Document:

EX-10.1

 

EXHIBIT 10.1

RES-CARE, INC.

2005 OMNIBUS INCENTIVE COMPENSATION PLAN

     Res-Care, Inc. hereby establishes an omnibus incentive compensation plan for the benefit of
its employees and directors, as set forth below.

Section 1 – PURPOSE

The Company adopts this compensation program for certain key employees and directors to (a)
increase the profitability and growth of the Company, (b) provide competitive compensation, (c)
attract and retain exceptional personnel and encourage excellence in the performance of individual
responsibilities, and (d) motivate key employees and directors to contribute to the Company’s
success.

Section 2 – DEFINITIONS

For purposes of the Plan, the following terms shall have the meanings below unless the context
clearly indicates otherwise:

     2.1 “Award” means an Incentive Stock Option, a Nonqualified Stock Option, a Stock Appreciation
Right, a Restricted Stock Award, Restricted Stock Unit, Cash Dividend Right, Dividend Unit Right,
Other Incentive Award or a Performance Award granted under the Plan.

     2.2 “Award Agreement” shall mean a certificate of grant or, if there are promises required of
the recipient of an Award, a written agreement, in such form as the Committee prescribes from time
to time, setting forth the terms and conditions of an Award.

     2.3 “Board” means the Board of Directors of the Company.

     2.4 “Cash Dividend Right” means a contingent right, granted in tandem with a specific
Restricted Stock Unit Award, to receive an amount in cash equal to the cash distributions made by
the Company with respect to a share of Stock during the period such Award is outstanding.

     2.5 “Change of Control” means (i) an event or series of events which have the effect of any
“person” as such term is used in Section 13(d) and 14(d) of the Exchange Act, other than any
trustee or other fiduciary holding securities of the Company under any employee benefit plan of the
Company, becoming the “beneficial owner” as defined in Rule 13d-3 under the Exchange Act, directly
or indirectly, of securities of the Company representing 30% or more of the combined voting power
of the Company’s then outstanding capital stock; (ii) any merger, consolidation, share exchange,
recapitalization or other transaction in which any person becomes the beneficial owner of
securities of the Company representing 30% or more of the combined voting power of the Company’s
then outstanding capital stock; (iii) the persons who were Directors immediately before a
transaction shall cease to constitute a majority of the Board of the Company or any successor to
the Company; (iv) the business of the Company is disposed of pursuant to a partial or complete
liquidation, sale of assets, or otherwise. Provided, however, that the Committee may provide in an
Award

 

 

Agreement that it believes will constitute “deferred compensation” pursuant to Code Section 409A,
that “Change in Control” for purposes of the subject Award will have the meaning given in guidance
from the Internal Revenue Service construing that term for purposes of allowable triggers for
payment of deferred compensation. Further provided that holding of beneficial ownership of
securities representing 30% or more but not more than 50% of the combined voting power of the
outstanding capital stock of the Company by Onex Partners and its affiliates shall not constitute a
Change of Control for purposes of the 2005 Plan.

     2.6 “Code” means the Internal Revenue Code of 1986, as amended from time to time, and the
Treasury regulations promulgated thereunder.

     2.7 “Committee” shall, for purposes of Plan administration and interpretation, mean the
Executive Compensation Committee of the Board, except that, (i) with respect to the terms of and
grants of Awards to non-employee Directors, the Corporate Governance and Nominating Committee of
the Board shall make decisions, (ii) the entire Board may act to grant any Awards in lieu of the
Executive Compensation Committee or the Corporate Governance and Nominating Committee, and, (iii)
except with respect to Awards to Named Executives, grant authority may be delegated to the Chief
Executive Officer of the Company. If at any time the Executive Compensation Committee does not
consisting of two or more members of the Board, each of whom is both a “non-employee director” and
an “outside director,” another committee shall be designated by the Board. For purposes of this
Section, (A) “outside director” means a Director of the Company who either (i) (a) is not a current
employee of the Company or an “affiliated corporation” (within the meaning of Treasury Regulations
promulgated under Code Section 162(m)), (b) is not a former employee of the Company or an
“affiliated corporation” who still receives compensation for prior services (other than benefits
under a tax-qualified retirement plan), or was not an employee during any prior period within the
time defined under Exchange Act rules or the rules of any stock exchange on which the Stock is then
traded, (c) was not an officer of the Company or an “affiliated corporation” at any time, and (d)
does not currently receive remuneration from the Company or an “affiliated corporation,” either
directly or indirectly, in any capacity other than as a Director, or (ii) is otherwise considered
an “outside director” for purposes of Code Section 162(m); and (B) “non-employee director” means a
Director of the Company who (i) is not a current Employee or officer of the Company or its parent
or a subsidiary, (ii) does not receive compensation (directly or indirectly) from the Company or
its parent or a subsidiary for services rendered as a consultant or in any capacity other than as a
Director (except for an amount as to which disclosure would not be required under Item 404(a) of
Regulation S-K promulgated pursuant to the Securities Act (“Regulation S-K”)), (iii) does not
possess an interest in any other transaction as to which disclosure would be required under Item
404(a) of Regulation S-K and (iv) is not engaged in a business relationship as to which disclosure
would be required under Item 404(b) of Regulation S-K.

     2.8 “Company” shall mean Res-Care, Inc. and its successors.

     2.9 “Director” means a voting member of the Board, excluding any person who serves solely in
an advisory capacity or as a director emeritus.

     2.10 “Disability” means permanent disability within the meaning of Section 22(e)(3) of the
Code.

 

 

     2.11 “Dividend Unit Right” means a contingent right, granted in tandem with a specific
Restricted Stock Unit Award, to have an additional number of Restricted Stock Units credited to a
Participant in respect of the Award equal to the whole number of shares of Stock that could be
purchased at Fair Market Value with the amount of each cash distribution made by the Company with
respect to a share of Stock during the period such Award is outstanding.

     2.12 “Effective Date” shall have the meaning set forth in Section 18.

     2.13 “Employee” means an employee of the Company or a Subsidiary.

     2.14 “Exchange Act” means the Securities Exchange Act of 1934, as amended.

     2.15 “Fair Market Value” means, as of any Grant Date, closing sale price of a share of Stock
as reported on the Nasdaq National Market, or if no such reported sale of the Stock shall have
occurred on such date, on the next preceding date on which there was a reported sale. If there
shall be any material alteration in the present system of reporting sale prices of the Stock, or if
the Stock shall no longer be listed on the Nasdaq National Market, the Fair Market Value of a share
of Stock, as of a Grant Date, shall be determined by such method as shall be determined in good
faith by the Committee.

     2.16 “Full Value Award” means any Award under which a Participant may be issued shares of
Stock without the Participant tendering consideration therefor in the form of Stock or cash at
least equal to the Fair Market Value at the Grant Date of the Stock issuable upon exercise or
maturity of the Award.

     2.17 “Grant Date” means, with respect to an Award, the date on which the Committee approves
the grant of an Award pursuant to Section 4.4, or such later date as is determined and explicitly
specified in an Award Agreement.

     2.18 “Incentive Stock Option” means an option to purchase Stock granted under Section 6 of the
Plan that is designated by the Committee as an Incentive Stock Option and is intended to meet the
requirements of Section 422 of the Code.

     2.19 “Named Executive” means any individual who, on the last day of the Company’s fiscal year,
is the chief executive officer of the Company (or is acting in such capacity) or among the four
most highly compensated officers of the Company (other than the chief executive officer), or any
other person for whom executive compensation disclosure is required under the Exchange Act or for
whom short-term trading reports are required under Section 16(a) of the Exchange Act.

     2.20 “Nonqualified Stock Option” means an option to purchase Stock granted under Section 6 of
the Plan that is not intended to be an Incentive Stock Option.

     2.21 “Other Incentive Award” means an incentive award granted to a Participant pursuant to
Section 12.

     2.22 “Option” means an Incentive Stock Option or a Nonqualified Stock Option.

     2.23 “Option Period” means the period from the Grant Date of an Option to the date the period
for exercise of the Option expires (which date might be determined based on

 

 

the condition that certain performance measures be attained) as stated in the Award Agreement.

     2.24 “Parent” means a “parent corporation,” whether now or hereafter existing, as defined in
Section 424(e) of the Code, or any successor provision.

     2.25 “Participant” means an Employee or Director who has been granted an Award under the Plan.

     2.26 “Performance Award” means an Award granted pursuant to Section 11 under which, upon the
satisfaction of predetermined performance measures, cash, shares of Stock, or a combination thereof
is paid to the Participant.

     2.27 “Plan” means this Res-Care, Inc. 2005 Omnibus Incentive Compensation Plan.

     2.28 “Restriction Period” means the period of time from the Grant Date of a Restricted Stock
Award or Restricted Stock Unit to the date when the restrictions placed on the Award in the Award
Agreement lapse.

     2.29 “Restricted Stock Award” or “Restricted Stock” means Stock which is granted under Section
9 of the Plan, subject to a Restriction Period and/or condition which, if not satisfied, may result
in the complete or partial forfeiture of such Stock.

     2.30 “Restricted Stock Unit” means an Award granted pursuant to Section 10 under which, upon
the lapse of predetermined restrictions, shares of Stock are issued to the Participant.

     2.31 “Stock” means the Company’s voting common stock of no par value per share, or such other
securities into which the Stock may be converted, by merger or otherwise.

     2.32 “Stock Appreciation Right” or “SAR” means a Stock Appreciation Right granted under
Section 7 of the Plan.

     2.33 “Subsidiary” means any corporation which at the time qualifies as a subsidiary of the
Company under the definition of “subsidiary corporation” in Section 424(f) of the Code.

     2.34 “Termination of Employment” or “Service” shall be deemed to have occurred at the close of
business on the last day on which an Employee is carried as an active employee on the records of
the Company or any Parent or Subsidiary. With respect to a Director, it shall be deemed to occur
on a Director’s cessation of service on the board of directors of both the Company and any Parent
or Subsidiary. The Committee shall determine whether an authorized leave of absence, or other
absence on military or government service, constitutes severance of the Employee’s employment
relationship. No termination shall be deemed to occur if (i) the Participant is a Director who
becomes an Employee, or (ii) the Participant is an Employee who becomes a Director, except in the
latter case Incentive Stock Options shall become Nonqualified Stock Options if not exercised within
the time period following employment termination provided for in Section 8.

 

 

Section 3 – STOCK SUBJECT TO THE PLAN

     3.1 Available Stock.

          (a) Subject to adjustment as provided in Section 3.2 and as provided in Section 3.1(c), the
aggregate number of shares of Stock that may be issued pursuant to Awards under the Plan, and the
maximum number of shares that may be issued pursuant to Incentive Stock Option Awards, shall be (i)
1,000,000 shares, plus (ii) no more than 213,760 shares of Stock remaining available for issuance
as of the Effective Date of the Plan under the Company’s 2000 Stock Option and Incentive
Compensation Plan and 2000 Nonemployee Directors Stock Ownership Incentive Plan (the “Prior
Plans”), plus (iii) any share subject to an award previously granted under a Prior Plan which is
forfeited, cancelled, terminated, expires or lapses for any reason without the issuance of shares
pursuant to the award, which cannot occur with respect to more than 2,264,776 shares now subject to
such awards, or, in total, no more than 3,478,536 shares. When adopted by the Company’s
shareholders, this Plan shall amend the Prior Plans to immediately terminate the right to make
additional grants under the Prior Plans.

          (b) The maximum number of shares of Stock that may be subject to all Awards granted under the
Plan to any one Participant during a calendar year is 500,000 from the total set forth in
subparagraph (a) above, or $1,000,000 for cash-based Awards, plus the unused amount of this
per-person Award limit from the prior fiscal years as to any particular individual.

          (c) The maximum number of shares of Stock that may be subject to issuance under Awards that
are Full Value Awards shall be (i) 606,880 shares of Stock from the total set forth in subparagraph
(a) above, plus (ii) up to 2/3rds of the total number of shares of Stock still available
for grant pursuant to subparagraph (a) hereof, but, in the event that the total Full Value Awards
exceed 606,880, the number of shares of Stock available for future Awards thereafter shall be
reduced by 1.5 shares of Stock for each share of Stock in excess of 606,880 subject to a Full Value
Award.

     3.2 Changes in Capitalization. In the event of any merger, reorganization,
consolidation, recapitalization, separation, liquidation, stock dividend, split-up, share
combination, or other change in the corporate structure of the Company affecting the number of
shares of Stock or the kind of shares or securities issuable upon exercise of an Option or payment
of another Award, and subject to Section 14.1, an appropriate and proportionate adjustment shall be
made by the Committee in the number and kind of shares which may be delivered under the Plan, and
in the number and kind of or price of shares subject to outstanding Awards; provided that the
number of shares subject to an Award shall always be a whole number. Any adjustment of an
Incentive Stock Option under this Section shall be made in such a manner so as not to constitute a
“modification” within the meaning of Section 424(h) of the Code and adjustments on other Awards
shall be made in a manner consistent with that Section, as if it applied to non-Incentive Stock
Options as well so as not to trigger issues under Code Section 409A. Except as expressly provided
herein, no issuance by the Company of shares of stock of any class, or securities convertible into
shares of stock of any class, shall affect, and no adjustment by reason thereof shall be made with
respect to, the number or price of shares of Stock subject to an Award.

 

 

     3.3 Adjustments for Awards. The Committee shall have sole discretion to determine the
manner in which shares of Stock available for grant of Awards under the Plan are counted. Without
limiting the discretion of the Committee under this Section 3.3, unless otherwise determined by the
Committee, the following rules shall apply for the purpose of determining the number of shares of
Stock available for grant of Awards under the Plan:

          (a) The grant of Options, Restricted Stock, Performance Awards or other Incentive Awards to be
settled in Stock shall initially reduce the number of shares of Stock available for grant of Awards
under the Plan by the number of shares of Stock subject to such an Award, and that number shall
remain unavailable (even after exercise or maturity of that Award), except as provided in (c) or
(d) below.

          (b) The grant of SARs that may be paid or settled only in Stock shall reduce the number of
shares available for grant of Awards under the Plan by the number of shares subject to such an
Award; provided, however, that upon the exercise of SARs, the excess of the number of shares of
Stock with respect to which the Award is exercised over the number of shares of Stock issued upon
exercise of the Award shall again be available for grant of Awards under the Plan.

          (c) If any Award referred to in Sections 3.3(a) or (b), is wholly or partly canceled or
forfeited, or terminates, expires or lapses, for any reason, the number of shares with respect to
which the Award can no longer be exercised or realized by the Participant shall again be available
for grant of Awards under the Plan.

          (d) If previously acquired shares of Stock are used to pay the exercise price of an Award, the
number of shares available for grant of Awards under the Plan shall be increased by the number of
shares delivered as payment of such exercise price. If previously acquired shares of Stock are
used to pay withholding taxes payable upon exercise, vesting or payment of an Award, or shares of
Stock that would be acquired upon exercise, vesting or payment of an Award are withheld to pay
withholding taxes payable upon exercise, vesting or payment of such Award, the number of shares
available for grant of Awards under the Plan shall be increased by the number of shares delivered
or withheld as payment of such withholding taxes.

Section 4 – ADMINISTRATION

     4.1 Committee Governance. Except with respect to other parties to whom Section 2.7
gives the power to make specific Awards hereunder, the Plan shall be administered by the Executive
Compensation Committee. Any Committee acting hereunder shall select one of its members as the
chairperson of the Committee and shall hold meetings at such times and places as it may determine.
The Committee may appoint a secretary and, subject to the provisions of the Plan and to policies
determined by the Board, may make such rules and regulations for the conduct of its business as it
shall deem advisable. Written action of the Committee may be taken unanimously by its members, and
actions so taken shall be fully effective as if taken by a vote of a majority of the members at a
meeting duly called and held. A majority of Committee members shall constitute a quorum for
purposes of meeting. The act of a majority of the members present at any meeting for which there
is a quorum shall be a valid act of the Committee.

 

 

     4.2 Committee to Interpret Plan. Subject to the provisions of the Plan, the Executive
Compensation Committee shall have sole power to (i) construe and interpret the Plan; (ii)
establish, amend or waive rules and regulations for its administration; (iii) determine and
accelerate the exercisability of any Award or the termination of any Restriction Period; (iv)
correct inconsistencies in the Plan or in any Award Agreement, or any other instrument relating to
an Award; and (v) subject to the provisions of Section 15, amend the terms and conditions of any
Award to the extent such terms and conditions are within the discretion of the Committee as
provided in the Plan. Notwithstanding the foregoing, no action of the Committee may, without the
consent of the person or persons entitled to exercise any outstanding Award, adversely affect the
rights of such person or persons. All constructions of this Plan shall be made in a manner the
Committee believes consistent with Awards under the Plan not constituting “deferred
compensation” within the meaning of Section 409A of the Code or to comply with that Code Section’s
requirements, and with respect to Incentive Stock Options, consistent with the Code and Regulations
governing the preservation of their tax treatment. Constructions, interpretations and rules for
administration of the Plan by the entire Board shall take precedence over and control any
construction or interpretation by the Committee, and the Board shall attempt to reconcile any such
constructions, interpretations or administrative procedures that will have application to more than
one class of Participant.

     4.3 Liability; Indemnification. No member of the Committee, nor any person to whom it
has delegated authority, shall be personally liable for any action, interpretation or determination
made in good faith with respect to the Plan or Awards granted hereunder, and each member of the
Committee (or delegatee of the Committee) shall be fully indemnified and protected by the Company
with respect to any liability he may incur with respect to any such action, interpretation or
determination, to the maximum extent permitted by applicable law.

     4.4 Selection of Participants. The Committee as defined in Section 2.7 shall have the
authority to grant Awards from time to time to such Employees and Directors as may be selected by
it in its sole discretion. The grants shall not be deemed made, nor the Fair Market Value of the
underlying shares of Stock of an Award (if necessary) determined, until (i) a Committee written
action is unanimously signed, or (ii) a Committee resolution is duly adopted at a meeting called in
conformance with the rules governing the Committee’s operation, or (iii) where the authority to
serve as the Committee rests with the CEO, when any paper or electronic writing by the CEO listing
the material terms of the grants (i.e., at least the names of Participants and amount and type of
Awards to be granted to each), is delivered to another officer for purposes of directing the prompt
preparation of Award Agreements.

     4.5 Decisions Binding. All determinations and decisions made by the Committee pursuant
to the Plan, including factual determinations, shall be final, conclusive and binding on all
persons, including the Company, its Subsidiaries, its shareholders, Participants and their estates
and assignees.

     4.6 Award Agreements. Each Award under the Plan shall be evidenced by an Award
Agreement which shall be signed by the Chairman or Secretary of the Committee or by an officer of
the Company authorized by the Committee, and shall contain such terms and conditions as may be
approved by the Committee, which need not be the same in all cases. Any Award Agreement may be
supplemented or amended in writing from time to time as approved by the Committee, provided that
the terms of the Agreement as amended or supplemented, as well as the terms of the original Award
Agreement, are not inconsistent with the provisions of the Plan. An Employee who receives an Award
under the Plan shall not,

 

 

with respect to the Award, be deemed to have become a Participant, or to have any rights with
respect to the Award, unless and until the Award Agreement has been signed by the Chairman or
Secretary of the Committee or by an officer of the Company authorized by the Committee and, if
required by its terms, by the Employee and delivered to the Committee or its designee, and the
Employee has otherwise complied with the applicable terms and conditions of the Award. The
Committee may condition any Award upon the agreement by the Participant to such confidentiality,
non-competition, and non-solicitation covenants as the Committee deems appropriate.

     4.7 Administration With Respect To Named Executives. The per-share exercise price of
an Option granted to a Named Executive shall, like all other Options hereunder, be no less than
100% of the Fair Market Value per share on the Grant Date and such Option shall thereby qualify as
performance-based compensation under Section 162(m) of the Code. With respect to other Awards
granted to Named Executives, the Plan may (but need not) be administered so as to permit such
Awards to qualify as performance-based compensation under Section 162(m) of the Code.

Section 5 – AWARDS UNDER THE PLAN

     Subject to the limitations of the Plan, the Committee may in its sole and absolute discretion
grant Awards in such numbers, upon such terms and at such times as the Committee shall determine.
Directors and Employees who are expected to contribute substantially to the growth and
profitability of the Company or a Subsidiary are eligible for selection by the Committee under
Section 4.4 to receive Awards.

Section 6 – STOCK OPTIONS

     6.1 Grant. Both Incentive Stock Options and Nonqualified Stock Options may be granted
under the Plan. If an Option is designated as an Incentive Stock Option but does not qualify as
such under Section 422 of the Code, the Option (or portion thereof) shall be treated as a
Nonqualified Stock Option, and governed by Section 83 of the Code. All Options granted under the
Plan shall be evidenced by an Award Agreement in such form as the Committee may from time to time
approve. All Options are subject to the terms and conditions of this Section 6 and such additional
terms and conditions contained in the Award Agreement, which need not be the same in each case, not
inconsistent with the provisions of the Plan, as the Committee finds desirable.

     6.2 Exercise Price. The exercise price per share of Stock covered by an Option shall
be determined by the Committee, but shall not be less than 100% of the Fair Market Value of the
Stock on the Grant Date. If an Incentive Stock Option is granted to a person who on the Grant Date
owns (within the meaning of Section 424 of the Code) stock possessing more than 10% of the total
combined voting power of all classes of stock of the Company or any Subsidiary, the exercise price
shall be at least 110% of the Fair Market Value of the Stock on the Grant Date.

     6.3 Option Period. The Option Period shall be determined by the Committee, and unless
otherwise specifically provided in the Award Agreement, no Option shall be exercisable later than
ten years from the Grant Date. No Incentive Stock Option shall be exercisable later than ten years
from the Grant Date, provided that in the case of an Employee who on the Grant Date owns or is
deemed to own (within the meaning of Section 424(d) of

 

 

the Code) more than 10% of the total combined voting power of all classes of stock of the Company
or any Subsidiary, the Incentive Stock Option shall not be exercisable later than five years from
the Grant Date. Options may expire prior to the end of the Option Period due to the Participant’s
Termination of Employment as provided in Section 8, or in accordance with any provision of the
Award Agreement. No Option may be exercised at any time unless the Option is valid and
outstanding.

     6.4 Limitation on Amount of Incentive Stock Options. The aggregate Fair Market Value
(determined as of each Option Grant Date) of Stock with respect to which a Participant’s Incentive
Stock Options are exercisable for the first time during any calendar year (under this and all other
stock option plans of the Company and any Subsidiary) shall not exceed $100,000. Options or
portions of Options exercisable as a result of acceleration under Section 11.2 in excess of the
$100,000 limit described herein shall be treated as Nonqualified Stock Options for tax purposes, in
accordance with the first-grant ordering rules of Treas. Reg. § 1.422-4.

     6.5 Transferability of Options. Except as otherwise provided in this Section 6.5, no
Option shall be transferable by a Participant otherwise than by will or the laws of descent and
distribution, and an Option shall be exercisable, during the Participant’s lifetime, only by the
Participant (or, in the event of the Participant’s legal incapacity or incompetency, the
Participant’s guardian or legal representative). The Committee may in an Award Agreement allow a
Participant, subject to any restrictions under Section 16(b) of the Exchange Act, to transfer all
or part of a Nonqualified Stock Option to (i) the Participant’s spouse or lineal descendants
(“Immediate Family Members”), (ii) trusts for the exclusive benefit of the Participant and/or his
Immediate Family Members, or (iii) a partnership or limited liability company in which the
Participant and/or his Immediate Family Members are the only partners or members, as applicable.
Such transfer may be made by a Participant only if there is no consideration for the transfer, and
subsequent transfers of any Option shall be prohibited other than in accordance with this Section
6.5 and by will or the laws of descent and distribution. Following a transfer of an Option, the
Option shall continue to be subject to the same terms and conditions as were applicable immediately
before the transfer, and Termination of Employment or Service, retirement, Disability, satisfaction
of service requirements or performance objectives, and other conditions to exercise of an Option
shall be applied with respect to the original Participant. However, for purposes of exercising the
Option, the term Participant shall refer to the transferee. In addition, for purposes of the death
benefit provisions of Section 8, the Participant’s Representative shall be deemed to refer to the
transferee, the personal representative of the transferee’s estate, or after final settlement of
the transferee’s estate, the successor or successors entitled thereto by law.

     6.6 Exercise. An Option may be exercised, so long as it is valid and outstanding,
from time to time in part or as a whole, subject to any limitations with respect to the number of
shares for which the Option may be exercised at a particular time and to such other conditions
(e.g., exercise could be conditioned on performance) as the Committee in its discretion may
specify upon granting the Option or as otherwise provided in this Section 6.

     6.7 Method of Exercise. To exercise an Option, the Participant or the other person(s)
entitled to exercise the Option shall deliver to the Committee (i) a written notice of exercise in
such form as the Committee may prescribe, specifying the number of full shares to be purchased;
(ii) payment in full of the exercise price in accordance with Section 6.8; and (iii) in the case of
Nonqualified Stock Options, any required withholding taxes as provided in

 

 

Section 17. No shares of Stock shall be issued unless the Participant has fully complied with the
provisions of this Section 6.7.

     6.8 Payment of Exercise Price. To the extent provided in the Award Agreement for an
Option and subject to the rules of Section 16 of the Exchange Act and any exchange on which the
Stock is traded at any relevant time, payment of the exercise price may be made (i) in cash; (ii)
in shares of Stock (based on the Fair Market Value of the Stock on the date the Option is
exercised) owned by the Participant (or jointly by the Participant and his spouse) for at least six
months (12 months in the case of Shares acquired by exercise of an Incentive Stock Option)
evidenced by negotiable certificates or by a written attestation of ownership and consent to
issuance; (iii) if specifically allowed in the Award Agreement, by a written election to have the
Company retain that number of shares of Stock subject to the Option having an aggregate Fair Market
Value equal to the aggregate exercise price of the Option, provided that for Incentive Stock
Options, this right must be granted by the Committee at the time the Option is granted and may not
be added in any modification of the Award Agreement; or (iv) by any combination thereof.
Notwithstanding the preceding sentence, any such right to exercise by delivering already owned
shares or by retaining shares of Stock subject to the Option shall be void from its inception if
such right is deemed to be a feature allowing deferral of compensation with the meaning of Section
409A of the Code that would eliminate the Option’s status as exempt from the deferred compensation
rules of that Section. If permitted in the Award Agreement, Restricted Stock (valued as if it were
not subject to restrictions on transfer or possibilities of forfeiture) issued to the Participant
may be tendered as payment of the exercise price of an Option. If Restricted Stock is tendered as
the exercise price of an Option, a number of shares of Stock issued on exercise of such Option,
equal to the number of shares of Restricted Stock tendered as consideration thereof, shall be
subject to the same restrictions as the Restricted Stock so tendered and shall be held by the
secretary of the Company pursuant to Section 9.1. Any surrender by a person subject to the
reporting requirement of Section 16(b) of the Exchange Act of previously owned shares of Stock to
satisfy tax withholding obligations arising upon exercise of an Option or SAR must comply with the
applicable provisions of Rule 16b-3 under the Exchange Act.

Section 7 – STOCK APPRECIATION RIGHTS

     7.1 Grant. All Stock Appreciation Rights (“SARs”) granted under the Plan shall be
evidenced by an Award Agreement in such form as the Committee may from time to time approve. All
SARs are subject to the terms and conditions of this Section 7 and such additional terms and
conditions contained in the Award Agreement, which need not be the same in each case, not
inconsistent with the Plan, as the Committee finds desirable.

     7.2 Exercise Price. The exercise price per share of Stock subject to an SAR shall be
specified in the Award Agreement and determined by the Committee at the time of grant, but the
exercise price shall not be less than Fair Market Value of the Stock on the Grant Date.

     7.3 Exercise Period. The exercise period shall be determined by the Committee, and
unless otherwise specified in the Award Agreement, no SAR shall be exercisable later than ten years
from the Grant Date. No SAR may be exercised at any time unless such SAR is valid and outstanding
as provided in this Section 7.

 

 

     7.4 Nontransferability. No SAR shall be transferable other than by will or by the
laws of descent and distribution, and SARs shall be exercisable, during the Participant’s lifetime,
only by the Participant (or, in the event of the Participant’s legal incapacity or incompetency,
the Participant’s guardian or legal representative).

Exercise. An SAR may be exercised, so long as it is valid and outstanding, from time to
time in part or as a whole, subject to any limitations with respect to the number of shares for
which the SAR may be exercised at a particular time and to such other conditions (e.g.,
exercise could be conditioned on performance) as the Committee in its discretion may specify upon
granting the SAR or as otherwise provided in this Section 7.

Method of Exercise. To exercise an SAR, the Participant or the other person(s) entitled to
exercise the SAR shall give written notice of exercise to the Committee, specifying the number of
full shares with respect to which the SAR is being exercised.

Payment Upon Exercise. Upon the exercise of an SAR, a Participant shall be entitled to
receive an amount of cash (subject to the SARs terms complying with Section 16.1 hereof) or whole
shares of Stock equal to the amount by which the then Fair Market Value of one share of Stock
exceeds the exercise price per share specified in the Award Agreement, multiplied by the number of
shares with respect to which the SAR is exercised. No fractional shares of Stock will be issued
upon the exercise of an SAR. If the calculation of the number of shares of Stock to be issued upon
the exercise of an SAR results in fractional shares, then the number of shares of Stock will be
rounded up to the nearest whole share of Stock. The number of shares of Stock to be delivered to
the Participant upon exercise of an SAR shall be based on the Fair Market Value of the Stock on the
date of exercise.

Section 8 – LIMITATIONS ON EXERCISE AFTER TERMINATION OF EMPLOYMENT OR SERVICE

     8.1 Exercise after Termination. After a Participant’s Termination of Employment or
Service, an Award may be exercised or may mature only to the extent that the Award was exercisable
immediately before the Termination of Employment or Service, but in no event after the expiration
date of the Award as specified in the Award Agreement. Except to the extent that shorter or longer
periods are provided in the Award Agreement, a Participant’s right to exercise or receive the
unrestricted value of an Award upon Termination of Employment or Service shall terminate:

          (a) At the expiration of one year in the event of Disability of the Participant;

          (b) At the expiration of one year after the Participant’s death if the Participant’s
Termination of Employment or Service occurs by reason of death, any Award exercised or realized
under this subparagraph (b) may be exercised by the legal representative of the estate of the
Participant or by the person or persons who acquire the right to exercise such Award by bequest or
inheritance; or

          (c) No later than three months after the Participant’s Termination of Employment or Service
for any reason other than those described in (a) and (b) above or termination for “Cause” as
described in Section 8.2.

     8.2 Termination for Cause. Unless an Award agreement provides to the contrary, if the
Committee determines that an Employee’s employment has been terminated for Cause, the Employee
shall forfeit any and all unexercised Awards and all Awards having

 

 

performance conditions not yet met or restrictions that have not lapsed, immediately upon the
Termination of Employment. For purposes of this Plan, “Cause” shall have the definition set forth
in the employment agreement between the Company and the Employee, if any; otherwise, “Cause” shall
mean the Employee’s (i) willful failure to substantially perform such Employee’s duties on behalf
of the Company, (ii) repeated gross negligence in performing such Optionee’s duties, (iii) illegal
conduct in performing such Employee’s duties, (iv) willful and improper actions contrary to the
Company’s interest, (v) repeated refusal to comply with the reasonable and lawful instructions of
management of the company, or (vi) violation of the obligations imposed on the Employee under any
confidentiality or solicitation covenants to which the Employee is bound under the terms of the
Stock Option Agreement or otherwise.

Section 9 – RESTRICTED STOCK AWARDS

     9.1 Grant. All Restricted Stock Awards granted under the Plan shall be evidenced by
an Award Agreement in such form as the Committee may from time to time approve. All Restricted
Stock Awards are subject to the terms and conditions in this Section 9, and such additional terms
and conditions contained in the Award Agreement, which need not be the same in each case, not
inconsistent with the provisions of the Plan, as the Committee finds desirable. The Company shall
issue, in the name of each Participant who is granted a Restricted Stock Award, a certificate for
the shares of Stock granted in the Award (subject to Section 13.3), as soon as practicable after
the Grant Date. The Secretary of the Company shall hold such certificates for the Participant’s
benefit until the Restriction Period lapses or the Restricted Stock is forfeited to the Company in
accordance with the Award Agreement.

     9.2 Restriction Period. The Restriction Period shall be determined by the Committee,
and shall commence on the Grant Date and expire at the time specified in the Award Agreement. The
Committee may provide in an Award Agreement that a Restriction Period that has not otherwise
expired will expire immediately upon the retirement, death or Disability of the Participant. The
Committee may not retain the discretion to lengthen the restriction period, if such change in the
Restriction Period would have the effect of delaying the date on which the Award ceases being
subject to a “substantial risk of forfeiture” within the meaning of Sections 83(b) and 409A of the
Code and therefore when it is subject to Federal income tax. Unless otherwise provided in the
Award Agreement, in the event of a Participant’s Termination of Employment during the Restriction
Period for any reason, the Participant’s rights to the Stock subject to the Restricted Stock Award
shall be forfeited and all such Stock shall immediately be surrendered to the Company.

     9.3 Rights of Participant. Subject to the terms and conditions of the Award
Agreement, a Participant to whom Restricted Stock has been awarded shall have the right to receive
dividends thereon during the Restricted Period, to vote the Restricted Stock and to enjoy all other
stockholder rights with respect thereto, except that (i) the Company shall retain custody of any
certificates evidencing the Restricted Stock during the Restricted Period, and (ii) the Participant
may not sell, transfer, pledge, exchange, hypothecate or otherwise dispose of the Restricted Stock
during the Restricted Period. Any attempt by a Participant to sell, transfer, pledge, assign or
otherwise dispose of Restricted Stock shall cause immediate forfeiture of the Award. The Committee
may provide in an Award Agreement that dividends paid on Restricted Stock must be reinvested in
shares of Stock, which may or may not be subject to the same Restriction Period applicable to the
original Restricted Stock Award. In the event of any adjustment as provided in Section 3.2 or if
any securities are received as a

 

 

dividend on Restricted Stock, new or additional shares or securities shall be subject to the same
terms and conditions as the original Restricted Stock.

     9.4 Expiration of Restriction Period. At the expiration of the Restriction Period,
the restrictions contained in Section 9.3 and in the Award Agreement shall, except as otherwise
specifically provided in the Award Agreement, expire.

     9.5 Nontransferability. No Restricted Stock Award shall be transferable other than by
will or the laws of descent and distribution until any restrictions applicable to such Award have
lapsed and a certificate evidencing the Participant’s ownership of the stock free of restrictions
has been issued in accordance with Section 16.3.

Section 10 – RESTRICTED STOCK UNITS

     10.1 General. All Restricted Stock Units granted under the Plan shall be evidenced by
an Award Agreement in such form as the Committee may from time to time approve but at a minimum
shall contain such terms, conditions and restrictions on the Restricted Stock Unit and the period
for which they apply, which need not be the same in each case, not inconsistent with the provisions
of the Plan, as the Committee finds desirable. Upon the lapse of the restrictions, the Participant
shall be entitled to receive from the Company a number of shares of Stock equal to the number of
Restricted Stock Units granted under the Award.

     10.2 Rights of Participant. A Participant shall not, with respect to a Restricted
Stock Unit, have any rights as a shareholder of the Company, such as the right to vote the shares
or the right to receive dividends and other distributions, at any time before the Participant has
become the holder of record of the Stock, except as provided in Section 10.4 below.

     10.3 Nontransferability. No Restricted Stock Unit shall be transferable other than by
will or by the laws of descent and distribution.

     10.4 Dividends. The Committee may provide in the Award Agreement for a Cash Dividend
Right or a Dividend Unit Award in tandem with the Restricted Stock Unit Award.

Section 11 – PERFORMANCE AWARDS

     11.1 Grant. Performance Awards may be granted based upon, payable in or otherwise
related to, in whole or in part, shares of Stock or cash, although this Plan need not be the
exclusive mechanism for grant cash-based incentive compensation. Performance Awards granted under
the Plan shall be evidenced by an Award Agreement in such form as the Committee may from time to
time approve but at a minimum shall set forth (i) the amount of cash, the number of shares of
Stock, or combination of both that the Participant may receive, (ii) the performance objectives
(the “Performance Goals”), (iii) the performance period over which the performance measure is
determined (the “Performance Period”), (iv) the date on which payment under the Award, if any, will
be made, and (v) such additional terms and conditions, which need not be the same in each case, not
inconsistent with the Plan, as the Committee finds desirable. The Performance Goals may include,
but need not be limited to, those established to comply with the performance criteria in Section 14
hereof.

 

 

     11.2 Payment. The Committee shall establish the method of calculating the amount of
payment to be made under a Performance Award of the Performance Goals. After completion of a
Performance Period, the performance of the Company or the Employee will be measured against the
Performance Goals, and the Committee will determine whether all, none, or any portion of a
Performance Award will be paid.

     11.3 Revision of Performance Goals. As to any Performance Award not subject to
Section 13, at any time before the end of a Performance Period, the Committee may revise the
Performance Goals if unforeseen events occur that have a substantial effect on the performance of
the Company or the Employee, and that the Committee determines make the application of the
Performance Goals unfair unless a revision is made.

     11.4 Rights of Participant. A Participant shall not, with respect to a Performance
Award under which Stock may in the future be issued, have any rights as a shareholder of the
Company, such as the right to vote the shares or the right to receive dividends and other
distributions, at any time before the Participant has become the holder of record of the Stock,
except as provided in Section 11.6 below.

     11.5 Nontransferability. No Performance Share Award shall be transferable other than
by will or by the laws of descent and distribution.

     11.6 Dividends. The Committee may provide in the Award Agreement for a Performance
Award for shares of Stock that any dividends declared on the Stock during the Performance Period
that would have been paid with respect to such shares had they been owned by the Participant be
paid in cash or additional shares to the Participant at the end of the Performance Period.

Section 12 – OTHER INCENTIVE AWARDS

     Other Incentive Awards may be granted in such amounts, upon such terms and at such times as
the Committee shall determine. Other Incentive Awards may be granted based upon, payable in or
otherwise related to, in whole or in part, shares of Stock or cash, although this Plan need not be
the exclusive mechanism for grant cash-based incentive compensation. Each grant of an Other
Incentive Award shall be evidenced by an Award Agreement that shall specify the amount of the Other
Incentive Award and the terms, conditions, restrictions and limitations applicable to such Award
Payment of Other Incentive Awards shall be made at such times and in such form, which may be cash,
shares of Stock or other property (or a combination thereof), as established by the Committee,
subject to the terms of the Plan.

Section 13 – MINIMUM VESTING REQUIREMENTS

     Except with respect to a maximum of five percent of the shares of Stock authorized in Section
3.1(a), any Restricted Stock Award, Restricted Stock Unit, or Other Incentive Award that is payable
in shares of Stock that vest solely on the basis of a Participant’s continued employment or service
with the Company will not vest any more rapidly than annual pro-rata vesting over a three-year
period, and any Award that vests upon the attainment of performance goals will provide for a
performance period of at least 12 months, in either case, subject to the provisions of Section 15
and the Committee’s discretion to accelerate vesting upon a Participant’s death, Disability or
retirement.

 

 

Section 14 – SECTION 162(m) COMPENSATION

     14.1 Code Section 162(m) Requirements. Notwithstanding any other provision of the
Plan, if the Committee determines, at the time a Restricted Stock Award, Restricted Stock Unit,
Performance Award or Other Incentive Award is granted to a Participant who is, or is likely to be
as of the end of the tax year in which the Company would claim a tax deduction in connection with
such Award, a Named Executive, the Committee may provide that this Section 14 is applicable to such
Award.

     14.2 Performance Criteria. If an Award is subject to this Section 14, the
distribution of shares of Stock under the Award shall be subject to the achievement of one or more
objective performance goals established by, and the satisfaction of which is certified by, the
Committee, which shall be based on the attainment of specified levels of one of or any combination
of the following “performance criteria” for the Company as a whole or any business unit of the
Company, as reported or calculated by the Company: (i) revenues, (ii) earnings from operations,
earnings before or after taxes, earnings before or after interest, depreciation, amortization,
incentives service fees or extraordinary or special items; (iii) net income or net income per share
(basic or diluted); (iv) return on assets, return on investment, return on capital, or return on
equity; (v) cash flow, free cash flow, cash flow return on investment, or net cash provided by
operations; (vi) economic value created; (vii) one or more operating ratios; (viii) stock price,
dividends or total stockholder return; (ix) the accomplishment of mergers, acquisitions,
dispositions, public offerings or similar extraordinary business transactions, or (x) quality goals
that are objectively determinable (collectively, the “Performance Criteria”). Such performance
goals also may be based on the achievement of specified levels of Company performance (or
performance of an applicable affiliate, division or business unit of the Company) under one or more
of the Performance Criteria described above relative to the performance of other corporations.
Such performance goals shall be set by the Committee over a specified performance period that shall
not be shorter than one year and otherwise within the time period prescribed by, and shall
otherwise comply with the requirements of, Section 162(m) of the Code, or any successor provision
thereto, and the regulations thereunder. Requirements shall be established in writing by the
Committee based on one or more performance goals as set forth in this Section 14.2 not later than
90 days after commencement of the performance period with respect to such Award, provided that the
outcome of the performance in respect of the goals remains substantially uncertain as of such time.

     14.3 Adjustment of Awards. Notwithstanding any provision of the Plan to the contrary,
with respect to any Award that is subject to this Section 14, the Committee may adjust downwards,
but not upwards, the amount payable pursuant to such Award, and the Committee may not waive the
achievement of the applicable performance goals except in the case of the death or Disability of
the Named Executive or upon a Change in Control.

Section 15 – ADJUSTMENTS UPON CHANGE OF CONTROL,

OR CERTAIN OTHER TRANSACTIONS

     15.1 Change of Control.

          (a) Options and SARs. The Committee, in its discretion, may provide in an Award
Agreement that each outstanding Option and SAR shall become exercisable in full in the event of a
Change of Control. In addition, in the event of a Change of Control, each

 

 

outstanding Option and SAR shall be assumed or an equivalent option or right shall be substituted
by the successor corporation or a Parent or Subsidiary of the successor corporation. Except where
such discretion would be prohibited under Section 409A of the Code, the Committee shall have the
discretion to revoke or limit the acceleration of exercisability of an Option or SAR at any time
before and within 20 business days following the date a Change of Control is approved by the Board
or otherwise occurs. Unless the Committee believes that cash payment would make an Option or SAR
not otherwise subject to Code Section 409A “deferred compensation” within the meaning of that
Section, which deferred compensation would not be in compliance with Code Section 409A, a
Participant may be entitled to receive, in lieu of the exercise of any Option or SAR, a cash
payment in an amount equal to the difference between the exercise price of the Option or SAR and
(A) in the case of a tender offer or cash exchange offer, the final offer price paid per share of
Stock, multiplied by the number of shares of Stock covered by the Option or SAR, or (B) in the case
of any other Change of Control, the aggregate Fair Market Value of the shares of Stock covered by
the Option.

          (b) Restricted Stock. The Committee, in its discretion, may provide in an Award
Agreement that in the event of a Change of Control, the Restriction Period of any Restricted Stock
Award shall lapse.

          (c) Assumption of Option or SAR. For purposes of Section 15.1(a), an Option or SAR
shall be considered assumed if the Committee determines, at the time of issuance of the stock or
other consideration upon such Change of Control, that the holder of the Option or SAR would be
entitled to receive upon exercise the same number and kind of shares of stock or the same amount of
property, cash or securities as the holder would have been entitled to receive after the effective
time of the transaction if the holder had been, immediately before the effective time of the
transaction, the holder of the number of shares of Stock covered by the Option or SAR at such time
(whether or not the Option or SAR was then exercisable and after giving effect to any adjustments
in the number of Shares covered by the Option or SAR as provided in Section 3.2). If the
consideration to be received in a Change of Control transaction is not solely common stock of the
successor corporation or its Parent, the Committee shall provide for the consideration to be
received upon exercise of the Option or SAR to be solely common stock of the successor corporation
or its Parent equal to the Fair Market Value of the consideration per share received by holders of
Stock in the transaction.

     15.2 Certain Distributions. In the event of any distribution to the Company’s
shareholders of securities of any other entity or other assets (other than dividends payable in
cash or stock of the Company) without receipt of consideration by the Company, the Committee may,
in its discretion, appropriately adjust the exercise price covered by each outstanding Option or
SAR to reflect the effect of such distribution.

     15.3 Other Adjustments. The Committee is authorized to make, in its sole discretion
and without the consent of Participants, adjustments to the terms and conditions of, and the
criteria included in, Awards in recognition of unusual and nonrecurring events affecting the
Company, or changes of 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.

 

 

Section 16 – AMENDMENTS AND TERMINATION

     16.1 Amendments and Termination. The Committee or the Board may terminate, suspend,
amend or alter the Plan, but no action of the Committee may:

          (a) Impair or adversely affect the rights of a Participant under an outstanding Award
theretofore granted, without the Participant’s consent, other than as provided in Section 3.2 or
15;

          (b) Extend the Option Period or exercise period of an SAR, or the vesting/payment (and
taxation) date of a Performance Award or a Restricted Stock Award or Unit beyond that originally
stated in the Award Agreement, unless and until the Committee determines that such extension does
not constitute a deferral of compensation feature that would subject the Award to the excise taxes
provided under Code Section 409A;

          (c) Decrease the price of an Option or the base price of any SAR to less than the Fair Market
Value on the date the Award was granted; or

          (d) Without the approval of the shareholders:

               (i) Increase the total amount of Stock which may be delivered under the Plan;

               (ii) Decrease the exercise price of any Option or SAR to less than the exercise price on the
Grant Date;

               (iii) Extend the period during which Awards may be granted; or

               (iv) In the case of an outstanding Award intended to be eligible for the performance-based
compensation exemption under Section 162(m) of the Code, the Committee shall not, without the
approval of a majority of the stockholders of the Company, amend the Plan or the Award in a manner
that would adversely affect the Award’s continued eligibility for the performance-based
compensation exemption under Section 162(m) of the Code.

     16. 2 Conditions on Awards. In granting an Award, the Committee may establish any
conditions that it determines are consistent with the purposes and provisions of the Plan,
including, without limitation, a condition that the granting of an Award is subject to the
surrender for cancellation of any or all outstanding Awards held by the Participant.

     16.3 No Repricing. Except for adjustments made pursuant to Section 3.2, the exercise
price for any outstanding Option or SAR shall not be decreased after the Grant Date, nor may any
outstanding Option or SAR be surrendered to the Company as consideration for the grant of a new
Option or SAR with a lower exercise price.

     16.4 No Reload Rights. Awards shall not contain any provision entitling the
Participant to an automatic grant of additional Awards in connection with any exercise of the
original Award.

 

 

     16.5 Selective Amendments. Any amendment or alteration of the Plan may be limited to,
or may exclude from its effect, particular classes of Participants.

Section 17 – GENERAL PROVISIONS

     17.1 Section 409A Compliance. Notwithstanding any other provision of the Plan, any
Award under the Plan that comes within the meaning of Code Section 409A’s definition of “deferred
compensation” shall be designed and granted in such a way as to comply with that Code Section’s
election timing rules, limitation on distribution triggering events, and must specify in the Award
Agreement the time and form of payment of the Award, subject only to delay in accordance with Code
Section 409A’s provisions, and never subject to acceleration.

     17.2 Issuance of Stock. As soon as practicable following exercise or maturity of an
Award to be satisfied in Stock, and subject to Section 17.5, the Company will deliver to the
Participant the shares of Stock acquired upon such exercise or maturity either by (i) physical
delivery of the certificate(s) for such shares or (ii) book entry to a brokerage account of the
Participant, free and clear of any lapsed restrictions.

     17.3 Unfunded Status of Plan. The Plan is intended to constitute an “unfunded” plan
for incentive compensation, and the Plan is not intended to constitute a plan subject to the
provisions of the Employee Retirement Income Security Act of 1974, as amended, and shall not
extend, with respect to any payments not yet made to a Participant, any rights that are greater
than those of a general creditor of the Company.

     17.4 Transfers, Leaves of Absence and Other Changes in Employment Status. For
purposes of the Plan (i) a transfer of an Employee from the Company to a Subsidiary or vice versa,
or from one Subsidiary to another, or (ii) a leave of absence not in excess of 90 days duly
authorized in writing by the Company or a Subsidiary for military service, sickness or any other
purpose approved by the Company or a Subsidiary, shall not be Termination of Employment. The
Committee, in its sole discretion subject to the terms of the Award Agreement, shall determine the
disposition of all Awards made under the Plan in all cases involving any substantial change in
employment status other than an event described in this Section 16.3.

     17.5 Restrictions on Distribution of Stock. The Committee may require Participants
receiving Stock pursuant to any Award under the Plan to represent to and agree with the Company in
writing that the Participant is acquiring the Stock for investment without a view to distribution
thereof. No Stock shall be issued or transferred pursuant to an Award unless the Committee
determines, in its sole discretion, that such issuance or transfer complies with all relevant
provisions of law, including but not limited to, the (i) limitations, if any, imposed in the state
of issuance or transfer, (ii) restrictions, if any, imposed by the Securities Act of 1933, as
amended, the Exchange Act, and the rules and regulations promulgated thereunder, and (iii)
requirements of any stock exchange upon which the Stock may then be listed. The certificates for
Stock issued pursuant to an Award may include any legend that the Committee deems appropriate to
reflect any restrictions on transfer. The Company shall not be obligated to register any
securities covered hereby or to take any affirmative action in order to facilitate the sale,
transfer or other disposition of Stock issued pursuant to an Award.

 

 

     17.6 Assignment Prohibited. Subject to the provisions of the Plan and the Award
Agreement, no Award shall be assigned, transferred, pledged or otherwise encumbered by the
Participant otherwise than by will or by the laws of descent and distribution, and an Award shall
be exercisable, during the Participant’s lifetime, only by the Participant. Awards shall not be
pledged or hypothecated in any way, and shall not be subject to any execution, attachment, or
similar process. Any attempted transfer, assignment, pledge, hypothecation or other disposition of
an Award contrary to the provisions of the Plan, or the levy of any process upon an Award, shall be
null, void and without effect.

     17.7 Other Compensation Plans. Nothing contained in the Plan shall prevent the
Company from adopting other compensation arrangements, subject to shareholder approval if such
approval is required.

     17.8 Limitation of Authority. No person shall at any time have any right to receive
an Award hereunder and no person other than a duly authorized member of the Committee or an officer
of the Committee duly authorized by the Committee shall have authority to enter into an agreement
on behalf of the Company for the granting of an Award or to make any representation or warranty
with respect thereto. Participants shall have no rights in respect to any Award except as set
forth in the Plan and the applicable Award Agreement.

     17.9 No Right to Employment. Neither the action of the Company in establishing the
Plan, nor any action taken by it or by the Board or the Committee under the Plan or any Award
Agreement, nor any provision of the Plan, shall be construed as giving to any person the right to
be retained in the employ or service of the Company or any other entity as an employee, director or
independent contractor or to interfere in any way with the right of the Company or any other entity
to terminate any person’s service or employment at any time.

     17.10 Not a Shareholder. The person or persons entitled to exercise, or who have
exercised, an Option or SAR shall not be entitled to any rights as a shareholder of the Company
with respect to any Stock to be issued upon such exercise until such persons or persons shall have
become the holder of record of such Stock.

     17.11 Severability. If any provision of this Plan is found to be illegal or
unenforceable by any court of law in any jurisdiction, the remaining provisions hereof and thereof
shall be severable and enforceable in accordance with their terms, and all provisions shall remain
enforceable in any other jurisdiction.

     17.12 Headings. The headings in this Plan have been inserted solely for convenience
of reference and shall not be considered in the interpretation or construction of this Plan.

     17.13 Governing Law. The validity, interpretation, construction and administration of
this Plan shall be governed by the laws of the Company’s state of incorporation, as it may change
from time to time.

Section 18 – TAXES

     18.1 Tax Withholding. All Participants shall make arrangements satisfactory to the
Committee to pay to the Company or a Subsidiary, any federal, state or local taxes required to be
withheld with respect to an Award issued under the Plan at the time such taxes are required to be
withheld. If a Participant fails to make such tax payments, the Company and its

 

 

Subsidiary shall, to the extent permitted by law, have the right to deduct any such taxes from any
payment of any kind otherwise due to the Participant, including a payment related to any Award
under the Plan.

     18.2 Share Withholding. If permitted by the Committee in an Award Agreement, a tax
withholding obligation may be satisfied by the Company retaining shares of Stock with a Fair Market
Value equal to the amount required to be withheld if the Committee first determines that such a
feature would not bring the Award within the definition of deferred compensation for purposes of
Section 409A of the Code, or would comply with that Code Section.

     18.3 Tax Reporting. The Company shall reflect the exercise of any Incentive Stock
Option on an informational report as required by Section 6039 of the Code no later than January
31st of the year following exercise. The compensation resulting from the exercise of a
Nonqualified Stock Option or SAR, the lapse of the restrictions of a Restricted Stock Award, or the
satisfaction of the criteria of a Performance Share Award, and related income and employment tax
withholding related thereto, shall be reported on the Employee’s W-2 Form for the year of exercise
or vesting (as the case may be) or required by the Code.

Section 19 – EFFECTIVE DATE OF PLAN

     The Plan shall be effective on the date (the “Effective Date”) when the Board of Directors
adopts the Plan, subject to approval of the Plan by a majority of the total votes eligible to be
cast at a meeting of shareholders following adoption of the Plan by the Board of Directors, which
vote shall be taken within 12 months of the Effective Date. Awards may be granted before obtaining
shareholder approval of the Plan, but any such Awards shall be contingent upon such shareholder
approval being obtained and may not be exercised before such approval.

Section 20 – TERM OF PLAN

     The Plan has no termination date, provided that no Incentive Stock Option may be issued on or
after the tenth anniversary of the Effective Date as defined in Section 19.EX-4.8

 

1.

Exhibit 4.8

     SECOND SUPPLEMENTAL INDENTURE (this “Second Supplemental Indenture”) dated as of February 15,
2000 among PNC Funding Corp, a Pennsylvania corporation, as issuer (the “Company”), PNC Bank Corp.
(formerly known as PNC Financial Corp), a Pennsylvania corporation (the “Guarantor”) and The Chase
Manhattan Bank (formerly known as Chemical Bank as successor by merger to Manufacturers Hanover
Trust Company, as trustee (the “Trustee”).

     WHEREAS each of the Company, the Guarantor and the Trustee have heretofore executed and
delivered to the Trustee an Indenture dated as of December 1, 1991, as amended by a Supplemental
Indenture dated as of February 15, 1993 (as so amended, the “Indenture”);

     WHEREAS, pursuant to Section 3.01 of the Indenture and an Officers’ Certificate dated November
2, 1999 (the “Authorizing Officers’ Certificate”), the Company has heretofore created and issued a
series of Securities designated as the “7.50% Subordinated Noted Due 2009” (the “Notes”) limited to
$400,000,000 in aggregate principal amount;

     WHEREAS Section 3.01 of the Indenture provides that the aggregate principal amount of all
Securities that may be issued, authenticated and delivered under the Indenture is unlimited;

     WHEREAS Section 9.02 of the Indenture provides that when authorized by a Board Resolution and
with the consent of the Holders of not less than a majority in principal amount of the Outstanding
Securities of all series (voting as one class) affected by such supplemental indenture or
indentures, by Act of said Holders, delivered to the Company, the Guarantor and the Trustee, the
Trustee may enter into a supplemental indenture for the purpose of adding any provisions to or
changing in any manner or eliminating any of the provisions of the Indenture or of modifying in any
manner the rights of the Holders of the Securities of each such series under the Indenture;

     WHEREAS the purpose of this Second Supplemental Indenture is to provide for the issuance of up
to $100,000,000 aggregate principal amount of additional Notes with the same terms as the Notes in
accordance with Section 3.01 of the Indenture (the “Additional Notes”);

     WHEREAS the Holders of the Notes are the only Holders of Securities issued under the Indenture
that will be affected by any supplemental indenture providing for the issuance of Additional Notes
and this Second Supplemental Indenture;

     WHEREAS on February 11, 2000, the Holders of at least a majority in principal amount of the
Outstanding Notes, by Act of such Holders, consented to the amendment of this Indenture and the
execution and delivery of a supplemental indenture to provide for the issuance of up to
$100,000,000 aggregate principal amount of the Additional Notes; and

     WHEREAS the Company has requested that the Trustee execute and deliver this Second
Supplemental Indenture and all requirements necessary to make this Second Supplemental Indenture a
valid instrument in accordance with its terms, and the execution and delivery of this Second
Supplemental Indenture have been duly authorized in all respects.

     NOW THEREFORE, the Company, the Guarantor and the Trustee hereby agree that the following
Sections of this Second Supplemental Indenture supplement and amend the

 

 

2.

Indenture to provide for the issuance of Additional Notes proposed to be issued thereunder on or
after the date of this Second Supplemental Indenture:

     SECTION 1. Definitions. Capitalized terms used herein and not defined herein have the
meanings ascribed to such terms in the Indenture.

     SECTION 2. Issuance of Additional Notes. (a) The terms of the Notes are hereby amended to
permit the Company to issue from time to time on or after the date hereof up to $100,000,000
aggregate principal amount of Additional Notes under the Indenture, so that the aggregate principal
amount of Notes that may be authenticated and delivered under the Indenture is limited to
$500,000,000, subject to the exceptions set forth in paragraph 3 of the Authorizing Officers’
Certificate. Additional Notes shall constitute the same series as the Notes and be treated as a
single class with the Outstanding Notes for all purposes under the Indenture.

     (b) The Additional Notes shall have the same terms as the Notes as set forth in the
Authorizing Officers’ Certificate with respect to the interest rate, interest accrual, interest
payment dates, maturity, redemption provisions, and other terms.

     (c) No Additional Notes may be issued with original issue discount for United States Federal
income tax purposes.

     SECTION 3. Forms of Notes. (a) Each certificate representing Notes that is issued after the
date hereof shall (i) refer to this Second Supplemental Indenture and (ii) specify the revised
aggregate principal amount of Notes that may be issued pursuant to the Indenture.

     SECTION 4. This Second Supplemental Indenture. This Second Supplemental Indenture shall be
construed as supplemental to the Indenture and shall form a part of it, and the Indenture is hereby
incorporated by reference herein and each is hereby ratified, approved and confirmed.

     SECTION 5. GOVERNING LAW. THIS SECOND SUPPLEMENTAL INDENTURE SHALL BE CONSTRUED IN ACCORDANCE
WITH AND GOVERNED BY THE LAWS OF THE JURISDICTION WHICH GOVERN THE INDENTURE AND ITS CONSTRUCTION.

     SECTION 6. Counterparts. This Second Supplemental Indenture may be executed in two or more
counterparts, each of which shall constitute an original, but all of which when taken together
shall constitute but one instrument.

     SECTION 7. Headings. The headings of this Second Supplemental Indenture are for reference
only and shall not limit or otherwise affect the meaning hereof.

     SECTION 8. Trustee Not Responsible for Recitals. The recitals herein contained are made by
the Company and not by the Trustee, and the Trustee assumes no responsibility for the correctness
thereof. The Trustee shall not be responsible in any manner whatsoever for or in respect of the
validity or sufficiency of this Second Supplemental Indenture.

     SECTION 9. Separability. In case any one or more of the provisions contained in this Second
Supplemental Indenture shall for any reason be held to be invalid, illegal or

 

 

3.

unenforceable in any respect, such invalidity, illegality or unenforceability shall not affect any
other provisions of this Second Supplemental Indenture, but this Second Supplemental Indenture
shall be construed as if such invalid or illegal or unenforceable provision had never been
contained herein.

 

 

4.

     IN WITNESS WHEREOF, the parties hereto have caused this Second Supplemental Indenture to be
duly executed by their respective authorized officers as of the date first written above.

	 	 	 	 	 
	(Corporate Seal)

	 	PNC FUNDING CORP, as Issuer,	 	 
	Attest:
	 	 	 	 
	 
	 	 	 	 
	/s/ THOMAS R. MOORE

	 	by /s/ RANDALL C. KING	 	 
	 

	 	 	 	 
	Secretary

	 	Name: Randall C. King	 	 
	 

	 	Title: Senior Vice President	 	 
	 
	 	 	 	 
	(Corporate Seal)

	 	PNC BANK CORP, as Guarantor,	 	 
	Attest:
	 	 	 	 
	 
	 	 	 	 
	/s/ THOMAS R. MOORE

	 	by /s/ RANDALL C. KING	 	 
	 

	 	 	 	 
	Secretary

	 	Name: Randall C. King	 	 
	 

	 	Title: Senior Vice President	 	 
	 
	 	 	 	 
	(Corporate Seal)

	 	THE CHASE MANHATTAN BANK,	 	 
	Attest:

	 	as Trustee	 	 
	 
	 	 	 	 
	/s/ N. RODRIGUEZ

	 	by /s/ WILLIAM G. KEENAN	 	 
	 

	 	 	 	 
	Title: Natalia Rodriguez

	 	Name: William Keenan	 	 
	Trust Officer

	 	Title: Trust Officer

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