Exhibit 10(r)
FOLKSAMERICA HOLDING COMPANY, INC. LONG-TERM INCENTIVE PLAN
1. PURPOSE
The purpose of the Folksamerica Holding Company, Inc. Long-Term Incentive
Plan (the "Plan") is to advance the interests of Folksamerica Holding
Company, Inc. (the "Company") and its stockholders by providing long-term
incentives to certain key executives of the Company and of its
subsidiaries.
2. ADMINISTRATION
The Plan shall be administered by the Human Resources Committee (the
"Committee") of the Board of Directors (the "Board") of the Company. No
member of the Committee shall be an employee of the Company or a subsidiary
of the Company or shall have been eligible within one year prior to his
appointment to receive awards under the Plan ("Awards") or to receive
awards under any other plan of the Company or its subsidiaries under which
participants are entitled to acquire stock, stock options, or appreciation
rights of the Company or any of its subsidiaries.
The Committee shall have exclusive authority to select the employees to be
granted Awards, to determine the type, size and terms of the Awards and to
prescribe the form of the instruments embodying Awards. The Committee shall
be authorized to interpret the Plan and the Awards granted under the Plan,
to establish, amend and rescind any rules and regulations relating to the
Plan and to make any other determinations which it believes necessary or
advisable for the administration of the Plan. The Committee may correct any
defect or supply any omission or reconcile any inconsistency in the Plan or
in any Award in the manner and to the extent the Committee deems desirable
to carry it into effect. Any decision of the Committee in the
administration of the Plan, as described herein, shall be final and
conclusive. The Committee may act only by a majority of its members in
office, except that the members thereof may authorize any one or more of
their number or any officer of the Company to execute and deliver documents
on behalf of the Committee. No member of the Company shall be liable for
anything done or omitted to be done by him or by any other member of the
Committee in connection with the Plan, except for his own willful
misconduct or as expressly provided by statute.
3. PARTICIPATING SUBSIDIARIES
If a subsidiary of the Company wishes to participate in the Plan and its
participation shall have been approved by the Board, the Board of Directors
of the subsidiary shall adopt a resolution in form and substance
satisfactory to the Committee authorizing participation by the subsidiary
in the Plan. As used herein, "subsidiary" shall mean a "subsidiary
corporation" as defined in Section 424 (f) of the Code.
A subsidiary may cease to participate in the Plan at any time by action of
the Board or by action of the Board of Directors of such subsidiary, which
latter action shall be effective not earlier than the date of delivery to
the Secretary of the Company of a certified copy of a resolution of the
subsidiary's Board of Directors taking such action. Termination of
participation in the Plan shall not relieve a subsidiary of any obligations
theretofore incurred by it under the Plan.
4. AWARDS
(a) TYPE OF AWARDS. Awards shall be limited to the following four types:
(i) "Stock Options" (ii) "Stock Appreciation Rights", (iii) "Restricted
Stock" and (iv) "Performance Shares." Stock Options, which include
"Incentive Stock Options" and other stock options or combinations
thereof, are rights to purchase common stock of the Company having a
par value of $.01 per shares
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("Shares"). A Stock Appreciation Right is a right to receive, without
payment to the Company, cash and/or Shares in lieu of the purchase of
Shares under the Stock Option to which the Stock Appreciation Right
relates.
(b) MAXIMUM NUMBER OF SHARES THAT MAY BE ISSUED. A maximum of 1,000,000
Shares, subject to adjustment as provided in paragraph 14, may be
issued under the Plan. For purposes of the foregoing, the exercise of a
Stock Appreciation Right shall constitute the issuance of Shares equal
to the Shares covered by the related Stock Option. Shares issued
pursuant to the Plan may be either authorized but unissued Shares or
reacquired Shares, or both. If any Shares issued as Restricted Shares
shall be repurchased pursuant to the Company's option described in
paragraph 6 below, or if any Shares issued under the Plan shall be
reacquired pursuant to restrictions imposed at the time of issuance,
such Shares may again be issued under the Plan.
(c) RIGHTS WITH RESPECT TO SHARES.
(i) An employee to whom Restricted Stock has been issued shall have
prior to the expiration of the Restricted Period or the earlier
repurchase of such Shares as herein provided, ownership of such
Shares, including the right to vote the same and to receive
dividends thereon, subject, however, to the Options,
restrictions and limitations imposed thereon pursuant hereto.
(ii) An employee to whom Stock Options, Stock Appreciation Rights or
Performance Shares are granted (and any person succeeding to
such employee's rights pursuant to the Plan) shall have no
rights as a shareholder with respect to any Shares issuable
pursuant thereto until the date of the issuance of a stock
certificate (whether or not delivered) therefore. Except as
provided in paragraph 14, no adjustment shall be made for
dividends, distributions or other rights (whether ordinary or
extraordinary, and whether in cash, securities or other
property) the record date for which is prior to the date such
stock certificate is issued.
(iii) The Company, in its discretion, may hold custody during the
Restricted Period of any Shares of Restricted Stock.
(D) MARKET VALUE OF SHARES. "Market value of Shares" on any day means
(i) Shares are listed on the New York Stock Exchange, the last sale
price, regular way, or, in case no such sale takes place on such
day, the average of the closing bid and ask prices, regular way,
and either case as reported in the principle consolidated
transaction reporting systems with respect to securities listed
or admitted to trading on the New York Stock Exchange or, if
Shares are not listed or admitted to trading on the New York
Stock Exchange, as reported in the principle consolidated
transaction reporting system with respect to securities listed
on the principle national securities exchange on which Shares
are listed or admitted to trading, if Shares are not listed or
admitted to trading on any national securities exchange, the
last quoted sale price or, if not so quoted, the average of the
high bid and the low ask prices in the over-the-counter market,
as reported by NASDAQ or such other system then in use, or, if
on any such date Shares are not quoted by any such organization,
the average of the closing bid and ask prices as furnished by
one or more professional market makers making a market in Shares
and
(ii) if Shares are not publicly held or so listed on publicly traded,
the fully diluted book value per Share as determined by the
Committee in accordance with the United States generally
accepted accounting principles.
5. STOCK OPTIONS AND STOCK APPRECIATION RIGHTS
The Committee may grant Stock Options (including, in its discretion, Stock
Appreciation Rights) either alone or, as provided in paragraph 7, in
conjunction with Performance Shares. A maximum of 10,000 Stock Options and
Stock Appreciation Rights (not including Stock Appreciation Rights attached
to
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Stock Options) may be issued in one year to an employee. Each Stock
Option shall comply with the following terms and conditions:
(a) The exercise price shall not be less than the greater of (i) the fair
market value of the Shares subject to such Stock Option at the time of
grant, as determined in good faith by the Committee, or (ii) the par
value of such Shares. However, the exercise price of an Incentive Stock
Option granted to an employee who owns stock representing more than ten
percent (10%) of the voting power of all classes of stock of the
Company or of a subsidiary (a "Ten Percent Employee") shall not be less
than the greater of 110 % of such fair market value, or the par value
of such Shares.
(b) The Committee shall initially determine the number of Shares to be
subject to each Stock Option. The number of Shares subject to a Stock
Option will subsequently be reduced (i) on a share-for-share basis to
the extent that Shares under such Stock Option are used to calculate
the cash and/or Shares received pursuant to exercise of a Stock
Appreciation Right attached to such Stock Option, and (ii) on a
one-for-one basis to the extent that any Performance Shares granted in
conjunction with such Stock Option pursuant to subparagraph 7(a) are
paid, such reduction to be made in accordance with the provisions of
subparagraph 7(e)(ii).
(c) The Stock Option shall not be transferable by the optionee otherwise
than by will or the laws of descent and distribution, and shall be
exercisable during his lifetime only by him.
(d) The Stock Option shall not be exercisable:
(i) in case of any Incentive Stock Option as defined in Section 422
(b) of the Code, after the expiration of ten years from the date
it is granted, and in the case of any other Stock Option, after
the expiration of ten years from the date it is granted. Any
Stock Option may be exercised during such period only at such
time or times as the Committee may establish;
(ii) unless payment in full is made for the Shares being acquired
thereunder at the time of exercise (including any federal, state
or local income or other taxes which the Committee determines
are required to be withheld in respect of such shares); such
payment shall be made (A) in United States dollars by cash or
check, or (B) by tendering to the Company Shares owned by the
person exercising the Stock Option and having a fair market
value equal to the cash exercise price thereof, such fair market
value to be determined in such reasonable manner as may be
provided for from time to time by the Committee or as may be
required in order to comply with or to conform to the
requirements of any applicable or relevant laws or regulations,
or (C) by a combination of United States dollars and Shares as
aforesaid;
(iii) unless the person exercising the Stock Option has been, at all
times during the period beginning with the date of grant of the
Stock Option and ending on the date three months prior to such
exercise, an officer or employee of the Company or a subsidiary,
or of a corporation, or a parent or subsidiary of a corporation,
issuing or assuming the Stock Option in a transaction to which
Section 424 (a) of the Internal Revenue Code of 1986, as amended
(the "Code"), is applicable, except that:
(A) if such person shall cease to be an officer or employee of
the Company or one of its subsidiary corporations solely
by reason of a period of Related Employment as defined in
paragraph 9, he may, during such period of Related
Employment (but in no event after the Stock Option has
expired under the provisions of subparagraph 5(d)(i)
hereof), exercise such Stock Option as if he continued to
be such an officer or employee; or
(B) if an optionee shall become disabled as defined in
paragraph 8 he may, at any time within three years of the
date he becomes disabled (but in no event after the Stock
Option has expired under the provisions of subparagraph
5(d)(i) hereof), exercise the Stock Option with respect to
(i) any Shares as to which he could have exercised the
Stock Option on the date he became disabled and (ii) if
the Stock Option is not fully
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exercisable on the date he becomes disabled, the number of
additional Shares as to which the Stock Option would have
become exercisable had he remained an employee through the
next two dates on which additional Shares were scheduled
to become exercisable under the Stock Option; or
(C) if an optionee shall die while holding a Stock Option, his
executors, administrators, heirs or distributees, as the
case may be, at any time within one year after the date of
such death (but in no event after the Stock Option has
expired under the provisions of subparagraph 5(d)(i)
hereof), may exercise the Stock Option with respect to (i)
any Shares as to which the decedent could have exercised
the Stock Option at the time of his death, and (ii) if the
Stock Option is not fully exercisable on the date of his
death, the number of additional Shares as to which the
Stock Option would have become exercisable had he remained
an employee through the next two dates on which additional
Shares were scheduled to become exercisable under the
Stock Option provided, however, that if death occurs
during the three-year period following a disability as
described in subparagraph 5(d)(iv)(B) hereof, the
three-year period following a retirement as described in
subparagraph 5(d)(iv)(D) hereof or any period following a
voluntary termination in respect of which death, the
number of additional Shares as to which the Stock Option
would have become exercisable had he remained an employee
through the next date or, if applicable, two dates on
which additional Shares were scheduled to become
exercisable under the Stock Option provided, however, that
if death occurs during the three-year period following a
disability as described in subparagraph 5(d)(iv)(B)
hereof, the three-year period following a retirement as
described in subparagraph 5(d)(iv)(D) hereof or any period
following a voluntary termination in respect of which the
Board has exercised its discretion to grant continuing
exercise rights as provided in subparagraph 5(d)(iv)(E)
hereof, the Stock Option shall not become exercisable as
to any Shares in addition to those as to which the
decedent could have exercised the Stock Option at the time
of his death; or
(D) if such person shall retire under an approved retirement
program of the Company or a subsidiary (or such other plan
as may be approved by the Committee, in its sole
discretion, for this purpose) while holding a Stock Option
which has not expired and has not been fully exercised,
such person, at any time within three years after his
retirement (but in no event after the Stock Option has
expired under the provisions of subparagraph 5(d)(i)
hereof), may exercise the Stock Option with respect to any
Shares as to which he could have exercised the Stock
Option on the date he retired; or
(E) if such person shall voluntarily terminate his employment
with the Company, the Board may determine that the
optionee may exercise the Stock Option with respect to
some or all of the Shares subject to the Stock Option as
to which it would not otherwise be exercisable on the date
of his voluntary termination provided, however, that in no
event may such exercise take place after the Stock Option
has expired under the provisions of subparagraph 5(d)(i)
hereof.
(e) (i) The aggregate fair market value of Shares (determined
at the time of grant of the Stock Option pursuant to
subparagraph 5(a) of the Plan) with respect to which
Incentive Stock Options granted to any employee under the
Plan are exercisable for the first time, by such employee
during any calendar year may not exceed $100,000.
(f) If the Committee, in its discretion, so determines, there may be
related to the Stock Option, either at the time of grant or by
amendment, a Stock Appreciation Right which shall be subject to such
terms and conditions, not inconsistent with the Plan, as the Committee
shall impose, including the following:
(i) A Stock Appreciation Right may be exercised only
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(A) to the extent that the Stock Option to which it relates is
at the time exercisable, and
(B) if
(1) in the case of a Stock Option other than an Incentive
Stock Option only, such Stock Option will expire by
its terms within 30 days (90 days if the optionee is
at the time an officer of the Company who is required
to file reports pursuant to Section 16(a) of the
Securities and Exchange Act of 1934, as amended (the
"Exchange Act"));
(2) the optionee has become disabled or ceased to be an
officer or employee by reason of his retirement under
an approved retirement program of the Company or a
subsidiary (or such other plan as may be approved by
the Committee, in its sole discretion, for this
purpose); or
(3) the optionee has died.
However, if the Stock Option to which the Stock
Appreciation Right relates is exercisable and if the
optionee is at the time an officer of the Company who
is required to file reports pursuant to Section 16(a)
of the Exchange Act, the Stock Appreciation Right
may, subject to the approval of the Committee, be
exercised during such periods, as may be specified by
the Committee;
(ii) A Stock Appreciation Right shall entitle the optionee (or any
person entitled to act under the provisions of subparagraph
5(d)(iv)(C) hereof) to surrender unexercised the related Stock
Option (or any portion of such Option) to the Company and to
receive from the Company in exchange therefor that number of
Shares having an aggregate value equal to the excess of the value
of one Share over the Stock Option price per share, times the
number of Shares subject to the Stock Option, or portion thereof,
which is so surrendered. The Committee shall be entitled to elect
to settle the obligation arising out of the exercise of a Stock
Appreciation Right by the payment or cash equal to the aggregate
value of the Shares it would otherwise be obligated to deliver or
partly by the payment of cash and partly by the delivery of
Shares. Any such election shall be made within 15 business days
after the receipt by the Committee of written notice of the
exercise of the Stock Appreciation Right. The value of a Share for
this purpose shall be the fair market value thereof on the last
business day preceding the date of the election to exercise the
Stock Appreciation Right, provided that if notice of such election
is received by the Committee more than three business days after
the date of such election (as such date of election is stated in
the notice of election), the Committee may, but need not,
determine the value of a Share as of the day preceding the date on
which the notice of election is received;
(iii) No fractional Shares shall be delivered under this subparagraph
5(f), but in lieu thereof a cash adjustment shall be made; and
(iv) In the case of a Stock Appreciation Right attached to an Incentive
Stock Option, such Stock Appreciation Right shall only be transferable
when such Incentive Stock Option is transferable pursuant to Section 5
(c) hereof.
(g) Notwithstanding anything herein to the contrary:
(i) in the event an Unfriendly Change in Control of the Company, as
defined in subparagraph 10(b), occurs, then as of the Acceleration
Date, as defined in subparagraph 10(b), each Stock Option granted
hereunder shall be exercisable in full; provided, however, that in
the case of an officer subject to Section 16(b) of the Exchange
Act, no Stock Option shall become exercisable until the expiration
of the period ending six months after the date of grant of the
Stock Option hereunder; and
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(ii) in the event a Change in Control as defined in subparagraph 10(a)
occurs and within 24 months thereafter: (A) there is a Termination
Without Cause, as defined in paragraph 11, of an optionee's
employment; or (B) there is a Constructive Termination as defined
in paragraph 12, of an optionee's employment; or (C) there occurs
an Adverse Change in the Plan, as defined in paragraph 13, in
respect of an optionee affecting any Award held by such optionee
and if the optionee then holds a Stock Option,
1. In the case of a Termination Without Cause or a Constructive
Termination, the optionee may exercise the entire Stock
Option, at any time within 30 days of such Termination Without
Cause or such Constructive Termination (but in no event after
the option has expired under the provisions of subparagraphs
(5)(d)(i)), and
2. in the case of an Adverse Change in the Plan, the optionee may
exercise the entire Stock Option at any time after such
Adverse Change in the Plan in respect of him and prior to the
date 30 days following his termination of employment as a
result of a Termination Without Cause or a Constructive
Termination (but in no event after the option has expired
under the provisions of subparagraph 5(d) (i)).
Notwithstanding anything in this subparagraph 5(g) to the
contrary, (x) in the case of an officer subject to Section
16(b) of the Exchange Act, no Stock Option shall become
exercisable until the expiration of the period ending six
months after the date of grant of the Stock Option hereunder.
6. RESTRICTED STOCK
Each Award of Restricted Stock shall comply with the following terms and
conditions:
(a) The Committee shall determine the number of Shares to be issued to a
participant pursuant to the Award.
(b) Shares issued may not be sold, assigned, transferred, pledged,
hypothecated or otherwise disposed of, except by will or the laws of
descent and distribution, for such period from the date on which the
Award is granted (the "Restricted Period") as the Committee shall
determine. The Company shall have the option to repurchase the Shares
subject to the Award at such price as the Committee shall have fixed,
in its sole discretion, when the Award was made, which option will be
exercisable if the participant's continuous employment with the Company
or a subsidiary shall terminate for any reason, except solely by reason
of an event described in paragraph 6(c), prior to the expiration of the
Restricted Period or the earlier lapse of the option. Such option shall
be exercisable on such terms, in such manner and during such period as
shall be determined by the Committee when the Award is made.
Certificates for Shares issued pursuant to Restricted Stock Awards
shall bear an appropriate legend referring to the foregoing option and
other restrictions. Any attempt to dispose of any such Shares in
contravention of the foregoing option and other restrictions shall be
null and void and without effect. If Shares issued pursuant to a
Restricted Stock Award shall be repurchased pursuant to the option
described above, the participant to whom the Award was granted, or in
the event of his death after such option become exercisable, his
executor or administrator, shall forthwith deliver to the Secretary of
the Company any certificates for the Shares awarded to the participant,
accompanied by such instruments of transfer, if any, as may reasonably
be required by the Secretary of the Company. If the option described
above is not exercised by the Company, such option and the restriction
imposed pursuant to the first sentence of this subparagraph 6(b) shall
terminate and be of no further force and effect. Notwithstanding
anything to the contrary in this paragraph 6 (b), neither any
Restricted Period nor any option shall lapse to the extent the Company
or any subsidiary would be unable to take a deduction with respect to
such lapse by reason of Section 162 (m) of the Code.
(c) If a participant who has been in the continuous employment of the
Company or of a subsidiary shall,
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(i) die or become disabled (as defined in paragraph 8) during the
Restricted Period, the option of the Company to repurchase (and
any and all other restrictions on) all Shares awarded to him under
such Award shall lapse and cease to be effective as of the date on
which his death or disability occurs, or
(ii) voluntarily terminate his employment with the Company or retire
under an approved retirement plan of the Company or of a
subsidiary (or such other retirement plan as may be approved by
the Committee, in its sole discretion, for this purpose) during
Restricted Period, the Board may determine that the option to
repurchase and any and all other restrictions on some or all of
the Shares awarded to him under such Award, if such option and
other restrictions are still in effect, shall lapse and cease to
be effective as the date on which such voluntary termination or
retirement occurs.
(d) In the event within 24 months after a Change in Control as defined in
subparagraph 10(a) and during the Restricted Period
(i) there is a Termination Without Cause, as defined in paragraph 11,
of the employment of a participant;
(ii) there is a Constructive Termination, as defined in paragraph 12,
of the employment of a participant; or
(iii) there occurs an Adverse Change in the Plan, as defined in
paragraph 13, in respect of a participant, the option to
repurchase (and any and all other restrictions on) all Shares
awarded to him under his Award shall lapse and cease to be
effective as of the date on which such event occurs.
7. PERFORMANCE SHARES
The Award of Performance Shares to a participant will entitle him to
receive, without payment to the Company, all or part of a specified amount
(the "Actual Value") determined by the Committee, if the terms and
conditions specified herein and in the Award are satisfied. Payment in
respect of an Award shall be made as provided in subparagraph 7(e). Each
Award of Performance Shares shall be subject to the following terms and
conditions:
(a) The Committee shall determine the number of Performance Shares to be
granted to each participant and whether or not such Performance Shares
are granted in conjunction with a Stock Option (the "Associated Stock
Option"). The "Maximum Value" of each Performance Share shall be the
market value per Share or a percentage of base salary as determined by
the Board on the date the award is paid or becomes payable to
participants. Performance Shares may be issued in different classes or
series having different terms and conditions. In the case of any
Performance Shares granted in conjunction with an Associated Stock
Option, the number of Performance Shares shall initially be equal to
the number of Shares which are subject to the Associated Stock Option,
but the number of such performance Shares shall be reduced on a one for
one basis to the extent that (A) Shares are purchased upon exercise of
the Associated Stock Option, or (B) Shares may no longer be purchased
under the Associated Stock Option because the Associated Stock Option
or a part thereof has been surrendered unexercised pursuant to exercise
of a Share Appreciation Right attached to such Associated Stock Option.
(b) The award period (the "Award Period") in respect of any Award of
Performance Shares shall be such period as the Committee shall
determine commencing as of the beginning of the fiscal year of the
Company in which such Award is made. An Award Period may contain a
number of performance periods; each performance period shall commence
on or after the first day of the Award Period and shall end no later
than the last day of the Award Period. At the time each Award is made,
the Committee shall establish performance objectives to be attained
within the performance periods as the means of determining the Actual
Value. The performance objectives
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shall be based on the Company's growth in intrinsic business value, as
outlined below, for each of the fiscal years comprising of the
performance period(s). The Actual Value of a Performance Share shall be
a portion of such Maximum Value only if the performance objectives are
met in part. In determining Actual Value, the Committee may either (i)
multiply the total number of Shares available for payout at that time
with respect to the participant by the Actual Value of each individual
Share or (ii) multiply the Maximum Value of each individual Share by a
number of Shares equal to or less than the total number of Shares
available for payout, provided that the products obtained in (i) and/or
(ii) are the same. The Company's growth in intrinsic business value for
any performance period shall be measured individually or as a
combination of the following measurement factors: (i) the sum of the
Company's return on equity (computed in accordance with generally
accepted accounting principles ("GAAP")) for any fiscal years in the
performance period divided by the number of fiscal years in the
performance period, (ii) the growth in market value per Share for any
fiscal years in the performance period divided by the number of fiscal
years in the performance period, or (iii) the sum of the Company's
economic return on equity (computed as the Company's GAAP return on
equity adjusted for changes in the intrinsic value of assets whose
value differs from their GAAP carrying value) for any fiscal years in
the performance period divided by the number of fiscal years in the
performance period. The Committee shall determine, no later than the
award date and prior to the commencement of the performance period of
such award, which of the above measurement factor(s) will be the
relevant performance objectives for each award.
(c) Performance Shares shall be cancelled if the participant's continuous
employment with the Company or any of its subsidiaries shall terminate
for any reason prior to the end of the Award Period (in which event the
Associated Stock Option, if any, shall continue in effect in accordance
with its terms), except solely by reason of a period of Related
Employment as defined in paragraph 9, and except as otherwise specified
in this subparagraph 7(c) or in subparagraph 7(d). Notwithstanding the
foregoing an without regard to subparagraph 7(b), if a participant
shall,
(i) while in such employment, die or become disabled as described in
paragraph 8 prior to the end of the Award Period, the Performance
Shares shall be cancelled at the end of the next ending
performance period and he, or his legal representative, as the
case may be, shall receive payment in respect of such Shares which
he would have received had he been in continuous employment with
the Company through the end of that period and had the individual
performance objectives, if any, that were imposed been achieved;
provided, however, that no such continuation shall be deemed to
have occurred for purposes of applying subparagraph 7(d) in the
event of an Adverse Change in the Plan in respect of the
participant following a Change in Control; or
(ii) retire under an approved retirement program of the Company or a
subsidiary (or such other plan as may be approved by the
Committee, in its sole discretion, for this purpose) prior to the
end of the Award Period, and
(A) at the time of his retirement, the participant is 65 years old
or older, the Performance Shares shall be cancelled at the end
of the next ending performance period, and he shall receive
the Maximum Value in respect to such Shares, at the date of
cancellation,
(B) at the time of his retirement the participant is less than 65
years old and his retirement occurs prior to the end of the
first performance period, and before 24 months have elapsed
since the first day of the Award Period, the participant shall
receive payment with respect to the Actual Value of one-ninth
of the Performance Shares awarded to him under the Award, and
(C) at the time of his retirement the participant is less than 65
years old and his retirement occurs prior to the end of the
first performance period and after at least 24 months have
elapsed since the first day of the Award Period, the
participant shall receive payment with respect to the Actual
Value of two-ninths of the Performance Shares awarded to him
under the Award.
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(d) If within 24 months after a Change in Control of the Company as defined
in subparagraph 10(a) and prior to the end of an Award Period:
(i) there is a Termination Without Cause, as defined in paragraph 11,
of the employment of a participant;
(ii) there is a Constructive Termination, as defined in paragraph 12,
of the employment of a participant; or
(iii) there occurs an Adverse Change in the Plan, as defined in
paragraph 13, in respect of a participant, then:
(A) the participant shall receive the Maximum Value of:
(1) that number of Performance Shares which is in the same
proportion to the total number of Performance Shares
awarded to the participant under such Award as
(x) the number of full months which have elapsed since
the first day of the Award Period to the end of the
first month in which occurs one of the events
described in clauses (i), (ii) or (iii) of
subparagraph 7(d) is to
(y) the total number of months in the Award Period, less
(2) the number of Performance Shares awarded to the
participant under the Award in respect of which payment
has already been made to the participant, and
(B) if the number of Performance Shares determined pursuant to
subclause (1) of clause (A) is less than the number of
Performance Shares subject to the particular Award, the
participant shall receive the Actual Value of the remaining
Performance Shares. The Actual Value of the remaining
Performance Shares shall be determined as follows:
(x) if the Board shall have determined, prior to the Change in
Control and based on the most recent performance status
reports, that the performance objectives for the
particular Award were being met at the date of the
determination, the Actual Value of the remaining
Performance Shares subject to the particular Award shall
be equal to their Maximum Value, and
(y) if the determination of the Board was that the performance
objectives for the particular Award were not being met at
the date of the determination, the Actual Value of the
remaining Performance Shares subject to the particular
Award shall be such amount as shall have been determined
by the Board as provided above in this subparagraph 7(d),
but in no event shall Actual Value be less than fifty
percent (50%) of Maximum Value. Payment of any amount in
respect of Performance Shares as described above in this
subparagraph 7(d) shall be made as promptly as possible
after the occurrence of one of the events described in
clauses 7(d)(i) through 7(d)(iii). Notwithstanding
anything herein to the contrary, if, following a Change in
Control of the Company as defined in subparagraph 10(a), a
participant's employment remains continuous through the
end of a performance period, then the participant shall be
paid with respect to those Performance Shares for which he
would have been paid had there not been a Change in
Control and the Actual Value of those Shares shall be
determined in accordance with subparagraph 7(e).
(e) Except as otherwise provided in subparagraph 7(d), as soon as
practicable after the end of the performance period or such earlier
date as the Committee in its sole discretion may designate, the
Committee shall determine whether the conditions of subparagraphs 7(b)
and/or 7(c) hereof have
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been met and, if so, shall certify such fact to the Board of Directors
and shall ascertain the Actual Value of the Performance Shares. If the
Performance Shares:
(i) were not awarded in conjunction with an Associated Stock Option,
the Committee shall cause an amount equal to the Actual Value of
the Performance Shares earned by the participant to be paid to him
or his beneficiary; or
(ii) were awarded in conjunction with an Associated Stock Option, the
Committee shall determine, in accordance with criteria specified
by the Committee when the Award was made, (A) to cancel the
Performance Shares, in which event no amount in respect thereof
shall be paid to the participant or his beneficiary, and the
Associated Stock Option shall continue in effect in accordance
with its terms, (B) to pay the Actual Value of the Performance
Shares to the participant or his beneficiary, in which event the
Associated Stock Option shall be cancelled, or (C) to pay to the
participant or his beneficiary the Actual Value of only a portion
of the Performance Shares, in which event (1) all such Performance
Shares shall be cancelled and (2) the Associated Stock Option
shall be cancelled only as to a number of Shares equal to the
number of Performance Shares so paid. Such determination by the
Committee shall, if practicable, be made during the three-month
period following the end of the performance period, or during such
earlier period as shall be designated by the Committee and shall
be made pursuant to criteria, specified by the Committee, which
shall be uniform for all Awards having the same performance
period.
Payment of any amount in respect of the Performance Shares shall
be made by the Company as promptly as practicable or shall be
deferred to such other time or times as the Committee shall
determine, and may be made in cash, in Shares, or partly in cash
and partly in Shares as determined by the Committee. Such deferred
payments may be made by undertaking to pay cash in the future,
together with such additional amounts as may accrue thereon until
the date or dates of payment, as determined by the Committee in
its discretion.
8. DISABILITY
For the purposes of this Plan, a participant shall be deemed to be disabled
if the Committee shall determine that (i) the physical or mental condition
of the participant is such as would entitle him to payment of monthly
disability benefits under the Source One Long-Term Disability Income Plan
or any disability plan of the Company or a subsidiary in which he is a
participant or (ii) he is not a participant in any such plan but his
physical or mental condition would entitle him to benefits under the Source
One Long-Term Disability Income Plan if he were a participant therein.
9. RELATED EMPLOYMENT
For the purposes of this Plan, Related Employment shall mean the employment
of an individual by an employer which is neither the Company nor a
subsidiary provided: (i) such employment is undertaken by the individual
and continued at the request of the Company or a subsidiary; (ii)
immediately prior to undertaking such employment, the individual was an
officer or employee of the Company or a subsidiary, or was engaged in
Related Employment as herein defined; and (iii) such employment is
recognized by the Committee, in its sole discretion, as Related Employment
for the purposes of this paragraph 9. The death or disability of an
individual during a period of Related Employment as herein defined shall be
treated, for purposes of this Plan, as if the death or onset of disability
had occurred while the individual was an officer or employee of the
Company.
10. CHANGE IN CONTROL
(a) For purposes of this Plan, a "Change in Control of the Company" within
the meaning of this subparagraph 10(a) shall occur if:
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(i) Any person or group (within the meaning of Sections 13(d) and
14(d)(2) of the Exchange Act), other than John J. Byrne, Berkshire
Hathaway, Inc. or one of its wholly owned subsidiaries or the
Company, becomes the beneficial owner (within the meaning of Rule
13d-3 under the (Exchange Act) of thirty-five percent (35%) or
more of the Company"s then outstanding Shares;
(ii) the Continuing Directors, as defined in subparagraph 10(c), cease
for any reason to constitute a majority of the Board of the
Company; or
(iii) the business of the Company for which the participant's services
are principally performed is disposed of by the Company pursuant to a
sale or other disposition of all or substantially all of the business
or business related assets of the Company (including the capital stock
of a subsidiary of the Company). A Change in Control of the Company
within the meaning of this subparagraph 10(a) also may constitute an
Unfriendly Change in Control of the Company within the meaning of this
subparagraph 10(b).
(b) A Change in Control of the Company shall be deemed an "Unfriendly
Change in Control of the Company" if:
(i) any person or group (within the meaning of Section 13(d) and
14(d)(2) of the Exchange Act), other than American Express Company or
the Company, becomes the beneficial owner (within the meaning of Rule
13d-3 under the Exchange Act) of thirty-five percent (35%) or more of
the Company's then outstanding Shares through a transaction that is
opposed by the Company's Chairman and Chief Executive Officer, and
(ii) a majority of the Company's Continuing Directors, as defined in
subparagraph 10(c), by resolution adopted within 30 days following the
date the Company becomes aware that subparagraph 10(b)(i) has been
satisfied, determines that a Change in Control has occurred.
For purposes of subparagraph 5(g), "Acceleration Date" shall mean the date
on which a majority of the Company's Continuing Directors adopts a
resolution (or takes other action) making the determination that a Change
in Control of the Company has occurred.
(c) For the purposes of this Plan, "Continuing Director" shall mean a
member of the Board (A) who is not an employee of the Company or its
subsidiaries or of a holder of, or an employee or an affiliate of an
entity or group that holds, thirty-five percent (35 %) or more of the
Company's Shares and (B) who either was a member of the Board on
September 4, 1985, or who subsequently became a director of the Company
and whose election, or nomination for election, by the Company's
shareholders was approved by a vote of a majority of the Continuing
Directors then on the Board (which term, for purposes of this
definition, shall mean the whole Board and not any committee thereof).
Any action, approval of which shall require the approval of a majority
of the Continuing Directors, may be authorized by one Continuing
Director, if he is the only Continuing Director on the Board, but no
such action may be taken if there are not Continuing Directors on the
Board.
11. TERMINATION WITHOUT CAUSE
For purposes of this Plan, "Termination Without Cause" shall mean a
termination of the participant's employment with the Company or a
subsidiary by the Company or the subsidiary other than (i) for disability
as described in paragraph 8 or (ii) for Cause. "Cause" shall mean (a) an
act or omission by the participant that constitutes a felony or any crime
involving moral turpitude; or (b) willful gross negligence or willful gross
misconduct by the participant in connection with his employment by the
Company or by a subsidiary which causes, or is likely to cause, material
loss or damage to the Company.
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12. CONSTRUCTIVE TERMINATION
"Constructive Termination" shall mean a termination of employment with the
Company or a subsidiary at the initiative of the participant that the
participant declares by prior written notice delivered to the Secretary of
the Company to be a Constructive Termination by the Company or a subsidiary
and which follows (a) a material decrease in his salary or (b) a material
diminution in the authority, duties or responsibilities of his position
with the result that the participant makes a determination in good faith
that he cannot continue to carry out his job in substantially the same
manner as it was intended to be carried out immediately before such
diminution. Notwithstanding anything herein to the contrary, Constructive
Termination shall not occur within the meaning of this paragraph 12 until
and unless 30 days have elapsed from the date the Company receives such
written notice without the Company curing or causing to be cured the
circumstance or circumstances described in this paragraph 12 on the basis
of which the declaration of Constructive Termination is given.
13. ADVERSE CHANGE IN THE PLAN
An "Adverse Change in the Plan" shall mean
(a) termination of the Plan pursuant to subparagraph 19(a);
(b) amendment of the Plan pursuant to paragraph 18 that materially
diminishes the value of Awards that may be granted under the Plan,
either to individual participants or in the aggregate, unless there is
substituted concurrently authority to grant long-term incentive awards
of comparable value to individual participants in the Plan or in the
aggregate, as the case may be; or
(c) in respect of any holder of an Award a material diminution in his
rights held under such Award (except as may occur under the terms of
the Award as originally granted) unless there is substituted
concurrently a long-term incentive award with a value at least
comparable to the loss in value attributable to such diminution in
rights.
14. DILUTION AND OTHER ADJUSTMENTS
In the event of any change in the Outstanding Shares of the Company by
reason of any stock split, stock dividend, recapitalization, merger,
consolidation, reorganization, combination or exchange of Shares or other
similar event, and if the Committee shall determine, in its sole
discretion, that such change equitably requires an adjustment in the number
or kind of Shares that may be issued under the Plan pursuant to
subparagraph 4(b), in the number or kind of Shares subject to, or the Stock
Option price per share under, any outstanding Stock Option, in the number
or kind of Shares which have been awarded as Restricted Stock or in the
repurchase option price per share relating thereto, in the number of
Maximum Value or Actual Value of Performance Shares which have been awarded
to any participant, or in any measure of performance, then such adjustment
shall be made by the Committee and shall be conclusive and binding for all
purposes of the Plan.
15. DESIGNATION OF BENEFICIARY BY PARTICIPANT
A participant may name a beneficiary to receive any payment to which he may
be entitled in respect of Performance Shares under the Plan in the event of
his death, on a form to be provided by the Committee. A participant may
change his beneficiary from time to time in the same manner. If no
designated beneficiary is living on the date on which any amount becomes
payable to a participant's executors or administrators, the term
"beneficiary" as used in the Plan shall include such person or persons.
16. FINANCIAL ASSISTANCE
If those members of the Board who are ineligible to receive Awards under
the Plan determine that such action is advisable, the Company may assist
any person to whom an Award has been granted in
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obtaining financing from the Company under a program of the Company or a
subsidiary approved pursuant to applicable law or regulation, or from a
bank or other third party, in such amount as is required to permit the
payment of taxes in respect of such Award (or, in the case of an Award of a
Stock Option, to permit the exercise thereof and/or the payment of any
taxes in respect thereof) to the extent that such taxes (and Stock Option
price) exceed the cash portion, if any, of the Award. Such assistance may
take any form that the Committee deems appropriate, including but not
limited to a direct loan from the Company or a subsidiary, a guarantee of
the obligation by the Company or a subsidiary, or the maintenance by the
Company or a subsidiary of deposits with such bank or third party.
17. MISCELLANEOUS PROVISIONS
(a) No employee or other person shall have any claim or right to be granted
an Award under the Plan. Neither the Plan nor any action taken
hereunder shall be construed as giving an employee any right to be
retained in the employ of the Company or any subsidiary.
(b) A participant's rights and interest under the Plan may not be assigned
or transferred in whole or in part either directly or by operation of
law or otherwise (except in the event of a participant's death),
including but not limited to, execution, levy, garnishment, attachment,
pledge, bankruptcy or in any other manner and no such right or interest
of any participant in the Plan shall be subject to any obligation or
liability or such participant.
(c) No Shares shall be issued hereunder unless counsel for the Company
shall be satisfied that such issuance will be in compliance with
applicable Federal and state securities laws.
(d) The Company and its subsidiaries shall have the right to deduct from
any payment made under the Plan any federal, state or local income or
other taxes required by law to be withheld with respect to such
payment. It shall be a condition to the obligation of the Company to
issue Shares upon exercise of a Stock Option, upon settlement of a
Stock Appreciation Right, or upon payment of a Performance Share that
the participant (or any beneficiary or person entitled to payment under
subparagraph 5(d)(iii)(C) hereof) pay to the Company, upon its demand,
such amount as may be required by the Company for the purpose of
satisfying any liability to withhold Federal, state or local income or
other taxes. If the amount requested is not paid, the Company may
refuse to issue Shares.
(e) The expenses of the Plan shall be borne by the Company. However, if an
Award is made to an employee of a subsidiary:
(i) if such Award results in payment of cash to the participant, such
subsidiary shall pay to the Company an amount equal to such cash
payment; and
(ii) if the Award results in the issuance to the participant of Shares,
such subsidiary shall pay to the Company an amount equal to fair
market value thereof, as determined by the Committee, on the date
such Shares are issued (or, in the case of issuance of Restricted
Stock or of Shares subject to transfer and forfeiture conditions,
equal to the fair market value thereof on the date on which such
Shares are no longer subject to applicable restriction), minus the
amount, if any received by the Company in exchange for such
Shares.
(f) The Plan shall be unfunded. The Company shall not be required to
establish any special or separate fund or to make any other segregation
of assets to assure the payment of any Award under the Plan.
(g) By accepting any Award or other benefit under the Plan, each
participant and each person claiming under or through him shall be
conclusively deemed to have indicated his acceptance and ratification
of, and consent to, any action taken under the Plan by the Company, the
Board or the Committee.
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18. AMENDMENT
The Plan may be amended at any time and from time to time by the Board, but
no amendment which increases the aggregate number of Shares which may be
issued pursuant to the Plan or the class of employees eligible to
participate shall be effective unless and until the same is approved by the
shareholders of the Company. No amendment of the Plan shall adversely
affect any right of any participant with respect to any Award previously
granted without such participant's written consent.
19. TERMINATION
This Plan shall terminate upon the earlier of the following dates or events
to occur:
(a) the adoption of a resolution of the Board terminating the Plan; or
(b) ten years from the date the Plan is initially or subsequently approved
and adopted by the shareholders of the Company in accordance with
paragraph 20 hereof.
No termination of the Plan shall alter or impair any of the rights or
obligations of any person, without his consent, under any Award previously
granted under the Plan.
20. BOARD OF DIRECTORS APPROVAL
As originally approved by the Human Resources Committee of
the Board of Directors, August, 1997 and adopted by the
shareholders of the Company, November, 1997.