2006 INCENTIVE STOCK PLAN
Section 1. Purpose of the Plan.
The purpose of the 2006 Incentive Stock Plan (the “Plan”) is to promote the interests of Hartmarx Corporation, a Delaware Corporation (the “Company”), and its stockholders by providing key employees of the Company and its Subsidiaries and Affiliates with opportunities to acquire a proprietary interest in the Company and thereby develop a stronger incentive to put forth maximum effort for the success and growth of the Company and its Subsidiaries and Affiliates. In addition, the opportunity to acquire a proprietary interest in the Company will aid in attracting and retaining key personnel of outstanding ability.
Section 2. Definitions.
For purposes of the Plan, the following terms shall be defined as set forth below:
2.1 “Affiliate” means any entity 50% or more of the voting power of the outstanding voting securities of which is owned by the Company or its Subsidiaries or by any other Affiliate.
2.2 “Award” means an award of Incentive Stock Options, Nonqualified Stock Options, Stock Appreciation Rights, Restricted Stock, Restricted Stock Units, Stock Bonus or Other Awards under the Plan.
2.3 “Award Agreement” means, with respect to any Award, the written agreement between the Company and the Participant setting forth the terms and conditions of the Award.
2.4 “Board” means the Board of Directors of the Company.
2.5 “Cause” means, unless a Participant is a party to a written employment agreement with the Company, Subsidiary or Affiliate which contains a definition of “cause,” “termination for cause,” or any other similar term or phrase, in which case “Cause” shall have the meaning set forth in such agreement, conduct involving one or more of the following (unless otherwise defined in the applicable Award Agreement):
(i) conviction for the commission of a felony; or
(ii) willful or grossly negligent wrongful conduct that is demonstrably and materially injurious to the Company, a Subsidiary or Affiliate.
2.6 “Change in Capitalization” means any increase, reduction, or change or exchange of Shares for a different number or kind of shares or other securities or property by reason of a reclassification, recapitalization, merger, consolidation, reorganization, issuance of warrants or rights, stock dividend, stock split or reverse stock split, combination or exchange of shares, repurchase of shares, change in corporate structure or otherwise; or any other corporate action, such as declaration of a special dividend, that affects the capitalization of the Company.
2.7 “Code” means the Internal Revenue Code of 1986, as amended from time to time, or any successor thereto.
2.8 “Committee” means the Compensation and Stock Option Committee of the Board. The Committee of the Board may designate a subcommittee of its members to serve as the Committee (to
the extent the Board has not designated another person, committee or entity as the Committee) to cause the Committee to (i) consist solely of persons who are “Non-Employee Directors” as defined in Rule 16b-3 issued under the Exchange Act, (ii) consist solely of persons who are “outside directors” as defined in Section 162(m) of the Code, or (iii) satisfy the applicable requirements of any stock exchange on which the Common Stock may then be listed.
2.9 “Common Stock” means the common stock, par value $2.50 per share, of the Company.
2.10 “Company” means Hartmarx Corporation, a Delaware corporation (or any successor corporation).
2.11 “Disability” means (i) any physical or mental condition that would qualify a Participant for a disability benefit under any long-term disability plan maintained by the Company (or by the Subsidiary or Affiliate by which he is employed); (ii) when used in connection with the exercise of an Incentive Stock Option following termination of employment, disability within the meaning of Section 22(e)(3) of the Code; or (iii) such other condition as may be determined in the sole discretion of the Committee to constitute Disability.
2.12 “Eligible Recipient” means an employee, or officer of the Company or of any Subsidiary or Affiliate.
2.13 “Exchange Act” means the Securities Exchange Act of 1934, as amended from time to time.
2.14 “Exercise Price” means the per share price at which a holder of an Option may purchase the Shares issuable upon exercise of the Option.
2.15 “Fair Market Value” of a share of Common Stock as of a particular date means (i) the average of the high and low prices reported for such share on the national securities exchange or national market system on which such stock is principally traded on such date, or (ii) if the shares of Common Stock are not then listed on a national securities exchange or national market system, or the value of such shares is not otherwise determinable, such value as determined by the Committee in good faith in its sole discretion (but in any event not less than fair market value within the meaning of Section 409A of the Code). If no trading of shares of Common Stock occurred on such date, the average price of a share as reported for the immediately preceding day on which sales of Common Stock were made shall be used.
2.16 “Freestanding SAR” means an SAR that is granted independently of any Options, as described Section 10 hereof.
2.17 “Immediate Family” means any child, stepchild, grandchild, parent, stepparent, grandparent, spouse, sibling, mother-in-law, father-in-law, son-in-law, daughter-in-law, brother-in-law or sister-in-law, including adoptive relationships of the Participant; trusts for the benefit of such immediate family members; or partnerships in which such immediate family members are the only partners.
2.18 “Incentive Stock Option” means an Option that is an “incentive stock option” within the meaning of Section 422 of the Code, or any successor provision.
2.19 “Nonqualified Stock Option” means any Option that is not an “incentive stock option” within the meaning of Section 422 of the Code, or any successor provision including any Option that provides (as of the time such Option is granted) that it will not be treated as an Incentive Stock Option.
2.20 “Option” means an Incentive Stock Option, a Nonqualified Stock Option, or either or both of them, as the context requires.
2.21 “Other Award” means an Award granted pursuant to Section 11 hereof.
2.22 “Participant” means any Eligible Recipient selected by the Committee, pursuant to the Committee’s authority in Section 3 hereof, to receive an Award. A Participant who receives the grant of an Option is sometimes referred to herein as “Optionee.”
2.23 “Performance Goal” means one or more of the following business criteria applied to a Participant and/or a business unit or the Company and/or a Subsidiary on an absolute or relative basis or in comparison to a peer group or other market measure: consolidated pre-tax income, consolidated EBIT, consolidated sales levels, consolidated gross margin improvement, net income or loss per common share, return on equity, return on capital, debt reduction, book value, enhancement of shareholder value, stock price increases, adjusted net assets, return on assets, pre-tax income, operating unit sales levels, operating unit EBIT, inventory turnover, inventory reduction or expense reduction, and any combination of, or a specified increase or decrease of one or more of the foregoing over a specified period, in each case, as applicable, as determined in accordance with generally accepted accounting principles.
2.24 “Prior Plans” means each of the Company’s 1988 Stock Option Plan, 1995 Incentive Stock Plan, 1998 Incentive Stock Plan and 2003 Incentive Stock Plan.
2.25 “Restricted Stock Unit” means the right to receive a Share or the Fair Market Value of a Share in cash granted pursuant to Section 8 hereof.
2.26 “Restricted Stock” means Shares subject to certain restrictions granted pursuant to Section 7 hereof.
2.27 “Shares” means shares of Common Stock and any successor security.
2.28 “Stock Appreciation Right” or “SAR” means an Award, granted alone or in connection with a related Option, designated as an SAR, pursuant to Section 10 hereof.
2.29 “Stock Bonus” means the right to receive a Share granted pursuant to Section 9 or 11 hereof.
2.30 “Subsidiary” means any corporation (other than the Company) in an unbroken chain of corporations beginning with the Company, if each of the corporations (other than the last corporation) in the unbroken chain owns stock possessing 50% or more of the total combined voting power of all classes of stock in one of the other corporations in the chain.
2.31 “Tandem SAR” means an SAR that is granted in connection with a related Option pursuant to Section 10 hereof, the exercise of which shall require forfeiture of the right to purchase a Share under the related Option (and when a Share is purchased under the Option, the Tandem SAR shall similarly be canceled).
Section 3. Plan Administration.
3.1 The Plan shall be administered by the Committee. Pursuant to the terms of the Plan, the Committee shall have the discretionary power and authority, without limitation:
(i) to select those Eligible Recipients who shall be Participants;
(ii) to determine whether and to what extent Options or Stock Appreciation Rights or awards of Restricted Stock, Restricted Stock Units, Stock Bonus or Other Awards are to be granted hereunder to Eligible Recipients;
(iii) to determine the number of Shares to be covered by each Award granted hereunder;
(iv) to determine the terms and conditions, not inconsistent with the terms of the Plan, of each Award granted hereunder;
(v) to determine the terms and conditions, not inconsistent with the terms of the Plan, which shall govern all written instruments evidencing Options or Stock Appreciation Rights or awards of Restricted Stock, Restricted Stock Units, Stock Bonus or Other Awards granted hereunder;
(vi) to adopt, alter and repeal such administrative rules, guidelines and practices governing the Plan as it shall from time to time deem advisable; and
(vii) to interpret the terms and provisions of the Plan and any Award issued under the Plan (and any Award Agreement relating thereto), and to otherwise supervise the administration of the Plan.
3.2 To the extent expressly permitted by any Award Agreement, the Committee may, without amendment to the Plan, (i) accelerate the date on which any Option or SAR granted under the Plan becomes exercisable, waive or amend the operation of Plan provisions respecting exercise after termination of employment or otherwise adjust any of the terms of such Option or SAR, and (ii) accelerate the lapse of restrictions, or waive any condition imposed hereunder, with respect to any Restricted Stock, Restricted Stock Units, Stock Bonus or Other Awards or otherwise adjust any of the terms applicable to any such Award; provided that no action under this subsection 3.2 shall adversely affect any outstanding Award without the consent of the holder thereof.
3.3 The Committee in its discretion may condition entitlement to an Award in whole or in part on the attainment of one or more Performance Goals. The Committee shall establish any such Performance Goal not later than 90 days after the commencement of the period of service to which the Award relates (or if less, 25% of such period of service), and once granted, the Committee may not have discretion to increase the amount payable under such Award, provided, however, that whether or not an Award is intended to constitute qualified performance based compensation within the meaning of Section 162(m) of the Code, the Committee shall have the authority to make appropriate adjustments in Performance Goals under an Award to reflect the impact of extraordinary items not reflected in such Performance Goals. For purposes of the Plan, extraordinary items shall be defined as (i) any profit or loss attributable to acquisitions or dispositions of stock or assets, (ii) any changes in accounting standards that may be required or permitted by the Financial Accounting Standards Board or adopted by the Company after the goal is established, (iii) all items of gain, loss or expense for the year related to restructuring charges for the Company, (iv) all items of gain, loss or expense for the year determined to be extraordinary or unusual in nature or infrequent in occurrence or related to the disposal of a segment of a business, (v) all items of gain, loss or expense for the year related to discontinued operations that do not qualify as a segment of a business as defined in APB Opinion No. 30, and (vi) such other items as may be prescribed by Section 162(m) of the Code and the Treasury Regulations thereunder as may be in effect from time to time, and any amendments, revisions or successor provisions and any changes thereto.
3.4 Subject to Section 162(m) of the Code with respect to grants of Awards intended to qualify as performance based compensation within the meaning of Section 162(m) of the Code and except as required by Rule 16b-3 under the Exchange Act with respect to grants of Awards to individuals who are subject to Section 16 of the Exchange Act, or as otherwise required for compliance with other applicable law, the Committee may delegate all or any part of its authority under the Plan to one or more officers of the Company.
3.5 Any determination made by the Committee or by one or more officers pursuant to delegated authority in accordance with the provisions of the Plan with respect to any Award shall be made in the sole discretions of the Committee or such delegate. All decisions made by the Committee or such delegate pursuant to the provisions of the Plan shall be final, conclusive and binding on all persons, including the Company and the Participants. No member of the Board or the Committee, nor any officer or employee of the Company acting on behalf of the Board or the Committee, shall be personally liable for any action, determination, or interpretation taken or made in good faith with respect to the Plan, and all members of the Board or the Committee and each and any officer or employee of the Company acting on their behalf shall, to the extent permitted by law, be fully indemnified and protected by the Company in respect of any such action, determination or interpretation.
Section 4. Shares Reserved for Issuance Under the Plan.
4.1 Shares Reserved. The total number of Shares reserved and available for issuance under the Plan shall be 1,500,000 Shares. Such Shares may consist, in whole or in part, of authorized and unissued Shares or treasury shares. All such Shares may be made subject to Incentive Stock Options. The grant of any Restricted Stock Units or SARs that may be settled only in cash shall not reduce the number of Shares with respect to which Awards may be granted pursuant to the Plan, and, upon exercise of a SAR, only the number of Shares actually issued under the SAR (and not the number of Shares with respect to which the SAR is granted) shall reduce the number of Shares with respect to which Awards may be granted pursuant to the Plan. Shares which are currently available for grant or become available for grant under the Company’s Prior Plans will be added to the aggregate number of Shares authorized under the Plan, and all subsequent grants will be made pursuant to the Plan. The maximum number of Shares that may be made subject to Awards granted to any one Participant in any one calendar year shall not exceed 300,000 Shares. In addition, the aggregate number of Shares subject to Restricted Stock Awards or awards of Restricted Stock Units shall not exceed 600,000 Shares, plus 40% of the Shares under the Company’s Prior Plans which become available for issuance under the Plan.
4.2 Usage and Replenishment. To the extent that (i) an Option expires or is otherwise cancelled or terminated without being exercised as to the underlying Shares, (ii) any Shares subject to any award of Stock Appreciation Rights, Restricted Stock, Restricted Stock Unit, Stock Bonus or Other Awards are forfeited, such Shares shall again be available for issuance in connection with future Awards granted under the Plan.
4.3 Equitable Adjustments. In the event of any Change in Capitalization, an equitable substitution or proportionate adjustment shall be made in (i) the aggregate number and/or kind of shares of stock reserved for issuance under the Plan, (ii) the kind, number and/or option price of shares of stock or other property subject to outstanding Options and Stock Appreciation Rights granted under the Plan, and (iii) the kind, number and/or purchase price of shares of stock or other property subject to outstanding awards of Restricted Stock, Restricted Stock Units, Stock Bonus and Other Awards granted under the Plan, and including any awards made under the Prior Plans, in each case as may be determined by the Committee, in its sole discretion. Such other equitable substitutions or adjustments shall be made as may be determined by the Committee, in its sole discretion. Without limiting the generality of the foregoing, in connection with a Change in Capitalization, the Committee may provide, to the extent expressly permitted by any Award Agreement, for the cancellation of any outstanding Awards in exchange for payment in cash or other property of the Fair Market Value of the Shares covered by such Awards reduced, in the case of Options, by the Exercise Price thereof, and in the case of Stock Appreciation Rights, by the grant price thereof, or by any other applicable purchase price.
Section 5. Eligibility.
The Participants under the Plan shall be selected from time to time by the Committee, in its sole discretion, from among Eligible Recipients. The Committee shall have the authority to grant to any Eligible Recipient Incentive Stock Options, Nonqualified Stock Options, Stock Appreciation Rights, Restricted Stock, Restricted Stock Units, a Stock Bonus or Other Awards. In no event may an Award be granted under the Plan to any person who is not an employee of the Company or a Subsidiary or Affiliate.
Section 6. Options.
6.1 General. Options may be granted alone or in addition to other Awards granted under the Plan. Any Option granted under the Plan shall be evidenced by an Award Agreement in such form as the Committee may from time to time approve. The provisions of each Option need not be the same with respect to each Participant. Participants who are granted Options shall enter into an Award Agreement with the Company, in such form as the Committee shall determine, which Award Agreement shall set forth, among other things, the Exercise Price of the Option, the term of the Option and provisions regarding exercisability of the Option granted thereunder. The Options granted under the Plan may be of two types: (i) Incentive Stock Options and (ii) Nonqualified Stock Options. To the extent that any Option does not qualify as an Incentive Stock Option, it shall constitute a separate Nonqualified Stock Option. More than one Option may be granted to the same Participant and be outstanding concurrently hereunder. Options granted under the Plan shall be subject to the terms and conditions set forth in subsections 6.2 – 6.9 of this Section 6, and shall contain such additional terms and conditions, not inconsistent with the terms of the Plan, as the Committee shall deem desirable.
6.2 Exercise Price. The per share Exercise Price of Shares purchasable under an Option shall be determined by the Committee in its sole discretion at the time of grant but shall not be less than the greater of (i) 100% of the Fair Market Value per Share on the date of grant or (ii) $2.50 per Share.
6.3 Option Term. The term of each Option shall be fixed by the Committee, but no Option shall be exercisable more than ten years after the date such Option is granted.
6.4 Exercisability. Options shall be exercisable at such time or times and subject to such terms and conditions, including the attainment of pre-established performance goals, as shall be determined by the Committee in the Award Agreement or after the time of grant, provided that no action under this subsection 6.4 following the time of grant shall adversely affect any outstanding Option without the consent of the holder thereof. The Committee may also provide that any Option shall be exercisable only in installments, and the Committee may waive such installment exercise provisions at any time, in whole or in part, based on such factors as the Committee may determine in its sole discretion.
6.5 Method of Exercise. Options may be exercised in whole or in part by giving written notice of exercise to the Company specifying the number of Shares to be purchased, and, except as otherwise authorized below and set forth in the Award Agreement, accompanied by payment in full of the aggregate Exercise Price of the Shares so purchased in cash or its equivalent, as determined by the Committee. As determined by the Committee, in its sole discretion, payment in whole or in part may also be made (i) by means of any cashless exercise procedure approved by the Committee, (ii) in the form of unrestricted Shares already owned by the Optionee for at least six months on the date of surrender to the extent the Shares have a Fair Market Value on the date of surrender equal to the aggregate option price of the Shares as to which such Option shall be exercised, provided that, in the case of an Incentive Stock Option, the right to make payment in the form of already owned Shares may be authorized only at the time of grant, or (iii) any combination of the foregoing. The Committee, in its sole discretion and as set forth in the applicable Award Agreement, may permit an Option to be exercised by tendering an exercise notice in a form and manner acceptable to the Committee, in
which case the Optionee will receive a number of Shares with a Fair Market Value equal to the difference between the Exercise Price and the Fair Market Value of the Shares underlying the Option on the date of exercise in full settlement of the Option or portion thereof so exercised, less applicable withholding pursuant to Section 17.
6.6 Rights as Stockholder. An Optionee shall have no rights to dividends, if any, or any other rights of a stockholder with respect to the Shares subject to the Option until the Optionee has given written notice of exercise, has paid in full for such Shares, and has satisfied the requirements of Section 17 hereof.
6.7 Nontransferability of Options. The Optionee shall not be permitted to sell, transfer, pledge or assign any Option other than by will, the laws of descent and distribution or a qualified domestic relations order, and all Options shall be exercisable during the Participant’s lifetime only by the Participant, in each case, except as set forth in the following two sentences. During an Optionee’s lifetime, the Committee may, in its discretion, permit the transfer, assignment or other encumbrance of an outstanding Option if such Option is a Nonqualified Stock Option or an Incentive Stock Option that the Committee and the Participant intend to change to a Nonqualified Stock Option. Subject to the approval of the Committee and to any conditions that the Committee may prescribe, an Optionee may, upon providing written notice to the Company, elect to transfer any or all Options described in the preceding sentence (i) to members of his or her Immediate Family, provided that no such transfer by any Participant may be made in exchange for consideration, or (ii) by instrument to an inter vivos or testamentary trust in which the Options are to be passed to beneficiaries upon the death of the Participant.
6.8 Termination of Employment. Except as otherwise provided in an Award Agreement, if a Participant’s employment with the Company or any Subsidiary or Affiliate terminates for any other reason than Cause, (i) Options granted to such Participant, to the extent that they are exercisable at the time of such termination, shall remain exercisable for a period of not less than 90 days after such termination (one year in the case of termination by reason of death or Disability), on which date they shall expire, and (ii) Options granted to such Optionee, to the extent that they were not exercisable at the time of such termination, shall expire on the date of such termination. In the event of the termination of an Optionee’s employment for Cause, all outstanding Options granted to such Participant shall expire on the date of such termination. Notwithstanding the foregoing, no Option shall be exercisable after the expiration of its term. Notwithstanding the foregoing and any provision set forth in an Award Agreement, if a Participant is a party to a written employment agreement with the Company, exercisability and termination of Options upon termination of employment shall be governed by the provisions of such employment agreement.
6.9 Limitation on Incentive Stock Options. To the extent that the aggregate Fair Market Value of Shares with respect to which Incentive Stock Options are exercisable for the first time by an Optionee during any calendar year under the Plan and any other stock option plan of the Company shall exceed $100,000, such Options shall be treated as Nonqualified Stock Options. Such Fair Market Value shall be determined as of the date on which each such Incentive Stock Option is granted.
Section 7. Restricted Stock.
7.1 General. Awards of Restricted Stock may be issued either alone or in addition to other Awards granted under the Plan and shall be evidenced by an Award Agreement. The Committee shall determine the Eligible Recipients to whom, and the time or times at which, Awards of Restricted Stock shall be made; the number of Shares to be awarded; the price, if any, to be paid by the Participant for the acquisition of Restricted Stock; and the Restricted Period (as defined in subsection 7.4) applicable to awards of Restricted Stock. The provisions of the awards of Restricted Stock need not be the same with respect to each Participant.
7.2 Purchase Price. The price per Share, if any, that a Recipient must pay for Shares purchasable under an award of Restricted Stock shall be determined by the Committee in its sole discretion at the time of grant.
7.3 Awards and Certificates. The prospective recipient of an Award of Restricted Stock shall not have any rights with respect to any such Award, unless and until (i) such recipient has executed an Award Agreement evidencing the Award and delivered a fully executed copy thereof to the Company, within such period as the Committee may specify after the award date, or (ii) such recipient has accepted the award, which acceptance shall be conclusive evidence of such recipient’s agreement to the terms of the Award Agreement. Each Participant who is granted an award of Restricted Stock shall be issued a stock certificate in respect of such shares of Restricted Stock, which certificate shall be registered in the name of the Participant and shall bear an appropriate legend referring to the terms, conditions, and restrictions applicable to any such Award, provided that the Company may require that the stock certificates evidencing Restricted Stock granted hereunder be held in the custody of the Company until the restrictions thereon shall have lapsed, and that, as a condition of any award of Restricted Stock, the Participant shall have delivered a stock power, endorsed in blank, relating to the Shares covered by such Award.
7.4 Nontransferability. Any Award of Restricted Stock granted pursuant to this Section 7 shall be subject to the restrictions on transferability set forth in this subsection 7.4. During such period as may be set by the Committee in the Award Agreement (the “Restricted Period”), the Participant shall not be permitted to sell, transfer, pledge, hypothecate or assign Shares of Restricted Stock awarded under the Plan except by will or the laws of descent and distribution, provided that the Committee may, in its sole discretion, provide for the lapse of such restrictions in installments and may accelerate or waive such restrictions in whole or in part based on such factors and such circumstances as the Committee may determine in its sole discretion. The Committee may also impose such other restrictions and conditions, including the achievement of Performance Goals, on Restricted Stock as it deems appropriate. In no event shall the Restricted Period end with respect to a Restricted Stock Award prior to the satisfaction by the Participant of any liability arising under Section 17 hereof. Any attempt to dispose of any Restricted Stock in contravention of any such restrictions shall be null and void and without effect.
7.5 Rights as a Stockholder. Except as provided in subsections 7.3 and 7.4 or as otherwise set forth in an Award Agreement, the Participant shall possess all incidents of ownership with respect to Shares of Restricted Stock during the Restricted Period which have actually been issued in the Participant’s name, including the right to receive or reinvest dividends, if any, with respect to such Shares (except that the Committee may provide in its discretion that any dividends paid in property other than cash shall be subject to the same restrictions as those that apply to the underlying Restricted Stock) and to vote such Shares. Certificates for unrestricted Shares shall be delivered to the Participant promptly after, and only after, the Restricted Period shall expire without forfeiture in respect of such awards of Restricted Stock except as the Committee, in its sole discretion, shall otherwise determine.
7.6 Termination of Employment. The rights of Participants granted an Award of Restricted Stock upon termination of employment with the Company or any Subsidiary or Affiliate for any reason during the Restricted Period shall be set forth in the Award Agreement governing such Award. Notwithstanding the foregoing and any provision set forth in an Award Agreement, if a Participant is a party to a written employment agreement with the Company, vesting and forfeiture of an Award of Restricted Stock upon termination of employment shall be governed by the provisions of such employment agreement.
Section 8. Restricted Stock Units.
8.1 Vesting. At the time of the grant of Restricted Stock Units, the Committee may impose such restrictions or conditions to the vesting of such Restricted Stock Units as it, in its sole discretion, deems appropriate, to be contained in the Award Agreement. The Committee may divide such Restricted Stock Units into classes and assign different vesting conditions for each class. Provided that all conditions to the vesting of a Restricted Stock Unit are satisfied, and except as provided in subsection 8.3, upon the satisfaction of all vesting conditions with respect to a Restricted Stock Unit, such Restricted Stock Unit shall vest. The provisions of the awards of Restricted Stock Units need not be the same with respect to each Participant.
8.2 Benefit Upon Vesting. Upon the vesting of a Restricted Stock Unit, the Participant shall be entitled to receive, within 30 days of the date on which such Restricted Stock Unit vests: (i) a stock certificate in number of Shares equal to the number of Restricted Stock Units; or (ii) an amount in cash or Common Stock with a Fair Market Value equal to the sum of (A) the Fair Market Value of a Share of Common Stock on the date on which such Restricted Stock Unit vests and (B) the aggregate amount of cash dividends paid with respect to a Share of Common Stock during the period commencing on the date on which the Restricted Stock Unit was granted and terminating on the date on which such Share vests, as set forth in the applicable Award Agreement.
8.3 Termination of Employment. The rights of Participants granted a Restricted Stock Unit upon termination of employment with the Company or any Subsidiary or Affiliate for any reason before the Restricted Stock Unit vests shall be set forth in the Award Agreement governing such Award. Notwithstanding the foregoing and any provision set forth in an Award Agreement, if a Participant is a party to a written employment agreement with the Company, vesting and forfeiture of an Award of Restricted Stock Units upon termination of employment shall be governed by the provisions of such employment agreement.
Section 9. Stock Bonus Awards.
In the event that the Committee grants a Stock Bonus, a certificate for the shares of Common Stock constituting such Stock Bonus shall be issued in the name of the Participant to whom such grant was made and delivered to such Participant as soon as practicable after the date on which such Stock Bonus is payable.
Section 10. Stock Appreciation Rights.
10.1 Grant of SARs. Subject to the terms and conditions of the Plan, SARs may be granted to Participants at any time and from time to time as shall be determined by the Committee in its sole discretion. The Committee may grant Freestanding SARs, Tandem SARs, or any combination of these forms of SAR. The Committee shall have complete discretion in determining the number of SARs granted to each Participant (subject to Section 4 hereof) and, consistent with the provisions of the Plan, in determining the terms and conditions pertaining to such SARs. The provisions of the awards of SARs need not be the same with respect to each Participant.
10.2 Grant Price. The grant price of a Freestanding SAR shall equal the greater of (i) Fair Market Value of a Share on the date of grant of the SAR or (ii) $2.50 per Share. The grant price of Tandem SARs shall equal the Exercise Price of the related Option.
10.3 Exercise of Tandem SARs. Tandem SARs may be exercised for all or part of the Shares subject to the related Option upon the surrender of the right to exercise the equivalent portion of the related Option. A Tandem SAR may be exercised only with respect to the Shares for which its related Option is then exercisable. Notwithstanding any other provision of this Plan to the contrary, with
respect to a Tandem SAR granted in connection with an Incentive Stock Option: (i) the Tandem SAR will expire no later than the expiration of the underlying Incentive Stock Option; (ii) the value of the payout with respect to the Tandem SAR may be for no more than one hundred percent (100%) of the difference between the Exercise Price of the underlying Incentive Stock Option and the Fair Market Value of the Shares subject to the underlying Incentive Stock Option at the time the Tandem SAR is exercised; and (iii) the Tandem SAR may be exercised only when the Fair Market Value of the Shares subject to the Incentive Stock Option exceeds the Exercise Price of the Incentive Stock Option.
10.4 Exercise of Freestanding SARs. Freestanding SARs may be exercised upon whatever terms and conditions the Committee, in its sole discretion, imposes upon them.
10.5 SAR Agreement. Each SAR grant shall be evidenced by an Award Agreement that shall specify the grant price, the term of the SAR, and such other provisions as the Committee shall determine.
10.6 Term of SARs. The term of an SAR granted under the Plan shall be determined by the Committee, in its sole discretion; provided, however, that such term shall not exceed ten (10) years.
10.7 Payment of SAR Amount. Upon exercise of an SAR, a Participant shall be entitled to receive payment from the Company in an amount determined by multiplying:
(i) the difference between the Fair Market Value of a Share on the date of exercise over the grant price; by
(ii) the number of Shares with respect to which the SAR is exercised.
At the discretion of the Committee, the payment upon SAR exercise may be in cash, in Shares of equivalent value, or in some combination thereof. The Committee’s determination regarding the form of SAR payout shall be set forth in the Award Agreement pertaining to the grant of the SAR.
Section 11. Other Awards.
Other forms of Awards (“Other Awards”) valued in whole or in part by reference to, or otherwise based on, Common Stock may be granted either alone or in addition to other Awards under the Plan. Subject to the provisions of the Plan, the Committee shall have sole and complete authority to determine the persons to whom and the time or times at which such Other Awards shall be granted, the number of Shares to be granted pursuant to such Other Awards and all other conditions of such Other Awards.
Section 12. Stock Option Re-pricing.
The Committee shall not decrease the Exercise Price of any outstanding Options unless first approved by the requisite vote of stockholders.
Section 13. Award Agreements.
Awards under the Plan shall be evidenced by agreements that set forth the terms, conditions and limitations for each Award, which may include the term of the Award, the provisions applicable in the event the participant’s employment terminates, and any Committee authority to amend, modify, suspend, cancel or rescind any Award. The Committee need not require the execution of any such Award Agreement, in which case acceptance of the Award by the respective Participant shall constitute agreement by the Participant to the terms of the Award.
Section 14. Change-In-Control.
The Committee may provide for appropriate adjustments (including the acceleration of vesting) and settlements of awards, either at the time an award is granted or at a subsequent date, either in contemplation of or in the event that the Company undergoes a change in control (as defined in the Award Agreement) or is not to be the surviving corporation in a merger or consolidation with another corporation, or in the event of a liquidation or reorganization of the Company.
Section 15. Amendment and Termination.
The Board may amend, alter or discontinue the Plan, but no amendment, alteration, or discontinuation shall be made that would impair the rights of a Participant under any Award theretofore granted without such Participant’s consent. Unless the Board determines otherwise, the Board shall obtain approval of the Company’s stockholders for any amendments to the extent required by applicable provisions of Section 162(m) of the Code, Section 422 of the Code, the rules of any stock exchange upon which the Common Stock may then be listed or other applicable law. The Committee may amend the terms of any Award theretofore granted, prospectively or retroactively, but, subject to Section 4 of Plan, no such amendment shall impair the rights of any Participant without his or her consent. Notwithstanding the foregoing provisions of this Section 15, neither the Plan nor any outstanding Award Agreement shall be amended in any way that could cause an outstanding Award that is not subject to the tax described in Section 409A(a)(1)(A)(i) of the Code to be subject to such tax.
Section 16. Unfunded Status of Plan.
The Plan is intended to constitute an “unfunded” plan for incentive compensation. With respect to any payments not yet made to a Participant by the Company, nothing contained herein shall give any such Participant any rights that are greater than those of an unsecured general creditor of the Company.
Section 17. Withholding Taxes.
17.1 Whenever cash is to be paid pursuant to an Award, the Company shall have the right to deduct therefrom an amount sufficient to satisfy any federal, state and local tax withholding requirements related thereto. Whenever Shares are to be delivered pursuant to an Award, the Company shall have the right to require the Participant to remit to the Company in cash an amount sufficient to satisfy any federal, state and local tax withholding requirements related thereto. With the approval of the Committee, a Participant may satisfy the minimum amount of the foregoing requirement by electing to have the Company withhold from delivery Shares or by delivering Shares already owned by the Participant (valued at Fair Market Value on the date the amount of tax to be withheld is determined) for at least six months. Fractional share amounts shall be settled in cash. Such an election may be made with respect to all or any portion of the Shares to be delivered pursuant to an Award.
17.2 If the Participant makes a disposition, within the meaning of Section 424(c) of the Code and regulations promulgated thereunder, of any Share or Shares issued to such Participant pursuant to such Participant’s exercise of an Incentive Stock Option, and such disposition occurs within the two-year period commencing on the day after the date of grant or within the one-year period commencing on the day after the date of exercise, such Participant shall, within ten (10) days of such disposition, notify the Company thereof and thereafter immediately deliver to the Company any amount of federal, state or local income taxes and other amounts which the Company informs the Participant the Company is required to withhold.
Section 18. General Provisions.
18.1 Shares shall not be issued pursuant to any Award granted hereunder unless the exercise of such Award and/or the issuance and delivery of Shares pursuant thereto shall comply with all relevant provisions of law, including, without limitation, the Securities Act of 1933, as amended, the Exchange Act and the requirements of any stock exchange upon which the Common Stock may then be listed, and shall be further subject to the approval of counsel for the Company with respect to such compliance. The Company shall be under no obligation to effect the registration pursuant to the Securities Act of 1933, as amended, of any interests in the Plan or any shares of Common Stock to be issued hereunder or to effect similar compliance under any state laws.
18.2 All certificates for Shares delivered under the Plan shall be subject to such stock-transfer orders and other restrictions as the Committee may deem advisable under the rules, regulations, and other requirements of the Securities and Exchange Commission, any stock exchange upon which the Common Stock may then be listed, and any applicable federal or state securities law, and the Committee may cause a legend or legends to be placed on any such certificates to make appropriate reference to such restrictions. The Committee may require, as a condition of the issuance and delivery of certificates evidencing Shares pursuant to the terms hereof, that the recipient of such Shares make such agreements and representations as the Committee, in its sole discretion, deems necessary or desirable.
18.3 Nothing contained in the Plan shall prevent the Board from adopting other or additional compensation arrangements, subject to stockholder approval, if such approval is required; and such arrangements may be either generally applicable or applicable only in specific cases. Unless otherwise specifically determined by the Committee or otherwise provided in a written employment agreement entered into between the Participant and the Company, Subsidiary or Affiliate, settlements of Awards received by Participants under the Plan shall not be deemed a part of a Participant’s regular, recurring compensation for purposes of calculating payments or benefits from any Company benefit plan or severance program. The adoption of the Plan shall not confer upon any Eligible Recipient any right to continued employment with the Company or any Subsidiary or Affiliate, as the case may be, nor shall it interfere in any way with the right of the Company or any Subsidiary or Affiliate to terminate the employment of any of its Eligible Recipients at any time.
18.4 No fractional shares of Common Stock shall be issued or delivered pursuant to the Plan. The Committee shall determine whether cash, other Awards, or other property shall be issued or paid in lieu of such fractional shares or whether such fractional shares or any rights thereto shall be forfeited or otherwise eliminated.
18.5 If any provision of the Plan is held to be invalid or unenforceable, the other provisions of the Plan shall not be affected but shall be applied as if the invalid or unenforceable provision had not been included in the Plan.
18.6 The Plan shall be binding on all successors and assigns of a Participant, including, without limitation, the estate of such Participant and the executor, administrator or trustee of such estate, or any receiver or trustee in bankruptcy or representative of the Participant’s creditors. However, no Award or other interest in the Plan may be assigned, pledged or otherwise alienated, except to the extent permitted in accordance with provisions of the Plan and any applicable Award Agreement.
18.7 The validity, construction and effect of the Plan, any actions taken or relating to the Plan and all Awards shall be determined in accordance with applicable federal law and the laws of the State of Delaware without regard to its principles of conflict of laws.
Section 19. Effective Date and Stockholder Approval of Plan; Term of Plan.
The Plan shall become effective as of April 20, 2006, subject to the approval and ratification of the Plan at the Annual Meeting of Stockholders of the Company held on April 20, 2006, by the requisite vote of stockholders. The Plan shall remain in effect until April 19, 2016 or until earlier termination by the Board. If the Plan is terminated, the terms of the Plan and rights of Participants shall continue to apply to all Awards made prior to such termination.