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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934.
Date of Report October 7, 1996
C-TEC CORPORATION
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(Exact name of registrant as specified in its charter)
Pennsylvania 23-2093008
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(State or other jurisdiction (Commission (IRS Employer
of Incorporation) File Number) Identification No.)
105 Carnegie Center, Princeton, New Jersey 08540
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (609) 734-3700
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(Former name or former address, if changed since last report)
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Item 5. Other Events.
On October 7, 1996 the Board of Directors of C-TEC Corporation adopted
the C-TEC Corporation 1996 Equity Incentive Plan providing equity-based
compensation opportunities to its key employees. In addition, the Board of
Directors also adopted the C-TEC Corporation 1996 Bonus Plan in order to provide
an incentive based short-term bonus program for its key employees as well as
serve as a qualified performance-based compensation program under Section 162
(m) of the Internal Revenue Code. Both plans are subject to shareholder
approval.
SIGNATURES
By: /s/ Michael J. Mahoney
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Name: Michael J. Mahoney
Title: President and Chief Operating Officer
Date: October 11, 1996
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C-TEC CORPORATION
1996 EQUITY INCENTIVE PLAN
1. Purpose
The purpose of the Plan is to provide a means through which the Company may
attract able persons to become and remain directors of the Company and enter and
remain in the employ of the Company and its Subsidiaries and to provide a means
whereby they can acquire and maintain Common Stock ownership, or be paid
incentive compensation measured by reference to the value of Common Stock,
thereby strengthening their commitment to the welfare of the Company and
promoting an identity of interest between stockholders of the Company and these
employees, directors and consultants.
So that the appropriate incentive can be provided, the Plan provides for
granting Incentive Stock Options, Nonqualified Stock Options, Outperformance
Options, Stock Appreciation Rights, Restricted Stock Awards, Phantom Stock Unit
Awards, Performance Share Unit Awards and other Stock-based awards, or any
combination of the foregoing.
2. Definitions
The following definitions shall be applicable throughout the Plan.
(a) "Award" means, individually or collectively, any Incentive Stock
Option, Nonqualified Stock Option, Outperformance Option, Stock Appreciation
Right, Restricted Stock Award, Phantom Stock Unit Award, Performance Share Unit
Award or any other Stock-based award under the Plan.
(b) "Award Agreement" means the agreement between the Company and a
Participant who has been granted an Award which defines the rights and
obligations of the parties with respect to such Award.
(c) "Award Period" means a period of time within which performance is
measured for the purpose of determining whether an Award of Performance Share
Units has been earned.
(d) "Board" means the Board of Directors of the Company.
(e) "Cause" means the Company or a Subsidiary (as the case may be) having
cause to terminate a Participant's employment or service in accordance with the
provisions of any existing employment, consulting or any other agreement between
the
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Participant and the Company or a Subsidiary (as the case may be) or, in the
absence of such an employment, consulting or other agreement, upon (i) the
determination by the Company or a Subsidiary (as the case may be) that the
Participant has ceased to perform his duties to the Company or a Subsidiary (as
the case may be)(other than as a result of his incapacity due to physical or
mental illness or injury), which failure amounts to intentional and extended
neglect of his duties, (ii) the Committee's determination that the Participant
has engaged in conduct materially injurious to the Company, or (iii) the
Participant having pled no contest to a charge of a felony or having been
convicted of a felony.
(f) A "Change in Control" shall be deemed to occur, unless the Board
otherwise directs by prior resolution, in the event that:
(i) Except as provided in subparagraph (v) of this definition, any
person, entity or group (within the meaning of Section 13(d)(3)
of the Exchange Act, other than Peter Kiewit & Sons, Inc. and its
affiliates, becomes, directly or indirectly, in a single
transaction or in a related series of transactions by way of
merger, consolidation or other business combination or otherwise,
the "beneficial owner" (as defined in Rule 13d-3 under the
Exchange Act) of the capital stock of the Company entitled to
more than 50% of the aggregate votes represented by the capital
stock of all classes of common stock of the Company entitled to
vote generally in the election of directors ("Outstanding Voting
Securities"); provided, however, that the following acquisitions
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will not constitute a Change of Control: (A) any acquisition by
any employee benefit plan (or related trust) sponsored or
maintained by the Company or any Subsidiary or (b) any
acquisition by any corporation pursuant to a reorganization,
merger or consolidation, if, following such reorganization,
merger or consolidation, the conditions described in clauses (A)
and (B) of clause (iii) of this definition are satisfied; or
(ii) Individuals who, as of the effective date of the Plan, constitute
the Board of Directors of the Company (the "Incumbent Board")
cease for any reason to constitute at least a majority of the
Company's Board of Directors; provided, however, that any
individual becoming a director subsequent to the date hereof
whose election, or nomination for election by the Company's
shareholders was approved by a vote of at least a majority of the
directors then comprising the Incumbent Board will
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be considered as though such individual were a member of the
Incumbent Board; or
(iii) The occurrence of a reorganization, merger or
consolidation, in each case, unless, following such
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reorganization, merger or consolidation, (A) more than 50% of,
respectively, the then outstanding shares of common stock of the
corporation resulting from such reorganization, merger or
consolidation and the combined voting power of the then
outstanding voting securities of such corporation entitled to
vote generally in the election of directors is then beneficially
owned, directly or indirectly, by all or substantially all of the
individuals and entities who were the beneficial owners,
respectively, of the Outstanding Voting Securities immediately
prior to such reorganization, merger or consolidation in
substantially the same proportions as their ownership,
immediately prior to such reorganization, merger or
consolidation, of the Outstanding Voting Securities, and (B) at
least a majority of the members of the board of directors of the
corporation resulting from such reorganization, merger or
consolidation were members of the Incumbent Board at the time of
the execution of the initial agreement providing for such
reorganization, merger or consolidation; or
(iv) Approval by the shareholders of the Company of (A) a
complete liquidation or dissolution of the Company, as
applicable, or (B) the sale or other disposition of all or
substantially all of the assets of the Company, other than to a
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corporation, with respect to which following such sale or other
disposition, (1) more than 50% of, respectively, the then
outstanding shares of common stock of such corporation and the
combined voting power of the then outstanding voting securities
of such corporation entitled to vote generally in the election of
directors is then beneficially owned, directly or indirectly, by
all or substantially all of the individuals and entities who were
the beneficial owners, respectively of the Outstanding Voting
Securities immediately prior to such sale or other disposition,
in substantially the same proportion as their ownership
immediately prior to such sale or other disposition, of the
Outstanding Voting Securities and (2) at least a majority of the
members of the board of directors of such corporation were
members of the Incumbent Board at the time of the execution of
the initial agreement or action of the Board providing for such
sale or other disposition of assets of the Company; provided,
however, that no transaction resulting in the disposition of one
or more Subsidiaries or other business units of the Company will
be treated as substantially all of the assets of the Company
unless the assets so disposed of comprise more than 90% of all
corporate assets.
(v) If Peter Kiewit & Sons, Inc. and its affiliates reduce
their direct or indirect ownership interest of the Outstanding
Voting Securities of the Company (the "Kiewit Interest"), below
the percentage of ownership of such securities on the Effective
Date, then there shall be substituted, for the reference to "50%"
appearing in the text of subparagraph (i) of this definition, a
percentage equal to 50% minus the number of whole percentage
points by which the Kiewit Interest was reduced below 50%, but
the substituted percentage shall in no event be less than 40%.
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A. "Code" means the Internal Revenue Code of 1986, as amended.
Reference in the Plan to any section of the Code shall be deemed to include
any amendments or successor provisions to such section and any regulations
under such section.
B. "Committee" means the Qualified Committee appointed by the
Board to administer the Plan.
C. "Common Stock" means the common stock, par value $1.00 per
share, of the Company.
D. "Company" means C-TEC Corporation, a Pennsylvania
corporation.
E. "Date of Grant" means the date on which the granting of an
Award is authorized or such other date as may be specified in such
authorization.
F. "Disability" means that the Participant has been determined
to meet the requirements for payment of long-term disability benefits by
reason of total disability in accordance with the provisions of the
Company's Long-Term Disability Plan.
G. "Eligible Person" means any (i) person regularly employed by
the Company or a Subsidiary; provided, however, that no such employee
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covered by a collective bargaining agreement shall be an Eligible Person
unless and to the extent that such eligibility is set forth in such
collective bargaining agreement or in an agreement or instrument relating
thereto; (ii) director of the Company; or (iii) consultant to the Company
or a Subsidiary.
H. "Exchange Act" means the Securities Exchange Act of 1934.
"Fair Market Value" on a given date means (i) if the Stock is listed on a
national securities exchange, the average between the highest and lowest
sale prices reported as having occurred on the primary exchange with which
the Stock is listed and traded on the date prior to such date, or, if there
is no such sale on that date, then on the last preceding date on which such
a sale was reported; (ii) if the Stock is not listed on any national
securities exchange but is quoted in the National Market System of the
National Association of Securities Dealers Automated Quotation System on a
last sale basis, the average between the highest and lowest sale prices
reported on the date prior to such date, or, if there is no such sale on
that date, then on the last preceding date on which a sale was reported; or
(iii) if the Stock is not listed on a national securities exchange nor
quoted in the National Market System of the National Association of
Securities Dealers Automated Quotation System on a last sale basis, the
amount determined by the Committee to be the fair market value based upon a
good faith attempt to value the Stock accurately.
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J. "Holder" means a Participant who has been granted an Award.
K. "Incentive Stock Option" means an Option granted by the
Committee to a Participant under the Plan which is designated by the
Committee as an "incentive stock option" within the meaning of Section 422
of the Code.
L. "Non-Employee Director" means a "non-employee director"
within the meaning of Rule 16b-3 of the Exchange Act or any successor rule
or regulation.
A. "Nonqualified Stock Option" means an Option granted under the
Plan which is not designated as an Incentive Stock Option.
A. "Normal Termination" means termination of employment or
service with the Company or a Subsidiary:
1. Upon retirement pursuant to the retirement
plan of the Company or a Subsidiary (as the case may
be), as may be applicable at the time to the Participant
in question;
2. On account of Disability; or
3. By the Company without Cause.
A. "Option" means an Incentive Stock Option or a Nonqualified
Stock Option.
A. "Option Period" means the period of time set by the Committee
after which time an Option, OSO or SAR will expire.
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(w) "Option Price" means the exercise price set for an Option described in
Section 7(a).
(x) "Outperformance Option" or "OSO" means an Award granted under
Section 8.
(y) "Outside Director" means a member of the Board who is not also an
employee of the Company.
(z) "Participant" means an Eligible Person who has been selected by the
Committee to participate in the Plan and to receive an Award.
(aa) "Performance Goals" means the performance objectives of the Company
during an Award Period, Restricted Period or other period, with respect to
Performance Share Units, Restricted Stock, Phantom Stock Units or other Awards,
respectively, established for the purpose of determining whether, and to what
extent, such Awards will be earned for such period. Performance goals intended
to comply with Section 162(m) shall be based on the business criteria available
to set performance goals under the Company's 1996 Bonus Plan.
(bb) "Performance Share Unit" means a hypothetical investment equivalent
equal to one share of Stock granted in connection with an Award made under
Section 10.
(cc) "Phantom Stock Unit" means a hypothetical investment equivalent equal
to one share of Stock granted in connection with an Award made under Section 11.
(dd) "Plan" means the Company's 1996 Equity Incentive Plan.
(ee) "Qualified Committee" means a committee composed of at least two
Qualified Directors.
(ff) "Qualified Director" means a person who is (i) a Non-Employee Director
and (ii) an "outside director" within the meaning of Section 162(m) of the Code.
(gg) "Restricted Period" means, with respect to any share of Restricted
Stock or any Phantom Stock Unit, the period of time determined by the Committee
during which such Award is subject to the restrictions set forth in Section 11.
(hh) "Restricted Stock" means shares of Stock issued or transferred to a
Participant subject to forfeiture and the other restrictions set forth in
Section 11.
(ii) "Restricted Stock Award" means an Award of Restricted Stock granted
under Section 11.
(jj) "Securities Act" means the Securities Act of 1933, as amended.
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(kk) "Stock" means the Common Stock or such other authorized shares of stock
of the Company as from time to time may be authorized for use under the Plan.
(ll) "Stock Appreciation Right" or "SAR" means an Award granted under
Section 9.
(mm) "Subsidiary" means a corporation which is a "subsidiary corporation" of
the Company as defined in Section 424 of the Code.
The following terms are defined in the text of the Plan at the subsection
referenced.
(nn) "Adjusted Price" shall have the meaning ascribed thereto in subsection
8(c).
(oo) "Annualized Percentage C-TEC Stock Price Change" shall have the meaning
ascribed thereto in subsection 8(g).
(pp) "Annualized Percentage S&P Change" shall have the meaning ascribed
thereto in subsection 8(g).
(qq) "Annualized Percentage S&P Performance" shall have the meaning ascribed
thereto in subsection 8(c).
(rr) "C-TEC Period" shall have the meaning ascribed thereto in subsection
8(g).
(ss) "Dividend Equivalents" shall have the meaning ascribed thereto in
subsection 11(a)(iv).
(tt) "Initial Price" shall have the meaning ascribed thereto in subsection
8(b).
(uu) "Multiplier" shall have the meaning ascribed thereto in subsection
8(f).
(vv) "Outperformance Percentage" shall have the meaning ascribed thereto in
subsection 8(h).
(ww) "S&P Period" shall have the meaning ascribed thereto in subsection
8(c).
(xx) "Substituted Index " shall have the meaning ascribed thereto in
subsection 8(i).
3. Effective Date, Duration and Shareholder Approval
The Plan is effective as of October 7, 1996, the date of adoption of the
Plan by the Board. The effectiveness of the Plan and the validity of any and
all Awards granted pursuant to the Plan is contingent upon approval of the Plan
by the stockholders of the Company in a manner which complies with (i) Section
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422(b)(1) and Section 162(m) of the Code and (ii) the requirements of the
primary national securities exchange with which the Common Stock is listed, if
so listed, and/or the National Market System of the National Association of
Securities Dealers Automated Quotation System, if the Common Stock is quoted
thereon. Unless and until the stockholders approve the Plan in compliance with
the applicable requirements, no Award granted under the Plan shall be effective.
The expiration date of the Plan, after which no Awards may be granted
hereunder, shall be October 6, 2006; provided, however, that the administration
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of the Plan shall continue in effect until all matters relating to the payment
of Awards previously granted have been settled.
4. Administration
The Committee shall administer the Plan. The majority of the members of
the Committee shall constitute a quorum. The acts of a majority of the members
present at any meeting at which a quorum is present or acts approved in writing
by a majority of the Committee shall be deemed the acts of the Committee.
Subject to the provisions of the Plan, the Committee shall have exclusive
power to:
(a) Select the Eligible Persons to participate in the Plan;
(b) Determine the nature and extent of the Awards to be made to each
Participant;
(c) Determine the time or times when Awards will be made to Eligible
Persons;
(d) Determine the duration of each Award Period and Restricted Period;
(e) Determine the conditions to which the payment of Awards may be
subject;
(f) Establish the Performance Goals, if any, for each Award;
(g) Prescribe the form of Award Agreement or other form or forms
evidencing Awards;
(h) Cause records to be established in which there shall be entered, from
time to time as Awards are made to Eligible Persons, the date of each Award, the
number of Incentive Stock Options, Nonqualified Stock Options, OSOs, SARs,
Phantom Stock Units, Performance Share Units, shares of Restricted Stock and any
other Awards granted by the Committee to each Eligible Person, the expiration
date and the duration of any applicable
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Award Period or Restricted Period and the number of shares of Stock underlying
each Award; and
(i) At any time prior to or in connection with any termination of
employment or service of a Holder with the Company or its subsidiaries, provide
for a longer post-termination exercise or survival period with respect to any
Award (not to exceed three years) or modify any such forfeiture provisions with
respect to any Award; except to the extent that the ability to so modify an
Award shall cause an Award intended to qualify as "performance-based" under
Section 162(m) to not so qualify.
The Committee shall have the authority, subject to the provisions of the
Plan, to establish, adopt, or revise such rules and regulations and to make all
such determinations relating to the Plan as it may deem necessary or advisable
for the administration of the Plan. The Committee's interpretation of the Plan
or any documents evidencing Awards granted pursuant thereto and all decisions
and determinations by the Committee with respect to the Plan shall be final,
binding, and conclusive on all parties unless otherwise determined by the Board.
5. Grant of Awards; Shares Subject to the Plan
The Committee may, from time to time, grant Awards of Options, OSOs, Stock
Appreciation Rights, Restricted Stock, Phantom Stock Units, Performance Share
Units and/or any other Award authorized under the Plan to one or more Eligible
Persons; provided, however, that:
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(a) Subject to Section 15, the aggregate number of shares of Stock
made subject to all Awards may not exceed 2,000,000, as increased by the
number of shares of Common Stock authorized and unissued and not subject to
outstanding awards under the Company's 1994 Stock Option Plan, on the date
shareholder approval of the Plan is received. Such number shall be
increased by the number of shares which would have been added back to share
grant authorization under the 1994 Stock Option Plan, but for its
termination, upon cancellation of outstanding awards under the 1994 Stock
Option Plan; provided, however, that such number shall not exceed 3,350,000
shares.
(b) Such shares shall be deemed to have been used in payment of
Awards whether they are actually delivered or the Fair Market Value
equivalent of such shares is paid in cash. In the event any Option, OSO,
SAR not attached to an Option, Restricted Stock Award, Phantom Stock Unit,
Performance Share Unit shall be surrendered, terminate, expire, or be
forfeited or any other Award, the number of shares of Stock no longer
subject thereto shall thereupon be released and shall thereafter be
available for new Awards under the Plan;
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(c) Stock delivered by the Company in settlement of Awards under the
Plan may be authorized and unissued Stock or Stock held in the treasury of
the Company or may be purchased on the open market or by private purchase;
(d) No Participant may receive Awards under the Plan with respect to
more than 1,000,000 shares of Stock in any one year; and
(e) The Committee may, in its sole discretion, require a Participant
to pay consideration for an Award in an amount and in a manner as the
Committee deems appropriate.
6. Eligibility
Participation shall be limited to Eligible Persons who have received
written notification from the Committee, or from a person designated by the
Committee, that they have been selected to participate in the Plan.
7. Stock Options
The Committee is authorized to grant one or more Incentive Stock Options or
Nonqualified Stock Options to any Eligible Person; provided, however, that no
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Incentive Stock Options shall be granted to any Eligible Person who is not an
employee of the Company. Each Option so granted shall be subject to the
following conditions, or to such other conditions as may be reflected in the
applicable Award Agreement.
(a) Option price. The Option Price per share of Stock for each Option
shall be set by the Committee at the time of grant but, with respect to
Incentive Stock Options, shall not be less than the Fair Market Value of a share
of Stock at the Date of Grant.
(b) Manner of exercise and form of payment. Options which have become
exercisable may be exercised by delivery of written notice of exercise to the
Committee accompanied by payment of the Option Price. The Option Price shall be
payable in cash or, in the discretion of the Committee, either (i) in shares of
Stock valued at the Fair Market Value at the time the Option is exercised, (ii)
in other property having a fair market value on the date of exercise equal to
the Option Price, or (iii) by delivering to the Committee a copy of irrevocable
instructions to a stockbroker to deliver promptly to the Company an amount of
sale or loan proceeds sufficient to pay the Option Price.
(i) Option Period and Vesting. Options shall vest and become
exercisable in such manner and on such date or dates as shall be
determined by the Committee. The Committee shall also establish
an Option Period which shall not exceed ten years.
Notwithstanding any dates set by the
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Committee for vesting and exercisability, the Committee may in
its sole discretion accelerate the vesting and exercisability of
any Option. If an Option is exercisable in installments, exercise
of one installment shall not effect the Holder's ability to
exercise unexercised installments in accordance with the terms of
the Plan and the applicable Award Agreement. Unless otherwise
stated in the applicable Award Agreement, the Option shall expire
upon a Holder's termination of employment with the Company or a
Subsidiary at such times as are set forth in Section 13.
(c) Other Terms and Conditions. Each Option granted under the Plan shall
be evidenced by an Award Agreement, which shall contain such provisions as may
be determined by the Committee and, except as may be specifically stated
otherwise in such Award Agreement, be subject to the following terms and
conditions:
(i) Each Option or portion thereof that is exercisable shall be
exercisable for the full amount or for any part thereof.
(ii) Each share of Stock purchased through the exercise of an Option
shall be paid for in full at the time of the exercise. Each
Option shall cease to be exercisable, as to any share of Stock,
when the Holder purchases the share or exercises a related SAR
or when the Option expires.
(iii) Subject to Section 14(k), Options shall not be transferable by
the Holder except by will or the laws of descent and
distribution and shall be exercisable during the Holder's
lifetime only by the Holder.
(iv) Each Option shall vest and become exercisable by the Holder in
accordance with the vesting schedule established by the
Committee and set forth in the Award Agreement.
(v) Each Award Agreement may contain a provision that, upon demand
by the Committee for such a representation, the Holder shall
deliver to the Committee at the time of any exercise of an
Option a written representation that the shares to be acquired
upon such exercise are to be acquired for investment and not for
resale or with a view to the distribution thereof. Upon such
demand, delivery of such representation prior to the delivery of
any shares issued upon exercise of an Option shall be a
condition
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precedent to the right of the Holder or such other person to
purchase any shares. In the event certificates for Stock are
delivered under the Plan with respect to which such investment
representation has been obtained, the Committee may cause a
legend or legends to be placed on such certificates to make
appropriate reference to such representation and to restrict
transfer in the absence of compliance with applicable federal or
state securities laws.
(vi) Each Incentive Stock Option Award Agreement shall contain a
provision requiring the Holder to notify the Company in writing
immediately after the Holder makes a disqualifying disposition
of any Stock acquired pursuant to the exercise of such Incentive
Stock Option. A disqualifying disposition is any disposition
(including any sale) of such Stock before the later of (a) two
years after the Date of Grant of the Incentive Stock Option or
(b) one year after the date the Holder acquired the Stock by
exercising the Incentive Stock Option.
(d) Incentive Stock Option Grants to 10% Stockholders. Notwithstanding
anything to the contrary in this Section 7, if an Incentive Stock Option is
granted to a Holder who owns stock representing more than ten percent of the
voting power of all classes of stock of the Company or of a Subsidiary, the
Option Period shall not exceed five years from the Date of Grant of such Option
and the Option Price shall be at least 110 percent of the Fair Market Value (on
the Date of Grant) of the Stock subject to the Option.
(e) $100,000 Per Year Limitation for Incentive Stock Options. To the
extent the aggregate Fair Market Value (determined as of the Date of Grant) of
Stock for which Incentive Stock Options are exercisable for the first time by
any Participant during any calendar year (under all plans of the Company and its
Subsidiaries) exceeds $100,000, the portion of the Option under which such
excess arises shall be treated as a Nonqualified Stock Option.
(f) Voluntary Surrender. The Committee may permit the voluntary surrender
of all or any portion of any Nonqualified Stock Option issued pursuant to this
Section 7 and its corresponding SAR, if any, granted under the Plan to be
conditioned upon the granting to the Holder of a new Option for the same or a
different number of shares as the Option surrendered or require such voluntary
surrender as a condition precedent to a grant of a new Option to such
Participant. Such new Option shall be exercisable at an Option Price, during an
Option Period, and in accordance with any other terms or conditions specified by
the Committee at the time the new Option
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is granted, all determined in accordance with the provisions of the Plan without
regard to the Option Price, Option Period, or any other terms and conditions of
the Nonqualified Stock Option surrendered.
8. OUTPERFORMANCE OPTIONS
The Committee may from time to time at its discretion, subject to the
provisions of the Plan, grant one or more Outperformance Options to any Eligible
Person. At the time of each grant, the Committee shall determine the number of
shares subject to such Outperformance Options and, subject to the provisions of
the Plan, any other terms or conditions affecting the Outperformance Options.
Each such Outperformance Option shall be evidenced by an Award Agreement
containing terms and conditions established by the Committee not inconsistent
with the provisions of the Plan. Such agreements need not be identical with
respect to Participants.
Subject to subsections 8(i) and 8(j) below, the terms of Outperformance
Options granted pursuant to this Plan shall include the following:
(a) Each Outperformance Option shall relate to a number of shares of
Stock.
(b) The initial per-share exercise price of an Outperformance Option (the
"Initial Price") shall be equal to the Fair Market Value per share of
Stock on the trading day immediately preceding the Date of Grant.
(c) The Initial Price shall be adjusted upward or downward as of the date
of exercise of such Outperformance Option (the "Adjusted Price"), by a
percentage equal to the annualized percentage increase or decrease in
the Standard & Poor's 500 Index (the "Annualized Percentage S&P
Performance") over the period (the "S&P Period") beginning on the date
of grant and ending on the trading day immediately preceding the date
of exercise; provided, however, that the Adjusted Price may never be
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less than the Initial Price unless the closing price of Stock on the
trading day immediately preceding the date of exercise is equal to or
greater than the Initial Price. For purposes of determining the
Annualized Percentage S&P Performance with respect to any S&P Period,
the Standard & Poor's 500 Index as of the last day of the S&P Period
shall be deemed to equal the average closing value of such index over
the ten-consecutive-trading day period ending on the last day of such
S&P Period.
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(d) The Option Period of each Outperformance Option shall be ten (10)
years from the date of grant or such shorter period as determined by
the Committee.
(e) Each Outperformance Option shall become vested and exercisable in
accordance with the terms and conditions established by the Committee
and reflected in the written Award Agreement.
(f) Upon receipt by the Committee of a Holder's notice of intent to
exercise an Outperformance Option, the Committee shall deliver to the
Participant with respect to and in cancellation of the portion of the
Outperformance Option being exercised (i) a number of whole shares of
Stock with a fair market value equal to the product of (A) the closing
price of a share of Stock on the trading day immediately preceding the
date of exercise, less the Adjusted Price, multiplied by (B) the
multiplication factor to be applied to the Outperformance Option (the
"Multiplier"), plus (ii) cash in lieu of fractional shares, unless the
Committee determines, in its discretion, to elect any one or more of
the following methods of payment with respect to and in cancellation
of the Outperformance Option: (1) the Committee may, upon the receipt
from the Participant of an amount with respect to the portion of the
Outperformance Option being exercised equal to the Adjusted Price
multiplied by the Multiplier, deliver to such Participant a number of
shares of Stock equal to the product of the number of shares relating
to the Outperformance Option being exercised and the Multiplier; or
(2) the Committee may provide to a Participant any other form of
benefit or arrangement (including, without limitation, shares of
Common Stock, cash or a combination thereof) which, in the Committee's
judgment after considering all relevant factors, provides
substantially equivalent economic benefit to such Participant.
(g) The Multiplier shall be determined on the date of exercise based on
the extent to which the annualized percentage change (expressed as a
whole percentage point followed by two decimal places) in the fair
market value per share of Stock (the "Annualized Percentage C-TEC
Stock Price Change") over the period (the "C-TEC Period") beginning on
the date of grant and ending on the trading day immediately preceding
the date of exercise exceeds the annualized percentage change
(expressed as a whole percentage point followed by two decimal places)
in the Standard and Poor's 500 Index (the "Annualized Percentage S&P
Change") over the corresponding S&P Period (determined in a manner
consistent with the determination of the Annualized Percentage S&P
Performance under paragraph (c) above.
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(h) The Multiplier shall be based on a range of factors each corresponding
to a percentage (the "Outperformance Percentage") by which the
Annualized Percentage C-TEC Stock Price Change exceeds the Annualized
Percentage S&P Change. The range of factors and their relationship to
the Outperformance Percentage shall be established by the Committee,
at the sole discretion of the Committee (based on whatever information
it deems appropriate), at the time of grant of the OSO, which factors
and Outperformance Percentage may vary from Award to Award; provided,
however that, subject to adjustment as provided in Section 15 below,
the Multiplier may not exceed eight (8).
(i) Notwithstanding the foregoing provisions of this Section 8, the
Committee may provide in the Award Agreement that the Multiplier shall
be reduced by a percentage or percentages, with respect to any portion
of the OSO exercised during one or more years following the Date of
Grant. For purposes of determining the Annualized Percentage C-TEC
Stock Price Change with respect to any C-TEC Period, the Fair Market
Value of a share of Company Stock as of the last day of any C-TEC
Period shall be deemed to equal the average of the closing prices of
such share of stock over the ten-consecutive-trading-day period ending
on the last day of such C-TEC Period.
(i) Notwithstanding the foregoing provisions of this Section 8, the
Committee may substitute, with respect to one or more tranches of
grants, any other nationally recognized broad-based index of stock
prices established and maintained by an independent third party (a
"Substituted Index") for the Standard & Poor's 500 Index. Any such
substitution may only be made at the time of the grant. If any such
index is substituted for the Standard & Poor's Index, all defined
terms used in the calculation of amounts due in respect of
Outperformance Options which take their meaning by reference for the
Standard & Poor's 500 Index shall instead take their meaning by
reference to the Substituted Index.
9. Stock Appreciation Rights
Any Option granted under the Plan may include SARs, either at the Date of
Grant or, except in the case of an Incentive Stock Option, by subsequent
amendment. The Committee also may award SARs to Eligible Persons independent of
any Option. An SAR shall confer on the Holder thereof the right to receive in
shares of Stock, cash or a combination thereof the value equal to the excess of
the Fair Market Value of one share of Stock on the date of exercise over the
exercise price for the SAR, with respect to every share of Stock for which the
SAR is granted. An SAR shall
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be subject to such terms and conditions not inconsistent with the Plan as the
Committee shall impose, including, but not limited to, the following:
(a) Vesting. SARs granted in connection with an Option shall become
exercisable, be transferable and shall expire according to the same vesting
schedule, transferability rules and expiration provisions as the corresponding
Option. An SAR granted independent of an Option shall become exercisable, be
transferable and shall have an Option Period in accordance with a vesting
schedule, transferability rules and expiration provisions as established by the
Committee and reflected in an Award agreement.
(b) Automatic exercise. If on the last day of the Option Period, the Fair
Market Value of the Stock exceeds the Option Price (or in the case of an SAR
granted independent of an Option, the Fair Market Value of the Stock on the Date
of Grant), the Holder has not exercised the SAR or the corresponding Option, and
neither the SAR nor the corresponding Option has expired, such SAR shall be
deemed to have been exercised by the Holder on such last day and the Company
shall make the appropriate payment therefor.
(c) Payment. Upon the exercise of an SAR, the Company shall pay to the
Holder an amount equal to the number of shares subject to the SAR multiplied by
the excess, if any, of the Fair Market Value of one share of Stock on the
exercise date over the Option Price, in the case of an SAR granted in connection
with an Option, or the Fair Market Value of one share of Stock on the Date of
Grant, in the case of an SAR granted independent of an Option. The Company shall
pay such excess in cash, in shares of Stock valued at Fair Market Value, or any
combination thereof, as determined by the Committee. Fractional shares shall be
settled in cash.
(d) Method of exercise. A Holder may exercise an SAR after such time as
the SAR vests by filing an irrevocable written notice with the Committee or its
designee, specifying the number of SARs to be exercised, and the date on which
such SARs were awarded.
(e) Expiration. Each SAR shall cease to be exercisable, as to any share
of Stock, when the Holder exercises the SAR or exercises a related Option, with
respect to such shares of Stock. In the case of an SAR granted independent of an
Option, the Option Period shall be set by the Committee on the Date of Grant and
shall not exceed ten years.
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10. Performance Shares
(a) Award grants. The Committee is authorized to establish Performance
Share programs to be effective over designated Award Periods determined by the
Committee. The Committee may grant Awards of Performance Share Units to
Eligible Persons in accordance with such Performance Share programs. Before or
within 90 days after the beginning of each Award Period, the Committee will
establish written Performance Goals based upon financial objectives for the
Company for such Award Period and a schedule relating the accomplishment of the
Performance Goals to the Awards to be earned by Holders. The Committee shall
determine the number of Performance Share Units to be awarded, if any, to each
Eligible Person who is selected to receive such an Award. The Committee may add
new Participants to a Performance Share program after its commencement by making
pro rata grants.
(b) Determination of Award. At the completion of a Performance Share Award
Period (provided the Holder is still in the employ or service of the Company or
a Subsidiary), or at other times as specified by the Committee, the Committee
shall calculate the number of shares of Stock earned with respect to each
Holder's Performance Share Unit Award by multiplying the number of Performance
Share Units granted to the Participant by a performance factor representing the
degree of attainment of the Performance Goals. To the degree that the
Performance Goals are not achieved at the end of the Performance Share Award
Period, the Award shall expire.
(c) Partial Awards. A Participant for less than a full Award Period, by
reason of commencement employment after the beginning of an Award Period, shall
receive such portion of an Award, if any, for that Award Period as the Committee
shall determine.
(d) Payment of Performance Share Unit Awards. Performance Share Unit
Awards shall be payable in that number of shares of Stock determined in
accordance with Section 9(b); provided, however, that, at its discretion, the
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Committee may make payment to any Participant in the form of cash upon the
specific request of such Participant. The amount of any payment made in cash
shall be based upon the Fair Market Value of the Stock on the day prior to
payment. Payments of Performance Share Unit Awards shall be made as soon as
practicable after the completion of an Award Period.
(e) Adjustment of Performance Goals. The Committee may, during the Award
Period, make such adjustments to Performance Goals as it may deem appropriate,
to compensate for, or reflect, (i) extraordinary or non-recurring events
experienced during an Award Period by the Company or by any other corporation
whose performance is relevant to the determination of whether Performance Goals
have been attained; (ii) any significant changes that may have occurred during
such Award Period in
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applicable accounting rules or principles or changes in the Company's method of
accounting or in that of any other corporation whose performance is relevant to
the determination of whether an Award has been earned or (iii) any significant
changes that may have occurred during such Award Period in tax laws or other
laws or regulations that alter or affect the computation of the measures of
Performance Goals used for the calculation of Awards; provided, however, that,
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with respect to such Awards intended to qualify as "performance-based
compensation" under Section 162(m) of the Code, such adjustment shall be made
only to the extent that the Committee determines that such adjustments may be
made without a loss of deductibility of the compensation includible with respect
to such Award under Section 162(m) of the Code.
11. Restricted Stock Awards and Phantom Stock Units
(a) Award of Restricted Stock and Phantom Stock Units.
(i) The Committee shall have the authority (1) to grant Restricted
Stock and Phantom Stock Unit Awards, (2) to issue or transfer
Restricted Stock to Eligible Persons, and (3) to establish terms,
conditions and restrictions applicable to such Restricted Stock
and Phantom Stock Units, including the Restricted Period, which
may differ with respect to each grantee, the time or times at
which Restricted Stock or Phantom Stock Units shall be granted or
become vested and the number of shares or units to be covered by
each grant.
(ii) The Holder of a Restricted Stock Award shall execute and deliver
to the Company an Award Agreement with respect to the Restricted
Stock setting forth the restrictions applicable to such
Restricted Stock. If the Committee determines that the Restricted
Stock shall be held in escrow rather than delivered to the Holder
pending the release of the applicable restrictions, the Holder
additionally shall execute and deliver to the Company (i) an
escrow agreement satisfactory to the Committee, and (ii) the
appropriate blank stock powers with respect to the Restricted
Stock covered by such agreements. If a Holder shall fail to
execute a Restricted Stock Award Agreement and, if applicable, an
escrow agreement and stock powers, the Award shall be null and
void. Subject to the restrictions set forth in Section 10(b), the
Holder shall generally have the rights and privileges of a
stockholder as to such Restricted Stock, including the right to
vote such Restricted Stock. At the discretion of the Committee,
cash dividends and stock dividends with respect to the Restricted
Stock may be
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<PAGE>
either currently paid to the Holder or withheld by the Company
for the Holder's account, and interest may be paid on the amount
of cash dividends withheld at a rate and subject to such terms as
determined by the Committee. Cash dividends or stock dividends so
withheld by the Committee shall not be subject to forfeiture.
(iii) Upon the Award of Restricted Stock, the Committee shall cause a
stock certificate registered in the name of the Holder to be
issued and, if it so determines, deposited together with the
stock powers with an escrow agent designated by the Committee. If
an escrow arrangement is used, the Committee shall cause the
escrow agent to issue to the Holder a receipt evidencing any
stock certificate held by it registered in the name of the
Holder.
(iv) The terms and conditions of a grant of Phantom Stock Units shall
be reflected in a written Award Agreement. No shares of Stock
shall be issued at the time a Phantom Stock Unit Award is made,
and the Company will not be required to set aside a fund for the
payment of any such Award. Holders of Phantom Stock Units shall
receive an amount equal to the cash dividends paid by the Company
upon one share of Stock for each Phantom Stock Unit then credited
to such Holder's account ("Dividend Equivalents"). The Committee
shall, in its sole discretion, determine whether to credit to the
account of, or to currently pay to, each Holder of an Award of
Phantom Stock Units such Dividend Equivalents. Dividend
Equivalents credited to a Holder's account shall be subject to
forfeiture on the same basis as the related Phantom Stock Units,
and may bear interest at a rate and subject to such terms as are
determined by the Committee.
(b) Restrictions.
(i) Restricted Stock awarded to a Participant shall be subject to the
following restrictions until the expiration of the Restricted
Period, and to such other terms and conditions as may be set
forth in the applicable Award Agreement: (1) if an escrow
arrangement is used, the Holder shall not be entitled to delivery
of the stock certificate; (2) the shares shall be subject to the
restrictions on transferability set forth in the Award agreement;
(3) the shares shall be subject to forfeiture until the
expiration of the Restricted Period, upon the termination of
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<PAGE>
employment or service with the Company or a Subsidiary, to the
extent provided in Section 13 and the Award Agreement and, to the
extent such shares are forfeited, the stock certificates shall be
returned to the Company, and all rights of the Holder to such
shares and as a shareholder shall terminate without further
obligation on the part of the Company.
(ii) Phantom Stock Units awarded to any Participant shall be subject
to (1) forfeiture until the expiration of the Restricted Period,
upon the termination of employment or service with the Company or
a Subsidiary, to the extent provided in Section 13 and the Award
Agreement, and to the extent such Awards are forfeited, all
rights of the Holder to such Awards shall terminate without
further obligation on the part of the Company and (2) such other
terms and conditions as may be set forth in the applicable Award
Agreement.
(iii) The Committee shall have the authority to remove any or all of
the restrictions on the Restricted Stock and Phantom Stock Units
whenever it may determine that, by reason of changes in
applicable laws or other changes in circumstances arising after
the date of the Restricted Stock Award or Phantom Stock Award,
such action is appropriate.
(c) Restricted Period. The Restricted Period of Restricted Stock and
Phantom Stock Units shall commence on the Date of Grant and shall expire from
time to time as to that part of the Restricted Stock and Phantom Stock Units
indicated in a schedule established by the Committee and set forth in a written
Award Agreement.
(d) Delivery of Restricted Stock and Settlement of Phantom Stock Units.
Upon the expiration of the Restricted Period with respect to any shares of Stock
covered by a Restricted Stock Award, the restrictions set forth in Section 11(b)
and the Award Agreement shall be of no further force or effect with respect to
shares of Restricted Stock which have not then been forfeited. If an escrow
arrangement is used, upon such expiration, the Company shall deliver to the
Holder, or his beneficiary, without charge, the Stock certificate evidencing the
shares of Restricted Stock which have not then been forfeited and with respect
to which the Restricted Period has expired (to the nearest full share) and any
cash dividends or stock dividends credited to the Holder's account with respect
to such Restricted Stock and the interest thereon, if any.
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<PAGE>
Upon the expiration of the Restricted Period with respect to any Phantom
Stock Units covered by a Phantom Stock Unit Award, the Company shall deliver to
the Holder, or his beneficiary, without charge, one share of Stock for each
Phantom Stock Unit which has not then been forfeited and with respect to which
the Restricted Period has expired and cash equal to any Dividend Equivalents
credited with respect to each such Phantom Stock Unit and the interest thereon,
if any; provided, however, that, if so noted in the applicable Award Agreement,
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the Committee may, in its sole discretion, elect to pay cash or part cash and
part Stock in lieu of delivering only Stock for Vested Units. If cash payment
is made in lieu of delivering Stock, the amount of such payment shall be equal
to the Fair Market Value of the Stock as of the date on which the Restricted
Period lapsed with respect to such Phantom Stock Unit.
(e) Stock Restrictions. Each certificate representing Restricted Stock
awarded under the Plan shall bear the following legend until the end of the
Restricted Period with respect to such Stock:
"Transfer of this certificate and the shares represented hereby
is restricted pursuant to the terms of a Restricted Stock Agreement, dated
as of__________, between C-TEC Corporation and____________________. A
copy of such Agreement is on file at the offices of the Company at
_________________________________________________________."
Stop transfer orders shall be entered with the Company's transfer agent and
registrar against the transfer of legended securities.
12. Other Awards
The Committee may issue unrestricted Stock or any other Stock-based award,
including performance-based Options, under the Plan to Eligible Persons, alone
or in tandem with other Awards, in such amounts and subject to such terms and
conditions as the Committee shall from time to time in its sole discretion
determine. Stock bonus awards under the Plan may be granted as, or in payment
of, a bonus, or to provide incentives or recognize special achievements or
contributions.
13. Expiration of Award upon Termination of Employment
Except as otherwise determined by the Committee and set forth in an Award
Agreement, the following provisions will apply to Awards upon a Holder's
termination of employment with the Company or a Subsidiary.
(a) Options, OSOs and SARs
(i) If prior to the end of the Option Period (with respect to any
Option, OSO or SAR), the Holder shall undergo a Normal
Termination, all unvested
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Options, OSOs and SARs then held by such Holder shall expire on
the date of Normal Termination and all vested Options, OSOs and
SARs then held by such Holder shall expire on the earlier of the
last day of the respective Option Period or the date that is
three months after the date of such Normal Termination. All
vesting with respect to Options, OSOs and SARs shall cease on the
date of Normal Termination and all Options, OSOs and SARs which
are vested as of such date shall remain exercisable by the Holder
until their expiration as provided above.
(ii) If the Holder dies prior to the end of the Option Period (with
respect to any Option, OSO or SAR) and while still in the employ
or service of the Company or a Subsidiary or within three months
of Normal Termination, all unvested Options, OSOs and SARs then
held by such Holder shall expire on the date of death and all
other Options, OSOs and SARs then held by such Holder shall
expire on the earlier of the last day of the respective Option
Period or the date that is one year after the date of death of
the Holder. All vesting with respect to Options, OSOs and SARs
shall cease on the earlier of the date of Normal Termination or
the date of death and all such Options, OSOs and SARs which are
vested as of such date shall remain exercisable by the person or
persons to whom the Holder's rights under the Options, OSOs and
SARs pass by will or the applicable laws of descent and
distribution until their expiration as provided above.
(b) Restricted Stock Phantom Stock Units and Phantom Share Units
(i) Upon a Normal Termination prior to the end of any Restricted
Period, all Restricted Stock and Phantom Stock Units shall be
forfeited with respect to the portion of such Awards for which
restrictions have not lapsed at the time of such termination.
Upon a Normal Termination prior to the end of any Award Period,
all Performance Share Units which have not theretofore become
vested and earned shall expire; provided, however, that the
Committee may, in its sole discretion, award a pro rata portion
of any Performance Share Unit Award representing the degree of
attainment of the Performance Goals related thereto over the
period prior to termination.
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<PAGE>
(ii) Upon a Holder's death prior to the end of any Restricted Period,
all Restricted Stock and Phantom Stock Units shall be forfeited
with respect to the portion of such Awards for which restrictions
have not lapsed at the time of such death. Upon a Holder's death
prior to the end of any Award Period, all Performance Share Units
which have not theretofore become vested and earned shall expire;
provided, however, that the Committee may, in its sole
discretion, award a pro rata portion of any Performance Share
Unit Award representing the degree of attainment of the
Performance Goals related thereto over the period prior to death.
(c) Termination for Reasons Other Than Normal Termination or Death
(i) If a Holder ceases employment or service with the Company or a
Subsidiary for any reason other than Normal Termination or death,
all Options, OSOs , SARs, Restricted Stock (with respect to which
restrictions have not lapsed), Phantom Stock Units (with respect
to which restrictions have not lapsed) and Performance Share
Units then held by such Holder shall expire immediately upon such
cessation of employment or service.
14. General
(a) Additional Provisions of an Award. Awards under the Plan also may be
subject to such other provisions (whether or not applicable to the benefit
awarded to any other Participant) as the Committee determines appropriate
including, without limitation, provisions to assist the Participant in financing
the purchase of Stock upon the exercise of Options, provisions for the
forfeiture of or restrictions on resale or other disposition of shares of Stock
acquired under any Award, provisions giving the Company the right to repurchase
shares of Stock acquired under any Award in the event the Participant elects to
dispose of such shares, and provisions to comply with Federal and state
securities laws and Federal and state tax withholding requirements. Any such
provisions shall be reflected in the applicable Award agreement.
(b) Privileges of Stock Ownership. Except as otherwise specifically
provided in the Plan, no person shall be entitled to the privileges of stock
ownership in respect of shares of Stock which are subject to Awards hereunder
until such shares have been issued to that person.
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<PAGE>
(c) Government and Other Regulations. The obligation of the Company to
make payment of Awards in Stock or otherwise shall be subject to all applicable
laws, rules, and regulations, and to such approvals by governmental agencies as
may be required. Notwithstanding any terms or conditions of any Award to the
contrary, the Company shall be under no obligation to offer to sell or to sell
and shall be prohibited from offering to sell or selling any shares of Stock
pursuant to an Award unless such shares have been properly registered for sale
pursuant to the Securities Act with the Securities and Exchange Commission or
unless the Company has received an opinion of counsel, satisfactory to the
Company, that such shares may be offered or sold without such registration
pursuant to an available exemption therefrom and the terms and conditions of
such exemption have been fully complied with. The Company shall be under no
obligation to register for sale under the Securities Act any of the shares of
Stock to be offered or sold under the Plan. If the shares of Stock offered for
sale or sold under the Plan are offered or sold pursuant to an exemption from
registration under the Securities Act, the Company may restrict the transfer of
such shares and may legend the Stock certificates representing such shares in
such manner as it deems advisable to ensure the availability of any such
exemption.
(d) Tax Withholding. Notwithstanding any other provision of the Plan, the
Company or a Subsidiary, as appropriate, shall have the right to deduct from all
Awards cash and/or Stock, valued at Fair Market Value on the date of payment, in
an amount necessary to satisfy all Federal, state or local taxes as required by
law to be withheld with respect to such Awards and, in the case of Awards paid
in Stock, the Holder or other person receiving such Stock may be required to pay
to the Company prior to delivery of such Stock, the amount of any such taxes
which the Company is required to withhold, if any, with respect to such Stock.
Subject in particular cases to the disapproval of the Committee, the Company may
accept shares of Stock of equivalent Fair Market Value in payment of such
withholding tax obligations if the Holder of the Award elects to make payment in
such manner.
(e) Claim to Awards and Employment Rights. No employee or other person
shall have any claim or right to be granted an Award under the Plan or, having
been selected for the grant of an Award, to be selected for a grant of any other
Award. Neither the Plan nor any action taken hereunder shall be construed as
giving any Participant any right to be retained in the employ or service of the
Company or any Subsidiary.
(f) Designation and Change of Beneficiary. Each Participant may file with
the Committee a written designation of one or more persons as the beneficiary
who shall be entitled to receive the rights or amounts payable with respect to
an Award due under the Plan upon his death. A Participant may, from time to
time, revoke or change his beneficiary designation without the consent of any
prior beneficiary by filing a new designation with
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the Committee. The last such designation received by the Committee shall be
controlling; provided, however, that no designation, or change or revocation
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thereof, shall be effective unless received by the Committee prior to the
Participant's death, and in no event shall it be effective as of a date prior to
such receipt. If no beneficiary designation is filed by the Participant, the
beneficiary shall be deemed to be his or her spouse or, if the Participant is
unmarried at the time of death, his or her estate.
(g) Payments to Persons Other Than Participants. If the Committee shall
find that any person to whom any amount is payable under the Plan is unable to
care for his affairs because of illness or accident, or is a minor, or has died,
then any payment due to such person or his estate (unless a prior claim therefor
has been made by a duly appointed legal representative) may, if the Committee so
directs the Company, be paid to his spouse, child, relative, an institution
maintaining or having custody of such person, or any other person deemed by the
Committee to be a proper recipient on behalf of such person otherwise entitled
to payment. Any such payment shall be a complete discharge of the liability of
the Committee and the Company therefor.
(h) No Liability of Committee Members. No member of the Committee shall
be personally liable by reason of any contract or other instrument executed by
such member or on his behalf in his capacity as a member of the Committee nor
for any mistake of judgment made in good faith, and the Company shall indemnify
and hold harmless each member of the Committee and each other employee, officer
or director of the Company to whom any duty or power relating to the
administration or interpretation of the Plan may be allocated or delegated,
against any cost or expense (including counsel fees) or liability (including any
sum paid in settlement of a claim) arising out of any act or omission to act in
connection with the Plan unless arising out of such person's own fraud or
willful bad faith; provided, however, that approval of the Board shall be
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required for the payment of any amount in settlement of a claim against any such
person. The foregoing right of indemnification shall not be exclusive of any
other rights of indemnification to which such persons may be entitled under the
Company's Articles of Incorporation or By-Laws, as a matter of law, or
otherwise, or any power that the Company may have to indemnify them or hold them
harmless.
(i) Governing law. The Plan shall be governed by and construed in
accordance with the internal laws of the Commonwealth of Pennsylvania applicable
to contracts made and performed within such state, without regard to the
principles of conflicts of law thereof, except as such laws may be supplanted by
the federal laws of the United States of America, which laws shall then govern
its effect and its construction to the extent they supplant Pennsylvania law.
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(j) Funding. No provision of the Plan shall require the Company, for the
purpose of satisfying any obligations under the Plan, to purchase assets or
place any assets in a trust or other entity to which contributions are made or
otherwise to segregate any assets, nor shall the Company maintain separate bank
accounts, books, records or other evidence of the existence of a segregated or
separately maintained or administered fund for such purposes. Holders shall have
no rights under the Plan other than as unsecured general creditors of the
Company, except that insofar as they may have become entitled to payment of
additional compensation by performance of services, they shall have the same
rights as other employees under general law.
(k) Nontransferability. A person's rights and interest under the Plan,
including amounts payable, may not be sold, assigned, donated, or transferred or
otherwise disposed of, mortgaged, pledged or encumbered except, in the event of
a Holder's death, to a designated beneficiary to the extent permitted by the
Plan, or in the absence of such designation, by will or the laws of descent and
distribution; provided, however, the Committee may, in its sole discretion and
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subject to such conditions as it may establish, allow for transfer of Awards
other than Incentive Stock Options to other persons or entities.
(l) Reliance on Reports. Each member of the Committee and each member of
the Board shall be fully justified in relying, acting or failing to act, and
shall not be liable for having so relied, acted or failed to act in good faith,
upon any report made by the independent public accountant of the Company and its
Subsidiaries and upon any other information furnished in connection with the
Plan by any person or persons other than himself.
(m) Relationship to Other Benefits. No payment under the Plan shall be
taken into account in determining any benefits under any pension, retirement,
profit sharing, group insurance or other benefit plan of the Company except as
otherwise specifically provided in such other plan.
(n) Expenses. The expenses of administering the Plan shall be borne by the
Company.
(o) Pronouns. Masculine pronouns and other words of masculine gender
shall refer to both men and women.
(p) Titles and Headings. The titles and headings of the sections in the
Plan are for convenience of reference only, and in the event of any conflict,
the text of the Plan, rather than such titles or headings shall control.
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<PAGE>
15. Changes in Capital Structure
Awards granted under the Plan and any agreements evidencing such Awards
shall be subject to equitable adjustment or substitution, as determined by the
Committee in its sole discretion, as to the number of shares, the Multiplier
(with respect to OSOs), the exercise price, the price or kind of a share of
Stock or other consideration subject to such Awards (i) in the event of changes
in the outstanding Common Stock or in the capital structure of the Company by
reason of stock dividends, stock splits, reverse stock splits,
recapitalizations, reorganizations, mergers, consolidations, combinations,
exchanges, spinoffs, split-ups or other relevant changes in capitalization
occurring after the Date of Grant of any such Award, (ii) in the event of any
change in applicable laws or any change in circumstances which results in or
would result in any substantial dilution or enlargement of the rights granted
to, or available for, Participants in the Plan, or (iii) upon the occurrence of
any other event which otherwise warrants equitable adjustment because it
interferes with the intended operation of the Plan. In addition, upon any such
event, the aggregate number of shares of Stock available under the Plan and the
maximum number of shares of Stock with respect to which any one person may be
granted in connection with Awards during any year shall be appropriately
adjusted by the Committee, whose determination shall be conclusive. With respect
to Awards intended to qualify as "performance-based compensation" under Section
162(m) of the Code, such adjustments or substitutions shall be made only to the
extent that the Committee determines that such adjustments or substitutions may
be made without a loss of deductibility for such Awards under Section 162(m) of
the Code. The Company shall give each Participant notice of an adjustment
hereunder and, upon notice, such adjustment shall be conclusive and binding for
all purposes.
Notwithstanding the above, in the event of any of the following:
(a) The Company is merged or consolidated with another
corporation or entity and, in connection therewith, consideration is
received by shareholders of the Company in a form other than stock or
other equity interests of the surviving entity;
(b) All or substantially all of the assets of the Company are
acquired by another person;
(c) The reorganization or liquidation of the Company; or
(d) The Company shall enter into a written agreement to undergo
an event described in clauses (a), (b) or (c) above,
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<PAGE>
then the Committee may, in its sole discretion and upon at least 10 days advance
notice to the affected persons, cancel any outstanding Awards and pay to the
Holders thereof, in cash, the value of such Awards based upon the price per
share of Stock received or to be received by other shareholders of the Company
in the event. The terms of this Section 15 may be varied by the Committee in
any particular Award agreement.
16. Change in Control
Upon the occurrence of a Change in Control (i) all outstanding Options,
OSOs and freestanding SARs shall become immediately exercisable in full, (ii)
all restrictions with respect to outstanding shares of Restricted Stock shall
lapse, (iii) all outstanding Phantom Stock Units will be immediately converted
into shares of Stock, or cash equivalents at the discretion of the Committee,
and paid out to such Holders, (iv) the Committee will make a determination on
the degree of achievement of all Performance Goals with respect to outstanding
Performance Share Units and shall make such payments with respect thereto as it
deems appropriate and (v) all other Awards shall accelerate and become payable
as determined by the Committee.
17. Nonexclusivity of the Plan
Neither the adoption of this Plan by the Board nor the submission of this
Plan to the stockholders of the Company for approval shall be construed as
creating any limitations on the power of the Board to adopt such other incentive
arrangements as it may deem desirable, including, without limitation, the
granting of stock options otherwise than under this Plan, and such arrangements
may be either applicable generally or only in specific cases.
18. Amendments and Termination
The Board may at any time terminate the Plan. With the express written
consent of an individual Participant, the Board or the Committee may cancel or
reduce or otherwise alter outstanding Awards if, in its judgment, the tax,
accounting, or other effects of the Plan or potential payouts thereunder would
not be in the best interest of the Company. The Board or the Committee may, at
any time, or from time to time, amend or suspend and, if suspended, reinstate,
the Plan in whole or in part; provided, however, that no amendment which
requires stockholder approval in order for the Plan to continue to comply with
Section 162(m) of the Code shall be effective unless the same shall be approved
by the requisite vote of the stockholders of the Company.
28
<PAGE>
19. Non-Employee Director Awards
In addition to its power to make subjective discretionary grants of Awards
to Outside Directors generally, the Committee may establish a formula under
which Outside Directors will receive automatic Awards under the Plan in lieu of
or in addition to their normal director compensation. The type of Award, amount
and timing under the formula will be determined by the Committee in its sole
discretion.
* * *
As adopted by the Board of Directors of
C-TEC Corporation as of
October 7, 1996
By:
-------------------------------
Raymond B. Ostroski, Executive
Vice President, General Counsel
and Corporate Secretary
29
<PAGE>
C-TEC Corporation
1996 Bonus Plan
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1. Purposes.
--------
The purposes of the C-TEC Corporation 1996 Bonus Plan (the "Plan") are to
attract and retain highly-qualified executives by providing appropriate
performance-based short-term incentive awards and to serve as a qualified
performance-based compensation program under Section 162(m) of the Code, in
order to preserve the Company's tax deduction for compensation paid under the
Plan to Covered Employees.
2. Definitions.
-----------
The following terms, as used herein, shall have the following meanings:
(a) "Board" shall mean the Board of Directors of the Company.
(b) "Bonus" shall mean any annual incentive bonus award granted pursuant
to the Plan, the payment of which shall be contingent upon the
attainment of Performance Goals with respect to a Plan Year.
(c) "Code" shall mean the Internal Revenue Code of 1986, as amended from
time to time.
(d) "Committee" shall mean the Compensation Committee of the Board.
(e) "Company" shall mean C-TEC Corporation, a corporation organized under
the laws of the Commonwealth of Pennsylvania, or any successor
corporation.
(f) "Covered Employee" shall have the meaning set forth in Section 162(m)
(3) of the Code (or any successor provision) and regulations from time
to time promulgated thereunder.
(g) "Executive Officers" shall mean an officer of the Company who, as of
the beginning of a Plan Year, is an "executive officer" within the
meaning of Rule 3b-7 promulgated under the Securities Exchange Act of
1934, as amended.
(h) "Participant" shall mean the chief executive officer, chief operating
officer and chief financial officer of the Company, the chief
executive officer of each staff or Operating Group of the Company and
each other Executive Officer who has received written notice of his
selection by the Committee to participate in the Plan.
<PAGE>
(i) "Performance Goals" shall mean the criteria and objectives which must
be met during the Plan Year as a condition of the Participant's
receipt of payment with respect to a Bonus, as described in Section 3
hereof.
(j) "Plan" shall mean the C-TEC Corporation 1996 Bonus Plan, as amended
from time to time.
(k) "Plan Year" shall mean the Company's fiscal year.
(l) "Stock" shall mean common stock of the Company, par value $1.00 per
share.
(m) "Subsidiary" shall mean any subsidiary of the Company which is
designated by the Board or the Committee to have an Executive Officer
participate in the Plan.
3. Performance Goals.
-----------------
Performance Goals for each Plan Year shall be established by the Committee
not later than the latest permissible date under Code Section 162(m). Such
Performance Goals may be expressed in terms of one or more of the following:
(i) financial; (ii) customer satisfaction; and (iii) employee development. To
the extent applicable, any such Performance Goal shall be determined (i) in
accordance with the Company's audited financial statements and generally
accepted accounting principles and reported upon the Company's independent
accountants or (ii) so that a third party having knowledge of the relevant facts
could determine whether such Performance Goal is met. Performance Goals shall
include a threshold level of performance below which no Bonus payment shall be
made, levels of performance at which specified percentages of the target Bonus
shall be paid, and a maximum level of performance above which no additional
Bonus shall be paid. The Performance Goals established by the Committee may be
(but need not be) different for the each Plan Year and different Performance
Goals may be applicable to different Participants.
4. Bonuses.
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(a) In General. For each Plan Year commencing with the Plan Year ending
----------
December 31, 1997, the Committee shall, no later than the time specified in
paragraph 3 hereof, specify the Performance Goals applicable to such Plan Year.
A Participant's target Bonus for each Plan Year shall be expressed as a dollar
amount or as a percentage of such Participant's base salary for such Plan Year.
Unless otherwise provided by the Committee in its discretion in connection with
termination of employment, payment of a Bonus for a particular Plan Year shall
be made only if and to the extent the Performance Goals with respect to such
Plan Year are attained and only if the Participant is employed by the Company or
one of its Subsidiaries on the last day of such Plan Year. The actual amount of
a Bonus payable under the Plan shall be determined as a percentage of the
Participant's target Bonus, which percentage shall vary depending upon the
extent to
<PAGE>
which the Performance Goals have been attained and may be lesser than, greater
than, or equal to 100%. The Committee may, in its discretion, reduce or
eliminate the amount payable to any Participant (including a Covered Employee),
in each case based upon such factors as the Committee may deem relevant, but
shall not increase the amount payable to any Covered Employee.
(b) Limitation on Bonuses. Notwithstanding anything to the contrary
---------------------
contained in this Section 4, the maximum Bonus which may be earned by any
Participant under the Plan in respect of any Plan Year (prior to giving effect
thereof) shall not exceed the lesser of (i) 300% of the Participant's annual
base salary as in effect on the first day of such Plan Year and (ii) $1,500,000.
(c) Time of Payment. Unless otherwise determined by the Committee, all
---------------
payments in respect of Bonuses granted under this Section 4 shall be made no
later than a reasonable period after the end of the Plan Year. In the case of
Participants who are Covered Employees, unless otherwise determined by the
Committee in connection with termination of employment, such payments shall be
made only after achievement of the Performance Goals has been certified by the
Committee.
(d) Form of Payment. Payment of each Participant's Bonus for any Plan
---------------
Year shall be made in cash, less the appropriate withholding taxes as set forth
in Section 6(c).
(e) Deferral Elections. The Company may give each Participant the right,
------------------
in accordance with rules and regulations to be established by the Committee, to
elect to defer the receipt of any or all of such Participant's Bonus under the
Plan in respect of any Plan Year.
5. Administration.
--------------
The Plan shall be administered by the Committee. The Committee shall have
the authority in its sole discretion, subject to and not inconsistent with the
express provisions of the Plan, to administer the Plan and to exercise all the
powers and authorities either specifically granted to it under the Plan or
necessary or advisable in the administration of the Plan; including, without
limitation, the authority to grant Bonuses; to determine the persons to whom and
the time or times at which Bonuses shall be granted; to determine the terms,
conditions, restrictions and performance criteria relating to any Bonus; to make
adjustments in the Performance Goals in response to changes in applicable laws,
regulations, or accounting principles to the extent not inconsistent with
Section 162(m) of the Code and the regulations thereunder; except as otherwise
provided in Section 4(a) hereof, to adjust compensation payable upon attainment
of Performance Goals; to construe and interpret the Plan and any Bonus; to
prescribe, amend and rescind rules and regulations relating to the Plan and to
make all other determinations deemed necessary or advisable for the
administration of the Plan.
<PAGE>
The Committee shall consist of two or more persons each of whom is an
"outside director" within the meaning of Section 162(m) of the Code. The
Committee may appoint a chairperson and a secretary and may make such rules and
regulations for the conduct of its business as it shall deem advisable, and
shall keep minutes of its meetings. All determinations of the Committee shall
be made by a majority of its members either present in person or participating
by conference telephone at a meeting or by unanimous written consent. The
Committee may delegate to one or more its members or to one or more agents such
administrative duties as it may deem advisable, and the Committee or any person
to whom it has delegated duties as aforesaid may employ one or more persons to
render advice with respect to any responsibility the Committee or such person
may have under the Plan. All decisions, determinations and interpretations of
the Committee shall be final and binding on all persons; including the Company,
the Participant (or any person claiming any rights under the Plan from or
through any Participants) and any shareholder.
No member of the Board or the Committee shall be liable for any action
taken or determination made in good faith with respect to the Plan or any Bonus
granted hereunder.
6. General Provisions.
------------------
(a) Compliance with Legal Requirements. The Plan and the granting of
----------------------------------
Bonuses, and the other obligations of the Company under the Plan shall be
such approvals by any regulatory or governmental agency as may be required.
(b) No right To Continued Employment. Nothing in the Plan or in any Bonus
--------------------------------
granted shall confer upon any Participant the right to continue in the employ of
the Company or any of its Subsidiaries or to be entitled to any remuneration or
benefits not set forth in the Plan or to interfere with or limit in any way the
right of the Company to terminate such Participant's employment.
(c) Withholding Taxes. The Company or Subsidiary employing any
-----------------
Participant shall deduct from all payments and distributions under the Plan any
taxes required to be withheld by federal, state or local governments.
(d) Amendment and Termination of the Plan. The Board may at any time and
-------------------------------------
from time to time alter, amend, suspend, or terminate the Plan in whole or in
part; provided, however, that no amendment which requires stockholder approval
in order for the Plan to continue to comply with Code Section 162 (m) shall be
effective unless the same shall be approved by the requisite vote of the
shareholders of the Company. Additionally, the Committee may make such
amendments as it deems necessary to comply with other applicable laws, rules and
regulations. Notwithstanding the foregoing, no amendment shall affect adversely
any of the rights of any Participant, without such Participant's consent, under
any Bonus theretofore granted under the Plan.
<PAGE>
(e) Participant Rights. No Participant shall have any claim to be granted
------------------
any bonus under the Plan, and there is no obligation for uniformity of treatment
among Participants.
(f) Unfunded Status of Bonuses. The Plan is intended to constitute an
--------------------------
"unfunded" plan for incentive compensation. With respect to any payments which
at any time are not yet made to a Participant pursuant to a Bonus, nothing
contained in the Plan or any Bonus shall give any such Participant any rights
that are greater than those of a general creditor of the Company.
(g) Governing Law. The Plan and the rights of all persons claiming
-------------
hereunder shall be construed and determined in accordance with the laws of the
[State of Delaware] without giving effect to the choices of law principles
thereof.
(h) Effective Date. The Plan shall first be effective with respect to the
--------------
1997 Plan Year, but only if the Plan shall have been approved at the 1996 annual
meeting by the requisite vote approval of the shareholders of the Company.
(i) Interpretation. The Plan is designed and intended to comply with
--------------
Section 162(m) of the Code, to the extent applicable, and all provisions hereof
shall be construed in a manner to so comply.
(j) Term. No Bonus may be granted under the Plan with respect to any Plan
----
Year after Plan Year 2000. Bonuses made with respect to Plan year 2000 or prior
years, however, may extend beyond Plan Year 2000 and the provisions of the Plan
shall continue to apply thereto.
