FOUNDATION HEALTH SYSTEMS, INC.
1997 STOCK OPTION PLAN
I. INTRODUCTION
The purposes of the Foundation Health Systems, Inc. 1997 Stock Option Plan
(the "Plan") are (i) to align the interests of the stockholders of Foundation
Health Systems, Inc. (the "Company") and the recipients of awards under the Plan
by increasing the proprietary interest of such recipients in the Company's
growth and success, (ii) to advance the interests of the Company by attracting
and retaining key salaried employees of the Company and its subsidiaries and
(iii) to motivate such employees to act in the long-term best interests of the
Company's stockholders.
II. DEFINITIONS
For purposes of the Plan, the following capitalized terms shall have the
meanings set forth in this Article.
2.1 "Agreement" shall mean the written instrument evidencing an award
hereunder between the Company and the recipient of such award, the terms of
which may be amended or modified as provided in Section 6.3.
2.2 "Board" shall mean the Board of Directors of the Company.
2.3 "Bonus Stock" shall mean shares of Common Stock which are not subject to a
Restriction Period.
2.4 "Bonus Stock Award" shall mean an award of Bonus Stock.
2.5 "Code" shall mean the Internal Revenue Code of 1986, as amended.
2.6 "Committee" shall mean the Compensation and Stock Option Committee of the
Board.
2.7 "Common Stock" shall mean the Class A Common Stock, $.001 par value, of
the Company.
2.8 "Company" shall mean Foundation Health Systems, Inc., a Delaware
corporation, or any successor thereto.
2.9 "Disability" shall mean the inability, as determined solely by the
Committee, of the holder of an award to perform substantially such holder's
duties and responsibilities for a continuous period of at least six months.
2.10 "Employer" shall mean the Company and each Subsidiary.
2.11 "ERISA" shall mean the Employee Retirement Income Security Act of 1974, as
amended.
2.12 "Exchange Act" shall mean the Securities Exchange Act of 1934, as amended.
2.13 "Fair Market Value" shall mean the closing price of a share of Common
Stock as reported in THE WALL STREET JOURNAL on the New York Stock Exchange
Composite Transactions list for the date as of which such value is being
determined or, if there shall be no reported transaction for such date or if
such date is not a trading day, on the next immediately preceding date for which
a transaction was reported or which was a trading day; PROVIDED, HOWEVER, that
Fair Market Value may be determined by the Committee by whatever means or method
as the Committee, in the good faith exercise of its discretion, shall at such
time deem appropriate.
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2.14 "Incentive Stock Option" shall mean an option to purchase shares of Common
Stock that meets the requirements of Section 422 of the Code, or any successor
provision, which is intended by the Committee to constitute an Incentive Stock
Option.
2.15 "Mature Shares" shall mean previously acquired shares of Common Stock for
which the holder thereof has good title, free and clear of all liens and
encumbrances and which such holder either (i) has held for at least six months
or (ii) has purchased on the open market.
2.16 "Maturity Value" shall mean, unless the Committee shall determine
otherwise, the average of the Fair Market Value of a share of Common Stock for a
period of sixty consecutive trading days ending on the Valuation Date with
respect to each Restricted Stock Award, or if the Valuation Date is not a
trading day, the sixty consecutive trading days ending on the last trading day
before the Valuation Date.
2.17 "Merger" shall mean any merger of the Company in which the holders of
Common Stock immediately prior to the merger have the same proportionate
ownership of common stock of the surviving or resulting parent corporation
immediately after the merger.
2.18 "Nonqualified Stock Option" shall mean a stock option which is not an
Incentive Stock Option.
2.19 "Permanent and Total Disability" shall have the meaning set forth in
Section 22(e)(3) of the Code or any successor thereto.
2.20 "Restricted Stock" shall mean shares of Common Stock which are subject to
a Restriction Period.
2.21 "Restricted Stock Award" shall mean an award of Restricted Stock.
2.22 "Restriction Period" shall mean any period designated by the Committee
during which the Common Stock subject to a Restricted Stock Award may not be
sold, transferred, assigned, pledged, hypothecated or otherwise encumbered or
disposed of, except as provided in the Plan or the Agreement relating to such
award.
2.23 "SAR" shall mean a stock appreciation right which is granted in tandem
with, or by reference to, an option (including a Nonqualified Stock Option
granted prior to the date of grant of the SAR), which entitles the holder
thereof to receive, upon exercise of such SAR and surrender for cancellation of
all or a portion of such option, shares of Common Stock, cash or a combination
thereof with an aggregate value equal to the excess of the Fair Market Value of
one share of Common Stock on the date of exercise over the base price of such
SAR, multiplied by the number of shares of Common Stock subject to such option,
or portion thereof, which is surrendered.
2.24 "Securities Act" shall mean the Securities Act of 1933, as amended.
2.25 "Stock Award" shall mean a Restricted Stock Award or a Bonus Stock Award.
2.26 "Subsidiary" shall mean any corporation other than the Company in an
unbroken chain of corporations beginning with the Company if, at the time of
reference, each of the corporations other than the last corporation in the
unbroken chain owns stock possessing 50 percent or more of the total combined
voting power of all classes of stock in one of the other corporations in such
chain.
2.27 "Ten Percent Holder" shall have the meaning set forth in Section 4.2(a).
2.28 "Valuation Date" with respect to any Restricted Stock Award shall mean the
date designated in the Agreement with respect to each Restricted Stock Award
pursuant to Section 5.2(a).
III. ELIGIBILITY AND ADMINISTRATION
3.1 ELIGIBILITY. Participants in the Plan shall consist of such key salaried
employees of the Employers as the Committee in its sole discretion may select
from time to time. The Committee's selection of an
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employee to participate in the Plan at any time shall not require the Committee
to select such employee to participate in the Plan at any other time.
3.2 ADMINISTRATION.
(a) IN GENERAL. The Plan shall be administered by the Committee. The
Committee may grant to eligible employees any one or a combination of the
following awards under the Plan: (i) options to purchase shares of Common Stock
in the form of Incentive Stock Options or Nonqualified Stock Options, (ii) SARs
and (iii) Stock Awards in the form of Restricted Stock or Bonus Stock. The
Committee shall, subject to the terms of the Plan, select eligible key salaried
employees for participation in the Plan and determine the form, amount and
timing of each award to such employees and, if applicable, the number of shares
of Common Stock and the number of SARs subject to such an award, the exercise
price or base price associated with the award, the time and conditions of
exercise or settlement of the award and all other terms and conditions of the
award, including, without limitation, the form of the Agreement evidencing the
award. The Committee may, in its sole discretion and for any reason at any time,
subject to the requirements imposed under Section 162(m) of the Code and
regulations promulgated thereunder in the case of an award intended to be
qualified performance-based compensation, take action such that (i) any or all
outstanding options and SARs shall become exercisable in part or in full and
(ii) all or a portion of the Restriction Period applicable to any outstanding
Restricted Stock Award shall lapse. The Committee shall, subject to the terms of
the Plan, interpret the Plan and the application thereof, establish rules and
regulations it deems necessary or desirable for the administration of the Plan,
make any determinations necessary or desirable to effectuate the purposes of the
Plan and may impose, incidental to the grant of an award, conditions with
respect to the award, such as limiting competitive employment or other
activities. All such interpretations, rules, regulations, determinations and
conditions shall be final, binding and conclusive. The acts of the Committee
shall be either (i) acts of a majority of the members of the Committee present
at any meeting at which a majority of the Committee members is present or (ii)
acts approved in writing by a majority of the members of the Committee without a
meeting.
(b) DELEGATION. The Committee may delegate some or all of its power and
authority hereunder to such executive officer or officers of the Company as the
Committee deems appropriate; PROVIDED, HOWEVER, that the Committee may not
delegate its power and authority with regard to (i) the grant of an award to any
person who is a "covered employee" within the meaning of Section 162(m) of the
Code or who, in the Committee's judgment, is likely to be a covered employee at
any time during the period an award hereunder to such employee would be
outstanding or (ii) the selection for participation in the Plan of an officer or
other person subject to Section 16 of the Exchange Act or decisions concerning
the timing, pricing or amount of an award to such an officer or other person.
(c) INDEMNIFICATION. No member of the Board of Directors or Committee, nor
any executive officer to whom the Committee delegates any of its power and
authority hereunder, shall be liable for any act, omission, interpretation,
construction or determination made in connection with the Plan in good faith,
and the members of the Board of Directors and the Committee and any such
executive officer shall be entitled to indemnification and reimbursement by the
Company in respect of any claim, loss, damage or expense (including attorneys'
fees) arising therefrom to the full extent permitted by law, except as otherwise
may be provided in the Company's Certificate of Incorporation or By-laws, and
under any directors' and officers' liability insurance that may be in effect
from time to time.
3.3 SHARES AVAILABLE. Subject to adjustment as provided in Section 6.7,
10,000,000 shares of Common Stock shall be available under the Plan. Such shares
of Common Stock and shares of each other class of stock which become available
under the Plan shall be reduced by the sum of the aggregate number of shares of
such stock then subject to awards under the Plan. To the extent that shares of
Common Stock subject to an outstanding option (except to the extent shares of
Common Stock are issued or delivered by the Company in connection with the
exercise of an SAR) or Stock Award are not issued or delivered by reason of the
expiration, termination, cancellation or forfeiture of such award or by reason
of the delivery
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or withholding of shares of Common Stock to satisfy all or a portion of the tax
withholding obligations relating to an award, then such shares of Common Stock
shall again be available under the Plan. Shares of Common Stock shall be made
available from authorized and unissued shares of Common Stock, or authorized and
issued shares of Common Stock reacquired and held as treasury shares or
otherwise or a combination thereof.
To the extent required by Section 162(m) of the Code and the regulations
thereunder, the maximum number of shares of Common Stock with respect to which
options, SARs, Stock Awards, or a combination thereof may be granted during the
term of the Plan to any employee shall be 3,000,000, subject to adjustment as
provided in Section 6.7.
IV. STOCK OPTIONS AND STOCK APPRECIATION RIGHTS
4.1 STOCK OPTIONS. The Committee may, in its discretion, grant options to
purchase shares of Common Stock to such eligible employees as may be selected by
the Committee. Each option, or portion thereof, that is not an Incentive Stock
Option, shall be a Nonqualified Stock Option. Each Incentive Stock Option shall
be granted within ten years of the effective date of the Plan. To the extent
that the aggregate Fair Market Value (determined as of the date of grant) of
shares of Common Stock with respect to which options designated as Incentive
Stock Options are exercisable for the first time by an option holder during any
calendar year (under the Plan or any other plan of the Company or any
Subsidiary) exceeds $100,000 (or any other applicable dollar limitation
established under the federal tax laws) such options shall constitute
Nonqualified Stock Options.
4.2 TERMS OF STOCK OPTIONS. Options 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 advisable.
(a) NUMBER OF SHARES AND PURCHASE PRICE. The number of shares of Common
Stock subject to an option and the purchase price per share of Common Stock
purchasable upon exercise of the option shall be determined by the Committee;
PROVIDED, HOWEVER, that the purchase price per share of Common Stock purchasable
upon exercise of an option shall not be less than 100% of the Fair Market Value
of a share of Common Stock on the date of grant of such option; PROVIDED
FURTHER, that if an Incentive Stock Option shall be granted to an employee who,
at the time such option is granted, owns capital stock possessing more than ten
percent of the total combined voting power of all classes of capital stock of
the Company (or of any Subsidiary) (a "Ten Percent Holder"), then the purchase
price per share of Common Stock shall be the price (currently 110% of Fair
Market Value) required under the Code in order to constitute an Incentive Stock
Option.
(b) OPTION PERIOD AND EXERCISABILITY. The period during which an option
may be exercised shall be determined by the Committee; PROVIDED, HOWEVER, that
no Incentive Stock Option shall be exercised later than ten years after its date
of grant; PROVIDED FURTHER, that if an Incentive Stock Option shall be granted
to a Ten Percent Holder, such option shall not be exercised later than five
years after its date of grant. The Committee may, in its discretion, establish
performance measures which must be satisfied as a condition either to a grant of
an option or to the exercisability of all or a portion of an option. The
Committee shall determine whether an option shall become exercisable in
cumulative or noncumulative installments and in part or in full at any time. An
exercisable option, or portion thereof, may be exercised only with respect to
whole shares of Common Stock.
(c) METHOD OF EXERCISE. An option may be exercised (i) by giving written
notice to the Company specifying the number of whole shares of Common Stock to
be purchased and accompanied by payment therefor in full (or arrangement made
for such payment to the Company's satisfaction) either (A) in cash, (B) by
delivery (either actual delivery or by attestation procedures established by the
Company) of Mature Shares having an aggregate Fair Market Value, determined as
of the date of exercise, equal to the aggregate purchase price payable by reason
of such exercise, (C) in cash by a broker-dealer acceptable to
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the Company to whom the optionee has submitted an irrevocable notice of exercise
or (D) a combination of (A) and (B) , (ii) if applicable, by surrendering to the
Company any SARs which are canceled by reason of the exercise of the option and
(iii) by executing such documents as the Company may reasonably request. Cash
payments shall be made by wire transfer, certified or bank check or personal
check, in each case payable to the order of the Company. If payment is to be
made by delivery of Mature Shares, any fraction of a share of Common Stock which
would be required to pay such purchase price shall be disregarded and the
remaining amount due shall be paid in cash by the optionee. The Company shall
not be required to deliver certificates for shares of Common Stock until the
Company has confirmed the receipt of good and available funds in payment of the
full purchase price therefor.
4.3 STOCK APPRECIATION RIGHTS. The Committee may, in its discretion, grant
SARs to such eligible employees as may be selected by the Committee. Any SAR
related to an Incentive Stock Option shall be granted at the same time that such
Incentive Stock Option is granted.
4.4 TERMS OF SARS. SARs 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 advisable.
(a) NUMBER OF SARS AND BASE PRICE. The number of SARs subject to an award
shall be determined by the Committee. The base price of an SAR shall be the
purchase price per share of Common Stock of the related option.
(b) EXERCISE PERIOD AND EXERCISABILITY. The Agreement relating to an award
of SARs shall specify whether such award may be settled in shares of Common
Stock or cash or a combination thereof. The period for the exercise of an SAR
shall be determined by the Committee; PROVIDED, HOWEVER, that no SAR shall be
exercised later than the expiration, cancellation, forfeiture or other
termination of the related option. The Committee shall determine whether an SAR
may be exercised in cumulative or non-cumulative installments and in part or in
full at any time. An exercisable SAR, or portion thereof, may be exercised only
with respect to whole shares of Common Stock. Prior to the exercise of an SAR
for shares of Common Stock, the holder of such SAR shall have no rights as a
stockholder of the Company with respect to the shares of Common Stock subject to
such SAR and shall have rights as a stockholder of the Company in accordance
with Section 6.11.
(c) METHOD OF EXERCISE. An SAR may be exercised (i) by giving written
notice to the Company specifying the number of whole SARs which are being
exercised, (ii) by surrendering to the Company any options which are canceled by
reason of the exercise of the SAR and (iii) by executing such documents as the
Company may reasonably request.
4.4 TERMINATION OF EMPLOYMENT.
(a) IN GENERAL. Subject to Sections 6.9 and 4.4(b) and as described in
Section 4.4(c) in the case of an Incentive Stock Option, all of the terms
relating to the exercise, cancellation or other disposition of an option or SAR
in the event the holder of such option or SAR, as the case may be, is no longer
employed by an Employer, whether by reason of Disability, retirement, death or
other termination of employment, shall be determined by the Committee. Such
determination shall be made at the time of the grant of such option or SAR, as
the case may be, and shall be specified in the Agreement relating to such option
or SAR.
(b) INCENTIVE STOCK OPTIONS. Each Incentive Stock Option held by an
optionee who ceases to be employed by any Employer by reason of Permanent and
Total Disability or death shall be exercisable only to the extent that such
option is exercisable on the date of such optionee's termination of employment.
In the case of the optionee's Permanent and Total Disability, the option may
thereafter be exercised by such optionee (or such optionee's legal
representative) for a period of one year (or such shorter period as the
Committee may specify in the Agreement) after the effective date of such
optionee's termination of employment by reason of Permanent and Total Disability
or until the expiration of the term of such Incentive Stock Option, whichever
period is shorter. In the case of the optionee's death, the option may
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thereafter be exercised by the beneficiary or beneficiaries duly designated by
the optionee or, if none, the executor or administrator of the optionee's estate
or, if none, the person to whom the optionee's rights under such option shall
pass by will or by the applicable laws of descent and distribution for a period
of one year (or such other period as the Committee may specify in the Agreement)
after the date of such optionee's death or until the expiration of the term of
such Incentive Stock Option, whichever period is shorter.
Each Incentive Stock Option held by an optionee who ceases to be employed by
any Employer for any reason other than Permanent and Total Disability or death
shall be exercisable only to the extent such option is exercisable on the
effective date of such optionee's termination of employment, and may thereafter
be exercised by such optionee (or such optionee's legal representative) for a
period of three months after the effective date of such optionee's termination
of employment or until the expiration of the term of the Incentive Stock Option,
whichever period is shorter.
If an optionee dies during the exercise period specified in the Agreement
evidencing the award of such option following the termination of the optionee's
employment by reason of Permanent and Total Disability, or if the optionee dies
during the three-month period following termination of employment for any reason
other than death or Permanent and Total Disability, each Incentive Stock Option
held by such optionee shall be exercisable only to the extent such option is
exercisable on the date of the optionee's death and may thereafter be exercised
by the beneficiary or beneficiaries duly designated by the optionee or, if none,
the executor or administrator of the optionee's estate or, if none, the person
to whom the optionee's rights under such option shall pass by will or by the
applicable laws of descent and distribution for a period of one year (or such
shorter period as the Committee may specify in the Agreement) after the date of
death or until the expiration of the term of such Incentive Stock Option,
whichever period is shorter.
V. STOCK AWARDS
5.1 STOCK AWARDS. The Committee may, in its discretion, grant Stock Awards to
such eligible employees as may be selected by the Committee. The Agreement
relating to a Stock Award shall specify whether the Stock Award is a Restricted
Stock Award or Bonus Stock Award.
5.2 TERMS OF STOCK AWARDS. Stock Awards 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 advisable.
(a) NUMBER OF SHARES AND OTHER TERMS. The Committee shall determine the
number of shares of Common Stock subject to a Restricted Stock Award or Bonus
Stock Award conditions. In the case of a Restricted Stock Award, the Committee
shall designate a Valuation Date and shall determine the price, if any, to be
paid by the holder for each share of Restricted Stock subject to the Award.
(b) VESTING AND FORFEITURE. The Agreement relating to a Restricted Stock
Award shall provide, in the manner determined by the Committee, in its
discretion, and subject to the provisions of the Plan, (i) for the vesting of
the shares of Common Stock subject to such award if the holder of such award
remains continuously in the employment of any one or more Employers during the
specified Restriction Period and satisfies any other applicable conditions and
(ii) for the forfeiture of the shares of Common Stock subject to such award if
the holder of such award does not remain continuously in the employment of any
one or more Employers during the specified Restriction Period or does not
satisfy any other applicable condition. Bonus Stock Awards shall not be subject
to any Restriction Periods.
(c) SHARE CERTIFICATES. In the case of a Restricted Stock Award, during
the Restriction Period, a certificate or certificates representing the award may
be registered in the holder's name and may bear a legend, in addition to any
legend which may be required pursuant to Section 6.6, indicating that the
ownership of the shares of Common Stock represented by such certificate is
subject to the restrictions,
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terms and conditions of the Plan and the Agreement relating to the Restricted
Stock Award. All such certificates shall be deposited with the Company, together
with stock powers or other instruments of assignment (including a power of
attorney), each endorsed in blank with a guarantee of signature if deemed
necessary or appropriate by the Company, which would permit transfer to the
Company of all or a portion of the shares of Common Stock subject to the
Restricted Stock Award in the event such award is forfeited in whole or in part.
Upon termination of any applicable Restriction Period, or upon the grant of a
Bonus Stock Award, in each case subject to the Company's right to require
payment of any taxes in accordance with Section 6.5, either (i) a certificate or
certificates evidencing ownership of the requisite number of shares of Common
Stock shall be delivered to the holder of such award or (ii) a notation of
noncertificated shares shall be made on the stock records of the Company.
(d) RIGHTS WITH RESPECT TO RESTRICTED STOCK AWARDS. Unless otherwise set
forth in the Agreement relating to a Restricted Stock Award, and subject to the
terms and conditions of a Restricted Stock Award and the Plan, the holder of
such award shall have all rights as a stockholder of the Company, including, but
not limited to, voting rights, the right to receive dividends and the right to
participate in any capital adjustment applicable to all holders of Common Stock;
PROVIDED, HOWEVER, that a distribution with respect to shares of Common Stock,
other than a regular cash dividend or any other distribution as the Committee
may in its sole discretion designate, shall be deposited with the Company and
shall be subject to the same restrictions as the shares of Common Stock with
respect to which such distribution was made. Any such distributions on deposit
with the Company shall not be segregated in separate accounts and shall not bear
interest. Any breach of any restrictions, terms or conditions applicable to a
Restricted Stock Award by the holder of such award shall cause a forfeiture of
Restricted Stock, any related distributions, and all rights under the Agreement.
(e) CASH AWARDS. In connection with any Restricted Stock Award, the
Committee may authorize (either at the time such award is made or subsequently)
the payment of a cash amount (a "Cash Award") to the holder of such Restricted
Stock at any time after such Restricted Stock shall have become vested;
PROVIDED, HOWEVER, that the amount of the cash payment, if any, that a holder
shall be entitled to receive shall not exceed 100 percent of the aggregate
Maturity Value of the Restricted Stock Award. Such Cash Awards shall be payable
in accordance with such additional restrictions, terms and conditions as shall
be prescribed by the Committee and shall be in addition to any other salary,
incentive, bonus or other compensation payments which holders shall be otherwise
entitled or eligible to receive from the Company.
5.3 TERMINATION OF EMPLOYMENT. Subject to Section 6.9, all of the terms
relating to the termination of the Restriction Period or other conditions
relating to a Restricted Stock Award, or any cancellation or forfeiture of such
Restricted Stock Award in the event the holder of such Restricted Stock Award is
no longer employed by an Employer, whether by reason of Disability, retirement,
death or other termination of employment, shall be specified in the Agreement
relating to such Restricted Stock Award.
VI. GENERAL
6.1 EFFECTIVE DATE AND TERM OF PLAN. The Plan shall be submitted to the
stockholders of the Company for approval and, if approved by the affirmative
vote of a majority of the shares of Common Stock present in person or
represented by proxy at the 1997 annual meeting of stockholders, shall become
effective on the date of such meeting. The Plan shall terminate when shares of
Common Stock are no longer available for the grant of awards, unless terminated
earlier by the Board. Termination of the Plan shall not affect the terms or
conditions of any award granted prior to termination.
In the event that the Plan is not approved by the stockholders of the
Company on or before June 11, 1998, the Plan and any awards granted hereunder
shall be null and void.
6.2 AMENDMENTS. The Board may amend the Plan as it shall deem advisable,
subject to any requirement of stockholder approval required by applicable law,
rule or regulation, including Section 162(m) and
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Section 422 of the Code; PROVIDED, HOWEVER, that no amendment shall be made
without stockholder approval if such amendment would (a) increase the maximum
number of shares of Common Stock available under the Plan (subject to Section
6.7), (b) effect any change inconsistent with Section 422 of the Code or (c)
extend the term of the Plan. No amendment may impair the rights of a holder of
an outstanding award without the consent of such holder.
6.3 AGREEMENT. Each award under the Plan shall be evidenced by an Agreement
setting forth the terms and conditions applicable to such award. No award shall
be valid until an Agreement is executed by a duly authorized representative of
the Company and the recipient of such award and, upon execution by each party
and delivery of the Agreement to the Company, such award shall be effective as
of the effective date set forth in the Agreement. No award under the Plan shall
be effective unless the Agreement evidencing such award is executed by the
recipient and delivered to the Company. An Agreement may be modified or amended
at any time by the Committee, PROVIDED that no modification or amendment may
adversely affect the rights of the holder of the award evidenced by the
Agreement without the holder's consent.
6.4 NON-TRANSFERABILITY OF AWARDS. Unless otherwise specified in the
Agreement relating to an award, no award (or rights thereunder) shall be
transferable other than by will, the laws of descent and distribution, a
qualified domestic relations order or pursuant to beneficiary designation or
assignment procedures approved by the Company. Except to the extent permitted by
the foregoing sentence or the Agreement relating to an award, each award may be
exercised or settled during the holder's lifetime only by the holder or the
holder's legal representative or similar person. Except to the extent permitted
by the second preceding sentence or the Agreement relating to an award, no award
may be sold, transferred, assigned, pledged, hypothecated, encumbered or
otherwise disposed of (whether by operation of law or otherwise) or be subject
to execution, attachment or similar process. Upon any attempt to so sell,
transfer, assign, pledge, hypothecate, encumber or otherwise dispose of any such
award, such award and all rights thereunder and its related Agreement shall
immediately become null and void.
6.5 TAX WITHHOLDING. The Company shall have the right to require, prior to
the issuance or delivery of any shares of Common Stock or the payment of any
cash pursuant to an award made hereunder, payment by the holder of such award of
any federal, state, local or other taxes which may be required to be withheld or
paid in connection with such award. The holder may satisfy any such obligation
by any of the following means: (A) a cash payment to the Company, (B)
authorizing the Company to withhold whole shares of Common Stock which would
otherwise be delivered having an aggregate Fair Market Value, determined as of
the date the obligation to withhold or pay taxes arises in connection with the
award (the "Tax Date"), or withhold an amount of cash which would otherwise be
payable to a holder, equal to the amount necessary to satisfy any such
obligation, (C) by delivery (either actual delivery or by attestation procedures
established by the Company) of shares of Common Stock having an aggregate Fair
Market Value, determined as of the Tax Date, equal to the amount necessary to
satisfy any such obligation, (D) in the case of the exercise of an option, a
cash payment by a broker-dealer acceptable to the Company to whom the optionee
has submitted an irrevocable notice of exercise or (E) a combination of (A), (B)
and (C); PROVIDED, HOWEVER, that the Company shall have sole discretion to
disapprove of an election pursuant to any of clauses (B)-(E), and PROVIDED
FURTHER that no shares of Common Stock shall be withheld or delivered in excess
of the minimum statutory requirements with respect to such tax obligation unless
such shares are Mature Shares. Any fraction of a share of Common Stock which
would be required to satisfy such an obligation shall be disregarded and the
remaining amount due shall be paid in cash by the holder.
6.6 RESTRICTIONS ON SHARES. Each award made hereunder shall be subject to the
requirement that if at any time the Company determines that the listing,
registration or qualification of the shares of Common Stock subject to such
award upon any securities exchange or under any law, or the consent or approval
of any governmental body, or the taking of any other action is necessary or
desirable as a condition of, or in connection with, the exercise or settlement
of such award or the delivery of shares thereunder, such award shall not be
exercised or settled and such shares shall not be delivered unless such listing,
registration, qualification, consent, approval or other action shall have been
effected or obtained, free of any conditions
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not acceptable to the Company. The Company may require that certificates
evidencing shares of Common Stock delivered pursuant to any award made hereunder
bear a legend indicating that the sale, transfer or other disposition thereof by
the holder is prohibited except in compliance with the Securities Act.
6.7 ADJUSTMENT. In the event of any stock split, stock dividend,
recapitalization, reorganization, merger, consolidation, combination, exchange
of shares, liquidation, spin-off or other similar change in capitalization or
event, or any distribution to holders of Common Stock other than a regular cash
dividend, the number and class of securities available under the Plan, the
number and class of securities subject to each outstanding option and the
purchase price per security, the terms of each outstanding SAR, and the number
and class of securities subject to each outstanding Stock Award shall be
appropriately adjusted by the Committee, such adjustments to be made in the case
of outstanding options and SARs without an increase in the aggregate purchase
price or base price. The decision of the Committee regarding any such adjustment
shall be final, binding and conclusive. If any such adjustment would result in a
fractional security being (a) available under the Plan, such fractional security
shall be disregarded, or (b) subject to an award under the Plan, the Company
shall pay the holder of such award, in connection with the vesting, exercise or
settlement of such award in whole or in part occurring after such adjustment, an
amount in cash determined by multiplying (i) the fraction of such security
(rounded to the nearest hundredth) by (ii) the excess, if any, of (A) the Fair
Market Value on the vesting, exercise or settlement date over (B) the exercise
or base price, if any, of such award.
6.8 ACCELERATION OF AWARDS.
(a) IN GENERAL. Notwithstanding any provision in the Plan, upon the
occurrence of a Change in Control, as defined below, (i) all outstanding options
and SARs shall immediately become exercisable in full and (ii) the Restriction
Period applicable to any outstanding Restricted Stock Award shall lapse, except
as otherwise provided in the applicable Agreement.
(b) DEFINITION OF CHANGE IN CONTROL. A "Change in Control" shall mean:
(i) APPROVED TRANSACTION. An action of the Board (or, if approval of
the Board is not required as a matter of law, the stockholders of the
Company) approving (a) any consolidation or merger of the Company in which
the Company is not the continuing or surviving corporation or pursuant to
which shares of Common Stock would be converted into cash, securities or
other property, other than a Merger, or (b) any sale, lease, exchange, or
other transfer (in one transaction or a series of related transactions) of
all, or substantially all, of the assets of the Company, or (c) the adoption
of any plan or proposal for the liquidation or dissolution of the Company;
(ii) CONTROL PURCHASE. The purchase by any person (as such term is
defined in Sections 13(d)(3) and 14(d)(2) of the Exchange Act), corporation
or other entity (other than the Company or any employee benefit plan
sponsored by an Employer) of any Common Stock of the Company (or securities
convertible into the Company's Common Stock) for cash, securities or any
other consideration pursuant to a tender offer or exchange offer, without
the prior consent of the Board and, after such purchase, such person shall
be the "beneficial owner" (as such term is defined in Rule 13d-3 under the
Exchange Act), directly or indirectly, of securities of the Company
representing 20 percent or more of the combined voting power of the then
outstanding securities of the Company ordinarily (and apart from rights
accruing under special circumstances) having the right to vote in the
election of directors (calculated as provided in Section (d) of such Rule
13d-3 in the case of rights to acquire the Company's securities);
(iii) BOARD CHANGE. A change in the composition of the Board during
any period of two consecutive years, such that individuals who at the
beginning of such period constitute the entire Board shall cease for any
reason to constitute 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
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of at least two-thirds of the directors then still in office who were
directors at the beginning of the period; or
(iv) OTHER TRANSACTIONS. The occurrence of such other transactions
involving a significant issuance of voting stock or change in the
composition of the Board that the Board determines to be a Change in Control
for purposes of the Plan.
The Agreement evidencing options or Restricted Stock granted under the Plan
may contain such provisions limiting the acceleration of the exercisability of
options and the acceleration of the vesting of Restricted Stock as provided in
this Section as the Committee deems appropriate to ensure that the penalty
provisions of Section 4999 of the Code, or any successor thereto in effect at
the time of such acceleration, will not apply to any stock, cash or other
property received by the holder from the Company.
(c) CERTAIN BUSINESS COMBINATIONS. (1) With respect to any optionee who is
subject to Section 16 of the Exchange Act, (i) notwithstanding the exercise
periods set forth in any Agreement to which such optionee is a party, and (ii)
notwithstanding the expiration date of the term of such option (other than an
Incentive Stock Option), in the event the Company is involved in a business
combination which is intended to be treated as a pooling of interests for
financial accounting purposes (a "Pooling Transaction") or pursuant to which
such optionee receives a substitute option to purchase securities of any entity,
including an entity directly or indirectly acquiring the Company, then each
option (or option in substitution thereof) held by such optionee shall be
exercisable to the extent set forth in the Agreement evidencing such option
until and including the latest of (x) the expiration date of the term of the
option or, in the event of such optionee's termination of employment, the last
exercise date prescribed by the optionee's Agreement, (y) the date which is six
months and one day after the consummation of such business combination and (z)
the date which is ten business days after the date of expiration of any period
during which such optionee may not dispose of a security issued in the Pooling
Transaction in order for the Pooling Transaction to be accounted for as a
pooling of interests; and
(2) With respect to any holder of an SAR (other than an SAR which may be
settled only for cash) who is subject to Section 16 of the Exchange Act, (i)
notwithstanding the exercise periods set forth in any Agreement to which such
holder is a party, and (ii) notwithstanding the expiration date of the term of
such SAR (other than an SAR which is related to an Incentive Stock Option), in
the event the Company is involved in a Pooling Transaction or pursuant to which
such holder receives a substitute SAR relating to any entity, including an
entity directly or indirectly acquiring the Company, then each such SAR (or SAR
in substitution thereof) held by such holder shall be exercisable to the extent
set forth in the Agreement evidencing such SAR until and including the latest of
(x) the date set forth pursuant to the optionee's Agreement or the expiration
date of the term of such SAR, as the case may be, (y) the date which is six
months and one day after the consummation of such business combination and (z)
the date which is ten business days after the date of expiration of any period
during which such holder may not dispose of a security issued in the Pooling
Transaction in order for the Pooling Transaction to be accounted for as a
pooling of interests.
6.9 TERMINATION OF EMPLOYMENT.
(a) ACCELERATION OF EXERCISABILITY OR VESTING. Notwithstanding any
provisions to the contrary in an Agreement, if the employment of the holder of
an option or Stock Award shall terminate for any reason (including, without
limitation, the holder's death, Permanent and Total Disability, retirement
(either pursuant to any retirement plan of the Company or any Subsidiary or, in
the absence of any such plan, pursuant to the Committee's discretionary
determination that such termination of employment shall be treated as retirement
for purposes of the Plan), resignation or voluntary termination other than for
"Cause" (as defined in subsection (b) hereof) as determined by the Committee in
its sole discretion, the Committee may determine the following:
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(i) Any Restriction Period applicable to any Restricted Stock Award
shall be deemed to have expired upon the holder's termination of employment,
and all Restricted Stock subject to such award shall become vested, and any
Cash Award payable pursuant to the applicable Restricted Stock Award shall
be adjusted in such manner as is provided in the Agreement; and
(ii) Any option shall become exercisable in full upon the holder's
termination of employment.
(b) TERMINATION BY COMPANY FOR CAUSE. If the employment with an Employer
of a holder of a Restricted Stock Award shall terminate for Cause during the
Restriction Period, then all Restricted Stock and any Cash Awards shall be
forfeited immediately. All options held by such holder shall immediately
terminate. For purposes of this subsection, "Cause" shall have the meaning
ascribed thereto in any employment agreement to which such holder is a party or,
in the absence thereof, shall include, but not be limited to, insubordination,
dishonesty, incompetence, moral turpitude, other misconduct of any kind and the
refusal to perform his or her duties and responsibilities for any reason other
than illness or incapacity; PROVIDED, HOWEVER, that if such termination occurs
within 12 months after an Approved Transaction, Control Purchase or Board Change
(as such terms are defined in Section 6.8(a)), termination for Cause shall only
mean a felony conviction for fraud, misappropriation or embezzlement.
(c) GENERAL. For purposes of the Plan, a leave of absence, unless
otherwise determined by the Committee prior to the commencement thereof, shall
not be considered a termination of employment. Awards made under the Plan shall
not be affected by any change of employment so long as the holder continues to
be an employee of an Employer.
6.10 NO RIGHT OF PARTICIPATION OR EMPLOYMENT. No person shall have any right
to participate in the Plan. Neither the Plan nor any award made hereunder shall
confer upon any person any right to continued employment by any Employer or
affect in any manner the right of an Employer to terminate the employment of any
person at any time without liability hereunder.
6.11 RIGHTS AS STOCKHOLDER. No person shall have any right as a stockholder of
the Company with respect to any shares of Common Stock or other equity security
of the Company which is subject to an award hereunder unless and until such
person becomes a stockholder of record with respect to such shares of Common
Stock or equity security.
6.12 GOVERNMENTAL AND OTHER REGULATIONS. The obligations of the Company with
respect to awards under the Plan and related Agreements shall be subject to such
rules, regulations and approvals as may be required, including rules,
regulations and approvals relating to registration statements under the
Securities Act, and those of the New York Stock Exchange. No option shall be
exercisable, no Restriction Period shall expire and no Common Stock shall be
delivered under the Plan until the Company has obtained such consent and
approval from regulatory bodies (federal, state or self-regulatory
organizations) having jurisdiction over such matters as the Committee deems
advisable.
6.13 NON-EXCLUSIVITY. The Plan shall not be construed as creating any
limitations on the Company or the Committee to adopt such other incentive
arrangements as it may deem desirable, including the granting of stock options
and the awards of either shares of Common Stock or cash to any individual.
6.14 GOVERNING LAW. The Plan, each award hereunder and the related Agreement,
and all determinations made and actions taken pursuant thereto, to the extent
not otherwise governed by the Code or the laws of the United States, shall be
governed by the laws of the State of Delaware and construed in accordance
therewith without giving effect to principles of conflicts of laws.
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