Appendix A
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COGNIZANT TECHNOLOGY SOLUTIONS CORPORATION
1999 INCENTIVE COMPENSATION PLAN
1.0 DEFINITIONS
The following terms shall have the following meanings unless the context
indicates otherwise:
1.1 "Award" shall mean either a Stock Option, an SAR, a Stock Award, a Stock
Unit, a Performance Share, a Performance Unit, or a Cash Award.
1.2 "Award Agreement" shall mean a written agreement between the Company and
the Participant that establishes the terms, conditions, restrictions and/or
limitations applicable to an Award in addition to those established by the
Plan and by the Committee's exercise of its administrative powers.
1.3 "Board" shall mean the Board of Directors of the Company.
1.4 "Cash Award" shall mean the grant by the Committee to a Participant of an
award of cash as described in Section 11 below.
1.5 "Cause" shall mean (i) willful malfeasance or willful misconduct by the
Employee in connection with his employment, (ii) continuing failure to
perform such duties as are requested by the Company and/or its
subsidiaries, (iii) failure by the Employee to observe material policies of
the Company and/or its subsidiaries applicable to the Employee or (iv) the
commission by the Employee of (x) any felony or (y) any misdemeanor
involving moral turpitude.
1.6 "Change in Control of the Company" shall mean the occurrence of any of the
following events:
(a) any Person, as such term is used for purposes of Section 13(d) or
14(d) of the Exchange Act, or any successor section thereto, (other
than (i) the Company, (ii) any trustee or other fiduciary holding
securities under an employee benefit plan of the Company, (iii) any
Subsidiaries of the Company, (iv) any company owned, directly or
indirectly, by the stockholders of the Company in substantially the
same proportions as their ownership of stock of the Company or (v) IMS
Health Incorporated or its Subsidiaries), becomes the beneficial
owner, directly or indirectly, of securities of the Company
representing 35% or more of the combined voting power of the Company's
then-outstanding securities; provided however, that the acquisition of
securities in a bona fide public offering or private placement of
securities by an investor who is acquiring such securities for passive
investment purposes only shall not constitute a "Change in Control".
(b) during any period of twenty-four months, individuals who at the
beginning of such period constitute the Board, and any new director
(other than (i) a director nominated by a Person who has entered into
an agreement with the Company to effect a transaction described in
Sections 1.6 (a), (c) or (d) of the Plan, (ii) a director nominated by
any Person (including the Company) who publicly announces an intention
to take or to consider taking actions (including, but not limited to,
an actual or threatened proxy contest) which if consummated would
constitute a Change in Control or (iii) a director nominated by any
Person who is the beneficial owner, directly or indirectly, of
securities of the Company
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representing 10% or more of the combined voting power of the Company's
securities) whose election by the Board or nomination for election by
the Company's shareholders is or was approved by a vote of at least
two-thirds (2/3) of the directors then still in office who either were
directors at the beginning of the period or whose election or
nomination for election was previously, so approved, cease for any
reason to constitute at least a majority thereof;
(c) the effective date or date of consummation of any transaction or
series of transactions (other than a transaction to which only the
Company and one or more of its subsidiaries are parties) under which
the Company is merged or consolidated with any other company, other
than a merger or consolidation (i) which would result in the voting
securities of the Company outstanding immediately prior thereto
continuing to represent (either by remaining outstanding or by being
converted into voting securities of the surviving entity) more than 66
2/3% of the combined voting power of the voting securities of the
Company or such surviving entity outstanding immediately after such
merger or consolidation and (ii) after which no Person holds 35% or
more of the combined voting power of the then-outstanding securities
of the Company or such surviving entity; or
(d) the shareholders of the Company approve a plan of complete
liquidation of the Company or an agreement for the sale or disposition
by the Company of all or substantially all of the Company's assets;
1.7 "Code" shall mean the Internal Revenue Code of 1986, as amended from time
to time.
1.8 "Committee" shall mean (i) the Board or (ii) a committee or subcommittee
of the Board appointed by the Board from among its members. The Committee
may be the Board's Compensation Committee. Unless the Board determines
otherwise, the Committee shall be comprised solely of not less than two
members who each shall qualify as:
(a) a "Non-Employee Director" within the meaning of Rule 16b-3(b)(3)
(or any successor rule) under the Exchange Act, and
(b) an "outside director" within the meaning of Code Section 162(m)
and the Treasury Regulations thereunder.
1.9 "Common Stock" shall mean the Class A common stock, $.01 par value per
share, of the Company.
1.10 "Company" shall mean Cognizant Technology Solutions Corporation, a
Delaware corporation.
1.11 "Disability" shall mean shall mean the inability to engage in any
substantial gainful activity by reason of a medically determinable
physical or mental impairment which constitutes a permanent and total
disability, as defined in Section 22(e) (3) of the Code (or any successor
section thereto). The determination whether a Participant has suffered a
Disability shall be made by the Committee based upon such evidence as it
deems necessary and appropriate, and shall be conclusive and binding on
the Participant. A Participant shall not be considered disabled unless he
or she
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furnishes such medical or other evidence of the existence of the
Disability as the Committee, in its sole discretion, may require.
1.12 "Dividend Equivalent Right" shall mean the right to receive an amount
equal to the amount of any dividend paid with respect to a share of Common
Stock multiplied by the number of shares of Common Stock underlying or
with respect to a Stock Option, a SAR, a Stock Unit or a Performance Unit,
and which shall be payable in cash, in Common Stock, in the form of Stock
Units or Performance Units, or a combination of any or all of the
foregoing.
1.13 "Effective Date" shall mean the date on which the Plan is adopted by the
Board.
1.14 "Employee" shall mean an employee of the Company or any Subsidiary as
described in Treasury Regulation Section 1.421-7(h).
1.15 "Exchange Act" shall mean the Securities Exchange Act of 1934, as amended
from time to time, including applicable regulations thereunder.
1.16 "Fair Market Value of the Common Stock" shall mean:
(a) if the Common Stock is readily tradable on a national securities
exchange or other market system, the closing price of the Common Stock
on the date of calculation (or on the last preceding trading date if
Common Stock was not traded on such date), or
(b) if the Common Stock is not readily tradable on a national
securities exchange or other market system:
(i) the book value of a share of Common Stock as of the last day
of the last completed fiscal quarter preceding the date of
calculation; or
(ii) any other value as otherwise determined in good faith by the
Board.
1.17 "Independent Contractor" shall mean a person (other than a person who is
an Employee or a Nonemployee Director) or an entity that renders services
to the Company.
1.18 "ISO" shall mean an "incentive stock option" as such term is used in Code
Section 422.
1.19 "Nonemployee Director" shall mean a member of the Board who is not an
Employee.
1.20 "Nonqualified Stock Option" shall mean a Stock Option that does not
qualify as an ISO.
1.21 "Participant" shall mean any Employee, Nonemployee Director or Independent
Contractor to whom an Award has been granted by the Committee under the
Plan.
1.22 "Performance-Based Award" shall mean an Award subject to the achievement
of certain performance goal or goals as described in Section 12 below.
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1.23 "Performance Share" shall mean the grant by the Committee to a Participant
of an Award as described in Section 10.1 below.
1.24 "Performance Unit" shall mean the grant by the Committee to a Participant
of an Award as described in Section 10.2 below.
1.25 "Plan" shall mean the Cognizant Technology Solutions Corporation 1999
Incentive Compensation Plan.
1.26 "SAR" shall mean the grant by the Committee to a Participant of a stock
appreciation right as described in Section 8 below.
1.27 "Stock Award" shall mean the grant by the Committee to a Participant of an
Award of Common Stock as described in Section 9.1 below.
1.28 "Stock Option" shall mean the grant by the Committee to a Participant of
an option to purchase Common Stock as described in Section 7 below.
1.29 "Stock Unit" shall mean the grant by the Committee to a Participant of an
Award as described in Section 9.2 below.
1.30 "Subsidiary" shall mean a corporation of which the Company directly or
indirectly owns more than 50 percent of the Voting Stock or any other
business entity in which the Company directly or indirectly has an
ownership interest of more than 50 percent.
1.31 "Treasury Regulations" shall mean the regulations promulgated under the
Code by the United States Department of the Treasury, as amended from time
to time.
1.32 "Vest" shall mean:
(a) with respect to Stock Options and SARs, when the Stock Option or
SAR (or a portion of such Stock Option or SAR) first becomes
exercisable and remains exercisable subject to the terms and
conditions of such Stock Option or SAR; or
(b) with respect to Awards other than Stock Options and SARs, when
the Participant has:
(i) an unrestricted right, title and interest to receive the
compensation (whether payable in Common Stock, cash or a
combination of both) attributable to an Award (or a portion of
such Award) or to otherwise enjoy the benefits underlying such
Award; and
(ii) a right to transfer an Award subject to no Company-imposed
restrictions or limitations other than restrictions and/or
limitations imposed by Section 14 below.
1.33 "Vesting Date" shall mean the date or dates on which an Award Vests.
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1.34 "Voting Stock" shall mean the capital stock of any class or classes having
general voting power under ordinary circumstances, in the absence of
contingencies, to elect the directors of a corporation.
2.0 PURPOSE AND TERM OF PLAN
2.1 Purpose. The purpose of the Plan is to motivate certain Employees,
Nonemployee Directors and Independent Contractors to put forth maximum
efforts toward the growth, profitability, and success of the Company and
Subsidiaries by providing incentives to such Employees, Nonemployee
Directors and Independent Contractors either through cash payments and/or
through the ownership and performance of the Common Stock. In addition,
the Plan is intended to provide incentives which will attract and retain
highly qualified individuals as Employees and Nonemployee Directors and to
assist in aligning the interests of such Employees and Nonemployee
Directors with those of its stockholders.
2.2 Term. The Plan shall be effective as of the Effective Date; provided,
however, that the Plan shall be approved by the stockholders of the
Company at an annual meeting or any special meeting of stockholders of the
Company within 12 months before or after the Effective Date, and such
approval by the stockholders of the Company shall be a condition to the
right of each Participant to receive Awards hereunder. Any Award granted
under the Plan prior to the approval by the stockholders of the Company
shall be effective as of the date of grant (unless the Committee specifies
otherwise at the time of grant), but no such Award may Vest, be paid out,
or otherwise be disposed of prior to such stockholder approval. If the
stockholders of the Company fail to approve the Plan in accordance with
this Section 2.2, any Award granted under the Plan shall be cancelled. The
Plan shall terminate on the 10th anniversary of the Effective Date (unless
sooner terminated by the Board under Section 16.1 below.
3.0 ELIGIBILITY AND PARTICIPATION
3.1 Eligibility. All Employees of the Company, all Nonemployee Directors and
all Independent Contractors shall be eligible to participate in the Plan
and to receive Awards.
3.2 Participation. Participants shall consist of such Employees, Nonemployee
Directors and Independent Contractors as the Committee in its sole
discretion designates to receive Awards under the Plan. Designation of a
Participant in any year shall not require the Committee to designate such
person or entity to receive an Award in any other year or, once
designated, to receive the same type or amount of Award as granted to the
Participant in any other year. The Committee shall consider such factors
as it deems pertinent in selecting Participants and in determining the
type and amount of their respective Awards.
4.0 ADMINISTRATION
4.1 Responsibility. The Committee shall have the responsibility, in its sole
discretion, to control, operate, manage and administer the Plan in
accordance with its terms.
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4.2 Award Agreement. Each Award granted under the Plan shall be evidenced by an
Award Agreement which shall be signed by the Committee and the Participant;
provided, however, that in the event of any conflict between a provision of
the Plan and any provision of an Award Agreement, the provision of the Plan
shall prevail.
4.3 Authority of the Committee. The Committee shall have all the discretionary
authority that may be necessary or helpful to enable it to discharge its
responsibilities with respect to the Plan, including but not limited to the
following:
(a) to determine eligibility for participation in the Plan;
(b) to determine eligibility for and the type and size of an Award
granted under the Plan;
(c) to supply any omission, correct any defect, or reconcile any
inconsistency in the Plan in such manner and to such extent as it
shall deem appropriate in its sole discretion to carry the same into
effect;
(d) to issue administrative guidelines as an aid to administer the
Plan and make changes in such guidelines as it from time to time deems
proper;
(e) to make rules for carrying out and administering the Plan and
make changes in such rules as it from time to time deems proper;
(f) to the extent permitted under the Plan, grant waivers of Plan
terms, conditions, restrictions, and limitations;
(g) to accelerate the Vesting of any Award when such action or
actions would be in the best interest of the Company;
(h) to grant Award in replacement of Awards previously granted under
this Plan or any other executive compensation plan of the Company; and
(i) to take any and all other actions it deems necessary or advisable
for the proper operation or administration of the Plan.
4.4 Action by the Committee. The Committee may act only by a majority of its
members. Any determination of the Committee may be made, without a meeting,
by a writing or writings signed by all of the members of the Committee. In
addition, the Committee may authorize any one or more of its members to
execute and deliver documents on behalf of the Committee.
4.5 Delegation of Authority. The Committee may delegate to one or more of its
members, or to one or more agents, such administrative duties as it may
deem advisable; provided, however, that any such delegation shall be in
writing. In addition, the Committee, or any person to whom it has delegated
duties under this Section 4.5, 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 employ such legal or other counsel,
consultants and agents as it may deem
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desirable for the administration of the Plan and may rely upon any opinion
or computation received from any such counsel, consultant or agent.
Expenses incurred by the Committee in the engagement of such counsel,
consultant or agent shall be paid by the Company, or the Subsidiary whose
employees have benefited from the Plan, as determined by the Committee.
4.6 Determinations and Interpretations by the Committee. All determinations and
interpretations made by the Committee shall be binding and conclusive on
all Participants and their heirs, successors, and legal representatives.
4.7 Liability. No member of the Board, no member of the Committee and no
employee of the Company shall be liable for any act or failure to act
hereunder, except in circumstances involving his or her bad faith, gross
negligence or willful misconduct, or for any act or failure to act
hereunder by any other member or employee or by any agent to whom duties in
connection with the administration of the Plan have been delegated.
4.8 Indemnification. The Company shall indemnify members of the Committee and
any agent of the Committee who is an employee of the Company, against any
and all liabilities or expenses to which they may be subjected by reason of
any act or failure to act with respect to their duties on behalf of the
Plan, except in circumstances involving such person's bad faith, gross
negligence or willful misconduct.
5.0 SHARES SUBJECT TO PLAN
5.1 Available Shares. The aggregate number of shares of Common Stock which
shall be available for grants or payments of Awards under the Plan during
its term shall be 1,000,000 shares. Such shares of Common Stock available
for issuance under the Plan may be either authorized but unissued shares,
shares of issued stock held in the Company's treasury, or both, at the
discretion of the Company, and subject to any adjustments made in
accordance with Section 5.2 below. Any shares of Common Stock underlying
Awards which terminate by expiration, forfeiture, cancellation or otherwise
without the issuance of such shares shall again be available for grants of
Awards under the Plan. Awards that are payable only in cash are not subject
to this Section 5.1.
5.2 Adjustment to Shares. If there is any change in the Common Stock of the
Company, through merger, consolidation, reorganization, recapitalization,
stock dividend, stock split, reverse stock split, split-up, split-off,
spin-off, 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, an adjustment shall be made
to each outstanding Award so that each such Award shall thereafter be with
respect to or exercisable for such securities, cash and/or other property
as would have been received in respect of the Common Stock subject to such
Award had such Award been paid, distributed or exercised in full
immediately prior to such change or distribution. Such adjustment shall be
made successively each time any such change shall occur. In addition, in
the event of any such change or distribution, in order to prevent dilution
or enlargement of Participants' rights under the Plan, the Committee shall
have the authority to adjust, in an equitable manner, the number and kind
of shares that may be issued under the Plan, the number and kind of shares
subject to outstanding Awards, the exercise price applicable to outstanding
Stock Options, and the Fair Market Value of the Common Stock and other
value determinations applicable to outstanding Awards. Appropriate
adjustments may also be made by
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the Committee in the terms of any Awards granted 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; provided, however, that
with respect to Performance-Based Awards, such modifications and/or changes
do not disqualify compensation attributable to such Awards as
"performance-based compensation" under Code Section 162(m). In addition,
the Committee is authorized to make adjustments to the terms and conditions
of, and the criteria included in, Awards in recognition of unusual or
nonrecurring events affecting the Company or the financial statements of
the Company, or in response to changes in applicable laws, regulations, or
accounting principles. Notwithstanding anything contained in the Plan, any
adjustment with respect to an ISO due to a change or distribution described
in this Section 5.2 shall comply with the rules of Code Section 424(a), and
in no event shall any adjustment be made which would render any ISO granted
hereunder other than an incentive stock option for purposes of Code Section
422.
6.0 MAXIMUM INDIVIDUAL AWARDS
6.1 Maximum Aggregate Number of Shares Underlying Stock-Based Awards Granted
Under the Plan to Any Single Participant. The maximum aggregate number of
shares of Common Stock underlying all Awards measured in shares of Common
Stock (whether payable in Common Stock, cash or a combination of both) that
may be granted to any single Participant during the life of the Plan shall
be 750,000 shares, subject to adjustment as provided in Section 5.2 above.
For purposes of the preceding sentence, such Awards that are cancelled or
repriced shall continue to be counted in determining such maximum aggregate
number of shares of Common Stock that may be granted to any single
Participant during the life of the Plan.
6.2 Maximum Dollar Amount Underlying Cash-Based Awards Granted Under the Plan
to Any Single Participant. The maximum dollar amount that may be paid to
any single Participant with respect to all Awards measured in cash (whether
payable in Common Stock, cash or a combination of both) during the life of
the Plan shall be $10,000,000.
7.0 STOCK OPTIONS
7.1 In General. The Committee may, in its sole discretion, grant Stock Options
to Employees, Nonemployee Directors and Independent Contractors on or after
the Effective Date. The Committee shall, in its sole discretion, determine
the Employees, the Nonemployee Directors and Independent Contractors who
will receive Stock Options and the number of shares of Common Stock
underlying each Stock Option. With respect to Employees who become
Participants, the Committee may grant such Participants ISOs or
Nonqualified Stock Options or a combination of both. With respect to
Nonemployee Directors and Independent Contractors who become Participants,
the Committee may grant such Participants only Nonqualified Stock Options.
Each Stock Option shall be subject to such terms and conditions consistent
with the Plan as the Committee may impose from time to time. In addition,
each Stock Option shall be subject to the following terms and conditions
set forth in Sections 7.2 through 7.8 below.
7.2 Exercise Price. The Committee shall specify the exercise price of each
Stock Option in the Award Agreement; provided, however, that (i) the
exercise price of any ISO shall not be less than 100 percent of the Fair
Market Value of the Common Stock on the date of grant, and (ii) the
exercise
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price of any Nonqualified Stock Option shall not be less than 100 percent
of the Fair Market Value of the Common Stock on the date of grant unless
the Committee in its sole discretion and due to special circumstances
determines otherwise on the date of grant.
7.3 Term of Stock Option. The Committee shall specify the term of each Stock
Option in the Award Agreement; provided, however, that (i) no ISO shall be
exercised after the 10th anniversary of the date of grant of such ISO and
(ii) no Nonqualified Stock Option shall be exercised after the 10th
anniversary of the date of grant of such Nonqualified Stock Option. Each
Stock Option shall terminate at such earlier times and upon such conditions
or circumstances as the Committee shall, in its sole discretion, set forth
in the Award Agreement on the date of grant.
7.4 Vesting Date. The Committee shall specify the Vesting Date with respect to
each Stock Option in the Award Agreement. The Committee may grant Stock
Options that are Vested, either in whole or in part, on the date of grant.
If the Committee fails to specify a Vesting Date in the Award Agreement, 25
percent of such Stock Option shall become exercisable on each of the first
4 anniversaries of the date of grant and shall remain exercisable following
such anniversary date until the Stock Option expires in accordance with its
terms under the Award Agreement or under the terms of the Plan. The Vesting
of a Stock Option may be subject to such other terms and conditions as
shall be determined by the Committee, including, without limitation,
accelerating the Vesting if certain performance goals are achieved.
7.5 Exercise of Stock Options. The Stock Option exercise price may be paid in
cash or, in the sole discretion of the Committee, by the delivery of shares
of Common Stock then owned by the Participant, by the withholding of shares
of Common Stock for which a Stock Option is exercisable, or by a
combination of these methods. In the sole discretion of the Committee,
payment may also be made by delivering a properly executed exercise notice
to the Company together with a copy of irrevocable instructions to a broker
to deliver promptly to the Company the amount of sale or loan proceeds to
pay the exercise price. To facilitate the foregoing, the Company may enter
into agreements for coordinated procedures with one or more brokerage
firms. The Committee may prescribe any other method of paying the exercise
price that it determines to be consistent with applicable law and the
purpose of the Plan, including, without limitation, in lieu of the exercise
of a Stock Option by delivery of shares of Common Stock then owned by a
Participant, providing the Company with a notarized statement attesting to
the number of shares owned by the Participant, where upon verification by
the Company, the Company would issue to the Participant only the number of
incremental shares to which the Participant is entitled upon exercise of
the Stock Option. In determining which methods a Participant may utilize to
pay the exercise price, the Committee may consider such factors as it
determines are appropriate; provided, however, that with respect to ISOs,
all such discretionary determinations by the Committee shall be made at the
time of grant and specified in the Award Agreement.
7.6 Restrictions Relating to ISOs. In addition to being subject to the terms
and conditions of this Section 7, ISOs shall comply with all other
requirements under Code Section 422. Accordingly, ISOs may be granted only
to Participants who are employees (as described in Treasury Regulation
Section 1.421-7(h)) of the Company or of any "Parent Corporation" (as
defined in Code Section 424(e)) or of any "Subsidiary Corporation" (as
defined in Code Section 424(f)) on the date of grant. The aggregate market
value (determined as of the time the ISO is granted) of the Common Stock
with respect to which ISOs (under all option plans of the Company and of
any Parent
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Corporation and of any Subsidiary Corporation) are exercisable for the
first time by a Participant during any calendar year shall not exceed
$100,000. For purposes of the preceding sentence, (i) ISOs shall be taken
into account in the order in which they are granted and (ii) ISOs granted
before 1987 shall not be taken into account. ISOs shall not be transferable
by the Participant otherwise than by will or the laws of descent and
distribution and shall be exercisable, during the Participant's lifetime,
only by such Participant. The Committee shall not grant ISOs to any
Employee who, at the time the ISO is granted, owns stock possessing (after
the application of the attribution rules of Code Section 424(d)) more than
10 percent of the total combined voting power of all classes of stock of
the Company or of any Parent Corporation or of any Subsidiary Corporation
unless the exercise price of the ISO is fixed at not less than 110 percent
of the Fair Market Value of the Common Stock on the date of grant and the
exercise of such ISO is prohibited by its terms after the 5th anniversary
of the ISO's date of grant. In addition, no ISO shall be issued to a
Participant in tandem with a Nonqualified Stock Option issued to such
Participant in accordance with Treasury Regulation Section 14a.422A-1,
Q/A-39.
7.7 Additional Terms and Conditions. The Committee may, by way of the Award
Agreements or otherwise, establish such other terms, conditions,
restrictions and/or limitations, if any, of any Stock Option, provided they
are not inconsistent with the Plan, including, without limitation, the
requirement that the Participant not engage in competition with the
Company.
7.8 Conversion Stock Options. The Committee may, in its sole discretion, grant
a Stock Option to any holder of an option (hereinafter referred to as an
"Original Option") to purchase shares of the stock of any corporation:
(a) the stock or assets of which were acquired, directly or
indirectly, by the Company or any Subsidiary, or
(b) which was merged with and into the Company or a Subsidiary,
so that the Original Option is converted into a Stock Option (hereinafter
referred to as a "Conversion Stock Option"); provided, however, that such
Conversion Stock Option as of the date of its grant (the "Conversion Stock
Option Grant Date") shall have the same economic value as the Original
Option as of the Conversion Stock Option Grant Date. In addition, unless
the Committee, in its sole discretion determines otherwise, a Conversion
Stock Option which is converting an Original Option intended to qualify as
an ISO shall have the same terms and conditions as applicable to the
Original Option in accordance with Code Section 424 and the Treasury
Regulations thereunder so that the conversion (x) is treated as the
issuance or assumption of a stock option under Code Section 424(a) and (y)
is not treated as a modification, extension or renewal of a stock option
under Code Section 424(h).
8.0 SARS
8.1 In General. The Committee may, in its sole discretion, grant SARs to
Employees, Nonemployee Directors, and/or Independent Contractors. An SAR is
a right to receive a payment in cash, Common Stock or a combination of
both, in an amount equal to the excess of (x) the Fair Market Value of the
Common Stock, or other specified valuation, of a specified number of shares
of Common Stock on the date the SAR is exercised over (y) the Fair Market
Value of the Common
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Stock, or other specified valuation (which shall be no less than the Fair
Market Value of the Common Stock), of such shares of Common Stock on the
date the SAR is granted, all as determined by the Committee; provided,
however, that if a SAR is granted retroactively in tandem with or in
substitution for a Stock Option, the designated Fair Market Value of the
Common Stock in the Award Agreement may be the Fair Market Value of the
Common Stock on the date such Stock Option was granted. Each SAR shall be
subject to such terms and conditions, including, but not limited to, a
provision that automatically converts a SAR into a Stock Option on a
conversion date specified at the time of grant, as the Committee shall
impose from time to time in its sole discretion and subject to the terms of
the Plan.
9.0 STOCK AWARDS AND STOCK UNITS
9.1 Stock Awards. The Committee may, in its sole discretion, grant Stock Awards
to Employees, Nonemployee Directors, and/or Independent Contractors as
additional compensation or in lieu of other compensation for services to
the Company. A Stock Award shall consist of shares of Common Stock which
shall be subject to such terms and conditions as the Committee in its sole
discretion determines appropriate including, without limitation,
restrictions on the sale or other disposition of such shares, the Vesting
Date with respect to such shares, and the right of the Company to reacquire
such shares for no consideration upon termination of the Participant's
employment within specified periods. The Committee may require the
Participant to deliver a duly signed stock power, endorsed in blank,
relating to the Common Stock covered by such Stock Award and/or that the
stock certificates evidencing such shares be held in custody or bear
restrictive legends until the restrictions thereon shall have lapsed. With
respect to the shares of Common Stock subject to a Stock Award, the
Participant shall have all of the rights of a holder of shares of Common
Stock, including the right to receive dividends and to vote the shares,
unless the Committee determines otherwise on the date of grant.
9.2 Stock Units. The Committee may, in its sole discretion, grant to Employees,
Nonemployee Directors, and/or Independent Contractor Stock Units as
additional compensation or in lieu of other compensation for services to
the Company. A Stock Unit is a hypothetical share of Common Stock
represented by a notional account established and maintained (or caused to
be established or maintained) by the Company for such Participant who
receives a grant of Stock Units. Stock Units shall be subject to such terms
and conditions as the Committee, in its sole discretion, determines
appropriate including, without limitation, determinations of the Vesting
Date with respect to such Stock Units and the criteria for the Vesting of
such Stock Units. A Stock Unit granted by the Committee shall provide for
payment in shares of Common Stock at such time or times as the Award
Agreement shall specify. The Committee shall determine whether a
Participant who has been granted a Stock Unit shall also be entitled to a
Dividend Equivalent Right.
9.3 Payout of Stock Units. Subject to a Participant's election to defer in
accordance with Section 17.3 below, upon the Vesting of a Stock Unit, the
shares of Common Stock representing the Stock Unit shall be distributed to
the Participant, unless the Committee, in its sole discretion, provides for
the payment of the Stock Unit in cash (or partly in cash and partly in
shares of Common Stock) equal to the value of the shares of Common Stock
which would otherwise be distributed to the Participant.
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10.0 PERFORMANCE SHARES AND PERFORMANCE UNITS
10.1 Performance Shares. The Committee may, in its sole discretion, grant
Performance Shares to Employees, Nonemployee Directors, and/or Independent
Contractors as additional compensation or in lieu of other compensation
for services to the Company. A Performance Share shall consist of a share
or shares of Common Stock which shall be subject to such terms and
conditions as the Committee, in its sole discretion, determines
appropriate including, without limitation, determining the performance
goal or goals which, depending on the extent to which such goals are met,
will determine the number and/or value of the Performance Shares that will
be paid out or distributed to the Participant who has been granted
Performance Shares. Performance goals may be based on, without limitation,
Company-wide, divisional and/or individual performance, as the Committee,
in its sole discretion, may determine, and may be based on the performance
measures listed in Section 12.3 below.
10.2 Performance Units. The Committee may, in its sole discretion, grant to
Employees, Nonemployee Directors, and/or Independent Contractors
Performance Units as additional compensation or in lieu of other
compensation for services to the Company. A Performance Unit is a
hypothetical share or shares of Common Stock represented by a notional
account which shall be established and maintained (or caused to be
established or maintained) by the Company for such Participant who
receives a grant of Performance Units. Performance Units shall be subject
to such terms and conditions as the Committee, in its sole discretion,
determines appropriate including, without limitation, determining the
performance goal or goals which, depending on the extent to which such
goals are met, will determine the number and/or value of the Performance
Units that will be accrued with respect to the Participant who has been
granted Performance Units. Performance goals may be based on, without
limitation, Company-wide, divisional and/or individual performance, as the
Committee, in its sole discretion, may determine, and may be based on the
performance measures listed in Section 12.3 below.
10.3 Adjustment of Performance Goals. With respect to those Performance Shares
or Performance Units that are not intended to qualify as Performance-Based
Awards (as described in Section 12 below), the Committee shall have the
authority at any time to make adjustments to performance goals for any
outstanding Performance Shares or Performance Units which the Committee
deems necessary or desirable unless at the time of establishment of the
performance goals the Committee shall have precluded its authority to make
such adjustments.
10.4 Payout of Performance Shares or Performance Units. Subject to a
Participant's election to defer in accordance with Section 17.3 below,
upon the Vesting of a Performance Share or a Performance Unit, the shares
of Common Stock representing the Performance Share or the Performance Unit
shall be distributed to the Participant, unless the Committee, in its sole
discretion, provides for the payment of the Performance Share or a
Performance Unit in cash (or partly in cash and partly in shares of Common
Stock) equal to the value of the shares of Common Stock which would
otherwise be distributed to the Participant.
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11.0 CASH AWARDS
11.1 In General. The Committee may, in its sole discretion, grant Cash Awards
to Employees, Nonemployee Directors, and/or Independent Contractors as
additional compensation or in lieu of other compensation for services to
the Company. A Cash Award shall be subject to such terms and conditions as
the Committee, in its sole discretion, determines appropriate including,
without limitation, determining the Vesting Date with respect to such Cash
Award, the criteria for the Vesting of such Cash Award, and the right of
the Company to require the Participant to repay the Cash Award (with or
without interest) upon termination of the Participant's employment within
specified periods.
12.0 PERFORMANCE-BASED AWARDS
12.1 In General. The Committee, in its sole discretion, may designate Awards
granted under the Plan as Performance-Based Awards (as defined below) if
it determines that such compensation might not be tax deductible by the
Company due to the deduction limitation imposed by Code Section 162(m).
Accordingly, an Award granted under the Plan may be granted in such a
manner that the compensation attributable to such Award is intended by the
Committee to qualify as "performance-based compensation" (as such term is
used in Code Section 162(m) and the Treasury Regulations thereunder) and
thus be exempt from the deduction limitation imposed by Code Section
162(m) ("Performance-Based Awards").
12.2 Qualification of Performance-Based Awards. Awards shall only qualify as
Performance-Based Awards under the Plan if:
(a) at the time of grant the Committee is comprised solely of two or
more "outside directors" (as such term is used in Code Section 162(m)
and the Treasury Regulations thereunder);
(b) with respect to either the granting or Vesting of an Award (other
than (i) a Nonqualified Stock Option or (ii) an SAR, which are granted
with an exercise price at or above the Fair Market Value of the Common
Stock on the date of grant), such Award is subject to the achievement
of a performance goal or goals based on one or more of the performance
measures specified in Section 12.3 below;
(c) the Committee establishes in writing (i) the objective
performance-based goals applicable to a given performance period and
(ii) the individual employees or class of employees to which such
performance-based goals apply no later than 90 days after the
commencement of such performance period (but in no event after 25
percent of such performance period has elapsed);
(d) no compensation attributable to a Performance-Based Award will be
paid to or otherwise received by a Participant until the Committee
certifies in writing that the performance goal or goals (and any other
material terms) applicable to such performance period have been
satisfied; and
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(e) after the establishment of a performance goal, the Committee
shall not revise such performance goal (unless such revision will not
disqualify compensation attributable to the Award as
"performance-based compensation" under Code Section 162(m)) or
increase the amount of compensation payable with respect to such Award
upon the attainment of such performance goal.
12.3 Performance Measures. The Committee may use the following performance
measures (either individually or in any combination) to set performance
goals with respect to Awards intended to qualify as Performance-Based
Awards: net sales; pretax income before allocation of corporate overhead
and bonus; budget; cash flow; earnings per share; net income; division,
group or corporate financial goals; return on stockholders' equity; return
on assets; attainment of strategic and operational initiatives;
appreciation in and/or maintenance of the price of the Common Stock or any
other publicly-traded securities of the Company; market share; gross
profits; earnings before interest and taxes; earnings before interest,
taxes, depreciation and amortization; economic value-added models;
comparisons with various stock market indices; increase in number of
customers; and/or reductions in costs.
12.4 Stockholder Reapproval. As required by Treasury Regulation Section
1.162-27(e)(vi), the material terms of performance goals as described in
this Section 12 shall be disclosed to and reaaproved by the Company's
stockholders no later than the first stockholder meeting that occurs in
the 5th year following the year in which the Company's stockholders
previously approved such performance goals.
13.0 CHANGE IN CONTROL
13.1 Accelerated Vesting. Notwithstanding any other provision of this Plan to
the contrary, if there is a Change in Control of the Company, the
Committee, in its sole discretion, may take such actions as it deems
appropriate with respect to outstanding Awards, including, without
limitation, accelerating the Vesting Date and/or payout of such Awards;
provided, however, that such action shall not conflict with any provision
contained in an Award Agreement unless such provision is amended in
accordance with Section 16.3 below.
13.2 Cashout. The Committee, in its sole discretion, may determine that, upon
the occurrence of a Change in Control of the Company, all or a portion of
certain outstanding Awards shall terminate within a specified number of
days after notice to the holders, and each such holder shall receive an
amount equal to the value of such Award on the date of the change in
control, and with respect to each share of Common Stock subject to a Stock
Option or SAR, an amount equal to the excess of the Fair Market Value of
such shares of Common Stock immediately prior to the occurrence of such
change in control over the exercise price per share of such Stock Option
or SAR. Such amount shall be payable in cash, in one or more kinds of
property (including the property, if any, payable in the transaction) or
in a combination thereof, as the Committee, in its sole discretion, shall
determine.
13.3 Assumption or Substitution of Awards. Notwithstanding anything contained
in the Plan to the contrary, the Committee may, in its sole discretion,
provide that an Award may be assumed by any entity which acquires control
of the Company or may be substituted by a similar award under such
entity's compensation plans.
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14.0 TERMINATION OF EMPLOYMENT IF PARTICIPANT IS AN EMPLOYEE
14.1 Termination of Employment Due to Death or Disability. Subject to any
written agreement between the Company and a Participant, if a
Participant's employment is terminated due to death or Disability:
(a) all non-Vested portions of Awards held by the Participant on the
date of the Participant's death or the date of the termination of his
or her employment, as the case may be, shall immediately be forfeited
by such Participant as of such date; and
(b) all Vested portions of Stock Options and SARs held by the
Participant on the date of the Participant's death or the date of the
termination of his or her employment, as the case may be, shall remain
exercisable until the earlier of:
(i) the end of the 12-month period following the date of the
Participant's death or the date of the termination of his or her
employment, as the case may be, or
(ii) the date the Stock Option or SAR would otherwise expire.
14.2 Termination of Employment for Cause. Subject to any written agreement
between the Company and a Participant, if a Participant's employment is
terminated by the Company for cause, all Awards held by a Participant on
the date of the termination of his or her employment for cause, whether
Vested or non-Vested, shall immediately be forfeited by such Participant
as of such date.
14.3 Other Terminations of Employment. Subject to any written agreement between
the Company and a Participant, if a Participant's employment is terminated
for any reason other than for cause or other than due to death or
Disability:
(a) all non-Vested portions of Awards held by the Participant on the
date of the termination of his or her employment shall immediately be
forfeited by such Participant as of such date; and
(b) all Vested portions of Stock Options and/or SARs held by the
Participant on the date of the termination of his or her employment
shall remain exercisable until the earlier of (i) the end of the
90-day period following the date of the termination of the
Participant's employment or (ii) the date the Stock Option or SAR
would otherwise expire.
14.4 Committee Discretion. Notwithstanding anything contained in the Plan to
the contrary, the Committee may, in its sole discretion, provide that:
(a) any or all non-Vested portions of Stock Options and/or SARs held
by the Participant on the date of the Participant's death and/or the
date of the termination of his or her employment shall immediately
become exercisable as of such date and, except with respect to ISOs,
shall remain exercisable until a date that occurs on or prior to the
date the Stock Option or SAR is scheduled to expire;
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(b) any or all Vested portions of Nonqualified Stock Options and/or
SARs held by the Participant on the date of the Participant's death
and/or the date of the termination of his or her employment shall
remain exercisable until a date that occurs on or prior to the date
the Stock Option or SAR is scheduled to expire; and/or
(c) any or all non-Vested portions of Stock Awards, Stock Units,
Performance Shares, Performance Units, and/or Cash Awards held by the
Participant on the date of the Participant's death and/or the date of
the termination of his or her employment shall immediately Vest or
shall become Vested on a date that occurs on or prior to the date the
Award is scheduled to vest.
14.5 ISOs. Notwithstanding anything contained in the Plan to the contrary, (i)
the provisions contained in this Section 14 shall be applied to an ISO
only if the application of such provision maintains the treatment of such
ISO as an ISO and (ii) the exercise period of an ISO in the event of a
termination of the Participant's employment due to Disability provided in
Section 14.1 above shall be applied only if the Participant is
"permanently and totally disabled" (as such term is defined in Code
Section 22(e)(3)).
15.0 TAXES
15.1 Withholding Taxes. With respect to Employees, the Company, or the
applicable Subsidiary, may require a Participant who has become vested in
his or her Stock Award, Stock Unit, Performance Share or Performance Unit
granted hereunder, or who exercises a Stock Option or SAR granted
hereunder to reimburse the corporation which employs such Participant for
any taxes required by any governmental regulatory authority to be withheld
or otherwise deducted and paid by such corporation or entity in respect of
the issuance or disposition of such shares or the payment of any amounts.
In lieu thereof, the corporation or entity which employs such Participant
shall have the right to withhold the amount of such taxes from any other
sums due or to become due from such corporation or entity to the
Participant upon such terms and conditions as the Committee shall
prescribe. The corporation or entity that employs such Participant may, in
its discretion, hold the stock certificate to which such Participant is
entitled upon the vesting of a Stock Award, Stock Unit, Performance Share
or Performance Unit or the exercise of a Stock Option or SAR as security
for the payment of such withholding tax liability, until cash sufficient
to pay that liability has been accumulated.
15.2 Use of Common Stock to Satisfy Withholding Obligation. With respect to
Employees, at any time that the Company, Subsidiary or other entity that
employs such Participant becomes subject to a withholding obligation under
applicable law with respect to the vesting of a Stock Award, Stock Unit,
Performance Share or Performance Unit or the exercise of a Nonqualified
Stock Option (the "Tax Date"), except as set forth below, a holder of such
Award may elect to satisfy, in whole or in part, the holder's related
personal tax liabilities (an "Election") by (i) directing the Company,
Subsidiary or other entity that employs such Participant to withhold from
shares issuable in the related vesting or exercise either a specified
number of shares or shares of Common Stock having a specified value (in
each case equal to the related minimum statutory personal withholding tax
liabilities with respect to the applicable taxing jurisdiction in order to
comply with
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the requirements for a "fixed plan" under Accounting Principals Board
Opinion No. 25), (ii) tendering shares of Common Stock previously issued
pursuant to the exercise of a Stock Option or other shares of the Common
Stock owned by the holder, or (iii) combining any or all of the foregoing
Elections in any fashion. An Election shall be irrevocable. The withheld
shares and other shares of Common Stock tendered in payment shall be
valued at their Fair Market Value of the Common Stock on the Tax Date. The
Committee may disapprove of any Election, suspend or terminate the right
to make Elections or provide that the right to make Elections shall not
apply to particular shares or exercises. The Committee may impose any
additional conditions or restrictions on the right to make an Election as
it shall deem appropriate, including conditions or restrictions with
respect to Section 16 of the Exchange Act.
15.3 No Guarantee of Tax Consequences. No person connected with the Plan in any
capacity, including, but not limited to, the Company and any Subsidiary
and their directors, officers, agents and employees makes any
representation, commitment, or guarantee that any tax treatment,
including, but not limited to, federal, state and local income, estate and
gift tax treatment, will be applicable with respect to amounts deferred
under the Plan, or paid to or for the benefit of a Participant under the
Plan, or that such tax treatment will apply to or be available to a
Participant on account of participation in the Plan.
16.0 AMENDMENT AND TERMINATION
16.1 Termination of Plan. The Board may suspend or terminate the Plan at any
time with or without prior notice; provided, however, that no action
authorized by this Section 16.1 shall reduce the amount of any outstanding
Award or change the terms and conditions thereof without the Participant's
consent.
16.2 Amendment of Plan. The Board may amend the Plan at any time with or
without prior notice; provided, however, that no action authorized by this
Section 16.2 shall reduce the amount of any outstanding Award or change
the terms and conditions thereof without the Participant's consent. No
amendment of the Plan shall, without the approval of the stockholders of
the Company:
(a) increase the total number of shares which may be issued under the
Plan;
(b) increase the maximum number of shares with respect to all Awards
measured in Common Stock that may be granted to any individual under
the Plan;
(c) increase the maximum dollar amount that may be paid with respect
to all Awards measured in cash; or
(d) modify the requirements as to eligibility for Awards under the
Plan.
In addition, the Plan shall not be amended without the approval of such
amendment by the Company's stockholders if such amendment (i) is required
under the rules and regulations of the stock exchange or national market
system on which the Common Stock is listed or (ii) will disqualify any ISO
granted hereunder.
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16.3 Amendment or Cancellation of Award Agreements. The Committee may amend or
modify any Award Agreement at any time by mutual agreement between the
Committee and the Participant or such other persons as may then have an
interest therein. In addition, by mutual agreement between the Committee
and a Participant or such other persons as may then have an interest
therein, Awards may be granted to an Employee, Nonemployee Director or
Independent Contractor in substitution and exchange for, and in
cancellation of, any Awards previously granted to such Employee,
Nonemployee Director or Independent Contractor under the Plan, or any
award previously granted to such Employee, Nonemployee Director or
Independent Contractor under any other present or future plan of the
Company or any present or future plan of an entity which (i) is purchased
by the Company, (ii) purchases the Company, or (iii) merges into or with
the Company.
17.0 MISCELLANEOUS
17.1 Other Provisions. Awards granted under the Plan may also be subject to
such other provisions (whether or not applicable to the Award granted to
any other Participant) as the Committee determines on the date of grant to
be appropriate, including, without limitation, for the installment
purchase of Common Stock under Stock Options, to assist the Participant in
financing the acquisition of Common Stock, for the forfeiture of, or
restrictions on resale or other disposition of, Common Stock acquired
under any Stock Option, for the acceleration of Vesting of Awards in the
event of a change in control of the Company, for the payment of the value
of Awards to Participants in the event of a change in control of the
Company, or to comply with federal and state securities laws, or
understandings or conditions as to the Participant's employment in
addition to those specifically provided for under the Plan.
17.2 Transferability. Each Award granted under the Plan to a Participant shall
not be transferable otherwise than by will or the laws of descent and
distribution, and Stock Options and SARs shall be exercisable, during the
Participant's lifetime, only by the Participant. In the event of the death
of a Participant, each Stock Option or SAR theretofore granted to him or
her shall be exercisable during such period after his or her death as the
Committee shall, in its sole discretion, set forth in the Award Agreement
on the date of grant and then only by the executor or administrator of the
estate of the deceased Participant or the person or persons to whom the
deceased Participant's rights under the Stock Option or SAR shall pass by
will or the laws of descent and distribution. Notwithstanding the
foregoing, the Committee, in its sole discretion, may permit the
transferability of a Stock Option (other than an ISO) by a Participant
solely to members of the Participant's immediate family or trusts or
family partnerships or other similar entities for the benefit of such
persons, and subject to such terms, conditions, restrictions and/or
limitations, if any, as the Committee may establish and include in the
Award Agreement.
17.3 Election to Defer Compensation Attributable to Award. The Committee may,
in its sole discretion, allow a Participant to elect to defer the receipt
of any compensation attributable to an Award under guidelines and
procedures to be established by the Committee after taking into account
the advice of the Company's tax counsel.
17.4 Listing of Shares and Related Matters. If at any time the Committee shall
determine that the listing, registration or qualification of the shares of
Common Stock subject to any Award on any securities exchange or under any
applicable law, or the consent or approval of any governmental regulatory
authority, is necessary or desirable as a condition of, or in connection
with, the granting
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of an Award or the issuance of shares of Common Stock thereunder, such
Award may not be exercised, distributed or paid out, as the case may be,
in whole or in part, unless such listing, registration, qualification,
consent or approval shall have been effected or obtained free of any
conditions not acceptable to the Committee.
17.5 No Right, Title, or Interest in Company Assets. Participants shall have no
right, title, or interest whatsoever in or to any investments which 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 intended to be subject to the Employee Retirement Income
Security Act of 1974, as amended.
17.6 No Right to Continued Employment or Service or to Grants. The
Participant's rights, if any, to continue to serve the Company as a
director, officer, employee, independent contractor or otherwise, shall
not be enlarged or otherwise affected by his or her designation as a
Participant under the Plan, and the Company or the applicable Subsidiary
reserves the right to terminate the employment of any Employee or the
services of any Independent Contractor or director at any time. The
adoption of the Plan shall not be deemed to give any Employee, Nonemployee
Director, Independent Contractor or any other individual any right to be
selected as a Participant or to be granted an Award.
17.7 Awards Subject to Foreign Laws. The Committee may grant Awards to
individual Participants who are subject to the tax laws of nations other
than the United States, and such Awards may have terms and conditions as
determined by the Committee as necessary to comply with applicable foreign
laws. The Committee may take any action which it deems advisable to obtain
approval of such Awards by the appropriate foreign governmental entity;
provided, however, that no such Awards may be granted pursuant to this
Section 16.6 and no action may be taken which would result in a violation
of the Exchange Act or any other applicable law.
17.8 Governing Law. The Plan, all Awards granted hereunder, and all actions
taken in connection herewith shall be governed by and construed in
accordance with the laws of the State of Delaware without reference to
principles of conflict of laws, except as superseded by applicable federal
law.
17.9 Other Benefits. No Award granted under the Plan shall be considered
compensation for purposes of computing benefits under any retirement plan
of the Company or any Subsidiary nor affect any benefits or compensation
under any other benefit or compensation plan of the Company or any
Subsidiary now or subsequently in effect.
17.10 No Fractional Shares. No fractional shares of Common Stock shall be issued
or delivered pursuant to the Plan or any Award. The Committee shall
determine whether cash, Common Stock, Stock Options, 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.
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