EXHIBIT 99.1
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PRUDENTIAL FINANCIAL, INC.
OMNIBUS INCENTIVE PLAN
ARTICLE I
PURPOSE
The purpose of the "Prudential Financial, Inc. Omnibus Incentive Plan"
(the "Plan") is to foster and promote the long-term financial success of
Prudential Financial, Inc. (the "Company") and materially increase shareholder
value by (a) motivating superior employee performance by means of
performance-related incentives, (b) encouraging and providing for the
acquisition of an ownership interest in the Company by the Company's and its
Subsidiaries' (as hereinafter defined) employees, and (c) enabling the Company
to attract and retain the services of employees upon whose judgment, interest,
and effort the successful conduct of its operations is largely dependent.
The Company has previously adopted the Prudential Financial, Inc. Stock
Option Plan (the "Stock Option Plan"), which was intended to provide similar
equity-based compensation incentives through the grant of stock options and
stock appreciation rights. Effective upon the adoption of the Plan by
shareholders of the Company, the Stock Option Plan will be merged into this
Plan, thereby making available for the grant of awards under this Plan any
authorized but unused shares of Common Stock (as herein defined) not already
used for such purpose under the Stock Option Plan. All outstanding award grants
under the Stock Option Plan shall continue in full force and effect, subject to
their original terms, after the Stock Option Plan is merged into the Plan under
the terms and conditions noted above.
ARTICLE II
DEFINITIONS
2.1 Definitions. Whenever used herein, the following terms shall have
the respective meanings set forth below:
Adjusted Operating Income. "Adjusted Operating Income" means
the income from continuing operations before income taxes of the
Company's Financial Services Businesses, excluding: realized
investment gains, net of losses and related charges and adjustments;
sales practices remedies and costs; demutualization costs and
expenses; and the contributions to income/loss of divested businesses
that have been sold or exited by the Company but did not qualify for
"discontinued operations" accounting treatment under generally
accepted accounting principles.
Adjustment Event. "Adjustment Event" means any stock dividend,
stock split or share combination of, or extraordinary cash dividend
on, the Common Stock or recapitalization, reorganization, merger,
consolidation, split-up, spin-off, combination, dissolution,
liquidation, exchange of shares, warrants or rights offering to
purchase Common stock at a price substantially below Fair Market
Value, or other similar event affecting the Common Stock of the
Company.
Alternative Awards. "Alternative Awards" shall have the meaning
set forth in Section 10.3.
Annual Incentive Awards. "Annual Incentive Awards" means an Award
made pursuant to Article IX of the Plan with a Performance Cycle of
one year or less.
Approved Retirement. "Approved Retirement" means termination of a
Participant's employment (i) on or after the normal retirement date
or any early retirement date established under any defined benefit
pension plan maintained by the Company or a Subsidiary and in which
the Participant participates or (ii) on or after attaining age 50 and
completing such period of service as the Committee shall determine
from time to time, to the extent the Participant does not participate
in any such defined benefit pension plan maintained by the Company or
a Subsidiary. Notwithstanding the foregoing, with respect only to
Participants who reside in the United States, the term "Approved
Retirement" shall not apply to any Participant: (a) who has an Agent
Emeritus contract with an insurance affiliate of the Company
(including, but not limited to, The Prudential Insurance Company of
America), whether or not such individual is deemed to be retirement
eligible or is receiving retirement benefits under any defined
benefit pension plan maintained by the Company or a Subsidiary and in
which the Participant participates; or (b) to any Participant whose
employment with the Company or a Subsidiary has been terminated for
Cause, in either case whether or not such individual is deemed to be
retirement eligible or is receiving retirement benefits under any
defined benefit pension plan maintained by the Company or a
Subsidiary and in which the Participant participates or would
otherwise satisfy the criteria set forth by the Committee as noted in
the preceding sentence.
Award. An "Award" means the award of an Annual Incentive Award, a
Long-Term Performance Unit Award, an Option, a SAR, a Restricted
Unit, Restricted Stock or Performance Share, including any associated
Dividend Equivalents, under the Plan, and shall also include an award
of Restricted Stock or Restricted Units (including any associated
Dividend Equivalents) made in conjunction with other incentive
programs established by the Company or its Subsidiaries and so
designated by the Committee.
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Beneficial Owner. "Beneficial Owner" means any "person," as such
term is used in Section 13(d) of the Act, who, directly or indirectly,
has or shares the right to vote, dispose of, or otherwise has
"beneficial ownership" of such securities (within the meaning of Rule
13d-3 and Rule 13d-5 under the Act), including pursuant to any
agreement, arrangement or understanding (whether or not in writing).
Board. "Board" means the Board of Directors of the Company.
Cause. "Cause" means, with respect to a Participant, any of the
following (as determined by the Committee in its sole discretion): (i)
dishonesty, fraud or misrepresentation; (ii) inability to obtain or
retain appropriate licenses; (iii) violation of any rule or regulation
of any regulatory agency or self-regulatory agency; (iv) violation of
any policy or rule of the Company or any Subsidiary; (v) commission of
a crime; (vi) breach by a Participant of any written covenant or
agreement with the Company or any Subsidiary not to disclose or misuse
any information pertaining to, or misuse any property of, the Company
or any Subsidiary, or (vii) any act or omission detrimental to the
conduct of the business of the Company or any Subsidiary in any way.
Change of Control. A "Change of Control" shall be deemed to have
occurred if:
(i) any Person is or becomes the Beneficial Owner, either
directly or indirectly, of securities of the Company representing
twenty-five percent (25%) or more of the combined Voting Power of
the Company's securities; or
(ii) within any twenty-four (24) month period, the Incumbent
Directors shall cease to constitute at least a majority of the
Board or the board of directors of any successor to the Company;
provided, however, that any director elected to the Board, or
nominated for election, by a majority of the Incumbent Directors
then still in office shall be deemed to be an Incumbent Director
for purposes of this subclause (ii); or
(iii) upon the consummation of a Corporate Event, immediately
following the consummation of which the stockholders of the
Company immediately prior to such Corporate Event do not hold,
directly or indirectly, a majority of the Voting Power of (x) in
the case of a merger or consolidation, the surviving or resulting
corporation, (y) in the case of a share exchange, the acquiring
corporation or (z) in the case of a division or a sale or other
disposition of assets, each surviving, resulting or acquiring
corporation which, immediately following the relevant Corporate
Event,
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holds more than twenty-five percent (25%) of the consolidated assets of
the Company immediately prior to such Corporate Event; or
(iv) any other event occurs which the Board declares to be a
Change of Control.
Notwithstanding the foregoing, a Change of Control shall not be deemed to have
occurred merely as a result of an underwritten offering of the equity securities
of the Company where no Person (including any "group" (within the meaning of
Rule 13d-5(b) under the Exchange Act)) acquires more than twenty-five percent
(25%) of the beneficial ownership interests in such securities.
Change of Control Price. "Change of Control Price" means the highest
price per share of Common Stock paid in conjunction with any transaction
resulting in a Change of Control (as determined in good faith by the Committee
if any part of the offered price is payable other than in cash) or, in the case
of a Change of Control occurring solely by reason of a change in the composition
of the Board, the highest Fair Market Value of the Common Stock on any of the 30
trading days immediately preceding the date on which a Change of Control occurs.
Code. "Code" means the Internal Revenue Code of 1986, as amended,
including, for these purposes, any regulations promulgated by the Internal
Revenue Service with respect to the provisions of the Code ("Treasury
Regulations"), and any successor thereto.
Committee. "Committee" means the Compensation Committee of the Board or
such other committee of the Board as the Board shall designate from time to
time, which committee shall consist of two or more members, each of whom shall
be a "Non Employee Director" within the meaning of Rule 16b-3, as promulgated
under the Exchange Act, an "outside director" within the meaning of section
162(m) of the Code, and an "independent director" under Section 303A of the New
York Stock Exchange's Listed Company Manual, or any successors thereto.
Common Stock. "Common Stock" means the common stock of the Company, par
value $0.01 per share.
Company. "Company" means Prudential Financial, Inc., a New Jersey
corporation, and any successor thereto.
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Corporate Event. "Corporate Event" means a merger, consolidation,
recapitalization or reorganization, share exchange, division, sale, plan of
complete liquidation or dissolution, or other disposition of all or
substantially all of the assets of the Company, which has been approved by the
shareholders of the Company.
Covered Employees. "Covered Employees" are any Executive Officers or
other Eligible Individuals who are "covered employees" within the meaning of
Code section 162(m).
Disability. "Disability" means with respect to any Participant,
long-term disability (but not optional long-term disability coverage) as defined
under the welfare benefit plan maintained by either the Company or a Subsidiary
and in which the Participant participates and from which the Participant is
receiving a long-term disability benefit. In jurisdictions outside of the United
States where long-term disability is covered by a mandatory or universal program
sponsored by the government or an industrial association, a Participant
receiving long-term disability benefits from such a program is considered to
meet the disability definition of the Plan.
Dividends. "Dividends" means the regular cash dividends paid by the
Company upon one share of Common Stock from time to time.
Dividend Equivalents. "Dividend Equivalents" means an amount equal to
the regular cash dividends paid by the Company upon one share of Common Stock in
connection with the grant of Restricted Units, Performance Shares, Options,
and/or SARs awarded to a Participant in accordance with Article VIII of the
Plan.
Domestic Partner. "Domestic Partner" means any person qualifying to be
treated as a domestic partner of a Participant under the applicable policies, if
any, of the Company or Subsidiary that employs the Participant.
Effective Date. "Effective Date" generally means the first date upon
which the Plan shall become effective, which will be the date the Plan has been
both (a) approved by the Board on March 11, 2003, and (b) approved by a majority
of the votes cast at a duly held stockholders' meeting (currently scheduled for
June 2003) at which the requisite quorum, as set forth in the Company's Amended
and Restated Certificate of Incorporation, of outstanding voting stock of the
Company is, either in person or by proxy, present and voting on the Plan.
However, for purposes of any Option grant that is an ISO, the term "Effective
Date" shall mean solely the adoption of the Plan by the Board.
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Eligible Individual. For purposes of this Plan only, "Eligible
Individual" means any individual who is either an employee (including each
officer) of, or an insurance agent (including, but not limited to, a common law
employee, a statutory employee, or, for purposes of any non-domestic United
States Subsidiary, any individual who is classified as a Life Planner and/or
Sales Manager and has the status of an "international independent contractor
agent" who is characterized as an independent contractor for purposes of
applicable local law) of, the Company or any such Subsidiary.
Exchange Act. "Exchange Act" means the Securities Exchange Act of 1934,
as amended.
Executive Officer. "Executive Officer" means each person who is an
officer of the Company or any Subsidiary and who is subject to the reporting
requirements under Section 16(a) of the Exchange Act.
Fair Market Value. "Fair Market Value" means, on any date, the price of
the last trade, regular way, in the Common Stock on such date on the New York
Stock Exchange or, if at the relevant time, the Common Stock is not listed to
trade on the New York Stock Exchange, on such other recognized quotation system
on which the trading prices of the Common Stock are then quoted (the "Applicable
Exchange"). In the event that (i) there are no Common Stock transactions on the
Applicable Exchange on any relevant date, Fair Market Value for such date shall
mean the closing price on the immediately preceding date on which Common Stock
transactions were so reported and (ii) the Applicable Exchange adopts a trading
policy permitting trades after 5 P.M. Eastern Standard Time ("EST"), Fair Market
Value shall mean the last trade, regular way, reported on or before 5 P.M. EST
(or such earlier or later time as the Committee may establish from time to
time).
Family Member. "Family Member" means, as to a Participant, any (i)
child, stepchild, grandchild, parent, stepparent, grandparent, spouse, sibling,
mother-in-law, father-in-law, son-in-law, daughter-in-law, brother-in-law,
sister-in-law (including adoptive relationships), or Domestic Partner of such
Participant, (ii) trusts for the exclusive benefit of one or more such persons
and/or the Participant and (iii) other entity owned solely by one or more such
persons and/or the Participant.
Financial Services Businesses. "Financial Services Businesses" means
the businesses in the Company's three operating divisions of "Insurance,"
"Investments" and "International Insurance and Investments," as well as the
Company's "Corporate and Other" operations.
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Grandfathered Awards. "Grandfathered Awards" shall have the meaning set
forth in Section 5.5 herein.
Incumbent Directors. "Incumbent Directors" means, with respect to any
period of time specified under the Plan for purposes of determining a Change of
Control, the persons who were members of the Board at the beginning of such
period.
ISO. "ISO" means an Option that is an "incentive stock option" within
the meaning of Code section 422.
Long-Term Performance Unit Award. A "Long-Term Performance Unit Award"
means an Award made pursuant to Article IX of the Plan, which are units valued
by reference to property other than Common Stock (including cash), the number or
value of such units which may be adjusted over a Performance Cycle based on the
satisfaction of Performance Goals.
Nonstatutory Stock Option. "Nonstatutory Stock Option" means an Option
that is not an ISO.
Option (including ISOs and Nonstatutory Stock Options). "Option" means
the right to purchase Common Stock at a stated price for a specified period of
time. For purposes of the Plan, an Option may be either (i) an ISO or (ii) a
Nonstatutory Stock Option.
Participant. "Participant" shall have the meaning set forth in Article
III of the Plan.
Performance Cycle. "Performance Cycle" means the period, not to exceed
five (5) years, selected by the Committee during which the performance of the
Company or any Subsidiary or unit thereof or any individual is measured for the
purpose of determining the extent to which an Award subject to Performance Goals
has been earned.
Performance Goals. "Performance Goals" means the objectives for the
Company, any Subsidiary or business unit thereof, or an Eligible Individual that
may be established by the Committee for a Performance Cycle with respect to any
performance-based Awards contingently granted under the Plan.
Performance Shares. "Performance Shares" means an Award made pursuant
to Article IX of the Plan, which are units denominated in Common Stock, the
number of such units which may be adjusted over a Performance Cycle based upon
the satisfaction of Performance Goals.
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Person. "Person" means any person (within the meaning of
Section 3(a)(9) of the Exchange Act), including any group (within the
meaning of Rule 13d-5(b) under the Exchange Act)), but excluding any of
the Company, any Subsidiary or any employee benefit plan sponsored or
maintained by the Company or any Subsidiary.
Plan Year. "Plan Year" means a period of twelve months
commencing on January 1st and ending on the next December 31st.
Restricted Period. "Restricted Period" means the period of
time during which Restricted Units or shares of Restricted Stock are
subject to forfeiture or restrictions on transfer (if applicable)
pursuant to Article VIII of the Plan.
Restricted Stock. "Restricted Stock" means Common Stock
awarded to a Participant pursuant to the Plan that is subject to
forfeiture and restrictions on transferability in accordance with
Article VIII of the Plan.
Restricted Unit. "Restricted Unit" means a Participant's right
to receive, pursuant to this Plan, one share of Common Stock at the end
of a specified period of time, which right is subject to forfeiture in
accordance with Article VIII of the Plan.
SAR. "SAR" means a stock appreciation right granted under
Article VII in respect of one or more shares of Common Stock that
entitles the holder thereof to receive, in cash or Common Stock, at the
discretion of the Committee (which discretion may be exercised at or
after grant, including after exercise of the SAR), an amount per share
of Common Stock equal to the excess, if any, of the Fair Market Value
on the date the SAR is exercised over the Fair Market Value on the date
the SAR is granted.
Stock Option Plan. "Stock Option Plan" means the Prudential
Financial, Inc. Stock Option Plan, as amended from time to time.
Subsidiary. "Subsidiary" means any corporation or partnership
in which the Company owns, directly or indirectly, more than fifty
percent (50%) of the total combined voting power of all classes of
stock of such corporation or of the capital interest or profits
interest of such partnership.
2.2 Gender and Number. Except when otherwise indicated by the context,
words in the masculine gender used in the Plan shall include the feminine
gender, the singular shall include the plural, and the plural shall include the
singular.
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ARTICLE III
ELIGIBLITY AND PARTICIPATION
3.1 Participants. Participants in the Plan shall be those Eligible
Individuals designated by the affirmative action of the Committee (or its
delegate) to participate in the Plan.
3.2 Types of Awards. The Committee (or its delegate) may grant any or
all of the Awards specified herein to any particular Participant (subject to the
applicable limitations set forth in the Plan). Any Award may be made for one (1)
year or multiple years without regard to whether any other type of Award is made
for the same year or years.
ARTICLE IV
POWERS OF THE COMMITTEE
4.1 Power to Grant. The Committee shall have the authority, subject to
the terms of the Plan, to determine those Eligible Individuals to whom Awards
shall be granted and the terms and conditions of any and all Awards including,
but not limited to:
(a) the number of shares of Common Stock to be covered by each Award;
(b) the time or times at which Awards shall be granted;
(c) the terms and provisions of the instruments by which Options may be
evidenced, including the designation of Options as ISOs or
Nonstatutory Stock Options;
(d) the determination of the period of time during which restrictions
on Restricted Stock or Restricted Units shall remain in effect;
(e) the establishment and administration of any Performance Goals
applicable to Awards granted under the Plan;
(f) the determination of Participants' Long Term Performance Unit
Awards or Performance Share Awards, including any Performance Goals
and Performance Cycles; and
(g) the development and implementation of specific stock-based programs
for the Company and its Subsidiaries that are consistent with the
intent and specific terms of the framework created by this Plan.
Appropriate officers of the Company or any Subsidiary may suggest to the
Committee the Eligible Individuals who should receive Awards, which the
Committee may accept or
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reject in its sole discretion. The Committee shall determine the terms and
conditions of each Award at the time of grant. The Committee may establish
different terms and conditions for different Participants and for the same
Participant for each Award such Participant may receive, whether or not granted
at different times.
4.2 Administration.
(a) Rules, Interpretations and Determinations. The Committee
shall administer the Plan. Any Award granted by the Committee under the
Plan may be subject to such conditions, not inconsistent with the terms
of the Plan, as the Committee shall determine. The Committee shall have
full authority to interpret and administer the Plan, to establish,
amend, and rescind rules and regulations relating to the Plan, to
provide for conditions deemed necessary or advisable to protect the
interests of the Company, to construe the respective Award agreements
and to make all other determinations necessary or advisable for the
administration and interpretation of the Plan in order to carry out its
provisions and purposes. Determinations, interpretations, or other
actions made or taken by the Committee shall be final, binding, and
conclusive for all purposes and upon all persons.
The Committee's determinations under the Plan (including the
determination of the Eligible Individuals to receive Awards, the form,
amount and timing of such Awards, the terms and provisions of such
Awards and the agreements hereunder) may vary, and need not be uniform,
whether or not any such Eligible Individuals could be deemed to be
similarly situated.
(b) Agents and Expenses. The Committee may appoint agents (who
may be officers or employees of the Company) to assist in the
administration of the Plan and may grant authority to such persons to
execute agreements or other documents on its behalf. All expenses
incurred in the administration of the Plan, including, without
limitation, for the engagement of any counsel, consultant or agent,
shall be paid by the Company. The Committee may consult with legal
counsel, who may be counsel to the Company, and shall not incur any
liability for any action taken in good faith in reliance upon the
advice of counsel. Any proceeds received by the Company in connection
with any Award will be used for general corporate purposes.
(c) Delegation of Authority. Notwithstanding anything else
contained in the Plan to the contrary herein, the Committee may
delegate, subject to such terms or conditions or guidelines as it shall
determine, to any employee of the Company or any group of employees of
the Company or its affiliates any portion of its authority and powers
under the Plan with respect to Participants who are not Executive
Officers. Only the Committee may select, grant, administer, or exercise
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any other discretionary authority under the Plan in respect of Awards
granted to such Participants who are Executive Officers.
4.3 Participants Based Outside the United States. Notwithstanding
anything to the contrary herein, the Committee, to conform with provisions of
local laws and regulations in foreign countries in which the Company or its
Subsidiaries operate, shall have sole discretion to (a) modify the terms and
conditions of Awards granted to Participants employed outside the United States,
(b) establish subplans with modified exercise procedures and such other
modifications as may be necessary or advisable under the circumstances presented
by local laws and regulations; and (c) take any action which it deems advisable
to obtain, comply with or otherwise reflect any necessary governmental
regulatory procedures, exemptions or approvals with respect to the Plan or any
subplan established hereunder.
4.4 Newly Eligible Participants. The Committee shall be entitled to
make such rules, determinations and adjustments, as it deems appropriate with
respect to any Participant who becomes eligible to receive a performance-based
Award after the commencement of a Performance Cycle.
4.5 Restrictive Covenants and Other Conditions. Without limiting the
generality of the foregoing, the Committee may condition the grant of any Award
under the Plan upon the Participant to whom such Award would be granted agreeing
in writing to certain conditions in addition to the provisions regarding
exercisability of the Award (such as restrictions on the ability to transfer the
underlying shares of Common Stock) or covenants in favor of the Company and/or
one or more Subsidiaries (including, without limitation, covenants not to
compete, not to solicit employees and customers and not to disclose confidential
information) that may have effect during or following the termination of the
Participant's employment with the Company and its Subsidiaries and before or
after the Award has been exercised, including, without limitation, the
requirement that the Participant disgorge any profit, gain or other benefit
received in respect of the exercise of the Award prior to any breach of any such
covenant by the Participant).
4.6 Performance Based Compensation Interpretations; Limitations on
Discretion. Notwithstanding anything contained in the Plan to the contrary, to
the extent the Committee has required upon grant that any Annual Incentive
Award, Long-Term Performance Unit Award, Performance Share, Restricted Unit or
Restricted Stock must qualify as "other performance based compensation" within
the meaning of Section 162(m)(4)(c) of the Code, the Committee shall (a) specify
and approve the specific terms of any Performance Goals with respect to such
Awards in writing no later than ninety (90) days from the commencement of the
Performance Cycle to which the Performance Goal or Goals relate, and (b) not be
entitled to exercise any subsequent discretion otherwise
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authorized under the Plan (such as the right to authorize payout at a level
above that dictated by the achievement of the relevant Performance Goals) with
respect to such Award if the ability to exercise discretion (as opposed to the
exercise of such discretion) would cause such Award to fail to qualify as other
performance based compensation.
4.7 Indemnification. No member of the Committee shall be personally
liable for any action, omission or determination relating to the Plan, and the
Company shall indemnify and hold harmless each member of the Committee and each
other director or employee of the Company to whom any duty or power relating to
the administration or interpretation of the Plan has been delegated, against any
cost or expense (including counsel fees) or liability (including any sum paid in
settlement of a claim with the approval of the Committee) arising out of any
action, omission or determination related to the Plan, if, in either case, such
member, director or employee made or took such action, omission, or
determination in good faith and in a manner such person reasonably believed to
be in or not opposed to the best interests of the Company, and, with respect to
any criminal action or proceeding, such person had no reasonable cause to
believe his or her conduct was unlawful.
ARTICLE V
COMMON STOCK SUBJECT TO PLAN; OTHER LIMITATIONS
5.1 Plan Limits.
(a) Shares Available for Awards: Subject to the provisions of
Section 5.4, the number of shares of Common Stock issuable under the
Plan for Awards shall be 50,000,000 plus any remaining shares of Common
Stock available for awards under the Stock Option Plan as of the
effective date of the merger of the Stock Option Plan with this Plan.
Any shares issued in connection with Options and SARs shall be counted
against this limit as one (1) share for every one (1) share issued; for
Awards other than Options and SARs, any shares issued shall be counted
against this limit as two (2) shares for every one (1) share issued.
(b) The shares to be delivered under the Plan may consist, in
whole or in part, of Common Stock purchased by the Company for such
purpose, treasury Common Stock or authorized but unissued Common Stock,
not reserved for any other purpose.
5.2 Individual Award Limitations. Subject to the provisions of Section
5.4, the following individual Award limits apply:
(a) Options/SARs: During any three (3) year period, the total
number of shares of Common Stock subject to Options and SARs awarded to
any Participant may not exceed 2,500,000.
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(b) Individual Performance-Based Limitations: To the extent
that any Annual Incentive, Long-Term Performance Unit, Restricted
Stock, Restricted Unit and Performance Share Awards to a Participant
are intended to satisfy the requirements of Code section 162(m)(4)(C)
as "other performance based compensation," the maximum aggregate amount
of such Award(s) paid or otherwise made available to such Participant
shall not exceed six-tenths of one percent (0.6%) of Adjusted Operating
Income for the most recently reported year ending December 31st prior
to the year such Award or Awards is or are paid or otherwise made
available.
5.3 Cancelled, Terminated, or Forfeited Awards. Should an Award under
this Plan (including, for these purposes, any award under the Stock Option Plan
made prior to the Effective Date) for any reason expire without having been
exercised, be cancelled, repurchased by the Company, terminated or forfeited or
otherwise settled without the issuance of any Common Stock (including, but not
limited to, shares tendered to exercise outstanding Options, shares tendered or
withheld for taxes on Awards or shares issued in connection with a Restricted
Stock or Restricted Unit Award that are subsequently forfeited), any such shares
of Common Stock subject to such Award shall again be available for grants of
Awards under the Plan.
5.4 Adjustment in Capitalization. In the event of any Adjustment Event,
(a) the aggregate number of shares of Common Stock available for Awards under
Section 5.1, (b) the aggregate limitations on the number of shares that may be
awarded as a particular type of Award or that may be awarded to any particular
Participant in any particular period under Section 5.2 and (c) the aggregate
number of shares subject to outstanding Awards and the respective exercise
prices or base prices applicable to outstanding Awards shall be appropriately
adjusted by the Committee, in its discretion, with respect to such Adjustment
Event, and the Committee's determination shall be conclusive. To the extent
deemed equitable and appropriate by the Committee and subject to any required
action by shareholders of the Company, in any Adjustment Event that is a merger,
consolidation, reorganization, liquidation, dissolution or similar transaction,
any Award granted under the Plan shall be deemed to pertain to the securities
and other property, including cash, to which a holder of the number of shares of
Common Stock covered by the Award would have been entitled to receive in
connection with such Adjustment Event.
Any shares of stock (whether Common Stock, shares of stock into which shares of
Common Stock are converted or for which shares of Common Stock are exchanged or
shares of stock distributed with respect to Common Stock) or cash or other
property received with respect to any award of Restricted Stock or Restricted
Units granted under the Plan as a result of any Adjustment Event or any
distribution of property shall, except
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as provided in Article X or as otherwise provided by the Committee, be subject
to the same terms and conditions, including restrictions on transfer, as are
applicable to such shares of Restricted Stock or Restricted Units and any stock
certificate(s) representing or evidencing any shares of stock so received shall
be legended in such manner as the Company deems appropriate.
5.5 Application of Limits. The limitations set forth under Sections 5.1
and 5.2 herein apply only to Awards both granted and payable to Participants
after the Effective Date under this Plan (or, if made previously under the Stock
Option Plan, subject to the limitations set forth in such Plan). With respect to
any other compensation or performance based awards previously made to Eligible
Individuals prior to the Effective Date under some other compensation plan or
program sponsored by the Company or its Subsidiaries, which become due or
payable after the Effective Date of this Plan (the "Grandfathered Awards"), the
limitations set forth under Sections 5.1 and 5.2 will not be deemed to apply to
such Grandfathered Award payments.
ARTICLE VI
STOCK OPTIONS
6.1 Grant of Options. Subject to the provisions of Section 5.1, Options
may be granted to Participants at such time or times as shall be determined by
the Committee. Options granted under the Plan may be of two types: (i) ISOs and
(ii) Nonstatutory Stock Options. Except as otherwise provided herein, the
Committee shall have complete discretion in determining the number of Options,
if any, to be granted to a Participant, except that ISOs may only be granted to
Eligible Individuals who satisfy the requirements for eligibility set forth
under Code section 424. The date of grant of an Option under the Plan will be
the date on which the Option is awarded by the Committee or, if so determined by
the Committee, the date on which occurs any event (including, but not limited
to, the completion of an individual or corporate Performance Goal) the
occurrence of which is an express condition precedent to the grant of the
Option. Subject to Section 5.4, the Committee shall determine the number of
Options, if any, to be granted to the Participant. Each Option grant shall be
evidenced by an Option agreement (in electronic or written form) that shall
specify the type of Option granted, the exercise price, the duration of the
Option, the number of shares of Common Stock to which the Option pertains, and
such other terms and conditions as the Committee shall determine which are not
inconsistent with the provisions of the Plan. Options may be granted in tandem
with SARs (as described in more detail in Article VII), and/or with associated
Dividend Equivalents (as described in more detail in Article VIII).
6.2 Exercise Price; No Repricing or Substitution of Options.
Nonstatutory Stock Options and ISOs granted pursuant to the Plan shall have an
exercise price no less than the Fair Market Value of a share of Common Stock on
the date the Option is
14
granted. Except as a result of any Adjustment Event, the Committee shall not
have the power or authority to reduce, whether through amendment or otherwise,
the exercise price of any outstanding Option nor to grant any new Options or
other Awards in substitution for or upon the cancellation of Options previously
granted which shall have the effect of reducing the exercise price of any
outstanding Option.
6.3 Exercise of Options. Unless the Committee shall determine otherwise
at the time of grant, one-third (1/3) of each Option granted pursuant to the
Plan shall become exercisable on each of the first three (3) anniversaries of
the date such Option is granted; provided that the Committee may establish
performance-based criteria for exercisability of any Option. Subject to the
provisions of this Article VI, once any portion of any Option has become
exercisable it shall remain exercisable for its remaining term. Once
exercisable, an Option may be exercised from time to time, in whole or in part,
up to the total number of shares of Common Stock with respect to which it is
then exercisable. The Committee shall determine the term of each Option granted,
but, except as expressly provided below, in no event shall any such Option be
exercisable for more than 10 years after the date on which it is granted.
6.4 Payment. The Committee shall establish procedures governing the
exercise of Options. No shares shall be delivered pursuant to any exercise of an
Option unless arrangements satisfactory to the Committee have been made to
assure full payment of the exercise price therefore. Without limiting the
generality of the foregoing, payment of the exercise price may be made: (a) in
cash or its equivalent (b) by exchanging shares of Common Stock (which are not
the subject of any pledge or other security interest) owned by the person
exercising the Option (through actual tender or by attestation); (c) through an
arrangement with a broker approved by the Company whereby payment of the
exercise price is accomplished with the proceeds of the sale of Common Stock; or
(iv) by any combination of the foregoing; provided that the combined value of
all cash and cash equivalents paid and the Fair Market Value of any such Common
Stock so tendered to the Company, valued as of the date of such tender, is at
least equal to such exercise price. The Company may not make a loan to a
Participant to facilitate such Participant's exercise of any of his or her
Options or payment of taxes.
6.5 ISOs. Notwithstanding anything in the Plan to the contrary, no
Option that is intended to be an ISO may be granted after the tenth anniversary
of the Effective Date of the Plan. Except as may otherwise be provided for under
the provisions of Article X of the Plan, no term of this Plan relating to ISOs
shall be interpreted, amended or altered, nor shall any discretion or authority
granted under the Plan be so exercised, so as to disqualify the ISO or the Plan
under Section 422 of the Code, or, without the consent of any Participant
affected thereby, to disqualify any ISO under such Section 422.
15
6.6 Termination of Employment. Unless otherwise determined by the
Committee at or following the time of grant, the following provisions of the
Plan shall apply in the event of the Participant's termination of employment:
(a) Due to Death. In the event a Participant's employment
terminates by reason of death, any Options granted to such Participant
shall become immediately exercisable in full and may be exercised by
the Participant's estate or as may otherwise be provided for in
accordance with the requirements of Section 12.2, at any time prior to
the earlier to occur of the (i) expiration of the term of the Options
or (ii) third (3rd) anniversary (or such earlier date as the Committee
shall determine at the time of grant) of the Participant's death;
provided, however, that Nonstatutory Stock Options shall be deemed to
be amended to provide that they are exercisable for not less than one
(1) year after a Participant's death even if such period exceeds the
expiration of the term of the original grant of such Nonstatutory Stock
Options.
(b) Due to Disability. In the event a Participant's employment is
terminated by his or her employer by reason of Disability, any Options
granted to such Participant shall become immediately exercisable in
full and may be exercised by the Participant (or, in the event of the
Participant's death after termination of employment when the Option is
exercisable pursuant to its terms, by the Participant's designated
beneficiary, and if none is named, by the person determined in
accordance with the requirements of Section 12.2), at any time prior
to the expiration date of the term of the Options or within three (3)
years (or such shorter period as the Committee shall determine at the
time of grant) following the Participant's termination of employment,
whichever period is shorter.
(c) Due to Approved Retirement. In the event a Participant's
employment terminates by reason of Approved Retirement, any Options
granted to such Participant which are then outstanding shall become
immediately exercisable in full and may be exercised by the Participant
(or, in the event of the Participant's death after termination of
employment when the Option is exercisable pursuant to its terms, by the
Participant's estate or as otherwise may be provided for in accordance
with Section 12.2), at any time prior to the expiration date of the
term of the Options or within five (5) years (or such shorter period as
the Committee shall determine at the time of grant) following the
Participant's Approved Retirement, whichever period is shorter.
(d) Due to Cause. In the event a Participant's employment is
terminated by the Company or any Subsidiary for Cause, any Options
granted to such Participant that are then not yet exercised shall be
forfeited at the time of such termination and shall not be exercisable
thereafter and the Committee may, consistent with Section 4.5 of the
Plan, require that such Participant disgorge any
16
profit, gain or other benefit received in respect of the exercise of
any such Award for a period of up to twelve (12) months prior to the
Participant's termination of employment for Cause. For purposes of this
Section 6.6, in the event a Participant's employment is terminated by
the Company or any Subsidiary for Cause, the provisions of this
Section 6.6(d) will apply notwithstanding any assertion (by the
Participant or otherwise) of a termination of employment for any other
reason enumerated under this Section.
(e) Due to Resignation. In the event a Participant's employment
ends as a result of such Participant's resignation from the Company or
any Subsidiary, any Options granted to such Participant that are then
not yet exercised shall be forfeited at the time of such termination
and shall not be exercisable thereafter.
(f) Due to Any Other Reason. In the event the employment of the
Participant shall terminate for any reason other than one described
in Section 6.6 (a) through (e), any Options granted to such Participant
which are exercisable at the date of the Participant's termination of
employment may be exercised by the Participant (or, in the event of the
Participant's death after termination of employment when the Option is
exercisable pursuant to its terms, by the Participant's estate or as
may otherwise be provided for in accordance with the requirements of
Section 12.2) at any time prior to the expiration of the term of the
Options or the ninetieth (90th) day following the Participant's
termination of employment, whichever period is shorter, and any Options
that are not exercisable at the time of termination of employment shall
be forfeited at the time of such termination and not be exercisable
thereafter.
ARTICLE VII
STOCK APPRECIATION RIGHTS (SARs)
7.1 Grant of SARs. SARs may be granted to any Participants, all
Participants or any class of Participants at such time or times as shall be
determined by the Committee. SARs may be granted in tandem with an Option, on a
freestanding basis, not related to any other Award, and/or with associated
Dividend Equivalents. A grant of a SAR shall be evidenced in writing, whether as
part of the agreement governing the terms of the Option, if any, to which such
SARs relate or pursuant to a separate written agreement with respect to
freestanding SARs, in each case containing such provisions not inconsistent with
the Plan as the Committee shall approve.
7.2 Terms and Conditions of SARs. Notwithstanding the provisions of
Section 7.1, unless the Committee shall otherwise determine the terms and
conditions (including, without limitation, the exercise period of the SAR, the
vesting schedule applicable thereto and the impact of any termination of service
on the Participant's rights with respect to the SAR) applicable with respect to
(i) SARs granted in tandem with an
17
Option shall be substantially identical (to the extent possible taking into
account the differences related to the character of the SAR) to the terms and
conditions applicable to the tandem Options and (ii) freestanding SARs shall be
substantially identical (to the extent possible taking into account the
differences related to the character of the SAR) to the terms and conditions
that would have been applicable under Section 6 were the grant of the SARs a
grant of an Option (including, but not limited to, the application of Section
6.6).
7.3 Exercise of Tandem SARs. SARs that are granted in tandem with an
Option may only be exercised upon the surrender of the right to exercise such
Option for an equivalent number of shares and may be exercised only with respect
to the shares of Stock for which the related Award is then exercisable.
7.4 Payment of SAR Amount. Upon exercise of a SAR, the holder shall be
entitled to receive payment, in cash, in shares of Common Stock or in a
combination thereof, as determined by the Committee, of an amount determined by
multiplying:
(a) the excess, if any, of the Fair Market Value of a share of
Stock at the date of exercise over the Fair Market Value of a share of
Common Stock on the date of grant, by
(b) the number of shares of Common Stock with respect to which
the SARs are then being exercised;
provided, however, that at the time of grant with respect to any SAR payable in
cash, the Committee may establish, in its sole discretion, a maximum amount per
share which will be payable upon the exercise of such SAR.
ARTICLE VIII
RESTRICTED STOCK, RESTRICTED UNITS AND DIVIDEND EQUIVALENTS
8.1 Grant of Restricted Stock and Restricted Units. The Committee, in
its sole discretion, may make Awards to Participants of Restricted Stock or
Restricted Units. Any Award made hereunder of Restricted Stock or Restricted
Units shall be subject to the terms and conditions of the Plan and to any other
terms and conditions not inconsistent with the Plan (including, but not limited
to, requiring the Participant to pay the Company an amount equal to the par
value per share for each share of Restricted Stock awarded) as shall be
prescribed by the Committee in its sole discretion, either at the time of grant
or thereafter. As determined by the Committee, with respect to an Award of
Restricted Stock, the Company shall either (i) transfer or issue to each
Participant to whom an award of Restricted Stock has been made the number of
shares of Restricted Stock specified by the Committee or (ii) hold such shares
of Restricted Stock for the benefit of the Participant for the Restricted
Period. In the case of an Award of Restricted Units, no
18
shares of Common Stock shall be issued at the time an Award is made, and the
Company shall not be required to set aside a fund for the payment of such Award.
Dividends or Dividends Equivalents (if connected with the grant of Restricted
Units) may be subject to the same terms and conditions as the underlying Award
of Restricted Stock or Restricted Units.
8.2 Grant, Terms and Conditions of Dividend Equivalents. The Committee,
in its sole discretion, may make Awards to Participants of Dividend Equivalents
in connection with the grant of Restricted Units, Options, SARs and/or
Performance Shares. Unless the Committee shall otherwise determine, the terms
and conditions (including, without limitation, the vesting schedule applicable
thereto and the impact of any termination of service on the Participant's rights
with respect to the Dividend Equivalent) shall be substantially identical (to
the extent possible taking into account the differences related to the character
of the Dividend Equivalent) to the terms and conditions applicable to the
associated Award.
8.3 Restrictions On Transferability. Shares of Restricted Stock and
Restricted Units may not be sold, assigned, transferred, pledged, hypothecated
or otherwise encumbered by the Participant during the Restricted Period, except
as hereinafter provided. Notwithstanding the foregoing, the Committee may permit
(on such terms and conditions as it shall establish) shares of Restricted Stock
and Restricted Units to be transferred during the Restricted Periods pursuant to
Section 12.1, provided that any shares of Restricted Stock or Restricted Units
so transferred shall remain subject to the provisions of this Article VIII.
8.4 Rights as a Shareholder. Except for the restrictions set forth
herein and unless otherwise determined by the Committee, the Participant shall
have all the rights of a shareholder with respect to such shares of Restricted
Stock, including but not limited to, the right to vote and the right to receive
dividends. A Participant shall not have any right, in respect of Restricted
Units or Dividend Equivalents awarded pursuant to the Plan, to vote on any
matter submitted to the Company's stockholders until such time as the shares of
Common Stock attributable to such Restricted Units (and, if applicable, Dividend
Equivalents) have been issued.
8.5 Restricted Period. Unless the Committee shall otherwise determine
at the date an Award of Restricted Stock or Restricted Units (including any
Dividend Equivalents issued in connection with such Restricted Units) is made to
the Participant by the Committee, the Restricted Period shall commence upon the
date of grant by the Committee and shall lapse with respect to the shares of
Restricted Stock or Restricted Units on the third (3rd) anniversary of the date
of grant, unless sooner terminated as otherwise provided herein.
19
8.6 Legending or Equivalent. To the extent that certificates are issued
to a Participant in respect of shares of Restricted Stock awarded under the Plan
(or in the event that such Restricted Stock are held electronically), such
shares shall be registered in the name of the Participant and shall have such
legends (or account restrictions) reflecting the restrictions of such Awards in
such manner as the Committee may deem appropriate.
8.7 Termination of Employment. Unless the Committee shall otherwise
determine at or subsequent to the date of grant:
(a) Due to Death. In the event a Participant's employment
terminates by reason of death, the Restricted Period will lapse as to
the entire portion of the shares of Restricted Stock and/or Restricted
Units (including any associated Dividend Equivalents) transferred or
issued to such Participant under the Plan.
(b) Due to Disability. In the event a Participant's employment
terminates by reason of Disability, the Restricted Period will lapse as
to the entire portion of the shares of Restricted Stock and/or
Restricted Units (including any associated Dividend Equivalents)
transferred or issued to such Participant under the Plan.
(c) Due to Approved Retirement. In the event a Participant's
employment terminates by reason of Approved Retirement, the Restricted
Period will lapse as to the entire portion of the shares of Restricted
Stock and/or Restricted Units transferred or issued to such Participant
under the Plan (including any associated Dividend Equivalents).
(d) Due to Cause. In the event a Participant's employment is
terminated by the Company or any Subsidiary for Cause, any Restricted
Stock or Restricted Units (including any associated Dividend
Equivalents) granted to such Participant shall be forfeited at the time
of such termination, and the Committee may, consistent with Section 4.5
of the Plan, require that such Participant disgorge any profit, gain or
other benefit received in respect of the lapse of restrictions on any
prior grant of Restricted Stock or Restricted Units (including any
Dividend Equivalents) for a period of up to twelve (12) months prior to
the Participant's termination of employment for Cause. For purposes of
this Section 8.7, in the event a Participant's employment is terminated
by the Company or any Subsidiary for Cause, the provisions of this
Section 8.7(d) will apply notwithstanding any assertion (by the
Participant or otherwise) of a termination of employment for any other
reason enumerated under this Section.
(e) Due to Resignation. In the event a Participant's employment
ends as a result of such Participant's resignation from the Company or
any Subsidiary,
20
any Restricted Stock granted to such Participant and all Restricted
Units (including any associated Dividend Equivalents) credited to such
Participant shall be forfeited upon the Participant's termination of
employment.
(f) Due to Any Other Reason. In the event a Participant's
employment is terminated by the Company or any Subsidiary for any other
reason during the applicable vesting period, the Participant (or the
Participant's estate or beneficiaries, if the Participant subsequently
dies) shall receive a payment calculated in the following manner: (i)
the number of shares of Restricted Stock or Restricted Units granted
will be reduced by multiplying the grant by a fraction, the numerator of
which is the number of full months in the applicable vesting period
during which the Participant was an active employee and the denominator
of which is the number of months in the applicable vesting period (with
a partial month worked shall be counted as a full month if the
Participant is an active employee for 15 days or more in that month);
and (ii) the resulting reduced number of Restricted Stock or Restricted
Units shall be considered vested and payment of such pro-rated Awards is
to be made to the Participant (or beneficiaries or estate, if the
Participant subsequently dies) as soon as practicable after the
Participant's termination of employment.
8.8 Issuance of New Certificate or Equivalent; Settlement of Restricted
Units and Dividend Equivalents. Upon the lapse of the Restricted Period with
respect to any shares of Restricted Stock, such shares shall no longer be
subject to the restrictions imposed under Section 8.3 and the Company shall
issue or have issued new share certificates (or remove any such restrictions
that may have been established electronically) without the legend or equivalent
described in Section 8.6 in exchange for those previously issued. Upon the lapse
of the Restricted Period with respect to any Restricted Units, the Company shall
deliver to the Participant, or the Participant's beneficiary or estate, as
provided in Section 12.2, one share of Common Stock for each Restricted Unit as
to which restrictions have lapsed and any Dividend Equivalents credited with
respect to such Restricted Units and any interest thereon. The Committee may, in
its sole discretion, elect to pay cash or part cash and part Common Stock in
lieu of delivering only Common Stock for Restricted Units and/or Dividend
Equivalents. If a cash payment is made in lieu of delivering Common Stock for
Restricted Units, the amount of such cash payment for each share of Common Stock
to which a Participant is entitled shall be equal to the Fair Market Value of
the Common Stock on the date on which the Restricted Period lapsed with respect
to the related Restricted Unit.
21
ARTICLE IX
ANNUAL INCENTIVE AWARDS,
LONG-TERM PERFORMANCE UNIT AWARDS
AND PERFORMANCE SHARE AWARDS
9.1 Annual Incentive Awards.
(a) General Description. At the direction of the Committee, Annual
Incentive Awards may be made to Participants and, unless determined otherwise by
the Committee at or after the date of grant, shall be paid in cash.
(b) Requirements for Covered Employees. For any Covered Employees and
to the extent the Committee intends to comply with the requirements for
performance-based Awards described generally under Code section 162(m), the
Committee must certify, prior to payment of any such amounts, that any
applicable Performance Goals and/or other requirements have been satisfied, and
that such amounts are consistent with the limits provided under Section 5.2(b).
(c) Payment of Annual Incentive Awards. Unless the Committee determines
otherwise either at grant or thereafter, in the event a Participant terminates
employment before the end of an annual Performance Cycle due to death,
Disability, or Approved Retirement, such Participant, or his or her estate,
shall be eligible to receive a prorated Annual Incentive Award based on (a) in
the case of death or Disability, full achievement of the Participant's
Performance Goals for such Performance Cycle, and (b) in the case of Approved
Retirement, the actual achievement of the Performance Goals for such Performance
Cycle, in each case prorated for the portion of the Performance Cycle completed
before the Participant's termination of employment. If a Participant terminates
employment before payment of an Annual Incentive Award is authorized by the
Committee for any reason other than death, Disability or Approved Retirement,
the Participant shall forfeit all rights to such Annual Incentive Award unless
otherwise determined by the Committee.
9.2 Long-Term Performance Unit Awards.
(a) General Description. At the discretion of the Committee, grants of
Long-Term Performance Unit Awards may be made to Participants.
(b) Requirements for Covered Employees. For any Covered Employees and
to the extent the Committee intends to comply with the requirements for
performance-based Awards described generally under Code section 162(m), the
Committee must certify, prior to payment of any such
22
amounts, that any applicable Performance Goals and/or other requirements have
been satisfied, and that such amounts paid are consistent with the limits
provided under Section 5.2(b).
(c) Payment of Long-Term Performance Unit Awards. Long-Term Performance
Unit Awards shall be payable in cash, Common Stock, or a combination of cash and
Common Stock at the discretion of the Committee. Unless the Committee shall
otherwise determine at or subsequent to the date of grant:
(i) Due to Death. In the event a Participant's employment
terminates by reason of death during the applicable Performance Cycle,
the Participant's estate or beneficiaries will receive a lump sum
payment as soon as practicable of such Long-Term Performance Unit
Award, calculated as if the target value or equivalent value for each
Unit had, in fact, been achieved.
(ii) Due to Disability. In the event a Participant's
employment terminates by reason of Disability during the applicable
Performance Cycle, the Participant (or the Participant's estate or
beneficiaries, if the Participant subsequently dies) will receive a
lump sum payment as soon as practicable of such Long-Term Performance
Unit Award, calculated as if the target value or equivalent value for
each Unit had, in fact, been achieved.
(iii) Due to Approved Retirement. In the event a Participant's
employment terminates by reason of Approved Retirement during the
applicable Performance Cycle, the Participant (or the Participant's
estate or beneficiaries, if the Participant subsequently dies) shall
receive a payment calculated in the following manner: (i) the number of
Long-Term Performance Units granted will be reduced by multiplying the
grant by a fraction, the numerator of which is the number of full
months in the Performance Cycle during which the Participant was an
active employee and the denominator of which is the number of months in
the Performance Cycle (with a partial month worked shall be counted as
a full month if the Participant is an active employee for 15 days or
more in that month); and (ii) the resulting reduced number of Long-Term
Performance Units shall be considered vested and payment made to the
Participant in a lump sum as soon as practicable after the completion
of the respective Performance Cycle and the final valuation of such
Units is determined.
23
(iv) Due to Cause. In the event a Participant's employment is
terminated by the Company or any Subsidiary for Cause, any outstanding
Long-Term Performance Unit Awards shall be cancelled and the Committee
may, consistent with Section 4.5 of the Plan, require that such
Participant disgorge any profit, gain or other benefit received in
respect of the payment of any prior Long-Term Performance Unit Awards
received within a period of twelve (12) months prior to the
Participant's termination of employment for Cause. For purposes of this
Section 9.2(c)(iv), in the event a Participant's employment is
terminated by the Company or any Subsidiary for Cause, the provisions
of this Section 9.2(c)(iv) will apply notwithstanding any assertion (by
the Participant or otherwise) of a termination of employment for any
other reason enumerated under this Section.
(v) Due to Resignation. In the event a Participant's
employment ends as a result of such Participant's resignation from the
Company or any Subsidiary, any Long-Term Performance Units credited to
such Participant shall be forfeited upon the Participant's termination
of employment.
(vi) Due to Any Other Reason. In the event a Participant's
employment is terminated by the Company or any Subsidiary for any other
reason during the applicable Performance Cycle, the Participant (or the
Participant's estate Participant (or the Participant's estate or
beneficiaries, if the Participant subsequently dies) shall receive a
payment calculated in the following manner: (i) the number of Long-Term
Performance Units granted will be reduced by multiplying the grant by a
fraction, the numerator of which is the number of full months in the
Performance Cycle during which the Participant was an active employee
and the denominator of which is the number of months in the Performance
Cycle (with a partial month worked shall be counted as a full month if
the Participant is an active employee for 15 days or more in that
month); and (ii) the resulting reduced number of Long-Term Performance
Units shall be considered vested and payment made to the Participant of
a lump sum payment as soon as practicable of such pro-rated Long-Term
Performance Unit Award, calculated as if the target value or equivalent
value for each Unit had, in fact, been achieved.
9.3 Performance Shares.
(a) General Description. At the discretion of the Committee, grants of
Performance Share Awards may be made to Participants.
24
(b) Requirements for Covered Employees. For any Covered Employees and
to the extent the Committee intends to comply with the requirements for
performance-based Awards described generally under Code section 162(m), the
Committee must certify, prior to payment of any such amounts, that any
applicable Performance Goals and/or other requirements have been satisfied, and
that such amounts paid are consistent with the limits provided under Section
5.2(b).
(c) Payment of Performance Share Awards. Performance Share Awards shall
be payable in Common Stock. Unless the Committee shall otherwise determine at or
subsequent to the date of grant:
(i) Due to Death. In the event a Participant's employment
terminates by reason of death during the applicable Performance Cycle,
the Participant's estate or beneficiaries will receive a lump sum
payment as soon as practicable of such Performance Share Award,
calculated as if the target number of Performance Shares had, in fact,
been earned.
(ii) Due to Disability. In the event a Participant's
employment terminates by reason of Disability during the applicable
Performance Cycle, the Participant (or the Participant's estate or
beneficiaries, if the Participant subsequently dies) will receive a
lump sum payment as soon as practicable of such Performance Share
Award, calculated as if the target number of Performance Shares had, in
fact, been earned.
(iii) Due to Approved Retirement. In the event a Participant's
employment terminates by reason of Approved Retirement during the
applicable Performance Cycle, the Participant (or the Participant's
estate or beneficiaries, if the Participant subsequently dies) shall
receive a payment calculated in the following manner: (i) the number of
Performance Shares granted will be reduced by multiplying the grant by
a fraction, the numerator of which is the number of full months in the
Performance Cycle during which the Participant was an active employee
and the denominator of which is the number of months in the Performance
Cycle (with a partial month worked shall be counted as a full month if
the Participant is an active employee for 15 days or more in that
month); and (ii) the resulting reduced number of Performance Shares
shall be considered vested and payment made to the Participant in a
lump sum as soon as practicable after the completion of the respective
Performance Cycle and the final number of Performance Shares has been
determined.
25
(iv) Due to Cause. In the event a Participant's employment is
terminated by the Company or any Subsidiary for Cause, any outstanding
Performance Share Awards shall be cancelled and the Committee may,
consistent with Section 4.5 of the Plan, require that such Participant
disgorge any profit, gain or other benefit received in respect of the
payment of any prior Performance Share Awards received within a period
of twelve (12) months prior to the Participant's termination of
employment for Cause. For purposes of this Section 9.3(c)(iv), in the
event a Participant's employment is terminated by the Company or any
Subsidiary for Cause, the provisions of this Section 9.3(c)(iv) will
apply notwithstanding any assertion (by the Participant or otherwise)
of a termination of employment for any other reason enumerated under
this Section.
(v) Due to Resignation. In the event a Participant's
employment ends as a result of such Participant's resignation from the
Company or any Subsidiary, any Performance Share Awards credited to
such Participant shall be forfeited upon the Participant's termination
of employment.
(vi) Due to Any Other Reason. In the event a Participant's
employment is terminated by the Company or any Subsidiary for any other
reason during the applicable Performance Cycle, the Participant (or the
Participant's estate or beneficiaries, if the Participant subsequently
dies) shall receive a payment calculated in the following manner: (i)
the number of Performance Shares granted will be reduced by multiplying
the grant by a fraction, the numerator of which is the number of full
months in the Performance Cycle during which the Participant was an
active employee and the denominator of which is the number of months in
the Performance Cycle (with a partial month worked shall be counted as
a full month if the Participant is an active employee for 15 days or
more in that month); and (ii) the resulting reduced number of
Performance Shares shall be considered vested and payment made to the
Participant of a lump sum payment as soon as practicable of such
pro-rated Performance Share Award, calculated as if the target number
of Performance Shares had, in fact, been earned.
26
ARTICLE X
CHANGE OF CONTROL
10.1 Accelerated Vesting and Payment of Awards. Subject to the
provisions of Section 10.3, in the event of a Change of Control each Option and
SAR then outstanding shall be fully exercisable regardless of the exercise
schedule otherwise applicable to such Option and/or SAR, and the Restricted
Period shall lapse as to each share of Restricted Stock and each Restricted Unit
then outstanding. In connection with such a Change of Control, the Committee
may, in its discretion, provide that each Option, SAR, Restricted Stock and/or
Restricted Unit shall, upon the occurrence of such Change of Control, be
cancelled in exchange for a payment per share/unit (the "Settlement Payment") in
an amount based on the Change of Control Price. Such Settlement Payment shall be
in the form of cash.
10.2 Long Term Performance Unit Awards and Performance Share Awards.
Subject to the provisions of Section 10.3, in the event of a Change of Control,
(a) any outstanding Long Term Performance Unit Awards or Performance Share
Awards relating to Performance Cycles ending prior to the Change of Control
which have been earned but not paid shall become immediately payable, (b) all
then-in-progress Performance Cycles for Long Term Performance Unit Awards or
Performance Share Awards that are outstanding shall end, and all Participants
shall be deemed to have earned an award equal to the Participant's target award
opportunity for the Performance Cycle in question, and (c) the Company shall pay
all such Long Term Performance Unit Awards and Performance Share Awards as a
Settlement Payment within thirty (30) days of such Change of Control, based on
the Change of Control Price. Such Settlement Payment shall be in cash.
10.3 Alternative Awards. Notwithstanding Section 10.1 or 10.2, no
cancellation, acceleration of exercisability, vesting, cash settlement or other
payment shall occur with respect to any Option, SAR, Restricted Stock,
Restricted Unit, Long-Term Performance Unit and/or Performance Share if the
Committee reasonably determines in good faith prior to the occurrence of a
Change of Control that such Option, SAR, Restricted Stock, Restricted Unit,
Long-Term Performance Unit and/or Performance Share shall be honored or assumed,
or new rights substituted therefore (such honored, assumed or substituted award
hereinafter called an "Alternative Award"), by a Participant's employer (or the
parent or an affiliate of such employer) immediately following the Change of
Control; provided that any such Alternative Award must:
(a) be based on stock that is traded on an established securities
market;
(b) provide such Participant with rights and entitlements
substantially equivalent to or better than the rights, terms and
conditions applicable under such
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Option, SAR, Restricted Stock, Restricted Unit, Long-Term Performance Unit
and/or Performance Share, including, but not limited to, an identical or
better exercise or vesting schedules;
(c) have substantially equivalent value to such Option, SAR,
Restricted Stock, Restricted Unit, Long-Term Performance Unit and/or
Performance Share (determined at the time of the Change in Control); and
(d) have terms and conditions which provide that in the event that the
Participant's employment is involuntarily terminated for any reason other than
for Cause, all of such Participant's Options, SARs, Restricted Stock, Restricted
Units, Long-Term Performance Units and/or Performance Shares shall be deemed
immediately and fully exercisable and/or all restrictions shall lapse, and shall
be settled for a payment per each share of stock subject to the Alternative
Award in cash, in immediately transferable, publicly traded securities, or in a
combination thereof, in an amount equal to (i) the Fair Market Value of such
stock on the date of the Participant's termination (with respect to any
Restricted Stock, and/or Restricted Units), (ii) the excess of the Fair Market
Value of such stock on the date of the Participant's termination over the
corresponding exercise or base price per share, if any (with respect to any
Option and/or SARs), or (iii) the Participant's target award opportunity for the
Performance Cycle in question (with respect to any Long-Term Performance Units
or Performance Shares).
ARTICLE XI
AMENDMENT, MODIFICATION, AND TERMINATION OF PLAN
11.1 General. The Board may, at any time and from time to time amend,
modify, suspend, or terminate this Plan, in whole or in part, without notice to
or the consent of any participant or employee; provided, however, that any
amendment which would (i) increase the number of shares available for issuance
under the Plan, (ii) lower the minimum exercise price at which an Option (or the
base price at which a SAR) may be granted or (iii) change the individual Award
limits shall be subject to the approval of the Company's shareholders. No
amendment, modification or termination of the Plan shall in any manner adversely
affect any Award theretofore granted under the Plan, without the consent of the
Participant, provided, however, that
(a) any change pursuant to, and in accordance with the requirements of,
Article X;
(b) any acceleration of payments of amounts accrued under the Plan by
action of the Committee or by operation of the Plan's terms; or
(c) any decision by the Committee to limit participation (or other
features of the Plan) prospectively under the Plan
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shall not be deemed to violate this provision.
ARTICLE XII
MISCELLANEOUS PROVISIONS
12.1 Transferability of Awards. No Awards granted under the Plan may be
sold, transferred, pledged, assigned, or otherwise alienated or hypothecated,
other than by will or by the laws of descent and distribution; provided that the
Committee may, in the Award agreement or otherwise, permit transfers of
Nonstatutory Stock Options with or without tandem SARs, freestanding SARs,
Restricted Stock and Restricted Units to Family Members (including, without
limitation, transfers effected by a domestic relations order).
12.2 Treatment of Any Outstanding Rights or Features Upon Participant's
Death. Any Awards, rights or features remaining unexercised or unpaid at the
Participant's death shall be paid to, or exercised by, the Participant's estate
except where otherwise provided by law, or when done in accordance with other
methods (including a beneficiary designation process) put in place by the
Committee or a duly appointed designee from time to time. Except as otherwise
provided herein, nothing in this Plan is intended or may be construed to give
any person other than Participants any options, rights or remedies under this
Plan.
12.3 Deferral of Payment. The Committee may, in the Award agreement or
otherwise, permit a Participant to elect, upon such terms and conditions as the
Committee may establish, to defer receipt of shares of Common Stock that would
otherwise be issued upon exercise or vesting of an Award. Notwithstanding
anything else contained herein to the contrary, deferrals shall not be permitted
hereunder in a way that will result in the Company or any Subsidiary being
required to recognize a financial accounting charge due to such deferral that is
substantially greater than the charge, if any, that was associated with the
underlying Award.
12.4 Awards In Substitution for Awards Granted By Other Companies.
Awards may be granted under the Plan from time to time as replacements for
awards (including, but not limited to, options, common stock, restricted stock,
performance shares or performance units) held by employees of other companies
who become Employees of the Company or of any Subsidiary as a result of a merger
or consolidation of the employing company with the Company, or such Subsidiary,
or the acquisition by the Company or a Subsidiary of all or a portion of the
assets of the employing company. Shares issued in connection with such
substitute Awards shall not reduce the number of shares of Common Stock issuable
under Section 5.1 of the Plan.
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12.5 No Guarantee of Employment or Participation. The existence of the
Plan shall not be deemed to constitute a contract of employment between the
Company or any affiliate and any Eligible Individual or Participant, nor shall
it constitute a right to remain in the employ of the Company or any affiliate.
The terms or existence of this Plan, as in effect at any time or from time to
time, or any Award granted under the Plan, shall not interfere with or limit in
any way the right of the Company or any Subsidiary to terminate any
Participant's employment at any time, nor confer upon any Participant any right
to continue in the employ of the Company or any Subsidiary or any other
affiliate of the Company. Each employee of the Company or any Subsidiary remains
at will. Except to the extent expressly selected by the Committee to be a
Participant, no person (whether or not an Eligible Individual or a Participant)
shall at any time have a right to be selected for (or additional) participation
in the Plan, despite having previously participated in an incentive or bonus
plan of the Company or an affiliate.
12.6 Tax Withholding. The Company, Subsidiary or an affiliate shall
have the right and power to deduct from all payments or distributions hereunder,
or require a Participant to remit to the Company promptly upon notification of
the amount due, an amount (which may include shares of Common Stock) to satisfy
any federal, state, local or foreign taxes or other obligations required by law
to be withheld with respect thereto with respect to any Award. The Company may
defer payments of cash or issuance or delivery of Common Stock until such
withholding requirements are satisfied. The Committee may, in its discretion,
permit a Participant to elect, subject to such conditions as the Committee shall
impose, (a) to have shares of Common Stock otherwise issuable under the Plan
withheld by the Company or (b) to deliver to the Company previously acquired
shares of Common Stock (through actual tender or attestation), in either case
for the greatest number of whole shares having a Fair Market Value on the date
immediately preceding the date of exercise not in excess of the amount required
to satisfy the withholding tax obligations.
12.7 No Limitation on Compensation; Scope of Liabilities. Nothing in
the Plan shall be construed to limit the right of the Company to establish other
plans if and to the extent permitted by applicable law. The liability of the
Company, Subsidiary or any affiliate under this Plan is limited to the
obligations expressly set forth in the Plan, and no term or provision of this
Plan may be construed to impose any further or additional duties, obligations,
or costs on the Company or any affiliate thereof or the Committee not expressly
set forth in the Plan.
12.8 Requirements of Law. The granting of Awards and the issuance of
shares of Common Stock shall be subject to all applicable laws, rules, and
regulations, and to such approvals by any governmental agencies or national
securities exchanges as may be required.
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12.9 Term of Plan. The Plan shall be effective upon the Effective Date.
The Plan shall terminate on the earlier of (a) the termination of the Plan
pursuant to Article XI, or (b) when no more shares are available for issuance of
Awards under the Plan.
12.10 Governing Law. The Plan, and all agreements hereunder, shall be
construed in accordance with and governed by the laws of the State of New
Jersey, without regard to principles of conflict of laws.
12.11 Securities Law Compliance. Instruments evidencing Awards may
contain such other provisions, not inconsistent with the Plan, as the Committee
deems advisable, including a requirement that the Participant represent to the
Company in writing, when an Award is granted or when he receives shares with
respect to such Award (or at such other time as the Committee deems appropriate)
that he is accepting such Award, or receiving or acquiring such shares (unless
they are then covered by a Securities Act of 1933 registration statement), for
his own account for investment only and with no present intention to transfer,
sell or otherwise dispose of such shares except such disposition by a legal
representative as shall be required by will or the laws of any jurisdiction in
winding up the estate of the Participant. Such shares shall be transferable, or
may be sold or otherwise disposed of only if the proposed transfer, sale or
other disposition shall be permissible pursuant to the Plan and if, in the
opinion of counsel satisfactory to the Company, such transfer, sale or other
disposition at such time will be in compliance with applicable securities laws.
12.12 No Impact On Benefits. Except as may otherwise be specifically
provided for under any employee benefit plan, policy or program provision to the
contrary, Awards shall not be treated as compensation for purposes of
calculating an Eligible Individual's right under any such plan, policy or
program.
12.13 No Constraint on Corporate Action. Except as provided in Article
XI, nothing contained in this Plan shall be construed to prevent the Company, or
any affiliate, from taking any corporate action (including, but not limited to,
the Company's right or power to make adjustments, reclassifications,
reorganizations or changes of its capital or business structure, or to merge or
consolidate, or dissolve, liquidate, sell, or transfer all or any part of its
business or assets) which is deemed by it to be appropriate, or in its best
interest, whether or not such action would have an adverse effect on this Plan,
or any Awards made under this Plan. No employee, beneficiary, or other person,
shall have any claim against the Company, any Subsidiary, or any of its
affiliates, as a result of any such action.
12.14 Captions. The headings and captions appearing herein are inserted
only as a matter of convenience. They do not define, limit, construe, or
describe the scope or intent of the provisions of the Plan.
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