
a grant letter executed solely by the Company.
2.4. "Board" shall mean the Board of Directors of the Company.
2.5. "Cause" shall mean, with respect to a Participant's Termination of
Service (other than for a Non-Employee Director): (i) in the case where there is
no employment agreement, consulting agreement, change in control agreement or
similar agreement in effect between the Company or an Affiliate and the
Participant at the time of the relevant grant or award, or where there is an
employment agreement, consulting agreement, change in control agreement or
similar agreement in effect at the time of the relevant grant or award but such
agreement does not define "cause" (or words of like import), habitual neglect by
a Participant with respect to his or her obligations and duties, which continues
after a written notice specifically identifying such conduct is delivered to the
Participant, dishonesty, gross negligence or misconduct in connection with a
Participant's employment with the Company or Affiliates or breach of fiduciary
duty to the Company or its Affiliates by a Participant or (ii) in the case where
there is an employment agreement, consulting agreement, change in control
agreement or similar agreement in effect
between the Company or an Affiliate and the Participant at the time of the
relevant grant or award that defines "cause" (or words of like import) and a
"cause" termination would be permitted under such agreement at that time,
termination that is or would be deemed to be for "cause" (or words of like
import) as defined under such agreement; provided, that with regard to any
agreement that conditions "cause" on occurrence of a change in control, such
definition of "cause" shall not apply until a change in control actually takes
place and then only with regard to a termination thereafter. For a Non-Employee
Director, "Cause" shall mean an act or failure to act that constitutes cause for
removal of a director under the law of the State under which the Company is then
organized.
2.6. "Change in Control" shall have the meaning set forth in Article 12.
2.7. "Change in Control Price" shall have the meaning set forth in Article
12.
2.8. "Code" shall mean the Internal Revenue Code of 1986, as amended.
2.9. "Committee" shall mean: (a) with respect to the application of the
Plan to Eligible Employees and Consultants, a committee or subcommittee of the
Board appointed from time to time by the Board, which committee or subcommittee
shall consist of two (2) or more non-employee directors, each of whom is
intended to be, to the extent required, as the case may be, by Rule 16b-3,
Section 162(m) of the Code or applicable registration, stock exchange, quotation
system, listing or similar rules or regulations or applicable accounting rules,
a "non-employee director," "outside director" or "independent director" (or term
of similar import); provided, however, that if and to the extent that no
Committee exists that has the authority to administer the Plan, the functions of
the Committee shall be exercised by the Board and all references herein to the
Committee shall be deemed to be references to the Board; and (b) with respect to
the application of the Plan to Non-Employee Directors, the Board. If for any
reason the appointed Committee does not meet the requirements of Rule 16b-3 or
Section 162(m) of the Code, such noncompliance with the requirements of Rule
16b-3 or Section 162(m) of the Code shall not affect the validity of the Awards,
grants, interpretations or other actions of the Committee.
2.10. "Common Stock" means the common stock, $.01 par value per share, of
the Company.
2.11. "Company" means Quaker Fabric Corporation, and its successors by
merger, consolidation or otherwise.
2.12. "Consultant" means any natural person who is an advisor or consultant
to the Company or any of its Affiliates.
2.13. "Disability" shall mean a Participant's inability to perform his or
her duties for a period of more than six consecutive months as a result of an
incapacity due to a physical or mental illness, as determined by the Committee
in its sole discretion; provided, however, that for purposes of Incentive Stock
Options, Disability shall mean an Eligible Employee's permanent and total
disability as defined in Section 22(e)(3) of the Code.
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2.14. "Effective Date" shall mean March 2, 2004, in accordance with Article
16.
2.15. "Eligible Employee" shall mean an employee of the Company or any of
its Affiliates.
2.16. "Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended, and the rules and regulations promulgated thereunder.
2.17. "Fair Market Value" means, for purposes of the Plan, unless otherwise
required by any applicable provision of the Code or any regulations issued
thereunder, as of any date and except as provided below, the last sales price
reported for the Common Stock on the applicable date: (a) as reported on the
principal national securities exchange in the United States on which it is then
traded; or (b) if not traded on any such national securities exchange, as quoted
on The Nasdaq Stock Market, or, if not quoted on The Nasdaq Stock Market, as
quoted on another automated quotation system sponsored by the National
Association of Securities Dealers, Inc. or if the Common Stock shall not have
been reported or quoted on such date, on the first day prior thereto on which
the Common Stock was reported or quoted; provided, that the Committee may modify
the definition of Fair Market Value to reflect any changes in the trading
practices of any exchange on which the Common Stock is listed or traded. If the
Common Stock is not traded or quoted on a national securities exchange, The
Nasdaq Stock Market or any automated quotation system sponsored by the National
Association of Securities Dealers, Inc., its Fair Market Value shall be set in
good faith by the Committee. Notwithstanding anything herein to the contrary,
for purposes of granting Incentive Stock Options, "Fair Market Value" means the
price for Common Stock set by the Committee in good faith based on reasonable
methods set forth under Section 422 of the Code, including, without limitation,
a method utilizing the average of prices of the Common Stock reported on the
principal national securities exchange on which it is then traded during a
reasonable period designated by the Committee. For purposes of any Stock
Appreciation Right, the applicable date shall be the date a notice of exercise
is received by the Committee, or if not a day on which the applicable market is
open, the next such day. For purposes of the grant of any Stock Option or Stock
Appreciation Right, the applicable date shall be the immediately preceding date
on which the applicable market was open.
2.18. "Family Member" shall mean "family member" as defined in Section
A.1.(5) of the general instructions of Form S-8 under the Securities Act.
2.19. "Incentive Stock Option" shall mean any Stock Option awarded under
the Plan intended to be and designated as an "Incentive Stock Option" within the
meaning of Section 422 of the Code.
2.20. "Limited Stock Appreciation Right" shall mean an Award made pursuant
to Section 8.5 of the Plan, which may be a Tandem Stock Appreciation Right or a
Non-Tandem Stock Appreciation Right.
2.21. "Non-Employee Director" shall mean a director of the Company who is
not also an employee of the Company or an Affiliate.
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2.22. "Non-Qualified Stock Option" shall mean any Stock Option awarded
under the Plan that is not an Incentive Stock Option.
2.23. "Other Stock-Based Award" means an Award of Common Stock and other
Awards made pursuant to Article 10 that are valued in whole or in part by
reference to, or are payable in or otherwise based on, Common Stock, including,
without limitation, an Award valued by reference to performance of an Affiliate.
2.24. "Parent" shall mean any parent corporation of the Company within the
meaning of Section 424(e) of the Code.
2.25. "Participant" shall mean an Eligible Employee, Non-Employee Director
or Consultant to whom an Award has been made pursuant to the Plan.
2.26. "Performance-Based Award" shall mean an Award made pursuant to
Article 9 of the Plan of a right to receive awards of Common Stock and other
Awards that are valued in whole or in part by reference to, or are payable in or
otherwise based on, Common Stock or attainment of pre-established performance
goals.
2.27. "Performance Criteria" has the meaning set forth in Appendix A.
2.28. "Performance Goal" means the objective performance goals established
by the Committee and, if desirable for purposes of Section 162(m) of the Code,
based on one or more Performance Criteria.
2.29. "Performance Period" means three consecutive fiscal years of the
Company, or such shorter period as determined by the Committee in its
discretion.
2.30. "Restricted Stock" shall mean an award of shares of Common Stock
under the Plan that is subject to restrictions under Article 7.
2.31. "Restriction Period" shall have the meaning set forth in Section
7.3(a) with respect to Restricted Stock for Participants.
2.32. "Retirement" unless otherwise provided by the Committee, shall apply
solely to employees of the Company and its Affiliates and shall mean a
Participant's termination of employment after (i) having attained age sixty-five
(65) or (ii) such earlier date after age fifty-five (55) as approved by the
Board with regard to such Participant (other than by reason of death or
Disability) unless the Participant was terminated for Cause or, as of such time,
could have been terminated for Cause.
2.33. "Rule 16b-3" shall mean Rule 16b-3 under Section 16(b) of the
Exchange Act as then in effect or any successor provisions.
2.34. "Securities Act" means the Securities Act of 1933, as amended, and
the rules and regulations promulgated thereunder.
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2.35. "Section 162(m) of the Code" shall mean the exception for
performance-based compensation under Section 162(m) of the Code and any Treasury
regulations thereunder.
2.36. "Stock Appreciation Right" shall mean the right pursuant to an Award
granted under Article 8. A Tandem Stock Appreciation Right shall mean the right
to surrender to the Company all (or a portion) of a Stock Option in exchange for
an amount in stock equal to the excess of (i) the Fair Market Value, on the date
such Stock Option (or such portion thereof) is surrendered, of the Common Stock
covered by such Stock Option (or such portion thereof), over (ii) the aggregate
exercise price of such Stock Option (or such portion thereof). A Non-Tandem
Stock Appreciation Right shall mean the right to receive an amount in stock
equal to the excess of (x) the Fair Market Value of a share of Common Stock on
the date such right is exercised, over (y) the aggregate exercise price of such
right, otherwise than on surrender of a Stock Option.
2.37. "Stock Option" or "Option" shall mean any option to purchase shares
of Common Stock granted to a Participant pursuant to Article 6.
2.38. "Subsidiary" shall mean any subsidiary corporation of the Company
within the meaning of Section 424(f) of the Code.
2.39. "Ten Percent Stockholder" shall mean a person owning stock possessing
more than 10% of the total combined voting power of all classes of stock of the
corporation employing such person.
2.40. "Termination of Service" shall mean (i) a termination of service (for
reasons other than a military or personal leave of absence granted by the
Company) of a Participant from the Company and its Affiliates or (ii) when an
entity that is employing a Participant ceases to be an Affiliate, unless the
Participant thereupon becomes employed by the Company or another Affiliate.
Unless otherwise specified by the Committee, a Participant shall not be deemed
to have experienced a Termination of Service as a result of the Participant's
change in status among the categories of Eligible Employee, Non-Employee
Director or Consultant.
2.41. "Transfer" or "Transferred" or "Transferable" shall mean anticipate,
alienate, attach, sell, assign, pledge, encumber, charge, hypothecate or
otherwise transfer.
ARTICLE III
ADMINISTRATION
3.1. The Committee. The Plan shall be administered and interpreted by the
Committee.
3.2. Awards. The Committee shall have full authority to grant to Eligible
Employees, Non-Employee Directors and Consultants, pursuant to the terms of the
Plan: (i) Stock Options, (ii) Restricted Stock, (iii) Stock Appreciation Rights,
(iv) Performance-Based Awards and (v) Other Stock-Based Awards. In particular,
the Committee shall have the authority:
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(a) to select the Eligible Employees, Non-Employee Directors and
Consultants to whom Stock Options, Restricted Stock, Stock Appreciation
Rights, Performance-Based Awards and Other Stock-Based Awards may from time
to time be granted hereunder;
(b) to determine whether and to what extent Stock Options, Restricted
Stock, Stock Appreciation Rights, Performance-Based Awards and Other
Stock-Based Awards, or any combination thereof, are to be granted hereunder
to one or more Eligible Employees, Non-Employee Directors or Consultants;
(c) to determine, in accordance with the terms of the Plan, the number
of shares of Common Stock to be covered by each Award granted to a
Participant hereunder;
(d) to determine the terms and conditions, not inconsistent with the
terms of the Plan, of any Award granted hereunder to a Participant
(including, but not limited to, the exercise or purchase price, any
restriction or limitation, any vesting schedule or acceleration thereof, or
any forfeiture restrictions or waiver thereof, regarding any Stock Option
or other Award, and the shares of Common Stock relating thereto, based on
such factors, if any, as the Committee shall determine, in its sole
discretion);
(e) to determine whether and under what circumstances a Stock Option
may be settled in cash and/or Common Stock (including Restricted Stock)
under Section 6.3(g);
(f) to determine whether, to what extent and under what circumstances
grants of Options and other Awards under the Plan are to operate on a
tandem basis and/or in conjunction with or apart from other awards made by
the Company outside of the Plan (including to determine whether a Stock
Appreciation Right is a Tandem Stock Appreciation Right or Non-Tandem Stock
Appreciation Right);
(g) solely to the extent permitted by applicable law, to determine
whether, to what extent and under what circumstances to provide loans
(which may be on a recourse basis and shall bear interest at the rate the
Committee shall provide) to Participants in order to exercise Options under
the Plan;
(h) to modify, extend or renew an Award, subject to Article 13 hereof;
provided, however, that if an Award is modified, extended or renewed and
thereby deemed to be the issuance of a new Award under the Code or the
applicable accounting rules, the exercise price of a Stock Option may
continue to be the original exercise price even if less than the Fair
Market Value of the Common Stock at the time of such modification,
extension or renewal;
(i) to determine whether any particular Award is intended to satisfy
the requirements of Section 162(m) of the Code;
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(j) to determine whether to require an Eligible Employee, Non-Employee
Director or Consultant, as a condition of the granting of any Award, to not
sell or otherwise dispose of shares acquired pursuant to the exercise of an
Option or as an Award for a period of time as determined by the Committee,
in its sole discretion, following the date of the acquisition of such
Option or Award; and
(k) to offer to buy out an Award previously granted, based on such
terms and conditions as the Committee shall establish and communicate to
the Participant at the time such offer is made (provided that any such
offer made in connection with, or in anticipation of, a Change in Control
shall be in accordance with the terms set forth in Section 12.1(c)).
3.3. Guidelines. Subject to Article 13 hereof, the Committee shall have the
authority to adopt, alter and repeal such administrative rules, guidelines and
practices governing the Plan and perform all acts, including the delegation of
its responsibilities, as it shall, from time to time, deem advisable; to
construe and interpret the terms and provisions of the Plan and any Award issued
under the Plan (and any agreements or grant letters relating thereto); and to
otherwise supervise the administration of the Plan. The Committee may correct
any defect, supply any omission or reconcile any inconsistency in the Plan or in
any agreement or grant letter relating thereto in the manner and to the extent
it shall deem necessary to carry the Plan into effect but only to the extent any
such action would be permitted under the applicable provisions of Rule 16b-3 and
Section 162(m) of the Code. The Committee may adopt special guidelines and
provisions for persons who are residing in, or subject to the taxes of,
countries other than the United States to comply with applicable tax and
securities laws and may impose any limitations and restrictions that they deem
necessary to comply with the applicable tax and securities laws of such
countries other than the United States. To the extent applicable, the Plan is
intended to comply with the applicable requirements of Rule 16b-3 and Section
162(m) of the Code with regard to Options, Stock Appreciation Rights and certain
awards of Restricted Stock, Performance-Based Awards and Other Stock-Based
Awards and shall be limited, construed and interpreted in a manner so as to
comply therewith.
3.4. Decisions Final. Any decision, interpretation or other action made or
taken in good faith by or at the direction of the Company, the Board or the
Committee (or any of its members) arising out of or in connection with the Plan
shall be within the absolute discretion of all and each of them, as the case may
be, and shall be final, binding and conclusive on the Company and all Company
and Affiliate employees, directors and consultants (whether current or former)
and their respective heirs, executors, administrators, successors and assigns.
3.5. Procedures. If the Committee is appointed, the Board shall designate
one of the members of the Committee as chairman and the Committee shall hold
meetings, subject to the By-Laws of the Company, at such times and places as it
shall deem advisable. A majority of the Committee members shall constitute a
quorum. All determinations of the Committee shall be made by a majority of the
members present. Any decision or determination reduced to writing and signed by
all the Committee members in accordance with the By-Laws of the Company shall be
fully as effective as if it had been made by a vote at a meeting duly called and
held. The Committee shall keep minutes of its meetings and shall make such rules
and regulations for the conduct of its business as it shall deem advisable.
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3.6. Designation of Consultants/Liability.
(a) The Committee may designate employees of the Company and
professional advisors to assist the Committee in the administration of the
Plan and may grant authority to employees to execute agreements or other
documents on behalf of the Committee.
(b) The Committee may employ such legal counsel, consultants,
appraisers and agents as it may deem desirable for the administration of
the Plan and may rely upon any opinion received from any such counsel,
appraiser or consultant and any computation received from any such
consultant, appraiser or agent. Expenses incurred by the Committee in the
engagement of any such counsel, consultant or agent shall be paid by the
Company. The Board, the Committee, its members and any employee of the
Company designated pursuant to paragraph (a) above shall not be liable for
any action or determination made in good faith with respect to the Plan. To
the maximum extent permitted by applicable law, no officer or employee of
the Company or member or former member of the Committee or of the Board
shall be liable for any action or determination made in good faith with
respect to the Plan or any Award granted under it. To the maximum extent
permitted by applicable law and the Certificate of Incorporation and
By-Laws of the Company and to the extent not covered by insurance, each
officer, employee of the Company and member or former member of the
Committee or of the Board shall be indemnified and held harmless by the
Company against any cost or expense (including reasonable fees of counsel
reasonably acceptable to the Company) or liability (including any sum paid
in settlement of a claim with the approval of the Company), and advanced
amounts necessary to pay the foregoing at the earliest time and to the
fullest extent permitted, arising out of any act or omission to act in
connection with the Plan, except to the extent arising out of such
officer's, employee's, member's or former member's own fraud or bad faith;
provided, however, that the payment of expenses in advance of the
settlement or final disposition of a suit, action or proceeding shall be
made only upon delivery to the Company of an undertaking by or on behalf of
such person to repay all amounts so advanced if it is ultimately determined
that such person is not entitled to be indemnified hereunder. The
indemnification described in this Section shall be in addition to any
rights of indemnification the person may have as a director, officer or
employee or under the Certificate of Incorporation of the Company or the
By-Laws of the Company. Expenses incurred by the Committee or the Board in
the engagement of any such counsel, consultant or agent shall be paid by
the Company. Such indemnification shall be in addition to any rights of
indemnification the officers, employees, directors or members or former
officers, directors or members may have under applicable law or under the
Certificate of Incorporation or By-Laws of the Company or Affiliates.
Notwithstanding anything else herein, this indemnification will not apply
to the actions or determinations made by an individual with regard to
Awards granted to him or her under the Plan.
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ARTICLE IV
SHARE AND OTHER LIMITATIONS
4.1. Shares.
(a) General Limitation. The aggregate number of shares of Common Stock
that may be issued or used for reference purposes under the Plan or with
respect to which all Awards may be granted shall not exceed 1,500,000
shares (subject to any increase or decrease pursuant to Section 4.2);
provided, however, that notwithstanding the foregoing, no more than 375,000
shares (subject to any increase or decrease pursuant to Section 4.2) shall
be subject to Awards of Restricted Stock, Performance-Based Awards or Other
Stock-Based Awards. If any Option or Stock Appreciation Right granted under
the Plan expires, terminates or is canceled for any reason without having
been exercised in full, the number of shares of Common Stock underlying any
unexercised Stock Appreciation Right or Option shall again be available for
the purposes of Awards under the Plan. If any shares of Restricted Stock,
Performance-Based Awards or Other Stock-Based Awards awarded under the Plan
to a Participant are forfeited for any reason, the number of forfeited
shares of Restricted Stock, Performance-Based Awards or Other Stock-Based
Awards shall again be available for the purposes of Awards under the Plan.
If a Tandem Stock Appreciation Right or a Limited Stock Appreciation Right
is granted in tandem with an Option, such grant shall only apply once
against the maximum number of shares of Common Stock that may be issued
under the Plan. In addition, to the extent consistent with applicable law
and, in the case of Incentive Stock Options, with the treatment of an
Incentive Stock Option as such, in determining the number of shares of
Common Stock available for Awards, if Common Stock has been delivered or
exchanged by a Participant as full or partial payment to the Company for
payment of the exercise price or payment of withholding taxes, or if the
number shares of Common Stock otherwise deliverable has been reduced for
payment of the exercise price or payment of withholding taxes, the number
of shares of Common Stock so exchanged or reduced shall again be available
for purposes of Awards.
(b) Individual Participant Limitations. (i) The maximum number of
shares of Common Stock subject to any Award that may be granted under the
Plan during any fiscal year of the Company to any Participant (other than
for a Non-Employee Director) shall be 150,000 shares (subject to any
increase or decrease pursuant to Section 4.2) and, for a Non-Employee
Director, 150,000 shares (subject to any increase or decrease pursuant to
Section 4.2); provided, however, that if the Performance Period for a
Performance-Based Award is less than three consecutive fiscal years, the
maximum number of shares of Common Stock subject to Performance-Based
Awards shall be determined by multiplying 150,000 by a fraction, the
numerator of which is the number of days in the Performance Period and the
denominator of which is 1,095.
(ii) To the extent that shares of Common Stock for which Awards
are permitted to be granted to a Participant pursuant to Section
4.1(b) during a fiscal year of the Company are not covered by an Award
in the Company's fiscal year,
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such shares of Common Stock shall not be available for grant or
issuance to the Participant in any subsequent fiscal year during the
term of the Plan.
4.2. Changes.
(a) The existence of the Plan and the Awards granted hereunder shall
not affect in any way the right or power of the Board or the stockholders
of the Company to make or authorize any adjustment, recapitalization,
reorganization or other change in the Company's capital structure or its
business, any merger or consolidation of the Company or its Affiliates, any
issue of bonds, debentures, preferred or prior preference stock ahead of or
affecting Common Stock, the dissolution or liquidation of the Company or
its Affiliates, any sale or transfer of all or part of its assets or
business or any other corporate act or proceeding.
(b) Subject to Section 4.2(d), in the event of any such change in the
capital structure or business of the Company by reason of any stock
dividend or distribution, stock split or reverse stock split,
recapitalization, reorganization, merger, consolidation, split-up,
combination or exchange of shares, distribution with respect to its
outstanding Common Stock or capital stock other than Common Stock,
reclassification of its capital stock, conversion of the Company's
preferred stock, issuance of warrants or options to purchase any Common
Stock or securities convertible into Common Stock, any sale or Transfer of
all or part of the Company's assets or business, any complete or partial
liquidation, or any similar change affecting the Company's capital
structure or business, then the aggregate number and kind of shares that
thereafter may be issued under the Plan, the number and kind of shares or
other property (including cash) to be issued upon exercise of an
outstanding Option or other Awards (collectively, "Exercisable Awards")
granted under the Plan and the purchase price thereof shall be
appropriately adjusted consistent with such change in such manner as the
Committee may deem equitable to prevent substantial dilution or enlargement
of the rights granted to, or available for, Participants under the Plan,
and any such adjustment determined by the Committee in good faith shall be
binding and conclusive on the Company and all Company and Affiliate
employees, directors, consultants (whether current or former) and their
respective heirs, executors, administrators, successors and assigns.
(c) Fractional shares of Common Stock resulting from any adjustment in
Exercisable Awards pursuant to Section 4.2(a) or (b) shall be aggregated
until, and eliminated at, the time of exercise by rounding down for
fractions less than one-half (1/2) and rounding up for fractions equal to
or greater than one-half (1/2). No cash settlements shall be made with
respect to fractional shares eliminated by rounding. Notice of any
adjustment shall be given by the Committee to each Participant whose
Exercisable Award has been adjusted and such adjustment (whether or not
such notice is given) shall be effective and binding for all purposes of
the Plan.
(d) In the event of a merger or consolidation in which the Company is
not the surviving entity or in the event of any transaction that results in
the acquisition of substantially all of the Company's outstanding Common
Stock by a single person or
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entity or by a group of persons and/or entities acting in concert, or in
the event of the sale or transfer of all or substantially all of the
Company's assets (all of the foregoing being referred to as "Acquisition
Events"), then the Committee may, in its sole discretion, terminate all
outstanding Exercisable Awards of Participants, effective as of the date of
the Acquisition Event, by delivering notice of termination to each such
Participant at least twenty (20) days prior to the date of consummation of
the Acquisition Event; provided, that during the period from the date on
which such notice of termination is delivered to the consummation of the
Acquisition Event, each such Participant shall have the right to exercise
in full all of his or her Exercisable Awards that are then outstanding
(unless otherwise provided in the agreement or grant letter associated with
such Exercisable Award) but contingent on occurrence of the Acquisition
Event, and, provided that, if the Acquisition Event does not take place
within a specified period after giving such notice for any reason
whatsoever, the notice and exercise shall be null and void. If an
Acquisition Event occurs, to the extent the Committee has not terminated
any outstanding Exercisable Awards pursuant to this Section 4.2(d), then
the provisions of Section 4.2(b) shall apply.
4.3. Minimum Purchase Price. Notwithstanding any provision of the Plan to
the contrary, if authorized but previously unissued shares of Common Stock are
issued under the Plan, such shares shall not be issued for a consideration that
is less than as permitted under applicable law.
ARTICLE V
ELIGIBILITY
Only Eligible Employees, Non-Employee Directors and Consultants are
eligible to be granted Awards under the Plan. Eligibility under the Plan shall
be determined by the Committee in its sole and absolute discretion.
ARTICLE VI
STOCK OPTIONS
6.1. Options. Each Stock Option granted hereunder shall be one of two
types: (i) an Incentive Stock Option intended to satisfy the requirements of
Section 422 of the Code or (ii) a Non-Qualified Stock Option.
6.2. Grants. The Committee shall have the authority to grant (x) to any
employee of the Company or an Affiliate described in Section 2.2(i) or (ii), one
or more Incentive Stock Options, Non-Qualified Stock Options or both types of
Stock Options (in each case, with or without Stock Appreciation Rights) and (y)
to any Eligible Employee, Non-Employee Director or Consultant, one or more
Non-Qualified Stock Options (with or without Stock Appreciation Rights). To the
extent that any Stock Option does not qualify as an Incentive Stock Option
(whether because of its provisions or the time or manner of its exercise or
otherwise), such Stock Option or the portion thereof that does not qualify shall
constitute a separate Non-Qualified Stock Option. Notwithstanding any other
provision of the Plan to the contrary or any provision in an agreement or grant
letter evidencing the grant of an Option to the contrary, any Option
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granted to a Participant who is not an employee of the Company or an Affiliate
described in Section 2.2(i) or (ii) shall be a Non-Qualified Stock Option.
6.3. Terms of Options. Options granted under Article 6 of the Plan shall be
subject to Article 11 and the following terms and conditions, and shall be in
such form and contain such additional terms and conditions, not inconsistent
with the terms of the Plan, as the Committee shall deem desirable:
(a) Option Price. The option price per share of Common Stock
purchasable under an Incentive Stock Option or a Non-Qualified Stock Option
shall be determined by the Committee at the time of grant but shall not be
less than 100% of the Fair Market Value of the share of Common Stock at the
time of grant; provided, however, if an Incentive Stock Option is granted
to a Ten Percent Stockholder, the purchase price shall not be less than
110% of the Fair Market Value of the share of Common Stock at the time of
grant.
(b) Option Term. The term of each Stock Option shall be fixed by the
Committee, but no Stock Option shall be exercisable more than ten (10)
years after the date the Option is granted; provided, however, that the
term of an Incentive Stock Option granted to a Ten Percent Stockholder may
not exceed five (5) years.
(c) Exercisability. Stock Options shall be exercisable at such time or
times and subject to such terms and conditions as shall be determined by
the Committee at grant. If the Committee provides, in its discretion, that
any Stock Option is exercisable subject to certain limitations (including,
without limitation, that it is exercisable only in installments or within
certain time periods), the Committee may waive such limitations on the
exercisability at any time at or after grant in whole or in part
(including, without limitation, that the Committee may waive the
installment exercise provisions or accelerate the time at which Options may
be exercised), based on such factors, if any, as the Committee shall
determine, in its sole discretion.
(d) Method of Exercise. Subject to whatever installment exercise and
waiting period provisions apply under subsection (c) above, Stock Options
may be exercised in whole or in part at any time during the Option term, by
giving written notice of exercise to the Company specifying the number of
shares to be purchased. Such notice shall be accompanied by payment in full
of the purchase price as follows: (i) in cash or by check, bank draft or
money order payable to the order of Company, (ii) solely to the extent
authorized by the Committee at the time of exercise and consistent with
applicable law, if the Common Stock is traded on a national securities
exchange, the Nasdaq Stock Market or quoted on a national quotation system
sponsored by the National Association of Securities Dealers, through the
delivery of irrevocable instructions to a broker to deliver promptly to the
Company an amount equal to the purchase price, (iii) by payment in full or
part in the form of Common Stock owned by the Participant for a period of
at least 6 months or such other period as may be required to avoid a charge
to earnings (and for which the Participant has good title free and clear of
any liens and encumbrances) based on the Fair Market Value of the Common
Stock on the payment date as determined
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by the Committee or the Board or (iv) on such other terms and conditions as
may be acceptable to the Committee or the Board, as applicable. No shares
of Common Stock shall be issued until payment therefor, as provided herein,
has been made or provided for.
(e) Incentive Stock Option Limitations. To the extent that the
aggregate Fair Market Value (determined as of the time of grant) of the
Common Stock with respect to which Incentive Stock Options are exercisable
for the first time by an Eligible Employee during any calendar year under
the Plan and/or any other stock option plan of the Company or any
Subsidiary or Parent exceeds $100,000, such Options shall be treated as
Options that are not Incentive Stock Options. In addition, if an Eligible
Employee does not remain employed by the Company, any Subsidiary or Parent
at all times from the time the Option is granted until three (3) months
prior to the date of exercise (or such other period as required by
applicable law), such Option shall be treated as an Option that is not an
Incentive Stock Option. Should the foregoing provision not be necessary in
order for the Stock Options to qualify as Incentive Stock Options or should
any additional provisions be required, the Committee may amend the Plan
accordingly, without the necessity of obtaining the approval of the
stockholders of the Company.
(f) Form of Options. Subject to the terms and conditions and within
the limitations of the Plan, an Option shall be evidenced by such form of
agreement or grant letter as is approved by the Committee.
(g) Form of Settlement. In its sole discretion, the Committee may
provide, at the time of grant, that the shares to be issued upon the
exercise of a Stock Option shall be in the form of Restricted Stock, or
may, in the Option agreement or grant letter, reserve a right to so provide
after the time of grant.
(h) Deferred Delivery of Common Shares. The Committee may in its
discretion permit Participants to defer delivery of Common Stock acquired
pursuant to a Participant's exercise of an Option in accordance with the
terms and conditions established by the Committee.
(i) Early Exercise. The Committee may provide that a Stock Option
include a provision whereby the Participant may elect at any time before
the Participant's Termination of Service to exercise the Stock Option as to
any part or all of the shares of Common Stock subject to the Stock Option
prior to the full vesting of the Stock Option and such shares shall be
subject to the provisions of Article 7 and treated as Restricted Stock. Any
unvested shares of Common Stock so purchased may be subject to a repurchase
option in favor of the Company or to any other restriction the Committee
determines to be appropriate.
(j) Other Terms and Conditions. Options may contain such other
provisions, which shall not be inconsistent with any of the foregoing terms
of the Plan, as the Committee shall deem appropriate. Notwithstanding the
foregoing, an outstanding Stock Option may not be modified to reduce the
exercise price thereof nor may a new Stock Option at a lower exercise price
be substituted for a surrendered Stock Option without the approval of the
stockholders of the Company (in accordance with the laws of
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the state under which the Company is then organized), provided that the
foregoing shall not apply to adjustments or substitutions made in
accordance with Section 4.2 hereof.
ARTICLE VII
RESTRICTED STOCK AWARDS
7.1. Awards of Restricted Stock. Shares of Restricted Stock may be issued
to Eligible Employees, Non-Employee Directors or Consultants either alone or in
addition to other Awards granted under the Plan. The Committee shall determine
the eligible persons to whom, and the time or times at which, grants of
Restricted Stock will be made, the number of shares to be awarded, the price (if
any) to be paid by the recipient (subject to Section 7.2), the time or times
within which such Awards may be subject to forfeiture, the vesting schedule and
rights to acceleration thereof, and all other terms and conditions of the
Awards. The Committee may condition the grant of Restricted Stock upon the
attainment of specified performance goals or such other factors as the Committee
may determine, in its sole discretion, including to comply with the requirements
of Section 162(m) of the Code.
7.2. Awards and Certificates. An Eligible Employee, Non-Employee Director
or Consultant selected to receive Restricted Stock shall not have any rights
with respect to such Award, unless and until such Participant has delivered a
fully executed copy of the Restricted Stock Award agreement or grant letter
evidencing the Award to the Company and has otherwise complied with the
applicable terms and conditions of such Award. Further, such Award shall be
subject to the following conditions:
(a) Purchase Price. The purchase price of Restricted Stock shall be
fixed by the Committee. Subject to Section 4.3, the purchase price for
shares of Restricted Stock may be the minimum permitted by applicable law.
(b) Acceptance. Awards of Restricted Stock must be accepted within a
period of ninety (90) days (or such shorter period as the Committee may
specify at grant) after the Award date, by executing a Restricted Stock
Award agreement or grant letter and by paying whatever price (if any) the
Committee has designated thereunder.
(c) Legend. Each Participant receiving a Restricted Stock Award shall
be issued a stock certificate in respect of such shares of Restricted
Stock, unless the Committee elects to use another system, such as book
entries by the transfer agent, as evidencing ownership of a Restricted
Stock Award. Such certificate shall be registered in the name of such
Participant, and shall bear an appropriate legend referring to the terms,
conditions, and restrictions applicable to such Award, substantially in the
following form:
"The anticipation, alienation, attachment, sale, transfer, assignment,
pledge, encumbrance or charge of the shares of stock represented
hereby are subject to the terms and conditions (including forfeiture)
of the Quaker Fabric Corporation (the "Company") 2004 Stock Incentive
Plan, and an associated agreement or a grant letter dated [________].
Copies of such
14
Plan and agreement or grant letter are on file at the principal office
of the Company."
(d) Custody. The Committee may require that any stock certificates
evidencing such shares be held in custody by the Company until the
restrictions thereon shall have lapsed, and that, as a condition of any
Restricted Stock Award, the Participant shall have delivered a duly signed
stock power, endorsed in blank, relating to the Common Stock covered by
such Award.
7.3. Restrictions and Conditions on Restricted Stock Awards. The shares of
Restricted Stock awarded pursuant to the Plan shall be subject to Article 11 and
the following restrictions and conditions:
(a) Restriction Period; Vesting and Acceleration of Vesting. (i) The
Participant shall not be permitted to Transfer shares of Restricted Stock
awarded under the Plan during a period set by the Committee (the
"Restriction Period") commencing with the date of such Award, as set forth
in the Restricted Stock Award agreement or grant letter, and such agreement
or grant letter shall set forth a vesting schedule and any events that
would accelerate vesting of the shares of Restricted Stock. Within these
limits, based on service, attainment of Performance Goals established
pursuant to Section 7.3(a)(ii) below and/or such other factors or criteria
(including the Performance Criteria set forth on Appendix A) as the
Committee may determine in its sole discretion, the Committee may provide
for the lapse of such restrictions in installments in whole or in part, or
may accelerate the vesting of all or any part of any Restricted Stock Award
and/or waive the deferral limitations for all or any part of any Restricted
Stock Award.
(ii) Performance Goals, Formulae or Standards. If the lapse of
restrictions is based on the attainment of Performance Goals, the
Committee shall establish the Performance Goals and the applicable
vesting percentage of the Restricted Stock Award applicable to each
Participant or class of Participants in writing prior to the beginning
of the applicable fiscal year or at such later date as otherwise
determined by the Committee and while the outcome of the Performance
Goals is substantially uncertain. Such Performance Goals may
incorporate provisions for disregarding (or adjusting for) changes in
accounting methods, corporate transactions (including, without
limitation, dispositions and acquisitions) and other similar type
events or circumstances.
(b) Rights as Stockholder. Except as provided in this subsection (b)
and subsection (a) above and as otherwise determined by the Committee, the
Participant shall have, with respect to the shares of Restricted Stock, all
of the rights of a holder of shares of Common Stock of the Company,
including, without limitation, the right to receive any dividends, the
right to vote such shares and, subject to and conditioned upon the full
vesting of shares of Restricted Stock, the right to tender such shares.
Notwithstanding the foregoing, the payment of dividends shall be deferred
until, and conditioned upon, the expiration of the applicable Restriction
Period, unless the Committee, in its sole discretion, specifies otherwise
at the time of the Award.
15
(c) Lapse of Restrictions. If and when the Restriction Period expires
without a prior forfeiture of the Restricted Stock subject to such
Restriction Period, the certificates for such shares shall be delivered to
the Participant. All legends shall be removed from said certificates at the
time of delivery to the Participant except as otherwise required by
applicable law.
(d) Committee Certification. Solely to the extent required by Section
162(m) of the Code (for Awards intended to satisfy such requirements), the
Committee shall determine and certify in writing, when and as set forth in
Section 162(m) of the Code, the extent to which any applicable Performance
Goals have been satisfied.
ARTICLE VIII
STOCK APPRECIATION RIGHTS
8.1. Tandem Stock Appreciation Rights. Stock Appreciation Rights may be
granted in conjunction with all or part of any Stock Option (a "Reference Stock
Option") granted under the Plan ("Tandem Stock Appreciation Rights"). In the
case of a Non-Qualified Stock Option, such rights may be granted either at or
after the time of the grant of such Reference Stock Option. In the case of an
Incentive Stock Option, such rights may be granted only at the time of the grant
of such Reference Stock Option.
8.2. Terms and Conditions of Tandem Stock Appreciation Rights. Tandem Stock
Appreciation Rights granted hereunder shall be subject to such terms and
conditions, not inconsistent with the provisions of the Plan, as shall be
determined from time to time by the Committee, including Article 11 and the
following:
(a) Term. A Tandem Stock Appreciation Right or applicable portion
thereof granted with respect to a Reference Stock Option shall terminate
and no longer be exercisable upon the termination or exercise of the
Reference Stock Option, except that, unless otherwise determined by the
Committee, in its sole discretion, at the time of grant, a Tandem Stock
Appreciation Right granted with respect to less than the full number of
shares covered by the Reference Stock Option shall not be reduced until,
and then only to the extent that, the exercise or termination of the
Reference Stock Option causes the number of shares covered by the Tandem
Stock Appreciation Right to exceed the number of shares remaining available
and unexercised under the Reference Stock Option.
(b) Exercisability. Tandem Stock Appreciation Rights shall be
exercisable only at such time or times and to the extent that the Reference
Stock Options to which they relate shall be exercisable in accordance with
the provisions of Article 6 and Article 8.
(c) Method of Exercise. A Tandem Stock Appreciation Right may be
exercised by a Participant by surrendering the applicable portion of the
Reference Stock Option. Upon such exercise and surrender, the Participant
shall be entitled to receive an amount determined in the manner prescribed
in this Section 8.2. Stock Options that have
16
been so surrendered, in whole or in part, shall no longer be exercisable to
the extent the related Tandem Stock Appreciation Rights have been
exercised.
(d) Payment. Upon the exercise of a Tandem Stock Appreciation Right a
Participant shall be entitled to receive up to, but no more than, an amount
in Common Stock (as chosen by the Committee in its sole discretion) equal
in value to the excess of the Fair Market Value of one share of Common
Stock over the Option price per share specified in the Reference Stock
Option multiplied by the number of shares in respect of which the Tandem
Stock Appreciation Right shall have been exercised, with the Committee
having the right to determine the form of payment.
(e) Deemed Exercise of Reference Stock Option. Upon the exercise of a
Tandem Stock Appreciation Right, the Reference Stock Option or part thereof
to which such Stock Appreciation Right is related shall be deemed to have
been exercised for the purpose of the limitation set forth in Article 4 of
the Plan on the number of shares of Common Stock to be issued under the
Plan.
8.3. Non-Tandem Stock Appreciation Rights. Non-Tandem Stock Appreciation
Rights may also be granted without reference to any Stock Options granted under
the Plan.
8.4. Terms and Conditions of Non-Tandem Stock Appreciation Rights.
Non-Tandem Stock Appreciation Rights granted hereunder shall be subject to such
terms and conditions, not inconsistent with the provisions of the Plan, as shall
be determined from time to time by the Committee, including Article 11 and the
following:
(a) Term. The term of each Non-Tandem Stock Appreciation Right shall
be fixed by the Committee, but shall not be greater than ten (10) years
after the date the right is granted.
(b) Exercisability. Non-Tandem Stock Appreciation Rights shall be
exercisable at such time or times and subject to such terms and conditions
as shall be determined by the Committee at grant. If the Committee
provides, in its discretion, that any such right is exercisable subject to
certain limitations (including, without limitation, that it is exercisable
only in installments or within certain time periods), the Committee may
waive such limitation on the exercisability at any time at or after grant
in whole or in part (including, without limitation, that the Committee may
waive the installment exercise provisions or accelerate the time at which
rights may be exercised), based on such factors, if any, as the Committee
shall determine, in its sole discretion.
(c) Method of Exercise. Subject to whatever installment exercise and
waiting period provisions apply under subsection (b) above, Non-Tandem
Stock Appreciation Rights may be exercised in whole or in part in
accordance with the terms provided by the Committee at grant, by giving
written notice of exercise to the Company specifying the number of
Non-Tandem Stock Appreciation Rights to be exercised.
17
(d) Payment. Upon the exercise of a Non-Tandem Stock Appreciation
Right a Participant shall be entitled to receive, for each right exercised,
up to, but no more than, an amount in Common Stock (as chosen by the
Committee in its sole discretion) equal in value to the excess of the Fair
Market Value of one share of Common Stock on the date the right is
exercised over the Fair Market Value of one (1) share of Common Stock on
the date the right was awarded to the Participant.
8.5. Limited Stock Appreciation Rights. The Committee may, in its sole
discretion, grant Tandem and Non-Tandem Stock Appreciation Rights either as a
general Stock Appreciation Right or as a Limited Stock Appreciation Right.
Limited Stock Appreciation Rights may be exercised only upon the occurrence of a
Change in Control or such other event as the Committee may, in its sole
discretion, designate at the time of grant or thereafter. Upon the exercise of
Limited Stock Appreciation Rights, except as otherwise provided in an Award
agreement or grant letter, the Participant shall receive in Common Stock, as
determined by the Committee, an amount equal to the amount (i) set forth in
Section 8.2(d) with respect to Tandem Stock Appreciation Rights or (ii) set
forth in Section 8.4(d) with respect to Non-Tandem Stock Appreciation Rights.
ARTICLE IX
PERFORMANCE-BASED AWARDS
9.1. Performance-Based Awards. Performance-Based Awards may be granted
either alone or in addition to or in tandem with Stock Options, Stock
Appreciation Rights, Restricted Stock or Other Stock-Based Awards, and may be
granted with or without the intention of complying with the requirements of
Section 162(m) of the Code. Subject to the provisions of the Plan, the Committee
shall have authority to determine the persons to whom and the time or times at
which such Awards shall be made, the number of shares of Common Stock to be
awarded pursuant to such Awards, and all other conditions of the Awards. The
Committee may also provide for the grant of Common Stock under such Awards upon
the completion of a specified Performance Period.
For each Participant, the Committee may specify a target value for the
Performance-Based Award for which the Participant may be eligible depending upon
the extent to which the applicable Performance Goals are satisfied. Such target
value may be expressed, at the Committee's discretion, as a fixed dollar amount,
a percentage of base pay or total pay (excluding payments made under the Plan)
or an amount determined pursuant to an objective formula or standard.
Establishment of the target value of a Participant's Performance-Based Award for
a calendar year shall not imply or require that the same target value (if any
such target value is established for the Participant by the Committee) be
established for any subsequent calendar year. At the time the Performance Goals
are established, the Committee shall prescribe a formula to determine the
percentage (which may be greater than 100%) of the target value of the
Performance-Based Award that may be payable based upon the degree of attainment
of the Performance Goals during the calendar year. Notwithstanding anything else
herein, the Committee may, in its sole discretion, elect to pay a Participant an
amount that is less than the target value of the Participant's Performance-Based
Award (or attained percentage thereof) regardless of the degree of attainment of
the Performance Goals; provided that no such discretion
18
to reduce a Performance-Based Award payable upon attainment of the Performance
Goals shall be permitted for the calendar year in which a Change in Control of
the Company occurs, or during such calendar year with regard to the prior
calendar year if, with regard to individuals who were Participants at the time
of the Change in Control of the Company, the Performance-Based Awards for the
prior calendar year have not been made by the time of the Change in Control of
the Company.
9.2. Terms and Conditions. Performance-Based Awards made pursuant to this
Article 9 shall be subject to the following terms and conditions:
(a) Dividends. Unless otherwise determined by the Committee at the
time of Award, subject to the provisions of the Award agreement or grant
letter and the Plan, the recipient of an Award under this Article 9 shall
be entitled to receive, currently or on a deferred basis, dividends or
dividend equivalents with respect to the number of shares of Common Stock
covered by the Award, as determined at the time of the Award by the
Committee, in its sole discretion.
(b) Vesting. Any Award under this Article 9 and any Common Stock
covered by any such Award shall vest or be forfeited to the extent so
provided in the Award agreement or grant letter, as determined by the
Committee, in its sole discretion.
(c) Waiver of Limitation. In the event of the Participant's
Retirement, Disability or death, or in cases of special circumstances, the
Committee may, in its sole discretion, waive in whole or in part any or all
of the limitations imposed hereunder (if any) with respect to any or all of
an Award under this Article.
(d) Purchase Price. Subject to Section 4.3, Common Stock issued on a
bonus basis under this Article 9 may be issued for no cash consideration;
Common Stock purchased pursuant to a purchase right awarded under this
Article 9 shall be priced as determined by the Committee.
(e) Performance Goals, Formulae or Standards. (i) The Committee shall
establish the Performance Goals and the target values (if any) in writing
prior to the beginning of the applicable Performance Period or at such
later date as otherwise determined by the Committee and while the outcome
of the Performance Goals is substantially uncertain. Such Performance Goals
may incorporate provisions for disregarding (or adjusting for) changes in
accounting methods, corporate transactions (including, without limitation,
dispositions and acquisitions) and other similar type events or
circumstances. To the extent any Performance-Based Award is intended to
comply with the provisions of Section 162(m) of the Code, if any provision
would create impermissible discretion under Section 162(m) of the Code or
otherwise violate Section 162(m) of the Code, such provision shall be of no
force or effect.
(ii) The measurements used in Performance Goals set under the
Plan shall be determined in accordance with Generally Accepted
Accounting Principles ("GAAP"), except, to the extent that any
objective Performance Goals
19
are used, if any measurements require deviation from GAAP, such
deviation shall be at the discretion of the Committee at the time the
Performance Goals are set or at such later time to the extent
permitted under Section 162(m) of the Code (to the extent the
Committee intends to meet the requirements of Section 162(m) of the
Code).
(f) Committee Certification. Solely to the extent required by Section
162(m) of the Code (for Awards intended to satisfy such requirements), at
the expiration of the Performance Period the Committee shall determine and
certify in writing, when and as set forth in Section 162(m) of the Code,
the extent to which any applicable Performance Goals have been satisfied.
ARTICLE X
OTHER STOCK-BASED AWARDS
10.1. Other Awards. Other Stock-Based Awards (including, without
limitation, restricted stock units) may be granted either alone or in addition
to or in tandem with Stock Options, Stock Appreciation Rights, Restricted Stock
and Performance-Based Awards. Without limiting the foregoing, the Committee may
grant Other Stock-Based Awards to Participants in payment of the amount due such
Participants under the Company's Employee Stock Purchase Plan, which is deemed
to be part of the Plan.
10.2. Committee. Subject to the provisions of the Plan, the Committee shall
have authority to determine the persons to whom and the time or times at which
such Awards shall be made, the number of shares of Common Stock to be awarded
pursuant to such Awards, and all other conditions of the Awards. The Committee
may also provide for the grant of Common Stock under such Awards upon the
completion of a specified performance period.
10.3. Terms and Conditions. Other Stock-Based Awards made pursuant to this
Article 10 shall be subject to the following terms and conditions:
(a) Non-Transferability. Subject to the applicable provisions of the
Award agreement or grant letter and the Plan, shares of Common Stock
subject to Awards made under this Article 10 may not be Transferred prior
to the date on which the shares are issued, or, if later, the date on which
any applicable restriction, performance or deferral period lapses.
(b) Dividends. Unless otherwise determined by the Committee at the
time of award, subject to the provisions of the Award agreement or grant
letter and the Plan, the recipient of an Award under this Article 10 shall
be entitled to receive, currently or on a deferred basis, dividends or
dividend equivalents with respect to the number of shares of Common Stock
covered by the Award, as determined at the time of the Award by the
Committee, in its sole discretion.
20
(c) Vesting. Any Award under this Article 10 and any Common Stock
covered by any such Award shall vest or be forfeited to the extent so
provided in the Award agreement or grant letter, as determined by the
Committee, in its sole discretion.
(d) Waiver of Limitation. The Committee may, in its sole discretion,
waive in whole or in part any or all of the limitations imposed hereunder
(if any) with respect to all or any portion of an Award under this Article
10.
(e) Price. Common Stock or Other Stock-Based Awards issued on a bonus
basis under this Article 10 may be issued for no cash consideration; Common
Stock or Other Stock-Based Awards purchased pursuant to a purchase right
awarded under this Article 10 shall be priced as determined by the
Committee. Subject to Section 4.3, the purchase price of shares of Common
Stock or Other Stock-Based Awards may be zero to the extent permitted by
applicable law, and, to the extent not so permitted, such purchase price
may not be less than par value. The purchase of shares of Common Stock or
Other Stock-Based Awards may be made on either an after-tax or pre-tax
basis, as determined by the Committee; provided, however, that if the
purchase is made on a pre-tax basis, such purchase shall be made pursuant
to a deferred compensation program established by the Committee, which will
be deemed a part of the Plan.
(f) Section 162(m) of the Code. Solely to the extent required by
Section 162(m) of the Code (for Other Stock-Based Awards intended to
satisfy such requirements), the Committee shall determine and certify in
writing, when and as set forth in Section 162(m) of the Code, the extent to
which any applicable Performance Goals have been satisfied.
ARTICLE XI
NON-TRANSFERABILITY AND TERMINATION PROVISIONS
The terms and conditions of this Article 11 shall apply to Awards under the
Plan as follows:
11.1. Nontransferability. No Stock Option, Stock Appreciation Right,
Performance-Based Award or Other Stock-Based Award shall be Transferable by the
Participant otherwise than by will or by the laws of descent and distribution.
All Stock Options and all Stock Appreciation Rights shall be exercisable, during
the Participant's lifetime, only by the Participant or his or her legal guardian
or representative. Tandem Stock Appreciation Rights shall be Transferable,
solely to the extent permitted above, only with the underlying Stock Option. In
addition, except as provided above, no Stock Option shall be Transferred
(whether by operation of law or otherwise), and no Stock Option shall be subject
to execution, attachment or similar process. Upon any attempt to Transfer any
Stock Option, or in the event of any levy upon any Stock Option by reason of any
execution, attachment or similar process contrary to the provisions hereof, such
Stock Option shall immediately terminate and become null and void.
Notwithstanding the foregoing, the Committee may determine at the time of grant
or thereafter that a Non-Qualified Stock Option that is otherwise not
Transferable pursuant to this Article 10 is Transferable to a Family Member in
whole or in part and in such circumstances, and under such conditions, as
specified by the Committee. A Non-Qualified Stock Option that is
21
Transferred to a Family Member pursuant to the preceding sentence may not be
subsequently Transferred by such Family Member. Shares of Restricted Stock under
Article 7 may not be Transferred prior to the date on which shares are issued,
or, if later, the date on which any applicable restriction, performance or
deferral period lapses. No Award shall, except as otherwise specifically
provided by law or herein, be Transferable in any manner, and any attempt to
Transfer any such Award shall be void, and no such Award shall in any manner be
liable for or subject to the debts, contracts, liabilities, engagements or torts
of any person who shall be entitled to such Award, nor shall it be subject to
attachment or legal process for or against such person. Notwithstanding the
foregoing, the Committee may determine at grant or thereafter that, to the
extent consistent with treatment as an Incentive Stock Option, an Incentive
Stock Option may be Transferred by a Participant to a trust if, under Section
671 of the Code and applicable State law, the Participant is considered the sole
beneficial owner of such Option while it is held in the trust.
11.2. Termination of Service. Unless otherwise determined by the Committee
at grant or, if no rights are reduced, thereafter, the following rules apply
with regard to the Termination of Service of a Participant:
(a) Termination by Reason of Death, Retirement or Disability. If a
Participant's Termination of Service is by reason of death, Retirement or
Disability, any Stock Option or Stock Appreciation Right held by such
Participant, unless otherwise determined by the Committee at grant or, if
no rights of the Participant (or his estate) are reduced, thereafter, may
be exercised, to the extent exercisable at the time of such termination, by
the Participant or, if applicable, the Participant's or the estate's legal
representative, at any time within a period of one (1) year from the date
of such Termination of Service, but in no event beyond the expiration of
the stated term of such Stock Option or Stock Appreciation Right; provided,
however, that, if the Participant's Termination of Service is due to
Disability or Retirement and the Participant dies within one year after
such termination, any unexercised Stock Option or Stock Appreciation Right
held by such Participant shall thereafter be exercisable, to the extent to
which it was exercisable at the time of death, for a period of one (1) year
(or such other period as the Committee may specify at grant or, if no
rights of the Participant's estate are reduced, thereafter) from the date
of such death, but in no event beyond the expiration of the stated term of
such Stock Option or Stock Appreciation Right.
(b) Voluntary Resignation or Involuntary Termination Without Cause. If
a Participant's Termination of Service is due to a voluntary resignation or
by involuntary termination without Cause and such termination occurs prior
to, or more than ninety (90) days after, the occurrence of an event that
would be grounds for Termination of Service by the Company for Cause
(without regard to any notice or cure period requirements), any Stock
Option or Stock Appreciation Right held by such Participant, unless
otherwise determined by the Committee at grant or, if no rights of the
Participant are reduced, thereafter, may be exercised, to the extent
exercisable at termination, by the Participant at any time within a period
of ninety (90) days after the date of a Termination of Service without
Cause or thirty (30) days after the date of a voluntary resignation, but in
no event
22
beyond the expiration of the stated term of such Stock Option or Stock
Appreciation Right.
(c) Termination of Service for Cause. Unless otherwise determined by
the Committee at grant or, if no rights of the Participant are reduced,
thereafter, if a Participant's Termination of Service is for Cause for any
reason, any Stock Option or Stock Appreciation Right held by such
Participant shall thereupon terminate and expire as of the date of
termination. In the event the termination is an involuntary termination
without Cause or is a voluntary resignation within ninety (90) days after
occurrence of an event that would be grounds for Termination of Service by
the Company for Cause (without regard to any notice or cure period
requirement), any Stock Option or Stock Appreciation Right held by the
Participant at the time of occurrence of the event that would be grounds
for Termination of Service by the Company for Cause shall be deemed to have
terminated and expired upon occurrence of the event that would be grounds
for Termination of Service by the Company for Cause.
(d) Termination of Service and Restricted Stock. Subject to the
applicable provisions of the Restricted Stock Award agreement or grant
letter and the Plan, upon a Participant's Termination of Service for any
reason during the relevant Restriction Period, all Restricted Stock still
subject to restriction will vest or be forfeited in accordance with the
terms and conditions established by the Committee at grant or thereafter.
(e) Termination of Service and Performance-Based Awards and Other
Stock-Based Awards. Subject to the applicable provisions of the Award
agreement or grant letter and the Plan, upon a Participant's Termination of
Service for any reason, the Performance-Based Award or Other Stock-Based
Awards in question will vest or be forfeited or be payable in accordance
with the terms and conditions established by the Committee at grant or
thereafter.
(f) Unvested Stock Options. Unless otherwise determined by the
Committee at grant, or if no rights of the Participant are reduced,
thereafter, Awards that are not vested as of the date of a Participant's
Termination of Service for any reason shall terminate and expire as of the
date of such Termination of Service, unless otherwise provided in an
employment agreement, consulting agreement, change in control agreement or
similar agreement in effect between the Company or an Affiliate and the
Participant.
ARTICLE XII
CHANGE IN CONTROL PROVISIONS
12.1. Benefits. In the event of a Change in Control of the Company (as
defined below), and except as otherwise provided by the Committee in an Award
agreement, a Participant's unvested Award shall not vest and a Participant's
Award shall be treated in accordance with one or more of the following methods
as determined by the Committee:
23
(a) The Committee, in its sole discretion, may provide that all
unvested Stock Options, Stock Appreciation Rights, Restricted Stock,
Performance-Based Awards and Other Stock-Based Awards shall become fully
vested upon a Change in Control, including, without limitation, the
following: (i) the restrictions to which any shares of Restricted Stock of
a Participant granted prior to the Change in Control are subject shall
lapse as if the applicable Restriction Period had ended upon such Change in
Control, and (ii) the Performance Goals required for vesting of any
unvested Performance-Based Awards or Other Stock-Based Awards shall be
deemed to be satisfied upon such Change in Control and each such Award
shall be paid upon a Change in Control at the higher of (1) the target
value applicable to the Participant, if any, and (2) a payment based on
actual achievement of the Performance Goals through the date of the Change
in Control.
(b) The Committee, in its sole discretion, may provide that awards,
whether or not then vested, shall be continued, assumed, have new rights
substituted therefor or be treated in accordance with Section 4.2(d)
hereof, as determined by the Committee, and restrictions to which any
shares of Restricted Stock or any other Award granted prior to the Change
in Control are subject shall not lapse upon a Change in Control and the
Restricted Stock or other Award shall, where appropriate in the sole
discretion of the Committee, receive the same distribution as other Common
Stock on such terms as determined by the Committee; provided that, the
Committee may decide to award additional Restricted Stock or other Award in
lieu of any cash distribution. Notwithstanding anything to the contrary
herein, for purposes of Incentive Stock Options, any assumed or substituted
Stock Option shall comply with the requirements of Treasury Regulation
Section 1.425-1 (and any amendments thereto).
(c) The Committee, in its sole discretion, may provide for the
purchase of any Awards by the Company or an Affiliate for an amount of cash
equal to the excess of the Change in Control Price (as defined below) of
the shares of Common Stock covered by such Awards, over the aggregate
exercise price of such Awards. For purposes of this Section 12.1, "Change
in Control Price" shall mean the highest price per share of Common Stock
paid in any transaction related to a Change in Control of the Company. All
Exercisable Awards of such Participant, if any, granted prior to the Change
in Control shall be fully vested and immediately exercisable in their
entirety immediately prior to such Change in Control.
12.2. Change in Control. A "Change in Control" shall mean the occurrence of
any of the following:
(a) any person (as defined in Section 3(a)(9) of the Exchange Act and
as used in Sections 13(d) and 14(d) thereof), excluding the Company, any
subsidiary of the Company, any employee benefit plan sponsored or
maintained by the Company or its subsidiaries (including any trustee of any
such plan acting in his capacity as trustee), and Nortex Holdings, Inc,
Larry A. Liebenow (or his estate, beneficiaries or heirs) and any affiliate
(as such term is defined in Rule 12b-2 of the Exchange Act) of Larry A.
Liebenow, becoming the "beneficial owner" (as defined in Rule 13d-3 under
the Exchange Act) of securities of the Company representing 25% of the
total combined voting power of the Company's then outstanding securities;
24
(b) the merger, consolidation or other business combination of the
Company (a "Transaction"), other than a Transaction involving only the
Company and one or more of its subsidiaries, or a Transaction immediately
following which the stockholders of the Company immediately prior to the
Transaction continue to have a majority of the voting power in the
resulting entity and no person other than Nortex Holdings, Inc., Larry A.
Liebenow (or his estate, beneficiaries or heirs) or any Affiliate of Larry
A. Liebenow is the beneficial owner of securities of the resulting entity
representing more than 25% of the voting power in the resulting entity;
(c) during any period of two (2) consecutive years beginning on or
after the date hereof, the persons who were members of the Board
immediately before the beginning of such period (the "Incumbent Directors")
ceasing (for any reason other than death) to constitute at least a majority
of the Board or the board of directors of any successor to the Company,
provided that, any director who was not a director as of the date hereof
shall be deemed to be an Incumbent Director if such director was elected to
the board of directors by, or on the recommendation of or with the approval
of, at least a majority of the directors who then qualified as Incumbent
Directors either actually or by prior operation of the foregoing unless
such election, recommendation or approval occurs as a result of an actual
or threatened election contest (as such terms are used in Rule 14a-11 of
Regulation 14A promulgated under the Exchange Act or any successor
provision) or other actual or threatened solicitation of proxies or
contests by or on behalf of a person other than a member of the Board; or
(d) the approval by the stockholders of the Company of an agreement
for the sale of all or substantially all of the Company's assets other than
the sale of all or substantially all of the assets of the Company to Nortex
Holdings, Inc., or Larry Liebenow (or his estate, beneficiaries or heirs)
or to a person or persons who beneficially own, directly or indirectly, at
least 50% or more of the combined voting power of the outstanding voting
securities of the Company or Nortex Holdings, Inc. at the time of such
sale.
ARTICLE XIII
TERMINATION OR AMENDMENT OF THE PLAN
13.1. Notwithstanding any other provision of the Plan, the Board may at any
time, and from time to time, amend, in whole or in part, any or all of the
provisions of the Plan, or suspend or terminate it entirely, retroactively or
otherwise; provided, however, that, unless otherwise required by law or
specifically provided herein, the rights of a Participant with respect to Awards
granted prior to such amendment, suspension or termination may not be impaired
without the consent of such Participant and, provided further, without the
approval of the stockholders of the Company (in accordance with the laws of the
state under which the Company is then organized), to the extent required by
applicable law, listing, registration, quotation system, exchange or other
similar rules, including the applicable provisions of Rule 16b-3 or Section
162(m) of the Code, or, with regard to Incentive Stock Options, Section 422 of
the Code, no amendment may be made that would (i) increase the aggregate number
of shares of Common Stock that may be
25
issued under the Plan or the maximum individual Participant limitations under
Section 4.1(b), (ii) change the classification of employees eligible to receive
Awards under the Plan, (iii) decrease the minimum option price of any Stock
Option, (iv) extend the maximum option period under Section 6.3, (v) require
stockholder approval in order for the Plan to continue to comply with the
applicable provisions of Rule 16b-3 or Section 162(m) of the Code, or, with
regard to Incentive Stock Options, Section 422 of the Code, (vi) materially
alter the Performance Criteria set forth in Appendix A or (vii) otherwise
violate any applicable law or rule.
13.2. The Committee may amend the terms of any Award theretofore granted,
prospectively or retroactively, but, subject to Article 4 above or as otherwise
specifically provided herein, no such amendment or other action by the Committee
shall impair the rights of any holder without the holder's consent.
ARTICLE XIV
UNFUNDED STATUS OF PLAN
The Plan is intended to constitute an "unfunded" plan for incentive
compensation. With respect to any payments as to which a Participant has a fixed
and vested interest but which are not yet made to a Participant by the Company,
nothing contained herein shall give any such Participant any rights that are
greater than those of a general creditor of the Company.
ARTICLE XV
GENERAL PROVISIONS
15.1. Legend. The Committee may require each person receiving shares of
Common Stock pursuant to an Award under the Plan to represent to and agree with
the Company in writing that the Participant is acquiring the shares without a
view to distribution thereof, and that any subsequent offer for sale or sale of
any such shares of Common Stock shall be made either pursuant to (i) a
registration statement on an appropriate form under the Securities Act, which
registration statement shall have become effective and shall be current with
respect to the shares of Common Stock being offered and sold, or (ii) a specific
exemption from the registration requirements of the Securities Act, and that in
claiming such exemption the Participant will, prior to any offer for sale or
sale of shares of Common Stock, obtain a favorable written opinion, satisfactory
in form and substance to the Company, from counsel acceptable to the Company as
to the availability of such exception. In addition to any legend required by the
Plan, the certificates for such shares may include any legend that the Committee
deems appropriate to reflect any restrictions on Transfer. All certificates for
shares of Common Stock delivered under the Plan shall be subject to such stock
transfer orders and other restrictions as the Committee may deem advisable under
the rules, regulations and other requirements of the Securities and Exchange
Commission, any stock exchange upon which the Common Stock is then listed or any
national securities association system upon whose system the Common Stock is
then quoted, any applicable Federal or state securities law and any applicable
corporate law, and the Committee may cause a legend or legends to be put on any
such certificates to make appropriate reference to such restrictions.
26
15.2. Other Plans. Nothing contained in the Plan shall prevent the Board
from adopting other or additional compensation arrangements, subject to
stockholder approval if such approval is required; and such arrangements may be
either generally applicable or applicable only in specific cases.
15.3. No Right to Employment. Neither the Plan nor the grant of any Award
hereunder shall give any Participant or other employee any right with respect to
continuance of employment by the Company or any Affiliate, nor shall there be a
limitation in any way on the right of the Company or any Affiliate by which an
employee is employed to terminate his employment at any time.
15.4. Withholding of Taxes. The Company shall have the right to deduct from
any payment to be made to a Participant, or to otherwise require, prior to the
issuance or delivery of any shares of Common Stock or the payment of any cash
hereunder, payment by the Participant of, any Federal, state or local taxes
required by law to be withheld. Upon the vesting of Restricted Stock, or upon
making an election under Section 83(b) of the Code, a Participant shall pay all
required withholding to the Company. At the discretion of the Committee, any
such withholding obligation with regard to any Participant may be satisfied by
reducing the number of shares of Common Stock otherwise deliverable or by
delivering shares of Common Stock already owned. Any fraction of a share of
Common Stock required to satisfy such tax obligations shall be disregarded and
the amount due shall be paid instead in cash by the Participant.
15.5. Listing and Other Conditions.
(a) As long as the Common Stock is listed on a national securities
exchange or system sponsored by a national securities association, the
issue of any shares of Common Stock pursuant to an Award shall be
conditioned upon such shares being listed on such exchange or system. The
Company shall have no obligation to issue such shares unless and until such
shares are so listed, and the right to exercise any Option with respect to
such shares shall be suspended until such listing has been effected.
(b) If at any time counsel to the Company shall be of the opinion that
any sale or delivery of shares of Common Stock pursuant to an Award is or
may in the circumstances be unlawful or result in the imposition of excise
taxes on the Company under the statutes, rules or regulations of any
applicable jurisdiction, the Company shall have no obligation to make such
sale or delivery, or to make any application or to effect or to maintain
any qualification or registration under the Securities Act, as amended, or
otherwise with respect to shares of Common Stock or Awards, and the right
to exercise any Option shall be suspended until, in the opinion of said
counsel, such sale or delivery shall be lawful or will not result in the
imposition of excise taxes on the Company.
(c) Upon termination of any period of suspension under this Section
15.5, any Award affected by such suspension that shall not then have
expired or terminated shall be reinstated as to all shares available before
such suspension and as to shares that would
27
otherwise have become available during the period of such suspension, but
no such suspension shall extend the term of any Award.
(d) A Participant shall be required to supply the Company with any
certificates, representations and information that the Company requests and
otherwise cooperate with the Company in obtaining any listing,
registration, qualification, exemption, consent or approval the Company
deems necessary or appropriate.
15.6. Governing Law. The Plan shall be governed and construed in accordance
with the laws of the state under which the Company is then organized (regardless
of the law that might otherwise govern under such state's principles of
conflicts of laws).
15.7. Construction. Wherever any words are used in the Plan in the
masculine gender, they shall be construed as though they were also used in the
feminine gender in all cases where they would so apply, and wherever any words
are used herein in the singular form, they shall be construed as though they
were also used in the plural form in all cases where they would so apply. Unless
otherwise noted, any determination to be made by the Committee under the Plan
shall be understood to be made by the Committee in its sole and absolute
discretion.
15.8. Other Benefits. No Award payment under the Plan shall be deemed
compensation for purposes of computing benefits under any retirement plan of the
Company or its Affiliates nor affect any benefits under any other benefit plan
now or subsequently in effect under which the availability or amount of benefits
is related to the level of compensation.
15.9. Costs. The Company shall bear all expenses included in administering
the Plan, including expenses of issuing Common Stock pursuant to any Awards
hereunder.
15.10. No Right to Same Benefits. The provisions of Awards need not be the
same with respect to each Participant, and such Awards to individual
Participants need not be the same in subsequent years.
15.11. Death/Disability. The Committee may in its discretion require the
transferee of a Participant to supply it with written notice of the
Participant's death or Disability and to supply it with a copy of the will (in
the case of the Participant's death) or such other evidence as the Committee
deems necessary to establish the validity of the transfer of an Award. The
Committee may also require the agreement of the transferee to be bound by all of
the terms and conditions of the Plan. If the Committee shall find, without any
obligation or responsibility of any kind to do so, that any person to whom
payment is payable under the Plan is unable to care for his or her affairs
because of disability, illness or accident, any payment due may be paid to such
person's duly appointed legal representative in such manner and proportions as
the Committee may determine, in it sole discretion. Any such payment shall be a
complete discharge of the liabilities of the Committee and the Board under the
Plan.
15.12. Section 16(b) of the Exchange Act. All elections and transactions
under the Plan by persons subject to Section 16 of the Exchange Act involving
shares of Common Stock are intended to comply with any applicable exemptive
condition under Rule 16b-3. The Committee may establish and adopt written
administrative guidelines, designed to facilitate compliance with
28
Section 16(b) of the Exchange Act, as it may deem necessary or proper for the
administration and operation of the Plan and the transaction of business
thereunder.
15.13. Severability of Provisions. If any provision of the Plan shall be
held invalid or unenforceable, such invalidity or unenforceability shall not
affect any other provisions hereof, and the Plan shall be construed and enforced
as if such provisions had not been included.
15.14. Headings and Captions. The headings and captions herein are provided
for reference and convenience only, shall not be considered part of the Plan,
and shall not be employed in the construction of the Plan.
ARTICLE XVI
APPROVAL OF BOARD AND STOCKHOLDERS
The Plan shall be effective March 2, 2004, subject solely to the extent
required by any applicable law (including without limitation, approval required
under Rule 16b-3, Section 162(m) of the Code or Section 422 of the Code) or
applicable registration, stock exchange, quotation system, listing or similar
rule or regulation, approval by the stockholders of the Company in the manner
set forth in such law, regulation or rule.
ARTICLE XVII
TERM OF PLAN
No Award shall be granted pursuant to the Plan on or after the tenth
anniversary of the earlier of the date the Plan was initially adopted or the
date of stockholder approval (if applicable), but Awards granted prior to such
tenth anniversary may extend beyond that date.
ARTICLE XVIII
NAME OF PLAN
The Plan shall be known as the Quaker Fabric Corporation 2004 Stock
Incentive Plan.
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APPENDIX A
PERFORMANCE CRITERIA
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Performance Goals established for purposes of conditioning the grant of an
Award of Restricted Stock based on performance or the vesting of
performance-based Awards of Restricted Stock, Performance Units,
Performance-Based Awards and/or Other Stock-Based Awards shall be based on one
or more of the following performance criteria ("Performance Criteria"): (i) the
attainment of certain target levels of, or a specified percentage increase in,
revenues, income before income taxes and extraordinary items, net income,
earnings before income tax, earnings before interest, taxes, depreciation and
amortization, funds from investments or a combination of any or all of the
foregoing; (ii) the attainment of certain target levels of, or a percentage
increase in, after-tax or pre-tax profits, including, without limitation, that
attributable to continuing and/or other operations; (iii) the attainment of
certain target levels of, or a specified increase in, operating cash flow; (iv)
the achievement of a certain level of, reduction of, or other specified
objectives with regard to limiting the level of increase in, all or a portion
of, the Company's bank debt or other long-term or short-term public or private
debt or other similar financial obligations of the Company, which may be
calculated net of such cash balances and/or other offsets and adjustments as may
be established by the Committee; (v) the attainment of a specified percentage
increase in earnings per share or earnings per share from continuing operations;
(vi) the attainment of certain target levels of, or a specified increase in
return on capital employed or return on invested capital; (vii) the attainment
of certain target levels of, or a percentage increase in, after-tax or pre-tax
return on stockholders' equity; (viii) the attainment of certain target levels
of, or a specified increase in, economic value-added targets based on a cash
flow return on investment formula; (ix) the attainment of certain target levels
in the fair market value of the shares of the Company's common stock; and (x)
the growth in the value of an investment in the Company's common stock assuming
the reinvestment of dividends. For purposes of item (i) above, "extraordinary
items" shall mean all items of gain, loss or expense for the fiscal year
determined to be extraordinary or unusual in nature or infrequent in occurrence
or related to a corporate transaction (including, without limitation, a
disposition or acquisition) or related to a change in accounting principle, all
as determined in accordance with standards established by Opinion No. 30 of the
Accounting Principles Board.
In addition, such Performance Criteria may be based upon the attainment of
specified levels of Company (or subsidiary, division or other operational unit
of the Company) performance under one or more of the measures described above
relative to the performance of other corporations. To the extent permitted under
Section 162(m) of the Code, but only to the extent permitted under Section
162(m) of the Code (including, without limitation, compliance with any
requirements for stockholder approval), the Committee may: (i) designate
additional business criteria on which the Performance Criteria may be based or
(ii) adjust, modify or amend the aforementioned business criteria.