Exhibit
10.11
MATTHEWS
INTERNATIONAL CORPORATION
2007
EQUITY INCENTIVE PLAN,
AS
AMENDED THROUGH SEPTEMBER 26, 2008
SECTION
1
Purpose;
Definitions
1.1 Purpose. The
purposes of the 2007 Equity Incentive Plan, as amended through September 26,
2008 (the "Plan") are to encourage eligible employees of Matthews International
Corporation (the "Corporation") and its Subsidiaries to increase their efforts
to make the Corporation and each Subsidiary more successful, to provide an
additional inducement for such employees to remain with the Corporation or a
Subsidiary, to reward such employees by providing an opportunity to acquire
shares of Common Stock on favorable terms and
to provide a means through which the Corporation may attract able persons to
enter the employ of the Corporation or one of its Subsidiaries.
1.2 Certain
Definitions. In addition to terms defined herein in the first
place where they are used, the following terms are defined as set forth
below:
(a) “Award”
means a stock option, a stock appreciation right, restricted stock, restricted
stock units, performance units or other stock-based award granted under the
Plan.
(b) “Base
Price” shall have the meaning set forth in Section 5.3.
(c) "Common
Stock" shall mean the Class A Common Stock, par value $1.00 per share, of the
Corporation.
(d) “Fair
Market Value” with respect to a share of the Common Stock shall mean the mean
between the following prices, as applicable, for the date as of which Fair
Market Value is to be determined as quoted in The Wall Street Journal
(or in such other reliable publication as the Committee, in its sole discretion,
may determine to rely upon): (i) if the Common Stock is
listed on the New York Stock Exchange, the highest and lowest sales prices per
share of the Common Stock as quoted in the NYSE-Composite Transactions listing
for such date, (ii) if the Common Stock is not listed on such exchange, the
highest and lowest sales prices per share of Common Stock for such date on (or
on any composite index including) the principal United States of America
securities exchange registered under the 1934 Act on which the Common Stock is
listed or (iii) if the Common Stock is not listed on any such exchange, the
highest and lowest sales prices per share of the Common Stock for such date on
the National Association of Securities Dealers Automated Quotations System or
any successor system then in use ("NASDAQ"). If there are no such
sale price quotations for the date as of which Fair Market Value is to be
determined but there are such sale price quotations within a reasonable period
both before and after such date, then Fair Market Value shall be determined by
taking a weighted average of the means between the highest and lowest sales
prices per share of the Common Stock as so quoted on the nearest date before and
the nearest date after the date as of which Fair Market Value is to be
determined. The average should be weighted inversely by the
respective numbers of trading days between the selling dates and the date as of
which Fair Market Value is to be determined. If there are no such
sale price quotations on or within a reasonable period both before and after the
date as of which Fair Market Value is to be determined, then Fair Market Value
of the Common Stock shall be the mean between the bona fide bid and asked prices
per share of Common Stock as so quoted for such date on NASDAQ, or if none, the
weighted average of the means between such bona fide bid and asked prices on the
nearest trading date before and the nearest trading date after the date as of
which Fair Market Value is to be determined, if both such dates are within a
reasonable period. The average is to be determined in the manner
described above in this definition. If the Fair Market Value of the
Common Stock cannot be determined on the basis previously set forth in this
definition on the date as of which Fair Market Value is to be determined, the
Committee shall in good faith and in conformance with the requirements of
Section 409A of the Code, to the extent applicable to an Award, determine the
Fair Market Value of the Common Stock on such date. Fair Market Value
shall be determined without regard to any restriction other than a restriction
which, by its terms, will never lapse.
(e) “Free-Standing
SARs” shall have the meaning set forth in Section 5.2.
(f) “Participant”
means an eligible employee selected by the Committee who has received an Award
under the Plan and any transferee or transferees of such employee to the extent
the transfer is permitted under the Plan.
(g) “Performance
Goals” means the performance goals, if any, established by the Committee in
connection with the grant of restricted stock, restricted stock units,
performance units or other Awards. In the case of Qualified
Performance-Based Awards, the “Performance Goals” means such performance goals
based on one or more of the following:
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(i)
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The
following criteria for the Corporation on a consolidated basis, one or
more of its direct or indirect Subsidiaries, and/or one or more divisions
of the foregoing, either in absolute terms or relative to the performance
of (x) the Corporation, its Subsidiaries or divisions (for a different
period), (y) one or more other companies or (z) an index covering multiple
companies:
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1.
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net
income
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2.
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economic
value added (earnings less a capital charge)
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3.
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EBITDA
(earnings before interest, taxes, depreciation and
amortization)
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4.
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sales
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5.
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costs
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6.
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gross
margin
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7.
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operating
margin
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8.
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pre-tax
profit or income
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9.
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market
share
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10.
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return
on net assets
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11.
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return
on assets
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12.
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return
on capital
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13.
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return
on invested capital
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14.
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cash
flow
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15.
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free
cash flow
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16.
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operating
cash flow
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17.
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operating
income
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18.
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earnings
before interest and taxes
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19.
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working
capital
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20.
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innovation
as measured by a percentage of sales from new
products
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(ii)
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The
following criteria for the Corporation, either in absolute terms or
relative to the performance of the Corporation (for a different period),
one or more other companies or an index covering multiple
companies:
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1.
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stock
price
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2.
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return
on shareholders’ equity
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3.
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earnings
per share
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4.
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cash
flow per share
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5.
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total
shareholder return (stock price appreciation plus
dividends)
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(h) “Qualified
Performance-Based Award” means an Award intended to qualify for the Section
162(m) Exemption, as provided in Section 12.
(i) "Subsidiary"
means any corporation, partnership, joint venture, limited liability company or
other entity in an unbroken chain of entities beginning with the Corporation if
each of the entities other than the last entity in the unbroken chain owns an
equity interest possessing at least fifty percent (50%) or more of the total
combined voting power of all classes of stock in one of the other entities in
the chain.
(j) “Tandem
SARs” shall have the meaning set forth in Section 5.2.
SECTION
2
Administration
2.1. Committee. The
Plan shall be administered by a Committee (the "Committee") appointed by the
Board of Directors of the Corporation (the "Board") and consisting of not less
than two members of the Board, who, at the time of their appointment to the
Committee and at all times during their service as members of the Committee, are
(a) "Non-Employee Directors" as then defined under Rule 16b-3 under the
Securities Exchange Act of 1934, as amended (the "1934 Act"), or any successor
rule, (b) "outside directors" under Section 162(m)(4)(C) of the Internal Revenue
Code of 1986 as amended (the “Code”) or any successor provision, and (c)
independent directors under the applicable rules of any applicable stock
exchange or NASDAQ, if the Common Stock is subject to such rules. The
Committee shall have plenary authority to interpret the Plan and prescribe such
rules, regulations and procedures in connection with the operations of the Plan
as it shall deem to be necessary and advisable for the administration of the
Plan consistent with the purposes of the Plan. Without limitation of
the foregoing, the Committee shall have the authority, subject to the terms and
conditions of the Plan:
(a) to select
the employees to whom Awards may be made;
(b) to
determine whether and to what extent incentive stock options, nonstatutory stock
options, stock appreciation rights, restricted stock, restricted stock units,
performance units, other Awards of or based upon Common Stock, or any
combination thereof, are to be granted hereunder;
(c) to
determine the number of shares of Common Stock to be covered by each Award made
hereunder;
(d) to
determine the terms and conditions of each Award made hereunder, based on such
factors as the Committee shall determine;
(e) subject
to Section 2.5, to modify, amend or adjust the terms and conditions of any
Award;
(f) to adopt,
alter and repeal such administrative rules, guidelines and practices governing
the Plan as it shall from time to time deem advisable;
(g) to
interpret the terms and provisions of the Plan and any Award under the Plan (and
any agreement under Section 2.5 relating thereto);
(h) subject
to Section 2.5, to accelerate the vesting or lapse of restrictions on any
outstanding Award, other than a Qualified Performance-Based Award, based in each
case on such considerations as the Committee in its sole discretion
determines;
(i) to decide
all other matters that must be determined in connection with an
Award;
(j) to
determine whether, to what extent and under what circumstances cash, shares of
Common Stock and other property and other amounts payable with respect to an
Award under this Plan shall be deferred either automatically or at the election
of the employee;
(k) to
establish any “blackout” period that the Committee in its sole discretion deems
necessary or advisable; and
(l)
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to
otherwise administer the Plan.
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In
determining any Award to be made to any eligible employee, the Committee shall
consider the position and the responsibilities of the employee being considered,
the nature and value to the Corporation or a Subsidiary of his or her services,
his or her present and/or potential contribution to the success of the
Corporation or a Subsidiary and such other factors as the Committee may deem
relevant. The Committee may, except to the extent prohibited by
applicable law or the listing standards of the stock exchange which is the
principal market for the Common Stock, allocate all or any portion of its
responsibilities and powers to any one or more of its members and may delegate
all or any part of its responsibilities and powers to any officers of the
Corporation or committee of officers of the Corporation selected by it, except
with respect to Awards (including Qualified Performance-Based Awards) to any
covered employees as defined in Section 162(m)(3) of the Code (“Covered
Employees”) or persons subject to Section 16 of the Exchange Act.
2.2. Committee
Action. The Committee shall keep records of action taken at
its meetings. A majority of the Committee shall constitute a quorum
at any meeting and the acts of a majority of the members present at any meeting
at which a quorum is present, or acts approved in writing by all members of the
Committee, shall be the acts of the Committee.
2.3 Committee
Discretion. Any determination made by the Committee or by an
appropriately delegated officer pursuant to delegated authority under the
provisions of the Plan with respect to any Award shall be made in the sole
discretion of the Committee or such officer at the time of the Award or, unless
in contravention of any express term of the Plan, at any time thereafter. All
decisions made by the Committee or any appropriately delegated officer pursuant
to the provisions of the Plan shall be final and binding on all persons,
including the Corporation and the employees eligible under the
Plan.
2.4 Cancellation; Suspension;
Clawback. Any or all outstanding Awards to a Participant may,
at any time between the date of grant and the third anniversary of any exercise,
payment or vesting of such Awards, in the Committee’s sole discretion and
subject to such terms and conditions established by the Committee, be cancelled,
suspended, or required to be repaid to the Corporation if the Participant
(whether during or after termination of employment with the Corporation and its
Subsidiaries) (i) engages in the operation or management of a business (whether
as owner, partner, officer, director, employee or otherwise) which is in
competition with the Corporation or any of its Subsidiaries, (ii) induces or
attempts to induce any customer, supplier, licensee or other individual,
corporation or other business organization having a business relationship with
the Corporation or any of its Subsidiaries to cease doing business with the
Corporation or any of its Subsidiaries or in any way interferes with the
relationship between any such customer, supplier, licensee or other person and
the Corporation or any of its Subsidiaries, (iii) solicits any employee of the
Corporation or any of its Subsidiaries to leave the employment thereof or in any
way interferes with the relationship of such employee with the Corporation or
any of its Subsidiaries, or (iv) makes any statements or comments, orally or in
writing, of a defamatory or disparaging nature regarding the Corporation or any
of its Subsidiaries (including but not limited to regarding any of their
respective businesses, officers, directors, personnel, products or policies),
provided, however, that this sentence shall not apply following the occurrence
of a Section 11 Event (as defined in Section 11) unless the agreement under
Section 2.5 specifically so provides. Whether a Participant has
engaged in any such activities shall also be determined, in its sole discretion,
by the Committee, and any such determination by the Committee shall be final and
binding.
2.5 Agreements. The
terms and conditions of each Award shall be set forth in a written (or
electronic) agreement, which shall be delivered to the Participant receiving
such Award upon, or as promptly as is reasonably practicable following, the
making of such Award. The effectiveness of an Award shall be subject
to the agreement being signed by the Corporation and the Participant receiving
the Award unless otherwise provided in the agreement. Unless
otherwise provided in the agreement, each agreement or amendment thereto shall
be executed on behalf of the Corporation by the Chief Executive Officer (if
other than the President), the President or any Vice President and by the
Participant. The agreement confirming a stock option shall specify
whether the stock option is an incentive stock option or a nonstatutory stock
option. The provisions of such agreements need not be
identical. Without the consent of the Participant, upon notice to the
Participant thereof, the Committee may amend any Award to the Participant and
the corresponding agreement in any respect not materially adverse to the
Participant. All other amendments to the agreement shall be in
writing (including electronic amendments) and executed on behalf of the
Corporation and by the Participant. Any reference in the Plan to the
agreement under Section 2.5 shall include any amendment to such
agreement.
SECTION
3
Eligibility
Those employees of the Corporation or
any Subsidiary (including, but not limited to, Covered Employees) who share
responsibility for the management, growth or protection of the business of the
Corporation or any Subsidiary shall be eligible to receive Awards as described
herein, provided however, that incentive stock options may be granted only to
employees of the Corporation and Subsidiaries which are its subsidiaries within
the meaning of Section 424(f) of the Code.
SECTION
4
Shares
Subject to the Plan
4.1 Number of
Shares. Subject to adjustment as provided in Section 4.5, the
maximum aggregate number of shares of the Common Stock for which Awards may be
made under the Plan shall be 2,200,000 shares. The maximum number of
shares of Common Stock that may be granted pursuant to options intended to be
incentive stock options shall be 1,000,000 shares.
4.2 Individual
Limit. The maximum number of shares of Common Stock as to
which Awards other than performance units under Section 8 or Awards under
Section 9 may be made under the Plan to any one Participant in any one calendar
year is 250,000 shares, subject to adjustment and substitution as set forth in
Section 4.5. For the purposes of this limitation, any adjustment or
substitution made pursuant to Section 4.5 in a calendar year with respect to the
maximum number of shares set forth in the preceding sentence shall also be made
with respect to any shares subject to Awards previously granted under the Plan
to such Participant in the same calendar year.
(a) For
purposes of the limit set forth in the first sentence of Section 4.1 (but not
for purposes of Section 4.2), each share of Common Stock which is subject to an
Award other than a stock option or a stock appreciation right shall be counted
as two (2) shares rather than one (1) share, provided, however, that in case of
performance units, shares of Common Stock shall be counted as two (2) shares
rather than one (1) share for each actual share issued only at the time, if any,
of the actual issuance of shares pursuant to the performance unit
Award.
(b) Except
in the case of performance unit Awards (where shares of Common Stock are counted
only upon actual issuance of the shares pursuant to Section 4.3(a)) to the
extent that any Award is forfeited, or any option and the Tandem SAR (if any) or
any Free-Standing SAR terminates, expires or lapses without being exercised, or
any Award is settled for cash, the shares of Common Stock subject to such Awards
shall again be available for Awards under the Plan under Section
4.1. However, shares of Common Stock subject to such Awards shall
continue to be counted for purposes of Section 4.2 or Section 9, as
applicable.
(c) If
the exercise price of any option and/or the tax withholding obligations relating
to any Awards are satisfied by delivering shares (either actually or through
attestation) or withholding shares relating to such Award, the gross number of
shares subject to the Award shall nonetheless be deemed to have been granted for
purposes of Sections 4.1 and 4.2 and any shares which are delivered will not be
added to the aggregate number of shares under Section 4.1 for which Awards may
be made under the Plan.
(d) If
a Tandem SAR is granted, each share of Common Stock subject to both the Tandem
SAR and related stock option shall be counted as only one share of Common Stock
for purposes of Sections 4.1 and 4.2.
(e) Each
share of Common Stock subject to a stock option (with or without a Tandem SAR)
or a Free-Standing SAR shall be counted as one share of Common Stock for
purposes of Sections 4.1 and 4.2.
(f) All
shares of Common Stock covered by a stock appreciation right, to the extent it
is exercised and shares of Common Stock are actually issued upon exercise of the
right, shall be counted for purposes of Sections 4.1 and 4.2, regardless of the
number of shares used to settle the stock appreciation right upon
exercise.
4.4 Common
Stock. To the extent that the Corporation has such shares of
Common Stock available to it and can issue such shares without violating any law
or regulation, the Corporation will reserve Common Stock for issuance with
respect to an Award payable in Common Stock. The shares of Common
Stock which may be issued under the Plan may be either authorized but unissued
shares or shares previously issued and thereafter acquired by the Corporation or
partly each, as shall be determined from time to time by the Board.
4.5 Adjustment and Substitution
of Shares. In the event of a merger, consolidation,
acquisition of shares, stock rights offering, liquidation, separation, spinoff,
disaffiliation of a Subsidiary from the Corporation, extra-ordinary dividend of
cash or other property,
or similar event affecting the Corporation or any of its Subsidiaries
(each, a “Corporate Transaction”), the Committee or the Board shall make such
substitutions or adjustments as it deems appropriate and equitable to prevent
the dilution or enlargement of the rights of Participants to (A) the aggregate
number and kind of shares of Common Stock reserved for issuance and delivery
under the Plan, (B) the various maximum limitations set forth in Sections 4.1
and 4.2 upon certain types of Awards and upon the Awards to individuals, (C) the
number and kind of shares of Common Stock subject to outstanding Awards; and (D)
the exercise price of outstanding Awards. In the event of a stock
dividend, stock split, reverse stock split, reorganization, share combination,
or recapitalization or similar event affecting the capital structure of the
Corporation (each, a “Share Change”), the Committee or the Board shall make such
substitutions or adjustments as it deems appropriate and equitable to prevent
the dilution or enlargement of the rights of Participants to (A) the aggregate
number and kind of shares of Common Stock reserved for issuance and delivery
under the Plan, (B) the various maximum limitations set forth in Sections 4.1
and 4.2 upon certain types of Awards and upon the Awards to individuals, (C) the
number and kind of shares of Common Stock subject to outstanding Awards; and (D)
the exercise price of outstanding Awards. In the case of Corporate Transactions,
such adjustments may include, without limitation, (1) the cancellation of
outstanding Awards in exchange for payments of cash, property or a combination
thereof having an aggregate value equal to the value of such Awards, as
determined by the Committee or the Board in its sole discretion (it being
understood that in the case of a Corporate Transaction with respect to which
shareholders of Common Stock receive consideration other than publicly-traded
equity securities of the ultimate surviving entity, any such determination by
the Committee that the value of an option or stock appreciation right shall for
this purpose be deemed to equal the excess, if any, of the value of the
consideration being paid for each share pursuant to such Corporate Transaction
over the exercise price of such option or stock appreciation right shall
conclusively be deemed valid); (2) the substitution of other property
(including, without limitation, cash or other securities of the Corporation and
securities of entities other than the Corporation) for the shares subject to
outstanding Awards; and (3) in connection with any disaffiliation of a
Subsidiary, arranging for the assumption of Awards, or replacement of Awards
with new Awards based on other property or other securities (including, without
limitation, other securities of the Corporation and securities of entities other
than the Corporation), by the affected Subsidiary, or by the entity that
controls such Subsidiary following such disaffiliation (as well as any
corresponding adjustments to Awards that remain based upon Corporation
securities). The Committee shall adjust the Performance Goals applicable to any
Awards to reflect any unusual or non-recurring events and other extraordinary
items, impact of charges for restructurings, discontinued operations, and the
cumulative effects of accounting or tax changes, each as defined by generally
accepted accounting principles or as identified in the Corporation’s financial
statements, notes to the financial statements, management’s discussion and
analysis or other of the Corporation’s SEC filings, provided that in the case of
Performance Goals applicable to any Qualified Performance-Based Awards, such
adjustment does not violate Section 162(m) of the Code or cause such Awards not
to qualify for the Section 162(m) Exemption, as defined in Section
12.1. No adjustment or substitution provided in this Section 4.5
shall require the Corporation or any other entity to issue or sell a fraction of
a share or other security. Except as provided in this Section 4.5, a
Participant shall not have any rights with respect to any Corporate Transaction
or Share Change.
4.6 Section 409A; Section
162(m); Incentive Stock Options. Notwithstanding the
foregoing: (i) any adjustments made pursuant to Section 4.5 to Awards that are
considered “deferred compensation” within the meaning of Section 409A of the
Code shall be made in compliance with the requirements of Section 409A of the
Code; (ii) any adjustments made pursuant to Section 4.5 to Awards that are not
considered “deferred compensation” subject to Section 409A of the Code shall be
made in such a manner as to ensure that after such adjustment, the Awards either
(A) continue not to be subject to Section 409A of the Code or (B) comply with
the requirements of Section 409A of the Code; and (iii) in any event, neither
the Committee nor the Board shall have the authority to make any adjustments
pursuant to Section 4.5 to the extent the existence of such authority would
cause an Award that is not intended to be subject to Section 409A of the Code at
the grant date of the Award to be subject thereto. If any such
adjustment or substitution provided for in Section 4.5 requires the approval of
shareholders in order to enable the Corporation to grant incentive stock options
or to comply with Section 162(m) of the Code, then no such adjustment or
substitution shall be made without the required shareholder
approval. Notwithstanding the foregoing, in the case of incentive
stock options, if the effect of any such adjustment or substitution would be to
cause the option to fail to continue to qualify as an incentive stock option or
to cause a modification, extension or renewal of such option within the meaning
of Section 424 of the Code, the Committee may determine that such adjustment or
substitution not be made but rather shall use reasonable efforts to effect such
other adjustment of each then outstanding incentive stock option as the
Committee, in its sole discretion, shall deem equitable and which will not
result in any disqualification, modification, extension or renewal (within the
meaning of Section 424 of the Code) of such incentive stock option.
SECTION
5
Grant
of Stock Options and Stock Appreciation Rights
5.1 Types of Options; Limit on
Incentive Stock Options. The Committee shall have authority,
in its sole discretion, to grant "incentive stock options" pursuant to Section
422 of the Code, to grant "nonstatutory stock options" (i.e., stock options
which do not qualify under Sections 422 or 423 of the Code) or to grant both
types of stock options (but not in tandem). Notwithstanding any other
provision contained in the Plan or in any agreement under Section 2.5, but
subject to the possible exercise of the Committee's discretion contemplated in
the last sentence of this Section 5.1, the aggregate Fair Market Value on the
date of grant of the shares with respect to which such incentive stock options
are exercisable for the first time by a Participant during any calendar year
under all plans of the corporation employing such Participant, any parent or
subsidiary corporation of such corporation and any predecessor corporation of
any such corporation shall not exceed $100,000. If the date on which
one or more incentive stock options could first be exercised would be
accelerated pursuant to any provision of the Plan or any agreement under Section
2.5 and the acceleration of such exercise date would result in a violation of
the $100,000 restriction set forth in the preceding sentence, then,
notwithstanding any such provision, but subject to the provisions of the next
succeeding sentence, the exercise dates of such incentive stock options shall be
accelerated only to the extent, if any, that does not result in a violation of
such restriction and, in such event, the exercise dates of the incentive stock
options with the lowest option prices shall be accelerated to the earliest such
dates. The Committee may, in its sole discretion, authorize the
acceleration of the exercise date of one or more incentive stock options even if
such acceleration would violate the $100,000 restriction set forth in the second
sentence of this Section 5.1 and even if one or more such incentive stock
options are thereby converted in whole or in part to nonstatutory stock
options.
5.2 Types and Nature of Stock
Appreciation Rights. Stock appreciation rights may be tandem
stock appreciation rights which are granted in conjunction with incentive stock
options or nonstatutory stock options (“Tandem SARs”), or stock appreciation
rights which are not granted in conjunction with options (“Free-Standing
SARs”). Upon the exercise of a stock appreciation right, the
Participant shall be entitled to receive an amount in cash, shares of Common
Stock, or both, in value equal to the product of (i) the excess of the Fair
Market Value of one share of Common Stock on the date of exercise of the stock
appreciation right over, in the case of a Tandem SAR, the exercise price of the
related option, or in the case of a Free-Standing SAR, the Base Price per share
(the “Spread”), multiplied by (ii) the number of shares of Common Stock in
respect of which the stock appreciation right has been
exercised. Notwithstanding the foregoing, the Committee at the time
it grants a stock appreciation right may provide that the Spread covered by such
stock appreciation right may not exceed a lower specified amount. The
applicable agreement under Section 2.5 governing the stock appreciation rights
shall specify whether such payment is to be made in cash or Common Stock or
both, or shall reserve to the Committee or the Participant the right to make
that determination prior to or upon the exercise of the stock appreciation
right. Tandem SARs may be granted at the grant date of the related
stock options or, in the case of a related nonstatutory stock option, also at a
later date. At the time a Tandem SAR is granted, the Committee may
limit the exercise period for such Tandem SAR, before and after which period no
Tandem SAR shall attach to the underlying stock option. In no event
shall the exercise period for a Tandem SAR exceed the exercise period for the
related stock option. A Tandem SAR shall be exercisable only at such
time or times and to the extent that the related option is exercisable in
accordance with the provisions of this Section 5. A Tandem SAR shall
terminate or be forfeited upon the exercise or forfeiture of the related stock
option, and the related stock option shall terminate or be forfeited upon the
exercise or forfeiture of the Tandem SAR. Any Tandem SAR granted with
a related incentive stock option shall be exercisable only when the Fair Market
Value of a share of Common Stock exceeds the exercise price for a share of
Common Stock under the related incentive stock option.
5.3 Exercise Price and Base
Price. The exercise price per share of Common Stock subject to
an option and any Tandem SAR, and the base price per share for any Free-Standing
SAR (the “Base Price”), shall be determined by the Committee and set forth in
the applicable agreement under Section 2.5, and shall not be less than the Fair
Market Value of a share of the Common Stock on the applicable grant date, except
that in the case of an incentive stock option granted to a Participant who,
immediately prior to such grant, owns stock possessing more than ten percent
(10%) of the total combined voting power of all classes of stock of the
Corporation or any Subsidiary which is a corporation (a "Ten Percent Employee"),
the exercise price shall not be less than one hundred ten percent (110%) of the
Fair Market Value on the date of grant. For purposes of this Section
5.3, an individual (i) shall be considered as owning not only shares of stock
owned individually but also all shares of stock that are at the time owned,
directly or indirectly, by or for the spouse, ancestors, lineal descendants and
brothers and sisters (whether by the whole or half blood) of such individual and
(ii) shall be considered as owning proportionately any shares owned, directly or
indirectly, by or for any corporation, partnership, estate or trust in which
such individual is a shareholder, partner or beneficiary. In no event
may any option or stock appreciation right granted under this Plan, other than
pursuant to Section 4.5, be amended to decrease the exercise price or Base Price
thereof, be cancelled in conjunction with the grant of any new option or stock
appreciation right with a lower exercise price or Base Price, be cancelled or
repurchased for cash, property, or another Award at a time when the exercise
price or Base Price is greater than the Fair Market Value of the underlying
Common Stock, or otherwise be subject to any action that would be treated, for
accounting purposes, as a “repricing” of such option or stock appreciation
right, unless such amendment, cancellation, or action is approved by the
Corporation’s shareholders.
5.4 Term; Vesting and
Exercisability. The term of each option and each stock
appreciation right shall be fixed by the Committee, but shall not exceed ten
years from the date of grant (five years in the case of an incentive stock
option granted to a Ten Percent Employee). Except as otherwise
provided herein, options and stock appreciation rights shall be exercisable at
such time or times and subject to such terms and conditions as shall be
determined by the Committee and may be exercisable commencing with the grant
date.
5.5 Method of
Exercise. Subject to the provisions of this Section 5, options
and stock appreciation rights may be exercised, in whole or in part (unless
otherwise specified by the Committee in its sole discretion), at any time during
the applicable term by giving written notice of exercise to the Corporation
specifying the number of shares of Common Stock as to which the option or stock
appreciation rights is being exercised. In the case of the exercise
of an option, such notice shall be accompanied by payment in full of the
exercise price in United States of America dollars by certified or bank check or
wire of immediately available funds. If approved by the Committee (at the time
of grant in the case of an incentive stock option or at any time in the case of
a nonstatutory stock option), payment, in full or in part, may also be made as
follows:
(a) Payment
may be made in the form of unrestricted shares of Common Stock (by delivery of
such shares or by attestation) of the same class as the Common Stock subject to
the option already owned by the Participant (based on the Fair Market Value of
the Common Stock on the date the option is exercised) provided however, that any
portion of the exercise price representing a fraction of a share shall be paid
in cash;
(b) To
the extent permitted by applicable law, payment may be made by delivering a
properly executed exercise notice to the Corporation, together with a copy of
irrevocable instructions to a broker to deliver promptly to the Corporation the
amount of sale or loan proceeds necessary to pay the exercise price, and, if
requested, the amount of any federal, state, local or foreign withholding taxes.
To facilitate the foregoing, the Corporation may, to the extent permitted by
applicable law, enter into agreements for coordinated procedures with one or
more brokerage firms. In the event the broker sells any shares on
behalf of a Participant, the broker shall be acting solely as the agent of the
Participant, and the Corporation disclaims any responsibility for the actions of
the broker in making any such sales; and/or
(c) With
such other instrument as approved by the Committee, including Corporation loans,
to the extent permitted by applicable law.
5.6 Delivery; Rights of
Shareholders. No shares shall be delivered pursuant to the
exercise of an option until the exercise price for the option has been fully
paid and applicable taxes have been withheld. Unless otherwise
specified by the Committee, the applicable Participant shall have all of the
rights of a shareholder of the Corporation holding Common Stock with respect to
the shares of Common Stock to be issued upon the exercise of the option or stock
appreciation right (including the right to vote the applicable shares and the
right to receive dividends), when the Participant (i) has given written notice
of exercise in accordance with the procedures established by the Committee, (ii)
if requested, has given the representation described in Section 10, and (iii) in
the case of an option, has paid in full the exercise price for such
shares.
5.7 Nontransferability of
Options and Stock Appreciation Rights. Unless
the Committee shall otherwise determine in the case of nonstatutory stock
options and stock appreciation rights and limited to a transfer without the
payment of value or consideration to the Participant, (i) no option or stock
appreciation right shall be transferable by a Participant other than by will, or
if the Participant dies intestate, by the laws of descent and distribution of
the state of domicile of the Participant at the time of death, and (ii) all
stock options and stock appreciation rights shall be exercisable during the
lifetime of the Participant only by the Participant (or the Participant’s
guardian or legal representative). Any Tandem SAR shall be
transferable only when the related stock option is transferable and with the
related stock option.
5.8 Termination of
Employment. Unless the Committee, in its sole discretion,
shall otherwise determine at the time of grant of the Award or, other than in
the case of incentive stock options, thereafter, but subject to the provisions
of Section 5.1 in the case of incentive stock options:
(a) If
the employment of a Participant who is not disabled within the meaning of
Section 422(c)(6) of the Code (a "Disabled Participant") is voluntarily
terminated with the consent of the Corporation or a Subsidiary or a Participant
retires under any retirement plan of the Corporation or a Subsidiary, any then
outstanding incentive stock option held by such Participant shall be exercisable
by the Participant (but only to the extent exercisable by the Participant
immediately prior to the termination of employment) at any time prior to the
expiration date of such incentive stock option or within three months after the
date of termination of employment, whichever is the shorter period;
(b) If
the employment of a Participant who is not a Disabled Participant is voluntarily
terminated with the consent of the Corporation or a Subsidiary or a Participant
retires under any retirement plan of the Corporation or a Subsidiary, any then
outstanding nonstatutory stock option or stock appreciation right held by such
Participant shall be exercisable by the Participant (but only to the extent
exercisable by the Participant immediately prior to the termination of
employment) at any time prior to the expiration date of such nonstatutory stock
option or stock appreciation right or within one year after the date of
termination of employment, whichever is the shorter period;
(c) If
the employment of a Participant who is a Disabled Participant is voluntarily
terminated with the consent of the Corporation or a Subsidiary, any then
outstanding stock option or stock appreciation right held by such Participant
shall be exercisable in full (whether or not so exercisable by the Participant
immediately prior to the termination of employment) by the Participant at any
time prior to the expiration date of such stock option or stock appreciation
right or within one year after the date of termination of employment, whichever
is the shorter period;
(d) Following
the death of a Participant during employment, any outstanding stock option or
stock appreciation right held by the Participant at the time of death shall be
exercisable in full (whether or not so exercisable by the Participant
immediately prior to the death of the Participant) by the person entitled to do
so under the will of the Participant, or, if the Participant shall fail to make
testamentary disposition of the stock option or stock appreciation right or
shall die intestate, by the legal representative of the Participant at any time
prior to the expiration date of such stock option or stock appreciation right or
within one year after the date of death, whichever is the shorter
period;
(e) Following
the death of a Participant after termination of employment during a period when
a stock option or stock appreciation right is exercisable, any outstanding stock
option or stock appreciation right held by the Participant at the time of death
shall be exercisable by such person entitled to do so under the will of the
Participant or by such legal representative (but only to the extent the stock
option or stock appreciation right was exercisable by the Participant
immediately prior to the death of the Participant) at any time prior to the
expiration date of such stock option or stock appreciation right or within one
year after the date of death, whichever is the shorter period; and
(f) Unless
the exercise period of a stock option or stock appreciation right following
termination of employment has been extended as provided in Section 11.3, if the
employment of a Participant terminates for any reason other than voluntary
termination with the consent of the Corporation or a Subsidiary, retirement
under any retirement plan of the Corporation or a Subsidiary or death, all
outstanding stock options and stock appreciation rights held by the Participant
at the time of such termination of employment shall automatically
terminate.
Whether
termination of employment is a voluntary termination with the consent of the
Corporation or a Subsidiary and whether a Participant is a Disabled Participant
shall be determined in each case, in its sole discretion, by the Committee (or,
in the case of Participants who are not (i) Covered Employees as of the end of
the Corporation’s immediately preceding fiscal year or (ii) the Chief Executive
Officer of the Corporation, by such Chief Executive Officer, in his sole
discretion) and any such determination by the Committee or such Chief Executive
Officer shall be final and binding. Without limitation of the
foregoing, a termination of employment by the Participant shall not be a
voluntary termination with the consent of the Corporation unless the Committee
or, if applicable, such Chief Executive Officer, in its or his sole discretion,
specifically consents to the termination of employment in writing.
5.9 Other Terms and
Conditions. Subject to the foregoing provisions of this
Section 5 and the other provisions of the Plan, any stock option or stock
appreciation right granted under the Plan may be exercised at such times and in
such amounts and be subject to such restrictions and other terms and conditions,
if any, as shall be determined, in its sole discretion, by the Committee and set
forth in the agreement under Section 2.5.
SECTION
6
Restricted
Stock
6.1 Restricted Stock Awards;
Certificates. Shares of restricted stock are actual shares of
Common Stock issued to a Participant, and shall be evidenced in such manner as
the Committee may deem appropriate, including book-entry registration or
issuance of one or more stock certificates. Any certificate issued in
respect of shares of restricted stock shall be registered in the name of the
applicable Participant and, unless held by or on behalf of the Corporation in
escrow or custody until the restrictions lapse or the shares are forfeited,
shall bear an appropriate conspicuous legend referring to the terms, conditions,
and restrictions applicable to such Award, substantially in the following
form:
“The
transferability of this certificate and the shares of stock represented hereby
are subject to the terms and conditions (including forfeiture) of the Matthews
International Corporation 2007 Equity Incentive Plan and a corresponding
agreement. Copies of such Plan and agreement are on file at the offices of
Matthews International Corporation, Two NorthShore Center, Pittsburgh, PA
15212-5851.”
The
Committee may require that the certificates evidencing such shares be held in
escrow or custody by or on behalf of the Corporation until the restrictions
thereon shall have lapsed or the shares are forfeited and that, as a condition
of any Award of restricted stock, the applicable Participant deliver to the
Corporation a stock power, endorsed in blank, relating to the Common Stock
covered by such Award.
6.2 Terms and
Conditions. Shares of restricted stock shall be subject to the
restrictions set forth in Section 15.11 and the following terms and
conditions:
(a) The
Committee shall, prior to or at the time of grant, condition the vesting of an
Award of restricted stock upon (i) the continued service of the applicable
Participant, (ii) the attainment of Performance Goals, or (iii) the attainment
of Performance Goals and the continued service of the applicable
Participant. The Committee shall establish at the time the restricted
stock is granted the performance periods during which any Performance Goals
specified by the Committee with respect to the restricted stock Award are to be
measured. In the event that the Committee conditions the vesting of
an Award of restricted stock upon the attainment of Performance Goals or the
attainment of Performance Goals and the continued service of the applicable
Participant, the Committee may, prior to or at the time of grant, designate an
Award of restricted stock as a Qualified Performance-Based Award. The
conditions for vesting and the other provisions of restricted stock Awards
(including without limitation any applicable Performance Goals) need not be the
same with respect to each recipient, and shall be established by the Committee
in its sole discretion. Except in the case of a Qualified
Performance-Based Award and subject to the restrictions set forth in Section
15.11, the Committee at any time after the date of grant, in its sole
discretion, may modify or waive any of the conditions applicable to an Award of
restricted stock.
(b) Subject
to the provisions of the Plan (including Section 6.3) and the applicable
agreement under Section 2.5, during the period, if any, set by the Committee,
commencing with the date of such restricted stock Award for which such vesting
restrictions apply (the “Restriction Period”), and until the expiration of the
Restriction Period, the Participant shall not be permitted to sell, assign,
transfer, pledge or otherwise encumber shares of such restricted
stock. A restricted stock Award may vest in part on a pro rata basis
prior to the expiration of any Restriction Period.
(c) Except
as provided in this Section 6 and in the applicable agreement under Section 2.5,
the applicable Participant shall have, with respect to the shares of restricted
stock, all of the rights of a shareholder of the Corporation holding the Common
Stock that is the subject of the restricted stock, including, if applicable, the
right to vote the shares and the right to receive any cash
dividends. If so determined by the Committee and set forth in the
applicable agreement under Section 2.5 and subject to Section 15.4, cash
dividends on the Common Stock that is the subject of the restricted stock Award
may be (i) automatically deferred and reinvested in additional restricted stock,
and held subject to the same vesting and forfeiture conditions of the underlying
restricted stock, or (ii) held by the Corporation in cash (without any payment
of interest thereon) subject to the same vesting and forfeiture conditions of
the restricted stock with respect to which the dividends are
payable. Unless otherwise determined by the Committee and set forth
in the applicable agreement under Section 2.5, any Common Stock or other
securities payable with respect to any restricted stock as a result of or
pursuant to Section 4.5, shall be held subject to the same vesting and
forfeiture conditions of the underlying restricted stock.
(d) As
soon as practicable after the applicable Restriction Period has ended, the
Committee shall determine and certify (in writing in the case of Qualified
Performance-Based Awards) whether and the extent to which the service period
and/or the Performance Goals were met for the applicable restricted
stock. If the vesting condition or conditions applicable to the
restricted stock are not satisfied by the time the Restriction Period has
expired, such restricted stock shall be forfeited. If and when the
Restriction Period expires without a prior forfeiture of the shares of
restricted stock (i) if legended certificates have been issued, unlegended
certificates for such shares shall be delivered to the Participant upon
surrender of the legended certificates, (ii) if legended certificates have not
yet been issued, unlegended certificates (and any related blank stock powers
previously executed by the Participant) shall be delivered to the Participant,
and (iii) any cash dividends held by the Corporation pursuant to Section 6.2(c)
shall be delivered to the Participant.
6.3 Permitted
Transfers. Neither this Section 6 nor any other provision of
the Plan shall preclude a Participant from transferring or assigning restricted
stock, without the payment of value or consideration to the Participant, to (i)
the trustee of a trust that is revocable by such Participant alone, both at the
time of the transfer or assignment and at all times thereafter prior to such
Participant's death or (ii) the trustee of any other trust to the extent
approved in advance by the Committee, in its sole discretion, in
writing. A transfer or assignment of restricted stock from such
trustee to any person other than such Participant shall be permitted only to the
extent approved in advance by the Committee, in its sole discretion, in writing,
and restricted stock held by such trustee shall be subject to all of the
conditions and restrictions set forth in the Plan and in the applicable
agreement under Section 2.5 as if such trustee were a party to such
agreement.
SECTION
7
Restricted
Stock Units
7.1 Restricted Stock Unit
Awards. Restricted stock units
are Awards denominated in shares of Common Stock that will be settled,
subject to the terms and conditions of the restricted stock units and at the
sole discretion of the Committee, in an amount in cash, shares of Common Stock,
or both, based upon the Fair Market Value of a specified number of shares of
Common Stock.
7.2 Terms and
Conditions. Restricted stock units shall be subject to the
restrictions set forth in Section 15.11 and the following terms and
conditions:
(a) The
Committee shall, prior to or at the time of grant, condition the vesting of
restricted stock units upon (i) the continued service of the applicable
Participant, (ii) the attainment of Performance Goals or (iii) the attainment of
Performance Goals and the continued service of the applicable Participant. In
the event that the Committee conditions the vesting of restricted stock units
upon the attainment of Performance Goals or the attainment of Performance Goals
and the continued service of the applicable Participant, the Committee may,
prior to or at the time of grant, designate the restricted stock units as a
Qualified Performance-Based Awards. The Committee shall determine the
performance period(s) during which any Performance Goals are to be
achieved. The conditions for grant or vesting and the other
provisions of restricted stock units (including without limitation any
applicable Performance Goals) need not be the same with respect to each
recipient. An Award of restricted stock units shall be settled as and when the
restricted stock units vest, as determined and certified (in writing in the case
of Qualified Performance-Based Awards) by the Committee, or at a later time
specified by the Committee or in accordance with an election of the Participant,
if the Committee so permits. Except in the case of a Qualified
Performance-Based Award and subject to the restrictions set forth in Section
15.11, the Committee at any time after the date of grant, in its sole
discretion, may modify or waive any of the conditions applicable to an Award of
restricted stock units.
(b) Subject
to the provisions of the Plan and the applicable agreement under Section 2.5,
during the period, if any, set by the Committee, commencing with the date of
grant of such restricted stock units for which such vesting restrictions apply
(the “Units Restriction Period”), and until the expiration of the Units
Restriction Period, the Participant shall not be permitted to sell, assign,
transfer, pledge or otherwise encumber restricted stock units. A
restricted stock unit may vest in part prior to the expiration of any Units
Restriction Period.
(c) Participants
granted restricted stock units shall not be entitled to any dividends payable on
the Common Stock unless the agreement under Section 2.5 for restricted stock
units specifies to what extent and on what terms and conditions the applicable
Participant shall be entitled to receive current or deferred payments of cash,
Common Stock or other property corresponding to the dividends payable on the
Common Stock (subject to Section 15.4 below). Restricted stock units
shall not have any voting rights, and holders of restricted stock units shall
not be shareholders of the Corporation unless and until shares of Common Stock
are issued by the Corporation (in book-entry form or otherwise).
SECTION
8
Performance
Units
Performance
units may be granted hereunder to eligible employees, for no cash consideration
or for such minimum consideration as may be required by applicable law, either
alone or in addition to other Awards granted under the Plan. The
Committee shall establish at the time the performance unit is granted the
performance period(s) during which any Performance Goals specified by the
Committee with respect to the Award are to be measured, provided, however, that
performance units shall be subject to the restrictions set forth in Section
15.11. The Performance Goals to be achieved during any performance
period(s) and the length of the performance period(s) shall be determined by the
Committee upon the grant of each performance unit. The Committee may,
in connection with the grant of performance units, designate them as Qualified
Performance-Based Awards. The conditions for grant or vesting and the
other provisions of performance units (including without limitation any
applicable Performance Goals) need not be the same with respect to each
Participant. Performance units may be paid in cash, shares of Common
Stock, other property or any combination thereof, in the sole discretion of the
Committee as set forth in the applicable agreement under Section
2.5. Performance units shall not have any voting rights, and holders
of performance units shall not be shareholders of the Corporation unless and
until shares of Common Stock are issued by the Corporation (in book-entry form
or otherwise). The Performance Goals to be achieved for each
performance period, whether the Performance Goals have been achieved, and the
amount of the Award to be distributed shall be conclusively determined and
certified (in writing in the case of Qualified Performance-Based Awards) by the
Committee. Performance units may be paid in a lump sum or in
installments following the close of the performance period(s). The
Participant shall not be permitted to sell, assign, transfer, pledge or
otherwise encumber performance units. The maximum value of the
property, including cash, that may be paid or distributed to any Participant
pursuant to a grant of performance units made in any one calendar year shall be
five million United States of America dollars ($5,000,000). Except in
the case of a Qualified Performance-Based Award and subject to the restrictions
set forth in Section 15.11, the Committee at any time after the grant of
performance units, in its sole discretion, may modify or waive any of the
conditions applicable to an Award of performance units.
SECTION
9
Other
Stock-Based Awards
The Committee may award Common Stock
and other Awards that are valued in whole or in part by reference to, or are
otherwise based upon, Common Stock, including but not limited to, unrestricted
stock or dividend equivalents. Any such Award shall be subject to the
restrictions set forth in Section 15.11 and such other terms and conditions as
established by the Committee, and may include Qualified Performance-Based
Awards. The maximum value of Common Stock and other property,
including cash, that may be paid or distributed to any Participant pursuant to
this Section 9 (and not pursuant to other sections of the Plan) in any one
calendar year shall be five million United States of America dollars
($5,000,000).
SECTION
10
Issuance
of Shares
The
Committee may require each person purchasing or receiving shares of Common Stock
pursuant to an Award to represent to and agree with the Corporation in writing
that such person is acquiring the shares without a view to the distribution
thereof. The certificates for such shares may include any legend
which the Committee deems appropriate to reflect any restrictions on
transfer. The obligation of the Corporation to issue shares of Common
Stock under the Plan shall be subject to (i) the effectiveness of a registration
statement under the Securities Act of 1933, as amended, with respect to such
shares, if deemed necessary or appropriate by counsel for the Corporation, (ii)
the condition that the shares shall have been listed (or authorized for listing
upon official notice of issuance) upon each stock exchange, if any, on which the
shares of Common Stock may then be listed, (iii) all other applicable laws,
regulations, rules and orders which may then be in effect and (iv) obtaining any
other consent, approval, or permit from any state or federal governmental agency
which the Committee shall, in its sole discretion, determine to be necessary or
advisable.
SECTION
11
Additional
Rights in Certain Events
11.1 Definitions.
For purposes of this Section 11, the
following terms shall have the following meaning:
(1) The
term "Person" shall be used as that term is used in Section 13(d) and 14(d) of
the 1934 Act.
(2) "Beneficial
Ownership" shall be determined as provided in Rule 13d-3 under the 1934 Act as
in effect on the effective date of the Plan.
(3) "Voting
Shares" shall mean all securities of a Corporation entitling the holders thereof
to vote in an annual election of Directors (without consideration of the rights
of any class of stock other than the Common Stock to elect Directors by a
separate class vote); and a specified percentage of "Voting Power" of a
Corporation shall mean such number of the Voting Shares as shall enable the
holders thereof to cast such percentage of all the votes which could be cast in
an annual election of directors (without consideration of the rights of any
class of stock other than the Common Stock to elect Directors by a separate
class vote).
(4) "Section
11 Event" shall mean the date upon which any of the following events
occurs:
(a) The
Corporation acquires actual knowledge that any Person other than the
Corporation, a Subsidiary or any employee benefit plan(s) sponsored by the
Corporation has acquired the Beneficial Ownership, directly or indirectly, of
securities of the Corporation entitling such Person to 20% or more of the Voting
Power of the Corporation;
(b) At
any time less than 60% of the members of the Board of Directors shall be
individuals who were either (i) Directors on the effective date of the Plan or
(ii) individuals whose election, or nomination for election, was approved by a
vote (including a vote approving a merger or other agreement providing the
membership of such individuals on the Board of Directors) of at least two-thirds
of the Directors then still in office who were Directors on the effective date
of the Plan or who were so approved;
(c) The
shareholders of the Corporation shall approve an agreement or plan providing for
the Corporation to be merged, consolidated or otherwise combined with, or for
all or substantially all its assets or stock to be acquired by, another
corporation, as a consequence of which the former shareholders of the
Corporation will own, immediately after such merger, consolidation, combination
or acquisition, less than a majority of the Voting Power of such surviving or
acquiring corporation or the parent thereof; or
(d) The
shareholders of the Corporation shall approve any liquidation, sale or transfer
of all or substantially all of the assets of the Corporation (other than to an
entity or entities controlled by the Corporation and/or its shareholders
following such event);
provided,
however, that if securities beneficially owned by a Participant are included in
determining the Beneficial Ownership of a Person referred to in paragraph 4(a),
then no Section 11 Event with respect to such Participant shall be deemed to
have occurred by reason of such event.
11.2 Acceleration of the Exercise
Date of Stock Options and Stock Appreciation Rights. Subject
to the provisions of Section 5 in the case of incentive stock options and
Section 11.6, unless the agreement under Section 2.5 shall otherwise provide,
notwithstanding any other provision contained in the Plan, in case any Section
11 Event occurs all outstanding stock options and stock appreciation rights
shall become immediately and fully exercisable whether or not otherwise
exercisable by their terms.
11.3 Extension of the Expiration
Date of Stock Options and Stock Appreciation Rights. Subject
to the provisions of Section 5 in the case of incentive stock options and
Section 11.6, unless the agreement under Section 2.5 shall otherwise provide,
notwithstanding any other provision contained in the Plan, all stock options and
stock appreciation rights held by a Participant whose employment with the
Corporation or a Subsidiary terminates within one year of any Section 11 Event
for any reason other than voluntary termination with the consent of the
Corporation or a Subsidiary, retirement under any retirement plan of the
Corporation or a Subsidiary or death shall be exercisable for a period of three
months from the date of such termination of employment, but in no event after
the expiration date of the stock option or stock appreciation
right.
11.4 Lapse of Restrictions on
Restricted Stock Awards. Unless the agreement under Section
2.5 shall otherwise provide, notwithstanding any other provision contained in
the Plan other than Section 11.6, if any Section 11 Event occurs prior to the
scheduled lapse of all restrictions applicable to restricted stock Awards under
the Plan (including but not limited to Qualified Performance-Based Awards), all
such restrictions shall lapse upon the occurrence of any such Section 11 Event
regardless of the scheduled lapse of such restrictions.
11.5 Vesting of Restricted Stock
Units and Performance Units. Unless the agreement under
Section 2.5 shall otherwise provide, notwithstanding any other provision
contained in the Plan other than Section 11.6, if any Section 11 Event occurs,
all restricted stock units and performance units (including but not limited to
Qualified Performance-Based Awards) shall be considered to be earned and payable
in full, any vesting conditions shall be considered to have been satisfied, and
such restricted stock units and performance units shall be settled in cash as
promptly as is practicable.
11.6 Code Section
409A. Notwithstanding the foregoing, if any Award is subject
to Section 409A of the Code, this Section 11 shall be applicable only to the
extent specifically provided in the agreement under Section 2.5 applicable to
the Award and permitted pursuant to Section 12.2.
11.7 Tax Gross-Up
Payments. Unless the agreement under Section 2.5 shall
otherwise provide, if the independent auditors of the Corporation most recently
selected by the Board determine that (i) any grant, payment or transfer to or
for the benefit of a Participant (whether granted, paid or payable or
transferred or transferable pursuant to the Plan or otherwise) (a “Payment”)
would be deemed to be an “excess parachute payment” for Federal income tax
purposes because of Section 280G of the Code, or any successor provision
(“Section 280G”), and (ii) any Award, grant, payment or transfer under the Plan
to or for the benefit of a Participant within one year of or following the
occurrence of a Section 11 Event constitutes in whole or in part a “parachute
payment” under Section 280G (without regard to Section 280G(b)(4)) used in
calculating such “excess parachute payment,” the Payment will be grossed up
through the payment by the Corporation to the Participant in cash of the amount
of any excise tax under Section 4999 of the Code, or any successor provision
(“Section 4999”), on the “excess parachute payment” and the amount of any excise
tax under Section 4999 and applicable income tax on the total amount of such
gross up payment so that the Participant will receive the full amount of the
Payment after the Participant has paid any excise tax under Section 4999 of the
Code on the “excess parachute payment” and any excise tax under Section 4999 and
applicable income tax on the amount of such gross up payment. On the
later of the date an “excess parachute payment” is paid to or for the benefit of
the Participant or the date on which it can be first determined that a Payment
would be deemed to be an “excess parachute payment” (but in any event no later
than the end of the Participant’s taxable year next following the taxable year
in which the Participant remits the taxes subject to the gross up payment), the
Corporation shall pay or distribute to or for the benefit of the Participant the
gross up payment due to the Participant under this Section
11.7. Notwithstanding the foregoing, no amounts shall be payable
under this Section 11.7 unless they are either exempt from the application of,
or comply with, the requirements of Section 409A of the Code.
SECTION
12
Qualified
Performance-Based Awards; Section 409A
12.1 Qualified Performance-Based
Awards.
(a) The
provisions of this Plan are intended to ensure that all options and stock
appreciation rights granted hereunder to any Participant who is or may be a
Covered Employee in the tax year in which such option or stock appreciation
right is expected to be deductible to the Corporation qualify for the exemption
from the limitation on deductions imposed by Section 162(m) of the Code (the
“Section 162(m) Exemption”), and all such Awards shall therefore be considered
Qualified Performance-Based Awards and this Plan shall be interpreted and
operated consistent with that intention. When granting any Award
other than an option or stock appreciation right, the Committee may designate
such Award as a Qualified Performance-Based Award, based upon a determination
that (i) the recipient is or may be a Covered Employee with respect to such
Award, and (ii) the Committee wishes such Award to qualify for the Section
162(m) Exemption, and the terms of any such Award (and of the grant thereof)
shall be consistent with such designation. Within 90 days after the
commencement of a performance period or, if earlier, by the expiration of 25% of
a performance period, the Committee will designate one or more performance
periods, determine the Participants for the performance periods and establish
the Performance Goals for the performance periods.
(b) Each
Qualified Performance-Based Award (other than an option or stock appreciation
right) shall be earned, vested and/or payable (as applicable) upon certification
in writing by the Committee of the achievement of one or more Performance Goals,
together with the satisfaction of any other conditions, such as continued
employment, as previously established by the Committee with respect to such
Award.
(c)
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Notwithstanding
any provision in the Plan or in any agreement under Section 2.5, to the
extent that any such provision or action of the Committee would cause any
Qualified Performance-Based Award not to qualify for the Section 162(m)
Exemption, such provision or action shall be null and void as it relates
to Covered Employees, to the extent permitted by law and deemed advisable
by the Committee.
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12.2 Code Section
409A. It is the intention of the Corporation that no Award
shall be “deferred compensation” subject to Section 409A of the Code, unless and
to the extent that the Committee specifically determines otherwise as provided
in the immediately following sentence, and the Plan and the terms and conditions
of all Awards shall be interpreted accordingly. The terms and
conditions governing any Awards that the Committee determines will be subject to
Section 409A of the Code, including any rules for elective or mandatory deferral
of the delivery of cash or shares of Common Stock pursuant thereto and any rules
regarding treatment of such Awards in the event of a Section 11 Event, shall be
set forth in the applicable agreement under Section 2.5, and shall comply in all
respects with Section 409A of the Code.
SECTION
13
Effect
of the Plan on the Rights of Employees and Employer
Neither
the adoption of the Plan nor any action of the Board or the Committee pursuant
to the Plan shall be deemed to give any employee any right to be granted any
Award under the Plan. Nothing in the Plan, in any Award under the
Plan or in any agreement under Section 2.5 providing for any Award under the
Plan shall confer any right to any employee to continue in the employ of the
Corporation or any Subsidiary or interfere in any way with the rights of the
Corporation or any Subsidiary to terminate the employment of any employee at any
time or adjust the compensation of any employee at any time.
SECTION
14
Amendment
or Termination
The right to amend the Plan at any time
and from time to time and the right to terminate the Plan are hereby
specifically reserved to the Board; provided that no such amendment of the Plan
shall, without shareholder approval (a) increase the maximum aggregate number of
shares of Common Stock for which Awards may be made under Section 4.1 of the
Plan, (b) increase the maximum aggregate number of shares of Common Stock as to
which incentive stock options may be granted under Section 4.1 of the Plan, (c)
make any changes in the class of employees eligible to receive Awards under the
Plan, (d) change the maximum number of shares of Common Stock as to which Awards
may be made to any Participant under Section 4.2 of the Plan, or the maximum
amount that may be paid or distributed to any Participant pursuant to a grant of
performance units or other stock-based Awards made in any one calendar year
under Section 8 or 9 of the Plan, respectively, (e) change the exercise price or
Base Price permitted under Section 5.3 of the Plan or the restrictions regarding
repricing under Section 5.3 of the Plan,(f) be made if shareholder approval of
the amendment is at the time required for Awards under the Plan to qualify for
the exemption from Section 16(b) of the 1934 Act provided by Rule 16b-3 or by
the rules of the NASDAQ National Market System or any stock exchange on which
the Common Stock may then be listed or (g) be made to the extent such approval
is needed for Qualified Performance-Based Awards to qualify for the Section
162(m) Exemption. No amendment or termination of the Plan shall,
without the written consent of the holder of an Award under the Plan, adversely
affect the rights of such holder with respect thereto.
SECTION
15
General
Provisions
15.1 Additional Compensation
Arrangements. Nothing contained in the Plan shall prevent the
Corporation or any Subsidiary from adopting other or additional compensation
arrangements for its employees.
15.2 Tax
Withholding. No later than the date as of which an amount
first becomes includible in the gross income of a Participant for federal,
state, local or foreign income or employment or other tax purposes with respect
to any Award under the Plan, such Participant shall pay to the Corporation (or,
if applicable, a Subsidiary), or make arrangements satisfactory to the
Corporation (or, if applicable, a Subsidiary) regarding the payment of, any
federal, state, local or foreign taxes of any kind required by law to be
withheld with respect to such amount. Unless otherwise determined by
the Committee, withholding obligations may be settled with Common Stock,
including Common Stock that is part of the Award that gives rise to the
withholding requirement, having a Fair Market Value on the date of withholding
equal to the minimum amount (and not any greater amount unless otherwise
determined by the Committee) required to be withheld for tax purposes, all in
accordance with such procedures as the Committee establishes, and provided that
any fractional share amount must be paid in cash or withheld from compensation
otherwise due to the Participant. The obligations of the Corporation
under the Plan shall be conditional on such payment or arrangements, and the
Corporation and its Subsidiaries shall, to the extent permitted by law, have the
right to deduct any such taxes from any payment otherwise due to such
Participant. The Committee may establish such procedures as it deems
appropriate, including making irrevocable elections, for the settlement of
withholding obligations with Common Stock.
15.3 Limitation of
Liability. The grant of any Award shall not:
(a) give
a Participant any rights except as expressly set forth in the Plan or in the
agreement under Section 2.5;
(b) create
any fiduciary or other obligation of the Corporation or any Subsidiary to take
any action or provide to the Participant any assistance or dedicate or permit
the use of any assets of the Corporation or any Subsidiary that would permit the
Participant to be able to attain any Performance Goals associated with any
Award;
(c) create
any trust, fiduciary or other duty or obligation of the Corporation or any
Subsidiary to engage in any particular business, continue to engage in any
particular business, engage in any particular business practices or sell any
particular product or products; or
(d) create
any obligation of the Corporation or any Subsidiary that shall be greater than
the obligation of the Corporation or that Subsidiary to any of their general
unsecured creditors.
15.4 Limitation on Dividend
Reinvestment and Dividend Equivalents. Reinvestment of
dividends in additional restricted stock at the time of any dividend payment,
and the payment of shares with respect to dividends to Participants holding
Awards of restricted stock units, shall only be permissible if authorized by the
Committee and if sufficient shares of Common Stock are available under Section 4
for such reinvestment or payment (taking into account then outstanding Awards).
In the event that sufficient shares of Common Stock are not available for such
reinvestment or payment, such reinvestment or payment shall be made in the form
of a grant of restricted stock units equal in number to the shares of Common
Stock that would have been obtained by such payment or reinvestment, the terms
of which restricted stock units shall provide for settlement in cash and for
dividend equivalent reinvestment in further restricted stock units on the terms
contemplated by this Section 15.4.
15.5 Governing Law and
Interpretation. To the extent not preempted by federal Law,
the Plan and all Awards made and actions taken thereunder shall be governed by
and construed in accordance with the laws of the Commonwealth of Pennsylvania,
without reference to principles of conflict of laws. The captions of this Plan
are not part of the provisions hereof and shall have no force or
effect.
15.6 Dispute
Resolution. Since Awards are granted in Western Pennsylvania,
records relating to the Plan and Awards are located in Western Pennsylvania, and
the Plan and Awards are administered in Western Pennsylvania, the Corporation
and the Participant to whom an Award is granted, for themselves and their heirs,
representatives, successors and assigns (collectively, the “Parties”)
irrevocably submit to the exclusive and sole jurisdiction and venue of the state
courts of Allegheny County, Pennsylvania and the federal courts of the Western
District of Pennsylvania with respect to any and all disputes arising out of or
relating to the Plan, the subject matter of the Plan or any Awards under the
Plan, including but not limited to any disputes arising out of or relating to
the interpretation and enforceability of any Awards or the terms and conditions
of the Plan. To achieve certainty regarding the appropriate forum in
which to prosecute and defend actions arising out of or relating to the Plan,
and to ensure consistency in application and interpretation of the governing law
under Section 15.5 of the Plan, the Parties agree that (a) sole and exclusive
appropriate venue for any such action shall be the Pennsylvania courts described
in the immediately preceding sentence, and no other, (b) all claims with respect
to any such action shall be heard and determined exclusively in such
Pennsylvania courts, and no other, (c) such Pennsylvania courts shall have sole
and exclusive jurisdiction over the Parties and over the subject matter of any
dispute relating hereto and (d) the Parties waive any and all objections and
defenses to bringing any such action before such Pennsylvania courts, including
but not limited to those relating to lack of personal jurisdiction, improper
venue or forum non
conveniens.
15.7 Non-Transferability. Except
as otherwise specifically provided in the Plan or by the Committee and limited
to a transfer without the payment of value or consideration to the Participant,
Awards under the Plan are not transferable except by will or by laws of descent
and distribution of the state of domicile of the Participant at the time of
death.
15.8 Deferrals. The
Committee shall be authorized to establish procedures pursuant to which the
payment of any Award may be deferred, provided that any such deferral is
consistent with all aspects of Section 409A of the Code. Subject to the
provisions of this Plan and any agreement under Section 2.5, the recipient of an
Award (including, without limitation, any deferred Award) may, if so determined
by the Committee, be entitled to receive, currently or on a deferred basis,
interest or dividends, or interest or dividend equivalents, with respect to the
number of shares covered by the Award, as determined by the Committee, in its
sole discretion, and the Committee may provide that such amounts (if any) shall
be deemed to have been reinvested in additional shares or otherwise
reinvested.
15.9 Integration. The
Plan and any written agreements executed by Participants and the Corporation
under Section 2.5 contain all of the understandings and representations between
the parties and supersede any prior understandings and agreements entered into
between them regarding the subject matter within. There are no
representations, agreements, arrangements or understandings, oral or written,
between the parties relating to the subject matter of the Plan which are not
fully expressed in the Plan and the written agreements.
15.10 Foreign Employees and
Foreign Law Considerations. The Committee may grant Awards to
eligible employees who are foreign nationals, who are located outside the United
States of America or who are not compensated from a payroll maintained in the
United States of America, or who are otherwise subject to (or could cause the
Corporation to be subject to) legal or regulatory provisions of countries or
jurisdictions outside the United States of America, 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 foster and promote achievement of the
purposes of the Plan, and, in furtherance of such purposes, the Committee may
make such modifications, amendments, procedures, or subplans as may be necessary
or advisable to comply with such legal or regulatory provisions.
15.11 Certain Restrictions on
Certain Awards. Subject to the terms of the Plan and more
restrictive terms, if any, of the applicable agreement under Section 2.5, any
Award of restricted stock, restricted stock units, performance units, or other
stock-based Awards under Section 9 shall be subject to vesting during a
restriction period of at least three (3) years following the date of grant,
provided, however, that:
(i) A
restriction period of only at least one (1) year following the date of grant is
permissible if vesting is conditional, in whole or in part, upon the achievement
of Performance Goals, except that there need not be any minimum restriction
period for a Performance Goal based upon stock price if there is also a
service-based restriction of at least one (1) year following the date of
grant;
(ii) To
the extent permitted by the Committee, in its sole discretion, and specified in
the applicable agreement under Section 2.5, an Award with a restriction period
of at least three (3) years may vest in part on a pro rata basis prior to the
expiration of any such restriction period;
(iii) To
the extent permitted by the Committee, in its sole discretion, and specified in
the applicable agreement under Section 2.5, an Award may vest prior to the
expiration of any restriction period required under this Section 15.11 in the
event of a Participant’s death or retirement, the Participant becoming a
Disabled Participant, or an involuntary termination of the Participant’s
employment by the Corporation or a Subsidiary;
(iv) In
the event of the occurrence of a Section 11 Event, an Award may vest prior to
the expiration of any restriction period required under this Section 15.11
pursuant to Section 11.4 or 11.5 or as otherwise permitted by the Committee, in
its sole discretion, and specified in the applicable agreement under Section
2.5; and
(v) The
Committee may grant Awards of restricted stock, restricted stock units,
performance units and other stock-based Awards under Section 9 without regard to
the foregoing requirements, and the Committee may accelerate the vesting of and
lapse any restrictions with respect to, any such Awards (in addition to the
potential acceleration under (ii)-(iv) of the foregoing), for up to,
collectively for all such Awards, ten percent (10%) of the shares of Common
Stock for which Awards may be made under Section 4.1 of the Plan, as adjusted
under the terms of the Plan.
SECTION
16
Effective
Date and Duration of Plan
The effective date and date of adoption
of the Plan shall be November 13, 2007, the date of adoption of the Plan by the
Board, and the effective date of the amendments to the Plan by the Board on
September 26, 2008 shall be September 26, 2008. No Award under the
Plan may be made subsequent to November 12, 2017.