Document:

Exhibit 4.1

Third Amended and Restated Revlon, Inc. Stock Plan

ARTICLE I

GENERAL

1.1 Purpose. The purpose of this Third Amended and Restated Revlon, Inc. Stock Plan (the “Plan”) is to provide for certain officers, directors and executive, managerial and other employees of Revlon, Inc. (“Revlon” and, together with its subsidiaries, the “Company”) and its Affiliates an incentive to maintain and enhance the long-term performance and profitability of the Company. It is the further purpose of the Plan to permit the granting of awards that will constitute performance based compensation for certain executive officers, as described in section 162(m) of the Internal Revenue Code of 1986, as amended (the “Code”), and regulations promulgated thereunder. 

1.2 Administration. 

(a) The Plan shall be administered by a committee (the “Committee”) appointed by the Board of Directors of Revlon (the “Board”), which committee shall consist of two or more directors. It is intended that the directors appointed to serve on the Committee shall be “outside directors” (within the meaning of Code section 162(m) and the Treasury Regulations thereunder as may be in effect from time to time, and any amendments, revisions or successor provisions thereto) to the extent Code section 162(m) is applicable, and that discretionary grants of Awards to non-employee directors be administered by a committee of “non-employee directors” (as such term is defined by Rule 16b-3 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”)); however, the mere fact that a Committee member shall fail to qualify under the
foregoing requirements shall not invalidate any award made by the Committee which award is otherwise validly made under the Plan. The members of the Committee shall be appointed by, and may be changed at any time and from time to time in the sole discretion of, the Board. To the extent permitted by applicable law, the Committee may delegate to any officer of Revlon the authority to grant options (as defined below) to officers or employees of the Company who are not subject to Section 16 of the Exchange Act, or the limitations of Code section 162(m).

(b) The Committee shall have the discretionary authority (i) to exercise all of the powers granted to it under the Plan, (ii) to construe, interpret and implement the Plan and Plan agreements executed pursuant to Section 2.6, (iii) to prescribe, amend and rescind rules and regulations relating to the Plan, (iv) to make all determinations necessary or advisable in administering the Plan, and (v) to correct any defect, supply any omission and reconcile any inconsistency in the Plan. 

(c) The determination of the Committee on all matters relating to the Plan or any Plan agreement (as defined in Section 2.6) shall be conclusive. 

(d) No member of the Committee shall be liable for any Plan Action (as defined in Section 3.2(a)), including without limitation any action or determination made in good faith with respect to the Plan or any Award hereunder. 

1.3 Persons Eligible for Awards. Awards under the Plan may be made to such officers, directors and executive, managerial and other employees (“key personnel”) of the Company or its Affiliates as the Committee shall in its sole discretion select. The Committee may make grants of Awards conditional upon execution by the grantee of the Company’s standard Agreement on Confidentiality and Non Competition, as in effect from time to time. 

1.4 Types of Awards Under Plan. 

(a) Awards may be made under the Plan in the form of (i) stock options (“options”), (ii) stock appreciation rights (“stock appreciation rights”) related to an option (“related stock appreciation rights”), (iii) stock appreciation rights not related to any option (“unrelated stock appreciation rights”), (iv) restricted stock awards, (v) unrestricted stock awards and (vi) restricted stock unit awards, all as more fully set forth in Article II (collectively, “Awards”). 

(b) Options granted under the Plan may be either (i) “nonqualified” stock options subject to the provisions of Code section 83 or (ii) options intended to qualify for incentive stock option treatment described in Code section 422. 

(c) All options when granted are intended to be nonqualified options, unless the applicable Plan agreement explicitly states that an option is intended to be an incentive stock option. If an option is granted with the stated intent that it be an incentive stock option, and if for any reason such option (or any portion thereof) shall not qualify as an incentive stock

 

 

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option, then, to the extent of such nonqualification, such option (or portion) shall be regarded as a nonqualified option appropriately granted under the Plan provided that such option (or portion) otherwise satisfies the terms and conditions of the Plan relating to nonqualified options generally.

1.5 Shares Available for Awards. 

(a) Subject to Section 3.5 (relating to adjustments upon changes in capitalization), as of any date the total number of shares of Common Stock with respect to which Awards may be granted shall be equal to the excess (if any) of (i) 65,650,000 shares over (ii) the sum (without duplication) of (A) the number of shares subject to outstanding options, outstanding unrelated stock appreciation rights, outstanding restricted stock awards not vested pursuant to the lapse of restrictions and outstanding restricted stock unit awards as to which the award cycle has not expired, granted under the Plan, (B) the number of shares previously issued pursuant to the exercise of options granted under the Plan, (C) the number of shares subject to an option, restricted stock award or restricted stock unit award or part thereof which is canceled by the Committee and for which cash is paid in respect
thereof pursuant to Section 2.8(f), (D) the number of shares in respect of which stock appreciation rights granted under the Plan shall have previously been exercised, (E) the number of shares previously vested pursuant to the lapse of restrictions under restricted stock awards granted under the Plan, (F) the number of shares previously issued pursuant to unrestricted stock awards, and (G) the number of shares previously issued or issuable pursuant to restricted stock unit awards as to which the award cycle has expired. In accordance with (and without limitation upon) the preceding sentence, if and to the extent an Award under the Plan expires, terminates or is canceled for any reason whatsoever without the grantee having received any benefit therefrom, the shares covered by such Award shall again become available for future Awards under the Plan. For purposes of the foregoing sentence, a grantee shall not be deemed to have received any “benefit” (i) in the case of forfeited
restricted stock awards by reason of having enjoyed voting rights and dividend rights prior to the date of forfeiture or (ii) in the case of an Award canceled pursuant to subsection (c) of this Section 1.5 by reason of a new Award being granted in substitution therefor. The grant or vesting of restricted stock unit awards that by their terms may be settled solely in cash shall not reduce the number of shares of Common Stock that may be made subject to awards under the Plan. Further, to the extent that payment for an option upon exercise is made with shares of Common Stock or shares of Common Stock are withheld from payment of an Award (including without limitation upon vesting of restricted stock) in satisfaction of any federal, state or local tax withholding requirements, such shares shall be available for future Awards under the Plan.

(b) Shares of Common Stock that shall be subject to issuance pursuant to Awards made under the Plan shall be authorized and unissued or treasury shares of Common Stock. 

(c) Without limiting the generality of the preceding provisions of this Section 1.5, the Committee may, but solely with the grantee’s consent, agree to cancel any Award under the Plan and issue a new Award in substitution therefor upon such terms as the Committee may in its sole discretion determine, provided that the substituted Award satisfies all applicable Plan requirements as of the date such new Award is made. 

(d) In any calendar year, a person eligible for Awards under the Plan may not be granted options or stock appreciation rights covering in the aggregate a total of more than 5,700,000 shares of Common Stock with respect to 2004 and 1,000,000 shares of Common Stock with respect to any subsequent year. In any calendar year, an “independent” director (as determined pursuant to Revlon’s “Board Guidelines for Assessing Director Independence” or similar guidelines in effect from time to time) of Revlon who is not also an employee of the Company may not be granted options or stock appreciation rights covering in the aggregate more than such number of shares of Common Stock with a fair market value (determined as of any respective date of grant in accordance with Section 1.6(c)) in excess of $100,000.

1.6 Definitions of Certain Terms. 

(a) The term “Affiliate” as used herein means any person or entity which, at the time of reference, directly, or indirectly through one or more intermediaries, controls, is controlled by, or is under common control with, the Company. 

(b) The term “Common Stock” as used herein means the shares of Class A Common Stock of Revlon as constituted on the effective date of the Plan, and any other shares into which such Common Stock shall thereafter be changed by reason of a recapitalization, merger, consolidation, split-up, combination, exchange of shares or the like. 

(c) Except as otherwise determined by the Committee, the term “fair market value” as used herein as of any date and in respect of any share of Common Stock shall mean, as determined by the Committee, either (i) the closing price of a share of Common Stock as reported on the New York Stock Exchange (or such other securities exchange or national market system on which Common Stock is principally traded) as of such date or (ii) the mean between the high and low sales prices of a share of Common Stock as reported on the New York Stock Exchange (or such other securities exchange or national market system on which Common Stock is principally traded) as of such date. 

 

 

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(d) In no event shall the fair market value of any share of Common Stock, the option exercise price of any option, the appreciation base per share of Common Stock under any stock appreciation right, or the amount payable per share of Common Stock under any other Award, be less than the par value per share of Common Stock. 

ARTICLE II

STOCK OPTIONS; STOCK APPRECIATION RIGHTS; STOCK AWARDS; RESTRICTED STOCK UNIT AWARDS

2.1 Grant of Stock Options. The Committee may grant options under the Plan to purchase shares of Common Stock to such key personnel, in such amounts and subject to such terms and conditions as the Committee shall from time to time determine in its sole discretion, subject to the terms and provisions of the Plan. 

2.2 Grant of Stock Appreciation Rights. 

(a) The Committee may grant a related stock appreciation right in connection with all or any part of an option granted under the Plan, either at the time such option is granted or at any time thereafter prior to the exercise, termination or cancellation of such option, and subject to such terms and conditions as the Committee shall from time to time determine in its sole discretion, consistent with the terms and provisions of the Plan. The grantee of a related stock appreciation right shall, subject to the terms and conditions of the Plan and the applicable Plan agreement, thereby have the right by exercise thereof to surrender to the Company for cancellation all or a portion of such related stock appreciation right, but only to the extent that the related option is then exercisable, and to be paid therefor an amount equal to the excess (if any) of (i) the aggregate fair market
value of the shares of Common Stock subject to the related stock appreciation right or portion thereof surrendered (determined as of the exercise date), over (ii) the aggregate appreciation base (determined pursuant to Section 2.6(d)) of the shares of Common Stock subject to the stock appreciation right or portion thereof surrendered. 

(b) The Committee may grant an unrelated stock appreciation right to such key personnel, and in such amounts and subject to such terms and conditions, as the Committee shall from time to time determine in its sole discretion, subject to the terms and provisions of the Plan. The grantee of an unrelated stock appreciation right shall, subject to the terms and conditions of the Plan and the applicable Plan agreement, have the right to surrender to the Company for cancellation all or a portion of such stock appreciation right, but only to the extent that such stock appreciation right is then exercisable, and to be paid therefor an amount equal to the excess (if any) of (i) the aggregate fair market value of the shares of Common Stock subject to the stock appreciation right or portion thereof surrendered (determined as of the exercise date), over (ii) the aggregate appreciation base
(determined pursuant to Section 2.6(d)) of the shares of Common Stock subject to the stock appreciation right or portion thereof surrendered. 

(c) Payment due to the grantee upon exercise of a stock appreciation right shall be made (i) by check, (ii) in Common Stock (valued at the fair market value thereof as of the date of exercise), or (iii) partly in the manner provided in clause (i) and partly in the manner provided in clause (ii), all as determined by the Committee in its sole discretion. If the Committee shall determine to make all of such payments in Common Stock, no fractional shares shall be issued and no payments shall be made in lieu of fractional shares. 

(d) The grant or exercisability of any stock appreciation right may be subject to such conditions as the Committee, in its sole discretion, shall determine, including a change of ownership or control of the Company or an Affiliate. A stock appreciation right may be deemed to be automatically exercised upon the occurrence of such events or conditions as may be determined by the Committee in an applicable Plan agreement. 

2.3 Special ISO Requirements. In order for a grantee to receive special tax treatment with respect to stock acquired under an option granted as an incentive stock option, the grantee of such option must be, at all times during the period beginning on the date of grant and ending on the day three months before the date of exercise of such option, an employee of the Company or any of the Company’s parent or subsidiary corporations (within the meaning of Code section 424), or of a corporation or a parent or subsidiary corporation of such corporation issuing or assuming a stock option in a transaction in which Code section 424(a) applies. If an option granted under the Plan is intended to be an incentive stock option, then the option exercise price per share shall in no event be less than 100% of the
fair market value of the Common Stock on the date of such grant. If an option granted under the Plan is intended to be an incentive stock option, and if the grantee, at the time of grant, owns stock possessing 10 percent or more of the total combined voting power of all classes of stock of the grantee’s employer corporation or of its parent or subsidiary corporation, then (i) the option exercise price per share shall in no event be less than 110% of the fair market value of the Common Stock on the date of such grant and (ii) such option shall not be exercisable after the expiration of five years after the date such option is granted. Options granted under the Plan that are 

 

 

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intended to be incentive stock options may also have additional limitations pursuant to the Code.

2.4 Restricted and Unrestricted Stock Awards. 

(a) The Committee may grant restricted stock awards, alone or in tandem with other Awards under the Plan, to such key personnel, and subject to such restrictions, terms and conditions, as the Committee shall determine in its sole discretion and as shall be evidenced by the applicable Plan agreements. The vesting of a restricted stock award granted under the Plan may be conditioned upon the completion of a specified period of employment, or in the case of directors who are not employees of the Company or its Affiliates, their services as such, with the Company or any Affiliate, upon the attainment of specified performance goals, and/or upon such other criteria as the Committee may determine in its sole discretion. 

(b) The Committee may grant unrestricted stock awards, alone or in tandem with other Awards under the Plan, to such key personnel and subject to such terms and conditions as the Committee shall determine in its sole discretion and as shall be evidenced by the applicable Plan agreements. 

(c) Each Plan agreement with respect to a restricted stock award shall set forth the amount (if any) to be paid by the grantee with respect to such Award and when or in what circumstances such payment is required to be made. If a grantee made any payment for a restricted stock award or portion thereof which does not vest, appropriate payment shall be made to the grantee upon or following such forfeiture if and on such terms and conditions as the Committee may determine. 

(d) Upon the grant of a restricted stock award, the Company shall promptly instruct its transfer agent to record the restricted stock as the property of the grantee, subject to the restrictions, terms and conditions set forth in the applicable Plan agreement. The Committee may provide that a certificate or certificates representing the shares underlying a restricted stock award shall be registered in the grantee’s name and bear an appropriate legend specifying that such shares are not transferable and are subject to the provisions of the Plan and the restrictions, terms and conditions set forth in the applicable Plan agreement, or that such certificate or certificates shall be held in escrow by the Company on behalf of the grantee until such shares become vested or are forfeited, all on such terms and conditions as the Committee may determine. Except as the applicable Plan
agreement may otherwise provide, no shares underlying a restricted stock award may be assigned, transferred, or otherwise encumbered or disposed of by the grantee until such shares have vested in accordance with the terms of such Award. Subject to the provisions of Section 3.2, upon the vesting of a restricted stock award in accordance with the terms of such Award, the Company shall promptly instruct its transfer agent to eliminate any notation of the restrictions with respect to the shares and to record the shares as outstanding, with no restrictions. After any restricted stock award shall vest, the Company may issue or reissue to the grantee (or to the grantee’s designated beneficiary in the event of the grantee’s death) a certificate or certificates for the Common Stock underlying such restricted stock award without the restrictive legend on such terms and conditions as the Committee may determine. 

(e) If and to the extent that the applicable Plan agreement may so provide, a grantee shall have the right to vote and receive dividends on the shares underlying a restricted stock award granted under the Plan. Unless otherwise provided in the applicable Plan agreement, any stock received as a dividend on, or in connection with a stock split of, the shares underlying a restricted stock award shall be subject to the same restrictions as the shares underlying such restricted stock award. 

(f) In the event that the Committee grants a stock award that is intended to constitute qualified performance-based compensation within the meaning of Code section 162(m), the following rules shall apply (as such rules may be modified by the Committee to conform with Code section 162(m) and the Treasury Regulations thereunder as may be in effect from time to time, and any amendments, revisions or successor provisions thereto): (i) payments under the stock award shall be made solely on account of the attainment of one or more objective performance goals established in writing by the Committee not later than 90 days after the commencement of the period of service to which the stock award relates (or if less, 25% of such period of service); (ii) the performance goal(s) to which the stock award relates shall be based on one or more of the following business criteria applied to the
grantee, a business unit or the Company and/or an Affiliate: stock price, market share, sales, earnings per share, return on equity, assets, capital or investment, net income, operating income, operating income before restructuring charges, plus depreciation and amortization other than relating to early extinguishment of debt and debt issuance costs, sales growth, expense targets, working capital targets relating to inventory and/or accounts receivable, operating margin, planning accuracy (as measured by comparing planned results to actual results), and implementation or completion of critical projects or processes; (iii) in any year, a grantee may not be granted stock awards covering a total of more than 1,000,000 shares of Common Stock pursuant to this Section 2.4(f); and (iv) once granted, the Committee may not have discretion to increase the amount payable under such stock award, provided, however, that whether or not a stock award is intended to constitute qualified
performance-based compensation within the meaning of Code section 162(m), the Committee shall make appropriate adjustments in performance goals under an Award to reflect the impact of extraordinary items not reflected in such goals. For purposes of the Plan, extraordinary items shall be defined as (1) any profit or loss attributable to acquisitions or

 

 

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dispositions of stock or assets, (2) any changes in accounting standards that may be required or permitted by the Financial Accounting Standards Board or adopted by the Company after the goal is established, (3) all items of gain, loss or expense for the year related to restructuring charges for the Company, (4) all items of gain, loss or expense for the year determined to be extraordinary or unusual in nature or infrequent in occurrence or related to the disposal of a segment of a business all determined in accordance with standards established by Opinion No. 30 of the Accounting Principles Board or any successor thereto (“APB Opinion No. 30”), (5) all items of gain, loss or expense for the year related to discontinued operations that do not qualify as a segment of a business as defined in APB Opinion No. 30, and (6) such other items as may be prescribed by Code section 162(m) and
the Treasury Regulations thereunder as may be in effect from time to time, and any amendments, revisions or successor provisions and any changes thereto. The Committee shall, prior to making any award under this Section 2.4(f), certify in writing that all applicable performance goals have been attained. 

2.5 Restricted Stock Unit Awards. 

(a) The Committee may grant restricted stock unit awards, alone or in tandem with other Awards under the Plan, to acquire shares of Common Stock to such key personnel and in such amounts and subject to such terms and conditions as the Committee shall from time to time in its sole discretion determine, subject to the terms of the Plan. 

(b) Each restricted stock unit award under the Plan shall relate to a specified maximum number of shares, and shall be exchangeable, as determined in the sole discretion of the Committee, for all or a portion of such shares, or for cash (or such other form of consideration as may be determined by the Committee equivalent in value thereto) in up to an amount equal to the fair market value of an equal number of unrestricted shares, at the end of such specified period (an “award cycle”) as may be established by the Committee. The number of such shares which may be deliverable pursuant to such restricted stock unit award shall be conditioned upon the completion of a specified period of employment (or in the case of directors who are not employees of the Company or its Affiliates, their services as such) with the Company or an Affiliate, upon the attainment over such award
cycle of such measure of the performance of the Company, an Affiliate, one or more of its or their respective divisions or other business units, or the grantee, and/or upon such other criteria as the Committee may determine in its sole discretion. The Committee may make such provision in the Plan agreement for full or partial credit, prior to completion of such award cycle or achievement of the degree of attainment of any measures of performance specified in connection with such restricted stock unit award, in the event of the participant’s death, retirement or other cessation of services, or disability, or in such other circumstances, as the Committee in its sole discretion may determine to be fair and equitable to the participant or in the interest of the Company. 

(c) In the event that the Committee grants a restricted stock unit award that is intended to constitute qualified performance-based compensation within the meaning of Code section 162(m), the following rules shall apply (as such rules may be modified by the Committee to conform with Code section 162(m) and the Treasury Regulations thereunder as may be in effect from time to time, and any amendments, revisions or successor provisions, and any changes thereto): (i) payments under the restricted stock unit award shall be made solely on account of the attainment of one or more objective performance goals established in writing by the Committee not later than 90 days after the commencement of the period of service to which the restricted stock unit award relates (or if less, 25% of such period of service); (ii) the performance goal(s) to which the restricted stock unit award relates
shall be based on one or more of the following business criteria applied to the grantee, a business unit or the Company and/or an Affiliate: stock price, market share, sales, earnings per share, return on equity, assets, capital or investment, net income, operating income, operating income before restructuring charges, plus depreciation and amortization other than relating to early extinguishment of debt and debt issuance costs, sales growth, expense targets, working capital targets relating to inventory and/or accounts receivable, operating margin, planning accuracy (as measured by comparing planned results to actual results), and implementation or completion of critical projects or processes; (iii) in any year, a grantee may not be granted restricted stock unit awards covering a total of more than 1,000,000 shares of Common Stock pursuant to this Section 2.5(c); and (iv) once granted, the Committee may not have discretion to increase the amount payable under such restricted stock
unit award, provided, however, that whether or not a restricted stock unit award is intended to constitute qualified performance-based compensation within the meaning of Code section 162(m), the Committee shall make appropriate adjustments in performance goals under an Award to reflect the impact of extraordinary items not reflected in such goals. For purposes of the Plan, extraordinary items shall be defined as (1) any profit or loss attributable to acquisitions or dispositions of stock or assets, (2) any changes in accounting standards that may be required or permitted the Financial Accounting Standards Board or adopted by the Company after the goal is established, (3) all items of gain, loss or expense for the year related to restructuring charges for the Company, (4) all items of gain, loss or expense for the year determined to be extraordinary or unusual in nature or infrequent in occurrence or related to the disposal of a segment of a business all determined in accordance with
standards established by APB Opinion No. 30, (5) all items of gain, loss or expense for the year related to discontinued operations that do not qualify as a segment of a business as defined in APB Opinion No. 30, and (6) such other items as may be prescribed by Code section 162(m) and the Treasury Regulations thereunder as may be in effect from time to time, and any amendments, revisions or successor provisions and any changes thereto. The Committee shall, prior to making any award under this Section 2.5(c), certify in writing that all applicable performance goals have been attained.

 

 

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(d) To the extent determined by the Committee and provided in a Plan agreement, dividend equivalents shall be credited to a grantee in respect of restricted stock units held by the grantee. Such dividend equivalents shall be converted into additional restricted stock units by dividing (i) the aggregate amount or value of the dividends paid with respect to that number of shares of Common Stock equal to the number of restricted stock units then credited by (ii) the fair market value per share of Common Stock on the payment date for such dividend. The additional restricted stock units credited by reason of such dividend equivalents shall be subject to all the terms and conditions of the restricted stock unit to which they relate.

2.6 Agreements Evidencing Awards. 

(a) Awards granted under the Plan shall be evidenced by written agreements (“Plan agreements”) which shall contain such provisions not inconsistent with the terms and provisions of the Plan as the Committee may in its sole discretion deem necessary or desirable. 

(b) Each Plan agreement with respect to the granting of an Award other than a related stock appreciation right shall set forth the number of shares of Common Stock subject to the Award granted thereby. Each Plan agreement with respect to the granting of a related stock appreciation right shall set forth the number of shares of Common Stock subject to the related option which shall also be subject to the related stock appreciation right granted thereby. 

(c) Each Plan agreement with respect to the granting of an option shall set forth the amount (the “option exercise price”) payable by the grantee to the Company in connection with the exercise of the option evidenced thereby. The option exercise price per share shall in no event be less than 100% of the fair market value of a share of Common Stock on the date the option is granted. 

(d) Each Plan agreement with respect to a stock appreciation right shall set forth the amount (the “appreciation base”) over which appreciation will be measured upon exercise of the stock appreciation right evidenced thereby. The appreciation base per share of Common Stock subject to an unrelated stock appreciation right shall in no event be less than 100% of the fair market value of a share of Common Stock on the date the stock appreciation right is granted. The appreciation base per share of Common Stock subject to a related stock appreciation right shall in all cases be the option exercise price per share of Common Stock subject to the related option. 

2.7 Exercise of Related Stock Appreciation Right Reduces Shares Subject to Option. Upon any exercise of a related stock appreciation right or any portion thereof, the number of shares of Common Stock subject to the related option shall be reduced by the number of shares of Common Stock in respect of which such stock appreciation right shall have been exercised. 

2.8 Exercisability of Options, Stock Appreciation Rights and Other Awards; Cancellation of Awards in Certain Cases.

Subject to the other provisions of the Plan: 

(a) Except as hereinafter provided, each Plan agreement with respect to an option or stock appreciation right shall set forth the period during which and the conditions subject to which the option or stock appreciation right evidenced thereby shall be exercisable, and each Plan agreement with respect to a restricted stock award or restricted stock unit award shall set forth the period after which and the conditions subject to which the shares underlying such Award shall vest or be deliverable, all such periods and conditions to be determined by the Committee in its sole discretion. Unless the applicable Plan agreement otherwise specifies: no option or stock appreciation right shall be exercisable prior to the first anniversary of the date of grant, and each option or stock appreciation right granted under the Plan shall become cumulatively exercisable with respect to 25% of the
shares of Common Stock subject thereto, rounded down to the next lower full share, on the first anniversary of the date of grant, and with respect to an additional 25% of the shares of Common Stock subject thereto, rounded down to the next lower full share, on each of the second and third anniversaries of the date of grant, and shall become 100% exercisable on the fourth anniversary of the date of grant, and shall remain 100% exercisable until the expiration date of the Award and shall terminate and cease to be exercisable on the day after the expiration date of the Award. 

(b) Except as provided in Section 2.10(e), (i) no option or stock appreciation right awarded on or after April 14, 2004 may be exercised more than 7 years after the date of grant, and (ii) no shares of Common Stock underlying any other Award under the Plan may vest or become deliverable more than 10 years after the date of grant.

(c) Unless the applicable Plan agreement otherwise provides, a related stock appreciation right shall be exercisable at any time during the period that the related option may be exercised. 

 

 

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(d) Unless the applicable Plan agreement otherwise provides, an option or stock appreciation right granted under the Plan may be exercised from time to time as to all or part of the full number of shares as to which such option or stock appreciation right shall then be exercisable. 

(e) An option or stock appreciation right shall be exercisable by the filing of a written notice of exercise with the Company, on such form and in such manner as the Committee shall in its sole discretion prescribe, and by payment in accordance with Section 2.9. 

(f) Unless the applicable Plan agreement otherwise provides: in the case of an option or stock appreciation right, at any time after the Company’s receipt of written notice of exercise of an option or stock appreciation right and prior to the option or stock appreciation right exercise date (as defined in subsection (g) of this Section 2.8), and in the case of a stock award or restricted stock unit award, at any time within the six business days immediately preceding the otherwise applicable date on which the previously restricted stock award or restricted stock unit award would otherwise have become unconditionally vested or the shares subject thereto unconditionally deliverable, the Committee, in its sole discretion, shall have the right, by written notice to the grantee, to cancel such Award or any part thereof if the Committee, in its sole judgment, determines that
legal or contractual restrictions and/or blockage and/or other market considerations would make the Company’s acquisition of Common Stock from the public markets, the Company’s issuance of Common Stock to the grantee, the grantee’s acquisition of Common Stock from the Company and/or the grantee’s sale of Common Stock to the public markets illegal, impracticable or inadvisable. If the Committee determines to cancel all or any part of an Award, the Company shall pay to the grantee an amount equal to the excess of (i) the aggregate fair market value of the shares of Common Stock subject to the Award or part thereof canceled (determined as of the option or stock appreciation right exercise date, or the date that shares would have been unconditionally vested or delivered in the case of a stock award or restricted stock unit award), over (ii) the aggregate option exercise price or appreciation base of the option or stock appreciation right or part thereof canceled (in
the case of an option or stock appreciation right) or any amount payable as a condition of delivery of shares (in the case of a stock award or restricted stock unit award). Such amount shall be delivered to the grantee as soon as practicable after such Award or part thereof is canceled. 

(g) Unless the applicable Plan agreement otherwise provides, the “option exercise date” and the “stock appreciation right exercise date” shall be the date that written notice of exercise, together with payment, are received by the Company; provided that if subsection (f) of this Section 2.8 is applicable, the option exercise date or stock appreciation right exercise date shall be the later of: (i) the sixth business day following the date written notice of exercise is received by the Company; and (ii) the date when payment is received by the Company. 

(h) Notwithstanding any other provision of the Plan (but except as otherwise provided in this subsection (h)), Awards other than options and stock appreciation rights shall vest (i.e., become nonforfeitable) over a minimum period of three years; provided that (i) in the event of a Reorganization Event (as defined in Section 3.11(a)) or, in respect of such an Award to any grantee, in the event of the grantee’s death, disability, or retirement, no such minimum vesting period shall be required, (ii) to the extent vesting in such an Award is conditioned upon the achievement of one or more performance goals, the Award shall vest over a minimum period of one year (rather than over a minimum period of three years), and (iii) subject to Section 3.5 (relating to adjustments upon changes in
capitalization), as of any date, the total number of shares of Common Stock with respect to which Awards may be made under this Section 2.8(h) without minimum vesting requirements shall not exceed (A) 6,565,000 shares (1) less the sum (without duplication) of (a) the number of shares subject to outstanding Awards granted pursuant to this clause (iii) or parts thereof not vested pursuant to the lapse of restrictions, (b) the number of shares subject to Awards granted pursuant to this clause (iii) or parts thereof which are canceled by the Committee and for which cash is paid in respect thereof pursuant to Section 2.8(f), and (c) the number of shares subject to Awards granted pursuant to this clause (iii) or parts thereof which have vested pursuant to the lapse of restrictions, (2) plus (a) the number of shares subject to Awards granted pursuant to this clause (iii) or parts thereof not vested pursuant to the lapse of restrictions which are canceled without payment of cash or other
consideration in connection with termination of the grantee’s employment, services or otherwise and (b) shares of Common Stock withheld by the Company for taxes upon vesting of any such Awards granted pursuant to this clause (iii)). For purposes of this subsection (h), vesting over a three-year period or one-year period (as the case may be) may include periodic vesting determined by the Committee over such period if the rate of such vesting is proportional throughout such period; provided, however, that, other than Awards granted under clause (iii) of this Section 2.8(h), Awards other than options and stock appreciation rights may not include periodic vesting thereunder for any interval of less than one year.

2.9 Payment of Award Price. 

(a) Unless the applicable Plan agreement otherwise provides or the Committee in its sole discretion otherwise determines, any written notice of exercise of an option or stock appreciation right must be accompanied by payment of the full option or stock appreciation exercise price. If Section 2.8(g) applies, and the six business day delay for the option 

 

 

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exercise date or stock appreciation right exercise date is applied, the grantee shall have no right to pay the option or stock appreciation right exercise price or to receive Common Stock with respect to the option or stock appreciation right exercise prior to the lapse of such six business days. 

(b) Payment of the option exercise price and of any other payment required by the Plan agreement to be made pursuant to any other Award shall be made in any combination of the following: (i) by certified or official bank check payable to the Company (or the equivalent thereof acceptable to the Committee); (ii) with the consent of the Committee in its sole discretion, by personal check (subject to collection) which may in the Committee’s sole discretion be deemed conditional; and/or (iii) unless otherwise provided in the applicable Plan agreement, by delivery of previously-acquired shares of Common Stock owned by the grantee for at least six months (or such longer or shorter period as the Committee may in its sole discretion determine that will not result in variable accounting treatment) having a fair market value (determined as of the option exercise date, in the case of
options, or other relevant payment date as determined by the Committee, in the case of other Awards) equal to the portion of the exercise price being paid thereby or attestation as to the ownership of such shares of Common Stock by the grantee, provided that the Committee may require, as a condition of accepting any such delivery (or attestation as to ownership) of shares of Common Stock, that the grantee furnish an opinion of counsel acceptable to the Company to the effect that such delivery (or attestation) would not result in the grantee incurring any liability under Section 16(b) of the Exchange Act and does not require any Consent (as defined in Section 3.2(b)) (a “Compliance Opinion”). Payment in accordance with clause (i) of this Section 2.9(b) may be deemed to be satisfied, if and to the extent that the applicable Plan agreement so provides or the Committee permits, by delivery to the Company of an assignment of a sufficient amount of the proceeds from the sale of
Common Stock to be acquired pursuant to the Award to pay for all of the Common Stock to be acquired pursuant to the Award and an authorization to the broker or selling agent to pay that amount to the Company and to effect such sale at the time of exercise or other delivery of shares of Common Stock, provided that the Committee may require, as a condition of accepting any such payment, that the grantee furnish a Compliance Opinion. As soon as practicable after receipt of full payment, the Company shall, subject to the provisions of Sections 2.8(f) and 3.2, deliver to the grantee a certificate or certificates for the shares of Common Stock deliverable pursuant to such Award, which certificate or certificates may bear such legends as the Company may deem appropriate concerning restrictions on their disposition in accordance with applicable federal and state securities laws, rules and regulations or otherwise. 

(c) Notwithstanding any other provision of this Plan or the applicable Plan agreement, no grantee shall, directly or indirectly, sell any shares of Common Stock unless (i) such grantee owns the shares to be sold or has exercised an Award with respect thereto and the shares to be sold are immediately issuable to the grantee pursuant to such exercise (subject to Section 2.8(g) if applicable) and (ii) such grantee delivers such shares in settlement in accordance with all settlement rules applicable to such transaction. 

2.10 Termination of Employment or Services.

(a) The following “default rules” set forth in this Section 2.10 shall govern the exercisability of options and the continuation of other Awards following termination of employment of a grantee with the Company and its Affiliates, or the termination of services as a director for the Company and its Affiliates for directors who are not employees of the Company or its Affiliates, except in each case where: (i) other provisions of the Plan specify a different rule (e.g., Section 3.11 dealing with early termination of an option in connection with certain corporate events); or (ii) the Plan agreement provides for a different rule (as specified by the Committee pursuant to its authority under the Plan). 

(b) Upon termination of a grantee’s employment with the Company and its Affiliates, or in the case of termination of services for directors who are not employees, (i) by the Company or its Affiliate either for (A) “good reason” as defined in the Revlon Executive Severance Policy as in effect on the date of adoption of this Plan, with respect to employees or (B) “good reason,” “cause” or any like term as defined under any employment agreement to which a grantee may be a party or, in the case of non-employee directors, removal for cause as set forth in Revlon’s By-laws from time to time or (ii) by a grantee otherwise than either for (A) “good reason,” “cause” or any like term as defined under any employment agreement to which a grantee may be a party from time to time or (B) the reasons described in subsection (d) or (e)
hereof, all outstanding options and stock appreciation rights granted to such grantee shall cease to be exercisable, the portions of all restricted stock or restricted stock unit Awards which are unvested or as to which all restrictions have not lapsed shall be automatically cancelled and such grantee may not satisfy any condition, limitation or restriction which is unsatisfied (and no additional portion shall otherwise become vested) under any other outstanding Award, following the date of such termination of employment with respect to employees or termination of services in the case of non-employee directors, and all outstanding Awards held by such grantee shall in all respects automatically be canceled on the date of such termination of employment or services, as the case may be. 

(c) Upon termination of a grantee’s employment with the Company and its Affiliates, or in the case of termination of services for non-employee directors, for any reason other than as described in subsection (b), (d) or (e) hereof

 

 

8

 

(including by reason of such grantee’s employer ceasing to be an Affiliate of the Company), the portions of outstanding options and stock appreciation rights granted to such grantee that are exercisable as of the date of termination of employment or, in the case of non-employee directors, services, may continue to be exercised, and any payment or notice provided for under the terms of any other outstanding Award as respects the portion thereof vested as of the date of termination of such employment or services, as the case may be, may be given for a period of ninety (90) days from and including the date of termination of such employment or services, but no additional portions of outstanding options or stock appreciation rights granted to such grantee shall become exercisable, and such grantee may not satisfy any condition, limitation or restriction which is unsatisfied (and no additional
portion shall otherwise become vested) under any other outstanding Award, following the date of such termination of employment or services, and such unexercisable or unvested Awards or parts thereof, including the portions of all restricted stock and restricted stock unit awards which are unvested or as to which all restrictions have not lapsed, shall in all respects automatically be canceled on the date of such termination of employment or services.

(d) If the grantee voluntarily retires with the consent of the grantee’s employer or retires as a non-employee director with the consent of the Company or the grantee’s employment or services as a non-employee director terminates due to permanent disability, the portions of outstanding options and stock appreciation rights granted to such grantee that are exercisable as of the date of voluntary retirement or termination of employment or, in the case of non-employee directors, services, may continue to be exercised, and any payment or notice provided for under the terms of any other outstanding Award as respects the portion thereof vested as of the date of termination of such employment or services, as the case may be, may be given for a period of one year from and including the date of termination of such employment or services, but no additional portions of
outstanding options or stock appreciation rights granted to such grantee shall become exercisable, and such grantee may not satisfy any condition, limitation or restriction which is unsatisfied (and no additional portion shall otherwise become vested) under any other outstanding Award, following the date of such termination of employment or services, and such unexercisable or unvested Awards or parts thereof, including the portions of all restricted stock and restricted stock unit awards which are unvested or as to which all restrictions have not lapsed, shall in all respects automatically be canceled on the date of such termination of employment or services. 

(e) If the grantee’s employment or services (in the case of non-employee directors) terminates by reason of death, or if the grantee’s employment or services (in the case of non-employee directors) terminates under circumstances providing for continued exercisability under subsection (c) or (d) of this Section 2.10 and during the period of continued exercisability described in subsection (c) or (d) the grantee dies, the portions of outstanding options and stock appreciation rights granted to such grantee that are exercisable as of the date of the grantee’s death may continue to be exercised, and any payment or notice provided for under the terms of any other outstanding Award as respects the portion thereof vested as of the date of death of such grantee may be given by the person to whom such rights have passed under the grantee’s will (or, if applicable,
pursuant to the laws of descent and distribution) for a period of one year from and including the date of the grantee’s death (notwithstanding that such period may extend beyond the otherwise applicable expiration date of the Award), but no additional portions of outstanding options or stock appreciation rights granted to such grantee shall become exercisable, and such grantee (or the person to whom such rights have passed under the grantee’s will (or, if applicable, pursuant to the laws of descent and distribution)) may not satisfy any condition, limitation or restriction which is unsatisfied (and no additional portion shall otherwise become vested) under any other outstanding Award, following either the date of death of such grantee as respects a grantee whose employment or services terminates by reason of death, or the date provided in subsection (c) or (d) as respects a grantee whose death occurs during the period of continued exercisability provided in subsection (c) or
(d), and such unexercisable or unvested Awards or parts thereof, including the portions of all restricted stock and restricted stock unit awards which are unvested or as to which all restrictions have not lapsed, shall in all respects automatically be canceled either on the date of death of such grantee as respects a grantee whose employment or services terminates by reason of death, or the date provided in subsections (c) or (d) as respects a grantee whose death occurs during the period of continued exercisability provided in subsections (c) or (d). 

(f) Notwithstanding the foregoing, the Committee may, subject to the provisions of this subsection (f), provide for a longer or shorter period for exercise of an option or stock appreciation right or may permit a grantee to continue vesting under any option, stock appreciation right or restricted stock or restricted stock unit award or to make any payment, give any notice and continue satisfying any performance or other condition under any other Award in the case of a grantee whose employment terminates, as follows:

(i) the Committee may make the aforesaid adjustments in respect to Awards of restricted stock and restricted stock units not subject to the minimum vesting requirements of Section 2.8(h), which have been granted pursuant to the exception thereto in Section 2.8(h)(iii), in the case of a grantee whose employment has terminated, for any reason in the Committee’s discretion, and

(ii) the Committee may make the aforesaid adjustments in respect to any Award granted under the Plan (without limitation by clause (i) immediately above) in the case of a grantee whose employment has terminated due to (or

 

 

9

 

in connection with) the following circumstances: (1) the occurrence of a Reorganization Event involving the Company; or (2) such grantee’s employer ceases to be an Affiliate of the Company; or (3) a grantee transfers employment with the Company’s consent to a purchaser of a business disposed of by the Company; or (4) a grantee voluntarily retires with the consent of the grantee’s employer or retires as a non-employee director with the consent of the Company; or (5) a grantee’s employment or services as a non-employee director terminates due to permanent disability; or (6) a grantee dies. 

The Committee may in its sole discretion determine: (i) whether any termination of employment or services (in the case of non-employee directors) is a voluntary retirement with employer or the Company consent or is due to permanent disability for purposes of the Plan; (ii) whether any leave of absence (including any short-term or long-term disability or medical leave) constitutes a termination of employment within the meaning of the Plan; or (iii) the applicable date of any such termination of employment or services (in the case of non-employee directors) or permanent disability, and (iv) the impact, if any, of any of the foregoing on Awards under the Plan. 

(g) Any grantee who terminates employment with the Company and its Affiliates who accepts employment with a competitor of the Company in violation of the Company’s Employee Agreement as to Confidentiality and Non-Competition, as in effect from time to time, or in violation of any other non-competition agreement or covenant executed by the grantee, as in effect from time to time, shall, within ten (10) days of such acceptance of employment, make a cash payment to the Company equal to the value of any: (1) profits realized from the exercise of any option or stock appreciation right during the twelve (12) month period immediately prior to termination of employment; and (2) restricted stock which vested, or any other Award which vested or for which consideration was received, during the twelve (12) month period immediately prior to the date of such termination of employment
and the Company shall be authorized to deduct such amounts from any amounts otherwise due such grantee. 

ARTICLE III

MISCELLANEOUS

3.1 Amendment of the Plan; Modification of Awards. 

(a) The Board may, without shareholder approval, at any time and from time to time suspend or discontinue the Plan or revise or amend it in any respect whatsoever, except that no such amendment shall impair any rights under any Award theretofore made under the Plan without the consent of the person to whom such Award was made. Furthermore, except as and to the extent otherwise permitted by Section 3.5 or 3.11, no such amendment shall, without approval by a majority in voting power of Revlon’s stockholders: 

(i) materially increase the benefits accruing to grantees under the Plan; 

(ii) materially increase the number of shares of Common Stock in respect of which Awards may be issued under the Plan pursuant to Section 1.5, or increase the number of shares of Common Stock in respect of which Awards may be granted in any year under Section 1.5; 

(iii) materially modify the designation in Section 1.3 of the class of persons eligible to receive Awards under the Plan; 

(iv) except as provided in Section 2.10(e), (A) permit a stock option or unrelated stock appreciation right awarded on or after April 14, 2004 to be exercisable more than 7 years after the date of grant, or (B) permit shares of Common Stock underlying any other Award to vest or become deliverable more than 10 years after the date of grant; 

(v) permit a stock option to have an option exercise price, or a stock appreciation right to have an appreciation base, of less than 100% of the fair market value of a share of Common Stock on the date the stock option or stock appreciation right is granted; 

(vi) have the effect of lowering the option exercise price of any option or the appreciation base per share of any stock appreciation right after it is granted; or 

(vii) extend the term of the Plan beyond the period set forth in Section 3.14. 

(b) Unless otherwise provided in the Plan or the applicable Plan agreement and subject to the terms and conditions of the Plan (including Section 3.1(a)), the Committee may amend outstanding Plan agreements with such grantee,

 

 

10

 

including, without limitation, any amendment which would (i) accelerate the time or times at which an Award may vest or be exercised and/or (ii) extend the scheduled expiration date of the Award, except that no such amendment shall impair any rights under any Award theretofore made under the Plan to the grantee without the consent of the grantee.

3.2 Restrictions. 

(a) If the Committee shall at any time determine that any Consent (as hereinafter defined) is necessary or desirable as a condition of, or in connection with, the granting of any Award under the Plan, the acquisition, issuance or purchase of shares or other rights thereunder, any determination regarding vesting or termination of any Award or satisfaction of any performance or other condition thereunder or the taking of any other action thereunder (each such action being hereinafter referred to as a “Plan Action”), then such Plan Action shall not be required to be taken, in whole or in part, unless and until such Consent shall have been effected or obtained to the full satisfaction of the Committee. Without limiting the generality of the foregoing, in the event that (i) the Committee shall be entitled under the Plan to make any payment in cash, Common Stock or both,
and (ii) the Committee shall determine that Consent is necessary or desirable as a condition of, or in connection with, payment in any one or more of such forms, then the Committee shall be entitled to determine not to make any payment whatsoever until such Consent shall have been obtained in the manner aforesaid. 

(b) The term “Consent” as used herein with respect to any Plan Action means (i) any and all listings, registrations or qualifications in respect thereof upon any securities exchange or other self-regulatory organization or under any federal, state, local or foreign law, rule or regulation, (ii) the expiration, elimination or satisfaction of any prohibitions, restrictions or limitations under any federal, state, local or foreign law, rule or regulation or the rules of any securities exchange or other self-regulatory organization, (iii) any and all written agreements and representations by the grantee with respect to the disposition of shares, or with respect to any other matter, which the Committee shall deem necessary or desirable to comply with the terms of any such listing, registration or qualification or to obtain an exemption from the requirement that any such
listing, qualification or registration be made, and (iv) any and all consents, clearances and approvals in respect of a Plan Action by any governmental or other regulatory bodies or any parties to any loan agreements or other contractual obligations of the Company or any of its Affiliates. 

3.3 Nontransferability. 

(a) No Award granted to any grantee under the Plan and no rights under any Plan agreement shall be assignable or transferable by the grantee (voluntarily or by operation of law) other than by will or by the laws of descent and distribution to the extent provided by the Plan and any applicable Plan agreement. During the lifetime of the grantee, all rights with respect to any Award granted to the grantee under the Plan or under any Plan agreement shall be exercisable only by such grantee. 

(b) Notwithstanding Section 3.3(a), the Committee may in the applicable Plan agreement or at any time thereafter provide that options granted hereunder which are not intended to qualify as incentive stock options under Code section 422 may be transferred without consideration by the grantee, subject to such rules as the Committee may adopt to preserve the purposes of the Plan, to: 

(i) the grantee’s spouse, children or grandchildren (including adopted and stepchildren and grandchildren) (collectively, the “Immediate Family”); 

(ii) a trust solely for the benefit of the grantee and or members of his or her Immediate Family; or 

(iii) a partnership or limited liability company whose only partners or shareholders are the grantee and/or members of his or her Immediate Family members 

(each transferee described in clauses (i), (ii) and (iii) above is hereinafter referred to as a “Permitted Transferee”); provided that the grantee provides the Committee with advance written notice describing the terms and conditions of the proposed transfer and the Committee notifies the grantee in writing that such a transfer would comply with the requirements of the Plan and any applicable Plan agreement; and provided further that with respect to options granted to officers and directors subject to the reporting requirements of Section 16 of the Exchange Act, no such options may be transferred within six months of the grant date to the extent such transfer would result in the grant of the option being deemed to constitute a non-exempt purchase under Section 16 of the Exchange Act. The terms of any such transferred option shall apply to the Permitted Transferee, except that
Permitted Transferees shall not be entitled to transfer any options, other than by will or the laws of descent and distribution.

 

 

	
                         
 	
                         
 	
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3.4 Withholding Taxes.

(a) Whenever under the Plan shares of Common Stock are to be delivered upon exercise of an option or stock appreciation right, upon the lapse of restrictions on restricted stock awards, pursuant to restricted stock unit awards or otherwise, the Committee shall be entitled to require as a condition of delivery that the grantee remit an amount sufficient to satisfy all federal, state and other governmental withholding tax requirements related thereto. Whenever cash is to be paid to a grantee under the Plan (whether upon the exercise or cancellation of an Award or otherwise), the Company shall be entitled as a condition of its payment to deduct therefrom, or from any compensation, expense reimbursement or other payments due to the grantee, an amount sufficient to satisfy all federal, state and other governmental withholding tax and like requirements related thereto or to the
delivery of any shares of Common Stock under the Plan. 

(b) With the approval of the Committee, a grantee may satisfy the foregoing withholding requirements, in whole or in part, by electing to have the Company withhold from delivery shares of Common Stock having a fair market value (determined as of the date as of which the amount of tax to be withheld is determined) equal to the minimum amount of tax required to be withheld. A grantee may also satisfy, in whole or in part, the foregoing withholding requirements by delivery of unrestricted shares of Common Stock owned by the grantee for at least six months (or such shorter or longer period as the Committee may approve or require that will not result in variable accounting treatment) having a fair market value (determined as of the date of such delivery by the grantee) equal to the amount otherwise payable. Without limiting the generality of the foregoing, the Committee may require,
as a condition of accepting any such delivery or approving any such withholding of shares of Common Stock, that the grantee furnish a Compliance Opinion.

3.5 Adjustments Upon Changes in Capitalization. In the event that any dividend or other distribution is declared by the Company (whether in the form of cash, Company stock, or other property), or there occurs any recapitalization, stock split, reverse stock split, reorganization, merger, consolidation, spin-off, combination, repurchase, or share exchange, or other similar corporate transaction or event with respect to the Company, if the Committee determines in its sole discretion that it is appropriate to do so, (i) the number and kind of shares of Common Stock or other property which may thereafter be issued in connection with Awards, (ii) the number and kind of shares of Common Stock, cash, or other property to be issued or issuable in respect of outstanding Awards, (iii) the exercise price, grant
price or purchase price relating to any Award, and (iv) the maximum number of shares subject to Awards which may be awarded to any grantee during any period shall be equitably adjusted (including without limitation by way of cancellation of an Award in exchange for a cash payment) to prevent the dilution or enlargement of the rights of grantees without change in any aggregate purchase price; provided that no incentive stock option granted under the Plan shall be adjusted in a manner that causes such option to fail to continue to qualify as an “incentive stock option” within the meaning of Code section 422 without the consent of the grantee. Adjustments under this Section 3.5 shall be made by the Committee, whose determination as to what adjustments shall be made, and the extent thereof, shall be final, binding and conclusive.

3.6 Right of Discharge Reserved. Nothing in the Plan or in any Plan agreement shall confer upon any officer, director, employee or other person the right to continue in the employment of, or to continue performing services as a director for, the Company or any of its Affiliates or affect any right which the Company or any of its Affiliates may have to terminate the employment or services of such officer, director, employee or other person. 

3.7 No Rights as a Stockholder. No grantee or other person exercising an option or stock appreciation right or entitled to delivery of shares of Common Stock pursuant to any other Award shall have any of the rights of a stockholder of the Company with respect to shares subject to an option or stock appreciation right or shares deliverable upon exercise of any other Award until the issuance of a stock certificate to such person for such shares or such person is otherwise deemed to have been issued shares pursuant to this Plan (including without limitation pursuant to Section 2.4(d)). Except as otherwise provided in Section 3.5, no adjustment shall be made for dividends, distributions or other rights (whether ordinary or extraordinary, and whether in cash, securities or other property) for which the
record date is prior to the date such stock certificate is registered in the name of the grantee. In the case of a grantee of a restricted stock award, the grantee shall have the rights of a stockholder of the Company if and only to the extent provided in the applicable Plan agreement. 

3.8 Nature of Payments. 

(a) Any and all grants of options, stock appreciation rights, stock awards and restricted stock unit awards and payments of cash or issuances of shares of Common Stock hereunder shall be granted, issued, delivered or paid, as the case may be, in consideration of services performed for the Company or for its Affiliates by the grantee. 

(b) All such grants, issuances and payments shall constitute a special incentive payment to the grantee and shall not, unless otherwise determined by the Committee, be taken into account in calculating the amount of compensation of the grantee for the purposes of determining any pension, retirement, death or other benefits under (i) any pension, retirement, life insurance or other benefit plan of the Company or any Affiliate or (ii) any agreement between the Company or any Affiliate, on the one hand, and the grantee on the other hand. 

 

	
                         
 	
                         
 	
                        12
 

 

 

(c) By accepting an Award under the Plan, the grantee shall thereby be understood to have waived any claim to continued exercise or vesting of an Award or to damages or severance entitlement related to non-continuation of the Award beyond the period provided herein or in the applicable Plan agreement, notwithstanding any contrary provision in any written employment contract or other agreement with the grantee, whether any such agreement is executed before or after the grant date of the Award. 

3.9 Non-Uniform Determinations. The Committee’s determinations under the Plan need not be uniform and may be made by it selectively among persons who receive, or are eligible to receive, Awards under the Plan (whether or not such persons are similarly situated). Without limiting the generality of the foregoing, the Committee shall be entitled, among other things, to make non-uniform and selective determinations, and to enter into non-uniform and selective Plan agreements, as to (a) the persons to receive Awards under the Plan, (b) the terms and provisions of Awards under the Plan, (c) the exercise by the Committee of its discretion in respect of the exercise of rights pursuant to the terms of the Plan or any Plan agreement, and (d) the treatment of leaves of absences, disability leaves,
terminations for cause or good reason and other determinations under the Plan or any Plan agreement. 

3.10 Other Payments or Awards. Nothing contained in the Plan shall be deemed in any way to limit or restrict the Company, any Affiliate or the Committee from making any award or payment or granting any right to any person under any other plan, arrangement or understanding, whether now existing or hereafter in effect. 

3.11 Reorganization. 

(a) In the event that Revlon or any successor is merged or consolidated with another corporation and, whether or not Revlon or such successor shall be the surviving corporation, there shall be any change in the shares of Common Stock as then constituted by reason of such merger or consolidation, or in the event that all or substantially all of the assets of the Company are acquired by another person, or in the event of a reorganization or liquidation of Revlon or any successor, or other similar transaction (each such event being hereinafter referred to as a “Reorganization Event”) or in the event that the Board shall propose that Revlon or any successor enter into a Reorganization Event, then the Committee may in its sole discretion, by written notice to a grantee: (1) provide that such grantee’s options and stock appreciation rights and all other Awards
requiring action on the part of such grantee will be terminated unless such grantee exercises or takes such action within 30 days (or such longer period as the Committee shall determine in its sole discretion) after the date of such notice; provided however that if the Committee takes such action the Committee also shall accelerate to an appropriate earlier date the dates upon which all outstanding options and stock appreciation rights of such grantee shall be exercisable and such action under such other Awards may be taken; or (2) accelerate to an appropriate earlier date the dates upon which all outstanding options and stock appreciation rights of such grantee shall be exercisable and the dates upon which action may be taken under other Awards requiring action on the part of such grantee. The Committee also may in its sole discretion, by written notice to a grantee, provide that the restrictions on restricted stock awards lapse and the performance and other conditions of other
Awards shall be adjusted in the event of a Reorganization Event upon such terms and conditions as the Committee may determine. 

(b) Whenever deemed appropriate by the Committee, the actions referred to in Section 3.11(a) may be made conditional upon the consummation of the applicable Reorganization Event.

3.12 Legend on Certificates. All certificates for shares of Common Stock issued pursuant to Awards hereunder may be stamped or otherwise imprinted with a legend in such form as the Company may require with respect to any applicable restrictions on the sale or transfer of shares. 

3.13 Section Headings. The section headings contained herein are for the purposes of convenience only and are not intended to define or limit the contents of said sections. 

3.14 Term of Plan. The Plan shall terminate on April 14, 2014, and no Awards shall thereafter be made under the Plan. Notwithstanding the foregoing, all Awards made under the Plan prior to such termination date shall remain in effect until such Awards have been satisfied or terminated in accordance with the terms and provisions of the Plan and the applicable Plan agreement. 

3.15 Tenure. A participant’s right, if any, to continue to serve the Company or any of its Affiliates as a director, officer, employee or otherwise shall not be enlarged or otherwise affected by his or her designation as a participant under the Plan. 

3.16 Unfunded Plan. Participants shall have no right, title, or interest whatsoever in or to any investments which the Company may make to aid it in meeting its obligations under the Plan. Nothing contained in the Plan, and no action taken

 

 

	
                         
 	
                         
 	
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pursuant to its provisions, shall create or be construed to create a trust of any kind, or a fiduciary relationship between the Company and any participant, beneficiary, legal representative or any other person. To the extent that any person acquires a right to receive payments from the Company under the Plan, such right shall be no greater than the right of an unsecured general creditor of the Company. All payments to be made hereunder shall be paid from the general funds of the Company and no special or separate fund shall be established and no segregation of assets shall be made to assure payment of such amounts except as expressly set forth in the Plan. The Plan is not intended to be subject to the Employee Retirement Income Security Act of 1974, as amended. 

3.17 Governing Law. This Plan shall be governed by the laws of the State of New York applicable to agreements made and to be performed entirely within such state.

3.18 Conditions. If pursuant to Section 2.10(f) or Section 3.11(a) the dates upon which options shall be exercisable are accelerated, it shall be on the condition that with respect to options granted to officers and directors subject to the reporting requirements of Section 16 of the Exchange Act the shares underlying such options may not be sold by any such individual (or their estate or Permitted Transferee) within 6 months after the grant of the option to the extent such sale would result in the grant of the option being deemed to constitute a non-exempt purchase under Section 16 of the Exchange Act.

 

 

	
                         
 	
                         
 	
                        14exv10w1

 

Exhibit 10.1

TOMOTHERAPY

DEFERRED COMPENSATION PLAN

(As effective January 1, 2008)

 

 

Table of Contents

	 	 	 	 	 	 	 
	 	 	 	 	Page	 
	ARTICLE I Introduction	 	1
	ARTICLE II Definitions	 	1
	 
	 	2.1	 	“Account”	 	1
	 
	 	2.2	 	“Administrator”	 	1
	 
	 	2.3	 	“Base Salary”	 	1
	 
	 	2.4	 	“Beneficiary”	 	1
	 
	 	2.5	 	“Bonus”	 	1
	 
	 	2.6	 	“Board of Directors”	 	1
	 
	 	2.7	 	“Change in Control”	 	1
	 
	 	2.8	 	“Code”	 	3
	 
	 	2.9	 	“Committee”	 	3
	 
	 	2.10	 	“Company”	 	3
	 
	 	2.11	 	“Controlled Group”	 	3
	 
	 	2.12	 	“Deferrals”	 	3
	 
	 	2.13	 	“Deferral Election”	 	3
	 
	 	2.14	 	"Disability"	 	3
	 
	 	2.15	 	“Earnings Credit”	 	3
	 
	 	2.16	 	“Participant”	 	3
	 
	 	2.17	 	“Plan”	 	3
	 
	 	2.18	 	“Separation from Service” or “Separates from Service”	 	3
	 
	 	2.19	 	“Specified Employee”	 	4
	 
	 	2.20	 	“Unforeseeable Emergency”	 	4
	 
	 	 	 	 	 	 
	ARTICLE III Participation	 	4
	 
	 	3.1	 	Selection of Participants	 	4
	 
	 	3.2	 	Limitation on Eligibility	 	4
	 
	 	 	 	 	 	 
	ARTICLE IV Compensation Deferrals	 	 
	 
	 	4.1	 	Amount of Deferrals	 	4
	 
	 	4.2	 	Suspension of Deferrals	 	5
	 
	 	4.3	 	Annual Elections	 	5
	 
	 	 	 	 	 	 
	ARTICLE V Accounts and Earnings Credits	 	 
	 
	 	5.1	 	General	 	5
	 
	 	5.2	 	Earnings Credits	 	5
	 
	 	5.3	 	Statements to Participants	 	5
	 
	 	 	 	 	 	 
	ARTICLE VI Form and Timing of Distribution	 	 
	 
	 	6.1	 	Normal Time for Distribution	 	5
	 
	 	6.2	 	Form of Payment	 	5
	 
	 	6.3	 	Special Rule for Death or Disability	 	6
	 
	 	6.4	 	Special Rule for a Change in Control	 	6
	 
	 	6.5	 	Beneficiary Designations	 	6
	 
	 	6.6	 	Payments to Incompetents	 	6
	 
	 	6.7	 	Specified Employees	 	7
	 
	 	 	 	 	 	 
	ARTICLE VII Amendment and Termination	 	 
	 
	 	7.1	 	Termination of Plan	 	7
	 
	 	7.2	 	Amendment	 	7

i

 

Table of Contents

	 	 	 	 	 	 	 
	 	 	 	 	 	Page	 
	ARTICLE VIII Administration	 	 
	 
	 	8.1	 	In General	 	  7
	 
	 	8.2	 	Agents	 	  8
	 
	 	8.3	 	Claims Procedure	 	  8
	 
	 	8.4	 	Review Procedure	 	  8
	 
	 	8.5	 	Binding Effect of Decisions	 	  9
	 
	 	8.6	 	Indemnity of Administrator	 	  9
	 
	 	 	 	 	 	 
	ARTICLE IX Miscellaneous	 	 
	 
	 	9.1	 	Status of Participants and Beneficiaries as General Creditors	 	  9
	 
	 	9.2	 	Non-Assignability	 	  9
	 
	 	9.3	 	Not a Contract of Employment	 	  9
	 
	 	9.4	 	FICA and Other Taxes	 	10
	 
	 	9.5	 	Captions	 	10
	 
	 	9.6	 	Construction	 	10
	 
	 	9.7	 	Distribution in the Event of Income Inclusion Under 409A	 	10
	 
	 	9.8	 	Deduction Limitation on Benefit Payments	 	10
	 
	 	9.9	 	Compliance With Section 409A Generally	 	10
	 
	 	 	 	 	 	 
	ARTICLE X Execution	 	 

-ii-

 

TOMOTHERAPY

DEFERRED COMPENSATION PLAN

(As effective January 1, 2008)

ARTICLE I

Introduction

     The purpose of this TomoTherapy Deferred Compensation Plan (the “Plan”) is to provide a means
by which eligible employees and directors may defer payment of their base salaries and bonuses. It
is intended that the Plan and its operation comply with the provisions of Section 409A of the Code.
If any provision of the Plan would not comply with Section 409A of the Code, such provision shall
be construed or deemed amended to conform to Section 409A.

ARTICLE II

Definitions

     The following terms have the meanings set forth below:

     2.1 “Account” means the recordkeeping account established for each Participant in the
Plan.

     2.2 “Administrator” shall have the meaning set forth in Article VIII.

     2.3 “Base Salary” means shall mean the annual cash compensation relating to services
performed during any calendar year, excluding distributions from nonqualified deferred compensation
plans, bonuses, overtime, fringe benefits, stock options, relocation expenses, incentive payments,
non-monetary awards, director fees and other fees, and automobile and other allowances paid to a
Participant for employment services rendered (whether or not includible in the employee’s gross
income). Base Salary shall be calculated before deferrals under qualified or nonqualified plans, as
determined by the Administrator.

     2.4 “Beneficiary” means the Participant’s beneficiary as determined under Section 6.5
of the Plan.

     2.5 “Bonus” shall mean any compensation, in addition to Base Salary, amounts earned by
a Participant under the Company’s bonus or cash incentive plan(s) and such other amounts as the
Administrator may specify from time to time. For avoidance of doubt, a Bonus shall include, without
limitation, amounts payable under the Company’s Variable Pay Plan and Incentive Bonus Plan.

     2.6 “Board of Directors” means the board of directors of TomoTherapy Incorporated.

     2.7 “Change in Control” means the occurrence of any one of the following events:

1

 

          (1) A change in the effective control of the Company, which shall occur on the date that any
one person, or more than one person Acting as a Group, other than Excluded Person(s), acquires (or
has acquired during the twelve (12) month period ending on the date of the most recent acquisition
by such person or persons) ownership of stock of the Company possessing fifty percent (50%) or more
of the total voting power of the stock of the Company. However, if any one person or more than one
person Acting as a Group is considered to own more than fifty percent (50%) of the total voting
power of the stock of the Company, the acquisition of additional voting stock by the same person or
persons is not considered to cause a Change of Control.

          (2) A change in the ownership of a substantial portion of the Company’s assets, which shall
occur on the date that any one person, or more than one person Acting as a Group, other than
Excluded Persons(s), acquires (or has acquired during the twelve (12) month period ending on the
date of the most recent acquisition by such person or persons) assets from the Company that have a
total Gross Fair market Value (as defined below) equal to more than eighty percent (80%) of the
total Gross Fair Market Value of all the assets of the Company immediately prior to such
acquisition or acquisitions, other than an Excluded Transaction (as defined below).

     For purposes of this Section 2.7:

     Persons will not be considered to be “Acting as a Group” solely because they purchase
or own stock of the Company at the same time, or as a result of the same public offering,
or solely because they purchase assets of the Company at the same time, or as a result of
the same public offering, as the case may be. However, persons will be considered to be
Acting as a Group if they are owners of any entity that enters into a merger,
consolidation, purchase or acquisition of assets, or similar business transaction with the
Company.

     The
term “Excluded Transaction” means any transaction in which assets are transferred
to: (A) a shareholder of the Company (determined immediately before the asset transfer) in
exchange for or with respect to its stock; (B) an entity, fifty percent (50%) or more of
the total value or voting power of which is owned, directly or indirectly, by the Company
(determined after the asset transfer); (C) a person, or more than one person Acting as a
Group, that owns, directly or indirectly, fifty percent (50%) or more of the total value of
voting power of all the outstanding stock of the Company (determined after the asset
transfer); or (D) an entity at least fifty percent (50%) of the total value or voting power
of which is owned, directly or indirectly, by a person described in clause (C) (determined
after the asset transfer).

     The term “Excluded Person(s)” means (A) the Company or any of its affiliates, (B) a
trustee or other fiduciary holding securities under an employee benefit plan of the Company
or any of its affiliates, (C) an underwriter temporarily holding securities pursuant to an
offering of such securities, or (D) a corporation owned, directly or indirectly, by the
shareholders of the Company in substantially the same proportions as their ownership of
stock in the Company.

2

 

          The term “Change of Control” as defined above shall be construed in accordance with any
guidance, rules or regulations promulgated by the Internal Revenue Service in construing the rules
and regulations applicable to Code Section 409A.

     2.8 “Code” means the Internal Revenue Code of 1986, as amended.

     2.9 “Committee” means the Compensation Committee of the Board of Directors.

     2.10 “Company” means TomoTherapy Incorporated, a Wisconsin corporation, and
any other member of the Controlled Group.

     2.11 “Controlled Group” means the Company and any member of a controlled group of
corporations (as defined in Code section 1563(a), determined without regard to Code sections
1563(a)(4) and (e)(3)(c)), a group of trades or businesses (whether incorporated or not) which are
under common control within the meaning of Code section 414(c), or an affiliated service group (as
defined in Code sections 414(m) or 414(o)) of which the Company is a part.

     2.12 “Deferrals” means the portion of a Participant’s Base Salary or Bonus, if any,
that he or she elects to defer on a pre-tax basis under this Plan in accordance with Article IV.

     2.13 “Deferral Election” means the election made by a Participant to defer a portion
of his or her Base Salary or Bonus in accordance with Article IV.

     2.14 “Disability” means a Participant’s absence from employment with the Company which
is due to his or her inability to engage in any substantial gainful activity by reason of any
medically determinable physical or mental impairment which can be expected to result in death or
can be expected to last for a continuous period of not less than twelve (12) months. The term
“disability” as defined above shall be construed in accordance with any guidance, rules or
regulations promulgated by the Internal Revenue Service applicable to Code Section 409A.

     2.15 “Earnings Credit” means the amount credited to a Participant’s Account under
Section 5.2.

     2.16 “Participant” means an officer or director selected by the Administrator as
eligible to participate in the Plan who has elected to defer his or her Base Salary or Bonus in
accordance with Article IV.

     2.17 “Plan” means this TomoTherapy Deferred Compensation Plan, as herein set forth,
together with any amendments that may be adopted.

     2.18 “Separation from Service” or “Separates from Service” means an employee’s death,
retirement or termination of employment from the Controlled Group within the meaning of Code
section 409A. For purposes of determining whether a Separation from Service has occurred, the
Controlled Group is defined by using the

3

 

language “at least 80 percent” under Code section 1563(a) in lieu of the 50 percent default
rule stated in Treasury Regulation section 1.409A-1(h)(3). A Separation from Service is deemed to
include a reasonably anticipated permanent reduction in the level of services performed by an
employee, to less than 50 percent of the average level of services performed by the employee during
the immediately preceding 36-month period.

     2.19 “Specified Employee” means an employee who is a “specified employee” within the
meaning of Code section 409A. Specified Employee status is determined on the last day of the prior
calendar year, to take effect as of April 1 of the calendar year for a 12-month period.

     2.20 “Unforeseeable Emergency” means “unforeseeable emergency” within the meaning of
Code section 409A, as determined by the Committee.

ARTICLE III

Participation

     3.1 Selection of Participants. The Administrator shall select the officers and
directors of the Company who are eligible to participate in the Plan. Each selected individual who
elect to participate in the Plan is referred to as a “Participant.”

     3.2 Limitation on Eligibility. No officer or director shall have any right to be a
Participant unless selected by the Administrator. It is intended that participation in the Plan be
limited to a select group of management or highly compensated employees within the meaning of the
Employee Retirement Income Security Act (“ERISA”).

ARTICLE IV

Compensation Deferrals

     4.1 Amount of Deferrals. A Participant who has been designated by the Administrator
as a Participant may elect to defer up to 50% of Base Salary and up to 100% of his or her Bonus in
accordance with rules established by the Administrator. A Participant may elect to defer
compensation for services performed during a calendar year only if the election is made before that
year, except as allowed by future regulations or as follows:

          (1) A new Participant can make the election within 30 days after becoming eligible, but the
election can only affect compensation for services performed after the date of the election.

          (2) For elections with respect to formula-based performance compensation based on services
performed over at least 12 months, the election must be made no later than 6 months before the end
of the service period.

          (3) In accordance with transition relief under Code Section 409A, a deferral election may be
made with respect to an amount that is a short-term deferral within the meaning of proposed
regulation §1.409A-1(b)(4), provided that the election is made before January 1, 2008 and before
the year in which the amount would otherwise

4

 

have been paid. In addition, a deferral election may be made with respect to an amount that
is a short-term deferral within the meaning of final regulation §1.409A-1(b)(4), provided that the
election is made before January 1, 2009 and before the year in which the amount would otherwise
have been paid.

     4.2 Suspension of Deferrals. In general, a Participant may not change or terminate a
Deferral Election during a calendar year. However, in the event that a Participant incurs an
Unforeseeable Emergency, the Administrator, in its sole discretion, may permit a Participant to
suspend Deferrals, but only the extent permitted by IRS guidance. 

     4.3 Annual Elections. Unless otherwise determined by the Administrator, a new
Deferral Election shall be required for each calendar year.

ARTICLE V

Accounts and Earnings Credits

     5.1 General. The Administrator will establish and maintain an Account for each
Participant. A Participant’s Deferrals shall be credited to the Participant’s Account as soon as
practical following the date on which the amounts would have been paid to the Participant in the
absence of a Deferral Election.

     5.2 Earnings Credits. A Participant’s Account shall be credited with Earnings Credits
as of the end of each calendar quarter and at such other times as are determined by the
Administrator. The rate used for calculating Earnings Credits shall be updated annually and
reported to Participants. The rate used to calculate Earnings Credits for 2008 shall be 7.5%. The
rate used for years after 2008 shall be based an average of the U.S. Prime Rate in effect as of the
first business day of the prior March, June, September and December, as reported in the Wall Street
Journal or such other source as may be designated by the Administrator. For example, the rate used
for 2009 shall be based an average of the U.S. Prime Rate in effect as of the first business day of
March, June, September and December, 2008.

     5.3 Statements to Participants. The Administrator shall provide statements to each
Participant detailing the amounts credited to the Participant’s Account. Such statements shall be
provided annually or more frequently, as determined by the Administrator.

ARTICLE VI

Form and Timing of Distribution

     6.1 Normal Time for Distribution. Except as otherwise provided in this Article VI,
the distribution of a Participant’s vested account shall commence sixty (60) days following the
Participant’s Separation from Service.

     6.2 Form of Payment. Each Participant shall indicate on his or her first deferral
election the form of payment for all amounts to be distributed to Participant from the Plan. A
Participant may not elect a different form of payment for amounts deferred in

5

 

different years. A Participant may elect (a) a lump sum payment, (b) two (2) annual
installments or (c) four (4) annual installment payments; provided, however, that a Participant who
elects to receive two or four annual installments shall receive payment in a lump sum if the
Participant’s Separation from Service occurs due to death or Disability. If the Participant
elected to receive two or four annual installment payments the amount of each installment shall be
equal to the balance credited to the Participant’s account as of the most recent valuation date
preceding the distribution, divided by the number of installments remaining to be made. Each
subsequent annual installment shall be paid to the Participant as near as administratively
practicable to each anniversary of the first installment payment. While a Participant’s account is
in installment payout status, the unpaid balance credited to the Participant’s account shall
continue to be credited with Earnings Credits under Section 5.2. Notwithstanding the foregoing,
the Administrator may pay a Participant’s account in a lump sum at any time after a termination of
service if the value of such account is less than the applicable dollar amount under section
402(g)(1)(B) ($15,500 for 2008).

     6.3 Special Rule for Death or Disability. If a Participant dies or becomes Disabled,
the balance then credited to his or her Account shall be distributed to the Participant (or his or
her beneficiary) in a lump sum as soon as administratively practicable after the date of death or
Disability.

     6.4 Special Rule for a Change in Control. If there is a Change in Control, the
Administrator shall distribute all Participants’ Accounts in a lump sum with sixty (60) day of the
Change in Control.

     6.5 Beneficiary Designations. Each Participant may, pursuant to such procedures as
the Administrator may specify, designate one or more beneficiaries. A Participant may designate
different beneficiaries (or may revoke a prior beneficiary designation) at any time by delivering a
new designation (or revocation of a prior designation) in like manner. Any designation or
revocation shall be effective only if it is received by the Administrator. However, when so
received, the designation or revocation shall be effective as of the date the notice is executed
(whether or not the Participant still is living), but without prejudice to the Administrator on
account of any payment made before the change is recorded. The last effective designation received
by the Administrator shall supersede all prior designations. If a Participant dies without having
effectively designated a beneficiary, or if no beneficiary survives the Participant, the
Participant’s Account shall be payable to his or her surviving spouse, or, if the Participant is
not survived by his or her spouse, the Account shall be paid to his or her estate.

     6.6 Payments to Incompetents. If any individual to whom a benefit is payable under
the Plan is a minor or legally incompetent, the Administrator shall determine whether payment shall
be made directly to the individual, any person acting as his or her custodian or legal guardian
under the Uniform Transfers to Minors Act, his or her legal representative or a near relative, or
directly for his or her support, maintenance or education.

6

 

     6.7 Specified Employees. Notwithstanding Section 6.1 of the Plan, a Specified
Employee will not receive any distribution under this Plan during the six-month period immediately
following his or her Separation from Service. In the event that any amount payable to Specified
Employee is subject to the six-month delay, the amount will be paid on the earliest permissible
payment date and shall include Earnings Credits through the date of distribution. In the event of
a Specified Employee’s death during the six-month waiting period, the waiting period will cease to
apply.

ARTICLE VII

Amendment and Termination

     7.1 Termination of Plan. The Company reserves the right, exercisable in its absolute
discretion, to terminate or suspend the Plan at any time. In the event of Plan termination or
suspension, except as hereinafter provided, no additional amounts shall be credited to any Account
other than Earnings Credits under Section 5.2 and other than the crediting of such Deferrals as to
which a Deferral Election was in effect, prior to termination, for the calendar year of termination
and which the Administrator determines must continue to be given effect to comply with Section
409A. If the Plan is amended or terminated in accordance with the immediately preceding sentence,
existing Accounts shall continue to be administered and paid out as though the Plan had not been
terminated (and the Company shall have the continuing right to amend the Plan provisions affecting
such Account, subject to Section 7.2 below). Notwithstanding the foregoing, if permitted by Section
409A and in accordance with such special rules as the Administrator may establish to comply with
Section 409A, the Administrator may instead provide upon termination of the Plan that all Accounts
shall be paid out in connection with such termination.

     7.2 Amendment. The Company, at any time, amend or modify the Plan in whole or in
part; provided, that no amendment or modification shall be effective if it would cause a
Participant’s Account, determined immediately after the amendment takes effect, to be lower than it
was immediately before the amendment took effect.

ARTICLE VIII

Administration

     8.1 In General. The term “Administrator” as used in the Plan shall mean the person(s),
board or committee principally charged with administrative responsibility under the Plan, and its
or their delegates to the extent of the applicable delegation. The initial Administrator of the
Plan shall be the Compensation Committee of the Board of Directors. The Compensation Committee may
from time to time delegate such of its functions hereunder as it may determine, to one or more of
the officers of the Company, on such terms and conditions as the Compensation Committee may
determine. The Administrator shall have the discretion and authority to (a) make, amend,
interpret, and enforce all appropriate rules and regulations for the administration of this Plan,
(b) determine all issues of eligibility for participation in or benefits under the Plan, and (c)
decide or resolve any and all questions including interpretations of this Plan that may arise in
connection with the Plan. No individual who has or to whom administrative

7

 

responsibility is delegated hereunder, or who is a member of a board or committee that has or
to which is delegated administrative responsibility hereunder, shall vote or act on any matter
relating solely to himself or herself. When making a determination or calculation, the
Administrator shall be entitled to rely on information furnished by a Participant or the Company.

     8.2 Agents. In the administration of this Plan, the Administrator may, from time to
time, employ agents and delegate to them such administrative duties as it sees fit (including
acting through a duly appointed representative) and may from time to time consult with counsel, who
may be counsel to any Employer.

     8.3 Claims Procedure. If the Participant or the Participant’s beneficiary
(hereinafter referred to as a “Claimant”) is denied all or a portion of an expected benefit under
the Plan for any reason, he or she may file a claim with the Administrator. The Administrator
shall notify the Claimant within 60 days of allowance or denial of the claim, unless the Claimant
receives written notice from the Administrator prior to the end of the sixty (60) day period
stating that special circumstances require an extension of the time for decision and specifying the
expected date of decision. The notice of the Administrator’s decision shall be in writing, sent by
mail to the Claimant’s last known address, and if a denial of the claim, must contain the following
information:

	 	(a)	 	the specific reasons for the denial;
	 
	 	(b)	 	specific reference to pertinent provisions of the Plan on
which the denial is based; and
	 
	 	(c)	 	if applicable, a description of any additional information or
material necessary to perfect the claim, an explanation of why such
information or material is necessary, and an explanation of the claims review
procedure.

     8.4 Review Procedure. A Claimant is entitled to request a review of any denial of his
claim by the Administrator. The request for review must be submitted in writing within 60 days
after receipt of the notice of the denial. The timely filing of such a request is necessary to
preserve any legal recourse which may be available to the claimant and, absent a request for review
within the 60-day period, the claim will be deemed to be conclusively denied. Upon receipt of a
written request for review, the Claimant or his representatives shall be entitled to review all
pertinent documents, and to submit issues and comments in writing for consideration by the
Administrator. The Administrator shall fully and fairly review the matter and shall promptly
respond to the claimant, in writing, of its decision within 60 days after receipt of the review
request. Due to special circumstances, if no response has been provided within the first 60 days,
and notice of the need for additional time has been furnished within such period, the review and
response may be made within the following 60 days. The Administrator’s decision shall include
specific reasons for the decision, including references to the particular Plan provisions upon
which the decision is based.

8

 

     8.5 Binding Effect of Decisions. The decision or action of the Administrator with
respect to any question arising out of or in connection with the administration, interpretation and
application of the Plan and the rules and regulations promulgated hereunder shall be final and
conclusive and binding upon all persons having any interest in the Plan. No legal action may be
brought in court on a claim for benefits under the Plan after 180 days following the decision on
appeal (or 180 days following the expiration of the time to make an appeal if no appeal is made).

     8.6 Indemnity of Administrator. The Company shall indemnify and hold harmless the
members of the Administrator (including any employee to whom the duties of the Administrator are
delegated) any and all claims, losses, damages, expenses or liabilities arising from any action or
failure to act with respect to this Plan, except in the case of gross negligence or willful
misconduct.

ARTICLE IX

Miscellaneous

     9.1 Status of Participants and Beneficiaries as General Creditors. This Plan is
generally exempt from the provisions of ERISA because it is intended to benefit a select group of
management or highly compensated employees. Participants and their Beneficiaries, heirs, successors
and assigns shall have no legal or equitable rights, interests or claims in any property or assets
of any Employer. Their rights to benefits, if any, under the Plan shall be solely those of
unsecured general creditors of the Employer and shall be limited to those contractual rights
expressly set forth in the Plan and/or Plan Agreements applicable to them.

     9.2 Non-Assignability. No Participant nor any other person shall have any right to
commute, sell, assign, transfer, pledge, anticipate, mortgage or otherwise encumber, transfer,
hypothecate, alienate or convey in advance of actual receipt, the amounts, if any, payable
hereunder, or any part thereof, which are, and all rights to which are expressly declared to be,
non-assignable and non-transferable. No part of the amounts payable shall, prior to actual payment,
be subject to seizure, attachment, garnishment or sequestration for the payment of any debts,
judgments, alimony or separate maintenance owed by a Participant or any other person, be
transferable by operation of law in the event of a Participant’s or any other person’s bankruptcy
or insolvency or be transferable to a spouse as a result of a property settlement or otherwise.

     9.3 Not a Contract of Employment. The terms and conditions of this Plan shall not be
deemed to constitute a contract of employment between any Employer and the Participant. Nothing in
the Plan nor in any Plan Agreement shall limit in any way the Employer’s rights to terminate any
Participant. The loss of benefits or potential benefits under the Plan by reason of the termination
of a Participant’s service with the Employer shall not constitute an element of damages in any
claim brought by the Participant or his or her Beneficiary(ies) against the Employer.

     9.4 FICA and Other Taxes. The Administrator may require that a Participant’s cash or
other compensation be reduced to satisfy any FICA tax or other tax

9

 

due with respect to the deferral or vesting of any amount under the Plan or may require as
part of a Plan Agreement or otherwise that the Participant make other arrangements for the payment
of such taxes (which other arrangements may include, if the Administrator so determines, but shall
not be limited to, a reduction in the Participant’s Account Balance). Any distribution under the
Plan shall be reduced by any required tax and other withholdings.

     9.5 Captions. The captions of the articles, sections and paragraphs of this Plan are
for convenience only and shall not control or affect the meaning or construction of any of its
provisions.

     9.6 Construction. The validity of the Plan or any of its provisions will be
determined under and will be construed according to federal law and, to the extent permissible,
according to the internal laws of the state of Wisconsin. If any provision of the Plan is held
illegal or invalid for any reason, such determination will not affect the remaining provisions of
the Plan and the Plan will be construed and enforced as if said illegal or invalid provision had
never been included.

     9.7 Distribution in the Event of Income Inclusion Under 409A. If any portion of a
Participant’s Account is required to be included in income by the Participant prior to receipt
owing to a failure of this Plan to meet the requirements of Section 409A, the Participant may
petition the Administrator for a distribution of that portion of his or her Account that is
required to be included in his or her income. Upon the grant of such a petition, which grant shall
not be unreasonably withheld, the Administrator shall distribute to the Participant immediately
available funds in an amount equal to the lesser of (i) the portion of his or her Account required
to be included in income as a result of the failure of the Plan to meet the requirements of Section
409A, or (ii) the unpaid Account.

     9.8 Deduction Limitation on Benefit Payments. If the Company reasonably anticipates
that its deduction with respect to any distribution from this Plan would be limited or eliminated
by application of Code Section 162(m), then payment may, at the discretion of the Administrator, be
delayed to the extent deemed necessary by the Administrator to ensure that the entire amount of any
distribution from this Plan is deductible. The delayed amounts, adjusted for Earnings Credits,
shall be distributed to the Participant (or his or her Beneficiary in the event of the
Participant’s death) at the earliest date the Company reasonably anticipates that the deduction of
the payment of the amount will not be limited or eliminated by application of Code Section 162(m)
or, if earlier, by the close of the calendar year in which the Participant separates from service.

     9.9 Compliance With Section 409A Generally. The Administrator may deviate from the
express terms of the Plan if it determines such deviation to be necessary to comply with the
requirements of Section 409A. The Administrator may also, notwithstanding the otherwise applicable
restrictions on elections and payment under the Plan, establish opportunities for Participants and
Beneficiaries to make any special elections permitted under the transition rules under Section
409A.

10

 

ARTICLE X

Execution

     IN
WITNESS WHEREOF, TomoTherapy Inc has executed this Plan as of the 6th day of
December, 2007.

ATTEST:

			
	/s/ Shawn D. Guse,	 	Secretary

TomoTherapy, Inc.

			
	By:	 	/s/ Frederick A. Robertson

			
	Title:	 	Chief Executive Officer

11

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