AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON OCTOBER 30, 2002
REGISTRATION NO. 333-
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM S-8
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
KENNAMETAL INC.
(Exact name of registrant as specified in its charter)
PENNSYLVANIA 25-0900168
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification Number)
1600 TECHNOLOGY WAY
P.O. BOX 231
LATROBE, PENNSYLVANIA 15650
(Address, including Zip Code, of Registrant's Principal Executive Offices)
KENNAMETAL INC. STOCK AND INCENTIVE PLAN OF 2002
(Full title of the plan)
DAVID W. GREENFIELD, ESQUIRE COPIES OF COMMUNICATIONS TO:
VICE PRESIDENT, SECRETARY AND GENERAL COUNSEL
KENNAMETAL INC. RONALD BASSO, ESQUIRE
1600 TECHNOLOGY WAY BUCHANAN INGERSOLL
P.O. BOX 231 PROFESSIONAL CORPORATION
LATROBE, PENNSYLVANIA 15650 ONE OXFORD CENTRE
724-539-5000 301 GRANT STREET, 20TH FLOOR
(Name, Address, including Zip Code, PITTSBURGH, PA 15219-1410
and Telephone Number, including Area Code, 412-562-3943
of Agent for Service)
CALCULATION OF REGISTRATION FEE
Proposed Maximum Proposed Maximum
Title of Securities to be Amount to be Offering Price Aggregate Offering Amount of
Registered(1) Registered Per Share(2) Price Registration Fee(3)
------------- ---------- ------------ ----- -------------------
Capital Stock, par value $1.25 per 2,400,000 $30.285 $72,684,000 $6,687
share
(1) Includes Preferred Stock Purchase Rights. Prior to the occurrence of certain
events, such rights will not be exercisable or evidenced separately from the
Common Stock.
(2) Estimated solely for purposes of calculating the registration fee pursuant
to Rule 457(h). Such price, which is the average of the high and low sales
prices for the Capital Stock on the New York Stock Exchange on October 29, 2002,
has been determined in accordance with Rule 457(c).
(3) Calculated pursuant to Section 6(b) of the Securities Act.
PART I
INFORMATION REQUIRED IN THE SECTION 10(a) PROSPECTUS
ITEM 1. PLAN INFORMATION.
The documents containing the information specified in Part I of this
Registration Statement will be sent or given to employees as specified by Rule
428(b)(1). Such documents are not required to be and are not filed with the
Securities and Exchange Commission (the "Commission") either as a part of this
Registration Statement or as prospectuses or prospectus supplements pursuant to
Rule 424. These documents and the documents incorporated by reference in this
Registration Statement pursuant to Item 3 of Part II of this Form S-8, taken
together, constitute a prospectus that meets the requirements of Section 10(a)
of the Securities Act of 1933, as amended (the "Securities Act").
ITEM 2. COMPANY INFORMATION AND EMPLOYEE PLAN ANNUAL INFORMATION.
Upon written or oral request, any of the documents incorporated herein by
reference in Item 3 of Part II of this Registration Statement (which documents
are incorporated by reference in the Section 10(a) Prospectus) and other
documents required to be delivered to eligible employees pursuant to Rule 428(b)
or additional information about the Kennametal Inc. Stock and Incentive Plan of
2002 and its administrators are available without charge by contacting
Kennametal Inc.
1600 Technology Way
P.O. Box 231
Latrobe, PA 15650-0231
(724) 539-5000
Attn: David W. Greenfield, Esquire
Vice President, Secretary and General Counsel
PART II
INFORMATION REQUIRED IN THE REGISTRATION STATEMENT
ITEM 3. INCORPORATION OF DOCUMENTS BY REFERENCE
Kennametal Inc. (the "Corporation") hereby incorporates by reference into
this Registration Statement the documents listed in (a) through (c) below. The
Corporation also incorporates by reference, from the date of filing of such
documents, all documents subsequently filed by it pursuant to Section 13(a),
13(c), 14 and 15(d) of the Securities Exchange Act of 1934, as amended (the
"Securities Exchange Act"), prior to the filing of a post-effective amendment
which indicates that all securities offered have been sold or which deregisters
all securities then remaining unsold:
(a) The latest annual report of the Corporation filed pursuant to
Section 13(a) or 15(d) under the Securities Exchange Act;
(b) All other reports filed pursuant to Section 13(a) or 15(d) of
the Securities Exchange Act since the end of the fiscal year covered by the
annual report referred to in (a) above; and
(c) The description of the Capital Stock of the Corporation
contained in the Corporation's registration statement filed under Section 12 of
the Securities Exchange Act, including any amendment or report filed for the
purpose of updating such description.
The audited financial statements as of and for the years ended June 30,
2000 and 2001 included in the Annual Report on Form 10-K incorporated herein by
reference were audited by Arthur Andersen LLP. After reasonable efforts, the
Corporation has not been able to obtain the consent of Arthur Andersen LLP to
the incorporation by reference of its audit report dated July 20, 2001 into this
Registration Statement. Accordingly, Arthur Andersen LLP will not be liable to
investors under Section 11(a) of the Securities Act because it has not consented
to being named as an expert in this Registration Statement, and therefore such
lack of consent may limit the recovery by investors from Arthur Andersen LLP.
ITEM 4. DESCRIPTION OF SECURITIES
Not Applicable.
ITEM 5. INTERESTS OF NAMED EXPERTS AND COUNSEL
Buchanan Ingersoll Professional Corporation ("BIPC"), counsel for the
Corporation, is issuing an opinion to the Corporation in connection with this
Registration Statement regarding the legality of the securities being
registered. Mr. William R. Newlin, the Managing Director and a shareholder of
BIPC, is a Director of the Corporation. As of October 30, 2002, BIPC, and all
attorneys of BIPC who may be deemed to be substantively involved in this
Registration Statement, did not beneficially own any shares of the Capital Stock
of the Corporation.
ITEM 6. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Pennsylvania statutory law regarding directors and officers insurance and
indemnification is embodied in Subchapter D (Sections 1741 through 1750) of the
Pennsylvania Business Corporation Law of 1988, as amended (the "PBCL"). Section
1741 (relating to third party actions) and 1742 (relating to derivative actions)
of the PBCL provide that, unless otherwise restricted by its bylaws, a business
corporation shall have the power to indemnify any person who is made a party to
a third-party or derivative action, respectively, by reason that such person is
or was a representative of the corporation. The PBCL defines representative to
mean a director, officer, employee or agent thereof (a "Representative"). The
sections further state that the corporation is authorized to indemnify the
Representative against expenses (including attorneys' fees), judgments, fines
and amounts paid in settlement actually and reasonably incurred by him or her in
connection with the action. However, the Representative must have acted in good
faith and with a reasonable belief that his or her actions were in the best
interests, or not opposed to the best interests, of the corporation; and with
respect to any criminal
proceeding, the Representative must have had no reasonable cause to believe his
or her conduct was unlawful.
Section 1743 of the PBCL provides mandatory indemnification for a
Representative if he or she succeeds on the merits or otherwise in the defense
of any claim or action. The corporation must indemnify him or her to the extent
of his or her actual and reasonable expenses (including attorney's fees) in
connection with the claim or action.
Section 1746(a) states that the statutory rights of indemnification shall
not be deemed exclusive of any other rights to which a person might be entitled
under any bylaw, agreement, or otherwise. However, 1746(b) forbids
indemnification to be made in any case where the act or failure to act giving
rise to the claim is determined by a court to be willful misconduct or
recklessness. A corporation may not provide indemnification in the case of
willful misconduct or recklessness.
The PBCL, in Section 1747, also authorizes corporations to purchase and
maintain insurance on behalf of a Representative, whether or not the corporation
would have the power to indemnify him or her. Such insurance is declared to be
consistent with Pennsylvania's public policy.
Article IX, Section 1 of the Corporation's By-Laws provides that a
director shall not be personally liable for monetary damages for any action
taken or failed to be taken unless the director has breached or failed to
perform the duties of his office and such breach or failure to perform
constitutes self-dealing, willful misconduct or recklessness. A director's
criminal or tax liability is not limited by the foregoing provision.
Section 2 of Article IX of the Corporation's By-Laws requires the
Corporation to indemnify any director or officer who is involved in any action,
suit or proceeding, whether, civil, criminal, administrative or investigative,
unless a court determines that such director or officer's conduct constituted
willful misconduct or recklessness. However, the Corporation will indemnify a
director or officer who initiates an action only if the action was authorized by
the board of directors. The right to indemnification conferred by this By-Law
includes payment of all reasonable expenses, including attorney's fees, and any
liability and loss. The By-Laws further provide that any director or officer who
is entitled to indemnification but is not paid in full by the Corporation within
forty-five (45) days after a written claim, may bring suit against the
Corporation; and if the director or officer succeeds, in whole or in part, he or
she shall be entitled to also be paid the expense of prosecuting such claim.
The Corporation has entered into indemnification contracts with directors
and certain officers of the Corporation which entitle them to full
indemnification in accordance with the PBCL and the Corporation's By-Laws. Also,
pursuant to the indemnification contracts, the Corporation is obligated to
purchase and maintain directors and officers' liability insurance. Accordingly,
the Corporation provides insurance contracts which insure its directors and
officers, within the limits and subject to the limitations of the policies,
against certain expenses and liabilities which have been incurred by, or
resulted from, any actions, suits or proceedings to which they are parties by
reason of being or having been directors or officers of the Corporation.
ITEM 7. EXEMPTION FROM REGISTRATION CLAIMED
Not Applicable.
ITEM 8. EXHIBITS
The following is a list of exhibits filed as part of this Registration
Statement, which are incorporated herein:
4.01 Rights Agreement, effective as of November 2, 2000
(incorporated herein by reference to Exhibit 1 of Form 8-A
filed on October 10, 2000)
5.01 Opinion of Buchanan Ingersoll Professional Corporation
23.01 Consent of Independent Public Accountants
23.02 Consent of Arthur Andersen LLP (omitted pursuant to Rule
437(a))
23.03 Consent of Buchanan Ingersoll Professional Corporation
(included in Exhibit 5.01)
99.01 Kennametal Inc. Stock and Incentive Plan of 2002
ITEM 9. UNDERTAKINGS
(a) The undersigned Registrant hereby undertakes:
(i) To file during any period in which offers or sales are being
made, a post-effective amendment to this Registration Statement to include any
material information with respect to the plan of distribution not previously
disclosed in this Registration Statement or any material change to such
information in this Registration Statement.
(ii) That, for the purpose of determining any liability under the
Securities Act of 1933, as amended ("Securities Act"), each such post-effective
amendment shall be deemed to be a new registration statement relating to the
securities offered therein, and the offering of such securities at that time
shall be deemed to be the initial bona fide offering thereof.
(iii) To remove from registration by means of a post-effective
amendment any of the securities being registered which remain unsold at the
termination of the offering.
(b) The undersigned Registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act, each filing of the
Registrant's annual report pursuant to Section 13(a) or Section 15(d) of the
Securities Exchange Act (and, where applicable, each filing of an employee
benefit plan's annual report pursuant to Section 15(d) of the Securities
Exchange Act) that is incorporated by reference in this Registration Statement
shall be deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof.
(c) Insofar as indemnification for liabilities arising under the
Securities Act may be permitted to directors, officers and controlling persons
of the Registrant pursuant to the provisions described in Item 6 of this
Registration Statement, or otherwise, the Registrant has been advised that in
the opinion of the Securities and Exchange Commission such indemnification is
against public policy as expressed in the Securities Act and is, therefore,
unenforceable. In the event that a claim for indemnification against such
liabilities (other than the payment by the Registrant of expenses incurred or
paid by a director, officer or controlling person of the Registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Securities Act and will be governed by the final
adjudication of such issue.
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended,
the registrant certifies that it has reasonable grounds to believe that it meets
all of the requirements for filing on Form S-8 and has duly caused this
Registration Statement to be signed on its behalf by the undersigned, thereunto
duly authorized, in Unity Township, Westmoreland County, Commonwealth of
Pennsylvania, on the 30th day of October, 2002.
KENNAMETAL INC.
By: /s/ David W. Greenfield
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David W. Greenfield
Vice President, Secretary and
General Counsel
Pursuant to the requirements of the Securities Act of 1933, as amended,
this Registration Statement has been signed by the following persons in the
capacities indicated on October 30, 2002.
Signature Capacity
/s/ Markos I. Tambakeras Chairman, President
- ------------------------------------ and Chief Executive Officer
Markos I. Tambakeras
/s/ F. Nicholas Grasberger, III Vice President
- ------------------------------------ and Chief Financial Officer
F. Nicholas Grasberger, III
/s/ Timothy A. Hibbard Corporate Controller
- ------------------------------------ and Chief Accounting Officer
Timothy A. Hibbard
/s/ William R. Newlin Director
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William R. Newlin
/s/ Richard C. Alberding Director
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Richard C. Alberding
/s/ Peter B. Bartlett Director
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Peter B. Bartlett
/s/ Ronald M. DeFeo Director
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Ronald M. DeFeo
/s/ A. Peter Held Director
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A. Peter Held
/s/ Kathleen J. Hempel Director
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Kathleen J. Hempel
/s/ Aloysius T. McLaughlin, Jr Director
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Aloysius T. McLaughlin, Jr.
/s/ Larry D. Yost Director
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Larry D. Yost
EXHIBIT INDEX
EXHIBIT NO. DESCRIPTION
4.01 Rights Agreement, effective as of November 2, 2000
(incorporated by reference to Exhibit 1 of Form 8-A
filed on October 10, 2000)
5.01 Opinion of Buchanan Ingersoll Professional Corporation
23.01 Consent of Independent Public Accountants
23.02 Consent of Arthur Andersen LLP (omitted pursuant to Rule
437(a))
23.03 Consent of Buchanan Ingersoll Professional Corporation
(included in Exhibit 5.01)
99.01 Kennametal Inc. Stock and Incentive Plan of 2002
EXHIBIT 5.01
October 30, 2002
Board of Directors
Kennametal Inc.
1600 Technology Way
P.O. Box 231
Latrobe, PA 15650
Ms. Hempel and Gentlemen:
We have acted as counsel to Kennametal Inc., a Pennsylvania corporation
(the "Corporation"), in connection with the proposed issuance by the Corporation
of shares (the "Shares") of the Corporation's capital stock, par value $1.25 per
share, pursuant to the terms of the Kennametal Inc. Stock and Incentive Plan of
2002 (the "Plan").
In connection with such proposed issuance, we have examined the Plan, the
Amended and Restated Articles of Incorporation of the Corporation, as amended,
the By-Laws of the Corporation, as amended, the relevant corporate proceedings
of the Corporation, the registration statement on Form S-8 covering the issuance
of the Shares, and such other documents, records, certificates of public
officials, statutes and decisions as we consider necessary to express the
opinions contained herein. In the examination of such documents, we have assumed
the genuineness of all signatures and the authenticity of all documents
submitted to us as originals and the conformity to those original documents of
all documents submitted to us as certified or photostatic copies.
Based on the foregoing, we are of the opinion that when the Shares have
been duly issued and delivered pursuant to the terms of the Plan, the Shares
will be validly issued, fully paid and non-assessable.
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement. In giving such consent, we do not hereby admit that we
are in the category of persons whose consent is required under Section 7 of the
Securities Act of 1933, as amended, or the rules and regulations of the
Securities and Exchange Commission.
Very truly yours,
BUCHANAN INGERSOLL
PROFESSIONAL CORPORATION
By: /s/ Ronald Basso
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Ronald Basso
EXHIBIT 23.01
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in this Registration
Statement on Form S-8 of our report dated July 26, 2002, except for Note 19 as
to which the date is August 30, 2002, relating to the financial statements,
which appears in the 2002 Annual Report to Shareholders of Kennametal Inc.,
which is incorporated by reference in Kennametal Inc.'s Annual Report on Form
10-K for the year ended June 30, 2002. We also consent to the incorporation by
reference of our report dated July 26, 2002, except for Note 19 as to which the
date is August 30, 2002, relating to the financial statement schedule, which
appears in such Annual Report on Form 10-K.
/s/ Pricewaterhouse Coopers LLP
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Pittsburgh, Pennsylvania
October 29, 2002
EXHIBIT 99.01
KENNAMETAL INC.
STOCK AND INCENTIVE PLAN OF 2002
SECTION 1. ESTABLISHMENT. There is hereby established the Kennametal
Inc. Stock and Incentive Plan of 2002 (hereinafter called the "Plan") pursuant
to which Eligible Individuals who are or will be mainly responsible for its
continued growth and development and future financial success may be granted
Awards in order to secure to the Company the advantage of the incentive and
sense of proprietorship inherent in stock ownership by such persons, to further
align such person's interests with those of the shareowners, to reward such
persons for services previously performed and/or as an added inducement to
continue to provide service to the Company.
SECTION 2. CERTAIN DEFINITIONS. As used herein or, unless otherwise
specified, in any document with respect to an Award, the following definitions
shall apply:
(a) "Affiliate" of a person means a person controlling,
controlled by, or under common control with such person where control means the
power to direct the policies and practices of such person.
(b) "Award" means any Incentive Bonus Award, Option, Performance
Share Award, Performance Unit Award, Restricted Stock Award, Restricted Unit
Award, SAR, Share Award or Stock Unit Award granted under the Plan.
(c) "Board" means the Board of Directors of the Company.
(d) "Business Combination" shall mean a merger or consolidation
of the Company with another corporation or entity, other than a corporation or
entity which is an Affiliate.
(e) "Capital Stock" means the Capital Stock, par value $1.25 per
share, of the Company as adjusted pursuant to Section 10 of this Plan.
(f) "Change in Control" shall mean a change in control of the
Company of a nature that would be required to be reported in response to Item
6(e) of Schedule 14A promulgated under the Exchange Act as in effect on the date
thereof or, if Item 6(e) is no longer in effect, any regulations issued which
serve similar purposes; provided that, without limitation, such a Change in
Control shall be deemed to have occurred if: (i) a Business Combination shall
have occurred, or (ii) the Company shall sell all or substantially all of its
operating properties and assets to another person, group of associated persons
or corporation, excluding any Affiliate of the Company, if any, or (iii) any
"person" (as such term is used in Sections 13(d) and 14(d) of the Exchange Act)
is or becomes a beneficial owner, directly or indirectly, of securities of the
Company representing 25% or more of the combined voting power of the Company's
then outstanding securities coupled with or followed by the election as
directors of the Company of
persons who were not directors at the time of such acquisition if such person
shall elect a majority of the Board.
(g) "Code" means the Internal Revenue Code of 1986, as amended.
(h) "Committee" means a committee of the Board.
(i) "Company" means Kennametal Inc., a Pennsylvania corporation.
(j) "Consultant" means any person, including an advisor, who is
engaged by the Company or any Parent or Subsidiary of the Company to render
services and is compensated for such services.
(k) "Continuous Status as an Employee" means the absence of any
interruption or termination of the employment relationship by the Employee with
the Company or any Parent or Subsidiary of the Company. Continuous Status as an
Employee shall not be considered interrupted in the case of: (i) sick leave;
(ii) military leave; (iii) any other leave of absence approved by the Plan
Administrator; or (iv) transfers between locations of the Company or between the
Company, its Parents, its Subsidiaries or its successor.
(l) "Disability" means disability as determined by the Company's
disability policy as in effect from time to time or as determined by the Plan
Administrator consistent therewith.
(m) "Eligible Individual" means any Employee or Consultant.
(n) "Employee" means any person, including officers and
directors, employed by the Company or any Parent or Subsidiary of the Company or
any prospective employee who shall have received an offer of employment from the
Company or any Parent or Subsidiary of the Company. The payment of a director's
fee by the Company shall not be sufficient to constitute "employment" by the
Company.
(o) "Exchange Act" means the Securities Exchange Act of 1934, as
amended.
(p) "Fair Market Value" means, as of any date, the value of the
Capital Stock determined as follows:
(i) If the Capital Stock is listed on any established stock
exchange, system or market, its Fair Market Value shall be the mean
between the highest and lowest sales prices for the Capital Stock as
quoted on such exchange, system or market for the last trading day
prior to the time of determination as reported in the Wall Street
Journal or such other source as the Plan Administrator deems reliable
and;
(ii) In the absence of an established market for the Capital
Stock, the Fair Market Value thereof shall be determined in good faith
by the Plan Administrator.
(q) "Grantee" means an Eligible Individual who has been granted
an Award.
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(r) "Incentive Bonus Award" means the opportunity to earn a
future cash payment tied to the level of achievement with respect to one or more
Qualifying Performance Criteria for a performance period as established by the
Plan Administrator.
(s) "Incentive Stock Option" means an Option intended to qualify
as an incentive stock option within the meaning of Section 422 of the Code.
(t) "Non-Employee Director" means a member of the Board who is
not an employee of the Company or any Parent or Subsidiary of the Company.
(u) "Nonstatutory Stock Option" means an Option not intended to
qualify as an Incentive Stock Option.
(v) "Option" means a right to purchase Shares granted pursuant
to the Plan.
(w) "Optionee" means a Participant who holds an Option or SAR.
(x) "Original Option Period" means the initial period or periods
for which an Option or SAR may be exercised as determined by the Plan
Administrator at the time of the Award or, if no such determination is made, a
period of 10 years from the date of grant of the Award.
(y) "Parent" means a "parent corporation," whether now or
hereafter existing, as defined in Section 424(e) of the Code.
(z) "Participant" means any person who has an Award under the
Plan including any person (including any estate) to whom an Award has been
assigned or transferred in accordance with the Plan.
(aa) "Performance Share Award" means a grant of a right to
receive Shares or Stock Units contingent on the achievement of performance or
other objectives during a specified period.
(bb) "Performance Unit Award" means a grant of a right to
receive a designated dollar value amount of Shares or Stock Units contingent on
the achievement of performance or other objectives during a specified period.
(cc) "Plan" means this Stock and Incentive Plan of 2002.
(dd) "Plan Administrator" means the Board and/or any Committee
appointed by the Board to administer the Plan; provided, however, that the
Board, in its sole discretion, may, notwithstanding the appointment of any
Committee to administer the Plan, exercise any authority under this Plan.
(ee) "Prior Stock Plans" means the Kennametal Inc. Stock Option
and Incentive Plan of 1988, the Kennametal Inc. Stock Option and Incentive Plan
of 1992, the Kennametal Inc. Stock Option and Incentive Plan of 1996, the
Kennametal Inc. 1999 Stock Plan, and the Kennametal Inc. Stock Option and
Incentive Plan of 1999.
-3-
(ff) "Qualifying Performance Criteria" means any one or more of
the following performance criteria, either individually, alternatively or in any
combination, applied to either the Company as a whole or to a business unit or
Subsidiary, either individually, alternatively or in any combination, and
measured over a period of time including any portion of a year, annually or
cumulatively over a period of years, on an absolute basis or relative to a
pre-established target, to previous years' results or to a designated comparison
group, in each case as specified in the Award: (a) cash flow, (b) earnings
(including earnings before interest, taxes, depreciation, and amortization or
some variation thereof), (c) stock price, (d) return on equity, (e) total
stockholder return, (f) return on capital, (g) return on assets or net assets,
(h) revenue, (i) income or net income, (j) operating income or net operating
income, (k) operating profit or net operating profit, (l) operating margin or
profit margin, (m) return on operating revenue, and (n) market share. To the
extent consistent with Section 162(m) of the Code, the Plan Administrator shall
appropriately adjust any evaluation of performance under a Qualifying
Performance Criteria to exclude any of the following events that occurs during a
performance period: (i) asset write-downs, (ii) litigation or claim judgments or
settlements, (iii) the effect of changes in tax law, accounting principles or
other such laws or provisions affecting reported results, (iv) accruals for
reorganization and restructuring programs and (v) any extraordinary
non-recurring items as described in management's discussion and analysis of
financial condition and results of operations or the financial statements and
notes thereto appearing in the Company's annual report to shareowners for the
applicable year.
(gg) "Restricted Stock Award" means a grant of Shares subject to
a risk of forfeiture or other restrictions that will lapse upon the achievement
of one or more goals relating to completion of service by the Grantee, or
achievement of performance or other objectives, as determined by the Plan
Administrator.
(hh) "Restricted Unit Award" means a grant of Stock Units
subject to a risk of forfeiture or other restrictions that will lapse upon the
achievement of one or more goals relating to completion of service by the
Participant, or achievement of performance or other objectives, as determined by
the Plan Administrator.
(ii) "Retirement" means, in the case of an Employee, the
termination of employment with the Company or any Subsidiary or Parent of the
Company at a time when the Employee is eligible to receive immediately payable
retirement benefits under a then existing retirement plan and, in the case of a
Non-Employee Director, means retirement from service on the Board.
(jj) "SAR" means a stock appreciation right, which is the right
to receive a payment in cash, Shares or Stock Units equal to the amount of
appreciation, if any, in the Fair Market Value of a Share from the date of the
grant of the right to the date of its payment.
(kk) "Share" means a share of Capital Stock.
(ll) "Share Award" means a grant of Shares without a risk of
forfeiture and without other restrictions.
(mm) "Stock Unit" means the right to receive a Share at a future
point in time.
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(nn) "Stock Unit Award" means the grant of a Stock Unit without
a risk of forfeiture and without other restrictions.
(oo) "Subsidiary" means a "subsidiary corporation," whether now
or hereafter existing, as defined in Section 424(f) of the Code.
SECTION 3. ADMINISTRATION.
(a) The Plan shall be administered by the Plan Administrator.
(b) Subject to the provisions of this Plan and, in the case of a
Committee, the specific duties delegated to or limitations imposed upon such
Committee by the Board, the Plan Administrator shall have the authority, in its
discretion:
(i) to establish, amend and rescind rules and regulations
relating to the Plan;
(ii) to select the Eligible Individuals to whom Awards may
from time to time be granted hereunder;
(iii) to determine the amount and type of Awards, including
any combination thereof, to be granted to any Eligible Individual;
(iv) subject to Section 3(c) hereof, to grant Awards to
Eligible Individuals and, in connection therewith, to determine the
terms and conditions, not inconsistent with the terms of this Plan, of
any such Award including, but not limited to, the number of Shares or
Stock Units that may be issued or amount of cash that may be paid
pursuant to the Award, the exercise or purchase price of any Share or
Stock Unit, the circumstances under which Awards or any cash, Shares or
Stock Units relating thereto are issued, retained, become exercisable
or vested, are no longer subject to forfeiture or are terminated,
forfeited or expire, based in each case on such factors as the Plan
Administrator shall determine, in its sole discretion;
(v) to determine the Fair Market Value of the Capital Stock,
in accordance with this Plan;
(vi) to establish, verify the extent of satisfaction of, or
adjust any performance goals or other conditions applicable to the
grant, issuance, exercisability, vesting and/or ability to retain any
Award;
(vii) to approve forms of agreement for use under the Plan;
(viii) to determine whether and under what circumstances an
Award may be settled in cash instead of Shares or Stock Units;
(ix) to determine whether, to what extent and under what
circumstances Shares and other amounts payable with respect to an Award
under this Plan shall be deferred either automatically or at the
election of the participant (including providing for
-5-
and determining the amount, if any, of any deemed earnings on any
deferred amount during any deferral period);
(x) to determine whether and to what extent an adjustment is
required under Section 10 of this Plan;
(xi) to interpret and construe this Plan, any rules and
regulations under this Plan and the terms and conditions of any Award
granted hereunder, and to make exceptions to any such provisions in
good faith and for the benefit of the Company; and
(xii) to make all other determinations deemed necessary or
advisable for the administration of this Plan.
(c) Notwithstanding anything contained in this Plan, the Plan
Administrator may not:
(i) grant any Option or SAR in substitution for an outstanding
Option or SAR except as provided in Section 10(b);
(ii) reduce the exercise price of an outstanding Option or
SAR, whether through amendment, cancellation or replacement of such
Option or SAR, unless such reduction is approved by the shareowners of
the Company;
(iii) grant a Restricted Stock Award or Restricted Unit Award
with a risk of forfeiture or restriction that lapses earlier than at
the rate of one-third of the Shares subject to the Award on each of the
first, second and third anniversary of the date of grant; provided,
however, that the Plan Administer may grant a Restricted Stock Award or
Restricted Unit Award with a risk of forfeiture or restriction that
lapses upon the later to occur of (x) the date of achievement of one or
more performance criteria and (y) the one year anniversary of the date
of grant of the Award;
(iv) grant a Performance Share Award or Performance Unit Award
that vests earlier than the later to occur of (x) the date of
achievement of one or more performance criteria and (y) the one year
anniversary of the date of the Award;
(v) lapse or waive restrictions applicable to any Restricted
Stock Award, Restricted Unit Award, Performance Share Award, or
Performance Unit Award; or
(vi) grant any Share Award or Stock Unit Award to any officer
or director of the Company except in lieu of salary or cash bonus.
(d) The limitations of Section 3(c) shall not apply to Awards
for up to ten percent of the Shares under the Plan granted by a Committee
composed entirely of "independent directors" (under all definitions of
independence then applicable to the Company).
-6-
(e) Except as specifically provided in this Plan, no action of
the Plan Administrator shall deprive any person without such person's consent of
any rights theretofore granted pursuant hereto.
(f) All decisions, determinations and interpretations of the
Plan Administrator shall be final and binding on all Participants.
SECTION 4. SHARES SUBJECT TO THE PLAN.
(a) The aggregate number of Shares which may be issued pursuant
to the Plan shall be 1,750,000 plus Shares added to the Plan from the Prior
Stock Plans pursuant to Sections 4(d) and 4(e) hereof.
(b) Upon shareowner approval of this Plan, no further grants or
awards of any kind shall be made by the Company under its Prior Stock Plans.
(c) The number of Shares which may be issued under the Plan and
covered by outstanding Awards is subject to adjustment as provided in Section
10.
(d) To the extent that Options granted under the Plan or under
the Prior Stock Plans shall expire or terminate without being exercised or
Shares awarded under the Plan or under the Prior Stock Plans shall be forfeited,
such Shares shall remain available or be added to and shall increase the number
of Shares available for purposes of the Plan.
(e) Shares delivered in payment of the purchase price in
connection with the exercise of Options or Shares delivered or withheld to pay
tax withholding obligations or otherwise under the Plan or under the Prior Stock
Plans shall be added to and shall increase the number of Shares available for
purposes of the Plan.
(f) The aggregate number of Shares that may be issued pursuant
to Incentive Stock Options shall be limited to 1,750,000. Notwithstanding
anything to the contrary in this Plan, the foregoing limitation shall be subject
to adjustment under Section 10, but only to the extent that such adjustment will
not affect the status of any Award intended to qualify as an Incentive Stock
Option. The foregoing limitation shall not apply to the extent that it is no
longer required in order for Options to qualify as Incentive Stock Options.
(g) The aggregate number of Shares issuable under all Awards
granted under this Plan during any fiscal year to any one Eligible Individual
shall not exceed 500,000. Notwithstanding anything to the contrary in this Plan,
the foregoing limitation shall be subject to adjustment under Section 10, but
only to the extent that such adjustment will not affect the status of any Award
intended to qualify as "performance-based compensation" under Section 162(m) of
the Code. The foregoing limitation shall not apply to the extent that it is no
longer required in order for compensation in connection with grants under this
Plan to be treated as "performance-based compensation" under Section 162(m) of
the Code.
(h) Capital Stock to be issued under the Plan may be either
authorized and unissued Shares or Shares held in treasury by the Company.
-7-
SECTION 5. TERMS OF OPTIONS AND SARS. Each Option and SAR granted under
the Plan shall be evidenced by a written document (including an electronic
version thereof) and shall be subject to the following terms and conditions:
(a) Subject to adjustment as provided in Section 10 of this
Plan, the price at which a Share covered by an Option may be purchased shall not
be less than the Fair Market Value thereof at the time the Option is granted. If
required by the Code, if an Optionee owns (or is deemed to own under applicable
provisions of the Code and rules and regulations promulgated thereunder) more
than ten percent (10%) of the combined voting power of all classes of the stock
of the Company (or any Parent or Subsidiary of the Company) and an Option
granted to such Optionee is intended to qualify as an Incentive Stock Option,
the price at which a Share covered by an Option may be purchased shall be not
less than 110% of the Fair Market Value thereof at the time the Option is
granted.
(b) The aggregate Fair Market Value of Shares with respect to
which Incentive Stock Options are first exercisable by the Optionee in any
calendar year (under all plans of the Company and its Subsidiaries and Parent)
shall not exceed the limitations, if any, imposed by the Code.
(c) If any Option designated as an Incentive Stock Option,
either alone or in conjunction with any other Option or Options, exceeds the
foregoing limitation, or does not otherwise qualify for treatment as an
Incentive Stock Option, all or the portion of such Option in excess of such
limitation shall automatically be reclassified (in whole Share increments and
without fractional Share portions) as a Nonstatutory Stock Option, with later
granted Options being so reclassified first.
(d) Except as otherwise provided by the Plan Administrator,
during the lifetime of the Optionee the Option or SAR may be exercised only by
the Optionee and the Option or SAR shall not be transferable by the Optionee
other than by will or by the laws of descent and distribution or pursuant to a
domestic relations order. After the death of the Optionee, the Option or SAR may
be transferred to the Company upon such terms and conditions, if any, as the
Plan Administrator and the personal representative or other person entitled to
the Option may agree within the period specified in this Section 5.
(e) An Option or SAR may be exercised in whole at any time, or
in part from time to time, within the Original Option Period; provided, however,
that, unless otherwise provided by the Plan Administrator:
(i) If the Optionee is an Employee who shall cease to be
employed by the Company or any Subsidiary or Parent of the Company by
reason of death, Disability or Retirement, the Option or SAR may be
exercised only within three years after termination of employment and
within the Original Option Period;
(ii) If the Optionee is an Employee who shall cease to be
employed by the Company or any Subsidiary or Parent of the Company by
reason of termination of the Optionee for cause, the Option or SAR
shall forthwith terminate and the Optionee shall
-8-
not be permitted to exercise the Option or SAR following the Optionee's
termination of employment;
(iii) If the Optionee is an Employee who shall cease to be
employed by the Company or any Subsidiary or Parent of the Company by
reason of the Optionee's voluntary termination or a termination of the
Optionee other than for cause, the Option or SAR may be exercised only
within the three months after the termination of employment and within
the Original Option Period;
(iv) If the Optionee is a Non-Employee Director who shall
cease to serve on the Board, the Option or SAR may be exercised only
within three months after the cessation of Board service and within the
Original Option Period or, if such cessation was due to death,
Disability or Retirement, within three years after cessation of Board
service and within the Original Option Period, unless such cessation of
service as a Non-Employee Director was the result of removal for cause,
in which case the Option or SAR shall forthwith terminate;
(v) Notwithstanding anything to the contrary contained in this
Plan, each Option or SAR held by an Employee who is terminated by the
Company or any Subsidiary or Parent of the Company for any reason
during the two-year period following a Change in Control or a
Non-Employee Director who is removed from the Board for any reason
during the two-year period following a Change in Control shall
immediately vest and may be exercised at any time within the
three-month period after the termination of employment or cessation of
Board service regardless of the Original Option Period;
(vi) If the Optionee shall die, the Option or SAR may be
exercised by the Optionee's personal representative or persons entitled
thereto under the Optionee's will or the laws of descent and
distribution;
(vii) Except as provided in Sections 5(e)(v), (ix) and (x),
the Option or SAR may not be exercised for more Shares (subject to
adjustment as provided in Section 10) after the termination of the
Optionee's employment, cessation of service as a Non-Employee Director
or the Optionee's death (as the case may be) than the Optionee was
entitled to purchase thereunder at the time of such Optionee's
termination of employment, cessation of service as a Non-Employee
Director or the Optionee's death;
(viii) To the extent provided by the Code, if an Optionee owns
(or is deemed to own under applicable provisions of the Code and rules
and regulations promulgated thereunder) more than 10% of the combined
voting power of all classes of stock of the Company (or any Parent or
Subsidiary of the Company) at the time an Option is granted to such
Optionee and such Option is intended to qualify as an Incentive Stock
Option, the Option, if not exercised within five years from the date of
grant or any other period proscribed by the Code, will cease to be an
Incentive Stock Option;
(ix) If the Optionee is an Employee who shall cease to be
employed by the Company or any Subsidiary or Parent of the Company or
is a Non-Employee Director who shall cease to serve on the Board by
reason of death or Disability, as the case may be,
-9-
all Options and SARs held by the Optionee shall automatically vest and
become exercisable in full as of the date that the Optionee's
employment with the Company or any Subsidiary or Parent of the Company
or service on the Board ceased; and
(x) In the event that an Optionee ceases to be employed by the
Company or any Subsidiary or Parent of the Company or to serve on the
Board, as the case may be, as a result of such Optionee's Retirement,
all Options and SARs held by the Optionee which are not vested on the
date of Retirement shall continue to vest and become exercisable in
accordance with their original vesting schedule during the two-year
period following such Optionee's Retirement. Any Options or SARs which
remain unvested on the second anniversary of such Optionee's Retirement
shall forthwith terminate on such date. In the event of the death or
Disability of such Optionee during the two-year period following
Retirement, all Options or SARs held by the Optionee shall
automatically vest and become exercisable in full.
(f) Except as otherwise provided by the Plan Administrator, the
purchase price of each Share purchased pursuant to an Option shall be paid in
full at the time of each exercise (the "Payment Date") of the Option (i) in
cash; (ii) by delivering to the Company a notice of exercise with an irrevocable
direction to a registered broker-dealer under the Securities Exchange Act of
1934, as amended, to sell a sufficient portion of the Shares and deliver the
sale proceeds directly to the Company to pay the exercise price; (iii) through
the delivery to the Company (by attestation of Share ownership or as otherwise
provided by the Plan Administrator) of previously-owned Shares having an
aggregate fair market value equal to the price of the Shares being purchased
pursuant to the Option; provided, however, that Shares delivered in payment of
the Option price must have been purchased in the open market or held by the
Participant for at least six (6) months in order to be utilized to pay the
purchase price of the Option or must meet such other conditions as established
by the Plan Administrator; or (iv) through any combination of the payment
procedures set forth in subsections (i)-(iii) of this Section 5(f).
(g) Exercise of an Option or SAR in any manner shall result in a
decrease in the number of Shares which thereafter may be available under the
Option or SAR by the number of Shares as to which the Option or SAR is
exercised. In addition, in the event of an Option granted in tandem with an SAR,
the exercise of the Option in any manner shall result in a decrease in the
number of Shares which thereafter may be available under the SAR by the number
of Shares as to which the Option is exercised, and the exercise of the SAR in
any manner shall result in a decrease in the number of Shares which thereafter
may be available under the Option by the number of Shares as to which the SAR is
exercised.
(h) The Plan Administrator, in its discretion, may authorize the
issuance of "stock retention Options" under this Plan which provide, upon the
exercise of an Option granted under this Plan or under any other stock plan (a
"prior Option") and payment of the purchase price using previously-owned Shares,
for the automatic issuance of a new Option under this Plan for up to the number
of Shares equal to the number of previously-owned Shares delivered in payment of
the exercise price of the prior Option, with an exercise price equal to the
current Fair Market Value and for a term equal to the term of the prior Option.
-10-
(i) The Plan Administrator may include such other terms and
conditions of Options or SARs not inconsistent with the foregoing as
the Plan Administrator shall approve. Without limiting the generality
of the foregoing sentence, the Plan Administrator shall be authorized
to determine that Options or SARs shall be exercisable in one or more
installments during the term of the Option or SAR as determined by the
Plan Administrator.
SECTION 6. PERFORMANCE SHARE AWARDS, PERFORMANCE UNIT AWARDS,
RESTRICTED STOCK AWARDS, RESTRICTED UNIT AWARDS, SHARE AWARDS AND STOCK UNIT
AWARDS.
(a) Subject to the terms of this Plan, including Section 3(c)
hereof, Performance Share Awards, Performance Unit Awards, Restricted Stock
Awards, Restricted Unit Awards, Share Awards or Stock Unit Awards may be issued
by the Plan Administrator to Eligible Individuals, either alone, in addition to,
or in tandem with other Awards granted under the Plan and/or cash awards made
outside of this Plan. Such Awards shall be evidenced by a written document
(including an electronic version thereof) containing any provisions regarding
(i) the number of Shares or Stock Units subject to such Award or a formula for
determining such, (ii) the purchase price of the Shares or Stock Units, if any,
and the means of payment for the Shares or Stock Units, (iii) the performance
criteria, if any, and level of achievement versus these criteria that shall
determine the number of Shares or Stock Units granted, issued, retainable and/or
vested, (iv) such terms and conditions on the grant, issuance, vesting and/or
forfeiture of the Shares or Stock Units as may be determined from time to time
by the Plan Administrator, including continued employment or service, (v)
restrictions on the transferability of the Shares or Stock Units and (vi) such
further terms and conditions in each case not inconsistent with this Plan as may
be determined from time to time by the Plan Administrator.
(b) The grant, issuance, retention and/or vesting of Shares or
Stock Units pursuant to any Performance Share Award, Performance Unit Award,
Restricted Stock Award or Restricted Unit Award shall occur at such time and in
such installments as determined by the Plan Administrator or under criteria
established by the Plan Administrator and consistent with this Plan, including
Section 3(c) hereof. The Plan Administrator shall have the right to make the
timing of the grant and/or the issuance, ability to retain and/or vesting of
Shares or Stock Units subject to continued employment, passage of time and/or
such performance criteria as deemed appropriate by the Plan Administrator and
consistent with this Plan, including Section 3(c) hereof. Notwithstanding
anything to the contrary herein, the performance criteria for any Award that is
intended to satisfy the requirements for "performance-based compensation" under
Section 162(m) of the Code shall be a measure based on one or more Qualifying
Performance Criteria selected by the Plan Administrator and specified at the
time the Award is granted.
(c) Notwithstanding the foregoing, no single Share Award or
Stock Unit Award to any one Grantee in any fiscal year shall be for more than
200 Shares.
(d) With respect to any Performance Share Award, Performance
Unit Award, Restricted Stock Award or Restricted Unit Award:
(i) If, prior to a Change in Control, the designated goals
have not been achieved within the designated period or the Grantee
ceases to be employed by the Company or ceases to serve on the Board
for any reason other than death, Disability or
-11-
Retirement prior to the lapse of any restrictions or vesting of the
Award, the Grantee shall forfeit such Award;
(ii) In the event that a Grantee ceases to be an Employee or
to serve on the Board as a result of such Grantee's death, Disability
or Retirement, all outstanding Awards held by such Grantee shall
automatically vest and all restrictions shall lapse as of the date of
such Grantee's death, Disability or Retirement;
(iii) Notwithstanding anything to the contrary contained in
this Plan, each Award held by an Employee who is terminated by the
Company or any Subsidiary or Parent of the Company for any reason
during the two-year period following a Change in Control or a
Non-Employee Director who is removed from the Board for any reason
during the two-year period following a Change in Control shall
automatically vest and all restrictions shall lapse as of the date of
such Grantee's termination of employment or cessation of Board service;
and
(iv) During the lifetime of the Grantee, the Award shall not
be transferable otherwise than by will or by the laws of descent and
distribution or pursuant to a domestic relations order.
(e) Except as otherwise provided by the Plan Administrator, a
Grantee who has received a Restricted Stock Award shall have all rights of a
shareowner in such Shares including, but not limited to, the right to vote and
receive dividends with respect thereto from and after the date of grant of such
Award; provided, however, that Shares awarded pursuant to the Plan which have
not vested or which contain restrictions or conditions may not be sold or
otherwise transferred by the Grantee and stock certificates representing such
Shares may bear a restrictive legend to that effect.
SECTION 7. INCENTIVE BONUS AWARDS.
(a) Each Incentive Bonus Award will confer upon the Employee the
opportunity to earn a future payment tied to the level of achievement with
respect to one or more performance criteria established for a performance period
established by the Plan Administrator.
(b) Each Incentive Bonus Award shall be evidenced by a document
containing provisions regarding (a) the target and maximum amount payable to the
Employee, (b) the performance criteria and level of achievement versus these
criteria that shall determine the amount of such payment, (c) the term of the
performance period as to which performance shall be measured for determining the
amount of any payment, (d) the timing of any payment earned by virtue of
performance, (e) restrictions on the alienation or transfer of the bonus prior
to actual payment, (f) forfeiture provisions and (g) such further terms and
conditions, in each case not inconsistent with this Plan as may be determined
from time to time by the Plan Administrator. The maximum amount payable as a
bonus may be a multiple of the target amount payable, but the maximum amount
payable pursuant to that portion of an Incentive Bonus Award granted under this
Plan for any fiscal year to any Employee that is intended to satisfy the
requirements for "performance-based compensation" under Section 162(m) of the
Code shall not exceed $2,000,000.
-12-
(c) The Plan Administrator shall establish the performance
criteria and level of achievement versus these criteria that shall determine the
target and maximum amount payable under an Incentive Bonus Award, which criteria
may be based on financial performance and/or personal performance evaluations.
The Plan Administrator may specify the percentage of the target incentive bonus
that is intended to satisfy the requirements for "performance-based
compensation" under Section 162(m) of the Code. Notwithstanding anything to the
contrary herein, the performance criteria for any portion of an Incentive Bonus
Award that is intended by the Plan Administrator to satisfy the requirements for
"performance-based compensation" under Section 162(m) of the Code shall be a
measure based on one or more Qualifying Performance Criteria selected by the
Plan Administrator and specified at the time the Incentive Bonus Award is
granted. The Plan Administrator shall certify the extent to which any Qualifying
Performance Criteria has been satisfied, and the amount payable as a result
thereof, prior to payment of any incentive bonus that is intended to satisfy the
requirements for "performance-based compensation" under Section 162(m) of the
Code.
(d) The Plan Administrator shall determine the timing of payment
of any incentive bonus. The Plan Administrator may provide for or, subject to
such terms and conditions as the Plan Administrator may specify, may permit an
election for the payment of any incentive bonus to be deferred to a specified
date or event. An Incentive Bonus Award may be payable in Shares, Stock Units or
in cash or other property, including any Award permitted under this Plan.
(e) Notwithstanding satisfaction of any performance goals, the
amount paid under an Incentive Bonus Award on account of either financial
performance or personal performance evaluations may be reduced by the Plan
Administrator on the basis of such further considerations as the Plan
Administrator shall determine.
SECTION 8. NON-EMPLOYEE DIRECTOR AWARDS.
Notwithstanding anything to the contrary contained in this Plan,
each Non-Employee Director shall only be entitled to receive the following
Awards under this Plan, which Awards will be made on the day following the first
regular Board meeting of each fiscal year beginning in fiscal year 2004:
(a) Each Non-Employee Director shall receive a Nonstatutory
Stock Option to purchase up to 5,000 shares, as determined by the Board, at Fair
Market Value, such Option to Vest as to exercisability in 3 equal, annual
installments and to have a term of ten (10) years.
(b) Each Non-Employee Director shall receive a Restricted Stock
Award for Shares with a Fair Market Value of up to $7,500, as determined by the
Board, rounded to the nearest whole Share. Such Awards shall vest and the
restrictions on transfer shall lapse as to one-third of the Shares subject to
the Award on each anniversary of the date of grant provided that the
Non-Employee Director continues to serve on the Board.
(c) Each new Non-Employee Director shall receive, as of the
first date of service on the Board, a Nonstatutory Stock Option to purchase
twice the number of Shares provided in the Nonstatutory Stock Option most
recently granted to the Non-Employee Directors
-13-
(other than the lead director) and a Restricted Stock Award based on the number
of Shares provided in the Restricted Stock Award most recently granted to the
Non-Employee Directors (other than the lead director) but pro rated for the
amount of the fiscal year remaining as of the first date of service.
SECTION 9. TAX WITHHOLDING.
(a) Whenever Shares are to be issued under the Plan, the Company
shall have the right to require the Grantee to remit to the Company an amount
sufficient to satisfy federal, state and local tax withholding requirements
prior to the delivery of any certificate for such Shares; provided, however,
that in the case of a Grantee who receives an Award of Shares under the Plan
which is not fully vested, the Grantee shall remit such amount on the first
business day following the Tax Date. The "Tax Date" for purposes of this Section
9 shall be the date on which the amount of tax to be withheld is determined. If
an Optionee makes a disposition of Shares acquired upon the exercise of an
Incentive Stock Option within the applicable disqualifying period, the Optionee
shall promptly notify the Company and the Company shall have the right to
require the Optionee to pay to the Company an amount sufficient to satisfy
federal, state and local tax withholding requirements.
(b) A Participant who is obligated to pay the Company an amount
required to be withheld under applicable tax withholding requirements may pay
such amount (i) in cash; (ii) in the discretion of the Plan Administrator,
through the withholding by the Company of Shares otherwise deliverable to the
Participant or through the delivery by the Participant to the Company of
previously-owned Shares in each case having an aggregate Fair Market Value on
the Tax Date equal to the tax obligation; or (iii) in the discretion of the Plan
Administrator, through a combination of the foregoing.
SECTION 10. ADJUSTMENT OF NUMBER AND PRICE OF SHARES.
(a) In the event of a corporate transaction involving the
Company (including, without limitation, any stock dividend, stock split, reverse
stock split, extraordinary cash dividend, recapitalization, reorganization,
merger, consolidation, split-up, spin-off, combination or exchange of shares),
the Plan Administrator may adjust Awards to preserve the benefits or potential
benefits of the Awards. Action by the Plan Administrator may include: (i)
adjustment of the number and kind of securities which may be delivered under the
Plan; (ii) adjustment of the number and kind of securities subject to
outstanding Awards; (iii) adjustment of the exercise price of outstanding
Options and SARs; (iv) adjustment of the share limitations contained in this
Plan; and (v) any other adjustments that the Plan Administrator determines to be
equitable. Any such adjustment shall be effective and binding for all purposes
of the Plan and on each outstanding Award.
(b) Without limiting the foregoing, in the event that, by reason
of a corporate merger, consolidation, acquisition of property or stock,
separation, reorganization or liquidation, the Board shall authorize the
issuance or assumption of an Option in a transaction to which Section 424(a) of
the Code applies, then, notwithstanding any other provision of the Plan, the
Plan Administrator may grant an Option upon such terms and conditions as it may
deem appropriate for the purpose of assumption of the old Option, or
substitution of a new Option for
-14-
the old Option, in conformity with the provisions of Code Section 424(a) and the
rules and regulations thereunder, as they may be amended from time to time.
(c) No adjustment or substitution provided for in this Section
10 shall require the Company to issue or to sell a fractional share and the
total adjustment or substitution with respect to each Award agreement shall be
limited accordingly.
(d) Without limiting the foregoing, and notwithstanding anything
to the contrary contained in the Plan or any document with respect to any Award,
in the event of a Business Combination under the terms of which the holders of
Capital Stock of the Company will receive upon consummation thereof cash for
each share of Capital Stock of the Company surrendered pursuant to such Business
Combination (the "Cash Purchase Price"), the Plan Administrator may provide that
all outstanding Awards representing the right to purchase or receive Shares
shall terminate upon consummation of the Business Combination and each such
Award, including each Option and SAR, shall receive, in exchange therefor, a
cash payment equal to the amount (if any) by which (i) the Cash Purchase Price
multiplied by the number of Shares subject to such Award held by such Grantee
exceeds (ii) the aggregate purchase or exercise price, if any, thereof.
SECTION 11. CHANGE IN CONTROL. Unless the Board shall determine by
resolution prior to a Change in Control, in the event of a Change in Control,
the following provisions shall apply to Awards previously granted under the
Plan, notwithstanding any provision herein or in any agreement to the contrary:
(a) All Options which provide for exercise in one or more
installments shall become immediately exercisable in full immediately prior to
the Change in Control; and
(b) All Awards which have not previously vested shall become
vested and all restrictions on Awards shall lapse immediately prior to the
Change in Control.
SECTION 12. TERMINATION OF EMPLOYMENT AND FORFEITURE. Notwithstanding
any other provision of the Plan (other than provisions regarding Change in
Control, which shall apply in all events), a Participant shall have no right to
exercise any Option or vest in any Shares awarded under the Plan if following
the Participant's termination of employment with the Company or any Subsidiary
or Parent of the Company and within a period of two years thereafter, the
Participant engages in any business or enters into any employment which the
Board in its sole discretion determines to be either directly or indirectly
competitive with the business of the Company or substantially injurious to the
Company's financial interest (the occurrence of an event described above shall
be referred to herein as "Injurious Conduct"). Furthermore, notwithstanding any
other provision of the Plan to the contrary, in the event that a Participant
receives or is entitled to the delivery or vesting of cash or Shares pursuant to
an Award made during the 12-month period prior to the Participant's termination
of employment with the Company or any Subsidiary or Parent of the Company or
during the 24-month period following the Participant's termination of such
employment, then the Board, in its sole discretion, may require the Participant
to return or forfeit to the Company the cash or Capital Stock received with
respect to such Award (or its economic value as of (i) the date of the exercise
of the Option
-15-
or (ii) the date of grant or payment with respect to any other Award, as the
case may be) in the event that the participant engages in Injurious Conduct.
SECTION 13. AMENDMENT AND DISCONTINUANCE. The Board may alter, amend,
suspend or discontinue the Plan, provided that no such action shall deprive any
person without such person's consent of any rights theretofore granted pursuant
hereto and, provided further, that the Board may not materially amend this Plan
without shareowner approval.
SECTION 14. COMPLIANCE WITH GOVERNMENTAL REGULATIONS. Notwithstanding
any provision of the Plan or the terms of any agreement entered into pursuant to
the Plan, the Company shall not be required to issue any securities hereunder
prior to registration of the Shares subject to the Plan under the Securities Act
of 1933, as amended, or the Exchange Act, if such registration shall be
necessary, or before compliance by the Company or any Participant with any other
provisions of either of those acts or of regulations or rulings of the
Securities and Exchange Commission thereunder, or before compliance with other
federal and state laws and regulations and rulings thereunder, including the
rules of the New York Stock Exchange, Inc. and any other exchange or market on
which the Shares are listed or quoted. The Company shall use its reasonable best
efforts to effect such registrations and to comply with such laws, regulations
and rulings forthwith upon advice by its counsel that any such registration or
compliance is necessary.
SECTION 15. COMPLIANCE WITH SECTION 16. With respect to persons subject
to Section 16 of the Exchange Act, transactions under this Plan are intended to
comply with all applicable conditions of Rule 16b-3 (or its successor rule). To
the extent that any grant of an Award fails to so comply, it shall be deemed
null and void to the extent permitted by law and to the extent deemed advisable
by the Plan Administrator.
SECTION 16. PARTICIPATION BY FOREIGN NATIONALS. The Plan Administrator
may, in order to fulfill the purposes of the Plan and without amending the Plan,
modify grants to foreign nationals or United States citizens employed abroad in
order to recognize differences in local law, tax policy or custom.
SECTION 17. NO RIGHT TO EMPLOYMENT. The Plan shall not confer upon any
Participant any right with respect to continuation of any employment or
consulting relationship with the Company or membership on the Board, nor shall
it interfere in any way with the right to terminate such Participant's
employment or consulting relationship at any time, with or without cause.
SECTION 18. GOVERNING LAW. The validity, constrictions and effect of
this Plan, agreements entered into pursuant to the Plan, and of any rules,
regulations, determinations or decisions made by the Plan Administrator relating
to the Plan or such agreements, and the rights of any and all persons having or
claiming to have any interest therein or thereunder, shall be determined
exclusively in accordance with applicable federal laws and the laws of the
Commonwealth of Pennsylvania, without regard to its conflict of laws principles.
SECTION 19. EFFECTIVE DATE OF PLAN/DURATION. The Plan shall become
effective upon approval of the Plan by the affirmative vote of holders of a
majority of the outstanding Shares
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present and voting at a meeting of shareowners; provided that at least a
majority of the outstanding Shares votes for, against or abstains on the matter
and at least a majority of these Shares votes in favor of the Plan. No Award may
be granted under the Plan after July 23, 2012. Awards granted on or prior to
July 23, 2012 shall remain outstanding in accordance with this Plan and their
respective terms.
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