Document:

Exhibit 10.2

 

 

    Exhibit 10.2

 

    GERBER
    SCIENTIFIC, INC.

 

    2006 OMNIBUS INCENTIVE PLAN

 

    Contents

 

	 	 	 	 	 	 	 	 	 
	
	
    Article 1.
    
	
	
 
	
    Establishment, Purpose, and
    Duration
    
	
 
	
	
    1
    
	

	
	
 
	 	
 
	
 
	
 
	
	
 
	 
	
	

    Article 2.
    

	
	
 
	
    Definitions
    
	
 
	
	
    1
    
	

	
	
 
	 	
 
	
 
	
 
	
	
 
	 
	
	

    Article 3.
    

	
	
 
	
    Administration
    
	
 
	
	
    4
    
	

	
	
 
	 	
 
	
 
	
 
	
	
 
	 
	
	

    Article 4.
    

	
	
 
	
    Shares Subject to This Plan
    and Maximum Awards
    
	
 
	
	
    5
    
	

	
	
 
	 	
 
	
 
	
 
	
	
 
	 
	
	

    Article 5.
    

	
	
 
	
    Eligibility and Participation
    
	
 
	
	
    6
    
	

	
	
 
	 	
 
	
 
	
 
	
	
 
	 
	
	

    Article 6.
    

	
	
 
	
    Stock Options
    
	
 
	
	
    7
    
	

	
	
 
	 	
 
	
 
	
 
	
	
 
	 
	
	

    Article 7.
    

	
	
 
	
    Stock Appreciation Rights
    
	
 
	
	
    8
    
	

	
	
 
	 	
 
	
 
	
 
	
	
 
	 
	
	

    Article 8.
    

	
	
 
	
    Restricted Stock and Restricted
    Stock Units
    
	
 
	
	
    9
    
	

	
	
 
	 	
 
	
 
	
 
	
	
 
	 
	
	

    Article 9.
    

	
	
 
	
    Performance Units/Performance
    Shares
    
	
 
	
	
    10
    
	

	
	
 
	 	
 
	
 
	
 
	
	
 
	 
	
	

    Article 10.
    

	
	
 
	
    Cash-Based Awards and Other
    Stock-Based Awards
    
	
 
	
	
    11
    
	

	
	
 
	 	
 
	
 
	
 
	
	
 
	 
	
	

    Article 11.
    

	
	
 
	
    Transferability of Awards
    
	
 
	
	
    12
    
	

	
	
 
	 	
 
	
 
	
 
	
	
 
	 
	
	

    Article 12.
    

	
	
 
	
    Performance Measures
    
	
 
	
	
    12
    
	

	
	
 
	 	
 
	
 
	
 
	
	
 
	 
	
	

    Article 13.
    

	
	
 
	
    Nonemployee Director Awards
    
	
 
	
	
    13
    
	

	
	
 
	 	
 
	
 
	
 
	
	
 
	 
	
	

    Article 14.
    

	
	
 
	
    Dividend Equivalents
    
	
 
	
	
    13
    
	

	
	
 
	 	
 
	
 
	
 
	
	
 
	 
	
	

    Article 15.
    

	
	
 
	
    Beneficiary Designation
    
	
 
	
	
    14
    
	

	
	
 
	 	
 
	
 
	
 
	
	
 
	 
	
	

    Article 16.
    

	
	
 
	
    Rights of Participants
    
	
 
	
	
    14
    
	

	
	
 
	 	
 
	
 
	
 
	
	
 
	 
	
	

    Article 17.
    

	
	
 
	
    Change in Control
    
	
 
	
	
    14
    
	

	
	
 
	 	
 
	
 
	
 
	
	
 
	 
	
	

    Article 18.
    

	
	
 
	
    Effective Date, Amendment,
    Modification, Suspension, and Termination
    
	
 
	
	
    15
    
	

	
	
 
	 	
 
	
 
	
 
	
	
 
	 
	
	

    Article 19.
    

	
	
 
	
    Withholding
    
	
 
	
	
    15
    
	

	
	
 
	 	
 
	
 
	
 
	
	
 
	 
	
	

    Article 20.
    

	
	
 
	
    Successors
    
	
 
	
	
    16
    
	

	
	
 
	 	
 
	
 
	
 
	
	
 
	 
	
	

    Article 21.
    

	
	
 
	
    General Provisions
    
	
 
	
	
    16
    
	

 

    Article 1.

    

 

    Establishment,
    Purpose, and Duration

 

    1.1  Establishment.  Gerber
    Scientific, Inc., a Connecticut corporation and its successors
    (hereinafter referred to as the “Company”),
    establishes an incentive compensation plan to be known as the
    Gerber Scientific, Inc. 2006 Omnibus Incentive Plan (hereinafter
    referred to as the “Plan”), as set forth in this
    document.

 

    This Plan permits the grant of Nonqualified Stock Options,
    Incentive Stock Options, Stock Appreciation Rights, Restricted
    Stock, Restricted Stock Units, Performance Shares, Performance
    Units, Cash-Based Awards, and Other Stock-Based Awards.

 

    This Plan shall become effective on the Effective Date and shall
    remain in effect as provided in Section 1.3 hereof.

 

    1.2  Purpose of this Plan.  The
    purpose of this Plan is to provide a means whereby Employees and
    Directors of the Company develop a sense of proprietorship and
    personal involvement in the development and financial success of
    the Company, and to encourage them to devote their best efforts
    to the business of the Company, thereby advancing the interests
    of the Company and its shareholders. A further purpose of this
    Plan is to provide a means through which the Company may attract
    able individuals to become Employees or serve as Directors of
    the Company and to provide a means whereby those individuals can
    acquire and maintain stock ownership, thereby strengthening
    their concern for the welfare of the Company.

 

    1.3  Duration of this Plan.  Unless
    sooner terminated as provided herein, this Plan shall terminate
    ten (10) years from the Effective Date. After this Plan is
    terminated, no Awards may be granted but Awards previously
    granted shall remain outstanding in accordance with their
    applicable terms and conditions and this Plan’s terms and
    conditions. Notwithstanding the foregoing, no Incentive Stock
    Options may be granted more than ten (10) years after the
    earlier of: (a) adoption of this Plan by the Board, or
    (b) the Effective Date.

 

    Article 2.

    

 

    Definitions

 

    Whenever used in this Plan, the following terms shall have the
    meanings set forth below, and when the meaning is intended, the
    initial letter of the word shall be capitalized:

 

    2.1  “Affiliate” shall mean any
    corporation or other entity (including, but not limited to, a
    partnership or a limited liability company) that is affiliated
    with the Company through stock or equity ownership or otherwise,
    and is designated as an Affiliate for purposes of this Plan by
    the Committee. For purposes of granting stock options or stock
    appreciation rights, an entity may not be considered an
    Affiliate if it results in noncompliance with Code
    Section 409A.

 

    2.2  “Annual Award Limit” or
    “Annual Award Limits” have the meaning set
    forth in Section 4.3.

 

    2.3  “Award” means, individually or
    collectively, a grant under this Plan of Nonqualified Stock
    Options, Incentive Stock Options, Stock Appreciation Rights,
    Restricted Stock, Restricted Stock Units, Performance Shares,
    Performance Units, Cash-Based Awards, or Other Stock-Based
    Awards, in each case subject to the terms of this Plan.

 

    2.4  “Award Agreement” or
    “Agreement” means either: (i) a written
    agreement entered into by the Company and a Participant setting
    forth the terms and provisions applicable to an Award granted
    under this Plan, or (ii) a written statement issued by the
    Company to a Participant describing the terms and provisions of
    such Award, including any amendment or modification thereof. The
    Committee may provide for the use of electronic, Internet, or
    other nonpaper Award Agreements, and the use of electronic,
    Internet, or other nonpaper means for the acceptance thereof and
    actions thereunder by a Participant.

 

    2.5  “Beneficial Owner” or
    “Beneficial Ownership” shall have the meaning
    ascribed to such term in
    Rule 13d-3
    of the General Rules and Regulations under the Exchange Act.

    

    1

 

    2.6  “Board” or “Board of
    Directors” means the Board of Directors of the Company.

 

    2.7  “Cash-Based Award” means an
    Award, denominated in cash, granted to a Participant as
    described in Article 10.

 

    2.8  “Change in Control” means any of
    the following events:

 

    (a) the Company shall (i) merge or consolidate, with
    or into another corporation or entity or enter into a share
    exchange between the Company or stockholders of the Company and
    another individual, corporation or other entity and as a result
    of such merger, consolidation or share exchange less than fifty
    percent (50%) of the outstanding voting securities of the
    surviving or resulting corporation or entity shall then be owned
    in the aggregate by the former stockholders of the Company; or
    (ii) sell, lease, exchange, or otherwise dispose of all or
    substantially all of the Company’s property and assets in
    one transaction or a series of related transactions to one or
    more individuals, corporations or other entities that are not
    subsidiaries of the Company assuming that if consummation of
    such transaction is subject, at the time of such approval by
    stockholders, to the consent of any government or governmental
    agency, such consent by the government or governmental agency is
    obtained (either explicitly or implicitly by consummation of the
    transaction);

 

    (b) the stockholders of the Company adopt a plan of
    complete liquidation of the Company;

 

    (c) any “person” (as such term is used in
    Sections 13(d) or 14(d)(2) of the Exchange Act) (other than
    the Employee, the Company, any of the Company’s
    subsidiaries, any employee benefit plan of the Company
    and/or one
    or more of its subsidiaries or any person or entity organized,
    appointed or established pursuant to the terms of any such
    employee benefit plan) becomes the beneficial owner (within the
    meaning of
    Rule 13d-3
    under the Exchange Act) of voting securities of the Company
    representing thirty percent (30%) or more of the total number of
    votes eligible to be cast at any election of directors of the
    Company; provided, however, that no Change in Control
    shall be deemed to have occurred under this
    subparagraph (c) if such “person” becomes a
    holder of the Company’s securities in one or more
    transactions initiated or pursued by the Company unless after
    such transaction(s) less than fifty percent (50%) of the
    outstanding voting securities of the Company shall be owned in
    the aggregate by the former stockholders of the Company; or

 

    (d) as a result of, or in connection with, any tender offer
    or exchange offer, share exchange, merger, consolidation or
    other business combination, sale, lease, exchange or other
    disposition of all or substantially all of the Company’s
    assets, a contested election, or any combination of the
    foregoing transactions, the persons who are directors of the
    Company on the date hereof (the “Incumbent Board”)
    shall cease to constitute a majority of the Board of Directors
    of the Company or any successor to the Company; provided
    that any person becoming a director subsequent to the date
    hereof whose election or nomination for election by the
    Company’s stockholders was approved by a vote of at least
    three-fourths
    (3/4)
    of the directors constituting the Incumbent Board (either by a
    specific vote or by approval of a proxy statement of the Company
    in which such person is named as a nominee for director without
    any objection to such nomination) shall be, for purposes herein,
    considered as though such person were a member of the Incumbent
    Board.

 

    2.9  “Code” means the
    U.S. Internal Revenue Code of 1986, as amended from time to
    time. For purposes of this Plan, references to sections of the
    Code shall be deemed to include references to any applicable
    regulations thereunder and any successor or similar provision.

 

    2.10  “Committee” means the
    Management Development and Compensation Committee of the Board
    (or any other committee of the Board authorized by the Board to
    administer the Plan), which shall administer this Plan in
    accordance with the provisions of Article 5 of the Plan;
    provided, however, that with respect to Awards to Nonemployee
    Directors, the Committee means the Nominating and Corporate
    Governance Committee of the Board.

 

    2.11  “Common Stock” means the common
    stock, $.01 par value, of the Company.

 

    2.12  “Company” means Gerber
    Scientific, Inc., its Subsidiaries and their successors and
    assigns.

    

    2

 

    2.13  “Covered Employee” means any
    key Employee who is or may become a “Covered
    Employee,” as defined in Code Section 162(m), and who
    is designated by the Committee as a “Covered Employee”
    under this Plan for such applicable Performance Period.

 

    2.14  “Director” means any individual
    who is a member of the Board of Directors of the Company.

 

    2.15  “Effective Date” means
    May 23, 2006, which is the date on which the Company’s
    Board of Directors approved the Plan.

 

    2.16  “Employee” means any individual
    designated as an employee of the Company, its Affiliates,
    and/or its
    Subsidiaries on the payroll records thereof.

 

    2.17  “Exchange Act” means the
    Securities Exchange Act of 1934, as amended from time to time,
    or any successor act thereto.

 

    2.18  “Fair Market Value” or
    “FMV” means, as applied to a specific date, the
    closing price for the Common Stock on the New York Stock
    Exchange Composite Tape on such date as reported by The Wall
    Street Journal or such other source as the Committee deems
    reliable, or if no Common Stock was traded on such date, on the
    next preceding day on which Common Stock was so traded; such
    determination shall be made in compliance with Code
    Section 409A. Such definition(s) of FMV shall be specified
    in each Award Agreement and may differ depending on whether FMV
    is in reference to the grant, exercise, vesting, settlement, or
    payout of an Award.

 

    2.19  “Full-Value Award” means an
    Award other than in the form of an ISO, NQSO, or SAR, and which
    is settled by the issuance of Shares.

 

    2.20  “Grant Price” means the price
    established at the time of grant of an SAR pursuant to
    Article 7, used to determine whether there is any payment
    due upon exercise of the SAR.

 

    2.21  “Incentive Stock Option” or
    “ISO” means an Option to purchase Shares
    granted under Article 6 to an Employee and that is
    designated as an Incentive Stock Option and that is intended to
    meet the requirements of Code Section 422, or any successor
    provision.

 

    2.22  “Insider” shall mean an
    individual who is, on the relevant date, an officer or Director
    of the Company, or a more than ten percent (10%) Beneficial
    Owner of any class of the Company’s equity securities that
    is registered pursuant to Section 12 of the Exchange Act,
    as determined by the Board in accordance with Section 16 of
    the Exchange Act.

 

    2.23  “Nonemployee Director” means a
    Director who is not an Employee.

 

    2.24  “Nonemployee Director Award”
    means any NQSO, SAR, or Full-Value Award granted, whether
    singly, in combination, or in tandem, to a Participant who is a
    Nonemployee Director pursuant to such applicable terms,
    conditions, and limitations as the Board or Committee may
    establish in accordance with this Plan.

 

    2.25  “Nonqualified Stock Option” or
    “NQSO” means an Option that is not intended to
    meet the requirements of Code Section 422, or that
    otherwise does not meet such requirements.

 

    2.26  “Option” means an Incentive
    Stock Option or a Nonqualified Stock Option, as described in
    Article 6.

 

    2.27  “Option Price” means the price
    at which a Share may be purchased by a Participant pursuant to
    an Option.

 

    2.28  “Other Stock-Based Award” means
    an equity-based or equity-related Award not otherwise described
    by the terms of this Plan, granted pursuant to Article 10.

 

    2.29  “Participant” means any
    eligible individual as set forth in Article 5 to whom an Award
    is granted.

    

    3

 

    2.30  “Performance-Based Compensation”
    means compensation under an Award that is intended to
    satisfy the requirements of Code Section 162(m) for certain
    performance-based compensation paid to Covered Employees.
    Notwithstanding the foregoing, nothing in this Plan shall be
    construed to mean that an Award which does not satisfy the
    requirements for performance-based compensation under Code
    Section 162(m) does not constitute performance-based
    compensation for other purposes, including Code
    Section 409A.

 

    2.31  “Performance Measures” means
    measures as described in Article 12 on which the
    performance goals are based and which are approved by the
    Company’s shareholders pursuant to this Plan in order to
    qualify Awards as Performance-Based Compensation.

 

    2.32  “Performance Period” means the
    period of time during which the performance goals must be met in
    order to determine the degree of payout
    and/or
    vesting with respect to an Award.

 

    2.33  “Performance Share” means an
    Award under Article 9 herein and subject to the terms of
    this Plan, denominated in Shares, the value of which at the time
    it is payable is determined as a function of the extent to which
    corresponding performance criteria have been achieved.

 

    2.34  “Performance Unit” means an
    Award under Article 9 herein and subject to the terms of
    this Plan, denominated in units, the value of which at the time
    it is payable is determined as a function of the extent to which
    corresponding performance criteria have been achieved.

 

    2.35  “Period of Restriction” means
    the period when Restricted Stock or Restricted Stock Units are
    subject to a substantial risk of forfeiture (based on the
    passage of time, the achievement of performance goals, or upon
    the occurrence of other events as determined by the Committee,
    in its discretion), as provided in Article 8.

 

    2.36  “Plan” means the Gerber
    Scientific, Inc. 2006 Omnibus Incentive Plan.

 

    2.37  “Plan Year” means the fiscal
    year of the Company: May 1 to April 30.

 

    2.38  “Prior Plans” means the Gerber
    Scientific, Inc. 2003 Employee Stock Option Plan, the Gerber
    Scientific, Inc. Non-Employee Director’s Stock Grant Plan
    and the Gerber Scientific, Inc.
    2005-2006
    Executive Annual Incentive Bonus Plan.

 

    2.39  “Restricted Stock” means an
    Award granted to a Participant pursuant to Article 8.

 

    2.40  “Restricted Stock Unit” means
    an Award granted to a Participant pursuant to Article 8,
    except no Shares are actually awarded to the Participant on the
    date of grant.

 

    2.41  “Share” means a share of common
    stock of the Company, $.01 par value per share.

 

    2.42  “Stock Appreciation Right” or
    “SAR” means an Award, designated as an SAR,
    pursuant to the terms of Article 7 herein.

 

    2.43  “Subsidiary” means any
    corporation or other entity, whether domestic or foreign, in
    which the Company has or obtains, directly or indirectly, a
    proprietary interest of more than fifty percent (50%) by reason
    of stock ownership or otherwise.

 

    Article 3.

    

 

    Administration

 

    3.1  General.  The Committee shall be
    responsible for administering this Plan, subject to this
    Article 3 and the other provisions of this Plan. The
    Committee may employ attorneys, consultants, accountants,
    agents, and other individuals, any of whom may be an Employee,
    and the Committee, the Company, and its officers and Directors
    shall be entitled to rely upon the advice, opinions, or
    valuations of any such individuals. All actions taken and all
    interpretations and determinations made by the Committee shall
    be final and binding upon the Participants, the Company, and all
    other interested individuals.

    

    4

 

    3.2  Authority of the Committee.  The
    Committee shall have discretionary power to interpret the terms
    and the intent of this Plan and any Award Agreement or other
    agreement or document ancillary to or in connection with this
    Plan, to determine eligibility for Awards and to adopt such
    rules, regulations, forms, instruments, and guidelines for
    administering this Plan as the Committee may deem necessary or
    proper. Such authority shall include, but not be limited to,
    selecting Award recipients, establishing all Award terms and
    conditions, including the terms and conditions set forth in
    Award Agreements, granting Awards as an alternative to or as the
    form of payment for grants or rights earned or due under
    compensation plans or arrangements of the Company, construing
    any ambiguous provision of the Plan or any Award Agreement, and,
    subject to Article 18, adopting modifications and
    amendments to this Plan or any Award Agreement, including
    without limitation, any that are necessary to comply with the
    laws of the countries and other jurisdictions in which the
    Company, its Affiliates,
    and/or its
    Subsidiaries operate. Notwithstanding the foregoing, the Board,
    in its discretion, shall have the final and ultimate authority
    with respect to all aspects of interpreting and administrating
    the Plan, and with respect to changing the authority granted to
    the Committee.

 

    3.3  Delegation.  The Committee may
    delegate to one or more of its members or to one or more
    officers of the Company
    and/or its
    Subsidiaries and Affiliates, or to one or more agents or
    advisors such administrative duties or powers as it may deem
    advisable, and the Committee or any individuals to whom it has
    delegated duties or powers as aforesaid may employ one or more
    individuals to render advice with respect to any responsibility
    the Committee or such individuals may have under this Plan. The
    Committee may, by resolution, authorize one or more officers of
    the Company, each of whom shall be a Director, to do one or both
    of the following on the same basis as can the Committee:
    (a) designate Employees to be recipients of Awards; and
    (b) determine the amount and number of any such Awards;
    provided, however, (i) the Committee shall not delegate
    such responsibilities to any such officer for Awards granted to
    an Employee who is considered an Insider; (ii) the
    resolution providing such authorization shall set forth the
    total amount and number of Awards such officer(s) may grant; and
    (iii) the officer(s) shall report periodically to the
    Committee regarding the nature and scope of the Awards granted
    pursuant to the authority delegated.

 

    Article 4.

    

 

    Shares Subject
    to This Plan and Maximum Awards

 

    4.1  Number of Shares Available for Awards.

 

    (a) Subject to such additional Shares as shall be available
for grant under this Plan pursuant to Section 4.2, and subject to adjustment as provided in Section 4.4,
    the maximum number of Shares available for grant to Participants
    pursuant to this Plan on or after the Effective Date shall be one and
    one-half million (1,500,000) (the “Share
    Authorization”), which shall consist of: (i) one
million three hundred thirty-eight thousand and seven hundred
thirty-three (1,338,733)
    newly issued Shares authorized for issuance under this Plan,
    plus (ii) one hundred sixty-one thousand and two hundred
sixty-seven (161,267) Shares that remained available for issuance
    under the Prior Plans but were not subject to outstanding awards
    as of the date of shareholder approval of this Plan.

 

    (b) The maximum number of Shares of the Share Authorization
    that may be issued pursuant to ISOs under this Plan shall be one
    and one-half million (1,500,000) Shares.

 

    4.2  Share Usage.  Shares covered by
    an Award shall be counted as used as of the date of grant. Any
    Shares related to Awards under this Plan or under Prior Plans
    which terminate by expiration, forfeiture, cancellation, or
    otherwise without the issuance of such Shares, are settled in
    cash in lieu of Shares, or are exchanged with the
    Committee’s permission, prior to the issuance of Shares,
    for Awards not involving Shares, shall be available again for
    grant under this Plan. Moreover, if the Option Price of any
    Option granted under this Plan or the tax withholding
    requirements with respect to any Award granted under this Plan
    are satisfied by tendering Shares to the Company (by either
    actual delivery or by attestation), such tendered Shares shall
    again be available for grant under this Plan. Furthermore, if an
    SAR is exercised and settled in Shares, the difference between
    the total Shares exercised and the net Shares delivered shall
    again be available for grant under this Plan, with the result
    being that only the number of Shares issued upon exercise of an
    SAR are counted against the Shares available. The Shares
    available for issuance under this Plan may be authorized and
    unissued Shares or treasury Shares.

    

    5

 

    4.3  Annual Award Limits.  Unless and
    until the Committee determines that an Award to a Covered
    Employee shall not be designed to qualify as Performance-Based
    Compensation, the following limits (each an “Annual Award
    Limit” and, collectively, “Annual Award Limits”)
    shall apply to grants of such Awards under this Plan:

 

    (a)  Options:  The maximum aggregate
    number of Shares subject to Options granted in any one Plan Year
    to any one Participant shall be three hundred thousand (300,000).

 

    (b)  SARs:  The maximum number of
    Shares subject to Stock Appreciation Rights granted in any one
    Plan Year to any one Participant shall be three hundred thousand
    (300,000).

 

    (c)  Restricted Stock or Restricted Stock
    Units:  The maximum aggregate grant with respect
    to Awards of Restricted Stock or Restricted Stock Units in any
    one Plan Year to any one Participant shall be one hundred and
    fifty thousand (150,000) Shares or Restricted Stock Units, or
    equal to the value of one hundred and fifty thousand (150,000)
    Shares.

 

    (d)  Performance Units or Performance
    Shares:  The maximum aggregate Award of
    Performance Units or Performance Shares that a Participant may
    receive in any one Plan Year shall be one hundred and fifty
    thousand (150,000) Shares or Performance Units, or equal to the
    value of one hundred and fifty thousand (150,000) Shares,
    determined as of the date of vesting or payout, as applicable.

 

    (e)  Cash-Based Awards and Other Stock-Based
    Awards:  The maximum aggregate amount awarded or
    credited with respect to Cash-Based or Other Stock-Based Awards
    to any one Participant in any one Plan Year may not exceed the
    value of one and one-half million dollars ($1,500,000),
    determined as of the date of vesting or payout, as applicable.

 

    4.4  Adjustments in Authorized
    Shares.  In the event of any corporate event or transaction (including,
	but not limited to, a change in the Shares of the Company or the
	capitalization of the Company) such as a merger, consolidation,
	reorganization, recapitalization, separation, partial or complete
	liquidation, stock dividend, extraordinary dividend, stock split, reverse
	stock split, split up, spin-off, or other distribution of stock or property
	of the Company, combination of Shares, exchange of Shares, dividend in-kind,
	or other like change in capital structure, the Committee in order to prevent dilution
    or enlargement of Participants’ rights under this Plan,
    shall proportionately substitute or adjust, as applicable, the number and kind
    of Shares that may be issued under this Plan or under particular
    forms of Awards, the number and kind of Shares subject to
    outstanding Awards, the Option Price or Grant Price applicable
    to outstanding Awards, the Annual Award Limits, and other value
    determinations applicable to outstanding Awards. The determination of the Committee as to the foregoing adjustments shall be conclusive and binding on Participants under this Plan.

 

    The Committee shall also make proportionate adjustments in the terms
    of any Awards under this Plan to reflect, or related to, such
    changes or distributions and to modify any other terms of
    outstanding Awards, including modifications of performance goals
    and changes in the length of Performance Periods.
    Notwithstanding anything herein to the contrary, following a
    Change in Control the Committee may not take any such action as
    described in this Section 4.4 if such action would result
    in a violation of the requirements of Code Section 409A.
    The determination of the Committee as to the foregoing
    adjustments, if any, shall be conclusive and binding on
    Participants under this Plan.

 

    Subject to the provisions of Article 18 and notwithstanding
    anything else herein to the contrary, without affecting the
    number of Shares reserved or available hereunder, the Committee
    may authorize the issuance or assumption of benefits under this
    Plan in connection with any merger, consolidation, acquisition
    of property or stock, or reorganization upon such terms and
    conditions as it may deem appropriate, subject to compliance
    with the rules under Code Sections 409A, 422, and 424, as
    and where applicable.

 

    Article 5.

    

 

    Eligibility
    and Participation

 

    5.1  Eligibility.  Individuals
    eligible to participate in this Plan include all Employees and
    Directors.

    

    6

 

    5.2  Actual Participation.  Subject
    to the provisions of this Plan, the Committee may, from time to
    time, select from all eligible individuals, those individuals to
    whom Awards shall be granted and shall determine, in its sole
    discretion, the nature of any and all terms permissible by law,
    and the amount of each Award.

 

    Article 6.

    

 

    Stock
    Options

 

    6.1  Grant of Options.  Subject to
    the terms and provisions of this Plan, Options may be granted to
    Participants in such number, and upon such terms, and at any
    time and from time to time as shall be determined by the
    Committee, in its sole discretion, provided that ISOs may be
    granted only to eligible Employees of the Company or of any
    parent or subsidiary corporation (as permitted under Code
    Sections 422 and 424). However, an Employee who is employed
    by an Affiliate
    and/or
    Subsidiary may only be granted Options to the extent the
    Affiliate
    and/or
    Subsidiary is part of: (i) the Company’s controlled
    group of corporations, or (ii) a trade or business under
    common control, as of the date of grant as determined within the
    meaning of Code Section 414(b) or 414(c), and substituting
    for this purpose ownership of at least fifty percent (50%) of
    the Affiliate
    and/or
    Subsidiary to determine the members of the controlled group of
    corporations and the entities under common control.

 

    6.2  Award Agreement.  Each Option
    grant shall be evidenced by an Award Agreement that shall
    specify the Option Price, the maximum duration of the Option,
    the number of Shares to which the Option pertains, the
    conditions upon which an Option shall become vested and
    exercisable, and such other provisions as the Committee shall
    determine which are not inconsistent with the terms of this
    Plan. The Award Agreement also shall specify whether the Option
    is intended to be an ISO or an NQSO.

 

    6.3  Option Price.  The Option Price
    for each grant of an Option under this Plan shall be determined
    by the Committee in its sole discretion and shall be specified
    in the Award Agreement; provided, however, the Option Price must
    be at least equal to one hundred percent (100%) of the FMV of
    the Shares as determined on the date of grant.

 

    6.4  Term of Options.  Each Option
    granted to a Participant shall expire at such time as the
    Committee shall determine at the time of grant; provided,
    however, no Option shall be exercisable later than the tenth
    (10th) anniversary date of its grant. Notwithstanding the
    foregoing, for Nonqualified Stock Options granted to
    Participants outside the United States, the Committee has the
    authority to grant Nonqualified Stock Options that have a term
    greater than ten (10) years.

 

    6.5  Exercise of Options.  Options
    granted under this Article 6 shall be exercisable at such
    times and be subject to such restrictions and conditions as the
    Committee shall in each instance approve, which terms and
    restrictions need not be the same for each grant or for each
    Participant.

 

    6.6  Payment.  Options granted under
    this Article 6 shall be exercised by the delivery of a
    notice of exercise to the Company or an agent designated by the
    Company in a form specified or accepted by the Committee, or by
    complying with any alternative procedures which may be
    authorized by the Committee, setting forth the number of Shares
    with respect to which the Option is to be exercised, accompanied
    by full payment for the Shares.

 

    A condition of the issuance of the Shares as to which an Option
    shall be exercised shall be the payment of the Option Price. The
    Option Price of any Option shall be payable to the Company in
    full either: (a) in cash or its equivalent; (b) by
    tendering (either by actual delivery or attestation) previously
    acquired Shares having an aggregate Fair Market Value at the
    time of exercise equal to the Option Price (provided that except
    as otherwise determined by the Committee, the Shares that are
    tendered must have been held by the Participant for at least six
    (6) months (or such other period, if any, as the Committee
    may permit) prior to their tender to satisfy the Option Price if
    acquired under this Plan or any other compensation plan
    maintained by the Company or have been purchased on the open
    market); (c) by a cashless (broker-assisted) exercise;
    (d) by a combination of (a), (b),
    and/or (c);
    or (e) any other method approved or accepted by the
    Committee in its sole discretion.

    

    7

 

    Subject to any governing rules or regulations, as soon as
    practicable after receipt of written notification of exercise
    and full payment (including satisfaction of any applicable tax
    withholding), the Company shall deliver to the Participant
    evidence of book entry Shares, or upon the Participant’s
    request, Share certificates in an appropriate amount based upon
    the number of Shares purchased under the Option(s).

 

    Unless otherwise determined by the Committee, all payments under
    all of the methods indicated above shall be paid in
    U.S. dollars.

 

    6.7  Restrictions on Share
    Transferability.  The Committee may impose such
    restrictions on any Shares acquired pursuant to the exercise of
    an Option granted under this Article 6 as it may deem
    advisable, including, without limitation, minimum holding period
    requirements or restrictions under applicable federal securities
    laws, under the requirements of any stock exchange or market
    upon which such Shares are then listed
    and/or
    traded, or under any blue sky or state securities laws
    applicable to such Shares.

 

    6.8  Termination of Employment.  Each
    Participant’s Award Agreement shall set forth the extent to
    which the Participant shall have the right to exercise the
    Option following termination of the Participant’s
    employment or provision of services to the Company, its
    Affiliates,
    and/or its
    Subsidiaries, as the case may be. Such provisions shall be
    determined in the sole discretion of the Committee, shall be
    included in the Award Agreement entered into with each
    Participant, need not be uniform among all Options issued
    pursuant to this Article 6, and may reflect distinctions
    based on the reasons for termination.

 

    6.9  Notification of Disqualifying
    Disposition.  If any Participant shall make any
    disposition of Shares issued pursuant to the exercise of an ISO
    under the circumstances described in Code Section 421(b)
    (relating to certain disqualifying dispositions), such
    Participant shall notify the Company of such disposition within
    ten (10) days thereof.

 

    6.10  No Other Feature of
    Deferral.  No Option granted pursuant to this Plan
    shall provide for any feature for the deferral of compensation
    other than the deferral of recognition of income until the later
    of the exercise or disposition of the Option, or the time the
    stock acquired pursuant to the exercise of the Option first
    becomes substantially vested.

 

    Article 7.

    

 

    Stock
    Appreciation Rights

 

    7.1  Grant of SARs.  Subject to the
    terms and conditions of this Plan, SARs may be granted to
    Participants at any time and from time to time as shall be
    determined by the Committee. However, an Employee who is
    employed by an Affiliate
    and/or
    Subsidiary may only be granted SARs to the extent the Affiliate
    and/or
    Subsidiary is: (i) part of the Company’s controlled
    group of corporations, or (ii) a trade or business under
    common control, as of the date of grant as determined within the
    meaning of Code Section 414(b) or 414(c) and substituting
    for this purpose ownership of at least fifty percent (50%) of
    the Affiliate
    and/or
    Subsidiary to determine the members of the controlled group of
    corporations and the entities under common control.

 

    Subject to the terms and conditions of this Plan, the Committee
    shall have complete discretion in determining the number of SARs
    granted to each Participant and, consistent with the provisions
    of this Plan, in determining the terms and conditions pertaining
    to such SARs.

 

    The Grant Price for each grant of an SAR shall be determined by
    the Committee and shall be specified in the Award Agreement;
    provided, however, the Grant Price on the date of grant must be
    at least equal to one hundred percent (100%) of the FMV of the
    Shares as determined on the date of grant.

 

    7.2  SAR Agreement.  Each SAR Award
    shall be evidenced by an Award Agreement that shall specify the
    Grant Price, the term of the SAR, and such other provisions as
    the Committee shall determine.

 

    7.3  Term of SAR.  The term of an SAR
    granted under this Plan shall be determined by the Committee, in
    its sole discretion, and except as determined otherwise by the
    Committee and specified in the SAR Award Agreement, no SAR shall
    be exercisable later than the tenth
    (10th)
    anniversary date of its grant.

    

    8

 

    Notwithstanding the foregoing, for SARs granted to Participants
    outside the United States, the Committee has the authority to
    grant SARs that have a term greater than ten (10) years.

 

    7.4  Exercise of SARs.  SARs may be
    exercised upon whatever terms and conditions the Committee, in
    its sole discretion, imposes.

 

    7.5  Settlement of SARs.  Upon the
    exercise of an SAR, a Participant shall be entitled to receive
    payment from the Company in an amount determined by multiplying:

 

    (a) The excess of the Fair Market Value of a Share on the
    date of exercise over the Grant Price; by

 

    (b) The number of Shares with respect to which the SAR is
    exercised.

 

    At the discretion of the Committee, the payment upon SAR
    exercise may be in cash, Shares, or any combination thereof, or
    in any other manner approved by the Committee in its sole
    discretion. The Committee’s determination regarding the
    form of SAR payout shall be set forth in the Award Agreement
    pertaining to the grant of the SAR.

 

    7.6  Termination of Employment.  Each
    Award Agreement shall set forth the extent to which the
    Participant shall have the right to exercise the SAR following
    termination of the Participant’s employment with or
    provision of services to the Company, its Affiliates,
    and/or its
    Subsidiaries, as the case may be. Such provisions shall be
    determined in the sole discretion of the Committee, shall be
    included in the Award Agreement entered into with Participants,
    need not be uniform among all SARs issued pursuant to this Plan,
    and may reflect distinctions based on the reasons for
    termination.

 

    7.7  Other Restrictions.  The
    Committee shall impose such other conditions
    and/or
    restrictions on any Shares received upon exercise of an SAR
    granted pursuant to this Plan as it may deem advisable or
    desirable. These restrictions may include, but shall not be
    limited to, a requirement that the Participant hold the Shares
    received upon exercise of an SAR for a specified period of time.

 

    7.8  No Other Feature of
    Deferral.  No SAR granted pursuant to this Plan
    shall provide for any feature for the deferral of compensation
    other than the deferral of recognition of income until the
    exercise of the SAR.

 

    Article 8.

    

 

    Restricted
    Stock and Restricted Stock Units

 

    8.1  Grant of Restricted Stock or Restricted Stock
    Units.  Subject to the terms and provisions of
    this Plan, the Committee, at any time and from time to time, may
    grant Shares of Restricted Stock
    and/or
    Restricted Stock Units to Participants in such amounts as the
    Committee shall determine. Restricted Stock Units shall be
    similar to Restricted Stock except that no Shares are actually
    awarded to the Participant on the date of grant.

 

    8.2  Restricted Stock or Restricted Stock Unit
    Agreement.  Each Restricted Stock
    and/or
    Restricted Stock Unit grant shall be evidenced by an Award
    Agreement that shall specify the Period(s) of Restriction, the
    number of Shares of Restricted Stock or the number of Restricted
    Stock Units granted, and such other provisions as the Committee
    shall determine.

 

    8.3  Other Restrictions.  The
    Committee shall impose such other conditions
    and/or
    restrictions on any Shares of Restricted Stock or Restricted
    Stock Units granted pursuant to this Plan as it may deem
    advisable including, without limitation, a requirement that
    Participants pay a stipulated purchase price for each Share of
    Restricted Stock or each Restricted Stock Unit, restrictions
    based upon the achievement of specific performance goals,
    time-based restrictions on vesting following the attainment of
    the performance goals, time-based restrictions
    and/or
    restrictions under applicable laws or under the requirements of
    any stock exchange or market upon which such Shares are listed
    or traded, or holding requirements or sale restrictions placed
    on the Shares by the Company upon vesting of such Restricted
    Stock or Restricted Stock Units.

    

    9

 

    To the extent deemed appropriate by the Committee, the Company
    may retain the certificates representing Shares of Restricted
    Stock in the Company’s possession until such time as all
    conditions
    and/or
    restrictions applicable to such Shares have been satisfied or
    lapse.

 

    Except as otherwise provided in this Article 8, Shares of
    Restricted Stock covered by each Restricted Stock Award shall
    become freely transferable by the Participant after all
    conditions and restrictions applicable to such Shares have been
    satisfied or lapse (including satisfaction of any applicable tax
    withholding obligations), and Restricted Stock Units shall be
    paid in cash, Shares, or a combination of cash and Shares as the
    Committee, in its sole discretion shall determine.

 

    8.4  Certificate Legend.  In addition
    to any legends placed on certificates pursuant to
    Section 8.3, each certificate representing Shares of
    Restricted Stock granted pursuant to this Plan may bear a legend
    such as the following or as otherwise determined by the
    Committee in its sole discretion:

 

    The sale or transfer of Shares of stock represented by this
    certificate, whether voluntary, involuntary, or by operation of
    law, is subject to certain restrictions on transfer as set forth
    in the Gerber Scientific Inc. 2006 Omnibus Incentive Plan, and
    in the associated Award Agreement. A copy of this Plan and such
    Award Agreement may be obtained from Gerber Scientific, Inc.

 

    8.5  Voting Rights.  Unless otherwise
    determined by the Committee and set forth in a
    Participant’s Award Agreement, to the extent permitted or
    required by law as determined by the Committee, Participants
    holding Shares of Restricted Stock granted hereunder shall have
    the right to exercise full voting rights and the right to
    receive any dividends declared or paid with respect to those
    Shares during the Period of Restriction. The Committee may
    provide that any dividends paid on Shares of Restricted Stock
    must be reinvested in Shares, which may or may not be subject to
    the same vesting conditions and restrictions applicable to such
    Restricted Stock. All distributions, if any, received by a
    Participant with respect to Shares of Restricted Stock as a
    result of any stock split, stock dividend, combination of Shares
    or other similar transaction shall be subject to the
    restrictions applicable to the original Award. A Participant
    shall have no voting rights with respect to any Restricted Stock
    Units granted hereunder.

 

    8.6  Termination of Employment.  Each
    Award Agreement shall set forth the extent to which the
    Participant shall have the right to retain Restricted Stock
    and/or
    Restricted Stock Units following termination of the
    Participant’s employment with or provision of services to
    the Company, its Affiliates,
    and/or its
    Subsidiaries, as the case may be. Such provisions shall be
    determined in the sole discretion of the Committee, shall be
    included in the Award Agreement entered into with each
    Participant, need not be uniform among all Shares of Restricted
    Stock or Restricted Stock Units issued pursuant to this Plan,
    and may reflect distinctions based on the reasons for
    termination.

 

    8.7  Section 83(b)
    Election.  The Committee may provide in an Award
    Agreement that the Award of Restricted Stock is conditioned upon
    the Participant making or refraining from making an election
    with respect to the Award under Code Section 83(b). If a
    Participant makes an election pursuant to Code
    Section 83(b) concerning a Restricted Stock Award, the
    Participant shall be required to file promptly a copy of such
    election with the Company.

 

    Article 9.

    

 

    Performance
    Units/Performance Shares

 

    9.1  Grant of Performance Units/Performance
    Shares.  Subject to the terms and provisions of
    this Plan, the Committee, at any time and from time to time, may
    grant Performance Units
    and/or
    Performance Shares to Participants in such amounts and upon such
    terms as the Committee shall determine.

 

    9.2  Value of Performance Units/Performance
    Shares.  Each Performance Unit shall have an
    initial value that is established by the Committee at the time
    of grant. Each Performance Share shall have an initial value
    equal to the Fair Market Value of a Share on the date of grant.
    The Committee shall set performance goals in its discretion
    which, depending on the extent to which they are met, will
    determine the value
    and/or
    number of Performance Units/Performance Shares that will be paid
    out to the Participant.

    

    10

 

    9.3  Earning of Performance Units/Performance
    Shares.  Subject to the terms of this Plan, after
    the applicable Performance Period has ended, the holder of
    Performance Units/Performance Shares shall be entitled to
    receive payout on the value and number of Performance
    Units/Performance Shares earned by the Participant over the
    Performance Period, to be determined as a function of the extent
    to which the corresponding performance goals have been achieved.

 

    9.4  Form and Timing of Payment of Performance
    Units/Performance Shares.  Payment of earned
    Performance Units/Performance Shares shall be as determined by
    the Committee and as evidenced in the Award Agreement. Subject
    to the terms of this Plan, the Committee, in its sole
    discretion, may pay earned Performance Units/Performance Shares
    in the form of cash or in Shares (or in a combination thereof)
    equal to the value of the earned Performance Units/Performance
    Shares at the close of the applicable Performance Period, or as
    soon as practicable after the end of the Performance Period. Any
    Shares may be granted subject to any restrictions deemed
    appropriate by the Committee. The determination of the Committee
    with respect to the form of payout of such Awards shall be set
    forth in the Award Agreement pertaining to the grant of the
    Award.

 

    9.5  Termination of Employment.  Each
    Award Agreement shall set forth the extent to which the
    Participant shall have the right to retain Performance Units
    and/or
    Performance Shares following termination of the
    Participant’s employment with or provision of services to
    the Company, its Affiliates,
    and/or its
    Subsidiaries, as the case may be. Such provisions shall be
    determined in the sole discretion of the Committee, shall be
    included in the Award Agreement entered into with each
    Participant, need not be uniform among all Awards of Performance
    Units or Performance Shares issued pursuant to this Plan, and
    may reflect distinctions based on the reasons for termination.

 

    Article 10.

    

 

    Cash-Based
    Awards and Other Stock-Based Awards

 

    10.1  Grant of Cash-Based
    Awards.  Subject to the terms and provisions of
    the Plan, the Committee, at any time and from time to time, may
    grant Cash-Based Awards to Participants in such amounts and upon
    such terms as the Committee may determine.

 

    10.2  Other Stock-Based Awards.  The
    Committee may grant other types of equity-based or
    equity-related Awards not otherwise described by the terms of
    this Plan (including the grant or offer for sale of unrestricted
    Shares) in such amounts and subject to such terms and conditions
    as the Committee shall determine. Such Awards may involve the
    transfer of actual Shares to Participants, or payment in cash or
    otherwise of amounts based on the value of Shares, and may
    include, without limitation, Awards designed to comply with or
    take advantage of the applicable local laws of jurisdictions
    other than the United States.

 

    10.3  Value of Cash-Based and Other Stock-Based
    Awards.  Each Cash-Based Award shall specify a
    payment amount or payment range as determined by the Committee.
    Each Other Stock-Based Award shall be expressed in terms of
    Shares or units based on Shares, as determined by the Committee.
    The Committee may establish performance goals in its discretion.
    If the Committee exercises its discretion to establish
    performance goals, the number
    and/or value
    of Cash-Based Awards or Other Stock-Based Awards that will be
    paid out to the Participant will depend on the extent to which
    the performance goals are met.

 

    10.4  Payment of Cash-Based Awards and Other
    Stock-Based Awards.  Payment, if any, with respect
    to a Cash-Based Award or an Other Stock-Based Award shall be
    made in accordance with the terms of the Award, in cash or
    Shares as the Committee determines.

 

    10.5  Termination of Employment.  The
    Committee shall determine the extent to which the Participant
    shall have the right to receive Cash-Based Awards or Other
    Stock-Based Awards following termination of the
    Participant’s employment with or provision of services to
    the Company, its Affiliates,
    and/or its
    Subsidiaries, as the case may be. Such provisions shall be
    determined in the sole discretion of the Committee, shall be
    included in an agreement entered into with each Participant,
    need not be uniform among all Awards of Cash-Based

    

    11

 

    Awards or Other Stock-Based Awards issued pursuant to the Plan,
    and may reflect distinctions based on the reasons for
    termination.

 

    Article 11.
    

    

 

    Transferability
    of Awards

 

    11.1  Transferability.  Except as
    provided in Section 11.2 below, during a Participant’s
    lifetime, his or her Awards shall be exercisable only by the
    Participant. Awards shall not be transferable other than by will
    or the laws of descent and distribution; no Awards shall be
    subject, in whole or in part, to attachment, execution, or levy
    of any kind; and any purported transfer in violation hereof
    shall be null and void. The Committee may establish such
    procedures as it deems appropriate for a Participant to
    designate a beneficiary to whom any amounts payable or Shares
    deliverable in the event of, or following, the
    Participant’s death, may be provided.

 

    11.2  Committee Action.  The
    Committee may, in its discretion, determine that notwithstanding
    Sections 11.1, any or all Awards (other than ISOs) shall be
    transferable to and exercisable by such transferees, and subject
    to such terms and conditions, as the Committee may deem
    appropriate; provided, however, no Award may be transferred for
    value (as defined in the General Instructions to
    Form S-8).

 

    Article 12.
    

    

 

    Performance
    Measures

 

    12.1  Performance Measures.  The
    performance goals upon which the payment or vesting of an Award
    to a Covered Employee that is intended to qualify as
    Performance-Based Compensation shall be limited to the following
    Performance Measures:

 

    (a) Net earnings or net income (before or after taxes);

 

    (b) Earnings per share;

 

    (c) Net sales or revenue growth;

 

    (d) Net operating profit;

 

    (e) Return measures (including, but not limited to, return
    on assets, capital, equity, sales, or revenue);

 

    (f) Cash flow (including, but not limited to, operating
    cash flow, free cash flow, cash flow return on equity, and cash
    flow return on investment);

 

    (g) Earnings before or after taxes, interest, depreciation,
    and/or
    amortization;

 

    (h) Gross or operating margins;

 

    (i) Productivity ratios;

 

    (j) Share price (including, but not limited to, growth
    measures and total shareholder return);

 

    (k) Expense targets;

 

    (l) Market share;

 

    (m) Customer satisfaction;

 

    (n) Working capital targets;

 

    (o) Cash value added or CVA (operating income minus cash
    taxes plus depreciation minus (cost of capital multiplied by
    gross investment); and,

 

    (p) Economic value added or EVA (net operating profit after
    tax minus the sum of capital multiplied by the cost of capital).

    

    12

 

    Any Performance Measure(s) may be used to measure the
    performance of the Company, Subsidiary,
    and/or
    Affiliate as a whole or any business unit of the Company,
    Subsidiary,
    and/or
    Affiliate or any combination thereof, as the Committee may deem
    appropriate, or any of the above Performance Measures as
    compared to the performance of a group of comparator companies,
    or published or special index that the Committee, in its sole
    discretion, deems appropriate, or the Company may select
    Performance Measure (j) above as compared to various stock
    market indices. The Committee also has the authority to provide
    for accelerated vesting of any Award based on the achievement of
    performance goals pursuant to the Performance Measures specified
    in this Article 12.

 

    12.2  Evaluation of Performance.  The
    Committee may provide in any such Award that any evaluation of
    performance may include or exclude any of the following events
    that occur during a Performance Period: (a) asset
    write-downs; (b) litigation or claim judgments or
    settlements; (c) the effect of changes in tax laws,
    accounting principles, or other laws or provisions affecting
    reported results; (d) any reorganization and restructuring
    programs; (e) extraordinary nonrecurring items as described
    in Accounting Principles Board Opinion No. 30
    and/or in
    management’s discussion and analysis of financial condition
    and results of operations appearing in the Company’s annual
    report to shareholders for the applicable year;
    (f) acquisitions or divestitures; and (g) foreign
    exchange gains and losses. To the extent such inclusions or
    exclusions affect Awards to Covered Employees, they shall be
    prescribed in a form that meets the requirements of Code
    Section 162(m) for deductibility.

 

    12.3  Adjustment of Performance-Based
    Compensation.  Awards that are intended to qualify
    as Performance-Based Compensation may not be adjusted upward.
    The Committee shall retain the discretion to adjust such Awards
    downward, either on a formula or discretionary basis, or any
    combination as the Committee determines.

 

    12.4  Committee Discretion.  In the
    event that applicable tax
    and/or
    securities laws change to permit Committee discretion to alter
    the governing Performance Measures without obtaining shareholder
    approval of such changes, the Committee shall have sole
    discretion to make such changes without obtaining shareholder
    approval provided the exercise of such discretion does not
    violate Code Section 409A. In addition, in the event that
    the Committee determines that it is advisable to grant Awards
    that shall not qualify as Performance-Based Compensation, the
    Committee may make such grants without satisfying the
    requirements of Code Section 162(m) and base vesting on
    Performance Measures other than those set forth in
    Section 12.1.

 

    Article 13.
    

    

 

    Nonemployee
    Director Awards

 

    The Board or the Company’s Nominating and Corporate
    Governance Committee shall determine all Awards to Nonemployee
    Directors. The terms and conditions of any grant to any such
    Nonemployee Director shall be set forth in an Award Agreement.

 

    Article 14.

    

 

    Dividend
    Equivalent

 

    Any Participant selected by the Committee may be granted
    dividend equivalents based on the dividends declared on Shares
    that are subject to any Award, to be credited as of dividend
    payment dates during the period between the date the Award is
    granted and the date the Award is exercised, vests, or expires,
    as determined by the Committee. Such dividend equivalents shall
    be converted to cash or additional Shares by such formula and at
    such time and subject to such limitations as may be determined
    by the Committee.

    

    13

 

    Article 15.
    

    

 

    Beneficiary
    Designation

 

    Each Participant under this Plan may, from time to time, name
    any beneficiary or beneficiaries (who may be named contingently
    or successively) to whom any benefit under this Plan is to be
    paid in case of his death before he receives any or all of such
    benefit. Each such designation shall revoke all prior
    designations by the same Participant, shall be in a form
    prescribed by the Committee, and will be effective only when
    filed by the Participant in writing with the Company during the
    Participant’s lifetime. In the absence of any such
    beneficiary designation, benefits remaining unpaid or rights
    remaining unexercised at the Participant’s death shall be
    paid to or exercised by the Participant’s executor,
    administrator, or legal representative.

 

    Article 16.

    

 

    Rights of
    Participants

 

    16.1  Employment.  Nothing in this
    Plan or an Award Agreement shall interfere with or limit in any
    way the right of the Company, its Affiliates,
    and/or its
    Subsidiaries to terminate any Participant’s employment or
    service on the Board or to the Company at any time or for any
    reason not prohibited by law, nor confer upon any Participant
    any right to continue his employment or service as a Director
    for any specified period of time.

 

    Neither an Award nor any benefits arising under this Plan shall
    constitute an employment contract with the Company, its
    Affiliates,
    and/or its
    Subsidiaries and, accordingly, subject to Articles 3
    and 18, this Plan and the benefits hereunder may be
    terminated at any time in the sole and exclusive discretion of
    the Committee without giving rise to any liability on the part
    of the Company, its Affiliates,
    and/or its
    Subsidiaries.

 

    16.2  Participation.  No individual
    shall have the right to be selected to receive an Award under
    this Plan, or, having been so selected, to be selected to
    receive a future Award.

 

    16.3  Rights as a
    Shareholder.  Except as otherwise provided herein,
    a Participant shall have none of the rights of a shareholder
    with respect to Shares covered by any Award until the
    Participant becomes the record holder of such Shares.

 

    Article 17.

    

 

    Change in
    Control

 

    Notwithstanding any other provision of this Plan to the
    contrary, the provisions of this Article 17 shall apply in
    the event of a Participant’s termination of employment
    within two (2) years after a Change in Control unless
    otherwise determined by the Committee, in connection with the
    grant of an Award as reflected in the applicable Award Agreement.

 

    (a) All outstanding Options and Stock Appreciation Rights
    shall become immediately vested and exercisable;

 

    (b) All Restricted Stock and Restricted Stock Units shall
    become immediately vested and payable; and

 

    (c) The Performance Period applicable to Performance Shares
    and Performance Units shall lapse and the performance goals
    associated with such awards shall be deemed to have been met at
    their target level. Such awards shall vest on a pro rata basis
    based on the portion of the vesting period completed as of the
    Change in Control.

 

    The Committee may, in its sole discretion, determine that any or
    all outstanding Awards granted under the Plan, whether or not
    exercisable, will be canceled and terminated and that in
    connection with such cancellation and termination the holder of
    such Award may receive for each Share of common stock subject to
    such Awards a cash payment (or the delivery of shares of stock,
    other securities or a combination of cash, stock and securities
    equivalent to such cash payment) equal to the difference, if
    any, between the consideration

    

    14

 

    received by shareholders of the Company in respect of a Share of
    common stock in connection with such transaction and the
    purchase price per share, if any, under the Award multiplied by
    the number of Shares of common stock subject to such Award;
    provided that if such product is zero or less or to the extent
    that the Award is not then exercisable, the Awards may be
    canceled and terminated without payment therefore.

 

    Article 18.

    

 

    Effective
    Date, Amendment, Modification, Suspension, and
    Termination

 

    18.1  Effective Date.  The Plan shall
    be effective as of the Effective Date, subject to approval of
    the Plan by the Company’s shareholders within one year
    after the Effective Date. Upon approval of the Plan by the
    Company’s shareholders as set forth above, all Awards’
    made under the Plan on or after the Effective Date shall be
    fully effective as if the Company’s shareholders had
    approved the Plan on the Effective Date. If the Company’s
    shareholders fail to approve the Plan within one year after the
    Effective Date, any Awards made hereunder shall be null and void
    and of no effect.

 

    18.2  Amendment, Modification, Suspension, and
    Termination.  Subject to Section 18.4, the
    Committee may, at any time and from time to time, alter, amend,
    modify, suspend, or terminate this Plan and any Award Agreement
    in whole or in part; provided, however, that without the prior
    approval of the Company’s shareholders and except as
    provided in Section 4.4, Options or SARs issued under this
    Plan will not be repriced, replaced, or regranted through
    cancellation or by lowering the Option Price of a previously
    granted Option or the Grant Price of a previously granted SAR,
    and no amendment of this Plan shall be made without shareholder
    approval if shareholder approval is required by law, regulation,
    or stock exchange rule.

 

    18.3  Adjustment of Awards Upon the Occurrence of
    Certain Unusual or Nonrecurring Events.  The
    Committee may make adjustments in the terms and conditions of,
    and the criteria included in, Awards in recognition of unusual
    or nonrecurring events (including, without limitation, the
    events described in Section 4.4 hereof) affecting the
    Company or the financial statements of the Company or of changes
    in applicable laws, regulations, or accounting principles,
    whenever the Committee determines that such adjustments are
    appropriate in order to prevent unintended dilution or
    enlargement of the benefits or potential benefits intended to be
    made available under this Plan. The determination of the
    Committee as to the foregoing adjustments, if any, shall be
    conclusive and binding on Participants under this Plan.

 

    18.4  Awards Previously
    Granted.  Notwithstanding any other provision of
    this Plan to the contrary (other than Section 18.5), no
    termination, amendment, suspension, or modification of this Plan
    or an Award Agreement shall adversely affect in any material way
    any Award previously granted under this Plan without the written
    consent of the Participant holding such Award.

 

    18.5  Amendment to Conform to
    Law.  Notwithstanding any other provision of this
    Plan to the contrary, the Board of Directors may amend the Plan
    or an Award Agreement, to take effect retroactively or
    otherwise, as deemed necessary or advisable for the purpose of
    conforming the Plan or an Award Agreement to any present or
    future law relating to plans of this or similar nature
    (including, but not limited to, Code Section 409A), and to
    the administrative regulations and rulings promulgated
    thereunder.

 

    Article 19.

    

 

    Withholding

 

    19.1  Tax Withholding.  The Company
    shall have the power and the right to deduct or withhold, or
    require a Participant to remit to the Company, the minimum
    statutory amount to satisfy federal, state, and local taxes,
    domestic or foreign, required by law or regulation to be
    withheld with respect to any taxable event arising as a result
    of this Plan.

 

    19.2  Share Withholding.  With
    respect to withholding required upon the exercise of Options or
    SARs, upon the lapse of restrictions on Restricted Stock and
    Restricted Stock Units, or upon the achievement of performance
    goals related to Performance Shares or any other taxable event
    arising as a result of an Award

    

    15

 

    granted hereunder, Participants may elect, subject to the
    approval of the Committee, to satisfy the withholding
    requirement, in whole or in part, by having the Company withhold
    Shares having a Fair Market Value on the date the tax is to be
    determined equal to the minimum statutory total tax that could
    be imposed on the transaction. All such elections shall be
    irrevocable, made in writing, and signed by the Participant, and
    shall be subject to any restrictions or limitations that the
    Committee, in its sole discretion, deems appropriate.

 

    Article 20.

    

 

    Successors

 

    All obligations of the Company under this Plan with respect to
    Awards granted hereunder shall be binding on any successor to
    the Company, whether the existence of such successor is the
    result of a direct or indirect purchase, merger, consolidation,
    or otherwise, of all or substantially all of the business
    and/or
    assets of the Company.

 

    Article 21.

    

 

    General
    Provisions

 

    21.1  Forfeiture Events.  The
    Committee may specify in an Award Agreement that the
    Participant’s rights, payments, and benefits with respect
    to an Award shall be subject to reduction, cancellation,
    forfeiture, or recoupment upon the occurrence of certain
    specified events, in addition to any otherwise applicable
    vesting or performance conditions of an Award. Such events may
    include, but shall not be limited to, termination of employment
    for cause, termination of the Participant’s provision of
    services to the Company, Affiliate,
    and/or
    Subsidiary, violation of material Company, Affiliate,
    and/or
    Subsidiary policies, breach of noncompetition, confidentiality,
    or other restrictive covenants that may apply to the
    Participant, or other conduct by the Participant that is
    detrimental to the business or reputation of the Company, its
    Affiliates,
    and/or its
    Subsidiaries.

 

    21.2  Legend.  The certificates for
    Shares may include any legend which the Committee deems
    appropriate to reflect any restrictions on transfer of such
    Shares.

 

    21.3  Gender and Number.  Except
    where otherwise indicated by the context, any masculine term
    used herein also shall include the feminine, the plural shall
    include the singular, and the singular shall include the plural.

 

    21.4  Severability.  In the event any
    provision of this Plan shall be held illegal or invalid for any
    reason, the illegality or invalidity shall not affect the
    remaining parts of this Plan, and this Plan shall be construed
    and enforced as if the illegal or invalid provision had not been
    included.

 

    21.5  Requirements of Law.  The
    granting of Awards and the issuance of Shares under this Plan
    shall be subject to all applicable laws, rules, and regulations,
    and to such approvals by any governmental agencies or national
    securities exchanges as may be required.

 

    21.6  Delivery of Title.  The Company
    shall have no obligation to issue or deliver evidence of title
    for Shares issued under this Plan prior to:

 

    (a) Obtaining any approvals from governmental agencies that
    the Company determines are necessary or advisable; and

 

    (b) Completion of any registration or other qualification
    of the Shares under any applicable national or foreign law or
    ruling of any governmental body that the Company determines to
    be necessary or advisable.

 

    21.7  Inability to Obtain
    Authority.  The inability of the Company to obtain
    authority from any regulatory body having jurisdiction, which
    authority is deemed by the Company’s counsel to be
    necessary to the lawful issuance and sale of any Shares
    hereunder, shall relieve the Company of any liability in respect
    of the failure to issue or sell such Shares as to which such
    requisite authority shall not have been obtained.

    

    16

 

    21.8  Investment
    Representations.  The Committee may require any
    individual receiving Shares pursuant to an Award under this Plan
    to represent and warrant in writing that the individual is
    acquiring the Shares for investment and without any present
    intention to sell or distribute such Shares.

 

    21.9  Employees Based Outside of the United
    States.  Notwithstanding any provision of this
    Plan to the contrary, in order to comply with the laws in other
    countries in which the Company, its Affiliates,
    and/or its
    Subsidiaries operate or have Employees or Directors, the
    Committee, in its sole discretion, shall have the power and
    authority to:

 

    (a) Determine which Affiliates and Subsidiaries shall be
    covered by this Plan.

 

    (b) Determine which Employees
    and/or
    Directors outside the United States are eligible to participate
    in this Plan.

 

    (c) Modify the terms and conditions of any Award granted to
    Employees
    and/or
    Directors outside the United States to comply with applicable
    foreign laws.

 

    (d) Establish subplans and modify exercise procedures and
    other terms and procedures, to the extent such actions may be
    necessary or advisable. Any subplans and modifications to Plan
    terms and procedures established under this Section 21.9 by
    the Committee shall be attached to this Plan document as
    appendices.

 

    (e) Take any action, before or after an Award is made, that
    it deems advisable to obtain approval or comply with any
    necessary local government regulatory exemptions or approvals.

 

    Notwithstanding the above, the Committee may not take any
    actions hereunder, and no Awards shall be granted, that would
    violate applicable law.

 

    21.10  Uncertificated Shares.  To the
    extent that this Plan provides for issuance of certificates to
    reflect the transfer of Shares, the transfer of such Shares may
    be affected on a noncertificated basis, to the extent not
    prohibited by applicable law or the rules of any stock exchange.

 

    21.11  Unfunded Plan.  Participants
    shall have no right, title, or interest whatsoever in or to any
    investments that the Company,
    and/or its
    Subsidiaries,
    and/or its
    Affiliates may make to aid it in meeting its obligations under
    this Plan. Nothing contained in this Plan, and no action taken
    pursuant to its provisions, shall create or be construed to
    create a trust of any kind, or a fiduciary relationship between
    the Company and any Participant, beneficiary, legal
    representative, or any other individual. To the extent that any
    individual acquires a right to receive payments from the
    Company, its Subsidiaries,
    and/or its
    Affiliates under this Plan, such right shall be no greater than
    the right of an unsecured general creditor of the Company, a
    Subsidiary, or an Affiliate, as the case may be. All payments to
    be made hereunder shall be paid from the general funds of the
    Company, a Subsidiary, or an Affiliate, as the case may be and
    no special or separate fund shall be established and no
    segregation of assets shall be made to assure payment of such
    amounts except as expressly set forth in this Plan.

 

    21.12  No Fractional Shares.  No
    fractional Shares shall be issued or delivered pursuant to this
    Plan or any Award. The Committee shall determine whether cash,
    Awards, or other property shall be issued or paid in lieu of
    fractional Shares, whether fractional Shares shall be rounded up
    or down to the nearest whole Share, or whether such fractional
    Shares or any rights thereto shall be forfeited or otherwise
    eliminated.

 

    21.13  Retirement and Welfare
    Plans.  Neither Awards made under this Plan nor
    Shares or cash paid pursuant to such Awards may be included as
    “compensation” for purposes of computing the benefits
    payable to any Participant under the Company’s or any
    Subsidiary’s or Affiliate’s retirement plans (both
    qualified and nonqualified) or welfare benefit plans unless such
    other plan expressly provides that such compensation shall be
    taken into account in computing a Participant’s benefit.

 

    21.14  Deferred Compensation.  It is
    intended that any Award made under this Plan that results in the
    deferral of compensation (as defined under Code
    Section 409A) complies with the requirements of Code
    Section 409A.

    

    17

 

    21.15  Nonexclusivity of this
    Plan.  The adoption of this Plan shall not be
    construed as creating any limitations on the power of the Board
    or Committee to adopt such other compensation arrangements as it
    may deem desirable for any Participant.

 

    21.16  No Constraint on Corporate
    Action.  Nothing in this Plan shall be construed
    to: (i) limit, impair, or otherwise affect the
    Company’s or a Subsidiary’s or an Affiliate’s
    right or power to make adjustments, reclassifications,
    reorganizations, or changes of its capital or business
    structure, or to merge or consolidate, or dissolve, liquidate,
    sell, or transfer all or any part of its business or assets; or
    (ii) limit the right or power of the Company or a
    Subsidiary or an Affiliate to take any action which such entity
    deems to be necessary or appropriate.

 

    21.17  Governing Law.  The Plan and
    each Award Agreement shall be governed by the laws of the state
    of Connecticut, excluding any conflicts or choice of law rule or
    principle that might otherwise refer construction or
    interpretation of this Plan to the substantive law of another
    jurisdiction. Unless otherwise provided in the Award Agreement,
    recipients of an Award under this Plan are deemed to submit to
    the exclusive jurisdiction and venue of the federal or state
    courts of Connecticut, to resolve any and all issues that may
    arise out of or relate to this Plan or any related Award
    Agreement.

 

    21.18  Indemnification.  Subject to
    requirements of Connecticut law, each individual who is or shall
    have been a member of the Board, or a Committee appointed by the
    Board, shall be indemnified and held harmless by the Company
    against and from any loss, cost, liability, or expense that may
    be imposed upon or reasonably incurred by him or her in
    connection with or resulting from any claim, action, suit, or
    proceeding to which he or she may be a party or in which he or
    she may be involved by reason of any action taken or failure to
    act under this Plan and against and from any and all amounts
    paid by him or her in settlement thereof, with the
    Company’s approval, or paid by him or her in satisfaction
    of any judgment in any such action, suit, or proceeding against
    him or her, provided he or she shall give the Company an
    opportunity, at its own expense, to handle and defend the same
    before he or she undertakes to handle and defend it on
    his/her own
    behalf, unless such loss, cost, liability, or expense is a
    result of
    his/her own
    willful misconduct or except as expressly provided by statute.

 

    The foregoing right of indemnification shall not be exclusive of
    any other rights of indemnification to which such individuals
    may be entitled under the Company’s Articles of
    Incorporation, as a matter of law, or otherwise, or any power
    that the Company may have to indemnify them or hold them
    harmless.

    

    18Converted by EDGARwiz

Exhibit 10.1

PHILLIPS-VAN HEUSEN CORPORATION

2006 STOCK INCENTIVE PLAN

(As Amended Through September 21, 2006)

1.

Establishment, Objectives and Duration.

(a)

Establishment of the Plan.  Phillips-Van Heusen Corporation established this  incentive compensation plan to be known as the "Phillips-Van Heusen Corporation 2006 Stock Incentive Plan."  The Plan permits the granting of Nonqualified Stock Options, Incentive Stock Options, Stock Appreciation Rights, Restricted Stock, Restricted Stock Units, Performance Shares and Other Stock-Based Awards.  The Plan became effective on April 27, 2006 (the "Effective Date").   Definitions of capitalized terms used in the Plan are contained in the attached glossary, which is an integral part of the Plan.

(b)

Purposes of the Plan.  The purposes of the Plan are to induce certain individuals to remain in the employ, or to continue to serve as directors of, or consultants or advisors to, the Company and its present and future Subsidiaries, to attract new individuals to enter into such employment or service and to encourage such individuals to secure or increase on reasonable terms their stock ownership in the Company.  The Board believes that the granting of Awards under the Plan will promote continuity of management and increased incentive and personal interest in the welfare of the Company by those who are or may become primarily responsible for shaping and carrying out the long range plans of the Company and securing its continued growth and financial success.

(c)

Duration of the Plan.  No Award may be granted under the Plan after the day immediately preceding the tenth (10th) anniversary of the Effective Date, or such earlier date as the Board shall determine.  The Plan will remain in effect with respect to outstanding Awards until no Awards remain outstanding.

2.

Administration of the Plan.

(a)

The Committee.  Except as otherwise provided in Section 2(d), the Plan shall be administered by the "Committee."  The Committee shall consist of two or more members of the Board.  It is intended that all of the members of the Committee shall be "non-employee directors" within the meaning of Rule 16b-3(b)(3) promulgated under the Exchange Act, and "outside directors" within the contemplation of Section 162(m)(4)(C)(i) of the Code.  The Committee shall be appointed annually by the Board, which may at any time and from time to time remove any members of the Committee, with or without cause, appoint additional members to the Committee and fill vacancies, however caused, in the Committee.  A majority of the members of the Committee shall constitute a quorum.  All determinations of the Committee shall be made by a majority of its members present at a meeting duly called and held, except that the Committee may delegate to any one of its members the authority of the Committee with respect to the grant of Awards to any person who (i) shall not be an officer and/or director of the Company and (ii) is not, and in the judgment of the Committee may not be reasonably expected 

to become, a "covered employee" within the meaning of Section 162(m)(3) of the Code.  Any decision or determination of the Committee reduced to writing and signed by all of the members of the Committee (or by the member(s) of the Committee to whom authority has been delegated) shall be fully as effective as if it had been made at a meeting duly called and held.

(b)

Authority of the Committee.  Subject to Applicable Laws and the provisions of the Plan (including any other powers given to the Committee hereunder), and except as otherwise provided by the Board, the Committee shall have full and final authority in its discretion to take all actions determined by the Committee to be necessary in the administration of the Plan, including, without limitation, discretion to:

(i)

select the Employees, Directors and Consultants to whom Awards may from time to time be granted hereunder;

(ii)

determine whether and to what extent Awards are granted hereunder;

(iii)

determine the size and types of Awards granted hereunder;

(iv)

approve forms of Award Agreement for use under the Plan;

(v)

determine the terms and conditions of any Award granted hereunder;

(vi)

establish performance goals for any Performance Period and determine whether such goals were satisfied;

(vii)

amend the terms of any outstanding Award granted under the Plan; provided that, except as otherwise provided in Section 16, no such amendment shall reduce the Exercise Price of outstanding Options or the grant price of outstanding SARs without the approval of the stockholders of the Company;

(viii)

construe and interpret the terms of the Plan and any Award Agreement entered into under the Plan, and to decide all questions of fact arising in its application; and

(ix)

take such other action, not inconsistent with the terms of the Plan, as the Committee deems appropriate.

(c)

Effect of Committee's Decision.  All decisions, determinations and interpretations of the Committee shall be final, binding and conclusive on all persons, including the Company, its Subsidiaries, its stockholders, Employees, Directors, Consultants and their estates and beneficiaries.

(d)

Delegation.  As permitted by Applicable Laws, the Committee may delegate its authority as identified herein, including the power and authority to make Awards to Participants who are not "insiders" subject to Section 16(b) of the Exchange Act or expected to be "covered employees" within the meaning of Section 162(m) of the Code, pursuant to such conditions and limitations as the Committee may establish.

2

 

3.

Shares Subject to the Plan; Effect of Grants; Individual Limits.

(a)

Number of Shares Available for Grants.  Subject to adjustment as provided in Section 18 hereof, the maximum number of Shares which may be issued pursuant to Awards under the Plan shall be 3,000,000, plus any Shares remaining available for issuance under the Prior Plans as of the Effective Date, plus the number of Shares subject to outstanding awards under the Prior Plans at the Effective Date that are deemed not delivered under the Prior Plans pursuant to paragraph (i) or (ii), of this Section 3(a).

(i)

Shares that are potentially deliverable under an Award granted under the Plan or an option granted under a Prior Plan that expires or is canceled, forfeited, settled in cash or otherwise settled without the delivery of Shares shall not be treated as having been issued under the Plan or a Prior Plan.

(ii)

Shares that are issued pursuant to awards that are assumed, converted or substituted in connection with a merger, acquisition, reorganization or similar transaction shall not be treated as having been issued under the Plan; provided, however, that the Shares referred to in this paragraph (ii) shall not be considered for purposes of determining the number of Shares available for grant as Incentive Stock Options. 

Notwithstanding any other provisions herein: (i) shares tendered in payment of the exercise price of an Award shall not be added to the maximum share limitations described above, (ii) shares withheld by the Company to satisfy the tax withholding obligation shall not be added to the maximum share limitations described above and (iii) all shares covered by a Stock Appreciation Right, to the extent that it is exercised and whether or not shares of Common Stock are actually issued upon exercise of the right, shall be considered issued or transferred pursuant to the Plan.

The Shares to be issued pursuant to Awards may be authorized but unissued Shares or treasury Shares.

(b)

Individual Limits.  Subject to adjustment as provided in Section 16 hereof, the maximum aggregate number of Shares with respect to which Awards may be granted in any calendar year to any one Participant shall be 500,000 Shares.

(c)

Share Counting.  A Stock Option or Stock Appreciation Right shall be counted as one share for purposes of the limits set forth in Sections 3(a) and 3(b).  A combination of Stock Appreciation Right and Stock Option, where the exercise of the Stock Appreciation Right or Stock Option results in the cancellation of the other, shall be counted as one share for purposes of the limits set forth in Sections 3(a) and 3(b).  A Restricted Stock Grant, Restricted Stock Unit, Performance Share or Stock Award shall be counted as three shares for purposes of the limits set forth in Sections 3(a) and 3(b).

4.

Eligibility and Participation.

(a)

Eligibility.  Persons eligible to participate in the Plan include all Employees, Directors and Consultants.

3

 

(b)

Actual Participation.  Subject to the provisions of the Plan, the Committee may, from time to time, select from all eligible Employees, Directors and Consultants, those to whom Awards shall be granted and shall determine the nature and amount of each Award.  The Committee may establish additional terms, conditions, rules or procedures to accommodate the rules or laws of applicable foreign jurisdictions and to afford Participants favorable treatment under such laws; provided, however, that no Award shall be granted under any such additional terms, conditions, rules or procedures with terms or conditions which are inconsistent with the provisions of the Plan.

5.

Types of Awards.

(a)

Type of Awards.  Awards under the Plan may be in the form of Options (both Nonqualified Stock Options and/or Incentive Stock Options), SARs, Restricted Stock, Restricted Stock Units, Performance Shares and Other Stock-Based Awards.

(b)

Designation of Award.  Each Award shall be designated in the Award Agreement.

6.

Options.

(a)

Grant of Options.  Subject to the terms and provisions of the Plan, Options may be granted to Participants in such number and upon such terms, and at any time and from time to time, as shall be determined by the Committee. 

(b)

Award Agreement.  Each Option grant shall be evidenced by an Award Agreement that shall specify the Exercise Price, the duration of the Option, the number of Shares to which the Option pertains, and such other provisions as the Committee shall determine including, but not limited to, the Option vesting schedule, repurchase provisions, rights of first refusal, forfeiture provisions, form of payment (cash, Shares, or other consideration) upon settlement of the Award, and payment contingencies; provided, however that the Agreement Award shall provide for full vesting upon a Participant’s Retirement.  The Award Agreement also shall specify whether the Option is intended to be an Incentive Stock Option or a Nonqualified Stock Option.  Options that are intended to be Incentive Stock Options shall be subject to the limitations set forth in Section 422 of the Code.  Options granted pursuant to the Plan shall not provide Participants with the right to receive Dividends or Dividend Equivalents.  

(c)

Exercise Price.  Except for Options adjusted pursuant to Section 18 herein, and replacement Options granted in connection with a merger, acquisition, reorganization or similar transaction, the Exercise Price for each grant of an Option shall not be less than 100% of the Fair Market Value of a Share on the date the Option is granted.  However, in the case of an Incentive Stock Option granted to a Participant who, at the time the Option is granted, owns stock representing more than 10% of the voting power of all classes of stock of the Company or any Subsidiary, the Exercise Price for each grant of an Option shall not be less than 110% of the Fair Market Value of a Share on the date the Option is granted.

(d)

Term of Options.  The term of an Option granted under the Plan shall be determined by the Committee, in its sole discretion; provided, however, that such term shall not exceed 10 years.  However, in the case of an Incentive Stock Option granted to a Participant who, at the time the Option is granted, owns stock representing more than 10% of the voting 

4

 

power of all classes of stock of the Company or any Subsidiary, the term of the Incentive Stock Option shall be five years from the date of grant thereof or such shorter term as may be provided in the Award Agreement.

(e)

Exercise of Options.  Options granted under this Section 6 shall be exercisable at such times and be subject to such restrictions and conditions as set forth in the Award Agreement and as the Committee shall in each instance approve, which need not be the same for each grant or for each Participant.

(f)

Payments.  Options granted under this Section 6 shall be exercised by the delivery of a written notice to the Company setting forth the number of Shares with respect to which the Option is to be exercised and payment of the Exercise Price.  The Exercise Price of an Option shall be payable to the Company: (i) in cash or its equivalent, (ii) by tendering (either actually or constructively by attestation) Shares having an aggregate Fair Market Value at the time of exercise equal to the Exercise Price, (iii) in any other manner then permitted by the Committee, or (iv) by a combination of any of the permitted methods of payment.  The Committee may limit any method of payment, other than that specified under (i), for administrative convenience, to comply with Applicable Laws or otherwise.

(g)

Restrictions on Share Transferability.  The Committee may impose such restrictions on any Shares acquired pursuant to the exercise of an Option granted under this Section 6 as it may deem advisable, including, without limitation, restrictions under applicable federal securities laws, under the requirements of any stock exchange or market upon which such Shares are then listed and/or traded, and under any blue sky or state securities laws applicable to such Shares.

(h)

Termination of Employment or Service.  Each Participant's Option Award Agreement shall set forth the extent to which the Participant shall have the right to exercise the Option following termination of the Participant's employment or, if the Participant is a Director or Consultant, service with the Company and its Subsidiaries.  Such provisions shall be determined in the sole discretion of the Committee, need not be uniform among all Options, and may reflect distinctions based on the reasons for termination of employment or service.

7.

Stock Appreciation Rights.

(a)

Grant of SARs.  Subject to the terms and provisions of the Plan, SARs may be granted to Participants in such amounts and upon such terms, and at any time and from time to time, as shall be determined by the Committee.  

(b)

Award Agreement.  Each SAR grant shall be evidenced by an Award Agreement that shall specify the grant price, the term of the SAR, and such other provisions as the Committee shall determine.  SARs granted pursuant to the Plan shall not provide Participants with the right to receive Dividends or Dividend Equivalents.  

(c)

Grant Price.  The grant price of a Freestanding SAR shall not be less than 100% of the Fair Market Value of a Share on the date of grant of the SAR; provided, however, that these limitations shall not apply to Awards that are adjusted pursuant to Section 18 herein.

5

 

(d)

Term of SARs.  The term of a SAR granted under the Plan shall be determined by the Committee, in its sole discretion; provided, however, that such term shall not exceed 10 years.

(e)

Exercise of SARs.  SARs may be exercised upon whatever terms and conditions the Committee, in its sole discretion, imposes upon them and sets forth in the Award Agreement.

(f)

Payment of SAR Amount.  Upon exercise of a SAR, a Participant shall be entitled to receive payment from the Company in an amount determined by multiplying:

(i)

the difference between the Fair Market Value of a Share on the date of exercise over the grant price; by

(ii)

the number of Shares with respect to which the SAR is exercised.

At the discretion of the Committee, the payment upon SAR exercise may be in cash, in Shares of equivalent value, or in some combination thereof.

(g)

Termination of Employment or Service.  Each SAR Award Agreement shall set forth the extent to which the Participant shall have the right to exercise the SAR following termination of the Participant's employment or, if the Participant is a Director or Consultant, service with the Company and its Subsidiaries.  Such provisions shall be determined in the sole discretion of the Committee, need not be uniform among all SARs, and may reflect distinctions based on the reasons for termination of employment or service.

8.

Restricted Stock.

(a)

Grant of Restricted Stock.  Subject to the terms and provisions of the Plan, Restricted Stock may be granted to Participants in such amounts and upon such terms, and at any time and from time to time, as shall be determined by the Committee.

(b)

Award Agreement.  Each Restricted Stock grant shall be evidenced by an Award Agreement that shall specify the Period of Restriction, the number of Shares of Restricted Stock granted, and such other provisions as the Committee shall determine.

(c)

Period of Restriction and Other Restrictions.  Except as otherwise provided in a Participant's Award Agreement, upon a termination of employment or, pursuant to Section 19, in the event of a Change in Control or Subsidiary Disposition, an Award of Restricted Stock shall have a minimum Period of Restriction of three years, which period may, at the discretion of the Committee, lapse on a pro-rated, graded, or cliff basis (as specified in an Award Agreement).  The Committee shall impose such other conditions and/or restrictions on any Shares of Restricted Stock granted pursuant to the Plan as it may deem advisable including, without limitation, a requirement that Participants pay a stipulated purchase price for each Share of Restricted Stock, a requirement that the issuance of Shares of Restricted Stock be delayed, restrictions based upon the achievement of specific performance goals, additional time-based restrictions, and/or restrictions under Applicable Laws, or holding requirements or sale restrictions placed on the Shares by the Company upon vesting of such Restricted Stock. As soon as practicable following the grant of Restricted Stock, the Shares of Restricted Stock shall be 

6

 

registered in the Participant's name in certificate or book-entry form.  If a certificate is issued, it shall bear an appropriate legend referring to the restrictions and it shall be held by the Company, or its agent, on behalf of the Participant until the Period of Restriction has lapsed or otherwise been satisfied.  If the Shares are registered in book-entry form, the restrictions shall be placed on the book-entry registration.  

(d)

Removal of Restrictions.  Subject to Applicable Laws, Restricted Stock shall become freely transferable by the Participant after the last day of the Period of Restriction applicable thereto.  Once Restricted Stock is released from the restrictions, the Participant shall be entitled to receive a certificate evidencing the Shares.

(e)

Voting Rights.  Unless otherwise determined by the Committee and set forth in a Participant's Award Agreement, to the extent permitted or required by Applicable Laws.  Participants holding Shares of Restricted Stock granted hereunder may exercise full voting rights with respect to those Shares during the Period of Restriction.

(f)

Dividends and Other Distributions.  Except as otherwise provided in a Participant's Award Agreement, during the Period of Restriction, Participants holding Shares of Restricted Stock shall receive all regular cash Dividends paid with respect to all Shares while they are so held, and, except as otherwise determined by the Committee, all other distributions paid with respect to such Restricted Stock shall be credited to Participants subject to the same restrictions on transferability and forfeitability as the Restricted Stock with respect to which they were paid and paid at such time following full vesting as are paid the Shares of Restricted Stock with respect to which such distributions were made.

(g)

Termination of Employment or Service.  Each Award Agreement shall set forth the extent to which the Participant shall have the right to retain unvested Restricted Stock following termination of the Participant's employment or, if the Participant is a Director or Consultant, service with the Company and its Subsidiaries.  Such provisions shall be determined in the sole discretion of the Committee, need not be uniform among all Awards of Restricted Stock, and may reflect distinctions based on the reasons for termination of employment or service.

9.

Restricted Stock Units.

(a)

Grant of Restricted Stock Units.  Subject to the terms and provisions of the Plan, Restricted Stock Units may be granted to Participants in such amounts and upon such terms, and at any time and from time to time, as shall be determined by the Committee.

(b)

Award Agreement.  Each grant of Restricted Stock Units shall be evidenced by an Award Agreement that shall specify the applicable Period of Restriction, the number of Restricted Stock Units granted, and such other provisions as the Committee shall determine.

(c)

Value of Restricted Stock Units.  The initial value of a Restricted Stock Unit shall equal the Fair Market Value of a Share on the date of grant; provided, however, that this restriction shall not apply to Awards that are adjusted pursuant to Section 16.

7

 

(d)

Period of Restriction.  Except as otherwise provided in a Participant's Award Agreement, upon a termination of employment or, pursuant to Section 17, in the event of a Change in Control or Subsidiary Disposition, an Award of Restricted Stock Units shall have a minimum Period of Restriction of three (3) years, which period may, at the discretion of the Committee, lapse on a pro-rated, graded, or cliff basis.

(e)

Form and Timing of Payment.  Except as otherwise provided in Section 17 or a Participant's Award Agreement, payment of Restricted Stock Units shall be made at a specified settlement date that shall not be earlier than the last day of the Period of Restriction.  The Committee, in its sole discretion, may pay earned Restricted Stock Units by delivery of Shares or by payment in cash of an amount equal to the Fair Market Value of such Shares (or a combination thereof).  The Committee may provide that settlement of Restricted Stock Units shall be deferred, on a mandatory basis or at the election of the Participant.

(f)

Voting Rights.  A Participant shall have no voting rights with respect to any Restricted Stock Units granted hereunder.

(g)

Termination of Employment or Service.  Each Award Agreement shall set forth the extent to which the Participant shall have the right to receive a payout respecting an Award of Restricted Stock Units following termination of the Participant's employment or, if the Participant is a Director or Consultant, service with the Company and its Subsidiaries.  Such provisions shall be determined in the sole discretion of the Committee, need not be uniform among all Restricted Stock Units, and may reflect distinctions based on the reasons for termination of employment or service.

(h)

At the discretion of the Committee, Restricted Stock Units granted pursuant to the Plan may provide Participants with the right to receive Dividend Equivalents, which may be paid currently or credited to an account for the Participants, and may be settled in cash and/or Shares, as determined by the Committee in its sole discretion, subject in each case to such terms and conditions as the Committee shall establish.

10.

Performance Shares.

(a)

Grant of Performance Shares.  Subject to the terms and provisions of the Plan, Performance Shares may be granted to Participants in such amounts and upon such terms, and at any time and from time to time, as shall be determined by the Committee.

(b)

Award Agreement.  Each grant of Performance Shares shall be evidenced by an Award Agreement that shall specify the applicable Performance Period and Performance Measure(s), the number of Performance Shares granted, and such other provisions as the Committee shall determine.

(c)

Value of Performance Shares.  The initial value of a Performance Share shall equal the Fair Market Value of a Share on the date of grant; provided, however, that this restriction shall not apply to Awards that are adjusted pursuant to Section 16.

(d)

Form and Timing of Payment.  Except as otherwise provided in Section 17 or a Participant's Award Agreement, payment of Performance Shares shall be made at a specified 

8

 

settlement date that shall not be earlier than the last day of the Performance Period.  The Committee, in its sole discretion, may pay earned Performance Shares by delivery of Shares or by payment in cash of an amount equal to the Fair Market Value of such Shares (or a combination thereof).  The Committee may provide that settlement of Performance Shares shall be deferred, on a mandatory basis or at the election of the Participant.

(e)

Voting Rights.  A Participant shall have no voting rights with respect to any Performance Shares granted hereunder.

(f)

Termination of Employment or Service.  Each Award Agreement shall set forth the extent to which the Participant shall have the right to receive a payout respecting an Award of Performance Shares following termination of the Participant's employment or, if the Participant is a Consultant, service with the Company and its Subsidiaries.  Such provisions shall be determined in the sole discretion of the Committee, need not be uniform among all Participants, and may reflect distinctions based on the reasons for termination of employment or service

11.

Other Stock-Based Awards.

(a)

Grant.  The Committee shall have the right to grant other Awards that may include, without limitation, the grant of Shares based on attainment of performance goals established by the Committee, the payment of Shares as a bonus or in lieu of cash based on attainment of performance goals established by the Committee, and the payment of Shares in lieu of cash under other Company incentive or bonus programs.

(b)

Period of Restriction.  Except as otherwise provided in a Participant's Award Agreement, upon a termination of employment or, pursuant to Section 17, in the event of a Change in Control or Subsidiary Disposition, Awards granted pursuant to this Section 12 shall have a minimum Period of Restriction of three years, which period may, at the discretion of the Committee, lapse on a pro-rated, graded, or cliff basis (as specified in an Award Agreement).  Notwithstanding the above, the payment of Shares in lieu of cash under other Company incentive or bonus programs shall not be subject to the minimum Period of Restriction limitations described above.

(c)

Payment of Other Stock-Based Awards.  Subject to Section 11(b) hereof, payment under or settlement of any such Awards shall be made in such manner and at such times as the Committee may determine.  The Committee may provide that settlement of Other Stock-Based Awards shall be deferred, on a mandatory basis or at the election of the Participant.

(d)

Termination of Employment or Service.  The Committee shall determine the extent to which the Participant shall have the right to receive Other Stock-Based Awards following termination of the Participant's employment or, if the Participant is a Director or Consultant, service with the Company and its Subsidiaries.  Such provisions shall be determined in the sole discretion of the Committee, such provisions may be included in an agreement entered into with each Participant, but need not be uniform among all Other Stock-Based Awards, and may reflect distinctions based on the reasons for termination of employment or service.

9

 

12.

Performance-Based Exception.

(a)

The Committee may specify that the attainment of one or more of the Performance Measures set forth in this Section 12 shall determine the degree of granting, vesting and/or payout with respect to Awards that the Committee intends will qualify for the Performance-Based Exception.  The performance goals to be used for such Awards shall be chosen from among the following performance measures (the "Performance Measures"): earnings, earnings before interest and taxes, earnings before interest, taxes, depreciation and amortization, earnings per share, economic value created, market share, net income (before or after taxes), operating income, adjusted net income after capital charge, return on assets, return on capital (based on earnings or cash flow), return on equity, return on investment, revenue, cash flow, operating margin, share price, total stockholder return, total market value, and strategic business criteria, consisting of one or more objectives based on meeting specified market penetration goals, productivity measures, geographic business expansion goals, cost targets, customer satisfaction or employee satisfaction goals, goals relating to merger synergies, management of employment practices and employee benefits, or supervision of litigation or information technology, and goals relating to acquisitions or divestitures of subsidiaries, affiliates or joint ventures.  The targeted level or levels of performance with respect to such Performance Measures may be established at such levels and on such terms as the Committee may determine, in its discretion, on a corporate-wide basis or with respect to one or more business units, divisions, subsidiaries, business segments or functions, and in either absolute terms or relative to the performance of one or more comparable companies or an index covering multiple companies.  Awards that are not intended to qualify for the Performance-Based Exception may be based on these or such other performance measures as the Committee may determine. 

(b)

Unless otherwise determined by the Committee, measurement of performance goals with respect to the Performance Measures above shall exclude the impact of charges for restructurings, discontinued operations, extraordinary items, and other unusual or non-recurring items, as well as the cumulative effects of tax or accounting changes, each as determined in accordance with generally accepted accounting principles or identified in the Company's financial statements, notes to the financial statements, management's discussion and analysis or other filings with the SEC, as well as any other items determined in accordance with Section 18(b).

(c)

Performance goals may differ for Awards granted to any one Participant or to different Participants.

(d)

Achievement of performance goals in respect of Awards intended to qualify under the Performance-Based Exception shall be measured over a Performance Period specified in the Award Agreement, and the goals shall be established not later than 90 days after the beginning of the Performance Period or, if less than 90 days, the number of days which is equal to 25% of the relevant Performance Period applicable to the Award.

(e)

The Committee shall have the discretion to adjust the determinations of the degree of attainment of the pre-established performance goals; provided, however, that Awards that are 

10

 

designed to qualify for the Performance-Based Exception may not be adjusted upward (the Committee may, in its discretion, adjust such Awards downward). 

13.

Transferability of Awards.  Incentive Stock Options may not be sold, transferred, pledged, assigned, or otherwise alienated or hypothecated, other than by will or by the laws of descent and distribution, and shall be exercisable during a Participant's lifetime only by such Participant.  Other Awards shall be transferable to members of the Participant's Immediate Family to the extent provided in the Award Agreement, except that no Award may be transferred for consideration.  

14.

Taxes.  The Company shall have the power and right, prior to the delivery of Shares pursuant to an Award, to deduct or withhold, or require a participant to remit to the Company (or a Subsidiary), an amount (in cash or Shares) sufficient to satisfy any applicable tax withholding requirements applicable to an Award.  Whenever under the Plan payments are to be made in cash, such payments shall be net of an amount sufficient to satisfy any applicable tax withholding requirements.  Subject to such restrictions as the Committee may prescribe, in the event that an Award of Restricted Stock shall become taxable to a Participant during any Company-imposed blackout period, a Participant may satisfy all or a portion of any tax withholding requirements by electing to have the Company withhold Shares having a Fair Market Value equal to the amount to be withheld up to the minimum statutory tax withholding rate (or such other rate that will not result in a negative accounting impact). 

15.

Conditions Upon Issuance of Shares.

(a)

Shares shall not be issued pursuant to the exercise of an Award unless the exercise of such Award and the issuance and delivery of such Shares pursuant thereto shall comply with all Applicable Laws, and shall be further subject to the approval of counsel for the Company with respect to such compliance.  

(b)

As a condition to the exercise of an Award, the Company may require the person exercising such Award to represent and warrant at the time of any such exercise that the Shares are being purchased only for investment and without any present intention to sell or distribute such Shares if, in the opinion of counsel for the Company, such a representation is required by any Applicable Laws.

16.

Adjustments Upon Changes in Capitalization.  In the event of any equity restructuring (within the meaning of Financial Accounting Standards No. 123R), such as a stock dividend, stock split, spinoff, rights offering, or recapitalization through a large, nonrecurring cash dividend the Committee shall cause there to be an equitable adjustment in the number and kind of Shares that may be delivered under the Plan, the individual limits set forth in Section 3(b), and, with respect to outstanding Awards, in the number and kind of Shares subject to outstanding Awards, the Exercise Price, grant price or other price of Shares subject to outstanding Awards, any performance conditions relating to Shares, the market price of Shares, or per-Share results, and other terms and conditions of outstanding Awards, to prevent dilution or enlargement of rights.  In the event of any other change in corporate capitalization, such as a merger, consolidation, or liquidation, the Committee may, in its sole discretion, cause there to be such equitable adjustment as described in the foregoing sentence, to prevent dilution or enlargement 

11

 

of rights; provided, however, that, unless otherwise determined by the Committee, the number of Shares subject to any Award shall always be rounded down to a whole number.  Adjustments made by the Committee pursuant to this Section 16 shall be final, binding, and conclusive.

17.

Change in Control, Cash-Out and Termination of Underwater Options/SARs, and Subsidiary Disposition.

(a)

Change in Control.  Except as otherwise provided in a Participant's Award Agreement or pursuant to Section 17(b), upon the occurrence of a Change in Control, unless otherwise specifically prohibited under Applicable Laws:

(i)

any and all outstanding Options and SARs granted hereunder shall become immediately exercisable;

(ii)

any Period of Restriction or other restriction imposed on Restricted Stock, Restricted Stock Units, and Other Stock-Based Awards shall lapse; and

(iii)

any and all Performance Shares and other Awards (if performance-based) shall vest on a pro-rata monthly basis, including full credit for partial months elapsed, and will be paid (A) based on the level of performance achieved as of the date of the Change in Control, if determinable, or (B) at the target level, if not determinable.  The amount of the vested Award may be computed under the following formula:  total Award number of Shares times (number of full months elapsed in shortest possible vesting period divided by number of full months in shortest possible vesting period) times percent performance level achieved immediately prior to the specified effective date of the Change in Control.

(b)

Cash-Out and Termination of Underwater Options/SARs.  The Committee may, in its sole discretion, provide that (i) all outstanding Options and SARs shall be terminated upon the occurrence of a Change in Control and that each Participant shall receive, with respect to each Share subject to such Options or SARs, an amount in cash equal to the excess of the Fair Market Value of a Share immediately prior to the occurrence of the Change in Control over the Option Exercise Price or the SAR grant price; and (ii) Options and SARs outstanding as of the date of the Change in Control may be cancelled and terminated without payment therefore if the Fair Market Value of a Share as of the date of the Change in Control is less than the Option Exercise Price or the SAR grant price.

(c)

Subsidiary Disposition.  The Committee shall have the authority, exercisable either in advance of any actual or anticipated Subsidiary Disposition or at the time of an actual Subsidiary Disposition and either at the time of the grant of an Award or at any time while an Award remains outstanding, to provide for the automatic full vesting and exercisability of one or more outstanding unvested Awards under the Plan and the termination of restrictions on transfer and repurchase or forfeiture rights on such Awards, in connection with a Subsidiary Disposition, but only with respect to those Participants who are at the time engaged primarily in Continuous Service with the Subsidiary involved in such Subsidiary Disposition.  The Committee also shall have the authority to condition any such Award vesting and exercisability or release from such limitations upon the subsequent termination of the affected Participant's Continuous Service with that Subsidiary within a specified period following the effective date of the Subsidiary 

12

 

Disposition.  The Committee may provide that any Awards so vested or released from such limitations in connection with a Subsidiary Disposition, shall remain fully exercisable until the expiration or sooner termination of the Award. 

18.

Amendment, Suspension or Termination of the Plan.

(a)

Amendment, Modification and Termination.  The Board may at any time and from time to time, alter, amend, suspend or terminate the Plan in whole or in part; provided, however, that no amendment that requires stockholder approval in order for the Plan to continue to comply with the New York Stock Exchange listing standards or any rule promulgated by the SEC or any securities exchange on which Shares are listed or any other Applicable Laws shall be effective unless such amendment shall be approved by the requisite vote of stockholders of the Company entitled to vote thereon within the time period required under such applicable listing standard or rule.

(b)

Adjustment of Awards Upon the Occurrence of Certain Unusual or Nonrecurring Events.  The Committee may make adjustments in the terms and conditions of, and the criteria included in, Awards in recognition of unusual or nonrecurring events (including, without limitation, the events described in Section 16) affecting the Company or the financial statements of the Company or of changes in Applicable Laws, regulations, or accounting principles, whenever the Committee determines that such adjustments are appropriate in order to prevent dilution or enlargement of the benefits or potential benefits intended to be made available under the Plan.  With respect to any Awards intended to comply with the Performance-Based Exception, unless otherwise determined by the Committee, any such exception shall be specified at such times and in such manner as will not cause such Awards to fail to qualify under the Performance-Based Exception.

(c)

Awards Previously Granted.  No termination, amendment or modification of the Plan or of any Award shall adversely affect in any material way any Award previously granted under the Plan without the written consent of the participant holding such Award, unless such termination, modification or amendment is required by Applicable Laws and except as otherwise provided herein. 

(d)

No Repricing.  Except for adjustments made pursuant to Section 16, no amendment shall reduce the Exercise Price of outstanding Options or the grant price of outstanding SARs, nor may any outstanding Options or outstanding SARs be surrendered to the Company as consideration for the grant of new Options or SARs with a lower Exercise Price or grant price, without the approval of the stockholders of the Company.

(e)

Compliance with the Performance-Based Exception.  If it is intended that an Award comply with the requirements of the Performance-Based Exception, the Committee may apply any restrictions it deems appropriate such that the Awards maintain eligibility for the Performance-Based Exception.  If changes are made to Code Section 162(m) or regulations promulgated thereunder to permit greater flexibility with respect to any Award or Awards available under the Plan, the Committee may, subject to this Section 18, make any adjustments to the Plan and/or Award Agreements it deems appropriate.

13

 

19.

Reservation of Shares.

(a)

The Company, during the term of the Plan, will at all times reserve and keep available such number of Shares as shall be sufficient to satisfy the requirements of the Plan.

(b)

The inability of the Company to obtain authority from any regulatory body having jurisdiction, which authority is deemed by the Company's counsel to be necessary to the lawful issuance and sale of any Shares hereunder, shall relieve the Company of any liability in respect of the failure to issue or sell such Shares as to which such requisite authority shall not have been obtained.

20.

Rights of Participants.

(a)

Continued Service.  The Plan shall not confer upon any Participant any right with respect to continuation of employment or consulting relationship with the Company, nor shall it interfere in any way with his or her right or the Company's right to terminate his or her employment or consulting relationship at any time, with or without cause. 

(b)

Participant.  No Employee, Director or Consultant shall have the right to be selected to receive an Award under the Plan, or, having been so selected, to be selected to receive future Awards.

21.

Successors.  All obligations of the Company under the Plan and with respect to Awards shall be binding on any successor to the Company, whether the existence of such successor is the result of a direct or indirect purchase, merger, consolidation, or other event, or a sale or disposition of all or substantially all of the business and/or assets of the Company and references to the "Company" herein and in any Award agreements shall be deemed to refer to such successors.

22.

Legal Construction.

(a)

Gender, Number and References.  Except where otherwise indicated by the context, any masculine term used herein also shall include the feminine, the plural shall include the singular and the singular shall include the plural.  Any reference in the Plan to a Section of the Plan either in the Plan or any Award agreement or to an act or code or to any section thereof or rule or regulation thereunder shall be deemed to refer to such Section of the Plan, act, code, section, rule or regulation, as may be amended from time to time, or to any successor Section of the Plan, act, code, section, rule or regulation.

(b)

Severability.  In the event any provision of the Plan shall be held illegal or invalid for any reason, the illegality or invalidity shall not affect the remaining parts of the Plan, and the Plan shall be construed and enforced as if the illegal or invalid provision had not been included.

(c)

Requirements of Law.  The granting of Awards and the issuance of Shares or cash under the Plan shall be subject to all Applicable Laws and to such approvals by any governmental agencies or national securities exchanges as may be required. 

14

 

(d)

Governing Law.  To the extent not preempted by federal law, the Plan, and all agreements hereunder, shall be construed in accordance with and governed by the laws of the State of New York, excluding any conflicts or choice of law rule or principle that might otherwise refer construction or interpretation of this Plan to the substantive law of another jurisdiction.

(e)

Non-Exclusive Plan.  Neither the adoption of the Plan by the Board nor its submission to the stockholders of the Company for approval shall be construed as creating any limitations on the power of the Board or a committee thereof to adopt such other incentive arrangements as it may deem desirable.

(f)

Code Section 409A Compliance.  To the extent applicable, it is intended that this Plan and any Awards granted hereunder comply with the requirements of Section 409A of the Code and any related regulations or other guidance promulgated with respect to such Section by the U.S. Department of the Treasury or the Internal Revenue Service ("Section 409A").  Any provision that would cause the Plan or any Award granted hereunder to fail to satisfy Section 409A shall have no force or effect until amended to comply with Section 409A, which amendment may be retroactive to the extent permitted by Section 409A.

15

 

GLOSSARY OF DEFINED TERMS

1.

Definitions.  As used in the Plan, the following definitions shall apply:

"Applicable Laws" means the legal requirements relating to the administration of stock incentive plans, if any, under applicable provisions of federal law, applicable state law, and the rules and regulations of any applicable stock exchange or national market system.

"Award" means, individually or collectively, Nonqualified Stock Options, Incentive Stock Options, Stock Appreciation Rights, Restricted Stock, Restricted Stock Units, Performance Shares, and Other Stock-Based Awards granted under the Plan.

"Award Agreement" means an agreement entered into by the Company and a Participant setting forth the terms and provisions applicable to an Award.

"Board" means the Board of Directors of the Company.

"Cause" means, with respect to any Participant (i) gross negligence or willful misconduct, as the case may be, in the performance of the material responsibilities of the Participant's office or position; (ii) the willful and continued failure of the Participant to perform substantially the Participant's duties with the Company or any Subsidiary (other than any such failure resulting from incapacity due to physical or mental illness); (iii) the Participant is convicted of, or pleads guilty or nolo contendere to, a felony within the meaning of U.S. Federal, state or local law (other than a traffic violation); (iv) the Participant having willfully divulged, furnished or made accessible to anyone other than the Company or any Subsidiary, or any of their respective directors, officers, employees, auditors and legal advisors, otherwise than in the ordinary course of business, any confidential or proprietary information of the Company or such Subsidiary; or (v) any act or failure to act by the Participant, which, under the provisions of applicable law, disqualifies the Participant from performing his or her duties or serving in his or her then current capacity with the Company or a Subsidiary; provided, however, that with respect to a Participant who has an employment agreement with the Company or any of its Subsidiaries which has a definition of "cause", the definition contained therein shall govern.

"Change in Control" means the first to occur of the following events:

1.

Any Person, other than a Person who as of the date the Plan is first approved by the Board is the owner of at least 8% of the combined voting power of the then-outstanding voting securities of the Company entitled to vote generally in the election of directors (the "Outstanding Company Voting Securities"), becomes (A) a "beneficial owner," as such term is used in Rule 13d-3 of the Exchange Act, of at least one-quarter but less than one-half of the Outstanding Company Voting Securities, unless such acquisition has been approved within 30 days thereafter by at least a majority of the Incumbent Board (as defined in clause (2) below taking into account the provisos), or (B) a "beneficial owner," as such term is used in Rule 13d-3 of the Exchange Act, of at least one-half of the Outstanding Company Voting Securities; provided, however, that, for purposes of this definition, the following acquisitions shall not constitute a Change in Control: (I) any acquisition directly from the Company, other than an acquisition by virtue of the exercise of a conversion privilege unless the security being so converted was 

16

 

itself acquired directly from the Company, (II) any acquisition by the Company, (III) any acquisition by any employee benefit plan (or related trust) sponsored or maintained by the Company or any of its affiliates, or (IV) any acquisition pursuant to a transaction which complies with clauses (A), (B) and (C) of paragraph 3 of this definition; or

2.

Individuals who, as of the date hereof, constitute the Board (such Board, and any Board consisting of individuals who hereafter replace such individuals or otherwise join the Board in accordance with the terms of the proviso to this sentence, the "Incumbent Board") cease for any reason to constitute at least a majority of the Board; provided, however, that any individual becoming a director subsequent to when the Plan is first approved by the Board whose election, or nomination for election by the Company's stockholders, was approved by a vote of at least a majority of the directors then comprising the Incumbent Board shall be considered as though such individual were a member of the Incumbent Board, but excluding, for this purpose, any such individual whose initial assumption of office occurs as a result of an actual or threatened election contest with respect to the election or removal of directors or other actual or threatened solicitation of proxies or consents by or on behalf of a Person other than the Board; or

3.

Consummation of a reorganization, merger, consolidation or a sale or other disposition of all or substantially all of the assets of the Company (each, a "Business Combination"), in each case unless, following such Business Combination, (A) all or substantially all of the individuals and entities that were the beneficial owners of the outstanding Shares (the "Outstanding Company Common Stock") and the Outstanding Company Voting Securities, immediately prior to such Business Combination, beneficially own, directly or indirectly, more than 50% of the then-outstanding shares of common stock and more than 50% of the combined voting power of the then-outstanding voting securities entitled to vote generally in the election of directors, as the case may be, of the corporation resulting from such Business Combination (including, without limitation, a corporation that, as a result of such transaction, owns the Company or all or substantially all of the Company's assets either directly or through one or more subsidiaries) in substantially the same proportions as their ownership immediately prior to such Business Combination of the Outstanding Company Common Stock and the Outstanding Company Voting Securities, as the case may be, (B) no Person (other than the Company, any employee benefit plan (or related trust) of the Company or such corporation resulting from such Business Combination) beneficially owns directly or indirectly, 20% or more of, respectively, the outstanding shares of common stock of the corporation resulting from such Business Combination or the outstanding voting securities of such corporation entitled to vote generally in the election of directors, except to the extent that such ownership existed prior to the Business Combination or to the extent that such Business Combination has been approved within 30 days thereafter by at least a majority of the Incumbent Board, and (C) at least a majority of the members of the board of directors of the corporation resulting from such Business Combination were members of the Incumbent Board at the time of the execution of the initial agreement or of the action of the Board providing for such Business Combination, whichever occurs first; or

17

 

4.

The approval by the stockholders of the Company of a complete liquidation or dissolution of the Company.

"Code" means the Internal Revenue Code of 1986, as amended.

"Committee" means the Committee, as specified in Section 2(a), appointed by the Board to administer the Plan.

"Company" means Phillips-Van Heusen Corporation, a Delaware corporation, and any successor thereto, as provided in Section 23 herein.

"Consultant" means any consultant or advisor to the Company or a Subsidiary.

"Continuous Service" means that the provision of services to the Company or any Subsidiary in any capacity by an Employee is not interrupted or terminated.  Continuous Service shall not be considered interrupted in the case of (i) any leave of absence approved by the Company or (ii) transfers between locations of the Company or between the Company, any Subsidiary, or any successor.  A leave of absence approved by the Company shall include sick leave, military leave, or any other personal leave approved by an authorized representative of the Company.  For purposes of Incentive Stock Options, no such leave may exceed 90 days, unless reemployment upon expiration of such leave is guaranteed by statute or contract.

"Director" means any individual who is a member of the Board of Directors of the Company or a Subsidiary who is not an Employee and is not designated or elected to serve as a director by the holders of the Company's Series B convertible preferred stock, or the holders of any other securities of the Company, other than Shares, voting separately as a class.

"Dividend" means the dividends declared and paid on Shares subject to an Award.

"Dividend Equivalent" means, with respect to Shares subject to an Award, a right to be paid an amount equal to the Dividends declared and paid on an equal number of outstanding Shares.

"Employee" means any employee of the Company or a Subsidiary.

"Exchange Act" means the Securities Exchange Act of 1934, as amended.

"Exercise Price" means the price at which a Share may be purchased by a Participant pursuant to an Option.

"Fair Market Value" means, as of any date, the value of a Share equal to (i) the closing sale price of a Share on the New York Stock Exchange on the date of determination or (ii) if there is no sale of Shares on that date, the closing sale price of a Share on the last trading date on which sales were reported on the New York Stock Exchange. 

"Full-Value Award" means Awards other than Options, SARs, or other Awards for which the Participant pays the grant date intrinsic value directly or by forgoing a right to receive a cash payment from the Company.  

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"Immediate Family" means a Participant's children, stepchildren, grandchildren, parents, stepparents, grandparents, spouse, former spouse, siblings, nieces, nephews, mother-in-law, father-in-law, son-in-law, daughter-in-law, brother-in-law, or sister-in-law, including adoptive relationships or any person sharing the Participant's household (other than a tenant or employee).

"Incentive Stock Option" or "ISO" means an Option intended to qualify as an incentive stock option within the meaning of Section 422 of the Code.

"Nonqualified Stock Option" means an Option that is not intended to meet the requirement of Section 422 of the Code.

"Option" means an Incentive Stock Option or a Nonqualified Stock Option granted under the Plan, as described in Section 6.

"Other Stock-Based Award" means a Share-based or Share-related Award granted pursuant to Section 11 herein.

"Participant" means a current or former Employee, Director or Consultant who has rights relating to an outstanding Award.

"Performance-Based Exception" means the performance-based exception from the tax deductibility limitations of Code Section 162(m).

"Performance Measures" shall have the meaning set forth in Section 12(a).

"Performance Period" means the period during which a performance measure must be met.

"Performance Share" means an Award granted to a Participant, as described in Section 10 herein.

"Period of Restriction" means the period Restricted Stock, Restricted Stock Units or Other Stock-Based Awards are subject to a substantial risk of forfeiture and are not transferable, as provided in Sections 8, 9 and 11 herein.

"Person" means person as such term is used in Section 3(a)(9) and 13(d) of the Exchange Act.

"Plan" means the Phillips-Van Heusen Corporation 2006 Stock Incentive Plan.

"Prior Plans" means the Company's 1997 Stock Option Plan, 2000 Stock Option Plan and 2003 Stock Option Plan.

"Restricted Stock" means an Award granted to a Participant, as described in Section 8.

"Restricted Stock Units" means an Award granted to a Participant, as described in Section 9.

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“Retirement” means a Participant’s termination of employment by the Company and its Subsidiaries at or after age 63 other than for cause (as defined in the Award Agreement).

"SEC" means the United States Securities and Exchange Commission.

"Share" means a share of the common stock, $1.00 par value, of the Company, subject to adjustment pursuant to Section 16.

"Stock Appreciation Right" or "SAR" means an Award granted to a Participant, either alone or in connection with a related Option, as described in Section 7.

"Subsidiary" has the meaning ascribed to such term in Code Section 424(f).

"Subsidiary Disposition" means the disposition by the Company of its equity holdings in any Subsidiary effected by a merger or consolidation involving that Subsidiary, the sale of all or substantially all of the assets of that Subsidiary or the Company's sale or distribution of substantially all of the outstanding capital stock of such Subsidiary.

"Voting Securities" means voting securities of the Company entitled to vote generally in the election of Directors.

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