Annual Incentive Plan - PFSweb Inc.
ANNUAL INCENTIVE PLAN
1. The purposes of the PFSweb, Inc. Annual Incentive Plan (this "Plan") are
to reward performance and provide incentives for employees of PFSweb, Inc. and
its subsidiaries (collectively, the "Company") who contribute to the success of
the business of the Company by making them participants in that success.
2(a). The Compensation Committee of the Board of Directors of PFSweb (the
"Committee"), as from time to time constituted pursuant to the By-Laws of
PFSweb, may authorize the granting to employees of the Company of annual target
awards. The Committee, in accordance with this Plan, shall determine the
performance levels at which different percentages of such awards shall be
earned, the collective amount for all awards to be granted at any one time, and
the individual annual grants with respect to employees who are officers or key
employees (as defined below) of PFSweb. The Committee may delegate to the PFSweb
Board of Directors responsibility for determining, within the limits established
by the Committee, individual award grants for employees who are not officers or
key employees of PFSweb. All such awards shall be denominated and paid in cash
(U.S. dollars or local currency equivalent). The term "key employee" shall mean
any employees whose projected cash compensation for a fiscal year may cause the
Company to be subject to Section 162(m) of the Internal Revenue Code of 1986, as
amended (hereinafter, the "Code").
2(b). Prior to the grant of any target award, the Committee shall establish
for each such award performance levels related to the enterprise (as defined
below) at which 100% of the award shall be earned and a range (which need not be
the same for all awards) within which greater and lesser percentages shall be
earned. The term "enterprise" shall mean the Company and/or any subsidiary,
division, unit or portion thereof, and any entity in which the Company has,
directly or indirectly, a substantial ownership interest.
2(c). With respect to the performance levels to be established pursuant to
paragraph 2(b), for employees other than officers and key employees, the
Committee shall establish the specific measures for each grant at the time of
such grant. With respect to officers and key employees, the specific measures
shall be established prior to commencement of the period to which the
performance award relates. In creating the measures for employees other than
officers and key employees, the Committee may establish the specific goals based
upon or relating to such business criteria as it shall deem appropriate under
the circumstances, including without limitation, one or more of the following
business criteria: return on assets, return on equity, return on capital, market
price appreciation of the PFSweb common stock, economic value added, total
stockholder return, net income, pre-tax income, earnings per share, operating
profit margin, net income margin, cash flow, market share, sales growth,
capacity utilization, increase in customer base, and operations efficiency
and/or quality. The business criteria may be expressed in absolute terms or
relative to the performance of other companies or to an index. With respect to
officers and key employees, the business criteria to measure performance shall
be limited to one or more of the specific criteria listed in this paragraph.
<PAGE> 2
2(d). If any event occurs during a performance period that requires changes
to preserve the incentive features of this Plan, for employees other than
officers and key employees, the Committee may make appropriate adjustments
(either upward or downward), in the specified performance levels.
2(e). Except as otherwise provided in paragraph 6, the percentage of each
target award to be distributed to an employee shall be determined by the
Committee on the basis of the performance levels established for such award and
the performance of the applicable enterprise or specified portion thereof, as
the case may be, during the performance period. Following determination of the
final payout percentage, the Committee may, upon the recommendation of the Chief
Executive Officer, make adjustments to awards for employees who are not officers
or key employees to reflect individual performance during such period.
Adjustments to awards to reflect individual performance for employees who are
not officers or key employees of PFSweb may be made by the PFSweb Board. Any
target award, as determined and adjusted pursuant to this paragraph 2(e) and
paragraph 6, is herein referred to as a "final award." The total award paid to
any employee who is not an officer or key employee for any one year shall not
exceed such amount as may be fixed by the Committee or the PFSweb Board from
time to time. The total award under this Plan paid to any officer or key
employee for any one year shall not exceed $1,000,000.
3. Subject to such additional limitations or restrictions as the Committee
may impose, the term "employees" shall mean persons (a) who are employed by
PFSweb, or any subsidiary (as such term is defined below), including employees
who are also directors of PFSweb or any such subsidiary, or (b) who accept (or
previously have accepted) employment, at the request of the Company, with any
entity not described in 3(a) above but in which the Company has, directly or
indirectly, a substantial ownership interest. For purposes of this Plan, the
term "subsidiary" shall mean (i) a Company of which capital stock having
ordinary voting power to elect a majority of the board of directors of such
Company is owned, directly or indirectly, by the PFSweb, or (ii) any
unincorporated entity in respect of which the Company can exercise, directly or
indirectly, comparable control. The Committee shall, among other things,
determine when and to what extent individuals otherwise eligible for
consideration shall become or cease to be, as the case may be, employees for
purposes of this Plan and shall determine when, and under what circumstances,
any individual shall be considered to have terminated employment for purposes of
this Plan. To the extent determined by the Committee, the term employees shall
be deemed to include former employees and any beneficiaries thereof.
4(a). Target awards that have become final awards shall be subject to a
vesting schedule, if any, established by the Committee. Except as otherwise
provided in this Plan, no final award (or portion thereof) subject to a vesting
schedule, if any, shall be paid prior to vesting, and the unpaid portion of any
final award shall be subject to the provisions of paragraph 6. The Committee
shall have the authority to modify a vesting schedule as may be necessary or
appropriate in order to implement the purposes of this Plan. As a condition to
the vesting of all or any portion of a final award, the Committee may, among
other things, require an employee to enter into such agreements as the Committee
considers appropriate and in the best interests of the Company.
2
<PAGE> 3
4(b). If employment of an employee is terminated by death, all final awards
not currently vested shall immediately vest. In all other cases, if employment
of an employee is terminated for any reason prior to the vesting of any final
award, the Committee may, but in any case shall not be required to, change the
vesting period with respect to such final awards to accelerate the vesting
period related to all or any portion of such final award.
4(c). With respect to target awards which have become final awards as
provided in paragraph 2(e), the Committee may, in its discretion, pay to the
participant interest on all portions thereof which are unvested. No holder of a
target award shall have any rights to interest prior to such target award
becoming a final award. Any interest payable with respect to such unvested final
awards shall be paid at such times, in such amounts, and in accordance with such
procedures as the Committee shall determine; provided, however, that the rate of
interest paid to key employees shall not exceed a "reasonable rate of interest"
as contemplated by the regulations promulgated under Section 162(m) of the Code.
5(a). An employee shall be eligible for consideration for a target award
based on such criteria as the Committee shall from time to time determine, in
its sole and absolute discretion, subject to the provisions of this Plan;
provided, however, that all officers and key employees shall be eligible for
consideration for an award under this Plan.
5(b). No target award shall be granted to any director of PFSweb who is not
an employee at the date of grant.
6(a). Payment of any final award (or portion thereof) to an individual
employee shall be subject to the satisfaction of the conditions precedent that
such employee: (i) continue to render services as an employee (unless this
condition is waived by the Committee), (ii) refrain from engaging in any
activity which, in the opinion of the Committee, is competitive with any
activity of the Company or any subsidiary (except that employment at the request
of the Company with an entity in which the Company has, directly or indirectly,
a substantial ownership interest, or other employment specifically approved by
the Committee, shall not be considered to be an activity which is competitive
with any activity of the Company or any subsidiary) and from otherwise acting,
either prior to or after termination of employment, in any manner inimical or in
any way contrary to the best interests of the Company, and (iii) furnish to the
Company such information with respect to the satisfaction of the foregoing
conditions precedent as the Committee shall reasonably request. Except as
otherwise provided under paragraph 6(c) below, the failure by any employee to
satisfy such conditions precedent shall result in the immediate cancellation of
the unvested portion of any final award previously made to such employee and
such employee shall not be entitled to receive any consideration in respect of
such cancellation.
6(b). If any employee is dismissed for cause or quits employment without
the prior consent of the Company, the unvested portion of any final award
previously made to such employee shall be canceled as of the date of such
termination of employment, and such employee shall not be entitled to receive
any consideration in respect of such cancellation.
6(c). Upon termination of an employee's employment for any reason other
than as described in (b) above, the Committee may, but shall not in any case be
required to, waive the
3
<PAGE> 4
condition precedent relating to the continued rendering of services in respect
of all or any specified percentage of the unvested portion of any final award,
as the Committee shall determine. To the extent such condition precedent is
waived, the Committee may accelerate the vesting of all or any specified
percentage of the unvested portion of any final award.
6(d). For purposes of this Plan, a qualifying leave of absence, determined
in accordance with procedures established by the Committee, shall not constitute
a termination of employment, except that a final award shall not vest during a
leave of absence granted an employee for government service.
7. Subject to paragraph 6, all final awards which have vested in accordance
with the provisions of this Plan shall be paid as soon as practicable following
the end of the related vesting period. If the Company shall have any unpaid
claim against an employee arising out of or in connection with the employee's
employment with the Company, such claim may be offset against awards under this
Plan. Such claim may include, but is not limited to, unpaid taxes or corporate
business credit card charges.
8. To the extent that any employee, former employee, or any other person
acquires a right to receive payments or distributions under this Plan, such
right shall be no greater than the right of a general unsecured creditor of the
Company. All payments and distributions to be made hereunder shall be paid from
the general assets of the Company. Nothing contained in this Plan, and no action
taken pursuant to its provisions, shall create or be construed to create a trust
of any kind or a fiduciary relationship between the Company and any employee,
former employee, or any other person.
9. The expenses of administering this Plan shall be borne by the Company.
10. Except as otherwise determined by the Committee, with the exception of
transfer by will or the laws of descent and distribution, no target or final
award shall be assignable or transferable and, during the lifetime of the
employee, any payment in respect of any final award shall be made only to the
employee. An employee shall designate a beneficiary or beneficiaries to receive
all or part of the amounts to be distributed to the employee under this Plan in
case of death. A designation of beneficiary may be replaced by a new designation
or may be revoked by the employee at any time. A designation or revocation shall
be on forms prescribed by and filed with the Secretary of the Committee. In case
of the employee's death, the amounts distributable to the employee under this
Plan with respect to which a designation of beneficiary has been made (to the
extent it is valid and enforceable under applicable law) shall be distributed in
accordance with this Plan to the designated beneficiary or beneficiaries. The
amount distributable on account of an employee's death that is not subject to
such a designation shall be distributed to the employee's estate or legal
representative. If there shall be any question as to the legal right of any
beneficiary to receive a distribution under this Plan, the amount in question
may be paid to the estate of the employee, in which event the Company shall have
no further liability to any party with respect to such amount.
11. Full power and authority to construe and interpret this Plan shall be
vested in the Committee. To the extent determined by the Committee,
administration of this Plan, including,
4
<PAGE> 5
but not limited to (a) the selection of employees for participation in this
Plan, (b) the determination of the number of installments, and (c) the
determination of the vesting schedule for final awards, if any, may be delegated
to the PFSweb Board of Directors; provided, however, the Committee shall not
delegate to the PFSweb Board any powers, determinations, or responsibilities
with respect to officers or key employees of PFSweb. Any person who accepts any
award hereunder agrees to accept as final, conclusive, and binding all
determinations of the Committee and the PFSweb Board. The Committee shall have
the right, in the case of participants (other than key employees) who are not
employed in the United States, to vary from the provisions of this Plan in order
to preserve the incentive features of this Plan.
12. The Committee, in its sole discretion, may, at any time, amend, modify,
suspend, or terminate this Plan provided that no such action shall adversely
affect the rights of an employee with respect to previous target awards or final
awards under this Plan (except as otherwise permitted under paragraphs 2(d), 4,
or 6), and this Plan, as constituted prior to such action, shall continue to
apply with respect to target awards previously granted and final awards which
have not been paid.
13. Every right of action by, or on behalf of, the Company or by any
stockholder against any past, present, or future member of the Board of
Directors, officer, or employee of the Company or its subsidiaries arising out
of or in connection with this Plan shall, irrespective of the place where action
may be brought and irrespective of the place of residence of any such director,
officer, or employee, cease and be barred by the expiration of three years from
the date of the act or omission in respect of which such right of action arises.
Any and all right of action by any employee (past, present, or future) against
the Company arising out of or in connection with this Plan shall, irrespective
of the place where an action may be brought, cease and be barred by the
expiration of three years from the date of the act or omission in respect of
which such right of action arises. This Plan and all determinations made and
actions taken pursuant hereto shall, be governed by the laws of the State of
Delaware, without giving effect to principles of conflict of laws, and construed
accordingly.
14. This Plan shall be effective upon its adoption and approval by the
Board of Directors and stockholder of PFSweb.
5