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RELIANCE GROUP HOLDINGS, INC.
1999 STOCK OPTION PLAN
PART I
PURPOSES; DEFINITIONS; STOCKHOLDER APPROVAL;
RESERVATION OF SHARES; PARTICIPATION IN PLAN
ARTICLE I
Purposes
1.1 Purposes of Plan. The purpose of this Reliance Group Holdings, Inc.
1999 Stock Option Plan (this "Plan") is to provide incentives to selected key
employees of the Company and/or its Affiliates who contribute, and are expected
to contribute, materially to the success of the Company and its Affiliates; to
provide a means of rewarding outstanding performance; and to enhance the
interest of such key employees in the Company's continued success and progress
by providing them a proprietary interest in the Company. Further, this Plan is
designed to enhance the Company's ability to maintain a competitive position in
attracting and retaining qualified key personnel necessary for the continued
success and progress of the Company.
ARTICLE II
Definitions
Certain terms used herein shall have the meaning below stated,
subject to the provisions of Section 7.1.
"Affiliate" means a person that directly, or indirectly through one or
more intermediaries, controls, or is controlled by, the Company.
"Board" or "Board of Directors" means the Board of Directors
of the Company.
"Chairman" means the Chairman of the Board of the Company.
"Code" means the Internal Revenue Code of 1986, as amended.
"Committee" means, except as set forth in Article X, the Stock Option
Committee appointed by the Board to administer this Plan pursuant to Article
VII.
"Common Stock" means, subject to the provisions of Section 9.3, the
authorized common stock of the Company, par value $.10 per share.
"Company" means Reliance Group Holdings, Inc.
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"Disability" means a physical or mental impairment of sufficient
severity such that an Employee is both eligible for and in receipt of benefits
under the long-term disability provisions of the Company's benefit plans.
"Employee" means an employee (including an officer) of the Company or
of an Affiliate of the Company.
"Fair Market Value" means the closing price at which the Common Stock
of the Company shall have been sold regular way on the New York Stock Exchange
on the date as of which such value is being determined or, if no sales occurred
on such day, then on the next preceding day on which there were such sales, or,
if at any time the Common Stock shall not be listed on the New York Stock
Exchange, the fair market value as determined by the Committee on the basis of
available prices for such Common Stock or in such manner as may be authorized by
applicable regulations under the Code.
"Key Employee" means an Employee selected to participate in this Plan
pursuant to the terms hereof.
"Non-Qualified Option" means an option to purchase Common Stock,
granted by the Company to a Key Employee pursuant to Section 5.1. Non-Qualified
Options are not intended to qualify as "incentive stock options" under Section
422 of the Code and the regulations thereunder.
"Option" means a Non-Qualified Option.
"Option Agreement" has the meaning assigned to it in Section 5.1(c)
hereof.
"Plan" means the Reliance Group Holdings, Inc. 1999 Stock Option Plan,
as set forth herein and as from time to time amended.
"Special Compensation Committee" means the Special Compensation
Committee of the Board.
ARTICLE III
Stockholder Approval; Reservation of Shares
3.1 Stockholder Approval. This Plan shall be effective upon approval of
the Plan by a vote of a majority of shares of Common Stock present or
represented and entitled to vote (including abstentions to the extent
abstentions are counted as voting under applicable state law), at the Company's
2000 annual meeting of stockholders.
3.2 Shares Reserved Under Plan. Subject to adjustment under the
provisions of Section 9.3 hereof, the maximum number of shares of Common Stock
which may be issued and sold under this Plan is 15,000,000 shares. Such shares
may be either authorized and unissued shares or shares issued and thereafter
acquired by the Company. Shares issued pursuant to this Plan shall be subject to
all applicable provisions of the Certificate of Incorporation and By-Laws of the
Company in existence at the time of issuance of such shares and at all times
thereafter. If Options granted
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under this Plan shall terminate or cease to be exercisable by reason of
expiration, surrender for cancellation or otherwise without having been wholly
exercised, new Options may be granted under this Plan covering the number of
shares to which such termination or cessation relates.
ARTICLE IV
Participation in Plan
4.1 Eligibility to Receive Options. Options under this Plan may be
granted only to officers and other Key Employees of the Company or an Affiliate
of the Company on the date the Option is granted. A member of the Board of
Directors who is not also an Employee of the Company or of an Affiliate of the
Company shall not be eligible to receive an Option.
4.2 Participation Not Guarantee of Employment. Nothing in this Plan or
in the instrument evidencing the grant of an Option shall in any manner be
construed to limit in any way the right of the Company or an Affiliate to
terminate a Key Employee's employment at any time, without regard to the effect
of such termination on any rights such Key Employee would otherwise have under
this Plan, or give any right to such a Key Employee to remain employed by the
Company or an Affiliate thereof in any particular position or at any particular
rate of compensation.
PART II
OPTIONS; TERMINATION OF EMPLOYMENT AND DEATH
ARTICLE V
Options
5.1 Grants of Options.
(a) Grant. The Committee or the Special Compensation Committee, as
the case may be, may grant Options to Key Employees. All Options under this Plan
shall be granted within ten years of the date on which this Plan is approved by
the shareholders of the Company. No more than 3,000,000 of the shares issuable
under Options granted under this Plan may be granted to any employee over the
ten-year term of this Plan, subject to adjustment in accordance with Section 9.3
hereof.
(b) Option Price. The purchase price per share of Common Stock
under each Option shall be determined by the Committee but, subject to Section
10.1 hereof, shall be not less than 90 percent of the Fair Market Value per
share of such Common Stock on the date such Option is granted. The Option price
may be subject to adjustment in accordance with the provisions of Section 9.3
hereof.
(c) Option Agreements. Options shall be evidenced by Option
Agreements in such form and containing such terms and conditions as the
Committee shall approve, which terms and conditions need not be the same for all
Options (each an "Option Agreement").
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(d) Options Nontransferable. An Option granted under this Plan
shall by its terms be nontransferable by the Key Employee otherwise than by will
or the laws of descent and distribution, and except, solely to the extent
permitted by the Committee in an Option Agreement, to such persons or entities
that may be approved by the Committee, in each case subject to the condition
that the Committee be satisfied that such transfer is being made for estate or
tax planning purposes or for gratuitous or donative purposes, without
consideration being received therefor. No transfer of an Option by a Key
Employee shall be effective to bind the Company unless the Company shall have
been furnished with written notice thereof and a copy of such evidence as the
Committee may determine necessary to establish the validity of the transfer.
(e) Substitution and Cancellation. The Committee, in its sole
discretion, may grant to an Employee who has been granted an Option under this
Plan, in exchange for the surrender and cancellation of such Option, a new
Option having a purchase price lower (or higher) than the purchase price
provided in the Option so surrendered and cancelled and containing such other
terms as the Committee may deem appropriate.
5.2 Exercise of Options.
(a) Term of Options; Vesting. The term of each Option granted under
this Plan shall be ten (10) years from the date of grant, except that an Option
with a per share Option price that equals or exceeds Fair Market Value per share
on the date of grant shall have a term of ten (10) years and ten (10) days from
the date of grant. An Option granted under this Plan shall become 100% vested at
the earliest of the following times if the Optionee is an Employee at such time:
(i) the Employee's normal retirement date (age 65 or later), (ii) the Employee's
death or Disability, (iii) five years from the date of grant or (iv) a "Change
of Control of RGH" has occurred. Each Option shall vest and become exercisable
cumulative installments to the extent of 25% of the number of shares originally
covered thereby on and after the second, third, fourth and fifth anniversaries
of the grant of the Option, if the Optionee is an Employee on such anniversary.
In its sole discretion, the Committee or the Special Compensation Committee, as
the case may be, may prescribe shorter installments or accelerate the
exercisability of any Option at any time.
For purposes of this Plan, the term "Change of Control of RGH" means
that any person (as such term is used in Sections 13(d) and 14(d) of the
Exchange Act), other than members of the immediate family of Saul P. Steinberg,
is or becomes a "beneficial owner" (as defined in Rules 13d3 and 13d-5 under the
Exchange Act), directly or indirectly, of 50% or more of the common stock, par
value $.10 per share of Reliance Group Holdings, Inc. and the term "Exchange
Act" means the Securities Exchange Act of 1934, as amended (together with the
rules and regulations promulgated thereunder).
(b) Payment on Exercise. No shares of Common Stock shall be issued on
the exercise of an Option unless paid for in full at the time of purchase.
Payment for shares of Common Stock purchased upon the exercise of an Option
shall be made in cash or, with the consent of the Committee, in whole or in part
in shares of Common Stock valued at the then Fair Market Value thereof. Stock
certificates for the shares of Common Stock so paid for will be issued and
delivered to the person entitled thereto only at the Company's office in New
York, New York. No Key Employee shall have any rights as a shareholder with
respect to any share of Common Stock covered by an Option unless and until such
Employee shall have become the holder of record
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of such share, and, except as otherwise permitted in Section 9.3 hereof, no
adjustment shall be made for dividends (ordinary or extraordinary, whether in
cash, securities or other property or distributions or other rights) in respect
of such share for which the record date is prior to the date on which such
Employee shall have become the holder of record thereof.
(c) Exercise upon Dissolution, Liquidation or Winding Up. If at any
time after an Option has become exercisable and prior to its exercise and
expiration, a voluntary dissolution, liquidation (other than a liquidation into
another corporation which agrees to continue this Plan) or winding up of the
affairs of the Company shall be proposed, the Company shall cause notice in
writing to be mailed to each person holding an Option under this Plan, which
notice shall be mailed not less than twenty days prior to the closing of the
transfer books of the Company or the record date for determination of the
holders of Common Stock of the Company entitled to participate in such
dissolution, liquidation or winding up, as the case may be, to the end that
during such notice period the holder of any Option, to the extent that the same
is then exercisable by such holder, may, subject to the terms of Article V
hereof, purchase Common Stock in accordance with the terms of the Option and be
entitled, in respect of the number of shares so purchased, to all the rights of
the other holders of Common Stock of the Company with respect to such proposed
dissolution, liquidation or winding up of the affairs of the Company. Each
Option at the time outstanding shall terminate at the close of business on the
twentieth day after mailing of such notice to the holder of such Option or on
the record date for determination of holders of Common Stock entitled to
participate in such dissolution, liquidation or winding up, whichever date is
later.
ARTICLE VI
Termination of Employment and Death
6.1 Termination of Employment. Unless earlier terminated in accordance
with its terms, an Option shall terminate after 90 days after any of the
following:
(a) voluntary termination of employment by the Key Employee, with
or without consent of the Company,
(b) termination of employment of the Key Employee by the Company or
any of its Affiliates, with or without cause, or
(c) termination of employment of the Key Employee for any other
reason, including retirement under a retirement plan maintained by
the Company, or because the Affiliate employing such Key Employee
ceases to be an Affiliate of the Company and such Employee does
not, prior thereto or contemporaneously therewith, become a Key
Employee of the Company or of another Affiliate.
6.2 Death or Disability of Optionee. If a Key Employee's employment is
terminated as a result of Disability or death, such Employee or such Employee's
legal representatives, shall be entitled to exercise the Option in whole or in
part at any time within one year following the Disability or death of such Key
Employee.
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6.3 Employment. For all purposes of this Plan, and any Option granted
hereunder, "employment" shall be defined in accordance with the provisions of
Section 1.421-7(h) of the Income Tax Regulations (or any successor regulations).
PART III
ADMINISTRATION, AMENDMENT AND TERMINATION OF PLAN; MISCELLANEOUS
ARTICLE VII
Administration of Plan
7.1 The Committee. This Plan shall be administered by a Committee of
three or more persons, all of whom shall be members of the Board and shall be
appointed by, and serve at the pleasure of, the Board. Solely to the extent
deemed necessary or advisable by the Board to satisfy the requirements of Rule
16b-3 of the Exchange Act, each Committee member shall meet the definition of a
"Non-employee Director" for purposes of such Rule 16b-3. A majority of the
Committee shall constitute a quorum thereof and the actions of a majority of the
Committee at a meeting at which a quorum is present, or actions unanimously
approved in writing by all members of the Committee, shall be the actions of the
Committee. Vacancies occurring on the Committee shall be filled by the Board.
The Committee shall have full and final authority to interpret this Plan and the
Option Agreements (which agreements need not be identical), to prescribe, amend
and rescind rules and regulations, if any, relating to this Plan and to make all
determinations necessary or advisable for the administration of this Plan. The
Committee's determination in all matters referred to herein shall be conclusive
and binding for all purposes and upon all persons including, but without
limitation, the Company, the shareholders of the Company, the Committee and each
of the members thereof, Employees of the Company, and their respective
successors in interest.
7.2 Liability of Committee. No member of the Committee shall be liable
for anything done or omitted to be done by such member or by any other member of
the Committee in connection with this Plan, except for the willful misconduct or
gross negligence of such member. The Committee shall have power to engage
outside consultants, auditors or other professional help to assist in the
fulfillment of the Committee's duties under this Plan at the Company's expense.
7.3 Determinations of the Committee. In making its determinations
concerning the Key Employees who shall receive Options, as well as the number of
shares to be covered thereby and time or times at which they shall be granted,
the Committee shall take into account the nature of the services rendered by the
respective Key Employees, their past, present and potential contribution to the
Company's success and such other factors as the Committee may deem relevant. The
Committee shall also determine the form of Option Agreements to be issued under
this Plan and the terms and conditions to be included therein, provided such
terms and conditions are not inconsistent with the terms of this Plan. The
Committee may, in its discretion or in accordance with a direction from the
Board, waive any provisions of any Option Agreement, provided such waiver is not
inconsistent with the terms of this Plan as then in effect.
7.4 Plan Sponsors; Expenses. The Committee shall act on behalf of the
Company as sponsor of the Plan. All expenses associated with the Plan shall be
borne by the Company.
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ARTICLE VIII
Amendment and Termination of Plan
8.1 Amendment of Plan. This Plan may be amended at any time and from
time to time by the Board of Directors of the Company. Solely to the extent
deemed necessary or advisable by the Board, for purposes of complying with
Section 162(m) of the Code or the rules of any securities exchange or for any
other reason, the Board of Directors of the Company may seek the approval of any
such amendment by the Company's stockholders. No termination or amendment of
this Plan, without the consent of the holder of any Option then existing, may
terminate such holder's Option or materially and adversely affect such holder's
rights thereunder.
8.2 Termination. The Board of Directors of the Company may at any time
terminate this Plan as of any date specified in a resolution adopted by the
Board. If not earlier terminated, this Plan shall terminate on the tenth
anniversary of the effective date of the Plan. No Options may be granted after
this Plan has terminated. After this Plan shall terminate, the function of the
Committee will be limited to supervising the administration of Options
previously granted.
ARTICLE IX
Miscellaneous Provisions
9.1 Restrictions Upon Grant of Options. The listing upon the New York
Stock Exchange or the registration or qualification under any Federal or State
law of any shares of Common Stock to be granted pursuant to this Plan (whether
to permit the grant of Options or the resale or other disposition of any such
shares of Common Stock by or on behalf of the Employees receiving such shares)
may be necessary or desirable and, in any such event, delivery of the
certificates for such shares of Common Stock shall, if the Board of Directors,
in its sole discretion, shall determine, not be made until such listing,
registration or qualification shall have been completed. In such connection, the
Company agrees that it will use its best efforts to effect any such listing,
registration or qualification, provided, however, that the Company shall not be
required to use its best efforts to effect such registration under the
Securities Act of 1933, as amended ("1933 Act"), other than on Form S-8, as
presently in effect, or such other forms as may be in effect from time to time
calling for information comparable to that presently required to be furnished
under Form S-8.
9.2 Restrictions upon Resale of Unregistered Stock. If the shares of
Common Stock that have been transferred to a Key Employee pursuant to the terms
of this Plan are not registered under the 1933 Act, pursuant to an effective
registration statement, such Key Employee, if the Committee shall deem it
advisable, may be required to represent and agree in writing (i) that any shares
of Common Stock acquired by such Key Employee pursuant to this Plan will not be
sold except pursuant to an effective registration statement under the 1933 Act,
or pursuant to an exemption from registration under the 1933 Act and (ii) that
such Key Employee is acquiring such shares of Common Stock for such Employee's
own account and not with a view to the distribution thereof.
9.3 Adjustments. In the event of any change (through recapitalization,
merger, consolidation, stock dividend, split-up, combination or exchange of
shares or otherwise) in the character or amount of the Company's capital stock
(or any other transaction described in Section
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424(a) of the Code) after any Option is granted hereunder and prior to the
exercise thereof, the Option, to the extent that it has not been exercised,
shall entitle the holder to such number and kind of securities as such holder
would have been entitled to had such holder actually owned the stock subject to
the Option at the time of the occurrence of such change. If any such event
should occur, the number of shares subject to Options which are authorized to be
issued hereunder, but which have not been issued, shall be similarly adjusted.
If any other event shall occur, prior to the exercise of an Option granted to a
Key Employee hereunder, which shall increase or decrease the amount of capital
stock outstanding and which the Committee, in its sole discretion, shall
determine equitably requires an adjustment in the number of shares which the
holder should be permitted to acquire and/or the exercise price of the Option,
such adjustments as the Committee shall determine may be made, and when so made
shall be effective and binding for all purposes of this Plan.
9.4 Withholding of Taxes. Each Key Employee who exercises an Option to
purchase Common Stock shall agree to pay to the Company, or make arrangements
satisfactory to the Committee regarding payment of, any taxes of any kind
required by law to be withheld with respect to the transfer to such Employee of
such shares of Common Stock.
9.5 Other Grants. Options may be granted under this Plan from time to
time in substitution for stock options and/or stock appreciation rights held by
employees of other corporations who are or are about to become employees of the
Company as the result of a merger or consolidation of the employing corporation
with the Company, or the acquisition by the Company of the assets of the
employing corporation, or the acquisition by the Company of stock of the
employing corporation as the result of which it becomes an Affiliate of the
Company. The terms and conditions of the substituted Options so granted may vary
from the terms and conditions set forth in Part II to such extent as the
Committee may deem appropriate to conform, in whole or in part, to the
provisions of the substituted stock incentives.
9.6 Other Benefits. Nothing contained herein shall prevent the Company
from establishing other incentive plans in which Key Employees in the Plan may
also participate. No award under this Plan shall be considered as compensation
in calculating any insurance, pension or other benefit for which the recipient
is eligible unless any such insurance, pension or other benefit is granted under
a plan which expressly provides that compensation under this Plan (and
specifying the type of such compensation) shall be considered as compensation
under such plan.
PART IV
PROVISIONS RELATING TO CERTAIN KEY EMPLOYEES
ARTICLE X
Limitation on Grants; Applicability of Other Provisions
10.1 Limitations With Respect To Executive Officers. Notwithstanding
any other provision contained in the Plan, the Special Compensation Committee
shall have the exclusive right to grant Options to the executive officers of the
Company. Solely to the extent deemed necessary or advisable by the Board to
satisfy the requirements of Section 162(m) of the Code, each Special Committee
member shall meet the definition of an "outside director" for purposes of such
Section 162(m). Any Options so granted in any year, shall be granted, in the
case of the persons who are
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the Chairman and the four other most highly compensated executive officers, at
not less than Fair Market Value.
10.2 Applicability of Other Provisions. Grants of Options to any
executive officer of the Company in exchange for the surrender and cancellation
of any Option pursuant to Section 5.1 (e) shall be made only if the purchase
price of the newly granted Option is at least the Fair Market Value of the
Common Stock on the date such Option is granted. Any Option granted to an
executive officer of the Company that is cancelled pursuant to Section 5.1(e)
shall continue to be counted against the maximum number of shares that may be
granted to any Key Employee in accordance with Section 5.1(a). The provisions of
Article VII shall be incorporated herein as if included herein, except that
"Special Compensation Committee" shall replace "Committee" whenever it appears
therein.
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