Exhibit 10.5
FINE HOST CORPORATION
LONG-TERM INCENTIVE COMPENSATION PLAN
ARTICLE I
PURPOSE
The purpose of the Long-Term Incentive Compensation Plan (the "Plan") is to
promote the interests of Fine Host Corporation (the "Company") and its
stockholders by (i) helping the Company to attract and retain outstanding
management, (ii) stimulating management's efforts on behalf of the Company by
giving participants a direct interest in the performance of the Company and
(iii) suitably rewarding participants' contributions to the success of the
Company.
The Company intends that certain performance-based compensation payable under
the Plan will qualify for deduction under Section 162(m) of the Internal
Revenue Code of 1986, as amended.
ARTICLE II
DEFINITIONS
2.1 Award Certificate: A written instrument evidencing the award of
Units to a Participant.
2.2 Base Year EPS: Earnings Per Share for the Fiscal Year immediately
preceding the date of an award of Units.
2.3 Beneficiary: The person or persons designated by a Participant, in
accordance with Section 9.1, to receive any amount payable under the Plan
upon the Participant's death.
2.4 Board: The Board of Directors of the Company.
2.5 Change in Control: Change in Control shall, unless the Board
otherwise directs by resolution adopted prior thereto or, in the case of a
particular award, the particular Award Certificate states otherwise, be
deemed to occur if:
(i) any "person" (as that term is used in Sections 13 and 14(d)(2)
of the Securities Exchange Act of 1934, as amended (the "Exchange Act")),
other than a Permitted Holder (as defined below), is or becomes the
beneficial owner (as that term is used in Section 13(d) of the Exchange Act),
directly or indirectly, of 30% or more of either the outstanding Common
Shares or the combined voting power of the Company's then outstanding voting
securities entitled to vote generally,
(ii) the Company is merged, consolidated or reorganized into or
with another corporation or other legal entity, and as a result of such
merger, consolidation or reorganization, less than 50% of the combined voting
power of the then outstanding securities of such corporation or entity
immediately after such transaction is held in the aggregate by the holders of
the combined voting power of the outstanding securities of the Company
entitled to vote generally in the election of the Board immediately prior to
such transaction,
(iii) during any period of two consecutive years beginning on the
Effective Date, individuals who constitute the Board at the beginning of such
period cease for any reason to constitute at least a majority thereof, unless
the election or the nomination for election by the Company's stockholders of
each new director was approved by a vote of at least three-quarters of the
directors then still in office who were directors at the beginning of the
period, or
(iv) the Company undergoes a liquidation or dissolution or a sale
of all or substantially all of the assets of the Company.
No merger, consolidation or corporate reorganization in which the
owners of the combined voting power of the Company's then outstanding voting
securities entitled to vote generally prior to said combination own 50% or
more of the resulting entity's outstanding securities shall, by itself, be
considered a Change in Control. As used herein, "Permitted Holder" means
William R. Berkley or any of his affiliates (as such term is defined in Rule
1-02 of Regulation S-X under the Securities Act of 1933).
2.6 Code: The Internal Revenue Code of 1986, as amended from time to
time.
2.7 Committee: The Compensation Committee of the Board, which is
comprised solely of two or more "outside directors" within the meaning of
Section 162(m) of the Code.
2.8 Common Shares: Shares of common stock ($.01 par value) of the
Company.
2.9 Company: Fine Host Corporation and consolidated subsidiaries, a
Delaware corporation, or any successor thereto.
2.10 Cumulative Unit Value: The amount determined in accordance with
Section 7.2.
2.11 Disability: Disability, as defined in a Participant's employment
agreement with the Company, or, absent an agreement, in the Company's group
disability insurance contract.
2.12 Earnings: For any Fiscal Year, the consolidated income of the
Company from continuing operations before income taxes, prepared in
accordance with generally accepted accounting principles, as reported in the
Company's audited consolidated financial statements for that Fiscal Year;
adjusted to exclude (a) in its entirety any item of nonrecurring gain or loss
in excess of $2,000,000 and (b) any accruals for this Plan.
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2.13 Earnings Per Share: For any Fiscal Year, Earnings divided by the
number of Common Shares used to determine the Company's basic earnings per
share for that Fiscal Year, as reported in the Company's audited consolidated
financial statements for the Fiscal Year; provided, however, that for the
Fiscal Year ending December 31,1997, Earnings per Share shall be based on
Earnings for the period March 27 through December 31, 1997 on an annualized
basis (i.e., multiplied by 133%).
2.14 Effective Date: The effective date of the Plan, which is March 27,
1997.
2.15 Fiscal Year: The 52- or 53-week period beginning on the Thursday
after the last Wednesday in December of one year and ending on the last
Wednesday in December of the next year; provided, however, that the first
Fiscal Year shall commence on the Effective Date and end on December 31,
1997.
2.16 Incremental Unit Value: The amount determined in accordance with
Section 7.1.
2.17 Maximum Cumulative Unit Value: For all Units awarded as of the
beginning of any Fiscal Year, the amount determined by the Committee for
those Units when they are awarded.
2.18 Measuring Price: For each Unit awarded as of the Effective Date,
$19.25; for each Unit awarded thereafter, the closing price of a Common Share
as reported on the NASDAQ National Market System on the last day of the
Fiscal Year preceding the date as of which the Unit is awarded.
2.19 Participant: A key employee of the Company designated by the
Committee to participate in the Plan.
2.20 Plan: The Fine Host Corporation Long-Term Incentive Compensation
Plan, as herein set forth and as it may be amended from time to time.
2.21 Term of the Plan: The period commencing on the Effective Date and
ending five years after the final award of Units, in accordance with Section
5.1, or on such earlier date as the Maximum Cumulative Unit Value of such
Units may be achieved.
2.22 Termination Without Cause: Termination of a Participant's
employment by the Company without "Cause," as defined in the Participant's
employment agreement with the Company, or, absent an agreement defining
Cause, termination of the Participant's employment by the Company for any
reason other than (i) continuing and material failure to fulfill his or her
employment obligations or willful misconduct or gross neglect in the
performance of such duties, (ii) commission of fraud, misappropriation or
embezzlement in the performance of such duties, or (iii) conviction of a
felony, which, as determined in good faith by the Board, constitutes a crime
involving moral turpitude and may result in material harm to the Company.
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2.23 Unit: A unit of participation in the Plan awarded to a
Participant in accordance with Article V.
2.24 Valuation Date: The last day of any Fiscal Year.
ARTICLE III
ADMINISTRATION
3.1 The Plan shall be administered by the Committee. A majority of the
Committee shall constitute a quorum. Committee decisions and determinations
shall be made by a majority of its members present at a meeting at which a
quorum is present, and they shall be final. The actions of the Committee
with respect to the Plan shall be binding on all affected Participants. Any
decision or determination reduced to writing and signed by all of the members
of the Committee shall be fully effective as if it had been made by a vote at
a meeting duly called and held. The Committee shall keep minutes of its
meetings and shall make such rules and regulations for the conduct of its
business as it shall deem advisable.
3.2 The Committee shall have full authority, subject to the provisions
of the Plan (i) to select Participants and determine the extent and terms of
their participation; (ii) to adopt, amend and rescind such rules and
regulations as, in its opinion, may be advisable in the administration of the
Plan, (iii) to construe and interpret the Plan, the rules and regulations
adopted thereunder and any notice or Award Certificate given to a
Participant; and (iv) to make all other determinations that it deems
necessary or advisable in the administration of the Plan. The Committee may
request advice or assistance or employ such persons as it deems necessary for
the proper administration of the Plan and may rely on such advice or
assistance; provided, however, that in making any determinations with respect
to the administration of the Plan, the Committee shall at all times be
obligated to act in good faith and in conformity with the terms of the Plan.
3.3 In the event of any stock split, stock dividend, reclassification,
recapitalization or other change that affects the character or amount of
outstanding Common Shares and Earnings Per Share, the Committee shall make
such adjustments in the number of Units (whether authorized or outstanding
and unexercised), the Measuring Price or both as shall, in the sole judgment
of the Committee, be equitable and appropriate in order to make the value of
such Units, as nearly as may be practicable, equivalent to the value of Units
outstanding and unexercised immediately prior to such change. In no event,
however, shall any such adjustment give any Participant any additional
benefits.
3.4 The Committee shall be precluded from increasing compensation
payable under the Plan to a Participant, including acceleration of payment
and increase of any amount payable, unless specifically provided for by the
Plan.
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ARTICLE IV
PARTICIPATION
4.1 Only key employees of the Company who, in the Committee's judgment,
will have a significant impact on the success of the business shall be
eligible to participate in the Plan. The Committee, in its sole discretion,
shall select the Participants.
4.2 In selecting Participants and in determining the number of Units to
be awarded to each Participant for any Fiscal Year, the Committee shall take
into account such factors as the individual's position, experience,
knowledge, responsibilities, advancement potential and past and anticipated
contribution to Company performance.
ARTICLE V
AWARD OF UNITS
5.1 Subject to adjustment as provided in Section 3.3, a maximum of
300,000 Units may be awarded under the Plan. A Participant who has been
awarded Units may be awarded additional Units from time to time and new
Participants may be awarded Units, both in the discretion of the Committee;
provided, however, that no Units shall be awarded after 2006.
5.2 Units shall be awarded solely by the Committee and shall be
evidenced by an Award Certificate, as provided in Article X.
5.3 Subject to adjustment as provided in Section 3.3, the maximum
number of Units awarded to any one individual shall not exceed 75,000 during
the Term of the Plan.
ARTICLE VI
TERM AND VESTING OF UNITS
6.1 Each Unit shall have a term of five years from the date of award,
subject to earlier termination (i) upon exercise by a Participant, (ii) as
provided in Article XI or (iii) upon achievement before five years of the
Unit's Maximum Cumulative Unit Value. Notwithstanding the foregoing, the
term of Units awarded as of the Effective Date shall terminate on the last
day of the Fiscal Year ending in 2001, subject to earlier termination as
aforesaid. Units shall be deemed to be awarded as of the Effective Date or
the first day of any subsequent Fiscal Year through 2006, as the case may be.
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6.2 Units shall become vested as follows, except that Units awarded as
of the Effective Date shall become vested as if their date of award was the
first day of Fiscal Year 1997:
Vested Fiscal Years
Percentage of from
Units Awarded Date of Award
40% 2
60% 3
80% 4
100% 5
6.3 Notwithstanding Section 6.2, each Unit shall immediately become
fully vested in the event of (i) attainment of its Maximum Cumulative Unit
Value, (ii) a Participant's Termination Without Cause (before or after a
Change in Control) or (iii) termination of a Participant's employment with
the Company by reason of retirement on or after attainment of age 65, death
or Disability.
ARTICLE VII
DETERMINATION OF VALUE OF A UNIT
7.1 For any Fiscal Year, the Incremental Unit Value of a Unit shall be
equal to the product of (i) the Measuring Price, multiplied by (ii) .85 of
the percentage by which Earnings Per Share for the Fiscal Year exceeds Base
Year EPS. In the event Base Year EPS exceeds Earnings Per Share for any
Fiscal Year, the Incremental Unit Value for the Fiscal Year shall be zero.
The Committee shall notify each Participant of the Incremental Unit Value of
his or her Units for each Fiscal Year as soon as practicable after the
Valuation Date for the Fiscal Year.
7.2 The Incremental Unit Value of each Unit for any Fiscal Year shall
be cumulated with the Incremental Unit Value of the Unit for all prior Fiscal
Years from the date of the Unit's award. The cumulative amount thus
determined shall be the then Cumulative Unit Value of such Unit.
ARTICLE VIII
PAYMENT OF UNITS
8.1 A Unit may be exercised, to the extent that it is vested, at any
time prior to becoming fully vested; provided, however, that upon exercise
any partially vested Unit shall be canceled and its nonvested portion
forfeited. Except as provided in Article XI, a Unit that is fully vested, in
accordance with Article VI, shall thereupon be exercised.
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8.2 In order to exercise a partially or fully vested outstanding Unit,
a Participant (i) shall give written notice of exercise, as provided in
Section 8.3, specifying the number of Units being exercised, and (ii) shall
deliver his or her Award Certificate to the Secretary of the Company, who
shall endorse thereon a notation of such exercise and return the same to the
Participant. The date of exercise of a Unit shall be the date on which the
Company receives the required documentation. Upon exercise of a Unit, the
Participant shall be entitled to receive the Cumulative Unit Value of the
Vested Units being exercised, determined as of the concurrent or immediately
preceding Valuation date, but not in excess of the Maximum Cumulative Unit
Value.
8.3 Notice of exercise of a partially or fully vested Unit shall be in
writing addressed to the Secretary of the Company. Payment of the amount due
under the Plan shall be made not later than five days following the date of
exercise or the date of such other event as shall entitle the Participant to
payment; provided, however, that, before any payment may be made, the
Committee must certify in writing that all performance criteria under the
Plan have been met. Not less than 50 percent of any amount due shall be paid
in cash, and the balance shall be paid in cash or Common Shares or both, as
determined by the Committee in its discretion; provided, however, that upon a
Participant's Termination Without Cause following a Change in Control,
payment shall be made solely in cash.
ARTICLE IX
LIMITS ON TRANSFERABILITY OF UNITS
9.1 Each Participant shall file with the Committee a written
designation of one or more persons as the Beneficiary who shall be entitled
to receive any amount or any Common Shares payable under the Plan upon his or
her death. A Participant may, from time to time, revoke or change his or her
Beneficiary designation without the consent of any previously designated
Beneficiary by filing a new designation with the Committee. The last such
designation received by the Committee shall be controlling; provided,
however, that no designation, or change or revocation thereof, shall be
effective unless received by the Committee prior to the Participant's death,
and in no event shall it be effective as of a date prior to such receipt. If
at the date of a Participant's death, there is no designation of a
Beneficiary in effect for the Participant, or if no Beneficiary survives to
receive any amount payable under the Plan by reason of the Participant's
death, the Participant's estate shall be treated as the Beneficiary for
purposes of the Plan.
9.2 A Unit may be exercised only by the Participant to whom it was
awarded, except in the event of the Participant's death, when a Unit may be
exercised by his or her Beneficiary. Except as provided in Section 9.1, a
Participant may not transfer, assign, alienate or hypothecate any benefits
under the Plan.
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ARTICLE X
AWARD CERTIFICATE
Promptly following the making of an award, the Company shall deliver to
the recipient an Award Certificate, specifying the terms and conditions of
the Unit. This writing shall be in such form and contain such provisions not
inconsistent with the Plan as the Committee shall prescribe.
ARTICLE XI
TERMINATION OF UNITS
11.1 An outstanding Unit awarded to a Participant shall be canceled and
all rights with respect thereto shall expire upon the earlier to occur of (i)
its exercise as provided in Section 8.1 or (ii) termination of the
Participant's employment with the Company; provided, however, that if such
termination occurs by reason of retirement on or after attainment of age 65,
death, Disability or Termination Without Cause, or for any other reason
specifically approved in advance by the Committee, the term of such Unit
shall continue for a period of 14 months from the date of termination (the
"Extended Term"). For purposes of this Section 11.1, the Cumulative Unit
Value of such Unit shall be determined as of the Valuation Date concurrent
with or immediately preceding the end of the Extended Term or any earlier
exercise date, whichever is applicable. A Unit whose term is continued for
an Extended Term shall be deemed to be automatically exercised as of the last
Valuation Date within the Extended Term, unless sooner exercised by the
Participant or his or her legal representative.
11.2 Nothing contained in Section 11.1 shall be deemed to extend the
term of any Unit beyond the end of the Term of the Plan.
ARTICLE XII
TERMINATION AND AMENDMENT OF THE PLAN
The Company reserves the right to amend or terminate the Plan at any
time, by action of the Committee, but no such amendment or termination shall
adversely affect the rights of any Participant with respect to outstanding
Units held by the Participant without his or her written consent. No
amendment will be effective prior to approval by the Company's stockholders
to the extent such approval is required by Section 162(m) of the Code or
otherwise required by law.
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ARTICLE XIII
GENERAL PROVISIONS
13.1 Nothing in the Plan, nor the award of any Unit, shall confer a
right to continue in the employment of the Company or affect any right of the
Company to terminate a Participant's employment.
13.2 The Plan shall be governed by and construed in accordance with the
laws of the State of Connecticut without reference to principles of conflict
of laws.
13.3 The Company shall be authorized to withhold from any award or
payment it makes under the Plan to a Participant the amount of withholding
taxes due with respect to such award or payment and to take such other action
as may be necessary in the opinion of the Company to satisfy all obligations
for the payment of such taxes.
13.4 Nothing in the Plan shall prevent the Board from adopting other or
additional compensation arrangements, subject to stockholder approval as may
be necessary, and such arrangements may be either generally applicable or
applicable only in specific cases.
13.5 Participants shall not be required to make any payment or provide
any consideration for awards under the Plan other than the rendering of
services.
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