Exhibit 10.13
CONSECO, INC.
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2003 AMENDED AND RESTATED LONG-TERM INCENTIVE PLAN
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CONSECO, INC.
2003 AMENDED AND RESTATED LONG-TERM INCENTIVE PLAN
Page
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1. Purpose....................................................................................................... 3
2. Definitions................................................................................................... 3
3. Administration................................................................................................ 4
4. Stock Subject to Plan......................................................................................... 5
5. Eligibility; Per-Person Award Limitations..................................................................... 6
6. Specific Terms of Awards...................................................................................... 7
7. Performance-Based Compensation............................................................................... 11
8. Certain Provisions Applicable to Awards...................................................................... 13
9. Change in Control............................................................................................ 14
10. Additional Award Forfeiture Provisions....................................................................... 14
11. General Provisions........................................................................................... 16
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CONSECO, INC.
2003 AMENDED AND RESTATED LONG-TERM INCENTIVE PLAN
1. Purpose. The purpose of this 2003 Amended and Restated Long-Term Incentive
Plan (the "Plan") is to aid Conseco Inc., a Delaware corporation (together
with its successors and assigns, the "Company"), in attracting, retaining,
motivating and rewarding certain employees and non-employee directors of
the Company or its subsidiaries or affiliates, to provide for equitable and
competitive compensation opportunities, to recognize individual
contributions and reward achievement of Company goals, and promote the
creation of long-term value for stockholders by closely aligning the
interests of Participants with those of stockholders. The Plan authorizes
stock based incentives for Participants.
2. Definitions. In addition to the terms defined in Section 1 above and
elsewhere in the Plan, the following capitalized terms used in the Plan
have the respective meanings set forth in this Section:
(a) "Annual Limit" shall have the meaning specified in Section 5(b).
(b) "Award" means any Option, SAR, Restricted Stock, Restricted Stock
Unit, Stock granted as a bonus or in lieu of another award, Dividend
Equivalent, Other Stock-Based Award or Performance Award, together
with any related right or interest, granted to a Participant under the
Plan.
(c) "Beneficiary" means the legal representatives of the Participant's
estate entitled by will or the laws of descent and distribution to
receive the benefits under a Participant's Award upon a Participant's
death, provided that, if and to the extent authorized by the
Committee, a Participant may be permitted to designate a Beneficiary,
in which case the "Beneficiary" instead will be the person, persons,
trust or trusts (if any are then surviving) which have been designated
by the Participant in his or her most recent written and duly filed
beneficiary designation to receive the benefits specified under the
Participant's Award upon such Participant's death.
(d) "Board" means the Company's Board of Directors.
(e) "Code" means the Internal Revenue Code of 1986, as amended. References
to any provision of the Code or regulation thereunder shall include
any successor provisions and regulations, and reference to regulations
includes any applicable guidance or pronouncement of the Department of
the Treasury and Internal Revenue Service.
(f) "Committee" means the Human Resources and Compensation Committee of
the Board, the composition and governance of which is established in
the Committee's Charter as approved from time to time by the Board and
subject to Section 303A.05 of the Listed Company Manual of the New
York Stock Exchange, and other corporate governance documents of the
Company. No action of the Committee shall be void or deemed to be
without authority due to the failure of any member, at the time the
action was taken, to meet any qualification standard set forth in the
Committee Charter or the Plan. The full Board may perform any function
of the Committee hereunder except to the extent limited under Section
303A.05 of the Listed Company Manual, in which case the term
"Committee" shall refer to the Board.
(g) "Covered Employee" means an Eligible Person who is a Covered Employee
as specified in Section 11(j).
(h) "Dividend Equivalent" means a right, granted under this Plan, to
receive cash, Stock, other Awards or other property equal in value to
all or a specified portion of the dividends paid with respect to a
specified number of shares of Stock.
(i)"Effective Date" means the effective date specified in Section 11(p).
(j)"Eligible Person" has the meaning specified in Section 5.
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(k) "Exchange Act" means the Securities Exchange Act of 1934, as amended.
References to any provision of the Exchange Act or rule (including a
proposed rule) thereunder shall include any successor provisions and
rules.
(l) "Fair Market Value" means the fair market value of Stock, Awards or
other property as determined in good faith by the Committee or under
procedures established by the Committee. Unless otherwise determined
by the Committee, the Fair Market Value of Stock shall be the
officially-quoted closing selling price of the Stock on the principal
stock exchange or market on which Stock is traded on the day as of
which such value is being determined or, if there is no sale on that
day, then on the last previous day on which a sale was reported. Fair
Market Value relating to the exercise price or base price of any
Non-409A Option or SAR shall conform to requirements under Code
Section 409A.
(m) "409A Awards" means Awards that constitute a deferral of compensation
under Code Section 409A and regulations thereunder. "Non-409A Awards"
means Awards other than 409A Awards. Although the Committee retains
authority under the Plan to grant Options, SARs and Restricted Stock
on terms that will qualify those Awards as 409A Awards, Options, SARs
exercisable for Stock, and Restricted Stock will be Non-409A Awards
unless otherwise expressly specified by the Committee.
(n) "Incentive Stock Option" or "ISO" means any Option designated as an
incentive stock option within the meaning of Code Section 422 and
qualifying thereunder.
(o) "Option" means a right, granted under the Plan, to purchase Stock.
(p) "Other Stock-Based Awards" means Awards granted to a Participant under
Section 6(h).
(q) "Participant" means a person who has been granted an Award under the
Plan which remains outstanding, including a person who is no longer an
Eligible Person.
(r) "Performance Award" means a conditional right, granted to a
Participant under Sections 6(i) and 7, to receive cash, Stock or other
Awards or payments.
(s) "Restricted Stock" means Stock granted under the Plan which is subject
to certain restrictions and to a risk of forfeiture.
(t) "Restricted Stock Unit" or "RSU" means a right, granted under the
Plan, to receive Stock, cash or other Awards or a combination thereof
at the end of a specified deferral period.
(u) "Retirement" means, unless otherwise stated in an applicable Award
agreement, Participant's voluntary termination of employment after
achieving 65 years of age.
(v) "Rule 16b-3" means Rule 16b-3, as from time to time in effect and
applicable to Participants, promulgated by the Securities and Exchange
Commission under Section 16 of the Exchange Act.
(w) "Stock" means the Company's Common Stock, par value $0.01 per share,
and any other equity securities of the Company that may be substituted
or resubstituted for Stock pursuant to Section 11(c).
(x) "Stock Appreciation Rights" or "SAR" means a right granted to a
Participant under Section 6(c).
3. Administration.
(a) Authority of the Committee. The Plan shall be administered by the
Committee, which shall have full and final authority, in each case
subject to and consistent with the provisions of the Plan, to select
Eligible Persons to become Participants; to grant Awards; to determine
the type and number
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of Awards, the dates on which Awards may be exercised and on which the
risk of forfeiture or deferral period relating to Awards shall lapse
or terminate, the acceleration of any such dates, the expiration date
of any Award, whether, to what extent, and under what circumstances an
Award may be settled, or the exercise price of an Award may be paid,
in cash, Stock, other Awards, or other property, and other terms and
conditions of, and all other matters relating to, Awards; to prescribe
documents evidencing or setting terms of Awards (such Award documents
need not be identical for each Participant), amendments thereto, and
rules and regulations for the administration of the Plan and
amendments thereto (including outstanding Awards); to construe and
interpret the Plan and Award documents and correct defects, supply
omissions or reconcile inconsistencies therein; and to make all other
decisions and determinations as the Committee may deem necessary or
advisable for the administration of the Plan. Decisions of the
Committee with respect to the administration and interpretation of the
Plan shall be final, conclusive, and binding upon all persons
interested in the Plan, including Participants, Beneficiaries,
transferees under Section 11(b) and other persons claiming rights from
or through a Participant, and stockholders.
(b) Manner of Exercise of Committee Authority. The express grant of any
specific power to the Committee, and the taking of any action by the
Committee, shall not be construed as limiting any power or authority
of the Committee. The Committee may act through subcommittees,
including for purposes of perfecting exemptions under Rule 16b-3 or
qualifying Awards under Code Section 162(m) as performance-based
compensation, in which case the subcommittee shall be subject to and
have authority under the charter applicable to the Committee, and the
acts of the subcommittee shall be deemed to be acts of the Committee
hereunder. The Committee may delegate the administration of the Plan
to one or more officers or employees of the Company, and such
administrator(s) may have the authority to execute and distribute
Award agreements or other documents evidencing or relating to Awards
granted by the Committee under this Plan, to maintain records relating
to Awards, to process or oversee the issuance of Stock under Awards,
to interpret and administer the terms of Awards and to take such other
actions as may be necessary or appropriate for the administration of
the Plan and of Awards under the Plan, provided that in no case shall
any such administrator be authorized (i) to grant Awards under the
Plan, (ii) to take any action that would result in the loss of an
exemption under Rule 16b-3 for Awards granted to or held by
Participants who at the time are subject to Section 16 of the Exchange
Act in respect of the Company or that would cause Awards intended to
qualify as "performance-based compensation" under Code Section 162(m)
to fail to so qualify, (iii) to take any action inconsistent with
Section 157 and other applicable provisions of the Delaware General
Corporation Law, or (iv) to make any determination required to be made
by the Committee under the New York Stock Exchange corporate
governance standards applicable to listed company compensation
committees (currently, Rule 303A.05). Any action by any such
administrator within the scope of its delegation shall be deemed for
all purposes to have been taken by the Committee and, except as
otherwise specifically provided, references in this Plan to the
Committee shall include any such administrator. The Committee (and, to
the extent it so provides, any subcommittee) shall have sole authority
to determine whether to review any actions and/or interpretations of
any such administrator, and if the Committee shall decide to conduct
such a review, any such actions and/or interpretations of any such
administrator shall be subject to approval, disapproval or
modification by the Committee.
(c) Limitation of Liability. The Committee and each member thereof, and
any person acting pursuant to authority delegated by the Committee,
shall be entitled, in good faith, to rely or act upon any report or
other information furnished by any executive officer, other officer or
employee of the Company or a subsidiary or affiliate, the Company's
independent auditors, consultants or any other agents assisting in the
administration of the Plan. Members of the Committee, any person
acting pursuant to authority delegated by the Committee, and any
officer or employee of the Company or a subsidiary or affiliate acting
at the direction or on behalf of the Committee or a delegee shall not
be personally liable for any action or determination taken or made in
good faith with respect to the Plan, and shall, to the extent
permitted by law, be fully indemnified and protected by the Company
with respect to any such action or determination.
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4. Stock Subject To Plan.
(a) Overall Number of Shares Available for Delivery. The total number of
shares of Stock reserved for delivery in connection with Awards under
this Plan shall be 10,000,000 shares. The total number of shares
available is subject to adjustment as provided in Section 11(c). Any
shares of Stock delivered under the Plan shall consist of authorized
and unissued shares or treasury shares. No more than 10,000,000 shares
may be delivered hereunder as ISOs.
(b) Share Counting Rules. The Committee may adopt reasonable counting
procedures to ensure appropriate counting, avoid double counting (as,
for example, in the case of tandem or substitute awards) and make
adjustments in accordance with this Section 4(b). Shares shall be
counted against those reserved to the extent such shares have been
delivered and are no longer subject to a risk of forfeiture. To the
extent that an Award under the Plan is canceled, expired, forfeited,
settled in cash, settled by issuance of fewer shares than the number
underlying the award, or otherwise terminated without delivery of
shares to the Participant, the shares retained by or returned to the
Company will be available under the Plan; and shares that are withheld
from such an award or separately surrendered by the Participant in
payment of any exercise price or taxes relating to such an award shall
be deemed to constitute shares not delivered to the Participant and
will be available under the Plan. In addition, in the case of any
Award granted in assumption of or in substitution for an award of a
company or business acquired by the Company or a subsidiary or
affiliate or with which the Company or a subsidiary or affiliate
combines, shares issued or issuable in connection with such substitute
Award shall not be counted against the number of shares reserved under
the Plan.
5. Eligibility; Per-Person Award Limitations.
(a) Eligibility. Awards may be granted under the Plan only to Eligible
Persons. For purposes of the Plan, an "Eligible Person" means (i) an
employee of the Company or any subsidiary or affiliate, including any
person who has been offered employment by the Company or a subsidiary
or affiliate, provided that such prospective employee may not receive
any payment or exercise any right relating to an Award until such
person has commenced employment with the Company or a subsidiary or
affiliate, (ii) any non-employee directors of the Company or (iii)
other individuals who perform services for the Company or any
subsidiary or affiliate. An employee on leave of absence may be
considered as still in the employ of the Company or a subsidiary or
affiliate for purposes of eligibility for participation in the Plan,
if so determined by the Committee. For purposes of the Plan, a joint
venture in which the Company or a subsidiary has a substantial direct
or indirect equity investment shall be deemed an affiliate, if so
determined by the Committee. Holders of awards who will become
Eligible Persons granted by a company or business acquired by the
Company or a subsidiary or affiliate, or with which the Company or a
subsidiary or affiliate combines, are eligible for grants of
substitute awards granted in assumption of or in substitution for such
outstanding awards previously granted under the Plan in connection
with such acquisition or combination transaction, if so determined by
the Committee.
(b) Per-Person Award Limitations. In each calendar year during any part of
which the Plan is in effect, an Eligible Person may be granted Awards
under each of Section 6(b) through (i) relating to up to his or her
Annual Limit (such Annual Limit to apply separately to the type of
Award authorized under each specified subsection). A Participant's
Annual Limit, in any year during any part of which the Participant is
then eligible under the Plan, shall equal 1,000,000 shares plus the
amount of the Participant's unused Annual Limit relating to the same
type of Award as of the close of the previous year, subject to
adjustment as provided in Section 11(c). In the case of an Award which
is not valued in a way in which the limitation set forth in the
preceding sentence would operate as an effective limitation satisfying
applicable law (including Treasury Regulation 1.162-27(e)(4)), an
Eligible Person may not be granted Awards authorizing the earning
during any calendar year of an amount that exceeds the Eligible
Person's Annual Limit, which for this purpose shall equal $4 million
plus the amount of the Eligible Person's unused cash Annual Limit as
of the close of the previous year (this limitation is separate and not
affected by the number of Awards granted during such calendar year
subject to the limitation in the preceding sentence). For this
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purpose, (i) "earning" means satisfying performance conditions so that
an amount becomes payable, without regard to whether it is to be paid
currently or on a deferred basis or continues to be subject to any
service requirement or other non-performance condition, and (ii) a
Participant's Annual Limit is used to the extent an amount or number
of shares may be potentially earned or paid under an Award, regardless
of whether such amount or shares are in fact earned or paid.
6. Specific Terms of Awards.
(a) General. Awards may be granted on the terms and conditions set forth
in this Section 6. In addition, the Committee may impose on any Award
or the exercise thereof, at the date of grant or thereafter (subject
to Sections 11(e) and 11(k)), such additional terms and conditions,
not inconsistent with the provisions of the Plan, as the Committee
shall determine, including terms requiring forfeiture of Awards in the
event of termination of employment or service by the Participant and
terms permitting a Participant to make elections relating to his or
her Award. The Committee shall retain full power and discretion with
respect to any term or condition of an Award that is not mandatory
under the Plan, subject to Section 11(k). The Committee shall require
the payment of lawful consideration for an Award to the extent
necessary to satisfy the requirements of the Delaware General
Corporation Law, and may otherwise require payment of consideration
for an Award except as limited by the Plan.
(b) Options. The Committee is authorized to grant Options to Participants
on the following terms and conditions:
(i) Exercise Price. The exercise price per share of Stock purchasable
under an Option (including both ISOs and non-qualified Options)
shall be determined by the Committee, provided that,
notwithstanding anything contained herein to the contrary such
exercise price shall be (A) fixed as of the grant date, and (B)
not less than the Fair Market Value of a share of Stock on the
grant date. Notwithstanding the foregoing, any substitute award
granted in assumption of or in substitution for an outstanding
award granted by a company or business acquired by the Company or
a subsidiary or affiliate, or with which the Company or a
subsidiary or affiliate combines, may be granted with an exercise
price per share of Stock other than as required above.
(ii) No Repricing. Without the approval of stockholders, the Committee
will not amend or replace previously granted Options in a
transaction that constitutes a "repricing," as such term is used
in Section 303A.08 of the Listed Company Manual of the New York
Stock Exchange.
(iii)Option Term; Time and Method of Exercise. The Committee shall
determine the term of each Option, provided that in no event
shall the term of any Option exceed a period of ten years from
the date of grant. The Committee shall determine the time or
times at which or the circumstances under which an Option may be
exercised in whole or in part. In addition, the Committee shall
determine the methods by which such exercise price may be paid or
deemed to be paid and the form of such payment (subject to
Section 11(k)), including, without limitation, cash, Stock
(including by withholding Stock deliverable upon exercise), other
Awards or awards granted under other plans of the Company or any
subsidiary or affiliate, or other property (including through
broker-assisted "cashless exercise" arrangements, to the extent
permitted by applicable law), and the methods by or forms in
which Stock will be delivered or deemed to be delivered in
satisfaction of Options to Participants.
(iv) ISOs. Notwithstanding anything to the contrary in this Section 6,
in the case of the grant of an Option intending to qualify as an
ISO: (i) if the Participant owns stock possessing more than 10
percent of the combined voting power of all classes of stock of
the Company (a "10% Shareholder"), the purchase price of such
Option must be at least 110 percent of the fair market value of
the Common Stock on the date of grant and the Option must expire
within a period of not more than five (5) years from the date of
grant, and (ii) termination of employment will occur when the
person to whom an Award was granted ceases to be an employee (as
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determined in accordance with Section 3401(c) of the Code and the
regulations promulgated thereunder) of the Company and its
subsidiaries. Notwithstanding anything in this Section 6 to the
contrary, Options designated as ISOs shall not be eligible for
treatment under the Code as ISOs to the extent that either (iii)
the aggregate fair market value of shares of Common Stock
(determined as of the time of grant) with respect to which such
Options are exercisable for the first time by the Participant
during any calendar year (under all plans of the Company and any
Subsidiary) exceeds $100,000, taking Options into account in the
order in which they were granted, and (iv) such Options otherwise
remain exercisable but are not exercised within three (3) months
of termination of employment (or such other period of time
provided in Section 422 of the Code).
(c) Stock Appreciation Rights. The Committee is authorized to grant SARs
to Participants on the following terms and conditions:
(i) Right to Payment. An SAR shall confer on the Participant to whom
it is granted a right to receive, upon exercise thereof, shares
of Stock having a value equal to the excess of (A) the Fair
Market Value of one share of Stock on the date of exercise (or,
in the case of a "Limited SAR," the Fair Market Value determined
by reference to the change in control price, as defined under the
applicable award agreement) over (B) the exercise or settlement
price of the SAR as determined by the Committee. Stock
Appreciation Rights may be granted to Participants from time to
time either in tandem with or as a component of other Awards
granted under the Plan ("tandem SARs") or not in conjunction with
other Awards ("freestanding SARs") and may, but need not, relate
to a specific Option granted under Section 6(b). The per share
price for exercise or settlement of SARs (including both tandem
SARs and freestanding SARs) shall be determined by the Committee,
but in the case of SARs that are granted in tandem to an Option
shall not be less than the exercise price of the Option and in
the case of freestanding SARs shall be (A) fixed as of the grant
date, and (B) not less than the Fair Market Value of a share of
Stock on the grant date.
(ii) No Repricing. Without the approval of stockholders, the Committee
will not amend or replace previously granted SARs in a
transaction that constitutes a "repricing," as such term is used
in Section 303A.08 of the Listed Company Manual of the New York
Stock Exchange.
(iii)Other Terms. The Committee shall determine the term of each SAR,
provided that in no event shall the term of an SAR exceed a
period of ten years from the date of grant. The Committee shall
determine at the date of grant or thereafter, the time or times
at which and the circumstances under which a SAR may be exercised
in whole or in part (including based on future service
requirements), the method of exercise, method of settlement,
method by or forms in which Stock will be delivered or deemed to
be delivered to Participants, and whether or not a SAR shall be
free-standing or in tandem or combination with any other Award.
Limited SARs that may only be exercised in connection with a
change in control or termination of service following a change in
control as specified by the Committee may be granted on such
terms, not inconsistent with this Section 6(c), as the Committee
may determine. The Committee may require that an outstanding
Option be exchanged for an SAR exercisable for Stock having
vesting, expiration, and other terms substantially the same as
the Option, so long as such exchange will not result in
additional accounting expense to the Company.
(d) Restricted Stock. The Committee is authorized to grant Restricted
Stock to Participants on the following terms and conditions:
(i) Award and Restrictions. Subject to Section 6(d)(ii), Restricted
Stock shall be subject to such restrictions on transferability,
risk of forfeiture and other restrictions, if any, as the
Committee may impose, which restrictions may lapse separately or
in combination at such times, under such circumstances, in such
installments or otherwise and under such other circumstances as
the Committee may determine at the date of grant or thereafter.
Except to the extent restricted under the terms of the Plan and
any Award document relating to the Restricted Stock, a
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Participant granted Restricted Stock shall have all of the rights
of a stockholder, including the right to vote the Restricted
Stock and the right to receive dividends thereon (subject to any
mandatory reinvestment or other requirement imposed by the
Committee).
(ii) Forfeiture. Except as otherwise determined by the Committee, upon
termination of employment or service during the applicable
restriction period, Restricted Stock that is at that time subject
to restrictions shall be forfeited and reacquired by the Company;
provided that the Committee may provide, by rule or regulation or
in any Award document, or may determine in any individual case,
that restrictions or forfeiture conditions relating to Restricted
Stock will lapse in whole or in part, including in the event of
terminations resulting from specified causes.
(iii)Limitation on Vesting. The grant, issuance, retention, vesting
and/or settlement of Restricted Stock shall occur at such time
and in such installments as determined by the Committee or under
criteria established by the Committee. Subject to Section 10, the
Committee shall have the right to make the timing of the grant
and/or the issuance, ability to retain, vesting and/or settlement
of Restricted Stock subject to continued employment, passage of
time and/or such performance conditions as deemed appropriate by
the Committee; provided that the grant, issuance, retention,
vesting and/or settlement of a Restricted Stock Award that is
based in whole or in part on performance conditions and/or the
level of achievement versus such performance conditions shall be
subject to a performance period of not less than one year, and
any Award based solely upon continued employment or the passage
of time shall vest over a period not less than three years from
the date the Award is made, provided that such vesting may occur
ratably over the three-year period. The foregoing minimum vesting
conditions need not apply (A) in the case of the death,
disability or Retirement of the Participant or termination in
connection with a Change in Control, (B) with respect to up to an
aggregate of 5% of the shares of Stock authorized under the Plan,
which may be granted (or regranted upon forfeiture) as Restricted
Stock or RSUs without regard to such minimum vesting requirements
and (C) with respect to non-employee director awards.
(iv) Certificates for Stock. Restricted Stock granted under the Plan
may be evidenced in such manner as the Committee shall determine.
If certificates representing Restricted Stock are registered in
the name of the Participant, the Committee may require that such
certificates bear an appropriate legend referring to the terms,
conditions and restrictions applicable to such Restricted Stock,
that the Company retain physical possession of the certificates,
and that the Participant deliver a stock power to the Company,
endorsed in blank, relating to the Restricted Stock.
(v) Dividends and Splits. As a condition to the grant of an Award of
Restricted Stock, the Committee may require that any dividends
paid on a share of Restricted Stock shall be either (A) paid with
respect to such Restricted Stock at the dividend payment date in
cash, in kind, or in a number of shares of unrestricted Stock
having a Fair Market Value equal to the amount of such dividends,
or (B) automatically reinvested in additional Restricted Stock or
held in kind, which shall be subject to the same terms as applied
to the original Restricted Stock to which it relates. Unless
otherwise determined by the Committee, Stock distributed in
connection with a Stock split or Stock dividend, and other
property distributed as a dividend, shall be subject to
restrictions and a risk of forfeiture to the same extent as the
Restricted Stock with respect to which such Stock or other
property has been distributed.
(e) Restricted Stock Units. The Committee is authorized to grant RSUs to
Participants, subject to the following terms and conditions:
(i) Award and Restrictions. Subject to Section 6(e)(ii), RSUs shall
be subject to such restrictions on transferability, risk of
forfeiture and other restrictions, if any, as the Committee may
impose, which restrictions may lapse separately or in combination
at such times, under such circumstances (including based on
achievement of performance conditions and/or future service
requirements), in such installments or otherwise and under such
other circumstances as
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the Committee may determine at the date of grant or thereafter. A
Participant granted RSUs shall not have any of the rights of a
stockholder, including the right to vote, until Stock shall have
been issued in the Participant's name pursuant to the RSUs,
except that the Committee may provide for dividend equivalents
pursuant to Section 6(e)(iii) below.
(ii) Limitation on Vesting. The grant, issuance, retention, vesting
and/or settlement of RSUs shall occur at such time and in such
installments as determined by the Committee or under criteria
established by the Committee. Subject to Section 10, the
Committee shall have the right to make the timing of the grant
and/or the issuance, ability to retain, vesting and/or settlement
of RSUs subject to continued employment, passage of time and/or
such performance conditions as deemed appropriate by the
Committee; provided that the grant, issuance, retention, vesting
and/or settlement of an RSU that is based in whole or in part on
performance conditions and/or the level of achievement versus
such performance conditions shall be subject to a performance
period of not less than one year, and any Award based solely upon
continued employment or the passage of time shall vest over a
period not less than three years from the date the Award is made,
provided that such vesting may occur ratably over the three-year
period. The foregoing minimum vesting conditions need not apply
(A) in the case of the death, disability or Retirement of the
Participant or termination in connection with a Change in
Control, and (B) with respect to up to an aggregate of 5% of the
shares of Stock authorized under the Plan, which may be granted
(or regranted upon forfeiture) as Restricted Stock or RSUs
without regard to such minimum vesting requirements.
(iii)Dividend Equivalents. Unless otherwise determined by the
Committee, dividend equivalents on the specified number of shares
of Stock covered by an Award of RSUs shall be either (A) paid
with respect to such RSUs at the dividend payment date in cash or
in shares of unrestricted Stock having a Fair Market Value equal
to the amount of such dividends, or (B) deferred with respect to
such RSUs, either as a cash deferral or with the amount or value
thereof automatically deemed reinvested in additional RSUs, other
Awards or other investment vehicles having a Fair Market Value
equal to the amount of such dividends, as the Committee shall
determine or permit a Participant to elect.
(f) Bonus Stock and Awards in Lieu of Obligations. The Committee is
authorized to grant Stock as a bonus, or to grant Stock or other
Awards in lieu of obligations of the Company or a subsidiary or
affiliate to pay cash or deliver other property under the Plan or
under other plans or compensatory arrangements, subject to such terms
as shall be determined by the Committee.
(g) Dividend Equivalents. The Committee is authorized to grant Dividend
Equivalents to a Participant, which may be awarded on a free-standing
basis or in connection with another Award, provided, however, that if
Dividend Equivalents are payable with respect to an Option, such
Dividend Equivalents will be payable either as declared or on a
specified vesting date, but may not be payable solely with respect to
the Participant's date of exercise. The Committee may provide that
Dividend Equivalents shall be paid or distributed when accrued or
shall be deemed to have been reinvested in additional Stock, Awards,
or other investment vehicles, and subject to restrictions on
transferability, risks of forfeiture and such other terms as the
Committee may specify.
(h) Other Stock-Based Awards. The Committee is authorized, subject to
limitations under applicable law, to grant to Participants such other
Awards that may be denominated or payable in, valued in whole or in
part by reference to, or otherwise based on, or related to, Stock or
factors that may influence the value of Stock, including, without
limitation, convertible or exchangeable debt securities, other rights
convertible or exchangeable into Stock, purchase rights for Stock,
Awards with value and payment contingent upon performance of the
Company or business units thereof or any other factors designated by
the Committee, and Awards valued by reference to the book value of
Stock or the value of securities of or the performance of specified
subsidiaries or affiliates or other business units. The Committee
shall determine the terms and conditions of such Awards. Stock
delivered pursuant to an Award in
10
the nature of a purchase right granted under this Section 6(h) shall
be purchased for such consideration, paid for at such times, by such
methods, and in such forms, including, without limitation, cash,
Stock, other Awards, notes, or other property, as the Committee shall
determine. Cash awards, as an element of or supplement to any other
Award under the Plan, may also be granted pursuant to this Section
6(h).
(i) Performance Awards. Performance Awards, denominated in cash or in
Stock or other Awards, may be granted by the Committee in accordance
with Section 7.
7. Performance-Based Compensation.
(a) Performance Awards Generally. Performance Awards may be denominated as
a cash amount, number of shares of Stock, or specified number of other
Awards (or a combination) which may be earned upon achievement or
satisfaction of performance conditions specified by the Committee. In
addition, the Committee may specify that any other Award shall
constitute a Performance Award by conditioning the right of a
Participant to exercise the Award or have it settled, and the timing
thereof, upon achievement or satisfaction of such performance
conditions as may be specified by the Committee. The Committee may use
such business criteria and other measures of performance as it may
deem appropriate in establishing any performance conditions, and may
exercise its discretion to reduce or increase the amounts payable
under any Award subject to performance conditions, except as limited
under Sections 7(b) and 7(c) in the case of a Performance Award
intended to qualify as "performance-based compensation" under Section
162(m).
(b) Performance Awards Granted to Covered Employees. If the Committee
determines that a Performance Award to be granted to an Eligible
Person who is designated by the Committee as likely to be a Covered
Employee should qualify as "performance-based compensation" for
purposes of Section 162(m), the grant, exercise and/or settlement of
such Performance Award shall be contingent upon achievement of a
pre-established performance goal and other terms set forth in this
Section 7(b).
(i) Performance Goal Generally. The performance goal for such
Performance Awards shall consist of one or more business criteria
and a targeted level or levels of performance with respect to
each of such criteria, as specified by the Committee consistent
with this Section 7(b). The performance goal shall be objective
and shall otherwise meet the requirements of Code Section 162(m)
and regulations thereunder, including the requirement that the
level or levels of performance targeted by the Committee result
in the achievement of performance goals being "substantially
uncertain." The Committee may determine that such Performance
Awards shall be granted, exercised and/or settled upon
achievement of any one performance goal or that two or more of
the performance goals must be achieved as a condition to grant,
exercise and/or settlement of such Performance Awards.
Performance goals may differ for Performance Awards granted to
any one Participant or to different Participants.
(ii) Business Criteria. For purposes of this Plan, a "performance
goal" shall mean any one or more of the following business
criteria, in each case as specified by the Committee: (1) gross
or net revenue, premiums collected, new annualized premiums, and
investment income, (2) any earnings or net income measure,
including earnings from operations, earnings before taxes,
earnings before interest and/or taxes and/or depreciation,
statutory earnings before realized gains (losses), or net income
available to common shareholders, (3) operating earnings per
common share (either basic or diluted); (4) return on assets,
return on investment, return on capital, return on equity, or
return on tangible equity; (5) economic value created; (6)
operating margin or profit margin; (7) net interest margin; (8)
asset quality; (9) stock price or total stockholder return; and
(10) strategic business criteria, consisting of one or more
objectives based on meeting specified market penetration, total
market capitalization, business retention, new product
generation, rate
11
increase actions, geographic business expansion goals, cost
targets (including cost of capital), investment portfolio yield,
risk-based capital, statutory capital, Best Capital Adequacy
Ratio, tax net operating loss utilization, customer satisfaction,
employee satisfaction, agency ratings, management of employment
practices and employee benefits, supervision of litigation and
information technology, and goals relating to acquisitions or
divestitures of subsidiaries, affiliates or joint ventures. The
targeted level or levels of performance with respect to such
business criteria may be established at such levels and in such
terms as the Committee may determine, in its discretion,
including in absolute terms, on a per share basis (either basic
or diluted), as a goal relative to performance in prior periods,
or as a goal compared to the performance of one or more
comparable companies or an index covering multiple companies.
(iii)Performance Period; Timing for Establishing Performance Goals.
Achievement of performance goals in respect of such Performance
Awards shall be measured over a performance period of up to one
year or more than one year, as specified by the Committee. A
performance goal shall be established not later than the earlier
of (A) 90 days after the beginning of any performance period
applicable to such Performance Award or (B) the time 25% of such
performance period has elapsed.
(iv) Performance Award Pool. The Committee may establish a Performance
Award pool, which shall be an unfunded pool, for purposes of
measuring performance of the Company in connection with
Performance Awards. The amount of such Performance Award pool
shall be based upon the achievement of a performance goal or
goals based on one or more of the business criteria set forth in
Section 7(b)(ii) during the given performance period, as
specified by the Committee in accordance with Section 7(b)(iv).
The Committee may specify the amount of the Performance Award
pool as a percentage of any of such business criteria, a
percentage thereof in excess of a threshold amount, or as another
amount which need not bear a strictly mathematical relationship
to such business criteria.
(v) Settlement of Performance Awards; Other Terms. Settlement of
Performance Awards shall be in cash, Stock, other Awards or other
property, in the discretion of the Committee. The Committee may,
in its discretion, increase or reduce the amount of a settlement
otherwise to be made in connection with such Performance Awards,
but may not exercise discretion to increase any such amount
payable to a Covered Employee in respect of a Performance Award
subject to this Section 7(b). Any settlement which changes the
form of payment from that originally specified shall be
implemented in a manner such that the Performance Award and other
related Awards do not, solely for that reason, fail to qualify as
"performance-based compensation" for purposes of Section 162(m).
The Committee shall specify the circumstances in which such
Performance Awards shall be paid or forfeited in the event of
termination of employment by the Participant or other event
(including a change in control) prior to the end of a performance
period or settlement of such Performance Awards.
(vi) Recapture Rights. If at any time after the date on which a
Participant has been granted or becomes vested in an Award
pursuant to the achievement of a performance goal under Section
7, the Committee determines that the earlier determination as to
the achievement of the performance goal was based on incorrect
data and that in fact the performance goal had not been achieved
or had been achieved to a lesser extent than originally
determined and a portion of an Award would not have been granted,
vested or paid, given the correct data, then (i) such portion of
the Award that was granted shall be forfeited and any related
shares (or if such shares were disposed of the cash equivalent)
shall be returned to the Company as provided by the Committee,
(ii) such portion of the Award that became vested shall be deemed
to be not vested and any related shares (or if such shares were
disposed of the cash equivalent) shall be returned to the Company
as provided by the Committee, and (iii) such portion of the Award
paid to the Participant shall be paid by the
12
Participant to the Company upon notice from the Company as
provided by the Committee.
(c) Written Determinations. Determinations by the Committee as to the
establishment of performance goals, the amount potentially payable in
respect of Performance Awards, the level of actual achievement of the
specified performance goals shall be recorded in writing in the case
of Performance Awards intended to qualify under Section 162(m).
Specifically, the Committee shall certify in writing, in a manner
conforming to applicable regulations under Section 162(m), prior to
settlement of each such Award granted to a Covered Employee, that the
performance objective relating to the Performance Award and other
material terms of the Award upon which settlement of the Award was
conditioned have been satisfied.
8. Certain Provisions Applicable To Awards.
(a) Stand-Alone, Additional, Tandem, and Substitute Awards. Awards granted
under the Plan may, in the discretion of the Committee, be granted
either alone or in addition to, in tandem with, or in substitution or
exchange for, any other Award or any award granted under another plan
of the Company, any subsidiary or affiliate, or any business entity to
be acquired by the Company or a subsidiary or affiliate, or any other
right of a Participant to receive payment from the Company or any
subsidiary or affiliate; provided, however, that a 409A Award may not
be granted in tandem with a Non-409A Award. Awards granted in addition
to or in tandem with other Awards or awards may be granted either as
of the same time as or a different time from the grant of such other
Awards or awards. Subject to Section 11(k), the Committee may
determine that, in granting a new Award, the in-the-money value or
fair value of any surrendered Award or award or the value of any other
right to payment surrendered by the Participant may be applied to
reduce the exercise price of any Option, grant price of any SAR, or
purchase price of any other Award.
(b) Term of Awards. The term of each Award shall be for such period as may
be determined by the Committee, subject to the express limitations set
forth in the Plan.
(c) Form and Timing of Payment under Awards; Deferrals. Subject to the
terms of the Plan (including Section 11(k)) and any applicable Award
document, payments to be made by the Company or a subsidiary or
affiliate upon the exercise of an Option or other Award or settlement
of an Award may be made in such forms as the Committee shall
determine, including, without limitation, cash, Stock, other Awards or
other property, and may be made in a single payment or transfer, in
installments, or on a deferred basis. The settlement of any Award may
be accelerated, and cash paid in lieu of Stock in connection with such
settlement, in the discretion of the Committee or upon occurrence of
one or more specified events, subject to Section 11(k)). Subject to
Section 11(k), installment or deferred payments may be required by the
Committee (subject to Section 11(e)) or permitted at the election of
the Participant on terms and conditions established by the Committee.
Subject to Section 11(k), payments may include, without limitation,
provisions for the payment or crediting of reasonable interest on
installment or deferred payments or the grant or crediting of Dividend
Equivalents or other amounts in respect of installment or deferred
payments denominated in Stock. In the case of any 409A Award that is
vested and no longer subject to a risk of forfeiture (within the
meaning of Code Section 83), such Award will be distributed to the
Participant, upon application of the Participant, if the Participant
has had an unforeseeable emergency within the meaning of Code Sections
409A(a)(2)(A)(vi) and 409A(a)(2)(B)(ii), in accordance with Section
409A(a)(2)(B)(ii).
(d) Limitation on Vesting of Certain Awards. Subject to Section 8,
Restricted Stock will vest over a minimum period of three years except
in the event of a Participant's death, disability, or retirement, or
in the event of a change in control or other special circumstances.
The foregoing notwithstanding, (i) Restricted Stock as to which either
the grant or vesting is based on, among other things, the achievement
of one or more performance conditions generally will vest over a
13
minimum period of one year except in the event of a Participant's
death, disability, or retirement, or in the event of a change in
control or other special circumstances, and (ii) up to 5% of the
shares of Stock authorized under the Plan may be granted as Restricted
Stock without any minimum vesting requirements. For purposes of this
Section 8(d)(i), a performance period that precedes the grant of the
Restricted Stock will be treated as part of the vesting period if the
participant has been notified promptly after the commencement of the
performance period that he or she has the opportunity to earn the
Award based on performance and continued service, and (ii) vesting
over a three-year period or one-year period will include periodic
vesting over such period if the rate of such vesting is proportional
(or less rapid) throughout such period.
(e) Cash Settlement of Awards. To the extent permitted by the Committee at
the time of grant or thereafter, the Company may deliver cash in full
or partial satisfaction, payment and/or settlement upon exercise,
cancellation, forfeiture or surrender of any Award.
9. Change in Control. The Committee may set forth in any Award agreement the
effect, if any, that a change in control or other, similar transaction
shall have on any awards granted under this Plan.
10. Additional Award Forfeiture Provisions.
(a) Forfeiture of Options and Other Awards and Gains Realized Upon Prior
Option Exercises or Award Settlements. Unless otherwise determined by
the Committee, each Award granted hereunder, other than Awards granted
to non-employee directors, shall be subject to the following
additional forfeiture conditions, to which the Participant, by
accepting an Award hereunder, agrees. If any of the events specified
in Section 10(b)(i), (ii), or (iii) occurs (a "Forfeiture Event"), all
of the following forfeitures will result:
(i) The unexercised portion of each Option held by the Participant,
whether or not vested, and any other Award not then settled will
be immediately forfeited and canceled upon the occurrence of the
Forfeiture Event; and
(ii) The Participant will be obligated to repay to the Company, in
cash, within five business days after demand is made therefor by
the Company, the total amount of Award Gain (as defined herein)
realized by the Participant upon each exercise of an Option or
settlement of an Award that occurred on or after (A) the date
that is six months prior to the occurrence of the Forfeiture
Event, if the Forfeiture Event occurred while the Participant was
employed by the Company or a subsidiary or affiliate, or (B) the
date that is six months prior to the date the Participant's
employment by the Company or a subsidiary or affiliate
terminated, if the Forfeiture Event occurred after the
Participant ceased to be so employed. For purposes of this
Section, the term "Award Gain" shall mean (i), in respect of a
given Option exercise, the product of (X) the Fair Market Value
per share of Stock at the date of such exercise (without regard
to any subsequent change in the market price of shares) minus the
exercise price times (Y) the number of shares as to which the
Option was exercised at that date, and (ii), in respect of any
other settlement of an Award granted to the Participant, the Fair
Market Value of the cash or Stock paid or payable to Participant
(regardless of any elective deferral) less any cash or the Fair
Market Value of any Stock or property (other than an Award or
award which would have itself then been forfeitable hereunder and
excluding any payment of tax withholding) paid by the Participant
to the Company as a condition of or in connection such
settlement.
(b) Events Triggering Forfeiture. The forfeitures specified in Section
10(a) will be triggered upon the occurrence of any one of the
following Forfeiture Events at any time during Participant's
employment by the Company or a subsidiary or affiliate, or during the
one-year period following termination of such employment:
14
(i) Participant, acting alone or with others, directly or indirectly,
(A) engages, either as employee, employer, consultant, advisor,
or director, or as an owner, investor, partner, or stockholder
unless Participant's interest is insubstantial, in any business
in an area or region in which the Company conducts business at
the date the event occurs, which is directly in competition with
a business then conducted by the Company or a subsidiary or
affiliate; (B) induces any customer or supplier of the Company or
a subsidiary or affiliate, with which the Company or a subsidiary
or affiliate has a business relationship, to curtail, cancel, not
renew, or not continue his or her or its business with the
Company or any subsidiary or affiliate; or (C) induces, or
attempts to influence, any employee of or service provider to the
Company or a subsidiary or affiliate to terminate such employment
or service. The Committee shall, in its discretion, determine
which lines of business the Company conducts on any particular
date and which third parties may reasonably be deemed to be in
competition with the Company. For purposes of this Section
10(b)(i), a Participant's interest as a stockholder is
insubstantial if it represents beneficial ownership of less than
five percent of the outstanding class of stock, and a
Participant's interest as an owner, investor, or partner is
insubstantial if it represents ownership, as determined by the
Committee in its discretion, of less than five percent of the
outstanding equity of the entity;
(ii) Participant discloses, uses, sells, or otherwise transfers,
except in the course of employment with or other service to the
Company or any subsidiary or affiliate, any confidential or
proprietary information of the Company or any subsidiary or
affiliate, including but not limited to information regarding the
Company's current and potential customers, organization,
employees, finances, and methods of operations and investments,
so long as such information has not otherwise been disclosed to
the public or is not otherwise in the public domain (other than
by Participant's breach of this provision), except as required by
law or pursuant to legal process, or Participant makes statements
or representations, or otherwise communicates, directly or
indirectly, in writing, orally, or otherwise, or takes any other
action which may, directly or indirectly, disparage or be
damaging to the Company or any of its subsidiaries or affiliates
or their respective officers, directors, employees, advisors,
businesses or reputations, except as required by law or pursuant
to legal process; or
(iii)Participant fails to cooperate with the Company or any subsidiary
or affiliate in any way, including, without limitation, by making
himself or herself available to testify on behalf of the Company
or such subsidiary or affiliate in any action, suit, or
proceeding, whether civil, criminal, administrative, or
investigative, or otherwise fails to assist the Company or any
subsidiary or affiliate in any way, including, without
limitation, in connection with any such action, suit, or
proceeding by providing information and meeting and consulting
with members of management of, other representatives of, or
counsel to, the Company or such subsidiary or affiliate, as
reasonably requested.
(c) Agreement Does Not Prohibit Competition or Other Participant
Activities. Although the conditions set forth in this Section 10 shall
be deemed to be incorporated into an Award, a Participant is not
thereby prohibited from engaging in any activity, including but not
limited to competition with the Company and its subsidiaries and
affiliates. Rather, the non-occurrence of the Forfeiture Events set
forth in Section 10(b) is a condition to the Participant's right to
realize and retain value from his or her compensatory Options and
Awards, and the consequence under the Plan if the Participant engages
in an activity giving rise to any such Forfeiture Event are the
forfeitures specified herein. The Company and Participant shall not be
precluded by this provision or otherwise from entering into other
agreements concerning the subject matter of Sections 10(a) and 10(b).
(d) Committee Discretion. The Committee may, in its discretion, waive in
whole or in part the Company's right to forfeiture under this Section,
but no such waiver shall be effective unless evidenced by a writing
signed by a duly authorized officer of the Company. In addition, the
15
Committee may impose additional conditions on Awards, by inclusion of
appropriate provisions in the document evidencing or governing any
such Award.
11. General Provisions.
(a) Compliance with Legal and Other Requirements. The Company may, to the
extent deemed necessary or advisable by the Committee and subject to
Section 11(k), postpone the issuance or delivery of Stock or payment
of other benefits under any Award until completion of such
registration or qualification of such Stock or other required action
under any federal or state law, rule or regulation, listing or other
required action with respect to any stock exchange or automated
quotation system upon which the Stock or other securities of the
Company are listed or quoted, or compliance with any other obligation
of the Company, as the Committee may consider appropriate, and may
require any Participant to make such representations, furnish such
information and comply with or be subject to such other conditions as
it may consider appropriate in connection with the issuance or
delivery of Stock or payment of other benefits in compliance with
applicable laws, rules, and regulations, listing requirements, or
other obligations.
(b) Limits on Transferability; Beneficiaries. No Award or other right or
interest of a Participant under the Plan shall be pledged,
hypothecated or otherwise encumbered or subject to any lien,
obligation or liability of such Participant to any party (other than
the Company or a subsidiary or affiliate thereof), or assigned or
transferred by such Participant otherwise than by will or the laws of
descent and distribution or to a Beneficiary upon the Participant's
death, and such Awards or rights that may be exercisable shall be
exercised during the lifetime of the Participant only by the
Participant or his or her guardian or legal representative. A
Beneficiary, transferee, or other person claiming any rights under the
Plan from or through any Participant shall be subject to all terms and
conditions of the Plan and any Award document applicable to such
Participant, except as otherwise determined by the Committee, and to
any additional terms and conditions deemed necessary or appropriate by
the Committee.
(c) Adjustments. In the event that any large, special and non-recurring
dividend or other distribution (whether in the form of cash or
property other than Stock), recapitalization, forward or reverse
split, Stock dividend, reorganization, merger, consolidation,
spin-off, combination, repurchase, share exchange, liquidation,
dissolution or other similar corporate transaction or event affects
the Stock such that an adjustment is determined by the Committee to be
appropriate, then the Committee shall, in an equitable manner as
determined by the Committee, adjust any or all of (i) the number and
kind of shares of Stock or other securities of the Company or other
issuer which are subject to the Plan, (ii) the number and kind of
shares of Stock or other securities of the Company or other issuer by
which annual per-person Award limitations are measured under Section
5, including the share limits applicable to non-employee director
Awards under Section 5(c), (iii) the number and kind of shares of
Stock or other securities of the Company or other issuer subject to or
deliverable in respect of outstanding Awards and (iv) the exercise
price, settlement price or purchase price relating to any Award or, if
deemed appropriate, the Committee may make provision for a payment of
cash or property to the holder of an outstanding Option or other
Award. In addition, the Committee is authorized to make adjustments in
the terms and conditions of, and the criteria included in, Awards
(including performance-based Awards and performance goals and any
hypothetical funding pool relating thereto) in recognition of unusual
or nonrecurring events (including, without limitation, events
described in the preceding sentence, as well as acquisitions and
dispositions of businesses and assets, or in response to changes in
applicable laws, regulations, or accounting principles) affecting any
performance conditions; provided that no such adjustment shall be
authorized or made if and to the extent that the existence of such
authority (i) would cause Options, SARs, or Performance Awards granted
under the Plan to Participants designated by the Committee as Covered
Employees and intended to qualify as "performance-based compensation"
under Code Section 162(m)
16
and regulations thereunder to otherwise fail to qualify as
"performance-based compensation" under Code Section 162(m) and
regulations thereunder, or (ii) would cause the Committee to be deemed
to have authority to change the targets, within the meaning of
Treasury Regulation 1.162-27(e)(4)(vi), under the performance goals
relating to Options or SARs granted to Covered Employees and intended
to qualify as "performance-based compensation" under Code Section
162(m) and regulations thereunder.
(d) Tax Provisions.
(i) Withholding. The Company and any subsidiary or affiliate is
authorized to withhold from any Award granted, any payment
relating to an Award under the Plan, including from a
distribution of Stock, or any payroll or other payment to a
Participant, amounts of withholding and other taxes due or
potentially payable in connection with any transaction or event
involving an Award, or to require a Participant to remit to the
Company an amount in cash or other property (including Stock) to
satisfy such withholding before taking any action with respect to
an Award, and to take such other action as the Committee may deem
advisable to enable the Company and Participants to satisfy
obligations for the payment of withholding taxes and other tax
obligations relating to any Award. This authority shall include
authority to withhold or receive Stock or other property and to
make cash payments in respect thereof in satisfaction of a
Participant's withholding obligations, either on a mandatory or
elective basis in the discretion of the Committee, or in
satisfaction of other tax obligations. The Company can delay the
delivery to a Participant of Stock under any Award to the extent
necessary to allow the Company to determine the amount of
withholding to be collected and to collect and process such
withholding.
(ii) Required Consent to and Notification of Code Section 83(b)
Election. No election under Section 83(b) of the Code (to include
in gross income in the year of transfer the amounts specified in
Code Section 83(b)) or under a similar provision of the laws of a
jurisdiction outside the United States may be made unless
expressly permitted by the terms of the Award document or by
action of the Committee in writing prior to the making of such
election. In any case in which a Participant is permitted to make
such an election in connection with an Award, the Participant
shall notify the Company of such election within ten days of
filing notice of the election with the Internal Revenue Service
or other governmental authority, in addition to any filing and
notification required pursuant to regulations issued under Code
Section 83(b) or other applicable provision.
(iii)Requirement of Notification Upon Disqualifying Disposition Under
Code Section 421(b). If any Participant shall make any
disposition of shares of Stock delivered pursuant to the exercise
of an ISO under the circumstances described in Code Section
421(b) (i.e., a disqualifying disposition), such Participant
shall notify the Company of such disposition within ten days
thereof.
(e) Changes to the Plan. The Board may amend, suspend or terminate the
Plan or the Committee's authority to grant Awards under the Plan
without the consent of stockholders or Participants; provided,
however, that any amendment to the Plan shall be submitted to the
Company's stockholders for approval not later than the earliest annual
meeting for which the record date is at or after the date of such
Board action:
(i) if such stockholder approval is required by any federal or state
law or regulation or the rules of the New York Stock Exchange or
any other stock exchange or automated quotation system on which
the Stock may then be listed or quoted; or
(ii) if such amendment would materially increase the number of shares
reserved for issuance and delivery under the Plan; or
17
(iii)if such amendment would alter the provisions of the Plan
restricting the Company's ability to grant Options or SARs with
an exercise price that is not less than the Fair Market Value of
Stock; or
(iv) in connection with any action to amend or replace previously
granted Options or SARs in a transaction that constitutes a
"repricing," as such term is used in Section 303A.08 of the
Listed Company Manual of the New York Stock Exchange.
The Board may otherwise, in its discretion, determine to submit other
amendments to the Plan to stockholders for approval; and provided further,
that, without the consent of an affected Participant, no such Board (or any
Committee) action may materially and adversely affect the rights of such
Participant under any outstanding Award (for this purpose, actions that
alter the timing of federal income taxation of a Participant will not be
deemed material unless such action results in an income tax penalty on the
Participant). With regard to other terms of Awards, the Committee shall
have no authority to waive or modify any such Award term after the Award
has been granted to the extent the waived or modified term would be
mandatory under the Plan for any Award newly granted at the date of the
waiver or modification.
(f) Right of Setoff. The Company or any subsidiary or affiliate may, to
the extent permitted by applicable law, deduct from and set off
against any amounts the Company or a subsidiary or affiliate may owe
to the Participant from time to time (including amounts payable in
connection with any Award, owed as wages, fringe benefits, or other
compensation owed to the Participant), such amounts as may be owed by
the Participant to the Company, including but not limited to amounts
owed under Section 10(a), although the Participant shall remain liable
for any part of the Participant's payment obligation not satisfied
through such deduction and setoff. By accepting any Award granted
hereunder, the Participant agrees to any deduction or setoff under
this Section 11(f).
(g) Unfunded Status of Awards; Creation of Trusts. To the extent that any
Award is deferred compensation, the Plan is intended to constitute an
"unfunded" plan for deferred compensation with respect to such Award.
With respect to any payments not yet made to a Participant or
obligation to deliver Stock pursuant to an Award, nothing contained in
the Plan or any Award shall give any such Participant any rights that
are greater than those of a general creditor of the Company; provided
that the Committee may authorize the creation of trusts and deposit
therein cash, Stock, other Awards or other property, or make other
arrangements to meet the Company's obligations under the Plan. Such
trusts or other arrangements shall be consistent with the "unfunded"
status of the Plan unless the Committee otherwise determines with the
consent of each affected Participant.
(h) Nonexclusivity of the Plan. Neither the adoption of the Plan by the
Board nor its submission to the stockholders of the Company for
approval shall be construed as creating any limitations on the power
of the Board or a committee thereof to adopt such other incentive
arrangements, apart from the Plan, as it may deem desirable, including
incentive arrangements and awards which do not qualify under Code
Section 162(m), and such other arrangements may be either applicable
generally or only in specific cases.
(i) Payments in the Event of Forfeitures; Fractional Shares. No fractional
shares of Stock shall be issued or delivered pursuant to the Plan or
any Award. The Committee shall determine whether cash, other Awards or
other property shall be issued or paid in lieu of such fractional
shares or whether such fractional shares or any rights thereto shall
be forfeited or otherwise eliminated.
(j) Compliance with Code Section 162(m). It is the intent of the Company
that Options and SARs granted to Covered Employees and other Awards
designated as Awards to Covered Employees subject to Section 7 shall
constitute qualified "performance-based compensation" within the
meaning of Code Section 162(m) and regulations thereunder, unless
otherwise determined by
18
the Committee at the time of allocation of an Award. Accordingly, the
terms of Sections 7(b) and (c), including the definitions of Covered
Employee and other terms used therein, shall be interpreted in a
manner consistent with Code Section 162(m) and regulations thereunder.
The foregoing notwithstanding, because the Committee cannot determine
with certainty whether a given Participant will be a Covered Employee
with respect to a fiscal year that has not yet been completed, the
term Covered Employee as used herein shall mean only a person
designated by the Committee as likely to be a Covered Employee with
respect to a specified fiscal year. If any provision of the Plan or
any Award document relating to a Performance Award that is designated
as intended to comply with Code Section 162(m) does not comply or is
inconsistent with the requirements of Code Section 162(m) or
regulations thereunder, such provision shall be construed or deemed
amended to the extent necessary to conform to such requirements, and
no provision shall be deemed to confer upon the Committee or any other
person discretion to increase the amount of compensation otherwise
payable in connection with any such Award upon attainment of the
applicable performance objectives.
(k) Certain Limitations on Awards to Ensure Compliance with Code Section
409A. For purposes of this Plan, references to an award term or event
(including any authority or right of the Company or a Participant)
being "permitted" under Section 409A mean, for a 409A Award, that the
term or event will not cause the Participant to be liable for payment
of interest or a tax penalty under Section 409A and, for a Non-409A
Award, that the term or event will not cause the Award to be treated
as subject to Section 409A. Other provisions of the Plan
notwithstanding, the terms of any 409A Award and any Non-409A Award,
including any authority of the Company and rights of the Participant
with respect to the Award, shall be limited to those terms permitted
under Section 409A, and any terms not permitted under Section 409A
shall be automatically modified and limited to the extent necessary to
conform with Section 409A. For this purpose, other provisions of the
Plan notwithstanding, the Company shall have no authority to
accelerate distributions relating to 409A Awards in excess of the
authority permitted under Section 409A, and any distribution subject
to Section 409A(a)(2)(A)(i) (separation from service) to a "key
employee" as defined under Section 409A(a)(2)(B)(i), shall not occur
earlier than the earliest time permitted under Section
409A(a)(2)(B)(i).
(l) Governing Law. The validity, construction, and effect of the Plan, any
rules and regulations relating to the Plan and any Award document
shall be determined in accordance with the laws of the State of
Delaware, without giving effect to principles of conflicts of laws,
and applicable provisions of federal law.
(m) Awards to Participants Outside the United States. The Committee may
modify the terms of any Award under the Plan made to or held by a
Participant who is then resident or primarily employed outside of the
United States in any manner deemed by the Committee to be necessary or
appropriate in order that such Award shall conform to laws,
regulations, and customs of the country in which the Participant is
then resident or primarily employed, or so that the value and other
benefits of the Award to the Participant, as affected by foreign tax
laws and other restrictions applicable as a result of the
Participant's residence or employment abroad shall be comparable to
the value of such an Award to a Participant who is resident or
primarily employed in the United States. An Award may be modified
under this Section 11(m) in a manner that is inconsistent with the
express terms of the Plan, so long as such modifications will not
contravene any applicable law or regulation or result in actual
liability under Section 16(b) for the Participant whose Award is
modified.
(n) Limitation on Rights Conferred under Plan. Neither the Plan nor any
action taken hereunder shall be construed as (i) giving any Eligible
Person or Participant the right to continue as an Eligible Person or
Participant or in the employ or service of the Company or a subsidiary
or affiliate, (ii) interfering in any way with the right of the
Company or a subsidiary or affiliate to terminate any Eligible
Person's or Participant's employment or service at any time (subject
to the terms and provisions of any separate written agreements), (iii)
giving an Eligible Person or
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Participant any claim to be granted any Award under the Plan or to be
treated uniformly with other Participants and employees, or (iv)
conferring on a Participant any of the rights of a stockholder of the
Company unless and until the Participant is duly issued or transferred
shares of Stock in accordance with the terms of an Award or an Option
is duly exercised. Except as expressly provided in the Plan and an
Award document, neither the Plan nor any Award document shall confer
on any person other than the Company and the Participant any rights or
remedies thereunder.
(o) Severability; Entire Agreement. If any of the provisions of the Plan
or any Award document is finally held to be invalid, illegal or
unenforceable (whether in whole or in part), such provision shall be
deemed modified to the extent, but only to the extent, of such
invalidity, illegality or unenforceability, and the remaining
provisions shall not be affected thereby; provided, that, if any of
such provisions is finally held to be invalid, illegal, or
unenforceable because it exceeds the maximum scope determined to be
acceptable to permit such provision to be enforceable, such provision
shall be deemed to be modified to the minimum extent necessary to
modify such scope in order to make such provision enforceable
hereunder. The Plan and any agreements or documents designated by the
Committee as setting forth the terms of an Award contain the entire
agreement of the parties with respect to the subject matter thereof
and supersede all prior agreements, promises, covenants, arrangements,
communications, representations and warranties between them, whether
written or oral with respect to the subject matter thereof.
(p) Plan Effective Date and Termination. The Plan as hereby amended shall
become effective if, and at such time as, the stockholders of the
Company have approved it in accordance with applicable law and stock
exchange requirements. Unless earlier terminated by action of the
Board of Directors, the authority of the Committee to make grants
under the Plan shall terminate on the date that is ten years after the
latest date upon which stockholders of the Company have approved the
Plan, and the Plan will remain in effect until such time as no Stock
remains available for delivery under the Plan or as set forth above
and the Company has no further rights or obligations under the Plan
with respect to outstanding Awards under the Plan.
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