Document:

Exhibit

NORTHROP GRUMMAN CORPORATION
EQUITY GRANT PROGRAM FOR NON-EMPLOYEE DIRECTORS
UNDER THE 
NORTHROP GRUMMAN 2011 LONG-TERM INCENTIVE STOCK PLAN
Amended and Restated Effective as of January 1, 2016 

		
	1.
	Purpose

(a)    The purpose of the Northrop Grumman Corporation Equity Grant Program for Non-Employee Directors (the “Program”) is to promote the long-term growth and financial success of Northrop Grumman Corporation (the “Company”) by attracting and retaining non-employee directors of outstanding ability and assisting the Company in promoting a greater identity of interest between the Company’s non-employee directors and its stockholders.
(b)    The Program is adopted and maintained under the Company’s 2011 Long-Term Incentive Stock Plan and any successor equity compensation plan of the Company (as each such plan may be amended from time to time, the “Equity Plan”).  The Program sets forth terms and conditions previously approved by the Company’s Board of Directors (the “Board”) with respect to the compensation of Eligible Directors (as defined below) for 2012 and will continue in effect for 2012 and, as amended from time to time, in subsequent years unless and until otherwise provided by the Company’s Board of Directors (the “Board”).  The term “Stock Units” as used in the Program and any provision of the Program applicable to such Stock Units refers only to Stock Units that are credited under the Program on or after January 1, 2012 (the “Effective Date”).  The Program as in effect at the time that Stock Units are awarded hereunder constitutes the award agreement evidencing the terms and conditions of the awards applicable to such Stock Units.  This Program does not affect any stock units or other awards granted prior to the Effective Date.  Unless otherwise provided by the Board, no awards will be granted to Eligible Directors under the Equity Plan on or after the Effective Date other than as provided under this Program.
(c)    Effective January 1, 2015 the Program provides for alternative investment options pursuant to Section 10 for certain compensation earned on or after January 1, 2015. 
		
	2.
	Term

The Program shall operate and shall remain in effect until terminated by action of the Board.
		
	3.
	Program Operation

The Program and transactions hereunder in respect of Company equity securities are intended to be exempt from Section 16(b) of the Securities Exchange Act of 1934 (the “1934 Act”) to the maximum extent possible under Rule 16b-3 promulgated thereunder.  Except as specifically provided for herein, the Program requires no discretionary action by any administrative body with regard to any transaction under the Program.  To the extent, if any, that any administrative or interpretive actions are required under the Program, such actions shall be undertaken by the Board or by the Compensation Committee of the Board (the “Compensation Committee”).
		
	4.
	Eligibility

Only directors of the Company who are not employees of the Company or any subsidiary of the Company (“Eligible Directors”) shall participate in the Program.
		
	5.
	Shares of Common Stock Subject to the Program

Shares of common stock of the Company (“Common Stock”) that are paid in settlement of Stock Units awarded under the Program shall be applied to reduce the maximum number of shares of Common Stock remaining available for issuance under the Equity Plan then in effect and giving effect to any applicable fungible or premium share-counting rules of such plan.
		
	6.
	Adjustments and Reorganizations

(a)    Upon (or, as may be necessary to effect the adjustment, immediately prior to): any reclassification, recapitalization, stock split (including a stock split in the form of a stock dividend) or reverse stock split; any merger, combination, consolidation, or other reorganization; any spin-off, split-up, or similar extraordinary dividend distribution in respect of the Common Stock; or any exchange of shares of Common Stock or other securities of the Company, or any similar, unusual or extraordinary corporate transaction in respect of the Common Stock; then the Board or Compensation Committee shall equitably and proportionately adjust (1) the number and type of shares of Common Stock (or other securities) that thereafter may be made the subject of Stock Units, (2) the number, amount and type of shares of Common Stock (or other securities or property) subject to any outstanding Stock Units, and/or (3) the securities, cash or other property deliverable upon payment of any outstanding Stock Units, in each case to the extent necessary to preserve (but not increase) the level of incentives intended by this Program and the then-outstanding Stock Units.  The Board or Compensation Committee may also prospectively make such similar appropriate adjustment in the calculation of Fair Market Value (as defined in Section 7) as it deems necessary to preserve (but not increase) Eligible Directors’ rights under the Program.
(b)    It is intended that, if possible, any adjustments contemplated by the preceding Section 6(a) be made in a manner that satisfies applicable legal, tax (including, without limitation and as applicable in the circumstances, Section 409A of the Internal Revenue Code of 1986, as amended (“Section 409A”)) and accounting (so as to not trigger any charge to earnings with respect to such adjustment) requirements.  Any good faith determination by the Board or Compensation Committee as to whether an adjustment is required in the circumstances pursuant to Section 6(a), and the extent and nature of any such adjustment, shall be conclusive and binding on all persons.
		
	7.
	Fair Market Value

Fair Market Value for all purposes under the Program shall mean the NYSE closing price of a share of Common Stock on the relevant date and if no shares of Common Stock are traded on the NYSE on such date then the NYSE closing price on the immediately preceding  trading day.
		
	8.
	Annual Retainer; Grants of Stock Units

(a)    The Board (or applicable committee thereof) shall establish what portion or amount, if any, of the annual retainer payable to each Eligible Director for services as a director (the “Annual Retainer”) will be paid in the form of shares of Common Stock (the “Stock Component”) and what portion or amount of the Annual Retainer will be paid in cash (the “Cash Component”). The Stock Component shall be compensation for services rendered for one year commencing with the Company’s Annual Meeting of Shareholders (the “Service Year”).  The Cash Component shall be compensation for services rendered during the calendar year, paid on a quarterly basis. 
(b)    As of the close of business on the day of the Company’s Annual Meeting of Shareholders, each Eligible Director’s account under the Program automatically will be credited with a number of Stock Units equal to the Stock Component for that Service Year divided by the Fair Market Value of a share of Common Stock on that date (the “Automatic Stock Units”). As used herein, a “Stock Unit” is a non-voting unit of measurement which is credited to a bookkeeping account and deemed for purposes of the Program to be equivalent in value to one outstanding share of Common Stock. The Stock Units shall be used solely as a device for the determination of any payment to eventually be made to the Eligible Director pursuant to Section 9.  Automatic Stock Units will vest on the first anniversary of the date of the Company’s Annual Meeting of Shareholders held for the year for which such Stock Component was granted, and, absent a valid election in accordance with Section 9(a), be payable on or within 30 days after the Eligible Director’s Separation from Service. Should any individual cease to serve as a director prior to the vesting date of his or her Automatic Stock Units on the first anniversary date, such individual shall be entitled to a pro rata portion of such Automatic Stock Units based on the number of calendar days that such individual served as a director during the Service Year for which such Automatic Stock Units were granted, which pro rata portion shall vest and become payable on the same date(s) as otherwise would have applied with respect to such Automatic Stock Units (including after giving effect to any election pursuant to Section 9(a) hereof).   
(c)    Absent a valid election in accordance with this Section 8(c), the Cash Component of the Annual Retainer earned for each calendar quarter, as well as any fees payable for service on Board committees, for service as lead independent director or for extraordinary services (the “Other Annual Retainers”) for such calendar quarter shall be payable to each Eligible Director as of the last day of each calendar quarter during the relevant year. For any Eligible Director who validly elects pursuant to this Section 8(c), all or any portion of the Cash Component and the Other Annual Retainers shall be payable in the form of a credit of Stock Units under the Program (collectively, the “Elective Stock Units”), which shall be credited as of the date that such amounts otherwise would have been payable in cash under the Program (each, a “Crediting Date”).  The number of Elective Stock Units to be credited pursuant to such election on a Crediting Date shall be determined by dividing the portion of the Annual Retainer and Other Annual Retainer that would have otherwise been paid in cash to the Eligible Director for the corresponding calendar quarter but for such an election by the Eligible Director, divided by the Fair Market Value of a share of Common Stock on that Crediting Date.  Any such election to receive Elective Stock Units in lieu of a cash payment under the foregoing proviso must be made on a form and in a manner prescribed by Company management prior to the beginning of the calendar year to which such Cash Component or Other Annual Retainers relate.   
(d)    Should any individual become an Eligible Director after the beginning of the Service Year or after the beginning of the calendar year, such Eligible Director shall be entitled to a pro rata Annual Retainer, with the amount of the Stock Component and the Cash Component proportionately reduced to reflect the number of calendar days that have elapsed between the beginning of the Service Year (with respect to the Stock Component) or the calendar year (with respect to the Cash Component), respectively, and the effective date of the individual’s election as an Eligible Director. Such pro-rated Stock Component shall be credited as Automatic Stock Units as of the effective date of the individual’s election as an Eligible Director and shall vest on the first anniversary of the date of the Company’s most recent Annual Meeting of Shareholders.  The number of Automatic Stock Units so credited to the Eligible Director’s account shall be equal to the pro-rated Stock Component divided by the Fair Market Value of a share of Common Stock on the effective date of the Eligible Director’s election to the Board.  Such pro-rated Cash Component shall be paid on the date that the relevant Cash Component would otherwise have been paid had the individual served as an Eligible Director during the entire calendar year. 
(e)    As a transition, each individual serving as an Eligible Director as of January 1, 2016 shall be credited with a number of Automatic Stock Units as of that date determined by dividing 138/363 of the Stock Component of the Annual Retainer by the Fair Market Value of a share of Common Stock on January 1, 2016, which Automatic Stock Units shall vest as of May 18, 2016 and shall be payable as provided in Section 9(a), subject to any valid election made by an Eligible Director pursuant to Section 9(a) no later than December 31, 2015.    
		
	9.
	Payment of Stock Units

(a)    All Stock Units shall be paid in an equivalent number of shares of Common Stock.  All Stock Units shall be paid on or within 30 days after the Eligible Director’s Separation from Service; provided, however, that an Eligible Director may  make an irrevocable election in advance to have all or any portion of any Stock Units paid (A) upon the earlier of (i) the Eligible Director’s Separation from Service or (ii) a calendar year specified by the Eligible Director in his or her election (which year may be no earlier than the year after the relevant year to which the deferred Annual Retainer or Other Annual Retainers, as the case may be, relate), or (B) in the case of Automatic Stock Units, upon the Automatic Stock Units’ vesting date.  Notwithstanding the foregoing, no Automatic Stock Units shall be paid before the date they otherwise vest pursuant to Section 8.  Any election to receive payment of Stock Units upon an event other than Separation from Service must be made on a form and in a manner prescribed by Company management by no later than December 31st of the calendar year before the start of the relevant Service Year (that is, before the calendar year in which the Eligible Director performs the services giving rise to Stock Units).  Notwithstanding the foregoing, an individual who first becomes an Eligible Director on or after January 1 of a calendar year shall be permitted to make an irrevocable election to receive payment of Automatic Stock Units upon an event other than Separation from Service provided that such election is made within 30 days after the date the individual becomes an Eligible Director and such election relates only to Automatic Stock Units attributable to services performed after the election.  If the Eligible Director makes such an election to receive payment upon an event that is earlier than Separation from Service and payment is triggered (1) by the occurrence of the specified calendar year, the applicable Stock Units will generally be paid in January of such calendar year, and shall in all cases be paid prior to the end of such calendar year, or (2) upon vesting or Separation from Service, the applicable Stock Units shall be paid on or within 30 days of such event.
(b)      Notwithstanding the foregoing Section 9(a), if an Eligible Director is a Key Employee as of his Separation from Service, any payment triggered by the Eligible Director’s Separation from Service shall be made on the first day of the seventh month following the date of his or her Separation from Service (or, if earlier, the date of his or her death).  Such payment shall be subject to adjustment as provided in Section 6 and shall be in complete satisfaction of such Stock Units.  For the avoidance of doubt, an Eligible Director shall continue to be eligible to receive additional credits of Stock Units as dividend equivalents pursuant to Section 12 during any period of time payment of the Eligible Director’s Stock Units is delayed pursuant to this Section 9(b). 
(c)    For purposes of this Program, the following terms shall have the meanings indicated below:
Affiliated Company.  The Company and any other entity related to the Company under the rules of section 414 of the Code.  The Affiliated Companies include Northrop Grumman Corporation and its 80%-owned subsidiaries and may include other entities as well.
Key Employee.  A director or an employee treated as a “specified employee” under Code section 409A(a)(2)(B)(i) of the Company or an Affiliated Company (i.e., a key employee (as defined in Code section 416(i) without regard to paragraph (5) thereof)) if the Company’s or an Affiliated Company’s stock is publicly traded on an established securities market or otherwise.  The Company shall determine in accordance with a uniform Company policy which participants are Key Employees as of each December 31 in accordance with IRS regulations or other guidance under Section 409A.  Such determination shall be effective for the twelve (12) month period commencing on April 1 of the following year.
Separation from Service.  A “separation from service” within the meaning of Section 409A.
(d)    Section 6 of the 2011 Long-Term Incentive Stock Plan (addressing certain change in control events) shall apply to the Stock Units; provided that no modification to the timing of payment of the Stock Units shall be made unless the requirements of Treas. Reg. Section 1.409A-3(j)(4)(ix) (“plan terminations and liquidations”), or any successor provision thereto, are satisfied and such modification would not result in any tax, penalty or interest under Section 409A.
		
	10.
	Elective Deferrals

(a)     Eligible Directors shall be provided with the opportunity to elect to defer all or a portion of their Eligible Compensation, at the time and in the form and manner set forth below.  To be effective, any deferral election must be filed by the deadline established by Company management, which shall be no later than December 31st of the calendar year before the calendar year in which the services giving rise to the Eligible Compensation to be deferred will be performed.  An individual who becomes an Eligible Director on or after January 1 of a calendar year shall not be eligible to defer any portion of Eligible Compensation during that calendar year.  Deferral election forms shall be in such form, and shall be filed and revoked in such manner as Company management shall from time to time determine.  In addition, the Board may establish such minimum deferral amounts, specified percentages of Eligible Compensation that may be deferred, and similar requirements and limitations, as it may determine to be appropriate for convenience of administration of the Program.  
(b)    The Board shall cause Company management to establish and maintain an Elective Deferral Account for each Eligible Director who elects to defer Eligible Compensation earned on or after January 1, 2015, pursuant to Section 10(a) above.  On the last day of each calendar quarter, the Elective Deferral Account of each person who is an Eligible Director as of such date shall be credited with his or her Elective Deferral Amount (if any) for such calendar quarter.
(c)    Company management shall from time to time establish one or more bookkeeping investment funds (each, an "Investment Fund") based upon such criteria as it may from time to time determine.  Company management shall establish procedures to permit Eligible Directors to make Investment Elections from time to time indicating in which of the available Investment Funds their Elective Deferral Accounts shall be deemed invested.  Company management shall cause Eligible Director’s Elective Deferral Account to be adjusted upwards or downwards, at such intervals as it may from time to time determine, to reflect the net investment return (whether positive or negative) of the particular Investment Fund(s) elected; provided, that no Elective Deferral Account may at any time have a balance less than zero.
(d)    For purposes of this Program, the following terms shall have the meanings indicated below:
Elective Deferral Account.  A bookkeeping account for an Eligible Director representing the Eligible Compensation that the Eligible Director has elected to defer under Section 10(a) of the Program, as adjusted to reflect earnings, losses, contributions and distributions in accordance with Section 10(c) and Section 11 of the Program.
Elective Deferral Amount.  An amount of Eligible Compensation that an Eligible Director elects to defer under and in accordance with Section 10(a) of the Program.
Eligible Compensation.  With respect to any calendar quarter, the portion of an Eligible Director’s Cash Component and Other Annual Retainers payable for such quarter, less any portion of such amount for such quarter which the Eligible Director elects to receive in the form of Elective Stock Units in accordance with Section 8(c).
Investment Election.  An election by an Eligible Director to have Elective Deferral Amounts invested in an Investment Fund.  Investment Elections shall be made on a form and in the manner prescribed by Company management. 
		
	11.
	Payment of Elective Deferrals

(a)    The balance of an Eligible Director’s Elective Deferral Account shall be paid in a single distribution within 30 days following such Eligible Director’s Separation from Service, unless: (i) the Eligible Director has elected an alternative time of payment under Section 11(b) or (ii) a later date is required by Section 11(e).
(b)    In lieu of the default time of payment set forth in Section 11(a), an Eligible Director may elect to receive a distribution of all or a portion of his Elective Deferral Account at the earlier of Separation from Service or a calendar year specified by the Eligible Director.  Any such election must be made in accordance with the procedures set forth in Section 11(d).  A distribution scheduled to be made due to the Eligible Director’s Separation from Service shall be made within 30 days of such Separation from Service.  A distribution scheduled to be made in a specified calendar year shall be made no later than December 31st of such calendar year.
(c)    All distributions from an Eligible Director’s Elective Deferral Account shall be made in cash.
(d)    Company management shall establish rules and procedures for an Eligible Director to file a distribution election form on which such Eligible Director may make a distribution election, subject to the following requirements and restrictions:
(1)    A distribution election form must be filed by the deadline established by Company management, which shall be no later than December 31st of the calendar year before the calendar year in which the Eligible Director will perform the services giving rise to the Annual Retainer (or Other Annual Retainer, if applicable) to be deferred;
(2)    A distribution election applies only with respect to deferrals for the calendar year for which the distribution election form is filed.  If an Eligible Director wishes to make a distribution election for amounts deferred in subsequent calendar years, a new distribution election form must be filed for each calendar year by the deadline described in Section 11(d)(1), above; and
(3)    A distribution election is irrevocable once the distribution election form is filed.
In addition, Company management may establish rules for designating a beneficiary, and such other rules, limitations and conditions as Company management determines to be appropriate, subject to the requirements and restrictions set forth above.
(e)    If an Eligible Director is a “specified employee” (as determined by the Company in accordance with Section 409A(a)(2)(B) of the Code and Treas. Reg. § 1.409A-1(i)), any amount that becomes payable under this Section 11 as a result of the Eligible Director’s Separation from Service shall be paid on the later of (a) the payment date prescribed by this Section 11, and (b) the first day of the seventh month that begins after the Eligible Director’s Separation from Service.
(f)    If an Eligible Director dies before the balance of his Elective Deferral Account is fully distributed, the remaining balance of the Eligible Director’s Elective Deferral Account shall be distributed (in the form such balance would have been paid to such Eligible Director) to his beneficiary within 90 days after the Eligible Director’s death.
(g)    Section 6 of the Equity Plan (addressing certain change in control events) shall apply to Elective Deferral Accounts; provided that no modification to the timing of payment shall be made unless the requirements of Treas. Reg. Section 1.409A-3(j)(4)(ix) (“plan terminations and liquidations”), or any successor provision thereto, are satisfied and such modification would not result in any tax, penalty or interest under Section 409A.
		
	12.
	Dividend Equivalents

No later than sixty (60) days following each date that the Company pays an ordinary cash dividend on its outstanding Common Stock (if any ordinary cash dividends are paid), for which the related record date occurs on or after the Effective Date and prior to all of the Eligible Director’s Stock Units being paid pursuant to Section 9, the Eligible Director’s Stock Unit account shall be credited with additional Stock Units equal to (i) the number of outstanding and unpaid Stock Units credited to such account as of such record date, multiplied by (ii) the amount of the ordinary cash dividend paid by the Company on a share of Common Stock, divided by (iii) the Fair Market Value of a share of the Common Stock as of such record date.  Any Stock Units credited pursuant to the foregoing provisions of this Section 12 shall be subject to the same payment and other terms and conditions as the original Stock Units to which they relate.
		
	13.
	Restrictions on Transfer

Stock Units shall be nontransferable and shall not be assignable, alienable, saleable or otherwise transferable by an Eligible Director other than by will or the laws of descent and distribution or pursuant to a qualified domestic relations order.  An Eligible Director may designate a beneficiary or beneficiaries to receive any distributions under the Program, including distributions of Elective Deferral Accounts, upon the death of the Eligible Director.
		
	14.
	Issuance of Certificates

(a)    On each payment date described in Section 9, the Company shall deliver to the Eligible Director a number of shares of Common Stock (either by delivering one or more certificates for such shares or by entering such shares in book entry form, as determined by the Company in its discretion) equivalent to the number of Stock Units which are payable under the Program with respect to such payment date.
(b)    Whenever under the terms of the Program a fractional share would be required to be issued, the fractional share shall be rounded up to the next full share.
(c)    All shares of Common Stock delivered under the Program shall be subject to such stop-transfer orders and other restrictions as the Company may deem advisable or legally necessary under any laws, statutes, rules, regulations and other legal requirements, including those of any stock exchange upon which the Common Stock is then listed and any applicable Federal, state or foreign securities law.
(d)    Anything to the contrary herein notwithstanding, the Company shall not be required to issue any shares of Common Stock under the Program if, in the opinion of legal counsel, the issuance and delivery of such shares would constitute a violation by the Eligible Director or the Company of any applicable law or regulation of any governmental authority, including, without limitation, Federal and state securities laws, or the regulations of any stock exchange on which the Company’s securities may then be listed.
		
	15.
	Program Amendment

The Board may suspend or terminate the Program or any portion of the Program.  The Board may also amend the Program if deemed to be in the best interests of the Company and its stockholders; provided, however, that (a) no such amendment may impair any Eligible Director’s right regarding any outstanding grants or Stock Units, Elective Deferral Accounts, or other right to receive shares or cash payments under the Program without his or her consent, and (b) no such amendment may cause the Program not to comply with Rule 16b-3, or any successor rule, under the 1934 Act.
		
	16.
	Unfunded Program

The Program shall be unfunded and shall not create (or be construed to create) a trust or a separate fund or funds.  The Program shall not establish any fiduciary relationship between the Company and any Eligible Director or other person.  To the extent any person holds any rights by virtue of an award granted under the Program, such rights (unless otherwise determined by the Board) shall be no greater than the rights of an unsecured general creditor of the Company.
		
	17.
	Future Rights

Neither the Program, nor the granting of Common Stock nor any other action taken pursuant to the Program, shall constitute or be evidence of any agreement or understanding, express or implied, that the Company will retain an Eligible Director for any period of time, or at any particular rate of compensation.  Nothing in this Program shall in any way limit or affect the right of the Board or the stockholders of the Company to remove any Eligible Director or otherwise terminate his or her service as a director of the Company.
		
	18.
	Governing Law

The Program and all rights and obligations under the Program shall be governed by, and construed in accordance with, the laws of the State of Delaware and applicable Federal law.
		
	19.
	Successors and Assigns

The Program shall be binding on all successors and assigns of an Eligible Director, including, without limitation, the estate of such Eligible Director and the executor, administrator or trustee of such estate, or any receiver or trustee in bankruptcy or representative of the Eligible Director’s creditors.
		
	20.
	Rights as a Stockholder

The Eligible Director in whose name any shares of Common Stock have been issued pursuant to this Program shall have all of the rights of a stockholder with respect to such shares, including the right to vote the Common Stock and receive dividends and other distributions made on the Common Stock.  Shares of Common Stock issued in respect of Stock Units credited under the Program shall be fully paid and non-assessable.
		
	21.
	Construction

The Program shall be construed and interpreted to comply with, and avoid any tax or penalty or interest under, Section 409A.  Notwithstanding Section 15 above, the Company reserves the right to amend the Program and any outstanding grants or deferrals under the Program to the extent it reasonably determines is consistent with and necessary in order to preserve the intended tax consequences of the Stock Units and amounts deferred in Elective Deferral Accounts, in light of Section 409A and any regulations or other guidance promulgated thereunder.

1Exhibit 10.1

 

WATTS WATER TECHNOLOGIES, INC.

MANAGEMENT STOCK PURCHASE PLAN

 

Amended and Restated as of October 27, 2015

 

I.                                        INTRODUCTION

 

The purpose of the Watts Water Technologies, Inc. Management Stock Purchase Plan (the “Plan”) is to provide equity incentive compensation to selected management employees of Watts Water Technologies, Inc. (the “Company”) and its subsidiaries.  Participants in the Plan may elect to receive restricted stock units (“RSUs”) in lieu of a portion of their annual incentive bonus.  Each RSU represents the right to receive one share of the Company’s Class A Common Stock (the “Stock”) upon the terms and conditions stated herein.  RSUs are granted at a discount of 20% from the fair market value of the Stock on the Valuation Date (as defined in Subsection IV(B) below).  Vested RSUs will be settled in shares of Stock after a period of deferral selected by the participant, or upon termination of employment, if earlier.

 

The Plan is intended to comply with Section 409A of the Internal Revenue Code of 1986, as amended (the “Code”) and the guidance promulgated thereunder (“Section 409A”).  The Plan should be interpreted in a manner to comply with Section 409A, including that all uses of the terms “termination of employment” and “terminates his/her employment” shall mean a “separation from service” within the meaning of Treasury Regulation 1.409A-1(h).  In addition, this Plan is a “top hat plan” subject to certain provisions of the Employee Retirement Income Security Act of 1974.

 

II.                                   ADMINISTRATION

 

The Plan shall be administered by the Compensation Committee of the Board of Directors of the Company (the “Committee”).  Each member of the Committee shall be a “non-employee director” within the meaning of Rule 16b-3 promulgated under the Securities Exchange Act of 1934, as amended (the “Act”).  The Committee shall have complete discretion and authority with respect to the Plan and its application, except as

 

 

expressly limited herein.  Determinations by the Committee shall be final and binding on all parties with respect to all matters relating to the Plan.

 

III.                              ELIGIBILITY

 

Management employees of the Company and its subsidiaries as designated by the Committee shall be eligible to participate in the Plan.

 

IV.                               PARTICIPATION

 

A.                                    Restricted Stock Units.  Participation in the Plan shall be based on the award of RSUs.  Each RSU awarded to a participant shall be credited to a bookkeeping account established and maintained for that participant.

 

B.                                    Valuation of RSUs; Fair Market Value of Stock.  The value of each RSU, for purposes of the Plan, shall be determined as follows:  The “Cost” of each RSU shall be equal to 80% of the fair market value of the Stock on the relevant Valuation Date.  The “Valuation Date” for each year is the date that is the third business day after the date that the Company releases its year-end earnings to the public.  The “Value” of each RSU shall be equal to its Cost plus simple interest per annum on such amount at the one-year U.S. Treasury Bill rate (as published in The Wall Street Journal) in effect on the Valuation Date and each anniversary thereof.  For all purposes of the Plan, the “fair market value of the Stock” on any given date shall mean the last reported sale price at which Stock is traded on such date or, if no Stock is traded on such date, the most recent date on which Stock was traded, as reflected on the New York Stock Exchange.

 

C.                                    Election to Participate.  Each year, each participant may elect to receive an award of RSUs under the Plan in lieu of a portion of any bonus payable for the subsequent calendar year by completing a Bonus Deferral and RSU Subscription Agreement (“Subscription Agreement”).  The Subscription Agreement shall provide that the participant elects to receive RSUs in lieu of a specified portion of any annual incentive bonus to be earned in the following calendar year.  Such portion may be expressed as a specified percentage of the participant’s actual bonus amount up to 50% of

 

2

 

such bonus amount.  Any percentage specified must be at least 10% and not more than 50%.  Amounts specified are entirely contingent on the amount of bonus actually awarded.  If a management employee first commences employment with the Company after January 1 of a calendar year, such individual shall be permitted to elect to receive an award of RSUs under the Plan in lieu of a portion of his or her annual incentive bonus for that first calendar year of eligibility by completing a Subscription Agreement and filing it with the Company no later than 30 days after such employee is first designated as eligible to participate in the Plan.  With respect to such first calendar year of eligibility, an election to participate in the Plan shall apply only to the portion of the annual incentive bonus or targeted maximum which is attributable to earnings for service performed after the election is made.

 

D.                                    Deferral Beyond Vesting Period.  Each Subscription Agreement shall specify a deferral period, beyond the three -year vesting period, for the RSUs to which it pertains.  The deferral period shall be expressed as a number of whole years, not less than three, beginning on the Valuation Date.  Subscription Agreements must be received by the Company no later than December 31 of the year prior to the year in which the bonus amount will be earned; provided, however, that if a management employee first commences employment with the Company after January 1 of a calendar year, the Company must receive such employee’s Subscription Agreement for that calendar year no later than 30 days after the employee is designated as eligible to participate in the Plan.  Notwithstanding the foregoing, to the extent that any bonus deferred hereunder constitutes “performance-based compensation” within the meaning of Section 409A, Subscription Agreements with respect to such compensation must be received by the Company no later than six months before the end of the so-called performance period to which such bonus relates.

 

E.                                     Changes to Deferral Period.  A participant may change the deferral period specified in a Subscription Agreement to extend the deferral period, provided, however,

 

3

 

that any such change must be made at least 12 months before the original distribution date.  Any such change shall not become effective for 12 months after it is made.  In addition, any such change must extend the deferral period for a minimum of five additional years from the original distribution date.  Participants are not permitted to change a deferral to reduce the length of a deferral period.

 

F.                                      Award of RSUs.  On each annual Valuation Date, the Company shall award RSUs to each participant as follows:  Each participant’s account shall be credited with a whole number of RSUs determined by dividing the amount (expressed in dollars) that is determined under his or her Subscription Agreement by the Cost of each RSU awarded on such date.  No fractional RSU will be credited and the amount equivalent in value to the fractional RSU will be paid out to the participant currently in cash.

 

V.                                    VESTING AND SETTLEMENT OF RSUs

 

A.                                    Vesting.  Unless otherwise provided below by the Committee, a participant shall become vested in the RSUs that are awarded in a year over a three-year vesting period in which one-third of the RSUs shall vest on each anniversary of the Valuation Date on which the RSUs were awarded as long as the participant remains employed by the Company or a subsidiary on each such anniversary date.  In lieu of the foregoing vesting, the Committee, in its sole discretion, may designate in the Subscription Agreement that a participant shall vest in all of the RSUs that are awarded in a year on the third anniversary of the Valuation Date provided, that the participant remains continuously employed by the Company or a subsidiary through such anniversary date.

 

B.                                    Settlement After Vesting.  With respect to each vested RSU, the Company shall issue to the participant one share of Stock within 30 days after the earliest of: (i) the end of the deferral period specified in the participant’s Subscription Agreement pertaining to such RSU; (ii) the date of the participant’s termination of employment with

 

4

 

the Company and its subsidiaries; (iii) the date of the participant’s death; or (iv) the date the participant becomes Disabled (as defined below).

 

For purposes of this Plan, a participant shall be “Disabled” if the participant (i) is unable to engage in any substantial gainful activity by reason of any medically determinable physical or mental impairment which can be expected to result in death or can be expected to last for a continuous period of not less than 12 months; or (ii) is, by reason of any medically determinable physical or mental impairment which can be expected to result in death or can be expected to last for a continuous period of not less than 12 months, receiving income replacement benefits for a period of not less than three months under an accident and health plan covering employees of the participant’s employer.

 

C.                                    Settlement Prior to Vesting.  If a participant terminates his/her employment with the Company, the participant’s nonvested RSUs shall be canceled and he or she shall receive a cash payment equal to the lesser of (a) the Value of such RSUs or (b) an amount equal to the number of such RSUs multiplied by the fair market value of the Stock on the date of the participant’s termination of employment.

 

D.                                    Committee’s Discretion.  The Committee shall have complete discretion to determine the circumstances of a participant’s termination of employment, including whether the same is a result of Disability, and the Committee’s determination shall be final and binding on all parties and not subject to review or challenge by any participant or other person.  Except as otherwise provided in Subsection VIII.(C) hereof, in no event may the Committee apply its discretion to accelerate the time or schedule of any payment made under the Plan.

 

E.                                     Waiting Period Applicable to Officers.  Notwithstanding the provisions of Subsections V.(B) and V.(C) above, any participant who is a “specified employee” within the meaning of Section 409A of the Code (which generally includes any officers of the

 

5

 

Company) may not receive any payment or settlement with respect to his/her RSUs in connection with his/her termination of employment until the expiration of a six month waiting period following such termination of employment.  This waiting period does not apply to the termination of an officer’s employment as a result of the officer’s death or Disability (as defined in Subsection V.(B) above).

 

VI.                               DIVIDEND EQUIVALENT AMOUNTS

 

Whenever dividends (other than dividends payable only in shares of Stock) are paid with respect to Stock, each participant shall be paid an amount in cash equal to the number of his or her vested RSUs multiplied by the dividend value per share.  In addition, each participant’s account shall be credited with an amount equal to the number of such participant’s nonvested RSUs multiplied by the dividend value per share.  Amounts credited with respect to each nonvested RSU shall be paid, without interest, on the date the participant becomes vested in such RSU, or when the participant receives payment of his or her nonvested RSUs pursuant to Subsection V.(C).

 

VII.                          DESIGNATION OF BENEFICIARY

 

A participant may designate one or more beneficiaries to receive payments or shares of Stock in the event of his/her death.  A designation of beneficiary may apply to a specified percentage or a participant’s entire interest in the Plan.  Such designation, or any change therein, must be in writing and shall be effective upon receipt by the Company.  If there is no effective designation of beneficiary, or if no beneficiary survives the participant, the participant’s estate shall be deemed to be the beneficiary.

 

VIII.                     SHARES ISSUABLE; MAXIMUM NUMBER OF RSUs; ADJUSTMENTS; CHANGE IN CONTROL

 

A.                                    Shares Issuable.  The aggregate maximum number of shares of Stock reserved and available for issuance under the Plan shall be 2,000,000.  For purposes of this limitation, the shares of Stock underlying any RSUs that are canceled shall be added back to the shares of Stock available for issuance under the Plan.  Shares subject to the

 

6

 

Plan are authorized but unissued shares or shares that were once issued and subsequently re-acquired by the Company.

 

B.                                    Adjustments.  In the event of a stock dividend, stock split or similar change in capitalization affecting the Stock, the Committee shall make appropriate adjustments in (i) the number and kind of shares of Stock or securities with respect to which RSUs shall thereafter be granted, (ii) the number and kind of shares remaining subject to outstanding RSUs; (iii) the number of RSUs credited to each participant’s account; and (iv) the method of determining the value of RSUs.

 

C.                                    Change in Control.  In the event of any proposed merger, consolidation, sale, dissolution or liquidation of the Company, all non-vested RSUs shall become fully vested upon the effective date of such merger, consolidation, sale, dissolution or liquidation and the Committee in its sole discretion may, as to any outstanding RSUs, make such substitution or adjustment in the aggregate number of shares reserved for issuance under the Plan and the number of shares subject to such RSUs as it may determine on an equitable basis and as may be permitted by the terms of such transaction, or terminate such RSUs upon such terms and conditions as it shall provide.  In the event that any such merger, consolidation, sale, dissolution or liquidation of the Company constitutes a “change in control event” for purposes of Section 409A, the Committee may terminate the Plan and make payment with respect to each RSU (taking into account any adjustment provided for herein), provided that such payment is made within 12 months of such change in control event.

 

IX.                              AMENDMENT OR TERMINATION OF PLAN

 

The Company reserves the right to amend or terminate the Plan at any time, by action of its Board of Directors, provided that no such action shall adversely affect a participant’s rights under the Plan with respect to RSUs awarded and vested before the date of such action, and provided, further, that Plan amendments shall be subject to approval by the Company’s shareholders to the extent required by the Act to ensure that

 

7

 

awards are exempt under Rule 16b-3 promulgated under the Act or as otherwise required by applicable law, including the relevant listing requirements of the New York Stock Exchange.

 

X.                                   MISCELLANEOUS PROVISIONS

 

A.                                    No Distribution; Compliance with Legal Requirements.  The Committee may require each person acquiring shares of Stock under the Plan to represent to and agree with the Company in writing that such person is acquiring the shares without a view to distribution thereof.  No shares of Stock shall be issued until all applicable securities laws and other legal and stock exchange requirements have been satisfied.  The Committee may require the placing of such stop-orders and restrictive legends on certificates for Stock as it deems appropriate.

 

B.                                    Withholding.  Participation in the Plan is subject to any required tax withholding on wages or other income of the participant in connection with the Plan.  Each participant agrees, by entering the Plan, that the Company shall have the right to deduct any such taxes by withholding shares of Stock otherwise issuable to him under the Plan with an aggregate fair market value (as of the date the withholding is effected) that would satisfy the minimum required tax withholding obligation.

 

C.                                    Notices; Delivery of Stock Certificates.  Any notice required or permitted to be given by the Company or the Committee pursuant to the Plan shall be deemed given when personally delivered or deposited in the United States mail, registered or certified, postage prepaid, addressed to the participant at the last address shown for the participant on the records of the Company.  Delivery of stock certificates to persons entitled to receive them under the Plan shall be deemed effected for all purposes when the Company or a share transfer agent of the Company shall have deposited such certificates in the United States mail, addressed to such person at his/her last known address on file with the Company.

 

8

 

D.                                    Nontransferability of Rights.  During a participant’s lifetime, any payment or issuance of shares under the Plan shall be made only to him/her.  No RSU or other interest under the Plan shall be subject in any manner to anticipation, alienation, sale, transfer, assignment, pledge, encumbrance or charge, and any attempt by a participant or any beneficiary under the Plan to do so shall be void.  No interest under the Plan shall in any manner be liable for or subject to the debts, contracts, liabilities, engagements or torts of a participant or beneficiary entitled thereto.

 

E.                                     Company’s Obligations to Be Unfunded and Unsecured.  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 (including Stock) for payment of any amounts or issuance of any shares of Stock hereunder.  No participant or other person shall have any interest in any particular assets of the Company (including Stock) by reason of the right to receive payment under the Plan, and any participant or other person shall have only the rights of a general unsecured creditor of the Company with respect to any rights under the Plan.

 

F.                                      Forfeiture and Claw-Back Provisions.  Notwithstanding anything contained in the Plan to the contrary, all RSUs awarded under this agreement, and any shares of Class A Common Stock issued upon settlement of RSUs hereunder, shall be subject to forfeiture or repayment pursuant to the terms of the Company’s Compensation Recovery Policy as in effect from time to time, including any amendments necessary for compliance with the requirements of the Dodd-Frank Wall Street Reform and Consumer Protection Act.

 

G.                                    Governing Law.  The terms of the Plan shall be governed, construed, administered and regulated in accordance with the laws of the Commonwealth of Massachusetts.  In the event any provision of this Plan shall be determined to be illegal or invalid for any reason, the other provisions shall continue in full force and effect as if such illegal or invalid provision had never been included herein.

 

9

 

H.                                   Effective Date of Plan.  The Plan became effective as of October 17, 1995, upon approval by the holders of a majority of the shares of the Company’s Class A Common Stock and Class B Common Stock, voting as a single class, present or represented and entitled to vote at a meeting of the shareholders.

 

10

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00250-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00250-of-00352.parquet"}]]