Exhibit
10.33
PG&E
Corporation
2006
Long-Term Incentive Plan
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TABLE
OF CONTENTS
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Page
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1.
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Establishment,
Purpose and Term of Plan
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1
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1.1
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Establishment
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1
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1.2
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Purpose
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1
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1.3
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Term
of Plan
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1
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2.
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Definitions
and Construction
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1
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2.1
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Definitions
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1
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2.2
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Construction
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7
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3.
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Administration
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7
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3.1
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Administration
by the Committee
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7
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3.2
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Authority
of Officers
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7
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3.3
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Administration
with Respect to Insiders
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8
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3.4
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Committee
Complying with Section 162(m)
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8
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3.5
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Powers
of the Committee
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8
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3.6
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Option
or SAR Repricing
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9
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3.7
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Indemnification
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9
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4.
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Shares
Subject to Plan
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10
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4.1
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Maximum
Number of Shares Issuable
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10
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4.2
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Adjustments
for Changes in Capital Structure
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10
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5.
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Eligibility
and Award Limitations
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11
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5.1
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Persons
Eligible for Awards
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11
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5.2
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Participation
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11
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5.3
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Incentive
Stock Option Limitations
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11
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5.4
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Award
Limits
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12
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6.
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Terms
and Conditions of Options
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13
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6.1
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Exercise
Price
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13
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6.2
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Exercisability
and Term of Options
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13
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6.3
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Payment
of Exercise Price
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13
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6.4
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Effect
of Termination of Service
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14
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6.5
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Transferability
of Options
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14
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7.
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Terms
and Conditions of Nonemployee Director Awards
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15
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7.1
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Automatic
Grant of Restricted Stock
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15
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7.2
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Annual
Election to Receive Nonstatutory Stock Option and Restricted Stock
Units
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15
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7.3
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Grant
of Nonstatutory Stock Option
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15
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7.4
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Grant
of Restricted Stock Unit
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16
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7.5
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Effect
of Termination of Service as a Nonemployee Director
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17
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7.6
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Effect
of Change in Control on Nonemployee Director Awards
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18
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TABLE
OF CONTENTS
(continued)
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Page
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7.7
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Right
to Decline Nonemployee Director Awards
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18
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8.
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Terms
and Conditions of Stock Appreciation Rights
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19
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8.1
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Types
of SARs Authorized
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19
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8.2
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Exercise
Price
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19
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8.3
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Exercisability
and Term of SARs
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19
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8.4
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Deemed
Exercise of SARs
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19
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8.5
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Effect
of Termination of Service
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20
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8.6
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Nontransferability
of SARs
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20
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9.
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Terms
and Conditions of Restricted Stock Awards
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20
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9.1
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Types
of Restricted Stock Awards Authorized
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20
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9.2
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Purchase
Price
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20
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9.3
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Purchase
Period
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20
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9.4
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Vesting
and Restrictions on Transfer
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20
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9.5
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Voting
Rights, Dividends and Distributions
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21
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9.6
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Effect
of Termination of Service
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21
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9.7
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Nontransferability
of Restricted Stock Award Rights
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21
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10.
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Terms
and Conditions of Performance Awards
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21
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10.1
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Types
of Performance Awards Authorized
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22
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10.2
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Initial
Value of Performance Shares and Performance Units
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22
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10.3
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Establishment
of Performance Period, Performance Goals and Performance Award
Formula
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22
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10.4
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Measurement
of Performance Goals
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22
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10.5
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Settlement
of Performance Awards
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23
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10.6
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Voting
Rights, Dividend Equivalent Rights and Distributions
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24
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10.7
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Effect
of Termination of Service
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24
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10.8
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Nontransferability
of Performance Awards
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25
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11.
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Terms
and Conditions of Restricted Stock Unit Awards
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25
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11.1
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Grant
of Restricted Stock Unit Awards
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25
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11.2
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Vesting
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25
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11.3
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Voting
Rights, Dividend Equivalent Rights and Distributions
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25
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11.4
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Effect
of Termination of Service
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26
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11.5
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Settlement
of Restricted Stock Unit Awards
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26
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11.6
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Nontransferability
of Restricted Stock Unit Awards
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26
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12.
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Deferred
Compensation Awards
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27
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12.1
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Establishment
of Deferred Compensation Award Programs
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27
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12.2
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Terms
and Conditions of Deferred Compensation Awards
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27
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TABLE
OF CONTENTS
(continued)
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Page
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13.
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Other
Stock-Based Awards
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28
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14.
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Change
in Control
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28
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14.1
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Effect
of Change in Control on Options and SARs
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28
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14.2
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Effect
of Change in Control on Restricted Stock and Other Awards
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29
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14.3
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Nonemployee
Director Awards
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29
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15.
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Compliance
with Securities Law
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29
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16.
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Tax
Withholding
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29
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16.1
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Tax
Withholding in General
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29
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16.2
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Withholding
in Shares
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30
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17.
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Amendment
or Termination of Plan
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30
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18.
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Miscellaneous
Provisions
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30
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18.1
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Repurchase
Rights
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30
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18.2
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Provision
of Information
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30
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18.3
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Rights
as Employee, Consultant or Director
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30
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18.4
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Rights
as a Shareholder
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31
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18.5
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Fractional
Shares
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31
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18.6
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Severability
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31
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18.7
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Beneficiary
Designation
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31
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18.8
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Unfunded
Obligation
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31
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18.9
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Choice
of Law
|
32
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PG&E
Corporation
2006
Long-Term Incentive Plan
1. Establishment,
Purpose and Term of Plan.
1.1 Establishment.
The
PG&E Corporation 2006 Long-Term Incentive Plan (the “Plan”)
is
hereby established effective as of January 1, 2006 (the “Effective
Date”),
provided it has been approved by the shareholders of the Company.
1.2 Purpose.
The
purpose of the Plan is to advance the interests of the Participating Company
Group and its shareholders by providing an incentive to attract and retain
the
best qualified personnel to perform services for the Participating Company
Group, by motivating such persons to contribute to the growth and profitability
of the Participating Company Group, by aligning their interests with interests
of the Company’s shareholders, and by rewarding such persons for their services
by tying a significant portion of their total compensation package to the
success of the Company. The Plan seeks to achieve this purpose by providing
for
Awards in the form of Options, Stock Appreciation Rights, Restricted Stock
Awards, Performance Shares, Performance Units, Restricted Stock Units, Deferred
Compensation Awards and other Stock-Based Awards as described
below.
1.3 Term
of Plan.
The Plan
shall continue in effect until the earlier of its termination by the Board
or
the date on which all of the shares of Stock available for issuance under
the
Plan have been issued and all restrictions on such shares under the terms
of the
Plan and the agreements evidencing Awards granted under the Plan have lapsed.
However, all Awards shall be granted, if at all, within ten (10) years from
the
Effective Date. Moreover, Incentive Stock Options shall not be granted later
than ten (10) years from the date of shareholder approval of the
Plan.
2. Definitions
and Construction.
2.1 Definitions.
Whenever
used herein, the following terms shall have their respective meanings set
forth
below:
(a) “Affiliate”
means
(i) an entity, other than a Parent Corporation, that directly, or
indirectly through one or more intermediary entities, controls the Company
or
(ii) an entity, other than a Subsidiary Corporation, that is controlled by
the Company directly, or indirectly through one or more intermediary entities.
For this purpose, the term “control” (including the term “controlled by”) means
the possession, direct or indirect, of the power to direct or cause the
direction of the management and policies of the relevant entity, whether
through
the ownership of voting securities, by contract or otherwise; or shall have
such
other meaning assigned such term for the purposes of registration on
Form S-8 under the Securities Act.
(b) “Award”
means
any Option, SAR, Restricted Stock Award, Performance Share, Performance Unit,
Restricted Stock Unit or Deferred Compensation Award or other Stock-Based
Award
granted under the Plan.
(c) “Award
Agreement”
means a
written agreement between the Company and a Participant setting forth the
terms,
conditions and restrictions of the Award granted to the
Participant.
(d) “Board”
means
the Board of Directors of the Company.
(e) “Change
in Control”
means,
unless otherwise defined by the Participant’s Award Agreement or contract of
employment or service, the occurrence of any of the following:
(i) any
“person” (as such term is used in Sections 13(d) and 14(d) of the Exchange
Act, but excluding any benefit plan for Employees or any trustee, agent or
other
fiduciary for any such plan acting in such person’s capacity as such fiduciary),
directly or indirectly, becomes the “beneficial owner” (as defined in
Rule 13d-3 promulgated under the Exchange Act), of stock of the Company
representing twenty percent (20%) or more of the combined voting power of
the
Company’s then outstanding voting stock; or
(ii) during
any two consecutive years, individuals who at the beginning of such period
constitute the Board cease for any reason to constitute at least a majority
of
the Board, unless the election, or the nomination for election by the
shareholders of the Company, of each new Director was approved by a vote
of at
least two-thirds (2/3) of the Directors then still in office who were Directors
at the beginning of the period; or
(iii) the
consummation of any consolidation or merger of the Company other than a merger
or consolidation which would result in the voting stock of the Company
outstanding immediately prior thereto continuing to represent (either by
remaining outstanding or by being converted into voting stock of the surviving
entity or any parent of such surviving entity) at least seventy percent (70%)
of
the Combined Voting Power of the Company, such surviving entity or the parent
of
such surviving entity outstanding immediately after the merger or consolidation;
or
(iv) the
approval of the Shareholders of the Company of any (1) sale, lease, exchange
or
other transfer (in one or a series of related transactions) of all or
substantially all of the assets of the Company, or (2) any plan or proposal
for
the liquidation or dissolution of the Company.
For
purposes of paragraph (iii), the term “Combined
Voting Power”
shall
mean the combined voting power of the Company’s or other relevant entity’s then
outstanding voting stock.
(f) “Code”
means
the Internal Revenue Code of 1986, as amended, and any applicable regulations
promulgated thereunder.
(g) “Committee”
means
the Nominating, Compensation, and Governance Committee or other committee
of the
Board duly appointed to administer the Plan and having
such
powers as shall be specified by the Board. If no committee of the Board has
been
appointed to administer the Plan, the Board shall exercise all of the powers
of
the Committee granted herein, and, in any event, the Board may in its discretion
exercise any or all of such powers.
(h) “Company”
means
PG&E Corporation, a California corporation, or any successor corporation
thereto.
(i) “Consultant”
means a
person engaged to provide consulting or advisory services (other than as
an
Employee or a member of the Board) to a Participating Company, provided that
the
identity of such person, the nature of such services or the entity to which
such
services are provided would not preclude the Company from offering or selling
securities to such person pursuant to the Plan in reliance on registration
on a
Form S-8 Registration Statement under the Securities Act.
(j) “Deferred
Compensation Award”
means an
award of Stock Units granted to a Participant pursuant to
Section 12
of the
Plan.
(k) “Director”
means a
member of the Board.
(l) “Disability”
means
the permanent and total disability of the Participant, within the meaning
of
Section 22(e)(3) of the Code.
(m) “Dividend
Equivalent”
means a
credit, made at the discretion of the Committee or as otherwise provided
by the
Plan, to the account of a Participant in an amount equal to the cash dividends
paid on one share of Stock for each share of Stock represented by an Award
held
by such Participant.
(n) “Employee”
means
any person treated as an employee (including an Officer or a member of the
Board
who is also treated as an employee) in the records of a Participating Company
and, with respect to any Incentive Stock Option granted to such person, who
is
an employee for purposes of Section 422 of the Code; provided, however,
that neither service as a member of the Board nor payment of a director’s fee
shall be sufficient to constitute employment for purposes of the Plan. The
Company shall determine in good faith and in the exercise of its discretion
whether an individual has become or has ceased to be an Employee and the
effective date of such individual’s employment or termination of employment, as
the case may be. For purposes of an individual’s rights, if any, under the Plan
as of the time of the Company’s determination, all such determinations by the
Company shall be final, binding and conclusive, notwithstanding that the
Company
or any court of law or governmental agency subsequently makes a contrary
determination.
(o) “Exchange
Act”
means
the Securities Exchange Act of 1934, as amended.
(p) “Fair
Market Value”
means,
as of any date, the value of a share of Stock or other property as determined
by
the Committee, in its discretion, or by the Company, in its discretion, if
such
determination is expressly allocated to the Company herein, subject to the
following:
(i) Except
as
otherwise determined by the Committee, if, on such date, the Stock is listed
on
a national or regional securities exchange or market system, the Fair Market
Value of a share of Stock shall be the closing price of a share of Stock
as
quoted on the New York Stock Exchange or such other national or regional
securities exchange or market system constituting the primary market for
the
Stock, as reported in The
Wall Street Journal
or such
other source as the Company deems reliable. If the relevant date does not
fall
on a day on which the Stock has traded on such securities exchange or market
system, the date on which the Fair Market Value shall be established shall
be
the last day on which the Stock was so traded prior to the relevant date,
or
such other appropriate day as shall be determined by the Committee, in its
discretion.
(ii) Notwithstanding
the foregoing, the Committee may, in its discretion, determine the Fair Market
Value on the basis of the opening, closing, high, low or average sale price
of a
share of Stock or the actual sale price of a share of Stock received by a
Participant, on such date, the preceding trading day, the next succeeding
trading day or an average determined over a period of trading days. The
Committee may vary its method of determination of the Fair Market Value as
provided in this Section for different purposes under the Plan.
(iii) If,
on
such date, the Stock is not listed on a national or regional securities exchange
or market system, the Fair Market Value of a share of Stock shall be as
determined by the Committee in good faith without regard to any restriction
other than a restriction which, by its terms, will never lapse.
(q) “Incentive
Stock Option”
means an
Option intended to be (as set forth in the Award Agreement) and which qualifies
as an incentive stock option within the meaning of Section 422(b) of the
Code.
(r) “Insider”
means an
Officer, a Director or any other person whose transactions in Stock are subject
to Section 16 of the Exchange Act.
(s) “Mandatory
Retirement”
means
retirement as a Director at age 70 or at such other age as may be specified
in
the retirement policy for the Board in effect at the time of a Nonemployee
Director’s termination of Service as a Director.
(t) “Net-Exercise”
means a
procedure by which the Participant will be issued a number of shares of Stock
determined in accordance with the following formula:
X
=
Y(A-B)/A, where
X
= the
number of shares of Stock to be issued to the Participant upon exercise of
the
Option;
Y
= the
total number of shares with respect to which the Participant has elected
to
exercise the Option;
A
= the
Fair Market Value of one (1) share of Stock;
B
= the
exercise price per share (as defined in the Participant’s Award
Agreement).
(u) “Nonemployee
Director”
means a
Director who is not an Employee.
(v) “Nonemployee
Director Award”
means an
Award granted to a Nonemployee Director pursuant to Section 7
of the
Plan.
(w) “Nonstatutory
Stock Option”
means an
Option not intended to be (as set forth in the Award Agreement) an incentive
stock option within the meaning of Section 422(b) of the Code.
(x) “Officer”
means
any person designated by the Board as an officer of the Company.
(y) “Option”
means
the right to purchase Stock at a stated price for a specified period of time
granted to a Participant pursuant to Section 6
or
Section 7
of the
Plan. An Option may be either an Incentive Stock Option or a Nonstatutory
Stock
Option.
(z) “Option
Expiration Date”
means
the date of expiration of the Option’s term as set forth in the Award
Agreement.
(aa) “Parent
Corporation”
means
any present or future “parent corporation” of the Company, as defined in
Section 424(e) of the Code.
(bb) “Participant”
means
any eligible person who has been granted one or more Awards.
(cc) “Participating
Company”
means
the Company or any Parent Corporation, Subsidiary Corporation or
Affiliate.
(dd) “Participating
Company Group”
means,
at any point in time, all entities collectively which are then Participating
Companies.
(ee) “Performance
Award”
means an
Award of Performance Shares or Performance Units.
(ff) “Performance
Award Formula”
means,
for any Performance Award, a formula or table established by the Committee
pursuant to Section 10.3
of the
Plan which provides the basis for computing the value of a Performance Award
at
one or more threshold levels of attainment of the applicable Performance
Goal(s)
measured as of the end of the applicable Performance Period.
(gg) “Performance
Goal”
means a
performance goal established by the Committee pursuant to
Section 10.3
of the
Plan.
(hh) “Performance
Period”
means a
period established by the Committee pursuant to Section 10.3
of the
Plan at the end of which one or more Performance Goals are to be
measured.
(jj) “Performance
Share”
means a
bookkeeping entry representing a right granted to a Participant pursuant
to
Section 10
of the
Plan to receive a payment equal to the value of a Performance Share, as
determined by the Committee, based on performance.
(jj) “Performance
Unit”
means a
bookkeeping entry representing a right granted to a Participant pursuant
to
Section 10
of the
Plan to receive a payment equal to the value of a Performance Unit, as
determined by the Committee, based upon performance.
(kk) “Restricted
Stock Award”
means an
Award of Restricted Stock.
(ll) “Restricted
Stock Unit”
or
“Stock
Unit”
means a
bookkeeping entry representing a right granted to a Participant pursuant
to
Section 11
or
Section 12
of the
Plan, respectively, to receive a share of Stock on a date determined in
accordance with the provisions of Section 11
or
Section 12,
as
applicable, and the Participant’s Award Agreement.
(mm) “Restriction
Period”
means
the period established in accordance with Section 9.4
of the
Plan during which shares subject to a Restricted Stock Award are subject
to
Vesting Conditions.
(nn) “Retirement”
means
termination as an Employee of a Participating Company at age 55 or older,
provided that the Participant was an Employee for at least five consecutive
years prior to the date of such termination.
(oo) “Rule
16b-3”
means
Rule 16b-3 under the Exchange Act, as amended from time to time, or any
successor rule or regulation.
(pp) “SAR”
or
“Stock
Appreciation Right”
means a
bookkeeping entry representing, for each share of Stock subject to such SAR,
a
right granted to a Participant pursuant to Section 8
of the
Plan to receive payment in any combination of shares of Stock or cash of
an
amount equal to the excess, if any, of the Fair Market Value of a share of
Stock
on the date of exercise of the SAR over the exercise price.
(qq) “Section 162(m)”
means
Section 162(m) of the Code.
(rr) “Securities
Act”
means
the Securities Act of 1933, as amended.
(ss) “Service”
means a
Participant’s employment or service with the Participating Company Group,
whether in the capacity of an Employee, a Director or a Consultant. A
Participant’s Service shall not be deemed to have terminated merely because of a
change in the capacity in which the Participant renders such Service or a
change
in the Participating Company for which the Participant renders such Service,
provided that there is no interruption or termination of the Participant’s
Service. Furthermore, a Participant’s Service shall not be deemed to have
terminated if the Participant takes any military leave, sick leave, or other
bona fide leave of absence approved by the Company. However, if any such
leave
taken by a Participant exceeds ninety (90) days, then on the one hundred
eighty-first (181st) day following the commencement of such leave any Incentive
Stock Option held by the Participant shall cease to be treated as an Incentive
Stock Option and instead shall be treated thereafter as a Nonstatutory Stock
Option, unless the Participant’s right to return to Service with
the
Participating
Company Group is guaranteed by statute or contract. Notwithstanding the
foregoing, unless otherwise designated by the Company or required by law,
a
leave of absence shall not be treated as Service for purposes of determining
vesting under the Participant’s Award Agreement. A Participant’s Service shall
be deemed to have terminated either upon an actual termination of Service
or
upon the entity for which the Participant performs Service ceasing to be
a
Participating Company. Subject to the foregoing, the Company, in its discretion,
shall determine whether the Participant’s Service has terminated and the
effective date of such termination.
(tt) Stock”
means
the common stock of the Company, as adjusted from time to time in accordance
with Section 4.2
of the
Plan.
(uu) “Stock-Based
Awards”
means
any award that is valued in whole or in part by reference to, or is otherwise
based on, the Stock, including dividends on the Stock, but not limited to
those
Awards described in Sections 6 through 12 of the Plan.
(vv) “Subsidiary
Corporation”
means
any present or future “subsidiary corporation” of the Company, as defined in
Section 424(f) of the Code.
(ww) “Ten
Percent Owner”
means a
Participant who, at the time an Option is granted to the Participant, owns
stock
possessing more than ten percent (10%) of the total combined voting power
of all
classes of stock of a Participating Company (other than an Affiliate) within
the
meaning of Section 422(b)(6) of the Code.
(xx) “Vesting
Conditions”
mean
those conditions established in accordance with Section 9.4
or
Section 11.2
of the
Plan prior to the satisfaction of which shares subject to a Restricted Stock
Award or Restricted Stock Unit Award, respectively, remain subject to forfeiture
or a repurchase option in favor of the Company upon the Participant’s
termination of Service.
2.2 Construction.
Captions
and titles contained herein are for convenience only and shall not affect
the
meaning or interpretation of any provision of the Plan. Except when otherwise
indicated by the context, the singular shall include the plural and the plural
shall include the singular. Use of the term “or” is not intended to be
exclusive, unless the context clearly requires otherwise.
3. Administration.
3.1 Administration
by the Committee.
The Plan
shall be administered by the Committee. All questions of interpretation of
the
Plan or of any Award shall be determined by the Committee, and such
determinations shall be final and binding upon all persons having an interest
in
the Plan or such Award.
3.2 Authority
of Officers.
Any
Officer shall have the authority to act on behalf of the Company with respect
to
any matter, right, obligation, determination or election which is the
responsibility of or which is allocated to the Company herein, provided the
Officer has apparent authority with respect to such matter, right, obligation,
determination or election. In addition, to the extent specified in a resolution
adopted by the Board, the Chief Executive Officer of the
Company
shall have the authority to grant Awards to an Employee who is not an Insider
and who is receiving a salary below the level which requires approval by
the
Committee; provided that the terms of such Awards conform to guidelines
established by the Committee and provided further that at the time of making
such Awards the Chief Executive Officer also is a Director.
3.3 Administration
with Respect to Insiders.
With
respect to participation by Insiders in the Plan, at any time that any class
of
equity security of the Company is registered pursuant to Section 12 of the
Exchange Act, the Plan shall be administered in compliance with the
requirements, if any, of Rule 16b-3.
3.4 Committee
Complying with Section 162(m).
While
the Company is a “publicly held corporation” within the meaning of
Section 162(m), the Board may establish a Committee of “outside directors”
within the meaning of Section 162(m) to approve the grant of any Award
which might reasonably be anticipated to result in the payment of employee
remuneration that would otherwise exceed the limit on employee remuneration
deductible for income tax purposes pursuant to Section 162(m).
3.5 Powers
of the Committee.
In
addition to any other powers set forth in the Plan and subject to the provisions
of the Plan, the Committee shall have the full and final power and authority,
in
its discretion:
(a) to
determine the persons to whom, and the time or times at which, Awards shall
be
granted and the number of shares of Stock or units to be subject to each
Award
based on the recommendation of the Chief Executive Officer of the Company
(except that Awards to the Chief Executive Officer shall be based on the
recommendation of the independent members of the Board in compliance with
applicable stock exchange rules and Awards to Nonemployee Directors shall
be
granted automatically pursuant to Section 7 of the Plan);
(b) to
determine the type of Award granted and to designate Options as Incentive
Stock
Options or Nonstatutory Stock Options;
(c) to
determine the Fair Market Value of shares of Stock or other
property;
(d) to
determine the terms, conditions and restrictions applicable to each Award
(which
need not be identical) and any shares acquired pursuant thereto, including,
without limitation, (i) the exercise or purchase price of shares purchased
pursuant to any Award, (ii) the method of payment for shares purchased
pursuant to any Award, (iii) the method for satisfaction of any tax
withholding obligation arising in connection with Award, including by the
withholding or delivery of shares of Stock, (iv) the timing, terms and
conditions of the exercisability or vesting of any Award or any shares acquired
pursuant thereto, (v) the Performance Award Formula and Performance Goals
applicable to any Award and the extent to which such Performance Goals have
been
attained, (vi) the time of the expiration of any Award, (vii) the
effect of the Participant’s termination of Service on any of the foregoing, and
(viii) all other terms, conditions and restrictions applicable to any Award
or shares acquired pursuant thereto not inconsistent with the terms of the
Plan;
(e) to
determine whether an Award will be settled in shares of Stock, cash, or in
any
combination thereof;
(f) to
approve one or more forms of Award Agreement;
(g) to
amend,
modify, extend, cancel or renew any Award or to waive any restrictions or
conditions applicable to any Award or any shares acquired pursuant
thereto;
(h) to
accelerate, continue, extend or defer the exercisability or vesting of any
Award
or any shares acquired pursuant thereto, including with respect to the period
following a Participant’s termination of Service;
(i) without
the consent of the affected Participant and notwithstanding the provisions
of
any Award Agreement to the contrary, to unilaterally substitute at any time
a
Stock Appreciation Right providing for settlement solely in shares of Stock
in
place of any outstanding Option, provided that such Stock Appreciation Right
covers the same number of shares of Stock and provides for the same exercise
price (subject in each case to adjustment in accordance with
Section 4.2)
as the
replaced Option and otherwise provides substantially equivalent terms and
conditions as the replaced Option, as determined by the Committee;
(j) to
prescribe, amend or rescind rules, guidelines and policies relating to the
Plan,
or to adopt sub-plans or supplements to, or alternative versions of, the
Plan,
including, without limitation, as the Committee deems necessary or desirable
to
comply with the laws or regulations of or to accommodate the tax policy,
accounting principles or custom of, foreign jurisdictions whose citizens
may be
granted Awards;
(k) to
correct any defect, supply any omission or reconcile any inconsistency in
the
Plan or any Award Agreement and to make all other determinations and take
such
other actions with respect to the Plan or any Award as the Committee may
deem
advisable to the extent not inconsistent with the provisions of the Plan
or
applicable law; and
(l) to
delegate to the Chief Executive Officer or the Senior Vice President of Human
Resources the authority with respect to ministerial matters regarding the
Plan
and Awards made under the Plan.
3.6 Option
or SAR Repricing. Without
the affirmative vote of holders of a majority of the shares of Stock cast
in
person or by proxy at a meeting of the shareholders of the Company at which
a
quorum representing a majority of all outstanding shares of Stock is present
or
represented by proxy, the Board shall not approve a program providing for
either
(a) the cancellation of outstanding Options or SARs and the grant in
substitution therefore of new Options or SARs having a lower exercise price
or
(b) the amendment of outstanding Options or SARs to reduce the exercise
price thereof. This paragraph shall not be construed to apply to “issuing or
assuming a stock option in a transaction to which section 424(a) applies,”
within the meaning of Section 424 of the Code.
3.7 Indemnification.
In
addition to such other rights of indemnification as they may have as members
of
the Board or the Committee or as officers or employees of the Participating
Company Group, members of the Board or the Committee and any officers or
employees of the Participating Company Group to whom authority to act for
the
Board, the Committee or the Company is delegated shall be indemnified by
the
Company against all reasonable expenses, including attorneys’ fees, actually and
necessarily incurred in connection with the defense of any
action,
suit or proceeding, or in connection with any appeal therein, to which they
or
any of them may be a party by reason of any action taken or failure to act
under
or in connection with the Plan, or any right granted hereunder, and against
all
amounts paid by them in settlement thereof (provided such settlement is approved
by independent legal counsel selected by the Company) or paid by them in
satisfaction of a judgment in any such action, suit or proceeding, except
in
relation to matters as to which it shall be adjudged in such action, suit
or
proceeding that such person is liable for gross negligence, bad faith or
intentional misconduct in duties; provided, however, that within sixty (60)
days
after the institution of such action, suit or proceeding, such person shall
offer to the Company, in writing, the opportunity at its own expense to handle
and defend the same.
4. Shares
Subject to Plan.
4.1 Maximum
Number of Shares Issuable.
Subject
to adjustment as provided in Section 4.2, the maximum aggregate number of
shares of Stock that may be issued under the Plan shall be twelve million
(12,000,000) and shall consist of authorized but unissued or reacquired shares
of Stock or any combination thereof. If an outstanding Award for any reason
expires or is terminated or canceled without having been exercised or settled
in
full, or if shares of Stock acquired pursuant to an Award subject to forfeiture
or repurchase are forfeited or repurchased by the Company, the shares of
Stock
allocable to the terminated portion of such Award or such forfeited or
repurchased shares of Stock shall again be available for issuance under the
Plan. Shares of Stock shall not be deemed to have been issued pursuant to
the
Plan (a) with respect to any portion of an Award that is settled in cash or
(b) to the extent such shares are withheld or reacquired by the Company in
satisfaction of tax withholding obligations pursuant to
Section 16.2.
Upon
payment in shares of Stock pursuant to the exercise of an SAR, the number
of
shares available for issuance under the Plan shall be reduced only by the
number
of shares actually issued in such payment. If the exercise price of an Option
is
paid by tender to the Company, or attestation to the ownership, of shares
of
Stock owned by the Participant, or by means of a Net-Exercise, the number
of
shares available for issuance under the Plan shall be reduced only by the
net
number of shares for which the Option is exercised.
4.2 Adjustments
for Changes in Capital Structure.
Subject
to any required action by the shareholders of the Company, in the event of
any
change in the Stock effected without receipt of consideration by the Company,
whether through merger, consolidation, reorganization, reincorporation,
recapitalization, reclassification, stock dividend, stock split, reverse
stock
split, split-up, split-off, spin-off, combination of shares, exchange of
shares,
or similar change in the capital structure of the Company, or in the event
of
payment of a dividend or distribution to the shareholders of the Company
in a
form other than Stock (excepting normal cash dividends) that has a material
effect on the Fair Market Value of shares of Stock, appropriate adjustments
shall be made in the number and kind of shares subject to the Plan and to
any
outstanding Awards, in the Award limits set forth in Section 5.4,
in the
Nonemployee Director Awards to be granted automatically pursuant to Section
7,
and
in
the exercise or purchase price per share under any outstanding Award in order
to
prevent dilution or enlargement of Participants’ rights under the Plan. For
purposes of the foregoing, conversion of any convertible securities of the
Company shall not be treated as “effected without receipt of consideration by
the Company.” Any fractional share resulting from an adjustment pursuant to this
Section 4.2
shall be
rounded down to the nearest whole number. The Committee in its sole discretion,
may also make such
adjustments
in the terms of any Award to reflect, or related to, such changes in the
capital
structure of the Company or distributions as it deems appropriate, including
modification of Performance Goals, Performance Award Formulas and Performance
Periods. The adjustments determined by the Committee pursuant to this
Section 4.2
shall be
final, binding and conclusive.
5. Eligibility
and Award Limitations.
5.1 Persons
Eligible for Awards.
Awards
may be granted only to Employees, Consultants and Directors. For purposes
of the
foregoing sentence, “Employees,” “Consultants”and “Directors” shall include
prospective Employees, prospective Consultants and prospective Directors
to whom
Awards are granted in connection with written offers of an employment or
other
service relationship with the Participating Company Group; provided, however,
that no Stock subject to any such Award shall vest, become exercisable or
be
issued prior to the date on which such person commences Service. A Nonemployee
Director Award may be granted only to a person who, at the time of grant,
is a
Nonemployee Director.
5.2 Participation.
Awards
other
than Nonemployee Director Awards are
granted solely at the discretion of the Committee. Eligible persons may be
granted more than one Award. However,
excepting Nonemployee Director Awards,
eligibility in accordance with this Section shall not entitle any person
to be
granted an Award, or, having been granted an Award, to be granted an additional
Award.
5.3 Incentive
Stock Option Limitations.
(a) Persons
Eligible.
An
Incentive Stock Option may be granted only to a person who, on the effective
date of grant, is an Employee of the Company, a Parent Corporation or a
Subsidiary Corporation (each being an “ISO-Qualifying
Corporation”).
Any
person who is not an Employee of an ISO-Qualifying Corporation on the effective
date of the grant of an Option to such person may be granted only a Nonstatutory
Stock Option. An Incentive Stock Option granted to a prospective Employee
upon
the condition that such person become an Employee of an ISO-Qualifying
Corporation shall be deemed granted effective on the date such person commences
Service with an ISO-Qualifying Corporation, with an exercise price determined
as
of such date in accordance with Section 6.1.
(b) Fair
Market Value Limitation.
To the
extent that options designated as Incentive Stock Options (granted under
all
stock option plans of the Participating Company Group, including the Plan)
become exercisable by a Participant for the first time during any calendar
year
for stock having a Fair Market Value greater than One Hundred Thousand Dollars
($100,000), the portion of such options which exceeds such amount shall be
treated as Nonstatutory Stock Options. For purposes of this Section, options
designated as Incentive Stock Options shall be taken into account in the
order
in which they were granted, and the Fair Market Value of stock shall be
determined as of the time the option with respect to such stock is granted.
If
the Code is amended to provide for a limitation different from that set forth
in
this Section, such different limitation shall be deemed incorporated herein
effective as of the date and with respect to such Options as required or
permitted by such amendment to the Code. If an Option is treated as an Incentive
Stock Option in part and as a Nonstatutory Stock Option in part by reason
of the
limitation set forth in this Section, the Participant may designate which
portion of such
Option
the Participant is exercising. In the absence of such designation, the
Participant shall be deemed to have exercised the Incentive Stock Option
portion
of the Option first. Upon exercise, shares issued pursuant to each such portion
shall be separately identified.
5.4 Award
Limits.
(a) Maximum
Number of Shares Issuable Pursuant to Incentive Stock
Options.
Subject
to adjustment as provided in Section 4.2,
the
maximum aggregate number of shares of Stock that may be issued under the
Plan
pursuant to the exercise of Incentive Stock Options shall not exceed twelve
million (12,000,000) shares. The maximum aggregate number of shares of Stock
that may be issued under the Plan pursuant to all Awards other than Incentive
Stock Options shall be the number of shares determined in accordance with
Section 4.1,
subject
to adjustment as provided in Section 4.2
and
further subject to the limitation set forth in Section 5.4(b)
below.
(b) Aggregate
Limit on Full Value Awards.
Subject
to adjustment as provided in Section 4.2,
in no
event shall more than twelve million (12,000,000) shares in the aggregate
be
issued under the Plan pursuant to the exercise or settlement of Restricted
Stock
Awards, Restricted Stock Unit Awards and Performance Awards (“Full Value
Awards”). Except with respect to a maximum of five percent (5%) of the shares of
Stock authorized in this Section 5.4(b), any Full Value Awards which vest
on the basis of the Participant’s continued Service shall not provide for
vesting which is any more rapid than annual pro rata vesting over a three
(3)
year period and
any
Full Value Awards which vest upon the attainment of Performance Goals shall
provide for a Performance Period of at least twelve (12) months.
(c) Section
162(m) Award Limits.
The
following limits shall apply to the grant of any Award if, at the time of
grant,
the Company is a “publicly held corporation” within the meaning of
Section 162(m).
(i) Options
and SARs.
Subject
to adjustment as provided in Section 4.2,
no
Employee shall be granted within any fiscal year of the Company one or more
Options or Freestanding SARs which in the aggregate are for more than 400,000
shares of Stock reserved for issuance under the Plan.
(ii) Restricted
Stock and Restricted Stock Unit Awards.
Subject
to adjustment as provided in Section 4.2,
no
Employee shall be granted within any fiscal year of the Company one or more
Restricted Stock Awards or Restricted Stock Unit Awards, subject to Vesting
Conditions based on the attainment of Performance Goals, for more than 400,000
shares of Stock reserved for issuance under the Plan.
(iii) Performance
Awards.
Subject
to adjustment as provided in Section 4.2,
no
Employee shall be granted (1) Performance Shares which could result in such
Employee receiving more than 400,000 shares of Stock reserved for issuance
under
the Plan for each full fiscal year of the Company contained in the Performance
Period for such Award, or (2) Performance Units which could result in such
Employee receiving more than two million dollars ($2 million) for each full
fiscal year of the Company contained in the Performance Period
for
such
Award. No Participant may be granted more than one Performance Award for
the
same Performance Period.
6. Terms
and Conditions of Options.
Options
shall be evidenced by Award Agreements specifying the number of shares of
Stock
covered thereby, in such form as the Committee shall from time to time
establish. No Option or purported Option shall be a valid and binding obligation
of the Company unless evidenced by a fully executed Award Agreement. Award
Agreements evidencing Options may incorporate all or any of the terms of
the
Plan by reference and,
except
as otherwise set forth in Section 7
with
respect to Nonemployee Director Options,
shall
comply with and be subject to the following terms and conditions:
6.1 Exercise
Price.
The
exercise price for each Option shall be established in the discretion of
the
Committee; provided, however, that (a) the exercise price per share shall
be not
less than the Fair Market Value of a share of Stock on the effective date
of
grant of the Option and (b) no Incentive Stock Option granted to a Ten
Percent Owner shall have an exercise price per share less than one hundred
ten
percent (110%) of the Fair Market Value of a share of Stock on the effective
date of grant of the Option. Notwithstanding the foregoing, an Option (whether
an Incentive Stock Option or a Nonstatutory Stock Option) may be granted
with an
exercise price lower than the minimum exercise price set forth above if such
Option is granted pursuant to an assumption or substitution for another option
in a manner qualifying under the provisions of Section 424(a) of the
Code.
6.2 Exercisability
and Term of Options.
Options
shall be exercisable at such time or times, or upon such event or events,
and
subject to such terms, conditions, performance criteria and restrictions
as
shall be determined by the Committee and set forth in the Award Agreement
evidencing such Option; provided, however, that (a) no Option shall be
exercisable after the expiration of ten (10) years after the effective date
of
grant of such Option, (b) no Incentive Stock Option granted to a Ten
Percent Owner shall be exercisable after the expiration of five (5) years
after
the effective date of grant of such Option, and (c) no Option granted to a
prospective Employee, prospective Consultant or prospective Director may
become
exercisable prior to the date on which such person commences Service. Subject
to
the foregoing, unless otherwise specified by the Committee in the grant of
an
Option, any Option granted hereunder shall terminate ten (10) years after
the
effective date of grant of the Option, unless earlier terminated in accordance
with its provisions.
6.3 Payment
of Exercise Price.
(a) Forms
of Consideration Authorized.
Except
as otherwise provided below, payment of the exercise price for the number
of
shares of Stock being purchased pursuant to any Option shall be made (i) in
cash, by check or in cash equivalent, (ii) by tender to the Company, or
attestation to the ownership, of shares of Stock owned by the Participant
having
a ,Fair Market Value not less than the exercise price, (iii) by delivery of
a properly executed notice of exercise together with irrevocable instructions
to
a broker providing for the assignment to the Company of the proceeds of a
sale
or loan with respect to some or all of the shares being acquired upon the
exercise of the Option (including, without limitation, through an exercise
complying
with the provisions of Regulation T as promulgated from time to time by the
Board of Governors of the Federal Reserve System) (a “Cashless
Exercise”),
(iv)
by delivery of a properly executed notice of exercise electing a Net-Exercise,
(v) by such other consideration as may be approved by the Committee from
time to time to the extent permitted by applicable law, or (vi) by any
combination thereof. The Committee may at any time or from time to time grant
Options which do not permit all of the foregoing forms of consideration to
be
used in payment of the exercise price or which otherwise restrict one or
more
forms of consideration.
(b) Limitations
on Forms of Consideration.
(i) Tender
of Stock.
Notwithstanding the foregoing, an Option may not be exercised by tender to
the
Company, or attestation to the ownership, of shares of Stock to the extent
such
tender or attestation would constitute a violation of the provisions of any
law,
regulation or agreement restricting the redemption of the Company’s stock.
(ii) Cashless
Exercise.
The
Company reserves, at any and all times, the right, in the Company’s sole and
absolute discretion, to establish, decline to approve or terminate any program
or procedures for the exercise of Options by means of a Cashless Exercise,
including with respect to one or more Participants specified by the Company
notwithstanding that such program or procedures may be available to other
Participants.
6.4 Effect
of Termination of Service.
(a) Option
Exercisability.
Subject
to earlier termination of the Option as otherwise provided herein and unless
otherwise provided by the Committee, an Option shall be exercisable after
a
Participant’s termination of Service only during the applicable time periods
provided in the Award Agreement.
(b) Extension
if Exercise Prevented by Law.
Notwithstanding the foregoing, unless the Committee provides otherwise in
the
Award Agreement, if the exercise of an Option within the applicable time
periods
is prevented by the provisions of Section 14.1
below,
the Option shall remain exercisable until three (3) months (or such longer
period of time as determined by the Committee, in its discretion) after the
date
the Participant is notified by the Company that the Option is exercisable,
but
in any event no later than the Option Expiration Date.
(c) Extension
if Participant Subject to Section 16(b).
Notwithstanding the foregoing, if a sale within the applicable time periods
of
shares acquired upon the exercise of the Option would subject the Participant
to
suit under Section 16(b) of the Exchange Act, the Option shall remain
exercisable until the earliest to occur of (i) the tenth (10th) day
following the date on which a sale of such shares by the Participant would
no
longer be subject to such suit, (ii) the one hundred and ninetieth (190th)
day after the Participant’s termination of Service, or (iii) the Option
Expiration Date.
6.5 Transferability
of Options.
During
the lifetime of the Participant, an Option shall be exercisable only by the
Participant or the Participant’s guardian or legal representative. Prior to the
issuance of shares of Stock upon the exercise of an Option, the Option shall
not
be subject in any manner to anticipation, alienation, sale, exchange, transfer,
assignment, pledge,
encumbrance,
or garnishment by creditors of the Participant or the Participant’s beneficiary,
except transfer by will or by the laws of descent and distribution.
Notwithstanding the foregoing, to the extent permitted by the Committee,
in its
discretion, and set forth in the Award Agreement evidencing such Option,
a
Nonstatutory Stock Option shall be assignable or transferable subject to
the
applicable limitations, if any, described in the General Instructions to
Form S-8 Registration Statement under the Securities Act.
7. Terms
and Conditions of Nonemployee Director Awards.
Nonemployee
Director Awards shall be evidenced by Award Agreements in such form as the
Board
shall from time to time establish. Such Award Agreements may incorporate
all or
any of the terms of the Plan by reference, shall be automatic and
non-discretionary and shall comply with and be subject to the following terms
and conditions:
7.1 Automatic
Grant of Restricted Stock.
(a) Timing
and Amount of Grant.
On the
first business day of each calendar year beginning on January 1, 2006, and
continuing for the term of the Plan, each person who is a Nonemployee Director
on such date shall be granted a Restricted Stock Award to purchase a number
of
shares of Stock determined by dividing thirty thousand dollars ($30,000)
(or
$40,000 for grants made on or after January, 1, 2007) by
the
Fair Market Value of the Stock on the first business day of the applicable
calendar year, and rounding down to the nearest whole number.
(b) Vesting
The
shares subject to the Restricted Stock Award granted pursuant to
Section 7.1(a) shall vest in equal
annual installments of twenty percent (20%) on each anniversary of the date
of
grant, with one hundred percent (100%) of the shares vested on the fifth
anniversary of the date of grant.
7.2 Annual
Election to Receive Nonstatutory Stock Option and Restricted Stock Units.
On
a date
no later than December 31 of each calendar year during the term of the
Plan, each person who is then a Nonemployee Director shall deliver to the
Board
a written election to receive either Nonstatutory Stock Options or Restricted
Stock Units, or both, with an aggregate value of $30,000 (or $40,000 for
grants
made on or after January, 1, 2007), on the first business day of the following
calendar year, provided the person continues to be a Nonemployee Director
on the
date of grant. A Nonemployee Director may allocate between Nonstatutory Stock
Options and Restricted Stock Units in minimum increments with a value equal
to
$5,000, as determined in accordance with Sections 7.3 and 7.4. All awards
of
Nonstatutory Stock Options and Restricted Stock Units made to Nonemployee
Directors shall comply with the provisions of Sections 7.3 and 7.4,
respectively. A Nonemployee Director who fails to make a timely election
or who
first becomes a Nonemployee Director after December 31 shall be awarded
Nonstatutory Stock Options and Restricted Stock Units each with a value of
$15,000 (or $20,000 for grants made on or after January, 1, 2007), as determined
in accordance with Sections 7.3 and 7.4, provided the Nonemployee Director
continues to be a Nonemployee Director on the first business day of the
following calendar year.
7.3 Grant
of Nonstatutory Stock Option.
(a) Timing
and Amount of Grant.
Unless
a Nonemployee Director made an election to decline the award of a Nonstatutory
Stock Option in accordance with Section 7.2 above, on the first business
day of
each calendar year beginning on January 1, 2006, and continuing for the term
of
the Plan, each person who is a Nonemployee Director on such date shall receive
a
grant of a Nonstatutory Stock Option with an aggregate value equal to $5,000,
$10,000, $15,000, $20,000, $25,000 or $30,000 (grants made after January
1, 2007
also may have an aggregate value of $35,000 or $40,000) as previously elected
by
the Nonemployee Director (or $15,000 (or $20,000 for grants made on or after
January, 1, 2007) in the case of a Nonemployee Director who failed to make
a
timely election or who became a Nonemployee Director after December 31) (the
“Elected
Option Value”).
The
number of shares subject to the Nonstatutory Stock Option shall be determined
by
dividing the Elected Option Value by the value of a Nonstatutory Stock Option
to
purchase a single share of Stock as of the first business day of the applicable
calendar year. The per share option value shall be calculated in accordance
with
the Black-Scholes stock option valuation method using the average preceding
November closing price of Stock and reducing the per option value by twenty
percent (20%). The resulting number of shares subject to the Nonstatutory
Stock
Option shall be rounded down to the nearest whole share. No person shall
receive
more than one grant of Nonstatutory Stock Options pursuant to this
Section 7.3(a) during any calendar year.
(b) Exercise
Price and Payment.
The
exercise price of each Nonstatutory Stock Option granted pursuant to
Section 7.3(a) shall be the Fair Market Value of the Stock on the date of
grant. The payment of the exercise price for the number of share of Stock
being
purchased pursuant to the Nonstatutory Stock Option shall be made in accordance
with the provisions of Section 6.3.
(c) Vesting
and Exercisability.
The
Nonstatutory Stock Option granted in accordance with this Section shall become
vested and exercisable as to one third (1/3) of the shares subject to the
Nonstatutory Stock Option on the second, third and fourth anniversaries of
the
date of grant, respectively. The Nonstatutory Stock Option shall terminate
ten
(10) years after the date of grant, unless earlier terminated in accordance
with
its provisions.
7.4 Grant
of Restricted Stock Unit.
(a) Timing
and Amount of Grant.
Unless
a Nonemployee Director made an election to decline the award of a Restricted
Stock Unit in accordance with Section 7.2 above, on the first business day
of
each calendar year beginning on January 1, 2006, and continuing for the term
of
the Plan, each person who is a Nonemployee Director on such date shall receive
a
grant of a Restricted Stock Unit Award with an aggregate value (as determined
by
the Fair Market Value of the Stock on the first business day of the applicable
calendar year) equal to $5,000, $10,000, $15,000, $20,000, $25,000 or $30,000,
(grants made after January 1, 2007 also may have an aggregate value of $35,000
or $40,000) as previously elected by the Nonemployee Director (or $15,000
(or
$20,000 for grants made on or after January, 1, 2007) in the case of a
Nonemployee Director who failed to make a timely election or who became a
Nonemployee Director after December 31) (the “Elected
Stock Unit Value”).
The
number of shares subject to the Restricted Stock Unit Award shall be determined
by dividing the Elected Stock Unit Value by the Fair Market Value of the
Stock
as of the first business day of the applicable calendar year (including
fractions computed to three decimal places). The Restricted Stock Units awarded
to a
Nonemployee
Director shall be credited to a newly established Restricted Stock Unit account.
Each Restricted Stock Unit awarded to a Nonemployee Director in accordance
with
this Section 7.4(a) shall be deemed to be equal to one (1) (or fraction
thereof) share of Stock on the date of grant, and shall thereafter fluctuate
in
value in accordance with the Fair Market Value of the Stock. No person shall
receive more than one grant of Restricted Stock Units pursuant to this
Section 7.4(a) during any calendar year.
(b) Dividend
Rights.
Each
Nonemployee Director’s Restricted Stock Unit account shall be credited quarterly
on each dividend payment date with additional shares of Restricted Stock
Units
(including fractions computed to three decimal places) determined by dividing
(1) the amount of cash dividends paid on such date with respect to the number
of
shares of Stock represented by the Restricted Stock Units previously credited
to
the account by (2) the Fair Market Value per share of Stock on such date.
Such
additional Restricted Stock Units shall be subject to the same terms and
conditions and shall be settled in the same manner and at the same time as
the
Restricted Stock Units originally subject to the Restricted Stock Unit Award.
(c) Settlement
of Restricted Stock Unit Award.
Settlement of the shares credited to a Nonemployee Director’s Restricted Stock
Unit account shall only be made after the Nonemployee Director’s Retirement or
Mandatory Retirement from the Board or as provided in Section 7.5 below.
Settlement shall be made only in the form of shares of Stock equal to the
number
of Restricted Stock Units credited to the Nonemployee Director’s account on the
date of distribution, rounded down to the nearest whole share. The Nonemployee
Director may elect to receive the Stock in a lump sum distribution or in
a
series of ten or less approximately equal annual installments, provided that
distribution shall commence no later than January of the year following the
year
in which the Nonemployee Director’s Retirement or Mandatory Retirement
occurred.
7.5 Effect
of Termination of Service as a Nonemployee Director.
(a) Status
of Award.
Subject
to earlier termination of the Nonemployee Director Award as otherwise provided
herein, the status of a Nonemployee Director Award shall be determined as
follows:
(i) Death
or Disability.
If the
Nonemployee Director’s Service terminates due to death or Disability (1) all
shares subject to the Restricted Stock Award shall become fully vested, and
the
Participant (or the Participant’s legal representative or other person who
acquired the rights to the Restricted Stock by reason of the Participant’s
death) shall have the right to resell or transfer such shares at any time;
(2)
all Nonstatutory Stock Options held by the Participant shall become fully
vested
and exercisable, and the Participant (or the Participant’s legal representative
or other person who acquired the rights to the Nonstatutory Stock Option
by
reason of the Participant’s death) shall have the right to exercise the
Nonstatutory Stock Options until the earlier of (a) the date that is twelve
(12) months after the date on which the Participant’s Service terminated, or
(b) the Option Expiration Date and (3) all Restricted Stock Units credited
to the Nonemployee Director’s account shall immediately become payable to the
Participant (or the Participant’s legal representative or other person who
acquired the rights to the Restricted Stock Units by reason of the Participant’s
death) in the form of a number of shares of Stock
equal
to
the number of Restricted Stock Units credited to the Restricted Stock Unit
account, rounded down to the nearest whole share.
(ii) Mandatory
Retirement.
If the
Participant’s Service terminates because of the Mandatory Retirement of the
Participant (1) all shares subject to the Restricted Stock Award shall become
fully vested, and the Participant shall have the right to resell or transfer
such shares at any time; (2) all Nonstatutory Stock Options held by the
Participant shall become fully vested and exercisable and the Participant
shall
have the right to exercise the Nonstatutory Stock Options until the earlier
of
(a) the date that is five (5) years after the date on which the
Participant’s Service terminated, or (b) the Option Expiration Date and (3)
all Restricted Stock Units credited to the Nonemployee Director’s account shall
immediately become payable to the Participant in accordance with Section
7.4(c)
above.
(iii) her
Termination of Service.
If the
Participant’s Service terminates for any reason other than those enumerated in
Sections 7.5(a)(i) and 7.5(a)(ii), (1) any unvested shares of Restricted
Stock
shall be forfeited to the Company and from and after the date of such
termination, the Participant shall cease to be a shareholder with respect
to
such forfeited shares and shall have no dividend, voting or other rights
with
respect thereto, (2) the unvested portion of any Nonstatutory Stock Option
shall terminate, and any portion of the Nonstatutory Stock Option exercisable
by
the Participant on the date on which the Participant’s Service terminated may be
exercised until the earlier of (a) the date that is three (3) months after
the date on which the Participant’s Service terminated, or (b) the Option
Expiration Date and (3) except as provided in Section 7.4(c), all
Restricted Stock Units credited to the Participant’s account shall be forfeited
on the date of termination.
(iv) Notwithstanding
the provisions of Section 7.5(i) through 7.5(iii) above, the Board, in its
sole
discretion, may establish different terms and conditions pertaining to
Nonemployee Director Awards.
(b) Extension
if Exercise Prevented by Law.
Notwithstanding the foregoing, if the exercise of a Nonstatutory Stock Option
within the applicable time periods set forth in Section 7.5(a)
is
prevented by the provisions of Section 14.1
below,
the Nonstatutory Stock Option shall remain exercisable until three (3) months
after the date the Participant is notified by the Company that the Nonstatutory
Stock Option is exercisable, but in any event no later than the Option
Expiration Date.
(c) Extension
if Participant Subject to Section 16(b).
Notwithstanding the foregoing, if a sale within the applicable time periods
set
forth in Section 7.5(a)
of
shares acquired upon the exercise of the Nonstatutory Stock Option would
subject
the Participant to suit under Section 16(b) of the Exchange Act, the
Nonstatutory Stock Option shall remain exercisable until the earliest to
occur
of (i) the tenth (10th) day following the date on which asale of such
shares by the Participant would no longer be subject to such suit, (ii) the
one hundred and ninetieth (190th) day after the Participant’s termination of
Service, or (iii) the Option Expiration Date.
7.6 Effect
of Change in Control on Nonemployee Director Awards. Upon
the
occurrence of a Change in Control, (i) the vesting of all shares of
Restricted Stock granted
pursuant
to Section 7.1(a) shall be accelerated so that all such shares become fully
vested, (ii) the vesting of Nonstatutory Stock Options granted pursuant to
Section 7.3(a) shall be accelerated and such Nonstatutory Stock Options
shall remain fully exercisable until the Option Expiration Date, and (iii)
all
Restricted Stock Units shall be settled in accordance with Section 7.4(c)
as if
the Change of Control constituted Retirement.
7.7 Right
to Decline Nonemployee Director Awards. Notwithstanding
the foregoing, any person may elect not to receive a Nonemployee Director
Award
by delivering written notice of such election to the Board no later than
the day
prior to the date such Nonemployee Director Award would otherwise be granted.
A
person so declining a Nonemployee Director Award shall receive no payment
or
other consideration in lieu of such declined Nonemployee Director Award.
A
person who has declined a Nonemployee Director Award may revoke such election
by
delivering written notice of such revocation to the Board no later than the
day
prior to the date such Nonemployee Director Award would be granted.
8. Terms
and Conditions of Stock Appreciation Rights.
Stock
Appreciation Rights shall be evidenced by Award Agreements specifying the
number
of shares of Stock subject to the Award, in such form as the Committee shall
from time to time establish. No SAR or purported SAR shall be a valid and
binding obligation of the Company unless evidenced by a fully executed Award
Agreement. Award Agreements evidencing SARs may incorporate all or any of
the
terms of the Plan by reference and shall comply with and be subject to the
following terms and conditions:
8.1 Types
of SARs Authorized.
SARs may
be granted in tandem with all or any portion of a related Option (a “Tandem
SAR”)
or may
be granted independently of any Option (a “Freestanding
SAR”).
A
Tandem SAR may be granted either concurrently with the grant of the related
Option or at any time thereafter prior to the complete exercise, termination,
expiration or cancellation of such related Option.
8.2 Exercise
Price.
The
exercise price for each SAR shall be established in the discretion of the
Committee; provided, however, that (a) the exercise price per share subject
to a Tandem SAR shall be the exercise price per share under the related Option
and (b) the exercise price per share subject to a Freestanding SAR shall be
not less than the Fair Market Value of a share of Stock on the effective
date of
grant of the SAR.
8.3 Exercisability
and Term of SARs.
(a) Tandem
SARs.
Tandem
SARs shall be exercisable only at the time and to the extent, and only to
the
extent, that the related Option is exercisable, subject to such provisions
as
the Committee may specify where the Tandem SAR is granted with respect to
less
than the full number of shares of Stock subject to the related
Option.
(b) Freestanding
SARs.
Freestanding SARs shall be exercisable at such time or times, or upon such
event
or events, and subject to such terms, conditions, performance criteria and
restrictions as shall be determined by the Committee and set forth in the
Award
Agreement evidencing such SAR; provided, however, that no Freestanding SAR
shall
be exercisable after the expiration of ten (10) years after the effective
date
of grant of such SAR.
8.4 Deemed
Exercise of SARs.
If, on
the date on which an SAR would otherwise terminate or expire, the SAR by
its
terms remains exercisable immediately prior to such termination or expiration
and, if so exercised, would result in a payment to the holder of such SAR,
then
any portion of such SAR which has not previously been exercised shall
automatically be deemed to be exercised as of such date with respect to such
portion.
8.5 Effect
of Termination of Service.
Subject
to earlier termination of the SAR as otherwise provided herein and unless
otherwise provided by the Committee in the grant of an SAR and set forth
in the
Award Agreement, an SAR shall be exercisable after a Participant’s termination
of Service only as provided in the Award Agreement.
8.6 Nontransferability
of SARs.
During
the lifetime of the Participant, an SAR shall be exercisable only by the
Participant or the Participant’s guardian or legal representative. Prior to the
exercise of an SAR, the SAR shall not be subject in any manner to anticipation,
alienation, sale, exchange, transfer, assignment, pledge, encumbrance, or
garnishment by creditors of the Participant or the Participant’s beneficiary,
except transfer by will or by the laws of descent and distribution.
9. Terms
and Conditions of Restricted Stock Awards.
Restricted
Stock Awards shall be evidenced by Award Agreements specifying the number
of
shares of Stock subject to the Award, in such form as the Committee shall
from
time to time establish. No Restricted Stock Award or purported Restricted
Stock
Award shall be a valid and binding obligation of the Company unless evidenced
by
a fully executed Award Agreement. Award Agreements evidencing Restricted
Stock
Awards may incorporate all or any of the terms of the Plan by reference and
shall comply with and be subject to the following terms and
conditions:
9.1 Types
of Restricted Stock Awards Authorized.
Restricted Stock Awards may or may not require the payment of cash compensation
for the stock. Restricted Stock Awards may be granted upon such conditions
as
the Committee shall determine, including, without limitation, upon the
attainment of one or more Performance Goals described in
Section 10.4.
If
either the grant of a Restricted Stock Award or the lapsing of the Restriction
Period is to be contingent upon the attainment of one or more Performance
Goals,
the Committee shall follow procedures substantially equivalent to those set
forth in Sections 10.3
through
10.5(a).
9.2 Purchase
Price.
The
purchase price, if any, for shares of Stock issuable under each Restricted
Stock
Award and the means of payment shall be established by the Committee in its
discretion.
9.3 Purchase
Period.
A
Restricted Stock Award requiring the payment of cash consideration shall
be
exercisable within a period established by the Committee; provided, however,
that no Restricted Stock Award granted to a prospective Employee, prospective
Consultant or prospective Director may become exercisable prior to the date
on
which such person commences Service.
9.4 Vesting
and Restrictions on Transfer.
Shares
issued pursuant to any Restricted Stock Award may or may not be made subject
to
Vesting Conditions based upon the satisfaction
of
such
Service requirements, conditions, restrictions or performance criteria,
including, without limitation, Performance Goals as described in
Section 10.4,
as
shall be established by the Committee and set forth in the Award Agreement
evidencing such Award. During any Restriction Period in which shares acquired
pursuant to a Restricted Stock Award remain subject to Vesting Conditions,
such
shares may not be sold, exchanged, transferred, pledged, assigned or otherwise
disposed of other than as provided in the Award Agreement or as provided
in
Section 9.7.
Upon
request by the Company, each Participant shall execute any agreement evidencing
such transfer restrictions prior to the receipt of shares of Stock hereunder
and
shall promptly present to the Company any and all certificates representing
shares of Stock acquired hereunder for the placement on such certificates
of
appropriate legends evidencing any such transfer restrictions.
9.5 Voting
Rights, Dividends and Distributions.
Except
as provided in this Section, Section 9.4
and any
Award Agreement, during the Restriction Period applicable to shares subject
to a
Restricted Stock Award, the Participant shall have all of the rights of a
shareholder of the Company holding shares of Stock, including the right to
vote
such shares and to receive all dividends and other distributions paid with
respect to such shares. However, in the event of a dividend or distribution
paid
in shares of Stock or any other adjustment made upon a change in the capital
structure of the Company as described in Section 4.2,
any and
all new, substituted or additional securities or other property (other than
normal cash dividends) to which the Participant is entitled by reason of
the
Participant’s Restricted Stock Award shall be immediately subject to the same
Vesting Conditions as the shares subject to the Restricted Stock Award with
respect to which such dividends or distributions were paid or adjustments
were
made.
9.6 Effect
of Termination of Service.
Unless
otherwise provided by the Committee in the grant of a Restricted Stock Award
and
set forth in the Award Agreement, if a Participant’s Service terminates for any
reason, whether voluntary or involuntary (including the Participant’s death or
disability), then the Participant shall forfeit to the Company any shares
acquired by the Participant pursuant to a Restricted Stock Award which remain
subject to Vesting Conditions as of the date of the Participant’s termination of
Service in exchange for the payment of the purchase price, if any, paid by
the
Participant. The Company shall have the right to assign at any time any
repurchase right it may have, whether or not such right is then exercisable,
to
one or more persons as may be selected by the Company.
9.7 Nontransferability
of Restricted Stock Award Rights.
Prior to
the issuance of shares of Stock pursuant to a Restricted Stock Award, rights
to
acquire such shares shall not be subject in any manner to anticipation,
alienation, sale, exchange, transfer, assignment, pledge, encumbrance or
garnishment by creditors of the Participant or the Participant’s beneficiary,
except transfer by will or the laws of descent and distribution. All
rights with respect to aRestricted Stock Award granted to a Participant
hereunder shall be exercisable during his or her lifetime only by such
Participant or the Participant’s guardian or legal representative.
10. Terms
and Conditions of Performance Awards.
Performance
Awards shall be evidenced by Award Agreements in such form as the Committee
shall from time to time establish. No Performance Award or purported
Performance
Award shall be a valid and binding obligation of the Company unless evidenced
by
a fully executed Award Agreement. Award Agreements evidencing Performance
Awards
may incorporate all or any of the terms of the Plan by reference and shall
comply with and be subject to the following terms and conditions:
10.1 Types
of Performance Awards Authorized.
Performance Awards may be in the form of either Performance Shares or
Performance Units. Each Award Agreement evidencing a Performance Award shall
specify the number of Performance Shares or Performance Units subject thereto,
the Performance Award Formula, the Performance Goal(s) and Performance Period
applicable to the Award, and the other terms, conditions and restrictions
of the
Award.
10.2 Initial
Value of Performance Shares and Performance Units.
Unless
otherwise provided by the Committee in granting a Performance Award, each
Performance Share shall have an initial value equal to the Fair Market Value
of
one (1) share of Stock, subject to adjustment as provided in
Section 4.2,
on the
effective date of grant of the Performance Share. Each Performance Unit shall
have an initial value determined by the Committee. The final value payable
to
the Participant in settlement of a Performance Award determined on the basis
of
the applicable Performance Award Formula will depend on the extent to which
Performance Goals established by the Committee are attained within the
applicable Performance Period established by the Committee.
10.3 Establishment
of Performance Period, Performance Goals and Performance Award
Formula.
In
granting each Performance Award, the Committee shall establish in writing
the
applicable Performance Period, Performance Award Formula and one or more
Performance Goals which, when measured at the end of the Performance Period,
shall determine on the basis of the Performance Award Formula the final value
of
the Performance Award to be paid to the Participant. To the extent compliance
with the requirements under Section 162(m) with respect to
“performance-based compensation” is desired, the Committee shall establish the
Performance Goal(s) and Performance Award Formula applicable to each Performance
Award no later than the earlier of (a) the date ninety (90) days after the
commencement of the applicable Performance Period or (b) the date on which
25%
of the Performance Period has elapsed, and, in any event, at a time when
the
outcome of the Performance Goals remains substantially uncertain. Once
established, the Performance Goals and Performance Award Formula shall not
be
changed during the Performance Period. The Company shall notify each Participant
granted a Performance Award of the terms of such Award, including the
Performance Period, Performance Goal(s) and Performance Award
Formula.
10.4 Measurement
of Performance Goals.
Performance Goals shall be established by the Committee on the basis of targets
to be attained (“Performance
Targets”)
with
respect to one or more measures of business or financial performance (each,
a
“Performance
Measure”),
subject to the following:
(a) Performance
Measures.
Performance Measures shall have the same meanings as used in the Company’s
financial statements, or, if such terms are not used in the Company’s financial
statements, they shall have the meaning applied pursuant to generally accepted
accounting principles, or as used generally in the Company’s industry.
Performance Measures shall be calculated with respect to the Company and
each
Subsidiary Corporation
consolidated
therewith for financial reporting purposes or such division or other business
unit as may be selected by the Committee. For purposes of the Plan, the
Performance Measures applicable to a Performance Award shall be calculated
in
accordance with generally accepted accounting principles, but prior to the
accrual or payment of any Performance Award for the same Performance Period
and
excluding the effect (whether positive or negative) of any change in accounting
standards or any extraordinary, unusual or nonrecurring item, as determined
by
the Committee, occurring after the establishment of the Performance Goals
applicable to the Performance Award. Each such adjustment, if any, shall
be made
solely for the purpose of providing a consistent basis from period to period
for
the calculation of Performance Measures in order to prevent the dilution
or
enlargement of the Participant’s rights with respect to a Performance Award.
Performance Measures may be one or more of the following, as determined by
the
Committee: (i) sales revenue; (ii) gross margin; (iii) operating
margin; (iv) operating income; (v) pre-tax profit; (vi) earnings
before interest, taxes and depreciation and amortization; (vii) net income;
(viii) expenses; (ix) the market price of the Stock; (x) earnings
per share; (xi) return on shareholder equity; (xii) return on capital;
(xiii) return on net assets; (xiv) economic value added; and
(xv) market share; (xvi) customer service; (xvii) customer
satisfaction; (xviii) safety; (xix) total shareholder return; or
(xx) such other measures as determined by the Committee consistent with
this Section 10.4(a).
(b) Performance
Targets.
Performance Targets may include a minimum, maximum, target level and
intermediate levels of performance, with the final value of a Performance
Award
determined under the applicable Performance Award Formula by the level attained
during the applicable Performance Period. A Performance Target may be stated
as
an absolute value or as a value determined relative to a standard selected
by
the Committee.
10.5 Settlement
of Performance Awards.
(a) Determination
of Final Value.
As soon
as practicable following the completion of the Performance Period applicable
to
a Performance Award, the Committee shall certify in writing the extent to
which
the applicable Performance Goals have been attained and the resulting final
value of the Award earned by the Participant and to be paid upon its settlement
in accordance with the applicable Performance Award Formula.
(b) Discretionary
Adjustment of Award Formula.
In its
discretion, the Committee may, either at the time it grants a Performance
Award
or at any time thereafter, provide for the positive or negative adjustment
of
the Performance Award Formula applicable to a Performance Award that is not
intended to constitute “qualified performance based compensation” to a “covered
employee” within the meaning of Section 162(m) (a “Covered
Employee”)
to
reflect such Participant’s individual performance in his or her position with
the Company or such other factors as the Committee may determine. With respect
to a Performance Award intended to constitute qualified performance-based
compensation to a Covered Employee, the Committee shall have the discretion
to
reduce some or all of the value of the Performance Award that would otherwise
be
paid to the Covered Employee upon its settlement notwithstanding the attainment
of any Performance Goal and the resulting value of the Performance Award
determined in accordance with the Performance Award Formula.
(c) Payment
in Settlement of Performance Awards.
As soon
as practicable following the Committee’s determination and certification in
accordance with Sections 10.5(a)
and
(b),
payment
shall be made to each eligible Participant (or such Participant’s legal
representative or other person who acquired the right to receive such payment
by
reason of the Participant’s death) of the final value of the Participant’s
Performance Award. Payment of such amount shall be made in cash, shares of
Stock, or a combination thereof as determined by the Committee.
10.6 Voting
Rights, Dividend Equivalent Rights and Distributions.
Participants shall have no voting rights with respect to shares of Stock
represented by Performance Share Awards until the date of the issuance of
such
shares, if any (as evidenced by the appropriate entry on the books of the
Company or of a duly authorized transfer agent of the Company). However,
the
Committee, in its discretion, may provide in the Award Agreement evidencing
any
Performance Share Award that the Participant shall be entitled to receive
Dividend Equivalents with respect to the payment of cash dividends on Stock
having a record date prior to the date on which the Performance Shares are
settled or forfeited. Such Dividend Equivalents, if any, shall be credited
to
the Participant in the form of additional whole Performance Shares as of
the
date of payment of such cash dividends on Stock. The number of additional
Performance Shares (rounded to the nearest whole number) to be so credited
shall
be determined by dividing (a) the amount of cash dividends paid on such
date with respect to the number of shares of Stock represented by the
Performance Shares previously credited to the Participant by (b) the Fair
Market Value per share of Stock on such date. Dividend Equivalents may be
paid
currently or may be accumulated and paid to the extent that Performance Shares
become nonforfeitable, as determined by the Committee. Settlement of Dividend
Equivalents may be made in cash, shares of Stock, or a combination thereof
as
determined by the Committee, and may be paid on the same basis as settlement
of
the related Performance Share as provided in Section 10.5.
Dividend Equivalents shall not be paid with respect to Performance Units.
In the
event of a dividend or distribution paid in shares of Stock or any other
adjustment made upon a change in the capital structure of the Company as
described in Section 4.2,
appropriate adjustments shall be made in the Participant’s Performance Share
Award so that it represents the right to receive upon settlement any and
all
new, substituted or additional securities or other property (other than normal
cash dividends) to which the Participant would be entitled by reason of the
shares of Stock issuable upon settlement of the Performance Share Award,
and all
such new, substituted or additional securities or other property shall be
immediately subject to the same Performance Goals as are applicable to the
Award.
10.7 Effect
of Termination of Service.
Unless
otherwise provided by the Committee in the grant of a Performance Award and
set
forth in the Award Agreement, the effect of a Participant’s termination of
Service on the Performance Award shall be as follows:
(a) Death
or Disability.
If the
Participant’s Service terminates because of the death or Disability of the
Participant before the completion of the Performance Period applicable to
the
Performance Award, the final value of the Participant’s Performance Award shall
be determined by the extent to which the applicable Performance Goals have
been
attained with respect to the entire Performance Period and shall be prorated
based on the number of months of the Participant’s Service during the
Performance Period. Payment shall be made following the end of the Performance
Period in any manner permitted by Section 10.5.
(b) Other
Termination of Service.
If the
Participant’s Service terminates for any reason except death or Disability
before the completion of the Performance Period applicable to the Performance
Award, such Award shall be forfeited in its entirety; provided, however,
that in
the event of an involuntary termination of the Participant’s Service, the
Committee, in its sole discretion, may waive the automatic forfeiture of
all or
any portion of any such Award.
10.8 Nontransferability
of Performance Awards.
Prior to
settlement in accordance with the provisions of the Plan, no Performance
Award
shall be subject in any manner to anticipation, alienation, sale, exchange,
transfer, assignment, pledge, encumbrance, or garnishment by creditors of
the
Participant or the Participant’s beneficiary, except transfer by will or by the
laws of descent and distribution. All rights with respect to a Performance
Award
granted to a Participant hereunder shall be exercisable during his or her
lifetime only by such Participant or the Participant’s guardian or legal
representative.
11. Terms
and Conditions of Restricted Stock Unit Awards.
Restricted
Stock Unit Awards shall be evidenced by Award Agreements specifying the number
of Restricted Stock Units subject to the Award, in such form as the Committee
shall from time to time establish. No Restricted Stock Unit Award or purported
Restricted Stock Unit Award shall be a valid and binding obligation of the
Company unless evidenced by a fully executed Award Agreement. Award Agreements
evidencing Restricted Stock Units may incorporate all or any of the terms
of the
Plan by reference and shall comply with and be subject to the following terms
and conditions:
11.1 Grant
of Restricted Stock Unit Awards.
Restricted Stock Unit Awards may be granted upon such conditions as the
Committee shall determine, including, without limitation, upon the attainment
of
one or more Performance Goals described in Section 10.4.
If
either the grant of a Restricted Stock Unit Award or the Vesting Conditions
with
respect to such Award is to be contingent upon the attainment of one or more
Performance Goals, the Committee shall follow procedures substantially
equivalent to those set forth in Sections 10.3
through 10.5(a).
11.2 Vesting.
Restricted Stock Units may or may not be made subject to Vesting Conditions
based upon the satisfaction of such Service requirements, conditions,
restrictions or performance criteria, including, without limitation, Performance
Goals as described in Section 10.4,
as
shall be established by the Committee and set forth in the Award Agreement
evidencing such Award.
11.3 Voting
Rights, Dividend Equivalent Rights and Distributions.
Participants shall have no voting rights with respect to shares of Stock
represented by Restricted Stock Units until the date of the issuance of such
shares (as evidenced by the appropriate entry on the books of the Company
or of
a duly authorized transfer agent of the Company). However, the Committee,
in its
discretion, may provide in the Award Agreement evidencing any Restricted
Stock
Unit Award that the Participant shall be entitled to receive Dividend
Equivalents with respect to the payment of cash dividends on Stock having
a
record date prior to the date on which Restricted Stock Units held by such
Participant are settled. Such Dividend Equivalents, if any, shall be paid
by
crediting the Participant with additional whole Restricted Stock Units as
of the
date
of
payment of such cash dividends on Stock. The number of additional Restricted
Stock Units (rounded to the nearest whole number) to be so credited shall
be
determined by dividing (a) the amount of cash dividends paid on such date
with
respect to the number of shares of Stock represented by the Restricted Stock
Units previously credited to the Participant by (b) the Fair Market Value
per
share of Stock on such date. Such additional Restricted Stock Units shall
be
subject to the same terms and conditions and shall be settled in the same
manner
and at the same time (or as soon thereafter as practicable) as the Restricted
Stock Units originally subject to the Restricted Stock Unit Award. In the
event
of a dividend or distribution paid in shares of Stock or any other adjustment
made upon a change in the capital structure of the Company as described in
Section 4.2,
appropriate adjustments shall be made in the Participant’s Restricted Stock Unit
Award so that it represents the right to receive upon settlement any and
all
new, substituted or additional securities or other property (other than normal
cash dividends) to which the Participant would be entitled by reason of the
shares of Stock issuable upon settlement of the Award, and all such new,
substituted or additional securities or other property shall be immediately
subject to the same Vesting Conditions as are applicable to the
Award.
11.4 Effect
of Termination of Service.
Unless
otherwise provided by the Committee in the grant of a Restricted Stock Unit
Award and set forth in the Award Agreement, if a Participant’s Service
terminates for any reason, whether voluntary or involuntary (including the
Participant’s death or disability), then the Participant shall forfeit to the
Company any Restricted Stock Units pursuant to the Award which remain subject
to
Vesting Conditions as of the date of the Participant’s termination of
Service.
11.5 Settlement
of Restricted Stock Unit Awards.
The
Company shall issue to a Participant on the date on which Restricted Stock
Units
subject to the Participant’s Restricted Stock Unit Award vest or on such other
date determined by the Committee, in its discretion, and set forth in the
Award
Agreement one (1) share of Stock (and/or any other new, substituted or
additional securities or other property pursuant to an adjustment described
in
Section 11.3)
for
each Restricted Stock Unit then becoming vested or otherwise to be settled
on
such date, subject to the withholding of applicable taxes. Notwithstanding
the
foregoing, if permitted by the Committee and set forth in the Award Agreement,
the Participant may elect in accordance with terms specified in the Award
Agreement to defer receipt of all or any portion of the shares of Stock or
other
property otherwise issuable to the Participant pursuant to this
Section.
11.6 Nontransferability
of Restricted Stock Unit Awards.
Prior to
the issuance of shares of Stock in settlement of a Restricted Stock Unit
Award,
the Award shall not be subject in any manner to anticipation, alienation,
sale,
exchange, transfer, assignment, pledge, encumbrance, or garnishment by creditors
of the Participant or the Participant’s beneficiary, except transfer by will or
by the laws of descent and distribution. All rights with respect to a Restricted
Stock Unit Award granted to a Participant hereunder shall be exercisable
during
his or her lifetime only by such Participant or the Participant’s guardian or
legal representative.
12. Deferred
Compensation Awards.
12.1 Establishment
of Deferred Compensation Award Programs.
This
Section 12
shall
not be effective unless and until the Committee determines to establish a
program pursuant
to
this
Section. The Committee, in its discretion and upon such terms and conditions
as
it may determine, may establish one or more programs pursuant to the Plan
under
which:
(a) Participants
designated by the Committee who are Insiders or otherwise among a select
group
of highly compensated Employees may irrevocably elect, prior to a date specified
by the Committee, to reduce such Participant’s compensation otherwise payable in
cash (subject to any minimum or maximum reductions imposed by the Committee)
and
to be granted automatically at such time or times as specified by the Committee
one or more Awards of Stock Units with respect to such numbers of shares
of
Stock as determined in accordance with the rules of the program established
by
the Committee and having such other terms and conditions as established by
the
Committee.
(b) Participants
designated by the Committee who are Insiders or otherwise among a select
group
of highly compensated Employees may irrevocably elect, prior to a date specified
by the Committee, to be granted automatically an Award of Stock Units with
respect to such number of shares of Stock and upon such other terms and
conditions as established by the Committee in lieu of:
(i) shares
of
Stock otherwise issuable to such Participant upon the exercise of an
Option;
(ii) cash
or
shares of Stock otherwise issuable to such Participant upon the exercise
of an
SAR; or
(iii) cash
or
shares of Stock otherwise issuable to such Participant upon the settlement
of a
Performance Award or Performance Unit.
12.2 Terms
and Conditions of Deferred Compensation Awards.
Deferred
Compensation Awards granted pursuant to this Section 12
shall be
evidenced by Award Agreements in such form as the Committee shall from time
to
time establish. No such Deferred Compensation Award or purported Deferred
Compensation Award shall be a valid and binding obligation of the Company
unless
evidenced by a fully executed Award Agreement. Award Agreements evidencing
Deferred Compensation Awards may incorporate all or any of the terms of the
Plan
by reference and shall comply with and be subject to the following terms
and
conditions:
(a) Vesting
Conditions.
Deferred Compensation Awards shall not be subject to any vesting
conditions.
(b) Terms
and Conditions of Stock Units.
(i) Voting
Rights, Dividend Equivalent Rights and Distributions.
Participants shall have no voting rights with respect to shares of Stock
represented by Stock Units until the date of the issuance of such shares
(as
evidenced by the appropriate entry on the books of the Company or of a duly
authorized transfer agent of the Company). However, a Participant shall be
entitled to receive Dividend Equivalents with respect to the payment of cash
dividends on Stock having a record date prior to the date on which Stock
Units
held by such Participant are settled. Such Dividend Equivalents shall be
paid by
crediting the Participant with
additional
whole and/or fractional Stock Units as of the date of payment of such cash
dividends on Stock. The method of determining the number of additional Stock
Units to be so credited shall be specified by the Committee and set forth
in the
Award Agreement. Such additional Stock Units shall be subject to the same
terms
and conditions and shall be settled in the same manner and at the same time
(or
as soon thereafter as practicable) as the Stock Units originally subject
to the
Stock Unit Award. In the event of a dividend or distribution paid in shares
of
Stock or any other adjustment made upon a change in the capital structure
of the
Company as described in Section 4.2,
appropriate adjustments shall be made in the Participant’s Stock Unit Award so
that it represents the right to receive upon settlement any and all new,
substituted or additional securities or other property (other than normal
cash
dividends) to which the Participant would be entitled by reason of the shares
of
Stock issuable upon settlement of the Award.
(ii) Settlement
of Stock Unit Awards.
A
Participant electing to receive an Award of Stock Units pursuant to this
Section 12,
shall
specify at the time of such election a settlement date with respect to such
Award. The Company shall issue to the Participant as soon as practicable
following the earlier of the settlement date elected by the Participant or
the
date of termination of the Participant’s Service, a number of whole shares of
Stock equal to the number of whole Stock Units subject to the Stock Unit
Award.
Such shares of Stock shall be fully vested, and the Participant shall not
be
required to pay any additional consideration (other than applicable tax
withholding) to acquire such shares. Any fractional Stock Unit subject to
the
Stock Unit Award shall be settled by the Company by payment in cash of an
amount
equal to the Fair Market Value as of the payment date of such fractional
share.
(iii) Nontransferability
of Stock Unit Awards.
Prior to
their settlement in accordance with the provision of the Plan, no Stock Unit
Award shall be subject in any manner to anticipation, alienation, sale,
exchange, transfer, assignment, pledge, encumbrance, or garnishment by creditors
of the Participant or the Participant’s beneficiary, except transfer by will or
by the laws of descent and distribution. All rights with respect to a Stock
Unit
Award granted to a Participant hereunder shall be exercisable during his
or her
lifetime only by such Participant or the Participant’s guardian or legal
representative.
13. Other
Stock-Based Awards.
In
addition to the Awards set forth in Sections 6 through 12 above, the Committee,
in its sole discretion, may carry out the purpose of this Plan by awarding
Stock-Based Awards as it determines to be in the best interests of the Company
and subject to such other terms and conditions as it deems necessary and
appropriate.
14. Change
in Control.
14.1 Effect
of Change in Control on Options and SARs.
In the
event of a Change in Control, the surviving, continuing, successor, or
purchasing corporation or other business entity or parent thereof, as the
case
may be (the “Acquiror”),
may,
without the consent of any Participant, either assume or continue the Company’s
rights and obligations under outstanding Options or SARs or substitute for
outstanding Options or SARs substantially equivalent options or SARs covering
the Acquiror’s stock. Any Options or SARs which are neither assumed or
continued
by the Acquiror in connection with the Change in Control nor exercised as
of the
Change in Control shall, contingent on the Change in Control, become fully
vested and exercisable immediately prior to the Change in Control. Options
and
SARs which are assumed or continued in connection with a Change in Control
shall
be subject to such additional accelerated vesting and/or exercisability in
connection with the Participant’s subsequent termination of Service as the Board
may determine.
14.2 Effect
of Change in Control on Other Awards.
In the
event of a Change in Control, the Acquiror may, without the consent of any
Participant, either assume or continue the Company’s rights and obligations
under outstanding Awards other than Options or SARs or substitute for such
Awards substantially equivalent Awards covering the Acquiror’s stock. Any such
Awards which are neither assumed or continued by the Acquiror in connection
with
the Change in Control shall, contingent on the Change in Control, become
fully
vested and all restrictions shall be released immediately prior to the Change
in
Control. Awards which are assumed or continued in connection with a Change
in
Control shall be subject to such additional accelerated vesting or lapse
of
restrictions in connection with the Participant’s subsequent termination of
Service as the Board may determine.
14.3 Nonemployee
Director Awards.
Notwithstanding the foregoing, Nonemployee Director Awards shall be subject
to
the terms of Section 7, and not this Section 14.
15. Compliance
with Securities Law.
The
grant
of Awards and the issuance of shares of Stock pursuant to any Award shall
be
subject to compliance with all applicable requirements of federal, state
and
foreign law with respect to such securities and the requirements of any stock
exchange or market system upon which the Stock may then be listed. In addition,
no Award may be exercised or shares issued pursuant to an Award unless
(a) a registration statement under the Securities Act shall at the time of
such exercise or issuance be in effect with respect to the shares issuable
pursuant to the Award or (b) in the opinion of legal counsel to the
Company, the shares issuable pursuant to the Award may be issued in accordance
with the terms of an applicable exemption from the registration requirements
of
the Securities Act. The inability of the Company to obtain from any regulatory
body having jurisdiction the authority, if any, deemed by the Company’s legal
counsel to be necessary to the lawful issuance and sale of any shares hereunder
shall relieve the Company of any liability in respect of the failure to issue
or
sell such shares as to which such requisite authority shall not have been
obtained. As a condition to issuance of any Stock, the Company may require
the
Participant to satisfy any qualifications that may be necessary or appropriate,
to evidence compliance with any applicable law or regulation and to make
any
representation or warranty with respect thereto as may be requested by the
Company.
16. Tax
Withholding.
16.1 Tax
Withholding in General.
The
Company shall have the right to deduct from any and all payments made under
the
Plan, or to require the Participant, through payroll withholding, cash payment
or otherwise, including by means of a Cashless Exercise or Net Exercise of
an
Option, to make adequate provision for, the federal, state, local and foreign
taxes, if any, required by law to be withheld by the Participating Company
Group
with respect to an
Award
or
the shares acquired pursuant thereto. The Company shall have no obligation
to
deliver shares of Stock, to release shares of Stock from an escrow established
pursuant to an Award Agreement, or to make any payment in cash under the
Plan
until the Participating Company Group’s tax withholding obligations have been
satisfied by the Participant.
16.2 Withholding
in Shares.
The
Company shall have the right, but not the obligation, to deduct from the
shares
of Stock issuable to a Participant upon the exercise or settlement of an
Award,
or to accept from the Participant the tender of, a number of whole shares
of
Stock having a Fair Market Value, as determined by the Company, equal to
all or
any part of the tax withholding obligations of the Participating Company
Group.
The Fair Market Value of any shares of Stock withheld or tendered to satisfy
any
such tax withholding obligations shall not exceed the amount determined by
the
applicable minimum statutory withholding rates.
17. Amendment
or Termination of Plan.
The
Board
or the Committee may amend, suspend or terminate the Plan at any time. However,
without the approval of the Company’s shareholders, there shall be (a) no
increase in the maximum aggregate number of shares of Stock that may be issued
under the Plan (except by operation of the provisions of Section 4.2),
(b) no change in the class of persons eligible to receive Incentive Stock
Options, and (c) no other amendment of the Plan that would require
approval of the Company’s shareholders under any applicable law, regulation or
rule. Notwithstanding the foregoing, only the Board may amend Section 7. No
amendment, suspension or termination of the Plan shall affect any then
outstanding Award unless expressly provided by the Board or the Committee.
In
any event, no amendment, suspension or termination of the Plan may adversely
affect any then outstanding Award without the consent of the Participant
unless
necessary to comply with any applicable law, regulation or rule.
18. Miscellaneous
Provisions.
18.1 Repurchase
Rights.
Shares
issued under the Plan may be subject to one or more repurchase options, or
other
conditions and restrictions as determined by the Committee in its discretion
at
the time the Award is granted. The Company shall have the right to assign
at any
time any repurchase right it may have, whether or not such right is then
exercisable, to one or more persons as may be selected by the Company. Upon
request by the Company, each Participant shall execute any agreement evidencing
such transfer restrictions prior to the receipt of shares of Stock hereunder
and
shall promptly present to the Company any and all certificates representing
shares of Stock acquired hereunder for the placement on such certificates
of
appropriate legends evidencing any such transfer restrictions.
18.2 Provision
of Information.
Each
Participant shall be given access to information concerning the Company
equivalent to that information generally made available to the Company’s common
shareholders.
18.3 Rights
as Employee, Consultant or Director.
No
person, even though eligible pursuant to Section 5,
shall
have a right to be selected as a Participant, or, having been so selected,
to be
selected again as a Participant. Nothing in the Plan or any Award granted
under
the Plan shall confer on any Participant a right to remain an Employee,
Consultant or Director or
interfere
with or limit in any way any right of a Participating Company to terminate
the
Participant’s Service at any time. To the extent that an Employee of a
Participating Company other than the Company receives an Award under the
Plan,
that Award shall in no event be understood or interpreted to mean that the
Company is the Employee’s employer or that the Employee has an employment
relationship with the Company.
18.4 Rights
as a Shareholder.
A
Participant shall have no rights as a shareholder with respect to any shares
covered by an Award until the date of the issuance of such shares (as evidenced
by the appropriate entry on the books of the Company or of a duly authorized
transfer agent of the Company). No adjustment shall be made for dividends,
distributions or other rights for which the record date is prior to the date
such shares are issued, except as provided in Section 4.2
or
another provision of the Plan.
18.5 Fractional
Shares.
The
Company shall not be required to issue fractional shares upon the exercise
or
settlement of any Award.
18.6 Severability.
If any
one or more of the provisions (or any part thereof) of this Plan shall be
held
invalid, illegal or unenforceable in any respect, such provision shall be
modified so as to make it valid, legal and enforceable, and the validity,
legality and enforceability of the remaining provisions (or any part thereof)
of
the Plan shall not in any way be affected or impaired thereby.
18.7 Beneficiary
Designation.
Subject
to local laws and procedures, each Participant may file with the Company
a
written designation of a beneficiary who is to receive any benefit under
the
Plan to which the Participant is entitled in the event of such Participant’s
death before he or she receives any or all of such benefit. Each designation
will revoke all prior designations by the same Participant, shall be in a
form
prescribed by the Company, and will be effective only when filed by the
Participant in writing with the Company during the Participant’s lifetime. If a
married Participant designates a beneficiary other than the Participant’s
spouse, the effectiveness of such designation may be subject to the consent
of
the Participant’s spouse. If a Participant dies without an effective designation
of a beneficiary who is living at the time of the Participant’s death, the
Company will pay any remaining unpaid benefits to the Participant’s legal
representative.
18.8 Unfunded
Obligation.
Participants shall have the status of general unsecured creditors of the
Company. Any amounts payable to Participants pursuant to the Plan shall be
unfunded and unsecured obligations for all purposes, including, without
limitation, Title I of the Employee Retirement Income Security Act of 1974.
No Participating Company shall be required to segregate any monies from its
general funds, or to create any trusts, or establish any special accounts
with
respect to such obligations. The Company shall retain at all times beneficial
ownership of any investments, including trust investments, which the Company
may
make to fulfill its payment obligations hereunder. Any investments or the
creation or maintenance of any trust or any Participant account shall not
create
or constitute a trust or fiduciary relationship between the Committee or
any
Participating Company and a Participant, or otherwise create any vested or
beneficial interest in any Participant or the Participant’s creditors in any
assets of any Participating Company. The Participants shall have no claim
against any Participating Company for any changes in the value of any assets
which may be invested or reinvested by the Company
with
respect to the Plan. Each Participating Company shall be responsible for
making
benefit payments pursuant to the Plan on behalf of its Participants or for
reimbursing the Company for the cost of such payments, as determined by the
Company in its sole discretion. In the event the respective Participating
Company fails to make such payment or reimbursement, a Participant’s (or other
individual’s) sole recourse shall be against the respective Participating
Company, and not against the Company. A Participant’s acceptance of an Award
pursuant to the Plan shall constitute agreement with this
provision.
18.9 Choice
of Law.
Except
to the extent governed by applicable federal law, the validity, interpretation,
construction and performance of the Plan and each Award Agreement shall be
governed by the laws of the State of California, without regard to its conflict
of law rules.
PLAN
HISTORY AND NOTES TO COMPANY
|
December 15,
2004
|
Board
adopts Plan with a reserve of 12 million
shares.
|
|
April
20, 2005
|
Shareholders
approve Plan.
|
|
January
1, 2006
|
Plan
Effective Date
|
|
February
15, 2006
|
Change
in control provisions are amended
|
| December 20, 2006 |
Board amends Section 7
containing the terms for automatic awards for Non-Employee Directors,
effective January 1, 2007 |