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EXHIBIT 99(c)
ALLEGIANCE CORPORATION
1998 INCENTIVE COMPENSATION PROGRAM
1. PURPOSE. The purpose of the Allegiance Corporation 1998 Incentive
Compensation Program (the "Program") is to increase stockholder value
and to advance the interests of Allegiance Corporation ("Allegiance")
and its subsidiaries (collectively, the "Company") by providing a
variety of economic incentives designed to attract, retain, and
motivate officers and other employees and by strengthening the
mutuality of interest between such employees and the Company's
stockholders. As used in this Program, the term "subsidiary" means any
business, whether or not incorporated, in which the Company has a
direct or indirect ownership interest.
2. ADMINISTRATION.
2.1 ADMINISTRATION BY COMMITTEE. The Program shall be administered
by the Compensation and Nominating Committee of the Allegiance
Board of Directors (the "Committee"), which shall consist of
two or more nonemployee directors within the meaning of Rule
16b-3 of the Securities Exchange Act of 1934, as amended (the
"Exchange Act") who also qualify as outside directors within
the meaning of Section 162(m) and the related regulations
("Section 162(m)"), under the Internal Revenue Code of 1986 as
amended (the "Code"). The Chief Executive Officer of the
Company may exercise any or all authority otherwise delegated
to the Committee under the terms of the Program with respect
to the grant or administration of incentives (a) made to or
held by persons who, at the time of the exercise of such
authority, are not subject to Section 16(a) of the Exchange
Act, or (b) that are not intended to comply with Section
162(m).
2.2 AUTHORITY. Subject to the provisions of the Program, the
Committee shall have the authority to: (a) interpret the
provisions of the Program, and prescribe, amend, and rescind
rules and procedures relating to the Program; (b) grant
incentives under the Program, in such forms and amounts and
subject to such terms and conditions as it deems appropriate,
including, without limitation, incentives that are made in
combination with or in tandem with other incentives (whether
or not contemporaneously granted) or compensation or in lieu
of current or deferred compensation, and to determine the
terms and conditions of incentives, including the vesting and
exercisability provisions of options to purchase shares of
Common Stock (as defined in Section 4.1) ("Stock Options") and
stock appreciation rights ("SARs"), the restrictions on awards
of shares of Common Stock subject to restrictions ("Restricted
Stock"), and the performance goals, measures and period for
performance-based awards; (c) modify the terms of, cancel and
reissue, or repurchase outstanding incentives, subject to
Section 12.7; and (d) make all other determinations and take
all other actions as it deems
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necessary or desirable for the administration of the Program;
provided, however, that in no event shall the Committee cancel
any outstanding Stock Option for the purpose of reissuing an
option to the option holder at a lower exercise price. The
determination of the Committee on matters within its authority
shall be conclusive and binding on the Company and all other
persons. The Committee shall comply with all applicable law in
administering the Program.
3. PARTICIPATION. Subject to the terms and conditions of the Program, the
Committee shall designate from time to time the employees of the
Company (including employees who are directors of Allegiance) who
shall receive incentives under the Program ("Participants"). All
officers and other full-time or part-time employees of the Company are
eligible to receive incentives under the Program. Participation, the
grant of incentives and any related performance goals that are
intended to satisfy the requirements of Section 162(m), must be
determined by the Committee.
4. SHARES SUBJECT TO THE PROGRAM.
4.1 NUMBER OF SHARES RESERVED. Subject to adjustment in accordance
with Sections 4.2 and 4.3, the aggregate number of shares of
Allegiance Common Stock ("Common Stock") available for
incentives under the Program shall be four million (4,000,000)
shares. All shares of Common Stock issued under the Program
may be authorized and unissued shares, treasury shares, or
shares that shall have been or may be reacquired by Allegiance
in the open market, in private transactions or otherwise. All
of such shares may, but need not, be issued pursuant to the
exercise of Incentive Stock Options (as defined in Section
5.1). The maximum number of shares of Common Stock that may be
granted in the form of Restricted Stock pursuant to an award
or awards granted in any fiscal year to a Participant shall be
200,000, subject to adjustment in accordance with Section 4.3.
The maximum number of shares of Common Stock that may be
granted in total under the Program in the form of Restricted
Stock shall be 1,000,000, subject to adjustment in accordance
with Section 4.3. The maximum number of shares of Common Stock
that may be granted in the form of performance shares
("Performance Shares") pursuant to an award or awards granted
in any fiscal year to a Participant shall be 200,000, subject
to adjustment in accordance with Section 4.3. The maximum
number of shares of Common Stock that may be granted in total
under the Program in the form of Performance Shares shall be
1,000,000, subject to adjustment in accordance with Section
4.3. The maximum number of shares that may be granted in the
form of a Stock Option or SAR pursuant to an award or awards
granted in any fiscal year to a Participant shall be 750,000
shares, subject to adjustment in accordance with Section 4.3.
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The shares made available for incentives hereunder are in
addition to the shares made available for incentives under Allegiance's
1996 Incentive Compensation Program.
4.2 REUSAGE OF SHARES.
(a) In the event of the exercise or termination (by
reason of forfeiture, expiration, cancellation,
surrender, or otherwise) of any incentive under the
Program, that number of shares of Common Stock that
was subject to the incentive but not delivered shall
be available again for incentives under the Program.
(b) In the event that shares of Common Stock are
delivered under the Program and are thereafter
forfeited or reacquired by Allegiance pursuant to
rights reserved upon the award thereof, such
forfeited or reacquired shares shall be available
again for incentives under the Program.
(c) In the event that shares of Common Stock are
delivered by an optionee in full or partial payment
to Allegiance for the exercise price of any option
under the Program, that number of shares of Common
Stock delivered shall be available again for
incentives under the Program.
(d) In the event shares of Common Stock are retained by
Allegiance pursuant to a Participant's tax
withholding election or are delivered by the
Participant to satisfy his or her tax withholding
obligation, the number of shares retained or
delivered shall be available again for incentives
under the Program.
4.3 ADJUSTMENTS TO SHARES RESERVED. In the event of any merger,
consolidation, reorganization, recapitalization, spin-off,
stock dividend, stock split, exchange, or other distribution
with respect to shares of Common Stock or other change in the
corporate structure or capitalization affecting the Common
Stock, the type and number of shares of stock that are or may
be subject to incentives under the Program, the maximum number
of shares that may be granted in the form of Restricted Stock,
shares of Common Stock without restrictions ("Stock Awards"),
Performance Shares, a Stock Option or an SAR, and the terms of
any outstanding incentives (including the price at which
shares of stock may be issued pursuant to an outstanding
incentive) shall be equitably adjusted by the Committee, in
its sole discretion, to preserve the value of incentives
awarded or to be awarded to Participants under the Program.
5. STOCK OPTIONS.
5.1 AWARDS. Subject to the terms and conditions of the Program,
the Committee shall designate the employees to whom Stock
Options are to
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be awarded under the Program and shall determine the number,
type, and terms of the Stock Options to be awarded to each of
them. Each Stock Option shall expire not later than 10 years
after the date of grant. The option price per share for any
Stock Option awarded shall not be less than the Fair Market
Value (as defined in Section 12.9) of a share of Common Stock
on the date the Stock Option is granted ("Option Price"). The
Committee shall designate each Stock Option awarded under the
Program as either a "nonqualified stock option" for tax
purposes or, with respect to a Stock Option that satisfies the
applicable requirements of Section 422 of the Code, as an
"Incentive Stock Option."
5.2 MANNER OF EXERCISE. A Stock Option may be exercised by notice
to Allegiance specifying the number of shares of Common Stock
to be purchased and prompt delivery to Allegiance of the
payment of the Option Price by check or, in the discretion of
the Committee, by the delivery of shares of Common Stock then
owned by the Participant and having been held by such
Participant for at least six months, or certification of such
ownership, or in such other manner as the Committee, in its
sole discretion, shall determine. In the discretion of the
Committee, payment may also be made by delivering a properly
executed exercise notice to Allegiance, together with a copy
of irrevocable instructions to a broker to deliver promptly to
Allegiance the amount of sale of the Common Stock received
upon option exercise or loan proceeds to pay the exercise
price, all in accordance with Federal Reserve Board Regulation
T, if applicable.
5.3 DIVIDEND EQUIVALENTS. The Committee may grant dividend
equivalents in connection with any option granted under this
Program. Such dividend equivalents may be payable in cash or
in shares of Common Stock upon such terms and conditions as
the Committee in its sole discretion deems appropriate.
6. STOCK APPRECIATION RIGHTS.
6.1 GRANT OF SARS. Subject to the terms and conditions of the
Program, the Committee shall designate the employees to whom
SARs are to be awarded under the Program and shall determine
the number, type and terms of the SARs to be awarded to each
of them. An SAR may be granted in tandem with a stock option
granted under the Program, or the SAR may be granted on a
free-standing basis. Tandem SARs may granted either at or
after the time of grant of a Stock Option, provided that, in
the case of an Incentive Stock Option, a tandem SAR may be
granted only at the time of the grant of such option. The
grant price of a free-standing SAR shall be equal to the Fair
Market Value of a share of Common Stock on the date of grant
of the SAR.
6.2 EXERCISE OF TANDEM SARS. Tandem SARs may be exercised for all
or part of the shares subject to the related option upon the
surrender of the right to exercise the equivalent portion of
the related option. A tandem
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SAR shall terminate and no longer be exercisable upon
termination or exercise of the related Stock Option. A tandem
SAR may be exercised only with respect to the shares for which
its related option is then exercisable.
6.3 EXERCISE OF FREE-STANDING SARS. Free-standing SARs may be
exercised upon such terms and conditions as the Committee, in
its sole discretion, determines.
6.4 TERM OF SARS. The term of an SAR granted under the Program
shall be determined by the Committee in its sole discretion;
provided, however, that such term shall not exceed the option
term in the case of a tandem SAR, or ten years in the case of
a free-standing SAR.
6.5 PAYMENT OF SAR AMOUNT. Upon exercise of an SAR, a Participant
shall be entitled to receive payment from Allegiance in an
amount determined by multiplying (a) the excess of the Fair
Market Value of a share of Common Stock on the date of
exercise over the grant price of the SAR by (b) the number of
shares with respect to which the SAR is exercised.
At the discretion of the Committee, the payment to be made
upon an SAR exercise may be in cash, in shares of Common Stock
of equivalent value, or in some combination thereof.
7. STOCK AWARDS. Subject to the terms and conditions of the Program, the
Committee shall designate the employees who shall be awarded Stock
Awards under the Program and shall determine the number and terms of
the Stock Awards to be awarded to each of them. No person eligible to
receive a Stock Award may receive a Stock Award representing more than
5,000 shares of Common Stock in any calendar year, subject to
adjustment in accordance with Section 4.3.
8. RESTRICTED STOCK.
8.1 AWARDS. Subject to the terms and conditions of the Program,
the Committee shall designate the employees to whom Restricted
Stock shall be awarded or sold under the Program and determine
the number of shares and the terms and conditions of each such
award.
8.2 RESTRICTIONS. All shares of Restricted Stock shall be subject
to such restrictions as the Committee may determine,
including, without limitation, any of the following:
(a) a prohibition against the sale, assignment, transfer,
pledge, hypothecation, or other encumbrance of the
shares of Restricted Stock for a specified period;
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(b) a requirement that the holder of shares of Restricted
Stock forfeit (or in the case of shares sold to a
Participant, resell to Allegiance at his or her cost)
such shares in the event of termination of his or her
employment during any period in which such shares are
subject to restrictions;
(c) a prohibition against employment of the holder by any
competitor of the Company or against such holder's
dissemination of any confidential information
belonging to the Company; or
(d) the attainment of pre-established performance
criteria.
All restrictions shall expire at such time as the Committee
shall specify.
8.3 STOCKHOLDER RIGHTS. Shares of Restricted Stock shall be
registered in the name of the Participant. Each Participant
who has been awarded shares of Restricted Stock shall have
such rights of a stockholder with respect to such shares as
the Committee may designate at the time of the award,
including the right to vote such shares and the right to
receive dividends paid on such shares. Unless otherwise
provided by the Committee, stock dividends or other non-cash
dividends and any other securities distributed with respect to
Restricted Stock shall be subject to the same restrictions and
other terms and conditions as the Restricted Stock to which
they are attributable.
8.4 LAPSE OF RESTRICTIONS. Shares of Restricted Stock will be
delivered free of all restrictions to the Participant (or to
the Participant's legal representative, beneficiary, or heir)
when the shares are no longer subject to forfeiture or
restrictions on transfer.
9. PERFORMANCE SHARES.
9.1 AWARDS. Subject to the terms and conditions of the Program,
the Committee shall designate the employees to whom
Performance Shares are to be awarded and determine the number
of shares and the terms and conditions of each such award.
Each Performance Share shall entitle the Participant to a
payment in the form of one share of Common Stock upon the
attainment of performance goals and other terms and conditions
specified by the Committee.
9.2 NO ADJUSTMENTS. Except as otherwise provided by the Committee
or in Section 4.3, no adjustment shall be made in Performance
Shares awarded on account of cash dividends which may be paid
or other rights which may be provided to the holders of Common
Stock prior to the end of any performance period.
9.3 SUBSTITUTION OF CASH. The Committee may, in its sole
discretion, substitute cash equal to the Fair Market Value
(determined as of the date
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of the issuance) of shares of Common Stock otherwise required
to be issued to a Participant hereunder.
10. OTHER INCENTIVES. In addition to the incentives described in Sections 5
through 9 above and subject to the terms and conditions of the Program,
the Committee may grant other incentives ("Other Incentives"), payable
in cash or in Common Stock, under the Program as it determines to be in
the best interest of the Company. Other Incentives may be in the form
of annual awards, long-term awards, or such other form of award as the
Committee may, in its sole discretion determine. The maximum dollar
amount that may be earned by any one Participant in any fiscal year for
all annual cash awards granted under the Program to such Participant
shall be $2,000,000. The maximum dollar amount that may be earned by
any one Participant in any fiscal year for all long-term cash awards
granted under the Program to such Participant shall be $5,000,000.
11. PERFORMANCE GOALS. Awards of Restricted Stock, Performance Shares and
Other Incentives under the Program may be made subject to the
attainment of performance goals relating to one or more business
criteria within the meaning of Section 162(m), which shall include one
or more of the following objective business criteria: stock price,
sales, unit sales earnings, earnings per share, net earnings after tax,
return on equity, return on investments, return on invested capital,
pre-tax profit, post-tax profit, consolidated net income, operating
expenses, free cash flow, discounted cash flow, value added,
production, unit production volume and total stockholder return, as
determined by the Committee from time to time.
The Program is designed so that certain awards granted
thereunder are intended to comply with the requirements for
"performance-based compensation" under Section 162(m). Insofar as may
be applicable to such awards, the Program shall be interpreted in a
manner consistent with such requirements. With respect to awards
intended to comply with Section 162(m), the Committee shall specify in
a timely manner the performance goals with respect thereto, and the
performance period during which such performance goals are to be
achieved. The performance goals must be based on the objective business
criteria described in the foregoing paragraph. Any award that is not
intended to satisfy Section 162(m) shall be bifurcated from awards that
are so intended. Unless otherwise determined by the Committee in
connection with either a specified termination of employment or the
occurrence of a Change in Control (as defined in Section 12.8), payment
with respect to awards that are intended to satisfy Section 162(m)
shall be made only if, and to the extent that, the performance goals
with respect to the performance period are attained, and only after the
Committee has certified that the performance goals have been attained.
Performance goals may include a level of performance below which no
payment may be made, and levels of performance at which specified
percentages (which may be greater than 100) of the awards shall be paid
or credited.
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12. GENERAL.
12.1 EFFECTIVE DATE. The Program, which was adopted by the
Allegiance Board of Directors, shall be subject to the
approval by a majority of the Allegiance stockholders present
and voting on the matter at the 1998 annual stockholders'
meeting. Upon approval of the stockholders, the effective date
of the Program shall be February 5, 1998.
12.2 DURATION. The Program shall remain in effect until all
incentives granted under the Program have been satisfied by
the issuance of shares of Common Stock, lapse of restrictions
or the payment of cash, or have been terminated in accordance
with the terms of the Program or the incentive. No incentive
may be granted under the Program after the tenth anniversary
of its effective date.
12.3 NONTRANSFERABILITY OF INCENTIVES. Except as otherwise provided
by the Committee, no incentive granted under the Program may
be transferred, pledged, or assigned by the employee except by
will or the laws of descent and distribution in the event of
death, and Allegiance shall not be required to recognize any
attempted assignment of such rights by any Participant. Except
as otherwise provided by the Committee, during a Participant's
lifetime, awards may be exercised only by the Participant or
by the Participant's guardian or legal representative. The
Committee may provide that a grant of an award may permit the
transfer of the award by the Participant solely to members of
the Participant's immediate family or trusts or family
partnerships for the benefit of such persons, subject to such
terms and conditions as may be established by the Committee.
12.4 COMPLIANCE WITH APPLICABLE LAW AND WITHHOLDING.
(a) The award of any benefit under the Program may also
be made subject to such other provisions as the
Committee determines appropriate, including, without
limitation, provisions to comply with federal and
state securities laws or stock exchange requirements.
(b) If, at any time, Allegiance, in its sole discretion,
determines that the listing, registration, or
qualification of any type of incentive, or the shares
of Common Stock issuable pursuant thereto, is
necessary on any securities exchange or under any
federal or state securities or blue sky law, or that
the consent or approval of any governmental
regulatory body is necessary or desirable, the
issuance of shares of Common Stock pursuant to any
incentive, or the removal of any restrictions imposed
on shares subject to an incentive, may be delayed
until such listing, registration, qualification,
consent, or approval is effected.
(c) Allegiance shall have the right to withhold from any
award under the Program or to collect as a condition
of any payment under the
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Program, as applicable, any taxes required by law to
be withheld. To the extent permitted by the
Committee, a Participant may elect to have any
distribution, or a portion thereof, otherwise
required to be made under the Program to be withheld
or to surrender to Allegiance previously owned shares
of Common Stock to fulfill any tax withholding
obligation.
12.5 NO CONTINUED EMPLOYMENT. Participation in the Program will not
give any Participant the right to be retained in the employ of
the Company or any right or claim to any benefit under the
Program unless such right or claim has specifically accrued
under the terms of any incentive under the Program.
12.6 TREATMENT AS A STOCKHOLDER. No incentive granted to a
Participant under the Program shall create any rights in such
Participant as a stockholder of the Company until shares of
Common Stock related to the incentive are registered in the
name of the Participant.
12.7 AMENDMENT OR DISCONTINUATION OF THE PROGRAM. The Board of
Directors may amend, suspend, or discontinue the Program at
any time; provided, however, that no amendment, suspension or
discontinuance shall adversely affect any outstanding benefit
and if any law, agreement or exchange on which Common Stock of
Allegiance is traded requires stockholder approval for an
amendment to become effective, no such amendment shall become
effective unless approved by requisite vote of Allegiance's
stockholders.
12.8 ACCELERATION OF INCENTIVES. Notwithstanding any provision in
this Program to the contrary or the normal terms of vesting in
any incentive, (a) the restrictions on all shares of
Restricted Stock shall lapse immediately, (b) all outstanding
Stock Options will become exercisable immediately, and (c) all
performance goals shall be deemed to be met and payment made
immediately if a Change in Control occurs. For purposes of
this Program, a "Change in Control" shall have occurred if:
(1) any "Person," as such term is used in Section 13(d)
and 14(d) of the Exchange Act (other than Allegiance,
any corporation owned, directly or indirectly, by the
stockholders of Allegiance in substantially the same
proportions as their ownership of stock of
Allegiance, and any trustee or other fiduciary,
holding securities under an employee benefit plan of
Allegiance or such proportionately owned
corporation), is or becomes the "beneficial owner"
(as defined in Rule 13d-3 under the Exchange Act),
directly or indirectly, of securities of Allegiance
representing 20% or more of the combined voting power
of Allegiance's then outstanding securities;
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(2) during any period of not more than 24 months,
individuals who at the beginning of such period
constitute the Board of Directors of Allegiance, and
any new director (other than a director designated by
a Person who has entered into an agreement with
Allegiance to effect a transaction described in
paragraph (1), (3), or (4) of this Section 12.8)
whose election by the Board of Directors or
nomination for election by Allegiance's stockholders
was approved by a vote of at least two-thirds of the
directors then still in office who either were
directors at the beginning of the period or whose
election or nomination for election was previously so
approved, cease for any reason to constitute at least
a majority thereof;
(3) the stockholders of Allegiance approve a merger or
consolidation of Allegiance with any other
corporation, other than (A) a merger or consolidation
which would result in the holders of the voting
securities of Allegiance outstanding immediately
prior thereto continuing to represent (either by
remaining outstanding or by being converted into
voting securities of the surviving entity) more than
60% of the combined voting power of the voting
securities of Allegiance or such surviving entity
outstanding immediately after such merger or
consolidation, or (B) a merger or consolidation
effected to implement a recapitalization of
Allegiance (or similar transaction) in which no
Person acquires more than 20% of the combined voting
power of Allegiance's then outstanding securities; or
(4) the stockholders of Allegiance approve a plan of
complete liquidation of Allegiance or an agreement
for the sale or disposition by Allegiance of all or
substantially all of its assets (or any transaction
having a similar effect).
The Committee may also determine, in its discretion, that a sale of a
substantial portion of Allegiance's assets or one of its businesses
constitutes a "Change in Control" with respect to incentives held by
Participants employed in the affected operation.
12.9 DEFINITION OF FAIR MARKET VALUE. Except as otherwise determined by the
Committee, the Fair Market Value of a share of Common Stock as of any
date shall be equal to the closing sale price of a share of Common
Stock on that date as reported on the New York Stock Exchange Composite
Reporting Tape.
12.10 SEVERABILITY. Whenever possible, each provision in the Program and in
every award at any time granted under the Program shall be interpreted
in such manner as to be effective and valid under applicable law, but
if any provision of the Program or any award at any time granted under
the Program shall be held to be prohibited by or invalid under
applicable law, then (a) such provision shall be deemed amended to
accomplish the objectives of the provision as originally written to the
fullest extent permitted by law, and (b) all other provisions and
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every award at any time granted under the Program shall remain in
full force and effect.
12.11 NO STRICT CONSTRUCTION. No rule of strict construction shall be applied
against the Company, the Board of Directors, the Committee, or any
other person in the interpretation of any of the terms of the Program,
any award granted under the Program or any rule or procedure
established by the Board of Directors or the Committee.
12.12 GOVERNING LAW. The Program and all determinations made and actions
taken pursuant hereto shall be governed by the laws of the State of
Delaware without giving effect to the conflict of laws principles
thereof.
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