EXHIBIT (i)
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PITNEY BOWES INC.
KEY EMPLOYEES' INCENTIVE PLAN
(As Amended and Restated: February 12, 2001)
1. The Pitney Bowes Inc. Key Employees Incentive Plan (the "Plan") is
designed to provide additional incentives for key employees of Pitney Bowes Inc.
(the "Company") and its subsidiaries and affiliates by the making of awards of
supplemental compensation. It is intended that such awards will be given in a
way designed to retain or attract, and to provide additional incentive to, key
employees, having regard for their individual potential, location, contributions
to the Company and other appropriate considerations.
2. (A) The Plan shall be administered by a committee (the "Committee") which
shall consist of directors then constituting the Board of Directors of the
Company, excluding any director who is not a "disinterested person" within the
meaning of Rule 16b-3 ("Rule 16b-3") promulgated by the Securities and Exchange
Commission under the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), and an "outside director" within the meaning of Section 162(m) of the
Internal Revenue Code of 1986, and regulations promulgated thereunder
(directors meeting both such requirements being hereinafter referred to as
"Qualified Directors"), or any such other committee designated by the Board of
Directors of the Company to administer the Plan, which committee shall be
composed of not less than the minimum number of directors from time to time
required by Rule 16b-3 or Section 162(m), each of whom is a Qualified Director.
The Committee shall have full authority to establish rules for the
administration of the Plan and to make administrative decisions regarding the
Plan or awards hereunder. The Committee may delegate its functions hereunder to
the extent consistent with applicable law.
(B) Unless otherwise expressly provided in the Plan, all designations,
determinations, interpretations, and other decisions under or with respect to
the Plan, any award, or any award agreement or certificate shall be with and in
the sole discretion of the Committee, may be made at any time, and shall be
final, conclusive, and binding upon all persons, including the Company, any
affiliate, any participant, any holder or beneficiary of any award, and any
employee of the Company or of any affiliate.
3. (A) Awards of supplemental compensation may be made in respect of each
calendar year up to the aggregate amount of the "Incentive Fund" for such year.
The amount of the Incentive Fund for each year shall be determined by the
Committee prior to the end of the following year, provided that the amount so
determined shall not exceed an amount equal to (a) 4-1/2% of the consolidated
net income of the Company and its consolidated subsidiaries before provision for
income taxes, as certified by the Company's independent public accountants, plus
(b) an additional amount equal to- any excess of the aggregate amount of the
Incentive Funds for the five preceding years over the aggregate amount of awards
made for such years.
(B) (i) The Committee shall fix the extent, within the limits of the
Incentive Fund, to which awards shall be made by the Company, shall decide who
shall receive awards for the year, and shall determine the amount of each award.
Such awards may be made in cash, shares of the Company; units (as defined in
subparagraph ii), or such other kind or form of compensation (other than options
to acquire shares of the Company) or any combination of them as may, in the
judgment of the Committee, be best calculated to further the purposes of the
Plan.
(ii) A "unit" shall be an award which entitles the recipient to receive
cash, shares or other compensation in an amount which depends upon the business
performance of the Company or any of its divisions, subsidiaries, or affiliates
during a stated period. Performance of this purpose may be measured by the
growth in book or market value of capital stock, the increase in the earnings in
total or per share, or any other indicator specified by the Committee. The
Committee shall also fix the period during which such performance is to be
measured, the time at which the value of the units is to be paid, and the form
of the payment to be made in respect of the units.
(iii) All awards under the Plan shall be made on such terms and subject
to such conditions as the Committee may determine.
(C) Awards other than awards of units shall be deemed, for the purpose only
of determining the amount to be charged against the Incentive Fund, to have the
value of the cash, shares, or other kind or form of compensation awarded, as
determined by the Committee, as of the time the award is made. Awards of units
shall be deemed for such purpose to have a value, which represents 50% of the
estimated maximum liability of the Company to make payments with regard to such
units as determined by the Committee. Such units may be revalued by the
Committee from time to-time during the stated period referred to in Section
3(B)(ii) above, and any excess over the value originally assigned shall be
charged to the Incentive Fund for such year or years as the Committee shall
determine.
4. Nothing in the Plan shall prevent a participant from being included in any
other employee benefit or stock option or purchase plan of the Company or its
subsidiaries or affiliates, or from receiving any compensation provided by them.
Neither the Plan nor any action taken thereunder shall be understood as giving
any person any right to be retained in the employ of the Company or any
subsidiary or affiliate, nor shall any person (including persons participating
for a prior year) be entitled as of right to be selected as a participant in the
Plan for any years.
5. The Committee may amend, suspend, or terminate the Plan in whole or in part
at any time provided, however, that if in the judgment of the Committee such
amendment or other action would have a material effect on the Plan, such
amendment or other action must be taken by the Board of Directors of the
Company. No amendment which would materially increase the cost of the Plan
shall be made effective unless approved by the shareholders of the Company;
provided, however, that this Plan may not be amended, suspended or terminated
from and after the date of a Change of Control (as hereinafter defined) or in
anticipation of a Change of Control so as to reduce or otherwise adversely
affect the benefits to which participants in the Plan are entitled upon a Change
of Control.
6. Notwithstanding anything in the Plan to the contrary:
(A) In the event of a Change of Control (as defined below) awards under
the Plan, other than units payable in cash governed by Section 6(B), or shares
or units entitling the recipient to receive shares which shall be governed by
Section 6(G), shall be paid in cash to all executives of the Company and its
subsidiaries and affiliates who, as of the date of such Change of Control, had
previously been notified by the Company that they were eligible to receive
annual supplemental compensation as provided under the Plan. (Such annual
supplemental compensation is to be known as Performance Based Compensation or
"PBC", and any individual as so notified is to be known as a "PBC Participant").
(i) With respect to a PBC Participant's award, the amount of which
has been determined pursuant to the provisions of the Plan as provided above but
not yet paid as of the date of a Change of Control, the PBC Participant shall
have a vested right thereto as of the day of the Change of Control, which amount
shall be paid as provided below.
(ii) With respect to a PBC Participant's award, the amount of which
has not been determined as of the date of a Change of Control and which pertains
to services for a year which has been completed prior to the date of a Change of
Control, the award shall be determined pursuant to the provisions of the Plan as
provided above, and the amount thereby determined shall be a vested right of
each PBC Participant as of the day of the Change of Control and shall be paid as
provided below.
(iii) With respect to a PBC award, regarding services for a year in
which the Change of Control occurs and the amount of such award has not been
determined (a "Determinable PBC"), such award shall be paid as provided below.
(a) If a rating system to determine the amount of PBC awards had
been in effect in any of the three (3) years preceding the year in which the
Change of Control occurs, whereunder (1) each PBC Participant had been assigned
a rating (expressed as a number) corresponding to the evaluation of his or her
individual performance with respect to a fiscal year (the "Personal Rating"),
and (2) each PBC Participant had been assigned a rating (also expressed as a
number) corresponding to evaluation of the performance with respect to such
fiscal year for the Company and/or the division or divisions or unit or units to
which such PBC Participant had been assigned during such fiscal year, each PBC
Participant shall be assigned ratings for (1) his or her personal level of
performance, (2) the Company's performance and/or (3) his or her division(s)' or
unit(s)' performance (a "Determinable Rating") for purposes of determining his
or her Determinable PBC, each of which Determinable Ratings shall be equal to
the respective aggregate average rating for a period which shall be composed of
such of the three fiscal years (prior to the year that the Change of Control
occurs) during which such rating system was in effect and such Participant was
eligible to receive PBC with respect to the individual's performance, the
Company's performance and/or the appropriate division(s)' or unit(s)'
performance. If a Change of Control occurs in the first year in which a PBC
Participant is eligible to receive PBC, his or her Personal Rating shall be
equal to the mid-level rating then in effect, and such rating shall be used as
the Determinable Rating regarding his or her personal performance for
purposes of this Section, provided that the Determinable Rating regarding the
Company and/or the relevant business unit or division shall be determined as
provided above. The Determinable Ratings with respect to each PBC Participant
shall be applied in accordance with the appropriate bonus grid (or such similar
device then in effect) for which such PBC Participant is eligible at the time of
Change of Control to determine the appropriate percentages, the aggregate of
which shall then be multiplied by the salary range midpoint (or the computation
basis used to compute the value of PBC) then in effect for each respective PBC
Participant, and the amount thereby derived shall be the Determinable PBC and
shall be a vested right of each PBC Participant as of the day of the Change of
Control, payable as provided below.
(b) If a rating system has not been in effect in any of the three
years immediately preceding the year in which the Change of Control occurs,
payment of an award in respect of the year in which the Change of Control occurs
shall be determined by the Committee in its sole discretion, provided, however,
that each PBC Participant shall be entitled to receive and shall receive a
minimum amount of no less than the amount received in respect to the past fiscal
year and, in the event of a PBC Participant's first year of participation, no
less than the average award made in the preceding year to PBC Participants of
the same job level.
(c) The foregoing is intended to set forth the minimum amount of PBC
payments that shall be made in the circumstances as above provided but are not
intended to limit any additional payments that the Committee may desire to make
as in its discretion it deems appropriate.
(B) In the event of a Change of Control (as defined below) the Committee
shall determine the value of all units payable in cash (or any other form of
compensation value other than shares) ("KEIP Units") maturing upon the end of
any stated period (the "Cycle") as authorized under Subsection 3(B)(ii) above,
which had been awarded and not yet paid to all executives of the Company and its
subsidiaries and affiliates who had received notice of such award ("KEIP
Participants") as follows:
(ii) The Company shall make payments from the Determinable Fund in
the amounts as described below according to the following priorities as
applicable:
(a) First, if applicable, 100% of the amounts for each PBC
Participant as determined under Subsection 6(A)(i) or Subsection 6(A)(ii), as
the case may be.
(b) Second, if applicable, 100% of the amount as computed under
Subsection 6(B)(i) above.
(c) Third, an amount for each PBC Participant (the "PBC
Payment") equal to the Determinable PBC computed under Section 6(A)(iii) for
each PBC Participant, discounted by such amount so that the PBC Payment, when
compounded at an interest rate equal to the Prime Rate as established by Chase
Manhattan Bank, N. A., as of the day of the Change of Control (the "Prime Rate")
for the period from the day of the Change of Control until the following
February 10, will equal the Determinable PBC.
(d) Fourth, an amount (the "First KEIP Payment") equal to the
amount as computed under Subsection 6(B)(ii) with respect to each KEIP payment
thereunder, discounted by such amount so that the First KEIP Payment, when
compounded at an interest rate equal to the Prime Rate for the period from the
day of the Change of Control until the following February 10, will equal such
amount as computed under Subsection 6(B)(ii).
(e) Fifth, an amount (the "Second KEIP Payment") equal to the
amount as computed under Subsection 6(B)(iii) with respect to the cycle which
shall be completed during or at the end of the first complete fiscal year after
the Change of Control occurs, discounted by such amount so that the Second KEIP
Payment, when compounded at an interest rate equal to the Prime Rate for the
period from the day of the Change of Control until the second February 10
thereafter occurring, will equal such amount as computed under Subsection
6(B)(iii).
(f) Sixth, if applicable, an amount (the "Additional KEIP
Payment") equal to the amount or amounts as computed under Subsection 6(B)(iii)
with respect to any cycle which shall be completed during or at the end of the
second or subsequent complete fiscal year after the Change of Control occurs,
discounted by an amount so that the additional KEIP Payment, when compounded at
an interest rate equal to the Prime Rate for the period from the day of the
Change of Control until the appropriate February 10 will, in each instance,
equal such amount or amounts computed under Subsection 6(B)(iii).
(iii) Any payments as provided above in accordance with the
priorities ascertained above, which are to be made at or about the same time,
shall be reduced proportionately in the event a full payment thereof shall
reduce the Determinable Fund to less than zero.
(D) All payments and actions required pursuant to this Section shall be
made as expeditiously as possible after the action of the Committee as herein
provided has been taken, but in no event later than five days after a Change of
Control. Payments, as provided above, to PBC Participants or KEIP Participants
who reside outside the United States shall be made in such currencies and such
exchange rates that are consistent with the patterns and practices under this
Plan.
(E) For purposes of this Plan, a "Change of Control" shall be deemed to
have occurred if:
(i) There is an acquisition, in any one transaction or a series of
transactions (other than from the Company), by any individual, entity or group
(within the meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange
Act of 1934, as amended (the "Exchange Act")) of beneficial ownership (within
the meaning of Rule 13d-3 promulgated under the Exchange Act) of 20% or more of
either the then outstanding shares of common stock of the Company or the
combined voting power of the then outstanding voting securities of the Company
entitled to vote generally in the election of directors, but excluding, for this
purpose, any such acquisition by the Company or any of its subsidiaries, or any
employee benefit plan (or related trust) of the Company or its subsidiaries, or
any corporation with respect to which, following such acquisition,
more than 50 percent of the then outstanding shares of common stock of such
corporation and the combined voting power of the then outstanding voting
securities of such corporation entitled to vote generally in the election of
directors is then beneficially owned, directly or indirectly, by the individuals
and entities who were the beneficial owners, respectively, of the common stock
and voting securities of the Company immediately prior to such acquisition in
substantially the same proportion as their ownership, immediately prior to such
acquisition, of the then outstanding shares of common stock of the Company or
the combined voting power of the then outstanding voting securities of the
Company entitled to vote generally in the election of directors, as the case may
be; or
(ii) Individuals who, as of February 12, 2001, constitute the
Board of Directors (as of such date, the "Incumbent Board") cease for any reason
to constitute at least a majority of the Board, provided that any individual
becoming a director subsequent to February 12, 2001 whose election, or
nomination for election by the Company's shareholders, was approved by a vote of
at least a majority of the directors then comprising the Incumbent Board shall
be considered as though such individual were a member of the Incumbent Board,
but excluding, for this purpose, any such individual whose initial assumption of
office is in connection with an actual or threatened election contest relating
to the election of the Directors of the Company (as such terms are used in Rule
14a-11 of Regulation 14A promulgated under the Exchange Act); or
(iii) There is (x) an approval by the shareholders of the Company of
a reorganization, merger or consolidation, in each case, with respect to which
the common stock and voting securities of the Company immediately prior to such
reorganization, merger or consolidation do not, following such reorganization,
merger or consolidation, represent, either by remaining outstanding or being
converted into securities of the resulting corporation, directly or indirectly,
more than 50 percent of, respectively, the then outstanding shares of common
stock and the combined voting power of the then outstanding voting securities
entitled to vote generally in the election of directors, as the case may be, of
the corporation resulting from such reorganization, merger or consolidation, or
(y) an approval by the shareholders of the Company of a complete liquidation or
dissolution of the Company or of the sale or other disposition of all or
substantially all of the assets of the Company.
(F) Any right to a payment as provided in this Section shall be a
contract right of the executives as herein described, enforceable against the
Company, its assigns and successors. Upon and following the occurrence of a
Change of Control, any decision rendered pursuant to this Section 6 may be
contested by any claimant, and the Company agrees to pay, to the full extent
permitted by law, all legal fees and expenses which a claimant may reasonably
incur as a result of any contest, provided the claimant substantially prevails
in the outcome thereof.
(G) Notwithstanding any contrary provision in this Section 6, in the event
of a Change of Control (as defined) awards under the Plan of shares or units
entitling the recipient to receive shares shall be fully vested with all
performance conditions deemed fully earned and any and all restrictions and
conditions shall be deemed satisfied.
7. To the extent required, and only to such extent, in order to render the
grant of an award, or the sale of equity securities corresponding to an award,
an exempt transaction under Section 16(b) of the Exchange Act, if no other
exemption applies, any equity security granted under the Plan to any participant
designated by the Company as having Section 16 reporting obligations must be
held by such participant for at least six months from the date of grant before
disposition, or in the case of a derivative security granted pursuant to the
Plan to a participant, at least six months must elapse from the date of
acquisition of the derivative security to the date of disposition of the
derivative security (other than upon a conversion) or its underlying equity
security. Terms used in the preceding sentence shall, for the purposes of such
sentence only, have the meanings, if any, assigned or attributed to them under
Rule 16b-3.
8. Except for any award with respect to which all applicable restrictions have
expired, lapsed, or been waived, (a "Released Award"), no award, and no right
under any award shall be assignable, alienable, saleable, or transferable by a
participant other than by will or by the laws of descent and distribution or
pursuant to a qualified domestic relations order as defined in the Internal
Revenue Code of 1986, as amended, or Title I of the Employee Retirement Income
Security Act of 1974, as amended, or the rules thereunder (or, in the case of
any award of restricted stock, to the Company); provided however, that if so
determined by the Committee, a participant may in the manner established by the
Committee, designate a beneficiary or beneficiaries to exercise the rights of
the rights of the participant, and to receive any property distributable, with
respect to any award upon the death of the participant. Each award, and each
right under any award, shall be issuable or payable only to the participant, or,
if permissible under applicable law, to the participant's guardian or legal
representative or to a transferee receiving such award pursuant to a qualified
domestic relations order referred to above. No award (other than a Released
Award), and no right under any such award, may be pledged, alienated, attached,
or otherwise encumbered and any purported pledge, alienation, attachment, or
encumbrance thereof shall be void and unenforceable against the Company or any
affiliate.
9. The Plan, as amended and restated herein, shall become effective on
February 12, 2001.
10. (A) The provisions of this Section 10 shall be applicable to awards under
the Plan to "Covered Employees" if the Committee so provides at the time of
grant (such awards being referred to as "Covered Awards"). For purposes of this
Section 10, "Covered Employees" means participants in the Plan who are
designated by the Committee prior to the grant of an award hereunder who are, or
are expected to be at the time taxable income will realized with respect to the
award, "covered employees" within the meaning of Section 162(m) of the Internal
Revenue Code of 1986, as amended, or any successor thereto, and the Treasury
Regulations thereunder ("Section 162(m)").
(B) Covered Awards shall be made subject to the achievement of one or
more preestablished Performance Goals (as defined below), in accordance with
procedures to be established by the Committee from time to time.
Notwithstanding any provision of the Plan to the contrary, the Committee shall
not have discretion to waive or amend such Performance Goals or to increase the
amount payable pursuant to Covered Awards after the Performance Goals have
been established, provided, however, that the Committee may, in its sole
discretion, reduce the amount which would otherwise be payable with respect to
any Covered Award, and provided, further, that the provisions of Section 6 shall
override any contrary provision of this Section 10.
(C) "Performance Goals" means one or more objective performance goals,
established by the Committee at the time an award is granted, and based upon the
attainment of targets for one or any combination of the following criteria:
operating income, revenues, return on operating assets, earnings per share,
return on stockholder equity, stock price, free cash flow, or achievement of
cost control, of the Company or such subsidiary, division or department of the
Company for or within which the participant is primarily employed. Performance
Goals also may be based upon attaining specified levels of Company performance
based upon one or more of the criteria described above relative to prior periods
or the performance of other corporations. Performance Goals shall be set by the
Committee within the time period prescribed by Section 162(m).
(D) No payment shall be made pursuant to a Covered Award unless and until
the Committee shall have certified in writing that the applicable Performance
Goals have been attained. The maximum amount payable pursuant to Covered Awards
to a particular Covered employee for any fiscal year of the Company shall be
$5,000,000.
(E) The Committee may from time to time establish procedures pursuant to
which Covered Employees will be permitted or required to defer receipt of awards
under the Plan.
(F) Notwithstanding any other provision of the Plan, for all purposes
involving Covered Awards, the Committee shall consist of at least two members of
the Board of Directors, each of whom is an "outside director" within the meaning
of Section 162(m).