EXHIBIT 4.3
Long-Term Stock Incentive
Compensation Program
Edwards Lifesciences Corporation
March 2000
Contents
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Article 1. Establishment, Objectives, and Duration 1
Article 2. Definitions 1
Article 3. Administration 4
Article 4. Eligibility and Participation 5
Article 5. Shares Subject to the Program and Maximum Awards 5
Article 6. Stock Options 7
Article 7. Restricted Stock 9
Article 8. Performance Units and Performance Shares 10
Article 9. Performance Measures 12
Article 10. Beneficiary Designation 13
Article 11. Deferrals 13
Article 12. Rights of Employees and Contractors 13
Article 13. Change in Control 13
Article 14. Amendment, Modification, and Termination 14
Article 15. Compliance with Applicable Law and Withholding 15
Article 16. Indemnification 17
Article 17. Successors 17
Article 18. Legal Construction 17
Edwards Lifesciences Corporation
Long-Term Stock Incentive Compensation Program
Article 1. Establishment, Objectives, and Duration
1.1 Establishment of the Program. Edwards Lifesciences Corporation, a
Delaware corporation (hereinafter referred to as the "Company"), hereby
establishes an incentive compensation plan to be known as the "Edwards
Lifesciences Corporation Long-Term Stock Incentive Compensation Program"
(hereinafter referred to as the "Program"), as set forth in this document. The
Program permits the grant of Nonqualified Stock Options, Incentive Stock
Options, Restricted Stock, Performance Shares, and Performance Units.
The Program shall become effective as of April 1, 2000 (the "Effective Date")
and shall remain in effect as provided in Section 1.3 hereof.
1.2 Objectives of the Program. The objectives of the Program are to optimize
the profitability and growth of the Company through long-term incentives which
are consistent with the Company's goals and which link the personal interests of
Participants to those of the Company's stockholders; to provide Participants
with an incentive for excellence in individual performance; and to promote
teamwork among Participants. Awards generally are made in conjunction with
services performed by the Participant within the previous twelve (12) months.
The Program is further intended to provide flexibility to the Company in its
ability to motivate, attract, and retain the services of Participants who make
significant contributions to the Company's success and to allow Participants to
share in the success of the Company.
1.3 Duration of the Program. The Program shall commence on the Effective
Date, as described in Section 1.1 hereof, and shall remain in effect, subject to
the right of the Board to amend or terminate the Program at any time pursuant to
Article 14 hereof, until all Shares subject to it shall have been purchased or
acquired according to the Program's provisions. However, in no event may an
Award be granted under the Program on or after April 1, 2010.
Article 2. Definitions
Whenever used in the Program, the following terms shall have the meanings set
forth below, and when the meaning is intended, the initial letter of the word
shall be capitalized:
2.1 "Award" means, individually or collectively, a grant under this Program
of Nonqualified Stock Options, Incentive Stock Options, Restricted Stock,
Performance Shares, or Performance Units.
2.2 "Award Agreement" means an agreement entered into by the Company and
each Participant setting forth the terms and provisions applicable to Awards
granted under this Program.
2.3 "Board" or "Board of Directors" means the Board of Directors of the
Company.
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2.4 "Change in Control" of the Company shall mean the occurrence of any one
of the following events:
(a) Any "Person", as such term is used in Sections 13(d) and 14(d) of
the Exchange Act (other than the Company, any corporation owned,
directly or indirectly, by the stockholders of the Company in
substantially the same proportions as their ownership of stock of
the Company, and any trustee or other fiduciary holding securities
under an employee benefit plan of the Company or such
proportionately owned corporation), is or becomes the "beneficial
owner" (as defined in Rule 13d-3 under the Exchange Act), directly
or indirectly, of securities of the Company representing thirty
percent (30%) or more of the combined voting power of the Company's
then outstanding securities; or
(b) During any period of not more than twenty-four (24) months,
individuals who at the beginning of such period constitute the Board
of Directors of the Company, and any new director (other than a
director designated by a Person who has entered into an agreement
with the Company to effect a transaction described in Sections
2.4(a), 2.4(c), or 2.4(d) of this Section 2.4) whose election by the
Board or nomination for election by the Company's stockholders was
approved by a vote of at least two-thirds (2/3) of the directors
then still in office who either were directors at the beginning of
the period or whose election or nomination for election was
previously so approved, cease for any reason to constitute at least
a majority thereof; or
(c) The consummation of a merger or consolidation of the Company with
any other entity, other than: (i) a merger or consolidation which
would result in the voting securities of the Company outstanding
immediately prior thereto continuing to represent (either by
remaining outstanding or by being converted into voting securities
of the surviving entity) more than sixty percent (60%) of the
combined voting power of the voting securities of the Company or
such surviving entity outstanding immediately after such merger or
consolidation; or (ii) a merger or consolidation effected to
implement a recapitalization of the Company (or similar transaction)
in which no Person acquires more than thirty percent (30%) of the
combined voting power of the Company's then outstanding securities;
or
(d) The Company's stockholders approve a plan of complete liquidation or
dissolution of the Company, or an agreement for the sale or
disposition by the Company of all or substantially all of the
Company's assets (or any transaction having a similar effect).
2.5 "Code" means the Internal Revenue Code of 1986, as amended from time to
time.
2.6 "Committee" means the Compensation Committee or any other committee
appointed by the Board to administer Awards to Participants, as specified in
Article 3 herein.
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2.7 "Company" means Edwards Lifesciences Corporation, a Delaware
corporation, and any successor thereto as provided in Article 17 herein.
2.8 "Contractor" means an individual providing services to the Company who
is not an Employee or member of the Board, and who does not participate in the
Edwards Lifesciences Corporation Nonemployee Directors and Consultants Stock
Incentive Program.
2.9 "Covered Employee" means a Participant who, as of the date of vesting
and/or payout of an Award, as applicable, is one of the group of "covered
employees," as defined in the regulations promulgated under Code Section 162(m),
or any successor statute.
2.10 "Disability" shall have the meaning ascribed to such term in the
Participant's governing long-term disability plan, or if no such plan exists, at
the discretion of the Board.
2.11 "Effective Date" shall have the meaning ascribed to such term in
Section 1.1 hereof.
2.12 "Employee" means any employee of the Company or of a Subsidiary of the
Company. Directors who are employed by the Company shall be considered Employees
under this Program. For the purposes of this definition, "Subsidiary" means any
business, whether or not incorporated, in which the Company has a direct or
indirect ownership interest.
2.13 "Exchange Act" means the Securities Exchange Act of 1934, as amended
from time to time, or any successor act thereto.
2.14 "Fair Market Value" means, at any date, the closing sale price on the
principal securities exchange on which the Shares are traded on the last
previous day on which a sale was reported.
2.15 "Incentive Stock Option" or "ISO" means an option to purchase Shares
granted under Article 6 herein and which is designated as an Incentive Stock
Option and which is intended to meet the requirements of Code Section 422.
2.16 "Insider" shall mean an individual who is, on the relevant date, an
officer, director, or ten percent (10%) beneficial owner of any class of the
Company's equity securities that is registered pursuant to Section 12 of the
Exchange Act, all as defined under Section 16 of the Exchange Act.
2.17 "Nonqualified Stock Option" or "NQSO" means an option to purchase
Shares granted under Article 6 herein and which is not intended to meet the
requirements of Code Section 422.
2.18 "Option" means an Incentive Stock Option or a Nonqualified Stock
Option, as described in Article 6 herein.
2.19 "Option Price" means the price at which a Share may be purchased by a
Participant pursuant to an Option.
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2.20 "Participant" means an Employee or Contractor who has been selected to
receive an Award or who has outstanding an Award granted under the Program.
2.21 "Performance-Based Exception" means the performance-based exception
from the tax deductibility limitations of Code Section 162(m).
2.22 "Performance Share" means an Award granted to a Participant, as
described in Article 8 herein.
2.23 "Performance Unit" means an Award granted to a Participant, as
described in Article 8 herein.
2.24 "Period of Restriction" means the period during which the transfer of
Shares of Restricted Stock is limited in some way (based on the passage of time,
the achievement of performance goals, or upon the occurrence of other events as
determined by the Committee, in its discretion), and the Shares are subject to a
substantial risk of forfeiture, as provided in Article 7 herein.
2.25 "Restricted Stock" means an Award granted to a Participant pursuant to
Article 7 herein.
2.26 "Retirement" means, unless otherwise defined in the applicable Award
Agreement, any termination of an Employee's employment or a Contractor's service
after age fifty-five (55) other than due to death or Disability, provided that
such Employee or Contractor has at least a combined ten (10) years of service
with the Company and Baxter International Inc. A Participant's number of years
of service with the Company and Baxter International, Inc. shall be determined
by calculating the number of complete twelve-month (12) periods of employment
from the Participant's original date of hire as an Employee or Contractor with
the Company or Baxter International, Inc. to the Participant's date of
employment or service termination.
2.27 "Shares" means the shares of common stock of the Company.
Article 3. Administration
3.1 General. The Program shall be administered by the Compensation Committee
of the Board, or by any other Committee appointed by the Board, which shall
consist of two (2) or more nonemployee directors within the meaning of the rules
promulgated by the Securities and Exchange Commission under Section 16 of the
Exchange Act who also qualify as outside directors within the meaning of Code
Section 162(m) and the related regulations under the Code, except as otherwise
determined by the Board. Any Committee administering the Program shall be
comprised entirely of directors. The members of the Committee shall be appointed
from time to time by, and shall serve at the sole discretion of, the Board. The
Committee shall have the authority to delegate administrative duties to
officers, Employees, or directors of the Company; provided, however, that the
Committee shall not be able to delegate its authority with respect to: (i)
granting Awards to Insiders; (ii) granting Awards to Covered Employees that are
intended to qualify for the Performance-Based Exception; and (iii) certifying
that any performance goals and other material terms attributable to
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Awards to Covered Employees that are intended to qualify for the Performance-
Based Exception have been satisfied.
3.2 Authority of the Committee. Except as limited by law or by the
Certificate of Incorporation or Bylaws of the Company, and subject to the
provisions of the Program, the Committee shall have the authority to: (a)
interpret the provisions of the Program, and prescribe, amend, and rescind rules
and procedures relating to the Program; (b) grant Awards under the Program, in
such forms and amounts and subject to such terms and conditions as it deems
appropriate, including, without limitation, Awards which are made in combination
with or in tandem with other Awards (whether or not contemporaneously granted)
or compensation or in lieu of current or deferred compensation; (c) subject to
Article 14, modify the terms of, cancel and reissue, or repurchase outstanding
Awards; (d) prescribe the form of agreement, certificate, or other instrument
evidencing any Award under the Program; (e) correct any defect or omission and
reconcile any inconsistency in the Program or in any Award hereunder; (f) to
design Awards to satisfy requirements to make such Awards tax-advantaged to
Participants in any jurisdiction or for any other reason that the Company
desires; and (g) make all other determinations and take all other actions as it
deems necessary or desirable for the administration of the Program; provided,
however, that it is the Company's intent that no outstanding Option will be
canceled for the purpose of reissuing such Option to a Participant at a lower
exercise price. The determination of the Committee on matters within its
authority shall be conclusive and binding on the Company and all other persons.
The Committee shall comply with all applicable law in administering the Plan. As
permitted by law (and subject to Section 3.1 herein), the Committee may delegate
its authority as identified herein.
3.3 Decisions Binding. All determinations and decisions made by the
Committee pursuant to the provisions of the Program and all related orders and
resolutions of the Board shall be final, conclusive, and binding on all persons,
including the Company, its stockholders, directors, Employees, Contractors,
Participants, and their estates and beneficiaries.
Article 4. Eligibility and Participation
4.1 Eligibility. Persons eligible to participate in this Program shall
include all Employees and Contractors. Directors who are not Employees of the
Company shall not be eligible to participate in the Program.
4.2 Actual Participation. Subject to the provisions of the Program, the
Committee may, from time to time, select from all eligible Employees and
Contractors those to whom Awards shall be granted and shall determine the nature
and amount of each Award.
Article 5. Shares Subject to the Program and Maximum Awards
5.1 Number of Shares Available for Grants. Subject to adjustment as provided
in Section 5.4 herein, the number of Shares hereby reserved for delivery to
Participants under the Program shall be twelve million five hundred thousand
(12,500,000) Shares. No more than five hundred thousand (500,000) Shares
reserved for issuance under the Program may be granted in the form of Shares of
Restricted Stock. The Committee shall determine the appropriate methodology for
calculating the number of Shares issued pursuant to the Program. Unless and
until the Committee determines that an Award to a Covered Employee shall not be
designed to comply with the
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Performance-Based Exception, the following rules shall apply to grants of such
Awards under the Program:
(a) Options: The maximum aggregate number of Shares that may be granted
in the form of Options in any one (1) fiscal year to any one (1)
Participant shall be one million (1,000,000).
(b) Restricted Stock: The maximum aggregate number of Shares that may be
granted in the form of Restricted Stock in any one (1) fiscal year
to any one (1) Participant shall be fifty thousand (50,000).
(c) Performance Shares: The maximum aggregate payout (determined as of
the end of the applicable performance period) with respect to Awards
of Performance Shares granted in any one (1) fiscal year to any one
(1) Participant shall be equal to the value of one hundred thousand
(100,000) Shares.
(d) Performance Units: The maximum aggregate payout (determined as of
the end of the applicable performance period) with respect to Awards
of Performance Units granted in any one (1) fiscal year to any one
(1) Participant shall be equal to two million dollars ($2,000,000).
5.2 Type of Shares. Shares issued under the Program in connection with Stock
Options and Performance Shares may be authorized and unissued Shares or issued
Shares held as treasury Shares. Shares issued under the Program in connection
with Restricted Stock shall be issued Shares held as treasury Shares; provided,
however, that authorized and unissued Shares may be issued in connection with
Restricted Stock to the extent that the Committee determines that past services
of the Participant constitute adequate consideration for at least the par value
thereof.
5.3 Reusage of Shares.
(a) General. In the event of the exercise or termination (by reason of
forfeiture, expiration, cancellation, surrender, or otherwise) of
any Award under the Program, that number of Shares that was subject
to the Award but not delivered shall again be available as Awards
under the Program.
(b) Restricted Stock. In the event that Shares are delivered under the
Program as Restricted Stock and are thereafter forfeited or
reacquired by the Company pursuant to rights reserved upon the grant
thereof, such forfeited or reacquired Shares shall again be
available as Awards under the Program.
(c) Limitation. Notwithstanding the provisions of Sections 5.3(a) or
5.3(b) above, the following Shares shall not be available for
reissuance under the Program: (i) Shares which are withheld from any
Award or payment under the Program to satisfy tax withholding
obligations (as described in Section 15.3; (ii) Shares which are
surrendered to fulfill tax obligations (as described in Section
15.4; and
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(iii) Shares which are surrendered in payment of the Option Price
upon the exercise of an Option.
5.4 Adjustments in Authorized Shares. In the event of any change in
corporate capitalization, such as a stock split, or a corporate transaction,
such as any merger, consolidation, separation, including a spin-off, or other
distribution of stock or property of the Company, any reorganization (whether or
not such reorganization comes within the definition of such term in Code Section
368) or any partial or complete liquidation of the Company, such adjustment
shall be made in the number and class of Shares which may be delivered under
Section 5.1, in the number and class of and/or price of Shares subject to
outstanding Awards granted under the Program, and in the Award limits set forth
in Section 5.1, as may be determined to be appropriate and equitable by the
Committee, in its sole discretion, to prevent dilution or enlargement of rights;
provided, however, that the number of Shares subject to any Award shall always
be a whole number. In a stock-for-stock acquisition of the Company, the
Committee may, in its sole discretion, substitute securities of another issuer
for any Shares subject to outstanding Awards.
Article 6. Stock Options
6.1 Grant of Options. Subject to the terms and provisions of the Program,
Options may be granted to Participants in such number, and upon such terms, and
at any time and from time to time as shall be determined by the Committee. If
all or any portion of the exercise price or taxes incurred in connection with
the exercise are paid by delivery (or, in the case of payment of taxes, by
withholding of Shares) of other Shares of the Company, the Options may provide
for the grant of replacement Options.
6.2 Award Agreement. Each Option grant shall be evidenced by an Award
Agreement that shall specify the Option Price, the duration of the Option, the
number of Shares to which the Option pertains, and such other provisions as the
Committee shall determine. The Award Agreement also shall specify whether the
Option is intended to be an ISO or an NQSO.
6.3 Option Price. The Option Price for each grant of an Option under this
Program shall be at least equal to one hundred percent (100%) of the Fair Market
Value of a Share on the date the Option is granted. The only exception to the
foregoing shall be for Options issued to Participants upon the conversion of
their Baxter International, Inc. stock options at the time of the Company's
spin-off from Baxter International, Inc.
6.4 Duration of Options. Each Option granted to a Participant shall expire
at such time as the Committee shall determine at the time of grant; provided,
however, that no Option shall be exercisable later than the tenth (10th)
anniversary date of its grant.
6.5 Exercise of Options. Options granted under this Article 6 shall be
exercisable at such times and be subject to such restrictions and conditions as
the Committee shall in each instance approve, which need not be the same for
each grant or for each Participant.
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6.6 Payment. Options granted under this Article 6 shall be exercised by the
delivery of a written notice of exercise to the Company, setting forth the
number of Shares with respect to which the Option is to be exercised,
accompanied by full payment for the Shares.
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The Option Price upon exercise of any Option shall be payable to the Company
in full either: (a) in cash or its equivalent; or (b) by tendering previously
acquired Shares (by either actual delivery or attestation) having an aggregate
Fair Market Value at the time of exercise equal to the total Option Price
(provided that the Shares which are tendered must have been held by the
Participant for at least six (6) months prior to their tender to satisfy the
Option Price); or (c) by a combination of (a) and (b).
The Committee also may allow cashless exercise as permitted under Federal
Reserve Board's Regulation T, subject to applicable securities law restrictions,
or by any other means which the Board determines to be consistent with the
Program's purpose and applicable law.
Subject to any governing rules or regulations, as soon as practicable after
receipt of a written notification of exercise and full payment, the Company
shall deliver to the Participant, in the Participant's name (or, at the
direction of the Participant, jointly in the names of the Participant and the
Participant's spouse), Share certificates in an appropriate amount based upon
the number of Shares purchased under the Option(s).
6.7 Restrictions on Share Transferability. The Committee may impose such
restrictions on any Shares acquired pursuant to the exercise of an Option
granted under this Article 6 as it may deem advisable, including, without
limitation, restrictions under applicable federal securities laws, under the
requirements of any stock exchange or market upon which such Shares are then
listed and/or traded, and under any blue sky or state securities laws applicable
to such Shares.
6.8 Termination of Employment or Service. Each Participant's Option Award
Agreement shall set forth the extent to which the Participant shall have the
right to exercise the Option following termination of the Participant's
employment with the Company or service to the Company as a Contractor. Such
provisions shall be determined in the sole discretion of the Committee, shall be
included in the Award Agreement entered into with each Participant, need not be
uniform among all Options issued pursuant to this Article 6, and may reflect
distinctions based on the reasons for termination.
6.9 Nontransferability of Options.
(a) Incentive Stock Options. No ISO granted under the Program may be
sold, transferred, pledged, assigned, or otherwise alienated or
hypothecated, other than by will or by the laws of descent and
distribution. Further, all ISOs granted to a Participant under the
Program shall be exercisable during his or her lifetime only by such
Participant.
(b) Nonqualified Stock Options. Except as otherwise provided in a
Participant's Award Agreement, no NQSO granted under this Article 6
may be sold, transferred, pledged, assigned, or otherwise alienated
or hypothecated, other than by will or by the laws of descent and
distribution. Further, except as otherwise provided in a
Participant's Award Agreement, all NQSOs granted to a Participant
under this Article 6 shall be exercisable during his or her lifetime
only by such Participant.
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6.10 Substitution of Cash. Unless otherwise provided in a Participant's
Award Agreement, and notwithstanding any provision in the Program to the
contrary (including but not limited to Section 14.3), in the event of a Change
in Control in which the Company's stockholders holding Shares receive
consideration other than shares of common stock that are registered under
Section 12 of the Exchange Act, the Committee shall have the authority to
require that any outstanding Option be surrendered to the Company by a
Participant for cancellation by the Company, with the Participant receiving in
exchange a cash payment from the Company within ten (10) days of the Change in
Control. Such cash payment shall be equal to the number of Shares under Option,
multiplied by the excess, if any, of the greater of (i) the highest per Share
price offered to stockholders in any transaction whereby the Change in Control
takes place, or (ii) the Fair Market Value of a Share on the date the Change in
Control occurs, over the Option Price.
Article 7. Restricted Stock
7.1 Grant of Restricted Stock. Subject to the terms and provisions of the
Program, the Committee, at any time and from time to time, may grant Shares of
Restricted Stock to Participants in such amounts as the Committee shall
determine.
7.2 Restricted Stock Agreement. Each Restricted Stock grant shall be
evidenced by a Restricted Stock Award Agreement that shall specify the Period(s)
of Restriction, the number of Shares of Restricted Stock granted, and such other
provisions as the Committee shall determine.
7.3 Restriction on Transferability. Except as provided in this Article 7,
the Shares of Restricted Stock granted herein may not be sold, transferred,
pledged, assigned, or otherwise alienated or hypothecated until the end of the
applicable Period of Restriction established by the Committee and specified in
the Restricted Stock Award Agreement, or upon earlier satisfaction of any other
conditions, as specified by the Committee in its sole discretion and set forth
in the Restricted Stock Award Agreement. All rights with respect to the
Restricted Stock granted to a Participant under the Program shall be available
during his or her lifetime only to such Participant.
7.4 Other Restrictions. Subject to Article 9 herein, the Committee shall
impose such other conditions and/or restrictions on any Shares of Restricted
Stock granted pursuant to the Program as it may deem advisable including,
without limitation, any or all of the following:
(a) A required period of employment or service as a Contractor with the
Company, as determined by the Committee, prior to the vesting of
Shares of Restricted Stock.
(b) A requirement that Participants forfeit (or in the case of Shares
sold to a Participant, resell to the Company at his or her cost) all
or a part of Shares of Restricted Stock in the event of termination
of his or her employment or service as a Contractor during the
Period of Restriction.
(c) A prohibition against employment of Participants holding Shares of
Restricted Stock by any competitor of the Company, against such
Participants' dissemination of any secret or confidential
information belonging to the Company, or the solicitation by
Participants of the Company's employees for employment by another
entity.
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Shares of Restricted Stock awarded pursuant to the Program shall be
registered in the name of the Participant and, if such Shares are certificated,
in the sole discretion of the Committee, may be deposited in a bank designated
by the Committee or with the Company. The Committee may require a stock power
endorsed in blank with respect to Shares of Restricted Stock whether or not
certificated.
Except as otherwise provided in this Article 7, Shares of Restricted Stock
covered by each Restricted Stock grant made under the Program shall become
freely transferable (subject to any restrictions under any applicable securities
law) by the Participant after the last day of the applicable Period of
Restriction.
7.5 Voting Rights. At the Committee's sole discretion, Participants holding
Shares of Restricted Stock granted hereunder may be granted the right to
exercise full voting rights with respect to those Shares during the Period of
Restriction.
7.6 Dividends and Other Distributions. At the Committee's sole discretion,
during the Period of Restriction, Participants holding Shares of Restricted
Stock granted hereunder may be credited with regular cash dividends paid with
respect to the underlying Shares while they are so held. The Committee may apply
any restrictions to the dividends that the Committee deems appropriate. Without
limiting the generality of the preceding sentence, if the grant or vesting of
Shares of Restricted Stock granted to a Covered Employee is designed to comply
with the requirements of the Performance-Based Exception, the Committee may
apply any restrictions it deems appropriate to the payment of dividends declared
with respect to such Shares of Restricted Stock, such that the dividends and/or
the Shares of Restricted Stock maintain eligibility for the Performance-Based
Exception.
7.7 Termination of Employment or Service. Each Restricted Stock Award
Agreement shall set forth the extent to which the Participant shall have the
right to receive unvested Shares of Restricted Stock following termination of
the Participant's employment with the Company or service to the Company as a
Contractor. Such provisions shall be determined in the sole discretion of the
Committee, shall be included in the Award Agreement entered into with each
Participant, need not be uniform among all Shares of Restricted Stock issued
pursuant to the Program, and may reflect distinctions based on the reasons for
termination; provided, however that, except in the cases of terminations
connected with a Change in Control and terminations by reason of death or
Disability, the vesting of Shares of Restricted Stock which qualify for the
Performance-Based Exception and which are held by Covered Employees shall occur
at the time they otherwise would have, but for the termination.
Article 8. Performance Units and Performance Shares
8.1 Grant of Performance Units/Shares. Subject to the terms of the Program,
Performance Units and/or Performance Shares may be granted to Participants in
such amounts and upon such terms, and at any time and from time to time, as
shall be determined by the Committee.
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8.2 Value of Performance Units/Shares. Each Performance Unit shall have an
initial value that is established by the Committee at the time of grant. Each
Performance Share shall have an initial value equal to the Fair Market Value of
a Share on the date of grant. The Committee shall set performance goals in its
sole discretion which, depending on the extent to which they are met, will
determine the number and/or value of Performance Units/Shares that will be paid
out to the Participant. For purposes of this Article 8, the time period during
which the performance goals must be met shall be called a "Performance Period."
8.3 Earning of Performance Units/Shares. Subject to the terms of this
Program, after the applicable Performance Period has ended, the holder of
Performance Units/Shares shall be entitled to receive payout on the number and
value of Performance Units/Shares earned by the Participant over the Performance
Period, to be determined as a function of the extent to which the corresponding
performance goals have been achieved.
8.4 Form and Timing of Payment of Performance Units/Shares. Payment of
earned Performance Units/Shares shall be made in a single lump sum following the
close of the applicable Performance Period. Subject to the terms of this
Program, the Committee, in its sole discretion, may pay earned Performance
Units/Shares in the form of cash or in Shares (or in a combination thereof)
which have an aggregate Fair Market Value equal to the value of the earned
Performance Units/Shares at the close of the applicable Performance Period. Such
Shares may be granted subject to any restrictions deemed appropriate by the
Committee. The determination of the Committee with respect to the form of payout
of such Awards shall be set forth in the Award Agreement pertaining to the grant
of the Award.
At the discretion of the Committee, Participants may be entitled to receive
any dividends declared with respect to Shares which have been earned in
connection with grants of Performance Units and/or Performance Shares which have
been earned, but not yet distributed to Participants (such dividends shall be
subject to the same accrual, forfeiture, and payout restrictions as apply to
dividends earned with respect to Shares of Restricted Stock, as set forth in
Section 7.6 herein). In addition, Participants may, at the discretion of the
Committee, be entitled to exercise their voting rights with respect to such
Shares.
8.5 Termination of Employment or Service Due to Death, Disability, or
Retirement. Unless determined otherwise by the Committee and set forth in the
Participant's Award Agreement, following termination of the Participant's
employment with the Company or service to the Company as a Contractor, by reason
of death, Disability, or Retirement during a Performance Period, the Participant
or his legal representative shall receive a payout of the Performance
Units/Shares which is prorated, as specified by the Committee in its discretion.
Payment of earned Performance Units/Shares shall be made at a time specified
by the Committee in its sole discretion and set forth in the Participant's Award
Agreement. Notwithstanding the foregoing, with respect to Covered Employees who
retire during a Performance Period, payments shall be made at the same time as
payments are made to Participants who did not terminate employment during the
applicable Performance Period.
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8.6 Termination of Employment or Service for Other Reasons. In the event
that a Participant's employment or service to the Company as a Contractor
terminates for any reason other than those reasons set forth in Section 8.5
herein, all Performance Units/Shares shall be forfeited by the Participant to
the Company unless determined otherwise by the Committee, as set forth in the
Participant's Award Agreement.
8.7 Nontransferability. Except as otherwise provided in a Participant's
Award Agreement, Performance Units/Shares may not be sold, transferred, pledged,
assigned, or otherwise alienated or hypothecated, other than by will or by the
laws of descent and distribution. Further, except as otherwise provided in a
Participant's Award Agreement, a Participant's rights under the Program shall be
exercisable during the Participant's lifetime only by the Participant or the
Participant's legal representative.
Article 9. Performance Measures
Unless and until the Board proposes for stockholder vote and stockholders
approve a change in the general performance measures set forth in this Article
9, the attainment of which may determine the degree of payout and/or vesting
with respect to Awards to Covered Employees which are designed to qualify for
the Performance-Based Exception, the performance measure(s) to be used for
purposes of such grants shall be chosen from among:
(a) Earnings per share;
(b) Net income (before or after taxes);
(c) Return measures (including, but not limited to, return on assets,
capital, equity, or sales);
(d) Cash flow return on investments which equals net cash flows divided by
owners' equity;
(e) Gross revenues;
(f) Market-to-book value ratio;
(g) Share price (including, but not limited to, growth measures and total
shareholder return);
(h) Working capital measures;
(i) Economic value added; and
(j) The percentage of sales generated by new products.
Subject to the terms of the Program, each of these measures shall be defined
by the Committee on a corporation or subsidiary basis or in comparison with peer
group performance, and may include or exclude specified extraordinary items, as
determined by the corporation's auditors.
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The Committee shall have the discretion to adjust the determinations of the
degree of attainment of the preestablished performance goals or the size of
Awards; provided, however, that Awards which are designed to qualify for the
Performance-Based Exception, and which are held by Covered Employee, may not be
adjusted upward in terms of either the degree of goal attainment or size (the
Committee shall retain the discretion to adjust the degree of goal attainment or
the size of the Awards downward).
In the event that applicable tax and/or securities laws change to permit
Committee discretion to alter the governing performance measures without
obtaining stockholder approval of such changes, the Committee shall have sole
discretion to make such changes without obtaining stockholder approval. In
addition, in the event that the Committee determines that it is advisable to
grant Awards that shall not qualify for the Performance-Based Exception, the
Committee may make such grants without satisfying the requirements of Code
Section 162(m).
Article 10. Beneficiary Designation
Each Participant under the Program may, from time to time, name any
beneficiary or beneficiaries (who may be named contingently or successively) to
whom any benefit under the Program is to be paid in case of his or her death
before he or she receives any or all of such benefit. Each such designation
shall revoke all prior designations by the same Participant, shall be in a form
prescribed by the Company, and will be effective only when filed by the
Participant in writing with the Company during the Participant's lifetime. In
the absence of any such designation, benefits remaining unpaid at the
Participant's death shall be paid to the Participant's estate.
Article 11. Deferrals
The Committee may permit or require a Participant to defer such Participant's
receipt of the payment of cash or the delivery of Shares that would otherwise be
due to such Participant by virtue of the exercise of an Option, lapse or waiver
of restrictions with respect to Restricted Stock, or the satisfaction of any
performance goals with respect to Performance Units/Shares. If any such deferral
election is required or permitted, the Committee shall, in its sole discretion,
establish rules and procedures for such payment deferrals.
Article 12. Rights of Employees and Contractors
12.1 Employment. Nothing in the Program or any Award Agreement shall
interfere with or limit in any way the right of the Company to terminate at any
time any Participant's employment or service to the Company as a Contractor, nor
confer upon any Participant any right to continue in the employ of the Company
or to provide services to the Company as a Contractor.
12.2 Participation. No Employee or Contractor shall have the right to be
selected to receive an Award under this Program, or, having been so selected, to
be selected to receive a future Award.
Article 13. Change in Control
13.1 Treatment of Outstanding Awards. Except as may otherwise be provided in
a Participant's Award Agreement, and subject to Section 13.3, upon the
occurrence of a Change in Control, unless otherwise specifically prohibited
under applicable laws, or by the rules and regulations of any governing
governmental agencies or national securities exchanges:
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(a) Any and all Options granted hereunder shall become immediately
exercisable, and shall remain exercisable throughout their entire
term;
(b) Any restriction periods and restrictions imposed on Share of
Restricted Stock that are not performance-based shall lapse;
(c) The vesting of all performance-based Awards denominated in Shares
such as performance-based Restricted Stock and Performance Shares
shall be accelerated as of the effective date of the Change in
Control, and there shall be paid out to Participants within thirty
(30) days following the effective date of the Change in Control a
pro rata number of Shares based upon an assumed achievement of all
relevant targeted performance goals and upon the length of time
within the Performance Period(s) which has elapsed prior to the
Change in Control. The vesting of Awards denominated in cash, such
as Performance Units, shall also be accelerated as of effective date
of the Change in Control and there shall be paid out to Participants
within thirty (30) days following the effective date of the Change
in Control a pro rata cash payment with the proration determined as
a function of the length of time within the Performance Period(s)
which has elapsed prior to the Change in Control, and based on an
assumed achievement of all relevant targeted performance goals.
13.2 Termination, Amendment, and Modifications of Change-in-Control
Provisions. Notwithstanding any other provision of this Program (but subject to
the limitations of Section 13.3 hereof) or any Award Agreement provision, the
provisions of this Article 13 may not be terminated, amended, or modified on or
after the date of a Change in Control to affect adversely any Award theretofore
granted under the Program without the prior written consent of the Participant
with respect to said Participant's outstanding Awards; provided, however, the
Board may terminate, amend, or modify this Article 13 at any time and from time
to time prior to the date of a Change in Control.
13.3 Pooling of Interests Accounting. Notwithstanding any provision of the
Program or of any Award Agreement to the contrary, in the event that the
consummation of a Change in Control is contingent on using pooling of interests
accounting methodology, the Board may, in its sole discretion, take any action
necessary to preserve the use of pooling of interests accounting.
Article 14. Amendment, Modification, and Termination
14.1 Amendment, Modification, and Termination. Subject to the terms of the
Program, the Board may at any time and from time to time, alter, amend, suspend
or terminate the Program in whole or in part.
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14.2 Adjustment of Awards Upon the Occurrence of Certain Unusual or
Nonrecurring Events. The Committee may make adjustments in the terms and
conditions of, and the criteria included in, Awards in recognition of unusual or
nonrecurring events (including, without limitation, the events described in
Section 5.4 hereof) affecting the Company or the financial statements of the
Company or of changes in applicable laws, regulations, or accounting principles,
whenever the Committee determines that such adjustments are appropriate in order
to prevent dilution or enlargement of the benefits or potential benefits
intended to be made available under the Program; provided that, unless the
Committee determines otherwise at the time such adjustment is considered, no
such adjustment shall be authorized to the extent that such authority would be
inconsistent with the Program's meeting the requirements of Section 162(m) of
the Code, as from time to time amended.
14.3 Awards Previously Granted. Notwithstanding any provision of the Program
or of any Award Agreement to the contrary (but subject to Sections 6.10 and 13.3
hereof), no termination, amendment, or modification of the Program shall
adversely affect in any material way any Award previously granted under the
Program, without the written consent of the Participant holding such Award.
14.4 Compliance with Code Section 162(m). At all times when Code Section
162(m) is applicable, all Awards granted under this Program to a Covered
Employee shall comply with the requirements of Code Section 162(m); provided,
however, that in the event the Committee determines that such compliance is not
desired with respect to any Award or Awards available for grant under the
Program, then compliance with Code Section 162(m) will not be required. In
addition, in the event that changes are made to Code Section 162(m) to permit
greater flexibility with respect to any Award or Awards available under the
Program, the Committee may, subject to this Article 14, make any adjustments it
deems appropriate.
Article 15. Compliance with Applicable Law and Withholding
15.1 General. The granting of Awards and the issuance of Shares under the
Program shall be subject to all applicable laws, rules, and regulations, and to
such approvals by any governmental agencies or national securities exchanges as
may be required. Notwithstanding anything to the contrary in the Program or any
Award Agreement, the following shall apply:
(a) The Company shall have no obligation to issue any Shares under the
Program if such issuance would violate any applicable law or any
applicable regulation or requirement of any securities exchange or
similar entity.
(b) Prior to the issuance of any Shares under the Program, the Company
may require a written statement that the recipient is acquiring the
Shares for investment and not for the purpose or with the intention
of distributing the Shares and that the recipient will not dispose
of them in violation of the registration requirements of the
Securities Act of 1933.
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(c) With respect to any person who is subject to Section 16(a) of the
Exchange Act, the Committee may, at any time, add such conditions
and limitations to any incentive or payment under the Program or
implement procedures for the administration of the Program which it
deems necessary or desirable to comply with the requirements of Rule
16b-3 of the Exchange Act.
(d) If, at any time, the Company, determines that the listing,
registration, or qualification (or any updating of any such
document) of any Award, or the Shares issuable pursuant thereto, is
necessary on any securities exchange or under any federal or state
securities or blue sky law, or that the consent or approval of any
governmental regulatory body is necessary or desirable as a
condition of, or in connection with, any Award, the issuance of
Shares pursuant to any Award, or the removal of any restrictions
imposed on Shares subject to an Award, such Award shall not be
granted and the Shares shall not be issued or such restrictions
shall not be removed, as the case may be, in whole or in part,
unless such listing, registration, qualification, consent, or
approval shall have been effected or obtained free of any conditions
not acceptable to the Company.
15.2 Securities Law Compliance. With respect to Insiders, transactions under
this Program are intended to comply with all applicable conditions of Rule 16b-3
or its successors under the 1934 Act. To the extent any provision of the Program
or action by the Committee or the Board fails to so comply, it shall be deemed
null and void, to the extent permitted by law and deemed advisable by the Board.
15.3 Tax Withholding. The Company shall have the power and the right to
deduct or withhold, or require a Participant to remit to the Company, an amount
sufficient to satisfy federal, state, and local taxes, domestic or foreign,
required by law or regulation to be withheld with respect to any taxable event
arising as a result of this Program.
15.4 Share Withholding. With respect to withholding required upon any
taxable event arising as a result of Awards payable in Shares granted hereunder,
Participants may elect, subject to the approval of the Committee, to satisfy the
withholding requirement, in whole or in part, by having the Company withhold
Shares to satisfy their tax obligations. With respect to withholding required
upon the exercise of Options, or upon the lapse of restrictions on Shares of
Restricted Stock, Participants may only elect to have Shares withheld having a
Fair Market Value on the date the tax is to be determined equal to the minimum
statutory withholding tax which could be imposed on the transaction. All
elections shall be irrevocable, made in writing, signed by the Participant, and
shall be subject to any restrictions or limitations that the Committee, in its
sole discretion, deems appropriate.
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Article 16. Indemnification
Each person who is or shall have been a member of the Committee, or of the
Board, shall be indemnified and held harmless by the Company against and from
any loss, cost, liability, or expense that may be imposed upon or reasonably
incurred by him or her in connection with or resulting from any claim, action,
suit, or proceeding to which he or she may be a party or in which he or she may
be involved by reason of any action taken or failure to act under the Program
and against and from any and all amounts paid by him or her in settlement
thereof, with the Company's approval, or paid by him or her in satisfaction of
any judgement in any such action, suit, or proceeding against him or her,
provided he or she shall give the Company an opportunity, at its own expense, to
handle and defend the same before he or she undertakes to handle and defend it
on his or her own behalf. The foregoing right of indemnification shall not be
exclusive of any other rights of indemnification to which such persons may be
entitled under the Company's Articles of Incorporation or Bylaws, as a matter of
law, or otherwise, or any power that the Company may have to indemnify them or
hold them harmless.
Article 17. Successors
All obligations of the Company under the Program with respect to Awards
granted hereunder shall be binding on any successor to the Company, whether the
existence of such successor is the result of a direct or indirect purchase,
merger, consolidation, or otherwise, of all or substantially all of the business
and/or assets of the Company.
Article 18. Legal Construction
18.1 Gender and Number. Except where otherwise indicated by the context, any
masculine term used herein also shall include the feminine; the plural shall
include the singular and the singular shall include the plural.
18.2 Severability. In the event any provision of the Program shall be held
illegal or invalid for any reason, the illegality or invalidity shall not affect
the remaining parts of the Program, and the Program shall be construed and
enforced as if the illegal or invalid provision had not been included.
18.3 Governing Law. To the extent not preempted by federal law, the Program,
and all Award or other agreements hereunder, shall be construed in accordance
with and governed by the laws of the state of Delaware without giving effect to
principles of conflicts of laws.
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