EXHIBIT 10.7
FORM OF
HUDSON HOTELS TRUST
1998 INCENTIVE PLAN
TABLE OF CONTENTS
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ARTICLE I DEFINITIONS
1.01. Acceleration Date............................................ 1
1.02. Acquiring Person............................................. 1
1.03. Administrator................................................ 1
1.04. Affiliate.................................................... 1
1.05. Agreement.................................................... 2
1.06. Associate.................................................... 2
1.07. Board........................................................ 2
1.08. Change in Control............................................ 2
1.09. Code......................................................... 2
1.10. Committee.................................................... 3
1.11. Common Shares................................................ 3
1.12. Company...................................................... 3
1.13. Continuing Trustee........................................... 3
1.14. Control Affiliate............................................ 3
1.15. Control Change Date.......................................... 3
1.16. Corresponding SAR............................................ 3
1.17. Exchange Act................................................. 4
1.18. Fair Market Value............................................ 4
1.19. Initial Value................................................ 5
1.20. Incentive Award.............................................. 5
1.21. Option....................................................... 5
1.22. Participant.................................................. 5
1.23. Performance Based Dividend Equivalent Right.................. 5
1.24. Performance Shares........................................... 6
1.25. Person....................................................... 6
1.26. Plan......................................................... 6
1.27. Related Entity............................................... 7
1.28. SAR.......................................................... 7
1.29. Share Award.................................................. 7
ARTICLE II PURPOSES..................................................... 7
ARTICLE III ADMINISTRATION.............................................. 8
ARTICLE IV ELIGIBILITY.................................................. 9
ARTICLE V SHARES SUBJECT TO PLAN
5.01. Shares Issued................................................ 9
5.02. Aggregate Limit.............................................. 10
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5.03. Reallocation of Shares....................................... 10
ARTICLE VI OPTIONS
6.01. Award........................................................ 11
6.02. Option Price................................................. 11
6.03. Maximum Option Period........................................ 11
6.04. Nontransferability........................................... 12
6.05. Transferable Options......................................... 12
6.06. Employee Status.............................................. 12
6.07. Exercise..................................................... 13
6.08. Performance Based Dividend Equivalent Rights................. 14
6.09. Payment...................................................... 14
6.10. Shareholder Rights........................................... 14
6.11. Disposition of Shares........................................ 15
ARTICLE VII SARS
7.01. Award........................................................ 15
7.02. Maximum SAR Period........................................... 15
7.03. Nontransferability........................................... 16
7.04. Transferable SARs............................................ 16
7.05. Exercise..................................................... 17
7.06. Employee Status.............................................. 17
7.07. Settlement................................................... 18
7.08. Shareholder Rights........................................... 18
ARTICLE VIII SHARE AWARDS
8.01. Award........................................................ 18
8.02. Vesting...................................................... 18
8.03. Performance Objectives....................................... 18
8.04. Employee Status.............................................. 19
8.05. Change in Control............................................ 19
8.06. Shareholder Rights........................................... 19
ARTICLE IX PERFORMANCE SHARE AWARDS
9.01. Award........................................................ 20
9.02. Earning the Award............................................ 20
9.03. Payment...................................................... 21
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9.04. Shareholder Rights........................................... 21
9.05. Nontransferability........................................... 21
9.06. Transferable Performance Shares.............................. 21
9.07. Employee Status.............................................. 22
9.08. Change In Control............................................ 22
ARTICLE X INCENTIVE AWARDS
10.01. Award....................................................... 22
10.02. Terms and Conditions........................................ 22
10.03. Nontransferability.......................................... 23
10.04. Transferable Incentive Awards............................... 23
10.05. Employee Status............................................. 24
10.06. Change in Control........................................... 24
10.07. Shareholder Rights.......................................... 24
ARTICLE XI ADJUSTMENT UPON CHANGE IN COMMON SHARES...................... 24
ARTICLE XII COMPLIANCE WITH LAW AND APPROVAL OF REGULATORY BODIES....... 25
ARTICLE XIII GENERAL PROVISIONS
13.01. Effect on Employment and Service............................ 26
13.02. Unfunded Plan............................................... 26
13.03. Rules of Construction....................................... 27
13.04. Certain Reduction of Parachute Payments..................... 27
ARTICLE XIV AMENDMENT................................................... 28
ARTICLE XV DURATION OF PLAN............................................. 28
ARTICLE XVI EFFECTIVE DATE OF PLAN...................................... 28
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ARTICLE I
DEFINITIONS
1.01. ACCELERATION DATE
-----------------
Acceleration Date means the earlier of (i) the date that the Board
approves a transaction or series of transactions which, if consummated,
would result in a Change in Control or (ii) the date that an agreement is
entered into with respect to a transaction or series of transactions which,
if consummated, would result in a Change in Control.
1.02. ACQUIRING PERSON
----------------
Acquiring Person means that a Person, considered alone or together
with all Control Affiliates and Associates of that Person, is or becomes
directly or indirectly the beneficial owner of securities representing at
least thirty percent (30%) of the Company's then outstanding securities
entitled to vote generally in the election of the Board.
1.03. ADMINISTRATOR
-------------
Administrator means (i) while the Company is a Non-Public Company (as
defined in Section 1.18), the Board, and (ii) while the Company is a Public
Company (as defined in Section 1.18), the Committee and any delegate of the
Committee that is appointed in accordance with Article III.
1.04. AFFILIATE
---------
Affiliate means any "subsidiary" or "parent" corporation (within the
meaning of Section 424 of the Code) of the Company.
1
1.05. AGREEMENT
---------
Agreement means a written agreement (including any amendment or
supplement thereto) between the Company and a Participant specifying the
terms and conditions of a Share Award, an award of Performance Shares, an
Incentive Award or an Option or SAR granted to such Participant.
1.06. ASSOCIATE
---------
Associate, with respect to any Person, is defined in Rule 12b-2 of
the General Rules and Regulations under the Exchange Act, as amended as of
January 1, 1990. An Associate does not include the Company or a majority-
owned subsidiary of the Company.
1.07. BOARD
-----
Board means the Board of Trustees of the Company.
1.08. CHANGE IN CONTROL
-----------------
Change in Control means (i) a Person is or becomes an Acquiring
Person; (ii) a Person enters into an agreement that would result in that
Person's becoming an Acquiring Person; (iii) at least fifty percent (50%) of
the Company's total assets on a consolidated basis, as reported in the
Company's consolidated financial statements filed with the Securities and
Exchange Commission, is sold or transferred (in a single transaction or
series of transactions) to one or more Persons; (iv) the Company is merged,
consolidated or reorganized into or with, or effects a statutory share
exchange with, another Person, regardless of whether the Company is the
surviving or resulting entity after the merger, consolidation, or statutory
share exchange; or (v) the Continuing Trustees cease for any reason to
constitute a majority of the Board.
1.09. CODE
----
Code means the Internal Revenue Code of 1986, and any amendments
thereto.
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1.10. COMMITTEE
---------
Committee means the Compensation Committee of the Board.
1.11. COMMON SHARES
-------------
Common Shares means the common shares of the Company.
1.12. COMPANY
-------
Company means Hudson Hotels Trust.
1.13. CONTINUING TRUSTEE
------------------
Continuing Trustee means any member of the Board, while a member of
the Board and (i) who was a member of the Board immediately following the
Company's initial public offering of Common Shares, or (ii) whose nomination
for or election to the Board was recommended or approved by a majority of
the Continuing Trustees.
1.14. CONTROL AFFILIATE
-----------------
Control Affiliate, with respect to any Person, means an affiliate as
defined in Rule 12b-2 of the General Rules and Regulations under the
Exchange Act, as amended as of January 1, 1990.
1.15. CONTROL CHANGE DATE
-------------------
Control Change Date means the date on which a Change in Control
occurs. If a Change in Control occurs on account of a series of
transactions, the "Control Change Date" is the date of the last of such
transactions.
1.16. CORRESPONDING SAR
-----------------
Corresponding SAR means an SAR that is granted in relation to a
particular Option and that can be exercised only upon the surrender to the
Company, unexercised, of that portion of the Option to which the SAR
relates.
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1.17. EXCHANGE ACT
------------
Exchange Act means the Securities Exchange Act of 1934, as amended.
1.18. FAIR MARKET VALUE
-----------------
Fair Market Value means, on any given date, the current fair market
value of a Common Share as determined pursuant to subsection (a), (b) or (c)
below.
(a) While the Company is a Non-Public Company, Fair Market Value
shall be determined by the Committee using any reasonable method in good
faith.
(b) While the Company is a Public Company, Fair Market Value shall be
determined as follows: if the Common Shares are not listed on an established
stock exchange, Fair Market Value shall be the average of the final bid and
asked quotations on the over-the-counter market in which the Common Shares
are traded or, if applicable, the reported "closing" price of a Common Share
in the New York over-the-counter market as reported by the National
Association of Securities Dealers, Inc. If the Common Shares are listed on
an established stock exchange or exchanges, Fair Market Value shall be
deemed to be the highest closing price of a Common Share reported on that
stock exchange or exchanges. In any case, if no sale of Common Shares is
made on any stock exchange or over-the-counter market on that date, then
Fair Market Value shall be determined as of the next preceding day on which
there was a sale. For purposes of this definition, the term "Public
Company" means an entity that has sold securities pursuant to an effective
registration statement on Form S-11 filed pursuant to the Securities Act of
1933, as amended, and the term "Non-Public Company" means an entity that has
never sold securities pursuant to an effective registration statement on
Form S-11 filed pursuant to the Securities Act of 1933, as amended.
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(c) Notwithstanding the foregoing, Fair Market Value on the effective
date of the registration statement relating to the initial public offering
of the Company shall be the initial public offering price of the Common
Shares.
1.19. INITIAL VALUE
-------------
Initial Value means, with respect to an SAR, the Fair Market Value of
one Common Share on the date of grant.
1.20. INCENTIVE AWARD
---------------
Incentive Award means an award which, subject to such terms and
conditions as may be prescribed by the Administrator, entitles the
Participant to receive a cash payment from the Company or an Affiliate.
1.21. OPTION
------
Option means a share option that entitles the holder to purchase from
the Company a stated number of Common Shares at the price set forth in an
Agreement. In the discretion of the Administrator and if provided in an
Agreement, an Option may include a Performance Based Dividend Equivalent
Right.
1.22. PARTICIPANT
-----------
Participant means an employee of the Company or an Affiliate,
including an employee who is a member of the Board, who satisfies the
requirements of Article IV and is selected by the Administrator to receive a
Share Award, an award of Performance Shares, an Option, an SAR, an Incentive
Award or a combination thereof.
1.23. PERFORMANCE BASED DIVIDEND EQUIVALENT RIGHT
-------------------------------------------
Performance Based Dividend Equivalent Right means the right, awarded
in tandem with a newly granted or outstanding Option, to receive a cash
payment for all dividends that would
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have been paid on each Share for which the related Option is exercised,
without interest or compounding, during the period from the date of grant of
the Option (or, if later, the date of grant of the Performance Based
Dividend Equivalent Right) through the date that the Option is exercised for
such Share, had such Share been outstanding throughout that period. A
Performance Based Dividend Equivalent Right will be earned only if the
performance objectives and other conditions specified by the Administrator
in an Agreement have been satisfied.
1.24. PERFORMANCE SHARES
------------------
Performance Shares means an award, in the amount determined by the
Administrator and specified in an Agreement, stated with reference to a
specified number of Common Shares, that in accordance with the terms of an
Agreement entitles the holder to receive a payment for each specified share
equal to the Fair Market Value of a Common Share on the date of payment.
1.25. PERSON
------
Person means any human being, firm, corporation, partnership, or
other entity. Person also includes any human being, firm, corporation,
partnership, or other entity as defined in Sections 13(d)(3) and 14(d)(2) of
the Exchange Act, as amended as of January 1, 1990. The term Person does not
include the Company or any Related Entity, and the term Person does not
include any employee-benefit plan maintained by the Company or by any
Related Entity, and any person or entity organized, appointed, or
established by the Company or by any subsidiary for or pursuant to the terms
of any such employee-benefit plan, unless the Board determines that such an
employee-benefit plan or such person or entity is a Person.
1.26. PLAN
----
Plan means the Hudson Hotels Trust 1998 Incentive Plan.
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1.27. RELATED ENTITY
--------------
Related Entity means any entity that is part of a controlled group of
corporations or is under common control with the Company within the meaning
of Code Section 1563(a), 414(b) or 414(c).
1.28. SAR
---
SAR means a share appreciation right that in accordance with the
terms of an Agreement entitles the holder to receive, with respect to each
Common Share encompassed by the exercise of such SAR, the amount determined
by the Administrator and specified in an Agreement, which amount shall be
based on an increase price of such SAR that is not less than the Initial
Value. In the absence of such a determination, the holder shall be entitled
to receive, with respect to each Common Share encompassed by the exercise of
such SAR, the excess of the Fair Market Value on the date of exercise over
the Initial Value. References to "SARs" include both Corresponding SARs and
SARs granted independently of Options, unless the context requires
otherwise.
1.29. SHARE AWARD
-----------
Share Award means Common Shares awarded to a Participant under
Article VIII.
ARTICLE II
PURPOSES
--------
The Plan is intended to assist the Company and its Affiliates in
recruiting and retaining individuals with ability and initiative by enabling
such persons to participate in the future success of the Company and its
Affiliates and to associate their interests with those of the Company and
its shareholders. The Plan is intended to permit the grant of both Options
qualifying under Section 422 of the Code ("incentive share options") and
Options not so qualifying (either type of which may include Performance
Based Dividend Equivalent Rights), and the grant of SARs, Share Awards,
Performance Shares and Incentive Awards. No Option
7
that is intended to be an incentive share option shall be invalid for
failure to qualify as an incentive share option. The proceeds received by
the Company from the sale of Common Shares pursuant to this Plan shall be
used for general corporate purposes.
ARTICLE III
ADMINISTRATION
--------------
The Plan shall be administered by the Administrator. The
Administrator shall have authority to grant Share Awards, Performance
Shares, Incentive Awards, Options (including associated Performance Based
Dividend Equivalent Rights), and SARs upon such terms (not inconsistent with
the provisions of this Plan), as the Administrator may consider appropriate.
Such terms may include conditions (in addition to those contained in this
Plan), on the exercisability of all or any part of an Option or SAR or on
the transferability or forfeitability of a Share Award, an award of
Performance Shares or an Incentive Award. Notwithstanding any such
conditions, the Administrator may, in its discretion, accelerate the time at
which any Option or SAR may be exercised, or the time at which a Share Award
may become transferable or nonforfeitable or the time at which an Incentive
Award, award of Performance Shares or Performance Based Dividend Equivalent
Right may be settled or earned. In addition, the Administrator shall have
complete authority to interpret all provisions of this Plan; to prescribe
the form of Agreements; to adopt, amend, and rescind rules and regulations
pertaining to the administration of the Plan; and to make all other
determinations necessary or advisable for the administration of this Plan.
The express grant in the Plan of any specific power to the Administrator
shall not be construed as limiting any power or authority of the
Administrator. Any decision made, or action taken, by the Administrator or
in connection with the administration of this Plan shall be final and
conclusive. Neither the Administrator nor any
8
member of the Committee shall be liable for any act done in good faith with
respect to this Plan or any Agreement, Option, SAR, Share Award or Incentive
Award or award of Performance Shares. All expenses of administering this
Plan shall be borne by the Company.
The Committee, in its discretion, may delegate to one or more
officers of the Company all or part of the Committee's authority and duties
with respect to grants and awards to individuals who are not subject to the
reporting and other provisions of Section 16 of the Exchange Act. The
Committee may revoke or amend the terms of a delegation at any time but such
action shall not invalidate any prior actions of the Committee's delegate or
delegates that were consistent with the terms of the Plan.
ARTICLE IV
ELIGIBILITY
-----------
Any employee of the Company or an Affiliate (including a corporation
that becomes an Affiliate after the adoption of this Plan), is eligible to
participate in this Plan if the Administrator, in its sole discretion,
determines that such person has contributed significantly or can be expected
to contribute significantly to the profits or growth of the Company or an
Affiliate. Trustees of the Company who are employees of the Company or an
Affiliate may be selected to participate in this Plan.
ARTICLE V
SHARES SUBJECT TO PLAN
----------------------
5.01. SHARES ISSUED
-------------
Upon the award of Common Shares pursuant to a Share Award or in
settlement of an award of Performance Shares, the Company may issue Common
Shares from its authorized but
9
unissued Common Shares. Upon the exercise of any Option or SAR, the Company
may deliver to the Participant (or the Participant's broker if the
Participant so directs) Common Shares from its authorized but unissued
Common Shares.
5.02. AGGREGATE LIMIT
---------------
The maximum aggregate number of Common Shares that may be issued
under this Plan pursuant to the exercise of SARs and Options and the grant
of Share Awards and the settlement of Performance Shares is 1,786,000
shares. The maximum aggregate number of Common Shares that may be issued
under this Plan as Share Awards and in settlement of Performance Shares is
500,000 shares. The maximum aggregate number of Common Shares that may be
issued under this Plan and the maximum number of Common Shares that may be
issued as Share Awards and in settlement of Performance Shares shall be
subject to adjustment as provided in Article XI.
5.03. REALLOCATION OF SHARES
----------------------
If an Option is terminated, in whole or in part, for any reason other
than its exercise or the exercise of a Corresponding SAR that is settled
with Common Shares, the number of Common Shares allocated to the Option or
portion thereof may be reallocated to other Options, SARs, Performance
Shares and Share Awards to be granted under this Plan. If an SAR is
terminated, in whole or in part, for any reason other than its exercise that
is settled with Common Shares or the exercise of a related Option, the
number of Common Shares allocated to the SAR or portion thereof may be
reallocated to other Options, SARs, Performance Shares and Share Awards to
be granted under this Plan. If an award of Performance Shares is
terminated, in whole or in part, for any reason other than its settlement
with Common Shares, the number of Common Shares allocated to the Performance
Shares or portion thereof may be reallocated to
10
other Options, SARs, Performance Shares and Share Awards to be granted under
this Plan. If a Share Award is forfeited, in whole or in part, for any
reason, the number of Common Shares allocated to the Share Award or portion
thereof may be reallocated to other Options, SARs, Performance Shares and
Share Awards to be granted under this Plan.
ARTICLE VI
OPTIONS
-------
6.01. AWARD
-----
In accordance with the provisions of Article IV, the Administrator
will designate each individual to whom an Option is to be granted and will
specify the number of Common Shares covered by such awards; provided,
however, that no individual may be granted Options in any calendar year
covering more than 500,000 Common Shares. For purposes of the preceding
sentence, an Option and Corresponding SAR shall be treated as a single
award.
6.02. OPTION PRICE
------------
The price per share for Common Shares purchased on the exercise of an
Option shall be determined by the Administrator on the date of grant, but
shall not be less than the Fair Market Value on the date the Option is
granted.
6.03. MAXIMUM OPTION PERIOD
---------------------
The maximum period in which an Option may be exercised shall be
determined by the Administrator on the date of grant, except that no Option
that is an incentive share option shall be exercisable after the expiration
of ten years from the date such Option was granted. The terms of any Option
that is an incentive share option may provide that it is exercisable for a
period less than such maximum period.
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6.04. NONTRANSFERABILITY
------------------
Except as provided in Section 6.05, each Option granted under this
Plan shall be nontransferable except by will or by the laws of descent and
distribution. In the event of any transfer of an Option (by the Participant
or his transferee), the Option and any Corresponding SAR that relates to
such Option must be transferred to the same person or persons or entity or
entities. During the lifetime of the Participant to whom the Option is
granted, the Option may be exercised only by the Participant. No right or
interest of a Participant in any Option shall be liable for, or subject to,
any lien, obligation, or liability of such Participant.
6.05. TRANSFERABLE OPTIONS
--------------------
Section 6.04 to the contrary notwithstanding, if the Agreement
provides, an Option that is not an incentive share option may be transferred
by a Participant to the Participant's children, grandchildren, spouse, one
or more trusts for the benefit of such family members or a partnership in
which such family members are the only partners, on such terms and
conditions as may be permitted under Securities and Exchange Commission Rule
16b-3 as in effect from time to time. The holder of an Option transferred
pursuant to this section shall be bound by the same terms and conditions
that governed the Option during the period that it was held by the
Participant; provided, however, that such transferee may not transfer the
Option except by will or the laws of descent and distribution. In the event
of any transfer of an Option (by the Participant or his transferee), the
Option and any Corresponding SAR that relates to such Option must be
transferred to the same person or persons or entity or entities.
6.06. EMPLOYEE STATUS
---------------
For purposes of determining the applicability of Section 422 of the
Code (relating to incentive share options), or in the event that the terms
of any Option provide that it may be
12
exercised only during employment or within a specified period of time after
termination of employment, the Administrator may decide to what extent
leaves of absence for governmental or military service, illness, temporary
disability, or other reasons shall not be deemed interruptions of continuous
employment.
6.07. EXERCISE
--------
All outstanding Options previously granted under the Plan shall be
exercisable, in whole or in part, on a Control Change Date or, if sooner, an
Acceleration Date and shall remain exercisable thereafter in accordance with
the terms of this Plan and the applicable Agreement. Subject to the
preceding sentence and the other provisions of this Plan and the applicable
Agreement, an Option may be exercised in whole at any time or in part from
time to time at such times and in compliance with such requirements as the
Administrator shall determine; provided, however, that incentive share
options (granted under the Plan and all plans of the Company and its
Affiliates) may not be first exercisable in a calendar year for shares
having a Fair Market Value (determined as of the date an Option is granted)
exceeding the amount prescribed by the Code (currently $100,000). An Option
granted under this Plan may be exercised with respect to any number of whole
shares less than the full number for which the Option could be exercised. A
partial exercise of an Option shall not affect the right to exercise the
Option from time to time in accordance with this Plan and the applicable
Agreement with respect to the remaining shares subject to the Option. The
exercise of an Option shall result in the termination of any Corresponding
SAR to the extent of the number of shares with respect to which the Option
is exercised.
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6.08. PERFORMANCE BASED DIVIDEND EQUIVALENT RIGHTS
--------------------------------------------
If an Option Agreement includes a Performance Based Dividend
Equivalent Right, the Participant shall be entitled to the payment (if any)
that is due thereunder at the time or times specified in the Agreement. An
Agreement may provide that such payment will be made only upon satisfaction
of performance objectives stated with respect to the Company's, an
Affiliate's or an operating unit's funds from operations per share, return
on equity, earnings per share, total earnings, earnings growth, return on
capital, return on assets, Fair Market Value, or such other measures as may
be selected by the Administrator. If the Administrator, on the date of
award, prescribes that a Performance Based Dividend Equivalent Right will be
earned only upon the attainment of performance objectives stated with
respect to one or more of the criteria set forth above, any payment
thereunder shall be made only to the extent that the Administrator certifies
that such objectives have been achieved.
6.09. PAYMENT
-------
Unless otherwise provided by the Agreement, payment of the Option
price shall be made in cash or a cash equivalent acceptable to the
Administrator, or by the surrender to the Company or attestation of
ownership of Common Shares. If Common Shares are used to pay all or part of
the Option price, the sum of the cash and cash equivalent and the Fair
Market Value (determined as of the day preceding the date of exercise) of
the shares that are surrendered or that are the subject of attestation must
not be less than the Option price of the shares for which the Option is
being exercised.
6.10. SHAREHOLDER RIGHTS
------------------
No Participant shall have any rights as a shareholder with respect to
shares subject to his Option until the date of exercise of such Option.
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6.11. DISPOSITION OF SHARES
---------------------
A Participant shall notify the Company of any sale or other
disposition of Common Shares acquired pursuant to an Option that was an
incentive share option if such sale or disposition occurs (i) within two
years of the grant of an Option or (ii) within one year of the issuance of
the Common Shares to the Participant. Such notice shall be in writing and
directed to the Secretary of the Company.
ARTICLE VII
SARS
----
7.01. AWARD
-----
In accordance with the provisions of Article IV, the Administrator
will designate each individual to whom SARs are to be granted and will
specify the number of shares covered by such awards; provided, however, that
no individual may be granted SARs in any calendar year covering more than
500,000 shares. For purposes of the preceding sentence, an Option and
Corresponding SAR shall be treated as a single award. In addition no
Participant may be granted Corresponding SARs (under all incentive share
option plans of the Company and its Affiliates) that are related to
incentive share options which are first exercisable in any calendar year for
shares having an aggregate Fair Market Value (determined as of the date the
related Option is granted) that exceeds the amount prescribed by the Code
(currently $100,000).
7.02. MAXIMUM SAR PERIOD
------------------
The term of each SAR shall be determined by the Administrator on the
date of grant, except that no Corresponding SAR that is related to an
incentive share option shall have a term of more than ten years from the
date such related Option was granted. The terms of any
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Corresponding SAR that is related to an incentive share option may provide
that it has a term that is less than such maximum period.
7.03. NONTRANSFERABILITY
------------------
Except as provided in Section 7.04, each SAR granted under this Plan
shall be nontransferable except by will or by the laws of descent and
distribution. In the event of any such transfer, a Corresponding SAR and the
related Option must be transferred to the same person or persons or entity
or entities. During the lifetime of the Participant to whom the SAR is
granted, the SAR may be exercised only by the Participant. No right or
interest of a Participant in any SAR shall be liable for, or subject to, any
lien, obligation, or liability of such Participant.
7.04. TRANSFERABLE SARS
-----------------
Section 7.03 to the contrary notwithstanding, if the Agreement
provides, an SAR, other than a Corresponding SAR that is related to an
incentive share option, may be transferred by a Participant to the
Participant's children, grandchildren, spouse, one or more trusts for the
benefit of such family members or a partnership in which such family members
are the only partners, on such terms and conditions as may be permitted
under Securities and Exchange Commission Rule 16b-3 as in effect from time
to time. The holder of an SAR transferred pursuant to this section shall be
bound by the same terms and conditions that governed the SAR during the
period that it was held by the Participant; provided, however, that such
transferee may not transfer the SAR except by will or the laws of descent
and distribution. In the event of any transfer of a Corresponding SAR (by
the Participant or his transferee), the Corresponding SAR and the related
Option must be transferred to the same person or person or entity or
entities.
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7.05. EXERCISE
--------
All outstanding SARs previously granted under the Plan shall be
exercisable, in whole or in part, on a Control Change Date or, if sooner, an
Acceleration Date and shall remain exercisable thereafter in accordance with
the terms of the Plan and the applicable Agreement. Subject to the
preceding sentence and the other provisions of this Plan and the applicable
Agreement, an SAR may be exercised in whole at any time or in part from time
to time at such times and in compliance with such requirements as the
Administrator shall determine; provided, however, that a Corresponding SAR
that is related to an incentive share option may be exercised only to the
extent that the related Option is exercisable and only when the Fair Market
Value exceeds the option price of the related Option. An SAR granted under
this Plan may be exercised with respect to any number of whole shares less
than the full number for which the SAR could be exercised. A partial
exercise of an SAR shall not affect the right to exercise the SAR from time
to time in accordance with this Plan and the applicable Agreement with
respect to the remaining shares subject to the SAR. The exercise of a
Corresponding SAR shall result in the termination of the related Option to
the extent of the number of shares with respect to which the SAR is
exercised.
7.06. EMPLOYEE STATUS
---------------
If the terms of any SAR provide that it may be exercised only during
employment or within a specified period of time after termination of
employment, the Administrator may decide to what extent leaves of absence
for governmental or military service, illness, temporary disability or other
reasons shall not be deemed interruptions of continuous employment.
17
7.07. SETTLEMENT
----------
At the Administrator's discretion, the amount payable as a result of
the exercise of an SAR may be settled in cash, Common Shares, or a
combination of cash and Common Shares. No fractional share will be
deliverable upon the exercise of an SAR but a cash payment will be made in
lieu thereof.
7.08. SHAREHOLDER RIGHTS
------------------
No Participant shall, as a result of receiving an SAR award, have any
rights as a shareholder of the Company or any Affiliate until the date that
the SAR is exercised and then only to the extent that the SAR is settled by
the issuance of Common Shares.
ARTICLE VIII
SHARE AWARDS
------------
8.01. AWARD
-----
In accordance with the provisions of Article IV, the Administrator
will designate each individual to whom a Share Award is to be made and will
specify the number of Common Shares covered by such awards; provided,
however, that no Participant may receive Share Awards in any calendar year
for more than 115,000 Common Shares.
8.02. VESTING
-------
A Participant's rights in a Share Award may be forfeitable or
otherwise restricted for a period of time or subject to such conditions as
may be set forth in the Agreement.
8.03. PERFORMANCE OBJECTIVES
----------------------
In accordance with Section 8.02, the Administrator may prescribe that
Share Awards will become vested or transferable or both based on objectives
stated with respect to the Company's,
18
an Affiliate's or an operating unit's funds from operations per share,
return on equity, earnings per share, total earnings, earnings growth,
return on capital, or return on assets, Fair Market Value, or such other
measures as may be selected by the Administrator. If the Administrator, on
the date of award, prescribes that a Share Award shall become nonforfeitable
and transferable only upon the attainment of performance objectives stated
with respect to one or more of the criteria set forth above, the shares
subject to such Share Award shall become nonforfeitable and transferable
only to the extent that the Administrator certifies that such objectives
have been achieved.
8.04. EMPLOYEE STATUS
---------------
In the event that the terms of any Share Award provide that shares
may become transferable and nonforfeitable thereunder only after completion
of a specified period of employment, the Administrator may decide in each
case to what extent leaves of absence for governmental or military service,
illness, temporary disability, or other reasons shall not be deemed
interruptions of continuous employment.
8.05. CHANGE IN CONTROL
-----------------
Sections 8.02 and 8.03 to the contrary notwithstanding, each
outstanding Share Award shall be transferable and nonforfeitable as of a
Control Change Date.
8.06. SHAREHOLDER RIGHTS
------------------
Prior to their forfeiture (in accordance with the applicable
Agreement and while the Common Shares granted pursuant to the Share Award
may be forfeited or are nontransferable), a Participant will have all rights
of a shareholder with respect to a Share Award, including the right to
receive dividends and vote the shares; provided, however, that during such
period (i) a Participant may not sell, transfer, pledge, exchange,
hypothecate, or otherwise dispose of
19
Common Shares granted pursuant to a Share Award, (ii) the Company shall
retain custody of the certificates evidencing Common Shares granted pursuant
to a Share Award, and (iii) the Participant will deliver to the Company a
share power, endorsed in blank, with respect to each Share Award. The
limitations set forth in the preceding sentence shall not apply after the
Common Shares granted under the Share Award are transferable and are no
longer forfeitable.
ARTICLE IX
PERFORMANCE SHARE AWARDS
------------------------
9.01. AWARD
-----
In accordance with the provisions of Article IV, the Administrator
will designate each individual to whom an award of Performance Shares is to
be made and will specify the number of Common Shares covered by such awards;
provided, however, that no Participant may receive an award of Performance
Shares in any calendar year for more than 115,000 Common Shares.
9.02. EARNING THE AWARD
-----------------
The Administrator, on the date of the grant of an award, shall
prescribe that the Performance Shares, or portion thereof, will be earned,
and the Participant will be entitled to receive payment pursuant to the
award of Performance Shares, only upon the satisfaction of performance
objectives and such other criteria as may be prescribed by the Administrator
during a performance measurement period of at least one year. The
performance objectives may be stated with respect to the Company's, an
Affiliate's, or an operating unit's funds from operations per share, return
on equity, earnings per share, total earnings, earnings growth, return on
capital, return on assets, Fair Market Value, or such other measures as may
be selected by the Administrator. No payments will be made with respect to
Performance Shares unless, and then only to the extent that, the
Administrator certifies that such objectives have been achieved.
20
9.03. PAYMENT
-------
In the discretion of the Administrator, the amount payable when an
award of Performance Shares is earned may be settled in cash, by the
issuance of Common Shares or a combination of cash and Common Shares. A
fractional share shall not be deliverable when an award of Performance
Shares is earned, but a cash payment will be made in lieu thereof.
9.04. SHAREHOLDER RIGHTS
------------------
No Participant shall, as a result of receiving an award of
Performance Shares, have any rights as a shareholder until and then only to
the extent that the award of Performance Shares is earned and settled by the
issuance of Common Shares. After an award of Performance Shares is earned,
if settled completely or partially in Common Shares, a Participant will have
all the rights of a shareholder with respect to such Common Shares.
9.05. NONTRANSFERABILITY
------------------
Except as provided in Section 9.06, Performance Shares granted under
this Plan shall be nontransferable except by will or by the laws of descent
and distribution. No right or interest of a Participant in any Performance
Shares shall be liable for, or subject to, any lien, obligation, or
liability of such Participant.
9.06. TRANSFERABLE PERFORMANCE SHARES
-------------------------------
Section 9.05 to the contrary notwithstanding, if the Agreement
provides, an award of Performance Shares may be transferred by a Participant
to the Participant's children, grandchildren, spouse, one or more trusts for
the benefit of such family members or a partnership in which such family
members are the only partners, on such terms and conditions as may be
permitted under Securities and Exchange Commission Rule 16b-3 as in effect
from time to time. The holder of Performance Shares transferred pursuant to
this section shall be bound by the same
21
terms and conditions that governed the Performance Shares during the period
that they were held by the Participant; provided, however that such
transferee may not transfer Performance Shares except by will or the laws of
descent and distribution.
9.07. EMPLOYEE STATUS
---------------
In the event that the terms of any Performance Share award provide
that no payment will be made unless the Participant completes a stated
period of employment, the Administrator may decide to what extent leaves of
absence for government or military service, illness, temporary disability,
or other reasons shall not be deemed interruptions of continuous employment.
9.08. CHANGE IN CONTROL
-----------------
Section 9.02 to the contrary notwithstanding, each outstanding
Performance Share shall be earned in its entirety as of a Control Change
Date.
ARTICLE X
INCENTIVE AWARDS
----------------
10.01. AWARD
-----
The Administrator shall designate Participants to whom Incentive
Awards are made. All Incentive Awards shall be finally determined
exclusively by the Administrator under the procedures established by the
Administrator; provided, however, that no Participant may receive an
Incentive Award payment in any calendar year that exceeds $500,000.
10.02. TERMS AND CONDITIONS
--------------------
The Administrator, at the time an Incentive Award is made, shall
specify the terms and conditions which govern the award. Such terms and
conditions shall prescribe that the Incentive Award shall be earned only
upon, and to the extent that, performance objectives are satisfied. The
performance objectives may be stated with respect to the Company's, an
Affiliate's or an
22
operating unit's funds from operations per share, return on equity, earnings
per share, total earnings, earnings growth, return on capital, return on
assets, Fair Market Value or such other measures as may be selected by the
Administrator. Such terms and conditions also may include other limitations
on the payment of Incentive Awards including, by way of example and not of
limitation, requirements that the Participant complete a specified period of
employment with the Company or an Affiliate. The Administrator, at the time
an Incentive Award is made, shall also specify when amounts shall be payable
under the Incentive Award and whether amounts shall be payable in the event
of the Participant's death, disability, or retirement.
10.03. NONTRANSFERABILITY
------------------
Except as provided in Section 10.04, Incentive Awards granted under
this Plan shall be nontransferable except by will or by the laws of descent
and distribution. No right or interest of a Participant in an Incentive
Award shall be liable for, or subject to, any lien, obligation, or liability
of such Participant.
10.04. TRANSFERABLE INCENTIVE AWARDS
-----------------------------
Section 10.03 to the contrary notwithstanding, if the Agreement
provides, an Incentive Award may be transferred by a Participant to the
Participant's children, grandchildren, spouse, one or more trusts for the
benefit of such family members or to a partnership in which such family
members are the only partners, on such terms and conditions as may be
permitted by Securities and Exchange Commission Rule 16b-3 as in effect from
time to time. The holder of an Incentive Award transferred pursuant to this
section shall be bound by the same terms and conditions that governed the
Incentive Award during the period that it was held by the Participant;
provided, however, that such transferee may not transfer the Incentive Award
except by will or the laws of descent and distribution.
23
10.05. EMPLOYEE STATUS
---------------
If the terms of an Incentive Award provide that a payment will be
made thereunder only if the Participant completes a stated period of
employment, the Administrator may decide to what extent leaves of absence
for governmental or military service, illness, temporary disability or other
reasons shall not be deemed interruptions of continuous employment.
10.06. CHANGE IN CONTROL
-----------------
Section 10.02 to the contrary notwithstanding, each Incentive Award
shall be earned in its entirety as of a Control Change Date.
10.07. SHAREHOLDER RIGHTS
------------------
No Participant shall, as a result of receiving an Incentive Award,
have any rights as a shareholder of the Company or any Affiliate on account
of such award.
ARTICLE XI
ADJUSTMENT UPON CHANGE IN COMMON SHARES
---------------------------------------
The maximum number of shares as to which Options, SARs, Performance
Shares and Share Awards may be granted under this Plan, the terms of
outstanding Share Awards, Options (including associated Performance Based
Dividend Equivalent Rights), Performance Shares, Incentive Awards, and SARs,
and the per individual limitations on the number of shares or for which
Options, SARs, Performance Shares, and Share Awards may be granted shall be
adjusted as the Committee shall determine to be equitably required in the
event that (i) the Company (a) effects one or more share dividends, share
split-ups, subdivisions or consolidations of shares or (b) engages in a
transaction to which Section 424 of the Code applies or (ii) there occurs
any other event which, in the judgment of the Committee necessitates such
action. Any determination made under this Article XI by the Committee shall
be final and conclusive.
24
The issuance by the Company of shares of any class, or securities
convertible into shares of any class, for cash or property, or for labor or
services, either upon direct sale or upon the exercise of rights or warrants
to subscribe therefor, or upon conversion of shares or obligations of the
Company convertible into such shares or other securities, shall not affect,
and no adjustment by reason thereof shall be made with respect to, the
maximum number of shares as to which Options, SARs, Performance Shares and
Share Awards may be granted, the per individual limitations on the number of
shares for which Options, SARs, Performance Shares and Share Awards may be
granted or the terms of outstanding Share Awards, Options, Performance
Shares, Incentive Awards or SARs.
The Committee may make Share Awards and may grant Options, SARs,
Performance Shares, and Incentive Awards in substitution for performance
shares, phantom shares, stock awards, stock options, stock appreciation
rights, or similar awards held by an individual who becomes an employee of
the Company or an Affiliate in connection with a transaction described in
the first paragraph of this Article XII. Notwithstanding any provision of
the Plan (other than the limitation of Section 5.02), the terms of such
substituted Share Awards or Option, SAR, Performance Shares or Incentive
Award grants shall be as the Committee, in its discretion, determines is
appropriate.
ARTICLE XII
COMPLIANCE WITH LAW AND APPROVAL OF REGULATORY BODIES
-----------------------------------------------------
No Option or SAR shall be exercisable, no Common Shares shall be
issued, no certificates for Common Shares shall be delivered, and no payment
shall be made under this Plan except in compliance with all applicable
federal and state laws and regulations (including, without limitation,
withholding tax requirements), any listing agreement to which the Company
25
is a party, and the rules of all domestic stock exchanges on which the
Company's shares may be listed. The Company shall have the right to rely on
an opinion of its counsel as to such compliance. Any share certificate
issued to evidence Common Shares when a Share Award is granted, a
Performance Share is settled or for which an Option or SAR is exercised may
bear such legends and statements as the Administrator may deem advisable to
assure compliance with federal and state laws and regulations. No Option or
SAR shall be exercisable, no Share Award or Performance Share shall be
granted, no Common Share shall be issued, no certificate for shares shall be
delivered, and no payment shall be made under this Plan until the Company
has obtained such consent or approval as the Administrator may deem
advisable from regulatory bodies having jurisdiction over such matters.
ARTICLE XIII
GENERAL PROVISIONS
------------------
13.01. EFFECT ON EMPLOYMENT AND SERVICE
--------------------------------
Neither the adoption of this Plan, its operation, nor any documents
describing or referring to this Plan (or any part thereof), shall confer
upon any individual any right to continue in the employ or service of the
Company or an Affiliate or in any way affect any right and power of the
Company or an Affiliate to terminate the employment or service of any
individual at any time with or without assigning a reason therefor.
13.02. UNFUNDED PLAN
-------------
The Plan, insofar as it provides for grants, shall be unfunded, and
the Company shall not be required to segregate any assets that may at any
time be represented by grants under this Plan. Any liability of the Company
to any person with respect to any grant under this Plan shall be based
solely upon any contractual obligations that may be created pursuant to this
Plan. No such
26
obligation of the Company shall be deemed to be secured by any pledge of, or
other encumbrance on, any property of the Company.
13.03. RULES OF CONSTRUCTION
---------------------
Headings are given to the articles and sections of this Plan solely
as a convenience to facilitate reference. The reference to any statute,
regulation, or other provision of law shall be construed to refer to any
amendment to or successor of such provision of law.
13.04. CERTAIN REDUCTION OF PARACHUTE PAYMENTS
---------------------------------------
Any benefit, payment, accelerated vesting or other right under this
Plan may constitute a "parachute payment" (as defined in Code Section
280G(b)(2)(A), but without regard to Code Section 280G(b)(2)(A)(ii)), with
respect to which a Participant may incur a liability under Code Section
4999. In accordance with the terms of an Agreement, the Company shall
reduce any such parachute payments if, and only to the extent that, a
reduction will allow the Participant to receive a greater "net after-tax
amount" than such Participant would receive absent a reduction. For
purposes of this Section 13.04, "net after-tax amount" means the amount of
any parachute payments, net of taxes imposed under Code Sections 1, 3101(b)
and 4999 and any state or local income taxes applicable to the Participant.
The determination of the net after-tax amount shall be calculated by using
the top marginal rates of federal, state and local income taxes and
employment taxes applicable to the Participant's taxable income in effect
for the year in which the determination is made. The determination of any
reduction pursuant to this Section 13.04 must be made by the Company in good
faith, before any amount is due and payable to the Participant.
27
ARTICLE XIV
AMENDMENT
---------
The Board may amend or terminate this Plan from time to time;
provided, however, that no amendment may become effective until shareholder
approval is obtained if the amendment increases the aggregate number of
Common Shares that may be issued under the Plan. No amendment shall, without
a Participant's consent, adversely affect any rights of such Participant
under any outstanding Share Award, Performance Share award, Option, SAR or
Incentive Award outstanding at the time such amendment is made.
ARTICLE XV
DURATION OF PLAN
----------------
No Share Award, Performance Share award, Option, SAR or Incentive
Award may be granted under this Plan more than ten years after the earlier
of the date that the Plan is adopted by the Board or is approved by the
Company's shareholders as provided in Article XVII. Share Awards,
Performance Shares, Options, SARs and Incentive Awards granted before that
date shall remain valid in accordance with their terms.
ARTICLE XVI
EFFECTIVE DATE OF PLAN
----------------------
Options (including associates Performance Based Dividend Equivalent
Rights), SARs, Performance Shares and Incentive Awards may be granted under
this Plan upon its adoption by the Board, provided that no Option, SAR,
Performance Shares or Incentive Award shall be effective or exercisable
unless this Plan is approved by a majority of the votes cast by the
Company's shareholders, voting either in person or by proxy, at a duly held
shareholders'
28
meeting at which a quorum is present. Share Awards may be granted under this
Plan upon the later of its adoption by the Board or its approval by
shareholders in accordance with the preceding sentence.
29