Document:

ex101.htm

EXHIBIT 10.1

 

WESBANCO, INC.

 

INCENTIVE BONUS, OPTION AND RESTRICTED STOCK PLAN

 

as adopted February 13, 1998

and as amended and restated effective February 25, 2010

 

 

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WESBANCO, INC.

 

INCENTIVE BONUS, OPTION AND RESTRICTED STOCK PLAN

 

INTRODUCTION

 

The purposes of the WesBanco, Inc. Incentive Bonus, Option and Restricted Stock Plan are to enhance shareholder value and to contribute to the growth of WesBanco, Inc., its subsidiaries and affiliates by:

 

1. directing the planning, implementation and supervisory efforts of Key Executives toward the achievement of strategic, financial and individual goals determined by the Board of Directors of the Company to be in the best interests of the Company and its shareholders over annual and multi-year planning cycles;

 

2. requiring Key Executives and Non-Employee Directors to position the Company, in light of changing business conditions and the Company’s business plans, to succeed over annual and multi-year business horizons;

 

3. placing a significant portion of the compensation of Key Executives at risk in the event Performance Goals are not met and, thereby, provide substantial incentive to achieve annual and longer term goals;

 

4. identifying the interests of Key Executives and Non-Employee Directors more closely with those of shareholders by denominating compensation at least in part in Shares of Common Stock and options to purchase Shares of Common Stock; and

 

5. providing the Company with a flexible compensation arrangement to use as a tool to attract and retain Key Executives and Non-Employee Directors of outstanding competence.

 

The Plan is designed to accomplish its purposes by providing financial rewards to Key Executives if, but only if, pre-established financial and/or personal goals, which may include completion of specified periods of employment, are achieved. Non-Employee Directors are eligible to receive grants of nonqualified options and will be reward if the trading price for the Common Stock increases after the date the nonqualified option is granted.

 

For Key Executives:

 

The Plan has four portions for Key Executives: an Annual Bonus Portion, a Long Term Bonus Portion, a Stock Option Portion and a Restricted Stock Portion. The Annual Bonus Portion offers Participants opportunities for Incentive Compensation generally denominated in cash, based on the degree of attainment of corporate and/or personal goals over one fiscal year. The Long Term Bonus Portion offers Participants opportunities for Incentive Compensation denominated, generally in cash and Shares of Common Stock, based on the degree of attainment of corporate and/or personal goals over more than one fiscal year. The Stock Option Portion permits the Compensation Committee to award options which will become vested, if at all, based on attainment of performance goals or the completion of a specified period of employment. The Restricted Stock Portion permits the Compensation Committee to award shares of Common Stock subject to restrictions that will lapse, if at all, upon the attainment of performance and/or personal goals or the completion of specified period of employment.

 

Participation in any portion of the Plan will be limited to those executive level employees of the Company (including in that term executive level employees of any subsidiary of the Company) who are in a position to directly influence the achievement of goals set by the Board. The Plan is not intended to be a broad based arrangement. Further, in recognition that certain executives may be in a position to have more influence over attainment of certain goals, the Plan does not require that all Performance Goals or Performance Levels be uniform for all Key Executives. In addition, in recognition that certain executives may be able to influence the outcome of certain goals set for a particular Fiscal Year but not for a period longer than a Fiscal Year, a Key Executive may be made eligible for an Annual Bonus but not for a Long Term Bonus and/or Stock Options or, in the alternative, for a Long Term Bonus, Stock Options or Restricted Stock but not an Annual Bonus. Inclusion in one portion of the Plan or for any one year is no assurance of future eligibility by a particular Key Executive for any other portion or any other year or Incentive Cycle. Accordingly, opportunities to earn Incentive Compensation as well as the individual and collective goals to be met to realize Incentive Compensation, as Annual Bonus or Long Term Bonus or to vest Stock Options or Restricted Stock under the Plan, may vary from Key Executive to Key Executive.

 

The Annual Bonus Portion focuses on the business plan for the next Fiscal Year and sets goals to be achieved in that Fiscal Year. If the goals are met, Incentive Compensation for the Annual Bonus portion is paid primarily in cash. On the other hand, Long Term Bonus focuses on the business plan over several successive Fiscal Years. If goals are met over the measurement period, Long Term Bonus is paid in the form of a combination of stock and cash.

 

The number of years under consideration for a Long Term Bonus is referred to as an “Incentive Cycle”. It is intended that an Incentive Cycle will be formed each year for the number of years for which a reasonably thorough business plan can be prepared. At the adoption of the Plan, the appropriate number of years to be included in an Incentive Cycle is believed to be three but the Plan allows the Compensation Committee to elect, in its discretion exercised at the formation of each Incentive Cycle, to include more or fewer years in an Incentive Cycle.

 

 

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For the Long Term Bonus Portion, Incentive Compensation is denominated as a “Unit”, that is, the basic unit of Incentive Compensation expressed in terms of dollars and whole or fractional Shares. Moreover, at the adoption of the Plan, it is believed that the appropriate composition of each Unit should be a combination of Shares and cash so that any income tax obligations of Key Executives in connection with the Plan may be settled without resort to sale of Shares.

 

Stock Options are granted at the discretion of the Compensation Committee, each with an exercise price equal to the then fair market value of a share of Common Stock. The Compensation Committee shall set a vesting schedule with vesting in years following the grant of the Stock Option based upon continuation of employment for that year or attainment in each such year of performance goals set for that year under the Annual Bonus Plan (or if no Annual Bonus Plan is in effect for that year, performance goals set specifically for the Stock Option Portion.)

 

Restricted Stock is granted at the discretion of the Compensation Committee. The Compensation Committee shall set as a vesting schedule attainment of performance goals and/or continuous employment over a period of years specified in the granting documents.

 

The Board of Directors, in consultation with management and in connection with the Company’s ongoing business planning processes, will direct which goals are to be achieved over the ensuing Fiscal Year for purposes of the Annual Bonus, Stock Option and Restricted Stock Portions and for the longer Incentive Cycle for purposes of the Long Term Bonus. The Compensation Committee will determine and set the following to be consistent with the Board’s directions:

 

(a) Performance Goals appropriate to the Board’s directions;

 

(b) the composition of Units used to denominate Incentive Compensation opportunities for the Long Term Bonus;

 

(c) Threshold, Target and Superior levels of achievement with respect to Performance Goals for the Annual and Long Term Bonus, respectively;

 

(d) Incentive Compensation, expressed in Units for Long term Bonus and dollars for Annual Bonus, which may be distributed to each Key Executive, in the event Threshold, Target or Superior Performance Levels are achieved; and

 

(e) whether Stock Options will be granted in that year and, if so, in what amount and to what Key Employees.

 

The Compensation Committee will then communicate with the Key Executive and cause the execution and delivery of such documents as may be required to implement the Plan for the Fiscal Year for Annual Bonus and Stock Option purposes and the Incentive Cycle for Long Term Bonus purposes.

 

At or after (but not more than seventy five days after) the end of a particular Fiscal Year and/or an Incentive Cycle, the Compensation Committee, after review of financial and other information appropriate to determining whether Performance Goals have been met for that Fiscal Year or Incentive Cycle, including, but not limited to, extraordinary items and/or special circumstances, and taking such other actions as the Compensation Committee shall deem appropriate, will:

 

(i) determine the level of actual achievement of Performance Goals, taking into account, to the extent the Committee deems appropriate in its sole judgment, extraordinary items and/or special circumstances which affected or may have affected the ability of one or more of the Key Executives to achieve one or more of the Performance Goals;

 

(ii) determine the Incentive Compensation, if any, to be distributed to each Key Executive participating in the Plan as Annual Bonus for a particular Fiscal Year or Long Term Bonus for that Incentive Cycle and the vesting, if any, with respect to any previously granted Stock Options; and

 

(iii) direct the commencement of installment distributions of Incentive Compensation which may have been earned under the Plan as Long Term Bonus with respect to that Incentive Cycle.

 

To accommodate the changing nature of the Company’s business and the adjustments to business objectives from year to year, as well as to provide continuous incentive to achieve those objectives and to offset the effects of business anomalies, the Long Term Bonus Portion is designed to form a new Incentive Cycle each year and to have that Incentive Cycle overlap with the Incentive Cycles for the preceding and subsequent years. Each Incentive Cycle, if formed, will be formed independently of any other Incentive Cycle and Incentive Compensation for any Incentive Cycle will be determined with respect to only that Incentive Cycle. In this regard, the rolling three year Incentive Cycles are intended as a complement to the Annual Bonus portion of this Plan.

 

Incentive Compensation for both the Annual Bonus and the Long Term Bonus will be determined by the Compensation Committee within seventy-five (75) days of the end of that Incentive Cycle. Incentive Compensation earned as Annual Bonus will be paid in a single sum as soon as practicable after its determination. Incentive Compensation earned with respect to a particular Incentive Cycle will be distributed in three (3) substantially equal annual installments. The payment of Incentive Compensation and of each installment is contingent upon a Key Employee’s being an employee of the Company on the date of distribution, except if the cessation of employment is related to death, disability or retirement of that Key Employee.

 

 

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Stock Options, to the extent vested and exercisable, can be exercised in accordance with the terms and conditions set forth in the stock option agreement which evidences those Stock Options. Restricted Stock will become vested on the terms and conditions set forth by the Compensation Committee at the time of grant.

 

For Non-Employee Directors:

 

The Plan has two features for Non-Employee Directors. The Plan permits the Compensation Committee to grant Stock Options and/or shares of Restricted Stock to Non-Employee Directors. Grants of Stock Options to Non-Employee Directors may vest based on a period of continuous service on the Board. Restrictions on shares of Restricted Stock may lapse based on a period of Continuous Service on the Board.

 

Administrative Delegation:

 

In order to facilitate the administration of the Plan, the Plan contemplates that the Compensation Committee may delegate ministerial functions, such as preparation of documents and notices, withholding for required taxes and delivery of distributions authorized under the Plan, to such members of the management of the Company as the Compensation Committee shall deem appropriate.

 

The foregoing Introduction is included in this Plan document for descriptive purposes only and the Plan’s provisions which follow shall control over the Introduction. As used in the Introduction, initially capitalized terms shall have the meanings assigned thereto under the Plan.

 

ARTICLE I

 

DEFINITIONS

 

1.1 “Annual Bonus” shall mean the amount of Incentive Compensation which may be earned by a particular eligible Key Executive based on performance for a particular Fiscal Year.

 

1.2 “Cause” shall mean a Key Executive’s (i) conviction for a felony (or of a lesser included offense following indictment and entry of a guilty plea), (ii) continued failure, after thirty (30) days written notice from the Company, to render service to the Company as required under the terms and conditions of his or her employment or (iii) persistent negligence and dereliction of duty which shall include, but shall not be limited to, the Key Executive’s frequent failure to perform properly assigned tasks or violation of the Company’s drug and alcohol policies.

 

1.3 “Beneficiary” shall mean the person or persons a Key Executive has designated by filing an election with the Administrative Committee, substantially in the form of Schedule A attached hereto to receive his or her Incentive Compensation, to the extent payable, in the event of his or her death. If no Beneficiary has been designated, or if a Key Executive’s Beneficiary has predeceased the Key Executive, the Key Executive’s spouse or, if none, the Key Executive’s children per stirpes, or, if none, the Key Executive’s estate, shall be deemed to be the Key Executive’s Beneficiary.

 

1.4 “Board of Directors” or “Board” shall mean the Board of Directors of WesBanco, Inc.

 

1.5 “Common Stock” shall mean common stock, par value $2.0833 per share, of WesBanco, Inc.

 

1.6 “Company” shall mean WesBanco, Inc., a West Virginia corporation, its subsidiaries, and the affiliates, subsidiaries, successors and assigns of the Company.

 

1.7 “Compensation Committee” or “Committee” shall mean the Compensation Committee of the Board of Directors of WesBanco, Inc., provided, however, no member of the Compensation Committee who is or at any time during the then past year has been a Key Executive or is then under consideration to become a Key Executive shall be permitted to participate in the discussion of or vote on his or her participation in the Plan or any Incentive Compensation which he or she may receive hereunder or to assist in the administration of the Plan and to the extent necessary to supplement the foregoing, each member of the Compensation Committee eligible to participate in the administration of this Plan shall be a “disinterested person” within the meaning of Section 16b-3 of the Securities Exchange Act of 1934, as amended, and the regulations promulgated thereunder, and provided, further, participation by such person, directly or indirectly, in the preparation or review of all or any portion of the Company’s business plan, analysis or forecast shall not be regarded as participating in a discussion or voting on Incentive Compensation under the Plan.

 

1.8 “Disability” shall mean the inability of a Key Employee due to mental or physical defect or disease to perform the services required of the Key Employee in the position he or she held prior to the manifestation of that defect or disease.

 

1.9 “Fair Market Value” shall mean, as of a relevant date, the reported closing price of a share of Common Stock on the business day immediately preceding that date.

 

 

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1.10 “Fiscal Year” shall mean the twelve month period used by the Company for financial reporting purposes which, as of the date of adoption hereof, is the calendar year.

 

1.11 “Incentive Compensation” shall mean the distribution, if any, a Key Executive is or may become entitled to receive under the terms of this Plan as Long Term Bonus for a particular Incentive Cycle and/or Annual Bonus for a Fiscal Year.

 

1.12 “Incentive Cycle” shall mean the number of Fiscal Years over which an opportunity to earn Long Term Bonus will be measured. At the adoption of the Plan, the number of Fiscal Years deemed appropriate is three (3) but the Compensation Committee may include more or fewer years at the formation of a particular Incentive Cycle.

 

1.13 “Key Executives” shall mean those employees of the Company who, with respect to a particular Plan Year, are deemed to hold positions which may substantially influence the attainment of Performance Goals. Employees designated as Key Employees for the Annual Bonus and/or Long Term Bonus purposes, may or may not, in the discretion of the Committee be eligible to earn Incentive Compensation under the other portion of this Plan and may or may not be eligible to earn Incentive Compensation in future years under any portion of this Plan.

 

1.14 “Long Term Bonus” shall mean the amount of Incentive Compensation which may be earned by a particular eligible Key Employee for a particular Incentive Cycle.

 

1.15 “Non-Employee Director” shall mean a member of the Board who is not then and has not been for a period of one year prior to the relevant time an employee of the Company.

 

1.16 “Plan” shall mean this WesBanco, Inc. Key Executive Bonus, Stock Option and Restricted Stock Plan, as amended and in effect from time to time and as interpreted and/or administratively supplemented by the Compensation Committee under the terms of this Plan from time to time.

 

1.17 “Performance Goals” shall mean those goals, described in terms of financial results, operational achievements or individual objectives, or any combination thereof, to be achieved for Annual Bonus purposes, over a particular Fiscal Year or for Long Term Bonus purposes, over a particular Incentive Cycle, as may be set by the Compensation Committee to implement the Board’s directions for that Fiscal year or Incentive Cycle, respectively. For the Option Portion and Restricted Stock Portion, “Performance Goals” may include periods of continuous employment.

 

1.18 “Performance Levels” shall mean the relative level of achievement of Performance Goals. Performance Levels shall be set as Threshold for acceptable performance, Target for meeting expectations and Superior for exceeding expectations.

 

1.19 “Restricted Stock” shall mean shares of Common Stock awarded to a Participant subject to certain restrictions as determined by the Compensation Committee at the time of grant. A Participant receiving a grant of Restricted Stock shall not be a shareholder with respect to those shares of Restricted Stock unless or until the Restricted Stock vests in accordance with the terms of the grant, except that, if shares of Restricted Stock vest, the Participant may be paid an amount of cash equal to dividends that would have been paid on the shares of Restricted Stock during the restricted period.

 

1.20 “Retirement” shall mean the cessation of employment with the Company after fifteen (15) years of service.

 

1.21 “Shares” shall mean one or more (as indicated) shares of Common Stock.

 

1.22 “Stock Option” shall mean the right to purchase a share of Common Stock for the exercise price indicated on the date of grant of such Stock Option.

 

1.23 “Unit” shall mean the smallest unit of measurement of Incentive Compensation opportunities and may be comprised of an amount of cash, one or more Shares or a combination of cash and Shares.

 

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ARTICLE II

 

ADMINISTRATION

 

2.1 Board of Directors. The Board of Directors shall have the authority and responsibility to determine from year to year whether (i) Annual Bonus opportunities shall be available to Key Executives for the ensuing Fiscal Year, (ii) whether Long Term Bonus opportunities will be available to Key Executives for an Incentive Cycle and (iii) whether Stock Options or Restricted Stock shall be awarded to Key Executives and/or Non-Employee Directors. If the Board determines it appropriate to form an Incentive Cycle for Long Term Bonus purposes and/or to make Annual Bonus opportunities available for the ensuing Fiscal Year, the Board shall direct the Compensation Committee’s attention to the results the Board believes important for the Company to achieve during that Incentive Cycle or Fiscal Year. With respect to results to be achieved, it is intended that the Board will give qualitative directions, generally providing priorities among the Company’s several operations.

 

2.2 Compensation Committee. The Compensation Committee shall have the authority and responsibility to:

 

(a) adopt, amend and rescind rules and regulations relating to the Plan and its operation and administration;

 

(b) interpret the Plan;

 

(c) execute and deliver documents deemed necessary to implement, operate or administer the Plan;

 

(d) set Performance Goals (Threshold, Target and Superior) for Key Executives with respect to a Fiscal Year and/or an Incentive Cycle;

 

(e) determine which executive employees of the Company will be Key Executives participating in the Plan for a particular Fiscal Year and/or Incentive Cycle and, if applicable, determine whether an employee hired during a Fiscal Year or Incentive Cycle will be a Key Executive for that Fiscal Year and/or Incentive Cycle;

 

(f) determine the opportunity to earn Incentive Compensation to be provided to individuals deemed Key Executives for that Fiscal Year and/or Incentive Cycle, as applicable;

 

(g) determine the compensation of Units for that Incentive Cycle;

 

(h) set the amount of Incentive Compensation, expressed in dollars for Annual Bonus and Units for Long Term Bonus, which may be earned by each Key Executive for any Fiscal Year and/or Incentive Cycle at the respective Performance Levels;

 

(i) determine whether Performance Levels have been met or exceeded for any Fiscal Year and/or Incentive Cycle on or before the seventy-fifth (75th) day after the last day of the last year of a particular Fiscal Year and/or Incentive Cycle and direct the commencement of installments of Long Term Bonus and the opportunity to Key Employees for further deferral of distributions;

 

(j) determine the number, terms and conditions of Stock Options or Restricted Stock to be granted to Non-Employee Directors and the identity of Key Executives to receive grants of Stock Options and Restricted Stock and the number, term, Performance Goals and other terms and conditions applicable to those Stock Options or shares of Restricted Stock;

 

(k) consult with such accountants, attorneys, advisors or experts (in each case, who may also provide services to the Company) as the Committee shall deem appropriate;

 

(l) take into account, to the extent the Committee deems appropriate in its sole judgment, extraordinary items and/or special circumstances which affected or may have affected the ability of one or more Key Executives to achieve Performance Goals with respect to any portion of the Plan and, to the extent deemed appropriate by the Committee, modify or waive any Performance Goal(s) or any term or condition of any previously made award;

 

(m) delegate such ministerial functions relating to the Plan to such persons as the Compensation Committee may deem appropriate from time to time; and

 

(n) take such other actions as the Committee shall determine necessary or appropriate to implement, operate or administer the Plan, including, but not limited to, taking into account special circumstances and determining whether to exercise the discretionary authority conferred on the Compensation Committee under this or other sections of the Plan.

 

The Compensation Committee shall have all discretion and authority necessary to perform each or any of the forgoing. Any determination made by the Compensation Committee shall be final and binding upon the Company and each and all employees, whether or not then participating in the Plan.

 

 

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2.3 Company Employees. Employees of the Company shall perform such ministerial functions as may be delegated to them by the Committee from time to time. No employee of the Company may exercise any judgment or discretion relating to the Plan, its implementation, operation or administration. For purposes of this Plan, in the event an employee’s duties as an employee of the Company include, directly or indirectly, preparation or assistance in the preparation of all or any portion of a business plan, analysis, forecast or result which may be reviewed or used by the Board or the Committee in connection with the Plan shall not be deemed to have exercised discretion with respect to the Plan.

 

ARTICLE III

 

OPERATION OF THE PLAN FOR KEY EXECUTIVES

 

3.1 Commencement of Annual Bonus and/or Long Term Bonus Opportunities. The Board of Directors shall inform the Compensation Committee whether Annual Bonus opportunities will be made available for a particular Fiscal Year and/or whether Long Term Bonus opportunities will be made available for an Incentive Cycle which will include that Fiscal Year. If Annual Bonus and/or Long Term Bonus opportunities are to be made available, the Board shall also inform the Compensation Committee of the results the Board believes important to be achieved during that Fiscal Year and/or Incentive Cycle.

 

3.2 Implementation of Annual and/or Long Term Bonus Opportunities. In the event it is informed that Annual Bonus or Long Term Bonus opportunities will be made available, the Compensation Committee shall promptly:

 

(a) determine the number of Fiscal Years to be included in the Incentive Cycle;

 

(b) determine the Performance Goals for Annual and Long Term Bonus purposes;

 

(c) determine which executive employees will be Key Executives eligible to participate in the Plan for the Fiscal Year for Annual Bonus and for the Incentive Cycle for Long Term Bonus Purposes;

 

(d) determine the composition of Units to denominate Incentive Compensation for Long Term Bonus purposes for that Incentive Cycle;

 

(e) establish Threshold, Target and Superior Performance Levels with respect to the Performance Goals for each Key Executive, expressed in dollars for Annual Bonus and Units for Long Term Bonus; and

 

(f) determine the amount of Incentive Compensation opportunities for the respective Key Executives for Annual Bonus and Long Term Bonus purposes at the respective levels of achievement; and

 

(g) communicate the foregoing to each Key Executive and prepare, execute and deliver, on behalf of and binding, upon the Company, such documents evidencing the foregoing as the Committee shall determine appropriate.

 

3.3 Measurement of Performance. No later than seventy-five (75) days after the last day of the Fiscal Year measured for Annual Bonus purposes and of the last day of the last Fiscal Year in any Incentive Cycle, the Committee shall review such financial, performance or other information relating to the Company and the Performance Goals, including, but not limited to, extraordinary items and/or special circumstances, and shall determine whether the Performance Goals for that Fiscal Year and/or Incentive Cycle have been achieved and, if so, the Performance Level of achievement, respectively. From the Performance Level actually achieved, the Committee shall determine the amount in cash for Annual Bonus and/or the number of Units of Incentive Compensation, if any, distributable to any Key Executive. Except as provided in Section 6.3 of this Plan, no Incentive Compensation shall be distributed unless the Committee determines that no less than Threshold has been reached. In the event the level of achievement exceeds Threshold but is not exactly equal to Threshold, Target or Superior, the Committee shall interpolate between the amount or number of Units assigned to each such Performance Level for each Key Executive to determine the number of Units of Incentive Compensation distributable.

 

3.4 Distribution of Incentive Compensation.

 

(a) Annual Bonus. The amount of cash earned as Annual Bonus shall be paid in a single payment, net of applicable withholding for taxes, as soon as practicable after the amount is determined, provided, however, no Incentive Compensation as Annual Bonus shall be payable to a Key Employee who ceases to be an employee of the Company for any reason other than death or retirement prior to the distribution date.

 

 

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(b) Long Term Bonus. The amount of Incentive Compensation earned in any Incentive Cycle shall be distributed in three (3) substantially equal installments. The first installment shall be distributed within five (5) working days of the determination of performance under Section 3.3. The second installment with respect to an Incentive Cycle shall be distributable on the first business day of the calendar year next following the calendar year in which the first installment was paid and the third installment with respect to an Incentive Cycle shall be distributable on the anniversary of the second installment. The distribution of each installment of Incentive Compensation is contingent (in addition to the conditions set forth in Section 3.6) upon the employment with the Company of the Key Employee to whom such installment is due on the date the installment is distributable, provided, however, if a Key Employee ceases employment with the Company for reasons of his death, disability or Retirement, the condition of continued employment shall not apply. In the event a Key Employee otherwise due an installment of Incentive Compensation is not an employee of the Company on the date such installment is distributable under this Section 3.4, that and any subsequently distributable installments shall be forfeited by that Key Employee and shall not be distributed to him or her at any time.

 

3.5 Additional Conditions to the Distribution of Incentive Compensation.

 

(a) In Default. No Incentive Compensation shall be payable to any Key Executive with respect to a Fiscal Year or an Incentive Cycle if, as of the date distribution thereof is due under this Plan, the Company is in default under any instrument, indenture or agreement to which the Company is a party and by which the Company is bound.

 

(b) Not an Employee. Except as provided in Article V, no Incentive Compensation shall be distributed to any Key Executive with respect to a Fiscal Year or an Incentive Cycle unless such Key Executive is an employee of the Company on the last business day of the last Fiscal Year in that Incentive Cycle.

 

3.6 Withholding for Taxes from Incentive Compensation. From each installment of Incentive Compensation, the Company shall withhold the amount required (as determined by the Company in good faith) to be withheld for applicable taxes and shall promptly remit the withheld amount to the appropriate taxing bodies. In the event that an installment will be paid in part in cash and in part in Shares of Common Stock, withholding shall be taken from the cash portion first. Withholding from the stock portion shall be accomplished in a manner not inconsistent with applicable securities laws as determined by the Company.

 

3.7 Terms and Conditions of Stock Options. The Compensation Committee shall have authority and responsibility and all necessary discretion for granting Stock Options under this Plan and setting the terms and conditions of each grant to the extent not inconsistent with the terms of this Plan. Each grant and the terms and conditions of a grant of a Stock Option shall be evidenced by an option agreement between the Company and the person to whom such Stock Option has been granted. The Compensation Committee shall have the power and authority, which need not be exercised uniformly among all grants, to set the terms and conditions of each grant of Stock Options except that the following terms and conditions shall apply to all Stock Options granted hereunder:

 

a. Non-qualified Options. All Stock Options granted under the Plan shall be non-qualified options, that is, Stock Options shall not be eligible for the tax treatment described in Section 422 of the Internal Revenue Code of 1986, as amended (the “Code”).

 

b. Exercise Price. Each Stock Option shall have a per Share exercise price equal to Fair Market Value as of the date the Stock Option is granted.

 

c. Term of Options. Each Stock Option shall have a term not to exceed ten (10) years from the date of grant.

 

d. Vesting Schedule. No Stock Option shall be immediately vested when granted. Each Stock Option shall be subject to a vesting schedule which vests such Stock Option over one or more Fiscal Years based on attainment of Performance Goals during such Fiscal Years. The vesting schedule may take into account exceptional performance in one or more years in determining vesting in other years. The number of Fiscal Years in a particular vesting schedule and the applicable Performance Goals shall be determined by the Compensation Committee.

 

e. No Exercise After Termination of Employment. Except as provided in Article VI, no Stock Option shall vest or be exercisable after a Key Employee ceases to be an employee of the Company.

 

3.8 Exercise of Stock Options. To the extent then vested, Stock Options may be exercised in whole or in part at any time or from time to time prior to the expiration date of such Stock Option. The Stock Option shall be exercised by delivery to the Company of a written notice of exercise setting forth the number of Stock Options to be exercised and indicating which one or combination of the following methods shall be used to pay the aggregate exercise price:

 

a. cash;

 

b. shares of Common Stock held by the Key Executive for more than six months prior to the relevant date; and/or

 

c. “cashless” exercise or interim broker loan. In the event a cashless exercise or interim broker loan arrangement is intended, the arrangements made shall be to the satisfaction of the Compensation Committee in its sole and complete discretion.

 

 

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Notwithstanding the notice of exercise and delivery of the exercise price, no certificates representing Shares of Common Stock shall be delivered to a Key Executive unless or until all applicable federal, state and local tax withholding and payroll taxes have been paid or appropriate arrangements satisfactory to the Committee made for payment or withholding. Any such withholding and payroll tax withholding obligations may be settled in cash paid by the Key Executive, reduction in the number of Shares of Common Stock issuable with respect to such exercise or a combination of the foregoing or any other reasonable means approved by the Compensation Committee.

 

3.9 Terms and Conditions of Restricted Stock. The Compensation Committee shall have authority and responsibility and all necessary discretion for granting shares of Restricted Stock under this Plan and setting the terms and conditions of each grant to the extent not inconsistent with the terms of this Plan. Each grant and the terms and conditions of that grant shall be evidenced by a restricted stock agreement between the Company and the person to whom such grant of Restricted Stock has been granted. The Compensation Committee shall have the power and authority, which need not be exercised uniformly among all grants, to set the terms and conditions of each grant of shares of Restricted Stock.

 

ARTICLE IV

 

OPERATION OF PLAN FOR NON-EMPLOYEE DIRECTORS

 

From time to time the Board may determine whether Stock Options or Restricted Stock shall be granted to Non-Employee Directors. If the Board determines that Stock Options or Restricted Stock shall be awarded to Non-Employee Directors, subject to the following limitations, the Compensation Committee shall determine the identity of the grantees, the number of Stock Options or shares of Restricted Stock to be awarded to each grantee and the terms and conditions of the grant:

 

1. All Stock Options granted to Non-Employee Directors shall be nonqualified options (as described in Section 3.7(a) above) and the exercise price shall be no less than the Fair Market Value on the date of grant.

 

2. Vesting schedules for Stock Options and restrictions applicable to shares of Restricted Stock shall be time-based only.

 

3. No Stock Option shall be exercisable after the tenth anniversary of the date of grant of that Stock Option.

 

4. In lieu of Section 6.1 and 6.2, if an optionee ceases to be a member of the Board for any reason other than death, disability or retirement with the consent of the majority of then members of the Board, his or her Stock Options shall cease to vest and shall cease to be exercisable four months after the date the optionee ceases to be a member of the Board. If an optionee ceases to be a member of the Board for reasons of death, disability or retirement with the consent of a majority of the members of the Board, his or her Stock Options shall cease to vest but any then vested Stock Options shall remain exercisable in accordance with the terms applicable on the date of grant.

 

5. The Change in Control provisions of Section 6.3 shall apply to all grants to Non-Employee Directors.

 

6. Each grant of Stock Options or Restricted stock shall be evidenced by an award agreement setting forth the terms and conditions of the award and which shall incorporate this Plan as it may be amended from time to time.

 

7. For Non-Employee Directors, the Company shall not withhold for income or payroll taxes on any exercised Stock Option or Shares delivered on the lapse of restrictions on shares of Restricted Stock.

 

ARTICLE V

 

Amendment or Termination of the Plan

 

The Board of Directors may, in its sole and complete discretion, terminate this Plan at any time or amend this Plan from time to time. No amendment shall adversely affect the rights of Key Employees or Non-Employee Directors hereunder with respect to then open Fiscal Years or Incentive Cycles or then outstanding Stock Options or Restricted Stock. Without the written consent of all Key Executives who had been provided an opportunity to earn Incentive Compensation during an open Fiscal Year or Incentive Cycle and/or all Key Executive and Non-Employee Directors who had been granted a Stock Option or Restricted Stock, no amendment or termination shall affect the rights of the Non-Employee Directors to exercise Stock Options or receive shares of Common Stock not subject to restrictions in accordance with the terms of the Stock Options or Restricted Stock or of those Key Executives to earn Incentive Compensation during open Fiscal Years or Incentive Cycles or to exercise Stock Options in accordance with their terms and each such opportunity shall be in full force and effect as if such amendment or termination had not taken place.

 

 

A-9

 

ARTICLE VI

 

SPECIAL CIRCUMSTANCES

 

6.1 Retirement or Disability. In the event of a Key Executive’s Retirement or Disability:

 

a. Each installment of Incentive Compensation earned for Incentive Cycles completed prior to the relevant event shall be paid to the Key Employee on the date such amounts would be distributable without regard to the Key Employee’s Retirement or Disability and no installment shall be forfeited;

 

b. the Compensation Committee may, in its discretion, permit the Key Executive to receive a pro rata portion of the cash as Annual Bonus or Units as Long Term Bonus or shares of Restricted Stock which otherwise would have been distributable to such Key Executive with respect to an open Fiscal Year or Incentive Cycle if the Performance Level actually achieved as of the date of his or her termination of employment had continued for the remainder of the Incentive Cycle; and

 

c. the Compensation Committee may, in its discretion, permit the exercise of any then outstanding Stock Option, to the extent then vested, for a period not to exceed two (2) years after such Retirement or Disability.

 

6.2 Death. In the event a Key Executive dies:

 

a. Each installment of Incentive Compensation earned for a Fiscal Year or Incentive Cycles completed prior to the Key Employee’s death shall be paid to his or her Beneficiary within one hundred twenty (120) days following the date of the Key Employee’s death;

 

b. the Compensation Committee may, in its discretion, permit the Key Executive’s Beneficiary to receive a pro rata portion of the cash as Annual Bonus and/or Units as Long Term Bonus and/or shares of Restricted Stock which otherwise would have been distributable to the Key Executive with respect to those open Fiscal Year and Incentive Cycles if the Performance Level actually achieved as of the date of his or her death had continued for the remainder of the Fiscal Year and/or Incentive Cycles; and

 

c. the Compensation Committee may, in its discretion, permit the exercise of any then outstanding Stock Option, to the extent then vested, for a period not to exceed one (1) year after such death.

 

6.3 Change in Control. In the event that (i) any person or group acting in concert acquires, other than from the Company, 20% or more of the outstanding voting securities of the Company, (ii) more than one third of the individuals comprising the Board at the beginning of an Incentive Cycle cease to be members of the Board of Directors during the Incentive Cycle (except a member who is replaced by a person nominated by the then Board shall not be considered under this subsection), (iii) the Company sells all or substantially all of its assets or (iv) such other event occurs which would constitute a change in control under rules promulgated by the Securities Exchange Commission, provided, however, notwithstanding the foregoing, no Change of Control shall be deemed to have occurred unless the events giving rise to the Change in Control would also constitute a change in control for the purposes of Section 409A of the Code and the regulations promulgated thereunder:

 

a. all Fiscal Year and/or Incentive Cycles then formed shall be deemed completed and the Performance Goals for each such period shall be deemed to be met at the greater of (i) Target or (ii) the level of achievement which would have been attained if actual performance to such time continued until the end of each such period;

 

b. all Stock Options shall be deemed vested and completely exercisable and all Performance Goals for each such Fiscal Year and/or Incentive Cycle shall be deemed met at the Superior Performance Level;

 

c. all unpaid installments of Incentive Compensation earned in prior years shall be vested and distributable and, in the case of deferred installments, as if the deferral period elected by the Key Employee had been completed; and

 

d. all Incentive Compensation of each Key Executive shall be distributed within ten (10) days of the happening of that event unless prior to the happening of the event giving rise to a change in control, such Incentive Compensation shall have been distributed.

 

6.4 Cause. In the event the Compensation Committee determines that a Key Executive has committed an act constituting Cause, the Compensation Committee may, in its discretion, declare that the Key Executive has forfeited the right to receive any installment of any Incentive Compensation under this Plan for the Incentive Cycle, without regard to whether or not the Key Executive’s employment has been terminated. Each agreement evidencing a Stock Option shall provide that such Stock Option, whether or not then vested, shall be void and no longer exercisable upon the occurrence of a termination for cause.

 

A-10

 

 

ARTICLE VII

 

MISCELLANEOUS

 

7.1 Non-Assignability. No right to Incentive Compensation which is or may be earned under this Plan shall be assignable or transferable by the Key Executive. During the life of the Key Executive, any distribution of Incentive Compensation made with respect to a Key Executive shall be made only to such Key Executive. Stock Options may be transferred by a Non-Employee Director if such transfer is permitted under the applicable option agreement.

 

7.2 Withholding Taxes. The Company shall have the right to withhold from any distribution to be made to a Key Executive under the terms of the Plan or with respect to an exercise of Stock Options an amount sufficient to satisfy the Company’s obligations under any federal, state and local withholding tax requirements applicable to such distribution.

 

7.3 No Right to Employment. Nothing in this Plan or any agreement entered into pursuant to it shall confer upon any Key Executive the right to continue in the employment of the Company or any Subsidiary or affect any right which the Company or any Subsidiary may have to terminate the employment of such Key Executive.

 

7.4 Non-Uniform Determinations. Since it is the intent of this Plan to reward extraordinary performance by the Key Executives, any determinations made by the Compensation Committee under this Plan (including without limitation determinations of Key Executives, Performance Goals, Units, Performance Levels and any other determination within the discretion of the Compensation Committee) need not be uniform and may be made by the Compensation Committee selectively among persons who receive, or are eligible to receive, Incentive Compensation under this Plan, whether or not such persons are similarly situated.

 

7.5 No Continuing Right to Participate. A Key Executive shall not have any right to receive Incentive Compensation for an Incentive Cycle merely because he or she was granted an opportunity to earn Incentive Compensation for a prior Incentive Cycle. The right to participate in the Plan shall be subject to a new determination by the Compensation Committee each Incentive Cycle, and participation in the Plan during any one Incentive Cycle shall not confer any rights with respect to any subsequent Incentive Cycle.

 

7.6 Unfunded Plan. The Plan shall at all times be entirely unfunded and no provision shall at any time be made with respect to segregating assets of the Company for distribution of any Incentive Compensation hereunder. No Key Executive, Non-Employee Director or other person shall have any interest in any particular assets of the Company by reason of participation in this Plan. Key Executives (or their Beneficiaries, if applicable) shall have only the rights of a general unsecured creditor of the Company with respect to the Incentive Compensation payable under the Plan.

 

7.7 Effect on Other Compensation Plans. Any amounts distributed to a Key Executive as an Incentive Compensation under this Plan shall be included, subject to limitations imposed under Section 401(a)(17) of the Internal Revenue Code of 1986, as amended, in the Key Executive’s compensation for purposes of determining his or her benefits under any retirement plan or other employee benefit plan of the Company.

 

7.8 Merger, Consolidation or Acquisition. The Plan shall be binding upon the Company, its assigns, and any successor Company which shall succeed to substantially all of its assets and business through merger, acquisition or consolidation, and each Key Executive and each Non-Employee Director and his or her Beneficiary, assigns, heirs, executors and administrators.

 

7.9 Applicable Law. This Plan shall be governed by the laws of the State of West Virginia, without regard to its principles of conflicts of laws and to the extent not pre-empted by federal laws. Any provision of this Plan prohibited by the law of any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such prohibition without invalidating the remaining provisions hereof.

 

7.10 Captions. The captions of Articles and Sections of this Plan are for the convenience of reference only and shall not control or affect the meaning or construction of any of its provisions.

 

7.11 Shares of Common Stock Reserved for Issuance under the Plan. The number of shares of Common Stock reserved for issuance under the Plan shall be 1,800,000, no more than 300,000 of which shall be grants of Restricted Stock, and such numbers shall be adjusted as necessary or appropriate as determined by the Compensation Committee in the event of a substantial corporate event which affects the number of shares of Common Stock then outstanding.

 

7.12 Compliance with Securities Laws. The Compensation Committee may hold certificates in connection with any distribution, attach legends to certificates, require representations for Key Executives and Non-Employee Directors (or Beneficiaries, if appropriate) and take such other actions (including, but not limited to, forming a subcommittee of the Compensation Committee comprised only of disinterested persons, as described above, to act in connection with the Plan) as the Committee deems necessary or advisable to ensure or enhance compliance by the Plan, the Company and all Key Executives with applicable federal and state securities laws.

 

 

A-11

 

 

TO RECORD THE adoption of this WesBanco, Inc. Key Executive Incentive Bonus, Option & Restricted Stock Plan, as amended and restated, by the Board of Directors at a meeting duly called and held with a quorum present throughout, the Company has caused the execution hereof by its duly authorized officer on behalf of itself and each of its subsidiaries on the date indicated.

 

	
Attest:

	  WESBANCO, INC.
	  	  	  
	
/s/ Linda M. Woodfin

	

By:

	
/s/ Paul M. Limbert

	  Assistant Secretary	 	
Paul M. Limbert

	  	  	  
	  	
Title:

	
Chief Executive Officer

	  	  	  
	  	
Date:

	
February 25, 2010

 

A-12exhibit101.htm

Exhibit 10.1

CONTINENTAL AIRLINES, INC.

LONG TERM INCENTIVE AND RSU PROGRAM

(as amended and restated through March 11, 2010)

 

I.   PURPOSE OF PROGRAM

 

1.1 Purpose.  This Continental Airlines, Inc. Long Term Incentive and RSU Program (the “Program”) has been adopted by the Human Resources Committee of the Board of Directors of Continental Airlines, Inc., a Delaware corporation (the “Company”), to implement in part the Performance Award provisions of the Continental Airlines, Inc. Incentive Plan 2010 (as amended from time to time, the “Incentive Plan 2010”), and is intended to provide a method for attracting, motivating, and retaining key employees to assist in the development and growth of the Company and its Subsidiaries.  The Program and Awards hereunder shall be subject to the terms of the Incentive Plan 2010, including the limitations on the maximum amount of compensation that may be paid with respect to Performance Awards (as such term is defined in the Incentive Plan 2010) as provided therein.

 

II.   DEFINITIONS AND CONSTRUCTION

 

2.1 Definitions.  Where the following words and phrases are used in the Program, they shall have the respective meanings set forth below, unless the context clearly indicates to the contrary:

 

(a) “Administrator” means the Committee or the Chief Executive Officer of the Company (if the Chief Executive Officer is a director of the Company), subject to the provisions of Section 3.1.

 

(b) “Award” means, with respect to each Participant for a Performance Period, such Participant’s opportunity to earn a Payment Amount for such Performance Period, upon the satisfaction of the terms and conditions of the Program.  Awards shall relate to an LTIP Performance Target (“LTIP Awards”) or a Profit Based RSU Performance Target (“Profit Based RSU Awards”).  Awards hereunder constitute Performance Awards (as such term is defined in the Incentive Plan 2010) under the Incentive Plan 2010.

 

(c) “Award Notice” means a written notice issued by the Company to a Participant evidencing such Participant’s receipt of an Award with respect to a Performance Period.

 

(d) “Base Amount” means, with respect to a Participant, the sum of (i) the Participant’s base annual salary payable by the Company or a Subsidiary, plus (ii) an additional amount equal to the amount described in clause (i) multiplied by the Participant’s Base Amount Multiple.

 

(e) “Base Amount Multiple” means, with respect to a Participant who receives an LTIP Award for an LTIP Performance Period, the percentage established by the Committee as the Base Amount Multiple with respect to such Award pursuant to Section 3.1.

 

(f) “Basis Point” means one one-hundredth of one percent (0.01%).

 

(g) “Board” means the Board of Directors of the Company

 

(h) “Cash Hurdle” means, with respect to an LTIP Performance Period or a Profit Based RSU Performance Period, the dollar amount established by the Committee as the Cash Hurdle with respect to such Performance Period pursuant to Section 3.1, and achievement of the Cash Hurdle means (i) in the case of an LTIP Performance Period, that the Company’s cash, cash equivalents and short term investments (excluding restricted cash, cash equivalents and short term investments) at the end of such Performance Period, as reflected on the regularly prepared and publicly available balance sheet of the Company and its consolidated subsidiaries prepared in accordance with applicable accounting rules, is equal to or greater than the dollar amount established by the Committee as the Cash Hurdle for such Performance Period, and (ii) in the case of a Profit Based RSU Performance Period, that the Company’s cash, cash equivalents and short term investments (excluding restricted cash, cash equivalents and short term investments) at the end of the Fiscal Year prior to the applicable Specified Payment Date (the “Cash Hurdle Measurement Date”), as reflected on the regularly prepared and publicly available balance sheet of the Company and its consolidated subsidiaries prepared in accordance with applicable accounting rules, is equal to or greater than the dollar amount established by the Committee as the Cash Hurdle for such Performance Period.

 

(i) “Change in Control” means a “Change in Control” as defined in the Incentive Plan 2010 as in effect on the date the Incentive Plan 2010 is approved by the stockholders of the Company.

 

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

 

(k) “Committee” means a committee of the Board comprised solely of two or more outside directors (within the meaning of the term “outside directors” as used in section 162(m) of the Code).  Such committee shall be the Human Resources Committee of the Board unless and until the Board designates another committee of the Board to serve as the Committee.

 

(l) “Company” means Continental Airlines, Inc., a Delaware corporation.

 

(m) “Company Stock” means the Class B common stock, par value $0.01 per share, of the Company.

 

(n) “Cumulative Profit Sharing Pool” means, with respect to the last day of a Fiscal Year in a Profit Based RSU Performance Period, the aggregate amount of the Profit Sharing Pools, if any, for such Fiscal Year and for all prior Fiscal Years in such Profit Based RSU Performance Period.

 

(o) “Cumulative Profit Sharing Pool Target” means, with respect to a Profit Based RSU Performance Period, the dollar amount established by the Committee as the Cumulative Profit Sharing Pool Target with respect to such Performance Period pursuant to Section 3.1.  The Committee may set multiple levels (including through interpolation) for the Cumulative Profit Sharing Pool Target that may apply to a single Profit Based RSU Performance Period (and each such level is referred to herein as a “Cumulative Profit Sharing Pool Target Level”), and the Payout Structure relating to the Profit Based RSU Award for such Performance Period may specify different Profit Based RSU Payment Percentages depending on the Cumulative Profit Sharing Pool Target Level achieved (including the interpolation of Profit Based RSU Payment Percentages if the Cumulative Profit Sharing Pool Target Levels include interpolated levels).  Achievement of a Cumulative Profit Sharing Pool Target means that, as of the last day of a Fiscal Year in the Profit Based RSU Performance Period, the Cumulative Profit Sharing Pool equals or exceeds a Cumulative Profit Sharing Pool Target Level that has not been so achieved as of the last day of any prior Fiscal Year in such Profit Based RSU Performance Period (and the Cumulative Profit Sharing Pool Target shall be deemed achieved for such Fiscal Year only with respect to the highest such Cumulative Profit Sharing Pool Target Level so achieved for such Fiscal Year).

 

(p) “Disability” or “Disabled” means, with respect to a Participant, that such Participant is, by reason of any medically determinable physical or mental impairment that can be expected to result in death or can be expected to last for a continuous period of not less than 12 months, receiving income replacement benefits for a period of not less than three months under an accident and health plan covering employees of such Participant’s employer.

 

(q) “EBITDAR” means, with respect to the Company and each company in the Industry Group and each LTIP Performance Period, the aggregate earnings of the Company or such company and its consolidated subsidiaries during the Performance Period, determined prior to the charges, costs, and expenses associated with interest, income taxes, depreciation, amortization, and aircraft rent.  EBITDAR shall be determined based on the regularly prepared and publicly available statements of operations of the Company and each company in the Industry Group prepared in accordance with applicable accounting rules (and if necessary to determine certain items, based on Form 41 data filed by the Company or such company with the Department of Transportation); provided, however, that EBITDAR shall be adjusted to exclude (i) non-operating income or expense, (ii) write-offs of assets (including aircraft and associated parts), (iii) one-time gains or losses from the disposal of assets, and (iv) any other item of gain, loss, or expense determined to be special, extraordinary or unusual in nature or infrequent in occurrence, in each case under clauses (i), (ii), (iii) and (iv) as determined by the Committee in accordance with applicable accounting rules.  If the fiscal year of a company in the Industry Group is not the calendar year, then such company’s EBITDAR for an LTIP Performance Period shall be determined based upon the fiscal quarters of such company that coincide with the fiscal quarters contained in such Performance Period. Further, if a company in the Industry Group provides publicly available statements of operations with respect to its airline business that are separate from the statements of operations provided with respect to its other businesses, then such company’s EBITDAR shall be determined based solely upon the separately provided statements of operations pertaining to its airline business.

 

(r) “EBITDAR Margin” means, with respect to the Company and each LTIP Performance Period, the cumulative EBITDAR for the Company for such Performance Period divided by the Company’s cumulative revenues (determined on a consolidated basis based on the regularly prepared and publicly available statements of operations of the Company prepared in accordance with applicable accounting rules) over such Performance Period; provided, however, that, such cumulative revenues shall be adjusted to exclude any item determined to be special, extraordinary or unusual in nature or infrequent in occurrence as determined by the Committee in accordance with applicable accounting rules.

 

(s) “Eligible Employee” means any individual who is a staff vice president or more senior officer of the Company or a Subsidiary.

 

(t) “Entry EBITDAR Margin” means, with respect to each LTIP Performance Period, the percentage determined by dividing (i) the cumulative EBITDAR of all companies in the Industry Group for such Performance Period by (ii) all such companies’ cumulative revenues (determined as provided in Section 2.1(r) with respect to the Company) over such Performance Period.  If the fiscal year of a company in the Industry Group is not the calendar year, then such company’s cumulative revenues for an LTIP Performance Period shall be determined based upon the fiscal quarters of such company that coincide with the fiscal quarters contained in such Performance Period.  Further, if a company in the Industry Group provides publicly available statements of operations with respect to its airline business that are separate from the statements of operations provided with respect to its other businesses, then such company’s cumulative revenues shall be determined based solely upon the separately provided statements of operations pertaining to its airline business.

 

(u) “Entry Level LTIP Percentage” means, with respect to each Participant who receives an LTIP Award for an LTIP Performance Period, the percentage established by the Committee as the Entry Level LTIP Percentage for such Participant with respect to such Award pursuant to Section 3.1.

 

(v) “Fiscal Year” means each 12-consecutive month period commencing on January 1.

 

(w) “Incentive Plan 2010” means the Continental Airlines, Inc. Incentive Plan 2010, as amended from time to time.

 

(x) “Industry Group” means, with respect to each LTIP Performance Period, the companies determined in accordance with the provisions of Article V for such Performance Period.

 

(y) “LTIP Performance Period” means each three-year period commencing on the first day of a calendar year that begins on or after January 1, 2010.  Notwithstanding the foregoing, no new LTIP Performance Period shall commence on or after the date upon which a Change in Control occurs, unless otherwise determined by the Committee.

 

(z) “Market Value per Share” means, as of any specified date, the simple average of the closing sales prices of Company Stock in the principal securities market in which the Company Stock is then traded over the 20 most recent consecutive Trading Days ending on the last Trading Day preceding the specified date, adjusted appropriately by the Committee for any stock splits, stock dividends, reverse stock splits, special dividends or other similar matters occurring during or with respect to any relevant measurement period.

 

(aa) “Maximum Aggregate Payment Amount” means an amount equal to the product of (i) the Profit Based RSU Payment Percentage applicable to the highest Cumulative Profit Sharing Pool Target Level established by the Committee with respect to such Award multiplied by (ii) a dollar amount determined by the Committee in its sole discretion; provided, however, that the Committee may, in its sole discretion, determine whether or not to establish a Maximum Aggregate Payment Amount with respect to any particular RSU.  The Maximum Aggregate Payment Amount, if any, with respect to an RSU subject to an outstanding Profit Based RSU Award shall be subject to appropriate adjustment by the Committee for any stock splits, stock dividends, reverse stock splits, special dividends or other similar matters relating to Company Stock occurring after the date of grant of such Award.

 

(bb) “Participant” means an Eligible Employee who has received an Award under the Program with respect to a Performance Period pursuant to Section 4.1.

 

(cc) “Payment Amount” (A) with respect to LTIP Awards means, with respect to each Participant and each LTIP Performance Period for which the LTIP Performance Target is satisfied, an amount equal to (i) such Participant’s Base Amount in effect as of the earlier of (1) the last day of such LTIP Performance Period, (2) the date of such Participant’s death, Disability or Retirement, or (3) the day immediately preceding the date upon which such Participant suffers a Qualifying Event on or after the occurrence of a Change in Control, multiplied by (ii) the Payout Percentage applicable to such Participant for such LTIP Performance Period, and (B) with respect to each Profit Based RSU Award and related Profit Based RSU Performance Period, means each amount payable pursuant to Section 6.2(b), 6.3(b) and 6.4(b).  Notwithstanding the foregoing, a Payment Amount may be pro-rated as provided in the Program.

 

(dd) “Payout Percentage” means, with respect to each Participant for an LTIP Performance Period for which the LTIP Performance Target is satisfied, a percentage, determined as of the earlier of (i) the last day of such Performance Period, (ii) the date of such Participant’s death, Disability or Retirement, or (iii) the day immediately preceding the date upon which such Participant suffers a Qualifying Event on or after the occurrence of a Change in Control, equal to such Participant’s Entry Level LTIP Percentage plus (A) if the Company’s EBITDAR Margin with respect to such Performance Period exceeds the Entry EBITDAR Margin with respect to such Performance Period, an additional percentage equal to (x) such Participant’s Target Level LTIP Percentage divided by (y) the difference between the Target EBITDAR Margin with respect to such Performance Period and the Entry EBITDAR Margin with respect to such Performance Period (expressed in Basis Points), for each Basis Point that the Company’s EBITDAR Margin with respect to such Performance Period exceeds the Entry EBITDAR Margin with respect to such Performance Period, up to and including the Target EBITDAR Margin with respect to such Performance Period, and (B) if the Company’s EBITDAR Margin with respect to such Performance Period exceeds the Target EBITDAR Margin with respect to such Performance Period, an additional percentage equal to (x) such Participant’s Stretch Level LTIP Percentage divided by (y) the difference between the Stretch EBITDAR Margin with respect to such Performance Period and the Target EBITDAR Margin with respect to such Performance Period (expressed in Basis Points), for each Basis Point that the Company’s EBITDAR Margin with respect to such Performance Period exceeds the Target EBITDAR Margin with respect to such Performance Period, up to and including the Stretch EBITDAR Margin with respect to such Performance Period.

 

(ee) “Payout Structure” means, with respect to each Profit Based RSU Performance Period, a Profit Based RSU Payment Percentage determined by the Committee to apply to each Cumulative Profit Sharing Pool Target Level relating to such Performance Period.  The Payout Structure for each Profit Based RSU Performance Period shall be established by the Committee pursuant to Section 3.1.

 

(ff) “Performance Period” means an LTIP Performance Period or a Profit Based RSU Performance Period, as applicable or as the context requires.

 

(gg) “Performance Target” means (A) with respect to an LTIP Performance Period, that (1) the Cash Hurdle with respect to such Performance Period has been achieved, and (2) the Company’s EBITDAR Margin with respect to such Performance Period equals or exceeds the Entry EBITDAR Margin with respect to such Performance Period (clauses (A)(1) and (2) together, the “LTIP Performance Target”), and (B) with respect to a Profit Based RSU Performance Period, that, as of the last day of a Fiscal Year in such Performance Period, the Cumulative Profit Sharing Pool Target for such Performance Period has been achieved (clause (B), the “Profit Based RSU Performance Target”).

 

(hh) “Profit Based RSU Payment Percentage” means, with respect to each Profit Based RSU Performance Period, the percentage of the RSUs subject to the related Profit Based RSU Award for which payments may be made under the Program upon achievement of a particular Cumulative Profit Sharing Pool Target Level relating to such Performance Period.  The Profit Based RSU Payment Percentages for a Profit Based RSU Performance Period shall be determined by the Committee in connection with the Committee’s determination of the Payout Structure for such Performance Period.

 

(ii) “Profit Based RSU Performance Period” means each period established by the Committee pursuant to Section 3.1 that consists of one or more consecutive Fiscal Years that begin on or after January 1, 2010.

 

(jj) “Profit Sharing Pool” means, with respect to each Fiscal Year, the “Annual Award Pool” for such Fiscal Year determined under the Company’s broad-based profit sharing plan (the “PSP”) as in effect on the 90th day of the Profit Based RSU Performance Period that includes such Fiscal Year, calculated assuming that all workgroups (other than officers and management level employees at Grade 46 and above) are participating; provided, however, that any Minor Pool (as defined in the PSP) with respect to a Fiscal Year that ended prior to the beginning of any Profit Based RSU Performance Period shall not be included in the Profit Sharing Pool with respect to a Fiscal Year in such Performance Period.

 

(kk) “Program” means this Continental Airlines, Inc. Long Term Incentive and RSU Program, as amended from time to time.

 

(ll) “Qualifying Event” means, with respect to a Participant, the termination of such Participant’s employment with the Company under circumstances which would permit such Participant to receive a Termination Payment or Monthly Severance Amount (as such terms are defined in such Participant’s employment agreement), or similar payment, pursuant to any contract of employment between such Participant and the Company or any Subsidiary.

 

(mm) “Retirement,” “Retires” or “Retired” means retirement of a Participant from employment with the Company pursuant to the provisions of the Continental Retirement Plan, as amended from time to time.

 

(nn) “RSUs” means the method of denominating Profit Based RSU Awards, which shall be granted in whole numbers and which are denominated in Company Stock for purposes of Incentive Plan 2010.  The number of RSUs subject to an outstanding Profit Based RSU Award shall be subject to appropriate adjustment by the Committee for any stock splits, stock dividends, reverse stock splits, special dividends or other similar matters relating to Company Stock occurring after the date of grant of such Award and during or with respect to the applicable Performance Period.

 

(oo) “Section 16” means Section 16 of the Securities Exchange Act of 1934, as amended (including any successor section to the same or similar effect).

 

(pp) “Specified Payment Date” means, with respect to a Profit Based RSU Performance Target that is achieved for any Profit Based RSU Performance Period as of the last day of a Fiscal Year, (i) with respect to a payment under Section 6.2(b)(i) for such Fiscal Year, the first day of the 3rd month following the end of such Fiscal Year, (ii) with respect to a payment under Section 6.2(b)(ii) for such Fiscal Year, the first day of the 15th month following the end of such Fiscal Year, and (iii) with respect to a payment under Section 6.2(b)(iii) for such Fiscal Year, the first day of the 27th month following the end of such Fiscal Year.  With respect to each Fiscal Year during a Profit Based RSU Performance Period for which a Profit Based RSU Performance Target is achieved, the Specified Payment Date referred to in clause (i) of the preceding sentence is referred to herein as the “First Specified Payment Date,” the Specified Payment Date referred to in clause (ii) of the preceding sentence is referred to herein as the “Second Specified Payment Date,” and the Specified Payment Date referred to in clause (iii) of the preceding sentence is referred to herein as the “Third Specified Payment Date.”  Notwithstanding the foregoing, a Specified Payment Date may be deferred as provided in Section 6.2(b).

 

(qq) “Stretch EBITDAR Margin” means, with respect to an LTIP Performance Period, the percentage established by the Committee to be the Stretch EBITDAR Margin with respect to such Performance Period pursuant to Section 3.1, which shall be expressed as the Target EBITDAR Margin plus that number of Basis Points established by the Committee pursuant to Section 3.1.

 

(rr) “Stretch Level LTIP Percentage” means, with respect to each Participant who receives an LTIP Award for an LTIP Performance Period, the percentage established by the Committee as the Stretch Level LTIP Percentage for such Participant with respect to such Award pursuant to Section 3.1.

 

(ss) “Subsidiary” for purposes of participation in the Program means any entity (other than the Company) with respect to which the Company, directly or indirectly through one or more other entities, owns equity interests possessing 50 percent or more of the total combined voting power of all equity interests of such entity (excluding voting power that arises only upon the occurrence of one or more specified events).

 

(tt) “Target EBITDAR Margin” means, with respect to an LTIP Performance Period, the percentage established by the Committee to be the Target EBITDAR Margin with respect to such Performance Period pursuant to Section 3.1, which shall be expressed as the Entry EBITDAR Margin plus that number of Basis Points established by the Committee pursuant to Section 3.1.

 

(uu) “Target Level LTIP Percentage” means, with respect to each Participant who receives an LTIP Award for an LTIP Performance Period, the percentage established by the Committee as the Target Level LTIP Percentage for such Participant with respect to such Award pursuant to Section 3.1.

 

(vv) “Trading Day” means a day during which trading in securities generally occurs in the principal securities market in which Company Stock is traded.

 

2.2 Number, Gender, Headings, and Periods of Time.  Wherever appropriate herein, words used in the singular shall be considered to include the plural, and words used in the plural shall be considered to include the singular.  The masculine gender, where appearing in the Program, shall be deemed to include the feminine gender.  The headings of Articles, Sections, and Paragraphs herein are included solely for convenience.  If there is any conflict between such headings and the text of the Program, the text shall control.  All references to Articles, Sections, and Paragraphs are to the Program unless otherwise indicated.  Any reference in the Program to a period or number of days, weeks, months, or years shall mean, respectively, calendar days, calendar weeks, calendar months, or calendar years unless expressly provided otherwise.

 

III.   ADMINISTRATION

 

3.1 Administration by the Administrator.  The Program shall be administered by the Administrator, so that (i) Awards made to, and the administration (or interpretation of any provision) of the Program as it relates to, any person who is subject to Section 16, shall be made or effected by the Committee, and (ii) Awards made to, and the administration (or interpretation of any provision) of the Program as it relates to, any person who is not subject to Section 16, shall be made or effected by the Chief Executive Officer of the Company (or, if the Chief Executive Officer is not a director of the Company, the Committee), unless the Program specifies that the Committee shall take specific action (in which case such action may only be taken by the Committee) or the Committee (as to any Award described in this clause (ii) or the administration or interpretation of any specific provision of the Program) specifies that it shall serve as Administrator.  Notwithstanding the foregoing, the Committee may from time to time in its discretion put any conditions and restrictions on the powers that may be exercised by the Chief Executive Officer of the Company in his or her capacity as Administrator.  The action of a majority of the members of the Committee will be the act of the Committee.

 

The Committee may from time to time in its discretion establish in writing for purposes of the Program a Profit Based RSU Performance Period that consists of one or more consecutive Fiscal Years.  The Committee shall, within 90 days after the first day of each Performance Period commencing on or after January 1, 2010 (but in no event after the date required for a performance goal to be considered preestablished under section 162(m) of the Code), establish in writing for purposes of the Program: (i) for LTIP Awards, (A) the applicable Target EBITDAR Margin and Stretch EBITDAR Margin (such that at all times the Stretch EBITDAR Margin shall be higher than the Target EBITDAR Margin, which in turn shall be higher than the Entry EBITDAR Margin) and the Cash Hurdle for each such Performance Period and (B) the Base Amount Multiple, Entry Level LTIP Percentage, Target Level LTIP Percentage and Stretch Level LTIP Percentage for each Participant with respect to such Performance Period, and (ii) for Profit Based RSU Awards, the Cash Hurdle, the Cumulative Profit Sharing Pool Target Levels (including the Cumulative Profit Sharing Pool Target Level that shall apply for purposes of Section 6.4(b)), the related Payout Structure for such Performance Period and the Maximum Aggregate Payment Amount, if any, applicable to the RSUs subject to such Award.  The targets and other amounts established by the Committee pursuant to the preceding sentence shall in each case be subject to adjustment as determined by the Committee in its discretion as a result of changes in accounting principles and other significant extraordinary items or events; provided that in respect of any Award intended to qualify as performance-based compensation within the meaning of section 162(m) of the Code, such adjustments may only be made if and to the extent permitted by section 162(m) of the Code.

 

3.2 Powers of the Administrator.  The Administrator shall supervise the administration and enforcement of the Program according to the terms and provisions hereof and shall have the sole discretionary authority and all of the powers necessary to accomplish these purposes.  The Administrator (which shall be limited solely to the Committee with respect to clauses (e), (f), (g), (h), (i) and (j) below and as described in clause (c) below) shall have all of the powers specified for it under the Program, including, without limitation, the power, right, or authority: (a) to designate an Eligible Employee as a Participant with respect to a Performance Period at any time prior to the last day of such period, (b) from time to time to establish rules and procedures for the administration of the Program, which are not inconsistent with the provisions of the Program or the Incentive Plan 2010, and any such rules and procedures shall be effective as if included in the Program, (c) to construe in its discretion all terms, provisions, conditions and limitations of the Program and any Award, and to determine the number of RSUs subject to a Profit Based RSU Award to a Participant (which determination with respect to any person who is subject to Section 16 shall be made only by the Committee), (d) to correct any defect or to supply any omission or to reconcile any inconsistency that may appear in the Program in such manner and to such extent as the Administrator shall deem appropriate, (e) to determine the Target EBITDAR Margin, the Stretch EBITDAR Margin, the Cumulative Profit Sharing Pool Target Levels and the Participant Base Amount Multiples, Entry Level LTIP Percentages, Target Level LTIP Percentages and Stretch Level LTIP Percentages with respect to each relevant Performance Period, (f) to determine the Cash Hurdle for each relevant Performance Period, (g) to determine the Payout Structure and the Maximum Aggregate Payment Amount, if any, for each Profit Based RSU Award, (h) to make determinations as to whether the Performance Targets for the various Performance Periods were satisfied, (i) to make determinations as to whether the Cash Hurdles for the various Profit Based RSU Performance Periods were satisfied, (j) to certify in writing, prior to the payment of any amount under the Program with respect to a Performance Period, whether the Performance Targets relating to such Performance Period and any other material terms of the Program have in fact been satisfied, and (k) to make all other determinations necessary or advisable for the administration of the Program. The Administrator may correct any defect or supply any omission or reconcile any inconsistency in the Program or in any Award or Award Notice in the manner and to the extent it shall deem expedient to carry it into effect.

 

3.3 Administrator Decisions Conclusive; Standard of Care.  The Administrator shall, in its sole discretion exercised in good faith (which, for purposes of this Section 3.3, shall mean the application of reasonable business judgment), make all decisions and determinations and take all actions necessary in connection with the administration of the Program.  All such decisions, determinations, and actions by the Administrator shall be final, binding, and conclusive upon all persons.  However, in the event of any conflict in any such determination as between the Committee and the Chief Executive Officer of the Company, each acting in its or his capacity as Administrator of the Plan, the determination of the Committee shall be conclusive. The Administrator shall not be liable for any action or determination taken or made in good faith or upon reliance in good faith on the records of the Company or information presented to the Administrator by the Company’s officers, employees, or other persons (including the Company’s outside auditors) as to matters the Administrator reasonably believes are within such other person’s professional or expert competence.  If a Participant disagrees with any decision, determination, or action made or taken by the Administrator, then the dispute will be limited to whether the Administrator has satisfied its duty to make such decision or determination or take such action in good faith.  No liability whatsoever shall attach to or be incurred by any past, present or future stockholders, officers or directors, as such, of the Company or any of its Subsidiaries, under or by reason of the Program or the administration thereof, and each Participant, in consideration of receiving benefits and participating hereunder, expressly waives and releases any and all claims relating to any such liability.

 

IV.   PARTICIPATION AND AWARD NOTICES

 

4.1 Participation.  Each individual who is an Eligible Employee on the first day of a Performance Period shall automatically be a Participant and receive an Award with respect to such Performance Period, unless otherwise determined by the Administrator prior to the first day of the relevant Performance Period.  LTIP Awards shall be made with respect to LTIP Performance Periods and Profit Based RSU Awards shall be made with respect to Profit Based RSU Performance Periods.  Each individual who becomes an Eligible Employee after the first day of a Performance Period shall become a Participant and receive an Award with respect to such Performance Period only if such individual is selected prior to the last day of such Performance Period by the Administrator in its sole discretion for participation in the Program with respect to such Performance Period.  Unless otherwise determined by the Administrator, Payment Amounts with respect to an LTIP Award for an individual who becomes a Participant with respect to such Award after the first day of the related Performance Period shall be pro-rated based on a fraction, the numerator of which is (except as otherwise provided in Section 6.3 or Section 6.4) the number of days during the period beginning on the date of such Participant’s commencement of participation in the Program for such Performance Period and ending on the last day of such Performance Period, and the denominator of which is the total number of days in such Performance Period.  In addition, unless otherwise determined by the Administrator, Payment Amounts under Section 6.2(b) with respect to an individual who becomes a Participant with respect to a Profit Based RSU Performance Period after the first day of such Performance Period shall be pro-rated based on a fraction, the numerator of which is (except as otherwise provided in Section 6.3) the number of days during the period beginning on the date of such Participant’s commencement of participation in the Program for such Performance Period and ending on the date of the applicable payment under Section 6.2(b), and the denominator of which is (except as otherwise provided in Section 6.3) the number of days in the period beginning on the first day of the relevant Profit Based RSU Performance Period and ending on the date of the applicable payment under Section 6.2(b).

 

4.2 Award Notices.  The Company shall provide an Award Notice to each Eligible Employee who becomes a Participant with respect to a Performance Period within 90 days after such Eligible Employee becomes such a Participant.  With respect to Profit Based RSU Awards to a Participant, the Administrator shall determine in each case the number of RSUs subject to the Award as of the date of grant of the Award.  Each Award Notice with respect to a Profit Based RSU Award shall specify (a) the Performance Period to which the Award relates, (b) the applicable Cumulative Profit Sharing Pool Target Levels and Cash Hurdle, (c) the number of RSUs subject to the Award as of the date of grant of the Award, and (d) the Payout Structure and the Maximum Aggregate Payment Amount, if any, applicable to the Award.  Each Award Notice with respect to an LTIP Award shall specify (A) the Performance Period to which the Award relates, (B) the applicable Cash Hurdle, Target EBITDAR Margin and Stretch EBITDAR Margin, (C) the applicable Base Amount Multiple, and (D) the applicable Payout Percentages set forth in Section 2.1(dd) hereof with respect to the Participant applicable upon the date of grant of the Award.

 

V.   INDUSTRY GROUP

 

5.1 Initial Designation.  The Industry Group shall consist of Alaska Air Group, Inc., AMR Corporation, Delta Air Lines, Inc., Southwest Airlines Co., UAL Corporation, and US Airways Group, Inc.; provided, however, that (a) within 90 days after the first day of each LTIP Performance Period, the Committee may in its discretion add any United States certificated scheduled mainline air carrier to, or remove any such company from, the Industry Group for such Performance Period and (b) the Industry Group for each LTIP Performance Period shall be subject to adjustment as provided in Section 5.2.

 

5.2 Adjustments to the Industry Group During an LTIP Performance Period.  Except as provided in clause (a) of the proviso to Section 5.1, no company shall be added to, or removed from, the Industry Group for an LTIP Performance Period during such period; provided, however, that a company shall be removed from the Industry Group for an LTIP Performance Period if (a) during such period, (i) such company ceases to maintain publicly available statements of operations prepared in accordance with applicable accounting rules, (ii) such company is not the surviving entity in any merger, consolidation, or other non-bankruptcy reorganization (or survives only as a subsidiary of an entity other than a previously wholly owned subsidiary of such company), (iii) such company sells, leases, or exchanges all or substantially all of its assets to any other person or entity (other than a previously wholly owned subsidiary of such company), or (iv) such company is dissolved and liquidated, or (b) more than 20% of such company’s revenues (determined on a consolidated basis based on the regularly prepared and publicly available statements of operations of such company prepared in accordance with applicable accounting rules) for any fiscal year of such company that ends during such Performance Period are attributable to the operation of businesses other than such company’s airline business and such company does not provide publicly available statements of operations with respect to its airline business that are separate from the statements of operations provided with respect to its other businesses.

 

VI.   AWARD PAYMENTS

 

6.1 Determinations and Certification by the Committee.  As soon as administratively feasible after the end of each LTIP Performance Period, and as soon as administratively feasible after the end of each Fiscal Year in a Profit Based RSU Performance Period, as the case may be, the Committee shall determine whether the applicable Performance Target for such Performance Period has been met (including, with respect to a Profit Based RSU Performance Period, the Cumulative Profit Sharing Pool Target Level, if any, that has been achieved) and whether any other material terms relating to the payment of the related Awards have been satisfied.  As soon as administratively feasible on or before each Specified Payment Date under Section 6.2(b), the Committee shall determine whether the Cash Hurdle for any Cash Hurdle Measurement Date related to such Specified Payment Date has been met.  The Committee’s determination as to whether the applicable Performance Target for a Performance Period, the Cash Hurdle for a Cash Hurdle Measurement Date and any other material terms relating to the payment of the related Awards have been satisfied shall be certified by the Committee in writing (including by electronic mail transmission) and delivered to the Secretary of the Company.  For purposes of the preceding sentence, approved minutes of the Committee meeting in which the certification is made shall be treated as a written certification.  Notwithstanding the foregoing, each written certification by the Committee (including a certification by electronic email transmission) under this Section 6.1 shall be made by a date which will permit the Company to comply with the time of payment requirements of Sections 6.2 and 6.3 (after giving effect to the provisions of Section 6.7).

 

6.2 Eligibility for Payment of Awards.  Subject to the delayed payment restrictions of Section 6.6, payments with respect to Awards shall be made as follows:

 

(a) LTIP Awards.  Upon the Committee’s written certification in accordance with Section 6.1 that the applicable LTIP Performance Target for an LTIP Performance Period and any other material terms relating to the payment of the related Awards have been satisfied, each Participant who has received an Award with respect to the relevant Performance Period for which the related Performance Target and other material terms have been satisfied, who has remained continuously employed by the Company from the date he or she received such Award until the last day of such Performance Period and who has not surrendered such Award to the Company shall be entitled to the Payment Amount applicable to such Participant’s Award for such Performance Period.  Except as provided in Section 6.3(a) and Section 6.4(a), if a Participant’s employment with the Company terminates for any reason whatsoever prior to the last day of an LTIP Performance Period, then such Participant shall not be entitled to receive any payment under the Program with respect to his or her Award for such Performance Period, unless otherwise determined by the Administrator or otherwise provided in the Participant’s employment agreement with the Company.  Payment of the amount to which a Participant becomes entitled pursuant to this Section 6.2(a) shall be made by the Company on or before the 15th day of the third calendar month following the end of the applicable Performance Period.

 

(b) Profit Based RSU Awards.  If the Committee certifies in writing in accordance with Section 6.1 that a Profit Based RSU Performance Target has been achieved as of the last day of a Fiscal Year in a Profit Based RSU Performance Period, then each Participant who has received an Award with respect to such Performance Period for which the related Performance Target and other material terms (including the relevant Cash Hurdle for the Cash Hurdle Measurement Date) have been satisfied shall receive the following payments with respect to the achievement of such Performance Target as of the last day of such Fiscal Year, provided that such Participant remains continuously employed by the Company from the date he or she received such Award until the date of payment specified below:

 

(i)           on the First Specified Payment Date for such Fiscal Year, a payment in an amount equal to (A) one third of the number of RSUs subject to such Award as of such Specified Payment Date multiplied by (B) the Profit Based RSU Payment Percentage applicable to the Cumulative Profit Sharing Pool Target Level achieved at the end of such Fiscal Year multiplied by (C) the Market Value per Share as of such First Specified Payment Date;

 

(ii)           on the Second Specified Payment Date for such Fiscal Year, a payment in an amount equal to (A) one third of the number of RSUs subject to such Award as of such Specified Payment Date multiplied by (B) the Profit Based RSU Payment Percentage applicable to the Cumulative Profit Sharing Pool Target Level achieved at the end of such Fiscal Year multiplied by (C) the Market Value per Share as of such Second Specified Payment Date; and

 

(iii)           on the Third Specified Payment Date for such Fiscal Year, a payment in an amount equal to (A) one third of the number of RSUs subject to such Award as of such Specified Payment Date multiplied by (B) the Profit Based RSU Payment Percentage applicable to the Cumulative Profit Sharing Pool Target Level achieved at the end of such Fiscal Year multiplied by (C) the Market Value per Share as of such Third Specified Payment Date.

 

Notwithstanding the foregoing, if the Cash Hurdle for the relevant Profit Based RSU Performance Period has not been achieved as of an applicable Specified Payment Date set forth above and been certified by the Committee in writing in accordance with Section 6.1, then such Specified Payment Date shall be deferred and shall be deemed to occur on the next annual anniversary date of the original Specified Payment Date for which the Committee certifies in writing in accordance with Section 6.1 that such Cash Hurdle was achieved; provided, however, that if such Cash Hurdle is not so achieved on or before the first day of the 87th month following the end of the Fiscal Year to which such Specified Payment Date relates, then no payment shall be made under this Section 6.2(b) for such Specified Payment Date with respect to the related Profit Based RSU Award.  Except as provided in Section 6.3(b) and Section 6.4(b), if a Participant’s employment with the Company terminates for any reason whatsoever prior to a payment date specified in this Section 6.2(b), then such Participant shall not be entitled to receive any payment with respect to his or her Profit Based RSU Award for such payment date or for any subsequent payment date, unless otherwise determined by the Administrator or otherwise provided in the Participant’s employment agreement with the Company.

 

Notwithstanding the preceding provisions of this Section 6.2(b) or the provisions of Sections 6.3(b) and 6.4(b), in no event shall the aggregate payments under the Program to a Participant with respect to an RSU subject to a Profit Based RSU Award exceed an amount equal to the Maximum Aggregate Payment Amount, if any, applicable to such RSU.  To the extent that any payment provided under the Program with respect to an RSU (determined without regard to the limitation described in the preceding sentence) would, together with all prior payments made with respect to such RSU, exceed the limitation described in the preceding sentence, then such excess shall not be paid under the Program and the holder of such RSU shall have no rights or entitlements to any such excess amount.

 

6.3 Death, Disability or Retirement.

 

(a)           LTIP Awards.  Except as provided in Section 6.4(a) and except as specifically provided in a Participant’s employment agreement or retirement agreement with the Company, if during an LTIP Performance Period with respect to which a Participant has received an Award, such Participant dies or becomes Disabled or Retires, then as to such Participant only (i) the Administrator, with respect to each LTIP Performance Period that began prior to the date of such Participant’s death, Disability or Retirement and which has not ended as of such date, shall as promptly as practicable determine (based on publicly available data with respect to each LTIP Performance Period that began prior to the date of such Participant’s death, Disability or Retirement and which has not ended as of such date) the Company’s EBITDAR Margin and the Entry EBITDAR Margin through the most recent practicable date and the Company’s cash flow through the most recent practicable date, and the Company’s resulting cash, cash equivalents and short term investments, excluding restricted cash, cash equivalents and short term investments at the most recent practicable date, and shall determine, based on such data and publicly available data with respect to the companies contained in the Industry Group (and, if deemed appropriate by the Administrator, annualizing or otherwise making assumptions with respect to any relevant data), whether the Company has achieved the relevant LTIP Performance Target through such most recent practicable date (and if so, the LTIP Performance Target shall be deemed to have been met, as to such Participant only), and (ii) the provisions of Sections 6.1 and 6.2(a) shall cease to apply with respect to each such Performance Period.  Except as provided in Section 6.4(a) and except as specifically provided in a Participant’s employment agreement or retirement agreement with the Company, with respect to each LTIP Performance Period that began prior to the date of such Participant’s death, Disability or Retirement and which has not ended as of such date with respect to which the LTIP Performance Target has been satisfied in the manner described in clause (i) of the preceding sentence, such Participant (or, in the case of death, such Participant’s estate) shall (A) receive a payment from the Company, within five business days after the determination by the Administrator referred to in clause (i) of the foregoing sentence (but in no event later than March 15 of the calendar year following the calendar year in which occurred the Participant’s death, Disability or Retirement), equal to the relevant Payment Amount applicable to such Participant’s LTIP Award for such LTIP Performance Period multiplied by a fraction, the numerator of which is the number of days during the period beginning on the date of such Participant’s commencement of participation in the Program for such LTIP Performance Period and ending on the date such Participant died, became Disabled or Retired, and the denominator of which is the number of days in the entire LTIP Performance Period, and (B) not be entitled to any additional payment under the Program with respect to such LTIP Performance Period.

 

(b)           Profit Based RSU Awards.  Except as provided in Section 6.4(b) and except as specifically provided in a Participant’s employment agreement or retirement agreement with the Company, if during a Profit Based RSU Performance Period with respect to which a Participant has received an Award (or after such Performance Period has ended but prior to the date such Participant has received all payments to which such Participant may have otherwise been entitled to under Section 6.2(b) if such Participant had continued to be employed by the Company), such Participant dies or becomes Disabled or Retires, then, as to such Participant only, such Participant shall receive a payment on the Applicable Specified Payment Date (as defined below) in an amount equal to the aggregate remaining individual payments (each, an “Individual Payment”) that such Participant would have otherwise received with respect to such Award pursuant to the provisions of Section 6.2(b) determined as if such Participant had remained continuously employed by the Company until the applicable payment date and assuming that the Cash Hurdle applicable to each such Individual Payment was achieved at the earliest relevant time, except that:

 

(A)           each such Individual Payment shall be multiplied by a fraction, the numerator of which is the number of days during the period beginning on the date of such Participant’s commencement of participation in the Program for the relevant Profit Based RSU Performance Period and ending on the date such Participant died, became Disabled or Retired, and the denominator of which is the number of days in the period beginning on the first day of the relevant Profit Based RSU Performance Period and ending on the earliest date after the date such Participant died, became Disabled or Retired as of which payment of such Individual Payment could have been made under Section 6.2(b) (determined based upon the assumption that the Cash Hurdle applicable to such payment was satisfied); and

 

(B)           no payments shall be made to or for the benefit of such Participant with respect to any Profit Based RSU Performance Target that is achieved with respect to a Fiscal Year that begins after the date of such Participant’s death, Disability or Retirement.

 

For purposes of the preceding sentence, the “Applicable Specified Payment Date” means, with respect to each relevant Profit Based RSU Performance Period, the Specified Payment Date next occurring (and for which the Cash Hurdle was actually achieved) with respect to such Performance Period after the Fiscal Year in which the Participant died, became Disabled or Retired.

 

Notwithstanding the foregoing, except as specifically provided in a Participant’s employment agreement or retirement agreement with the Company, (1) if a Change in Control occurs after the date of such Participant’s death, Disability or Retirement, then each payment to which such Participant may still be entitled to pursuant to the preceding provisions of this Section 6.3(b) as of the date of such Change in Control that has not previously been paid to such Participant shall be paid to such Participant within five business days after the date of such Change in Control, and (2) each such payment shall be determined in the manner described in such provisions, except that the amount of such payment shall be based on the Market Value per Share as of the date of such Change in Control (rather than as of the date specified in Section 6.2(b)).

 

6.4 Change in Control.

 

(a) LTIP Awards.  Upon the occurrence of a Change in Control, with respect to each Participant who is employed by the Company on the day immediately preceding the date of such Change in Control, (i) the LTIP Performance Targets, including achievement of the Stretch EBITDAR Margin, for each relevant Performance Period that began prior to the date of such Change in Control and which has not ended as of such date shall be deemed to have been satisfied, and (ii) the provisions of Sections 6.1, 6.2(a) and 6.3(a) shall cease to apply with respect to each such Performance Period.

 

If a Change in Control occurs during an LTIP Performance Period, then, on or before the Applicable Payment Date (as defined below) following the end of each calendar year in such LTIP Performance Period ending on or after the date of such Change in Control, each Retirement Eligible Participant (as defined below) with respect to such calendar year who has received an LTIP Award with respect to such LTIP Performance Period shall receive a payment from the Company equal to (i) the Payment Amount applicable to such Participant’s LTIP Award for such LTIP Performance Period (determined as if such Participant had Retired on the last day of such calendar year) multiplied by a fraction, the numerator of which is the number of days during the period beginning on the date of such Participant’s commencement of participation in the Program for such LTIP Performance Period and ending on the last day of such calendar year, and the denominator of which is the number of days in the entire LTIP Performance Period, minus (ii) the aggregate payments, if any, made to such Participant pursuant to this paragraph with respect to prior calendar years.  For purposes of the preceding sentence, (A) the “Applicable Payment Date” with respect to a calendar year shall mean the fifteenth day of the third calendar month following the end of such year (or, in the case of the last calendar year in an LTIP Performance Period, such term shall mean the fifth business day after the end of such year), and (B) a Participant shall be considered a “Retirement Eligible Participant” with respect to a calendar year if such Participant was eligible to Retire during such year and did not suffer a Qualifying Event, die, become Disabled or Retire during such year.

 

If a Change in Control occurs and on the date thereof or thereafter during an LTIP Performance Period described in the first paragraph of this Section 6.4(a) a Participant who has received an LTIP Award with respect to such LTIP Performance Period suffers a Qualifying Event or subsequent to the Change in Control dies, becomes Disabled, or Retires, then, with respect to each such LTIP Performance Period, such Participant (or, in the case of death, such Participant’s estate) shall (i) within five business days after the occurrence of the Qualifying Event, death, Disability or Retirement, receive a payment from the Company equal to (A) the Payment Amount applicable to such Participant’s LTIP Award for such LTIP Performance Period multiplied by a fraction, the numerator of which is the number of days during the period beginning on the date of such Participant’s commencement of participation in the Program for such LTIP Performance Period and ending on the date such Participant died, became Disabled, Retired or suffered the Qualifying Event, and the denominator of which is the number of days in the entire LTIP Performance Period, minus (B) the aggregate payments, if any, made or payable to such Participant pursuant to the second paragraph of this Section 6.4(a) with respect to calendar years that ended prior to the date of such Participant’s Qualifying Event, death, Disability or Retirement, and (ii) not be entitled to any additional payment under the Program with respect to such LTIP Performance Period (other than any unpaid amount owed to such Participant pursuant to the second paragraph of this Section 6.4(a) with respect to a calendar year that ended prior to the date of such Participant’s Qualifying Event, death, Disability or Retirement).

 

If a Change in Control occurs and a Participant who has received an Award with respect to an LTIP Performance Period described in the first paragraph of this Section 6.4(a) did not die, become Disabled, Retire or suffer a Qualifying Event during such Performance Period and such Participant remained continuously employed by the Company from the date he or she received such Award until the last day of such Performance Period, then, with respect to each such Performance Period, such Participant shall receive a payment from the Company within five business days after the last day of such Performance Period in an amount equal to (i) the Payment Amount applicable to such Participant’s Award for such Performance Period, minus (ii) the aggregate payments, if any, made or payable to such Participant pursuant to the second paragraph of this Section 6.4(a) with respect to such Award.

 

(b)           Profit Based RSU Awards.  Upon the occurrence of a Change in Control, (i) the Cash Hurdle for each Profit Based RSU Performance Period that began prior to the date of such Change in Control and for which a potential for payment under Sections 6.2(b) or 6.3(b) exists as of the date of such Change in Control shall be deemed to have been satisfied, and (ii) the Profit Based RSU Performance Targets for each Profit Based RSU Performance Period that began prior to the date of such Change in Control and which has not ended as of such date shall be deemed to have been satisfied for the Fiscal Year in which the Change in Control occurs at the Cumulative Profit Sharing Pool Target Level established by the Committee for purposes of this Section 6.4(b) at the time of grant of the related Award (provided that this clause (ii) shall not be applicable with respect to any such Profit Based RSU Performance Period if such Profit Based RSU Performance Target was satisfied in a Fiscal Year that ended prior to the Fiscal Year in which such Change in Control occurs at such Cumulative Profit Sharing Pool Target Level or a higher level).  Notwithstanding any provision in the Program to the contrary, upon the occurrence of a Change in Control, no Profit Based RSU Performance Target may be achieved with respect to a Fiscal Year that begins after the date of such Change in Control, and no payments shall be made to or for the benefit of any Participant with respect to any Profit Based RSU Performance Target that would have otherwise been achieved for any such Fiscal Year.

 

If a Change in Control occurs, then the provisions of Sections 6.2(b) and 6.3(b) shall continue to apply to the Profit Based RSU Performance Periods described in the preceding paragraph with the following modifications:

 

(i)           certification by the Committee under Section 6.1 of the achievement of the relevant Profit Based RSU Performance Target and Cash Hurdle shall not be required;

 

(ii)           the Payment Amount described in Section 6.2(b) as of each applicable Specified Payment Date that occurs after the date of such Change in Control shall be based on the Market Value per Share as of the date of such Change in Control (rather than the Market Value per Share as of such Specified Payment Date); and

 

(iii)           if on or after the occurrence of such Change in Control and prior to receiving all payments pursuant to Section 6.2(b) with respect to such Profit Based RSU Performance Periods a Participant who has received a Profit Based RSU Award with respect to such Profit Based RSU Performance Periods suffers a Qualifying Event or subsequent to the Change in Control dies, becomes Disabled, or Retires, then such Participant (or, in the case of death, such Participant’s estate) shall (A) within five business days after the occurrence of the Qualifying Event, death, Disability or Retirement, receive a payment from the Company equal to the aggregate of such remaining Payment Amounts, and (B) not be entitled to any additional payment under the Program with respect to such Payment Amounts; provided, however, that if a Participant who has received a Profit Based RSU Award with respect to such Profit Based RSU Performance Periods is eligible to Retire as of the date of such Change in Control or continues in employment with the Company after such Change in Control until the date such Participant first becomes eligible to Retire, and if such Participant does not suffer a Qualifying Event, die, become Disabled or Retire prior to such Participant’s Applicable Retirement Date (as defined below), then the payments described in the preceding provisions of this clause (iii) shall not be made following such Participant’s Retirement as provided above, but, rather, shall be made on or before the March 15 that next follows such Participant’s Applicable Retirement Date.

 

For purposes of clause (iii) of the preceding sentence, a Participant’s “Applicable Retirement Date” is the date that is five business days before March 15 of the calendar year next following the later of (x) the calendar year in which such Change in Control occurs or (y) the calendar year in which such Participant first became eligible to Retire.

 

6.5 Form of Payment of Awards.  All payments to be made under the Program to a Participant with respect to an Award shall be paid in a single lump sum payment in cash; provided, however, that, to the extent permitted and subject to any limitations under the Incentive Plan 2010 and applicable laws and securities exchange rules, the Committee may, in its sole discretion, direct that payment of Profit Based RSU Awards be made either (a) in shares of Company Stock, but if and only if at the time of payment the Company has an effective registration statement under the Securities Act of 1933, as amended, covering the issuance of Company Stock under the Program, or (b) in a combination of cash and/or shares of Company Stock.  If the Committee elects to direct the Company to pay all or a portion of a payment due for Profit Based RSU Awards in shares of Company Stock, then the number of shares of Company Stock shall be determined by multiplying (i) one third of the number of RSUs subject to such Award that are to be so paid in Company Stock by (ii) the Profit Based RSU Payment Percentage applicable to the Cumulative Profit Sharing Pool Target Level achieved with respect to the payment to be made in shares on the Specified Payment Date, rounding such number of shares down to the nearest whole share.  Notwithstanding the preceding provisions of this Section 6.5, if a payment to be made under the Program to a Participant with respect to a Profit Based RSU Award is limited due to the application of the Program limitations relating to the Maximum Aggregate Payment Amount, then such payment may not be made in shares of Company Stock.

 

6.6 Delayed Payment Restriction.  With respect to a Participant who is identified as a specified employee (within the meaning of section 409A(a)(2)(B)(i) of the Code and as determined by the Company in accordance with any of the methods permitted under the regulations issued under section 409A of the Code) and who is to receive a payment hereunder (which payment is not a “short-term deferral” for purposes of section 409A of the Code) on account of such Participant’s separation from service (within the meaning of section 409A(a)(2)(A)(i) of the Code and applicable administrative guidance thereunder, but excluding a separation from service by reason of death or Disability), the payment to such Participant shall not be made prior to the earlier of (a) the date that is six months after the Participant’s termination of employment or (b) the date of death of the Participant.  In such event, any payment to which the Participant would have otherwise been entitled during the first six months following the Participant’s termination of employment (or, if earlier, prior to the Participant’s date of death) shall be accumulated and paid in the form of a single lump sum payment to the Participant on the date that is six months after the Participant’s termination of employment or to the Participant’s estate on the date of the Participant’s death, as applicable.

 

6.7 Time of Payment Obligations.  Any obligation hereunder to make a payment on a specified date shall be deemed to have been satisfied in the event that such payment is made within five business days after such specified date; provided, however, that, with respect to a payment that is intended to qualify as a “short-term deferral” under section 409A of the Code, in no event shall such payment be made later than the date required in order for such payment to so qualify.

 

VII.   TERMINATION AND AMENDMENT OF PROGRAM

 

7.1 Termination and Amendment.  Subject to the terms of this Section 7.1, the Committee may amend the Program at any time and from time to time, and the Committee may at any time terminate the Program (in its entirety or as it applies to one or more specified Subsidiaries) with respect to Performance Periods that have not commenced as of the date of such Committee action; provided, however, that, (a) except as provided in the following sentence, the Program may not be amended in a manner that would impair the rights of any Participant with respect to any outstanding Award without the consent of such Participant, and (b) to the extent required by section 409A of the Code, the Program may not be amended or terminated in a manner that would give rise to an impermissible acceleration of the time or form of a payment of a benefit under the Program pursuant to section 409A(a)(3) of the Code and any regulations or guidance issued thereunder.  Notwithstanding anything in the Program or an Award Notice to the contrary, if the Committee determines that the terms of the Program and/or any Award Notice do not, in whole or in part, satisfy the requirements of section 409A of the Code (or the requirements for an exemption to the application of section 409A of the Code), then the Committee, in its sole discretion, may unilaterally modify the Program and any such Award Notice in such manner as it deems appropriate to comply with such section and any regulations or guidance issued thereunder (or to qualify for an exemption to the application of such section).  No Participant’s participation herein may be terminated in contemplation of or in connection with a Change in Control.  The Program may not be amended or terminated in contemplation of or in connection with a Change in Control unless adequate and effective provision for the making of all payments otherwise payable pursuant to Section 6.4 of the Program (as in effect on the date of the adoption of the Program by the Committee) with respect to such Change in Control shall be made in connection with any such amendment or termination.  The Committee shall remain in existence after the termination of the Program for the period determined necessary by the Committee to facilitate the termination of the Program and the payment of any outstanding Awards hereunder, and all provisions of the Program that are necessary, in the opinion of the Committee, for equitable operation of the Program during such period shall remain in force.

 

VIII.   MISCELLANEOUS PROVISIONS

 

8.1 No Effect on Employment Relationship.  Except as expressly provided otherwise herein, for all purposes of the Program, a Participant shall be considered to be in the employment of the Company as long as he or she has not incurred a separation from service with the Company and its affiliates within the meaning of section 409A(a)(2)(A)(i) of the Code and applicable administrative guidance issued thereunder; provided, however, that whether such a separation from service has occurred shall be determined based upon a reasonably anticipated permanent reduction in the level of bona fide services to be performed to no more than 20% (or 49% if the Participant will no longer serve as an officer of the Company) of the average level of bona fide services provided in the immediately preceding 36 months.  Nothing in the adoption of the Program, the grant of Awards, or the payment of amounts under the Program shall confer on any person the right to continued employment by the Company or any Subsidiary or affect in any way the right of the Company (or a Subsidiary, if applicable) to terminate such employment at any time.  Unless otherwise provided in a written employment agreement, the employment of each Participant shall be on an at-will basis, and the employment relationship may be terminated at any time by either the Participant or the Participant’s employer for any reason whatsoever, with or without cause.  Any question as to whether and when there has been a termination of a Participant’s employment for purposes of the Program, and the reason for such termination, shall be determined solely by and in the discretion of the Administrator, and its determination shall be final, binding, and conclusive on all parties.

 

8.2 Prohibition Against Assignment or Encumbrance.  No Award or other right, title, interest, or benefit hereunder shall ever be assignable or transferable, or liable for, or charged with any of the torts or obligations of a Participant or any person claiming under a Participant, or be subject to seizure by any creditor of a Participant or any person claiming under a Participant.  No Participant or any person claiming under a Participant shall have the power to anticipate or dispose of any Award or other right, title, interest, or benefit hereunder in any manner until the same shall have actually been distributed free and clear of the terms of the Program.  Payments with respect to an Award shall be payable only to the Participant (or (a) in the event of a Disability that renders such Participant incapable of conducting his or her own affairs, any payment due under the Program to such Participant shall be made to his or her duly appointed legal representative and (b) in the event of the death of a Participant, any payment due under the Program to such Participant shall be made to his or her estate). Notwithstanding the preceding provisions of this paragraph, the Administrator shall comply with the terms of any qualified domestic relations order (as defined in the Incentive Plan 2010) providing for the transfer or assignment of all or any portion of a Participant’s interest under the Program.  The provisions of the Program shall be binding on all successors and permitted assigns of a Participant, including without limitation the estate of such Participant and the executor, administrator or trustee of such estate, or any receiver or trustee in bankruptcy or representative of the Participant’s creditors.

 

8.3 Unfunded, Unsecured Program.  The Program shall constitute an unfunded, unsecured obligation of the Company to make payments of incentive compensation to certain individuals from its general assets in accordance with the Program.  Each Award granted under the Program merely constitutes a mechanism for measuring such incentive compensation and does not constitute a property right or interest in the Company, any Subsidiary, or any of their assets.  Neither the establishment of the Program, the granting of Awards, nor any other action taken in connection with the Program shall be deemed to create an escrow or trust fund of any kind.

 

8.4 No Rights of Participant.  No Participant shall have any security or other interest in any assets of the Company or any Subsidiary or in Company Stock as a result of participation in the Program (except after payment thereof to the Participant).  Participants and all persons claiming under Participants shall rely solely on the unsecured promise of the Company set forth herein, and nothing in the Program, an Award or an Award Notice shall be construed to give a Participant or anyone claiming under a Participant any right, title, interest, or claim in or to any specific asset, fund, entity, reserve, account, or property of any kind whatsoever owned by the Company or any Subsidiary or in which the Company or any Subsidiary may have an interest now or in the future; but each Participant shall have the right to enforce any claim hereunder in the same manner as a general creditor.  Neither the establishment of the Program nor participation hereunder shall create any right in any Participant to make any decision, or provide input with respect to any decision, relating to the business of the Company or any Subsidiary.

 

8.5 Tax Withholding.  The Company and the Subsidiaries shall deduct and withhold, or cause to be withheld, from a Participant’s payment, including the delivery of Company Stock, made under the Program, or from any other payment to such Participant, an amount necessary to satisfy any and all tax withholding obligations arising under applicable local, state, federal, or foreign laws associated with such payment.  The Company and the Subsidiaries may take any other action as may in their opinion be necessary to satisfy all obligations for the payment and withholding of such taxes.

 

8.6 No Effect on Other Compensation Arrangements.  Nothing contained in the Program or any Participant’s Award or Award Notice shall prevent the Company or any Subsidiary from adopting or continuing in effect other or additional compensation arrangements affecting any Participant.  Nothing in the Program shall be construed to affect the provisions of any other compensation plan or program maintained by the Company or any Subsidiary.

 

8.7 Subsidiaries.  The Company may require any Subsidiary employing a Participant to assume and guarantee the Company’s obligations hereunder to such Participant, either at all times or solely in the event that such Subsidiary ceases to be a Subsidiary.

 

8.8 Governing Law.  The Program shall be construed in accordance with the laws of the State of Texas.

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