EXHIBIT 10(J)
FIRST UNION CORPORATION
1998 STOCK INCENTIVE PLAN
(AS AMENDED AND RESTATED)
1. ESTABLISHMENT AND PURPOSE
First Union Corporation, a North Carolina corporation ("First Union"),
hereby establishes an incentive compensation plan, which shall be known as the
"FIRST UNION CORPORATION 1998 STOCK INCENTIVE PLAN" (the "Plan").
The purposes of the Plan are to (a) help align the long-term financial
interests of Participants with those of stockholders; (b) reinforce a
performance-oriented culture/strategy; (c) incent and reward employees for
increasing First Union's common stock price over time; and (d) motivate, attract
and retain the services of Participants upon whose judgment, interest and
special effort the successful conduct of First Union's operations are dependent.
2. EFFECTIVE DATE AND DURATION OF THE PLAN
The Plan shall become effective on April 21, 1998, subject to its
approval by the stockholders of First Union, and shall remain in effect, subject
to the right of the Board to amend or terminate the Plan at any time pursuant to
the terms hereof, until all Shares subject to it shall have been purchased or
acquired according to the Plan's provisions. In no event may an Award be granted
under the Plan after April 20, 2008. After the date on which the Plan becomes
effective, no further grants will be made under the Prior Plan.
3. DEFINITIONS
(a) "1934 Act" means the Securities Exchange Act of 1934,
as amended, including the rules and regulations promulgated thereunder.
(b) "Award" means, individually or collectively, an
Option (including an ISO or an NQSO), SAR, Stock Award, any other award
made pursuant to the terms of the Plan, or any combination thereof.
(c) "Award Agreement" means an agreement entered into by
the Corporation and each Participant setting forth the terms and
provisions applicable to Awards.
(d) "Beneficial Owner" or "Beneficial Ownership" shall
have the meaning ascribed to such term in Rule 13d-3 of the General
Rules and Regulations under the 1934 Act.
(e) "Board" means the Board of Directors of First Union.
(f) "Change of Control" means a change in control of
First Union of a nature that would be required to be reported in
response to Item 6(e) of Schedule 14A of Regulation 14A promulgated
under the 1934 Act; provided, however, that, without limitation, such a
Change of Control shall be deemed to have occurred if (i) any one
person, or more than one person acting as a group, acquires Beneficial
Ownership of Shares that, together with Shares held by such person or
group, possesses more than 50 percent of the total Fair Market Value or
total voting power of the Shares, (ii) any one person, or more than one
person acting as a group, acquires (or has acquired during the 12-month
period ending on the date of the most recent acquisition by such person
or persons) Beneficial Ownership of Shares possessing 20 percent or
more of the total voting power of the Shares, or (iii) a majority of
members of the Board is replaced during any 12-month period by
directors whose appointment or election is not endorsed by a majority
of the members of the Board prior to the date of such appointment or
election.
(g) "Code" means the Internal Revenue Code of 1986, as
amended (or any successor thereto), including any rules and regulations
promulgated thereunder.
(h) "Committee" means the Human Resources Committee of
the Board or such other committee as is appointed by the Board to
administer the Plan.
1
(i) "Corporation" means (i) First Union and any entity
that is directly or indirectly controlled by First Union, or (ii) any
entity in which First Union has a significant equity interest, as
determined by the Committee.
(j) "Covered Officer" means, for a calendar year, a
Participant who is one of the group of executive officers of the
Corporation designated by the Committee in writing as "Covered
Officers".
(k) "Date of Termination of Employment" means, with
respect to an Employee who is terminating employment with the
Corporation, (i) the last day such Employee performs actual services
for the Corporation as an Employee, (ii) the 91st day of a bona fide
leave of absence when such Employee's right to continue employment with
the Corporation is not guaranteed by law or contract or, if later, on
the date that such legal or contractual guarantee lapses, (iii) the
date that such Employee is deemed to have a Disability, or (iv) the
date of such Employee's death, as applicable.
(l) "Disability", with respect to an Employee, means
having received long-term disability benefits under the Corporation's
Long-Term Disability Plan for a period of 12 consecutive months.
(m) "Early Retirement" means termination of a
Participant's employment upon satisfaction of the requirements for
early retirement under First Union's pension plan.
(n) "Employee" means an employee of the Corporation.
(o) "Fair Market Value" means the closing sales price of
the Shares on the New York Stock Exchange Composite Tape on the
valuation date, or, if there were no sales on the valuation date, the
closing sales price on the New York Stock Exchange Composite Tape on
the first trading day before such valuation date.
(p) "First Union" is defined in Section 1 herein.
(q) "ISO" means an Option to purchase Shares granted
under Section 7(a) herein, which is designated as an ISO and which is
intended to meet the requirements of Section 422 of the Code.
(r) "NQSO" means an Option to purchase Shares granted
under Section 7(a) herein, and which is not intended to meet the
requirements of Section 422 of the Code.
(s) "Normal Retirement" means termination of a
Participant's employment upon satisfaction of the requirements for
normal retirement under the terms of First Union's pension plan.
(t) "Option" means an ISO or an NQSO.
(u) "Option Price" means the price at which a Share may
be purchased by a Participant pursuant to an Option.
(v) "Participant" means an Employee of the Corporation
who has been granted an Award under the Plan.
(w) "Performance-Based Exception" means the
performance-based exception set forth in Code Section 162(m)(4)(C) from
the deductibility limitations of Code Section 162(m).
(x) "Performance Goals" means performance goals based on
any of the following criteria and established by the Committee prior to
April 1 of each year: earnings or earnings growth; return on equity,
assets or investment; revenues; expenses; stock price; market share;
charge-offs; or reductions in non-performing assets. Such Performance
Goals may be particular to an Employee or the division, department,
branch, line of business, subsidiary or other unit in which the
Employee works, or may be based on the performance of the Corporation
generally.
(y) "Performance Stock Awards" means the Stock Awards
granted to Covered Officers upon satisfaction of the conditions set
forth in Section 7(c)(ii) of the Plan.
2
(z) "Period of Restriction" means the period during which
the vesting and/or transfer of Stock Awards is limited in some way, and
the Shares subject to such Stock Awards are subject to a substantial
risk of forfeiture, as provided in Section 7(c) herein.
(aa) "Plan" is defined in Section 1 herein.
(bb) "Plan Year" means a twelve-month period beginning
with January 1 of each year.
(cc) "Prior Plan" means the First Union 1996 Master Stock
Compensation Plan.
(dd) "RSAs" means a Stock Award granted to a Participant
pursuant to Section 7(c) herein which contains restrictions on vesting
and/or transfer.
(ee) "Retirement" means either Early Retirement or Normal
Retirement.
(ff) "SAR" means an Award, granted alone or in connection
with a related Option, designated as an SAR, pursuant to the terms of
Section 7(b) herein.
(gg) "Shares" means the common stock of First Union, par
value $3.33 1/3 per share.
(hh) "Stock Award" shall represent an Award made in Shares
or denominated in units equivalent in value to Shares or any other
Award based on or related to Shares, including, but not limited to,
RSAs.
4. PLAN ADMINISTRATION
(a) The Committee. The Committee shall be responsible for
administering the Plan. If considered appropriate by the Board in light
of applicable laws, rules, or regulations, the Committee shall be
comprised of two or more non-employee members of the Board each of whom
is a "Non-Employee Director" within the meaning of Rule 16b-3 under the
1934 Act and an "outside director" within the meaning of Section 162(m)
of the Code. Any action taken with respect to Covered Officers for
purpose of meeting the Performance-Based Exception shall be taken by
the Committee only if all of the members of the Committee are "outside
directors" within the meaning of Code Section 162(m).
(b) Committee Authority. The Committee may at any time
alter, amend, suspend or discontinue the Plan or any or all agreements
granted under the Plan to the extent permitted by law. Except as
limited by law, or by the Articles of Incorporation or By-laws of First
Union, and subject to the provisions herein, the Committee shall have
full and exclusive power to interpret the Plan and to adopt such rules,
regulations, and guidelines for carrying out the Plan as it may deem
necessary or proper, all of which powers shall be executed in the best
interests of the Corporation and in keeping with the provisions and
objectives of the Plan. These powers include, but are not limited to
(i) selecting Award recipients and the extent of their participation;
(ii) establishing all Award terms and conditions; (iii) adopting
procedures and regulations governing Awards; and (iv) making all other
determinations necessary or advisable for the administration of the
Plan. In addition, except as provided herein, in First Union's Articles
of Incorporation or By-laws, or pursuant to applicable law, the
Committee shall have authority, in its sole discretion, to accelerate
the date that any Award which was not otherwise exercisable or vested
shall become exercisable or vested in whole or in part without any
obligation to accelerate such date with respect to any other Awards
granted to any Participant. All determinations, interpretations or
other actions taken or made by the Committee pursuant to the provisions
of the Plan shall be final, binding and conclusive on all persons
interested herein.
The Committee may delegate to one or more officers of the
Corporation the authority to carry out some or all of its
responsibilities, provided that the Committee may not delegate its
authority and powers in any way which would be inconsistent with the
requirements of the Code or the 1934 Act. The Committee may at any time
rescind the authority delegated to any such officers.
In no event shall the Committee have the right to (i) cancel
outstanding Options or SARs for the purpose of replacing or regranting
such Options or SARs with an Option Price that is less than the
original Option Price of the Option or SAR, or otherwise reduce the
Option Price, or (ii) increase the number of
3
shares available for issuance in accordance with Section 6 of the Plan
(except in accordance with Section 6(c)) without shareholder approval.
No member of the Committee shall be liable for any action or
determination with respect to the Plan, and the members shall be
entitled to indemnification and reimbursement in the manner provided in
First Union's Articles of Incorporation. In the performance of its
functions under the Plan, the Committee shall be entitled to rely upon
information and advice furnished by the Corporation's officers,
accountants, counsel and any other party the Committee deems necessary,
and no member of the Committee shall be liable for any action taken or
not taken in reliance upon any such advice.
5. PARTICIPATION
The individuals who shall be eligible to receive Awards under the Plan
shall be officers or other selected key employees of the Corporation as the
Committee shall approve from time to time.
In the event of a change in a Participant's duties and
responsibilities, or a transfer of the Participant to a different position, the
Committee may terminate any Award granted to such Participant or reduce the
number of Shares subject thereto commensurate with the transfer or change in
responsibility, as determined by the Committee in its discretion.
Notwithstanding any provision of the Plan to the contrary, in order to
foster and promote achievement of the purposes of the Plan or to comply with
provisions of laws in other countries in which the Corporation operates or has
employees, the Committee, in its sole discretion, shall have the power and
authority to (i) determine which Employees (if any) employed outside the United
States are eligible or required to participate in the Plan, (ii) modify the
terms and conditions of any Awards made to such Employees, and (iii) establish
subplans, modified Option exercise and other terms and procedures to the extent
such actions may be necessary or advisable.
6. AVAILABLE SHARES OF COMMON STOCK
(a) Share Limitations. The aggregate amount of Shares
that may be granted under the Plan shall be as follows:
(i) the aggregate number of Shares as to which
Awards may be granted in any Plan Year shall not exceed 1.5%
of the total Shares outstanding as reported in the Annual
Report on Form 10-K of First Union for the fiscal year ending
immediately prior to such Plan Year;
(ii) there shall be carried forward and be
available for Awards under the Plan in each Plan Year, in
addition to the Shares available for grant under Section
6(a)(i) above, (a) 5,000,000 Shares available for issuance
under the Prior Plan; (b) with respect to any succeeding Plan
Year, any unused portion of the limit for a Plan Year; and (c)
any Shares represented by Awards or portions of Awards made
under the Plan which are forfeited, expire, terminate or are
canceled or settled without issuance; provided, however, that
if (a) the Option Price for an Option granted under the Plan
is satisfied by tendering Shares or (b) an SAR is paid by
issuing Shares, only the net number of Shares issued shall be
used for determining the maximum number of Shares available
for issuance under the Plan;
(iii) the aggregate number of Shares (prior to
adjustments as provided in Section 6(c)) that may be
represented by Awards granted to any single individual under
the Plan in any calendar year under Sections 7(a), (b) and (c)
of the Plan shall not exceed 1,250,000; and
(iv) the aggregate number of Shares (prior to
adjustments as provided in Section 6(c)) that may be covered
by Awards made in the form of ISOs shall not exceed
100,000,000. Such aggregate number of Shares may be increased
by any Shares represented by ISOs or portions of ISOs granted
under the Plan which are forfeited, expire, terminate or are
cancelled or settled without issuance. If the Option Price for
an ISO granted under the Plan is satisfied by tendering
Shares, only the net number of Shares issued shall be used for
determining the maximum number of Shares in the form of ISOs
available for issuance under the Plan.
(b) Shares not applied to limitations. The following will
not be applied to the share limitations of Section 6(a) above: (i)
dividends or dividend equivalents paid in cash in connection with
4
outstanding Awards, (ii) stock denominated Awards which by their terms
may be settled only in cash, and (iii) Shares and any Awards that are
granted through the assumption of, or in substitution for, outstanding
Awards previously granted to Employees as the result of a merger,
consolidation, or acquisition of the employing company as the result of
which it is merged with the Corporation or becomes a subsidiary of the
Corporation.
(c) Adjustments. In the event of any stock dividend,
stock split, combination or exchange of equity securities, merger,
consolidation, recapitalization, divestiture or other distribution
(other than ordinary cash dividends) of assets to stockholders, or any
other change affecting Shares or Share price, such proportionate
adjustments, if any, as the Committee in its discretion may deem
appropriate to reflect such change shall be made with respect to the
limitations on the numbers of Shares that may be issued and represented
by Awards under the Plan; provided, however, that any fractional shares
resulting from any such adjustment shall be eliminated. Upon the
occurrence of any such event, the Committee may also (or in lieu of any
of the foregoing adjustments) make such other adjustments as it shall
consider appropriate to preserve the benefits or potential benefits
intended to be made available to Participants. Options granted pursuant
to the Plan and described as ISOs shall not be adjusted in a manner
that causes the Options to fail to continue to qualify as ISOs.
The Shares subject to the provisions of the Plan shall be
shares of authorized but unissued Shares.
7. AWARDS UNDER THE PLAN
The types of Awards set forth in this Article 7 may be granted under
the Plan, singly, in combination or in tandem as the Committee may determine.
(a) Options.
(i) Grant. An Option shall represent a right to purchase
a specified number of Shares at a stated Option Price during a
specified time, not to exceed ten years from the date of grant, as
determined by the Committee. The Option Price per Share for each ISO
shall not be less than 100% of the Fair Market Value on the date of
grant. An Option may be in the form of an ISO which is consistent with
the applicable terms, conditions, and limitations established by the
Code and the Committee. Each Option grant shall be evidenced by an
Award Agreement that shall specify the Option Price, the duration of
the Option, the number of Shares to which the Option pertains, and such
other provisions as the Committee shall determine. The Award Agreement
also shall specify whether the Option is intended to be an ISO or an
NQSO. Options granted under this Section 7(a) shall be exercisable at
such times and be subject to such restrictions and conditions as the
Committee shall in each instance approve and which shall be set forth
in the applicable Award Agreement, which need not be the same for each
grant or for each Participant. Upon satisfaction of the applicable
conditions to exercisability specified in the terms and conditions of
the Award as set forth in the Award Agreement, the Participant shall be
entitled to exercise the Option in whole or in part and to receive,
upon satisfaction or payment of the Option Price in the manner
contemplated in this Section 7(a), the number of Shares in respect of
which the Option shall have been exercised.
(ii) Exercise. Options shall be exercised by the delivery
of a written notice of exercise to the Corporation, setting forth the
number of Shares with respect to which the Option is to be exercised,
accompanied by full payment for the Shares. The Shares covered by an
Option may be purchased by methods designated by the Committee, in its
discretion, including, but not limited to (A) a cash payment; (B)
tendering Shares owned by the Participant, valued at the Fair Market
Value at the date of exercise; or (C) any combination of the above. As
soon as practicable after receipt of a written notification of exercise
and full payment, the Corporation shall deliver to the Participant,
Share certificates in an appropriate amount based upon the number of
Shares purchased under the Option.
(iii) Termination. If the employment of a Participant with
the Corporation shall terminate by reason of death, Disability or
Retirement, any then outstanding Options granted to such Participant
shall become immediately exercisable on the Date of Termination of
Employment. Unless the Committee determines otherwise, any such
outstanding Options will be forfeited on the expiration date of such
Options or within three years after the Date of Termination of
Employment, whichever period is shorter. Unless the Committee
determines otherwise, if the employment of a Participant with the
Corporation shall terminate for any reason other than death, Disability
or Retirement, (i) any then outstanding but unexercisable Options
granted to such Participant will be forfeited on the Date of
Termination of Employment, and (ii)
5
any then outstanding and exercisable Options granted to such
Participant will be forfeited on the expiration date of such Options or
three months after the Date of Termination of Employment, whichever
period is shorter.
(iv) ISOs. In the case of any outstanding Options granted
to a Participant that are ISOs, the tax treatment prescribed under
Section 422 of the Code shall not be available if such Options are not
exercised (A) within three months after the Date of Termination of
Employment unless such termination is due to death or Disability, or
(B) within one year after the Date of Termination of Employment due to
Disability. If a Participant's employment is terminated due to death,
the tax treatment prescribed under Section 422 of the Code shall be
available if the Participant was either an Employee on the date of
death or an Employee within the three month period prior to the date of
death.
(b) SARs.
(i) Grant. An SAR shall represent a right to receive a
payment in cash, Shares, or a combination thereof, equal to the excess
of the Fair Market Value of a specified number of Shares on the date
the SAR is exercised over an amount which shall be no less than the
Fair Market Value on the date the SAR was granted (or the Option Price
for SARs granted in tandem with an Option) as set forth in the
applicable Award Agreement. Each SAR grant shall be evidenced by an
Award Agreement that shall specify the SAR exercise price, the duration
of the SAR, the number of Shares to which the SAR pertains, whether the
SAR is granted in tandem with the grant of an Option or is
freestanding, and such other provisions as the Committee shall
determine. SARs granted under this Section 7(b) shall be exercisable at
such times and be subject to such restrictions and conditions as the
Committee shall in each instance approve and which shall be set forth
in the applicable Award Agreement, which need not be the same for each
grant or for each Participant.
(ii) Exercise. SARs shall be exercised by the delivery of
a written notice of exercise to the Corporation, setting forth the
number of Shares with respect to which the SAR is to be exercised. The
date of exercise of the SAR shall be the date on which the Corporation
shall have received notice from the Participant of the exercise of such
SAR. SARs granted in tandem with the grant of an Option may be
exercised for all or part of the Shares subject to the related Option
upon the surrender of the right to exercise the equivalent portion of
the related Option. SARs granted in tandem with the grant of an Option
may be exercised only with respect to the Shares for which its related
Option is then exercisable. With respect to SARs granted in tandem with
an ISO, (A) such SAR will expire no later than the expiration of the
underlying ISO, (B) the value of the payout with respect to such SAR
may be for no more than one hundred percent of the difference between
the Option Price of the underlying ISO and the Fair Market Value of the
Shares subject to the underlying ISO at the time such SAR is exercised,
and (C) such SAR may be exercised only when the Fair Market Value of
the Shares subject to the underlying ISO exceeds the Option Price of
the ISO. SARs granted independently from the grant of an Option may be
exercised upon the terms and conditions contained in the applicable
Award Agreement. Notwithstanding any other provision of the Plan, the
Committee may impose such conditions on exercise of an SAR (including,
without limitation, the right of the Committee to limit the time of
exercise to specified periods) as may be required to satisfy the
requirements of Section 16 (or any successor law) of the 1934 Act. In
the event the SAR shall be payable in Shares, a certificate for the
Shares acquired upon exercise of an SAR shall be issued in the name of
the Participant as soon as practicable following receipt of notice of
exercise. No fractional Shares will be issuable upon exercise of the
SAR and, unless provided in the applicable Award Agreement, the
Participant will receive cash in lieu of fractional Shares.
(iii) Termination. If the employment of a Participant with
the Corporation shall terminate by reason of death, Disability or
Normal Retirement, any then outstanding SARs granted to such
Participant shall become immediately exercisable on the Date of
Termination of Employment. Unless the Committee determines otherwise,
any such outstanding SARs will be forfeited on the expiration date of
such SARs or within three years after the Date of Termination of
Employment, whichever period is shorter. Unless the Committee
determines otherwise, if the employment of a Participant with the
Corporation shall terminate for any reason other than death, Disability
or Normal Retirement, (i) any then outstanding but unexercisable SARs
granted to such Participant will be forfeited on the Date of
Termination of Employment, and (ii) any then outstanding and
exercisable SARs granted to such Participant will be forfeited on the
expiration date of such SARs or three months after the Date of
Termination of Employment, whichever period is shorter.
6
(c) Stock Awards.
(i) Grant. All or any part of any Stock Award may be
subject to conditions and restrictions established by the Committee,
and set forth in the applicable Award Agreement, which may include, but
are not limited to, continuous service with the Corporation, a
requirement that Participants pay a stipulated purchase price for each
Stock Award, the achievement of specific Performance Goals, and/or
applicable securities laws restrictions. During the applicable Period
of Restriction, Participants holding RSAs may exercise full voting
rights with respect to such Shares. During the applicable Period of
Restriction, Participants holding RSAs shall be entitled to receive all
dividends and other distributions paid with respect to such Shares
while they are so restricted. If any such dividends or distributions
are paid in Shares, such Shares shall be subject to the same
restrictions on transferability as the RSAs with respect to which they
are paid.
(ii) Performance Stock Awards. Performance Stock Awards
will be granted to Covered Officers under the following conditions:
(A) Prior to April 1 of each year, the Committee
shall determine the Covered Officers and the Performance Goals
for such year that will need to be attained in order to permit
Performance Stock Awards to be granted to the Covered Officers
in the following year; and
(B) the value of Performance Stock Awards
granted to a Covered Officer (calculated by multiplying the
Fair Market Value on the date of grant times the number of
Shares of the Stock Award) shall equal 300% of the Covered
Officer's base salary for the calendar year preceding the date
of grant; provided, that such value may not exceed $4,500,000;
and provided, further, that the Committee may, in its
discretion, reduce the number of Shares to be granted in the
Performance Stock Award.
Notwithstanding the foregoing, any Shares of restricted stock issued to
Covered Officers in 1998 pursuant to the satisfaction of the performance goal
set forth in the Prior Plan shall be issued under the Plan in accordance with
the terms, conditions and limitations set forth in the Prior Plan.
(iii) Termination. Unless the Committee determines
otherwise, if the employment of a Participant with the Corporation
shall terminate because of Normal Retirement, Disability or death, any
remaining Period of Restriction applicable to Stock Awards granted to
such Participant shall automatically terminate and, except as otherwise
provided in this Section 7(c), such Stock Awards shall be free of
restrictions and freely transferable. Unless the Committee determines
otherwise, if the employment of a Participant with the Corporation
shall terminate for any reason other than death, Disability or Normal
Retirement, then any Stock Awards subject to restrictions on the date
of such termination shall automatically be forfeited on the Date of
Termination of Employment and returned to the Corporation; provided,
however, if such employment terminates due to Early Retirement or any
involuntary termination by the Corporation, the Committee may, in its
sole discretion, waive the automatic forfeiture of any or all such
Stock Awards and/or may add such new restrictions to such Stock Awards
as it deems appropriate.
8. DIVIDENDS AND DIVIDEND EQUIVALENTS
The Committee may provide the Awards under Section 7(c) of the Plan
earn dividends or dividend equivalents. Such dividends or dividend equivalents
may be paid currently or may be credited to a Participant's account. Any
crediting of dividends or dividend equivalents may be subject to such
restrictions and conditions as the Committee may establish, including
reinvestment in additional Shares or Share equivalents.
9. PAYMENTS AND PAYMENT DEFERRALS
Payment of Awards may be in the form of cash, Shares, other Awards, or
combinations thereof as the Committee shall determine, and with such
restrictions as it may impose. The Committee also may require or permit
Participants to elect to defer the receipt or issuance of Shares from Options or
Stock Awards or the settlement of Awards in cash under such rules and procedures
as it may establish under the Plan. It also may provide that deferred
settlements of Awards include the payment or crediting of earnings on deferred
amounts. In addition, the Committee may stipulate in an Award Agreement, either
at the time of grant or by subsequent amendment, that a payment or portion of a
payment of an Award be delayed in the event that Section 162(m) of the Code (or
any successor or similar provision of the Code affecting tax deductibility)
would disallow a tax deduction by the
7
Corporation for all or a portion of such payment. The period of any such delay
in payment shall be until the payment, or portion thereof, is tax deductible, or
such earlier date as the Committee shall determine.
10. TRANSFERABILITY
(a) ISOs. No ISO granted under the Plan may be sold,
transferred, pledged, assigned or otherwise alienated or hypothecated,
other than by will or by the laws of descent and distribution. Further,
all ISOs granted to a Participant under the Plan shall be exercisable
during his or her lifetime only by such Participant. The foregoing
shall also apply to all SARs granted in tandem with an ISO.
(b) NQSOs and SARs. Except as otherwise provided in a
Participant's Award Agreement, no NQSO or SAR granted under the Plan
may be sold, transferred, pledged, assigned or otherwise alienated or
hypothecated, other than by will or by the laws of descent and
distribution. Further, except as otherwise provided in a Participant's
Award Agreement, all NQSOs and SARs granted to a Participant under the
Plan shall be exercisable during his or her lifetime only by such
Participant.
(c) Stock Awards. Stock Awards granted under the Plan may
not be sold, transferred, pledged, assigned or otherwise alienated or
hypothecated until the end of the applicable Period of Restriction
established by the Committee and specified in the applicable Award
Agreement, or upon earlier satisfaction of any other conditions, as
specified by the Committee in its sole discretion and set forth in the
applicable Award Agreement. All rights with respect to a Stock Award
granted to a Participant under the Plan shall be available during his
or her lifetime only to such Participant.
11. CHANGE OF CONTROL
In the event of (i) any merger, consolidation, or acquisition where the
stockholders of First Union on the effective date of such merger, consolidation,
or acquisition do not own at least 50% of the outstanding shares of voting stock
of the surviving corporation, or (ii) any Change of Control, each Award granted
under the Plan shall immediately be exercisable and/or fully vested and
nonforfeitable, as the case may be.
12. AWARD AGREEMENTS
Each Award under the Plan shall be evidenced by an Award Agreement
setting forth its terms, conditions, and limitations for each Award, the
provisions applicable in the event the Participant's employment terminates, and
the Corporation's authority unilaterally or bilaterally to amend, modify,
suspend, cancel, or rescind any Award. The Committee need not require the
execution of any such agreement by the recipient, in which case acceptance of
the Award by the respective Participant shall constitute agreement by the
Participant to the terms and conditions of the Awards.
13. TAX WITHHOLDING
The Corporation shall have the right to deduct from any settlement of
an Award made under the Plan, including the delivery of Shares, or require the
payment of, a sufficient amount to cover withholding of any federal, state or
local or other governmental taxes or charges required by law or such greater
amount of withholding as the Committee shall determine from time to time and as
permitted or required by applicable rules and regulations, or to take such other
action as may be necessary to satisfy any such withholding obligations. If the
Committee permits or requires Shares to be used to satisfy required tax
withholding, such Shares shall be valued at the Fair Market Value as of the tax
recognition date for such Award or such other date as may be required by
applicable law, rule or regulation. The Corporation shall have the right to
effect income, social security and medicare tax withholding and reporting as may
be required under applicable law upon the disposition by an Employee of Common
Stock acquired upon the exercise of an option qualifying as an incentive stock
option under Section 422 of the Code at the time of exercise. The Corporation
shall collect any required withholding from "other earnings" of the employee. In
the absence of "other earnings" sufficient to satisfy such withholding, the
employee shall remit such amounts required to satisfy such withholding
obligations to the Corporation within 10 business days of any such notice and
request for payment.
14. OTHER BENEFIT AND COMPENSATION PROGRAMS
Unless otherwise specifically determined by the Committee, settlements
of Awards received by Participants under the Plan shall not be deemed a part of
a Participant's regular, recurring compensation for purposes of
8
calculating payments or benefits from the Corporation's benefit plans or
severance program. Further, the Corporation may adopt other compensation
programs, plans or arrangements as it deems appropriate or necessary. The
Committee may permit a Participant to defer such Participant's receipt of the
payment of cash or the delivery of Shares that would otherwise be due to such
Participant by virtue of the exercise of an Option or SAR, or the satisfaction
of conditions, lapse or waiver of restrictions with respect to Stock Awards. If
any such deferral election is required or permitted, the Committee shall, in its
sole discretion, establish rules and procedures for such payment deferrals.
15. UNFUNDED PLAN
Unless otherwise determined by the Committee, the Plan shall be
unfunded and shall not create (or be construed to create) a trust or a separate
fund or funds. The Plan shall not establish any fiduciary relationship between
the Corporation and any participant or other person. To the extent any person
holds any rights by virtue of an Award granted under the Plan, such rights shall
constitute general unsecured liabilities of the Corporation and shall not confer
upon any participant any right, title, or interest in any assets of the
Corporation.
16. REGULATORY APPROVALS
The implementation of the Plan, the granting of any Award under the
Plan, and the issuance of Shares upon the exercise or settlement of any Award
shall by subject to the Corporation's procurement of all approvals and permits
required by regulatory authorities having jurisdiction over the Plan, the Awards
granted under it, or the Shares issued pursuant to it.
17. RIGHTS AS A STOCKHOLDER
A Participant shall have no rights as a stockholder with respect to
Shares covered by an Award until the date the Participant or his nominee is the
holder of record. No adjustment will be made for dividends or other rights for
which the record date is prior to such date, except as provided in Section 6(c).
18. FUTURE RIGHTS
No person shall have any claim or right to be granted an Award, and the
grant of an Award shall not be construed as giving a Participant the right to be
retained in the employ of the Corporation or to participate in any other
compensation or benefit plan, program or arrangement of the Corporation. In
addition, the Corporation expressly reserves the right at any time to dismiss a
Participant free from any liability or any claim under the Plan, except as
provided herein or in any agreement entered into hereunder.
19. GOVERNING LAW
The Plan and all agreements entered into under the Plan shall be
construed in accordance with and governed by the laws of the State of North
Carolina.
20. SUCCESSORS AND ASSIGNS
The Plan and any applicable Award Agreement entered into under the Plan
shall be binding on all successors and assigns of a Participant, including,
without limitation, the estate of such Participant and the executor,
administrator or trustee of such estate, or any receiver or trustee in
bankruptcy or representative of the Participant's creditors.
21. INDEMNIFICATION
Each person who is or shall have been a member of the Committee or of
the Board shall be indemnified and held harmless by the Corporation against and
from any loss, cost, liability, or expense that may be imposed upon or
reasonably incurred by him in connection with or resulting from any claim,
action, suit, or proceeding to which he may be a party or in which he may be
involved by reason of any action taken or failure to act under the Plan and
against and from any and all amounts paid by him in settlement thereof, with the
Corporation's approval, or paid by him in satisfaction of any judgment in any
such action, suit, or proceeding against him, provided he shall give the
Corporation an opportunity, at its own expense, to handle and defend the same
before he undertakes to handle and defend it on his own behalf. The foregoing
right of indemnification shall not be exclusive of any other rights of
indemnification to which such persons may be entitled under First Union's
Articles of Incorporation or
9
Bylaws, as a matter of law, or otherwise, or any power that the Corporation may
have to indemnify them or hold them harmless.
22. APPLICATION OF FUNDS
The proceeds received by the Corporation from the issuance of Shares
pursuant to the exercise of Options will be used for general corporate purposes.
10