EXHIBIT 10.26
ARM FINANCIAL GROUP, INC.
1997 EQUITY INCENTIVE PLAN
TABLE OF CONTENTS
PAGE
1. PURPOSE................................................................. 1
2. DEFINITIONS............................................................. 1
3. ADMINISTRATION OF THE PLAN.............................................. 5
4. DURATION OF PLAN......................................................... 6
5. SHARES OF STOCK SUBJECT TO THE PLAN..................................... 7
6. MAXIMUM NUMBER OF SHARES PER ELIGIBLE INDIVIDUAL........................ 7
7. ELIGIBLE INDIVIDUALS.................................................... 7
8. STOCK OPTIONS........................................................... 7
9. RESTRICTED STOCK AWARDS................................................. 9
10. PERFORMANCE SHARE AWARDS............................................... 11
11. PERFORMANCE UNITS....................................................... 12
12. STOCK APPRECIATION RIGHTS............................................... 13
13. OTHER EQUITY-BASED OR EQUITY-RELATED AWARDS ............................ 13
14. NON-TRANSFERABILITY..................................................... 16
15. RECAPITALIZATION OR REORGANIZATION...................................... 16
16. CHANGE IN CONTROL....................................................... 17
17. AMENDMENT OF THE PLAN................................................... 17
18. MISCELLANEOUS........................................................... 18
ARM FINANCIAL GROUP, INC.
1997 EQUITY INCENTIVE PLAN
1. PURPOSE. The purposes of the ARM Financial Group, Inc. 1997
Equity Incentive Plan (the "PLAN") are to attract, retain and motivate officers
and other key employees and consultants of ARM Financial Group, Inc., a Delaware
corporation (the "COMPANY"), and its Subsidiaries (as hereinafter defined), to
compensate them for their contributions to the growth and profits of the Company
and to encourage ownership by them of stock of the Company.
2. DEFINITIONS. For purposes of the Plan, the following terms shall
be defined as follows:
"ADMINISTRATOR" means the individual or individuals to whom the
Committee delegates authority under the Plan in accordance with Section
3(d).
"AFFILIATE" and "ASSOCIATE" have the respective meanings ascribed to
such terms in Rule 12b-2 promulgated under the Exchange Act.
"AWARD" means an award made pursuant to the terms of the Plan to an
Eligible Individual (as hereinafter defined) in the form of Stock Options,
Restricted Stock Awards, Performance Share Awards, Performance Units or
Stock Appreciation Rights.
"AWARD AGREEMENT" means a written agreement or Certificate granting an
Award. An Award Agreement shall be executed by an officer on behalf of the
Company, and containing such terms and conditions as the Committee deems
appropriate and that are not inconsistent with the terms of the Plan. The
Committee may in its discretion require that an Award Agreement be executed
by the Participant to whom the relevant Award is made.
"BENEFICIAL OWNER" has the meaning ascribed to such term in Rule 13d-3
promulgated under the Exchange Act.
"BOARD" means the Board of Directors of the Company.
A "CHANGE IN CONTROL" of the Company shall be deemed to have occurred
when:
(a) any Person (other than (x) the Company, any Subsidiary of the
Company, any employee benefit plan of the Company or of any
Subsidiary of the Company, or any person or entity organized,
appointed or established by the Company or any Subsidiary of the
Company for or pursuant to the terms of any such plan or
(y) Morgan Stanley, MSLEFII or the MSCP Funds or any of their
respective
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Affiliates or any other entity controlled by one or more of
them), alone or together with its Affiliates and Associates
(collectively, an "ACQUIRING PERSON"), shall become the
Beneficial Owner of twenty (20%) or more of the then outstanding
shares of Common Stock or the Combined Voting Power of the
Company;
(b) during any period of two consecutive years, individuals who at
the beginning of such period constitute the Board, and any new
director (other than a director who is a representative or
nominee of an Acquiring Person) whose election by the Board or
nomination for election by the Company's shareholders was
approved by a vote of at least a majority of the directors then
still in office who either were directors at the beginning of the
period or whose election or nomination for election was
previously so approved (collectively, the "CONTINUING
DIRECTORS"), cease for any reason to constitute a majority of the
Board;
(c) the shareholders of the Company approve a merger or consolidation
of the Company with any other corporation, other than a merger or
consolidation which would result in the voting securities of the
Company outstanding immediately prior thereto continuing to
represent (either by remaining outstanding or by being converted
into voting securities of the Surviving Entity (as defined in
Section 16 hereof) or any Parent of such Surviving Entity) at
least 51% of the Combined Voting Power of the Company, such
Surviving Entity or the Parent of such Surviving Entity
outstanding immediately after such merger or consolidation; or
(d) the shareholders of the Company approve a plan of reorganization
(other than a reorganization under the United States Bankruptcy
Code) or complete liquidation of the Company or an agreement for
the sale or disposition by the Company of all or substantially
all of the Company's assets;
PROVIDED, HOWEVER, that a Change in Control shall not be deemed to
have occurred in the event of (i) a sale or conveyance in which the
Company continues as a holding company of an entity or entities that
conduct all or substantially all of the business or businesses
formerly conducted by the Company or (ii) any transaction undertaken
for the purpose of reincorporating the Company under the laws of
another jurisdiction, if such sale, conveyance or transaction does not
materially affect the beneficial ownership of the Company's capital
stock.
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"CODE" means the Internal Revenue Code of 1986, as amended, and the
applicable rulings and regulations thereunder.
"COMBINED VOTING POWER" means the combined voting power of the
Company's or other relevant entity's then outstanding voting securities.
"COMMITTEE" means the Compensation Committee of the Board, any
successor committee thereto or any other committee appointed by the Board
to administer the Plan; PROVIDED that, in the absence of any such
committee, "COMMITTEE" means the Board. The Committee shall consist of at
least two individuals and shall serve at the pleasure of the Board.
"COMMON STOCK" means the Class A Common Stock, par value $.01 per
share, of the Company.
"ELIGIBLE INDIVIDUALS" means the individuals described in Section 7
who are eligible for Awards under the Plan.
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended,
and the applicable rulings and regulations thereunder.
"FAIR MARKET VALUE" means, in the event the Common Stock is traded on
a recognized securities exchange or quoted by the National Association of
Securities Dealers Automated Quotations on National Market Issues, an
amount equal to the average of the high and low prices of the Common Stock
on such exchange or such quotation on the date set for valuation or, if no
sales of Common Stock were made on said exchange or so quoted on that date,
the average of the high and low prices of the Common Stock on the next
preceding day on which sales were made on such exchange or quotations; or,
if the Common Stock is not so traded or quoted, that value determined, in
its sole discretion, by the Committee.
"INCENTIVE STOCK OPTION" means a Stock Option which is an "incentive
stock option" within the meaning of Section 422 of the Code and designated
by the Committee as an Incentive Stock Option in an Award Agreement.
"MORGAN STANLEY" means Morgan Stanley Group Inc.
"MSCP FUNDS" means collectively, Morgan Stanley Capital Partners III,
L.P., Morgan Stanley Capital Investors, L.P. and MSCP III 892 Investors,
L.P.
"MSLEF II" means the Morgan Stanley Leveraged Equity Fund II, L.P.
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"NONQUALIFIED STOCK OPTION" means a Stock Option which is not an
Incentive Stock Option.
"PARENT" means any corporation which is a "parent corporation" within
the meaning of Section 424(e) of the Code with respect to the relevant
entity.
"PARTICIPANT" means an Eligible Individual to whom an Award has been
granted under the Plan.
"PERFORMANCE SHARE AWARD" means a conditional Award of shares of
Common Stock granted to an Eligible Individual pursuant to Section 10
hereof.
"PERFORMANCE UNIT" means a conditional Award to receive all or some
portion of the appreciation on shares of Common Stock granted to an
Eligible Individual pursuant to Section 11 hereof.
"PERSON" means any person, entity or "group" within the meaning of
Section 13(d)(3) or Section 14(d)(2) of the Exchange Act.
"RESTRICTED STOCK AWARD" means an Award of shares of Common Stock
granted to an Eligible Individual pursuant to Section 9 hereof.
"SECTION 162(M) PARTICIPANT" means, for a given fiscal year of the
Company, any Participant designated by the Committee by not later than 90
days following the start of such year as a Participant (or such other time
as may be required or permitted by Section 162(m) of the Code) whose
compensation for such fiscal year may be subject to the limit on deductible
compensation imposed by Section 162(m) of the Code.
"STOCK APPRECIATION RIGHT" means an Award to receive all or some
portion of the appreciation on shares of Common Stock granted to an
Eligible Individual pursuant to Section 12 hereof.
"STOCK OPTION" means an Award to purchase shares of Common Stock
granted to an Eligible Individual pursuant to Section 8 hereof.
"SUBSIDIARY" means (i) any corporation which is a "subsidiary
corporation" within the meaning of Section 424(f) of the Code with respect
to the Company or (ii) any other corporation or other entity in which the
Company, directly or indirectly, has an equity or similar interest and
which the Committee designates as a Subsidiary for the purposes of the
Plan.
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"SUBSTITUTE AWARD" means an Award granted upon assumption of, or in
substitution for, outstanding awards previously granted by a company or
other entity in connection with a corporate transaction, such as a merger,
combination, consolidation or acquisition of property or stock.
"TEN PERCENT SHAREHOLDER" means an Eligible Individual who, at the
time an Incentive Stock Option is to be granted to him or her, owns (within
the meaning of Section 422(b)(6) of the Code) stock possessing more than
ten percent (10%) of the total combined voting power of all classes of
stock of the Company, or of a Parent or a Subsidiary.
3. ADMINISTRATION OF THE PLAN.
(a) The Plan shall be administered by the Committee, and the
Committee shall make the determinations set forth in this subsection 3(a). The
Committee shall have full power and authority, subject to the express provisions
hereof, (i) to select Participants from the Eligible Individuals, (ii) to make
Awards in accordance with the Plan, (iii) to determine the number of Shares
subject to each Award or the cash amount payable in connection with an Award,
(iv) to determine the terms and conditions of each Award, including, without
limitation, those related to vesting, forfeiture, payment and exercisability,
and the effect, if any, of a Participant's termination of employment with the
Company or, subject to Section 16 hereof, of a Change in Control on the
outstanding Awards granted to such Participant and including the authority to
amend the terms and conditions of an Award after the granting thereof to a
Participant in a manner that is not prejudicial to the rights of such
Participant in such Award, (v) to specify and approve the provisions of the
Award Agreements delivered to Participants in connection with their Awards, (vi)
to construe and interpret any Award Agreement delivered under the Plan, (vii) to
prescribe, amend and rescind rules and procedures relating to the Plan, (viii)
to vary the terms of Awards to take account of tax, securities law and other
regulatory requirements of foreign jurisdictions, (ix) subject to the provisions
of the Plan and subject to such additional limitations and restrictions as the
Committee may impose, to delegate to one or more officers of the Company some or
all of its authority under the Plan, and (x) to make all other determinations
and to formulate such procedures as may be necessary or advisable for the
administration of the Plan.
(b) The Committee shall have full power and authority, subject to the
express provisions hereof, to construe and interpret the Plan.
(c) All determinations by the Committee in carrying out and
administering the Plan and in construing and interpreting the Plan shall be
final, binding and conclusive for all purposes and upon all persons interested
herein.
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(d) The Committee may, but need not, from time to time delegate some
or all of its authority under the Plan to an Administrator consisting of one or
more members of the Committee or of one or more officers of the Company;
PROVIDED, HOWEVER, that the Committee may not delegate its authority (i) to make
Awards to Eligible Individuals (A) who are subject on the Date of the Award to
the reporting rules under Section 16(a) of the Exchange Act, (B) who are Section
162(m) Participants or (C) who are officers of the Company who are delegated
authority by the Committee hereunder, or (ii) under Sections 3(b) and 17 of the
Plan. Any delegation hereunder shall be subject to the restrictions and limits
that the Committee specifies at the time of such delegation or thereafter.
Nothing in the Plan shall be construed as obligating the Committee to delegate
authority to an Administrator, and the Committee may at any time rescind the
authority delegated to an Administrator appointed hereunder or appoint a new
Administrator. At all times, the Administrator appointed under this Section
3(d) shall serve in such capacity at the pleasure of the Committee. Any action
undertaken by the Administrator in accordance with the Committee's delegation of
authority shall have the same force and effect as if undertaken directly by the
Committee, and any reference in the Plan to the Committee shall, to the extent
consistent with the terms and limitations of such delegation, be deemed to
include a reference to the Administrator.
(e) No member of the Committee shall be liable for anything
whatsoever in connection with the administration of the Plan except such
person's own willful misconduct. Under no circumstances shall any member of the
Committee be liable for any act or omission of any other member of the
Committee. In the performance of its functions with respect to the Plan, the
Committee shall be entitled to rely upon information and advice furnished by the
Company's officers, the Company's accountants, the Company's counsel and any
other party the Committee deems necessary, and no member of the Committee shall
be liable for any action taken or not taken in reliance upon any such advice.
4. DURATION OF PLAN. The Plan shall remain in effect until
terminated by the Board of Directors and thereafter until all Awards granted
under the Plan are satisfied by the issuance of shares of Common Stock or the
payment of cash or are terminated under the terms of the Plan or under the Award
Agreement entered into in connection with the grant thereof. Notwithstanding
the foregoing, no Awards may be granted under the Plan after the tenth
anniversary of the Effective Date (as defined in Section 18(l)).
5. SHARES OF STOCK SUBJECT TO THE PLAN. Subject to adjustment as
provided in Section 15(b) hereof, the number of shares of Common Stock that may
be issued under the Plan pursuant to Awards shall not exceed, in the aggregate,
1,600,000 shares (the "Section 5 Limit"). Such shares may be either authorized
but unissued shares, treasury shares or any combination thereof. For purposes
of determining the number of shares that remain available for issuance under the
Plan, the following rules shall apply:
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(a) the number of Shares subject to outstanding Awards shall be
charged against the Section 5 Limit; and
(b) the Section 5 Limit shall be increased by:
(i) the number of shares subject to an Award (or portion
thereof) which lapses, expires or is otherwise terminated without the
issuance of such shares or is settled by the delivery of consideration
other than shares,
(ii) the number of shares tendered to pay the exercise price of a
Stock Option or other Award, and
(iii) the number of shares withheld from any Award to satisfy
a Participant's tax withholding obligations or, if applicable, to pay
the exercise price of a Stock Option or other Award.
In addition, any shares underlying Substitute Awards shall not be counted
against the Section 5 Limit set forth in the first sentence of this Section 5.
6. MAXIMUM NUMBER OF SHARES PER ELIGIBLE INDIVIDUAL. In accordance
with the requirements under Section 162(m) of the Code, no Eligible Individual
shall receive grants of Awards with respect to an aggregate of more than 240,000
shares of Common Stock in respect of any fiscal year of the Company. For
purposes of the preceding sentence, any Award that is made as bonus
compensation, or is made in lieu of compensation that otherwise would be payable
to an Eligible Individual, shall be considered made in respect of the fiscal
year to which such bonus or other compensation relates or otherwise was earned.
7. ELIGIBLE INDIVIDUALS. Awards may be granted by the Committee to
individuals ("ELIGIBLE INDIVIDUALS") who are officers or other key employees or
consultants of the Company or a Subsidiary with the potential to contribute to
the future success of the Company or its Subsidiaries. An individual's status
as an Administrator will not affect his or her eligibility to participate in the
Plan. Awards shall not be affected by any change of duties or positions so long
as the holder continues to be an employee or consultant of the Company or of a
Subsidiary.
8. STOCK OPTIONS. Stock Options granted under the Plan may be in
the form of Incentive Stock Options or Nonqualified Stock Options; PROVIDED that
only employees may be granted Incentive Stock Options. Stock Options granted
under the Plan shall be subject to the following terms and conditions and shall
contain such additional terms and conditions, not inconsistent with the terms of
the Plan, as the Committee shall deem appropriate:
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(a) AWARD AGREEMENT. Stock Options shall be evidenced by an Award
Agreement in such form and containing such terms and conditions as the
Committee deems appropriate and which are not inconsistent with the terms
of the Plan.
(b) TERMS OF STOCK OPTIONS GENERALLY. Subject to the terms of the
Plan and the applicable Award Agreement, each Stock Option shall entitle
the Participant to whom such Stock Option was granted to purchase, upon
payment of the relevant exercise price, the number of shares of Common
Stock specified in the Award Agreement.
(c) EXERCISE PRICE. The exercise price per share of Common Stock
purchasable under a Stock Option shall be determined by the Committee at
the time of grant and set forth in the Award Agreement; PROVIDED, HOWEVER,
that with respect to Incentive Stock Options, the exercise price shall not
be less than one hundred percent (100%) of the Fair Market Value of a share
of Common Stock on the date of grant (110% in the case of an Incentive
Stock Option granted to a Ten Percent Shareholder). Notwithstanding the
foregoing, the exercise price per share of a Stock Option that is a
Substitute Award shall be as determined by the Committee in its discretion
to preserve, on a per share basis immediately after the transaction giving
rise to the issuance of such Substitute Award, the same ratio of fair
market value per Stock Option share to exercise price per share which
existed immediately prior to such transaction under the option issued by
the other corporation that is party to such transaction.
(d) OPTION TERM. The term of each Stock Option shall be fixed by the
Committee and set forth in the Award Agreement; PROVIDED, HOWEVER, that a
Stock Option shall not be exercisable after the expiration of ten (10)
years after the date the Stock Option is granted (five (5) years in the
case of an Incentive Stock Option granted to a Ten Percent Shareholder).
(e) EXERCISABILITY. A Stock Option shall be exercisable at such time
or times and subject to such terms and conditions as shall be determined by
the Committee.
The Committee may provide that Stock Options shall be exercisable
in whole or in part based upon length of service or attainment of specified
performance criteria. Subject to the first sentence of this paragraph, the
Committee, in its sole discretion, may provide for the acceleration of
vesting of a Stock Option, in whole or in part, based on such factors or
criteria (including specified performance criteria) as the Committee may
determine.
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(f) METHOD OF EXERCISE. Subject to the provisions of the applicable
Award Agreement, a Stock Option may be exercised, in whole or in part, by
giving written notice of exercise to the Secretary of the Company
specifying the number of shares to be purchased, and containing any
representations required by the Committee. Such notice shall be
accompanied by payment in full of the exercise price either by cash,
certified or bank check, or other instrument acceptable to the Committee.
As determined by the Committee in its sole discretion, payment of the
exercise price may also be made in full or in part by tendering to the
Company shares of Common Stock that are already owned by the Participant
for a period of at least six months (having a Fair Market Value as of the
date of exercise of such Stock Option equal to the exercise price (or such
portion thereof)). In its discretion, in accordance with rules and
procedures established by the Committee for this purpose, the Committee may
also permit a Participant to exercise an Option through a "cashless
exercise" procedure approved by the Committee involving a broker or dealer
approved by the Committee, that affords Participants the opportunity to
sell immediately some or all of the shares underlying the exercised portion
of the Stock Option in order to generate sufficient cash to pay the Stock
Option exercise price and/or to satisfy withholding tax obligations related
to the Stock Option.
(g) RIGHTS AS SHAREHOLDER. A Participant shall have no rights as a
shareholder with respect to any shares of Common Stock issuable upon
exercise of a Stock Option until a certificate or certificates evidencing
the shares of Common Stock shall have been issued to the Participant and,
subject to Section 15(b), no adjustment shall be made for dividends or
distributions or other rights in respect of any share for which the record
date is prior to the date on which the Participant shall become the holder
of record thereof.
(h) SPECIAL RULE FOR INCENTIVE STOCK OPTIONS. With respect to
Incentive Stock Options granted under the Plan, if the aggregate Fair
Market Value (determined as of the date the Incentive Stock Option is
granted) of the number of shares with respect to which Incentive Stock
Options are exercisable for the first time by a Participant during any
calendar year under all plans of the Company or a Parent or Subsidiary
exceeds One Hundred Thousand Dollars ($100,000) or such other limit as may
be required by the Code, such Incentive Stock Options shall be treated, to
the extent of such excess, as Nonqualified Stock Options.
9. RESTRICTED STOCK AWARDS. Restricted Stock Awards granted under
the Plan shall be subject to the following terms and conditions and shall
contain such additional terms and conditions, not inconsistent with the Plan, as
the Committee shall deem appropriate:
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(a) AWARD AGREEMENT. Restricted Stock Awards shall be evidenced by
an Award Agreement in such form and containing such restrictions, terms and
conditions as the Committee deems appropriate and which are not
inconsistent with the terms of the Plan, including, without limitation,
restrictions on the sale, assignment, transfer or other disposition of such
shares and provisions requiring that a Participant forfeit such shares upon
a termination of employment for specified reasons within a specified period
of time.
(b) TERMS OF RESTRICTED STOCK AWARDS GENERALLY. Restricted Stock
Awards may be granted under the Plan in such form as the Committee may from
time to time approve. Restricted Stock Awards may be granted for no
consideration or such consideration as the Committee deems appropriate.
Restricted Stock Awards may be granted alone or in addition to other Awards
under the Plan. Subject to the terms of the Plan, the Committee shall
determine the number of shares of Common Stock subject to each Restricted
Stock Award granted to a Participant, and the Committee may impose
different terms and conditions on any particular Restricted Stock Award
granted to any Participant. The Committee, in its sole discretion, may
provide for the lapse of restrictions in installments and may waive or
accelerate such restrictions in whole or in part, based on such factors or
criteria, including specified performance criteria, as the Committee may
determine. Upon expiration of any applicable restriction period or lapse
of any restrictions, the Participant shall be vested in the Restricted
Stock Award, or applicable portion thereof.
(c) EVIDENCE OF OWNERSHIP. Each Participant receiving a Restricted
Stock Award shall be issued a certificate or certificates in respect of
such shares of Common Stock at the time of grant. Such certificate shall
be registered in the name of such Participant, and shall bear an
appropriate legend referring to the terms, conditions and restrictions
applicable to such Award. The Committee may require that the certificate
or certificates evidencing such shares be held in custody by the Company
until the restrictions thereon shall have lapsed, and that, as a condition
of any Restricted Stock Award, the Participant shall have delivered a stock
power, endorsed in blank, relating to the Common Stock covered by such
Award.
(d) RIGHTS AS SHAREHOLDER. Except as otherwise provided by the
Committee in its sole discretion, a Participant shall have, with respect to
the shares of Common Stock received under a Restricted Stock Award, all of
the rights of a shareholder of the Company, including the right to vote the
shares and the right to receive any cash dividends. Stock dividends issued
with respect to shares covered by a Restricted Stock Award shall be treated
as additional shares under the Restricted Stock Award and shall be subject
to the same restrictions and other terms and conditions that apply to the
shares with respect to which such dividends are issued.
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10. PERFORMANCE SHARE AWARDS. Performance Share Awards granted under
the Plan shall be subject to the following terms and conditions and shall
contain such additional terms and conditions, not inconsistent with the Plan, as
the Committee shall deem appropriate:
(a) AWARD AGREEMENT. Performance Share Awards shall be evidenced by
an Award Agreement in such form and containing such terms and conditions as
the Committee deems appropriate and which are not inconsistent with the
terms of the Plan. Each Award Agreement shall set forth the number of
shares of Common Stock to be received by a Participant upon satisfaction of
certain specified performance criteria and subject to such other terms and
conditions as the Committee deems appropriate.
(b) TERMS OF PERFORMANCE SHARE AWARDS GENERALLY. Performance Share
Awards may be granted under the Plan in such form as the Committee may from
time to time approve. Performance Share Awards may be granted for no
consideration or such consideration as the Committee deems appropriate.
Performance Share Awards may be granted alone or in addition to other
Awards under the Plan. Subject to the terms of the Plan, the Committee
shall determine the number of shares of Common Stock subject to each
Performance Share Award granted to a Participant.
(c) PERFORMANCE GOALS. Performance Share Awards shall provide that,
in order for a Participant to be entitled to receive shares of Common Stock
under such Award, the Company, a Subsidiary and/or the Participant must
achieve certain specified performance goals ("PERFORMANCE GOALS") over a
designated performance period ("PERFORMANCE PERIOD"). The Performance
Goals and Performance Period shall be established by the Committee in its
sole discretion. The Committee shall establish the Performance Goals for
each Performance Period before, or as soon as practicable after, the
commencement of the Performance Period. In setting Performance Goals, the
Committee may use such measures as net earnings, operating earnings or
income, absolute and/or relative return on equity or assets, earnings per
share, cash flow, pretax profits, earnings growth, revenue growth, book
value per share, stock price, comparison to peer companies, any combination
of the foregoing, or such other measure or measures of performance,
including individual measures of performance, in such manner as it deems
appropriate. Prior to the end of a Performance Period, the Committee may,
in its discretion and only under conditions which do not affect the
deductibility of compensation attributable to such Performance Shares,
adjust the performance objectives to reflect a Change in Capitalization (as
hereinafter defined) or any other event which may materially affect the
performance of the Company, a Subsidiary or a division, including, but not
limited to, market conditions or a significant acquisition or disposition
of assets or other property by the Company, a Subsidiary or a division.
The extent to which a Participant is entitled to
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payment of a Performance Share Award at the end of the Performance Period
shall be determined by the Committee, in its sole discretion, based on the
Committee's determination of whether the Performance Goals established by
the Committee in the granting of such Performance Share Award have been
met.
(d) PAYMENT OF AWARDS. Payment in settlement of a Performance Share
Award shall be made as soon as practicable following the conclusion of the
respective Performance Period, or at such other time as the Committee shall
determine, in shares of Common Stock.
(e) RIGHTS AS SHAREHOLDER. Except as otherwise provided by the
Committee in the applicable Award Agreement, a Participant shall have no
rights as a shareholder with respect to a Performance Share Award until a
certificate or certificates evidencing the shares of Common Stock shall
have been issued to the Participant following the conclusion of the
Performance Period, and, subject to Section 15(b), no adjustment shall be
made for dividends or distributions or other rights in respect of any share
for which the record date is prior to the date on which the Participant
shall become the holder of record thereof.
11. PERFORMANCE UNITS. Awards of Performance Units shall be subject
to the following terms and conditions and shall contain such additional terms
and conditions, not inconsistent with the terms of the Plan, as the Committee
shall deem appropriate:
(a) AWARD AGREEMENT. Awards of Performance Units shall be evidenced
by an Award Agreement in such form and containing such terms and conditions
as the Committee deems appropriate and which are not inconsistent with the
terms of the Plan.
(b) TERMS OF PERFORMANCE UNITS GENERALLY. Each Performance Unit
shall entitle the Participant to whom such Performance Unit was granted to
receive, upon satisfaction of certain specified performance criteria and
subject to such other terms and conditions as the Committee deems
appropriate, the amount specified in Section 11(d). Performance Units may
be granted alone or in addition to other Awards under the Plan.
(c) PERFORMANCE GOALS. Awards of Performance Units shall provide
that, in order for a Participant to be entitled to payment under such
Award, the Company, a Subsidiary and/or the Participant must achieve
certain specified Performance Goals over a designated Performance Period.
The Performance Goals and Performance Period shall be established by the
Committee in its sole discretion. The Committee shall establish the
Performance Goals for each Performance Period before, or as soon as
practicable after, the commencement of the Performance Period. In setting
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Performance Goals, the Committee may use such measures as net earnings,
operating earnings or income, absolute and/or relative return on equity or
assets, earnings per share, cash flow, pretax profits, earnings growth,
revenue growth, book value per share, stock price, comparison to peer
companies, any combination of the foregoing, or such other measure or
measures of performance, including individual measures of performance, in
such manner as it deems appropriate. Prior to the end of a Performance
Period, the Committee may, in its discretion and only under conditions
which do not affect the deductibility of compensation attributable to such
Performance Units, adjust the performance objectives to reflect a Change in
Capitalization (as hereinafter defined) or any other event which may
materially affect the performance of the Company, a Subsidiary or a
division, including, but not limited to, market conditions or a significant
acquisition or disposition of assets or other property by the Company, a
Subsidiary or a division. The extent to which a Participant is entitled to
payment of a Performance Unit Award at the end of the Performance Period
shall be determined by the Committee, in its sole discretion, based on the
Committee's determination of whether the Performance Goals established by
the Committee in the granting of such Performance Unit Award have been met.
(d) PAYMENT OF AWARDS. Payment in settlement of a Performance Unit
Award shall be made as soon as practicable following the conclusion of the
respective Performance Period, or at such other time as the Committee shall
determine, in cash. The amount of any such payment shall be determined by
multiplying (i) the difference between the Fair Market Value of one share
of Common Stock on the relevant date and the price per share specified for
the Performance Unit by (ii) the number of Performance Units.
Notwithstanding the foregoing, the Committee may limit in any manner the
amount payable with respect to any Performance Unit by including such a
limit in the Award Agreement at the time the Performance Unit is granted.
(e) RIGHTS AS SHAREHOLDER. A Participant shall have no rights as a
shareholder with respect to an Award of Performance Units.
12. STOCK APPRECIATION RIGHTS. Stock Appreciation Rights granted
under the Plan shall be subject to the following terms and conditions and shall
contain such additional terms and conditions, not inconsistent with the terms of
the Plan, as the Committee shall deem appropriate.
(a) AWARD AGREEMENT. Stock Appreciation Rights shall be evidenced by
an Award Agreement in such form and containing such terms and conditions as
the Committee deems appropriate and which are not inconsistent with the
terms of the Plan.
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(b) TERMS OF STOCK APPRECIATION RIGHTS GENERALLY. Subject to the
terms of the Plan and the applicable Award Agreement, each Stock
Appreciation Right shall entitle the Participant to whom such Stock
Appreciation Right was granted to receive, upon exercise thereof, the
amount specified in Section 12(e). A Stock Appreciation Right may be
granted alone or in addition to other Awards, or in tandem with a Stock
Option. If granted in tandem with a Stock Option, a Stock Appreciation
Right shall cover the same number of shares of Common Stock as covered by
the Stock Option (or such lesser number of shares as the Committee may
determine).
(c) EXERCISE PRICE. The exercise price per share of Common Stock
subject to a Stock Appreciation Right shall be determined by the Committee
at the time of grant and set forth in the Award Agreement.
(d) EXERCISE. A Stock Appreciation Right may be exercised by a
Participant in accordance with procedures established by the Committee. A
Stock Appreciation Right granted in tandem with a Stock Option shall be
exercisable only at such time or times and to the extent the related Stock
Option shall be exercisable, and shall have the same term and exercise
price as the related Stock Option. A Stock Appreciation Right unrelated to
a Stock Option shall contain such terms and conditions as to
exercisability, vesting and duration as the Committee shall determine, but
in no event shall any such Stock Appreciation Right have a term of greater
than ten (10) years. The Committee, in its sole discretion, may provide
for the acceleration of vesting of a Stock Appreciation Right, in whole or
in part, based on such factors or criteria (including specified performance
criteria) as the Committee may determine. Upon exercise of a Stock
Appreciation Right granted in tandem with a Stock Option, the related Stock
Option shall be cancelled automatically to the extent of the number of
shares covered by such exercise, and such shares shall no longer be
available for grant under the Plan. If the related Stock Option is
exercised as to some or all of the shares covered by the tandem grant, the
related Stock Appreciation Right shall be cancelled automatically to the
extent of the number of shares covered by the Stock Option exercise. (A
Stock Appreciation Right granted in tandem with an Incentive Stock Option
may be exercised only when the Fair Market Value of the Common Stock
subject to the Incentive Stock Option exceeds the exercise price of such
Stock Option.)
(e) AMOUNT OF PAYMENT. In the event a Participant exercises a Stock
Appreciation Right, such Participant shall be entitled to receive an amount
determined by multiplying (i) the difference between the Fair Market Value
of one share of Common Stock on the date of exercise and the exercise price
per share specified for the Stock Appreciation Right by (ii) the number of
shares in respect of which the Stock Appreciation Right shall have been
exercised. Notwithstanding the foregoing, the Committee may limit in any
manner the amount payable with respect to any Stock
15
Appreciation Right by including such a limit in the Award Agreement at the
time the Stock Appreciation Right is granted.
(f) FORM OF PAYMENT. Payment upon exercise of a Stock Appreciation
Right shall be made in cash, in shares of Common Stock, or some combination
thereof, as the Committee shall determine in its sole discretion.
(g) RIGHTS AS SHAREHOLDER. A Participant shall have no rights as a
shareholder with respect to any Stock Appreciation Right unless and until a
certificate or certificates evidencing shares of Common Stock are issued to
the Participant as payment upon exercise of such Stock Appreciation Right,
and, subject to Section 15(b), no adjustment shall be made for dividends or
distributions or other rights in respect of any share for which the record
date is prior to the date on which the Participant shall become the holder
of record thereof.
(h) LIMITED STOCK APPRECIATION RIGHTS. The Committee may grant to an
Eligible Individual a Stock Appreciation Right (a "LIMITED STOCK
APPRECIATION RIGHT") pursuant to which the Participant shall have the right
to surrender such Limited Stock Appreciation Right or any portion thereof
to the Company within thirty (30) days following a Change in Control and to
receive from the Company in exchange therefor a cash payment in an amount
equal to (a) the number of shares of Common Stock under the Limited Stock
Appreciation Right or portion thereof which is being exercised, multiplied
by (b) the excess of (i) the greater of (A) the highest price per share of
Common Stock paid in connection with the Change in Control or (B) the
highest Fair Market Value per share of Common Stock in the 90 day period
preceding such Change in Control, over (ii) the Fair Market Value of a
share of Common Stock on the date the Limited Stock Appreciation Right was
granted as set forth in the Award Agreement. Limited Stock Appreciation
Rights granted under the Plan shall contain such additional terms and
conditions, not inconsistent with the Plan, as the Committee deems
appropriate.
13. OTHER EQUITY-BASED OR EQUITY-RELATED AWARDS. The Committee shall
have the authority to specify the terms and provisions of other forms of equity-
based or equity-related Awards not described above which the Committee
determines to be consistent with the purpose of the Plan and the interests of
the Company, which Awards may provide for cash payments based in whole or in
part on the value or future value of Common Stock, for the acquisition or future
acquisition of Common Stock, or any combination thereof. Other Awards shall
also include cash payments (including the cash payment of dividend equivalents)
under the Plan which may be based on one or more criteria determined by the
Committee which are unrelated to the value of Stock and which may be granted in
tandem with, or independent of, other Awards under the Plan.
16
14. NON-TRANSFERABILITY. No Award granted under the Plan or any
rights or interests therein shall be sold, transferred, assigned, pledged or
otherwise encumbered or disposed of except by will or by the laws of descent and
distribution or, except in the case of an Incentive Stock Option, pursuant to a
"qualified domestic relations order" ("QDRO") as defined in the Code or Title I
of the Employee Retirement Income Security Act of 1974, as amended, and the
rules and regulations thereunder; PROVIDED, HOWEVER, that the Committee may,
subject to such terms and conditions as the Committee shall specify, permit the
transfer of an Award that is not an Incentive Stock Option to a Participant's
family members or to one or more trusts established in whole or in part for the
benefit of one or more of such family members; PROVIDED FURTHER that the
restrictions in this sentence shall not apply to the shares received in
connection with an Award after the date that the restrictions on transferability
of such shares set forth in the applicable Award Agreement have lapsed. During
the lifetime of a Participant, a Stock Option or Stock Appreciation Right shall
be exercisable only by, and payments in settlement of Awards shall be payable
only to, the Participant or, if applicable, the "alternate payee" under a QDRO
or the family member or trust to whom such Stock Option, Stock Appreciation
Right or other Award has been transferred in accordance with the previous
sentence.
15. RECAPITALIZATION OR REORGANIZATION.
(a) The existence of the Plan, the Award Agreements and the Awards
granted hereunder shall not affect or restrict in any way the right or power of
the Company or the shareholders of the Company to make or authorize any
adjustment, recapitalization, reorganization or other change in the Company's
capital structure or its business, any merger or consolidation of the Company,
any issue of stock or of options, warrants or rights to purchase stock or of
bonds, debentures, preferred or prior preference stocks whose rights are
superior to or affect the Common Stock or the rights thereof or which are
convertible into or exchangeable for Common Stock, or the dissolution or
liquidation of the Company, or any sale or transfer of all or any part of its
assets or business, or any other corporate act or proceeding, whether of a
similar character or otherwise.
(b) Notwithstanding any provision of the Plan or any Award Agreement,
in the event of any change in the outstanding Common Stock by reason of a stock
dividend, recapitalization, reorganization, merger, consolidation, stock split,
combination or exchange of shares or any other significant corporate event
affecting the Common Stock (a "CHANGE IN CAPITALIZATION"), (i) such
proportionate adjustments as may be necessary (in the form determined by the
Committee in its sole discretion) to reflect such change shall be made to
prevent dilution or enlargement of the rights of Participants under the Plan
with respect to the aggregate number of shares of Common Stock for which Awards
in respect thereof may be granted under the Plan, the number of shares of Common
Stock covered by each outstanding Award, and the exercise or Award prices in
respect thereof and (ii) the
17
Committee may make such other adjustments, consistent with the foregoing, as it
deems appropriate in its sole discretion.
16. CHANGE IN CONTROL. In the event of a Change in Control, (i) all
Stock Options or Stock Appreciation Rights then outstanding shall become fully
exercisable as of the date of the Change in Control, whether or not then
exercisable, (ii) all restrictions and conditions of all Restricted Stock Awards
then outstanding shall lapse as of the date of the Change in Control, (iii) all
Performance Share Awards and Performance Unit Awards shall be deemed to have
been fully earned as of the date of the Change in Control, and (iv) in the case
of a Change in Control involving a merger of, or consolidation involving, the
Company in which the Company is (A) not the surviving corporation (the
"SURVIVING ENTITY") or (B) becomes a wholly owned subsidiary of the Surviving
Entity or any Parent thereof, each outstanding Stock Option granted under the
Plan and not exercised (a "PREDECESSOR OPTION") will be converted into an option
(a "SUBSTITUTE OPTION") to acquire common stock of the Surviving Entity or its
Parent, which Substitute Option will have substantially the same terms and
conditions as the Predecessor Option, with appropriate adjustments as to the
number and kind of shares and exercise prices.
17. AMENDMENT OF THE PLAN. The Board or Committee may at any time
and from time to time terminate, modify, suspend or amend the Plan in whole or
in part; PROVIDED, HOWEVER, except that no termination, modification, suspension
or amendment shall be effective without shareholder approval if such approval is
required to comply with any applicable law or stock exchange or Nasdaq National
Market rule; and PROVIDED, further that the Board or Committee may not, without
shareholder approval, increase the maximum number of shares issuable under the
Plan. No termination, modification, suspension or amendment of the Plan shall,
without the consent of a Participant to whom any Awards shall previously have
been granted, adversely affect his or her rights under such Awards.
Notwithstanding any provision herein to the contrary, the Board or Committee
shall have broad authority to amend the Plan or any Stock Option to take into
account changes in applicable tax laws, securities laws, accounting rules and
other applicable state and federal laws.
18. MISCELLANEOUS.
(a) TAX WITHHOLDING. (i) No later than the date as of which an
amount first becomes includable in the gross income of the Participant for
applicable income tax purposes with respect to any award under the Plan, the
Participant shall pay to the Company or make arrangements satisfactory to the
Committee regarding the payment of any federal, state or local taxes of any kind
required by law to be withheld with respect to such amount. Unless otherwise
determined by the Committee, in accordance with rules and procedures
18
established by the Committee, the minimum required withholding obligations may
be settled with Common Stock, including Common Stock that is part of the award
that gives rise to the withholding requirement. The obligation of the Company
under the Plan shall be conditioned upon such payment or arrangements and the
Company shall, to the extent permitted by law, have the right to deduct any such
taxes from any payment of any kind otherwise due to the Participant.
(ii) The applicable Award Agreement for an Incentive Stock Option
shall provide that if a Participant makes a disposition, within the meaning of
Section 424(c) of the Code and the regulations promulgated thereunder, of any
share of Common Stock issued to such Participant pursuant to the exercise of an
Incentive Stock Option within the two-year period commencing on the day after
the date of the grant or within the one-year period commencing on the day after
the date of transfer of such share of Common Stock to the Participant pursuant
to such exercise, the Participant shall, within ten (10) days of such
disposition, notify the Company thereof, by delivery of written notice to the
Company at its principal executive office.
(b) LOANS. On such terms and conditions as shall be approved by the
Committee, the Company may directly or indirectly lend money to a Participant to
accomplish the purposes of the Plan, including to assist such Participant to
acquire or carry shares of Common Stock acquired upon the exercise of Stock
Options granted hereunder, and the Committee may also separately lend money to
any Participant to pay taxes with respect to any of the transactions
contemplated by the Plan.
(c) NO RIGHT TO GRANTS OR EMPLOYMENT. No Eligible Individual or
Participant shall have any claim or right to receive grants of Awards under the
Plan. Nothing in the Plan or in any Award or Award Agreement shall confer upon
any employee of the Company or any Subsidiary any right to continued employment
with the Company or any Subsidiary, as the case may be, or interfere in any way
with the right of the Company or a Subsidiary to terminate the employment of any
of its employees at any time, with or without cause.
(d) UNFUNDED PLAN. The Plan is intended to constitute an unfunded
plan for incentive compensation. With respect to any payments not yet made to a
Participant by the Company, nothing contained herein shall give any such
Participant any rights that are greater than those of a general creditor of the
Company. In its sole discretion, the Committee may authorize the creation of
trusts or other arrangements to meet the obligations created under the Plan to
deliver Common Stock or payments in lieu thereof with respect to awards
hereunder.
(e) OTHER EMPLOYEE BENEFIT PLANS. Payments received by a Participant
under any Award made pursuant to the provisions of the Plan shall not be
included in, nor
19
have any effect on, the determination of benefits under any other employee
benefit plan or similar arrangement provided by the Company.
(f) SECURITIES LAW RESTRICTIONS. The Committee may require each
Eligible Individual purchasing or acquiring shares of Common Stock pursuant to a
Stock Option or other Award under the Plan to represent to and agree with the
Company in writing that such Eligible Individual is acquiring the shares for
investment and not with a view to the distribution thereof. All certificates
for shares of Common Stock delivered under the Plan shall be subject to such
stock-transfer orders and other restrictions as the Committee may deem advisable
under the rules, regulations, and other requirements of the Securities and
Exchange Commission, the New York Stock Exchange or any other exchange upon
which the Common Stock is then listed, and any applicable federal or state
securities law, and the Committee may cause a legend or legends to be put on any
such certificates to make appropriate reference to such restrictions. No shares
of Common Stock shall be issued hereunder unless the Company shall have
determined that such issuance is in compliance with, or pursuant to an exemption
from, all applicable federal and state securities laws.
(g) COMPLIANCE WITH RULE 16B-3. (i) The Plan is intended to comply
with Rule 16b-3 under the Exchange Act or its successors under the Exchange Act
and the Committee shall interpret and administer the provisions of the Plan or
any Award Agreement in a manner consistent therewith. To the extent any
provision of the Plan or Award Agreement or any action by the Committee fails to
so comply, it shall be deemed null and void, to the extent permitted by law and
deemed advisable by the Committee. Moreover, in the event the Plan or an Award
Agreement does not include a provision required by Rule 16(b)(3) to be stated
therein, such provision (other than one relating to eligibility requirements, or
the price and amount of Awards) shall be deemed automatically to be incorporated
by reference into the Plan or such Award Agreement insofar as Participants
subject to Section 16 of the Exchange Act are concerned.
(ii) Notwithstanding anything contained in the Plan or any Award
Agreement to the contrary, if the consummation of any transaction under the Plan
would result in the possible imposition of liability on a Participant pursuant
to Section 16(b) of the Exchange Act, the Committee shall have the right, in its
sole discretion, but shall not be obligated, to defer such transaction to the
extent necessary to avoid such liability, but in no event for a period in excess
of 180 days.
(h) DEDUCTIBILITY UNDER CODE SECTION 162(M). Awards granted under
the Plan to Eligible Individuals which the Committee reasonably believes may be
subject to the deduction limitation of Section 162(m) of the Code shall not be
exercisable, and payment under the Plan in connection with such an Award shall
not be made, unless and until the Committee has determined in its sole
discretion that such exercise or payment would no longer be subject to the
deduction limitation of Section 162(m) of the Code.
20
(i) AWARD AGREEMENT. In the event of any conflict or inconsistency
between the Plan and any such Award Agreement, the Plan shall govern, and the
Award Agreement shall be interpreted to minimize or eliminate any such conflict
or inconsistency.
(j) EXPENSES. The costs and expenses of administering the Plan shall
be borne by the Company.
(k) APPLICABLE LAW. Except as to matters of federal law, the Plan
and all actions taken thereunder shall be governed by and construed in
accordance with the laws of the State of Delaware without giving effect to
conflicts of law principles.
(l) EFFECTIVE DATE. The Plan shall be effective as of May __, 1997
(the "EFFECTIVE DATE"), PROVIDED that the Plan is approved by the affirmative
votes of a majority of shares of Common Stock or by written consent of a
majority of shares of Common Stock. Awards granted under the Plan prior to such
shareholder approval shall be and are made subject to defeasance by the failure
of the shareholders to approve the Plan.