2000 Broad-Based Employee Plan - Waste Management Inc.(Feb 28, 2000)
WASTE MANAGEMENT, INC. 2000 BROAD-BASED EMPLOYEE PLAN FEBRUARY 28, 2000 2 TABLE OF CONTENTS PAGE ---- ARTICLE I. GENERAL...................................................1 Section 1.1. Purpose..........................................1 Section 1.2. Administration...................................1 Section 1.3. Eligibility for Participation....................2 Section 1.4. Types of Awards Under Plan.......................2 Section 1.5. Aggregate Limitation on Awards...................2 Section 1.6. Effective Date and Term of Plan..................3ARTICLE II. STOCK OPTIONS............................................4 Section 2.1. Award of Stock Options...........................4 Section 2.2. Stock Option Agreements..........................4 Section 2.3. Stock Option Price...............................4 Section 2.4. Term and Exercise................................4 Section 2.5. Manner of Payment................................4 Section 2.6. Delivery of Shares...............................5 Section 2.7. Death, Retirement and Termination of Employment of Optionee..........................5 Section 2.8. Tax Election.....................................5 Section 2.9. Effect of Exercise...............................6ARTICLE III. INCENTIVE STOCK OPTIONS.................................6 Section 3.1. Award of Incentive Stock Options.................6 Section 3.2. Incentive Stock Option Agreements................6 Section 3.3. Incentive Stock Option Price.....................6 Section 3.4. Term and Exercise................................6 Section 3.5. Maximum Amount of Incentive Stock Option Grant...7 Section 3.6. Death of Optionee................................7 Section 3.7. Retirement or Disability.........................7 Section 3.8. Termination for Other Reasons....................7 Section 3.9. Applicability of Stock Options Sections..........7ARTICLE IV. RELOAD OPTIONS...........................................8 Section 4.1. Authorization of Reload Options..................8 Section 4.2. Reload Option Amendment..........................8 Section 4.3. Reload Option Price..............................8 Section 4.4. Term and Exercise................................8 Section 4.5. Termination of Employment........................8 Section 4.6. Applicability of Stock Options Sections..........9ARTICLE V. ALTERNATE APPRECIATION RIGHTS.............................9 Section 5.1. Award of Alternate Appreciation Rights...........9 i 3 Section 5.2. Alternate Appreciation Rights Agreement..........9 Section 5.3. Exercise.........................................9 Section 5.4. Amount of Payment................................9 Section 5.5. Form of Payment..................................9 Section 5.6. Effect of Exercise...............................10 Section 5.7. Termination of Employment, Retirement, Death or Disability.............................10ARTICLE VI. LIMITED RIGHTS...........................................10 Section 6.1. Award of Limited Rights..........................10 Section 6.2. Limited Rights Agreement.........................10 Section 6.3. Exercise Period..................................10 Section 6.4. Amount of Payment................................10 Section 6.5. Form of Payment..................................11 Section 6.6. Effect of Exercise...............................11 Section 6.7. Retirement or Disability.........................11 Section 6.8. Death of Optionee or Termination for Other Reasons...................................11 Section 6.9. Termination Related to a Change in Control.......11ARTICLE VII. SUBSTITUTION AWARDS.....................................12ARTICLE VIII. BONUS STOCK AWARDS.....................................12 Section 8.1. Award of Bonus Stock.............................12 Section 8.2. Stock Bonus Agreements...........................12ARTICLE IX. MISCELLANEOUS............................................12 Section 9.1. General Restriction..............................12 Section 9.2. Non-Assignability................................13 Section 9.3. Withholding Taxes................................13 Section 9.4. Right to Terminate Employment....................13 Section 9.5. Non-Uniform Determination........................13 Section 9.6. Rights as a Shareholder..........................13 Section 9.7. Definitions......................................14 Section 9.8. Leaves of Absence................................15 Section 9.9. Newly Eligible Employees.........................15 Section 9.10. Adjustments......................................15 Section 9.11. Changes in the Company's Capital Structure.......16 Section 9.12. Change in Control................................17 Section 9.13. Amendment of the Plan............................18 Section 9.14. Effective Date...................................18 ii 4 WASTE MANAGEMENT, INC. 2000 BROAD-BASED EMPLOYEE PLAN ARTICLE I. GENERAL Section 1.1. Purpose. The purposes of this Broad-Based Employee Plan (the"Plan") are to: (1) closely associate the interests of the employees andconsultants of Waste Management, Inc. and its Subsidiaries and Affiliates(collectively referred to as the "Company") with the shareholders to generate anincreased incentive to contribute to the Company's future success andprosperity, thus enhancing the value of the Company for the benefit of itsstockholders; (2) provide employees and consultants with a proprietary ownershipinterest in the Company commensurate with Company performance, as reflected inincreased shareholder value; (3) maintain competitive compensation levelsthereby attracting and retaining highly competent and talented employees andconsultants; and (4) provide an incentive to employees and consultants forcontinuous employment with or services to the Company. Section 1.2. Administration. (a) The Plan shall be administered by a committee of non-employeedirectors appointed by the Board of Directors of the Company (the "Committee"),as constituted from time to time. (b) The Committee shall have the authority, in its sole discretion andfrom time to time to: (i) designate the employees and consultants or classes of employees of and consultants to the Company eligible to participate in the Plan; (ii) grant awards ("Awards") provided in the Plan in such form and amount as the Committee shall determine; (iii) impose such limitations, restrictions, and conditions, not inconsistent with this Plan, upon any such Award as the Committee shall deem appropriate; and (iv) interpret the Plan and any agreement, instrument, or other document executed in connection with the Plan; adopt, amend, and rescind rules and regulations relating to the Plan; and make all other determinations and take all other action necessary or advisable for the implementation and administration of the Plan. 1 5 (c) Decisions and determinations of the Committee on all matters relatingto the Plan shall be in its sole discretion and shall be final, conclusive, andbinding upon all persons, including the Company, any participant, anystockholder of the Company, and any employee or consultant. A majority of themembers of the Committee may determine its actions and fix the time and place ofits meetings. No member of the Committee shall be liable for any action taken ordecision made in good faith relating to the Plan or any Award thereunder. Section 1.3. Eligibility for Participation. Participants in the Plan("Participants") shall be selected by the Committee from the employees of andconsultants to the Company who are responsible for or contribute to themanagement, growth, success and profitability of the Company and who are notofficers of the Company. In making this selection and in determining the formand amount of Awards, the Committee shall consider any factors deemed relevant,including the individual's functions, responsibilities, value of services to theCompany, and past and potential contributions to the Company's profitability andgrowth. Section 1.4. Types of Awards Under Plan. Awards under the Plan may be inthe form of any one or more of the following: (i) Stock Options, as described in Article II; (ii) Incentive Stock Options, as described in Article III; (iii) Reload Options, as described in Article IV; (iv) Alternate Appreciation Rights, as described in Article V; (v) Limited Rights, as described in Article VI; (vi) Substitution Awards, as described in Article VII; and/or (vii) Stock Bonus Awards, as described in Article VIII.Awards under the Plan shall be evidenced by an Award Agreement between theCompany and the recipient of the Award, in form and substance satisfactory tothe Committee, and not inconsistent with this Plan. 2 6 Section 1.5. Aggregate Limitation on Awards. (a) Shares of stock which may be issued under the Plan shall be authorizedand unissued or treasury shares of Common Stock $.01 par value, of the Company("Common Stock"). Subject to the further provisions of this Section 1.5 andSection 9.10, the maximum number of shares of Common Stock which may be issuedunder the Plan shall be 3,000,000. (b) For purposes of calculating the maximum number of shares of CommonStock that may be issued under the Plan: (i) all the shares issued (including the shares, if any, withheld for tax withholding requirements) shall be counted when cash is used as full payment for shares issued upon exercise of a Stock Option, Incentive Stock Option, or Reload Option; (ii) only the shares issued (including the shares, if any, withheld for tax withholding requirements) as a result of an exercise of Alternate Appreciation Rights shall be counted; and (iii) only the net shares issued (including the shares, if any, withheld for tax withholding requirements) shall be counted when shares of Common Stock or another Award under the Plan are used or withheld as full or partial payment for shares issued upon exercise of a Stock Option, Incentive Stock Option, or Reload Option;provided, however, in all events the maximum number of shares of Common Stockthat may be issued pursuant to Incentive Stock Options is 3,000,000. (c) In addition to shares of Common Stock actually issued pursuant to theexercise of Stock Options, Incentive Stock Options, Reload Options, or AlternateAppreciation Rights, there shall be deemed to have been issued a number ofshares equal to the number of shares of Common Stock in respect of which LimitedRights (as described in Article VI) shall have been exercised. (d) Shares tendered by a Participant or withheld as payment for sharesissued upon exercise of a Stock Option, Incentive Stock Option, or Reload Optionshall be available for issuance under the Plan. Any shares of Common Stocksubject to a Stock Option, Incentive Stock Option, or Reload Option that for anyreason is terminated unexercised or expires shall again be available forissuance under the Plan, but shares subject to a Stock Option, Incentive StockOption, or Reload Option that are not issued as a result of the exercise ofLimited Rights shall not again be available for issuance under the Plan. 3 7 (e) The maximum number of shares of Common Stock with respect to which anyParticipant may receive Awards in any calendar year is 500,000. Section 1.6. Effective Date and Term of Plan. (a) The Plan shall become effective on the date it is approved by theBoard of Directors of the Company. (b) No Awards shall be made under the Plan after the tenth anniversary ofthe effective date of this Plan; provided, however, that the Plan and all Awardsmade under the Plan prior to such date shall remain in effect until such Awardshave been satisfied or terminated in accordance with the Plan and the terms ofsuch Awards. ARTICLE II. STOCK OPTIONS Section 2.1. Award of Stock Options. The Committee may from time to time,and subject to the provisions of the Plan and such other terms and conditions asthe Committee may prescribe, grant to any Participant in the Plan one or moreoptions to purchase the number of shares of Common Stock ("Stock Options")allotted by the Committee. The date a Stock Option is granted shall mean thedate selected by the Committee as of which the Committee allots a specificnumber of shares to a Participant pursuant to the Plan. Section 2.2. Stock Option Agreements. The grant of a Stock Option shall beevidenced by a written Award Agreement, executed by the Company and the holderof the Stock Option (the "Optionee"), stating the number of shares of CommonStock subject to the Stock Option evidenced thereby, and in such form as theCommittee may from time to time determine. Section 2.3. Stock Option Price. The Option Price per share of CommonStock deliverable upon the exercise of a Stock Option shall be an amountselected by the Committee and shall not be less than 100% of the Fair MarketValue of a share of Common Stock on the date the Stock Option is granted. Section 2.4. Term and Exercise. A Stock Option shall not be exercisableprior to six months from the date of its grant unless a shorter period isprovided by the Committee or by another Section of this Plan, and may beexercised during the period established by the Committee, but not after tenyears from the date of grant thereof (the "Option Term"). No Stock Option shallbe exercisable after the expiration of its Option Term. Section 2.5. Manner of Payment. Each Award Agreement providing for StockOptions shall set forth the procedure governing the exercise of the Stock Optiongranted thereunder, and shall provide that, upon such exercise in respect of anyshares of 4 8Common Stock subject thereto, the Optionee shall pay to the Company, in full,the Option Price for such shares with cash, which may be pursuant to a"cashless-broker" exercise pursuant to procedures established by the Committeefrom time to time, or with previously owned Common Stock, or at the discretionof the Committee, in whole or in part with, the surrender of another Award underthe Plan, the withholding of shares of Common Stock issuable upon exercise ofsuch Stock Option, other property, or any combination thereof (each based on theFair Market Value of such Common Stock, Award or other property on the date theStock Option is exercised as determined by the Committee). Section 2.6. Delivery of Shares. As soon as practicable after receipt ofpayment, the Committee shall deliver to the Optionee a certificate orcertificates for such shares of Common Stock. The Optionee shall become ashareholder of the Company with respect to Common Stock represented by sharecertificates so issued and as such shall be fully entitled to receive dividends,to vote and to exercise all other rights of a shareholder. Section 2.7. Death, Retirement and Termination of Employment of Optionee.Unless otherwise provided in an Award Agreement or otherwise agreed to by theCommittee: (a) Upon the death of the Optionee, any rights to the extent exercisableby the Optionee on the date of termination of employment or consulting, as thecase may be, may be exercised by the Optionee's estate, or by a person whoacquires the right to exercise such Stock Option by bequest or inheritance or byreason of the death of the Optionee, provided that such exercise occurs withinboth the remaining effective term of the Stock Option and one year after theOptionee's death. The provisions of this Section shall apply notwithstanding thefact that the Optionee's employment may have terminated prior to death. (b) Upon termination of the Optionee's employment by reason of retirementor permanent disability (as each is determined by the Committee), the Optioneemay, within 36 months from the date of termination, exercise any Stock Optionsto the extent such Stock Options are exercisable on the date of such terminationof employment. (c) Except as provided in Subsections (a) and (b) of this Section 2.7, orexcept as otherwise determined by the Committee, all Stock Options shallterminate three months after the date of the termination of the Optionee'semployment or consulting, as the case may be, and shall be exercisable duringsuch period only to the extent exercisable on the date of termination ofemployment or consulting. Section 2.8. Tax Election. Recipients of Stock Options who are directorsor executive officers of the Company or who own more than 10% of the CommonStock of the Company ("Section 16(a) Option Holders") at the time of exercise ofa Stock Option may elect, in lieu of paying to the Company an amount required tobe withheld under 5 9applicable tax laws in connection with the exercise of a Stock Option in wholeor in part, to have the Company withhold shares of Common Stock having a fairmarket value equal to the amount required to be withheld. Such election may notbe made prior to six months following the grant of the Stock Option, except inthe event of a Section 16(a) Option Holders's death or disability. The electionmay be made at the time the Stock Option is exercised by notifying the Companyof the election, specifying the amount of such withholding and the date on whichthe number of shares to be withheld is to be determined ("Tax Date"), whichshall be either (i) the date the Stock Option is exercised or (ii) a date sixmonths after the Stock Option was granted, if later. The number of shares ofCommon Stock to be withheld to satisfy the tax obligation shall be the amount ofsuch tax liability divided by the fair market value of the Common Stock on theTax Date (or if not a business day, on the next closest business day). If theTax Date is not the exercise date, the Company may issue the full number ofshares of Common Stock to which the Section 16(a) Option Holders is entitled,and such option holder shall be obligated to tender to the Company on the TaxDate a number of such shares necessary to satisfy the withholding obligation.Certificates representing such shares of Common Stock shall bear a legenddescribing such Section 16(a) Option Holders obligation hereunder. Section 2.9. Effect of Exercise. The exercise of any Stock Option shallcancel that number of related Alternate Appreciation Rights and/or LimitedRights, if any, that is equal to the number of shares of Common Stock purchasedpursuant to said option unless otherwise agreed by the Committee in an AwardAgreement or otherwise. ARTICLE III. INCENTIVE STOCK OPTIONS Section 3.1. Award of Incentive Stock Options. The Committee may, fromtime to time and subject to the provisions of the Plan and such other terms andconditions as the Committee may prescribe, grant to any employee of the Companyor a Subsidiary one or more "incentive stock options" (intended to qualify assuch under the provisions of Section 422 of the Internal Revenue Code of 1986,as amended (the "Code") ("Incentive Stock Options") to purchase the number ofshares of Common Stock allotted by the Committee. The date an Incentive StockOption is granted shall mean the date selected by the Committee as of which theCommittee allots a specific number of shares to a participant pursuant to thePlan. Section 3.2. Incentive Stock Option Agreements. The grant of an IncentiveStock Option shall be evidenced by a written Award Agreement, executed by theCompany and the holder of an Incentive Stock Option (the "Optionee"), statingthe number of shares of Common Stock subject to the Incentive Stock Optionevidenced thereby, and in such form as the Committee may from time to timedetermine. Section 3.3. Incentive Stock Option Price. The Option Price per share ofCommon Stock deliverable upon the exercise of an Incentive Stock Option shall beat 6 10least 100% of the Fair Market Value of a share of Common Stock on the date theIncentive Stock Option is granted; provided, however, the Option Price per shareof Common Stock deliverable upon the exercise of an Incentive Stock Optiongranted to any owner of 10% or more of the total combined voting power of allclasses of stock of the Company and its subsidiaries shall be at least 110% ofthe fair market value of a share of Common Stock on the date the Incentive StockOption is granted. Section 3.4. Term and Exercise. Each Incentive Stock Option shall not beexercisable prior to six months from the date of its grant unless a shorterperiod is provided by the Committee or another Section of this Plan, and may beexercised during the period established by the Committee, but not after tenyears from the date of grant thereof (the "Option Term"). No Incentive StockOption shall be exercisable after the expiration of its Option Term. Section 3.5. Maximum Amount of Incentive Stock Option Grant. To the extentthat the aggregate Fair Market Value (determined at the time the respectiveIncentive Stock Option is granted) of Common Stock with respect to whichIncentive Stock Options granted are exercisable for the first time by anindividual during any calendar year under all incentive stock option plans ofthe Company and its parent and subsidiary corporations exceeds $100,000, suchIncentive Stock Options shall be treated as Options which do not constituteIncentive Stock Options. Section 3.6. Death of Optionee. Unless otherwise provided in an AwardAgreement: (a) Upon the death of the Optionee, any Incentive Stock Option exercisableby the Optionee on the date of termination of employment may be exercised by theOptionee's estate or by a person who acquires the right to exercise suchIncentive Stock Option by bequest or inheritance or by reason of the death ofthe Optionee, provided that such exercise occurs within both the remainingoption term of the Incentive Stock Option and one year after the Optionee'sdeath. (b) The provisions of this Section shall apply notwithstanding the factthat the Optionee's employment may have terminated prior to death. Section 3.7. Retirement or Disability. Unless otherwise provided in anAward Agreement, upon the termination of the Optionee's employment by reason ofpermanent disability or retirement (as each is determined by the Committee), theOptionee may, within 36 months from the date of such termination of employment,exercise any Incentive Stock Options to the extent such Incentive Stock Optionswere exercisable at the date of such termination of employment. Notwithstandingthe foregoing, the tax treatment available pursuant to Section 422 of the Codeupon the exercise of an Incentive Stock Option will not be available to anOptionee who exercises any Incentive Stock Options more than (i) 12 months afterthe date of termination of employment due to 7 11permanent disability or (ii) three months after the date of termination ofemployment due to retirement. Section 3.8. Termination for Other Reasons. Except as provided in Sections3.6 and 3.7 or except as otherwise determined by the Committee, all IncentiveStock Options shall terminate three months after the date of the termination ofthe Optionee's employment and shall be exercisable during such period only tothe extent exercisable on the date of termination of employment. Section 3.9. Applicability of Stock Options Sections. Sections 2.5, Mannerof Payment; 2.6, Delivery of Shares; 2.8, Tax Elections and 2.9, Effect ofExercise, applicable to Stock Options, shall apply equally to Incentive StockOptions. Such Sections are incorporated by reference in this Article III asthough fully set forth herein. ARTICLE IV. RELOAD OPTIONS Section 4.1. Authorization of Reload Options. Concurrently with orsubsequent to the award of Stock Options to any Participant in the Plan, theCommittee may authorize reload options ("Reload Options") to purchase shares ofCommon Stock. The number of Reload Options shall equal (i) the number of sharesof Common Stock used to pay the exercise price of the underlying Stock Optionsor Incentive Stock Options and (ii) to the extent authorized by the Committee,the number of shares of Common Stock withheld by the Company in payment of theexercise price underlying the Stock Option or Incentive Stock Option or used tosatisfy any tax withholding requirement incident to the exercise of theunderlying Stock Options or Incentive Stock Options. The grant of a ReloadOption will become effective upon the exercise of underlying Stock Options,Incentive Stock Options, or Reload Options through the use of shares of CommonStock held by the Optionee or the withholding of shares by the Company inpayment of the exercise price of the underlying Stock Option or Incentive StockOption held by the Optionee. Notwithstanding the fact that the underlying optionmay be an Incentive Stock Option, a Reload Option is not intended to qualify asan "incentive stock option" under Section 422 of the Code. Section 4.2. Reload Option Amendment. Each Award Agreement shall statewhether the Committee has authorized Reload Options with respect to the StockOptions and/or Incentive Stock Options covered by such Award Agreement. Upon theexercise of an underlying Stock Option, Incentive Stock Option, or other ReloadOption, the Reload Option will be evidenced by an amendment to the underlyingAward Agreement in such form as the Committee shall approve. Section 4.3. Reload Option Price. The Option Price per share of CommonStock deliverable upon the exercise of a Reload Option shall be the Fair MarketValue of a share of Common Stock on the date the grant of the Reload Optionbecomes effective. 8 12 Section 4.4. Term and Exercise. Each Reload Option is fully exercisablesix months from the effective date of grant. The term of each Reload Optionshall be equal to the remaining option term of the underlying Stock Optionand/or Incentive Stock Option. Section 4.5. Termination of Employment. Unless otherwise determined by theCommittee in an Award Agreement or otherwise, no additional Reload Options shallbe granted to Optionees when Stock Options, Incentive Stock Options, and/orReload Options are exercised pursuant to the terms of this Plan followingtermination of the Optionee's employment. Section 4.6. Applicability of Stock Options Sections. Sections 2.5, Mannerof Payment; 2.6 Delivery of Shares; 2.7, Death, Retirement and Termination ofEmployment of Optionee; 2.8, Tax Elections; and 2.9, Effect of Exercise,applicable to Stock Options, shall apply equally to Reload Options. SuchSections are incorporated by reference in this Article IV as though fully setforth herein. ARTICLE V. ALTERNATE APPRECIATION RIGHTS Section 5.1. Award of Alternate Appreciation Rights. Concurrently with orsubsequent to the award of any Stock Option, Incentive Stock Option, or ReloadOption to purchase one or more shares of Common Stock, the Committee may,subject to the provisions of the Plan and such other terms and conditions as theCommittee may prescribe, award to the Optionee with respect to each share ofCommon Stock covered by an Option, a related alternate appreciation rightpermitting the Optionee to be paid the appreciation on the Option in lieu ofexercising the Option ("Alternate Appreciation Right"). Section 5.2. Alternate Appreciation Rights Agreement. AlternateAppreciation Rights shall be evidenced by written Award Agreements in such formas the Committee may from time to time determine. Section 5.3. Exercise. An Optionee who has been granted AlternateAppreciation Rights may, from time to time, in lieu of the exercise of an equalnumber of Options, elect to exercise one or more Alternate Appreciation Rightsand thereby become entitled to receive from the Company payment in Common Stockof the number of shares determined pursuant to Section 5.4 and 5.5. AlternateAppreciation Rights shall be exercisable only to the same extent and subject tothe same conditions as the Options related thereto are exercisable, as providedin this Plan. The Committee may, in its discretion, prescribe additionalconditions to the exercise of any Alternate Appreciation Rights. Section 5.4. Amount of Payment. The amount of payment to which an Optioneeshall be entitled upon the exercise of each Alternate Appreciation Right shallbe equal to 9 13100% of the amount, if any, by which the Fair Market Value of a share of CommonStock on the exercise date exceeds the Option Price per share on the Optionrelated to such Alternate Appreciation Right. A Section 16(a) Option Holder mayelect to withhold shares of Common Stock issued under this Section to pay taxesas described in Section 2.8. Section 5.5. Form of Payment. The number of shares to be paid shall bedetermined by dividing the amount of payment determined pursuant to Section 5.4by the Fair Market Value of a share of Common Stock on the exercise date of suchAlternate Appreciation Rights. As soon as practicable after exercise, theCompany shall deliver to the Optionee a certificate or certificates for suchshares of Common Stock. Section 5.6. Effect of Exercise. Unless otherwise provided in an AwardAgreement or agreed to by the Committee, the exercise of any AlternateAppreciation Rights shall cancel an equal number of Stock Options, IncentiveStock Options, Reload Options, and Limited Rights, if any, related to saidAlternate Appreciation Rights. Section 5.7. Termination of Employment, Retirement, Death or Disability.Unless otherwise provided in an Award Agreement or agreed to by the Committee: (a) Upon termination of the Optionee's employment (including employment as a director of the Company after an Optionee terminates employment as an employee of the Company) by reason of permanent disability or retirement (as each is determined by the Committee) or consulting, the Optionee may, within six months from the date of such termination, exercise any Alternate Appreciation Rights to the extent such Alternate Appreciation Rights are exercisable during such six-month period. (b) Except as provided in Section 5.7(a), all Alternate Appreciation Rights shall terminate three months after the date of the termination of the Optionee's employment, consulting or upon the death of the Optionee. ARTICLE VI. LIMITED RIGHTS Section 6.1. Award of Limited Rights. Concurrently with or subsequent tothe award of any Stock Option, Incentive Stock Option, Reload Option, orAlternate Appreciation Right, the Committee may, subject to the provisions ofthe Plan and such other terms and conditions as the Committee may prescribe,award to the Optionee with respect to each share of Common Stock covered by anOption, a related limited right permitting the Optionee, during a specifiedlimited time period, to be paid the appreciation on the Option in lieu ofexercising the Option ("Limited Right"). 10 14 Section 6.2. Limited Rights Agreement. Limited Rights granted under thePlan shall be evidenced by written Award Agreements in such form as theCommittee may from time to time determine. Section 6.3. Exercise Period. Limited Rights are exercisable in full for aperiod of seven months following the date of a Change in Control of the Company(the "Exercise Period"); provided, however, that Limited Rights may not beexercised under any circumstances until the expiration of the six-month periodfollowing the date of grant. Section 6.4. Amount of Payment. The amount of payment to which an Optioneeshall be entitled upon the exercise of each Limited Right shall be equal to 100%of the amount, if any, which is equal to the difference between the Option Priceper share of Common Stock covered by the related Option and the Market Price ofa share of such Common Stock. "Market Price" is defined to be the greater of (i)the highest price per share of the Company's Common Stock paid in connectionwith any Change in Control and (ii) the highest price per share of the Company'sCommon Stock reflected in the consolidated trading tables of The Wall StreetJournal (presently the New York Stock Exchange - Composite Transactions) duringthe 60-day period prior to the Change in Control. Section 6.5. Form of Payment. Payment of the amount to which an Optioneeis entitled upon the exercise of Limited Rights, as determined pursuant toSection 6.4, shall be made solely in cash. Section 6.6. Effect of Exercise. If Limited Rights are exercised, theStock Options, Incentive Stock Options, Reload Options, and AlternateAppreciation Rights, if any, related to such Limited Rights shall cease to beexercisable to the extent of the number of shares with respect to which theLimited Rights were exercised. Upon the exercise or termination of the StockOptions, Incentive Stock Options, Reload Options, and Alternate AppreciationRights, if any, related to such Limited Rights, the Limited Rights granted withrespect thereto terminate to the extent of the number of shares as to which therelated options and Alternate Appreciation Rights were exercised or terminated. Section 6.7. Retirement or Disability. Upon termination of the Optionee'semployment (including employment as a director of the Company after an Optioneeterminates employment as an employee of the Company) by reason of permanentdisability or retirement (as each is determined by the Committee) or consulting,the Optionee may, within six months from the date of such termination, exerciseany Limited Right to the extent such Limited Right is exercisable during suchsix-month period. Section 6.8. Death of Optionee or Termination for Other Reasons. Except asprovided in Sections 6.7 and 6.9, or except as otherwise determined by theCommittee, all 11 15Limited Rights granted under the Plan shall terminate upon the termination ofthe Optionee's employment, consulting or upon the death of the Optionee. Section 6.9. Termination Related to a Change in Control. The requirementthat an Optionee be terminated by reason of retirement or permanent disabilityor be employed by the Company at the time of exercise pursuant to Sections 6.7and 6.8, respectively, is waived during the Exercise Period as to an Optioneewho (i) was employed by the Company at the time of the Change in Control and(ii) is subsequently terminated by the Company other than for just cause or whovoluntarily terminates if such termination was the result of a good faithdetermination by the Optionee that as a result of the Change in Control he isunable to effectively discharge his present duties or the duties of the positionwhich he occupied just prior to the Change in Control. As used herein "justcause" shall mean willful misconduct or dishonesty or conviction of or failureto contest prosecution for a felony, or excessive absenteeism unrelated toillness. 12 16 ARTICLE VII. SUBSTITUTION AWARDS Section 7.1. Awards may be granted under the Plan from time to time insubstitution for stock options held by individuals employed by corporations whobecome employees of the Company as a result of a merger or consolidation of theemploying corporation with the Company, or the acquisition by the Company of theassets of the employing corporation, or the acquisition by the Company of stockof the employing corporation with the result that such employing corporationbecomes a Subsidiary or an Affiliate. ARTICLE VIII. BONUS STOCK AWARDS Section 8.1. Award of Bonus Stock. The Committee may from time to time,and subject to the provisions of this Plan and such other terms and conditionsas the Committee may prescribe, grant to any Participant in the Plan shares ofCommon Stock ("Stock Bonus"). A Stock Bonus shall vest (i) in the case ofperformance-based vesting criteria, no sooner than one year following the dateof the Stock Bonus grant, and (ii) in the case of time-based vesting criteria,no sooner than one-third of the grant on each subsequent anniversary of the dateof grant. Notwithstanding the foregoing, the Committee may grant a fully vestedStock Bonus in lieu of an earned cash bonus. Section 8.2. Stock Bonus Agreements. The grant of a Stock Bonus shall beevidenced by a written Award Agreement, executed by the Company and therecipient of a Stock Bonus, in such form as the Committee may from time to timedetermine, providing for the terms of such grant, including any vestingschedule, restrictions on the transfer of such Common Stock or other matters. ARTICLE IX. MISCELLANEOUS Section 9.1. General Restriction. Each Award under the Plan shall besubject to the requirement that, if at any time the Committee shall determinethat (i) the listing, registration, or qualification of the shares of CommonStock subject to or related thereto upon any securities exchange or under anystate or federal law, or (ii) the consent or approval of any governmentregulatory body, or (iii) an agreement by the grantee of an Award with respectto the disposition of shares of Common Stock, is necessary or desirable as acondition of, or in connection with, the granting of such Award or the issue orpurchase of shares of Common Stock thereunder, such Award may not be consummatedin whole or in part unless such listing, registration, qualification, consent,approval or agreement shall have been effected or obtained free of anyconditions not acceptable to the Committee. 13 17 Section 9.2. Non-Assignability. Except as provided below, no Award underthe Plan shall be assignable or transferable by the recipient thereof, except bywill or by the laws of descent and distribution, and during the life of therecipient, such Award shall be exercisable only by such person or by suchperson's guardian or legal representative. Notwithstanding the foregoing, as provided by the Committee in an AwardAgreement, Awards (other than Incentive Stock Options) may be transferred (inwhole or in part in a form approved by the Company) by a Participant to (i) thespouse, children or grandchildren of the Participant ("Immediate FamilyMembers"), (ii) a trust or trusts for the exclusive benefit of the ImmediateFamily Members and, if applicable, the Participant, or (iii) a partnership inwhich such Immediate Family Members and, if applicable, the Participant are theonly partners. Following any such transfer, the Award shall continue to besubject to the same terms and conditions as were applicable to the Awardimmediately prior to the transfer. A transferee of an Award may not transfer theAward except to an Immediate Family Member or the Participant. Section 9.3. Withholding Taxes. Whenever the Company proposes or isrequired to issue or transfer shares of Common Stock under the Plan, the Companyshall have the right to require the grantee to remit to the Company an amountsufficient to satisfy any federal, state and/or local withholding taxrequirements prior to the delivery of any certificates for such shares.Alternatively, the Company may issue or transfer such shares of the Company netof the number of shares sufficient to satisfy the withholding tax requirements.For withholding tax purposes, the shares of Common Stock shall be valued on thedate the withholding obligation is incurred. Section 9.4. Right to Terminate Employment. Nothing in the Plan or in anyagreement entered into pursuant to the Plan shall confer upon any Participantthe right to continue in the employment of, or consulting to, the Company oreffect any right which the Company may have to terminate the employment orconsulting relationship of such Participant. Section 9.5. Non-Uniform Determination. The Committee's determinationsunder the Plan (including without limitation determinations of the persons toreceive Awards, the form, amount and timing of such Awards, the terms andprovisions of such Awards and the agreements evidencing same) need not beuniform and may be made by it selectively among persons who receive, or areeligible to receive, awards under the Plan, whether or not such persons aresimilarly situated. Section 9.6. Rights as a Shareholder. The recipient of any Award under thePlan shall have no right as a shareholder with respect thereto unless and untilcertificates for shares of Common Stock are issued to him. 14 18 Section 9.7. Definitions. In this Plan the following definitions shallapply: (a) "Subsidiary" means any corporation of which, at the time more than 50% of the shares entitled to vote generally in an election of directors are owned directly or indirectly by the Company or any subsidiary thereof. (b) "Affiliate" means any person or entity which directly, or indirectly through one or more intermediaries, controls, is controlled by, or is under common control with the Company. (c) "Fair Market Value" as of any date and in respect or any share of Common Stock means the lowest reported trading price on such date or on the next business day, if such date is not a business day, of a share of Common Stock reflected in the consolidated trading tables of The Wall Street Journal (presently the New York Stock Exchange - Composite Transactions) or any other publication selected by the Committee, provided that, if shares of Common Stock shall not have been quoted on the New York Stock Exchange for more than 10 days immediately preceding such date or if deemed appropriate by the Committee for any other reason, the fair market value of shares of Common Stock shall be as determined by the Committee in such other manner as it may deem appropriate. In no event shall the Fair Market Value of any share of Common Stock be less than its par value. (d) "Option" means Stock Option, Incentive Stock Option, or Reload Option. (e) "Option Price" means the purchase price per share of the Common Stock deliverable upon the exercise of a Stock Option, Incentive Stock Option, or Reload Option. (f) "Change in Control" means the occurrence, at any time during the specified term of an Option granted under the Plan, of any of the following events: (i) The Company is merged or consolidated or reorganized into or with another corporation or other legal person (an "Acquiror") and as a result of such merger, consolidation or reorganization less than 75% of the outstanding voting securities or other capital interests of the surviving, resulting or acquiring corporation or other legal person are owned in the aggregate by the stockholders of the Company, directly or indirectly, immediately prior to such merger, consolidation or reorganization, other than the Acquiror or any corporation or other legal person controlling, controlled by or under common control with the Acquiror; 15 19 (ii) The Company sells all or substantially all of its business and/or assets to an Acquiror, of which less than 75% of the outstanding voting securities or other capital interests are owned in the aggregate by the stockholders of the Company, directly or indirectly, immediately prior to such sale, other than any corporation or other legal person controlling, controlled by or under common control with the Acquiror; (iii) There is a report filed on Schedule 13D or Schedule 14D-1 (or any successor schedule, form or report), each as promulgated pursuant to the Securities Exchange Act of 1934, as amended (the "Exchange Act"), disclosing that any person or group (as the terms "person" and "group" are used in Section 13(d)(3) or Section 14(d)(2) of the Exchange Act and the rules and regulations promulgated thereunder) has become the beneficial owner (as the term "beneficial owner") is defined under Rule 13d-3 or any successor rule or regulation promulgated under the Exchange Act) of 20% or more of the issued and outstanding shares of voting securities of the Company; or (iv) During any period of two consecutive years, individuals who at the beginning of any such period constitute the directors of the Company cease for any reason to constitute at least a majority thereof unless the election, or the nomination for election by the Company's stockholders, of each new director of the Company was approved by a vote of at least two-thirds of such directors of the Company then still in office who were directors of the Company at the beginning of any such period. Section 9.8. Leaves of Absence. The Committee shall be entitled to makesuch rules, regulations, and determinations as it deems appropriate under thePlan in respect of any leave of absence taken by the recipient of any Award.Without limiting the generality of the foregoing, the Committee shall beentitled to determine (i) whether or not any such leave of absence shallconstitute a termination of employment within the meaning of the Plan and (ii)the impact, if any, of any such leave of absence on Awards under the Plantheretofore made to any recipient who takes such leave of absence. Section 9.9. Newly Eligible Employees. The Committee shall be entitled tomake such rules, regulations, determinations and awards as it deems appropriatein respect of any employee who becomes eligible to participate in the Plan orany portion thereof after the commencement of an award or incentive period. Section 9.10. Adjustments. In any event of any change in the outstandingCommon Stock by reason of a stock dividend or distributions, recapitalization,merger, consolidation, split-up, combination, exchange of shares or the like,the Committee may 16 20appropriately adjust the number of shares of Common Stock that may be issuedunder the Plan, the number of shares of Common Stock subject to Optionstheretofore granted under the Plan, and any and all other matters deemedappropriate by the Committee. Section 9.11. Changes in the Company's Capital Structure. (a) The existence of outstanding Options, Alternative Appreciation Rights, or Limited Rights shall not affect in any way the right or power of the Company or its stockholders to make or authorize any or all adjustments, recapitalizations, reorganizations, or other changes in the Company's capital structure or its business, or any merger or consolidation of the Company, or any issue of bonds, debentures, preferred or prior preference stock ahead of or affecting the Common Stock or the rights thereof, or the dissolution or liquidation of the Company, or any sale or transfer of all or any part of its assets or business, or any other corporate act or proceeding, whether of a similar character or otherwise. (b) If, while there are outstanding Options, the Company shall effect a subdivision or consolidation of shares or other increase or reduction of the number of shares of the Common Stock outstanding without receiving compensation therefor in money, services or property, then (i) in the event of an increase in the number of such shares outstanding, the number of shares of Common Stock then subject to Options hereunder shall be proportionately increased; and (ii) in the event of a decrease in the number of such shares outstanding the number of shares then available for Option hereunder shall be proportionately decreased. (c) After a merger of one or more corporations into the Company, or after a consolidation of the Company and one or more corporations in which the Company shall be the surviving corporation, each holder of an outstanding Option shall, at no additional cost, be entitled upon exercise of such Option to receive (subject to any required action by stockholders) in lieu of the number of shares as to which such Option shall then be so exercisable, the number and class of stock or other securities to which such holder would have been entitled to receive pursuant to the terms of the agreement of merger or consolidation if, immediately prior to such merger or consolidation, such holder had been the holder of record of a number of shares of the Company equal to the number of shares as to which such Option had been exercisable. (d) If the Company is merged into or consolidated with another corporation or other entity under circumstances where the Company is not the surviving corporation, or if the Company sells or otherwise disposes of substantially all of its assets to another corporation or other entity while unexercised Options remain outstanding, then the Committee may direct that any of the following shall occur: 17 21 (i) If the successor entity is willing to assume the obligation to deliver shares of stock or securities after the effective date of the merger, consolidation or sale of assets, as the case may be, each holder of an outstanding Option shall be entitled to receive, upon the exercise of such Option and payment of the Option Price, in lieu of shares of Common Stock, such shares of stock or other securities as the holder of such Option would have been entitled to receive had such Option been exercised immediately prior to the consummation of such merger, consolidation or sale, and any related Alternate Appreciation Right and Limited Right associated with such Option shall apply as nearly as practicable to the shares of stock or other securities purchasable upon exercise of the Option following such merger, consolidation or sale of assets. (ii) The Committee may waive any limitations set forth in or imposed pursuant to this Plan or any Award Agreement with respect to such Option and any related Alternate Appreciation Right or Limited Option such that such Option and related Alternate Appreciation Right and Limited Right shall become exercisable prior to the record or effective date of such merger, consolidation or sale of assets. (iii) The Committee may cancel all outstanding Options and Alternate Appreciation Rights (but not Limited Rights) as of the effective date of any such merger, consolidation, or sale of assets provided that prior notice of such cancellation shall be given to each holder of an Option at least 30 days prior to the effective date of such merger, consolidation, or sale of assets, and each holder of an Option shall have the right to exercise such Option and any related Alternate Appreciation Right in full during a period of not less than 30 days prior to the effective date of such merger, consolidation, or sale of assets. No action taken by the Committee under this subsection shall have the effect of terminating, and nothing in this subsection shall permit the Committee to terminate, any Limited Right held by an Optionee. (c) Except as herein provided, the issuance by the Company of Common Stock or any other shares of capital stock or services convertible into shares of capital stock, for cash property, labor done or other consideration, shall not affect, and no adjustment by reason thereof shall be made with respect to, the number or price of shares of Common Stock then subject to outstanding Options. Section 9.12. Change in Control. Any Award granted under the Plan prior tothe date of a Change in Control shall be immediately exercisable in full on suchdate, without regard to any times of exercise established under its AwardAgreement; provided, 18 22however, in no event shall Stock Options or Incentive Stock Options beexerciseable after the tenth anniversary of their respective grant dates. Section 9.13. Amendment of the Plan. (a) The Committee may without further action by the shareholders and without receiving further consideration from the Participants, amend this Plan or condition or modify Awards under this Plan in response to changes in securities or other laws or rules, regulations or regulatory interpretations thereof applicable to this Plan or to comply with stock exchange rules or requirements. (b) The Committee may at any time and from time to time terminate or modify or amend the Plan in any respect. The termination or any modification or amendment of the Plan, except as provided in subsection (a), shall not, without the consent of a Participant, affect his or her rights under an Award previously granted to him or her. Section 9.14. Effective Date. The Plan shall become effective as ofFebruary 29, 2000. 19
