Exhibit 10.1
DYNEX CAPITAL, INC.
2004 STOCK INCENTIVE PLAN
DYNEX CAPITAL, INC.
2004 Stock Incentive Plan
iii
Table of Contents
ARTICLE I DEFINITIONS . 1
1.01. Administrator...............................................1
1.02. Agreement...................................................1
1.03. Average Net Worth...........................................1
1.04. Award.......................................................1
1.05. Board.......................................................1
1.06. Change in Control...........................................1
1.07. Code........................................................2
1.08. Committee...................................................2
1.09. Common Stock................................................3
1.10. Company.....................................................3
1.11. Control Change Date.........................................3
1.12. Corresponding SAR...........................................3
1.13. DER Accrual Period..........................................3
1.14. DER Award Date..............................................3
1.15. Dividend Equivalent Right...................................3
1.16. Exchange Act................................................3
1.17. Fair Market Value...........................................3
1.18. Initial Value...............................................4
1.19. Net Worth...................................................4
1.20. Option......................................................4
1.21. Participant.................................................4
1.22. Performance Criteria........................................4
1.23. Performance Shares..........................................4
1.24. Plan........................................................5
1.25. Related Entity..............................................5
1.26. SAR.........................................................5
1.27. Stock Award.................................................5
1.28. Stock Unit..................................................5
ARTICLE II PURPOSES 6
ARTICLE III ADMINISTRATION 7
ARTICLE IV ELIGIBILITY 8
ARTICLE V STOCK SUBJECT TO PLAN 9
5.01. Shares Issued...............................................9
5.02. Aggregate Limit.............................................9
5.03. Reallocation of Shares......................................9
ARTICLE VI OPTIONS 10
6.01. Award......................................................10
6.02. Option Price...............................................10
6.03. Maximum Option Period......................................10
6.04. Nontransferability.........................................10
6.05. Transferable Options.......................................10
6.06. Employee Status............................................11
6.07. Exercise...................................................11
6.08. Payment....................................................11
6.09. Change in Control..........................................11
6.10. Shareholder Rights.........................................11
6.11. Disposition of Stock.......................................12
ARTICLE VII SARS 13
7.01. Award......................................................13
7.02. Maximum SAR Period.........................................13
7.03. Nontransferability.........................................13
7.04. Transferable SARs..........................................13
7.05. Exercise...................................................14
7.06. Change in Control..........................................14
7.07. Employee Status............................................14
7.08. Settlement.................................................14
7.09. Shareholder Rights.........................................14
ARTICLE VIII STOCK AWARDS 15
8.01. Award......................................................15
8.02. Vesting....................................................15
8.03. Employee Status............................................15
8.04. Change in Control..........................................15
8.05. Shareholder Rights.........................................15
ARTICLE IX DIVIDEND EQUIVALENT RIGHTS 17
9.01. Award......................................................17
9.02. Time and Method of Exercise................................17
ARTICLE X PERFORMANCE SHARE AWARDS 18
10.01. Award......................................................18
10.02. Earning the Award..........................................18
10.03. Payment....................................................18
10.04. Shareholder Rights.........................................18
10.05. Nontransferability.........................................19
10.06. Transferable Performance Shares............................19
10.07. Employee Status............................................19
10.08. Change in Control..........................................19
ARTICLE XI STOCK UNITS 20
11.01. Award......................................................20
11.02. Earning the Award..........................................20
11.03. Payment....................................................20
11.04. Nontransferability.........................................20
11.05. Shareholder Rights.........................................20
11.06. Change in Control..........................................21
ARTICLE XII ADJUSTMENT UPON CHANGE IN COMMON STOCK 22
ARTICLE XIII COMPLIANCE WITH LAW AND APPROVAL OF
REGULATORY BODIES 23
ARTICLE XIV GENERAL PROVISIONS 24
14.01. Effect on Employment and Service...........................24
14.02. Unfunded Plan..............................................24
14.03. Rules of Construction......................................24
14.04. Tax Withholding............................................24
ARTICLE XV AMENDMENT 25
ARTICLE XVI DURATION OF PLAN 26
ARTICLE XVII EFFECTIVE DATE OF PLAN 27
ARTICLE I
DEFINITIONS
1.01. Administrator
Administrator means the Committee and any delegate of the Committee
that is appointed in accordance with Article III. Notwithstanding the preceding
sentence, "Administrator" means the Board on any date on which there is not a
Committee.
1.02. Agreement
Agreement means a written agreement (including any amendment or
supplement thereto) between the Company and a Participant specifying the terms
and conditions of an Award granted to such Participant.
1.03. Average Net Worth
Average Net Worth means for any period, the arithmetic average of the
Net Worth of the Company at the beginning of such period and at the end of such
period.
1.04. Award
Award means an award of Performance Shares, or a Stock Award, Stock
Unit, Option or SAR granted to such Participant.
1.05. Board
Board means the Board of Directors of the Company.
1.06. Change in Control
Change in Control means the occurrence of any of the events set forth
in any one of the following paragraphs:
(a) The acquisition by any individual, entity or group (within the meaning
of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934, as
amended) (a "Person") of beneficial ownership (within the meaning of Rule 13d-3
promulgated under the Exchange Act) of 25% or more of either (i) the then
outstanding shares of common stock of the Company (the "Outstanding Company
Common Stock") or (ii) the combined voting power of the then outstanding voting
securities of the Company entitled to vote generally in the election of
directors (the "Outstanding Company Voting Securities"); or
(b) Individuals who, as of the date hereof, constitute the Board (the
"Incumbent Board") cease for any reason to constitute at least a majority of the
Board; provided, however, that any individual becoming a director subsequent to
the date hereof whose election, or nomination for election by the Company's
shareholders, was approved by a vote of at least two-thirds of the directors
then comprising the Incumbent Board shall be considered as though such
individual were a member of the Incumbent Board, but excluding, for this
purpose, any such individual whose initial assumption of office occurs as a
result of an actual or threatened election contest with respect to the election
or removal of directors or other actual or threatened solicitation of proxies or
consents by or on behalf of a Person other than the Board; or
(c) Consummation of a reorganization, merger or consolidation or sale
or other disposition of all or substantially all of the assets of the Company (a
"Business Combination"), in each case, unless, following such Business
Combination,
(i) all or substantially all of the individuals and entities
who were the beneficial owners, respectively, of the Outstanding
Company Common Stock and Outstanding Company Voting Securities
immediately prior to such Business Combination beneficially own,
directly or indirectly, at least 80% of, respectively, the then
outstanding shares of common stock and the combined voting power of the
then outstanding voting securities entitled to vote generally in the
election of directors, as the case may be, of the corporation resulting
from such Business Combination (including, without limitation a
corporation which as a result of such transaction owns the Company or
all or substantially all of the Company's assets either directly or
through one or more subsidiaries) in substantially the same proportions
as their ownership, immediately prior to such Business Combination of
the Outstanding Company Common Stock and Outstanding Company Voting
Securities, as the case may be; or
(ii) no Person (excluding any corporation resulting from such
Business Combination or any employee benefit plan (or related trust) of
the Company or such corporation resulting from such Business
Combination) beneficially owns, directly or indirectly, 20% or more of,
respectively, the then outstanding shares of common stock of the
corporation resulting from such Business Combination or the combined
voting power of the then outstanding voting securities of such
corporation except to the extent that such ownership existed prior to
the Business Combination; or
(iii) at least a majority of the members of the board of
directors of the corporation resulting from such Business Combination
were members of the Incumbent Board at the time of the execution of the
initial agreement, or of the action of the Board, providing for such
Business Combination; or
(d) Approval by the shareholders of the Company of a complete
liquidation or dissolution of the Company.
1.07. Code
Code means the Internal Revenue Code of 1986, and any amendments
thereto.
1.08. Committee
Committee means the Compensation Committee of the Board.
1.09. Common Stock
Common Stock means the common stock of the Company.
1.10. Company
Company means Dynex Capital, Inc. or any successor thereto.
1.11. Control Change Date
Control Change Date means the date on which a Change in Control occurs.
If a Change in Control occurs on account of a series of transactions, the
Control Change Date is the date of the last of such transactions.
1.12. Corresponding SAR
Corresponding SAR means an SAR that is granted in relation to a
particular Option and that can be exercised only upon the surrender to the
Company, unexercised, of that portion of the Option to which the SAR relates.
1.13. DER Accrual Period
DER Accrual Period means any period that begins with the previous DER
Award Date, or any date determined by this Committee after the grant date of the
related Option or SAR if there is no previous DER Award Date, and that ends on
the next DER Award Date.
1.14. DER Award Date
DER Award Date means any date determined by the Committee on which
Dividend Equivalent Rights are awarded.
1.15. Dividend Equivalent Right
Dividend Equivalent Right means any right granted under Section 9.01 of
the Plan.
1.16. Exchange Act
Exchange Act means the Securities Exchange Act of 1934, as amended from
time to time.
1.17. Fair Market Value
Fair Market Value means, on any given date, the reported closing price
of a share of Common Stock as reported on the New York Stock Exchange composite
tape on such day, or if the Common Stock was not traded on the New York Stock
Exchange on such day, then on the next preceding day that the Common Stock was
so traded, all as reported by such service as the Administrator may select.
1.18. Initial Value
Initial Value means, with respect to a Corresponding SAR, the Option
price per share of the related Option and, with respect to an SAR granted
independently of an Option, the price per share of Common Stock as determined by
the Administrator on the date of the grant; provided, however, that the price
per share of Common Stock encompassed by the grant of an SAR shall not be less
than the Fair Market Value on the date of grant. Except for an adjustment
authorized under Article XII, the Initial Value may not be reduced (by amendment
or cancellation of the SAR or otherwise) after the date of grant.
1.19. Net Worth
Net Worth means the excess of the Company's assets over liabilities,
but excluding the value of any preferred equity in the Company, as determined in
accordance with generally accepted accounting principles.
1.20. Option
Option means a stock option that entitles the holder to purchase from
the Company a stated number of shares of Common Stock at the price set forth in
an Agreement.
1.21. Participant
Participant means an employee of the Company or a Related Entity, a
member of the Board or the board of directors of a Related Entity or a
consultant or advisor to the Company or a Related Entity who satisfies the
requirements of Article IV and is selected by the Administrator to receive an
Award.
1.22. Performance Criteria
Performance Criteria means one or more of (a) cash flow and/or free
cash flow (before or after dividends), (b) earnings per share (including
earnings before interest, taxes, depreciation and amortization) (diluted and
basic earnings per share), (c) the price of Common Stock, (d) return on equity,
(e) total shareholder return, (f) return on capital (including return on total
capital or return on invested capital), (g) return on assets or net assets, (h)
market capitalization, (i) income or net income (before or after taxes), (j)
operating income or net operating income, (k) operating profit or net operating
profit, (l) operating margin or profit margin, (m) return on operating revenue,
(n) market share, (o) revenue growth, (p) net interest margin, (q) sales, (r)
delinquency ratios, (s) credit loss levels, (t) expenses, (u) total shareholder
equity, (v) return the portfolio assets, (w) portfolio growth, (x) servicing
volume, (y) production volume and (z) dividends.
1.23. Performance Shares
Performance Shares means an Award, in the amount determined by the
Administrator and specified in an Agreement, stated with reference to a specific
number of shares of Common Stock, or Stock Units, that entitles holder to
receive a payment for each specified share equal to the Fair Market Value of
Common Stock on the date of payment.
1.24. Plan
Plan means the Dynex Capital, Inc. 2004 Stock Incentive Plan.
1.25. Related Entity
Related Entity means any entity in which the Company has a significant
entity interest, as determined by the Company.
1.26. SAR
SAR means a stock appreciation right that entitles the holder to
receive, with respect to each share of Common Stock encompassed by the exercise
of such SAR, the amount determined by the Administrator and specified in an
Agreement. In the absence of such a determination, the holder shall be entitled
to receive the excess, if any, of the Fair Market Value at the time of exercise
over the Initial Value. References to "SARs" include both Corresponding SARs and
SARs granted independently of Options, unless the context requires otherwise.
1.27. Stock Award
Stock Award means Common Stock awarded to a Participant under Article
VIII.
1.28. Stock Unit
Stock Unit means an Award, or the amount determined by the
Administrator and specified in an Agreement, stated with reference to a
specified number of shares of Common Stock, that entitles the holder to receive
a payment for each Stock Unit equal to the Fair Market Value of a share of
Common Stock on the date of payment.
ARTICLE II
PURPOSES
The Plan is intended to assist the Company and Related Entities in
recruiting and retaining individuals with ability and initiative by enabling
such persons to participate in the future success of the Company and the Related
Entities and to associate their interests with those of the Company and its
shareholders. The Plan is intended to permit the grant of both Options
qualifying under Section 422 of the Code ("incentive stock options") and Options
not so qualifying, and the grant of SARs, Stock Awards, Stock Units, Performance
Shares and Dividend Equivalent Rights. No Option that is intended to be an
incentive stock option shall be invalid for failure to qualify as an incentive
stock option. The proceeds received by the Company from the sale of Common Stock
pursuant to this Plan shall be used for general corporate purposes.
ARTICLE III
ADMINISTRATION
The Plan shall be administered by the Administrator. The Administrator
shall have authority to grant Awards, upon such terms (not inconsistent with the
provisions of this Plan), as the Administrator may consider appropriate. Such
terms may include conditions (in addition to those contained in this Plan) on
the exercisability of all or any part of an Option, SAR or Dividend Equivalent
Rights or on the transferability or forfeitability of a Stock Award, Stock Unit
or award of Performance Shares including by way of example and not of
limitation, requirements that the Participant complete a specified period of
employment or service with the Company or a Related Entity, requirements that
the Company achieve a specified level of financial performance or that the
Company achieve a specified level of financial return. Notwithstanding any such
conditions, the Administrator may, in its discretion, accelerate the time at
which any Option, SAR or Dividend Equivalent Rights may be exercised, or the
time at which a Stock Award may become transferable or nonforfeitable or both,
or the time at which an award of Performance Shares may be settled. In addition,
the Administrator shall have complete authority to interpret all provisions of
this Plan; to prescribe the form of Agreements; to adopt, amend, and rescind
rules and regulations pertaining to the administration of the Plan; and to make
all other determinations necessary or advisable for the administration of this
Plan. The express grant in the Plan of any specific power to the Administrator
shall not be construed as limiting any power or authority of the Administrator.
Any decision made, or action taken, by the Administrator in connection with the
administration of this Plan shall be final and conclusive. Neither the
Administrator nor any member of the Committee shall be liable for any act done
in good faith with respect to this Plan or any Agreement, or Award. All expenses
of administering this Plan shall be borne by the Company, a Related Entity or a
combination thereof.
The Committee, in its discretion, may delegate to one or more officers
of the Company all or part of the Committee's authority and duties with respect
to grants and awards to individuals who are not subject to the reporting and
other provisions of Section 16 of the Exchange Act. The Committee may revoke or
amend the terms of a delegation at any time but such action shall not invalidate
any prior actions of the Committee's delegate or delegates that were consistent
with the terms of the Plan.
ARTICLE IV
ELIGIBILITY
Any employee of the Company, any member of the Board, any employee or
director of a Related Entity (including a corporation that becomes a Related
Entity after the adoption of this Plan), or any consultant or advisor to the
Company or Related Entity is eligible to participate in this Plan if the
Administrator, in its sole discretion, determines that such person has
contributed or can be expected to contribute to the profits or growth of the
Company or a Related Entity.
ARTICLE V
STOCK SUBJECT TO PLAN
5.01. Shares Issued
Upon the award of shares of Common Stock pursuant to a Stock Award or
in settlement of an Award of Performance Shares or Stock Units, the Company may
issue shares of Common Stock from its authorized but unissued Common Stock. Upon
the exercise of any Option, SAR or Dividend Equivalent Rights, the Company may
deliver to the Participant (or the Participant's broker if the Participant so
directs), shares of Common Stock from its authorized but unissued Common Stock.
5.02. Aggregate Limit
The maximum aggregate number of shares of Common Stock that may be
issued under this Plan, pursuant to the exercise of SARs, Options and Dividend
Equivalent Rights, the grant of Stock Awards and the settlement of Performance
Shares and Stock Units is 1,500,000 shares. The maximum aggregate number of
shares that may be issued under this Plan as Stock Awards is 500,000 shares. The
maximum aggregate number of shares that may be issued under this Plan in
settlement of Performance Shares is 500,000. The maximum aggregate number of
shares that may be issued under the Plan in settlement of Stock Units is
500,000. The maximum aggregate number of shares that may be issued under this
Plan and the maximum number of shares that may be issued as Stock Awards and in
settlement of Performance Shares and Stock Units shall be subject to adjustment
as provided in Article XII.
5.03. Reallocation of Shares
If an Option is terminated, in whole or in part, for any reason other
than its exercise or the exercise of a Corresponding SAR, the number of shares
of Common Stock allocated to the Option and any related Dividend Equivalent
Rights or portion thereof may be reallocated to other Awards to be granted under
this Plan. If an SAR is terminated, in whole or in part, for any reason other
than its exercise or the exercise of a related Option, the number of shares of
Common Stock allocated to the SAR and any related Dividend Equivalent Rights or
portion thereof may be reallocated to other Awards to be granted under this
Plan. If a Stock Award, Performance Share Award or Stock Unit is forfeited or
terminated, in whole or in part, for any reason, the number of shares of Common
Stock allocated to the Stock Award, Performance Share Award or Stock Unit or
portion thereof may be reallocated to other Awards to be granted under this
Plan. If shares of Common Stock are surrendered or withheld in satisfaction of
tax withholding requirements the number of shares surrendered or withheld may be
reallocated to other Awards to be granted under this Plan.
ARTICLE VI
OPTIONS
6.01. Award
In accordance with the provisions of Article IV, the Administrator will
designate each individual to whom an Option is to be granted and will specify
the number of shares of Common Stock covered by each such award; provided,
however that no Participant may be granted Options in any calendar year covering
more than 150,000 shares of Common Stock.
6.02. Option Price
The price per share for Common Stock purchased on the exercise of an
Option shall be determined by the Administrator on the date of grant, but shall
not be less than the Fair Market Value on the date the Option is granted. Except
for an adjustment authorized under Article XII, the Option price may not be
reduced (by amendment or cancellation of the Option or otherwise) after the date
of grant.
6.03. Maximum Option Period
The maximum period in which an Option may be exercised shall be ten
years from the date such Option was granted. The terms of any Option may provide
that it has a term that is less than such maximum period.
6.04. Nontransferability
Except as provided in Section 6.05, each Option granted under this Plan
shall be nontransferable except by will or by the laws of descent and
distribution. In the event of any transfer of an Option (by the Participant or
his transferee), the Option and any Corresponding SAR that relates to such
Option must be transferred to the same person or persons or entity or entities.
Except as provided in Section 6.05, during the lifetime of the Participant to
whom the Option is granted, the Option may be exercised only by the Participant.
No right or interest of a Participant in any Option shall be liable for, or
subject to, any lien, obligation, or liability of such Participant.
6.05. Transferable Options
Section 6.04 to the contrary notwithstanding, if the Agreement
provides, an Option that is not an incentive stock option may be transferred by
a Participant to the Participant's children, grandchildren, spouse, one or more
trusts for the benefit of such family members or a partnership in which such
family members are the only partners, on such terms and conditions as may be
permitted under Securities Exchange Commission Rule 16b-3 as in effect from time
to time. The holder of an Option transferred pursuant to this section shall be
bound by the same terms and conditions that governed the Option during the
period that it was held by the Participant; provided, however, that such
transferee may not transfer the Option except by will or the laws of descent and
distribution. In the event of any transfer of an Option (by the Participant or
his transferee), the Option and any Corresponding SAR that relates to such
Option must be transferred to the same person or persons or entity or entities.
6.06. Employee Status
For purposes of determining the applicability of Section 422 of the
Code (relating to incentive stock options), or in the event that the terms of
any Option provide that it may be exercised only during employment or continued
service or within a specified period of time after termination of employment or
service, the Administrator may decide to what extent leaves of absence for
governmental or military service, illness, temporary disability, or other
reasons shall not be deemed interruptions of continuous employment or service.
6.07. Exercise
Subject to the provisions of this Plan and the applicable Agreement, an
Option may be exercised in whole at any time or in part from time to time at
such times and in compliance with such requirements as the Administrator shall
determine; provided, however, that incentive stock options (granted under the
Plan and all plans of the Company and its Related Entities) may not be first
exercisable in a calendar year for stock having a Fair Market Value (determined
as of the date an Option is granted) exceeding the limit prescribed by Section
422(d) of the Code. An Option granted under this Plan may be exercised with
respect to any number of whole shares less than the full number for which the
Option could be exercised. A partial exercise of an Option shall not affect the
right to exercise the Option from time to time in accordance with this Plan and
the applicable Agreement with respect to the remaining shares subject to the
Option. The exercise of an Option shall result in the termination of any
Corresponding SAR to the extent of the number of shares with respect to which
the Option is exercised.
6.08. Payment
Unless otherwise provided by the Agreement, payment of the Option price
shall be made in cash or a cash equivalent acceptable to the Administrator.
Subject to rules established by the Administrator, payment of all or part of the
Option price may be made with shares of Common Stock which have been owned by
the Participant for at least six months and which have not been used for another
Option exercise during the prior six months. If Common Stock is used to pay all
or part of the Option price, the sum of the cash and cash equivalent and the
Fair Market Value (determined as of the day preceding the date of exercise) of
the shares surrendered must not be less than the Option price of the shares for
which the Option is being exercised.
6.09. Change in Control
Section 6.07 to the contrary notwithstanding and subject to the terms
set forth in an Agreement, each outstanding Option may be fully exercisable (in
whole or in part at the discretion of the holder) upon a Change in Control. An
Option that becomes exercisable pursuant to this Section 6.09 shall remain
exercisable thereafter in accordance with the terms of the Agreement.
6.10. Shareholder Rights
No Participant shall have any rights as a shareholder with respect to
shares subject to his Option until the date of exercise of such Option.
6.11. Disposition of Stock
A Participant shall notify the Company of any sale or other disposition
of Common Stock acquired pursuant to an Option that was an incentive stock
option if such sale or disposition occurs (i) within two years of the grant of
an Option or (ii) within one year of the issuance of the Common Stock to the
Participant. Such notice shall be in writing and directed to the Secretary of
the Company.
ARTICLE VII
SARS
7.01. Award
In accordance with the provisions of Article IV, the Administrator will
designate each individual to whom SARs are to be granted and will specify the
number of shares covered by each such award; provided, however, no Participant
may be granted SARS in any calendar year covering more than 150,000 shares of
Common Stock. For purposes of the foregoing limit, an Option and Corresponding
SAR shall be treated as a single award. In addition, no Participant may be
granted Corresponding SARs (under all incentive stock option plans of the
Company and its Affiliates) that are related to incentive stock options which
are first exercisable in any calendar year for stock having an aggregate Fair
Market Value (determined as of the date the related Option is granted) that
exceeds the limit prescribed by Section 422(d) of the Code.
7.02. Maximum SAR Period
The maximum period in which an SAR may be exercised shall be ten years
from the date such SAR was granted. The terms of any SAR may provide that it has
a term that is less than such maximum period.
7.03. Nontransferability
Except as provided in Section 7.04, each SAR granted under this Plan
shall be nontransferable except by will or by the laws of descent and
distribution. In the event of any such transfer, a Corresponding SAR and the
related Option must be transferred to the same person or persons or entity or
entities. Except as provided in Section 7.04, during the lifetime of the
Participant to whom the SAR is granted, the SAR may be exercised only by the
Participant. No right or interest of a Participant in any SAR shall be liable
for, or subject to, any lien, obligation, or liability of such Participant.
7.04. Transferable SARs
Section 7.03 to the contrary notwithstanding, if the Agreement
provides, an SAR, other than a Corresponding SAR that is related to an incentive
stock option, may be transferred by a Participant to the Participant's children,
grandchildren, spouse, one or more trusts for the benefit of such family members
or a partnership in which such family members are the only partners, on such
terms and conditions as may be permitted under Securities Exchange Commission
Rule 16b-3 as in effect from time to time. The holder of an SAR transferred
pursuant to this Section shall be bound by the same terms and conditions that
governed the SAR during the period that it was held by the Participant;
provided, however, that such transferee may not transfer the SAR except by will
or the laws of descent and distribution. In the event of any transfer of a
Corresponding SAR (by the Participant or his transferee), the Corresponding SAR
and the related Option must be transferred to the same person or person or
entity or entities.
7.05. Exercise
Subject to the provisions of this Plan and the applicable Agreement, an
SAR may be exercised in whole at any time or in part from time to time at such
times and in compliance with such requirements as the Administrator shall
determine; provided, however, that a Corresponding SAR that is related to an
incentive stock option may be exercised only to the extent that the related
Option is exercisable and only when the Fair Market Value exceeds the option
price of the related Option. An SAR granted under this Plan may be exercised
with respect to any number of whole shares less than the full number for which
the SAR could be exercised. A partial exercise of an SAR shall not affect the
right to exercise the SAR from time to time in accordance with this Plan and the
applicable Agreement with respect to the remaining shares subject to the SAR.
The exercise of a Corresponding SAR shall result in the termination of the
related Option to the extent of the number of shares with respect to which the
SAR is exercised.
7.06. Change in Control
Section 7.05 to the contrary notwithstanding and subject to the terms
of the Agreement, each outstanding SAR may be fully exercisable (in whole or in
part at the discretion of the holder) upon a Change in Control. An SAR that
becomes exercisable pursuant to this Section 7.06 shall remain exercisable
thereafter in accordance with the terms of the Agreement.
7.07. Employee Status
If the terms of any SAR provide that it may be exercised only during
employment or continued service or within a specified period of time after
termination of employment or service, the Administrator may decide to what
extent leaves of absence for governmental or military service, illness,
temporary disability or other reasons shall not be deemed interruptions of
continuous employment or service.
7.08. Settlement
At the Administrator's discretion, the amount payable as a result of
the exercise of an SAR may be settled in cash, Common Stock, or a combination of
cash and Common Stock. No fractional share will be deliverable upon the exercise
of an SAR but a cash payment will be made in lieu thereof.
7.09. Shareholder Rights
No Participant shall, as a result of receiving an SAR, have any rights
as a shareholder of the Company until the date that the SAR is exercised and
then only to the extent that the SAR is settled by the issuance of Common Stock.
ARTICLE VIII
STOCK AWARDS
8.01. Award
In accordance with the provisions of Article IV, the Administrator will
designate each individual to whom a Stock Award is to be made and will specify
the number of shares of Common Stock covered by each such award; provided,
however, that no Participant may receive Stock Awards in any calendar year for
more than 150,000 shares of Common Stock.
8.02. Vesting
The Administrator, on the date of the award, may prescribe that a
Participant's rights in a Stock Award shall be forfeitable or otherwise
restricted for a period of time or subject to such conditions as may be set
forth in the Agreement. The restrictions set forth in the Agreement must include
a period of restriction for at least three years; provided, however, that such
restrictions shall not apply in the case of a Stock Award granted in connection
with the settlement of Performance shares. By way of example and not of
limitation, the restrictions may postpone transferability of the shares or may
provide that the shares will be forfeited if the Participant separates from the
service of the Company and its Related Entities before the expiration of a
stated period or if the Company, a Related Entity, the Company and its Related
Entities or the Participant fails to achieve stated performance objectives,
including performance objectives stated with reference to Performance Criteria.
The Administrator, in its discretion, may waive the requirements for vesting or
transferability for all or part of the shares subject to a Stock Award in
connection with a Participant's termination of employment or service.
8.03. Employee Status
In the event that the terms of any Stock Award provide that shares may
become transferable and nonforfeitable thereunder only after completion of a
specified period of employment or service, the Administrator may decide in each
case to what extent leaves of absence for governmental or military service,
illness, temporary disability, or other reasons shall not be deemed
interruptions of continuous employment or service.
8.04. Change in Control
Sections 8.02 and 8.03 to the contrary notwithstanding and subject to
the terms of the Agreement, each outstanding Stock Award may be transferable and
nonforfeitable upon a Change in Control.
8.05. Shareholder Rights
Prior to their forfeiture (in accordance with the applicable Agreement
and while the shares of Common Stock granted pursuant to the Stock Award may be
forfeited or are nontransferable), a Participant will have all the rights of a
shareholder with respect to a Stock Award, including the right to receive
dividends and vote the shares; provided, however, that during such period (i) a
Participant may not sell, transfer, pledge, exchange, hypothecate, or otherwise
dispose of shares of Common Stock granted pursuant to a Stock Award, (ii) the
Company shall retain custody of the certificates evidencing shares of Common
Stock granted pursuant to a Stock Award, and (iii) the Participant will deliver
to the Company a stock power, endorsed in blank, with respect to each Stock
Award. The limitations set forth in the preceding sentence shall not apply after
the shares of Common Stock granted under the Stock Award are transferable and
are no longer forfeitable.
ARTICLE IX
DIVIDEND EQUIVALENT RIGHTS
9.01. Award
If provided in an Agreement, any Option or SAR granted hereunder will
accrue Dividend Equivalent Rights on each DER Award Date following the grant of
such Option or SAR in an amount determined by the following formula: the number
of shares of Common Stock subject to the Option or SAR (including for this
purpose the number of shares of Common Stock subject to Dividend Equivalent
Rights previously accrued on such Option or SAR) will be multiplied by the
Dividend Excess (as hereinafter defined) per outstanding share of Common Stock,
and the resulting product will be divided by the Fair Market Value on the DER
Award Date. The "Dividend Excess," if any, for any DER Award Date shall equal
the excess of dividends actually paid on shares of Common Stock during the DER
Accrual Period ending with the DER Award Date, which excess shall not exceed the
Company's net income for such period, over the Benchmark Earnings (as
hereinafter defined). The Benchmark Earnings for any DER Award Date shall equal
the product of (i) the Designated Yield (as hereinafter defined) for the DER
Accrual Period ending with the DER Award Date, (ii) the Company's Average Net
Worth during such DER Accrual Period and (iii) a fraction, the numerator of
which is the number of days in the DER Accrual Period ending with the DER Award
Date and the denominator of which is 365. The Designated Yield shall be set by
the Committee or each DER Award Date, but will not be less than 2%. The
Committee will determine if the DERs are to be paid in additional Options (if
Options were granted), in additional SARs (if SARs were granted), in Common
Stock or in cash.
9.02. Time and Method of Exercise
Upon exercise of the Option or the SAR, a number of accrued Dividend
Equivalent Rights shall be deemed to have been exercised equal to the total
number of such accrued Dividend Equivalent Rights as of the end of the month
preceding the month of exercise multiplied by a fraction, the numerator of which
is the number of shares of Common Stock for which the Option or SAR is being
exercised on such date, and the denominator of which is the maximum number of
shares of Common Stock for which the Option or the SAR could have been exercised
immediately prior to such exercise; provided, however, that any fractional
Dividend Equivalent Rights resulting from this calculation shall not be deemed
to have been exercised. As provided in an Agreement, each Dividend Equivalent
Right shall entitle the Option or the SAR holder to receive either (i)
additional Options or SARs, as the case may be; (ii) Common Stock or (iii) cash
upon the deemed exercise of such Right. Fractional Dividend Equivalent Rights
shall continue to accrue with respect to any Option or SAR that has not been
totally exercised. Upon the total exercise of any Option or SAR, any remaining
fractional Dividend Equivalent Rights accrued with respect thereto shall be
canceled if paid in stock. Upon the exercise of the Dividend Equivalent Rights
on an Option, the proportionate number of Dividend Equivalent Rights on any
Corresponding SAR will be canceled and vice versa.
ARTICLE X
PERFORMANCE SHARE AWARDS
10.01. Award
In accordance with the provisions of Article IV, the Administrator will
designate each individual to whom an Award of Performance Shares is to be made
and will specify the number of shares of Common Stock covered by each such
Award; provided, however, that no Participant may receive an Award of
Performance Shares in any calendar year for more than 150,000 shares of Common
Stock.
10.02. Earning the Award
The Administrator, on the date of the grant of an Award, shall
prescribe that the Performance Shares, or a portion thereof, will be earned, and
the Participant will be entitled to receive payment pursuant to the Award of
Performance Shares, only upon the satisfaction of performance objectives or such
other criteria as may be prescribed by the Administrator and set forth in the
Agreement. The restrictions set forth in the Agreement must include the
attainment of performance objectives, including performance objectives stated
with reference to Performance Criteria; provided, however, that such
restrictions shall not apply in the case of a Stock Award granted in connection
with the settlement of Performance Shares or Stock Awards or in the case of a
substitute Award pursuant to Article XII. By way of example and not of
limitation, the performance objectives or other criteria may provide that the
Performance Shares will be earned only if the Participant remains in the employ
or service of the Company or a Related Entity for a stated period and that the
Company, a Related Entity, the Company and its Related Entities or the
Participant achieve stated objectives. Notwithstanding the preceding sentences
of this Section 10.02, the Administrator, in its discretion, may reduce the
duration of the performance period and may adjust the performance objectives for
outstanding Performance Shares in connection with a Participant's termination of
employment or service.
10.03. Payment
In the discretion of the Administrator, the amount payable when an
Award of Performance Shares is earned may be settled in cash, by the issuance of
Common Stock, grant of Stock Units or a combination of cash, Common Stock and/or
Stock Units. A fractional share shall not be deliverable when an Award of
Performance Shares is earned, but a cash payment will be made in lieu thereof.
10.04. Shareholder Rights
No Participant shall, as a result of receiving an Award of Performance
Shares, have any rights as a shareholder until and to the extent that the Award
of Performance Shares is earned and settled by the issuance of Common Stock.
After an Award of Performance Shares is earned, if settled completely or
partially in Common Stock, a Participant will have all the rights of a
shareholder with respect to such Common Stock.
10.05. Nontransferability
Except as provided in Section 10.06, Performance Shares granted under
this Plan shall be nontransferable except by will or by the laws of descent and
distribution. No right or interest of a Participant in any Performance Shares
shall be liable for, or subject to, any lien, obligation, or liability of such
Participant.
10.06. Transferable Performance Shares
Section 10.05 to the contrary notwithstanding, if the Agreement
provides, an Award of Performance Shares may be transferred by a Participant to
the Participant's children, grandchildren, spouse, one or more trusts for the
benefit of such family members or a partnership in which such family members are
the only partners, on such terms and conditions as may be permitted under
Securities Exchange Commission Rule 16b-3 as in effect from time to time. The
holder of Performance Shares transferred pursuant to this Section shall be bound
by the same terms and conditions that governed the Performance Shares during the
period that they were held by the Participant; provided, however that such
transferee may not transfer Performance Shares except by will or the laws of
descent and distribution.
10.07. Employee Status
In the event that the terms of any Performance Share Award provide that
no payment will be made unless the Participant completes a stated period of
employment or service, the Administrator may decide to what extent leaves of
absence for government or military service, illness, temporary disability, or
other reasons shall not be deemed interruptions of continuous employment or
service.
10.08. Change in Control
Section 10.02 to the contrary notwithstanding and subject to the terms
of the Agreement, each outstanding Performance Award may be fully earned upon a
Change in Control.
ARTICLE XI
STOCK UNITS
11.01. Award
In accordance with the provisions of Article IV, the Administrator will
designate each individual to whom an Award of Stock Units is to be made and will
specify the number of Stock Units covered by such Awards; provided, however,
that no Participant may be awarded Stock Units for more than 150,000 shares of
Common Stock in any calendar year.
11.02. Earning the Award
The Administrator, on the date of grant of the Award, may prescribe
that the Stock Units or a portion thereof, will be earned only upon, and the
Participant will be entitled to receive a payment pursuant to the Award of Stock
Units, only upon the satisfaction of performance objectives or such other
criteria as may be prescribed by the Administrator and set forth in the
Agreement. The restrictions set forth in the Agreement must include a period of
restriction of at least three years or the attainment of performance objectives,
including performance objectives stated with reference to Performance Criteria;
provided, however, that such restrictions shall not apply in the case of a Stock
Unit granted in connection with the Settlement of Performance Shares or Stock
Awards or in the case of a substitute award pursuant to Article XII. By way of
example and not of limitation, the Performance Criteria or other criteria may
provide that the Stock Units will be earned only if the Participant remains in
the employ or service of the Company or a Related Entity for a stated period or
that the Company, a Related Entity, the Company and its Related Entities or the
Participant achieve stated objectives including performance objectives stated
with reference to Performance Criteria. Notwithstanding the preceding sentences
of this Section 11.02, the Administrator, in its discretion, may reduce the
duration of the performance period and may adjust the performance objectives for
outstanding Stock Units in connection with a Participant's termination of
employment or service.
11.03. Payment
In accordance with the Agreement, the amount payable when an award of
Stock Units is earned may be settled in cash, Common Stock or a combination of
cash and Common Stock. A fractional share shall not be deliverable when an Award
of Stock Units is earned, but a cash payment will be made in lieu thereof.
11.04. Nontransferability
A Participant may not sell, transfer, pledge, exchange, hypothecate, or
otherwise dispose of a Stock Unit Award other than by will or the laws of
descent and distribution. The limitations set forth in the preceding sentence
shall not apply to Common Stock issued as payment pursuant to a award of Stock
Units.
11.05. Shareholder Rights
No Participant shall, as a result of receiving an award of Stock Units,
have any rights as a shareholder of the Company or Subsidiary until and to the
extent that the Stock Units are earned and settled in shares of Common Stock.
After Stock Units are earned and settled in shares of Common Stock, a
Participant will have all the rights of a shareholder with respect to such
shares.
11.06. Change in Control
Section 11.02 to the contrary notwithstanding and subject to the terms
of the Agreement, each outstanding award of Stock Units may be transferable and
non-forfeitable upon a Change in Control.
ARTICLE XII
ADJUSTMENT UPON CHANGE IN COMMON STOCK
The maximum number of shares as to which Awards may be granted under
this Plan; the terms of outstanding Awards; and the per individual limitations
on the number of shares of Common Stock for which Stock Awards may be granted
shall be adjusted as the Committee shall determine to be equitably required in
the event that (a) the Company (i) effects one or more stock dividends, stock
split-ups, subdivisions or consolidations of shares or (ii) engages in a
transaction to which Section 424 of the Code applies, (b) there occurs any other
event which, in the judgment of the Committee necessitates such action or (c)
there is a Change in Control. Any determination made under this Article XII by
the Committee shall be final and conclusive.
The issuance by the Company of shares of stock of any class, or
securities convertible into shares of stock of any class, for cash or property,
or for labor or services, either upon direct sale or upon the exercise of rights
or warrants to subscribe therefore, or upon conversion of shares or obligations
of the Company convertible into such shares or other securities, shall not
affect, and no adjustment by reason thereof shall be made with respect to, the
maximum number of shares as to which Awards may be granted, the per individual
limitations on the number of shares of Common Stock for which Awards may be
granted or the terms of outstanding Awards.
The Committee may grant Awards in substitution for performance shares,
phantom shares, stock awards, stock options, stock appreciation rights, or
similar awards held by an individual who becomes an employee of the Company or a
Related Entity in connection with a transaction or event described in the first
paragraph of this Article XII. Notwithstanding any provision of the Plan (other
than the limitation of Section 5.02), the terms of such substituted Awards,
shall be as the Committee, in its discretion, determines is appropriate.
ARTICLE XIII
COMPLIANCE WITH LAW AND APPROVAL OF REGULATORY BODIES
No Option or SAR shall be exercisable, no Common Stock shall be issued,
no certificates for shares of Common Stock shall be delivered, and no payment
shall be made under this Plan except in compliance with all applicable federal
and state laws and regulations (including, without limitation, withholding tax
requirements), any listing agreement to which the Company is a party, and the
rules of all domestic stock exchanges on which the Company's shares may be
listed. The Company shall have the right to rely on an opinion of its counsel as
to such compliance. Any share certificate issued to evidence Common Stock when a
Stock Award is granted, a Performance Share or Stock Unit is settled or for
which an Option or SAR is exercised may bear such legends and statements as the
Administrator may deem advisable to assure compliance with federal and state
laws and regulations. No Option or SAR shall be exercisable, no Stock Award,
Performance Share or Stock Unit shall be granted, no Common Stock shall be
issued, no certificate for shares shall be delivered, and no payment shall be
made under this Plan until the Company has obtained such consent or approval as
the Administrator may deem advisable from regulatory bodies having jurisdiction
over such matters.
ARTICLE XIV
GENERAL PROVISIONS
14.01. Effect on Employment and Service
Neither the adoption of this Plan, its operation, nor any documents
describing or referring to this Plan (or any part thereof), shall confer upon
any individual any right to continue in the employ or service of the Company or
a Related Entity or in any way affect any right or power of the Company or a
Related Entity to terminate the employment or service of any individual at any
time with or without assigning a reason therefore.
14.02. Unfunded Plan
The Plan, insofar as it provides for grants, shall be unfunded, and the
Company shall not be required to segregate any assets that may at any time be
represented by grants under this Plan. Any liability of the Company to any
person with respect to any grant under this Plan shall be based solely upon any
contractual obligations that may be created pursuant to this Plan. No such
obligation of the Company shall be deemed to be secured by any pledge of, or
other encumbrance on, any property of the Company.
14.03. Rules of Construction
Headings are given to the articles and sections of this Plan solely as
a convenience to facilitate reference. The reference to any statute, regulation,
or other provision of law shall be construed to refer to any amendment to or
successor of such provision of law.
14.04. Tax Withholding
Each Participant shall be responsible for satisfying any income and
employment tax withholding obligation attributable to participation in this
Plan. In accordance with procedures established by the Administrator, a
Participant may surrender shares of Common Stock, or receive fewer shares of
Common Stock than otherwise would be issuable, in satisfaction of all or part of
that obligation.
ARTICLE XV
AMENDMENT
The Board may amend or terminate this Plan from time to time; provided,
however, that no amendment may become effective until shareholder approval is
obtained if (i) the amendment increases the aggregate number of shares of Common
Stock that may be issued under the Plan (other than an adjustment pursuant to
Article XII) or (ii) the amendment changes the class of individuals eligible to
become Participants. No amendment shall, without a Participant's consent,
adversely affect any rights of such Participant under any Award outstanding at
the time such amendment is made.
ARTICLE XVI
DURATION OF PLAN
No Award may be granted under this Plan more than ten years after the
earlier of the date the Plan is adopted by the Board or the date that the Plan
is approved in accordance with Article XVII. Awards granted before that date
shall remain valid in accordance with their terms.
ARTICLE XVII
EFFECTIVE DATE OF PLAN
Options, SARs, Stock Units, Performance Shares and Dividend Equivalent
Rights may be granted under this Plan upon its adoption by the Board, provided
that no Option, SAR, Stock Unit, Performance or Dividend Equivalent Rights shall
be effective or exercisable unless this Plan is approved by a majority of the
votes cast by the Company's shareholders, voting either in person or by proxy,
at a duly held shareholders' meeting at which a quorum is present or by
unanimous consent. Stock Awards may be granted under this Plan, upon the later
of its adoption by the Board or its approval by shareholders in accordance with
the preceding sentence.