Exhibit 10(A)
ARVIN INDUSTRIES, INC.
1998 STOCK BENEFIT PLAN
1. PURPOSE OF THE PLAN
This Plan is intended to benefit the Corporation and its subsidiaries by
providing compensation arrangements that may be used to attract, retain and
reward Officers and Nonemployee Directors of training, experience and
ability, to attract new Officers and Nonemployee Directors whose services are
considered valuable, and to provide such persons with a proprietary interest
in and a greater concern for the welfare of the Corporation and its
subsidiaries.
2. DEFINITIONS
Whenever used herein, the following words and phrases shall (for
purposes of this Plan and this Plan only) have the meanings stated unless a
different meaning is plainly required by the context:
(a) "Award" means a grant, pursuant to the Plan, of Options, SARs,
Performance Shares, Performance Units, Restricted Shares, or any
combination thereof.
(b) "Board" means the board of directors of the Corporation.
(c) "Cause" means (A) the willful and continued failure by a Participant
to substantially perform his duties with the Corporation or its
subsidiaries (other than any such failure resulting from his
Disability) after a written demand for substantial performance is
delivered to him by the Corporation that specifically identifies the
manner in which the Participant has not substantially performed his
duties, or (B) the willful engaging by the Participant in gross
misconduct materially and demonstrably injurious to the Corporation
or its subsidiaries. No act, or failure to act, on the Participant's
part shall be considered "willful" unless done, or omitted to be
done, by him not in good faith and without reasonable belief that
his action or omission was in the best interest of the Corporation
and its subsidiaries.
(d) "Change of Control," for purposes of the Plan, means:
(i) the acquisition by any individual, entity or group
(within the meaning of Section 13(d)(3) or 14(d)(2) of the
Securities Exchange Act of 1934, as amended (the "Exchange
Act")) (a "Person") of beneficial ownership (within the
meaning of Rule 13d-3 promulgated under the Exchange Act) of
20% or more of either (A) the then outstanding Common Shares
of the Corporation (the "Outstanding Corporation Common
Shares") or (B) the combined voting power of the then
outstanding voting securities of the Corporation entitled to
vote
48
generally in the election of directors (the "Outstanding
Corporation Voting Securities"); provided, however, that for
purposes of this subsection (i), the following acquisitions
shall not constitute a Change of Control: (w) any acquisition
directly from the Corporation, (x) any acquisition by the
Corporation, (y) any acquisition by any employee benefit plan
(or related trust) sponsored or maintained by the Corporation
or any corporation controlled by the Corporation or (z) any
acquisition by any corporation pursuant to a transaction which
complies with clauses (A), (B) and (C) of subsection (iii) of
this definition of Change of Control; or
(ii) individuals who, as of the date hereof, constitute the Board
(the "Incumbent Board") cease for any reason to constitute at
least a majority of the Board; provided, however, that any
individual becoming a director subsequent to the date hereof
whose election, or nomination for election by the
Corporation's shareholders, was approved by a vote of at least
a majority of the directors comprising the Incumbent Board as
of the date hereof shall be considered as though such
individual were a member of the Incumbent Board, but
excluding, for this purpose, any such individual whose initial
assumption of office occurs as a result of an actual or
threatened election contest with respect to the election or
removal of directors or other actual or threatened
solicitation of proxies or consents by or on behalf of a
Person other than the Board; or
(iii) consummation of a reorganization, merger or consolidation or
sale or other disposition of all or substantially all of the
assets of the Corporation (a "Business Combination"), in each
case, unless, following such Business Combination, (A) all or
substantially all of the individuals and entities who were the
beneficial owners, respectively, of the Outstanding
Corporation Common Shares and Outstanding Corporation Voting
Securities immediately prior to such Business Combination
beneficially own, directly or indirectly, more than 50% of,
respectively, the then outstanding Common Shares and the
combined voting power of the then outstanding voting
securities entitled to vote generally in the election of
directors, as the case may be, of the corporation resulting
from such Business Combination (including, without limitation,
a corporation which as a result of such transaction owns the
Corporation or all or substantially all of the Corporation's
assets either directly or through one or more subsidiaries) in
substantially the same proportions as their ownership,
immediately prior to such Business Combination of the
Outstanding Corporation Common Shares and Outstanding
Corporation
49
Voting Securities, as the case may be, (B) no person
(excluding any corporation resulting from such Business
Combination or any employee benefit plan (or related trust) of
the Corporation or such corporation resulting from such
Business Combination) beneficially owns, directly or
indirectly, 20% or more of, respectively, the then outstanding
Common Shares of the corporation resulting from such Business
Combination or the combined voting power of the then
outstanding voting securities of such corporation except to
the extent that such ownership existed prior to the Business
Combination and (C) at least a majority of the members of the
board of directors of the corporation resulting from such
Business Combination were members of the Incumbent Board at
the time of the execution of the initial agreement, or of the
action of the Board, providing for such Business Combination;
or
(iv) approval by the shareholders of the Corporation of a complete
liquidation or dissolution of the Corporation.
(e) "Code" means the Internal Revenue Code of 1986, as amended
from time to time.
(f) "Committee" means the Human Resources Committee of the Board or any
other committee designated by the Board.
(g) "Common Shares" means the Corporation's common shares, par value
$2.50 per share, together with one Right for each Common Share to
purchase one one-hundredth of a share of the Corporation's Series C
Junior Participating Preferred Shares, without par value, issuable
prior to the Distribution Date pursuant to the Rights Agreement.
(h) "Corporation" means Arvin Industries, Inc., an Indiana corporation.
(i) "Disability" means a physical or mental condition that renders a
Participant unable to perform his usual duties or any comparable
duties for the Corporation or its subsidiaries if, in the opinion of
a physician selected by the Corporation, such condition will
continue indefinitely or for a substantial period of time.
(j) "Distribution Date," for purposes of the Plan, shall have the
meaning given in the Rights Agreement.
(k) "Fair Market Value" means (i) if the Common Shares are listed on the
New York Stock Exchange, the closing price of the Common Shares on
the consolidated tape of the New York Stock Exchange on the relevant
date or the most recent date on which Common Shares traded on such
Exchange; and (ii) if the Common Shares are not listed on such
Exchange, such value as the Committee, in good faith, shall
determine. Notwithstanding any provision of the Plan to the
contrary,
50
no determination made with respect to the Fair Market Value of
Common Shares subject to an ISO shall be inconsistent with Section
422A of the Code or regulations thereunder.
(l) "ISO" means an incentive stock option, within the meaning of Section
422A of the Code, granted under the Plan pursuant to Sections 5 and
6.
(m) "Limited Right" means a limited stock appreciation right
granted under the Plan pursuant to Section 7.
(n) "Nonemployee Directors" means any member of the Board who is not
employed by the Corporation or any one of its subsidiaries.
(o) "Non-tandem SAR" means an SAR not granted in connection with an
Option.
(p) "Officer" means any officer of the Corporation elected by the Board
who is employed on a full-time salaried basis.
(q) "Option" means an option, including an ISO, granted under the Plan
pursuant to Section 5.
(r) "Option Agreement" means a written agreement specifying the type of
Option granted, the price at which the Option shall be exercisable,
the duration of the Option, the number of Common Shares to which
the Option pertains and such other provisions as the Committee
shall determine.
(s) "Participant" means any Officer who has been selected by the
Committee to receive an Award.
(t) "Performance Share" means a performance share granted under the
Plan pursuant to Section 9.
(u) "Performance Unit" means a performance unit granted under the Plan
pursuant to Section 9.
(v) "Plan" means the Arvin Industries, Inc. 1998 Stock Benefit
Plan.
(w) "Restricted Share" means a restricted share granted under the Plan
pursuant to Section 8.
(x) "Restricted Share Agreement" means a written agreement governing
the issuance of a Restricted Share or Shares.
(y) "Retirement Age" means the age at which employment is terminated or
benefits are paid as a result of the attainment of the normal or
early retirement age as defined in the retirement plan sponsored by
the Corporation or one of its subsidiaries in which the Participant
is actively participating.
51
(z) "Rights Agreement" means the Rights Agreement dated as of May 29,
1986, between the Corporation and Harris Trust and Savings Bank, as
amended by Amendments No. 1, 2 and 3 thereto, dated February 23,
1989, November 10, 1994 and May 10, 1996, respectively, as such
agreement may be further amended from time to time.
(aa) "SAR" means a stock appreciation right granted under the Plan
pursuant to Section 7.
(bb) "SAR Agreement" means a written agreement evidencing the terms and
conditions applicable to an SAR.
(cc) "Tandem SAR" means an SAR granted in connection with an
Option.
3. ADMINISTRATION OF THE PLAN
The Plan shall be administered by the Committee, which shall consist of
two or more directors who shall be appointed by the Board, all of whom shall
not be (or formerly have been) employees of the Corporation. The Committee
shall, within the limits and pursuant to the terms of the Plan, determine the
individuals to whom Awards are to be granted under the Plan, the number of
shares to be subject to each Award, the exercise price with respect to each
Option, the base price with respect to each SAR, the restrictions to be
imposed on Restricted Shares, the performance goals which must be met in
order to earn each Performance Share and each Performance Unit, and all other
terms and conditions of such Awards and the shares to be issued pursuant to
the Plan. The Committee is also authorized to interpret any provision of the
Plan, to adopt, amend and rescind rules, regulations, terms and agreements
relating to the Plan, Awards granted thereunder and the shares to be issued
pursuant thereto, and to make all other determinations and take all other
action that it deems necessary to advisable for the administration of the
Plan. The Committee is also authorized to provide and accept any notices
provided for hereunder. Action with respect to the Plan may be taken by a
majority of the members of the Committee then in office either at a meeting
called by any member of the Committee or by unanimous written consent.
4. SHARES SUBJECT TO THE PLAN
(a) COMMON SHARES AVAILABLE FOR DELIVERY. Subject to the Section 11 and
the following provisions of this Section 4, the maximum number of Common
Shares that may be subject to Awards (excluding Awards which are Tandem SARs)
shall be equal to the sum of (i) 1,200,000 Common Shares; (ii) any Common
Shares available for future awards under the 1988 Stock Benefit Plan (the
"1988 Plan") as of the Effective Date (as determined pursuant to Section 19);
and (iii) any Common Shares that are represented by awards granted under the
1998 Plan which are forfeited, expire or are cancelled without delivery of
Common Shares or which result in the forfeiture of Common Shares back to the
Corporation.
52
In the event that, prior to the expiration date of the Plan, any Option
granted under the Plan expires unexercised or is terminated, surrendered or
cancelled (other than in connection with the exercise of an SAR) without
being exercised, in whole or in part, for any reason, any Non-tandem SAR
granted under the Plan expires unexercised or is terminated, surrendered or
cancelled without being exercised, in whole or in part, for any reason, any
Restricted Shares granted under the Plan are forfeited or reacquired by the
Corporation in connection with the restrictions imposed upon such Common
Shares pursuant to the Plan, or any Performance Share or Performance Unit
distributable as Common Shares is unearned, terminated, surrendered,
cancelled or forfeited, then the number of Common Shares theretofore subject
to such Option, SAR, Performance Share, or Performance Unit or constituting
such Restricted Shares, or the unexercised, terminated, surrendered,
forfeited, cancelled or reacquired portion thereof, shall be added to the
remaining number of Common Shares that may be made subject to Awards under
the Plan. If either the purchase price of Common Shares upon exercise of any
Option or the tax withholding requirement is satisfied by tendering or
withholding Common Shares or by tendering exercisable Options, only the
number of Common Shares issued net of the Common Shares tendered or withheld
shall be deemed delivered for purposes of determining the number of Common
Shares available for Awards under the Plan.
(b) OTHER PLAN LIMITS. Subject to Section 11, the following
additional maximums are imposed under the Plan:
(i) The maximum number of Common Shares that may be issued as ISOs
shall be 1,200,000 Common Shares.
(ii) The maximum number of Common Shares that may be covered
by Awards granted to any one Participant pursuant to
Section 5 (Options) shall be 200,000 Common Shares
during any calendar year.
(iii) The maximum number of Common Shares that may be covered
by Awards granted to any one Participant pursuant to
Section 8 (Restricted Share Awards) and Section 9
(Performance Shares and Performance Units) shall be
25,000 Common Shares during any calendar year.
5. OPTIONS
(a) Options may be granted to Participants at any time and from
time to time as shall be determined by the Committee. The
Committee shall have complete discretion in determining the
number of Common Shares subject to Options granted to each
Participant. The Committee may grant any type of Option to
purchase Common Shares that is permitted by law at the time
of the grant, including ISOs. Unless otherwise expressly
provided at the time of grant, Options granted under the
Plan will be nonqualified stock options.
53
(b) Each Nonemployee Director shall be granted automatically an Option
(that is not an ISO) to purchase 1,000 Common Shares, on the day
following each annual meeting of the Board held on or after each
Annual Meeting of Shareholders. The per share exercise price of
each option to be paid by each Nonemployee Director shall be 100%
of the Fair Market Value of the Common Shares on the date an Option
is granted.
(c) Each Option shall be evidenced by an Option Agreement.
(d) Except as provided in Sections 6 and 11 below, the number of Common
Shares subject to Options to be granted to each Participant and the
price per share to be paid by each Participant upon exercise shall
be determined by the Committee at the time the Options are granted,
provided that such exercise price shall not be less than 100% of
the Fair Market Value of the Common Shares on the date an Option is
granted or the par value of the Common Shares, whichever is
greater.
(e) Except as provided in Section 6 and subject to earlier
termination as provided in subsections (f) and (g) hereof,
an Option granted under the Plan shall expire on the date
determined by the Committee at the time the Option is
granted, provided that such date shall not be more than ten
years from the date the Option is granted. The Committee
shall specify in the Option Agreement, at the time each
Option is granted, the time or times at which, and in what
proportions, the Option may be exercised prior to its
expiration or earlier termination. The Committee, in its
discretion, shall have the power to accelerate the
exercisability of any or all Options, or any part thereof,
granted under the Plan.
(f) Except as otherwise provided in this subsection (f), no
Option may be exercised by a Participant at any time unless
the Participant is then a salaried full-time employee of the
Corporation or one of its subsidiaries. The Options of any
Participant whose full-time salaried employment with the
Corporation and its subsidiaries is terminated by the
Corporation without Cause (except in connection with a
Disability) shall expire on the earlier of (i) three months
after such termination, or (ii) the date that such Options
expire in accordance with their terms. During such period,
the Options may be exercised by such Participant with
respect to the same number of shares and in the same manner
and to the same extent as if the Participant had continued
as a full-time salaried employee of the Corporation or one
of its subsidiaries during such period. In the event that a
Participant voluntarily terminates employment with the
Corporation and its subsidiaries (except in connection with
a Disability or after attainment of Retirement Age) or is
discharged by the Corporation or one of its subsidiaries for
Cause, any Option or Options held by the Participant under
the Plan and not previously exercised shall expire
54
immediately upon such termination or discharge and may not be
exercised thereafter. The Options of any Participant whose
full-time salaried employment with the Corporation and its
subsidiaries is terminated in connection with attainment of
Retirement Age shall expire upon the earlier of five years after
such termination or the date such Options expire in accordance with
their terms. During such period, the Options may be exercised by
the Participant with respect to the same number of shares and in
the same manner and to the same extent as if the Participant had
continued as a full-time salaried employee of the Corporation or
one of its subsidiaries during such period. The Options of any
Participant whose full-time salaried employment with the
Corporation and its subsidiaries is terminated by Disability or
death shall expire upon the earlier of one year after such
Disability or death, or the date such Options expire in accordance
with their terms. During such period the Options may be exercised
by the Participant, or in the event of his death by a legatee or
legatees of the Options under the Participant's will or by his
executors, personal representatives or distributees, with respect
to the number of shares that the Participant could have purchased
on the date of his Disability or death, as the case may be.
(g) Except as otherwise provided in this subsection (g), no
Option may be exercised by a Nonemployee Director at any
time unless the Nonemployee Director is then a member of the
Board. The Options held by any Nonemployee Director under
the Plan and not previously exercised whose membership on
the Board is terminated for any reason other than death
shall expire immediately upon such termination and may not
be exercised thereafter. The Options of any Nonemployee
Director whose membership on the Board is terminated by
death shall expire upon the earlier of one year after such
death or the date such Options expire in accordance with
their terms. In the event of death, the Options may be
exercised by a legatee or legatees of the Options under the
Nonemployee Director's will or by his executors, personal
representatives or distributees.
(h) Options granted under the Plan shall be exercisable at such
times and be subject to such restrictions and conditions as
the Committee shall in each instance approve at the time the
Options are granted, which restrictions and conditions need
not be the same for all Participants; provided, however,
that ISOs shall comply with the applicable provisions of the
Code pertaining thereto. The Committee may specify a
minimum number of full shares that must be purchased by a
Participant or Nonemployee Director upon any exercise of an
Option granted to him under the Plan. Notwithstanding any
other restriction on exercisability approved by the
Committee, an Option granted under the Plan shall be fully
exercisable upon a Change of Control of the Corporation or
as of the Distribution Date.
55
(i) The purchase price of Common Shares upon exercise of any
Option shall be paid in full either (i) in cash or (ii) in
Common Shares valued at their Fair Market Value on the day
before the date of exercise, (iii) by delivery of a
promissory note of the Participant, (iv) in cash by a
broker-dealer to whom the holder of the Option has submitted
an exercise notice consisting of a fully endorsed Option,
(v) by agreeing to surrender Options then exercisable by him
valued at the excess of the aggregate Fair Market Value of
the Common Shares subject to such Options on the date of
exercise over the aggregate option price of such Common
Shares, (vi) by directing the Corporation to withhold such
number of Common Shares otherwise issuable upon exercise of
such Option having an aggregate Fair Market Value on the
date of exercise equal to the exercise price of the Option,
or (vii) by any combination of (i), (ii), (iii), (iv), (v)
and (vi), if approved by the Committee in its discretion or
in the manner provided in the Option Agreement. Subject to
Section 15, the Corporation shall issue, in the name of the
Participant, certificates representing the total number of
Common Shares purchased pursuant to the exercise of any
Option in a timely manner after such exercise.
(j) At the time of grant of an Option, the Committee may impose
such restrictions on disposition of Common Shares acquired
upon the exercise of such Option as it deems appropriate,
which restrictions may, without limitation, include a right
in the Corporation to repurchase upon the occurrence of a
specified event or events, all or any of such shares at the
price not less than the exercise price paid by the
Participant or Nonemployee Director for those shares.
(k) Any Option granted under the Plan may be exercised by the
Participant or Nonemployee Director, by a legatee or
legatees of such Option under the Participant's or Nonemployee
Director's will, or by his executors, personal representatives or
distributees, by delivering to the Corporation at its principal
executive office (attention of its Secretary) written notice of the
number of Common Shares with respect to which the Option is being
exercised accompanied either by payment or instructions regarding
payment in accordance with subsection (i) above. The date of
exercise shall be the date the notice is received by the
Corporation, unless a later date is specified in such notice.
Notwithstanding the foregoing, if an exercise notice is received by
the Corporation within ten days following the Distribution Date,
such exercise shall be effective as of the day immediately
preceding the Distribution Date unless a later date is specified in
the notice.
(l) As of the effective date of a merger, consolidation or share
exchange involving the Corporation as a result of which Common
Shares are converted into the right to receive another security
and/or any other consideration, each Option
56
shall automatically become an option to acquire the securities
and/or other consideration that a holder of the number of Common
Shares then subject to the Option would have become entitled to
receive as a result of such merger, consolidation or share
exchange. Such converted option shall be governed by the terms and
conditions applicable to the Option.
(m) The Committee may prescribe such other terms and conditions of the
Options granted under the Plan that are neither inconsistent with
nor prohibited by the Plan.
6. SPECIAL RULES RELATING TO ISOS
Notwithstanding anything in Section 5 to the contrary, ISOs shall be in
such form and upon such terms and conditions as the Committee shall from time
to time determine, subject to the following to the extent necessary to comply
with Section 422A of the Code:
(a) An ISO must be granted within ten years from the date the Plan is
adopted or the date the Plan is approved by the shareholders of the
Corporation, whichever is earlier;
(b) The aggregate Fair Market Value (determined at the time the ISOs
are granted) of the Common Shares with respect to which ISOs are
exercisable for the first time by a Participant during any calendar
year (under all plans of the Corporation and its subsidiaries)
shall not exceed $100,000; and
(c) Notwithstanding any other provision herein contained, no
Participant may receive an ISO under the Plan if such
Participant, at the time the ISO is granted, owns shares
possessing more than ten percent of the total combined
voting power of all classes of shares of the Corporation or
of its parent or subsidiary corporation (within the
contemplation of Section 425(d) of the Code); provided,
however, that such Participant shall be eligible to receive
a grant of an ISO if, at the time such ISO is granted, the
exercise price is at least 110% of the Fair Market Value of
Common Shares, and such ISO is not exercisable after the
expiration of five years from the date such ISO is granted.
7. SHARE APPRECIATION RIGHTS
(a) SARs may be granted to Participants at any time and from
time to time as shall be determined by the Committee. The
Committee may specify that an SAR granted under the Plan
shall be a Tandem SAR or a Non-tandem SAR. An SAR granted
to a Participant at the same time and covering the same
number of Common Shares as an Option shall be a Tandem SAR
unless the Committee specifies to the contrary. At the time
of grant of a Non-tandem SAR, the Committee shall specify
the base price of Common Shares to be used in connection
with the calculation described in subsection (c) below and
the number of Common Shares subject to the SAR. The base
57
price of a Non-tandem SAR shall not be less than 100% of the Fair
Market Value of one Common Share on the date of grant. No Tandem
SAR may be granted to a Participant in connection with an ISO in a
manner that will disqualify the ISO under Section 422A of the Code
unless the Participant consents thereto.
(b) Each SAR shall be evidenced by an SAR Agreement.
(c) An SAR shall entitle the Participant to receive from the
Corporation the number of Common Shares having an aggregate Fair
Market Value equal to:
(i) In the case of a Tandem SAR, all, or if specified by
the Committee at the time of grant, some portion, of
the excess of the Fair Market Value of one Common Share
as of the date on which the SAR is exercised over the
Option price per share specified in such Option,
multiplied by the number of shares then subject to the
Option, or the portion thereof as to which the SAR is
being exercised; or
(ii) In the case of a Non-tandem SAR, all, or if specified by the
Committee at the time of grant, some portion or multiple, of
the excess of the Fair Market Value of one Common Share as of
the date on which the SAR is exercised over the base price
specified in such SAR, multiplied by the number of Common
Shares then subject to the SAR, or the portion thereof as to
which it is being exercised.
Cash shall be delivered in lieu of any fractional shares. The
Corporation shall be entitled to elect to settle any part or all of
its obligation arising out of the exercise of an SAR by the payment
of cash in lieu of all or part of the Common Shares it would
otherwise be obligated to deliver in an amount equal to the Fair
Market Value of such shares.
(d) A Tandem SAR shall be exercisable at the time and to the
extent, but only at such time and to such extent, that the
Option to which it relates is exercisable. Upon the
exercise of a Tandem SAR, the unexercised Option or portion
thereof, to which the exercised portion of the Tandem SAR is
related shall expire. The exercise of any Option shall
cause the expiration of the Tandem SAR related to such
Options, or portion thereof, that is exercised.
(e) (i) Non-tandem SARs granted under the Plan shall be
exercisable at such times and be subject to such
restrictions and conditions as the Committee shall in
each instance approve at the time the Non-tandem SARs
are granted, which restrictions and conditions need not
be the same for all Participants. The Committee may
specify a minimum number of full shares with respect to
which any exercise of a Non-tandem SAR must be made.
58
Notwithstanding any other restriction on exercisability
approved by the Committee, a Non-tandem SAR granted under the
Plan shall be fully exercisable upon a Change of Control of
the Corporation or as of the Distribution Date.
(ii) Subject to earlier termination as provided in the last
sentence of this paragraph (ii), a Non-tandem SAR granted
under the Plan shall expire on the date determined by the
Committee, provided that such date shall not be more than ten
years from the date the SAR is granted. The Committee shall
specify at the time each Non-tandem SAR is granted, the time
or times at which, and in what proportions, the Non-tandem SAR
may be exercised prior to its expiration or earlier
termination. The Committee, in its discretion, shall have the
power to accelerate the exercisability of any or all
Non-tandem SARs, or any part thereof, granted under the Plan.
Notwithstanding the foregoing, any Non-tandem SAR granted to a
Participant under the Plan shall expire following a
termination of his full-time salaried employment with the
Corporation and its subsidiaries in the same manner as an
Option held by such Participant would expire pursuant to the
provisions of subsection 5(e).
(f) Any SAR granted under the Plan may be exercised by the
Participant, by a legatee or legatees of such SAR under the
Participant's last will, or by his executors, personal
representatives or distributees, by delivering to the
Corporation at its principal executive office (attention of
its Secretary) written notice of the number of Common Shares
with respect to which the SAR is being exercised accompanied
by any related SAR Agreement and, in the case of a Tandem
SAR, by the related Option Agreement. The date of exercise
shall be the date the notice is received by the Corporation,
unless a later date is specified in such notice.
Notwithstanding the foregoing, if an exercise notice is
received by the Corporation within ten days following the
Distribution Date, such exercise shall be effective as of
the day immediately preceding the Distribution Date unless a
later date is specified in the notice.
(g) Subject to Section 15, the Corporation shall, in a timely
manner, (i) issue, in the name of the Participant,
certificates representing the total number of Common Shares
to which the Participant is entitled pursuant to subsection
(c) hereof, and (ii) if the Corporation elects to settle all
or part of its obligations arising out of the exercise of
the SAR in cash, deliver to the Participant an amount in
cash equal to the Fair Market Value of the Common Shares it
would otherwise be obligated to deliver.
(h) On or after the effective date of a merger, consolidation or share
exchange involving the Corporation as a result of
59
which Common Shares are converted into the right to receive another
security and/or any other consideration, each SAR shall, upon
exercise in accordance with its terms, entitle the Participant to
receive from the Corporation an amount of such security and/or
other consideration (in the proportions received by the holders of
Common Shares in the merger, consolidation or share exchange)
having an aggregate Fair Market Value equal to:
(i) In the case of a Tandem SAR, all, or if specified by
the Committee at the time of grant pursuant to
paragraph (c)(i) of this Section, some portion, of the
excess of the Fair Market Value (as of the date of
exercise) of the security and/or other consideration
(on a per share basis) received by the holders of
Common Shares in the merger, consolidation or share
exchange over the option price per share specified in
the related option multiplied by the number of shares
then subject to the option, or portion thereof as to
which the SAR is being exercised; or
(ii) In the case of a Non-tandem SAR, all, or if specified by the
Committee at the time of grant pursuant to paragraph (c)(ii)
of this Section, some portion or multiple, of the excess of
the Fair Market Value as of the date of exercise of the
security and/or other consideration (on a per share basis)
received by the holders of Common Shares in the merger,
consolidation or share exchange, over the base price specified
in such SAR multiplied by the number of shares then subject to
the SAR, or portion thereof, as to which it is being
exercised.
Cash shall be delivered in lieu of fractional securities and may be
delivered if elected by the Corporation.
(i) The Committee may specify that an SAR granted under the Plan shall
be a Limited Right. Limited Rights shall, in addition to or in lieu
of the provisions regarding exercisability described in subsection
(c) above (as specified by the Committee), be subject to one or
both of the following (as specified by the Committee):
(i) Limited Rights shall be exercisable within thirty days
after a Change of Control, and upon exercise shall
entitle the holder to receive from the Corporation a
cash payment equal to the number of Common Shares
subject to the related Option (in the case of a Tandem
SAR) or subject to the SAR (in the case of a Non-tandem
SAR) times the greater of (A) the excess of the Fair
Market Value of one Common Share as of the date on
which the Limited Right is exercised, over the Option
price per share (in the case of a Tandem SAR) or the
base price per share (in the case of a Non-tandem SAR),
or (B) the excess of the value (as determined by the
60
Committee as in existence immediately prior to the Change of
Control) of the highest per share consideration received by
shareholders of the Corporation in connection with the Change
of Control over such per share price.
(ii) In the event of a dissolution or liquidation of the
Corporation, Limited Rights shall be exercisable for the
thirty days prior to the effective date of such dissolution or
liquidation, and, in the absence of exercise during such
period, shall be automatically exercised on the last business
day immediately prior to such effective date, unless both the
Committee and the Participant agree in writing that the
Limited Right shall not be exercised at that time. Upon
exercise of a Limited Right pursuant to this paragraph (ii),
the holder shall be entitled to receive from the Corporation a
cash payment equal to the number of Common Shares subject to
the related Option (in the case of a Tandem SAR) or subject to
the SAR (in the case of a Non-tandem SAR), multiplied by the
greater of (A) the excess of the Fair Market Value of one
Common Share as of the date on which the Limited Right is
exercised, over the Option price per share (in the case of a
Tandem SAR) or the base price per share (in the case of a
Non-tandem SAR), or (B) the excess of the value (as determined
by the Committee as in existence immediately prior to the
dissolution or liquidation) of the per share consideration
received by shareholders of the Corporation in connection with
the dissolution or liquidation over such per share price.
On or after the effective date of a merger, consolidation, or share
exchange involving the Corporation which does not constitute a
Change of Control, but which results in the holders of Common
Shares receiving another security and/or other consideration, the
cash payments contemplated by this subsection shall be computed
with reference to such security and/or other consideration in a
manner consistent with subsection (h) above. Except as provided in
subsection (c) of this Section and in this subsection (i), a
Limited Right shall be subject to the same terms and conditions as
other SARs.
(j) The Committee may prescribe such other terms and conditions of all
SARs granted under the Plan that are neither inconsistent with nor
prohibited by the Plan.
8. RESTRICTED SHARE AWARDS
The Committee may from time to time grant, or sell for such amount of
cash, Common Shares or such other consideration as the Committee deems
satisfactory (which amount may be less than Fair Market Value), Restricted
Shares under the Plan to such Participants
61
and upon such terms and conditions as the Committee may determine at the time
of grant or sale, subject to the following:
(a) Restricted Shares issued under the Plan shall be governed by a
Restricted Share Agreement in such form as the Committee shall from
time to time determine.
(b) Subject to Section 15 hereof, the Corporation shall issue, in the
name of the Participant, certificates representing the total number
of Restricted Shares granted or sold to the Participant, in a
timely manner after such grant or sale.
(c) Subject to the provisions of subsection (d) hereof and the
restrictions set forth in the related Restricted Share
Agreement, the Participant acquiring Restricted Shares shall
thereupon be a shareholder with respect to all of the shares
represented by such certificate or certificates and shall
have the right of a shareholder with respect to such shares,
including the right to vote such shares and to receive
dividends and other distributions paid with respect to such
shares.
(d) Any Restricted Share granted to a Participant pursuant to
the Plan shall be forfeited and any Restricted Share sold to
a Participant pursuant to the Plan shall, at the
Corporation's option, be resold to the Corporation for an
amount equal to the value of the consideration paid therefor
and, upon such forfeiture or resale, such share shall revert
to the Corporation if the Participant's employment with the
Corporation and its subsidiaries terminates prior to a date
specified by the Committee at the time of grant or sale,
which date shall not be earlier than the first anniversary
of such grant or sale, unless such employment terminates (A)
after the Participant's attainment of Retirement Age, (B)
because of the Participant's Disability, (C) because of the
Participant's death, or (D) following a Change of Control
for any reason other than Cause. As of such specified date,
or, if earlier, the Participant's date of termination of
employment described in (A) through (D) of the preceding
sentence, the restrictions of this subsection (d) shall
lapse. The Corporation may exercise its right to require a
resale of a Restricted Share pursuant to this subsection by
notice to the Participant at any time within the thirty-day
period following his termination of employment with the
Corporation and its subsidiaries. A Participant who has
received such notice shall promptly surrender his Restricted
Shares and the Corporation shall make payment therefor
within ten days after such surrender. The Committee, in its
discretion, shall have the power to accelerate the date on
which the restrictions of this subsection (d) shall lapse
with respect to any or all Restricted Shares granted or sold
under the Plan that have been outstanding for at least one
year.
62
(e) Except as set forth in subsection (f), Restricted Shares
issued pursuant to the Plan shall not be sold, assigned,
pledged or otherwise transferred, voluntarily or
involuntarily, by the holder thereof until the date the
restrictions of subsection (d) lapse. Each certificate
evidencing Restricted Shares issued under the Plan shall
bear a legend indicating that transferability of such shares
is restricted by and subject to the terms and conditions
imposed under the Plan.
(f) Notwithstanding anything contained herein to the contrary:
(i) Restricted Shares may be tendered in response to a
tender offer for or a request or invitation to tenders
of (both within the meaning of Section 14 of the
Securities Exchange Act of 1934, as in effect on
February 1, 1998) greater than 50% of the outstanding
Common Shares of the Corporation; provided the security
and/or other consideration received in exchange
therefor shall thereafter be subject to the
restrictions and conditions applicable to such
Restricted Shares until they lapse pursuant to the Plan
or the related Restricted Share Agreement and that the
tendering Participant agrees to any reasonable
provisions requested by the Corporation to assure that
any consideration received as a result of such tender
is subject to such restrictions and conditions and that
the consideration cannot be transferred in violation of
any such restrictions and conditions;
(ii) Restricted Shares may be surrendered in a merger,
consolidation or share exchange involving the Corporation
provided that the security and/or other consideration received
in exchange therefor shall thereafter be subject to the
restrictions and conditions applicable to such Restricted
Shares until they lapse pursuant to the Plan or the related
Restricted Share Agreement and that the surrendering
Participant agrees to any reasonable provisions requested by
the Corporation to assure that any consideration received as a
result of such surrender is subject to such restrictions and
conditions and that the consideration cannot be transferred in
violation of any such restrictions and conditions.
(g) The Committee may prescribe such other terms and conditions of the
Restricted Shares issued under the Plan that are neither
inconsistent with nor prohibited by the Plan including, without
limitation, terms providing for a lapse of the restrictions of
subsection (d) in installments.
(h) From and after the Distribution Date, each Rights Certificate
issued pursuant to the Rights Agreement for each Restricted Share
and all Series C Junior Participating Preferred Shares issued upon
exercise of the Rights
63
evidenced by such Rights Certificate shall be subject to such
restrictions and conditions applicable to such Restricted Share
until they lapse pursuant to the Plan or the related Restricted
Share Agreement; provided, however, that the Participant holding
such Rights Certificate shall be entitled to surrender the Rights
Certificate pursuant to the terms of the Rights Agreement in
exchange for the Series C Junior Participating Preferred Shares
issuable in respect thereof.
9. PERFORMANCE SHARES AND PERFORMANCE UNITS
The Committee may from time to time grant Performance Shares or
Performance Units to such Participants and upon such terms and conditions as
the Committee shall determine, subject to the following:
(a) Each Performance Share shall represent one Common Share and
shall be earned upon the attainment of performance goals
established by the Committee at the time of grant. Each
Performance Unit shall represent the Fair Market Value of a
Common Share as of the date of such award and shall be
earned upon the attainment of performance goals established
by the Committee at the time of grant. The time period
during which the performance goals must be met shall be
determined by the Committee and shall be called a
"performance period." The Committee may provide that a
Participant will earn a specified portion of the Performance
Shares or Performance Units for a performance period in the
event that performance goals for such performance period are
partially attained.
(b) As of the last day of a performance period, Performance
Shares and Performance Units earned by a Participant for
such period shall be credited to an account (the "Account")
established and maintained for such Participant, and any
unearned Performance Shares or Performance Units shall be
forfeited. When the Corporation pays a cash dividend on
Common Shares, each Participant's Account shall also be
credited with the amount of any cash dividends that would
have been paid on the number of Common Shares equal to the
number of Performance Shares then credited to such Account.
The Committee may provide that Performance Units credited to
an Account shall be credited with earnings at a rate
determined by the Committee. The Account of any
Participant, which shall be the record of Performance Shares
earned by him under the Plan, dividends paid thereon,
Performance Units earned by him under the Plan and earnings
credited thereon, is solely for accounting purposes and
shall not require a segregation of any Corporation assets.
(c) The Committee may provide at the time of grant that any earned
Performance Share in Account of a Participant, the amount of cash
dividends credited with respect thereto, any Performance Units in
an Account of a Participant, and earnings credited with respect
thereto (as well as
64
Performance Shares or Performance Shares or Performance Units for
performance periods then in progress) shall be forfeited if the
Participant's employment with the Corporation and its subsidiaries
terminates prior to a date specified by the Committee at the time
of grant, unless such employment terminates (i) because of death,
(ii) because of Disability, (iii) after attainment of Retirement
Age, or (iv) following a Change of Control for any reason other
than Cause. The Committee may provide that, with respect to a
termination described in (i) through (iv) of the prior sentence, a
participant shall earn all or a portion of the Performance Shares
or Performance Units granted to him for the performance period then
in progress.
(d) As of the earlier of (i) the date specified by the Committee
as referred to in subsection (c) above, or (ii) the date of
a termination of employment described in paragraphs (c)(i)
through (iv) above, a Participant, with respect to
Performance Shares, shall be entitled to receive from the
Corporation either a number of Common Shares equal to the
number of Performance Shares in his Account, or cash in an
amount equal to the number of Performance Shares in his
Account times the Fair Market Value of one Common Share on
such date, and with respect to Performance Units, shall be
entitled to receive from the Corporation either cash in an
amount equal to the number of Performance Units in his
Account, multiplied by the Fair Market Value of one Common
Share on such date, the number of Common Shares equal to the
number of Performance Units, multiplied by the Fair Market
Value of one Common Share on such Date, or a combination of
such Common Shares and cash, the product of which is divided
by the Fair Market Value of one Common Share on such date.
In connection with a distribution pursuant to the preceding
sentence, a Participant shall also be entitled to a cash
payment equal to the dividends in his Account relating to
the distributed Performance Shares and the earnings in his
Account relating to the distributed Performance Units.
Payment to a Participant of the amount set forth above shall
be made or commence within 90 days after the earlier of (i)
such specified date, or (ii) the date of termination
described in paragraphs (c)(i) through (iv) above. Payments
in cash may be made either in a lump sum or in equal annual
installments over a period not to exceed ten years. The
Committee shall have the sole discretion to determine the
form and method of payment under the Plan and the period
over which such payment shall be made. Notwithstanding the
foregoing, in the event that a Participant's employment with
the Corporation and its subsidiaries terminates following a
Change of Control of the Corporation for any reason other
than attainment of Retirement Age, death, Disability or
termination by the Corporation for Cause, payments with
respect to all Performance Shares and Performance Units in
his Account, including credits with respect to dividends on
Performance Shares or earnings on Performance Units, shall
be made in cash within ten days after such termination takes
65
place. Except as provided in subsection (b), a Participant shall
not be entitled to receive any earnings on the value of his
Performance Shares or Performance Units with respect to the period
between his termination of employment and the receipt of payments
under the Plan.
10. ASSIGNMENT
Except as provided in subsection 8(e) and (f) or in connection with
unrestricted Common Shares issued pursuant to an Award, Awards granted under
the Plan and any rights and privileges pertaining thereto, may not be
transferred, assigned, pledged or hypothecated in any manner, by operation of
law or otherwise, other than by will or by the laws of descent and
distribution, and shall not be subject to execution, attachment or similar
process. In the event of the death of a Participant or a Nonemployee
Director, any distribution due under the Plan shall be made to the duly
appointed and qualified executor or other personal representative of the
Participant or the Nonemployee Director to be distributed in accordance with
the will or applicable intestacy law of the Participant or Nonemployee
Director; or in the event that there shall be no representative duly
appointed and qualified within six months after the date of death of such
deceased Participant or Nonemployee Director, then to such persons as, at the
date of his death, would be entitled to share in the distribution of such
deceased person's personal estate under the provisions of the applicable
statute then in force governing the descent of intestate property, in the
proportions specified in such statute.
11. ADJUSTMENTS
The number of shares available for issuance under the Plan, the number
of shares subject to Awards granted under the Plan, the number of Performance
Shares credited to a Participant's Account or applicable to performance
periods in progress, and the exercise price with respect to Options and base
price with respect to SARs granted under the Plan may be appropriately
adjusted as the Committee may determine for any increase or decrease in the
number of issued Common Shares resulting from a subdivision or consolidation
of shares whether through reorganization, recapitalization, share split,
reverse share split, share distribution or combination of shares, or the
payment of a share dividend or other increase or decrease in the number of
such shares outstanding effected without receipt of consideration by the
Corporation. Adjustments under this Section 11 shall be made according to the
sole discretion of the Committee, and the decision of the Committee as to the
timing, nature and amount of such adjustments shall be binding and
conclusive. If any such adjustment results in the computation of a number of
Common Shares that is not a whole number, such number shall be rounded down
to the next whole number.
12. DISSOLUTION OR LIQUIDATION
Upon the dissolution or liquidation of the Corporation, each
Participant's and Nonemployee Director's rights with respect to Options and
SARs that have not been exercised, Restricted Shares that are subject to
forfeiture, and Performance Shares or Performance Units
66
that are either unearned or not yet distributable, as of the date of the
occurrence of such event, shall terminate and be forfeited and neither the
Participant, the Nonemployee Director, nor their heirs, personal
representatives, successors or assigns shall have any future rights with
respect to any such Options, SARs, Restricted Shares, Performance Shares, or
Performance Units. Notwithstanding the foregoing, the Committee, in its
discretion exercised in a nondiscriminatory way, may (i) adjust the terms of
any Award to give the holder thereof the opportunity to participate in any
distribution on Common Shares related to the dissolution or liquidation, or
(ii) otherwise provide for a distribution to any holder of an Award affected
by the dissolution or liquidation; provided, however, that if the dissolution
or liquidation occurs after a Change of Control of the Corporation, the
Committee shall, (i) by such adjustment or distribution, provide that the
holder of each Award shall benefit in the same manner as if such Award had
been exercised or made unrestricted prior to the distributions on Common
Shares related to the dissolution or liquidation, or (ii) make a cash
distribution to such holder in an amount equal to the value of the Award
(including, in the case of a Performance Share and Performance Unit, the
Account related thereto).
13. GOVERNMENT REGULATIONS
Notwithstanding any of the provisions hereof, or of any Option, SAR,
Restricted Share, Performance Share, or Performance Unit granted hereunder,
the obligation of the Corporation to issue and deliver shares upon the
exercise of such Option or SAR or upon a distribution with respect to a
Performance Share or Performance Unit, or the obligation of the Corporation
to issue and deliver certificates evidencing Restricted Shares, shall be
subject to all applicable laws, rules and regulations and to such approvals
by any governmental agencies or national securities exchanges as may be
required, including, without limitation, the obligation of the Corporation to
have a registration statement or statement that complies with the provisions
of the Securities Act of 1933, as amended, in effect with respect to such
shares at the time of such issuance and delivery unless the Corporation
receives evidence satisfactory to it that such issuance and delivery, in
absence of such an effective registration statement or statements, would not
constitute a violation of the terms and provisions of such act.
14. TERMINATION AND AMENDMENT OF PLAN
The Board (or the Committee) may amend, alter or terminate the Plan,
provided that, subject to Section 11, no amendment, alteration or termination
shall be made which would materially and adversely affect the rights of any
Participant or Nonemployee Director under any Option, SAR, Performance Share,
or Performance Unit theretofore granted, or of any Participant who had
theretofore acquired Restricted Shares pursuant to the Plan, without such
Participant's or Nonemployee Director's consent, as the case may be.
67
15. WITHHOLDING TAXES
Whenever the Corporation proposes or is required to issue or transfer
Common Shares to a Participant under the Plan, the Corporation shall have the
right to require the Participant to remit to the Corporation an amount
sufficient to satisfy all federal, state and local withholding tax
requirements prior to the delivery of any certificate or certificates for
such shares. If such certificates have been delivered prior to the time a
withholding obligation arises, the Corporation shall have the right to
require the Participant to remit to the Corporation an amount sufficient to
satisfy all federal, state or local withholding tax requirements at the time
such obligation arises and to withhold from other amounts payable to the
Participant, as compensation or otherwise, as necessary. Whenever payments
under the Plan are to be made to a Participant in cash, such payments shall
be net of any amounts sufficient to satisfy all federal, state and local
withholding tax requirements. The Corporation may, if approved by the
Committee in its discretion, in connection with an Award in the form of
Common Shares, allow a Participant to direct the Corporation to withhold a
portion of the Common Shares otherwise distributable or to transfer to the
Corporation a certain number of Common Shares (either subject to a Restricted
Share Award or previously owned) with a Fair Market Value at the date of
exercise equal to the amount required to be withheld, and make necessary cash
payments to appropriate taxing authorities to satisfy its withholding
obligation.
16. RIGHT TO TERMINATE EMPLOYMENT
Nothing in the Plan or any agreement entered into pursuant to the Plan
shall confer upon any Participant the right to continue in the employment of
the Corporation or its subsidiaries or affect any right that the Corporation
or its subsidiaries may have to terminate the employment of such Participant.
17. RIGHTS AS SHAREHOLDER
The recipient of any Award under the Plan shall have no rights as a
shareholder with respect thereto unless and until certificates for Common
Shares are issued to him.
18. LEAVES OF ABSENCE
The Committee shall be entitled to make such rules, regulations and
determinations as it deems appropriate under the Plan in respect of any leave
of absence taken by the recipient of any Award. Without limiting the
generality of the foregoing, the Committee shall be entitled to determine (i)
whether or not any such leaves of absence shall constitute a termination of
employment within the meaning of the Plan, and (ii) the impact, if any, of
any such leave of absence on awards under the Plan theretofore made to any
recipient who takes such leave of absence.
68
19. EFFECTIVE DATE
The Plan shall become effective as of the date it is approved by the
holders of a majority of the Common Shares of the Corporation (voting as a
single class) present, or represented, and entitled to vote at the 1998
Annual Meeting of Shareholders of the Corporation. There shall be no Options,
SARs, Restricted Shares, Performance Shares, or Performance Units granted or
awarded under the Plan after 2008; provided, however, that all Options, SARs,
Restricted Shares, Performance Shares, and Performance Units granted or sold
under the Plan prior to such date shall remain in effect and subject to
adjustment and amendment as herein provided until they have been satisfied or
terminated in accordance with the Plan and the terms of their related
agreements.
20. GOVERNING LAW
The Plan, and all agreements hereunder, shall be construed in accordance
with and governed by the laws of the State of Indiana and, in the case of
ISOs, Section 422A of the Code.
21. INDEMNIFICATION
Each person who is or shall have been a member of the Committee or of
the Board shall be indemnified and held harmless by the Corporation against
and from any loss, cost, liability, or expense that may be imposed upon or
reasonably incurred by him in connection with or resulting from any claim,
action, suit, or proceeding to which he may be a party or in which he may be
involved by reason of any action taken or failure to act under the Plan and
against and from any and all amounts paid by him in settlement thereof with
the Corporation's approval, or paid by him in satisfaction of any judgment in
any such action, suit or proceeding against him; provided, however, that he
shall give the Corporation an opportunity at its own expense, to handle and
defend the same before he undertakes to handle and defend it on his own
behalf. The foregoing right of indemnification shall not be exclusive of any
other rights of indemnification to which such persons may be entitled under
the Corporation's Articles of Incorporation or By-laws, as a matter of law,
or otherwise, or any power that the Corporation may have to indemnify them or
to hold them harmless.
22. SUCCESSORS
In the event of a sale of substantially all of the assets of the
Corporation, or a merger, consolidation or share exchange involving the
Corporation, all obligations of the Corporation under the Plan with respect
to awards granted hereunder shall be binding on the successor to the
Corporation in the transaction. Employment with such a successor shall be
considered employment with the Corporation for purposes of the Plan.
69
23. NOTICES
Notices given pursuant to this Agreement shall be in writing and shall
be deemed received when personally delivered or five days after mailed by
United States registered or certified mail, return receipt requested,
addressee only, postage prepaid. Notice to the Corporation shall be directed
to:
Secretary
Arvin Industries, Inc.
One Noblitt Plaza
Box 3000
Columbus, Indiana 47202-3000
Notices to Participants and Nonemployee Directors shall be directed to
such person at the home address of such person on the records of the
Corporation. Notwithstanding the foregoing, if either party shall have
previously designated address by notice to the other party given in the
foregoing manner, then notices to such party shall be directed as designated
70