EXHIBIT 10.23
VENCOR, INC.
1997 INCENTIVE COMPENSATION PLAN
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ARTICLE 1. PURPOSE
The purpose of this 1997 Incentive Compensation Plan ("Plan") is to advance
the interest of Vencor, Inc., a Delaware corporation ("Company"), and its
stockholders by encouraging employees who will largely be responsible for the
long-term success and development of the Company. The Plan is also intended to
provide flexibility to the Company in attracting, retaining and motivating
employees and promoting their efforts on behalf of the Company.
ARTICLE 2. DEFINITIONS AND CONSTRUCTION
2.1 Definitions. As used in the Plan, terms defined parenthetically
immediately after their use shall have the respective meanings provided by such
definitions, and the terms set forth below shall have the following meanings (in
either case, such terms shall apply equally to both the singular and plural
forms of the terms defined):
(a) "Award" shall mean, individually or collectively, a grant under the
Plan of Options, Restricted Stock, SARs, Performance Units, stock awards and
cash awards.
(b) "Board" shall mean the Board of Directors of the Company.
(c) "Cause" shall mean, unless otherwise defined in an agreement
evidencing an Award, a felony conviction of a Participant or the failure of a
Participant to contest prosecution for a felony, or a Participant's willful
misconduct or dishonesty, any of which is determined by the Committee to be
directly and materially harmful to the business or reputation of the Company or
its Subsidiaries.
(d) A "Change in Control" shall mean any of the following events:
(1) An acquisition (other than directly from the Company) of any
voting securities of the Company ("Voting Securities") by any Person immediately
after which such Person has beneficial ownership (within the meaning of Rule
13d-3 promulgated under the Exchange Act) ("Beneficial Ownership and/or
Beneficially Owned") of 20% or more of the combined voting power of the
Company's then outstanding Voting Securities; provided, however, that in
determining whether a Change in Control has occurred, Voting Securities which
are acquired in a Non-Control Acquisition (as hereinafter defined) shall not
constitute an acquisition which would cause a Change in Control. A Non-Control
Acquisition shall mean an acquisition by (i) the Company or any Subsidiary, (ii)
an employee benefit plan (or a trust forming a part thereof) maintained by the
Company or any Subsidiary, or (iii) any Person in connection with a Non-Control
Transaction (as hereinafter defined);
(2) The individuals who, as of December 31, 1996, are members of the
Board ("Incumbent Board") cease for any reason to constitute at least a majority
of the Board; provided, however, that if the election, or nomination for
election by the Company's stockholders, of any new director was approved by a
vote of at least a majority of the Incumbent Board, such new director shall, for
purposes of the Plan, be considered as a member of the Incumbent Board;
provided, further, however, that no individual shall be considered a member of
the Incumbent Board if such individual initially assumed office as a result of
either an actual or threatened election contest (as described in Rule 14a-11
promulgated under the Exchange Act) ("Election Contest") or other actual or
threatened solicitation of proxies or consents by or on behalf of a Person other
than the Board ("Proxy Contest") including by reason of any agreement intended
to avoid or settle any Election Contest or Proxy Contest; or
(3) Approval by stockholders of the Company of:
(A) A merger, consolidation or reorganization involving the
Company, unless such is a Non-Control Transaction. For purposes of the Plan, the
term "Non-Control Transaction" shall mean a merger, consolidation or
reorganization of the Company in which:
(i) the stockholders of the Company, immediately
before such merger, consolidation or reorganization, own, directly or indirectly
immediately following such merger, consolidation or reorganization, at least a
majority of the combined voting power of the voting securities of the
corporation resulting from such merger or consolidation or reorganization
("Surviving Corporation") over which any Person has Beneficial Ownership in
substantially the same proportion as their ownership of the Voting Securities
immediately before such merger, consolidation or reorganization;
(ii) the individuals who were members of the
Incumbent Board immediately prior to the execution of the agreement providing
for such merger, consolidation or reorganization constitute at least a majority
of the members of the board of directors of the Surviving Corporation; and
(iii) no Person (other than the Company, any
Subsidiary, any employee benefit plan (or any trust forming a part thereof)
maintained by the Company, the Surviving Corporation, or any Person who,
immediately prior to such merger, consolidation or reorganization had Beneficial
Ownership of 20% or more of the then outstanding Voting Securities) has
Beneficial Ownership of 20% or more of the combined voting power of the
Surviving Corporation's then outstanding voting securities;
(B) A complete liquidation or dissolution of the Company; or
(C) An agreement for the sale or other disposition of all or
substantially all of the assets of the Company to any Person (other than a
transfer to a Subsidiary).
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(4) Any other event that the Committee shall determine constitutes an
effective Change in Control of the Company.
Notwithstanding the foregoing, a Change in Control shall not be deemed to
occur solely because any Person ("Subject Person") acquired Beneficial Ownership
of more than the permitted amount of the outstanding Voting Securities as a
result of the acquisition of Voting Securities by the Company which, by reducing
the number of Voting Securities outstanding, increases the proportional number
of shares Beneficially Owned by the Subject Person; provided, however, that if a
Change in Control would occur (but for the operation of this sentence) as a
result of the acquisition of Voting Securities by the Company, and after such
share acquisition by the Company, the Subject Person becomes the Beneficial
Owner of any additional Voting Securities which increases the percentage of the
then outstanding Voting Securities Beneficially Owned by the Subject Person,
then a Change in Control shall occur.
(e) "Code" shall mean the Internal Revenue Code of 1986, as amended from
time to time, or any successor thereto.
(f) "Committee" shall mean the committee described in Section 3.1.
(g) "Disability" shall mean the total disability as determined by the
Committee in accordance with standards and procedures similar to those under the
Company's long-term disability plan, or, if none, a physical or mental infirmity
which the Committee determines impairs the Participant's ability to perform
substantially his or her duties for a period of 180 consecutive days.
(h) "Employee" shall mean an individual who is a full-time employee of the
Company, a Subsidiary or a partnership or limited liability company in which the
Company or its Subsidiaries own a majority interest.
(i) "Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended from time to time.
(j) "Fair Market Value" of the Shares shall mean, as of any applicable
date, the closing sale price of the Shares on the New York Stock Exchange or any
national or regional stock exchange in which the Shares are traded, or if no
such reported sale of the Shares shall have occurred on such date, on the next
preceding date on which there was such a reported sale. If there shall be any
material alteration in the present system of reporting sale prices of the
Shares, or if the Shares shall no longer be listed on the New York Stock
Exchange or a national or regional stock exchange, the fair market value of the
Shares as of a particular date shall be determined by such method as shall be
determined by the Committee.
(k) "ISOs" shall have the meaning given such term in Section 6.1.
(1) "NQSOs" shall have the meaning given such term in Section 6.1.
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(m) "Option" shall mean an option to purchase Shares granted pursuant to
Article 6.
(n) "Option Agreement" shall mean an agreement evidencing the grant of an
Option as described in Section 6.2.
(o) "Option Exercise Price" shall mean the purchase price per Share
subject to an Option, which shall not be less than the Fair Market Value of the
Share on the date of grant (110% of Fair Market Value in the case of an ISO
granted to a Ten Percent Shareholder).
(p) "Participant" shall mean any Employee selected by the Committee to
receive an Award under the Plan.
(q) "Performance Goals" shall have the meaning given such term in Section
8.4.
(r) "Performance Period" shall have the meaning given such term in
Section 8.3.
(s) "Performance Unit" shall mean the right to receive a payment from the
Company upon the achievement of specified Performance Goals as set forth in a
Performance Unit Agreement.
(t) "Performance Unit Agreement" shall mean an agreement evidencing a
Performance Unit Award, as described in Section 8.2.
(u) "Person" shall have the meaning ascribed to such term in Section
3(a)(9) of the Exchange Act and as used in Sections 13(d) and 14(d) thereof,
including a "group" as defined in Section 13(d).
(v) "Plan" shall mean this Vencor, Inc. 1997 Incentive Compensation Plan
as the same may be amended from time to time.
(w) "Restriction Period" shall mean the period determined by the
Committee during which the transfer of Shares is limited in some way or Shares
are otherwise restricted or subject to forfeiture as provided in Article 7.
(x) "Restricted Stock" shall mean Shares granted pursuant to Article 7 as
to which the restrictions have not expired.
(y) "Restricted Stock Agreement" shall mean an agreement evidencing a
Restricted Stock Award, as described in Section 7.2.
(z) "Retirement" shall mean retirement by a Participant in accordance
with the terms of the Company's retirement or pension plans.
(aa) "Shares" shall mean the shares of the Company's common stock, par
value $.25 per share.
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(ab) "Subsidiary" shall mean, with respect to any company, any corporation
or other Person of which a majority of its voting power, equity securities, or
equity interest is owned directly or indirectly by such company but excluding
Atria Communities, Inc.
(ac) "Ten Percent Shareholder" shall mean an Employee who, at the time an
ISO is granted, owns (within the meaning of Section 422(b)(6) of the Code) stock
possessing more than 10% of the total combined voting power of all classes of
stock of the Company.
2.2 Gender and Number. Except where otherwise indicated by the context,
reference to the masculine gender shall include the feminine gender, the plural
shall include the singular and the singular shall include the plural.
2.3 Severability. In the event any provision of the Plan shall be held
illegal or invalid for any reason, the illegality or invalidity shall not affect
the remaining parts of the Plan, and the Plan shall be construed and enforced as
if the illegal or invalid provision had not been included.
ARTICLE 3. ADMINISTRATION
3.1 The Committee. The Plan shall be administered by a Committee appointed
by the Board consisting of three or more directors of the Company or the entire
Board of the Company. Members of the Committee shall be "outside directors"
within the meaning of Section 162(m) of the Code (or any successor provision
thereto). The Committee shall meet at such times and places as it determines
and may meet through a telephone conference call. The members of the Committee
shall be appointed from time to time by, and shall serve at the discretion of,
the Board.
3.2 Authority of the Committee. Subject to the provisions of the Plan, the
Committee shall have full authority to:
(a) select Participants to whom Awards are granted;
(b) determine the size, types and frequency of Awards granted under
the Plan;
(c) determine the terms and conditions of Awards, including any
restrictions or conditions to the Award, which need not be identical;
(d) cancel or modify, with the consent of the Participant, outstanding
Awards and to grant new Awards in substitution therefor;
(e) accelerate the exercisability of any Award, for any reason;
(f) construe and interpret the Plan and any agreement or instrument
entered into under the Plan;
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(g) establish, amend and rescind rules and regulations for the Plan's
administration; and
(h) amend the terms and conditions of any outstanding Award to the
extent such terms and conditions are within the discretion of the Committee as
provided in the Plan.
The Committee shall make all other determinations which may be necessary or
advisable for the administration of the Plan. The Committee may delegate its
authority as identified hereunder; provided, however, that such delegation is
permitted by law and Rule 16b-3 promulgated under the Exchange Act and that such
delegation would not jeopardize compliance with the "outside directors"
requirements (or any other applicable requirement) under Section 162(m) of the
Code.
3.3 Decisions Binding. All determinations and decisions made by the
Committee pursuant to the provisions of the Plan, and all related orders or
resolutions of the Board, shall be final, conclusive and binding upon all
persons, including the Company, its stockholders, Employees, Participants and
their estates and beneficiaries.
3.4 Section 16 Compliance; Bifurcation of Plan. It is the intention of
the Company that the Plan and the administration of the Plan comply in all
respects with Section 16(b) of the Exchange Act and the rules and regulations
promulgated thereunder. If any Plan provision, or any aspect of the
administration of the Plan, is found not to be in compliance with Section 16(b)
of the Exchange Act, the provision or administration shall be deemed null and
void, and in all events the Plan shall be construed in favor of its meeting the
requirements of Rule 16b-3 promulgated under the Exchange Act. Notwithstanding
anything in the Plan to the contrary, the Board or the Committee, in its
discretion, may bifurcate the Plan so as to restrict, limit or condition the use
of any provision of the Plan to Participants who are subject to Section 16 of
the Exchange Act without so restricting, limiting or conditioning the Plan with
respect to other Participants.
ARTICLE 4. SHARES AVAILABLE UNDER THE PLAN
4.1 Number of Shares. Subject to adjustment as provided in Section 4.2,
the number of Shares reserved for issuance upon the exercise of Awards and the
payment of benefits in connection with Awards is 3,400,000 Shares. Any Shares
issued under the Plan may consist, in whole or in part, of authorized and
unissued Shares or treasury Shares. If and to the extent an Award shall expire
or terminate for any reason without having been exercised in full (including a
cancellation and regrant of an Option), or shall be forfeited, the Shares
(including Restricted Stock) associated with such Awards shall again become
available for Awards under the Plan.
4.2 Adjustments in Authorized Shares and Outstanding Awards. In the event
of a merger, reorganization, consolidation, recapitalization, reclassification,
split-up, spin-off, separation, liquidation, stock dividend, stock split,
reverse stock split, property dividend, share repurchase, share combination,
share exchange, issuance of warrants, rights or debentures, or other change in
the corporate structure of the Company affecting the Shares, the Committee may
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substitute or adjust the total number and class of Shares or other stock or
securities which may be issued under the Plan, and the number, class and/or
price of Shares subject to outstanding Awards, as it determines to be
appropriate and equitable to prevent dilution or enlargement of the rights of
Participants and to preserve, without exceeding, the value of any outstanding
Awards; and further provided, that the number of Shares subject to any Award
shall always be a whole number. In the case of ISOs, such adjustments shall be
made in such a manner so as not to constitute a "modification" within the
meaning of Section 424(h)(3) of the Code and only to the extent otherwise
permitted by Sections 422 and 424 of the Code.
ARTICLE 5. ELIGIBILITY AND PARTICIPATION
All Employees are eligible to receive Awards under the Plan. In selecting
Employees to receive Awards under the Plan, as well as in determining the number
of Shares subject to, and the other terms and conditions applicable to, each
Award, the Committee shall take into consideration such factors as it deems
relevant in promoting the purposes of the Plan, including the duties of the
Employees, their present and potential contribution to the success of the
Company and their anticipated number of years of active service as employees.
ARTICLE 6. STOCK OPTIONS
6.1 Grant of Options. Subject to the terms and provisions of the Plan,
the Committee may grant Options to Participants at any time and from time to
time, in the form of options which are intended to qualify as incentive stock
options within the meaning of Section 422 of the Code ("ISOs"), Options which
are not intended to so qualify ("NQSOs") or a combination thereof. All ISOs
must be granted within ten years from the date on which the Plan was adopted by
the Board, and may only be granted to employees of the Company or any subsidiary
corporation (within the meaning of Section 422(f)). The maximum number of
Shares with respect to which Options may be granted to any Participant during
any calendar year shall be 250,000, subject to adjustment as provided in Section
4.2.
6.2 Option Agreement. Each Option shall be evidenced by an Option
Agreement that shall specify the Option Exercise Price, the duration of the
Option, the number of Shares to which the Option relates and such other
provisions as the Committee may determine or which are required by the Plan.
The Option Agreement shall also specify whether the Option is intended to be an
ISO or a NQSO and shall include such provisions applicable to the particular
type of Option granted.
6.3 Duration of Options. Each Option shall expire at such time as is
determined by the Committee at the time of grant; provided, however, that no
Option shall be exercised later than the tenth anniversary of its grant (fifth
anniversary in the case of an ISO granted to a Ten Percent Shareholder).
6.4 Exercise of Options. Options shall be exercisable at such times and
be subject to such restrictions and conditions as the Committee shall approve at
the time of grant, which need not be the same for each grant or for each
Participant. Except as provided in Section 6.6,
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however, in no event may any Option become exercisable within six months of the
date of grant in the case of any Participant subject to Section 16(b) of the
Exchange Act. Subject to the foregoing sentence, the Committee may accelerate
the exercisability of any Option. Options shall be exercised, in whole or in
part, by delivery to the Company of a written notice of exercise, setting forth
the number of Shares with respect to which the Option is to be exercised and
accompanied by full payment of the Option Exercise Price and all applicable
withholding taxes.
6.5 Payment of Option Exercise Price. The Option Exercise Price for
Shares as to which an Option is exercised shall be paid to the Company in full
at the time of exercise either (a) in cash in the form of currency or other cash
equivalent acceptable to the Company, (b) by tendering Shares having a Fair
Market Value (determined as of the close of the business day immediately
preceding the day on which the Option is exercised) equal to the Option Exercise
Price (provided, however, that in the case of a Participant subject to Section
16(b) of the Exchange Act, such Shares have been held by the Participant for at
least six months prior to their tender), (c) any other reasonable consideration
that the Committee may deem appropriate or (d) by a combination of the forms of
consideration described in (a), (b) and (c) of this Section 6.5. The Committee
may permit the cashless exercise of Options as described in Regulation T
promulgated by the Federal Reserve Board, subject to applicable securities law
restrictions, or by any other means which the Committee determines to be
consistent with the Plan's purpose and applicable law.
6.6 Vesting Upon Change in Control. Upon a Change in Control, any then
outstanding Options held by Participants shall become fully vested and
immediately exercisable. Furthermore, if provided in an Option Agreement, the
Participant shall have the right to sell the Option back to the Company for an
amount generally equal to the excess of the Fair Market Value of the Shares
subject to the Option over the Option Price.
6.7 Termination of Employment. If the employment of a Participant is
terminated for Cause, all then outstanding Options of such Participant, whether
or not exercisable, shall terminate immediately. If the employment of a
Participant is terminated for any reason other than for Cause, death, Disability
or Retirement, to the extent then outstanding Options of such Participant are
exercisable, such Options may be exercised by such Participant or such
Participant's personal representative at any time prior to the expiration date
of the Options or within 90 days after the date of such termination of
employment, whichever is earlier. In the event of the Retirement of a
Participant, to the extent then outstanding Options of such Participant are
exercisable, such Options may be exercised by the Participant (a) in the case of
NQSOs, within two years after the date of Retirement and (b) in the case of
ISOs, within 90 days after Retirement; provided, however, that no such Options
may be exercised on a date subsequent to their expiration. In the event of the
death or Disability of a Participant while employed by the Company or a
Subsidiary, all then outstanding Options of such Participant shall become fully
vested and immediately exercisable, and may be exercised at any time (a) in the
case of NQSOs, within two years after the date of death or determination of
Disability and (b) in the case of ISOs, within one year after the date of death
or determination of Disability; provided, however, that no such Options may be
exercised on a date subsequent to their expiration. In the event of the death
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of a Participant, the Option may be exercised by the person or persons to whom
rights pass by will or by the laws of descent and distribution, or if
appropriate, the legal representative of the deceased Participant's estate. In
the event of the Disability of a Participant, Options may be exercised by the
Participant, or if such Participant is incapable of exercising the Options, by
such Participant's legal representative.
6.8 Transferable Options. The Committee may, in its discretion by
appropriate provision in the Participant's Option Agreement, authorize all or a
portion of any NQSOs to be granted to a Participant be on terms which permit
transfer by such Participant to (i) the spouse, children or grandchildren of the
Participant ("Immediate Family Members"), (ii) a trust or trusts for the
exclusive benefit of such Participant and/or his Immediate Family Members, or
(iii) a partnership or limited liability company in which such Participant
and/or his Immediate Family Members are the only partners or members, as
applicable; provided that (a) there may be no consideration for any such
transfer, (b) the Option Agreement must expressly provide for transferability in
a manner consistent with this Section and (c) subsequent transfers of
transferable NQSOs shall be prohibited except by will or the laws of descent and
distribution. Following transfer, any such NQSOs shall continue to be subject
to the same terms and conditions as were applicable immediately prior to
transfer, provided that for purposes of this Article 6 (excluding Section 6.7)
the term "Participant" shall be deemed to refer to the transferee. The events
of termination of employment as set forth in Section 6.7 shall continue to be
applied with respect to the original Participant. Any transferred NQSOs shall
be exercisable by the transferee only to the extent, and for the periods,
specified in the Option Agreement.
6.9 Repurchase. Upon approval of the Committee, the Company may
repurchase a previously granted Option from a Participant by mutual agreement
before such Option has been exercised by payment to the Participant of an amount
equal to the amount by which (i) the Fair Market Value of the Shares subject to
the Option on the date immediately preceding the date of repurchase exceeds (ii)
the Option Exercise Price of such Shares.
6.10 Certificate Legend. For any Shares issued upon exercise of an ISO, the
Company may legend such Shares as it deems appropriate.
ARTICLE 7. RESTRICTED STOCK
7.1 Grant of Restricted Stock. Subject to the terms and provisions of the
Plan, the Committee may grant shares of Restricted Stock to Participants at any
time and from time to time and upon such terms and conditions as it may
determine.
7.2 Restricted Stock Agreement. Each grant of Restricted Stock shall be
evidenced by a Restricted Stock Agreement which shall specify the Restriction
Period, the number of shares of Restricted Stock granted and such other
provisions as the Committee may determine and which are required by the Plan.
7.3 Non-Transferability of Restricted Stock. Except as provided in this
Article 7, shares of Restricted Stock may not be sold, transferred, pledged,
assigned or otherwise alienated
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or hypothecated until the end of the applicable Restriction Period as specified
in the Restricted Stock Agreement, or upon earlier satisfaction of any other
conditions determined at the time of grant specified in the Restricted Stock
Agreement. Except as provided in Section 7.8, however, in no event may any
Restricted Stock become vested in a Participant subject to Section 16(b) of the
Exchange Act prior to six months following the date of its grant.
7.4 Other Restrictions. The Committee may impose such other restrictions
on any shares of Restricted Stock as it may deem advisable, including, without
limitation, restrictions based upon the achievement of Performance Goals, years
of service and/or restrictions under applicable Federal or state securities
laws. The Committee may provide that any share of Restricted Stock shall be
held (together with a stock power executed in blank by the Participant) in
custody by the Company until any or all restrictions thereon shall have lapsed.
7.5 Reacquisition of Restricted Stock. Committee shall determine and set
forth in a Participant's Restricted Stock Agreement such events upon which a
Participant's shares of Restricted Stock shall be reacquired by the Company,
which may include, without limitation, the termination of a Participant's
employment during the Restriction Period or the nonachievement of Performance
Goals. Any such forfeited shares of Restricted Stock held by a Participant
which are to be reacquired by the Company shall be immediately returned to the
Company by the Participant, and the Participant shall only receive the amount,
if any, paid by the Participant for such Restricted Stock.
7.6 Certificate Legend. In addition to any legends placed on certificates
pursuant to Section 7.4, each certificate representing shares of Restricted
Stock shall bear the following legend:
"The sale or other transfer of the shares represented by this
Certificate, whether voluntary, involuntary or by operation of law, is
subject to certain restrictions on transfer as set forth in the
Vencor, Inc. 1997 Incentive Compensation Plan, and in the related
Restricted Stock Agreement. A copy of the Plan and such Restricted
Stock Agreement may be obtained from the Secretary of Vencor, Inc."
7.7 Lapse of Restrictions Generally. Except as otherwise provided in this
Article 7, shares of Restricted Stock shall be delivered to the Participant and
no longer subject to reacquisition after the last day of the Restriction Period;
provided, however, that if the restriction relates to the achievement of a
Performance Goal, the Restriction Period shall not end until the Committee has
certified in writing that the Performance Goal has been met. Once the shares of
Restricted Stock are released from their restrictions, the Participant shall be
entitled to have the legend required by Section 7.6 removed from the
Participant's share certificate, which certificate shall thereafter represent
Shares free from any and all restrictions under the Plan.
7.8 Lapse of Restrictions Upon Change in Control. Upon a Change in
Control, any restrictions and other conditions pertaining to then outstanding
shares of Restricted Stock held by
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Participants, including, but not limited to, vesting requirements, shall lapse
and such Shares shall thereafter be immediately free from any and all
restrictions under the Plan.
7.9 Voting Rights; Dividends and Other Distributions. Unless the
Committee exercises its discretion as provided in Section 7.10, during the
Restriction Period, Participants holding shares of Restricted Stock may exercise
full voting rights, and shall be entitled to receive all dividends and other
distributions paid, with respect to such Restricted Stock. If any dividends or
distributions are paid in Shares, the Shares shall be subject to the same
restrictions as the shares of Restricted Stock with respect to which they were
paid.
7.10 Treatment of Dividends. At the time shares of Restricted Stock are
granted to a Participant, the Committee may, in its discretion, determine that
the payment of dividends, or a specified portion thereof, declared or paid on
such Shares shall be deferred until the lapse of the restrictions with respect
to such Shares, in which event such deferred dividends shall be held by the
Company for the account of the Participant. In the event of such deferral,
there may be credited at the end of each year (or portion thereof) interest on
the amount of the account during the year at a rate per annum as the Committee,
in its discretion, may determine. Deferred dividends, together with interest
accrued thereon, if any, shall be (i) paid to the Participant upon the lapse of
restrictions on the shares of Restricted Stock as to which the dividends related
or (ii) revert to the Company upon the reacquisition of such Shares.
7.11 Termination of Employment. If the employment of a Participant is
terminated for any reason other than death or Disability prior to the expiration
of the Restriction Period applicable to any shares of Restricted Stock then held
by the Participant, such Shares shall thereupon be immediately reacquired by and
returned to the Company, and the Participant shall only receive the amount, if
any, paid by the Participant for such Restricted Stock. If the employment of a
Participant is terminated as a result of death or Disability prior to the
expiration of the Restriction Period applicable to any Shares of Restricted
Stock then held by the Participant, any restrictions and other conditions
pertaining to such Shares then held by the Participant, including, but not
limited to, vesting requirements, shall immediately lapse and such Shares shall
thereafter be immediately transferable and nonforfeitable. Notwithstanding
anything in the Plan to the contrary, except in the case of Restricted Stock for
which a Performance Goal must be achieved, the Committee may determine, in its
sole discretion, in the case of any termination of a Participant's employment
other than for Cause, that the restrictions on some or all of the shares of
Restricted Stock awarded to a Participant shall immediately lapse and such
Shares shall thereafter be immediately transferable and nonforfeitable.
ARTICLE 8. PERFORMANCE UNITS
8.1 Grant of Performance Units. The Committee may, from time to time and
upon such terms and conditions as it may determine, grant Performance Units
which will become payable to a Participant upon certification in writing by the
Committee that the Performance Goals related thereto have been achieved. The
maximum number of Performance Units which may be awarded to a Participant during
any calendar year shall be 100,000 units, subject to adjustment as provided in
Section 4.2. If the Performance Goals are achieved in full, and the
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Participant remains employed with the Company as of the end of the relevant
Performance Period, the Participant will be allocated Shares equal to the number
of Performance Units initially awarded to the Participant for the relevant
Performance Period. Each award of Performance Units may provide for the
allocation of fewer Performance Units in the event of partial fulfillment of
Performance Goals.
8.2 Performance Unit Agreement. Each Performance Unit grant shall be
evidenced by a Performance Unit Agreement that shall specify the Performance
Goals, the Performance Period and the number of Performance Units to which it
pertains.
8.3 Performance Period. The period of performance ("Performance Period")
with respect to each Performance Unit shall be such period of time, which shall
not be less than six months, nor more than five years, as determined by the
Committee, for the measurement of the extent to which Performance Goals are
attained.
8.4 Performance Goals. The goals ("Performance Goals") that are to be
achieved with respect to each Performance Unit (or Restricted Stock, stock
award or cash award subject to a requirement that Performance Goals be
achieved), shall be those objectives established by the Committee as it deems
appropriate, and which may be expressed in terms of (a) earnings per Share, (b)
Share price, (c) pre-tax profit, (d) net earnings, (e) return on equity or
assets, (f) revenues, (g) any combination of the foregoing, or (h) such other
goals as the Committee may determine. Performance Goals may be in respect of
the performance of the Company and its Subsidiaries (which may be on a
consolidated basis), a Subsidiary, a division or other operating unit of the
Company. Performance Goals may be absolute or relative and may be expressed in
terms of a progression within a specified range. The Committee shall establish
Performance Goals applicable to a particular fiscal year within 90 days of the
commencement of such fiscal year, provided that the outcome of the Performance
Goal is substantially uncertain at the time of its adoption. The Performance
Goals with respect to a Performance Period shall be established by the Committee
in order to comply with Rule 16b-3 under the Exchange Act and Section 162(m) of
the Code, as applicable. The Committee shall determine the target levels of
performance that must be achieved with respect to each criteria that is
identified in a Performance Goal in order for a Performance Goal to be treated
as attained in whole or in part. In the event that the Performance Goals are
based on more than one business criteria, the Committee may determine to make a
grant of an Award upon attainment of the Performance Goal relating to any one or
more of such criteria.
8.5 Termination of Employment. If the employment of a Participant shall
terminate prior to the expiration of the Performance Period for any reason other
than for death or Disability, the Performance Units then held by the Participant
shall terminate. In the case of termination of employment by reason of death or
Disability of a Participant prior to the expiration of the Performance Period,
then all Performance Units which are potentially available under an outstanding
Award and which have not been issued shall be fully vested in, paid and issued
to Participant or, in the case of Participant's death, shall be vested in, paid
and issued to Participant's estate, as of the date of the Participant's death.
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8.6 Payment Upon Change In Control. Upon a Change in Control, any and all
outstanding Performance Units which are potentially available under any
outstanding Award shall become fully vested and immediately payable.
8.7 Payment of Performance Units. Subject to such terms and conditions as
the Committee may impose, and unless otherwise provided in the Performance Unit
Agreement, Performance Units shall be payable within 90 days following the end
of the Performance Period during which the Participant attained at least the
minimum acceptable level of achievement under the Performance Goals, or 90 days
following a Change in Control, as applicable. The Committee, in its discretion,
may determine at the time of payment required in connection with a Performance
Unit whether such payment shall be made (a) solely in cash, (b) solely in Shares
(valued at the Fair Market Value of the Shares on the date of payment) or (c) a
combination of cash and Shares; provided, however, that if a Performance Unit
becomes payable upon a Change in Control, the Performance Unit shall be paid
solely in cash.
8.8 Designation of Beneficiary. Each Participant may, from time to time,
name any beneficiary or beneficiaries (who may be named contingently or
successively) to whom the right to receive payments under a Performance Unit is
to be paid in case of the Participant's death before receiving any or all such
payments. Each such designation shall revoke all prior designations by the
Participant, shall be in a form prescribed by the Company and shall be effective
only when filed by the Participant in writing with the Committee during the
Participant's lifetime. In the absence of any such designation, benefits
remaining unpaid at the Participant's death shall be paid to the Participant's
estate.
8.9 No Rights as Stockholder. The award of Performance Units to a
Participant shall not create any rights in such Participant as a stockholder of
the Company, until the payment of any Shares associated with such Performance
Units.
ARTICLE 9. STOCK APPRECIATION RIGHTS
9.1 Grant of Stock Appreciation Rights. An SAR is a right to receive,
without payment to the Company, a number of Shares, cash or any combination
thereof, the amount of which is determined pursuant to the formula set forth in
Section 9.5. An SAR may be granted (a) with respect to any Option granted under
the Plan, either concurrently with the grant of such Option or at such later
time as determined by the Committee (as to all or any portion of the Shares
subject to the Option) or (b) alone, without reference to any Option.
9.2 Number of SARs. Each SAR granted to any Participant shall relate to
such number of Shares as the Committee shall determine, subject to adjustment as
provided in Section 4.2. If an SAR is granted in conjunction with an Option,
the number of Shares to which the SAR pertains shall be reduced by the same
number for which the holder of the Option exercises the related Option. The
maximum number of SARs which may be granted to any Participant during any
calendar year shall be 100,000, subject to adjustment as provided in Section
4.2.
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9.3 Duration. Subject to early termination as herein provided, the term
of each SAR shall be as determined by the Committee, but shall not exceed ten
years from the date of grant. Unless otherwise provided by the Committee, each
SAR shall become exercisable at such time or times, to such extent and upon such
conditions as the Option, if any, to which it relates is exercisable.
Notwithstanding the above, no SAR may be exercised during the first six months
of its term. Subject to the foregoing sentence, the Committee may, in its
discretion, accelerate the exercisability of any SAR.
9.4 Exercise. A holder may exercise an SAR, in whole or in part, by
giving written notice to the Company, specifying the number of SARs which such
Participant wishes to exercise. Upon receipt of such written notice, the
Company shall deliver, within 90 days thereafter, to the exercising holder,
certificates for the Shares or cash or both as determined by the Committee, to
which the Participant is entitled pursuant to Section 9.5.
9.5 Payment.
(a) Number of Shares. Subject to the right of the Committee to deliver
----------------
cash in lieu of Shares (which, as it pertains to officers and directors of the
Company, shall comply with all requirements of the Exchange Act and regulations
adopted thereunder), the number of Shares which shall be issuable upon the
exercise of an SAR shall be determined by dividing (i) the number of Shares to
which the SAR is exercised multiplied by the amount of the appreciation in such
Shares (for this purpose, the "appreciation" shall be the amount by which the
Fair Market Value of the Shares subject to the SAR on the date of exercise
exceeds (x) in the case of an SAR related to an Option, the Option Exercise
Price of the Shares under the Option or (y) in the case of an SAR granted alone
without reference to a related Option, an amount that the Committee determined
at the time of grant to be the Fair Market Value of a Share, subject to
adjustment as provided in Section 4.2) by (ii) the Fair Market Value of a Share
on the exercise date.
(b) Cash. In lieu of issuing Shares upon the exercise of an SAR, the
----
Committee may elect, in its sole discretion, to pay the holder of the SAR cash
equal to the Fair Market Value on the exercise date of any or all of the Shares
which would otherwise be issuable. No fractional Shares shall be issued upon
exercise of an SAR; instead, the holder of the SAR shall be entitled to receive
a cash adjustment equal to the same fraction of the Fair Market Value of a Share
on the exercise date or to purchase the portion necessary to make a whole Share
at its Fair Market Value on the date of exercise.
9.6 SAR Agreement. Each SAR shall be evidenced by an SAR Agreement that
shall further specify the terms and conditions of such Award. Any terms and
conditions of the Award shall be consistent with the terms of the Plan.
ARTICLE 10. STOCK AND CASH AWARDS
A stock award consists of the transfer by the Company to a Participant of
Shares, without other payment therefor, as additional compensation for services
to the Company. A cash award consists of a monetary payment made by the Company
to a Participant as additional
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compensation for services to the Company. The Committee shall determine, in its
sole discretion, the amount of any stock or cash award. Stock and cash awards
may be subject to the terms and conditions, which may vary from time to time and
among Participants, as the Committee deems appropriate. The maximum amount of a
cash award which may be granted to a Participant during any calendar year under
the Plan shall not be greater than $500,000. Payment of a stock or cash award
will normally depend on meeting Performance Goals. Each award of stock or cash
may provide for lesser payment in the event of partial fulfillment of
Performance Goals.
ARTICLE 11. AMENDMENT, MODIFICATION AND TERMINATION
11.1 Effective Date. The Plan shall become effective upon adoption by the
Board. The Plan shall be rescinded and all Options, Shares of Restricted Stock,
SARs and Performance Units granted hereunder shall be null and void unless
within 12 months from the date of the adoption of the Plan by the Board it shall
have been approved by the holders of a majority of the outstanding Shares
present or represented and entitled to vote on the Plan at a stockholders'
meeting.
11.2 Termination Date. The Plan shall terminate on the earliest to occur
of (a) the tenth anniversary of the adoption of the Plan by the Board, (b) the
date when all Shares available under the Plan shall have been acquired pursuant
to the exercise of Awards and the payment of all benefits in connection with
Performance Unit Awards has been made or (c) such other date as the Board may
determine in accordance with Section 11.3.
11.3 Amendment, Modification and Termination. The Board may, at any time,
amend, modify or terminate the Plan. Without the approval of the stockholders
of the Company (as may be required by the Code, Section 16 of the Exchange Act
and the rules promulgated thereunder, any national securities exchange or system
on which the Shares are then listed or reported or a regulatory body having
jurisdiction with respect hereto), however, no such amendment, modification or
termination may:
(a) materially increase the benefits accruing to Participants under the
Plan;
(b) increase the total amount of Shares which may be issued under the
Plan, except as provided in Section 4.2; or
(c) materially modify the class of Employees eligible to participate in
the Plan.
11.4 Awards Previously Granted. No amendment, modification or termination
of the Plan shall in any manner adversely affect any outstanding Award without
the written consent of the Participant holding such Award.
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ARTICLE 12. NON-TRANSFERABILITY
Except as expressly provided in the Plan, a Participant's rights under the
Plan may not be assigned, pledged or otherwise transferred other than by will or
the laws of descent and distribution, except that upon a Participant's death,
the Participant's rights to payment pursuant to a Performance Unit may be
transferred to a beneficiary designated in accordance with Section 8.8. Except
as expressly provided in the Plan, during a Participant's lifetime, an Award may
be exercised only by such Participant.
ARTICLE 13. NO GRANTING OF EMPLOYMENT RIGHTS
Neither the Plan, nor any action taken under the Plan, shall be construed
as giving any Employee the right to become a Participant, nor shall an Award
under the Plan be construed as giving a Participant any right with respect to
continuance of employment by the Company. The Company expressly reserves the
right to terminate, whether by dismissal, discharge or otherwise, a
Participant's employment at any time, with or without Cause, except as may
otherwise be provided by any written agreement between the Company and the
Participant.
ARTICLE 14. WITHHOLDING
14.1 Tax Withholding. A Participant shall remit to the Company an amount
sufficient to satisfy Federal, state and local taxes (including the
Participant's FICA and Medicare obligation) required by law to be withheld with
respect to any grant, exercise or payment made under or as a result of the Plan.
14.2 Share Withholding. If the Company has a withholding obligation upon
the issuance of Shares under the Plan, a Participant may, subject to the
discretion of the Committee, elect to satisfy the withholding requirement, in
whole or in part, by having the Company withhold Shares having a Fair Market
Value on the date the withholding tax is to be determined equal to the amount
required to be withheld under applicable law. Notwithstanding the foregoing,
the Committee may, by the adoption of rules or otherwise, modify the provisions
of this Section 14.2 or impose such other restrictions or limitations on such
elections as may be necessary to ensure that such elections will be exempt
transactions under Section 16(b) of the Exchange Act.
ARTICLE 15. INDEMNIFICATION
No member of the Board or the Committee, nor any officer or Employee acting
on behalf of the Board or the Committee, shall be personally liable for any
action, determination or interpretation taken or made with respect to the Plan,
and all members of the Board, the Committee and each officer or Employee of the
Company acting on their behalf shall, to the extent permitted by law, be fully
indemnified and protected by the Company with respect to any such action,
determination or interpretation.
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ARTICLE 16. SUCCESSORS
All obligations of the Company with respect to Awards granted under the
Plan shall be binding on any successor to the Company, whether the existence of
such successor is a result of a direct or indirect purchase, merger,
consolidation or otherwise, of all or substantially all of the business and/or
assets of the Company.
ARTICLE 17. GOVERNING LAW
To the extent not preempted by Federal law, the Plan, and all agreements
under the Plan, shall be governed by, and construed in accordance with, the laws
of the State of Delaware without regard to its conflict of laws rules.
Furthermore, the Plan and all Option Agreements relating to ISOs shall be
interpreted so as to qualify as incentive stock options under the Code.
IN WITNESS WHEREOF, this Vencor, Inc. 1997 Incentive Compensation Plan has
been executed by the Company as of the 31st day of December, 1996, being the
date the Plan was adopted by the Board.
VENCOR, INC.
By: /s/ W. Bruce Lunsford
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Title: Chairman of the Board, President
and Chief Executive Officer
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