1
EXHIBIT 10.15
WESTINGHOUSE AIR BRAKE COMPANY
1995 STOCK INCENTIVE PLAN
(AS AMENDED THROUGH MAY 26, 1998)
The purposes of the 1995 Stock Incentive Plan (as amended, the "Plan")
are to encourage eligible employees of Westinghouse Air Brake Company (the
"Corporation") and its Subsidiaries to increase their efforts to make the
Corporation and each Subsidiary more successful, to provide an additional
inducement for such employees to remain with the Corporation or a Subsidiary, to
reward such employees by providing an opportunity to acquire shares of the
Common Stock, par value $0.01 per share, of the Corporation (the "Common Stock")
on favorable terms and to provide a means through which the Corporation may
attract able persons to enter the employ of the Corporation or one of its
Subsidiaries. For the purposes of the Plan, the term "Subsidiary" means any
corporation in an unbroken chain of corporations beginning with the Corporation,
if each of the corporations other than the last corporation in the unbroken
chain owns stock possessing at least fifty percent (50%) or more of the total
combined voting power of all classes of stock in one of the other corporations
in the chain.
SECTION 1
ADMINISTRATION
The Plan shall be administered by a Committee (the
"Committee") appointed by the Board of Directors of the Corporation (the
"Board") and consisting of not less than two members of the Board, each of whom
at the time of appointment to the Committee and at all times during service as a
member of the Committee shall be (i) "Non-Employee Directors" as then defined
under Rule 16b-3 under the Securities Exchange Act of 1934, as amended (the
"1934 Act"), or any successor Rule and (ii) if so determined by the Board, an
"outside director" under Section 162(m)(4)(C) of the Internal Revenue Code of
1986 (the "Code"), or any successor provision.
The Committee shall interpret the Plan and prescribe such
rules, regulations and procedures in connection with the operation of the Plan
as it shall deem to be necessary and advisable for the administration of the
Plan consistent with the purposes of the Plan. All questions of interpretation
and application of the Plan, or as to grants or awards under the Plan, shall be
subject to the determination of the Committee which shall be final and binding.
The Committee shall keep records of action taken. A majority
of the Committee shall constitute a quorum at any meeting, and the acts of a
majority of the members present at any meeting at which a quorum is present, or
acts approved in writing by all the members of the Committee, shall be the acts
of the Committee.
SECTION 2
ELIGIBILITY
Those key employees of the Corporation or any Subsidiary (including,
but not limited to, covered employees as defined in Section 162(m)(3) of the
Code, or any successor provision) who share responsibility for the management,
growth or protection of the business of the Corporation or any Subsidiary shall
be eligible to be granted stock options (with or without cash payment rights)
and to receive awards of restricted shares and performance units as described
herein.
Subject to the provisions of the Plan, the Committee shall have full
and final authority, in its discretion, to grant stock options (with or without
cash payment rights) and to award restricted shares and performance units as
described herein and to determine the employees to whom any such grant or award
shall be made and the number of shares to be covered thereby. In determining the
eligibility of any employee, as well as in determining the number of shares or
units covered by each grant or award and
2
whether cash payment rights shall be granted in conjunction with a stock option,
the Committee shall consider the position and the responsibilities of the
employee being considered, the nature and value to the Corporation or a
Subsidiary of his or her services, his or her present and/or potential
contribution to the success of the Corporation or a Subsidiary and such other
factors as the Committee may deem relevant.
SECTION 3
SHARES AVAILABLE UNDER THE PLAN
The aggregate number of shares of the Common Stock that may be issued
and as to which grants or awards may be made under the Plan is 3,100,000 shares,
subject to adjustment and substitution as set forth in Section 7. If any stock
option granted under the Plan is canceled by mutual consent or terminates or
expires for any reason without having been exercised in full, the number of
shares subject thereto shall again be available for purposes of the Plan. If
shares of Common Stock are forfeited to the Corporation pursuant to the
restrictions applicable to restricted shares awarded under the Plan, the shares
so forfeited shall again be available for purposes of the Plan. To the extent
any award of performance units is not earned or is paid in cash rather than
shares, the number of shares covered thereby shall again be available for
purposes of the Plan.
The shares which may be issued under the Plan may be either
authorized but unissued shares or treasury shares or partly each, as shall be
determined from time to time by the Board.
SECTION 4
GRANT OF STOCK OPTIONS
AND CASH PAYMENT RIGHTS AND AWARD OF
RESTRICTED SHARES AND PERFORMANCE UNITS
The Committee shall have authority, in its discretion, (i) to grant
"incentive stock options" pursuant to Section 422 of the Code, to grant
"nonstatutory stock options" (i.e., stock options which do not qualify under
Sections 422 or 423 of the Code) or to grant both types of stock options (but
not in tandem), (ii) to award restricted shares and (iii) to award performance
units, all as provided herein. The Committee also shall have the authority, in
its discretion, to grant cash payment rights in conjunction with nonstatutory
stock options with the effect provided in Section 5(D). Cash payment rights may
not be granted in conjunction with incentive stock options. Cash payment rights
granted in conjunction with a nonstatutory stock option may be granted either at
the time the stock option is granted or at any time thereafter during the term
of the stock option.
During the duration of the Plan, the maximum number of shares as to
which stock options may be granted and as to which shares may be awarded under
the Plan to any one employee is 800,000 shares, subject to adjustment and
substitution as set forth in Section 7. For the purposes of this limitation, any
adjustment or substitution made pursuant to Section 7 with respect to the
maximum number of shares set forth in the preceding sentence shall also be made
with respect to any shares subject to stock options or share awards previously
granted under the Plan to such employee.
Notwithstanding any other provision contained in the Plan or in any
agreement referred to in Section 5(H), but subject to the possible exercise of
the Committee's discretion contemplated in the last sentence of this paragraph,
the aggregate fair market value, determined as provided in Section 5(I) on the
date of grant, of the shares with respect to which incentive stock options are
exercisable for the first time by an employee during any calendar year under all
plans of the corporation employing such employee, any parent or subsidiary
corporation of such corporation and any predecessor corporation of any such
corporation shall not exceed $100,000. If the date on which one or more of such
incentive stock options could first be exercised would be accelerated pursuant
to any provision of the Plan or any stock option agreement, and the acceleration
of such exercise date would result in a violation of the limitation set forth in
the preceding sentence, then, notwithstanding any such provision, but subject to
the provisions of the
-2-
3
next succeeding sentence, the exercise dates of such incentive stock options
shall be accelerated only to the date or dates, if any, that do not result in a
violation of such limitation and, in such event, the exercise dates of the
incentive stock options with the lowest option prices shall be accelerated to
the earliest such dates. The Committee may, in its discretion, authorize the
acceleration of the exercise date of one or more incentive stock options even if
such acceleration would violate the $100,000 limitation set forth in the first
sentence of this paragraph and even if such incentive stock options are thereby
converted in whole or in part to nonstatutory stock options.
SECTION 5
TERMS AND CONDITIONS OF
STOCK OPTIONS AND CASH PAYMENT RIGHTS
Stock options and cash payment rights granted under the Plan shall be
subject to the following terms and conditions:
(A) The purchase price at which each stock option may be exercised (the
"option price") shall be such price as the Committee, in its discretion, shall
determine, but shall not be less than one hundred percent (100%) of the fair
market value per share of the Common Stock covered by the stock option on the
date of grant, except that in the case of an incentive stock option granted to
an employee who, immediately prior to such grant, owns stock possessing more
than (10%) of the total combined voting power of all classes of stock of the
Corporation or any Subsidiary (a "Ten Percent Employee"), the option price shall
be one hundred ten percent (110%) of such fair market value on the date of
grant; provided, however, that with respect to employees who become employees of
the Corporation or any Subsidiary as a result of the acquisition by the
Corporation or any Subsidiary of the stock or assets of another entity or
business (an "Acquisition"), and who are not deemed to be reporting persons of
the Corporation or any Subsidiary for purposes of Section 16(b) of the 1934 Act,
the option price with respect to nonstatutory stock options granted to such
persons within 12 months of such Acquisition shall be such price as the
Committee, in its discretion, shall determine, which may be less than the fair
market value per share of the Common Stock on the date of grant. For purposes of
this Section 5(A), the fair market value of the Common Stock shall be determined
as provided in Section 5(I); provided, however, that notwithstanding any other
provision of the Plan, if the IPO (as defined in Section 5(I) does not occur on
or before December 31, 1995, the fair market value of the Common Stock for
purposes of any nonstatutory stock options granted under the Plan in calendar
year 1995 shall be $15.00 per share. For purposes of this Section 5(A), an
individual (i) shall be considered as owning not only shares of stock owned
individually but also all shares of stock that are at the time owned, directly
or indirectly, by or for the spouse, ancestors, lineal descendants and brothers
and sisters (whether by the whole or half blood) of such individual and (ii)
shall be considered as owning proportionately any shares owned, directly or
indirectly, by or for any corporation, partnership, estate or trust in which
such individual is a stockholder, partner or beneficiary.
(B) The option price for each stock option shall be payable in
cash in United States dollars (including check, bank draft or money order);
provided, however, that in lieu of cash the person exercising the stock option
may (if authorized by the Committee at the time of grant in the case of an
incentive stock option, or at any time in the case of a nonstatutory stock
option) pay the option price in whole or in part by delivering to the
Corporation shares of the Common Stock having a fair market value on the date of
exercise of the stock option, determined as provided in Section 5(I), equal to
the option price for the shares being purchased, except that (i) any portion of
the option price representing a fraction of a share shall in any event be paid
in cash and (ii) no shares of the Common Stock which have been held for less
than six months may be delivered in payment of the option price of a stock
option. Delivery of shares, if authorized, may also be accomplished through the
effective transfer to the Corporation of shares held by a broker or other agent.
The Corporation will also cooperate with any person exercising a stock option
who participates in a cashless exercise program of a broker or other agent under
which all or part of the shares received upon exercise of the stock option are
sold through the broker or other agent or under which the broker or other agent
makes a loan to such person. Notwithstanding the foregoing,
-3-
4
unless the Committee, in its discretion, shall otherwise determine at the time
of grant in the case of an incentive stock option, or at any time in the case of
a nonstatutory stock option, the exercise of the stock option shall not be
deemed to occur and no shares of Common Stock will be issued by the Corporation
upon exercise of the stock option until the Corporation has received payment of
the option price in full. The date of exercise of a stock option shall be
determined under procedures established by the Committee, and as of the date of
exercise the person exercising the stock option shall be considered for all
purposes to be the owner of the shares with respect to which the stock option
has been exercised. Payment of the option price with shares shall not increase
the number of shares of the Common Stock which may be issued under the Plan as
provided in Section 3.
(C) Unless the Committee, in its discretion, shall otherwise
determine, stock options shall be exercisable by a grantee during employment
commencing on the date of grant. No stock option shall be exercisable after the
expiration of ten years (five years in the case of an incentive stock option
granted to a Ten Percent Employee) from the date of grant. Unless the Committee,
in its discretion, shall otherwise determine, a stock option to the extent
exercisable at any time may be exercised in whole or in part.
(D) Cash payment rights granted in conjunction with a
nonstatutory stock option shall entitle the person who is entitled to exercise
the stock option, upon exercise of the stock option or any portion thereof, to
receive cash from the Corporation (in addition to the shares to be received upon
exercise of the stock option) equal to such percentage as the Committee, in its
discretion, shall determine not greater than one hundred percent (100%) of the
excess of the fair market value of a share of the Common Stock on the date of
exercise of the stock option over the option price per share of the stock option
times the number of shares covered by the stock option, or portion thereof,
which is exercised. Payment of the cash provided for in this Section 5(D) shall
be made by the Corporation as soon as practicable after the time the amount
payable is determined. For purposes of this Section 5(D), the fair market value
of the Common Stock shall be determined as provided in Section 5(I).
(E) (i) No stock option shall be transferable by the grantee
otherwise than by Will, or if the grantee dies intestate, by the laws of descent
and distribution of the state of domicile of the grantee at the time of death
and (ii) all stock options shall be exercisable during the lifetime of the
grantee only by the grantee.
(F) Subject to the provisions of Section 4 in the case of
incentive stock options, unless the Committee, in its discretion, shall
otherwise determine:
(i) If the employment of a grantee who is not
disabled within the meaning of Section 422(c)(6) of the Code
(a "Disabled Grantee") is voluntarily terminated with the
consent of the Corporation or a Subsidiary or a grantee
retires under any retirement plan of the Corporation or a
Subsidiary, any then outstanding incentive stock option held
by such grantee shall be exercisable by the grantee (but only
to the extent exercisable by the grantee immediately prior to
the termination of employment) at any time prior to the
expiration date of such incentive stock option or within three
months after the date of termination of employment, whichever
is the shorter period;
(ii) If the employment of a grantee who is not a
Disabled Grantee is voluntarily terminated with the consent of
the Corporation or a Subsidiary or a grantee retires under any
retirement plan of the Corporation or a Subsidiary, any then
outstanding nonstatutory stock option held by such grantee
shall be exercisable by the grantee (but only to the extent
exercisable by the grantee immediately prior to the
termination of employment) at any time prior to the expiration
date of such nonstatutory stock option or within one year
after the date of termination of employment, whichever is the
shorter period;
-4-
5
(iii) If the employment of a grantee who is a
Disabled Grantee is voluntarily terminated with the consent of
the Corporation or a Subsidiary, any then outstanding stock
option held by such grantee shall be exercisable by the
grantee in full (whether or not so exercisable by the grantee
immediately prior to the termination of employment) by the
grantee at any time prior to the expiration date of such stock
option or within one year after the date of termination of
employment, whichever is the shorter period;
(iv) Following the death of a grantee during
employment, any outstanding stock option held by the grantee
at the time of death shall be exercisable in full (whether or
not so exercisable by the grantee immediately prior to the
death of the grantee) by the person entitled to do so under
the Will of the grantee, or, if the grantee shall fail to make
testamentary disposition of the stock option or shall die
intestate, by the legal representative of the grantee at any
time prior to the expiration date of such stock option or
within one year after the date of death of the grantee,
whichever is the shorter period;
(v) Following the death of a grantee after
termination of employment during a period when a stock option
is exercisable, the stock option shall be exercisable by such
person entitled to do so under the Will of the grantee or by
such legal representative (but only to the extent the stock
option was exercisable by the grantee immediately prior to the
death of the grantee) at any time prior to the expiration date
of such stock option or within one year after the date of
death, whichever is the shorter period;
(vi) Unless the exercise period of a stock option
following termination of employment has been extended as
provided in Section 8(C), if the employment of a grantee
terminates for any reason other than voluntary termination
with the consent of the Corporation or a Subsidiary,
retirement under any retirement plan of the Corporation or a
Subsidiary or death, all outstanding stock options held by the
grantee at the time of such termination of employment shall
automatically terminate.
Whether termination of employment is a voluntary termination with the consent of
the Corporation or a Subsidiary shall be determined, in its discretion, by the
Committee and any such determination by the Committee shall be final and
binding.
(G) If a grantee of a stock option (i) engages in the operation or
management of a business (whether as owner, partner, officer, director, employee
or otherwise and whether during or after termination of employment) which is in
competition with the Corporation or any of its Subsidiaries (provided, however,
that this clause shall not apply if Section 8(C) applies following termination
of employment), (ii) induces or attempts to induce any customer, supplier,
licensee or other individual, corporation or other business organization having
a business relationship with the Corporation or any of its Subsidiaries to cease
doing business with the Corporation or any of its Subsidiaries or in any way
interferes with the relationship between any such customer, supplier, licensee
or other person and the Corporation or any of its Subsidiaries or (iii) solicits
any employee of the Corporation or any of its Subsidiaries to leave the
employment thereof or in any way interferes with the relationship of such
employee with the Corporation or any of its Subsidiaries, the Committee, in its
discretion, may immediately terminate all outstanding stock options held by the
grantee. Whether a grantee has engaged in any of the activities referred to in
the preceding sentence which would cause the outstanding stock options to be
terminated shall be determined, in its discretion, by the Committee, and any
such determination by the Committee shall be final and binding.
(H) All stock options and cash payment rights shall be confirmed by an
agreement which shall be executed on behalf of the Corporation by the Chief
Executive Officer (if other than the President), the President or any Vice
President and by the grantee. The agreement confirming a stock option shall
specify whether the stock option is an incentive stock option or a nonstatutory
stock option. The provisions of such agreements need not be identical.
-5-
6
(I) Fair market value of the Common Stock shall be the mean between the
following prices, as applicable, for the date as of which fair market value is
to be determined as quoted in The Wall Street Journal (or in such other reliable
publication as the Committee, in its discretion, may determine to rely upon):
(i) if the Common Stock is listed on the New York Stock Exchange, the highest
and lowest sales prices per share of the Common Stock as quoted in the
NYSE-Composite Transactions listing for such date, (ii) if the Common Stock is
not listed on such exchange the highest and lowest sales prices per share of
Common Stock for such date on (or on any composite index including) the
principal United States securities exchange registered under the 1934 Act on
which the Common Stock is listed or (iii) if the Common Stock is not listed on
any such exchange, the highest and lowest sales prices per share of the Common
Stock for such date on the National Association of Securities Dealers Automated
Quotations System or any successor system then in use ("NASDAQ"); provided,
however, the fair market value of the Common Stock for the date of the initial
public offering of the Common Stock (the "IPO") shall be the IPO price of the
Common Stock. If there are no such sale price quotations for the date as of
which fair market value is to be determined but there are such sale price
quotations within a reasonable period both before and after such date, then fair
market value shall be determined by taking a weighted average of the means
between the highest and lowest sales prices per share of the Common Stock as so
quoted on the nearest date before and the nearest date after the date as of
which fair market value is to be determined. The average should be weighted
inversely by the respective numbers of trading days between the selling dates
and the date as of which fair market value is to be determined. If there are no
such sale price quotations on or within a reasonable period both before and
after the date as of which fair market value is to be determined, then fair
market value of the Common Stock shall be the mean between the bona fide bid and
asked prices per share of Common Stock as so quoted for such date on NASDAQ, or
if none, the weighted average of the means between such bona fide bid and asked
prices on the nearest trading date before and the nearest trading date after the
date as of which fair market value is to be determined, if both such dates are
within a reasonable period. The average is to be determined in the manner
described above in this Section 5(I). If the fair market value of the Common
Stock cannot be determined on any basis previously set forth in this Section
5(I) for the date as of which fair market value is to be determined, the
Committee shall in good faith determine the fair market value of the Common
Stock on such date. Fair market value shall be determined without regard to any
restriction other than a restriction which, by its terms, will never lapse.
(J) The obligation of the Corporation to issue shares of the Common
Stock under the Plan shall be subject to (i) the effectiveness of a registration
statement under the Securities Act of 1933, as amended, with respect to such
shares, if deemed necessary or appropriate by counsel for the Corporation, (ii)
the condition that the shares shall have been listed (or authorized for listing
upon official notice of issuance) upon each stock exchange, if any, on which the
Common Stock may then be listed and (iii) all other applicable laws,
regulations, rules and orders which may then be in effect.
Subject to the foregoing provisions of this Section 5 and the
other provisions of the Plan, stock options and cash payment rights granted
under the Plan shall be subject to such restrictions and other terms and
conditions, if any, as shall be determined, in its discretion, by the Committee
and set forth in the agreement referred to in Section 5(H), or an amendment
thereto.
-6-
7
SECTION 6
RESTRICTED SHARES AND PERFORMANCE UNITS
(A) RESTRICTED SHARES
Awards of restricted shares shall be confirmed by a written agreement
in the form prescribed by the Committee in its discretion, which shall set forth
the number of shares of the Common Stock awarded, restrictions imposed thereon
(including, without limitation, restrictions on the right of the grantee to
sell, assign, transfer or encumber such shares (except as provided below) while
such shares are subject to other restrictions imposed under this Section 6(A)),
the duration of such restrictions, events (which may, in the discretion of the
Committee, include termination of employment and/or performance-based events)
the occurrence of which would cause a forfeiture of the restricted shares and
such other terms and conditions as shall be determined, in its discretion, by
the Committee. The agreement shall be executed on behalf of the Corporation by
the Chief Executive Officer (if other than the President), the President or any
Vice President and by the grantee. The provisions of such agreements need not be
identical. Awards of restricted shares shall be effective on the date
determined, in its discretion, by the Committee.
Following the award of restricted shares and prior to the lapse or
termination of the applicable restrictions, share certificates for the
restricted shares shall be issued in the name of the grantee and deposited with
the Corporation in escrow together with related stock powers signed by the
grantee. Except as provided in Section 7, the Committee, in its discretion, may
determine that dividends and other distributions on the shares held in escrow
shall not be paid to the grantee until the lapse or termination of the
applicable restrictions. Unless otherwise provided, in its discretion, by the
Committee, any such dividends or other distributions shall not bear interest.
Upon the lapse or termination of the applicable restrictions (and not before
such time), the grantee shall receive the share certificates for the restricted
shares (subject to the provisions of Section 10) and unpaid dividends, if any.
From the date the award of restricted shares is effective, the grantee shall be
a stockholder with respect to all the shares represented by the share
certificates and shall have all the rights of a stockholder with respect to all
the restricted shares, including the right to vote such shares and to receive
all dividends and other distributions paid with respect to such shares, subject
only to the preceding provisions of this paragraph and the other restrictions
imposed by the Committee. If a grantee of restricted shares (i) engages in the
operation or management of a business (whether as owner, partner, officer,
director, employee or otherwise and whether during or after termination of
employment) which is in competition with the Corporation or any of its
Subsidiaries (provided, however, that this clause shall not apply if Section
8(D) applies), (ii) induces or attempts to induce any customer, supplier,
licensee or other individual, corporation or other business organization having
a business relationship with the Corporation or any of its Subsidiaries to cease
doing business with the Corporation or any of its Subsidiaries or in any way
interferes with the relationship between any such customer, supplier, licensee
or other person and the Corporation or any of its Subsidiaries or (iii) solicits
any employee of the Corporation or any of its Subsidiaries to leave the
employment thereof or in any way interferes with the relationship of such
employee with the Corporation or any of its Subsidiaries, the Committee may
immediately declare forfeited all restricted shares held by the grantee as to
which the restrictions have not yet lapsed. Whether a grantee has engaged in any
of the activities referred to in the preceding sentence which would cause the
restricted shares to be forfeited shall be determined, in its discretion, by the
Committee, and any such determination by the Committee shall be final and
binding.
Neither this Section 6(A) nor any other provision of the Plan shall
preclude a grantee from transferring or assigning restricted shares to (i) the
trustee of a trust that is revocable by such grantee alone, both at the time of
the transfer or assignment and at all times thereafter prior to such grantee's
death or (ii) the trustee of any other trust to the extent approved in advance
by the Committee in writing. A transfer or assignment of restricted shares from
such trustee to any person other than such grantee shall be permitted only to
the extent approved in advance by the Committee in writing, and restricted
shares held by such trustee shall be subject to all of the conditions and
restrictions set forth in the Plan and in the applicable agreement as if such
trustee were a party to such agreement.
-7-
8
(B) PERFORMANCE UNITS
The Committee may award performance units which shall be
earned by an awardee based on the level of performance over a specified period
of time by the Corporation, a Subsidiary or Subsidiaries, any branch, department
or other portion thereof or the awardee individually, as determined by the
Committee. For the purposes of the grant of performance units, the following
definitions shall apply:
(i) "Performance unit" shall mean an award, expressed in
dollars or shares of Common Stock, granted to an awardee with respect
to a Performance Period. Awards expressed in dollars may be established
as fixed dollar amounts, as a percentage of salary, as a percentage of
a pool based on earnings of the Corporation, a Subsidiary or
Subsidiaries or any branch, department or other portion thereof or in
any other manner determined by the Committee in its discretion,
provided that the amount thereof shall be capable of being determined
as a fixed dollar amount as of the close of the Performance Period.
(ii) "Performance Period" shall mean an accounting period of
the Corporation or a Subsidiary of not less than one year, as
determined by the Committee in its discretion.
(iii) "Performance Target" shall mean that level of
performance established by the Committee which must be met in order for
the performance unit to be fully earned. The Performance Target may be
expressed in terms of earnings per share, return on assets, asset
growth, ratio of capital to assets or such other level or levels of
accomplishment by the Corporation, a Subsidiary or Subsidiaries, any
division, branch, department or other portion thereof or the awardee
individually as may be established or revised from time to time by the
Committee.
(iv) "Minimum Target" shall mean a minimal level of
performance established by the Committee which must be met before any
part of the performance unit is earned. The Minimum Target may be the
same as or less than the Performance Target in the discretion of the
Committee.
(v) "Performance shares" shall mean shares of Common Stock
issued in payment of earned performance units.
An awardee shall earn the performance unit in full by meeting the
Performance Target for the Performance Period. If the Minimum Target has not
been attained at the end of the Performance Period, no part of the performance
unit shall have been earned by the awardee. If the Minimum Target is attained
but the Performance Target is not attained, the portion of the performance unit
earned by the awardee shall be determined on the basis of a formula established
by the Committee.
At any time prior to the end of a Performance Period, the
Committee may adjust downward (but not upward) the Performance Target and/or
Minimum Target as a result of major events unforeseen at the time of the award,
such as changes in the economy, in the industry or laws affecting the operations
of the Corporation or a Subsidiary, or any division, branch, department or other
portion thereof, or any other event the Committee determines would have a
significant impact upon the probability of attaining the previously established
Performance Target.
Payment of earned performance units shall be made to awardees following
the close of the Performance Period as soon as practicable after the time the
amount payable is determined by the Committee. Payment in respect of earned
performance units, whether expressed in dollars or shares, may be made in cash,
in shares of Common Stock, or partly in cash and partly in shares of Common
Stock, as determined by the Committee at the time of payment. For this purpose,
performance units expressed in dollars shall be converted to shares, and
performance units expressed in shares shall be converted to
-8-
9
dollars, based on the fair market value of the Common Stock, determined as
provided in Section 5(I), as of the date the amount payable is determined by the
Committee. The Committee, in its discretion, may determine that awardees shall
also be entitled to any dividends or other distributions that would have been
paid on earned performance shares had the shares been outstanding during the
period from the award to the payment of the performance shares. Unless otherwise
provided, in its discretion, by the Committee, any such dividends or other
distributions shall not bear interest.
Unless otherwise provided in the agreement confirming the
award of the performance units, if prior to the close of a Performance Period,
the employment of an awardee of performance units is voluntarily terminated with
the consent of the Corporation or a Subsidiary, the grantee retires under any
retirement plan of the Corporation or a Subsidiary or the grantee dies during
employment, the Committee in its discretion may determine to pay to the grantee
all or part of the performance unit based upon the extent to which the Committee
determines the Performance Target or Minimum Target has been achieved as of the
date of termination of employment, retirement or death, the period of time
remaining until the end of the Performance Period and/or such other factors as
the Committee may deem relevant. If the Committee, in its discretion, determines
that all or any part of the performance unit shall be paid, payment shall be
made to the awardee or the estate of the awardee as promptly as practicable
following such determination and may be made in cash, in shares of Common Stock,
or partly in cash and partly in shares of Common Stock, as determined by the
Committee at the time of payment. For this purpose, performance units expressed
in dollars shall be converted to shares, and performance units expressed in
shares shall be converted to dollars, based on the fair market value of the
Common Stock, determined as provided in Section 5(I), as of the date the amount
payable is determined by the Committee.
Except as otherwise provided in Section 8(E), if the employment of a
grantee of an award of performance units terminates prior to the close of the
Performance Period for any reason other than voluntary termination with the
consent of the Corporation or a Subsidiary, retirement under any retirement plan
of the Corporation or a Subsidiary or death, the unearned performance units
shall be deemed not to have been earned and such unearned units shall not be
paid.
Whether termination of employment is a voluntary termination with the
consent of the Corporation or a Subsidiary shall be determined, in its
discretion, by the Committee and any such determination by the Committee shall
be final and binding.
If an awardee of performance units (i) engages in the operation or
management of a business (whether as owner, partner, officer, director, employee
or otherwise and whether during or after termination of employment) which is in
competition with the Corporation or any of its Subsidiaries (provided, however,
that this clause shall not apply if Section 8(E) applies), (ii) induces or
attempts to induce any customer, supplier, licensee or other individual,
corporation or other business organization having a business relationship with
the Corporation or any of its Subsidiaries to cease doing business with the
Corporation or any of its Subsidiaries or in any way interferes with the
relationship between any such customer, supplier, licensee or other person and
the Corporation or any of its Subsidiaries or (iii) solicits any employee of the
Corporation or any of its Subsidiaries to leave the employment thereof or in any
way interferes with the relationship of such employee with the Corporation or
any of its Subsidiaries, the Committee may immediately cancel the award. Whether
an awardee has engaged in any of the activities referred to the preceding
sentence which would cause the award of performance units to be canceled shall
be determined, in its discretion, by the Committee, and any such determination
by the Committee shall be final and binding.
Performance unit awards shall be evidenced by a written
agreement in the form prescribed by the Committee which shall set forth the
amount or manner of determining the amount of the performance unit, the
Performance Period, the Performance Target and any Minimum Target and such other
terms and conditions as the Committee in its discretion deems appropriate.
Performance unit awards shall be effective only upon execution of the applicable
performance unit agreement on behalf of
-9-
10
the Corporation by the Chief Executive Officer (if other than the President),
the President or any Vice President, and by the awardee.
SECTION 7
ADJUSTMENT AND SUBSTITUTION OF SHARES
If a dividend or other distribution shall be declared upon the Common
Stock payable in shares of the Common Stock, (i) the number of shares of the
Common Stock subject to any outstanding stock options or performance unit
awards, (ii) the number of shares of the Common Stock which may be issued under
the Plan but are not subject to outstanding stock options or performance unit
awards and (iii) the maximum number of shares as to which stock options may be
granted and as to which shares may be awarded under the Plan to any employee
under Section 4 on the date fixed for determining the stockholders entitled to
receive such stock dividend or distribution shall be adjusted by adding thereto
the number of shares of the Common Stock which would have been distributable
thereon if such shares had been outstanding on such date. Shares of Common Stock
so distributed with respect to any restricted shares held in escrow shall also
be held by the Corporation in escrow and shall be subject to the same
restrictions as are applicable to the restricted shares on which they were
distributed.
If the outstanding shares of Common Stock shall be changed into or
exchangeable for a different number or kind of shares of stock or other
securities of the Corporation or another corporation, whether through
reorganization, reclassification, recapitalization, stock split-up, combination
of shares, merger or consolidation, then there shall be substituted for each
share of the Common Stock subject to any then outstanding stock option or
performance unit award, for each share of the Common Stock which may be issued
under the Plan but which is not then subject to any outstanding stock option or
performance unit award and for the maximum number of shares as to which stock
options may be granted and as to which shares may be awarded under the Plan to
any employee under Section 4, the number and kind of shares of stock or other
securities into which each outstanding share of the Common Stock shall be so
changed or for which each such share shall be exchangeable. Unless otherwise
determined by the Committee, in its discretion, any such stock or securities, as
well as any cash or other property, into or for which any restricted shares held
in escrow shall be changed or exchangeable in any such transaction shall also be
held by the Corporation in escrow and shall be subject to the same restrictions
as are applicable to the restricted shares in respect of which such stock,
securities, cash or other property was issued or distributed.
In case of any adjustment or substitution as provided for in the first
two paragraphs of this Section 7, the aggregate option price for all shares
subject to each then outstanding stock option prior to such adjustment or
substitution shall be the aggregate option price for all shares of stock or
other securities (including any fraction) to which such shares shall have been
adjusted or which shall have been substituted for such shares.
Any new option price per share shall be carried to at least three
decimal places with the last decimal place rounded upwards to the nearest whole
number.
If the outstanding shares of the Common Stock shall be changed in value
by reason of any spin-off, split-off or split-up, or dividend in partial
liquidation, dividend in property other than cash or extraordinary distribution
to holders of the Common Stock, (i) the Committee shall make any adjustments to
any then outstanding stock option which it determines are equitably required to
prevent dilution or enlargement of the rights of grantees which would otherwise
result from any such transaction, and (ii) unless otherwise determined by the
Committee, in its discretion, any stock, securities, cash or other property
distributed with respect to any restricted shares held in escrow or for which
any restricted shares held in escrow shall be exchanged in any such transaction
shall also be held by the Corporation in escrow and shall be subject to the same
restrictions as are applicable to the restricted shares in respect of which such
stock, securities, cash or other property was distributed or exchanged.
-10-
11
No adjustment or substitution provided for in this Section 7 shall
require the Corporation to issue or sell a fraction of a share or other
security. Accordingly, all fractional shares or other securities which result
from any such adjustment or substitution shall be eliminated and not carried
forward to any subsequent adjustment or substitution. Owners of restricted
shares held in escrow shall be treated in the same manner as owners of Common
Stock not held in escrow with respect to fractional shares created by an
adjustment or substitution of shares, except that, unless otherwise determined
by the Committee, in its discretion, any cash or other property paid in lieu of
a fractional share shall be subject to restrictions similar to those applicable
to the restricted shares exchanged therefor.
If any adjustment or substitution provided for in this Section 7
requires the approval of stockholders in order to enable the Corporation to
grant incentive stock options or to comply with Section 162(m) of the Code, then
no such adjustment or substitution shall be made without the required
stockholder approval. Notwithstanding the foregoing, in the case of incentive
stock options, if the effect of any such adjustment or substitution would be to
cause the stock option to fail to continue to qualify as an incentive stock
option or to cause a modification, extension or renewal of such stock option
within the meaning of Section 424 of the Code, the Committee may elect that such
adjustment or substitution not be made but rather shall use reasonable efforts
to effect such other adjustment of each then outstanding stock option as the
Committee, in its discretion, shall deem equitable and which will not result in
any disqualification, modification, extension or renewal (within the meaning of
Section 424 of the Code) of the incentive stock option.
Except as provided in this Section 7, a grantee shall have no rights by
reason of any issue by the Corporation of stock of any class or securities
convertible into stock of any class, any subdivision or consolidation of shares
of stock of any class, the payment of any stock dividend or any other increase
or decrease in the number of shares of stock of any class.
SECTION 8
ADDITIONAL RIGHTS IN CERTAIN EVENTS
(A) DEFINITIONS
For purposes of this Section 8, the following terms shall have the
following meanings:
(1) The term "Person" shall be used as that term is used in Sections
13(d) and 14(d) of the 1934 Act as in effect on the effective date of the Plan.
(2) "Beneficial Ownership" shall be determined as provided in Rule
13d-3 under the 1934 Act as in effect on the effective date of the Plan.
(3) A specified percentage of "Voting Power" of a company shall mean
such number of the Voting Shares as shall enable the holders thereof to cast
such percentage of all the votes which could be cast in an annual election of
directors (without consideration of the rights of any class of stock other than
the common stock of the company to elect directors by a separate class vote);
and "Voting Shares" shall mean all securities of a company entitling the holders
thereof to vote in an annual election of directors (without consideration of the
rights of any class of stock other than the common stock of the company to elect
directors by a separate class vote).
(4) "Tender Offer" shall mean a tender offer or exchange offer to
acquire securities of the Corporation (other than such an offer made by the
Corporation or any Subsidiary), whether or not such offer is approved or opposed
by the Board.
(5) "Continuing Directors" shall mean a director of the Corporation who
either (a) was a director of the Corporation on the effective date of the Plan
or (b) is an individual whose election, or nomination for election, as a
director of the Corporation was approved by a vote of at least two-thirds of
-11-
12
the directors then still in office who were Continuing Directors (other than an
individual whose initial assumption of office is in connection with an actual or
threatened election contest relating to the election of directors of the
Corporation which would be subject to Rule 14a-11 under the 1934 Act, or any
successor Rule).
(6) "Initial Public Offering" shall mean the first public offering of
Common Stock consummated after the effective date of the Plan (whether or not
registered under the Securities Act of 1933, as amended).
(7) "Designated Person" shall mean (a) the Westinghouse Air Brake
Company Employee Stock Ownership Plan and the Westinghouse Air Brake Company
Employee Stock Ownership Trust (collectively, the "ESOP"), (b) the RAC Voting
Trust (the "Voting Trust") and (c) any Person serving on the Committee
administering the ESOP or as Trustee of the Voting Trust, to the extent that
such Person is deemed to have Beneficial Ownership of shares of Common Stock
held by the ESOP or the Voting Trust.
(8) "SIH" shall mean Incentive AB or Scandinavian Incentive Holding
B.V. or any of their respective subsidiaries.
(9) "Section 8 Event" shall mean the date upon which any of the
following events occurs:
(a) The Corporation acquires actual knowledge that (i) any
Person, other than the Corporation, a Subsidiary, any employee benefit
plan(s) sponsored by the Corporation or a Subsidiary, any Designated
Person or SIH, has acquired the Beneficial Ownership, directly or
indirectly, of securities of the Corporation entitling such Person to
30% or more of the Voting Power of the Corporation, or (ii) SIH has
acquired Beneficial ownership, directly or indirectly, of securities of
the Corporation entitling SIH to 40% or more of the Voting Power of the
Corporation (30% if the Initial Public Offering has been consummated
and the Common Stock is registered pursuant to Section 12(b) or 12(g)
of the 1934 Act); or (iii) SIH and any Person or Persons who agree to
act together for the purpose of acquiring, holding, voting or disposing
of securities of the Corporation or who act in concert or otherwise
with the purpose or effect of changing or influencing control of the
Corporation, or in connection with or as a participant in any
transaction having such purpose or effect, have acquired the Beneficial
Ownership, directly or indirectly, of securities of the Corporation
entitling SIH and such Person(s) to 40% or more of the Voting Power of
the Corporation (30% if the Initial Public Offering has been
consummated and the Common Stock is registered pursuant to Section 12
(b) or 12 (g) of the 1934 Act);
(b) A Tender Offer is made to acquire securities of the
Corporation entitling the holders thereof to 30% or more of the Voting
Power of the Corporation; or
(c) A solicitation subject to Rule 14a-11 under the 1934 Act
(or any successor Rule) relating to the election or removal of 50% or
more of the members of the Board or any class of the Board shall be
made by any person other than the Corporation or less than 51% of the
members of the Board (excluding vacant seats) shall be Continuing
Directors; or
(d) The stockholders of the Corporation shall approve a
merger, consolidation, share exchange, division or sale or other
disposition of assets of the Corporation as a result of which the
stockholders of the Corporation immediately prior to such transaction
shall not hold, directly or indirectly, immediately following such
transaction a majority of the Voting Power of (i) in the case of a
merger or consolidation, the surviving or resulting corporation, (ii)
in the case of a share exchange, the acquiring corporation or (iii) in
the case of a division or a sale or other disposition of assets, each
surviving, resulting or acquiring corporation which, immediately
following the transaction, holds more than 30% of the consolidated
assets of the Corporation immediately prior to the transaction;
-12-
13
provided, however, that (i) if securities beneficially owned by a grantee are
included in determining the Beneficial Ownership of a Person referred to in
paragraph 9(a)(i) above, (ii) a grantee is required to be named pursuant to Item
2 of the Schedule 14D-1 (or any similar successor filing requirement) required
to be filed by the bidder making a Tender Offer referred to in paragraph
9(a)(ii) above or (iii) if a grantee is a "participant" as defined in
Instruction 3 to Item 4 of Schedule 14A under the 1934 Act (or any successor
Rule) in a solicitation (other than a solicitation by the Corporation) referred
to in paragraph 9(a)(iii) above, then no Section 8 Event with respect to such
grantee shall be deemed to have occurred by reason of such event. Neither SIH
nor any other Person shall be deemed to have agreed to act together or to be
acting in concert or otherwise for purposes of paragraph 9(a)(iii) above to the
extent that they are acting pursuant to and in accordance with the terms of the
Voting Trust Agreement creating the Voting Trust or the Stockholders Agreement
dated as of January 31, 1995 among the Corporation, SIH and the Voting Trust.
(B) ACCELERATION OF THE EXERCISE DATE OF STOCK OPTIONS
Subject to the provisions of Section 4 in the case of incentive stock
options, unless the agreement referred to in Section 5(H), or an amendment
thereto, shall otherwise provide, notwithstanding any other provision contained
in the Plan, in case any "Section 8 Event" occurs all outstanding stock options
(other than those held by a person referred to in the proviso to Section
8(A)(9)) shall become immediately and fully exercisable whether or not otherwise
exercisable by their terms.
(C) EXTENSION OF THE EXPIRATION DATE OF STOCK OPTIONS
Subject to the provisions of Section 4 in the case of incentive stock
options, unless the agreement referred to in Section 5(H), or an amendment
thereto, shall otherwise provide, notwithstanding any other provision contained
in the Plan, all outstanding stock options held by a grantee (other than a
grantee referred to in the proviso to Section 8(A)(9)) whose employment with the
Corporation or a Subsidiary terminates within one year of any Section 8 Event
for any reason other than voluntary termination with the consent of the
Corporation or a Subsidiary, retirement under any retirement plan of the
Corporation or a Subsidiary or death which are exercisable shall continue to be
exercisable for a period of three years from the date of such termination of
employment, but in no event after the expiration date of the stock option.
(D) LAPSE OF RESTRICTIONS ON RESTRICTED SHARE AWARDS
Unless the agreement referred to in Section 6(A), or an amendment
thereto, shall otherwise provide, notwithstanding any other provision contained
in the Plan, if any "Section 8 Event" occurs prior to the scheduled lapse of all
restrictions applicable to restricted share awards under the Plan (other than
those held by a person referred to in the proviso to Section 8(A)(9)), all such
restrictions shall lapse upon the occurrence of any such "Section 8 Event"
regardless of the scheduled lapse of such restrictions.
(E) PAYMENT OF PERFORMANCE UNITS
Unless the agreement referred to in Section 6(B), or an amendment
thereto, shall otherwise provide, notwithstanding any other provision contained
in the Plan, if any "Section 8 Event" occurs prior to the end of any Performance
Period, all performance units (unless the awardee is a person referred to in the
proviso to Section 8(A)(9)) shall be deemed to have been fully earned as of the
date of the Section 8 Event, regardless of the attainment or nonattainment of
any Performance Target or any Minimum Target and shall be paid to the awardee
thereof as promptly as practicable after the Section 8 Event. If the performance
unit is not expressed as a fixed amount in dollars or shares, the Committee may
provide in the performance unit agreement for the amount to be paid in the case
of Section 8 Event.
-13-
14
(F) TAX-RELATED CASH PAYMENTS
Unless the agreements referred to in Sections 5(H), 6(A) or 6(B), or an
amendment thereto, shall otherwise provide, if the independent auditors most
recently selected by the Board determine that (i) any grant, payment or transfer
to or for the benefit of a grantee or awardee under the Plan (whether granted,
paid or payable or transferred or transferable pursuant to the Plan or
otherwise) (a "Payment") would be deemed to be an "excess parachute payment" for
Federal income tax purposes because of Section 280G of the Code, or any
successor provision ("Section 280G"), and (ii) any grant, payment or transfer
under the Plan to or for the benefit of a grantee or awardee within one year of
or following the occurrence of a Section 8 Event constitutes in whole or in part
a "parachute payment" under Section 280G (without regard to Section 280G(b)(4))
used in calculating such "excess parachute payment," the Payment will be grossed
up through the payment by the Corporation to the grantee or awardee in cash of
the amount of any excise tax under Section 4999 of the Code, or any successor
provision ("Section 4999"), on the "excess parachute payment" and the amount of
any excise tax under Section 4999 and applicable income tax on the total amount
of such gross up payment, so that the grantee or awardee will receive the full
amount of the Payment after the grantee or awardee has paid any excise tax under
Section 4999 of the Code on the "excess parachute payment" and any excise tax
under Section 4999 and applicable income tax on the amount of such gross up
payment. On the later of the date an "excess parachute payment" is paid to or
for the benefit of the grantee or awardee or the date on which it can be first
determined that a Payment would be deemed to be an "excess parachute payment,"
the Corporation shall pay or distribute to or for the benefit of the grantee or
awardee the gross up payment due to the grantee or awardee under this Section
8(F).
SECTION 9
EFFECT OF THE PLAN ON THE RIGHTS OF EMPLOYEES AND EMPLOYER
Neither the adoption of the Plan nor any action of the Board or the
Committee pursuant to the Plan shall be deemed to give any employee any right to
be granted a stock option (with or without cash payment rights) or to be awarded
restricted shares or performance units under the Plan. Nothing in the Plan, in
any stock option or cash payment rights granted under the Plan or in any award
of restricted shares or performance units under the Plan or in any agreement
providing for any of the foregoing shall confer any right on any employee to
continue in the employ of the Corporation or any Subsidiary or interfere in any
way with the rights of the Corporation or any Subsidiary to terminate the
employment of any employee at any time.
SECTION 10
WITHHOLDING
Income, excise or employment taxes may be required to be withheld by
the Corporation or a Subsidiary in connection with the grant or exercise of a
stock option, upon a "disqualifying disposition" of the shares acquired upon
exercise of an incentive stock option, at the time restricted shares are granted
or vest or performance units are earned or upon the receipt by the grantee of
cash in payment of cash payment rights or dividends on restricted stock which
has not vested. Any taxes required to be withheld by the Corporation or any of
its Subsidiaries upon the receipt by the grantee of cash in payment of cash
payment rights or dividends will be satisfied by the Corporation by withholding
the taxes required to be withheld from the cash the grantee would otherwise
receive. The Corporation will request that the grantee pay any additional amount
required to be withheld directly to the Corporation in cash. If a grantee does
not pay any taxes required to be withheld by the Corporation or any of its
Subsidiaries within ten days after a request for the payment of such taxes, the
Corporation or such Subsidiary may withhold such taxes from any compensation to
which the grantee is entitled.
SECTION 11
AMENDMENT
The right to alter and amend the Plan at any time to time and the right
to revoke or terminate the Plan are hereby specifically reserved to the Board;
provided that no such alteration or amendment of the
-14-
15
Plan shall, without stockholder approval, (i) increase the number of shares
which may be issued under the Plan as set forth in Section 3, (ii) increase the
maximum number of shares as to which stock options may be granted and as to
which shares may be awarded under the Plan to any one employee as set forth in
Section 4, (iii) make any changes in the class of employees eligible to receive
options or awards under the Plan or (iv) be made if stockholder approval of the
amendment is at the time required for grants or awards under the Plan to qualify
for the exemption from Section 16(b) of the 1934 Act provided by Rule 16b-3 or
by the rules of the New York Stock Exchange or any other stock exchange on which
the Common Stock may then be listed. No alteration, amendment, revocation or
termination of the Plan shall, without the written consent of the holder of an
outstanding grant or award under the Plan, adversely affect the rights of such
holder with respect to such outstanding grant or award.
SECTION 12
EFFECTIVE DATE AND DURATION OF PLAN
The effective date and date of adoption of the Plan shall be May 26,
1995, the date of adoption of the Plan by the Board, and the effective date of
the amendments to the Plan adopted by the Board on July 29, 1997 shall be July
29, 1997. No stock option or cash payment rights may be granted and no
restricted shares or performance units payable in performance shares may be
awarded under the Plan subsequent to May 26, 2005.