EXHIBIT 10.25
CAPSTEAD MORTGAGE CORPORATION AND SUBSIDIARIES
1994 FLEXIBLE LONG TERM INCENTIVE PLAN
EXHIBIT 10.25
CAPSTEAD MORTGAGE CORPORATION
1994 FLEXIBLE LONG TERM INCENTIVE PLAN
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Section 1. PURPOSE OF THE PLAN
The purposes of the Capstead Mortgage Corporation 1994 Flexible Long Term
Incentive Plan (the "Plan") are to promote the interests of Capstead Mortgage
Corporation (together with any successor thereto, the "Company") and its
stockholders by enabling the Company to attract, motivate, reward and retain key
employees and to encourage the holding of proprietary interests in the Company
by persons who occupy key positions in the Company or its Affiliates by enabling
the Company to offer such key employees performance-based stock incentives and
other equity interests in the Company and other incentive awards that recognize
the creation of value for the stockholders of the Company and promote the
Company's long-term growth and success. To achieve this purpose, eligible
persons may receive stock options, Stock Appreciation Rights, Restricted Stock,
Performance Awards, performance stock, Dividend Equivalent Rights and any other
Awards, or any combination thereof.
Section 2. DEFINITIONS
As used in this Plan, the following terms shall have the meanings set forth
below unless the content otherwise requires:
2.1 "Affiliate" shall mean (i) any corporation, partnership or
other entity that, directly or indirectly, is controlled by the Company
(ii) any entity in which the Company has a significant equity interest and
(iii) any entity that provides substantial management advisory services
for the Company, in each case as determined by the Committee.
2.2 "Award" shall mean a stock option, Stock Appreciation Right,
Restricted Stock, Performance Award, performance stock, Dividend Equivalent
Right or any other Award under the Plan.
2.3 "Board" shall mean the Board of Directors of the Company, as
the same may be constituted from time to time.
2.4 "Change in Control" shall mean, after the effective date of
this Plan, (i) the occurrence of an event of a nature that would be
required to be reported in response to Item 1 or Item 2 of a Form 8-K
Current Report of the Company promulgated pursuant to Sections 13 and
15(d) of the Securities Exchange Act of 1934, as amended; provided that,
without limitation, such a Change in Control shall be deemed to have
occurred if (a) any "person," as such term is used in Sections 13(d) and
14(d) of the Exchange Act (other than the Company, any trustee or other
fiduciary holding securities under any employee benefit plan of the
Company, or any company owned, directly or indirectly, by the stockholders
of the Company in substantially the same proportions as their ownership
of stock of the Company), is or becomes the "beneficial owner" (as defined
in Rule 13d-3 under the Exchange Act, directly or indirectly, of
securities of the Company representing twenty-five percent (25%) or more
of the combined voting power of the Company's then outstanding securities
or (b) during any period of two consecutive years, individuals who at the
beginning of such period constitute the Board cease for any reason to
constitute at least a majority thereof, unless the election by the Board
or the nomination for election by the Company's stockholders was approved
by a vote of at least two-thirds (2/3) of the directors then still in
office who either were directors
at the beginning of the two-year period or whose election or nomination for
election was previously so approved; (ii) the stockholders of the Company
approve a merger or consolidation of the Company with any other
corporation, other than a merger or consolidation that would result in the
voting securities of the Company outstanding immediately prior thereto
continuing to represent (either by remaining outstanding or by being
converted into voting securities of the surviving entity) more than eighty
percent (80%) of the combined voting power of the voting securities of the
Company or such surviving entity outstanding immediately after such merger
or consolidation; provided, however, that a merger or consolidation
effected to implement a reorganization or recapitalization of the Company,
or a similar transaction (collectively, a "Reorganization"), in which no
"person" acquires more than twenty percent (20%) of the combined voting
power of the Company's then outstanding securities shall not constitute a
Change in Control of the Company; or (iii) the stockholders of the Company
approve a plan of complete liquidation of the Company or an agreement for
the sale or disposition by the Company of all or substantially all of the
Company's assets.
2.5 "Code" shall mean the Internal Revenue Code of 1986, as amended
from time to time.
2.6 "Committee" shall mean a committee of the Board, which shall
consist solely of not less than two (2) members of the Board who are
appointed by, and serve at the pleasure of, the Board and who are (i)
"disinterested" within the meaning of Rule 16b-3 of the General Rules and
Regulations of the Exchange Act and (ii) "outside directors," as required
under Section 162(m) of the Code and such Treasury Regulations as may be
promulgated thereunder. The Plan shall be administered and interpreted by
the Committee, which Committee meets the requirements for "disinterested
administration" within the requirements of Rule 16b-3 and any future rule
promulgated therefor during the duration of the Plan. The Board may amend
the Plan to modify the definition of Committee within the limits of Rule
16b-3 to assure that the Plan is administered by "disinterested" directors.
2.7 "Common Stock" shall mean the Common Stock, par value $.01 per
share, of the Company.
2.8 "Disability" shall mean permanent and total inability to engage
in any substantial gainful activity by reason of any medically determinable
physical or mental impairment which can be expected to result in death or
which has lasted or can be expected to last for a continuous period of not
less than twelve (12) months, as determined in the sole and absolute
discretion of the Committee.
2.9 "Dividend Equivalent Right" shall mean the right of the holder
thereof to receive credits based on the cash dividends that would have been
paid on the Shares specified in the Award if the Shares were held by the
holder to whom the Award is made.
2.10 "Exchange Act" shall mean the Securities Exchange Act of 1934,
as amended from time to time.
2.11 "Fair Market Value" shall mean with respect to the Shares, as of
any date, (i) the last reported sales price regular way on the New York
Stock Exchange or, if not reported for the New York Stock Exchange, on the
Composite Tape, or, in case no such sale takes place on such day, the
average of the reported closing bid and asked quotations on the New York
Stock Exchange; (ii) if the Shares are not listed on the New York Stock
Exchange or no such quotations are available, the closing price of the
Shares as reported by the National Market System, or similar organization,
or, if no such quotations are available, the average of the high bid and
low asked quotations in the over-the-counter market as reported by the
National Quotation Bureau Incorporated, or similar organization; or (iii)
in the event that there shall be no public market for the Shares, the fair
market value of the Shares as determined (which determination shall
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be conclusive) in good faith by the Committee, based upon the value of the
Company as a going concern, as if such Shares were publicly owned stock,
but without any discount with respect to minority ownership.
2.12 "Incentive Stock Option" shall meany any stock option awarded
under this Plan intended to be and designated as an "Incentive Stock
Option" under Section 422 of the Code or any successor provision.
2.13 "Non-Tandem Stock Appreciation Right" shall mean any Stock
Appreciation Right granted alone and not in connection with an Award which
is a stock option.
2.14 "Non-Qualified Stock Option" shall mean any stock option awarded
under this Plan that is not an Incentive Stock Option.
2.15 "Optionee" shall mean any person who has been granted a stock
option under this Plan and who has executed a written stock option
agreement with the Company reflecting the terms of such grant.
2.16 "Plan" shall mean the Capstead Mortgage Corporation 1994
Flexible Long Term Incentive Plan set forth herein.
2.17 "Performance Award" shall mean any Award hereunder of Shares,
units or rights based upon, payable in, or otherwise related to, Shares
(including Restricted Stock), or cash of an equivalent value, as the
Committee may determine, at the end of a specified performance period
established by the Committee.
2.18 "Reload Option" shall mean a stock option as defined in
subsection 6.7(b) herein.
2.19 "Restricted Stock" shall mean any Award of Shares under this
Plan that are subject to restrictions or risk of forfeiture.
2.20 "Retirement" shall mean termination of employment, other than
discharge for cause, after age 65 or on or before age 65 if pursuant to the
terms of any retirement plan maintained by the Company or any of its
Affiliates in which such person participates.
2.21 "Senior Officers" shall mean the Senior Officers of the Company
as set forth in subsection 6.5(e) herein.
2.22 "Shares" shall mean shares of the Company's Common Stock and any
shares of capital stock or other securities of the Company hereafter issued
or issuable upon, in respect of or in substitution or exchange for such
Shares.
2.23 "Stock Appreciation Right" shall mean the right of the holder
thereof to receive an amount in cash or Shares equal to the excess of the
Fair Market Value of a Share on the date of exercise over the Fair Market
Value of a Share on the date of the grant (or such other value as may be
specified in the agreement granting the Stock Appreciation Right).
2.24 "Tandem Stock Appreciation Right" shall mean a Stock
Appreciation Right granted in connection with an Award which is a stock
option.
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Section 3. ADMINISTRATION OF THE PLAN
3.1 Committee. The Plan shall be administered and interpreted by
the Committee.
3.2 Awards. Subject to the provisions of the Plan and directions
from the Board, the Committee is authorized to:
(a) determine the persons to whom Awards are to be granted;
(b) determine the types and combinations of Awards to be
granted, the number of Shares to be covered by the Award, the pricing
of the Award, the time or times when the Award shall be granted and
may be exercised, the terms, performance criteria or other conditions,
vesting periods or any restrictions for an Award, any restrictions on
Shares acquired pursuant to the exercise of an Award and any other
terms and conditions of an Award;
(c) conclusively interpret the Plan provisions;
(d) prescribe, amend and rescind rules and regulations
relatin to the Plan or make individual decisions as questions arise,
or both;
(e) determine whether, to what extent and under what
circumstances to provide loans from the Company to participants in
order to purchase Shares subject to Awards under the Plan, and the
terms and conditions of such loans;
(f) rely upon employees of the Company for such clerical and
record-keeping duties as may be necessary in connection with the
administration of the Plan; and
(g) make all other determinations and take all other actions
necessary or advisable for the administration of the Plan.
3.3 Procedures. A majority of the Committee members shall
constitute a quorum. All determinations of the Committee shall be made by
a majority of its members. All questions of interpretation and
application of the Plan or pertaining to any question of fact or Award
granted hereunder shall be decided by the Committee, whose decision shall
be final, conclusive and binding upon the Company and each other affected
party.
Section 4. SHARES SUBJECT TO PLAN
4.1 Limitations. The maximum number of Shares that may be issued
with respect to Awards under the Plan shall not exceed 1,250,000 unless
such maximum shall be increased or decreased by reason of changes in
capitalization of the Company as hereinafter provided. The maximum number
of Shares with respect to which Awards may be granted in any fiscal year to
any participant in the Plan shall not exceed 300,000. The Shares issued
pursuant to the Plan may be authorized but unissued Shares, or may be
issued Shares which have been reacquired by the Company.
4.2 Changes. To the extent that any Award under the Plan, or any
stock option or performance award granted under any prior incentive plan of
the Company, shall be forfeited, shall expire or shall be cancelled, in
whole or in part, then the number of Shares covered by the Award or stock
option so forfeited, expired or cancelled may again be awarded pursuant to
the provisions of this Plan. In the event that Shares are delivered to the
Company in full or partial payment of the exercise price for the exercise
of a stock option granted under the Plan or any prior incentive plan of the
Company, the number
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of Shares available for future Awards under the Plan shall be reduced only
by the net number of Shares issued upon the exercise of the option. Awards
that may be satisfied either by the issuance of Shares or by cash or other
consideration shall be counted against the maximum number of Shares that
may be issued under the Plan, even though the Award is ultimately satisfied
by the payment of consideration other than Shares, as, for example, a stock
option granted in tandem with a Stock Appreciation Right that is settled
by a cash payment of the stock appreciation. However, Awards will not
reduce the number of Shares that may be issued pursuant to the Plan if the
settlement of the Award will not require the issuance of Shares, as, for
example, a Stock Appreciation Right that can be satisfied only by the
payment of cash.
Section 5. ELIGIBILITY
Except with respect to stock options and Stock Appreciation Rights,
eligibility for participation in the Plan shall be confined to a select number
of persons who are employed by the Company, or one or more of its Affiliates,
and who are officers of the Company or one or more of its Affiliates, or who are
in managerial or other key positions in the Company or one or more of its
Affiliates. In making any determination as to persons to whom Awards shall be
granted, the type of Award, and/or the number of Shares to be covered by the
Award, the Committee shall consider the position and responsibilities of the
person, his or her importance to the Company and its Affiliates, the duties of
such person, his or her past, present and potential contributions to the growth
and success of the Company and its Affiliates, and such other factors as the
Committee shall deem relevant in connection with accomplishing the purposes of
the Plan. With respect to stock options and Stock Appreciation Rights, all
officers and employees of the Company are eligible for participation in the
Plan.
Section 6. STOCK OPTIONS
6.1 Grants. The Committee may grant stock options alone or in
addition to other Awards granted under this Plan to any eligible officer or
employee. Each person so selected shall be offered an option to purchase
the number of Shares determined by the Committee; provided, however, that
the maximum number of shares for which stock options may be granted during
any calendar year may not exceed 300,000 Shares for any eligible officer or
employee. The Committee shall specify whether such option is an Incentive
Stock Option or Non-Qualified Stock Option and any other terms or
conditions relating to such Award. To the extent that any stock option
does not qualify as an Incentive Stock Option (whether because of its
provisions or the time or manner of its exercise or otherwise), such stock
option or the portion thereof which does not qualify, shall constitute a
separate Non-Qualified Stock Option. Each such person so selected shall
have a reasonable period of time within which to accept or reject the
offered option. Failure to accept within the period so fixed by the
Committee may be treated as a rejection. Each person who accepts an option
shall enter into a written agreement with the Company, in such form as the
Committee may prescribe, setting forth the terms and conditions of the
option, consistent with the provisions of the Plan. The Optionee and the
Company shall enter into option agreements for Incentive Stock Options and
Non-Qualified Stock Options. At any time and from time to time, the
Optionee and the Company may agree to modify an option agreement in order
that an Incentive Stock Option may be converted to a Non-Qualified Stock
Option.
The Committee may require than an Optionee meet certain conditions
before the option or a portion thereof may vest or be exercised, as, for
example, that the Optionee remain in the employ of the Company or one of
its Affiliates for a stated period or periods of time before the option, or
stated portions thereof, may vest or be exercised; provided, however, that
nothing in the Plan or in any option agreement shall confer upon any
Optionee any right to remain in the employ of the Company or one of its
Affiliates, and nothing herein shall be construed in any manner to
interfere in any way with the right of the Company or its Affiliates to
terminate such Optionee's employment at any time.
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6.2 Option Price. The option exercise price of the Shares covered by
each stock option shall be determined by the Committee; provided, however,
that the option exercise price of an Incentive Stock Option or, with
respect to the Chief Executive Officer of the Company only, a Non-Qualified
Stock Option shall not be less than one hundred percent (100%) of the Fair
Market Value of Shares on the date of the grant of such Incentive Stock
Option.
6.3 Incentive Stock Options Limitations.
(a) In no event shall any person be granted Incentive Stock
Options so that the Shares covered by any Incentive Stock Options that
may be exercised for the first time by such person in any calendar
year have an aggregate Fair Market Value in excess of $100,000. For
this purpose, the Fair Market Value of the Shares shall be determined
as of the dates on which the Incentive Stock Options are granted. It
is intended that the limitation on Incentive Stock Options provided in
this paragraph be the maximum limitation on options which may be
considered Incentive Stock Options under the Code.
(b) Notwithstanding anything herein to the contrary, in no event
shall any employee owning more than ten percent (10%) of the total
combined voting power of the Company or any Affiliate corporation be
granted an Incentive Stock Option hereunder unless: the option
exercise price shall be at least one hundred ten percent (110%) of the
Fair Market Value of the Shares at the time that the option is granted
and the term of the option shall not exceed five (5) years.
6.4 Option Term. The term of a stock option shall be for such period
of months or years from the date of its grant as may be determined by the
Committee; provided, however, that no Incentive Stock Option shall be
exercisable later than ten (10) years from the date of its grant. Each
option shall be subject to earlier termination as hereinafter provided
(unless the Committee has provided otherwise):
(a) If the Optionee ceases to be an officer or employee of the
Company or any Affiliate by reason of the Optionee's discharge for
cause, as determined solely and exclusively by the Committee, all
rights of the Optionee to exercise an option shall terminate, lapse
and be forfeited immediately at the time of the Optionee's discharge
for cause.
(b) If the Optionee ceases to be an employee of the Company or
any Affiliate by reason of the Optionee's resignation, all rights of
the Optionee to exercise an option shall terminate, lapse and be
forfeited immediately upon the date of such resignation by the
Optionee.
(c) If the Optionee ceases to be an employee of the Company or
any Affiliate by reason of death, the personal representatives, heirs,
legatees or distributees of the Optionee, as appropriate, shall have
the right up to the earlier of (i) two (2) years from the Optionee's
death or (ii) the remaining term of the option to exercise any such
option.
(d) If the Optionee ceases to be an employee of the Company or
any Affiliate by reason of the Optionee's Retirement, Disability or
for any reason other than the Optionee's discharge for cause,
resignation or death, all rights of the Optionee to exercise an option
shall terminate, lapse, and be forfeited upon the earlier of (i) two
(2) years after the date of the Optionee's termination of employment
by reason of such employee's Retirement, Disability or such other
reason or (ii) the remaining term of the option, except that in case
the Optionee shall die within two (2) years after the date of
termination of employment by reason of such employee's Retirement,
Disability or such other reason, the personal representatives, heirs,
legatees or distributees of the Optionee, as appropriate, shall have
the right up to an additional twelve (12) months from the date of the
Optionee's death to exercise any such option.
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(e) Despite the provisions of paragraphs (b), (c) and (d) of
this subsection, no Incentive Stock Option shall be exercisable
after the expiration of the earlier of: (i) the ten (10) year period
beginning on the date of its grant, (ii)the three (3) month period
beginning on the date of the Optionee's termination of employment
for any reason other than death or Disability, or (iii) the one (1)
year period beginning on the date of the Optionee's termination of
employment by reason of Disability.
6.5 Vesting of Stock Options.
(a) Each stock option granted hereunder may only be exercised to
the extent that the Optionee is vested in such option. Each stock
option shall vest separately in accordance with the option vesting
schedule, if any, determined by the Committee in its sole discretion,
which will be incorporated in the stock option agreement entered into
between the Company and each Optionee. The option vesting schedule
will be accelerated in the event the provisions of paragraphs (b),
(c), (d) or (e) of this subsection apply; or if, in the sole
discretion of the Committee, the Committee determines that
acceleration of the option vesting schedule would be desirable for the
Company.
(b) If an Optionee ceases to be an employee of the Company or
any Affiliate by reason of death, Disability or Retirement or for any
reason other than the Optionee's resignation or discharge for cause,
the Optionee or the personal representatives, heirs, legatees or
distributees of the Optionee, as appropriate, shall become fully
vested in each stock option granted to the Optionee, effective on the
date of the Optionee's death or on the date that the Optionee ceases
to be an employee, as appropriate, and shall have the immediate right
to exercise any such option to the extent not previously exercised.
(c) In the event of the dissolution or liquidation of the
Company, each stock option granted under the Plan shall terminate as
of a date to be fixed by the Board; provided, however, that not less
than thirty (30) days' written notice of the date so fixed shall be
given to each Optionee and each such Optionee shall be fully vested in
and shall have the right during such period to exercise the option,
even though such option would not otherwise be exercisable under the
option vesting schedule. At the end of such period, any unexercised
option shall terminate and be of no further effect.
(d) In the event of a Reorganization:
(1) If there is no plan or agreement respecting the
Reorganization, or if such plan or agreement does not
specifically provide for the change, conversion or exchange of
the Shares under outstanding and unexercised stock options for
other securities then the provisions of the above paragraph (c)
of this subsection shall apply as if the Company had dissolved or
been liquidated on the effective date of the Reorganization; or
(2) If there is a plan or agreement respecting the
Reorganization, and if such plan or agreement specifically
provides for the change, conversion or exchange of the Shares
under outstanding and unexercised stock options for securities of
another corporation, then the Board shall adjust the Shares under
such outstanding and unexercised stock options (and shall adjust
the Shares remaining under the Plan which are then available to
be awarded under the Plan, if such plan or agreement makes no
specific provision therefor) in a manner not inconsistent with
the provisions of such plan or agreement for the adjustment,
change, conversion or exchange of such Shares and such options.
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(e) In the event of a Change in Control of the Company, with
respect to only certain senior executive officers of the Company (the
number of which shall include no more than ten (10) persons; provided,
that a limited number of additional senior executive officers shall
also be included if each such additional person is approved by the
Committee and the Board (collectively, the ten senior executive
officers plus any additional, approved senior executive officers shall
be referred to herein as the "Senior Officers")), all stock options
and any associated Stock Appreciation Rights shall become fully vested
and immediately exercisable and the vesting of all performance-based
stock options shall be determined as if the performance period or
cycle applicable to such stock options had ended immediately upon such
Change in Control.
6.6 Exercise of Stock Options.
(a) Stock options may be exercised as to Shares only in amounts
and at intervals of time specified in the written option agreement
between the Company and the Optionee. Each exercise of a stock
option, or any part thereof, shall be evidenced by a notice in writing
to the Company. The purchase price of the Shares as to which an
option shall be exercised shall be paid in full at the time of
exercise, and may be paid to the Company either:
(1) in cash (including check, bank draft or money order);
or
(2) by the delivery of Shares having a Fair Market Value
equal to the aggregate option price; or
(3) by a combination of cash and Shares.
(b) If an Optionee delivers Shares (including Shares of
Restricted Stock) already owned by him or her in full or partial
payment of the exercise price for any stock option granted under the
Plan or any prior incentive plan of the Company, or if the Optionee
elects to have the Company retain that number of Shares out of the
Shares being acquired through the exercise of the option having a
Fair Market Value equal to the exercise price of the stock option
being exercised, the Committee may authorize the automatic grant of a
new option (a "Reload Option") for that number of Shares as shall
equal the number of already owned Shares surrendered (including Shares
of Restricted Stock) or newly acquired Shares being retained in
payment of the option exercise price of the underlying stock option
being exercised. The grant of a Reload Option will become effective
upon the exercise of the underlying stock option. The option exercise
price of the Reload Option shall be the Fair Market Value of a Share
on the effective date of the grant of the Reload Option. Each Reload
Option shall be exercisable no earlier than six (6) months from the
date of its grant and no later than the time when the underlying stock
option being exercised could be last exercised. The Committee may
also specify additional terms, conditions and restrictions for the
Reload Option and the Shares to be acquired upon the exercise thereof.
(c) The amount, as determined by the Committee, of any federal,
state or local tax required to be withheld by the Company due to the
exercise of a stock option shall be satisfied, at the election of the
Optionee, either (a) by payment by the Optionee to the Company of the
amount of such withholding obligation in cash (the "Cash Method") or
(b) through either the retention by the Company of a number of Shares
out of the Shares being acquired through the exercise of the option or
the delivery of already owned Shares having a Fair Market Value equal
to the amount of the withholding obligation (the "Share Retention
Method"). If an Optionee elects to use the Share Retention Method in
full or partial satisfaction for any tax liability resulting from the
exercise of a stock option, the Committee may authorize the grant of a
Reload Option for that
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number of Shares as shall equal the number of Shares used to satisfy
the tax liabilities of the stock option being exercised on the price
and terms set forth in subsection (b) above. The cash payment or the
amount equal to the Fair Market Value of the Shares so withheld, as
the case may be, shall be remitted by the Company to the appropriate
taxing authorities. The Committee shall determine the time and manner
in which an Optionee may elect to satisfy a withholding obligation by
either the Cash Method or the Share Retention Method.
(d) An Optionee shall not have any of the rights of a
stockholder of the Company with respect to the Shares covered by a
stock option except to the extent that one or more certificates of
such Shares shall have been delivered to the Optionee, or the Optionee
has been determined to be a stockholder of record by the Company's
Transfer Agent, upon due exercise of the option.
6.7 Date of a Stock Option Grant. The granting of a stock option
shall take place only when the Committee approves the granting of such
option. Neither any action taken by the Board nor anything contained in
the Plan or in any resolution adopted or to be adopted by the Board or the
stockholders of the Company shall constitute the granting of a stock option
under the Plan.
Section 7. STOCK APPRECIATION RIGHTS
7.1 Grants. The Committee may grant to any eligible officer or
employee either Non-Tandem Stock Appreciation Rights or Tandem Stock
Appreciation Rights. Stock Appreciation Rights shall be subject to such
terms and conditions as the Committee shall impose; provided, however, that
the maximum number of shares (or cash equivalent value) with respect to
which Stock Appreciation Rights may be granted during any calendar year may
not exceed 300,000 Shares for any eligible officer or employee. The grant
of the Stock Appreciation Right may provide that the holder may be paid for
the value of the Stock Appreciation Right either in cash or in Shares, or a
combination thereof, at the discretion of the Committee. In the event of
the exercise of a Stock Appreciation Right payable in Shares, the holder of
the Stock Appreciation Right shall receive that number of whole Shares of
stock of the Company having an aggregate Fair Market Value on the date of
exercise equal to the value obtained by multiplying (i) either (a) in the
case of a Tandem Stock Appreciation Right, the difference between the Fair
Market Value of a Share on the date of exercise over the per share exercise
price of the related option, or (b) in the case of a Non-Tandem Stock
Appreciation Right, the difference between the Fair Market Value of a Share
on the date of exercise over the Fair Market Value on the date of the grant
by (ii) the number of Shares as to which the Stock Appreciation Right is
exercised. However, notwithstanding the foregoing, the Committee, in its
sole discretion, may place a ceiling on the amount payable upon exercise of
a Stock Appreciation Right, but any such limitation shall be specified at
the time that the Stock Appreciation Right is granted.
7.2 Exercisability. A Tandem Stock Appreciation Right may be granted
at the time of the grant of the related stock option or, if the related
stock option is a Non-Qualified Stock Option, at any time thereafter during
the term of the stock option. A Tandem Stock Appreciation Right granted in
connection with an Incentive Stock Option (i) generally may be exercised
at, and only at, the times and to the extent the related stock option is
exercisable, (ii) expires upon the termination of the related stock option,
(iii) may not exceed 100% of the difference between the exercise price of
the related stock option and the market price of the Shares subject to the
related stock option at the time the Tandem Stock Appreciation Right is
exercised and (iv) may be exercised at, and only at, such times as the
market price of the Shares subject to the related stock option exceeds the
exercise price of the related stock option. The Tandem Stock Appreciation
Right may be transferred at, and only at, the times and to the extent the
related stock option is transferable. If a Tandem Stock Appreciation
Right is granted, there shall be surrendered and cancelled from the option
at the time of exercise of the Tandem Stock Appreciation Right, in lieu of
exercise under
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the option, that number of Shares as shall equal the number of Shares as to
which the Tandem Stock Appreciation Right shall have been exercised.
7.3 Certain Limitations on Non-Tandem Stock Appreciation Rights. A
Non-Tandem Stock Appreciation Right will be exercisable as provided by the
Committee and will have such other terms and conditions as the Committee
may determine. A Non-Tandem Stock Appreciation Right is subject to
acceleration of vesting or immediate termination in certain circumstances
in the same manner as stock options pursuant to subsections 6.4 and 6.5 of
this Plan.
7.4 Limited Stock Appreciation Rights. The Committee is also
authorized to grant "limited stock appreciation rights," either as Tandem
Stock Appreciation Rights or Non-Tandem Stock Appreciation Rights. Limited
stock appreciation rights would become exercisable only upon the occurrence
of a Change in Control or such other event as the Committee may designate
at the time of grant or thereafter.
Section 8. RESTRICTED STOCK
8.1 Grants. The Committee may grant Awards of Restricted Stock for
no cash consideration, for such minimum consideration as may be required by
applicable law, or for such other consideration as may be specified by the
grant. The terms and conditions of the Restricted Stock shall be specified
by the grant agreement. The Committee, in its sole discretion, shall
determine what rights, if any, the person to whom an Award of Restricted
Stock is made shall have in the Restricted Stock during the restriction
period and the restrictions applicable to the particular Award, including,
without limitation, whether the holder of the Restricted Stock shall have
the right to vote the Shares and receive Dividend Equivalent Rights and
other distributions applicable to the Shares, the vesting schedule (which
may be based on service, performance or other factors) and rights to
acceleration of vesting (including, without limitation, whether non-vested
Shares are forfeited or vested upon termination of employment). Further,
the Committee may award performance-based Restricted Stock by conditioning
the grant, or vesting or such other factors, such as the release,
expiration or lapse of restrictions upon any such Award (including the
acceleration of any such conditions or terms) of such Restricted Stock upon
the attainment of specified performance goals or such other factors as the
Committee may determine; provided, however, that notwithstanding the
foregoing, and with respect to the Senior Officers only, upon a Change in
Control, the amount of granting or vesting, as the case may be, for all
performance-based Restricted Stock, shall be determined as if the
performance period or cycle applicable to such Restricted Stock had
terminated immediately upon such Change in Control; provided, however, that
to the extent that any such performance period or cycle is shortened
adversely to the Senior Officers by virtue of the Change in Control, such
Restricted Stock shall be prorated accordingly. The Committee shall also
determine when the restrictions shall lapse or expire and the conditions,
if any, under which the Restricted Stock will be forfeited or sold back to
the Company; provided, however, that notwithstanding the foregoing, and
with respect to the Senior Officers only, upon a Change in Control, all
restrictions applicable to Restricted Stock shall lapse and expire and
Shares of Restricted Stock with vesting provisions shall become fully
vested. Each Award of Restricted Stock may have different restrictions and
conditions. The Committee, in its discretion, may prospectively change the
restriction period and the restrictions applicable to any particular Award
of Restricted Stock. Unless otherwise set forth in the Plan, Restricted
Stock may not be disposed of by the recipient until the restrictions
specified in the Award expire. Subject to certain exceptions, the
aggregate number of nonperformance-based Shares of Restricted Stock that
may be awarded is limited to three percent (3%) of the aggregate number of
outstanding Shares of the Company's Common Stock; otherwise, the Committee
is not limited in the total number of Shares of Restricted Stock that may
be awarded under the Plan.
8.2 Awards and Certificates. Any Restricted Stock issued hereunder
may be evidenced in such manner as the Committee, in its sole discretion,
shall deem appropriate including, without limitation, book-entry
registration or issuance of a stock certificate or certificates. In the
event any stock certificate
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is issued in respect of Shares of Restricted Stock awarded hereunder, such
certificate shall bear an appropriate legend with respect to the
restrictions applicable to such Award. The Company may retain, at its
option, the physical custody of any stock certificate representing any
awards of Restricted Stock during the restriction period or require that
the Restricted Stock be placed in escrow or trust, along with a stock power
endorsed in blank, until all restrictions are removed or expire.
Section 9. PERFORMANCE AWARDS
9.1 Grants. A Performance Award may consist of either or both, as
the Committee may determine, of (i) "Performance Shares" or the right to
receive Shares, Restricted Stock or cash of an equivalent value, or any
combination thereof as the Committee may determine, or (ii) "Performance
Units," or the right to receive a fixed dollar amount payable in cash,
Common Stock, Restricted Stock or any combination thereof, as the Committee
may determine. The Committee may grant Performance Awards to any eligible
employee, for no cash consideration, for such minimum consideration as may
be required by applicable law or for such other consideration as may be
specified at the time of the grant. The terms and conditions of
Performance Awards shall be specified at the time of the grant and may
include provisions establishing the performance period, the performance
criteria to be achieved during a performance period, the criteria used to
determine vesting (including the acceleration thereof), whether Performance
Awards are forfeited or vest upon termination of employment during a
performance period and the maximum or minimum settlement values; provided,
however, that notwithstanding the foregoing, and with respect to the Senior
Officers only, upon a Change in Control, the vesting, if any, and the
determination of the amount earned of a Performance Award shall be
determined as if the performance period or cycle applicable to such
Performance Award had terminated immediately upon such Change in Control;
provided, however, that to the extent that any such performance period or
cycle is shortened adversely to the Senior Officers by virtue of the Change
in Control, such Performance Award shall be prorated accordingly. Each
Performance Award shall have its own terms and conditions, which shall be
determined in the discretion of the Committee. If the Committee
determines, in its sole discretion, that the established performance
measures or objectives are no longer suitable because of a change in the
Company's business, operations, corporate structure or for other reasons
that the Committee deems satisfactory, the Committee may modify the
performance measures or objectives and/or the performance period.
9.2 Terms and Conditions. Performance Awards may be valued by
reference to the Fair Market Value of a Share or according to any formula
or method deemed appropriate by the Committee, in its sole discretion,
including, but not limited to, achievement of specific financial,
production, sales, cost or earnings performance objectives that the
Committee believes to be relevant to the Company's business and for
remaining in the employ of the Company for a specified period of time, or
the Company's performance or the performance of its Common Stock measured
against the performance of the market, the Company's industry segment or
its direct competitors. Performance Awards may be paid in cash, Shares
(including Restricted Stock) or other consideration, or any combination
thereof. If payable in Shares, the consideration for the issuance of the
Shares may be the achievement of the performance objective established at
the time of the grant of the Performance Award. Performance Awards may be
payable in a single payment or in installments and may be payable at a
specified date or dates or upon attaining the performance objective, all at
the Committee's discretion. The extent to which any applicable performance
objective has been achieved shall be conclusively determined by the
Committee.
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Section 10. DIVIDEND EQUIVALENT RIGHTS
The Committee may grant a Dividend Equivalent Right, either as a component
of another Award or as a separate Award, and, in general, each such holder of a
Dividend Equivalent Right that is outstanding on a dividend record date for the
Company's Common Stock shall be credited with an amount equal to the cash or
stock dividends or other distributions that would have been received had the
Shares covered by the Award been issued and outstanding on the dividend record
date. The terms and conditions of the Dividend Equivalent Right shall be
specified by the grant. Dividend equivalents credited to the holder of a
Dividend Equivalent Right may be paid currently or may be deemed to be
reinvested in additional Shares (which may thereafter accrue additional Dividend
Equivalent Rights). Any such reinvestment shall be at the Fair Market Value at
the time thereof. Dividend Equivalent Rights may be settled in cash or Shares,
or a combination thereof, in a single payment or in installments. A Dividend
Equivalent Right granted as a component of another Award may provide that such
Dividend Equivalent Right shall be settled upon exercise, settlement or payment
for or lapse of restrictions on such other Award, and that such Dividend
Equivalent Right shall expire or be forfeited or annulled under the same
conditions as such other Award. A Dividend Equivalent Right granted as a
component of another Award may also contain terms and conditions different from
such other Award.
Section 11. OTHER AWARDS
The Committee may grant to any eligible employee other forms of Awards
based upon, payable in or otherwise related to, in whole or in part, Shares if
the Committee, in its sole discretion, determines that such other form of Award
is consistent with the purposes and restrictions of the Plan. The terms and
conditions of such other form of Award shall be specified by the grant,
including, but not limited to, the price, if any, and the vesting schedule, if
any. Such Awards may be granted for no cash consideration, for such minimum
consideration as may be required by applicable law or for such other
consideration as may be specified by the grant.
Section 12. NON-TRANSFERABILITY OF AWARDS.
A stock option shall not be transferable otherwise than by will or the laws
of descent and distribution, and a stock option may be exercised, during the
lifetime of the Optionee, only by the Optionee; provided, however, that with the
approval of the Committee, the agreement relating to any Award (including,
without limitation, a stock option) may provide that such Award may be
transferred to one or more members of the immediate family of the grantee of the
Award or to a trust for the benefit of such person or as directed under a
qualified domestic relations order. Any attempted assignment, transfer, pledge,
hypothecation or other disposition of a stock option or other Award contrary to
the provisions hereof, or the levy of any execution, attachment or similar
process upon a stock option or other Award shall be null and void and without
effect.
Section 13. COMPLIANCE WITH SECURITIES AND OTHER LAWS
In no event shall the Company be required to sell or issue Shares under any
Award if the sale or issuance thereof would constitute a violation of applicable
federal or state securities laws or regulations or a violation of any other law
or regulation of any governmental or regulatory agency or authority or any
national securities exchange. As a condition to any sale or issuance of Shares,
the Company may place legends on Shares, issue stop transfer orders and require
such agreements or undertakings as the Company may deem necessary or advisable
to assure compliance with any such laws or regulations, including, if the
Company or its counsel deems it appropriate, representations from the person to
whom an Award is granted that he or she is acquiring the Shares solely for
investment and not with a view to distribution and that no distribution of the
Shares will be made unless registered pursuant to applicable federal and state
securities laws, or in the opinion of counsel of the Company, such registration
is unnecessary.
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Section 14. ADJUSTMENTS UPON CHANGES IN CAPITALIZATION OR REORGANIZATION
The value of an Award in Shares shall be adjusted from time to time as
follows:
(a) Subject to any required action by stockholders, the number of
Shares covered by each outstanding Award, and the exercise price, shall be
proportionately adjusted for any increase or decrease in the number of
issued Shares of the Company resulting from a subdivision or consolidation
of Shares or the payment of a stock dividend (but only in Shares) or any
other increase or decrease in the number of Shares effected without receipt
of consideration by the Company.
(b) Subject to any required action by stockholders, if the Company
shall be the surviving corporation in any Reorganization, merger or
consolidation, each outstanding Award shall pertain to and apply to the
securities to which a holder of the number of Shares subject to the Award
would have been entitled, and if a plan or agreement reflecting any such
event is in effect that specifically provides for the change, conversion or
exchange of Shares, then any adjustment to Shares relating to an Award
hereunder shall not be inconsistent with the terms of any such plan or
agreement.
(c) In the event of a change in the Shares of the Company as
presently constituted, which is limited to a change of par value into the
same number of Shares with a different par value or without par value, the
Shares resulting from any such change shall be deemed to be the Shares
within the meaning of the Plan.
To the extent that the foregoing adjustments relate to stock or
securities of the Company, such adjustments shall be made by the Board,
whose determination shall be final, binding and conclusive.
Except as hereinbefore expressly provided in the Plan, any person to
whom an Award is granted shall have no rights by reason of any subdivision
or consolidation of stock of any class or the payment of any stock dividend
or any other increase or decrease in the number of shares of stock of any
class or by reason of any dissolution, liquidation, reorganization, merger
or consolidation or spinoff of assets or stock of another corporation, and
any issue by the Company of shares of stock of any class, or securities
convertible into shares of stock of any class, shall not affect, and no
adjustment by reason thereof shall be made with respect to, the number or
exercise price of Shares subject to an Award.
The grant of an Award pursuant to the Plan shall not affect in any way
the right or power of the Company to make adjustments, reclassifications,
Reorganizations or changes of its capital or business structure or to merge
or to consolidate or to dissolve, liquidate or sell or transfer all or any
part of its business or assets.
Section 15. AMENDMENT OR TERMINATION OF THE PLAN
15.1 Amendment of the Plan. Notwithstanding anything contained in the
Plan to the contrary, all provisions of the Plan may at any time or from time
to time be modified or amended by the Board; provided, however, that no Award
at any time outstanding under the Plan may be modified, impaired or cancelled
adversely to the holder of the Award without the consent of such holder; and
provided, further, that the Plan may not be amended without approval by the
holders of a majority of the Shares of the Company represented and voted at a
meeting of the stockholders (a) to increase the maximum number of Shares
subject to the Plan, (b) to materially modify the requirements as to
eligibility for participation in the Plan, (c) to decrease the minimum
exercise price for options, (d) to otherwise materially increase the benefits
accruing to persons to whom Awards may be made under the Plan, as amended, or
(e) if such approval is otherwise necessary, to comply with Rule 16b-3
promulgated under the Exchange Act, as amended, or to comply with any other
applicable laws, regulations or listing requirements, or to qualify for an
exemption or characterization that is deemed desirable by the Board.
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15.2 Termination of the Plan. The Board may suspend or terminate the Plan
at any time, and such suspension or termination may be retroactive or
prospective. However, no Award may be granted on or after April 22, 2004, the
tenth anniversary of the adoption of the Plan. Termination of the Plan shall
not impair or affect any Award previously granted hereunder and the rights of
the holder of the Award shall remain in effect until the Award has been
exercised in its entirety or has expired or otherwise has been terminated by the
terms of such Award.
Section 16. AMENDMENTS AND ADJUSTMENTS TO AWARDS
The Committee may amend, modify or terminate any outstanding Award with the
Participant's consent at any time prior to payment or exercise in any manner not
inconsistent with the terms of the Plan, including, without limitation, (i) to
change the date or dates as of which (A) an option becomes exercisable or (B) a
performance-based Award is deemed earned or (ii) to cancel an Award and grant a
new Award in substitution therefor under such different terms and conditions as
it determines in its sole and complete discretion to be appropriate. The
Committee is also authorized to make adjustments in the terms and conditions of,
and the criteria included in, Awards in recognition of unusual or nonrecurring
events (including, without limitation, the events described in Section 14
hereof) affecting the Company, or the financial statements of the Company or any
Affiliate, or of changes in applicable laws, regulations or accounting
principles, whenever the Committee determines that such adjustments are
appropriate in order to prevent reduction or enlargement of the benefits or
potential benefits intended to be made available under the Plan. Any provision
of the Plan or any agreement regarding an Award to the contrary notwithstanding,
the Committee may cause any Award granted to be cancelled in consideration of a
cash payment or alternative Award made to the holder of such cancelled Award
equal in value to the Fair Market Value of such cancelled Award. The
determinations of value under this Section 16 shall be made by the Committee in
its sole discretion.
Section 17. GENERAL PROVISIONS
17.1 No Limit on Other Compensation Arrangements. Nothing contained in
the Plan shall prevent the Company from adopting or continuing in effect other
compensation arrangements, and such arrangements may be either generally
applicable or applicable only in specific cases.
17.2 No Right to Employment. The grant of an Award shall not be construed
as giving the recipient thereof the right to be retained in the employ of the
Company. Further, the Company may at any time dismiss a participant in the Plan
from employment, free from any liability or any claim under the Plan, unless
otherwise expressly provided in the Plan or in any Award agreement. No
employee, participant or other person shall have any claim to be granted any
Award, and there is no obligation for uniformity or treatment of employees,
participants or holders or beneficiaries of Awards.
17.3 GOVERNING LAW. THE VALIDITY, CONSTRUCTION AND EFFECT OF THE PLAN AND
ANY RULES AND REGULATIONS RELATING TO THE PLAN SHALL BE DETERMINED IN ACCORDANCE
WITH THE LAWS OF THE STATE OF MARYLAND.
17.4 Severability. If any provision of the Plan or any Award is or
becomes or is deemed to be invalid, illegal or unenforceable in any
jurisdiction or as to any person or Award, or would disqualify the Plan or any
Award under any law deemed applicable by the Committee, such provision shall
be construed or deemed amended to conform to applicable laws, or if it cannot
be construed or deemed amended without, in the sole determination of the
Committee, materially altering the intent of the Plan or the Award, such
provision shall be stricken as to such jurisdiction, person or Award and the
remainder of the Plan and any such Award shall remain in full force and
effect.
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17.5 No Fractional Shares. No fractional Shares shall be issued or
delivered pursuant to the Plan or any Award, and the Committee shall determine
whether cash, other securities or other property shall be paid or transferred in
lieu of any fractional Shares or whether such fractional Shares or any rights
thereto shall be cancelled, terminated or otherwise eliminated.
17.6 Headings. Headings are given to the subsections of the Plan solely
as a convenience to facilitate reference. Such headings shall not be deemed in
any way material or relevant to the construction or interpretation of the Plan
or any provision thereof.
17.7 Effective Date. The Plan shall be effective as of April 22, 1994,
the date of its approval by the holders of a majority of the Shares of the
Company represented and voting at the 1994 Annual Meeting of Stockholders. If
the Plan is not approved by the stockholders at the 1994 Annual Meeting, after
such date, the Plan and all Awards granted hereunder, if any, shall be void.
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