EXHIBIT 10(zz)
CLEVELAND-CLIFFS INC NONEMPLOYEE
DIRECTORS' COMPENSATION PLAN
(AS AMENDED AND RESTATED AS OF JANUARY 1, 2005)
RECITALS
WHEREAS, Cleveland-Cliffs Inc ("Company"), with approval of the Company's
shareholders on May 14, 1996, established the Cleveland-Cliffs Inc Nonemployee
Directors' Compensation Plan ("Plan"), effective July 1, 1996;
WHEREAS, with approval of the Board of Directors of the Company ("Board"),
the Plan was amended by the First Amendment to the Plan effective November 12,
1996;
WHEREAS, with the approval of the Board, the Plan was further amended by
the Second Amendment to the Plan, effective May 13, 1997;
WHEREAS, with the approval of the Board, the Plan was further amended by
the Third Amendment, effective January, 1999;
WHEREAS, with the approval of the Board and the shareholders, the Plan was
further amended by the Fourth Amendment, effective May 8, 2001;
WHEREAS, with the approval of the Board, the Plan was amended and
restated, effective January 1, 2004.
WHEREAS, the Company now desires to further amend and restate the Plan;
and
WHEREAS, the Board of Directors of the Company has approved such amendment
and restatement, effective as of January 1, 2005, in accordance with Section 8.2
of the Plan.
AMENDMENT AND RESTATEMENT
NOW, THEREFORE, the Plan is amended and restated as follows:
ARTICLE I. DEFINITIONS
Whenever the following terms are used in this Plan they shall have
the meanings specified below unless the context clearly indicates to the
contrary:
(a) "Account": A Deferred Fee Account and/or a Deferred Share Account, as
the context may require.
(b) "Accounting Date": December 31 of each year and the last day of each
calendar quarter.
(c) "Accounting Period": The quarterly period beginning on the date
immediately following an Accounting Date and ending the next following
Accounting Date.
(d) "Administrator": The Board Affairs Committee of the Board or any
successor committee designated by the Board.
(e) "Annual Equity Grants": The Restricted Shares or Shares awarded
annually pursuant to Section 3.1.
(f) "Beneficiary": The person or persons (natural or otherwise) designated
pursuant to Section 7.7.
(g) "Board": The Board of Directors of the Company.
(h) "Change in Control": The meaning set forth in Section 3.1(c).
(i) "Code": The Internal Revenue Code of 1986, as amended.
(j) "Company": Cleveland-Cliffs Inc or any successor or successors
thereto.
(k) "Declared Rate": The Moody's Corporate Average Bond Yield as adjusted
on the first business day of January, April, July and October or such other rate
as the Administrator shall determine from time to time.
(l) "Deferral Commitment": An agreement made by a Director in a
Participation Agreement to have all of his or her Annual Equity Grant and/or all
or a specified portion of his or her Fees, Required Retainer Shares and/or
Voluntary Shares deferred under the Plan for a specified period in the future.
(m) "Deferral Period": The Plan Year for which a Director has elected to
defer all of his or her Annual Equity Grant and/or all or a portion of his or
her Fees, Required Retainer Shares and/or Voluntary Shares.
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(n) "Deferred Fees": The Fees credited to a Director's Deferred Fee
Account pursuant to Articles IV and V and payable to a Director pursuant to
Article VII.
(o) "Deferred Fee Account": The account maintained on the books of the
Company for each Director pursuant to Article V.
(p) "Deferred Shares": The Annual Equity Grant, Required Retainer Shares
and Voluntary Shares credited to a Director's Deferred Share Account pursuant to
Articles IV and VI and payable to a Director pursuant to Article VII.
(q) "Deferred Share Account": The account maintained on the books of the
Company for each Director pursuant to Article VI.
(r) "Director": An individual duly elected or chosen as a Director of the
Company who is not also an employee of the Company or any of its subsidiaries.
(s) "Director Share Ownership Guidelines": Guidelines relating to
ownership of Shares by Directors as established by the Administrator from time
to time.
(t) "Disability" or "Disabled": A Director shall be deemed to have a
"Disability" or be "Disabled" if the Participant (i) is unable to engage in any
substantial gainful activity by reason of any medically determinable physical or
mental impairment which can be expected to result in death or can be expected to
last for a continuous period of not less than 12 months, or (ii) is, by reason
of any medically determinable physical or mental impairment which can be
expected to result in death or can be expected to last for a continuous period
of not less than 12 months, receiving income replacement benefits for a period
of not less than 3 months under an employer-sponsored accident and health plan.
(u) "Election Filing Date": December 31 of the calendar year next
preceding the first day of (i) in the case of dividends deferred under Section
3.1(f) of the Plan, the Plan Year in which Restricted Shares (on which such
dividends are declared) are granted (ii) in the case of Fees, the Deferral
Period in which the Fees would otherwise be earned (iii) in the case of an
Annual Equity Grant, the Deferral Period in which the Restricted Shares or
Shares would otherwise be awarded (iv) in the case of Required Retainer Shares
and Voluntary Shares, the Deferral Period in which such shares would otherwise
be earned.
(v) "Fair Market Value": With respect to a Share, the last reported
closing price for a Share on the New York Stock Exchange (or any appropriate
over-the-counter market if the Shares are no longer listed on such Exchange) for
a day specified herein for which such fair market value is to be calculated, or
if there was no sale of Shares so reported for such day, on the most recently
preceding day on which there was such a sale.
(w) "Fees": The portion of the annual Retainer and other Director
compensation payable in cash.
(x) "Participation Agreement": The agreement submitted by a Director to
the Administrator in which a Director may specify an amount of Voluntary Shares,
or may elect to
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defer receipt of all of his Annual Equity Grant and/or all or any portion of his
or her Fees, Required Retainer Shares and/or Voluntary Shares for a specified
period in the future.
(y) "Plan": The Plan set forth in this instrument as it may from time to
time be amended.
(z) "Plan Year": The 12-month period beginning January 1 and ending
December 31.
(aa) "Prior Plan": The Company's Plan for Deferred Payment of Directors'
Fees originally adopted in 1981.
(bb) "Restricted Shares": Shares automatically awarded pursuant to Section
3.1 as to which neither the substantial risk of forfeiture nor the restrictions
on transfer referred to in Section 3.1 hereof have expired.
(cc) "Retainer": The portion of a Director's annual compensation that is
payable without regard to number of Board or committee meetings attended,
committee positions or the Lead Director position.
(dd) "Required Retainer Shares": Such number of Shares or dollar value of
a Director's Retainer as the Administrator may specify from time to time as the
portion of a Director's Retainer required to be paid in Shares, less any amount
such Director may have elected to receive in cash pursuant to Section 3.2
(a)(ii).
(ee) "Rule 16b-3": Rule 16b-3 promulgated under the Securities Exchange
Act of 1934 (or any successor rule to the same effect), as in effect from time
to time.
(ff) "Settlement Date": The date which is the earliest to occur of the
following: (i) the date of a Director's Termination of Service (including by
death); (ii) the date a Director becomes Disabled;(iii) the date of the
occurrence of a Change in Control of the Company; or (iv) the date prior to the
date of Termination of Service selected by a Director in a Participation
Agreement for distribution of all or a portion of the Annual Equity Grants,
Fees, Required Retainer Shares and Voluntary Shares deferred during such
Deferral Period as provided in Section 7.3.
(gg) "Shares": The Company's fully paid, non-assessable Common Shares, par
value $0.50 per share. Shares may be shares of original issuance or treasury
shares or a combination of the foregoing.
(hh) "Termination of Service": A separation from service as defined under
Section 409A of the Code.
(ii) "Unforeseeable Emergency": A severe financial hardship to a Director
or Beneficiary resulting from (i) an illness or accident of the Participant or
Beneficiary or his or her spouse or dependent (as defined in Section 152(a) of
the Code), (ii) loss of the Participant's or Beneficiary's property due to
casualty, or (iii) other similar or extraordinary circumstances arising as a
result of events beyond the control of the Participant or Beneficiary.
(jj) "Voluntary Shares": The meaning set forth in Section 3.2(b).
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ARTICLE II. PURPOSE
The purpose of this Plan is to provide for the Annual Equity Grant
to Directors and for the payment to Directors of a portion of the Retainer
earned by them for services as Directors in Shares in order to further align the
interests of Directors with the shareholders of the Company and thereby promote
the long-term success and growth of the Company. In addition, the Plan is
intended to provide Directors with opportunities to invest additional amounts of
their compensation payable for services as a Director in Shares and defer
receipt of any or all of such compensation.
ARTICLE III. ANNUAL EQUITY GRANTS, REQUIRED RETAINER SHARES
AND VOLUNTARY SHARES
3.1 Automatic Annual Equity Grants.
(a) For the year 2005 only, each Director shall automatically on July 12,
2005, receive 433 Restricted Shares, which is the number of Restricted Shares
equal to $32,500 divided by the Fair Market Value per Share on July 12, 2005,
pro-rated from July 1, 2005. Each Director who joins the Board after the date of
the 2005 annual meeting, but before the 2006 annual meeting, shall automatically
receive on the date such Director joins the Board, the number of Restricted
Shares equal to $32,500 divided by the Fair Market Value of a Share on such
date, pro-rated from the date such Director joins the Board.
(b) Beginning with the year 2006, each Director, shall automatically
receive each year on the date of the annual meeting, the number of Restricted
Shares equal to $32,500 divided by the Fair Market Value of a Share on the date
of the annual meeting. Each Director who joins the Board after an annual
meeting, shall receive a pro-rated amount of Restricted Shares from the date
such Director joins the Board. Notwithstanding the foregoing, any Director who
is age 69 years old or older on the date of an annual meeting shall, in lieu of
Restricted Shares, receive an equal number of Shares (with no restrictions).
(c) The Restricted Shares may not be assigned, exchanged, pledged, sold,
transferred or otherwise disposed of by a Director, except to the Company, and
shall be subject to forfeiture as herein provided until the earliest to occur of
the following ("Vesting Event"): (a) the third anniversary of the date of award;
(b) a Change in Control (as defined below); (c) death; or (d) Disability. Any
purported transfer in violation of the provisions of this paragraph shall be
null and void, and the purported transferee shall obtain no rights with respect
to such Restricted Shares. For purposes of this Section 3.1, "Change in Control"
shall mean the occurrence of any of the following events:
(i) The acquisition by any individual, entity or group (within the
meaning of Section 13(d)(3) or 14(d)(2) of the Exchange Act of 1934, as
amended (the "Exchange Act")) (a "Person") of beneficial ownership (within
the meaning of Rule 13d-3 promulgated under the Exchange Act) of 30% or
more of the combined voting power of the then outstanding voting stock of
the Company; provided, however, that for purposes of this Section
3.1(c)(i) of Article III, the following acquisitions shall not constitute
a Change in Control: (A) any issuance of voting stock of the Company
directly from the Company that is approved by the Incumbent Board (as
defined in Section 3.1(c)(ii) of
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Article III below), (B) any acquisition by the Company of voting stock of
the Company, (C) any acquisition of voting stock of the Company by any
employee benefit plan (or related trust) sponsored or maintained by the
Company or any subsidiary, or (D) any acquisition of voting stock of the
Company by any Person pursuant to a Business Combination that complies
with clauses (A), (B) and (C) of Section 3.1(c)(iii) of Article III,
below; or
(ii) individuals who, as of the date hereof, constitute the Board
(the "Incumbent Board") cease for any reason to constitute at least a
majority of the Board; provided, however, that any individual becoming a
Director subsequent to the date hereof whose election, or nomination for
election by the Company's shareholders, was approved by a vote of at least
a majority of the Directors then comprising the Incumbent Board (either by
a specific vote or by approval of the proxy statement of the Company in
which such person is named as a nominee for director, without objection to
such nomination) shall be deemed to have been a member of the Incumbent
Board, but excluding, for this purpose, any such individual whose initial
assumption of office occurs as a result of an actual or threatened
election contest (within the meaning of Rule 14a-11 of the Exchange Act)
with respect to the election or removal of Directors or other actual or
threatened solicitation of proxies or consents by or on behalf of a Person
other than the Board; or
(iii) consummation of a reorganization, merger or consolidation
involving the Company, a sale or other disposition of all or substantially
all of the assets of the Company, or any other transaction involving the
Company (each, a "Business Combination"), unless, in each case,
immediately following such Business Combination, (A) all or substantially
all of the individuals and entities who were the beneficial owners of
voting stock of the Company immediately prior to such Business Combination
beneficially own, directly or indirectly, more than 55% of the combined
voting power of the then outstanding shares of voting stock of the entity
resulting from such Business Combination (including, without limitation,
an entity which as a result of such transaction owns the Company or all or
substantially all of the Company's assets either directly or through one
or more subsidiaries) in substantially the same proportions relative to
each other as their ownership, immediately prior to such Business
Combination, of the voting stock of the Company, (B) no Person (other than
the Company, such entity resulting from such Business Combination, or any
employee benefit plan (or related trust) sponsored or maintained by the
Company, any subsidiary or such entity resulting from such Business
Combination) beneficially owns, directly or indirectly, 30% or more of the
combined voting power of the then outstanding shares of voting stock of
the entity resulting from such Business Combination, and (C) at least a
majority of the members of the Board of Directors of the entity resulting
from such Business Combination were members of the Incumbent Board at the
time of the execution of the initial agreement or of the action of the
Board providing for such Business Combination; or
(iv) approval by the shareholders of the Company of a complete
liquidation or dissolution of the Company, except pursuant to a Business
Combination that complies with clauses (A), (B) and (C) of Section
3.1(c)(iii) of Article III.
For purposes of this Section 3.1(c) of Article III, voting stock means
securities entitled to vote generally in the election of directors, and
subsidiary means an entity in which the Company
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directly or indirectly beneficially owns 50% or more of the outstanding capital
or profits interests or voting stock.
(d) All of the Restricted Shares shall be forfeited by a Director who is
terminated before a Vesting Event; provided, however, if service as a Director
is terminated by the Company owing to removal as a Director without cause before
the third anniversary of the date of an award, a portion of the Restricted
Shares covered by such award that then remain forfeitable shall become freely
transferable and nonforfeitable on a prorated basis (rounded up to the nearest
whole Restricted Share) for the number of full months the Director remained on
the Board during the three-year period from the date of grant.
(e) Unless otherwise directed by the Administrator, all certificates
representing Restricted Shares shall be held in custody by the Company until the
occurrence of a Vesting Event. As a condition to each award of Restricted
Shares, unless otherwise determined by the Administrator, each Director shall
have delivered to the Company a stock power, endorsed in blank, relating to the
Restricted Shares covered by such award. After the occurrence of a Vesting
Event, assuming no event has occurred that would effect a forfeiture of a
Director's Restricted Shares, a certificate or certificates evidencing
unrestricted ownership of such Shares shall be delivered to the Director.
(f) With respect to dividends on Restricted Shares:
(i) A Director may elect, prior to December 31, 2005 or the
applicable Election Filing Date for any Plan Year thereafter, that all
cash dividends declared with respect to Restricted Shares awarded during
such Plan Year shall be deferred and reinvested in additional Common
Shares during the period of restriction of such Restricted Shares and
which shall be subject to the same restrictions as such Restricted Shares.
Such deferral election shall be effective as of the applicable Election
Filing Date and shall apply to dividends declared on Restricted Shares
granted in the Plan Year following the applicable Election Filing Date and
in each subsequent Plan Year unless terminated for a subsequent Plan Year
by filing a termination election by the applicable Election Filing Date
for such subsequent Plan Year.
(ii) In addition, any Director who joins the Board on or after
January 1 of any Plan Year may make such an election with respect to
dividends declared on his or her award of Restricted Shares within 30 days
after becoming a Director. Such deferral election shall be effective when
filed and shall apply only to dividends declared on Restricted Shares
granted during the remainder of such Plan Year and in each subsequent Plan
Year unless terminated for a subsequent Plan Year by filing a termination
election by the applicable Election Filing Date for such subsequent Plan
Year.
(iii) Once such a deferral election has been terminated, another
deferral election may not be made.
(iv) All such deferred dividends shall be reinvested and held in the
Director's name and shall be delivered as additional unrestricted Common
Shares on the applicable Vesting Date, subject to vesting as provided in
Section 3.1(c) hereof and proration as provided in Section 3.1(d) hereof.
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Notwithstanding the foregoing, in accordance with Question and Answer 20
of Internal Revenue Service Notice 2005-1, prior to December 31, 2005 a
Director may elect to cancel his or her deferral election that was made in
2005 that covered Restricted Shares granted in 2005 under Section 3.1(a)
hereof as long as (i) the amounts subject to cancellation are includible
in the gross income of the Director in the taxable year in which such
amounts are earned and vested and (ii) the amounts subject to such
cancellation shall be distributed to the Director.
3.2 Required Retainer Shares and Voluntary Shares.
(a) Payment of Retainer.
(i) Subject to Section 3.2(a)(ii), Section 3.2(b) and Article IV of
this Plan, the Retainer established by the Administrator from time to time
shall be payable in part as Required Retainer Shares payable on January 1
of the following year, and the balance of such Retainer and all other Fees
shall be payable in cash quarterly in advance of each Accounting Period.
(ii) If a Director meets the Director Share Ownership Guidelines on
December 1 of 2004 or any year thereafter, such Director may elect, by the
filing of a Participant Agreement or such other form as may be approved by
the Administrator by March 29, 2004 or by December 15 of such year, as
applicable, to have up to 100% of such Director's Retainer paid by the
Company in cash. Such election shall apply to the Director's Retainer for
the Plan Year commencing January 1, 2004 or the Plan Year following such
election, as applicable.
(b) Voluntary Shares. Prior to the commencement of any calendar quarter, a
Director may elect by the filing of a Participation Agreement to have up to 100%
of his or her Fees for such quarter paid by the Company in the form of Voluntary
Shares and in lieu of the cash payment. Such Participation Agreement must be
filed as a one-time election. Such election, unless subsequently terminated,
shall apply to a Director's Fees for the remainder of the current Plan Year and
each subsequent Plan Year. Once an election has been terminated another election
may not be made.
(c) Issuance of Shares. On the first business day of each year the Company
shall issue (i) to each Director a number of Shares equal to such Director's
Required Retainer Shares for each Accounting Period during the prior Plan Year
divided by the Fair Market Value per Share on the first day of such Accounting
Period and (ii) to each Director who has made an election under Section 3.2(b),
a number of Shares for each such Accounting Period equal to the portion of such
Director's Fees for such Accounting Period that such Director has elected to
receive as Voluntary Shares for such Accounting Period divided by the Fair
Market Value per Share on the first day of such Accounting Period (less, in each
case, the portion of the Required Retainer Shares and Voluntary Shares the
Director elected to defer under Section 4.3). To the extent that the application
of the foregoing formula would result in the issuance of fractional Shares, no
fractional Shares shall be issued, but instead, the Company shall maintain two
separate non-interest-bearing accounts for each Director, which accounts shall
be credited with the amount of any Required Retainer Shares or Voluntary Shares,
as the case may be, not convertible into whole Shares, which amounts shall be
combined with Required Retainer Shares
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and Voluntary Shares, respectively, which are paid for the next following Plan
Year. When whole Shares are issued by the Company to the Director on January 1,
the amounts in such accounts shall be reduced by that amount which (when added
to the Required Retainer Shares and Voluntary Shares for such Director for such
quarter) results in the issuance of the maximum number of Shares to such
Director. The Company shall pay any and all fees and commissions incurred in
connection with the payment of Required Retainer Shares and Voluntary Shares to
a Director in Shares.
ARTICLE IV. DEFERRAL OF FEES, ANNUAL EQUITY GRANT,
REQUIRED RETAINER SHARES AND VOLUNTARY SHARES
4.1 Deferral of Fees. A Director may elect to defer all or a specified
percentage of his or her Fees earned for any Deferral Period by filing a
Participation Agreement with the Administrator by the applicable Election Filing
Date. Such Deferral Commitment shall be effective as of the applicable Election
Filing Date and shall continue to be effective from Deferral Period to Deferral
Period until terminated or modified by filing a new Participation Agreement with
the Administrator, provided that such Participant Agreement must be filed by the
applicable Election Filing Date for the Deferral Period for which it is to be
effective.
4.2 Crediting of Deferred Fees. The portion of a Director's Fees that is
deferred pursuant to a Deferral Commitment shall be credited promptly following
each Plan Year to the Director's Deferred Fee Account as of the date the
corresponding non-deferred portion of his or her Fees would have been paid to
the Director.
4.3 Deferral of Annual Equity Grant. A Director may elect to defer all of
his or her Annual Equity Grant (in lieu of receiving Restricted Shares or Shares
pursuant to Section 3.1(b)) awarded during any Deferral Period by filing a
Participation Agreement with the Administrator by the applicable Election Filing
Date. Such Deferral Commitment shall be effective as of the applicable Election
Filing Date and shall continue to be effective from Deferral Period to Deferral
Period until terminated by filing a new Participation Agreement with the
Administrator, provided that such Participation Agreement must be filed by the
applicable Election Filing Date for the Plan Year for which it is to be
effective. Once such a Deferral Commitment has been terminated, another Deferral
Commitment may not be made. Such Deferred Shares are still subject to forfeiture
pursuant to Section 6.5.
4.4 Deferral of Required Retainer Shares and Voluntary Shares. A Director
may elect to defer all or a specified percentage of his or her Required Retainer
Shares and his or her Voluntary Shares earned for any Deferral Period by filing
a Participation Agreement with the Administrator by the applicable Election
Filing Date. Such Deferral Commitment shall be effective as of the applicable
Election Filing Date and shall continue to be effective from Deferral Period to
Deferral Period until terminated or modified by filing a new Participation
Agreement with the Administrator, provided that such Participation Agreement
must be filed by the applicable Election Filing Date for the Deferral Period for
which it is to be effective.
4.5 Crediting of Deferred Shares. The portion of a Director's Annual
Equity Grant, Required Retainer Shares and Voluntary Shares that is deferred
pursuant to a Deferral Commitment shall be credited promptly following each Plan
Year to the Director's Deferred
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Share Account as of the date the corresponding non-deferred portion of his or
her Required Retainer Shares and Voluntary Shares would have been issued to the
Director.
ARTICLE V. DEFERRED FEE ACCOUNT
5.1 Determination of Deferred Fee Account. On any particular date, a
Director's Deferred Fee Account shall consist of the aggregate amount credited
thereto pursuant to Section 4.2, plus any interest credited pursuant to Section
5.2, minus the aggregate amount of distributions, if any, made from such
Deferred Fee Account.
5.2 Crediting of Interest. Each Deferred Fee Account to which Fees have
been credited in dollar amounts shall be increased by the amount of interest
earned since the immediately preceding Accounting Date. Interest shall be
credited at the Declared Rate as of each Accounting Date based on the average
daily balance of the Director's Deferred Fee Account since the immediately
preceding Accounting Date, but after the Deferred Fee Account has been adjusted
for any contributions or distributions to be credited or deducted for such
period. Interest for the period prior to the first Accounting Date applicable to
a Deferred Fee Account shall be prorated.
5.3 Adjustments to Deferred Fee Accounts. Each Director's Deferred Fee
Account shall be immediately debited with the amount of any distributions under
the Plan to or on behalf of the Director or, in the event of his or her death,
his or her Beneficiary.
5.4 Statements of Deferred Fee Accounts. As soon as practicable after the
end of each Plan Year, a statement shall be furnished to each Director or, in
the event of his or her death, to his or her Beneficiary showing the status of
his or her Deferred Fee Account as of the end of the Accounting Period, any
changes in such Account since the end of the immediately preceding Accounting
Period, and such other information as the Administrator shall determine.
5.5 Vesting of Deferred Fee Account. A Director shall be 100% vested in
his or her Deferred Fee Account at all times.
ARTICLE VI. DEFERRED SHARE ACCOUNT
6.1 Determination of Deferred Share Account. On any particular date, a
Director's Deferred Share Account shall consist of the aggregate number of
Deferred Shares credited thereto pursuant to Section 4.5, plus any dividend
equivalents credited pursuant to Section 6.2, minus the aggregate amount of
distributions, if any, made from such Deferred Share Account.
6.2 Crediting of Dividend Equivalents. Each Deferred Share Account shall
be credited as of the end of each Accounting Period with additional Deferred
Shares equal in value to the amount of cash dividends paid by the Company during
such Accounting Period on that number of Shares equivalent to the number of
Deferred Shares in such Deferred Share Account during such Accounting Period.
The dividend equivalents shall be valued by dividing the dollar value of such
dividend equivalents by the Fair Market Value on the Accounting Date next
following the dividend payment date. Until a Director or his or her Beneficiary
receives his or her entire Deferred Share Account, the unpaid balance thereof
credited in Deferred Shares shall be credited with dividend equivalents as
provided in this Section 6.2.
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6.3 Adjustments to Deferred Share Accounts. Each Director's Deferred Share
Account shall be immediately debited with the amount of any distributions under
the Plan to or on behalf of the Director or, in the event of his or her death,
his or her Beneficiary.
6.4 Statements of Deferred Share Accounts. As soon as practicable after
the end of each Plan Year, a statement shall be furnished to each Director or,
in the event of his or her death, to his or her Beneficiary showing the status
of his or her Deferred Share Account as of the end of the Accounting Period, any
changes in such Account since the end of the immediately preceding Accounting
Period, and such other information as the Administrator shall determine.
6.5 Vesting of Deferred Share Account. A Director shall be 100% vested in
his or her Deferred Share Account at all times with respect to the deferral of
Required Retainer Shares and Voluntary Shares, and with respect to any Annual
Equity Grant received when a Director was 69 years of age or older. A Director
shall become 100% vested in his or her Deferred Share Account with respect to
each Annual Equity Grant upon the occurrence of a Vesting Event described in
Section 3.1(c) (excluding any such Annual Equity Grant made to a Director who
was 69 or older on the date of grant of such Annual Equity Grant) and any
unvested portion shall be forfeited upon Termination of Service.
ARTICLE VII. DISTRIBUTION OF BENEFITS
7.1 Settlement Date. A Director, or in the event of such Director's death,
his or her Beneficiary shall be entitled to all or a portion of the balance in
such Director's Deferred Fee Account and Deferred Share Account, as provided in
this Article VII, following such Director's Settlement Date or Dates.
7.2 Amount to be Distributed. The amount to which a Director, or in the
event of such Director's death, his or her Beneficiary is entitled in accordance
with the following provisions of this Article VII shall be based on the
Director's adjusted balances in his or her Deferred Fee Account and Deferred
Share Account determined as of the Accounting Date coincident with or next
following his or her Settlement Date or Dates.
7.3 In-Service Distribution. A Director may irrevocably elect to receive a
pre-termination distribution of all or any specified percentage of his or her
Deferred Fees or vested Deferred Shares commencing on a specified date in a Plan
Year that begins at least three Plan Years after the date such Fees and Shares
otherwise would have been payable. Such election (i) shall be made in a
Participation Agreement filed at the same time he or she files a Deferral
Commitment covering such Deferred Fees or Deferred Shares as provided in
Sections 4.1, 4.2 or Section 4.4 and (ii) shall contain the Director's
irrevocable election to receive such Deferred Fees or Deferred Shares under one
of the forms provided in Section 7.4 or Section 7.5. Notwithstanding the
foregoing, with respect to Deferred Shares in lieu of an Annual Equity Grant in
the form of Restricted Shares for a Director under age 69 at the date of grant,
the specified distribution date must be at least three years from the date of
grant.
7.4 Form of Distribution -- Deferred Fees. Thirty days after the end of
the Accounting Period in which a Director's Settlement Date occurs, the Company
shall distribute or cause to be distributed, to the Director the balance of the
Director's Deferred Fee Account as determined under Section 7.2, under one of
the forms provided in this Section 7.4. In the event
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of a Director's death, the balance of his or her Deferred Fee Account shall be
distributed to his or her Beneficiary in a lump sum.
Distribution of a Director's Deferred Fee Account shall be made in one of
the following forms as elected by the Director:
(a) by payment in cash in a single lump sum;
(b) by payment in cash in not greater than ten annual installments; or
(c) a combination of (a) and (b) above. The Director shall designate the
percentage payable under each option.
The Director's election of the form of distribution of Deferred Fees shall
be on a Participation Agreement filed with the Administrator at the same time
the Director files a Deferral Commitment covering such Deferred Fees pursuant to
Section 4.1 hereof.
The amount of cash to be distributed in each installment shall be equal to
the quotient obtained by dividing the Director's Deferred Fee Account balance as
of the date of such installment payment by the number of installment payments
remaining to be made to or in respect of such Director at the time of
calculation.
If a Director fails to make an election in a timely manner as provided in
this Section 7.4, distribution shall be made in cash in a single lump sum.
7.5 Form of Distribution -- Deferred Shares. Thirty days after the end of
the Accounting Period in which a Director's Settlement Date occurs, the Company
shall distribute or cause to be distributed, to the Director a number of Shares
equal to the number of Deferred Shares in the Director's Deferred Share Account
as determined under Section 7.2, under one of the forms provided in this Section
7.5. In the event of a Director's death, the number of Shares equal to the
number of Deferred Shares in his or her Deferred Share Account shall be
distributed to his or her Beneficiary in a single distribution.
Distribution of a Director's Deferred Share Account shall be made in one
of the following forms as elected by the Director:
(a) by payment in Shares or cash in a single distribution;
(b) by payment in Shares or cash in not greater than ten annual
installments; or
(c) a combination of (a) and (b) above. The Director shall designate the
percentage payable under each option.
The Director's election of the form of distribution of Deferred Shares
shall be on a Participation Agreement filed with the Administrator at the same
time the Director files a Deferral Commitment covering the Annual Equity Grant,
Required Retainer Shares or Voluntary Shares comprising such Deferred Shares
pursuant to Section 4.3 or 4.4 hereof.
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The number of Shares to be distributed in each installment shall be equal
to the quotient obtained by dividing the number of Deferred Shares in the
Director's Deferred Share Account as of the date of such installment payment by
the number of installment payments remaining to be made to or in respect of such
Director at the time of calculation. Fractional Shares shall be rounded down to
the nearest whole Share, and such fractional amount shall be re-credited as a
fractional Deferred Share in the Director's Deferred Share Account.
If a Director elects payment in a single distribution in cash, the amount
of the payout shall be equal to the Fair Market Value of the Deferred Shares in
the Director's Deferred Share Account on the Settlement Date. If such Director
elects payout in installments in cash, an amount equal to the Fair Market Value
of the Deferred Shares in the Director's Deferred Share Account on the
Settlement Date shall be transferred to the Director's Deferred Fee Account
pending distribution.
If a Director fails to make an election in a timely manner as provided in
this Section 7.5, distribution of the Director's Deferred Share Account shall be
made in Shares in a single distribution.
7.6 Special Distributions. Notwithstanding any other provision of this
Article VII, with respect to Deferred Fees or Deferred Shares that were earned
and vested prior to January 1, 2005, a Director may elect to receive a
distribution of part or all of his or her Deferred Fee Account and/or Deferred
Share Account attributable to such Deferred Fees or Deferred Shares in one or
more distributions if (and only if) the amount in the Director's Deferred Fee
Account and/or the number of the Shares in the Director's Deferred Share Account
subject to such distribution is reduced by 6%. The remaining 6% of the portion
of the electing Director's Deferred Fee Account and/or Deferred Share Account
subject to such distribution shall be forfeited. If a Director makes an election
under this Section 7.6 during a Plan Year in which he or she is also making
deferrals under the deferral portion of the Plan: (i) such election shall be
effective as of the last day of the Plan Year in which it is submitted to the
Administrator and any distribution made pursuant to such an election shall be
made on such day and (ii) such Director shall terminate his or her participation
in the deferral portion of the Plan for the two Plan Years following the Plan
Year during which the Director's election is effective under this Section 7.6.
If a Director makes an election under this Section 7.6 during a Plan Year in
which he or she is not making any deferrals under the deferral portion of the
Plan: (i) such election shall be effective when it is submitted to the
Administrator and any distribution made pursuant to such an election shall be
made within sixty days of the date such election is submitted to the
Administrator and (ii) such Director shall not be eligible to participate in the
deferral portion of the Plan for the two Plan Years following the Plan Year
during which the Director's election is effective under this Section 7.6.
7.7 Beneficiary Designation. As used in the Plan the term "Beneficiary"
means:
(a) The person last designated as Beneficiary by the Director in writing
on a form prescribed by the Administrator;
(b) If there is no designated Beneficiary or if the person so designated
shall not survive the Director, such Director's spouse; or
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(c) If no such designated Beneficiary and no such spouse is living upon
the death of a Director, or if all such persons die prior to the distribution of
the Director's balance in his or her Deferred Fee Account and Deferred Share
Account, then the legal representative of the last survivor of the Director and
such persons, or, if the Administrator shall not receive notice of the
appointment of any such legal representative within one year after such death,
the heirs-at-law of such survivor shall be the Beneficiaries to whom the then
remaining balance of such Accounts shall be distributed (in the proportions in
which they would inherit his or her intestate personal property).
Any Beneficiary designation may be changed from time to time by the filing of a
new form. No notice given under this Section 7.7 shall be effective unless and
until the Administrator actually receives such notice.
7.8 Facility of Payment. Whenever and as often as any Director or his or
her Beneficiary entitled to payments hereunder shall be under a legal disability
or, in the sole judgment of the Administrator, shall otherwise be unable to
apply such payments to his or her own best interests and advantage, the
Administrator in the exercise of its discretion may direct all or any portion of
such payments to be made in any one or more of the following ways: (i) directly
to him or her; (ii) to his or her legal guardian or conservator; or (iii) to his
or her spouse or to any other person, to be expended for his or her benefit; and
the decision of the Administrator, shall in each case be final and binding upon
all persons in interest.
7.9 Elections to Change Time and Form of Distribution. A Director may make
an election to change the time of commencement of distribution(s) of his or her
Deferred Fee Account or vested Deferred Shares Account, the form of payment of
such accounts, or both, with respect to an amount previously deferred by the
Director under a Deferral Commitment if all of the following requirements are
met:
(a) Such election may not take effect until at least twelve months after
the date on which the election is made;
(b) In the case of a election related to a payment other than a payment on
account of death, Disability or occurrence of an Unforeseeable Emergency, the
first payment under such election shall in all cases be deferred for a period of
not less than five years from the date such payment would otherwise have been
made (or, in the case of installment payments, which shall be treated as a
single payment for purposes of this Section 7.9, five years from the date the
first installment payment was scheduled to be paid); and
(c) Any subsequent election related to a distribution that is to be made
at a specified date or pursuant to a fixed schedule pursuant to Sections 7.3 of
the Plan must be made not less than twelve months prior to the date the payment
was scheduled to be made under the prior election or deemed election (or, in the
case of installment payments, which shall be treated as a single payment for
purposes of this Section 7.9, twelve months prior to the date the first
installment payment was scheduled to be paid).
7.10 Unforeseeable Emergency. Notwithstanding any other provision of this
Article VII, in the event of an Unforeseeable Emergency and at the request of a
Director or Beneficiary, accelerated payment shall be made to the Participant or
Beneficiary of all or a part of his or her
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(i) Deferred Fee Account or (ii) vested Deferred Share Account. Payments of
amounts as a result of an Unforeseeable Emergency may not exceed the amount
necessary to satisfy such Unforeseeable Emergency plus amounts necessary to pay
taxes reasonably anticipated as a result of the distribution(s), after taking
into account the extent to which the hardship is or may be relieved through
reimbursement or compensation by insurance or otherwise by liquidation of the
Participant's assets (to the extent the liquidation of such assets would not
itself cause severe financial hardship).
ARTICLE VIII. ADMINISTRATION, AMENDMENT AND TERMINATION
8.1 Administration. The Plan shall be administered by the Administrator.
The Administrator shall have such powers as may be necessary to discharge its
duties hereunder. The Administrator may, from time to time, employ, appoint or
delegate to an agent or agents (who may be an officer or officers of the
Company) and delegate to them such administrative duties as it sees fit, and may
from time to time consult with legal counsel who may be counsel to the Company.
The Administrator shall have no power to add to, subtract from or modify any of
the terms of the Plan, or to change or add to any benefits provided under the
Plan, or to waive or fail to apply any requirements of eligibility for a benefit
under the Plan. No member of the Administrator shall act in respect of his or
her own Deferred Fee Account or his or her own Deferred Share Account. All
decisions and determinations by the Administrator shall be final and binding on
all parties. No member of the Administrator shall be liable for any such action
taken or determination made in good faith. All decisions of the Administrator
shall be made by the vote of the majority, including actions and writing taken
without a meeting. All elections, notices and directions under the Plan by a
Director shall be made on such forms as the Administrator shall prescribe.
8.2 Amendment and Termination. The Board may alter or amend this Plan from
time to time or may terminate it in its entirety; PROVIDED, HOWEVER, that no
such action shall, without the consent of a Director, affect the rights in any
Shares issued or to be issued to such Director, in any Deferred Shares in a
Director's Deferred Share Account or in any amounts in a Director's Deferred Fee
Account (except that this limitation requiring the consent of a Director to
certain actions shall not apply to any amendment or termination that is deemed
necessary by the Company to ensure compliance with Section 409A of the Code);
and further provided, that, without further approval by the shareholders of the
Company no such action shall (a) increase the total number of Shares available
for issuance under this Plan specified in Article X or (b) otherwise cause Rule
16b-3 to become inapplicable to this Plan.
ARTICLE IX. FINANCING OF BENEFITS
9.1 Financing of Benefits. The Shares and benefits payable in cash under
the Plan to a Director or, in the event of his or her death, to his or her
Beneficiary shall be paid by the Company from its general assets. The right to
receive payment of the Shares and benefits payable in cash represents an
unfunded, unsecured obligation of the Company. No person entitled to payment
under the Plan shall have any claim, right, security interest or other interest
in any fund, trust, account, insurance contract, or asset of the Company which
may be responsible for such payment.
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9.2 Security for Benefits. Notwithstanding the provisions of Section 9.1,
nothing in this Plan shall preclude the Company from setting aside Shares or
funds in trust ("Trust") pursuant to one or more trust agreements between a
trustee and the Company. However, no Director or Beneficiary shall have any
secured interest or claim in any assets or property of the Company or the Trust
and all Shares or funds contained in the Trust shall remain subject to the
claims of the Company's general creditors.
ARTICLE X. SHARES SUBJECT TO PLAN
10.1 Shares Subject to Plan. Subject to adjustment as provided in this
Plan, the total number of Shares which may be issued under this Plan shall be
200,000 (100,000 of which were approved in 1996 and 100,000 of which were added
as of May 8, 2001).
10.2 Adjustments. In the event of any change in the outstanding Shares by
reason of (a) any stock dividend, stock split, combination of shares,
recapitalization or any other change in the capital structure of the Company,
(b) any merger, consolidation, spin-off, split-off, spin-out, split-up,
reorganization, partial or complete liquidation or other distribution of assets,
issuance of rights or warrants to purchase securities, or (c) any other
corporate transaction or event having an effect similar to any of the foregoing,
the number and kind of shares specified in Article III, the number or kind of
Shares that may be issued under the Plan as specified in Article X and the
number of Deferred Shares in a Director's Deferred Share Account shall
automatically be adjusted so that the proportionate interest of the Directors
shall be maintained as before the occurrence of such event. Such adjustment
shall be conclusive and binding for all purposes with respect to the Plan.
ARTICLE XI. PRIOR PLANS
11.1 1992 Incentive Equity Plan. No further options shall be issued to the
Directors under Section 8 of the Company's 1992 Incentive Equity Plan on or
after July 1, 1996.
11.2 Plan for Deferred Payment of Director's Fees. Effective May 14, 1996,
the Prior Plan was discontinued, except that amounts remaining payable to former
Directors in the Prior Plan were paid in accordance with its terms.
ARTICLE XII. GENERAL PROVISIONS
12.1 Interests Not Transferable; Restrictions on Shares and Rights to
Shares. No rights to Shares or other benefits payable in cash shall be assigned,
pledged, hypothecated or otherwise transferred by a Director or any other
person, voluntarily or involuntarily, other than (i) by will or the laws of
descent and distribution, or (ii) to the extent permitted by Section 409A of the
Code, pursuant to a judgment, order or decree from a state domestic relations
court which requires payment of all or a part of a Director's interest under the
Plan to an "alternate payee" as defined in Section 414(p) of the Code. No person
shall have any right to commute, encumber, pledge or dispose of any other
interest herein or right to receive payments hereunder, nor shall such interests
or payments be subject to seizure, attachment or garnishment for the payments of
any debts, judgments, alimony or separate maintenance obligations or be
transferable by operation of law in the event of bankruptcy, insolvency or
otherwise, all payments and rights hereunder being expressly declared to be
nonassignable and nontransferable.
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12.2 Governing Law. The provisions of this Plan shall be governed by and
construed in accordance with the laws of the State of Ohio.
12.3 Withholding Taxes. To the extent that the Company is required to
withhold Federal, state or local taxes in connection with any component of a
Director's compensation in cash or Shares, and the amounts available to the
Company for such withholding are insufficient, it shall be a condition to the
receipt of any Shares that the Director make arrangements satisfactory to the
Company for the payment of the balance of such taxes required to be withheld,
which arrangement may include relinquishment of the Shares.
12.4 Application of the American Jobs Creation Act of 2004.
(a) Notwithstanding any other provision of the Plan, any Deferred Fees or
Deferred Shares (and earnings thereon) that qualify for "grandfathered status"
under Section 409A of the Code because they were earned and vested prior to
January 1, 2005 shall continue to be governed by the law applicable to
nonqualified deferred compensation prior to the addition of Section 409A of the
Code and shall be subject to the terms and conditions specified in the Plan as
in effect prior to such date and shall not be modified by this amendment and
restatement of the Plan (other than Section 7.6 hereof).
(b) To the extent applicable, it is intended that this Plan comply with
the provisions of Section 409A of the Code. The Plan shall be administered in a
manner consistent with this intent, and any provision that would cause the Plan
to fail to satisfy Section 409A of the Code shall have no force and effect until
amended to comply with Section 409A of the Code (which amendment may be
retroactive to the extent permitted under Section 409A of the Code and may be
made by the Company without consent of the participants). Any reference in this
Plan to Section 409A of the Code will also include any proposed, temporary or
final regulations, or any other guidance, promulgated with respect to such
Section by the U.S. Department of the Treasury or the Internal Revenue Service.
(c) Notwithstanding any other provision of the Plan to the contrary, to
the extent that Deferred Shares shall be deemed to be vested or restrictions
lapse, expire or terminate upon the occurrence of a Change in Control or all or
a portion of a Director's Deferred Fee Account or Deferred Share Account becomes
payable upon the occurrence of such a Change in Control and, in either case,
such Change in Control does not constitute a "change in the ownership or
effective control" or a "change in the ownership or substantial portion of the
assets" of the Company within the meaning of Section 409A(a)(2)(A)(v) of the
Code, then though such Deferred Shares may be deemed to be vested or
restrictions lapse, expire or terminate upon the occurrence of a Change in
Control and all or a portion of such Deferred Fee Account or Deferred Share
Account shall become payable upon the occurrence of a Change in Control, payment
will be made, to the extent necessary to comply with the provisions of Section
409A of the Code, to the Director upon the earliest to occur of the following
events: (i) the date of a Director's Termination of Service (including by
death); (ii) the date payment would have been made in the absence of any
provisions in the Plan to the contrary (provided such date is permissible under
Section 409A of the Code); or (iii) the Participant's death.
12.5 Rule 16b-3. This Plan is intended to comply with Rule 16b-3. The
Board may make such other changes in the terms or operation of the Plan as may
then by necessary or
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appropriate to comply with such Rule, including, without limitation, by
eliminating any restriction originally included in the Plan to comply with Rule
16b-3 that may no longer be required. Without limiting the generality of the
foregoing, the Board may change the number of Restricted Shares and Restricted
Retainer Shares to be awarded under Section 3.1 and 3.2, respectively, from time
to time, and the Board may provide for annual election of Voluntary Shares
pursuant to Section 3.3 if such election would be permitted by Rule 16b-3.
12.6 Miscellaneous. Headings are given to the sections of this Plan solely
as a convenience to facilitate reference. Such headings, numbering and
paragraphing shall not in any case be deemed in any way material or relevant to
the construction of this Plan or any provisions thereof. The use of the singular
shall also include within its meaning the plural, and vice versa.
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