1998 Long-Term Incentive Plan - Ford Motor Co.
FORD MOTOR COMPANY
1998 LONG-TERM INCENTIVE PLAN
(Effective as of January 1, 1998,
subject to shareholder approval)
PURPOSE
1.(a) Purpose. This Plan, known as the "1998 Long-Term Incentive Plan" (the
"Plan"), is intended to provide an incentive to certain salaried employees of
Ford Motor Company (the "Company"), and of its subsidiaries, in order to
encourage them to remain in the employ of the Company and to increase their
interest in the Company's success. It is intended that this purpose be effected
through awards or grants of stock options and various other rights with respect
to shares of the Company's Common Stock (collectively, the "Plan Awards"), as
provided herein, to eligible employees ("Participants").
(b) Company; Subsidiary; Employee. The term "Company" when used with
reference to employment shall include subsidiaries of the Company. The term
"subsidiary" shall mean (i) any corporation a majority of the voting stock of
which is owned directly or indirectly by the Company or (ii) any limited
liability company a majority of the membership interest of which is owned,
directly or indirectly, by the Company. The term "employee" shall be deemed to
include any person who is an employee of any joint venture corporation or
partnership, or comparable entity, in which the Company has a substantial equity
interest (a "Joint Venture"), provided such person was an employee of the
Company immediately prior to becoming employed by such Joint Venture.
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ADMINISTRATION
2.(a) Compensation and Option Committee. The Compensation and Option
Committee of the Company's Board of Directors (the "Committee") shall administer
the Plan and perform such other functions as are assigned to it under the Plan.
The Committee is authorized, subject to the provisions of the Plan, from time to
time to establish such rules and regulations as it may deem appropriate for the
proper administration of the Plan, and to make such determinations under, and
such interpretations of, and to take such steps in connection with, the Plan and
the Plan Awards as it may deem necessary or advisable, in each case in its sole
discretion.
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(b) Delegation of Authority. The Committee may delegate any or all of its
powers and duties under the Plan, including, but not limited to, its authority
to grant waivers pursuant to Article 8, to one or more other committees as it
shall appoint, pursuant to such conditions or limitations as the Committee may
establish; provided, however, that the Committee shall not delegate its
authority to (1) make Plan Awards under the Plan, except as otherwise provided
in Articles 4 and 5, (2) act on matters affecting any Participant who is subject
to the reporting requirements of Section 16(a) of the Securities Exchange Act of
1934, as amended (the "Exchange Act"), or the liability provisions of Section
16(b) of the Exchange Act (any such Participant being called a "Section 16
Person") or (3) amend or modify the Plan pursuant to the provisions of paragraph
(b) of Article 14.
(c) Eligibility of Committee Members. No person while a member of the
Committee or any committee of the Board of Directors administering the Plan
shall be eligible to hold or receive a Plan Award.
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STOCK AVAILABLE FOR PLAN AWARDS
3.(a) Stock Subject to Plan. The stock to be subject to or related to Plan
Awards shall be shares of the Company's Common Stock of the par value of $1.00
per share ("Stock"), and may be either authorized and unissued or held in the
treasury of the Company. The maximum number of shares of Stock with respect to
which Plan Awards may be granted under the Plan, subject to adjustment in
accordance with the provisions of Article 11, in each calendar year during any
part of which the Plan is in effect shall be 2% of the total number of issued
shares of Stock as of December 31 of the calendar year immediately preceding
such year (the number of shares determined by application of such percentage in
any calendar year being called the "2% Limit" for such year); provided, however,
that such percentage may be increased to up to 3% in any one or more calendar
years, in which event the excess over 2% in any such calendar year shall be
applied to the reduction of the aggregate number of shares that otherwise would
have been available for Plan Awards pursuant to this paragraph (a) and paragraph
(c) of this Article 3 in subsequent calendar years during the term of the Plan,
in inverse order commencing with the year 2008. Notwithstanding the foregoing,
(i) the aggregate number of shares that may be issued upon exercise of
"incentive stock options" (as defined in paragraph (a)(l) of Article 5) shall
not exceed 2% of the number of shares authorized under the Company's Certificate
of Incorporation at the date of adoption of the Plan (subject to adjustment in
accordance with the provisions of Article 11), (ii) the maximum number of shares
subject to Options (as defined below), with or without any related Stock
Appreciation Rights (as defined below), that may be granted pursuant to Article
5 to any Covered Executive during any calendar year during any part of which the
Plan is in effect shall be 2.5% of the maximum number of shares of Stock with
respect to which Plan Awards may be granted during such year under the Plan
determined in accordance with this paragraph (a), subject to adjustment in
accordance with the provisions of Article 11 and (iii) the maximum number of
shares of Stock that may be granted as Final Awards (as defined below) pursuant
to Article 4 to any Covered Executive during any calendar year during any part
of which the Plan is in effect shall be 500,000, subject to adjustment in
accordance with the provisions of Article 11.
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(b) Computation of Stock Available for Plan Awards. For the purpose of
computing the total number of shares of Stock remaining available for Plan
Awards at any time in each calendar year during which the Plan is in effect,
there shall be debited against the total number of shares determined to be
available pursuant to paragraphs (a) and (c) of this Article 3 (i) the maximum
number of shares of Stock subject to issuance upon exercise of Options (as
defined below) granted in such year, (ii) the number of shares of Stock
representing 150% of the Target Awards under Performance Stock Rights (as
defined below) granted in such calendar year, and (iii) the number of shares of
Stock related to Other Stock-Based Awards (as defined below) granted in such
year, as determined by the Committee in each case as at the dates on which such
Plan Awards were granted.
(c) Unused, Forfeited and Reacquired Shares. Any unused portion of the 2%
Limit for any calendar year shall be carried forward and shall be made available
for Plan Awards in succeeding calendar years. The shares involved in the
unexercised or undistributed portion of any terminated, expired or forfeited
Plan Award (including, without limitation, the shares representing 150% of any
Target Award that are not included in the related Final Award also shall be made
available for further Plan Awards. Any shares of Stock made available for Plan
Awards pursuant to this paragraph (c) shall be in addition to the shares
available pursuant to paragraph (a) of this Article 3.
PERFORMANCE STOCK RIGHTS AND FINAL AWARDS
4.(a) Grant of Performance Stock Rights. The term "Performance Stock Right"
("Right"), shall mean the right to receive, without payment to the Company, up
to the number of shares of Stock described therein, subject to the terms and
provisions of the Right and the Plan. The Committee, at any time and from time
to time while the Plan is in effect, may grant, or authorize the granting of,
Rights to such officers and other key salaried employees of the Company, whether
or not members of the Board of Directors, as it may select and for such numbers
of shares based on such dollar amounts as it shall designate, subject to the
provisions of this Article 4 and Article 3. Notwithstanding anything contained
in the Plan to the contrary, the Committee may authorize a committee of two or
more Company officers appointed by it to determine the amount of individual
grants of Rights and related Final Awards to key employees of the Company
selected by such committee who are not officers or directors of the Company,
subject to the provisions of Articles 3 and 4 and subject to a maximum number of
shares of Stock and any other limitations specified by the Committee.
(b) Terms and Provisions of Performance Stock Rights. Prior to the grant of
any Right, the Committee shall determine the terms and provisions of each Right,
including, without limitation, (i) the number of shares of Stock to be earned
under such Right if 100% of each of the Performance Goals is achieved (the
"Target Award"), as adjusted pursuant to Article 11, (ii) one or more
performance goals ("Performance Goals") based on one or more Performance
Criteria (as defined below) to be used to measure performance under such Right,
(iii) the formula (the "Performance Formula") to be applied against the
Performance Goals in determining the percentage (which shall not exceed 150%) of
the Target Award (as adjusted pursuant to Article 11) used to determine the
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number of shares of Stock earned under such Right, (iv) the period of time for
which such performance is to be measured (the "Performance Period"), which shall
commence not earlier than 90 days prior to the date of grant of such Right, and
(v) the period of time, if any, during which the disposition of shares of Stock
covered by any Final Award relating to such Right shall be restricted as
provided in paragraph (a) of Article 9 (the "Restriction Period"); provided,
however, that the Committee may establish the Restriction Period applicable to
any Right at the time of or at any time prior to the granting of the related
Final Award rather that at the time of granting such Right. Within 90 days of
commencement of a Performance Period, the Committee may establish a minimum
threshold objective for any Performance Goal for such Performance Period, which
if not met, would result in no Final Award being made to any Participant with
such Goal for such Period. During and after the Performance Period, but prior to
the grant of a Final Award relating to any Right granted to a Participant who is
not a "Covered Executive" (as defined below), the Committee may adjust the
Performance Goals, Performance Formula and Target Award and otherwise modify the
terms and provisions of such Right, subject to the terms and conditions of the
Plan. Each Right shall be evidenced by a letter, an agreement or such other
document as the Committee may determine. The term "Performance Criteria" shall
mean, with respect to any Right granted to a Participant who is a Covered
Executive, one or more of the following objective business criteria established
by the Committee with respect to the Company and/or any subsidiary, division,
business unit or component thereof upon which the Performance Goals for a
Performance Period are based: asset charge, asset turnover, automotive return on
sales, capacity utilization, capital employed in the business, capital spending,
cash flow, cost structure improvements, complexity reductions, customer loyalty,
diversity, earnings growth, earnings per share, economic value added,
environmental health and safety, facilities and tooling spending, hours per
vehicle, increase in customer base, inventory turnover, market price
appreciation, market share, net cash balance, net income, net income margin, net
operating cash flow, operating profit margin, order to delivery time, plant
capacity, process time, profits before tax, quality/customer satisfaction,
return on assets, return on capital, return on equity, return on net operating
assets, return on sales, revenue growth, sales margin, sales volume, total
shareholder return, vehicles per employee, warranty performance to budget,
variable margin and working capital. The term "Performance Criteria" shall mean,
with respect to any Right granted to a Participant who is not a Covered
Executive, one or more of the business criteria applicable to Covered Executives
for the Performance Period and any other criteria based on individual, business
unit, group or Company performance selected by the Committee. The Performance
Criteria may be expressed in absolute terms or relate to the performance of
other companies or to an index. The term "Covered Executive" shall mean the
Chief Executive Officer and the other four highest compensated officers of the
Company at year-end whose compensation is required to be reported in the Summary
Compensation Table of the Proxy Statement.
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(c) Dividend Equivalents on Rights. (1) If the Committee shall determine,
each Participant to whom a Right is granted shall be entitled to receive payment
of the same amount of cash that such Participant would have received as cash
dividends if, on each record date during the entire Performance Period relating
to such Right, such Participant had been the holder of record of a number of
shares of Stock equal to 100% of the related Target Award (as adjusted pursuant
to Article 11). In the case of any Right granted to a Participant after the
commencement of the related Performance Period, any such payment relating to any
dividend payable prior to the date of grant of such Right shall be made at the
same time as the payment relating to the first dividend paid after such date of
grant. Such cash payments are hereinafter called "dividend equivalents".
(2) Notwithstanding the provisions of paragraph (c)(1) of this Article 4
relating to dividend equivalents, the Committee may determine that, in lieu of
receiving all or any portion of any such dividend equivalent in cash, a
Participant shall receive an award of full shares of Stock having a value (as
determined by the Committee) approximately equal to the portion of such dividend
equivalent that was not paid in cash. Certificates for shares of Stock so
awarded shall be issued as of the payment date for the related cash dividend,
and the shares of Stock covered thereby shall be treated in the same manner as
shares of Stock representing Final Awards, subject to the terms and conditions
of the Plan, including, without limitation, the provisions of paragraphs (b),
(d) and (e) of Article 4 and Articles 8, 9, and 11.
(d) Final Awards. (1) As soon as practicable following the completion of
the Performance Period relating to any Right, but not later than 12 months
following such completion, the Committee shall determine the percentage (which
shall not exceed 150%) of the Target Award (as adjusted pursuant to Article 11)
which shall be used to determine the number of shares of Stock to be awarded
finally to the Participant who holds such Right. Such number of shares of Stock
is called the "Final Award". Each Final Award shall represent only full shares
of Stock, and any fractional share that would otherwise result from such Final
Award calculation shall be disregarded. In making such determination, the
Committee shall apply the applicable Performance Formula for the Participant for
the Performance Period against the accomplishment of the related Performance
Goals. The Committee may, in its sole discretion, reduce the amount of any Final
Award that otherwise would be awarded to any Participant for any Performance
Period. In addition, the Committee may, in its sole discretion, increase the
amount of any Final Award that otherwise would be awarded to any Participant who
is not a Covered Executive, subject to the maximum Final Award amount of 150% of
the related Target Award (as adjusted pursuant to Article 11), taking into
account (i) the extent to which the Performance Goals provided in such Right
was, in the Committee's sole opinion, achieved, (ii) the individual performance
of such Participant during the related Performance Period and (iii) such other
factors as the Committee may deem relevant, including, without limitation, any
change in circumstances or unforeseen events, relating to the Company, the
economy or otherwise, since the date of grant of such Right. The Committee shall
notify such Participant of such Participant's Final Award as soon as practicable
following such determination.
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(2) Following the determination of each Final Award, the Company shall
issue or cause to be issued certificates for the number of shares of Stock
representing such Final Award, registered in the name of the Participant who
received such Final Award. Such Participant shall thereupon become the holder of
record of the number of shares of Stock evidenced by such certificates, entitled
to dividends, voting rights and other rights of a holder thereof, subject to the
terms and provisions of the Plan, including, without limitation, the provisions
of paragraph (e) of this Article 4 and Articles 8, 9 and 11. If the Committee
has determined that dividend equivalents shall be payable to a Participant with
respect to any Right pursuant to paragraph (c) of this Article 4, concurrently
with the issuance of such certificates, the Company shall deliver to such
Participant an amount equal to the amount of the cash dividends that such
Participant would have received with respect to the shares of Stock representing
such Final Award, prior to the date on which such Participant shall have become
the holder of record of such shares, if such Participant had become such a
holder of record immediately following completion of the Performance Period
relating to such Final Award. The Committee may require that such certificates
bear such restrictive legend as the Committee may specify and be held by the
Company in escrow or otherwise pursuant to any form of agreement or instrument
that the Committee may specify.
(3) Notwithstanding the provisions of paragraphs (d)(l) and (2) of this
Article 4 or any other provision of the Plan, in the case of any Right held by a
Participant who is an employee of a foreign subsidiary or foreign branch of the
Company or of a foreign Joint Venture, or held by a Participant who is in any
other category specified by the Committee, the Committee may specify that such
Participant's Final Award shall not be represented by certificates for shares of
Stock but shall be represented by rights approximately equivalent (as determined
by the Committee) to the rights that such Participant would have received if
certificates for shares of Stock had been issued in the name of such Participant
in accordance with paragraphs (d)(l) and (2) of this Article 4 (such rights
being called "Stock Equivalents"). Subject to the provisions of Article 11 and
the other terms and provisions of the Plan, if the Committee shall so determine,
each Participant who holds Stock Equivalents shall be entitled to receive the
same amount of cash that such Participant would have received as dividends if
certificates for shares of Stock had been issued in the name of such Participant
pursuant to paragraphs (d)(l) and (2) of this Article 4 covering the number of
shares equal to the number of shares to which such Stock Equivalents relate.
Notwithstanding any other provision of the Plan to the contrary, the Stock
Equivalents representing any Final Award may, at the option of the Committee, be
converted into an equivalent number of shares of Stock or, upon the expiration
of the applicable Restriction Period, into cash, under such circumstances and in
such manner as the Committee may determine.
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(4) If the Restriction Period relating to any Final Award shall expire
while the Participant who was granted such Award is employed by the Company, the
certificates for the shares of Stock issued in such Participant's name with
respect to such Final Award, and certificates for a number of shares of Stock
equal to the number of shares represented by any Stock Equivalents then held by
such Participant with respect to such Final Award, shall be delivered to such
Participant as soon as practicable, free of all restrictions and restrictive
legends.
(e) Effect of Termination of Employment or Death. (1) If a Participant's
employment with the Company shall be terminated, prior to the expiration of the
Restriction Period relating to any Right granted to such Participant, by reason
of discharge, release in the best interest of the Company, voluntary quit or
retirement without the approval of the Company, such Right, and any shares of
Stock or Stock Equivalents issued in the name of such Participant as a Final
Award relating to such Right, shall be forfeited and cancelled forthwith unless
the Committee shall grant an appropriate waiver. Any such waiver shall be
granted in accordance with the procedure specified in paragraph (b) of Article 8
(in which event the reference in such paragraph (b) to "the nonfulfillment of
such condition" shall be deemed to refer to such Participant's termination for
any of the reasons specified above).
(2) If a Participant's employment with the Company shall be terminated for
any reason other than a reason specified in paragraph (e)(l) of this Article 4,
except death, prior to or concurrently with the expiration of the Restriction
Period relating to any Right granted to such Participant,
(i) certificates for any shares of Stock issued in such Participant's name
prior to such termination of employment as a Final Award relating to such
Right, and certificates for a number of shares of Stock equal to the number
of shares represented by any Stock Equivalents then held by such
Participant with respect to such Final Award, shall be delivered to such
Participant as soon as practicable, free of all restrictions and
restrictive legends; and
(ii) subject to the provisions of Article 8, certificates for any shares of
Stock issued in such Participant's name following such termination of
employment as a Final Award relating to such Right (whether relating to a
Performance Period ended prior to such termination or subsequent thereto)
shall be delivered to such Participant as soon as practicable, free of all
restrictions and restrictive legends.
(3) If a Participant's employment with the Company shall be terminated at
any time by reason of a sale or other disposition (including, without
limitation, a transfer to a Joint Venture) of the division, operation or
subsidiary in which such Participant was employed or to which such Participant
was assigned, unless the Committee shall specify otherwise, any Rights then held
by such Participant, and any shares of Stock or Stock Equivalents issued in the
name of such Participant as a Final Award relating to such Rights, shall be
dealt with as provided in paragraph (e)(2) of this Article 4.
(4) If a Participant shall die while in the employ of the Company, any
Rights then held by such Participant shall remain in effect. Such Rights, and
any shares of Stock then issued in the name of such Participant (but not yet
distributed to such Participant), and any such shares thereafter issuable with
respect to such Rights, as Final Awards under the Plan, shall be transferred or
issued and delivered to the beneficiary designated pursuant to Article 10 or, if
no such designation is in effect, to the executor or administrator of the estate
of such Participant, free of all restrictions and restrictive legends. With
regard to any Stock Equivalents then held by such Participant, certificates for
a number of shares of Stock equal to the number of shares represented thereby
shall be issued and delivered to such beneficiary, executor or administrator,
free of all restrictions and restrictive legends.
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(5) Subject to the provisions of Article 8, if a Participant shall die
following termination of employment, any rights then held by such Participant
shall remain in effect. Such Rights, and any shares of Stock then issued in
Rights then held by such Participant shall remain in effect. Such Rights, and
any shares of Stock then issued in the name of such Participant (but not yet
distributed to such Participant), and any such shares thereafter issuable with
respect to such Rights, as Final Awards under the Plan, shall be transferred or
issued and delivered to the beneficiary designated pursuant to Article 10 or, if
no such designation is in effect, to the executor or administrator of the estate
of such Participant, free of all restrictions and restrictive legends. With
regard to any Stock Equivalents then held by such Participant, certificates for
a number of shares of Stock equal to the number of shares represented thereby
shall be issued and delivered to such beneficiary, executor or administrator,
free of all restrictions and restrictive legends.
(6) Notwithstanding any other provision of the Plan to the contrary, if a
Participant's employment with the Company shall for any reason terminate prior
to the later of (a) the date of expiration of the period of six months following
the commencement of the Performance Period relating to any Right (or such other
period as the Committee may specify) or (b) the date six months following the
date of grant of such Right, such Right shall be forfeited and cancelled
forthwith unless the Committee shall determine otherwise.
(7) Notwithstanding any provision of the Plan to the contrary, (i) the
Committee may at any time establish a Restriction Period applicable to the Stock
to be represented by any Final Award, and such Restriction Period shall remain
in effect until such time (which may be later than the date of the Participant's
retirement or other termination of employment) as the Committee may determine;
and (ii) the Committee may determine that no shares of Stock or certificates
therefor shall be delivered to any Participant until the date of expiration of
the applicable Restriction Period (or such earlier date as the Committee may
determine).
OPTIONS AND STOCK APPRECIATION RIGHTS
5.(a) Grant of Options. (1) The Board of Directors, at any time and from
time to time while the Plan is in effect, may authorize the granting of Options
to such officers and other key salaried employees of the Company, whether or not
members of the Board of Directors, as it may select from among those nominated
by the Committee, and for such numbers of shares as it shall designate, subject
to the provisions of this Article 5 and Article 3; provided, however, that no
Option shall be granted to a Participant for a larger number of shares than the
Committee shall recommend for such Participant. Each Option granted pursuant to
the Plan shall be designated at the time of grant as either an "incentive stock
option" ("ISO"), as such term is defined in the Internal Revenue Code of 1986,
as amended (the "Code"), or its successors (or shall otherwise be designated as
an option entitled to favorable treatment under the Code) or as a "nonqualified
stock option" ("NQO") (ISOs and NQOs being individually called an "Option" and
collectively called "Options").
(2) Without in any way limiting the authority provided in paragraph (a)(l)
of this Article 5, the Board of Directors may authorize the Committee to
authorize the granting of Options, at any time and from time to time while the
Plan is in effect, to such officers and other key salaried employees of the
Company, whether or not members of the Board of Directors, as the Committee may
select, subject to the provisions of this Article 5 and Article 3 and subject to
such other limitations as the Board of Directors may specify. In addition, to
the extent such authority has been delegated to the Committee pursuant to this
Article 5, the Committee may authorize a committee of two or more Company
officers appointed by it to determine the amount and date of individual Option
grants for key employees selected by such committee who are not officers or
directors of the Company, subject to Articles 3 and 5 and subject to a maximum
number of shares of Stock and any other limitations specified by the
Committee.
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(3) The date on which an Option shall be granted shall be the date of
authorization of such grant or such later date as may be determined at the time
such grant is authorized. Any individual may hold more than one Option.
(b) Price. In the case of each Option granted under the Plan the
option price shall be the fair market value of Stock on the date of grant of
such Option; provided, however, that in the case of any Option granted to an
employee of a foreign subsidiary or a foreign branch of the Company or of a
foreign Joint Venture the Board of Directors may in its discretion fix an option
price in excess of the fair market value of Stock on such date. The term "fair
market value" when used with reference to the option price shall mean the
average of the highest price and the lowest price at which Stock shall have been
sold regular way on the New York Stock Exchange on the date of grant of such
Option. In the event that any Option shall be granted on a date on which there
were no such sales of Stock on such Exchange, the fair market value of Stock on
such date shall be deemed to be the average of such highest price and lowest
price on the next preceding day on which there were such sales.
(c) Grant of Stock Appreciation Rights. (1) The Board of Directors may
authorize the granting of Stock Appreciation Rights (as defined below) to such
Participants who are granted Options under the Plan as it may select from among
those nominated therefor by the Committee. The Committee may authorize the
granting of Stock Appreciation Rights to such Participants as are granted
Options under the Plan pursuant to paragraph (a) of this Article 5. Each Stock
Appreciation Right shall relate to a specific Option granted under the Plan and
may be granted concurrently with the Option to which it relates or at any time
prior to the exercise, termination or expiration of such Option.
(2) The term "Stock Appreciation Right" shall mean the right to receive,
without payment to the Company and as the Participant may elect, either (a) that
number of shares of Stock determined by dividing (i) the total number of shares
of Stock subject to the related Option (or the portion or portions thereof which
the Participant from time to time elects to use for purposes of this clause (a),
multiplied by the amount by which the fair market value of a share of Stock on
the day the right is exercised exceeds the option price (such amount being
hereinafter referred to as the "Spread"), by (ii) the fair market value of a
share of Stock on the exercise date; or (b) cash in an amount determined by
multiplying (i) the total number of shares of Stock subject to the related
Option (or the portion or portions thereof which the Participant from time to
time elects to use for purposes of this clause (b)), by (ii) the amount of the
Spread; or (c) a combination of shares of Stock and cash, in amounts determined
as set forth in clauses (a) and (b) above; provided, however, that the total
number of shares which may be received upon exercise of a Stock Appreciation
Right for Stock shall not exceed the total number of shares subject to the
related Option or portion thereof, and the total amount of cash which may be
received upon exercise of a Stock Appreciation Right for cash shall not exceed
the fair market value on the date of exercise of the total number of shares
subject to the related Option or portion thereof.
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(3) The Committee may impose such conditions as it may deem appropriate
upon the exercise of an Option or a Stock Appreciation Right, including, without
limitation, a condition that the Stock Appreciation Right may be exercised only
in accordance with rules and regulations adopted by the Committee from time to
time.
(4) The right of a Participant to exercise a Stock Appreciation Right shall
be cancelled if and to the extent the related Option is exercised. The right of
a Participant to exercise an Option shall be cancelled if and to the extent that
shares covered by such Option are used to calculate shares or cash received upon
exercise of a related Stock Appreciation Right.
(5) The fair market value of Stock on the date of exercise of a Stock
Appreciation Right shall be determined as of such exercise date in the same
manner as the fair market value of Stock on the date of grant of an Option is
determined pursuant to paragraph (b) of this Article 5.
(6) If any fractional share of Stock would otherwise be payable to a
Participant upon the exercise of a Stock Appreciation Right, the Participant
shall be paid a cash amount equal to the same fraction of the fair market value
(determined as described above) of the Stock on the date of exercise.
(d) Stock Option Agreement. Each Option and related Stock Appreciation
Right shall be evidenced by a Stock Option Agreement in such form and containing
such provisions not inconsistent with the provisions of the Plan as the
Committee from time to time shall approve. Each Stock Option Agreement shall
provide that the Participant shall agree to remain in the employ of the Company
for such period from the date of grant of such Option or combination of Options
or related Stock Appreciation Rights as shall be provided in the Stock Option
Agreement; provided, however, that the Company's right to terminate the
employment of the Participant at any time, with or without cause, shall not be
restricted by such agreement.
(e) Terms of Options and Stock Appreciation Rights. Each Option and related
Stock Appreciation Right granted under the Plan shall be exercisable on such
date or dates, during such period, for such number of shares and subject to such
further conditions as shall be determined pursuant to the provisions of the
Stock Option Agreement with respect to such Option and related Stock
Appreciation Right; provided, however, that a Stock Appreciation Right shall not
be exercisable prior to or later than the time the related Option could be
exercised; and provided, further, that in any event no Option or related Stock
Appreciation Right shall be exercised beyond ten years from the date of grant of
the Option.
(f) Effect of Termination of Employment or Death. (1) Except as provided in
paragraphs (f)(2), (3) and (4) of this Article 5, if, prior to the date that any
Option or Stock Appreciation Right shall first have become exercisable, the
Participant's employment with the Company shall be terminated by the Company,
with or without cause, or by the act, death, incapacity or retirement of the
Participant, the Participant's right to exercise such Option or Stock
Appreciation Right shall terminate on the date of such termination of employment
and all rights thereunder shall cease.
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(2) Notwithstanding the provisions of paragraph (f)(l) of this Article 5,
if the Participant's employment with the Company shall be terminated by reason
of retirement, release because of disability or death, and the Participant had
remained in the employ of the Company for at least six months following the date
of any Stock Option Agreement under the Plan between such Participant and the
Company, and subject to the provisions of Article 8, all such Participant's
rights under such Stock Option Agreement shall continue in effect or continue to
accrue for the period ending on the date ten years from the date of grant of any
Option (or such shorter period as the Committee may specify), subject, in the
event of the Participant's death prior to such date, to the provisions of
paragraph (f)(7) of this Article 5 and subject to any other limitation on the
exercise of such rights in effect at the date of exercise.
(3) Notwithstanding the provisions of paragraph (f)(l) of this Article 5,
if the Participant's employment with the Company shall be terminated under
mutually satisfactory conditions, and the Participant had remained in the employ
of the Company for at least six months following the date of any Stock Option
Agreement under the Plan between the Participant and the Company, and subject to
the provisions of Article 8, all such Participant's rights under such Stock
Option Agreement shall continue in effect or continue to accrue until the date
three months after the date of such termination (but not later than the date ten
years from the date of grant of any Option), subject, in the event of the
Participant's death during such three-month period, to the provisions of
paragraph (f)(7) of this Article 5 and subject to any other limitation on the
exercise of such rights in effect at the date of exercise.
(4) Notwithstanding any other provision of the Plan to the contrary, if a
Participant's employment with the Company shall be terminated at any time by
reason of a sale or other disposition (including, without limitation, a transfer
to a Joint Venture) of the division, operation or subsidiary in which such
Participant was employed or to which such Participant was assigned, all such
Participant's rights under any Option and any related Stock Appreciation Right
granted to him or her shall continue in effect and continue to accrue until the
date five years after the date of such termination or such earlier or later date
as the Committee may specify (but not later than the date ten years from the
date of grant of any Option), provided such Participant shall satisfy both of
the following conditions:
(a) such Participant, at the date of such termination, had remained in the
employ of the Company for at least three months following the grant of such
Option and Stock Appreciation Right, and
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(b) such Participant continues to be or becomes employed in such division,
operation or subsidiary following such sale or other disposition and remains in
such employ until the date of exercise of such Option or Stock Appreciation
Right (unless the Committee, or any committee appointed by it for the purpose,
shall waive this condition (b)).
Upon termination of such Participant's employment with such (former)
division, operation or subsidiary following such sale or other disposition, any
then existing right of such Participant to exercise any such Option or Stock
Appreciation Right shall be subject to the following limitations: (i) if such
Participant's employment is terminated by reason of disability, death or
retirement with the approval of his or her employer, such Participant's rights
shall continue as provided in the preceding sentence with the same effect as if
his or her employment had not terminated; (ii) if such Participant's employment
is terminated by reason of discharge or voluntary quit, such Participant's
rights shall terminate on the date of such termination of employment and all
rights under such Option and Stock Appreciation Right shall cease; and (iii) if
such Participant's employment is terminated for any reason other than a reason
set forth in the preceding clauses (i) and (ii), such Participant shall have the
right, within three months after such termination, to exercise such Option or
Stock Appreciation Right to the extent that it or any installment thereof shall
have accrued at the date of such termination and shall not have been exercised,
subject in the case of any such termination to the provisions of Article 8 and
any other limitation on the exercise of such Option and Stock Appreciation Right
in effect at the date of exercise.
(5) If, on or after the date that any Option or Stock Appreciation Right
shall first have become exercisable, a Participant's employment with the Company
shall be terminated for any reason except retirement, release because of
disability, death, release because of a sale or other disposition of the
division, operation or subsidiary in which such Participant was employed or to
which such Participant was assigned, release under mutually satisfactory
conditions, discharge, release in the best interest of the Company or voluntary
quit, such Participant shall have the right, within three months after such
termination, to exercise such Option or Stock Appreciation Right to the extent
that it or any installment thereof shall have accrued at the date of such
termination of employment and shall not have been exercised, subject to the
provisions of Article 8 and any other limitation on the exercise of such Option
or Stock Appreciation Right in effect at the date of exercise.
(6) If a Participant's employment with the Company shall be terminated at
any time by reason of discharge, release in the best interest of the Company or
voluntary quit, the Participant's right to exercise such Option or Stock
Appreciation Right shall terminate on the date of such termination of employment
and all rights thereunder shall cease.
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(7) If a Participant shall die within the applicable period specified in
paragraph (f)(2), (3), (4) or (5) of this Article 5, the beneficiary designated
pursuant to Article 10 or, if no such designation is in effect, the executor or
administrator of the estate of the decedent or the person or persons to whom the
Option or Stock Appreciation Right shall have been validly transferred by the
executor or administrator pursuant to will or the laws of descent and
distribution shall have the right, within the same period of time as the period
during which the Participant would have been entitled to exercise such Option or
Stock Appreciation Right (except that (a) in the case of a Participant to whom
paragraph (f)(5) of this Article 5 applies, such Participant's Option or Stock
Appreciation Right may be exercised only to the extent that it or any
installment thereof shall have accrued at the date of death and shall not have
been exercised; and (b) the period of time within which any Option or Stock
Appreciation Right shall be exercisable following the date of the Participant's
death shall not be less than one year (unless the Option by its terms expires
earlier)), subject to the provision that no Option or related Stock Appreciation
Right shall be exercised under any circumstances beyond ten years from the date
of grant of such Option, and to any other limitation on the exercise of such
Option or Stock Appreciation Right in effect at the date of exercise. No
transfer of an Option or Stock Appreciation Right by the Participant, other than
by filing a written designation of beneficiary pursuant to Article 10, shall be
effective to bind the Company unless the Company shall have been furnished with
written notice of such transfer and a copy of the will and/or such other
evidence as the Committee may deem necessary to establish the validity of the
transfer. No transfer shall be effective without the acceptance by the
designated beneficiary or other transferee of the terms and conditions of such
Option or Stock Appreciation Right.
(g) Payment for Option Shares. (1) Payment for shares of Stock purchased
upon exercise of an Option granted hereunder shall be made, either in full or,
if the Committee shall so determine and at the election of the Participant, in
installments, in such manner as provided in the applicable Stock Option
Agreement.
(2) Unless the Committee shall provide otherwise in any form of Stock
Option Agreement, any payment for shares of Stock purchased upon exercise of an
Option granted hereunder may be made in cash, by delivery of shares of Stock
beneficially owned by the Participant or by a combination of cash and Stock, at
the election of the Participant; provided, however, that any shares of Stock so
delivered shall have been beneficially owned by the Participant for a period of
not less than six months prior to the date of exercise. Any such shares of Stock
so delivered shall be valued at their fair market value on the date of such
exercise, which shall be determined as of such date in the same manner as the
fair market value of Stock on the date of grant of an Option is determined
pursuant to paragraph (b) of this Article 5. The Committee shall determine
whether and if so the extent to which actual delivery of share certificates to
the Company shall be required.
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STOCK AND OTHER STOCK-BASED
AND COMBINATION AWARDS
6.(a) Grants of Other Stock-Based Awards. The Committee, at any time and
from time to time while the Plan is in effect, may grant to such officers and
other salaried employees of the Company, whether or not members of the Board of
Directors, as it may select, Plan Awards pursuant to which Stock is or may in
the future be acquired, or Plan Awards valued or determined in whole or part by
reference to, or otherwise based on, Stock (including but not limited to Plan
Awards denominated in the form of "stock units", grants of so-called "phantom
stock" and options containing terms or provisions differing in whole or in part
from Options granted pursuant to Article 5) (such Plan Awards being hereinafter
called "Other Stock-Based Awards"). Other Stock-Based Awards may be granted
either alone, in addition to, in tandem with or as an alternative to any other
kind of Plan Award, grant or benefit granted under the Plan or under any other
employee plan of the Company, including a plan of any acquired entity.
(b) Terms and Conditions. Subject to the provisions of the Plan, the
Committee shall have authority to determine the time or times at which Other
Stock-Based Awards shall be made, the number of shares of Stock or stock units
and the like to be granted or covered pursuant to such Plan Awards (subject to
the provisions of Article 3) and all other terms and conditions of such Plan
Awards, including, but not limited to, whether such Plan Awards shall be payable
or paid in cash, Stock or otherwise.
(c) Consideration for Other Stock-Based Awards. In the discretion of the
Committee, any Other-Stock Based Award may be granted as a Stock bonus for no
consideration other than services rendered; provided, however, that in the event
an Other Stock-Based Award shall be granted to a Participant who is a Section 16
Person under which shares of Stock are or may in the future be issued for any
other type of consideration, the amount of such consideration shall either be
(i) equal to the amount (such as the par value of such shares) required to be
received by the Company in order to assure compliance with applicable state law
or (ii) equal to or greater than 50% of the fair market value of such shares (as
determined in accordance with paragraph (b) of Article 5) on the date of grant
of such Other Stock-Based Award.
CASH AWARDS TO EMPLOYEES OF
FOREIGN SUBSIDIARIES OR BRANCHES OR JOINT VENTURES
7. Notwithstanding any other provision of the Plan to the contrary, the
Committee may determine to permit a Participant, other than a Section 16 Person,
who is an employee of a foreign subsidiary or a foreign branch of the Company or
of a foreign Joint Venture to receive cash in lieu of any Plan Award or shares
of Stock that would otherwise have been granted to or delivered to such
Participant under the Plan, in such amount as the Committee may determine in its
sole discretion.
PAYMENT OF PLAN AWARDS AND CONDITIONS THEREON
8.(a) Effect of Competitive Activity. Anything contained in the Plan to the
contrary notwithstanding, if the employment of any Participant shall terminate,
for any reason other than death, while any Plan Award to such Participant is
outstanding hereunder, and such Participant has not yet received the Stock
covered by such Plan Award or otherwise received the full benefit of such Plan
Award, such Participant, if otherwise entitled thereto, shall receive such Stock
or benefit only if, during the entire period from the date of such Participant's
termination to the date of such receipt, such Participant shall have earned out
such Plan Award by (i) making himself or herself available, upon request, at
reasonable times and upon a reasonable basis, to consult with, supply
information to and otherwise cooperate with the Company or any subsidiary
thereof with respect to any matter that shall have been handled by him or her or
under his or her supervision while he or she was in the employ of the Company or
of any subsidiary thereof, and (ii) refraining from engaging in any activity
that is directly or indirectly in competition with any activity of the Company
or any subsidiary thereof.
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(b) Nonfulfillment of Competitive Activity Conditions: Waivers Under the
Plan. In the event of a Participant's nonfulfillment of any condition set forth
in paragraph (a) of this Article 8 such Participant's rights under any Plan
Award shall be forfeited and cancelled forthwith; provided, however, that the
nonfulfillment of such condition may at any time (whether before, at the time of
or subsequent to termination of employment) be waived in the following manner:
(i) with respect to any such Participant who at any time shall have been a
Section 16 Person, such waiver may be granted by the Committee upon its
determination that in its sole judgment there shall not have been and will
not be any substantial adverse effect upon the Company or any subsidiary
thereof by reason of the nonfulfillment of such condition; and
(ii) with respect to any other such Participant, such waiver may be granted
by the Committee (or any committee appointed by it for the purpose) upon
its determination that in its sole judgment there shall not have been and
will not be any such substantial adverse effect.
(c) Effect of Inimical Conduct. Anything contained in the Plan to the
contrary notwithstanding, all rights of a Participant under any Plan Award shall
cease on and as of the date on which it has been determined by the Committee
that such Participant at any time (whether before or subsequent to termination
of such Participant's employment) acted in a manner inimical to the best
interests of the Company or any subsidiary thereof.
(d) Tax and Other Withholding. Prior to any distribution of cash, Stock or
Other Stock-Based Awards (including payments under paragraph (c) of Article 4)
to any Participant, appropriate arrangements (consistent with the Plan and any
rules adopted hereunder) shall be made for the payment of any taxes and other
amounts required to be withheld by federal, state or local law.
(e) Substitution. The Committee, in its sole discretion, may substitute a
Plan Award (except ISOs) for another Plan Award or Plan Awards of the same or
different type.
NON-TRANSFERABILITY OF PLAN AWARDS;
RESTRICTIONS ON DISPOSITION AND EXERCISE OF PLAN AWARDS
9.(a) Restrictions on Transfer of Rights or Final Awards. (i) No Right or
(ii) until the expiration of the applicable Restriction Period, no shares of
Stock covered by any Final Award determined under paragraph (d) of Article 4,
shall be transferred, pledged, assigned or otherwise disposed of by a
Participant, except as permitted by the Plan, without the consent of the
Committee, otherwise than by will or the laws of descent and distribution;
provided, however, that the Committee may permit, on such terms as it may deem
appropriate, use of Stock included in any Final Award as partial or full payment
upon exercise of an Option under the Plan or a stock option under any Stock
Option Plan of the Company prior to the expiration of the Restriction Period
relating to such Final Award.
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(b) Restrictions on Transfer of Options or Stock Appreciation Rights.
Unless the Committee determines otherwise, no Option or related Stock
Appreciation Right shall be transferable by a Participant otherwise than by will
or the laws of descent and distribution, and during the lifetime of a
Participant the Option or Stock Appreciation Right shall be exercisable only by
such Participant or such Participant's guardian or legal representative.
(c) Restrictions on Transfer of Certain Other Stock-Based Awards. Unless
the Committee determines otherwise, no Other-Stock Based Award which constitutes
an option or similar right shall be transferable by a Participant otherwise than
by will or the laws of descent and distribution, and during the lifetime of a
Participant any such Other-Stock Based Award shall be exercisable only by such
Participant or such Participant's guardian or legal representative.
DESIGNATION OF BENEFICIARIES
10. Anything contained in the Plan to the contrary notwithstanding, a
Participant may file with the Company a written designation of a beneficiary or
beneficiaries under the Plan (subject to such limitations as to the classes and
number of beneficiaries and contingent beneficiaries and such other limitations
as the Committee from time to time may prescribe), subject to the provisions of
paragraph (e) of Article 4 and paragraph (f) of Article 5. A Participant shall
be deemed to have designated as beneficiary or beneficiaries under the Plan the
person or persons who receive such Participant's life insurance proceeds under
the basic Company Life Insurance Plan unless such Participant shall have
assigned such life insurance or shall have filed with the Company a written
designation of a different beneficiary or beneficiaries under the Plan. A
Participant may from time to time revoke or change any such designation of
beneficiary. Any designation of beneficiary under the Plan shall be controlling
over any other disposition, testamentary or otherwise; provided, however, that
if the Committee shall be in doubt as to the entitlement of any such beneficiary
to any Right, Final Award, Option, Stock Appreciation Right or Other Stock-Based
Award, the Committee may determine to recognize only the legal representative of
such Participant, in which case the Company, the Committee and the members
thereof shall not be under any further liability to anyone. In the event of the
death of any Participant, the term "Participant" as used in the Plan shall
thereafter be deemed to refer to the beneficiary designated pursuant to this
Article 10 or, if no such designation is in effect, the executor or
administrator of the estate of such Participant, unless the context otherwise
requires.
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MERGER, CONSOLIDATION, STOCK DIVIDENDS, ETC.
ll.(a) Adjustments. In the event of any merger, consolidation,
reorganization, stock split, stock dividend or other event affecting Stock, an
appropriate adjustment shall be made in the total number of shares available for
Plan Awards and in all other provisions of the Plan that include a reference to
a number of shares, and in the numbers of shares covered by, and other terms and
provisions of, outstanding Plan Awards.
(b) Committee Determinations. The foregoing adjustments and the manner of
application of the foregoing provisions shall be determined by the Committee in
its sole discretion. Any such adjustment may provide for the elimination of any
fractional share which might otherwise become subject to a Plan Award.
ACCELERATION OF PAYMENT
OR MODIFICATION OF PLAN AWARDS
12. Notwithstanding any other provision of the Plan, the Committee, in the
event of the death of a Participant or in any other circumstance, may accelerate
distribution of any Plan Award in its entirety or in a reduced amount, in cash
or in Stock, or modify any Plan Award, in each case on such basis and in such
manner as the Committee may determine in its sole discretion.
RIGHTS AS A STOCKHOLDER
13. A Participant shall not have any rights as a stockholder with respect
to any share covered by any Plan Award until such Participant shall have become
the holder of record of such share.
TERM, AMENDMENT, MODIFICATION
AND TERMINATION OF THE PLAN
14. (a) Term. The Plan shall terminate on May 1, 2008, except with respect
to Plan Awards then outstanding.
(b) Amendment, Modification and Termination. The Board of Directors, upon
recommendation of the Committee, at any time may amend, modify or terminate the
Plan, and the Committee at any time may amend or modify the Plan; provided,
however, that no such action of the Board of Directors or the Committee, without
approval of the stockholders, may (a) increase the total number of shares of
Stock with respect to which Plan Awards may be granted under the Plan, (b)
extend the term of the Plan as set forth in paragraph (a) of this Article 14 or
(c) permit any person while a member of the Committee or any committee of the
Board of Directors administering the Plan to be eligible to receive or hold a
Plan Award; provided, however, that neither the Board of Directors nor the
Committee may amend or modify the Plan so as to increase the maximum number of
shares determinable pursuant to the last sentence of paragraph (a) of Article 3.
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INDEMNIFICATION AND EXCULPATION
15.(a) Indemnification. Each person who is or shall have been a member of
the Board of Directors or of the Committee or of any committee of the Board of
Directors administering the Plan or of any committee appointed by the foregoing
committees shall be indemnified and held harmless by the Company against and
from any and all loss, cost, liability or expense that may be imposed upon or
reasonably incurred by such person in connection with or resulting from any
claim, action, suit or proceeding to which such person may be or become a party
or in which such person may be or become involved by reason of any action taken
or failure to act under the Plan and against and from any and all amounts paid
by such person in settlement thereof (with the Company's written approval) or
paid by such person in satisfaction of a judgment in any such action, suit or
proceeding, except a judgment in favor of the Company based upon a finding of
such person's lack of good faith; subject, however, to the condition that, upon
the institution of any claim, action, suit or proceeding against such person,
such person shall in writing give the Company an opportunity, at its own
expense, to handle and defend the same before such person undertakes to handle
and defend it on such person's behalf. The foregoing right of indemnification
shall not be exclusive of any other right to which such person may be entitled
as a matter of law or otherwise, or any power that the Company may have to
indemnify or hold such person harmless.
(b) Exculpation. Each member of the Board of Directors or of the Committee
or of any committee of the Board of Directors administering the Plan or any
committee appointed by the foregoing committees, and each officer and employee
of the Company, shall be fully justified in relying or acting in good faith upon
any information furnished in connection with the administration of the Plan by
any appropriate person or persons other than such person. In no event shall any
person who is or shall have been a member of the Board of Directors or of the
Committee or of any committee of the Board of Directors administering the Plan
or of any committee appointed by the foregoing committees, or an officer or
employee of the Company, be held liable for any determination made or other
action taken or any omission to act in reliance upon any such information, or
for any action (including the furnishing of information) taken or any failure to
act, if in good faith.
EXPENSES OF PLAN
16. The entire expense of offering and administering the Plan shall be
borne by the Company and its participating subsidiaries.
FINALITY OF DETERMINATIONS
17. Each determination, interpretation, or other action made or taken
pursuant to the provisions of the Plan by the Board of Directors or the
Committee or any committee of the Board of Directors administering the Plan or
any committee appointed by the foregoing committees shall be final and shall be
binding and conclusive for all purposes and upon all persons, including, but
without limitation thereto, the Company, the stockholders, the Committee and
each of the members thereof, and the directors, officers, and employees of the
Company and its subsidiaries, the Participants, and their respective successors
in interest.
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