EXHIBIT 10.3
BORG-WARNER SECURITY CORPORATION
1993 STOCK INCENTIVE PLAN
(As Amended Through July 8, 1997)
SECTION 1. Purpose; Definitions.
The purpose of the Plan is to give the Company a significant advantage in
attracting, retaining and motivating officers, employees and directors and to
provide the Company and its subsidiaries with the ability to provide incentives
more directly linked to the profitability of the Company's businesses and
increases in stockholder value.
For purposes of the Plan, the following terms are defined as set forth
below:
a. "Affiliate" means a corporation or other entity controlled by the
Company and designated by the Committee as such.
b. "Award" means a Stock Appreciation Right, Stock Option or Restricted
Stock.
c. "Board" means the Board of Directors of the Company.
d. "Cause" has the meaning set forth in Section 5(i).
e. "Change in Control" and "Change in Control Price" have the meanings
set forth in Sections 8(b) and (c), respectively.
f. "Code" means the Internal Revenue Code of 1986, as amended from time
to time, and any successor thereto.
g. "Commission" means the Securities and Exchange Commission or any
successor agency.
h. "Committee" means the Committee referred to in Section 2.
i. "Company" means Borg-Warner Security Corporation, a Delaware
corporation.
j. "Disability" means permanent and total disability as determined under
procedures established by the Committee for purposes of the Plan.
k. "Disinterested Person" shall mean a member of the Board who qualifies
as a disinterested person as defined in Rule 16b-3(c)(2), as
promulgated by the Commission under the Exchange Act, or any successor
definition adopted by the Commission.
l. "Exchange Act" means the Securities Exchange Act of 1934, as amended
from time to time, and any successor thereto.
m. "Fair Market Value" means, except as provided in Section 5(j) and
6(b)(ii)(2), as of any given date, the mean between the highest and
lowest reported sales prices of the Stock on the New York Stock
Exchange Composite Tape or, if not listed on such exchange, on
any other national securities exchange on which the Stock is listed or
on NASDAQ. If there is no regular public trading market for such
Stock, the Fair Market Value of the Stock shall be determined by the
Committee in good faith.
n. "Incentive Stock Option" means any Stock Option intended to be and
designated as an "incentive stock option" within the meaning of
Section 422 of the Code.
o. "Non-Qualified Stock Option" means any Stock Option that is not an
Incentive Stock Option.
p. "Plan" means the Borg-Warner Security Corporation 1993 Stock Incentive
Plan, as set forth herein and as hereinafter amended from time to
time.
q. "Restricted Stock" means an award granted under Section 7.
r. "Retirement" means retirement from active employment under a pension
plan of the Company, any subsidiary or Affiliate, or under an
employment contract with any of them, or termination of employment at
or after age 55 under circumstances which the Committee, in its sole
discretion, deems equivalent to retirement.
s. "Rule 16b-3" means Rule 16b-3, as promulgated by the Commission under
Section 16(b) of the Exchange Act, as amended from time to time.
t. "Stock" means Common Stock, par value $.01 per share, of the Company.
u. "Stock Appreciation Right" means a right granted under Section 6.
v. "Stock Option" means an option granted under Section 5.
w. "Termination of Employment" means the termination of any participant's
employment with the Company and any subsidiary or Affiliate. A
participant employed by a subsidiary or an Affiliate shall also be
deemed to incur a Termination of Employment if the subsidiary or
Affiliate ceases to be such a subsidiary or Affiliate, as the case may
be, and the participant does not immediately thereafter become an
employee of the Company or another subsidiary or Affiliate.
In addition, certain other terms used herein have definitions given to them
in the first place in which they are used.
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SECTION 2. Administration
The Plan shall be administered by the Executive Compensation Committee of
the Board or such other committee of the Board, composed of not less than two
Disinterested Persons, each of whom shall be appointed by and serve at the
pleasure of the Board. If at any time no Committee shall be in office, the
functions of the Committee specified in the Plan shall be exercised by the
Board.
The Committee shall have plenary authority to grant Awards pursuant to the
terms of the Plan to officers, employees and directors of the Company and its
subsidiaries and Affiliates.
Among other things, the Committee shall have the authority, subject to the
terms of the Plan:
(a) to select the officers, employees and directors to whom Awards may
from time to time be granted; provided that awards to non-employee
directors may be made only in accordance with Section 13;
(b) to determine whether and to what extent Incentive Stock Options, Non-
Qualified Stock Options, Stock Appreciation Rights and Restricted
Stock or any combination thereof are to be granted hereunder;
(c) to determine the number of shares of Stock to be covered by each Award
granted hereunder;
(d) to determine the terms and conditions of any Award granted hereunder
(including, but not limited to, the option price (subject to Section
5(a)), any vesting restriction or limitation and any vesting
acceleration or forfeiture waiver regarding any Award and the shares
of Stock relating thereto, based on such factors as the Committee
shall determine);
(e) to modify, amend or adjust the terms and conditions of any Award, at
any time or from time to time, including, but not limited to, with
respect to performance goals and measurements applicable to
performance-based Awards pursuant to the terms of the Plan;
(f) to determine to what extent and under what circumstances Stock and
other amounts payable with respect to an Award shall be deferred; and
(g) to determine under what circumstances a Stock Option may be settled in
cash or Stock under Section 5(j).
The Committee shall have the authority to adopt, alter and repeal such
administrative rules, guidelines and practices governing the Plan as it shall,
from time to time, deem advisable, to interpret the terms and provisions of the
Plan and any Award issued under the Plan (and any agreement relating thereto)
and to otherwise supervise the administration of the Plan.
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The Committee may act only by a majority of its members then in office,
except that the members thereof may (i) delegate to an officer of the Company
the authority to make decisions pursuant to paragraphs (c), (f), (g), (h), and
(i) of Section 5 (provided that no such delegation may be made that would cause
Awards or other transactions under the Plan to cease to be exempt from Section
16(b) of the Exchange Act) and (ii) authorize any one or more of their number or
any officer of the Company to execute and deliver documents on behalf of the
Committee.
Any determination made by the Committee or pursuant to delegated authority
pursuant to the provisions of the Plan with respect to any Award shall be made
in the sole discretion of the Committee or such delegate at the time of the
grant of the Award or, unless in contravention of any express term of the Plan,
at any time thereafter. All decisions made by the Committee or any appropriately
delegated officer pursuant to the provisions of the Plan shall be final and
binding on all persons, including the Company and Plan participants.
SECTION 3. Stock Subject to Plan.
Subject to adjustment as provided herein, the total number of shares of
Stock of the Company available for grant under the Plan shall be 1,900,000,
provided that no "covered employee" (as such term is defined in Section 162(m)
of the Code) shall be granted more than 100,000 shares of Stock in any taxable
year. Shares subject to an Award under the Plan may be authorized and unissued
shares or may be treasury shares.
If any shares of Restricted Stock are forfeited for which the participant
did not receive any benefits of ownership (as such phrase is construed by the
Commission or its Staff), or if any Stock Option (and related Stock Appreciation
Right, if any) terminates without being exercised, or if any Stock Appreciation
Right is exercised for cash, shares subject to such Awards shall again be
available for distribution in connection with Awards under the Plan.
In the event of any merger, reorganization, consolidation,
recapitalization, stock dividend, stock split, extraordinary distribution with
respect to the Stock or other change in corporate structure affecting the Stock,
the Committee or Board may make such substitution or adjustments in the
aggregate number and kind of shares reserved for issuance under the Plan, in the
number, kind and option price of shares subject to outstanding Stock Options and
Stock Appreciation Rights, in the number and kind of shares subject to other
outstanding Awards granted under the Plan and/or such other substitution or
adjustments in the consideration receivable upon exercise as it may determine to
be appropriate in its sole discretion; provided, however, that the number of
shares subject to any Award shall always be a whole number. Such adjusted option
price shall also be used to determine the amount payable by the Company upon the
exercise of any Stock Appreciation Right associated with any Stock Option.
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SECTION 4. Eligibility.
Officers, employees and directors of the Company, its subsidiaries and
Affiliates who are responsible for or contribute to the management, growth and
profitability of the business of the Company, its subsidiaries and Affiliates
are eligible to be granted Awards under the Plan. Except as expressly authorized
by Section 13 of the Plan, however, no grant shall be made to a director who is
not an officer or a salaried employee.
SECTION 5. Stock Options.
Stock Options may be granted alone or in addition to other Awards granted
under the Plan and may be of two types: Incentive Stock Options and Non-
Qualified Stock Options. Any Stock Option granted under the Plan shall be in
such form as the Committee may from time to time approve.
The Committee shall have the authority to grant any optionee Incentive
Stock Options, Non-Qualified Stock Options or both types of Stock Options (in
each case with or without Stock Appreciation Rights). Incentive Stock Options
may be granted only to employees of the Company and its subsidiaries (within the
meaning of Section 424(f) of the Code). To the extent that any Stock Option is
not designated as an Incentive Stock Option or even if so designated does not
qualify as an Incentive Stock Option, it shall constitute a Non-Qualified Stock
Option.
The Committee may authorize the Chief Executive Officer of the Corporation,
who need not be a Disinterested Person, to grant in any calendar year a Non-
Qualified Stock Option (with or without Stock Appreciation Rights) for up to
3,000 shares of Stock to any employee of the Company who is not an executive
officer of the Company subject to Section 16 of the Exchange Act. The Committee
may limit or qualify such authorization in any manner it deems appropriate.
Stock Options granted by the Chief Executive Officer shall have the terms and
conditions determined by the Committee and the Committee shall periodically
review such grants.
Stock Options shall be evidenced by option agreements, the terms and
provisions of which may differ. An option agreement shall indicate on its face
whether it is intended to be an agreement for an Incentive Stock Option or a
Non-Qualified Stock Option. The grant of a Stock Option shall occur on the date
the Committee by resolution selects an individual to be a participant in any
grant of a Stock Option, determines the number of shares of Stock to be subject
to such Stock Option to be granted to such individual and specifies the terms
and provisions of the Stock Option. The Company shall notify a participant of
any grant of a Stock Option, and a written option agreement or agreements shall
be duly executed and delivered by the Company to the participant. Such agreement
or agreements shall become effective upon execution by the participant.
Anything in the Plan to the contrary notwithstanding, no term of the Plan
relating to Incentive Stock Options shall be interpreted, amended or altered nor
shall any discretion or authority granted under the Plan be exercised so as to
disqualify the Plan under Section 422 of the Code or, without
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the consent of the optionee affected, to disqualify any Incentive Stock Option
under such Section 422.
Stock Options granted under the Plan shall be subject to the following
terms and conditions and shall contain such additional terms and conditions as
the Committee shall deem desirable:
(a) Option Price. The option price per share of Stock purchasable under a Stock
Option shall be determined by the Committee and set forth in the option
agreement and shall not be less than the Fair Market Value of the Stock
subject to the Stock Option on the date of grant.
(b) Option Term. The term of each Stock Option shall be fixed by the Committee,
but no Stock Option shall be exercisable more than 10 years after the date
the Stock Option is granted.
(c) Exercisability. Except as otherwise provided herein, Stock Options shall be
exercisable at such time or times and subject to such terms and conditions
as shall be determined by the Committee. If the Committee provides that any
Stock Option is exercisable only in installments, the Committee may at any
time waive such installment exercise provisions, in whole or in part, based
on such factors as the Committee may determine. In addition, the Committee
may at any time, in whole or in part, accelerate the exercisability of any
Stock Option.
(d) Method of Exercise. Subject to the provisions of this Section 5, Stock
Options may be exercised, in whole or in part, at any time during the
option term by giving written notice of exercise to the Company specifying
the number of shares of Stock subject to the Stock Option to be purchased.
The option price of Stock to be purchased upon exercise of any Option shall
be paid in full in cash (by certified or bank check or such other
instrument as the Company may accept) or, if and to the extent set forth in
the option agreement, may also be paid by one or more of the following: (i)
in the form of unrestricted Stock already owned by the optionee (and, in
the case of the exercise of a Non-Qualified Stock Option, Restricted Stock
subject to an Award hereunder) based in any such instance on the Fair
Market Value of the Stock on the date the Stock Option is exercised;
provided, however, that, in the case of an Incentive Stock Option, the
right to make a payment in the form of already owned shares of Stock may be
authorized only at the time the Stock Option is granted; (ii) by requesting
the Company to withhold from the number of shares of Stock otherwise
issuable upon exercise of the Stock Option that number of shares having an
aggregate fair market value on the date of exercise equal to the exercise
price for all of the shares of Stock subject to such exercise; or (iii) by
a combination thereof, in each case in the manner provided in the option
agreement.
In the discretion of the Committee, payment for any shares subject to a
Stock Option may also be made by delivering a properly executed exercise
notice to the Company, together with a copy of irrevocable instructions to
a broker to deliver promptly to the Company the amount of
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sale or loan proceeds to pay the purchase price. To facilitate the
foregoing, the Company may enter into agreements for coordinated procedures
with one or more brokerage firms.
If payment of the option exercise price of a Non-Qualified Stock Option is
made in whole or in part in the form of Restricted Stock, the number of
shares of Stock to be received upon such exercise equal to the number of
shares of Restricted Stock used for payment of the option exercise price
shall be subject to the same forfeiture restrictions to which such
Restricted Stock was subject, unless otherwise determined by the Committee.
No shares of Stock shall be issued until full payment therefor has been
made. Subject to any forfeiture restrictions that may apply if a Stock
Option is exercised using Restricted Stock, an optionee shall have all of
the rights of a stockholder of the Company holding the Stock that is
subject to such Stock Option (including, if applicable, the right to vote
the shares and the right to receive dividends), when the optionee has given
written notice of exercise, has paid in full for such shares and, if
requested, has given the representation described in Section 11(a).
(e) Transferability of Stock Options. The Committee may in its discretion
authorize all or a portion of the Stock Options to be granted to an
optionee to be on terms that permit transfer by such optionee to (i) the
spouse, children or grandchildren of the optionee ("Immediate Family
Members"), (ii) a trust or trusts for the exclusive benefit of such
Immediate Family Members or (iii) a partnership in which such Immediate
Family Members are the only partners, provided that (x) such transfer shall
be by gift with no consideration, (y) the stock option agreement pursuant
to which such Stock Options are granted must expressly provide for the
transferability of Stock Options in a manner consistent with this Section
and (z) no subsequent transfers of Stock Options shall be permitted other
than by will or by the laws of descent and distribution. Except as
permitted in the first sentence of this section, no Stock Option shall be
transferable by the optionee other than (i) by will or by the laws of
descent and distribution or (ii) in the case of a Non-Qualified Stock
Option, pursuant to a qualified domestic relations order (as defined in the
Code or Title I of the Employee Retirement Income Security Act of 1974, as
amended, or the rules thereunder). All Stock Options shall be exercisable,
during the optionee's lifetime, only by the optionee or by the guardian or
legal representative of the optionee or, in the case of a Non-Qualified
Stock Option, its alternate payee pursuant to such qualified domestic
relations order, it being understood that the terms "holder" and "optionee"
include the guardian and legal representative of the optionee named in the
option agreement and any person to whom an option is transferred by will or
the laws of descent and distribution or, in the case of a Non-Qualified
Stock Option, pursuant to a qualified domestic relations order.
(f) Termination by Death. If an optionee's employment terminates by reason of
death, any Stock Option held by such optionee may thereafter be exercised,
to the extent then exercisable, or on such accelerated basis as the
Committee may determine, for a period of one year (or such other period as
the Committee may specify in the option agreement) from the date of such
death or until the expiration of the stated term of such Stock Option,
whichever period is the shorter. In the event of termination of employment
due to death, if an Incentive Stock Option is
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exercised after the expiration of the exercise periods that apply for
purposes of Section 422 of the Code, such Stock Option will thereafter be
treated as a Non-Qualified Stock Option.
(g) Termination by Reason of Disability. If an optionee's employment terminates
by reason of Disability, any Stock Option held by such optionee may
thereafter be exercised by the optionee, to the extent it was exercisable
at the time of termination, or on such accelerated basis as the Committee
may determine, for a period of three years (or such shorter period as the
Committee may specify in the option agreement) from the date of such
termination of employment or until the expiration of the stated term of
such Stock Option, whichever period is the shorter; provided, however, that
if the optionee dies within such three-year period (or such shorter
period), any unexercised Stock Option held by such optionee shall,
notwithstanding the expiration of such three-year (or such shorter) period,
continue to be exercisable to the extent to which it was exercisable at the
time of death for a period of 12 months from the date of such death or
until the expiration of the stated term of such Stock Option, whichever
period is the shorter. In the event of termination of employment by reason
of Disability, if an Incentive Stock Option is exercised after the
expiration of the exercise periods that apply for purposes of Section 422
of the Code, such Stock Option will thereafter be treated as a
Non-Qualified Stock Option.
(h) Termination by Reason of Retirement. If an optionee's employment terminates
by reason of Retirement, any Stock Option held by such optionee may
thereafter be exercised by the optionee, to the extent it was exercisable
at the time of such Retirement or on such accelerated basis as the
Committee may determine, for a period of three years (or such shorter
period as the Committee may specify in the option agreement) from the date
of such termination of employment or until the expiration of the stated
term of such Stock Option, whichever period is the shorter; provided,
however, that if the optionee dies within such three-year (or such shorter)
period, any unexercised Stock Option held by such optionee shall,
notwithstanding the expiration of such three-year (or such shorter) period,
continue to be exercisable to the extent to which it was exercisable at the
time of death for a period of 12 months from the date of such death or
until the expiration of the stated term of such Stock Option, whichever
period is the shorter. In the event of termination of employment by reason
of Retirement, if an Incentive Stock Option is exercised after the
expiration of the exercise periods that apply for purposes of Section 422
of the Code, such Stock Option will thereafter be treated as a Non-
Qualified Stock Option.
(i) Other Termination. Unless otherwise determined by the Committee, if an
optionee incurs a Termination of Employment for any reason other than
death, Disability or Retirement, any Stock Option held by such optionee
shall thereupon terminate, except that such Stock Option, to the extent
then exercisable, or on such accelerated basis as the Committee may
determine, may be exercised for the lesser of one year from the date of
such Termination of Employment or the balance of such Stock Option's term
if such Termination of Employment of the optionee is involuntary and
without Cause; provided, however, that if the optionee dies within such
one-year period, any unexercised Stock Option held by such optionee shall
notwithstanding the
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expiration of such one-year period, continue to be exercisable to the
extent to which it was exercisable at the time of death for a period of 12
months from the date of such death or until the expiration of the stated
term of such Stock Option, whichever period is the shorter. In the event of
Termination of Employment for any reason other than death, Disability or
Retirement, if an Incentive Stock Option is exercised after the expiration
of the exercise periods that apply for purposes of Section 422 of the Code,
such Stock Option will thereafter be treated as a Non-Qualified Stock
Option. Unless otherwise determined by the Committee, for the purposes of
the Plan "Cause" shall mean (i) the conviction of the optionee for
committing a felony under Federal law or the law of the state in which such
action occurred, (ii) dishonesty in the course of fulfilling the optionee's
employment duties or (iii) willful and deliberate failure on the part of
the optionee to perform his employment duties in any material respect.
(j) Cashing Out of Stock Option. On receipt of written notice of exercise, the
Committee may elect to cash out all or part of the portion of the shares of
Stock for which a Stock Option is being exercised by paying the optionee an
amount, in cash or Stock, equal to the excess of the Fair Market Value of
the Stock over the option price times the number of shares of Stock for
which to the Option is being exercised on the effective date of such cash
out.
Cash outs pursuant to this Section 5(j) relating to options held by
optionees who are actually or potentially subject to Section 16(b) of the
Exchange Act shall comply with the "window period" provisions of Rule
16(b)-3(e), to the extent applicable, and in the case of cash outs of
Non-Qualified Stock Options held by such optionees, the Committee may
determine Fair Market Value under the pricing rule set forth in Section
6(b)(ii)(2).
(k) Change in Control Cash Out. Notwithstanding any other provision of the
Plan, during the 60-day period from and after a Change in Control (the
"Exercise Period"), unless the Committee shall determine otherwise at the
time of grant, an optionee shall have the right, whether or not the Stock
Option is fully exercisable and in lieu of the payment of the exercise
price for the shares of Stock being purchased under the Stock Option and by
giving notice to the Company, to elect (within the Exercise Period) to
surrender all or part of the Stock Option to the Company and to receive
cash, within 30 days of such notice, in an amount equal to the amount by
which the Change in Control Price per share of Stock on the date of such
election shall exceed the exercise price per share of Stock under the Stock
Option (the "Spread") multiplied by the number of shares of Stock granted
under the Stock Option as to which the right granted under this Section
5(k) shall have been exercised; provided, however, that if the Change in
Control is within six months of the date of grant of a particular Stock
Option held by an optionee who is an officer or director of the Company and
is subject to Section 16(b) of the Exchange Act no such election shall be
made by such optionee with respect to such Stock Option prior to six months
from the date of grant. Notwithstanding any other provision hereof, if the
end of such 60-day period from and after a Change in Control is within six
months of the date of grant of a Stock Option held by an optionee who is an
officer or director of the Company and is subject to Section 16(b) of the
Exchange Act, such Stock Option shall be cancelled in exchange for a cash
payment to the optionee, effected on the day which is six
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months and one day after the date of grant of such Option, equal to the
Spread multiplied by the number of shares of Stock granted under the Stock
Option.
SECTION 6. Stock Appreciation Rights.
(a) Grant and Exercise. Stock Appreciation Rights may be granted in conjunction
with all or part of any Stock Option granted under the Plan. In the case of
a Non-Qualified Stock Option, such rights may be granted either at or after
the time of grant of such Stock Option. In the case of an Incentive Stock
Option, such rights may be granted only at the time of grant of such Stock
Option. A Stock Appreciation Right shall terminate and no longer be
exercisable upon the termination or exercise of the related Stock Option.
A Stock Appreciation Right may be exercised by an optionee in accordance
with Section 6(b) by surrendering the applicable portion of the related
Stock Option in accordance with procedures established by the Committee.
Upon such exercise and surrender, the optionee shall be entitled to receive
an amount determined in the manner prescribed in Section 6(b). Stock
Options which have been so surrendered shall no longer be exercisable to
the extent the related Stock Appreciation Rights have been exercised.
(b) Terms and Conditions. Stock Appreciation Rights shall be subject to such
terms and conditions as shall be determined by the Committee, including the
following:
(i) Stock Appreciation Rights shall be exercisable only at such time or
times and to the extent that the Stock Options to which they relate
are exercisable in accordance with the provisions of Section 5 and
this Section 6.
(ii) Upon the exercise of a Stock Appreciation Right, an optionee shall be
entitled to receive an amount in cash, shares of Stock or both equal
in value to the excess of the Fair Market Value of one share of Stock
over the option price per share specified in the related Stock Option
multiplied by the number of shares in respect of which the Stock
Appreciation Right shall have been exercised, with the Committee
having the right to determine the form of payment.
In the case of Stock Appreciation Rights relating to Stock Options
held by optionees who are actually or potentially subject to Section
16(b) of the Exchange Act, the Committee:
(1) may require that such Stock Appreciation Rights be exercised for
cash only in accordance with the applicable "window period"
provisions of Rule 16b-3; and
(2) in the case of Stock Appreciation Rights relating to Non-
Qualified Stock Options, may provide that any amount to be paid
in cash upon exercise of such Stock Appreciation Rights during a
Rule 16b-3 "window period" shall be based on the
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highest of the daily means between the highest and lowest
reported sales prices of the Stock on the New York Stock Exchange
or other national securities exchange on which the shares are
listed or on NASDAQ, as applicable, occurring during such "window
period".
(iii) Stock Appreciation rights shall be transferable only to permitted
transferees of the underlying Stock Option in accordance with
Section 5(e).
SECTION 7. Restricted Stock.
(a) Administration. Shares of Restricted Stock may be awarded either alone or
in addition to other Awards granted under the Plan. The Committee shall
determine the officers and employees to whom and the time or times at which
grants of Restricted Stock will be awarded, the number of shares to be
awarded to any participant, the time or times within which such Awards may
be subject to forfeiture and any other terms and conditions of the Awards,
in addition to those contained in Section 7(c).
The Committee may condition the grant of Restricted Stock upon the
attainment of specified performance goals of the participant or of the
Company or subsidiary, division or department of the Company for or within
which the participant is primarily employed or upon such other factors or
criteria as the Committee shall determine. The provisions of Restricted
Stock Awards need not be the same with respect to each recipient.
(b) Awards and Certificates. Shares of Restricted Stock shall be evidenced in
such manner as the Committee may deem appropriate, including book-entry
registration or issuance of one or more stock certificates. Any certificate
issued in respect of shares of Restricted Stock shall be registered in the
name of such participant and shall bear an appropriate legend referring to
the terms, conditions, and restrictions applicable to such Award,
substantially in the following form:
"The transferability of this certificate and the shares of stock
represented hereby are subject to the terms and conditions (including
forfeiture) of the 1993 Stock Incentive Plan and a Restricted Stock
Agreement. Copies of such Plan and Agreement are on file at the
offices of Borg-Warner Security Corporation, 200 South Michigan
Avenue, Chicago, Illinois 60604."
The Committee may require that the certificates evidencing such shares be
held in custody by the Company until the restrictions thereon shall have
lapsed and that, as a condition of any Award of Restricted Stock, the
participant shall have delivered a stock power, endorsed in blank, relating
to the Stock covered by such Award.
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(c) Terms and Conditions. Shares of Restricted Stock shall be subject to the
following terms and conditions:
(i) Subject to the provisions of the Plan and the Restricted Stock
Agreement referred to in Section 7(c)(vi), during a period set by
the Committee, commencing with the date of such Award (the
"Restriction Period"), the participant shall not be permitted to
sell, assign, transfer, pledge or otherwise encumber shares of
Restricted Stock. The Committee may provide for the lapse of such
restrictions in installments or otherwise and may accelerate or
waive such restrictions, in whole or in part, in each case based on
period of service, performance of the participant or of the Company
or the subsidiary, division or department for which the participant
is employed or such other factors or criteria as the Committee may
determine.
(ii) Except as provided in this paragraph (ii) and Section 7(c)(i) and
the Restricted Stock Agreement, the participant shall have, with
respect to the shares of Restricted Stock, all of the rights of a
stockholder of the Company holding the class or series of Stock that
is the subject of the Restricted Stock, including, if applicable,
the right to vote the shares and the right to receive any cash
dividends. If so determined by the Committee in the applicable
Restricted Stock Agreement and subject to Section 11(f) of the Plan,
(1) cash dividends on the shares of Stock that are the subject of
the Restricted Stock Award shall be automatically deferred and
reinvested in additional Restricted Stock, and (2) dividends payable
in Stock shall be paid in the form of Restricted Stock.
(iii) Except to the extent otherwise provided in the applicable Restricted
Stock Agreement and Sections 7(c)(i), 7(c)(iv) and 8(a)(ii), upon a
participant's Termination of Employment for any reason during the
Restriction Period, all shares still subject to restriction shall be
forfeited by the participant.
(iv) Except to the extent otherwise provided in Section 8(a)(ii), in the
event of an involuntary Termination of Employment of a participant
for any reason (other than for Cause), the Committee shall have the
discretion to waive in whole or in part any or all remaining
restrictions with respect to any or all of such participant's shares
of Restricted Stock.
(v) If and when the Restriction Period expires without a prior
forfeiture of the Restricted Stock subject to such Restriction
Period, unlegended certificates for such shares shall be delivered
to the participant.
(vi) Each Award shall be confirmed by, and be subject to the terms of, a
Restricted Stock Agreement.
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SECTION 8. Change In Control Provisions.
(a) Impact of Event. Notwithstanding any other provision of the Plan to the
contrary, in the event of a Change in Control:
(i) Any Stock Options and Stock Appreciation Rights outstanding as of the
date such Change in Control is determined to have occurred and not
then exercisable and vested shall become fully exercisable and vested
to the full extent of the original grant.
(ii) The restrictions applicable to any Restricted Stock shall lapse, and
such Restricted Stock shall become free of all restrictions and become
fully vested and transferable to the full extent of the original
grant.
(b) Definition of Change in Control. For purposes of the Plan, a "Change in
Control" shall mean the happening of any of the following events:
(i) An acquisition by any individual, entity or group (within the meaning
of Section 13(d)(3) or 14(d)(2) of the Exchange Act) (a "Person") of
beneficial ownership (within the meaning of Rule 13d-3 promulgated
under the Exchange Act) of 20% or more of either (1) the then
outstanding shares of common stock of the Company (the "Outstanding
Company Common Stock") or (2) the combined voting power of the then
outstanding voting securities of the Company entitled to vote
generally in the election of directors (the "Outstanding Company
Voting Securities"); excluding, however, the following: (1) any
acquisition directly from the Company, other than an acquisition by
virtue of the exercise of a conversion privilege unless the security
being so converted was itself acquired directly from the Company, (2)
any acquisition by the Company, (3) any acquisition by any employee
benefit plan (or related trust) sponsored or maintained by the Company
or any corporation controlled by the Company or (4) any acquisition by
any Person pursuant to a transaction which complies with clauses (1),
(2) and (3) of subsection (iii) of this Section 8(b); or
(ii) A change in the composition of the Board such that the individuals
who, as of the effective date of the Plan, constitute the Board (such
Board shall be hereinafter referred to as the "Incumbent Board") cease
for any reason to constitute at least a majority of the Board;
provided, however, for purposes of this Section 8(b), that any
individual who becomes a member of the Board subsequent to such
effective date, whose election, or nomination for election by the
Company's shareholders, was approved by a vote of at least a majority
of those individuals who are members of the Board and who were also
members of the Incumbent Board (or deemed to be such pursuant to this
proviso) shall be considered as though such individual were a member
of the Incumbent Board; but, provided further, that any such
individual whose initial assumption of office occurs as a result of
either an actual or threatened election contest (as such terms are
used in Rule 14a-11 of Regulation 14A promulgated under the Exchange
Act) or other actual or
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threatened solicitation of proxies or consents by or on behalf of a
Person other than the Board shall not be so considered as a member
of the Incumbent Board; or
(iii) The approval by the shareholders of the Company of a reorganization,
merger or consolidation or sale or other disposition of all or
substantially all of the assets of the Company ("Corporate
Transaction"); excluding, however, such a Corporate Transaction
pursuant to which (1) all or substantially all of the individuals
and entities who are the beneficial owners, respectively, of the
outstanding Company Common Stock and Outstanding Company Voting
Securities immediately prior to such Corporate Transaction will
beneficially own, directly or indirectly, more than 60% of,
respectively, the outstanding shares of common stock, and the
combined voting power of the then outstanding voting securities
entitled to vote generally in the election of directors, as the case
may be, of the corporation resulting from such Corporate Transaction
(including, without limitation, a corporation which as a result of
such transaction owns the Company or all or substantially all of the
Company's assets either directly or through one or more
subsidiaries) in substantially the same proportions as their
ownership, immediately prior to such Corporate Transaction, of the
outstanding Company Common Stock and Outstanding Company Voting
Securities, as the case may be, (2) no Person (other than the
Company, any employee benefit plan (or related trust) sponsored or
maintained by the Company or any corporation controlled by the
Company or such corporation resulting from such Corporate
Transaction) will beneficially own, directly or indirectly, 20% or
more of, respectively, the outstanding shares of common stock of the
corporation resulting from such Corporate Transaction or the
combined voting power of the outstanding voting securities of such
corporation entitled to vote generally in the election of directors
except to the extent that such ownership existed with respect to the
Company prior to the Corporate Transaction and (3) individuals who
were members of the Incumbent Board will constitute at least a
majority of the members of the board of directors of the corporation
resulting from such Corporate Transaction; or
(iv) The approval by the shareholders of the Company of a complete
liquidation or dissolution of the Company.
(c) Change in Control Price. For purposes of the Plan, "Change in Control
Price" means the higher of (i) the highest reported sales price, regular
way, of a share of Stock in any transaction reported on the New York Stock
Exchange Composite Tape or other national securities exchange on which such
shares are listed or on NASDAQ, as applicable, during the 60-day period
prior to and including the date of a Change in Control and (ii) if the
Change in Control is the result of a tender or exchange offer or a
Corporate Transaction, the highest price per share of Stock paid in such
tender or exchange offer or Corporate Transaction; provided, however, that
(x) in the case of a Stock Option which (A) is held by an optionee who is
an officer or director of the Company and is subject to Section 16(b) of
the Exchange Act and (B) was granted within 240 days of the Change in
Control, then the Change in Control Price for such Stock Option shall be
the Fair Market Value of the Stock on the date such Stock Option
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is exercised or cancelled and (y) in the case of Incentive Stock Options
and Stock Appreciation Rights relating to Incentive Stock Options, the
Change in Control Price shall be in all cases the Fair Market Value of the
Stock on the date such Incentive Stock Option or Stock Appreciation Right
is exercised. To the extent that the consideration paid in any such
transaction described above consists all or in part of securities or other
non-cash consideration, the value of such securities or other non-cash
consideration shall be determined in the sole discretion of the Board.
SECTION 9. Term, Amendment and Termination.
The Plan will terminate on December 31, 2003. Under the Plan, Awards
outstanding as of December 31, 2003 shall not be affected or impaired by the
termination of the Plan.
The Board may amend, alter, or discontinue the Plan, but no amendment,
alteration or discontinuation shall be made which would (i) impair the rights of
an optionee under a Stock Option or a recipient of a Stock Appreciation Right or
Restricted Stock Award theretofore granted without the optionee's or recipient's
consent, except such an amendment made to cause the Plan to qualify for the
exemption provided by Rule 16b-3, or (ii) disqualify the Plan from the exemption
provided by Rule 16b-3. In addition, no such amendment shall be made without the
approval of the Company's stockholders to the extent such approval is required
by law or agreement.
The Committee may amend the terms of any Stock Option or other Award
theretofore granted, prospectively or retroactively, but no such amendment shall
impair the rights of any holder without the holder's consent except such an
amendment made to cause the Plan or Award to qualify for the exemption provided
by Rule 16b-3. The Committee may also substitute new Stock Options for
previously granted Stock Options, including previously granted Stock Options
having higher option prices.
Subject to the above provisions, the Board shall have authority to amend
the Plan to take into account changes in law and tax and accounting rules, as
well as other developments and to grant Awards which qualify for beneficial
treatment under such rules without stockholder approval.
SECTION 10. Unfunded Status of Plan.
It is presently intended that the Plan constitute an "unfunded" plan for
incentive and deferred compensation. The Committee may authorize the creation of
trusts or other arrangements to meet the obligations created under the Plan to
deliver Stock or make payments; provided, however, that unless the Committee
otherwise determines, the existence of such trusts or other arrangements is
consistent with the "unfunded" status of the Plan.
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SECTION 11. General Provisions.
(a) The Committee may require each person purchasing or receiving shares
pursuant to an Award to represent to and agree with the Company in writing
that such person is acquiring the shares without a view to the distribution
thereof. The certificates for such shares may include any legend which the
Committee deems appropriate to reflect any restrictions on transfer.
All certificates for shares of Stock or other securities delivered under
the Plan shall be subject to such stock transfer orders and other
restrictions as the Committee may deem advisable under the rules,
regulations and other requirements of the Commission, any stock exchange
upon which the Stock is then listed and any applicable Federal or state
securities law, and the Committee may cause a legend or legends to be put
on any such certificates to make appropriate reference to such
restrictions.
(b) Nothing contained in the Plan shall prevent the Company or any subsidiary
or Affiliate from adopting other or additional compensation arrangements
for its employees.
(c) The adoption of the Plan shall not confer upon any employee any right to
continued employment nor shall it interfere in any way with the right of
the Company or any subsidiary or Affiliate to terminate the employment of
any employee at any time.
(d) No later than the date as of which an amount first becomes includible in
the gross income of the participant for Federal income tax purposes with
respect to any Award under the Plan, the participant shall pay to the
Company, or make arrangements satisfactory to the Company regarding the
payment of, any Federal, state, local or foreign taxes of any kind required
by law to be withheld with respect to such amount. Unless otherwise
determined by the Committee, withholding obligations may be settled with
Stock, including Stock that is part of the Award that gives rise to the
withholding requirement. The obligations of the Company under the Plan
shall be conditional on such payment or arrangements, and the Company, its
Subsidiaries and its Affiliates shall, to the extent permitted by law, have
the right to deduct any such taxes from any payment otherwise due to the
participant. The Committee may establish such procedures as it deems
appropriate, including the making of irrevocable elections, for the
settlement of withholding obligations with Stock.
(e) At the time of grant, the Committee may provide in connection with any
grant made under the Plan that the shares of Stock received as a result of
such grant shall be subject to a right of first refusal pursuant to which
the participant shall be required to offer to the Company any shares that
the participant wishes to sell at the then Fair Market Value of the Stock,
subject to such other terms and conditions as the Committee may specify at
the time of grant.
(f) The reinvestment of dividends in additional Restricted Stock at the time of
any dividend payment shall only be permissible if sufficient shares of
Stock are available under Section 3 for such reinvestment (taking into
account then outstanding Stock Options and other Awards).
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(g) The Committee shall establish such procedures as it deems appropriate for a
participant to designate a beneficiary to whom any amounts payable in the
event of the participant's death are to be paid.
(h) The Plan and all Awards made and actions taken thereunder shall be governed
by and construed in accordance with the laws of the State of Delaware.
SECTION 12. Effective Date of Plan.
The Plan shall be effective on the date it is approved by the shareholders
of the Company.
SECTION 13. Director Stock Options.
(a) Each director of the Company who is not otherwise an employee of the
Company, any of its subsidiaries or Merrill Lynch Capital Partners, Inc.
shall be granted Non-Qualified Stock Options to purchase 10,000 shares of
Stock having an exercise price per share equal to the Fair Market Value of
the Stock on November 16, 1993. Any person who initially becomes a director
after November 16, 1993 shall automatically be awarded a grant of Non-
Qualified Stock Options to purchase 10,000 shares of Stock having an
exercise price equal to 100% of the Fair Market Value of the Stock as of
the date such person becomes a director. All Non-Qualified Stock Options
granted pursuant to this paragraph shall be exercisable in accordance with
the following schedule, if as of each such date such director is still a
director of the Company:
Anniversary Date Cumulative Percentage
of Grant Exercisable
---------------- ---------------------
First 20
Second 40
Third 60
Fourth 80
Fifth 100
(b) An automatic director Stock Option shall be granted hereunder only if as of
each date of grant (or, in the case of any initial grant, from and after
the effective date of the Plan) the director (i) is not otherwise an
employee of the Company, any Affiliate or Merrill Lynch Capital Partners,
Inc., (ii) has not been an employee of the Company or any subsidiary for
any part of the preceding fiscal year, and (iii) has served on the Board
continuously since the commencement of his term.
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(c) Each holder of a Stock Option granted pursuant to this Section 13 shall
also have the rights specified in Section 5(k).
(d) In the event that the number of shares of Stock available for future grant
under the Plan is insufficient to make all automatic grants required to be
made on such date, then all non-employee directors entitled to a grant on
such date shall share ratably in the number of options on shares available
for grant under the Plan.
(e) The provisions of paragraph (a) of this Section 13 may not be amended more
often than once every six months. Except as expressly provided in this
Section 13, any Stock Option granted hereunder shall be subject to the
terms and conditions of the Plan as if the grant were made pursuant to
Section 5 hereof.
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