A. SCHULMAN, INC.
2002 EQUITY INCENTIVE PLAN
ESTABLISHMENT, PURPOSE, AND DURATION
1.1 Establishment. A. Schulman, Inc., a Delaware corporation (hereinafter
referred to as the "Company"), establishes an incentive compensation plan to be
known as the 2002 Equity Incentive Plan (hereinafter referred to as the "Plan"),
as set forth in this document.
The Plan permits the grant of Nonqualified Stock Options, Incentive Stock
Options, Restricted Stock, Restricted Stock Units, and Director Deferred Units.
The Plan shall become effective as of December 5, 2002 (the "Effective
Date") and shall remain in effect as provided in Section 1.3 hereof.
1.2 Purpose of the Plan. The purpose of the Plan is to promote the
long-term interests of the Company and its stockholders by strengthening the
Company's ability to attract, motivate, and retain Employees of the Company upon
whose judgment, initiative, and efforts the financial success and growth of the
business of the Company largely depend, and to provide an additional incentive
for such individuals through stock ownership and other rights that promote and
recognize the financial success and growth of the Company and create value for
1.3 Duration of the Plan. The Plan shall commence as of the Effective
Date, as described in Section 1.1 hereof, and shall remain in effect, subject to
the right of the Committee to amend or terminate the Plan at any time pursuant
to Article 13 hereof, until all Shares subject to it shall have been purchased
or acquired according to the Plan's provisions.
Whenever used in the Plan, the following terms shall have the meanings set
forth below, and when the meaning is intended, the initial letter of the word
shall be capitalized.
2.1 "Affiliate" shall have the meaning ascribed to such term in Rule
12b-2 of the General Rules and Regulations of the Exchange Act.
2.2 "Award" means, individually or collectively, a grant under this Plan
of Nonqualified Stock Options, Incentive Stock Options, Restricted Stock,
Restricted Stock Units, and Director Deferred Units.
2.3 "Award Agreement" means either (i) an agreement entered into by the
Company and a Participant setting forth the terms and provisions applicable to
Awards granted under this Plan, or (ii) a statement issued by the Company to a
Participant describing the terms and provisions of such Award.
2.4 "Beneficial Owner" or "Beneficial Ownership" shall have the meaning
ascribed to such term in Rule 13d-3 of the General Rules and Regulations under
the Exchange Act.
2.5 "Board" or "Board of Directors" means the Board of Directors of the
2.6 "Change in Control" shall be deemed to have occurred as of the first
day that any one or more of the following conditions have been satisfied:
(a) Any Person is or becomes the Beneficial Owner, directly or
indirectly, of securities of the Company (not including in the securities
beneficially owned by such Person any securities acquired directly from the
Company or its Affiliates other than in connection with the acquisition by
the Company or its Affiliates of a business) representing twenty-five
percent (25%) or more of either the then outstanding Shares of common stock
of the Company or the combined voting power of the Company's then
outstanding securities; or
(b) The following individuals cease for any reason to constitute a
majority of the number of Directors then serving: individuals who, on the
date hereof, constitute the Board and any new Director (other than a
Director whose initial assumption of office is in connection with an actual
or threatened election contest, including but not limited to, a consent
solicitation relating to the election of Directors of the Company) whose
appointment or election by the Board or nomination for election by the
Company's stockholders was approved by a vote of at least two-thirds (2/3)
of the Directors then still in office who either were Directors on the date
hereof or whose appointment, election, or nomination for election was
previously so approved; or
(c) The stockholders of the Company approve a merger or consolidation
of the Company with any other corporation or approve the issuance of voting
securities of the Company in connection with a merger or consolidation of
the Company (or any direct or indirect subsidiary of the Company) pursuant
to applicable stock exchange requirements, other than (i) a merger or
consolidation which would result in the voting securities of the Company
outstanding immediately prior to such merger or consolidation continuing to
represent (either by remaining outstanding or by being converted into
voting securities of the surviving entity or any parent thereof), in
combination with the ownership of any trustee or other fiduciary holding
securities under an employee benefit plan of the Company or any subsidiary
of the Company, at least seventy-five percent (75%) of the combined voting
power of the voting securities of the Company or such surviving entity or
any parent thereof outstanding immediately after such merger or
consolidation; or (ii) a merger or consolidation effected to implement a
recapitalization of the Company (or similar transaction) in which no Person
is or becomes the Beneficial Owner, directly or indirectly, of securities
of the Company (not including in the securities Beneficially Owned by such
Person any securities acquired directly from the Company or its
Subsidiaries other than in connection with the acquisition by the Company
or its Subsidiaries of a business) representing twenty-five percent (25%)
or more of either the then outstanding shares of common stock of the
Company or the combined voting power of the Company's then outstanding
(d) The stockholders of the Company approve a plan of complete
liquidation or dissolution of the Company or an agreement for the sale or
disposition by the Company of all or substantially all of the Company's
assets, other than a sale or disposition by the Company of all or
substantially all of the Company's assets, other than a sale or disposition
by the Company of all or substantially all of the Company's assets to an
entity, at least seventy-five percent (75%) of the combined voting power of
the voting securities of which are owned by stockholders in substantially
the same proportions as their ownership of the Company immediately prior to
Notwithstanding the foregoing, no "Change in Control" shall be deemed to
have occurred if there is consummated any transaction or series of integrated
transactions immediately following which the record holders of the common Stock
of the Company immediately prior to such transaction or series of transactions
continue to have substantially the same proportionate ownership in an entity
which owns all or substantially all of the assets of the Company immediately
following such transaction or series of transactions.
Further, notwithstanding the foregoing, any event or transaction which
would otherwise constitute a Change in Control (a "Transaction") shall not
constitute a Change in Control for purposes of this Plan if, with respect to a
Participant, if the Participant participates as an equity investor in the
acquiring entity or any of its Affiliates (the "Acquiror"). For purposes of the
preceding sentence, such Participant shall not be deemed to have participated as
an equity investor in the Acquiror by virtue of (i) obtaining Beneficial
Ownership of any equity interest in the Acquiror as a result of the grant to the
Participant of an incentive compensation award under one or more incentive plans
of the Acquiror (including, but not limited to, the conversion in connection
with the Transaction of incentive compensation awards of the Company into
incentive compensation awards of the Acquiror), on terms and conditions
substantially equivalent to those applicable to other executives of the Company
immediately prior to the Transaction, after taking into account normal
differences attributable to job responsibilities, title and similar matters;
(ii) obtaining Beneficial Ownership of any equity interest in the Acquiror on
terms and conditions substantially equivalent to those obtained in the
Transaction by all other stockholders of the Company; or (iii) passive ownership
of less than three percent (3%) of the stock of the Acquiror.
2.7 "Code" means the U.S. Internal Revenue Code of 1986, as amended from
time to time.
2.8 "Committee" means the Compensation Committee of the Board.
2.9 "Company" means A. Schulman, Inc., a Delaware corporation, and any
successor thereto as provided in Article 15 herein.
2.10 "Covered Employee" means a Participant who is a "Covered Employee,"
as defined in Code Section 162(m) and the regulations promulgated under Code
Section 162(m), or any successor statute.
2.11 "Director" means any individual who is a member of the Board of
Directors of the Company.
2.12 "Director Deferred Unit" means an Award granted to a nonemployee
Director pursuant to Article 8 herein.
2.13 "Disability" means a permanent and total disability, within the
meaning of Code Section 22(e)(3), as determined by the Committee in good faith,
upon receipt of sufficient competent medical advice from one or more
individuals, selected by the Committee, who are qualified to give professional
2.14 "Employee" means any Employee of the Company, its Affiliates, and/or
2.15 "Exchange Act" means the Securities Exchange Act of 1934, as amended
from time to time, or any successor act thereto.
2.16 "Extraordinary Items" means (i) extraordinary, unusual, and/or
nonrecurring items of gain or loss; (ii) gains or losses on the disposition of a
business; (iii) changes in tax or accounting regulations or laws; or (iv) the
effect of a merger or acquisition, all of which must be identified in the
audited financial statements, including footnotes, or Management Discussion and
Analysis section of the Company's annual report.
2.17 "Fair Market Value" means a price to be determined by the Committee,
that is at or within the range of the high and low selling prices of a Share on
the NASDAQ on the date in question or, if no sales of Shares were made on said
exchange on such date, on the next preceding day on which sales were made on
2.18 "Incentive Stock Option" or "ISO" means an Option to purchase Shares
granted under Article 6 herein and that is designated as an Incentive Stock
Option and that is intended to meet the requirements of Code Section 422, or any
2.19 "Insider" shall mean an individual who is, on the relevant date, an
officer, Director, or more than ten percent (10%) Beneficial Owner of any class
of the Company's equity securities that is registered pursuant to Section 12 of
the Exchange Act, as determined by the Board in accordance with Section 16 of
the Exchange Act.
2.20 "Nonqualified Stock Option" or "NQSO" means an Option that is not
intended to meet the requirements of Code Section 422, or that otherwise does
not meet such requirements.
2.21 "Option" means an Incentive Stock Option or a Nonqualified Stock
Option, as described in Article 6 herein.
2.22 "Option Price" means the price at which a Share may be purchased by
a Participant pursuant to an Option.
2.23 "Participant" means an Employee or Director of the Company who has
been selected to receive an Award or who has an outstanding Award granted under
2.24 "Performance-Based Compensation" means an Award that is qualified as
Performance-Based Compensation under Code Section 162(m).
2.25 "Performance Measures" means measures as described in Article 9, the
attainment of which may determine the degree of payout and/or vesting with
respect to Awards.
2.26 "Performance Period" means the period of time during which the
performance goals must be met in order to determine the degree of payout and/or
vesting with respect to an Award.
2.27 "Period of Restriction" means the period when Restricted Stock or
Restricted Stock Units are subject to a substantial risk of forfeiture (based on
the passage of time, the achievement of performance goals, or upon the
occurrence of other events as determined by the Committee, at its discretion),
as provided in Article 7 herein.
2.28 "Person" shall have the meaning given in Section 3(a)(9) of the
Exchange Act, as modified and used in Sections 13(d) and 14(d) thereof, except
that such term shall not include (i) the Company or any of its Subsidiaries;
(ii) a trustee or other fiduciary holding securities under any employee benefit
plan of the Company or any of its Subsidiaries; (iii) an underwriter temporarily
holding securities pursuant to an offering of such securities; or (iv) a
corporation owned, directly or indirectly, by the stockholders of the Company in
substantially the same proportions as their ownership of stock of the Company.
2.29 "Plan Year" means the Company's fiscal year.
2.30 "Retirement" shall have the meaning set forth in A. Schulman, Inc.
Employees' Profit Sharing Trust.
2.31 "Restricted Stock" means an Award granted to a Participant pursuant
to Article 7 herein.
2.32 "Restricted Stock Unit" means an Award granted to a Participant
pursuant to Article 7 herein.
2.33 "Share" means a Share of common stock of the Company, $1.00 par
value per Share.
2.34 "Subsidiary" means any corporation or other entity, whether domestic
or foreign, in which the Company has or obtains, directly or indirectly, a
proprietary interest of more than twenty percent (20%) by reason of stock
ownership or otherwise.
3.1 General. The Committee shall be responsible for administering the
Plan. The Committee may employ attorneys, consultants, accountants, and other
persons, and the Committee, the Company, and its officers and Directors shall be
entitled to rely upon the advice, opinions, or valuations of any such persons.
All actions taken and all interpretations and determinations made by the
Committee shall be final and binding upon the Participants, the Company, and all
other interested persons.
3.2 Authority of the Committee. The Committee shall have full and
exclusive discretionary power to interpret the terms and the intent of the Plan
and to determine eligibility for Awards and to adopt such rules, regulations,
and guidelines for administering the Plan as the Committee may deem necessary or
proper. Such authority shall include, but not be limited to, selecting Award
recipients, establishing all Award terms and conditions and, subject to Article
13, adopting modifications and amendments to the Plan or any Award Agreement,
including without limitation, any that are necessary to comply with the laws of
the countries in which the Company, its Affiliates, and/or its Subsidiaries
3.3 Delegation. The Committee may delegate to one or more of its members
or to one or more agents or advisors such administrative duties as it may deem
advisable, and the Committee or any person to whom it has delegated duties as
aforesaid may employ one or more persons to render advice with respect to any
responsibility the Committee or such person may have under the Plan. The
Committee may, by resolution, authorize one or more officers of the Company to
do one or both of the following: (a) designate Employees of the Company, its
Affiliates, and/or its Subsidiaries to be recipients of Awards; and (b)
determine the size of
the Award; provided, however, the Committee shall not delegate such
responsibilities to any such officer for Awards granted to an Employee that is
considered an elected officer of the Company.
SHARES SUBJECT TO THE PLAN AND MAXIMUM AWARDS
4.1 Number of Shares Available for Awards. Subject to adjustment as
provided in Section 4.2 herein, the number of Shares hereby reserved for
issuance to Participants under the Plan shall be four million five hundred
thousand (4,500,000), no more than five hundred thousand (500,000) of the
reserved Shares may be granted in the form of Awards other than in the form of
Any Shares related to Awards which terminate by expiration, forfeiture,
cancellation, or otherwise without the issuance of such Shares, are settled in
cash in lieu of common stock, or are exchanged with the Committee's permission
for Awards not involving common stock, shall be available again for grant under
the Plan. Moreover, if the Option Price of any Option granted under the Plan or
the tax withholding requirements with respect to any Award granted under the
Plan are satisfied by tendering Shares to the Company (by either actual delivery
or by attestation), only the number of Shares issued net of the Shares tendered
will be deemed delivered for purposes of determining the maximum number of
Shares available for delivery under the Plan. The maximum number of Shares
available for issuance under the Plan shall not be reduced to reflect any
dividends or dividend equivalents that are reinvested into additional Shares or
credited as additional Restricted Stock, Restricted Stock Units, or Director
Deferred Units. In addition, the Committee, in its discretion, may establish any
other appropriate methodology for calculating the number of Shares issued
pursuant to the Plan. The Shares available for issuance under the Plan may be
authorized and unissued shares or treasury shares.
Unless and until the Committee determines that an Award to a Covered
Employee shall not be designed to qualify as Performance-Based Compensation, the
following limits ("Award Limits") shall apply to grants of such Awards under the
(a) Options: The maximum aggregate number of Shares that may be
granted in the form of Options, pursuant to any Award granted in any one
Plan Year to any one Participant shall be five hundred thousand (500,000).
(c) Restricted Stock or Restricted Stock Units: The maximum aggregate
grant with respect to Awards of Restricted Stock or Restricted Stock Units
granted in any one Plan Year to any one Participant shall be two hundred
4.2 Adjustments in Authorized Shares. In the event of any corporate event
or transaction (including, but not limited to, a change in the shares of the
Company or the capitalization of the Company) such as a merger, consolidation,
reorganization, recapitalization, separation, stock dividend, stock split,
reverse stock split, split up, spin-off, or other distribution of stock or
property of the Company, combination of shares, exchange of shares, dividend in
kind, or other like change in capital structure or distribution (other than
normal cash dividends) to stockholders of the Company, or any similar corporate
event or transaction, the Committee, in its sole discretion, in order to prevent
dilution or enlargement of Participants' rights under the Plan, shall substitute
or adjust, in an equitable manner, as applicable, the number and kind of Shares
that may be issued under the Plan, the number and kind of Shares subject to
outstanding Awards, the Option Price applicable to outstanding Awards, the Award
Limits, and other value determinations applicable to outstanding Awards.
Appropriate adjustments may also be made by the Committee in the terms of
any Awards under the Plan to reflect such changes or distributions and to modify
any other terms of outstanding Awards on an equitable basis, including
modifications of performance goals and changes in the length of Performance
Periods. The determination of the Committee as to the foregoing adjustments, if
any, shall be conclusive and binding on Participants under the Plan.
Subject to the provisions of Article 12, without affecting the number of
Shares reserved or available hereunder, the Committee may authorize the issuance
or assumption of benefits under this Plan in connection
with any merger, consolidation, acquisition of property or stock, or
reorganization upon such terms and conditions as it may deem appropriate.
ELIGIBILITY AND PARTICIPATION
5.1 Eligibility. Individuals eligible to participate in this Plan include
all Employees and members of the Board of Directors of the Company.
5.2 Actual Participation. Subject to the provisions of the Plan, the
Committee may, from time to time, select from all eligible individuals, those to
whom Awards shall be granted and shall determine the nature and amount of each
6.1 Grant of Options. Subject to the terms and provisions of the Plan,
Options may be granted to Participants in such number, and upon such terms, and
at any time and from time to time as shall be determined by the Committee. In
addition, ISOs may not be granted following the ten-year (10) anniversary of the
date on which the Company's Board of Directors adopts the Plan, which is October
6.2 Award Agreement. Each Option grant shall be evidenced by an Award
Agreement that shall specify the Option Price, the duration of the Option, the
number of Shares to which the Option pertains, the conditions upon which an
Option shall become vested and exercisable, and such other provisions as the
Committee shall determine which are not inconsistent with the terms of the Plan.
The Award Agreement also shall specify whether the Option is intended to be an
ISO or an NQSO.
6.3 Option Price. The Option Price for each grant of an Option under this
Plan shall be as determined by the Committee; provided, however, the Option
Price shall not be less than one hundred percent (100%) of the Fair Market Value
of a Share on the date the Option is granted. Notwithstanding the foregoing, for
Options granted to Participants outside the United States, the Committee, in
order to utilize a locally available tax advantage, has the authority to grant
Options at a price that is less than the Fair Market Value of a Share on the
date of grant.
6.4 Duration of Options. Each Option granted to a Participant shall
expire at such time as the Committee shall determine at the time of grant;
provided, however, no Option shall be exercisable later than the tenth (10th)
anniversary date of its grant.
6.5 Exercise of Options. Options granted under this Article 6 shall be
exercisable at such times and be subject to such restrictions and conditions as
the Committee shall in each instance approve, which need not be the same for
each grant or for each Participant.
6.6 Payment. Options granted under this Article 6 shall be exercised by
the delivery of notice of exercise to an agent designated by the Company or by
complying with any alternative procedures which may be authorized by the
Committee, setting forth the number of Shares with respect to which the Option
is to be exercised, accompanied by full payment for the Shares.
The Option Price upon exercise of any Option shall be payable to the
Company in full either: (a) in cash or its equivalent, (b) by tendering (either
by actual delivery or attestation) previously acquired Shares having an
aggregate Fair Market Value at the time of exercise equal to the total Option
Price (provided that the Shares that are tendered must have been held by the
Participant for at least six (6) months prior to their tender to satisfy the
Option Price or have been purchased on the open market), (c) by a combination of
(a) and (b), or (d) any other method approved by the Committee in its sole
The Committee also may allow cashless exercise as permitted under the
Federal Reserve Board's Regulation T, subject to applicable securities law
restrictions, or by any other means which the Committee determines to be
consistent with the Plan's purpose and applicable law.
Subject to any governing rules or regulations, as soon as practicable after
receipt of notification of exercise and full payment, the Company shall deliver
to the Participant evidence of book entry Shares, or upon the Participant's
request, Share certificates in an appropriate amount based upon the number of
Shares purchased under the Option(s).
Unless otherwise determined by the Committee, all payments under all of the
methods indicated above shall be paid in United States dollars.
6.7 Restrictions on Share Transferability. The Committee may impose such
restrictions on any Shares acquired pursuant to the exercise of an Option
granted under this Article 6 as it may deem advisable, including, without
limitation, restrictions under applicable federal securities laws, under the
requirements of any stock exchange or market upon which such Shares are then
listed and/or traded, and under any blue sky or state securities laws applicable
to such Shares.
6.8 Termination of Employment. Each Participant's Award Agreement shall
set forth the extent to which the Participant shall have the right to exercise
the Option following termination of the Participant's employment with the
Company, its Affiliates, and/or its Subsidiaries, as the case may be. Such
provisions shall be determined in the sole discretion of the Committee, shall be
included in the Award Agreement entered into with each Participant, need not be
uniform among all Options issued pursuant to this Article 6, and may reflect
distinctions based on the reasons for termination.
6.9 Transferability of Options.
(a) Incentive Stock Options. No ISO granted under the Plan may be
sold, transferred, pledged, assigned, or otherwise alienated or
hypothecated, other than by will or by the laws of descent and
(b) Nonqualified Stock Options. Except as otherwise provided in a
Participant's Award Agreement, no NQSO granted under this Article 6 may be
sold, transferred, pledged, assigned, or otherwise alienated or
hypothecated, other than by will or by the laws of descent and
During his or her lifetime, only the Participant shall have the right
to exercise the Options. After the Participant's death, the Participant's
estate or beneficiary shall have the right to exercise such Options.
6.10 Notification of Disqualifying Disposition. If any Participant shall
make any disposition of Shares issued pursuant to the exercise of an ISO under
the circumstances described in Section 421(b) of the Code (relating to certain
disqualifying dispositions), such Participant shall notify the Company of such
disposition within ten (10) days thereof.
RESTRICTED STOCK AND RESTRICTED STOCK UNITS
7.1 Grant of Restricted Stock or Restricted Stock Units. Subject to the
terms and provisions of the Plan, the Committee, at any time and from time to
time, may grant Shares of Restricted Stock and/or Restricted Stock Units to
Participants in such amounts as the Committee shall determine. Restricted Stock
Units shall be similar to Restricted Stock except that no Shares are actually
awarded to the Participant on the date of grant.
7.2 Restricted Stock or Restricted Stock Unit Agreement. Each Restricted
Stock and/or Restricted Stock Unit grant shall be evidenced by an Award
Agreement that shall specify the Period(s) of Restriction, the number of Shares
of Restricted Stock or the number of Restricted Stock Units granted, and such
other provisions as the Committee shall determine.
7.3 Transferability. Except as provided in this Article 7, the Shares of
Restricted Stock and/or Restricted Stock Units granted herein may not be sold,
transferred, pledged, assigned, or otherwise alienated or hypothecated until the
end of the applicable Period of Restriction established by the Committee and
specified in the Award Agreement (and in the case of Restricted Stock Units
until the date of delivery or other payment), or upon earlier satisfaction of
any other conditions, as specified by the Committee, in its sole discretion, and
set forth in the Award Agreement.
7.4 Other Restrictions. The Committee shall impose such other conditions
and/or restrictions on any Shares of Restricted Stock or Restricted Stock Units
granted pursuant to the Plan as it may deem advisable including, without
limitation, restrictions based upon the achievement of specific performance
goals, time-based restrictions on vesting following the attainment of the
performance goals, time-based restrictions, and/or restrictions under applicable
federal or state securities laws.
To the extent deemed appropriate by the Committee, the Company may retain
the certificates representing Shares of Restricted Stock in the Company's
possession until such time as all conditions and/or restrictions applicable to
such Shares have been satisfied or lapse.
Except as otherwise provided in this Article 7, Shares of Restricted Stock
covered by each Restricted Stock Award shall become freely transferable by the
Participant after all conditions and restrictions applicable to such Shares have
been satisfied or lapse, and Restricted Stock Units shall be paid in cash,
Shares, or a combination of cash and Shares as the Committee, in its sole
discretion shall determine.
7.5 Voting Rights. To the extent permitted or required by law, as
determined by the Committee, Participants holding Shares of Restricted Stock
granted hereunder may be granted the right to exercise full voting rights with
respect to those Shares during the Period of Restriction. A Participant shall
have no voting rights with respect to any Restricted Stock Units granted
7.6 Dividends and Other Distributions. During the Period of Restriction,
Participants holding Shares of Restricted Stock or Restricted Stock Units
granted hereunder may, if the Committee so determines, be credited with
dividends paid with respect to the underlying Shares or dividend equivalents
while they are so held in a manner determined by the Committee in its sole
discretion. The Committee may apply any restrictions to the dividends or
dividend equivalents that the Committee deems appropriate. The Committee, in its
sole discretion, may determine the form of payment of dividends or dividend
equivalents, including cash, Shares, Restricted Stock, or Restricted Stock
7.7 Termination of Employment. Each Award Agreement shall set forth the
extent to which the Participant shall have the right to retain Restricted Stock
and/or Restricted Stock Units following termination of the Participant's
employment with the Company, its Affiliates, and/or its Subsidiaries, as the
case may be. Such provisions shall be determined in the sole discretion of the
Committee, shall be included in the Award Agreement entered into with each
Participant, need not be uniform among all Shares of Restricted Stock or
Restricted Stock Units issued pursuant to the Plan, and may reflect distinctions
based on the reasons for termination.
7.8 Section 83(b) Election. The Committee may provide in an Award
Agreement that the Award of Restricted Stock is conditioned upon the Participant
making or refraining from making an election with respect to the Award under
Section 83(b) of the Code. If a Participant makes an election pursuant to
Section 83(b) of the Code concerning a Restricted Stock Award, the Participant
shall be required to file promptly a copy of such election with the Company.
NONEMPLOYEE DIRECTOR DEFERRED UNITS
8.1 Director Deferred Units. Subject to the terms and provisions of the
Plan, each nonemployee Director may elect to defer payment of all, or a
specified portion (in twenty-five percent (25%) increments), of such Director's
total compensation for service in the capacity as a Director for such year (the
8.2 Determination of Units. In lieu of the deferred amount of fees to be
paid to an eligible Director, the Director shall receive a number of Director
Deferred Units equal to the quotient of (a) the product of (1) the amount of
Director's fees to be paid to the participant, multiplied by (2) the Deferred
Percentage, divided by (b) the Fair Market Value of the Shares on the last
business day of the year immediately preceding the year in question.
8.3 Time of Deferral Election. An election to defer must be made, to the
Assistant Secretary of the Company, no later than the last day of the year
immediately preceding the year the compensation is to be earned.
8.4 Irrevocable Deferral Election. All deferral elections shall be
8.5 Vesting of Deferrals. All Director Deferred Units under this Article
8 shall be one hundred percent (100%) vested at the time of such deferral.
8.6 Voting Rights. A Director shall have no voting rights with respect to
any Director Deferred Units granted hereunder.
8.7 Transferability. Director Deferred Units granted herein may not be
sold, transferred, pledged, assigned, or otherwise alienated or hypothecated
until the date of delivery or other payment.
8.8 Dividends and Other Distributions. Director Deferred Units shall be
credited with dividends paid with respect to the underlying Shares or dividend
equivalents while they are so held in a manner determined by the Committee in
its sole discretion. The Committee may apply any restrictions to the dividends
or dividend equivalents that the Committee deems appropriate. The Committee, in
its sole discretion, may determine the form of payment of dividends or dividend
8.9 Surrender of Units. Each Director's Units shall be surrendered upon
such Director's death, permanent disability (as determined by the Board of
Directors), retirement from the Board of Directors, or removal from the Board of
8.10 Payment. In exchange for the surrender of the Director Deferred
Units, the Company shall pay to the Director, in cash, an amount equal to the
product of (a) the number of Director Deferred Units held by such Director,
multiplied by (b) the Fair Market Value of the Shares on the date immediately
preceding such Director's termination of service.
Unless and until the Committee proposes for stockholder vote and the
stockholders approve a change in the general Performance Measures set forth in
this Article 9, the performance goals upon which the payment or vesting of an
Award to a Covered Employee that is intended to qualify as Performance-Based
Compensation shall be limited to the following Performance Measures:
(a) Net earnings;
(b) Earnings per share;
(c) Net sales growth;
(d) Net income (before or after taxes);
(e) Net income growth;
(f) Net operating profit;
(g) Return measures (including, but not limited to, return on assets,
capital, equity, or sales);
(h) Cash flow (including, but not limited to, operating cash flow and
free cash flow);
(i) Cash flow return on capital;
(j) Earnings before or after taxes, interest, depreciation, and/or
(k) Gross or operating margins;
(l) Productivity ratios;
(m) Share price (including, but not limited to, growth measures and
total stockholder return);
(n) Expense targets; and
Any Performance Measure(s) may be used to measure the performance of the
Company as a whole or any business unit of the Company or any combination
thereof, as the Committee may deem appropriate, or any of the above Performance
Measures as compared to the performance of a group of comparator companies, or
published or special index that the Committee, in its sole discretion, deems
appropriate. The Committee also has the authority to provide for accelerated
vesting of any Award based on the achievement of performance goals pursuant to
the Performance Measures specified in this Article 9.
The Committee may provide in any such Award that any evaluation of
performance may include or exclude any of the following events that occurs
during a Performance Period: (a) asset write-downs, (b) litigation or claim
judgments or settlements, (c) the effect of changes in tax laws, accounting
principles, or other laws or provisions affecting reported results, (d) any
reorganization and restructuring programs, (e) extraordinary nonrecurring items
as described in Accounting Principles Board Opinion No. 30 and/or in
management's discussion and analysis of financial condition and results of
operations appearing in the Company's annual report to stockholders for the
applicable year, (f) acquisitions or divestitures, and (g) foreign exchange
gains and losses. To the extent such inclusions or exclusions affect Awards to
Covered Employees, they shall be prescribed in a form that meets the
requirements of Code Section 162(m) for deductibility.
Awards that are designed to qualify as Performance-Based Compensation, and
that are held by Covered Employees, may not be adjusted upward. The Committee
shall retain the discretion to adjust such Awards downward.
In the event that applicable tax and/or securities laws change to permit
Committee discretion to alter the governing Performance Measures without
obtaining stockholder approval of such changes, the Committee shall have sole
discretion to make such changes without obtaining stockholder approval. In
addition, in the event that the Committee determines that it is advisable to
grant Awards that shall not qualify as Performance-Based Compensation, the
Committee may make such grants without satisfying the requirements of Code
Each Participant under the Plan may, from time to time, name any
beneficiary or beneficiaries (who may be named contingently or successively) to
whom any benefit under the Plan is to be paid in case of his or her death before
he or she receives any or all of such benefit. Each such designation shall
revoke all prior designations by the same Participant, shall be in a form
prescribed by the Company, and will be effective only when filed by the
Participant in writing with the Company during the Participant's lifetime. In
the absence of any such designation, benefits remaining unpaid at the
Participant's death shall be paid to the Participant's estate.
RIGHTS OF PARTICIPANTS
11.1 Employment. Nothing in the Plan or an Award Agreement shall
interfere with or limit in any way the right of the Company, its Affiliates,
and/or its Subsidiaries, to terminate any Participant's employment at any time
or for any reason not prohibited by law, nor confer upon any Participant any
right to continue his or her employment for any specified period of time.
Neither an Award nor any benefits arising under this Plan shall constitute
an employment contract with the Company, its Affiliates, and/or its Subsidiaries
and, accordingly, subject to Article 3 and Section 13.1, this Plan and the
benefits hereunder may be terminated at any time in the sole and exclusive
discretion of the Committee without giving rise to any liability on the part of
the Company, its Affiliates, and/or its Subsidiaries.
11.2 Participation. No individual shall have the right to be selected to
receive an Award under this Plan, or, having been so selected, to be selected to
receive a future Award.
11.3 Rights as a Stockholder. A Participant shall have none of the rights
of a stockholder with respect to Shares covered by any Award until the
Participant becomes the record holder of such Shares.
CHANGE IN CONTROL
12.1 Change in Control of the Company. Upon the occurrence of a Change in
Control, unless otherwise specifically prohibited under applicable laws or by
the rules and regulations of any governing governmental agencies or national
securities exchanges, or unless the Committee shall determine otherwise in the
(a) Any and all Options granted hereunder shall become immediately
vested and exercisable; additionally, if a Participant's employment is
terminated for any other reason except cause within three (3) months prior
to such Change in Control or within twelve (12) months subsequent to such
Change in Control, the Participant shall have until the earlier of: (i)
thirty-six (36) months following such termination date, or (ii) the
expiration of the Option to exercise any such Option;
(b) Any Period of Restriction and restrictions imposed on Restricted
Stock or Restricted Stock Units shall lapse;
(c) The maximum payout opportunities attainable under all outstanding
Awards of performance-based Restricted Stock and performance-based
Restricted Stock Units shall be deemed to have been fully earned as of the
effective date of the Change in Control;
(i) The vesting of all Awards denominated in Shares shall be
accelerated as of the effective date of the Change in Control, and shall
be paid out to Participants within thirty (30) days following the
effective date of the Change in Control. The Committee has the authority
to pay all or any portion of the value of the Shares in cash;
(ii) Awards denominated in cash shall be paid to Participants in
cash within thirty (30) days following the effective date of the Change
in Control; and
(f) All Awards shall become Noncancellable. For purposes of this
Article 12.1, "Noncancellable" shall mean the Awards cannot be cancelled
without the Participant receiving appropriate compensation, with such
appropriate compensation determined by the Committee.
AMENDMENT, MODIFICATION, SUSPENSION, AND TERMINATION
13.1 Amendment, Modification, Suspension, and Termination. The Committee
may, at any time and from time to time, alter, amend, modify, suspend, or
terminate the Plan in whole or in part. Notwithstanding anything herein to the
contrary, without the prior approval of the Company's stockholders, Options
issued under the Plan will not be repriced, replaced, or regranted through
cancellation, or by lowering the exercise price of a previously granted Option.
No amendment of the Plan shall be made without stockholder approval if
stockholder approval is required by law, regulation, or stock exchange rule.
13.2 Adjustment of Awards Upon the Occurrence of Certain Unusual or
Nonrecurring Events. The Committee may make adjustments in the terms and
conditions of, and the criteria included in, Awards in recognition of unusual or
nonrecurring events (including, without limitation, the events described in
Section 4.2 hereof) affecting the Company or the financial statements of the
Company or of changes in applicable laws, regulations, or accounting principles,
whenever the Committee determines that such adjustments are appropriate in order
to prevent unintended dilution or enlargement of the benefits or potential
benefits intended to be made available under the Plan. The determination of the
Committee as to the foregoing adjustments, if any, shall be conclusive and
binding on Participants under the Plan.
13.3 Awards Previously Granted. Notwithstanding any other provision of
the Plan to the contrary, no termination, amendment, suspension, or modification
of the Plan shall adversely affect in any material way any Award previously
granted under the Plan, without the written consent of the Participant holding
14.1 Tax Withholding. The Company shall have the power and the right to
deduct or withhold, or require a Participant to remit to the Company, the
minimum statutory amount to satisfy federal, state, and local taxes, domestic or
foreign, required by law or regulation to be withheld with respect to any
taxable event arising as a result of this Plan.
All obligations of the Company under the Plan with respect to Awards
granted hereunder shall be binding on any successor to the Company, whether the
existence of such successor is the result of a direct or indirect purchase,
merger, consolidation, or otherwise, of all or substantially all of the business
and/or assets of the Company.
16.1 Forfeiture Events. The Committee may specify in an Award Agreement
that the Participant's rights, payments, and benefits with respect to an Award
shall be subject to reduction, cancellation, forfeiture, or recoupment upon the
occurrence of certain specified events, in addition to any otherwise applicable
vesting or performance conditions of an Award. Such events shall include, but
shall not be limited to, termination of employment for cause, violation of
material Company, Affiliate, and/or Subsidiary policies, breach of
noncompetition, confidentiality, or other restrictive covenants that may apply
to the Participant, or other conduct by the Participant that is detrimental to
the business or reputation of the Company, its Affiliates, and/or its
16.2 Legend. The certificates for Shares may include any legend which the
Committee deems appropriate to reflect any restrictions on transfer of such
16.3 Gender and Number. Except where otherwise indicated by the context,
any masculine term used herein also shall include the feminine, the plural shall
include the singular, and the singular shall include the plural.
16.4 Severability. In the event any provision of the Plan shall be held
illegal or invalid for any reason, the illegality or invalidity shall not affect
the remaining parts of the Plan, and the Plan shall be construed and enforced as
if the illegal or invalid provision had not been included.
16.5 Requirements of Law. The granting of Awards and the issuance of
Shares under the Plan shall be subject to all applicable laws, rules, and
regulations, and to such approvals by any governmental agencies or national
securities exchanges as may be required.
16.6 Securities Law Compliance. With respect to Insiders, transactions
under this Plan are intended to comply with all applicable conditions of Rule
16b-3 or its successor under the Exchange Act. To the extent any provision of
the Plan or action by the Committee fails to so comply, it shall be deemed null
and void, to the extent permitted by law and deemed advisable by the Committee.
16.7 Listing. The Company may use reasonable endeavors to register Shares
allotted pursuant to the exercise of an Award with the United States Securities
and Exchange Commission or to effect compliance with the registration,
qualification, and listing requirements of any national securities laws, stock
exchange, or automated quotation system.
16.8 Delivery of Title. The Company shall have no obligation to issue or
deliver evidence of title for Shares issued under the Plan prior to:
(a) Obtaining any approvals from governmental agencies that the
Company determines are necessary or advisable; and
(b) Completion of any registration or other qualification of the
Shares under any applicable national or foreign law or ruling of any
governmental body that the Company determines to be necessary or advisable.
16.9 Inability to Obtain Authority. The inability of the Company to
obtain authority from any regulatory body having jurisdiction, which authority
is deemed by the Company's 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.
16.10 Employees Based Outside of the United States. Notwithstanding any
provision of the Plan to the contrary, in order to comply with the laws in other
countries in which the Company, its Affiliates, and/or its Subsidiaries operate
or have Employees, the Committee, in its sole discretion, shall have the power
and authority to:
(a) Determine which Affiliates and Subsidiaries shall be covered by
(b) Determine which Employees outside the United States are eligible
to participate in the Plan;
(c) Modify the terms and conditions of any Award granted to Employees
outside the United States to comply with applicable foreign laws;
(d) Establish subplans and modify exercise procedures and other terms
and procedures, to the extent such actions may be necessary or advisable.
Any subplans and modifications to Plan terms and procedures established
under this Section 16.10 by the Committee shall be attached to this Plan
document as appendices; and
(e) Take any action, before or after an Award is made, that it deems
advisable to obtain approval or comply with any necessary local government
regulatory exemptions or approvals.
Notwithstanding the above, the Committee may not take any actions
hereunder, and no Awards shall be granted, that would violate the Exchange Act,
the Code, any securities law, or governing statute or any other applicable law.
16.11 Uncertificated Shares. To the extent that the Plan provides for
issuance of certificates to reflect the transfer of Shares, the transfer of such
Shares may be effected on a noncertificated basis, to the extent not prohibited
by applicable law or the rules of any stock exchange.
16.12 Unfunded Plan. Participants shall have no right, title, or interest
whatsoever in or to any investments that the Company may make to aid it in
meeting its obligations under the Plan. Nothing contained in the Plan, and no
action taken pursuant to its provisions, shall create or be construed to create
a trust of any kind, or a fiduciary relationship between the Company and any
Participant, beneficiary, legal representative, or any other person. To the
extent that any person acquires a right to receive payments from the Company
under the Plan, such right shall be no greater than the right of an unsecured
general creditor of the Company. All payments to be made hereunder shall be paid
from the general funds of the Company and no special or separate fund shall be
established and no segregation of assets shall be made to assure payment of such
amounts except as expressly set forth in the Plan. The Plan is not subject to
16.13 No Fractional Shares. No fractional Shares shall be issued or
delivered pursuant to the Plan or any Award. The Committee shall determine
whether cash, Awards, or other property shall be issued or paid in lieu of
fractional Shares or whether such fractional Shares or any rights thereto shall
be forfeited or otherwise eliminated.
16.14 Retirement and Welfare Plans. The value of compensation paid under
this Plan will not be included as "compensation" for purposes of computing the
benefits payable to any participant under the Company's retirement plans (both
qualified and non-qualified) or welfare benefit plans unless such other plan
expressly provides that such compensation shall be taken into account in
computing a participant's benefit.
16.15 Governing Law. The Plan and each Award Agreement shall be governed
by the laws of the State of Ohio, excluding any conflicts or choice of law rule
or principle that might otherwise refer construction or interpretation of the
Plan to the substantive law of another jurisdiction. Unless otherwise provided
in the Award Agreement, recipients of an Award under the Plan are deemed to
submit to the exclusive jurisdiction and venue of the federal or state courts of
Ohio, to resolve any and all issues that may arise out of or relate to the Plan
or any related Award Agreement.
16.16 Plan Approval. This Plan shall become effective upon adoption of
the Plan by the Board or stockholder approval of such Plan, whichever occurs