SOUTHSIDE
BANCSHARES, INC.
2009
INCENTIVE PLAN
ARTICLE
1
|
PURPOSE
|
3
|
1.1
|
General
|
3
|
ARTICLE
2
|
DEFINITIONS
|
3
|
2.1
|
Definitions
|
3
|
ARTICLE
3
|
EFFECTIVE
TERM OF PLAN
|
8
|
3.1
|
Effective
Date
|
8
|
3.2
|
Termination
of Plan
|
8
|
ARTICLE
4
|
ADMINISTRATION
|
8
|
4.1
|
Committee
|
8
|
4.2
|
Action and
Interpretations by the Committee
|
8
|
4.3
|
Authority of
Committee
|
9
|
4.4
|
Delegation
|
9
|
4.5
|
Award
Certificates
|
9
|
ARTICLE
5
|
SHARES
SUBJECT TO THE PLAN
|
9
|
5.1
|
Number of
Shares
|
9
|
5.2
|
Share
Counting
|
10
|
5.3
|
Stock
Distributed
|
10
|
5.4
|
Limitation on
Awards
|
10
|
ARTICLE
6
|
ELIGIBILITY
|
11
|
6.1
|
General
|
11
|
ARTICLE
7
|
STOCK
OPTIONS
|
11
|
7.1
|
General
|
11
|
7.2
|
Incentive
Stock Options
|
11
|
ARTICLE
8
|
STOCK
APPRECIATION RIGHTS
|
12
|
8.1
|
Grant of
Stock Appreciation Rights
|
12
|
ARTICLE
9
|
RESTRICTED
STOCK, RESTRICTED STOCK UNITS AND DEFERRED STOCK UNITS
|
12
|
9.1
|
Grant of
Restricted Stock, Restricted Stock Units and Deferred
|
|
|
Stock
Units
|
12
|
9.2
|
Issuance and
Restrictions
|
12
|
9.3
|
Forfeiture
|
13
|
9.4
|
Delivery of
Restricted Stock
|
13
|
ARTICLE
10
|
PERFORMANCE
AWARDS
|
13
|
10.1
|
Grant of
Performance Awards
|
13
|
10.2
|
Performance
Goals
|
13
|
ARTICLE
11
|
QUALIFIED
PERFORMANCE-BASED AWARDS
|
14
|
11.1
|
Options and
Stock Appreciation Rights
|
14
|
11.2
|
Other
Awards
|
14
|
11.3
|
Performance
Goals
|
14
|
11.4
|
Inclusions
and Exclusions from Performance Criteria
|
15
|
11.5
|
Certification
of Performance Goals
|
15
|
11.6
|
Award
Limits
|
15
|
ARTICLE
12
|
DIVIDEND
EQUIVALENTS
|
15
|
12.1
|
Grant of
Dividend Equivalents
|
15
|
ARTICLE
13
|
STOCK OR
OTHER STOCK-BASED AWARDS
|
16
|
13.1
|
Grant of
Stock or Other Stock-Based Awards
|
16
|
ARTICLE
14
|
PROVISIONS
APPLICABLE TO AWARDS
|
16
|
14.1
|
Term of
Award
|
16
|
14.2
|
Form of
Payment for Awards
|
16
|
14.3
|
Limits on
Transfer
|
16
|
14.4
|
Beneficiaries
|
16
|
14.5
|
Stock Trading
Restrictions
|
17
|
14.6
|
Acceleration
upon Death or Disability
|
17
|
14.7
|
Effect of a
Change in Control
|
17
|
14.8
|
Acceleration
for Other Reasons
|
18
|
14.9
|
Forfeiture
Events
|
18
|
14.10
|
Substitute
Awards
|
19
|
ARTICLE 15
|
CHANGES IN
CAPITAL STRUCTURE
|
19
|
15.1
|
Mandatory
Adjustments
|
19
|
15.2
|
Discretionary
Adjustments
|
19
|
15.3
|
General
|
19
|
ARTICLE 16
|
AMENDMENT,
MODIFICATION AND TERMINATION
|
20
|
16.1
|
Amendment,
Modification and Termination
|
20
|
16.2
|
Awards
Previously Granted
|
20
|
16.3
|
Compliance
Amendments
|
20
|
ARTICLE 17
|
GENERAL
PROVISIONS
|
21
|
17.1
|
Rights of
Participants
|
21
|
17.2
|
Withholding
|
21
|
17.3
|
Special
Provisions Related to Section 409A of the Code
|
21
|
17.4
|
Unfunded
Status of Awards
|
22
|
17.5
|
Relationship
to Other Benefits
|
22
|
17.6
|
Expenses
|
22
|
17.7
|
Titles and
Headings
|
23
|
17.8
|
Gender and
Number
|
23
|
17.9
|
Fractional
Shares
|
23
|
17.10
|
Government
and Other Regulations
|
23
|
17.11
|
Governing
Law
|
23
|
17.12
|
Additional
Provisions
|
23
|
17.13
|
No
Limitations on Rights of Company
|
23
|
17.14
|
Indemnification
|
24
|
SOUTHSIDE
BANCSHARES, INC.
2009
INCENTIVE PLAN
ARTICLE
1
PURPOSE
1.1.
GENERAL
. The
purpose of the Southside Bancshares, Inc. 2009 Incentive Plan (the “Plan”) is to
promote the success, and enhance the value, of Southside Bancshares, Inc. (the
“Company”), by linking the personal interests of employees, officers, directors
and consultants of the Company or any Affiliate (as defined below) to those of
Company shareholders and by providing such persons with an incentive for
outstanding performance. The Plan is further intended to provide
flexibility to the Company in its ability to motivate, attract, and retain the
services of employees, officers, directors and consultants upon whose judgment,
interest, and special effort the successful conduct of the Company’s operation
is largely dependent. Accordingly, the Plan permits the grant of
incentive awards from time to time to selected employees, officers, directors
and consultants of the Company and its Affiliates.
ARTICLE
2
DEFINITIONS
2.1.
DEFINITIONS
. When
a word or phrase appears in this Plan with the initial letter capitalized, and
the word or phrase does not commence a sentence, the word or phrase shall
generally be given the meaning ascribed to it in this Section or in Section 1.1
unless a clearly different meaning is required by the context. The
following words and phrases shall have the following meanings:
(a)
“Affiliate” means (i)
any Subsidiary or Parent, or (ii) an entity that directly or through one or more
intermediaries controls, is controlled by or is under common control with, the
Company, as determined by the Committee.
(b)
“Award” means any
Option, Stock Appreciation Right, Restricted Stock, Restricted Stock Unit,
Deferred Stock Unit, Performance Award, Dividend Equivalent, Other Stock-Based
Award, or any other right or interest relating to Stock or cash, granted to a
Participant under the Plan.
(c)
“Award Certificate”
means a written document, in such form as the Committee prescribes from time to
time, setting forth the terms and conditions of an Award. Award
Certificates may be in the form of individual award agreements or certificates
or a program document describing the terms and provisions of an Award or series
of Awards under the Plan. The Committee may provide for the use of
electronic, internet or other non-paper Award Certificates, and the use of
electronic, internet or other non-paper means for the acceptance thereof and
actions thereunder by a Participant.
(d)
“Beneficial Owner”
shall have the meaning given such term in Rule 13d-3 of the General Rules and
Regulations under the 1934 Act.
(e)
“Board” means the Board
of Directors of the Company.
(f)
“Cause” as a reason for
a Participant’s termination of employment shall have the meaning assigned such
term in the employment, severance or similar agreement, if any, between such
Participant and the Company or an Affiliate, provided, however that if there is
no such employment, severance or similar agreement in which such term is
defined, and unless otherwise defined in the applicable Award Certificate,
“Cause” shall mean any of the following acts by the Participant, as determined
by the Committee: gross neglect of duty, prolonged absence from duty without the
consent of the Company, material breach by the Participant of any published
Company code of conduct or code of ethics; or willful misconduct, misfeasance or
malfeasance of duty which is reasonably determined to be detrimental to the
Company. With respect to a Participant’s termination of directorship, “Cause”
means an act or failure to act that constitutes cause for removal of a director
under applicable Texas law. The determination of the Committee as to the
existence of “Cause” shall be conclusive on the Participant and the
Company.
(g)
“Change in Control”
means and includes the occurrence of any one of the following
events:
(i) individuals
who, on the Effective Date, constitute the Board of Directors of the Company
(the “Incumbent Directors”) cease for any reason to constitute at least a
majority of such Board, provided that any person becoming a director after the
Effective Date and whose election or nomination for election was approved by a
vote of at least a majority of the Incumbent Directors then on the Board shall
be an Incumbent Director;
provided
,
however
, that no
individual initially elected or nominated as a director of the Company as a
result of an actual or threatened election contest with respect to the election
or removal of directors (“Election Contest”) or other actual or threatened
solicitation of proxies or consents by or on behalf of any Person other than the
Board (“Proxy Contest”), including by reason of any agreement intended to avoid
or settle any Election Contest or Proxy Contest, shall be deemed an Incumbent
Director; or
(ii) any
person becomes a Beneficial Owner, directly or indirectly, of either (A) 35% or
more of the then-outstanding shares of common stock of the Company (“Company
Common Stock”) or (B) securities of the Company representing 35% or more of the
combined voting power of the Company’s then outstanding securities eligible to
vote for the election of directors (the “Company Voting Securities”);
provided
,
however
, that for
purposes of this subsection (ii), the following acquisitions of Company Common
Stock or Company Voting Securities shall not constitute a Change in Control: (x)
an acquisition directly from the Company, (y) an acquisition by the Company or a
Subsidiary, or (z) an acquisition by any employee benefit plan (or related
trust) sponsored or maintained by the Company or any Subsidiary; or
(iii) the
consummation of a reorganization, merger, consolidation, statutory share
exchange or similar form of corporate transaction involving the Company or a
Subsidiary (a “Reorganization”), or the sale or other disposition of all or
substantially all of the Company’s assets (a “Sale”) or the acquisition of
assets or stock of another corporation or other entity (an “Acquisition”),
unless immediately following such Reorganization, Sale or Acquisition all or
substantially all of the individuals and entities who were the Beneficial
Owners, respectively, of the outstanding Company Common Stock and outstanding
Company Voting Securities immediately prior to such Reorganization, Sale or
Acquisition beneficially own, directly or indirectly, more than 50% of,
respectively, the then outstanding shares of common stock and the combined
voting power of the then outstanding voting securities entitled to vote
generally in the election of directors, as the case may be, of the entity
resulting from such Reorganization, Sale or Acquisition (including, without
limitation, an entity which as a result of such transaction owns the Company or
all or substantially all of the Company’s assets or stock either directly or
through one or more subsidiaries, the “Surviving Entity”) in substantially the
same proportions as their ownership, immediately prior to such Reorganization,
Sale or Acquisition, of the outstanding Company Common Stock and the outstanding
Company Voting Securities, as the case may be; or
(iv) approval
by the shareholders of the Company of a complete liquidation or dissolution of
the Company.
(h)
“Code” means the
Internal Revenue Code of 1986, as amended from time to time. For
purposes of this Plan, references to sections of the Code shall be deemed to
include references to any applicable regulations thereunder and any successor or
similar provision.
(i)
“Committee” means the
committee of the Board described in Article 4.
(j)
“Company” means
Southside Bancshares, Inc., a Texas corporation, or any successor
corporation.
(k)
“Continuous Status as a
Participant” means the absence of any interruption or termination of service as
an employee, officer, or director of the Company or any Affiliate, as
applicable; provided, however, that for purposes of an Incentive Stock Option
“Continuous Status as a Participant” means the absence of any interruption or
termination of service as an employee of the Company or any Parent or
Subsidiary, as applicable, pursuant to applicable tax
regulations. Continuous Status as a Participant shall not be
considered interrupted in the following cases: (i) a Participant transfers
employment between the Company and an Affiliate or between Affiliates, or (ii)
in the discretion of the Committee as specified at or prior to such occurrence,
in the case of a spin-off, sale or disposition of the Participant’s employer
from the Company or any Affiliate, or (iii) any leave of absence authorized in
writing by the Company prior to its commencement; provided, however, that for
purposes of Incentive Stock Options, no such leave may exceed 90 days, unless
reemployment upon expiration of such leave is guaranteed by statute or
contract. If reemployment upon expiration of a leave of absence
approved by the Company is not so guaranteed, on the 91st day of such leave any
Incentive Stock Option held by the Participant shall cease to be treated as an
Incentive Stock Option and shall be treated for tax purposes as a Nonstatutory
Stock Option. Whether military, government or other service or other
leave of absence shall constitute a termination of Continuous Status as a
Participant shall be determined in each case by the Committee at its discretion,
and any determination by the Committee shall be final and
conclusive.
(l)
“Covered Employee”
means a covered employee as defined in Code Section 162(m)(3).
(m)
“Deferred Stock Unit”
means a right granted to a Participant under Article 9 to receive Shares (or the
equivalent value in cash or other property if the Committee so provides) at a
future time as determined by the Committee, or as determined by the Participant
within guidelines established by the Committee in the case of voluntary deferral
elections.
(n)
“Disability” of a
Participant means that the Participant (i) is unable to engage in any
substantial gainful activity by reason of any medically determinable physical or
mental impairment which can be expected to result in death or can be expected to
last for a continuous period of not less than 12 months, or (ii) is, by reason
of any medically determinable physical or mental impairment which can be
expected to result in death or can be expected to last for a continuous period
of not less than 12 months, receiving income replacement benefits for a period
of not less than three months under an accident and health plan covering
employees of the Participant’s employer. If the determination of
Disability relates to an Incentive Stock Option, Disability means Permanent and
Total Disability as defined in Section 22(e)(3) of the Code. In the
event of a dispute, the determination of whether a Participant is Disabled will
be made by the Committee and may be supported by the advice of a physician
competent in the area to which such Disability relates.
(o)
“Dividend Equivalent”
means a right granted to a Participant under Article 12.
(p)
“Effective Date” has
the meaning assigned such term in Section 3.1.
(q)
“Eligible Participant”
means an employee, officer, consultant or director of the Company or any
Affiliate.
(r)
“Exchange” means any
national securities exchange on which the Stock may from time to time be listed
or traded.
(s)
“Fair Market Value,” on
any date, means (i) if the Stock is listed on a securities exchange, the closing
sales price on such exchange or over such system on such date or, in the absence
of reported sales on such date, the closing sales price on the immediately
preceding date on which sales were reported, or (ii) if the Stock is not listed
on a securities exchange, the mean between the bid and offered prices as quoted
by the applicable interdealer quotation system for such date, provided that if
the Stock is not quoted on such interdealer quotation system or it is determined
that the fair market value is not properly reflected by such quotations, Fair
Market Value will be determined by such other method as the Committee determines
in good faith to be reasonable and in compliance with Code Section
409A.
(t)
“Full
Value Award
”
means an
Award other than in the form of an Option or SAR, and which is settled by the
issuance of Stock (or at the discretion of the Committee, settled in cash valued
by reference to Stock value).
(u)
“Good Reason” (or a
similar term denoting constructive termination) has the meaning, if any,
assigned such term in the employment, severance or similar agreement, if any,
between a Participant and the Company or an Affiliate, provided, however that if
there is no such employment, severance or similar agreement in which such term
is defined, “Good Reason” shall have the meaning, if any, given such term in the
applicable Award Certificate. If not defined in each such document,
the term “Good Reason” as used herein shall not apply to a particular
Award.
(v)
“Grant Date” of an
Award means the first date on which all necessary corporate action has been
taken to approve the grant of the Award as provided in the Plan, or such later
date as is determined and specified as part of that authorization
process. Notice of the grant shall be a provided to the grantee
within a reasonable time after the Grant Date.
(w)
“Incentive Stock
Option” means an Option that is intended to be an incentive stock option and
meets the requirements of Section 422 of the Code or any successor provision
thereto.
(x)
“Independent Directors”
means those members of the Board of Directors who qualify at any given time as
“independent” directors under Nasdaq Marketplace Rule 4200, “non-employee”
directors under Rule 16b-3 of the 1934 Act, and “outside” directors under
Section 162(m) of the Code.
(y)
“Non-Employee Director”
means a director of the Company who is not a common law employee of the Company
or an Affiliate.
(z)
“Nonstatutory Stock
Option” means an Option that is not an Incentive Stock Option.
(aa)
“Option” means a right
granted to a Participant under Article 7 of the Plan to purchase Stock at a
specified price during specified time periods. An Option may be
either an Incentive Stock Option or a Nonstatutory Stock Option.
(bb)
“Other Stock-Based
Award” means a right, granted to a Participant under Article 13, that relates to
or is valued by reference to Stock or other Awards relating to
Stock.
(cc)
“Parent” means a
corporation, limited liability company, partnership or other entity which owns
or beneficially owns a majority of the outstanding voting stock or voting power
of the Company. Notwithstanding the above, with respect to an Incentive Stock
Option, Parent shall have the meaning set forth in Section 424(e) of the
Code.
(dd)
“Participant” means a
person who, as an employee, officer, director or consultant of the Company or
any Affiliate, has been granted an Award under the Plan; provided that in the
case of the death of a Participant, the term “Participant” refers to a
beneficiary designated pursuant to Section 14.4 or the legal guardian or other
legal representative acting in a fiduciary capacity on behalf of the Participant
under applicable state law and court supervision.
(ee)
“Performance Award”
means any award granted under the Plan pursuant to Article 10.
(ff)
“Person” means any
individual, entity or group, within the meaning of Section 3(a)(9) of the 1934
Act and as used in Section 13(d)(3) or 14(d)(2) of the 1934 Act.
(gg)
“Plan” means the
Southside Bancshares, Inc. 2009 Incentive Plan, as amended from time to
time.
(hh)
“Qualified
Performance-Based Award” means an Award that is either (i) intended to qualify
for the Section 162(m) Exemption and is made subject to performance goals based
on Qualified Business Criteria as set forth in Section 11.2, or (ii) an Option
or SAR having an exercise price equal to or greater than the Fair Market Value
of the underlying Stock as of the Grant Date.
(ii)
“Qualified Business
Criteria” means one or more of the Business Criteria listed in Section 11.2 upon
which performance goals for certain Qualified Performance-Based Awards may be
established by the Committee.
(jj)
“Restricted Stock”
means Stock granted to a Participant under Article 9 that is subject to certain
restrictions and to risk of forfeiture.
(kk)
“Restricted Stock Unit”
means the right granted to a Participant under Article 9 to receive shares of
Stock (or the equivalent value in cash or other property if the Committee so
provides) in the future, which right is subject to certain restrictions and to
risk of forfeiture.
(ll)
“Retirement” means a
Participant’s voluntary termination of employment with the Company or an
Affiliate after attaining any normal retirement age specified in any pension,
profit sharing or other retirement program sponsored by the Company, or, in the
event of the inapplicability thereof with respect to the Participant in
question, after attaining age 65 with at least five years of service with the
Company or its Affiliates.
(mm)
“Section 162(m)
Exemption” means the exemption from the limitation on deductibility imposed by
Section 162(m) of the Code that is set forth in Section 162(m)(4)(C) of the Code
or any successor provision thereto.
(nn)
“Shares” means shares
of the Company’s Stock. If there has been an adjustment or
substitution pursuant to Section 15.1, the term “Shares” shall also include any
shares of stock or other securities that are substituted for Shares or into
which Shares are adjusted pursuant to Section 15.1.
(oo)
“Stock” means the $1.25
par value common stock of the Company and such other securities of the Company
as may be substituted for Stock pursuant to Section 15.1.
(pp)
“Stock Appreciation
Right” or “SAR” means a right granted to a Participant under Article 8 to
receive a payment equal to the difference between the Fair Market Value of a
Share as of the date of exercise of the SAR over the grant price of the SAR, all
as determined pursuant to Article 8.
(qq)
“Subsidiary” means any
corporation, limited liability company, partnership or other entity of which a
majority of the outstanding voting stock or voting power is beneficially owned
directly or indirectly by the Company. Notwithstanding the above, with respect
to an Incentive Stock Option, Subsidiary shall have the meaning set forth in
Section 424(f) of the Code.
(rr)
“1933 Act” means the
Securities Act of 1933, as amended from time to time.
(ss)
“1934 Act” means the
Securities Exchange Act of 1934, as amended from time to time.
ARTICLE
3
EFFECTIVE
TERM OF PLAN
3.1.
EFFECTIVE
DATE
. The Plan shall be effective as of the date it is
approved by both the Board and the shareholders of the Company (the “Effective
Date”).
3.2.
TERMINATION OF
PLAN
. The Plan shall terminate on the tenth anniversary of the
Effective Date unless earlier terminated as provided herein. The
termination of the Plan on such date shall not affect the validity of any Award
outstanding on the date of termination, which shall continue to be governed by
the applicable terms and conditions of this Plan. Notwithstanding the
foregoing, no Incentive Stock Options may be granted more than ten (10) years
after the earlier of (a) adoption of this Plan by the Board, or (b) the
Effective Date.
ARTICLE
4
ADMINISTRATION
4.1.
COMMITTEE
. The
Plan shall be administered by a Committee appointed by the Board (which
Committee shall consist of at least two directors) or, at the discretion of the
Board from time to time, the Plan may be administered by the
Board. It is intended that at least two of the directors appointed to
serve on the Committee shall be Independent Directors and that any such members
of the Committee who do not so qualify shall abstain from participating in any
decision to make or administer Awards that are made to Eligible Participants who
at the time of consideration for such Award (i) are persons subject to the
short-swing profit rules of Section 16 of the 1934 Act, or (ii) are reasonably
anticipated to become Covered Employees during the term of the
Award. However, the mere fact that a Committee member shall fail to
qualify as an Independent Director or shall fail to abstain from such action
shall not invalidate any Award made by the Committee which Award is otherwise
validly made under the Plan. The members of the Committee shall be
appointed by, and may be changed at any time and from time to time in the
discretion of, the Board. Unless and until changed by the Board, the
Compensation Committee of the Board is designated as the Committee to administer
the Plan. The Board may reserve to itself any or all of the authority
and responsibility of the Committee under the Plan or may act as administrator
of the Plan for any and all purposes. To the extent the Board has
reserved any authority and responsibility or during any time that the Board is
acting as administrator of the Plan, it shall have all the powers of the
Committee hereunder, and any reference herein to the Committee (other than in
this Section 4.1) shall include the Board. To the extent any action
of the Board under the Plan conflicts with actions taken by the Committee, the
actions of the Board shall control.
4.2.
ACTION AND INTERPRETATIONS
BY THE COMMITTEE
. For purposes of administering the Plan, the
Committee may from time to time adopt rules, regulations, guidelines and
procedures for carrying out the provisions and purposes of the Plan and make
such other determinations, not inconsistent with the Plan, as the Committee may
deem appropriate. The Committee’s interpretation of the Plan, any
Awards granted under the Plan, any Award Certificate and all decisions and
determinations by the Committee with respect to the Plan are final, binding, and
conclusive on all parties. Each member of the Committee is entitled
to, in good faith, rely or act upon any report or other information furnished to
that member by any officer or other employee of the Company or any Affiliate,
the Company’s or an Affiliate’s independent certified public accountants,
Company counsel or any executive compensation consultant or other professional
retained by the Company to assist in the administration of the
Plan.
4.3.
AUTHORITY OF
COMMITTEE
. Except as provided in Section 4.1 and 4.5 hereof,
the Committee has the exclusive power, authority and discretion to:
(b)
|
Designate Participants;
|
(c) Determine
the type or types of Awards to be granted to each Participant;
(d) Determine
the number of Awards to be granted and the number of Shares or dollar amount to
which an Award will relate;
(e) Determine
the terms and conditions of any Award granted under the Plan;
(f)
Prescribe the form of each Award Certificate, which need not be
identical for each Participant;
(g) Decide
all other matters that must be determined in connection with an
Award;
(h) Establish,
adopt or revise any rules, regulations, guidelines or procedures as it may deem
necessary or advisable to administer the Plan;
(i) Make
all other decisions and determinations that may be required under the Plan or as
the Committee deems necessary or advisable to administer the Plan;
(j) Amend
the Plan or any Award Certificate as provided herein; and
4.4.
DELEGATION
. The
Board may, by resolution, expressly delegate to a special committee, consisting
of one or more directors who may but need not be officers of the Company, the
authority, within specified parameters as to the number and terms of Awards, to
(i) designate officers and/or employees of the Company or any of its Affiliates
to be recipients of Awards under the Plan, and (ii) to determine the number of
such Awards to be received by any such Participants; provided, however, that
such delegation of duties and responsibilities to an officer of the Company may
not be made with respect to the grant of Awards to eligible participants (a) who
are subject to Section 16(a) of the 1934 Act at the Grant Date, or (b) who as of
the Grant Date are reasonably anticipated to be become Covered Employees during
the term of the Award. The acts of such delegates shall be treated
hereunder as acts of the Board and such delegates shall report regularly to the
Board and the Compensation Committee regarding the delegated duties and
responsibilities and any Awards so granted.
4.5.
AWARD
CERTIFICATES
. Each Award shall be evidenced by an Award
Certificate. Each Award Certificate shall include such provisions,
not inconsistent with the Plan, as may be specified by the
Committee.
ARTICLE
5
SHARES
SUBJECT TO THE PLAN
5.1.
NUMBER OF
SHARES
. Subject to adjustment as provided in Sections 5.2 and
Section 15.1, the aggregate number of Shares reserved and available for issuance
pursuant to Awards granted under the Plan shall be 1,000,000. The maximum
number of Shares that may be issued upon exercise of Incentive Stock Options
granted under the Plan shall be 1,000,000.
5.2.
SHARE
COUNTING
. Shares covered by an Award shall be subtracted from
the Plan share reserve as of the date of grant, but shall be added back to the
Plan share reserve in accordance with this Section 5.2.
(a) To
the extent that an Award is canceled, terminates, expires, is forfeited or
lapses for any reason, any unissued or forfeited Shares subject to the Award
will again be available for issuance pursuant to Awards granted under the
Plan.
(b) Shares
subject to Awards settled in cash will again be available for issuance pursuant
to Awards granted under the Plan.
(c) Shares
withheld from an Award or delivered by a Participant to satisfy minimum tax
withholding requirements will again be available for issuance pursuant to Awards
granted under the Plan.
(d) If
the exercise price of an Option is satisfied by delivering Shares to the Company
(by either actual delivery or attestation), only the number of Shares issued to
the Participant in excess of the Shares tendered (by delivery or attestation)
shall be considered for purposes of determining the number of Shares remaining
available for issuance pursuant to Awards granted under the Plan.
(e) To
the extent that the full number of Shares subject to an Option or SAR is not
issued upon exercise of the Option or SAR for any reason, including by reason of
net-settlement of the Award, only the number of Shares issued and delivered upon
exercise of the Option or SAR shall be considered for purposes of determining
the number of Shares remaining available for issuance pursuant to Awards granted
under the Plan.
(f) To
the extent that the full number of Shares subject to an Award other than an
Option or SAR is not issued for any reason, including by reason of failure to
achieve maximum performance goals, only the number of Shares issued and
delivered shall be considered for purposes of determining the number of Shares
remaining available for issuance pursuant to Awards granted under the
Plan.
(g) Substitute
Awards granted pursuant to Section 14.10 of the Plan shall not count against the
Shares otherwise available for issuance under the Plan under Section
5.1.
5.3.
STOCK
DISTRIBUTED
. Any Stock distributed pursuant to an Award may
consist, in whole or in part, of authorized and unissued Stock, treasury Stock
or Stock purchased on the open market.
5.4.
LIMITATION ON
AWARDS
. Notwithstanding any provision in the Plan to the
contrary (but subject to adjustment as provided in Section 15.1):
(a)
Options
. The
maximum aggregate number of Shares subject to Options granted under the Plan in
any 12-month period to any one Participant shall be 35,000.
(b)
SARs
. The
maximum number of Shares subject to Stock Appreciation Rights granted under the
Plan in any 12-month period to any one Participant shall be 35,000.
(c)
Restricted Stock or
Restricted Stock Units
. The maximum aggregate number of Shares
underlying of Awards of Restricted Stock or Restricted Stock Units under the
Plan in any 12-month period to any one Participant shall be 25,000.
(d)
Other Stock-Based
Awards
. The maximum aggregate grant with respect to Other
Stock-Based Awards under the Plan in any 12-month period to any one Participant
shall be 25,000 Shares.
(e)
Cash-Based
Awards
. The maximum aggregate amount that may be paid with
respect to cash-based Awards under the Plan to any one Participant in any fiscal
year of the Company shall be $500,000.
ARTICLE
6
ELIGIBILITY
6.1.
GENERAL
. Awards
may be granted only to Eligible Participants. Incentive Stock Options
may be granted only to Eligible Participants who are employees of the Company or
a Parent or Subsidiary as defined in Section 424(e) and (f) of the
Code. Eligible Participants who are service providers to an Affiliate
may be granted Options or SARs under this Plan only if the Affiliate qualifies
as an “eligible issuer of service recipient stock” within the meaning of
§1.409A-1(b)(5)(iii)(E) of the final regulations under Code Section
409A.
ARTICLE
7
STOCK
OPTIONS
7.1.
GENERAL
. The
Committee is authorized to grant Options to Participants on the following terms
and conditions:
(a)
EXERCISE
PRICE
. The exercise price per Share under an Option shall be
determined by the Committee, provided that the exercise price for any Option
(other than an Option issued as a substitute Award pursuant to Section 14.11)
shall not be less than the Fair Market Value as of the Grant Date.
(b)
PROHIBITION ON
REPRICING
. Except as otherwise provided in Section 15.1, the
exercise price of an Option may not be reduced, directly or indirectly by
cancellation and regrant or otherwise, without the prior approval of the
shareholders of the Company.
(c)
TIME AND CONDITIONS OF
EXERCISE
. The Committee shall determine the time or times at
which an Option may be exercised in whole or in part, subject to Section
7.1(e). The Committee shall also determine the performance or other
conditions, if any, that must be satisfied before all or part of an Option may
be exercised or vested.
(d)
PAYMENT
. The
Committee shall determine the methods by which the exercise price of an Option
may be paid, the form of payment, including, without limitation, cash, Shares,
or other property (including “cashless exercise” arrangements), and the methods
by which Shares shall be delivered or deemed to be delivered to
Participants.
(e)
EXERCISE
TERM
. Except for Nonstatutory Options granted to Participants
outside the United States, no Option granted under the Plan shall be exercisable
for more than ten years from the Grant Date.
(f)
NO DEFERRAL
FEATURE
. No Option shall provide for any feature for the
deferral of compensation other than the deferral of recognition of income until
the exercise or disposition of the Option.
(g)
NO DIVIDEND
EQUIVALENTS
. No Option shall provide for Dividend
Equivalents.
7.2.
INCENTIVE STOCK
OPTIONS
. The terms of any Incentive Stock Options granted
under the Plan must comply with the requirements of Section 422 of the
Code. If all of the requirements of Section 422 of the Code are not
met, the Option shall automatically become a Nonstatutory Stock
Option.
ARTICLE
8
STOCK
APPRECIATION RIGHTS
8.1.
GRANT OF STOCK APPRECIATION
RIGHTS
. The Committee is authorized to grant Stock
Appreciation Rights to Participants on the following terms and
conditions:
(a)
RIGHT TO
PAYMENT
. Upon the exercise of a SAR, the Participant to whom
it is granted has the right to receive, for each Share with respect to which the
SAR is being exercised, the excess, if any, of:
(1) The
Fair Market Value of one Share on the date of exercise; over
(2) The
base price of the SAR as determined by the Committee, which shall not be less
than the Fair Market Value of one Share on the Grant Date.
(b)
PROHIBITION ON
REPRICING
. Except as otherwise provided in Section 15.1, the
base price of a SAR may not be reduced, directly or indirectly by cancellation
and regrant or otherwise, without the prior approval of the shareholders of the
Company.
(c)
EXERCISE
TERM
. Except for SARs granted to Participants outside the
United States, no SAR shall be exercisable for more than ten years from the
Grant Date.
(d)
NO DEFERRAL
FEATURE
. No SAR shall provide for any feature for the deferral
of compensation other than the deferral of recognition of income until the
exercise or disposition of the SAR.
(e)
NO DIVIDEND
EQUIVALENTS
. No SAR shall provide for Dividend
Equivalents.
(f)
OTHER
TERMS
. All SARs shall be evidenced by an Award
Certificate. Subject to the limitations of this Article 8, the terms,
methods of exercise, methods of settlement, form of consideration payable in
settlement, and any other terms and conditions of any SAR shall be determined by
the Committee at the time of the grant of the Award and shall be reflected in
the Award Certificate.
ARTICLE
9
RESTRICTED
STOCK, RESTRICTED STOCK UNITS
AND
DEFERRED STOCK UNITS
9.1.
GRANT OF RESTRICTED STOCK,
RESTRICTED STOCK UNITS AND DEFERRED STOCK UNITS
. The Committee
is authorized to make Awards of Restricted Stock, Restricted Stock Units or
Deferred Stock Units to Participants in such amounts and subject to such terms
and conditions as may be selected by the Committee. An Award of
Restricted Stock, Restricted Stock Units or Deferred Stock Units shall be
evidenced by an Award Certificate setting forth the terms, conditions, and
restrictions applicable to the Award.
9.2.
ISSUANCE AND
RESTRICTIONS
. Restricted Stock, Restricted Stock Units or
Deferred Stock Units shall be subject to such restrictions on transferability
and other restrictions as the Committee may impose (including, without
limitation, limitations on the right to vote Restricted Stock or the right to
receive dividends on the Restricted Stock). These restrictions may
lapse separately or in combination at such times, under such circumstances, in
such installments, upon the satisfaction of performance goals or otherwise, as
the Committee determines at the time of the grant of the Award or
thereafter. Except as otherwise provided in an Award Certificate or
any special Plan document governing an Award, the Participant shall have all of
the rights of a shareholder with respect to the Restricted Stock, and the
Participant shall have none of the rights of a stockholder with respect to
Restricted Stock Units or Deferred Stock Units until such time as Shares of
Stock are paid in settlement of the Restricted Stock Units or Deferred Stock
Units. Unless otherwise provided in the applicable Award Certificate,
Awards of Restricted Stock will be entitled to full dividend rights and any
dividends paid thereon will be paid or distributed to the holder no later than
the end of the calendar year in which the dividends are paid to shareholders or,
if later, the 15th
day
of the third month following the date the dividends are paid to
shareholders.
9.3.
FORFEITURE
. Except
as otherwise determined by the Committee at the time of the grant of the Award
or thereafter, upon termination of Continuous Status as a Participant during the
applicable restriction period or upon failure to satisfy a performance goal
during the applicable restriction period, Restricted Stock or Restricted Stock
Units that are at that time subject to restrictions shall be
forfeited.
9.4.
DELIVERY OF RESTRICTED
STOCK
. Shares of Restricted Stock shall be delivered to the
Participant at the time of grant either by book-entry registration or by
delivering to the Participant, or a custodian or escrow agent (including,
without limitation, the Company or one or more of its employees) designated by
the Committee, a stock certificate or certificates registered in the name of the
Participant. If physical certificates representing shares of
Restricted Stock are registered in the name of the Participant, such
certificates must bear an appropriate legend referring to the terms, conditions,
and restrictions applicable to such Restricted Stock.
ARTICLE
10
PERFORMANCE
AWARDS
10.1.
GRANT OF PERFORMANCE
AWARDS
. The Committee is authorized to grant any Award under
this Plan, including cash-based Awards, with performance-based vesting criteria,
on such terms and conditions as may be selected by the Committee. Any
such Awards with performance-based vesting criteria are referred to herein as
Performance Awards. The Committee shall have the complete discretion to
determine the number of Performance Awards granted to each Participant, subject
to Section 5.4, and to designate the provisions of such Performance Awards as
provided in Section 4.3. All Performance Awards shall be evidenced by
an Award Certificate or a written program established by the Committee, pursuant
to which Performance Awards are awarded under the Plan under uniform terms,
conditions and restrictions set forth in such written program.
10.2.
PERFORMANCE
GOALS
. The Committee may establish performance goals for
Performance Awards which may be based on any criteria selected by the
Committee. Such performance goals may be described in terms of
Company-wide objectives or in terms of objectives that relate to the performance
of the Participant, an Affiliate or a division, region, department or function
within the Company or an Affiliate. If the Committee determines that
a change in the business, operations, corporate structure or capital structure
of the Company or the manner in which the Company or an Affiliate conducts its
business, or other events or circumstances render performance goals to be
unsuitable, the Committee may modify such performance goals in whole or in part,
as the Committee deems appropriate. If a Participant is promoted,
demoted or transferred to a different business unit or function during a
performance period, the Committee may determine that the performance goals or
performance period are no longer appropriate and may (i) adjust, change or
eliminate the performance goals or the applicable performance period as it deems
appropriate to make such goals and period comparable to the initial goals and
period, or (ii) make a cash payment to the participant in an amount determined
by the Committee. The foregoing two sentences shall not apply with
respect to a Performance Award that is intended to be a Qualified
Performance-Based Award if the recipient of such award (a) was a Covered
Employee on the date of the modification, adjustment, change or elimination of
the performance goals or performance period, or (b) in the reasonable judgment
of the Committee, may be a Covered Employee on the date the Performance Award is
expected to be paid.
ARTICLE
11
QUALIFIED
PERFORMANCE-BASED AWARDS
11.1.
OPTIONS AND STOCK
APPRECIATION RIGHTS
. The provisions of the Plan are intended
to ensure that all Options and Stock Appreciation Rights granted hereunder to
any Covered Employee shall qualify for the Section 162(m)
Exemption.
11.2.
OTHER
AWARDS
. When granting any other Award, the Committee may
designate such Award as a Qualified Performance-Based Award, based upon a
determination that the recipient is or may be a Covered Employee with respect to
such Award, and the Committee wishes such Award to qualify for the Section
162(m) Exemption. If an Award is so designated, the Committee shall
establish performance goals for such Award within the time period prescribed by
Section 162(m) of the Code based on one or more of the following Qualified
Business Criteria, which may be expressed in terms of Company-wide objectives or
in terms of objectives that relate to the performance of an Affiliate or a
division, region, department or function within the Company or an
Affiliate:
-
|
Profit (net
profit, gross profit, operating profit, economic profit, profit margins or
other corporate profit measures)
|
-
|
Earnings
(EBIT, EBITDA, earnings per share, or other corporate earnings
measures)
|
-
|
Net income
(before or after taxes, operating income or other income
measures)
|
-
|
Cash (cash
flow, cash generation or other cash
measures)
|
-
|
Stock price
or performance
|
-
|
Total
shareholder return (stock price appreciation plus reinvested dividends
divided by beginning share price)
|
-
|
Economic
value added
|
-
|
Return
measures (including, but not limited to, return on assets, capital,
equity, investments or sales, and cash flow return on assets, capital,
equity, or sales);
|
-
|
Market
share
|
-
|
Improvements
in capital structure
|
-
|
Expenses
(expense management, expense ratio, expense efficiency ratios or other
expense measures)
|
-
|
Business
expansion or consolidation (acquisitions and
divestitures)
|
-
|
Internal rate
of return or increase in net present value
|
-
|
Productivity
measures
|
-
|
Cost
reduction measures
|
-
|
Strategic
plan development and implementation
|
Performance goals
with respect to the foregoing Qualified Business Criteria may be specified in
absolute terms, in percentages, or in terms of growth from period to period or
growth rates over time, as well as measured relative to the performance of a
group of comparator companies, or a published or special index, or a stock
market index, that the Committee deems appropriate. Any member of a
comparator group or an index that disappears during a measurement period shall
be disregarded for the entire measurement period. Performance Goals
need not be based upon an increase or positive result under a business criterion
and could include, for example, the maintenance of the status quo or the
limitation of economic losses (measured, in each case, by reference to a
specific business criterion).
11.3.
PERFORMANCE
GOALS
. Each Qualified Performance-Based Award (other than a
market-priced Option or SAR) shall be earned, vested and payable (as applicable)
only upon the achievement of performance goals established by the Committee
based upon one or more of the Qualified Business Criteria, together with the
satisfaction of any other conditions, such as continued employment, as the
Committee may determine to be appropriate; provided, however, that the Committee
may provide, either in connection with the grant thereof or by amendment
thereafter, that achievement of such performance goals will be waived, in whole
or in part, upon (i) the termination of employment of a Participant by reason of
death or Disability, or (ii) the occurrence of a Change in Control. Performance
periods established by the Committee for any such Qualified Performance-Based
Award may be as short as three months and may be any longer
period. In addition, the Committee has the right, in connection with
the grant of a Qualified Performance-Based Award, to exercise negative
discretion to determine that the portion of such Award actually earned, vested
and/or payable (as applicable) shall be less than the portion that would be
earned, vested and/or payable based solely upon application of the applicable
performance goals.
11.4.
INCLUSIONS AND EXCLUSIONS
FROM PERFORMANCE CRITERIA
. The Committee may provide in any
Qualified Performance-Based Award, at the time the performance goals are
established, that any evaluation of performance shall exclude or otherwise
objectively adjust for any of the following events that occurs during a
performance period: (a) asset write-downs or impairment charges; (b) litigation
or claim judgments or settlements; (c) the effect of changes in tax laws,
accounting principles or other laws or provisions affecting reported results;
(d) accruals for reorganization and restructuring programs; (e) extraordinary
nonrecurring items as described in Accounting Principles Board Opinion No. 30;
(f) extraordinary nonrecurring items as described in management’s discussion and
analysis of financial condition and results of operations appearing in the
Company’s annual report to shareholders for the applicable year; (g)
acquisitions or divestitures; and (h) foreign exchange gains and
losses. To the extent such inclusions or exclusions affect Awards to
Covered Employees, they shall be prescribed in a form that meets the
requirements of Code Section 162(m) for deductibility.
11.5.
CERTIFICATION OF PERFORMANCE
GOALS
. Any payment of a Qualified Performance-Based Award
granted with performance goals pursuant to Section 11.3 above shall be
conditioned on the written certification of the Committee in each case that the
performance goals and any other material conditions were
satisfied. Except as specifically provided in Section 11.3, no
Qualified Performance-Based Award held by a Covered Employee or by an employee
who in the reasonable judgment of the Committee may be a Covered Employee on the
date of payment, may be amended, nor may the Committee exercise any
discretionary authority it may otherwise have under the Plan with respect to a
Qualified Performance-Based Award under the Plan, in any manner to waive the
achievement of the applicable performance goal based on Qualified Business
Criteria or to increase the amount payable pursuant thereto or the value
thereof, or otherwise in a manner that would cause the Qualified
Performance-Based Award to cease to qualify for the Section 162(m)
Exemption.
11.6.
AWARD
LIMITS
. Section 5.4 sets forth (i) the maximum number of
Shares that may be granted in any one-year period to a Participant in designated
forms of stock-based Awards, and (ii) the maximum aggregate dollar amount that
may be paid with respect to cash-based Awards under the Plan to any one
Participant in any fiscal year of the Company.
ARTICLE
12
DIVIDEND
EQUIVALENTS
12.1.
GRANT OF DIVIDEND
EQUIVALENTS
. The Committee is authorized to grant Dividend
Equivalents with respect to Full Value Awards granted hereunder, subject to such
terms and conditions as may be selected by the Committee. Dividend
Equivalents shall entitle the Participant to receive payments equal to dividends
with respect to all or a portion of the number of Shares subject to a Full Value
Award, as determined by the Committee. The Committee may provide that
Dividend Equivalents be paid or distributed when accrued or be deemed to have
been reinvested in additional Shares, or otherwise
reinvested. Unless otherwise provided in the applicable Award
Certificate, Dividend Equivalents will be paid or distributed no later than the
15
th
day of the 3
rd
month
following the later of (i) the calendar year in which the corresponding
dividends were paid to shareholders, or (ii) the first calendar year in which
the Participant’s right to such Dividends Equivalents is no longer subject to a
substantial risk of forfeiture.
ARTICLE
13
STOCK
OR OTHER STOCK-BASED AWARDS
13.1.
GRANT OF STOCK OR OTHER
STOCK-BASED AWARDS
. The Committee is authorized, subject to
limitations under applicable law, to grant to Participants such other Awards
that are payable in, valued in whole or in part by reference to, or otherwise
based on or related to Shares, as deemed by the Committee to be consistent with
the purposes of the Plan, including without limitation Shares awarded purely as
a “bonus” and not subject to any restrictions or conditions, convertible or
exchangeable debt securities, other rights convertible or exchangeable into
Shares, and Awards valued by reference to book value of Shares or the value of
securities of or the performance of specified Parents or
Subsidiaries. The Committee shall determine the terms and conditions
of such Awards.
ARTICLE
14
PROVISIONS
APPLICABLE TO AWARDS
14.1.
TERM OF
AWARD
. The term of each Award shall be for the period as
determined by the Committee, provided that in no event shall the term of any
Option or a Stock Appreciation Right exceed a period of ten years from its Grant
Date.
14.2.
FORM OF PAYMENT FOR
AWARDS
. At the discretion of the Committee, payment of Awards
may be made in cash, Stock, a combination of cash and Stock, or any other form
of property as the Committee shall determine. In addition, payment of
Awards may include such terms, conditions, restrictions and/or limitations, if
any, as the Committee deems appropriate, including, in the case of Awards paid
in the form of Stock, restrictions on transfer and forfeiture
provisions. Further, payment of Awards may be made in the form of a
lump sum, or in installments, as determined by the Committee.
14.3.
LIMITS ON
TRANSFER
. No right or interest of a Participant in any
unexercised or restricted Award may be pledged, encumbered, or hypothecated to
or in favor of any party other than the Company or an Affiliate, or shall be
subject to any lien, obligation, or liability of such Participant to any other
party other than the Company or an Affiliate. No unexercised or
restricted Award shall be assignable or transferable by a Participant other than
by will or the laws of descent and distribution or, except in the case of an
Incentive Stock Option, pursuant to a domestic relations order that would
satisfy Section 414(p)(1)(A) of the Code if such Section applied to an Award
under the Plan; provided, however, that the Committee may (but need not) permit
other transfers (other than transfers for value) where the Committee concludes
that such transferability (i) does not result in accelerated taxation, (ii) does
not cause any Option intended to be an Incentive Stock Option to fail to be
described in Code Section 422(b), and (iii) is otherwise appropriate and
desirable, taking into account any factors deemed relevant, including without
limitation, state or federal tax or securities laws applicable to transferable
Awards.
14.4.
BENEFICIARIES
. Notwithstanding
Section 14.3, a Participant may, in the manner determined by the Committee,
designate a beneficiary to exercise the rights of the Participant and to receive
any distribution with respect to any Award upon the Participant’s
death. A beneficiary, legal guardian, legal representative, or other
person claiming any rights under the Plan is subject to all terms and conditions
of the Plan and any Award Certificate applicable to the Participant, except to
the extent the Plan and Award Certificate otherwise provide, and to any
additional restrictions deemed necessary or appropriate by the
Committee. If no beneficiary has been designated or survives the
Participant, payment shall be made to the Participant’s
estate. Subject to the foregoing, a beneficiary designation may be
changed or revoked by a Participant at any time provided the change or
revocation is filed with the Committee.
14.5.
STOCK TRADING
RESTRICTIONS
. All Stock issuable under the Plan is subject to
any stop-transfer orders and other restrictions as the Committee deems necessary
or advisable to comply with federal or state securities laws, rules and
regulations and the rules of any national securities exchange or automated
quotation system on which the Stock is listed, quoted, or traded. The
Committee may place legends on any Stock certificate or issue instructions to
the transfer agent to reference restrictions applicable to the
Stock.
14.6.
ACCELERATION UPON DEATH OR
DISABILITY
. Except as otherwise provided in the Award
Certificate or any special Plan document governing an Award, upon the
termination of a person’s Continuous Status as a Participant by reason of death
or Disability:
(i)
all of that Participant’s outstanding Options and SARs shall become fully
exercisable, and shall thereafter remain exercisable for a period of one (1)
year or until the earlier expiration of the original term of the Option or
SAR;
(ii)
all time-based vesting restrictions on that Participant’s outstanding
Awards shall lapse as of the date of termination; and
(iii) the
payout opportunities attainable under all of that Participant’s outstanding
performance-based Awards shall be deemed to have been fully earned as of the
date of termination as follows:
(A) if
the date of termination occurs during the first half of the applicable
performance period, all relevant performance goals will be deemed to have been
achieved at the “target” level, and
(B) if
the date of termination occurs during the second half of the applicable
performance period, the actual level of achievement of all relevant performance
goals against target will be measured as of the end of the calendar quarter
immediately preceding the date of termination, and
(C) in either such
case, there shall be a prorata payout to the Participant or his or her estate
within sixty (60) days following the date of termination (unless a later date is
required by Section 17.3 hereof), based upon the length of time within the
performance period that has elapsed prior to the date of
termination.
To
the extent that this provision causes Incentive Stock Options to exceed the
dollar limitation set forth in Code Section 422(d), the excess Options shall be
deemed to be Nonstatutory Stock Options.
14.7.
EFFECT OF A CHANGE IN
CONTROL
. The provisions of this Section 14.7 shall apply in
the case of a Change in Control, unless otherwise provided in the Award
Certificate or any special Plan document or separate agreement with a
Participant governing an Award.
(a)
Awards not Assumed or
Substituted by Surviving Entity
. Upon the occurrence of a
Change in Control, and except with respect to any Awards assumed by the
Surviving Entity or otherwise equitably converted or substituted in connection
with the Change in Control in a manner approved by the Committee or the Board:
(i) outstanding Options, SARs, and other Awards in the nature of rights that may
be exercised shall become fully exercisable, (ii) time-based vesting
restrictions on outstanding Awards shall lapse, and (iii) the target payout
opportunities attainable under outstanding performance-based Awards shall be
deemed to have been fully earned as of the effective date of the Change in
Control based upon (A) an assumed achievement of all relevant performance goals
at the “target” level if the Change in Control occurs during the first half of
the applicable performance period, or (B) the actual level of achievement of all
relevant performance goals against target measured as of the date of the Change
in Control, if the Change in Control occurs during the second half of the
applicable performance period, and, in either such case, subject to Section
17.3, there shall be a prorata payout to Participants within sixty (60) days
following the Change in Control (unless a later date is required by Section 17.3
hereof), based upon the length of time within the performance period that has
elapsed prior to the Change in Control. Any Awards shall thereafter
continue or lapse in accordance with the other provisions of the Plan and the
Award Certificate. To the extent that this provision causes Incentive
Stock Options to exceed the dollar limitation set forth in Code Section 422(d),
the excess Options shall be deemed to be Nonstatutory Stock
Options.
(b)
Awards Assumed or
Substituted by Surviving Entity
. With respect to Awards
assumed by the Surviving Entity or otherwise equitably converted or substituted
in connection with a Change in Control: if within two years after the effective
date of the Change in Control, a Participant’s employment is terminated without
Cause or the Participant resigns for Good Reason, then (i) all of that
Participant’s outstanding Options, SARs and other Awards in the nature of rights
that may be exercised shall become fully exercisable, (ii) all time-based
vesting restrictions on the his or her outstanding Awards shall lapse, and (iii)
the target payout opportunities attainable under all outstanding of that
Participant’s performance-based Awards shall be deemed to have been fully earned
as of the date of termination based upon (A) an assumed achievement of all
relevant performance goals at the “target” level if the date of termination
occurs during the first half of the applicable performance period, or (B) the
actual level of achievement of all relevant performance goals against target, if
the date of termination occurs during the second half of the applicable
performance period, and, in either such case, there shall be a prorata payout to
such Participant within sixty (60) days following the date of termination of
employment (unless a later date is required by Section 17.3 hereof), based upon
the length of time within the performance period that has elapsed prior to the
date of termination of employment. With regard to each Award, a
Participant shall not be considered to have resigned for Good Reason unless
either (i) the Award Certificate includes such provision or (ii) the Participant
is party to an employment, severance or similar agreement with the Company or an
Affiliate that includes provisions in which the Participant is permitted to
resign for Good Reason. Any Awards shall thereafter continue or lapse
in accordance with the other provisions of the Plan and the Award
Certificate. To the extent that this provision causes Incentive Stock
Options to exceed the dollar limitation set forth in Code Section 422(d), the
excess Options shall be deemed to be Nonstatutory Stock Options.
14.8.
ACCELERATION FOR OTHER
REASONS
. Regardless of whether an event has occurred as
described in Section 14.6 or 14.7 above, and subject to Article 11 as to
Qualified Performance-Based Awards, the Committee may in its sole discretion at
any time determine that, upon the termination of service of a Participant, or
the occurrence of a Change in Control, all or a portion of such Participant’s
Options, SARs and other Awards in the nature of rights that may be exercised
shall become fully or partially exercisable, that all or a part of the
restrictions on all or a portion of the Participant’s outstanding Awards shall
lapse, and/or that any performance-based criteria with respect to any Awards
held by that Participant shall be deemed to be wholly or partially satisfied, in
each case, as of such date as the Committee may, in its sole discretion,
declare. The Committee may discriminate among Participants and among
Awards granted to a Participant in exercising its discretion pursuant to this
Section 14.8.
14.9.
FORFEITURE
EVENTS
. The Committee may specify in an Award Certificate that
the Participant’s rights, payments and benefits with respect to an Award shall
be subject to reduction, cancellation, forfeiture or recoupment upon the
occurrence of certain specified events, in addition to any otherwise applicable
vesting or performance conditions of an Award. Such events shall include, but
shall not be limited to, termination of employment for cause, violation of
material Company or Affiliate policies, breach of noncompetition,
confidentiality or other restrictive covenants that may apply to the
Participant, or other conduct by the Participant that is detrimental to the
business or reputation of the Company or any Affiliate.
14.10.
SUBSTITUTE
AWARDS
. The Committee may grant Awards under the Plan in
substitution for stock and stock-based awards held by employees of another
entity who become employees of the Company or an Affiliate as a result of a
merger or consolidation of the former employing entity with the Company or an
Affiliate or the acquisition by the Company or an Affiliate of property or stock
of the former employing corporation. The Committee may direct that
the substitute awards be granted on such terms and conditions as the Committee
considers appropriate in the circumstances.
ARTICLE
15
CHANGES
IN CAPITAL STRUCTURE
15.1.
MANDATORY
ADJUSTMENTS
. In the event of a nonreciprocal transaction
between the Company and its stockholders that causes the per-share value of the
Stock to change (including, without limitation, any stock dividend, stock split,
spin-off, rights offering, or large nonrecurring cash dividend), the
authorization limits under Section 5.1 and 5.4 shall be adjusted
proportionately, and the Committee shall make such adjustments to the Plan and
Awards as it deems necessary, in its sole discretion, to prevent dilution or
enlargement of rights immediately resulting from such
transaction. Action by the Committee may include: (i) adjustment of
the number and kind of shares that may be delivered under the Plan; (ii)
adjustment of the number and kind of shares subject to outstanding Awards; (iii)
adjustment of the exercise price of outstanding Awards or the measure to be used
to determine the amount of the benefit payable on an Award; and (iv) any other
adjustments that the Committee determines to be
equitable. Notwithstanding the foregoing, the Committee shall not
make any adjustments to outstanding Options or SARs that would constitute a
modification or substitution of the stock right under Treas. Reg. Sections
1.409A-1(b)(5)(v) that would be treated as the grant of a new stock right or
change in the form of payment for purposes of Code Section
409A. Without limiting the foregoing, in the event of a subdivision
of the outstanding Stock (stock-split), a declaration of a dividend payable in
Shares, or a combination or consolidation of the outstanding Stock into a lesser
number of Shares, the authorization limits under Section 5.1 and 5.4 shall
automatically be adjusted proportionately, and the Shares then subject to each
Award shall automatically, without the necessity for any additional action by
the Committee, be adjusted proportionately without any change in the aggregate
purchase price therefore.
15.2
DISCRETIONARY
ADJUSTMENTS
. Upon the occurrence or in anticipation of any
corporate event or transaction involving the Company (including, without
limitation, any merger, reorganization, recapitalization, combination or
exchange of shares, or any transaction described in Section 15.1), the Committee
may, in its sole discretion, provide (i) that Awards will be settled in cash
rather than Stock, (ii) that Awards will become immediately vested and
exercisable and will expire after a designated period of time to the extent not
then exercised, (iii) that Awards will be assumed by another party to a
transaction or otherwise be equitably converted or substituted in connection
with such transaction, (iv) that outstanding Awards may be settled by payment in
cash or cash equivalents equal to the excess of the Fair Market Value of the
underlying Stock, as of a specified date associated with the transaction, over
the exercise price of the Award, (v) that performance targets and performance
periods for Performance Awards will be modified, consistent with Code Section
162(m) where applicable, or (vi) any combination of the
foregoing. The Committee’s determination need not be uniform and may
be different for different Participants whether or not such Participants are
similarly situated.
15.3
GENERAL
. Any
discretionary adjustments made pursuant to this Article 15 shall be subject to
the provisions of Section 16.2. To the extent that any adjustments
made pursuant to this Article 15 cause Incentive Stock Options to cease to
qualify as Incentive Stock Options, such Options shall be deemed to be
Nonstatutory Stock Options.
ARTICLE
16
AMENDMENT,
MODIFICATION AND TERMINATION
16.1.
AMENDMENT, MODIFICATION AND
TERMINATION
. The Board or the Committee may, at any time and
from time to time, amend, modify or terminate the Plan without stockholder
approval; provided, however, that if an amendment to the Plan would, in the
reasonable opinion of the Board or the Committee, either (i) materially increase
the number of Shares available under the Plan, (ii) expand the types of awards
under the Plan, (iii) materially expand the class of participants eligible to
participate in the Plan, (iv) materially extend the term of the Plan, or (v)
otherwise constitute a material change requiring stockholder approval under
applicable laws, policies or regulations or the applicable listing or other
requirements of an Exchange, then such amendment shall be subject to stockholder
approval; and provided, further, that the Board or Committee may condition any
other amendment or modification on the approval of stockholders of the Company
for any reason, including by reason of such approval being necessary or deemed
advisable (i) to comply with the listing or other requirements of an Exchange,
or (ii) to satisfy any other tax, securities or other applicable laws, policies
or regulations.
16.2.
AWARDS PREVIOUSLY
GRANTED
. At any time and from time to time, the Committee may
amend, modify or terminate any outstanding Award without approval of the
Participant; provided, however:
(a) Subject
to the terms of the applicable Award Certificate, such amendment, modification
or termination shall not, without the Participant’s consent, reduce or diminish
the value of such Award determined as if the Award had been exercised, vested,
cashed in or otherwise settled on the date of such amendment or termination
(with the per-share value of an Option or SAR for this purpose being calculated
as the excess, if any, of the Fair Market Value as of the date of such amendment
or termination over the exercise or base price of such Award);
(b) The
original term of an Option or SAR may not be extended without the prior approval
of the stockholders of the Company;
(c) Except
as otherwise provided in Section 15.1, the exercise price of an Option or SAR
may not be reduced, directly or indirectly, without the prior approval of the
stockholders of the Company; and
(d) No
termination, amendment, or modification of the Plan shall adversely affect any
Award previously granted under the Plan, without the written consent of the
Participant affected thereby. An outstanding Award shall not be
deemed to be “adversely affected” by a Plan amendment if such amendment would
not reduce or diminish the value of such Award determined as if the Award had
been exercised, vested, cashed in or otherwise settled on the date of such
amendment (with the per-share value of an Option or SAR for this purpose being
calculated as the excess, if any, of the Fair Market Value as of the date of
such amendment over the exercise or base price of such Award).
16.3.
COMPLIANCE
AMENDMENTS
. Notwithstanding anything in the Plan or in any
Award Certificate to the contrary, the Board may amend the Plan or an Award
Certificate, to take effect retroactively or otherwise, as deemed necessary or
advisable for the purpose of conforming the Plan or Award Certificate to any
present or future law relating to plans of this or similar nature (including,
but not limited to, Section 409A of the Code), and to the administrative
regulations and rulings promulgated thereunder. By accepting an Award
under this Plan, a Participant agrees to any amendment made pursuant to this
Section 16.3 to any Award granted under the Plan without further consideration
or action.
ARTICLE
17
GENERAL
PROVISIONS
17.1.
RIGHTS OF
PARTICIPANTS
.
(a) No
Participant or any Eligible Participant shall have any claim to be granted any
Award under the Plan. Neither the Company, its Affiliates nor the
Committee is obligated to treat Participants or Eligible Participants uniformly,
and determinations made under the Plan may be made by the Committee selectively
among Eligible Participants who receive, or are eligible to receive, Awards
(whether or not such Eligible Participants are similarly situated).
(b) Nothing
in the Plan, any Award Certificate or any other document or statement made with
respect to the Plan, shall interfere with or limit in any way the right of the
Company or any Affiliate to terminate any Participant’s employment or status as
an officer, or any Participant’s service as a director, at any time, nor confer
upon any Participant any right to continue as an employee, officer, or director
of the Company or any Affiliate, whether for the duration of a Participant’s
Award or otherwise.
(c) Neither
an Award nor any benefits arising under this Plan shall constitute an employment
contract with the Company or any Affiliate and, accordingly, subject to Article
16, this Plan and the benefits hereunder may be terminated at any time in the
sole and exclusive discretion of the Committee without giving rise to any
liability on the part of the Company or an of its Affiliates.
(d) No
Award gives a Participant any of the rights of a shareholder of the Company
unless and until Shares are in fact issued to such person in connection with
such Award.
17.2.
WITHHOLDING
. The
Company or any Affiliate shall have the authority and the right to deduct or
withhold, or require a Participant to remit to the Company, an amount sufficient
to satisfy federal, state, and local taxes (including the Participant’s FICA
obligation) required by law to be withheld with respect to any exercise, lapse
of restriction or other taxable event arising as a result of the
Plan. With respect to withholding required upon any taxable event
under the Plan, the Committee may, at the time the Award is granted or
thereafter, require or permit that any such withholding requirement be
satisfied, in whole or in part, by withholding from the Award Shares having a
Fair Market Value on the date of withholding equal to the minimum amount (and
not any greater amount) required to be withheld for tax purposes, all in
accordance with such procedures as the Committee establishes. All
such elections shall be subject to any restrictions or limitations that the
Committee, in its sole discretion, deems appropriate.
17.3.
SPECIAL PROVISIONS RELATED
TO SECTION 409A OF THE CODE
.
(a)
General
. It is
intended that the payments and benefits provided under the Plan and any Award
shall either be exempt from the application of, or comply with, the requirements
of Section 409A of the Code. The Plan and all Award Certificates
shall be construed in a manner that effects such
intent. Nevertheless, the tax treatment of the benefits provided
under the Plan or any Award is not warranted or guaranteed. Neither
the Company, its Affiliates nor their respective directors, officers, employees
or advisers (other than in his or her capacity as a Participant) shall be held
liable for any taxes, interest, penalties or other monetary amounts owed by any
Participant or other taxpayer as a result of the Plan or any Award.
(b)
Definitional
Restrictions
. Notwithstanding anything in the Plan or in any Award
Certificate to the contrary, to the extent that any amount or benefit that would
constitute non-exempt “deferred compensation” for purposes of Section 409A
of the Code would otherwise be payable or distributable, or a different form of
payment (e.g., lump sum or installment) would be effected, under the Plan or any
Award Certificate by reason of the occurrence of a Change in Control, or the
Participant’s Disability or separation from service, such amount or benefit will
not be payable or distributable to the Participant, and/or such different form
of payment will not be effected, by reason of such circumstance unless the
circumstances giving rise to such Change in Control, Disability or separation
from service meet any description or definition of “change in control event”,
“disability” or “separation from service”, as the case may be, in
Section 409A of the Code and applicable regulations (without giving effect
to any elective provisions that may be available under such
definition). This provision does not prohibit the
vesting
of any Award upon a
Change in Control, Disability or separation from service, however
defined. If this provision prevents the payment or distribution of
any amount or benefit, such payment or distribution shall be made on the next
earliest payment or distribution date or event specified in the Award
Certificate that is permissible under Section 409A. If this provision
prevents the application of a different form of payment of any amount or
benefit, such payment shall be made in the same form as would have applied
absent such designated event or circumstance.
(c)
Allocation among Possible
Exemptions
. If any one or more Awards granted under the Plan to a
Participant could qualify for any separation pay exemption described in Treas.
Reg. Section 1.409A-1(b)(9), but such Awards in the aggregate exceed the dollar
limit permitted for the separation pay exemptions, the Company (acting through
the Committee or the Head of Human Resources) shall determine which Awards or
portions thereof will be subject to such exemptions.
(d)
Six-Month Delay in Certain
Circumstances
. Notwithstanding anything in the Plan or in any Award
Certificate to the contrary, if any amount or benefit that would constitute
non-exempt “deferred compensation” for purposes of Section 409A of the Code
would otherwise be payable or distributable under this Plan or any Award
Certificate by reason of a Participant’s separation from service during a period
in which the Participant is a Specified Employee (as defined below), then,
subject to any permissible acceleration of payment by the Committee under Treas.
Reg. Section 1.409A-3(j)(4)(ii) (domestic relations order), (j)(4)(iii)
(conflicts of interest), or (j)(4)(vi) (payment of employment
taxes):
(i) the amount of
such non-exempt deferred compensation that would otherwise be payable during the
six-month period immediately following the Participant’s separation from service
will be accumulated through and paid or provided on the first day of the seventh
month following the Participant’s separation from service (or, if the
Participant dies during such period, within 30 days after the Participant's
death) (in either case, the “Required Delay Period”); and
(ii) the normal
payment or distribution schedule for any remaining payments or distributions
will resume at the end of the Required Delay Period.
For purposes of
this Plan, the term “Specified Employee” has the meaning given such term in Code
Section 409A and the final regulations thereunder,
provided, however
, that, as
permitted in such final regulations, the Company’s Specified Employees and its
application of the six-month delay rule of Code Section 409A(a)(2)(B)(i) shall
be determined in accordance with rules adopted by the Board or any committee of
the Board, which shall be applied consistently with respect to all nonqualified
deferred compensation arrangements of the Company, including this
Plan.
17.4.
UNFUNDED STATUS OF
AWARDS
. The Plan is intended to be an “unfunded” plan for
incentive and deferred compensation. With respect to any payments not
yet made to a Participant pursuant to an Award, nothing contained in the Plan or
any Award Certificate shall give the Participant any rights that are greater
than those of a general creditor of the Company or any
Affiliate. This Plan is not intended to be subject to
ERISA.
17.5.
RELATIONSHIP TO OTHER
BENEFITS
. No payment under the Plan shall be taken into
account in determining any benefits under any pension, retirement, savings,
profit sharing, group insurance, welfare or benefit plan of the Company or any
Affiliate unless provided otherwise in such other plan.
17.6.
EXPENSES
. The
expenses of administering the Plan shall be borne by the Company and its
Affiliates.
17.7.
TITLES AND
HEADINGS
. The titles and headings of the Sections in the Plan
are for convenience of reference only, and in the event of any conflict, the
text of the Plan, rather than such titles or headings, shall
control.
17.8.
GENDER AND
NUMBER
. Except where otherwise indicated by the context, any
masculine term used herein also shall include the feminine; the plural shall
include the singular and the singular shall include the plural.
17.9.
FRACTIONAL
SHARES
. No fractional Shares shall be issued and the Committee
shall determine, in its discretion, whether cash shall be given in lieu of
fractional Shares or whether such fractional Shares shall be eliminated by
rounding up or down.
17.10.
GOVERNMENT AND OTHER
REGULATIONS
.
(a) Notwithstanding
any other provision of the Plan, no Participant who acquires Shares pursuant to
the Plan may, during any period of time that such Participant is an affiliate of
the Company (within the meaning of the rules and regulations of the Securities
and Exchange Commission under the 1933 Act), sell such Shares, unless such offer
and sale is made (i) pursuant to an effective registration statement under the
1933 Act, which is current and includes the Shares to be sold, or (ii) pursuant
to an appropriate exemption from the registration requirement of the 1933 Act,
such as that set forth in Rule 144 promulgated under the 1933 Act.
(b) Notwithstanding
any other provision of the Plan, if at any time the Committee shall determine
that the registration, listing or qualification of the Shares covered by an
Award upon any Exchange or under any foreign, federal, state or local law or
practice, or the consent or approval of any governmental regulatory body, is
necessary or desirable as a condition of, or in connection with, the granting of
such Award or the purchase or receipt of Shares thereunder, no Shares may be
purchased, delivered or received pursuant to such Award unless and until such
registration, listing, qualification, consent or approval shall have been
effected or obtained free of any condition not acceptable to the
Committee. Any Participant receiving or purchasing Shares pursuant to
an Award shall make such representations and agreements and furnish such
information as the Committee may request to assure compliance with the foregoing
or any other applicable legal requirements. The Company shall not be
required to issue or deliver any certificate or certificates for Shares under
the Plan prior to the Committee’s determination that all related requirements
have been fulfilled. The Company shall in no event be obligated to
register any securities pursuant to the 1933 Act or applicable state or foreign
law or to take any other action in order to cause the issuance and delivery of
such certificates to comply with any such law, regulation or
requirement.
17.11.
GOVERNING
LAW.
To the extent not governed by federal law, the Plan and
all Award Certificates shall be construed in accordance with and governed by the
laws of the State of Texas.
17.12.
ADDITIONAL
PROVISIONS
. Each Award Certificate may contain such other
terms and conditions as the Committee may determine; provided that such other
terms and conditions are not inconsistent with the provisions of the
Plan.
17.13.
NO LIMITATIONS ON RIGHTS OF
COMPANY
. The grant of any Award shall not in any way affect
the right or power of the Company to make adjustments, reclassification or
changes in its capital or business structure or to merge, consolidate, dissolve,
liquidate, sell or transfer all or any part of its business or
assets. The Plan shall not restrict the authority of the Company, for
proper corporate purposes, to draft or assume awards, other than under the Plan,
to or with respect to any person. If the Committee so directs, the
Company may issue or transfer Shares to an Affiliate, for such lawful
consideration as the Committee may specify, upon the condition or understanding
that the Affiliate will transfer such Shares to a Participant in accordance with
the terms of an Award granted to such Participant and specified by the Committee
pursuant to the provisions of the Plan.
17.14.
INDEMNIFICATION
. Each
person who is or shall have been a member of the Committee, or of the Board, or
an officer of the Company to whom authority was delegated in accordance with
Article 4 shall be indemnified and held harmless by the Company against and
from any loss, cost, liability, or expense that may be imposed upon or
reasonably incurred by him or her in connection with or resulting from any
claim, action, suit, or proceeding to which he or she may be a party or in which
he or she may be involved by reason of any action taken or failure to act under
the Plan and against and from any and all amounts paid by him or her in
settlement thereof, with the Company’s approval, or paid by him or her in
satisfaction of any judgment in any such action, suit, or proceeding against him
or her, provided he or she shall give the Company an opportunity, at its own
expense, to handle and defend the same before he or she undertakes to handle and
defend it on his or her own behalf, unless such loss, cost, liability, or
expense is a result of his or her own willful misconduct or except as expressly
provided by statute. The foregoing right of indemnification shall not
be exclusive of any other rights of indemnification to which such persons may be
entitled under the Company’s charter or bylaws, as a matter of law, or
otherwise, or any power that the Company may have to indemnify them or hold them
harmless.
The foregoing is
hereby acknowledged as being the Southside Bancshares, Inc. 2009 Incentive Plan
as adopted by the Board on February 5, 2009 and by the shareholders on April 16,
2009.
SOUTHSIDE
BANCSHARES, INC.
By:
/s/
Sam Dawson
Its: President and
Secretary
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