CMC/CORPORATE INCENTIVE PLAN
FY 94
I. PURPOSE
The purpose of this plan is to provide an incentive to certain
executives and key employees of the Company who contribute to the
success of the enterprise by offering an opportunity to such persons to
earn compensation in addition to their salaries, based on the operating
income of the Company.
II. ELIGIBLE PARTICIPANTS
Eligibility for participation in the Incentive Plan shall be determined
by management from among those key employees who are in a position to
materially contribute to the success of the Company. Specific
requirements for participation are outlined in Section VIII C,
Conditions for Receiving Payment, in the Definition of Terms.
If a person otherwise eligible for participation in the Incentive Plan
becomes an employee of the Company during the fiscal year, such
employee shall be eligible to receive a prorated portion of an annual
bonus (number of semimonthly pay periods of employment divided by
twenty-four), subject to approval of such employee's vice president or,
in the case of an officer, his superior's approval.
III. METHOD OF ALLOCATION
Each participant must meet the goals established by management. In
order to receive a bonus, each participant must be recommended for all,
part or none of his bonus by his superior, with the approval of the
Chairman. Each participant's assigned bonus percentage corresponds to
established targets set by management. The percentages are on a
variable scale. The various percentages of achievement are:
Target Bonus Percentage
90% 95% 100% 110% 120%
Executive Officer 0% 40% 50.0% 67.5% 85%
Senior Vice President 0% 32% 40.0% 65.0% 85%
Vice President 0% 32% 40.0% 65.0% 85%
Assistant Vice President 0% 26% 32.5% 60.0% 80%
Sr. Exec., Exec. and Sr. Director 0% 20% 25.0% 40.0% 50%
Director 0% 12% 15.0% 25.0% 35%
Corporate 0% 4% 5.0% 10.0% 15%
IV. PLAN SEGMENTS
For corporate personnel, the Incentive Plan consists of one segment
with one target:
1. an EBDIT (defined in Section VIII A.) bonus target for the
corporation
V. DISTRIBUTION
The distribution of bonuses shall be made promptly after completion of
unaudited financial statements for the 1994 Fiscal Year or as may be
otherwise approved by the Board of Directors. Specific provisions
regarding distribution are outlined in Section VIII C, Conditions for
Receiving Payment, in the Definition of Terms.
VI. ADMINISTRATION
The Plan will be administered by the Executive Committee of the Company.
VII. INTERPRETATION AND DURATION
Any areas of question, interpretation, dispute, etc., concerning any
area of this plan shall be governed by the Executive Committee of the
Company. The Executive Committee is defined as the Chairman, the
Executive Vice President and Chief Financial Officer, and the Vice
President of Administrative Services. This plan shall be effective for
the fiscal year beginning October 1, 1993. The Executive Committee and
the Board of Directors each retain the authority to modify, repeal or
discontinue the plan.
VIII. DEFINITION OF TERMS
A. EBDIT
EBDIT is income of the Company before (1) interest expense, (2)
ESOP expense, (3) depreciation and amortization, (4) provision for
state and federal income taxes, (5) interest income, (6)
restructuring charges, and (7) stock option expense, subject to
adjustment for the following:
A significant, unexpected change in the operation of the
company as a result of condemnation, major physical damage
from a fire or other catastrophe, strike, governmental
seizure, or disruption due to construction will result in an
adjustment to income. This will avoid any penalty or
windfall as a result of changes in capacity to contribute to
overall parent company earnings which are not the result of
the participant's ability to manage the operation. This does
not include changes in Blue Cross or governmental
reimbursement policies, loss of a prime admitter, expansion
by another hospital, etc., which are regarded as normal
business risks.
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B. Change in Accounting Policy or Practice
A material change (from the prior year) in accounting policy or
practice which has an effect on the Company's EBDlT (i.e., changes
in the procedures for reserving for doubtful accounts, asset sales
or acquisitions, etc.) will be considered as an adjustment to
EBDIT. Year end adjustments to correct prior errors or to adjust
previous estimates and accruals will not be regarded as changes in
policy or practice.
C. Conditions For Receiving Payment
Incentive compensation under the Incentive Plan is not an integral
part of an employee's compensation package. An employee's base
salary compensates the employee for the expected results of any
given job. Payment of incentive compensation is in the discretion
of the Executive Committee.
No incentive compensation will be paid to any employee if
employment is terminated, whether voluntary or involuntary, prior
to the actual payment date. However, the Executive Committee
retains authority to make exceptions to the foregoing policy in
unusual or meritorious cases including, but not limited to, the
death of an employee during the fiscal year or termination of
employment due to total or partial disability or retirement with
the consent of the Company.
If a person (eligible for the Incentive Plan) joins the Company
within the first three quarters of the fiscal year, he will be
eligible for the prorated amount of his bonus subject to the
approval of the Executive Committee.
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CHARTER MEDICAL CORPORATION
1992 STOCK OPTION PLAN
(as amended on 8/27/92, 4/1/93, 12/2/93 and 9/15/94)
1. Purpose. The purpose of the Charter Medical Corporation
1992 Stock Option Plan is to motivate and retain key employees of
Charter Medical Corporation and its Subsidiaries who have major
responsibility for the attainment of the primary long-term
performance goals of Charter Medical Corporation.
2. Definitions. The following terms shall have the
following meanings:
"Board" means the Board of Directors of the
Corporation.
"Cause" means a finding by the Corporation that the
Participant (i) has materially breached any material term of
any employment contract between the Participant and the
Corporation or any Subsidiary; (ii) is convicted by a court
of competent jurisdiction of, or pleads nolo contendere to,
a felony; (iii) refuses, fails or neglects to perform his
employment duties as specified under any employment contract
with the Corporation or any Subsidiary or as specified by
his superiors or the Board, and such refusal, failure or
neglect is substantially detrimental to the business of the
Corporation or any Subsidiary; (iv) engages in illegal or
other wrongful conduct substantially detrimental to the
business or reputation of the Corporation or any Subsidiary;
or (v) develops or pursues interests substantially adverse
to the Corporation or any Subsidiary.
"Change in Control" means at any time following the
consummation of the Restructuring (i) the sale, lease,
transfer or other disposition in one or more related
transactions of all or substantially all of the
Corporation's assets, or the sale of substantially all of
the stock or assets of the Corporation's subsidiaries that
constitute a sale of substantially all of the Corporation's
assets, to any person or related group of persons (including
a "group" as such term is used in Section 13(d)(3) of the
Exchange Act), (ii) the merger or consolidation of the
Corporation with or into another corporation, or the merger
of another corporation into the Corporation or any other
transaction, with the effect that the stockholders of the
Corporation immediately prior to such transaction hold less
than 50% of the total voting power entitled to vote in the
election of directors, managers or trustees of the surviving
corporation resulting from such consolidation or such other
transaction, (iii) any person or related group of persons
acquires a majority in interest of the voting power or
voting stock of the Corporation, or (iv) the liquidation or
dissolution of the Corporation.
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"Code" means the Internal Revenue Code of 1986, as
amended, and the rules promulgated thereunder.
"Committee" means a committee of two or more members of
the Board constituted and empowered by the Board to
administer the Plan in accordance with its terms.
"Contract Target EBDIT" means 100% of Target EBDIT for
the Corporation's 1991 fiscal year, 80% of Target EBDIT for
the Corporation's 1992 fiscal year and, for each fiscal year
of the Corporation during the period commencing October 1,
1992 and ending September 30, 1995, 90% of Target EBDIT, as
illustrated on Exhibit A.
"Corporation" means Charter Medical Corporation, a
Delaware corporation.
"Director" means a member of the Board.
"Disability" means a physical or mental condition under
which the Participant qualifies for (or will qualify for
after expiration of a waiting period) disability benefits
under the long-term disability plan of the Corporation or
Subsidiary that employs such Participant.
"EBDIT" means earnings of the Corporation, on a
consolidated basis, before depreciation and amortization,
interest, taxes, ESOP expense and deferred compensation
expense, expense of the Plan and provision for restructuring
of operations, any gains (or losses) resulting from the
early extinguishment of debt, any gains (or losses)
resulting from the sale of assets other than in the ordinary
course of business, and any gains (or losses) resulting from
the termination of any interest rate or currency rate
protection agreement, determined in accordance with
generally accepted accounting principles consistently
applied over the period.
"Effective Date" means the date that the Corporation's
Plan of Reorganization pursuant to chapter 11 of the United
States Bankruptcy Code and the rules promulgated thereunder
becomes effective and the Restructuring is consummated.
"ERISA" means the Employee Retirement Income Security
Act of 1974, as amended, and the rules promulgated
thereunder.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended.
"Fair Market Value" means: (1) If the Stock is listed
on a national securities exchange (as such term is defined
by the Exchange Act) or is regularly traded in the
over-the-counter market on the date of determination, the
price equal to the mean between the high and low sales
prices of a share of Stock on said national securities
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exchange on that day (or if no shares of the Stock are
traded on that date but there were shares traded on dates
within a reasonable period both before and after such date,
the Fair Market Value shall be the weighted average of the
means between the high and low sales prices of the Stock on
the nearest date before and the nearest date after that date
on which shares of the Stock are traded) or of the mean
between the high "bid" and low "asked" prices per share in
said over-the-counter market on that day, as reported by the
National Association of Securities Dealers Automated
Quotation System (or a successor to such system); (2) If the
Stock is traded both on a national securities exchange and
in the over-the-counter market, the Fair Market Value shall
be determined by the prices on the national securities
exchange, unless transactions on such exchange and in the
over-the-counter market are jointly reported on a
consolidated reporting system, in which case the Fair Market
Value shall be determined by reference to such consolidated
reporting system; (3) If the Stock is not listed for trading
on a national securities exchange and is not regularly
traded in the over-the-counter market, then the Committee
shall determine the Fair Market Value of the Stock from time
to time in its sole discretion.
"Financial Target EBDIT" means, for each fiscal year of
the Corporation during the period commencing October 1, 1990
and ending September 30, 1995, 95% of Target EBDIT, as
illustrated on Exhibit A. For the purpose only of
determining whether Financial Target EBDIT or cumulative
Financial Target EBDIT has been achieved, an amount not in
excess of $10 million will be added to EBDIT for the
Corporation's 1992 fiscal year to the extent necessary in
order for EBDIT for such fiscal year to equal 95% of Target
EBDIT for the Corporation's 1992 fiscal year.
"Option" means a Series A Option or a Series B Option
granted pursuant to Section 6.
"Participant" means an employee of the Corporation or
any of its Subsidiaries who is selected to participate in
the Plan in accordance with Section 4.
"Plan" means the Charter Medical Corporation 1992 Stock
Option Plan.
"Restructuring" means the restructuring of the
Corporation's debt and equity capitalization to be effected
pursuant to the Corporation's Plan of Reorganization
pursuant to chapter 11 of the Bankruptcy Code.
"Series A Options" means options to purchase shares of
Stock granted pursuant to Section 6, which options shall
have a per share exercise price of $4.36 unless adjusted in
accordance with the terms and provisions of this Plan.
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"Series B Options" means options to purchase shares of
Stock granted pursuant to Section 6, which options shall
have a per share exercise price of $9.60 unless adjusted in
accordance with the terms and provisions of this Plan.
"Stock" means the common stock, par value $0.25 per
share, of the Corporation to be authorized upon consummation
of the Restructuring.
"Stock Option Agreement" means the written agreement or
instrument which sets forth the terms of an Option granted
to a Participant under this Plan.
"Subsidiary" means any corporation, as defined in
Section 7701 of the Internal Revenue Code of 1986, as
amended, and the regulations promulgated thereunder, of
which the Corporation, at the time, directly or indirectly,
owns 50% or more of the outstanding securities having
ordinary voting power to elect directors (other than
securities having voting power only by reason of a
contingency).
"Target EBDIT" means, for each fiscal year of the
Corporation commencing October 1, 1990, the amount of EBDIT
set forth for such year in Section 8, and as illustrated on
Exhibit A.
3. Administration. The Plan shall be administered by the
Committee. Subject to the provisions of the Plan, the Committee,
acting in its absolute discretion, shall exercise such powers and
take such action as expressly called for under this Plan and,
further, the Committee shall have the power to interpret the Plan
and (subject to Section 19 and Rule 16b-3 under the Exchange Act,
if applicable) to take such other action in the administration
and operation of this Plan as the Committee deems equitable under
the circumstances. All actions of the Committee shall be binding
on the Corporation, on each affected Participant and on each
other person directly or indirectly affected by such action.
Following such time as the Stock is first registered under
Section 12 of the Exchange Act, no member of the Board shall
serve as a member of the Committee unless such member is a
"disinterested person" within the meaning of Rule 16b-3 under the
Exchange Act.
4. Participation. Participants in the Plan shall be
limited to those employees of the Corporation or any of its
Subsidiaries who have been selected to participate in the Plan by
the Committee acting in its absolute discretion.
5. Maximum Number of Shares Subject to Options. Subject to
the provisions of Section 10, there shall be 3,437,939 shares of
Stock reserved for use under this Plan, and such shares of Stock
shall be reserved to the extent that the Committee and the Board
deems appropriate from authorized but unissued shares of Stock or
from shares of Stock which have been reacquired by the
Corporation. Furthermore, any shares of Stock subject to any
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Option which remain after the cancellation, expiration, exchange
or forfeiture of such Option thereafter shall again become
available for use under this Plan. All authorized and unissued
shares issued upon exercise of Options under the Plan shall be
fully paid and nonassessable shares.
6. Grant of Options. The Committee, acting in its absolute
discretion, shall have the right to grant Options to Participants
under this Plan from time to time and, further, shall have the
right to grant new Options in exchange for outstanding Options
granted pursuant to this Section 6; provided, however, that the
maximum number of shares of Stock issuable upon exercise of
Series A Options shall not exceed 2,435,207, subject to
adjustment as provided in Section 10.
7. Terms and Conditions of Options. Options granted
pursuant to the Plan shall be evidenced by Stock Option
Agreements in such form as the Committee from time to time shall
approve and including such terms and conditions not inconsistent
with the provisions set forth in the Plan as the Committee may
determine; provided, that such Stock Option Agreements and the
Options granted shall comply with and be subject to the following
terms and conditions:
(a) Employment. Each Participant shall agree to
remain in the employ of and to render services to the
Corporation or a Subsidiary thereof for such period as the
Committee may require in the Stock Option Agreement;
provided, however, that such agreement shall not impose upon
the Corporation or any Subsidiary thereof any obligation to
retain the Participant in its employ for any period.
(b) Number of Shares. Each Stock Option Agreement
shall state the total number of shares of Stock to which it
pertains.
(c) Exercise Price. With respect to options granted prior
to March 31, 1993, the exercise price per share for Series A
Options shall be $4.36, subject to adjustment as contemplated by
Section 9 and 10. With respect to options granted on or after
March 31, 1993, the exercise price per share for Series A Options
shall be Fair Market Value of the Stock on the date of grant, but
not less than $4.36 per share, subject to adjustment as
contemplated by Sections 9 and 10. The exercise price per share
for Series B Options shall be $9.60, subject to adjustment as
contemplated by Sections 9 and 10.
(d) Medium and Time of Payment. The exercise price
shall be payable upon the exercise of the Option, or as
provided in Section 7(e) if the Corporation adopts a
broker-directed cashless exercise/resale procedure, in each
case in an amount equal to the number of shares then being
purchased times the per share exercise price. Payment, at
the election of the Participant, shall be (i) in cash; (ii)
by delivery to the Corporation of a certificate or
certificates for shares of Stock duly endorsed for transfer
8
to the Corporation with signature guaranteed by a member
firm of the New York Stock Exchange or by a national banking
association, (iii) by the withholding by the Corporation of
shares of stock that otherwise would be issued to the
Participant as a result of the exercise of such Option to
the extent that the Participant elects to pay such exercise
price through such withheld shares of Stock (provided,
however, that any such election and withholding of shares of
Stock pursuant to this clause (iii) shall be effected so as
to comply with the provisions of Rule 16b-3 under the
Exchange Act, if applicable), or (iv) by a combination of
(i), (ii) and (iii). In the event of any payment by
delivery or withholding of shares of Stock, such shares
shall be valued on the basis of their Fair Market Value
determined as of the day prior to the date of delivery or
withholding. If payment is made by delivery of shares of
Stock, the value of such Stock may not exceed the total
exercise price payment; but the preceding clause shall not
prevent delivery of a stock certificate for a number of
shares having a greater value, if the number of shares to be
applied to payment of the exercise price is designated by
the Participant and the Participant requests that a
certificate for the remainder shares be delivered to the
Participant.
In addition to the payment of the purchase price of the
shares of Stock then being purchased, a Participant shall
also, pursuant to Section 16, pay to the Corporation or
otherwise provide for an amount equal to the amount, if any,
which the Corporation at the time of exercise is required to
withhold under the income tax withholding provisions of the
Internal Revenue Code and other applicable income tax laws.
(e) Method of Exercise. All Options shall be
exercised (i) by written notice directed to the Secretary of
the Corporation at its principal place of business,
accompanied by payment made in accordance with the foregoing
subsection (d) of the option exercise price for the number
of shares specified in the notice of exercise and by any
documents required by Section 14, or (ii) by complying with
the exercise and other provisions of any broker-directed
cashless exercise/resale procedure adopted by the
Corporation and approved by the Committee, and by delivery
of any documents required by Section 14. The Corporation
shall make delivery of such shares within a reasonable
period of time or in accordance with applicable provisions
of any such broker-directed cashless exercise/resale
procedure; provided, however, that if any law or regulation
requires the Corporation to take any action (including but
not limited to the filing of a registration statement under
the Securities Act of 1933 and causing such registration
statement to become effective) with respect to the shares
specified in such notice before their issuance, then the
date of delivery of such shares shall be extended for the
period necessary to take such action.
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(f) Term of Options. Except as otherwise specifically
provided in the Plan or in a particular Stock Option
Agreement, the terms of all Options shall commence on the
date of grant and shall expire on October 1, 2000.
(g) Exercise of Options. Options are exercisable only
to the extent they are vested as provided in Section 8.
After Options have vested in accordance with Section 8, such
Options are exercisable at any time, in whole or in part
during their terms, except that Options that vest prior to
December 31, 1995 shall not be exercisable after
September 30, 2000. If a Participant's employment with the
Corporation or any Subsidiary is terminated without Cause,
the vested portion of each Option held by such Participant
on the date of such termination (after giving effect to the
provisions of Section 8) may be exercised for one year
following the date of termination of employment, or, if such
termination occurs subsequent to September 30, 1995, within
six months of such termination of employment. In the event
of the death, Disability or retirement at or after age 65 of
a Participant, the vested portion of each Option held by
such Participant on the date of such event may be exercised
within six months of the date of such event.
In the event of the death of a Participant, the vested
portion of each Option previously held by such Participant may be
exercised within the time set forth above by the executor or
other legal representative of such Participant.
(h) Adjustments Upon Changes in Capitalization. Upon
a change in capitalization pursuant to Section 10, the
number of shares covered by an Option and the per share
option exercise price shall be adjusted in accordance with
the provisions of Section 10.
(i) Transferability. No Option shall be assignable or
transferable by the Participant except by will or by the
laws of descent and distribution or pursuant to a qualified
domestic relations order as defined by the Code or ERISA.
The designation of a beneficiary shall not constitute a
transfer; and, during the lifetime of a Participant, all
Options held by such Participant shall be exercisable only
by him or his lawful representative in the event of his
incapacity.
(j) Rights as a Stockholder. A Participant shall have
no rights as a stockholder with respect to shares covered by
his Option until the date of the issuance of the shares to
him and only after such shares are fully paid. Unless
specified in Section 10, no adjustment will be made for
dividends or other rights for which the record date is prior
to the date of such issuance.
(k) Miscellaneous Provisions. The Stock Option
Agreements authorized under the Plan may contain such other
provisions not inconsistent with the terms of this Plan as
the Committee shall deem advisable.
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8. Vesting. Options granted under this Plan shall be
exercisable only to the extent such Options have become vested
pursuant to this Section 8.
(a) Options granted under this Plan prior to, on or
within ninety (90) days following the Effective Date (1)
shall become vested as follows, or (2), in the discretion of
the Committee, shall become vested on terms that are no more
favorable to a Participant than the following terms:
(i) 20% (or such lesser amount as the Committee
may determine) of each Option shall be deemed vested on
the Effective Date or date of grant, whichever is
later.
(ii) 20% of each Option shall vest as of the last
day of each of the fiscal years 1992 through 1995 in
which the Corporation achieves 100% of cumulative
Target EBDIT through such fiscal year. If cumulative
Target EBDIT is achieved through a given fiscal year
between the end of fiscal year 1991 through fiscal year
1995, such percentage of each Option which would have
become vested had the Corporation achieved Target EBDIT
for prior fiscal years shall be deemed vested as of the
last day of the fiscal year in which cumulative Target
EBDIT was achieved by the Corporation. Target EBDIT
for each of the fiscal years 1991 through 1995 is set
forth below and on Exhibit A:
Fiscal Year Target EBDIT
1991 Actual
1992 $222.000 million
1993 $231.000 million
1994 $154.692 million
1995 $255.000 million
(iii) 10% of each Option shall vest as of the
last day of each of the fiscal years 1992 through 1995
in which the Corporation achieves exactly 100% of
cumulative Financial Target EBDIT through such fiscal
year. If cumulative Financial Target EBDIT is exactly
achieved through a given fiscal year between the end of
fiscal year 1991 through fiscal year 1995, such
percentage of each Option which would have become
vested had the Corporation achieved exactly 100% of
Financial Target EBDIT for prior fiscal years shall be
deemed vested as of the last day of the fiscal year in
which cumulative Financial Target EBDIT was achieved
exactly by the Corporation.
(iv) To the extent that the Corporation achieves
a level of cumulative EBDIT between cumulative Target
EBDIT and cumulative Financial Target EBDIT as of the
end of any of the fiscal years 1992 through 1995, there
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shall be deemed to have vested as of the last day of
such fiscal year such percentage of each Option as
shall equal [A - (B X C)] - D where:
A equals:
the cumulative percentage of Options which would
be deemed vested as of the last day of the fiscal
year with respect to which this calculation is
made had the Corporation achieved cumulative
Target EBDIT through such date;
B equals:
(1) the difference between (a) the cumulative
percentage of Options which would be deemed vested
as of the last day of the fiscal year with respect
to which this calculation is made had the
Corporation achieved cumulative Target EBDIT
through such date and (b) the cumulative
percentage of Options which would be deemed vested
as of the same date had the Corporation achieved
exactly the cumulative Financial Target EBDIT for
each of the fiscal years through such date,
divided by (2) the difference between cumulative
Target EBDIT through such date and cumulative
Financial Target EBDIT through such date;
C equals:
the difference between cumulative Target EBDIT and
cumulative EBDIT as of the last day of the fiscal
year with respect to which this calculation is
made; and
D equals:
the percentage of each Option which has already
become vested.
(v) The unvested portion of each Option shall
become fully vested in the event of a Change in
Control.
(vi) The unvested portion of each Option shall
terminate and be cancelled immediately upon the
termination of a Participant's employment with the
Corporation or any Subsidiary for Cause.
(vii) With respect to Options granted prior to
August 27, 1992, if a Participant's employment with the
Corporation or any Subsidiary is terminated without
Cause or upon the death, Disability or retirement at or
after age 65, the unvested portion of each Option
shall: (a) vest as of the date of termination of
employment, death, Disability or retirement at or after
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age 65 if cumulative Contract Target EBDIT has been
achieved by the Corporation through the end of the
fiscal year ending most recently prior to the date of
such termination of employment, death, Disability or
retirement at or after age 65, or (b) terminate and be
cancelled immediately upon termination of employment if
cumulative Contract Target EBDIT has not been achieved
by the Corporation through the end of the fiscal year
ending most recently prior to the date of such
termination of employment. With respect to Options
granted on or after August 27, 1992, if a Participant's
employment is terminated without Cause or upon the
death, Disability or retirement at or after age 65, the
unvested portion of each Option shall: (a) terminate
and be cancelled immediately as of the date of
termination of employment, death, Disability or
retirement at or after age 65, or (b) vest, in whole or
in part, as provided by the Committee in its
discretion.
(b) Options granted under this Plan after ninety (90)
days following the Effective Date shall become vested on
such terms and conditions as the Committee shall determine,
after consultation with the Chief Executive Officer.
9. Adjustment of Exercise Price.
In addition to adjustments made as a result of a change in
the capitalization of the Corporation as provided in Section 10,
the exercise price of Options shall be adjusted as follows:
(a) Change in Control. In the event of a Change in
Control within three years following the Effective Date, the
option exercise price per share shall be automatically
reduced so as to equal the applicable percentage of the full
exercise price per share set forth in the table below:
If Change in Control
Occurs: Percent of Full Exercise Price
Within twelve months
of the Effective Date
(Year One) 50%
First Quarter of
Year Two 56.25%
Second Quarter of
Year Two 62.5%
Third Quarter of
Year Two 68.75%
Fourth Quarter of
Year Two 75%
First Quarter of
Year Three 81.25%
Second Quarter of
Year Three 87.5%
Third Quarter of
Year Three 93.75%
Fourth Quarter of
Year Three and Thereafter 100%
(b) Termination Without Cause. With respect to
Options granted prior to August 27, 1992, the exercise price of
Options shall be adjusted as follows:
(i) If a Participant's employment with the Corporation
or any Subsidiary is terminated without Cause, the exercise
price per share of the vested portion of each Option of such
Participant shall be reduced to 50% of the full exercise
price if cumulative Contract Target EBDIT has been achieved
by the Corporation through the end of the fiscal year ending
most recently prior to the date of termination of employment
of a Participant without Cause.
(ii) If cumulative Target EBDIT has been achieved by
the Corporation through the end of the fiscal year ending
most recently prior to the date of termination of employment
of a Participant without Cause, the exercise price per share
of the vested portion of each Option of such Participant
shall be equal to: (a) the par value per share of shares of
Stock issued from authorized but unissued shares of Stock in
satisfaction of the exercise of the vested portion of such
Options, and (b) $0.10 per share for shares of Stock issued
from shares of Stock held by the Corporation as treasury
shares in satisfaction of the exercise of the vested portion
of such Options.
(iii) If the Corporation has achieved a level of
cumulative EBDIT in excess of cumulative Contract Target
EBDIT through the end of the fiscal year most recently
preceding the date of a Participant's termination of
employment without Cause, but such cumulative EBDIT achieved
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by the Corporation does not equal or exceed cumulative
Target EBDIT through such period, the percentage of the full
exercise price per share of the vested percentage of each
Option of such Participant shall equal the product of A and
B where:
A equals:
(a) 50 divided by (b) the difference between 100% and the
percentage derived by dividing cumulative Contract Target
EBDIT by cumulative Target EBDIT through the end of the
fiscal year with respect to which this calculation relates;
and
B equals:
the difference between 100% and the percentage of cumulative
Target EBDIT achieved by the Corporation through the end of
the fiscal year with respect to which this calculation
relates;
provided, however, that in no event shall the exercise price per
share of Stock be reduced to an amount per share of less than (i)
the par value per share of shares of Stock issued from authorized
but unissued shares of Stock, or (ii) $.10 per share for shares
of Stock issued from shares of Stock held by the Corporation as
treasury shares, in satisfaction of the exercise of the vested
portion of any Option.
With respect to Options granted on or after August 27, 1992,
the exercise price of Options shall not be adjusted upon
termination of employment without Cause, except as may be
otherwise provided by the Committee, in its discretion.
10. Change in Capitalization. If the Stock should, as a
result of a stock split or stock dividend, combination of shares,
recapitalization or other change in the capital structure of the
Corporation or exchange of Stock for other securities by
reclassification or otherwise, be increased or decreased or
changed into, or exchanged for, a different number or kind of
shares or other securities of the Corporation, or any other
corporation, then the number of shares covered by Options, the
number and kind of shares which thereafter may be distributed or
issued under the Plan and the per share option price of Options
shall be appropriately adjusted consistent with such change in
such manner as the Committee may deem equitable to prevent
dilution of or increase in the rights granted to, or available
for, Participants.
11. Fractional Shares. In the event that any provision of
this Plan or a Stock Option Agreement would create a right to
acquire a fractional share of Stock, such fractional share shall
be disregarded.
14
12. Successor Corporation. The obligations of the
Corporation under the Plan shall be binding upon any successor
corporation or organization succeeding to substantially all of
the assets and business of the Corporation and shall continue to
be binding upon the Corporation notwithstanding any change in
ownership of the Corporation. The Corporation agrees that it
will make appropriate provision for the preservation of
Participants' rights under the Plan in any agreement or plan
which it may enter into or adopt to effect any such transfer of
assets or ownership.
13. Non-Alienation of Benefits. Except insofar as
applicable law may otherwise require, (i) no Options, rights or
interest of Participants or Stock deliverable to any Participant
at any time under the Plan shall be subject in any manner to
alienation by anticipation, sale, transfer, assignment,
bankruptcy, pledge, attachment, charge of encumbrance of any
kind, and any attempt to so alienate, sell, transfer, assign,
pledge, attach, charge or otherwise encumber any such amount,
whether presently or thereafter payable, shall be void; and (ii),
to the fullest extent permitted by law, the Plan shall in no
manner be liable for, or subject to, claims, liens, attachments
or other like proceedings or the debts, liabilities, contracts,
engagements, or torts of any Participant or beneficiary. Nothing
in this Section 13 shall prevent a Participant's rights and
interests under the Plan from being transferred by will or by the
laws of descent and distribution or pursuant to a qualified
domestic relations order as defined by the Code or ERISA;
provided, however, that no transfer by will or by the laws of
descent and distribution shall be effective to bind the
Corporation unless the Committee or its designee shall have been
furnished before or after the death of such Participant with a
copy of such will or such other evidence as the Committee may
deem necessary to establish the validity of the transfer.
14. Listing and Qualification of Shares. The Corporation,
in its discretion, may postpone the issuance or delivery of
shares of Stock until completion of any stock exchange listing,
or other qualification or registration of such shares under any
state or federal law, rule or regulation, as the Corporation may
consider appropriate, and may require any Participant to make
such representations, including, but not limited to, a written
representation that the shares are to be acquired for investment
and not for resale or with a view to the distribution thereof,
and furnish such information as it may consider appropriate in
connection with the issuance or delivery of the shares in
compliance with applicable laws, rules and regulations. The
Corporation may cause a legend or legends to be placed on such
certificates to make appropriate reference to such representation
and to restrict transfer in the absence of compliance with
applicable federal or state securities laws.
15. No Claim or Right Under the Plan. No employee of the
Corporation or any Subsidiary shall at any time have the right to
be selected as a Participant in the Plan nor, having been
15
selected as a Participant and granted an Option, to be granted
any additional Option. Neither the action of the Corporation in
establishing the Plan, nor any action taken by it or by the Board
or the Committee thereunder, nor any provision of the Plan, nor
participation in the Plan, shall be construed to give, and does
not give, to any person the right to be retained in the employ of
the Corporation or any Subsidiary, or interfere in any way with
the right of the Corporation or any Subsidiary to discharge or
terminate any person at any time without regard to the effect
such discharge or termination may have upon such person's rights,
if any, under the Plan.
16. Taxes. The Corporation may make such provisions and
take such steps as it may deem necessary or appropriate for the
withholding of all federal, state, local and other taxes required
by law to be withheld with respect to Options under the Plan,
including, but not limited to, (i) deducting the amount required
to be withheld from salary or any other amount then or thereafter
payable to a Participant, beneficiary or legal representative,
(ii) requiring a Participant, beneficiary or legal representative
to pay to the Corporation the amount required to be withheld as a
condition of releasing the Stock or (iii) complying with
applicable provisions of any broker-directed cashless
exercise/resale procedure adopted by the Corporation pursuant to
Section 7(e). If, in the exercise of an Option, the Corporation
requires payment pursuant to (ii), then, to the extent permitted
by the Corporation in its discretion, payment may be made in any
medium provided for in subsection (d) of Section 7. The
Committee also shall have the right to provide in any Stock
Option Agreement that a Participant may elect to satisfy federal
and state withholding requirements through a reduction in the
number of shares of Stock actually transferred to such
Participant under this Plan and, if applicable, any such election
and any such reduction shall be effected so as to satisfy the
conditions of Rule 16b-3 under the Exchange Act.
17. No Liability of Directors. No member of the Board or
Committee shall be personally liable by reason of any contract or
other instrument executed by such member on his behalf in his
capacity as a member of the Board or Committee, nor for any
mistake of judgment made in good faith, and the Corporation shall
indemnify and hold harmless each employee, officer and Director
of the Corporation, to whom any duty or power relating to the
administration or interpretation of the Plan may be allocated or
delegated, against any cost or expense (including counsel fees)
or liability (including any sum paid in settlement of a claim
with the approval of the Board) arising out of any act or
omission to act in connection with the Plan to the fullest extent
permitted or required by the Corporation's governing instruments
and, in addition, to the fullest extent of any applicable
insurance policy purchased by the Corporation.
18. Other Plans. Nothing contained in the Plan is intended
to amend, modify or rescind any previously approved compensation
plans or programs entered into by the Corporation or its
16
Subsidiaries. The Plan shall be construed to be in addition to
any and all such plans or programs. No award of Options under
the Plan shall be construed as compensation under any other
executive compensation or employee benefit plan of the
Corporation or any of its Subsidiaries, except as specifically
provided in any such plan or as otherwise provided by the
Committee. The adoption of the Plan by the Board shall not be
construed as creating any limitations on the power or authority
of the Board to adopt such additional compensation or incentive
arrangements as the Board may deem necessary or desirable.
19. Amendment or Termination. This Plan may be amended by
the Board from time to time to the extent that the Board deems
necessary or appropriate; provided, however, no such amendment
shall be made absent the approval of the stockholders of the
Corporation: (1) if stockholder approval of such amendment is
required for continued compliance with Rule 16b-3 of the Exchange
Act, or (2) if stockholder approval of such amendment is required
by any other applicable laws or regulations or by the rules of
the American Stock Exchange as long as the Stock is listed for
trading on such Exchange. The Committee also may suspend the
granting of Options under this Plan at any time and may terminate
this Plan at any time; provided, however, the Corporation shall
not have the right initially to modify, amend or cancel any
Option granted before such suspension or termination unless (1)
the Participant consents in writing to such modification,
amendment or cancellation or (2) there is a dissolution or
liquidation of the Corporation or a transaction described in
Section 10 of this Plan or (3) there is a Change in Control.
20. Captions. The captions preceding the sections of the
Plan have been inserted solely as a matter of convenience and
shall not, in any manner, define or limit the scope or intent of
any provisions of the Plan.
21. Governing Law. The Plan and all rights thereunder
shall be governed by, and construed in accordance with, the laws
of the State of Georgia, without reference to the principles of
conflicts of law thereof.
22. Expenses. All expenses of administering the Plan shall
be borne by the Corporation.
23. Effective Date. The Plan shall be effective as of the
Effective Date following its adoption by the Board, provided that
the stockholders of the Corporation shall approve this Plan after
the date of its adoption in accordance with the requirements of
Rule 16b-3 under the Exchange Act at a meeting of stockholders to
be held prior to the Effective Date.
17
ANNEX I
1992 STOCK OPTION PLAN - EXHIBIT A
Cumulative
Cumulative Financial Financial Contract Cumulative
Fiscal Target Target Target Target Target Target
Year EBDIT EBDIT EBDIT EBDIT EBDIT EBDIT
1991 216 216 205.2 205.2 216 216
1992 222 438 210.9 416.1 177.6 393.6
1993 231 669 219.5 635.6 207.9 601.5
1994 154.692 -- -- -- -- --
1995 255 -- -- -- -- --
NOTE: All EBDIT figures are in millions.
18
CHARTER MEDICAL CORPORATION
DIRECTORS' STOCK OPTION PLAN
(as amended on December 15, 1993 and September 15, 1994)
1. Purpose. The Charter Medical Corporation Directors'
Stock Option Plan (the "Plan") is intended as an incentive and as a
means of encouraging stock ownership by non-employee members of the
Board of Directors of Charter Medical Corporation (the "Company").
2. Administration.
(a) The Plan shall be administered, construed and interpreted
by the Compensation Committee (the "Committee") of the Board of
Directors. During any time that the Board of Directors does not have
a Compensation Committee, the duties of the Committee under the Plan
shall be performed by the Board of Directors.
(b) The interpretation and construction by the Committee of
any provision of the Plan, any option granted under it or any Stock
Option Agreement and any determination by the Committee, pursuant to
any provision of the Plan, any such option or any provisions of a
Stock Option Agreement, shall be final and conclusive. The terms and
conditions of each individual Stock Option Agreement shall be in
accordance with the provisions of the Plan, but the Committee may
provide for such additional terms and conditions, not in conflict
with the provisions of the Plan, as it deems advisable.
3. Eligibility. Members of the Board of Directors who are
not employees of the Company or any subsidiary shall be granted
options under and pursuant to the terms of the Plan.
4. Stock. The stock subject to the options and other
provisions of the Plan shall be authorized but unissued or reacquired
shares of the $.25 par value Common Stock of the Company (the "Common
Stock"). Subject to readjustment in accordance with the provisions
of Section 6(h), the total amount of Common Stock on which options
may be granted to Directors under the Plan shall not exceed in the
aggregate 175,000 shares.
If any outstanding option (or portion thereof) under the Plan
for any reason expires unexercised or is terminated without exercise
prior to the end of the period during which options may be granted,
the shares of Common Stock allocable to the unexercised portion of
such option again may be subjected to an option under the Plan.
5. Grant of Options. Each eligible Director shall be
granted on the later of February 4, 1993, or the date he or she first
becomes a Director an option to purchase 25,000 shares of Common
Stock, for so long as shares are available under the Plan, but no
option shall be granted after February 4, 1998. Options granted
shall be subject to the vesting and other terms and conditions of the
Plan and each optionee's Stock Option Agreement.
19
6. Terms and Conditions of Options. Stock options granted
pursuant to the Plan shall be evidenced by Stock Option Agreements in
such form as the Committee from time to time shall approve; such
agreements and the stock options granted thereby shall comply with
and be subject to the following terms and conditions:
(a) Number of Shares. Each Stock Option Agreement
shall state the total number of shares of Common Stock to which
it pertains.
(b) Exercise Price. The exercise price per share shall
be the arithmetic average of the Fair Market Value per share of
the Common Stock on the ten trading days that precede the date
of grant, including the date of grant as the tenth trading day,
on which shares of the Common Stock are traded.
(c) Medium and Time of Payment. The exercise price
shall be payable upon the exercise of the option, or as provided
in Section 6(f) if the Company adopts a broker-directed cashless
exercise/resale procedure, in each case in an amount equal to
the number of shares then being purchased times the per share
exercise price. Payment at the election of the optionee, shall
be (i) in cash; (ii) by delivery to the Company of a certificate
or certificates for shares of Common Stock, duly endorsed for
transfer to the Company with signature guaranteed by a member
firm of the New York Stock Exchange or by a national banking
association; (iii) by the withholding by the Company of shares
of stock that otherwise would be issued to the optionee as a
result of the exercise of such option to the extent that the
optionee elects to pay such exercise price through such withheld
shares of Common Stock (provided, however, that any such
election and withholding of shares pursuant to this clause (iii)
shall be effected so as to comply with the provisions of Rule
16b-3 under the Securities Exchange Act of 1934, if applicable);
or (iv) by a combination of (i), (ii) and (iii). In the event
of any payment by delivery or withholding of shares of Common
Stock, such shares shall be valued on the basis of their Fair
Market Value determined as of the day prior to the date of
delivery or withholding. If payment is made by delivery of
shares of Common Stock, the value of such shares may not exceed
the total exercise price payment; but the preceding clause shall
not prevent delivery of a stock certificate for a number of
shares having a greater value, if the number of shares to be
applied to payment of the exercise price is designated by the
optionee and the optionee requests that a certificate for the
remainder shares be delivered to the optionee.
In addition to the payment of the purchase price of the
shares then being purchased, an optionee shall also, pursuant to
Section 12, pay to the Company or otherwise provide for an
amount equal to the amount, if any, which the Company at the
time of exercise is required to withhold under the income tax
withholding provisions of the Internal Revenue Code and other
applicable income tax laws.
20
(d) Fair Market Value. For purposes of Sections 6(b)
and (c), Fair Market Value of Common Stock shall be determined
on the applicable date as follows. If the Common Stock is
registered on a national securities exchange (as such term is
defined by the Securities Exchange Act of 1934) or is regularly
traded in the over-the-counter market on the date of
determination, the Fair Market Value per share of the Common
Stock shall be determined as the price equal to the mean between
the high and low sales prices of a share of the Common Stock on
said national securities exchange on that day [or, for purposes
of Section 6(c), if no shares of the stock are traded on that
date but there were shares traded on dates within a reasonable
period both before and after such date, the Fair Market Value
shall be the weighted average of the means between the high and
low sales prices of the stock on the nearest date before and the
nearest date after that date on which shares of the stock are
traded] or of the mean between the high "bid" and low "asked"
prices per share in said over-the-counter market on that day, as
reported by the National Association of Securities Dealers
Automated Quotation System (or a successor to such system). If
the Common Stock is traded on two national securities exchanges,
the Fair Market Value shall be determined by the weighted
average Fair Market Value on such exchanges unless one of such
exchanges is the American Stock Exchanges in which case Fair
Market Value shall be determined by prices on that exchange. If
the Common Stock is traded both on a national securities
exchange and in the over-the-counter market, the Fair Market
Value shall be determined by the prices on the national
securities exchange, unless transactions on such exchange and in
the over-the-counter market are jointly reported on a
consolidated reporting system in which case the Fair Market
Value shall be determined by reference to such consolidated
reporting system. If the Common Stock is not listed for trading
on a national securities exchange and is not regularly traded in
the over-the-counter market, then the Committee shall determine
the Fair Market Value of the stock from all relevant available
facts which may include opinions of independent experts as to
value and may take into account any recent sales and purchases
of such stock to the extent they are representative.
(e) Terms of Options; Date of Exercise. Terms of
options granted under the Plan shall commence on the date of
grant and shall expire on February 3, 2003, subject to Section
6(g). Each option shall become exercisable when vested.
(f) Method of Exercise. Options shall be exercised (i) by
written notice directed to the Secretary of the Company at its
principal place of business, accompanied by payment [made in
accordance with Section 6(c)], in cash or personal check (which will
be accepted subject to collection), or by certificates for shares of
the Common Stock, or by directions for withholding of shares, or by a
combination of the foregoing, of the option price for the number of
shares specified in the notice of exercise and by any documents
required by Section 6(j), or (ii) by complying with the exercise and
other provisions of any broker-directed cashless exercise/resale
procedure adopted by the Company and approved by the Committee, and by
21
delivery of any documents required by Section 6(j). The Company shall
make delivery of such shares within a reasonable period of time or in
accordance with applicable provisions of any such broker-directed
cashless exercise/resale procedure; provided, however, that if any law
or regulation requires the Company to take any action (including but
not limited to the filing of a registration statement under the
Securities Act of 1933 and causing such registration statement to
become effective) with respect to the shares specified in such notice
before the issuance thereof, then the date of delivery of such shares
shall be extended for the period necessary to take such action.
(g) Effect of Termination of Service as a Director. If
an optionee during his life ceases to be a non-employee Director
of the Company (including its subsidiaries) due to voluntary
resignation as a Director, voluntary decision not to stand for
reelection or removal as a Director by the stockholders for
cause, then the unvested portion of any option shall terminate
on the earlier to occur of (i) the expiration date of the
option, or (ii) the date of termination of service as a non-
employee Director. If an optionee ceases to be a Director for
any other reason, the unvested portion of options shall vest on
the date of termination of service and may thereafter be
exercised in accordance with their terms. In the event of the
death of the optionee while he is a non-employee Director of the
Company or after termination of such service, the vested portion
any option may be exercised by his personal representatives,
heirs or legatees at any time prior to the expiration of six
months from the date of death of the optionee, but in no event
later than the date of expiration of the option.
(h) Adjustments Upon Changes in Capitalization. If the
Common Stock should, as a result of a stock split or stock
divided, combination of shares, recapitalization or other change
in the capital structure of the company or exchange of Common
Stock for other securities by reclassification or otherwise, be
increased or decreased or changed into, or exchanged for, a
different number or kind of shares of other securities of the
Company, or any other corporation, then the number of shares
covered by options, the number and kind of shares which
thereafter may be distributed or issued under the Plan and the
per share option price of options shall be appropriately
adjusted consistent with such change in such manner as the
Committee may deem equitable to prevent dilution of or increase
in the rights granted to, or available for, optionees.
(i) Who May Exercise. No option shall be assignable or
transferable by the optionee except by will or by the laws of
descent and distribution; and, during the lifetime of an
optionee, the option shall be exercisable only by him.
(j) Optionee's Agreement. If, in the opinion of counsel
for the Company, such action is necessary or desirable, no
option shall be granted to any optionee unless at such time such
optionee represents and warrants that the stock will be acquired
for investment only and not for purposes of resale or
distribution and makes such further representation and
22
warranties as are deemed necessary or desirable by counsel to
the Company with regard to holding and resale of the stock. If
at the time of the exercise of any option, in the opinion of
counsel for the Company, it is necessary or desirable, in order
to comply with any applicable laws or regulations relating to
the sale of securities, that the optionee shall represent and
warrant that he is purchasing the shares that are subject to the
option for investment and not with any present intention to
resell or distribute the same or make other and further
representations and warranties with regard to the holding and
resale of the shares, the optionee, upon the request of the
Committee, will execute and deliver to the Company an agreement
or affidavit to such effect. All certificates issued pursuant
to the exercise of any option shall be marked with a restrictive
legend, if such marking, in the opinion of counsel to the
Company, is necessary or desirable.
(k) Rights as a Stockholder. An optionee shall have no
rights as a stockholder with respect to shares covered by his
option until the date of the issuance of the shares to him and
only after such shares are fully paid. Unless specified in
Section 6(h), no adjustment will be made for dividends or other
rights for which the record date is prior to the date of such
issuance.
(l) Vesting. The right to purchase 20% of the shares of
Common Stock covered by an option shall vest on the date of
grant. An additional 20% of the shares of Common Stock covered
by an option shall vest on the February 1st next following the
date of grant and on each succeeding February 1st until fully
vested, provided that the optionee must be a non-employee
Director of the Company on a February 1st in order for options
to vest on such February 1st.
(m) Miscellaneous Provisions. The Stock Option
Agreements authorized under the Plan shall contain such other
provisions, including, without limitation, restrictions upon the
exercise of the option as the Committee shall deem advisable.
7. Effective Date and Termination of Plan.
(a) The Plan shall become effective upon adoption by the Board
of Directors of the Company, provided the Plan is approved by the
holders of a majority of the shares of Common Stock voting on the
matter at an annual or special meeting of stockholders held within
twelve months of adoption by the Board of Directors.
(b) The Plan, with respect to the granting of options, shall
terminate at midnight on February 4, 1998, but the Board of Directors
may terminate the Plan at any time prior to said time and date. Such
termination of the Plan by the Board of Directors shall not alter or
impair any of the rights or obligations under any option theretofore
granted under the Plan unless the affected optionee shall so consent.
23
8. Fractional Shares. If any provision of this Plan or a
Stock Option Agreement would create a right to acquire a fractional
share, such fractional share shall be disregarded.
9. Successor Corporation. The obligations of the Company under
the Plan shall be binding upon any successor corporation or
organization succeeding to substantially all of the assets and
business of the Company and shall continue to be binding upon the
Company notwithstanding any change in ownership of the Company. The
Company agrees that it will make appropriate provision for the
preservation of optionees' rights under the Plan in any agreement or
plan which it may enter into or adopt to effect any such transfer of
assets or ownership.
10. Non-Alienation of Benefits. Except insofar as applicable
law may otherwise require, (i) no options, rights or interest of
optionees or Common Stock deliverable to any optionee at any time
under the Plan shall be subject in any manner to alienation by
anticipation, sale, transfer, assignment, bankruptcy, pledge,
attachment, charge of encumbrance of any kind, and any attempt to so
alienate, sell, transfer, assign, pledge, attach, charge or otherwise
encumber any such amount, whether presently or thereafter payable,
shall be void; and (ii), to the fullest extent permitted by law, the
Plan shall in no manner be liable for, or subject to, claims, liens,
attachments or other like proceedings or the debts, liabilities,
contracts, engagements, or torts of any optionee. Nothing in this
Section 10 shall prevent a optionee's rights and interests under the
Plan from being transferred by will or by the laws of descent and
distribution or pursuant to a qualified domestic relations order as
defined by the Code or ERISA; provided, however, that no transfer by
will or by the laws of descent and distribution shall be effective to
bind the Company unless the Committee or its designee shall have been
furnished before or after the death of such optionee with a copy of
such will or such other evidence as the Committee may deem necessary
to establish the validity of the transfer.
11. Listing and Qualification of Shares. The Company, in its
discretion, may postpone the issuance or delivery of shares of Common
Stock until completion of any stock exchange listing, or other
qualification or registration of such shares under any state or
federal law, rule or regulation, as the Company may consider
appropriate, and may require any optionee to furnish such information
as it may consider appropriate in connection with the issuance or
delivery of the shares in compliance with applicable laws, rules and
regulations.
12. Taxes. The Company may make such provisions and take such
steps as it may deem necessary or appropriate for the withholding of
all federal, state, local and other taxes required by law to be
withheld with respect to options under the Plan, including, but not
limited to, (i) deducting the amount required to be withheld from any
amount then or thereafter payable to an optionee, beneficiary or legal
representative, (ii) requiring an optionee , beneficiary or legal
representative to pay to the Company the amount required to be
withheld as a condition of releasing shares, or (iii) complying with
applicable provisions of any broker-directed cashless exercise/resale
24
procedure adopted by the Company pursuant to Section 6(f). If, in the
exercise of an Option, the Company requires payment pursuant to (ii),
then, to the extent permitted by the Company in its discretion,
payment may be made in any medium provided for in subsection (d) of
Section 6.
13. No Liability of Directors. No member of the Board or the
Committee shall be personally liable by reason of any contract or
other instrument executed by such member on his behalf in his capacity
as a member of the Board or Committee, nor for any mistake of judgment
made in good faith, and the Company shall indemnify and hold harmless
each employee, officer and Director of the Company, to whom any duty
or power relating to the administration or interpretation of the Plan
may be allocated or delegated, against any cost or expense (including
counsel fees) or liability (including any sum paid in settlement of a
claim with the approval of the Board) arising out of any act or
omission to act in connection with the Plan to the fullest extent
permitted or required by the Company's governing instruments and, in
addition, to the fullest extent of any applicable insurance policy
purchased by the Company.
14. Amendment. This Plan may be amended by the Board from time
to time to the extent that the Board deems necessary or appropriate;
provided, however, no such amendment shall be made absent the approval
of the stockholders of the Company: (1) if stockholder approval of
such amendment is required for continued compliance with Rule 16b-3 of
the Securities Exchange Act, or (2) if stockholder approval of such
amendment is required by any other applicable laws or regulations or
by the rules of the American Stock Exchange as long as the Common
Stock is listed for trading on such Exchange. The Committee also may
suspend the granting of options under this Plan at any time; provided,
however, the Company shall not have the right initially to modify,
amend or cancel any option granted before such suspension unless (1)
the optionee consents in writing to such modification, amendment or
cancellation or (2) there is a dissolution or liquidation of the
Company or a transaction described in Section 6(h) of this Plan.
15. Captions. The captions preceding the sections of the Plan
have been inserted solely as a matter of convenience and shall not, in
any manner, define or limit the scope or intent of any provisions of
the Plan.
16. Governing Law. The Plan and all rights thereunder shall be
governed by, and construed in accordance with, the laws of the State
of Georgia, without reference to the principles of conflicts of law
thereof.
17. Expenses. All expenses of administering the Plan shall be
borne by the Company.
25
CHARTER MEDICAL CORPORATION
1994 STOCK OPTION PLAN
(as amended 9/15/94)
1. Purpose. The purpose of the Charter Medical Corporation
1994 Stock Option Plan is to motivate and retain officers and
other key employees of Charter Medical Corporation and its
Subsidiaries who have major responsibility for the attainment of
the primary long-term performance goals of Charter Medical
Corporation.
2. Definitions. The following terms shall have the
following meanings:
"Board" means the Board of Directors of the
Corporation.
"Code" means the Internal Revenue Code of 1986, as
amended, and the rules promulgated thereunder.
"Committee" means a committee of two or more members of
the Board constituted and empowered by the Board to
administer the Plan in accordance with its terms.
"Corporation" means Charter Medical Corporation, a
Delaware corporation.
"Director" means a member of the Board.
"Disability" means a physical or mental condition under
which the Participant qualifies for (or will qualify for
after expiration of a waiting period) disability benefits
under the long-term disability plan of the Corporation or
Subsidiary that employs such Participant.
"ERISA" means the Employee Retirement Income Security
Act of 1974, as amended, and the rules promulgated
thereunder.
"Exchange Act" means the Securities Exchange Act of
1934, as amended.
"Fair Market Value" means: (1) If the Stock is listed
on a national securities exchange (as such term is defined
by the Exchange Act) or is traded on the Nasdaq National
Market System on the date of determination, the price equal
to the mean between the high and low sales prices of a share
of Stock on said national securities exchange or on said
Nasdaq National Market System on that day (or if no shares
of the Stock are traded on that date but there were shares
traded on dates within a reasonable period both before and
after such date, the Fair Market Value shall be the weighted
average of the means between the high and low sales prices
of the Stock on the nearest date before and the nearest date
26
after that date on which shares of the Stock are traded);
(2) If the Stock is traded both on a national securities
exchange and in the over-the-counter market, the Fair Market
Value shall be determined by the prices on the national
securities exchange; and (3) If the Stock is not listed for
trading on a national securities exchange and is not traded
on the Nasdaq National Market System or otherwise in the
over-the-counter market, then the Committee shall determine
the Fair Market Value of the Stock from time to time in its
sole discretion.
"Option" means an Option granted pursuant to Section 6.
"Participant" means an employee of the Corporation or
any of its Subsidiaries who is selected to participate in
the Plan in accordance with Section 4.
"Plan" means the Charter Medical Corporation 1994 Stock
Option Plan.
"Stock" means the common stock, par value $0.25 per
share, of the Corporation.
"Stock Option Agreement" means the written agreement or
instrument which sets forth the terms of an Option granted
to a Participant under this Plan.
"Subsidiary" means any corporation, as defined in
Section 7701 of the Internal Revenue Code of 1986, as
amended, and the regulations promulgated thereunder, of
which the Corporation, at the time, directly or indirectly,
owns 50% or more of the outstanding securities having
ordinary voting power to elect directors (other than
securities having voting power only by reason of a
contingency).
3. Administration. The Plan shall be administered by the
Committee. Subject to the provisions of the Plan, the Committee,
acting in its absolute discretion, shall exercise such powers and
take such action as expressly called for under this Plan and,
further, the Committee shall have the power to interpret the
Plan, to determine the terms of each Stock Option Agreement
(subject to the provisions of the Plan) and (subject to Section
18 and Rule 16b-3 under the Exchange Act, if applicable) to take
such other action in the administration and operation of this
Plan as the Committee deems equitable under the circumstances.
All actions of the Committee shall be binding on the Corporation,
on each affected Participant and on each other person directly or
indirectly affected by such action. No member of the Board shall
serve as a member of the Committee unless such member is a
"disinterested person" within the meaning of Rule 16b-3 under the
Exchange Act. The Committee shall have the right to delegate to
the chief executive officer of the Corporation the authority to
select Participants and to grant Options (except to any person
subject to Section 16 of the Exchange Act), subject to any
review, approval, or notification required by the Committee or as
may otherwise be required by law.
27
4. Participation. Participants in the Plan shall be
limited to those officers and employees of the Corporation or any
of its Subsidiaries who have been selected to participate in the
Plan by the Committee acting in its absolute discretion.
5. Maximum Number of Shares Subject to Options. Subject to
the provisions of Section 9, there shall be 1,300,000 shares of
Stock reserved for use under this Plan, and such shares of Stock
shall be reserved to the extent that the Committee and the Board
deems appropriate from authorized but unissued shares of Stock or
from shares of Stock which have been reacquired by the
Corporation. Any shares of Stock subject to any Option which
remain after the cancellation, expiration, exchange or forfeiture
of such Option thereafter shall again become available for use
under this Plan. All authorized and unissued shares issued upon
exercise of Options under the Plan shall be fully paid and
nonassessable shares.
6. Grant of Options. The Committee, acting in its absolute
discretion, shall have the right to grant Options to Participants
under this Plan from time to time; provided, however, that the
maximum number of shares of Stock issuable upon exercise of
Options shall not exceed 1,300,000, subject to adjustment as
provided in Section 9. No Option shall be granted after December
31, 1996. The maximum number of Options that are granted to any
Participant shall not exceed 150,000, subject to adjustment as
provided in Section 9.
7. Terms and Conditions of Options. Options granted
pursuant to the Plan shall be evidenced by Stock Option
Agreements in such form as the Committee from time to time shall
approve and including such terms and conditions not inconsistent
with the provisions set forth in the Plan as the Committee may
determine; provided, that such Stock Option Agreements and the
Options granted shall comply with and be subject to the following
terms and conditions:
(a) Employment. Each Participant shall agree to
remain in the employ of and to render services to the
Corporation or a Subsidiary thereof for such period as the
Committee may require in the Stock Option Agreement;
provided, however, that such agreement shall not impose upon
the Corporation or any Subsidiary thereof any obligation to
retain the Participant in its employ for any period.
(b) Number of Shares. Each Stock Option Agreement
shall state the total number of shares of Stock to which it
pertains.
(c) Exercise Price. The exercise price per share for
Options shall be Fair Market Value of the Stock on the date
of grant, subject to adjustment as contemplated by Section
9.
(d) Medium and Time of Payment. The exercise price
shall be payable upon the exercise of the Option, or as
28
provided in Section 7(e) if the Corporation adopts a
broker-directed cashless exercise/resale procedure, in each
case in an amount equal to the number of shares then being
purchased times the per share exercise price. Payment shall
be in cash; except that the Corporation, in its sole
discretion, may permit payment by delivery to the
Corporation of a certificate or certificates for shares of
Stock duly endorsed for transfer to the Corporation with
signature guaranteed by a member firm of the New York Stock
Exchange or by a national banking association. In the event
of any payment by delivery of shares of Stock, such shares
shall be valued on the basis of their Fair Market Value
determined as of the day prior to the date of delivery. If
payment is made by delivery of shares of Stock, the value of
such Stock may not exceed the total exercise price payment;
but the preceding clause shall not prevent delivery of a
stock certificate for a number of shares having a greater
value, if the number of shares to be applied to payment of
the exercise price is designated by the Participant and the
Participant requests that a certificate for the remainder
shares be delivered to the Participant.
In addition to the payment of the purchase price of the
shares of Stock then being purchased, a Participant shall
also, pursuant to Section 15, pay to the Corporation or
otherwise provide for payment of an amount equal to the
amount, if any, which the Corporation at the time of
exercise is required to withhold under the income tax
withholding provisions of the Code and other applicable
income tax laws.
(e) Method of Exercise. All Options shall be
exercised (i) by written notice directed to the Secretary of
the Corporation at its principal place of business,
accompanied by payment made in accordance with the foregoing
subsection (d) of the option exercise price for the number
of shares specified in the notice of exercise and by any
documents required by Section 13, or (ii) by complying with
the exercise and other provisions of any broker-directed
cashless exercise/resale procedure adopted by the
Corporation and approved by the Committee, and by delivery
of any documents required by Section 13. The Corporation
shall make delivery of such shares within a reasonable
period of time or in accordance with applicable provisions
of any such broker-directed cashless exercise/resale
procedure; provided, however, that if any law or regulation
requires the Corporation to take any action (including but
not limited to the filing of a registration statement under
the Securities Act of 1933 and causing such registration
statement to become effective) with respect to the shares
specified in such notice before their issuance, then the
date of delivery of such shares shall be extended for the
period necessary to take such action.
29
(f) Term of Options. Except as otherwise specifically
provided in the Plan, the terms of all Options shall
commence on the date of grant and shall expire ten years
after the date of grant.
(g) Exercise of Options. Options are exercisable only
to the extent they are vested as provided in Section 8.
After Options have vested in accordance with Section 8, such
Options are exercisable at any time, in whole or in part
during their terms if the Participant is at the time of
exercise employed by the Company or a Subsidiary. If a
Participant's employment with the Corporation or any
Subsidiary is terminated for any reason other than death or
disability, the vested portion of each Option held by such
Participant on the date of such termination may be exercised
for 90 days following the date of termination of employment
(but not after expiration of the term of the option). In
the event of the death or Disability of a Participant, the
vested portion of each Option held by such Participant on
the date of such event may be exercised within twelve months
of the date of such event (but not after the expiration of
the term of the option).
In the event of the death of a Participant, the vested
portion of each Option previously held by such Participant
may be exercised within the time set forth above by the
executor, other legal representative or, if none, the heir
or legatee of such Participant.
(h) Adjustments Upon Changes in Capitalization. Upon
a change in capitalization pursuant to Section 9, the number
of shares covered by an Option and the per share option
exercise price shall be adjusted in accordance with the
provisions of Section 9.
(i) Transferability. No Option shall be assignable or
transferable by the Participant except by will or by the
laws of descent and distribution or pursuant to a qualified
domestic relations order as defined by the Code or ERISA.
The designation of a beneficiary shall not constitute a
transfer; and, during the lifetime of a Participant, all
Options held by such Participant shall be exercisable only
by him or his lawful representative in the event of his
incapacity.
(j) Rights as a Stockholder. A Participant shall have
no rights as a stockholder with respect to shares covered by
his Option until the date of the issuance of the shares to
him and only after such shares are fully paid. Unless
specified in Section 9, no adjustment will be made for
dividends or other rights for which the record date is prior
to the date of such issuance.
(k) Miscellaneous Provisions. The Stock Option
Agreements authorized under the Plan may contain such other
provisions not inconsistent with the terms of this Plan as
the Committee shall deem advisable.
30
8. Vesting. Options granted under this Plan shall be
exercisable only to the extent such Options have become vested
pursuant to this Section 8. An Option shall vest at the rate of
33-1/3% of the shares covered by the Option on each of the first
three anniversary dates of the grant of the Option if the
Participant is an employee of the Company or a Subsidiary on such
dates.
9. Change in Capitalization. If the Stock should, as a
result of a stock split or stock dividend, combination of shares,
recapitalization or other change in the capital structure of the
Corporation or exchange of Stock for other securities by
reclassification or otherwise, be increased or decreased or
changed into, or exchanged for, a different number or kind of
shares or other securities of the Corporation, or any other
corporation, then the number of shares covered by Options, the
number and kind of shares which thereafter may be distributed or
issued under the Plan and the per share option price of Options
shall be appropriately adjusted consistent with such change in
such manner as the Committee may deem equitable to prevent
dilution of or increase in the rights granted to, or available
for, Participants.
10. Fractional Shares. In the event that any provision of
this Plan or a Stock Option Agreement would create a right to
acquire a fractional share of Stock, such fractional share shall
be disregarded.
11. Successor Corporation. If the Company is merged or
consolidated with another corporation or other legal entity and
the Company is not the surviving corporation or legal entity, or
in the event all or substantially all of the property or common
stock of the Company is acquired by another corporation or legal
entity, or in case of a dissolution, reorganization or
liquidation of the Company, the Board of Directors of the
Company, or the board of directors or governing body of any
corporation or other legal entity assuming the obligations of the
Company hereunder, shall either: (i) make appropriate provision
for the preservation of Participants' rights under the Plan in
any agreement or plan it may enter into or adopt to effect any of
the foregoing transactions; or (ii) upon written notice to each
Participant, provide that all Options, whether or not vested, may
be exercised within thirty days of the date of such notice and if
not so exercised, shall be terminated.
12. Non-Alienation of Benefits. Except insofar as
applicable law may otherwise require, (i) no Options, rights or
interest of Participants or Stock deliverable to any Participant
at any time under the Plan shall be subject in any manner to
alienation by anticipation, sale, transfer, assignment,
bankruptcy, pledge, attachment, charge of encumbrance of any
kind, and any attempt to so alienate, sell, transfer, assign,
pledge, attach, charge or otherwise encumber any such amount,
whether presently or thereafter payable, shall be void; and (ii),
to the fullest extent permitted by law, the Plan shall in no
manner be liable for, or subject to, claims, liens, attachments
31
or other like proceedings or the debts, liabilities, contracts,
engagements, or torts of any Participant or beneficiary. Nothing
in this Section 12 shall prevent a Participant's rights and
interests under the Plan from being transferred by will or by the
laws of descent and distribution or pursuant to a qualified
domestic relations order as defined by the Code or ERISA;
provided, however, that no transfer by will or by the laws of
descent and distribution shall be effective to bind the
Corporation unless the Committee or its designee shall have been
furnished before or after the death of such Participant with a
copy of such will or such other evidence as the Committee may
deem necessary to establish the validity of the transfer.
13. Listing and Qualification of Shares. The Corporation,
in its discretion, may postpone the issuance or delivery of
shares of Stock until completion of any stock exchange listing,
or other qualification or registration of such shares under any
state or federal law, rule or regulation, as the Corporation may
consider appropriate, and may require any Participant to make
such representations, including, but not limited to, a written
representation that the shares are to be acquired for investment
and not for resale or with a view to the distribution thereof,
and furnish such information as it may consider appropriate in
connection with the issuance or delivery of the shares in
compliance with applicable laws, rules and regulations. The
Corporation may cause a legend or legends to be placed on such
certificates to make appropriate reference to such representation
and to restrict transfer in the absence of compliance with
applicable federal or state securities laws.
14. No Claim or Right Under the Plan. No employee of the
Corporation or any Subsidiary shall at any time have the right to
be selected as a Participant in the Plan nor, having been
selected as a Participant and granted an Option, to be granted
any additional Option. Neither the action of the Corporation in
establishing the Plan, nor any action taken by it or by the Board
or the Committee thereunder, nor any provision of the Plan, nor
participation in the Plan, shall be construed to give, and does
not give, to any person the right to be retained in the employ of
the Corporation or any Subsidiary, or interfere in any way with
the right of the Corporation or any Subsidiary to discharge or
terminate any person at any time without regard to the effect
such discharge or termination may have upon such person's rights,
if any, under the Plan.
15. Taxes. The Corporation may make such provisions and
take such steps as it may deem necessary or appropriate for the
withholding of all federal, state, local and other taxes required
by law to be withheld with respect to Options under the Plan,
including, but not limited to, (i) deducting the amount required
to be withheld from salary or any other amount then or thereafter
payable to a Participant, beneficiary or legal representative,
(ii) requiring a Participant, beneficiary or legal representative
to pay to the Corporation the amount required to be withheld as a
condition of releasing the Stock, or (iii) complying with
applicable provisions of any broker-directed cashless
32
exercise/resale procedure adopted by the Corporation pursuant to
Section 7(e).
16. No Liability of Directors. No member of the Board or
Committee shall be personally liable by reason of any contract or
other instrument executed by such member on his behalf in his
capacity as a member of the Board or Committee, nor for any
mistake of judgment made in good faith, and the Corporation shall
indemnify and hold harmless each employee, officer and Director
of the Corporation, to whom any duty or power relating to the
administration or interpretation of the Plan may be allocated or
delegated, against any cost or expense (including counsel fees)
or liability (including any sum paid in settlement of a claim
with the approval of the Board) arising out of any act or
omission to act in connection with the Plan to the fullest extent
permitted or required by the Corporation's governing instruments
and, in addition, to the fullest extent of any applicable
insurance policy purchased by the Corporation.
17. Other Plans. Nothing contained in the Plan is intended
to amend, modify or rescind any previously approved compensation
plans or programs entered into by the Corporation or its
Subsidiaries. The Plan shall be construed to be in addition to
any and all such plans or programs. No award of Options under
the Plan shall be construed as compensation under any other
executive compensation or employee benefit plan of the
Corporation or any of its Subsidiaries, except as specifically
provided in any such plan or as otherwise provided by the
Committee. The adoption of the Plan by the Board shall not be
construed as creating any limitations on the power or authority
of the Board to adopt such additional compensation or incentive
arrangements as the Board may deem necessary or desirable.
18. Amendment or Termination. This Plan may be amended by
the Board from time to time to the extent that the Board deems
necessary or appropriate; provided, however, no such amendment
shall be made absent the approval of the stockholders of the
Corporation: (1) if stockholder approval of such amendment is
required for continued compliance with Rule 16b-3 of the Exchange
Act, or (2) if stockholder approval of such amendment is required
by any other applicable laws or regulations or by the rules of
any stock exchange as long as the Stock is listed for trading on
such exchange. The Committee also may suspend the granting of
Options under this Plan at any time and may terminate this Plan
at any time; provided, however, the Corporation shall not have
the right to modify, amend or cancel any Option granted before
such suspension or termination unless (1) the Participant
consents in writing to such modification, amendment or
cancellation or (2) there is a dissolution or liquidation of the
Corporation or a transaction described in Section 11 of this
Plan.
19. Captions. The captions preceding the sections of the
Plan have been inserted solely as a matter of convenience and
shall not, in any manner, define or limit the scope or intent of
any provisions of the Plan.
33
20. Governing Law. The Plan and all rights thereunder
shall be governed by, and construed in accordance with, the laws
of the State of Georgia, without reference to the principles of
conflicts of law thereof.
21. Expenses. All expenses of administering the Plan shall
be borne by the Corporation.
22. Effective Date. The Plan shall be effective as of the
date of its adoption by the Board, subject to approval of this
Plan by the stockholders of the Corporation after the date of its
adoption in accordance with the requirements of Rule 16b-3 under
the Exchange Act.
34
EXECUTIVE BENEFIT PLAN
Plan Year
The Plan Year for Executive Benefits is January 1 to December
31, and benefit levels will be based upon salary. Changes in
benefit selections will be permitted annually, during the
enrollment period.
FLEX Benefits
Participants may choose among tax-sheltered options to create
a benefit package of the greatest value.
The amount of the FLEX Allowance is equal to 11% of base
salary as of January 1.
It is important to note that to preserve the tax-favored
status of benefits within the Execu-FLEX Benefit Plan, the
FLEX Allowance cannot be distributed in cash under current
tax law.
The calculations of benefit costs are estimated. Final
calculations will be shown on Summary of Elections which will
be sent to participants approximately 90 days after the
enrollment period.
Individual Long-Term Disability Coverage
Overview. Using tax-sheltered FLEX dollars, a participant can
purchase a personal disability insurance policy with
provisions designed especially for the needs of executives,
including a much greater benefit and more liberal definition
of disability.
Amount of benefit. Up to the carrier maximum.
Term of benefit. Benefits are paid until age 65, unless a
participant becomes disabled after age 61:
Total Disability Beginning Benefit Period
At age 62 42 months
At age 63 36 months
At age 64 30 months
At age 65 24 months
At age 66 21 months
At age 67 18 months
At age 68 15 months
At age 69 or older 12 months
35
Waiting period. Benefits commence after a 180-day waiting
period.
Definition of disability. Inability to perform the duties of
the participant's occupation.
Benefit offsets. Benefits are not reduced by Social Security
or any other disability income payments.
Partial disability. If partially disabled, benefits are paid
for loss of earnings to age 65. All income earned prior to
disability will be considered when determining the percentage
of income which is lost.
Policy renewal. The policy is non-cancelable and guaranteed
renewable.
Portability. Participants own the disability insurance policy
and may continue it if the participants leave Charter.
Benefit increases. Coverage will increase automatically each
year for five years regardless of health condition. The
annual increase will match actual percentage increases in
income not to exceed 15%, to a maximum total benefit of
$15,000 per month.
Optional provisions. The following coverages may be added to
the individual long-term disability policy at an additional
charge:
- Inflation adjustment
- Lifetime accident
- Premium refund
Group benefit is discontinued.
Tax status. Premiums for this benefit are charged against
tax-sheltered FLEX dollars, and any benefits received will be
subject to income tax.
However, a participant may pay some or all of the premiums
with after-tax dollars to receive a tax-free benefit. The IRS
considers the proportion of premiums contributed after-tax to
the total of premiums paid during the prior year in
determining the percentage of benefit sheltered; i.e.,
executive pays 60% of premium via payroll deduction, 60% of
benefits received are tax free.
Evidence of insurability. FLEX disability coverage is subject
to medical evidence of insurability, and a physical exam will
be scheduled with a health care professional selected by the
insurance company.
36
Integration of coverage. The individual disability policy
will integrate with any existing individual disability
policies.
Benefit charge. The FLEX account will be charged with the
annual cost of the coverage selected. The annual cost will
increase at approximately the same percentage amount per year
for the first five years as coverage automatically increases.
Supplemental Survivor Plan
Overview. A participant may allocate a portion of FLEX
benefit dollars to the Supplemental Survivor Plan, for
additional life insurance coverage both pre- and
post-retirement. Charter will assist with the purchase of a
permanent insurance policy by advancing premiums for a
ten-year period. This benefit option is in addition to
Charter-provided Benefits Plus Plan and the Executive
Survivor insurance.
Amount of benefit. A participant may elect life insurance
coverage of up to four times plan entry salary over and above
the Basic and Executive survivor benefits. Insurance coverage
is selected in whole multiples of salary.
Benefit increases. The benefit will not increase each year
with compensation. Coverage will increase or decrease based
upon the financial performance of the investment funds
selected.
Type of insurance. This benefit is provided through a
specially-selected variable universal life insurance policy.
Investment choices. The participant directs the investment of
the premium deposits among portfolios within the insurance
policy plus a Real Property Account and fixed-rate option.
The participant may move the money within the portfolios up
to four times per year without charge.
Charter sponsorship. To assist with the purchase of this
benefit, Charter will deposit premiums, as an advance, into
the life insurance contract for ten years. Upon retirement or
at the end of 15 years, whichever is later, funds will be
withdrawn and/or borrowed from the cash value of the policy
to repay Charter's advances. The participant will retain
ownership of the policy.
Post-Retirement Death Benefit. The amount and duration of the
policy's post-retirement death benefit depend upon the amount
of cash value retained in the policy after Charter withdraws
its premium advances.
Early policy distribution. A participant may request an
early release of the policy when the cash value equals the
cumulative premium advances.
37
Split Dollar insurance. The insurance is provided on a Split
Dollar basis. In this case, the participant will legally own
the policy. Cash accumulation value equal to Charter's
deposits will be legally assigned to Charter and will be paid
either from proceeds at death, or from cash values upon
retirement (or at the end of 15 years, if later).
Termination of employment. The Supplemental Survivor policy
is portable, and the participant may elect to continue it
upon leaving Charter by repaying Charter its premium advances
and making future premium payments.
After-tax contributions. Based on IRS rules, the participant
will make after-tax contributions through payroll deductions
in equal installments. By using Split Dollar, the lowest
possible rates for valuing this benefit are used when
calculating payments.
Evidence of insurability. Supplemental Survivor coverage is
subject to medical evidence of insurability.
Benefit charge. The charge to the tax-sheltered FLEX
Allowance is for the Time Value of Money (TVM) multiplied by
Charter's cumulative outstanding advances. The current TVM is
3%.
Spouse Survivor Benefits
Overview. The participant may allocate a portion of the
participant's tax-sheltered FLEX Allowance to the Spouse
Survivor Benefit to purchase life insurance coverage on the
participant's spouse.
Amount of benefit. The participant may elect either $50,000
or $100,000 of insurance coverage.
Charter sponsorship. To assist with the purchase of this
benefit, Charter will deposit premiums, as an advance, into
the life insurance contract for ten years.
Benefit increases. The amount of benefit does not change over
time.
Type of insurance. This benefit is provided through a
specially selected universal life insurance policy.
Split Dollar insurance. The insurance is provided on a Split
Dollar basis. The participant legally owns the policy. Cash
accumulation value equal to Charter deposits will be assigned
to Charter and will be paid either from proceeds at death or
from cash values at the end of 12 years.
Policy distribution. At the end of the twelfth year, the
participant will withdraw and/or borrow funds from the cash
value of the policy to repay Charter's advances.
38
Termination of employment. A spouse's policy is portable. If
a participant leaves Charter before the end of 12 years, a
participant may continue the policy by repaying Charter for
its premium advances and by personally making future premium
payments.
After-tax contributions. Based on IRS rules, a participant
will make after-tax contributions through payroll deductions
in equal installments. By using Split Dollar, the lowest
possible rates for valuing this benefit are used when
calculating payments.
Evidence of insurability. The Spouse Survivor Benefit is
subject to medical evidence of insurability.
Benefit charge. The charge to a tax-sheltered FLEX Allowance
is for the Time Value of Money (TVM) multiplied by Charter's
cumulative outstanding advances. The current TVM is 3%.
Executive Retirement Benefits - Annual Incentive Match
Overview. As of January 1, 1994 each Annual Incentive plan
award will be matched by a 33 1/3% contribution by Charter.
Tax status. Credits to and earnings on the Annual Incentive
match are tax-sheltered until the vesting date. Upon
vesting, a benefit equal to the account balance will be
distributed, and the participant will owe income taxes on the
full amount.
Vesting. A participant may elect a vesting date from one of
three options.
- Two years
- Mid-term date (more than two years but less than
specified retirement date)
- Specified retirement date
Once a participant selects a mid-term date and/or specified
retirement, all future deposits will be limited to two years
or the previously-selected mid-term and retirement dates. One
year prior to a selected mid-term date, a participant will
have the opportunity to elect a new mid-term vesting date.
The vesting date will be the earliest of the following dates:
- Date elected
- Death
- Termination as a result of disability
39
- Involuntary termination without cause
Or in the case of any other termination, whether voluntary or
terminated with cause:
- Twenty-four months following any other termination,
provided the participant fulfills the terms of the
noncompetition agreement
Substantial risk of forfeiture. The Annual Incentive Match is
subject to a substantial risk of forfeiture in the form of a
non-competition agreement. The non-competition agreement
stipulates that the participant will not work for a competitor
in the same or similar job duties for a period of 24 months as
described in the agreement.
Employer insolvency. If Charter becomes insolvent, the
participant will be an unsecured creditor and will have no
preferred claim to any assets. However, a special trust is
being implemented to safeguard assets informally funding the
Annual Incentive Match benefits from any other contingencies
such as change in control of Charter.
Method of investment. A participant may elect from several
investment funds within a mutual fund family. The interest
credited will be equal the total investment returns on your
selected funds, less any applicable loads and charges as
described in the fund(s) prospectus.
Timing of deposits. Deposits will be made annually in January
based on the previous year's incentive award.
FLEX Retirement Benefits - Capital Accumulation Account
Overview. The Capital Accumulation Account is a tax-sheltered
opportunity to build net worth on a medium- or long-term basis.
It is designed to be an effective means of supplementing
retirement income from other sources.
This account is subject to the same elective vesting rules, the
Substantial Risk of Forfeiture, and the risk of Employer
insolvency as the Annual Incentive Match. A participant may
elect the same or a different vesting date for a Capital
Accumulation Account.
Timing of credits. FLEX Fund dollars allocated to the Capital
Accumulation Account will be credited annually in April 1994.
Benefit charge. Tax-sheltered FLEX Allowance dollars are used
to pay for this benefit should the participant elect it.
40