EXHIBIT 4(b)
DOMINION HOMES, INC.
2003 Stock Option and Incentive Equity Plan
1.00 PURPOSE
This Plan is intended to foster and promote the long-term financial success of
the Company and to materially increase shareholder value [1] by providing
Employees and Eligible Directors an opportunity to acquire an ownership interest
in the Company and [2] by enabling the Company to attract and retain the
services of outstanding Employees and Eligible Directors upon whose judgment,
interest and special efforts the successful conduct of the Company's business is
largely dependent.
2.00 DEFINITIONS
When used in this Plan, the following terms have the meanings given to them in
this section unless another meaning is expressly provided elsewhere in this
document or clearly required by the context. When applying these definitions,
the form of any term or word will include any of its other forms.
2.01 Act. The Securities Exchange Act of 1934, as amended.
2.02 Affiliated SAR. An SAR that is granted in conjunction with an Option and
which is always deemed to have been exercised at the same time that the related
Option is exercised. The deemed exercise of an Affiliated SAR will not reduce
the number of shares of Stock subject to the related Option, except to the
extent of the exercise of the related Option.
2.03 Annual Meeting. The annual meeting of the Company's shareholders.
2.04 Award. Any Incentive Stock Option, Nonstatutory Stock Option, Performance
Share, Performance Unit, Restricted Stock and Stock Appreciation Right issued
under the Plan. During any single Plan Year, no Participant may be granted SARs
affecting more than 50,000 shares of Stock allocated to the Plan (adjusted as
provided in Section 5.03) and Options affecting more than 50,000 shares of Stock
allocated to this Plan (adjusted as provided in Section 5.03), including Options
and SARs that are cancelled [or deemed to have been cancelled under Treas. Reg.
(S)1.162-27(e)(2)(vi)(B)] during the Plan Year issued.
2.05 Award Agreement. The written agreement described in Section 4.03.
2.06 Beneficiary. The person a Member designates to receive (or exercise) any
Plan benefits (or rights) that are unpaid (or unexercised) when he or she dies.
A Beneficiary may be designated only by following the procedures described in
Section 13.02; neither the Company nor the Committee is required to infer a
Beneficiary from any other source.
2.07 Board. The Company's Board of Directors.
1
2.08 Cause. Unless the Committee specifies otherwise in the Award Agreement,
with respect to any Member:
[1] Any unauthorized disclosure of the Company's or any Subsidiary's
business practices or accounts to a competitor that results in serious
damage to the Company;
[2] Willful and wrongful misappropriation of funds, property or rights of
the Company or any Subsidiary that results in serious damage to the
Company or any Subsidiary;
[3] Willful and wrongful destruction of business records or other
property that results in serious damage to the Company or any Subsidiary;
[4] Conviction of a felony involving moral turpitude;
[5] Conviction of a misdemeanor involving moral turpitude but only if the
conviction arose as part of a plea bargain and relates to acts that were
originally charged as felonies;
[6] Gross and willful misconduct that results in serious damage to the
Company or any Subsidiary;
[7] Material breach of, or inability to perform, regularly assigned
duties, other than by reason of disability (as defined in the Company's
short-term disability plan); or
[8] A Member's failure to return to active employment with the Company or
any Subsidiary within 30 days after the end of any disability (as defined
in the Company's short-term disability plan) but only if that period ends
before the Member's Retirement.
2.09 Change in Control. The occurrence of any of the following events:
[1] Douglas Borror and David Borror both cease to be members of the
Company's Board of Directors; or
[2] Any direct or indirect acquisition by a "person," including a "group"
[as such terms are used in Sections 13(d) and 14(d)(2) of the Securities
Exchange Act of 1934, as amended ("Act")] after which the "person" or
"group" is the "beneficial owner" (as defined in Rule 13d-3 under the
Act), directly or indirectly, of securities of the Company representing
more than 40 percent of the combined voting power of the Company's then
outstanding securities; provided, however, that "person" or "group" will
not include [a] the Company, [b] any entity under common control with the
Company (within the meaning of Code (S)414), [c] BRC Properties Inc. or
any of its shareholders or members of the family (as defined in Code
(S)318) of Donald Borror or [d] any employee benefit plan of any entity
described in Section 2.09[2][a], [b] and/or [c] of this definition; or
2
[3] The adoption or authorization by the shareholders of the Company of a
definitive agreement or a series of related agreements [a] for the merger
or other business combination of the Company with or into another entity
in which the shareholders of the Company immediately before the effective
date of that merger or other business combination own less than 50 percent
of the voting power in the entity immediately after the effective date of
that merger or other business combination or [b] for the sale or other
disposition of all or substantially all of the assets of the Company; or
[4] The adoption by the shareholders of the Company of a plan relating to
the liquidation or dissolution of the Company.
2.10 Change in Control Price. The highest price per share of Stock offered in
conjunction with any transaction resulting in a Change in Control (as determined
in good faith by the Committee if any part of the offered price is payable other
than in cash) or, in the case of a Change in Control occurring solely by reason
of events not related to a transfer of Stock, the highest Fair Market Value of a
share of Stock on any of the 30 consecutive trading days ending on the last
trading day before the Change in Control occurs.
2.11 Code. The Internal Revenue Code of 1986, as amended, and any regulations
issued under the Code and any applicable regulations or rulings issued under the
Code.
2.12 Committee.
[1] In the case of Awards to Eligible Directors, the Board; or
[2] In the case of all other Awards, the Board's Compensation Committee
which also constitutes a "compensation committee" within the meaning of
Treas. Reg. (S)1.162-27(c)(4). The Committee will be comprised of at least
three persons [a] each of whom is [i] an outside director, as defined in
Treas. Reg. (S)1.162-27(e)(3)(i), and [ii] a "non-employee" director
within the meaning of Rule 16b-3 under the Act and [b] none of whom may
receive remuneration from the Company or any Subsidiary in any capacity
other than as a director, except as permitted under Treas. Reg.
(S)1.162-27(e)(3)(ii).
2.13 Company. Dominion Homes, Inc., an Ohio corporation
2.14 Director Option. A Nonstatutory Stock Option granted to an Eligible
Director under Section 6.05.
2.15 Disability. Unless the Committee specifies otherwise in the Award
Agreement:
[1] With respect to any Award other than an Incentive Stock Option, a
Participant's inability due to illness, accident or otherwise to perform
his duties for the period of time during which benefits are payable to the
Participant under the Company's short-term disability plan, as determined
by an independent physician selected by the Committee and reasonably
acceptable to the Participant (or to his or her legal representative),
provided that the Participant does not return to work on a
3
substantially full-time basis within 30 days after the Company notifies
the Participant that his employment is being terminated because of his or
her Disability; or
[2] With respect to an Incentive Stock Option, as defined in Code
(S)22(e)(3).
2.16 Effective Date. The earlier of the date this Plan is adopted by the Board
or the date the Plan is approved by the Company's shareholders.
2.17 Eligible Director. A person who, on an applicable Grant Date [1] is an
elected member of the Board (or has been appointed to the Board to fill an
unexpired term and will continue to serve at the expiration of that term only if
elected by shareholders) and [2] is not an Employee. For purposes of applying
this definition, an Eligible Director's status will be determined as of the
Grant Date applicable to each affected Award.
2.18 Employee. Any person who, on an applicable Grant Date, is a common law
employee of the Company or any Subsidiary and is performing services and to whom
the Committee has granted an Award. A worker who is classified as other than a
common law employee but who is subsequently reclassified as a common law
employee of the Company for any reason and on any basis will be treated as a
common law employee only from the date of that determination and will not
retroactively be reclassified as an Employee for any purpose of this Plan.
2.19 Exercise Price. The price at which a Member may exercise an Award.
2.20 Fair Market Value. The value of one share of Stock on any relevant date,
determined under the following rules:
[1] If the Stock is traded on the Nasdaq National Market or on an
exchange, the reported "closing price" on the last trading day before the
relevant date;
[2] If the Stock is traded over-the-counter with no reported closing
price, the mean between the lowest bid and the highest asked prices on
that quotation system on the last trading day before the relevant date; or
[3] If neither Section 2.20[1] nor Section 2.20[2] applies, the fair
market value as determined by the Committee in good faith.
2.21 Freestanding SAR. An SAR that is not associated with an Option and is
granted under Section 9.00.
2.22 Grant Date. The date an Award is granted to a Participant, whether or not
an Award Agreement is required.
2.23 Incentive Stock Option. Any Option granted under Section 6.00 that meets
the conditions imposed under Code(S)422(b).
2.24 Member. Each Participant and Terminated Participant to whom an Award has
been granted and which has not expired under the terms of the Award Agreement or
as provided in Section 10.00.
4
2.25 Nonstatutory Stock Option. Any Option granted under Section 6.00 that is
not an Incentive Stock Option.
2.26 Option. The right granted under the Plan to purchase a share of Stock at a
stated price for a specified period of time. An Option may be either [1] an
Incentive Stock Option or [2] a Nonstatutory Stock Option.
2.27 Participant. Any Employee or Eligible Director who has not Terminated.
2.28 Performance Goal. The conditions that must be met before an Employee will
earn a Performance Share or Performance Unit.
2.29 Performance Period. The period over which the Committee will determine if
applicable Performance Goals have been met.
2.30 Performance Share. An Award granted under Section 8.00.
2.31 Performance Unit. An Award granted under Section 8.00.
2.32 Plan. The Dominion Homes, Inc. 2003 Stock Option and Incentive Equity
Plan.
2.33 Plan Year. The Company's fiscal year.
2.34 Prior Plan. The Dominion Homes, Inc. Incentive Stock Plan.
2.35 Restricted Stock. An Award granted under Section 7.00.
2.36 Restriction Period. The period over which the Committee will determine if
an Employee has met conditions placed on Restricted Stock.
2.37 Retirement. Unless the Committee specifies otherwise in the Award
Agreement, the date an Employee Terminates on or after reaching age 55.
2.38 Stock. A common share, without par value, issued by the Company.
2.39 Stock Appreciation Right (or "SAR"). An Award granted under Section 9.00
that is a Tandem SAR, an Affiliated SAR or a Freestanding SAR.
2.40 Subsidiary. Any corporation, partnership or other form of unincorporated
entity of which the Company owns, directly or indirectly, 50 percent or more of
the total combined voting power of all classes of stock if the entity is a
corporation; or of the capital or profits interest, if the entity is a
partnership or another form of unincorporated entity.
2.41 Tandem SAR. An SAR that is associated with an Option and which expires
when that Option expires or is exercised, as described in Section 9.00.
2.42 Termination or Terminated. Unless the Committee specifies otherwise in the
Award Agreement, [1] cessation of the employee-employer relationship between an
Employee and the Company and all Subsidiaries for any reason or [2] cessation of
an
5
Eligible Director's service on the Board for any reason. However, a Member will
not be treated as having Terminated if, without interruption, his or her status
changes from Employee to Eligible Director or, if the Company agrees, from
Employee or Eligible Director to consultant.
3.00 PARTICIPATION
3.01 Employees.
[1] Consistent with the terms of the Plan and subject to Sections 3.02
and 3.03, the Committee will:
[a] Decide which Employees may become Participants;
[b] Decide which Employees will be granted Awards; and
[c] Specify the type of Award to be granted and the terms upon which
an Award will be granted.
[2] The Committee may establish different terms and conditions:
[a] For each type of Award;
[b] For each Employee receiving the same type of Award; and
[c] For the same Employees for each Award the Employee receives,
whether or not those Awards are granted at different times.
3.02 Eligible Directors. Each Eligible Director will [1] become a Participant
on the date he or she becomes an Eligible Director and [2] receive the Awards
described in Section 6.05 without any further action by the Committee. However,
as of the date an Award is made, the Committee may complete and deliver an Award
Agreement to each affected Eligible Director describing the terms of the Award.
3.03 Conditions of Participation. Each Participant receiving an Award agrees
[1] If required by the Committee, to sign an Award Agreement
acknowledging the terms of the Plan and of the Award;
[2] To be bound by the terms of the Award Agreement and the Plan; and
[3] To comply with other conditions imposed by the Committee.
4.00 ADMINISTRATION
4.01 Committee Duties. The Committee is responsible for administering the Plan
and has all powers appropriate and necessary to that purpose. Consistent with
the Plan's objectives, the Committee may adopt, amend and rescind rules and
regulations relating to the Plan, to the extent appropriate to protect the
Company's interests and has complete discretion to
6
make all other decisions (including whether a Participant has incurred a
Disability) necessary or advisable for the administration and interpretation of
the Plan. Any action by the Committee will be final, binding and conclusive for
all purposes and upon all persons.
4.02 Delegation of Ministerial Duties. In its sole discretion and to the extent
allowed by law and consistent with Plan objectives, the Committee may delegate
any duties associated with the Plan to any person (including employees) that it
deems appropriate.
4.03 Award Agreement. At the time any Award is made, the Committee may prepare
and deliver an Award Agreement to each affected Participant. The Award
Agreement:
[1] Will describe:
[a] The type of Award and when and how it may be exercised;
[b] The effect of exercising the Award; and
[c] Any Exercise Price associated with the Award.
[2] To the extent different from the terms of the Plan, will describe:
[a] Any conditions that must be met before the Award may be
exercised;
[b] Any objective restrictions placed on Restricted Stock,
Performance Shares and Performance Units and any performance related
conditions and Performance Goals that must be met before those
restrictions will be released;
[c] When and how an Award may be exercised; and
[d] Any other applicable terms and conditions affecting the Award.
4.04 Repricing/Settlement. In its sole discretion, the Committee may "reprice"
(as defined under rules issued by the Nasdaq National Market or any national
securities exchange or system on which shares of Stock are then listed or
traded) any Award and may repurchase or settle any outstanding Award for cash at
any time and on any basis it believes is appropriate and consistent with the
Plan's purposes.
5.00 STOCK SUBJECT TO PLAN
5.01 Number of Shares of Stock. Subject to Sections 5.02 and 5.03, the number
of shares of Stock subject to Awards under the Plan may not be larger than
500,000. The shares of Stock to be delivered under the Plan may consist, in
whole or in part, of treasury Stock or authorized but unissued Stock not
reserved for any other purpose.
5.02 Cancelled, Terminated or Forfeited Awards or Awards Settled for Cash. Any
Stock subject to an Award that, for any reason, is cancelled, terminated or
forfeited or otherwise settled without the issuance of the Stock may again be
granted under the Plan.
7
5.03 Adjustment in Capitalization. If, after the Effective Date, there is a
Stock dividend or Stock split, recapitalization (including payment of an
extraordinary dividend), merger, consolidation, combination, spin-off,
distribution of assets to shareholders, exchange of shares or other similar
corporate change affecting Stock, the Committee will adjust as it deems
appropriate [1] the number of Awards that may or will be issued to Participants
during a Plan Year, [2] the aggregate number of shares of Stock available for
Awards under Section 5.01 or subject to outstanding Awards (as well as any
share-based limits imposed under this Plan), [3] the respective Exercise Price,
number of shares and other limitations applicable to outstanding or subsequently
issued Awards and [4] any other factors, limits or terms affecting any
outstanding or subsequently issued Awards.
6.00 OPTIONS
6.01 Grant of Options. The Committee may grant Options to Employees and
Eligible Directors at any time during the term of this Plan. Options may be
either [1] Incentive Stock Options or [2] Nonstatutory Stock Options. However,
Options issued to Eligible Directors must always be Nonstatutory Stock Options.
6.02 Option Price. Each Option will bear the Exercise Price the Committee
specifies in the Award Agreement. However, in the case of an Incentive Stock
Option, the Exercise Price [1] will not be less than the Fair Market Value of a
share of Stock on the Grant Date and [2] will be at least 110 percent of the
Fair Market Value of a share of Stock on the Grant Date with respect to any
Incentive Stock Options issued to an Employee who, on the Grant Date, owns [as
defined in Code (S)424(d)] Stock possessing more than 10 percent of the total
combined voting power of all classes of Stock.
6.03 Exercise of Options. Subject to the terms of the Plan, Options will be
exercisable under the conditions specified in the Award Agreement. However:
[1] Any Option to purchase a fraction of a share of Stock will be
liquidated as of the date it arises and the Participant will be given cash
equal to Fair Market Value multiplied by the fractional share.
[2] Unless the Committee specifies otherwise in the Award Agreement, no
Employee may exercise Options for fewer than the smaller of:
[a] 100 shares of Stock; or
[b] The full number of shares of Stock for which Options are then
exercisable.
[3] No Option may be exercised more than ten years after it is granted
(five years in respect of an Incentive Stock Option, if the Employee owns
[as defined in Code (S)424(d)] Stock possessing more than 10 percent of
total combined voting power of all classes of Stock on the Grant Date).
8
6.04 Incentive Stock Options. Notwithstanding anything in the Plan to the
contrary:
[1] No provision of this Plan relating to Incentive Stock Options will be
interpreted, amended or altered; nor will any discretion or authority
granted under the Plan be exercised, in a manner that is inconsistent with
Code (S)422, or, without the consent of any affected Member, to cause any
Incentive Stock Option to fail to qualify for the federal income tax
treatment afforded under Code (S)421;
[2] The aggregate Fair Market Value of the Stock (determined as of the
Grant Date) with respect to which Incentive Stock Options are exercisable
for the first time by any Member during any calendar year (under all
option plans of the Company and all Subsidiaries of the Company) will not
exceed $100,000 [or other amount specified in Code (S)422(d)]; and
[3] No Incentive Stock Option will be granted to any person who is not an
Employee on the Grant Date.
6.05 Director Options.
[1] On the first business day after each Annual Meeting, each Eligible
Director will be issued Director Options to purchase 2,500 shares of
Stock. The Director Options issued under this section will be reduced (but
not below zero) by any options issued for the same purpose under the Prior
Plan.
[2] Subject to the terms of the Plan and the Award Agreement, each
Director Option may be exercised at any time during the ten years
beginning on the Grant Date.
[3] However:
[a] Any Director Option to purchase a fraction of a share of Stock
will be liquidated as of the date it arises and the Participant will
be given cash equal to Fair Market Value multiplied by the fractional
share;
[b] Unless the Committee specifies otherwise in the Award Agreement,
no Eligible Director may exercise Director Options for fewer than the
smaller of:
[i] 100 shares of Stock; or
[ii] The full number of shares of Stock for which Director
Options are then exercisable.
6.06 Payment for Options. Unless the Committee specifies otherwise in the Award
Agreement, the Exercise Price associated with each Option must be paid in cash.
However, the Committee may, at any time and in its discretion, develop, and
extend to some or all Members, procedures through which Members may pay an
Option's Exercise Price, including allowing a Member to tender Stock he or she
already has owned for at least six months before the exercise date, either by
actual delivery of the previously owned Stock or by attestation, valued at its
Fair Market Value on the exercise date, as partial or full payment of the
Exercise Price.
9
6.07 Transferability of Stock. Unless the Committee specifies otherwise in the
Award Agreement, Stock acquired through an Option will be transferable, subject
to applicable federal securities laws, the Company's stock trading policy, the
requirements of the Nasdaq National Market or any national securities exchange
or system on which shares of Stock are then listed or traded or any blue sky or
state securities laws.
7.00 RESTRICTED STOCK
7.01 Restricted Stock Grants. Subject to the terms of the Plan and the Award
Agreement, the Committee may grant Restricted Stock to Employees at any time
during the term of this Plan.
7.02 Transferability. Shares of Restricted Stock may not be sold, transferred,
pledged, assigned or otherwise alienated or hypothecated until the end of the
applicable Restriction Period. Restricted Stock normally will be held by the
Company as escrow agent during the Restriction Period and will be distributed as
described in Section 7.03. However, at any time during the Restriction Period,
the Committee may, in its sole discretion, issue the Restricted Stock to the
Employee in the form of certificates containing a legend describing restrictions
imposed on the Restricted Stock.
7.03 Removal of Restrictions. Shares of Restricted Stock will be:
[1] Forfeited, if all restrictions have not been met at the end of the
Restriction Period and again become available to be granted under the
Plan; or
[2] Released from escrow and distributed to the affected Employee (or any
restrictions imposed on the distributed certificate removed) as soon as
practicable after the last day of the Restriction Period if all
restrictions have then been met.
7.04 Rights Associated with Restricted Stock. During the Restriction Period:
[1] Employees may exercise full voting rights associated with their
Restricted Stock; and
[2] All dividends and other distributions paid with respect to any
Restricted Stock will be held by the Company as escrow agent during the
Restriction Period. At the end of the Restriction Period, these dividends
will be distributed to the Employee or forfeited as provided in Section
7.03. No interest or other accretion will be credited with respect to any
dividends held in this escrow account. If any dividends or other
distributions are paid in shares of Stock, those shares will be subject to
the same restrictions on transferability and forfeitability as the shares
of Restricted Stock with respect to which they were issued.
8.00 PERFORMANCE SHARES AND PERFORMANCE UNITS
8.01 Performance Shares and Performance Unit Grants. Subject to the terms of
the Plan and the Award Agreement, the Committee may grant Performance Shares or
Performance Units to Employees at any time during the term of this Plan.
However, Performance Shares and Performance Units will be granted to
Participants whose
10
compensation is subject to Code (S)162(m) ["Code (S)162(m) Participants"] solely
under the terms of Section 8.02, while Performance Shares and Performance Units
will be granted to Participants who are not Code (S)162(m) Participants solely
under the terms of Section 8.03
8.02 Code (S)162(m) Participants.
[1] For each Performance Period, the Committee will establish the
Performance Goal that will be applied to determine the Performance Shares
or Performance Units that may be distributed at the end of the
Performance Period to any Code (S)162(m) Participant.
[2] In establishing each affected Code (S)162(m) Participant's
Performance Goal, the Committee will consider the relevance of his or her
assigned duties and responsibilities to factors that preserve and
increase the Company's value. These factors will include:
[a] Increasing sales;
[b] Developing new products and lines of revenue;
[c] Reducing operating expenses;
[d] Increasing customer satisfaction;
[e] Developing new markets and increasing the Company's share of
existing markets;
[f] Meeting completion schedules;
[g] Increasing standardized pricing;
[h] Developing and managing relationships with regulatory and other
governmental agencies;
[i] Managing cash;
[j] Managing claims against the Company, including litigation;
[k] Identifying and completing strategic acquisitions; and
[l] Increasing the Company's book value.
[3] The Committee will make adjustments that appropriately reflect:
[a] The effect on any Performance Goal of any Stock dividend or
Stock split, recapitalization (including, without limitation, the
payment of an extraordinary dividend), merger, consolidation,
combination, spin-off, distribution of assets to shareholders,
exchange of shares or similar corporate change. This adjustment to
the Performance Goal will be made [i] to the
11
extent the Performance Goal is based on Stock, [ii] as of the
effective date of the event and [iii] for the Performance Period in
which the event occurs. Also, the Committee will make a similar
adjustment to any portion of a Performance Goal that is not based on
Stock but which is affected by an event having an effect similar to
those just described.
[b] A substantive change in a Code (S)162(m) Participant's job
description or assigned duties and responsibilities.
[4] Performance Goals will be established and communicated to each
affected Code (S)162(m) Participant in an Award Agreement no later than
the earlier of:
[a] 90 days after the beginning of the applicable Performance
Period; or
[b] The expiration of 25 percent of the applicable Performance
Period.
[5] As of the end of each Performance Period, the Committee will certify
to the Board the extent to which each Code (S)162(m) Participant has or
has not met the Performance Goals established under this section. These
Performance Shares or Performance Units will be:
[a] Forfeited, to the extent that Performance Goals have not been
met at the end of the Performance Period, and again become available
to be granted under the Plan; or
[b] Valued and distributed, in a single lump sum in the form of
cash, Stock or a combination of both (as determined by the
Committee) as soon as practicable after the last day of the
Performance Period, to the extent that related Performance Goals
have been met.
8.03 Non-Code (S)162(m) Participants. At its discretion, the Committee may
issue Performance Shares and Performance Units to Participants who are not
Code (S)162(m) Participants ("Non-Code (S)162(m) Participants") by applying the
procedures described in Section 8.02 or on any other basis it deems appropriate.
These Performance Shares or Performance Units will be;
[1] Forfeited, to the extent that any Performance Goals or other
standards (if any) have not been met, and again become available to be
granted under the Plan; or
[2] Valued and distributed, in a single lump sum in the form of cash,
Stock or a combination of both (as determined by the Committee) at a time
determined by the Committee, to the extent that related Performance Goals
(if any) have been met.
8.04 Rights Associated with Performance Shares and Performance Units. During
the Performance Period, and unless any Award Agreement provides otherwise:
[1] Employees may not exercise voting rights associated with their
Performance Shares or Performance Units; and
12
[2] No dividends or other distributions made or declared during the
Performance Period will be paid with respect to any Performance Shares or
Performance Units.
9.00 STOCK APPRECIATION RIGHTS
9.01 SAR Grants, Subject to the terms of the Plan and the Award Agreement, the
Committee may grant Affiliated SARs, Freestanding SARs and Tandem SARs (or a
combination of each) to Employees at any time during the term of this Plan.
9.02 Exercise Price. Unless the Committee specifies otherwise in the Award
Agreement, the Exercise Price specified in the Award Agreement will:
[1] In the case of an Affiliated SAR, not be less than 100 percent of
the Fair Market Value of a share of Stock on the Grant Date;
[2] In the case of a Freestanding SAR, not be less than 100 percent of
the Fair Market Value of a share of Stock on the Grant Date; and
[3] In the case of a Tandem SAR, not be less than the Exercise Price of
the related Option.
9.03 Exercise of Affiliated SARs. Affiliated SARs will be deemed to be
exercised on the date the related Option is exercised. However:
[1] An Affiliated SAR will expire no later than the date the related
Option expires;
[2] The value of the payout with respect to the Affiliated SAR will not
be more than the Exercise Price of the related Option; and
[3] An Affiliated SAR may be exercised only if the Fair Market Value of
the shares of Stock subject to the related Option is larger than the
Exercise Price of the related Option.
9.04 Exercise of Freestanding SARs. Freestanding SARs will be exercisable
subject to the terms specified in the Award Agreement.
9.05 Exercise of Tandem SARs. Tandem SARs may be exercised with respect to all
or part of the shares of Stock subject to the related Option by surrendering the
right to exercise the equivalent portion of the related Option. A Tandem SAR may
be exercised only with respect to the shares of Stock for which its related
Option is then exercisable. However:
[1] A Tandem SAR will expire no later than the date the related Option
expires;
[2] The value of the payout with respect to the Tandem SAR will not be
more than 100 percent of the difference between the Exercise Price of the
related Option and the Fair Market Value of a share of Stock subject to
the related Option at the time the Tandem SAR is exercised; and
13
[3] A Tandem SAR may be exercised only if the Fair Market Value of a
share of Stock subject to the Option is larger than the Exercise Price of
the related Option.
9.06 Settling SARs.
[1] A Member exercising a Tandem SAR or a Freestanding SAR will receive
an amount equal to:
[a] The difference between the Fair Market Value of a share of
Stock on the exercise date and the Exercise Price; multiplied by
[b] The number of shares of Stock with respect to which the Tandem
SAR or Freestanding SAR is exercised.
[2] A Member will not receive any cash or other amount when exercising
an Affiliated SAR. Instead, the value of the Affiliated SAR being
exercised will be applied to reduce (but not below zero) the Exercise
Price of the related Option.
At the discretion of the Committee, the value of any Tandem SAR or Freestanding
SAR being exercised will be settled in cash, shares of Stock or any combination
of both.
10.00 TERMINATION
10.01 Retirement. Unless otherwise specified in the Award Agreement, all Awards
that are outstanding (whether or not then exercisable) when a Participant
Retires may be exercised at any time before the earlier of [1] the expiration
date specified in the Award Agreement or [2] 12 months (three months in the case
of Incentive Stock Options) beginning on the Retirement date (or any shorter
period specified in the Award Agreement).
10.02 Death or Disability. Unless otherwise specified in the Award Agreement,
all Awards that are outstanding (whether or not then exercisable) when a
Participant Terminates because of death or Disability may be exercised by the
Participant or the Participant's Beneficiary at any time before the earlier of
[1] the expiration date specified in the Award Agreement or [2] 12 months
beginning on the date of death or Termination because of Disability (or any
shorter period specified in the Award Agreement).
10.03 Termination for Cause. Unless otherwise specified in the Award Agreement,
all Awards that are outstanding (whether or not then exercisable) if a
Participant Terminates for Cause will be forfeited.
10.04 Termination for any Other Reason. Unless otherwise specified in the Award
Agreement or subsequently, any Awards that are outstanding when a Participant
Terminates for any reason not described in Sections 10.01 through 10.03 and
which are then exercisable, or which the Committee has, in its sole discretion,
decided to make exercisable, may be exercised at any time before the earlier of
[1] the expiration date specified in the Award Agreement or [2] 90 days
beginning on the date the Participant Terminates.
10.05 Limits on Exercisability/Forfeiture of Exercised Awards. Regardless of
any other provision of this section or the Plan and unless the Committee
specifies otherwise in the Award
14
Agreement or the Company subsequently consents in writing, a Member who fails to
comply with Section 10.05[3]will:
[1] Forfeit all outstanding Awards; and
[2] Forfeit all shares of Stock or cash (including dividends held in
escrow under Sections 7.04[2]) acquired or received by the exercise of
any Award, lapse of any restrictions or attainment of any Performance
Goals on the date of Termination or within 180 days before and 365 days
after Terminating, including any amounts received under a cash settlement
described in Section 4.04 but excluding amounts received as a consequence
of a Change in Control as described in Section 11.00.
[3] The forfeiture described in Sections 10.05[1] and [2] will apply if,
within the time period described in Section 10.05[2] the Member
"competes" with the Company or any Subsidiary. For purposes of this
section, "compete" means:
[a] Anywhere in the State of Ohio or in any other state in which
the Company or any Subsidiary is conducting business when benefits
are paid, the Member, without the written consent of the Company,
provides advice with respect to, engages in or directly or
indirectly supervises or assists the provision of any service or
sale of any product that competes with any service or product of the
Company or any Subsidiary; or
[b] Anywhere in any state, the Member accepts employment with, the
Member provides advice to, or engages in or directly or indirectly
supervises or assists the provision of any service or sale of any
product by any person, company, partnership, corporation or other
entity that builds homes, develops land or otherwise competes with
the Company or any Subsidiary in any market, city or area in which
the Company or any Subsidiary conducts business when benefits are
paid.
11.00 CHANGE IN CONTROL
11.01 Accelerated Vesting and Settlement. Subject to Section 11.02, on the date
of any Change in Control:
[1] [a] Each Option (other than Director Options) outstanding on the
date of a Change in Control (whether or not exercisable) will be
cancelled in exchange [i] for cash equal to the excess of the Change in
Control Price over the Exercise Price associated with the cancelled
Option or, [ii] at the Committee's discretion, for whole shares of Stock
with a Fair Market Value equal to the excess of the Change in Control
Price over the Exercise Price associated with the cancelled Option and
the Fair Market Value of any fractional share of Stock will be
distributed in cash, and [b] all related Affiliated and Tandem SARs will
be cancelled. However, the Committee, in its sole discretion, may offer
the holders of the Options to be cancelled a reasonable opportunity (not
longer than 15 days beginning on the date of the Change in Control) to
exercise all their outstanding Options (whether or not otherwise then
exercisable) by following the exercise procedures described in Section
6.00;
15
[2] All Performance Goals associated with Performance Shares or
Performance Units will be deemed to have been met on the date of the
Change in Control, all Performance Periods accelerated to the date of the
Change in Control and all outstanding Performance Shares and Performance
Units (including those subject to the acceleration described in this
subsection) will be distributed in a single lump sum cash payment;
[3] All Freestanding SARs will be deemed to be exercisable and will be
liquidated in a single lump sum cash payment; and
[4] All Restricted Stock will be released from escrow and distributed to
the affected Employee (or any restrictions imposed on the distributed
certificate removed).
11.02 Alternative Awards. Section 11.01 will not apply to the extent that the
Committee reasonably concludes in good faith before the Change in Control occurs
that Awards will be honored or assumed or new rights substituted for the Award
(collectively "Alternative Awards") by the Employee's employer (or the parent or
a subsidiary of that employer) immediately after the Change in Control, provided
that any Alternative Award must:
[1] Be based on stock that is (or, within 60 days of the Change in
Control, will be) traded on the Nasdaq National Market or a national
securities exchange or system;
[2] Provide the Employee (or each Employee in a class of Employees)
rights and entitlements substantially equivalent to the rights, terms and
conditions of each Award for which it is substituted, including an
identical or better exercise or vesting schedule and identical or better
timing and methods of payment, provided that such substitution of an
Award will not constitute a modification, extension or renewal of any
Award;
[3] Have substantially equivalent economic value to the Award
(determined at the time of the Change in Control) for which it is
substituted; and
[4] Provide that, if the Employee's employment is involuntarily
Terminated without Cause or constructively Terminated by the Employee,
any conditions on the Employee's rights under, or any restrictions on
transfer or exercisability applicable to, each Alternative Award will be
waived or lapse.
For purposes of this section, a constructive Termination means a Termination by
an Employee following a material reduction in the Employee's compensation or job
responsibilities (when compared to the Employee's compensation and job
responsibilities on the date of the Change in Control) or the relocation of the
Employee's principal place of employment to a location at least 50 miles from
his or her principal place of employment on the date of the Change in Control
(or other location to which the Employee has been reassigned with his or her
written consent), in each case without the Employee's written consent but only
if the material reduction or relocation occurs within 24 months after the Change
in Control.
11.03 Director Options. Upon a Change in Control, each outstanding Director
Options will be cancelled unless [1] the Stock continues to be traded on an
established securities market
16
after the Change in Control or [2] the Eligible Director continues to be a Board
member after the Change in Control. In the situations just described, the
Director Option will be unaffected by a Change in Control. Any Director Option
to be cancelled under the next preceding sentence will be exchanged [3] for cash
equal to the excess of the Change in Control Price over the Exercise Price
associated with the cancelled Director Option or [4] at the Committee's
discretion, for whole shares of Stock with a Fair Market Value equal to the
excess of the Change in Control Price over the Exercise Price associated with
the cancelled Director Option and the Fair Market Value of any fractional share
of Stock will be distributed in cash. However, the Committee, in its sole
discretion, may offer the holders of the Director Options to be cancelled a
reasonable opportunity (not longer than 15 days beginning on the date of the
Change in Control) to exercise all their outstanding Director Options (whether
or not otherwise then exercisable) by following the exercise procedures
described in Section 6.00.
11.04 Coordination of Change In Control Benefits. If the sum of the benefits
received due to a Change in Control, as described in this section, and those
provided under all other plans, programs or agreements between the Participant
and the Company or any Subsidiary constitute "excess parachute payments" as
defined in Code (S)280G(b)(1), the Company and or Subsidiary will either:
[1] Reimburse the Participant for the amount of any excise tax due under
Code (S)4999 (but not for any income taxes or additional excise taxes
associated with this initial payment), if this procedure provides the
affected Participant with an after-tax amount that is larger than the
after-tax amount produced under Section 11.04[2]; or
[2] Reduce the amounts paid to the Participant under this Plan so that
his or her total "parachute payment" as defined in Code (S)280G(b)(2)(A)
under this and any all other plans, programs or agreements between the
Participant and the Company or Subsidiary will be $1.00 less than the
amount that would be an "excess parachute payment," if this procedure
provides the Participant with an after-tax amount that is larger than the
after-tax amount produced under Section 11.04[1].
12.00 AMENDMENT, MODIFICATION AND TERMINATION OF PLAN
The Board or the Committee may terminate, suspend or amend the Plan at any time
without shareholder approval except to the extent that shareholder approval is
required to satisfy applicable requirements imposed by [1] Rule 16b-3 under the
Act, or any successor rule or regulation, [2] applicable requirements of the
Code or [3] the Nasdaq National Market or any securities exchange, market or
other quotation system on or through which the Company's securities are listed
or traded. Also, no Plan amendment may [4] result in the loss of a Committee
member's status as a "non-employee director" as defined in Rule 16b-3 under the
Act, or any successor rule or regulation, with respect to any employee benefit
plan of the Company, [5] cause the Plan to fail to meet requirements imposed by
Rule 16b-3 or [6] without the consent of the affected Member, adversely affect
any Award issued before the amendment, modification or termination.
17
13.00 MISCELLANEOUS
13.01 Assignability. Except as described in this section, an Award may not be
transferred except by will or the laws of descent and distribution and, during
the Member's lifetime, may be exercised only by the Member, the Member's
guardian or legal representative. However, with the permission of the Committee,
a Member or a specified group of Members may transfer Awards (other than
Incentive Stock Options) to a revocable inter vivos trust, of which the Member
is the settlor, or may transfer Awards (other than an Incentive Stock Option) to
any member of the Member's immediate family, any trust, whether revocable or
irrevocable, established solely for the benefit of the Member's immediate
family, any partnership or limited liability company whose only partners or
members are members of the Member's immediate family or an organization
described in Code (S)501(c)(3) ("Permissible Transferees"). Any Award
transferred to a Permissible Transferee will continue to be subject to all of
the terms and conditions that applied to the Award before the transfer and to
any other rules prescribed by the Committee. A Permissible Transferee [other
than an organization described in Code (S)501(c)(3)] may not retransfer an Award
except by will or the laws of descent and distribution and then only to another
Permissible Transferee.
13.02 Beneficiary Designation. Each Member may name a Beneficiary or
Beneficiaries (who may be named contingently or successively) to receive or to
exercise any vested Award that is unpaid or unexercised at the Member's death.
Each designation made will revoke all prior designations made by the same
Member, must be made on a form prescribed by the Committee and will be effective
only when filed in writing with the Committee. If a Member has not made an
effective Beneficiary designation, the deceased Member's Beneficiary will be his
or her surviving spouse or, if none, the deceased Member's estate. The identity
of a Member's designated Beneficiary will be based only on the information
included in the latest beneficiary designation form completed by the Member and
will not be inferred from any other evidence.
13.03 No Guarantee of Employment or Participation. Nothing in the Plan may be
construed as:
[1] Interfering with or limiting the right of the Company or any
Subsidiary to Terminate any Employee's employment at any time;
[2] Conferring on any Participant any right to continue as an employee
or director of the Company or any Subsidiary;
[3] Guaranteeing that any common-law employee will be selected to be a
Participant; or
[4] Guaranteeing that any Member will receive any future Awards.
13.04 Tax Withholding.
[1] The Company will withhold from other amounts owed to the Member, or
require a Member to remit to the Company, an amount sufficient to satisfy
federal, state and local withholding tax requirements on any Award,
exercise or cancellation
18
of an Award or purchase of Stock. If these amounts are not to be withheld
from other payments due to the Member (or if there are no other payments
due to the Member), the Company will defer payment of cash or issuance of
shares of Stock until the earlier of:
[a] Thirty days after the settlement date; or
[b] The date the Member remits the required amount.
If the Member has not remitted the required amount within 30 days after
the settlement date, the Company will permanently withhold from the value
of the Awards to be distributed the minimum amount required to be
withheld to comply with applicable federal, state and local income, wage
and employment taxes and distribute the balance to the Member.
[2] In its sole discretion, which may be withheld for any reason or for
no reason, the Committee may permit a Member to elect, subject to
conditions the Committee establishes, to reimburse the Company for this
tax withholding obligation through one or more of the following methods:
[a] By having shares of Stock otherwise issuable under the Award
withheld by the Company (but only to the extent of the minimum
amount that must be withheld to comply with applicable state,
federal and local income, employment and wage tax laws);
[b] By delivering to the Company previously acquired shares of
Stock that the Member has owned for at least six months;
[c] By remitting cash to the Company; or
[d] By remitting a personal check immediately payable to the
Company.
13.05 Indemnification. Each individual who is or was a member of the Committee
or of the Board will be indemnified and held harmless by the Company against and
from any loss, cost, liability or expense that may be imposed upon or reasonably
incurred by him or her in connection with or resulting from any claim, action,
suit or proceeding to which he or she may be made a party or in which he or she
may be involved by reason of any action taken or failure to take action under
the Plan as a Committee member and against and from any and all amounts paid,
with the Company's approval, by him or her in settlement of any matter related
to or arising from the Plan as a Committee member or paid by him or her in
satisfaction of any judgment in any action, suit or proceeding relating to or
arising from the Plan against him or her as a Committee member, but only if he
or she gives the Company an opportunity, at its own expense, to handle and
defend the matter before he or she undertakes to handle and defend it in his or
her own behalf. The right of indemnification described in this section is not
exclusive and is independent of any other rights of indemnification to which the
individual may be entitled under the Company's organizational documents, by
contract, as a matter of law or otherwise.
19
13.06 No Limitation on Compensation. Nothing in the Plan is to be construed to
limit the right of the Company to establish other plans or to pay compensation
to its employees or directors, in cash or property, in a manner not expressly
authorized under the Plan.
13.07 Requirements of Law. The grant of Awards and the issuance of shares of
Stock will be subject to all applicable laws, rules and regulations and to all
required approvals of any governmental agencies or national securities exchange,
market or other quotation system. Also, no shares of Stock will be issued under
the Plan unless the Company is satisfied that the issuance of those shares of
Stock will comply with applicable federal and state securities laws.
Certificates for shares of Stock delivered under the Plan may be subject to any
stock transfer orders and other restrictions that the Committee believes to be
advisable under the rules, regulations and other requirements of the Securities
and Exchange Commission, the Nasdaq National Market or any stock exchange or
other recognized market or quotation system upon which the Stock is then listed
or traded, or any other applicable federal or state securities law. The
Committee may cause a legend or legends to be placed on any certificates issued
under the Plan to make appropriate reference to restrictions within the scope of
this section.
13.08 Term of Plan. The Plan will be effective upon its adoption by the Board
and approval by the affirmative vote of the holders of at least a majority of
the common shares issued and outstanding as of the record date for the first
Annual Meeting occurring after the Board approves the Plan. Subject to Section
12.00, the Plan will continue until the tenth anniversary of the Effective Date.
13.09 Governing Law. The Plan, and all agreements hereunder, will be construed
in accordance with and governed by the laws (other than laws governing conflicts
of laws) of the State of Ohio.
13.10 No Impact on Other Benefits. Plan Awards are incentives designed to
promote the objectives described in Section 1.00. Also, Awards are not
compensation for purposes of calculating a Member's rights under any other
employee benefit plan.
13.11 Effect on Prior Plan. Upon shareholder approval of the Plan, the Prior
Plan will terminate; however, all outstanding Awards at the time of termination
will continue to be governed by the rights and terms of the Prior Plan until
exercised or forfeited.
20