SCHEDULE 14A
(Rule 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] Confidential, For Use of the Commission Only
(as permitted by Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
Troy Financial Corporation
- --------------------------------------------------------------------------------
(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 is determined)
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
[ ] Fee paid previously with preliminary proxy 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:
<PAGE>
[GRAPHIC -- TROY FINANCIAL CORPORATION LOGO]
TROY FINANCIAL CORPORATION
32 Second Street
Troy, New York 12180
August 27, 1999
Dear Stockholder:
You are cordially invited to attend the Special Meeting of Stockholders
of Troy Financial Corporation to be held on Friday, October 1, 1999 at 10:00
a.m., at The Troy Savings Bank Music Hall, 32 Second Street, Troy, New York
12180. I hope that you will be able to join us.
At this meeting you will be asked to vote, in person or by proxy, to
approve and adopt our Long-Term Equity Compensation Plan and to act on such
other business as may properly come before the meeting.
The Notice of Special Meeting and Proxy Statement accompanying this
letter describe the business to be transacted at the meeting.
It is important that your shares be represented at the meeting,
regardless of the number you may hold. Whether or not you plan to attend the
meeting in person, please sign, date and return the enclosed proxy card as soon
as possible. If you attend the meeting and desire to vote in person, you may do
so even though you have previously returned a proxy to us.
Thank you. We look forward to seeing you at the meeting.
Sincerely,
/s/Daniel J. Hogarty, Jr.
Daniel J. Hogarty, Jr.
Chairman of the Board,
President and
Chief Executive Officer
<PAGE>
TROY FINANCIAL CORPORATION
32 SECOND STREET
TROY, NEW YORK 12180
(518) 270-3200
NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
TO BE HELD ON OCTOBER 1, 1999
NOTICE IS HEREBY GIVEN that the Special Meeting of Stockholders of Troy
Financial Corporation will be held on Friday, October 1, 1999 at 10:00
a.m., at The Troy Savings Bank Music Hall, 32 Second Street, Troy, New
York 12180, for the following purposes:
1. To approve the Troy Financial Corporation Long-Term Equity
Compensation Plan, and
2. To transact such other business as may properly come before the
Special Meeting or any adjournments or postponements thereof.
The board of directors has fixed the close of business on August 25,
1999 as the record date for the determination of stockholders entitled to notice
of and to vote at the Special Meeting. Only holders of record of Troy Financial
Corporation common stock, par value $.0001 per share, at the close of business
on that date will be entitled to notice of and to vote at the Special Meeting or
any adjournments or postponements thereof.
By Order of the Board of Directors,
/s/Daniel J. Hogarty, Jr.
Daniel J. Hogarty, Jr.
Chairman of the Board,
President and
Chief Executive Officer
Troy, New York
August 27, 1999
- --------------------------------------------------------------------------------
YOUR VOTE IS IMPORTANT. PLEASE RETURN YOUR PROXY PROMPTLY. WHETHER OR NOT YOU
PLAN TO ATTEND THE SPECIAL MEETING IN PERSON, PLEASE SIGN, DATE AND COMPLETE THE
ENCLOSED PROXY AND RETURN IT IN THE ENVELOPE PROVIDED. IF YOU ATTEND THE MEETING
AND DESIRE TO VOTE IN PERSON, YOU MAY DO SO EVEN THOUGH YOU HAVE PREVIOUSLY
RETURNED YOUR PROXY.
- --------------------------------------------------------------------------------
<PAGE>
TROY FINANCIAL CORPORATION
32 SECOND STREET
TROY, NEW YORK 12180
(518) 270-3200
PROXY STATEMENT
SPECIAL MEETING OF STOCKHOLDERS
August 27, 1999
Proxy Solicitation
Troy Financial Corporation, a Delaware corporation, is furnishing this
Proxy Statement and the accompanying Notice of Special Meeting and proxy card to
the holders of its common stock, in connection with the solicitation of proxies
by the board of directors for use at the Special Meeting of Stockholders, and
any adjournment or postponement of the meeting. The special meeting will be held
at The Troy Savings Bank Music Hall, 32 Second Street, Troy, New York 12180, on
Friday, October 1, 1999 at 10:00 a.m. The board of directors has called the
special meeting for the purposes described in the Notice of Special Meeting. In
this proxy statement, the terms "we," "our," "us," or similar terms refer to
Troy Financial Corporation.
We will bear the cost of soliciting proxies. In addition to the
solicitation of proxies by mail, our directors, officers and regular employees,
without extra remuneration, may solicit proxies personally, by telephone,
telegram, or otherwise. We will request persons, firms and corporations holding
shares in their name or in the names of their nominees, which are beneficially
owned by others, to send proxy materials to and obtain proxies from the
beneficial owners and will reimburse the holders for their reasonable expenses
in doing so.
This proxy statement and the enclosed proxy are first being mailed to
the stockholders on or about August 31, 1999.
Voting and Revocability of Proxies
If you properly sign and return the enclosed proxy to us and do not
revoke it prior to its use, your shares will be voted at the special meeting in
accordance with your instructions on the proxy. Executed but unmarked proxies
that are timely received and not subsequently revoked will be voted FOR the
approval and adoption of our Long-Term Equity Compensation Plan. If any other
matters are properly brought before the special meeting, proxies will be voted
in the discretion of the proxy holders. We are not aware of any such matters
that are proposed to be presented at the special meeting.
The board of directors has fixed the close of business on August 25,
1999 as the record date for the determination of stockholders entitled to notice
of and to vote at the special meeting. On the record date, there were
approximately 6,639 holders of common stock. The number of shares of common
stock outstanding on the record date was 12,139,021. Each outstanding share of
common stock entitles its holder to one vote on each matter presented to the
stockholders.
The presence, in person or by proxy, of holders of at least a majority
of the common stock issued and outstanding and entitled to vote at the meeting
is necessary to constitute a quorum at the special meeting. Stockholders' votes
will be tabulated by the person appointed by the board of directors to act as
inspector of election for the special meeting.
Under the rules and regulations of the New York Banking Board and the
Federal Deposit Insurance Corporation, the affirmative vote of a majority of the
total votes eligible to be cast at the special meeting is required to approve
our Long-Term Equity Compensation Plan (the "Plan"). These regulations are
applicable to management stock benefit plans, such as the Plan, which are
established by a savings bank or its holding company sooner than one year after
the savings bank's mutual to stock conversion. If approved by stockholders, the
Plan will take effect on the date of the special meeting.
Under other applicable laws, the affirmative vote of the holders of at
least a majority of the votes present and entitled to vote at the special
meeting at which a quorum is present would ordinarily be sufficient for approval
of the Plan. In the event that less than a majority of the total votes eligible
to be cast at the special meeting, but at
1
<PAGE>
least a majority of the votes present and entitled to vote at the special
meeting, vote in favor of approval, the Plan will be considered approved, but it
will not be established or implemented and no grants or awards will be made
before March 31, 2000, which is the first anniversary of Troy Savings'
conversion.
Abstentions and broker non-votes will be treated as shares that are
present, or represented, and entitled to vote for purposes of determining the
presence of a quorum at the special meeting. Broker non-votes will not be
counted as a vote cast or entitled to vote on any matter presented at the
special meeting. A broker "non-vote" occurs when a nominee holding shares for a
beneficial holder does not have discretionary voting power and does not receive
voting instructions from the beneficial owner. Abstentions are counted in
tabulations of the votes cast on proposals presented to stockholders, whereas
broker non-votes are not counted for purposes of determining whether a proposal
has been approved.
A stockholder who has given a proxy may revoke it at any time prior to
its exercise at the special meeting by (1) giving written notice of revocation
to our Corporate Secretary, (2) properly submitting to us a duly executed proxy
bearing a later date, or (3) voting in person at the special meeting. All
written notices of revocation or other communications with respect to the
revocation of proxies should be addressed as follows: Troy Financial
Corporation, 32 Second Street, Troy, New York 12180, Attention: Corporate
Secretary.
2
<PAGE>
Security Ownership of Directors, Executive Officers, Key Employees and
Certain Beneficial Owners
The following table shows information regarding the beneficial
ownership of our common stock as of August 25, 1999 by (1) any person known to
us to be the beneficial owner of more than 5% of our common stock, (2) each
director, (3) the executive officers named in the Summary Compensation Table
under "Executive Compensation" (the "Named Executive Officers") and (4) all
directors and executive officers as a group.
The information shown below regarding beneficial ownership of our
common stock has been presented in accordance with the rules of the Securities
and Exchange Commission (the "SEC") and is not necessarily indicative of
beneficial ownership for any other purpose. Under such rules, beneficial
ownership of common stock includes any shares as to which a person has the sole
or shared voting power or investment power and also any shares of which a person
has the right to acquire beneficial ownership within 60 days as of the date
shown below through the exercise of any stock option, warrant, or conversion or
other right.
<TABLE>
<CAPTION>
Amount and
Nature of
Beneficial Percentage
Name and Address of Beneficial Owner (a) Ownership (b) Of Ownership
- ---------------------------------------- ------------- ------------
<S> <C> <C>
Employee Stock Ownership Plan 971,121 8.0%
Daniel J. Hogarty, Jr. 100,440 (c) *
Chairman of the Board, President and Chief Executive Officer
George Arakelian 120,000 (d) *
Director
Richard B. Devane 2,000 *
Director
Michael E. Fleming 30,000 (e) *
Director
Willie Anderson Hammett 17,646 (f) *
Director
Thomas B. Healy 50,000 (g) *
Director
Keith D. Millsop 40,000 *
Director
Edward G. O'Haire 40,127 (h) *
Director
Marvin L. Wulf 16,349 (i) *
Director
Kevin M. O'Bryan 10,369 (j) *
Senior Vice President and Secretary
All directors and executive officers as a group (10 persons) 426,931 3.5%
</TABLE>
- ----------
* Less than 1%.
3
<PAGE>
(a) Unless otherwise indicated, the address of each beneficial owner listed
above is c/o Troy Financial Corporation, 32 Second Street, Troy, New York
12180.
(b) In accordance with Rule 13d-3 under the Securities Exchange Act of 1934,
as amended, a person is deemed to be the beneficial owner of a security
for purposes of the Rule if such person has or shares voting power or
investment power with respect to such security or has the right to acquire
beneficial ownership at any time within 60 days. As used herein, "voting
power" is the power to vote or direct the voting of shares and "investment
power" is the power to dispose or direct the disposition of shares.
(c) Mr. Hogarty's share ownership includes 50,440 shares held by Mr. Hogarty's
spouse, as to which Mr. Hogarty disclaims beneficial interest, 24,014
shares held in a 401(k) plan and 25,986 shares held in Mr. Hogarty's
Individual Retirement Account ("IRA").
(d) Mr. Arakelian's share ownership includes 50,000 shares held by Mr.
Arakelian's spouse, as to which Mr. Arakelian disclaims beneficial
interest, and 50,000 shares held in Mr. Arakelian's IRA. It also includes
20,000 shares held by Standard Manufacturing Co., Inc. of which Mr.
Arakelian is President and Chairman of the Board.
(e) Dr. Fleming's share ownership includes 15,000 shares held in Dr. Fleming's
IRA.
(f) Mr. Hammett's share ownership includes 11,416 shares held in an IRA for
the benefit of Mr. Hammett's spouse, as to which Mr. Hammett disclaims
beneficial interest, and 730 shares held in Mr. Hammett's IRA.
(g) Mr. Healy's share ownership includes 28,200 shares held in Mr. Healy's
IRAs.
(h) Mr. O'Haire's share ownership includes (i) 16,000 shares held by Mr.
O'Haire's spouse and 2,727 shares held in an IRA for the benefit of Mr.
O'Haire's spouse, as to which Mr. O'Haire disclaims beneficial interest,
(ii) 18,200 shares held in Mr. O'Haire's IRA, and (iii) 3,000 shares held
by Ryan & O'Haire Agency. Mr. O'Haire serves as president of Ryan &
O'Haire Agency and, as such, is deemed to exercise beneficial ownership
over Ryan & O'Haire Agency's shares.
(i) Mr. Wulf's share ownership includes 5,000 shares held by Mr. Wulf's
spouse, as to which Mr. Wulf disclaims beneficial interest, and 11,349
shares held in Mr. Wulf's IRAs.
(j) Mr. O'Bryan's share ownership includes 200 shares held by Mr. O'Bryan's
son, as to which Mr. O'Bryan disclaims beneficial interest, and 10,169
shares held in a 401(k) plan.
4
<PAGE>
Compensation of Directors
Directors of Troy Savings receive fees of $1,375 per board meeting
attended and fees ranging from $250 to $850 per committee meeting attended,
depending on the type of committee. No separate fees are paid to directors in
their role as directors of Troy Financial. Troy Financial and Troy Savings
intend to engage a compensation consultant to study the level and structure of
compensation paid to the directors, as compared to similarly situated publicly
traded financial institutions and, upon review of such study, may revise the
amount of fees paid to such directors.
Executive Compensation
The following table sets forth the cash and certain other compensation
paid by Troy Savings for services rendered in all capacities during the year
ended September 30, 1998, to the President and Chief Executive Officer and the
other executive officer who received compensation in excess of $100,000.
<TABLE>
<CAPTION>
Long Term
Compensation Awards
---------------------------------
Annual Compensation(1) Restricted
Name and ---------------------------------- Stock All Other
Principal Positions Year Salary ($) Bonus ($) Awards ($)(2) Options (#)(2) Compensation(3)
- ------------------- ---- ---------- --------- ------------- -------------- ---------------
<S> <C> <C> <C> <C> <C> <C>
Daniel J. Hogarty, Jr...... 1998 $577,967(4) - - - $10,000
President and Chief
Executive Officer
Kevin M. O'Bryan........... 1998 $154,048 - - - $ 8,789
Senior Vice President,
Chief Credit Officer
and Secretary
</TABLE>
- ----------------
(1) For fiscal year ended September 30, 1998, there were no perquisites with
an aggregate value for any named individual in excess of the lesser of
$50,000 or 10% of the individual's salary and bonus or other annual
compensation not categorized as salary or bonus.
(2) As a mutual institution until March 31, 1999, Troy Savings did not have
any stock based plans.
(3) Reflects matching contributions made by Troy Savings under a 401(k) plan.
(4) Includes deferred compensation of $98,000.
Benefit Plans
Employment and Employment Protection Agreements
Troy Financial and Troy Savings have entered into employment agreements
with three executive officers, including Messrs. Hogarty and O'Bryan (the
"Employment Agreements") and employment protection agreements with six other
officers (the "Employment Protection Agreements").
The following summarizes the principal terms of the Employment
Agreements:
o term -- initial three-years, with possible year-to-year renewals;
o specified annual salary, plus annual cost of living and merit
increases;
o discretionary bonuses;
o participation in all benefit and compensation plans; and
o car or automobile allowance.
As of September 30, 1998, the base salaries for Messrs. Hogarty and O'Bryan were
$600,000 and $160,000, respectively.
5
<PAGE>
Troy Financial and Troy Savings may terminate an executive officer's
employment at any time during the term of an Employment Agreement. Unless the
termination is for "cause" (as defined in the Employment Agreement), Troy
Financial and Troy Savings will be required to pay the following amounts to the
executive officer:
o three times the executive officer's annual base salary plus bonus;
and
o the value of the additional retirement benefits that the
executive officer would have been entitled to receive under Troy
Savings' qualified benefit plans and Supplemental Retirement and
Benefits Restoration Plan ("Supplemental Plan") if the executive
officer had continued to be employed for three years.
The foregoing amounts will be paid in a lump sum. Troy Financial and Troy
Savings will also provide the terminated executive:
o insurance and other non-pension benefits for three years;
o outplacement services; and
o indemnification and director and officer liability insurance.
In addition, following a termination without cause, the executive
officer will be fully vested, except to the extent limited by applicable
regulations, in:
o stock options;
o shares of common stock, which may be subject to vesting
restrictions ("Restricted Stock");
o the Supplemental Plan; and
o any other benefit that would otherwise be forfeited.
If an executive officer terminates his employment with "good reason"
(as defined in the Employment Agreement), the above provisions will also apply,
as if Troy Financial and Troy Savings had terminated his employment without
cause.
If the executive officer is subject to the federal excise tax imposed
on excess parachute payments, Troy Financial and Troy Savings will pay to the
executive officer a gross-up amount sufficient, after all taxes, to pay the
excise tax and any interest and penalties. However, if making the gross-up
payment would not produce a net after-tax benefit to the executive officer of at
least $50,000 more than the amount the executive officer could receive without
triggering the excise tax, the amounts payable to the executive officer will be
reduced as necessary to avoid the excise tax.
After termination, the executive officer cannot have any other
employment during a specified noncompetition period with a substantial
competitor (as defined in the Employment Agreements) of Troy Savings or Troy
Financial if:
o the executive officer terminates his employment without consent
and without good reason, or
o Troy Financial and Troy Savings terminate the officer's
employment for cause.
The noncompetition period is one year or the remaining term of the agreement
plus six months, whichever is less. The Employment Agreements also contain
provisions relating to unauthorized disclosure of confidential information and
return of written materials upon termination of employment.
The principal terms of the Employment Protection Agreements are:
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<PAGE>
o term -- initially three-years, with possible renewals;
o no severance or other compensation is payable following
termination of employment except in the context of a change of
control;
o severance is payable if, either before and in connection with a
change of control, or within up to two years after a change of
control, Troy Financial and Troy Savings terminate the officer's
employment without cause (as defined in the Employment Protection
Agreement), or the officer terminates employment with "good
reason" (as defined in the Employment Protection Agreement);
o severance amount is two times the officer's annual salary;
o if severance is payable, employee welfare benefits continue for
two years after the termination;
and
o except to the extent limited by applicable regulations, stock
options, Restricted Stock and other equity compensation
arrangements, and deferred compensation and other employee
benefits that would otherwise be forfeited are fully vested.
However, severance and other benefits, including accelerated vesting, will be
limited to the maximum amount that can be paid to the officer without
constituting an "excess parachute payment" under the Internal Revenue Code (the
"IRC").
For purposes of the Employment Protection Agreements, a "change of
control" means any of the following:
o the acquisition by any individual, entity or group (a "Person")
of beneficial ownership of 20% or more of either the outstanding
shares of Troy Financial's common stock, or the combined voting
power of Troy Financial's outstanding voting securities that are
entitled to vote generally in the election of directors ("Voting
Securities"), except that the following will not constitute a
change of control:
(1) any acquisition directly from Troy Financial,
(2) any acquisition by Troy Financial,
(3) any acquisition by any employees benefit plan or trust of
Troy Financial or Troy Savings, or
(4) any acquisition pursuant to a transaction that complies
with clauses (a), (b) and (c) of the second bullet below.
o individuals who, as of the conversion, constituted the "Incumbent
Board" (as defined therein) cease for any reason to constitute at
least a majority of Troy Financial's Board of Directors;
o a reorganization, merger or consolidation or sale or other
disposition of all or substantially all of Troy Financial's assets
or Troy Financial's acquisition of the stock or assets of another
entity (a "Business Combination"), unless:
(a) the beneficial owners of Troy Financial's outstanding common stock
and Voting Securities, respectively, beneficially own, directly or
indirectly, more than 50% of, respectively, the outstanding shares
of common stock (the "Resulting common stock") and the combined
voting power of the outstanding voting securities entitled to vote
generally in the election of directors (the "Resulting Voting
Securities"), as the case may be, of the corporation resulting
from the Business Combination (the "Resulting Corporation") in
substantially the same proportions as before,
(b) no Person, excluding any employee benefit plan or trust of Troy
Financial or Troy Savings or of the Resulting Corporation,
beneficially owns, directly or indirectly, 20% or more of the
Resulting common stock or the combined voting power of the
Resulting Voting Securities, except to the extent of the Person's
ownership before the Business Combination, and
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<PAGE>
(c) at least a majority of the members of the board of directors of
the Resulting Corporation were members of the Incumbent Board; or
o approval by Troy Financial's stockholders of a complete
liquidation or dissolution of Troy Financial.
Defined Benefit Pension Plan. Troy Savings maintains a non-contributory
defined benefit pension plan covering substantially all of its full-time
salaried employees (the "Pension Plan"). A participant is 100% vested after five
years of service, upon attaining normal retirement age or upon a change of
control (as defined above).
The normal retirement benefit (generally at age 65) is based on the
participant's highest three-year average annual base earnings during the
participant's final 10 years of participation, subject to a limitation on the
amount of compensation that can be taken into account under the IRC. The annual
benefit provided to a participant at normal retirement age is:
o 2% of average annual earnings, times years of credited service,
up to 32.5 years, plus .4% of average annual earnings that exceed
50% of the Social Security wage base, times years of
o credited service, up to 30 years.
An unreduced annual retirement benefit, calculated in the same manner
as described above, will be provided to a participant who:
o is eligible for an early retirement benefit (generally age 60
with five years of service or age 55 with 10 years of service) and
elects to defer the payment of the benefit to normal retirement
age;
o has attained age 60 and completed 30 years of service, or
attained age 62 and completed 25 years of service, and elects to
receive payment of the benefit before normal retirement age; or
o postpones annual benefits beyond normal retirement age.
If a participant begins receiving early retirement benefits before satisfying
the foregoing age and service requirements, his benefits will be actuarially
reduced.
The Pension Plan also provides a surviving spouse benefit if the
participant dies before retirement or other termination of employment with a
vested retirement benefit.
The following table sets forth, as of September 30, 1998, estimated
annual pension benefits for individuals at age 65 payable in the form of a life
annuity under the most advantageous plan provisions for various levels of
compensation and years of service. The figures in this table are based upon the
assumption that the Pension Plan continues in its present form and do not
reflect Social Security benefits and benefits payable under the ESOP. At
September 30, 1998, the estimated years of credited service of Messrs. Hogarty
and O'Bryan were 13 and 23 years, respectively.
<TABLE>
<CAPTION>
Years of service
Final ------------------------------------------------------------------
average
salary 15 20 25 30 35
- ---------- -------- -------- -------- -------- -------
<S> <C> <C> <C> <C> <C>
$75,000................................ $24,948 $33,264 $41,580 $49,896 $53,646
100,000................................ 33,948 45,264 56,580 67,896 72,896
125,000................................ 42,948 57,264 71,580 85,896 92,146
150,000................................ 51,948 69,264 86,580 103,896 111,396
160,000 and above (1).................. 55,548 74,064 92,580 111,096 119,096
</TABLE>
- --------------
(1) For the 1998 plan year, the maximum compensation under IRC Section
401(a)(17) is limited to $160,000.
Supplemental Retirement and Benefit Restoration Plan
Troy Savings has implemented a non-tax qualified Supplemental
Retirement and Benefit Restoration Plan (the "Supplemental Plan") to provide
additional benefits to designated employees. Three executive officers, including
Messrs. Hogarty and O'Bryan, participate in the Supplemental Plan. Participants
receive additional
8
<PAGE>
retirement benefits that cannot be provided under Troy Savings' qualified
retirement plans, including the Pension Plan, because of limitations in effect
under the IRC. In addition, the Supplemental Plan will make up for benefits lost
under our Employee Stock Ownership Plan ("ESOP") if participants retire or
otherwise terminate employment before the ESOP has repaid the funds it borrowed
to purchase common stock.
Each participant in the Supplemental Plan will be entitled to an annual
pension amount at age 65 equal to 65% of his average annual earnings (the
"Pension Amount"), reduced by any amounts actually payable under the Pension
Plan and an offset amount, in Mr. Hogarty's case, of $26,000 per year. The
benefit will be fully vested upon completion of five years of service, including
service before adoption, and will be reduced in proportion to years of service
if the participant retires or terminates employment before age 65. No more than
$500,000 of Mr. Hogarty's annual compensation will be counted. In the event of
the participants' death, the Pension Amount (reduced by the death benefit
payable under the Pension Plan) will be paid to his surviving spouse for life,
beginning when the participant would have reached age 65. The Pension Amount
will be actuarially reduced if benefits are paid before the participant attains
age 65, unless the participant is eligible for an unreduced early retirement
benefit under the Pension Plan, and will be reduced by the benefit payable at
that time under the Pension Plan. Participants may also be entitled to a benefit
under the Supplemental Plan that is calculated by reference to the qualified
defined contribution plans maintained by Troy Savings. Participants' rights to
benefits under the Supplemental Plan are limited to those of general unsecured
creditors of Troy Savings.
The following table sets forth, as of September 30, 1998, estimated
annual Supplemental Plan benefits, including benefits received under the Pension
Plan, for individuals at age 65 for various levels of compensation. The figures
in this table are based upon the assumption that the Supplemental Plan continues
in its present form and do not reflect Social Security benefits and benefits
payable under the ESOP.
Final
average salary Pension amount
-------------- --------------
$75,000................................ $ 48,750
100,000................................ 65,000
125,000................................ 81,250
150,000................................ 97,500
200,000................................ 130,000
300,000................................ 195,000
400,000................................ 360,000
500,000 or more........................ 325,000
9
<PAGE>
APPROVAL OF TROY FINANCIAL CORPORATION LONG-TERM EQUITY COMPENSATION PLAN
General
On July 29, 1999, the board of directors adopted the Troy Financial
Corporation Long-Term Equity Compensation Plan (the "Plan"), subject to adoption
and approval of the Plan within one year of its adoption by the board of
directors by the affirmative vote of the holders of a majority of our common
stock entitled to vote. If the stockholders fail to approve the Plan within one
year of its adoption by the board of directors, the Plan shall be null and void
and of no effect. No grants shall be made under the Plan before it has been
approved by the stockholders. The principal provisions of the Plan are
summarized below. Such summary does not, however, purport to be complete and is
qualified in its entirety by the terms of the Plan. A copy of the Plan is
attached hereto as Exhibit A and incorporated herein by reference.
Purposes of the Plan
The purposes of the Plan are to enhance our ability to attract and
retain highly qualified directors, consultants, officers and other employees and
service providers to advance our interests by providing such persons with
stronger incentives to continue to serve us and to expend maximum effort to
improve our business results and earnings.
Description of the Plan
The Plan consists of a stock option plan and a Management Recognition
Plan (the "MRP"). If approved, the Plan will permit us to grant:
o stock options intended to qualify as incentive options
("Incentive Options") under Section 422 of the IRC to
officers and other employees;
o stock options that do not qualify as Incentive Options
("Non-Qualified Options") to directors, officers, employees
and independent contractors;
o Restricted Stock to directors, officers, employees and
independent contractors; and
o units representing a conditional right to receive Restricted
Stock ("Restricted Stock Units") to directors, officers,
employees and independent contractors.
The Plan does not provide for the grant of stock appreciation rights.
We have reserved 1,213,902 shares for options to be issued under the Plan. We
may contribute cash to a trust we have established so that the trust can buy up
to 485,561 shares of common stock that will be used for grants of Restricted
Stock under the MRP. Alternatively, we may reserve an equivalent number of our
authorized but unissued shares for grants of Restricted Stock.
A compensation committee of our directors will administer the Plan.
Each member of the compensation committee will be a "non-employee director," as
defined in regulations issued by the SEC, and an "outside director," as defined
under Section 162(m) of the IRC. The compensation committee will have the
authority to grant options, Restricted Stock and Restricted Stock Units and to
determine whether options will be Incentive Options. When the compensation
committee grants an option, it will specify the number of shares subject to the
option, the exercise price, the manner of exercise and any vesting or other
restrictions.
The option exercise price must be paid in full in cash or by exchanging
shares of our common stock with a fair market value equal to or less than the
total option price plus cash for any difference. Options may also be exercised
by directing that certificates for the shares purchased be delivered to a
licensed broker acceptable to us, as agent for the optionee, provided that the
broker tenders to us cash or cash equivalents equal to the option exercise
price.
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The option exercise price of an Incentive Option may not be less than
100% of the fair market value of the common stock on the grant date (110% if an
Incentive Option is granted to an owner of more than 10% of the outstanding
common stock). The maximum option term is 10 years (five years if an Incentive
Option is granted to an owner of more than 10% of the outstanding common stock).
The maximum number of shares that may be covered by options granted to any
employee in any calendar year is 500,000. There is a $100,000 limit on the value
of stock (determined at the time of grant) covered by Incentive Options that
first become exercisable by an employee in any calendar year. The compensation
committee will specify the number of shares of Restricted Stock and Restricted
Stock Units it grants to an eligible individual and the nature of the vesting
and other restrictions that apply to each grant. Vesting of Restricted Stock,
Restricted Stock Units and options may not be accelerated except upon death or
disability.
Options granted pursuant to the Plan generally will be exercisable for
at least three months after a participant terminates employment or service,
unless the compensation committee determines otherwise. Unvested Restricted
Stock, Restricted Stock Units and options will be forfeited upon a voluntary
termination of employment without "good reason" or involuntary termination of
employment for "cause." However, in the event of death or disability, Restricted
Stock, Restricted Stock Units and options will be vested and exercisable for up
to one year, or such other period as determined by the compensation committee.
Such vesting shall be subject to applicable regulatory requirements and, unless
otherwise determined by us, to limitations to prevent such accelerated vesting
from constituting an excess parachute payment under the IRC. Incentive Options,
Restricted Stock and Restricted Stock Unit awards will be non-transferable and
non-assignable (except at death). In its discretion, the compensation committee
may allow an optionee to transfer Non-Qualified Options for estate planning
purposes.
Appropriate adjustments will be made to shares available under the Plan
and to shares covered by outstanding awards to reflect changes in our
capitalization. The board of directors at any time may terminate or suspend the
Plan. Unless previously terminated, the Plan will terminate automatically on the
tenth anniversary of the effective date of the Plan. No termination, suspension
or amendment of the Plan may, without the consent of the optionee to whom an
option has been granted, adversely affect the rights of the holder of the
option.
Federal Income Tax Consequences of the Plan
The grant of an option or Restricted Stock Unit under the Plan will not
be a taxable event. When a participant in the Plan exercises a Non-Qualified
Option, he will generally recognize ordinary income equal to the difference
between the exercise price and the fair market value of the common stock on the
date of exercise and we generally will be entitled to a business expense
deduction in the same amount. Different rules may apply if the common stock is
subject to restrictions.
An employee will not recognize taxable income upon exercise of an
Incentive Option, except that the alternative minimum tax may apply. Gain
realized upon a sale of shares received pursuant to the exercise of an Incentive
Option will be taxed as long-term capital gain if the employee has held the
shares for at least two years after the grant date and for one year after the
date of exercise of the option. We will not be entitled to any business expense
deduction with respect to the grant or exercise of an Incentive Option, except
as discussed below.
If an employee exercises an Incentive Option and does not complete the
special holding period set forth above, he will recognize ordinary income when
he disposes of the shares, generally in an amount equal to the excess of the
fair market value of the shares at the time the option was exercised over the
option exercise price (or, if less, the amount of gain recognized on the
disposition). Any remaining gain will be taxed as long- or short-term capital
gain, depending upon how long the shares were held. If we comply with applicable
reporting requirements, we will be allowed a business expense deduction to the
extent the employee recognizes ordinary income.
The grant of Restricted Stock will not be a taxable event if the shares
are subject to a substantial risk of forfeiture, unless the recipient makes a
special tax election under Section 83(b) of the IRC within 30 days after the
grant. Upon the vesting of Restricted Stock (assuming no Section 83(b)
election), the grantee will realize ordinary income equal to the value of the
Restricted Stock that become vested and we will generally be entitled to a
deduction for tax purposes in the same amount, except as limited by Section
162(m) of the IRC, if the employee's annual compensation exceeds $1 million. If
the grantee makes a Section 83(b) election, he will realize ordinary income as
of the grant date in an amount equal to the value of the Restricted Stock at
that time and we generally will
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be entitled to a deduction in a like amount. A grantee who makes a Section 83(b)
election will not be entitled to any tax deduction if he subsequently forfeits
the shares.
If a grantee receives unrestricted shares of stock pursuant to a
Restricted Stock Unit, he will recognize ordinary income equal to the value of
the shares at the time he receives them. Subject to the Section 162(m)
limitation discussed in the previous paragraph, we will be allowed a deduction
for the same amount, if we satisfy applicable reporting requirements.
If an employee becomes vested in an option or in shares of Restricted
Stock or Restricted Stock Units because of a change of control, the employee may
be subject to an additional 20% excise tax if he has an "excess parachute
payment" under the IRC. In that case, we would not be allowed to claim a
deduction for the amount that constituted an excess parachute payment.
Required Vote
Under the rules and regulations of the New York Banking Board and the
Federal Deposit Insurance Corporation, the affirmative vote of a majority of the
total votes eligible to be cast at the special meeting is required to approve
the Plan. These regulations are applicable to management stock benefit plans,
such as the Plan, which are established by a savings bank or its holding company
sooner than one year after the savings bank's mutual to stock conversion. If
approved by stockholders, the Plan will take effect on the date of the special
meeting.
Under other applicable laws, the affirmative vote of the holders of at
least a majority of the votes present and entitled to vote at the special
meeting at which a quorum is present would ordinarily be sufficient for approval
of the Plan. In the event that less than a majority of the total votes eligible
to be cast at the special meeting, but at least a majority of the votes present
and entitled to vote at the special meeting, vote in favor of approval, the Plan
will be considered approved, but it will not be established or implemented and
no grants or awards will be made before March 31, 2000, which is the first
anniversary of Troy Savings' conversion.
If not otherwise specified, proxies will be voted FOR approval of the Plan.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT
THE STOCKHOLDERS VOTE FOR THE APPROVAL OF THE PLAN.
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OTHER MATTERS
The board of directors does not intend to present, and has not
been informed that any other person intends to present, any matters for action
at the special meeting other than those specifically referred to herein. If,
however, any other matters should properly come before the special meeting, it
is the intention of the person named in the enclosed proxy to vote the shares
represented thereby in accordance with the determination of a majority of the
board of directors.
The board of directors urges each stockholder, whether or not he or she
intends to be present at the special meeting, to complete, sign, and return the
enclosed proxy as promptly as possible.
By order of the Board of Directors,
/s/Daniel J. Hogarty, Jr.
Daniel J. Hogarty, Jr.
Chairman of the Board, President and
Chief Executive Office
Dated: August 27, 1999
<PAGE>
Exhibit A
TROY FINANCIAL CORPORATION
LONG-TERM EQUITY COMPENSATION PLAN
Troy Financial Corporation, a Delaware corporation (the "Company"), sets
forth herein the terms of its Long-Term Equity Compensation Plan (the "Plan") as
follows:
1. PURPOSE
The Plan is intended to enhance the Company's ability to attract and
retain highly qualified officers, employees, directors, consultants and other
service providers to advance the interests of the Company by providing such
persons with stronger incentives to continue to serve the Company and its
Affiliates (as defined herein) and to expend maximum effort to improve the
business results and earnings of the Company. The Plan is intended to accomplish
this objective by providing to eligible persons an opportunity to acquire or
increase a direct proprietary interest in the operations and future success of
the Company. To this end, the Plan is comprised of a stock option plan and a
Management Recognition Plan. The stock option portion of the Plan provides for
the grant of stock options and the Management Recognition Plan portion provides
for the grant of restricted stock and restricted stock units, in accordance with
the terms hereof. Stock options granted under the Plan may be non-qualified
stock options or incentive stock options, as provided herein, except that stock
options granted to non-employee directors and other persons who are not
employees of the Company or a Subsidiary shall in all cases be non-qualified
stock options.
2. DEFINITIONS
For purposes of interpreting the Plan and related documents (including
Award Agreements), the following definitions shall apply:
2.1 "Affiliate" of, or Person "affiliated" with, a Person means any
Person that controls, is controlled by or is under common control with such
Person within the meaning of Rule 405 of Regulation C under the 1933 Act (as
defined herein), or any successor provision.
2.2 "Award Agreement" means the stock option agreement, restricted stock
agreement, restricted stock unit agreement or other written agreement between
the Company and a Grantee that evidences and sets out the terms and conditions
of a Grant.
2.3 "Benefit Arrangement" shall have the meaning set forth in Section 14
hereof.
2.4 "Board" means the Board of Directors of the Company.
2.5 "Code" means the Internal Revenue Code of 1986, as now in effect or
as hereafter amended.
2.6 "Committee" means a committee of, and designated from time to time
by resolution of, the Board, which shall consist of no fewer than two members of
the Board. During any time when the Company has a class of equity securities
registered under Section 12 of the Exchange Act, each member of the Committee
shall qualify in all respects as a "non-employee director" within the meaning of
Rule 16b-3 under the Exchange Act or any successor rule or regulation and an
"outside director" for purposes of Code Section 162(m).
2.7 "Company" means Troy Financial Corporation.
2.8 "Effective Date" is defined in Section 5.1 below.
2.9 "Exchange Act" means the Securities Exchange Act of 1934, as now in
effect or as hereafter amended.
2.10 "Fair Market Value" means the value of a share of Stock, determined
as follows: if on the Grant Date or other determination date the Stock is listed
on an established national or regional stock exchange, is admitted to
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quotation on an automated quotation system maintained by the NASD, or otherwise
is publicly traded on an established securities market, the Fair Market Value of
a share of Stock shall be the closing price of the Stock on such exchange or in
such market (the highest such closing price if there is more than one such
exchange or market) on the Grant Date or such other determination date (or if
there is no such reported closing price, the Fair Market Value shall be the mean
between the highest bid and lowest asked prices or between the high and low sale
prices on such trading day) or, if no sale of Stock is reported for such trading
day, on the next preceding day on which any sale shall have been reported. If
the Stock is not listed on such an exchange, quoted on such system or traded on
such a market, Fair Market Value shall be the value of the Stock as reasonably
determined by the Board in good faith.
2.11 "Grant" means an award of an Option, Restricted Stock or Restricted
Stock Units under the Plan.
2.12 "Grant Date" means the later of (i) the date as of which the Board
approves the Grant or (ii) the date as of which the Grantee and the Company or
Service Provider enter into the relationship resulting in the Grantee's becoming
eligible to receive a Grant.
2.13 "Grantee" means a person who receives or holds one or more Grants
of Options, Restricted Stock or Restricted Stock Units under the Plan.
2.14 "Incentive Stock Option" means an option that is specifically
designated as being intended to qualify on the Grant Date as an "incentive stock
option" within the meaning of Section 422 of the Code, or the corresponding
provision of any subsequently enacted tax statute, as amended from time to time.
2.15 "Option" means an option to purchase one or more shares of Stock
pursuant to the Plan.
2.16 "Option Period" means the period during which Options may be
exercised as set forth in Section 10 hereof.
2.17 "Option Price" means the purchase price for each share of Stock
subject to an Option.
2.18 "Other Agreement" shall have the meaning set forth in Section 14
hereof.
2.19 "Person" means any person or group within the meaning of Section
13(d)(3) or 14(d)(2) of the Exchange Act.
2.20 "Plan" means the Troy Financial Corporation Long-Term Equity
Compensation Plan.
2.21 "Reporting Person" means a person who is required to file reports
under Section 16(a) of the Exchange Act.
2.22 "Restricted Period" means the period during which Restricted Stock
or Restricted Stock Units are subject to restrictions or conditions pursuant to
Section 13.2 hereof.
2.23 "Restricted Stock" means shares of Stock, awarded to a Grantee
pursuant to Section 13 hereof, that are subject to restrictions and to a risk of
forfeiture.
2.24 "Restricted Stock Unit" means a unit awarded to a Grantee pursuant
to Section 13 hereof, which represents a conditional right to receive a share of
Stock in the future, and which is subject to restrictions and to a risk of
forfeiture.
2.25 "Securities Act" means the Securities Act of 1933, as now in effect
or as hereafter amended.
2.26 "Service Provider" means a consultant or adviser to the Company, or
other similar service provider or Affiliate of the Company, and employees of any
of the foregoing, and a member of the board of directors of the Company or any
Subsidiary who is not an employee of the Company or a Subsidiary, as such
persons may be designated from time to time by the Board pursuant to Section 6
hereof.
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2.27 "Stock" means the common stock, par value $.0001 per share, of the
Company.
2.28 "Subsidiary" means any "subsidiary corporation" of the Company
within the meaning of Section 424(f) of the Code.
2.29 "Termination Date" shall be the date upon which an Option shall
terminate or expire, as set forth in Section 10.2 hereof.
2.30 "Trust" means the Troy Financial Corporation Management Recognition
Plan Trust described in Section 11 below.
3. ADMINISTRATION OF THE PLAN
3.1 General. The Plan shall be administered by the Board, which shall
have the full power and authority to take all actions and to make all
determinations required or provided for under the Plan, any Option granted or
any Award Agreement entered into hereunder. The Board shall have full power and
authority to take all such other actions and determinations not inconsistent
with the specific terms and provisions of the Plan, which the Board deems to be
necessary or appropriate to the administration of the Plan, any Grant made, or
any Award Agreement entered into, hereunder. The Board's reasonable
interpretation and construction of any provision of the Plan, any Grant or any
Award Agreement shall be final, binding and conclusive upon all persons.
3.2 Committee. The Board, in its sole discretion, may appoint a
Committee to administer the Plan, subject to such terms and conditions as the
Board may prescribe. Once appointed, the Committee shall continue to serve until
otherwise directed by the Board. In its discretion, the Board may provide that
the role of the Committee shall be limited to making recommendations to the
Board concerning any determinations to be made and actions to be taken by the
Board pursuant to or with respect to the Plan, or the Board may delegate to the
Committee such powers and authorities related to the administration of the Plan,
as set forth in Section 3.1 above, as the Board shall determine, consistent with
the Certificate of Incorporation and By-laws of the Company and applicable law.
In the event that the Plan, any Grant or Award Agreement provides for any action
to be taken by or determination to be made by the Board, such action may be
taken by or such determination may be made by the Committee if the power and
authority to do so has been delegated to the Committee by the Board as provided
for in this Section. Unless otherwise expressly determined by the Board, any
such action or determination by the Committee shall be final and conclusive.
3.3 Discretionary Grants. Subject to the terms and conditions of the
Plan, the Board shall have full and final authority to designate Grantees, (i)
to determine the type or types of Grant to be made to a Grantee, (ii) to
determine the number of shares of Stock to be subject to a Grant, (iii) to
establish the terms and conditions of each Grant (including, but not limited to,
the exercise price of any Option, the nature and duration of any restriction or
condition (or provision for lapse thereof) relating to the vesting, exercise,
transfer, or forfeiture of a Grant or the shares of Stock subject thereto, and
any terms or conditions that may be necessary to qualify Options as Incentive
Stock Options), (iv) to prescribe the form of each Award Agreement evidencing a
Grant, and (v) to amend, modify, or supplement the terms of any outstanding
Grant (except that no such amendment, modification or supplementation shall
adversely affect the Grantee without the consent of the Grantee). Such authority
specifically includes the authority, in order to effectuate the purposes of the
Plan but without amending the Plan, to modify Grants to eligible individuals who
are foreign nationals or are individuals who are employed outside the United
States to recognize differences in local law, tax policy, or custom. As a
condition to any subsequent Grant, the Board shall have the right, at its
discretion, to require Grantees to return to the Company any Grants previously
awarded to them under the Plan. Subject to the terms and conditions of the Plan,
any such new Grant shall be made upon such terms and conditions as the Board
shall specify in its discretion.
3.4 No Liability. No member of the Board or of the Committee shall be
liable for any action or determination made reasonably and in good faith with
respect to the Plan or any Grant or Award Agreement.
3.5 Applicability of Rule 16b-3. Those provisions of the Plan that make
express reference to Rule 16b-3 under the Exchange Act shall apply only to
Reporting Persons.
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4. STOCK SUBJECT TO THE PLAN
Subject to adjustment as provided in Section 17 hereof, the number of
shares of Stock available for issuance under the Plan shall be 1,699,463 of
which 1,213,902 shall be available for issuance pursuant to Options and 485,561
shall be available for issuance as Restricted Stock or pursuant to Restricted
Stock Units. Stock issued or to be issued under the Plan may be authorized but
unissued shares, treasury shares or, in the case of Stock issued as Restricted
Stock or pursuant to Restricted Stock Units, shares of Stock held by the Trust.
If any shares covered by a Grant are not purchased or are forfeited, or if a
Grant is canceled or otherwise terminates without delivery of any Stock subject
thereto, then the number of shares of Stock counted against the aggregate number
of shares available under the Plan with respect to such Grant shall, to the
extent of any such forfeiture, cancellation or termination, again be available
for making Grants under the Plan.
5. EFFECTIVE DATE AND TERM OF THE PLAN
5.1 Effective Date. The Plan shall be effective as of the latest of (1)
the date the Plan is adopted by the Board, (2) the date the Plan is approved by
stockholders of the Company by a majority of the votes entitled to vote at a
duly held meeting of the stockholders at which a quorum representing a majority
of all outstanding voting stock is present, either in person or by proxy or by
written consent in accordance with the Company's Articles of Incorporation and
By-Laws or (3) the later of (i) April 1, 2000 and (ii) the date the Plan is
approved by stockholders of the Company by a majority of the votes present and
entitled to vote at a duly held meeting of the stockholders at which a quorum
representing a majority of all outstanding voting stock is present, either in
person or by proxy or by written consent in accordance with the Company's
Articles of Incorporation and By-Laws (the "Effective Date"); provided, that
such approval of stockholders must occur within one year before or after the
adoption of the Plan by the Board. If the stockholders fail to approve the Plan
within one year after the Plan is approved by the Board, or if the Board fails
to adopt the Plan within one year after the Plan is approved by stockholders,
the Plan shall be null and void and of no effect. No Grants shall be made under
the Plan before it has been approved by the Board and the stockholders of the
Company, as set out in this Section 5.1.
5.2 Term. The Plan shall terminate on the 10th anniversary of the date
on which the Plan is adopted by the Board or approved by stockholders of the
Company, whichever is earlier.
6. DISCRETIONARY GRANTS
6.1 Company or Subsidiary Employees. Grants (including Grants of
Incentive Stock Options) may be made under the Plan to any employee of the
Company or of any Subsidiary, including any such employee who is an officer or
director of the Company or of any Subsidiary, as the Board shall determine and
designate from time to time.
6.2 Service Providers. Grants may be made under the Plan to any Service
Provider whose participation in the Plan is determined by the Board to be in the
best interests of the Company and is so designated by the Board; provided,
however, that Grants to Service Providers who are not employees of the Company
or of any Subsidiary shall not be Incentive Stock Options.
6.3 Successive Grants. An eligible person may receive more than one
Grant, subject to such restrictions as are provided herein.
7. LIMITATIONS ON GRANTS
7.1 Limitation on Shares of Stock Subject to Grants. During any time
when the Company has a class of equity securities registered under Section 12 of
the Exchange Act, the maximum number of shares of Stock subject to Options that
can be awarded under the Plan to any person eligible for a Grant is 500,000 per
year, subject to adjustment pursuant to Section 17 hereof.
7.2 Limitations on Incentive Stock Options. An Option shall constitute
an Incentive Stock Option only (i) if the Grantee of such Option is an employee
of the Company or any Subsidiary of the Company; (ii) to the extent specifically
provided in the related Award Agreement; and (iii) to the extent that the
aggregate Fair Market Value (determined at the time the Option is granted) of
the shares of Stock with respect to which all Incentive Stock Options
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held by such Grantee become exercisable for the first time during any calendar
year (under the Plan and all other plans of the Company and Subsidiaries) does
not exceed $100,000. This limitation shall be applied by taking Options into
account in the order in which they were granted. To the extent that an Option
does not satisfy such requirements, the Option shall constitute a non-qualified
option.
8. AWARD AGREEMENT
Each Grant pursuant to the Plan shall be evidenced by an Award
Agreement, to be executed by the Company and by the Grantee, in such form or
forms as the Board shall from time to time determine. Award Agreements granted
from time to time or at the same time need not contain similar provisions but
shall be consistent with the terms of the Plan. Each Award Agreement evidencing
a Grant of Options shall specify whether and to the extent that such Options are
intended to be non-qualified stock options or Incentive Stock Options.
9. OPTION PRICE
The Option Price of each Option shall be fixed by the Board and stated
in the Award Agreement evidencing such Option. The Option Price of an Incentive
Stock Option shall be the Fair Market Value on the Grant Date of a share of the
Stock; provided, however, that in the event that a Grantee would otherwise be
ineligible to receive an Incentive Stock Option by reason of the provisions of
Sections 422(b)(6) and 424(d) of the Code (relating to ownership of more than 10
percent of the Company's outstanding Stock), the Option Price of an Option
granted to such Grantee that is intended to be an Incentive Stock Option shall
be not less than the greater of the par value of a share of Stock or 110 percent
of the Fair Market Value of a share of Stock on the Grant Date. In no case shall
the Option Price of any Option be less than the par value of a share of Stock.
10. VESTING, TERM AND EXERCISE OF OPTIONS
10.1 Vesting and Option Period. Subject to applicable regulatory
requirements, each Option granted under the Plan shall be exercisable, in whole
or in part, at any time and from time to time over a period commencing on or
after the Grant Date and ending upon the expiration or termination of the
Option, as the Board shall determine and set forth in the Award Agreement
relating to such Option. Without limiting the foregoing, the Board, subject to
the terms and conditions of the Plan and applicable regulatory requirements, may
in its sole discretion provide that an Option granted to persons may not be
exercised in whole or in part for a stated period or periods of time during
which such Option is outstanding. For purposes of this Section 10.1, fractional
numbers of shares of Stock subject to an Option shall be rounded down to the
next nearest whole number. The period during which any Option shall be
exercisable in accordance with the foregoing schedule shall constitute the
"Option Period" with respect to such Option.
10.2 Term. Each Option granted under the Plan shall terminate, and all
rights to purchase shares of Stock thereunder shall cease, upon the expiration
of 10 years from the date such Option is granted, or under such circumstances
and on such date prior thereto as is set forth in the Plan or as may be fixed by
the Board and stated in the Award Agreement relating to such Option (the
"Termination Date"); provided, however, that in the event that the Grantee would
otherwise be ineligible to receive an Incentive Stock Option by reason of the
provisions of Sections 422(b)(6) and 424(d) of the Code (relating to ownership
of more than 10 percent of the outstanding Stock), an Option granted to such
Grantee that is intended to be an Incentive Stock Option shall not be
exercisable after the expiration of five years from its Grant Date.
10.3 Acceleration. Any limitation on the exercise of an Option contained
in any Award Agreement may be rescinded, modified or waived by the Board, in its
sole discretion, at any time and from time to time after the Grant Date of such
Option, so as to accelerate the time at which the Option may be exercised.
Notwithstanding any other provision of the Plan, no Option shall be exercisable
in whole or in part before the date the Plan is approved by the stockholders of
the Company as provided in Section 5.1 hereof.
10.4 Termination of Employment or Other Relationship. Upon the
termination (i) of the employment of a Grantee with the Company or a Service
Provider or (ii) of a Service Provider's relationship with the Company, other
than, in the case of individuals, by reason of death or "permanent and total
disability" (within the meaning of Section 22(e)(3) of the Code), except as
otherwise provided by the Board in the applicable Award Agreement, any Option or
portion thereof held by such Grantee that has not vested in accordance with the
provisions of Section 10.1
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hereof shall terminate immediately, and any Option or portion thereof that has
vested in accordance with the provisions of Section 10.1 hereof but has not been
exercised shall terminate at the close of business at the end of three months
following the Grantee's termination of service, employment, or other
relationship, unless the Board, in its discretion, extends the period during
which the Option may be exercised (which period may not be extended beyond the
original term of the Option). Upon termination of an Option or portion thereof,
the Grantee shall have no further right to purchase shares of Stock pursuant to
such Option or portion thereof. Whether a leave of absence or leave on military
or government service shall constitute a termination of employment for purposes
of the Plan shall be determined by the Board, which determination shall be final
and conclusive. For purposes of the Plan, a termination of employment, service
or other relationship shall not be deemed to occur if the Grantee is immediately
thereafter employed with an Affiliate of the Company or any other Service
Provider, or is engaged as a Service Provider. The Board's reasonable and good
faith determination whether a termination of a Service Provider's relationship
with the Company shall have occurred shall be final and conclusive.
10.5 Rights in the Event of Death. If a Grantee dies while employed by
the Company or a Service Provider, or while serving as a Service Provider,
except as otherwise provided by the Board in the applicable Award Agreement, all
Options granted to such Grantee shall fully vest on the date of death, and the
executors or administrators or legatees or distributees of such Grantee's estate
shall have the right, at any time within one year after the date of such
Grantee's death (or such longer period as the Board, in its discretion, may
determine before the expiration of such one-year period) and before termination
of the Option pursuant to Section 10.2 above, to exercise any Option held by
such Grantee at the date of such Grantee's death.
10.6 Rights in the Event of Disability. If a Grantee terminates
employment with the Company or a Service Provider, or (if the Grantee is a
Service Provider who is an individual) ceases to provide services to the
Company, in either case by reason of the "permanent and total disability"
(within the meaning of Section 22(e)(3) of the Code) of such Grantee, except as
otherwise provided by the Board in the applicable Award Agreement, such
Grantee's Options shall continue to vest, and shall be exercisable to the extent
that they are vested, for a period of one year after such termination of
employment or service (or such longer period as the Board, in its discretion,
may determine before the expiration of such one-year period), subject to earlier
termination of the Option as provided in Section 10.2 above. The Board's
reasonable and good faith determination whether a termination of employment or
service is to be considered by reason of "permanent and total disability" for
purposes of the Plan shall be final and conclusive.
10.7 Limitations on Exercise of Option. Notwithstanding any other
provision of the Plan, in no event may any Option be exercised, in whole or in
part, before the date the Plan is approved by the stockholders of the Company as
provided herein, or after 10 years following the date upon which the Option is
granted, or after the occurrence of an event referred to in Section 17 hereof
which results in termination of the Option.
10.8 Method of Exercise. An Option that is exercisable hereunder may be
exercised by delivery to the Company on any business day, at its principal
office, addressed to the attention of the Board, of written notice of exercise,
which notice shall specify the number of shares with respect to which the Option
is being exercised, and shall be accompanied by payment in full of the Option
Price of the shares for which the Option is being exercised, except as provided
below. The minimum number of shares of Stock with respect to which an Option may
be exercised, in whole or in part, at any time shall be the lesser of (i) 100
shares or such lesser number set forth in the applicable Award Agreement and
(ii) the maximum number of shares available for purchase under the Option at the
time of exercise. Payment of the Option Price for the shares of Stock purchased
pursuant to the exercise of an Option shall be made (i) in cash or in cash
equivalents; (ii) subject to the provisions of this Section 10.8 and except as
otherwise provided in the applicable Award Agreement, through the tender to the
Company of shares of Stock, which shares shall be valued, for purposes of
determining the extent to which the Option Price has been paid thereby, at their
Fair Market Value on the date of exercise; (iii) except as otherwise provided in
the applicable Award Agreement, if at the time of exercise the Stock is publicly
traded on an established securities market or exchange, by delivering a written
direction to the Company that the Option be exercised pursuant to a "cashless"
exercise/sale procedure (pursuant to which funds to pay for exercise of the
option are delivered to the Company by a broker upon receipt of stock
certificates from the Company) or a cashless exercise/loan procedure (pursuant
to which the Grantees would obtain a margin loan from a broker to fund the
exercise) through a licensed broker acceptable to the Company whereby the stock
certificate or certificates for the shares of Stock for which the Option is
exercised will be delivered to such broker as the agent for the individual
exercising the Option and the broker will deliver to the Company cash (or cash
equivalents acceptable to the Company) equal to the Option Price for the shares
of Stock
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<PAGE>
purchased pursuant to the exercise of the Option plus the amount (if any) of
federal and other taxes that the Company, may, in its judgment, be required to
withhold with respect to the exercise of the Option; or (iv) by a combination of
the methods described in (i), (ii) and (iii). The Grantee's right to pay the
exercise price by exchange of Stock, however, is subject to the following
limitation: the Stock being exchanged must have been held by the Grantee for at
least six months. An attempt to exercise any Option granted hereunder other than
as set forth above shall be invalid and of no force and effect. Promptly after
the exercise of an Option and the payment in full of the Option Price of the
shares of Stock covered thereby, the individual exercising the Option shall be
entitled to the issuance of a Stock certificate or certificates evidencing his
ownership of such shares. A separate Stock certificate or certificates shall be
issued for any shares purchased pursuant to the exercise of an Option which is
an Incentive Stock Option, which certificate or certificates shall not include
any shares which were purchased pursuant to the exercise of an Option which is
not an Incentive Stock Option. Unless otherwise specified in the applicable
Award Agreement, an individual holding or exercising an Option shall have none
of the rights of a stockholder until the shares of Stock covered thereby are
fully paid and issued to him and, except as provided in Section 17 below, no
adjustment shall be made for dividends or other rights for which the record date
is before the date of such issuance. Shares issued pursuant to the exercise
shall be subject to applicable restrictions pursuant to Section 22 hereof.
10.9 Delivery of Stock Certificates. Promptly after the exercise of an
Option by a Grantee and the payment in full of the Option Price, such Grantee
shall be entitled to the issuance of a stock certificate or certificates
evidencing his or her ownership of the shares of Stock subject to the Option.
11. MANAGEMENT RECOGNITION PLAN TRUST
The Company may establish the Trust to acquire shares of Stock for
issuance pursuant to the Management Recognition Plan portion of the Plan in
connection with Grants of Restricted Stock and Restricted Stock Units. No
Grantee shall have any right in or claim to any assets of the Trust except as
expressly provided in an Award Agreement. The Company shall not be required to
establish the Trust or to make any contributions to the Trust if it is
established. Any funds or other assets remaining in the Trust after the
termination of the Plan and all Grants of Restricted Stock and Restricted Stock
Units hereunder shall be distributed to the Company.
12. TRANSFERABILITY OF OPTIONS
During the lifetime of a Grantee, only such Grantee (or, in the event of
legal incapacity or incompetence, the guardian or legal representative of the
Grantee) may exercise the Option, except as otherwise specifically permitted by
this Section 12. No Option shall be assignable or transferable other than by
will or in accordance with the laws of descent and distribution; provided,
however, if so provided in the applicable Award Agreement, and to the extent the
transfer is in compliance with any applicable restrictions on transfers
including restrictions imposed pursuant to Section 22 hereof, the Board may
permit a Grantee to transfer, assign or pledge a non-qualified Option subject to
such restrictions as the Board shall specify by inclusion of appropriate
language in the Award Agreement with respect to a particular Option, provided
that subsequent transfers of transferred Options are prohibited except those in
accordance with this Section 12 or by will or the laws of descent and
distribution and each transferee shall be subject to the terms and conditions of
the Plan and Award Agreement.
13. RESTRICTED STOCK
13.1 Grant of Restricted Stock or Restricted Stock Units. The Board may
from time to time grant Restricted Stock or Restricted Stock Units to persons
eligible to receive such Grants as set forth in Section 6 hereof, subject to
such restrictions, conditions and other terms as the Board may determine.
13.2 Restrictions. At the time a Grant of Restricted Stock or Restricted
Stock Units is made, the Board shall establish a period of time (the "Restricted
Period") applicable to such Restricted Stock or Restricted Stock Units. Each
Grant of Restricted Stock or Restricted Stock Units may be subject to a
different Restricted Period. The Board may, in its sole discretion, at the time
a Grant of Restricted Stock or Restricted Stock Units is made, prescribe
restrictions in addition to or other than the expiration of the Restricted
Period, including the satisfaction of corporate or individual performance
objectives, which may be applicable to all or any portion of the Restricted
Stock or Restricted Stock Units. Such performance objectives shall be
established in writing by the Board before the 90th day of the year in which the
Grant is made and while the outcome is substantially uncertain. Performance
objectives shall be based on one or more
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of the following criteria: Stock price, income, assets and liabilities,
stockholders equity, market share, revenue, operating expenses, financial
ratings by outside agencies, earnings per share, or return on assets, equity or
investments of the Company or, except with respect to Stock price, a Subsidiary.
Performance objectives may include positive results, maintaining the status quo
or limiting economic losses. The Board also may, in its sole discretion, shorten
or terminate the Restricted Period or waive any other restrictions applicable to
all or a portion of the Restricted Stock or Restricted Stock Units. Neither
Restricted Stock nor Restricted Stock Units may be sold, transferred, assigned,
pledged or otherwise encumbered or disposed of during the Restricted Period or
before the satisfaction of any other restrictions prescribed by the Board with
respect to such Restricted Stock or Restricted Stock Units.
13.3 Restricted Stock Certificates. The Company shall issue, in the name
of each Grantee to whom Restricted Stock has been granted, stock certificates
representing the total number of shares of Restricted Stock granted to the
Grantee, as soon as reasonably practicable after the Grant Date. Such
certificates shall be held by the Trust, if a Trust is created, or otherwise by
the Secretary of the Company for the Grantee's benefit until such time as the
Restricted Stock is forfeited, or all applicable restrictions have lapsed or
been waived.
13.4 Rights of Holders of Restricted Stock. Unless the Board otherwise
provides in an Award Agreement, holders of Restricted Stock shall have the right
to vote such Stock and the right to receive any dividends declared or paid with
respect to such Stock. The Board may provide that any dividends paid on
Restricted Stock must be reinvested in shares of Stock, which may or may not be
subject to the same vesting conditions and restrictions applicable to such
Restricted Stock. All distributions, if any, received by a Grantee with respect
to Restricted Stock as a result of any stock split, stock dividend, combination
of shares, or other similar transaction shall be subject to the restrictions
applicable to the original Grant.
13.5 Rights of Holders of Restricted Stock Units. Unless the Board
otherwise provides in an Award Agreement, holders of Restricted Stock Units
shall have no rights as stockholders of the Company. The Board may provide in an
Award Agreement evidencing a Grant of Restricted Stock Units that the holder of
such Restricted Stock Units shall be entitled to receive, upon the Company's
payment of a cash dividend on its outstanding Stock, a cash payment for each
Restricted Stock Unit held equal to the per-share dividend paid on the Stock.
Such Award Agreement may also provide that such cash payment will be deemed
reinvested in additional Restricted Stock Units at a price per unit equal to the
Fair Market Value of a share of Stock on the date that such dividend is paid.
13.6 Termination of Employment or Other Relationship. Upon the
termination of the employment of a Grantee with the Company or a Service
Provider, or of a Service Provider's relationship with the Company, in either
case other than, in the case of individuals, by reason of death or "permanent
and total disability" (within the meaning of Section 22(e)(3) of the Code), any
Restricted Stock or Restricted Stock Units held by such Grantee that has not
vested, or with respect to which all applicable restrictions and conditions have
not lapsed, shall immediately be deemed forfeited, unless the Board, in its
discretion, determines otherwise. Upon forfeiture of Restricted Stock or
Restricted Stock Units, the Grantee shall have no further rights with respect to
such Grant, including but not limited to any right to vote Restricted Stock or
any right to receive dividends with respect to shares of Restricted Stock or
Restricted Stock Units. Whether a leave of absence or leave on military or
government service shall constitute a termination of employment for purposes of
the Plan shall be determined by the Board, which determination shall be final
and conclusive. For purposes of the Plan, a termination of employment, service
or other relationship shall not be deemed to occur if the Grantee is immediately
thereafter employed with the Company or any other Service Provider, or is
engaged as a Service Provider. The Board's reasonable and good faith
determination whether a termination of a Service Provider's relationship with
the Company shall have occurred shall be final and conclusive.
13.7 Rights in the Event of Death. If a Grantee dies while employed by
the Company or a Service Provider or while serving as a Service Provider, except
as provided in the applicable Award Agreement, all Restricted Stock or
Restricted Stock Units granted to such Grantee shall fully vest on the date of
death, and the shares of Stock represented thereby shall be deliverable in
accordance with the terms of the Plan to the executors, administrators, legatees
or distributees of the Grantee's estate.
13.8 Rights in the Event of Disability. If a Grantee terminates
employment with the Company or a Service Provider, or (if the Grantee is a
Service Provider who is an individual) ceases to provide services to the
Company, in either case by reason of the "permanent and total disability"
(within the meaning of Section 22(e)(3) of the Code) of such Grantee, except as
provided in the applicable Award Agreement, such Grantee's Restricted
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Stock or Restricted Stock Units shall continue to vest in accordance with the
applicable Award Agreement for a period of one year after such termination of
employment or service (or such longer period as the Board, in its discretion,
may determine before the expiration of such one-year period), subject to the
earlier forfeiture of such Restricted Stock or Restricted Stock Units in
accordance with the terms of the applicable Award Agreement. The Board's
reasonable and good faith determination whether a termination of employment or
service is to be considered by reason of "permanent and total disability" for
purposes of the Plan shall be final and conclusive.
13.9 Delivery of Stock and Payment Therefor. Upon the expiration or
termination of the Restricted Period and the satisfaction of any other
conditions prescribed by the Board, the restrictions applicable to shares of
Restricted Stock or Restricted Stock Units shall lapse, and, upon payment by the
Grantee to the Company, in cash or by check, of the aggregate par value of the
shares of Stock represented by such Restricted Stock or Restricted Stock Units,
a stock certificate for such shares shall be delivered, free of all such
restrictions, to the Grantee or the Grantee's beneficiary or estate, as the case
may be.
14. PARACHUTE LIMITATIONS
Notwithstanding any other provision of the Plan or of any other
agreement, contract, or understanding heretofore or hereafter entered into by a
Grantee with the Company or any Subsidiary, except an agreement, contract, or
understanding hereafter entered into that expressly modifies or excludes
application of this paragraph (an "Other Agreement"), and notwithstanding any
formal or informal plan or other arrangement for the direct or indirect
provision of compensation to the Grantee (including groups or classes of
participants or beneficiaries of which the Grantee is a member), whether or not
such compensation is deferred, is in cash, or is in the form of a benefit to or
for the Grantee (a "Benefit Arrangement"), if the Grantee is a "disqualified
individual," as defined in Section 280G(c) of the Code, any Option, Restricted
Stock or Restricted Stock Unit held by that Grantee and any right to receive any
payment or other benefit under this Plan shall not become exercisable or vested
(i) to the extent that such right to exercise, vesting, payment, or benefit,
taking into account all other rights, payments, or benefits to or for the
Grantee under this Plan, all Other Agreements, and all Benefit Arrangements,
would cause any payment or benefit to the Grantee under this Plan to be
considered a "parachute payment" within the meaning of Section 280G(b)(2) of the
Code as then in effect (a "Parachute Payment") and (ii) if, as a result of
receiving a Parachute Payment, the aggregate after-tax amounts received by the
Grantee under this Plan, all Other Agreements, and all Benefit Arrangements
would be less than the maximum after-tax amount that could be received by the
Grantee without causing any such payment or benefit to be considered a Parachute
Payment. In the event that the receipt of any such right to exercise, vesting,
payment, or benefit under this Plan, in conjunction with all other rights,
payments, or benefits to or for the Grantee under any Other Agreement or any
Benefit Arrangement would cause the Grantee to be considered to have received a
Parachute Payment under this Plan that would have the effect of decreasing the
after-tax amount received by the Grantee as described in clause (ii) of the
preceding sentence, then the Grantee shall have the right, in the Grantee's sole
discretion, to designate those rights, payments, or benefits under this Plan,
any Other Agreements, and any Benefit Arrangements that should be reduced or
eliminated so as to avoid having the payment or benefit to the Grantee under
this Plan be deemed to be a Parachute Payment.
15. REQUIREMENTS OF LAW
15.1 General. The Company shall not be required to sell or issue any
shares of Stock under any Grant if the sale or issuance of such shares would
constitute a violation by the Grantee, any other individual exercising an
Option, or the Company of any provision of any law or regulation of any
governmental authority, including without limitation any United States federal
or state securities laws or regulations. If at any time the Company shall
determine, in its discretion, that the listing, registration or qualification of
any shares subject to a Grant upon any securities exchange or under any
governmental regulatory body is necessary or desirable as a condition of, or in
connection with, the issuance or purchase of shares hereunder, no shares of
Stock may be issued or sold to the Grantee or any other individual exercising an
Option pursuant to such Grant unless such listing, registration, qualification,
consent or approval shall have been effected or obtained free of any conditions
not acceptable to the Company, and any delay caused thereby shall in no way
affect the date of termination of the Grant. Specifically, in connection with
the Securities Act, upon the exercise of any Option or the delivery of any
shares of Restricted Stock or Stock underlying Restricted Stock Units, unless a
registration statement under such Act is in effect with respect to the shares of
Stock covered by such Grant, the Company shall not be required to sell or issue
such shares unless the Board has received evidence satisfactory to it that the
Grantee or any other individual exercising an Option may acquire such shares
pursuant to an exemption from
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registration under the Securities Act. Any determination in this connection by
the Board shall be final, binding, and conclusive. The Company may, but shall in
no event be obligated to, register any securities covered hereby pursuant to the
Securities Act. The Company shall not be obligated to take any affirmative
action in order to cause the exercise of an Option or the issuance of shares of
Stock pursuant to the Plan to comply with any law or regulation of any
governmental authority. As to any jurisdiction that expressly imposes the
requirement that an Option shall not be exercisable until the shares of Stock
covered by such Option are registered or are exempt from registration, the
exercise of such Option (under circumstances in which the laws of such
jurisdiction apply) shall be deemed conditioned upon the effectiveness of such
registration or the availability of such an exemption.
15.2 Rule 16b-3. It is the intent of the Company that, during any time
when the Company has a class of equity securities registered under Section 12 of
the Exchange Act, Grants pursuant to the Plan and the exercise of Options
granted hereunder will qualify for the exemption provided by Rule 16b-3 under
the Exchange Act. To the extent that any provision of the Plan or action by the
Board does not comply with the requirements of Rule 16b-3, it shall be deemed
inoperative to the extent permitted by law and deemed advisable by the Board,
and shall not affect the validity of the Plan. In the event that Rule 16b-3 is
revised or replaced, the Board may exercise its discretion to modify this Plan
in any respect necessary to satisfy the requirements of, or to take advantage of
any features of, the revised exemption or its replacement.
16. AMENDMENT AND TERMINATION OF THE PLAN
The Board may, at any time and from time to time, amend, suspend, or
terminate the Plan as to any shares of Stock as to which Grants have not been
made; provided, however, that the Board shall not, without approval of the
Company's stockholders, increase the number of shares available for the grant of
Incentive Stock Options or change the eligibility requirements of the Plan
relating to the grant of Incentive Stock Options. The Company may retain the
right in an Award Agreement to cause a forfeiture of the gain realized by a
Grantee on account of the Grantee taking actions in "competition with the
Company," as defined in the applicable Award Agreement. Furthermore, the Company
may annul a Grant if the Grantee is terminated "for cause" as defined in the
applicable Award Agreement. Except as permitted under this Section 16 or Section
17 hereof, no amendment, suspension, or termination of the Plan shall, without
the consent of the Grantee, alter or impair rights or obligations under any
Grant theretofore awarded under the Plan.
17. EFFECT OF CHANGES IN CAPITALIZATION
17.1 Changes in Stock. If the number of outstanding shares of Stock is
increased or decreased or the shares of Stock are changed into or exchanged for
a different number or kind of shares or other securities of the Company on
account of any recapitalization, reclassification, stock split, reverse split,
combination of shares, exchange of shares, stock dividend or other distribution
payable in capital stock, or other increase or decrease in such shares effected
without receipt of consideration by the Company occurring after the Effective
Date, the number and kinds of shares for which Grants of Options, Restricted
Stock and Restricted Stock Units may be made under the Plan shall be adjusted
proportionately and accordingly by the Company. In addition, the number and kind
of shares for which Grants are outstanding shall be adjusted proportionately and
accordingly so that the proportionate interest of the Grantee immediately
following such event shall, to the extent practicable, be the same as
immediately before such event. In the event of any spin-off of a Subsidiary of
the Company, the Board also may adjust the Option as provided in the Plan. Any
adjustment in outstanding Options under this Section 17.2 shall not change the
aggregate Option Price payable with respect to shares that are subject to the
unexercised portion of the Option outstanding but shall include a corresponding
proportionate adjustment in the Option Price per share.
17.2 Reorganization in which the Company is the Surviving Entity and in
which no Acquisition of Control Occurs. Subject to and except as otherwise
provided in Section 17.3 hereof, if the Company shall be the surviving entity in
any reorganization, merger, or consolidation of the Company with one or more
other entities, any Option theretofore granted pursuant to the Plan shall
pertain to and apply to the securities to which a holder of the number of shares
of Stock subject to such Option would have been entitled immediately following
such reorganization, merger, or consolidation, with a corresponding
proportionate adjustment of the Option Price per share so that the aggregate
Option Price thereafter shall be the same as the aggregate Option Price of the
shares remaining subject to the Option immediately before such reorganization,
merger, or consolidation. Subject to any contrary language in an Award
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Agreement evidencing a Grant of Restricted Stock, any restrictions applicable to
such Restricted Stock shall apply as well to any replacement shares received by
the Grantee as a result of the reorganization, merger or consolidation.
17.3 Dissolution, Reorganization in which the Company is not the
Surviving Entity, Sale of Assets, Acquisition of Control, Etc. Upon the
dissolution or liquidation of the Company or upon a merger, consolidation, or
reorganization of the Company with one or more other entities in which the
Company is not the surviving entity, or upon a sale of all or substantially all
of the assets of the Company to another entity, or upon any transaction
(including, without limitation, a merger or reorganization in which the Company
is the surviving entity) that results in any person or entity (or persons or
entities acting as a group or otherwise in concert), other than a person who is
a stockholder of the Company as of the Effective Date, owning 80% or more of the
combined voting power of all classes of securities of the Company, subject to
Section 14 hereof and to applicable regulatory requirements, (i) all outstanding
shares of Restricted Stock and Restricted Stock Units shall be deemed to have
vested, and all restrictions and conditions applicable to such shares of
Restricted Stock and Restricted Stock Units shall be deemed to have lapsed,
immediately before the occurrence of such event, and (ii) all Options
outstanding hereunder shall become immediately exercisable for a period of not
less than 15 days immediately preceding the scheduled consummation of the event,
except to the extent provision is made in writing in connection with such
transaction for the continuation of the Plan or the assumption of such Options,
Restricted Stock and Restricted Stock Units theretofore granted, or for the
substitution for such Options, Restricted Stock and Restricted Stock Units of
new options, restricted stock and restricted stock units covering the stock of a
successor corporation, or a parent or subsidiary thereof, with appropriate
adjustments as to the number and kinds of shares or units and exercise prices,
in which event the Plan and Options, Restricted Stock and Restricted Stock Units
theretofore granted shall continue in the manner and under the terms so
provided. Any exercise of an Option following the giving of the notice required
by the last sentence of this Section 17.3 shall be conditioned upon the
consummation of the event and shall be effective only immediately before the
consummation of the event, unless such Grant would have expired during such
period without regard to this Section 17.3. Upon consummation of any such event,
the Plan and all outstanding but unexercised Options shall terminate, except to
the extent the Plan is continued or of the assumption of or substitution for
such Options theretofore granted. The Board shall send written notice of an
event that will result in such a termination to all individuals who hold Options
not later than the time at which the Company gives notice thereof to its
stockholders.
17.4 Adjustments. Adjustments under this Section 17 related to shares of
Stock or securities of the Company shall be made by the Board, whose reasonable
and good faith determination in that respect shall be final, binding and
conclusive. No fractional shares or other securities shall be issued pursuant to
any such adjustment, and any fractions resulting from any such adjustment shall
be eliminated in each case by rounding downward to the nearest whole share.
17.5 No Limitations on Company. The making of Grants pursuant to the
Plan shall not affect or limit in any way the right or power of the Company to
make adjustments, reclassifications, reorganizations, or changes of its capital
or business structure or to merge, consolidate, dissolve, or liquidate, or to
sell or transfer all or any part of its business or assets.
18. DISCLAIMER OF RIGHTS
No provision in the Plan or in any Grant or Award Agreement shall be
construed to confer upon any individual the right to remain in the employ or
service of the Company or any Subsidiary or Affiliate of the Company, or to
interfere in any way with any contractual or other right or authority of the
Company or any Service Provider either to increase or decrease the compensation
or other payments to any individual at any time, or to terminate any employment
or other relationship between any individual and the Company, Subsidiary,
Affiliate or a Service Provider. No provision in the Plan or in any Grant
awarded or Award Agreement entered into pursuant to the Plan shall be construed
to confer upon any individual the right to remain in the service of the Company
as a director, or shall interfere with or restrict in any way the rights of the
Company's stockholders to remove any director pursuant to the provisions of the
Delaware General Corporation Law, as from time to time amended. In addition,
notwithstanding anything contained in the Plan to the contrary, unless otherwise
stated in the applicable Award Agreement, no Grant awarded under the Plan shall
be affected by any change of duties or position of the Grantee (including a
transfer to or from the Company or a Service Provider), so long as such Grantee
continues to be a person who is eligible to receive a Grant hereunder. The
obligation of the Company to pay any benefits pursuant to this Plan shall be
interpreted as a contractual obligation to pay only those amounts described
herein, in the manner and under the conditions prescribed herein. The Plan shall
in
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no way be interpreted to require the Company to transfer any amounts to the
Trust or any other third party trustee or otherwise hold any amounts in trust or
escrow for payment to any participant or beneficiary under the terms of the
Plan.
19. NONEXCLUSIVITY OF THE PLAN
Neither the adoption of the Plan nor the submission of the Plan to the
stockholders of the Company for approval shall be construed as creating any
limitations upon the right and authority of the Board to adopt such other
incentive compensation arrangements (which arrangements may be applicable either
generally to a class or classes of individuals or specifically to a particular
individual or particular individuals) as the Board in its discretion determines
desirable, including, without limitation, the granting of stock options, stock
appreciation rights, restricted stock and restricted stock units otherwise than
under the Plan.
20. WITHHOLDING TAXES
The Company, a Subsidiary or a Service Provider, as the case may be,
shall have the right to deduct from payments of any kind otherwise due to a
Grantee any taxes of any kind required by applicable law to be withheld with
respect to the vesting of or other lapse of restrictions applicable to
Restricted Stock or Restricted Stock Units or upon the issuance of any shares of
Stock upon the exercise of an Option. At the time of such vesting, lapse, or
exercise, the Grantee shall pay to the Company, the Subsidiary or the Service
Provider, as the case may be, any amount that the Company, the Subsidiary or the
Service Provider may reasonably determine to be necessary to satisfy such
withholding obligation. Subject to the prior approval of the Company, the
Subsidiary or the Service Provider, which may be withheld by the Company, the
Subsidiary or the Service Provider, as the case may be, in its sole discretion,
the Grantee may elect to satisfy such obligations, in whole or in part, (i) by
causing the Company, the Subsidiary or the Service Provider to withhold shares
of Stock otherwise issuable pursuant to the Grantee or (ii) by delivering to the
Company, the Subsidiary or the Service Provider shares of Stock already owned by
the Grantee. The shares of Stock so delivered or withheld shall have an
aggregate Fair Market Value equal to such withholding obligations, reduced by
the amount of any cash paid by the Grantee. The Fair Market Value of the shares
of Stock used to satisfy such withholding obligation shall be determined by the
Company, the Subsidiary or the Service Provider as of the date that the amount
of tax to be withheld is to be determined. Except as otherwise determined by the
Board, a Grantee may not satisfy his or her withholding obligation with shares
of Stock that are subject to any repurchase, forfeiture, unfulfilled vesting, or
other similar requirements.
21. CAPTIONS
The use of captions in this Plan or any Award Agreement is for the
convenience of reference only and shall not affect the meaning of any provision
of the Plan or such Award Agreement.
22. OTHER PROVISIONS
The Board may, in its sole discretion, include additional terms,
conditions and other provisions in any Grant, all of which shall be reflected in
the Award Agreement with respect to such Grant or any amendment thereto,
including without limitation restrictions on transfer, repurchase rights,
commitments to pay cash bonuses, arrangements for loans or transfers of property
to Grantees upon exercise of Options, a requirement to enter into any applicable
stockholders agreement by and among the Company and any of its stockholders or
such other provisions as shall be determined by the Board; provided, however,
that such additional provisions shall not be inconsistent with any term or
condition of the Plan and such additional provisions shall not cause any
Incentive Stock Option granted under the Plan to fail to qualify as an Incentive
Stock Option within the meaning of Section 422 of the Code and no such amendment
to an Award Agreement shall be made without the consent of the Grantee thereof.
23. NUMBER AND GENDER
With respect to words used in this Plan, the singular form shall include
the plural form, the masculine gender shall include the feminine gender, etc.,
as the context requires.
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24. SEVERABILITY
If any provision of the Plan or any Award Agreement shall be determined
to be illegal or unenforceable by any court of law in any jurisdiction, the
remaining provisions hereof and thereof shall be severable and enforceable in
accordance with their terms, and all provisions shall remain enforceable in any
other jurisdiction.
25. GOVERNING LAW
The validity and construction of this Plan and the instruments
evidencing the Grants awarded hereunder shall be governed by the laws of the
United States, to the extent applicable, and otherwise of the State of Delaware
(other than any choice of law rule that would cause the laws of another
jurisdiction apply).
* * *
The Plan was duly approved by the Board of Directors of the Company on
the 29th day of July, 1999.
/s/ Kevin M. O'Bryan
--------------------------------
Secretary of the Company
The Plan was duly approved by the stockholders of the Company on the 1st
day of October, 1999.
--------------------------------
Secretary of the Company
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TROY FINANCIAL CORPORATION
LONG-TERM EQUITY COMPENSATION PLAN
TABLE OF CONTENTS
Page
----
1. PURPOSE....................................................................1
2. DEFINITIONS................................................................1
3. ADMINISTRATION OF THE PLAN.................................................3
4. STOCK SUBJECT TO THE PLAN..................................................4
5. EFFECTIVE DATE AND TERM OF THE PLAN........................................4
6. DISCRETIONARY GRANTS.......................................................4
7. LIMITATIONS ON GRANTS......................................................4
8. AWARD AGREEMENT............................................................5
9. OPTION PRICE...............................................................5
10. VESTING, TERM AND EXERCISE OF OPTIONS......................................5
11. MANAGEMENT RECOGNITION PLAN TRUST..........................................7
12. TRANSFERABILITY OF OPTIONS.................................................7
13. RESTRICTED STOCK...........................................................7
14. PARACHUTE LIMITATIONS......................................................9
15. REQUIREMENTS OF LAW........................................................9
16. AMENDMENT AND TERMINATION OF THE PLAN.....................................10
17. EFFECT OF CHANGES IN CAPITALIZATION.......................................10
18. DISCLAIMER OF RIGHTS......................................................11
19. NONEXCLUSIVITY OF THE PLAN................................................12
20. WITHHOLDING TAXES.........................................................12
21. CAPTIONS..................................................................12
22. OTHER PROVISIONS..........................................................12
23. NUMBER AND GENDER.........................................................12
24. SEVERABILITY..............................................................13
25. GOVERNING LAW.............................................................13
<PAGE>
REVOCABLE PROXY
TROY FINANCIAL CORPORATION
THIS PROXY IS BEING SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS.
The undersigned stockholder hereby appoints a member of Pattison,
Sampson, Ginsberg & Griffin, P.C., Troy, New York, as proxy, such person being
duly appointed by the board of directors with the power to appoint an
appropriate substitute, and hereby authorizes such proxy to represent the
undersigned at the Special Meeting of Stockholders of the Company to be held at
The Troy Savings Bank Music Hall, 32 Second Street, Troy, New York 12180, on
Friday, October 1, 1999, at 10:00 a.m., local time, and at any adjournments or
postponements thereof, in respect of all shares of the common stock of the
Company which the undersigned may be entitled to vote, on the following matters:
1. To approve and adopt the Company's Long-Term Equity Compensation Plan:
|_| FOR |_| AGAINST |_| ABSTAIN
2. In their discretion, on any other matters that may properly come before the
meeting, or any adjournments or postponements thereof, in accordance with the
recommendations of a majority of the board of directors.
(Continued and to be dated and signed on reverse side.)
<PAGE>
(continued from other side)
This proxy, when properly executed, will be voted as directed herein by
the undersigned stockholder. However, if no direction is given, this proxy will
be voted FOR the approval and adoption of the Company's Long-Term Equity
Compensation Plan.
The undersigned hereby acknowledges prior receipt of a copy of the
Notice of Special Meeting of Stockholders and Proxy Statement dated August 27,
1999, including the attachments thereto, and hereby revokes any proxy or proxies
heretofore given. This Proxy may be revoked at any time before it is voted by
delivering to the Corporate Secretary of the Company either a written revocation
of proxy, or a duly executed proxy bearing a later date, or by appearing at the
special meeting and voting in person.
If you receive more than one proxy form, please sign and return all
cards in the accompanying envelope.
|_| I PLAN TO ATTEND THE OCTOBER 1, 1999
SPECIAL STOCKHOLDERS MEETING
Date: ----------------------------- , 1999.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Signature of Stockholder(s) or Authorized
Representative(s)
Please date and sign exactly as name appears hereon. Each executor,
administrator, trustee, guardian, attorney-in-fact, and other fiduciary should
sign and indicate his or her full title. In the case of stock ownership in the
name of two or more persons, both persons should sign.
PLEASE MARK, DATE AND SIGN THIS PROXY AND RETURN IT PROMPTLY TO ENSURE A QUORUM
AT THE MEETING. IT IS IMPORTANT WHETHER YOU OWN FEW OR MANY SHARES. DELAY IN
RETURNING YOUR PROXY MAY SUBJECT THE COMPANY TO ADDITIONAL EXPENSE.
