AMERICAN PRESIDENT COMPANIES, LTD.
1989 STOCK INCENTIVE PLAN
(as amended and restated effective April 28, 1994)
TABLE OF CONTENTS
PAGE
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ARTICLE 1. INTRODUCTION.................................................. 1
ARTICLE 2. ADMINISTRATION................................................ 1
2.1 The Committee................................................. 1
2.2 Disinterested Directors....................................... 2
2.3 Committee Responsibilities.................................... 2
ARTICLE 3. LIMITATION ON AWARDS.......................................... 3
ARTICLE 4. ELIGIBILITY................................................... 4
4.1 General Rule.................................................. 4
4.2 Ten-Percent Stockholders...................................... 4
4.3 Attribution Rules............................................. 4
4.4 Outstanding Stock............................................. 5
ARTICLE 5. OPTIONS....................................................... 5
5.1 Stock Option Agreement........................................ 5
5.2 Options Nontransferable....................................... 5
5.3 Number of Shares.............................................. 6
5.4 Exercise Price................................................ 6
5.5 Exercisability and Term....................................... 6
5.6 Effect of Change in Control................................... 7
5.7 Modification, Extension and Renewal of Options................ 7
ARTICLE 6. PAYMENT FOR OPTION SHARES..................................... 8
6.1 General Rule.................................................. 8
6.2 Surrender of Stock............................................ 8
6.3 Exercise/Sale................................................. 9
6.4 Exercise/Pledge............................................... 9
6.5 Other Forms of Payment........................................ 9
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ARTICLE 7. STOCK APPRECIATION RIGHTS..................................... 9
7.1 Grant of SARs................................................. 9
7.2 Manner of Exercise of SARs.................................... 10
7.3 Special Holding Period........................................ 11
7.4 Special Exercise Window....................................... 11
7.5 Limited SARs.................................................. 11
ARTICLE 8. RESTRICTED SHARES AND STOCK UNITS............................. 11
8.1 Time, Amount and Form of Awards............................... 11
8.2 Payment for Awards............................................ 12
8.3 Vesting Conditions............................................ 12
8.4 Form of Settlement of Stock Units............................. 13
8.5 Time of Settlement of Stock Units............................. 13
8.6 Death of Recipient............................................ 13
ARTICLE 9. VOTING RIGHTS AND DIVIDENDS OR DIVIDEND EQUIVALENTS........... 14
9.1 Restricted Shares............................................. 14
9.2 Stock Units................................................... 14
ARTICLE 10. PROTECTION AGAINST DILUTION.................................. 15
10.1 General....................................................... 15
10.2 Reorganizations............................................... 15
10.3 Reservation of Rights......................................... 16
ARTICLE 11. LIMITATION OF RIGHTS......................................... 16
11.1 Employment Rights............................................. 16
11.2 Stockholders' Rights.......................................... 17
11.3 Creditors' Rights............................................. 17
11.4 Government Regulations........................................ 17
ARTICLE 12. LIMITATION ON PAYMENTS....................................... 18
12.1 Basic Rule.................................................... 18
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12.2 Reduction of Payments......................................... 19
12.3 Overpayments and Underpayments................................ 20
12.4 Related Corporations........................................... 21
ARTICLE 13. WITHHOLDING TAXES............................................ 21
13.1 General....................................................... 21
13.2 Share Withholding............................................. 21
ARTICLE 14. ASSIGNMENT OR TRANSFER OF AWARD.............................. 22
ARTICLE 15. FUTURE OF THE PLAN........................................... 23
15.1 Term of the Plan.............................................. 23
15.2 Amendment or Termination...................................... 23
15.3 Effect of Amendment or Termination............................ 23
ARTICLE 16. DEFINITIONS.................................................. 23
ARTICLE 17. EXECUTION.................................................... 27
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AMERICAN PRESIDENT COMPANIES, LTD.
1989 STOCK INCENTIVE PLAN
ARTICLE 1. INTRODUCTION.
The Plan was adopted by the Board on January 24, 1989, and approved by
the Company's stockholders on April 28, 1989. The Plan was amended and
restated by the Board on January 28, 1994, subject to approval by the
Company's stockholders at the annual meeting of stockholders on April 28,
1994. The purpose of the Plan is to promote the long-term success of the
Company and the creation of incremental stockholder value by (a) encouraging
Key Employees to focus on critical long-range objectives, (b) encouraging the
attraction and retention of Key Employees with exceptional qualifications and
(c) linking Key Employees directly to stockholder interests through increased
stock ownership. The Plan seeks to achieve this purpose by providing for
Awards in the form of Restricted Shares, Stock Units, stock appreciation
rights or Options, which may constitute incentive stock options or
nonstatutory stock options. The Plan shall be governed by, and construed in
accordance with, the laws of the State of California.
ARTICLE 2. ADMINISTRATION.
2.1 THE COMMITTEE. The Plan shall be administered by the Committee.
The Committee shall consist of two or more disinterested directors of the
Company, who shall be appointed by the Board. A member of the Committee shall
not be eligible to receive any Award under the Plan. The Board may also
appoint one or more separate committees of the Board, each composed of
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one or more directors of the Company who need not be disinterested, who may
administer the Plan with respect to Key Employees who are not officers or
directors of the Company, may grant Awards under the Plan to such Key
Employees and may determine all terms of such Awards.
2.2 DISINTERESTED DIRECTORS. A member of the Board shall be deemed
to be "disinterested" only if he or she satisfies (a) such requirements as the
Securities and Exchange Commission may establish for disinterested
administrators acting under plans intended to qualify for exemption under Rule
16b-3 (or its successor) under the Exchange Act and (b) such requirements as
the Internal Revenue Service may establish for outside directors acting under
plans intended to qualify for exemption under section 162(m)(4)(C) of the
Code.
2.3 COMMITTEE RESPONSIBILITIES. The Committee shall select the Key
Employees who are to receive Awards under the Plan, determine the amount,
vesting requirements and other conditions of such Awards, interpret the Plan,
and make all other decisions relating to the operation of the Plan. The
Committee may adopt such rules or guidelines as it deems appropriate to
implement the Plan. The Committee's determinations under the Plan shall be
final and binding on all persons.
ARTICLE 3. LIMITATION ON AWARDS.
The aggregate number of Restricted Shares, Stock Units and Options
awarded under the Plan shall not exceed 6,000,000 plus the number of Common
Shares remaining available for awards under the 1987 Contingent Management
Incentive Plan of American
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President Companies, Ltd. and the American President Companies, Ltd. 1983
Stock Option Plan as of April 28, 1989; provided that the aggregate number of
Restricted Shares and Stock Units awarded under the Plan shall not exceed
4,000,000 plus the number of Common Shares remaining available for awards
under the 1987 Contingent Management Incentive Plan of American President
Companies, Ltd. as of April 28, 1989. If any Stock Units or Options are
forfeited or if any Options terminate for any other reason before being
exercised, then such Stock Units or Options shall again become available for
Awards under the Plan. If Restricted Shares are forfeited before any
dividends have been paid with respect to such Restricted Shares, then such
Restricted Shares shall again become available for Awards under the Plan. If
any options granted under such option plan are forfeited or terminate for any
other reason before being exercised, then such options shall become available
for additional Awards under this Plan. However, if Options are surrendered
upon the exercise of related SARs, then such Options shall not be restored to
the pool available for Awards. Any dividend equivalents distributed under the
Plan shall not be applied against the number of Restricted Shares, Stock Units
or Options available for Awards, whether or not such dividend equivalents are
converted into Stock Units. The limitation of this Article 3 shall be subject
to adjustment pursuant to Article 10. Any Common Shares issued pursuant to
the Plan may be authorized but unissued shares or treasury shares.
ARTICLE 4. ELIGIBILITY.
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4.1 GENERAL RULE. Only Key Employees (including, without
limitation, members of the Board or officers of the Company who are also Key
Employees) shall be eligible for designation as Participants by the Committee.
4.2 TEN-PERCENT STOCKHOLDERS. A Key Employee who owns more than 10
percent of the total combined voting power of all classes of outstanding stock
of the Company or any of its Subsidiaries shall not be eligible for the grant
of an ISO unless (a) the Exercise Price under such ISO is at least 110 percent
of the Fair Market Value of a Common Share on the date of grant and (b) such
ISO by its terms is not exercisable after the expiration of five years from
the date of grant.
4.3 ATTRIBUTION RULES. For purposes of Section 4.2, in determining
stock ownership, a Key Employee shall be deemed to own the stock owned,
directly or indirectly, by or for his or her brothers, sisters, spouse,
ancestors and lineal descendants. Stock owned, directly or indirectly, by or
for a corporation, partnership, estate or trust shall be deemed to be owned
proportionately by or for its stockholders, partners or beneficiaries. Stock
with respect to which the Key Employee holds an option shall not be counted.
4.4 OUTSTANDING STOCK. For purposes of Section 4.2, "outstanding
stock" shall include all stock actually issued and outstanding immediately
after the grant of the ISO to the Key Employee. "Outstanding stock" shall not
include treasury shares or shares authorized for issuance under outstanding
options held by the Key Employee or by any other person.
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ARTICLE 5. OPTIONS.
5.1 STOCK OPTION AGREEMENT. Each grant of an Option under the Plan
shall be evidenced by a Stock Option Agreement between the Optionee and the
Company. Such Option shall be subject to all applicable terms and conditions
of the Plan and may be subject to any other terms and conditions which are not
inconsistent with the Plan and which the Committee deems appropriate for
inclusion in a Stock Option Agreement. The provisions of the various Stock
Option Agreements entered into under the Plan need not be identical. The
Committee may designate all or any part of an Option as an ISO.
5.2 OPTIONS NONTRANSFERABLE. No Option granted under the Plan shall
be transferable by the Optionee other than by will, by a beneficiary
designation executed by the Optionee and delivered to the Company or by the
laws of descent and distribution, and no Option may be exercised during the
lifetime of the Optionee except by him or her. No Option or interest therein
may be transferred, assigned, pledged or hypothecated by the Optionee during
his or her lifetime, whether by operation of law or otherwise, or be made
subject to execution, attachment or similar process.
5.3 NUMBER OF SHARES. Each Stock Option Agreement shall specify the
number of Shares subject to the Option and shall provide for the adjustment of
such number in accordance with Article 10. Options granted to any Optionee in
a single calendar year shall in no event cover more than 250,000 Common
Shares, subject to adjustment in accordance with Article 10.
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The Stock Option Agreement shall also specify whether the Option is an ISO or
an NSO.
5.4 EXERCISE PRICE. Each Stock Option Agreement shall specify the
Exercise Price. The Exercise Price under an ISO shall not be less than 100
percent of the Fair Market Value of a Common Share on the date of grant,
except as otherwise provided in Section 4.2. The Exercise Price under an NSO
shall not be less than the par value of the Common Shares subject to such NSO.
Subject to the preceding two sentences, the Exercise Price under any Option
shall be determined by the Committee. The Exercise Price shall be payable in
accordance with Article 7.
5.5 EXERCISABILITY AND TERM. Each Stock Option Agreement shall
specify the date when all or any installment of the Option is to become
exercisable. The Stock Option Agreement shall also specify the term of the
Option. The term of an ISO shall in no event exceed 10 years from the date of
grant, and Section 4.2 may require a shorter term. Subject to Sections 7.3
and 7.4 and the preceding sentence, the Committee shall determine when all or
any part of an Option (and any SARs included therein) is to become exercisable
and when such Option is to expire. A Stock Option Agreement may provide for
accelerated exercisability in the event of the Optionee's death, disability or
retirement and may provide for expiration prior to the end of its term in the
event of the termination of the Optionee's employment. NSOs may also be
awarded in combination with Restricted Shares or Stock Units, and such an
Award may provide that the NSOs will not be
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exercisable unless the related Restricted Shares or Stock Units are forfeited.
5.6 EFFECT OF CHANGE IN CONTROL. The Committee (at its sole
discretion) may determine, at the time of granting an Option or thereafter,
that such Option (and any SARs included therein) shall become fully
exercisable as to all Common Shares subject to such Option in the event that a
Change in Control occurs with respect to the Company. If the Committee finds
that there is a reasonable possibility that, within the succeeding six months,
a Change in Control will occur with respect to the Company, then the Committee
may determine that all outstanding Options (and any SARs included therein)
shall become fully exercisable as to all Common Shares subject to such
Options.
5.7 MODIFICATION, EXTENSION AND RENEWAL OF OPTIONS. Within the
limitations of the Plan, the Committee may modify, extend or renew outstanding
Options or may accept the cancellation of outstanding Options (to the extent
not previously exercised) in return for the grant of new Options at the same
or a different price. The foregoing notwithstanding, no modification of an
Option shall, without the consent of the Optionee, alter or impair his or her
rights or obligations under such Option.
ARTICLE 6. PAYMENT FOR OPTION SHARES.
6.1 GENERAL RULE. The entire Exercise Price of Common Shares issued
upon exercise of Options shall be payable in cash at the time when such Common
Shares are purchased, except as follows:
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(a) In the case of an ISO granted under the Plan, payment shall
be made only pursuant to the express provisions of the applicable Stock
Option Agreement. However, the Committee may specify in the Stock
Option Agreement that payment may be made pursuant to Section 6.2, 6.3,
6.4 or 6.5.
(b) In the case of an NSO, the Committee may at any time accept
payment pursuant to Section 6.2, 6.3, 6.4 or 6.5.
6.2 SURRENDER OF STOCK. To the extent that this Section 6.2 is
applicable, payment for all or any part of the Exercise Price may be made with
Common Shares which have already been owned by the Optionee for more than six
months and which are surrendered to the Company. Such Common Shares shall be
valued at their Fair Market Value on the date when the new Common Shares are
purchased under the Plan. In the event that the Common Shares being
surrendered are Restricted Shares that have not yet become vested, the same
restrictions shall be imposed upon the new Common Shares being purchased.
6.3 EXERCISE/SALE. To the extent this Section 6.3 is applicable,
payment may be made by the delivery (on a form prescribed by the Company) of
an irrevocable direction to a securities broker approved by the Company to
sell Common Shares and to deliver all or part of the sales proceeds to the
Company in payment of all or part of the Exercise Price and any withholding
taxes.
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6.4 EXERCISE/PLEDGE. To the extent that this Section 6.4 is
applicable, payment may be made by the delivery (on a form prescribed by the
Company) of an irrevocable direction to pledge Common Shares to a securities
broker or lender approved by the Company as security for a loan and to deliver
all or part of the loan proceeds to the Company in payment of all or part of
the Exercise Price and any withholding taxes.
6.5 OTHER FORMS OF PAYMENT. To the extent that this Section 6.5 is
applicable, payment may be made in any other form approved by the Committee,
consistent with applicable laws, regulations and rules.
ARTICLE 7. STOCK APPRECIATION RIGHTS.
7.1 GRANT OF SARS. Each Option granted under the Plan may, at the
discretion of the Committee, include an SAR. Such SAR shall entitle the
Optionee (or any person having the right to exercise the Option after his or
her death) to surrender to the Company, unexercised, all or any part of that
portion of the Option which then is exercisable and to receive from the
Company Common Shares or cash, or a combination of Common Shares and cash, as
the Committee shall determine. If an SAR is exercised, the number of Common
Shares remaining subject to the related Option shall be reduced accordingly,
and vice versa. The amount of cash and/or the Fair Market Value of Common
Shares received upon exercise of an SAR shall, in the aggregate, be equal to
the amount by which the Fair Market Value (on the date of surrender) of the
Common Shares subject to the surrendered portion of the Option exceeds the
Exercise Price. In no event shall any SAR be
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exercised if such Fair Market Value does not exceed the Exercise Price. The
discretion of the Committee to include an SAR in an ISO may be exercised only
at the time of the grant of such ISO. The discretion of the Committee to
include an SAR in an NSO may be exercised at the time of the grant of such NSO
or at any subsequent time, but not later than six months before the expiration
of such NSO.
7.2 MANNER OF EXERCISE OF SARS. An SAR may be exercised by written
notice to the Company. Subject to Sections 7.3 and 7.4, it may be exercised
to the extent, and only to the extent, that the Option in which it is included
is exercisable. If, on the date when an Option expires, the Exercise Price
under such Option is less than the Fair Market Value on such date but any
portion of such Option has not been exercised or surrendered, then any SAR
included in such Option shall automatically be deemed to be exercised as of
such date with respect to such portion.
7.3 SPECIAL HOLDING PERIOD. To the extent required by section 16 of
the Exchange Act or any rule thereunder, an SAR shall not be exercised for
cash unless both it and the related Option have been outstanding for more than
six months.
7.4 SPECIAL EXERCISE WINDOW. To the extent required by section 16
of the Exchange Act or any rule thereunder, an SAR may only be exercised for
cash during a period which (a) begins on the third business day following a
date when the Company's quarterly summary statement of sales and earnings is
released to the public and (b) ends on the 12th business day following such
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date. This Section 7.4 shall not apply if the exercise occurs automatically
on the date when the related Option expires, and the Committee may determine
that it shall not apply to limited SARs granted under Section 7.5.
7.5 LIMITED SARS. An Option granted under the Plan may, at the
discretion of the Committee, provide that it will be exercisable as an SAR
only in the event of a Change in Control.
ARTICLE 8. RESTRICTED SHARES AND STOCK UNITS.
8.1 TIME, AMOUNT AND FORM OF AWARDS. The Committee may grant
Restricted Shares or Stock Units with respect to an Award Year during such
Award Year or at any time thereafter. The amount of each Award of Restricted
Shares or Stock Units shall be determined by the Committee. Awards under the
Plan may be granted in the form of Restricted Shares, in the form of Stock
Units, or in any combination of both, as the Committee shall determine at its
sole discretion at the time of the grant. Restricted Shares or Stock Units
may also be awarded in combination with NSOs, and such an Award may provide
that the Restricted Shares or Stock Units will be forfeited in the event that
the related NSOs are exercised.
8.2 PAYMENT FOR AWARDS. To the extent that an Award is granted in
the form of Restricted Shares, the Award recipient, as a condition to the
grant of such Award, shall be required to pay the Company in cash an amount
equal to the par value of such Restricted Shares. To the extent that an Award
is granted in the form of Stock Units, no cash consideration shall be required
of Award recipients.
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8.3 VESTING CONDITIONS. Each Award of Restricted Shares or Stock
Units shall become vested, in full or in installments, upon satisfaction of
the conditions specified in the Stock Award Agreement. The Committee shall
select the vesting conditions, which may be based upon the Participant's
service, the Participant's performance, the Company's performance or such
other criteria as the Committee may adopt. A Stock Award Agreement may also
provide for accelerated vesting in the event of the Participant's death,
disability or retirement. The Committee (at its sole discretion) may
determine, at the time of making an Award or thereafter, that such Award shall
become fully vested in the event that a Change in Control occurs with respect
to the Company.
8.4 FORM OF SETTLEMENT OF STOCK UNITS. Settlement of vested Stock
Units may be made in the form of cash, in the form of Common Shares, or in any
combination of both, as the Committee shall determine at or before the time
when distribution commences. The Committee may designate a method of
converting Stock Units into cash, including (without limitation) a method
based on the average Fair Market Value of Common Shares over a series of
trading days. Until an Award of Stock Units is settled, the number of such
Stock Units shall be subject to adjustment pursuant to Article 10.
8.5 TIME OF SETTLEMENT OF STOCK UNITS. Vested Stock Units may be
settled in a lump sum or in installments. The distribution may occur or
commence when all vesting conditions applicable to the Stock Units have been
satisfied or have lapsed, or
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it may be deferred to any later date. The Committee shall determine when all
or any part of an Award of Stock Units is to be distributed, and it may modify
its original determination with respect to the time of distribution at any
time before settlement of the Stock Units is completed. The Committee may
also permit Participants to request a deferral of any distribution under this
Section 8.5. In the case of any deferred distribution, the Committee may
increase the amount of such distribution by an interest factor or by dividend
equivalents, as it deems appropriate.
8.6 DEATH OF RECIPIENT. Any Stock Units Award which becomes payable
after the recipient's death shall be delivered or distributed to the
recipient's beneficiary or beneficiaries. Each recipient of a Stock Units
Award under the Plan shall designate one or more beneficiaries for this
purpose by filing the prescribed form with the Company. A beneficiary
designation may be changed by filing the prescribed form with the Company at
any time before the Award recipient's death. If no beneficiary was designated
or if no designated beneficiary survives the Award recipient, then any Stock
Units Award which becomes payable after the recipient's death shall be
delivered or distributed to the recipient's estate. The Committee, at its
sole discretion, shall determine the form and time of any distribution(s) to a
recipient's beneficiary or estate.
ARTICLE 9. VOTING RIGHTS AND DIVIDENDS
OR DIVIDEND EQUIVALENTS.
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9.1 RESTRICTED SHARES. The holders of Restricted Shares awarded
under the Plan shall have the same voting, dividend and other rights as the
Company's other stockholders.
9.2 STOCK UNITS. The holders of Stock Units shall have no voting
rights. Prior to settlement or forfeiture, any Stock Unit awarded under the
Plan shall carry with it a right to dividend equivalents. Such right entitles
the holder to be credited with an amount equal to all cash dividends paid on
one Common Share while the Stock Unit is outstanding. Dividend equivalents
may be converted into additional Stock Units. The Committee shall determine
at what time(s) any dividend equivalents are to be distributed. Settlement of
dividend equivalents may be made in the form of cash, in the form of Common
Shares, or in a combination of both. Prior to distribution, any dividend
equivalents which are not paid on or about the date when dividends on Common
Shares are paid shall be subject to the same conditions and restrictions
(including, without limitation, any forfeiture conditions) as the Stock Units
to which they attach. The Committee, at its sole discretion, shall make all
determinations relating to dividend equivalents.
ARTICLE 10. PROTECTION AGAINST DILUTION.
10.1 GENERAL. In the event of a subdivision of the outstanding
Common Shares, a declaration of a dividend payable in Common Shares, a
declaration of a dividend payable in a form other than Common Shares in an
amount that has a material effect on the price of Common Shares, a spinoff, a
combination or consolidation of the outstanding Common Shares (by
reclassifica-
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tion or otherwise) into a lesser number of Common Shares, a recapitalization
or a similar occurrence, the Committee shall make appropriate adjustments in
one or more of (a) the number of Options, Restricted Shares and Stock Units
available for future Awards under Section 3.1, (b) the number of Stock Units
included in any prior Award which has not yet been settled, (c) the number of
Common Shares covered by each outstanding Option or (d) the Exercise Price
under each outstanding Option.
10.2 REORGANIZATIONS. In the event that the Company is a party to a
merger or other reorganization, outstanding Options, Restricted Shares and
Stock Units shall be subject to the agreement of merger or reorganization.
Such agreement may provide, without limitation, for the assumption of
outstanding Awards by the surviving corporation or its parent, for their
continuation by the Company (if the Company is a surviving corporation), for
accelerated vesting or for settlement in cash.
10.3 RESERVATION OF RIGHTS. Except as provided in this Article 10, a
Participant shall have no rights by reason of any subdivision or consolidation
of shares of stock of any class, the payment of any stock dividend or any
other increase or decrease in the number of shares of stock of any class. Any
issue by the Company of shares of stock of any class, or securities
convertible into shares of stock of any class, shall not affect, and no
adjustment by reason thereof shall be made with respect to, the number or
Exercise Price of Common Shares subject to an Option. The grant of an Award
pursuant to the Plan shall not affect in any way the right or power of the
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Company to make adjustments, reclassifications, reorganizations or changes of
its capital or business structure, to merge or consolidate or to dissolve,
liquidate, sell or transfer all or any part of its business or assets.
ARTICLE 11. LIMITATION OF RIGHTS.
11.1 EMPLOYMENT RIGHTS. Neither the Plan nor any Award granted under
the Plan shall be deemed to give any individual a right to remain employed by
the Company or a Subsidiary. The Company and its Subsidiaries reserve the
right to terminate the employment of any employee at any time, with or without
cause, subject only to a written employment agreement (if any).
11.2 STOCKHOLDERS' RIGHTS. A Participant shall have no dividend
rights, voting rights or other rights as a stockholder with respect to any
Common Shares covered by his or her Award prior to the issuance of a stock
certificate for such Common Shares. No adjustment shall be made for cash
dividends or other rights for which the record date is prior to the date when
such certificate is issued, except as expressly provided in Articles 8, 9 and
10.
11.3 CREDITORS' RIGHTS. A holder of Stock Units shall have no rights
other than those of a general creditor of the Company. Stock Units represent
an unfunded and unsecured obligation of the Company, subject to the terms and
conditions of the applicable Stock Award Agreement.
11.4 GOVERNMENT REGULATIONS. Any other provision of the Plan
notwithstanding, the obligations of the Company with respect to Common Shares
to be issued pursuant to the Plan shall
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be subject to all applicable laws, rules and regulations and such approvals by
any governmental agencies as may be required. The Company reserves the right
to restrict, in whole or in part, the delivery of Common Shares pursuant to
any Award until such time as:
(a) Any legal requirements or regulations have been met relating
to the issuance of such Common Shares or to their registration,
qualification or exemption from registration or qualification under the
Securities Act of 1933, as amended, or any applicable state securities
laws; and
(b) Satisfactory assurances have been received that such Common
Shares, when issued, will be duly listed on the New York Stock Exchange,
Inc. or any other securities exchange on which Common Shares are then
listed.
ARTICLE 12. LIMITATION ON PAYMENTS.
12.1 BASIC RULE. Any provision of the Plan to the contrary
notwithstanding, in the event that the independent auditors most recently
selected by the Board (the "Auditors") determine that any payment or transfer
by the Company to or for the benefit of a Key Employee, whether paid or
payable (or transferred or transferable) pursuant to the terms of this Plan or
otherwise (a "Payment"), would be nondeductible by the Company for federal
income tax purposes because of the provisions concerning "excess parachute
payments" in section 280G of the Code, then the aggregate present value of all
Payments shall be reduced (but
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not below zero) to the Reduced Amount; provided that each award granted under
a plan of the Company prior to May 2, 1986, shall not be so reduced and shall
not be subject to this Article 12; and provided, further, that the Committee,
at the time of making an Award under this Plan or at any time thereafter, may
specify in writing that such Award shall not be so reduced and shall not be
subject to this Article 12. For purposes of this Article 12, the "Reduced
Amount" shall be the amount, expressed as a present value, which maximizes the
aggregate present value of the Payments without causing any Payment to be
nondeductible by the Company because of section 280G of the Code.
12.2 REDUCTION OF PAYMENTS. If the Auditors determine that any
Payment would be nondeductible by the Company because of section 280G of the
Code, then the Company shall promptly give the Key Employee notice to that
effect and a copy of the detailed calculation thereof and of the Reduced
Amount, and the Key Employee may then elect, in his or her sole discretion,
which and how much of the Payments shall be eliminated or reduced (as long as
after such election the aggregate present value of the Payments equals the
Reduced Amount) and shall advise the Company in writing of his or her election
within 10 days of receipt of notice. If no such election is made by the Key
Employee within such 10-day period, then the Company may elect which and how
much of the Payments shall be eliminated or reduced (as long as after such
election the aggregate present value of the Payments equals the Reduced
Amount) and shall notify the Key Employee promptly of such election. For
purposes
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of this Article 12, present value shall be determined in accordance with
section 280G(d)(4) of the Code. All determinations made by the Auditors under
this Article 12 shall be binding upon the Company and the Key Employee and
shall be made within 60 days of the date when a payment becomes payable or
transferable. As promptly as practicable following such determination and the
elections hereunder, the Company shall pay or transfer to or for the benefit
of the Key Employee such amounts as are then due to him or her under the Plan
and shall promptly pay or transfer to or for the benefit of the Key Employee
in the future such amounts as become due to him or her under the Plan.
12.3 OVERPAYMENTS AND UNDERPAYMENTS. As a result of uncertainty in
the application of section 280G of the Code at the time of an initial
determination by the Auditors hereunder, it is possible that Payments will
have been made by the Company which should not have been made (an
"Overpayment") or that additional Payments which will not have been made by
the Company could have been made (an "Underpayment"), consistent in each case
with the calculation of the Reduced Amount hereunder. In the event that the
Auditors, based upon the assertion of a deficiency by the Internal Revenue
Service against the Company or the Key Employee which the Auditors believe has
a high probability of success, determine that an Overpayment has been made,
such Overpayment shall be treated for all purposes as a loan to the Key
Employee which he or she shall repay to the Company, together with interest at
the applicable federal rate provided in section 7872(f)(2) of the Code;
provided, however,
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that no amount shall be payable by the Key Employee to the Company if and to
the extent that such payment would not reduce the amount which is subject to
taxation under section 4999 of the Code. In the event that the Auditors
determine that an Underpayment has occurred, such Underpayment shall promptly
be paid or transferred by the Company to or for the benefit of the Key
Employee, together with interest at the applicable federal rate provided in
section 7872(f)(2) of the Code.
12.4 RELATED CORPORATIONS. For purposes of this Article 12, the term
"Company" shall include affiliated corporations to the extent determined by
the Auditors in accordance with section 280G(d)(5) of the Code.
ARTICLE 13. WITHHOLDING TAXES.
13.1 GENERAL. If withholding tax obligations arise under federal,
state, local or foreign law in connection with any transaction under the Plan,
then the Participant, beneficiary or other person who is subject to such
obligations shall make arrangements satisfactory to the Company to meet such
obligations. The Company shall not be required to issue any Common Shares or
make any cash payment under the Plan until such obligations are satisfied.
13.2 SHARE WITHHOLDING. The Committee may permit a Participant,
beneficiary or other person who is subject to withholding or income tax
obligations in connection with any transaction under the Plan to satisfy all
or part of such obligations by having the Company withhold a portion of any
Common Shares that otherwise would be issued to him or her or by surrendering
a
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portion of any Common Shares that previously were issued to him or her. Such
Common Shares shall be valued at their Fair Market Value on the date when
taxes otherwise would be withheld in cash. Any payment of taxes by assigning
Common Shares to the Company may be subject to restrictions, including any
restrictions required by rules of the Securities and Exchange Commission.
ARTICLE 14. ASSIGNMENT OR TRANSFER OF AWARD.
Any Award granted under the Plan shall not be anticipated, assigned,
attached, garnished, optioned, transferred or made subject to any creditor's
process, whether voluntarily, involuntarily or by operation of law. Any act
in violation of this Article 14 shall be void. However, this Article 14 shall
not preclude a Participant from designating a beneficiary who will receive any
undistributed Awards in the event of the Participant's death, nor shall it
preclude a transfer by will or by the laws of descent and distribution. In
addition, neither this Article 14 nor any other provision of the Plan shall
preclude a Participant from transferring or assigning Restricted Shares to (a)
the trustee of a trust that is revocable by such Participant alone, both at
the time of the transfer or assignment and at all times thereafter prior to
such Participant's death, or (b) the trustee of any other trust to the extent
approved in advance by the Committee in writing. A transfer or assignment of
Restricted Shares from such trustee to any person other than such Participant
shall be permitted only to the extent approved in advance by the Committee in
writing, and Restricted Shares held by such
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trustee shall be subject to all of the conditions and restrictions set forth
in the Plan and in the applicable Stock Award Agreement as if such trustee
were a party to such Agreement.
ARTICLE 15. FUTURE OF THE PLAN.
15.1 TERM OF THE PLAN. The Plan, as set forth herein, shall become
effective on April 28, 1994, subject to the approval of the Company's
stockholders. The Plan shall remain in effect until it is terminated under
Section 15.2, except that no ISOs shall be granted after January 27, 2004.
15.2 AMENDMENT OR TERMINATION. The Board may, at any time and for
any reason, amend or terminate the Plan. However, any amendment of the Plan
shall be subject to the approval of the Company's stockholders to the extent
required by applicable laws, regulations or rules.
15.3 EFFECT OF AMENDMENT OR TERMINATION. No Awards shall be made
under the Plan after the termination thereof. The termination of the Plan, or
any amendment thereof, shall not affect any Option, Restricted Share or Stock
Unit previously granted under the Plan.
ARTICLE 16. DEFINITIONS.
16.1 "AWARD" means any award of an Option (with or without a related
SAR), a Restricted Share or a Stock Unit under the Plan.
16.2 "AWARD YEAR" means a calendar year with respect to which an
Award may be granted.
16.3 "BOARD" means the Company's Board of Directors, as constituted
from time to time.
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16.4 "CHANGE IN CONTROL" means the occurrence of any of the following
events:
(a) A change in control required to be reported pursuant to Item
6(e) of Schedule 14A of Regulation 14A under the Exchange Act;
(b) A change in the composition of the Board, as a result of
which fewer than two-thirds of the incumbent directors are directors who
either (i) had been directors of the Company 24 months prior to such
change or (ii) were elected, or nominated for election, to the Board
with the affirmative votes of at least a majority of the directors who
had been directors of the Company 24 months prior to such change and who
were still in office at the time of the election or nomination; or
(c) Any "person" (as such term is used in sections 13(d) and
14(d) of the Exchange Act) is or becomes the beneficial owner, directly
or indirectly, of securities of the Company representing 20 percent or
more of the combined voting power of the Company's then outstanding
securities ordinarily (and apart from rights accruing under special
circumstances) having the right to vote at elections of directors (the
"Base Capital Stock"); provided, however, that any change in the
relative beneficial ownership of securities of any person resulting
solely from a reduction in the aggregate number of outstanding shares of
Base Capital
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Stock, and any decrease thereafter in such person's ownership of
securities, shall be disregarded until such person increases in any
manner, directly or indirectly, such person's beneficial ownership of
any securities of the Company.
16.5 "CODE" means the Internal Revenue Code of 1986, as amended.
16.6 "COMMITTEE" means the Compensation Committee of the Board, as
constituted from time to time in accordance with Article 2.
16.7 "COMMON SHARE" means one share of the common stock of the
Company.
16.8 "COMPANY" means American President Companies, Ltd., a Delaware
corporation.
16.9 "EXCHANGE ACT" means the Securities Exchange Act of 1934, as
amended.
16.10 "EXERCISE PRICE" means the amount for which one Common Share
may be purchased upon exercise of an Option, as specified by the Committee in
the applicable Stock Option Agreement.
16.11 "FAIR MARKET VALUE" shall mean the closing price of a Common
Share on the trading day immediately preceding the day in question, as stated
in the New York Stock Exchange composite transactions report.
16.12 "ISO" means an incentive stock option described in section
422(b) of the Code.
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16.13 "KEY EMPLOYEE" means a key employee of the Company or any
Subsidiary, as determined by the Committee.
16.14 "NSO" means an employee stock option not described in section
422 or 423 of the Code.
16.15 "OPTION" means an ISO or NSO granted under the Plan and
entitling the holder to purchase one Common Share.
16.16 "OPTIONEE" means an individual who holds an
Option.
16.17 "PARTICIPANT" means a Key Employee who has received an Award.
16.18 "PLAN" means this American President Companies, Ltd. 1989 Stock
Incentive Plan, as it may be amended from time to time.
16.19 "RESTRICTED SHARE" means a Common Share awarded to a
Participant under the Plan subject to vesting conditions.
16.20 "SAR" means a stock appreciation right granted under the Plan
as part of an Option or as a subsequent addition to an Option.
16.21 "STOCK AWARD AGREEMENT" means the agreement between the Company
and the recipient of a Restricted Share or Stock Unit which contains the
terms, conditions and restrictions pertaining to such Restricted Share or
Stock Unit.
16.22 "STOCK OPTION AGREEMENT" means the agreement between the
Company and an Optionee which contains the terms, conditions and restrictions
pertaining to his or her Option.
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16.23 "STOCK UNIT" means a bookkeeping entry representing the
equivalent of one Common Share and awarded to a Participant under the Plan.
16.24 "SUBSIDIARY" means any corporation, if the Company and/or one
or more other Subsidiaries own not less than 50 percent of the total combined
voting power of all classes of outstanding stock of such corporation. A
corporation that attains the status of a Subsidiary on a date after the
adoption of the Plan shall be considered a Subsidiary commencing as of such
date.
ARTICLE 17. EXECUTION.
To record the amendment and restatement of the Plan by the Board, the
Company has caused its duly authorized officer to affix the corporate name and
seal hereto.
AMERICAN PRESIDENT COMPANIES, LTD.
By
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