<PAGE>
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934 (Amendment No. )
Filed by the Registrant /X/)
Filed by a Party other than the Registrant / /
Check the appropriate box:
/X/ Preliminary Proxy Statement
/ / Confidential, for Use of the Commission Only (as permitted by Rule 14a-
6(e)(2))
/ / Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to Section240.14a-11(c) or
Section240.14a-12
AVIS GROUP HOLDINGS, INC.,
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
/X/ No fee required.
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(1)
and 0-11.
(1) Title of each class of securities to which transaction applies:
-----------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
-----------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
-----------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
-----------------------------------------------------------------------
(5) Total fee paid:
-----------------------------------------------------------------------
/ / Fee paid previously with preliminary materials.
/ / Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
-----------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
-----------------------------------------------------------------------
(3) Filing Party:
-----------------------------------------------------------------------
(4) Date Filed:
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<PAGE>
[LOGO]
AVIS GROUP HOLDINGS, INC.
900 OLD COUNTRY ROAD
GARDEN CITY, NEW YORK 11530
NOTICE OF 2000 ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON
MAY 16, 2000
NOTICE IS HEREBY GIVEN that the annual meeting of stockholders of Avis Group
Holdings, Inc. (the "Company") will be held on Tuesday, May 16, 2000 at
10:00 a.m. Eastern Daylight Time at the Garden City Hotel, 45 Seventh Street,
Garden City, NY 11530 (the "Meeting") for the following purposes:
1. To elect eleven directors for a one-year term and until their successors
are duly elected and qualified;
2. To ratify the appointment of Deloitte & Touche LLP as the auditors of
the Company's financial statements for the year ending December 31, 2000;
3. To approve an amendment to the Company's Amended and Restated
Certificate of Incorporation to (i) reclassify the Company's 100,000,000 shares
of authorized Common Stock as Class A Common Stock and (ii) authorize 15,000,000
shares of non-voting Class B Common Stock which may be converted into Class A
Common Stock under certain circumstances;
4. To approve the Company's 2000 Incentive Compensation Plan; and
5. To transact such other business as may properly come before the Meeting
or any adjournment or postponement thereof.
The Board of Directors has fixed the close of business on Wednesday,
March 22, 2000 as the record date for the Meeting. Only stockholders of record
at that time are entitled to notice of, and to vote at, the Meeting and any
adjournment or postponement thereof. A list of stockholders entitled to vote at
the Meeting will be available for examination 10 days before the Meeting during
ordinary business hours at the offices of the Company, 900 Old Country Road,
Garden City, New York 11530.
The enclosed proxy is solicited by the Board of Directors of the Company.
Reference is made to the attached Proxy Statement for further information with
respect to the business to be transacted at the Meeting. The Board of Directors
urges you to date, sign and return the enclosed proxy promptly. A reply envelope
is enclosed for your convenience. You are cordially invited to attend the
Meeting in person. The return of the enclosed proxy will not affect your right
to vote if you attend the Meeting in person.
By Order of the Board of Directors
KAREN C. SCLAFANI
Secretary
Dated: April 14, 2000
<PAGE>
AVIS GROUP HOLDINGS, INC.
900 OLD COUNTRY ROAD
GARDEN CITY, NEW YORK 11530
------------------------
PROXY STATEMENT
------------------------
ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON TUESDAY, MAY 16, 2000
This Proxy Statement is furnished in connection with the solicitation of
proxies by the Board of Directors of Avis Group Holdings, Inc., a Delaware
corporation (the "Company"), to be voted at the 2000 Annual Meeting of
Stockholders, and any adjournment or postponement thereof (the "Meeting"), to be
held on the date, at the time and place, and for the purposes set forth in the
foregoing notice. This Proxy Statement, the accompanying notice and the enclosed
proxy card are first being mailed to stockholders on or about April 14, 2000.
The Board of Directors does not intend to bring any matter before the
Meeting except as specifically indicated in the notice, nor does the Board of
Directors know of any matters which anyone else proposes to present for action
at the Meeting. However, if any other matters properly come before the Meeting,
the persons named in the enclosed proxy, or their duly constituted substitutes
acting at the Meeting, will be authorized to vote or otherwise act thereon in
accordance with their judgment on such matters.
Shares of the Company's Common Stock, par value $.01 per share (the "Common
Stock"), represented by proxies received by the Company, where the stockholder
has specified his or her choice with respect to the proposals described in this
Proxy Statement (including the election of directors), will be voted in
accordance with the specifications so made. In the absence of such
specifications, the shares will be voted "For" the election of all eleven
nominees for the Board of Directors, "For" the ratification of the appointment
of Deloitte & Touche LLP as auditors of the Company's financial statements for
the fiscal year ending December 31, 2000, "For" the approval of the amendment to
the Company's Amended and Restated Certificate of Incorporation to reclassify
existing Common Stock as Class A Common Stock and authorize Class B Common Stock
and "For" the approval of the Company's 2000 Incentive Compensation Plan.
Except as provided below, any proxy may be revoked at any time prior to its
exercise by notifying the Secretary in writing, by delivering a duly executed
proxy bearing a later date or by attending the Meeting and voting in person.
The accompanying form of proxy is being solicited on behalf of the Board of
Directors of the Company. The expenses of solicitation of proxies for the
Meeting will be paid by the Company. In addition to the mailing of the proxy
material, such solicitation may be made in person or by telephone by directors,
officers and employees of the Company, who will receive no additional
compensation therefor. Upon request, the Company will reimburse brokers,
dealers, banks and trustees, or their nominees, for reasonable expenses incurred
by them in forwarding material to beneficial owners of shares of Common Stock.
A copy of the Annual Report on Form 10-K filed by the Company with the
Securities and Exchange Commission for its latest fiscal year is available
without charge to stockholders upon written request to the Corporate
Communications Department, Avis Group Holdings, Inc., 900 Old Country Road,
Garden City, New York 11530.
<PAGE>
TABLE OF CONTENTS
<TABLE>
<S> <C>
PAGE
--------
VOTING SECURITIES AND PRINCIPAL HOLDERS THEREOF............. 1
Outstanding Shares and Voting Rights...................... 1
Security Ownership of Certain Beneficial Owners and
Management.............................................. 2
ELECTION OF DIRECTORS [Proposal 1].......................... 3
General................................................... 3
Information Regarding Directors and Nominees Standing for
Election................................................ 3
Committees and Meetings of the Board of Directors......... 5
EXECUTIVE OFFICERS.......................................... 6
EXECUTIVE COMPENSATION AND OTHER INFORMATION................ 8
Summary Compensation Table................................ 8
Option Grants Table....................................... 9
Option Exercises and Year-End Option Value Table.......... 9
Defined Benefit Plan...................................... 9
Pension Plan Table........................................ 10
Compensation Committee Report on Executive Compensation... 10
Performance Graph......................................... 12
Employment Contracts and Termination, Severance and Change
of Control Arrangements................................. 12
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.............. 13
Relationship with Cendant................................. 13
COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT........... 14
RATIFICATION OF APPOINTMENT OF AUDITORS [Proposal 2]........ 14
APPROVAL OF CERTIFICATE AMENDMENT [Proposal 3].............. 15
APPROVAL OF 2000 INCENTIVE COMPENSATION PLAN
[Proposal 4].............................................. 18
STOCKHOLDER PROPOSALS....................................... 25
FINANCIAL INFORMATION....................................... 25
APPENDIX A--CERTIFICATE AMENDMENT........................... A-1
APPENDIX B--2000 INCENTIVE COMPENSATION PLAN................ B-1
</TABLE>
<PAGE>
VOTING SECURITIES AND PRINCIPAL HOLDERS THEREOF
OUTSTANDING SHARES AND VOTING RIGHTS
Only holders of record of the Company's Common Stock at the close of
business on March 22, 2000 are entitled to notice of, and to vote at, the
Meeting. On that date, the Company had outstanding 31,131,712 shares of Common
Stock.
The presence, in person or by proxy, of the holders of a majority of the
issued and outstanding shares of Common Stock entitled to vote at the Meeting
will constitute a quorum. On all matters voted upon at the Meeting and any
adjournment or postponement thereof, the holders of the Common Stock vote
together as a single class, with each record holder of Common Stock entitled to
one vote per share.
Directors shall be elected by a plurality of the votes of the shares of
Common Stock present at the Meeting, in person or by proxy, and entitled to vote
in the election of directors. Under applicable Delaware law, in determining
whether the nominees have received the requisite number of affirmative votes,
abstentions and broker non-votes will be disregarded and will have no effect on
the outcome of the vote.
Approval of the proposals relating to the adoption of the Company's 2000
Incentive Compensation Plan and ratification of the appointment of auditors of
the Company's financial statements require the affirmative vote of the holders
of a majority of the shares of Common Stock present at the Meeting, in person or
by proxy, and entitled to vote. Under applicable Delaware law, in determining
whether each such proposal has received the requisite number of affirmative
votes, abstentions and broker non-votes will be counted and will have the same
effect as a vote against the proposal.
The Company's Amended and Restated Certificate of Incorporation and Delaware
law require the affirmative vote of the holders of a majority of the outstanding
shares of Common Stock entitled to vote to approve the amendment to such
Certificate. Under applicable Delaware law, in determining whether such proposal
has received the requisite number of affirmative votes, abstentions and broker
non-votes will be counted and will have the same effect as a vote against the
proposal.
1
<PAGE>
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The information set forth on the following table is furnished as of
March 10, 2000 with respect to any person (including any "group" as that term is
used in Section 13(d)(3) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act")) who is known to the Company to be the beneficial owner of more
than 5% of any class of the Company's voting securities, and as to those shares
of the Company's equity securities beneficially owned by each of its directors
and nominees for director, its named executive officers, and all of its
executive officers and directors as a group.
<TABLE>
<CAPTION>
AMOUNT AND
NATURE OF
BENEFICIAL PERCENT OF
NAME OWNERSHIP CLASS
- ---- ---------- ----------
<S> <C> <C>
PRINCIPAL STOCKHOLDERS
Cendant Corporation ("Cendant")(1).......................... 5,535,800 17.8%
6 Sylvan Way
Parsippany, NJ 07054
T. Rowe Price Associates, Inc.(2)........................... 2,378,650 7.6%
100 E. Pratt Street
Baltimore, MD 21202
DIRECTORS AND EXECUTIVE OFFICERS(3)
Thomas J. Byrnes............................................ 17,620 *
W. Alun Cathcart............................................ 20,000 *
Leonard S. Coleman, Jr...................................... 20,000 *
Alfonse M. D'Amato.......................................... 0 *
Martin L. Edelman........................................... 35,000 *
Deborah L. Harmon........................................... 20,000 *
Stephen P. Holmes........................................... 21,000 *
Michael J. Kennedy.......................................... 20,000 *
Maria M. Miller............................................. 13,400
Michael P. Monaco........................................... 21,000 *
A. Barry Rand............................................... 0 *
F. Robert Salerno........................................... 260,780 *
Kevin M. Sheehan(4)......................................... 177,200 *
DIRECTORS AND EXECUTIVE OFFICERS AS A GROUP (21 persons).... 784,273 2.5%
</TABLE>
- ------------------------
* Less than 1%
(1) Cendant beneficially owns 5,535,800 shares of Common Stock, which shares are
held of record by its indirect wholly-owned subsidiary, Cendant Car Rental
Holdings, Inc.
(2) Based upon the information contained in a Schedule 13G dated December 31,
1999 by T. Rowe Price Associates, Inc. ("T. Rowe"). T. Rowe beneficially
owns 2,378,650 shares of Common Stock with sole power to dispose of all of
such shares and sole power to vote only 177,850 of such shares. These
securities are owned by various individuals and institutional investors for
which T. Rowe serves as investment adviser with power to direct investments
and/or sole power to vote the securities. For purposes of the reporting
requirements of the Exchange Act, T. Rowe is deemed to be a beneficial owner
of such securities; however, T. Rowe expressly disclaims that it is, in
fact, the beneficial owner of such securities.
(3) Includes shares which could be acquired within 60 days of March 10, 2000
through the exercise of options to purchase Common Stock of the Company
under the Company's 1997 Stock Option Plan as follows: Messrs. Cathcart,
Coleman, Holmes, Kennedy and Monaco and Ms. Harmon--20,000 each;
Mr. Edelman--35,000; Mr. Byrnes--17,620; Ms. Miller 13,400,
Mr. Salerno--253,780; Mr. Sheehan--173,200 and all directors and executive
officers as a group--684,473.
(4) Includes 1,000 shares of Common Stock held by Mr. Sheehan's children.
2
<PAGE>
ELECTION OF DIRECTORS
[PROPOSAL 1]
GENERAL
The Board of Directors presently consists of eleven members. The Board of
Directors has nominated all eleven incumbent members as candidates to be elected
at the Meeting to serve as directors for a one-year term ending at the 2001
annual meeting of stockholders when their successors are duly elected and
qualified.
Each nominee has consented to being named in the Proxy Statement and to
serve if elected. If prior to the Meeting any nominee should become unavailable
to serve, the shares of Common Stock represented by a properly executed and
returned proxy will be voted for such additional person as shall be designated
by the Board of Directors, unless the Board determines to reduce the number of
directors in accordance with the Company's Amended and Restated Certificate of
Incorporation and By-Laws.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE ELECTION
OF EACH NOMINEE AS DIRECTOR. UNLESS MARKED TO THE
CONTRARY, PROXIES RECEIVED BY THE COMPANY WILL BE VOTED FOR
THE ELECTION OF THE ELEVEN NOMINEES LISTED BELOW.
Certain information regarding each nominee is set forth below, including
such individual's age and principal occupation, a brief account of such
individual's business experience during the last five years and other
directorships currently held by such nominee.
INFORMATION REGARDING DIRECTORS AND NOMINEES STANDING FOR ELECTION
<TABLE>
<S> <C>
W. Alun Cathcart Michael J. Kennedy
Leonard S. Coleman, Jr. Michael P. Monaco
Alfonse M. D'Amato A. Barry Rand
Martin L. Edelman F. Robert Salerno
Deborah L. Harmon Kevin M. Sheehan
Stephen P. Holmes
</TABLE>
MR. CATHCART, age 56, has been a Director of the Company since
September 1997. Mr. Cathcart has been non-Executive Chairman of Avis Europe plc
since April 1, 1999. From January 1, 1999 until April 1, 1999 Mr. Cathcart
served as Executive Chairman of Avis Europe plc. and for more than five years
prior thereto Mr. Cathcart was Chairman and Chief Executive of Avis Europe plc.
MR. COLEMAN, age 51, has been a Director of the Company since
September 1997. Mr. Coleman has been a senior advisor to Major League Baseball
since November 1999 and served as President of the organization from March 1994
to October 1999. From 1992 to March 1994, Mr. Coleman served as Executive
Director-Market Development of Major League Baseball. Mr. Coleman also is a
director of the following corporations which file reports pursuant to the
Exchange Act: Cendant, H.J. Heinz Company, New Jersey Resources, The Omnicom
Group, Owens Corning and Radio Unica.
SEN. D'AMATO, age 62, has been a Director of the Company since June 1999. He
has been Managing Director of Park Strategies, a business consulting firm in New
York City, since its formation in January 1999. From January 1981 until
January 4, 1999, Sen. D'Amato served in the United States Senate representing
the State of New York where he was Chairman of the Committee on Banking, Housing
and Urban Affairs from 1995 until he left office.
MR. EDELMAN, age 58, has been a Director of the Company since
September 1997 and served as Interim Chairman of the Board from December 1998 to
November 1999. From January 1996 to March 1998,
3
<PAGE>
Mr. Edelman served as President and a director of Chartwell Leisure, Inc. He was
a partner with Battle Fowler, a New York City law firm, from 1972 through 1993
and since January 1, 1994 has been Of Counsel to that firm. Mr. Edelman is also
a partner of Chartwell Hotels Associates, Chartwell Leisure Associates L.P.,
Chartwell Leisure Associates L.P. II, and of certain of their respective
affiliates. Mr. Edelman also serves as a director of the following corporations
which file reports pursuant to the Exchange Act: Arcadia Realty and Capital
Trust, each a real estate investment trust, and Cendant.
MS. HARMON, age 40, has been a Director of the Company since
September 1997. Ms. Harmon has been a principal in the Office of the President
at JER Real Estate Partners, L.P., an institutional, private equity fund for
investment in real estate assets, since 1991. Prior to joining JER, Ms. Harmon
served as Managing Director of the Real Estate Finance Group at Banker's Trust
Company.
MR. HOLMES, age 43, has been a Director of the Company since October 1996.
Mr. Holmes was appointed a Vice Chairman of Cendant in December 1997 and from
September 1996 through December 1997 Mr. Holmes served as Vice Chairman of HFS
Incorporated ("HFS"), the predecessor company of Cendant. From July 1990 through
September 1996, Mr. Holmes served as Executive Vice President, Treasurer and
Chief Financial Officer of HFS. Mr. Holmes also serves as a director of Avis
Europe plc and as a director of the following corporations which file reports
pursuant to the Exchange Act: Cendant and PHH Corporation.
MR. KENNEDY, age 63, has been a Director of the Company since
September 1997. Mr. Kennedy has been an attorney with his own law firm since
1976.
MR. MONACO, age 52, has been a Director of the Company since May 1997.
Mr. Monaco has been Chairman and Chief Executive Officer of @ccelerator Inc., an
incubator designed to serve technology and new media ventures, since March 2000.
He also served as a Vice Chairman of Cendant from December 1997 to March 2000
and as Chief Executive Officer of the Direct Marketing Division of Cendant from
November 1998 to March 2000. From December 1997 until November 1998, Mr. Monaco
was Chief Financial Officer of Cendant and from October 1996 to December 1997,
Mr. Monaco served as Vice Chairman and Chief Financial Officer of HFS.
Mr. Monaco served as Executive Vice President and Chief Financial Officer of the
American Express Company from September 1990 to June 1996. Mr. Monaco is also a
director of Cendant.
MR. RAND, age 55, has been Chairman and Chief Executive Officer of the
Company, its car rental subsidiary, Avis Rent A Car System, Inc. ("ARACS") and
its car leasing and vehicle management services subsidiary, PHH Vehicle
Management Services, LLC ("PHH"), since November 1999. Prior thereto, he held
various positions with Xerox Corporation during a 30-year career including
Executive Vice President for Worldwide Customer Operations from 1996 to 1999,
Executive Vice President--Business Operations from 1992 to 1996 and
President--U.S. Operations from 1986 to 1992. Mr. Rand is a director of Abbott
Laboratories, which files reports pursuant to the Exchange Act.
MR. SALERNO, age 48, has been President and Chief Operating Officer--Rental
Car Group of the Company since August 1999 and President and Chief Operating
Officer of ARACS since November 1996. He has also been serving as a Director of
the Company since May 1997. From November 1996 to August 1999, Mr. Salerno was
President and Chief Operating Officer of the Company. From September 1995 to
November 1996, Mr. Salerno was Executive Vice President of Operations of
Avis, Inc., the predecessor of the Company, and ARACS. From July 1990 to
September, 1995, Mr. Salerno was Senior Vice President and General Manager Rent
A Car of Avis, Inc. and ARACS.
MR. SHEEHAN, age 46, has been President--Corporate and Business Affairs and
Chief Financial Officer of the Company since August 1999 and a Director of the
Company since June 1999. From December 1996 to August 1999 Mr. Sheehan was
Executive Vice President and Chief Financial Officer of the Company. He has also
been serving as Executive Vice President and Chief Financial Officer of ARACS
since December 1996 and of PHH since June 1999. From September 1996 to
September 1997, Mr. Sheehan was
4
<PAGE>
a Senior Vice President of HFS. From December 1994 to September 1996,
Mr. Sheehan was Chief Financial Officer for STT Video Partners, a joint venture
between Time Warner, Telecommunications, Inc., Sega of America and HBO. Prior
thereto, he was with Reliance Group Holdings, Inc., an insurance holding
company, and some of its affiliated companies for ten years and was involved
with the formation of the Spanish language television network, Telemundo
Group, Inc. and from 1991 through 1994 was Senior Vice President--Finance and
Controller.
COMMITTEES AND MEETINGS OF THE BOARD OF DIRECTORS
The Board of Directors held five meetings during 1999. All incumbent
directors attended at least 75% of the aggregate number of meetings of the Board
and of the committees of the Board on which they served.
The Executive Committee of the Board of Directors, which was designated by
the Board in September 1997, is composed currently of Messrs. Edelman, Holmes
and Rand. The Executive Committee is authorized to exercise all powers and
authority of the Board of Directors in the management of the business and
affairs of the Company except those powers reserved, by law or resolution, to
the Board of Directors. The Executive Committee met four times in 1999.
In September 1997 the Board of Directors designated an Audit Committee which
is composed currently of Messrs. Edelman and D'Amato. The Audit Committee
reviews and evaluates the Company's internal accounting and auditing procedures,
recommends to the Board of Directors the firm to be appointed as independent
accountants to audit the Company's financial statements, reviews with management
and the independent accountants the Company's interim and year-end operating
results, reviews the scope and results of the audit with the independent
accountants, and reviews the non-audit services to be performed by the firm of
independent accountants and considers the effect of such performance on the
accountants' independence. The Audit Committee met six times in 1999.
The Board of Directors has designated a Compensation Committee composed of
Ms. Harmon and Mr. Kennedy, who were appointed to the Committee in
September 1997. The Compensation Committee determines compensation arrangements
for executives, reviews and makes recommendations to the full Board regarding
the adoption or amendment of employee benefit plans, and administers the
Company's 1997 Stock Option Plan (the "1997 Plan"). The Compensation Committee
met three times in 1999.
The Policy Committee of the Board of Directors, which was designated by the
Board in September 1997, is composed of Ms. Harmon and Messrs. Coleman and
D'Amato. The Policy Committee establishes and implements corporate policy with
respect to the business operations of the Company, including its code of
conduct. The Policy Committee met once in 1999.
The Company has no standing nominating committee. The Board of Directors
makes nominations for the Board. In accordance with Delaware law, stockholders
may make nominations for the Board of Directors in advance of or at the Meeting.
Non-employee directors receive an annual retainer of $30,000, plus $4,000
for chairing a committee and $2,000 for serving as a member of a committee other
than Chair. Non-employee directors are also paid $1,000 for each Board meeting
attended and $500 ($1,000 for committee chair) for each Board committee meeting
if held on the same day as a Board meeting and $1,000 ($2,000 for committee
chair) for each Board committee meeting attended on a day on which there is no
Board meeting. Non-employee directors are reimbursed for expenses incurred in
attending meetings of the Board of Directors and committees.
Under the 1997 Plan, each non-employee director is granted options to
purchase 50,000 shares of Common Stock on the date of his or her initial
election to the Board of Directors. Such options have an exercise price of the
fair market value on the date of grant, vest over a five-year period from the
date of grant at the rate of 20% per year, and have other terms which are the
same as all other options granted under the 1997 Plan.
5
<PAGE>
Directors shall be elected by the affirmative vote of a plurality of the
shares of Common Stock present at the Meeting, in person or by proxy, and
entitled to vote in the election of directors. Pursuant to applicable Delaware
law, abstentions and broker non-votes will have no effect on the outcome of the
vote.
EXECUTIVE OFFICERS
The executive officers of the Company as of the date of this Proxy Statement
are set forth in the table below. All executive officers are appointed at the
annual meeting or interim meetings of the Board of Directors. Each executive
officer is appointed by the Board to hold office until his or her successor is
duly appointed and qualified.
<TABLE>
<CAPTION>
NAME OFFICE OR POSITION HELD
- ---- ----------------------------------------------------------
<S> <C>
A. Barry Rand.......................... Chairman and Chief Executive Officer
F. Robert Salerno...................... President and Chief Operating Officer--Rental Car Group
and Director
Kevin M. Sheehan....................... President--Corporate and Business Affairs, Chief Financial
Officer and Director
Mark E. Miller......................... President and Chief Operating Officer--Vehicle Management
Services Group
Thomas J. Byrnes....................... Senior Vice President--Sales
Lawrence E. Kinder..................... Senior Vice President and Chief Information Officer
Maria M. Miller........................ Senior Vice President--Marketing
Michael P. Collins..................... Vice President--International
Richard S. Jacobson.................... Vice President--Tax
Gerard J. Kennell...................... Vice President and Treasurer
James A. Keyes......................... Vice President--HR, Staffing and Diversity
Karen C. Sclafani...................... Vice President, General Counsel and Secretary
Timothy M. Shanley..................... Vice President and Controller
</TABLE>
For biographical information concerning Messrs. Rand, Salerno and Sheehan,
see "Election of Directors".
MR. MILLER, age 40, has been President and Chief Operating Officer--Vehicle
Management Services Group of the Company since June 1999. Mr. Miller has also
been serving as President of PHH since July 1997. From June 1994 to July 1997
Mr. Miller was President of GE Capital Financial. Prior thereto, he was Senior
Vice President of World Travel Partners and held various strategic sales
management positions with American Express Company.
MR. BYRNES, age 55, has been Senior Vice President--Sales of the Company and
ARACS since February 1998 and Vice President--Sales North America for the
Company or its predecessor and ARACS since 1987.
MR. KINDER, age 45, has been Senior Vice President and Chief Information
Officer of the Company since March 2000. Mr. Kinder has also been serving as
Senior Vice President--Information Technology Services and Chief Information
Officer of PHH since October 1997. From September 1998 to November 1999
Mr. Kinder also served as Chief Operating Officer of PHH. From August 1996 to
October 1997 Mr. Kinder was Vice President--Information Technology Services of
PHH. Prior thereto, he was a principal of American Management Systems, Inc. a
systems and management consulting firm which provided technology consulting
services to Fortune 500 companies and government organizations.
MS. MILLER, age 43, has been Senior Vice President--Marketing of the Company
since February 1998. From January 1997 to February 1998, Ms. Miller was the
principal in her own consulting firm, which provided marketing consulting
services to small and mid-sized businesses and nonprofit organizations. From
1987 to 1995, Ms. Miller held various positions with American Express Company
including Vice
6
<PAGE>
President, Platinum Card Operations from September 1993 to October 1995 and Vice
President, Small Business Services Marketing from December 1990 to August 1993.
MR. COLLINS, age 52, has been Vice President--International of the Company
or its predecessor and ARACS, and General Manager of their international
operations, since 1987.
MR. JACOBSON, age 56, has been Vice President--Tax of the Company and ARACS
since September 1998. From November 1997 until August 1998, Mr. Jacobson was
Staff Vice President of ARACS and for more than five years prior thereto he was
employed by ARACS as Director of Corporate Tax.
MR. KENNELL, age 55, has been Vice President and Treasurer of the Company or
its predecessor and ARACS since February 1987.
MR. KEYES, age 54, has been Vice President-HR, Staffing and Diversity of the
Company since March 1999 and of ARACS since January 1999. From July 1997 until
December 1998, Mr. Keyes was Vice President--Staffing, Diversity & Management
Development of ARACS. From June 1993 until December 1996, Mr. Keyes was
Corporate Director of Human Relations at The Dun and Bradstreet Corporation.
MS. SCLAFANI, age 48, has been Vice President, General Counsel and Secretary
of the Company and ARACS since August 1998. From April 1990 until March 1997,
Ms. Sclafani was Vice President, Deputy General Counsel and Assistant Secretary
of Avis, Inc. and ARACS. In March 1997, Ms. Sclafani was elected Vice President
and Secretary of the Company.
MR. SHANLEY, age 51, has been Vice President and Controller of the Company
and ARACS since November 1996. From November 1989 to November 1996, Mr. Shanley
was Vice President--Planning and Analysis of Avis, Inc. and ARACS.
7
<PAGE>
EXECUTIVE COMPENSATION AND OTHER INFORMATION
SUMMARY COMPENSATION TABLE
The following table sets forth the 1997, 1998 and 1999 cash and non-cash
compensation awarded to or earned by the Chief Executive Officer of the Company
and the four other most highly compensated executive officers of the Company
(the "Named Executive Officers"):
<TABLE>
<CAPTION>
LONG TERM
COMPENSATION
AWARDS
-------------------------------
ANNUAL COMPENSATION SECURITIES
-------------------- OTHER ANNUAL UNDERLYING ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY($) BONUS($) COMPENSATION(1) OPTIONS(#)(2) COMPENSATION($)(3)
- --------------------------- -------- --------- -------- --------------- ------------- ------------------
<S> <C> <C> <C> <C> <C> <C>
A. Barry Rand.............. 1999 91,539 700,000
Chairman & Chief
Executive Officer
F. Robert Salerno.......... 1997 336,346 351,752 533,200 6,197
President & Chief 1998 356,730 420,000 392,500 11,844
Operating Officer-- 1999 373,077 456,000 110,000 20,009
Rental Car Group
Kevin M. Sheehan........... 1997 264,414 289,330 355,500 4,156
President--Corporate & 1998 279,950 302,501 265,000 12,011
Business Affairs & Chief 1999 361,052 432,000 90,000 27,252
Financial Officer
Thomas J. Byrnes........... 1997 162,692 108,331 71,100 7,738
Senior Vice President-- 1998 196,769 170,176 10,000 10,917
Sales 1999 198,153 180,000 7,000 13,770
Maria M. Miller............ 1998 158,173 169,902 23,600 60,000 1,107
Senior Vice President-- 1999 181,288 166,500 5,940 7,000 1,804
Marketing
</TABLE>
- ------------------------
(1) Amounts listed represent relocation reimbursement.
(2) Amounts listed represent options to acquire the Company's Common Stock.
(3) Payments included in these amounts for the fiscal year ended December 31,
1999 consist of (i) the value of group term life insurance premiums paid for
by the Company and (ii) Company matching contributions to the Avis Voluntary
Investment Savings Plan, which is a defined contribution salary reduction
401(k) plan qualified under Section 401(a) of the Internal Revenue Code of
1986, as amended, and/or under a non-qualified deferred compensation plan
established by the Company in 1998 as follows: Mr. Salerno--(i) $10,409 and
(ii) $9,600; Mr. Sheehan--(i) $3,890 and (ii) $23,363;
Mr. Byrnes--(i) $8,970 and (ii) $4,800 and Ms. Miller--(i) $1,404 and
(ii) $400.
8
<PAGE>
OPTION GRANTS TABLE
The following table describes the options to acquire shares of Common Stock
of the Company granted to the Named Executive Officers in the last fiscal year:
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
---------------------
<S> <C> <C> <C> <C> <C>
PERCENT OF
TOTAL
NUMBER OPTIONS
OF GRANTED
SECURITIES TO EXERCISE OR GRANT DATE
UNDERLYING EMPLOYEES BASE PRICE PRESENT
OPTIONS IN FISCAL PER EXPIRATION VALUE
NAME GRANTED YEAR SHARE($)(1) DATE ($)(2)
- ----------------------------------- ------- ------ -------- -------- ----------
A. Barry Rand(3)................... 500,000 18.70% 18.9375 11/9/09 4,826,350
200,000 7.48% 18.9375 11/9/09 1,930,540
F. Robert Salerno.................. 110,000 4.11% 26.0625 3/22/09 1,461,273
Kevin M. Sheehan................... 90,000 3.37% 26.0625 3/22/09 1,195,587
Thomas J. Byrnes................... 7,000 .26% 26.0625 3/22/09 92,990
Maria M. Miller.................... 7,000 .26% 26.0625 3/22/09 92,990
</TABLE>
- ------------------------
(1) Options granted at $26.0625 per share vest 20% per year beginning March 22,
2000.
(2) The amount shown in this column represents the Grant Date Present Value
using the "Black-Scholes" valuation method.
(3) The grant of 500,000 shares vests 33 1/3% per year beginning November 9,
2000 and the grant of 200,000 shares vests 20% per year beginning
November 9, 2000.
OPTION EXERCISES AND YEAR-END OPTION VALUE TABLE
The following table summarizes the exercise of options by the Named
Executive Officers during 1999 and the value of unexercised in-the-money options
to acquire Common Stock of the Company held by the Named Executive Officers at
December 31, 1999:
<TABLE>
<CAPTION>
NUMBER OF SECURITIES
UNDERLYING VALUE OF UNEXERCISED
UNEXERCISED OPTIONS AT IN THE MONEY OPTIONS AT
SHARES FY END (#) FY END ($)(1)
ACQUIRED ON VALUE --------------------------- ---------------------------
NAME EXERCISE (#) REALIZED ($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ---- ------------ ------------ ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
A. Barry Rand................... 700,000 4,634,000
F. Robert Salerno............... 231,780 803,920 1,854,537 4,107,955
Kevin M. Sheehan................ 155,200 555,300 1,237,512 2,742,968
Thomas J. Byrnes................ 14,220 149,888 16,220 57,660 124,843 377,650
Maria M. Miller................. 12,000 55,000 18,720 74,880
</TABLE>
- ------------------------
(1) Based upon the closing price of the Common Stock on the New York Stock
Exchange on December 31, 1999 and applicable exercise prices.
DEFINED BENEFIT PLAN
The Company maintains a defined benefit pension plan for employees who met
the eligibility requirements as of December 31, 1983. The eligibility
requirements are non-union, full time employees hired prior to December 31, 1983
who were age 25 or above on January 1, 1985. The plan was amended to curtail all
benefit accruals and to add two years of credited service to the accrued benefit
of each participant employed by the Company on December 31, 1998.
9
<PAGE>
The plan provides that the benefit for each participant, payable monthly, be
equal to 1 1/2% of his or her final average compensation (average compensation
being the average of the highest five consecutive years of compensation in the
last ten years of employment) for each year of service, not to exceed 35, minus
1 3/7% of the estimated Social Security benefit for each year of service. In
general, the effect is to provide a participant who has worked for the Company
for 35 years prior to retirement, with a pension, including Social Security,
equal to at least 52% of the average compensation (including bonus, overtime and
commissions) earned during the highest five consecutive years of his or her
employment.
To the extent that applicable federal laws limit a participant's pension
plan benefit to an amount less than the amount otherwise provided by the plan's
formula, the Company has adopted a retirement equalization benefit plan to
compensate the participant for the reductions in the retirement benefit. In
light of the curtailment of benefit accruals under the Company's defined benefit
plan, no additional employees will be designated as participants in this
retirement equalization benefit plan.
The following table shows the estimated annual pension benefit payable under
the plans under normal retirement in 2000 after selected periods of service
(assuming such employees and their spouses elect a straight life annuity rather
than a form of joint and survivor or other form of annuity, in which case the
benefits would generally be lower than shown in the following table.) The
estimated maximum benefits for employees who retire in years other than 2000
will be different from the amount shown in the table because pension benefits
will be offset by different Social Security benefits; however, the benefit shown
in the table will not be reduced by the amount of Social Security benefits
actually paid.
PENSION PLAN TABLE
ESTIMATED ANNUAL PENSION BENEFIT(1)
<TABLE>
<CAPTION>
YEARS OF SERVICE
----------------------------------------------------
<S> <C> <C> <C> <C> <C>
ANNUAL PAY 15 20 25 30 35
- ------------------------------------------ -------- -------- -------- -------- --------
$200,000.................................. $ 39,194 $ 52,258 $ 65,323 $ 78,387 $ 91,452
250,000.................................. 49,881 66,508 83,135 99,762 116,390
300,000.................................. 60,569 80,758 100,948 121,137 141,327
350,000.................................. 71,256 95,008 118,760 142,512 166,265
400,000.................................. 81,944 109,258 136,573 163,887 191,202
450,000.................................. 92,631 123,508 154,385 185,262 216,140
500,000.................................. 103,919 137,758 172,198 206,637 241,077
</TABLE>
- ------------------------
(1) A portion of the benefit will be paid by the Company under its retirement
equalization benefit plan, if the benefit exceeds the maximum pension
payable from the tax qualified retirement plan under federal law.
As of December 31, 1999, the specified Named Executive Officers had the
following years of service under the defined benefit plan: Mr. Salerno, eighteen
years, seven months; Mr. Byrnes, thirty-two years, eleven months.
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
OVERALL POLICY. The Compensation Committee of the Board of Directors, which
was established in September 1997 and is comprised of members who are
non-employee directors, is responsible for administering the Company's executive
compensation policies and programs.
The Compensation Committee's goal is to attract and retain the best possible
executive talent, to motivate these executives to achieve the goals inherent in
the Company's business strategy and to link executive and stockholder interests
through equity-based compensation plans.
10
<PAGE>
The key elements of the Company's executive compensation program include
base salary, annual bonus and stock options. Each executive's compensation
package is designed to condition a significant portion of the executive's
overall anticipated compensation on the Company's success in achieving specified
performance targets or on appreciation in the value of the Common Stock or both.
BASE SALARIES. The 1999 base salaries for Messrs. Rand, Salerno and Byrnes
are set forth in their respective employment agreements.
ANNUAL BONUS. In 1999 the executive officers were eligible to earn bonuses
equal to a percentage of base salary based upon the degree of achievement of
pre-tax profit goals and attainment of a strategic employee loyalty goal. The
percentages of base salary for the executive officers ranged from 30%, if the
budgeted profit plan goal was achieved, to a maximum of 120%, if the highest
level of pre-tax profit was achieved and the strategic goal was met. The 1999
bonuses for the Named Executive Officers are set forth in the Summary
Compensation Table.
STOCK OPTIONS. On September 23, 1997, the 1997 Plan was approved by the
Board of Directors and stock options have been granted to the Company's
executive officers pursuant thereto. Information with respect to option grants
to the Named Executive Officers is set forth in the "Option Grants Table". The
stock option awards for the Named Executive Officers, which were approved at the
time of grant by the Compensation Committee of the Board of Directors, are
intended to provide a long term incentive to such executives.
CEO COMPENSATION. Mr. Rand was elected Chairman of the Board and Chief
Executive Officer of the Company in November 1999. At that time his compensation
package was determined by the Executive and Compensation Committees of the Board
of Directors of the Company in accordance with their executive compensation
guidelines.
DEDUCTIBILITY OF COMPENSATION. The deductibility for corporate tax purposes
of compensation paid to individual executive officers of the Company in excess
of $1 million in any year commencing with 1994 may be restricted. However, where
it is deemed necessary, in the best interests of the Company, to continue to
attract and retain the best possible executive talent, and to motivate such
executives to achieve the goals inherent in the Company's business strategy, the
Compensation Committee will recommend, and the Company is expected to pay,
compensation to executive officers which may exceed the limits of deductibility.
THE COMPENSATION COMMITTEE
Michael J. Kennedy, Chair
Deborah L. Harmon
11
<PAGE>
PERFORMANCE GRAPH
Set forth below is a line graph comparing percentage change in the
cumulative total return* of the Common Stock, the Russell 2000 Index and the
Company's Peer Group for the period from September 1, 1997 (September 24, 1997
for the Company) through December 31, 1999.
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
SEP-97 1997 1998 1999
<S> <C> <C> <C> <C>
Avis Group Holdings, Inc. $100 188 142 $150
Russell 2000 Index $100 97 94 $114
Peer Group $100 81 62 $52
</TABLE>
<TABLE>
9/97* 12/31/97 12/31/98 12/31/99
<S> <C> <C> <C> <C>
Avis Group Holdings,
Inc...................... $100 $188 $142 $150
Russell 2000 Index......... $100 $ 97 $ 94 $114
Peer Group................. $100 $ 81 $ 62 $ 52
</TABLE>
* Assumes $100 invested on September 1, 1997 for the Russell 2000 Index and
the Company's Peer Group and September 24, 1997 for the Company (the first day
of trading in the Common Stock).
EMPLOYMENT CONTRACTS AND TERMINATION, SEVERANCE AND CHANGE OF CONTROL
ARRANGEMENTS
Three of the Named Executive Officers have written employment agreements.
Mr. Rand has an employment agreement with the Company which terminates on
January 1, 2005. Under the terms of his agreement, Mr. Rand is entitled to a
base salary of $700,000 which may be increased annually at the Company's
discretion after review by the Compensation Committee of the Board of Directors.
If the employment of Mr. Rand is terminated by the Company for any reason other
than "cause" or if Mr. Rand terminates his employment for "good reason" (as each
term is defined in the agreement), and such termination does not occur in
connection with or within 24 months following a
12
<PAGE>
change-of-control, he is entitled to receive a lump sum cash severance equal to
the sum of (i) 24 times his average monthly base salary during the 24 months (or
lesser period) preceding his termination and (ii) twice the average annual
amount of any bonus for which he was eligible for the last two fiscal years
prior to his termination, plus a prorated share of his bonus for the year in
which his termination occurs if the cause for termination is disability.
However, if the employment of Mr. Rand is terminated by the Company with or
within 24 months following a change-of-control, the cash severance formula in
the preceding sentence is increased to 36 times average monthly base salary and
three times average annual bonus, plus he is entitled to a prorated share of his
bonus for the year in which his termination occurs, provided that he was
employed by the Company for at least eight months during that year. If the
employment of Mr. Rand is terminated by the Company as a result of his death,
his estate is entitled to receive all accrued salary, vacation pay and bonus
prorated until the date of his death. Furthermore, if the employment of
Mr. Rand is terminated by the Company during the term of his employment
agreement for reasons other than "cause", or if he terminates his employment for
"good reason" during such term, Mr. Rand may exercise his vested stock options
until the earlier of two years after the date of termination or the expiration
date for such options. If such termination occurs after the expiration of his
employment agreement, Mr. Rand may exercise his vested options until the earlier
of five years after the date of termination or their expiration date.
Mr. Salerno and Mr. Byrnes have employment agreements with a predecessor
company of the Company which terminate on February 8, 2001 and September 20,
2000, respectively. Under the terms of their agreements, Mr. Salerno and
Mr. Byrnes are entitled to receive an annual base salary of not less than
$373,077 and $198,153, respectively, which salary may be increased by the Board
of Directors during the term of their agreements. If the employment of
Mr. Salerno is terminated by the Company for reasons other than "just cause", or
if Mr. Salerno terminates his employment for "good reason" (as each term is
defined in the agreement), he is entitled to receive his remaining salary and
full bonus and certain perquisites through the term of his agreement. However,
if the employment of Mr. Salerno is terminated by the Company on or after a
change-in-control, he is entitled to receive his remaining salary, full bonus
and certain perquisites under the agreement in a single lump sum within 30 days
following his termination. If the employment of Mr. Byrnes is terminated by the
Company as a result of his death, his estate is entitled to receive his salary
for a period of one year as a death benefit. If the employment of Mr. Byrnes is
terminated without "just cause" (as defined in his agreement), he is entitled to
receive his salary for a period of one year and a pro rated share of his bonus
for the year in which his termination occurs.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
RELATIONSHIP WITH CENDANT
Cendant, which beneficially owns 17.8% of the Company's outstanding Common
Stock, licenses the Avis trademark to ARACS pursuant to a 50-year master license
agreement and receives royalty fees from ARACS equal to 4% of its gross revenue.
Cendant also provides the Company at cost with (i) office space at its
headquarters in Garden City, New York and at facilities in Virginia Beach,
Virginia, and Tulsa, Oklahoma, and (ii) with reservation center services and
computer services to process reservation and rental transactions and for
accounting and fleet control. In addition, until March 4, 2002, ARACS has agreed
to pay Cendant $1.75 per call transferred and $8.00 per resulting rental for
transferring Cendant's lodging customers to ARACS for vehicle rentals with a
minimum fee of $2.25 million per year. ARACS paid Cendant approximately
$2.8 million in call transfer fees for the fiscal year ended December 31, 1999.
Four of the Company's directors, Messrs. Coleman, Edelman, Holmes and Monaco,
are directors of Cendant and Mr. Holmes is also an executive officer of Cendant.
In connection with the Company's stock repurchase program, on January 15, 1999
and April 26, 1999 the Company repurchased 1.3 million shares and 314,200 shares
of its Common Stock from Cendant at a cost of approximately $31.5 million and
$9.3 million, respectively. A subsidiary of Cendant owns 7,200,000 shares of
preferred stock issued to it on June 30, 1999 by a subsidiary of the Company
which shares (a) accrue dividends at the rate of 5% and
13
<PAGE>
(b) under certain circumstances, may be convertible into Common Stock. See
"APPROVAL OF CERTIFICATE AMENDMENT [Proposal 3]."
COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT
Section 16(a) of the Exchange Act requires the Company's officers and
directors, and persons who own more than ten percent of a registered class of
the Company's equity securities, to file reports of ownership and changes in
ownership on Forms 3, 4 and 5 with the Securities and Exchange Commission and
the New York Stock Exchange. Officers, directors and greater than ten percent
owners are required to furnish the Company with copies of all Forms 3, 4 and 5
they file.
Based solely on the Company's review of the copies of such forms it has
received and written representations from certain reporting persons, except as
set forth below, the Company believes that all of its officers, directors, and
greater than ten percent beneficial owners complied with all filing requirements
applicable to them with respect to transactions during 1999.
On June 8, 1999, Cendant filed a Form 4 which reported three sales of Common
Stock which, through an oversight, were not timely reported in 1998 and 1999.
RATIFICATION OF APPOINTMENT OF AUDITORS
[PROPOSAL 2]
Deloitte & Touche LLP has been appointed by the Board of Directors as the
auditors for the Company's financial statements for the fiscal year ending
December 31, 2000. A representative of Deloitte & Touche LLP is expected to be
present at the Meeting and will have the opportunity to make a statement if he
desires to do so and will be available to respond to appropriate questions from
stockholders.
Pursuant to applicable Delaware law, the ratification of the appointment of
auditors of the Company requires the affirmative vote of the holders of a
majority of the shares of Common Stock present at the Meeting, in person or by
proxy, and entitled to vote. Abstentions and broker non-votes will be counted
and will have the same effect as a vote against this proposal.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS
THAT YOU VOTE FOR THIS PROPOSAL.
14
<PAGE>
APPROVAL OF CERTIFICATE AMENDMENT
[PROPOSAL 3]
On June 29, 1999, the Board of Directors approved a resolution to submit a
proposed amendment to subparagraphs (a) and (b) of Article "Fourth" of the
Company's Amended and Restated Certificate of Incorporation (the "Certificate")
to the stockholders for approval (the "Certificate Amendment"). The provisions
of that Article set forth the aggregate number and designations of shares of
stock which the Company has authority to issue and the rights and restrictions
of the Company's Common Stock. Specifically, the Board of Directors recommends
that the Company's stockholders vote in favor of the Certificate Amendment to
eliminate the existing subparagraphs (a) and (b) of Article "Fourth" of the
Certificate and substitute a new Article "Fourth" which provides for:
(i) reclassification of the Company's 100,000,000 shares of authorized Common
Stock as Class A Common Stock, par value $.01 per share, and (ii) authorization
of 15,000,000 shares of non-voting Class B Common Stock, par value $.01 per
share, which may be converted into Class A Common Stock under certain
circumstances. The 20,000,000 shares of authorized preferred stock of the
Company would remain unchanged.
Upon the filing of the Certificate Amendment with the Secretary of State of
the State of Delaware, each share of the Company's Common Stock issued and
outstanding immediately prior to the filing will be reclassified as and
converted into one share of Class A Common Stock authorized by subparagraph
(a) of Article "Fourth" of the Certificate Amendment. The shares of Class A
Common Stock will be identical to the shares of Common Stock now authorized
except for the reclassification. The shares of Class B Common Stock will have
the same rights as the shares of Class A Common Stock (including with respect to
dividends), except that the shares of Class B Common Stock (1) will be
non-voting, (2) under certain circumstances described below, will be convertible
into Class A Common Stock and (3) will not be included in determining the number
of shares voting or entitled to vote on any matter, unless otherwise required by
law. Holders of shares of Class A Common Stock and Class B Common Stock will
have no preemptive rights. Each share of Class B Common Stock will be
convertible into a share of Class A Common Stock (a) at the option of the holder
(i) if, after giving effect to a conversion, the aggregate number of shares of
Class A Common Stock owned by Cendant or its affiliates does not exceed 20% of
the outstanding number of shares of Class A Common Stock or (ii) upon the
occurrence of a bankruptcy or insolvency of the Company or a change of control
(as defined in the Certificate Amendment) and (b) automatically upon the
transfer or sale of any shares of Class B Common Stock to any person other than
Cendant or its affiliates. A complete description of the rights and restrictions
of Class A Common Stock and Class B Common Stock is contained in the Certificate
Amendment, a copy of which is set forth on Appendix A hereto. The Company
intends to apply to the New York Stock Exchange for listing and registration of
the shares of Class A Common Stock.
REASONS FOR THE CERTIFICATE AMENDMENT
On June 30, 1999, the Company acquired the car leasing, vehicle management
and fuel card businesses (the "Businesses") of PHH Corporation, a subsidiary of
Cendant ("PHH"). As partial consideration for the Businesses, Avis Fleet Leasing
and Management Corporation, a wholly owned Texas subsidiary of the Company
("Avis Fleet"), issued to PHH 7,200,000 shares of Series A Cumulative
Participating Redeemable Convertible Preferred Stock of Avis Fleet (the
"Series A Preferred") with a liquidation preference of $50 per share plus
accrued but unpaid dividends. Dividends on the Series A Preferred accrue
annually at the rate of 5% and are payable semi-annually on January 1 and
July 1 of each year. Under the terms of the Series A Preferred, Avis is also
required to pay an annual dividend in addition to the Series A Preferred
dividends at the rate of 2%, to the extent Avis Fleet meets certain stated
earnings thresholds. The 2% dividend will accrue whether or not the Company has
earnings or profits, whether or not there are funds legally available for the
payment of such dividend and whether or not dividends are declared. The
Series A Preferred, by their terms, but subject to the approval by the Company's
stockholders of the Certificate Amendment, are convertible into shares of
Class B Common Stock of the Company
15
<PAGE>
(a) at the option of the holder if (i) after the date the Businesses meet a
stated earnings threshold for the preceding year, the market price of the
Company's Class A Common Stock has equaled or exceeded $50 a share at any time,
(ii) Avis Fleet fails to comply with its redemption or dividend obligations or
its obligation to retire shares upon conversion or redemption with respect to
the Series A Preferred or the Series B Preferred (as defined below) (a
"Non-Compliance Event"), (b) at the option of Avis Fleet if, after June 30,
2004, the market price of the Company's Class A Common Stock has exceeded $55 a
share (the "Minimum Price") for at least 20 trading days within a 30-day
consecutive period, provided that Avis Fleet converts all of the Series A
Preferred and (c) automatically upon the bankruptcy of Avis Fleet or any of the
Company's Significant Subsidiaries as defined in the certificate of designation
for the Series A Preferred (a "Bankruptcy Event"). Each share of Series A
Preferred is convertible currently into one share of Class B Common Stock (the
"Conversion Rate"). The Conversion Rate may be adjusted from time to time to
avoid dilution to the holder thereof if, prior to conversion of the Series A
Preferred, the Company (w) declares a dividend on the Common Stock payable in
kind, (x) splits outstanding Common Stock into a greater number of shares,
(y) combines outstanding Common Stock into a smaller number of shares or
(z) issues any Common Stock by reclassification (each an "Adjustment Event").
Upon an Adjustment Event, the Minimum Price will also be appropriately adjusted.
Until June 30, 2004, dividends on the Series A Preferred are payable at the
option of Avis Fleet in shares of its Series B Cumulative PIK Preferred Stock
(the "Series B Preferred") which, by their terms, but subject to the approval by
the Company's stockholders of the Certificate Amendment, are also convertible
into shares of Class B Common Stock of the Company (a) at the option of PHH upon
a Non-Compliance Event and (b) automatically upon a Bankruptcy Event. Dividends
on the Series B Preferred accrue annually at the rate of 5% and are payable
semi-annually on January 1 and July 1 of each year. Until January 1, 2005,
dividends on the Series B Preferred are payable in kind at the option of Avis
Fleet. On January 1, 2000, Avis Fleet issued 180,000 shares of Series B
Preferred to PHH in payment of its dividend obligation for the Series A
Preferred on such date.
Each share of Series B Preferred is convertible currently into that number
of whole shares of Class B Common Stock equal to the quotient obtained by
dividing $50 by the average trading price of the Company's Class A Common Stock
for the 30-day consecutive period preceding the date of conversion. This
conversion rate is also subject to adjustment upon an Adjustment Event.
Under the terms of both the Series A and the Series B Preferred (i) after
June 30, 2004, Avis Fleet will have the option to redeem any of the Series A or
the Series B Preferred and (ii) after June 30, 2011, Avis Fleet will be required
to redeem all the shares of the Series A and/or the Series B Preferred, by
payment in cash equal to the liquidation preference of $50 per share.
Based upon the current conversion rates and assuming that (a) the
Certificate Amendment is approved by the Company's shareholders and becomes
effective and (b) the required earnings threshold and $50 market price for the
Company's Class A Common Stock are met, the shares of the Series A Preferred
currently held by PHH would have been convertible into 18.8% of the total
outstanding shares of the Company's Common Stock as of February 14, 2000,
adjusted to give effect to such conversion, and Cendant's beneficial ownership
of the Company's Common Stock as of such date would have been 33.2%, of which
only 20% would have been voting Class A Common Stock.
In the event the Company's stockholders do not approve the Certificate
Amendment, the dividend rate on the Series A Preferred and the Series B
Preferred will automatically increase from the existing 5% to 12% on June 30,
2000 and such increase will be retroactive from the issue dates for such shares.
This increase in the dividend rate on the Series A Preferred and the Series B
Preferred would require an additional $25.8 million in dividends to be paid to
PHH, which payment would have a significant dilutive effect on the Company's
earnings in 2000. It is anticipated that this dilution would also be compounded
in future years as dividends on the Series A Preferred and the Series B
Preferred are paid in shares of Series B Preferred.
16
<PAGE>
The Board of Directors believes that it is in the best interest of the
Company for the stockholders to approve the Certificate Amendment in order to
avoid the increase in the dividend rate on the Series A Preferred and the
Series B Preferred and the resulting dilutive effect on earnings.
No further vote of the stockholders will be required prior to issuance of
the Class B Common Stock except as otherwise required by applicable law or the
rules of the New York Stock Exchange. However, the Board of Directors of the
Company may only issue shares of Class B Common Stock to PHH in the limited
circumstances described in the preceding paragraphs.
The Certificate Amendment is not intended to have an anti-takeover effect.
However, if the Certificate Amendment is approved by the Company's stockholders,
Avis Fleet will have the right to cause the Series A Preferred and the Series B
Preferred to be converted into Class B Common Stock of the Company under certain
circumstances. If these circumstances were to exist, the Company could cause the
conversion of the Series A Preferred and the Series B Preferred into Class B
Common Stock to make any attempt by a third party to gain control of the Company
more difficult, costly or time consuming.
Furthermore, if the Certificate Amendment is approved by the Company's
stockholders, PHH will be entitled, (i) under certain circumstances, to convert
the Series A Preferred and the Series B Preferred into Class B Common Stock of
the Company and (ii) upon the occurrence of a change of control (as defined in
the Certificate Amendment) and under certain other circumstances, to convert the
Class B Common Stock into Class A Common Stock. If this were to occur, Cendant's
beneficial ownership of the Class A Common Stock, and therefore its voting
power, would increase accordingly. PHH also has the right to sell Class B Common
Stock to third parties, in which case, the Class B Common Stock would be
automatically converted into the voting Class A Common Stock. The issuance of
Class A Common Stock upon conversion of Class B Common Stock would dilute the
voting power of the existing holders of the Company's Common Stock and could be
used to frustrate a third party's attempt to gain control of the Company.
Pursuant to the Certificate and Delaware law, the affirmative vote of the
holders of a majority of the outstanding shares of Common Stock entitled to vote
is required for approval of the Certificate Amendment. Abstentions and broker
non-votes will be counted and will have the same effect as a vote against this
proposal.
This Proxy Statement contains statements related to future results, which
are forward-looking statements that are made pursuant to the Safe Harbor
Provisions of the Private Securities Litigation Reform Act of 1995.
Forward-looking statements involve risks and uncertainties, including the impact
of competitive products and pricing, changing market conditions; and risks which
are detailed from time to time in the Company's publicly-filed documents,
including its Annual Report on Form 10-K for the period ended December 31, 1999.
Actual results may differ materially from those projected. These forward-
looking statements represent the Company's judgements as of the date of this
Proxy Statement.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS
THAT YOU VOTE FOR THIS PROPOSAL.
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APPROVAL OF 2000 INCENTIVE COMPENSATION PLAN
[PROPOSAL 4]
The Compensation Committee has approved, and the Board of Directors has
ratified, the adoption of the Avis Group Holdings, Inc. 2000 Incentive
Compensation Plan (the "Plan") subject to stockholder approval. The Plan is
intended to promote the long-term success of the Company and increase
shareholder value by attracting, motivating, and retaining key employees of the
Company and its subsidiaries and affiliates, and by motivating consultants who
provide significant services to the Company and its subsidiaries and affiliates.
To achieve this purpose, the Plan allows the granting of stock options, stock
appreciation rights ("SARs"), restricted stock awards, performance unit awards,
performance share awards and cash-based awards (collectively, "Awards") to
eligible persons.
Subject to adjustment for certain changes in the Company's capitalization
(described below under "Changes in Capital"), a total of 1,500,000 shares of
Common Stock (which may be either authorized and unissued shares (which will not
be subject to preemptive rights) or previously issued shares that the Company or
a subsidiary has reacquired), would be available for issuance under the Plan if
the Plan is approved by the stockholders. No more than 300,000 shares of such
authorized total may be issued as restricted stock under the Plan.
The Company has no intention to use the Plan for any corporate purpose other
than to recruit and retain, and provide stock-based performance incentives to,
eligible employees and consultants of the Company and its subsidiaries and
affiliates.
The following paragraphs provide a summary of the principal features of the
Plan and its operation. This summary is qualified in its entirety by reference
to the Plan, a complete copy of which is attached hereto as Appendix B.
ADMINISTRATION OF THE PLAN
The Plan will be administered by the Compensation Committee of the Board of
Directors. The Compensation Committee will have the exclusive discretionary
authority to operate, manage and administer the Plan in accordance with its
terms. Subject to the terms of the Plan, the Compensation Committee has the sole
discretion to determine the employees and consultants who will be granted
Awards, the size and types of such Awards, and the terms and conditions of such
Awards. The Compensation Committee will determine the form and content of award
agreements which grant Awards under the Plan. The Compensation Committee will
interpret the Plan and award agreements thereunder and will have authority to
correct any errors, supply any omissions and reconcile any inconsistencies in
the Plan and/or any award agreements. The Compensation Committee's decisions and
actions concerning the Plan will be final and conclusive. Within the limitations
of the Plan and applicable law, the Compensation Committee may delegate its
responsibilities under the Plan to persons selected by it, and the Board of
Directors will be permitted to exercise all of the Compensation Committee's
powers under the Plan.
PARTICIPATION
The Compensation Committee may grant Awards under the Plan to officers,
employees and consultants of the Company and its subsidiaries and affiliates
designated by the Compensation Committee. However, only employees of the Company
and its subsidiaries (as defined in the Plan) will be eligible to receive
"incentive stock options" under the Plan. Directors who are not also employees
of the Company or its subsidiaries or affiliates are not eligible to participate
in the Plan.
The actual number of employees and consultants who will receive Awards under
the Plan cannot be determined because selection for participation in the Plan is
in the discretion of the Compensation Committee. Similarly, the performance
goals which may determine the degree of payout and/or vesting with respect to
such Awards may vary from year to year and from participant to participant.
Therefore,
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benefits under the Plan are not determinable. No Awards will be granted under
the Plan unless the Plan is approved by the stockholders.
OPTIONS
The Compensation Committee may grant either "incentive stock options"
("ISOs") (within the meaning of Section 422 of the Internal Revenue Code of
1986, as amended (the "Code")) or options not subject to Section 422 of the Code
("NQSOs"). The number of shares covered by each option will be determined by the
Compensation Committee, but during any fiscal year of the Company, no
participant may be granted options for more than 250,000 shares of Common Stock.
The exercise price of each option is set by the Committee but generally
cannot be less than 100% of the fair market value (as defined in the Plan) of a
share of Common Stock on the date of grant, or, in any event, less than $17, the
offering price of the Common Stock in the Company's initial public offering
which occurred on September 23, 1997. Thus, an option will have value only if
the Common Stock appreciates in value after the date of grant. On March 10,
2000, the fair market value of a share of Common Stock was $15.25.
The exercise price of each option must be paid in full in cash at the time
of exercise. The Compensation Committee also may permit payment through the
tender of shares of Common Stock that are already owned by the participant, by
using a "cashless exercise" procedure, or by any other legal means which the
Compensation Committee determines to be consistent with the Plan's purpose.
Options become exercisable at the time and on the terms established by the
Compensation Committee. Options expire at the time established by the
Compensation Committee, but in no event may an option be exercised later than
the tenth anniversary of the date of grant.
STOCK APPRECIATION RIGHTS
SARs are Awards that, upon their exercise, give a participant the right to
receive from the Company an amount equal to (i) the number of shares for which
the SAR is exercised, multiplied by (ii) the difference between the fair market
value of a share of Common Stock on the date of exercise and the grant price of
the SAR. The Compensation Committee will have the discretion to determine
whether a SAR is settled in cash, shares of Common Stock, or a combination of
cash and shares. SARs may be granted in tandem with options or may be granted on
an independent basis. The Compensation Committee will determine the terms and
conditions of each SAR, including its vesting schedule, and the times and terms
on which SARs may be exercised. However, the grant price of a SAR cannot be less
than 100% of the fair market value of a share of Common Stock on the date of
grant of such SAR (except that a SAR granted in tandem with a previously granted
option will have a grant price equal to the exercise price of such option), or,
in any event, less than the offering price of the Common Stock in the Company's
initial public offering. SARs expire at the times established by the
Compensation Committee, but are subject to the same maximum time limits as are
applicable to options granted under the Plan. A SAR granted in tandem with an
option will be exercisable to the extent such related option is exercisable.
Such an option will no longer be exercisable to the extent that the participant
exercises any SAR granted in tandem with such option. Likewise, a SAR will not
be exercisable to the extent of the exercise or expiration of the related
option. The number of shares covered by each SAR will be determined by the
Compensation Committee, but no participant may be granted SARs for more than
150,000 shares of Common Stock in any one fiscal year of the Company.
RESTRICTED STOCK AWARDS
Restricted stock Awards are shares of Common Stock that are granted to a
participant subject to the satisfaction of such terms and conditions as the
Compensation Committee may determine. Vesting may be based on continued
employment (or other period of service) and/or satisfaction of performance goals
or
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other conditions established by the Compensation Committee. Until such time as
these restrictions lapse, shares of restricted stock are subject to forfeiture
and may not be sold, assigned, pledged or otherwise disposed of by the
participant who holds such shares. Nevertheless, such participant will receive
dividends, if any (which may be subject to the same restrictions as the
restricted stock, if the Compensation Committee so provides), and have voting
rights and all other rights of a stockholder during the restricted period,
unless the Compensation Committee provides otherwise in the grant. The number of
shares of restricted stock granted to a participant will be determined by the
Compensation Committee, but no participant may be granted more than 100,000
shares of Common Stock in the form of restricted stock Awards in a single fiscal
year of the Company. In addition, no more than 300,000 shares of the 1,500,000
shares of Common Stock authorized for issuance under the Plan may be awarded in
the form of restricted stock.
In determining the vesting schedule for each award of restricted stock, the
Compensation Committee may impose whatever conditions to vesting it determines
to be appropriate. For example, the Compensation Committee may (but is not
required to) provide that restricted stock will vest only if one or more
pre-established objective performance goals are satisfied. In order for the
Award to qualify as "performance-based" compensation under Section 162(m) of the
Code (SEE "Certain Federal Income Tax Consequences" below), the Compensation
Committee must use one or more of the following performance criteria in setting
such performance goals: (1) earnings per share, (2) net income, (3) share price
(including return relative to a designated market index), (4) cash flow return
on investments, (5) return measures (such as return on assets, equity or sales)
or (6) earnings before or after taxes. The Compensation Committee may apply the
performance measures on a corporate or business unit basis, as deemed
appropriate in light of the participant's specific responsibilities. The
Compensation Committee may, in its discretion, adjust the determination of the
degree of attainment of any pre-established performance goal; however, with
respect to Awards which are intended to qualify for the "performance-based"
compensation exception to Section 162(m) of the Code, the Compensation Committee
may adjust the degree of attainment of such performance goals upward but not
downward.
When shares of restricted stock vest, they are delivered to the participant
free of restrictions. Upon termination of employment or a period of service, a
participant's shares of restricted stock will vest or be forfeited in accordance
with the terms of the participant's restricted stock award agreement. Shares of
restricted stock subject to performance goals will be forfeited to the extent
such performance goals are not met. However, the Compensation Committee may, in
its discretion, accelerate the vesting, or waive any forfeitures, of restricted
stock Awards not intended to qualify for the "performance-based" compensation
exception to Section 162(m) of the Code.
PERFORMANCE UNITS, PERFORMANCE SHARES AND CASH-BASED AWARDS
Performance units, performance shares or cash-based Awards granted to a
participant are amounts credited to a bookkeeping account established for the
participant. A performance unit has an initial value that is established by the
Compensation Committee at the time of its grant. A performance share has an
initial value equal to the fair market value of a share of Common Stock on the
date of grant. Each cash-based Award has a value that is established by the
Compensation Committee at the time of its grant. The number of performance
units, performance shares and cash-based Awards granted to a participant will be
determined by the Compensation Committee, but the maximum aggregate payout with
respect to performance share Awards, performance unit Awards or cash-based
Awards granted to a participant in any one fiscal year of the Company may not
exceed the value of 150,000 shares of Common Stock at the beginning of the
applicable performance period.
Whether a performance unit, performance share or cash-based Award actually
will result in a payment to a participant will depend upon the extent to which
performance goals established by the Compensation Committee are satisfied. The
applicable performance goals will be determined by the Compensation Committee
using the same performance criteria as are discussed above with respect to
restricted stock.
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The Compensation Committee may, in its discretion, waive any performance goal
requirements relating to Awards not intended to qualify as "performance-based"
compensation under Section 162(m) of the Code.
After a performance unit, performance share or cash-based Award has vested
(that is, after the applicable performance goals or goal have been achieved),
the participant will be entitled to receive a payout of cash, Common Stock or a
combination thereof, as determined by the Compensation Committee.
TRANSFERABILITY AND CERTAIN OTHER TERMS OF AWARDS
Options, SARs, unvested restricted stock, performance shares, performance
units and cash-based Awards granted under the Plan may not be sold, transferred,
pledged, assigned, or otherwise alienated or hypothecated, other than by will or
by the applicable laws of descent and distribution, unless permitted by the
Compensation Committee with respect to Awards other than ISOs or performance
shares, performance units or cash-based awards. However, a participant may
designate one or more beneficiaries to receive any exercisable or vested Awards
following his or her death.
The Compensation Committee may permit or require a participant to defer
until a later date delivery of shares or cash otherwise deliverable upon
exercise, vesting or payment of such participant's Award. The Compensation
Committee may also extend loans, on terms and conditions it establishes, to
participants in connection with the exercise or receipt of their Awards.
CHANGE-OF-CONTROL TRANSACTIONS
Upon the occurrence of a Change-of-Control Transaction (as defined in the
Plan), (i) all options and SARs granted under the Plan become fully exercisable,
(ii) any restrictions imposed on outstanding Awards of restricted stock will
lapse and (iii) the target payout opportunities attainable under all outstanding
performance-based restricted stock, performance units, performance shares and
cash-based Awards will be deemed to have been fully earned for the entire
performance period(s) as of or immediately prior to the effective date of the
Change-of-Control Transaction. The Plan also gives the Compensation Committee
discretion, in the event of a Change-of-Control Transaction, to substitute for
shares of Common Stock subject to options or SARs outstanding under the Plan
shares or other securities of the surviving or successor corporation, or another
corporate party to the transaction, with approximately the same value, or to
cash out outstanding options or SARs based upon the highest value of the
consideration received for the Common Stock in such transaction, or, if higher,
the highest fair market value of the Common Stock during the 30 business days
immediately prior to the closing or expiration date of the Change-of-Control
Transaction, reduced by the exercise price or grant price of the option or SAR
cashed out. The Compensation Committee may provide that any Award the payment of
which was deferred under the Plan shall be paid or distributed as of, or
promptly following, a Change-of-Control Transaction. The Compensation Committee
may also provide that any Awards subject to any such acceleration, payment,
adjustment or conversion cannot be exercised after, or will terminate as of, a
Change-of-Control Transaction. If a Change-of-Control Transaction disqualifies
an employee's ISOs from favorable "incentive stock option" tax treatment under
the Code or results in the imposition of certain additional taxes on such an
employee, the Compensation Committee has discretion to authorize the Company to
make a cash payment that would leave such an employee in the same after-tax
position that he or she would have been in had such disqualification not
occurred, or to otherwise equalize such employee for such taxes.
CHANGES IN CAPITAL
In order to prevent dilution or enlargement of rights intended to be made
available under the Plan or outstanding Awards, or as otherwise necessary, the
Compensation Committee will, in its discretion, make appropriate and equitable
adjustments in (a) the number, class and type of shares available under the
Plan, (b) the Plan's limits on the number of shares that can be subject to
Awards granted to a single participant
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during a single fiscal year, and (c) the number, class, type and price (as
applicable) of shares under each outstanding Award, in the event of changes in
the Company's outstanding Common Stock resulting from certain changes in the
Company's corporate capitalization or structure, such as the payment of a stock
dividend, a stock split, a recapitalization, reorganization, merger or
consolidation, a spin-off, liquidation or distribution of assets or the issuance
of warrants or rights or convertible securities with respect to the Common
Stock.
AMENDMENT AND TERMINATION OF THE PLAN
The Board of Directors may amend, alter, suspend or terminate the Plan.
However, the Board of Directors will be required to obtain approval of the
shareholders, if such approval is required by any applicable law (including
requirements relating to ISOs) or rule, of any amendment of the Plan that would:
(i) Except in the event of certain changes in capital of the Company (as
described above under "Changes in Capital"), increase the number of shares of
Common Stock that may be delivered under the Plan, or that may be subject to
Awards granted to a single participant during a single fiscal year;
(ii) decrease the minimum option exercise price, or SAR grant price, required by
the Plan; (iii) change the class of persons eligible to receive Awards under the
Plan; or (iv) extend the duration of the Plan or the exercise period of any
options or SARs granted under the Plan. The Compensation Committee may amend
outstanding Awards. However, unless otherwise required by law or specifically
provided for in the Plan, no such amendment or termination of the Plan or
amendment of outstanding Awards may materially impair the previously accrued
rights of any participant under the Plan without his or her written consent.
Additionally, the provisions of the Plan described above under
"Change-of-Control Transactions" may not be amended, terminated or modified on
or after the date of a Change-of-Control Transaction to affect materially
adversely any participant's outstanding Award, without any such participant's
consent.
The Plan will remain in effect until all shares of Common Stock available
under the Plan have been purchased or acquired, unless the Plan is terminated
earlier by the Board of Directors. However, no Awards may be granted under the
Plan on or after May 16, 2010.
TAX WITHHOLDING OBLIGATIONS
If any tax withholding obligations arise under applicable law with respect
to any Award granted to a participant under the Plan, the Plan requires the
participant to pay, or make other satisfactory arrangements to pay, in cash, any
such taxes at the time the income with respect to such Award is first includible
in the participant's taxable income. The Compensation Committee may permit a
participant to elect to satisfy all or a part of such tax obligations by
requesting that the Company withhold shares otherwise deliverable to such
participant under his or her Award and/or by tendering shares of Common Stock
already owned by such participant for at least six months. The Company may also,
in accordance with applicable law, deduct any such taxes from amounts that are
otherwise due to such a participant.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
The following is a brief summary of certain significant United States
Federal income tax consequences, under the Code, as in effect on the date of
this summary, applicable to the Company and Plan participants in connection with
Awards under the Plan. This summary is not intended to be exhaustive, and, among
other things, does not describe state, local or foreign tax consequences, or the
effect of gift, estate or inheritance taxes. References to "the Company" in this
summary of tax consequences mean Avis Group Holdings, Inc., or any affiliate of
Avis Group Holdings, Inc. that employs a Plan participant, as the case may be.
The grant of options under the Plan will not result in taxable income to a
participant who receives such an option or an income tax deduction for the
Company. However, the transfer of Common Stock to a
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participant upon exercise of his or her option may or may not give rise to
taxable income to the participant and a tax deduction for the Company, depending
upon whether such option is an ISO or NQSO.
The exercise of a NQSO by a participant generally results in immediate
recognition of taxable ordinary income by the participant and a corresponding
tax deduction for the Company in the amount by which the fair market value of
the shares of Common Stock purchased, on the date of such exercise, exceeds the
aggregate exercise price. Any appreciation or depreciation in the fair market
value of such shares after the date of such exercise will generally result in a
capital gain or loss to the participant at the time he or she disposes of such
shares.
In general, the exercise of an ISO by a participant is exempt from income
tax (although not from the alternative minimum tax) and does not result in a tax
deduction for the Company at any time unless the participant disposes of the
Common Stock purchased thereby within two years of the date such ISO was granted
or one year of the date of such exercise (known as a "disqualifying
disposition"). If these holding period requirements under the Code are
satisfied, and if the participant has been an employee of the Company at all
times from the date of grant of the ISO to the day three months before such
exercise (or twelve months in the case of termination of employment due to
disability), then such participant will recognize any gain or loss upon
disposition of such shares as capital gain or loss. However, if the participant
makes a disqualifying disposition of any such shares, he or she will generally
be obligated to report as taxable ordinary income for the year in which such
disposition occurs the excess, with certain adjustments, of the fair market
value of the shares disposed of, on the date the ISO was exercised, over the
exercise price paid for such shares. The Company would be entitled to a tax
deduction in the same amount so reported by such participant. Any additional
gain realized by such participant on such a disqualifying disposition of such
shares would be capital gain. If the total amount realized in a disqualifying
disposition is less than the exercise price of the ISO, the difference would be
a capital loss for the participant.
The granting of SARs does not produce taxable income to a participant who
receives a SAR or a tax deduction to the Company. Upon the exercise of a SAR,
the amount of any cash the participant receives and the fair market value as of
the exercise date of any Common Stock received are generally taxable to the
participant as ordinary income and deductible by the Company.
A participant will not recognize any taxable income upon the award of
restricted stock which is not transferable and is subject to a substantial risk
of forfeiture. Dividends paid with respect to restricted stock prior to the
lapse of restrictions applicable to such stock will be taxable as compensation
income to the participant. Generally, a participant will recognize taxable
ordinary income at the first time such stock becomes transferable or no longer
subject to a substantial risk of forfeiture, in an amount equal to the fair
market value of such shares of Common Stock on the date the restrictions lapse.
However, a participant may elect to recognize taxable ordinary income upon the
grant of restricted stock based on the fair market value of the shares of Common
Stock subject to such award on the date of such award. If a participant makes
such an election, dividends paid with respect to such restricted shares, if any,
will not be treated as compensation, but rather as dividend income, and the
participant will not recognize additional taxable income when the restrictions
applicable to such restricted stock lapse. Assuming compliance with the
applicable withholding requirements, the Company will be entitled to a tax
deduction equal to the amount of ordinary income recognized by a participant in
connection with his or her restricted stock award in the Company's taxable year
in which such participant recognizes such income.
The receipt of a performance unit, performance share or cash-based Award
will not generally result in the recognition of taxable income by a participant.
The payment of a performance unit, performance share or cash-based Award will
generally result in immediate recognition of taxable ordinary income by a
participant equal to the amount of any cash paid or the then-current fair market
value of the shares of Common Stock received (and a corresponding tax deduction
by the Company); however, to the extent that such Common Stock is not
transferable and subject to a substantial risk of forfeiture, the tax
consequences
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to the participant and the Company will be similar to the tax consequences of
restricted stock Awards, described above.
Under Section 162(m) of the Code, the Company may be limited as to Federal
income tax deductions to the extent that total annual compensation in excess of
$1 million is paid to any of the Company's Named Executive Officers. However,
certain "performance-based compensation" the material terms of which are
disclosed to and approved by the Company's stockholders is not subject to this
deduction limitation. The Plan has been structured with the intention that
compensation resulting from options and free-standing SARs granted under the
Plan will be qualified performance-based compensation and, assuming shareholder
approval of the Plan, deductible without regard to the limitations otherwise
imposed by Section 162(m) of the Code. The Plan allows the Compensation
Committee discretion to award tandem SARs, restricted stock, performance shares,
performance units and cash-based Awards that are intended to be qualified
performance-based compensation.
Under certain circumstances, accelerated vesting, exercise or payment of
Awards under the Plan in connection with a "change in control" of the Company
might be deemed an "excess parachute payment" for purposes of the golden
parachute payment provisions of Section 280G of the Code. To the extent it is so
considered, the participant holding such an Award would be subject to an excise
tax equal to 20 percent of the amount of the excess parachute payment, and the
Company would be denied a tax deduction for the excess parachute payment.
REASONS FOR ADOPTION OF THE PLAN
On June 30, 1999, the Company acquired the car leasing, vehicle management
and fuel card businesses of PHH, an acquisition which increased the Company's
revenues from approximately $2.5 billion to $4.1 billion on a pro forma basis.
In order to integrate these businesses successfully with the existing operations
of the Company, key employees of the former PHH businesses were awarded options
under the Company's 1997 Plan. Of the shares authorized for issuance pursuant to
the 1997 Plan, only 388,200 shares remained available for grant as of March 10,
2000. The Board of Directors believes that adoption of the Plan is necessary in
order for the Company to compete with other companies in attracting and
retaining the most experienced and able employees and consultants and in order
to motivate existing and future officers, employees and consultants of the
Company and its subsidiaries and affiliates to achieve the Company's goals.
Inasmuch as the Plan also provides for the granting of Awards which are
performance-based, the Board of Directors believes that the Plan aligns the
economic interests of the employees and consultants of the Company and its
subsidiaries and affiliates with those of the Company's stockholders.
Pursuant to applicable Delaware law, adoption of the Plan requires the
affirmative vote of the holders of a majority of the shares of Common Stock
present at the Meeting, in person or by proxy, and entitled to vote. The
Company's Named Executive Officers have an interest in this proposal.
THE BOARD OF DIRECTORS UNANIMOUSLY
RECOMMENDS THAT YOU VOTE FOR THIS PROPOSAL.
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STOCKHOLDER PROPOSALS
Proposals received from stockholders are given careful consideration by the
Company in accordance with Rule 14a-8 under the Exchange Act. Stockholder
proposals are eligible for consideration for inclusion in the proxy statement
and form of proxy for the Company's 2001 annual meeting of stockholders if they
are received by the Company on or before December 16, 2000. Any proposal should
be directed to the attention of the Secretary, Avis Group Holdings, Inc., 900
Old Country Road, Garden City, New York 11530. In order for a shareholder
proposal submitted outside of Rule 14a-8 to be considered "timely" within the
meaning of Rule 14a-4(c), such proposal must be received by the Company on or
prior to February 28, 2001.
FINANCIAL INFORMATION
The information required by Item 13(a) of Schedule 14A will be set forth in
the Company's Annual Report on Form 10-K for the fiscal year ended December 31,
1999, which information is incorporated herein by reference.
By Order of the Board of Directors
KAREN C. SCLAFANI
SECRETARY
Dated: April 14, 2000
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APPENDIX A
CERTIFICATE AMENDMENT
FOURTH: (a) AUTHORIZED CAPITAL STOCK. The total number of shares of capital
stock which the Corporation shall have authority to issue is 135,000,000 shares
of capital stock, consisting of (i) 100,000,000 shares of Class A Common Stock,
par value $.01 per share (the "Class A Common Stock"), (ii) 15,000,000 shares of
Class B Common Stock, par value $.01 per share (the "Class B Common Stock") and
(iii) 20,000,000 shares of preferred stock, par value $.01 per share (the
Preferred Stock"). The Class A Common Stock and Class B Common Stock are
sometimes collectively referred to herein as the "Common Stock". Notwithstanding
the foregoing, no shares of Class B Common Stock may be issued except upon, and
all authorized shares of Class B Common Stock shall be reserved for issuance
upon, the conversion, pursuant to the terms of their respective Certificate of
Designation or the Stockholders Agreement, dated as of June 30, 1999, by and
among the Corporation, Fleet (as hereinafter defined) and PHH Corporation, of
shares of the Series A Cumulative Participating Redeemable Convertible Preferred
Stock (the "Fleet Series A Preferred") of Avis Fleet Leasing and Management
Corporation ("Fleet") and/or the Series B Cumulative PIK Preferred Stock of
Fleet (the "Fleet Series B Preferred" and together with the Fleet Series A
Preferred, the "Fleet Preferred"), as the case may be, being converted. In
addition, any share of Class B Common Stock redeemed, purchased or otherwise
acquired by the Corporation may not be reissued as a share of Class B Common
Stock.
(b) COMMON STOCK. The powers, preferences and rights, and the
qualifications, limitations and restrictions of the Common Stock are as follows:
(1) RANKING. Except as otherwise expressly provided in this Amended and
Restated Certificate of Incorporation, the powers, preferences and rights of
each share of Common Stock, and the qualifications, limitations and
restrictions thereof, shall be in all respects identical. In this regard,
all stock splits, stock combinations and/or other reclassifications shall
apply PARI PASSU to the issued and outstanding shares of Class A Common
Stock and the issued and outstanding shares of Class B Common Stock.
(2) VOTING. (A) Class A Common Stock. Except as otherwise expressly
required by law or provided in this Amended and Restated Certificate of
Incorporation, each outstanding share of Class A Common Stock shall be
entitled to vote on each matter on which the stockholders of the Corporation
shall be entitled to vote, and each holder of Class A Common Stock shall be
entitled to one vote for each share of such stock held by such holder.
(B) CLASS B COMMON STOCK. Except as otherwise required by law (in
which case, holders of Class B Common Stock shall vote (at the rate of
one vote for each share of such stock held) as a single class unless
otherwise required by law), each outstanding share of Class B Common
Stock shall not entitle the holder thereof to vote on any matter on which
the stockholders of the Corporation shall be entitled to vote, and shares
of Class B Common Stock shall not be included in determining the number
of shares voting or entitled to vote on any such matters.
(C) NO CUMULATIVE VOTING. The holders of shares of Common Stock shall
not have cumulative voting rights.
(3) CONVERSION. (A) OPTIONAL CONVERSION. Each share of Class B Common
Stock beneficially owned by a Cendant Affiliate (as defined herein) may be
converted at the option of the holder thereof into one share of validly
issued, fully paid and non-assessable share of Class A Common Stock at any
time and from time to time (i) if at the time of such reclassification and
conversion, and after giving effect thereto, the aggregate number of the
issued and outstanding shares of Class A Common Stock beneficially owned by
all Cendant Affiliates does not exceed 20% of the aggregate number of all
issued and outstanding shares of Class A Common Stock or (ii) upon or after
the occurrence of (1) a
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bankruptcy or insolvency of the Corporation and/or (2) a Change of Control
(as defined herein). Any conversion of shares of Class B Common Stock into
shares of Class A Common Stock pursuant to this clause (3)(A) shall be
effected by the delivery to the Corporation at its principal executive
office of the certificates representing shares to be converted, duly
endorsed, together with written instructions that the shares are to be
converted pursuant to this clause (3)(A) (and identifying the basis for such
conversion) and accompanied, in the case of a conversion pursuant to
clause (i) above, by a statement setting forth the aggregate number of
shares of Class A Common Stock held by all Cendant Affiliates as of the date
of such delivery. The issuance of a certificate or certificates for shares
of the Class A Common Stock upon conversion of shares of the Class B Common
Stock shall be made without charge for any stamp or other similar tax in
respect of such issuance. For purposes of this clause (3)(A), (i) "Cendant
Affiliate" shall mean Cendant and each Affiliate of Cendant (other than the
Corporation or any subsidiary of the Corporation); (ii) "Cendant" shall mean
Cendant Corporation and any successor thereto by merger, consolidation,
transfer of all or substantially all of its assets or otherwise;
(iii) "Affiliate" shall mean, with respect to any person, company,
corporation or entity (herein, a "Person"), any other Person directly or
indirectly controlling, controlled by, or under common control with such
first Person; and (iv) "Change of Control" shall mean a transaction or
series of related transactions by which (a) any "person" or "group" (as such
terms are used in Sections 13(d) and 14(d) of the Securities Exchange Act of
1934, as amended (the "Exchange Act")) other than a Cendant Affiliate, is or
becomes the "beneficial owner" (as defined in Rules 13d-3 and 13d-5 under
the Exchange Act) of more than (1) 25% of the total voting power of all of
the voting stock of the Corporation then outstanding at any time Cendant
controls 25% or more of such voting power and (2) 20% of the total voting
power of all voting stock of the Corporation at any time Cendant controls
less than 25% of such voting power (the "Relevant Percentage") except in
each case to the extent such person or group becomes such beneficial owner
solely as a result of transfers by Cendant Affiliates of shares of Common
Stock and/or Fleet Preferred; (b)(1) another corporation merges into the
Corporation or the Corporation consolidates with or merges into any other
corporation or (2) the Corporation conveys, transfers or leases all or
substantially all of its assets to any person or group, in one transaction
or a series of related transactions other than any conveyance, transfer or
lease between the Corporation and a wholly-owned subsidiary of the
Corporation, with the effect that a person or group, other than a person or
group which is the beneficial owner of more than the Relevant Percentage of
the total voting power of all voting stock of the Corporation immediately
prior to such transaction, becomes the beneficial owner of more than the
Relevant Percentage of the total voting power of all voting stock of the
surviving or transferee corporation of such transaction or series; or
(c) during any period of two consecutive years, individuals who at the
beginning of such period constituted the Board of Directors (together with
any new directors whose election by the Board of Directors, or whose
nomination for election by the Corporation's shareholders, was approved by a
vote of a majority of the Directors of the Corporation then still in office
who were either Directors of the Corporation at the beginning of such period
or whose election or nomination for election was previously so approved)
cease for any reason to constitute a majority of the Directors of the
Corporation then in office.
(B) AUTOMATIC CONVERSION. Upon the transfer, sale or disposition for
value of the beneficial ownership of any shares of Class B Common Stock
to any person other than to a Cendant Affiliate, each such share of
Class B Common Stock shall be reclassified as and converted
automatically, without any action on the part of the holder thereof, into
one validly issued, fully paid and non-assessable share of Class A Common
Stock, without any action by the holder thereof and shall be converted
without charge for any stamp or other similar tax in respect of such
conversion.
(4) RESERVATION. The Corporation shall at all times reserve and keep
available out of its authorized but unissued Class A Common Stock, solely
for the purpose of effecting conversions of Class B Common Stock into shares
of Class A Common Stock pursuant to clause (b)(3) of this Article Fourth,
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the full number of shares of Class A Common Stock from time to time issuable
upon the conversion of all shares of Class B Common Stock then outstanding
and shall take all such action and obtain all such permits or orders as may
be necessary to enable the Corporation lawfully to issue such shares upon
any such conversion.
(5) DIVIDENDS; STOCK SPLITS. Subject to the rights of the holders of
Preferred Stock, and subject to any other provisions of this Amended and
Restated Certificate of Incorporation, as it may be amended from time to
time, holders of shares of Common Stock shall be entitled to receive such
dividends and other distributions in cash, stock or property of the
Corporation when, as and if declared thereon by the Board of Directors from
time to time out of assets or funds of the Corporation legally available
therefor.
(6) LIQUIDATION, DISSOLUTION, ETC. In the event of any liquidation,
dissolution or winding up (either voluntary or involuntary) of the
Corporation, the holders of shares of Common Stock shall be entitled to
receive the assets and funds of the Corporation available for distribution
after payments to creditors and to the holders of any Preferred Stock of the
Corporation that may at the time be outstanding, in proportion to the number
of shares held by them, respectively, without regard to class.
(7) MERGER, ETC. In the event of a merger or consolidation of the
Corporation with or into another entity (whether or not the Corporation is
the surviving entity), the holders of each share of Common Stock shall be
entitled to receive the same per share consideration on a per share basis.
(8) NO PREEMPTIVE OR SUBSCRIPTION RIGHTS. No holder of shares of Common
Stock shall be entitled to preemptive or subscription rights.
(9) POWER TO SELL AND PURCHASE SHARES. Subject to the requirements of
applicable law and the terms of this Amended and Restated Certificate of
Incorporation, the Corporation shall have the power to issue and sell all or
any part of any shares of any class of stock herein or hereafter authorized
(other than shares of Class B Common Stock) to such persons, and for such
consideration, as the Board of Directors shall from time to time, in its
discretion, determine, whether or not greater consideration could be
received upon the issue or sale of the same number of shares of another
class, and as otherwise permitted by law. Subject to the requirements of
applicable law, the Corporation shall have the power to purchase any shares
of any class of stock herein or hereafter authorized from such persons, and
for such consideration, as the Board of Directors shall from time to time,
in its discretion, determine, whether or not less consideration could be
paid upon the purchase of the same number of shares of another class, and as
otherwise permitted by law.
(10) AMENDMENTS TO CLASS OF COMMON STOCK. The consent of a majority of
the holders of either Class A or Class B Common Stock, as the case may be
(the "Affected Stock"), at the time outstanding, in the case of any
amendment, alteration or repeal of any of the provisions of these Articles
of Incorporation, as amended, so as to affect adversely any right,
preference, privilege or power of such Affected Stock given in person or by
proxy, either in writing or at a special meeting called for the purpose of
approving such amendment, alteration or repeal, at which the Affected Stock
shall vote separately as a class (unless the consent of the holders of a
larger amount of such Affected Stock is then required by law) shall be
necessary to effect or validate any such adverse amendment, alteration or
repeal.
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APPENDIX B
AVIS GROUP HOLDINGS, INC.
2000 INCENTIVE COMPENSATION PLAN
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CONTENTS
<TABLE>
<CAPTION>
<S> <C> <C>
Article 1. Establishment, Purposes, and Duration....................... 1
Article 2. Definitions................................................. 1
Article 3. Administration.............................................. 5
Article 4. Shares Subject to the Plan and Maximum Awards............... 7
Article 5. Eligibility and Participation............................... 9
Article 6. Stock Options............................................... 9
Article 7. Stock Appreciation Rights................................... 12
Article 8. Restricted Stock............................................ 14
Performance Units, Performance Shares, and Cash-Based
Article 9. Awards...................................................... 16
Article 10. Performance Criteria........................................ 18
Article 11. Beneficiary Designation..................................... 19
Article 12. Deferrals................................................... 20
Article 13. No Implied Rights of Employees and Consultants.............. 20
Article 14. Change-of-Control Transactions.............................. 20
Article 15. Amendment, Modification, and Termination.................... 23
Article 16. Tax Withholding............................................. 24
Article 17. Limits of Liability; Indemnification........................ 25
Article 18. Successors.................................................. 26
Article 19. Miscellaneous............................................... 26
</TABLE>
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AVIS GROUP HOLDINGS, INC.
2000 INCENTIVE COMPENSATION PLAN
ARTICLE 1. ESTABLISHMENT, PURPOSES, AND DURATION
1.1. ESTABLISHMENT OF THE PLAN. Avis Group Holdings, Inc., a Delaware
corporation (hereinafter referred to as the "Company"), hereby establishes this
incentive compensation plan to be known as the "Avis Group Holdings, Inc. 2000
Incentive Compensation Plan" (hereinafter referred to as the "Plan"), as set
forth in this document. The Plan permits the grant of Nonqualified Stock
Options, Incentive Stock Options, Stock Appreciation Rights, Restricted Stock,
Performance Shares, Performance Units, and Cash-Based Awards. Following adoption
of the Plan by the Board of Directors, the Plan shall become effective as of the
date (the "Effective Date") on which it is approved by the holders of a majority
of the Company's outstanding Shares which is present and voted at a meeting held
within the period ending twelve (12) months after the date the Plan is adopted
by the Board. The Plan shall remain in effect as provided in Section 1.3.
1.2. PURPOSES OF THE PLAN. The purposes of the Plan are to provide
additional incentives to those officers, key employees and independent
contractors of the Company and its eligible subsidiaries and affiliates whose
substantial contributions are essential to the continued growth and success of
the business of the Company and such subsidiaries and affiliates in order to
strengthen their commitment to the Company and such subsidiaries and affiliates,
and to attract and retain competent and dedicated individuals whose efforts will
result in the long-term growth and profitability of the Company and to further
align the interests of such officers, key employees and independent contractors
with the interests of the stockholders of the Company. To accomplish such
purposes, the Plan provides that the Company may grant Nonqualified Stock
Options, Incentive Stock Options, Stock Appreciation Rights, Restricted Stock,
Performance Shares, Performance Units, and Cash-Based Awards.
1.3. DURATION OF THE PLAN. The Plan shall commence on the Effective Date,
as described in Section 1.1, and shall remain in effect, subject to the right of
the Board of Directors to amend or terminate the Plan at any time pursuant to
Article 15, until all Shares subject to it shall have been purchased or acquired
according to the Plan's provisions. However, in no event may an Award be granted
under the Plan on or after ten years from the Effective Date.
ARTICLE 2. DEFINITIONS
Whenever used in the Plan, the following terms shall have the meanings set
forth below, and when the meaning is intended, the initial letter of the word
shall be capitalized:
2.1. "AFFILIATE" means, other than the Company, (i) any corporation or
limited liability company in an unbroken chain of corporations or limited
liability companies ending with the Company if each corporation or limited
liability company owns stock or membership interests (as applicable)
possessing more than fifty percent (50%) of the total combined voting power
of all classes of stock in one of the other corporations or limited
liability companies in such chain; (ii) any corporation, trade or business
(including, without limitation, a partnership or limited liability company)
which is more than fifty percent (50%) controlled (whether by ownership of
stock, assets or an equivalent ownership interest or voting interest) by the
Company or one of its Affiliates; or (iii) any other entity, approved by the
Committee as an Affiliate under the Plan, in which the Company or any of its
Affiliates has a material equity interest.
2.2. "AWARD" means, individually or collectively, a grant under this
Plan of Nonqualified Stock Options, Incentive Stock Options, Stock
Appreciation Rights, Restricted Stock, Performance Shares, Performance
Units, or Cash-Based Awards.
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2.3. "AWARD AGREEMENT" means an agreement entered into by the Company
and a Participant setting forth the terms and provisions applicable to
Awards granted to such Participant under the Plan.
2.4. "BOARD" or "BOARD OF DIRECTORS" means the Board of Directors of
the Company.
2.5. "CASH-BASED AWARD" means an Award granted to a Participant, as
described in Article 9.
2.6. "CHANGE-OF-CONTROL TRANSACTION" means any transaction or series of
transactions pursuant to or as a result of which (i) during any period of
not more than 24 months, individuals who at the beginning of such period
constitute the Board, and any new director (other than a director designated
by a third party who has entered into an agreement to effect a transaction
described in clause (ii), (iii) or (iv) of this Section 2.6) whose election
by the Board or nomination for election by the Company's stockholders was
approved by a vote of at least a majority of the directors then still in
office who either were directors at the beginning of the period or whose
election or nomination for election was previously so approved (other than
approval given in connection with an actual or threatened proxy or election
contest), cease for any reason to constitute at least a majority of the
members of the Board; (ii) beneficial ownership of 50% or more of the Shares
(or other securities having generally the right to vote for election of the
Board) of the Company shall be sold, assigned or otherwise transferred,
directly or indirectly, other than pursuant to a public offering, to a third
party, whether by sale or issuance of Shares or other securities or
otherwise; (iii) the Company or any Subsidiary shall sell, assign or
otherwise transfer, directly or indirectly, assets (including stock or other
securities of Subsidiaries) having a fair market or book value or earning
power of 50% or more of the assets or earning power of the Company and its
Subsidiaries (taken as a whole) to any third party, other than the Company
or a wholly-owned Subsidiary thereof; or (iv) control of 50% or more of the
business of the Company shall be sold, assigned or otherwise transferred
directly or indirectly to any third party.
2.7. "CODE" means the Internal Revenue Code of 1986, as it may be
amended from time to time, including regulations and rules promulgated
thereunder and successor provisions and regulations and rules thereto.
2.8. "COMMITTEE" means the Compensation Committee of the Board of
Directors, or such other committee appointed by the Board to administer the
Plan and to perform the functions set forth herein.
2.9. "CONSULTANT" means an independent contractor who performs services
for the Company or a Subsidiary or Affiliate in a capacity other than as an
Employee or director.
2.10. "COVERED EMPLOYEE" means a Participant who, as of the date of
vesting, exercise and/or payment of an Award, as applicable, is one of the
group of "covered employees," as defined in Code Section 162(m), or any
successor statute, and the regulations promulgated thereunder.
2.11. "DISABILITY" means the inability, due to illness or injury, to
engage in any gainful occupation to which the individual is suited by
education, training or experience, which condition continues for at least
six (6) months; PROVIDED, HOWEVER, that, for purposes of ISOs, "Disability"
shall mean "permanent and total disability" as set forth in
Section 22(e)(3) of the Code.
2.12. "EFFECTIVE DATE" shall have the meaning ascribed to such term in
Section 1.1.
2.13. "EMPLOYEE" means any officer or other employee of the Company, a
Subsidiary and/or an Affiliate. Directors of the Company who are employed by
the Company or a Subsidiary or Affiliate shall be considered Employees under
the Plan.
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2.14. "EXCHANGE ACT" means the Securities Exchange Act of 1934, as it
may be amended from time to time, including the regulations and rules
promulgated thereunder and successor provisions and regulations and rules
thereto.
2.15. "FAIR MARKET VALUE" means the fair market value of the Shares as
determined by the Board in its sole discretion by such reasonable valuation
method as the Committee shall, in its discretion, select and apply in good
faith as of a given date; PROVIDED, HOWEVER, that for purposes of
Section 6.3 and 6.11(c), such fair market value shall be determined subject
to Section 422(c)(7) of the Code; PROVIDED FURTHER, HOWEVER, that (A) if the
Shares are admitted to trading on a national securities exchange, Fair
Market Value on any date shall be the last sale price reported for the
Shares on such exchange on such date or on the last date preceding such date
on which a sale was reported, (B) if the Shares are admitted to quotation on
the National Association of Securities Dealers Automated Quotation System
("NASDAQ") or other comparable quotation system and have been designated as
a National Market System ("NMS") security, Fair Market Value on any date
shall be the last sale price reported for the Shares on such system on such
date or on the last day preceding such date on which a sale was reported, or
(C) if the Shares are admitted to quotation on NASDAQ and have not been
designated as a NMS security, Fair Market Value on any date shall be the
average of the highest bid and lowest asked prices of the Shares on such
system on such date.
2.16. "FISCAL YEAR" means the calendar year, or such other consecutive
twelve-month period as the Board may select.
2.17. "FREESTANDING SAR" means an SAR that is granted independently of
any Options, as described in Article 7.
2.18. "INCENTIVE STOCK OPTION" or "ISO" means a right to purchase
Shares under the Plan in accordance with the terms and conditions set forth
in Article 6 and which is designated as an Incentive Stock Option and which
is intended to meet the requirements of Code Section 422.
2.19. "NONQUALIFIED STOCK OPTION" or "NQSO" means a right to purchase
Shares under the Plan in accordance with the terms and conditions set forth
in Article 6 and which is not intended to meet the requirements of Code
Section 422.
2.20. "OPTION" or "STOCK OPTION" means an Incentive Stock Option or a
Nonqualified Stock Option, as described in Article 6.
2.21. "OPTION PRICE" means the price at which a Share may be purchased
by a Participant pursuant to an Option.
2.22. "PARTICIPANT" means any Employee or Consultant who has received
an Award that is outstanding and has not expired, terminated or been
exercised, as applicable.
2.23. "PERFORMANCE-BASED EXCEPTION" means the exception for qualified
performance-based compensation from the tax deductibility limitations of
Section 162(m) of the Code, or any successor statute, and the regulations
promulgated thereunder.
2.24. "PERFORMANCE PERIOD" has the meaning given such term in
Section 9.2.
2.25. "PERFORMANCE SHARE" means an Award of a performance share granted
to a Participant, as described in Article 9.
2.26. "PERFORMANCE UNIT" means an Award of a performance unit granted
to a Participant, as described in Article 9.
2.27. "PERIOD OF RESTRICTION" means the period during which the
transfer of Shares of Restricted Stock is limited in some way, and such
Shares are subject to a substantial risk of forfeiture, as provided in
Article 8.
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2.28. "RESTRICTED STOCK" means an Award granted to a Participant
pursuant to Article 8.
2.29. "RETIREMENT" means either (a) retirement in accordance with any
employee benefit plan maintained by the Company that is intended to satisfy
the requirements of Code Section 401(a) entitling a participant in such plan
to a full pension or (b) retirement with the consent of the Board.
2.30. "SECURITIES ACT" means the Securities Act of 1933, as it may be
amended from time to time, including the regulations and rules promulgated
thereunder and successor provisions and regulations and rules thereto.
2.31. "SHARES" means the common stock, par value $.01 per share, of the
Company (including any new, additional or different stock or securities
resulting from any change in corporate capitalization as listed in
Section 4.3).
2.32. "STOCK APPRECIATION RIGHT" or "SAR" means an Award, granted alone
(a Freestanding SAR) or in connection with a related Option (a Tandem SAR),
designated as an SAR, pursuant to the terms of Article 7.
2.33. "SUBSIDIARY" means any present or future corporation which is or
would be a "subsidiary corporation" of the Company as the term is defined in
Section 424(f) of the Code.
2.34. "TANDEM SAR" means a SAR that is granted in connection with a
related Option pursuant to Article 7.
ARTICLE 3. ADMINISTRATION
3.1. GENERAL. The Committee shall have exclusive authority to operate,
manage and administer the Plan in accordance with its terms and conditions.
Notwithstanding the foregoing, in its absolute discretion, the Board may at any
time and from time to time exercise any and all rights, duties and
responsibilities of the Committee under the Plan, including, but not limited to,
establishing procedures to be followed by the Committee, but excluding matters
which under any applicable law, regulation or rule, including, without
limitation, any exemptive rule under Section 16 of the Exchange Act (including
Rule 16b-3, or any successor rule, as the same may be amended from time to time)
or Section 162(m) of the Code, are required to be determined in the sole
discretion of the Committee. If and to the extent that no Committee exists which
has the authority to administer the Plan, the functions of the Committee shall
be exercised by the Board.
3.2. COMMITTEE. The members of the Committee shall be appointed from time
to time by, and shall serve at the discretion of, the Board of Directors. The
Committee shall consist of not less than two members of the Board. Appointment
of Committee members shall be effective upon their acceptance of such
appointment. Committee members may be removed by the Board at any time either
with or without cause, and such members may resign at any time by delivering
notice thereof to the Board. Any vacancy on the Committee, whether due to action
of the Board or any other reason, shall be filled by the Board. The Committee
shall keep minutes of its meetings. A majority of the Committee shall constitute
a quorum and a majority of a quorum may authorize any action. Any decision
reduced to writing and signed by a majority of the members of the Committee
shall be fully effective as if it has been made at a meeting duly held.
3.3. AUTHORITY OF THE COMMITTEE. Except as limited by law or by the
Certificate of Incorporation or By-Laws of the Company, and subject to the
provisions herein, the Committee shall have full power, in accordance with the
other terms and provisions of the Plan, to: select Employees and Consultants who
may receive Awards under the Plan and become Participants; determine eligibility
for participation in the Plan; determine the sizes and types of Awards;
determine the terms and conditions of Awards, including, without limitation, the
Option Prices of Options and the grant prices of SARs; construe and interpret
the Plan and any agreement or instrument entered into under the Plan, including,
without limitation, any Award Agreement; make all determinations concerning
termination of any Participant's employment or service
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with the Company or a Subsidiary or Affiliate, including, without limitation,
whether such termination occurs by reason of Disability or Retirement or in
connection with a Change-of-Control Transaction; establish and administer any
terms, conditions, performance criteria, performance goals, restrictions,
limitations, forfeiture, vesting or exercise schedule, and other provisions of
or relating to any Award; construe any ambiguous provision of the Plan and/or
the Award Agreements; correct any errors, supply any omissions or reconcile any
inconsistencies in the Plan and/or any Award Agreement or any other instrument
relating to any Awards; establish, amend or waive rules, regulations or
procedures for the Plan's operation or administration; grant waivers of terms,
conditions, restrictions and limitations under the Plan or applicable to any
Award, or accelerate the vesting or exercisability of any Award; (subject to the
provisions of Article 15) amend the terms and conditions of any outstanding
Award; offer to buy out an Award previously granted, based on such terms and
conditions as the Committee shall establish with and communicate to the
Participant at the time such offer is made; and permit the transfer of an Option
or SAR or the exercise of an Option or SAR by one other than the Participant who
received the grant of such Option or SAR (other than any such a transfer or
exercise which would cause any ISO to fail to qualify as an "incentive stock
option" under Section 422 of the Code). Further, the Committee shall exercise
all such powers, perform all such acts and make all other determinations that
may be necessary or advisable for the administration of the Plan.
3.4. AWARD AGREEMENTS. Each Award shall be evidenced by an Award
Agreement, which shall be executed by the Company and the Participant to whom
such Award has been granted, unless the Award Agreement provides otherwise; two
or more Awards granted to a single Participant may, however, be combined in a
single Award Agreement. An Award Agreement shall not be a precondition to the
granting of an Award; no person shall have any rights under any Award, however,
unless and until the Participant to whom the Award shall have been granted
(i) shall have executed and delivered to the Company an Award Agreement or other
instrument evidencing the Award, unless such Award Agreement provides otherwise,
and (ii) has otherwise complied with the applicable terms and conditions of the
Award. The Committee shall prescribe the form of all Award Agreements, and,
subject to the terms and conditions of the Plan, shall determine the content of
all Award Agreements. Any Award Agreement may be supplemented or amended in
writing from time to time as approved by the Committee; PROVIDED that the terms
and conditions of any such Award Agreement as supplemented or amended are not
inconsistent with the provisions of the Plan.
3.5. DECISIONS BINDING. All determinations, decisions and actions made by
the Committee pursuant to the provisions of the Plan and all related orders and
resolutions of the Committee shall be final, conclusive and binding on all
persons, including the Company and its stockholders, any Subsidiary or
Affiliate, and all Employees, Consultants and Participants, and their estates
and beneficiaries.
3.6. DELEGATION OF ADMINISTRATION. Except to the extent prohibited by
applicable law, including, without limitation, the requirements applicable under
Section 162(m) of the Code to any Award intended to qualify for the
Performance-Based Exception or the requirements for any Award granted to an
officer or director to be covered by any exemptive rule under Section 16 of the
Exchange Act (including Rule 16b-3, or any successor rule, as the same may be
amended from time to time), or the applicable rules of a stock exchange, the
Committee may, in its discretion, allocate all or any portion of its
responsibilities and powers under this Article 3 to any one or more of its
members and/or delegate all or any part of its responsibilities and powers under
this Article 3 to any person or persons selected by it; PROVIDED, HOWEVER, that
the Committee may not delegate its authority to correct errors, omissions or
inconsistencies in the Plan. Any such authority delegated or allocated by the
Committee under this Section 3.6 shall be exercised in accordance with the terms
and conditions of the Plan and any rules, regulations or administrative
guidelines that may from time to time be established by the Committee, and any
such allocation or delegation may be revoked by the Committee at any time.
3.7. SUBSTITUTE AWARDS. In the event that a transaction described in
Section 424(a) of the Code involving the Company or an Affiliate is consummated,
such as the acquisition of property or stock from an
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unrelated corporation, or a merger or consolidation, individuals who become
eligible to participate in the Plan in connection with such transaction, as
determined by the Committee, may be granted Awards in substitution for stock
options or stock or stock-based awards granted by another corporation that is a
party to such transaction. The Committee shall determine, in its discretion and
consistent with Section 424(a) of the Code, if applicable, and the terms of the
Plan, though notwithstanding Section 6.3, the Option Price, if applicable, and
other terms and conditions of such substitute Awards.
3.8. FOREIGN PARTICIPANTS. The Committee shall have the authority to adopt
such procedures and subplans and grant Options or other Awards on such terms and
conditions as the Committee determines necessary or appropriate to permit
participation in the Plan by individuals otherwise eligible to so participate
who are foreign nationals or employed outside of the United States, or otherwise
to conform to applicable requirements or practices of jurisdictions outside of
the United States.
ARTICLE 4. SHARES SUBJECT TO THE PLAN AND MAXIMUM AWARDS
4.1. NUMBER OF SHARES AVAILABLE FOR GRANTS. The shares of stock subject to
Awards granted under the Plan shall be Shares. Such Shares subject to the Plan
may be either authorized and unissued shares (which will not be subject to
preemptive rights) or previously issued shares acquired by the Company or any
Subsidiary. Subject to adjustment as provided in Section 4.3, the number of
Shares hereby reserved for issuance to Participants under the Plan shall be one
million five hundred thousand (1,500,000) Shares, no more than three hundred
thousand (300,000) Shares of which may be granted in the form of Restricted
Stock Awards. The Committee shall determine the appropriate methodology for
calculating the number of Shares issued pursuant to the Plan; PROVIDED, HOWEVER,
that (a) any Shares subject to an Option which for any reason expires or is
terminated or canceled without having been fully exercised, and any Shares that
are subject to any Restricted Stock Award or other Award granted under the Plan
which are forfeited prior to the payment of any dividends thereon, may again be
granted pursuant to an Award, subject to the limitations of this Article 4;
(b) if the Option Price of an Option granted under the Plan is paid by tendering
to the Company Shares already owned by the holder of such Option, only the
number of Shares issued net of the Shares so tendered shall be deemed issued for
purposes of determining the total number of Shares that may be issued under the
Plan; and (c) any Shares delivered under the Plan in assumption or substitution
of outstanding, or obligations to grant future, stock options, stock or
stock-based awards under plans or arrangements of an entity other than the
Company or an Affiliate in connection with the Company or an Affiliate acquiring
such other entity, or an interest in such an entity, or a transaction otherwise
described in Section 3.7, shall not reduce the maximum number of Shares
available for delivery under the Plan; PROVIDED FURTHER, HOWEVER, that the total
number of Shares that may be issued pursuant to Incentive Stock Options shall be
1,500,000 Shares without application of clause (b) of this sentence.
4.2. MAXIMUM AWARDS. The following rules shall apply to grants of all
Awards under the Plan:
(a) OPTIONS: The maximum aggregate number of Shares that may be
subject to Options, pursuant to any Awards granted in any one Fiscal Year to
any one Participant shall be two hundred fifty thousand (250,000) Shares.
(b) SARS: The maximum aggregate number of Shares that may be subject
to Stock Appreciation Rights, pursuant to any Awards granted in any one
Fiscal Year to any one Participant shall be one hundred fifty thousand
(150,000) Shares. Any Shares covered by Options which include Tandem SARs
granted to one Participant in any Fiscal Year shall reduce this limit on the
number of Shares subject to SARs that can be granted to such Participant in
such Fiscal Year.
(c) RESTRICTED STOCK: The maximum aggregate number of Shares that may
be subject to Awards of Restricted Stock granted in any one Fiscal Year to
any one Participant shall be one hundred thousand (100,000) Shares.
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(d) PERFORMANCE SHARES, PERFORMANCE UNITS AND CASH-BASED AWARDS: The
maximum aggregate payment with respect to Cash-Based Awards or Awards of
Performance Shares or Performance Units granted in any one Fiscal Year to
any one Participant shall be equal to the value of one hundred fifty
thousand (150,000) Shares (determined using the equivalent Fair Market Value
as of the beginning of the applicable Performance Period of the Shares
covered by such Award).
To the extent required by Section 162(m) of the Code, Shares subject to Options
or SARs which are canceled shall continue to be counted against the limits set
forth in paragraphs (a) and (b) immediately preceding, and if, after the grant
of an Option or SAR, the price of Shares subject to such Option or SAR is
reduced and the transaction is treated as a cancellation of the Option or SAR
and a grant of a new Option or SAR, both the Option or SAR, as the case may be,
deemed to be canceled and the Option or SAR deemed to be granted shall be
counted against such limits set forth in paragraphs (a) and (b) immediately
preceding.
4.3. ADJUSTMENTS IN AUTHORIZED SHARES. Upon any changes in the outstanding
Shares by reason of a change in corporate capitalization, such as an increase,
reduction, or change or exchange of Shares for a different number or kind of
shares or other securities of the Company by reason of a reclassification,
recapitalization, merger, consolidation, reorganization (whether or not such
reorganization comes within the definition of such term in Code Section 368),
issuance of warrants or rights, dividend or other distribution (whether in the
form of cash, stock or other property), stock split or reverse stock split,
spin-off, combination or exchange of shares, repurchase of shares, change in
corporate structure or any partial or complete liquidation of the Company, such
adjustment shall be made in the number, class and type of shares of stock which
may be delivered under Section 4.1, in the number, class and type, and/or price
(such as the Option Price of Options or the grant price of SARs) of shares
subject to outstanding Awards granted under the Plan, and in the Award limits
set forth in Section 4.2, as may be determined to be appropriate and equitable
by the Committee, in its sole discretion, to prevent dilution or enlargement of
rights intended to be made available under the Plan or any Award, or as
otherwise necessary to reflect any such change; PROVIDED, HOWEVER, that the
number of Shares subject to any Award shall always be a whole number.
4.4. NO LIMITATION ON CORPORATE ACTIONS. The existence of the Plan and any
Awards granted hereunder shall not affect in any way the right or power of the
Board or the stockholders of the Company to make or authorize any adjustment,
recapitalization, reorganization or other change in the Company's capital
structure or its business, any merger or consolidation of the Company or an
Affiliate, any issue of debt, preferred or prior preference stock ahead of or
affecting Shares, the authorization or issuance of additional Shares, the
dissolution or liquidation of the Company or its Affiliates, any sale or
transfer of all or part of its assets or business or any other corporate act or
proceeding.
ARTICLE 5. ELIGIBILITY AND PARTICIPATION
5.1. ELIGIBILITY. Employees and Consultants shall be eligible to become
Participants and receive Awards in accordance with the terms and conditions of
the Plan, subject to the limitations on granting of ISOs set forth in
Section 6.11(a). Directors of the Company or any Subsidiary or Affiliate who are
not also employees of the Company or any Subsidiary or Affiliate shall not be
eligible to participate in the Plan.
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5.2. ACTUAL PARTICIPATION. Subject to the provisions of the Plan, the
Committee may, from time to time, select Participants from all eligible
Employees and Consultants and shall determine the nature and amount of each
Award.
ARTICLE 6. STOCK OPTIONS
6.1. GRANT OF OPTIONS. Subject to the terms and provisions of the Plan,
Options may be granted to Participants in such number, and upon such terms, and
at any time and from time to time as shall be determined by the Committee.
6.2. AWARD AGREEMENT. Each Option grant shall be evidenced by an Award
Agreement that shall specify the Option Price, the duration of the Option, the
number of Shares to which the Option pertains, and such other provisions as the
Committee shall determine. The Award Agreement also shall specify whether the
Option is intended to be an ISO or an NQSO. To the extent that any Option does
not qualify as an Incentive Stock Option (whether because of its provisions or
the time or manner of its exercise or otherwise), such Option, or the portion
thereof which does not so qualify, shall constitute a separate Nonqualified
Stock Option.
6.3. OPTION PRICE. The Option Price for each Option shall be determined by
the Committee and set forth in the Award Agreement, PROVIDED that, subject to
Sections 3.7 and 6.11(c), the Option Price of an Option shall be (a) not less
than one hundred percent (100%) of the Fair Market Value of a Share on the date
the Option is granted and (b) in any event, not less than the offering price of
a Share in the initial public offering of the Company's common stock.
6.4. DURATION OF OPTIONS. Each Option granted to a Participant shall expire
at such time as the Committee shall determine at the time of grant and set forth
in the Award Agreement; PROVIDED, HOWEVER, that no Option shall be exercisable
later than the tenth (10th) anniversary of its date of grant.
6.5. EXERCISE OF OPTIONS. Options shall be exercisable at such times and be
subject to such restrictions and conditions as the Committee shall in each
instance determine and set forth in the Award Agreement, which need not be the
same for each grant or for each Option or Participant.
6.6. PAYMENT. Options shall be exercised by the delivery of a written
notice of exercise to the Company, setting forth the number of Shares with
respect to which the Option is to be exercised, accompanied by full payment for
such Shares, which shall include applicable taxes, if any, in accordance with
Article 16. The Option Price upon exercise of any Option shall be payable to the
Company in full either: (a) in cash or its equivalent; (b) subject to such
terms, conditions and limitations as the Committee may prescribe, by tendering
Shares previously acquired by the Participant exercising such Option having an
aggregate Fair Market Value at the time of exercise equal to the total Option
Price (PROVIDED that the Shares which are tendered must have been held by such
Participant for at least six (6) months prior to their tender to satisfy the
Option Price), or (c) by a combination of (a) and (b). The Committee also may
allow cashless exercise as permitted by applicable law, subject to applicable
securities law restrictions, or by any other means which the Committee
determines to be consistent with the Plan's purpose and applicable law, in all
cases, subject to such terms, conditions and limitations as the Committee may
prescribe. Subject to any governing rules or regulations, as soon as practicable
after receipt of a written notification of exercise and full payment, the
Company shall deliver to the Participant exercising an Option, in the
Participant's name, Share certificates in an appropriate amount based upon the
number of Shares purchased under the Option, subject to Section 19.8.
6.7. RIGHTS AS A SHAREHOLDER. No Participant or other person shall become
the beneficial owner of any Shares subject to an Option, nor have any rights to
dividends or other rights of a shareholder with respect to any such Shares,
until the Participant has exercised his or her Option in accordance with the
provisions of the Plan and the applicable Award Agreement.
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6.8. TERMINATION OF EMPLOYMENT OR SERVICE. Each Participant's Option Award
Agreement shall set forth the extent to which, if at all, a Participant shall
have the right to exercise his or her Option following termination of such
Participant's employment or service with the Company, a Subsidiary or an
Affiliate. Such provisions shall be determined in the sole discretion of the
Committee, need not be uniform among all Options granted, and may reflect
distinctions based on the reasons for, or circumstances of, such termination.
6.9. LIMITATIONS ON TRANSFERABILITY OF OPTIONS.
(a) INCENTIVE STOCK OPTIONS. Except as otherwise provided in Article 11, no
ISO may be sold, transferred, pledged, assigned, or otherwise alienated or
hypothecated, other than by will or by the laws of descent and distribution.
Further, all ISOs granted to a Participant under the Plan shall be exercisable
during his or her lifetime only by such Participant.
(b) NONQUALIFIED STOCK OPTIONS. Except as otherwise provided in a
Participant's Award Agreement or Article 11, no NQSO may be sold, transferred,
pledged, assigned, or otherwise alienated or hypothecated, other than by will or
by the laws of descent and distribution. Further, except as otherwise provided
in a Participant's Award Agreement, all NQSOs granted to a Participant under
this Article 6 shall be exercisable during his or her lifetime only by such
Participant.
(c) EXERCISE BY ONE OTHER THAN A PARTICIPANT. In the event any Option is
exercised by the executors, administrators, heirs or distributees of the estate
of a deceased Participant, or such a Participant's beneficiary, or the
transferee of an Option, in any such case pursuant to the terms and conditions
of the Plan and the applicable Award Agreement and in accordance with such terms
and conditions as may be specified from time to time by the Committee, the
Company shall be under no obligation to issue Shares thereunder unless and until
the Committee is satisfied that the person or persons exercising such Option is
the duly appointed legal representative of the deceased Participant's estate or
the proper legatee or distributee thereof or the named beneficiary of such
Participant, or the valid transferee of such Option, as applicable.
6.10. RENEWAL AND SUBSTITUTION OF OPTIONS. Subject to the terms and
conditions and within the limitations of the Plan, the Committee may modify,
extend or renew outstanding Options granted under the Plan, or accept the
surrender of outstanding Options (up to the extent not theretofore exercised)
and authorize the granting of new Options in substitution therefor (to the
extent not theretofore exercised).
6.11. LIMITATIONS ON INCENTIVE STOCK OPTIONS.
(a) GENERAL. No ISO shall be granted to any individual otherwise eligible to
participate in the Plan who is not an Employee of the Company or a Subsidiary on
the date of granting of such Option. Any ISO granted under the Plan shall
contain such terms and conditions, consistent with the Plan, as the Committee
may determine to be necessary to qualify such Option as an "incentive stock
option" under Section 422 of the Code. Any ISO granted under the Plan may be
modified by the Committee to disqualify such Option from treatment as an
"incentive stock option" under Section 422 of the Code.
(b) $100,000 PER YEAR LIMITATION. Notwithstanding any intent to grant ISOs,
an Option granted under the Plan will not be considered an ISO to the extent
that it, together with any other "incentive stock options" (within the meaning
of Section 422 of the Code, but without regard to subsection (d) of such
Section) under the Plan and any other "incentive stock option" plans of the
Company, any Subsidiary and any "parent corporation" of the Company within the
meaning of Section 424(e) of the Code, are exercisable for the first time by any
Participant during any calendar year with respect to Shares having an aggregate
Fair Market Value in excess of $100,000 (or such other limit as may be required
by the Code) as of the time the Option with respect to such Shares is granted.
The rule set forth in the preceding sentence shall be applied by taking Options
into account in the order in which they were granted.
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(c) OPTIONS GRANTED TO CERTAIN SHAREHOLDERS. No ISO shall be granted to an
individual otherwise eligible to participate in the Plan who owns (within the
meaning of Section 424(d) of the Code), at the time the Option is granted, more
than ten percent (10%) of the total combined voting power of all classes of
stock of the Company or a Subsidiary or any "parent corporation" of the Company
within the meaning of Section 424(e) of the Code. This restriction does not
apply if at the time such ISO is granted the Option Price of the ISO is at least
110% of the Fair Market Value of a Share on the date such ISO is granted, and
the ISO by its terms is not exercisable after the expiration of five years from
such date of grant.
ARTICLE 7. STOCK APPRECIATION RIGHTS
7.1. GRANT OF SARS. Subject to the terms and conditions of the Plan, SARs
may be granted to Participants at any time and from time to time as shall be
determined by the Committee. The Committee may grant a SAR (a)(i) in connection
and simultaneously with the grant of an Option or (ii) with respect to a
previously-granted Nonqualified Stock Option (a Tandem SAR) or (b) independent
of, and unrelated to, an Option (a Freestanding Option). The Committee shall
have complete discretion in determining the number of Shares granted in the form
of SARs to each Participant (subject to Article 4) and, consistent with the
provisions of the Plan, in determining the terms and conditions pertaining to
such SARs.
7.2. GRANT PRICE. The grant price for each SAR shall be determined by the
Committee and set forth in the Award Agreement, subject to the limitations of
this Section 7.2. The grant price of a Freestanding SAR shall be (a) not less
than one hundred percent (100%) of the Fair Market Value of a Share on the date
the SAR is granted and (b) in any event, not less than the offering price of a
Share in the initial public offering of the Shares. The grant price of a Tandem
SAR shall be equal to the Option Price of the related Option.
7.3. EXERCISE OF TANDEM SARS. Tandem SARs may be exercised for all or part
of the Shares subject to the related Option upon the surrender of the right to
exercise the equivalent portion of the related Option. A Tandem SAR shall be
exercisable only when and to the extent the related Option is exercisable and
may be exercised only with respect to the Shares for which the related Option is
then exercisable. A Tandem SAR shall entitle a Participant to elect, in the
manner set forth in the Plan and the applicable Award Agreement, in lieu of
exercising his or her unexercised related Option for all or a portion of the
Shares for which such Option is then exercisable pursuant to its terms, to
surrender such Option to the Company with respect to any or all of such Shares
and to receive from the Company in exchange therefor a payment described in
Section 7.7. An Option with respect to which a Participant has elected to
exercise a Tandem SAR shall, to the extent of the Shares covered by such
exercise, be canceled automatically and surrendered to the Company. Such Option
shall thereafter remain exercisable according to its terms only with respect to
the number of Shares as to which it would otherwise be exercisable, less the
number of Shares with respect to which such Tandem SAR has been so exercised.
Notwithstanding any other provision of the Plan to the contrary, with respect to
a Tandem SAR granted in connection with an ISO: (i) the Tandem SAR will expire
no later than the expiration of the related ISO; (ii) the value of the payment
with respect to the Tandem SAR may be for no more than one hundred percent
(100%) of the difference between the Option Price of the related ISO and the
Fair Market Value of the Shares subject to the related ISO at the time the
Tandem SAR is exercised; and (iii) the Tandem SAR may be exercised only when the
Fair Market Value of the Shares subject to the ISO exceeds the Option Price of
the ISO.
7.4. EXERCISE OF FREESTANDING SARS. Freestanding SARs may be exercised upon
whatever terms and conditions the Committee, in its sole discretion, in
accordance with the Plan, determines and sets forth in the Award Agreement.
7.5. SAR AGREEMENT. Each SAR grant shall be evidenced by an Award Agreement
that shall specify the grant price, the term of the SAR, and such other
provisions as the Committee shall determine in accordance with the Plan.
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7.6. TERM OF SARS. The term of a SAR granted under the Plan shall be
determined by the Committee, in its sole discretion; PROVIDED, HOWEVER, that the
term of any Tandem SAR shall be the same as the related Option and no SAR shall
be exercisable more than ten (10) years after it is granted.
7.7. PAYMENT OF SAR AMOUNT. Upon exercise of a SAR, a Participant shall be
entitled to receive payment from the Company in an amount determined by
multiplying:
(a) The difference between the Fair Market Value of a Share on the date of
exercise over the grant price of the SAR; by
(b) The number of Shares with respect to which the SAR is exercised.
At the discretion of the Committee, such payment upon exercise of a SAR may be
in cash or its equivalent, in Shares of equivalent Fair Market Value, or in some
combination thereof.
7.8. TERMINATION OF EMPLOYMENT OR SERVICE. Each SAR Award Agreement shall
set forth the extent to which the Participant shall have the right to exercise
the SAR following termination of the Participant's employment or service with
the Company, the Subsidiary and/or the Affiliate. Such provisions shall be
determined in the sole discretion of the Committee, need not be uniform among
all SARs issued pursuant to the Plan, and may reflect distinctions based on the
reasons for termination.
7.9. NONTRANSFERABILITY OF SARS. Except as otherwise provided in a
Participant's Award Agreement, no SAR granted under the Plan may be sold,
transferred, pledged, assigned, or otherwise alienated or hypothecated, other
than by will or by the laws of descent and distribution. Further, except as
otherwise provided in a Participant's Award Agreement, all SARs granted to a
Participant under the Plan shall be exercisable during his or her lifetime only
by such Participant.
ARTICLE 8. RESTRICTED STOCK
8.1. AWARDS OF RESTRICTED STOCK. Subject to the terms and provisions of the
Plan, the Committee, at any time and from time to time, may grant Shares of
Restricted Stock to Participants in such amounts as the Committee shall
determine. Subject to the terms and conditions of this Article 8 and the Award
Agreement, upon delivery of Shares of Restricted Stock to a Participant, or
creation of a book entry evidencing a Participant's ownership of Shares of
Restricted Stock, pursuant to Section 8.5, the Participant shall have all of the
rights of a stockholder with respect to such Shares, subject to the terms and
restrictions set forth in this Article 8 or the applicable Award Agreement or
determined by the Committee.
8.2. RESTRICTED STOCK AWARD AGREEMENT. Each Restricted Stock Award shall be
evidenced by a Restricted Stock Award Agreement that shall specify the Period of
Restriction, the number of Shares of Restricted Stock granted, and such other
provisions as the Committee shall determine in accordance with the Plan. Any
Restricted Stock Award must be accepted by the Participant within a period of
sixty (60) days (or such shorter period as determined by the Committee at the
time of award) after the award date, by executing such Restricted Stock Award
Agreement and providing the Committee or its designee a copy of such executed
Award Agreement and payment of the applicable purchase price of such Shares of
Restricted Stock, if any, as determined by the Committee.
8.3. TRANSFERABILITY. Except as provided in this Article 8, Shares of
Restricted Stock may not be sold, transferred, pledged, assigned, encumbered,
alienated, hypothecated or otherwise disposed of until the end of the applicable
Period of Restriction established by the Committee and specified in the
Restricted Stock Award Agreement. All rights with respect to the Restricted
Stock granted to a Participant under the Plan shall be available during his or
her lifetime only to such Participant.
8.4. PERIOD OF RESTRICTION AND OTHER RESTRICTIONS. The Period of
Restriction shall lapse based on continuing employment (or other business
relationships) with the Company, a Subsidiary or an Affiliate, the achievement
of performance goals, or upon the occurrence of other events as determined by
the
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Committee, at its discretion, and stated in the Award Agreement. If the grant or
vesting of Shares of Restricted Stock awarded to a Covered Employee is intended
to qualify for the Performance-Based Exception, the lapse of the Period of
Restriction shall be based on the achievement of pre-established, objective
performance goals that are determined over a measurement period or periods
established by the Committee and relate to one or more performance criteria
listed in Article 10. The Committee shall determine the extent to which any such
pre-established performance goals are attained or not attained, in accordance
with Article 10. Subject to Article 11, the Committee may impose such other
conditions and/or restrictions on any Shares of Restricted Stock awarded
pursuant to the Plan as it may deem advisable including, without limitation, a
requirement that Participants pay a stipulated purchase price for each Share of
Restricted Stock. Except pursuant to Section 8.9, a Participant's rights in his
or her Shares of Restricted Stock shall lapse upon termination of his or her
employment or other service with the Company or any Subsidiary or Affiliate,
prior to termination of the Period of Restriction or lapse of any other
restrictions set forth in the applicable Award Agreement, or upon any other
failure to satisfy any vesting conditions or restrictions set forth in the
applicable Award Agreement and such Shares shall be forfeited and revert to the
Company.
8.5. DELIVERY OF SHARES. Subject to Section 19.8, after the last day of the
applicable Period of Restriction or other expiration or termination of all
restrictions applicable to a Participant's Shares of Restricted Stock, pursuant
to his or her Award Agreement, such Shares of Restricted Stock shall become
freely transferable by such Participant, and the Company shall then deliver
certificates evidencing such Shares to such Participant, free of all
restrictions hereunder.
8.6. FORMS OF RESTRICTED STOCK AWARDS. Each Participant who receives an
Award of Shares of Restricted Stock shall be issued a stock certificate or
certificates evidencing the Shares covered by such Award registered in the name
of such Participant, which certificate or certificates may contain an
appropriate legend. The Committee may require a Participant who receives a
certificate or certificates evidencing a Restricted Stock Award to immediately
deposit such certificate or certificates, together with a stock power or other
appropriate instrument of transfer, endorsed in blank by the Participant, with
signatures guaranteed in accordance with the Exchange Act if required by the
Committee, with the Secretary of the Company or an escrow holder as provided in
the immediately following sentence. The Secretary of the Company or such escrow
holder as the Committee may appoint shall retain physical custody of each
certificate representing a Restricted Stock Award until the Period of
Restriction and any other restrictions imposed by the Committee or under the
Award Agreement with respect to the Shares evidenced by such certificate expire
or shall have been removed. The foregoing to the contrary notwithstanding, the
Committee may, in its discretion, provide that a Participant's ownership of
Shares of Restricted Stock prior to the lapse of the Period of Restriction or
any other applicable restrictions shall, in lieu of such certificates, be
evidenced by a "book entry" (I.E., a computerized or manual entry) in the
records of the Company or its designated agent in the name of the Participant
who has received such Award. Such records of the Company or such agent shall,
absent manifest error, be binding on all Participants who are granted Restricted
Stock Awards. The holding of Shares of Restricted Stock by the Company or such
an escrow holder, or the use of book entries to evidence the ownership of Shares
of Restricted Stock, in accordance with this Section 8.6, shall not affect the
rights of Participants as owners of the Shares of Restricted Stock awarded to
them, nor affect the restrictions applicable to such shares under the Award
Agreement or the Plan, including, without limitation, the Period of Restriction.
8.7. VOTING RIGHTS. Participants holding Shares of Restricted Stock may be
granted the right to exercise full voting rights with respect to those Shares
during the Period of Restriction.
8.8. DIVIDENDS AND OTHER DISTRIBUTIONS. During the Period of Restriction,
Participants holding Shares of Restricted Stock shall be credited with any cash
dividends paid with respect to such Shares while they are so held, unless
determined otherwise by the Committee and set forth in the Award Agreement. The
Committee may apply any restrictions to such dividends that the Committee deems
appropriate. Without
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limiting the generality of the preceding sentence, if the grant or vesting of
Shares of Restricted Stock awarded to a Covered Employee is designed to comply
with the requirements of the Performance-Based Exception, the Committee may
apply any restrictions it deems appropriate to the right to payment of dividends
declared with respect to such Restricted Stock, such that the dividends and/or
the Restricted Stock maintain eligibility for the Performance-Based Exception.
The Award Agreement may require or permit the immediate payment, waiver,
deferral or investment of dividends paid on the Restricted Stock.
8.9. TERMINATION OF EMPLOYMENT OR SERVICE. Each Restricted Stock Award
Agreement shall set forth the extent to which, if any, the Participant shall
have the right to receive Shares of Restricted Stock following termination of
the Participant's employment or period of other service with the Company or the
applicable Subsidiary or Affiliate even though the Period of Restriction has not
then ended. Such provisions shall be determined in the sole discretion of the
Committee, need not be uniform among all Shares of Restricted Stock, and may
reflect distinctions based on the reasons for, or circumstances of, such
termination of employment or service; PROVIDED, HOWEVER, that, except in cases
of termination of employment connected with a Change in Control or termination
of employment by reason of death or Disability (or similar involuntary
terminations of employment as determined by the Committee in its discretion),
the lapse of the Period of Restriction of Shares of Restricted Stock which are
intended to qualify for the Performance-Based Exception and which are held by
Covered Employees shall occur only to the extent otherwise provided in the Award
Agreement, but for such termination. In addition, except with respect to any
Restricted Stock Award intended to qualify for the Performance-Based Exception,
by action taken after a Restricted Stock Award is issued, the Committee may, in
its sole discretion, and on such terms and conditions as it may determine to be
appropriate, remove any or all of the restrictions, including, without
limitation, the Period of Restriction, imposed on such Restricted Stock Award.
8.10. MODIFICATION OR SUBSTITUTION. Subject to the terms of the Plan, the
Committee may modify outstanding Restricted Stock Awards or accept the surrender
of outstanding Shares of Restricted Stock (to the extent that the Period of
Restriction or other restrictions applicable to such Shares have not yet lapsed)
and grant new Awards in substitution for them.
8.11. SECTION 83(B) ELECTION. If a Participant makes an election under
Section 83(b) of the Code, or any successor section thereto, to be taxed with
respect to a Restricted Stock Award as of the date of transfer of the Restricted
Stock rather than as of the date or dates upon which such Participant would
otherwise be taxable under Section 83(a) of the Code, such Participant shall
deliver a copy of such election to the Company immediately after filing such
election with the Internal Revenue Service. None of the Company, a Subsidiary or
an Affiliate shall have any liability or responsibility relating to or arising
out of the filing or not filing of any such election or any defects in its
construction.
ARTICLE 9. PERFORMANCE UNITS, PERFORMANCE SHARES, AND CASH-BASED AWARDS
9.1. GRANT OF PERFORMANCE UNITS, PERFORMANCE SHARES AND CASH-BASED
AWARDS. Subject to the terms of the Plan, Performance Units, Performance
Shares, and/or Cash-Based Awards may be granted to Participants in such amounts
and upon such terms, and at any time and from time to time, as shall be
determined by the Committee, in accordance with the Plan. A Performance Unit,
Performance Share or Cash-Based Award entitles the Participant who receives such
Award to receive Shares or cash upon the attainment of performance goals and/or
satisfaction of other terms and conditions determined by the Committee when the
Award is granted and set forth in the Award Agreement. Such entitlements of a
Participant with respect to his or her outstanding Performance Unit, Performance
Share or Cash-Based Award shall be reflected by a bookkeeping entry in the
records of the Company, unless otherwise provided by the Award Agreement. The
terms and conditions of such Awards shall be consistent with the Plan and set
forth in the Award Agreement and need not be uniform among all such Awards or
all Participants receiving such Awards.
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9.2. VALUE OF PERFORMANCE UNITS, PERFORMANCE SHARES AND CASH-BASED
AWARDS. Each Performance Unit shall have an initial value that is established
by the Committee at the time of grant. Each Performance Share shall have an
initial value equal to the Fair Market Value of a Share on the date of grant.
Each Cash-Based Award shall have a value as shall be determined by the
Committee. The Committee shall set performance goals in its discretion which,
depending on the extent to which they are met, will determine the number and/or
value of Performance Units and Performance Shares and Cash-Based Awards that
will be paid out to the Participant. In the case of any Performance Units,
Performance Shares or Cashed-Based Awards granted to a Covered Employee that are
intended to qualify for the Performance-Based Exception, such objective
performance goals shall be established in advance by the Committee and based on
one or more performance criteria described in Article 10. For purposes of the
Plan, the period during which the achievement of performance goals is measured
shall be called a "Performance Period."
9.3. EARNING OF PERFORMANCE UNITS, PERFORMANCE SHARES AND CASH-BASED
AWARDS. Subject to the terms of the Plan, after the applicable Performance
Period has ended, the holder of Performance Units, Performance Shares or
Cash-Based Awards shall be entitled to receive payment on the number and value
of Performance Units, Performance Shares or Cash-Based Awards earned by the
Participant over the Performance Period, to be determined as a function of the
extent to which the corresponding performance goals and/or other terms and
conditions have been achieved or satisfied. The Committee shall determine the
extent to which any such pre-established performance goals and/or other terms
and conditions of a Performance Unit, Performance Share or Cash-Based Award are
attained or not attained following conclusion of the applicable Performance
Period, in accordance with Article 10. The Committee may, in its discretion,
waive any such performance goals and/or other terms and conditions relating to
any such Award not intended to qualify for the Performance-Based Exception.
9.4. FORM AND TIMING OF PAYMENT OF PERFORMANCE UNITS, PERFORMANCE SHARES AND
CASH-BASED AWARDS. Payment of earned Performance Units, Performance Shares and
Cash-Based Awards shall be made in a single lump-sum following the close of the
applicable Performance Period. Subject to the terms of the Plan, the Committee,
in its sole discretion, may pay earned Performance Units, Performance Shares and
Cash-Based Awards in the form of cash or in Shares (or in a combination thereof)
which have an aggregate Fair Market Value equal to the value of the earned
Performance Units, Performance Shares or Cash-Based Awards at the close of the
applicable Performance Period. Such Shares may be granted subject to any
restrictions imposed by the Committee, including, without limitation, pursuant
to Section 19.8. The determination of the Committee with respect to the form of
payment of such Awards shall be set forth in the Award Agreement pertaining to
the grant of the Award. At the discretion of the Committee, Participants may be
entitled to receive any dividends declared with respect to Shares which have
been earned in connection with grants of Performance Units and/or Performance
Shares which have been earned, but not yet distributed to Participants (such
dividends shall be subject to the same accrual, forfeiture, and payment
restrictions as apply to dividends earned with respect to Shares of Restricted
Stock, as set forth in Section 8.8). In addition, Participants may, at the
discretion of the Committee, be entitled to exercise their voting rights with
respect to such Shares.
9.5. RIGHTS AS A SHAREHOLDER. A Participant receiving a Performance Unit,
Performance Share or Cash-Based Award shall have the rights of a shareholder
only as to Shares, if any, actually received by the Participant upon
satisfaction or achievement of the terms and conditions of such Award and not
with respect to Shares subject to the Award but not actually issued to such
Participant.
9.6. TERMINATION OF EMPLOYMENT OR SERVICE DUE TO DEATH, DISABILITY, OR
RETIREMENT. Unless determined otherwise by the Committee and set forth in the
Participant's Award Agreement, in the event the employment or other service of a
Participant is terminated by reason of death, Disability, or Retirement during a
Performance Period, the Participant shall receive a payment of the Performance
Units, Performance Shares or Cash-Based Awards which is prorated based upon the
portion of the Performance Period completed, as specified by the Committee in
its discretion. Payment of earned Performance Units,
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Performance Shares or Cash-Based Awards shall be made at a time specified by the
Committee in its sole discretion and set forth in the Participant's Award
Agreement. Notwithstanding the foregoing, with respect to Covered Employees who
retire during a Performance Period, payments shall be made at the same time as
payments are made to Participants who did not terminate employment during the
applicable Performance Period.
9.7. TERMINATION OF EMPLOYMENT OR SERVICE FOR OTHER REASONS. In the event
that a Participant's employment or service terminates under any circumstances
other than those reasons set forth in Section 9.6, all Performance Units,
Performance Shares and Cash-Based Awards shall be forfeited by the Participant
to the Company, except to the extent otherwise provided in the Participant's
Award Agreement or as determined by the Committee.
9.8. NONTRANSFERABILITY. Performance Units, Performance Shares and
Cash-Based Awards may not be sold, transferred, pledged, assigned, encumbered or
otherwise alienated or hypothecated, other than by will or by the laws of
descent and distribution.
ARTICLE 10. PERFORMANCE CRITERIA
Unless and until the Board proposes for shareholder vote and shareholders
approve a change in the general performance criteria set forth in this
Article 10, the attainment of pre-established, objective performance goals based
on which determine the grant, payment and/or vesting with respect to Awards to
Covered Employees which are designed to qualify for the Performance-Based
Exception, the performance criteria to be used for purposes of such Awards shall
be selected by the Committee from among the following:
(a) Earnings per share;
(b) Net income (before or after taxes);
(c) Return measures (including, but not limited to, return on assets,
equity, or sales);
(d) Cash flow return on investments which equals net cash flows divided by
owners' equity;
(e) Earnings before or after taxes; and
(f) Share price (including, but not limited to, growth measures, total
shareholder return and return relative to market indices such as the
Russell 2000).
Performance goals of Awards may relate to the performance of the entire Company,
a Subsidiary or Affiliate, any of their respective divisions, units or offices,
an individual Participant or any combination of the foregoing. The Committee
shall have the discretion to adjust the determinations of the degree of
attainment of the pre-established performance goals based on the above-listed
performance criteria; PROVIDED, HOWEVER, that Awards which are designed to
qualify for the Performance-Based Exception, and which are held by a Covered
Employee, may not be adjusted upward (the Committee shall retain the discretion
to adjust such Awards downward). In the event that applicable tax and/or
securities laws change to permit Committee discretion to alter the governing
performance criteria without obtaining shareholder approval of such changes, the
Committee shall have sole discretion to make such changes without obtaining
shareholder approval. In addition, in the event that the Committee determines
that it is advisable to grant Awards which shall not qualify for the
Performance-Based Exception, the Committee may make such grants without
satisfying the requirements of Code Section 162(m).
Notwithstanding any other provisions of the Plan to the contrary, payment of
compensation in respect of any such Awards granted to a Covered Employee that
are intended to qualify for the Performance-Based Exception, including, without
limitation, the grant, vesting or payment of any Restricted Stock Award,
Performance Shares, Performance Units or Cash-Based Awards, shall not be made
until the
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Committee certifies in writing that the applicable performance goals and any
other material terms of such Awards were in fact satisfied, except as otherwise
provided under Section 8.8 or 9.5 or Article 14.
ARTICLE 11. BENEFICIARY DESIGNATION
Each Participant under the Plan may, from time to time, name any beneficiary
or beneficiaries who shall be permitted to exercise his or her Option or SAR or
to whom any amount due such Participant under the Plan is to be paid, in case of
his or her death before he or she fully exercises his or her Option or SAR or
receives any or all of such benefit. Each such designation shall revoke all
prior designations by the same Participant, shall be in a form prescribed by the
Company, and will be effective only when filed by the Participant in writing
with the Company during the Participant's lifetime. In the absence of any such
beneficiary designation, a Participant's unexercised Option or SAR, or amounts
due but remaining unpaid to such Participant, at the Participant's death may be
exercised by, or paid as designated by the Participant by will or by the laws of
descent and distribution.
ARTICLE 12. DEFERRALS
The Committee may permit or require a Participant to defer such
Participant's receipt of the payment of cash or the delivery of Shares that
would otherwise be due to such Participant by virtue of the exercise of an
Option or SAR, the lapse or waiver of the Period of Restriction or other
restrictions with respect to Restricted Stock, or the satisfaction of any
requirements or goals with respect to Performance Units, Performance Shares or
Cash-Based Awards. If any such deferral election is required or permitted, the
Committee shall, in its sole discretion, establish rules and procedures for such
payment deferrals.
ARTICLE 13. NO IMPLIED RIGHTS OF EMPLOYEES AND CONSULTANTS
13.1. EMPLOYMENT. Nothing in the Plan shall interfere with or limit in any
way the right of the Company or any Subsidiary or Affiliate to terminate any
Participant's employment or other service at any time, nor confer upon any
Participant any right to continue in the employ or service of the Company or any
Subsidiary or Affiliate.
13.2. PARTICIPATION. No Employee or Consultant shall have the right to be
selected to receive an Award under the Plan, or, having been so selected, to be
selected to receive a future Award.
13.3. VESTING. Notwithstanding any other provision of the Plan or an Award
Agreement, a Participant's right or entitlement to exercise or otherwise vest in
any Award not vested or exercisable at the time of grant shall only result from
continued employment or other service with the Company or any Subsidiary or
Affiliate, or satisfaction of any other performance goals or other conditions or
restrictions applicable, by its terms, to such Award.
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ARTICLE 14. CHANGE-OF-CONTROL TRANSACTIONS
14.1. TREATMENT OF OUTSTANDING AWARDS. In the event of a Change-of-Control
Transaction, unless otherwise specifically prohibited under applicable laws, or
by the rules and regulations of any governing governmental agencies or national
securities exchanges:
(a) Immediately prior to the occurrence of such Change-of-Control
Transaction, any and all Options and SARs which are outstanding shall
immediately become fully exercisable as to all Shares covered thereby,
notwithstanding anything to the contrary in the Plan or the Award
Agreement.
(b) Immediately prior to the occurrence of such Change-of-Control
Transaction, any restrictions imposed by the Committee on Restricted
Stock previously awarded to Participants shall be immediately canceled,
the Period of Restriction applicable thereto shall immediately terminate,
and any applicable performance goals shall be deemed achieved,
notwithstanding anything to the contrary in the Plan or the Award
Agreement.
(c) Immediately prior to the occurrence of such Change-of-Control
Transaction, all Awards which are outstanding shall immediately become
fully vested.
(d) The target payment opportunities attainable under any outstanding Awards
of Performance Units, Performance Shares or Cash-Based Awards shall be
deemed to have been fully earned for the entire Performance Period(s) as
of the effective date of the Change-of-Control Transaction. There shall
be paid out to each Participant holding such an Award denominated in
Shares, within thirty (30) days following the effective date of the
Change-of-Control Transaction, a PRO RATA number of Shares (or the
equivalent Fair Market Value thereof, as determined by the Committee, in
cash) based upon an assumed achievement of all relevant targeted
performance goals and upon the length of time within the Performance
Period which has elapsed prior to the Change-of-Control Transaction.
Awards denominated in cash shall be paid pro rata to participants in cash
within thirty (30) days following the effective date of the
Change-of-Control Transaction, with the PRO-RATION determined as a
function of the length of time within the Performance Period which has
elapsed prior to the Change-of-Control Transaction, and based on an
assumed achievement of all relevant targeted performance goals.
(e) The Committee may provide that any Award the payment of which was
deferred under Article 12 shall be paid or distributed as of or promptly
following such Change-of-Control Transaction.
(f) In its discretion, and on such terms and conditions as it deems
appropriate, the Committee may provide, either by the terms of the Award
Agreement applicable to any Option or Freestanding SAR or by resolution
adopted prior to the occurrence of the Change-of-Control Transaction,
that any outstanding Option or Freestanding SAR shall be adjusted by
substituting for Shares subject to such Option or Freestanding SAR stock
or other securities of the surviving corporation or any successor
corporation to the Company, or a parent or subsidiary thereof, or that
may be issuable by another corporation that is a party to the transaction
resulting in the Change-of-Control Transaction, whether or not such stock
or other securities are publicly traded, in which event the aggregate
Option Price or grant price, as applicable, shall remain the same and the
amount of shares or other securities subject to the Option or
Freestanding SAR shall be the amount of shares or other securities which
could have been purchased on the closing date or expiration date of such
transaction with the proceeds which would have been received by the
Participant if the Option or Freestanding SAR had been exercised in full
(or with respect to a portion of such Award, as determined by the
Committee, in its discretion) for Shares prior to such transaction or
expiration date, and the Participant exchanged all of such Shares in the
transaction.
(g) In its discretion, and on such terms and conditions as it deems
appropriate, the Committee may provide, either by the terms of the Award
Agreement applicable to any Option or SAR or by resolution adopted prior
to the occurrence of the Change-of-Control Transaction, that any
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outstanding Option or SAR shall be converted into a right to receive cash
on or following the closing date or expiration date of the transaction
resulting in the Change-of-Control Transaction in an amount equal to the
highest value of the consideration to be received in connection with such
transaction for one Share, or, if higher, the highest Fair Market Value
of a Share during the thirty (30) consecutive business days immediately
prior to the closing date or expiration date of such transaction, less
the per Share Option Price of such Option or grant price of such SAR,
multiplied by the number of Shares subject to such Option or SAR, or a
portion thereof.
(h) The Committee may, in its discretion, provide that an Award cannot be
exercised after, or will otherwise terminate as of, such a
Change-of-Control Transaction, to the extent that such Award is or
becomes fully exercisable on or before such Change-of-Control Transaction
or is subject to any acceleration, adjustment, conversion or payment in
accordance with the foregoing paragraphs of this Section 14.1.
14.2. NO IMPLIED RIGHTS. No Participant shall have any right to prevent the
consummation of any of the acts described in Section 14.1 affecting the number
of Shares available to, or other entitlement of, such Participant under the Plan
or such Participant's Award. Any actions or determinations of the Committee
under this Article 14 need not be uniform as to all outstanding Awards, nor
treat all Participants identically. Notwithstanding the adjustments described in
Section 14.1, in no event may any Option or SAR be exercised after ten
(10) years from the date it was originally granted, and any changes to ISOs
pursuant to this Article 14 shall, unless the Committee determines otherwise,
only be effective to the extent such adjustments or changes do not cause a
"modification" (within the meaning of Section 424(h)(3) of the Code) of such
ISOs or adversely affect the tax status of such ISOs.
14.3. CERTAIN PAYMENTS RELATING TO ISOS. If, as a result of a
Change-of-Control Transaction, an ISO fails to qualify as an "incentive stock
option," within the meaning of Section 422 of the Code, either because of the
failure of the Participant to meet the holding period requirements of Code
Section 422(a)(1) (a "Disqualifying Disposition") or the exercisability of such
Option is accelerated pursuant to Section 14.1(a), or any similar provision of
the applicable Award Agreement, in connection with such Change-of-Control
Transaction and such acceleration causes the aggregate Fair Market Value
(determined at the time the Option is granted) of the Shares with respect to
which such Option, together with any other "incentive stock options," as
provided in Section 6.11(b), are exercisable for the first time by such
Participant during the calendar year in which such accelerated exercisability
occurs to exceed the limitations described in Section 6.11(b) (a "Disqualified
Option"); or any other exercise, payment, acceleration, adjustment or conversion
of an Option in connection with a Change-of Control Transaction results in any
additional taxes imposed on a Participant, then the Company may, in the
discretion of the Committee or pursuant to an Award Agreement, make a cash
payment to or on behalf of the Participant who holds any such Option equal to
the amount that will, after taking into account all taxes imposed on the
Disqualifying Disposition or other exercise, payment, acceleration, adjustment
or conversion of the Option, as the case may be, and the receipt of such
payment, leave such Participant in the same after-tax position the Participant
would have been in had the Code Section 422(a)(1) holding period requirements
been met at the time of the Disqualifying Disposition or had the Disqualified
Option continued to qualify as an "incentive stock option," within the meaning
of Code Section 422 on the date of such exercise or otherwise equalize the
Participant for any such taxes; PROVIDED, HOWEVER, that the amount, timing and
recipients of any such payment or payments shall be subject to such terms,
conditions and limitations as the Committee shall, in its discretion, determine.
Without limiting the generality of the PROVISO contained in the immediately
preceding sentence, in determining the amount of any such payment or payments
referred to therein, the Committee may adopt such methods and assumptions as it
considers appropriate, and the Committee shall not be required to examine or
take into account the individual tax liability of any Participant.
14.4. TERMINATION, AMENDMENT, AND MODIFICATIONS OF CHANGE-OF-CONTROL
TRANSACTION PROVISIONS. Notwithstanding any other provision of the Plan (but
subject to the limitations of Section 15.3) or any Award Agreement provision,
the provisions of this Article 14 may not be terminated, amended, or modified on
or
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after the date of a Change-of-Control Transaction to affect materially adversely
any Participant's Award theretofore granted and then outstanding under the Plan
without the prior written consent of such Participant; PROVIDED, HOWEVER, the
Board may terminate, amend, or modify this Article 14 at any time and from time
to time prior to the date of a Change-of-Control Transaction.
14.5. POOLING OF INTERESTS ACCOUNTING. Notwithstanding any other provision
of the Plan or any Award Agreement to the contrary, in the event of a
Change-of-Control Transaction that is intended to be treated as a "pooling of
interests" under generally accepted accounting principles, the Board shall take
all actions necessary with regard to the Plan or any outstanding Award to
preserve such use of pooling of interests accounting.
ARTICLE 15. AMENDMENT, MODIFICATION, AND TERMINATION
15.1. AMENDMENT, MODIFICATION, AND TERMINATION. The Board may, at any time
and with or without prior notice, amend, alter, suspend or terminate the Plan,
retroactively or otherwise; PROVIDED, HOWEVER, unless otherwise required by law
or specifically provided herein, no such amendment, alteration, suspension or
termination shall be made which would materially impair the previously accrued
rights of any Participant who holds an Award theretofore granted without his or
her written consent, or which, without first obtaining approval of the
stockholders of the Company (where such approval is necessary to satisfy
(i) any applicable requirements under the Code relating to ISOs or for exemption
from Section 162(m) of the Code; (ii) the then-applicable requirements of
Rule 16b-3 promulgated under the Exchange Act, or any successor rule, as the
same may be amended from time to time; or (iii) any other applicable law,
regulation or rule), would:
(a) except as is provided in Section 4.3, increase the maximum number of
Shares which may be sold or awarded under the Plan or increase the
maximum limitations set forth in Section 4.2;
(b) except as is provided in Section 4.3, decrease the minimum Option Price
or grant price requirements of Section 6.3 and 7.2, respectively;
(c) change the class of persons eligible to receive Awards under the Plan;
or
(d) extend the duration of the Plan or the periods during which Options or
SARs may be exercised under Section 6.4 or 7.6, as applicable.
15.2. ADJUSTMENT OF AWARDS UPON THE OCCURRENCE OF CERTAIN UNUSUAL OR
NONRECURRING EVENTS. The Committee may make adjustments in the terms and
conditions of, and the criteria included in, Awards in recognition of unusual or
nonrecurring events (including, without limitation, the events described in
Section 4.3) affecting the Company or the financial statements of the Company or
of changes in applicable laws, regulations, or accounting principles, whenever
the Committee determines that such adjustments are appropriate in order to
prevent dilution or enlargement of the benefits or potential benefits intended
to be made available under the Plan; PROVIDED that, unless the Committee
determines otherwise at the time such adjustment is considered, no such
adjustment shall be authorized to the extent that such authority would be
inconsistent with the Plan's meeting the requirements of Section 162(m) of the
Code, as from time to time amended.
15.3. AWARDS PREVIOUSLY GRANTED. The Committee may amend the terms of any
Award theretofore granted, including any Award Agreement, retroactively or
prospectively, but no such amendment shall materially impair the previously
accrued rights of any Participant without his or her written consent.
15.4. COMPLIANCE WITH CODE SECTION 162(M). At all times when Code
Section 162(m) is applicable, all Awards granted under the Plan shall comply
with the requirements of Code Section 162(m); PROVIDED, HOWEVER, that in the
event the Committee determines that such compliance is not desired with respect
to any Award or Awards available for grant under the Plan, then compliance with
Code Section 162(m) will not be required. In addition, in the event that changes
are made to Code Section 162(m) to permit greater
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flexibility with respect to any Award or Awards available under the Plan, the
Committee may, subject to this Article 15, make any adjustments it deems
appropriate to such Awards and/or the Plan.
ARTICLE 16. TAX WITHHOLDING
16.1. TAX WITHHOLDING. The Company and/or any Affiliate shall have the power
and the right to deduct or withhold, or require a Participant to remit to the
Company, an amount sufficient, or take whatever other actions are necessary and
proper to satisfy, Federal, state, and local taxes, domestic or foreign,
required by law or regulation to be withheld or paid with respect to any taxable
event arising as a result of the Plan. Each Participant shall (and in no event
shall Shares be delivered to such Participant with respect to an Award until),
no later than the date as of which the value of the Award first becomes
includible in the gross income of the Participant for income tax purposes, pay
to the Company in cash, or make arrangements satisfactory to the Company, as
determined in the Committee's discretion, regarding payment to the Company of,
any taxes of any kind required by law to be withheld with respect to the Shares
or other property subject to such Award, and the Company and any Affiliate
shall, to the extent permitted by law, have the right to deduct any such taxes
from any payment of any kind otherwise due to such Participant.
16.2. SATISFACTION OF WITHHOLDING IN SHARES. With respect to withholding
required upon the exercise of Options or SARs, upon the lapse of restrictions on
Restricted Stock, or upon any other taxable event arising as a result of Awards
granted hereunder, the Committee may permit a Participant to elect, subject to
the approval of the Committee, to satisfy the withholding requirement, in whole
or in part, (a) by having the Company withhold Shares otherwise deliverable to
such Participant pursuant to such Award having a Fair Market Value, as
determined by the Committee, on the date the tax is to be determined equal to
the minimum statutory total tax which could be imposed on the transaction,
and/or (b) by tendering to the Company Shares owned by such Participant and
acquired more than six (6) months prior to such tender in full or partial
satisfaction of such tax obligations, based on the Fair Market Value of the
Shares, as determined by the Committee, on the date the tax is to be determined.
All such elections shall be irrevocable, made in writing, signed by the
Participant, and shall be subject to any restrictions or limitations that the
Committee, in its sole discretion, deems appropriate.
16.3. SPECIAL ISO OBLIGATIONS. The Committee may require a Participant to
give prompt written notice to the Company concerning any disposition of Shares
received upon the exercise of an ISO within: (i) two (2) years from the date of
granting such ISO to such Participant or (ii) one (1) year from the transfer of
such Shares to such Participant or (iii) such other period as the Committee may
from time to time determine. The Committee may direct that a Participant with
respect to an ISO undertake in the applicable Award Agreement to give such
written notice described in the preceding sentence, at such time and containing
such information as the Committee may prescribe, and/or that the certificates
evidencing Shares acquired by exercise of an ISO refer to such requirement to
give such notice.
ARTICLE 17. LIMITS OF LIABILITY; INDEMNIFICATION
17.1. LIMITS OF LIABILITY. (a) Any liability of the Company or an Affiliate
to any Participant with respect to any Award shall be based solely upon
contractual obligations created by the Plan and the Award Agreement.
(b) None of the Company, any Affiliate, any member of the Committee or
the Committee or any other person participating in any determination of any
question under the Plan, or in the interpretation, administration or
application of the Plan, shall have any liability, in the absence of bad
faith, to any party for any action taken or not taken in connection with the
Plan, except as may expressly be provided by statute.
17.2. INDEMNIFICATION. Each person who is or shall have been a member of the
Committee or of the Board, shall be indemnified and held harmless by the Company
against and from any loss, cost, liability, or expense that may be imposed upon
or reasonably incurred by him or her in connection with or resulting
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from any claim, action, suit, or proceeding to which he or she may be a party or
in which he or she may be involved by reason of any action taken or failure to
act under the Plan and against and from any and all amounts paid by him or her
in settlement thereof, with the Company's approval, or paid by him or her in
satisfaction of any judgment in any such action, suit, or proceeding against him
or her, PROVIDED he or she shall give the Company an opportunity, at its own
expense, to handle and defend the same before he or she undertakes to handle and
defend it on his or her own behalf. The foregoing right of indemnification shall
not be exclusive of any other rights of indemnification to which such persons
may be entitled under the Company's Articles of Incorporation or By-Laws, as a
matter of law, or otherwise, or any power that the Company may have to indemnify
them or hold them harmless.
ARTICLE 18. SUCCESSORS
All obligations of the Company under the Plan with respect to Awards granted
hereunder shall be binding on any successor to the Company, whether the
existence of such successor is the result of a direct or indirect purchase,
merger, consolidation, or otherwise, of all or substantially all of the business
and/or assets of the Company.
ARTICLE 19. MISCELLANEOUS
19.1. GENDER AND NUMBER; SECTION REFERENCES. Except where otherwise
indicated by the context, any masculine term used herein also shall include the
feminine; the plural shall include the singular and the singular shall include
the plural. The words "Article," "Section," and "paragraph" herein shall refer
to provisions of the Plan, unless expressly indicated otherwise.
19.2. SEVERABILITY. In the event any provision of the Plan shall be held
illegal or invalid for any reason, the illegality or invalidity shall not affect
the remaining parts of the Plan, and the Plan shall be construed and enforced as
if the illegal or invalid provision had not been included.
19.3. TRANSFER, LEAVE OF ABSENCE. A transfer of an Employee from the Company
to an Affiliate (or, for purposes of any ISO granted under the Plan, a
Subsidiary), or vice versa, or from one Affiliate to another (or in the case of
an ISO, from one Subsidiary to another), and a leave of absence, duly authorized
in writing by the Company or a Subsidiary or Affiliate, shall not be deemed a
termination of employment of the employee for purposes of the Plan or with
respect to any Award (in the case of ISOs, to the extent permitted by the Code).
A change in status of a Participant from an Employee to a Consultant shall be
considered a termination of such Participant's employment with the Company or an
Affiliate for purposes of the Plan and such Participant's Awards, except to the
extent that the Committee, in its discretion, determines otherwise with respect
to any Award that is not an ISO.
19.4. EXERCISE AND PAYMENT OF AWARDS. No Award shall be issuable or
exercisable except in whole Shares, and fractional Share interests shall be
disregarded. Not less than one hundred (100) Shares may be purchased or issued
at one time upon exercise of an Option or under any other Award, unless the
number of Shares so purchased or issued is the total number of Shares then
available under the Option or other Award. An Award shall be deemed exercised or
claimed when the Secretary or other official of the Company designated by the
Committee for such purpose receives appropriate written notice from a
Participant, in form acceptable to the Committee, together with payment of the
applicable Option Price or other purchase price, if any, and compliance with
Article 16, in accordance with the Plan and such Participant's Award Agreement.
19.5. LOANS. The Company may, in the discretion of the Committee, extend one
or more loans to Participants in connection with the exercise or receipt of an
Award granted to any such Participant. The terms and conditions of any such loan
shall be established by the Committee.
19.6. NO EFFECT ON OTHER PLANS. Neither the adoption of the Plan nor
anything contained herein shall affect any other compensation or incentive plans
or arrangements of the Company or any Affiliate, or
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prevent or limit the right of the Company or any Affiliate to establish any
other forms of incentives or compensation for their directors, employees or
consultants or grant or assume options or other rights otherwise than under the
Plan.
19.7. INSIDERS. With respect to Insiders (as hereinafter defined),
transactions under this Plan are intended to comply with all applicable
conditions of Rule 16b-3 or its successors under the Exchange Act. 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. "Insider" shall mean an individual who is, on the
relevant date, an officer, director or ten percent (10%) beneficial owner of any
class of the Company's equity securities that is registered pursuant to
Section 12 of the Exchange Act, all as defined under Section 16 of the Exchange
Act.
19.8. REQUIREMENTS OF LAW; LIMITATIONS ON AWARDS. (a) The granting of Awards
and the issuance of Shares under the Plan shall be subject to all applicable
laws, rules, and regulations, and to such approvals by any governmental agencies
or national securities exchanges as may be required.
(b) If at any time the Committee shall determine, in its discretion,
that the listing, registration and/or qualification of Shares upon any
securities exchange or under any state, Federal or foreign law, or the
consent or approval of any governmental regulatory body, is necessary or
desirable as a condition of, or in connection with, the sale or purchase of
Shares hereunder, no Award may be granted, exercised or paid in whole or in
part unless and until such listing, registration, qualification, consent
and/or approval shall have been effected or obtained, or otherwise provided
for, free of any conditions not acceptable to the Committee.
(c) If at any time counsel to the Company shall be of the opinion that
any sale or delivery of Shares pursuant to an Award is or may be in the
circumstances unlawful or result in the imposition of excise taxes on the
Company or any Affiliate under the statutes, rules or regulations of any
applicable jurisdiction, the Company shall have no obligation to make such
sale or delivery, or to make any application or to effect or to maintain any
qualification or registration under the Securities Act, or otherwise with
respect to Shares or Awards and the right to exercise or payment of any
Option or Award shall be suspended until, in the opinion of such counsel,
such sale or delivery shall be lawful or will not result in the imposition
of excise taxes on the Company or any Affiliate.
(d) Upon termination of any period of suspension under this
Section 19.8, any Award affected by such suspension which shall not then
have expired or terminated shall be reinstated as to all Shares available
before such suspension and as to the Shares which would otherwise have
become available during the period of such suspension, but no suspension
shall extend the term of any Award.
(e) The Committee may require each person receiving Shares in connection
with any Award under the Plan to represent and agree with the Company in
writing that such person is acquiring such Shares for investment without a
view to the distribution thereof. The Committee, in its absolute discretion,
may impose such restrictions on the ownership and transferability of the
Shares purchasable or otherwise receivable by any person under any Award as
it deems appropriate. Any such restrictions shall be set forth in the
applicable Award Agreement, and the certificates evidencing such shares may
include any legend that the Committee deems appropriate to reflect any such
restrictions.
(f) An Award and any Shares received upon the exercise or payment of an
Award shall be subject to such other transfer and/or ownership restrictions
and/or legending requirements as the Committee may establish in its
discretion and may be referred to on the certificates evidencing such
Shares, including, without limitation, restrictions under applicable Federal
securities laws, under the requirements of any stock exchange or market upon
which such Shares are then listed and/or traded, and under any blue sky or
state securities laws applicable to such Shares.
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19.9. PARTICIPANTS DEEMED TO ACCEPT PLAN. By accepting any benefit under the
Plan, each Participant and each person claiming under or through any such
Participant shall be conclusively deemed to have indicated their acceptance and
ratification of, and consent to, all of the terms and conditions of the Plan and
any action taken under the Plan by the Board, the Committee or the Company, in
any case in accordance with the terms and conditions of the Plan.
19.10. GOVERNING LAW. To the extent not preempted by Federal law, the Plan
and all Award Agreements and other agreements hereunder shall be construed in
accordance with and governed by the laws of the state of Delaware, without
giving effect to the choice of law principles thereof, except to the extent
superseded by applicable Federal law.
19.11. PLAN UNFUNDED. The Plan shall be unfunded. The Company shall not be
required to establish any special or separate fund or to make any other
segregation of assets to assure the issuance of Shares or the payment of cash
upon exercise or payment of any Award. Proceeds from the sale of Shares pursuant
to Options or other Awards granted under the Plan shall constitute general funds
of the Company.
19.12. ADMINISTRATION COSTS. The Company shall bear all costs and expenses
incurred in administering the Plan, including expenses of issuing Shares
pursuant to any Options or other Awards granted hereunder.
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