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EXHIBIT NO. 10(H)
THE PROGRESSIVE CORPORATION
1989 INCENTIVE PLAN
(amended and restated as of April 24, 1992,
as further amended on July 1, 1992 and February 5, 1993)
SECTION 1. Purpose; Definitions.
The purpose of The Progressive Corporation 1989 Incentive Plan (the "Plan")
is to enable The Progressive Corporation (the "Company") to attract, retain and
reward key employees of the Company and its Subsidiaries and Affiliates and
strengthen the mutuality of interests between such key employees and the
Company's shareholders by offering such key employees equity or equity-based
incentives.
For purposes of the Plan, the following terms shall be defined as set forth
below:
(a) "Affiliate" means Progressive Partners Limited Partnership and
any other entity (other than the Company and its Subsidiaries) that is
designated by the Board as a participating employer under the Plan.
(b) "Award" means any award of Stock Options, Stock Appreciation
Rights, Restricted Stock, Deferred Stock, Stock Purchase Rights and Other
Stock-Based Awards under the Plan.
(c) "Board" means the Board of Directors of the Company.
(d) "Book Value" means, as of any given date, on a per share basis
(1) the shareholders' equity in the Company as of the end of the
immediately preceding fiscal year as reflected in the Company's audited
consolidated balance sheet as of such year-end date, subject to such
adjustments as the Committee shall specify at or after grant, divided by
(2) the number of outstanding shares of Stock as of such year-end date,
subject to such adjustments as the Committee shall specify for events
subsequent to such year-end date.
(e) "Code" means the Internal Revenue Code of 1986, as amended from
time to time, and any successor thereto.
(f) "Committee" means the Committee referred to in Section 2 of the
Plan.
(g) "Company" means The Progressive Corporation, an Ohio corporation,
or any successor corporation.
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(h) "Deferred Stock" means an award of the right to receive Stock at the
end of a specified deferral period granted pursuant to Section 8.
(i) "Disability" means disability as determined under procedures
established by the Committee for purposes of the Plan.
(j) "Disinterested Person" shall have the meaning set forth in Rule
16b-3(c)(2)(i) as promulgated by the Securities and Exchange Commission under
the Exchange Act, or any successor definition adopted by the Commission.
(k) "Exchange Act" means the Securities Exchange Act of 1934, as amended.
(l) "Fair Market Value" means, as of any given date, the mean between the
highest and lowest quoted selling price, regular way, of the Stock on such date
on the New York Stock Exchange or, if no such sale of the Stock occurs on the
New York Stock Exchange on such date, then such mean price on the next preceding
day on which the Stock was traded. If the Stock is no longer traded on the New
York Stock Exchange, then the Fair Market Value of the Stock shall be determined
by the Committee in good faith.
(m) "Incentive Stock Option" means any Stock Option intended to be and
designated as an "Incentive Stock Option", within the meaning of Section 422 of
the Code or any successor section thereto.
(n) "Non-Qualified Stock Option" means any Stock Option that is not an
Incentive Stock Option.
(o) "Other Stock-Based Award" means an award granted pursuant to
Section 10 that is valued, in whole or in part, by reference to, or is otherwise
based on, Stock.
(p) "Plan" means The Progressive Corporation 1989 Incentive Plan, as
amended from time to time.
(q) "Restricted Stock" means an award of shares that is granted
pursuant to Section 7 and is subject to restrictions.
(r) "Section 16 participant" means a participant under the Plan who is
then subject to Section 16 of the Exchange Act.
(s) "Stock" means the Common Shares, $1.00 par value per share, of the
Company.
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(t) "Stock Appreciation Right" means an award of rights that is granted
pursuant to Section 6.
(u) "Stock Option" or "Option" means any option to purchase shares of
Stock (including Restricted Stock and Deferred Stock, if the Committee so
determines) that is granted pursuant to Section 5.
(v) "Stock Purchase Right" means an award of the right to purchase Stock
that is granted pursuant to Section 9.
(w) "Subsidiary" means any corporation (other than the Company) in an
unbroken chain of corporations beginning with the Company if each of the
corporations (other than the last corporation in the unbroken chain) owns stock
possessing 50% or more of the total combined voting power of all classes of
stock in one of the other corporations in such chain.
In addition, the terms "Change in Control," "Potential Change in Control"
and "Change in Control Price" shall have the meanings set forth, respectively,
in Sections 11(b), (c) and (d) and the term "Cause" shall have the meaning set
forth in Section 5(b)(8) below.
SECTION 2. Administration.
The Plan shall be administered by a Committee of not less than three
directors of the Company all of whom shall be directors who are Disinterested
Persons. Such directors shall be appointed by the Board and shall serve as the
Committee at the pleasure of the Board. The functions of the Committee specified
in the Plan shall be exercised by the Board if and to the extent that no
Committee exists which has the authority to so administer the Plan.
The Committee shall have full power to interpret and administer the Plan
and full authority to select the individuals to whom Awards will be granted and
to determine the type and amount of Award(s) to be granted to each participant,
the consideration, if any, to be paid for such Award(s), the timing of such
Award(s), the terms and conditions of Awards granted under the Plan and the
terms and conditions of the related agreements which will be entered into with
participants. As to the selection of and grant of Awards to participants who are
not Section 16 participants, the Committee may delegate its responsibilities to
members of the Company's management consistent with applicable law.
The Committee shall have the authority to adopt, alter and repeal such
rules, guidelines and practices governing the Plan as it shall, from time to
time, deem advisable; to interpret the terms and provisions of the Plan and any
Award issued under the Plan (and any agreements relating thereto); to direct
employees of the Company or other advisors to prepare such materials or perform
such analyses as the Committee deems necessary or appropriate; and otherwise to
supervise the administration of the Plan.
Any interpretation and administration of the Plan by the Committee, and all
actions and determinations of the Committee, shall be final, binding and
conclusive on the Company, its shareholders,
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Subsidiaries, Affiliates, all participants in the Plan, their respective legal
representatives, successors and assigns, and upon all persons claiming under or
through any of them. No member of the Board or of the Committee shall incur any
liability for any action taken or omitted, or any determination made, in good
faith in connection with the Plan.
SECTION 3. Stock Subject to the Plan.
(a) Aggregate Stock Subject to the Plan. Subject to adjustment as
provided below in Section 3(c), the total number of shares of Stock
reserved and available for Awards under the Plan is 6,500,000. Any Stock
issued hereunder may consist, in whole or in part, of authorized and
unissued shares or treasury shares.
(b) Forfeiture or Termination of Awards of Stock. If any Stock
subject to any Award granted hereunder is forfeited or an Award otherwise
terminates or expires without the issuance of Stock, the Stock subject to
such Award shall again be available for distribution in connection with
future Awards under the Plan as set forth in Section 3(a), unless the
participant who had been awarded such forfeited Stock or the expired or
terminated Award has theretofore received dividends or other benefits of
ownership with respect to such Stock. For purposes hereof, a participant
shall not be deemed to have received a benefit of ownership with respect to
such Stock by the exercise of voting rights or the accumulation of
dividends which are not realized due to the forfeiture of such Stock or the
expiration or termination of the related Award without issuance of such
Stock.
(c) Adjustment. In the event of any merger, reorganization,
consolidation, recapitalization, share dividend, share split, combination
of shares or other change in corporate structure of the Company affecting
the Stock, such substitution or adjustment shall be made in the aggregate
number of shares of Stock reserved for issuance under the Plan, in the
number and option price of shares subject to outstanding Options granted
under the Plan, in the number and purchase price of shares subject to
outstanding Stock Purchase Rights granted under the Plan, and in the number
of shares subject to Restricted Stock Awards, Deferred Stock Awards and any
other outstanding Awards granted under the Plan as may be approved by the
Committee, in its sole discretion; provided that the number of shares
subject to any Award shall always be a whole number. Any fractional shares
shall be eliminated.
SECTION 4. Eligibility.
Officers and other key employees of the Company and its Subsidiaries and
Affiliates (but excluding members of the Committee and any person who serves
only as a director) who are responsible for or contribute to the management,
growth or profitability of the business of the Company or its Subsidiaries or
Affiliates are eligible to be granted Awards under the Plan.
SECTION 5. Stock Options.
(a) Grant. Stock Options may be granted alone, in addition to or in
tandem with other Awards granted under the Plan or cash awards made outside
of the Plan. However, no Incentive Stock
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Option shall be issued in tandem with any other Award other than a Stock
Appreciation Right as provided for in Section 6. The Committee shall determine
the individuals to whom, and the time or times at which, grants of Stock Options
will be made, the number of shares purchasable under each Stock Option and the
other terms and conditions of the Stock Options in addition to those set forth
in Sections 5(b) and 5(c). Any Stock Option granted under the Plan shall be in
such form as the Committee may from time to time approve.
Stock Options granted under the Plan may be of two types which shall be
indicated on their face: (i) Incentive Stock Options and (ii) Non-Qualified
Stock Options. Subject to Section 5(c) hereof, the Committee shall have the
authority to grant to any participant Incentive Stock Options, Non-Qualified
Stock Options or both types of Stock Options.
(b) Terms and Conditions. Options granted under the Plan shall be evidenced
by Option agreements, shall be subject to the following terms and conditions and
shall contain such additional terms and conditions, not inconsistent with the
terms of the Plan, as the Committee shall deem desirable:
(1) Option Price. The option price per share of Stock purchasable
under a Non-Qualified Stock Option shall be determined by the Committee at
the time of grant and shall not be less than fifty percent of the Fair
Market Value of the Stock at the date of grant.
The option price per share of Stock purchasable under an Incentive Stock
Option shall be determined by the Committee at the time of grant and shall
be not less than 100% of the Fair Market Value of the Stock at the date of
grant (or 110% of the Fair Market Value of the Stock at the date of grant
in the case of a participant who at the date of grant owns shares
possessing more than ten percent of the total combined voting power of all
classes of stock of the Company or its parent or subsidiary corporations
(as determined under Section 425(d), (e) and (f) of the Code)).
(2) Option Term. The term of each Stock Option shall be determined
by the Committee and may not exceed ten years from the date the Option is
granted (or, with respect to Incentive Stock Options, five years in the
case of a participant who at the date of grant owns shares possessing more
than ten percent of the total combined voting power of all classes of stock
of the Company or its parent or subsidiary corporations (as determined
under Section 425(d), (e) and (f) of the Code)).
(3) Exercise. Stock Options shall be exercisable at such time or
times and subject to such terms and conditions as shall be determined by
the Committee at or after grant; provided, however, that, except as
provided in Section 5(b)(6) and Section 11, unless otherwise determined by
the Committee at or after grant, no Stock Option shall be exercisable prior
to six months and one day following the date of grant. If the Committee
provides, in its sole discretion, that any Stock Option is exercisable only
in installments, the Committee may waive, in whole or in part, such
installment exercise provisions at any time at or after grant based on such
factors as the Committee shall determine, in its sole discretion.
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(4) Method of Exercise. Subject to whatever installment
exercise provisions apply with respect to such Stock Option, and the
six month and one day holding period set forth in Section 5(b)(3),
Stock Options may be exercised in whole or in part, at any time during
the option period, by giving to the Company written notice of exercise
specifying the number of shares of Stock to be purchased.
Such notice shall be accompanied by payment in full of the option
price of the shares of Stock for which the Option is exercised, in
cash or by check or such other instrument as the Committee may accept.
Subject to the following sentence, unless otherwise determined by the
Committee, in its sole discretion, at or after grant, payment, in full
or in part, of the option price of (i) Incentive Stock Options may be
made in the form of unrestricted Stock then owned by the participant
and (ii) Non-Qualified Stock Options may be made in the form of
unrestricted Stock then owned by the participant or Stock that is part
of the Non-Qualified Stock Option being exercised. Notwithstanding the
foregoing, any election by a Section 16 participant to satisfy such
payment obligation, in whole or in part, with Stock that is part of
the Non-Qualified Stock Option being exercised shall be subject to
approval by the Committee, in its sole discretion. The value of each
such share surrendered or withheld shall be 100% of the Fair Market
Value of the Stock on the date the Option is exercised.
No Stock shall be issued pursuant to an exercise of an Option
until full payment has been made. A participant shall not have rights
to dividends or any other rights of a shareholder with respect to any
Stock subject to an Option unless and until the participant has given
written notice of exercise, has paid in full for such shares, has
given, if requested, the representation described in Section 14(a) and
such shares have been issued to him.
(5) Non-Transferability of Options. No Stock Option shall be
transferable by the participant other than by will or by the laws of
descent and distribution, and all Stock Options shall be exercisable,
during the participant's lifetime, only by the participant or, subject
to Sections 5(b)(3) and 5(c), by the participant's authorized legal
representative if the participant is unable to exercise an Option as a
result of the participant's Disability.
(6) Termination by Death. Subject to Section 5(c), if any
participant's employment by the Company or any Subsidiary or Affiliate
terminates by reason of death, any Stock Option held by such
participant may thereafter be exercised, to the extent such Option was
exercisable at the time of death or would have become exercisable
within one year from the time of death had the participant continued
to fulfill all conditions of the Option during such period (or on such
accelerated basis as the Committee may determine at or after grant),
by the estate of the participant (acting through its fiduciary), for a
period of one year (or such other period as the Committee may specify
at or after grant) from the date of such death. The balance of the
Stock Option shall be forfeited.
(7) Termination by Reason of Disability. Subject to Sections
5(b)(3) and 5(c), if a participant's employment by the Company or any
Subsidiary or Affiliate terminates by reason of Disability, any Stock
Option held by such participant may thereafter be exercised, to the
extent such Option was exercisable at the time of termination or would
have become exercisable within one year from the time of termination
had the participant continued to fulfill all conditions of the
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Option during such period (or on such accelerated basis as the
Committee may determine at or after grant), by the participant or by
the participant's duly authorized legal representative if the
participant is unable to exercise the Option as a result of the
participant's Disability, for a period of one year (or such other
period as the Committee may specify at or after grant) from the date
of such termination of employment; provided, however, that in no event
may any such Option be exercised prior to six months and one day from
the date of grant; and provided, further, that if the participant dies
within such one-year period (or such other period as the Committee
shall specify at or after grant), any unexercised Stock Option held by
such participant shall thereafter be exercisable by the estate of the
participant (acting through its fiduciary) to the same extent to which
it was exercisable at the time of death for a period of one year from
the date of such termination of employment. The balance of the Stock
Option shall be forfeited.
(8) Other Termination. Unless otherwise determined by the
Committee at or after the time of granting any Stock Option, if a
participant's employment by the Company or any Subsidiary or Affiliate
terminates for any reason other than death or Disability, all Stock
Options held by such participant shall thereupon immediately
terminate, except that if the participant is involuntarily terminated
by the Company or any Subsidiary or Affiliate without Cause, any such
Stock Option may be exercised, to the extent otherwise exercisable at
the time of such termination, at any time during the lesser of two
months from the date of such termination or the balance of such Stock
Option's term. For purposes of this Plan, "Cause" means a felony
conviction of a participant or the failure of a participant to contest
prosecution for a felony, or a participant's willful misconduct or
dishonesty, any of which, in the judgment of the Committee, is harmful
to the business or reputation of the Company or any Subsidiary or
Affiliate.
(c) Incentive Stock Options. Notwithstanding Section 4, only key
employees of the Company or any Subsidiary shall be eligible to receive
Incentive Stock Options. Notwithstanding Sections 5(b)(6) and (7), an
Incentive Stock Option shall be exercisable by (i) a participant's
authorized legal representative (if the participant is unable to exercise
the Incentive Stock Option as a result of the participant's Disability)
only if, and to the extent, permitted by Section 422 of the Code and
Section 16 of the Exchange Act and the rules and regulations promulgated
thereunder and (ii) by the participant's estate, in the case of death, or
authorized legal representative, in the case of Disability, no later than
10 years from the date the Incentive Stock Option was granted (in addition
to any other restrictions or limitations which may apply). Anything in the
Plan to the contrary notwithstanding, no term or provision of the Plan
relating to Incentive Stock Options shall be interpreted, amended or
altered, nor shall any discretion or authority granted under the Plan be
exercised, so as to disqualify the Plan under Section 422 of the Code, or,
without the consent of the participant(s) affected, to disqualify any
Incentive Stock Option under such Section 422 or any successor Section
thereto.
(d) Buyout Provisions. The Committee may at any time buy out for a
payment in cash, Stock, Deferred Stock or Restricted Stock an Option
previously granted, based on such terms and conditions as the Committee
shall establish and agree upon with the participant, provided that no such
transaction involving a Section 16 participant shall be structured or
effected in a manner that would violate, or result in any liability on the
part of the participant under, Section 16 of the Exchange Act or the rules
and regulations promulgated thereunder.
SECTION 6. Stock Appreciation Rights.
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(a) Grant. Stock Appreciation Rights may be granted alone, in
addition to or in tandem with other Awards granted under the Plan or cash
awards made outside of the Plan. The Committee shall determine the
individuals to whom, and the time or times at which, grants of Stock
Appreciation Rights will be made and the other terms and conditions of the
Stock Appreciation Rights in addition to those set forth in Section 6(b).
Any Stock Appreciation Right granted under the Plan shall be in such form
as the Committee may from time to time approve. In the case of
Non-Qualified Stock Options, such rights may be granted either at or after
the time of the grant of the related Non-Qualified Stock Options. In the
case of Incentive Stock Options, such rights may be granted in tandem with
Incentive Stock Options only at the time of the grant of such Incentive
Stock Options and exercised only when the Fair Market Value of the Stock
subject to the Option exceeds the option price of the Option.
Stock Appreciation Rights issued in tandem with Stock Options ("Tandem
SARs") shall terminate and no longer be exercisable upon the termination or
exercise of the related Stock Option, subject to such provisions as the
Committee may specify at grant if a Stock Appreciation Right is granted
with respect to less than the full number of shares of Stock subject to the
related Stock Option.
All Stock Appreciation Rights granted hereunder shall be exercised,
subject to Section 6(b), in accordance with the procedures established by
the Committee for such purpose. Upon such exercise, the participant shall
be entitled to receive an amount determined in the manner prescribed in
Section 6(b).
(b) Terms and Conditions. Stock Appreciation Rights granted under the
Plan shall be subject to the following terms and conditions and shall
contain such additional terms and conditions, not inconsistent with the
provisions of the Plan, as the Committee shall deem desirable:
(1) Tandem SARs shall be exercisable only at such time or times
and to the extent that the Stock Options to which they relate shall be
exercisable in accordance with the provisions of Section 5 and this
Section 6, and Stock Appreciation Rights granted separately
("Freestanding SARs") shall be exercisable as the Committee shall
determine; provided, however, that any Stock Appreciation Right
granted to a Section 16 participant shall not be exercisable at any
time prior to six months and one day from the date of the grant of
such Stock Appreciation Right, except that this limitation shall not
apply in the event of the death of the participant prior to the
expiration of the six-month and one-day period.
(2) Upon the exercise of a Stock Appreciation Right, a
participant shall be entitled to receive an amount in cash or shares
of Stock, as determined by the Committee, equal in value to the excess
of the Fair Market Value of one share of Stock on the date of exercise
of the Stock Appreciation Right over (i) the option price per share
specified in the related Stock Option in the case of Tandem SARs,
which price shall be fixed no later than the date of grant of the
Tandem SARs, or (ii) the price per share specified in the related
Stock Appreciation Rights Agreement in the case of Freestanding SARs,
which price shall be fixed at the date of grant and shall be not less
than fifty percent of the Fair Market Value of the Stock on the date
of grant, multiplied by the number of shares of Stock in respect of
which the Stock Appreciation Right shall have been exercised. The
Committee, in its sole discretion, shall have the right to determine
the form of payment (i.e. cash, Stock or any combination thereof) and
to approve any election by the
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participant to receive cash, in whole or in part, upon exercise of the
Stock Appreciation Right. When payment is to be made in Stock, the
number of shares of Stock to be paid shall be calculated on the basis
of the Fair Market Value of the Stock on the date of exercise.
Notwithstanding the foregoing, the Committee may unilaterally limit
the appreciation in value of any Stock Appreciation Right at any time
prior to exercise.
(3) Upon the exercise of a Tandem SAR, the Stock Option or part
thereof to which such Tandem SAR is related shall be deemed to have
been exercised.
(4) In its sole discretion, the Committee may grant "Limited"
Stock Appreciation Rights under this Section 6; that is, Freestanding
SARs that become exercisable only in the event of a Change in Control
or a Potential Change in Control, subject to such terms and conditions
as the Committee may specify at grant. Such Limited Stock Appreciation
Rights shall be settled solely in cash.
(5) Stock Appreciation Rights shall not be transferable by the
participant other than by will or by the laws of descent and
distribution, and all Stock Appreciation Rights shall be exercisable,
during the participant's lifetime, only by the participant or, subject
to Section 6(b)(6), by the participant's authorized legal
representative if the participant is unable to exercise a Stock
Appreciation Right as a result of the participant's Disability.
(6) Unless varied by the Committee, Stock Appreciation Rights
shall be subject to the terms and conditions specified for Stock
Options in Sections 5(b)(6), (7) and (8) and 5(d), except that the
terms and conditions applicable to any Stock Appreciation Right held
by a Section 16 participant shall not be varied in a manner that would
cause the exercise or cancellation of such Stock Appreciation Right to
fail to qualify for any applicable exemption from Section 16(b) of the
Exchange Act provided by Rule 16b-3 thereunder.
SECTION 7. Restricted Stock.
(a) Grant. Shares of Restricted Stock may be issued alone, in
addition to or in tandem with other Awards under the Plan or cash awards
made outside of the Plan. The Committee shall determine the individuals to
whom, and the time or times at which, grants of Restricted Stock will be
made, the number of shares of Restricted Stock to be awarded to each
participant, the price (if any) to be paid by the participant (subject to
Section 7(b)), the date or dates upon which Restricted Stock Awards will
vest and the period or periods within which such Restricted Stock Awards
may be subject to forfeiture, and the other terms and conditions of such
Awards in addition to those set forth in Section 7(b).
The Committee may condition the grant of Restricted Stock upon
the attainment of specified performance goals or such other factors as the
Committee may determine in its sole discretion.
(b) Terms and Conditions. Restricted Stock awarded under the Plan
shall be subject to the following terms and conditions and shall contain
such additional terms and conditions, not inconsistent
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with the provisions of the Plan, as the Committee shall deem desirable. A
participant who receives a Restricted Stock Award shall not have any rights with
respect to such Award, unless and until such participant has executed an
agreement evidencing the Award in the form approved from time to time by the
Committee and has delivered a fully executed copy thereof to the Company, and
has otherwise complied with the applicable terms and conditions of such Award.
(1) The purchase price for shares of Restricted Stock shall be
determined by the Committee at the time of grant and may be equal to their
par value or zero.
(2) Awards of Restricted Stock must be accepted by executing a
Restricted Stock Award agreement and paying whatever price (if any) is
required under Section 7(b)(1).
(3) Each participant receiving a Restricted Stock Award shall be
issued a stock certificate in respect of such shares of Restricted Stock.
Such certificate shall be registered in the name of such participant, and
shall bear an appropriate legend referring to the terms, conditions and
restrictions applicable to such Award.
(4) The Committee shall require that the stock certificates
evidencing such shares be held in custody by the Company until the
restrictions thereon shall have lapsed, and that, as a condition of any
Restricted Stock Award, the participant shall have delivered to the Company
a stock power, endorsed in blank, relating to the Stock covered by such
Award.
(5) Subject to the provisions of this Plan and the Restricted Stock
Award agreement, during a period set by the Committee commencing with the
date of such Award (the "Restriction Period"), the participant shall not be
permitted to sell, transfer, pledge, assign or otherwise encumber the
shares of Restricted Stock awarded under the Plan. The Restriction Period
shall not be less than six months and one day in duration ("Minimum
Restriction Period"). Subject to these limitations and the Minimum
Restriction Period requirement, the Committee, in its sole discretion, may
provide for the lapse of such restrictions in installments and may
accelerate or waive such restrictions, in whole or in part, based on
service, performance or such other factors and criteria as the Committee
may determine, in its sole discretion.
(6) Except as provided in this Section 7(b)(6), Section 7(b)(5) and
Section 7(b)(7), the participant shall have, with respect to the shares of
Restricted Stock awarded, all of the rights of a shareholder of the
Company, including the right to vote the Stock, and the right to receive
any dividends. The Committee, in its sole discretion, as determined at the
time of award, may permit or require the payment of cash dividends to be
deferred and, if the Committee so determines, reinvested, subject to
Section l4(f), in additional Restricted Stock to the extent shares are
available under Section 3, or otherwise reinvested. Stock dividends issued
with respect to Restricted Stock shall be treated as additional shares of
Restricted Stock that are subject to the same restrictions and other terms
and conditions that apply to the shares with respect to which such
dividends are issued.
(7) No Restricted Stock shall be transferable by a participant
otherwise than by will or by the laws of descent and distribution.
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(8) If a participant's employment by the Company or any
Subsidiary or Affiliate terminates by reason of death, any Restricted
Stock held by such participant shall thereafter vest or any
restriction lapse, to the extent such Restricted Stock would have
become vested or no longer subject to restriction within one year from
the time of death had the participant continued to fulfill all of the
conditions of the Restricted Stock Award during such period (or on
such accelerated basis as the Committee may determine at or after
grant). The balance of the Restricted Stock shall be forfeited.
(9) If a participant's employment by the Company or any
Subsidiary or Affiliate terminates by reason of Disability, any
Restricted Stock held by such participant shall thereafter vest or any
restriction lapse, to the extent such Restricted Stock would have
become vested or no longer subject to restriction within one year from
the time of termination had the participant continued to fulfill all
of the conditions of the Restricted Stock Award during such period (or
on such accelerated basis as the Committee may determine at or after
grant), subject in all cases to the Minimum Restriction Period
requirement. The balance of the Restricted Stock shall be forfeited.
(10) Unless otherwise determined by the Committee at or after
the time of granting any Restricted Stock, if a participant's
employment by the Company or any Subsidiary or Affiliate terminates
for any reason other than death or Disability, the Restricted Stock
held by such participant which is unvested or subject to restriction
at the time of termination shall thereupon be forfeited.
(c) Minimum Value Provisions. In order to better ensure that award
payments actually reflect the performance of the Company and service of the
participant, the Committee may provide, in its sole discretion, for a
tandem performance-based or other award designed to guarantee a minimum
value, payable in cash or Stock to the recipient of a Restricted Stock
Award, subject to such performance, future service, deferral and other
terms and conditions as may be specified by the Committee.
SECTION 8. Deferred Stock.
(a) Grant. Deferred Stock may be awarded alone, in addition to or in
tandem with other Awards granted under the Plan or cash awards made outside
of the Plan. The Committee shall determine the individuals to whom, and the
time or times at which, Deferred Stock shall be awarded, the number of
shares of Deferred Stock to be awarded to any participant, the duration of
the period (the "Deferral Period") during which, and the conditions under
which, receipt of the Stock will be deferred, and the other terms and
conditions of the Award in addition to those set forth in Section 8(b).
The Committee may condition the grant of Deferred Stock upon the
attainment of specified performance goals or such other factors as the
Committee shall determine, in its sole discretion.
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(b) Terms and Conditions. Deferred Stock Awards shall be subject to the
following terms and conditions and shall contain such additional terms and
conditions, not inconsistent with the terms of the Plan, as the Committee shall
deem desirable:
(1) The purchase price for shares of Deferred Stock shall be
determined at the time of grant and may be equal to their par value or
zero, as determined by the Committee. Subject to the provisions of the Plan
and the Award agreement referred to in Section 8(b)(9), Deferred Stock
Awards may not be sold, assigned, transferred, pledged or otherwise
encumbered during the Deferral Period. At the expiration of the Deferral
Period (or the Elective Deferral Period referred to in Section 8(b)(8),
where applicable), share certificates shall be delivered to the
participant, or his legal representative, for the shares covered by the
Deferred Stock Award. The Deferral Period applicable to any Deferred Stock
Award shall not be less than six months and one day ("Minimum Deferral
Period").
(2) Unless otherwise determined by the Committee at grant, amounts
equal to any dividends declared during the Deferral Period with respect to
the number of shares covered by a Deferred Stock Award will be paid to the
participant currently, or deferred and deemed to be reinvested in
additional Deferred Stock, or otherwise reinvested, all as determined at or
after the time of the Award by the Committee, in its sole discretion.
(3) No Deferred Stock shall be transferable by a participant
otherwise than by will or by the laws of descent and distribution.
(4) If a participant's employment by the Company or any Subsidiary or
Affiliate terminates by reason of death, any Deferred Stock held by such
participant shall thereafter vest or any restriction lapse, to the extent
such Deferred Stock would have become vested or no longer subject to
restriction within one year from the time of death had the participant
continued to fulfill all of the conditions of the Deferred Stock Award
during such period (or on such accelerated basis as the Committee may
determine at or after grant). The balance of the Deferred Stock shall be
forfeited.
(5) If a participant's employment by the Company or any Subsidiary or
Affiliate terminates by reason of Disability, any Deferred Stock held by
such participant shall thereafter vest or any restriction lapse, to the
extent such Deferred Stock would have become vested or no longer subject to
restriction within one year from the time of termination had the
participant continued to fulfill all of the conditions of the Deferred
Stock Award during such period (or on such accelerated basis as the
Committee may determine at or after grant), subject in all cases to the
Minimum Deferral Period requirement. The balance of the Deferred Stock
shall be forfeited.
(6) Unless otherwise determined by the Committee at or after the time
of granting any Deferred Stock Award, if a participant's employment by the
Company or any Subsidiary or Affiliate terminates for any reason other than
death or Disability, all Deferred Stock held by such participant which is
unvested or subject to restriction shall thereupon be forfeited.
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(7) Based on service, performance or such other factors or criteria as
the Committee may determine, the Committee may, at or after grant,
accelerate the vesting of all or any part of any Deferred Stock Award or
waive a portion of the Deferral Period for all or any part of such Award,
subject in all cases to the Minimum Deferral Period requirement.
(8) A participant may elect to further defer receipt of a Deferred
Stock Award (or an installment of an Award) for a specified period or until
a specified event (the "Elective Deferral Period"), subject in each case to
the Committee's approval and the terms of this Section 8 and such other
terms as are determined by the Committee, all in its sole discretion.
Subject to any exceptions approved by the Committee, such election must be
made at least 12 months prior to completion of the Deferral Period for such
Deferred Stock Award (or such installment).
(9) Each such Award shall be confirmed by, and subject to the terms
of, a Deferred Stock Award agreement evidencing the Award in the form
approved from time to time by the Committee.
(c) Minimum Value Provisions. In order to better ensure that award payments
actually reflect the performance of the Company and service of the participant,
the Committee may provide, in its sole discretion, for a tandem
performance-based or other Award designed to guarantee a minimum value, payable
in cash or Stock to the recipient of a Deferred Stock Award, subject to such
performance, future service, deferral and other terms and conditions as may be
specified by the Committee.
SECTION 9. Stock Purchase Rights.
(a) Grant. Stock Purchase Rights may be granted alone, in addition to or in
tandem with other Awards granted under the Plan or cash awards made outside the
Plan. The Committee shall determine the individuals to whom, and the time or
times at which, grants of Stock Purchase Rights will be made, the number of
shares of Stock which may be purchased pursuant to the Stock Purchase Rights,
and the other terms and conditions of the Stock Purchase Rights in addition to
those set forth in Section 9(b). The Stock subject to the Stock Purchase Rights
may be purchased, as determined by the Committee at the time of grant:
(1) at the Fair Market Value of such Stock on the date of grant;
(2) at 50% of the Fair Market Value of such Stock on the date of
grant;
(3) at an amount equal to the Book Value of such Stock on the
date of grant; or
(4) at an amount equal to the par value of such Stock on the date
of grant.
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Subject to Section 9(b) hereof, the Committee may also impose such
deferral, forfeiture or other terms and conditions as it shall determine,
in its sole discretion, on such Stock Purchase Rights or the exercise
thereof.
Each Stock Purchase Right Award shall be confirmed by, and be
subject to the terms of, a Stock Purchase Rights Agreement which shall be
in form approved by the Committee.
(b) Terms and Conditions. Stock Purchase Rights may contain such
additional terms and conditions not inconsistent with the terms of the Plan
as the Committee shall deem desirable, and shall generally be exercisable
for such period as shall be determined by the Committee. However, Stock
Purchase Rights granted to Section 16 participants shall not become
exercisable earlier than six months and one day after the grant date. Stock
Purchase Rights shall not be transferable by a participant other than by
will or by the laws of descent and distribution.
SECTION 10. Other Stock-Based Awards.
(a) Grant. Other Awards of Stock and other Awards that are valued, in
whole or in part, by reference to, or are otherwise based on, Stock,
including, without limitation, performance shares, convertible preferred
stock, convertible debentures, exchangeable securities and Stock Awards or
options valued by reference to Book Value or subsidiary performance, may be
granted alone, in addition to or in tandem with other Awards granted under
the Plan or cash awards made outside of the Plan.
At the time the Stock or Other Stock-Based Award is granted, the
Committee shall determine the individuals to whom and the time or times at
which such Stock or Other Stock-Based Awards shall be awarded, the number
of shares of Stock to be used in computing an Award or which are to be
awarded pursuant to such Awards, the consideration, if any, to be paid for
such Stock or Other Stock-Based Awards, and all other terms and conditions
of the Awards in addition to those set forth in Section 10(b).
The provisions of Other Stock-Based Awards need not be the same
with respect to each participant.
(b) Terms and Conditions. Other Stock-Based Awards shall be subject
to the following terms and conditions and shall contain such additional
terms and conditions, not inconsistent with the terms of the Plan, as the
Committee shall deem desirable:
(1) Subject to the provisions of this Plan and the Award
agreement referred to in Section 10(b)(5) below, Stock awarded or
subject to Awards made under this Section 10 may not be sold,
assigned, transferred, pledged or otherwise encumbered prior to the
date on which the Stock is issued, or, if later, the date on which any
applicable restriction, performance, holding or deferral period or
requirement is satisfied or lapses. All Stock or Other Stock Based
Awards granted under this Section 10 shall be subject to a minimum
holding period (including any applicable restriction, performance
and/or deferral periods) of six months and one day ("Minimum Holding
Period").
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(2) Subject to the provisions of this Plan and the Award
agreement and unless otherwise determined by the Committee at the time of
grant, the recipient of an Other Stock-Based Award shall be entitled to
receive, currently or on a deferred basis, interest or dividends or
interest or dividend equivalents with respect to the number of shares of
Stock covered by the Award, as determined at the time of the Award by the
Committee, in its sole discretion, and the Committee may provide that such
amounts (if any) shall be deemed to have been reinvested in additional
Stock or otherwise reinvested.
(3) Subject to the Minimum Holding Period, any Other Stock-Based
Award and any Stock covered by any such Award shall vest or be forfeited to
the extent, at the times and subject to the conditions, if any, provided in
the Award agreement, as determined by the Committee, in its sole
discretion.
(4) In the event of the participant's Disability or death, or in
cases of special circumstances, the Committee may, in its sole discretion,
waive, in whole or in part, any or all of the remaining limitations imposed
hereunder or under any related Award agreement (if any) with respect to any
part or all of any Award under this Section 10, provided that the Minimum
Holding Period requirement may not be waived, except in case of a
participant's death.
(5) Each Award shall be confirmed by, and subject to the terms
of, an agreement or other instrument evidencing the Award in the form
approved from time to time by the Committee, the Company and the
participant.
(6) Stock (including securities convertible into Stock) issued on a
bonus basis under this Section 10 shall be issued for no cash
consideration. Stock (including securities convertible into Stock)
purchased pursuant to a purchase right awarded under this Section 10 shall
bear a price of at least 50% of the Fair Market Value of the Stock on the
date of grant. The purchase price of such Stock, and of any Other Stock
Based Award granted hereunder, or the formula by which such price is to be
determined, shall be fixed by the Committee at the time of grant.
(7) In the event that any "derivative security", as defined in
Rule 16a-1(c) (or any successor thereto) promulgated by the Securities and
Exchange Commission under Section 16 of the Exchange Act, is awarded
pursuant to this Section 10 to any Section 16 participant, such derivative
security shall not be transferable other than by will or by the laws of
descent and distribution.
SECTION 11. Change In Control Provision.
(a) Impact of Event. In the event of: (1) a "Change in Control" as defined
in Section 11(b) or (2) a "Potential Change in Control" as defined in
Section 11(c), the following acceleration and valuation provisions shall apply:
16
(1) Any Stock Appreciation Rights and any Stock Options awarded under
the Plan not previously exercisable and vested shall become fully
exercisable and vested;
(2) The restrictions and deferral limitations applicable to any
Restricted Stock, Deferred Stock, Stock Purchase Rights and Other
Stock-Based Awards shall lapse and such shares and awards shall be deemed
fully vested; and
(3) The value of all outstanding Awards, in each case to the extent
vested, shall, unless otherwise determined by the Committee in its sole
discretion at or after grant but prior to any Change in Control or
Potential Change in Control, be cashed out on the basis of the "Change in
Control Price" as defined in Section 11(d) as of the date such Change in
Control or such Potential Change in Control is determined to have occurred;
provided, however, that the provisions of Sections 11(a)(1)-(3) shall not
apply with respect to Awards granted to any Section 16 participant which have
been held by such participant for less than six months and one day as of the
date that such Change in Control or Potential Change in Control is determined to
have occurred.
(b) Definition of Change in Control. For purposes of Section 11(a), a
"Change in Control" means the happening of any of the following:
(1) When any "person" as defined in Section 3(a)(9) of the Exchange
Act and as used in Sections 13(d) and 14(d) thereof, including a "group" as
defined in Section 13(d) of the Exchange Act, but excluding the Company and
any Subsidiary and any employee benefit plan sponsored or maintained by the
Company or any Subsidiary (including any trustee of such plan acting as
trustee), directly or indirectly, becomes the "beneficial owner" (as
defined in Rule l3d-3 under the Exchange Act, as amended from time to
time), of securities of the Company representing 20 percent or more of the
combined voting power of the Company's then outstanding securities;
provided, however, that the terms "person" and "group" shall not include
any "Excluded Director", and the term "Excluded Director" means any
director who, on the effective date of the Plan, is the beneficial owner of
or has the right to acquire an amount of Stock equal to or greater than
five percent of the number of shares of Stock outstanding on such effective
date; and further provided that, unless otherwise determined by the Board
or any committee thereof, the terms "person" and "group" shall not include
any entity or group of entities which has acquired Stock of the Company in
the ordinary course of business for investment purposes only and not with
the purpose or effect of changing or influencing the control of the
Company, or in connection with or as a participant in any transaction
having such purpose or effect, ("Investment Intent"), as demonstrated by
the filing by such entity or group of a statement on Schedule 13G
(including amendments thereto) pursuant to Regulation 13D under the
Exchange Act, as long as such entity or group continues to hold such Stock
with an Investment Intent;
(2) When, during any period of 24 consecutive months during the
existence of the Plan, the individuals who, at the beginning of such
period, constitute the Board (the "Incumbent Directors") cease for any
reason other than death to constitute at least a majority thereof;
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provided, however, that a director who was not a director at the beginning
of such 24-month period shall be deemed to have satisfied such 24-month
requirement (and be an Incumbent Director) if such director was elected by,
or on the recommendation of or with the approval of, at least two-thirds of
the directors who then qualified as Incumbent Directors either actually
(because they were directors at the beginning of such 24-month period) or
by prior operation of this Section 11(b)(2); or
(3) The occurrence of a transaction requiring shareholder approval
for the acquisition of the Company by an entity other than the Company or a
Subsidiary through purchase of assets, by merger or otherwise;
provided, however, a change in control shall not be deemed to be a Change in
Control for purposes of the Plan if the Board approves such change prior to
either (i) the commencement of any of the events described in Section (b)(l),
(2), or (3) or (c)(l) or (ii) the commencement by any person other than the
Company of a tender offer for Stock.
(c) Definition of Potential Change in Control. For purposes of Section
11(a), a "Potential Change in Control" means the happening of any one of the
following:
(1) The approval by shareholders of an agreement by the Company, the
consummation of which would result in a Change in Control of the Company as
defined in Section 11(b); or
(2) The acquisition of beneficial ownership, directly or indirectly,
by any entity, person or group (other than the Company or a Subsidiary or
any Company employee benefit plan (including any trustee of such plan
acting as such trustee)) of securities of the Company representing 5% or
more of the combined voting power of the Company's outstanding securities
and the adoption by the Board of a resolution to the effect that a
Potential Change in Control of the Company has occurred for purposes of
this Plan.
(d) Change in Control Price. For purposes of this Section 11, "Change in
Control Price" means the highest price per share paid in any transaction
reported on the New York Stock Exchange Composite Index, or paid or offered in
any bona fide transaction related to a Change in Control or Potential Change in
Control of the Company, at any time during the 60-day period immediately
preceding the occurrence of the Change in Control (or, where applicable, the
occurrence of the Potential Change in Control event), in each case as determined
by the Committee, except that, in the case of Incentive Stock Options and Stock
Appreciation Rights relating to Incentive Stock Options, such price shall be
based only on transactions reported for the date on which the participant
exercises such Stock Appreciation Rights or, where applicable, the date on which
a cash out occurs under Section 11(a)(3).
SECTION 12. Amendments and Termination.
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The Board may at any time, in its sole discretion, amend, alter or
discontinue the Plan, but no such amendment, alteration or discontinuation shall
be made which would impair the rights of a participant under an Award
theretofore granted, without the participant's consent. The Company shall submit
to the shareholders of the Company for their approval any amendments to the Plan
which are required by Section 16 of the Exchange Act, or the rules and
regulations thereunder, to be approved by the shareholders.
The Committee may at any time, in its sole discretion, amend the terms of
any Award, but no such amendment shall be made which would impair the rights of
a participant under an Award theretofore granted, without the participant's
consent; nor shall any such amendment be made which would make the applicable
exemptions provided by Rule 16b-3 under the Exchange Act unavailable to any
Section 16 participant holding the Award without the participant's consent. The
Committee may also substitute new Stock Options for previously granted Stock
Options (on a one-for-one or other basis), including previously granted Stock
Options having a higher option price.
Subject to the above provisions, the Board shall have all necessary
authority to amend the Plan to take into account changes in applicable
securities and tax laws and accounting rules, as well as other developments.
SECTION 13. Unfunded Status of Plan.
The Plan is intended to constitute an "unfunded" plan for incentive and
deferred compensation. With respect to any payments not yet made to a
participant by the Company, nothing contained herein shall give any such
participant any rights that are greater than those of a general creditor of the
Company.
SECTION 14. General Provisions.
(a) The Committee may require each participant acquiring Stock
pursuant to an Award under the Plan to represent to and agree with the
Company in writing that the participant is acquiring the Stock without a
view to distribution thereof. The certificates for such shares may include
any legend which the Committee deems appropriate to reflect any
restrictions on transfer.
All shares of Stock or other securities delivered under the Plan shall
be subject to such stop-transfer orders and other restrictions as the
Committee may deem advisable under the rules, regulations and other
requirements of the Securities and Exchange Commission, any stock exchange
upon which the Stock is then listed, and any applicable federal or state
securities laws, and the Committee may cause a legend or legends to be put
on any certificates for such shares to make appropriate reference to such
restrictions.
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(b) Nothing contained in this Plan shall prevent the Board from
adopting other or additional compensation arrangements, subject to
shareholder approval if such approval is required; and such arrangements
may be either generally applicable or applicable only in specific cases.
(c) Neither the adoption of the Plan, nor its operation, nor any
document describing, implementing or referring to the Plan, or any part
thereof, shall confer upon any participant under the Plan any right to
continue in the employ, or as a director, of the Company or any Subsidiary
or Affiliate, or shall in any way affect the right and power of the Company
or any Subsidiary or Affiliate to terminate the employment, or service as a
director, of any participant under the Plan at any time with or without
assigning a reason therefor, to the same extent as the Company or any
Subsidiary or Affiliate might have done if the Plan had not been adopted.
(d) For purposes of this Plan, a transfer of a participant between
the Company and its Subsidiaries and Affiliates shall not be deemed a
termination of employment.
(e) No later than the date as of which an amount first becomes
includable in the gross income of the participant for federal income tax
purposes with respect to any Award under the Plan, the participant shall
pay to the Company, or make arrangements satisfactory to the Committee
regarding the payment of, any federal, state or local taxes of any kind
required by law to be withheld with respect to such amount. Subject to the
following sentence, unless otherwise determined by the Committee,
withholding obligations may be settled with Stock, including unrestricted
Stock previously owned by the participant or Stock that is part of the
Award that gives rise to the withholding requirement. Notwithstanding the
foregoing, any election by a Section 16 participant to settle such tax
withholding obligation with Stock that is part of such Award shall be
subject to approval by the Committee, in its sole discretion. The
obligations of the Company under the Plan shall be conditional on such
payment or arrangements and the Company and its Subsidiaries and Affiliates
shall, to the extent permitted by law, have the right to deduct any such
taxes from any payment of any kind otherwise due to the participant.
(f) The actual or deemed reinvestment of dividends or dividend
equivalents in additional Restricted Stock (or in Deferred Stock or other
types of Awards) at the time of any dividend payment shall only be
permissible if sufficient shares of Stock are available under Section 3 for
such reinvestment (taking into account then outstanding Stock Options,
Stock Purchase Rights and other Plan Awards).
(g) The Plan, all Awards made and actions taken thereunder and any
agreements relating thereto shall be governed by and construed in
accordance with the laws of the State of Ohio.
(h) All agreements entered into with participants pursuant to the
Plan shall be subject to the Plan.
(i) The provisions of Awards need not be the same with respect to
each participant.
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SECTION 15. Effective Date of Plan.
The Plan was adopted by the Board on September 27, 1989 and approved by
shareholders on April 27, 1990. This amendment and restatement of the Plan
shall be effective as of April 24, 1992. Amendments made subsequent to
April 24, 1992 shall be effective upon the date of their adoption by the Board.
SECTION 16. Term of Plan.
No Award shall be granted pursuant to the Plan on or after April 27, 2000,
but Awards granted prior to such date may extend beyond that date.