EXHIBIT 10.7
DOVER CORPORATION
2005 EQUITY AND CASH INCENTIVE PLAN
(AS AMENDED EFFECTIVE JANUARY 1, 2006)
A. PURPOSE AND SCOPE OF
THE PLAN
1. Purpose. The 2005 Equity and Cash Incentive Plan (the "PLAN") is
intended to promote the long-term success of Dover Corporation by providing
salaried officers and other key employees of Dover Corporation and its
subsidiaries, on whom major responsibility for the present and future success of
Dover Corporation rests, with long-range and medium-range inducement to remain
with the organization and to encourage them to increase their efforts to make
Dover Corporation successful. The term "CORPORATION" shall mean Dover
Corporation and any present or future corporation which is or would be a
"subsidiary corporation" of Dover Corporation as defined in Section 424 of the
Internal Revenue Code of 1986, as amended (the "CODE"), unless the context
requires otherwise.
2. Successor Plan. The Plan is the successor to the 1995 Incentive Stock
Option Plan and 1995 Cash Performance Program (the "PREDECESSOR PLAN"). No
further grants of options, restricted stock or cash performance awards may be
made under the Predecessor Plan after the Predecessor Plan expires on January
30, 2005. Options, restricted stock and performance awards under the Predecessor
Plan shall be administered pursuant to the provisions of the Predecessor Plan.
3. Administration. The Plan shall be administered and interpreted by the
Compensation Committee or such other Committee of the Board of Directors as the
Board may designate if there is no Compensation Committee (the "COMMITTEE"),
consisting of not less than three (3) persons appointed by the Board of
Directors of Dover Corporation from among its members. A person may serve as a
Committee member provided he or she shall comply in all respects with any
qualifications required by law, including specifically being a "non-employee
director" for purposes of the rules promulgated under the Securities Exchange
Act of 1934, as amended (the "EXCHANGE ACT"), and an "outside director" for
purposes of Section 162(m) of the Code, and satisfying any other independence
requirement under applicable law and regulations. The Committee will have sole
and complete authority to administer all aspects of the Plan, including but not
limited to: (a) determining the individuals eligible to receive stock options,
SSARs (as defined in Paragraph 6), restricted stock and/or cash performance
awards under the Plan; (b) granting options, SSARs, restricted stock and cash
performance awards; (c) determining the number of shares to be subject to
options and SSARs, and the amount of restricted stock and cash performance
awards to be granted to any such eligible individuals at any time or from time
to time; (d) determining the terms and conditions under which option and SSAR
grants, restricted stock awards and cash performance awards will be made; and
(e) determining whether objectives, conditions and performance criteria for cash
performance awards and, if applicable, restricted stock awards have been met.
The Committee may, subject to the provisions of the Plan, from time to time
establish such rules and regulations as it deems appropriate for the proper
administration of the Plan. The Committee's decisions shall be final, conclusive
and binding with respect to the interpretation and administration of the Plan
and any grants or awards made thereunder.
4. Eligibility. Option and SSAR grants, restricted stock awards and cash
performance awards may be made to any employee of the Corporation who is a
salaried officer or other key employee, including salaried officers who are also
members of the Board of Directors (hereinafter sometimes referred to as
"PARTICIPANTS"). The Committee shall select the participants eligible and
determine the terms of the grants and awards to each.
5. Shares Available for Grant. An aggregate maximum of 20,000,000 shares of
common stock of Dover Corporation (the "COMMON STOCK") will be reserved for
issuance upon exercise of options to purchase Common Stock granted under the
Plan, the exercise of SSARs granted under the Plan, and for awards of restricted
stock. This maximum number is subject to appropriate adjustment resulting from
future stock splits, stock dividends, recapitalizations, reorganizations and
other similar changes to be computed in the same manner as that provided for in
Paragraph 14 below. If any option, SSAR, or award of restricted stock granted
under the Plan expires, terminates, or is forfeited or canceled for any reason,
the number of unpurchased, forfeited or cancelled shares under such option,
right or award will again be available under the Plan.
B. STOCK OPTION AND SSAR GRANTS
6. Stock Options and SSARs. Options to purchase shares of Common Stock may
be granted under the terms of the Plan and shall be designated as either
"non-qualified" stock options or "incentive" stock options ("ISOs") within the
meaning of Section 422 of the Code. Stock appreciation rights that are settled
upon exercise by the issuance of shares of Common Stock ("SSARS") may be granted
under the terms of the Plan. SSARs shall be granted separately from options and
the exercise of an SSAR shall not be linked in any way to the exercise of an
option and shall not affect any option award then outstanding. Stock option
grants and SSARs shall contain such terms and conditions as the Committee may
from time to time determine, subject to the following limitations:
Exercise Price. The price at which shares of Common Stock may be purchased upon
exercise of an option shall be fixed by the Committee and may be equal to or
more than (but not less than) the fair market value (as defined below) of a
share of the Common Stock as of the date the option is granted.
Base Price. The base price of an SSAR shall be fixed by the Committee and may be
equal to or more than (but not less than) the fair market value of a share of
the Common Stock as of the date the SSAR is granted.
Fair Market Value. For purposes of the Plan, the fair market value of a share of
Common Stock on the date the option or SSAR is granted shall be determined in
good faith by the Committee on the basis of such considerations as the Committee
deems appropriate from time to time, including, but not limited to, such factors
as the closing price for a share of Common Stock on such day (or, if such day is
not a trading day, on the next trading day) on the principal United States
exchange on which the Common Stock then regularly trades (the "EXCHANGE"), the
average of the closing bid and asked prices for a share of Common Stock on the
Exchange on the date the option or SSAR is granted by the Committee or the
average of the high and low sales price of a share of Common Stock on the
Exchange on the date the option or SSAR is granted by the Committee ("FAIR
MARKET VALUE"). The Committee shall be authorized, in its discretion, to
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round the fair market value of a share of Common Stock to the nearest whole
number or quarterly fraction thereof.
Term. The term of each option or SSAR will be for such period as the Committee
shall determine as set forth in the stock option or SSAR agreement, but in no
event shall the term of an option or SSAR be greater than 10 years from the date
of grant.
Rights of Holder. A recipient of stock options or SSARs shall have no rights as
a stockholder with respect to any shares issuable or transferable upon exercise
thereof until the date of issuance of a stock certificate for such shares.
Except as specifically set forth in Paragraph 14 below, no adjustment shall be
made for dividends or other distributions of cash or other property on or with
respect to shares of stock covered by options or SSARs paid or payable to
holders of record prior to such issuance.
Limits on Individuals. The maximum number of shares of Common Stock covered by
all options and SSARs granted to a single participant in any year may not exceed
600,000. The aggregate fair market value (determined on the date of grant) of
Common Stock with respect to which a participant is granted ISOs (including ISOs
granted under the Predecessor Plan) which first become exercisable during any
given calendar year shall not exceed $100,000.
7. Exercise. An option or SSAR granted under the Plan shall be exercisable
during the term of the option or SSAR subject to such terms and conditions as
the Committee shall determine and are specified in the stock option or SSAR
agreement, not inconsistent with the terms of the Plan; provided, however, that
except as set forth in Paragraphs 11, 14 and 35, no option or SSAR may be
exercised prior to the third (3rd) anniversary of the date of its grant and any
partial exercise of an option or SSAR shall be with respect to not fewer than
500 shares. In addition, the Committee may condition the exercise of an option
or SSAR upon the attainment by the Corporation or any subsidiary or division or
by the participant of any performance objectives set by the Committee. The
shares to be issued upon exercise of an option or SSAR will be either treasury
or authorized and unissued stock, in the sole discretion of the Corporation.
Option. To exercise an option, the option holder must give written notice
to the Corporation of the number of shares to be purchased accompanied by
payment of the full purchase price of such shares as set forth in Paragraph 8.
The date when the Corporation has actually received both such notice and payment
shall be deemed the date of exercise of the option with respect to the shares
being purchased and the stock certificates therefor shall be issued as soon as
practicable thereafter.
SSAR. To exercise an SSAR, the SSAR holder must give written notice to the
Corporation of the number of SSARs being exercised as provided in the SSAR
agreement. No payment shall be required to exercise an SSAR. The date of actual
receipt by the Corporation of such notice shall be deemed to be the date of
exercise of the SSAR and the stock certificates issued in settlement of such
exercise therefor shall be issued as soon as practicable thereafter. Upon the
exercise of an SSAR, the SSAR holder shall be entitled to receive from the
Corporation for the SSARs being exercised that number of whole shares of Common
Stock having a fair market value on the date of exercise of the SSAR equal in
value to the excess of (A) the fair market value of a share of Common Stock on
the exercise date multiplied by the number of SSARs being exercised over (B) the
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sum of (i) the base price of the SSAR being exercised multiplied by the number
of SSARs being exercised, plus (ii) unless the holder elects to pay such tax in
cash, any amount of tax that must be withheld in connection with such exercise.
For this purpose, the fair market value of a share of Common Stock on the date
of exercise of a SSAR shall be the average of the high and low sales price of a
share of Common Stock on the Exchange on the date a SSAR is exercised or if no
sales have occurred on that date, such value will be the closing price per share
on the next trading date following the exercise of the SSAR. Fractional shares
of Common Stock shall be disregarded upon exercise of an SSAR unless otherwise
determined by the Committee.
8. Payment of Exercise Price. Payment of the option exercise price must be
made in full at the time of exercise (a) by check made payable to the
Corporation, (b) by transfer to the Corporation of shares of Common Stock owned
by the participant, or (c) with a combination of the foregoing. If payment is
made by the transfer of shares, the shares of Common Stock to be transferred to
the Corporation must have been owned by the option holder for more than six (6)
months on the date of transfer (or such other period as may be required to
prevent the Corporation from incurring an adverse accounting charge), the value
per share of the shares so transferred to the Corporation to be credited toward
the purchase price will be the average between the high and the low sales price
per share of Common Stock on the Exchange on the date the option is exercised
or, if no sales have occurred on that date, such value will be the closing price
per share on the Exchange on the next trading day following the exercise of the
option. The shares transferred to the Corporation will be added to the
Corporation's treasury shares or canceled and become authorized and unissued
shares.
9. Transfers. The options and SSARs granted under the Plan may not be sold,
transferred, hypothecated, pledged or otherwise disposed of by any of the
holders except by will or by the laws of descent and distribution, or as
otherwise provided herein. The option or SSARs of any person to acquire stock
and all rights thereunder shall terminate immediately if the holder attempts to
or does sell, assign, transfer, pledge, hypothecate or otherwise dispose of the
option or SSAR or any rights thereunder to any other person except as permitted
herein. Notwithstanding the foregoing, a participant may transfer any
non-qualified stock option (but not ISOs or SSARs) granted under this Plan to
members of the holder's immediate family (defined as a spouse, children and/or
grandchildren), or to one or more trusts for the benefit of such family members
if the instrument evidencing such option expressly so provides and the option
holder does not receive any consideration for the transfer; provided that any
such transferred option shall continue to be subject to the same terms and
conditions that were applicable to such option immediately prior to its transfer
(except that such transferred option shall not be further transferred by the
transferee during the transferee's lifetime).
10. Registration. The Corporation will stamp stock certificates delivered
to the stockholder with an appropriate legend if the shares are not registered
under the Securities Act of 1933, as amended (the "SECURITIES ACT"), or are
otherwise not free to be transferred by the holder and will issue appropriate
stop-order instructions to the transfer agent for the Common Stock, if and to
the extent such stamping or instructions may then be required by the Securities
Act or by any rule or regulation of the Securities and Exchange Commission
issued pursuant to the Securities Act.
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11. Effect of Death, or Permanent Disability or Retirement. If an option or
SSAR holder dies or becomes permanently disabled while employed by the
Corporation, all options or SSARs held by such holder shall become immediately
exercisable and the holder or such holder's estate or the legatees or
distributees of such holder's estate or of the options or SSAR, as the case may
be, shall have the right, on or before the earlier of the respective expiration
date of an option or SSAR or sixty (60) months following the date of such death
or permanent disability, to exercise any or all options or SSARs held by such
holder as of such date of death or permanent disability. If an option or SSAR
holder retires at or after age 62, the holder shall have the right, on or before
the earlier of the expiration date of the option or SSAR or sixty (60) months
following the date of such retirement, to purchase shares under any options or
SSARs which at retirement are, or within sixty (60) months following retirement
would become, exercisable. If the employment of a holder of an option or an SSAR
is terminated for any reason other than the reasons specified above or for
"cause" (as defined below) and either (a) the employment is terminated
voluntarily by such holder who has at least 10 years of service with the
Corporation (including service with any subsidiary corporation of the
Corporation while it is owned by the Corporation) and for whom such years of
service plus his or her age on the date of such termination equals at least 65,
or (b) such holder's employment with the Corporation is terminated due to the
sale of stock or assets of the subsidiary corporation (or line of business) by
which the holder is employed and the holder is so employed by the subsidiary
corporation through the date of such sale, then, in either such case (each an
"EARLY RETIREMENT"), the holder shall have the right (subject to the provisions
of Paragraph 36 below), on or before the earlier of the expiration date of the
option or SSAR or twelve (12) months following the date of such Early
Retirement, to exercise, and acquire shares under, any options or SSARs which at
such termination are, or within twelve (12) months following such termination
would become, exercisable.
12. Voluntary or Involuntary Termination. If any option or SSAR holder's
employment with the Corporation is voluntarily or involuntarily terminated for
any reason, other than for reasons or in circumstances specified above or for
"cause" (as defined below), the holder shall have the right to purchase under
the option or receive upon exercise of the SSAR the number of shares, if any,
which such holder was entitled to so purchase or receive at the time of such
termination at any time on or before the earlier of three (3) months following
the effective date of such termination of employment or the expiration date of
the option or SSAR.
13. Termination for Cause. If an option or SSAR holder's employment with
the Corporation is terminated for cause (defined as (a) a felony conviction of
the holder; (b) the commission by the holder of an act of fraud or embezzlement
against the Corporation; or (c) the holder's willful misconduct or gross
negligence materially detrimental to the Corporation), the option or SSAR shall
be canceled and the holder shall have no further rights to exercise any such
option or SSAR and all of such holder's rights thereunder shall terminate as of
the effective date of termination of employment.
14. Effect of Stock Dividends, Merger, Recapitalization or Reorganization
or Similar Events. If any Common Stock dividend is paid by the Corporation, if
any non-cash distribution is made by the Corporation as respects its Common
Stock, if the shares of Common Stock are split or reclassified, if the
Corporation should be reorganized or consolidated or merged with or into another
corporation, or if all or substantially all the assets of the Corporation are
transferred to any other corporation in a reorganization, each option or SSAR
holder shall be entitled, upon exercise of such holder's option or SSAR, to
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receive for the same aggregate exercise price in the case of an option, or upon
exercise of the SSAR, the same number and kind of shares of stock (to the
nearest whole number) as he or she would have been entitled to receive upon the
happening of such stock dividend, distribution, stock split, reclassification,
reorganization, consolidation, merger or transfer, if he or she had been,
immediately prior to such event, the holder of such shares. Outstanding options
and SSARs shall be appropriately amended as to exercise price or base price and
other terms in a manner consistent with the aforementioned adjustment to the
shares of Common Stock subject to the Plan. The adjustments to be made pursuant
to this Paragraph 14 shall meet the requirements of Section 409A of the Code and
the regulations thereunder. The Board of Directors shall have the power, in the
event of any disposition of substantially all of the assets of the Corporation,
its dissolution, any merger or consolidation, or the merger or consolidation of
any other corporation into the Corporation, to amend all outstanding options and
SSARs to permit their exercise prior to the effectiveness of any such
transaction and to terminate such options or SSARs as of such effectiveness. If
the Board of Directors shall exercise such power, all options and SSARs
outstanding shall be deemed to have been amended to permit the exercise thereof
in whole or in part by the holder at any time or from time to time as determined
by the Board of Directors prior to the effectiveness of such transaction and
such options and SSARs shall be deemed to terminate upon such effectiveness.
15. Change of Control. Options and SSARs and grantees of options and SSARs
shall be subject to the terms of Paragraph 35 below related to a change of
control of the Corporation.
C. RESTRICTED STOCK AWARDS
16. Grant. Subject to the provisions and as part of the Plan, the Committee
shall have the discretion and authority to award to persons eligible to
participate in the Plan shares of Common Stock which are subject to specified
forfeiture restrictions during a specified restriction period and subject to the
other applicable terms of the Plan ("RESTRICTED STOCK"). Subject to the
provisions of the Plan, awards of restricted stock shall contain such terms and
conditions as the Committee may determine at the time of award; provided,
however, in no event shall the aggregate number of shares of restricted stock
awarded under the Plan exceed five percent (5%) of the total number of shares
reserved for issuance under the Plan in accordance with Paragraph 5 hereof.
17. Term of Restriction Period. The Committee may adopt such vesting
schedules, not less than one (1) year and not longer than five (5) years from
the date of the award, as it may deem appropriate with respect to awards of
restricted stock and may condition the lapse of the restrictions applicable to
an award upon the attainment by the Corporation or any subsidiary or division or
by the participant of any performance objectives set by the Committee.
18. Issuance of Shares. Certificates issued for restricted stock shall be
registered in the name of the participant and deposited by the participant with
the Secretary of the Corporation, together with a stock power endorsed in blank.
Upon lapse of the applicable restriction period and/or attainment of any
applicable performance objectives and/or satisfaction of any other restrictions,
the Corporation shall deliver such certificates to the participant. In the event
that the shares of restricted stock are forfeited, such shares automatically
shall be transferred back to the Corporation. The Corporation will stamp the
stock certificates delivered to the participant with an appropriate legend if
the shares are not registered under the Securities Act, or are otherwise not
free to be transferred by the participant and will issue appropriate stop-order
instructions to the transfer agent for the Common Stock, if and to the extent
such stamping or instructions may then be required by the Securities Act or by
any rule or regulation of the Securities and Exchange Commission issued pursuant
to the Securities Act.
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19. Dividends and Voting Rights. In the discretion of the Committee,
dividends which become payable with respect to restricted stock during the
restriction period will be reinvested in additional shares of restricted stock
for the account of the award recipient, accumulated for later distribution to
vested participants (in which case this treatment may be put in a separate
agreement in order for such treatment not to be subject to Section 409A of the
Code), or distributed to the award recipient as paid. An employee who receives
an award of restricted stock may also in the discretion of the Committee be
entitled, during the restriction period, to exercise voting rights with respect
to such restricted stock.
20. Nontransferability. Shares of restricted stock may not be sold,
assigned, transferred, pledged or otherwise encumbered and shall not be subject
to execution, attachment, garnishment or other similar legal process, except as
otherwise provided in the applicable award agreement. Upon any attempt to sell,
transfer, assign, pledge, or otherwise encumber or dispose of the restricted
stock contrary to the provisions of the award agreement or the Plan, the
restricted stock shall immediately be forfeited to the Corporation.
21. Termination of Employment. In the case of a participant's permanent
disability, death, termination of employment by the Corporation other than for
cause (as defined in Paragraph 13 above) or special circumstances, as determined
by the Committee, any purely temporal restrictions remaining with respect to
shares of restricted stock as of the date of such disability, death or
termination of employment shall lapse and, if any performance objectives are
applicable, the shares of restricted stock shall continue to vest as if the
participant's employment had not terminated until the prescribed time for
determining attainment of performance objectives has passed and the appropriate
determination has been made. If the participant's employment with the
Corporation is terminated as a result of (a) the retirement of the participant
at or after age 62, or (b) an Early Retirement approved by the Corporation's
Chief Executive Officer and subject to the provisions of Paragraph 36 below,
then, in either such case, the shares of restricted stock shall continue to vest
as if the participant's employment had not terminated until such time as the
remaining temporal restrictions lapse and, if any performance objectives are
applicable, the prescribed time for determining attainment of performance
objectives has passed and the appropriate determination has been made. If a
participant's employment with the Corporation is voluntarily or involuntarily
terminated for any other reason during the restriction period, the shares of
restricted stock shall be forfeited.
22. Effect of Stock Dividends, Merger, Recapitalization or Reorganization
or Similar Events. In the event of a stock dividend, merger, recapitalization,
reorganization or other transaction described in Paragraph 14 above, the terms
and conditions of the restricted stock awards shall be adjusted in a manner
consistent with adjustments made to options granted under the Plan.
23. Change of Control. Awards of restricted stock and participants who are
awarded restricted stock shall be subject to the terms of Paragraph 35 below.
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24. Cancellation. The Committee may at any time, with due consideration to
the effect on the holder of Section 409A of the Code, require the cancellation
of any award of restricted stock in consideration of a cash payment or
alternative award under the Plan equal to the fair market value of the cancelled
award of restricted stock.
D. CASH PERFORMANCE AWARDS
25. Awards and Period of Contingency. The Committee may, concurrently with,
or independently of, the granting of an option or SSAR under the Plan, in its
sole discretion, grant to a participant the opportunity to earn a cash
performance payment, conditional upon the satisfaction of objective
pre-established performance criteria during a performance period. The
performance period shall be not less than three (3) fiscal years of the
Corporation, including the year in which the conditional grant is made. Any
performance criteria established by the Committee shall include one or more
objective formulas or standards for determining the amount of the performance
payment payable to a participant if the criteria are satisfied and shall
otherwise meet the requirements of Section 162(m) of the Code and the
regulations thereunder. The performance criteria may be fixed by the Committee
for the Corporation as a whole or for a subsidiary or division of the
Corporation, depending on the Committee's judgment as to what is most
appropriate for the individual involved, and shall be set by the Committee not
later than the 90th day after the commencement of the period of services to
which the performance payment relates or by the time 25% of such period of
services has elapsed. Performance criteria shall be based on at least one or
more of the following factors which the Committee deems appropriate, as they
apply to the Corporation as a whole or to a subsidiary or a division: (a)
earnings per share, (b) operating earnings, (c) return on equity, and (d) return
on investment. The performance criteria with respect to a performance period
will be the same for all persons within the same business unit. The material
terms of the performance criteria shall be subject to stockholder approval to
the extent provided in regulations promulgated under Section 162(m) of the Code.
26. Determination of Payment Amount. The aggregate maximum cash payout for
any business unit within the Corporation or the Corporation as a whole shall not
exceed a fixed percentage of the annual average earnings increase of the
relevant entity during the performance period, such percentages and dollar
amounts to be determined by the Committee annually when performance criteria are
established. In no event can an individual receive an annual payment which
exceeds $2 million. A performance payment shall be payable with respect to a
performance period only if the Committee shall have certified that the
applicable performance criteria have been satisfied. The Committee shall also
have the power to approve proportional or adjusted payments under the Plan to
address situations where participants join the Corporation, or transfer within
the Corporation, during a performance period. The Committee shall have the
discretion to decrease the amount payable upon attainment of the performance
criteria (as determined under such formula or standard) to take into account the
effect of any unusual, non-recurring circumstance, but shall have the discretion
to increase the amount payable to take into account any such effect only if such
discretion would not cause such compensation to fail to qualify as "qualified
performance-based compensation" for purposes of Section 162(m) of the Code. Cash
performance awards shall be paid no later than March 15 of the year following
the year in which the Committee certifies that the performance criteria have
been satisfied.
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27. Effect of Death, Disability or Early Retirement. If the participant in
the Plan (a) dies, or (b) becomes permanently disabled while employed by the
Corporation, then, subject to the provisions of Paragraph 36 below, the
participant (or the participant's estate or the legatees or distributees of the
participant's estate, as the case may be) shall be entitled to receive on the
payment date the cash payment which the participant would have earned had the
participant then been an employee of the Corporation, multiplied by a fraction,
the numerator of which is the number of months the participant was employed by
the Corporation during the performance measurement period and the denominator of
which is the number of months of the performance measurement period (treating
fractional months as whole months in each case). If the participant in the Plan
is the subject of an Early Retirement (as defined in Paragraph 11) approved by
the Corporation's Chief Executive Officer and such Early Retirement occurs
during the performance measurement period of one or more cash performance awards
held by such participant, then, subject to the provisions of Paragraph 36 below,
the participant shall be entitled to receive, on the next date after such Early
Retirement on which the Corporation pays any cash performance award amounts, the
cash payment which the participant would have earned had the participant then
been an employee of the Corporation, and all other cash performance awards held
by such participant shall be canceled and all of the participant's rights
thereunder shall terminate as of the effective date of such Early Retirement.
28. Effect of Normal Retirement. If, before the date of payment, the
participant retires on or after age 62, the participant shall be entitled to
receive on the payment date the same amount of cash which the participant would
have earned had such participant then been an employee of the Corporation as of
such date.
29. Effect of Other Terminations of Employment.
(a) General Termination. If a participant's employment with the Corporation
is terminated for any reason, whether voluntary, involuntary, or for cause (as
defined as Paragraph 13 above), other than those described in Paragraphs 27 or
28 above or in Paragraph 29(b) below, then his or her cash performance awards
shall be canceled and all of the participant's rights under any award shall
terminate as of the effective date of the termination of such employment.
(b) Pre-Payment Termination. If, after the end of a performance measurement
period and before the date of payment or distribution of any final award, a
participant's employment is terminated, whether voluntarily or involuntarily for
any reason other than for cause (as defined in Paragraph 13 above), the
participant shall be entitled to receive on the payment or distribution date the
cash payment which the participant would have earned had the participant
continued to be an employee of the Corporation as of the payment or distribution
date.
30. Change of Control. The terms of any performance criteria and each
participant who is granted a cash performance award shall be subject to the
terms of Paragraph 35 below.
E. GENERAL PROVISIONS
31. Legal Compliance. It is the intent of the Corporation that the Plan
comply in all respects with applicable provisions of the Exchange Act, including
Section 16 and Rule 16b-3, so that any grant of options, SSARs or restricted
stock to, or other transaction by, a participant who is subject to the reporting
requirements of Section 16(a) of the Exchange Act shall not result
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in short-swing profits liability under Section 16(b) (except for any transaction
exempted under alternative Exchange Act rules or intended by such participant to
be a non-exempt transaction). It is also the intent of the Corporation that any
compensation income realized in connection with options, SSARs, restricted stock
or any cash performance payments made under the Plan constitute
"performance-based compensation" within the meaning of Section 162(m)(4)(C) of
the Code so that any deduction to which the Corporation is entitled in
connection with such compensation will not be subject to the limitations of
Section 162(m)(1) of the Code. Accordingly, if any provision of the Plan or any
agreement relating to an option or SSAR grant, a restricted stock award or cash
performance award does not comply with the requirements of Rule 16b-3 as then
applicable to any such transaction so that such a participant would be subject
to Section 16(b) liability (except for any transaction exempted under
alternative Exchange Act rules or intended by such participant to be a
non-exempt transaction), or if any provision of the Plan or any agreement
relating to an option or SSAR grant, a restricted stock award or cash
performance award would limit, under Section 162(m)(1) of the Code, the amount
of compensation income to an optionee or participant that the Corporation would
otherwise be entitled to deduct, such provision shall be construed or deemed
amended to the extent necessary to conform to such requirements, or to eliminate
such deductibility limitation, and the participant shall be deemed to have
consented to such construction or amendment.
32. Withholding Taxes. The Corporation shall make arrangements for the
collection of any Federal, State or local taxes of any kind required to be
withheld with respect to any transactions effected under the Plan. The
obligations of the Corporation under the Plan shall be conditional on
satisfaction of such obligations and the Corporation, to the extent permitted by
law, shall have the right to deduct any such taxes from any payment of any kind
otherwise due to or with respect to a participant. A participant shall be solely
responsible for any tax or other amounts payable with respect to amounts
included in participant's income under Section 409A of the Code in respect of
awards received under the Plan, including penalties or interest.
33. Effect of Recapitalization or Reorganization. The obligations of the
Corporation with respect to an option, SSAR, restricted stock award or cash
performance award granted under the Plan shall be binding upon the Corporation,
its successors or assigns, including any successor or resulting company either
in liquidation or merger of the Corporation into another company owning all the
outstanding voting stock of the Corporation or in any other transaction whether
by merger, consolidation or otherwise under which such succeeding or resulting
company acquires all or substantially all the assets of the Corporation and
assumes all or substantially all its obligations, unless options or SSARs are
terminated in accordance with Paragraph 14.
34. Employment Rights and Obligations. Neither the granting of any option
or SSAR, nor the making of a restricted stock or cash performance award under
the Plan, nor the provisions related to a change of control of the Corporation
(as defined below) or a Person (as defined below) seeking to effect a change of
control of the Corporation, shall alter or otherwise affect the rights of the
Corporation to change any and all the terms and conditions of employment of any
participant including, but not limited to, the right to terminate such
participant's employment.
35. Change of Control. Each participant, upon acceptance of a grant of
options, SSARs, restricted stock award or cash performance award, and as a
condition to such grant or award, shall be deemed to have agreed that, in the
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event any Person begins a tender or exchange offer, circulates a proxy to
shareholders, or takes other steps seeking to effect a change of control of the
Corporation (as defined below), such participant will not voluntarily terminate
his or her employment with the Corporation or with a direct or indirect
subsidiary of the Corporation, as the case may be, and, unless terminated by the
Corporation or such subsidiary, will continue to render services to the
Corporation or such subsidiary until such Person has abandoned, terminated or
succeeded in such efforts to effect a change of control.
In the event of a change of control,
(i) all options and SSARs to purchase or acquire shares of common
stock of the Corporation shall immediately vest and become exercisable in
accordance with the terms of the appropriate stock option or SSAR agreement;
(ii) all outstanding restrictions, including any performance
objectives, with respect to any restricted stock shall immediately expire and be
deemed to have been satisfied;
(iii) with respect to cash performance award grants:
(A) all cash performance awards outstanding shall
immediately vest and become immediately due and payable;
(B) the performance measurement period of all cash
performance awards outstanding shall terminate on the last day of the month
prior to the month in which the change of control occurs;
(C) the participant shall be entitled to a cash payment the
amount of which shall be determined in accordance with the terms and conditions
of the Plan and the appropriate cash performance award agreement, which amount
shall be multiplied by a fraction, the numerator of which is the actual number
of months in the performance measurement period (as determined in accordance
with clause (iii)(B) above) and the denominator of which is 36 (or 48 if the
performance measurement period established at the date of grant is four (4)
years or more); and
(D) the Continuing Directors (as defined in Article
Fourteenth of the Corporation's Certificate of Incorporation) shall promptly
determine whether the participant is entitled to any performance award, and any
performance award payable shall be paid to the participant promptly but in no
event more than five (5) days after a change of control;
(iv) the Continuing Directors shall have the sole and complete
authority and discretion to decide any questions concerning the application,
interpretation or scope of any of the terms and conditions of any grant, award
or participation under the Plan, and their decisions shall be binding and
conclusive upon all interested parties; and
(v) other than as set forth above, the terms and conditions of
all grants and awards shall remain unchanged.
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A "CHANGE OF CONTROL" shall be deemed to have taken place upon the
occurrence of any of the following events (capitalized terms are defined below):
(i) any Person is or becomes the Beneficial Owner, directly or
indirectly, of securities of the Corporation (not including in the securities
beneficially owned by such Person any securities acquired directly from the
Corporation or its Affiliates) representing 20% or more of either the then
outstanding shares of common stock of the Corporation or the combined voting
power of the Corporation's then outstanding securities, excluding any Person who
becomes such a Beneficial Owner in connection with a transaction described in
clause (A) of paragraph (iii) below; or
(ii) the following individuals cease for any reason to constitute
a majority of the number of directors then serving: individuals who, on January
1, 2006, constituted the Board and any new director (other than a director whose
initial assumption of office is in connection with an actual or threatened
election contest, including but not limited to a consent solicitation, relating
to the election of directors of the Corporation) whose appointment or election
by the Board or nomination for election by the Corporation's stockholders was
approved or recommended by a vote of at least two-thirds (2/3) of the directors
in office at the time of such approval or recommendation who either were
directors on January 1, 2006 or whose appointment, election or nomination for
election was previously so approved or recommended; or
(iii) there is consummated a merger or consolidation of the
Corporation or any direct or indirect subsidiary of the Corporation with any
other corporation, other than (A) any such merger or consolidation after the
consummation of which the voting securities of the Corporation outstanding
immediately prior to such merger or consolidation continue to represent (either
by remaining outstanding or by being converted into voting securities of the
surviving entity or any parent thereof) at least 50% of the combined voting
power of the voting securities of the Corporation or such surviving entity or
any parent thereof outstanding immediately after such merger or consolidation,
or (B) any such merger or consolidation effected to implement a recapitalization
of the Corporation (or similar transaction) in which no Person is or becomes the
Beneficial Owner, directly or indirectly, of securities of the Corporation (not
including in the securities Beneficially Owned by such Person any securities
acquired directly from the Corporation or its Affiliates) representing 20% or
more of either the then outstanding shares of common stock of the Corporation or
the combined voting power of the Corporation's then outstanding securities; or
(iv) the stockholders of the Corporation approve a plan of
complete liquidation or dissolution of the Corporation or there is consummated
an agreement for the sale or disposition by the Corporation of all or
substantially all of the Corporation's assets, other than a sale or disposition
by the Corporation of all or substantially all of the Corporation's assets to an
entity, at least 50% of the combined voting power of the voting securities of
which are owned by stockholders of the Corporation in substantially the same
proportions as their ownership of the Corporation immediately prior to such
transaction or series of transactions.
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For purposes of this Paragraph 35, the following terms shall have the
meanings indicated:
(i) "AFFILIATE" shall have the meaning set forth in Rule 12b-2
under Section 12 of the Exchange Act.
(ii) "BENEFICIAL OWNER" shall have the meaning set forth in Rule
13d-3 under the Exchange Act, except that a Person shall not be deemed to be the
Beneficial Owner of any securities which are properly filed on a Schedule 13-G.
(iii) "EXCHANGE ACT" shall mean the Securities Exchange Act of
1934, as amended from time to time.
(iv) "PERSON" shall have the meaning given in Section 3(a)(9) of
the Exchange Act, as modified and used in Sections 13(d) and 14(d) thereof,
except that such term shall not include (i) the Corporation or any of its
Affiliates, (ii) a trustee or other fiduciary holding securities under an
employee benefit plan of the Corporation or any of its Affiliates, (iii) an
underwriter temporarily holding securities pursuant to an offering of such
securities or (iv) a corporation owned, directly or indirectly, by the
stockholders of the Corporation in substantially the same proportions as their
ownership of stock of the Corporation.
To the extent deemed necessary or advisable by the Committee to comply with
the provisions of Section 409A of the Code, the Committee is authorized to use
the definition of "change in the ownership or effective control of a corporation
or a change in the ownership of a substantial portion of the assets of the
corporation" in Section 409A(a)(2)(A)(v) of the Code and the regulations
thereunder in lieu of the definition of "change in control" in this Paragraph 35
with respect to all or a portion of options, SSARs, restricted stock awards or
cash performance awards outstanding under the Plan.
36. Non-compete. (a) Any Early Retirement taken by any participant and the
benefits thereof, as contemplated in Paragraphs 11, 21 and 27, unless such
benefits are waived in writing by the participant, shall be subject to the
provisions of this Paragraph 36. Any participant who is the beneficiary of any
such Early Retirement shall be deemed to have expressly agreed not to compete
with the Corporation or any subsidiary of the Corporation at which such
participant was employed at any time in the three (3) years immediately prior to
termination of employment, as the case may be, in the geographic area in which
the Corporation or such subsidiary actively carried on business at the end of
the participant's employment there, for the period with respect to which such
Early Retirement affords the participant enhanced benefits, which period shall
be, (a) with respect to stock options or SSARs, the additional period allowed
the participant for the vesting and exercise of options or SSARs outstanding at
termination of employment, (b) with respect to restricted stock, the period
remaining after the participant's termination of employment until the end of the
original restriction period for such restricted stock, and (c) with respect to
cash performance awards granted under the Plan, the period until the payment
date following the end of the last applicable performance period.
In the event that a participant shall fail to comply with the provisions of
this Paragraph 36, the Early Retirement shall be automatically rescinded and the
participant shall forfeit the enhanced benefits referred to above and shall
return to the Corporation the economic value theretofore realized by reason of
such benefits as determined by the Committee. If the provisions of this
Paragraph 36, or the corresponding provisions of a stock option, SSAR,
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restricted stock award or cash performance award agreement, shall be
unenforceable as to any participant, the Committee may rescind the benefits of
any such Early Retirement with respect to such participant.
If any provision of this Paragraph 36, or the corresponding provisions of a
stock option, SSAR, restricted stock award or cash performance award agreement,
is determined by a court to be unenforceable because of its scope in terms of
geographic area or duration in time or otherwise, the Corporation and the
participant agree that the court making such determination is specifically
authorized to reduce the duration and/or geographical area and/or other scope of
such provision and, in its reduced form, such provision shall then be
enforceable; and in every case the remainder of this Paragraph 36, or the
corresponding provisions of a stock option, SSAR, restricted stock award or cash
performance award agreement, shall not be affected thereby and shall remain
valid and enforceable, as if such affected provision were not contained herein
or therein.
37. Interpretation. The Committee shall have the sole and complete
authority and discretion to decide any questions concerning the application,
interpretation or scope of any of the terms and conditions of the Plan, stock
option, SSAR, restricted stock award or cash performance award agreement entered
into pursuant to the Plan, and its decisions shall be binding and conclusive
upon all interested parties. Reference to any statute or regulation in the Plan
shall mean such statute or regulation in effect from time to time and shall
include any successor statute or regulation.
38. Amendment. Except as expressly provided in the next sentence, the Board
of Directors may amend the Plan in any manner it deems necessary or appropriate
(including any of the terms, conditions or definitions contained herein), or
terminate the Plan at any time prior to January 31, 2015; provided, however,
that any such termination will not affect the validity of any then outstanding
options, SSARs, restricted stock awards or cash performance awards previously
granted under the Plan, as the case may be. Without the approval of the
Corporation's stockholders, the Board of Directors cannot: (a) increase the
maximum number of shares covered by the Plan or change the class of employees
eligible to receive options, or SSARs, or restricted stock or cash performance
awards; (b) reduce the exercise price of any option or base price of a SSAR
below the fair market value of the Common Stock on the date of the option or
SSAR grant; (c) extend beyond 120 months from the date of the grant the period
within which an option or SSAR may be exercised; or (d) make any other amendment
to the Plan that would constitute a modification, revision or amendment
requiring shareholder approval pursuant to any applicable law or regulation or
rule of the Exchange.
39. Effective Date and Termination Date of Plan. The Plan shall become
effective on February 1, 2005, and will terminate on January 31, 2015, provided
that no ISOs shall be granted under the Plan after February 11, 2014. No
non-qualified stock options, SSARs, restricted stock or cash performance awards
shall be granted after January 31, 2015. The amendments to the Plan adopted
November 3, 2005 and February 2, 2006 shall become effective January 1, 2006.
40. Foreign Jurisdictions. The Committee may adopt, amend, and terminate
such arrangements, not inconsistent with the intent of the Plan, as it may deem
necessary or desirable to make available tax or other benefits of the laws of
foreign jurisdictions to participants who are subject to such laws.
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41. Governing Law. The Plan and all grants, options, SSARs, awards and
payments made hereunder shall be governed by and interpreted in accordance with
the laws of the State of New York.
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