SOFTWARE SPECTRUM, INC.
1998 LONG-TERM INCENTIVE PLAN
I. GENERAL
1. PURPOSE. The Software Spectrum, Inc. 1998 Long-Term Incentive Plan
(the "1998 Plan") has been established by Software Spectrum, Inc. (the
"Company") to:
(a) attract and retain key executive and managerial employees of the
Company;
(b) motivate participating employees by means of appropriate
incentives, to achieve long-range goals;
(c) provide incentive compensation opportunities which are
competitive with those of other major corporations; and
(d) further identify Participants' interests with those of the
Company's other shareholders through compensation alternatives
based on the Company's common stock;
and thereby promote the long-term financial interest of the Company and its
Subsidiaries, including the growth in value of the Company's equity and
enhancement of long-term shareholder return.
2. EFFECTIVE DATE. Subject to the approval of the holders of a majority
of the Stock of the Company present, or represented, and entitled to vote at a
meeting of its stockholders, the 1998 Plan shall be effective as of August 1,
1998, provided, however, that awards made under the 1998 Plan prior to such
approval of the 1998 Plan by stockholders of the Company are contingent on such
approval of the 1998 Plan by the stockholders of the Company and shall be null
and void if such approval of the stockholders of the Company is withheld. The
1998 Plan shall terminate on July 31, 2008.
3. DEFINITIONS. The following definitions are applicable to the 1998
Plan.
"Board" means the Board of Directors of the Company.
"Code" means the Internal Revenue Code of 1986, as amended.
"Committee" means the Compensation Committee of the Board.
"Disabled" means the inability of a Participant, by reason of a physical or
mental impairment, to engage in any substantial gainful activity, of which the
Board shall be the sole judge.
"Fair Market Value" of any Stock means (a) if the Stock is listed on a
national securities exchange, the closing price on the Stock on a given date;
(b) if the Stock is traded on an exchange or market in which prices are reported
on a bid and asked price, the average of the mean between the bid and asked
price for the Stock on a given date; and (c) if the Stock is not listed on a
national securities exchange nor traded on the over-the-counter market, such
value as the Committee, in good faith, shall determine.
"1934 Act" means the Securities Exchange Act of 1934, as amended, or any
successor statute.
"Option Date" means, with respect to any Stock Option, the date on which
the Stock Option is awarded under the 1998 Plan.
"Participant" means any regular full-time employee of the Company or any
Subsidiary (meaning an employee who works 30 hours or more per week) who is
selected by the Committee to participate in the 1998 Plan.
"Permitted Transferees" means a member of an optionee's immediate family,
trusts for the benefit of such immediate family members, and partnerships in
which the optionee and/or such immediate family members are the
only partners, provided that no consideration is provided for the transfer.
Immediate family members shall include an optionee's spouse, descendants
(children, grandchildren and more remote descendants), and shall include
step-children and relationships arising from legal adoption.
"Related Company" means any corporation during any period in which it is a
Subsidiary, or during any period in which it directly or indirectly owns 50% or
more of the total combined voting power of all classes of stock of the Company
that are entitled to vote.
"Restricted Period" has the meaning ascribed to it in Part V.
"Restricted Stock" has the meaning ascribed to it in Part V.
"Retirement" means (i) termination of employment in accordance with the
retirement procedures set by the Company from time to time; (ii) termination of
employment because a participant becomes Disabled; or (iii) termination of
employment voluntarily with the consent of the Company (of which the Board shall
be the sole judge).
"Stock" means Software Spectrum, Inc. common stock.
"Stock Appreciation Right" means the right of a holder of a Stock Option to
receive Stock or cash as described in Part IV.
"Stock Option" means the right of a Participant to purchase Stock pursuant
to an Incentive Stock Option or Non-Qualified Option awarded pursuant to the
provisions of the 1998 Plan.
"Subsidiary" means any corporation during any period of which 50% or more
of the total combined voting power of all classes of stock entitled to vote is
owned, directly or indirectly, by the Company.
4. ADMINISTRATION. The authority to manage and control the operation and
administration of the 1998 Plan shall be vested in the Board. Subject to the
provisions of the 1998 Plan, the Board will have authority to select employees
to receive awards of Stock Options, with or without tandem Stock Appreciation
Rights, Restricted Stock and/or Performance Units, to determine the time or
times of receipt, to determine the types of awards and the number of shares
covered by the awards, to establish the terms, conditions, performance criteria,
restrictions, and other provisions of such awards, to determine the number and
value of Performance Units awarded and earned, and to amend, modify or suspend
awards. In making such award determinations, the Board may take into account
the nature of services rendered by the respective employee, his or her present
and potential contribution to the Company's success and such other factors as
the Board deems relevant. The Board is authorized to interpret the 1998 Plan,
to establish, amend, and rescind any rules and regulations relating to the 1998
Plan, to determine the terms and provisions of any agreements made pursuant to
the 1998 Plan, to modify such agreements, and to make all other determinations
that may be necessary or advisable for the administration of the 1998 Plan.
With respect to persons subject to Section 16 of the 1934 Act, transactions
under the 1998 Plan 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 1998 Plan or action by the Board of Directors or the Committee fails to so
comply, it shall be deemed null and void, to the extent permitted by law.
The Board, in its discretion, may delegate any or all of its authority,
powers and discretion under this Plan to the Committee, and the Board in its
discretion may revest any or all such authority, powers and discretion in itself
at any time. If appointed, the Committee shall function as follows: A majority
of the Committee shall constitute a quorum, and the acts of a majority of the
members present at any meeting at which a quorum is present, or acts approved in
writing by all members of the Committee, shall be the acts of the Committee,
unless provisions to the contrary are embodied in the Company's Bylaws or
resolutions duly adopted by the Board. All actions taken and decisions and
determinations made by the Board or the Committee pursuant to the Plan shall be
binding and conclusive on all persons interested in the Plan. No member of the
Board or the Committee shall be liable for any action or determination taken or
made in good faith with respect to the Plan.
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5. PARTICIPATION. Subject to the terms and conditions of the 1998 Plan,
the Board shall determine and designate, from time to time, the full-time
employees of the Company and/or its Subsidiaries who will participate in the
1998 Plan. In the discretion of the Board, a Participant may be awarded Stock
Options with or without tandem Stock Appreciation Rights, Restricted Stock or
Performance Units or any combination thereof, and more than one award may be
granted to a Participant. Except as otherwise agreed to by the Company and the
Participant, any award under the 1998 Plan shall not affect any previous award
to the Participant under the 1998 Plan or any other plan maintained by the
Company or its Subsidiaries.
6. SHARES SUBJECT TO THE 1998 PLAN. The shares of Stock with respect to
which awards may be made under the 1998 Plan shall be either authorized and
unissued shares or issued and outstanding shares (including, in the discretion
of the Board, shares purchased in the market). Subject to the provisions of
paragraph I.10, the number of shares of Stock available under the 1998 Plan for
the grant of Stock Options with or without tandem Stock Appreciation Rights,
Performance Units and Restricted Stock shall not exceed 200,000 shares in the
aggregate. If, for any reason, any award under the 1998 Plan or any portion of
the award, shall expire, terminate or be forfeited or cancelled, or be settled
in cash pursuant to the terms of the 1998 Plan and, therefore, any such shares
are no longer distributable under the award, such shares of Stock shall again be
available for award under the 1998 Plan. The maximum number of shares of Stock
with respect to which options or rights may be granted each calendar year to
each employee shall be 50,000.
7. COMPLIANCE WITH APPLICABLE LAWS AND WITHHOLDING OF TAXES.
Notwithstanding any other provision of the 1998 Plan, the Company shall have no
liability to issue any shares of Stock under the 1998 Plan unless such issuance
would comply with all applicable laws and the applicable requirements of any
securities exchange or similar entity. Prior to the issuance of any shares of
Stock under the 1998 Plan, 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. All awards and payments under the
1998 Plan are subject to withholding of all applicable taxes, which withholding
obligations may be satisfied, with the consent of the Board, through the
surrender of shares of Stock which the Participant already owns, or to which a
Participant is otherwise entitled under the 1998 Plan. The Company shall have
the right to deduct from all amounts paid in cash in consequence of the exercise
of a Stock Option or Stock Appreciation Right or in connection with an award of
Restricted Stock or Performance Units under the 1998 Plan any taxes required by
law to be withheld with respect to such cash payments. Where an employee or
other person is entitled to receive shares of Stock pursuant to the exercise of
a Stock Option or a Stock Appreciation Right or with respect to an award of
Performance Units pursuant to the 1998 Plan, the Company shall have the right to
require the employee or such other person to pay to the Company the amount of
any taxes that the Company is required to withhold with respect to such shares,
or, in lieu thereof, to retain, or sell without notice, a sufficient number of
such shares to cover the amount required to be withheld. Upon the disposition
(within the meaning of Code Section 424(c)) of shares of Stock acquired pursuant
to the exercise of an Incentive Stock Option prior to the expiration of the
holding period requirements of Code Section 422(a)(1), the employee shall be
required to give notice to the Company of such disposition and the Company shall
have the rght to require the employee to pay to the Company the amount of any
taxes that are required by law to be withheld with respect to such disposition.
Upon termination of the Restricted Period with respect to an award of Restricted
Stock (or such earlier time, if any, as an election is made by the employee
under Code Section 83(b), or any successor provisions thereto, to include the
value of such shares in taxable income), the Company shall have the right to
require the employee or other person receiving shares of Stock in respect of
such Restricted Stock award to pay to the Company the amount of taxes that the
Company is required to withhold with respect to such shares of Stock or, in lieu
thereof, to retain or sell without notice a sufficient number of shares of Stock
held by it to cover the amount required to be withheld. The Company shall have
the right to deduct from all dividends paid with respect to Restricted Stock the
amount of taxes that the Company is required to withhold with respect to such
dividend payments.
8. TRANSFERABILITY. Incentive Stock Options with or without tandem Stock
Appreciation Rights, Performance Units, and, during the period of restriction,
Restricted Stock awarded under the 1998 Plan are not transferable except as
designated by the Participant by will or by the laws of descent and
distribution. Incentive Stock Options may be exercised during the lifetime of
the Participant only by the Participant or his guardian or legal representative.
If provided in the option agreement, Non-Qualified Stock Options with or without
tandem Stock
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Appreciation Rights may be transferred by a Participant to Permitted
Transferees, and may be exercised either by the Participant, his guardian or
legal representative, or by a Permitted Transferee.
9. EMPLOYEE AND STOCKHOLDER STATUS. The 1998 Plan does not constitute a
contract of employment, and selection as a Participant will not give any
employee the right to be retained in the employ of the Company or any
Subsidiary. No award under the 1998 Plan shall confer upon the holder thereof
any right as a stockholder of the Company prior to the date on which he fulfills
all service requirements and other conditions for receipt of shares of Stock.
If the redistribution of shares is restricted pursuant to paragraph I.7,
certificates representing such shares may bear a legend referring to such
restrictions.
10. ADJUSTMENTS TO NUMBER OF SHARES SUBJECT TO THE 1998 PLAN. In the
event of any change in the outstanding shares of Stock of the Company by reason
of any stock dividend, split, spinoff, recapitalization, merger, consolidation,
combination, extraordinary dividend, exchange of shares or other similar change,
the aggregate number of shares of Stock with respect to which awards may be made
under the 1998 Plan, the terms and the number of shares of any outstanding Stock
Options, Stock Appreciation Rights, Restricted Stock and Performance Units, and
the purchase price of a share of Stock under Stock Options, may be equitably
adjusted by the Board in its sole discretion.
11. BUSINESS COMBINATIONS. In addition to the rights and obligations of
the Committee to modify, adjust or accelerate exercisability of outstanding
options, in the event that, while any options, Stock Appreciation Rights,
Restricted Shares or Performance Units are outstanding under the 1998 Plan,
there shall occur (a) a merger or consolidation of the Company with or into
another corporation in which the Company shall not be the surviving corporation
(for purposes of this paragraph 11, the Company shall not be deemed the
surviving corporation in any such transaction if, as the result thereof, it
becomes a wholly-owned subsidiary of another corporation), (b) a dissolution of
the Company, or (c) a transfer of all or substantially all of the assets or
shares of stock of the Company in one transaction or a series of related
transactions to one or more other persons or entities, then, with respect to
each option, Stock Appreciation Right and share of Restricted Stock outstanding
immediately prior to the consummation of such transaction and without the
necessity of any action by the Committee:
(i) If provision is made in writing in connection with such
transaction for the continuance and/or assumption of the options, rights,
Restricted Shares and Performance Units granted under the 1998 Plan, or the
substitution for such options, rights, Restricted Shares and Performance Units
of new options, rights, Restricted Shares and Performance Units, with
appropriate adjustment as to the number and kind of shares or other securities
deliverable with respect thereto, the options, rights, Restricted Shares and
Performance Units granted under the 1998 Plan, or the new options, rights,
Restricted Shares and Performance Units substituted therefor, shall continue,
subject to such adjustment, in the manner and under the terms provided in the
respective agreements.
(ii) In the event provision is not made in connection with such
transaction for the continuance and/or assumption of the options, rights,
Restricted Shares and Performance Units granted under the 1998 Plan, or for the
substitution of equivalent options, rights and awards, then (A) each holder of
an outstanding option shall be entitled, immediately prior to the effective date
of such transaction, to purchase the full number of shares that he or she would
otherwise have been entitled to purchase during the entire remaining term of the
option; (B) the holder of any right shall be entitled, immediately prior to the
effective date of such transaction, to exercise such right to the extent the
related option is or becomes exercisable at such time in accordance with its
terms; (C) the recipient of any Performance Unit shall be entitled, immediately
prior to the effective date of such transaction, to receive all remaining values
under such unit; (D) all restrictions on any award of Restricted Shares shall
lapse, and (E) any restriction or risk of forfeiture imposed under the 1998 Plan
shall lapse immediately prior to the effective date of such transaction. The
unexercised portion of any option or right shall be deemed cancelled and
terminated as of the effective date of such transaction.
12. AGREEMENT WITH COMPANY. At the time of any awards under the 1998
Plan, the Board will require a Participant to enter into an agreement with the
Company in a form specified by the Board, agreeing to the terms and conditions
of the 1998 Plan and to such additional terms and conditions, not inconsistent
with the 1998 Plan, as the Board may, in its sole discretion, prescribe.
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13. AMENDMENT AND TERMINATION OF 1998 PLAN. Subject to the following
provisions of this paragraph 13, the Board may at any time and in any way amend,
suspend or terminate the 1998 Plan. No amendment of the 1998 Plan and, except
as provided in paragraph I.10, no action by the Board shall, without further
approval of the stockholders of the Company, increase the total number of shares
of Stock with respect to which awards may be made under the 1998 Plan,
materially increase the benefits accruing to Participants under the 1998 Plan or
materially modify the requirements as to eligibility for participation in the
1998 Plan, if stockholder approval of such amendment is a condition of
Securities and Exchange Commission Rule 16b-3 or the Code at the time such
amendment is adopted. No amendment, suspension or termination of the 1998 Plan
shall alter or impair any Stock Option with or without tandem Stock Appreciation
Right, share of Restricted Stock or Performance Unit previously awarded under
the 1998 Plan without the consent of the holder thereof.
II. INCENTIVE STOCK OPTIONS
1. DEFINITION. The award of an Incentive Stock Option under the 1998
Plan entitles the Participant to purchase shares of Stock at a price fixed at
the time the option is awarded, subject to the following terms of this Part II.
2. ELIGIBILITY. The Board shall designate the Participants to whom
Incentive Stock Options, as described in section 422(b) of the Code or any
successor section thereto, are to be awarded under the 1998 Plan and shall
determine the number of option shares to be offered to each of them. Incentive
Stock Options may be awarded only to employees. In no event shall the aggregate
Fair Market Value (determined at the time the option is awarded) of Stock with
respect to which Incentive Stock Options are exercisable for the first time by
an individual during any calendar year (under all plans of the Company and all
Related Companies) exceed $100,000.
3. PRICE. The purchase price of a share of Stock under each Incentive
Stock Option shall be determined by the Board, provided, however, that in no
event shall such price be less than the greater of (a) 100% of the Fair Market
Value of a share of Stock as of the Option Date (or 110% of such Fair Market
Value if the holder of the option owns stock possessing more than 10% of the
combined voting power of all classes of stock of the Company or any Subsidiary)
or (b) the par value of a share of Stock on such date. To the extent provided
by the Board, the full purchase price of each share of Stock purchased upon the
exercise of any Incentive Stock Option shall be paid in cash or in shares of
Stock (valued at Fair Market Value as of the day of exercise), or in any
combination thereof, at the time of such exercise and, as soon as practicable
thereafter, a certificate representing the shares so purchased shall be
delivered to the person entitled thereto.
4. EXERCISE. Each Option shall become and be exercisable at such time or
times and during such period or periods, in full or in such installments as may
be determined by the Board at the Option Date. In addition, unless restricted
by the Board, Participants may elect to pay the purchase price of shares of
Stock purchased upon the exercise of Incentive Stock Options in cash or through
the actual or constructive delivery at the time of such exercise of shares of
Stock (valued at Fair Market Value as of the day of exercise) already owned by
the Participant, or any combination thereof, equivalent to the purchase price of
such Incentive Stock Options. A Participant's payment of the purchase price in
connection with the exercise of an Incentive Stock Option through delivery of
shares of Stock (the "ISO Stock") that were acquired through the exercise of an
Incentive Stock Option and that have not been held for more than one year will
be considered a disposition (within the meaning of Code Section 424(c)) of the
ISO Stock, resulting in the disqualification of the ISO Stock from treatment as
an incentive stock option under Code Section 422, and the Participant's
recognition of ordinary income. Participants should consult with their tax
advisors prior to electing to exercise an Incentive Stock Option by this method.
5. OPTION EXPIRATION DATE. The "Expiration Date" with respect to an
Incentive Stock Option or any portion thereof awarded to a Participant under the
1998 Plan means the earliest of:
(a) the date that is 10 years after the date on which the Incentive
Stock Option is awarded (or, if the Participant owns stock
possessing more than 10% of the combined voting power of all
classes of stock of the Company or any Subsidiary, the date that
is 5 years
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after the date on which the Incentive Stock Option is awarded);
(b) the date established by the Board at the time of the award;
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(c) the date that is one year after the Participant's employment with
the Company and all Related Companies is terminated by reason of
the Participant becoming Disabled or by reason of the
Participant's death; or
(d) the date that the Participant's employment with the Company and
all Related Companies is terminated by reasons other than death
or becoming Disabled.
All rights to purchase shares of Stock pursuant to an Incentive Stock Option
shall cease as of such option's Expiration Date.
III. NON-QUALIFIED STOCK OPTIONS
1. DEFINITION. The award of a Non-Qualified Stock Option under the 1998
Plan entitles the Participant to purchase shares of Stock at a price fixed at
the time the option is awarded, subject to the following terms of this Part III.
2. ELIGIBILITY. The Board shall designate the Participants to whom
Non-Qualified Stock Options are to be awarded under the 1998 Plan and shall
determine the number of option shares to be offered to each of them.
3. PRICE. The purchase price of a share of Stock under each
Non-Qualified Stock Option shall be determined by the Board; provided, however,
that in no event shall such price be less than the Fair Market Value of a share
of Stock as of the Option Date.
4. EXERCISE. Each Option shall become and be exercisable at such time or
times and during such period or periods, in full or in such installments as may
be determined by the Board at the Option Date. To the extent provided by the
Board, the full purchase price of each share of Stock purchased upon the
exercise of any Non-Qualified Stock Option shall be paid in cash or in shares of
Stock (valued at Fair Market Value as of the day of exercise), or in any
combination thereof, at the time of such exercise and, as soon as practicable
thereafter, a certificate representing the shares so purchased shall be
delivered to the person entitled thereto. In addition, unless restricted by the
Board, Participants may elect to pay the purchase price of shares of Stock
purchased upon the exercise of Non-Qualified Stock Options in cash or through
the constructive delivery at the time of such exercise of shares of Stock
(valued at Fair Market Value as of the day of exercise) already owned by the
Participant, or any combination thereof, equivalent to the purchase price of
such Non-Qualified Stock Options, and, as soon as practicable thereafter, a
certificate representing the net number of shares so purchased shall be
delivered to the person entitled thereto. Participants also may elect to pay,
unless restricted by the Board, the purchase price, in whole or in part, of
shares of Stock purchased upon the exercise of Non-Qualified Options through the
Company's withholding of shares of Stock (valued at Fair Market Value as of the
day of exercise) that would otherwise by issuable upon exercise of such options
equivalent to the purchase price of such Non-Qualified Stock Options and, as
soon as practicable thereafter, a certificate representing the net number of
shares so purchased shall be delivered to the person entitled thereto.
5. OPTION EXPIRATION DATE. The "Expiration Date" with respect to a
Non-Qualified Stock Option or any portion thereof awarded to a Participant under
the 1998 Plan means the earliest of:
(a) the date established by the Board at the time of the award;
(b) the date that is one year after the Participant's employment with
the Company and all Related Companies is terminated by reason of
the Participant becoming Disabled or by reason of the
Participant's death; or
(c) the date that the Participant's employment with the Company and
all Related Companies is terminated by reasons other than death
or becoming Disabled.
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All rights to purchase shares of Stock pursuant to a Non-Qualified Stock Option
shall cease as of such option's Expiration Date.
IV. STOCK APPRECIATION RIGHTS
1. DEFINITION. A Stock Appreciation Right is an award that may be
granted in tandem with a Non-Qualified Stock Option or Incentive Stock Option,
and entitles the holder to receive an amount equal to the difference between the
Fair Market Value of the shares of option Stock at the time of exercise of the
Stock Appreciation Right and the option price, subject to the applicable terms
and conditions of the tandem options and the following provisions of this Part
IV.
2. ELIGIBILITY. The Board may, in its discretion, award the holders of
any Incentive Stock Options or Non-Qualified Stock Options awarded under the
1998 Plan a Stock Appreciation Right under this Part IV concurrent with, or
subsequent to, the award of the option.
3. EXERCISE. A Stock Appreciation Right may be exercised under the
applicable terms and conditions of the Incentive Stock Option or Non-Qualified
Stock Option with respect to which the Stock Appreciation Right is awarded. A
Stock Appreciation Right shall entitle the holder of a Stock Option to receive,
upon the exercise of the Stock Appreciation Right, shares of Stock (valued at
their Fair Market Value at the time of exercise), cash or a combination thereof,
in the discretion of the Board, in an amount equal in value to the excess of the
Fair Market Value of the shares of Stock subject to the Stock Appreciation Right
as of the date of such exercise over the purchase price of the Stock Option.
The exercise of a Stock Appreciation Right will result in the surrender of the
related Incentive Stock Option or Non-Qualified Stock Option.
4. EXPIRATION DATE. The "Expiration Date" with respect to a Stock
Appreciation Right shall be determined by the Board, and shall be not later than
the Expiration Date for the related Stock Option. If neither the right nor the
related Stock Option is exercised before the end of the day on which the right
ceases to be exercisable, such right shall be deemed exercised as of such date
and payment shall be made to the holder in cash.
V. RESTRICTED STOCK
1. DEFINITION. Restricted Stock awards are grants of Stock to
Participants, the vesting of which is subject to a required period of employment
and any other conditions established by the Board.
2. ELIGIBILITY. The Board shall designate the Participants to whom
Restricted Stock is to be awarded and the number of shares of Stock that are
subject to the award.
3. TERMS AND CONDITIONS OF AWARDS. All shares of Restricted Stock
awarded to Participants under the 1998 Plan shall be subject to the following
terms and conditions and to such other terms and conditions, not inconsistent
with the 1998 Plan, as shall be prescribed by the Board in its sole discretion
and as shall be contained in the Agreement referred to in Part I, paragraph 12.
(a) Restricted Stock awarded to Participants may not be sold,
assigned, transferred, pledged or otherwise encumbered, except as
hereinafter provided, for a period of ten years or such shorter
period as the Board may determine, but not less than one year,
after the time of the award of such stock (the "Restricted
Period"). Except for such restrictions, the Participant as owner
of such shares shall have all the rights of a shareholder,
including but not limited to the right to vote such shares and,
except as otherwise provided by the Board, the right to receive
all dividends paid on such shares.
(b) The Board may in its discretion, at any time after the date of
the award of Restricted Stock, adjust the length of the
Restricted Period to account for individual circumstances of a
Participant or group of Participants, but in no case shall the
length of the Restricted Period be less than one year.
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(c) Except as otherwise determined by the Board in its sole
discretion, a Participant whose employment with the Company and
all Related Companies terminates prior to the end of the
Restricted Period for any reason shall forfeit all shares of
Restricted Stock remaining subject to any outstanding Restricted
Stock Award.
(d) Each certificate issued in respect of shares of Restricted Stock
awarded under the 1998 Plan shall be registered in the name of
the Participant and, at the discretion of the Board, each such
certificate may be deposited in a bank designated by the Board.
Each such certificate shall bear the following (or a similar)
legend:
"The transferability of this certificate and the shares of stock
represented hereby are subject to the terms and conditions
(including forfeiture) contained in the Software Spectrum, Inc.
1998 Long-Term Incentive Plan and an agreement entered into
between the registered owner and Software Spectrum, Inc. A copy
of such plan and agreement is on file in the office of the
Secretary of Software Spectrum, Inc., 2140 Merritt Drive,
Garland, Texas 75041.
(e) At the end of the Restricted Period for Restricted Stock, such
Restricted Stock will be transferred free of all restrictions to
a Participant (or his or her legal representative, beneficiary or
heir).
4. SUBSTITUTION OF CASH. The Board may, in its discretion, substitute
cash equal to the Fair Market Value (determined as of the date of distribution)
of Stock otherwise required to be distributed to a Participant in accordance
with Part V, paragraph 3.
VI. PERFORMANCE UNITS
1. DEFINITION. Performance Units are awards to Participants who may
receive value for the units at the end of a Performance Period. The number of
units earned, and value received for them, will be contingent on the degree to
which the performance measures established at the time of the initial award are
met.
2. ELIGIBILITY. The Board shall designate the Participants to whom
Performance Units are to be awarded, and the number of units to be the subject
of such awards.
3. TERMS AND CONDITIONS OF AWARDS. For each Participant, the Board will
determine the timing of awards; the number of units awarded; the value of units,
which may be stated either in cash or in shares of Stock; the performance
measures used for determining whether the Performance Units are earned; the
performance period during which the performance measures will apply; the
relationship between the level of achievement of the performance measures and
the degree to which Performance Units are earned; whether, during or after the
performance period, any revision to the performance measures or performance
period should be made to reflect significant events or changes that occur during
the performance period; and the number of earned Performance Units that will be
paid in cash and/or shares of Stock.
4. PAYMENT. The Board will compare the actual performance to the
performance measures established for the performance period and determine the
number of units to be paid and their value. Payment for units earned shall be
wholly in cash, wholly in Stock or in a combination of the two, in a lump sum or
installments, and subject to vesting requirements and such other conditions as
the Board shall provide. The Board will determine the number of earned units to
be paid in cash and the number to be paid in Stock. For Performance Units
valued when awarded in shares of Stock, one share of Stock will be paid for each
unit earned, or cash will be paid for each unit earned equal to either (a) the
Fair Market Value of a share of Stock at the end of the Performance Period or
(b) the Fair Market Value of the Stock averaged for a number of days determined
by the Board. For Performance Units valued when awarded in cash, the value of
each unit earned will be paid in its initial cash value, or shares of Stock will
be distributed based on the cash value of the units earned divided by (a) the
Fair Market Value of a share of
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Stock at the end of the Performance Period or (b) the Fair Market Value of a
share of Stock averaged for a number of days determined by the Board.
5. RETIREMENT, DEATH OR TERMINATION. A Participant whose employment with
the Company and Related Companies terminates during a performance period because
of Retirement or death shall be entitled to the prorated value of earned
Performance Units, issued with respect to that performance period, at the
conclusion of the performance period based on the ratio of the months employed
during the period to the total months of the performance period. If the
Participant's employment with the Company and Related Companies terminates
during a performance period for any reason other than Retirement or death, the
Performance Units issued with respect to that performance period will be
forfeited on the date his employment with the Company and Related Companies
terminates. Notwithstanding the foregoing provisions of this Part VI, if a
Participant's employment with the Company and Related Companies terminates
before the end of the Performance Period with respect to any Performance Units
awarded to him, the Board may determine that the Participant will be entitled to
receive all or any portion of the units that he or she would otherwise receive,
and may accelerate the determination and payment of the value of such units or
make such other adjustments as the Board, in its sole discretion, deems
desirable.
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