EXHIBIT 10.16
KENNAMETAL INC.
STOCK AND INCENTIVE PLAN OF 2002
(AS AMENDED ON JULY 29, 2003)
SECTION 1. ESTABLISHMENT. There is hereby established the Kennametal
Inc. Stock and Incentive Plan of 2002 (hereinafter called the "Plan") pursuant
to which Eligible Individuals who are or will be mainly responsible for its
continued growth and development and future financial success may be granted
Awards in order to secure to the Company the advantage of the incentive and
sense of proprietorship inherent in stock ownership by such persons, to further
align such person's interests with those of the shareowners, to reward such
persons for services previously performed and/or as an added inducement to
continue to provide service to the Company.
SECTION 2. CERTAIN DEFINITIONS. As used herein or, unless otherwise
specified, in any document with respect to an Award, the following definitions
shall apply:
(a) "Affiliate" of a person means a person controlling,
controlled by, or under common control with such person where control means the
power to direct the policies and practices of such person.
(b) "Award" means any Incentive Bonus Award, Option,
Performance Share Award, Performance Unit Award, Restricted Stock Award,
Restricted Unit Award, SAR, Share Award or Stock Unit Award granted under the
Plan.
(c) "Board" means the Board of Directors of the Company.
(d) "Business Combination" shall mean a merger or
consolidation of the Company with another corporation or entity, other than a
corporation or entity which is an Affiliate.
(e) "Capital Stock" means the Capital Stock, par value
$1.25 per share, of the Company as adjusted pursuant to Section 10 of this Plan.
(f) "Change in Control" shall mean a change in control of
the Company of a nature that would be required to be reported in response to
Item 6(e) of Schedule 14A promulgated under the Exchange Act as in effect on the
date thereof or, if Item 6(e) is no longer in effect, any regulations issued
which serve similar purposes; provided that, without limitation, such a Change
in Control shall be deemed to have occurred if: (i) a Business Combination shall
have occurred, or (ii) the Company shall sell all or substantially all of its
operating properties and assets to another person, group of associated persons
or corporation, excluding any Affiliate of the Company, if any, or (iii) any
"person" (as such term is used in Sections 13(d) and 14(d) of the Exchange Act)
is or becomes a beneficial owner, directly or indirectly, of securities of the
Company representing 25% or more of the combined voting power of the Company's
then
outstanding securities coupled with or followed by the election as directors of
the Company of persons who were not directors at the time of such acquisition if
such person shall elect a majority of the Board.
(g) "Code" means the Internal Revenue Code of 1986, as
amended.
(h) "Committee" means a committee of the Board.
(i) "Company" means Kennametal Inc., a Pennsylvania
corporation.
(j) "Consultant" means any person, including an advisor,
who is engaged by the Company or any Parent or Subsidiary of the Company to
render services and is compensated for such services.
(k) "Continuous Status as an Employee" means the absence
of any interruption or termination of the employment relationship by the
Employee with the Company or any Parent or Subsidiary of the Company. Continuous
Status as an Employee shall not be considered interrupted in the case of: (i)
sick leave; (ii) military leave; (iii) any other leave of absence approved by
the Plan Administrator; or (iv) transfers between locations of the Company or
between the Company, its Parents, its Subsidiaries or its successor.
(l) "Disability" means disability as determined by the
Company's disability policy as in effect from time to time or as determined by
the Plan Administrator consistent therewith.
(m) "Eligible Individual" means any Employee or
Consultant.
(n) "Employee" means any person, including officers and
directors, employed by the Company or any Parent or Subsidiary of the Company or
any prospective employee who shall have received an offer of employment from the
Company or any Parent or Subsidiary of the Company. The payment of a director's
fee by the Company shall not be sufficient to constitute "employment" by the
Company.
(o) "Exchange Act" means the Securities Exchange Act of
1934, as amended.
(p) "Fair Market Value" means, as of any date, the value
of the Capital Stock determined as follows:
(i) If the Capital Stock is listed on any
established stock exchange, system or market, its Fair Market Value
shall be the mean between the highest and lowest sales prices for the
Capital Stock as quoted on such exchange, system or market for the last
trading day prior to the time of determination as reported in the Wall
Street Journal or such other source as the Plan Administrator deems
reliable and;
(ii) In the absence of an established market for
the Capital Stock, the Fair Market Value thereof shall be determined in
good faith by the Plan Administrator.
(q) "Grantee" means an Eligible Individual who has been
granted an Award.
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(r) "Incentive Bonus Award" means the opportunity to earn
a future cash payment tied to the level of achievement with respect to one or
more Qualifying Performance Criteria for a performance period as established by
the Plan Administrator.
(s) "Incentive Stock Option" means an Option intended to
qualify as an incentive stock option within the meaning of Section 422 of the
Code.
(t) "Non-Employee Director" means a member of the Board
who is not an employee of the Company or any Parent or Subsidiary of the
Company.
(u) "Nonstatutory Stock Option" means an Option not
intended to qualify as an Incentive Stock Option.
(v) "Option" means a right to purchase Shares granted
pursuant to the Plan.
(w) "Optionee" means a Participant who holds an Option or
SAR.
(x) "Original Option Period" means the initial period or
periods for which an Option or SAR may be exercised as determined by the Plan
Administrator at the time of the Award or, if no such determination is made, a
period of 10 years from the date of grant of the Award.
(y) "Parent" means a "parent corporation," whether now or
hereafter existing, as defined in Section 424(e) of the Code.
(z) "Participant" means any person who has an Award under
the Plan including any person (including any estate) to whom an Award has been
assigned or transferred in accordance with the Plan.
(aa) "Performance Share Award" means a grant of a right to
receive Shares or Stock Units contingent on the achievement of performance or
other objectives during a specified period.
(bb) "Performance Unit Award" means a grant of a right to
receive a designated dollar value amount of Shares or Stock Units contingent on
the achievement of performance or other objectives during a specified period.
(cc) "Plan" means this Stock and Incentive Plan of 2002.
(dd) "Plan Administrator" means the Board and/or any
Committee appointed by the Board to administer the Plan; provided, however, that
the Board, in its sole discretion, may, notwithstanding the appointment of any
Committee to administer the Plan, exercise any authority under this Plan.
(ee) "Prior Stock Plans" means the Kennametal Inc. Stock
Option and Incentive Plan of 1988, the Kennametal Inc. Stock Option and
Incentive Plan of 1992, the Kennametal Inc. Stock Option and Incentive Plan of
1996, the Kennametal Inc. 1999 Stock Plan, and the Kennametal Inc. Stock Option
and Incentive Plan of 1999.
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(ff) "Qualifying Performance Criteria" means any one or
more of the following performance criteria, either individually, alternatively
or in any combination, applied to either the Company as a whole or to a business
unit or Subsidiary, either individually, alternatively or in any combination,
and measured over a period of time including any portion of a year, annually or
cumulatively over a period of years, on an absolute basis or relative to a
pre-established target, to previous years' results or to a designated comparison
group, in each case as specified in the Award: (a) cash flow, (b) earnings
(including earnings before interest, taxes, depreciation, and amortization or
some variation thereof), (c) stock price, (d) return on equity, (e) total
stockholder return, (f) return on capital, (g) return on assets or net assets,
(h) revenue, (i) income or net income, (j) operating income or net operating
income, (k) operating profit or net operating profit, (l) operating margin or
profit margin, (m) return on operating revenue, and (n) market share. To the
extent consistent with Section 162(m) of the Code, the Plan Administrator shall
appropriately adjust any evaluation of performance under a Qualifying
Performance Criteria to exclude any of the following events that occurs during a
performance period: (i) asset write-downs, (ii) litigation or claim judgments or
settlements, (iii) the effect of changes in tax law, accounting principles or
other such laws or provisions affecting reported results, (iv) accruals for
reorganization and restructuring programs and (v) any extraordinary
non-recurring items as described in management's discussion and analysis of
financial condition and results of operations or the financial statements and
notes thereto appearing in the Company's annual report to shareowners for the
applicable year.
(gg) "Restricted Stock Award" means a grant of Shares
subject to a risk of forfeiture or other restrictions that will lapse upon the
achievement of one or more goals relating to completion of service by the
Grantee, or achievement of performance or other objectives, as determined by the
Plan Administrator.
(hh) "Restricted Unit Award" means a grant of Stock Units
subject to a risk of forfeiture or other restrictions that will lapse upon the
achievement of one or more goals relating to completion of service by the
Participant, or achievement of performance or other objectives, as determined by
the Plan Administrator.
(ii) "Retirement" means, in the case of an Employee, the
termination of employment with the Company or any Subsidiary or Parent of the
Company at a time when the Employee is eligible to receive immediately payable
retirement benefits under a then existing retirement plan and, in the case of a
Non-Employee Director, means retirement from service on the Board.
(jj) "SAR" means a stock appreciation right, which is the
right to receive a payment in cash, Shares or Stock Units equal to the amount of
appreciation, if any, in the Fair Market Value of a Share from the date of the
grant of the right to the date of its payment.
(kk) "Share" means a share of Capital Stock.
(ll) "Share Award" means a grant of Shares without a risk
of forfeiture and without other restrictions.
(mm) "Stock Unit" means the right to receive a Share at a
future point in time.
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(nn) "Stock Unit Award" means the grant of a Stock Unit
without a risk of forfeiture and without other restrictions.
(oo) "Subsidiary" means a "subsidiary corporation,"
whether now or hereafter existing, as defined in Section 424(f) of the Code.
SECTION 3. ADMINISTRATION.
(a) The Plan shall be administered by the Plan
Administrator.
(b) Subject to the provisions of this Plan and, in the
case of a Committee, the specific duties delegated to or limitations imposed
upon such Committee by the Board, the Plan Administrator shall have the
authority, in its discretion:
(i) to establish, amend and rescind rules and
regulations relating to the Plan;
(ii) to select the Eligible Individuals to whom
Awards may from time to time be granted hereunder;
(iii) to determine the amount and type of Awards,
including any combination thereof, to be granted to any Eligible
Individual;
(iv) subject to Section 3(c) hereof, to grant
Awards to Eligible Individuals and, in connection therewith, to
determine the terms and conditions, not inconsistent with the terms of
this Plan, of any such Award including, but not limited to, the number
of Shares or Stock Units that may be issued or amount of cash that may
be paid pursuant to the Award, the exercise or purchase price of any
Share or Stock Unit, the circumstances under which Awards or any cash,
Shares or Stock Units relating thereto are issued, retained, become
exercisable or vested, are no longer subject to forfeiture or are
terminated, forfeited or expire, based in each case on such factors as
the Plan Administrator shall determine, in its sole discretion;
(v) to determine the Fair Market Value of the
Capital Stock, in accordance with this Plan;
(vi) to establish, verify the extent of
satisfaction of, or adjust any performance goals or other conditions
applicable to the grant, issuance, exercisability, vesting and/or
ability to retain any Award;
(vii) to approve forms of agreement for use under
the Plan;
(viii) to determine whether and under what
circumstances an Award may be settled in cash instead of Shares or
Stock Units;
(ix) to determine whether, to what extent and
under what circumstances Shares and other amounts payable with respect
to an Award under this Plan shall be deferred either automatically or
at the election of the participant (including providing for
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and determining the amount, if any, of any deemed earnings on any
deferred amount during any deferral period);
(x) to determine whether and to what extent an
adjustment is required under Section 10 of this Plan;
(xi) to interpret and construe this Plan, any
rules and regulations under this Plan and the terms and conditions of
any Award granted hereunder, and to make exceptions to any such
provisions in good faith and for the benefit of the Company; and
(xii) to make all other determinations deemed
necessary or advisable for the administration of this Plan.
(c) Notwithstanding anything contained in this Plan, the
Plan Administrator may not:
(i) grant any Option or SAR in substitution for
an outstanding Option or SAR except as provided in Section 10(b);
(ii) reduce the exercise price of an outstanding
Option or SAR, whether through amendment, cancellation or replacement
of such Option or SAR, unless such reduction is approved by the
shareowners of the Company;
(iii) grant a Restricted Stock Award or Restricted
Unit Award with a risk of forfeiture or restriction that lapses earlier
than at the rate of one-third of the Shares subject to the Award on
each of the first, second and third anniversary of the date of grant;
provided, however, that the Plan Administer may grant a Restricted
Stock Award or Restricted Unit Award with a risk of forfeiture or
restriction that lapses upon the later to occur of (x) the date of
achievement of one or more performance criteria and (y) the one year
anniversary of the date of grant of the Award;
(iv) grant a Performance Share Award or
Performance Unit Award that vests earlier than the later to occur of
(x) the date of achievement of one or more performance criteria and (y)
the one year anniversary of the date of the Award;
(v) lapse or waive restrictions applicable to
any Restricted Stock Award, Restricted Unit Award, Performance Share
Award, or Performance Unit Award; or
(vi) grant any Share Award or Stock Unit Award to
any officer or director of the Company except in lieu of salary or cash
bonus.
(d) The limitations of Section 3(c) shall not apply to
Awards for up to ten percent of the Shares under the Plan granted by a Committee
composed entirely of "independent directors" (under all definitions of
independence then applicable to the Company).
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(e) Except as specifically provided in this Plan, no
action of the Plan Administrator shall deprive any person without such person's
consent of any rights theretofore granted pursuant hereto.
(f) All decisions, determinations and interpretations of
the Plan Administrator shall be final and binding on all Participants.
SECTION 4. SHARES SUBJECT TO THE PLAN.
(a) The aggregate number of Shares which may be issued
pursuant to the Plan shall be 1,750,000 plus Shares added to the Plan from the
Prior Stock Plans pursuant to Sections 4(d) and 4(e) hereof.
(b) Upon shareowner approval of this Plan, no further
grants or awards of any kind shall be made by the Company under its Prior Stock
Plans.
(c) The number of Shares which may be issued under the
Plan and covered by outstanding Awards is subject to adjustment as provided in
Section 10.
(d) To the extent that Options granted under the Plan or
under the Prior Stock Plans shall expire or terminate without being exercised or
Shares awarded under the Plan or under the Prior Stock Plans shall be forfeited,
such Shares shall remain available or be added to and shall increase the number
of Shares available for purposes of the Plan.
(e) Shares delivered in payment of the purchase price in
connection with the exercise of Options or Shares delivered or withheld to pay
tax withholding obligations or otherwise under the Plan or under the Prior Stock
Plans shall be added to and shall increase the number of Shares available for
purposes of the Plan.
(f) The aggregate number of Shares that may be issued
pursuant to Incentive Stock Options shall be limited to 1,750,000.
Notwithstanding anything to the contrary in this Plan, the foregoing limitation
shall be subject to adjustment under Section 10, but only to the extent that
such adjustment will not affect the status of any Award intended to qualify as
an Incentive Stock Option. The foregoing limitation shall not apply to the
extent that it is no longer required in order for Options to qualify as
Incentive Stock Options.
(g) The aggregate number of Shares issuable under all
Awards granted under this Plan during any fiscal year to any one Eligible
Individual shall not exceed 500,000. Notwithstanding anything to the contrary in
this Plan, the foregoing limitation shall be subject to adjustment under Section
10, but only to the extent that such adjustment will not affect the status of
any Award intended to qualify as "performance-based compensation" under Section
162(m) of the Code. The foregoing limitation shall not apply to the extent that
it is no longer required in order for compensation in connection with grants
under this Plan to be treated as "performance-based compensation" under Section
162(m) of the Code.
(h) Capital Stock to be issued under the Plan may be
either authorized and unissued Shares or Shares held in treasury by the Company.
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SECTION 5. TERMS OF OPTIONS AND SARs. Each Option and SAR granted under
the Plan shall be evidenced by a written document (including an electronic
version thereof) and shall be subject to the following terms and conditions:
(a) Subject to adjustment as provided in Section 10 of
this Plan, the price at which a Share covered by an Option may be purchased
shall not be less than the Fair Market Value thereof at the time the Option is
granted. If required by the Code, if an Optionee owns (or is deemed to own under
applicable provisions of the Code and rules and regulations promulgated
thereunder) more than ten percent (10%) of the combined voting power of all
classes of the stock of the Company (or any Parent or Subsidiary of the Company)
and an Option granted to such Optionee is intended to qualify as an Incentive
Stock Option, the price at which a Share covered by an Option may be purchased
shall be not less than 110% of the Fair Market Value thereof at the time the
Option is granted.
(b) The aggregate Fair Market Value of Shares with
respect to which Incentive Stock Options are first exercisable by the Optionee
in any calendar year (under all plans of the Company and its Subsidiaries and
Parent) shall not exceed the limitations, if any, imposed by the Code.
(c) If any Option designated as an Incentive Stock
Option, either alone or in conjunction with any other Option or Options, exceeds
the foregoing limitation, or does not otherwise qualify for treatment as an
Incentive Stock Option, all or the portion of such Option in excess of such
limitation shall automatically be reclassified (in whole Share increments and
without fractional Share portions) as a Nonstatutory Stock Option, with later
granted Options being so reclassified first.
(d) Except as otherwise provided by the Plan
Administrator, during the lifetime of the Optionee the Option or SAR may be
exercised only by the Optionee and the Option or SAR shall not be transferable
by the Optionee other than by will or by the laws of descent and distribution or
pursuant to a domestic relations order. After the death of the Optionee, the
Option or SAR may be transferred to the Company upon such terms and conditions,
if any, as the Plan Administrator and the personal representative or other
person entitled to the Option may agree within the period specified in this
Section 5.
(e) An Option or SAR may be exercised in whole at any
time, or in part from time to time, within the Original Option Period; provided,
however, that, unless otherwise provided by the Plan Administrator:
(i) If the Optionee is an Employee who shall
cease to be employed by the Company or any Subsidiary or Parent of the
Company by reason of death, Disability or Retirement, the Option or SAR
may be exercised only within three years after termination of
employment and within the Original Option Period;
(ii) If the Optionee is an Employee who shall
cease to be employed by the Company or any Subsidiary or Parent of the
Company by reason of termination of the Optionee for cause, the Option
or SAR shall forthwith terminate and the Optionee shall
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not be permitted to exercise the Option or SAR following the Optionee's
termination of employment;
(iii) If the Optionee is an Employee who shall
cease to be employed by the Company or any Subsidiary or Parent of the
Company by reason of the Optionee's voluntary termination or a
termination of the Optionee other than for cause, the Option or SAR may
be exercised only within the three months after the termination of
employment and within the Original Option Period;
(iv) If the Optionee is a Non-Employee Director
who shall cease to serve on the Board, the Option or SAR may be
exercised only within three months after the cessation of Board service
and within the Original Option Period or, if such cessation was due to
death, Disability or Retirement, within three years after cessation of
Board service and within the Original Option Period, unless such
cessation of service as a Non-Employee Director was the result of
removal for cause, in which case the Option or SAR shall forthwith
terminate;
(v) Notwithstanding anything to the contrary
contained in this Plan, each Option or SAR held by an Employee who is
terminated by the Company or any Subsidiary or Parent of the Company
for any reason during the two-year period following a Change in Control
or a Non-Employee Director who is removed from the Board for any reason
during the two-year period following a Change in Control shall
immediately vest and may be exercised at any time within the
three-month period after the termination of employment or cessation of
Board service regardless of the Original Option Period;
(vi) If the Optionee shall die, the Option or SAR
may be exercised by the Optionee's personal representative or persons
entitled thereto under the Optionee's will or the laws of descent and
distribution;
(vii) Except as provided in Sections 5(e)(v), (ix)
and (x), the Option or SAR may not be exercised for more Shares
(subject to adjustment as provided in Section 10) after the termination
of the Optionee's employment, cessation of service as a Non-Employee
Director or the Optionee's death (as the case may be) than the Optionee
was entitled to purchase thereunder at the time of such Optionee's
termination of employment, cessation of service as a Non-Employee
Director or the Optionee's death;
(viii) To the extent provided by the Code, if an
Optionee owns (or is deemed to own under applicable provisions of the
Code and rules and regulations promulgated thereunder) more than 10% of
the combined voting power of all classes of stock of the Company (or
any Parent or Subsidiary of the Company) at the time an Option is
granted to such Optionee and such Option is intended to qualify as an
Incentive Stock Option, the Option, if not exercised within five years
from the date of grant or any other period proscribed by the Code, will
cease to be an Incentive Stock Option;
(ix) If the Optionee is an Employee who shall
cease to be employed by the Company or any Subsidiary or Parent of the
Company or is a Non-Employee Director who shall cease to serve on the
Board by reason of death or Disability, as the case may be,
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all Options and SARs held by the Optionee shall automatically vest and
become exercisable in full as of the date that the Optionee's
employment with the Company or any Subsidiary or Parent of the Company
or service on the Board ceased; and
(x) In the event that an Optionee ceases to be
employed by the Company or any Subsidiary or Parent of the Company or
to serve on the Board, as the case may be, as a result of such
Optionee's Retirement, all Options and SARs held by the Optionee which
are not vested on the date of Retirement shall continue to vest and
become exercisable in accordance with their original vesting schedule
during the two-year period following such Optionee's Retirement. Any
Options or SARs which remain unvested on the second anniversary of such
Optionee's Retirement shall forthwith terminate on such date. In the
event of the death or Disability of such Optionee during the two-year
period following Retirement, all Options or SARs held by the Optionee
shall automatically vest and become exercisable in full.
(f) Except as otherwise provided by the Plan
Administrator, the purchase price of each Share purchased pursuant to an Option
shall be paid in full at the time of each exercise (the "Payment Date") of the
Option (i) in cash; (ii) by delivering to the Company a notice of exercise with
an irrevocable direction to a registered broker-dealer under the Securities
Exchange Act of 1934, as amended, to sell a sufficient portion of the Shares and
deliver the sale proceeds directly to the Company to pay the exercise price;
(iii) through the delivery to the Company (by attestation of Share ownership or
as otherwise provided by the Plan Administrator) of previously-owned Shares
having an aggregate fair market value equal to the price of the Shares being
purchased pursuant to the Option; provided, however, that Shares delivered in
payment of the Option price must have been purchased in the open market or held
by the Participant for at least six (6) months in order to be utilized to pay
the purchase price of the Option or must meet such other conditions as
established by the Plan Administrator; or (iv) through any combination of the
payment procedures set forth in subsections (i)-(iii) of this Section 5(f).
(g) Exercise of an Option or SAR in any manner shall
result in a decrease in the number of Shares which thereafter may be available
under the Option or SAR by the number of Shares as to which the Option or SAR is
exercised. In addition, in the event of an Option granted in tandem with an SAR,
the exercise of the Option in any manner shall result in a decrease in the
number of Shares which thereafter may be available under the SAR by the number
of Shares as to which the Option is exercised, and the exercise of the SAR in
any manner shall result in a decrease in the number of Shares which thereafter
may be available under the Option by the number of Shares as to which the SAR is
exercised.
(h) The Plan Administrator, in its discretion, may
authorize the issuance of "stock retention Options" under this Plan which
provide, upon the exercise of an Option granted under this Plan or under any
other stock plan (a "prior Option") and payment of the purchase price using
previously-owned Shares, for the automatic issuance of a new Option under this
Plan for up to the number of Shares equal to the number of previously-owned
Shares delivered in payment of the exercise price of the prior Option, with an
exercise price equal to the current Fair Market Value and for a term equal to
the term of the prior Option.
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(i) The Plan Administrator may include such other terms
and conditions of Options or SARs not inconsistent with the foregoing as the
Plan Administrator shall approve. Without limiting the generality of the
foregoing sentence, the Plan Administrator shall be authorized to determine that
Options or SARs shall be exercisable in one or more installments during the term
of the Option or SAR as determined by the Plan Administrator.
SECTION 6. PERFORMANCE SHARE AWARDS, PERFORMANCE UNIT AWARDS,
RESTRICTED STOCK AWARDS, RESTRICTED UNIT AWARDS, SHARE AWARDS AND STOCK UNIT
AWARDS.
(a) Subject to the terms of this Plan, including Section
3(c) hereof, Performance Share Awards, Performance Unit Awards, Restricted Stock
Awards, Restricted Unit Awards, Share Awards or Stock Unit Awards may be issued
by the Plan Administrator to Eligible Individuals, either alone, in addition to,
or in tandem with other Awards granted under the Plan and/or cash awards made
outside of this Plan. Such Awards shall be evidenced by a written document
(including an electronic version thereof) containing any provisions regarding
(i) the number of Shares or Stock Units subject to such Award or a formula for
determining such, (ii) the purchase price of the Shares or Stock Units, if any,
and the means of payment for the Shares or Stock Units, (iii) the performance
criteria, if any, and level of achievement versus these criteria that shall
determine the number of Shares or Stock Units granted, issued, retainable and/or
vested, (iv) such terms and conditions on the grant, issuance, vesting and/or
forfeiture of the Shares or Stock Units as may be determined from time to time
by the Plan Administrator, including continued employment or service, (v)
restrictions on the transferability of the Shares or Stock Units and (vi) such
further terms and conditions in each case not inconsistent with this Plan as may
be determined from time to time by the Plan Administrator.
(b) The grant, issuance, retention and/or vesting of
Shares or Stock Units pursuant to any Performance Share Award, Performance Unit
Award, Restricted Stock Award or Restricted Unit Award shall occur at such time
and in such installments as determined by the Plan Administrator or under
criteria established by the Plan Administrator and consistent with this Plan,
including Section 3(c) hereof. The Plan Administrator shall have the right to
make the timing of the grant and/or the issuance, ability to retain and/or
vesting of Shares or Stock Units subject to continued employment, passage of
time and/or such performance criteria as deemed appropriate by the Plan
Administrator and consistent with this Plan, including Section 3(c) hereof.
Notwithstanding anything to the contrary herein, the performance criteria for
any Award that is intended to satisfy the requirements for "performance-based
compensation" under Section 162(m) of the Code shall be a measure based on one
or more Qualifying Performance Criteria selected by the Plan Administrator and
specified at the time the Award is granted.
(c) Notwithstanding the foregoing, no single Share Award
or Stock Unit Award to any one Grantee in any fiscal year shall be for more than
200 Shares.
(d) With respect to any Performance Share Award,
Performance Unit Award, Restricted Stock Award or Restricted Unit Award:
(i) If, prior to a Change in Control, the
designated goals have not been achieved within the designated period or
the Grantee ceases to be employed by the Company or ceases to serve on
the Board for any reason other than death, Disability or
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Retirement prior to the lapse of any restrictions or vesting of the
Award, the Grantee shall forfeit such Award;
(ii) In the event that a Grantee ceases to be an
Employee or to serve on the Board as a result of such Grantee's death,
Disability or Retirement, all outstanding Awards held by such Grantee
shall automatically vest and all restrictions shall lapse as of the
date of such Grantee's death, Disability or Retirement;
(iii) Notwithstanding anything to the contrary
contained in this Plan, each Award held by an Employee who is
terminated by the Company or any Subsidiary or Parent of the Company
for any reason during the two-year period following a Change in Control
or a Non-Employee Director who is removed from the Board for any reason
during the two-year period following a Change in Control shall
automatically vest and all restrictions shall lapse as of the date of
such Grantee's termination of employment or cessation of Board service;
and
(iv) During the lifetime of the Grantee, the
Award shall not be transferable otherwise than by will or by the laws
of descent and distribution or pursuant to a domestic relations order.
(e) Except as otherwise provided by the Plan
Administrator, a Grantee who has received a Restricted Stock Award shall have
all rights of a shareowner in such Shares including, but not limited to, the
right to vote and receive dividends with respect thereto from and after the date
of grant of such Award; provided, however, that Shares awarded pursuant to the
Plan which have not vested or which contain restrictions or conditions may not
be sold or otherwise transferred by the Grantee and stock certificates
representing such Shares may bear a restrictive legend to that effect.
SECTION 7. INCENTIVE BONUS AWARDS.
(a) Each Incentive Bonus Award will confer upon the
Employee the opportunity to earn a future payment tied to the level of
achievement with respect to one or more performance criteria established for a
performance period established by the Plan Administrator.
(b) Each Incentive Bonus Award shall be evidenced by a
document containing provisions regarding (a) the target and maximum amount
payable to the Employee, (b) the performance criteria and level of achievement
versus these criteria that shall determine the amount of such payment, (c) the
term of the performance period as to which performance shall be measured for
determining the amount of any payment, (d) the timing of any payment earned by
virtue of performance, (e) restrictions on the alienation or transfer of the
bonus prior to actual payment, (f) forfeiture provisions and (g) such further
terms and conditions, in each case not inconsistent with this Plan as may be
determined from time to time by the Plan Administrator. The maximum amount
payable as a bonus may be a multiple of the target amount payable, but the
maximum amount payable pursuant to that portion of an Incentive Bonus Award
granted under this Plan for any fiscal year to any Employee that is intended to
satisfy the requirements for "performance-based compensation" under Section
162(m) of the Code shall not exceed $2,000,000.
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(c) The Plan Administrator shall establish the
performance criteria and level of achievement versus these criteria that shall
determine the target and maximum amount payable under an Incentive Bonus Award,
which criteria may be based on financial performance and/or personal performance
evaluations. The Plan Administrator may specify the percentage of the target
incentive bonus that is intended to satisfy the requirements for
"performance-based compensation" under Section 162(m) of the Code.
Notwithstanding anything to the contrary herein, the performance criteria for
any portion of an Incentive Bonus Award that is intended by the Plan
Administrator to satisfy the requirements for "performance-based compensation"
under Section 162(m) of the Code shall be a measure based on one or more
Qualifying Performance Criteria selected by the Plan Administrator and specified
at the time the Incentive Bonus Award is granted. The Plan Administrator shall
certify the extent to which any Qualifying Performance Criteria has been
satisfied, and the amount payable as a result thereof, prior to payment of any
incentive bonus that is intended to satisfy the requirements for
"performance-based compensation" under Section 162(m) of the Code.
(d) The Plan Administrator shall determine the timing of
payment of any incentive bonus. The Plan Administrator may provide for or,
subject to such terms and conditions as the Plan Administrator may specify, may
permit an election for the payment of any incentive bonus to be deferred to a
specified date or event. An Incentive Bonus Award may be payable in Shares,
Stock Units or in cash or other property, including any Award permitted under
this Plan.
(e) Notwithstanding satisfaction of any performance
goals, the amount paid under an Incentive Bonus Award on account of either
financial performance or personal performance evaluations may be reduced by the
Plan Administrator on the basis of such further considerations as the Plan
Administrator shall determine.
SECTION 8. NON-EMPLOYEE DIRECTOR AWARDS.
Notwithstanding anything to the contrary contained in this
Plan, each Non-Employee Director shall only be entitled to receive the following
Awards under this Plan, which Awards will be made on the day following the first
regular Board meeting of each fiscal year beginning in fiscal year 2004:
(a) Each Non-Employee Director shall receive a
Nonstatutory Stock Option to purchase up to 5,000 shares, as determined by the
Board, at Fair Market Value, such Option to Vest as to exercisability in 3
equal, annual installments and to have a term of ten (10) years.
(b) Each Non-Employee Director shall receive a Restricted
Stock Award for Shares with a Fair Market Value of up to $10,000, as determined
by the Board, rounded to the nearest whole Share. Such Awards shall vest and the
restrictions on transfer shall lapse as to one-third of the Shares subject to
the Award on each anniversary of the date of grant provided that the
Non-Employee Director continues to serve on the Board.
(c) Each new Non-Employee Director shall receive, as of
the first date of service on the Board, a Nonstatutory Stock Option to purchase
twice the number of Shares provided in the Nonstatutory Stock Option most
recently granted to the Non-Employee Directors
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(other than the lead director) and a Restricted Stock Award based on the number
of Shares provided in the Restricted Stock Award most recently granted to the
Non-Employee Directors (other than the lead director) but pro rated for the
amount of the fiscal year remaining as of the first date of service.
SECTION 9. TAX WITHHOLDING.
(a) Whenever Shares are to be issued under the Plan, the
Company shall have the right to require the Grantee to remit to the Company an
amount sufficient to satisfy federal, state and local tax withholding
requirements prior to the delivery of any certificate for such Shares; provided,
however, that in the case of a Grantee who receives an Award of Shares under the
Plan which is not fully vested, the Grantee shall remit such amount on the first
business day following the Tax Date. The "Tax Date" for purposes of this Section
9 shall be the date on which the amount of tax to be withheld is determined. If
an Optionee makes a disposition of Shares acquired upon the exercise of an
Incentive Stock Option within the applicable disqualifying period, the Optionee
shall promptly notify the Company and the Company shall have the right to
require the Optionee to pay to the Company an amount sufficient to satisfy
federal, state and local tax withholding requirements.
(b) A Participant who is obligated to pay the Company an
amount required to be withheld under applicable tax withholding requirements may
pay such amount (i) in cash; (ii) in the discretion of the Plan Administrator,
through the withholding by the Company of Shares otherwise deliverable to the
Participant or through the delivery by the Participant to the Company of
previously-owned Shares in each case having an aggregate Fair Market Value on
the Tax Date equal to the tax obligation; or (iii) in the discretion of the Plan
Administrator, through a combination of the foregoing.
SECTION 10. ADJUSTMENT OF NUMBER AND PRICE OF SHARES.
(a) In the event of a corporate transaction involving the
Company (including, without limitation, any stock dividend, stock split, reverse
stock split, extraordinary cash dividend, recapitalization, reorganization,
merger, consolidation, split-up, spin-off, combination or exchange of shares),
the Plan Administrator may adjust Awards to preserve the benefits or potential
benefits of the Awards. Action by the Plan Administrator may include: (i)
adjustment of the number and kind of securities which may be delivered under the
Plan; (ii) adjustment of the number and kind of securities subject to
outstanding Awards; (iii) adjustment of the exercise price of outstanding
Options and SARs; (iv) adjustment of the share limitations contained in this
Plan; and (v) any other adjustments that the Plan Administrator determines to be
equitable. Any such adjustment shall be effective and binding for all purposes
of the Plan and on each outstanding Award.
(b) Without limiting the foregoing, in the event that, by
reason of a corporate merger, consolidation, acquisition of property or stock,
separation, reorganization or liquidation, the Board shall authorize the
issuance or assumption of an Option in a transaction to which Section 424(a) of
the Code applies, then, notwithstanding any other provision of the Plan, the
Plan Administrator may grant an Option upon such terms and conditions as it may
deem appropriate for the purpose of assumption of the old Option, or
substitution of a new Option for
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the old Option, in conformity with the provisions of Code Section 424(a) and the
rules and regulations thereunder, as they may be amended from time to time.
(c) No adjustment or substitution provided for in this
Section 10 shall require the Company to issue or to sell a fractional share and
the total adjustment or substitution with respect to each Award agreement shall
be limited accordingly.
(d) Without limiting the foregoing, and notwithstanding
anything to the contrary contained in the Plan or any document with respect to
any Award, in the event of a Business Combination under the terms of which the
holders of Capital Stock of the Company will receive upon consummation thereof
cash for each share of Capital Stock of the Company surrendered pursuant to such
Business Combination (the "Cash Purchase Price"), the Plan Administrator may
provide that all outstanding Awards representing the right to purchase or
receive Shares shall terminate upon consummation of the Business Combination and
each such Award, including each Option and SAR, shall receive, in exchange
therefor, a cash payment equal to the amount (if any) by which (i) the Cash
Purchase Price multiplied by the number of Shares subject to such Award held by
such Grantee exceeds (ii) the aggregate purchase or exercise price, if any,
thereof.
SECTION 11. CHANGE IN CONTROL. Unless the Board shall determine by
resolution prior to a Change in Control, in the event of a Change in Control,
the following provisions shall apply to Awards previously granted under the
Plan, notwithstanding any provision herein or in any agreement to the contrary:
(a) All Options which provide for exercise in one or more
installments shall become immediately exercisable in full immediately prior to
the Change in Control; and
(b) All Awards which have not previously vested shall
become vested and all restrictions on Awards shall lapse immediately prior to
the Change in Control.
SECTION 12. TERMINATION OF EMPLOYMENT AND FORFEITURE. Notwithstanding
any other provision of the Plan (other than provisions regarding Change in
Control, which shall apply in all events), a Participant shall have no right to
exercise any Option or vest in any Shares awarded under the Plan if following
the Participant's termination of employment with the Company or any Subsidiary
or Parent of the Company and within a period of two years thereafter, the
Participant engages in any business or enters into any employment which the
Board in its sole discretion determines to be either directly or indirectly
competitive with the business of the Company or substantially injurious to the
Company's financial interest (the occurrence of an event described above shall
be referred to herein as "Injurious Conduct"). Furthermore, notwithstanding any
other provision of the Plan to the contrary, in the event that a Participant
receives or is entitled to the delivery or vesting of cash or Shares pursuant to
an Award made during the 12-month period prior to the Participant's termination
of employment with the Company or any Subsidiary or Parent of the Company or
during the 24-month period following the Participant's termination of such
employment, then the Board, in its sole discretion, may require the Participant
to return or forfeit to the Company the cash or Capital Stock received with
respect to such Award (or its economic value as of (i) the date of the exercise
of the Option
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or (ii) the date of grant or payment with respect to any other Award, as the
case may be) in the event that the participant engages in Injurious Conduct.
SECTION 13. AMENDMENT AND DISCONTINUANCE. The Board may alter, amend,
suspend or discontinue the Plan, provided that no such action shall deprive any
person without such person's consent of any rights theretofore granted pursuant
hereto and, provided further, that the Board may not materially amend this Plan
without shareowner approval.
SECTION 14. COMPLIANCE WITH GOVERNMENTAL REGULATIONS. Notwithstanding
any provision of the Plan or the terms of any agreement entered into pursuant to
the Plan, the Company shall not be required to issue any securities hereunder
prior to registration of the Shares subject to the Plan under the Securities Act
of 1933, as amended, or the Exchange Act, if such registration shall be
necessary, or before compliance by the Company or any Participant with any other
provisions of either of those acts or of regulations or rulings of the
Securities and Exchange Commission thereunder, or before compliance with other
federal and state laws and regulations and rulings thereunder, including the
rules of the New York Stock Exchange, Inc. and any other exchange or market on
which the Shares are listed or quoted. The Company shall use its reasonable best
efforts to effect such registrations and to comply with such laws, regulations
and rulings forthwith upon advice by its counsel that any such registration or
compliance is necessary.
SECTION 15. COMPLIANCE WITH SECTION 16. With respect to persons subject
to Section 16 of the Exchange Act, transactions under this Plan are intended to
comply with all applicable conditions of Rule 16b-3 (or its successor rule). To
the extent that any grant of an Award fails to so comply, it shall be deemed
null and void to the extent permitted by law and to the extent deemed advisable
by the Plan Administrator.
SECTION 16. PARTICIPATION BY FOREIGN NATIONALS. The Plan Administrator
may, in order to fulfill the purposes of the Plan and without amending the Plan,
modify grants to foreign nationals or United States citizens employed abroad in
order to recognize differences in local law, tax policy or custom.
SECTION 17. NO RIGHT TO EMPLOYMENT. The Plan shall not confer upon any
Participant any right with respect to continuation of any employment or
consulting relationship with the Company or membership on the Board, nor shall
it interfere in any way with the right to terminate such Participant's
employment or consulting relationship at any time, with or without cause.
SECTION 18. GOVERNING LAW. The validity, constrictions and effect of
this Plan, agreements entered into pursuant to the Plan, and of any rules,
regulations, determinations or decisions made by the Plan Administrator relating
to the Plan or such agreements, and the rights of any and all persons having or
claiming to have any interest therein or thereunder, shall be determined
exclusively in accordance with applicable federal laws and the laws of the
Commonwealth of Pennsylvania, without regard to its conflict of laws principles.
SECTION 19. EFFECTIVE DATE OF PLAN/DURATION. The Plan shall become
effective upon approval of the Plan by the affirmative vote of holders of a
majority of the outstanding Shares
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present and voting at a meeting of shareowners; provided that at least a
majority of the outstanding Shares votes for, against or abstains on the matter
and at least a majority of these Shares votes in favor of the Plan. No Award may
be granted under the Plan after July 23, 2012. Awards granted on or prior to
July 23, 2012 shall remain outstanding in accordance with this Plan and their
respective terms.
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