Exhibit 10.3
TECUMSEH PRODUCTS COMPANY
LONG-TERM INCENTIVE EQUITY AWARD PLAN
(AS AMENDED AND RESTATED ON AUGUST 7, 2007)
Tecumseh Products Company, a Michigan corporation (the "Company"), has
adopted this Long-Term Incentive Equity Award Plan (this "Plan") for the benefit
of its eligible employees. This Plan is effective as of July 31, 2007.
The purposes of this Plan are as follows:
A. To join the interests of management and other employees with the
interests of shareholders by providing an additional incentive for selected
management and other Employees to further the growth, development, and financial
success of the Company by personally benefiting through the ownership of Company
stock and/or stock rights that recognize such growth, development, and financial
success.
B. To enable the Company to obtain and retain the services of Employees
considered essential to the long-term success of the Company by offering them an
opportunity to own stock in the Company and/or stock rights that will reflect
the growth, development, and financial success of the Company.
C. This Plan is intended to constitute an unfunded, nonqualified plan of
deferred compensation for a select group of management or highly compensated
employees, within the meaning of Section 201(2) of the Employee Retirement
Income Security Act of 1974, as amended ("ERISA"), that is exempt from the
requirements of Title 1 of ERISA.
1. DEFINITIONS
Wherever the following terms are used in this Plan they have the meanings
specified below unless the context clearly indicates otherwise. The singular
pronoun includes the plural where the context so indicates.
"Administrator" means the Committee, unless the Committee has delegated its
authority to administer this Plan as provided in Section 9.5, in which events
"Administrator" means the delegated sub-committee.
"Award" means an Option, a Restricted Stock award, or a Performance Award
awarded or granted under this Plan.
"Award Agreement" means a written agreement executed by an authorized
officer of the Company and the Holder containing such terms and conditions with
respect to an Award as the Administrator determines, consistent with this Plan.
"Award Limit" means 300,000 shares of Class A Stock, as adjusted pursuant
to Section 10.3.
"Board" means the Board of Directors of the Company.
"Change in Control" means any change that occurs after the date this Plan
is first approved by the Company's shareholders and that qualifies as a change
of control event pursuant to Section 409A of the Code, Proposed Treasury
Regulation Section 1.409A-3(g)(5), and all subsequent relevant authority,
including any one or more of the following events::
(a) a change in the ownership of the Company in compliance with
Proposed Treasury Regulation Section 1.409A-3(g)(5)(v) pursuant to which
any person or group acquires ownership of stock of the Company that,
together with stock held by that person or group, constitutes more than 50%
of the total fair market value or total voting power of the stock of the
Company;
(b) a change in the effective control of the Company pursuant to
Proposed Treasury Regulation Section 1.409A-3(g)(5)(vi), pursuant to which
either:
(1) any one person, or more than one person acting as a group,
acquires (or has acquired during the twelve-month period ending on the
date of the most recent acquisition by that person or group) ownership
(including acquisition of beneficial ownership) of stock of the
Company possessing 35% or more of the total voting power of the stock
of the Company; or
(2) a majority of members of the Company's board of directors is
replaced during any twelve-month period by directors whose appointment
or election is not endorsed by a majority of the members of the
Company's board of directors before the date of the appointment or
election; or
(c) a change in the ownership of a substantial portion of the
Company's assets pursuant to Proposed Treasury Regulation Section
1.409A-3(g)(5)(vii) pursuant to which any one person or group acquires (or
has acquired during the twelve-month period ending on the date of the most
recent acquisition by that person or group) assets from the Company that
have a total gross fair market value (as defined in Proposed Treasury
Regulation Section 1.409A-3(g)(5)(vii)) equal to or more than 40% of the
total gross fair market value of all of the assets of the Company
immediately before the acquisition or acquisitions by that person or group.
For purposes of this definition:
(A) "person" means a person as defined in Section 3(a)(9) of the
Exchange Act;
(B) "beneficial ownership" is to be determined in accordance with Rule
13d-3 promulgated under the Exchange Act or any successor regulation;
(C) "group" means a group as described in Rule 13d-5 promulgated under
the Exchange Act or any successor regulation provided the group falls
within the purview of Proposed Treasury Regulation Sections
1.409A-3(g)(v)(B), 1.409A-3(g)(5)(vi)(D), or 1.409A-3(g)(5)(vii)(C), as
applicable; and
(D) the formation of a group under this definition will have the
effect described in paragraph (b) of Rule 13d-5 promulgated under the
Exchange Act or any successor regulation.
In addition, if an Employment Contract provides that a Holder is to receive
severance pay or other rights or benefits if his or her employment terminates
following a "change in control, "change of control," or other similar defined
event, then the occurrence of that event will be a Change in Control for
purposes of this Agreement with respect to that Holder.
"Class A Stock" means the Company's Class A Common Stock.
"Code" means the Internal Revenue Code of 1986, as amended.
"Committee" means the Governance, Compensation, and Nominating Committee of
the Board, or another committee or subcommittee of the Board, appointed as
provided in Section 9.1.
"Company" means Tecumseh Products Company, a Michigan corporation.
"Corporate Transaction" means:
(a) the shareholders of the Company approve a merger, consolidation,
or share exchange of the Company with any other corporation (or other
entity), other than a merger, consolidation, or share exchange that would
result in the voting securities of the Company outstanding immediately
before the transaction continuing to represent (either by remaining
outstanding or by being converted into voting securities of the surviving
entity) more than 50% of the combined voting power of the voting securities
of the Company or the surviving entity outstanding immediately after the
merger, consolidation, or share exchange; or
(b) the shareholders of the Company approve a plan of complete
liquidation of the Company or an agreement for the sale or
disposition by the Company of all or substantially all of the Company's
assets.
"DRO" means a domestic relations order as defined by the Code or Title I of
the Employee Retirement Income Security Act of 1974, as amended, or the rules
either.
"Effective Date" means July 31, 2007.
"Employment Contract" means a written employment contract between a Holder
and the Company or a Subsidiary.
"Employee" means any officer or other employee (as defined in accordance
with Section 3401(c) of the Code) of the Company or any Subsidiary.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Fair Market Value" of a share of Class A Stock as of a given date means:
(a) the closing price of a share of Class A Stock on the principal
exchange on which shares of Class A Stock are then trading, if any (or as
reported on any composite index which includes that principal exchange), on
that date, or if shares were not traded on that date, then on the next
preceding date on which a trade occurred; or
(b) if Class A Stock is not traded on an exchange but is quoted on
Nasdaq or a successor quotation system, the average of the closing
representative bid and asked prices for the Class A Stock on such date as
reported by Nasdaq or the successor quotation system; or
(c) if Class A Stock is not publicly traded on an exchange and not
quoted on Nasdaq or a successor quotation system, the fair market value of
a share of Class A Stock as established by the Administrator acting in good
faith.
"Holder" means a person who has been granted or awarded an Award.
"Option" means a stock option granted under Section 4 of this Plan. Any
Option granted under this Plan will be a non-qualified stock option and not an
incentive stock option within the meaning of Section 422 of the Code.
"Performance Award" means an award of the opportunity to receive shares of
Class A Stock made under Section 8 of this Plan.
"Performance Criteria" means the following business criteria with respect
to the Company, any Subsidiary, or any division or operating unit:
(a) net income;
(b) pre-tax income;
(c) operating income or margin;
(d) cash flow;
(e) earnings per share;
(f) return on equity;
(g) return on invested capital or assets;
(h) cost reductions or savings;
(i) sales or revenue growth;
(j) appreciation in the fair market value of Class A Stock; and
(k) earnings before any one or more of the following items: interest,
taxes, depreciation, or amortization;
each as determined in accordance with generally accepted accounting principles
and subject to any adjustments that may be specified by the Committee with
respect to a Performance Award.
"Permanent Disability" means the inability of the Holder to perform his
usual duties as an Employee by reason of any medically determinable physical or
mental impairment expected to result in death or to be of continuous duration of
twelve months or more.
"Plan" means this Long-Term Incentive Equity Award Plan, as amended and/or
restated from time to time.
"Restricted Stock" means Class A Stock subject to restrictions and awarded
under Section 7 of this Plan.
"Retirement" means a separation from service with the Company or a
Subsidiary at a time when the Holder is eligible for immediate commencement of a
defined benefit pension (other than a disability pension).
"Rule 16b-3" means Rule 16b-3 promulgated under the Exchange Act, as
amended from time to time, or any successor rule.
"Section 162(m) Participant" means any Senior Management Employee whose
compensation for the fiscal year in which the Employee is so designated or a
future fiscal year may be subject to the limit on deductible compensation
imposed by Section 162(m) of the Code. Unless the Administrator determines
otherwise in regard to particular Senior Management Employees whose compensation
is unlikely to be subject to such limit, all Senior Management Employees will be
treated as Section 162(m) Participants.
"Securities Act" means the Securities Act of 1933, as amended.
"Senior Management Employee" means any Employee designated by the
Administrator as a Senior Management Employee for purposes of this Plan.
"Subsidiary" means any corporation or limited liability company in an
unbroken chain of corporations or limited liability companies beginning with the
Company if each of the corporations and limited liabilities other than the last
one in the unbroken chain then owns stock or other equity interests possessing
50% or more of the total combined voting power of all classes of stock or equity
interests in one of the other corporations or limited liability companies in the
chain.
"Termination of Employment" means the time when the employee-employer
relationship between a Holder and the Company or any Subsidiary is terminated
for any reason, with or without cause, including but not limited to a
termination by resignation, discharge, death, Permanent Disability, or
Retirement; but excluding:
(a) terminations where there is a simultaneous reemployment or
continuing employment of a Holder by the Company or any Subsidiary; and
(b) at the discretion of the Administrator, terminations which result
in a temporary severance of the employee-employer relationship.
2. SHARES SUBJECT TO PLAN
2.1 Shares Subject to Plan.
(a) The shares of stock subject to Awards will be Class A Stock.
Subject to adjustment as provided in Section 10.3, the aggregate number of
shares that may be issued upon exercise of Options and under all other
Awards under this Plan may not exceed 1,850,000 shares. The shares of Class
A Stock issuable upon exercise of Options under other Awards will be
previously authorized but unissued shares.
(b) The maximum number of shares that may be subject to Awards granted
under this Plan to any individual in any fiscal year of the Company may not
exceed the Award Limit. For purposes of this limitation, where a
Performance Award is based on performance criteria measured over more than
one fiscal year, the entire potential Performance Award will be treated as
part of the Award Limit for the first year of the entire performance cycle
and not as part of the Award Limit for any other year.
2.2 Add-back of Options and Other Awards. If any Option or Performance
Award expires or is canceled without having been fully exercised or paid, the
number of shares subject to that Option or Performance Award but as to which the
Option or Performance Award was not exercised or paid before its expiration or
cancellation may again be optioned, granted, or awarded under this Plan, subject
to the limitations of Section 2.1. Any shares subject to Awards that are
adjusted under Section 10.3 and become exercisable with respect to shares of
stock of another corporation are to be considered canceled and may again be
optioned, granted, or awarded under this Plan, subject to the limitations of
Section 2.1. Shares of Class A Stock delivered by the Holder or withheld by the
Company upon the exercise or payment of any Award under this Plan, in payment of
the exercise price or tax withholding, may again be optioned, granted, or
awarded under this Plan, subject to the limitations of Section 2.1. If any
shares of Restricted Stock are surrendered by the Holder under Section 7.4,
those shares may again be optioned, granted, or awarded under this Plan, subject
to the limitations of Section 2.1.
3. GRANTING OF AWARDS
3.1 Award Agreement. Each Award will be evidenced by an Award Agreement.
Award Agreements evidencing Awards intended to qualify as performance-based
compensation as described in Section 162(m)(4)(C) of the Code will contain those
terms and conditions necessary to meet the applicable provisions of Section
162(m) of the Code.
3.2 Provisions Applicable to Section 162(m) Participants.
(a) The Administrator, in its discretion, may determine whether an
Award is to qualify as performance-based compensation as described in
Section 162(m)(4)(C) of the Code.
(b) Notwithstanding anything in this Plan to the contrary, the
Administrator may grant any Award to a Section 162(m) Participant,
including:
(1) Restricted Stock, the restrictions with respect to which
lapse upon the attainment of performance goals related to one or more
of the Performance Criteria; and
(2) any Performance Award that becomes payable upon the
attainment of performance goals which are related to one or more of
the Performance Criteria.
(c) To the extent necessary to comply with the performance-based
compensation requirements of Section 162(m)(4)(C) of the Code, with respect
to any Award of Restricted Stock or any Performance Award granted to
Section 162(m) Participants that is intended to qualify as
performance-based compensation, no later than 90 days following the
commencement of the fiscal year in question or any other designated fiscal
period or period of service (or such other time as may be required or
permitted by Section 162(m) of the Code), the Administrator will, in
writing:
(1) select the Performance Criteria applicable to the fiscal year
or other designated fiscal period or period of service;
(2) establish the various performance targets, in terms of an
objective formula or standard, and amounts of the Awards, as
applicable, that may be earned for the fiscal year or other designated
fiscal period or period of service; and
(3) specify the relationship among the Performance Criteria, the
performance targets, and the amounts of the Awards, as applicable, to
be earned by each Section 162(m) Participant for that fiscal year or
other designated fiscal period or period of service.
Following the completion of each fiscal year or other designated fiscal
period or period of service, the Administrator will certify in writing
whether the applicable performance targets have been achieved for the
fiscal year or other designated fiscal period or period of service. In
determining the amount earned by a Section 162(m) Participant, the
Administrator will have the right to reduce (but not to increase) the
amount payable at a given level of performance to take into account
additional factors that the Administrator may deem relevant to the
assessment of individual or corporate performance for the fiscal year or
other designated fiscal period or period of service.
(d) Furthermore, notwithstanding any other provision of this Plan or
any Award Agreement, any Award granted to a Section 162(m) Participant that
is intended to qualify as performance-based compensation as described in
Section 162(m)(4)(C) of the Code will be subject to any additional
limitations set forth in Section 162(m) of the Code (including any
amendment to Section 162(m) of the Code) or any regulations or rulings
issued under Section 162(m) of the Code that are requirements for
qualification as performance-based compensation as described in Section
162(m)(4)(C) of the Code, and this Plan will be deemed amended to the
extent necessary to conform to those requirements.
3.3 Limitations Applicable to Section 16 Persons. Notwithstanding any other
provision of this Plan, this Plan, and any Award granted or awarded to any
individual who is then subject to Section 16 of the Exchange Act, will be
subject to any additional limitations set forth in Rule 16b-3 that are
requirements for the application of the exemption provided by Rule 16b-3. To the
extent permitted by applicable law, this Plan and Awards granted or awarded
under this Plan will be deemed amended to the extent necessary to conform to
Rule 16b-3.
3.4 Consideration. In consideration of the granting of an Award under this
Plan, the Holder must agree, in the Award Agreement, to remain in the employ of
the Company or any Subsidiary for a period of at least one year (or such shorter
period as may be fixed in the Award Agreement or by action of the Administrator
following grant of the Award) after the Award is granted.
3.5 At-Will Employment. Nothing in this Plan or in any Award Agreement will
confer on any Holder any right to continue in the employ of the Company or any
Subsidiary or interfere with or restrict in any way the right of the Company or
any Subsidiary, all of which the Company expressly reserves, to discharge any
Holder at any time for any reason whatsoever, with or without cause, except to
the extent expressly provided otherwise in an Employment Contract.
3.6 Prohibition on Repricing. The Administrator may not, without prior
approval by the Company's shareholders, reprice, replace, or re-grant through
cancellation or lowering of the exercise price any Options issued under this
Plan. Notwithstanding shareholder approval, to the extent that the Company
reasonably determines that any repriced, replaced, or re-granted Option may
constitute a deferral of compensation under Section 409A of the Code, the Option
must be accompanied by a written agreement setting forth the terms and
conditions required to comply with the provisions of Section 409A of the Code.
4. OPTION GRANTS
4.1 Eligibility. Any Senior Management Employee selected by the
Administrator is eligible for the grant of an Option to purchase a number of
shares of Class A Stock determined by the Administrator, subject to the Award
Limit.
4.2 Granting of Options.
(a) The Administrator will from time to time, in its absolute
discretion, and subject to applicable limitations of this Plan:
(1) determine which Senior Management Employees (including but
not limited to Employees who have previously received Awards under
this Plan) are to be granted Options; and
(2) subject to the Award Limit, determine the number of shares to
be subject to the Options.
(b) Upon the selection of an Employee to be granted an Option, the
Administrator will instruct the Secretary of the Company to issue the
Option. The Administrator may impose such conditions on the grant of the
Option as it deems appropriate.
4.3 Options in Lieu of Cash Compensation. Options may be granted under this
Plan to Employees in lieu of cash bonuses that would otherwise be payable to
them, pursuant to policies adopted by the Administrator from time to time.
5. OPTION TERMS
5.1 Exercise Price.
(a) Subject to Section 5.1(b), the exercise price per share for each
Option will be set by the Administrator.
(b) The exercise price may not be less than 100% of the Fair Market
Value of a share of Class A Stock on the date the Option is granted. For
purposes of applying this limitation to any Option granted before this Plan
is approved by the Company's shareholders and where the grant is made
subject to shareholder approval of this Plan, the date the Option is
granted will be determined without regard to the requirement for
shareholder approval.
5.2 Option Term. The term of each Option will be set by the Administrator
but may not exceed ten years from the date the Option is granted.
5.3 Option Vesting. Each Option will vest and become exercisable as
determined by the Administrator and set forth in the Award Agreement evidencing
the Option. No portion of an Option that is unexercisable at Termination of
Employment will become exercisable, except as may be otherwise provided by the
express terms of an Employment Contract.
6. EXERCISE OF OPTIONS
6.1 Partial Exercise. An exercisable Option may be exercised in whole or in
part. However, an Option may not be exercised with respect to fractional shares,
and the Administrator may, by the terms of the Option, require that a partial
exercise be with respect to a minimum number of shares.
6.2 Manner of Exercise. All or a portion of an exercisable Option will be
deemed exercised upon delivery of all of the following to the Secretary of the
Company or his or her office:
(a) a written notice complying with the applicable rules established
by the Administrator stating that the Option or portion of the Option is
exercised, signed by the Holder or other person then entitled to exercise
the Option or portion of the Option;
(b) such representations and documents as the Administrator, in its
absolute discretion, deems necessary or advisable to effect
compliance with all applicable provisions of the Securities Act and any
other applicable federal or state securities laws or regulations;
(c) if the Option is being exercised under Section 10.1 by any person
or persons other than the Holder, appropriate proof of the right of such
person or persons to exercise the Option; and
(d) full cash payment for the shares with respect to which the Option
or portion of the Option is exercised, except that the Administrator may,
in its discretion:
(1) allow payment, in whole or in part, through delivery of
shares of Class A Stock which have been owned by the Holder for at
least six months, duly endorsed for transfer to the Company, with a
Fair Market Value on the date of delivery equal to the aggregate
exercise price;
(2) allow payment, in whole or in part, through surrender of
shares of Class A Stock then issuable upon exercise of the Option
having a Fair Market Value on the date of Option exercise equal to the
aggregate exercise price;
(3) allow payment, in whole or in part, through delivery of a
notice that the Holder has placed a market sell order with a broker
with respect to shares of Class A Stock issuable upon exercise of the
Option and has irrevocably instructed the broker to pay a sufficient
portion of the net proceeds of the sale to the Company to satisfy the
exercise price;
(4) allow payment through any combination of the methods allowed
by subsections (1), (2), and (3) of this Section 6.2(d).
The Administrator may, in its absolute discretion, take whatever actions it
deems appropriate to effect compliance with the Securities Act and any other
applicable federal or state securities laws or regulations including, without
limitation, placing legends on share certificates and issuing stop-transfer
notices to transfer agents and registrars.
6.3 Conditions to Issuance of Shares. The Company will not be required to
issue any shares of stock purchased upon the exercise of any Option or deliver
any related stock certificates before fulfillment of all of the following
conditions:
(a) admission of the shares to listing on all stock exchanges on which
that class of stock is then listed;
(b) completion of any registration or other qualification of the
shares under any state or federal law, or under the rulings or regulations
of the Securities and Exchange Commission or any other governmental
regulatory body that the Administrator, in its absolute discretion, deems
necessary or advisable;
(c) obtaining any approval or other clearance from any state or
federal governmental agency that the Administrator, in its absolute
discretion, determines to be necessary or advisable;
(d) lapse of such reasonable period of time following exercise of the
Option as the Administrator may establish from time to time for reasons of
administrative convenience; and
(e) receipt by the Company of full payment for the shares in good and
collected funds, including payment of any applicable withholding tax, which
in the discretion of the Administrator may be in the form of consideration
used by the Holder to pay for the shares under Section 6.2(d).
The Company may enter into a contract with an independent administrative
services provider to perform recordkeeping, custodial, and other administrative
services with respect to this Plan and shares issued under this Plan. Additional
or different conditions than those enumerated in subsections (a) through (e)
above may be imposed as a result of that contract, and any such conditions are
incorporated by reference in this Plan.
6.4 Rights as Shareholders. Holders will not be, nor have any of the rights
or privileges of, shareholders of the Company in respect of any shares
purchasable upon the exercise of any part of an Option unless and until those
shares have been issued by the Company.
6.5 Ownership and Transfer Restrictions. The Administrator, in its absolute
discretion, may impose such restrictions on the ownership and transferability of
the shares purchasable upon the exercise of an Option as it deems appropriate.
Any such restriction will be set forth in the respective Award Agreement and may
be referred to on the certificates evidencing the shares.
6.6 Additional Limitations on Exercise of Options. Holders may be required
to comply with any timing or other restrictions with respect to the exercise of
Options, including a window-period limitation, as may be imposed in the
discretion of the Administrator.
7. RESTRICTED STOCK
7.1 Eligibility. Any Senior Management Employee selected by the
Administrator is eligible for grant of a number of shares of Restricted Stock
determined by the Administrator, subject to the Award Limit.
7.2 Award of Restricted Stock.
(a) The Administrator may from time to time, in its absolute
discretion:
(1) determine which Senior Management Employees (including but
not limited to Employees who have previously received Awards under
this Plan) will be granted Restricted Stock; and
(2) determine the terms and conditions applicable to the
Restricted Stock, consistent with this Plan and consistent with the
grant being covered by Section 83 of the Code and thus exempt from
Section 409A of the Code.
(b) Rights to Restricted Stock will vest at such time or times as are
determined by the Administrator in its absolute discretion. Rights that do
not vest will be forfeited.
(c) Upon the selection of a Senior Management Employee to be awarded
Restricted Stock, the Administrator will instruct the Secretary of the
Company to issue the Restricted Stock and may impose such conditions on the
issuance of such Restricted Stock as it deems appropriate.
7.3 Rights as Shareholders. Subject to Section 7.4, upon delivery of the
shares of Restricted Stock to the escrow holder under Section 7.5, the Holder
will have, unless otherwise provided by the Administrator, all the rights of a
shareholder with respect to those shares, subject to the restrictions in his or
her Award Agreement, including the right to vote and receive all dividends and
other distributions paid or made with respect to the shares, except that, in the
discretion of the Administrator, any extraordinary distributions with respect to
the Class A Stock may be subjected to the restrictions set forth in Section 7.4.
7.4 Restrictions. All shares of Restricted Stock issued under this Plan
(including any shares received as a result of stock dividends, stock splits, or
any other form of recapitalization) will, under the terms of each individual
Award Agreement, be subject to such restrictions as the Administrator provides,
which restrictions may include, without limitation, restrictions concerning
voting rights and transferability and restrictions based on duration of
employment with the Company, Company performance and individual performance.
Except with
respect to shares of Restricted Stock granted to Section 162(m) Participants and
intended to be performance-based compensation under Section 162(m) of the Code,
by action taken after the Restricted Stock is issued, the Administrator may, on
such terms and conditions as it may determine to be appropriate, remove any or
all of the restrictions imposed by the terms of the Award Agreement. Restricted
Stock may not be sold or encumbered until all restrictions are terminated or
expire. A Holder's rights in unvested Restricted Stock will lapse, and the
Restricted Stock will be surrendered to the Company without consideration, upon
the Holder's Termination of Employment with the Company unless otherwise
expressly provided in an Employment Contract, in which event the terms of the
Employment Contract will be given effect.
7.5 Escrow. The Secretary of the Company or such other escrow holder as the
Administrator appoints will retain physical custody of each certificate
representing Restricted Stock and will credit the stock to a separate restricted
account until all of the restrictions imposed under the Award Agreement with
respect to the shares expire or are removed. The Company may enter into a
contract with an independent administrative services provider to perform
recordkeeping, custodial, and other administrative services with respect to this
Plan and Restricted Stock issued under this Plan. Terms and conditions in
addition to those enumerated in the Award Agreement may be imposed as a result
of that contract, and any such conditions are incorporated by reference in this
Plan and in any such Award Agreement.
7.6 Legend. In order to enforce the restrictions imposed upon shares of
Restricted Stock under this Plan, the Administrator will cause a legend or
legends to be placed on certificates representing shares of Restricted Stock, or
will appropriately mark any account to which shares of Restricted Stock are
credited, making appropriate reference to the conditions imposed by this Plan.
7.7 Section 83(b) Election. If a Holder makes an election under Section
83(b) of the Code, or any successor section, to be taxed with respect to the
Restricted Stock as of the date of award of the Restricted Stock rather than as
of the date or dates upon which the Holder would otherwise be taxable under
Section 83(a) of the Code, the Holder must deliver a copy of the election to the
Company immediately after filing it with the Internal Revenue Service, together
with any tax withholding required by the Company under Section 10.5.
8. PERFORMANCE AWARDS
8.1 Eligibility. Any Senior Management Employee selected by the
Administrator is eligible for grant of a Performance Award determined by the
Administrator, subject to the Award Limit.
8.2 Performance Awards.
(a) Any Senior Management Employee selected by the Administrator may
be granted one or more Performance Awards. The number of shares of Class A
Stock issuable under a Performance Award may be linked to any one or more
of the Performance Criteria or other specific performance criteria
determined appropriate by the Administrator, in each case on a specified
date or dates or over any period or periods determined by the
Administrator. In making such determinations, the Administrator will
consider (among such other factors as it deems relevant in light of the
specific type of award) the contributions, responsibilities, and other
compensation of the particular Employee.
(b) Not later than 90 days after commencement of each fiscal year or
performance period with respect to which Performance Awards may be made,
the Administrator will establish targeted group allocations and targeted
financial results, and may establish targeted individual allocations, for
that year or period. Actual Performance Awards for that fiscal year or
period will be based on the attainment of specified types and combinations
of performance measurement criteria, which may differ as to various
Employees or classes of Employees, and from time to time. The criteria may
include, without limitation:
(1) any of the Performance Criteria;
(2) attainment of certain performance levels by, and measured
against objectives of, the Company, the individual Employee, and/or a
group of Employees;
(3) increases in operating efficiency;
(4) completion of specified strategic actions;
(5) the recommendation of the Chief Executive Officer; and
(6) such other factors as the Administrator deems important in
connection with accomplishing the purposes of this Plan.
No Employee or group of Employees may receive an actual Performance Award
greater than the applicable targeted individual allocation (if any) or
group allocation for a given year, unless due to extraordinary
circumstances the Administrator deems it appropriate, in its sole
discretion, to make allocations to one or more Employees or groups of
Employees in excess of his or their targeted awards.
(c) The maximum amount of any Performance Award granted to an Employee
during any fiscal year of the Company may not exceed the Award Limit.
(d) Unless otherwise specified by the Administrator at the time of
grant, the Performance Criteria applicable to a Section 162(m) Participant
will be determined on the basis of generally accepted accounting
principles.
8.3 Disposition Upon Termination of Employment. A Performance Award is
payable only while the Holder is an Employee unless:
(a) otherwise expressly provided in an Employment Contract, in which
event the terms of the Employment Contract will be given effect; or
(b) the Administrator in its sole and absolute discretion provides for
payment of a Performance Award, in whole or in part, following a
Termination of Employment without good cause, or following a Change in
Control of the Company, or because of the Holder's Retirement, death, or
Permanent Disability, or otherwise.
9. ADMINISTRATION
9.1 Committee. The Board may from time to time appoint a committee or
subcommittee of the Board other than the Governance, Nominating, and
Compensation Committee to constitute the Committee under this Plan. The
Committee must consist solely of two or more directors, each of whom is both a
"non-employee director" as defined by Rule 16b-3 and an "outside director" for
purposes of Section 162(m) of the Code.
9.2 Duties and Powers of the Administrator. It is the Administrator's duty
to conduct the general administration of this Plan in accordance with its
provisions. The Administrator has the power to interpret this Plan and the Award
Agreements and to adopt such rules for the administration, interpretation, and
application of this Plan and Award Agreements as are consistent with this Plan,
to interpret, amend, or revoke any such rules, and to amend any Award Agreement
if the amendment will not adversely affect the rights or obligations of the
Holder of the Award. Any or award under this Plan need not be the same with
respect to each Holder.
9.3 Administrator's Authority with Respect to Termination of Employment.
The Administrator is authorized, in its absolute discretion, to determine the
effect of all matters and questions relating to Termination of Employment,
including but not the limited to the question of whether a Termination of
Employment results from a discharge for good cause and all
questions of whether a particular leave of absence constitutes a Termination of
Employment, except that:
(a) where the effect of a matter or question relating to Termination
of Employment is specified in an Employment Contract, the effect will be as
specified in the Employment Contract;
(b) where "good cause" is defined in an Employment Contract, the
definition in the Employment Contract will control; and
(c) where "good cause" is not defined in an Employment Contract:
(1) the following reasons are conclusively presumed to constitute
"good cause":
(A) an Employee's conviction of a felony; or
(B) an Employee's--
(1) willful and continued failure to perform the
material duties of his position,
(2) willful and serious fraud against the Company or
any Subsidiary, or
(3) material breach of any provision of any agreement
with the Company which has had (or is expected to have) a
material adverse effect on the business of the Company or
any Subsidiary; and
(2) "good cause" does not include any one or more of the
following:
(A) bad judgment,
(B) ordinary negligence, or
(C) any act or omission that an Employee believed in good
faith to have been in (or not opposed to) the best interests of
the Company and from which the Employee did not intend to gain,
directly or indirectly, a profit to which he was not legally
entitled.
9.4 Professional Assistance; Good Faith Actions. All expenses and
liabilities which the Administrator incurs in connection with the administration
of this Plan will be borne by the Company. The Administrator may employ
attorneys, consultants, accountants, appraisers, brokers, or other persons. The
Administrator, the Company, and the Company's officers and directors will be
entitled to rely on the advice, opinions, or valuations of any such persons. All
actions taken and all interpretations and determinations made by the
Administrator or the Board in good faith will be final and binding on all
Holders, the Company, and all other interested persons. No members of the
Administrator or Board will be personally liable for any action, determination,
or interpretation made in good faith with respect to this Plan or Awards, and
all members of the Administrator and the Board will be fully protected by the
Company in respect of any such action, determination, or interpretation.
9.5 Delegation of Authority to Grant Awards. The Committee may, but need
not, delegate from time to time some or all of its authority to grant Awards
under this Plan and administer this Plan to a subcommittee consisting of one or
more members of the Committee or of one or more officers of the Company, except
that the Committee may not delegate its authority to grant Awards to
individuals:
(a) who are subject on the date of the grant to the reporting rules
under Section 16(a) of the Exchange Act;
(b) who are Section 162(m) Participants; or
(c) who are officers of the Company who are delegated authority by the
Committee under this Section 9.5.
Any delegation under this Section 9.5 will be subject to the restrictions and
limits that the Committee specifies at the time of the delegation and may be
rescinded at any time by the Committee. Any subcommittee appointed under this
Section 9.5 will serve in that capacity at the pleasure of the Committee.
10. MISCELLANEOUS PROVISIONS
10.1 Transferability of Awards.
(a) Except as provided in Section 10.1(b):
(1) No Award under this Plan may be sold, pledged, assigned, or
transferred in any manner other than by will or the laws of descent
and distribution or, subject to the consent of the Administrator,
pursuant to a DRO, unless and until the Award has been exercised, or
the shares underlying the Award have been issued, and all restrictions
applicable to the shares have lapsed.
(2) No Award or interest or right in an Award will be liable for
the debts, contracts, or engagements of the Holder or his or her
successors in interest or will be subject to disposition by transfer,
alienation, anticipation, pledge, encumbrance, assignment, or any
other means, regardless of whether such purported disposition is
voluntary or involuntary or by operation of law, judgment, levy,
attachment, garnishment, or any other legal or equitable proceedings
(including bankruptcy), and any attempted disposition of an Award will
be null and void and of no effect.
(3) During the lifetime of the Holder, only he or she may
exercise an Option (or any portion of an Option) granted to him or her
under this Plan unless it has been disposed of with the consent of the
Administrator pursuant to a DRO. After the death of the Holder and
before to the time when the Option becomes unexercisable under the
terms of this Plan or the applicable Award Agreement, any exercisable
portion of an Option may be exercised by the deceased Holder's
personal representative or by any person empowered to do so under the
deceased Holder's will or under the then applicable laws of descent
and distribution.
(b) Notwithstanding Section 10.1(b), the Administrator, in its sole
discretion, may determine to permit a Holder to transfer an Option to any
one or more Permitted Transferees (as defined below), subject to the
following terms and conditions:
(1) an Option transferred to a Permitted Transferee will not be
assignable or transferable by the Permitted Transferee other than by
will or the laws of descent and distribution;
(2) an Option transferred to a Permitted Transferee will continue
to be subject to all the terms and conditions that were applicable to
the original Holder (other than the ability to further transfer the
Option); and
(3) the Holder and the Permitted Transferee must execute any and
all documents requested by the Administrator including, without
limitation, documents to--
(A) confirm the status of the transferee as a Permitted
Transferee,
(B) satisfy any requirements for an exemption for the
transfer under applicable federal and state securities laws, and
(C) evidence the transfer.
For purposes of this Section 10.1(b), "Permitted Transferee" means, with
respect to a Holder, any child, stepchild, grandchild, parent, stepparent,
grandparent, spouse, former spouse, sibling, niece, nephew, mother-in-law,
father-in-law, son-in-law, daughter-in-law, brother-in-law, or
sister-in-law, including adoptive relationships, any person sharing the
Holder's household (other than a tenant or employee), a trust in which
these persons (or the Holder) control the management of assets, and any
other entity in which these persons (or the Holder) own more than 50% of
the voting interests, or any other transferee specifically approved by the
Administrator after taking into account any state or federal tax or
securities laws applicable to transferable Options.
10.2 Amendment, Suspension, or Termination of this Plan.
(a) This Plan may be wholly or partially amended or otherwise
modified, suspended, or terminated at any time or from time to time by the
Administrator, except that:
(1) no amendment is permitted to the extent that the individual
Award or this Plan, in general, would constitute deferred compensation
subject to Section 409A of the Code unless the Award Agreement sets
forth the terms and conditions necessary to comply with the
requirements of Section 409A of the Code;
(2) without approval of the Company's shareholders given within
twelve months before or after the action by the Administrator, no
action of the Administrator may, except as provided in Section 10.3,
increase the limits imposed in Section 2.1 on the maximum number of
shares that may be issued under this Plan; and
(3) no amendment, suspension, or termination of this Plan may,
without the consent of the Holder, alter or impair any rights or
obligations under any Award granted or awarded before the date of the
amendment, suspension, or termination, unless the Award itself
otherwise expressly so provides.
(b) No Awards may be granted or awarded during any period of
suspension or after termination of this Plan.
(c) No awards may be granted or awarded after the tenth anniversary of
the Effective Date.
10.3 Changes in Class A Stock or Assets of the Company, Acquisition or
Liquidation of the Company and Other Corporate Events.
(a) Subject to Section 10.3(e), in the event that the Administrator
determines that any dividend or other distribution (whether
in the form of cash, Class A Stock, other securities, or other property),
recapitalization, reclassification, stock split, reverse stock split,
reorganization, merger, consolidation, share exchange, split-up, spin-off,
combination, repurchase, liquidation, dissolution, or sale, transfer,
exchange, or other disposition of all or substantially all of the assets of
the Company, or exchange of Class A Stock or other securities of the
Company, issuance of warrants, or other rights to purchase Class A Stock or
other securities of the Company, or other similar corporate transaction or
event, in the Administrator's sole discretion, affects the Class A Stock
such that an adjustment is determined by the Administrator to be
appropriate in order to prevent dilution or enlargement of the benefits or
potential benefits intended to be made available under this Plan or with
respect to an Award, then the Administrator will, in such manner as it may
deem equitable, adjust any or all of:
(1) the number and kind of shares of stock (or other securities
or property) with respect to which Awards may be granted or awarded
(including, but not limited to, adjustments of the limitations in
Section 2.1 on the maximum number and kind of shares that may be
issued and adjustments of the Award Limit);
(2) the number and kind of shares of stock (or other securities
or property) subject to outstanding Awards; and
(3) the grant or exercise price with respect to any Award.
(b) Subject to Sections 10.3(c) and 10.3(e), in the event of any
transaction or event described in Section 10.3(a), any Change in Control,
any Corporate Transaction, or any unusual or nonrecurring transactions or
events affecting the Company, any affiliate of the Company, or the
financial statements of the Company or any affiliate, or of changes in
applicable laws, regulations, or accounting principles, the Administrator,
in its sole and absolute discretion, and on such terms and conditions as it
deems appropriate, either by the terms of the Award or by action taken
before the occurrence of the transaction or event, is authorized to take
any one or more of the following actions whenever the Administrator
determines that the action is appropriate in order to prevent dilution or
enlargement of the benefits or potential benefits intended to be made
available under this Plan or with respect to any Award under this Plan, to
facilitate the transactions or events in question, or to give effect to
changes in laws, regulations, or accounting principles (but only to the
extent the action does not result in a deferral of compensation under
Section 409A of
the Code or, to the extent that the Company reasonably determines that any
action may constitute a deferral of compensation under Section 409A of
the Code, pursuant to an agreement setting forth the terms and conditions
required to comply with the provisions of Section 409A of the Code):
(1) provide for either the purchase of the Award for an amount of
cash equal to the amount that could have been attained upon the
exercise of the Award or realization of the Holder's rights had the
Award been currently exercisable or payable or fully vested or the
replacement of the Award with other rights or property selected by the
Administrator in its sole discretion;
(2) provide that the Award cannot vest, be exercised, or become
payable after the event in question;
(3) provide that the Award will be exercisable as to all shares
it covers, notwithstanding anything to the contrary in Section 5.3 or
the provisions of the Award Agreement;
(4) provide for the Award to be assumed by the successor or
survivor corporation, or its parent or subsidiary, or for it to be
substituted for by similar options, rights, or awards covering the
stock of the successor or survivor corporation, or its parent or
subsidiary, with appropriate adjustments as to the number and kind of
shares and prices;
(5) make adjustments in the number and type of shares of stock
(or other securities or property) subject to outstanding Awards, and
in the number and kind of shares of outstanding Restricted Stock,
and/or in the terms and conditions (including the grant or exercise
price), and the criteria included in, outstanding options, rights, and
awards and options, rights, and awards that may be granted in the
future; and
(6) provide that, for a specified period of time before the event
in question, the restrictions imposed under an Award Agreement upon
some or all shares of Restricted Stock may be terminated, and some or
all of those shares of Restricted Stock may cease to be subject to
forfeiture under Section 7.4 after the event.
(c) Notwithstanding any other provision of this Plan, in the event of
a Corporate Transaction, each outstanding Option will be assumed or an
equivalent option substituted by the successor corporation or a parent or
subsidiary of the successor corporation. In the event that the successor
corporation refuses to assume or substitute for the Option, the Holder will
have the right to exercise the Option as to all of the optioned shares,
including shares as to which it would not otherwise be exercisable. If an
Option is exercisable in lieu of assumption or substitution in the event of
a merger, consolidation, share exchange, or sale of assets, the
Administrator will notify the Holder that the Option will be fully
exercisable for a period of 15 days from the date of the notice, and the
Option will then terminate upon the expiration of that period to the extent
it has not been exercised. For the purposes of this Section 10.3(c), the
Option will be considered assumed if, following the merger, consolidation,
share exchange, or sale of assets, the option confers the right to purchase
or receive, for each share of optioned stock subject to the Option
immediately before the merger, consolidation, share exchange, or sale of
assets, the consideration (whether stock, cash, or other securities or
property) received in the merger, consolidation, share exchange, or sale of
assets by holders of Class A Stock for each share held on the effective
date of the transaction (and if holders were offered a choice of
consideration, the type of consideration chosen by the holders of a
majority of the outstanding shares); provided, however, that if the
consideration received in the merger, consolidation, share exchange, or
sale of assets was not solely common stock of the successor corporation or
its parent, the Administrator may, with the consent of the successor
corporation, provide for the consideration to be received upon the exercise
of the Option, for each share of optioned stock subject to the Option, to
be solely common stock of the successor corporation or its parent equal in
fair market value to the per share consideration received by holders of
Class A Stock in the merger, consolidation, share exchange, or sale of
assets.
(d) Subject to Sections 10.3(e), 3.2, and 3.3, the Administrator may,
in its discretion, include such further provisions and limitations in any
Award, agreement, or certificate, as it may deem equitable and in the best
interests of the Company.
(e) With respect to Awards which are granted to Section 162(m)
Participants and are intended to qualify as performance-based compensation
under Section 162(m)(4)(C), no adjustment or action described in this
Section 10.3 or in any other provision of this Plan is authorized to the
extent that the adjustment or action would cause the Award to fail to so
qualify under Section 162(m)(4)(C), or any successor provisions.
Furthermore, no such adjustment or action will be authorized
to the extent the adjustment or action would result in short-swing profits
liability under Section 16 of the Exchange Act or violate the exemptive
conditions of Rule 16b-3 unless the Administrator determines that the Award
is not to comply with such exemptive conditions. The number of shares of
Class A Stock or other stock subject to any Award will always be rounded up
to the next whole number.
(f) The existence of this Plan and the Awards granted under this Plan
will not affect or restrict in any way the right or power of the Company or
the shareholders 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, consolidation, or share exchange of
the Company, any issue of stock or of options, warrants, or rights to
purchase stock or of bonds, debentures, preferred or prior preference
stocks whose rights are superior to or affect the Class A Stock or the
rights thereof or which are convertible into or exchangeable for Class A
Stock, or the dissolution or liquidation of the Company, or any sale or
transfer of all or any part of its assets or business, or any other
corporate act or proceeding, whether of a similar character or otherwise.
10.4 Approval of Plan by Shareholders. This Plan will be submitted for the
approval of the Company's shareholders within twelve months after the date of
the Board's initial adoption of this Plan. Awards may be granted or awarded
before shareholder approval, but those Awards will not be exercisable or
payable, nor will they vest, before the time when this Plan is approved by the
shareholders. If shareholder approval has not been obtained at the end of the
twelve-month period, all Awards previously granted or awarded under this Plan
will automatically be canceled and become null and void. In addition, if the
Board determines that Awards that may be granted to Section 162(m) Participants
should continue to be eligible to qualify as performance-based compensation
under Section 162(m)(4)(C) of the Code, the Performance Criteria must be
disclosed to and approved by the Company's shareholders no later than the first
shareholder meeting that occurs in the fifth year following the year in which
the Company's shareholders previously approved the Performance Criteria.
10.5 Tax Withholding. The Company will be entitled to require payment in
cash or deduction from other compensation payable to each Holder of any sums
required by federal, state, or local tax law to be withheld with respect to the
issuance, vesting, exercise, or payment of any Award or in consequence of a
Holder's making a Section 83(b) election as describe in Section 7.7. The
Administrator may in its discretion and in satisfaction of the this requirement
to allow the Holder to elect to have the Company withhold shares of Class A
Stock otherwise issuable under the Award (or allow the return of shares of Class
A Stock) having a Fair Market Value equal to the sums required to be withheld.
Notwithstanding any other provision of this Plan, the number of shares of Class
A
Stock that may be withheld with respect to the issuance, vesting, exercise, or
payment of any Award (or that may be repurchased from the Holder of the Award
within six months after the shares were acquired by the Holder from the Company)
in order to satisfy the Holder's income and payroll tax liabilities with respect
to the issuance, vesting, exercise, or payment of the Award is limited to the
number of shares that have a Fair Market Value on the date of withholding or
repurchase equal to the aggregate amount of those liabilities based on the
minimum statutory withholding rates for tax purposes that are applicable to that
supplemental taxable income.
10.6 Forfeiture Provisions. Pursuant to its general authority to determine
the terms and conditions applicable to Awards under this Plan, the Administrator
will have the right to provide, in the terms of Awards made under this Plan, or
to require a Holder to agree by separate written instrument, that:
(a) any proceeds, gains, or other economic benefit actually or
constructively received by the Holder upon any receipt or exercise of the
Award, or upon the receipt or resale of any Class A Stock underlying the
Award, must be paid to the Company; and
(b) the Award will terminate and any unexercised portion of the Award
(whether or not vested) will be forfeited;
if
(1) a Termination of Employment occurs before a specified date, or
within a specified time period following receipt or exercise of the Award,
(2) the Holder at any time, or during a specified time period, engages
in any activity in competition with the Company, or that is inimical,
contrary, or harmful to the interests of the Company, as further defined by
the Administrator, or
(3) the Holder incurs a Termination of Employment for cause.
10.7 Right of Recapture. If at any time within one year after the date on
which an Employee exercises an Option, or on which Restricted Stock vests or on
which Class A Stock is issued to an Employee pursuant to a Performance Award
(each a "realization event"), the Administrator should determine in its
discretion that the Company has been materially harmed by the Employee, whether
the harm (a) results in the Employee's termination or deemed termination of
employment for cause or (b) results from any activity of the Employee determined
by the Committee to be in competition with any activity of the Company, or
otherwise inimical, contrary, or harmful to the interests of the Company
(including, but not limited to, accepting employment with or serving as a
consultant, adviser, or in any other capacity to an entity that is in
competition with or acting against the
interests of the Company), then any gain realized by the Employee from the
realization event must be paid by the Employee to the Company upon notice from
the Company. The gain will be determined as of the date of the realization
event, without regard to any later change in the Fair Market Value of a share of
Class A Stock. The Company will have the right, to the maximum extent permitted
by law, to set the gain off against any amounts otherwise owed to the Employee
by the Company or any Subsidiary (whether as wages, vacation pay, or pursuant to
any benefit plan or other compensatory arrangement).
10.8 Compliance with Laws. This Plan, the granting and vesting of Awards
under this Plan, and the issuance and delivery of shares of Class A Stock and
the payment of money under this Plan or under Awards are subject to compliance
with all applicable federal and state laws, rules, and regulations (including
but not limited to state and federal securities law and federal margin
requirements) and to such approvals by any listing, regulatory, or governmental
authority as may, in the opinion of counsel for the Company, be necessary or
advisable. Any securities delivered under this Plan will be subject to such
restrictions, and the person acquiring the securities must, if requested by the
Company, provide such assurances and representations to the Company as the
Company may deem necessary or desirable to assure compliance with all applicable
legal requirements. To the extent permitted by applicable law, this Plan and
Awards granted or awarded hereunder will be deemed amended to the extent
necessary to conform to applicable laws, rules, and regulations.
10.9 Headings. Headings are included in this Plan for convenience only and
are not to serve as a basis for interpretation or construction of this Plan.
10.10 Severability of Provisions. If any provision of this Plan is held to
be invalid or unenforceable, the other provisions of this Plan are not to be
affected but are to be applied as if the invalid or unenforceable provision had
not been included in this Plan.
10.11 Governing Law. This Plan and any agreements this Plan will be
administered, interpreted, and enforced under the internal laws of the State of
Michigan without regard to its law of conflicts of laws.
This Plan was duly adopted by the Board of Directors of Tecumseh Products
Company on July 31, 2007 and duly amended and restated by the Governance,
Compensation, and Nominating Committee of the Board of Directors on August 7,
2007.
Executed on August 7, 2007.
TECUMSEH PRODUCTS COMPANY
By: /s/ James S. Nicholson
------------------------------------
James S. Nicholson
Vice President, Treasurer and
Chief Financial Officer