Document:

exv10w1

 

Exhibit 10.1

Gannett Co., Inc.

2001 Omnibus Incentive

Compensation Plan

Effective January 1, 2001

[Revised to reflect revisions through May 6, 2003]

 

 

Contents

	 	 	 	 	 
	Article 1. Establishment, Objectives, and Duration
	 	 	1	 
	Article 2. Definitions
	 	 	1	 
	Article 3. Administration
	 	 	5	 
	Article 4. Shares Subject to the 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
	 	 	10	 
	Article 9. Performance Units, Performance Shares, and Cash-Based Awards
	 	 	11	 
	Article 10. Performance Measures
	 	 	12	 
	Article 11. Beneficiary Designation
	 	 	13	 
	Article 12. Deferrals
	 	 	13	 
	Article 13. Rights of Employees/Directors
	 	 	13	 
	Article 14. Termination of Employment/Directorship
	 	 	14	 
	Article 15. Change in Control
	 	 	14	 
	Article 16. Amendment, Modification, and Termination
	 	 	16	 
	Article 17. Withholding
	 	 	16	 
	Article 18. Successors
	 	 	17	 
	Article 19. General Provisions
	 	 	17	 

 

 

Gannett Co., Inc. 2001 Omnibus Incentive Compensation Plan

Article 1. Establishment, Objectives, and Duration

     1.1 Establishment of the Plan. Gannett Co., Inc., a Delaware corporation
(hereinafter referred to as the “Company”), hereby establishes an incentive
compensation plan to be known as the “Gannett Co., Inc. 2001 Omnibus Incentive
Compensation Plan” (hereinafter referred to as the “Plan”), as set forth in
this document. The Plan permits the grant of Nonqualified Stock Options,
Incentive Stock Options, Stock Appreciation Rights, Restricted Stock,
Performance Shares, Performance Units, and Cash-Based Awards.

     Subject to approval by the Company’s stockholders, the Plan shall become
effective as of January 1, 2001 (the “Effective Date”) and shall remain in
effect as provided in Section 1.3 hereof.

     1.2 Objectives of the Plan. The objectives of the Plan are to optimize the
profitability and growth of the Company through annual and long-term incentives
that are consistent with the Company’s goals and that link the personal
interests of Participants to those of the Company’s stockholders, to provide
Participants with an incentive for excellence in individual performance, and to
promote teamwork among Participants.

     The Plan is further intended to provide flexibility to the Company and its
Affiliates in their ability to motivate, attract, and retain the services of
Participants who make significant contributions to the Company’s success and to
allow Participants to share in that success.

     1.3 Duration of the Plan. The Plan shall commence on the Effective Date
and shall remain in effect, subject to the right of the Committee to amend or
terminate the Plan at any time pursuant to Article 16 hereof, until all Shares
subject to it shall have been purchased or acquired according to the Plan’s
provisions. However, in no event may an Award be granted under the Plan on or
after the tenth (10th) anniversary of the Effective Date.

     1.4 Prior Plans. Effective on May 8, 2001, no further awards shall be made
under the Company’s 1978 Executive Long-Term Incentive Plan or the 1968
Executive Incentive Bonus Plan; provided, however, that any rights theretofore
granted under either such plan shall not be affected.

Article 2. Definitions

          Whenever used in the 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 have the meaning ascribed to such term in Rule 12b-2
of the General Rules and Regulations of the Exchange Act.

     2.2 “Award” means, individually or collectively, a grant under this Plan
of Nonqualified Stock Options, Incentive Stock Options, Stock Appreciation
Rights, Restricted Stock, Performance Shares, Performance Units, or Cash-Based
Awards.

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     2.3 “Award Agreement” means a written or electronic agreement entered into
by the Company and each Participant setting forth the terms and provisions
applicable to Awards granted under this Plan.

     2.4 “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.

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

     2.6 “Cash-Based Award” means an Award granted to a Participant as
described in Article 9 hereof.

     2.7 “Change in Control” shall be deemed to have occurred under any one or
more of the following conditions:

		
	 	     i. if, within three years of any merger, consolidation, sale of a
substantial part of Gannett’s assets, or contested election, or any
combination of the foregoing transactions (a “Transaction”), the
persons who were directors of Gannett immediately before the
Transaction shall cease to constitute a majority of the Board of
Directors (x) of Gannett or (y) of any successor to Gannett, or (z) if
Gannett becomes a subsidiary of or is merged into or consolidated with
another corporation, of such corporation (Gannett shall be deemed a
subsidiary of such other corporation if such other corporation owns or
controls, directly or indirectly, a majority of the combined voting
power of the outstanding shares of the capital stock of Gannett
entitled to vote generally in the election of directors (“Voting
Stock”));
	 
	 	     ii. if, as a result of a Transaction, Gannett does not survive as
an entity, or its shares are changed into the shares of another
corporation;
	 
	 	     iii. if any “person” (as that term is used in Section 13(d) or
14(d)(2) of the Exchange Act) becomes a beneficial owner directly or
indirectly of securities of Gannett representing 20% or more of the
combined voting power of Gannett’s Voting Stock;
	 
	 	     iv. if three or more persons are elected directors of Gannett
despite the opposition of a majority of the directors of Gannett then
in office; or
	 
	 	     v. upon determination by the Committee that a Change in Control
has occurred, if such a person as defined in subparagraph (iii) above
becomes the beneficial owner directly or indirectly of securities of
Gannett representing from 12% up to 20% of the combined voting power
of Gannett’s Voting Stock.

Effective as of December 4, 2001, “Change in Control” shall have the same
definition as set forth in Section 5 of the Gannett Transitional Compensation
Plan, as that definition may be amended from time to time.

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

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     2.9 “Committee” means any committee appointed by the Board to administer
Awards to Employees or Directors, as specified in Article 3 hereof.

     2.10 “Company” means Gannett Co., Inc., a Delaware corporation and any
successor thereto as provided in Article 18 hereof.

     2.11 “Covered Employee” means a Participant who, as of the date of vesting
and/or payout of an Award, as applicable, is one of the group of “covered
employees,” as defined in the regulations promulgated under Code Section
162(m), or any successor statute.

     2.12 “Director” means any individual who is a member of the Board of
Directors of the Company; provided, however, that any Director who is employed
by the Company shall be considered an Employee under the Plan.

     2.13 “Disability” shall have the meaning ascribed to such term in the
Participant’s governing long-term disability plan, or if no such plan exists,
at the discretion of the Committee, or if different, as defined in the
Employee’s employment contract with the Company or any of its Affiliates or
Subsidiaries.

     2.14 “Effective Date” shall have the meaning ascribed to such term in
Section 1.1 hereof.

     2.15 “Employee” means any employee of the Company or its Subsidiaries or
Affiliates.

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

     2.17 “Fair Market Value” as of any date and in respect of any Share means
the then most recent closing price of a Share reflected in the consolidated
trading tables of USA Today or any other publication selected by the Committee,
provided that, if Shares shall not have been traded on the New York Stock
Exchange for more than 10 days immediately preceding such date or if deemed
appropriate by the Committee for any other reason, the fair market value of
Shares shall be as determined by the Committee in such other manner as it may
deem appropriate. In no event shall the fair market value of any Share be less
than its par value.

     2.18 “Freestanding SAR” means an SAR that is granted independently of any
Options, as described in Article 7 hereof.

     2.19 “Incentive Stock Option” or “ISO” means an option to purchase Shares
granted under Article 6 hereof and that is designated as an Incentive Stock
Option and that is intended to meet the requirements of Code Section 422.

     2.20 “Insider” shall mean an individual who is, on the relevant date, an
executive officer, director or 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, all as defined under Section 16 of the Exchange Act.

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     2.21 “Nonqualified Stock Option” or “NQSO” means an option to purchase
Shares granted under Article 6 hereof and that is not intended to meet the
requirements of Code Section 422, or that otherwise does not meet such
requirements.

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

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

     2.24 “Participant” means an Employee or Director who has been selected to
receive an Award or who has outstanding an Award granted under the Plan.

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

     2.26 “Performance Share” means an Award granted to a Participant, as
described in Article 9 hereof.

     2.27 “Performance Unit” means an Award granted to a Participant, as
described in Article 9 hereof.

     2.28 “Period of Restriction” means the period during which the transfer of
Shares of Restricted Stock is limited in some way (based on the passage of
time, the achievement of performance goals, or upon the occurrence of other
events as determined by the Committee, at its discretion), and the Shares are
subject to a substantial risk of forfeiture, pursuant to the Restricted Stock
Award Agreement, as provided in Article 8 hereof.

     2.29 “Person” shall have the meaning ascribed to such term in Section
3(a)(9) of the Exchange Act and used in Sections 13(d) and 14(d) thereof,
including a “group” as defined in Section 13(d) thereof.

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

     2.31 “Retirement” means any retirement recognized under the Gannett
Retirement Plan or any successor plan thereto.

     2.32 “Shares” means the Company’s common stock, par value $1.00 per share.

     2.33 “Stock Appreciation Right” or “SAR” means an Award, granted alone or
in connection with a related Option, designated as an SAR, pursuant to the
terms of Article 7 hereof.

     2.34 “Subsidiary” means any corporation, partnership, joint venture, or
other entity in which the Company has a majority voting interest.

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     2.35 “Tandem SAR” means an SAR that is granted in connection with a
related Option pursuant to Article 7 hereof, the exercise of which shall
require forfeiture of the right to purchase a Share under the related Option
(and when a Share is purchased under the Option, the Tandem SAR shall similarly
be canceled).

Article 3. Administration

     3.1 General. Subject to the terms and conditions of the Plan, the Plan
shall be administered by the Committee. The members of the Committee shall be
appointed from time to time by, and shall serve at the discretion of, the Board
of Directors. The Committee shall have the authority to delegate administrative
duties to officers of the Company.

     3.2 Authority of the Committee. Except as limited by law or by the
Certificate of Incorporation or Bylaws of the Company, and subject to the
provisions herein, the Committee shall have full power to select Employees and
Directors who shall participate in the Plan; determine the sizes and types of
Awards; determine the terms and conditions of Awards in a manner consistent
with the Plan; construe and interpret the Plan and any agreement or instrument
entered into under the Plan; establish, amend, or waive rules and regulations
for the Plan’s administration; and amend the terms and conditions of any
outstanding Award as provided in the Plan. Further, the Committee shall make
all other determinations that it deems necessary or advisable for the
administration of the Plan. As permitted by law and the terms of the Plan, the
Committee may delegate its authority herein. No member of the Committee shall
be liable for any action taken or decision made in good faith relating to the
Plan or any Award granted hereunder.

     3.3 Decisions Binding. All determinations and decisions made by the
Committee pursuant to the provisions of the Plan and all related orders and
resolutions of the Committee shall be final, conclusive, and binding on all
persons, including the Company, its stockholders, Directors, Employees,
Participants, and their estates and beneficiaries, unless changed by the Board.

Article 4. Shares Subject to the Plan and Maximum Awards

     4.1 Number of Shares Available for Grants. Subject to adjustment as
provided in Section 4.2 hereof, the number of Shares hereby reserved for
issuance to Participants under the Plan shall be twenty-one million
(21,000,000), no more than one million five hundred thousand (1,500,000) of
which may be granted in the aggregate in the form of Restricted Stock,
Performance Shares and/or Performance Units. The Committee shall determine the
appropriate methodology for calculating the number of shares issued pursuant to
the Plan. Shares issued under the Plan may be authorized but unissued shares or
treasury shares. The Plan also amends and restates the 1978 Executive Long-Term
Incentive Plan and the 1968 Executive Incentive Bonus Plan, each in its
entirety (it being noted that awards under such plans prior to May 8, 2001,
shall not be impacted by this amendment).

     Unless the Committee determines that an Award to a Covered Employee shall
not be designed to comply with the Performance-Based Exception, the following
rules shall apply to grants of such Awards under the Plan:

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	 	(a)	 	Stock Options: The maximum aggregate number of Shares
that may be granted in the form of Stock Options, pursuant to any
Award granted in any one fiscal year to any one Participant shall
be one million (1,000,000).
	 
	 	(b)	 	SARs: The maximum aggregate number of Shares that may
be granted in the form of Stock Appreciation Rights, pursuant to
any Award granted in any one fiscal year to any one Participant
shall be one million (1,000,000).
	 
	 	(c)	 	Restricted Stock: The maximum aggregate grant with
respect to Awards of Restricted Stock granted in any one fiscal
year to any one Participant shall be five hundred thousand
(500,000).
	 
	 	(d)	 	Performance Shares/Performance Units and Cash-Based
Awards: The maximum aggregate grant with respect to Awards of
Performance Shares made in any one fiscal year to any one
Participant shall be equal to the value of five hundred thousand
(500,000) shares; the maximum aggregate amount awarded with
respect to Cash-Based Awards or Performance Units to any one
Participant in any one fiscal year may not exceed ten million
dollars ($10,000,000).

     4.2 Adjustments in Authorized Shares. Upon a change in corporate
capitalization, such as a stock split, stock dividend or a corporate
transaction, such as any merger, consolidation, combination, exchange of shares
or the like, separation, including a spin-off, or other distribution of stock
or property of the Company, any reorganization (whether or not such
reorganization comes within the definition of such term in Code Section 368) or
any partial or complete liquidation of the Company, such adjustment shall be
made in the number and class of Shares that may be delivered under Section 4.1,
in the number and class of and/or price of Shares subject to outstanding Awards
granted under the Plan, and in the Award limits set forth in Section 4.1, as
may be determined to be appropriate and equitable by the Committee, in its sole
discretion, to prevent dilution or enlargement of rights.

     4.3 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 4.2 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 dilution or enlargement of the benefits or
potential benefits intended to be made available under the Plan; provided that,
unless the Committee determines otherwise at the time such adjustment is
considered, no such adjustment shall be authorized to the extent that such
authority would be inconsistent with the Plan’s or any Award’s meeting the
requirements of Section 162(m) of the Code, as from time to time amended.

Article 5. Eligibility and Participation

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

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     5.2 Actual Participation. Subject to the provisions of the Plan, the
Committee may, from time to time, select from all eligible Employees and
Directors, those to whom Awards shall be granted and shall determine the nature
and amount of each Award.

     5.3 Newly Eligible Employees. The Committee shall be entitled to make such
rules, regulations, determinations and awards as it deems appropriate in
respect of any Employee who becomes eligible to participate in the Plan or any
portion thereof after the commencement of an award or incentive period.

     5.4 Leaves of Absence. The Committee shall be entitled to make such rules,
regulations, and determinations as it deems appropriate under the Plan in
respect of any leave of absence taken by the recipient of any award. Without
limiting the generality of the foregoing, the Committee shall be entitled to
determine: (a) whether or not any such leave of absence shall constitute a
termination of employment within the meaning of the Plan; and (b) the impact,
if any, of such leave of absence on awards under the Plan theretofore made to
any recipient who takes such leave of absence.

Article 6. Stock Options

     6.1 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.

     6.2 Award Agreement. Each Option grant shall be evidenced by an Award
Agreement that shall specify the Option Price, the duration of the Option, the
number of Shares to which the Option pertains, and such other provisions as the
Committee shall determine which are not inconsistent with the terms of the
Plan.

     6.3 Option Price. The Option Price for each grant of an Option under this
Plan shall be as determined by the Committee; provided, however, the per-share
exercise price shall not be less than 100 percent of the Fair Market Value of
the Shares on the date the Option is granted.

     6.4 Duration of Options. Each Option granted to a Participant shall expire
at such time as the Committee shall determine at the time of grant.

     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 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 written, electronic or telephonic notice of exercise to the
Company, setting forth the number of Shares with respect to which the Option is
to be exercised, accompanied by full payment for the Shares.

     The Option Price upon exercise of any Option shall be payable to the
Company in full either: (a) in cash or its equivalent; or (b) by tendering
previously acquired Shares having an aggregate Fair Market Value at the time of
exercise equal to the total Option Price (provided that the Shares that are
tendered must have been held by the Participant for at least six (6) months
prior to their tender to

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satisfy the Option Price); or (c) by a combination of (a) and (b); or (d)
any other method approved by the Committee in its sole discretion. The
tendering of previously acquired shares may be done through attestation. No
fractional shares may be tendered or accepted in payment of the Option Price.

     Cashless exercises are permitted pursuant to Federal Reserve Board’s
Regulation T, subject to applicable securities law restrictions, or by any
other means which the Committee determines to be consistent with the Plan’s
purpose and applicable law.

     Subject to any governing rules or regulations, as soon as practicable
after receipt of notification of exercise and full payment, the Company shall
deliver to the Participant, in the Participant’s name, 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 United States 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, 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 Nontransferability of Options.

	 	(a)	 	Incentive Stock Options. No ISO granted under the Plan
may be sold, transferred, pledged, assigned, or otherwise
alienated or hypothecated, other than by will or by the laws of
descent and distribution. Further, all ISOs granted to a
Participant under the Plan shall be exercisable during his or her
lifetime only by such Participant.
	 
	 	(b)	 	Nonqualified Stock Options. Except as otherwise
provided in a Participant’s Award Agreement, no NQSO granted
under this Article 6 may be sold, transferred, pledged, assigned,
or otherwise alienated or hypothecated, other than by will or by
the laws of descent and distribution. Further, except as
otherwise provided in a Participant’s Award Agreement, all NQSOs
granted to a Participant under this Article 6 shall be
exercisable during his or her lifetime only by such Participant
or such Participant’s legal representative.

Article 7. Stock Appreciation Rights

     7.1 Grant of SARs. Subject to the terms and conditions of the Plan, SARs
may be granted to Participants at any time and from time to time as shall be
determined by the Committee. The Committee may grant Freestanding SARs, Tandem
SARs, or any combination of these forms of SAR.

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

     The grant price of a Freestanding SAR shall equal the Fair Market Value of
a Share on the date of grant of the SAR. The grant price of Tandem SARs shall
equal the Option Price of the related Option.

     7.2 SAR 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.

     7.3 Term of SARs. The term of an SAR granted under the Plan shall be
determined by the Committee, in its sole discretion.

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

     7.5 Exercise of Tandem SARs. Tandem SARs may be exercised for all or part
of the Shares subject to the related Option upon the surrender of the right to
exercise the equivalent portion of the related Option. A Tandem SAR may be
exercised only with respect to the Shares for which its related Option is then
exercisable.

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

	 	(a)	 	The difference between 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.

     In the sole discretion of the Committee, the payment upon SAR exercise may
be in cash, in Shares of equivalent value, in some combination thereof, or in
any other manner approved by the Committee. 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.

     7.7 Nontransferability of SARs. Except as otherwise provided in a
Participant’s Award Agreement, no SAR granted under the Plan may be sold,
transferred, pledged, assigned, or otherwise alienated or hypothecated, other
than by will or by the laws of descent and distribution. Further, except as
otherwise provided in a Participant’s Award Agreement, all SARs granted to a
Participant under the Plan shall be exercisable during his or her lifetime only
by such Participant or such Participant’s legal representative.

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Article 8. Restricted Stock

     8.1 Grant of Restricted Stock. Subject to the terms and provisions of the
Plan, the Committee, at any time and from time to time, may grant Shares of
Restricted Stock to Participants in such amounts, as the Committee shall
determine.

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

     8.3 Transferability. Except as provided in this Article 8, the Shares of
Restricted Stock granted herein may not be sold, transferred, pledged,
assigned, or otherwise alienated or hypothecated until the end of the
applicable Period of Restriction established by the Committee and specified in
the Restricted Stock Award Agreement, or upon earlier satisfaction of any other
conditions, as specified by the Committee in its sole discretion and set forth
in the Restricted Stock Award Agreement. All rights with respect to the
Restricted Stock granted to a Participant under the Plan shall be available
during his or her lifetime only to such Participant or such Participant’s legal
representative.

     8.4 Other Restrictions. 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, 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 federal or
state securities laws.

     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.

     Except as otherwise provided in this Article 8, Shares of Restricted Stock
covered by each Restricted Stock grant made under the Plan shall become freely
transferable by the Participant after the last day of the applicable Period of
Restriction.

     8.5 Voting Rights. If the Committee so determines, Participants holding
Shares of Restricted Stock granted hereunder may be granted the right to
exercise full voting rights with respect to those Shares during the Period of
Restriction.

     8.6 Dividends and Other Distributions. During the Period of Restriction,
Participants holding Shares of Restricted Stock granted hereunder may, if the
Committee so determines, be credited with dividends paid with respect to the
underlying Shares while they are so held. The Committee may apply any
restrictions to the dividends that the Committee deems appropriate. Without
limiting the generality of the preceding sentence, if the grant or vesting of
Restricted Shares granted to a Covered Employee is designed to comply with the
requirements of the Performance-Based Exception, the Committee may apply any
restrictions it deems appropriate to the payment of dividends declared with
respect to such Restricted Shares, such that the dividends and/or the
Restricted Shares maintain eligibility for the Performance-Based Exception.

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Article 9. Performance Units, Performance Shares, and Cash-Based Awards

     9.1 Grant of Performance Units/Shares and Cash-Based Awards. Subject to
the terms of the Plan, Performance Units, Performance Shares, and/or Cash-Based
Awards 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.

     9.2 Award Agreement. At the Committee’s discretion, each grant of
Performance Units/Shares and Cash-Based Awards may be evidenced by an Award
Agreement that shall specify the initial value, the duration of the Award, the
performance measures, if any, applicable to the Award, and such other
provisions as the Committee shall determine which are not inconsistent with the
terms of the Plan.

     9.3 Value of Performance Units/Shares and Cash-Based Awards. 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. Each
Cash-Based Award shall have a value as may be determined by the Committee. The
Committee shall set performance goals in its discretion which, depending on the
extent to which they are met, will determine the number and/or value of
Performance Units/Shares and Cash-Based Awards that will be paid out to the
Participant. For purposes of this Article 9, the time period during which the
performance goals must be met shall be called a “Performance Period.”

     9.4 Earning of Performance Units/Shares and Cash-Based Awards. Subject to
the terms of this Plan, after the applicable Performance Period has ended, the
holder of Performance Units/Shares and Cash-Based Awards shall be entitled to
receive payout on the number and value of Performance Units/Shares and
Cash-Based Awards 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. Unless otherwise determined by the Committee,
notwithstanding any other provision of the Plan, payment of Cash-Based Awards
shall only be made for those Participants who are Directors or in the employ of
the Company at the end of the Performance Period or, if none has been
specified, the end of the applicable award year.

     9.5 Form and Timing of Payment of Performance Units/Shares and Cash-Based
Awards. Payment of earned Performance Units/Shares and Cash-Based Awards shall
be as determined by the Committee and, if applicable, as evidenced in the
related Award Agreement. Subject to the terms of the Plan, the Committee, in
its sole discretion, may pay earned Performance Units/Shares and Cash-Based
Awards in the form of cash or in Shares (or in a combination thereof) that have
an aggregate Fair Market Value equal to the value of the earned Performance
Units/Shares and Cash-Based Awards at the close of the applicable Performance
Period. Such Shares may be granted subject to any restrictions deemed
appropriate by the Committee. No fractional shares will be issued. 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.

     Unless otherwise provided by the Committee, Participants holding
Performance Units/Shares may be entitled to receive dividend units with respect
to dividends declared with respect to the Shares. Such dividends may be subject
to the same accrual, forfeiture, and payout restrictions as

11

 

apply to dividends earned with respect to Shares of Restricted Stock, as
set forth in Section 8.6 hereof, as determined by the Committee.

     9.6 Nontransferability. Except as otherwise provided in a Participant’s
Award Agreement, Performance Units/Shares and Cash-Based Awards may not be
sold, transferred, pledged, assigned, or otherwise alienated or hypothecated,
other than by will or by the laws of descent and distribution. Further, except
as otherwise provided in a Participant’s Award Agreement, a Participant’s
rights under the Plan shall be exercisable during the Participant’s lifetime
only by such Participant or such Participant’s legal representative.

Article 10. Performance Measures

     Unless and until the Committee proposes for shareholder vote and
shareholders approve a change in the general performance measures set forth in
this Article 10, the attainment of which may determine the degree of payout
and/or vesting with respect to Awards to Covered Employees that are designed to
qualify for the Performance-Based Exception, the performance measure(s) to be
used for purposes of such grants shall be chosen from among:

	 	(a)	 	Earnings per share;
	 
	 	(b)	 	Net income (before or after taxes);
	 
	 	(c)	 	Net income from continuing operations;
	 
	 	(d)	 	Return measures (including, but not limited to, return on assets,
equity, capital or investment);
	 
	 	(e)	 	Cash flow (including, but not limited to, operating cash flow and
free cash flow);
	 
	 	(f)	 	Cash flow return on investments, which equals net cash flows
divided by owner’s equity;
	 
	 	(g)	 	Earnings before or after taxes, interest, depreciation and/or
amortization;
	 
	 	(h)	 	Internal rate of return or increase in net present value;
	 
	 	(i)	 	Dividend payments;
	 
	 	(j)	 	Gross revenues;
	 
	 	(k)	 	Gross margins;
	 
	 	(l)	 	Operating measures such as growth in circulation, television
ratings and advertising lineage;
	 
	 	(m)	 	Internal measures such as achieving a diverse workforce;

12

 

	 	(n)	 	Share price (including, but not limited to, growth measures and
total shareholder return); and
	 
	 	(o)	 	Any of the above measures compared to peer or other companies.

     Performance measures may be set either at the corporate level, division
level, or the business unit level.

     Awards that are designed to qualify for the Performance-Based Exception,
and that are held by Covered Employees, may not be adjusted upward (the
Committee shall retain the discretion to adjust such Awards downward).

     If 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.

Article 11. Beneficiary Designation

     Each Participant under the Plan may, from time to time, name any
beneficiary or beneficiaries (who may be named contingently or successively) to
whom any benefit under the Plan is to be paid in case of his or her death
before he or she 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 Company, and will be effective only when filed by the
Participant in writing with the Company during the Participant’s lifetime. If a
beneficiary designation has not been made, or the beneficiary was not properly
designated (in the sole discretion of the Committee), has died or cannot be
found, all payments after death shall be paid to the Participant’s estate. In
case of disputes over the proper beneficiary, the Company reserves the right to
make any or all payments to the Participant’s estate.

Article 12. Deferrals

     The Committee may permit or require a Participant to defer such
Participant’s receipt of the payment of cash or the delivery of Shares that
would otherwise be due to such Participant by virtue of the exercise of an
Option or SAR, the lapse or waiver of restrictions with respect to Restricted
Stock, or the satisfaction of any requirements or goals with respect to
Performance Units/Shares and Cash-Based Awards. If any such deferral election
is required or permitted, the Committee shall, in its sole discretion,
establish rules and procedures for such payment deferrals.

Article 13. Rights of Employees/Directors

     13.1 Employment. Nothing in the Plan shall confer upon any Participant any
right to continue in the Company’s employ, or as a Director, or interfere with
or limit in any way the right of the Company to terminate any Participant’s
employment or directorship at any time.

     13.2 Participation. No Employee or Director 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.

13

 

     13.3 Rights as a Stockholder. Except as provided in Sections 8.5, 8.6 and
9.5, a Participant shall have none of the rights of a shareholder with respect
to shares of Common Stock covered by any Award until the Participant becomes
the record holder of such shares.

Article 14. Termination of Employment/Directorship

     Each Participant’s Award Agreement shall set forth the extent to which the
Participant shall have the right to such Participant’s outstanding Award(s)
following termination of the Participant’s employment or directorship with the
Company. Such provisions shall be determined in the sole discretion of the
Committee, shall be included in the Award Agreements entered into with each
Participant, need not be uniform among all Awards issued pursuant to the Plan,
and may reflect distinctions based on the reasons for termination.

Article 15. Change in Control

     15.1 Treatment of Outstanding Awards Other than Cash-Based Awards. In the
event of a Change in Control, unless otherwise specifically prohibited under
applicable laws, or by the rules and regulations of any governing governmental
agencies or national securities exchanges, or unless the Board shall determine
otherwise in the Award Agreement:

	 	(a)	 	Any and all Options and SARs granted hereunder
shall become fully exercisable during their remaining term;
	 
	 	(b)	 	Any restriction periods and restrictions imposed
on Restricted Stock that are not performance-based shall
lapse; and
	 
	 	(c)	 	The target payout opportunities attainable under
all outstanding Awards of performance-based Restricted Stock,
Performance Units and Performance Shares shall be deemed to
have been fully earned for the entire Performance Period(s) as
of the effective date of the Change in Control. The vesting of
all such Awards denominated in Shares shall be accelerated as
of the effective date of the Change in Control and, subject to
Section 15.4, there shall be paid out to Participants within
thirty (30) days following the effective date of the Change in
Control, a pro rata number of shares based upon an assumed
achievement of all relevant targeted performance goals and
upon the length of time within the Performance Period that has
elapsed prior to the Change in Control. Subject to Section
15.4, such Awards denominated in cash shall be paid pro rata
to Participants in cash within thirty (30) days following the
effective date of the Change in Control, with the proration
determined as a function of the length of time within the
Performance Period that has elapsed prior to the Change in
Control, and based on an assumed achievement of all relevant
targeted performance goals.

     15.2 Treatment of Cash-Based Awards. Any outstanding Cash-Based Awards
shall not accelerate or vest as a result of a Change in Control. The extent to
which any outstanding Cash-Based Awards are impacted by a Change in Control
shall be governed by the Company’s Transitional Compensation Plan, as the same
may be amended from time to time.

14

 

     15.3 Limitation on Acceleration.

	 	(a)	 	Intention of Section 15.3: The acceleration or
payment of Awards could, in certain circumstances, subject the
Participant to the excise tax provided under Section 4999 of
the Code. It is the object of this Section 15.3 to enable
each Participant to retain in full the benefits of the Plan
and to provide for the maximum after-tax income to each
Participant. Accordingly, the Participant must determine,
before any payments are made on Awards governed by Section
15.1, which of two alternative forms of acceleration will
maximize the Participant’s after-tax proceeds, and must notify
the Company in writing of his or her determination. The first
alternative is the payment in full of all Awards governed by
Section 15.1. The second alternative is the payment of only a
part of the Participant’s Awards so that the Participant
receives the largest payment possible without causing an
excise tax to be payable by the Participant under Section
4999 of the Code. This second alternative is referred to in
this Section as “Limited Vesting”.
	 
	 	(b)	 	Limitation on Participant’s Rights: The
Participant’s Awards shall be paid only to the extent
permitted under the alternative determined by the Participant
to maximize his or her after-tax proceeds, and the Participant
shall have no rights to any greater payments on his or her
Awards.
	 
	 	(c)	 	Determination to be Conclusive: The
determination of whether Limited Vesting is required and the
application of the rules in Section 15.4 shall initially be
made by the Participant and all such determinations shall be
conclusive and binding on the Company unless the Company
proves that they are clearly erroneous. In the latter event,
such determinations shall be made by the Company.

     15.4 Limitation on Payment. Notwithstanding Section 15.1, if Limited
Vesting applies then the amount paid on exercise or payment of an Award shall
not exceed the largest amount that can be paid without causing an excise tax to
be payable by the Participant under Section 4999 of the Code. If payments are
so limited, awards shall be deemed paid in the following order:

	 	(a)	 	all exercised Options or SARs that were
accelerated pursuant to Section 15.1(a) shall be deemed paid
first;
	 
	 	(b)	 	all awards of Performance Units, Performance
Shares and performance-based Restricted Stock shall then be
deemed paid; and
	 
	 	(c)	 	finally, all awards of Restricted Stock that are
not performance-based shall be deemed paid.
	 

	 	 	 
   As among awards or portions of awards of the same type, those
vesting at the most distant time in the future (absent a Change in
	 	Control) shall be deemed paid first.

15

 

     15.5 Expenses. The Company shall pay all legal fees, court costs, fees of
experts and other costs and expenses when incurred by a Participant in
connection with any actual, threatened or contemplated litigation or legal,
administrative or other proceeding involving the provisions of Section 15.4,
whether or not initiated by the Participant.

     15.6 Termination, Amendment, and Modifications of Change-in-Control
Provisions. Notwithstanding any other provision of this Plan or any Award
Agreement provision, the provisions of this Article 15 may not be terminated,
amended, or modified on or after the date of a Change in Control to affect
adversely any Award theretofore granted under the Plan without the prior
written consent of the Participant with respect to said Participant’s
outstanding Awards; provided, however, the Committee may terminate, amend, or
modify this Article 15 at any time and from time to time prior to the date of a
Change in Control.

Article 16. Amendment, Modification, and Termination

     16.1 Amendment, Modification, and Termination. Subject to the terms of the
Plan, the Committee or the Board may at any time and from time to time, alter,
amend, suspend, or terminate the Plan in whole or in part.

     16.2 Awards Previously Granted. Notwithstanding any other provision of the
Plan to the contrary, no termination, amendment, or modification of the Plan
shall adversely affect in any material way any Award previously granted under
the Plan, without the written consent of the Participant holding such Award.

     16.3 Shareholder Approval Required for Certain Amendments. Shareholder
approval will be required for any amendment of the Plan that does any of the
following: (a) permits the grant of any Option with an Option Price less than
the Fair Market Value of the Shares on the date of grant; or (b) reduces the
Option Price of an outstanding Option, either by lowering the Option Price or
by canceling an outstanding Option and granting a replacement Option with a
lower exercise price.

     16.4 Compliance with Code Section 162(m). At all times when Code Section
162(m) is applicable, to the extent the Committee so determines, all Awards
granted under this Plan to Employees who are or could reasonably become Covered
Employees as determined by the Committee shall comply with the requirements of
Code Section 162(m). In addition, if changes are made to Code Section 162(m) to
permit greater flexibility with respect to any Award or Awards available under
the Plan, the Committee may, subject to this Article 16, make any adjustments
it deems appropriate.

Article 17. Withholding

     17.1 Tax Withholding. The Company shall have the power and the right to
deduct or withhold, or require a Participant to remit to the Company, an amount
sufficient to satisfy the Federal statutory minimum, 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. The Participant may
satisfy, totally or in part, his obligations pursuant to this Section 17.1 by
electing to have Shares withheld, to redeliver Shares acquired under an Award,
or to deliver previously owned Shares, provided that the

16

 

election is made in writing on or prior to (i) the date of exercise, in
the case of Options and SAR’s (ii) the date of payment, in respect of
Performance Units/Shares, or Cash-Based Awards, and (iii) the expiration of the
incentive period, in respect of Restricted Stock. Any election made under this
Section 17.1 shall be irrevocable by the Participant and may be disapproved by
the Committee at any time in its sole discretion. If an election is disapproved
by the Committee, the Participant must satisfy his obligations pursuant to this
paragraph in cash.

Article 18. Successors

     All obligations of the Company under the 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, stock and/or assets of the Company.

Article 19. General Provisions

     19.1 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.

     19.2 Severability. If 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.

     19.3 Requirements of Law. The granting of Awards and the issuance of
Shares under the 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.

     19.4 Securities Law Compliance. With respect to Insiders, transactions
under this Plan are intended to comply with all applicable conditions of Rule
16b-3 or its successors under the Exchange Act, unless determined otherwise by
the Board. To the extent any provision of the Plan or action by the Committee
fails to so comply, it shall be deemed null and void, to the extent permitted
by law and deemed advisable by the Board.

     19.5 Listing. The Company may use reasonable endeavors to register Shares
allotted pursuant to the exercise of an Option with the United States
Securities and Exchange Commission or to effect compliance with the
registration, qualification, and listing requirements of any national
securities laws, stock exchange, or automated quotation system.

     19.6 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.

17

 

     19.7 No Additional Rights. Neither the Award nor any benefits arising
under this Plan shall constitute part of an employment contract between the
Participant and the Company or any Subsidiary or Affiliate, and accordingly,
subject to Section 16.2, 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 liability on the part of the Company or any Affiliate for
severance payments.

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

	 	(a)	 	Determine which Affiliates and Subsidiaries will be
covered by the Plan or relevant subplans;
	 
	 	(b)	 	Determine which Employees employed outside the United
States are eligible to become Participants in the Plan;
	 
	 	(c)	 	Modify the terms and conditions of any Award granted to
Participants who are employed outside the United States;
	 
	 	(d)	 	Establish subplans, modified exercise procedures, and
other terms and procedures to the extent such actions may be
necessary, advisable or convenient, or to the extent appropriate
to provide maximum flexibility for the Participant’s financial
planning. Any subplans and modifications to the Plan terms or
procedures established under this Section 19.8 by the Committee
shall be filed with the Plan document as Appendices; and
	 
	 	(e)	 	Take any action, before or after an Award is made,
which the Committee deems advisable to obtain, comply with, or
otherwise reflect any necessary governmental regulatory
procedures, exemptions or approvals, as they may affect this
Plan, any subplan, or any Participant.

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

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

18<PAGE>
                                                                     EXHIBIT 4.2

                      AMENDED AND RESTATED Form of WARRANT

        Effective as of the date of this Agreement (the "Grant Date"), Portfolio
Recovery Associates, Inc. (the "Company") hereby grants to [_________]
("Warrantholder") warrants (the "Warrants") to acquire [_______] shares of the
common stock of the Company, par value $0.01 per share ("Share"), subject to the
terms and conditions set forth below. The exercise price per Share subject to
the Warrant is $[_______] (the per Share "Exercise Price").

        This Warrant is issued to Warrantholder under and pursuant to the Equity
Exchange Agreement between Portfolio Recovery Associates, L.L.C., the Company
and the additional parties named therein. The grant of the Warrants has been
approved by the sole non-employee director of the Company and by the
stockholders of the Company. [Vesting provisions of Warrants to be added.] The
Warrants shall cease to be exercisable and shall terminate on [_________] (the
"Expiration Date"). The Warrants may be exercised in whole or in part, but not
in fractional Shares.

        Once Warrantholder decides to exercise all or part of the Warrant,
Warrantholder shall notify the Company by registered or certified mail, return
receipt requested, addressed to its principal office as to the number of Shares
which he, she or it desires to purchase under the Warrants, which notice shall
be accompanied by payment (by cash, certified check or shares of common stock of
the Company held by Warrantholder for at least six months) of the Exercise
Price. As soon as practicable thereafter, the Company shall record
Warrantholder's purchase of additional Shares in accordance with its policies
then in effect.

        Warrantholder may not give, grant, sell, exchange, transfer legal title,
pledge, assign or otherwise encumber or dispose of the Warrants or any interest
herein, otherwise than by will or the laws of descent and distribution, and the
Warrants shall be exercisable during his or her lifetime only by Warrantholder.

        Warrantholder shall have no rights as a shareholder with respect to the
Shares subject to this Warrant until such time as Warrantholder exercises the
Warrants in accordance with the terms hereunder. The Company shall reserve the
right to amend the terms and conditions of this award, including the number and
kind of Shares and the Exercise Price, provided that no such amendment shall be
made which would adversely affect Warrantholder without Warrantholder's prior
written consent. In the event that the Shares are converted into a different
form of security, Warrantholder's Warrants shall be appropriately adjusted to
reflect such conversion as determined by the Company.

        Warrantholder agrees to cooperate with the Company to take all steps
necessary or appropriate for any required withholding of taxes by the Company
under law or regulation in connection therewith.

<PAGE>

        The Warrant granted under this Agreement is not intended to qualify as
an "incentive stock option" within the meaning of Section 422 of the Internal
Revenue Code of 1986, as amended.

        [Provisions regarding exercise of the Warrants, which are applicable to
Warrantholder's which are employees of the Company, will be added.]

                                          PORTFOLIO RECOVERY ASSOCIATES, INC.

                                          By:
-------------------------------                --------------------------------
Warrantholder                                  Name:
                                               Title:
-------------
Date

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