SCHEDULE 14A
(Rule 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14a INFORMATION
Proxy Statement Pursuant to Section 14(a) of Securities
Exchange Act of 1934 (Amendment No. )
Filed by the Registrant X
---
Filed by a Party other than the Registrant
---
Check the appropriate box:
Preliminary Proxy Statement
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Confidential, for use of the Commission Only (as permitted
- --- by Rule 14a-6(c)(2))
X Definitive Proxy Statement
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Definitive Additional Materials
- ---
Soliciting Material Pursuant to Rule 14a-11(c) or rule 14a-12
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Morgan Keegan, Inc.
- ---------------------------------------------------------------------
(Name of Registrant as Specified In The Charter)
- ---------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
X No fee required
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Fee computed on table below per Exchange Act Rules 14a-6(i)(l)
- --- and 0-11.
(1) Title of each class of securities to which transaction
applies:
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(2) Aggregate number of securities to which transaction
applies:
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(3) Per unit price or other underlying value of transaction
computed pursuant to Exchange Act Rule 0-11 (set forth
the amount on which the filing fee is calculated and
state how it was determined):
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(4) Proposed maximum aggregate value of transaction:
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Fee paid previously with preliminary materials:
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Check box if any part of the fee is offset as provided by
- --- Exchange Act Rule 0-11(a)(2) and identify the filing for
which the offsetting fee was paid previously. Identify
the previous filing by registration statement number, or
the Form or Schedule and the date of its filing:
(1) Amount Previously Paid:
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(2) Form, Schedule or Registration Statement No.:
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MORGAN KEEGAN, INC.
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON NOVEMBER 21, 2000
NOTICE IS HEREBY GIVEN that the 2000 Annual Meeting of the
Shareholders of Morgan Keegan, Inc. (the "Annual Meeting") will be held
at the offices of Morgan Keegan, Inc. (the "Company"), Twenty-First
Floor, Morgan Keegan Tower, 50 North Front Street, Memphis, Tennessee
38103 on Tuesday, November 21, 2000, at 10:00 a.m., local time, for the
following purpose:
1. To elect directors to serve for the ensuing year or until
their successors have been duly elected and qualified;
2. To approve the adoption of the Morgan Keegan, Inc. 2000
Equity Compensation Plan;
3. To approve the adoption of the Morgan Keegan, Inc. 2000
Employee Stock Purchase Plan;
4. To approve the adoption of the Morgan Keegan, Inc. 2000
Non-Employee Director Stock Option Plan; and
5. To approve the adoption of the Morgan Keegan, Inc. 2000
Executive Incentive Compensation Plan.
Only shareholders of the Company of record as of the close of
business on September 29, 2000, will be entitled to notice of, and to
vote at, the Annual Meeting and any adjournment thereof.
There is enclosed, as a part of this Notice, a Proxy Statement which
contains further information regarding the meeting and the above
proposal.
BY ORDER OF THE BOARD OF DIRECTORS
JOSEPH C. WELLER
Secretary
October 20, 2000
IMPORTANT
Shareholders who do not expect to attend the meeting
are requested to complete, date, sign and return the
accompanying proxy in the enclosed envelope. Share-
holders who attend the meeting may vote in person
even if they have already sent in a proxy.
MORGAN KEEGAN, INC.
PROXY STATEMENT
GENERAL INFORMATION
THIS PROXY STATEMENT is provided in connection with the solicitation
of proxies by the Board of Directors of Morgan Keegan, Inc. (the
"Company") for use at the annual meeting of shareholders to be held at
the offices of Morgan Keegan, Inc., 21st floor Morgan Keegan Tower, 50
North Front Street, Memphis, Tennessee 38103 at 10:00 a.m, local time,
on November 21, 2000, (the "Annual Meeting") and any adjournment
thereof. The mailing address of the principal executive offices of the
Company is Morgan Keegan Tower, 50 North Front Street, Memphis,
Tennessee 38103. This Proxy Statement and the Proxy Form, Notice of
Meeting and the Company's Annual Report, all enclosed herewith, are
first being mailed to the shareholders of the Company on or about
October 20, 2000.
The Proxy
The solicitation of proxies is being made primarily by the use of
the mails. The cost of preparing and mailing this Proxy Statement and
accompanying material, and the cost of any supplementary solicitations,
which may be made by mail, telephone, telegraph, telecopier or
personally by officers and employees of the Company, will be borne by
the Company. The annual report of the Company for the year ended July
31, 2000 is being mailed with the Proxy Statement to Shareholders
entitled to vote at the meeting. The shareholder giving the proxy has
the power to revoke it by delivering written notice of such revocation
to the Secretary of the Company prior to the Annual Meeting or by
attending the meeting and voting in person. The proxy will be voted as
specified by the shareholder in the spaces provided on the Proxy Form,
or, if no specification is made, it will be voted in accordance with
the terms thereof.
Common Shares represented by properly executed proxies, unless
previously revoked, will be voted in accordance with the instructions
on such proxies. If no instruction is indicated on the proxy, the
named holders of the proxies will vote such common shares FOR all
director nominees named in this Proxy Statement, FOR the approval
of the 2000 Equity Compensation Plan, FOR the approval of
the 2000 Employee Stock Purchase Plan, FOR the approval of
the 2000 Non-Employee Director Stock Option Plan, and FOR
the approval of the 2000 Executive Incentive Compensation
Plan. The named holders of proxies also will use their discretion
in voting the Common Shares in connection with any other business
that properly may come before the Annual Meeting.
Voting Rights
Each outstanding share is entitled to one vote. Only shareholders
of record at the close of business on September 29, 2000 will be
entitled to notice of, and to vote at, the Annual Meeting and any
adjournment thereof. As of the close of business on September 29,
2000, the Company had outstanding 28,555,066 shares of common stock
$.625 par value per share (the "Common Shares"). Of the total number
of outstanding Common Shares on September 29, 2000, the proposed
Directors and Executive Officers of the Company, consisting of eleven
persons, owned 6,942,677 shares comprising 24.3% of the total.
REQUIRED VOTE
Once a quorum of shareholders is present at the Annual Meeting,
the vote of the holders of a majority of the Common Shares cast in
person or by proxy shall decide any matter submitted to the shareholders
except the election of directors. The election of directors requires
the vote of the holders of a plurality of the Common Shares cast in
person or by proxy at the Annual Meeting, again assuming the presence
of a quorum. A quorum will be present at the Annual Meeting if the
holders of a majority of the issued and outstanding Common Shares are
present at the Annual Meeting in person or by proxy.
OWNERSHIP OF THE COMPANY'S COMMON SHARES
Security Ownership of Certain Beneficial Owners
The following table sets forth information as of September 29,
2000, regarding each person known to the Company to be the beneficial
owner of more than five percent of its Common Shares:
NAME AND ADDRESS AMOUNT AND NATURE
OF BENEFICIAL OF BENEFICIAL PERCENT OF CLASS(1)
OWNER OWNERSHIP
Allen B. Morgan, Jr. 3,417,309 (2) 12.0%
Morgan Keegan Tower
Fifty Front Street
Memphis, Tennessee 38103
Joseph C. Weller 1,586,581 5.6%
Morgan Keegan Tower
Fifty Front Street
Memphis, Tennessee 38103
[FN]
____________________________
(1) Based on 28,555,066 Common Shares outstanding at
September 29,2000. Beneficial ownership is determined
in accordance with rules of the Securities and
Exchange Commission and include voting or investment
power with respect to securities. Shares of Common
Stock issuable upon the exercise of stock options or
other rights to acquire Common Stock, currently exercisable
or convertible, or exercisable or convertible within 60 days
of September 29, 2000 are deemed outstanding and to be
beneficially owned by the person holding such option or
other right for purposes for computing such person's
percentage ownership, but are not deemed outstanding for the
purpose of computing the percentage ownership of any other
person. Except for shares held jointly with a person's spouse
and subject to applicable community property laws, or
indicated in the footnotes to this table, each shareholder
identified in the table possesses sole voting and investment
power with respect to all shares of Common Stock shown as
beneficially owned by such shareholder.
(2) Excludes 84,145 shares owned by Mr. Morgan's spouse and
70,000 owned by Mr. Morgan's children's trust over which
shares Mr. Morgan has no voting power or investment power and
in which Mr. Morgan disclaims any beneficial ownership.
Includes 95,872 shares held by Mr. Morgan as custodian or
Trustee for his minor children over which shares Mr. Morgan
has sole voting power and investment power.
</FN>
Security Ownership of Management
The following table sets forth the beneficial ownership of the
Company's Common Shares as of September 29, 2000 by (i) each
director, (ii) each director nominee, (iii) each executive officer
named in the Summary Compensation Table, and (iv) all directors,
nominees and Executive Officers as a group:
NAME OF AMOUNT AND NATURE
BENEFICIAL OWNER OF BENEFICIAL PERCENT OF CLASS(1)
OWNERSHIP
Kenneth F. Clark, Jr. 121,500 (2) *
Douglas Edwards 481,495 (6) 1.7%
James E. Harwood 97,683 (8) *
Steven P. Laffey 59,477 *
Allen B. Morgan, Jr. 3,417,309 (3) 12.0%
Harry J. Phillips, Sr. 48,000 (8) *
Donald Ratajczak, Ph.D. 110,084 (9) *
Robert M. Solmson 18,500 (7) *
John W. Stokes, Jr. 976,548 (4) 3.4%
Joseph C. Weller 1,586,581 (5) %
Spence L. Wilson 19,500 (7) *
All Director, Nominees and
Executive Officers as a Group
(11 Persons) 24.3%
[FN]
________
(1) Based on 28,555,066 Common Shares outstanding at
September 29, 2000. Beneficial ownership is
determined in accordance with rules of the
Securities and Exchange Commission and include
voting or investment power with respect to securities.
Shares of Common Stock issuable upon the exercise of stock
options or other rights to acquire Common Stock, currently
exercisable or convertible, or exercisable or convertible
within 60 days of September 29, 2000 are deemed outstanding
and to be beneficially owned by the person holding such
option or other right for purposes for computing such
person's percentage ownership, but are not deemed outstanding
for the purpose of computing the percentage ownership of any
other person. Except for shares held jointly with a person's
spouse and subject to applicable community property laws,
or indicated in the footnotes to this table, each shareholder
identified in the table possesses sole voting and investment
power with respect to all shares of Common Stock shown
as beneficially owned by such shareholder.
(2) Includes option to purchase 54,000 shares pursuant to the
Company's 1991 Directors Stock Option Plan which have
not been exercised.
(3) Excludes 84,145 shares owned by Mr. Morgan's spouse
and 70,000 in his children's trust over which
shares Mr. Morgan has no voting power or investment
power and in which Mr. Morgan disclaims any
beneficial ownership. Includes 95,872 shares
held by Mr. Morgan as custodian or Trustee for his
minor children over which shares Mr. Morgan has sole
voting power and investment power.
(4) Includes 30,000 shares owned of record by Mr. Stokes' spouse.
(5) Includes 67,500 shares owned of record by Mr. Weller's
spouse.
(6) Includes 6,988 shares owned of record by Mr. Edward's
spouse.
(7) Includes Option to purchase 13,500 shares pursuant to the
Company's 1991 Directors Stock Option Plan which have
not been exercised.
(8) Includes option to purchase 40,500 shares pursuant to the
Company's 1991 Directors Stock Option Plan which have
not been exercised.
(9) Includes options to purchase 54,000 shares pursuant to the
Company's 1991 Directors Stock Option Plan which have
not been exercised.
* Represents less than one 1% of total outstanding
Common Shares.
</FN>
(Proposal No.1)
Election of Directors
Committees and Meetings of the Board of Directors
The business of the Company is under the general management of its
Board of Directors as provided by the Company's by-laws and the laws of
Tennessee, the Company's state of incorporation. The Board of
Directors meets quarterly during the Company's fiscal year. There are
presently eleven directors. The Board of Directors held four meetings
during fiscal 2000, and each director attended at least three of the
four meetings.
The Company has an Audit Committee and a Compensation Committee. The
Company does not have a standing Nominating Committee. The entire
Board of Directors serves in the capacity of a Nominating Committee.
The Board of Directors will accept recommendations for director
nominations from shareholders, and shareholders wishing to propose such
nominees for consideration should write to Joseph C. Weller, Secretary,
at the principal executive office of the Company.
The Company has a standing Audit Committee of its Board of Directors
composed entirely of directors ("Independent Directors") who are not
officers or employees of the Company or Morgan Keegan & Company, Inc.
(the "Brokerage Company"). During fiscal 2000, the Audit Committee
consisted of Robert M. Solmson, Dr. Donald Ratajczak, and James E.
Harwood. The Audit Committee's function is to determine that the
Company's assets are properly accounted for and safeguarded and that
adequate operating, accounting and financial controls, consistent with
Company policy, regulatory requirements and accepted accounting
practice are in existence and adequately functioning. The Audit
Committee also may make recommendations to the Board of Directors
concerning the engagement of independent accountants to audit the
books, records and accounts of the Company and its subsidiaries. The
Audit Committee met four times during the past fiscal year and each
Audit Committee member attended at least three of the four meetings.
The Compensation Committee of the Board of Directors is composed of
Messrs. Clark, Wilson and Phillips, all of whom are non-employee
directors of the Company. The Compensation Committee met one time
during the past fiscal year and each Compensation Committee member
attended the meeting. The Compensation Committee determines the
compensation for all the Executive Officers.
Compensation of Directors
Directors who are employees of the Company or one of its subsidiaries
do not receive additional remuneration as directors. Independent
Directors receive an annual retainer of $8,000, fees of $1,500 for each
board meeting, and $500 for each committee meeting attended, and are
annually granted options to acquire up to 13,500 Common Shares pursuant
to the Company's 1991 Directors Stock Option Plan. If the 2000 Non-Employee
Director Stock Option Plan is approved by the shareholders
at the Annual Meeting, each Independent Director will thereafter
annually be granted options to acquire 4,000 Common Shares under such plan.
Nominees for Directors
The Company's bylaws provide for the election of all directors on an
annual basis. The Board of Directors proposes to nominate the
following eleven individuals, each of whom is currently a director of the
Company, for election to serve as directors of the Company for the
ensuing fiscal year.
KENNETH F. CLARK, JR., 73, is Counsel to the law firm of Wyatt, Tarrant
& Combs, a position held since September 29, 1995. From September 1,
1994 to September 29, 1995, Mr. Clark was a Member of the law firm of
McDonnell Dyer, P.L.C. From July 1990 to September 1, 1994, Mr. Clark
was a partner in the law firm of McDonnell Boyd. He was a Partner in
the law firm of Boone, Wellford, Clark, Langschmidt & Apperson for more
than 10 years prior thereto. Mr. Clark has been a Director of the
Company since 1984.
Committees: Compensation
G. DOUGLAS EDWARDS, 48, is a Director of the Company, a position he has
held since August of 1999. He is Vice Chairman of the Brokerage
Company, Inc. and President of the Fixed Income Capital Markets
division, a position he has held since 1996. Mr. Edwards serves as a
Director of the Brokerage Company and is on the Board of Advisors to
the SSM Venture Partners II Fund.
Committees: None
JAMES E. HARWOOD, 64, is President of Sterling Equities, Inc., a
business planning, capital and management services firm founded in
1991. He was an executive with Schering Plough, Inc., a pharmaceutical
and healthcare products company, from 1980 until 1991, and was
president of Scholl, Inc., a division of Schering Plough from 1983
until 1987. He was a director and held various executive positions with
Conwood Corporation from 1960 until 1980. Mr. Harwood is a director of
Union Planters Corporation, SCB Computer Technologies, Inc. and
Washington Life Insurance Co. He has been a director of the Company
since 1991.
Committees: Audit
ALLEN B. MORGAN, JR., 58, is the Chairman of the Board and Chief
Executive Officer of the Company, positions he has held since 1983. He
has also been Chairman of the Board, Chief Executive Officer, employee
and Director of the Brokerage Company since 1969 and was named Chief
Operating Officer in 1996. Mr. Morgan is President and a Director of
Morgan Keegan Select Fund, Inc. He has been a Director of the
Company since 1983.
Committees: None
HARRY J. PHILLIPS, SR., 70, is the former Chairman and Chief Executive
Officer of Browning-Ferris Industries, Inc. and is a member of the
board of directors of National Commerce Bancorporation, RFS Hotel
Investors, Inc. and Buckeye Technologies, Inc.
Committees: Compensation (Chairman)
DONALD RATAJCZAK, Ph. D., 57, was Director of the Economic Forecasting
Center at Georgia State University in Atlanta from 1973 until his
retirement in June 2000. He is currently director of Ruby Tuesday,
Inc., TBC Corp., and Auric Minerals (a venture capital firm) where he
is also President, and a Trustee of CIM High Yield Fund. He has been a
consulting economist to the Company and other businesses for more than
five years. Dr. Ratajczak has been a Director of the Company since
1984.
Committees: Audit (Chairman)
ROBERT M. SOLMSON, 53, is Chairman of the Board and Chief Executive
Officer of RFS Hotel Investors, Inc., a post he has held since 1993. He
was named a Director of the Company in February 2000.
Committees: Audit
JOHN W. STOKES, JR., 63, is the Vice President of the Company and Vice
Chairman of the Brokerage Company, positions he has held since 1983. He
has been an employee and Director of the Brokerage Company since 1970.
Mr. Stokes is a director of O'Charley's, Inc. (member of Compensation
Committee) and RFS Hotel Investors, Inc. He has been a Director of the
Company since 1983.
Committees: None
JOSEPH C. WELLER, 61, is the Secretary, Treasurer and Chief Financial
Officer of the Company, positions he has held since 1983. He has also
been an Executive Vice President and the Treasurer and Chief Financial
Officer, employee and Director of the Brokerage Company since 1969. Mr.
Weller has been a Director of the Company since 1983.
Committees: None
SPENCE L. WILSON, 58, is President of Kemmons Wilson, Inc. and is a
partner in Wilson Hotel Management. He also serves as a Director of
Union Planters Corporation. He was named a Director of the Company in
February 1999.
Committees: Compensation
STEPHEN P. LAFFEY, 38, is President and Chief Operating Officer of
Morgan Keegan & Company, Inc. and President of the Equity Capital
Markets Division, a position he has held since 1996. Mr. Laffey serves
as a Director of the brokerage company and is on the Board of NSI
Software, Inc.
Committees: None
__________________________________________________________________
Unless a shareholder specifies otherwise, it is intended that such
shareholder's shares will be voted FOR the election of the foregoing
nominees to serve as directors until the next annual meeting and until
their successors are elected and qualified. If any nominee shall
become unavailable or unwilling to serve the Company as a director for
any reason, the persons named in the Proxy Form are expected to consult
with the management of the Company in voting the shares represented by
them. The Board of Directors has no reason to doubt the availability
of any of the nominees, and each has indicated his willingness to serve
as a director of the Company if elected.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" ADOPTION OF
PROPOSAL NO. 1
Business Relationships Between Company and Nominees
Mr. Clark is of counsel to the law firm of Wyatt, Tarrant & Combs.
The Company and the Brokerage Company have retained Wyatt, Tarrant &
Combs during the past fiscal year and propose to retain them during the
present fiscal year as special counsel on select matters.
The Brokerage Company has retained Dr. Ratajczak as a consulting
economist to provide consulting services to it and its customers. Dr.
Ratajczak was so retained during the past fiscal year, and the
Brokerage Company proposes to retain Dr. Ratajczak in such capacity
during the current fiscal year.
Certain Indebtedness of Management
During the period from August 1, 1999 through July 31, 2000, except
for indebtedness as margin account customers of the Brokerage Company,
no director or executive officer was indebted to the Company in excess
of $60,000. The indebtedness of directors and executive officers as
margin account customers was as a result of debit balances in margin
accounts. Such indebtedness was incurred in transactions which were in
the ordinary course of business, on substantially the same terms,
including interest rates and collateral, as those prevailing at the
time for comparable transactions with unaffiliated customers, and did
not involve more than the normal risk of collectibility or present
other unfavorable features.
EXECUTIVE COMPENSATION
The following table sets forth the compensation for services rendered
for each of the Company's last three fiscal years, of the Chief
Executive Officer and its other four most highly compensated executive
officers whose total annual salary and bonus exceeded $100,000:
SUMMARY COMPENSATION TABLE
LONG-TERM COMPENSATION
ANNUAL COMPENSATION AWARDS PAYOUTS
ALL
NAME AND RESTRICTED OTHER
PRINCIPAL YEAR SALARY BONUS(1) OTHER STOCK OPTIONS LTIP COMPEN-
POSITION ($) ($) ($) AWARDS(2) /SARs PAYOUTS SATION(8)
($) (#) (#) ($)
Allen B. 2000 $130,000 $1,175,585 0 $145,217 0 0 $1,650
Morgan, Jr., 1999 130,000 1,223,401 0 165,370 0 0 1,650
CEO 1998 130,000 1,247,866 0 223,726(3) 0 0 1,600
John W.
Stokes 2000 $110,000 $1,084,323 0 $148,212 0 0 $1,650
Jr., Vice 1999 110,000 903,235 0 80,579 0 0 1,650
President 1998 110,000 924,408 0 220,595(4) 0 0 1,600
Joseph C. 2000 $110,000 $1,000,000 0 $ 95,602 0 0 $1,650
Weller 1999 110,000 950,000 0 131,128 0 0 1,650
Secretary 1998 110,000 950,000 0 176,333(5) 0 0 1,600
Steven P. 2000 $ 85,000 $1,036,165 0 $ 60,290 25,000 0 $1,650
Laffey, (9) 1999 85,000 865,000 0 49,954 25,000 0 1,650
Managing 1998 85,000 915,000 0 0 0 0 1,600
Director of
Brokerage
Company
Douglas 2000 $ 85,000 $ 951,165 0 $ 68,106 25,000 0 $1,650
Edwards,(10) 1999 85,000 1,044,852 0 96,981 25,000 0 1,650
Managing 1998 85,000 915,000 0 199,503(7) 0 0 1,600
Director of
Brokerage
Company
[FN]
(1) Includes commissions earned on brokerage business as
registered sales representatives of the Brokerage
Company. See "Report of Brokerage Company Compensation
Committee."
(2) Excludes dividends paid in respect of restricted stock at
the same rate as paid in respect of all outstanding Common
Shares.
(3) Mr. Morgan held 20,167 shares of restricted stock as of
July 31, 2000 the total value of those shares, determined
based on the closing market price of the Common Shares as
of the date of each grant, is $278,999. Dividends will
be paid on the restricted stock granted during the 2001
fiscal year.
(4) Mr. Stokes held 17,955 shares of restricted stock as of
July 31,2000. The total value of those shares, determined
based on the closing market price of the Common Shares as
of the date of each grant, is $249,301. Dividends will
be paid on the restricted stock granted during the 2000
fiscal year.
(5) Mr. Weller held 15,052 shares of restricted stock as of
July 31, 2000. The total value of those shares, determined
based on the closing market price of the Common Shares as
of the date of each grant, is $214,020. Dividends will
be paid on the restricted stock granted during the 2000
fiscal year.
(6) Mr. Laffey held 13,798 shares of restricted stock as of
July 31,2000. The total value of those shares, determined
based on the closing market price of the Common Shares as
of the date of each grant, is $202,877. Dividends will
be paid on the restricted stock granted during the 2000
fiscal year.
(7) Mr. Edwards held 12,839 shares of restricted stock as of
July 31,2000. The total value of those shares, determined
based on the closing market price of the Common Shares as
of the date of each grant, is $194,832. Dividends will
be paid on the restricted stock granted during the 2000
fiscal year.
(8) The amounts listed in this column are the amounts of matching
contributions made by the Company to the Revised Profit Sharing
and Retirement Savings Plan on behalf of the Executive Officers.
(9) Mr. Laffey is President of Morgan Keegan & Company, Inc.
(10) Mr. Edwards is Vice-Chairman of Morgan Keegan & Company, Inc.
and President of Fixed Income Capital Markets, a division
of Morgan Keegan & Company, Inc.
</FN>
The following tables contain information concerning options
granted to, and exercised by, the executive officers included in
the Summary Compensation Table during the fiscal year.
Option Grants in Last Fiscal Year
-------------------------------------------------
Potential Realizable
% of Total Value at Assumed
Options Annual Rates of
Options Granted Exercise Stock Appreciation
Granted in Fiscal Price Expiration for Option Term (2)
Name (#) (1) Year ($/share) Date 5% 10%
Doug Edwards 25,000 2000 16.8125 8/18/04 116,250 256,587
Steve Laffey 25,000 2000 16.8125 8/18/04 116,250 256,587
[FN]
1) All of these options were granted on 8/18/99. The options vest
1/3 after 2 years, 1/3 after 3 years, and 1/3 after 4 years.
2) Potential realized values represent the future value, net of
exercise price, of the options if the Company's stock price were
appreciate by 5% and 10% during each year of the awards.
</FN>
Last Fiscal Year and Year-end Value
Value of
Number of Unexercised
Unexercised In-the-Money
Options at Options at
Shares July 31, 2000 Sept. 29, 1999
Acquired Value (Exercisable/ (Exercisable/
Name On Exercise Realized Unexercisable) Unexercisable)
Doug Edwards None None 0/50,000 0/54,687
Steve Laffey None None 0/50,000 0/54,687
SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN
The Company has adopted a Supplemental Executive Retirement Plan
("SERP") for the benefit of executive officers and key employees of the
Company and its subsidiaries. The SERP is an unfunded, non-qualified
deferred compensation plan which provides for the payment of
supplemental retirement benefits to participants upon normal
retirement, disability retirement or death after reaching age 55 and
completing at least 20 years of employment with the Company or its
subsidiaries.
Benefits under the SERP will not be paid to or will cease with
respect to (if applicable) any participant whose employment terminates
prior to the participant's attaining age 55 or 20 years of service, if
such termination is for cause, for acts of willful malfeasance or gross
negligence or for violation of the non-competition provisions of the
SERP. Benefits are payable out of the general assets of the Company.
Participation in the SERP is determined by the Board of Directors of
the Company, and the SERP is administered by an ad hoc committee
consisting exclusively of Independent Directors. Current participants
are Messrs. Morgan, Stokes and Weller. The benefit payable from the
SERP is a monthly benefit, payable for 120 months based on the
participant's age at the date of termination of his employment, as
follows:
ATTAINED AGE
UPON MONTHLY
TERMINATION BENEFITS
62 or older $8,333
61 $7,917
60 $7,500
59 $7,083
58 $6,667
57 $6,250
56 $5,833
55 or younger $5,417
The estimated annual benefit to any participant who retires at the normal
retirement age of 65 is $100,000.
REPORT OF THE COMPENSATION COMMITTEE
Compensation of Officers and Employees, Generally
The Compensation Committee determines the compensation for Messrs.
Morgan, Stokes and Weller and reviews and advises senior management
with respect to the incentive compensation of all other Executive
Officers.
The Company strives to offer to officers and key employees
compensation packages that are not only competitive with packages
offered by other regional brokerage firms but that also encourage a
high level of individual productivity, with a view toward retaining the
highest quality personnel available. The Compensation Committee's
policy is to base a substantial portion of each Executive Officer's
annual compensation upon his individual productivity, the performance
of the Company and its subsidiaries and such officer's contribution to
the overall success of the Company during the fiscal year.
Compensation of Executive Officers consists of the following elements:
Base Salary. The base salaries of the Company's Executive Officers
have remained the same for more than five fiscal years. The
Compensation Committee has researched the base salaries of executive
officers in other firms in the securities brokerage industry and
believes the Company's salary levels to be very comparable to other
regional brokerage firms.
Incentive Compensation. Incentive bonuses are routinely paid to
those persons making significant contributions to the profitability of
the Company and its subsidiaries. The Brokerage Company maintains
several bonus pools which are distributed among officers and employees
based upon such factors as gross commission production, contribution to
the net income of the Company, new client development, contribution to
Company management and long-range planning, management of individual
profit centers and demonstrated firm leadership. Bonuses are
distributed to a broad cross-section of employees of the Company and
its subsidiaries, with 815 employees having received bonuses totaling
approximately $48.2 million for the 2000 fiscal year. Of such bonuses
for the 2000 fiscal year, approximately $2.8 million was paid to the
Executive Officers. Messrs. Morgan, Edwards and Stokes, in addition to
performing responsibilities as Executive Officers and senior management
of the Company, maintain day-to-day client relationships and,
consequently, conduct significant levels of brokerage business on
behalf of clients of the Brokerage Company. An element of their
compensation is brokerage commissions from their selling efforts, which
for the fiscal year ended July 31, 2000 amounted to approximately 28%
of the approximately $3.6 million total incentive compensation paid to
those three Executive Officers.
Stock Awards. Pursuant to the Company's 1994 Restricted Stock and
Incentive Stock Option Plan, the Company periodically awards shares of
restricted stock to officers and key employees of the Company and its
subsidiaries. Restricted stock must be returned to the Company if the
recipient forfeits such shares by reason of termination of employment
within a fixed period set by senior management. After the expiration
of any restriction period, the recipient owns such shares free of
restrictions. The number of shares awarded to a particular recipient
is subjectively determined by the executive committee of the Brokerage
Company, which considers gross revenue production, contribution to the
net income of the Company, new client development, management
contribution and demonstrated leadership, among other things, in
determining the number of shares to be granted to a particular person.
The Company believes that restricted stock awards are a key element
in the overall compensation packages of officers and key employees
because such awards recognize productivity and profitability while at
the same time giving recipients a vested long-term interest in the
success of the Company through stock ownership. Consequently, the
Company routinely grants restricted stock to a broad cross-section of
employees of the Company's subsidiaries, with approximately 28% of such
employees having received awards during the 2000 fiscal year. Each
Executive Officer received an award of restricted stock in 2000, in the
aggregate amount of 15,083 shares, which constituted approximately 29%
of all shares of restricted stock granted.
Compensation of Chief Executive Officer
Mr. Morgan's base salary has remained at $130,000 per year for the
last eight years, consistent with the Compensation Committee's and
Board of Directors' view that the Company should continue to place
greater emphasis on incentive and production-based compensation for
Executive Officers tied to the financial and strategic performance of
the Company.
Other cash compensation paid to Mr. Morgan in 2000 consisted of
$1,175,585 of incentive compensation based on the overall performance
of the Company and his role in achieving such performance, of which
approximately 30% was attributable to Mr. Morgan's share of commissions
on brokerage business conducted by him. In addition to the foregoing,
Mr. Morgan was granted 3,521 shares of the Company's restricted stock
during 2000, which shares had a value at the time of grant of
approximately $59,197.
Mr. Morgan presided over a fourth consecutive record year in terms of
revenue for the Company. Also, earnings per share set a new record of
$1.54 per share. Morgan Keegan has consistently ranked as one of the
top 10 securities firms in pre-tax operating margin, return on average
equity and pre-tax return on average assets. From August, 1995 until
July 2000, shares of Morgan Keegan common stock have appreciated in
value 257%. The Compensation Committee determined Mr. Morgan's
incentive bonus based primarily upon the foregoing factors and his
continued high level of personal productivity and commitment to the
success of the Company. The Compensation Committee believes Mr.
Morgan's compensation to be commensurate with the compensation paid to
the chief executive officers of corporations within the Company's peer
group.
The Compensation Committee believes that the compensation levels of
the Company's executive officers are competitive and reasonably
comparable with the compensation and benefits paid to executive
officers of companies that generate similar financial results.
Kenneth F. Clark, Jr.
Harry J. Phillips, Sr.
Spence L. Wilson
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
There were no compensation committee interlocks in 2000, and no
insider participated in decisions related to his compensation in 2000.
PERFORMANCE GRAPH
The following graph compares the Company's cumulative total
shareholder return on its Common Shares for a five year period (August
1, 1994 to July 31, 2000) with the cumulative total return of the
Standard & Poor's 500 Stock Index and the Regional Sub-Index of the
Financial Service Analytics Stock Price Index ("FSA Regional") over the
same period (assuming the investment of $100 in each on August 1, 1995,
and the reinvestment of all dividends). The FSA Regional is comprised
of 15 publicly held regional securities firms.
1995 1996 1997 1998 1999 2000
Morgan Keegan $100 $ 99 $181 $296 $220 $257
S&P 500 Stock
Index $100 $117 $177 $211 $254 $277
FSA Regional $100 $105 $217 $299 $293 $374
(Proposal No. 2)
Adoption of 2000 Equity Compensation Plan
The following is a summary of the 2000 Equity Compensation Plan
(the "Equity Compensation Plan"). This summary is qualified in its
entirety by the actual terms of the Equity Compensation Plan, which is
attached hereto as Exhibit I and incorporated herein by reference.
Description of the Plan
In General. The Company believes that a key element of employee
compensation is stock-based incentive compensation. Such compensation
advances the interests of the Company by encouraging and providing for
the acquisition of equity interests in the Company by employees,
thereby providing substantial motivation for superior performance. In
addition, the Company believes equity incentives provide a competitive
advantage in attracting and retaining valuable employees. In that
regard, the Board of Directors and the shareholders approved the 1994
Restricted Stock and Stock Option Plan (the "1994 Plan"), which
provided for award of up to 9,168,750 Common Shares. As of July 31,
2000, there were only 493,526 shares available for award under the 1994
Plan. The Board of Directors has now adopted the Equity Compensation
Plan and has recommended its submission to the Company's shareholders
for their approval.
Many of the features of the Equity Compensation Plan are similar
to those of the 1994 Plan. Under the Equity Compensation Plan, the
Compensation Committee of the Brokerage Company (the "Committee") has
the authority to grant up to 3,000,000 Common Shares to employees of
the Company and/or the Brokerage Company (referred to as "participants"
solely for purposes of this section). Awards under the plan may take
the form of (1) stock options; (2) stock appreciation rights; and/or
(3) restricted stock. The Committee has the power to delegate
authority to the Company's Chief Executive Officer to grant awards
under the Equity Compensation Plan, subject to such guidelines as the
Committee may determine from time to time. Pursuant to the Equity
Compensation Plan, a sufficient number of Common Shares have been
reserved to meet the grant of awards under the plan and, upon
shareholder approval, these shares will be available for issuance.
Common Shares shall be issued under the plan from the Company's
authorized and unissued Common Shares. Any share as to which an option
or other award expires, lapses unexpired, or is forfeited, terminated,
or canceled may become subject to a new option or other award.
Stock Options. Incentive stock options ("ISOs") and non-qualified
stock options ("NQSOs") may be granted for such number of shares as the
Committee may determine and may be granted alone, in conjunction with,
or in tandem with other awards under the Equity Compensation Plan.
Notwithstanding the foregoing, however, no individual participant shall
during any fiscal year be granted options to purchase Common Shares in
excess of 10% of the total number of Common Shares available for
issuance under the Equity Compensation Plan. A stock option will be
exercisable at such times and subject to such terms and conditions as
the Committee will determine. In the case of an ISO, however, the term
will be no more than ten years after the date of grant (five years in
the case of ISOs for certain 10% shareholders). The option price for
any stock option may not be less than the par value per share of the
Common Stock. In addition, the option price for an ISO may not be less
than 100% (110% in the case of certain 10% shareholders) of the fair
market value of a share of the Common Stock as of the date of grant.
Stock Appreciation Rights. Stock appreciation rights ("SARs"),
which were not available under the 1994 Plan, may be granted under the
Equity Compensation Plan either in conjunction with all or part of a
stock option (a "Tandem SAR") or separately (a "Freestanding SAR").
Tandem SARs will be exercisable only when the underlying stock option
is exercisable. Once a Tandem SAR has been exercised, the related
portion of the stock option underlying the Tandem SAR will terminate.
Upon the exercise of a Tandem SAR, the Company will pay to the
participant consideration equal in value to the excess of the fair
market value per Common Share on the exercise date over the option
price per Common Share of the underlying stock option, multiplied by
the number of Tandem SARs being exercised. The base price of a
Freestanding SAR shall not be less than 100% of the fair market value
per Common Share on the date of grant. Upon exercise of a Freestanding
SAR, the Company will pay to the participant, for each Common Share
with respect to which the Freestanding SAR is being exercised,
consideration equal in value to the excess of the fair market value of
a Common Share on the exercise date over the base price per share of
the Freestanding SAR, multiplied by the number of Freestanding SARs
being exercised, subject to any maximum value payable for SARs that the
Committee may establish.
Restricted Stock Awards. Restricted stock awards may be granted
alone, in addition to, or in tandem with other awards under the Equity
Compensation Plan. The provisions attendant to a grant of restricted
stock may vary from participant to participant. In making an award of
restricted stock, the Committee will determine the periods during which
the restricted stock shall be subject to forfeiture and may also impose
such other conditions and restrictions on the shares of restricted
stock as it deems appropriate. The Committee may provide that such
restrictions will lapse with respect to specified percentages of the
awarded shares of restricted stock on successive future dates. Unless
otherwise determined by the Committee at the time of the award, the
participant will be entitled to vote the restricted stock and to
receive dividends, if any, thereon until such shares are forfeited.
Transferability. ISOs, NQSOs, SARs, and restricted stock (as to
which all conditions to vesting have not been met and all restrictions
have not lapsed or expired) granted under the Equity Compensation Plan
may not be transferred or assigned other than by will or by the laws of
descent and distribution.
Change of Control. If there is a change of control of the
Company, all SARs and any stock options which are not then exercisable
will become fully exercisable and vested and the restrictions and
deferral limitations applicable to restricted stock shall lapse so that
such shares will be deemed fully vested. For purposes of the Equity
Compensation Plan, a change of control is deemed to have occurred if:
(i) after the effective date of the Plan, any "person" as defined in
Section 3(a)(9) of the Securities Exchange Act of 1934 (the "Exchange
Act") and as used in Sections 13(d) and 14(d) thereof, including any
"group" as defined in Section 13(d) of the Exchange Act, but excluding
the Company, any of the Company's existing shareholders as of the
effective date of the Equity Compensation Plan and any employee benefit
plan sponsored or maintained by the Company (including any trustee of
such plan acting as trustee), directly or indirectly, becomes a
"beneficial owner" (as defined in Rule 13d-3 under the Exchange Act) of
securities of the Company representing fifty percent (50%) or more of
the voting power of the then outstanding securities of the Company;
(ii) the shareholders of the Company approve (or, if shareholder
approval is not required, the Board of Directors approves) an agreement
providing for (A) the merger or consolidation of the Company with
another Company where the shareholders of the Company, immediately
prior to the merger or consolidation, will not beneficially own,
immediately after the merger or consolidation, shares entitling such
shareholders to a majority of all votes to which all shareholders of
the surviving company would be entitled in the election of directors,
or where the members of the Board of Directors, immediately prior to
the merger or consolidation, would not, immediately after the merger or
consolidation, constitute a majority of the board of directors of the
surviving company, (B) a sale or other disposition of all or
substantially all of the assets of the Company, or (C) a liquidation or
dissolution of the Company; or (iii) any person has commenced a tender
offer or exchange offer for thirty-five (35%) or more of the voting
power of the then outstanding shares of the Company. Notwithstanding
the foregoing, however, the Committee may, in the case of certain
business combinations, determine that awards under the Equity
Compensation Plan shall not vest or become exercisable on an
accelerated basis if the Board of Directors of the surviving or
acquiring corporation, as applicable, takes actions that in the
reasonable opinion of the Committee are equitable or appropriate to
protect the rights of the participants in the Equity Compensation Plan.
Amendment. The Board of Directors may amend, alter, or
discontinue the Equity Compensation Plan, provided that no amendment
may be made that would impair the rights of a participant under an
award already made under the Equity Compensation Plan without such
participant's consent. Unless earlier terminated by the Board of
Directors or unless extended by the Board of Directors with the
approval of the shareholders, the Equity Compensation Plan will
terminate on, and no award may be granted later than, the date
immediately preceding the tenth anniversary of the date of adoption of
the Equity Compensation Plan, but the exercise date of awards granted
prior to such tenth anniversary may extend beyond that date.
Because awards under the Equity Compensation Plan are at the
discretion of the Committee, the benefits that will be awarded under
the Equity Compensation Plan are not currently determinable. As of
October 16, 2000, the market value of a Common Share based on the
closing price on the New York Stock Exchange was $19 13/16.
Certain Federal Income Tax Consequences
The following is a brief summary of the federal income tax aspects
of awards made under the Equity Compensation Plan based upon the
federal income tax laws in effect on the date hereof. This summary is
not intended to be exhaustive and does not describe state or local tax
consequences.
Incentive Stock Options. No taxable income is realized by the
participant upon the grant or exercise of an ISO. If Common Shares are
issued to a participant pursuant to the exercise of an ISO, and if no
disqualifying disposition of the shares is made by the participant
within two years of the date of grant or within one year after the
transfer of the shares to the participant, then: (a) upon the sale of
the shares, any amount realized in excess of the option price will be
taxed to the participant as a capital gain, and any loss sustained will
be a capital loss, and (b) no deduction will be allowed to the Company
for federal income tax purposes. The exercise of an ISO will give rise
to an item of tax preference that may result in an alternative minimum
tax liability for the participant.
If Common Shares acquired upon the exercise of an ISO are disposed
of prior to the expiration of the holding periods described above, then
generally: (a) the participant will realize ordinary income in the
year of disposition in an amount equal to the excess, if any, of the
fair market value of the Common Shares at exercise (or, if less, the
amount realized on the disposition of the Common Shares) over the
option price paid for such shares, and (b) the Company will be entitled
to deduct any such recognized amount. Any further gain or loss
realized by the participant will be taxed as capital gain or loss, and
will not result in any deduction by the Company.
Non-Qualified Stock Options. Except as noted below, with respect
to NQSOs: (a) no income is realized by the participant at the time the
option is granted; (b) generally upon exercise of the option, the
participant realizes ordinary income in an amount equal to the
difference between the option price paid for the Common Shares and the
fair market value of the Common Shares on the date of exercise, and the
Company will be entitled to a tax deduction in the same amount; and (c)
at disposition, any appreciation (or depreciation) after the date of
exercise is treated either as short-term, or long-term capital gain or
loss, depending upon the length of time that the participant has held
the shares.
Stock Appreciation Rights. No income will be realized by a
participant in connection with the grant of an SAR. If the Committee
imposes a maximum upon the amount a participant can receive upon
exercise of a Freestanding SAR, then the participant will recognize
income when the maximum appreciation in the stock is attained. If no
such maximum is imposed, if such maximum is not reached, or if the SAR
is a Tandem SAR, the participant is taxed upon exercise of the SAR and
will generally be required to include as taxable ordinary income in the
year of exercise an amount equal to the amount of cash and/or the fair
market value of any Common Shares received. The Company will be
entitled to a deduction at the time and in the amount included in the
participant's income by reason of the exercise. If the participant
receives Common Shares upon exercise of an SAR, the post-exercise
appreciation or depreciation will be treated in the same manner
discussed above under "Non-Qualified Stock Options."
Restricted Stock. A participant receiving restricted stock
generally will recognize ordinary income in the amount of the fair
market value of the restricted stock at the time the stock is no longer
subject to forfeiture, less the consideration paid for the stock.
However, a participant may elect, under Section 83(b) of the Internal
Revenue Code of 1986, as amended (the "Code"), within 30 days of the
grant of the stock, to recognize taxable ordinary income on the date of
grant equal to the excess of the fair market value of the shares of
restricted stock (determined without regard to the restrictions) over
the purchase price of the restricted stock. Thereafter, if the shares
are forfeited, the participant will be entitled to a deduction, refund,
or loss, for tax purposes only, in an amount equal to the purchase
price of the forfeited shares regardless of whether he or she made a
Section 83(b) election. With respect to the sale of Common Shares
after the forfeiture period has expired, the holding period to
determine whether the participant has long-term, mid-term or short-term
capital gain or loss generally begins when the restriction period
expires, and the tax basis for such Common Shares will generally be
based on the fair market value of such Common Shares on such date.
However, if the participant makes an election under Section 83(b), the
holding period will commence on the date of grant, the tax basis will
be equal to the fair market value of shares on such date (determined
without regard to restrictions), and the Company generally will be
entitled to a deduction equal to the amount that is taxable as ordinary
income to the participant in the year that such income is taxable.
Dividends and Dividend Equivalents. Dividends paid on restricted
stock generally will be treated as compensation that is taxable as
ordinary income to the participant, and will be deductible by the
Company. If, however, the participant makes a Section 83(b) election,
the dividends will be taxable as ordinary income to the participant and
will not be deductible by the Company.
The Equity Compensation Plan is not intended to be a "qualified
plan" under Section 401(a) of the Code.
Assuming the presence of a quorum, the Equity Compensation Plan will
be approved and adopted if the votes cast at the Annual Meeting in favor
of the Equity Compensation Plan exceed the votes against it. Abstentions
and broker non-votes will not be considered in the vote. The Board of
Directors recommends a vote "FOR" Proposal Two.
(Proposal No. 3)
Adoption of 2000 Employee Stock Purchase Plan
The following is a summary of the 2000 Employee Stock Purchase
Plan (the "Stock Purchase Plan"). This summary is qualified in its
entirety by the actual terms of the Stock Purchase Plan, which is
attached hereto as Exhibit II and incorporated herein by reference.
Description of the Plan
In General. In keeping with the Company's belief that broad-based
employee participation in the ownership of the Company will help
achieve the unity of purpose conducive to the continued growth of the
Company and to the mutual benefit of its employees and shareholders,
the Board of Directors and shareholders of the Company approved the
1989 Employee Stock Purchase Plan. The provisions of the Stock
Purchase Plan, which has been approved by the Board of Directors for
submission to the shareholders, are in many respects similar to those
of its predecessor. If the shareholders approve the Stock Purchase
Plan at the Annual Meeting, the 1989 Employee Stock Purchase Plan will
remain in effect in accordance with its terms until December 31, 2000,
and the first Commencement Date (as defined below) of the new Stock
Purchase Plan will be January 10, 2001.
The Stock Purchase Plan seeks to provide eligible employees a
convenient means, through payroll deductions, for acquiring an equity
ownership in the Company at an advantageous price. The Company will be
authorized to issue up to 3,000,000 Common Shares under the plan,
subject to adjustment in the event of a change in the capitalization of
the Company such as a stock split, merger or recapitalization. All
employees of the Company or the Brokerage Company who regularly work
more than twenty hours per week and more than five months per calendar
year are eligible to participate, except those who own 5% or more of
the total combined voting power or value of all classes of stock of the
Company or the Brokerage Company. Due to this latter exclusion,
Messrs. Morgan and Weller are ineligible to participate in the plan.
Grant and Exercise of Options. To participate, each employee must
make an election at the beginning of each calendar year that authorizes
payroll deductions to be made throughout the year, to be credited to
such employee's contribution account. No eligible employee may
contribute more than 5% of his or her annual base pay or $10,000,
whichever is less. As of January 10 of each calendar year (the
"Commencement Date"), all eligible employees who have made an election
to participate are granted an option to purchase Common Shares. On
December 31 of the same year (the "Exercise Date"), the amount
accumulated in an employee's contribution account shall automatically
be used to exercise such option at a purchase price per share equal to
the lesser of the following two amounts:
(i) 85% of the fair market value per Common Share on the
Exercise Date or
(ii) the greater of (A) 85% of the fair market value per
Common Share on the Commencement Date that such options were granted or
(B) 85% of the average of the fair market value per Common Share on the
first day of each calendar month during the option period and on the
Exercise Date (the foregoing period having twelve (12) dates).
No fractional shares will be issued upon the exercise of any option
under the Stock Purchase Plan. The aggregate number of Common Shares
that may be purchased under the Stock Purchase Plan for each calendar
year shall be established by the Committee, subject to an absolute
limit of 750,000, plus any unsold allotment below 750,000 from any
previous option period. In the event of an over-subscription by
employees, the number of Common Shares purchasable by each employee
shall be reduced proportionately. The balance in any employee's
contribution account that is not used to purchase Common Shares under
the Stock Purchase Plan shall be promptly refunded to him.
Termination of Participation. An employee whose employment with
the Company is terminated for any reason other than death, disability
or retirement at or after age 65 shall immediately cease to be a
participant in the Stock Purchase Plan, and the balance in such
employee's contribution account shall be paid to him or her as soon as
practicable after his or her termination. In the event an employee
dies, retires at or after age 65, or becomes disabled, no further
contributions to the Stock Purchase Plan on behalf of such employee
shall be made. Such employee (or his or her legal representative, if
applicable) may elect to withdraw the balance in his or her
contribution account at any time before the Exercise Date of the option
period during which the death, retirement or disability occurred. If
no election is made, the balance in such employee's contribution
account shall be used to purchase Common Shares in accordance with the
provisions of the Stock Purchase Plan.
Plan Administration. The Committee is charged with administering
all aspects of the Stock Purchase Plan. The Board of Directors may
amend or terminate the Stock Purchase Plan at any time without notice
to participating employees, but no amendment may increase the number of
Common Shares reserved for issuance under the Stock Purchase Plan
without prior approval of the Company's shareholders in accordance with
the Company's charter and bylaws and applicable law. If the Stock
Purchase Plan is terminated as described above, all options outstanding
at the time of termination shall become null and void and the balance
of each employee's contribution account shall be refunded to such
employee.
Certain Federal Income Tax Consequences
The following is a brief summary of the federal income tax aspects
of awards made under the Stock Purchase Plan based upon the federal
income tax laws in effect on the date hereof. This summary is not
intended to be exhaustive and does not describe state or local tax
consequences.
An employee participating in the Stock Purchase Plan will not
recognize income either when the Company grants the option to purchase
Common Shares under the Stock Purchase Plan or when the option is
exercised. If the employee dies while holding Common Shares received
upon exercise of an option or sells such Common Shares in a "qualifying
sale," he or she will recognize ordinary compensation income in the
amount of (i) the difference between the option price and the fair
market value of the Common Shares on the date the option was granted or
(ii) the difference between the option price and the fair market value
of the Common Shares on the date of death or the sale, as applicable,
whichever is less. The balance of any gain or loss on the sale is
long-term capital gain or loss to the employee, and the Company is not
entitled to any deduction. A "qualifying sale" is defined as a sale
more than two years after the option was granted and one year after the
transfer of the Common Shares upon exercise of the option.
If the employee sells the shares in a "disqualifying sale," he or
she will recognize ordinary compensation income in the amount of the
difference between the option price and the fair market value of the
shares as of the date the option was exercised. The balance of any
gain or loss on the sale is short- or long-term capital gain, depending
on the holding period. The Company is entitled to a deduction in the
amount of the ordinary compensation income recognized by the employee.
Assuming the presence of a quorum, the Stock Purchase Plan will be
approved and adopted if the votes cast at the Annual Meeting in favor
of the Stock Purchase Plan exceed the votes cast against it.
Abstentions and broker non-votes will not be considered in the vote.
The Board of Directors recommends a vote "FOR" Proposal Three.
(Proposal No. 4)
Adoption of 2000 Non-Employee Director Stock Option Plan
The following is a summary of the 2000 Non-Employee Director Stock
Option Plan (the "Director Plan"). This summary is qualified in its
entirety by the actual terms of the Director Plan, which is attached
hereto as Exhibit III and incorporated herein by reference.
Description of the Plan
In General. The Company adopted the 1991 Directors Stock Option
Plan in order to attract and retain well-qualified persons for service
as directors of the Company. For the same reasons, the Board of
Directors has now recommended for approval by the shareholders the
Director Plan. If the shareholders approve the Director Plan, no
awards will be made under the 1991 Directors Stock Option Plan on the
date of the Annual Meeting, and the first awards under the Director
Plan will be made on the first business day after the Annual Meeting.
The Director Plan provides for automatic, non-discretionary grants
of NQSOs to members of the Company's Board of Directors who are neither
contractual nor common law employees of the Company or any of its
subsidiaries (the "Non-Employee Directors"). Options granted under the
Director Plan are not intended to qualify as "incentive stock options"
under Section 422 of the Code. Options to purchase up to 500,000
Common Shares may be granted under the Director Plan. If any options
granted under the Director Plan expire, lapse or otherwise terminate
without being exercised, they again become available for issuance under
the Director Plan. In the event of a change in the Company's
capitalization due to a merger, share exchange, consolidation, other
reorganization, recapitalization, reclassification, combination of
shares, stock split or stock dividend, appropriate adjustments shall be
made to both (i) the aggregate number and kind of shares subject to
options that may be granted under the Director Plan and (ii) the rights
under outstanding options granted under the Director Plan with regard
to both the number of subject shares and the option price.
Grant and Exercise of Options. Each Non-Employee Director who is
serving as a director on the first business day after each Annual
Meeting of shareholders shall automatically be granted options to
purchase 4,000 Common Shares on such date. The exercise price per share
shall be the fair market value of a Common Share as of the date the
option was granted. An option granted under the Director Plan shall
become exercisable upon grant and remain exercisable until the fifth
anniversary of the date of grant unless earlier terminated under the
terms of the Director Plan. The exercise price for the Common Shares
shall be paid in cash. The options granted under the Director Plan
may not be transferred in any manner other than by will or by the laws
of descent and distribution.
Change of Control. In the event of a change of control, all
options awarded under the Director Plan not previously exercisable
shall become fully exercisable, and the value of all such outstanding
options shall be cashed out on the basis of the "change of control
price." The "change of control price" shall mean the price per Common
Share paid in connection with the change of control of the Company.
Amendment. The Board of Directors may at any time amend, alter,
suspend, or discontinue the Director Plan except insofar as any such
change would impair a Non-Employee Director's rights as to any option
already granted under the Director Plan without his or her consent. In
addition, no amendment to the Plan may be made without approval of the
Company's shareholders if the effect of the amendment would be to: (i)
materially increase the number of Common Shares reserved hereunder or
benefits accruing to Non-Employee Directors, (ii) materially change the
requirements for eligibility, or (iii) materially modify the method for
determining the number of options to be granted, except for adjustments
made in the event of a change in the Company's capitalization as
described above. Finally, no amendment may be made to the Director
Plan within six months of a prior amendment, except as required for
compliance with the Code or the regulations thereunder.
Certain Federal Income Tax Consequences
The following is a brief summary of the federal income tax aspects
of awards made under the Director Plan based upon the federal income
tax laws in effect on the date hereof. This summary is not intended to
be exhaustive and does not describe state or local tax consequences.
There are no tax consequences to the Non-Employee Director or the
Company by reason of the grant of the NQSOs contemplated by the
Director Plan. Upon exercise of an NQSO, the Non-Employee Director
normally will recognize taxable ordinary income equal to the excess of
the stock's fair market value on the exercise date over the option
price. If the Non-Employee Director becomes an employee, the Company
is required to withhold from regular wages or supplemental wage
payments an amount equal to the ordinary income recognized. In that
event, the Company will generally be entitled to a business expense
deduction equal to the taxable ordinary income realized by the Non-
Employee Director, subject to the requirement of reasonableness,
Section 162(m) of the Code and the satisfaction of a tax reporting
obligation.
Upon sale of the shares, the Non-Employee Director will recognize
a capital gain or loss equal to the difference between the selling
price and the sum of the amount paid for the shares plus any amount
recognized as ordinary income upon exercise of the option. That gain
or loss will be long-term or short-term depending on whether the shares
were held for more than one year. Slightly different rules may apply
to a Non-Employee Director who acquires shares subject to certain
repurchase options or who are subject to Section 16(b) of the
Securities Exchange Act of 1934.
Assuming the presence of a quorum, the Director Plan will be
approved and adopted if the votes cast at the Annual Meeting in favor
of the Director Plan exceed the votes cast against it. Abstentions and
broker non-votes will not be considered in the vote. The Board of
Directors recommends a vote "FOR" Proposal Four.
(Proposal No. 5)
Adoption of 2000 Executive Incentive Compensation Plan
In September 2000, the Compensation Committee of the Board of
Directors (the "Compensation Committee") approved the Morgan Keegan,
Inc. 2000 Executive Incentive Compensation Plan (solely for purposes of
this section, the "Plan"). In order to meet the requirements of
Section 162(m) of the Internal Revenue Code of 1986, as amended, the
Plan must be submitted to, and approved by, the shareholders of the
Company. The text of the Plan is set forth in Exhibit IV to this proxy
statement and the following description of the Plan is qualified in its
entirety by reference to the Plan.
Description of the Plan
In General. The Plan is an annual bonus plan designed to provide
certain senior officers of the Company, including those who are
required to be named in the Summary Compensation Table, with incentive
compensation based upon achievement of pre-established performance
goals. The Plan is designed to comply with Section 162(m) of the
Internal Revenue Code of 1986, as amended, which denies a tax deduction
to a public company for compensation in excess of $1,000,000 paid in
any tax year to the chief executive officer and each of the four other
most highly compensated executive officers, subject to an exception for
"performance-based compensation" paid pursuant to performance goals
determined by the company's compensation committee and approved by its
shareholders.
Administration. The Plan is administered by the Compensation
Committee. Each year, the Compensation Committee selects Plan
participants from among the Company's senior management and key
employees who will be eligible to receive cash awards under the Plan
(collectively, "Awards").
Awards. The Plan provides for a total pool (the "Award Pool") to
be based upon a designated percentage of the Company's consolidated
pre-tax income for each fiscal year, before reduction by the amount of
the Award Pool ("Annual Profits"). The Award Pool for each fiscal year
is determined by the Compensation Committee, but may not exceed 10% of
Annual Profits. The Compensation Committee designates the persons who
will participate in the Plan for each fiscal year and determines the
maximum percentage of the Award Pool, if any, to be paid to each
participant for the particular fiscal year. In no event may more than
40% of the Award Pool for a fiscal year be awarded to any single
participant in the Plan. No payments will be made under the Plan
unless Annual Profits exceed $2,000,000.
The Compensation Committee is authorized at any time during or
after a fiscal year, in its sole and absolute discretion, to reduce or
eliminate the Award Pool or the portion of the Award Pool allocated to
any participant, for any reason. The Compensation Committee may, at
any time, terminate or, from time to time, amend, modify or suspend the
Plan or any Award which has not yet been paid. Any such amendment may
be made without shareholder approval. No Award may be granted during
any suspension of the Plan or after its termination.
The proposed approval of the Plan will first apply for the fiscal
year which began August 1, 2000. Because amounts payable under the
Plan will be based on fiscal 2001 performance and will be contingent
upon the right of the Compensation Committee to exercise discretion to
reduce the amount of the final payments, such amounts are not
determinable at the present time. The Committee anticipates that if
Annual Profits for fiscal 2001 were the same as earned in fiscal 2000
the aggregate Awards that would be paid under the Plan to the
executives named in the Summary Compensation Table and any other
executives specified by the Committee would not be materially different
than the aggregate incentive bonuses paid for fiscal 2000. Amounts
received under the Plan for fiscal 2000 are reflected in the Summary
Compensation Table under the heading "Executive Compensation."
The Company believes that, upon approval of the Plan by the
shareholders and certification by the Compensation Committee that
performance goals and any other material terms have been satisfied,
compensation paid pursuant to the Plan will be tax deductible. The
approval of the Plan by the shareholders and certification by the
Compensation Committee will be conditions to the receipt by
participants of any payments under the Plan for the fiscal year ending
in 2001 and beyond. Failure of the shareholders to approve the Plan
will not prohibit the Company from paying bonus compensation to senior
management who would have been covered by the Plan, including in
situations where such compensation may be subject to the deductibility
limitation under Section 162(m).
Assuming the presence of a quorum, the Plan will be approved and
adpoted if the votes cast at the Annual Meeting in favor of the Plan
exceed the votes cast against it. Abstentions and broker non-votes will
not be considered in the vote. The Board of Directors recommends a vote
"FOR" Proposal Five.
SHAREHOLDER PROPOSALS FOR 2001
Pursuant to the Securities Exchange Act of 1934, shareholder
proposals intended to be presented at the 2000 annual meeting of
shareholders of the Company must be received by the Company at its
executive offices on or before June 22, 2001.
RELATIONSHIPS WITH INDEPENDENT PUBLIC ACCOUNTANTS
Ernst & Young, LLP has served as auditor for the Company and its
subsidiaries for many years and will continue to so serve until and
unless changed by action of the Board of Directors. It has not been
the practice of the Company, and it is not required by its Charter or
Bylaws, to submit the Company's selection of auditors to the
shareholders for ratification.
A partner of Ernst & Young, LLP is expected to be present at the
annual meeting with the opportunity to make a statement if he desires
to do so and is expected to be available to respond to appropriate
questions.
BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
The federal securities laws require the Company's directors and
officers, and persons who own more than 10% of a registered class of
the Company's equity securities, to file with the Securities and
Exchange Commission initial reports of ownership and reports of changes
in ownership of any securities of the Company. To the Company's
knowledge, based solely on review of the copies of such reports
furnished to the Company and representations that no other reports were
required, during the year ended July 31, 2000, all of the Company's
officers and directors made all required filings.
OTHER MATTERS
The Board of Directors knows of no other business to be brought
before the meeting. If any other matters properly come before the
meeting, the proxies will be voted on such matters in accordance with
the judgment of the persons named as proxies therein, or their
substitutes, present and acting at the meeting.
INCORPORATION BY REFERENCE
The consolidated financial statements of the Company, included in the
Company's 2000 Annual Report which accompanies this Proxy Statement,
are hereby incorporated by reference into this Proxy Statement as if
stated verbatim herein.
BY ORDER OF THE BOARD OF DIRECTORS
/s/Joseph C. Weller
JOSEPH C. WELLER
Secretary
October 20, 2000
Exhibit I
2000 EQUITY COMPENSATION PLAN
OF
MORGAN KEEGAN, INC.
1. Purpose, Awards, Effective Date.
(a) Purpose. The purpose of the 2000 Equity Compensation Plan of
Morgan Keegan, Inc. (the "Plan") is to further the success and advance
the interests of Morgan Keegan, Inc., a Tennessee corporation (the
"Corporation"), by encouraging and enabling selected employees and
officers of the Corporation and its Related Corporations, if any, to
acquire or to increase their holdings of common stock, $0.625 par value
per share, of the Corporation (the "Common Stock") and other
proprietary interests in the Corporation in order to promote a closer
identification of their interests with those of the Corporation and its
shareholders, thereby further stimulating their efforts to enhance the
efficiency, soundness, profitability, growth and shareholder value of
the Corporation.
(b) Awards. Pursuant to the Plan, the Corporation intends to grant
(i) incentive stock options ("Incentive Stock Options"), as such term
is defined in Section 422 of the Internal Revenue Code of 1986, as
amended (the "Code"), to purchase shares of Common Stock; (ii) similar
options to purchase Common Stock that will not, however, be qualified
as Incentive Stock Options ("Non-Qualified Options"); (iii) shares of
Common Stock that are subject to restrictions on transfer or lienation,
vesting and forfeitability provisions and such other terms and
conditions as the Committee may determine and as may be set forth in
an Agreement in respect thereof ("Restricted Stock"); and (iv) stock
appreciation rights ("SARs") pursuant to which a recipient may
recognize in cash the benefit from appreciation in the price of the
Common Stock. Incentive Stock Options and Non-Qualified Options shall
be referred to herein collectively as "Options."
(c) Effective Date. The Plan shall become effective on the date of
approval by the Board of Directors and the shareholders of the
Corporation (the "Effective Date").
2. Definitions.
(a) As used in the Plan, the following terms have the following
respective meanings:
"10% Shareholder" means a person who owns stock possessing more
than 10% of the total combined voting power of all classes of stock of
the Corporation or of any Parent or Subsidiary of the Corporation after
giving effect to the attribution of stock ownership provisions of
Section 424(d) of the Code.
"Affiliate" means any Person that directly or indirectly through
one or more intermediaries controls or is controlled by or is under
common control with the Corporation. For purposes of this definition,
(i) "control" (including, with correlative meaning, the terms
"controlled by" and "under common control with"), as used with respect
to any Person, shall mean the possession, directly or indirectly, of
the power to direct or cause the direction of the management and
policies of such Person, whether through the ownership of voting
securities or by contract or otherwise.
"Agreement" means any written agreement or agreements between the
Corporation and the recipient of an Award pursuant to the Plan relating
to the terms, conditions and restrictions of Options, SARs, Restricted
Stock and any other Awards conferred herein.
"Award" means any grant of an Option or SAR, and any award of
Restricted Stock under the Plan, whether singly, in combination, or in
tandem, to an Eligible Person by the Committee pursuant to such terms,
conditions, restrictions and/or limitations, if any, as the Committee
may establish.
"Board" means the Board of Directors of the Corporation.
"Change of Control" shall be deemed to have occurred if: (i)
after the effective date of the Plan, any "person" as defined in
Section 3(a)(9) of the Exchange Act and as used in Sections 13(d) and
14(d) thereof, including any "group" as defined in Section 13(d) of the
Exchange Act, but excluding the Corporation and any Related
Corporation, any of the Corporation's existing shareholders as of the
effective date of the Plan and any employee benefit plan sponsored or
maintained by the Corporation or any Related Corporation (including
any trustee of such plan acting as trustee), directly or indirectly,
becomes a "beneficial owner" (as defined in Rule 13d-3 under the
Exchange Act) of securities of the Corporation representing fifty
percent (50%) or more of the voting power of the then outstanding
securities of the Corporation; (ii) the shareholders of the
Corporation approve (or, if shareholder approval is not required, the
Board approves) an agreement providing for (A) the merger or
consolidation of the Corporation with another corporation where the
shareholders of the Corporation, immediately prior to the merger or
consolidation, will not beneficially own, immediately after the merger
or consolidation, shares entitling such shareholders to a majority of
all votes to which all shareholders of the surviving corporation would
be entitled in the election of directors, or where the members of the
Board, immediately prior to the merger or consolidation, would not,
immediately after the merger or consolidation, constitute a majority of
the board of directors of the surviving corporation, (B) a sale or
other disposition of all or substantially all of the assets of the
Corporation, or (C) a liquidation or dissolution of the Corporation; or
(iii) any person has commenced a tender offer or exchange offer for
thirty-five percent (35%) or more of the voting power of the then
outstanding shares of the Corporation.
"Chief Executive Officer" means the Chief Executive Officer of the
Corporation, or if there is no Chief Executive Officer, the President,
Chief Operating Officer or other highest ranking officer of the
Corporation.
"Code" has the meaning set forth in Section 1(b) above.
References to any provision of the Code shall be deemed to include
successor provisions thereto and rules and regulations thereunder.
"Committee" means the Compensation Committee of Morgan Keegan &
Company, Inc.
"Common Stock" has the meaning set forth in Section 1(a) above.
"Corporation" has the meaning set forth in Section 1(a) above.
"Covered Employee" shall have the meaning given the term in
Section 162(m) of the Code or the regulations thereunder.
"Effective Date" has the meaning set forth in Section 1(c) above.
"Election" has the meaning set forth in Section 10 below.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended from time to time. References to any provision of the Exchange
Act shall be deemed to include successor provisions thereto and rules
and regulations thereunder.
"Exercise Price" has the meaning set forth in Section 6(b) below.
"Fair Market Value" as of a given date for purposes of the Plan
and any Option Agreement means (i) the closing sales price for the
shares of Common Stock on the New York Stock Exchange or any national
exchange on which shares of Common Stock are traded on such date (or if
such market or exchange was not open for trading on such date, the next
preceding date on which it was open); or (ii) if the Common Stock is
not listed on the New York Stock Exchange or on an established and
recognized exchange, such value as the Board, in good faith, shall
determine based on such relevant facts, which may include opinions of
independent experts, as may be available to the Board.
"Free Standing SAR" has the meaning set forth in Section 7(a)
below.
"Immediate Family" means a Participant's spouse, former spouse,
parents, children, stepchildren, adoptive relationships, sisters,
brothers, nieces, nephews, grandchildren and any person sharing the
Participant's household other than a tenant (and, for this purpose,
shall also include the Participant).
"Incentive Stock Option" has the meaning set forth in Section 1(b)
above.
"Modification" means any change in the terms of an Option which
would constitute a "modification" as defined in Section 424(h)(3) of
the Code, including, without limitation, such a modification to an
Option as effected by a change in the Plan and any other change in the
Plan which would increase the number of shares reserved for Options
under the Plan, materially change the administration of the Plan or
otherwise materially increase the benefits accruing to, or available
for, participants in the Plan; provided, however, that registration of
Common Stock underlying Options under the Securities Act, as amended,
shall not be deemed a Modification.
"Non-Employee Director" has the meaning set forth in Rule 16b-3,
promulgated under the Exchange Act.
"Non-Qualified Option" has the meaning set forth in Section 1(b)
above.
"Option" has the meaning set forth in Section 1(b) above.
"Parent" or "parent corporation" shall mean any corporation (other
than the Corporation) in an unbroken chain of corporations ending with
the Corporation if each corporation other than the Corporation owns
stock possessing fifty percent (50%) or more of the total combined
voting power of all classes of stock in another corporation in the
chain.
"Participant" means an individual eligible to receive an Award
under Section 5 below and selected by the Committee as an individual to
whom an Award shall be granted.
"Permanent Disability" has the meaning ascribed to the term
"disability" or any substantially similar term in the Corporation's
long-term income disability plan as in effect from time to time or, if
no such plan exists, the meaning ascribed to the term "permanent and
total disability" in Section 22(e)(3) of the Code.
"Person" means an individual, firm, partnership, association,
unincorporated organization, trust, corporation, or any other entity,
including, without limitation, a government or any department, agency
or instrumentality thereof.
"Plan" has the meaning set forth in Section 1(a) above.
"Predecessor" or "predecessor corporation" means a corporation
which was a party to a transaction described in Section 424(a) of the
Code (or which would be so described if a substitution or assumption
under that Section had occurred) with the Corporation, or a corporation
which is a Parent or Subsidiary of the Corporation, or a predecessor of
any such corporation.
"Related Corporation" means any Parent, Subsidiary or predecessor
of the Corporation.
"Related Option" has the meaning set forth in Section 7(a) below.
"Restricted Stock" has the meaning set forth in Section 1(b)
above.
"Retirement" means retirement from active employment under a
retirement plan of the Company, or pursuant to an employment agreement
with the Corporation, or termination of employment at or after age 55
under circumstances which the Committee, in its sole discretion, deems
equivalent to retirement.
"SARs" has the meaning set forth in Section 1(b) above.
"Securities Act" means the Securities Act of 1933, as amended from
time to time. References to any provision of the Securities Act shall
be deemed to include successor provisions thereto and rules and
regulations thereunder.
"Subsidiary" or "subsidiary corporation" means any corporation
that is a "subsidiary corporation" as such term is defined in Section
424(f) of the Code.
"Tandem SAR" has the meaning set forth in Section 7(a) below.
"Tax Date" has the meaning set forth in Section 10 below.
(b) References in these definitions to provisions of the Code shall,
when appropriate to effectuate the purpose of the Plan, be deemed to be
references to such provisions of the Code and regulations promulgated
thereunder as the same may from time to time be amended or to successor
provisions to such provisions.
1. Administration.
(a) Administrator. The Plan shall be administered by the
Committee.
(b) Authority of Committee. Any action of the Committee with
respect to the Plan may be taken by a written instrument signed by all
of the members of the Committee and any such action so taken by written
consent shall be as fully effective as if it had been taken by a
majority of the members at a meeting duly held and called. Subject to
the provisions of the Plan, and unless authority is granted to the
Chief Executive Officer as provided in Section 3(d), the Committee
shall have the full and final authority in its sole discretion to take
any action with respect to the Plan including, without limitation, the
authority to: (i) select the persons to receive Awards under the Plan;
(ii) determine the form of an Award and whether, if such Award is an
Option, such Option is to operate on a tandem basis and/or in
conjunction with or apart from other Awards made by the Corporation,
either within or outside of this Plan; (iii) determine the number of
shares of Common Stock to be covered by each Award hereunder; (iv)
determine the terms and conditions, not inconsistent with the terms of
this Plan, of any Award hereunder (including, but not limited to, any
restriction or limitation on transfer, any vesting schedule or
acceleration thereof, and any forfeiture provision or waiver thereof),
regarding any Award and the shares of Common Stock relating thereto,
based on such factors as the Committee shall determine, in its sole and
absolute discretion; and (v) make any other determination or take any
action that the Committee deems necessary or desirable
for the administration of the Plan. The Committee shall also have
authority, in its sole discretion, to accelerate the date that any
Award which was not otherwise exercisable or vested shall become
exercisable or vested in whole or in part without any obligation to
accelerate such date with respect to any other Award granted to any
recipient.
(c) Power of Committee. The Committee shall have full power and
authority to administer and interpret the Plan, to make factual
determinations and to adopt or amend such rules, regulations,
agreements and instruments for implementing the Plan and for the
conduct of its business as it deems necessary or advisable, in its sole
discretion. The Committee's interpretations of the Plan and all
determinations made by the Committee pursuant to the powers vested
in it hereunder shall be conclusive and binding on all persons having
any interest in the Plan or in any Awards granted hereunder. All
powers of the Committee shall be executed in its sole discretion, in
the best interest of the Corporation, not as a fiduciary, and in
keeping with the objectives of the Plan and need not be uniform as to
similarly situated individuals.
(d) Delegation. Notwithstanding Section 3(b) and Section 3(c)
above, the Committee may delegate to the Chief Executive Officer the
authority to grant Awards, and to make any or all of the determinations
reserved for the Committee in the Plan and summarized in Section 3(b)
or Section 3(c) above with respect to such Awards, to any individual
who, at the time of said grant or other determination, (i) is not
deemed to be an officer or director of the Corporation within the
meaning of Section 16 of the Exchange Act; (ii) is not deemed to be a
Covered Employee; and (iii) is otherwise eligible under Section 5
below. To the extent that the Committee has delegated authority to
grant Awards pursuant to this Section 3(d) to the Chief Executive
Officer, references to the Committee shall include references to such
person, subject, however, to the requirements of the Plan, Rule 16b-3
and other applicable law.
4. Shares of Stock Subject to the Plan; Award Limitations.
(a) Number of Shares. The number of shares of Common Stock
that may be issued pursuant to Awards shall be three million
(3,000,000).
(b) Sources of Shares. The shares to be issued hereunder shall
be issued from authorized but unissued shares. The Corporation hereby
reserves sufficient authorized shares of Common Stock to meet the grant
of Awards hereunder.
(c) Excess Shares. Any shares subject to an Award which is
subsequently forfeited, expires or is terminated may again be the
subject of an Award granted under the Plan. To the extent that any
shares of Common Stock subject to an Award are not delivered to a
Participant (or his beneficiary) because the Award is forfeited or
canceled or because the Award is settled in cash, such shares shall not
be deemed to have been issued for purposes of determining the maximum
number of shares of Common Stock available for issuance under the Plan.
If the option price of an Option granted under the Plan is satisfied by
tendering shares of Common Stock, only the number of shares issued
net of the shares of Common Stock tendered shall be deemed issued for
purposes of determining the maximum number of shares of Common Stock
available for issuance under the Plan.
(d) Adjustment. If there is any change in the number or kind of
shares of Common Stock outstanding (i) by reason of a stock dividend,
spin off, recapitalization, stock split, or combination or exchange of
shares; (ii) by reason of a merger, reorganization or consolidation
involving the Corporation; by reason of a reclassification or change in
par value; or (iv) by reason of any other extraordinary or unusual
event affecting the outstanding Common Stock as a class without the
Corporation's receipt of consideration, or if the value of outstanding
shares of Common Stock is substantially reduced as a result of a
spinoff or the Corporation's payment of an extraordinary dividend or
distribution, the maximum number of shares of Common Stock available
for Awards, the maximum number of shares of Common Stock for which any
individual participating in the Plan may receive Awards in any year,
the number of shares covered by outstanding Awards, the kind of shares
issued under the Plan, and the price per share of such Awards shall be
equitably adjusted by the Committee to reflect any increase or decrease
in the number of, or change in the kind or value of, issued shares of
Common Stock to preclude, to the extent practicable, the enlargement or
dilution of rights and benefits under such Awards; provided, however,
that any fractional shares resulting from such adjustment shall be
eliminated. Any adjustments determined by the Committee shall be
final, binding and conclusive.
5. Eligibility for Participation.
(a) General Qualifications. A Participant must be an employee
of the Corporation or a Related Corporation. For purposes of the Plan,
an individual shall be considered to be an "employee" only if there
exists between the individual and the Corporation or a Related
Corporation the legal and bona fide relationship of employer and
employee. In determining the persons to whom Awards shall be made and
the number of shares to be covered by each Award, the Committee may
take into account the nature of the services rendered by, and the
responsibilities borne by, such eligible persons, their present and
potential contributions to the Corporation's success and such other
factors as the Committee in its discretion shall deem relevant. Awards
may be made to persons who hold or have held options, restricted stock
and/or stock appreciation rights under previous plans, and a person who
has received an Award under the Plan may receive additional Awards
under the Plan or under any future stock or option plan if the
Committee shall so determine.
(b) Incentive Stock Options. Incentive Stock Options under
this Plan may be granted only to officers (who are employees) and to
other employees of the Corporation or a Related Corporation, as
determined by the Committee. A director of the Corporation may receive
an Incentive Stock Option under this Plan only if such person is
otherwise an employee of the Corporation or a Related Corporation.
(c) Other Awards. Employees of the Corporation or a Related
Corporation who the Committee determines are providing bona fide
services to the Corporation or a Related Corporation, whether or not
otherwise compensated, may receive any form of Award, except an
Incentive Stock Option, at the discretion of the Committee.
6. Granting of Options.
(a) General. Subject to the limitations of the Plan, the
Committee may in its sole and absolute discretion grant Options to such
eligible individuals in such numbers, upon such terms and at such times
as the Committee shall determine. Notwithstanding the foregoing,
however, no Participant shall during any fiscal year be granted Options
to purchase greater than 10% of the total number of shares of Common
Stock available for issuance under the Plan. Both Incentive Stock
Options and Non-Qualified Options may be granted under the Plan. To the
extent necessary to comply with Section 422 of the Code and related
regulations, if an Option is designated as an Incentive Option but does
not qualify as such under Section 422 of the Code, the Option (or
portion thereof) shall be treated as a Non-Qualified Option. An
Incentive Option shall be considered to be granted on the date that the
Committee acts to grant the Option, or on any later date specified by
the Committee as the effective date of the Option. A Non-Qualified
Option shall be considered to be granted on the date the Committee acts
to grant the Option or any other date specified by the Committee as the
date of grant of the Option.
(b) Option Price. The price per share at which an Option may
be exercised (the "Exercise Price") shall be established by the
Committee at the time the Option is granted and shall be set forth in
the terms of the agreement evidencing the grant of the Option;
provided, that (i) in the case of an Incentive Stock Option, the
Exercise Price shall be no less than the Fair Market Value per share of
the Common Stock on the date the Incentive Stock Option is granted and
(ii) in no event shall the Exercise Price of any Option be less than
the par value per share of the Common Stock. Notwithstanding the
foregoing, the Exercise Price of an Incentive Stock Option granted to a
10% Shareholder shall not be less than one hundred ten percent (110%)
of the Fair Market Value of the Common Stock on the date of grant.
(c) Limits on Incentive Stock Options. Each Incentive Stock
Option shall provide that, if the aggregate Fair Market Value of the
Common Stock on the date of the grant with respect to which Incentive
Stock Options are exercisable for the first time by a Participant
during any calendar year, under the Plan or any other stock option plan
of the Corporation (or a Parent or Subsidiary of the Corporation),
exceeds $100,000, then the Option, as to the excess, shall be treated
as a Non-Qualified Stock Option. An Incentive Stock Option shall not be
granted to any person who is not an employee of the Corporation or a
Parent or Subsidiary of the Corporation. If and to the extent that an
Option designated as an Incentive Stock Option fails so to qualify
under the Code, the Option shall remain outstanding according to its
terms as a Non-Qualified Stock Option.
(d) Option Term. The term of an Option shall be determined by
the Committee at the time the Option is granted. With respect to
Incentive Stock Options, such period shall not extend more than ten
years from the date on which the Option is granted; provided, however,
that the term of an Incentive Stock Option granted to an employee who
is a 10% Shareholder shall not exceed five years from the date of
grant. Any Option or portion thereof not exercised before expiration of
the option period shall terminate.
(e) Exercisability of Options. Options shall become
exercisable in accordance with such terms and conditions, consistent
with the Plan, as may be determined by the Committee and specified in
the Agreement or an amendment to the Agreement. The Committee may
accelerate the exercisability of any or all outstanding Options at any
time for any reason.
(f) Exercise of Options. A Participant may exercise an Option
that has become exercisable, in whole or in part, by delivering written
notice to the Corporation at such place as the Corporation shall
direct. Such notice shall specify the number of shares to be purchased
pursuant to an Option and the aggregate purchase price to be paid
therefor, and shall be accompanied by the payment of the Exercise
Price. Such payment shall be in the form of (i) cash; (ii) delivery of
written notice of exercise to the Corporation and delivery to a broker
of written notice of exercise and irrevocable instructions to promptly
deliver to the Corporation the amount of sale or loan proceeds to pay
the option price; or (iii) a combination of the foregoing methods, as
elected by the Participant. Shares of Common Stock tendered or
withheld in payment on the exercise of an Option shall be valued at
their Fair Market Value on the date of exercise. Any shares of Common
Stock used to exercise an Option shall have been held by the
Participant for the requisite period of time to avoid adverse
accounting consequences to the Corporation with respect to the exercise
of the Option. The Participant shall pay the Exercise Price and the
amount of any withholding tax due at the time of exercise. Shares of
Common Stock shall not be issued upon exercise of an Option until the
Exercise Price is fully paid and any required withholding is made.
(g) Nontransferability of Options. Options shall not be
transferable other than by will or the laws of intestate succession.
The designation of a beneficiary does not constitute a transfer. An
Option shall be exercisable during the Participant's lifetime only by
him or by his guardian or legal representative. If a Participant is
subject to Section 16 of the Exchange Act, shares of Common Stock
acquired upon exercise of an Option may not, without the consent of the
Committee, be disposed of by the Participant until the expiration of
six months after the date the Option was granted.
7. Stock Appreciation Rights.
(a) Grant of SARs. Subject to the limitations of the Plan,
the Committee may in its sole and absolute discretion grant SARs to
such eligible individuals, in such numbers, upon such terms and at such
times as the Committee shall determine. SARs may be granted to an
optionee of an Option (hereinafter called a "Related Option") with
respect to all or a portion of the shares of Common Stock subject to
the Related Option (a "Tandem SAR") or may be granted separately to an
eligible key employee (a "Freestanding SAR"). Subject to the
limitations of the Plan, SARs shall be exercisable in whole or in part
upon notice to the Corporation upon such terms and conditions as are
provided in the Agreement relating to the grant of the SAR.
(b) Tandem SARs. A Tandem SAR may be granted either
concurrently with the grant of the Related Option or (if the Related
Option is a Non-Qualified Option) at any time thereafter prior to the
complete exercise, termination, expiration or cancellation of such
Related Option. Tandem SARs shall be exercisable only at the time and
to the extent that the Related Option is exercisable (and may be
subject to such additional limitations on exercise as the Committee may
provide in the Agreement), and in no event after the complete
termination or full exercise of the Related Option. For purposes of
determining the number of shares of Common Stock that remain subject to
such Related Option and for purposes of determining the number of
shares of Common Stock in respect of which other Awards may be granted,
upon the exercise of Tandem SARs, the Related Option shall be
considered to have been surrendered to the extent of the number of
shares of Common Stock with respect to which such Tandem SARs are
exercised. Upon the exercise or termination of the Related Option, the
Tandem SARs with respect thereto shall be canceled automatically to the
extent of the number of shares of Common Stock with respect to which
the Related Option was so exercised or terminated. Subject to the
limitations of the Plan, upon the exercise of a Tandem SAR, the
Participant shall be entitled to receive from the Corporation, for each
share of Common Stock with respect to which the Tandem SAR is being
exercised, consideration equal in value to the excess of the Fair
Market Value of a share of Common Stock on the date of exercise over
the Related Option price per share; provided, that the Committee may,
in any agreement granting Tandem SARs, establish a maximum value
payable for such SARs.
(c) Freestanding SARs. Unless an individual agreement
provides otherwise, the base price of a Freestanding SAR shall be not
less than one hundred percent (100%) of the Fair Market Value of the
Common Stock on the date of grant of the Freestanding SAR. Subject to
the limitations of the Plan, upon the exercise of a Freestanding SAR,
the Participant shall be entitled to receive from the Corporation, for
each share of Common Stock with respect to which the Freestanding SAR
is being exercised, consideration equal in value to the excess of the
Fair Market Value of a share of Common Stock on the date of exercise
over the base price per share of such Freestanding SAR; provided, that
the Committee may, in any agreement granting Freestanding SARs,
establish a maximum value payable for such SARs.
(d) Exercise of SARs. Subject to the terms of the Plan, SARs
shall be exercisable in whole or in part upon such terms and conditions
as are provided in the Agreement relating to the grant of the SAR. The
period during which an SAR may be exercisable shall not exceed ten (10)
years from the date of grant or, in the case of Tandem SARs, such
shorter term as may apply to the Related Option. Any SAR or portion
thereof not exercised before expiration of the period stated in the
Agreement relating to the grant of the SAR shall terminate. SARs may
be exercised by giving written notice to the Corporation at such place
as the Committee shall direct. The date of exercise of the SAR shall
mean the date on which the Corporation shall have received notice from
the Participant of the exercise of such SAR.
(e) Consideration; Election. The consideration to be received
upon the exercise of the SAR by the Participant shall be paid in cash,
shares of Common Stock (valued at Fair Market Value on the date of
exercise of such SAR) or a combination of cash and shares of Common
Stock, as elected by the Participant, subject to the terms of the Plan
and the applicable Agreement. Ownership by the Participant (or his
beneficiary) of the shares of Common Stock acquired upon exercise of an
SAR for shares shall be reflected by a book entry in the stock records
maintained by the Corporation and its transfer agent as soon as
practicable following receipt of notice of exercise. No fractional
shares of Common Stock will be issuable upon exercise of the SAR and,
unless otherwise provided in the applicable Agreement, the Participant
will receive cash in lieu of fractional shares.
(f) Limitations. The applicable Agreement shall contain such
terms, conditions and limitations consistent with the Plan as may be
specified by the Committee. Unless otherwise so provided in the
applicable agreement or the Plan, any such terms, conditions or
limitations relating to a Tandem SAR shall not restrict the
exercisability of the Related Option.
(g) Nontransferability. SARs shall not be transferable other
than by will or the laws of intestate succession. The designation of a
beneficiary does not constitute a transfer. SARs may be exercised
during the Participant's lifetime only by him or by his guardian or
legal representative. If the Participant is subject to Section 16 of
the Exchange Act, shares of Common Stock acquired upon exercise of an
SAR may not, without the consent of the Committee, be disposed of by
the Participant until the expiration of six months after the date the
SAR was granted.
8. Restricted Stock Awards.
(a) Restricted Stock Awards. Subject to the limitations of
the Plan, the Committee may grant Restricted Stock Awards to such
Eligible Persons, in such amounts and subject to such terms and
conditions, as the Committee may determine in its sole discretion,
including such restrictions on transferability and other restrictions
as the Committee may impose, which restrictions may lapse separately or
in combination at such times, under such circumstances, in such
installments, or otherwise, as the Committee shall determine.
(b) Issuance of Restricted Stock. Restricted Stock awarded
under the Plan shall be recorded as owned by the Participant by means
of a book entry in the stock records maintained by the Corporation and
its transfer agent, and the Corporation shall instruct its transfer
agent regarding the terms, conditions and restrictions applicable to
such Restricted Stock. Each Participant awarded Restricted Stock
shall have delivered a stock power to the Corporation, endorsed in
blank, relating to the Restricted Stock for so long as the Restricted
Stock is subject to a risk of forfeiture.
(c) Voting and Dividend Rights of Restricted Stock. Unless
otherwise determined by the Committee at the time of an Award, the
holder of Restricted Stock shall have the right to vote the Restricted
Stock and to receive dividends, if any, thereon, unless and until such
shares are forfeited.
(d) Nontransferability. The recipient of Restricted Stock
shall not sell, transfer, assign, pledge or otherwise encumber shares
subject to the Award until the restrictions have lapsed, expired or
until all conditions to vesting have been met. Restricted Stock shall
not be transferable other than by will or the laws of intestate
succession until the restrictions have lapsed, expired or until all
conditions to vesting have been met. The designation of a beneficiary
does not constitute a transfer. If a Participant of a Restricted Award
is subject to Section 16 of the Exchange Act, shares of Common Stock
subject to such Award may not, without the consent of the Committee, be
sold or otherwise disposed of within six (6) months following the date
of grant of such Award.
9. Termination of Employment.
(a) Death of Participant. In the event of the death of a
Participant, any Incentive Stock Options granted to such Participant
may be exercised by the person or persons to whom the Participant's
rights under any such Incentive Stock Options pass by will or by the
laws of descent and distribution (including the Participant's estate
during the period of administration) at any time prior the respective
expiration dates of any such Incentive Stock Options. In addition, all
Non-Qualified Options and SARs held by such Participant shall
immediately vest and become exercisable in accordance with their terms,
and all Restricted Stock held by such Participant shall immediately
vest and become non-forfeitable.
(b) Permanent Disability of Participant. In the event that
any Participant's employment with the Corporation shall terminate as a
result of the Permanent Disability of such Participant, such
Participant may exercise any Incentive Stock Options granted to him
pursuant to the Plan at any time prior to the earlier of (i) the
respective expiration dates of any such Incentive Stock Options or (ii)
the date which is the first anniversary of the date of such termination
of employment. In addition, all Non-Qualified Options and SARs held by
such Participant shall immediately vest and become exercisable in
accordance with their terms, and all Restricted Stock held by such
Participant shall immediately vest and become non-forfeitable.
(c) Retirement of Participant. In the event of the Retirement
of a Participant, any Incentive Stock Options held by him under the
Plan shall immediately vest and shall be exercisable at any time prior
to the earlier of (i) the respective expiration dates of any such
Incentive Stock Options or (ii) the date which is ninety (90) days
after the date of such termination. In addition, all Non-Qualified
Options and SARs held by such Participant shall immediately vest and
become exercisable in accordance with their terms, and all Restricted
Stock held by such Participant shall immediately vest and become non-
forfeitable.
(d) Other Termination of Employment. Upon the termination of
any Participant's employment with the Corporation for any reason other
than death, Permanent Disability or Retirement, any Incentive Stock
Options held by him that are vested as of the date of such termination
shall be exercisable at any time prior to the earlier of (i) the
respective expiration dates of any such vested Incentive Stock Options
or (ii) the date which is ninety (90) days after the date of such
termination. In addition, the terms and conditions of Non-Qualified
Options, SARs and Restricted Stock shall be as specifically provided
for in the Agreement executed by the Participant at the time of an
Award.
(e) Non-Competition. Unless an Agreement specifies otherwise,
a Participant shall forfeit all unexercised, unearned, and/or unpaid
Awards, including, but not by way of limitation, Awards earned but not
yet paid, all unpaid dividends and dividend equivalents, and all
interest, if any, accrued on the foregoing if: (i) in the opinion of
the Committee, the Participant, without the prior written consent of
the Corporation, engages directly or indirectly in any manner or
capacity as a principal, agent, partner, officer, director,
shareholder, employee or otherwise, in any business or activity
competitive with the business conducted by the Corporation or any
Parent, Subsidiary or Affiliate of the Corporation; (ii) the
Participant at any time divulges to any person or entity other than the
Corporation (or any Parent, Subsidiary, or Affiliate of the
Corporation) any trade secrets, methods, processes or the proprietary
or confidential information of the Corporation (or any Parent,
Subsidiary, or Affiliate of the Corporation); (iii) the Participant
performs any act or engages in any activity which in the opinion of
Chief Executive Officer of the Corporation is inimical to the best
interests of the Corporation. Ownership of not more than four and
99/100 percent (4.99%) of the outstanding capital stock of a company
subject to the periodic and other reporting requirements of the
Exchange Act shall not be a violation of this Section 9(f).
10. Withholding of Taxes. The Corporation shall withhold all
required local, state and federal taxes from any amount payable in cash
with respect to an Award. The Corporation shall require any recipient
of an Award payable in shares of the Common Stock to pay to the
Corporation in cash the amount of any tax or other amount required by
any governmental authority to be withheld and paid over by the
Corporation to such authority for the account of such recipient.
11. Consequences of a Change of Control. Notwithstanding any other
provision of the Plan to the contrary, in the event of a Change of
Control: (a) all Options and SARs outstanding as of the date of such
Change of Control shall become fully exercisable, whether or not then
otherwise exercisable; (b) all restrictions applicable to any
Restricted Stock Award shall be deemed to have expired, and such
Restricted Stock Awards shall become fully vested and payable to the
fullest extent of the original grant of the applicable Award.
Notwithstanding the foregoing, in the event of a merger, share
exchange, reorganization or other business combination affecting the
Corporation or a Related Corporation, the Committee may, in its sole
and absolute discretion, determine that any or all Awards granted
pursuant to the Plan shall not vest or become exercisable on an
accelerated basis, if the Board of Directors of the surviving or
acquiring corporation, as the case may be, shall have taken such
action, including but not limited to the assumption of Awards granted
under the Plan or the grant of substitute awards (in either case, with
substantially similar terms as Awards granted under the Plan), as in
the reasonable opinion of the Committee is equitable or appropriate to
protect the rights and interests of participants under the Plan. For
the purposes herein, the Committee authorized to make the
determinations provided for in this Section 11 shall be appointed by
the Board of Directors, two-thirds of the members of which shall have
been directors of the Corporation prior to the merger, share exchange,
reorganization or other business combinations affecting the Corporation
or a Related Corporation.
12. Performance Based Compensation. To the extent that Section
162(m) of the Code is applicable, the Committee shall have discretion
to determine the extent, if any, that Awards conferred under the Plan
to Covered Employees shall comply with the qualified performance-based
compensation exception to employer compensation deductions set forth in
Section 162(m) of the Code.
13. No Right or Obligation of Continued Employment. Nothing
contained in the Plan shall require the Corporation or a Related
Corporation to continue the employment or service of a Participant, nor
shall any such individual be required to remain in the employment or
service of the Corporation or a Related Corporation. Except as
otherwise provided in the Plan, Awards granted under the Plan to
employees of the Corporation or a Related Corporation shall not be
affected by any change in the duties or position of the Participant, as
long as such individual remains an employee of, or in service to, the
Corporation or a Related Corporation.
14. Unfunded Plan; Retirement Plan. Neither a Participant nor any
other person shall, by reason of the Plan, acquire any right in or
title to any assets, funds or property of the Corporation or any
Related Corporation including, without limitation, any specific funds,
assets or other property which the Corporation or any related
corporation, in their discretion, may set aside in anticipation of a
liability under the Plan. A participant shall have only a contractual
right to the Common Stock or amounts, if any, payable under the Plan,
unsecured by any assets of the Corporation or any related corporation.
Nothing contained in the Plan shall constitute a guarantee that the
assets of such corporations shall be sufficient to pay any benefits to
any person. In no event shall any amounts accrued, distributable or
payable under the Plan be treated as compensation for the purpose of
determining the amount of contributions or benefits to which any person
shall be entitled under any retirement plan sponsored by the
Corporation or a related corporation that is intended to be a qualified
plan within the meaning of Section 401(a) of the Code.
15. Amendment and Termination of the Plan.
(a) Amendment. The Board may amend or terminate the Plan at
any time; provided, however, that if the Common Stock becomes publicly
traded, the Board shall not amend the Plan without shareholder approval
if such approval is required by (i) Section 162(m) of the Code and if
Section 162(m) is applicable to the Plan; (ii) the Securities Act; or
(iii) the Exchange Act.
(b) Termination of Plan. The Plan shall terminate on the day
immediately preceding the tenth anniversary of its effective date
unless terminated earlier by the Board or unless extended by the Board
with the approval of the shareholders.
(c) Termination and Amendment of Outstanding Awards. A
termination or amendment of the Plan that occurs after an Award is
granted shall not materially impair the rights of a Participant unless
the Participant consents. The termination of the Plan shall not impair
the power and authority of the Committee with respect to an outstanding
Award. No termination, Modification, or amendment of the Plan, may,
without the consent of the Participant to whom any Award shall
theretofore have been made, adversely affect the rights of such
Participant under such Award; nor shall any such Modification or
amendment be deemed to effect a Modification, extension or renewal of
any such Award previously made except pursuant to an express written
agreement to such effect, executed by the Corporation and the
Participant.
(d) Governing Document. The Plan shall be the controlling
document. No other statements, representations, explanatory materials
or examples, oral or written, may amend the Plan in any manner. The
Plan shall be binding upon and enforceable against the Corporation and
its successors and assigns.
16. Restrictions on Shares. The Committee may impose such
restrictions on any shares representing Awards hereunder as it may deem
advisable, including without limitation restrictions under the
Securities Act, under the requirements of any stock exchange or similar
organization and under any blue sky or state securities laws applicable
to such shares. Notwithstanding any other Plan provision to the
contrary, the Corporation shall not be obligated to issue or deliver
shares of Common Stock under the Plan or make any other distribution of
benefits under the Plan, or take any other action, unless such
delivery, distribution or action is in compliance with all applicable
laws, rules and regulations (including but not limited to the
requirements of the Securities Act). The Corporation may give
instructions to its transfer agent regarding such restrictions as may
be prescribed from time to time by applicable laws and regulations or
as may be advised by legal counsel with respect to shares of Common
Stock issued pursuant to an Award hereunder.
17. No Fractional Shares. No fractional shares of Common Stock
shall be issued or delivered pursuant to the Plan or any Option. The
Committee shall determine whether cash, other awards or other property
shall be issued or paid in lieu of such fractional shares or whether
such fractional shares or any rights thereto shall be forfeited or
otherwise eliminated.
18. Miscellaneous.
(a) Options in Connection with Corporate Transactions and
Otherwise. Nothing contained in this Plan shall be construed to (i)
limit the right of the Committee to grant Options under this Plan in
connection with the acquisition, by purchase, lease, merger,
consolidation or otherwise, of the business or assets of any
corporation, firm or association, including options granted to
employees thereof who become employees of the Corporation, or for other
proper corporate purpose, or (ii) limit the right of the Corporation to
grant stock options or make other awards outside of this Plan. Without
limiting the foregoing, the Committee may grant Options to an employee
of another corporation who becomes an employee of the Corporation by
reason of a corporate merger, consolidation, acquisition of stock or
property, reorganization or liquidation involving the Corporation or
any of its subsidiaries in substitution for a stock option or
restricted stock grant made by such corporation. The Committee shall
prescribe the provisions of the substitute Options.
(b) If the Committee determines that such action is advisable,
the Corporation may assist any Participant in obtaining financing from
the Corporation or from any bank or other third party, on such terms as
are determined by the Committee, and in such amount as is required to
accomplish the purposes of the Plan, including, but not limited to,
permitting the exercise of an Award and/or paying any taxes in respect
thereof to the extent permitted by law. Such assistance may take any
form that the Committee deems appropriate, including, but not limited
to, a direct loan from the Corporation, a guarantee of the obligation
by the Corporation, or the maintenance by the Corporation of deposits
with such bank or third party.
(b) Compliance with Law. The Plan, the grant and exercise of
Options, and the obligations of the Corporation to issue or transfer
shares of Common Stock under Options shall be subject to all applicable
laws and to approvals by any governmental or regulatory agency as may
be required. The Committee may revoke any Award if it is contrary to
law or modify an Award to bring it into compliance with any valid and
mandatory government regulation. The Committee may also adopt rules
regarding the withholding of taxes on payments to Participants. The
Committee may, in its sole discretion, agree to limit its authority
under this Section 18(b).
(c) Ownership of Stock. A Participant shall have no rights as
a shareholder with respect to any shares of Common Stock covered by an
Option until the shares are issued or transferred to the Participant or
Successor Participant on the stock transfer records of the Corporation.
(e) Governing Law. The validity, construction, interpretation
and effect of the Plan and grant instruments issued under the Plan
shall exclusively be governed by and determined in accordance with the
law of the State of Tennessee, without regard to conflict of laws
principles.
(f) Time of Awards. Nothing contained in the Plan shall
constitute an Award hereunder. Any Award pursuant to the Plan shall
take place only upon approval by the Committee of a resolution
recommending an Award under this Plan. Notice of the determination
shall be given to each person to whom an Award is so made within a
reasonable time after the date of such Award. After the making of an
Award under this Plan, a written Agreement shall be duly executed by or
on behalf of the Corporation and the Participant.
(g) Form and Terms of Award Agreement. Agreements evidencing
Awards pursuant to the Plan shall be in such form and shall contain
such terms not inconsistent with the Plan as the Committee may approve.
Award Agreements may contain such terms, conditions, restrictions and
limitations in respect of Options, SARs and/or Restricted Stock (and
such provisions for the enforcement of compliance with the Securities
Act and/or with state "Blue Sky" laws) as the Committee, in its sole
discretion, may determine. To the extent any term in any Award
Agreement shall be inconsistent with any term of this Plan, the term in
this Plan shall govern.
(h) Partial Invalidity. The invalidity or unenforceability of
any particular provision of this Plan or any Award Agreement shall not
effect the other provisions of this Plan or such Award Agreement nor
affect the validity or enforceability of the other provisions of Award
Agreements under this Plan, and this Plan and Awards hereunder shall be
construed in all respects as if such invalid or unenforceable provision
were omitted.
(i) Special Provisions with Respect to Incentive Stock Options
under this Plan and Non-Qualified Stock Options. The Committee in
making any Award of an Option shall indicate whether it intends the
Option to be an Incentive Stock Option under this Plan or a Non-
Qualified Stock Option and shall cause the Award Agreement with respect
thereto to indicate such intention. Should a person hold both one or
more Incentive Stock Options under this Plan and one or more Non-
Qualified Stock Options, all of such Options shall be exercisable in
accordance with their respective terms and limitations, and nothing in
this Plan shall be construed as causing the exercise of any such Option
to preclude the exercise of any such other Option in accordance with
its terms.
(j) Rule 16b-3 Savings Provision. It is the intent of the
Corporation that this Plan comply in all respects with any applicable
provisions of Rule 16b-3 and Rule 16a-1(c)(3) under the Exchange Act in
connection with any grant of Awards to or other transaction by a
Participant who is subject to Section 16 of the Exchange Act (except
for transactions exempted under alternative Exchange Act Rules or
acknowledged in writing to be non-exempt by such Participant).
Accordingly, if any provision of this Plan or any Award Agreement does
not comply with the requirements of Rule 16b-3 or Rule 16a-1(c)(3) as
then applicable to any such transaction, such provision will be
construed or deemed amended to the extent necessary to conform to the
applicable requirements of Rule 16b-3 or Rule 16a-1(c)(3) so that such
Participant shall avoid liability under Section 16(b).
(k) Headings. Section headings are for reference only. In the
event of a conflict between a title and the content of a Section, the
content of the Section shall control.
Exhibit II
MORGAN KEEGAN, INC.
2000 EMPLOYEE STOCK PURCHASE PLAN
ARTICLE I
INTRODUCTION
1.1 Establishment of Plan. Morgan Keegan, Inc., a Tennessee
corporation ("Morgan Keegan") with its principal offices located in
Memphis, Tennessee, has adopted the following employee stock purchase
plan for its eligible employees. This Plan shall be known as the
Morgan Keegan, Inc. 2000 Employee Stock Purchase Plan.
1.2 Purpose. The purpose of this Plan is to provide an
opportunity for eligible employees of the Employer to become
shareholders of Morgan Keegan. It is believed that broad-based
employee participation in the ownership of the business will help to
achieve the unity of purpose conducive to the continued growth of the
Employer and to the mutual benefit of its employees and shareholders.
1.3 Qualification. This Plan is intended to be an employee
stock purchase plan which qualifies for favorable federal income tax
treatment under Section 423 of the Code and is intended to comply with
the provisions thereof, including the requirement of Section 423(b)(5)
of the Code that all Employees granted options to purchase Stock under
the Plan have the same rights and privileges with respect to such
options.
1.4 Rule 16b-3 Compliance. This Plan is intended to comply
with Rule 16b-3 under the Securities Exchange Act of 1934, and should
be interpreted in accordance therewith.
ARTICLE II
DEFINITIONS
As used herein, the following words and phrases shall have the
meanings specified below:
2.1 Board of Directors. The Board of Directors of Morgan
Keegan.
2.2 Code. The Internal Revenue Code of 1986, as amended from
time to time.
2.3 Commencement Date. The first day of each Option Period.
The first Commencement Date shall be January 10, 2001.
2.4 Contribution Account. As set forth in Article V, the
account established on behalf of a Participant to which shall be
credited the amount of the Participant's contributions.
2.5 Effective Date. The first date on which this Plan shall
have been approved by both the Board of Directors and shareholders of
Morgan Keegan.
2.6 Employee. Each employee of an Employer except:
(a) any employee whose customary employment is
twenty(20) hours per week or less, or
(b) any employee whose customary employment is
for not more than five months in any calendar
year.
2.7 Employer. Morgan Keegan and any United States
corporation which is a Subsidiary of Morgan Keegan (except for a
Subsidiary which by resolution of the Board of Directors is expressly
not authorized to become a participating Employer). The term
"Employer" shall include any corporation into which an Employer may be
merged or consolidated or to which all or substantially all of its
assets may be transferred, provided that the surviving or transferee
corporation would qualify as a Subsidiary under Section 2.17.
2.8 Exercise Date. December 31 of each Option Period during
which options to purchase the Stock shall have been granted hereunder.
2.9 Exercise Price. The price per share of the Stock to be
charged to Participants at the Exercise Date, as determined in Section
6.3.
2.10 Fair Market Value. The closing sales price per share for
the shares of Common Stock on the New York Stock Exchange or any
national exchange on which shares of Common Stock are traded on such
date (or if such market or exchange was not open for trading on such
date, the next preceding date on which it was open) or, if the Common
Stock is not listed on the New York Stock Exchange or on an established
and recognized exchange, such value as the Board of Directors, in good
faith, shall determine based on such relevant facts, which may include
opinions of independent experts, as may be available to the Board of
Directors.
2.11 Five-Percent Shareholder. An Employee who, immediately
after an option is granted to purchase Stock under this Plan, owns five
percent (5%) or more of the total combined voting power or value of all
classes of stock of an Employer. In determining this five percent
test, shares of stock which the Employee may purchase under outstanding
options, warrants or other convertible securities, as well as stock
attributed to the Employee from members of his family or otherwise
under Section 424(d) of the Code, shall be treated as stock owned by
the Employee in the numerator, but treasury shares and shares of stock
which may be issued under options, warrants or other convertible
securities shall not be counted in the total of outstanding shares in
the denominator.
2.12 Option Period. The period commencing on January 10 and
ending on December 31 of each calendar year during which the Plan is in
effect.
2.13 Participant. Any Employee of an Employer who has met the
conditions for eligibility as provided in Article IV and who has
elected to participate in the Plan.
2.14 Plan. Morgan Keegan, Inc. 2000 Employee Stock Purchase
Plan.
2.15 Plan Administrator. The Compensation Committee of Morgan
Keegan & Company, Inc., to whom authority is delegated by the Board of
Directors to administer the Plan.
2.16 Stock. Those shares of common stock of Morgan Keegan
which are reserved pursuant to Section 6.1 for issuance upon the
exercise of options granted under this Plan.
2.17 Subsidiary. Any United States corporation (other than
Morgan Keegan) in an unbroken chain of corporations beginning with
Morgan Keegan if, at the time of the granting of the option, each of
the corporations other than the last corporation in the unbroken chain
owns stock possessing fifty-one percent (51%) or more of the total
combined voting power of all classes of stock in one of the other
corporations in such chain.
ARTICLE III
SHAREHOLDER APPROVAL
This Plan must be approved by the shareholders of Morgan Keegan
within the period beginning twelve (12) months before and ending twelve
(12) months after its adoption by the Board of Directors.
ARTICLE IV
ELIGIBILITY AND PARTICIPATION
4.1 Conditions. Each Employee shall become eligible to
become a Participant for each Option Period on the Commencement Date of
such Option Period if such Employee is employed by the Employer as of
such Commencement Date; provided, however, that no Employee who is a
Five-Percent Shareholder shall be eligible to participate in the Plan.
Notwithstanding anything to the contrary contained herein, no
individual who is not an Employee shall be granted an option to
purchase Stock under the Plan.
4.2 Application for Participation. Each Employee who becomes
eligible to participate shall be furnished a summary of the Plan and an
enrollment form. If such Employee elects to participate hereunder,
Employee shall complete such form and file it with Employer no later
than December 31 immediately prior to the Option Period with respect to
which the Employee desires to participate (the "Enrollment Date"). The
completed enrollment form shall indicate the amount of Employee
contribution authorized by the Employee. If no new enrollment form is
filed by a Participant by the Enrollment Date for any Option Period
after the initial Option Period, that Participant shall be deemed to
have elected to continue to participate with the same contribution
previously elected (subject to the limits specified in Section 5.1). If
any Employee does not elect to participate in any given Option Period,
such Employee may elect to participate on any future Commencement Date
so long as such Employee continues to meet the eligibility
requirements.
4.3 Date of Participation. All Employees who elect to
participate shall be enrolled in the Plan as of the Commencement Date
of the Option Period with respect to which they submitted an enrollment
form as described in Section 4.2 above. Upon becoming a Participant,
the Participant shall be bound by the terms of this Plan, including any
amendments whenever made.
4.4 Acquisition or Creation of Subsidiary. If the stock of a
corporation is acquired by Morgan Keegan or another Employer so that
the acquired corporation becomes a Subsidiary, or if a Subsidiary is
created, the Subsidiary in either case shall automatically become an
Employer, and its Employees shall become eligible to participate in the
Plan on the first Commencement Date after the acquisition or creation
of the Subsidiary, as the case may be. Notwithstanding the foregoing,
the Board of Directors may by appropriate resolutions (i) provide that
the acquired or newly created Subsidiary shall not be a participating
Employer, (ii) specify that the acquired or newly created Subsidiary
will become a participating Employer on a Commencement Date other than
the first Commencement Date after the acquisition or creation, or (iii)
attach any condition whatsoever (including denial of credit for prior
service) to eligibility of the employees of the acquired or newly
created Subsidiary, except to the extent such condition would not
comply with Section 423 of the Code.
ARTICLE V
CONTRIBUTION ACCOUNT
5.1 Employee Contributions. The enrollment form signed by
each Participant shall specify a fixed percentage of the Participant's
base pay per pay period to be withheld pursuant to this Plan, and the
Participant shall authorize the Employer to deduct said percentage from
the Participant's compensation for each pay period; provided, however,
that in no event shall a Participant contribute, with respect to any
one Option Period, more than (a) five percent (5%) of the Participant's
annual base pay as of the Commencement Date or (b) ten thousand
dollars, whichever is less. Base pay includes the Participant's wages
and salary, but does not include overtime payments, sales commissions,
incentive compensation, bonuses, expense reimbursements, fringe
benefits and other special payments. Base pay is not reduced by the
Participant's elective deferrals to a qualified plan under Section
401(k) of the Code, salary reduction contributions to a cafeteria plan
under Section 125 of the Code, or elective deferrals to a nonqualified
deferred compensation plan. The dollar amount deducted each payday
shall be credited to the Participant's Contribution Account.
Participant contributions will not be permitted to commence at any time
during the Option Period other than on a Commencement Date. No
interest will accrue on any contributions or on the balance in a
Participant's Contribution Account.
5.2 Modification of Contribution Rate. No change shall be
permitted in a Participant's amount of withholding except upon a
Commencement Date, and then only if the Participant files a new
enrollment form with the Employer designating the desired withholding
rate on or prior to the Enrollment Date for the Option Period with
respect to which the change is desired. Notwithstanding the foregoing,
a Participant may notify the Employer at any time prior to December 31
of an Option Period that the Participant wishes to discontinue the
Participant's contributions for that Option Period. This notice shall
be in writing and on such forms as provided by the Employer and shall
become effective as of a date provided on the form not more than five
(5) days following its receipt by the Employer. The Participant shall
become eligible to recommence contributions on the next Commencement
Date.
5.3 Withdrawal of Contributions. A Participant may elect to
withdraw the balance of his Contribution Account at any time during the
Option Period prior to December 15. The option granted to a
Participant shall be canceled upon his withdrawal of the balance in his
Contribution Account. This election to withdraw must be in writing on
such forms as may be provided by the Employer. If contributions are
withdrawn in this manner, further contributions during that Option
Period will be discontinued in the same manner as provided in Section
5.2, and the Participant shall become eligible to recommence
contributions on the next Commencement Date.
ARTICLE VI
ISSUANCE AND EXERCISE OF OPTIONS
6.1 Reserved Shares of Stock. Morgan Keegan shall reserve
three million (3,000,000) shares of Stock for issuance upon exercise of
the options granted under this Plan.
6.2 Issuance of Options. As of the Commencement Date, each
Participant shall be granted an option to purchase Stock with the
number of shares and Exercise Price determined as provided in this
Article VI, subject to the limits specified in Section 6.6(a) and (b).
All such options shall be automatically exercised on the following
Exercise Date, except for options which are canceled when a Participant
withdraws the balance of his Contribution Account or which are
otherwise terminated under the provisions of this Plan.
6.3 Determination of Exercise Price. The Exercise Price of
the options granted under this Plan for any Option Period shall be the
lesser of the following two (2) amounts:
(a) eighty-five percent (85%) of the Fair Market
Value of the Stock on the Exercise Date or
(b) the greater of (i) eighty-five percent (85%) of
the Fair Market Value of the Stock on the
Commencement Date that such options were
granted or (ii) eighty-five percent (85%) of
the average of the Fair Market Value on the
first day of each calendar month during the
Option Period and on the Exercise Date (the
foregoing period having twelve (12) dates).
6.4 Purchase of Stock. On an Exercise Date, all options shall
be automatically exercised, except that the options of a Participant
who has terminated employment pursuant to Section 7.1 or who has
withdrawn all his contribution shall expire. The Contribution Account
of each Participant shall be used to purchase the maximum number of
whole shares of Stock determined by dividing the Exercise Price into
the balance of the Participant's Contribution Account. Any money
remaining in a Participant's Contribution Account representing a
fractional share shall remain in his Contribution Account to be used in
the next Option Period along with new contributions in the next Option
Period; provided, however, that if the Participant does not enroll for
the next Option Period, the balance remaining shall be returned to such
Participant in cash.
6.5 Terms of Options. Options granted under this Plan shall
be subject to such amendment or modification as the Employer shall deem
necessary to comply with any applicable law or regulation, including
but not limited to Section 423 of the Code, and shall contain such
other provisions as the Employer shall from time to time approve and
deem necessary; provided, however, that any such provisions shall
comply with Section 423 of the Code.
6.6 Limitations on Options. The options granted hereunder
are subject to the following limitations:
(a) The maximum number of shares of Stock that
shall be offered during any Option Period
shall be determined by the Plan Administrator
in its sole discretion; provided, however,
that no more than seven hundred fifty thousand
(750,000) shares plus any unsold allotment
below seven hundred fifty thousand (750,000)
shares from any previous Option Period may be
offered during any Option Period. This maximum
number of shares shall be adjusted upon the
occurrence of an event described in Section 10.3.
(b) During any calendar year, no Participant shall
be permitted to accrue the right to purchase
Stock under this Plan (and any other plan of
the Employer or Subsidiary which is qualified
under Section 423 of the Code) having a market
value in excess of $25,000 (as determined on
the Commencement Date for the Option Period
on which the option to purchase each such share
of Stock was granted) as provided in Section
423(b)(8) of the Code.
(c) No option may be granted to a Participant if
the Participant immediately after the option
is granted would be a Five-Percent Shareholder.
(d) No Participant may assign, transfer or otherwise
alienate any options granted to him under this
Plan, otherwise than by will or the laws of
descent and distribution, and such options may
be exercised during the Participant's lifetime
only by the Participant.
6.7 Pro-Rata Reduction of Optioned Stock. If the total
number of shares of Stock to be purchased under option by all
Participants on an Exercise Date exceeds the number of shares of Stock
remaining authorized for issuance under Section 6.1 or the number
authorized to be offered for the Option Period pursuant to Section
6.6(a), a pro-rata allocation of the shares of Stock available for
issuance will be made among Participants in proportion to their
respective Contribution Account balances on the Exercise Date, and any
money remaining in the Contribution Accounts shall be returned to the
Participants no later than the fifteenth day of February in the next
succeeding calendar year after the Option Period, together with
interest on the refund amount computed for one hundred eighty (180)
days at the average annual 90-day certificate of deposit rate as quoted
by The Wall Street Journal on the first working day of each month
during the Option Period; provided, however, that no refund amounting
to less than one hundred dollars ($100.00) shall bear interest.
6.8 State Securities Laws. Notwithstanding anything to the
contrary contained herein, Morgan Keegan shall not be obligated to
issue shares of Stock to any Participant if to do so would violate any
State securities law applicable to the sale of Stock to such
Participant. In the event that Morgan Keegan refrains from issuing
shares of Stock to any Participant in reliance on this Section, Morgan
Keegan shall return to such Participant the amount in such
Participant's Contribution Account that would otherwise have been
applied to the purchase of Stock.
ARTICLE VII
TERMINATION OF PARTICIPATION
7.1 Termination of Employment. Any Employee whose employment
with the Employer is terminated during the Option Period prior to the
Exercise Date for any reason except death, disability or retirement at
or after age 65 shall cease being a Participant immediately. The
balance of that Participant's Contribution Account shall be paid to
such Participant as soon as practicable after his termination. The
option granted to such Participant shall be null and void.
7.2 Death. If a Participant should die while employed by the
Employer, no further contributions on behalf of the deceased
Participant shall be made. The legal representative of the deceased
Participant may elect to withdraw the balance in said Participant's
Contribution Account by notifying the Employer in writing prior to the
Exercise Date in the Option Period during which the Participant died.
In the event no election to withdraw is made prior to the Exercise
Date, the balance accumulated in the deceased Participant's
Contribution Account shall be used to purchase shares of Stock in
accordance with Section 6.4. Any money remaining which is insufficient
to purchase a whole share shall be paid to the legal representative.
7.3 Retirement. If a Participant shall retire from the
employment of the Employer at or after attaining age 65, no further
contributions on behalf of the retired Participant shall be made. The
Participant may elect to withdraw the balance in his Contribution
Account by notifying the Employer in writing prior to the Exercise Date
in the Option Period during which the Participant retired. In the
event no election to withdraw is made prior to the Exercise Date, the
balance accumulated in the retired Participant's Contribution Account
shall be used to purchase shares of Stock in accordance with Section
6.4. Any money remaining which is insufficient to purchase a whole
share shall be paid to the retired Participant.
7.4 Disability. If a Participant should terminate employment
with the Employer on account of disability, as determined by reference
to the definition of "disability" in the Employer's long-term
disability plan as amended from time to time or, if no such plan
exists, to the definition of "permanent and total disability" set forth
in Section 22(e)(3) of the Code, no further contributions on behalf of
the disabled Participant shall be made. The Participant may elect to
withdraw the balance in his Contribution Account by notifying the
Employer in writing prior to the Exercise Date in the Option Period
during which the Participant became disabled. In the event no election
to withdraw is made prior to the Exercise Date, the balance accumulated
in the disabled Participant's Contribution Account shall be used to
purchase shares of Stock in accordance with Section 6.4. Any money
remaining which is insufficient to purchase a whole share shall be paid
to the disabled Participant.
ARTICLE VIII
OWNERSHIP OF STOCK
8.1 Stock Ownership. Ownership of the Stock purchased through
the exercise of the options granted hereunder shall be recorded by book
entry in the stock records maintained by Morgan Keegan and its transfer
agent as soon as practical after the Exercise Date. Such ownership may
be recorded at the request of the Participant (i) in the name of the
Participant, (ii) jointly in the name of the Participant and a member
of the Participant's family, (iii) in trust to a trustee, (iv) to the
Participant as custodian for the Participant's child under the Gift to
Minors Act, or (v) to the legal representative of a deceased
Participant.
8.2 Premature Sale of Stock. If a Participant (or former
Participant) sells or otherwise disposes of any shares of Stock
obtained under this Plan
(a) prior to two (2) years after the Commencement
Date on which the option to purchase such
shares was granted or
(b) prior to one (1) year after the Exercise Date
on which such shares were obtained,
that Participant (or former Participant) must notify the Employer
immediately in writing concerning such disposition.
8.3 Restrictions on Sale. The Plan Administrator may, in its
sole discretion, place restrictions on the sale or transfer of shares
of Stock purchased under the Plan during any Option Period by notice to
all Participants of the nature of such restrictions given in advance of
the Commencement Date of such Option Period. The restrictions may
prevent the sale, transfer or other disposition of any shares of Stock
purchased during the Option Period for a period of up to two years from
the Commencement Date on which the option to purchase such shares was
granted, subject to such exceptions as the Plan Administrator may
determine (e.g., termination of employment with the Employer). With
respect to such restricted shares, Morgan Keegan shall give
instructions to its transfer agent regarding the nature and duration of
the applicable restrictions. Any such restrictions determined by the
Plan Administrator shall be applicable equally to all shares of Stock
purchased during the Option Period for which the restrictions are first
applicable and to all shares of Stock purchased during subsequent
Option Periods unless otherwise determined by the Plan Administrator.
If the Plan Administrator should change or eliminate the restrictions
for a subsequent Option Period, notice of such action shall be given to
all Participants.
8.4 Transfer of Ownership. Shares of Stock purchased under
this Plan shall be deemed transferred at such time substantially all of
the rights of ownership of such shares of Stock have been transferred
in accordance with Section 1.421-1(f) of the Treasury Regulations as in
effect on the Effective Date. Such rights of ownership shall include
the right to vote, the right to receive declared dividends, the right
to share in the assets of the Employer in the event of liquidation, the
right to inspect the Employer's books and the right to pledge or sell
such Stock subject to the restrictions in the Plan.
ARTICLE IX
ADMINISTRATION AND AMENDMENT
9.1 Administration. The Plan Administrator shall (i)
administer the Plan, (ii) keep records of the Contribution Account
balance of each Participant, (iii) interpret the Plan, (iv) determine
all questions arising as to eligibility to participate, amount of
contributions permitted, determination of the Exercise Price, and all
other matters of administration, and (v) determine whether to place
restrictions on the sale and transfer of Stock and the nature of such
restrictions, as provided in Section 8.3. The Plan Administrator shall
have such duties, powers and discretionary authority as may be
necessary to discharge the foregoing duties, and may delegate any or
all of the foregoing duties to any individual or individuals (including
officers or other Employees who are Participants). The Board of
Directors shall have the right at any time and without notice to remove
or replace any individual or committee of individuals serving as Plan
Administrator. All determinations by the Plan Administrator shall be
conclusive and binding on all persons. Any rules, regulations, or
procedures that may be necessary for the proper administration or
functioning of this Plan that are not covered in this Plan document
shall be promulgated and adopted by the Plan Administrator.
9.2 Amendment. The Board of Directors may at any time amend
the Plan in any respect, including termination of the Plan, without
notice to Participants. If the Plan is terminated, all options
outstanding at the time of termination shall become null and void and
the balance in each Participant's Contribution Account shall be paid to
that Participant. Notwithstanding the foregoing, no amendment to this
Plan shall increase the number of shares reserved under the Plan (other
than as provided in Section 10.3 below) without the approval of the
shareholders of Morgan Keegan. Approval by shareholders must comply
with applicable provisions of the corporate charter and bylaws of
Morgan Keegan and with Tennessee law prescribing the method and degree
of shareholder approval required for issuance of corporate stock or
options.
ARTICLE X
MISCELLANEOUS
10.1 Expenses. The Employer will pay all expenses of
administering this Plan that may arise in connection with the Plan.
10.2 No Contract of Employment. Nothing in this Plan shall be
construed to constitute a contract of employment between an Employer
and any Employee or to be an inducement for the employment of any
Employee. Nothing contained in this Plan shall be deemed to give any
Employee the right to be retained in the service of an Employer or to
interfere with the right of an Employer to discharge any Employee at
any time, with or without cause, regardless of the effect which such
discharge may have upon him as a Participant of the Plan.
10.3 Adjustment Upon Changes in Stock. The aggregate number
of shares of Stock reserved for purchase under the Plan as provided in
Section 6.1, and the calculation of the Exercise Price as provided in
Section 6.3, and the number of options outstanding shall be adjusted by
the Plan Administrator (subject to direction by the Board of Directors)
in an equitable manner to reflect changes in the capitalization of
Morgan Keegan, including, but not limited to, such changes as result
from merger, consolidation, reorganization, recapitalization, stock
dividend, dividend in property other than cash, stock split,
combination of shares, exchange of shares and change in corporate
structure. If any adjustment under this Section 10.3 would create a
fractional share of Stock or a right to acquire a fractional share of
Stock, such fractional share shall be disregarded and the number of
shares available under the Plan and the number of shares covered under
any options granted pursuant to the Plan shall be the next lower number
of shares, rounding all fractions downward.
10.4 Employer's Rights. The rights and powers of any Employer
shall not be affected in any way by its participation in this Plan,
including but not limited to the right or power of any Employer to make
adjustments, reclassifications, reorganizations or changes of its
capital or business structure or to merge or to consolidate or to
dissolve, liquidate or sell, or transfer all or any part of its
business or assets.
10.5 Limit on Liability. No liability whatever shall attach
to or be incurred by any past, present or future shareholders, officers
or directors, as such, of Morgan Keegan or any Employer, under or by
reason of any of the terms, conditions or agreements contained in this
Plan or implied therefore, and any and all liabilities of any and all
rights and claims against Morgan Keegan, an Employer, or any
shareholder, officer or director as such, whether arising at common law
or in equity or created by statute or constitution or otherwise,
pertaining to this Plan, are hereby expressly waived and released by
every Participant as a part of the consideration for any benefits under
this plan; provided, however, no waiver shall occur, solely by reason
of this Section 10.5, of any right which is not susceptible to advance
waiver under applicable law.
10.6 Gender and Number. For the purposes of the Plan, unless
the contrary is clearly indicated, the use of the masculine gender
shall include the feminine, and the singular number shall include the
plural and vice versa.
10.7 Governing Law. The validity, construction,
interpretation, administration and effect of this Plan, and any rules
or regulations promulgated hereunder, including all rights or
privileges of any Participants hereunder, shall be governed exclusively
by and in accordance with the laws of the State of Tennessee, except
that the Plan shall be construed to the maximum extent possible to
comply with Section 423 of the Code and the Treasury regulations
promulgated thereunder.
10.8 Severability. If any provision of this Plan is held by a court
to be unenforceable or is deemed invalid for any reason, then such provision
shall be deemed inapplicable and omitted, but all other provisions of this
Plan shall be deemed valid and enforceable to the full extent possible under
applicable law.
As duly adopted by the Board of Directors on October 19, 2000.
Exhibit III
MORGAN KEEGAN, INC.
2000 NON-EMPLOYEE DIRECTOR STOCK OPTION PLAN
Section 1. Purpose.
The purposes of the Non-Employee Director Stock Option Plan (the
"Plan") are to attract and retain well qualified persons for service as
directors of Morgan Keegan, Inc., a Tennessee corporation (the
"Company"), to provide directors with an opportunity to increase their
ownership interest in the Company, and thereby to increase their
personal interest in the Company's continued success, through the grant
of options (the "Options") to purchase shares of the $0.625 par value
common stock of the Company (the "Common Stock").
Section 2. Administration.
Responsibility and authority to administer and interpret the
provisions of the Plan shall rest with the Board of Directors of the
Company (the "Board"). The Board may employ attorneys, consultants,
accountants or other persons, and the Board, the Company and its
officers shall be entitled to rely upon the advice, opinions or
valuations of any such persons. All usual and reasonable expenses of
the Board shall be paid by the Company. All actions taken and all
interpretations and determinations made by the Board in good faith
shall be final and binding upon all recipients who have received
awards, the Company and other interested persons. Notwithstanding the
foregoing, the Board shall have no discretion with respect to the
amount, price and timing of the awards. No member of the Board shall
be personally liable for any action, determination or interpretation
taken or made in good faith with respect to the Plan or awards made
hereunder, and all members of the Board shall be fully indemnified and
protected the Company in respect of any such action, determination or
interpretation.
Section 3. Eligibility.
All directors of the Company who are neither contractual nor
common law employees of the Company or any of its subsidiaries shall be
Participants in the Plan (singly, a "Participant" and collectively, the
"Participants").
Section 4. Options.
Each Participant shall automatically be granted Options to
purchase four thousand (4,000) shares of Common Stock on the first
business day after each Annual Meeting of Shareholders of the Company
occurring after the effective date of the Plan. Each Option granted
hereunder shall be evidenced by an Option Agreement acceptable to the
Company in its discretion. The Option shall be registered pursuant to
a Registration Statement on Form S-8 to be filed in compliance with the
Securities Act of 1933, as amended (the "Securities Act").
Section 5. Terms and Conditions.
(a) Options to purchase up to five hundred thousand (500,000)
shares of Common Stock may be granted hereunder. In the event that any
Option granted hereunder expires unexercised or is canceled,
surrendered, or terminated without being exercised, in whole or in
part, for any reason, then the number of shares of Common Stock
theretofore subject to such Option which expired or were canceled,
surrendered or terminated without being exercised shall be added to the
remaining number of shares of Common Stock for which Options may be
granted hereunder.
(b) In the event that the outstanding shares of Common Stock
hereafter are changed into or exchanged for a different number or kind
of shares or other securities of the Company or of another corporation
by reason of merger, share exchange, consolidation, other
reorganization, recapitalization, reclassification, combination of
shares, stock split or stock dividend:
(i) The aggregate number and kind of shares subject to Options
which may be granted hereunder shall be adjusted appropriately; and
(ii) Rights under outstanding Options granted hereunder, both
as to the number of subject shares and the Option price, shall be
adjusted appropriately.
(c) The Options shall be exercisable only by the Participant
during his or her lifetime and may not be transferred other than by
will or the laws of descent and distribution. No transfer of an Option
held by a Participant by will or by the laws of descent and
distribution shall be effective to bind the Company unless the Company
shall have been furnished with written notice thereof and an
authenticated copy of the will and/or such other evidence as the Board
of Directors may deem necessary to establish the validity of the
transfer. During the lifetime of a Participant, the Option shall be
exercisable only by him, except that, in the case of a Participant who
is legally incapacitated, the Option shall be exercisable by his or her
guardian or legal representative.
(d) The exercise price per share for each Option granted under
the Plan shall be 100% of the Fair Market Value (as defined below) of a
share of Common Stock as of the date of grant. "Fair Market Value" as
of a given date for purposes of the Plan and any Option Agreement means
(i) the closing sales price per share for the shares of Common Stock on
the New York Stock Exchange or any national exchange on which shares of
Common Stock are traded on such date (or if such market or exchange was
not open for trading on such date, the next preceding date on which it
was open); or (ii) if the Common Stock is not listed on the New York
Stock Exchange or on an established and recognized exchange, such value
as the Board, in good faith, shall determine based on such relevant
facts, which may include opinions of independent experts, as may be
available to the Board.
(e) Options granted hereunder shall vest and become
exercisable immediately upon the grant thereof and shall remain
exercisable, to the extent not exercised, until their expiration date.
(d) If a Participant's service with the Company terminates due
to the Participant's death or disability, the Options granted to such
Participant shall immediately vest and shall be exercisable for a
period of one (1) year thereafter (subject to expiration as provided
below). If a Participant's service with the Company terminates for any
other reason, all Options granted to such Participant which are not
then vested and exercisable shall be canceled, and all vested and
exercisable Options granted to such Participant shall continue to be
exercisable for 24 months thereafter (subject to expiration as provided
below).
(g) Payment of the exercise price shall be in cash. Shares of
Common Stock issued pursuant to the exercise of an Option under the
Plan shall be from authorized but unissued shares.
(h) Notwithstanding any other provision herein to the
contrary, each Option granted hereunder shall expire on the fifth
anniversary of its date of grant.
(i) A Participant shall have no rights as a shareholder with
respect to any shares covered by his or her Option until the date on
which the Participant becomes the holder of record of such shares. No
adjustment shall be made for dividends, distributions, or other rights
for which the record date is prior to the date on which he or she shall
have become the holder of record thereof except as provided in Section
5(b).
(j) The Company shall have the right to deduct from any payment
to be made pursuant to this Plan, or to otherwise require, prior to the
issuance or delivery of any shares of Common Stock, payment by the
Participant of any federal, state, or local taxes required by law to be
withheld.
Section 6. Change of Control.
(a) In the event of a "Change of Control" (as defined below),
all Options awarded under this Plan not previously exercisable and
vested shall become fully exercisable and vested, and the value of all
such outstanding Options shall be cashed out on the basis of the Change
of Control Price (as defined below) as of the date of such Change of
Control.
(b) For purposes of this Section 6, a "Change of Control"
shall be deemed to have occurred if: (i) after the effective date of
the Plan, any "person" as defined in Section 3(a)(9) of the Exchange
Act and as used in Sections 13(d) and 14(d) thereof, including any
"group" as defined in Section 13(d) of the Exchange Act, but excluding
the Corporation and any Related Corporation, any of the Corporation's
existing shareholders as of the effective date of the Plan and any
employee benefit plan sponsored or maintained by the Corporation or any
Related Corporation (including any trustee of such plan acting as
trustee), directly or indirectly, becomes a "beneficial owner" (as
defined in Rule 13d-3 under the Exchange Act) of securities of the
Corporation representing fifty percent (50%) or more of the voting
power of the then outstanding securities of the Corporation; (ii) the
shareholders of the Corporation approve (or, if shareholder approval is
not required, the Board approves) an agreement providing for (A) the
merger or consolidation of the Corporation with another corporation
where the shareholders of the Corporation, immediately prior to the
merger or consolidation, will not beneficially own, immediately after
the merger or consolidation, shares entitling such shareholders to a
majority of all votes to which all shareholders of the surviving
corporation would be entitled in the election of directors, or where
the members of the Board, immediately prior to the merger or
consolidation, would not, immediately after the merger or
consolidation, constitute a majority of the board of directors of the
surviving corporation, (B) a sale or other disposition of all or
substantially all of the assets of the Corporation, or (C) a
liquidation or dissolution of the Corporation; or (iii) any person has
commenced a tender offer or exchange offer for thirty-five percent
(35%) or more of the voting power of the then outstanding shares of the
Corporation.
(c) For purposes of this Section 6, "Change of Control Price"
means the price per share paid for Common Stock in connection with the
Change of Control of the Company.
SECTION 7. Share Ownership.
The Company shall not be required to register on the stock records
of the Company the issuance of shares purchased upon the exercise of an
Option prior to the fulfillment of all of the following conditions:
(a) All such shares shall be subject to an effective
registration statement filed with the Securities and Exchange
Commission on such form as it shall require and shall otherwise be
qualified for issuance in any state wherein such shares are to be
issued;
(b) A listing application shall have been filed with the New
York Stock Exchange with respect to such shares and such shares shall
have been duly listed for trading thereon;
(c) All necessary approvals required for the issuance of such
shares shall have been obtained; and
(d) The issuance of such shares shall not violate any law or
regulation or the terms of any court order or decree, injunction, award
or any agreement between the Company and any other person or entity.
Section 8. Amendment or Discontinuance.
The Board of Directors of the Company may at any time amend,
rescind or terminate the Plan, as it shall deem advisable; provided,
however, that (i) no change may be made in any Option previously made
under the Plan which would impair the recipient's rights without his or
her consent; (ii) no amendment to the Plan may be made without approval
of the Company's shareholders if the effect of the amendment would be
to: (a) materially increase the number of shares reserved hereunder or
benefits accruing to Participants under the Plan, (b) materially change
the requirements for eligibility under Section 3 hereof, or (c)
materially modify the method for determining the number of Options
granted under Section 4 hereof, except that any such increase or
modification that results from adjustments authorized by Section 5(b)
shall not require such approval; and (iii) no amendment may be made to
the Plan within six (6) months of a prior amendment, except as required
for compliance with the Internal Revenue Code of 1986, as amended from
time to time, or the regulations thereunder.
Section 9. Right of Board of Directors or Shareholders to
Terminate Director's Service.
Nothing in this Plan or in the grant of any Option hereunder shall
in any way limit or affect the right of the Board of Directors or the
shareholders of the Company to remove any director or otherwise
terminate his or her service as a director, pursuant to applicable law,
the Charter, or the Bylaws of the Company.
Section 10. Effective Date.
The Plan shall become effective as of November 21, 2000, subject to the
approval of a majority of the shareholders of the Company within
twelve (12) months of the adoption of the Plan by the Board of
Directors. Options granted prior to termination of the Plan shall,
notwithstanding termination of the Plan, continue to be effective and
shall be governed by the Plan.
Section 11. Governing Law.
The Plan and all determinations made and actions taken pursuant
hereto shall be governed by the laws of the State of Tennessee
pertaining to contracts made and to be performed wholly within such
jurisdiction.
Exhibit IV
MORGAN KEEGAN, INC.
2000 EXECUTIVE INCENTIVE COMPENSATION PLAN
1. Purpose. The purpose of the Morgan Keegan, Inc. Executive
Incentive Compensation Plan (the "Plan") is to provide incentives to
executive officers and other key employees of Morgan Keegan, Inc.
(Morgan Keegan, Inc. and all direct and indirect subsidiaries being
referred to herein as the "Company") to incent such employees and to
encourage them to remain in the employ of the Company. Amounts paid
pursuant to the Plan are intended to qualify as performance-based
compensation within the meaning of Section 162(m) of the Internal
Revenue Code of 1986, as amended (the "Code").
2. Definitions. The terms defined in this section are used
(and capitalized) elsewhere in the Plan.
a. "Annual Profits" means the consolidated income before
income taxes of the Company for the Performance Period, before the
provisions for incentive compensation earned pursuant to this Plan, and
subject to accounting adjustments and adjustment for extraordinary
items.
b. "Award" means a portion of the Award Pool payable to a
Participant as determined pursuant to Section 4 hereof.
c. "Award Pool" means a pool specified by the Committee, in
accordance with Section 4 hereof, out of which Awards may be made to
Participants.
d. "Committee" means the Compensation Committee of the Board
of Directors of Morgan Keegan, Inc., or such other Board committee as
may be designated by the Board of Directors to administer the Plan.
e. "Participant" means an employee designated by the Committee
to participate in the Plan for a designated Performance Period.
f. "Performance Period" means the Company's fiscal year.
3. Administration.
3.1 The Committee shall administer the Plan. The Committee's
interpretation of the Plan and of any Awards made under the Plan shall
be final and binding on all persons with an interest therein. The
Committee shall have the power to establish regulations to administer
the Plan and to change such regulations.
3.2 Exculpation and Indemnification. To the full extent
permitted by laws, (i) no member of the Committee shall be liable for
any action or determination taken or made in good faith with respect to
the Plan or any Award made under the Plan, and (ii) the members of the
Committee shall be entitled to indemnification by the Company with
regard to such actions.
4. Awards.
4.1 Creation of Award Pools. Not later than 90 days following
the commencement of each Performance Period, the Committee shall
establish an Award Pool from which Awards may be paid in accordance
with the Plan. The amount included in the Award Pool for a particular
Performance Period shall be equal to a percentage of the Annual Profits
for the Performance Period to be determined by the Committee, not to
exceed 10% of the Annual Profits.
4.2 Allocation of Award Pools. Not later than 90 days
following the commencement of each Performance Period, the Committee
shall select the persons who shall be Participants for such Performance
Period and allocate, with respect to each Participant, a maximum
percentage of the Award Pool, if any, to be paid for such Performance
Period; provided that in no event shall the percentage portion of the
Award Pool allocated to any Participant exceed 40% of the Award Pool
nor shall the aggregate totals of awards under the Plan exceed 100% of
the Award Pool.
4.3 Adjustments. The Committee is authorized at any time
during or after a Performance Period, in its sole and absolute
discretion, to reduce or eliminate the Award Pool or the Award
allocated to any Participant for any reason; provided, however, that
the result of such reduction or elimination shall not increase the
Award payable to another Participant.
4.4 Payment of Awards. Following the completion of each
Performance Period the Committee shall certify in writing the amount of
the Award Pool and the Awards payable to Participants. No award shall
be paid under the Plan unless the Annual Profits for the Performance
Period exceed $2,000,000.
5. Effective Date of the Plan. The Plan shall be effective as
of August 1, 2000, provided that the Plan is approved by the
stockholders of the Company at a meeting held no later than July 31,
2000. The Plan shall remain in effect until it has been terminated
pursuant to Section 8.
6. Right to Terminate Employment. Nothing in the Plan or
designation as a Participant shall confer upon any Participant the
right to continue in the employment of the Company or any subsidiary or
affect any right which the Company or any subsidiary may have to
terminate the employment of a Participant with or without cause.
7. Tax Withholding. The Company shall withhold from cash
payments made pursuant to the Plan an amount sufficient to cover any
required withholding taxes.
8. Amendment, Modification and Termination of the Plan. The
Committee may at any time terminate, suspend or modify the Plan or any
Award which has not been paid. No Award may be granted during any
suspension of the Plan or after its termination.
9. Unfunded Plan. The Plan shall be unfunded and the Company
shall not be required to segregate any assets that may be represented
by the Award Pool.
10. Other Benefit and Compensation Programs. Neither the
adoption of the Plan by the Committee nor its submission to the
stockholders of the Company shall be construed as creating any
limitation on the power of the Committee or the Board of Directors to
adopt such other incentive or other compensation arrangements as it may
deem necessary. Payments received by a Participant pursuant to the
Plan shall not be deemed a part of a Participant's regular, recurring
compensation for purposes of the termination, indemnity or severance
pay law of any state or country and shall not be included in, nor have
any effect on, the determination of benefits under any other employee
benefit plan, contract or similar arrangement provided by the Company
or any subsidiary unless expressly so provided by such other plan,
contract or arrangement, or unless the Committee expressly determines
that an Award or portion of an Award should be included to accurately
reflect competitive compensation practice or to recognize that an Award
has been made in lieu of a portion of competitive cash compensation.
11. Governing Law. To the extent that federal laws do not
otherwise control, the Plan and all determinations made and actions
taken pursuant to thereto shall be governed by the laws of Tennessee.