Exhibit 10.03
FBR STOCK AND ANNUAL INCENTIVE PLAN
(as amended through April 26, 1999)
SECTION 1. Purpose; Definitions
The purpose of the Plan is to give Friedman, Billings, Ramsey Group,
Inc. (the "Company") a competitive advantage in attracting, retaining and
motivating officers and employees and to provide the Company and its
Subsidiaries and Affiliated Companies with an incentive compensation plan
providing incentives directly linked to the profitability of the Company's
businesses and/or increases in shareholder value.
For purposes of the Plan, the following terms are defined as set forth
below:
a. "Affiliated Company" means any corporation (or partnership, joint
venture, or other enterprise), of which the Company owns or controls, directly
or indirectly, 10% or more, but less than 50% of the outstanding shares of stock
normally entitled to vote for the election of directors (or comparable equity
participation and voting power).
b. "Award" means a Stock Appreciation Right, Stock Option, Restricted
Stock, unrestricted share of Common Stock, dividend equivalent, interest
equivalent, Bonus Award or other award granted under this Plan.
c. "Board" means the Board of Directors of the Company.
d. "Bonus Award" means an annual cash bonus award under Section 10 of this
Plan.
e. "Cause" means (except as otherwise provided by the Committee in the
agreement relating to any Award) (1) conviction of a participant for committing
a felony under federal law or the law of the state in which such action
occurred, (2) dishonesty in the course of fulfilling a participant's employment
duties or (3) willful and deliberate failure on the part of a participant to
perform his employment duties in any material respect. Notwithstanding the
foregoing, if a participant is a party to an employment agreement with the
Corporation or any Subsidiary or Affiliated Company that contains a definition
of "Cause," such definition shall apply to such participant for purposes of the
Plan except to the extent otherwise provided by the Committee in the agreement
relating to any Award.
f. "Change in Control" and "Change in Control Price" have the meanings set
forth in Sections 11(b) and (c), respectively.
g. "Code" means the Internal Revenue Code of 1986, as amended from time to
time, and any successor thereto.
h. "Committee" means a committee of two or more non-employee directors
selected by the Board provided, however, that with respect to any grants or
other determinations to be made in connection with Bonus Awards (including
without limitation the allocation of the Bonus Pool under Section 10(b)),
"Committee" shall mean the Board or the Executive Committee of the Board (unless
the Board specifically designates another committee of directors to grant and
administer Bonus Awards).
i. "Common Stock" means the Class A common stock, par value $0.01 per
share, of the Company.
j. "Company" means Friedman, Billings, Ramsey Group, Inc., a Virginia
corporation.
k. "Disability" means permanent and total disability as determined by the
Committee for purposes of the Plan.
l. "Exchange Act" means the Securities Exchange Act of 1934, as amended
from time to time, and any successor thereto.
m. "Fair Market Value" means, as of any given date, the closing price of
the Common Stock reported in the Wall Street Journal for the day prior to such
date, or if the Common Stock was not traded on the New York Stock Exchange on
such day, then for the last preceding day on which the Common Stock was traded.
If there is no regular public trading market for the Common Stock, Fair Market
Value shall be determined by such other source as the Committee may select.
n. "Incentive Stock Option" means any Stock Option designated as, and
qualified as, an "incentive stock option" within the meaning of Section 422 of
the Code. o. "NonQualified Stock Option" means any Stock Option that is not an
Incentive Stock Option.
o. "Performance Goals" means the performance goals established by the
Committee in connection with the grant of Restricted Stock or Performance p.
Units. Performance Goals may be established based on any of the following areas
of performance of the Company, or any Affiliated Company: asset growth; combined
net worth; debt to equity ratio; earnings per share; revenues; operating income;
operating cash flow; net income, before or after taxes; return on total capital,
equity, revenue or assets; total shareholder return; or changes in the market
price of the Common Stock.
q. "Performance Units" means an Award granted under Section 8.
r. "Plan" means the FBR Stock and Annual Incentive Plan, as set forth
herein and as hereinafter amended from time to time.
-2-
s. "Restricted Stock" means an Award granted under Section 7.
t. "Retirement" means retirement from employment with the Company, a
Subsidiary or an Affiliated Company as determined by the Committee for purposes
of an Award under the Plan.
u. "Stock Appreciation Right" means an Award granted under Section 6.
v. "Stock Option" means an Award granted under Section 5.
w. "Subsidiary" means: (i) for the purpose of an Incentive Stock Option,
any corporation (other than the Company) in an unbroken chain of corporations
beginning with the Company if, at the time of the granting of the Incentive
Stock Option, each of the corporations other than the last corporation in the
unbroken chain owns stock possessing 50% or more of the total combined voting
power of all classes of stock in one of the other corporations in such chain;
and (ii) for the purposes of any other Award, any corporation (or partnership,
joint venture, or other enterprise) of which the Company owns or controls,
directly or indirectly, 50% or more of the outstanding shares of stock normally
entitled to vote for the election of directors (or comparable equity
participation and voting power).
x. "Termination of Employment" means the termination of the participant's
employment with the Company and any Subsidiary or Affiliated Company. A
participant employed by a Subsidiary or an Affiliated Company shall also be
deemed to incur a Termination of Employment if the Subsidiary or Affiliated
Company ceases to be such a Subsidiary or Affiliated Company, as the case may
be, and the participant does not immediately thereafter become an employee of
the Company or another Subsidiary or Affiliated Company. Temporary absences
from employment because of illness, vacation or leave of absence and transfers
among the Company and its Subsidiaries, or, if the Committee so determines,
among the group consisting of the Company, its Subsidiaries and Affiliated
Companies, shall not be considered Terminations of Employment.
In addition, certain other terms used in the Plan have definitions provided
to them in the first place in which they are used herein.
SECTION 2. Administration
The Plan shall be administered by the Committee; provided, that any
authority granted to the Committee under the Plan may also be exercised by the
full Board.
The Committee shall have plenary authority to grant Awards pursuant to the
terms of the Plan or, in the Committee's discretion, in connection with awards
under other bonus plans or programs of the Company, to officers and employees of
the Company and its Subsidiaries and Affiliated Companies.
-3-
Among other things, the Committee shall have the authority, subject to the
terms of the Plan:
(a) To select the officers and employees to whom Awards may from time to
time be granted;
(b) To determine whether and to what extent Awards are to be granted
hereunder;
(c) To determine the number of shares of Common Stock to be covered by each
Stock Option granted hereunder;
(d) To determine the terms and conditions of any Award granted hereunder
(including, but not limited to, the option price (subject to Section 5(a)), any
vesting condition, restriction or limitation (which may be related to the
performance of the participant, the Company or any Subsidiary or Affiliated
Company) and any vesting acceleration or forfeiture or waiver regarding any
Award and the shares of Common Stock relating thereto, based on such factors as
the Committee shall determine; and
(e) To determine under what circumstances an Award may be settled in cash
or Common Stock under Section 5(g) or Section 6(d)(ii).
The Committee shall have the authority to adopt, alter and repeal such
administrative rules, guidelines and practices governing the Plan as it shall
from time to time deem advisable, to interpret the terms and provisions of the
Plan and any Award issued under the Plan (and any award certificate relating
thereto) and to otherwise supervise the administration of the Plan.
The Committee may act only by a majority of its members then in office,
except that the members thereof may delegate all or a portion of the
administration of the Plan to one or more senior managers of the Company.
Any determination made by the Committee or pursuant to delegated authority
pursuant to the provisions of the Plan with respect to any Award shall be made
in the sole discretion of the Committee or such delegate at the time of the
grant of the Award or, unless in contravention of any express term of the Plan,
at any time thereafter. All decisions made by the Committee or any appropriate
delegate pursuant to the provisions of the Plan shall be final and binding on
all persons, including the Company and Plan participants.
SECTION 3. Common Stock Subject to Plan
Subject to adjustment as described below, the total number of shares of
Common Stock reserved and available for grant pursuant to Awards under the Plan
shall not exceed 9,900,000 shares. Shares subject to Awards under the Plan may
be authorized and unissued shares or may be treasury shares, or both.
-4-
If any shares of Restricted Stock are forfeited, or if any Stock Option or
Stock Appreciation Right terminates without being exercised, or if any Stock
Appreciation Right (whether granted alone or in conjunction with a Stock Option)
is exercised for cash, shares subject to such Awards shall again be available
for distribution in connection with Awards under the Plan.
In the event of any change in corporate capitalization, such as a stock
split or a corporate transaction, such as any merger, consolidation, separation,
including a spin-off, or other distribution of stock or property (without regard
to the payment of any cash dividends by the Company in the ordinary course) of
the Company, any reorganization (whether or not such reorganization comes within
the definition of such term in Section 368 of the Code) or any partial or
complete liquidation of the Company, the Committee or Board may make such
substitution or adjustments in the aggregate number and kind of shares reserved
for issuance under the Plan, in the number, kind and option price, as
applicable, of shares subject to outstanding Stock Options, and in the number
and kind of shares subject to other outstanding Awards granted under the Plan,
and/or such other equitable substitution or adjustments as it may determine to
be appropriate in its sole discretion; provided, however, that the number of
shares subject to any Award shall always be a whole number. Such adjusted
option price shall also be used to determine the amount payable by the Company
upon the exercise of any Stock Appreciation Right associated with any Stock
Option.
SECTION 4. Eligibility
Officers and employees of the Company, a Subsidiary or an Affiliated
Company who are responsible for or contribute to the growth and profitability
of the business of the Company, a Subsidiary or an Affiliated Company are
eligible to be granted Awards under the Plan. No more than one million
(1,000,000) shares of Common Stock may be allocated to the Awards, including the
maximum amounts payable under or with respect to any Stock Option, Stock
Appreciation Right, unrestricted Common Stock, Restricted Stock, or Performance
Unit, that are granted to any participant during any single taxable year of the
Company.
SECTION 5. Stock Options
Stock Options may be granted alone or in addition to other Awards granted
under the Plan and may be of two types: Incentive Stock Options and
NonQualified Stock Options. Any Stock Option granted under the Plan shall be in
such form as the Committee may from time to time approve.
The Committee shall have the authority to grant any optionee Incentive
Stock Options, NonQualified Stock Options or both types of Stock Options (in
each case with or without Stock Appreciation Rights). Incentive Stock Options
may be granted only to employees of the Company and its Subsidiaries. To the
extent that any Stock Option is not designated as an Incentive Stock Option or,
even if so designated, does not qualify as an Incentive Stock Option, it shall
constitute a NonQualified Stock Option.
-5-
Stock Options shall be evidenced by option award certificates, the terms
and provisions of which may differ. An option award certificate shall indicate
on its face whether it is intended to be an award certificate for an Incentive
Stock Option or a NonQualified Stock Option. The grant of a Stock Option shall
occur on the date the Committee by resolution selects an individual to be a
participant in any grant of a Stock Option, determines the number of shares of
Common Stock to be subject to such Stock Option to be granted to such individual
and specifies the terms and provisions of the Stock Option, or on such later
date as is specified by the Committee.
Stock Options granted under the Plan shall be subject to the following
terms and conditions and shall contain such additional terms and conditions as
the Committee shall deem desirable:
(a) Option Price. The option price per share of Common Stock purchasable
under a Stock Option shall be determined by the Committee and, unless otherwise
determined by the Committee, shall not be less than the Fair Market Value of the
Common Stock subject to the Stock Option on the date of grant. The option price
per share shall not be decreased thereafter except pursuant to Section 3 of this
Plan.
(b) Option Term. The term of each Stock Option shall be fixed by the
Committee, but no Stock Option shall be exercisable more than 10 years after the
date the Stock Option is granted.
(c) Exercisability. Except as otherwise provided herein, Stock Options
shall be exercisable at such time or times and subject to such terms and
conditions as shall be determined by the Committee. Unless otherwise determined
by the Committee, Stock Options shall become exercisable ratably on each of the
first five anniversaries of the date of grant. In addition, the Committee may at
any time accelerate the exercisability of any Stock Option.
(d) Method of Exercise. Subject to the provisions of this Section 5, Stock
Options may be exercised, in whole or in part, at any time during the option
term by giving written notice of exercise, or notice in accordance with such
other procedures as may be established from time to time, to the Company or its
designated agent specifying the number of shares of Common Stock subject to the
Stock Option to be purchased.
Such notice shall be accompanied by payment in full of the purchase price
in cash or by certified or cashier's check or such other instrument as the
Company may accept. If approved by the Committee, payment, in full or in part,
may also be made in the form of unrestricted Common Stock already owned by the
optionee of the same class as the Common Stock subject to the Stock Option
(based on the Fair Market Value of the Common Stock on the date the Stock Option
is exercised); provided, however, that such already owned shares have been held
by the optionee for at least six months at the time of exercise unless otherwise
determined by the Committee; provided, further, that, in the case of an
Incentive Stock Option, the right to make a payment in the form of already owned
shares of Common Stock of the same class as the Common Stock subject to the
Stock Option may be authorized only at the time the Stock Option is granted.
-6-
In the discretion of the Committee, payment for any shares subject to a
Stock Option may also be made by delivering a properly executed exercise notice
to the Company, together with a copy of irrevocable instructions to a broker to
deliver promptly to the Company the amount of sale or loan proceeds necessary to
pay the purchase price, and, if requested, by the amount of any federal, state,
local or foreign withholding taxes. To facilitate the foregoing, the Company
may enter into agreements for coordinated procedures with one or more brokerage
firms.
In addition, in the discretion of the Committee, payment for any shares
subject to a Stock Option may also be made by instructing the Company or its
designated agent to withhold a number of such shares having a Fair Market Value
on the date of exercise equal to the aggregate exercise price of such Stock
Option.
No shares of Common Stock shall be issued until full payment therefor has
been made. An optionee shall have all of the rights of a shareholder of the
Company holding the class or series of Common Stock that is subject to such
Stock Option (including, if applicable, the right to vote the shares and the
right to receive dividends), when the optionee has given written notice of
exercise, has paid in full for such shares and, if requested, has given the
representation described in Section 3(a).
(e) Transferability of Stock Options. No Stock Option shall be transferable
by the optionee other than (i) by will or by the laws of descent and
distribution, or, in the Committee's discretion, pursuant to a written
beneficiary designation, (ii) pursuant to a qualified domestic relations order,
as defined in the Code or (iii) in the Committee's discretion, pursuant to a
gift to such optionee's "immediate family" members directly, or indirectly or by
means of a trust, partnership or limited liability company. All Stock Options
shall be exercisable, subject to the terms of this Plan, only by the optionee,
guardian, legal representative or beneficiary of the optionee or permitted
transferee, it being understood that the terms "holder" and "optionee" include
any such guardian, legal representative or beneficiary or transferee. For
purposes of this Section 5(e), "immediate family" shall mean, except as
otherwise defined by the Committee, the optionee's spouse, children, siblings,
stepchildren, grandchildren, parents, stepparents, grandparents, in-laws and
persons related by legal adoption. Such transferees may transfer a Stock Option
only by will or by the laws of descent and distribution.
(f) Termination by Death or Disability. Unless otherwise determined by the
Committee, if an optionee's Termination Employment is by reason of death or
Disability, any Stock Option held by such optionee may thereafter be exercised,
to the extent exercisable at the time of such termination, for a period of
twelve (12) months (or such other period as the Committee may specify in the
option agreement) from the date of such termination or until the expiration of
the stated term of such Stock Option, whichever period is the shorter.
(g) Termination by Reason of Retirement. Unless otherwise determined by the
Committee, if an optionee's Termination of Employment is by reason of
Retirement, any Stock Option held by such optionee may thereafter be exercised
by the optionee, to the extent it was exercisable at the time of such
Retirement, or on such accelerated basis as the Committee may determine, for a
period of five (5) years (or such other period as the Committee may specify in
the option
-7-
agreement) from the date of such Termination of Employment or until the
expiration of the stated term of such Stock Option, whichever period is the
shorter; provided, however, that if the optionee dies within such period any
unexercised Stock Option held by such optionee shall, notwithstanding the
expiration of such period, continue to be exercisable to the extent to which it
was exercisable at the time of death for a period of twelve (12) months from the
date of such death or until the expiration of the stated term of such Stock
Option, whichever period is the shorter.
(h) Other Termination. Unless otherwise determined by the Committee, if an
optionee's Termination of Employment is for any reason other than death,
Disability or Retirement, any Stock Option held by such optionee, to the extent
then exercisable, or on such accelerated basis as the Committee may determine,
may be exercised for the lesser of three (3) months from the date of such
Termination of Employment or the balance of such Stock Option's term; provided,
however, that if the optionee dies within such three (3) month period, any
unexercised Stock Option held by such optionee shall, notwithstanding the
expiration of such three (3) month period, continue to be exercisable to the
extent to which it was exercisable at the time of death for a period of twelve
(12) months from the date of such death or until the expiration of the stated
term of such Stock Option, whichever period is the shorter.
(i) Cashing Out of Stock Option. On receipt of written notice of exercise,
the Committee may elect to cash out all or part of the portion of the shares of
Common Stock for which a Stock Option is being exercised by paying the optionee
an amount, in cash or Common Stock, equal to the excess of the Fair Market Value
of the Common Stock over the option price times the number of shares of Common
Stock for which the Option is being exercised on the effective date of such
cash-out.
(j) Change in Control Cash-out. Notwithstanding any other provision of the
Plan, during the 60-day period from and after a Change in Control (the "Exercise
Period"), unless the Committee shall determine otherwise at the time of grant,
an optionee shall have the right, whether or not the Stock Option is fully
exercisable and in lieu of the payment of the exercise price for the shares of
Common Stock being purchased under the Stock Option and by giving notice to the
Company, to elect (within the Exercise Period) to surrender all or part of the
Stock Option to the Company and to receive cash, within 30 days of such notice,
in an amount equal to the amount by which the Change in Control Price per share
of Common Stock on the date of such election shall exceed the exercise price per
share of Common Stock under the Stock Option (the "Spread") multiplied by the
number of shares of Common Stock granted under the Stock Option as to which the
right granted under this Section 5(j) shall have been exercised. Notwithstanding
the foregoing, if any right granted pursuant to this Section 5(j) would make a
Change in Control transaction ineligible for pooling-of-interests accounting
under APB No. 16 that but for the nature of such grant would otherwise be
eligible for such accounting treatment, the Committee shall have the ability to
substitute for the cash payable pursuant to such right Common Stock with a Fair
Market Value equal to the cash that would otherwise be payable hereunder.
(k) Deferral of Option Shares. The Committee may from time to time
establish procedures pursuant to which an optionee may elect to defer, until a
time or times later than the
-8-
exercise of an Option, receipt of all or a portion of the shares subject to such
Option and/or to receive cash at such later time or times in lieu of such
deferred shares, all on such terms and conditions as the Committee shall
determine. If any such deferrals are permitted, then notwithstanding Section
5(d) above, an optionee who elects such deferral shall not have any rights as a
stockholder with respect to such deferred shares unless and until certificates
representing such shares are actually delivered to the optionee with respect
thereto, except to the extent otherwise determined by the Committee.
SECTION 6. Stock Appreciation Rights
(a) Grant and Exercise. Stock Appreciation Rights may be granted in
conjunction with all or part of any Stock Option granted under the Plan. In the
case of a NonQualified Stock Option, such rights may be granted either at or
after the time of grant of such Stock Option. In the case of an Incentive Stock
Option, such rights may be granted only at the time of grant of such Stock
Option. In addition, Stock Appreciation Rights may be granted without
relationship to a Stock Option to employees residing in foreign jurisdictions,
where the grant of a Stock Option is impossible or impracticable because of
securities or tax laws or other governmental regulations.
(b) Freestanding Stock Appreciation Rights. A Stock Appreciation Right
granted without relationship to a Stock Option, pursuant to Section 6(a), shall
be exercisable as determined by the Committee, but in no event after ten years
from the date of grant. The base price of a Stock Appreciation Right granted
without relationship to a Stock Option shall be the Fair Market Value of a share
of Common Stock on the date of grant. A Stock Appreciation Right granted without
relationship to a Stock Option shall entitle the holder, upon receipt of such
right, to a cash payment determined by multiplying (i) the difference between
the base price of the Stock Appreciation Right and the Fair Market Value of a
share of Common Stock on the date of exercise of the Stock Appreciation Right,
by (ii) the number of shares of Common Stock as to which such Stock Appreciation
Right shall have been exercised. A freestanding Stock Appreciation Right may be
exercised by giving written notice of exercise to the Company or its designated
agent specifying the number of shares of Common Stock as to which such Stock
Appreciation Right is being exercised.
(c) Tandem Stock Appreciation Rights. A Stock Appreciation Right granted in
conjunction with a Stock Option may be exercised by an optionee in accordance
with Section 6(d) by surrendering the applicable portion of the related Stock
Option in accordance with procedures established by the Committee. Upon such
exercise and surrender, the optionee shall be entitled to receive an amount
determined in the manner prescribed in Section 6(d). Stock Options which have
been so surrendered shall no longer be exercisable to the extent the related
Stock Appreciation Rights have been exercised. A Stock Appreciation Right shall
terminate and no longer be exercisable upon the termination or exercise of the
related Stock Option.
(d) Tandem Stock Appreciation Right Terms and Conditions. Stock
Appreciation Rights granted in conjunction with a Stock Option shall be subject
to such terms and conditions as shall be determined by the Committee, including
the following:
-9-
(i) Stock Appreciation Rights shall be exercisable only at such time
or times and to the extent that the Stock Options to which they relate are
exercisable in accordance with the provisions of Section 5 and this Section
6.
(ii) Upon the exercise of a Stock Appreciation Right, an optionee
shall be entitled to receive an amount in cash, equal to the excess of the
Fair Market Value of one share of Common Stock over the option price per
share specified in the related Stock Option multiplied by the number of
shares in respect of which the Stock Appreciation Right shall have been
exercised.
(iii) Stock Appreciation Rights shall be transferable only to
permitted transferees of the underlying Stock Option in accordance with
Section 5(e). (iv) Upon the exercise of a Stock Appreciation Right, the
Stock Option or part thereof to which such Stock Appreciation Right is
related shall be deemed to have been exercised for the purpose of the
limitation set forth in Section 3 on the number of shares of Common Stock
to be issued under the Plan, but only to the extent of the number of shares
covered by the Stock Appreciation Right at the time of exercise based on
the value of the Stock Appreciation Right at such time.
SECTION 7. Bonus Shares and Restricted Stock
(a) Administration. Awards of shares of Common Stock or Restricted Stock
may be made either alone or in addition to other Awards granted under the Plan.
In addition, a participant may receive unrestricted shares of Common Stock or
Restricted Stock in lieu of certain cash payments awarded under other plans or
programs of the Company. The Committee shall determine the officers and
employees to whom and the time or times at which grants of unrestricted shares
of Common Stock and Restricted Stock will be awarded, the number of shares to be
awarded to any participant, the conditions for vesting, the time or times within
which such Awards may be subject to forfeiture and any other terms and
conditions of the Awards, in addition to those contained in Section 7(c).
(b) Awards and Certificates. Awards of unrestricted shares of Common Stock
and Restricted Stock shall be evidenced in such manner as the Committee may deem
appropriate, including book-entry registration or delivery of one or more stock
certificates to the participant, or, in the case of Restricted Stock, a
custodian or escrow agent. Any stock certificate issued in respect of
unrestricted shares or shares of Restricted Stock shall be registered in the
name of such participant. The Committee may require that the stock certificates
evidencing shares of Restricted Stock be held in custody or escrow by the
Company or its designated agent until the restrictions thereon shall have lapsed
and that, as a condition of any Award of Restricted Stock, the participant shall
have delivered a stock power, endorsed in blank, relating to the Common Stock
covered by such Award.
-10-
(c) Terms and Conditions. Shares of Restricted Stock shall be subject to
the following terms and conditions:
(i) The Committee may, prior to or at the time of grant, condition
the grant or vesting, as applicable, of an award of Restricted Stock upon
the attainment of Performance Goals. The Committee may also condition the
grant or vesting of Restricted Stock upon the continued service of the
participant. The conditions for grant or vesting and the other provisions
of Restricted Stock Awards (including without limitation any applicable
Performance Goals) need not be the same with respect to each recipient. The
Committee may at any time, in its sole discretion, accelerate or waive, in
whole or in part, any of the foregoing restrictions.
(ii) Subject to the provisions of the Plan and the terms of the
Restricted Stock Award, during the period, if any, set by the Committee,
commencing with the date of such Award for which such participant's
continued service is required (the "Restriction Period"), and until the
later of (A) the expiration of the Restriction Period and (B) the date the
applicable Performance Goals (if any) are satisfied, the participant shall
not be permitted to sell, assign, transfer, pledge or otherwise encumber
shares of Restricted Stock; provided that the foregoing shall not prevent a
participant from pledging Restricted Stock as security for a loan, the sole
purpose of which is to provide funds to pay the option price for Stock
Options.
(iii) Except as provided in this paragraph (iii) and Sections 7(c)(i)
and 7(c)(ii) or the terms of the Restricted Stock Award, the participant
shall have, with respect to the shares of Restricted Stock, all of the
rights of a shareholder of the Company holding the class or series of
Common Stock that is the subject of the Restricted Stock, including, if
applicable, the right to vote the shares and the right to receive any cash
dividends. If so determined by the Committee under the applicable terms of
the Restricted Stock Award and subject to Section 15(e) of the Plan, (A)
cash dividends on the class or series of Common Stock that is the subject
of the Restricted Stock Award shall be automatically deferred and
reinvested in additional Restricted Stock, held subject to the vesting of
the underlying Restricted Stock, or held subject to meeting Performance
Goals applicable only to dividends, (B) dividends payable in Common Stock
shall be paid in the form of Restricted Stock of the same class as the
Common Stock with which such dividend was paid, held subject to the vesting
of the underlying Restricted Stock, or held subject to meeting Performance
Goals applicable only to dividends and (C) dividends paid in other property
shall be held subject to the vesting of the underlying Restricted Stock.
(iv) Except to the extent otherwise provided under the applicable
terms of the Restricted Stock Award and Sections 7(c)(i), 7(c)(ii), 7(c)(v)
and 11(a)(ii), upon a participant's Termination of Employment for any
reason during the Restriction Period or before the applicable Performance
Goals are satisfied, all shares still subject to restriction shall be
forfeited by the participant.
-11-
(v) Except to the extent otherwise provided in Section 11(a)(ii), in
the event of a participant's Termination of Employment by reason of
Retirement, the Committee shall have the discretion to waive, in whole or
in part, any or all remaining restrictions (other than, in the case of
Restricted Stock with respect to which a participant is a Covered Employee,
satisfaction of the applicable Performance Goals unless the participant's
employment is terminated by reason of death or Disability) with respect to
any or all of such participant's shares of Restricted Stock.
(vi) If and when any applicable Performance Goals are satisfied and
the Restriction Period expires without a prior forfeiture of the Restricted
Stock, unlegended certificates for such shares shall be delivered to the
participant upon surrender of the legended certificates, or the
restrictions on such shares shall be removed from the book-entry
registration.
SECTION 8. Performance Units
(a) Administration. Performance Units may be awarded either alone or in
addition to other Awards granted under the Plan. The Committee shall determine
the officers and employees to whom, and the time or times at which, Performance
Units shall be awarded, the number of Performance Units to be awarded to any
participant, the duration of the Award cycle and any other terms and conditions
of the Award, in addition to those contained in Section 8(b).
(b) Terms and Conditions. Performance Units Awards shall be subject to the
following terms and conditions.
(i) The Committee may, prior to or at the time of the grant,
designate Performance Units, in which event it shall condition the
settlement thereof upon the attainment of Performance Goals. The Committee
may also condition the settlement thereof upon the continued service of the
participant. The provisions of such Awards (including without limitation
any applicable Performance Goals) need not be the same with respect to each
recipient. Subject to the provisions of the Plan and the Performance Units
Agreement referred to in Section 8(b)(vi), Performance Units may not be
sold, assigned, transferred, pledged or otherwise encumbered during the
Award cycle.
(ii) Except to the extent otherwise provided in the applicable
Performance Unit Agreement and Sections 8(b)(ii) and 11(a)(iii), upon a
participant's Termination of Employment for any reason during the Award
cycle or before any applicable Performance Goals are satisfied, all rights
to receive cash or stock in settlement of the Performance Units shall be
forfeited by the participant.
(iii) Except to the extent otherwise provided in Section 11(a)(iii),
in the event that a participant's employment is terminated (other than for
Cause), or in the event of a participant's Retirement, the Committee shall
have the discretion to waive, in whole or in
-12-
part, any or all remaining payment limitations with respect to any or all
of such participant's Performance Units.
(iv) A participant may elect to further defer receipt of cash or
shares in settlement of Performance Units for a specified period or until a
specified event, subject in each case to the Committee's approval and to
such terms as are determined by the Committee (the "Elective Deferral
Period"). Subject to any exceptions adopted by the Committee, such election
must generally be made prior to commencement of the Award cycle for the
Performance Units in question.
(v) At the expiration of the Award cycle, the Committee shall
evaluate the Company's performance in light of any Performance Goals for
such Award, and shall determine the number of Performance Units granted to
the participant which have been earned, and the Committee shall then cause
to be delivered (A) a number of shares of Common Stock equal to the number
of Performance Units determined by the Committee to have been earned, or
(B) cash equal to the Fair Market Value of such number of shares of Common
Stock to the participant as determined by the Committee in its discretion
(subject to any deferral pursuant to Section 8(b)(iv)).
(vi) Each Award shall be confirmed by, and be subject to, the terms
of a Performance Unit Agreement.
SECTION 9. Dividend Equivalents and Interest Equivalents
(a) The Committee may provide that a participant to whom a Stock Option has
been awarded, which is exercisable in whole or in part at a future time for
shares of Common Stock (such shares, the "Option Shares") shall be entitled to
receive an amount per Option Share, equal in value to the cash dividends, if
any, paid per share of Common Stock on issued and outstanding shares, as of the
dividend record dates occurring during the period between the date of the Award
and the time each such Option Share is delivered pursuant to the exercise of
such Stock Option. Such amounts (herein called "dividend equivalents") may, in
the discretion of the Committee, be:
(i) paid in cash or shares of Common Stock from time to time prior to
or at the time of the delivery of such shares of Common Stock or upon
expiration of the Stock Option if it shall not have been fully exercised
(except that payment of the dividend equivalents on an Incentive Stock
Option may not be made prior to exercise); or
(ii) converted into contingently credited shares of Common Stock
(with respect to which dividend equivalents shall accrue) in such manner,
at such value, and deliverable at such time or times, as may be determined
by the Committee.
Such shares of Common Stock (whether delivered or contingently credited) shall
be charged against the limitations set forth in Section 3.
-13-
(b) The Committee, in its discretion, may authorize payment of interest
equivalents on any portion of any Award payable at a future time in cash,
and interest equivalents on dividend equivalents which are payable in cash
at a future time.
SECTION 10. Annual Cash Bonus Awards
(a) Bonus Pool. For each fiscal year of the Company, a bonus pool (the
"Bonus Pool") equal to up to 30% of the Company's adjusted pre-tax net income
for such fiscal year (prior to taking into account any payments under this
Section 10 for such fiscal year) will be established by the Committee.
Notwithstanding the foregoing, if the Company's aggregate compensation and
benefits expenses with respect to the fiscal year (including payments under this
Section 10) would otherwise exceed 55% of the Company's revenues for such fiscal
year (the "Maximum Expense"), the Committee shall reduce the Bonus Pool to the
greatest amount which would cause compensation and benefits expense for such
fiscal year not to exceed the Maximum Expense.
(b) Allocation of Bonus Pool. The Committee shall determine the allocation
of the Bonus Pool for each fiscal year. Such allocation may be made at any time
prior to payment of Bonus Awards. In the event the Bonus Pool is reduced
pursuant to paragraph (a) above, the Committee shall determine the required
reductions in Bonus Awards. Such reduction need not be on a pro rata basis among
the participants.
(c) Payment of Awards. Bonus Awards under the Plan shall be paid in cash as
soon as practicable following the end of the applicable fiscal year, but in any
event within 90 days following the end of such fiscal year.
(d) Termination of Employment. A participant shall not be entitled to
receive payment of a Bonus Award, unless the Committee determines otherwise, if
at any time prior to the end of the fiscal year the participant's Termination of
Employment occurs or, if at any time, following the end of the fiscal year the
participant's employment is terminated for Cause. In the event that a
participant's Termination of Employment (other than for Cause) occurs following
the end of the applicable fiscal year, such participant shall be entitled to
receive payment of his or her Bonus Award for such fiscal year.
SECTION 11. Change in Control Provisions
(a) Impact of Event. Notwithstanding any other provision of the Plan to the
contrary, in the event of a Change in Control:
(i) Any Stock Options outstanding as of the date such Change in
Control is determined to have occurred, and which are not then exercisable
and vested, shall become fully exercisable and vested to the full extent of
the original grant.
-14-
(ii) The restrictions and deferral limitations applicable to any
Restricted Stock shall lapse, and such Restricted Stock shall become free
of all restrictions and become fully vested and transferable to the full
extent of the original grant.
(iii) All Performance Units shall be considered to be earned and
payable in full, and any other deferred or other restrictions shall lapse
and such Performance Units shall be settled in cash or Common Stock (as
determined by the Committee) as promptly as is practicable.
(iv) Unless the Board determines to continue the Bonus Pool for the
remainder of the fiscal year, Bonus Awards for the fiscal year in which the
Change of Control occurs shall be paid out based upon calculations of
adjusted pre-tax net income and Maximum Expense under Section 10 through
the Change in Control as if the fiscal year had ended on the Change in
Control date.
(b) For purposes of the Plan, a "Change in Control" shall mean the
happening of any of the following events:
(i) acquisition by any individual, entity or group (with the meaning
of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934, as
amended (the "Exchange Act")) (a "Person") of beneficial ownership (within
the meaning of Rule 13d-3 promulgated under the Exchange Act) of 50% or
more of either (A) the then outstanding shares of common stock of the
Company (the "Outstanding Company Common Stock") or (B) the combined voting
power of the then outstanding voting securities of the Company entitled to
vote generally in the election of directors (the "Outstanding Company
Voting Securities"); provided, however, that, for purposes of this
subsection (i), the following acquisitions shall not constitute a Change of
Control: (1) any acquisition directly from the Company, (2) any acquisition
by the Company, (3) any acquisition by any employee benefit plan (or
related trust) sponsored or maintained by the Company or any corporation
controlled by the Company, (4) any acquisition by any corporation pursuant
to a transaction which complies with clauses (A), (B) and (C) of subsection
(iii) of this Section 11(b) or (5) any acquisition of beneficial ownership
by Emanual Friedman, Eric Billings, or W. Russell Ramsey (the "Founders"),
or any entity that is controlled by one or more of the Founders (the
"Founder Affiliates"); or
(ii) Individuals who, as of the date hereof, constitute the Board
(the "Incumbent Board") cease to constitute at least a majority of the
Board; provided, however, that any individual becoming a director
subsequent to the date hereof whose election, or nomination for election by
the Company's shareholders, was approved by a vote of at least a majority
of the directors then comprising the Incumbent Board shall be considered as
though such individual were a member of the Incumbent Board, but excluding,
for this purpose, any such individual whose initial assumption of office
occurs as a result of an actual or threatened election contest with respect
to the election or removal of directors or other actual or threatened
solicitation of proxies or consents by or on behalf of a Person other than
the Board; or
-15-
(iii) Approval by the shareholders of the Company of a
reorganization, merger or consolidation or sale or other disposition of all
or substantially all of the assets of the Company or the acquisition of
assets or stock of another corporation (a "Business Combination"), in each
case, unless, following such Business Combination, (A) all or substantially
all of the individuals and entities who were the beneficial owners,
respectively, of the Outstanding Company Common Stock and Outstanding
Company Voting Securities immediately prior to such Business Combination
beneficially own, directly or indirectly, more than 60% of, respectively,
the then outstanding shares of common stock and the combined voting power
of the then outstanding voting securities entitled to vote generally in the
election of directors, as the case may be, of the corporation resulting
from such Business Combination (including, without limitation, a
corporation which as a result of such transaction owns the Company or all
or substantially all of the Company's assets either directly or through one
or more subsidiaries) in substantially the same proportions as their
ownership, immediately prior to such Business Combination of the
Outstanding Company Common Stock and Outstanding Company Voting Securities,
as the case may be, (B) no Person (excluding any corporation resulting from
such Business Combination or any employee benefit plan (or related trust)
of the Company or such corporation resulting from such Business Combination
or the Founders or Founder Affiliates) beneficially owns, directly or
indirectly, 50% or more of, respectively, the then outstanding shares of
common stock of the corporation resulting from such Business Combination or
the combined voting power of the then outstanding voting securities of such
corporation except to the extent that such ownership existed prior to the
Business Combination and (C) at least a majority of the members of the
board of directors of the corporation resulting from such Business
Combination were members of the Incumbent Board at the time of the
execution of the initial agreement, or of the action of the Board,
providing for such Business Combination; or
(iv) Approval by the shareholders of the Company of a complete
liquidation or dissolution of the Company.
(c) Change in Control Price. For purposes of the Plan, "Change in Control
Price" means the higher of (i) the highest reported sales price, regular way, of
a share of Common Stock in any transaction reported on the New York Stock
Exchange Composite Tape or other national exchange on which such shares are
listed or on NASDAQ during the 60-day period prior to and including the date of
a Change in Control or (ii) if the Change in Control is the result of a tender
or exchange offer or a Corporate Transaction, the highest price per share of
Common Stock paid in such tender or exchange offer or Corporate Transaction;
provided, however, that in the case of Incentive Stock Options and Stock
Appreciation Rights relating to Incentive Stock Options, the Change in Control
Price shall be in all cases the Fair Market Value of the Common Stock on the
date such right under Section 5(j) is exercised. To the extent that the
consideration paid in any such transaction described above consists all or in
part of securities or other non-cash consideration, the value of such securities
or other non-cash consideration shall be determined in the sole discretion of
the Board.
-16-
SECTION 12. Tax Offset Bonuses
At the time an Award is made hereunder or at any time thereafter, the
Committee may grant to the participant receiving such Award the right to receive
a cash payment in an amount specified by the Committee, to be paid at such time
or times (if ever) as the Award results in compensation income to the
participant, for the purpose of assisting the participant to pay the resulting
taxes, all as determined by the Committee and on such other terms and conditions
as the Committee shall determine.
SECTION 13. Amendment and Termination
The Board may amend, alter, or discontinue the Plan, but no amendment,
alteration or discontinuation shall be made which would impair the rights of
participants under any Award theretofore granted without the participants'
consent. In addition, no such amendment shall be made without the approval of
the Company's shareholders to the extent such approval is required by law or
agreement.
The Committee may amend the terms of any Stock Option or other Award
theretofore granted, prospectively or retroactively, but no such amendment shall
impair the rights of any holder without the holder's consent.
Subject to the above provisions, the Board shall have authority to amend
the Plan to take into account changes in law and tax and accounting rules as
well as other developments, and to grant Awards which qualify for beneficial
treatment under such rules without stockholder approval.
SECTION 14. Unfunded Status of Plan
It is presently intended that the Plan constitute an "unfunded" plan for
incentive and deferred compensation. The Committee may authorize the creation
of trusts or other arrangements to meet the obligations created under the Plan
to deliver Common Stock or make payments; provided, however, that unless the
Committee otherwise determines, the existence of such trusts or other
arrangements is consistent with the "unfunded" status of the Plan.
SECTION 15. General Provisions
(a) The Committee may require each person purchasing or receiving shares
pursuant to an Award to represent to and agree with the Company in writing that
such person is acquiring the shares without a view to the distribution thereof.
The certificates for such shares may include any legend, or, in the case of
book-entry registration any notation, which the Committee deems appropriate to
reflect any restrictions on transfer.
Notwithstanding any other provision of the Plan or certificates made
pursuant thereto, the Company shall not be required to issue or deliver any
stock certificate or certificates for shares of
-17-
Common Stock, or account for such shares by book-entry registration, under the
Plan prior to fulfillment of all of the following conditions:
(1) Listing or approval for listing upon notice of issuance, of such
shares on the New York Stock Exchange, Inc., or such other securities
exchange as may at the time be the principal market for the Common Stock;
(2) Any registration or other qualification of such shares of the
Company under any state, federal or foreign law or regulation, or the
maintaining in effect of any such registration or other qualification which
the Committee shall, in its absolute discretion upon the advice of counsel,
deem necessary or advisable; and
(3) Obtaining any other consent, approval, or permit from any state
or federal governmental agency or foreign governmental body which the
Committee shall, in its absolute discretion after receiving the advice of
counsel, determine to be necessary or advisable.
(b) Nothing contained in the Plan shall prevent the Company or any
Subsidiary or Affiliated Company from adopting other or additional compensation
arrangements for its employees.
(c) Adoption of the Plan shall not confer upon any employee any right to
continued employment, nor shall it interfere in any way with the right of
the Company or a Subsidiary or an Affiliated Company to terminate the
employment of any employee at any time.
(d) No later than the date as of which an amount first becomes includible
in the gross income of the participant for federal income tax purposes with
respect to any Award under the Plan, the participant shall pay to the Company,
or make arrangements satisfactory to the Company regarding the payment of, any
federal, state, local or foreign taxes of any kind required by law to be
withheld with respect to such amount. Unless otherwise determined by the
Company, 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 obligations of the Company under the Plan shall be conditional
on such payment or arrangements, and the Company and its Subsidiaries or
Affiliated Companies shall, to the extent permitted by law, have the right to
deduct any such taxes from any payment otherwise due to the participant. The
Committee may establish such procedures as it deems appropriate, including
making irrevocable elections, for the settlement of withholding obligations with
Common Stock.
(e) Reinvestment of dividends in additional Restricted Stock at the time of
any dividend payment shall only be permissible if sufficient shares of Common
Stock are available under Section 3 for such reinvestment (taking into account
then outstanding Stock Options and other Awards).
(f) The Committee, in its sole discretion, may establish such procedures as
it deems appropriate for a participant to designate a beneficiary to whom any
amounts payable in the event
-18-
of the participant's death are to be paid or by whom any rights of the
participant, after the participant's death, may be exercised.
(g) In the case of a grant of an Award to any employee of a Subsidiary or
Affiliated Company, the Company may, if the Committee so directs, issue or
transfer the shares of Common Stock, if any, covered by the Award to the
Subsidiary or Affiliated Company, for such lawful consideration as the Committee
may specify, upon the condition or understanding that the Subsidiary or
Affiliated Company will transfer the shares of Common Stock to the employee in
accordance with the terms of the Award specified by the Committee pursuant to
the provisions of the Plan.
(h) The Plan and all Awards made and actions taken thereunder shall be
governed by and construed in accordance with the laws of the State of Virginia,
without reference to principles of conflict of laws.
SECTION 16. Effective Date of Plan
The Plan (other than Section 10, which shall be effective from and after
January 1, 1998 so long as the initial public offering of the Common Stock has
become effective by such date) shall be effective immediately prior to the date
on which the registration statement filed by the Company under the Securities
Act of 1933, as amended, registering the initial public offering of the Common
Stock is declared effective.
-19-