EXHIBIT 10.7
ABERCROMBIE & FITCH CO.
1996 STOCK OPTION AND PERFORMANCE INCENTIVE PLAN
ABERCROMBIE & FITCH CO.
1996 STOCK OPTION AND PERFORMANCE INCENTIVE PLAN
TABLE OF CONTENTS
Page
ARTICLE 1
ESTABLISHMENT AND PURPOSE
1.1 ESTABLISHMENT AND EFFECTIVE DATE.............................6
1.2 PURPOSE......................................................6
ARTICLE 2
AWARDS
2.1 FORM OF AWARDS...............................................6
2.2 MAXIMUM SHARES AVAILABLE.....................................7
2.3 RETURN OF PRIOR AWARDS.......................................7
ARTICLE 3
ADMINISTRATION
3.1 COMMITTEE....................................................7
3.2 POWERS OF COMMITTEE..........................................7
3.3 DELEGATION...................................................8
3.4 INTERPRETATIONS..............................................8
3.5 LIABILITY; INDEMNIFICATION...................................8
ARTICLE 4
ELIGIBILITY
2
ARTICLE 5
STOCK OPTIONS
5.1 GRANT OF OPTIONS............................................9
5.2 OPTION PRICE................................................9
5.3 TERM OF OPTIONS.............................................9
5.4 EXERCISE OF OPTIONS.........................................9
5.5 CANCELLATION OF STOCK APPRECIATION RIGHTS..................10
ARTICLE 6
SPECIAL RULES APPLICABLE TO INCENTIVE STOCK OPTIONS
6.1 TEN PERCENT STOCKHOLDER....................................10
6.2 LIMITATION ON GRANTS.......................................10
6.3 LIMITATIONS ON TIME OF GRANTS..............................10
ARTICLE 7
STOCK APPRECIATION RIGHTS
7.1 GRANTS OF STOCK APPRECIATION RIGHTS........................11
7.2 LIMITATIONS ON EXERCISE................................... 11
7.3 SURRENDER OR EXCHANGE OF TANDEM STOCK APPRECIATION RIGHTS..11
7.4 EXERCISE OF NONTANDEM STOCK APPRECIATION RIGHTS............11
7.5 SETTLEMENT OF STOCK APPRECIATION RIGHTS....................12
7.6 CASH SETTLEMENT............................................12
ARTICLE 8
NONTRANSFERABILITY OF OPTIONS AND STOCK APPRECIATION RIGHTS
ARTICLE 9
TERMINATION OF EMPLOYMENT
9.1 EXERCISE AFTER TERMINATION OF EMPLOYMENT...................13
9.2 TOTAL DISABILITY...........................................13
3
ARTICLE 10
DEATH OF ASSOCIATE
ARTICLE 11
RESTRICTED SHARES
11.1 GRANT OF RESTRICTED SHARES.................................13
11.2 RESTRICTIONS...............................................14
11.3 RESTRICTED STOCK CERTIFICATES..............................14
11.4 RIGHTS OF HOLDERS OF RESTRICTED SHARES.....................14
11.5 FORFEITURE.................................................14
11.6 DELIVERY OF RESTRICTED SHARES..............................14
11.7 PERFORMANCE-BASED OBJECTIVES...............................15
ARTICLE 12
PERFORMANCE SHARES
12.1 AWARD OF PERFORMANCE SHARES................................15
12.2 PERFORMANCE PERIOD.........................................15
12.3 RIGHT TO PAYMENT OF PERFORMANCE SHARES.....................15
12.4 PAYMENT FOR PERFORMANCE SHARES.............................16
12.5 VOTING AND DIVIDEND RIGHTS.................................16
ARTICLE 13
PERFORMANCE UNITS
13.1 AWARD OF PERFORMANCE UNITS.................................16
13.2 RIGHT TO PAYMENT OF PERFORMANCE UNITS......................17
13.3 PAYMENT FOR PERFORMANCE UNITS..............................17
ARTICLE 14
UNRESTRICTED SHARES
14.1 AWARD OF UNRESTRICTED SHARES...............................18
14.2 DELIVERY OF UNRESTRICTED SHARES............................18
4
ARTICLE 15
TAX OFFSET PAYMENTS
ARTICLE 16
ADJUSTMENT UPON CHANGES IN CAPITALIZATION
ARTICLE 17
AMENDMENT AND TERMINATION
ARTICLE 18
WRITTEN AGREEMENT
ARTICLE 19
MISCELLANEOUS PROVISIONS
19.1 FAIR MARKET VALUE..........................................20
19.2 TAX WITHHOLDING............................................20
19.3 COMPLIANCE WITH SECTION 16(B) AND SECTION 162(M)...........20
19.4 SUCCESSORS.................................................21
19.5 GENERAL CREDITOR STATUS....................................21
19.6 NO RIGHT TO EMPLOYMENT.....................................21
19.7 NOTICES....................................................21
19.8 SEVERABILITY...............................................21
19.9 GOVERNING LAW..............................................21
19.10 TERM OF PLAN...............................................22
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ABERCROMBIE & FITCH CO.
1996 STOCK OPTION AND PERFORMANCE INCENTIVE PLAN
ARTICLE 1
ESTABLISHMENT AND PURPOSE
1.1 ESTABLISHMENT AND EFFECTIVE DATE. Abercrombie & Fitch, a Delaware
corporation (the "COMPANY"), hereby establishes a stock incentive plan to be
known as the "Abercrombie & Fitch 1996 Stock Option and Performance Incentive
Plan" (the "PLAN"). The Plan shall become effective on the effective date of the
initial public offering of the Company's Class A Common Stock, par value $.01
per share ("COMMON STOCK"), subject to the consummation of such initial public
offering. Upon approval of the Plan by the Board of Directors of the Company
(the "BOARD"), awards may be made as provided herein, subject to such
consummation. In the event that such public offering is not consummated, any
such awards shall be cancelled and all rights of associates with respect to such
awards shall thereupon cease.
1.2 PURPOSE. The Company desires to attract and retain the best
available executive and key management associates for itself and its
subsidiaries and to encourage the highest level of performance by such
associates in order to serve the best interests of the Company and its
stockholders. The Plan is expected to contribute to the attainment of these
objectives by offering eligible associates the opportunity to acquire stock
ownership interests in the Company, and other rights with respect to stock of
the Company, and to thereby provide them with incentives to put forth maximum
efforts for the success of the Company and its subsidiaries.
ARTICLE 2
AWARDS
2.1 FORM OF AWARDS. Awards under the Plan may be granted in any one or
all of the following forms: (i) incentive stock options ("INCENTIVE STOCK
OPTIONS") meeting the requirements of Section 422 of the Internal Revenue Code
of 1986, as amended (the "CODE"); (ii) nonstatutory stock options ("NONSTATUTORY
STOCK OPTIONS") (unless otherwise indicated, references in the Plan to Options
shall include both Incentive Stock Options and Nonstatutory Stock Options);
(iii) stock appreciation rights ("STOCK APPRECIATION RIGHTS"), as described in
Article 7, which may be awarded either in tandem with Options ("TANDEM STOCK
APPRECIATION RIGHTS") or on a stand-alone basis ("NONTANDEM STOCK APPRECIATION
RIGHTS"); (iv) shares of Common Stock which are restricted as provided in
Article 11 ("RESTRICTED SHARES"); (v) units representing shares of Common Stock,
as described in Article 12 ("PERFORMANCE SHARES"); (vi) units which do not
represent shares of Common Stock
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but which may be paid in the form of Common Stock, as described in Article 13
("PERFORMANCE UNITS"); (vii) shares of unrestricted Common Stock ("UNRESTRICTED
SHARES") and (viii) tax offset payments ("TAX OFFSET PAYMENTS"), as described in
Article 15.
2.2 MAXIMUM SHARES AVAILABLE. The maximum aggregate number of shares of
Common Stock available for award under the Plan, including shares of Common
Stock awarded as Tax Offset Payments, is 3,500,000 subject to adjustment
pursuant to Article 16. Shares of Common Stock issued pursuant to the Plan may
be either authorized but unissued shares or issued shares reacquired by the
Company. In the event that prior to the end of the period during which Options
may be granted under the Plan, any Option or any Nontandem Stock Appreciation
Right under the Plan expires unexercised or is terminated, surrendered or
cancelled (other than in connection with the exercise of a Stock Appreciation
Right) without being exercised in whole or in part for any reason, or any
Restricted Shares, Performance Shares or Performance Units are forfeited, or if
such awards are settled in cash in lieu of shares of Common Stock, then such
shares or units may, at the discretion of the Committee to the extent
permissible under Rule 16b-3 under the Securities Exchange Act of 1934 (the
"ACT"), be made available for subsequent awards under the Plan, upon such terms
as the Committee may determine.
2.3 RETURN OF PRIOR AWARDS. As a condition to any subsequent award, the
Committee shall have the right, at its discretion, to require associates to
return to the Company awards previously granted under this Plan. Subject to the
provisions of this Plan, such new award shall be upon such terms and conditions
as are specified by the Committee at the time the new award is granted to the
extent permitted by Rule 16b-3 under the Act.
ARTICLE 3
ADMINISTRATION
3.1 COMMITTEE. The Plan shall be administered by a Committee (the
"COMMITTEE") appointed by the Board and consisting of not less than two (2)
members of the Board. Each member of the Committee shall be an "outside
director" (within the meaning of Section 162(m) of the Code) and a "non-employee
director" (within the meaning of Rule 16b-3(b)(3)(i) under the Act).
3.2 POWERS OF COMMITTEE. Subject to the express provisions of the Plan,
the Committee shall have the power and authority (i) to grant Options and to
determine the purchase price of the Common Stock covered by each Option, the
term of each Option, the number of shares of Common Stock to be covered by each
Option and any performance objectives or vesting standards applicable to each
Option, (ii) to designate Options as Incentive Stock Options or Nonstatutory
Stock Options and to
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determine which Options, if any shall be accompanied by Tandem Stock
Appreciation Rights; (iii) to grant Tandem Stock Appreciation Rights and
Nontandem Stock Appreciation Rights and to determine the terms and conditions of
such rights; (iv) to grant Restricted Shares and to determine the term of the
restricted period and other conditions and restrictions applicable to such
shares; (v) to grant Performance Shares and Performance Units and to determine
the performance objectives, performance periods and other conditions applicable
to such shares or units; (vi) to grant Unrestricted Shares; (vii) to determine
the amount of, and to make, Tax Offset Payments; and (viii) to determine the
associates to whom, and the time or times at which, Options, Stock Appreciation
Rights, Restricted Shares, Performance Shares, Performance Units and
Unrestricted Shares shall be granted.
3.3 DELEGATION. The Committee may delegate to one or more of its
members or to any other person or persons such ministerial duties as it may deem
advisable; provided, however, that the Committee may not delegate any of its
responsibilities hereunder if such delegation will cause (i) transactions under
the Plan to fail to comply with Section 16 of the Act or (ii) the Committee to
fail to qualify as "outside directors" under Section 162(m) of the Code. The
Committee may also employ attorneys, consultants, accountants or other
professional advisors and shall be entitled to rely upon the advice, opinions or
valuations of any such advisors.
3.4 INTERPRETATIONS. The Committee shall have sole discretionary
authority to interpret the terms of the Plan, to adopt and revise rules,
regulations and policies to administer the Plan and to make any other factual
determinations which it believes to be necessary or advisable for the
administration of the Plan. All actions taken and interpretations and
determinations made by the Committee in good faith shall be final and binding
upon the Company, all associates who have received awards under the Plan and all
other interested persons.
3.5 LIABILITY; INDEMNIFICATION. No member of the Committee, nor any
associate to whom ministerial duties have been delegated, shall be personally
liable for any action, interpretation or determination made with respect to the
Plan or awards made thereunder, and each member of the Committee shall be fully
indemnified and protected by the Company with respect to any liability he or she
may incur with respect to any such action, interpretation or determination, to
the extent permitted by applicable law and to the extent provided in the
Company's Certificate of Incorporation and Bylaws, as amended from time to time.
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ARTICLE 4
ELIGIBILITY
Awards shall be limited to executive and key management associates who
are regular, full-time associates of the Company, its present and future
subsidiaries, its parent and subsidiaries thereof. In determining the associates
to whom awards shall be granted and the number of shares to be covered by each
award, the Committee shall take into account the nature of the services rendered
by such associates, their present and potential contributions to the success of
the Company and its subsidiaries and such other factors as the Committee in its
sole discretion shall deem relevant. As used in this Plan, the term "subsidiary"
shall mean any corporation which at the time qualifies as a subsidiary of the
Company under the definition of "subsidiary corporation" set forth in Section
424(f) of the Code, or any successor provision hereafter enacted. No associate
may be granted in any calendar year awards covering more than 400,000 shares of
Common Stock.
ARTICLE 5
STOCK OPTIONS
5.1 GRANT OF OPTIONS. Options may be granted under this Plan for the
purchase of shares of Common Stock. Options shall be granted in such form and
upon such terms and conditions, including the satisfaction of corporate or
individual performance objectives and other vesting standards, as the Committee
shall from time to time determine.
5.2 OPTION PRICE. The option price of each Option to purchase Common
Stock shall be determined by the Committee at the time of grant, but shall not
be less than 100 percent of the fair market value of the Common Stock subject to
such Option on the date of grant. The option price so determined shall also be
applicable in connection with the exercise of any Tandem Stock Appreciation
Right granted with respect to such option.
5.3 TERM OF OPTIONS. The term of each Nonstatutory Stock Option granted
under the Plan shall not exceed ten (10) years and one day from the date of
grant, subject to earlier termination as provided in Articles 9 and 10. Except
as otherwise provided in Section 6.1 with respect to ten (10) percent
stockholders of the Company, the term of each Incentive Stock Option shall not
exceed ten (10) years from the date of grant, subject to earlier termination as
provided in Articles 9 and 10.
5.4 EXERCISE OF OPTIONS. An Option may be exercised, in whole or in
part, at such time or times as the Committee shall determine. The Committee may,
in its discretion, accelerate the exercisability of any Option at any time.
Options may be
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exercised by an associate by giving written notice to the committee stating the
number of shares of Common Stock with respect to which the Option is being
exercised and tendering payment therefor. Payment for the Common Stock issuable
upon exercise of the Option shall be made in full in cash, or by certified check
or, if the Committee, in its sole discretion, permits, in shares of Common Stock
(valued at fair market value on the date of exercise). As soon as reasonably
practicable following such exercise, a certificate representing the shares of
Common Stock purchased, registered in the name of the associate, shall be
delivered to the associate. Notwithstanding the foregoing, an associate may not
exercise an Option prior to the consummation of the initial public offering
referred to in Section 1.1 hereof.
5.5 CANCELLATION OF STOCK APPRECIATION RIGHTS. Upon exercise of all
or a portion of an Option, the related Tandem Stock Appreciation Rights shall be
cancelled with respect to an equal number of shares of Common Stock.
ARTICLE 6
SPECIAL RULES APPLICABLE TO INCENTIVE STOCK OPTIONS
6.1 TEN PERCENT STOCKHOLDER. Notwithstanding any other provision of
this Plan to the contrary, no associate may receive an Incentive Stock Option
under the Plan if such associate, at the time the award is granted, owns (after
application of the rules contained in Section 424(d) for the Code) stock
possessing more than ten (10) percent of the total combined voting power of all
classes of stock of the Company or its subsidiaries, unless (i) the option price
for such Incentive Stock Option is at least 110 percent of the fair market value
of the Common Stock subject to such Incentive Stock Option on the date of grant
and (ii) such Option is not exercisable after the date five (5) years from the
date such Incentive Stock Option is granted.
6.2 LIMITATION ON GRANTS. The aggregate fair market value (determined
with respect to each Incentive Stock Option at the time such Incentive Stock
Option is granted) of the shares of Common Stock with respect to which Incentive
Stock Options are exercisable for the first time by an associate during any
calendar year (under this Plan or any other plan of the Company or a subsidiary)
shall not exceed $100,000.
6.3 LIMITATIONS ON TIME OF GRANTS. No grant of an Incentive Stock
Option shall be made under this Plan after the termination date set forth in
Section 19.10 hereof.
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ARTICLE 7
STOCK APPRECIATION RIGHTS
7.1 GRANTS OF STOCK APPRECIATION RIGHTS. Tandem Stock Appreciation
Rights may be awarded by the Committee in connection with any Option granted
under the Plan, either at the time the Option is granted or thereafter at any
time prior to the exercise, termination or expiration of the Option. Nontandem
Stock Appreciation Rights may also be granted by the Committee at any time. At
the time of grant of a Nontandem Stock Appreciation Right, the Committee shall
specify the number of shares of Common Stock covered by such right and the base
price of shares of Common Stock to be used in connection with the calculation
described in Section 7.4 below. The base price of a Nontandem Stock Appreciation
Right Shall be not less than 100 percent of the fair market value of a share of
Common Stock on the date of grant. Stock Appreciation Rights shall be subject to
such terms and conditions not inconsistent with the other provisions of this
Plan as the Committee shall determine.
7.2 LIMITATIONS ON EXERCISE. A Tandem Stock Appreciation Right shall be
exercisable only to the extent that the related Option is exercisable and shall
be exercisable only for such period as the Committee may determine (which period
may expire prior to the expiration date of the related Option). Upon the
exercise of all or a portion of Tandem Stock Appreciation Rights, the related
Option shall be cancelled with respect to an equal number of shares of Common
Stock. Shares of Common Stock subject to Options or portions thereof,
surrendered upon exercise of a Tandem Stock Appreciation Right, shall not be
available for subsequent awards under the Plan. A Nontandem Stock Appreciation
Right shall be exercisable during such period as the Committee shall determine.
7.3 SURRENDER OR EXCHANGE OF TANDEM STOCK APPRECIATION RIGHTS. A Tandem
Stock Appreciation Right shall entitle the associate to surrender to the Company
unexercised the related Option, or any portion thereof, and to receive from the
Company in exchange therefor that number of shares of Common Stock having an
aggregate fair market value equal to (A) the excess of (i) the fair market value
of one (1) share of Common Stock as of the date the Tandem Stock Appreciation
Right is exercised over (ii) the option price per share specified in such
Option, multiplied by (B) the number of shares of Common Stock subject to the
Option, or portion thereof, which is surrendered. Cash shall be delivered in
lieu of any fractional shares.
7.4 EXERCISE OF NONTANDEM STOCK APPRECIATION RIGHTS. The exercise of a
Nontandem Stock Appreciation Right shall entitle the associate to receive from
the Company that number of shares of Common Stock having an aggregate fair
market value equal to (A) the excess of (i) the fair market value of one (1)
share of Common Stock as of the date on which the Nontandem Stock Appreciation
Right is exercised over (ii) the base price of the shares covered by the
Nontandem Stock Appreciation
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Right, multiplied by (B) the number of shares of Common Stock covered by the
Nontandem Stock Appreciation Right, or the portion thereof being exercised. Cash
shall be delivered in lieu of any fractional shares.
7.5 SETTLEMENT OF STOCK APPRECIATION RIGHTS. As soon as is reasonably
practicable after the exercise of a Stock Appreciation Right, the Company shall
(i) issue, in the name of the associate, stock certificates representing the
total number of full shares of Common Stock to which the associate is entitled
pursuant to Section 7.3 or 7.4 hereof and cash in an amount equal to the fair
market value, as of the date of exercise, of any resulting fractional shares,
and (ii) if the Committee causes the Company to elect to settle all or part of
its obligations arising out of the exercise of the Stock Appreciation Right in
cash pursuant to Section 7.6, deliver to the associate an amount in cash equal
to the fair market value, as of the date of exercise, of the shares of Common
Stock it would otherwise be obligated to deliver.
7.6 CASH SETTLEMENT. The Committee, in its discretion, may cause the
Company to settle all or any part of its obligation arising out of the exercise
of a Stock Appreciation Right by the payment of cash in lieu of all or part of
the shares of Common Stock it would otherwise be obligated to deliver in an
amount equal to the fair market value of such shares on the date of exercise.
ARTICLE 8
NONTRANSFERABILITY OF OPTIONS AND STOCK APPRECIATION RIGHTS
No Option or Stock Appreciation Right may be transferred, assigned,
pledged or hypothecated (whether by operation of law or otherwise), except as
provided by will or the applicable laws of descent and distribution, and no
Option or Stock Appreciation Right shall be subject to execution, attachment or
similar process. Any attempted assignment, transfer, pledge, hypothecation or
other disposition of an Option or a Stock Appreciation Right not specifically
permitted herein shall be null and void and without effect. An Option or Stock
Appreciation Right may be exercised by an associate only during his or her
lifetime, or following his or her death pursuant to Article 10.
ARTICLE 9
TERMINATION OF EMPLOYMENT
9.1 EXERCISE AFTER TERMINATION OF EMPLOYMENT. In the event that the
employment of an associate to whom an Option or Stock Appreciation Right has
been granted under the Plan shall be terminated (for reasons other than death or
total disability), such Option or Stock Appreciation Right may be exercised (to
the extent
12
that the associate was entitled to do so on the date of the termination of his
employment) at any time within three (3) months after such termination of
employment.
9.2 TOTAL DISABILITY. In the event that an associate to whom an Option
or Stock Appreciation Right has been granted under the Plan shall become totally
disabled, such Option or Stock Appreciation Right may be exercised at any time
during the first nine (9) months that the associate receives benefits under the
VABCO Long-Term Disability Plan (the "DISABILITY PLAN") to the extent otherwise
exercisable during such nine-month period. For purposes hereof, "total
disability" shall have the definition set forth in the Disability Plan, which
definition is hereby incorporated by reference.
ARTICLE 10
DEATH OF ASSOCIATE
If an associate to whom an Option or Stock Appreciation Right has been
granted under the Plan shall die while employed by the Company or one of its
subsidiaries or within three (3) months after the termination of such
employment, such Option or Stock Appreciation Right may be exercised to the
extent that the associate was entitled to do so at the time of his or her death,
by the associate's estate or by the person who acquires the right to exercise
such Option or Stock Appreciation Right upon his or her death by bequest or
inheritance. Such exercise may occur at any time within one (1) year after the
date of the associate's death, but in no case later than the date on which the
Option or Stock Appreciation Right terminates.
ARTICLE 11
RESTRICTED SHARES
11.1 GRANT OF RESTRICTED SHARES. The Committee may from time to time
cause the Company to grant Restricted Shares under the Plan to associates,
subject to such restrictions, conditions and other terms as the Committee may
determine.
11.2 RESTRICTIONS. At the time a grant of Restricted Shares is made,
the Committee shall establish a period of time (the "RESTRICTED PERIOD")
applicable to such Restricted Shares. Each grant of Restricted Shares may be
subject to a different Restricted Period. The Committee may, in its sole
discretion, at the time a grant is made, prescribe restrictions in addition to
or other than the expiration of the Restricted Period, including the
satisfaction of corporate or individual performance objectives as provided in
Section 11.7, which may be applicable to all or any portion of the Restricted
Shares. Except with respect to grants of Restricted Shares intended
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to qualify as performance-based compensation for purposes of Section 162(m) of
the Code, the Committee may also, in its sole discretion, shorten or terminate
the Restricted Period or waive any other restrictions applicable to all or a
portion of such Restricted Shares. None of the Restricted Shares may be sold,
transferred, assigned, pledged or otherwise encumbered or disposed of during the
Restricted Period or prior to the satisfaction of any other restrictions
prescribed by the Committee with respect to such Restricted Shares.
11.3 RESTRICTED STOCK CERTIFICATES. The Company shall issue, in the
name of each associate to whom Restricted Shares have been granted, stock
certificates representing the total number of Restricted Shares granted to the
associate, as soon as reasonably practicable after the grant. The Secretary of
the Company shall hold such certificates, properly endorsed for transfer, for
the associate's benefit until such time as the Restricted Shares are forfeited
to the Company, or the restrictions lapse.
11.4 RIGHTS OF HOLDERS OF RESTRICTED SHARES. Except as determined by
the Committee either at the time Restricted Shares are awarded or at any time
thereafter prior to the lapse of the restrictions, holders of Restricted Shares
shall not have the right to vote such shares or the right to receive any
dividends with respect to such shares. All distributions, if any, received by an
associate with respect to Restricted Shares as a result of any stock split-up,
stock distribution, a combination of shares, or other similar transaction shall
be subject to the restrictions of this Article 11.
11.5 FORFEITURE. Any restricted Shares granted to an associate pursuant
to the Plan shall be forfeited if the associate terminates employment with the
Company or its subsidiaries prior to the expiration or termination of the
Restricted Period and the satisfaction of any other conditions applicable to
such Restricted Shares. Upon such forfeiture, the Secretary of the Company shall
either cancel or retain in its treasury the Restricted Shares that are forfeited
to the Company. If the associate's employment terminates as a result of his or
her death or total disability (as defined in Article 9), Restricted Shares of
such associate shall be forfeited, unless the Committee, in its sole discretion,
shall determine otherwise.
11.6 DELIVERY OF RESTRICTED SHARES. Upon the expiration or termination
of the Restricted Period and the satisfaction of any other conditions prescribed
by the Committee, the restrictions applicable to the Restricted Shares shall
lapse and a stock certificate for the number of Restricted Shares with respect
to which the restrictions have lapsed shall be delivered, free of all such
restrictions, to the associate or the associate's beneficiary or estate, as the
case may be.
11.7 PERFORMANCE-BASED OBJECTIVES. At the time of the grant of
Restricted Shares to an associate, and prior to the beginning of the performance
period to which performance objectives relate, the Committee may establish
performance objectives based on operating income and/or gross margin objectives
of the Company or any subsidiary or division thereof. These objectives shall be
based on an analysis of
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historical performance and growth expectations for the relevant business unit,
financial results of other comparable businesses both inside and outside the
Company, and progress towards achieving the long-range strategic plan for that
business unit. These objectives and determination of results shall be based
entirely on such financial measures, and the Committee shall have no discretion
to modify such results.
ARTICLE 12
PERFORMANCE SHARES
12.1 AWARD OF PERFORMANCE SHARES. For each Performance Period (as
defined in Section 12.2), Performance Shares may be granted under the Plan to
such associates of the Company and its subsidiaries as the Committee shall
determine. Each Performance Share shall be deemed to be equivalent to one (1)
share of Common Stock. Performance Shares granted to an associate shall be
credited to an account (a "PERFORMANCE SHARE ACCOUNT") established and
maintained for such associate.
12.2 PERFORMANCE PERIOD. "PERFORMANCE PERIOD" shall mean such period
of time as shall be determined by the Committee in its sole discretion.
Different Performance Periods may be established for different associates
receiving Performance Shares. Performance Periods may run consecutively or
concurrently.
12.3 RIGHT TO PAYMENT OF PERFORMANCE SHARES. With respect to each award
of Performance Shares under this Plan, the Committee shall specify performance
objectives (the "PERFORMANCE OBJECTIVES") which must be satisfied in order for
the associate to vest in the Performance Shares which have been awarded to him
or her for the Performance Period. If the Performance Objectives established for
an associate for the Performance Period are partially but not fully met, the
Committee may, nonetheless, in its sole discretion, determine that all or a
portion of the Performance Shares have vested. If the Performance Objectives for
a Performance Period are exceeded, the Committee may, in its sole discretion,
grant additional, fully vested Performance Shares to the associate. The
Committee may also determine, in its sole discretion, that Performance Shares
awarded to an associate shall become partially or fully vested upon the
associate's death, total disability (as defined in Article 9) or retirement, or
upon the termination of the associate's employment prior to the end of the
Performance Period.
12.4 PAYMENT FOR PERFORMANCE SHARES. As soon as practicable following
the end of a Performance Period, the Committee shall determine whether the
Performance Objectives for the Performance Period have been achieved (or
partially achieved to the extent necessary to permit partial vesting at the
discretion of the Committee pursuant to Section 12.3). If the Performance
Objectives for the Performance Period have been exceeded, the Committee shall
determine whether
15
additional Performance Shares shall be granted to the associate pursuant to
Section 12.3. As soon as reasonably practicable after such determinations, or at
such later date as the Committee shall determine at the time of grant, the
Company shall pay to the associate an amount with respect to each vested
Performance Share equal to the fair market value of a share of Common Stock on
such payment date or, if the Committee shall so specify at the time of grant, an
amount equal to (i) the fair market value of a share of Common Stock on the
payment date less (ii) the fair market value of a share of Common Stock on the
date of grant of the Performance Share. Payment shall be made entirely in cash,
entirely in Common Stock (including Restricted Shares) or in such combination of
cash and Common Stock as the Committee shall determine.
12.5 VOTING AND DIVIDEND RIGHTS. No associate shall be entitled to any
voting rights, to receive any dividends, or to have his or her Performance Share
Account credited or increased as a result of any dividends or other distribution
with respect to Common Stock. Notwithstanding the foregoing, within sixty (60)
days from the date of payment of a dividend by the Company on its shares of
Common Stock, the Committee, in its discretion, may credit an associate's
Performance Share Account with additional Performance Shares having an aggregate
fair market value equal to the dividend per share paid on the Common Stock
multiplied by the number of Performance Shares credited to his or her account at
the time the dividend was declared.
ARTICLE 13
PERFORMANCE UNITS
13.1 AWARD OF PERFORMANCE UNITS. For each Performance Period (as
defined in Section 12.2), Performance Units may be granted under the Plan to
such associates of the Company and its subsidiaries as the Committee shall
determine. The award agreement covering such Performance Units shall specify a
value for each Performance Unit or shall set forth a formula for determining the
value of each Performance Unit at the time of payment (the "ENDING VALUE"). If
necessary to make the calculation of the amount to be paid to the associate
pursuant to Section 13.3, the Committee shall also state in the award agreement
the initial value of each Performance Unit (the "INITIAL VALUE"). Performance
Units granted to an associate shall be credited to an account (a "PERFORMANCE
UNIT ACCOUNT") established and maintained for such associate.
13.2 RIGHT TO PAYMENT OF PERFORMANCE UNITS. With respect to each award
of Performance Units under this Plan, the Committee shall specify Performance
Objectives which must be satisfied in order for the associate to vest in the
Performance Units which have been awarded to him or her for the Performance
Period. If the Performance Objectives established for an associate for the
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Performance Period are partially but not fully met, the Committee may,
nonetheless, in its sole discretion, determine that all or a portion of the
Performance Units have vested. If the Performance Objectives for a Performance
Period are exceeded, the Committee may, in its sole discretion, grant
additional, fully vested Performance Units to the associate. The Committee may
also determine, in its sole discretion, that Performance Units awarded to an
associate shall become partially or fully vested upon the associate's death,
total disability (as defined in Article 9) or retirement, or upon the
termination of employment of the associate by the Company.
13.3 PAYMENT FOR PERFORMANCE UNITS. As soon as practicable following
the end of a Performance Period, the Committee shall determine whether the
Performance Objectives for the Performance Period have been achieved (or
partially achieved to the extent necessary to permit partial vesting at the
discretion of the Committee pursuant to Section 13.2). If the Performance
Objectives for the Performance Period have been exceeded, the Committee shall
determine whether additional Performance Units shall be granted to the associate
pursuant to Section 13.2. As soon as reasonably practicable after such
determinations, or at such later date as the Committee shall determine at the
time of grant, the Company shall pay to the associate an amount with respect to
each vested Performance Unit equal to the Ending Value of the Performance Unit
or, if the Committee shall so specify at the time of grant, an amount equal to
(i) the Ending Value of the Performance Unit less (ii) the Initial Value of the
Performance Unit. Payment shall be made entirely in cash, entirely in Common
Stock (including Restricted Shares) or in such combination of cash and Common
Stock as the Committee shall determine.
ARTICLE 14
UNRESTRICTED SHARES
14.1 AWARD OF UNRESTRICTED SHARES. The Committee may cause the Company
to grant Unrestricted Shares to associates at such time or times, in such
amounts and for such reasons as the Committee, in its sole discretion, shall
determine. Except as required by applicable law, no payment shall be required
for Unrestricted Shares.
14.2 DELIVERY OF UNRESTRICTED SHARES. The Company shall issue, in the
name of each associate to whom Unrestricted Shares have been granted, stock
certificates representing the total number of Unrestricted Shares granted to the
associate, and shall deliver such certificates to the associate as soon as
reasonably practicable after the date of grant or on such later date as the
Committee shall determine at the time of grant.
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ARTICLE 15
TAX OFFSET PAYMENTS
The Committee shall have the authority at the time of any award under
this Plan or anytime thereafter to make Tax Offset Payments to assist associates
in paying income taxes incurred as a result of their participation in this Plan.
The Tax Offset Payments, which, if awarded, may be in cash or shares of Common
Stock, shall be determined by multiplying a percentage established by the
Committee times all or a portion (as the Committee shall determine) of the
taxable income recognized by an associate upon (i) the exercise of a
Nonstatutory Stock Option or a Stock Appreciation Right, (ii) the disposition of
shares received upon exercise of an Incentive Stock Option, (iii) the lapse of
restrictions on Restricted Shares, (iv) the award of Unrestricted Shares, or (v)
payments for Performance Shares or Performance Units. The percentage shall be
established, from time to time, by the Committee at that rate which the
Committee, in its sole discretion, determines to be appropriate and in the best
interests of the Company to assist associates in paying income taxes incurred as
a result of the events described in the preceding sentence. Tax Offset Payments
shall be subject to the restrictions on transferability applicable to Options
and Stock Appreciation Rights under Article 8.
ARTICLE 16
ADJUSTMENT UPON CHANGES IN CAPITALIZATION
Notwithstanding any other provision of the Plan, the Committee may at
any time make or provide for such adjustments to the Plan, to the number and
class of shares available thereunder or to any outstanding Options, Stock
Appreciation Rights, Restricted Shares or Performance Shares as it shall deem
appropriate to prevent dilution or enlargement of rights, including adjustments
in the event of changes in the number of shares of outstanding Common Stock by
reason of stock dividends, extraordinary cash dividends, split-ups,
recapitalizations, mergers, consolidations, combinations or exchanges of shares,
separations, reorganizations, liquidations and the like.
ARTICLE 17
AMENDMENT AND TERMINATION
The Board may suspend, terminate, modify or amend the Plan, provided
that any amendment that would materially increase the aggregate number of shares
which may be issued under the Plan shall be subject to the approval of the
Company's stockholders, except that any such increase or modification that may
result from
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adjustments authorized by Article 16 does not require such approval. If the Plan
is terminated, the terms of the Plan shall, notwithstanding such termination,
continue to apply to awards granted prior to such termination. No suspension,
termination, modification or amendment of the Plan may, without the consent of
the associate to whom an award shall theretofore have been granted, adversely
affect the rights of such associate under such award.
ARTICLE 18
WRITTEN AGREEMENT
Each award of Options, Stock Appreciation Rights, Restricted Shares,
Performance Shares, Performance Units, Unrestricted Shares and Tax Offset
Payments shall be evidenced by a written agreement, executed by the associate
and the Company, and containing such restrictions, terms and conditions, if any,
as the Committee may require. In the event of any conflict between a written
agreement and the Plan, the terms of the Plan shall govern.
ARTICLE 19
MISCELLANEOUS PROVISIONS
19.1 FAIR MARKET VALUE. For purposes of this Plan, fair market value
with respect to the exercise price of options granted prior to and subject to
the consummation of the initial public offering referred to in Section 1.1
hereof shall be the price at which shares of Common Stock are sold to the public
pursuant to such offering and, for all other purposes hereunder, shall be the
closing price of the Common Stock as reported on the principal exchange on which
the shares are listed for the date on which the grant, exercise or other
transaction occurs, or if there were no sales on such date, the most recent
prior date on which there were sales.
19.2 TAX WITHHOLDING. The Company shall have the right to require
associates or their beneficiaries or legal representatives to remit to the
Company an amount sufficient to satisfy Federal, state and local withholding tax
requirements, or to deduct from all payments under this Plan, including Tax
Offset Payments, amounts sufficient to satisfy all withholding tax requirements.
Whenever payments under the Plan are to be made to an associate in cash, such
payments shall be net of any amounts sufficient to satisfy all Federal, state
and local withholding tax requirements. The Committee may, in its discretion,
permit an associate to satisfy his or her tax withholding obligation either by
(i) surrendering shares owned by the associate or (ii) having the Company
withhold from shares otherwise deliverable to the associate. Shares surrendered
or withheld shall be valued at their fair market value as of the date on which
income is required to be recognized for income tax purposes. In the
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case of an award of Incentive Stock Options, the foregoing right shall be deemed
to be provided to the associate at the time of such award.
19.3 COMPLIANCE WITH SECTION 16(B) AND SECTION 162(M). In the case of
associates who are or may be subject to Section 16 of the Act, it is the intent
of the Company that any award granted hereunder satisfy and be interpreted in a
manner that satisfies the applicable requirements of Rule 16b-3, so that such
person will be entitled to the benefits of Rule 16b-3 or other exemptive rules
under Section 16 of the Act and will not be subjected to liability thereunder.
If any provision of the Plan or any award would otherwise conflict with the
intent expressed herein, that provisions to the extent possible, shall be
interpreted and deemed amended so as to avoid such conflict. To the extent of
any remaining irreconcilable conflict with such intent, such provision shall be
deemed void as applicable to associates who are or may be subject to Section 16
of the Act. If any award hereunder is intended to qualify as performance-based
for purposes of Section 162(m) of the Code, the Committee shall not exercise any
discretion to increase the payable under such award except to the extent
permitted by Section 162(m) and the regulations thereunder.
19.4 SUCCESSORS. The obligations of the Company under the Plan shall be
binding upon any successor corporation or organization resulting from the
merger, consolidation or other reorganization of the Company, or upon any
successor corporation or organization succeeding to substantially all of the
assets and business of the Company. In the event of any of the foregoing, the
Committee may, at its discretion prior to the consummation of the transaction,
cancel, offer to purchase, exchange, adjust or modify any outstanding awards, at
such time and in such manner as the Committee deems appropriate and in
accordance with applicable law.
19.5 GENERAL CREDITOR STATUS. Associates shall have no right, title, or
interest whatsoever in or to any investments which the Company may make to aid
it in meeting its obligations under the Plan. Nothing contained in the Plan, and
no action taken pursuant to its provisions, shall create or be construed to
create a trust of any kind, or a fiduciary relationship between the Company and
any associate or beneficiary or legal representative of such associate. To the
extent than any person acquires a right to receive payments from the Company
under the Plan, such right shall be no greater than the right of an unsecured
general creditor of the Company. All payments to be made hereunder shall be paid
from the general funds of the Company and no special or separate fund shall be
established and no segregation of assets shall be made to assure payment of such
amounts except as expressly set forth in the Plan.
19.6 NO RIGHT TO EMPLOYMENT. Nothing in the Plan or in any written
agreement entered into pursuant to Article 18, nor the grant of any award, shall
confer upon any associate any right to continue in the employ of the Company or
a subsidiary or to be entitled to any remuneration or benefits not set forth in
the Plan or such written agreement or interfere with or limit the right of the
Company or a
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subsidiary to modify the terms of or terminate such associate's employment at
any time.
19.7 NOTICES. Notices required or permitted to be made under the Plan
shall be sufficiently made if sent by registered or certified mail addressed (a)
to the associate at the associate's address as set forth in the books and
records of the Company or its subsidiaries, or (b) to the Company or the
Committee at the principal office of the Company.
19.8 SEVERABILITY. In the event that any provision of the Plan shall be
held illegal or invalid for any reason, such illegality or invalidity shall not
affect the remaining parts of the Plan, and the Plan shall be construed and
enforced as if the illegal or invalid provision had not been included.
19.9 GOVERNING LAW. To the extent not preempted by Federal law, the
Plan, and all agreements hereunder, shall be construed in accordance with and
governed by the laws of the State of Delaware.
19.10 TERM OF PLAN. Unless earlier terminated pursuant to Article 17
hereof, the Plan shall terminate on the tenth (10th) anniversary of the earlier
of the date of adoption of the Plan by the Board or the date of the consummation
of the initial public offering referred to in Section 1.1 hereof.
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