Document:

Exhibit 10.3

 

Separation and Release Agreement

 

This Separation and Release Agreement (this “Agreement”) dated as of March 9, 2012 (the “Effective Date”) is entered into by and between Harsco Corporation, a Delaware corporation (the “Company”), and Salvatore D. Fazzolari (the “Executive”) to set forth the terms and conditions of the Executive’s separation from the Company effective February 23, 2012 (the “Separation Date”).

 

WHEREAS, the Executive has been employed by the Company as its President and Chief Executive Officer;

 

WHEREAS, the Executive resigned his positions as Chairman of the Board of Directors and President and Chief Executive Officer, as well as an officer or director, in each case, of the Company and of any of the Company’s subsidiaries, effective as of the Separation Date; and

 

WHEREAS, the Executive wishes to accept the payments described herein, to make the covenants described herein, and to release the Company from any and all claims concerning his prior employment.

 

NOW, THEREFORE, in consideration of the mutual agreements and covenants contained herein, the parties agree as follows:

 

1.     Separation Date. The Executive hereby confirms that his employment with respect to all positions with the Company and its subsidiaries and service as a director of the Company and its subsidiaries has been terminated effective as of the Separation Date.

 

2.     Amount of Payments and Benefits. In exchange for the promises given by the Executive to the Company as described in this Agreement, the Executive has or will receive, in lieu of any other compensation whatsoever, except as otherwise provided herein, the separation benefits set forth in Subsections 2.a., 2.b., 9.a. and 9.c. hereof.

 

a.              A cash payment, payable as described below, equal to $3,843,000 (totaling an amount equal to two (2) times the Executive’s base salary and target bonus); plus an additional amount of $1,173,583 (in payment of a proportionate share of certain of his long-term incentive awards).  Provided that the Revocation Period shall have expired and this Agreement shall have not been revoked in accordance with Section 14 hereof, the Executive’s aggregate cash payment under this Section 2.a. shall be paid in five (5) equal installments as follows:

 

	
i.
    	
 
    	
$1,003,316.60 payable April 15, 2012
    	
 
    
	
 
    	
 
    	
 
    	
 
    
	
ii.
    	
 
    	
$1,003,316.60   payable June 15, 2012
    	
 
    
	
 
    	
 
    	
 
    	
 
    
	
iii.
    	
 
    	
$1,003,316.60   payable August 15, 2012
    	
 
    
	
 
    	
 
    	
 
    	
 
    
	
iv.
    	
 
    	
$1,003,316.60   payable October 15, 2012; and
    	
 
    
	
 
    	
 
    	
 
    	
 
    
	
v.
    	
 
    	
$1,003,316.60   payable December 15, 2012
    	
 
    
	
 
    	
 
    	
 
    	
 
    

b.              The Executive shall be entitled to and agrees to timely elect, for Executive, his spouse and covered dependents, COBRA health insurance continuation coverage with respect to the health plans of the Company.  Company agrees to pay the Executive’s COBRA health insurance premium, for the Executive, his spouse and covered dependents, for the maximum period in which Executive is able to participate in the Company’s health insurance plans pursuant to COBRA up to a maximum of 24 months.  If the COBRA coverage period ends on a date which is less than 24 months following the Effective Date, the Company shall reimburse Executive for Executive’s reasonable, documented monthly health insurance premium costs, for the Executive, his spouse and covered dependents, for the period beginning at the end of the COBRA coverage period and ending on the date which is 24 months following the Effective Date.  The Company agrees to make such payments under this Subsection 2.b., and if applicable, reimburse the Executive for any COBRA health insurance premium paid directly by the Executive prior to the expiration of the Revocation Period, provided the Revocation Period shall have expired and this Agreement shall not have been revoked in accordance with Section 14 hereof.  In the event of the Executive’s death prior to the expiration of 24 months following the Effective Date, the Company agrees to continue to pay the COBRA health insurance premiums for the Executive’s spouse and covered dependents through the end of the COBRA coverage period and provide the Executive’s spouse and covered dependents with health insurance premium cost reimbursement for the coverage period following

 

 

the COBRA period as described above, subject however to a maximum period of 24 months from the Effective Date.

 

c.               The Executive may elect to convert any group life insurance coverage to an individual program within 30 days of the Effective Date at the rates provided by the carrier, with conversion information provided in separate correspondence, provided however, that notwithstanding anything to the contrary herein, in the event of such election, the Executive shall be solely responsible for all premiums and costs associated with such coverage.

 

d.              Payment of all amounts earned or accrued as a result of Executive’s employment with the Company through the Separation Date, consisting of five weeks vacation pay, in the amount of $87,980.80.

 

3.     Withholding of Taxes.  All payments and benefits that the Executive is entitled to receive from the Company hereunder shall be subject to the withholding of such amounts, if any, relating to tax, excise tax and other payroll deductions as the Company may reasonably determine it should withhold pursuant to any applicable law or regulation. For the avoidance of doubt, the Executive (or any other agent acting for or on behalf of the Executive, as applicable) shall be solely responsible for the payment of any and all taxes imposed as a result of the Executive receiving or being entitled to receive the payments and benefits provided by the Company under this Agreement.

 

4.     Equity Awards.  All of the Executive’s outstanding equity compensation awards granted to him by the Company shall be terminated effective as of the Separation Date and be forfeited without consideration. Without limiting the generality of the foregoing, (a) the Executive’s outstanding stock options to purchase 165,000 shares of the Company’s common stock pursuant to that U.S. Option Contract between the Company and the Executive dated as of January 25, 2011 shall be terminated, effective as of the Separation Date; and (b) the Time-Based and Performance-Based portions of awards granted to Executive under the Company’s restricted stock unit program, granted under the Company’s 1995 Executive Incentive Compensation Plan, as amended and restated,  with respect to each of the 2010-2012 performance cycle, the 2011-2013 performance cycle, and the 2012-2014 performance cycle shall be terminated, effective as of the Separation Date.

 

5.     Pension/Deferred Compensation Benefits.  Nothing in this Agreement, including, without limitation, the release contained in Section 10 hereof, shall affect any rights that the Executive may have, to the benefits under Subsections 2.c. and 2.d. hereof or under the Harsco Employees Pension Plan, as amended and restated, the Harsco Corporation Supplemental Retirement Benefit Plan, as amended and restated, the Harsco Retirement Savings and Investment Plan, as amended and restated, and the Harsco Non-Qualified Retirement Savings and Investment Plan, as amended and restated.

 

6.     No Additional Compensation.  The Executive and the Company agree that, except as to the benefits and/or compensation to which the Executive is otherwise entitled to receive pursuant to existing plans and programs of the Company in effect and the additional benefits and compensation expressly set forth in this Agreement, the Executive shall not be entitled to receive any additional compensation, bonuses, incentive compensation, benefits or other consideration from the Company or any of its subsidiaries in connection with or in any way related to his resignation from, or prior employment by, the Company or any of its subsidiaries.

 

7.     Certain Covenants.

 

a.              Non-Disparagement.  The Executive shall not defame, disparage, or make negative statements about the Company or any of its affiliates, or any of its or their respective officers, directors, or employees.  In addition, the Company shall not, through its directors or officers, defame, disparage, or make negative statements about the Executive.  This paragraph shall not prohibit the Executive nor the Company or any of its/his representatives from taking action to enforce their rights under this Agreement, making disclosures required by law or the rules and regulations of any securities exchange upon which the securities of the Company are listed or from cooperating with or responding to any governmental, administrative or judicial investigations or proceedings.

 

b.              Confidentiality.  Executive agrees that, during his employment with the Company and its subsidiaries, he had access to confidential information and/or proprietary information about the Company, its subsidiaries and/or its or their customers, including, but not limited to, trade secrets, methods, models, passwords, access to computer files, financial information and records, forecasts, computer software programs, agreements and/or contracts between the Company, its subsidiaries and/or its or their respective customers, customer contracts, prospective contracts, creative policies and ideas, public relations and public affairs campaigns, media materials, budgets, practices, concepts, strategies, methods of operation, technical and scientific information, discoveries, developments, formulas, specifications, know-how, design inventions, marketing and business strategies and financial or business projects, and information about or received from customers  and other companies with which the Company or any of its subsidiaries does business.  The foregoing shall be collectively referred to as “Confidential Information,”

 

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provided that Confidential Information shall not include such information that is generally available to the public (other than as a result of disclosure by the Executive in breach of this Agreement).  With respect to such Confidential Information which is not readily available to the public, Executive agrees that he will not at any time, disclose to anyone any such Confidential Information, or utilize such Confidential Information for his own benefit, or for the benefit of third parties.  Disclosure of any Confidential Information will not be prohibited if such disclosure is directed pursuant to a valid and existing subpoena or order of a court or other governmental body or agency within the United States; provided, that the Executive will first have given prompt notice to the Company of any such subpoena or order (or proceeding pursuant to any such order).

 

c.               Non-Competition after Separation.  In consideration of the rights and payments contained herein, the Executive agrees that  for a period of 24 months commencing with the Effective Date, the Executive shall not, directly or indirectly:

 

	
i.
    	
 
    	
for   or on behalf of any business that competes with the Company or any of its   subsidiaries, solicit, contract with, or accept business from any entity or   individual which (1) was or has been a customer of the Company or any of   its subsidiaries within two years prior to the Separation Date, (2) was   or is a prospective customer of the Company or any of its subsidiaries with   which the Executive had business-related communications within two years   prior to the Separation Date;
    
	
 
    	
 
    	
 
    
	
ii.
    	
 
    	
render   services to, become employed by, own, or have a financial or other interest   in (either as an individual, partner, joint venturer, owner, manager,   stockholder, employee, partner, officer, director, independent contractor, or   other such role) any business which competes with the business of any the   operating unit(s) of the Company or any of its subsidiaries; and
    
	
 
    	
 
    	
 
    
	
iii.
    	
 
    	
induce,   offer, assist, encourage or suggest (1) that another business or   enterprise offer employment to or enter into a business affiliation with any   employee, agent or representative of the Company or any of its subsidiaries,   or (2) that any employee, agent or representative of the Company or any   of its subsidiaries, terminate his or her employment or business affiliation   with the Company or any of its subsidiaries;
    

 

 

provided however, that the foregoing shall not prohibit the Executive from being a passive investor and owning up to 5% of any class of publicly traded securities of any corporation.

 

8.     Enforcement.  The Executive acknowledges and agrees that the provisions of this Agreement, including Section 7, are reasonable and necessary for the successful operation of the Company and its subsidiaries.  The Executive acknowledges and agrees that a breach by the Executive of any of the provisions of this Agreement will cause irreparable harm to the Company and its subsidiaries and that money damages may not be a sufficient remedy for any breach by the Executive of any of the provisions of this Agreement.  Accordingly, the Company shall be entitled to obtain equitable relief, including, without limitation, injunctive relief and specific performance, as a remedy for any such breach or to prevent any potential breach by the Executive.  Such remedies shall not be deemed to be the exclusive remedies for a breach by the Executive of the provisions of this Agreement but shall be in addition to all other remedies available at law or equity to the Company.  The Executive further agrees not to raise as a defense or as an objection to the request or granting of any such relief that any breach by the Executive of provisions of this Agreement is or would be compensable by an award of monetary damages and agrees to waive any requirements for the securing or posting of any bond in connection with such remedy.  If any provision of this Agreement is determined by a court of competent jurisdiction to be not enforceable in the manner set forth herein, the Executive and the Company agree that it is the intention of the parties that such provision should be enforceable to the maximum extent possible under applicable law.

 

9.     Return of Property and Records.  Upon the Effective Date, Executive shall immediately return to the Company all property of the Company or any of its subsidiaries in his possession, including without limitation, all keys, access cards, credit cards, documents and other materials in any medium including but not limited to electronic, in his possession or under his direct or indirect control which relate in any way to the Company, its business, executives, clients and customers and will not retain copies, in whatever form of any such materials or documents, unless Executive first obtains the Company’s written consent to keep such records. Notwithstanding anything to the contrary set forth herein, the Company hereby acknowledges and agrees that the Executive may retain, as his own property, (a) his Company-provided  automobile,  (b) his copies of his individual personnel records and documents, such as his payroll and tax records, and similar personal records, his rolodex and address book (so long as a copy is left at the Company) and (c) his Company-provided cellular phone and personal computer, after providing the Company with a reasonable time to review and “scrub” such cellular phone and computer for Company information or property; and provided that from and after the Separation Date, the Executive shall be solely responsible for all costs and charges incurred in connection with such automobile,  cellular phone and personal computer.

 

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10.  Complete Release of Claims by the Executive Against the Company.  In consideration of the payments described in Subsections 2.a., 2.b., 9.a. and 9.c. of this Agreement, and other good and valuable consideration, which are given to the Executive specifically in exchange for this release as a result of negotiations between the Company and the Executive, the Executive, on behalf of himself, his heirs, successors and assigns, hereby releases and discharges the Company, its subsidiaries, its and their employee benefit plans, its and their current or former directors, officers, executives, agents, insurers, attorneys, consultants, and auditors, and any and each of their successors and assigns and predecessors (“Company Released Parties”), from any and all claims, charges, causes of action and damages (including attorneys’ fees and costs actually incurred) (“Claims”), known and unknown, including those Claims related in any way to the Executive’s employment with the Company or any of its subsidiaries, or the termination of his employment relationship or positions as an officer of the Company, arising on or prior to the Effective Date.  The waivers in this Agreement shall not waive the Executive’s rights respecting (i) the Company’s obligations under this Agreement; (ii) the Executive’s right to receive COBRA continuation coverage in accordance with applicable law; and (iii) claims for benefits under any health, disability, retirement, life insurance or other, similar employee benefit plan (within the meaning of Section 3(3) of the Employee Retirement Income Security Act of 1974, as amended (“ERISA”)) of the Company.

 

For the purposes of implementing a full and complete release and discharge of the Company Released Parties, the Executive expressly acknowledges that this Agreement is intended to include in its affect, without limitation, all Claims which he does not know or suspect to exist in his favor at the time he signs this Agreement, and that this Agreement is intended to fully and finally resolve any such Claim or Claims.

 

The release contained in this Section 10 specifically includes, but is not limited to, rights and claims under the local, state or federal laws prohibiting discrimination in employment, including the Americans with Disabilities Act, the Age Discrimination in Employment Act, the Family and Medical Leave Act, the Pennsylvania Human Relations Act, ERISA (except as otherwise stated herein), the Executive protection provisions of the Federal Deposit Insurance Act (12 U.S.C. § 1831j), Title VII of the Civil Rights Act of 1964, the Sarbanes-Oxley Act of 2002, as well as any other state or federal laws or common law theories relating to discrimination in employment, the termination of employment, or personal injury, including without limitation all claims for wrongful discharge, breach of contract, breach of an implied covenant of good faith and fair dealing, intentional infliction of emotional distress, tortious interference with contract or prospective economic advantage, defamation, loss of consortium, infliction of emotional distress; or any claim for any compensation, including, but not limited to additional compensation, back pay, front pay, or benefits (other than as provided for in this Agreement), severance, reinstatement, or any other form of economic loss; and all claims for personal injury, including, but not limited to: mental anguish, emotional distress, pain and suffering, humiliation, and damage to name or reputation; and all claims for liquidated damages and punitive damages and all claims for counsel fees and costs.

 

11.  Release of Claims by the Company Against the Executive.  In consideration of the Executive’s resignation and other good and valuable consideration, the Company, on behalf of itself and its subsidiaries, hereby releases and discharges the Executive from any and all Claims arising on or prior to the Effective Date that the Company or any of its subsidiaries may have against the Executive to the extent that such Claims are suspected or are known to any of the directors or officers of the Company as of the date of this Agreement (“Company Released Claims”).   The waivers in this Agreement shall not waive the Company’s rights respecting the Executive’s obligations under this Agreement.

 

With respect to any Company Released Claim, the release contained in this Section 11 specifically includes, but is not limited to, rights and claims under local, state or federal laws or common law theories relating to personal injury, breach of contract, breach of an implied covenant of good faith and fair dealing, tortuous interference with contract or prospective economic advantage, defamation, or any other claim of economic loss; and all claims for liquidated damages and punitive damages and all claims for counsel fees and costs.

 

12.  Covenant Not to Sue.  The Parties represent to each other that they have not filed any Claim that was released in this Agreement against the other (or other persons released hereunder) with any court or government agency, and that they will not, to the extent allowed by applicable law, do so at any time in the future; provided, however, that the covenants contained in Sections 10 and 11 and this Section 12 will not prevent either Party from filing a claim to enforce the terms of this Agreement or any other Claim not released hereunder.  If any government agency brings any claim or conducts any investigation against the Executive or the Company, nothing in this Agreement shall prevent the other from cooperating in such proceedings.

 

13.  Future Cooperation.  The Executive agrees to make himself reasonably available to the Company in connection with any claims, disputes, investigations, regulatory examinations or actions, lawsuits or administrative proceedings relating to matters in which he was involved during the period in which he was Chief Executive Officer or an officer of the Company, and to provide information to the Company, and otherwise cooperate with the Company in the Company’s investigation, defense or prosecution of such actions.  Executive further agrees to make himself available to the Chief Executive Officer of the Company, via telephone or electronic mail, to assist with the transition

 

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of his role, as reasonably requested by the new Chief Executive Officer of the Company, during the 24 month period following the Effective Date.  The Company agrees to make appropriate Company personnel available to the Executive to assist in Executive’s reasonable requests for assistance in insurance coverage and benefit claims, administrative matters and information technology.  The Company agrees to wire all payments or reimbursements due the Executive to such accounts designated by the Executive to the Company in writing.

 

14.  Revocation Period. Executive represents that he has read carefully and fully understands the terms of the Release set forth in Section 10 of this Agreement, and that Executive has been advised to consult with an attorney and has had the opportunity to consult with an attorney prior to signing this Agreement. Executive acknowledges that he is executing this Agreement voluntarily and knowingly and that he has not relied on any representations, promises or agreements of any kind made to Executive in connection with Executive’s decision to accept the terms of this Agreement, other than those set forth in this Agreement. Executive acknowledges that Executive has been given at least twenty-one (21) days to consider whether Executive wants to sign this Agreement and that the Age Discrimination in Employment Act gives Executive the right to revoke this Agreement within seven (7) days after it is signed, and Executive understands that he will not receive any payments not otherwise  due him under this Agreement until such seven (7) day revocation period (the “Revocation Period”) has passed and then, only if Executive has not revoked this Agreement. Executive may revoke the Agreement during the Revocation Period by providing written notice of the revocation to Mark Kimmel at the Company’s Corporate office at 350 Poplar Church Road, Camp Hill, PA 17011. Upon such revocation, this Agreement and the provisions entitling him to benefits to which he is not otherwise entitled under the Agreement shall be null and void and of no further force and effect. To the extent Executive has executed this Agreement within less than twenty-one (21) days after its delivery to Executive, Executive hereby acknowledges that his decision to execute this Release prior to the expiration of such twenty-one (21) day period was entirely voluntary.

 

15.  Voluntary Agreement; Full Understanding; Advice of Counsel.  The Executive understands and acknowledges the significance of this Agreement and acknowledges that this Agreement is voluntary and has not been given as a result of any coercion.  The Executive also acknowledges that he has been given full opportunity to review and negotiate this Agreement, that he has been specifically advised to consult with legal counsel prior to signing it, that he has in fact carefully reviewed it with his attorney before signing it, and that he executes this Agreement only after full reflection and analysis.

 

16.  Complete Agreement.  This Agreement represents and contains the entire understanding between the parties in connection with the subject matter of this Agreement.  This Agreement shall not be modified or varied except by a written instrument signed by the Executive and the Company.  It is expressly acknowledged and recognized by all parties that all prior written or oral agreements, understandings or representations between the parties are merged into this Agreement.

 

17.  Governing Law.  This Agreement shall be governed by and enforceable in accordance with the laws of the Commonwealth of Pennsylvania.  Any controversy, claim or dispute arising out of or relating to this Agreement, or any breach or alleged breach hereof, shall be settled by final and binding arbitration, conducted in Cumberland County, Pennsylvania, before, and in accordance with the Commercial Arbitration Rules of the American Arbitration Association, and judgment upon the award rendered may be entered in any court having jurisdiction thereof.  The costs of such arbitration shall be borne equally by the parties thereto and each party shall bear such party’s own attorneys’ fees in connection with such arbitration.  Notwithstanding the foregoing, the Company shall be entitled to bring an action seeking equitable relief, including, without limitation, injunction and specific performance, as a remedy for any breach or to prevent any potential breach of this Agreement by the Executive in any court having jurisdiction.

 

18.  Section 409A.

 

a.              The intent of the parties is that payments and benefits under this Agreement comply with or be exempt from Section 409A of the Internal Revenue Code of 1986, as amended (the “Code”), and the regulations and guidance promulgated thereunder (collectively “Section 409A”) and, accordingly, to the maximum extent permitted, this Agreement shall be interpreted to be exempt from Section 409A or in compliance therewith, as applicable.

 

b.              All expenses or other reimbursements as provided herein shall be payable in accordance with the Company’s objectively determinable and nondiscretionary policies in effect from time to time, but in any event shall be made on or prior to the last day of the taxable year following the taxable year in which such expenses were incurred by the Executive.

 

c.               For purposes of Section 409A, the Executive’s right to receive any installment payments pursuant to this Agreement shall be treated as a right to receive a series of separate and distinct payments.

 

19.  Successors and Assigns. This Agreement shall be binding upon Company’s successors and assigns.  The term “Company” as used herein includes such successors and assigns.  The term “successors and assigns” as used

 

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herein means any person or entity that acquires all or substantially all of Company’s assets and business (including this Agreement) whether by operation of law or otherwise.  This Agreement, with respect to Executive, is for personal services, and is therefore not assignable.

 

20.  Severability. To the extent any provision of this Agreement or portion thereof shall be invalid or unenforceable, it shall be considered deleted therefrom and the remainder of such provision and of this Agreement shall be unaffected and shall continue in full force and effect.

 

21.  Counterparts. This Agreement may be executed in one or more counterparts, each of which will be deemed to be an original copy of this agreement and all of which, when taken together, will be deemed to constitute one and the same agreement.

 

IN WITNESS WHEREOF, the parties have executed this Agreement as of the date set forth above.

 

 

	
 
    	
Harsco Corporation
    
	
 
    	
By: 
    	
/s/ Mark E. Kimmel
    
	
 
    	
Name: Mark E. Kimmel
    
	
 
    	
Title: Sr. Vice President, Chief Administrative   Officer,
   General Counsel and Corporate Secretary
    
	
 
    	
 
    
	
 
    	
Salvatore   D. Fazzolari
    
	
 
    	
 
    
	
 
    	
/s/   Salvatore D. Fazzolari
    

 

6Exhibit 10.1.5

 

AMENDED AND RESTATED

PRINCIPAL FINANCIAL GROUP, INC.

2010 STOCK INCENTIVE PLAN

 

SECTION 1.

PURPOSE

 

The purpose of the “AMENDED AND RESTATED PRINCIPAL FINANCIAL GROUP, INC. 2010 STOCK INCENTIVE PLAN (the “Plan”) is to foster and promote the long-term financial success of the Company and its subsidiaries and materially increase shareholder value by (a) motivating superior performance by means of performance-related incentives, (b) encouraging and providing for the acquisition of an ownership interest in the Company by the Company’s and its Subsidiaries’ employees and agents, and (c) enabling the Company to attract and retain the services of outstanding employees upon whose judgment, interest, and special effort the successful conduct of its operations is largely dependent.

 

SECTION 2.

DEFINITIONS

 

(a)           Definitions.  Whenever used herein, the following terms shall have the respective meanings set forth below:

 

(1)  “Agent” means each insurance agent (whether or not a statutory employee) and each other individual providing personal service to the Company or any Subsidiary who, in either case, is not an Employee.

 

(2) “Approved Retirement” means termination of a Participant’s employment or service (i) on or after the normal retirement date or any early retirement date established under any defined benefit pension plan maintained by the Company or a Subsidiary and in which the Participant participates; (ii) for those Participants who are either U.S. taxpayers or whose principal place of employment is in the United States and who do not participate in a defined benefit plan maintained by the Company or a Subsidiary, on or after attaining age 57 and having completed at least 10  years of service; or (iii) for those Participants who are not U.S. taxpayers and whose principal place of employment is outside the United States, and who do not participate in a defined benefit plan maintained by the Company or a Subsidiary, the later of: attaining age 57 and having completed at least 10 years of service, or the date that the Participant satisfies all eligibility and other requirements under a national or other government sponsored public social security system covering such Participant to qualify for immediate commencement of retirement income payments under such national or other government sponsored public social security system, as determined by the Committee, for each non - U.S. jurisdiction (iv) with the approval of the Committee (which may be given at or after grant), on or after attaining age 50 and completing such period of service as the Committee shall determine from time to time.

 

(3)  “Award” means an Option, SAR, award of Restricted Stock or Performance Shares, an award of Restricted Stock Units or Performance Units or an Other Stock-Based Award.

 

(4) “Beneficial Owner” means such term as defined in Rule 13d-3 under the Exchange Act.

 

(5) “Board” means the Board of Directors of the Company.

 

(6) “Cause” means (i) dishonesty, fraud or misrepresentation, (ii) the Participant’s engaging in conduct that is injurious to the Company or any Subsidiary in any way, including, but not limited to, by way of damage to its reputation or standing in the industry, (iii) the Participant’s having been convicted of, or entered a plea of nolo  contendere to, a crime that constitutes a felony; (iv) the breach by the Participant of any written covenant or agreement with the Company or any Subsidiary not to disclose or misuse any information pertaining to, or misuse any property of, the Company or any Subsidiary or not to compete or interfere with the Company or any Subsidiary or (v) a violation by the Participant of any policy of the Company or any Subsidiary.

 

(7) “Change of Control” means the occurrence of any one or more of the following:

 

(i)            any SEC Person becomes the Beneficial Owner of 40% or more of the Common Stock or of Voting Securities representing 40% or more of the combined voting power of all Voting Securities of the Company (such an SEC Person, a “40% Owner”); or

 

(ii)           the Incumbent Directors cease for any reason to constitute at least a majority of the Board; or

 

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(iii)          consummation of a merger, reorganization, consolidation, or similar transaction (any of the foregoing, a “Reorganization Transaction”) where the SEC Persons who were the direct or indirect owners of the outstanding Common Stock and Voting Securities of the Company immediately before such Reorganization Transaction are not or do not become, immediately after the consummation of such Reorganization Transaction, the direct or indirect owners of 60% of each of (i) the then-outstanding common stock of the Surviving Corporation and (ii) the combined voting power of the then-outstanding Voting Securities of the Surviving Corporation, in substantially the same respective proportions as such SEC Persons’ ownership of the Common Stock and Voting Securities of the Company immediately before such Reorganization Transaction; or

 

(iv)          approval by the Company’s stockholders and consummation of a plan or agreement for the sale or other disposition of all or substantially all of the consolidated assets of the Company or a plan of liquidation of the Company; or

 

(v)           any other event or circumstance (or series of events or circumstances) that the Board shall determine to constitute a Change of Control.

 

(8) “Change of Control Price” means the highest price per share of Common Stock offered in conjunction with any transaction resulting in a Change of Control (as determined in good faith by the Committee if any part of the offered price is payable other than in cash) or, in the case of a Change of Control occurring solely by reason of a change in the composition of the Board, the highest Fair Market Value of the Common Stock on any of the 30 trading days immediately preceding the date on which a Change of Control occurs.

 

(9) “Code” means the Internal Revenue Code of 1986, as amended.

 

(10)         “Committee” means the Human Resources Committee of the Board or such other committee of the Board as the Board shall designate from time to time.

 

(11)         “Common Stock” means the common stock of the Company, par value $0.01 per share.

 

(12)         “Company” means Principal Financial Group, Inc., a Delaware corporation, and any successor thereto.

 

(13)         “Disability” means, with respect to any Participant, long-term disability as defined under any long-term disability plan maintained by the Company or a Subsidiary in which the Participant participates.  In the event of any question as to whether a Participant has a Disability, the plan administrator of the relevant long-term disability plan shall determine whether a disability exists, in accordance with such plan.

 

(14)         “Domestic Partner” means any person qualifying to be treated as a domestic partner of a Participant under the applicable policies, if any, of the Company or Subsidiary which employs the Participant.

 

(15)         “Employee” means any employee (including each officer) of the Company or any Subsidiary.

 

(16)         “Exchange Act” means the Securities Exchange Act of 1934, as amended.

 

(17)         “Executive Officer” means any officer of the Company or any Subsidiary who is subject to the reporting requirements under Section 16(b) of the Exchange Act.

 

(18)         “Fair Market Value” means, on any date, the price of the last trade, regular way, in the Common Stock on such date on the New York Stock Exchange or, if at the relevant time, the Common Stock is not listed to trade on the New York Stock Exchange, on such other recognized quotation system on which the trading prices of the Common Stock are then quoted (the “applicable exchange”).  In the event that (i) there are no Common Stock transactions on the applicable exchange on any relevant date, Fair Market Value for such date shall mean the closing price on the immediately preceding date on which Common Stock transactions were so reported and (ii) the applicable exchange adopts a trading policy permitting trades after 5 P.M. Eastern Standard Time (“EST”), Fair Market Value shall mean the last trade, regular way, reported on or before 5 P.M. EST (or such earlier or later time as the Committee may establish from time to time).

 

(19)         “Family Member” means, as to a Participant, any (i) child, stepchild, grandchild, parent, stepparent, grandparent, spouse, mother-in-law, father-in-law, son-in-law or daughter-in-law (including adoptive relationships), or Domestic Partner of such Participant, (ii) trusts for the exclusive benefit of one or more such persons and/or the Participant and (iii) other entity owned solely by one or more such persons and/or the Participant.

 

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(20)         “40% Owner” shall have the meaning ascribed thereto in the definition of Change of Control.

 

(21)         “Incentive Stock Option” (ISO) means an option within the meaning of Section 422 of the Code.

 

(22)         “Incumbent Directors” means, as of any date, the individuals then serving as members of the Board who were also members of the Board as of the date two years prior to the date of determination; provided that any member appointed or elected as a member of the Board after such prior date, but whose election, or nomination for election, was approved by a vote or written consent of at least a majority of the directors then comprising the Incumbent Directors shall also be considered an Incumbent Director unless such person’s election, or nominated for election, to the Board was as a result of, or in connection with, a proxy contest or a Reorganization Transaction.

 

(23)         “Net Exercised” shall mean the exercise of an Option or any portion thereof by the delivery of the greatest number of whole shares of Common Stock having a Fair Market Value on the date of exercise not in excess of the difference between the aggregate Fair Market Value of the shares of Common Stock subject to the Option (or the portion of such Option then being exercised) and the aggregate exercise price for all such shares of Common Stock under the Option (or the portion thereof then being exercised), with any fractional share that would result from such equation to be payable in cash.

 

(24)         “Nonstatutory Stock Option” (NSO) means an option which is not an Incentive Stock Option within the meaning of Section 422 of the Code.

 

(25)         “Option” means the right to purchase Common Stock at a stated price for a specified period of time.  For purposes of the Plan, an Option may be either (i) an “Incentive Stock Option” (ISO) within the meaning of Section 422 of the Code or (ii) an option which is not an Incentive Stock Option (a “Nonstatutory Stock Option” (NSO)).

 

(26)         “Other Stock-Based Award” means an award of, or related to, shares of Common Stock other than an Award of Options, SAR, Restricted Stock, Performance Shares, Restricted Stock Units or Performance Units, as granted by the Committee in accordance with the provisions of Section 9 hereof.

 

(27) “Participant” means any Employee or Agent designated by the affirmative action of the Committee (or its delegate) to participate in the Plan.

 

(28)         “Performance Criteria” means the objectives established by the Committee for a Performance Period pursuant to Section 7(c) for the purpose of determining the extent to which an award of Performance Shares or Performance Units has been earned.

 

(29)         “Performance Period” means the period selected by the Committee during which performance is measured for the purpose of determining the extent to which an award of Performance Shares or Performance Units has been earned.

 

(30)         “Performance Share” means an award granted pursuant to Section 7 of the Plan of a contractual right to receive one share of Common Stock (or the Fair Market Value thereof in cash or any combination of cash and Common Stock, as determined by the Committee), or a fraction or multiple thereof, upon the achievement, in whole or in part, of the applicable Performance Criteria.

 

(31)         “Performance Unit” means an award granted pursuant to Section 7 of the Plan of a contractual right to receive a fixed or variable dollar denominated unit (or a unit denominated in the Participant’s local currency), or a fraction or multiple thereof, upon the achievement, in whole or in part, of the applicable Performance Criteria.  The Committee shall determine whether the earned portion of any such Performance Units shall be payable in cash, Common Stock or any combination thereof.

 

(32)         “Period of Restriction” means the period specified by the Committee or established pursuant to the Plan during which a Restricted Stock or Restricted Stock Unit award is subject to forfeiture.

 

(33)         “Prior Plan” means the Principal Financial Group Inc. Stock Incentive Plan and the Principal Financial Group, Inc., 2005 Stock Incentive Plan.

 

(34)         “Reorganization Transaction” shall have the meaning ascribed thereto in the definition of Change of Control.

 

(35)         “Restricted Stock” means an award of Stock made pursuant to Section 6 that is forfeitable by the Participant until the completion of a specified period of future service, the achievement of pre-established performance objectives or until otherwise determined by the Committee or in accordance with the terms of the Plan.

 

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(36)         “Restricted Stock Unit” means a contractual right awarded pursuant to Section 6 that entitles the holder to receive shares of Common Stock (or the value thereof in cash) upon the completion of a specified period of future service or the achievement of pre-established performance objectives or at such other time or times determined by the Committee or in accordance with the terms of the Plan.

 

(37)         “SAR” means a stock appreciation right granted under Section 8 of the Plan in respect of one or more shares of Common Stock that entitles the holder thereof to receive, in Common Stock (unless otherwise determined by the Committee at the time of grant), an amount per share of Common Stock equal to the excess, if any, of the Fair Market Value on the date the SAR is exercised over the Fair Market Value on the date the SAR is granted.

 

(38)         “SEC Person” means any person (as such term is defined in Section 3(a)(9) of the Exchange Act) or group (as such term is used in Rule 13d-5 under the Exchange Act), other than an affiliate or any employee benefit plan (or any related trust) of the Company or any of its affiliates.

 

(39)         “Subsidiary” means (i) any corporation in which the Company owns, directly or indirectly, at least 50% of the total combined voting power of all classes of stock of such corporation, (ii) any partnership or limited liability company in which the Company owns, directly or indirectly, at least 50% of the capital interests or profits interest of such partnership or limited liability company and (iii) any other business entity in which the Company owns at least 50% of the equity interests thereof, provided  that, in any such case, the Company is in effective control of such corporation, partnership, limited liability company or other entity.

 

(40)         “Surviving Corporation” means the corporation resulting from a Reorganization Transaction or, if securities representing at least 50% of the aggregate voting power of such resulting corporation are directly or indirectly owned by another corporation, such other corporation.

 

(41) “Voting Securities” means, with respect to any corporation, securities of such corporation that are entitled to vote generally in the election of directors of such corporation.

 

SECTION 3.

POWERS OF THE COMMITTEE; GENERAL TERMS OF AWARDS

 

(a)           Power to Grant.  The Committee shall determine those Employees and/or Agents to whom an Award shall be granted and the terms and conditions of any and all such Awards.  The Committee may establish different terms and conditions for different Awards and different Participants and for the same Participant for each Award such Participant may receive, whether or not granted at different times.

 

(b)           Rules, Interpretations and Determinations.  The Plan shall be administered by the Committee.  The Committee shall have full authority to interpret and administer the Plan, to establish, amend, and rescind rules and regulations relating to the Plan, to provide for conditions deemed necessary or advisable to protect the interests of the Company, to construe the terms of any Award or any document evidencing the grant of such Award and to make all other determinations necessary or advisable for the administration and interpretation of the Plan in order to carry out its provisions and purposes.  Unless otherwise expressly provided hereunder, any power, discretion or authority conveyed to or reserved to the Committee may be exercised by it in its sole and absolute discretion.  Determinations, interpretations, or other actions made or taken by the Committee shall be final, binding, and conclusive for all purposes and upon all persons.

 

(c)           Delegation of Authority.  The Committee may delegate to the Company’s Chief Executive Officer and/or to such other officer(s) of the Company the power and authority to make and/or administer Awards under the Plan with respect to individuals who are below the position of Senior Vice President (or any analogous title), pursuant to such conditions and limitations as the Committee may establish; provided that only the Committee or the Board may select, and grant Awards to, Executive Officers or exercise any other discretionary authority under the Plan in respect of Awards granted to such Executive Officers.  Unless the Committee shall otherwise specify, any delegate shall have the authority and right to exercise (within the scope of such person’s delegated authority) all of the same powers and discretion that would otherwise be available to the Committee pursuant to the terms hereof.  The Committee may also appoint agents (who may be officers or employees of the Company) to assist in the administration of the Plan and may grant authority to such persons to execute agreements or other documents on its behalf.  All expenses incurred in the administration of the Plan, including, without limitation, for the engagement of any counsel, consultant or agent, shall be paid by the Company.

 

(d)           Restrictive Covenants and Other Conditions.  Without limiting the generality of the foregoing, the Committee may condition the grant of any Award under the Plan upon the Participant to whom such Award would be granted agreeing in writing to certain conditions (such as restrictions on the ability to transfer the underlying shares of Common Stock) or covenants in favor of the 

 

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Company and/or one or more Subsidiaries (including, without limitation, covenants not to compete, not to solicit employees and customers and not to disclose confidential information, that may have effect following the termination of the Participant’s employment or service with the Company and its Subsidiaries and after the Common Stock subject to the Award has been transferred to the Participant), including, without limitation, the requirement that the Participant disgorge any profit, gain or other benefit received in respect of the Award prior to any breach of any such covenant.

 

(e)           Participants Based Outside the United States.  To conform with the provisions of local laws and regulations, or with local compensation practices and policies, in foreign countries in which the Company or any of its Subsidiaries operate, but subject to the limitations set forth herein regarding the maximum number of shares issuable hereunder and the maximum award to any single Participant, the Committee may (i) modify the terms and conditions of Awards granted to Participants employed outside the United States (“Non-US Awards”), (ii) establish subplans with modified exercise procedures and such other modifications as may be necessary or advisable under the circumstances (“Subplans”), and (iii) take any action which it deems advisable to obtain, comply with or otherwise reflect any necessary governmental regulatory procedures, exemptions or approvals with respect to the Plan.  The Committee’s decision to grant Non-US Awards or to establish Subplans is entirely voluntary, and at the complete discretion of the Committee.  The Committee may amend, modify or terminate any Subplans at any time, and such amendment, modification or termination may be made without prior notice to the Participants.  The Company, Subsidiaries, and members of the Committee shall not incur any liability of any kind to any Participant as a result of any change, amendment or termination of any Subplan at any time.  The benefits and rights provided under any Subplan or by any Non-US Award (i) are wholly discretionary and, although provided by either the Company or a Subsidiary, do not constitute regular or periodic payments and (ii) are not to be considered part of the Participant’s salary or compensation under the Participant’s employment with the Participant’s local employer for purposes of calculating any severance, resignation, redundancy or other end of service payments, vacation, bonuses, long-term service awards, indemnification, pension or retirement benefits, or any other payments, benefits or rights of any kind.  If a Subplan is terminated, the Committee may direct the payment of Non-US Awards (or direct the deferral of payments whose amount shall be determined) prior to the dates on which payments would otherwise have been made, and, in the Committee’s discretion, such payments may be made in a lump sum or in installments.

 

(f)            Maximum Individual Grants.  Subject to adjustment as provided in Section 4(d), no Participant shall be granted (i) Options or SARs (with tandem Options and SARs being counted only once with respect to this limit) during any 36-month period with respect to more than 3,000,000 shares of Common Stock or (ii)Restricted Stock, Restricted Stock Units, Performance Shares and/or Other Stock-Based Awards during any 12-month period that are denominated in shares of Common Stock with respect to more than 250,000 shares of Common Stock.  In addition to the foregoing, the maximum dollar value payable to any participant in any 12-month period with respect to Performance Units and/or Other Stock-Based Awards that are valued with reference to cash or property other than shares of Common Stock is $10,000,000.

 

(g)           Dividends and Dividends Equivalents.  Unless otherwise determined by the Committee at the time of grant, to the extent that shares of Common Stock are issued at the time of grant of any Award under the Plan, the Participant shall be entitled to receive all dividends and other distributions paid with respect to those shares, provided that if any such dividends or distributions are paid in shares of Common Stock, such shares shall be subject to the same forfeiture restrictions and restrictions on transferability as apply to the shares subject to such Award on which such dividends or distributions were paid.  To the extent that shares of Common Stock are not issued at the time of the grant of any Award, the Committee shall determine whether, and to what extent, the Participant shall be entitled to receive the payment of dividend equivalents in respect of that number of outstanding shares of Common Stock corresponding to the shares subject to such Award.  Unless otherwise determined by the Committee at or after grant, any additional shares credited in respect of any dividends or dividend equivalents payable in respect of any shares of Common Stock subject to any Award shall become vested and nonforfeitable upon the same terms and conditions as are applicable to the shares underlying the Award in respect of which they are payable (including, with respect to any Award that will become earned and vested upon the attainment of Performance Criteria, the achievement of such Performance Criteria).

 

SECTION 4.

COMMON STOCK SUBJECT TO PLAN

 

(a)           Number.  Subject to Section 4(d) below, unless the shareholders of the Company approve an increase in such number by a shareholder vote, the maximum number of shares of Common Stock that may be made issuable or distributable under the Plan is 24,000,000.  The number of shares of Common Stock subject to an Option or SAR shall be counted against such limit as one share for each share issued or issuable, provided that when a SAR is granted in tandem with an Option, so that only one may be exercised with the other terminating upon such exercise, the number of shares of Common Stock subject to the tandem Option and SAR award shall only be taken into account once (and not as to both awards) for purposes of this limit (and for purposes of the provisions of Section 4(b) below).  Without limiting the generality of the foregoing, the maximum number of shares as to which Incentive Stock Options may be granted shall not exceed 10 million shares.  The shares to be delivered under the Plan may consist, in whole or in part, of treasury Common Stock or authorized but unissued Common Stock, not reserved for any other purpose.

 

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(b)           Canceled or Terminated Awards.  Any shares of Common Stock subject to an Award (as determined under Section 4(a)) or any award made or granted under the Prior Plan which for any reason expires without having been exercised, is canceled or terminated or otherwise is settled without the issuance of any Common Stock shall again be available for grant under the Plans.  In applying the immediately preceding sentence, if (i) shares otherwise issuable or issued in respect of, or as part of, any Award that are withheld to cover taxes shall not be treated as having been issued under the Plan and (ii) any SARs are settled in shares of Common Stock or any Options are Net Exercised, only the net number of shares of Common Stock issued in respect of such SARs or Options shall be deemed issued under the Plan.  In addition, shares of Common Stock tendered to exercise outstanding Options or other Awards or to cover taxes shall also be available for issuance under the Plan (and shall be counted as one share for purposes of Section 4(a)), except and unless such shares are tendered more than ten years after the effective date of the Plan.

 

(c)           Repurchased Shares.  In addition to the shares otherwise authorized for issuance hereunder, any shares of Common Stock that are acquired by the Company through the application of the cash proceeds received in connection with the exercise of Options shall also be available for issuance under the Plan in the same manner as though such shares had been tendered to exercise the corresponding Options.

 

(d)           Adjustment Due to Change in Capitalization.  In the event of any Common Stock dividend or Common Stock split, recapitalization (including, but not limited to, the payment of an extraordinary dividend to the shareholders of the Company), merger, consolidation, combination, spin-off, distribution of assets to shareholders (other than ordinary cash dividends), exchange of shares, or other similar corporate change, the aggregate number of shares of Common Stock available for grant under Section 4(a) or subject to outstanding Awards and the respective exercise prices or base prices, if any, applicable to outstanding Awards will be appropriately adjusted by the Committee, in its discretion, and the Committee’s determination shall be conclusive.

 

(e)           Assumption of Options and Other Equity-Based Awards.  In the event that there is a merger, stock purchase or other transaction whereby the Company or any of its Subsidiaries acquires another business or any portion thereof, and that pursuant to the arrangements governing such acquisition, the Company agrees to provide options and/or other awards in respect of the Common Stock upon the assumption or in substitution of existing equity-based awards for other securities held by employees and other service providers of the acquired business, the shares of Common Stock subject to such assumed or substituted awards shall not be counted against the limits set forth under Section 4(a) (and no shares related to any such assumed or substituted awards shall be added to the number of awards issuable under this Plan pursuant to Section 4(b)), and none of the provisions of the Plan that would otherwise limit or constrain the ability of the Company to make such assumption or substitution (such as the provisions hereof that require the issuance of Options with an exercise price at least equal to the Fair Market Value on the date of grant) shall apply to the awards issued in substitution of the awards granted in respect of the employees and service providers of such acquired business.

 

SECTION 5.

STOCK OPTIONS

 

(a)           Grant of Options.  Subject to the provisions of Section 3(f) and Section 4 above, Options may be granted to Participants at such time or times as shall be determined by the Committee.  Options granted under the Plan may be of two types:  (i) Incentive Stock Options and (ii) Nonstatutory Stock Options.  Except as otherwise provided herein, the Committee shall have complete discretion in determining the number of Options, if any, to be granted to a Participant, except that Incentive Stock Options may only be granted to Employees.  The terms and conditions of each Option grant, including, but not limited to, the type of Option granted, the exercise price, the duration of the Option, the number of shares of Common Stock to which the Option pertains, shall be evidenced in writing.  Each such Option grant may also contain such other terms and conditions not inconsistent with the provisions of the Plan as the Committee shall determine.

 

(b)           Exercise Price.  Nonstatutory Stock Options and Incentive Stock Options granted pursuant to the Plan shall have an exercise price no less than the Fair Market Value of a share of Common Stock on the date on which the Option is granted.  No Option granted hereunder may have its exercise price reduced (other than pursuant to the provisions of Section 4(d)) unless such action is expressly authorized by shareholder action in accordance with Section 11.

 

(c)           Exercise of Options. The Committee shall determine the exercise schedule applicable with respect to any Option granted hereunder.  Such schedule may require a minimum period of service that must be completed before all or a portion of such Option shall be exercisable, and may establish performance-based conditions to the exercise of such Option which are in addition to, in lieu of, or as an alternative to any service requirement.  Except as otherwise expressly provided in the Plan (i) upon a termination of employment due to death, Disability or Approved Retirement or (ii) in connection with a Change of Control, and unless the Committee shall determine that special circumstances (including, but not limited to, the achievement of performance objectives) justify an exception, the minimum period of service required to exercise an Option, in whole or in part, shall be one year.  Subject to the provisions of this Section 5, once any portion of any Option has become exercisable it shall remain exercisable for its full term.  The Committee shall determine the term of each Nonstatutory Stock Option or Incentive Stock Option granted hereunder, but, except

 

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as expressly provided below, in no event shall any such Option be exercisable for more than ten (10) years after the date on which it is granted.

 

(d)           Payment.  The Committee shall establish procedures governing the exercise of Options.  No shares shall be delivered pursuant to any exercise of an Option unless arrangements satisfactory to the Committee have been made to assure full payment of the exercise price therefor.  Without limiting the generality of the foregoing, payment of the exercise price may be made (i) in cash or its equivalent; (ii) by exchanging shares of Common Stock (which are not the subject of any pledge or other security interest) which have been owned by the person exercising the Option for at least six (6) months at the time of exercise; (iii) by any combination of the foregoing; provided that the combined value of all cash and cash equivalents paid and the Fair Market Value of any such Common Stock tendered to the Company, valued as of the date of such tender, is at least equal to such exercise price; or (iv) in accordance with any other procedure or arrangement approved by the Committee.  Additionally, to the extent authorized by the Committee (whether at or after grant), Options may be Net Exercised subject to such terms and conditions as the Committee may from time to time impose.

 

(e)           Incentive Stock Options.  Notwithstanding anything in the Plan to the contrary, no Option that is intended to be an Incentive Stock Option may be granted after the tenth (10th) anniversary of the effective date of the Plan and no term of this Plan relating to Incentive Stock Options shall be interpreted, amended or altered, nor shall any discretion or authority granted under the Plan be so exercised, so as to disqualify the Plan under Section 422 of the Code, or, without the consent of any Participant affected thereby, to disqualify any Incentive Stock Option under such Section 422.

 

(f)            Termination of Employment or Service.

 

(i)            Due to Death.  In the event a Participant’s employment or service terminates by reason of death, any Options granted to such Participant shall become immediately exercisable in full and may be exercised by the Participant’s designated beneficiary or, if none is named, by the person determined in accordance with Section 12(b) below, at any time prior to the earlier to occur of (i) the expiration of the term of the Options or (ii) the third (3rd) anniversary (or such earlier date as the Committee shall determine at the time of grant) of the Participant’s death.

 

(ii)           Due to Disability.  In the event a Participant’s employment or service is terminated by reason of Disability, any Options granted to such Participant shall become immediately exercisable in full and may be exercised by the Participant (or, in the event of the Participant’s death after termination of employment or service when the Option is exercisable pursuant to its terms, by the Participant’s designated beneficiary or, if none is named, by the person determined in accordance with Section 12 (b) below), at any time prior to the earlier to occur of (i) the expiration of the term of the Options or (ii) the third (3rd) anniversary (or such earlier date as the Committee shall determine at the time of grant) of the Participant’s termination of employment or service.

 

(iii)          Approved Retirement.  Unless otherwise determined by the Committee at or following the time of grant, in the event a Participant’s employment or service terminates by reason of Approved Retirement, the Participant shall be entitled to exercise (regardless of whether and to what extent exercisable prior thereto) (i) the number of Options (the “Last Year Options”) granted during the year in which the Participant’s employment or service terminates by reason of Approved Retirement (the “Retirement Year”) equal to the product of (x) the Last Year Options, multiplied by (y) a fraction not greater than one, the numerator of which is (A) the number of days during the Retirement Year during which the Participant was employed and (B) the denominator of which is 365 (the “Pro-Ration Factor”), and (ii) any Options granted to such Participant prior to the Retirement Year. Any exercisable Options held by a Participant at the time of the Participant’s Approved Retirement (including any Last Year Options) may be exercised by the Participant (or, in the event of the Participant’s death after termination of employment or service when the Option is exercisable pursuant to its terms, by the Participant’s designated beneficiary or, if none is named, by the person determined in accordance with Section 12 (b) below), at any time prior to the expiration date of the term of the Options (or such shorter period following the Participant’s Approved Retirement as the Committee shall determine at the time of grant). Any of the Last Year Options that are not exercisable at the date of a Participant’s Approved Retirement shall be cancelled on such date.

 

(iv)          Termination of Employment For Cause.  In the event a Participant’s employment or service is terminated by the Company or any Subsidiary for Cause or by the Participant other than due to the Participant’s death, Disability,  Approved Retirement, any Options granted to such Participant that have not yet been exercised shall expire at the time of such termination and shall not be exercisable thereafter.

 

(v)           Termination for Resignation.  In the event a Participant employment or service terminates due to the Participant’s voluntary resignation other than on account of Approved Retirement (a “Resignation”), any of the Participant’s then outstanding Options that are exercisable on the date of such Resignation may be exercised by the Participant (or, in the

 

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event of the Participant’s death after such Resignation by the Participant’s designated beneficiary or, if none is named, by the person determined in accordance with Section 12 (b) below), until the later of (i) the thirtieth (30th) day following the Participant’s Resignation, or (ii) if, immediately prior to such Resignation, the Participant was subject to the Company’s policies restricting sales of its securities (a “Restricted Participant”), the last day of the first Trading Window that commences [on or] following the termination of Participant’s Resignation, but in no event following the expiration of the term of such Options.  Any outstanding Options that are not exercisable at the time of a Participant’s Resignation shall expire at the time of such Resignation and shall not be exercisable thereafter.  The “Trading Window” is a period during which officers and other key employees of the Company and its Subsidiaries may sell Common Stock without restrictions under the applicable policies of the Company.  A Trading Window generally opens on the third business day following the Company’s earnings release and closes on the 15th day of the last month of the quarter in which the Trading Window is opened (or the previous day if the 15th of the last month of the quarter is not a business day).

 

(vi)          Termination of Employment for Any Other Reason.  Unless otherwise determined by the Committee at or following the time of grant, in the event the employment or service of the Participant shall terminate for any reason other than one described in Section 5(f)(i), (ii), (iii), (iv) or (v) above, any Options granted to such Participant which are exercisable at the date of the Participant’s termination of employment or service may be exercised by the Participant (or, in the event of the Participant’s death after termination of employment or service when the Option is exercisable pursuant to its terms, by the Participant’s designated beneficiary, or, if none is named, by the person determined in accordance with Section 12 (b)), until the later of (i) the thirtieth (30th) day following the Participant’s termination of employment or service, or (ii) if the Participant was a Restricted Participant, the last day of the first Trading Window that commences [on or] following the termination of Participant’s service or employment), but in no event following the expiration of the term of such Options.  Any Options that are not exercisable at the time of the Participant’s termination of employment or service shall expire at the time of such termination and shall not be exercisable thereafter.

 

SECTION 6.

RESTRICTED STOCK AND RESTRICTED STOCK UNITS

 

(a)           Grant of Restricted Stock.  The Committee may grant Restricted Stock or Restricted Stock Units to Participants at such times and in such amounts, and subject to such other terms and conditions not inconsistent with the Plan as it shall determine.  If Restricted Stock is evidenced by the issuance of stock certificates, the Committee shall require that such stock certificates be held in the custody of the Secretary of the Company until the Period of Restriction lapses, and that, as a condition of such Restricted Stock award, the Participant shall have delivered a stock power, endorsed in blank, relating to the Common Stock covered by such award.  The terms and conditions of each grant of Restricted Stock or Restricted Stock Units shall be evidenced in writing.

 

(b)           Restrictions on Transferability.  Except as provided in Section 12(a), no Restricted Stock may be sold, transferred, pledged, assigned, or otherwise alienated or hypothecated until the lapse of the Period of Restriction.  The Committee shall determine the Period of Restriction applicable with respect to any award of Restricted Stock; provided, however, that, except as otherwise expressly provided in the Plan the Period of Restriction with respect to any such Award shall not be less than three years but may lapse ratably over such three year Period of Restriction.  Notwithstanding the foregoing, such minimum three-year Period of Restriction shall not be applicable with respect to any grant made to a newly-hired employee made to compensate for equity-based or other forms of compensation forfeited from a prior employer or grants made in satisfaction of incentive or other compensation payable to the Participant in respect of service to the Company or any of its Subsidiaries.  The Committee may provide that the Period of Restriction on Restricted Stock shall lapse, in whole or in part, upon the achievement of performance criteria (and without regard to the minimum service requirement), which criteria shall be selected from those available to the Committee under Section 7(c), provided, however, that any Award of Restricted Stock made to any Executive Officer that is intended to qualify as other performance based compensation under Section 162(m) of the Code shall be subject to the same restrictions and limitations applicable to Performance Share Awards under Section 7(d) and subject to the certification required under Section 7(e).

 

(c)           Rights as a Shareholder.  Unless otherwise determined by the Committee at the time of grant and subject to Section 3(g), Participants holding shares of Restricted Stock may exercise full voting rights and other rights as a shareholder with respect to those shares during the Period of Restriction.

 

(d)           Termination of Employment Due to Disability or Death.  Unless otherwise determined by the Committee at the time of grant, in the event a Participant’s employment or service terminates by reason of Disability or death, any shares related to Restricted Stock held by such Participant shall become non-forfeitable on the date of termination.

 

(e)           Termination for Approved Retirement,  Unless otherwise determined by the Committee at the time of grant, in the event a Participant’s employment or service terminates by reason Approved Retirement, the following number of shares of Restricted Stock shall become non-forfeitable at the time the restrictions would have lapsed had the Participant continued in employment: (i) in

 

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case of any Award of Restricted Stock made to such Participant in the Retirement Year, the number of shares equal to the product of (i) the number of shares granted pursuant to such Award (the “Last Year Shares”), multiplied by the Pro-Ration Factor and (ii) in the case of any Award of Restricted Stock made prior to the Retirement Year, the number of shares related to such Award.  Notwithstanding the foregoing, ,the Committee may waive any forfeiture and transfer restrictions with respect to up to the portion of any Award of Restricted Stock described in the immediately preceding sentence as is necessary for the Participant to satisfy any applicable tax withholding obligations in connection with such Award arising at the time of such termination of employment.  Any of the Last Year Shares that will not become nonforfeitable in accordance with this Section 6(e) shall be cancelled on such date.

 

(f)            Termination of Employment for Any Other Reason.  Unless otherwise determined by the Committee at or after the time of grant, in the event the employment or service of the Participant shall terminate for any reason other than one described in Section 6(d), any Restricted Stock awarded to such Participant as to which the Period of Restriction has not lapsed shall be forfeited.

 

(g)           Restricted Stock Units.  The Committee may elect to grant any Participant Restricted Stock Units, which are intended to be the economic equivalent of an award of Restricted Stock.  Any such Restricted Stock Units Award shall be made on substantially the same terms as apply to an Award of Restricted Stock under this Section 6, except that a Participant receiving such Award shall not have any rights as a shareholder prior to the actual issuance of such Common Stock (although, pursuant to Section 3(g), the Committee may authorize the payment of dividend equivalents on such rights equal to the dividends that would have been payable had the corresponding equity rights been outstanding shares of Common Stock).  Notwithstanding the foregoing provisions of this Section 6(g), at the time that an award of Restricted Stock Units is made (or, if later, at such time as may be permitted under transitional relief available under Section 409A of the Code), the time at which such award shall be payable (as opposed to when it becomes non-forfeitable) shall either (i) satisfy the requirements for such award to be treated as a short-term deferral within the meaning of Section 409A of the Code or (ii) shall be an event or fixed date (or more than one such permissible event or date, in the alternative) which is a permissible payment event or date for deferred compensation subject to Section 409A of the Code.  For purposes of subclause (ii) of the immediately preceding sentence, if an award of Restricted Stock Units fails to specify an otherwise permissible event or date for payment, the payment date for any vested portion of any such award shall be the earlier of (i) within 60 days of the originally stated time vesting date (or, where multiple dates are used for different portions of such award, each such vesting date for each such portion), determined without regard to any accelerated vesting otherwise applicable to such award, or (ii) as provided in Section 10, the occurrence of a Change of Control which is also a change in ownership or effective control of the Company within the meaning of Section 409A of the Code.

 

SECTION 7

PERFORMANCE SHARES AND PERFORMANCE UNITS

 

(a)           Generally.  The Committee shall have the authority to determine the Participants who shall receive Performance Shares and Performance Units, the number of Performance Shares and the number and value of Performance Units each Participant receives for each or any Performance Period, and the Performance Criteria applicable in respect of such Performance Shares and Performance Units for each Performance Period.  The Committee shall determine the duration of each Performance Period (the duration of Performance Periods may differ from each other), and there may be more than one Performance Period in existence at any one time as to any Participant or all or any class of Participants.  Performance Periods may be no shorter than twelve months.  Each grant of Performance Shares and Performance Units shall be evidenced in writing and shall specify the number of Performance Shares and the number and value of Performance Units awarded to the Participant, the Performance Criteria applicable thereto, and such other terms and conditions not inconsistent with the Plan as the Committee shall determine.  No shares of Common Stock will be issued at the time an Award of Performance Shares is made, and the Company shall not be required to set aside a fund for the payment of Performance Shares or Performance Units.

 

(b)           Earned Performance Shares and Performance Units.  Performance Shares and Performance Units shall become earned, in whole or in part, based upon the attainment of specified Performance Criteria or the occurrence of any event or events, including a Change of Control, as the Committee shall determine, either at or after the time of grant.  In addition to the achievement of the specified Performance Criteria, the Committee may, at the grant date, condition payment of Performance Shares and Performance Units on the Participant completing a minimum period of service following the date of grant or on such other conditions as the Committee shall specify.

 

(c)           Performance Criteria.  At the discretion of the Committee, Performance Criteria may be based on the total return to the Company’s shareholders, inclusive of dividends paid, during the applicable Performance Period (determined either in absolute terms or relative to the performance of one or more similarly situated companies or a published index covering the performance of a number of companies), or upon the attainment of one or more of the following criteria, whether in absolute terms or relative to the performance of one or more similarly situated companies or a published index covering the performance of a number of companies: stock price, operating earnings, net earnings, return on equity, income, market share, combined ratio, level of expenses, growth in revenue, earnings before interest, taxes, depreciation and amortization, cash flow, earnings per share, book value per share, return on

 

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invested capital, return on assets, economic value added, improvements in or attainment of working capital levels, and, in the case of persons who are not Executive Officers, such other criteria as may be determined by the Committee.  Performance Criteria may be established on a Company-wide basis or with respect to one or more business units or divisions or Subsidiaries.  When establishing Performance Criteria for a Performance Period, the Committee may exclude any or all “extraordinary items” as determined under U.S. generally accepted accounting principles including, without limitation, the charges or costs associated with restructurings of the Company or any Subsidiary, discontinued operations, other unusual or non-recurring items, and the cumulative effects of accounting changes.  Except to the extent that the exercise of (or the ability to exercise) such discretion in the case of Awards to Executive Officers intended to be other performance-based compensation under Section 162(m)(4) of the Code would cause them to fail to satisfy that requirement, the Committee may also adjust the Performance Criteria for any Performance Period as it deems equitable in recognition of unusual or non-recurring events affecting the Company, changes in applicable tax laws or accounting principles, or such other factors as the Committee may determine.

 

(d)           Special Rule for Performance Criteria.  If, at the time of grant, the Committee intends a Performance Share Award or Performance Unit to qualify as other performance based compensation within the meaning of Section 162(m)(4) of the Code, the Committee must establish Performance Criteria for the applicable Performance Period no later than the 90th day after the Performance Period begins (or by such other date as may be required under Section 162(m) of the Code), and the Committee shall not have the authority in respect of such Awards to exercise any discretion applicable to a grant of Performance Shares or Performance Units otherwise conveyed by this Section 7, if the ability to exercise such discretion would cause such Award not to qualify as other performance based compensation.

 

(e)           Certification of Attainment of Performance Criteria.  As soon as practicable after the end of a Performance Period and prior to any payment in respect of such Performance Period, the Committee shall certify in writing the number of Performance Shares and the number and value of Performance Units which have been earned on the basis of performance in relation to the established Performance Criteria.

 

(f)            Payment of Awards.  Earned Performance Shares and the value of earned Performance Units shall be distributed to the Participant or, if the Participant has died, to the Participant’s beneficiary, as soon as practicable after the expiration of the Performance Period and the Committee’s certification under paragraph 7(e) above, but in no event later than the March 15 of the calendar year following the end of the Performance Period, provided that (i) earned Performance Shares and the value of earned Performance Units shall not be distributed to a Participant until any other conditions on payment of such Awards established by the Committee have been satisfied, and (ii) any amounts payable in respect of Performance Shares or Performance Units pursuant to Section 10 shall be distributed in accordance with Section 10. The Committee shall determine whether Performance Shares and the value of earned Performance Units are to be distributed in the form of cash, shares of Common Stock or in a combination thereof, with the value or number of shares payable to be determined based on the Fair Market Value of Common Stock on the date of the Committee’s certification under paragraph 7(e) above.

 

(g)           Newly Eligible Participants.  Notwithstanding anything in this Section 7 to the contrary, the Committee shall be entitled to make such rules, determinations and adjustments as it deems appropriate with respect to any Participant who becomes eligible to receive Performance Shares or Performance Units after the commencement of a Performance Period.

 

(h)           Termination of Employment.

 

(i)            Termination of Employment due to Approved Retirement, Disability or Death.  Unless otherwise determined by the Committee at or after the time of grant, a Participant whose employment or service terminates by reason of Approved Retirement, Disability or death shall be entitled to receive the same payment or distribution in respect of Performance Shares and Performance Units (without pro-ration) that would have been payable for the Performance Period had his or her employment continued until the end of the applicable Performance Period.  Any Performance Shares or value of Performance Units becoming payable in accordance with the preceding sentence shall be paid at the same time as Performance Shares and the value of Performance Units are paid to other Participants (or at such earlier time as the Committee may permit).  Any rights that a Participant or beneficiary may have in respect of any Performance Shares or Performance Units outstanding at the date of such termination of employment that may not be earned (or that are eligible to be earned, but are not earned) in accordance with this section 7(h)(i) shall be forfeited and canceled, effective as of the date of the Participant’s termination of employment or service (or, if eligible to be earned, but are not earned, the date of the Committee’s certification pursuant to Section 7(e)).

 

(ii)           Termination for any Other Reason.  Unless otherwise determined by the Committee at or after the time of grant, in the event the employment or service of the Participant shall terminate during a Performance Period for any reason other than the one described in Section 7(h)(i), all of the Participant’s rights to Performance Shares and Performance Units

 

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related to such Performance Period shall be immediately forfeited and canceled as of the date of such termination of employment.

 

(iii)          Cause.  Notwithstanding anything in this Section 7 to the contrary, a Participant’s rights in respect of unearned Performance Shares and Performance Units shall in all events be immediately forfeited and canceled as of the date of the Participant’s termination of employment for Cause.

 

SECTION 8

STOCK APPRECIATION RIGHTS

 

(a)           Grant of SARs.  SARs may be granted to any Participants, all Participants, or any class of Participants at such time or times as shall be determined by the Committee.  SARs may be granted in tandem with an Option, or may be granted on a freestanding basis, not related to any Option.  The term and conditions of any SAR grant shall be evidenced in writing, and shall include such provisions not inconsistent with the Plan as the Committee shall determine.

 

(b)           Terms and Conditions of SARs.  Unless the Committee shall otherwise determine, the terms and conditions (including, without limitation, the exercise period of the SAR, the vesting schedule applicable thereto and the impact of any termination of service on the Participant’s rights with respect to the SAR) applicable with respect to (i) SARs granted in tandem with an Option shall be substantially identical (to the extent possible taking into account the differences related to the character of the SAR) to the terms and conditions applicable to the tandem Options and (ii) freestanding SARs shall be substantially identical (to the extent possible taking into account the differences related to the character of the SAR) to the terms and conditions that would have been applicable under Section 5 above were the grant of the SARs a grant of an Option.

 

(c)           Exercise of Tandem SARs.  SARs which are granted in tandem with an Option may only be exercised upon the surrender of the right to exercise such Option for an equivalent number of shares and may be exercised only with respect to the shares of Common Stock for which the related Option is then exercisable.

 

(d)           Payment of SAR Amount.  Upon exercise of a SAR, the holder shall be entitled to receive payment, in cash, in shares of Common Stock or in a combination thereof, as determined by the Committee, of an amount determined by multiplying:

 

(i)            the excess, if any, of the Fair Market Value of a share of Common Stock at the date of exercise over the Fair Market Value of a share of Common Stock on the date of grant, by

 

(ii)           the number of shares of Common Stock with respect to which the SARs are then being exercised.

 

SECTION 9.

OTHER STOCK-BASED AWARDS

 

(a)           Other Stock-Based Awards.  The Committee may grant other types of equity-based and equity-related awards in addition to Options, SARs, Restricted Stock, Performance Shares, Restricted Stock Units and Performance Units, including, but not limited to, the outright grant of Common Stock in satisfaction of obligations of the Company or any Subsidiary under another compensatory plan, program or arrangement, modified awards intended to comply with or structured in accordance with the provisions of applicable non-U.S. law or practice, or the sale of Common Stock, in such amounts and subject to such terms and conditions as the Committee shall determine, including, but not limited to, the satisfaction of Performance Criteria.  Notwithstanding the immediately preceding sentence, except in the case of Other Stock-Based Awards issued in satisfaction of an obligation of the Company or any Subsidiary to make a payment in cash in respect of a Participant (including, but not limited to, when an annual or long-term incentive compensation award is satisfied with the issuance of shares of Common Stock instead of cash or in respect of a Participant’s accrued benefit under a deferred compensation plan), except as provided under Section 10, no Participant shall be entitled to vest in any such Other Stock-Based Award on a schedule which is more favorable to the Participant than ratably over a period of three years from the date of grant.  Each such Other Stock-Based Award shall be evidenced in writing and specify the terms and conditions applicable thereto.  Any such Other Stock-Based Award may entail the transfer of actual shares of Common Stock or the payment of the value of such Award in cash based upon the value of a specified number of shares of Common Stock, or any combination of the foregoing, as determined by the Committee.  The terms of any Other Stock-Based Award need not be uniform in application to all (or any class of) Participants, and each Other Stock-Based Award granted to any Participant (whether or not at the same time) may have different terms.

 

(b) Termination of Employment or Service.  In addition to any other terms and conditions that may be specified by the Committee but subject to the limitations set forth in Section 9(a), each Other Stock Based Award shall specify the impact of

 

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termination of employment upon the rights of a Participant in respect of such Award.  At the discretion of the Committee, such conditions may be the same as apply with respect to Restricted Stock or Restricted Stock Units, or may be contain terms that are more or less favorable to the Participant.

 

SECTION 10.

CHANGE OF CONTROL

 

(a)           Accelerated Vesting and Payment.  Subject to the provisions of Section 10(b) below, in the event of a Change of Control (i) each Option and SAR then outstanding shall be fully exercisable regardless of the exercise schedule otherwise applicable to such Option and/or SAR, (ii) the Period of Restriction shall lapse as to each share of Restricted Stock then outstanding, (iii) each outstanding Restricted Stock Unit shall become fully vested and payable, (iv) each outstanding Performance Share Award and Performance Unit Award shall be deemed earned at the target level of performance for such Award, and (v) each outstanding Other Stock-Based Award shall become fully vested and payable.  In addition, in connection with such a Change of Control, the Committee may, in its discretion, provide that each Option and/or SAR shall, upon the occurrence of such Change of Control, be canceled in exchange for a payment per share in cash (the “Settlement Payment”) in an amount equal to the excess, if any, of the Fair Market Value over the exercise price for such Option or the base price of such SAR.  Should the Committee authorize any Settlement Payments in respect of Options, the Committee may determine that any Options which have an exercise price per share below the Fair Market Value shall be deemed cancelled and satisfied in full for a deemed Settlement Payment of zero.  The Committee may also direct that each Restricted Stock Unit, Other Stock-Based Award, Performance Share and/or Performance Unit shall be settled in cash with its value determined based on the Change of Control Price.

 

(b)           Alternative Awards.  Notwithstanding Section 10(a), except as otherwise specified in Section 10(c) below, no cancellation, acceleration of exercisability, vesting, cash settlement or other payment shall occur with respect to any Award if the Committee reasonably determines in good faith, prior to the occurrence of a Change of Control, that such Award shall be honored or assumed, or new rights substituted therefor (such honored, assumed or substituted award hereinafter called an “Alternative Award”), by a Participant’s employer (or the parent or an affiliate of such employer) immediately following the Change of Control; provided that any such Alternative Award must:

 

(i)            be based on stock which is traded on an established U.S. securities market;

 

(ii)           provide such Participant with rights and entitlements substantially equivalent to or better than the rights, terms and conditions applicable under such Award, including, but not limited to, an identical or better exercise or vesting schedule and identical or better timing and methods of payment;

 

(iii)          have substantially equivalent economic value to such Award (determined at the time of the Change of Control and using valuation principles permitted under Treas. Reg. §1.424-1); and

 

(iv)          have terms and conditions which provide that in the event that, during the 24-month period following the Change of Control, the Participant’s employment or service is involuntarily terminated for any reason (including, but not limited to a termination due to death, Disability or without Cause) or Constructively Terminated (as defined below), all of such Participant’s Options and/or SARs shall be deemed immediately and fully exercisable, the Period of Restriction shall lapse as to each of the Participant’s outstanding Restricted Stock awards, each of the Participant’s outstanding Restricted Stock Unit awards and other Stock-Based Awards shall be payable in full and each such Alternative Award shall be settled for a payment per each share of stock subject to the Alternative Award in cash, in immediately transferable, publicly traded securities or in a combination thereof, in an amount equal to, in the case of an Option or SAR, the excess of the fair market value of such stock on the date of the Participant’s termination over the corresponding exercise or base price per share and, in the case of any Restricted Stock, Restricted Stock Unit, or Other Stock-Based Award, the fair market value of the number of shares of stock subject or related thereto.

 

For this purpose, a Participant’s employment or service shall be deemed to have been Constructively Terminated if, without the Participant’s written consent, the Participant terminates employment or service within 120 days following either (x) a material reduction in the Participant’s base salary or a Participant’s incentive compensation opportunity, or (y) the relocation of the Participant’s principal place of employment or service to a location more than 35 miles away from the Participant’s prior principal place of employment or service.

 

(c)           Section 409A.  Should any event constitute a Change of Control for purposes of the Plan, but not constitute a change of control within the meaning of Section 409A of the Code, with respect to any Award that is deferred compensation for purposes of Section 409A (i.e., that is not exempt from the application of such Section by reason of an available exemption, such as for stock rights, restricted property or awards qualifying as short-term deferral within the meaning of such Section 409A of the Code), no

 

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payment or distribution shall be made to any affected Participant by reason of such Change of Control (although any other modification or enhancement to the Award, such as accelerated vesting, shall still apply) and the value of such Award as determined by the Committee prior to such Change of Control shall be paid to the affected Participant on the earlier to occur of (i) the day after the six month anniversary of such Participant’s termination of employment and (ii) whichever of the following is applicable to such Award (A) with respect to any unvested Award that would have become vested solely upon the passage of time and the continued performance of service, the date the Award would have otherwise become vested without regard to the Change of Control, (B) with respect to any unvested Award that would have become vested upon the achievement of specified Performance Criteria, on the last day of the applicable Performance Period or (C) if the Award was already vested at the time the Change of Control occurs, on the date on which the Award would have expired or been payable in accordance with its terms.  If an event occurs that constitutes a Change of Control both for purposes of the Plan and Section 409A of the Code, then Section 10(b) shall not be applicable with respect to any Award that is deferred compensation for purposes of Section 409A (i.e., that is not exempt from the application of such Section by reason of an available exemption, such as for stock rights, restricted property or awards qualifying as short-term deferral within the meaning of such Section 409A of the Code).

 

SECTION 11
 AMENDMENT, MODIFICATION, AND TERMINATION OF PLAN

 

The Board may, at any time and from time to time amend, modify, suspend, or terminate this Plan, in whole or in part, without notice to or the consent of any Participant, Employee or Agent; provided, however, that any amendment which would (i) increase the number of shares available for issuance under the Plan, (ii) lower the minimum exercise price at which an Option (or the base price at which a SAR) may be granted or otherwise permit the repricing of any outstanding Options or SARs (other than in the context of a transaction referenced in Section 4(d)), (iii) extend the maximum term for Options or SARs granted hereunder or (iv) otherwise amend the Plan in a material fashion that would require the approval of shareholders under the applicable rules and regulations of any exchange or automated quotation system on which the Common Stock is listed to trade shall be subject to the approval of the Company’s shareholders.  No amendment, modification, or termination of the Plan shall in any manner adversely affect any Award theretofore granted under the Plan, without the consent of the Participant.

 

SECTION 12.

MISCELLANEOUS PROVISIONS

 

(a)           Transferability.  No Award granted under the Plan may be sold, transferred, pledged, assigned, or otherwise alienated or hypothecated, other than in accordance with Section 12 (b) below, provided  that the Committee may permit transfers of Awards (other than Incentive Stock Options) to Family Members (including, without limitation, transfers effected by a domestic relations order) subject to such terms and conditions as the Committee shall determine.

 

(b)           Beneficiary Designation.  Each Participant under the Plan may from time to time name any beneficiary or beneficiaries (who may be named contingently or successively) to whom any benefit under the Plan is to be paid or by whom any right under the Plan is to be exercised in case of the Participant’s death; provided that, if the Participant shall not have designated any beneficiary under this Plan, the Participant’s beneficiary shall be deemed to be the person designated by the Participant under the group life insurance plan of the Company or a Subsidiary in which such Participant participates (unless such designated beneficiary is not a Family Member).  Each designation made hereunder will revoke all prior designations by the same Participant with respect to all Awards previously granted (including, solely for purposes of this Plan, any deemed designation), shall be in a form prescribed by the Committee, and will be effective only when received by the Committee in writing during the Participant’s lifetime.  In the absence of any such effective designation (including a deemed designation), benefits remaining unpaid at the Participant’s death shall be paid to or exercised by the Participant’s surviving spouse, if any, or otherwise to or by the Participant’s estate.  Except as otherwise expressly provided herein, nothing in this Plan is intended or may be construed to give any person other than Participants any rights or remedies under this Plan.

 

(c)           Deferral of Payment.  At the time any Award is granted (or such earlier time as the Committee may require), the Committee may permit a Participant to elect, upon such terms and conditions as the Committee may establish, to defer receipt of shares of Common Stock that would otherwise be issued in connection with an Award.

 

(d)           No Guarantee of Employment or Participation.  The existence of this Plan, as in effect at any time or from time to time, or any grant of Award under the Plan shall not interfere with or limit in any way the rights of the Company or any Subsidiary to terminate any Participant’s employment or other service provider relationship at any time, nor confer upon any Participant any rights to continue in the employ or service of the Company or any Subsidiary or any other affiliate of the Company.  Except to the extent expressly selected by the Committee to be a Participant, no person (whether or not an Employee, an Agent or a Participant) shall at anytime have a right to be selected for participation in the Plan or, having been selected as a Participant, to receive any additional awards hereunder, despite having previously participated in an incentive or bonus plan of the Company or an affiliate.  The existence

 

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of the Plan shall not be deemed to constitute a contract of employment between the Company or any affiliate and any Employee, Agent or Participant, nor shall it constitute a right to remain in the employ or service of the Company or any affiliate.  Except as may be provided in a separate written agreement, employment with or service for the Company or any affiliate is at-will and either party may terminate the participant’s employment or other service provider relationship at any time, for any reason, with or without cause or notice.

 

(e)           Tax Withholding.  The Company or an affiliate shall have the right to deduct from all payments or distributions hereunder any federal, state, foreign or local taxes or other obligations required by law to be withheld with respect thereto. The Company may defer issuance of Common Stock in respect of any Award until such requirements are satisfied.  The Committee may, in its discretion, permit a Participant to elect, subject to such conditions as the Committee shall impose, (i) to have shares of Common Stock otherwise to be issued under the Plan withheld by the Company or (ii) to deliver to the Company previously acquired shares of Common Stock, in either case for the greatest number of whole shares having a Fair Market Value on the date immediately preceding the date on which the applicable tax liability is determined not in excess of the minimum amount required to satisfy the statutory withholding tax obligations with respect to any Award.

 

(f)            No Limitation on Compensation; Scope of Liabilities.  Nothing in the Plan shall be construed to limit the right of the Company to establish other plans if and to the extent permitted by applicable law. The liability of the Company or any affiliate under this Plan is limited to the obligations expressly set forth in the Plan, and no term or provision of this Plan may be construed to impose any further or additional duties, obligations, or costs on the Company or any affiliate thereof or the Committee not expressly set forth in the Plan.

 

(g)           Requirements of Law.  The granting of Awards and the issuance of shares of Common Stock shall be subject to all applicable laws, rules, and regulations, and to such approvals by any governmental agencies or national securities exchanges as may be required.

 

(h)           Term of Plan.  The Plan shall be effective upon the date, if any, on which it is approved by the Company’s shareholders. The Plan shall continue in effect, unless sooner terminated pursuant to Section 11 above, until the tenth anniversary of the date of such shareholder approval.

 

(i)            Governing Law.  The Plan, and all Awards granted hereunder (and the terms and conditions of any document evidencing any such grant), shall be construed in accordance with and governed by the laws of the State of Delaware, without regard to principles of conflict of laws.

 

(j)            No Impact On Benefits.  Except as may otherwise be specifically stated under any employee benefit plan, policy or program, Awards shall not be treated as compensation for purposes of calculating an Employee’s or Agent’s right or benefits under any such plan, policy or program.

 

(k)           No Constraint on Corporate Action.  Except as provided in Section 11 above, nothing contained in this Plan shall be construed to prevent the Company, or any affiliate, from taking any corporate action (including, but not limited to, the Company’s right or power to make adjustments, reclassifications, reorganizations or changes of its capital or business structure, or to merge or consolidate, or dissolve, liquidate, sell, or transfer all or any part of its business or assets) which is deemed by it to be appropriate, or in its best interest, whether or not such action would have an adverse effect on this Plan, or any awards made under this Plan.  No director, beneficiary, or other person shall have any claim against the Company, or any of its affiliates, as a result of any such action.

 

(l)            Indemnification.  Each member of the Board and each member of the Committee shall be indemnified and held harmless by the Company and each Employer against and from any loss, cost, liability, or expense that may be imposed upon or reasonably incurred by such member of the Board or Committee in connection with or resulting from any claim, action, suit, or proceeding to which such member may be made a party or in which such member may be involved by reason of any action taken or failure to act under the Plan (in the absence of bad faith) and against and from any and all amounts paid by such member in settlement thereof, with the Company’s approval, or paid by such member in satisfaction of any judgment in any such action, suit, or proceeding against such member, provided  that such member shall give the Company an opportunity, at its own expense, to handle and defend the same before such member undertakes to handle and defend it individually.  The foregoing right of indemnification shall not be exclusive and shall be independent of any other rights of indemnification to which any such person may be entitled under the Company’s Certificate of Incorporation or By-Laws, by contract, as a matter of law, or otherwise.

 

(m)          Rights as a Stockholder.  A Participant shall have no rights as a stockholder with respect to any shares of Common Stock covered by any Award until the Participant shall have become the holder of record of such shares.

 

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(n)           Captions. The headings and captions appearing herein are inserted only as a matter of convenience.  They do not define, limit, construe, or describe the scope or intent of the provisions of the Plan.

 

On behalf of the Board of Directors of the Company, this Amended and Restated Principal Financial Group, Inc. 2010 Stock Incentive Plan has been executed this 28th day of February, 2012.

 

 

	
By:
    	
 
    	
 
    
	
 
    	
 
    
	
Michael   T. Dan
    

 

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