Document:

ex10-5.htm

    Exhibit 10.5

    
      

       

      NOTE
CONVERSION AGREEMENT

       

      This Note
Conversion Agreement (“Agreement”) is made
effective as of April 1, 2010, (the “Effective Date”) by
and between Home System Group, a Nevada corporation (the “Company”), Liming
Jiao and Xiaohong Chen (the “Investors”).

       

      RECITALS

       

      WHEREAS, the parties to this
Agreement are parties to that certain Stock Purchase Agreement dated as of
September 23, 2008 (the “Purchase Agreement”),
pursuant to which the Company agreed to acquire 100% of the ownership interests
in Asia Forever Investment Limited from the Investors for $39,473,684.21 (RMB
270,000,000) (the “Purchase
Price”);

       

      WHEREAS, pursuant to the
Purchase Agreement, the obligation to pay the Purchase Price is evidenced by
non-interest-bearing, unsecured promissory notes (the “Notes”) delivered by
the Company to each of the Investors in the forms attached hereto as Exhibit
A;

       

      WHEREAS, pursuant to the
Notes, as amended on December 18, 2009, the Company still owes the Investors the
final installment of the Purchase Price in the total amount of nine million
eight hundred sixty eight thousand four hundred twenty one dollars ($9,868,421)
(RMB 67,500,000) as of April 1, 2010 (the “Final
Installment”);

       

      WHEREAS, the Company desires
that the Investors exchange seven million eighty nine thousand three hundred
twelve dollars ($7,089,312) of the Final Installment for common stock of the
Company (the “Note
Conversion”);

       

      WHEREAS, the Company desires
to issue the Investors replacement notes for the outstanding balance of the
Final Installment following the Note Conversion (collectively, the “New Notes”) in the
form attached hereto as Exhibit
B.

       

      NOW THEREFORE, for good and
valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, the Company and the Investors hereby agree as
follows:

       

      AGREEMENT

       

      
        	
                1.
      THE NOTE
      CONVERSION.

              

      

       

      1.1 Conversion of the Note into
Common Stock. Upon the terms and subject to the conditions of this
Agreement, upon the Effective Date, the Investors shall surrender the Notes to
the Company for cancellation and promptly after receipt of such Notes, the
Company shall issue to the Investors seven million eighty nine thousand three
hundred twelve dollars worth of shares of the common stock of the Company
calculated as set forth in Section 1.3 below (the “Conversion
Stock”).

       

      1.2 Authorization and Issuance
of the Common Stock. The Company has authorized the issuance of the
Conversion Stock

       

      
        
           

        

        
           

          
            

          

        

        
           

        

      

      1.3 Conversion Rate for the
Conversion Stock. The number of shares of Conversion Stock issued
pursuant to the Note Conversion shall be calculated by dividing seven million
eighty nine thousand three hundred twelve dollars ($7,089,312) by three dollar
and fifty cents ($3.50) (the “Conversion Rate”). No
fractional shares of the Company’s common stock will be issued upon the Note
Conversion. In lieu of any fractional share to which the Investors would
otherwise be entitled, the Company will pay to the Investors in cash the amount
of that would otherwise be converted into such fractional share.

       

      
        	
                2. REPRESENTATIONS
      AND WARRANTIES OF THE COMPANY. The Company hereby
      represents and warrants to the Investors that, except as set forth in the
      SEC documents (as defined below), as of the Effective
  Date:

              

      

       

      2.1 Organization. The
Company is duly organized, validly existing and in good standing under the laws
of the State of Nevada. The Company has full power and authority to own or lease
its properties and to carry on its business as presently conducted and as
described in the documents filed by the Company under the Securities Act of
1933, as amended, and the rules and regulations promulgated thereunder (the
“Securities
Act”) (such documents, the “Securities Act
Documents”) and the Securities Exchange Act of 1934, as amended, and the
rules and regulations promulgated thereunder (the “Exchange Act”), since
the end of its most recently completed fiscal year through the date hereof (the
“Exchange Act
Documents,” and together with the Securities Act Documents, the “SEC
Documents”).

       

      2.2 Due Authorization and Valid
Issuance. The Company has all requisite corporate power and authority to
execute, deliver and perform its obligations under this Agreement. This
Agreement has been duly authorized and validly executed and delivered by the
Company and constitutes the legal, valid and binding agreement of the Company
enforceable against the Company in accordance with its terms, except as
(a) rights to indemnity and contribution may be limited by state or federal
securities laws or the public policy underlying such laws,
(b) enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or similar laws affecting creditors’ and contracting
parties’ rights generally and (c) enforceability may be subject to general
principles of equity (regardless of whether such enforceability is considered in
a proceeding in equity or at law). The New Notes being issued to Smith
hereunder, the Conversion Stock will, upon issuance and pursuant to the terms
hereof, be duly authorized, validly issued, fully-paid and
nonassessable.

       

      2.3 No Registration
Rights. No person will have the right, which right has not been waived,
to require the Company to register any securities for sale under the Securities
Act by reason of the issuance Conversion Stock.

       

      
        	
                3. REPRESENTATIONS
      AND WARRANTIES OF THE INVESTORS. The Investors hereby
      represents and warrants to the Company, as of the date hereof, as
      follows:

              

      

       

      3.1 Authorization. The
Investors have the requisite legal power and authority to enter into this
Agreement and this Agreement shall constitute a valid and legally binding
obligation of the Investors, except as the same may be limited by bankruptcy,
insolvency, moratorium or other laws of general application affecting the
enforcement of creditors’ rights.

       

      
        
           

        

        
           

          
            

          

        

        
           

        

      

      3.2 Accredited Investors.
The Investors are “accredited investors” within the meaning of the SEC Rule 501
of Regulation D, as presently in effect.

       

      3.3 Restricted
Securities. The Investors understands that the Conversion Stock are
restricted securities under applicable securities laws and may not be resold or
transferred unless they are first registered or qualified under the applicable
securities laws or unless an exemption from such registration or qualification
is available. Accordingly, the Investors hereby acknowledges that he is prepared
to hold the Conversion Stock for an indefinite period of time, until their
maturity or until resale is permitted under the applicable securities laws.
Without limitation to the foregoing, the Investors understands that if the
Company does not (i) register its common shares with the SEC pursuant to
Section 12 of Exchange Act, (ii) become subject to Section 15(d)
of the Exchange Act, (iii) supply information pursuant to Rule 15c2-11
thereunder, or (iv) have a registration statement covering the Conversion
Stock (or a filing pursuant to the exemption from registration under Regulation
A of the Securities Act covering the Converted Stock) under the Securities Act
in effect when it desires to sell the Conversion Stock, the Investors may be
required to hold the Conversion Stock for an indeterminate period.

       

      
        	
                4.
      RESTRICTED
      SECURITIES.

              

      

       

      4.1 Restrictive
Legends.

       

      (a)
Unless and until otherwise permitted by this Section, each certificate for
Conversion Stock issued to the Investors or any subsequent transferee shall be
stamped or otherwise imprinted with a legend in substantially the following
form:

       

      “THE
SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933 OR ANY OTHER APPLICABLE FEDERAL OR STATE SECURITIES LAWS,
AND THUS MAY NOT BE TRANSFERRED UNLESS REGISTERED UNDER THE SECURITIES ACT OF
1933 AND SUCH OTHER LAWS OR UNLESS AN EXEMPTION FROM REGISTRATION IS
AVAILABLE.”

       

      (b) In
addition to the legend required by this Section 4.1, each certificate for
Company shares issued under or pursuant to this Agreement to the Investors or
any subsequent transferee shall be stamped or otherwise imprinted with any
legend required pursuant to applicable state corporation and securities
laws.

       

      4.2 Transfer. The Company
may decline to acknowledge or register a transfer of any Company shares bearing
any legend pursuant to Section 4.1, and may instruct any transfer agent for
its Company shares to decline the same, unless the Company is reasonably
satisfied that the Company shares being transferred have been registered or are
exempt from registration under applicable securities laws.

       

      4.3 Removal of Legends.
Whenever the legend described in Section 4.1 shall no longer be required by
law, the holder of any particular Company shares bearing such legends shall be
entitled to receive from the Company, without expense to such holder, one or
more new certificates for such particular Company shares not bearing restrictive
legends pursuant to Section 4.1 hereof.

       

      
        
           

        

        
           

          
            

          

        

        
           

        

      

      
        	
                5.
      INDEMNIFICATION.

              

      

       

      5.1
Notwithstanding any termination of this Agreement, the Investors agree to
indemnify, defend and hold harmless the Company and its affiliates and
controlling persons (within the meaning of Section 15 of the Securities Act
or Section 20 of the Exchange Act) and each of its officers, managers,
members, partners, directors, stockholders, employees, representatives and
agents (all such persons and entities being collectively referred to as the
“Indemnified
Parties”) to the fullest extent permitted by applicable law from and
against any and all claims, losses (including any diminution in value of the
Conversion Stock acquired by the Investors), demands, actions, causes of action,
assessments, damages, liabilities, costs or expenses, including without
limitation interest, penalties, fines, fees, deficiencies, claims of damage,
court and arbitration costs and fees and disbursements of attorneys,
accountants, consultants and other experts as and when incurred or sustained by
any Indemnified Party (collectively, “Loss”) as a result of
or arising from (i) any inaccuracy or breach of any representation,
warranty or covenant made by the Investors in or pursuant to this Agreement or
(ii) any actions or proceedings by a third party against the Company in
connection with or as a result of the transactions contemplated by this
Agreement. The rights accorded to Indemnified Parties under this
Section 5.1 shall be in addition to any rights and remedies that any
Indemnified Party may have at law or in equity, by separate agreement or
otherwise. Payment of amounts due under this indemnity provision shall be made
promptly upon demand by the Indemnified Party, as and when incurred, by wire
transfer of immediately available funds to an account designated in writing by
the Indemnified Party.

       

      5.2 Conduct of Indemnification
Proceedings.

       

      (a) If
any proceeding shall be brought or asserted against an Indemnified Party with
respect to any proceeding in connection with any matter subject to
indemnification under Section 5.1, such Indemnified Party shall promptly
notify the person from whom indemnity is sought (the “Indemnifying Party”)
in writing, and the Indemnifying Party shall assume the defense thereof (with
such assumption being an acknowledgement that such proceeding is indemnifiable
pursuant to Section 5.1), including the employment of counsel reasonably
satisfactory to the Indemnified Party and the payment of all fees and expenses
incurred in connection with defense thereof; provided, that the failure of any
Indemnified Party to give such notice shall not relieve the Indemnifying Party
of its obligations or liabilities pursuant to this Agreement, except (and only)
to the extent that it shall be finally determined by a court of competent
jurisdiction (which determination is not subject to appeal or further review)
that such failure shall have proximately and materially adversely prejudiced the
Indemnifying Party.

       

      (b) An
Indemnified Party shall have the right to employ separate counsel in any such
proceeding and to participate in the defense thereof, but the fees and expenses
of such counsel shall be at the expense of such Indemnified Party or Parties
unless: (i) the Indemnifying Party has agreed in writing to pay such fees
and expenses; or (ii) the Indemnifying Party shall have failed promptly to
assume the defense of such proceeding and to employ counsel reasonably
satisfactory to such Indemnified Party in any such proceeding; or (iii) the
named parties to any such proceeding (including any impleaded parties) include
both such Indemnified Party and the Indemnifying Party, and such Indemnified
Party shall have been advised by counsel that a conflict of interest is likely
to exist if the same counsel were to represent such Indemnified Party and the
Indemnifying Party (in which case, if such Indemnified Party notifies the
Indemnifying Party in writing that it elects to employ separate counsel at the
expense of the Indemnifying Party, the Indemnifying Party shall not have the
right to assume the defense thereof and such counsel shall be at the expense of
the Indemnifying Party). The Indemnifying Party shall not be liable for any
settlement of any such proceeding effected without its written consent, which
consent shall not be unreasonably withheld or delayed. No Indemnifying Party
shall, without the prior written consent of the Indemnified Party, effect any
settlement of any pending proceeding in respect of which any Indemnified Party
is a party, unless such settlement includes an unconditional release of such
Indemnified Party from all liability on claims that are the subject matter of
such proceeding.

       

      
        
           

        

        
           

          
            

          

        

        
           

        

      

      (c) All
fees and expenses of the Indemnified Party (including reasonable fees and
expenses to the extent incurred in connection with investigating or preparing to
defend such proceeding in a manner not inconsistent with this Section 5)
shall be paid to the Indemnified Party, as incurred, within ten
(10) business days of written notice thereof to the Indemnifying Party
(regardless of whether it is ultimately determined that an Indemnified Party is
not entitled to indemnification hereunder; provided, that the Indemnifying Party
may require such Indemnified Party to undertake to reimburse all such fees and
expenses to the extent it is finally judicially determined that such Indemnified
Party is not entitled to indemnification hereunder).

      

      
        	
                6.
      MISCELLANEOUS.

              

      

       

      6.1 Further Instruments and
Actions. The parties agree to execute such further instruments and to
take such further action as may reasonably be necessary to carry out the intent
of this Agreement.

       

      6.2 Finder’s
Fees.

       

      (a) The
Company (i) represents and warrants that no agent, broker, investment
banker, person or firm acting on behalf of or under the authority of the Company
is or will be entitled to any broker’s or finder’s fee or any other commission
directly or indirectly in connection with the transactions contemplated herein
except as disclosed hereunder, and (ii) hereby agrees to indemnify and hold
the Investors harmless from and against any liability for any commission or
compensation in the nature of a finder’s fee to any broker or other person or
firm (and the costs and expenses of defending against such liability or asserted
liability) for which the Company is responsible.

       

      (b) The
Investors (i) represents and warrants that it has retained no finder or
broker in connection with the transactions contemplated by this Agreement, and
(ii) hereby agrees to indemnify and hold the Company harmless from and
against any liability for any commission or compensation in the nature of a
finder’s fee to any broker or other person or firm (and the costs and expenses
of defending against such liability or asserted liability) for which the
Investors are responsible.

       

      
        
           

        

        
           

          
            

          

        

        
           

        

      

      6.3 Expenses. Each party
hereto agrees to pay its expenses incurred in connection with this Agreement and
the documents and transactions contemplated herein.

       

      6.4 Notices. All notices
and other communications required or permitted hereunder shall be given in
writing and shall be delivered by personal delivery, facsimile, overnight
delivery service, or U.S. mail service, addressed as follows:

       

      The
Company:

       

      Yu
Lei

      Chief
Executive Officer

      Home
System Group

      Oceanic
Industry Park

      Sha Gang
highway, Gang Kou Town

      Zhongshan
City, Guangdong

      People’s
Republic of China 528447

      T:
347-624-5699

       

      With a copy
to:

       

      The Crone
Law Group

      101
Montgomery St., Suite 1950

      San
Francisco, CA 94104

      Attn:
Mark E. Crone

      T: (415)
955-8900

      F: (415)
955-8910

      

      The
Investors:

      

      Liming
Jiao

      Room
1714, 17/F Block 5, Chung Ming House, 21 Wah Ming Road, Wah Ming
Estate, Fanling, New Territories

      

      Xiaohong
Chen

      

      Room
1121, Dip Shui House, Shui Pin Wai Estate, Yuen Long, Hong Kong.

      

       

      Any
notice or other communication delivered in accordance with this Section 6.4
shall be deemed to have been given upon actual receipt or refusal of such
delivery.

       

      
        
           

        

        
           

          
            

          

        

        
           

        

      

      6.5 Governing Law. This
Agreement shall be governed in all respects by the laws of the State of Nevada
without giving effect to the conflicts of laws principles thereof.

       

      6.6 Successors and Assigns;
Assignment. No party may assign this Agreement or any rights or
obligations hereunder without the prior written consent of the other party,
which consent may not be unreasonably withheld, including by merger or
consolidation. Subject to the preceding, this Agreement shall be binding upon,
inure to the benefit of and be enforceable by the parties hereto and their
respective successors and assigns.

       

      6.7 Amendments and
Waivers. This Agreement may only be amended with the written consent of
the Company and the Investors, or the successors or permitted assigns of the
foregoing, and no oral waiver or amendment shall be effective under any
circumstances whatsoever.

       

      6.8 Counterparts. This
Agreement may be signed in two or more counterparts. Signatures and delivery may
be transmitted via facsimile.

       

      6.9 Entire Agreement.
This Agreement, the attached exhibits and the other documents delivered pursuant
hereto constitute the full and entire understanding and agreement between the
parties with regard to the subjects hereof and thereof and they supersede, merge
and render void every other prior written and/or oral understanding or agreement
among or between the parties hereto relating to the Notes to be purchased
pursuant to this Agreement.

       

      6.10
Severability.
The invalidity or unenforceability of any provision hereof in any jurisdiction
shall not affect the validity, legality or enforceability of the remainder
hereof in such jurisdiction or the validity, legality or enforceability hereof,
including any such provision, in any other jurisdiction, it being intended that
all rights and obligations of the parties hereunder shall be enforceable to the
fullest extent permitted by law.

       

      6.11
Titles and
Subtitles. The titles of the sections and subsections of this Agreement
are for convenience of reference only and are not to be considered in construing
this Agreement.

       

      6.12
Reference to the New
Notes. Reference is hereby made to the New Notes for certain terms and
conditions of indebtedness evidenced thereby, and the parties expressly agree to
be bound by such terms as if they were part of this Agreement.

       

      
        	
                 
      

              	
                 [Signature
      Page Follows]

              

      

       

      

      
        
           

        

        
           

          
            

          

        

        
           

        

      

      

       

      IN
WITNESS WHEREOF, the parties hereto have executed this Agreement as of the day
and year written above.

      

      
        	 
      	 
      	 
      
	
                COMPANY:

              
	 
      
	
                Home System Group, a
      Nevada corporation

              
	 
      	 
      
	
                By:

              	 
      	
                
                  /s/
      Yu Lei

                

              
	
                Name:

              	 
      	
                Yu
      Lei

              
	
                Title:

              	 
      	
                Chief
      Executive Officer

              
	 
      
	
                THE
      INVESTORS:

              
	 
      
	
                Liming
      Jiao

              
	 
      	 
      
	
                By:

              	 
      	
                
                  /s/
      Liming Jiao

                

              
	
                Name:

              	 
      	
                Liming
      Jiao

              
	 
      	 
      	 
      
	 
      
	
                Xiaohong
      Chen

              
	 
      	 
      
	
                By:

              	 
      	
                
                  /s/
      Xiaohong Chen

                

              
	
                Name:

              	 
      	
                Xiaohong
      Chen

              
	 
      	 
      	 
      

      

      

      
        
           

        

        
           

          
            

          

        

        
           

        

      

      

      Exhibit
A

      

      Senior
Promissory Note

      

      
        
           

        

        
           

          
            

          

        

        
           

        

      

      Exhibit
B

      

      New
Promissory Noteexhibit101march292010.htm

  

  

  

EXHIBIT 10.1

 

CHARMING SHOPPES, INC.

 

Annual Incentive Program – For Year Ending January 29, 2011 (“Fiscal 2010”)

 

As Amended and Restated March 29, 2010

 

1. General

 

This Annual Incentive Program, as amended and restated (the “Program”), of Charming Shoppes, Inc. (the “Company”) authorizes the grant of Annual Incentive Awards under the Company’s 2003 Incentive Compensation Plan (the “Plan”) to executives and key employees and sets forth certain terms and conditions of such Awards.  The purpose of the Program is to help the Company secure and retain executives and key employees of outstanding ability and to motivate such persons to help the Company achieve excellent performance, by providing incentives directly linked to measures of annual performance based on corporate consolidated results, divisional results, individual performance, and/or other performance measures, and otherwise to further the purposes of the Plan.  The terms and conditions of the Plan are hereby incorporated by reference in this Program.  If any provision of this program or an implementing document hereunder conflicts with a provision of the Plan, the provision of the Plan shall govern.  The Annual Incentive Awards authorized hereunder for Covered Employees are intended to qualify as “performance-based” compensation under Section 162(m) of the Code.

 

2. Definitions

 

Capitalized terms used in this Program but not defined herein have the same meanings as defined in the Plan.  In addition to such terms and those terms defined in Section 1 above, the following are defined terms under this Program:

 

(a) “Annual Incentive Award” or “Award” means the amount of a Participant’s Annual Incentive Award Opportunity in respect of a specified Performance Period (typically, one fiscal year) determined by the Committee to have been earned and the Participant’s rights to future payments of cash in settlement thereof.

 

(b) “Annual Incentive Award Opportunity” or “Award Opportunity” means the Participant’s opportunity to earn specified dollar-denominated amounts under this Plan based on performance during a Performance Period.  An Annual Incentive Award Opportunity constitutes a conditional right to receive settlement of an Annual Incentive Award.

 

(c) “Participant” means an employee participating in this Program.

 

(d) “Performance Goal” means the Company, divisional, individual, or other accomplishment required as a condition to the earning of an Award Opportunity.  Unless otherwise determined by the Committee at the time Award Opportunities are authorized, Performance Goals shall meet the requirements of Section 6(b) of the Plan.

 

  

1

  

(e) “Performance Period” means the period of one fiscal year over which an Annual Incentive Award Opportunity may be earned, provided that the Committee may specify a shorter duration for any Performance Period.

 

(f) “Retirement” shall mean the voluntary termination of a Participant’s employment by the Participant at or after the Participant has attained the age of 62 immediately after which the Participant is not employed by the Company or any Subsidiary.

 

(g) “Termination of Employment” means (i) the termination of a Participant’s employment by the Company or a Subsidiary, or (ii) the voluntary termination of a Participant’s employment (other than a Retirement) immediately after which the Participant is not employed by the Company or any Subsidiary.

 

3. Eligibility

 

Employees who are eligible to participate in the Plan may be selected by the Committee to participate in this Program.

 

4. Designation and Earning of Annual Incentive Award Opportunities

 

(a) Designation of Award Opportunities and Performance Goals.  The Committee shall select employees to participate in the Program for a Performance Period and designate, for each such Participant, the Award Opportunity such Participant may earn for such Performance Period, the nature of the Performance Goal the achievement of which will result in the earning of the Award Opportunity, and the levels of earning of the Award Opportunity corresponding to the levels of achievement of the Performance Goal.  In the case of a Covered Employee, the Committee’s determinations under this Section 4(a) shall be made not later than 90 days after the Performance Period begins and in no event after 25% of the Performance Period has elapsed.  The Award Opportunity earnable by each Participant shall range from 0% to a specified maximum percentage of a specified target Award Opportunity.  The Committee shall specify a table, grid, or formula that sets forth the amount of a Participant’s Award Opportunity that will be earned corresponding to the level of achievement of a specified Performance Goal.  The foregoing notwithstanding, the per-person limitation under Section 5 of the Plan shall apply to each Participant’s Award Opportunity.  For this purpose, awards under the Plan shall be deemed to use the per-person award limitation thereunder in the order in which the applicable performance periods are scheduled to end, and for performance periods ending on the same date in the order in which the award opportunities were authorized.

 

(b) Determination of Annual Incentive Award.  Within a reasonable time after the end of each Performance Period, the Committee shall determine the extent to which the Performance Goal for the earning of the Participant’s Annual Incentive Award Opportunity was achieved during such Performance Period and the resulting Award to the Participant for such Performance Period.  To the extent permitted under Section 6(d) of the Plan, the Committee may adjust the amount of an Award in its discretion in light of such considerations as the Committee may deem relevant (but subject to the applicable maximum Award Opportunity authorized for each Participant); provided, however, that, with respect to a Covered Employee, no upward adjustment may be made and such adjustments otherwise shall comply with applicable requirements of Treasury Regulation 1.162-27(e) under the Code.  Subject to Section 6 hereof, the Annual Incentive Award shall be deemed earned and vested at the time the Committee makes the determination pursuant to this Section 4(b).

 

  

2

  

 

5. Settlement of Awards.

 

(a) Elective Deferral.  A Participant will be permitted to elect to defer settlement of the Annual Incentive Award if and to the extent such Participant is selected to participate in the Company’s Variable Deferred Compensation Plan for Executives and deferrals of Awards are authorized and validly deferred in accordance with that plan.

 

(b) Settlement of Award.  Any non-deferred Annual Incentive Award shall be paid and settled by the Company promptly after the date of determination by the Committee under Section 4(b) hereof (such scheduled payment date being the “Stated Settlement Date”), but no later than 90 days after the end of the Performance Period.  With respect to any deferred amount of a Participant’s Annual Incentive Award, such amount will be credited to the Participant’s deferral account under the Company’s Variable Deferred Compensation Plan for Executives as promptly as practicable at or after the date of determination by the Committee under Section 4(b) hereof.

 

(c) Tax Withholding.  The Company shall deduct from any payment in settlement of a Participant’s Annual Incentive Award or other payment to the Participant any Federal, state, or local withholding or other tax or charge which the Company is then required to deduct under applicable law with respect to the Award.

 

(d) Non-Transferability.  An Annual Incentive Award Opportunity, any resulting Annual Incentive Award, including any deferred cash amount resulting from an Annual Incentive Award, and any other right hereunder shall be non-assignable and non-transferable except pursuant to the laws of descent and distribution in the event of the death of the Participant (or pursuant to a beneficiary designation, if permitted by the Committee), and shall not be pledged, encumbered, or hypothecated to or in favor of any party other than the Company or a subsidiary or affiliate or subject to any lien, obligation, or liability of the Participant to any party other than the Company or a subsidiary or affiliate.

 

6. Effect of Termination of Employment; Retirement

 

Upon a Participant’s Termination of Employment prior to completion of a Performance Period , the Participant’s Annual Incentive Award Opportunity relating to such Performance Period shall cease to be earnable and shall be canceled, and the Participant shall have no further rights or opportunities hereunder, unless otherwise provided in an employment agreement or severance agreement between the Company and the Participant in effect at the time of Termination of Employment or otherwise determined by the Committee in its sole discretion.

  

3

  

Upon a Participant’s Retirement prior to completion of a Performance Period, a Pro-Rata Portion of the Participant’s Annual Incentive Award relating to such Performance Period shall be deemed earned and vested in accordance with and at the time that the Committee makes, the determination pursuant to Section 4(b) hereof.  For purposes hereof, a Pro-Rata Portion of the Participant’s Annual Incentive Award shall be the product of (i) the Annual Incentive Award determined by the Committee pursuant to Section 4(b) hereof as if the Participant was employed by the Company or any Subsidiary through the completion of the Performance Period multiplied by (ii) a fraction, the numerator of which shall be the number of full and partial months that the Participant was employed by the Company or any Subsidiary between the date of commencement of the Performance Period and the date of Retirement, and the denominator of which shall be the number twelve (12).  The Retirement of a Participant after completion of a Performance Period will not result in forfeiture or otherwise affect the Participant’s Annual Incentive Award for that Performance Period.

 

7. General Provisions.

 

(a) Changes to this Program.  The Committee may at any time amend, alter, suspend, discontinue, or terminate this Program, and such action shall not be subject to the approval of the Company’s shareholders or Participants; provided, however, that any amendment to the Program beyond the scope of the Committee’s authority shall be subject to the approval of the Board of Directors.  Nothing shall limit the authority of the Committee, in its discretion, to accelerate the termination of any deferral period and the resulting payment and settlement of deferred amounts, with respect to an individual Participant or all Participants, without the consent of the affected Participants.

 

(b) Unfunded Status of Participant Rights.  Annual Incentive Awards, accounts, deferred amounts, and related rights of a Participant represent unfunded deferred compensation obligations of the Company for ERISA and federal income tax purposes and, with respect thereto, the Participant shall have rights no greater than those of an unsecured creditor of the Company.

 

(c) Nonexclusivity of the Program.  The adoption of this Program shall not be construed as creating any limitations on the power of the Board or Committee to adopt such other compensation arrangements as it may deem desirable for any Participant, or to pay other amounts as annual bonuses apart from the Program, whether under the Plan or otherwise.

 

(d) No Right to Continued Employment.  Neither the Program nor any action taken hereunder shall be construed as giving any employee the right to be retained in the employ of the Company or any of its subsidiaries or affiliates, nor shall it interfere in any way with the right of the Company or any of its subsidiaries or affiliates to terminate any employee’s employment at any time.

 

 

 

  

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(e) Severablity.  The invalidity of any provision of the Program or a document hereunder shall not be deemed to render the remainder of this Program or such document invalid.

 

Approved by the Compensation and Stock Option Committee on January 19, 2005;

Approved by the Independent members of the Board of Directors on January 20, 2005

Approved by the Compensation and Stock Option Committee on February 2, 2006

Approved by the Independent members of the Board of Directors on February 2, 2006

Approved by the Compensation Committee on January 24, 2007

Approved b y the Independent members of the Board of Directors on January 25, 2007

Approved by the Compensation Committee on March 23, 2007

Approved b y the Independent members of the Board of Directors on March 29, 2007

Approved by the Compensation Committee on September 19, 2007

Approved b y the Independent members of the Board of Directors on September 19, 2007

Approved by the Compensation Committee March 27, 2008

Approved by the Board of Directors March 28, 2008

Approved by the Compensation Committee March 26, 2009

Approved by the Compensation Committee March 29, 2010

(personal/Annual Incentive Plan as Amended and Restated March 29, 2010.doc)

 

  

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