EXHIBIT 99.1
INDYMAC BANCORP, INC.
2002 INCENTIVE PLAN
SECTION 1
GENERAL
1.1. Purpose. The IndyMac Bancorp, Inc. 2002 Incentive Plan (the "Plan")
has been established by IndyMac Bancorp, Inc. (the "Company") to (i) attract and
retain persons eligible to participate in the Plan; (ii) motivate Participants,
by means of appropriate incentives, to achieve long-range goals; (iii) provide
incentive compensation opportunities that are competitive with those of other
similar companies; and (iv) further identify Participants' interests with those
of the Company's other stockholders through compensation that is based on the
Company's common stock; and thereby promote the long-term financial interest of
the Company and the Subsidiaries, including the growth in value of the Company's
equity and enhancement of long-term stockholder return.
1.2. Participation. Subject to the terms and conditions of the Plan, the
Committee shall determine and designate, from time to time, from among the
Eligible Individuals (including transferees of Eligible Individuals to the
extent the transfer is permitted by the Plan and the applicable Award
Memorandum), those persons who will be granted one or more Awards under the
Plan, and thereby become "Participants" in the Plan.
1.3. Operation, Administration, and Definitions. The operation and
administration of the Plan, including the Awards made under the Plan, shall be
subject to the provisions of Section 5 (relating to operation and
administration). Capitalized terms in the Plan shall be defined as set forth in
the Plan (including the definition provisions of Section 9 and Exhibit A and
Exhibit B).
SECTION 2
OPTIONS AND SARS
2.1. Definitions.
(a) The grant of an "Option" entitles the Participant to purchase shares of
Stock at an Exercise Price established by the Committee. Any Option
granted under this Section 2 may be either an incentive stock option (an
"ISO") or a non-qualified option (an "NQO"), as determined in the
discretion of the Committee. An "ISO" is an Option that is intended to
satisfy the requirements applicable to an "incentive stock option"
described in section 422(b) of the Code. An "NQO" is an Option that is not
intended to be an "incentive stock option" as that term is described in
section 422(b) of the Code.
(b) A stock appreciation right (an "SAR") entitles the Participant to receive,
in cash or Stock (as determined in accordance with subsection 2.5), value
equal to (or otherwise based on) the excess of: (a) the Fair Market Value
of a specified number of shares of Stock at the time of exercise; over (b)
an Exercise Price established by the Committee.
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2.2. Exercise Price. The "Exercise Price" of each Option and SAR granted
under this Section 2 shall be established by the Committee or shall be
determined by a method established by the Committee at the time the Option or
SAR is granted; except that the Exercise Price shall not be less than 100% of
the Fair Market Value of a share of Stock on the date of grant (or, if greater,
the par value of a share of Stock).
2.3. Exercise. An Option and an SAR shall be exercisable in accordance
with such terms and conditions and during such periods as may be established by
the Committee; provided, however, that Awards granted pursuant to Section 2
(relating to Options and SARs) shall have a minimum 1-year vesting period and
Awards granted pursuant to Section 3 (relating to Other Stock Awards) shall have
a minimum 3-year vesting period. No fewer than 100 shares of Stock may be
purchased on exercise of any Option at one time unless the number purchased is
the total number at the time available for purchase under the Option.
2.4. Payment of Option Exercise Price. The payment of the Exercise Price
of an Option granted under this Section 2 shall be subject to the following:
(a) Subject to the following provisions of this subsection 2.4, the full
Exercise Price for shares of Stock purchased upon the exercise of any
Option shall be paid at the time of such exercise (except that, in the
case of an exercise arrangement approved by the Committee and described in
paragraph 2.4(c), payment may be made as soon as practicable after the
exercise).
(b) The Exercise Price shall be payable in cash, by promissory note, or by
tendering, by either actual delivery of shares or by attestation, shares
of Stock acceptable to the Committee, and valued at Fair Market Value as
of the day of exercise, provided that any such shares used in payment
shall have been owned by the Participant for at least six months prior to
the date of exercise, or in any combination thereof, as determined by the
Committee.
(c) The Committee may permit a Participant to elect to pay the Exercise Price
upon the exercise of an Option by irrevocably authorizing a third party to
sell shares of Stock (or a sufficient portion of the shares) acquired upon
exercise of the Option and remit to the Company a sufficient portion of
the sale proceeds to pay the entire Exercise Price and any tax withholding
resulting from such exercise.
2.5. Settlement of Award. Settlement of Options and SARs is subject to
subsection 5.7.
2.6. Non-Employee Director Option Awards. The Non-Employee Directors shall
receive Director Option Awards or New Director Option Awards, as the case may
be, in accordance with the provisions of Exhibit A to this Plan.
2.7. Employee Option Awards. Except as otherwise provided by the
Committee, the Option Awards granted to employees of the Company or any
Subsidiary shall be subject to the provisions of Exhibit B to this Plan.
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2.8. Repricing. Except for either adjustments pursuant to paragraph 5.2(f)
(relating to the adjustment of shares), or decreases approved by the Company's
stockholders, the Exercise Price for any outstanding Option granted under the
Plan may not be decreased after the date of grant nor may an outstanding Option
granted under the Plan be surrendered to the Company as consideration for the
grant of a new Option with a lower exercise price.
SECTION 3
OTHER STOCK AWARDS
3.1. Definitions.
(a) A "Bonus Stock" Award is a grant of shares of Stock in return for
previously performed services, or in return for the Participant
surrendering other compensation that may be due.
(b) A "Stock Unit" Award is the grant of a right to receive shares of Stock in
the future.
(c) A "Performance Share" Award is a grant of a right to receive shares of
Stock or Stock Units that is contingent on the achievement of performance
or other objectives during a specified period.
(d) A "Performance Unit" Award is a grant of a right to receive a designated
dollar value amount of Stock that is contingent on the achievement of
performance or other objectives during a specified period.
(e) A "Restricted Stock" Award is a grant of shares of Stock, and a
"Restricted Stock Unit" Award is the grant of a right to receive shares of
Stock in the future, with such shares of Stock or right to future delivery
of such shares of Stock subject to a risk of forfeiture or other
restrictions that will lapse upon the achievement of one or more goals
relating to completion of service by the Participant, or achievement of
performance or other objectives, as determined by the Committee.
3.2. Restrictions on Awards. Each Bonus Stock Award, Stock Unit Award,
Restricted Stock Award, Restricted Stock Unit Award, Performance Share Award,
and Performance Unit Award shall be subject to the following:
(a) Any such Award shall be subject to such conditions, restrictions and
contingencies as the Committee shall determine.
(b) The Committee may designate whether any such Award being granted to any
Participant is intended to be performance-based compensation. Any such
Awards designated as intended to be performance-based compensation shall
be conditioned on the achievement of one or more Performance Measures, to
the extent required by Code section 162(m) and the regulations thereunder.
For Awards under this Section 3 intended to be performance-based
compensation, the grant of the Awards and the establishment of the
Performance Measures shall be made during the period required under Code
section 162(m).
(c) If the right to become vested in a Restricted Stock Award or Restricted
Stock Unit Award granted under this Section 3 is conditioned on the
completion of a specified period of
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service with the Company or the Subsidiaries, without achievement of
Performance Measures or other performance objectives being required as a
condition of either grant or vesting, and without it being granted in lieu
of other compensation, then the required period of service for full
vesting shall be not less than three years (subject to acceleration of
vesting, to the extent permitted by the Committee, in the event of the
Participant's death, disability, retirement, change in control or
involuntary termination).
Notwithstanding any other provision of this Section 3 to the contrary, if a
Participant is subject to an Employment Agreement containing provisions which,
by their terms, govern Awards of the type described in this Section 3, such
terms shall supersede the provisions of this Section 3 with respect to such
Participant's Awards, and if a Participant is subject to an Employment Agreement
containing definitions of disability, retirement, change in control, or
involuntary termination, such definitions shall apply with respect to such
Participant's Awards granted under this Section 3. Notwithstanding the
foregoing, Awards granted pursuant to this Section 3 shall have a minimum 3-year
vesting period.
SECTION 4
CASH INCENTIVE AWARDS
4.1. Eligibility. The Committee may designate any one or more Eligible
Individuals as Participants eligible to receive Cash Incentive Awards. Subject
to this Section 4, a Participant's right to receive Cash Incentive Awards shall
be contingent on the achievement of performance goals established for the
applicable performance period, as established by the Committee. Except as
otherwise provided in this Section 4, Cash Incentive Awards are intended to be
performance-based compensation, and shall comply with the requirements of this
Section 4 to the extent such compliance is determined by the Committee to be
required for the Cash Incentive Awards to be treated as performance-based
compensation.
4.2. Maximum Award. For Cash Incentive Awards that are intended to be
performance-based compensation, no more than $1,500,000 may be paid to any one
individual pursuant to such Awards granted for any annual performance period
(provided that if a performance period is less than one year, the limit shall be
subject to a corresponding pro rata reduction). The Committee may establish
overlapping performance periods; provided that, to the extent that the
performance periods applicable to any individual overlap, the limit (and the pro
rata reduction required under the preceding sentence) with respect to the second
performance period shall be based on the portion of the period that does not
overlap with the prior period. Subject to Code section 162(m), if, after amounts
have been earned with respect to Cash Incentive Awards, the delivery of such
amounts is deferred, any additional amounts attributable to earnings during the
deferral period shall be disregarded.(1)
4.3. Performance Goals. The performance goals established for the
performance period established by the Committee shall be objective (as that term
is described in regulations under Code section 162(m)), and shall be established
in writing by the Committee not later than
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(1) Note that if deferral is permitted, the rate of return during the deferral
period is subject to certain limits to avoid disqualifying the award as
performance-based compensation.
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90 days after the beginning of the performance period (but in no event after 25%
of the performance period has elapsed), and while the outcome as to the
performance goals is substantially uncertain. The performance goals established
by the Committee may be with respect to corporate performance, operating group
or sub-group performance, individual company performance, other group or
individual performance, or division performance, and shall be based on one or
more of the Performance Measures.
4.4. Attainment of Performance Goals. A Participant otherwise entitled to
receive a Cash Incentive Award for any performance period shall not receive a
settlement of the Award until the Committee has determined that the applicable
performance goal(s) have been attained. To the extent that the Committee
exercises discretion in making the determination required by this subsection
4.4, such exercise of discretion may not result in an increase in the amount of
the payment.
4.5. Exceptions to Performance Goal Requirement. Except as otherwise
provided by the Committee, if a Participant's employment terminates because of
death or disability, or if a Change in Control occurs prior to the Participant's
termination of employment, the Participant's Cash Incentive Award shall become
vested without regard to whether the Cash Incentive Award would be
performance-based compensation.
4.6. Non-Performance-Based Compensation. Nothing in this Section 4 shall
preclude the Committee, the Company, or any Subsidiary from granting cash
incentive awards that are not intended to be performance-based compensation;
provided, however, that, at the time of grant of cash incentive awards by the
Committee, the Committee shall designate whether such amounts are intended to
constitute performance-based compensation.(2) To the extent that the provisions
of this Section 4 reflect the requirements applicable to performance-based
compensation, such provisions shall not apply to the portion of the award, if
any, which is not intended to satisfy the performance-based compensation
requirements.
SECTION 5
OPERATION AND ADMINISTRATION
5.1. Effective Date. Subject to the approval of the stockholders of the
Company at the Company's 2002 annual meeting of its stockholders, the Plan shall
be effective as of January 23, 2002 (the "Effective Date"); provided, however,
that to the extent that Awards are granted under the Plan prior to its approval
by stockholders, the Awards shall be contingent on approval of the Plan by the
stockholders of the Company at such annual meeting. The Plan shall be unlimited
in duration and, in the event of Plan termination, shall remain in effect as
long as any Awards under it are outstanding; provided, however, that no Awards
may be granted under the Plan after the
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(2) Note that Code section 162(m) generally provides that bonuses will be
"performance-based compensation" only if the payments will not be made if the
performance objectives are not achieved. For that reason, any
non-performance-based compensation should not be structured to "make a
Participant whole" for the failure to receive payments because performance
objectives were not achieved.
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ten-year anniversary of the Effective Date (except for Awards granted pursuant
to commitments entered into prior to such ten-year anniversary).
5.2. Shares Subject to Plan. The shares of Stock for which Awards may be
granted under the Plan shall be subject to the following:
(a) The shares of Stock with respect to which Awards may be made under the
Plan shall be shares currently authorized but unissued or currently held
or, to the extent permitted by applicable law, subsequently acquired by
the Company as treasury shares, including shares purchased in the open
market or in private transactions.
(b) Subject to the following provisions of this subsection 5.2, the maximum
number of shares of Stock that may be delivered to Participants and their
beneficiaries under the Plan shall be 3,000,000 shares of Stock.
(c) To the extent provided by the Committee, any Award may be settled in cash
rather than Stock. To the extent any shares of Stock covered by an Award
are not delivered to a Participant or beneficiary because the Award is
forfeited, or the shares of Stock are not delivered because the Award is
settled in cash or used to satisfy the applicable tax withholding
obligation, such shares shall not be deemed to have been delivered for
purposes of determining the maximum number of shares of Stock available
for delivery under the Plan.
(d) If the exercise price of any Option granted under the Plan is satisfied by
tendering shares of Stock to the Company (by either actual delivery or by
attestation), only the number of shares of Stock issued net of the shares
of Stock tendered shall be deemed delivered for purposes of determining
the maximum number of shares of Stock available for delivery under the
Plan.
(e) Subject to paragraph 5.2(f), the following additional maximums are imposed
under the Plan.
(i) The maximum number of shares that may be covered by Awards granted to
any one individual pursuant to Section 2 (relating to Options and SARs)
shall be 1,500,000 shares during any one calendar-year period. If an
Option is in tandem with an SAR, such that the exercise of the Option or
SAR with respect to a share of Stock cancels the tandem SAR or Option
right, respectively, with respect to such share, the tandem Option and SAR
rights with respect to each share of Stock shall be counted as covering
but one share of Stock for purposes of applying the limitations of this
paragraph (i).
(ii) The maximum number of shares of Stock that may be issued in
conjunction with Awards granted pursuant to Section 3 (relating to Other
Stock Awards) shall be 300,000 shares.
(iii) For Bonus Stock Awards, Stock Unit Awards, Restricted Stock Awards,
Restricted Stock Unit Awards and Performance Share Awards that are
intended to be performance-based compensation, no more than 300,000 shares
of Stock may be subject to such Awards granted to any one individual
during any one-calendar-year period. If,
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after shares have been earned, the delivery is deferred, any additional
shares attributable to dividends during the deferral period shall be
disregarded.
(iv) For Performance Unit Awards that are intended to be performance-based
compensation, no more than $1,500,000 may be subject to such Awards
granted to any one individual during any one-calendar-year period. If,
after amounts have been earned with respect to Performance Unit Awards,
the delivery of such amounts is deferred, any additional amounts
attributable to earnings during the deferral period shall be disregarded.
(f) If (i) the outstanding securities of the class then subject to this Plan
(the "outstanding shares") (A) are increased, decreased, exchanged or
converted as a result of a stock split (including a split in the form of a
stock dividend), reverse stock split, recapitalization, or similar event
or (B) are exchanged for or converted into cash, property or a different
number or kind of securities (or if cash, property or securities are
distributed in respect of the outstanding shares), as a result of a
reorganization, merger, consolidation, exchange, recapitalization,
restructuring or reclassification, or (ii) substantially all of the
property and assets of the Company are sold as an entirety, or (iii) the
Company is liquidated and dissolved, then the Committee (or, in the case
of Director Option Awards, the Board) shall, in such manner and to such
extent (if any) as is equitable and appropriate, make proportionate
adjustments in (x) the number and type of shares or other securities or
cash or other property that may be acquired pursuant to Options and other
Awards previously granted under this Plan (and, where applicable, the
exercise price thereof so as to maintain the same aggregate exercise
price), (y) the maximum number and type of shares or other securities,
cash, or property that may be issued or delivered pursuant to Options
(including ISOs and Director Option Awards) and other Awards thereafter
granted under this Plan, and (z) such other terms as necessarily are
affected by such event. In the case of an extraordinary distribution,
merger, reorganization, consolidation, combination, sale of assets,
exchange or spin off, the Committee (or the Board, in the case of Director
Option Awards) may make provisions for a substitution or exchange of any
or all outstanding Options or other Awards or rights (or for the
securities, cash or property deliverable upon exercise of such outstanding
Options or other Awards or rights), based upon the distribution or
consideration payable to holders of the shares of Stock upon or in respect
of such event.
5.3. General Restrictions. Delivery of shares of Stock or other amounts
under the Plan shall be subject to the following:
(a) Notwithstanding any other provision of the Plan, the Company shall have no
liability to deliver any shares of Stock under the Plan or make any other
distribution of benefits under the Plan unless such delivery or
distribution would comply with all applicable laws (including, without
limitation, the requirements of the Securities Act of 1933), and the
applicable requirements of any securities exchange or similar entity.
(b) To the extent that the Plan provides for issuance of stock certificates to
reflect the issuance of shares of Stock, the issuance may be effected on a
non-certificated basis, to the extent not prohibited by applicable law or
the applicable rules of any stock exchange.
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5.4. Tax Withholding. All distributions under the Plan are subject to
withholding of all applicable taxes, and the Committee may condition the
delivery of any shares or other benefits under the Plan on satisfaction of the
applicable withholding obligations. Except as otherwise provided by the
Committee, such withholding obligations may be satisfied (i) through cash
payment by the Participant, (ii) through the surrender, by either actual
delivery of shares or by attestation, of shares of Stock acceptable to the
Committee which the Participant already owns (provided that any such shares used
in payment shall have been owned by the Participant for at least six months
prior to the date of surrender); or (iii) through the surrender of shares of
Stock to which the Participant is otherwise entitled under the Plan; provided,
however, that such shares under this clause (iii) may be used to satisfy not
more than the Company's minimum statutory withholding obligation (based on
minimum statutory withholding rates for Federal and state tax purposes,
including payroll taxes, that are applicable to such supplemental taxable
income).
5.5. Grant and Use of Awards. In the discretion of the Committee, a
Participant may be granted any Award permitted under the provisions of the Plan,
and more than one Award may be granted to a Participant. Subject to subsection
2.8, Awards may be granted as alternatives to or replacement of awards granted
or outstanding under the Plan, or any other plan or arrangement of the Company
or a Subsidiary (including a plan or arrangement of a business or entity, all or
a portion of which is acquired by the Company or a Subsidiary). Subject to the
overall limitation on the number of shares of Stock that may be delivered under
the Plan, the Committee may use available shares of Stock as the form of payment
for compensation, grants or rights earned or due under any other compensation
plans or arrangements of the Company or a Subsidiary, including the plans and
arrangements of the Company or a Subsidiary assumed in business combinations.
5.6. Dividends and Dividend Equivalents. An Award (including without
limitation an Option or SAR Award) may provide the Participant with the right to
receive dividend payments or dividend equivalent payments with respect to Stock
subject to the Award (both before and after the Stock subject to the Award is
earned, vested, or acquired), which payments may be either made currently or
credited to an account for the Participant, and may be settled in cash or Stock,
as determined by the Committee. Any such settlements, and any such crediting of
dividends or dividend equivalents or reinvestment in shares of Stock, may be
subject to such conditions, restrictions and contingencies as the Committee
shall establish, including the reinvestment of such credited amounts in Stock
equivalents.
5.7. Settlement of Awards. The obligation to make payments and
distributions with respect to Awards may be satisfied through cash payments, the
delivery of shares of Stock, the granting of replacement Awards, or combination
thereof as the Committee shall determine. Satisfaction of any such obligations
under an Award, which is sometimes referred to as "settlement" of the Award, may
be subject to such conditions, restrictions and contingencies as the Committee
shall determine. The Committee may permit or require the deferral of any Award
payment, subject to such rules and procedures as it may establish, which may
include provisions for the payment or crediting of interest or dividend
equivalents, and may include converting such credits into deferred Stock
equivalents. Each Subsidiary shall be liable for payment of cash due under the
Plan with respect to any Participant to the extent that such benefits are
attributable to
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the services rendered for that Subsidiary by the Participant. Any disputes
relating to liability of a Subsidiary for cash payments shall be resolved by the
Committee.
5.8. Transferability. Except as otherwise provided by the Committee,
Awards under the Plan are not transferable except as designated by the
Participant by will or by the laws of descent and distribution.
5.9. Form and Time of Elections. Unless otherwise specified herein, each
election required or permitted to be made by any Participant or other person
entitled to benefits under the Plan, and any permitted modification, or
revocation thereof, shall be in writing filed with the senior Human Resources
manager for the Company, or his or her delegates, at such times, in such form,
and subject to such restrictions and limitations, not inconsistent with the
terms of the Plan, as the senior Human Resources manager for the Company, or his
or her delegates, shall require.
5.10. Agreement With Company. An Award under the Plan shall be subject to
such terms and conditions, not inconsistent with the Plan, as the Committee
shall, in its sole discretion, prescribe. All Awards shall be evidenced by a
writing with a schedule memorializing the grant of the Award to the Participant
and setting forth certain specifics with respect to the terms and conditions of
the Award. A copy of such document shall be provided to the Participant. Such
document is referred to in the Plan as an "Award Memorandum".
5.11. Action by Company or Subsidiary. Any action required or permitted to
be taken by the Company or any Subsidiary shall be by resolution of its board of
directors, or by action of one or more members of the board (including a
committee of the board) who are duly authorized to act for the board, or (except
to the extent prohibited by applicable law or applicable rules of any stock
exchange) by a duly authorized officer of such company.
5.12. Gender and Number. Where the context admits, words in any gender
shall include any other gender, words in the singular shall include the plural
and the plural shall include the singular.
5.13. Limitation of Implied Rights.
(a) Neither a Participant nor any other person shall, by reason of
participation in the Plan, acquire any right in or title to any assets,
funds or property of the Company or any Subsidiary whatsoever, including,
without limitation, any specific funds, assets, or other property which
the Company or any Subsidiary, in its sole discretion, may set aside in
anticipation of a liability under the Plan. A Participant shall have only
a contractual right to the Stock or amounts, if any, payable under the
Plan, unsecured by any assets of the Company or any Subsidiary, and
nothing contained in the Plan shall constitute a guarantee that the assets
of the Company or any Subsidiary shall be sufficient to pay any benefits
to any person.
(b) The Plan does not constitute a contract of employment, and selection as a
Participant will not give any participating employee the right to be
retained in the employ of the Company or any Subsidiary, nor any right or
claim to any benefit under the Plan, unless such right or claim has
specifically accrued under the terms of the Plan. Except as
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otherwise provided in the Plan, no Award under the Plan shall confer upon
the holder thereof any rights as a stockholder of the Company prior to the
date on which the individual fulfills all conditions for receipt of such
rights.
5.14. Evidence. Evidence required of anyone under the Plan may be by
certificate, affidavit, document or other information which the person acting on
it considers pertinent and reliable, and signed, made or presented by the proper
party or parties.
5.15. Applicable Law. The provisions of this Agreement shall be construed
in accordance with the laws of the State of Delaware, without regard to the
conflict of law provisions of any jurisdiction.
SECTION 6
CHANGE IN CONTROL
6.1. Determination of Change in Control. The Board, in the exercise of its
reasonable discretion, may, but need not, make an affirmative determination in
light of all circumstances surrounding a transaction or group of related
transactions that a "Change in Control" for purposes of this Plan will either
occur or not occur. In making any such determination, the Board shall give due
consideration, without limitation, to the likely effect of such transaction(s)
on the makeup of the stockholder base, the Board and the senior management of
the Company. If the Board does not exercise the right to make this affirmative
determination with respect to a specific transaction or group of related
transactions, then, with respect thereto, a "Change in Control" shall be deemed
to occur for purposes of this Plan upon the occurrence of any one of the
following events:
(A) An acquisition of any common stock or other "Voting Securities" (as
hereinafter defined) of the Company by any "Person" (as the term person is
used for purposes of Section 13(d) or 14(d) of the Securities Exchange Act
of 1934, as amended (the "Exchange Act")), immediately after which such
Person has "Beneficial Ownership" (within the meaning of Rule 13d-3
promulgated under the Exchange Act) of twenty five percent (25%) or more
of the then outstanding shares of the Company's common stock or the
combined voting power of the Company's then outstanding Voting Securities;
provided, however, in determining whether a Change in Control has
occurred, Voting Securities which are acquired in a "Non-Control
Acquisition" (as hereinafter defined) shall not constitute an acquisition
which would cause a Change in Control. For purposes of this Plan, (1)
"Voting Securities" shall mean the Company's outstanding voting securities
entitled to vote generally in the election of directors and (2) a
"Non-Control Acquisition" shall mean an acquisition by (a) the Company or
any of its Subsidiaries, (b) an employee benefit plan (or a trust forming
a part thereof) maintained by (x) the Company, or (y) any corporation or
other Person of which a majority of its voting power or its voting equity
securities or equity interest is owned, directly or indirectly, by the
Company (for purposes of the definition in this subsection 6.1, a
"Subsidiary"), or (c) any Person in connection with a "Non-Control
Transaction" (as hereinafter defined).
(B) The individuals who, as of the Effective Date, were members of the Board
(the "Incumbent Board"), cease for any reason to constitute at least a
majority of the members
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of the Board; provided, however, that if the election, or nomination for
election by Company's common stockholders, of any new director was
approved by a vote of at least two-thirds of the Incumbent Board, such new
director shall, for purposes of this Plan be considered as a member of the
Incumbent Board; provided further, however, that no individual shall be
considered a member of the Incumbent Board if such individual initially
assumed office as a result of either an actual or threatened "Election
Contest" (as described in Rule 14a-11 promulgated under the Exchange Act)
or other actual or threatened solicitation of proxies or consents by or on
behalf of a Person other than the Board (a "Proxy Contest") including by
reason of any agreement intended to avoid or settle any Election Contest
or Proxy Contest; or
(C) The consummation of:
(1) A merger, consolidation, or reorganization involving the Company,
unless such merger, consolidation, or reorganization is a
"Non-Control Transaction." A "Non Control Transaction" shall mean a
merger, consolidation or reorganization of the Company where:
(a) the stockholders of the Company, immediately before such
merger, consolidation or reorganization, own directly or
indirectly immediately following such merger, consolidation or
reorganization more than fifty percent (50% ) of the combined
voting power of the outstanding Voting Securities of the
corporation resulting from such merger, consolidation or
reorganization (the "Surviving Corporation") in substantially
the same proportion as their ownership of the Voting
Securities immediately before such merger, consolidation or
reorganization; provided, however, that if the stockholders of
the Company, immediately before such merger, consolidation or
reorganization, own directly or indirectly immediately
following such merger, consolidation or reorganization
forty-five percent to fifty percent (45% to 50%) of the
combined voting power of the outstanding Voting Securities of
the Surviving Corporation in substantially the same proportion
as their ownership of the Voting Securities immediately before
such merger, consolidation or reorganization, then a Change in
Control shall be deemed to have occurred unless the members of
the Incumbent Board who are not employees of the Company
determine otherwise; and
(b) no Person other than (i) the Company, (ii) any Subsidiary,
(iii) any employee benefit plan (or any trust forming a part
thereof) maintained by the Company, the Surviving Corporation
or any Subsidiary, or (iv) any Person who, immediately prior
to such merger, consolidation or reorganization had Beneficial
Ownership of twenty-five percent (25%) or more of the then
outstanding Voting Securities or common stock of the Company,
has Beneficial Ownership of twenty-five percent (25%) or more
of the combined voting power of the Surviving Corporation's
then outstanding Voting Securities or its common stock;
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(2) The Company's stockholders approve a complete liquidation or
dissolution of the Company;
(3) The sale or other disposition of all or substantially all of the
assets of the Company to any Person or Persons (other than a
transfer to a Subsidiary); or
(4) The sale or other disposition of all or substantially all of the
stock or assets of IndyMac Bank, F.S.B. to any Person or Persons
(other than a transfer to a Subsidiary).
Notwithstanding the foregoing provisions of this subsection 6.1, a Change in
Control shall not be deemed to occur solely because any Person (the "Subject
Person") acquired Beneficial Ownership of more than the permitted amount of the
then outstanding common stock or Voting Securities as a result of the
acquisition of common stock or Voting Securities by the Company which, by
reducing the number of shares of common stock or Voting Securities then
outstanding, increases the proportional number of shares Beneficially Owned by
the Subject Person; provided, however, that if a Change in Control would occur
(but for the operation of this sentence) as a result of the acquisition of
common stock or Voting Securities by the Company, and after such share
acquisition by the Company, the Subject Person becomes the Beneficial Owner of
any additional common stock or Voting Securities which increases the percentage
of the then outstanding common stock or Voting Securities Beneficially Owned by
the Subject Person, then a Change in Control shall occur.
6.2. Committee Action. Except as otherwise provided in Exhibit A, prior to
a Change in Control, the Committee may determine in respect of Awards held by
Participants that upon or in anticipation of the occurrence of the Change in
Control benefits under Awards shall be accelerated only for a limited period of
time, which period of time shall not be less than a period of time reasonably
necessary to realize the benefits of such acceleration nor more than one year
after the Change in Control. If such a determination is not made, then (subject
to the last sentence of this subsection 6.2) upon the occurrence of a Change in
Control and without further action by the Board or the Committee, (A) each
Option and SAR shall become immediately exercisable, and (B) outstanding Stock
Awards granted under subsection 3.1 shall immediately vest free of restrictions,
and shall become payable to the Participant. The Committee may override the
limitations on acceleration in this subsection 6.2 by express provision in the
Award Memorandum or otherwise, and may accord any holder of an Award a right to
refuse any acceleration, whether pursuant to the Award Memorandum or otherwise,
in such circumstances as the Committee may approve. Any acceleration of Awards
shall comply with any applicable regulatory and financial accounting
requirements, including without limitation section 422 of the Code.
6.3. Termination or Substitution of Awards. Any Awards that are (or but
for a holder's rejection of acceleration would have been) accelerated under this
Section 6 and that are not exercised or vested prior to a dissolution of the
Company or a reorganization event described in subsection 6.1 that the Company
does not survive shall terminate, provided that if provision has been made,
consistent with the terms hereof, for the substitution, exchange or other
settlement of Awards, such Awards shall be substituted, exchanged or otherwise
settled in accordance with such provision.
12
6.4. Restoration of Prior Status. Any Awards that are (or but for the
holder's rejection of the acceleration would have been) accelerated that are not
exercised or vested prior to an abandonment or termination of a transaction
subject to stockholder approval that triggered the Change in Control (as
evidenced by public announcement, Board resolution, execution of documents
terminating the transaction, or other action or document objectively confirming
such abandonment or termination), shall be restored to their prior status
(except for the effects of the passage of time) as if no Change in Control had
occurred.
6.5. Employment Agreement. Notwithstanding any other provision of this
Section 6 to the contrary, if a Participant is subject to an Employment
Agreement containing provisions which, by their terms, govern the effect of a
change in control, such terms shall supersede the provisions of this Section 6
with respect to such Participant's Awards, and if a Participant is subject to an
Employment Agreement containing a definition of Change in Control, such
definition shall supersede the definition of Change in Control set forth in this
Section 6 with respect to such Participant's Awards.
SECTION 7
COMMITTEE
7.1. Administration. The authority to control and manage the operation and
administration of the Plan shall be vested in a committee (the "Committee") in
accordance with this Section 7. The Committee shall be selected by the Board,
and shall consist of two or more members of the Board. If the Committee does not
exist, or for any other reason determined by the Board, the Board may take any
action under the Plan that would otherwise be the responsibility of the
Committee.
7.2. Powers of Committee. The Committee's administration of the Plan shall
be subject to the following:
(a) Subject to the provisions of the Plan, the Committee will have the
authority and discretion to select from among the Eligible Individuals
those persons who shall receive Awards, to determine the time or times of
receipt, to determine the types of Awards and the amount or number of
shares covered by the Awards, to establish the terms, conditions,
performance criteria, restrictions, and other provisions of such Awards,
and (subject to the restrictions imposed by subsection 2.8 and by Section
8) to accelerate the vesting of, cancel or suspend Awards.
(b) To the extent that the Committee determines that the restrictions imposed
by the Plan preclude the achievement of the material purposes of the
Awards in jurisdictions outside the United States, the Committee will have
the authority and discretion to modify those restrictions as the Committee
determines to be necessary or appropriate to conform to applicable
requirements or practices of jurisdictions outside of the United States.
(c) The Committee will have the authority and discretion to interpret the
Plan, to establish, amend, and rescind any rules and regulations relating
to the Plan, to determine the terms and provisions specified in any Award
Memorandum made pursuant to the Plan, and to
13
make all other determinations that may be necessary or advisable for the
administration of the Plan.
(d) Any interpretation of the Plan by the Committee and any decision made by
it under the Plan are final and binding on all persons.
(e) In controlling and managing the operation and administration of the Plan,
the Committee shall take action in a manner that conforms to the
certificate of incorporation and by-laws of the Company, and applicable
state corporate law.
7.3. Delegation by Committee. Except to the extent prohibited by
applicable law or the applicable rules of a stock exchange, the Committee may
allocate all or any portion of its responsibilities and powers to any one or
more of its members and may delegate all or any part of its responsibilities and
powers to any person or persons selected by it. The Committee also may delegate
to certain officers of the Company the authority to grant Awards pursuant to the
provisions of the Plan, provided that such delegation is set forth in writing
and includes all applicable limitations and parameters to such Awards, and
provided further that such Awards are subsequently ratified by the Committee.
Any such allocation or delegation may be revoked by the Committee at any time.
Subject to the foregoing, and except as to the grant of Awards under the Plan
and establishment of the terms of grant under the Plan, all ministerial,
non-discretionary powers of the Committee under the Plan are delegated to the
senior Human Resources manager for the Company and his or her delegates.
7.4. Information to be Furnished to Committee. The Company and
Subsidiaries shall furnish the Committee with such data and information as it
determines may be required for it to discharge its duties. The records of the
Company and Subsidiaries as to an employee's or Participant's employment or
period of service, termination of employment or service, leave of absence,
reemployment and compensation shall be conclusive on all persons unless
determined to be incorrect. Participants and other persons entitled to benefits
under the Plan must furnish the Committee such evidence, data or information as
the Committee considers desirable to carry out the terms of the Plan.
SECTION 8
AMENDMENT AND TERMINATION
The Board may, at any time, amend or terminate the Plan, and may amend any
Award Memorandum, provided that no amendment or termination may, in the absence
of written consent to the change by the affected Participant (or, if the
Participant is not then living, the affected beneficiary), adversely affect the
rights of any Participant or beneficiary under any Award granted under the Plan
prior to the date such amendment is adopted by the Board; and further provided
that adjustments pursuant to paragraph 5.2(f) shall not be subject to the
foregoing limitations of this Section 8; and further provided that the
provisions of subsection 2.8 (relating to Option repricing) cannot be amended
unless the amendment is approved by the Company's stockholders.
14
SECTION 9
DEFINED TERMS
In addition to the other definitions contained herein, the following
definitions shall apply:
(a) Award. The term "Award" means any award or benefit granted under the Plan,
including, without limitation, the grant of Options, SARs, Bonus Stock
Awards, Stock Unit Awards, Restricted Stock Awards, Restricted Stock Unit
Awards, Performance Unit Awards, Performance Share Awards, and Cash
Incentive Awards.
(b) Board. The term "Board" means the Board of Directors of the Company.
(c) Code. The term "Code" means the Internal Revenue Code of 1986, as amended.
A reference to any provision of the Code shall include reference to any
successor provision of the Code.
(d) Director. The term "Director" means a member of the Board or the Board of
Directors of a Subsidiary.
(e) Eligible Individual. For purposes of the Plan, the term "Eligible
Individual" means any employee, officer, or director of the Company or a
Subsidiary, and any consultant or other person providing services to the
Company or a Subsidiary; provided, however, that an ISO may only be
granted to an employee of the Company or a Subsidiary. An Award may be
granted to an employee, in connection with hiring, retention or otherwise,
prior to the date the employee first performs services for the Company or
the Subsidiaries, provided that such Awards shall not become vested prior
to the date the employee first performs such services.
(f) Employment Agreement. A Participant's "Employment Agreement" means, as of
any date, the agreement (if any) between the Participant and the Company
or a Subsidiary that governs the terms of such Participant's employment on
that date, and may include a change in control agreement governing the
effect of a change in control with respect to such Participant and, with
respect to the Participant's termination of employment, may also include a
severance agreement governing the terms of such Participant's termination
from employment.
(g) Fair Market Value. For purposes of determining the "Fair Market Value" of
a share of Stock as of any date, the following rules shall apply:
(i) (A) If shares of Stock are listed or admitted to trade on a national
securities exchange, the average of the high and low reported sales prices
of the shares of Stock on the Composite Tape on such date, as published in
the Western Edition of The Wall Street Journal, on the principal national
securities exchange on which the shares of Stock are so listed or admitted
to trade. (B) If the Stock is not listed or admitted to trade on a
national securities exchange, the average of the high and low reported
prices for the Stock on such date, as furnished by the National
Association of Securities Dealers, Inc. ("NASD") through the NASDAQ
National Market Reporting System (or a similar organization, if the NASD
is no longer reporting such information). (C) If the Stock is not listed
or
15
admitted to trade on a national securities exchange and are not reported
on the National Market Reporting System, the arithmetic mean between the
bid and asked prices for the Shares on such date, as furnished by the NASD
or a similar organization. (D) If the Stock is not listed or admitted to
trade on a national securities exchange nor reported on the National
Market Reporting System and if bid and asked prices for the stock are not
furnished by the NASD or a similar organization, the value as established
by the Board at such time for purposes of this Plan.
(ii) If the day is not a business day, and as a result, paragraph (i) next
above is inapplicable, the Fair Market Value of the Stock shall be
determined as of the next earlier business day.
(h) Performance-Based Compensation. The term "performance-based compensation"
shall have the meaning ascribed to it in section 162(m) of the Code and
the regulations thereunder.
(i) Performance Measures. The Performance Measures (which must be quantitative
and objective standards and not qualitative) that may be used by the
Committee for such Awards shall be based on any one or more of the
following, as selected by the Committee: core earnings; net worth; asset
quality; efficiency ratio; loan origination; deposit growth; interest rate
risk; earnings per share; return on average common equity; return on
average equity; net operating expense, either before or after amortization
of intangible assets (goodwill); operating earnings (earnings before
transaction-related expense) per diluted share of common stock, either
before or after amortization of intangible assets (goodwill); return on
average assets, ratio of non-performing assets to total assets; customer
service; and regulatory compliance.
(j) Subsidiary. The term "Subsidiary" means any company during any period in
which it is a "subsidiary corporation" (as that term is defined in Code
section 424(f)) with respect to the Company.
(k) Stock. The term "Stock" means shares of common stock of the Company.
(l) 2000 Plan. The term "2000 Plan" means the IndyMac Mortgage Holdings, Inc.
2000 Stock Incentive Plan.
16
EXHIBIT A
OUTSIDE DIRECTORS OPTION AWARDS
SECTION 1
OPTION AWARDS
1.1. Option Grant. Director Option Awards shall be granted to Non-Employee
Directors as follows:
(a) On the same date as the annual grant of Awards to employees of the Company
pursuant to this Plan in each calendar year after 2001 during the term of
the Plan (the "Regular Grant Date"), there shall be granted automatically
(without any action by the Committee or the Board) to each Non-Employee
Director then in office an NQO (the "Director Option Award") to purchase
the number of shares of Common Stock equal to 0.025% of the issued and
outstanding shares of Stock (excluding any Stock held in treasury by the
Company) as of the end of the preceding fiscal year.
(b) Upon the election of a newly elected Non-Employee Director, there shall be
granted automatically (without any action by the Committee or the Board)
an NQO, the grant date of which shall be the date of such election, to
each newly elected Non-Employee Director (the "New Director Option Award")
as follows: (i) if the Non-Employee Director is elected within six months
after the most recent Regular Grant Date, the New Director Option Award
shall cover the same number of shares of Stock for which Director Option
Awards were granted to existing Non-Employee Directors on the most recent
Regular Grant Date; and (ii) if the Non-Employee Director is elected more
than six months after the most recent Regular Grant Date, but prior to the
date on which Director Options are granted to existing Non-Employee
Directors, the New Director Option Award shall cover one-half the number
of shares of Stock for which the most recent Director Option Awards were
granted to existing Non-Employee Directors on the most recent Regular
Grant Date.
(c) In no event shall a Director Option Award granted under paragraph (a)
above cover fewer than 7,500 shares of Stock.
(d) A Director Option Award and New Director Option Award shall entitle the
Director to purchase shares of Stock at a price equal to the Fair Market
Value of the Stock as of the date the Option is granted.
(e) For all subsequent provisions of this Exhibit A, Director Option Awards
and New Director Option Awards shall be referred to collectively as
Director Option Awards.
1.2. Adjustment. Director Option Awards shall be subject to adjustment
pursuant to paragraph 5.2(f) of the Plan.
1.3. Heirs and Successors. Awards under this Exhibit A shall be binding
upon, and inure to the benefit of, the Company and its successors and assigns,
and upon any person acquiring, whether by merger, consolidation, purchase of
assets or otherwise, all or substantially all of the Company's assets and
business. If any rights exercisable by the Director or benefits
17
deliverable to the Director under such Award have not been exercised or
delivered, respectively, at the time of the Director's death, such rights shall
be exercisable by the Designated Beneficiary, and such benefits shall be
delivered to the Designated Beneficiary, in accordance with the provisions of
the Plan. The "Designated Beneficiary" shall be the beneficiary or beneficiaries
designated by the Director in a writing filed with the Committee in such form
and at such time as the Committee shall require. If a deceased Director fails to
designate a beneficiary, or if the Designated Beneficiary does not survive the
Director, any rights that would have been exercisable by the Director and any
benefits distributable to the Director shall be exercised by or distributed to
the legal representative of the estate of the Director. If a deceased Director
designates a beneficiary and the Designated Beneficiary survives the Director
but dies before the Designated Beneficiary's exercise of all rights under the
Award or before the complete distribution of benefits to the Designated
Beneficiary under the Award, then any rights that would have been exercisable by
the Designated Beneficiary shall be exercised by the legal representative of the
estate of the Designated Beneficiary, and any benefits distributable to the
Designated Beneficiary shall be distributed to the legal representative of the
estate of the Designated Beneficiary.
1.4. Prior Plan. No Director Option shall be granted under the 2000 Plan
to any Non-Employee Director for any calendar year for which a Director Option
Award is granted under this Plan.
SECTION 2
VESTING
A Director Option Award held by a Director will become fully exercisable
on the one-year anniversary of the date of grant. A recipient of a Director
Option Award who ceases to be a Director shall forfeit the Director Option Award
if it is not exercisable immediately prior to his date of termination; provided,
however, that (i) if a recipient of a Director Option Award ceases to be a
Director by reason of his death, Disability, or Retirement, any portion of the
Director Option Award that is not then exercisable shall become exercisable on
his date of termination; and (ii) any Director Option Award that is held by an
individual serving as a Director on the date of a Change in Control that is not
then exercisable shall become exercisable on the date of the Change of Control.
SECTION 3
EXERCISE AND EXPIRATION
3.1. Exercise. To the extent that a Director Option Award is exercisable,
it may be exercised in whole or in part by filing a written notice with the
Stock Award Administrator of the Company at its corporate headquarters prior to
the date the Option expires. Such notice shall specify the number of shares of
Stock which the Director elects to purchase, and shall be accompanied by payment
of the exercise price for such shares of Stock indicated by the Director's
election.
3.2. Payment of Purchase Price. Upon exercise of a Director Option Award,
the exercise price shall be paid in full in cash equivalents or in shares of
Stock (by actual delivery or attestation) valued at their Fair Market Value at
the time of exercise of the Option or partly in
18
such shares and partly in cash; provided that any such shares used in payment
shall have been owned by the Director for at least six months prior to the date
of exercise. Subject to the requirements of applicable law and any loan program
established by the Company, the Board may authorize loans to Non-Employee
Directors to finance the exercise of Director Option Awards; provided, however,
that no loan shall be made to any Non-Employee Director to finance the exercise
of a Director Option Award unless (i) such loan is made pursuant to a full
recourse promissory note, and (ii) such loan, if secured by Stock (whether
issuable under the Award in question or otherwise), is made in compliance with
Regulation U of the Federal Reserve Board. A Non-Employee Director may also
elect to pay the exercise price by irrevocably authorizing a third party to sell
shares of Stock (or a sufficient portion of the shares) acquired upon exercise
of the Director Option Award and remit to the Company a sufficient portion of
the sale proceeds to pay the entire exercise price and any tax withholding
resulting from such exercise.
3.3. Expiration. A Director Option Award granted to a Director shall
expire on the tenth anniversary of the grant date. However, in no event shall
the Director Option Award be exercisable after:
(a) if the termination occurs by reason of the Director's death, Disability or
Retirement, the one-year anniversary of the date of termination of the
Director;
(b) if the termination occurs by reason of Cause, the date of termination of
the Director; and
(c) if the termination occurs for reasons other than death, Disability,
Retirement, or Cause, the three-month anniversary of the date of
termination of the Director.
To the extent that any Director Option Award is not exercised prior to (i) a
dissolution of the Company or (ii) a merger or other corporate event that the
Company does not survive, and no provision is made for the assumption,
conversion, substitution or exchange of the Option, the Director Option Award
shall terminate upon the occurrence of such event.
SECTION 4
DEFINITIONS
In addition to the other definitions contained in the Plan, the following
definitions shall apply to this Exhibit A:
(a) Cause. "Cause" shall mean, with respect to any Non-Employee Director,
termination from the Board on account of any act of (i) fraud or
intentional misrepresentation, (ii) embezzlement, misappropriation or
conversion of assets or opportunities of the Company or any subsidiary or
affiliate, or (iii) conviction of a felony.
(b) Disability. "Disability" shall mean a "permanent and total disability"
within the meaning of section 22(e)(3) of the Code.
(c) Non-Employee Director. Each Director who is not an employee of the Company
or any Subsidiary shall be an "Non-Employee Director."
19
(d) Retirement. "Retirement" shall mean retirement or resignation as a
director after at least five (5) years service as a director.
20
EXHIBIT B
EMPLOYEE OPTION AWARDS
SECTION 1
OPTION AWARDS
1.1. Option Grant. Except as otherwise provided by the Committee, the
Option Awards granted to the Employees (an "Employee Option Award") shall be
subject to the provisions of this Exhibit B.
(a) Options shall be granted to Employees (as defined below) at such time or
times as may be determined by the Committee. The date on which any such
Option is granted is referred to as the "Grant Date" of that Option.
(b) Options shall cover such number of shares of Stock as may be determined by
the Committee on the Grant Date. The number of shares of Stock covered by
an Option is referred to as the "Covered Shares" of the Option.
(c) Employee Option Awards shall entitle the Employee to purchase shares of
Stock at a price equal to the Fair Market Value of the Stock as of the
date the Option is granted.
(d) Each Employee Option Award shall be an ISO unless otherwise designated in
the applicable Award Memorandum, provided, however, that an ISO may only
be granted to an employee of the Company or a Subsidiary.
1.2. Adjustment. Employee Option Awards shall be subject to adjustment
pursuant to paragraph 5.2(f) of the Plan.
1.3. Heirs and Successors. Awards under this Exhibit B shall be binding
upon, and inure to the benefit of, the Company and its successors and assigns,
and upon any person acquiring, whether by merger, consolidation, purchase of
assets or otherwise, all or substantially all of the Company's assets and
business. If any rights exercisable by the Employee or benefits deliverable to
the Employee under such Award have not been exercised or delivered,
respectively, at the time of the Employee's death, such rights shall be
exercisable by the Designated Beneficiary, and such benefits shall be delivered
to the Designated Beneficiary, in accordance with the provisions of the Plan.
The "Designated Beneficiary" shall be the beneficiary or beneficiaries
designated by the Employee in a writing filed with the Committee in such form
and at such time as the Committee shall require. If a deceased Employee fails to
designate a beneficiary, or if the Designated Beneficiary does not survive the
Employee, any rights that would have been exercisable by the Employee and any
benefits distributable to the Employee shall be exercised by or distributed to
the legal representative of the estate of the Employee. If a deceased Employee
designates a beneficiary and the Designated Beneficiary survives the Employee
but dies before the Designated Beneficiary's exercise of all rights under the
Award or before the complete distribution of benefits to the Designated
Beneficiary under the Award, then any rights that would have been exercisable by
the Designated Beneficiary shall be exercised by the legal representative of the
estate of the Designated Beneficiary, and any benefits distributable to the
Designated Beneficiary shall be distributed to the legal representative of the
estate of the Designated Beneficiary.
21
1.4. Employment Agreement. Notwithstanding any other provision of this
Exhibit B to the contrary, if a Participant is subject to an Employment
Agreement containing provisions which, by their terms, govern the vesting,
exercisability, or other aspects of any Options granted under the Plan, such
terms shall supersede the provisions of this Exhibit B with respect to such
Participant's Options, and if a Participant is subject to an Employment
Agreement containing definitions of cause, disability, or retirement, such
definitions shall supersede the respective definitions of this Exhibit B with
respect to such Participant's Options. Notwithstanding the foregoing, all Option
Awards shall have a minimum 1-year vesting period.
SECTION 2
VESTING
Subject to the limitations of the Plan, each installment of Covered Shares
of an Employee Option Award shall be exercisable on and after the vesting date
for such installment as established by the Committee and/or its delegates and
specified in the applicable Award Memorandum relating to the Option Award;
provided, however, that Option Awards shall have a minimum 1-year vesting
period.
Notwithstanding the foregoing provisions of this Section 2, the Option
shall become fully vested and exercisable upon the Employee's Date of
Termination, if the Date of Termination occurs by reason of the Employee's
death, Disability, or Retirement. The Option may be exercised on or after the
Employee's Date of Termination only as to that portion of the Covered Shares for
which it was exercisable immediately prior to the Employee's Date of
Termination, or became exercisable upon the Employee's Date of Termination.
SECTION 3
EXERCISE AND EXPIRATION
3.1. Exercise. To the extent that an Employee Option Award is exercisable,
it may be exercised in whole or in part by filing a written notice with the
Stock Award Administrator of the Company at its corporate headquarters prior to
the date the Option expires. Such notice shall specify the number of shares of
Stock which the Employee elects to purchase, and shall be accompanied by payment
of the exercise price for such shares of Stock indicated by the Employee's
election.
3.2. Payment of Purchase Price. Upon exercise of an Employee Option Award,
the exercise price shall be paid in full in cash equivalents or in shares of
Stock (by actual delivery or attestation) valued at their Fair Market Value at
the time of exercise of the Option or partly in such shares and partly in cash;
provided that any such shares used in payment shall have been owned by the
Employee for at least six months prior to the date of exercise. Subject to the
requirements of applicable law and any loan program established by the Company,
the Board may authorize loans to the Employee to finance the exercise of
Employee Option Awards; provided, however, that no loan shall be made to any
Employee to finance the exercise of an Employee Option Award unless (i) such
loan is made pursuant to a full recourse promissory note, and (ii) such loan, if
secured by Stock (whether issuable under the Award in question or otherwise), is
made in compliance with Regulation U of the Federal Reserve Board. An Employee
may also elect to pay the exercise price by irrevocably authorizing a third
party to sell
22
shares of Stock (or a sufficient portion of the shares) acquired upon exercise
of the Employee Option Award and remit to the Company a sufficient portion of
the sale proceeds to pay the entire exercise price and any tax withholding
resulting from such exercise.
3.3. Withholding Taxes. Employee Option Awards are subject to withholding
of all applicable taxes, and the delivery of any shares of Stock upon exercise
of an Employee Option Award shall be conditioned on satisfaction of the
applicable withholding obligations. Except as otherwise provided by the
Committee, such withholding obligations may be satisfied (i) through cash
payment by the Participant, (ii) through the surrender, by either actual
delivery of shares or by attestation, of shares of Stock acceptable to the
Committee which the Participant already owns (provided that any such shares used
in payment shall have been owned by the Participant for at least six months
prior to the date of surrender); or (iii) through the surrender of shares of
Stock to which the Participant is otherwise entitled under the Plan; provided,
however, that such shares under this clause (iii) may be used to satisfy not
more than the Company's minimum statutory withholding obligation (based on
minimum statutory withholding rates for Federal and state tax purposes,
including payroll taxes, that are applicable to such supplemental taxable
income).
3.4. Expiration. An Employee Option Award granted to an Employee shall
expire on the tenth anniversary of the Grant Date. However, in no event shall
the Employee Option Award be exercisable after:
(a) except as provided in paragraphs (b) and (c) below, if the termination
occurs for reasons other than death, Disability, Retirement, or Cause, the
three-month anniversary of the Employee's Date of Termination;
(b) if the termination occurs by reason of the Employee's death, or if the
holder's death occurs within three months after the Date of Termination in
accordance with paragraph (a) above, the one-year anniversary of the
Employee's Date of Termination;
(c) if the termination occurs by reason of the Employee's Disability, or if
the holder incurs a Disability within three months after the Date of
Termination in accordance with paragraph (a) above, the one-year
anniversary of the Employee's Date of Termination;
(d) if the termination occurs by reason of the Employee's Retirement, the
one-year anniversary of the Employee's Date of Termination; or
(e) if the termination occurs by reason of Cause, the Employee's Date of
Termination.
To the extent that any Employee Option Award is not exercised prior to (i) a
dissolution of the Company or (ii) a merger or other corporate event that the
Company does not survive, and no provision is made for the assumption,
conversion, substitution or exchange of the Option, the Employee Option Award
shall terminate upon the occurrence of such event.
23
SECTION 4
DEFINITIONS
In addition to the other definitions contained in the Plan, the following
definitions shall apply to this Exhibit B:
(a) Cause. "Cause" shall mean, with respect to any Employee, termination of
employment with the Company or any Subsidiary on account of any act of (i)
fraud or intentional misrepresentation, (ii) embezzlement,
misappropriation or conversion of assets or opportunities of the Company
or any subsidiary or affiliate, or (iii) conviction of a felony.
(b) Date of Termination. The term "Date of Termination" means the first day
occurring on or after the Grant Date on which the Employee is not employed
by the Company or any Subsidiary, regardless of the reason for the
termination of employment; provided that a termination of employment shall
not be deemed to occur by reason of a transfer of the Employee between the
Company and a Subsidiary or between two Subsidiaries; and further provided
that the Employee's employment shall not be considered terminated while
the Employee is on a military or sick leave from the Company or a
Subsidiary. If an Employee is employed by an entity that is a Subsidiary
and such entity ceases to be a Subsidiary, such event shall be deemed to
be the Employee's Date of Termination.
(c) Disability. "Disability" shall mean a "permanent and total disability"
within the meaning of section 22(e)(3) of the Code.
(d) Employee. An "Employee" is any employee of the Company or a Subsidiary
who is granted an Option under the Plan.
(e) Retirement. An Employee's "Retirement" shall mean retirement or
resignation after at least five (5) consecutive years of employment with
the Company or a Subsidiary and the attainment of age 55.
24