Exhibit 10.19
FIRST MERCURY FINANCIAL CORPORATION
OMNIBUS INCENTIVE PLAN OF 2006
OMNIBUS INCENTIVE PLAN OF 2006
FIRST MERCURY FINANCIAL CORPORATION
OMNIBUS INCENTIVE PLAN OF 2006
OMNIBUS INCENTIVE PLAN OF 2006
1. Purpose. The purposes of thePlanare (a) to promote the interests of theCorporationand itsSubsidiariesand its stockholders by strengthening the ability of theCorporationand itsSubsidiariesto attract and retain highly competent officers and other key employees, and (b) to provide a means to encourageStockownership and proprietary interest in theCorporation. ThePlan is intended to providePlan Participantswith forms of long-term incentive compensation that are not subject to the deduction limitation rules prescribed underCodeSection 162(m), and should be construed to the extent possible as providing for remuneration which is “performance-based compensation” within the meaning ofCodeSection 162(m) and the regulations promulgated thereunder.
2. Definitions. Where the context of thePlanpermits, words in the masculine gender shall include the feminine gender, the plural form of a word shall include the singular form, and the singular form of a word shall include the plural form. Unless the context clearly indicates otherwise, the following terms shall have the following meanings:
(a) | “Award”means the grant of incentive compensation under thisPlanto aParticipant. | ||
(b) | “Board”means the board of directors of theCorporation. | ||
(c) | “Change of Control”means: |
(i) | upon the acquisition by any individual, entity or group, including anyPerson, of beneficial ownership (as defined in Rule 13d-3 promulgated under the Exchange Act), directly or indirectly, of 20% or more of the combined voting power of the then outstanding capital stock of theCorporationthat by its terms may be voted on all matters submitted to stockholders of theCorporationgenerally (“Voting Stock”); provided, however, that the following acquisitions shall not constitute aChange in Control: (A) any acquisition directly from theCorporation(excluding any acquisition resulting from the exercise of a conversion or exchange |
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privilege in respect of outstanding convertible or exchangeable securities unless such outstanding convertible or exchangeable securities were acquired directly from theCorporation); (B) any acquisition by theCorporation; (C) any acquisition by an employee benefit plan (or related trust) sponsored or maintained by theCorporationor any corporation controlled by theCorporation; or (D) any acquisition by any corporation pursuant to a reorganization, merger or consolidation involving theCorporation, if, immediately after such reorganization, merger or consolidation, each of the conditions described in clauses (A), (B) and (C) of subsection (ii) below shall be satisfied; and provided further that, for purposes of clause (B) above, if (1) anyPerson(other than theCorporationor any employee benefit plan (or related trust) sponsored or maintained by theCorporationor any corporation controlled by theCorporation) shall become the beneficial owner of 20% or more of theVoting Stockby reason of an acquisition ofVoting Stockby theCorporation, and (2) suchPersonshall, after such acquisition by theCorporation, become the beneficial owner of any additional shares of theVoting Stockand such beneficial ownership is publicly announced, then such additional beneficial ownership shall constitute aChange in Control; or | |||
(ii) | upon the consummation of a reorganization, merger or consolidation of theCorporation, or a sale, lease, exchange or other transfer of all or substantially all of the assets of theCorporation; excluding, however, any such reorganization, merger, consolidation, sale, lease, exchange or other transfer with respect to which, immediately after consummation of such transaction: (A) all or substantially all of the beneficial owners of theVoting Stockof theCorporationoutstanding immediately prior to such transaction continue to beneficially own, directly or indirectly (either by remaining outstanding or by being converted into voting securities of the entity resulting from such transaction), more than [20]% of the combined |
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voting power of the voting securities of the entity resulting from such transaction (including, without limitation, theCorporationor an entity which as a result of such transaction owns theCorporationor all or substantially all of theCorporation‘s property or assets, directly or indirectly) (the “Resulting Entity”) outstanding immediately after such transaction, in substantially the same proportions relative to each other as their ownership immediately prior to such transaction; and (B) noPerson (other than anyPersonthat beneficially owned, immediately prior to such reorganization, merger, consolidation, sale or other disposition, directly or indirectly,Voting Stockrepresenting 20% or more of the combined voting power of theCorporation‘s then outstanding securities) beneficially owns, directly or indirectly, 20% or more of the combined voting power of the then outstanding securities of theResulting Entity; and (C) at least a majority of the members of the board of directors of the entity resulting from such transaction wereContinuing Directorsof theCorporationat the time of the execution of the initial agreement or action of theBoardauthorizing such reorganization, merger, consolidation, sale or other disposition; or | |||
(iii) | upon the approval of a plan of complete liquidation or dissolution of theCorporation; or | ||
(iv) | when theContinuing Directorscease for any reason to constitute at least a majority of theBoard. |
(d) | “Code”means the Internal Revenue Code of 1986, as amended. | ||
(e) | “Committee”means the Compensation and Employee Benefits Committee of theBoard. | ||
(f) | “Continuing Directors”means those individuals initially appointed as the directors of theCorporation; provided, however, that any individual who becomes a director of theCorporationat or after the first annual meeting |
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of stockholders of theCorporationwhose election, or nomination for election by theCorporation’sstockholders, was approved by the vote of at least a majority of the directors then comprising theBoard(or by the nominating committee of theBoard, if such committee is comprised ofContinuing Directorsand has such authority) shall be deemed to have been aContinuing Director; and provided further, that no individual shall be deemed to be aContinuing Directorif such individual initially was elected as a director of theCorporationas a result of: (i) an actual or threatened solicitation by aPerson(other than theBoard) made for the purpose of opposing a solicitation by theBoardwith respect to the election or removal of directors; or (ii) any other actual or threatened solicitation of proxies or consents by or on behalf of anyPerson(other than theBoard). | |||
(g) | “Corporation”means First Mercury Financial Corporation, a Delaware corporation, or any successor thereto. | ||
(h) | “Covered Employees”means covered employees within the meaning ofCode Section 162(m). | ||
(i) | “Deferred Stock Unit” (“DSU”)means a vested right to a future award ofStockgranted pursuant to Section 10 below. | ||
(j) | “Exchange Act”means the Securities Exchange Act of 1934, as amended. | ||
(k) | “Fair Market Value”means the fair market value ofStockdetermined at any time in such manner as theCommitteemay deem equitable, or as required by applicable law or regulation. | ||
(l) | “Incentive Stock Options”means aStock Optiondesigned to meet the requirements ofCodeSection 422 or any successor law. | ||
(m) | “Nonqualified Stock Option”means aStock Optionthat is not anIncentive Stock Option. |
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(n) | “Participant”means (i) an employee of theCorporationor itsSubsidiaries;or (ii) a non-employee director of theCorporationdesignated by theCommitteeas eligible to receive anAwardunder thePlan. | ||
(o) | “Performance Cash Awards”means cash incentives subject to the satisfaction of long-termPerformance Criteriaand granted pursuant to Section 12 below. | ||
(p) | “Performance Criteria”means business criteria within the meaning ofCodeSection 162(m), including, but not limited to: revenue; revenue growth; earnings before interest and taxes; earnings before interest, taxes, depreciation and amortization; earnings per share; operating income; pre-or after-tax income; net operating profit after taxes; economic value added (or an equivalent metric); ratio of operating earnings to capital spending; cash flow (before or after dividends); cash-flow per share (before or after dividends); net earnings; net sales; sales growth; share price performance; return on assets or net assets; return on equity; return on capital (including return on total capital or return on invested capital); cash flow return on investment; total shareholder return; improvement in or attainment of expense levels; and improvement in or attainment of working capital levels orPerformance Criteria. AnyPerformance Criteriamay be used to measure our performance as a whole or any of our business units and may be measured relative to a peer group or index. | ||
(q) | “Performance Period”means the period as designated by theCommittee with a minimum of one year and a maximum of five years. | ||
(r) | “Performance Shares”meansAwardssubject to the satisfaction of long-termPerformance Criteriaand granted pursuant to Section 11 below. | ||
(s) | “Person”means any individual, entity or group, including any “person” within the meaning of Section 13(d)(3) or 14(d)(2) of theExchange Act. |
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(t) | “Plan”means the First Mercury Financial Corporation Omnibus Incentive Plan of 2006. | ||
(u) | “Restricted Stock”meansStocksubject to a vesting condition specified by theCommitteein anAwardin accordance with Section 9 below. | ||
(v) | “Resulting Entity”means the entity resulting from a transaction (including, without limitation, theCorporationor an entity which as a result of such transaction owns theCorporationor all or substantially all of theCorporation’sproperty or assets, directly or indirectly). | ||
(w) | “RSU”means a restricted stock unit providing aParticipantwith the right to receiveStockat a date on or after vesting in accordance with the terms of such grant and/or upon the attainment ofPerformance Criteria specified by theCommitteein theAwardin accordance with Section 9 below. | ||
(x) | “SAR”means a stock appreciation right granted pursuant to Section 8 below. | ||
(y) | “Stock”means a share of common stock of theCorporationthat, by its terms, may be voted on all matters submitted to stockholders of theCorporation generally. | ||
(z) | “Stock Option”means the right to acquire shares ofStockat a certain price that is granted pursuant to Section 7 below. The termStock Option includes bothIncentive Stock OptionsandNonqualified Stock Options. | ||
(aa) | “Subsidiary”or “Subsidiaries”means any corporation or entity of which theCorporationowns directly or indirectly, at least 50% of the total voting power or in which it has at least a 50% economic interest, and which is authorized to participate in thePlan. |
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3. Administration. ThePlanwill be administered by theCommitteeconsisting of two or more directors of theCorporationas theBoardmay designate from time to time, each of whom shall satisfy such requirements as:
(a) | the Securities and Exchange Commission may establish for administrators acting under plans intended to qualify for exemption under Rule 16b-3 or its successor under theExchange Act; | ||
(b) | the New York Stock Exchange may establish pursuant to its rule-making authority; and | ||
(c) | the Internal Revenue Service may establish for outside directors acting under plans intended to qualify for exemption underCodeSection 162(m). |
TheCommitteeshall have the discretionary authority to construe and interpret thePlanand anyAwardsgranted thereunder, to establish and amend rules forPlanadministration, to change the terms and conditions ofAwardsat or after grant (subject to the provisions of Section 20 below), to correct any defect or supply any omission or reconcile any inconsistency in thePlanor in anyAwardgranted under thePlan, and to make all other determinations which it deems necessary or advisable for the administration of thePlan.
Awardsunder thePlanto aCovered Employeemay be made subject to the satisfaction of one or morePerformance Criteria.Performance Criteriashall be established by theCommitteefor aParticipant(or group ofParticipants) no later than ninety (90) days after the commencement of eachPerformance Period(or the date on which 25% of thePerformance Periodhas elapsed, if earlier). TheCommitteemay select one or morePerformance Criteriaand may apply thosePerformance Criteriaon a corporate-wide or division/business segment basis; provided, however, that theCommitteemay not increase the amount of compensation payable to aCovered Employeeupon the satisfaction ofPerformance Criteria.
TheCommitteeor theBoardmay authorize one or more officers of theCorporationto select employees to participate in thePlanand to determine the number and type ofAwardsto be granted to suchParticipants, except with respect toAwardsto officers subject to Section 16 of theExchange Act,or to non-employee directors of theCorporation, or to officers who are, or
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who are reasonably expected to be,Covered Employees. Any reference in thePlanto theCommittee shall include such officer or officers.
The determinations of theCommitteeshall be made in accordance with their judgment as to the best interests of theCorporationand its stockholders and in accordance with the purposes of thePlan. Any determination of theCommitteeunder thePlanmay be made without notice or meeting of theCommittee, if in writing signed by all theCommitteemembers.
4. Participants.Participantsmay consist of all employees of theCorporationand its subsidiaries and all non-employee directors of theCorporation; provided, however, the following individuals shall be excluded from participation in thePlan: (a) contract labor; (b) employees whose base wage or base salary is not processed for payment by the payroll department of theCorporationor any subsidiary; and (c) any individual performing services under an independent contractor or consultant agreement, a purchase order, a supplier agreement or any other agreement that theCorporationenters into for service. Designation of aParticipantin any year shall not require theCommitteeto designate that person to receive anAwardin any other year or to receive the same type or amount ofAwardas granted to theParticipantin any other year or as granted to any otherParticipantin any year. TheCommitteeshall consider all factors that it deems relevant in selectingParticipantsand in determining the type and amount of their respectiveAwards.
5. Shares Available under the Plan. There is hereby reserved for issuance under thePlanan aggregate of 1,500,000 shares ofStock.Stockcovered by anAwardgranted under thePlanshall not be counted as used unless and until actually issued and delivered to aParticipant. Accordingly, if there is (a) a lapse, expiration, termination or cancellation of anyStock Option or otherAwardoutstanding under thisPlanprior to the issuance ofStockthereunder or (b) a forfeiture of any shares ofRestricted StockorStocksubject toAwardsgranted under thisPlan prior to vesting, then theStocksubject to theseStock Optionsor otherAwardsshall be added to theStockavailable forAwardsunder thePlan. In addition, anyStockcovered by anSAR(including anSARsettled inStockwhich theCommittee, in its discretion, may substitute for an outstandingStock Option) shall be counted as used only to the extentStockis actually issued to theParticipantupon exercise of the right. Finally, anyStockexchanged by an
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optionee as full or partial payment of the exercise price under anyStock Optionexercised under thePlan, anyStockretained by theCorporationto comply with applicable income tax withholding requirements, and anyStockcovered by anAwardwhich is settled in cash, shall be added to theStockavailable forAwardsunder thePlan.
AllStockissued under thePlanmay be either authorized and unissuedStockor issuedStock reacquired by theCorporation. All of the availableStockmay, but need not, be issued pursuant to the exercise ofIncentive Stock Options; provided, however, notwithstanding aStock Option’s designation, to the extent thatIncentive Stock Optionsare exercisable for the first time by theParticipantduring any calendar year with respect toStockwhose aggregateFair Market Value exceeds $100,000, suchStock Optionsshall be treated asNonqualified Stock Options.
NoParticipantmay receive in any calendar yearAwardsrelating to more than 500,000 shares ofStock.
TheStockreserved for issuance and the other limitations set forth above shall be subject to adjustment in accordance with Section 15 hereto.
6. Types of Awards, Payments, and Limitations.Awardsunder thePlanshall consist ofStock Options,SARs,Restricted Stock,RSUs,DSUs,Performance Shares,Performance Cash Awards, and otherStockor cashAwards, all as described below. Payment ofAwards may be in the form of cash,Stock, otherAwardsor combinations thereof as theCommitteeshall determine, and with the expectation that anyAwardofStockshall be styled to preserve such restrictions as it may impose. TheCommittee, either at the time of grant or by subsequent amendment, and subject to the provisions of Sections 20 and 21 hereto, may require or permitParticipantsto elect to defer the issuance ofStockor the settlement ofAwards in cash under such rules and procedures as theCommitteemay establish under thePlan.
TheCommitteemay provide that anyAwardsunder thePlanearn dividends or dividend equivalents and interest on such dividends or dividend equivalents. Such dividends or dividend equivalents may be paid currently or may be credited to aParticipant’s Planaccount and are subject to the same vesting orPerformance Criteriaas the underlyingAward. Any crediting of dividends or dividend equivalents may be subject to such restrictions and conditions as theCommitteemay establish, including reinvestment in additionalStockorStockequivalents.
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Awards shall be evidenced by an agreement that sets forth the terms, conditions and limitations of suchAward. Such terms may include, but are not limited to, the term of theAward, the provisions applicable in the event theParticipant’semployment terminates, and theCorporation’s authority to unilaterally or bilaterally amend, modify, suspend, cancel or rescind anyAwardincluding without limitation the ability to amend suchAwardsto comply with changes in applicable law. AnAwardmay also be subject to other provisions (whether or not applicable to similarAwardsgranted to otherParticipants) as theCommitteedetermines appropriate, including provisions intended to comply with federal or state securities laws and stock exchange requirements, understandings or conditions as to theParticipant’semployment, requirements or inducements for continued ownership ofStockafter exercise or vesting ofAwards, or forfeiture ofAwardsin the event of termination of employment shortly after exercise or vesting, or breach of noncompetition or confidentiality agreements following termination of employment.
TheCommitteemay make retroactive adjustments to and theParticipantshall reimburse to theCorporationany cash or equity based incentive compensation paid to theParticipantwhere such compensation was predicated upon achieving certain financial results that were substantially the subject of a restatement, and as a result of the restatement it is determined that theParticipant otherwise would not have been paid such compensation, regardless of whether or not the restatement resulted from theParticipant’smisconduct. In each such instance, theCorporationwill, to the extent practicable, seek to recover the amount by which theParticipant’scash or equity based incentive compensation for the relevant period exceeded the lower payment that would have been made based on the restated financial results. TheCorporationwill, to the extent permitted by governing law, require reimbursement of any cash or equity based incentive compensation paid to any named executive officer (for purposes of this policy “named executive officers” has the meaning given that term in Item 402(a)(3) of Regulation S-K under the Securities Exchange Act of 1934) where: (i) the payment was predicated upon the achievement of certain financial results that were subsequently the subject of a substantial restatement, and (ii) in theCommittee’sview the officer engaged in fraud or misconduct that caused or partially caused the need for the substantial restatement. In each instance described above, theCorporationwill, to the extent practicable, seek to recover the
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described cash or equity based incentive compensation for the relevant period, plus a reasonable rate of interest.
Measurement of the attainment ofPerformance Criteriamay exclude, if theCommitteeprovides in anAwardagreement, impact of charges for restructurings, discontinued operations, extraordinary items and other unusual or non-recurring items, and the cumulative effects of tax or accounting changes, each as defined by Generally Accepted Accounting Principles and as identified in the financial statements, in the notes to the financial statements, in the Management’s Discussion and Analysis section of the financial statements, or in other Securities and Exchange Commission filings.
TheCommittee, in its sole discretion, may require aParticipantto have amounts orStockthat otherwise would be paid or delivered to theParticipantas a result of the exercise or settlement of anAwardunder thePlancredited to a deferred compensation or stock unit account established for theParticipantby theCommitteeon theCorporation’s books of account. In addition, theCommitteemay permitParticipantsto defer the receipt of payments ofAwardspursuant to such rules, procedures or programs as may be established for purposes of thisPlan.
TheCommitteeneed not require the execution of any such agreement by aParticipant. Acceptance of theAwardby the respectiveParticipantshall constitute agreement by theParticipant to the terms of theAward.
7. Stock Options.Stock Optionsmay be granted toParticipants, at any time as determined by theCommittee. TheCommitteeshall determine the number of shares subject to eachStock Optionand whether theStock Optionis anIncentive Stock Option. The exercise price for eachStock Option shall be determined by theCommitteebut shall not be less than 100% of theFair Market Valueof theStockon the date theStock Optionis granted unless theStock Optionis a substitute or assumedStock Optiongranted pursuant to Section 16 hereto. EachStock Optionshall expire at such time as theCommitteeshall determine at the time of grant.Stock Optionsshall be exercisable at such time and subject to such terms and conditions as theCommitteeshall determine; provided, however, that noStock Optionshall be exercisable later than the tenth anniversary of its grant. The exercise price, upon exercise of anyStock Option, shall be payable to theCorporationin full by: (a) cash payment or its equivalent; (b) tendering
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previously acquiredStockpurchased on the open market having aFair Market Valueat the time of exercise equal to the exercise price or certification of ownership of such previously-acquiredStock; (c) to the extent permitted by applicable law, delivery of a properly executed exercise notice, together with irrevocable instructions to a broker to promptly deliver to theCorporation the amount of sale proceeds from theStock Optionshares or loan proceeds to pay the exercise price and any withholding taxes due to theCorporation; and (d) such other methods of payment as theCommittee, in its discretion, deems appropriate. In no event shall theCommitteecancel any outstandingStock Optionwith an exercise price greater than the then currentFair Market Valueof theStockfor the purpose of reissuing any otherAwardto theParticipantat a lower exercise price nor reduce the exercise price of an outstandingStock Optionwithout stockholder approval. Reload options are not permitted.
8. Stock Appreciation Rights.SARsmay be granted toParticipantsat any time as determined by theCommittee. Notwithstanding any other provision of thePlan, theCommitteemay, in its discretion, substituteSARs which can be settled only inStockfor outstandingStock Options. The grant price of a substituteSARshall be equal to the exercise price of the relatedStock Option and the substituteSARshall have substantive terms (e.g., duration) that are equivalent to the relatedStock Option. The grant price of any otherSARshall be equal to theFair Market Valueof theStockon the date of its grant unless theSARsare substitute or assumedSARsgranted pursuant to Section 16 hereto. AnSARmay be exercised upon such terms and conditions and for the term theCommitteein its sole discretion determines; provided, however, that the term shall not exceed theStock Optionterm in the case of a substituteSARor ten years in the case of any otherSAR, and the terms and conditions applicable to a substituteSARshall be substantially the same as those applicable to theStock Optionwhich it replaces. Upon exercise of anSAR, theParticipantshall be entitled to receive payment from theCorporationin an amount determined by multiplying (a) the difference between theFair Market Valueof a share ofStockon the date of exercise and the grant price of theSARby (b) the number of shares with respect to which theSARis exercised. The payment may be made in cash orStock, at the discretion of theCommittee, except in the case of a substituteSARpayment which may be made only inStock. In no event shall theCommitteecancel any outstandingSARwith an exercise price greater than the then currentFair Market Valueof theStock for the purpose of reissuing
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any otherAwardto theParticipantat a lower grant price nor reduce the grant price of an outstandingSARwithout stockholder approval.
9. Restricted Stock and RSUs.Restricted StockandRSUsmay be awarded or sold toParticipantsunder such terms and conditions as shall be established by theCommittee.Restricted StockandRSUsshall be subject to such restrictions as theCommitteedetermines, including, without limitation, any of the following:
(a) | a prohibition against sale, assignment, transfer, pledge, hypothecation or other encumbrance for a specified period; | ||
(b) | a requirement that the holder forfeit (or in the case ofStockorRSUs sold to theParticipant, resell to theCorporationat cost) suchStockorRSUs in the event of termination of employment during the period of restriction; and | ||
(c) | the attainment ofPerformance Criteria. |
All restrictions shall expire at such times as theCommitteeshall specify, but generally shall require theParticipantto complete three years of service to fully vest in theAward.
10. DSUs.DSUsprovide aParticipanta vested right to receiveStockin lieu of other compensation at termination of employment or service or at a specific future designated date.
11. Performance Shares. TheCommitteeshall designate theParticipantsto whomPerformance Sharesare to be awarded and determine the number of shares, the length of thePerformance Period and the other terms and conditions of each suchAward; provided the statedPerformance Periodwill not be less than 12 months and to the extent theAwardis designed to constitute performance-based compensation underCodeSection 162(m),Performance Criteriashall be established within 90 days of the period of service to which thePerformance Criteriarelate has elapsed. EachAwardofPerformance Sharesshall entitle theParticipantto a payment in the form ofStockupon the attainment ofPerformance Criteriaand other terms and conditions specified by theCommittee.
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Notwithstanding satisfaction of anyPerformance Criteria, the number of shares issued under aPerformance Shares Awardmay be adjusted by theCommitteeon the basis of such further consideration as theCommitteein its sole discretion shall determine. However, theCommitteemay not, in any event, increase the number of shares earned upon satisfaction of anyPerformance Criteriaby anyParticipantwho is aCovered Employee. TheCommitteemay, in its discretion, make a cash payment equal to theFair Market ValueofStockotherwise required to be issued to aParticipantpursuant to aPerformance Share Award.
12. Performance Cash Awards. TheCommitteeshall designate theParticipantsto whomPerformance Cash Awardsare to be awarded and determine the amount of theAwardand the terms and conditions of each suchAward; provided thePerformance Periodwill not be less than 12 months and to the extent theAwardis designed to constitute performance-based compensation underCodeSection 162(m),Performance Criteriashall be established within 90 days of the period of service to which thePerformance Criteriarelate has elapsed. EachPerformance Cash Awardshall entitle theParticipantto a payment in cash upon the attainment ofPerformance Criteriaand other terms and conditions specified by theCommittee. NoAwardmay be paid to aParticipantin excess of [ ] for any single year. If anAwardis earned in excess of [ ], the amount of theAwardin excess of this amount shall be deferred in accordance with the date the Participant ceases to be covered byCodeSection 162(m) (or six months after that date if theParticipantceases to be covered byCodeSection 162(m) because ofParticipant’sseparation from service (as defined inCode Section 409A).
Notwithstanding the satisfaction of anyPerformance Criteria, the amount to be paid under aPerformance Cash Awardmay be adjusted by theCommitteeon the basis of such further consideration as theCommitteein its sole discretion shall determine. However, theCommitteemay not, in any event, increase the amount earned underPerformance Cash Awardsupon satisfaction of anyPerformance Criteriaby anyParticipantwho is aCovered Employee. TheCommitteemay, in its discretion, substitute actualStockfor the cash payment otherwise required to be made to aParticipantpursuant to aPerformance Cash Award.
13. Other Stock or Cash Awards. In addition to the incentives described in Sections 6 through 12 above, theCommitteemay grant other incentives payable in cash or in
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Stockunder thePlanas it determines to be in the best interests of theCorporationand subject to such other terms and conditions as it deems appropriate; provided an outright grant ofStockwill not be made unless it is offered in exchange for cash compensation that has otherwise already been earned by the recipient including without limitation awards earned under the First Mercury Financial Corporation Performance-Based Annual Incentive Plan (or any successor annual incentive plan of theCorporation) or the First Mercury Financial Corporation Non-qualified Deferred Compensation Plan.
14. Change of Control. Except as otherwise determined by theCommitteeat the time of grant of anAward, upon aChange of Control, all outstandingStock OptionsandSARsshall become vested and exercisable; all restrictions onRestricted StockandRSUsshall lapse; allPerformance Criteriashall be deemed achieved at target levels and all other terms and conditions met; allPerformance Sharesshall be delivered; allPerformance Cash Awards,DSUsandRSUsshall be paid out as promptly as practicable; and all otherStockor cashAwardsshall be delivered or paid.
In the event that a payment or delivery of anAwardfollowing aChange of Controlwould not be a permissible distribution event, as defined inCodeSection 409A(a)(2) or any regulations or other guidance issued thereunder, then the payment or delivery shall be made on the earlier of: (a) the date of payment or delivery originally provided for suchAward; or (b) the date of termination of theParticipant’semployment or service with theCorporationor six months after such termination in the case of a “specified employee” (as defined inCodeSection 409A(a)(2)(B)(i)).
15. Adjustment Provisions.
(a) | In the event of any change affecting the number, class, market price or terms of theStockby reason of share dividend, share split, recapitalization, reorganization, merger, consolidation, spin-off, disaffiliation of a subsidiary, combination ofStock, exchange ofStock,Stockrights offering, or other similar event, or any distribution to the holders ofStockother than a regular cash dividend, theCommitteeshall equitably substitute or adjust the number or class ofStockwhich may be issued under thePlanin the |
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aggregate or to any oneParticipantin any calendar year and the number, class, price or terms of shares ofStocksubject to outstandingAwards granted under thePlan. | |||
(b) | In the event of any merger, consolidation or reorganization of theCorporationwith or into another corporation which results in the outstandingStockof theCorporationbeing converted into or exchanged for different securities, cash or other property, or any combination thereof, there shall be substituted, on an equitable basis, for each share ofStockthen subject to anAwardgranted under thePlan, the number and kind of shares of stock, other securities, cash or other property to which holders ofStockwill be entitled pursuant to the transaction. |
16. Substitution and Assumption of Awards. TheBoardor theCommitteemay authorize the issuance ofAwardsunder thisPlanin connection with the assumption of, or substitution for, outstandingAwardspreviously granted to individuals who become employees of theCorporationor any subsidiary as a result of any merger, consolidation, acquisition of property or stock, or reorganization, upon such terms and conditions as theCommitteemay deem appropriate. Any substituteAwardsgranted under thePlanshall not count against theStocklimitations set forth in Section 5 hereto, to the extent permitted by Section 303A.08 of the Corporate Governance Standards of the New York Stock Exchange.
17. Nontransferability. EachAwardgranted under thePlanshall not be transferable other than by will or the laws of descent and distribution, and eachStock OptionandSARshall be exercisable during theParticipant’slifetime only by theParticipantor, in the event of disability, by theParticipant’spersonal representative. In the event of the death of aParticipant, exercise of anyAwardor payment with respect to anyAwardshall be made only by or to the beneficiary, executor or administrator of the estate of the deceasedParticipantor the person or persons to whom the deceasedParticipant’srights under theAwardshall pass by will or the laws of descent and distribution. Subject to the approval of theCommitteein its sole discretion,Stock Optionsmay be transferable to charity or to members of the immediate family of theParticipantand to one or more trusts for the benefit of such family members, partnerships in which such
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family members are the only partners, or corporations in which such family members are the only stockholders. Members of the immediate family means theParticipant’sspouse, children, stepchildren, grandchildren, parents, grandparents, siblings (including half brothers and sisters), and individuals who are family members by adoption.
18. Taxes. TheCorporationshall be entitled to withhold the amount of any tax attributable to any amounts payable orStockdeliverable under thePlan, after giving notice to the person entitled to receive such payment or delivery, and theCorporationmay defer making payment or delivery as to anyAward, if any such tax is payable, until indemnified to its satisfaction. AParticipantmay pay all or a portion of any withholding limited to the minimum statutory amount arising in connection with the exercise of aStock OptionorSARor the receipt or vesting ofStock hereunder by electing to have theCorporationwithholdStockhaving aFair Market Valueequal to the amount required to be withheld.
19. Duration of the Plan. NoAwardshall be made under thePlanmore than ten years after the date of its adoption by theBoard; provided, however, that the terms and conditions applicable to anyStock Optiongranted on or before such date may thereafter be amended or modified by mutual agreement between theCorporationand theParticipant, or such other person as may then have an interest therein.
20. Amendment and Termination. TheBoardor theCommitteemay amend thePlanfrom time to time or terminate thePlanat any time. However, unless expressly provided in anAwardor thePlan, no such action shall reduce the amount of any existingAwardor change the terms and conditions thereof without theParticipant’sconsent; provided, however, that theCommitteemay, in its discretion, substituteSARswhich can be settled only inStockfor outstandingStock Options, and may require anAwardbe deferred pursuant to Section 6 hereto, without aParticipant’sconsent; and further provided that theCommitteemay amend or terminate anAwardto comply with changes in law without aParticipant’sconsent. Notwithstanding any provision of thePlanto the contrary, the final sentence in each of Section 7 and Section 8 of thePlan(regarding the reissuing at a relatively reduced price,Stock OptionsandSARsrespectively) shall not be amended without stockholder approval. Notwithstanding any provision of thePlanto the contrary, to the extent thatAwardsunder thePlanare subject to
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the provisions ofCodeSection 409A, then thePlanas applied to those amounts shall be interpreted and administered so that it is consistent with suchCodesection.
TheCorporationshall obtain stockholder approval of anyPlanamendment to the extent necessary to comply with applicable laws, regulations, or stock exchange rules.
21. Other Provisions.
(a) | In the event anyAwardunder thisPlanis granted to an employee who is employed or providing services outside the United States and who is not compensated from a payroll maintained in the United States, theCommitteemay, in its sole discretion: (i) modify the provisions of thePlanas they pertain to such individuals to comply with applicable law, regulation or accounting rules consistent with the purposes of thePlan; and (ii) cause theCorporation to enter into an agreement with any local subsidiary pursuant to which such subsidiary will reimburse theCorporationfor the cost of such equity incentives. | ||
(b) | Neither thePlannor anyAwardshall confer upon aParticipantany right with respect to continuing theParticipant’semployment with theCorporation; nor interfere in any way with theParticipant’sright or theCorporation’s right to terminate such relationship at any time, with or without cause, to the extent permitted by applicable laws and any enforceable agreement between the employee and theCorporation. | ||
(c) | No fractional shares ofStockshall be issued or delivered pursuant to thePlanor anyAward, and theCommittee, in its discretion, shall determine whether cash, other securities, or other property shall be paid or transferred in lieu of any fractional shares ofStock, or whether such fractional shares or any rights thereto shall be canceled, terminated, or otherwise eliminated. |
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(d) | In the event any provision of thePlanshall be held to be illegal or invalid for any reason, such illegality or invalidity shall not affect the remaining parts of thePlan, and thePlanshall be construed and enforced as if such illegal or invalid provisions had never been contained in thePlan. | ||
(e) | Payments and other benefits received by aParticipantunder anAward made pursuant to thePlangenerally shall not be deemed a part of aParticipant’scompensation for purposes of determining theParticipant’s benefits under any other employee benefit plans or arrangements provided by theCorporationor a subsidiary, unless theCommitteeexpressly provides otherwise in writing or unless expressly provided under such plan. TheCommitteeshall administer, construe, interpret, and exercise discretion under thePlanand eachAwardin a manner that is consistent and in compliance with a reasonable, good faith interpretation of all applicable laws, and that avoids (to the extent practicable) the classification of anyAwardas “deferred compensation” for purposes ofCodeSection 409A, as determined by theCommittee. |
22. Governing Law. ThePlanand any actions taken in connection herewith shall be governed by and construed in accordance with the laws of the State of Michigan without regard to any state’s conflict of laws principles. Any legal action related to thisPlanshall be brought only in a federal or state court located in Michigan.
23. Stockholder Approval. ThisPlanshall be effective as of October 4, 2006, subject to stockholder approval.
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