1996 STOCK COMPENSATION PLAN,
AS AMENDED AND RESTATED FEBRUARY 10, 2004
1.1 Purpose. The purpose of the V.F. Corporation 1996 Stock Compensation Plan (this “Plan”) is to strengthen the ability of V.F. Corporation (the “Company”) to attract, motivate, and retain employees and directors of superior ability and to more closely align the interests of such employees and directors with those of the Company’s shareholders by relating compensation to increases in shareholder value.
2.1 “Agreement” The written instrument evidencing the grant to a Participant of an Award. Each Participant may be issued one or more Agreements from time to time, evidencing one or more Awards.
2.2 “Award” Any award granted under this Plan.
2.3 “Board” The Board of Directors of the Company.
2.4 “Change in Control” A change in control of a nature that would be required to be reported in response to Item 6(e) of Schedule 14A of regulation 14A, as in effect on the Effective Date hereof, promulgated under the Securities Exchange Act of 1934, as amended (the “Exchange Act”); provided that, without limitation, such a Change in Control shall be deemed to have occurred if (i) any “Person” (as such term is used in §13(d) and §14(d) of the Exchange Act), except for (A) those certain trustees under Deeds of Trust dated August 21, 1951 and under the Will of John E. Barbey, deceased (a “Trust” or the “Trustee”), and (B) any employee benefit plan of the Company or any Subsidiary, or any entity holding voting securities of the Company for or pursuant to the terms of any such plan (a “Benefit Plan” or the “Benefit Plans”), is or becomes the beneficial owner, directly or indirectly, of securities of the Company representing 20% or more of the combined voting power of the Company’s then outstanding securities; (ii) there occurs a contested proxy solicitation of the Company’s shareholders that results in the contesting party obtaining the ability to vote securities representing 30% or more of the combined voting power of the Company’s then outstanding securities; (iii) there occurs a sale, exchange, transfer or other disposition of substantially all of the assets of the Company to another entity, except to an entity controlled directly or indirectly by the Company, or a merger, consolidation or other reorganization of the Company in which the Company is not the surviving entity, or a plan of liquidation or dissolution of the Company other than pursuant to bankruptcy or insolvency laws is adopted; or (iv) during any period of two consecutive years, individuals who at the beginning of such period constituted the Board cease for any reason to constitute at least a
majority thereof unless the election, or the nomination for election by the Company’s shareholders, of each new director was approved by a vote of at least two-thirds of the directors then still in office who were directors at the beginning of the period.
Notwithstanding the foregoing, a Change in Control shall not be deemed to have occurred for purposes of this Plan (x) in the event of a sale, exchange, transfer or other disposition of substantially all of the assets of the Company to, or a merger, consolidation or other reorganization involving the Company and officers of the Company, or any entity in which such officers have, directly or indirectly, at least a 5% equity or ownership interest or (y) in a transaction otherwise commonly referred to as a “management leveraged buyout”.
Clause (i) above to the contrary notwithstanding, a Change in Control shall not be deemed to have occurred if a Person becomes the beneficial owner, directly or indirectly, of securities of the Company representing 20% or more of the combined voting power of the Company’s then outstanding securities solely as the result of an acquisition by the Company or any Subsidiary of voting securities of the Company which, by reducing the number of shares outstanding, increases the proportionate number of shares beneficially owned by such Person to 20% or more of the combined voting power of the Company’s then outstanding securities; provided, however, that if a Person becomes the beneficial owner of 20% or more of the combined voting power of the Company’s then outstanding securities by reason of share purchases by the Company or any Subsidiary and shall, after such share purchases by the Company or a Subsidiary, become the beneficial owner, directly or indirectly, of any additional voting securities of the Company, then a Change in Control of the Company shall be deemed to have occurred with respect to such Person under clause (i). Notwithstanding the foregoing, in no event shall a Change in Control of the Company be deemed to occur under clause (i) with respect to any Trust or Benefit Plan.
Clauses (i) and (ii) to the contrary notwithstanding, the Board may, by resolution adopted by at least two-thirds of the directors who were in office at the date a Change in Control occurred, declare that a Change in Control described in clause (i) or (ii) has become ineffective for purposes of this Plan if the following conditions then exist: (x) the declaration is made within 120 days of the Change in Control; and (y) no person, except for (A) the Trusts, and (B) the Benefit Plans, either is the beneficial owner, directly or indirectly, of securities of the Company representing 10% or more of the combined voting power of the Company’s outstanding securities or has the ability or power to vote securities representing 10% or more of the combined voting power of the Company’s then outstanding securities. If such a declaration shall be properly made, the Change in Control shall be ineffective ab initio.
2.5 “Code” The Internal Revenue Code of 1986, as amended, and applicable regulations and rulings issued thereunder.
2.6 “Committee” The Committee, appointed by the Board, to administer the Plan in accordance with the provisions in Article IV.
2.7 “Common Stock” The common stock of the Company as described in the Company’s Articles of Incorporation, or such other stock as shall be substituted therefor.
2.8 “Company” V.F. Corporation, or any successor to the Company.
2.9 “Date of Grant” The date on which the granting of an Award is authorized by the Committee, unless another date is specified by the Committee or by a provision in this Plan applicable to the Award.
2.10 “Director” A member of the Board who is not an Employee.
2.11 “Disposition” Any sale, transfer, encumbrance, gift, donation, assignment, pledge, hypothecation, or other disposition, whether similar or dissimilar to those previously enumerated, whether voluntary or involuntary, and whether during the Participant’s lifetime or upon or after his or her death, including, but not limited to, any disposition by operation of law, by court order, by judicial process, or by foreclosure, levy, or attachment.
2.12 “Employee” Any employee of the Company or a Subsidiary.
2.13 “Exchange Act” The Securities Exchange Act of 1934, as amended, and applicable regulations and rulings issued thereunder.
2.14 “Fair Market Value” Unless otherwise determined in good faith by the Committee, the average of the reported high and low sales price of the Common Stock (rounded up to the nearest one-tenth of a dollar) on the date on which Fair Market Value is to be determined (or if there was no reported sale on such date, the next preceding date on which any reported sale occurred) on the principal exchange or in such other principal market on which the Common Stock is trading.
2.15 “Incentive Stock Option” A Stock Option intended to satisfy the requirements of Section 422(b) of the Code.
2.16 “Limited Stock Appreciation Right” or “Limited Right” The rights specified in Article VIII.
2.17 “Non-qualified Stock Option” A Stock Option other than an Incentive Stock Option.
2.18 “Participant” An Employee or Director selected by the Committee to receive an Award.
2.19 “Performance Objective” A performance objective established pursuant to Section 9.3 hereof.
2.20 “Restricted Awards” Restricted Stock and Restricted Stock Units.
2.21 “Restricted Stock” Common Stock which is subject to restrictions and awarded to Participants under Article IX of this Plan and any Common Stock purchased with or issued in respect of dividends and distributions on the Restricted Stock.
2.22 “Restricted Stock Units” Stock Units which are subject to a risk of forfeiture and other restrictions and awarded to Participants under Article IX of this Plan, including Stock Units resulting from deemed reinvestment of dividend equivalents on Restricted Stock Units.
2.23 “Retirement” Employment separation and commencement of pension benefits under the V.F. Corporation Pension Plan (or any successor plan thereto) on account of early, normal or late retirement thereunder.
2.24 “Rule 16b-3” Rule 16b-3 under the Exchange Act or any successor thereto.
2.25 “Securities Act” The Securities Act of 1933, as amended, and applicable regulations and rulings issued thereunder.
2.26 “Stock Option” An award of a right to purchase Common Stock pursuant to Article VII.
2.27 “Stock Units” An unfunded obligation of the Company, the terms of which are set forth in Section 9.6.
2.28 “Subsidiary” Any majority-owned business organization of the Company or its direct or indirect subsidiaries, including but not limited to corporations, limited liability companies, partnerships, and any “subsidiary corporation” as defined in Section 424(f) of the Code that is a subsidiary of the Company.
SHARES OF COMMON STOCK SUBJECT TO THE PLAN
3.1 Common Stock Authorized. Subject to the provisions of this Article and Article XI, the total aggregate number of shares of Common Stock that may be issued, pursuant to Awards, shall not exceed 23,900,000 shares (plus additional shares, if any, which, as of the effective date of this Plan or thereafter, are available or become available for award under the Company’s 1991 Stock Option Plan and the 1995 Key Employee Restricted Stock Plan); provided, however, that in no event shall the number of shares of Restricted Stock which become vested and shares delivered in settlement of Restricted Stock Units (“full-value Awards”) exceed 3,200,000 except that full-value Awards may be granted which result in vesting and delivery of shares in excess of that number by reducing the aggregate number of shares that may thereafter be issued upon exercise of Stock Options and Limited Rights by two and nine-tenths (2.9) shares for each such excess share (subject to adjustment under Article XI).
3.2 Share Counting Rules. For purposes of the limitations specified in Section 3.1, the Committee may adopt reasonable counting procedures to ensure appropriate counting, avoid double counting (as, for example, in the case of tandem or substitute awards) and make adjustments if the number of shares of Stock actually delivered differs from the number of shares previously counted in connection with an Award. To the extent that an Award expires or is canceled, forfeited, settled in cash or otherwise terminated or concluded without a delivery to the Participant of the full number of shares to which the Award related or with the Participant not permitted to retain those shares free of restrictions under the Plan, the undelivered shares and any forfeited shares will again be available for Awards. Shares withheld in payment of the exercise price or taxes relating to an Award and shares equal to the number surrendered in payment of any exercise price or taxes relating to an Award shall be deemed to constitute shares not delivered to the Participant and shall be deemed to again be available for Awards under the Plan; provided, however, that shares withheld in payment of taxes upon vesting of Restricted Stock and shares equal to the number of outstanding shares surrendered in payment of the exercise price or taxes relating to an Award shall not become available again under the Plan if the withholding or surrender
transaction occurs more than ten years after the date of the most recent shareholder approval of the Plan, and otherwise shares shall not become available under this Section 3.2 in an event that would constitute a “material revision” of the Plan subject to shareholder approval under then applicable rules of the New York Stock Exchange. The same share counting rules will apply to awards under the 1991 Stock Option Plan and the 1995 Key Employee Restricted Stock Plan.
3.3 Shares Available. At the discretion of the Board or the Committee, the shares of Common Stock to be delivered under this Plan shall be made available either from authorized and unissued shares of Common Stock or shares of Common Stock controlled by the Company, or both; provided, however, that absent such determination by the Board or the Committee to the contrary, in whole or in part, the shares shall consist of the Company’s authorized but unissued Common Stock.
ADMINISTRATION OF THE PLAN
4.1 Committee. The Plan generally shall be administered by the Compensation Committee of the Board, or such other Board committee as may be designated by the Board to administer the Plan, subject to this Article IV. The Committee shall consist of two or more Directors. The members of the Committee shall serve at the pleasure of the Board, which shall have the power, at any time and from time to time, to remove members from the Committee or to add members thereto. Vacancies on the Committee, however caused, shall be filled by action of the Board. In appointing members of the Committee, the Board may consider whether a member is or will qualify as a “Non-Employee Director” within the meaning of Rule 16b-3(b)(3) under the Exchange Act and an “outside director” within the meaning of Treasury Regulation 1.62-27(e)(3) under Code Section 162(m), but such members are not required to so qualify at the time of appointment or during their term of service on the Committee. At any time that a member of the Committee does not so qualify, any action of the Committee relating to an award granted or to be granted to a Participant who is then subject to
Section 16 of the Exchange Act in respect of the Company, or relating to an award intended by the Committee to constitute “performance-based compensation” within the meaning of Code Section 162(m) and regulations thereunder, may be taken either (i) by a subcommittee, designated by the Committee, composed solely of two or more Directors who so qualify as a “Non-Employee Director” or “outside director” (whichever may apply), or (ii) by the Committee but with each such member who does not so qualify as a “Non-Employee Director” or “outside director” (whichever may apply) abstaining or recusing himself or herself from such action, provided that at least two Directors serving on the Committee remain qualified to act. Such action, authorized by such a subcommittee or by the Committee upon the abstention or recusal of such non-qualified member(s), shall be the action of the Committee for purposes of the Plan. The foregoing notwithstanding, the Board may perform any function of the Committee under the Plan, including transactions with respect to Directors. In any case in which the Board is performing a function of the
Committee under the Plan, each reference to the Committee herein shall be deemed to refer to the Board, except where the context otherwise requires.
4.2 Powers. The Committee has discretionary authority to determine the Employees and Directors to whom, and the time or times at which, Awards shall be granted. The Committee also has authority to determine the amount of shares of Common Stock that shall be subject to each Award and the terms, conditions, and limitations of each Award, subject to the express provisions of this Plan. The Committee shall have the discretion to interpret this Plan and to make all other determinations necessary for Plan administration. The Committee has authority to prescribe, amend and rescind any rules and regulations relating to this Plan, subject to the express provisions of this Plan. All Committee interpretations, determinations, and actions shall be in the sole discretion of the Committee and shall be binding on all parties. The Committee may correct any defect or supply any omission or reconcile any inconsistency in this Plan or in any Agreement in the manner and to the extent it shall deem expedient to carry it into effect, and it shall be the sole and final judge of such expediency.
4.3 Agreements. Awards shall be evidenced by an Agreement and may include any terms and conditions not inconsistent with this Plan, as the Committee may determine.
4.4 No Liability. No member of the Board, the Committee or any of its delegates shall be liable for any action or determination made in good faith with respect to this Plan, any Award or any Agreement.
5.1 Participation. Participants shall be selected by the Committee from the Employees and Directors. Such designation may be by individual or by class.
5.2 Incentive Stock Option Eligibility. A Director shall not be eligible for the grant of an Incentive Stock Option. In addition, no Employee shall be eligible for the grant of an Incentive Stock Option who owns (within the meaning of Section 422(b) of the Code), or would own immediately before the grant of such Incentive Stock Option, directly or indirectly, stock possessing more than 10 percent of the total combined voting power of all classes of stock of the Company or any Subsidiary.
5.3 Limit on Awards. Awards granted to any Employee shall not exceed in the aggregate during any calendar year (a) 500,000 Stock Options (with or without tandem Limited Rights and inclusive of any Limited Rights granted pursuant to Section 11.2) and (b) 200,000 shares relating to Restricted Awards (subject in each case to adjustment as provided in Article XI).
FORMS OF AWARDS
6.1 Award Eligibility. The forms of Awards under this Plan are Stock Options as described in Article VII, Limited Stock Appreciation Rights as described in Article VIII, and Restricted Awards (Restricted Stock and Restricted Stock Units) as described in Article IX. The Committee may, in its discretion, permit holders of Awards under this Plan to surrender outstanding Awards in order to exercise or realize the rights under other Awards.
7.1 Exercise Price. The exercise price of Common Stock under each Stock Option shall be not less than 100 percent of the Fair Market Value of the Common Stock on the Date of Grant.
7.2 Term. Stock Options may be exercised as determined by the Committee, provided that Stock Options may in no event be exercised later than 10 years from the Date of Grant and Incentive Stock Options may not be granted later than 10 years after the applicable date under Section 422(b)(2) of the Code. During the Participant’s lifetime, only the Participant may exercise an Incentive Stock Option. The Committee may amend the terms of an Incentive Stock Option at any time to include provisions that have the effect of changing such Incentive Stock Option to a Non-qualified Stock Option, or vice versa (to the extent any such change is permitted by applicable law).
7.3 Method of Exercise. Upon the exercise of a Stock Option, the exercise price shall be payable in full in cash or an equivalent acceptable to the Committee. No fractional shares shall be issued pursuant to the exercise of a Stock Option, and no payment shall be made in lieu of fractional shares. At the discretion of the Committee and provided such payment can be effected without causing the Participant to incur liability under Section 16(b) of the Exchange Act or causing the Company to incur additional expense under applicable accounting rules, the exercise price may be paid by assigning and delivering to the Company shares of Common Stock or directing the Company to withhold shares from the Stock Option shares or a combination of cash and such shares equal in value to the exercise price. Any shares so assigned and delivered to the Company in payment or partial payment of the exercise price shall be valued at the closing market price of the Common Stock on the principal exchange or in such other principal market on which the Common Stock is trading on the exercise date. In addition, at the request of the Participant and to the extent permitted by applicable law, the Company in its discretion may selectively approve arrangements with a brokerage firm under which such brokerage firm, on behalf of the Participant, shall pay to the Company the exercise price of the Stock Options being exercised, and the Company, pursuant to an irrevocable notice from the Participant, shall promptly deliver the shares being purchased to such firm.
7.4 Limitation of Incentive Stock Options. With respect to Incentive Stock Options, the aggregate Fair Market Value (determined at the Date of Grant) of the Common Stock with respect to which Incentive Stock Options are exercisable for the first time by a
Participant during any calendar year (under all stock option plans of the Company and its Subsidiaries) shall not exceed $100,000, or such other amount as may be prescribed under the Code. If any Stock Option intended to be an Incentive Stock Option fails to so qualify, including under the requirement set forth in this Section 7.4, such Stock Option shall be deemed to be a Non-qualified Stock Option and shall be exercisable in accordance with the Plan and the Stock Option’s terms.
LIMITED STOCK APPRECIATION RIGHTS
8.1 Grant. The grant of Limited Stock Appreciation Rights under this Plan shall be subject to the terms and conditions of this Article VIII and shall contain such additional terms and conditions, not inconsistent with the express provisions of this Plan, as the Committee shall deem desirable. A Limited Right is a stock appreciation right which is effective only upon a Change in Control (as defined in Section 2.4) and is payable only in cash. The amount of payment to which any grantee of such a Limited Right shall be entitled upon exercise shall be equal to the difference between the exercise price per share of any Common Stock covered by a Stock Option in connection with, whether or not in tandem, such Limited Right and the “Market Price” of a share of Common Stock. For purposes of this Section 8.1, the term “Market Price” shall mean the greater of (i) the highest price per share of Common Stock paid in connection with the Change in Control and (ii) the highest price per share of Common Stock reflected in the NYSE Transactions Report during the sixty day period prior to the Change in Control. If the Limited Rights are exercised, the tandem Stock Options shall cease to be exercisable to the extent of the Common Stock with respect to which such Limited Rights are exercised.
9.1 Types of Award. The Committee, in its discretion, is authorized to grant Restricted Awards either as Service Awards or Performance Awards. As used herein, the term “Service Award” refers to any Restricted Award described in Section 9.2 and the term “Performance Award” refers to any Restricted Award described in Section 9.3. Restricted Stock shall be nontransferable until such time as all of the restrictions underlying the Award have been satisfied. Subject to Section 3.1, the Committee in its discretion may grant up to 5% of the number of shares of Common Stock available for grant under this Plan as Service Awards or Performance Awards without regard to any minimum vesting requirement set forth in Section 9.2 or 9.3 except Service Awards shall have a minimum vesting requirement of one year.
9.2 Service Award. The Committee may grant shares of Restricted Stock or Restricted Stock Units to a Participant subject to forfeiture upon an interruption in the Participant’s continuous service with the Company or a Subsidiary within a period specified by the Committee, provided that the total period during which the Restricted Award is subject to forfeiture (the “vesting” period) shall not be less than three years, but with
ratable or proportionate vesting (or any other less rapid schedule for vesting) permitted during such period. The period during which Restricted Stock Units are subject to a risk of forfeiture may be shorter than the period during which settlement of the Restricted Stock Units is deferred.
9.3 Performance Award. The Committee may grant Restricted Stock or Restricted Stock Units to a Participant upon the attainment of a Performance Objective as follows: Not later than the applicable deadline under Treasury Regulation 1.162-27(e), the Committee, in its sole discretion, may establish (a) a Performance Award for a Participant for a specified period (which shall not be less than one year) during which performance will be measured (the “Performance Period”), and (b) with respect to such Participant one or more Performance Objectives to be satisfied prior to the Participant’s becoming entitled to settlement of such Performance Award for such Performance Period. Any Performance Objective shall be comprised of specified corporate, business group or divisional levels of performance, over the Performance Period, relating to one or more of the following performance criteria: earnings per share; net earnings; pretax earnings; operating income; net sales; market share; balance sheet measurements; cash return on assets; book value; shareholder return, or return on average common equity. In establishing the level of Performance Objective to be attained, the Committee may disregard or offset the effect of such factors as extraordinary and/or nonrecurring items as determined by the Company’s outside accountants in accordance with generally accepted accounting principles and changes in accounting standards as may be required by the Financial Accounting Standards Board. Performance Awards may also be granted in the sole discretion of the Committee if the Company’s performance during a specified Performance Period, as measured by one or more of the criteria enumerated in this Section 9.3, as compared to comparable measures of performance of peer companies, equals or exceeds Performance Objectives established by the Committee not later than the applicable deadline under Treasury Regulation 1.162-27(e). No Performance Award shall be settled or paid out to a Participant for a Performance Period prior to written certification by the Committee of attainment of the Performance Objective(s) applicable to such Participant. Notwithstanding attainment of the applicable Performance Objective or any provisions of this Plan to the contrary, the Committee shall have the power, in its sole discretion, to (a) exercise negative discretion to reduce the Performance Award to a Participant for any Performance Period to zero or such other amount as it shall determine; (b) impose service requirements which must be fulfilled by the Participant during the Performance Period or subsequent to the attainment of the Performance Objective; and (c) provide for accelerated settlement or payment of a Performance Award upon a Change in Control or specified terminations of employment.
9.4 Delivery. If a Participant, with respect to a Service Award, continuously remains in the employ of the Company or a Subsidiary for the period specified by the Committee, or, with respect to a Performance Award, if and to the extent that the Participant fulfills the requirements of the Performance Objective and any service requirements as may be imposed by the Committee, the shares awarded to such Participant as Restricted Stock shall be delivered to such Participant without any restrictions promptly after the applicable event, and the risk of forfeiture applicable to Restricted Stock Units shall end and such Restricted Stock Units shall then and thereafter be settled in accordance with the terms of such Restricted Stock Units (including any elective deferral of settlement permitted by the
Committee). The foregoing notwithstanding, the Committee may determine that any restrictions and/or deferral period applicable to a Restricted Award shall be deemed to end or have ended on an accelerated basis at the time of the Participant’s death while employed or serving as a Director or upon the Participant’s termination of employment or service due to disability or following a Change in Control.
9.5 Shareholder Rights. Except as otherwise provided in this Plan, each Participant shall have, with respect to all shares of Restricted Stock, all the rights of a shareholder of the Company, including the right to vote the Restricted Stock; provided, however, that all distributions payable with respect to the Restricted Stock shall be retained by the Company and reinvested in additional shares of Common Stock to be issued in the name of the Participant. Any shares of Common Stock acquired as a result of reinvestment of such distributions shall also be Restricted Stock subject to the terms and conditions of this Plan. A Participant shall have no rights of a shareholder relating to Restricted Stock Units or Stock Units until such time as shares are issued or delivered in settlement of such Restricted Stock Units or Stock Units.
9.6 Deferral of Receipt of Restricted Stock. A Stock Unit, whether or not restricted, shall represent the conditional right of the Participant to receive delivery of one share of Common Stock at a specified future date, subject to the terms of the Plan and the applicable Agreement. Until settled, a Stock Unit shall represent an unfunded and unsecured obligation of the Company with respect to which a Participant has rights no greater than those of a general creditor of the Company. Unless otherwise specified by the Committee, each Stock Unit will carry with it the right to crediting of an amount equal to dividends and distributions paid on a share of Common Stock (“dividend equivalents”), which amounts will be deemed reinvested in additional Stock Units, at the Fair Market Value of Common Stock at the dividend payment date. Such additional Stock Units will be subject to the same risk of forfeiture, other restrictions, and deferral of settlement as the original Stock Units to which such additional Stock Units directly or indirectly relate. Unless the Committee determines to settle Stock Units in cash, Stock Units shall be settled solely by issuance or delivery of shares of Common Stock. The Committee may, in its sole discretion, permit Participants to convert their Restricted Stock into an equivalent number of stock units as of the date on which all applicable restrictions pertaining to the Restricted Stock would either lapse or be deemed satisfied (the “Vesting Date”). Any such request for conversion must (a) be made by the Participant at least six months prior to the Vesting Date and (b) specify a deferral date which is no earlier than the earlier of (i) the Participant’s termination of employment or (ii) the first anniversary of the Vesting Date.
FORFEITURE AND EXPIRATION OF AWARDS
10.1 Termination of Employment or Service. Subject to the express provisions of this Plan and the terms of any applicable Agreement, the Committee, in its discretion, may provide for the forfeiture or continuation of any Award for such period and upon such terms and conditions as are determined by the Committee in the event that a Participant ceases to
be an Employee or Director. In the absence of Committee action or except as otherwise provided in an Agreement, the following rules shall apply:
(a) With respect to Stock Options granted to Employees, in the event of Retirement, the Stock Options shall continue to vest according to the original schedule, but no Stock Options may be exercised after the expiration of the earlier of the remaining term of such Stock Options or 36 months (12 months in the case of Incentive Stock Options) following the date of Retirement; in the event of permanent and total disability, the Stock Options shall continue to vest according to the original schedule, but no Stock Options may be exercised after the expiration of the earlier of the remaining term of such Stock Option or 12 months following the date of permanent and total disability; in the event of death, Stock Options held at the time of death by the Participant may be exercised by the estate or beneficiary of such Participant until the expiration of the earlier of the remaining term of such Stock Options or three years from the date of death; in the event of the Participant’s voluntary separation of employment, the Stock Options shall terminate and be forfeited as of the date of separation of employment; in the event of the Participant’s involuntary separation of employment, the Stock Option shall be exercisable until the end of the period of the Participant’s receipt of installments of severance pay, if any, from the Company; in the event of an involuntary separation of employment without severance pay or if severance pay is paid in a lump sum, the Stock Options shall not be exercisable after the date of separation of employment;
(b) With respect to Limited Rights granted to Employees, in the event of Retirement or permanent and total disability, the Limited Rights shall continue in effect for six months following separation of service, and such Limited Rights may be exercised during such six month period; in the event of the Participant’s death or voluntary separation of service, the Limited Rights shall terminate as of the date of separation from employment; provided that Limited Rights pursuant to Section 8.1 may be exercised in accordance with their terms by the holder thereof who separated from employment following a Change in Control, without respect to the separation of employment of such holder; and
(c) With respect to Restricted Awards granted to Employees, in the event of a Participant’s voluntary or involuntary separation before the expiration of the employment period specified by the Committee, with respect to Service Awards, or before the fulfillment of the Performance Objective and any other restriction imposed by the Committee, with respect to Performance Awards, any shares of Restricted Stock shall be returned to the Company and any Restricted Award shall be deemed to have been forfeited by the Participant as of the date of such separation.
10.2 Leave of Absence. With respect to an Award, the Committee may, in its sole discretion, determine that any Participant who is on leave of absence for any reason shall be considered to still be in the employ of the Company, provided that rights to such Award during a leave of absence shall be limited to the extent to which such rights were earned or vested when such leave of absence began.
11.1 Share Adjustments. If the number of outstanding shares of Common Stock is increased, decreased, or exchanged for a different number or kind of shares or other securities, or if additional, new, or different shares or other securities are distributed with respect to such shares of Common Stock or other securities, through merger, consolidation, sale of all or substantially all of the assets of the Company, reorganization, recapitalization, reclassification, stock dividend, stock split, reverse stock split, or other distribution with respect to such shares of Common Stock or other securities, an appropriate adjustment in order to preserve the benefits or potential benefits intended to be made available to the Participants may be made, in the discretion of the Committee, in all or any of the following (i) the maximum number and kind of shares provided in Section 3.1 and the number of Awards that may be granted to an Employee in the specified period under Section 5.3; (ii) the number and kind of shares or other securities subject to then outstanding Awards; and (iii) the price for each share or other unit of any other securities subject to then outstanding Awards. The Committee may also make any other adjustments, or take such action as the Committee, in its discretion, deems appropriate in order to preserve the benefits or potential benefits intended to be made available to the Participants. Any fractional share resulting from such adjustment may be eliminated.
11.2 Corporate Changes. Subject to Article XIII, upon (i) the dissolution or liquidation of the Company; (ii) a reorganization, merger, or consolidation (other than a merger or consolidation effecting a reincorporation of the Company in another state or any other merger or consolidation in which the shareholders of the surviving Company and their proportionate interests therein immediately after the merger or consolidation are substantially identical to the shareholders of the Company and their proportionate interests therein immediately prior to the merger or consolidation) of the Company with one or more corporations, following which the Company is not the surviving Company (or survives only as a subsidiary of another Company in a transaction in which the shareholders of the parent of the Company and their proportionate interests therein immediately after the transaction are not substantially identical to the shareholders of the Company and their proportionate interests therein immediately prior to the transaction); (iii) the sale of all or substantially all of the assets of the Company; or (iv) the occurrence of a Change in Control, subject to the terms of any applicable Agreement, the Committee serving prior to the date of the applicable event may, to the extent permitted in Section 3.1 of this Plan, in its discretion and without obtaining shareholder approval, take any one or more of the following actions with respect to any Participant:
(a) accelerate the exercise dates of any or all outstanding Awards;
(b) grant Limited Rights to holders of outstanding Stock Options;
(c) eliminate any and all restrictions with respect to outstanding Restricted Awards;
(d) pay cash to any or all holders of Stock Options in exchange for the cancellation of their outstanding Stock Options and cash out all outstanding stock units;
(e) grant new Awards to any Participants; or
(f) make any other adjustments or amendments to outstanding Awards or determine that there shall be substitution of new Awards by such successor employer Company or a parent or subsidiary company thereof, with appropriate adjustments as to the number and kind of shares or units subject to such awards and prices.
11.3 Binding Determination. Adjustments under Sections 11.1 and 11.2 shall be made by the Committee, and its determination as to what adjustments shall be made and the extent thereof shall be final, binding, and conclusive.
12.1 No Right to Employment. Nothing in this Plan or in any instrument executed pursuant to this Plan shall confer upon any Participant any right to continue in the employ of the Company or a Subsidiary or affect the Company’s or a Subsidiary’s right to terminate the employment of any Participant at any time with or without cause or any right to continue to serve as a Director of the Company or affect any party’s right to remove such Participant as a Director.
12.2 Securities Requirements. The Company shall not be obligated to issue or transfer shares of Common Stock pursuant to an Award unless all applicable requirements imposed by federal and state laws, regulatory agencies, and securities exchanges upon which the Common Stock may be listed have been fully complied with. As a condition precedent to the issuance of shares pursuant to the grant or exercise of an Award, the Company may require the Participant to take any reasonable action to meet such requirements.
12.3 No Right to Stock. No Participant and no beneficiary or other person claiming under or through such Participant shall have any right, title, or interest in any shares of Common Stock allocated or reserved under this Plan or subject to any Award except as to such shares of Common Stock, if any, that have been issued or transferred to such Participant.
12.4 Withholding. The Company or a Subsidiary, as appropriate, shall have the right to deduct from all Awards paid in cash any federal, state, or local taxes as required by law to be withheld with respect to such cash payments. In the case of Awards paid in Common Stock, the Participant or other person receiving such Common Stock may be required to pay to the Company or a Subsidiary, as appropriate, the amount of any such taxes which the Company or Subsidiary is required to withhold with respect to such Common Stock. Also, at the discretion of the Committee and provided such withholding can be effected without causing the Participant to incur liability under Section 16(b) of the Exchange Act, the Participant may (i) direct the Company or Subsidiary to withhold from the shares of Common Stock to be issued or transferred to the Participant the number of shares necessary to satisfy the Company’s or Subsidiary’s obligation to withhold taxes, such determination to be based on the shares’ Fair Market Value as of the date on which tax withholding is to be made, (ii) deliver sufficient shares of Common Stock (based upon the
Fair Market Value at the date of withholding) to satisfy the withholding obligations, or (iii) deliver sufficient cash to satisfy the withholding obligations. The Committee may permit withholding of shares (as under (i) or (ii) of the preceding sentence) to cover the Participant’s taxes relating to an Award in excess of the withholding taxes if and to the extent that such withholding will not result in additional expense to the Company under then applicable accounting rules. Participants who elect to use such a stock withholding feature must make the election at the time and in the manner prescribed by the Committee.
12.5 No Disposition. No Award under this Plan may be the subject of any Disposition (excluding shares of Common Stock with respect to which all restrictions have lapsed), other than by will or the laws of descent or distribution. Any attempted Disposition in violation of this provision shall be void and ineffective for all purposes. Notwithstanding the foregoing, the Committee may, in its sole discretion, permit a Participant to transfer a Non-qualified Stock Option (and any related limited right) to (a) a member or members of the Participant’s immediate family, (b) a trust, the beneficiaries of which consist exclusively of members of the Participant’s immediate family, (c) a partnership, the partners of which consist exclusively of members of the Participant’s immediate family, or (d) any similar entity created for exclusive benefit of members of the Participant’s immediate family.
12.6 Severability; Construction. If any provision of this Plan is held to be illegal or invalid for any reason, then the illegality or invalidity shall not affect the remaining provisions hereof, but such provision shall be fully severable and this Plan shall be construed and enforced as if the illegal or invalid provision had never been included herein. Headings and subheadings are for convenience only and not to be conclusive with respect to construction of this Plan.
12.7 Governing Law. All questions arising with respect to the provisions
of this Plan shall be determined by application of the laws of the
12.8 Other Deferrals. The Committee may permit selected Participants to elect to defer payment of Awards in accordance with procedures established by the Committee including, without limitation, procedures intended to defer taxation on such deferrals until receipt (including procedures designed to avoid incurrence of liability under Section 16(b) of the Exchange Act). Any deferred payment, whether elected by the Participant or specified by an Agreement or by the Committee, may require forfeiture in accordance with stated events, as determined by the Committee.
to Participants Outside the
authorize cash payments in lieu of issuance or delivery of shares, so long as such modifications will not contravene any applicable law or regulation or result in actual liability under Section 16(b) for the Participant whose Award is modified.
AMENDMENT AND TERMINATION
13.1 Amendments; Suspension; Termination. The Board may at any time amend, suspend (and if suspended, may reinstate) or terminate this Plan; provided, however, that after the shareholders have approved this Plan in accordance with Section 14.1, the Board may not, without approval of the shareholders of the Company, amend this Plan so as to (a) increase the number of shares of Common Stock subject to this Plan except as permitted in Article XI or (b) reduce the exercise price for shares of Common Stock covered by Stock Options granted hereunder below the applicable price specified in Article VII of this Plan or (c) make a material revision to the Plan within the meaning of Section 303A(8) of the Listed Company Manual of the New York Stock Exchange as then in effect ; and provided further, that the Board may not modify, impair or cancel any outstanding Award in a manner that materially and adversely affects a Participant without the consent of such Participant.
DATE OF PLAN ADOPTION
14.1 Date of Plan Adoption. This Plan was adopted by the Board effective December 3, 1996 and approved by shareholders April 15, 1997. The amendment and restatement of the Plan has been adopted by the Board effective February 10, 2004, subject to shareholder approval at the Company’s 2004 Annual Meeting of Shareholders. Awards (other than Restricted Stock) may be granted under the terms of the amended and restated Plan prior to such shareholder approval, but if the requisite shareholder approval is not obtained, to the extent any such Award exceeded the authorization under the terms of the Plan in effect prior to the amendment and restatement, the excess portion of such Award shall be canceled. This Plan shall continue in effect with respect to Awards granted before termination of this Plan and until such Awards have been settled, terminated or forfeited.
2004 MID-TERM INCENTIVE PLAN
1. PURPOSES. This 2004 Mid-Term Incentive Plan (the "Plan") of VF
Corporation (the "Company") is implemented under the Company's 1996 Stock
Compensation Plan (the "1996 Plan"). The Plan, which replaces, for periods
beginning on and after January 1, 2004, the Mid-Term Incentive Plan adopted in
1999, is intended to provide an additional means to attract and retain talented
executives, to link a significant element of executives' compensation
opportunity to the Company's performance over more than one year, thereby
providing an incentive for successful long-term strategic management of the
Company, and otherwise to further the purposes of the 1996 Plan.
2. STATUS AS SUBPLAN UNDER THE 1996 PLAN; ADMINISTRATION. This Plan is
a subplan implemented under the 1996 Plan, and will be administered by the
Compensation Committee of the Board of Directors in accordance with the terms of
the 1996 Plan. All of the terms and conditions of the 1996 Plan are hereby
incorporated by reference in this Plan, and if any provision of this Plan or an
agreement evidencing an award hereunder conflicts with a provision of the 1996
Plan, the provision of the 1996 Plan shall govern. Capitalized terms used in
this Plan but not defined herein shall have the same meanings as defined in the
3. CERTAIN DEFINITIONS. In addition to terms defined above and in the
1996 Plan, the following are defined terms under this Plan:
(a) "Account" means the account established for a Participant under
(b) "Administrator" means the officers and employees of the Company
responsible for the day-to-day administration of the Plan and to which other
authority may be delegated under Section 10(b). Unless otherwise specified by
the Committee, the Administrator shall be the VF Corporation Pension Plan
(c) "Cause" means (i), if the Participant has an Employment Agreement
defining "Cause," the definition under such Employment Agreement, or (ii), if
the Participant has no Employment Agreement defining "Cause," the Participant's
gross misconduct, meaning (A) the Participant's willful and continued refusal
substantially to perform his or her duties with the Company (other than any such
refusal resulting from his or her incapacity due to physical or mental illness),
after a demand for substantial performance is delivered to the Participant by
the Board of Directors which specifically identifies the manner in which the
Board believes that the Participant has refused to perform his or her duties, or
(B) the willful engaging by the Participant in gross misconduct materially and
demonstrably injurious to the Company. For purposes of this definition, no act
or failure to act on the Participant's part shall be considered "willful" unless
done, or omitted to be done, by the Participant not in good faith and without
reasonable belief that his or her action or omission was in the best interest of
(d) "Covered Employee" means a Participant determined by the Committee
to be likely to be a named executive officer of the Company in the year
compensation under the Plan will become payable and whose compensation in that
year likely could be non-deductible under Section 162(m) of the Internal Revenue
Code, such that the Committee has determined that compensation to such
Participant under the Plan should qualify as "performance-based compensation"
for purposes of Section 162(m).
(e) "Disability" means (i), if the Participant has an Employment
Agreement defining "Disability," the definition under such Employment Agreement,
or (ii), if the Participant has no Employment Agreement defining "Disability,"
the Participant's incapacity due to physical or mental illness resulting in the
Participant's absence from his or her duties with the Company on a full-time
basis for 26 consecutive weeks, and, within 30 days after written notice of
termination has been given by the Company, the Participant has not returned to
the full-time performance of his or her duties.
(f) "Dividend Equivalents" means credits in respect of each PRSU
representing an amount equal to the dividends or distributions declared and paid
on a share of Common Stock, subject to Section 7(b).
(g) "Employment Agreement" means a written agreement between the
Company and a Participant securing the Participant's services as an employee for
a period of time and in effect immediately prior to the Participant's
Termination of Employment or, if no such agreement is in effect immediately
prior to the Participant's Termination of Employment, an agreement providing
severance benefits to the Participant upon termination of employment in effect
immediately prior to the Participant's Termination of Employment (including for
this purpose an agreement providing such benefits only during a period following
a defined change in control, whether or not a change in control in fact has
occurred prior to such Termination of Employment).
(h) "Good Reason" means "Good Reason" as defined in the Participant's
Employment Agreement. If the Participant has no such Employment Agreement, no
circumstance will constitute "Good Reason" for purpose of this Plan.
(i) "Participant" means an Employee participating in this Plan.
(j) "Performance Cycle" means the period specified by the Committee
over which a designated amount of PRSUs potentially may be earned. Performance
Cycles generally will be periods comprising three consecutive fiscal years of
(k) "Performance Goal" means the performance required to be achieved as
a condition of earning of PRSUs under the Plan. As specified in Section 6(a),
for each Participant who is a Covered Employee in a given Performance Cycle, the
Performance Goal will include at least two components, a "Pre-Set Goal" which
must be met in order for any amount to be earned and one or more "Challenge
Goals" which will then determine the amount of PRSUs such Participant will earn
for the Performance Cycle, and for each Participant who is not a Covered
Employee in a given Performance Cycle, the Performance Goal may but is not
include the Pre-Set Goal and will include one or more Challenge Goals which will
then determine the amount of PRSUs such Participant will earn for the
(l) "PRSU" or "Performance Restricted Stock Unit" means a Stock Unit
which is potentially earnable by a Participant hereunder upon achievement of the
Performance Goal. PRSUs that have been earned but deferred at the election of
the Participant continue to be referred to as PRSUs under the Plan, with the
understanding that such PRSUs are no longer forfeitable upon Termination of
Employment or based on performance.
(m) "Pro Rata Portion" means a portion of a specified number of PRSUs
potentially earnable in a given Performance Cycle determined by multiplying such
number of PRSUs by a fraction the numerator of which is the number of calendar
days from the beginning of the Performance Cycle until a specified Proration
Date and the denominator of which is the number of calendar days in the
(n) "Stock Unit" means a bookkeeping unit which represents a right to
receive one share of Common Stock upon settlement, together with a right to
accrual of additional Stock Units as a result of Dividend Equivalents as
specified in Section 7(b), subject to the terms and conditions of this Plan.
Stock Units, which constitute an award under Article IX of the 1996 Plan
(including Section 9.6 thereof), are arbitrary accounting measures created and
used solely for purposes of this Plan, and do not represent ownership rights in
the Company, shares of Common Stock, or any asset of the Company.
(o) "Target PRSUs" means a number of PRSUs designated as a target
number that potentially may be earned by a Participant in a given Performance
(p) "Termination of Employment" means the Participant's termination of
employment with the Company or any of its subsidiaries or affiliates in
circumstances in which, immediately thereafter, the Participant is not employed
by the Company or any of its subsidiaries or affiliates.
4. SHARES AVAILABLE UNDER THE PLAN. Shares issuable or deliverable in
settlement of PRSUs shall be drawn from the 1996 Plan. The Committee will
monitor share usage under this Plan and the 1996 Plan to ensure that shares are
available for settlement of PRSUs in compliance with the requirements of the
5. ELIGIBILITY. Employees who are eligible to participate in the 1996
Plan may be selected by the Committee to participate in this Plan.
6. DESIGNATION AND EARNING OF PRSUS.
(a) DESIGNATION OF PRSUS, PRE-SET GOALS, CHALLENGE GOALS AND RELATED
TERMS. Not later than 90 days after the beginning of a Performance Cycle (except
that this time limitation will not apply in the case of a Participant other than
a Covered Employee), the Committee shall (i) select Employees to participate in
the Performance Cycle, (ii) designate the
Pre-Set Goal (to the extent applicable) for the Performance Cycle, and (iii)
designate for each Participant the number of Target PRSUs and the range of PRSUs
the Participant shall have the opportunity to earn in such Performance Cycle.
The number of PRSUs potentially earnable by each Participant shall range from 0%
to a maximum percentage of a specified number of Target PRSUs, subject to the
(A) In no event may the number of PRSUs that may be potentially
earnable by any one Participant in all Performance Cycles that
begin in any one calendar year exceed the applicable annual
per-person limitation set forth in Section 5.3 of the 1996
(B) The maximum percentage of the number of Target PRSUs that may
be earned shall be 200% of the number of Target PRSUs, unless
the Committee specifies a lesser percentage.
The Pre-Set Goal is intended to be a "Performance Objective" within the meaning
of Section 9.3 of the 1996 Plan, in order to qualify PRSUs as "performance-based
compensation" under Section 162(m) of the Code. Accordingly, the Pre-Set Goal
shall be based on one or more of the performance criteria specified in Section
9.3 of the 1996 Plan. If the Pre-Set Goal applicable to a Participant who is a
Covered Employee (or if so specified for a Participant who is not a Covered
Employee) for a Performance Cycle is not achieved, no PRSUs may be earned by the
Participant for such Performance Cycle. In addition, the Committee may at any
time, in its discretion, specify the Challenge Goals applicable to one or more
years of the Performance Cycle. Challenge Goals may be specified as a table,
grid, or formula that sets forth the amount of PRSUs that will be earned upon
achievement of a specified level of performance during all or part of the
Performance Cycle (subject to the requirement that the Pre-Set Goal has been
achieved, in the case of a Participant who is a Covered Employee or if so
specified by the Committee for other Participants). For purposes of Section
162(m) of the Code, the Committee is authorized to treat the maximum percentage
of PRSUs as earned upon achievement of the Pre-Set Goal, so specification of the
Challenge Goals and related terms represents an exercise of negative discretion
by the Committee.
(b) ADJUSTMENTS TO PERFORMANCE GOAL. The Committee may provide for
adjustments to the Performance Goal, to reflect changes in accounting rules,
corporate structure or other circumstances of the Company, for the purpose of
preventing dilution or enlargement of Participants' opportunity to earn PRSUs
hereunder; provided, however, that no adjustment shall be authorized if and to
the extent that such authorization or adjustment would cause the Pre-Set Goal
applicable to a Participant who is a Covered Employee not to meet the
"performance goal requirement" set forth in Treasury Regulation 1.162-27(e)(2)
under the Code.
(c) DETERMINATION OF NUMBER OF EARNED PRSUS. Not later than 75 days
after the end of each Performance Cycle, the Committee shall determine the
extent to which the Performance Goal for the earning of PRSUs was achieved
during such Performance Cycle and the number of PRSUs earned by each Participant
for the Performance Cycle. The Committee shall make written determinations that
any Pre-Set Goal and Challenge Goals and any other
material terms relating to the earning of PRSUs were in fact satisfied. The date
at which the Committee makes a final determination of PRSUs earned with respect
to a given Performance Cycle will be the "Earning Date" for such Performance
Cycle. The Committee may adjust upward or downward the number of PRSUs earned,
in its discretion, in light of such considerations as the Committee may deem
relevant (but subject to applicable limitations of the 1996 Plan, as referenced
in Section 6(a) of this Plan), provided that, with respect to a Participant who
is a Covered Employee, no upward adjustment may be made if the Pre-Set Goal has
not been achieved and adjustments otherwise shall comply with applicable
requirements of Treasury Regulation 1.162-27(e) under the Code.
7. CERTAIN TERMS OF PRSUS.
(a) ACCOUNTS. The Company shall maintain a bookkeeping account for each
Participant reflecting the number of PRSUs then credited to the Participant
hereunder. The Account may include subaccounts or other designations showing,
with respect to separate Performance Cycles, PRSUs that remain potentially
earnable, PRSUs that have been earned but deferred, and other relevant
information. Fractional PRSUs shall be credited to at least three decimal places
for purposes of this Plan, unless otherwise determined by the Administrator.
(b) DIVIDEND EQUIVALENTS AND ADJUSTMENTS. Unless otherwise determined
by the Administrator, Dividend Equivalents shall be paid or credited on PRSUs
that have been earned as follows:
(i) Regular Cash Dividends. At the time of settlement of PRSUs
under Section 9, the Administrator shall determine the
aggregate amount of regular cash dividends that would have
been payable to the Participant, based on record dates for
dividends since the beginning of the Performance Cycle, if the
earned PRSUs then to be settled had been outstanding shares of
Common Stock at such record date (without compounding of
dividends but adjusted to account for splits and other
extraordinary corporate transactions). Such aggregate cash
amount will be converted to a number of shares by dividing the
amount by the Fair Market Value of a share of Common Stock at
the settlement date.
(ii) Common Stock Dividends and Splits. If the Company declares and
pays a dividend or distribution on Common Stock in the form of
additional shares of Common Stock, or there occurs a forward
split of Common Stock, then the number of PRSUs credited to
each Participant's Account and potentially earnable hereunder
as of the payment date for such dividend or distribution or
forward split shall be automatically adjusted by multiplying
the number of PRSUs credited to the Account or potentially
earnable as of the record date for such dividend or
distribution or split by the number of additional shares of
Common Stock actually paid as a dividend or distribution or
issued in such split in respect of each outstanding share of
(iii) Adjustments. If the Company declares and pays a dividend or
Common Stock that is not a regular cash dividend and not in
the form of additional shares of Common Stock, of if there
occurs any other event referred to in Article XI of the 1996
Plan, the Committee may determine to adjust the number of
PRSUs credited to each Participant's Account and potentially
earnable hereunder, in order to prevent dilution or
enlargement of Participants' rights with respect to PRSUs.
(c) STATEMENTS. An individual statement relating to a Participant's
Account will be issued to the Participant not less frequently than annually.
Such statement shall report the amount of PRSUs potentially earnable and the
number of PRSUs earned and remaining credited to Participant's Account (i.e.,
not yet settled), transactions therein during the period covered by the
statement, and other information deemed relevant by the Administrator. Such
statement may be combined with or include information regarding other plans and
compensatory arrangements affecting the Participant. A Participant's statements
may evidence the Company's obligations in respect of PRSUs without the need for
the Company to enter into a separate agreement relating to such obligations;
provided, however, that any statement containing an error shall not represent a
binding obligation to the extent of such error.
8. EFFECT OF TERMINATION OF EMPLOYMENT.
(a) TERMINATION PRIOR TO PERFORMANCE CYCLE EARNING DATE. Except to the
extent set forth in subsections (i) through (v) of this Section 8(a), upon a
Participant's Termination of Employment prior to the Earning Date with respect
to a given Performance Cycle all unearned PRSUs relating to such Performance
Cycle shall cease to be earnable and shall be canceled and forfeited, and
Participant shall have no further rights or opportunities hereunder:
(i) Disability or Retirement. If Termination of Employment is due
to the Disability or Retirement (as defined in the 1996 Plan)
of the Participant, the Participant shall be entitled to
receive settlement of a Pro Rata Portion of the total number
of PRSUs the Participant is deemed to have earned in
accordance with this Section 8(a)(i), with the Proration Date
(used to calculate the Pro Rata Portion) being the date of
Termination of Employment. The settlement of PRSUs shall occur
promptly following completion of the fiscal year of the
Company in which the Termination of Employment occurs.
Performance for any open Performance Cycle shall be deemed to
be the average performance achieved for the fiscal year(s)
completed prior to the date of settlement. Any deferral
election filed by the Participant shall be effective and apply
to the settlement of the PRSUs.
(ii) Death. If Termination of Employment is due to the
Participant's death, the Participant's Beneficiary shall be
entitled to receive settlement of a Pro Rata Portion of the
total number of PRSUs the Participant is deemed to have earned
in accordance with this Section 8(a)(ii),with the Proration
Date (used to calculate the Pro Rata Portion) being the date
of death. The settlement of PRSUs shall occur promptly
following completion of the fiscal year of the Company in
which the date of death occurs. Performance for any open
Performance Cycle shall be
deemed to be the average performance achieved for the fiscal
year(s) completed prior to the date of settlement. Any
deferral election filed by the Participant shall have no
effect on the settlement of the PRSUs.
(iii) Involuntary Termination By the Company Not for Cause Prior to
a Change in Control. If Termination of Employment is an
involuntary separation by the Company not for Cause prior to a
Change in Control, the Participant shall be entitled to
receive settlement of a Pro Rata Portion of the total number
of PRSUs the Participant is deemed to have earned in
accordance with this Section 8(a)(iii), with the Proration
Date (used to calculate the Pro Rata Portion) being the
earlier of (A) the date the last severance payment in the
nature of salary continuation has been made and (B) the last
day of the Performance Cycle. If no severance payments are to
be made, the applicable Proration Date shall be the date of
Termination of Employment. Performance for any open
Performance Cycle shall be deemed to be the average
performance achieved for the fiscal year(s) completed prior to
the date of settlement. Any deferral election filed by the
Participant shall have no effect on the settlement of the
(iv) At or Following a Change in Control, Involuntary Termination
By the Company Not for Cause or by Participant for Good
Reason. If Termination of Employment occurs at or after a
Change in Control and is an involuntary separation by the
Company not for Cause or a Termination by the Participant for
Good Reason, the Participant shall be entitled to receive
settlement of the total number of PRSUs the Participant is
deemed to have earned in accordance with this Section
8(a)(iv), promptly following the date of Termination of
Employment. The amount of the settlement shall assume that the
Participant has remained with the Company through the
completion of each open Performance Cycle and that the
performance achieved by the Company for each such Performance
Cycle is the average of the performance achieved for the
completed year(s) in such Performance Cycle if greater than
100% (i.e., the performance required to earn at least the
Target PRSUs), or, if such average is less than 100%, the
performance achieved shall be deemed to be the average of the
actual performance for the completed year(s) in such
Performance Cycle (if any) together with performance for years
not yet complete being deemed to be 100% of target
performance. Any deferral election filed by the Participant
shall have no effect on the settlement of the PRSUs.
(v) Termination by the Company for Cause or Voluntary Termination
by the Participant. If Termination of Employment is either by
the Company for Cause or voluntary by the Participant
(excluding a Termination for Good Reason following a Change in
Control), PRSUs relating to each Performance Cycle which has
not yet ended or reached its Earning Date will cease to be
earnable and will be canceled.
(b) TERMINATION AFTER PERFORMANCE CYCLE EARNING DATE. Upon a
Participant's Termination of Employment at or after the Earning Date with
respect to a given Performance
Cycle, all PRSUs resulting from such Performance Cycle shall be settled in
accordance with Section 9(a) as promptly as practicable after such Termination,
except that, if the Participant has timely filed an irrevocable election to
defer settlement of PRSUs following a Termination of Employment due to
Retirement or Disability, such PRSUs shall be settled in accordance with such
(c) RELEASE. Any settlement of PRSUs following Termination of
Employment may be delayed by the Committee if the Participant's Employment
Agreement or any policy of the Committee then in effect conditions such
settlement or severance payments upon the Company receiving a full and valid
release of claims against the Company.
9. SETTLEMENT OF PRSUS.
(a) SETTLEMENT IF PRSUS NOT DEFERRED. Not later than the Earning Date
for each Performance Cycle, the Committee shall settle all PRSUs earned in
respect of such Performance Cycle, other than PRSUs deferred under Section 9(b),
by issuing and/or delivering to the Participant one share of Common Stock for
each PRSU being settled. Such issuance or delivery shall occur as promptly as
practicable after the Earning Date for the Performance Cycle.
(b) DEFERRAL OF PRSUS. At any time on or before such date as may be
specified by the Administrator, the Participant may elect to defer settlement of
PRSUs to a date (i) later than the Earning Date for the Performance Cycle to
which the PRSUs relate or (ii) later than Termination of Employment due to
Retirement or Disability, as specified by the Participant; provided, however,
that an optional deferral shall be subject to such additional restrictions and
limitations as the Committee or Administrator may from time to time specify,
including for purposes of ensuring that the Participant will not be deemed to
have constructively received compensation in connection with such deferral.
Dividend equivalents shall accrue on deferred PRSUs and shall be paid in cash
annually to the Participant at an annual payment date set by the Administrator,
without interest or compounding. Other provisions of the Plan notwithstanding,
if any legislation or regulation imposes requirements on elective non-qualified
deferred compensation that are inconsistent with the Plan and procedures
hereunder, if Participants are not afforded an opportunity under such
legislation or regulation to withdraw or modify their prior elections or
deferred compensation resulting therefrom, then (i) if the prior deferrals can
be automatically modified to conform to the requirements of the legislation or
regulation with the Participant being deemed not to be in constructive receipt
of the deferred compensation, then such modification automatically shall be in
effect, and (ii) if not, then such deferral will immediately end and the
deferred PRSUs shall be promptly settled in accordance with the Plan; provided,
however, that if a Participant would be deemed to be in constructive receipt of
any deferred amounts solely because of this provision, the provision shall be
void and of no effect.
(c) CREATION OF RABBI TRUST. If and to the extent authorized by the
Committee, the Company may create one or more trusts and deposit therein Common
Stock or other property for delivery to the Participant in satisfaction of the
Company's obligations hereunder. Any such trust shall be a "rabbi" trust that
shall not jeopardize the status of the Participant's rights hereunder as
"unfunded" deferred compensation for federal income tax purposes. If so provided
Committee, upon the deposit by the Committee of Common Stock in such a trust,
there shall be substituted for the rights of the Participant to receive
settlement by issuance and/or delivery of Common Stock under this Agreement a
right to receive property of the same type as and equal in value to the assets
of the trust (to the extent that such assets represent the full amount of the
Company's obligation at the date of deposit). The trustee of the trust shall not
be permitted to diversify trust assets by voluntarily disposing of shares of
Common Stock in the trust and reinvesting proceeds, but such trustee may be
authorized to dispose of other trust assets and reinvest the proceeds in
alternative investments, subject to such terms, conditions, and limitations as
the Committee may specify, including for the purpose of avoiding adverse
accounting consequences to the Company, and in accordance with applicable law.
(d) SETTLEMENT OF PRSUS AT THE END OF THE DEFERRAL PERIOD. Not later
than 15 days after the end of any elective period of deferral or immediately in
the case of a deferral period ending upon a Change in Control, the Company will
settle all PRSUs then credited to a Participant's Account by issuing and/or
delivering to the Participant one share of Common Stock for each PRSU being
settled. Any deferral period will end on an accelerated basis immediately prior
to a Change in Control, except as limited under Section 9(b).
(e) MANNER OF SETTLEMENT. The Committee or Administrator may, in its or
his or her sole discretion, determine the manner in which shares of Common Stock
shall be delivered by the Company, including the manner in which fractional
shares shall be dealt with; provided, however, that no certificate shall be
issued representing a fractional share. In furtherance of this authority, PRSUs
may be settled by the Company issuing and delivering the requisite number of
shares of Common Stock to a member firm of the New York Stock Exchange which is
also a member of the National Association of Securities Dealers, as selected by
the Company from time to time, which shares shall be deposited by such member
firm in separate brokerage accounts for each Participant. If there occurs any
delay between the settlement date and the date shares are issued or delivered to
the Participant, a cash amount equal to any dividends or distributions the
record date for which fell between the settlement date and the date of issuance
or delivery of the shares shall be paid to the Participant together with the
delivery of the shares.
(f) SETTLEMENT OF PRSUS HELD BY NON-
RESIDENTS. Other provisions of US
the Plan (including Section 9(e)) notwithstanding, PRSUs credited to the Account
of a Participant who resides in or is subject to income tax laws of a country
other than the
may be settled in cash, in the discretion of the United States
Committee. The cash amount payable in settlement of each PRSU shall equal the
Fair Market Value of a share at the date of not more than five business days
before the date of settlement. The Committee is authorized to vary the terms of
participation of such foreign Participants in any other respect (including in
ways not consistent with the express provisions of the Plan) in order to conform
to the laws, regulations, and business customs of a foreign jurisdiction.
(g) TAX WITHHOLDING. The Company shall deduct from any settlement of a
Participant's PRSUs and cash dividends paid in respect of any deferred PRSUs any
Federal, state, or local withholding or other tax or charge which the Company is
then required to deduct under applicable law. In furtherance of this
requirement, the Company shall withhold from the shares
of Common Stock issuable or deliverable in settlement of a Participant's PRSUs
the number of shares having an aggregate Fair Market Value equal to any Federal,
state, and local withholding or other tax or charge which the Company is
required to withhold under applicable law, unless the Participant has otherwise
elected and has made other arrangements satisfactory to the Company to pay such
(h) NON-TRANSFERABILITY. Unless otherwise determined by the Committee,
neither a Participant nor any beneficiary shall have the right to, directly or
indirectly, alienate, assign, transfer, pledge, anticipate, or encumber (except
by reason of death) any PRSU, Account or Account balance, or other right
hereunder, nor shall any such PRSU, Account or Account balance, or other right
be subject to anticipation, alienation, sale, transfer, assignment, pledge,
encumbrance, attachment, or garnishment by creditors of the Participant or any
beneficiary, or to the debts, contracts, liabilities, engagements, or torts of
the Participant or any Beneficiary or transfer by operation of law in the event
of bankruptcy or insolvency of the Participant or any beneficiary, or any legal
10. GENERAL PROVISIONS.
(a) CHANGES TO THIS PLAN. The Committee may at any time amend, alter,
suspend, discontinue, or terminate this Plan, and such action shall not be
subject to the approval of the Company's shareholders; provided, however, that,
without the consent of an affected Participant, no such action may materially
impair the rights of such Participant under this Plan. The foregoing
notwithstanding, the Committee may, in its discretion, accelerate the
termination of any Performance Cycle or any deferral period and the resulting
settlement of PRSUs with respect to an individual Participant or all
(b) DELEGATION OF ADMINISTRATIVE AUTHORITY. The Committee may, in
writing, delegate some or all of its power and responsibilities under the Plan
to the Administrator or any other officer of the Company or committee of
officers and employees, except such delegation may not include (i) authority to
amend the Plan under Section 10(a), (ii), with respect to any executive officer
of the Company, authority under Section 6 or other authority required to be
exercised by the Committee in order that compensation under the Plan will
qualify as performance-based compensation under Section 162(m) of the Code, or
(iii) authority that otherwise may not be delegated under the terms of the 1996
Plan, this Plan, or applicable law. In furtherance of this authority, the
Committee hereby delegates to the Administrator, as from time to time
designated, authority to administer the Plan and act on behalf of the Committee
to the fullest extent permitted under this Section 10(b). This delegation of
authority to the Administrator shall remain in effect until terminated or
modified by resolution of the Committee (without a requirement that the Plan be
amended further). The authority delegated to the Administrator hereunder shall
(i) Authority to adopt such rules for the administration of the
Plan as the Administrator considers desirable, provided they
do not conflict with the Plan; and
(ii) Authority under Section 9(b) to impose restrictions or
limitations on Participant deferrals under the Plan, including
in order to promote cost-effective administration of the Plan;
no restriction or limitation on deferrals shall be deemed to
conflict with the Plan.
No individual acting as Administrator (including any member of the committee
serving as Administrator) shall participate in a decision directly affecting his
or her own rights or obligations under the Plan, although participation in a
decision affecting all Participants shall not be prohibited by this provision.
(c) NONEXCLUSIVITY OF THE PLAN. The adoption of this Plan shall not be
construed as creating any limitations on the power of the Board or Committee to
adopt such other compensation arrangements as it may deem desirable for any
(d) EFFECTIVE DATE AND PLAN TERMINATION. This Plan became effective on
January 1, 2004, following its approval by the Committee. This Plan will remain
in effect until such time as the Company and Participants have no further rights
or obligations under this Plan in respect of PRSUs not yet settled or the
Committee otherwise terminates this Plan.