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Delaware
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1-8649
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41-0580470
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(State
of Incorporation)
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(Commission
File Number)
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(I.R.S.
Employer Identification Number)
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8111
Lyndale Avenue South
Bloomington,
Minnesota
(Address
of principal executive offices)
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55420
(Zip
Code)
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(e)
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On
January 15, 2008, the Board of Directors of The Toro Company (the
“Company”), on recommendation of the Compensation & Human Resources
Committee, adopted amendments to certain of the Company’s equity
compensation plans. Specifically, the Board of Directors:
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(i)
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Amended
The Toro Company 2000 Stock Option Plan (the “2000 Stock Option Plan”) to:
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·
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affirmatively
prohibit the “repricing” of stock options without the approval of the
Company’s shareholders;
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·
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reduce
the Company’s flexibility with respect to option grants to foreign
nationals and California residents by specifically prohibiting the
reservation of shares or grant of options to such individuals in
excess of
the authorized number of shares under the 2000 Stock Option Plan,
the
repricing of options granted to such individuals, the granting of
options
with an exercise price of less than 100% of the fair market value
of the
Company’s common stock on the date of grant and any other action that
would require the approval of the Company’s shareholders under any
applicable law, rule or regulation;
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·
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eliminate
the ability of the Board of Directors to increase the number of shares
of
the Company’s common stock authorized for issuance under the 2000 Stock
Option Plan by an immaterial amount;
and
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·
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clarify
that “share recycling” is not permitted under the 2000 Stock Option Plan
and provide a methodology for accounting for shares reserved under
the
2000 Stock Option Plan.
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(ii)
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Amended
The Toro Company Performance Share Plan (the “PSP”) to decrease the number
of shares of the Company’s common stock authorized for issuance under the
PSP as performance share awards by 250,000, from 3,000,000 to 2,750,000.
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(iii)
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Amended
The Toro Company 2000 Directors Stock Plan (“2000 Directors Plan”) to
decrease the number of shares of the Company’s common stock authorized for
issuance under the 2000 Directors Plan by 25,000, from 480,000 to
455,000.
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Exhibit
No.
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Description
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10.1
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The
Toro Company 2000 Stock Option Plan (as amended January 15, 2008)
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10.2
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The
Toro Company Performance Share Plan (as amended January 15, 2008)
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10.3
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The
Toro Company 2000 Directors Stock Plan (as amended January 15,
2008)
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Date: January
18, 2008
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By
/s/ Timothy P. Dordell
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Timothy
P. Dordell
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Vice
President, Secretary and General Counsel
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EXHIBIT
NUMBER
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DESCRIPTION
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10.1
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The
Toro Company 2000 Stock Option Plan (as amended January 15, 2008)
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10.2
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The
Toro Company Performance Share Plan (as amended January 15, 2008)
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10.3
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The
Toro Company 2000 Directors Stock Plan (as amended January 15,
2008)
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1.
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Purpose
. The
purpose of The Toro Company 2000 Stock Option Plan (the “Plan”) is to
enhance stockholder value of The Toro Company (the “Company”) by providing
an incentive to key employees and other key individuals who perform
services for the Company to contribute significantly to the long-term
performance and growth of the Company; to link a significant portion
of a
participant’s compensation to the value of the Company’s Common Stock, par
value $1.00 per share, and related Preferred Share Purchase Rights
(“Common Stock”); and to attract and retain experienced and knowledgeable
employees on a competitive basis. These purposes are expected
to be achieved by granting options to acquire the Common Stock
(“options”).
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2.
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Eligibility
. Any
employee of the Company who is regularly employed in an executive,
managerial, professional or technical position and any other individual
who performs services for the Company and who contributes significantly
to
the strategic and long-term performance objectives of the Company
is
eligible to participate in the Plan. Options may be granted to
directors of the Company who are also employees of the
Company. More than one option may be granted to the same
individual.
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a.
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Limitations
. No
option may be granted to an individual who owns, directly or indirectly,
Common Stock or other capital stock of the Company possessing more
than 5%
of the total combined voting power or value of any class of capital
stock
of the Company or a subsidiary immediately after such option is granted,
and the maximum number of shares that may be covered by options granted
to
any individual during any calendar year shall be 100,000
shares. Except for the foregoing limitations, there is no
minimum or maximum number of shares of Common Stock with respect
to which
options may be granted to any individual under the
Plan. Individuals to whom options are granted are referred to
as “option holders”.
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a.
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ISOs
and Nonqualified
Options
. Options granted under the Plan may be either
nonqualified stock options (“nonqualified options”) or incentive stock
options (“Incentive Stock Options”) as defined in Section 422 of the
Internal Revenue Code of 1986, as amended (the “Code”).
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(i)
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Incentive
Stock
Options
. Incentive Stock Options shall meet the
applicable requirements of, and contain or be deemed to contain all
provisions required by, the Code or corresponding provisions of subsequent
revenue laws and regulations in effect at the time such options are
granted. Any ambiguities in construction shall be interpreted
in order to effectuate such intent. To the extent that the
aggregate fair market value of Common Stock (determined at the time
of
grant of the Incentive Stock Option) with respect to which Incentive
Stock
Options are exercisable for the first time by an option holder during
any
calendar year (under all such plans of the Company and its parent
and
subsidiary corporations) exceeds $100,000 or such other limit as
may be
imposed by the Code, such options to the extent they exceed such
limit
shall be treated as options which are not Incentive Stock
Options. In applying the foregoing limitation, options shall be
taken into account in the order in which they were granted.
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b.
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Agreements
. Options
shall be evidenced by stock option agreements in such form and not
inconsistent with the Plan as the Compensation and Human Resources
Committee (the “Committee”) of the Board of Directors shall approve from
time to time.
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c.
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Number
of Shares, Date of Grant
and Term
. An option agreement shall specify the number
of shares of Common Stock to which it pertains; the date of grant,
which
shall be the date on which the Committee grants an option or any
later
date which the Committee specifically designates, and the term of
the
option, which shall not exceed ten years.
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d.
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Exercise
Price
. The exercise price of an option shall be not less
than 100% of fair market value of the Common Stock on the date of
grant. Fair market value is the 4 p.m. Eastern Time closing
price for the Common Stock as reported by the New York Stock
Exchange. Notwithstanding the foregoing, to the extent that
options are granted under the Plan as a result of the Company’s assumption
or substitution of options issued by any acquired, merged or consolidated
entity, the exercise price for such options shall be the price determined
by the Committee pursuant to the conversion terms applicable to the
transaction. After an option is granted, the exercise price
shall not be reduced.
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e.
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Vesting,
Transferability and
Exercisability
.
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(i)
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Vesting
. An
option granted to an officer or general manager of the Company shall
vest
and become exercisable in three approximately equal installments
on each
of the first, second and third anniversaries after the date of
grant. An option granted to an employee or other service
provider who is not an officer or general manager of the Company
shall
vest and become exercisable in full on the second anniversary after
the
date of grant. Notwithstanding the foregoing, the Committee
shall have the authority to provide in any option agreement for any
one or
more of the following: (a) longer periods after the date of
grant during which an option or any portion thereof may not yet be
exercisable, (b) acceleration of vesting in the event of an option
holder’s disability or death and (c) continued vesting after an
option holder’s retirement, subject to Section 3.e(iii)(c).
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(ii)
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No
Transfer
. Options shall not be transferable by the
option holder except by will or applicable laws of descent and
distribution.
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(iii)
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Exercise
. During
the lifetime of an option holder, an option may be exercised only
by the
option holder and only while an employee of the Company or a parent
or
subsidiary of the Company or otherwise performing services for the
Company
or a parent or subsidiary and only if the option holder has been
continuously so employed or engaged since the date such options were
granted, except as the Committee may otherwise determine and provide
for
in an option agreement at the time of grant or, if the Committee
does not
so provide, as follows:
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(a)
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Disability
. In
the event of disability of an option holder, options may be exercised
by
such individual or his or her guardian or legal representative, not
later
than the earlier of the date the option expires or one year after
the date
employment or performance of services ceases by reason of such disability,
but only with respect to an option exercisable at the time employment
or
performance of services ceases.
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(b)
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Death
. An
option may be exercised after the death of an option holder only
by such
individual’s legal representatives, heirs or legatees, not later than the
earlier of the date the option expires or one year after the date
of death
of such individual, and only with respect to an option exercisable
at the
time of death.
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(c)
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Retirement
. An
option may be exercised by an option holder after such individual
ceases
to be an employee by reason of retirement for up to four years after
the
date of retirement but not later than the date the option expires,
provided that the option holder has remained an employee of the Company
through the last day of the fiscal year in which the option is
granted. “Retirement” shall have the meaning established by the
Committee from time to time or, if no such meaning is established,
shall
mean termination of employment with the Company at or after age 55
and
with a number of years of service that, when added together with
the
option holder’s age, equals at least 65.
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(d)
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Other
Termination of
Employment
. An option may be exercised by an option
holder after such individual ceases to be an employee (for reasons
other
than disability, death or retirement) for up to three months after
the
date of termination of employment but not later than the date the
option
expires.
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(iv)
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Non-compete
. Notwithstanding
any other provision of paragraph 3.e., if within one year after the
termination of employment with or performance of services for the
Company,
an option holder is (a) employed or retained by or renders service to
any organization that, directly or indirectly, competes with or becomes
competitive with the Company, or if the rendering of such services
is
prejudicial or in conflict with the interests of the Company, or
(b) violates any confidentiality agreement or agreement governing the
ownership or assignment of intellectual property rights with the
Company,
or (c) engages in any other conduct or act determined to be
injurious, detrimental or prejudicial to any interest of the Company,
the
Company may cancel or rescind or restrict all options held by such
individual and shall have the right to the return of the economic
value of
any option which was realized or obtained (measured at the date of
exercise) by such individual at any time during the period beginning
on
the date that is twelve months prior to the date of termination to
the
date of the last exercise, provided however, that this provision
shall not
be applicable in the event of a Change of Control.
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(v)
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Interruption
in Service
. Absence on leave from the Company, or other
interruption in the performance of services, by an option holder
shall, if
approved by the Committee, not be deemed a cessation or interruption
of
employment or services for the purposes of the Plan.
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f.
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Methods
of Exercise and Payment
of Exercise Price
. Subject to the terms and conditions
of the Plan and the terms and conditions of the option agreement,
an
option may be exercised in whole at any time or in part from time
to time,
by delivery to the Company at its principal office of a written notice
of
exercise specifying the number of shares with respect to which the
option
is being exercised, accompanied by payment in full of the exercise
price
for shares to be purchased at that time. Payment may be made
(i) in cash, (ii) by tendering (either actually or by
attestation) shares of Common Stock already owned for at least six
months
(or other period necessary to avoid a charge to the Company’s earnings for
financial statement purposes) valued at the fair market value of
the
Common Stock on the date of exercise or (iii) in a combination of
cash and Common Stock; or the Committee may also, in its sole discretion
exercised either at the time the option is granted or at any time
before
an option is exercised, (iv) permit option holders to deliver a
notice of exercise of options, together with irrevocable instructions,
approved in advance by proper officers of the Company, (A) to a
brokerage firm designated by the Company, to deliver promptly to
the
Company the aggregate amount of sale or loan proceeds to pay the
exercise
price and any related tax withholding obligations and (B) to the
Company, to deliver certificates for such purchased shares directly
to
such brokerage firm, all in accordance with regulations of the Federal
Reserve Board; or (v) authorize such other methods as it deems
appropriate and as comply with requirements of the Code, the Securities
Exchange Act of 1934 (the “Exchange Act”) and other applicable laws and
regulations. No shares of Common Stock shall be issued until
full payment has been made.
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g.
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Rights
as a
Stockholder
. An option holder shall have no rights as a
stockholder with respect to any Common Stock covered by an option
until
the option is exercised and shares of Common Stock are
issued. Except as otherwise expressly provided in the Plan, no
adjustments shall be made for dividends or other rights for which
the
record date is prior to issuance of the Common Stock.
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4.
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Common
Stock Subject to the
Plan
. Subject to adjustment to reflect corporate
transactions provided for in paragraph 4.a., the total number of
shares of
Common Stock that is reserved and available for issuance pursuant
to
options granted under the Plan shall be 6,400,000. Any shares
issued by the Company in connection with the assumption or substitution
of
outstanding grants from any acquired corporation shall not reduce
the
shares available for option grants under the Plan. Shares of
Common Stock that may be issued under the Plan may be authorized
but
unissued shares, reacquired or treasury shares, or outstanding shares
acquired in the market or from private sources, or a combination
thereof. Shares of Common Stock that are issued under the Plan
or that are potentially issuable pursuant to outstanding options
granted
under the Plan will be applied to reduce the maximum number of shares
of
Common Stock remaining available for issuance under the
Plan. All shares so subtracted from the amount available under
the Plan with respect to an option that lapses, expires, is forfeited
or
for any reason is terminated unexercised or unvested or is settled
or paid
in cash or any form other than shares of Common Stock will not again
become available for issuance under the Plan. Without limiting
the generality of the foregoing, (i) any shares which would have
been
issued upon any exercise of an option but for the fact that the exercise
price was paid by the tender or attestation as to ownership of shares
of
Common Stock already owned pursuant to paragraph 3.f. of the Plan
will not
again become available for issuance under the Plan, (ii) shares withheld
or repurchased by the Company to satisfy the payment of the exercise
price
of an option or any tax withholding obligation will not again become
available for issuance under the Plan, and (iii) shares repurchased
by the
Company using option proceeds will not again become available for
issuance
under the Plan.
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a.
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Adjustments
for Corporate
Transactions
. In the event of a corporate transaction
involving the Company (including, without limitation, any merger,
consolidation, recapitalization, reorganization, split off, spin
off,
reclassification, combination, stock dividend, stock split, reverse
stock
split, repurchase, exchange, extraordinary cash dividend, issuance
of
warrants or other rights to purchase Common Stock or other securities
of
the Company, or other similar corporate transaction or change in
the
corporate structure of the Company affecting the Common Stock, or
a sale
by the Company of all or part of its assets or any distribution to
stockholders other than a normal cash dividend), the Committee shall
make
such proportional adjustments as are necessary to preserve the benefits
or
potential benefits of the options. Action by the Committee may
include appropriate adjustments in all or any of (i) the number of
shares of the Common Stock or other new or different securities that
may
be available for option grants under the Plan; (ii) the number of
shares of Common Stock or other new or different securities subject
to
outstanding options; (iii) the option price per share of outstanding
options and, if deemed appropriate, cash payments; (iv) the maximum
number and kind of securities that may be made subject to options
for any
individual as set forth in paragraph 2.a.; or (v) any other
adjustment the Committee determines to be equitable. The
Committee may also, in its sole discretion, make provisions in any
option
agreement for the protection of outstanding options in the event
of such a
corporate transaction.
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5.
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Administration
of the
Plan
.
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a.
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The
Plan shall be administered by the Committee, provided that members
of the
Committee shall be “non-employee directors” as contemplated by
Rule 16b-3 under the Exchange Act or any successor rule and
shall qualify to administer the Plan as “outside directors” as
contemplated by Section 162(m) of the Internal Revenue Code and the
regulations thereunder (“Section 162(m)”). The Committee
may delegate administrative duties and all decisions not required
to be
exercised by it under Section 162(m), Section 16 of the Exchange
Act or the rules of the New York Stock Exchange to an officer of the
Company. The decision of the Committee on any matter affecting
the Plan and obligations arising under the Plan or any option granted
thereunder shall be deemed final and binding upon all persons, including
the Company, its stockholders and option holders. No member of
the Board or of the Committee shall be liable for any action taken
or
determination made in good faith with respect to the Plan or any
option
granted under the Plan.
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b.
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Subject
to the express provisions of the Plan, the Committee shall have authority,
in its discretion, to grant options; to interpret the Plan; to prescribe,
amend and rescind rules and regulations relating to the Plan; to
determine
the exercise price of each option to purchase Common Stock, the
individuals to whom and the time or times at which options shall
be
granted, the number of shares to be subject to each option, when
an option
may be exercisable and the other terms and provisions (and amendments
thereto) of the respective option agreements (which need not be
identical); to determine whether a particular option is to be an
Incentive
Stock Option; and to make all other determinations deemed necessary
or
advisable for the administration of the Plan.
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c.
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Notwithstanding
any other provision of this Plan other than paragraph 4, the Committee
may
not, without prior approval of the Company’s stockholders, seek to effect
any repricing of any previously granted option by: (i) amending or
modifying the terms of the option to lower the exercise price; (ii)
canceling the option and granting replacement options having a lower
exercise price in exchange; (iii) repurchasing the options and granting
new options under this Plan; or (iv) taking any other action that
is
treated as a “repricing” under generally accepted accounting principles.
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6.
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Foreign
Nationals and Residents
of California
.
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a.
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Foreign
Nationals
. Without amending the Plan, options may be
granted to individuals who are foreign nationals or are employed
or
otherwise performing services for the Company or any subsidiary outside
the United States or both, on such terms and conditions different
from
those specified in the Plan as may, in the judgment of the Committee,
be
necessary or desirable to further the purposes of the Plan.
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b.
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California
Residents
. Without amending the Plan, and
notwithstanding any provision of the Plan to the contrary, options
granted
to individuals who are residents of the State of California may contain
such terms and conditions as may be required by applicable California
statutes governing stock options.
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c.
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Limitations
. The
Committee shall have no authority, however, to take action pursuant
to
paragraphs 6.a. and 6.b. of the Plan: (i) to reserve shares or grant
options in excess of the limitations provided in paragraph 4 of the
Plan;
(ii) to effect any repricing in violation of paragraph 5.c. of the
Plan;
(iii) to grant options having an exercise price in violation of paragraph
3.d. of the Plan; or (iv) for which stockholder approval would then
be
required pursuant to any applicable law, rule or regulation, including
without limitation the rules and regulations of the New York Stock
Exchange and the Securities and Exchange Commission.
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7.
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Change
of
Control
. In the event of a Change of Control of the
Company as hereinafter defined, whether or not approved by the Board,
all
options shall fully vest, unless otherwise limited by the Committee
at the
time of the option grant, and be exercisable in their entirety
immediately, and notwithstanding any other provisions of the Plan,
shall
continue to be exercisable for three years following the Change of
Control, but not later than ten years after the date of grant.
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a.
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Definition
. For
the purpose of this paragraph 7, a “Change of Control” shall mean:
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(i)
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The
acquisition by any individual, entity or group (within the meaning
of
Section 13(d)(3) or 14(d)(2) of the Exchange Act) (a
“Person”) of beneficial ownership (within the meaning of Rule 13d-3
under the Exchange Act) of 15% or more of either (A) the
then-outstanding shares of Common Stock of the Company (the “Outstanding
Company Common Stock”) or (B) the combined voting power of the
then-outstanding voting securities of the Company entitled to vote
generally in the election of directors (the “Outstanding Company Voting
Securities”); provided, however, that for purposes of this
subsection (i), the following acquisitions shall not constitute a
Change of Control: (A) any acquisition directly from the Company,
(B) any acquisition by the Company, (C) any acquisition by any
employee benefit plan (or related trust) sponsored or maintained
by the
Company or any corporation controlled by the Company, or (D) any
acquisition by any corporation pursuant to a transaction that complies
with clauses (A), (B) and (C) of subsection (iii) of
this paragraph 7; or
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(ii)
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Individuals
who, as of the date hereof, constitute the Board of Directors of
the
Company (the “Incumbent Board”) cease for any reason to constitute at
least a majority of the Board; provided, however, that any individual
becoming a director subsequent to the date hereof whose election,
or
nomination for election by the Company’s stockholders, was approved by a
vote of at least a majority of the directors then comprising the
Incumbent
Board shall be considered as though such individual were a member
of the
Incumbent Board, but excluding, for this purpose, any such individual
whose initial assumption of office occurs as a result of an actual
or
threatened election contest with respect to the election or removal
of
directors or other actual or threatened solicitation of proxies or
consents by or on behalf of a Person other than the Board; or
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(iii)
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Consummation
of a reorganization, merger or consolidation of the Company or sale
or
other disposition of all or substantially all of the assets of the
Company
or the acquisition by the Company of assets or stock of another entity
(a
“Business Combination”), in each case, unless, following such Business
Combination, (A) 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 Business Combination 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 corporation resulting from such Business Combination
(including, without limitation, a corporation which as a result of
such
transaction owns the Company or all or substantially all of the Company’s
assets either directly or through one or more subsidiaries) in
substantially the same proportions as their ownership, immediately
prior
to such Business Combination of the Outstanding Company Common Stock
and
Outstanding Company Voting Securities, as the case may be, (B) no
Person (excluding any corporation resulting from such Business Combination
or any employee benefit plan (or related trust) of the Company or
such
corporation resulting from such Business Combination) beneficially
owns,
directly or indirectly, 15% or more of, respectively, the then-outstanding
shares of common stock of the corporation resulting from such Business
Combination, or the combined voting power of the then-outstanding
voting
securities of such corporation except to the extent that such ownership
existed prior to the Business Combination and (C) at least a majority
of the members of the board of directors of the corporation resulting
from
such Business Combination were members of the Incumbent Board at
the time
of the execution of the initial agreement, or of the action of the
Board,
providing for such Business Combination; or
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(iv)
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Approval
by the stockholders of the Company of a complete liquidation or
dissolution of the Company.
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8.
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Tax
Withholding
. The Company shall have the right to deduct
from any settlement made under the Plan, including the exercise of
an
option or the sale of shares of Common Stock, any federal, state
or local
taxes of any kind required by law to be withheld with respect to
such
payments or to require the option holder to pay the amount of any
such
taxes or to take such other action as may be necessary in the opinion
of
the Company to satisfy all obligations for the payment of such
taxes. If Common Stock is withheld or surrendered to satisfy
tax withholding, such stock shall be valued at its fair market value
as of
the date such Common Stock is withheld or surrendered. The
Company may also deduct from any such settlement any other amounts
due the
Company by the option holder.
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9.
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Governing
Law
. The Plan, options granted under the Plan and
agreements entered into under the Plan shall be construed, administered
and governed in all respects under and by the applicable laws of
the State
of Delaware, excluding any conflicts or choice of law rule or
principle that might otherwise refer construction or interpretation
of the
Plan or an agreement to the substantive law of another jurisdiction.
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10.
|
Plan
Amendment and
Termination
. The Board may amend, suspend or terminate
the Plan at any time, with or without advance notice to option holders;
provided however that no amendment that would (a) increase the maximum
number of shares that may be subjected to options or (b) increase
the
number of shares that may be covered by an option grant to any person
referred to in Section 162(m) or (c) modify requirements as to eligibility
for participation in the Plan or (d) constitute a material revision
to the
terms of the Plan within the meaning of the rules and regulations
of the
New York Stock Exchange or the Securities and Exchange Commission
or (e)
than is required by any applicable law, rule or regulation to be
approved
by the stockholders of the Company or (f) modify paragraph 3.d. or
5.c. of
the Plan shall be effective unless the stockholders of the Company
shall
have approved such amendment in accordance with applicable provisions
of
the Code, other law, rule or regulation. No amendment,
modification or termination of the Plan may adversely affect in a
material
manner any right of any option holder with respect to any option
theretofore granted without such option holder’s written consent.
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11.
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Effective
Date and Duration of
the Plan
. The Plan first became effective on
March 29, 2000. Any amendment to the Plan shall be
effective on the date established by the Committee, subject to stockholder
approval, if required. The Plan shall remain in effect until
all shares reserved for issuance pursuant to the Plan have been purchased
pursuant to options granted under the Plan, provided that options
under
the Plan must be granted not later than ten years after the effective
date
of the Plan or any future amendment approved by stockholders.
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1.
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Purpose.
The
purpose of The Toro
Company Performance Share Plan (the “Plan”) is to enhance long-term
stockholder value of The Toro Company (the “Company”), by reinforcing the
incentives of key executives to achieve long-term performance goals
of the
Company; to link a significant portion of a participant’s compensation to
the achievement by the Company of performance goals and to the value
of
the Company’s Common Stock, par value $1.00 per share, and related
Preferred Share Purchase Rights (“Common Stock”); and to attract and
motivate executives and to encourage their continued employment on
a
competitive basis
.
The
purposes of the Plan are to be
achieved by the grant of Performance Share Awards.
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2.
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Eligibility
and
Participation.
Key employees
of the Company, who,
through their position or performance, can have a significant, positive
impact on the Company’s financial results, shall be eligible to
participate in the Plan
.
The
Compensation Committee (the
“Committee”) shall select recipients of Performance Shares (“Plan
Participants”)
.
Newly-hired
and newly-promoted
executives may be selected as Plan Participants subject to the provisions
of paragraph 3.c.(ii), if applicable.
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3.
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Performance
Share Awards.
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a.
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Performance
Share Defined.
A Performance
Share is a right to
receive shares of Common Stock or Common Stock units, contingent
on the
achievement of performance goals of the Company during a three-year
period, except that a shorter period may be established for new
participants (the “Award Term”)
.
A
Performance Share Award shall be
subject to such conditions, restrictions and contingencies as the
Committee shall determine.
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b.
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Vesting.
Performance
Shares shall be
subject to forfeiture until they vest and shall vest only after the
conclusion of the Award Term, and only if the Committee makes the
certification required by paragraph 3.c.(iv), except as may otherwise
be
provided in paragraphs 3.e.(i), 3.e.(ii) and 3.e.(iv).
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c.
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Section 162(m) Conditions.
Performance
Share Awards may
be designated as “performance-based compensation” as that term is used in
Section 162(m) of the Internal Revenue Code of 1986, as amended
(the “Code”).
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(i)
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Performance
Goals.
The performance
goal
criteria (“Performance Goals”) that may be used by the Committee for
Performance Shares shall include one or more of the following, as
selected
by the Committee: cumulative earnings, cumulative earnings per share,
profit after tax, net income, return on invested capital, invested
capital
dollars, earnings per share, average net assets, after-tax interest
expense, return on average net assets, average net asset turns, cumulative
average net asset turns, return on equity, return on beginning equity,
revenue growth, earnings growth, economic value added, fill rate,
customer
care and customer satisfaction scores.
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(ii)
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Establishment
of Performance Goals.
Performance
Share
Awards designated “performance-based compensation” shall be granted, and
Performance Goals shall be established, by the Committee in writing
not
later than 90 days after the commencement of the period of service
to
which the Performance Goal relates, or such other period required
under
Section 162(m) of the Code, provided that the outcome is
substantially uncertain at the time the Committee establishes the
Performance Goal; and provided further that in no event will a Performance
Goal be considered to be preestablished if it is established
after 25% of the period of service (as scheduled in good faith at the
time the Performance Goal is established) has elapsed.
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(iii)
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Section 162(m) Maximum
Award Payment.
With respect
to a
Performance Share Award that is designated “performance-based
compensation” for purposes of Section 162(m), the maximum number of
shares that may be issued under the award shall be set at the time
the
Committee grants the award and establishes Performance Goals under
the
award
.
Notwithstanding
any other
provision of this Plan, the maximum number of Performance Shares
that may
be granted to a Plan Participant with respect to any Award Term is
100,000, subject to adjustment as provided in paragraph 4.
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(iv)
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Certification
of Payment.
Before any
payment or
delivery of shares of Common Stock is made under the Plan to any
Participant who is a person referred to in Section 162(m), the
Committee must certify in writing, as reflected in the minutes, that
the
Performance Goals established with respect to a Performance Share
Award
have been achieved
.
To
the extent necessary with
respect to any fiscal year or Award Term, in order to avoid any undue
windfall or hardship due to external causes, the Committee may make
the
determination as to whether a Performance Goal has been achieved
without
regard to the effect on the Performance Goal measure, as it may otherwise
be presented in the financial statements, of any change in accounting
standards, any acquisition by the Company not planned for at the
time the
Performance Goals are established or any Board-approved extraordinary
or
non-recurring event or item
.
With
respect to any Plan
Participant who is a person referred to in Section 162(m), the
Committee shall have the discretion to decrease an award payment
under a
Performance Share Award, but may not under any circumstances increase
such
amount.
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d.
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Delivery.
Certificates
for shares of
Common Stock in the number of Performance Shares that vest under
an award
will be delivered as soon as possible after the applicable vesting
requirements (including accelerated vesting under paragraph 3.e.(iv))
have
been fulfilled, except that if a Plan Participant has properly elected
to
defer income that may be attributable to an award under a Company
deferred
compensation plan, Common Stock units will be credited to the Plan
Participant’s account thereunder
.
In
the event vesting requirements
are not fulfilled or in the event Performance Shares are canceled
under
the provisions of paragraph 3.e.(v), Performance Shares shall be
canceled
and have no value.
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e.
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Vesting
and
Cancellation Under Special Circumstances.
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(i)
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Retirement,
Death or Disability
.
If
a Plan Participant
retires, dies or becomes permanently disabled and unable to work
prior to
the end of an Award Term, but after the conclusion of not less than
33% of
the Award Term, the Committee may, in its sole discretion, cause
shares of
Common Stock to be delivered with respect to the participant’s Performance
Share Award, but only if otherwise earned and only with respect to
the
portion of the applicable Award Term completed at the date of such
event,
with proration based on full fiscal years only and no shares to be
delivered for partial fiscal years
.
“Retirement”
means
termination of
employment with the Company at age 55 or older and with a number
of years
of service to the Company that, when added together with the participant’s
age, equals at least 65
.
The
Committee shall consider the
requirements of paragraph (A) under this paragraph 3.e.(i) and shall
have the discretion to consider any other fact or circumstance in
making
its decision as to whether to deliver shares, including whether the
participant again becomes employed
.
Shares
shall be delivered only
after the conclusion of the applicable Award Term in accordance with
paragraphs 3.b., 3.c. and 3.d. of the Plan.
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(A)
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Non-compete
. Notwithstanding
the
foregoing, if a Plan Participant retires prior to age 65, and within
one year after the later of the date of that retirement or the date
shares
are delivered pursuant to paragraph 3.e.(i), the Plan Participant
(a) is employed or retained by or renders service to any organization
that, directly or indirectly, competes with or becomes competitive
with
the Company, or if the rendering of such services is prejudicial
or in
conflict with the interests of the Company; or (b) violates any
confidentiality agreement or agreement governing the ownership or
assignment of intellectual property rights with the Company, or
(c) engages in any other conduct or act determined to be injurious,
detrimental or prejudicial to any interest of the Company, the Company
may
rescind or restrict the special vesting under this paragraph
3.e.(i) or withhold or have the right to the return of the economic
value of the Performance Shares that vested under this paragraph;
provided, however, that this provision shall not be applicable in
the
event of a Change of Control.
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(ii)
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Reassignment
.
If
prior to the end of an
Award Term, a Plan Participant is reassigned to a position with the
Company (including a subsidiary or parent of the Company), and that
position is not eligible to participate in the Plan, but the Plan
Participant does not terminate employment with the Company, the Committee
may, in its sole discretion, cause shares of Common Stock to be delivered
with respect to the participant’s Performance Share Award, but only if
otherwise earned and only with respect to the portion of the applicable
Award Term completed at the date of such reassignment, based on full
fiscal years only, with no shares to be delivered for partial fiscal
years.
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(iii)
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Other
Termination
.
In
the event that a Plan
Participant terminates employment with the Company other than by
reason of
retirement, death or disability as
provided
in
paragraph 3.e.(i), Performance Shares in such participant’s name that
have not yet vested shall not vest and shall be canceled.
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(iv)
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Change
of Control
.
Notwithstanding
the
provisions of paragraphs 3.b. and 3.c., all Performance Shares that
have
not yet vested shall vest and become immediately payable if there
is a
change of control of the Company.
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Change
of Control means:
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(A)
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The
acquisition by any individual,
entity or group (within the meaning of Section 13(d)(3) or
14(d)(2) of the Exchange Act) (a “Person”) of beneficial ownership
(within the meaning of Rule 13d-3 under the Exchange Act) of 15% or
more of either (a) the then-outstanding shares of Common Stock of the
Company (the “Outstanding Company Common Stock”) or (b) the combined
voting power of the then-outstanding voting securities of the Company
entitled to vote generally in the election of directors (the “Outstanding
Company Voting Securities”); provided, however, that for purposes of this
paragraph (A), the following acquisitions shall not constitute a
Change of
Control: (a) any acquisition directly from the Company, (b) any
acquisition by the Company, (c) any acquisition by any employee
benefit plan (or related trust) sponsored or maintained by the Company
or
any corporation controlled by the Company, or (d) any acquisition by
any corporation pursuant to a transaction that complies with clauses
(a),
(b) and (c) of paragraph (C) of this
paragraph 3.e.(iv); or
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(B)
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Individuals
who, as of the date
hereof, constitute the Board of Directors of the Company (the “Incumbent
Board”) cease for any reason to constitute at least a majority of the
Board; provided, however, that any individual becoming a director
subsequent to the date hereof whose election, or nomination for election
by the Company’s stockholders, was approved by a vote of at least a
majority of the directors then comprising the Incumbent Board shall
be
considered as though such individual were a member of the Incumbent
Board,
but excluding, for this purpose, any such individual whose initial
assumption of office occurs as a result of an actual or threatened
election contest with respect to the election or removal of directors
or
other actual or threatened solicitation of proxies or consents by
or on
behalf of a Person other than the Board; or
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(C)
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Consummation
of a reorganization,
merger or consolidation of the Company or sale or other disposition
of all
or substantially all of the assets of the Company or the acquisition
by
the Company of assets or stock of another entity (a “Business
Combination”), in each case, unless, following such Business Combination,
(a) 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
Business Combination 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 corporation resulting
from such Business Combination (including, without limitation, a
corporation which as a result of such transaction owns the Company
or all
or substantially all of the Company’s assets either directly or through
one or more subsidiaries) in substantially the same proportions as
their
ownership, immediately prior to such Business Combination of the
Outstanding Company Common Stock and Outstanding Company Voting
Securities, as the case may be, (b) no Person (excluding any
corporation resulting from such Business Combination or any employee
benefit plan (or related trust) of the Company or such corporation
resulting from such Business Combination) beneficially owns, directly
or
indirectly, 15% or more of, respectively, the then-outstanding shares
of
common stock of the corporation resulting from such Business Combination,
or the combined voting power of the then-outstanding voting securities
of
such corporation except to the extent that such ownership existed
prior to
the Business Combination and (c) at least a majority of the members
of the board of directors of the corporation resulting from such
Business
Combination were members of the Incumbent Board at the time of the
execution of the initial agreement, or of the action of the Board,
providing for such Business Combination; or
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(D)
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Approval
by the stockholders of
the Company of a complete liquidation or dissolution of the
Company.
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(v)
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Committee
Discretion to Scale Back Awards
.
At
any time during an Award
Term of more than one fiscal year, the Committee may, in its discretion,
cancel a portion of the Performance Shares in any Performance Share
Award
prior to the conclusion of the Award Term (a “Scale Back”), provided
that:
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(A)
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the
Performance Share Award has
not yet vested;
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(B)
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based
on financial information
contained in the Company’s financial statements or similar internal
reports, the Committee determines that the Performance Goals for
the Award
Term cannot be achieved at the maximum levels established at the
time
of grant;
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(C)
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P
erformance
Share Awards shall be
Scaled Back in proportion to the estimated short fall in achievement
of
Performance Goals from maximum levels;
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(D)
|
all
Performance Share Awards for
the same Award Term are Scaled Back by the same percentage;
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(E)
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once
an award is Scaled Back, it
may not again be increased to add or recover Performance Shares that
were
canceled; and
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(F)
|
Performance
Shares canceled in a
Scale Back shall again be available to the Committee for grant of
new
Performance Share Awards for any future Award Term
.
This
provision shall not be used
in any manner that could have the effect of repricing a previous
Performance Share Award grant.
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f.
|
Dividends
and
Voting.
A
Plan Participant shall have no rights as a stockholder with respect
to
Performance Shares unless and until Common Stock or Common Stock
units are
issued in settlement of the award.
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g.
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Non-transferability.
Neither
Performance Shares nor Performance Share Awards nor any interest
in any
one of such awards or shares may be anticipated, alienated, encumbered,
sold, pledged, assigned, transferred or subjected to any charge or
legal
process, other than by will or the laws of descent and distribution,
so
long as the Performance Shares have not vested and shares of Common
Stock
have not been distributed in accordance with the Plan, and any sale,
pledge, assignment or other attempted transfer shall be null and
void.
A
Plan Participant may receive
payment under a Performance Share Award only while an employee of
the
Company and only if continuously employed from the date the award
was
granted, except as may otherwise be provided in paragraphs
3.e.(i) and 3.e.(ii).
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4.
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Maximum
Shares
Subject to Performance Share Awards.
Subject to
the
provisions of paragraph 4.a., the total number of shares of Common
Stock that may be issued pursuant to Performance Share Awards under
the
Plan is
2,75
0,000
.
Shares
of Common Stock that may be
issued hereunder may be authorized but unissued shares, reacquired
or
treasury shares or outstanding shares acquired in the market or from
private sources or a combination thereof.
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a.
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Adjustments
.
In
the event of a corporate
transaction involving the Company, the Common Stock or the Company’s
corporate or capital structure, including but not limited to any
stock
dividend, stock split, extraordinary cash dividend, recapitalization,
reorganization, merger, consolidation, reclassification, split-up,
spin-off, combination or exchange of shares, or a sale of the Company
or
of all or part of its assets or any distribution to stockholders
other
than a normal cash dividend, the Committee shall make such proportional
adjustments as are necessary to preserve the benefits or potential
benefits of the Performance Share Awards
.
Action
by the Committee may
include all or any of adjustment in (i) the maximum number and kind
of securities subject to the Plan as set forth in this paragraph;
(ii) the maximum number and kind of securities that may be made
subject to Performance Share Awards for any individual as set forth
in
paragraph 3.c. (iii); (iii) the number and kind of securities subject
to any outstanding Award; and (iv) any other adjustments that the
Committee determines to be equitable.
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5.
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Administration.
The
Plan shall
be administered by the Committee
.
The
Committee shall have the
authority to administer the Plan; establish policies under the Plan;
amend
the Plan, subject to the provisions of paragraph 8; interpret provisions
of the Plan; select Plan Participants; establish Performance Goals;
make
Performance Share Awards; or terminate the Plan, in its sole
discretion
.
The
Committee may delegate
administrative duties and all decisions not required to be exercised
by it
under Section 162(m) or Section 16 of the Exchange Act, as
it solely determines, including to Company officers
.
All
decisions of the Committee
shall be final and binding upon all parties including the Company,
its
stockholders and Plan Participants.
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6.
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Tax
Withholding
.
The
Company shall have the
right to deduct from any settlement made under the Plan or to require
the
Participant to pay the amount of any federal, state or local
taxes
of any kind required by law
to be withheld with respect to the grant, vesting, payment or settlement
of an award under this Plan, or to take such other action as may
be
necessary in the opinion of the Company to satisfy all obligations
for the
payment of such taxes
.
If
Common Stock is withheld or
surrendered to satisfy tax withholding, such stock shall be valued
at its
fair market value as of the date it is withheld or surrendered
.
The
Company may also deduct from
any award settlement any other amounts due the Company by the Plan
Participant.
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7.
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Governing
Law
.
The
Plan, awards granted
under the Plan, agreements entered into under the Plan and Performance
Shares shall be construed, administered and governed in all respects
under
and by the applicable laws of the State of Delaware, excluding any
conflicts or choice of law rule or principle that might otherwise
refer construction or interpretation of the Plan or an award or agreement
or Performance Shares to the substantive law of another
jurisdiction.
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8.
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Plan
Amendment
and Termination.
The Committee
may, in its sole
discretion, amend, suspend or terminate the Plan at any time, with
or
without advance notice to Plan Participants, provided that no amendment
to
the Plan shall be effective that would increase the maximum number
of
Performance Shares that may be granted under paragraph 3.c.(iii) to a
participant who is a person referred to in Section 162(m); that would
change the Performance Goal criteria applicable to a participant
who is a
person referred to in Section 162(m) for payment of awards as
set forth in paragraph 3.c.(i); or that would modify the requirements
as
to eligibility for participation under paragraph 2, unless the
stockholders of the Company shall have approved such change in accordance
with the requirements of Section 162(m)
.
No
amendment, modification or
termination of the Plan may adversely affect in a material manner
any
right of any Plan Participant with respect to any Performance Share
Award
theretofore granted without such participant’s written consent.
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