EXHIBIT 10(III) A10(a)
NATIONAL SERVICE INDUSTRIES, INC.
LONG-TERM INCENTIVE PROGRAM
1. Purpose. The purposes of the National Service Industries, Inc.
Long-Term Incentive Program (the "Program") are to provide additional incentives
to those officers and key employees of National Service Industries, Inc. (the
"Company") and its Subsidiaries (as hereinafter defined) whose substantial
contributions are essential to the continued growth and success of the Company's
business to strengthen their commitment to the Company and its Subsidiaries, to
motivate those officers and employees to perform their assigned responsibilities
faithfully and diligently and to attract and retain competent and dedicated
individuals whose efforts will result in the long-term growth and profitability
of the Company. To accomplish these purposes, the Program provides that the
Company may grant Incentive Stock Options, Nonqualified Stock Options, Stock
Appreciation Rights, Restricted Stock, Performance Units and Performance Shares
(as each term is hereinafter defined).
2. Definitions. For purposes of the Program:
(a) "Adjusted Fair Market Value" means, in the event of a
Change in Control, the greater of (1) the highest price per Share paid
to holders of the Shares in any transaction (or series of transactions)
constituting or resulting in a Change in Control or (ii) the highest
Fair Market Value of a Share during the ninety (90) day period ending
on the date of a Change in Control.
(b) "Agreement" means the written agreement between the
Company and an Optionee or Grantee evidencing the grant of an Option or
Award and setting forth the terms and conditions thereof.
(c) "Award" means a grant of Restricted Stock, Stock
Appreciation Rights, Performance Awards or any or all of them.
(d) "Board" means the Board of Directors of the Company.
(e) "Change in Capitalization" means any increase or
reduction in the number of Shares, or any change (including, but not
limited to, a change in value) or exchange of Shares for a different
number or kind of shares or other securities of the Company, by reason
of a reclassification, recapitalization, merger, consolidation,
reorganization, spin-off, split-up, issuance of warrants or rights or
debentures, stock dividend, stock split or reverse stock split, cash
dividend, property dividend, combination or exchange of shares,
repurchase of shares, public offering, private placement, change in
corporate structure or otherwise, which in the judgment of the
Committee is material or significant.
(f) "Change in Control" means any of the following
events:
(1) The acquisition (other than from the
Company) by any "Person" (as the term is used for purposes of
Sections 13(d) or 14(d) of the Exchange Act) of beneficial
ownership (within the meaning of Rule 13d-3 promulgated under
the Exchange Act) of twenty percent (20%) or more of the
combined voting power of the Company's then outstanding voting
securities; or
(2) The individuals who, as of September 21,
1989, are members of the Board (the "Incumbent Board"), cease
for any reason to constitute at least two-thirds of the Board,
provided, however, that if the election, or nomination for
election by the Company's stockholders, of any new director
was approved by a vote of at least two-thirds of the Incumbent
Board, such new director shall, for purposes of this
Agreement, be considered as a member of the Incumbent Board;
or
(3) Approval by stockholders of the Company of
(i) a merger or consolidation involving the Company if the
stockholders of the Company, immediately before such merger or
consolidation do not, as a result of such merger or
consolidation, own, directly or indirectly, more than seventy
percent (70%) of the combined voting power of the then
outstanding voting securities of the corporation resulting
from such merger or consolidation in substantially the same
proportion as their ownership of the combined voting power of
the voting securities of the Company outstanding immediately
before such merger or consolidation or (ii) a complete
liquidation or dissolution of the Company or an agreement for
the sale or other disposition of all or substantially
all of the assets of the Company.
Notwithstanding the foregoing, a Change in Control shall not be deemed
to occur pursuant to Section 2(f)(1), solely because twenty percent
(20%) or more of the combined voting power of the Company's then
outstanding securities is acquired by (i) a trustee or other fiduciary
holding securities under one or more employee benefit plans maintained
by the Company or any of its subsidiaries or (ii) any corporation
which, immediately prior to such acquisition, is owned directly or
indirectly by the stockholders of the Company in the same proportion as
their ownership of stock in the Company immediately prior to such
acquisition.
(g) "Code" means the Internal Revenue Code of 1986, as
amended.
(h) "Committee" means a committee consisting of at least
three (3) Disinterested Persons appointed by the Board to administer
the Program and to perform the functions set forth herein.
(i) "Company" means National Service Industries, Inc.
(j) "Disability" means a physical or mental infirmity
which impairs the Optionee's or Grantee's ability to substantially
perform his duties for a period of one hundred eighty (180) consecutive
days.
(k) "Disinterested Person" means a disinterested
administrator with respect to the Company or any Subsidiary as
described in Rule 16b-3(d)(3) under the Exchange Act.
(1) "Division" means any of the operating units or
divisions of the Company designated as a Division by the Committee.
(m) "Eligible Employee" means any officer or other
designated employees of the Company or a Subsidiary designated by the
Committee as eligible to receive Options or Awards subject to the
conditions set forth herein.
(n) "Exchange Act" means the Securities Exchange Act of
1984, as amended.
(o) "Fair Market Value" means the fair market value of
the Shares as determined in good faith by the Committee; provided,
however, that (A) if the Shares are admitted to trading on a national
securities exchange, Fair Market Value on any date shall be the last
sale price reported for the Shares on such exchange on such date or, if
no sale was reported on such date, on the last date preceding such date
on which a sale was reported, (B) if the Shares are admitted to
quotation on the National Association of Securities Dealers Automated
Quotation System ("NASDAQ") or other comparable quotation system and
have been designated as a National Market System ("NMS") security, Fair
Market Value on any date shall be the last sale price reported for the
Shares on such system on such date or on the last day preceding such
date on which a sale was reported, or (C) if the Shares are admitted to
quotation on NASDAQ and have not been designated a NMS security, Fair
Market Value on any date shall be the average of the highest bid and
lowest asked prices of the Shares on such system on such date.
(p) "Good Objective" means a challenging and above
average level of performance of the Company, a Subsidiary or a Division
during a Performance Cycle for which a Performance Award is granted, as
determined by the Committee at the time such Performance Award is
granted.
(q) "Grantee" means a person to whom an Award has been
granted under the Program.
(r) "Incentive Stock Option" means an Option within the
meaning of Section 422A of the Code.
(s) "Maximum Realistic Objective" means an excellent
level of performance of the Company, a Subsidiary or a Division during
a Performance Cycle for which a Performance Award is granted, as
determined by the Committee at the time such Performance Award is
granted.
(t) "Minimum Acceptable Objective" means a minimum level
of performance of the Company, a Subsidiary or a Division during a
Performance Cycle for which a Performance Award is granted, as
determined by the Committee at the time such Performance Award is
granted.
(u) "Nonqualified Stock Option" means an Option which is
not an Incentive Stock Option.
(v) "Option" means an Incentive Stock Option, a
Nonqualified Stock Option, or either or both of them.
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(w) "Optionee" means a person to whom an Option has been
granted under the Program.
(x) "Performance Awards" means Performance Units,
Performance Shares or either or both of them.
(y) "Performance Cycle" means the time period specified
by the Committee at the time a Performance Award is granted during
which the performance of the Company, a Subsidiary or a Division will
be measured, which period shall be at least two fiscal years.
(z) "Performance Shares" means Restricted Stock granted
under Section 9 of the Program.
(aa) "Performance Unit" means Performance Units granted
under Section 9 of the Program.
(bb) "Restricted Stock" means Shares issued or transferred
to an Eligible Employee which are subject to restrictions. Restricted
Stock may be subject to restrictions which lapse over time without
regard to the performance of the Company, a Subsidiary or a Division,
pursuant to Section 8 hereof or may be awarded as Performance Shares
pursuant to Section 9 hereof.
(cc) "Retirement" means the voluntary termination of
employment by the Grantee or Optionee at any time after the Grantee
attains age 65.
(dd) "Shares" means the common stock, par value $1.00 per
share, of the Company (including any new, additional or different stock
or securities resulting from a Change in Capitalization).
(ee) "Stock Appreciation Right" means a right to receive
all or some portion of the increase in the value of the Shares as
provided in Section 7 hereof.
(ff) "Subsidiary" means any corporation in an unbroken
chain of corporations, beginning with the Company, if each of the
corporations other than the last corporation in the unbroken chain owns
stock possessing 50% or more of the total combined voting power of all
classes of stock in one of the other corporations in such chain.
(gg) "Successor Corporation" means a corporation, or a
parent or subsidiary thereof within the meaning of Section 425(a) of
the Code, which issues or assumes a stock option in a transaction to
which Section 425(a) of the Code applies.
(hh) "Ten-Percent Stockholder" means an Eligible Employee,
who, at the time an Incentive Stock Option is to be granted to him,
owns (within the meaning of Section 422A(b)(6) of the Code) stock
possessing more than ten percent (10%) of the total combined voting
power of all classes of stock of the Company, or of a parent or a
subsidiary within the meaning of Section 422A(b)(6) of the Code.
3. Administration.
(a) The Program shall be administered by the Committee
which shall hold meetings at such times as may be necessary for the
proper administration of the Program. The Committee shall keep minutes
of its meetings. A quorum shall consist of not less than three members
of the Committee and a majority of a quorum may authorize any action.
Each member of the Committee shall be a Disinterested Person. No member
of the Committee shall be personally liable for any action,
determination or interpretation made in good faith with respect to the
Program, Agreements, Options or Awards, and all members of the
Committee shall be fully indemnified by the Company with respect to any
such action, determination or interpretation.
(b) Subject to the express terms and conditions set forth
herein, the Committee or the Board shall have the power from time to
time
(1) to determine those Eligible Employees to
whom Options shall be granted under the Program and the number
of Incentive Stock Options and/or Nonqualified Stock Options
to be granted to each Eligible Employee and to prescribe the
terms and conditions (which need not be identical) of each
Option, including the purchase price per Share subject to each
Option, and make any amendment or modification to any
Agreement consistent with the terms of the Program;
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(2) to select those Eligible Employees to whom
Awards shall be granted under the Program and to determine the
number of Performance Units, Performance Shares, Shares of
Restricted Stock, and/or Stock Appreciation Rights to be
granted pursuant to each Award, the terms and conditions of
each Award, including the restrictions or performance criteria
relating to such Units, Shares or Rights, the maximum value of
each Performance Unit and Performance Share and whether Stock
Appreciation Rights will be granted alone, or in conjunction
with or related to an Option, and make any amendment or
modification to any Agreement consistent with the terms of the
Program;
(c) Subject to the express terms and conditions set forth
herein, the Committee shall have the power from time to time:
(1) to construe and interpret the Program and
the Options and Awards granted thereunder and to establish,
amend and revoke rules and regulations for the administration
of the Program, including, but not limited to, correcting any
defect or supplying any omission, or reconciling any
inconsistency in the Program or in any Agreement, in the
manner and to the extent it shall deem necessary or advisable
to make the Program fully effective, and all decisions and
determinations by the Committee in the exercise of this power
shall be final, binding and conclusive upon the Company, a
Subsidiary, and the Optionees and Grantees, as the case may
be;
(2) to determine the duration and purposes for
leaves of absence which may be granted to an Optionee or
Grantee on an individual basis without constituting a
termination of employment or service for purposes of the
Program;
(3) to exercise its discretion with respect to
the powers and rights granted to it as set forth in the
Program;
(4) generally, to exercise such powers and to
perform such acts as are deemed necessary or advisable to
promote the best interests of the Company with respect to the
Program; and
provided however, that the Committee may delegate to senior members of
the management of the Company the right to exercise those powers
described in Sections (b)(1) and (2) with respect to Eligible Employees
who are not employed in the Company's corporate headquarters (and staff
vice presidents and assistant officers).
4. Stock Subject to Program.
(a) The maximum number of Shares that may be issued or
transferred pursuant to Options and Awards under the Program is
1,750,000 Shares (or the number and kind of shares of stock or other
securities to which such Shares are adjusted upon a Change in
Capitalization pursuant to Section 11) and the Company shall reserve
for the purposes of the Program, out of its authorized but unissued
Shares or out of Shares held in the Company's treasury, or partly out
of each, such number of Shares as shall be determined by the Board.
(b) Not more than fifteen percent (15%) of the Shares
referred to in Section 4(a) may be issued or transferred in connection
with Awards of Restricted Stock made pursuant to Section 8 (other than
Awards of Performance Shares pursuant to Section 9).
(c) Whenever any outstanding Option or Award or portion
thereof expires, is cancelled or is otherwise terminated for any reason
(other than by exercise of the Option or any Stock Appreciation Right),
the Shares allocable to the cancelled or otherwise terminated portion
of such Option or Award may again be the subject of Options and Awards
hereunder.
(d) Whenever any Shares subject to an Award or Option are
forfeited for any reason pursuant to the terms of the Program, such
Shares may again be the subject of Options and Awards hereunder.
5. Eligibility. Subject to the provisions of the Program, the
Committee shall have full and final authority to select those Eligible Employees
who will receive Options and/or Awards provided, however, that no Eligible
Employee shall receive any Incentive Stock Options unless he is an employee of
the Company, a parent or a subsidiary (within the meaning of Section 422A of the
Code) at the time the Incentive Stock Option is granted.
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6. Options. The Committee may grant Options in accordance with
the Program and the terms and conditions of the Option shall be set forth in an
Agreement. Each Option and Agreement shall be subject to the following
conditions:
(a) Purchase Price. The purchase price or the manner in
which the purchase price is to be determined for Shares under each
Option shall be set forth in the Agreement, provided that the purchase
price per Share under each Option shall not be less than 100% of the
Fair Market Value of a Share at the time the Option is granted (110% in
the case of an Incentive Stock Option granted to a Ten-Percent
Stockholder).
(b) Duration. Options granted hereunder shall be for such
term as the Committee shall determine, provided that no Option shall be
exercisable after the expiration of ten (10) years from the date it is
granted (five (5) years in the case of an Incentive Stock Option
granted to a Ten-Percent Stockholder). The Committee may, subsequent to
the granting of any Option, extend the term thereof but in no event
shall the term as so extended exceed the maximum term provided for in
the preceding sentence.
(c) Non-transferability. No Option granted hereunder
shall be transferable by the Optionee to whom granted otherwise than by
will or the laws of descent and distribution, and an Option may be
exercised during the lifetime of such Optionee only by the Optionee or
his guardian or legal representative. The terms of such Option shall be
final, binding and conclusive upon the beneficiaries, executors,
administrators, heirs and successors of the Optionee.
(d) Vesting. Subject to Section 6(i) hereof, each Option
shall be exercisable in such installments (which need not be equal) and
at such times as may be designated by the Committee and set forth in
the Agreement. To the extent not exercised, installments shall
accumulate and be exercisable, in whole or in part, at any time after
becoming exercisable, but not later than the date the Option expires.
The Committee may accelerate the exercisability of any Option or
portion thereof at any time.
(e) Method of Exercise. The exercise of an Option shall
be made only by a written notice delivered in person or by mail to the
Secretary of the Company at the Company's principal executive office,
specifying the number of Shares to be purchased and accompanied by
payment therefor and otherwise in accordance with the Agreement
pursuant to which the Option was granted. The purchase price for any
Shares purchased pursuant to the exercise of an Option shall be paid in
full upon such exercise, as determined by the Committee in its
discretion, in cash, by check, or by transferring Shares to the Company
upon such terms and conditions as determined by the Committee. The
written notice pursuant to this Section 6(e) may also provide
instructions from the Optionee to the Company that upon receipt of the
purchase price in cash from the Optionee's broker or dealer, designated
as such on the written notice, in payment for any Shares purchased
pursuant to the exercise of an Option, the Company shall issue such
Shares directly to the designated broker or dealer. Any Shares
transferred to the Company as payment of the purchase price under an
Option shall be valued at their Fair Market Value on the day preceding
the date of exercise of such Option. If requested by the Committee, the
Optionee shall deliver the Agreement evidencing the Option and the
Agreement evidencing any related Stock Appreciation Right to the
Secretary of the Company who shall endorse thereon a notation of such
exercise and return such Agreement to the Optionee. No fractional
Shares shall be issued upon exercise of an Option and the number of
Shares that may be purchased upon exercise shall be rounded to the
nearest number of whole Shares.
(f) Rights of Optionees. No Optionee shall be deemed for
any purpose to be the owner of any Shares subject to any Option unless
and until (i) the Option shall have been exercised pursuant to the
terms thereof, (ii) the Company shall have issued and delivered the
Shares to the Optionee and (iii) the Optionee's name shall have been
entered as a stockholder of record on the books of the Company.
Thereupon, the Optionee shall have full voting, dividend and other
ownership rights with respect to such Shares.
(g) Termination of Employment. The Agreement shall set
forth the terms and conditions of the Option upon the termination of
the Optionee's employment with the Company, Subsidiary or a Division
(including a Grantee's ceasing to be employed by a Subsidiary or
Division as a result of the sale of such Subsidiary or Division or an
interest in such Subsidiary or Division) as the Committee may, in its
discretion, determine at the time the Option is granted or thereafter;
provided, however, that no Option shall be exercisable beyond its
maximum term as described in Section 6(b) hereof.
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(h) Modification or Substitution. Subject to the terms of
the Program, the Committee may, in its discretion, modify outstanding
Options or accept the surrender of outstanding Options (to the extent
not exercised) and grant new Options in substitution for them.
Notwithstanding the foregoing, no modification of an Option shall
adversely alter or impair any rights or obligations under the Agreement
without the Optionee's consent.
(i) Effect of Change in Control. Notwithstanding anything
contained in the Program or an Agreement to the contrary, in the event
of a Change in Control, (i) all Options outstanding on the date of such
Change in Control shall become immediately and fully exercisable and
(ii) an Optionee will be permitted to surrender for cancellation within
sixty (60) days after such Change in Control, any Option or portion of
an Option to the extent not yet exercised and the Optionee will be
entitled to receive a cash payment in an amount equal to the excess, if
any, of (x) (A) except as described in clause (B) below, the greater of
(1) the Fair Market Value, on the date preceding the date of surrender,
of the Shares subject to the Option or portion thereof surrendered or
(2) the Adjusted Fair Market Value of the Shares subject to the Option
or portion thereof surrendered or (B) in the case of an Incentive Stock
Option, the Fair Market Value, at the time of surrender, of the Shares
subject to the Option or portion thereof surrendered, over (y) the
aggregate purchase price for such Shares under the Option; provided,
however, that in the case of an Option granted within six (6) months
prior to the Change in Control to any Optionee who may be subject to
liability under Section 16(b) of the Exchange Act, such Optionee shall
be entitled to surrender for cancellation his or her Option during the
sixty (60) day period commencing upon the expiration of six (6) months
from the date of grant of any such Option.
7. Stock Appreciation Rights. The Committee may, in its
discretion, either alone or in connection with the grant of an Option, grant
Stock Appreciation Rights in accordance with the Program and the terms and
conditions of which shall be set forth in an Agreement. If granted in connection
with an Option, a Stock Appreciation Right shall cover the same Shares covered
by the Option (or such lesser number of Shares as the Committee may determine)
and shall, except as provided in this Section 7, be subject to the same terms
and conditions as the related Option.
(a) Time of Grant. A Stock Appreciation Right may be
granted (i) at any time if unrelated to an Option, or (ii) if related
to an Option, either at the time of grant, or at any time thereafter
during the term of the Option.
(b) Stock Appreciation Right Related to an Option.
(1) Payment. A Stock Appreciation Right granted
in connection with an Option shall entitle the holder thereof,
upon exercise of the Stock Appreciation Right or any portion
thereof, to receive payment of an amount computed pursuant to
Section 7(b)(3).
(2) Exercise. Subject to Section 7(f), a Stock
Appreciation Right granted in connection with an Option shall
be exercisable at such time or times and only to the extent
that the related Option is exercisable, and will not be
transferable except to the extent the related Option may be
transferable. A Stock Appreciation Right granted in connection
with an Incentive Stock Option shall be exercisable only if
the Fair Market Value of a Share on the date of exercise
exceeds the purchase price specified in the related Incentive
Stock Option Agreement.
(3) Amount Payable. Except as otherwise provided
in Section 7(i), upon the exercise of a Stock Appreciation
Right related to an Option, the Grantee shall be entitled to
receive an amount determined by multiplying (A) the excess of
the Fair Market Value of a Share on the date of exercise of
such Stock Appreciation Right over the per Share purchase
price under the related Option, by (B) the number of Shares as
to which such Stock Appreciation Right is being exercised.
Notwithstanding the foregoing, the Committee may limit in any
manner the amount payable with respect to any Stock
Appreciation Right by including such a limit in the Agreement
evidencing the Stock Appreciation Right at the time it is
granted.
(4) Treatment of Related Options and Stock
Appreciation Rights Upon Exercise. Upon the exercise of a
Stock Appreciation Right granted in connection with an Option,
the Option shall be cancelled to the extent of the number of
Shares as to which the Stock Appreciation Right is exercised,
and upon the exercise of an Option granted in connection with
a Stock Appreciation
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Right or the surrender of such Option pursuant to Section
6(i), the Stock Appreciation Right shall be cancelled to the
extent of the number of Shares as to which the Option is
exercised or surrendered.
(c) Stock Appreciation Right Unrelated to an Option. The
Committee may grant to Eligible Employees Stock Appreciation Rights
unrelated to Options. Stock Appreciation Rights unrelated to Options
shall contain such terms and conditions as to exercisability (subject
to Section 7(f)), vesting and duration as the Committee shall
determine, but in no event shall they have a term of greater than ten
(10) years. The amount payable upon exercise of a Stock Appreciation
Right shall be determined in accordance with Section 7(b)(3) or 7(i),
as the case may be, except that "Fair Market Value of a Share on the
date of the grant of the Stock Appreciation Right" shall be substituted
in clause (A) of Section 7(b)(3) for "purchase price under the related
Option."
(d) Method of Exercise. Stock Appreciation Rights shall
be exercised by a Grantee only by a written notice delivered in person
or by mail to the Secretary of the Company at the Company's principal
executive office, specifying the number of Shares with respect to which
the Stock Appreciation Right is being exercised. If requested by the
Committee, the Grantee shall deliver the Agreement evidencing the Stock
Appreciation Right being exercised and the Agreement evidencing any
related Option to the Secretary of the Company who shall endorse
thereon a notation of such exercise and return such Agreement to the
Grantee.
(e) Form of Payment. Payment of the amount determined
under Sections 7(b)(3) or 7(c) may be made in the discretion of the
Committee, solely in whole Shares in a number determined at their Fair
Market Value on the date preceding the date of exercise of the Stock
Appreciation Right, or solely in cash, or in a combination of cash and
Shares. If the Committee decides to make full payment in Shares and the
amount payable results in a fractional Share, payment for the
fractional Share will be made in cash. Notwithstanding the foregoing,
no payment in the form of cash may be made upon the exercise of a Stock
Appreciation Right pursuant to Sections 7(b)(3) or 7(c) to an officer
of the Company or a Subsidiary who is subject to liability under
Section 16(b) of the Exchange Act, unless the exercise of such Stock
Appreciation Right is made during the period beginning on the third
business day and ending on the twelfth business day following the date
of release for publication of the Company's quarterly or annual
statements of earnings.
(f) Restrictions. No Stock Appreciation Right may be
exercised before the date six (6) months after the date it is granted,
except in the event that the death or Disability of the Grantee occurs
before the expiration of the six-month period.
(g) Termination of Employment. The Agreement shall set
forth the terms and conditions of the Award upon the termination of the
Grantee's employment with the Company, Subsidiary or a Division
(including a Grantee's ceasing to be employed by a Subsidiary or
Division as a result of the sale of such Subsidiary or Division or an
interest in such Subsidiary or Division) as the Committee may, in its
discretion, determine at the time the Stock Appreciation Right is
granted or thereafter.
(h) Modification or Substitution. Subject to the terms of
the Program, the Committee may modify outstanding Awards of Stock
Appreciation Rights or accept the surrender of outstanding Awards of
Stock Appreciation Rights (to the extent not exercised) and grant new
Awards in substitution for them. Notwithstanding the foregoing, no
modification of an Award shall adversely alter or impair any rights or
obligations under the Agreement without the Grantee's consent.
(i) Effect of Change in Control. Notwithstanding anything
contained in this Program to the contrary, in the event of a Change in
Control, subject to Section 7(f), all Stock Appreciation Rights shall
become immediately and fully exercisable. Notwithstanding Sections
7(b)(3), 7(c) and 7(e), upon the exercise of a Stock Appreciation Right
or any portion thereof during the sixty (60) day period following a
Change in Control, the amount payable shall be in cash and shall be
determined by reference to (A) except as provided in clause (B) below,
the greater of (x) the Fair Market Value of the Shares on the date
preceding the date of such exercise and (y) the Adjusted Fair Market
Value of the Shares on the date of such exercise or (B) in the case of
a Stock Appreciation Right related to an Incentive Stock Option, the
Fair Market Value of the Shares on the date of such exercise; provided,
however, that in the case of a Stock Appreciation Right granted within
six (6) months prior to the Change in Control to any Grantee who may be
subject to liability under Section 16(b) of the Exchange Act, such
Grantee shall be entitled to exercise
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his Stock Appreciation Right during the sixty (60) day period
commencing upon the expiration of six (6) months from the date of grant
of any such Stock Appreciation Right.
8. Restricted Stock. The Committee may grant Awards of Restricted
Stock, and may issue Shares of Restricted Stock in payment in respect of vested
Performance Units (as hereinafter provided in Section 9(b)), which shall be
evidenced by an Agreement between the Company and the Grantee. Each Agreement
shall contain such restrictions, terms and conditions as the Committee may, in
its discretion, determine and (without limiting the generality of the foregoing)
such Agreements may require that an appropriate legend be placed on Share
certificates. Awards of Restricted Stock shall be subject to the following terms
and provisions:
(a) Rights of Grantee. Shares of Restricted Stock granted
pursuant to an Award hereunder shall be issued in the name of the
Grantee as soon as reasonably practicable after the Award is granted
provided that the Grantee has executed an Agreement evidencing the
Award, the appropriate blank stock powers and, in the discretion of the
Committee, an escrow agreement and any other documents which the
Committee may require as a condition to the issuance of such Shares. If
a Grantee shall fail to execute the Agreement evidencing a Restricted
Stock Award, the appropriate blank stock powers and, in the discretion
of the Committee, an escrow agreement and any other documents which the
Committee may require within the time period prescribed by the
Committee at the time the Award is granted, the Award shall be null and
void. At the discretion of the Committee, Shares issued in connection
with a Restricted Stock Award shall be deposited together with the
stock powers with an escrow agent designated by the Committee. Unless
the Committee determines otherwise and as set forth in the Agreement,
upon delivery of the Shares to the escrow agent, the Grantee shall have
all of the rights of a stockholder with respect to such Shares,
including the right to vote the Shares and to receive all dividends or
other distributions paid or made with respect to the Shares.
(b) Non-transferability. Until any restrictions upon the
Shares of Restricted Stock awarded to a Grantee shall have lapsed in
the manner set forth in Section 8(c), such Shares shall not be sold,
transferred or otherwise disposed of and shall not be pledged or
otherwise hypothecated, nor shall they be delivered to the Grantee.
(c) Lapse of Restrictions.
(1) Generally. Restrictions upon Shares of
Restricted Stock awarded hereunder shall lapse at such time or
times and on such terms and conditions as the Committee may
determine.
(2) Effect of Change in Control. Notwithstanding
anything contained in the Program to the contrary, in the
event of a Change in Control, all restrictions upon any Shares
of Restricted Stock (other than Performance Shares) shall
lapse immediately and all such Shares shall become fully
vested in the Grantee.
(d) Termination of Employment. The Agreement shall set
forth the terms and conditions of the Award of Shares of Restricted
Stock upon the termination of the Grantee's employment with the
Company, a Subsidiary or a Division (including a Grantee's ceasing to
be employed by a Subsidiary or Division as a result of the sale of such
Subsidiary or Division or an interest in such Subsidiary or Division)
as the Committee may, in its discretion, determine at the time the
Award is granted or thereafter.
(e) Modification or Substitution. Subject to the terms of
the Program, the Committee may modify outstanding Awards of Restricted
Stock or accept the surrender of outstanding Awards of Restricted Stock
(to the extent not exercised) and grant new Awards in substitution for
them. Notwithstanding the foregoing, no modification of an Award shall
adversely alter or impair any rights or obligations under the Agreement
without the Grantee's consent.
(f) Treatment of Dividends. At the time the Award of
Shares of Restricted Stock is granted, the Committee may, in its
discretion, determine that the payment to the Grantee of dividends, or
a specified portion thereof, declared or paid on such Shares by the
Company shall be (i) deferred until the lapsing of the restrictions
imposed upon such Shares and (ii) held by the Company for the account
of the Grantee until such time. In the event of such deferral, there
shall be credited at the end of each year (or portion thereof) interest
on the amount of the account at the beginning of the year at a rate per
annum as the Committee, in its discretion, may determine. Payment of
deferred dividends, together with interest accrued thereon, shall
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be made upon the lapsing of restrictions imposed on such Shares, and
any dividends deferred (together with any interest accrued thereon) in
respect of any Shares of Restricted Stock shall be forfeited upon the
forfeiture of such Shares pursuant to Section 8(d) or otherwise.
(g) Delivery of Shares. Upon the lapse of the
restrictions on Shares of Restricted Stock, the Committee shall cause a
stock certificate to be delivered to the Grantee with respect to such
Shares, free of all restrictions hereunder.
9. Performance Awards.
(a) Performance Objectives. Performance objectives for
Performance Awards may be expressed in terms of (i) earnings per Share,
(ii) pre-tax profits, (iii) net earnings or net worth, (iv) return on
equity or assets, (v) any combination of the foregoing, or (vi) any
other standard or standards deemed appropriate by the Committee at the
time the Award is granted. Performance objectives may be in respect of
the performance of the Company and its Subsidiaries (which may be on a
consolidated basis), a Subsidiary or a Division. Performance objectives
may be absolute or relative and may be expressed in terms of a
progression within a specified range, with the Grantee becoming vested
in (i) a minimum percentage of such Performance Awards in the event the
Minimum Acceptable Objective is met or, if surpassed, a greater
percentage (ii) an intermediate percentage of such Performance Awards
in the event the Good Objective is met or, if surpassed, a greater
percentage and (iii) one hundred percent (100%) of such Performance
Awards in the event the Maximum Realistic Objective is met or
surpassed. Prior to the end of a Performance Cycle, the Committee, in
its discretion, may adjust the performance objectives to reflect a
Change in the Capitalization, a change in the tax rate or book tax rate
of the Company or any Subsidiary, or any other event which may
materially affect the performance of the Company, a Subsidiary or a
Division, including, but not limited to, market conditions or a
significant acquisition or disposition of assets or other property by
the Company, a Subsidiary or a Division.
(b) Performance Units. The Committee may grant
Performance Units, the terms and conditions of which shall be set forth
in an Agreement between the Company and the Grantee. Each Performance
Unit shall, contingent upon the attainment of specified performance
objectives within the Performance Cycle, represent one (1) Share. Each
Agreement shall specify the number of the Performance Units to which it
relates, the performance objectives which must be satisfied in order
for the Performance Units to vest, the Performance Cycle within which
such objectives must be satisfied, and the form of payment in respect
of vested Performance Units.
(1) Vesting and Forfeiture. A Grantee shall
become vested with respect to the Performance Units to the extent that
the performance objectives set forth in the Agreement are satisfied for
the Performance Cycle. Subject to Section 9(d) hereof, if the Minimum
Acceptable Objective specified in the Agreement is not satisfied for
the applicable Performance Cycle, the Grantee's rights with respect to
the Performance Shares shall be forfeited.
(2) Payment of Awards. Payment of Performance
Units to Grantees in respect of vested Performance Units shall be made
within sixty (60) days after the last day of the Performance Cycle to
which such Award relates. Subject to Section 9(d), such payments may be
made entirely in Shares, entirely in cash, or in such combination of
Shares and cash as the Committee in its discretion, shall determine at
any time prior to such payment; provided, however, that if the
Committee in its discretion determines to make such payment entirely or
partially in Shares of Restricted Stock, the Committee must determine
the extent to which such payment will be in Shares of Restricted Stock
at the time the Award is granted. Except as provided in Section 9(d),
if payment is made in the form of cash, the amount payable in respect
of any Share shall be equal to the Fair Market Value of such Share on
the last day of the Performance Cycle.
(3) Termination of Employment. The Agreement
shall set forth the terms and conditions of the Award of Performance
Units upon the termination of the Grantee's employment with the
Company, a Subsidiary, or a Division (including a Grantee's ceasing to
be employed by a Subsidiary or Division as a result of the sale of such
Subsidiary or Division or an interest in such Subsidiary or Division)
as the Committee may, in its discretion, determine at the time the
Award is granted or thereafter.
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(c) Performance Shares. The Committee, in its discretion,
may grant Awards of Performance Shares and shall be evidenced by an
Agreement between the Company and the Grantee. Each Agreement shall
contain such restrictions, if any, and the terms and conditions as the
Committee may, in its discretion, require, and (without limiting the
generality of the foregoing) such Agreements may require that an
appropriate legend be placed on Share certificates. Awards of
Performance Shares shall be subject to the following terms and
provisions:
(1) Rights of Grantee. The Committee shall
provide at the time an Award of Performance Shares is made,
the time or times at which the Performance Shares granted
pursuant to such Award hereunder shall be issued in the name
of the Grantee; provided, however, that no Performance Shares
shall be issued until the Grantee has executed an Agreement
evidencing the Award, the appropriate blank stock powers and,
in the discretion of the Committee, an escrow agreement and
any other documents which the Committee may require as a
condition to the issuance of such Performance Shares. If a
Grantee shall fail to execute the Agreement evidencing an
Award of Performance Shares, the appropriate blank stock
powers and, in the discretion of the Committee, an escrow
agreement and any other documents which the Committee may
require within the time period prescribed by the Committee at
the time the Award is granted, the Award shall be null and
void. At the discretion of the Committee, Shares issued in
connection with an Award of Performance Shares shall be
deposited together with the stock powers with an escrow agent
designated by the Committee. Except as restricted by the terms
of the Agreement, upon delivery of the Shares to the escrow
agent, the Grantee shall have, in the discretion of the
Committee, all of the rights of a stockholder with respect to
such Shares, including the right to vote the shares and to
receive all dividends or other distributions paid or made with
respect to the shares.
(2) Non-transferability. Until any restrictions
upon the Performance Shares awarded to a Grantee shall have
lapsed in the manner set forth in Sections 9(c)(3) or 9(d),
such Performance Shares shall not be sold, transferred or
otherwise disposed of and shall not be pledged or otherwise
hypothecated, nor shall they be delivered to the Grantee. The
Committee may also impose such other restrictions and
conditions on the Performance Shares, if any, as it deems
appropriate.
(3) Lapse of Restrictions. Subject to Section
9(d), restrictions upon Performance Shares awarded hereunder
shall lapse and such Performance Shares shall become vested at
such time or times and on such terms, conditions and
satisfaction of performance objectives as the Committee may,
in its discretion, determine at the time an Award is granted.
(4) Termination of Employment. The Agreement
shall set forth the terms and conditions of the Award of
Performance Shares upon the termination of the Grantee's
employment with the Company, a Subsidiary or a Division
(including a Grantee's ceasing to be employed by a Subsidiary
or Division as a result of the sale of such Subsidiary or
Division or an interest in such Subsidiary or Division) as the
Committee may, in its discretion, determine at the time the
Award is granted or thereafter.
(5) Treatment of Dividends. At the time the
Award of Performance Shares is granted, the Committee may, in
its discretion, determine that the payment to the Grantee of
dividends, or a specified portion thereof, declared or paid on
Performance Shares issued by the Company to the Grantee shall
be (i) deferred until the lapsing of the restrictions imposed
upon such Performance Shares and (ii) held by the Company for
the account of the Grantee until such time. In the event of
such deferral, there shall be credited at the end of each year
(or portion thereof) interest on the amount of the account at
the beginning of the year at a rate per annum as the
Committee, in its discretion, may determine. Payment of
deferred dividends, together with interest accrued thereon as
aforesaid, shall be made upon the lapsing of restrictions
imposed on such Performance Shares, except that any dividends
deferred (together with any interest accrued thereon) in
respect of any Performance Shares shall be forfeited upon the
forfeiture of such Performance Shares pursuant to Section
9(c)(4) or otherwise.
(6) Delivery of Shares. Upon the lapse of the
restrictions on Performance Shares awarded hereunder, the
Committee shall cause a stock certificate to be delivered to
the Grantee
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with respect to such Shares, free of all restrictions
hereunder.
(d) Effect of Change in Control. Notwithstanding anything
contained in the Program to the contrary, in the event of a Change in
Control:
(1) With respect to the Performance Units, the
Grantee shall (i) become vested in a percentage of Performance
Units as determined by the Committee at the time of the Award
of such Performance Units and as set forth in the Agreement
and (ii) be entitled to receive in respect of all Performance
Units which become vested as a result of a Change in Control,
a cash payment within ten (10) days after such Change in
Control equal to the product of the Adjusted Fair Market Value
of a Share multiplied by the number of Performance Units which
become vested in accordance with this Section 9(d); and
(2) With respect to the Performance Shares, all
restrictions shall lapse immediately on all or a portion of
the Performance Shares as determined by the Committee at the
time of the Award of such Performance Shares and as set forth
in the Agreement.
(e) Non-transferability. No Performance Awards shall be
transferable by the Grantee otherwise than by will or the laws of
descent and distribution.
(f) Modification or Substitution. Subject to the terms of
the Program, the Committee may modify outstanding Performance Awards or
accept the surrender of outstanding Performance Awards and grant new
Performance Awards in substitution for them. Notwithstanding the
foregoing, no modification of a Performance Award shall adversely alter
or impair any rights or obligations under the Agreement without the
Grantee's consent.
10. Loans.
(a) The Company or any Subsidiary may make loans to a
Grantee or Optionee in connection with the exercise of an Option,
subject to the following terms and conditions and such other terms and
conditions not inconsistent with the Program including the rate of
interest, if any, as the Committee shall impose from time to time.
(b) No loan made under the Program shall exceed the sum
of (i) the aggregate purchase price payable pursuant to the Option with
respect to which the loan is made, plus (ii) the amount of the
reasonably estimated income taxes payable by the Optionee or Grantee
with respect to the Option or Award. In no event may any such loan
exceed the Fair Market Value, at the date of exercise, of any such
Shares.
(c) No loan shall have an initial term exceeding ten (10)
years; provided, however, that loans under the Program shall be
renewable at the discretion of the Committee.
(d) Loans under the Program may be satisfied by an
Optionee or Grantee, as determined by the Committee, in cash or, with
the consent of the Committee, in whole or in part by the transfer to
the Company of Shares whose Fair Market Value on the date of such
payment is equal to the cash amount for which such Shares are
transferred.
(e) A loan shall be secured by a pledge of Shares with a
Fair Market Value of not less than the principal amount of the loan.
After partial repayment of a loan, pledged Shares no longer required as
security may be released into escrow or pursuant to the terms of the
Option, Award or escrow agreement to the Optionee or Grantee.
11. Adjustment Upon Changes in Capitalization.
(a) In the event of a Change in Capitalization, the
Committee shall conclusively determine the appropriate adjustments, if
any, to the maximum number and class of Shares or other stock or
securities with respect to which Options or Awards may be granted under
the Program, the number and class of Shares or other stock or
securities which are subject to outstanding Options or Awards granted
under the Program, and the purchase price therefor, if applicable.
(b) Any such adjustment in the Shares or other stock or
securities subject to outstanding Incentive Stock Options (including
any adjustments in the purchase price) shall be made in such manner as
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not to constitute a modification as defined by Section 425(h)(3) of the
Code and only to the extent otherwise permitted by Sections 422A and
425 of the Code.
(c) If, by reason of a Change in Capitalization, a
Grantee of an Award shall be entitled to, or an Optionee shall be
entitled to exercise an Option with respect to, new, additional or
different shares of stock, securities, Performance Units or Performance
Shares (other than rights or warrants to purchase securities), such new
additional or different shares shall thereupon be subject to all of the
conditions, restrictions and performance criteria which were applicable
to the Performance Units or Performance Shares pursuant to the Award or
Shares subject to the Option, as the case may be, prior to such Change
in Capitalization.
12. Effect of Certain Transactions. Subject to Sections 6(i),
7(i), 8(c)(2) and 9(d), in the event of (i) the liquidation or dissolution of
the Company or (ii) a merger or consolidation of the Company (a "Transaction"),
the Program and the Options and Awards issued hereunder shall continue in effect
in accordance with their respective terms and each Optionee and Grantee shall be
entitled to receive in respect of each Share subject to any outstanding Options
or Awards, as the case may be, upon exercise of any Option or Award or payment
or transfer in respect of any Award, the same number and kind of stock,
securities, cash, property, or other consideration that each holder of a Share
was entitled to receive in the Transaction in respect of a Share.
13. Release of Financial Information. A copy of the Company's
annual report to stockholders shall be delivered to each Optionee and Grantee at
the time such report is distributed to the Company's stockholders. Upon
reasonable request the Company shall furnish as soon as reasonably practicable,
to each Optionee and Grantee a copy of its most recent annual report and each
quarterly report and current report filed under the Exchange Act since the end
of the Company's prior fiscal year.
14. Termination and Amendment of the Program.
(a) The Program shall terminate on the day preceding the
tenth anniversary of its effective date and no Option or Award may be
granted thereafter. The Board may sooner terminate or amend the Program
(other than to reduce the rights of Optionees and Grantees, as the case
may be, under Sections 6(i), 7(i), 8(c)(2) and 9(d)), at any time and
from time to time; provided, however, that to the extent necessary
under Section 16(b) of the Exchange Act and the rules and regulations
promulgated thereunder, no amendment shall be effective unless approved
by the stockholders of the Company in accordance with applicable law
and regulations at an annual or special meeting held within twelve (12)
months before or after the date of adoption of such amendment.
(b) Except as provided in Sections 11 and 12 hereof,
rights and obligations under any Option or Award granted before any
amendment of the Program shall not be adversely altered or impaired by
such amendment, except with the consent of the Optionee or Grantee, as
the case may be.
15. Non-Exclusivity of the Program. The adoption of the Program by
the Board shall not be construed as amending, modifying or rescinding any
previously approved incentive arrangement or as creating any limitations on the
power of the Board to adopt such other incentive arrangements as it may deem
desirable, including, without limitation, the granting of stock options
otherwise than under the Program, and such arrangements may be either applicable
generally or only in specific cases.
16. Limitation of Liability. As illustrative of the limitations of
liability of the Company, but not intended to be exhaustive thereof, nothing in
the Program shall be construed to:
(a) give any person any right to be granted an Option or
Award other than at the sole discretion of the Committee;
(b) give any person any rights whatsoever with respect to
Shares except as specifically provided in the Program;
(c) limit in any way the right of the Company to
terminate the employment of any person at any time; or
(d) be evidence of any agreement or understanding,
expressed or implied, that the Company
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will employ any person in any particular position at any particular
rate of compensation or for any particular period of time.
17. Regulations and Other Approvals Governing Law.
(a) This Program and the rights of all persons claiming
hereunder shall be construed and determined in accordance with the laws
of the State of Delaware without giving effect to the conflicts of laws
principles thereof, except to the extent that such law is preempted by
federal law.
(b) The obligation of the Company to sell or deliver
Shares with respect to Options and Awards granted under the Program
shall be subject to all applicable laws, rules and regulations,
including all applicable federal and state securities laws, and the
obtaining of all such approvals by governmental agencies as may be
deemed necessary or appropriate by the Committee.
(c) The Program is intended to comply with Rule 16b-3
promulgated under the Exchange Act and the Committee shall interpret
and administer the provisions of the Program or any Agreement in a
manner consistent therewith. Any provisions inconsistent with such Rule
shall be inoperative and shall not affect the validity of the Program.
(d) The Board may make such changes as may be necessary
or appropriate to comply with the rules and regulations of any
government authority, or to obtain for Eligible Employees granted
Incentive Stock Options the tax benefits under the applicable
provisions of the Code and regulations promulgated thereunder.
(e) Each Option and Award is subject to the requirement
that, if at any time the Committee determines, in its discretion, that
the listing, registration or qualification of Shares issuable pursuant
to the Program is required by any securities exchange or under any
state or federal law, or the consent or approval of any governmental
regulatory body is necessary or desirable as a condition of, or in
connection with, the grant of an Option or the issuance of Shares, no
Options shall be granted or payment made or Shares issued, in whole or
in part, unless listing, registration, qualification, consent or
approval has been effected or obtained free of any conditions as
acceptable to the Committee.
(f) Notwithstanding anything contained in the Program to
the contrary, in the event that the disposition of Shares acquired
pursuant to the Program is not covered by a then current registration
statement under the Securities Act of 1933, as amended, and is not
otherwise exempt from such registration, such Shares shall be
restricted against transfer to the extent required by the Securities
Act of 1933, as amended, and Rule 144 or other regulations thereunder.
The Committee may require any individual receiving Shares pursuant to
the Program, as a condition precedent to receipt of such Shares
(including upon exercise of an Option), to represent and warrant to the
Company in writing that the Shares acquired by such individual are
acquired without a view to any distribution thereof and will not be
sold or transferred other than pursuant to an effective registration
thereof under said Act or pursuant to an exemption applicable under the
Securities Act of 1933, as amended, or the rules and regulations
promulgated thereunder. The certificates evidencing any of such Shares
shall be appropriately legended to reflect their status as restricted
securities as aforesaid.
18. Miscellaneous.
(a) Multiple Agreements. The terms of each Option or
Award may differ from other Options or Awards granted under the Program
at the same time, or at some other time. The Committee may also grant
more than one Option or Award to a given Eligible Employee during the
term of the Program, either in addition to, or in substitution for, one
or more Options or Awards previously granted to that Eligible Employee.
The grant of multiple Options and/or Awards may be evidenced by a
single Agreement or multiple Agreements, as determined by the
Committee.
(b) Withholding of Taxes.
(1) The Company shall have the right to deduct
from any distribution of cash to any Optionee or Grantee, an
amount equal to the federal, state and local income taxes and
other amounts as may be required by law to be withheld (the
`Withholding Taxes") with respect to any Option or Award. If
an Optionee or Grantee is entitled to receive Shares upon
exercise of an
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Option or pursuant to an Award, the Optionee or Grantee shall
pay the Withholding Taxes to the Company prior to the
issuance, or release from escrow, of such Shares. In
satisfaction of the Withholding Taxes to the Company, the
Optionee or Grantee may make a written election (the "Tax
Election"), which may be accepted or rejected in the
discretion of the Committee, to have withheld a portion of the
Shares issuable to him or her upon exercise of the Option or
pursuant to an Award having an aggregate Fair Market Value
equal to the Withholding Taxes, provided that (i) in respect
of an Optionee or Grantee who may be subject to liability
under Section 16(b) of the Exchange Act (unless his or her
employment was terminated due to Disability or death), (A) the
Optionee or Grantee makes the Tax Election at least six (6)
months after the date the Option or Award was granted and (B)
the Tax Election is made either at least six (6) months prior
to the date that the amount of the Withholding Taxes are
determined (the "Tax Date") or during the ten (10) day period
beginning on the third business day and ending on the twelfth
business day following the release for publication of the
Company's quarterly or annual statements of earnings, (ii) the
Tax Election is made prior to the Tax Date, and (iii) the Tax
Election is irrevocable; provided, however, in the event that
the Tax Date occurs subsequent to the exercise of the Option
or issuance of Shares, the Optionee or Grantee shall tender
back to the Company on the Tax Date that number of Shares
having a Fair Market Value on the date preceding the Tax Date
at least equal to the Withholding Taxes.
(2) If an Optionee makes a disposition, within
the meaning of Section 425(c) of the Code and regulations
promulgated thereunder, of any Share or Shares issued to him
pursuant to his exercise of the Option within the two-year
period commencing on the day after the date of the grant or
within the one-year period commencing on the day after the
date of transfer of such Share or Shares to the Optionee
pursuant to such exercise, the Optionee shall, within ten (10)
days of such disposition, notify the Company thereof, by
delivery of written notice to the Company at its principal
executive office, and immediately deliver to the Company the
amount of Withholding Taxes.
(c) Designation of Beneficiary. Each Optionee and Grantee
may designate a person or persons to receive in the event of his or her
death, any Option or Award or any amount payable pursuant thereto, to
which be or she would then be entitled. Such designation will be made
upon forms supplied by and delivered to the Company and may be revoked
in writing. If an Optionee fails effectively to designate a
beneficiary, then his or her estate will be deemed to be the
beneficiary.
19. Effective Date. The effective date of the Program shall be the
date of its adoption by the Board, subject only to the approval by the
affirmative votes of the holders of a majority of the securities of the Company
present, or represented, and entitled to vote at a meeting of stockholders duly
held in accordance with the applicable laws of the State of Delaware within
twelve (12) months of such adoption.
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