As filed with the Securities and Exchange Commission on September 5, 1997.
Registration No. 333-
================================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
---------------
FORM S-8
REGISTRATION STATEMENT
Under
The Securities Act of 1933
---------------
THE FORTRESS GROUP, INC.
------------------------------------------------------
(Exact Name of Registrant as Specified in Its Charter)
Delaware 54-1774997
-------- ----------
(State or Other Jurisdiction (I.R.S. Employer
of Incorporation or Organization) Identification No.)
1921 Gallows Road, Suite 730
Vienna, Virginia 22182
(703) 442-4545
(Address of Principal Executive Offices, Including Zip Code)
THE FORTRESS GROUP, INC.
EMPLOYEE STOCK PURCHASE PLAN
THE FORTRESS GROUP, INC.
1996 STOCK INCENTIVE PLAN
(Full Title of the Plan)
Jamie M. Pirrello
The Fortress Group, Inc.
1921 Gallows Road, Suite 730
Vienna, Virginia 22182
(Name and Address of Agent for Service)
(703) 442-4545
(Telephone Number, Including Area Code, of Agent For Service)
Copy to:
Jeffrey E. Jordan, Esq.
Arent Fox Kintner Plotkin & Kahn
1050 Connecticut Avenue, N.W.
Washington, DC 20036-5339
(202) 857-6473
---------------
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
===================================================================================================================
Proposed Proposed
Amount Maximum Maximum Amount of
Title of Securities to be Offering Price Aggregate Registration
to be Registered Registered Per Share Offering Price Fee
---------------- ---------- --------- -------------- ---
<S> <C> <C> <C> <C>
Common Stock, $.01 par value 1,125,000 Shares 5.25(1) $5,906,250(1)
500,000 4.463(2) 2,231,500(2) $2,466
--------- ---------
TOTAL 1,625,000 Shares $8,137,750
---------
===================================================================================================================
</TABLE>
(1) Pursuant to Rule 457(h)(1), based on the average of the high and low prices
reported in the NASDAQ National Market within five business days prior to
the date of filing.
(2) Pursuant to Rule 457(h)(1) and the Employee Stock Purchase Plan, amount is
calculated as 85% of the average of the high and low prices reported in the
NASDAQ National Market within five business days prior to the date of
filing.
================================================================================
<PAGE>
PART I
INFORMATION REQUIRED IN THE SECTION 10(a) PROSPECTUS
Item 1. Plan Information*
Item 2. Registrant Information and Employee Plan Annual Information*
* Information required by Part I to be contained in a Section 10(a)
prospectus is omitted from the Registration Statement in accordance
with Rule 428 under the Securities Act of 1933 (the "Securities Act")
and the Note to Part I of Form S-8.
PART II
INFORMATION REQUIRED IN THE REGISTRATION STATEMENT
Item 3. Incorporation of Documents by Reference
The following documents previously filed by the Registrant with the
Securities and Exchange Commission (the "Commission") are incorporated by
reference in this Registration Statement:
1. The Registrant's Annual Report on Form 10-K for the fiscal year
ended December 31, 1996.
2. All other reports filed pursuant to Section 13(a) or 15(d) of the
Securities Exchange Act of 1934 (the "Exchange Act") since the end
of the fiscal year ended December 31, 1996.
3. Registrant's Form 8-A Registration Statement filed March 20, 1996
pursuant to Section 12 of the Exchange Act, containing a
description of the Registrant's common stock ("Shares"), including
any amendment or report filed for the purpose of updating such
description.
In addition, all documents subsequently filed by the Registrant
pursuant to Sections 13(a), 13(c), 14 and 15(d) of the Exchange Act prior to the
filing of a post-effective amendment which indicate that all securities offered
have been sold or which deregisters all securities then remaining unsold, shall
be deemed to be incorporated by reference in this Registration Statement and to
be a part hereof from the date of filing of such documents.
Item 4. Description of Securities.
Not Applicable.
Item 5. Interests of Named Experts and Counsel
Not applicable.
<PAGE>
Item 6. Indemnification of Directors and Officers
Section 145 of the Delaware General Corporation Law, as amended,
provides that a corporation may indemnify any person who was or is a party or is
threatened to be made a party to any threatened, pending or completed action or
proceeding, whether civil, criminal, administrative or investigative, by reason
of the fact that he is or was a director, officer, employee or agent of the
corporation or is or was serving at its request in such capacity in another
corporation or business association, against expenses (including attorneys'
fees), judgments, fines and amounts paid in settlement actually and reasonably
incurred by him in connection with such action, suit or proceeding if he acted
in good faith and in a manner he reasonably believed to be in or not opposed to
the best interests of the corporation, and with respect to any criminal action
or proceeding, had no reasonable cause to believe his conduct was unlawful.
Section 102(b)(7) or the Delaware General Corporation Law, as amended,
permits a corporation to provide in its certificate of incorporation that a
director of the corporation shall not be personally liable to the corporation or
its stockholders for monetary damages for breach of fiduciary duty as a
director, except for liability (i) for any breach of the director's duty of
loyalty to the corporation or its stockholders, (ii) for acts or omissions not
in good faith or which involve intentional misconduct or a knowing violation of
law, (iii) under Section 174 of the Delaware General Corporation Law, or (iv)
for any transaction from which the director derived an improper personal
benefit.
Article 10 of the Company's Amended and Restated Certificate of
Incorporation provides that the Company shall indemnify its officers and
directors to the fullest extent permitted by the Delaware General Corporation
Law including those circumstances in which indemnification would otherwise be
discretionary, except that the Company shall not be obligated to indemnify any
such person (i) with respect to proceedings, claims or actions initiated or
brought voluntarily by any such person and not by way of defense or (ii) for any
amounts paid in settlement of an action indemnified against by the Company
without the prior written consent of the Company. With the approval of its
stockholders, the Company has entered into indemnity agreements with each of its
directors and certain of its officers. These agreements may require the Company,
among other things, to indemnify such officers and directors against certain
liabilities that may arise by reason of their status or service as directors of
officers, to advance expenses to them as they are incurred, provided that they
undertake to repay the amount advanced if it is ultimately determined by a court
that they are not entitled to indemnification, and to obtain directors' and
officers' liability insurance if available on reasonable terms.
In addition, Article 10 of the Company's Amended and Restated
Certificate of Incorporation provides that no director of the Company shall be
personally liable to the Company or its stockholders for monetary damages for
breach of his or her fiduciary duty as a director, except for liability (i) for
any breach of the director's duty of loyalty to the Company or its stockholders,
(ii) for acts or omissions not in good faith or which involve intentional
misconduct or a knowing violation of law, (iii) under Section 174 of the General
Corporation Law of the State of Delaware, or (iv) for any transaction from which
the director derives an improper personal benefit.
Item 7. Exemption from Registration Claimed
Not applicable.
Item 8. Exhibits
See Exhibit Index on page 6.
Item 9. Undertakings
(a) The Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are
being made of the securities registered hereby, a post-effective
amendment to this Registrant Statement;
2
<PAGE>
(i) To include any prospectus required by Section 10(a)(3)
of the Securities Act;
(ii) To reflect in the prospectus any facts or events
arising after the effective date of the Registration Statement
(or the most recent post-effective amendment thereof) which,
individually or in the aggregate, represent a fundamental
change in the information set forth in this Registration
Statement;
(iii) To include any material information with respect to
the plan of distribution not previously disclosed in this
Registration Statement or any material change to such
information in this Registration Statement;
provided, however, that the undertakings set forth in
paragraphs (1)(i) and (1)(ii) above do not apply if the
information required to be included in a post-effective
amendment by those paragraphs is contained in periodic reports
filed by the Registrant pursuant to Section 13 or Section
15(d) of the Exchange Act that are incorporated by reference
in this Registration Statement.
(2) That, for the purpose of determining any liability under
the Securities Act, each such post-effective amendment shall be deemed
to be a new Registration Statement relating to the securities offered
therein, and the offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective
amendment any of the securities being registered which remain unsold at
the termination of the offering.
(b) The Registrant hereby further undertakes that, for purposes of
determining any liability under the Securities Act, each filing of the
Registrant's annual report pursuant to Section 13(a) or Section 15(d) of the
Exchange Act that is incorporated by reference in the Registration Statement
shall be deemed to be a new Registration Statement relating to the securities
offered therein, and the offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof.
(c) Insofar as indemnification for liabilities arising under the
Securities Act may be permitted to directors, officers and controlling persons
of the Registrant pursuant to the foregoing provisions, or otherwise, the
Registrant has been advised that in the opinion of the Commission such
indemnification is against public policy as expressed in the Securities Act and
is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the Registrant of expenses
incurred or paid by a director, officer or controlling person of the Registrant
in the successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the Registrant, unless in the opinion of its counsel the matter has
been settled by controlling precedent, will submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Securities Act and will be governed by the final
adjudication of such issue.
3
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act, the Registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-8 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Vienna, State of Virginia, on the 5th day of
September, 1997.
THE FORTRESS GROUP, INC.
By: /s/ James J. Martell, Jr.
-------------------------------------
James J. Martell, Jr.
President and Chief Executive Officer
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS that each person whose signature appears
below constitutes and appoints James J. Martell, Jr. and J. Marshall Coleman,
and each of them, his true and lawful attorney-in-fact and agent with power of
substitution and resubstitution, for him, and in his name, place and stead, in
any and all capacities, to sign any and all amendments (including post effective
amendments) to this Registration Statement on Form S-8, and to file the same,
with all exhibits thereto, and all documents in connection therewith, with the
Commission, granting unto said attorney-in-fact and agents, and each of them,
full power and authority to do and perform each and every act and thing
requisite and necessary to be done to comply with the provisions of the
Securities Act and all requirements of the Commission, hereby ratifying and
confirming all that said attorney-in-fact or any of them, or their or his or her
substitutes, may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities indicated on September 5, 1997.
Signatures Title
- ---------------------------------------- ------------------------------------
/s/ J. Marshall Coleman Chairman of the Board and Director
- ----------------------------------------
J. Marshall Coleman
/s/ James J. Martell, Jr. President, Chief Executive Officer
- ---------------------------------------- and Director
James J. Martell, Jr.
/s/ George C. Yeonas Chief Operating Officer and Director
- ----------------------------------------
George C. Yeonas
/s/ Jamie M. Pirrello Chief Financial Officer
- ----------------------------------------
Jamie M. Pirrello
/s/ Thomas B. Buffington Director
- ----------------------------------------
Thomas B. Buffington
/s/ J. Christopher Stuhmer Director
- ----------------------------------------
J. Christopher Stuhmer
4
<PAGE>
/s/ Lawrence J. Witek Director
- ----------------------------------------
Lawrence J. Witek
/s/ Robert Short Director
- ----------------------------------------
Robert Short
/s/ Mark L. Fine Director
- ----------------------------------------
Mark L. Fine
/s/ Edward J. Mathias Director
- ----------------------------------------
Edward J. Mathias
/s/ Steven D. Rivers Director
- ----------------------------------------
Steven D. Rivers
/s/ William Shutzer Director
- ----------------------------------------
William Shutzer
/s/ Charles F. Smith Director
- ----------------------------------------
Charles F. Smith
5
<PAGE>
EXHIBIT INDEX
Exhibit
- -------
4.1 Form of The Fortress Group, Inc. Employee Stock
Purchase Plan (incorporated herein by reference to
the Addendum to the Proxy Statement dated April 18,
1997).
4.2 Form of The Fortress Group, Inc. 1996 Stock
Incentive Plan, as amended and restated.
5 Opinion of Arent Fox Kintner Plotkin & Kahn as to
legality of the shares of Common Stock being
offered under the Plans.
23.1 Consent of Independent Accountants, Price
Waterhouse LLP.
23.2 Consent of Arent Fox Kintner Plotkin & Kahn
(included in their opinion filed as Exhibit 5
herein).
24 Power of Attorney (included on the signature page
of this Registration Statement).
6
EXHIBIT 4.2
THE FORTRESS GROUP, INC.
1996 STOCK INCENTIVE PLAN
<PAGE>
THE FORTRESS GROUP, INC.
1996 STOCK INCENTIVE PLAN
TABLE OF CONTENTS
ARTICLE I ESTABLISHMENT..................................................1
1.1 Purpose........................................................1
ARTICLE II DEFINITION.....................................................1
2.1 Affiliate......................................................1
2.2 Agreement or Award Agreement...................................1
2.3 Award..........................................................1
2.4 Beneficiary....................................................1
2.5 Board of Directors or Board....................................1
2.6 Cause..........................................................2
2.7 Change in Control and Change in Control Price..................2
2.8 Code or Internal Revenue Code..................................2
2.9 Commission.....................................................2
2.10 Committee......................................................2
2.11 Common Stock...................................................2
2.12 Company........................................................2
2.13 Deferred Stock.................................................2
2.14 Disability.....................................................2
2.15 Disinterested Person...........................................3
2.16 Effective Date.................................................3
2.17 Exchange Act...................................................3
2.18 Extraordinary Termination of Employment....................... 3
2.19 Fair Market Value..............................................3
2.20 Grant Date.....................................................3
2.21 Incentive Stock Option.........................................3
2.22 Non-Employee Director..........................................3
2.23 Non-qualified Stock Option.....................................3
2.24 Option Period..................................................3
2.25 Option Price...................................................3
2.26 Participant....................................................3
2.27 Plan...........................................................4
2.28 Public Offering................................................4
2.29 Representative.................................................4
2.30 Restricted Stock...............................................4
2.31 Retirement.....................................................4
2.32 Rule 16b-3 and Rule 16a-1(c)(3)................................4
2.33 Securities Act.................................................4
2.34 Stock Appreciation Right.......................................4
-i-
<PAGE>
2.35 Stock Option or Option.........................................4
2.36 Termination of Employment......................................4
ARTICLE III ADMINISTRATION.................................................5
3.1 Committee Structure and Authority..............................5
ARTICLE IV STOCK SUBJECT TO PLAN..........................................7
4.1 Number of Shares...............................................7
4.2 Release of Shares..............................................8
4.3 Restrictions on Shares.........................................8
4.4 Stockholder Rights.............................................8
4.5 Best Efforts To Register.......................................8
4.6 Anti-Dilution..................................................9
ARTICLE V ELIGIBILITY....................................................9
5.1 Eligibility....................................................9
ARTICLE VI STOCK OPTIONS.................................................10
6.1 General.......................................................10
6.2 Grant.........................................................10
6.3 Terms and Conditions..........................................11
6.4 Termination by Reason of Death................................13
6.5 Termination by Reason of Disability...........................13
6.6 Other Termination.............................................13
6.7 Cashing Out of Option.........................................14
ARTICLE VII STOCK APPRECIATION RIGHTS.....................................14
7.1 General.......................................................14
7.2 Grant.........................................................14
7.3 Terms and Conditions..........................................14
ARTICLE VIII RESTRICTED STOCK..............................................16
8.1 General.......................................................16
8.2 Awards and Certificates.......................................16
8.3 Terms and Conditions..........................................16
-ii-
<PAGE>
ARTICLE IX DEFERRED STOCK................................................17
9.1 General ......................................................17
9.2 Terms and Conditions..........................................17
ARTICLE X PROVISIONS APPLICABLE TO STOCK ACQUIRED UNDER
THIS PLAN.....................................................18
10.1 Limited Transfer During Offering..............................18
10.2 Committee Discretion..........................................19
10.3 No Company Obligation.........................................19
ARTICLE XI CHANGE IN CONTROL PROVISIONS..................................19
11.1 Impact of Event...............................................19
11.2 Definition of Change in Control...............................20
11.3 Change in Control Price.......................................21
ARTICLE XII MISCELLANEOUS.................................................22
12.1 Amendments and Termination....................................22
12.2 Unfunded Status of Plan.......................................22
12.3 Status of Awards Under Code Section 162(m)....................22
12.4 General Provisions............................................23
12.4 Mitigation of Excise Tax......................................24
12.5 Rights with Respect to Continuance of Employment..............25
12.6 Awards in Substitution for Awards Granted by
Other Corporations............................................25
12.7 Procedure for Adoption........................................25
12.8 Procedure for Withdrawal......................................25
12.9 Delay.........................................................25
12.10 Headings......................................................26
12.11 Severability..................................................26
12.12 Successors and Assigns........................................26
12.13 Entire Agreement..............................................26
-iii-
<PAGE>
THE FORTRESS GROUP, INC.
1996 STOCK INCENTIVE PLAN
ARTICLE I
ESTABLISHMENT
1.1 Purpose.
The Fortress Group, Inc. 1996 Stock Incentive Plan ("Plan") is hereby
established by The Fortress Group, Inc. ("Company"). The purpose of this Plan is
to promote the overall financial objectives of the Company and its stockholders
by motivating those persons selected to participate in this Plan to achieve
long-term growth in stockholder equity in the Company and by retaining the
association of those individuals who are instrumental in achieving this growth.
This Plan is adopted effective as of April 1, 1996.
ARTICLE II
DEFINITIONS
For purposes of this Plan, the following terms are defined as set forth
below:
2.1 "Affiliate" means any individual, corporation, partnership,
association, joint-stock company, trust, unincorporated association or other
entity (other than the Company) that directly, or indirectly through one or more
intermediaries, controls, is controlled by, or is under common control with, the
Company including, without limitation, any member of an affiliated group of
which the Company is a common parent corporation as provided in Section 1504 of
the Code.
2.2 "Agreement" or "Award Agreement" means, individually or
collectively, any agreement entered into pursuant to this Plan pursuant to which
an Award is granted to a Participant.
2.3 "Award" means a Stock Option, Stock appreciation Right, Restricted
Stock or Deferred Stock.
2.4 "Beneficiary" means any person or trust which have been designated
by a Participant in his or her most recent written beneficiary designation filed
with the Committee to receive the benefits specified under the Plan upon such
Participant's death or to which Awards or other rights are transferred if and to
the extent permitted hereunder. If, upon a Participant's death, there is no
designated Beneficiary or surviving designated Beneficiary, then the term
Beneficiary means the person or trust entitled by will or the laws of descent
and distribution to receive such benefits.
1
<PAGE>
2.5 "Board of Directors" or "Board" means the Board of Directors of the
Company.
2.6 "Cause" shall mean, for purposes of whether and when a Participant
has incurred a Termination of Employment for Cause, any act of omission which
permits the Company to terminate the written agreement or arrangement between
the Participant and the Company or an Affiliate for Cause as defined in such
agreement or arrangement, or in the event there is no such agreement or
arrangement or arrangement does not define the term "cause," then Cause shall
mean (a) any act or failure to act deemed to constitute cause under the
Company's established practices, policies or guidelines applicable to the
Participant or (b) the Participant's act or omission constituting gross
misconduct with respect to the Company or an Affiliate in any material respect.
2.7 "Change in Control" and "Change in Control Price" have the meanings
set forth in Sections 11.2 and 11.3, respectively.
2.8 "Code" or "Internal Revenue Code" means the Internal Revenue Code of
1986, as amended, final Treasury Regulations thereunder and any subsequent
Internal Revenue Code.
2.9 "Commission" means the Securities and Exchange Commission or any
successor agency.
2.10 "Committee" means the person or persons appointed by the Board of
Directors to administer this Plan, as further described herein.
2.11 "Common Stock" means the shares of the regular voting Common Stock,
$.01 par value, whether presently or hereafter issued, and any other stock or
security resulting from adjustment thereof as described hereinafter or the
common stock of any successor to the Company which is designated for the purpose
of this Plan.
2.12 "Company" means The Fortress Group, Inc., a Delaware corporation,
and includes any successor or assignee corporation or corporations into which
the Company may be merged, changed or consolidated; any corporation for whose
securities all or substantially all of the securities of the Company shall be
exchanged; and any assignee of or successor to substantially all of the assets
of the Company.
2.13 "Deferred Stock" means an award made pursuant to Article IX.
2.14 "Disability" means a mental or physical illness that entitles the
Participant to receive benefits under the long term disability plan of the
Company or an Affiliate, or if the Participant is not covered by such a plan or
the Participant is not an employee of the Company or an Affiliate a mental or
physical illness that renders a Participant totally and permanently incapable of
performing the Participant's duties for the Company or an Affiliate.
Notwithstanding the foregoing, a Disability shall not qualify under this Plan if
it is the result of (i) a willfully self-inflicted injury or willfully
self-induced sickness; or (ii) an injury or disease contracted, suffered, or
incurred, while participating in a criminal offense. The determination of
Disability shall be made by the Committee. The determination of Disability for
purposes of this Plan shall not be construed to be an admission of disability
for any other purpose.
2
<PAGE>
2.15 "Disinterested Person" shall mean "Non-Employee Director" as that
term is set forth in Rule 16b-3, and shall mean a person who is also an "outside
director" under Section 162(m) of the Code.
2.16 "Effective Date" means April 1, 1996.
2.17 "Exchange Act" means the Securities Exchange Act of 1934, as
amended, and the rules and regulations promulgated thereunder.
2.18 "Extraordinary Termination of Employment" means the Termination of
Employment of the Participant due to death, Disability or Retirement.
2.19 "Fair Market Value" means the fair market value of Common Stock,
Awards, or other property as determined by the Committee or under procedures
established by the Committee. Unless otherwise determined by the Committee and
in the event of grants of Directors Options under Section 6.2, the Fair Market
Value per share of Common Stock as of any given date shall be the closing sale
price per share reported on a consolidated basis for stock listed on the
principal stock exchange or market on which Common Stock is traded on the date
as of which such value is being determined or, if there is no sale on that date,
then on the last previous day on which a sale was reported.
2.20 "Grant Date" means the date as of which an Award is granted
pursuant to this Plan.
2.21 "Incentive Stock Option" means any Stock Option intended to be and
designated as an "incentive stock option" within the meaning of Section 422 of
the Code.
2.22 "Non-Employee Director" means each and any director who serves on
the Board and who is not an officer or employee of the Company or any of its
Affiliates.
2.23 "Nonqualified Stock Option" means an Option to purchase Common
Stock in the Company granted under this Plan the taxation of which is pursuant
to Section 83 of the Code.
2.24 "Option Period" means the period during which the Option shall be
exercisable in accordance with the Agreement and Article VI.
2.25 "Option Price" means the price at which the Common Stock may be
purchased under an Option as provided in Section 6.3.
2.26 "Participant" means a person who satisfies the eligibility
conditions of Article V and to whom an Award has been granted by the Committee
under this Plan, and in the event a Representative is appointed for a
Participant or another person becomes a Representative, then the term
"Participant" shall mean such Representative. The term shall also include a
trust for the benefit of the Participant, a partnership the interest of which we
3
<PAGE>
held by or for the benefit of the Participant, the Participant's parents, spouse
or descendants, or a custodian under a uniform gifts to minors act or similar
statute for the benefit of the Participant's descendants, to the extent
permitted by the Committee and not inconsistent with the Rule 16b-3 or the
status of the Option as an Incentive Stock Option, to the extent intended.
Notwithstanding the foregoing, the term "Termination of Employment" shall mean
the Termination of Employment of the Employee.
2.27 "Plan" means this The Fortress Group, Inc. 1996 Stock Incentive
Plan, as the same may be amended from time to time.
2.28 "Public Offering" means a public offering of shares of Common Stock
under the Securities Act.
2.29 "Representative" means (a) the person or entity acting as the
executor or administrator of a Participant's estate pursuant to the last will
and testament of a Participant or pursuant to the laws of the jurisdiction in
which the Participant had the Participant's primary residence at the date of the
Participant's death; (b) the person or entity acting as the guardian or
temporary guardian of a Participant; (c) the person or entity which is the
beneficiary of the Participant upon or following the Participant's death; or (d)
any person to whom an Option has been transferred with the permission of the
Committee; provided that only one of the foregoing shall be the Representative
at any point in time as determined under applicable law and recognized by the
Committee.
2.30 "Restricted Stock" means an award under Article VIII.
2.31 "Retirement" means the Participant's Termination of Employment
after attaining either the normal retirement age or the early retirement age as
defined in the principal (as determined by the Committee) tax-qualified plan of
the Company or an Affiliate, if the Participant is covered by such plan, and if
the Participant is not covered by such a plan, then age 65, or age 55 with the
accrual of 10 years of service.
2.32 "Rule 16b-3" means Rule 16b-3, as from time to time in effect and
applicable to the Plan and Participants, promulgated by the Securities and
Exchange Commission under Section 16 of the Exchange Act.
2.33 "Securities Act" means the Securities Act of 1933, as amended, and
the rules and regulations promulgated thereunder.
2.34 "Stock Appreciation Right" means a right granted under Article VII.
2.35 "Stock Option" or "Option" means an option granted under Article
VI.
2.36 "Termination of Employment" means the occurrence of any act or
event whether pursuant to an employment agreement or otherwise that actually or
effectively causes or results in the person's ceasing, for whatever reason, to
be an officer, independent contractor, consultant, director or employee of the
Company or of any Affiliate, or to be an officer, independent contractor,
consultant, director or employee of any entity that provides services to the
4
<PAGE>
Company or an Affiliate, including, without limitation, death, Disability,
dismissal, severance at the election of the Participant, Retirement, or
severance as a result of the discontinuance, liquidation, sale or transfer by
the Company or its Affiliates of all businesses owned or operated by the Company
or its Affiliates. With respect to any person who is not an employee with
respect to the Company or an Affiliate, the Agreement shall establish what act
or event shall constitute a Termination of Employment for purposes of this Plan.
A transfer of employment from the Company to an Affiliate, or from an Affiliate
to the Company, shall not be a Termination of Employment, unless expressly
determined by the Committee. A Termination of Employment shall occur to an
employee who is employed by an Affiliate if the Affiliate shall cease to be an
Affiliate and the Participant shall not immediately thereafter become an
employee of the Company or an Affiliate. A transfer of employment from the
Company to an Affiliate, or from an Affiliate to the Company, will not be a
termination of Employment, unless expressly determined by the Company.
In addition, certain other terms used herein have definitions given to
them in the first place in which they are used.
ARTICLE III
ADMINISTRATION
3.1 Committee Structure and Authority. This Plan shall be administered
by the Committee which shall be comprised of one or more persons. The Committee
shall be the Compensation Committee of the Board of Directors, unless such
committee does not exist or the Board establishes a committee whose sole purpose
is the administration of this Plan. In the absence of an appointment of a
Compensation Committee or another specific committee the Board shall be the
Committee. A majority of the Committee shall constitute a quorum at any meeting
thereof (including telephone conference) and the acts of a majority of the
members present, or acts approved in writing by a majority of the entire
Committee without a meeting, shall be the acts of the Committee for purposes of
this Plan. The Committee may authorize any one or more of its members or an
officer of the Company to execute and deliver documents on behalf of the
Committee. The Committee shall be comprised of such number of Disinterested
Persons as is required for application of Rule 16b-3 and the deduction of
compensation under Section 162(m) of the Code. A member of the Committee shall
not exercise any discretion respecting himself or herself under this Plan. The
Board shall have the authority to remove, replace or fill any vacancy of any
member of the Committee upon notice to the Committee and the affected member.
Any member of the Committee may resign upon notice to the Board. The Committee
may allocate among one or more of its members, or may delegate to one or more of
its agents, such duties and responsibilities as it determines.
Among other things, the Committee shall have the authority, subject to
the terms of this Plan:
(a) to select those persons to whom Awards may be granted from
time to time;
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(b) to determine whether and to what extent Stock Options, Stock
Appreciation Rights, Restricted Stock and Deferred Stock or any
combination thereof are to be granted hereunder;
(c) to determine the number of shares of Common Stock to be
covered by each Award granted hereunder;
(d) to determine the terms and conditions of any Award granted
hereunder (including, but not limited to, the Option Price, the Option
Period, any exercise restriction or limitation and any exercise
acceleration or forfeiture waiver regarding any Award and the shares of
Common Stock relating thereto);
(e) to adjust the terms and conditions, at any time or from time
to time, of any Award, subject to the limitations of Section 12.1;
(f) to determine to what extent and under what circumstances
Common Stock and other amounts payable with respect to an Award shall be
deferred;
(g) to determine under what circumstances an Award may be
settled in cash or Common Stock;
(h) to provide for the forms of Agreement to be utilized in
connection with this Plan;
(i) to determine whether a Participant has a Disability or a
Retirement;
(j) to determine what securities law requirements are applicable
to this Plan, Awards, and the issuance of shares of Common Stock and to
require of a Participant that appropriate action be taken with respect
to such requirements;
(k) to cancel, with the consent of the Participant or as
otherwise provided in this Plan or an Agreement, outstanding Awards;
(1) to interpret and make a final determination with respect to
the remaining number of shares of Common Stock available under this
Plan;
(m) to require as a condition of the exercise of an Award or the
issuance or transfer of a certificate of Common Stock, the withholding
from a Participant of the amount of any federal, state or local taxes as
may be necessary in order for the Company or any other employer to
obtain a deduction or as may be otherwise required by law;
(n) to determine whether and with what effect an individual has
incurred a Termination of Employment;
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(o) to determine whether the Company or any other person has a
right or obligation to purchase Common Stock from a Participant and, if
so, the terms and conditions on which such Common Stock is to be
purchased;
(p) to determine the restrictions or limitations on the transfer
of Common Stock;
(q) to determine whether an Award is to be adjusted, modified or
purchased, or is to become fully exercisable, under this Plan or the
terms of an Agreement;
(r) to determine the permissible methods of Award exercise and
payment, including cashless exercise arrangements;
(s) to adopt, amend and rescind such rules and regulations as,
in its opinion, may be advisable in the administration of this Plan; and
(t) to appoint and compensate agents, counsel, auditors or other
specialists to aid it in the discharge of its duties.
The Committee shall have the authority to adopt, alter and repeal such
administrative rules, guidelines and practices governing this Plan as it shall,
from time to time, deem advisable, to interpret the terms and provisions of this
Plan and any Award issued under this Plan (and any Agreement) and to otherwise
supervise the administration of this Plan. The Committee's policies and
procedures may differ with respect to Awards granted at different times or to
different Participants.
Any determination made by the Committee pursuant to the provisions of
this Plan shall be made in its sole discretion, and in the case of any
determination relating to an Award, may be made at the time of the grant of the
Award or, unless in contravention of any express term of this Plan or an
Agreement, at any time thereafter. All decisions made by the Committee pursuant
to the provisions of this Plan shall be final and binding on all persons,
including the Company and Participants. Any determination shall not be subject
to de novo review if challenged in court.
ARTICLE IV
STOCK SUBJECT TO PLAN
4.1 Number of Shares. Subject to the adjustment under Section 4.6, the
total number of shares of Common Stock reserved and available for distribution
pursuant to Awards under this Plan shall be 1,125,000 shares of Common Stock
authorized for issuance on the Effective Date. Such shares may consist, in whole
or in part, of authorized and unissued shares or treasury shares.
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4.2 Release of Shares. The Committee shall have full authority to
determine the number of shares of Common Stock available for Award, and in its
discretion may include (without limitation) as available for distribution any
shares of Common Stock that have ceased to be subject to an Award, any shares of
Common Stock subject to any Award that are forfeited, any Award that otherwise
terminates without issuance of shares of Common Stock being made to the
Participant, or any shares (whether or not restricted) of Common Stock that are
received by the Company in connection with the exercise of an Award, including
the satisfaction of any tax liability or the satisfaction of a tax withholding
obligation. If any shares could not again be available for Options to a
particular Participant under applicable law, such shares shall be available
exclusively for Options to Participants who are not subject to such limitations.
4.3 Restrictions on Shares. Shares of Common Stock issued upon exercise
of an Award shall be subject to the terms and conditions specified herein and to
such other terms, conditions and restrictions as the Committee in its discretion
may determine or provide in the Award Agreement. The Company shall not be
required to issue or deliver any certificates for shares of Common Stock, cash
or other property prior to (i) the listing of such shares on any stock exchange
(or other public market) on which the Common Stock may then be listed (or
regularly traded), (ii) the completion of any registration or qualification of
such shares under federal or state law, or any ruling or regulation of any
government body which the Committee determines to be necessary or advisable, and
(iii) the satisfaction of any applicable withholding obligation in order for the
Company or an Affiliate to obtain a deduction with respect to the exercise of an
Award. The Company may cause any certificate for any share of Common Stock to be
delivered to be properly marked with a legend or other notation reflecting the
limitations on transfer of such Common Stock as provided in this Plan or as the
Committee may otherwise require. The Committee may require any person exercising
an Award to make such representations and furnish such information as it may
consider appropriate in connection with the issuance or delivery of the shares
of Common Stock in compliance with applicable law or otherwise. Fractional
shares shall not be delivered, but shall be rounded to the next lower whole
number of shares.
4.4 Stockholder Rights. No person shall have any rights of a stockholder
as to shares of Common Stock subject to an Award until, after proper exercise of
the Award or other action required, such shares shall have been recorded on the
Company's official stockholder records as having been issued or transferred. No
adjustment shall be made for cash dividends or other rights for which the record
date is prior to the date such shares are recorded as issued and transferred in
the Company's official stockholder records, except as provided herein or in an
Agreement.
4.5 Best Efforts To Register. The Company will register under the
Securities Act the Common Stock delivered or deliverable pursuant to Awards on
Commission Form S-8 if available to the Company for this purpose (or any
successor or alternate form that is substantially similar to that form to the
extent available to effect such registration), in accordance with the rules and
regulations governing such forms, as soon as such forms are available for
registration to the Company for this purpose. The Company will use its best
efforts to cause the registration statement to become effective as soon as
possible and will file such supplements and amendments to the registration
statement as may be necessary to keep the registration statement in effect until
the earliest of (a) one year following the expiration of the Option Period of
the last Option outstanding, (1,)the date the Company is no longer a reporting
company under the Exchange Act and (c) the date all Participants have disposed
of all shares delivered pursuant to any Award. The Company may delay the
foregoing obligation if the Committee reasonably determines that any such
registration would materially and adversely affect the Company's interests or if
there is no material benefit to Participants.
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4.6 Anti-Dilution. In the event of any Company stock dividend, stock
split, combination or exchange of shares, recapitalization or other change in
the capital structure of the Company, corporate separation or division of the
Company (including, but not limited to, a split-up, spin-off, split-off or
distribution to Company stockholders other than a normal cash dividend),
reorganization, rights offering, a partial or complete liquidation, or any other
corporate transaction, Company share offering or event involving the Company and
having an effect similar to any of the foregoing, then the Committee shall
adjust or substitute, as the case may be, the number of shares of Common Stock
available for Awards under this Plan, the number of shares of Common Stock
covered by outstanding Awards, the exercise price per share of outstanding
Awards, and any other characteristics or terms of the Awards as the Committee
shall deem necessary or appropriate to reflect equitably the effects of such
changes to the Participants; provided, however, that the Committee may limit any
such adjustment so as to maintain the deductibility of the Awards under Section
162(m) of the Code, and that any fractional shares resulting from such
adjustment shall be eliminated by rounding to the next lower whole number of
shares with appropriate payment for such fractional share as shall reasonably be
determined by the Committee.
ARTICLE V
ELIGIBILITY
5.1 Eligibility. Except as herein provided, the persons who shall be
eligible to participate in this Plan and be granted Awards shall be those
persons who are directors, officers, employees, independent contractors and
consultants of the Company or any subsidiary, who shall be in a position, in the
opinion of the Committee, to make contributions to the growth, management,
protection and success of the Company and its subsidiaries. Of those persons
described in the preceding sentence, the Committee may, from time to time,
select persons to be granted Awards and shall determine the terms and conditions
with respect thereto. In making any such selection and in determining the form
of the Award, the Committee may give consideration to the functions and
responsibilities of the person's contributions to the Company and its
subsidiaries, the value of the individual's service to the Company and its
subsidiaries and such other factors deemed relevant by the Committee. The
Committee may designate any person who is not eligible to participate in this
Plan if such person would otherwise be eligible to participate in this Plan (and
members of the Committee, except as provided in Section 6.2, are expressly
excluded).
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ARTICLE VI
STOCK OPTIONS
6.1 General. The Committee shall have authority to grant Options under
this Plan at any time or from time to time, subject to the limitations
applicable to Non-Employee Directors. Stock Options may be granted alone or in
addition to other Awards and may be either Incentive Stock Options or
Non-Qualified Stock Options. An Option shall entitle the Participant to receive
shares of Common Stock upon exercise of such Option, subject to the
Participant's satisfaction in full of any conditions, restrictions or
limitations imposed in accordance with this Plan or an Agreement (the terms and
provisions of which may differ from other Agreements) including without
limitation, payment of the Option Price. During any three-calendar-year period,
Options for no more than 300,000 shares of Common Stock shall be granted to any
Participant.
6.2 Grant
(a) Except Options granted to Non-Employee Directors, the grant of a
Stock Option shall occur as of the date the Committee determines. (Options
granted to Non-Employee Directors shall occur as provided in Section 6.2(b).)
Each Option granted under this Plan shall be evidenced by an Agreement, in a
form approved by the Committee, which shall embody the terms and conditions of
such Option and which shall be subject to the express terms and conditions set
forth in this Plan. Such Agreement shall become effective upon execution by the
Participant. Only a person who is a common-law employee of the Company, any
parent corporation of the Company or a subsidiary (as such terms are defined in
Section 424 of the Code) on the date of grant shall be eligible to be granted an
Option which is intended to be and is an Incentive Stock Option. To the extent
that any Stock Option is not designated as an Incentive Stock Option or even if
so designated does not qualify as an Incentive Stock Option, it shall constitute
a Non-Qualified Stock Option. Anything in this Plan to the contrary
notwithstanding, no term of this Plan relating to Incentive Stock Options shall
be interpreted, amended or altered, nor shall any discretion or authority
granted under this Plan be exercised, so as to disqualify this Plan under
Section 422 of the Code or, without the consent of the Participant affected, to
disqualify any Incentive Stock Option under such Section 422.
(b) The provisions of this Section 6.2(b) shall apply only to
Participants who are Non-Employee Directors. On the date of the Company's annual
meeting of stockholders each year, beginning with the annual meeting held in
1996, options to purchase 3,000 shares of Common Stock shall automatically be
granted to each Non-Employee Director serving on the Board on such date. If any
such Non-Employee Director will be required to retire pursuant to the policies
of the Board) during the 12 month period beginning on the date of any grant (or
if any such Non-Employee Director has notified the Board that he or she intends
to resign from the Board for any reason during the 12 month period beginning on
the date of any grant), such director shall instead be granted on the date of
the annual stockholders' meeting of such year, Options to purchase a number of
shares of Common Stock equal to (i) 3,000, multiplied by (ii) a fraction, the
numerator of which is the number of full calendar months such Non-Employee
Director will serve on the Board during the period beginning on the date of such
annual meeting of stockholders and ending on such director's last date of
service and the denominator of which is 12. If after 1996 a Non-Employee
Director is initially elected or appointed to the Board effective on any date
other than on the date of the annual meeting of stockholders, such Non-Employee
Director shall automatically be granted, on the date he or she joins the Board,
Options to purchase a number of shares of Common Stock equal to (i) 3,000,
multiplied by (ii) a fraction, the numerator of which is the number of full
calendar months such Non-Employee Director will serve on the Board during the
period beginning on the date such director joins the Board and ending on the
following date of the next annual meeting of stockholders and the denominator of
which is 12.
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6.3 Terms and Conditions. Stock Options shall be subject to such terms
and conditions as shall be determined by the Committee, including the following:
(a) Option Period. The Option Period of each Stock Option shall be fixed
by the Committee; provided that no Non-Qualified Stock Option shall be
exercisable more than fifteen (15) years after the date the Stock Option is
granted. In the case of an Incentive Stock Option, the Option Period shall not
exceed ten (10) years from the date of grant or five (5) years in the case of an
individual who owns more than ten percent (10%) of the combined voting power of
all classes of stock of the Company, a corporation which is a parent corporation
of the Company or any subsidiary of the Company (each as defined in Section 424
of the Code). No Option which is intended to be an Incentive Stock Option shall
be granted more than ten (10) years from the date this Plan is adopted by the
Company or the date this Plan is approved by the stockholders of the Company,
whichever is earlier.
(b) Option Price. The Option Price per share of the Common Stock
purchasable under an Option shall be determined by the Committee except that the
Option Price with respect to Non-Employee Directors shall be 100% of Fair Market
Value on the Grant Date. If an Option is intended to qualify as an Incentive
Stock Option, the Option Price per share shall be not less than the Fair Market
Value per share on the date the Option is granted, or where granted to an
individual who owns or who is deemed to own stock possessing more than ten
percent (10%) of the combined voting power of all classes of stock of the
Company, a corporation which is a parent corporation of the Company or any
subsidiary of the Company (each as defined in Section 424 of the Code), not less
than one hundred ten percent (110%) of such Fair Market Value per share.
(c) Exercisability. Subject to Section 11.1, Stock Options shall be
exercisable at such time or times and subject to such terms and conditions as
shall be determined by the Committee. If the Committee provides that any Stock
Option is exercisable only in installments, the Committee may at any time waive
such installment exercise provisions, in whole or in part. In addition, the
Committee may at any time accelerate the exercisability of any Stock Option. If
the Committee intends that an Option be an Incentive Stock Option, the Committee
may, in its discretion, provide that the aggregate Fair Market Value (determined
at the Grant Date) of an Incentive Stock Option which is exercisable for the
first time during the calendar year shall not exceed $100,000.
(d) Method of Exercise. Subject to the provisions of this Article VI, a
Participant may exercise Stock Options, in whole or in part, at any time during
the Option Period by the Participant's giving written notice of exercise on a
form provided by the Committee (if available) to the Company specifying the
number of shares of Common Stock subject to the Stock Option to be purchased.
Such notice shall be accompanied by payment in full of the purchase price by
cash or check or such other form of payment as the Company may accept. If
approved by the Committee (including approval at the time of exercise), payment
in full or in part may also be made (i) by delivering Common Stock already owned
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by the Participant having a total Fair Market Value on the date of such delivery
equal to the Option Price; (ii) by the execution and delivery of a note or other
evidence of indebtedness (and any security agreement thereunder) satisfactory to
the Committee and permitted in accordance with Section 6.3(e); (iii) by
authorizing the Company to retain shares of Common Stock which would otherwise
be issuable upon exercise of the Option having a total Fair Market Value on the
date of delivery equal to the Option Price; (iv) by the delivery of cash or the
extension of credit by a broker-dealer to whom the Participant has submitted a
notice of exercise or otherwise indicated an intent to exercise an Option (in
accordance with Part 220, Chapter II, Title 12 of the Code of Federal
Regulations, so-called "cashless" exercise); (v) by certifying ownership of
shares of Common Stock by the Participant to the satisfaction of the Committee
for later delivery to the Company as specified by the Committee; or (vi) by any
combination of the foregoing. If payment of the Option Price of a Non-Qualified
Stock Option is made in whole or in part in the form of Restricted Stock or
Deferred Stock, the number of shares of Common Stock to be received upon such
exercise equal to the number of shares of Restricted Stock or Deferred Stock
used for payment of the Option Price shall be subject to the same forfeiture
restrictions or deferral limitations to which such Restricted Stock or Deferred
Stock was subject, unless otherwise determined by the Committee. In the case of
an Incentive Stock Option, the right to make a payment in the form of already
owned shares of Common Stock of the same class as the Common Stock subject to
the Stock Option may be authorized only at the time the Stock Option is granted.
No shares of Common Stock shall be issued until full payment therefor, as
determined by the Committee, has been made. Subject to any forfeiture
restrictions or deferral limitations that may apply if a Stock Option is
exercised using Restricted Stock or Deferred Stock, a Participant shall have all
of the rights of a stockholder of the Company holding the class of Common Stock
that is subject to such Stock Option (including, if applicable, the right to
vote the shares and the right to receive dividends), when the Participant has
given written notice of exercise, has paid in full for such shares and such
shares have been recorded on the Company's official stockholder records as
having been issued and transferred.
(e) Company Loan or Guarantee. Upon the exercise of any Option and
subject to the pertinent Agreement and the discretion of the Committee, the
Company may at the request of the Participant:
(i) lend to the Participant, with recourse, an amount equal to such
portion of the Option Price as the Committee may determine; or
(ii) guarantee a loan obtained by the Participant from a third-party for
the purpose of tendering the Option Price.
The terms and conditions of any loan or guarantee, including the term,
interest rate, and any security interest thereunder, shall be determined by the
Committee, except that no extension of credit or guarantee shall obligate the
Company for an amount to exceed the lesser of the aggregate Fair Market Value
per share of the Common Stock on the date of exercise, less the par value of the
shares of Common Stock to be purchased upon the exercise of the Award, or the
amount permitted under applicable laws or the regulations and rules of the
Federal Reserve Board and any other governmental agency having jurisdiction.
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(f) Non-transferability of Options. Except as provided herein or in an
Agreement and then only consistent with the intent that the Option be an
Incentive Stock Option, no Stock Option or interest therein shall be
transferable by the Participant other than by will or by the laws of descent and
distribution or by a designation of beneficiary effective upon the death of the
Participant, and all Stock Options shall be exercisable during the Participant's
lifetime only by the Participant. If and to the extent transferability is
permitted by Rule 16b-3 or does not result in liability to any Participant and
except as otherwise provided herein or by an Agreement, every Option granted
hereunder shall be freely transferable, but only if such transfer does not
result in liability under Section 16 of the Exchange Act to the Participant or
other Participants and is consistent with registration of the Option and sale of
Common Stock on Form S-8 (or a successor form) or is consistent with the use of
Form S-8 (or the Committee's waiver of such condition) and consistent with an
Award's intended status as an Incentive Stock Option (as applicable).
6.4 Termination by Reason of Death. Unless otherwise provided in an
Agreement or determined by the Committee, if a Participant incurs a Termination
of Employment due to death, any unexpired and unexercised Stock Option held by
such Participant shall thereafter be fully exercisable for a period of one (1)
year (or such other period or no period as the Committee may specify)
immediately following the date of such death or until the expiration of the
Option Period, whichever period is the shorter.
6.5 Termination by Reason of Disability. Unless otherwise provided in an
Agreement or determined by the Committee, if a Participant incurs a Termination
of Employment due to a Disability, any unexpired and unexercised Stock Option
held by such Participant shall thereafter be fully exercisable by the
Participant for the period of one (1) year (or such other period or no period as
the Committee may specify) immediately following the date of such Termination of
Employment or until the expiration of the Option Period, whichever period is
shorter, and the Participant's death at any time following such Termination of
Employment due to Disability shall not affect the foregoing. In the event of
Termination of Employment by reason of Disability, if an Incentive Stock Option
is exercised after the expiration of the exercise periods that apply for
purposes of Section 422 of the Code, such Stock Option will thereafter be
treated as a Non-Qualified Stock Option.
6.6 Other Termination. Unless otherwise provided in an Agreement or
determined by the Committee, if a Participant incurs a Termination of Employment
due to Retirement, or the Termination of Employment is involuntary on the part
of the Participant (but is not due to death, Disability or with Cause), any
Stock Option held by such Participant shall thereupon terminate, except that
such Stock Option, to the extent then exercisable, may be exercised for the
lesser of the three-month period commencing with the date of such Termination of
Employment or until the expiration of the Option Period. Unless otherwise
provided in an Agreement or determined by the Committee, if the Participant
incurs a Termination of Employment which is either (a) voluntary on the part of
the Participant (and is not due to Retirement) or (b) with Cause, the Option
shall terminate immediately. Unless otherwise provided in an Agreement or
determined by the Committee, the death or Disability of a Participant after a
Termination of Employment otherwise provided herein shall not extend the
exercisability of the time permitted to exercise an Option.
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6.7 Cashing Out of Option. On receipt of written notice of exercise, the
Committee may elect to cash out all or part of the portion of any Stock Option
with respect to which Option at least six months have elapsed since the Grant
Date (provided that such limitation shall not apply to an Option granted to a
Participant who has subsequently died) to be exercised by paying the Participant
an amount, in cash or Common Stock, equal to the excess of the Fair Market Value
of the Common Stock that is subject to the Option over the Option Price times
the number of shares of Common Stock subject to the Option on the effective date
of such cash out. In the case of cash outs of Non-Qualified Stock Options, the
Committee may determine Fair Market Value under the pricing rule set forth in
Section 7.3(b).
ARTICLE VII
STOCK APPRECIATION RIGHTS
7.1 General. The Committee shall have authority to grant Stock
Appreciation Rights under this Plan at any time or from time to time. Subject to
the Participant's satisfaction in full of any conditions, restrictions or
limitations imposed in accordance with this Plan or an Agreement, a Stock
Appreciation Right shall entitle the Participant to surrender to the Company the
Stock Appreciation Right and to be paid therefor in shares of the Common Stock,
cash or a combination thereof as herein provided, the amount described in
Section 7.3(b).
7.2 Grant. Stock Appreciation Rights may be granted in conjunction with
all or part of any Stock Option granted under this Plan in which case the
exercise of the Stock Appreciation Right shall require the cancellation of a
corresponding portion of the Stock Option, and the exercise of the Stock Option
will result in cancellation of a corresponding portion of the Stock Appreciation
Right. In the case of a Non-Qualified Stock Option, such rights may be granted
either at or after the time of grant of such Stock Option. In the case of an
Incentive Stock Option, such rights may be granted only at the time of grant of
such Stock Option. A Stock Appreciation Right may also be granted on a stand
alone basis. The grant of a Stock Appreciation Right shall occur as of the date
the Committee determines. Each Stock Appreciation Right granted under this Plan
shall be evidenced by an Agreement, which shall embody the terms and conditions
of such Stock Appreciation Right and which shall be subject to the terms and
conditions set forth in this Plan. During any three-calendar-year period, no
more than 300,000 Stock Appreciation Rights shall be granted to any Participant.
7.3 Terms and Conditions. Stock Appreciation Rights shall be subject to
such terms and conditions as shall be determined by the Committee, including the
following:
(a) Period and Exercise. The term of a Stock Appreciation Right
shall be established by the Committee. If granted in conjunction with a
Stock Option, the Stock Appreciation Right shall have a term which is
the same as the Option Period and shall be exercisable only at such time
or times and to the extent the related Stock Options would be
exercisable in accordance with the provisions of Article VI. A Stock
Appreciation Right which is granted on a stand alone basis shall be for
such period and shall be exercisable at such times and to the extent
provided in an Agreement. Stock Appreciation Rights shall be exercised
by the Participant's giving written notice of exercise on a form
provided by the Committee (if available) to the Company specifying the
portion of the Stock Appreciation Right to be exercised.
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(b) Amount. Upon the exercise of a Stock Appreciation Right, a
Participant shall be entitled to receive an amount in cash, shares of
Common Stock or both as determined by the Committee or as otherwise
permitted in an Agreement equal in value to the excess of the Fair
Market Value per share of Common Stock over the Option Price per share
of Common Stock specified in the related Agreement multiplied by the
number of shares in respect of which the Stock Appreciation Right is
exercised. In the case of a Stock Appreciation Right granted on a stand
alone basis, the Agreement shall specify the value to be used in lieu of
the Option Price per share of Common Stock. The aggregate Fair Market
Value per share of the Common Stock shall be determined as of the date
of exercise of such Stock Appreciation Right.
(c) Non-transferability of Stock Appreciation Rights. Stock
Appreciation Rights shall be transferable only when and to the extent
that a Stock Option would be transferable under this Plan unless
otherwise provided in an Agreement.
(d) Termination. A Stock Appreciation Right shall terminate at
such time as a Stock Option would terminate under this Plan, unless
otherwise provided in an Agreement.
(e) Effect on Shares Under this Plan. To the extent required for
application of Rule 16b-3 to the Plan and its Participants, upon the
exercise of a Stock Appreciation Right, the Stock Option or part thereof
to which such Stock Appreciation Right is related shall be deemed to
have been exercised for the purpose of the limitation set forth in
Section 4.2 on the number of shares of Common Stock to be issued under
this Plan, but only to the extent of the number of shares of Common
Stock covered by the Stock Appreciation Right at the time of exercise
based on the value of the Stock Appreciation Right at such time.
(f) Incentive Stock Option. A Stock Appreciation Right granted
in tandem with an Incentive Stock Option shall not be exercisable unless
the Fair Market Value of the Common Stock on the date of exercise
exceeds the Option Price. In no event shall any amount paid pursuant to
the Stock Appreciation Right exceed the difference between the Fair
Market Value on the date of exercise and the Option Price.
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ARTICLE VIII
RESTRICTED STOCK
8.1 General. The Committee shall have authority to grant Restricted
Stock under this Plan at any time or from time to time. Shares of Restricted
Stock may be awarded either alone or in addition to other Awards granted under
this Plan. The Committee shall determine the persons to whom and the time or
times at which grants of Restricted Stock will be awarded, the number of shares
of Restricted Shares to be awarded to any Participant, the time or times within
which such Awards may be subject to forfeiture and any other terms and
conditions of the Awards. Each Award shall be confirmed by, and be subject to
the terms of, an Agreement. The Committee may condition the grant of Restricted
Stock upon the attainment of specified performance goals by the Participant or
by the Company or an Affiliate (including a division or department of the
Company or an Affiliate) for or within which the Participant is primarily
employed or upon such other factors or criteria as the Committee shall
determine. The provisions of Restricted Stock Awards need not be the same with
respect to any Participant.
8.2 Awards and Certificates. Notwithstanding the limitations on issuance
of shares of Common Stock otherwise provided in this Plan, each Participant
receiving an Award of Restricted Stock shall be issued a certificate in respect
of such shares of Restricted Stock. Such certificate shall be registered in the
name of such Participant and shall bear an appropriate legend referring to the
terms, conditions, and restrictions applicable to such Award as determined by
the Committee. The Committee may require that the certificates evidencing such
shares be held in custody by the Company until the restrictions thereon shall
have lapsed and that, as a condition of any Award of Restricted Stock, the
Participant shall have delivered a stock power, endorsed in blank, relating to
the Common Stock covered by such Award.
8.3 Terms and Conditions. Shares of Restricted Stock shall be subject to
the following terms and conditions:
(a) Limitations on Transferability Subject to the provisions of
this Plan and the Agreement, during a period set by the Committee,
commencing with the date of such Award (the "Restriction Period"), the
Participant shall not be permitted to sell, assign, transfer, pledge or
otherwise encumber any interest in shares of Restricted Stock.
(b) Rights. Except as provided in Section 8.3(a), the
Participant shall have, with respect to the shares of Restricted Stock,
all of the rights of a stockholder of the Company holding the class of
Common Stock that is the subject of the Restricted Stock, including, if
applicable, the right to vote the shares and the right to receive any
cash dividends. Unless otherwise determined by the Committee and subject
to this Plan, cash dividends on the class of Common Stock that is the
subject of the Restricted Stock shall be automatically deferred and
reinvested in additional Restricted Stock, and dividends on the class of
Common Stock that is the subject of the Restricted Stock payable in
Common Stock shall be paid in the form of Restricted Stock of the same
class as the Common Stock on which such dividend was paid.
(c) Criteria. Based on service, performance by the Participant
or by the Company or the Affiliate, including any division or department
for which the Participant is employed or such other factors or criteria
as the Committee may determine, the Committee may provide for the lapse
of restrictions in installments and may accelerate the vesting of all or
any part of any Award and waive the restrictions for all or any part of
such Award.
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(d) Forfeiture. Unless otherwise provided in an Agreement or
determined by the Committee, if the Participant incurs a Termination of
Employment during the Restriction Period due to death or Disability, the
restrictions shall lapse and the Participant shall be fully vested in
the Restricted Stock. Except to the extent otherwise provided in the
applicable Agreement and this Plan, upon a Participant's Termination of
Employment for any reason during the Restriction Period other than death
or Disability, all shares of Restricted Stock still subject to
restriction shall be forfeited by the Participant, except the Committee
shall have the discretion to waive in whole or in part any or all
remaining restrictions with respect to any or all of such Participant's
shares of stock.
(e) Delivery. If and when the Restriction Period expires without
a prior forfeiture of the Restricted Stock subject to such Restriction
Period, unlegended certificates for such shares shall be delivered to
the Participant.
(f) Election. A Participant may elect to further defer receipt
of the Restricted Stock for a specified period or until a specified
event, subject in each case to the Committee's approval and to such
terms as are determined by the Committee. Subject to any exceptions
adopted by the Committee, such election must be made one (1) year prior
to completion of the Restriction Period.
ARTICLE IX
DEFERRED STOCK
9.1 General. The Committee shall have authority to grant Deferred Stock
under this Plan at any time or from time to time. Shares of Deferred Stock may
be awarded either alone or in addition to other Awards granted under this Plan.
The Committee shall determine the persons to whom and the time or times at which
Deferred Stock will be awarded, the number of shares of Deferred Stock to be
awarded to any Participant, the duration of the period (the "Deferral Period")
prior to which the Common Stock will be delivered, and the conditions under
which receipt of the Common Stock will be deferred and any other terms and
conditions of the Awards. Each Award shall be confirmed by, and be subject to
the terms of, an Agreement. The Committee may condition the grant of Deferred
Stock upon the attainment of specified performance goals by the Participant or
by the Company or an Affiliate, including a division or department of the
Company or an Affiliate for or within which the Participant is primarily
employed or upon such other factors or criteria as the Committee shall
determine. The provisions of Deferred Stock Awards need not be the same with
respect to any Participant.
9.2 Terms and Conditions. Deferred Stock Awards shall be subject to the
following terms and conditions:
(a) Limitations on Transferability. Subject to the provisions of
this Plan and except as may otherwise be provided in an Agreement,
neither Deferred Stock Awards, nor any interest therein, may be sold,
assigned, transferred, pledged or otherwise encumbered during the
Deferral Period. At the expiration of the Deferral Period (or Elective
Deferral Period as defined in Section 9.2(e), where applicable), the
Committee may elect to deliver Common Stock, cash equal to the Fair
Market Value of such Common Stock or a combination of cash and Common
Stock, to the Participant for the shares covered by the Deferred Stock
Award.
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(b) Rights. Unless otherwise determined by the Committee and
subject to this Plan, cash dividends on the Common Stock that is the
subject of the Deferred Stock Award shall be automatically deferred and
reinvested in additional Deferred Stock, and dividends on the Common
Stock that is the subject of the Deferred Stock Award payable in Common
Stock shall be paid in the form of Deferred Stock of the same class as
the Common Stock on which such dividend was paid.
(c) Criteria. Based on service, performance by the Participant
or by the Company or the Affiliate, including any division or department
for which the Participant is employed or such other factors or criteria
as the Committee may determine, the Committee may provide for the lapse
of deferral limitations in installments and may accelerate the vesting
of all or any part of any Award and waive the deferral limitations for
all or any part of such Award.
(d) Forfeiture. Unless otherwise provided in an Agreement or
determined by the Committee, if the Participant incurs a Termination of
Employment during the Deferral Period due to death or Disability, the
restrictions shall lapse and the Participant shall be fully vested in
the Deferred Stock. Unless otherwise provided in an Agreement or
determined by the Committee, upon a Participant's Termination of
Employment for any reason during the Deferral Period other than death or
Disability, the rights to the shares still covered by the Award shall be
forfeited by the Participant, except the Committee shall have the
discretion to waive in whole or in part any or all remaining deferral
limitations with respect to any or all of such Participant's Deferred
Stock.
(e) E1ection. A Participant may elect to further defer receipt
of the Deferred Stock payable under an Award (or an installment of an
Award) for a specified period or until a specified event, subject in
each case to the Committee's approval and to such terms as are
determined by the Committee. Subject to any exceptions adopted by the
Committee, such election must be made at one (1) year prior to
completion of the Deferral Period for the Award.
ARTICLE X
PROVISIONS APPLICABLE TO STOCK ACQUIRED UNDER THIS PLAN
10.1 Limited Transfer During Offering. In the event there is an
effective registration statement under the Securities Act pursuant to which
shares of Common Stock shall be offered for sale in an underwritten offering, a
Participant shall not, during the period requested by the underwriters managing
the registered public offering, effect any public sale or distribution of shares
received directly or indirectly pursuant to an exercise of an Award.
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10.2 Committee Discretion. The Committee may in its sole discretion
include in any Agreement an obligation that the Company purchase a Participant's
shares of Common Stock received upon the exercise of an Award (including the
purchase of any unexercised Awards which have not expired), or may obligate a
Participant to sell shares of Common Stock to the Company upon such terms and
conditions as the Committee may determine and set forth in an Agreement. The
provisions of this Article X shall be construed by the Committee in its sole
discretion, and shall be subject to such other terms and conditions as the
Committee may from time to time determine. Notwithstanding any provision herein
to the contrary, the Company may upon determination by the Committee assign its
right to purchase shares of Common Stock this Article X, whereupon the assignee
of such right shall have all the rights, duties and obligations of the Company
with respect to purchase of the shares of Common Stock.
10.3 No Company Obligation. None of the Company, an Affiliate or the
Committee shall have any duty or obligation to affirmatively disclose to a
record or beneficial holder of Common Stock or an Award, and such holder shall
have no right to be advised of any material information regarding the Company or
any Affiliate at any time prior to, upon or in connection with receipt or the
exercise of an Award or the Company's purchase of Common Stock or an Award from
such holder in accordance with the terms hereof.
ARTICLE XI
CHANGE IN CONTROL PROVISIONS
11.1 Impact of Event. Notwithstanding any other provision of the Plan to
the contrary, unless otherwise provided in an Agreement, in the event of a
Change in Control (as defined in Section 11.2):
(a) Any Stock Appreciation Rights and Stock Options outstanding
as of the date of such Change in Control and not then exercisable shall
become fully exercisable to the full extent of the original grant;
(b) The restrictions and deferral limitations applicable to any
Restricted Stock, Deferred Stock or other Award shall lapse, and such
Restricted Stock, Deferred Stock or other Award shall become free of all
restrictions and become fully vested and transferable to the full extent
of the original grant.
(c) The performance goals and other conditions with respect to
any outstanding Award shall be deemed to have been satisfied in full,
and such Award shall be fully distributable, if and to the extent
provided by the Committee in the Agreement relating to such Award or
otherwise, notwithstanding that the Award may not be fully deductible to
the Company under Section 162(m) of the Code.
(d) The Committee shall have full discretion, notwithstanding
anything herein or in an Award Agreement to the contrary, to do any or
all of the following with respect to an outstanding Award:
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(1) To cause any Award to be canceled, provided notice of
at least 15 days thereof is provided before the date of
cancellation;
(2) To provide that the securities of another entity be
substituted hereunder for the Common Stock and to make equitable
adjustment with respect thereto;
(3) To grant the Participant by giving notice during a
pre-set period to surrender all or part of a stock-based Award to
the Company and to receive cash in an amount equal to the amount
by which the "Change in Control Price" (as defined in Section
11.3) per share of Common Stock on the date of such election
shall exceed the amount which the Participant must pay to
exercise the Award per share of Common Stock under the Award (the
"Spread") multiplied by the number of shares of Common Stock
granted under the Award;
(4) To require the assumption of the obligation of the
Company under the Plan subject to appropriate adjustment; and
(5) To take any other action the Committee determines to
take.
11.2 Definition of Change in Control. For purposes of this Plan, a
"Change in Control" shall be deemed to have occurred upon the first to occur of
the following:
(a) The acquisition by any individual, entity or group (within
the meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange
Act of 1934, as amended (the "Exchange Act")) (a "Person") of beneficial
ownership (within the meaning of Rule 13d-3 promulgated under the
Exchange Act) of fifty percent (50%) or more of either (1) the
then-outstanding shares of common stock of the Company (the "Outstanding
Company Common Stock") or (2) the combined voting power of the
then-outstanding voting securities of the Company entitled to vote
generally in the election of directors (the "Outstanding Company Voting
Securities"); provided, however, that for purposes of this subsection
(a), the following acquisitions shall not constitute a Change of
Control: (1) any acquisition directly from the Company, (2) any
acquisition by the Company, (3) any acquisition by any employee benefit
plan (or related trust) sponsored or maintained by the Company or any
corporation controlled by the Company, (4) any acquisition by any
corporation pursuant to a transaction which complies with clauses (1),
(2) and (3) of subsection (c) or (5) any acquisition by the Participant
or a Person of which the Participant is an affiliate.
(b) Individuals who, as of the date hereof, constitute the Board
(the "Incumbent Board") cease for any reason to constitute at least a
majority of the Board; provided, however, that any individual becoming a
director subsequent to the date hereof whose election, or nomination for
election by the Company's shareholders, was approved by a vote of at
least a majority of the directors then comprising the Incumbent Board
shall be considered as though such individual were a member of the
Incumbent Board, but excluding, for this purpose, any such individual
whose initial assumption of office occurs as a result of an actual or
threatened election contest with respect to the election or removal of
directors or other actual or threatened solicitation of proxies or
consents by or on behalf of a Person other than the Board;
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(c) Consummation of a reorganization, merger or consolidation or
sale or other disposition of all or substantially all of the assets of
the Company (a "Business Combination"), in each case, unless, following
such Business Combination, (1) the individuals and entities who were the
beneficial owners, respectively, of the Outstanding Company Common Stock
and Outstanding Company Voting Securities immediately prior to such
Business Combination beneficially own, directly or indirectly, more than
fifty percent (50%) of, respectively, the then-outstanding shares of
common stock and the combined voting power of the then outstanding
voting securities entitled to vote generally in the election of
directors, as the case may be, of the corporation resulting from such
Business Combination (including, without limitation, a corporation which
as a result of such transaction owns the Company or all or substantially
all of the Company's assets either directly or through one or more
subsidiaries) in substantially the same proportions as their ownership,
immediately prior to such Business Combination of the Outstanding
Company Common Stock and Outstanding Company Voting Securities, as the
case may be, (2) no Person (excluding any corporation resulting from
such Business Combination or any employee benefit plan (or related
trust) of the Company or such corporation resulting from such Business
Combination) beneficially owns, directly or indirectly, thirty-five
percent (35%) or more of, respectively, the then outstanding shares of
common stock of the corporation resulting from such Business
Combination, or the combined voting power of the then outstanding voting
securities of such corporation except to the extent that such ownership
existed prior to the Business Combination and (3) at least a majority of
the members of the board of directors of the corporation resulting from
such Business Combination were members of the Incumbent Board at the
time of the execution of the initial agreement, or of the action of the
Board, providing for such Business Combination provided that any
Business Combination initiated or controlled by the Participant in a
capacity other than as an officer of the Company or as a director of the
Company shall not be regarded as a Change of Control for purposes of
this Agreement; or
(d) Approval by the shareholders of the Company of a complete
liquidation or dissolution of the Company.
11.3 Change in Control Price. For purposes of the Plan, "Change in
Control Price" means the higher of (a) the highest reported sales price of a
share of Common Stock in any transaction reported on the principal exchange on
which such shares are listed or on NASDAQ during the 60-day period prior to and
including the date of a Change in Control or (b) if the Change in Control is the
result of a tender or exchange offer, merger, consolidation, liquidation or sale
of all or substantially all of the assets of the Company (in each case a
"Corporate Transaction"), the highest price per share of Common Stock paid in
such Corporate Transaction, except that, in the case of Incentive Stock Options
and Stock Appreciation Rights relating to Incentive Stock Options, such price
shall be based only on the Fair Market Value of the Common Stock on the date any
such Incentive Stock Option or Stock Appreciation Right is exercised. To the
extent that the consideration paid in any such Corporate Transaction consists
all or in part of securities or other non-cash consideration, the value of such
securities or other non-cash consideration shall be determined in the sole
discretion of the Committee.
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ARTICLE XII
MISCELLANEOUS
12.1 Amendments and Termination. The Board may amend, alter or
discontinue the Plan at any time, but no amendment, alteration or
discontinuation shall be made which would impair the rights of a Participant
under a Stock Option, Stock Appreciation Right, Restricted Stock Award or
Deferred Stock Award theretofore granted without the Participant's consent,
except such an amendment (a) made to avoid an expense charge to the Company or
an Affiliate, (b) made to cause the Plan to qualify for the exemption provided
by Rule 16b-3 (c) to prevent the Plan from being disqualified from the exemption
provided by Rule 16b-3, or (d) made to permit the Company or an Affiliate a
deduction under the Code. In addition, no such amendment shall be made without
the approval of the Company's stockholders to the extent such approval is
required by law or agreement.
The Committee may amend the terms of the Plan or any Award theretofore
granted, prospectively or retroactively, subject to the same limitations (and
exceptions to limitations) as applied to the Board and further subject to any
approval or limitations the Board may impose.
The Board shall have authority to amend this Plan to take into account
changes in law and tax and accounting rules, as well as other developments and
to grant Awards which qualify for beneficial treatment under such rules without
stockholder approval. Notwithstanding anything in the Plan to the contrary, if
any right under the Plan would cause a transaction to be ineligible for pooling
of interest accounting that would, but for the right hereunder, be eligible for
such accounting treatment, the Committee may modify or adjust the right so that
pooling of interest accounting shall be available.
12.2 Unfunded Status of Plan. It is intended that this Plan be an
"unfunded" plan for incentive and deferred compensation. The Committee may
authorize the creation of trusts or other arrangements to meet the obligations
created under this Plan to deliver Common Stock or make payments; provided,
however, that, unless the Committee otherwise determines, the existence of such
trusts or other arrangements is consistent with the "unfunded" status of this
Plan.
12.3 Status of Awards Under Code Section 162(m). It is the intent of the
Company that Awards granted to persons who are Covered Employees within the
meaning of Code Section 162(m) shall constitute "qualified performance-based
compensation" satisfying the requirements of Code Section 162(m). Accordingly,
the provisions of the Plan shall be interpreted in a manner consistent with Code
Section 162(m). If any provision of the Plan or any agreement relating to such
an Award does not comply or is inconsistent with the requirements of Code
Section 162(m), such provision shall be construed or deemed amended to the
extent necessary to conform to such requirements.
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12.4 General Provisions.
(a) Representation. The Committee may require each person
purchasing or receiving shares pursuant to an Award to represent to and
agree with the Company in writing that such person is acquiring the
shares without a view to the distribution thereof. The certificates for
such shares may include any legend which the Committee deems appropriate
to reflect any restrictions on transfer.
(b) No Additional Obligation. Nothing contained in this Plan
shall prevent the Company or an Affiliate from adopting other or
additional compensation arrangements for its employees.
(c) Withholding. No later than the date as of which an amount
first becomes includible in the gross income of the Participant for
Federal income tax purposes with respect to any Award, the Participant
shall pay to the Company (or other entity identified by the Committee),
or make arrangements satisfactory to the Company or other entity
identified by the Committee regarding the payment of, any Federal,
state, local or foreign taxes of any kind required by law to be withheld
with respect to such amount required in order for the Company or an
Affiliate to obtain a current deduction. Unless otherwise determined by
the Committee, withholding obligations may be settled with Common Stock,
including Common Stock that is part of the Award that gives rise to the
withholding requirement provided that any applicable requirements under
Section 16 of the Exchange Act are satisfied. The obligations of the
Company under this Plan shall be conditional on such payment or
arrangements, and the Company and its Affiliates shall, to the extent
permitted by law, have the right to deduct any such taxes from any
payment otherwise due to the Participant. If the Participant disposes of
shares of Common Stock acquired pursuant to an Incentive Stock Option in
any transaction considered to be a disqualifying transaction under the
Code, the Participant must give written notice of such transfer and the
Company shall have the right to deduct any taxes required by law to be
withheld from any amounts otherwise payable to the Participant.
(d) Reinvestment. The reinvestment of dividends in additional
Deferred or Restricted Stock at the time of any dividend payment shall
only be permissible if sufficient shares of Common Stock are available
for such reinvestment (taking into account then outstanding Options and
other Awards).
(e) Representation. The Committee shall establish such
procedures as it deems appropriate for a Participant to designate a
Representative to whom any amounts payable in the event of the
Participant's death are to be paid.
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(f) Controlling Law. This Plan and all Awards made and actions
taken thereunder shall be governed by and construed in accordance with
the laws of the State of Delaware (other than its law respecting choice
of law). This Plan shall be construed to comply with all applicable law,
and to avoid liability to the Company, an Affiliate or a Participant or
loss of a deduction, including, without limitation, liability under
Section 16(b) of the Exchange Act.
(g) Offset. Any amounts owed to the Company or an Affiliate by
the Participant of whatever nature may be offset by the Company from the
value of any shares of Common Stock, cash or other thing of value under
this Plan or an Agreement to be transferred to the Participant, and no
shares of Common Stock, cash or other thing of value under this Plan or
an Agreement shall be transferred unless and until all disputes between
the Company and the Participant have been fully and finally resolved and
the Participant has waived all claims to such against the Company or an
Affiliate.
(h) Fail-Safe. With respect to persons subject to Section 16 of
the Exchange Act, transactions under this Plan are intended to comply
with all applicable conditions of Rule 16b-3, as applicable. To the
extent any provision of the Plan or action by the Committee fails to so
comply, it shall be deemed null and void, to the extent permitted by law
and deemed advisable by the Committee. Moreover, in the event the Plan
does not include a provision required by Rule 16b-3 to be stated herein,
such provision (other than one relating to eligibility requirements or
the price and amount of Awards) shall be deemed to be incorporated by
reference into the Plan with respect to Participants subject to Section
16.
(i) Right to Capitalize. The grant of an Award shall in no way
affect the right of the Company to adjust, reclassify, reorganize or
otherwise change its capital or business structure or to merge,
consolidate, dissolve, liquidate or sell or transfer all or any part of
its business or assets.
12.4 Mitigation of Excise Tax. If any payment or right accruing to a
Participant under this Plan (without the application of this Section 12.4),
either alone or together with other payments or rights accruing to the
Participant from the Company or an Affiliate ("Total Payments") would constitute
a "parachute payment" (as defined in Section 280G of the Code and regulations
thereunder), such payment or right shall be reduced to the largest amount or
greatest right that will result in no portion of the amount payable or right
accruing under this Plan being subject to an excise tax under Section 4999 of
the Code or being disallowed as a deduction under Section 28OG of the Code. The
determination of whether any reduction in the rights or payments under this Plan
is to apply shall be made by the Committee in good faith after consultation with
the Participant, and such determination shall be conclusive and binding on the
Participant. The Participant shall cooperate in good faith with the Committee in
making such determination and providing the necessary information for this
purpose. The foregoing provisions of this Section 12.4 shall apply with respect
to any person only if after reduction for any applicable federal excise tax
imposed by Section 4999 of the Code and federal income tax imposed by the Code,
the Total Payments accruing to such person would be less than the amount of the
Total Payments as reduced, if applicable, under the foregoing provisions of this
Plan and after reduction for only federal income taxes.
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12.5 Rights with Respect to Continuance of Employment. Nothing contained
herein shall be deemed to alter the relationship between the Company or an
Affiliate and a Participant, or the contractual relationship between a
Participant and the Company or an Affiliate if there is a written contract
regarding such relationship. Nothing contained herein shall be construed to
constitute a contract of employment between the Company or an Affiliate and a
Participant. The Company or an Affiliate and each of the Participants continue
to have the right to terminate the employment or service relationship at any
time for any reason, except as provided in a written contract. The Company or an
Affiliate shall have no obligation to retain the Participant in its employ or
service as a result of this Plan. There shall be no inference as to the length
of employment or service hereby, and the Company or an Affiliate reserves the
same rights to terminate the Participant's employment or service as existed
prior to the individual becoming a Participant in this Plan.
12.6 Awards in Substitution for Awards Granted by Other Corporations.
Awards may be granted under this Plan from time to time in substitution for
awards held by employees, directors or service providers of other corporations
who are about to become officers, directors or employees of the Company or an
Affiliate as the result of a merger or consolidation of the employing
corporation with the Company or an Affiliate, or the acquisition by the Company
or an Affiliate of the assets of the employing corporation, or the acquisition
by the Company or Affiliate of the stock of the employing corporation, as the
result of which it becomes a designated employer under this Plan. The terms and
conditions of the Awards so granted may vary from the terms and conditions set
forth in this Plan at the time of such grant as the majority of the members of
the Committee may deem appropriate to conform, in whole or in part, to the
provisions of the awards in substitution for which they are granted.
12.7 Procedure for Adoption. Any Affiliate of the Company may by
resolution of such Affiliate's board of directors, with the consent of the Board
of Directors and subject to such conditions as may be imposed by the Board of
Directors, adopt this Plan for the benefit of its employees as of the date
specified in the board resolution.
12.8 Procedure for Withdrawal. Any Affiliate which has adopted this Plan
may, by resolution of the board of directors of such direct or indirect
subsidiary, with the consent of the Board of Directors and subject to such
conditions as may be imposed by the Board of Directors, terminate its adoption
of this Plan.
12.9 Delay. If at the time a Participant incurs a Termination of
Employment (other than due to Cause) or if at the time of a Change in Control,
the Participant is subject to "short-swing" liability under Section 16 of the
Exchange Act, any time period provided for under this Plan or an Agreement to
the extent necessary to avoid the imposition of liability shall be suspended and
delayed during the period the Participant would be subject to such liability,
but not more than six (6) months and one (1) day and not to exceed the Option
Period, or the period for exercise of a Stock Appreciation Right as provided in
the Agreement, whichever is shorter. The Company shall have the right to suspend
or delay any time period described in this Plan or an Agreement if the Committee
shall determine that the action may constitute a violation of any law or result
in liability under any law to the Company, an Affiliate or a stockholder of the
Company until such time as the action required or permitted shall not constitute
a violation of law or result in liability to the Company, an Affiliate or a
stockholder of the Company. The Committee shall have the discretion to suspend
the application of the provisions of this Plan required solely to comply with
Rule l6b-3 if the Committee shall determine that Rule 16b-3 does not apply to
this Plan.
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12.10 Headings. The headings contained in this Plan are for reference
purposes only and shall not affect the meaning or interpretation of this Plan.
12.11 Severability. If any provision of this Plan shall for any reason
be held to be invalid or unenforceable, such invalidity or unenforceability
shall not effect any other provision hereby, and this Plan shall be construed as
if such invalid or unenforceable provision were omitted.
12.12 Successors and Assigns. This Plan shall inure to the benefit of
and be binding upon each successor and assign of the Company. All obligations
imposed upon a Participant, and all rights granted to the Company hereunder,
shall be binding upon the Participant's heirs, legal representatives and
successors.
12.13 Entire Agreement. This Plan and the Agreement constitute the
entire agreement with respect to the subject matter hereof and thereof, provided
that in the event of any inconsistency between this Plan and the Agreement, the
terms and conditions of the Agreement shall control.
Executed on this day of , l99 .
THE FORTRESS GROUP, INC.
By_________________________________
EXHIBIT 5
[Arent Fox Letterhead]
September 5, 1997
The Board of Directors
The Fortress Group, Inc.
1921 Gallows Road, Suite 730
Vienna, Virginia 22182
Gentlemen:
We have acted as counsel to The Fortress Group, Inc. (the "Company")
with respect to the Company's Registration Statement on Form S-8, filed by the
Company with the Securities and Exchange Commission (the "Commission") in
connection with the registration under the Securities Act of 1933 of (i) 500,000
shares of Common Stock, $.01 par value (the "Shares"), subject to the Company's
Employee Stock Purchase Plan (the "Purchase Plan") and (ii) 1,125,000 Shares
subject to the Company's 1996 Stock Incentive Plan, as amended (the "Incentive
Plan").
As counsel to the Company, we have examined the Company's Certificate
of Incorporation and such records, certificates and other documents of the
Company, as well as relevant statutes, regulations, published rulings and such
questions of law, as we considered necessary or appropriate for the purpose of
this opinion.
We assume that, prior to the sale of any Shares to which the
Registration Statement relates, appropriate action will be taken to register and
qualify such Shares for sale, to the extent necessary, under any applicable
state securities laws.
Based on the foregoing, we are of the opinion that
1. The 500,000 Shares subject to the Purchase Plan, when issued and
paid for in accordance with the terms of the Purchase Plan, will be validly
issued, fully paid and nonassessable.
2. The 1,125,000 Shares subject to the Incentive Plan, when issued and
paid for in accordance with the terms of the Incentive Plan, will be validly
issued, fully paid and nonassessable.
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement and to all references to our firm in the Registration
Statement. In giving this consent, we do not hereby admit that we come within
the category of persons whose consent is required under Section 7 of the
Securities Act of 1933 or the General Rules and Regulations thereunder.
Very truly yours,
ARENT FOX KINTNER PLOTKIN & KAHN
We hereby consent to the incorporation by reference in this Registration
Statement on Form S-8 of our report dated February 18, 1997 appearing on page
F-7 of The Fortress Group, Inc.'s Annual Report on Form 10-K for the year ended
December 31, 1996.
Price Waterhouse LLP
Minneapolis, Minnesota
September 5, 1997
