April 20, 2000
By EDGARLink Transmission
Securities and Exchange Commission
Judiciary Plaza
450 Fifth Street, N.W.
Washington, D.C. 20549
Re: Century Bancshares, Inc.
Commission File No. 1-16234
Definitive Proxy Materials
Ladies and Gentlemen:
On behalf of Century Bancshares, Inc., a Delaware corporation (the "Company"),
and pursuant to Rule 14a-6(b) promulgated pursuant to the Securities Exchange
Act of 1934, as amended, transmitted herewith is one definitive copy of the
Company's proxy statement and form of proxy relating to the Company's Annual
Meeting of Stockholders to be held June 2, 2000. The materials include the cover
page required by Rule 14a-6(m).
There is no filing fee applicable to the Company's definitive proxy materials.
In accordance with Rule 14a-6(d), the Company has authorized us to advise the
Commission that the Company intends to begin release of the definitive copies of
its proxy materials to shareholders on April 26, 2000.
The enclosed preliminary materials also seek stockholder approval of a new stock
option plan. A copy of the plan has been filed with the proxy statement as
required by Instruction 3 of Item 10 of Schedule 14A. In accordance with the
requirements of Instruction 5 of Item 10 of Schedule 14A, the Company has
authorized us to inform the Commission that, if the Company's stockholders
approve such plan at its Annual Meeting of Stockholders, the Company intends to
file as promptly as practicable thereafter a registration statement on Form S-8
with respect to the offer and sale of the shares of common stock pursuant to the
plan. As described in the proxy statement, no options may be issued under the
proposed plan prior to approval of the stockholders.
Questions or comments concerning the enclosed materials may be addressed to the
undersigned, collect, at (713) 221-1301.
Very truly yours,
Bracewell & Patterson, L.L.P.
/s/ John R. Brantley
John R. Brantley
<PAGE>
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934
Filed by Registrant [ X ]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of Commission Only
(as permitted by Rule 14a-6(e)(2))
[ X ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to ss. 240.14a-11(c) or ss. 240.14a-12
Century Bancshares, Inc.
(Name of Registrant as Specified in Its Charter)
(Name of Person(s) Filing Proxy Statement if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[ X ] No fee required.
[ ] Fee computed on table below per Exchange Act
Rules 14a-6(i)(4) and 0-11.
1) Title of each class of securities to which transaction applies:
2) Aggregate number of securities to which transaction applies:
3) Per unit price or other underlying value of transaction
computed pursuant to Exchange Act Rule 0-11 (Set forth the
amount on which the filing fee is calculated and state how it
was determined):
4) Proposed maximum aggregate value of transaction:
5) Total fee paid:
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by
Exchange Act Rule 0-11(a)(2) and identify the filing for which the
offsetting fee was paid previously. Identify the previous filing by
registration statement number, or the Form or Schedule and the date
of its filing.
1) Amount Previously Paid:
2) Form, Schedule or Registration Statement No.:
3) Filing Party:
4) Date Filed:
<PAGE>
CENTURY BANCSHARES, INC.
1275 Pennsylvania Avenue, N.W.
Washington, D.C. 20004
NOTICE OF 2000 ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD JUNE 2, 2000
TO THE HOLDERS OF COMMON STOCK
OF CENTURY BANCSHARES, INC.:
Notice is hereby given that the 2000 Annual Meeting of the Stockholders
("Annual Meeting") of Century Bancshares, Inc. ("Company") will be held at JW
Marriott Hotel, 1331 Pennsylvania Avenue, NW, Washington, DC 20004 at 11:00 a.m.
(local time) on Friday, June 2, 2000, for the following purposes:
1. to elect a Board of seven directors to serve until the 2001 Annual
Meeting of Stockholders of the Company, and until their respective successors
have been elected and qualified;
2. to consider and act upon a proposed amendment to the Company's
Certificate of Incorporation, as amended, to increase the number of authorized
shares of common stock from five million to ten million shares;
3. to consider and act upon a proposal to approve the Century
Bancshares, Inc. 2000 Stock Awards Plan; and
4. to transact such other business as may properly come before the
meeting or any adjournment thereof.
All holders of common stock of record at the close of business on April
5, 2000 are entitled to vote at the Annual Meeting and any adjournment thereof.
A list of such stockholders will be available at the time and place of the
meeting and, during the ten days prior to the meeting, at the Company's
principal office, at 1275 Pennsylvania Avenue, N.W., Washington, D.C. 20004.
Stockholders are cordially invited to attend the meeting in person.
By Order of the Board of Directors
/s/ William C. Oldaker_________
William C. Oldaker
Secretary
Washington, D.C.
April 26, 2000
IMPORTANT
WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING, IT IS IMPORTANT THAT YOUR SHARES
ARE REPRESENTED. YOU ARE URGED TO SPECIFY YOUR CHOICES BY MARKING THE
APPROPRIATE BOXES ON THE ENCLOSED PROXY. IF YOU WISH TO VOTE IN ACCORDANCE WITH
THE BOARD OF DIRECTORS' RECOMMENDATIONS, MERELY SIGN, DATE AND RETURN THE PROXY
IN THE ENCLOSED ENVELOPE.
<PAGE>
CENTURY BANCSHARES, INC.
1275 Pennsylvania Avenue, N.W.
Washington, D.C. 20004
PROXY STATEMENT
FOR THE 2000 ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD JUNE 2, 2000
INTRODUCTION
This Proxy Statement is furnished in connection with the solicitation
by, and on behalf of, the Board of Directors of Century Bancshares, Inc.
("Company") of proxies for use at the 2000 Annual Meeting of Stockholders of the
Company to be held on Friday, June 2, 2000 at 11:00 a.m. (local time), at the JW
Marriott Hotel, 1331 Pennsylvania Avenue, NW, Washington, DC 20004, and any
adjournment thereof ("Annual Meeting"), for the purposes set forth in this Proxy
Statement and the accompanying Notice. It is anticipated that this Proxy
Statement, the Notice, and the enclosed form of proxy will be mailed to
stockholders on or about April 26, 2000.
Proxies
For the proxy solicited hereby to be voted, the enclosed form of proxy
must be signed (as registered), dated, and returned to the Company in a timely
manner. Proxies in the enclosed form that are properly executed and received by
the Company prior to or at the Annual Meeting and which are not revoked will be
voted in accordance with the directions set forth therein. If no direction is
made, a proxy that is properly executed and received by the Company and which is
not revoked will be voted FOR the election of all nominees for director named
herein to serve on the Board of Directors until the 2001 Annual Meeting of
Stockholders and until their successors are duly elected and qualified, FOR
approval of the amendment of the Company's Certificate of Incorporation, as
amended, to increase the number of authorized shares of common stock from five
million to ten million shares, and FOR approval of the Century Bancshares, Inc.
2000 Stock Awards Plan. The Board of Directors knows of no other matters to be
presented at the Annual Meeting. If any other matter, not known or determined at
the time of the solicitation of proxies, properly comes before the Annual
Meeting, the proxies will be voted in accordance with the discretion of the
person or persons voting the proxies. The proxy also confers on the persons
named therein discretionary authority to vote with respect to any matter
presented at the Annual Meeting for which advance notice was not received by the
Company prior to February 15, 2000.
Please ensure that your shares will be voted by signing (as
registered), dating, and returning the enclosed form of proxy in the enclosed
postage-paid envelope. A stockholder may revoke a proxy at any time prior to its
use by delivering to the Secretary of the Company a signed notice of revocation
or a later dated signed proxy, by attending the Annual Meeting and voting in
person, or by giving notice of revocation of the proxy at the Annual Meeting.
Attendance at the Annual Meeting will not in itself constitute the revocation of
a proxy. Prior to the Annual Meeting, any written notice of revocation or
subsequent proxy should be sent so as to be delivered to the Corporate
Secretary, Century Bancshares, Inc., 1275 Pennsylvania Avenue, N.W., Washington,
D.C. 20004, or hand delivered to the Corporate Secretary at the aforementioned
address (or at the Meeting) at or before the taking of the vote at the Annual
Meeting.
Voting Securities
The Board of Directors of the Company has fixed the close of business
on April 5, 2000 as the record date ("Record Date") for the determination of
stockholders entitled to notice of and to vote at the Annual Meeting. On the
Record Date, the Company had issued and outstanding 2,593,033 shares of its
common stock, $1.00 par value ("Common Stock"), the only class of voting
securities outstanding. Only the record owners of the Common Stock are entitled
to notice of, and to vote at, the Annual Meeting.
<PAGE>
Quorum and Other Matters
The presence at the Annual Meeting, in person or by proxy, of the
holders of a majority of the shares of Common Stock outstanding and entitled to
vote on the Record Date is necessary to constitute a quorum at the Annual
Meeting. Shares of Common Stock represented by a properly executed proxy will be
counted as present at the Annual Meeting for purposes of determining a quorum,
without regard to whether the proxy is marked as authorizing the casting of a
vote or abstaining. Shares of Common Stock held by nominees that are voted on at
least one matter coming before the Annual Meeting will also be counted as
present for purposes of determining a quorum, even if the beneficial owner's
discretion has been withheld (a "non-vote") for voting on some or all other
matters. In deciding all questions, each share of Common Stock is entitled to
one vote, in person or by proxy. Votes at the Annual Meeting will be tabulated
by an Inspector of Election appointed by the Company.
The Company's Certificate of Incorporation, as amended, provides that
amendments thereto must be approved by the affirmative vote of the holders of at
least two-thirds of the outstanding shares of capital stock of the Company
entitled to vote thereon. Accordingly, an abstention or a non-vote with respect
to the proposed amendment to the Company Certificate of Incorporation, as
amended, or a failure to attend the meeting in person or by proxy, will have the
effect of a vote against the proposal. Approval of the Century Bancshares, Inc.
2000 Stock Awards Plan requires a majority vote of the shares of Common Stock
present, in person or by proxy, and entitled to vote at the Annual Meeting.
Accordingly, an abstention with respect to the proposed stock awards plan will
have the effect of a vote against the 2000 Stock Awards Plan. However, under
Delaware law a non-vote will not be considered in determining the outcome of the
vote on the 2000 Stock Awards Plan. Directors are elected by a plurality of the
shares present in person or by proxy at a meeting at which a quorum is present.
As a result, the seven nominees for director receiving the greatest number of
votes of shares of Common Stock present in person or represented by proxy at the
meeting, although not necessarily a majority of such shares, will be elected to
serve as directors until the Company's 2000 Annual Meeting of Stockholders. An
abstention, a non-vote or a withholding of authority to vote with respect to one
or more nominees for director will not have the effect of a vote against such
nominee or nominees. All other matters properly to come before the Annual
Meeting for which the Company's Certificate of Incorporation, as amended, does
not require the affirmative vote of the holders of two-thirds of the outstanding
shares of common stock of the Company, require the approval of a majority of
outstanding shares of Common Stock of the Company present, in person or by
proxy, at the Annual Meeting.
<PAGE>
VOTING SECURITIES AND PRINCIPAL HOLDERS THEREOF
The following table sets forth the name, address and number of shares
of Common Stock owned beneficially at the Record Date by (a) each person known
to the Company to be the beneficial owner of more than five percent of the
outstanding shares of Common Stock; (b) each nominee to serve as director of the
Company; (c) each of the Company's executive officers named in the Summary
Compensation Table; and (d) all executive officers and directors of the Company
as a group. No executive officer or director of the Company has any family
relationship with any other officer or director. Unless otherwise indicated, all
shares are owned directly and the owner has sole voting and investment power
with respect thereto.
Name of Amount and Nature of Percent
Beneficial Owner Beneficial Ownership(1) of Class
Joseph S. Bracewell 201,342 (2) 7.76%
George Contis, M.D. 133,606 (3) 5.15%
John R. Cope 41,170 (4) 1.59%
Bernard J. Cravath 76,622 (5) 2.95%
Neal R. Gross 168,085 (6) 6.48%
William S. McKee 85,119 (7) 3.28%
William C. Oldaker 41,875 (8) 1.61%
All directors, and executive 752,828 29.04%
officers as a group (8 persons)
Robert Fleming Inc. 289,877 (9) 11.18%
320 Park Avenue, 11th Floor
New York, NY 10022
Tontine Management, L.L. C. 200,083 (10) 7.72%
200 Park Avenue
Suite 3900
New York, NY 10166-3799
- ---------------------------------
(footnotes on following page)
1) Subsequent to the Record Date, the Company paid a 5% stock dividend. The
share numbers in the foregoing table and elsewhere in this Proxy Statement
include the effect of the stock dividend.
2) Principal address is 1275 Pennsylvania Avenue, N.W., Washington, D.C.
Includes 4,266 shares held by minor children, 48,519 shares held as
Trustee, 58,002 shares held for the benefit of Mr. Bracewell in the
Company's 401(k) plan, and 7,449 shares held in individual retirement
accounts. Also includes 14,771 shares issuable upon exercise of currently
exercisable options.
3) Includes 102,309 shares held by Medical Services Corporation International
Profit Sharing Plan and Trust of which Dr. Contis is Trustee, and 7,354
shares issuable upon exercise of currently exercisable options.
4) Includes 15,410 shares held in the John R. Cope Rollover IRA, and 14,272
shares issuable upon exercise of currently exercisable options. Also
includes 968 shares held by Mr. Cope's spouse, and 9,306 shares in trust
for Mr. Cope's child for which Mr. Cope is trustee.
5) Includes 1,430 shares held by Mr. Cravath's wife, and 5,700 shares
issuable upon exercise of currently exercisable options. Also, includes
7,144 held in trust for minor grandchildren whose mother serves as trustee
and holds sole voting power. Mr. Cravath disclaims beneficial ownership of
shares in trust for minor grandchildren.
6) Principal address is 1323 Rhode Island Avenue, N.W., Washington, D.C.
20005. Includes 9,090 shares issuable upon exercise of currently
exercisable options.
7) Includes 5,700 shares issuable upon exercise of currently exercisable
options.
8) Includes 14,270 shares issuable upon exercise of currently exercisable
options. Also includes 2,555 shares held by Mr. Oldaker's spouse.
9) Based solely on information filed with the Securities and Exchange Commission
(the "Commission").
10) Based solely on information filed with the Securities and Exchange
Commission (the "Commission").
<PAGE>
ELECTION OF DIRECTORS
Each of the seven persons identified in the table below is a nominee
for election as a director of the Company and is currently an incumbent
director. The term of office for which the following persons are nominated will
expire at the time of the 2001 Annual Meeting of Stockholders of the Company and
when their respective successors shall have been elected and qualified. Should
any nominee for the office of director named herein become unable or unwilling
to accept nomination or election, the person or persons acting under the proxies
will vote for the election in his stead of such other person as the Board of
Directors may recommend. The Board of Directors has no reason to believe that
any of the nominees will be unable to serve if elected to office, and to the
knowledge of the Board of Directors, the nominees intend to serve the entire
term for which election is sought.
Directors will be elected by a plurality vote of the shares of Common
Stock present, in person or by proxy, at the Annual Meeting. The Board of
Directors recommends a vote FOR each of the nominees listed and, unless marked
to the contrary, proxies received from stockholders will be voted for the
election of such nominees.
The following table sets forth certain information regarding the
nominees for election to the Board of Directors of the Company.
Name Age Principal Occupation and Business Experience
Joseph S. Bracewell 53 Chairman of the Board, President and Chief Executive
Officer of the Company since 1985; Director and Chief
Executive Officer of Century National Bank (the "Bank")
since 1982 and Chairman thereof since 1985; President
of the Bank from 1982 to 1988 and since 1996.
George Contis, M.D. 66 Director of the Company since 1995; Director of the
Bank since 1989. Physician and the President of Medical
Services Corporation International, an international
contract provider of medical services, for more than
the past five years.
John R. Cope 57 Director and Vice President of the Company since 1985;
Director of the Bank since 1982; Vice Chairman of the
Bank since 1985 and General Counsel thereof since 1986.
Partner in the law firm of Bracewell & Patterson,
L.L.P., Washington, D.C.for more than the past five
years.
Bernard J. Cravath 68 Director of the Company since 1987; Director of the
Bank from 1984 to 1986. President of Reality Properties
,Inc.,a real estate investment corporation, since 1984.
Attorney in private practice for more than the past
five years.
<PAGE>
Neal R. Gross 56 Director of the Company since 1995; Director of the
Bank since 1992. Chairman and Chief Executive Officer
of Neal R. Gross and Co., Inc., a corporation providing
court reporting services to attorneys, the federal
government, and other private organizations and
individuals, for more than the past five years.
William S. McKee 56 Director of the Company since 1992; Director of the
Bank from 1986 to 1992. Partner in the law firm of
McKee, Nelson, Ernst & Young since February 2000. Prior
to February 2000, was a partner in the law firm of King
and Spalding,Washington, D.C.,for more than five years.
William C. Oldaker 58 Director of the Company since 1985 and Secretary since
1992; Director of the Bank since 1984. Partner in the
law firm of Oldaker, Ryan, Phillips and Utrecht,
Washington, D.C.from 1993 to November 1998, and Oldaker
& Harris, L.L.P. from November 1998 to the present.
The Board of Directors of the Company met fourteen times in 1999. Each
of the directors attended at least 75% of such meetings except Mr. Oldaker, who
attended 54% of the meetings. Messrs. Bracewell, Contis, Cope, Gross, and
Oldaker also serve on the Board of Directors of the Bank, which met fourteen
times during 1999.
The Company has standing Audit, Executive Compensation and Stock Option
committees of its Board of Directors. The Audit Committee, consisting of Messrs.
Gross (Chair) and Cravath, met four times during 1999 and each member attended
all of the meetings. The Executive Compensation Committee, which also serves as
the Stock Option Committee, met twice during 1999. The Committee is composed of
Messrs. Cope (Chair), Cravath, and Contis, and each member attended all of the
meetings. The Company does not have a standing nominating committee or other
committee serving a similar function. Members of the Board of Directors of the
Company also serve on other committees, formal and informal, with directors and
members of senior management of the Bank.
COMPENSATION
Executive Compensation
The following table sets forth the compensation for each of the last
three years awarded to, earned by, or paid to the Chief Executive Officer of the
Company, the only executive officer of the Company whose salary and bonus
exceeded $100,000 for the last completed fiscal year.
<TABLE>
<CAPTION>
Summary Compensation Table
Long-Term
Compensation
Awards
Securities
Name and Principal Annual Compensation Underlying All Other
Positions Year Salary Bonus (1) Other (2)(3) Options Compensation(4)
- --------------------------- ----- ----------- ----------- ------------ ----------- ----------------
<S> <C> <C> <C> <C> <C> <C>
Joseph S. Bracewell 1999 $205,000 $25,000 $11,000 13,500 $1,367
Chairman of the Board, 1998 199,325 -0- 11,000 4,250 1,517
President, and CEO of 1997 182,300 5,000 10,750 4,000 2,824
Company and the
Bank
</TABLE>
<PAGE>
1) These payments are listed in the year accrued and earned, but each was paid
in the following year.
2) Amounts in this column represent (a) matching contributions to the
executive's 401(k) plan account and (b) director fees deferred by the executive
pursuant to the deferred compensation program for directors. Contributions to
the 401(k) plan on behalf of Mr. Bracewell were $5,000, $5,000 and $4,750 during
1999, 1998 and 1997, respectively. Mr. Bracewell deferred $6,000 during each of
1999, 1998, and 1997 respectively, pursuant to the deferred compensation program
for directors.
(footnotes continued on following page)
3) Mr. Bracewell is provided the use of a Company car, and certain club dues
are paid by the Company on his behalf. Since the aggregate value thereof does
not exceed the lesser of $50,000 or 10% of Mr. Bracewell's annual cash
compensation, such amounts are not included in the table.
4) Includes the dollar value of insurance premiums paid by the Company with
respect to the term life insurance portion of split dollar policies in which the
Company has the full interest in the cash surrender value. During 1999, 1998 and
1997, the Company held three split dollar policies covering Mr. Bracewell.
Board Compensation
Each director of the Company, and each director of the Bank, is
entitled to receive an annual retainer of $4,200 for service on one of the two
Boards, or $6,000 for service on both Boards. All current directors of the
Company also serve as directors of the Bank. Individual directors may elect to
enter into a Compensation Agreement in lieu of receiving the annual retainer in
cash. All directors of the Company, and all but one of the directors of the
Bank, have elected to enter into Deferred Compensation Agreements (the
"Compensation Agreements") for that purpose. The Compensation Agreements
generally provide for the payment of a fixed monthly retirement benefit for 180
months payable to the director or his designated beneficiary commencing on the
first day of the month following the director's retirement on his 65th birthday.
In the event of the director's death prior to retirement, a reduced sum is
payable to a beneficiary designated by the director for 144 months. The
retirement benefit attributable to each annual deferral vests ratably over a
five year period, and in the event that a director does not serve for five years
after any benefit is accrued for any reason other than a change of control, the
director receives a benefit proportional to his time of service. In the event of
a change of control of the Company, all benefits are fully vested.
Prior to 1998, the Company administered the program informally and
satisfied its potential future obligations under these agreements by using the
amount of the deferred payments to purchase life insurance on the participating
directors. During 1998, the Company and the Bank established the Century
Director's Trust (the "Trust") to facilitate the efficient payment,
administration and record keeping requirements of the Company and the Bank under
the program. The Trust is an irrevocable grantor trust within the meaning of the
federal income tax laws administered by an affiliate of Allfirst Trust and two
individual trustees. The Trust permits contributions of cash and other property
to fund the obligations of the Company and the Bank under the Compensation
Agreements, and obligates the Company and the Bank to fully fund the benefits
due under the Compensation Agreements upon demand of the trustees of the Trust.
The Company and the Bank have transferred to the Trust all life insurance
policies purchased to fund the retirement program, which have aggregate death
benefits of $1,670,000, and aggregate cash surrender values of $375,175. During
1999, the Trust, on behalf of the Company and the Bank, paid $37,200 in premiums
on life insurance policies for directors who participated in the deferred
compensation program. As of December 31, 1999, the Company and the Bank had
accrued an aggregate liability of $794,431 in deferred compensation expense
related to this program.
<PAGE>
Executive Compensation Committee Report
To the Board of Directors:
As members of the Executive Compensation Committee, it is our duty to
establish the compensation level of the executive officers, to award bonuses to
the executive officers and to approve the Company's benefit plan arrangements,
other than those relating to stock options.
The base salary level of the executive officers is recommended to the
Executive Compensation Committee by the Chief Executive Officer. In assessing
the Chief Executive Officer's compensation relative to the Company's
performance, no specific criteria are applied. Factors considered by the
Compensation Committee are typically subjective, such as the committee's
perception of the individual's performance and any planned changes in functional
responsibility, and also include such factors as prior year compensation levels,
such information as is available about the salary level at comparable
institutions, and general inflationary considerations. The profitability of the
Company and the market value of its stock are not primary considerations in
setting executive officer base compensation, although significant changes in
these items are subjectively considered. The Committee reviewed the base
compensation for Mr. Joseph S. Bracewell and increased same from $205,000 to
$225,000 per year effective April 1, 2000.
The Committee considers bonuses for the executive officers, including
Mr. Bracewell, after subjectively considering the profitability of the Company
and individual performance. In making such determination, the Committee does not
apply any specific criteria. Based on Mr. Bracewell's performance and the
financial performance of the Company in 1999, the Committee recommended a bonus
for Mr. Bracewell in the amount of $25,000. The perquisites and other benefits
received by Mr. Bracewell that are reported in the Summary Compensation Table
are provided primarily pursuant to existing employee benefit programs.
No member of the Executive Compensation Committee is a former or
current paid officer or employee of the Company or any subsidiary.
Executive Compensation Committee
John R. Cope, Chair
Bernard J. Cravath
George Contis, M.D.
Stock Option Committee Report on Executive Compensation
The following report by the Stock Option Committee to the Board of
Directors discusses the factors the Stock Option Committee considers when
determining the number of shares, which will be made subject to stock options
granted to the executive officers and other employees of the Company.
<PAGE>
To the Board of Directors:
As members of the Stock Option Committee it is our duty to administer
the Company's stock option plans. Administering these plans includes awarding
stock options to the executive officers. Currently, the only stock option plan
in effect is the Company's 1994 Stock Option Plan. However, the Board of
Directors of the Company has adopted, and recommended that the stockholders
approve, the Company's 2000 Stock Awards Plan. Information about the 2000 Stock
Awards Plan is contained elsewhere in this proxy statement.
The Stock Option Committee believes that stock options and other
methods of incentive compensation are of increasing importance in attracting and
retaining executives, as well as other employees. As described in this Proxy
Statement under the caption "Approval of 2000 Stock Awards Plan," the Company
currently has only 1,997 shares available for grant under its 1994 Stock Option
Plan. The Stock Option Committee believes that this represents an insufficient
number of shares for use in attracting and retaining employees and executives.
The 1994 Stock Option Plan will expire in 2004. In addition, the 1994
Stock Option Plan only permits the use of stock options; it does not permit the
use of restricted stock awards, stock appreciation rights or other
performance-based awards available to certain of the Company's competitors. For
these reasons, the Stock Option Committee determined not to recommend that the
Company amend the 1994 Stock Option Plan to increase the shares available for
option under such plan. Rather, the Stock Option Committee recommended to the
Board of Directors that a new plan be adopted that provides for both additional
shares for use in granting stock options and for the use of other types of
incentive awards.
Stock options are a component of compensation that is intended to
retain executives and to motivate executives to improve stock market
performance. Historically, the number of options granted to each executive
officer was determined by taking a percentage of salary and dividing that amount
by the fair market value per share of the Company's Common Stock on the date of
the grant. The percentages were recommended annually by the Company's Chief
Executive Officer, subject to the approval of the Committee. The Stock Option
Committee now subjectively determines the number of shares to be covered by
options granted to the Company's employees and executives, including the Chief
Executive Officer. In making these determinations, the Stock Option Committee
considers the position, tenure and performance of the individual. The number of
options granted to the Chief Executive Officer during 1999 represented
approximately 9.7% of all options granted during that year, and the exercise
price of such options was the fair market value of the Company's common stock on
the date of the grant.
Stock Option Committee
John R. Cope, Chair
Bernard J. Cravath
George Contis, M.D.
Stock Option Plans
In 1986, the Company adopted an Incentive Stock Option Plan for Key
Employees, a Nonqualified Stock Option Plan for Key Employees, and a
Non-Qualified Stock Option Plan for Directors (collectively, the "1986 Plans")
in order to encourage ownership of Common Stock by key employees and directors
of the Company and its subsidiaries. The 1986 Plans expired during 1992 and
1993, and no options granted under the 1986 Plans remain outstanding.
The only stock option plan currently in force is the Company's 1994
Stock Option Plan (the "1994 Plan"). See "Approval of 2000 Stock Awards Plan."
During fiscal 1999, options to purchase 1,500 and 2,500 shares of the Common
Stock were granted to each of the fourteen non-employee directors of the Company
and the Bank under the 1994 Plan at an exercise price of $6.50 and $6.25 per
share, respectively.
<PAGE>
As of December 31, 1999, options to purchase an aggregate of 336,477
shares of Common Stock at exercise prices ranging from $2.96 to $9.64 were
outstanding (including 10,000 options issued pursuant to the 1986 Plans), and
there were 1,997 shares of Common Stock available for future grants under the
1994 Plan.
During the fiscal year ended December 31, 1999, the Company granted the
following options to purchase Common Stock to the Company's Chief Executive
Officer, the only executive officer of the Company listed in the Summary
Compensation Table:
<TABLE>
<CAPTION>
Options Granted to Executive Officers
in Fiscal Year 1999
Potential Realizable
Number of % of Total Value at Assumed
Securities Options Annual Rate of
Underlying Granted to Per Share Stock Price
Options Employees in Exercise Expiration Appreciation for
Name Granted(1) 1999 Price Date Option Term
- ------------------- ----------- ------------ --------- ---------- ---------------------
5% 10%
<S> <C> <C> <C> <C> <C> <C>
Joseph S. Bracewell 8,925 9.7% $6.50 01/15/09 $ 34,746 $ 88,054
5,000 6.25 11/19/09 19,653 49,804
</TABLE>
1) All of the options were granted under the 1994 Plan at an exercise price
equal to the fair market value of the Common Stock on the date of grant. Each
option has a term of 10 years from the date of grant. Options vest and become
exercisable in 25% increments after six, eighteen, thirty-six and forty-eight
months after the date of grant. Options expire 90 days after termination of
employment, and are fully vested in the event of a change of control of the
Company.
<PAGE>
During the fiscal year ended December 31, 1999, the following options
were exercised by the executive officer of the Company listed in the Summary
Compensation Table:
<TABLE>
<CAPTION>
Options Exercised in Last Fiscal Year
and Year-End Option Values
Number of Securities Value of Unexercised
Shares Underlying Unexercised In-the-Money Options
Acquired On Value Options at Year End at Year End
Name Exercise Realized Exercisable Unexercisable Exercisable Unexercisable
- ------------------- ----------- -------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Joseph S. Bracewell -0- $ -0- 14,771 15,054 $81,339.25 $97,851.00
</TABLE>
STOCK PERFORMANCE GRAPH
The following graph compares the cumulative total return to
stockholders for the period from September 23, 1997 (the date trading in the
Common Stock commenced on The NASDAQ Stock Market's SmallCap Market) through
December 31, 1999, for a holder of Common Stock against the cumulative total
return of both The NASDAQ Stock Market and the NASDAQ Bank Stock Index.
[OBJECT OMITTED]
<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------------------
Sept. Dec. Mar. Jun. Sep. Dec. Mar. Jun. Sep. Dec.
23, 31, 31, 30, 30, 31, 31, 30, 30, 31,
1997 1997 1998 1998 1998 1998 1999 1999 1999 1999
------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Century Bancshares,Inc. 100.00 123.19 126.09 115.66 103.48 82.18 74.56 76.70 75.10 83.09
Nasdaq Stock Market 100.00 93.65 109.60 112.61 101.69 131.96 147.62 161.51 165.19 238.41
Nasdaq Bank Stocks 100.00 113.49 119.96 117.51 99.20 112.71 108.19 116.11 105.67 108.34
------------------------------------------------------------------------------
</TABLE>
Assumes $100 invested at September 23, 1997. Dividends reinvested through
year ended December 31, 1999.
--------------------------------------------------------------------------
<PAGE>
CERTAIN RELATIONSHIPS AND TRANSACTIONS
The Company and Mr. Bracewell are parties to an Employment Agreement
which expires August 31, 2001. Under his Employment Agreement, Mr. Bracewell
receives an annual salary of $225,000, the use of a Company car, the payment by
the Company of life insurance premiums, and certain membership dues. Upon
termination of Mr. Bracewell's employment during the term of the Employment
Agreement (except by the reason of his death or upon termination by the Company
for cause), or if the Company elects not to renew the Employment Agreement prior
to its termination, Mr. Bracewell would be entitled to receive a payment in an
amount equal to twice his annual salary, maintenance of certain health care and
life insurance benefits for a period of one year subject to extension after such
time at Mr. Bracewell's expense, and all his stock options would automatically
vest. If Mr. Bracewell elects not to renew the Employment Agreement prior to its
expiration, the Employment Agreement provides for a severance payment in the
amount of his annual salary.
In the event of a change of control, Mr. Bracewell may terminate the
Employment Agreement within sixty (60) days after such occurrence. Under the
Employment Agreement, a "change of control" means (i) the acquisition by any
person or group of persons of beneficial ownership of securities representing
more than 50% of the Company or the Bank, (ii) a reorganization with respect to
which those persons who had been beneficial owners do not, following such
reorganization, beneficially own shares representing more than 50% of the
combined voting power of the voting securities of the resulting corporation,
(iii) a sale of substantially all the assets of the Company or the Bank, (iv)
the cessation for any reason of the individuals who constituted the Board of
Directors of the Company on the date of the Employment Agreement (the "Incumbent
Board") to constitute at least a majority of the Board of Directors, provided
that any person becoming a director subsequent to the date of the Employment
Agreement whose election or whose nomination for election by the Company's
stockholders was approved by a majority vote of the directors comprising the
Incumbent Board is, for purposes of the agreement, considered to be a member of
the Incumbent Board, or (v) a change in the Company's status requiring prior
notice to the Board of Governors of the Federal Reserve System and/or the Office
of the Comptroller of the Currency pursuant to the Change in Bank Control Act of
1978 and regulations promulgated thereunder. Mr. Bracewell has agreed not to
compete with the Company during the term of Employment Agreement and for 12
months thereafter.
The Company and each of its directors are parties to deferred
compensation agreements pursuant to which the directors have deferred their
annual retainer fees in exchange for a retirement benefit. During 1998, the
Company established a trust for the administration of its obligations under
these agreements. See "Compensation - Board Compensation" for a description of
the Company's obligations under these arrangements.
During 1999, the Bank made loans in the ordinary course of business to
certain of the directors and executive officers of the Company and the Bank,
their associates, and members of their immediate families. These loans were made
on substantially the same terms, including interest rates and collateral, as
those prevailing for comparable transactions with others and do not involve more
than normal risk of collectibility or present other unfavorable features. Loans
to directors, executive officers and principal stockholders of the Company and
to directors and officers of its subsidiaries are subject to limitations
contained in the Federal Reserve Act, the principal effect of which is to
require that extensions of such credits satisfy the foregoing standards. As of
December 31, 1999, loans outstanding to the directors and executive officers and
their immediate families totaled $5,365,322.99 (net of participations sold to
other banks on a non-recourse basis, but including undrawn amounts under
committed lines of credit), which represented approximately 3.12% of total loans
outstanding as of that date.
With respect to banking transactions other than loans, during 1999 the
Company and the Bank had transactions in the ordinary course of business with
many of their directors, executive officers, principal stockholders and other
affiliates; however, transactions with such persons were on substantially the
same terms as those that could be obtained from unaffiliated third parties and
those prevailing for comparable transactions with others.
Mr. Cope, a director of the Company and the Bank, is a member of
Bracewell & Patterson, L.L.P., a law firm that was retained by the Company and
its subsidiaries during 1999.
<PAGE>
EXECUTIVE OFFICERS
The executive officers of the Company are Joseph S. Bracewell and
Charles V. Joyce III. See "Election of Directors" for certain information with
respect to the age, positions and length of service with the Company, and the
business experience of Mr. Bracewell. Mr. Joyce is Senior Vice President and
Chief Financial Officer of the Company and the Bank. Mr.Joyce joined the
Company in November 1998, and he is 58 years old with 23 years of financial
services industry experience. From 1995 until April 1997, Mr. Joyce was Senior
Vice President and Chief Financial Officer for F&M Bank-Allegiance. From April
1997 until joining Century, Mr.Joyce was an independent consultant. The
Company's executive officers are elected annually and serve at the discretion of
the Board of Directors subject, in the case of Mr. Bracewell, to an employment
contract. See "Certain Relationships and Transactions."
APPROVAL OF AMENDMENT TO CERTIFICATE OF INCORPORATION
The Board of Directors has proposed an amendment to the Company's
Certificate of Incorporation, as amended, to increase the number of authorized
shares of Common Stock from five million to ten million shares. The Board of
Directors recommends a vote FOR such proposal.
The initial authorized capitalization of the company was established at
the time of the company's incorporation in 1985. Since that time, the company
has from time to time financed the growth of its business through the issuance
of additional shares of Common Stock, and has used options to purchase Common
Stock as a means to obtain and retain qualified employees. In addition, in
recent years the Company has declared a number of stock dividends. As a result
of these activities and other activities over a fifteen year period, as of April
5, 2000 the Company had 2,593,033 shares issued and outstanding, an aggregate of
335,694 shares of Common Stock reserved for issuance upon the exercise of
options to purchase Common Stock, 130,000 shares are held in treasury and 1,997
shares of Common Stock reserved for issuance upon exercise of future stock
options granted under the 1994 Plan. Consequently, only 2,069,276 shares of
Common Stock remain available for unrestricted issuance by the Company from time
to time. If the 2000 Stock Awards Plan is approved by the stockholders only
1,569,276 shares would be available for unrestricted use by the Company.
The Board of Directors believes that it would be desirable to have
additional authorized shares available for use by the Company. The availability
of additional authorized shares will enhance the Company's ability to meet
advantageous market conditions for the sale of additional Common Stock, for the
acquisition of desirable assets or companies and for other corporate purposes,
including attracting and retaining qualified employees and the payment of stock
dividends.
Potential Dilution
Approval of the amendment would make available a substantial number of
additional shares of Common Stock for issuance by the Company. Although the
Company monitors the financial markets and other business opportunities
available to it in an effort to be prepared to take advantage of relatively
attractive market conditions and other opportunities, the Company currently has
no understandings or agreements for the issuance of securities. No stockholder
of the Company has, or will have, any preemptive or other right to acquire
additional authorized and unissued shares of Common Stock. Depending on the
amount of or purpose for which additional shares are issued, approval of the
Company's stockholders may or may not be required. Issuance of additional shares
might, under certain circumstances, dilute either stockholder's equity or voting
rights, or both.
<PAGE>
Potential Antitakeover Effects
The additional shares of Common Stock available for issuance by the
Company may be issued by the Board of Directors for any corporate purpose. As
indicated above, approval of the Company's stockholders for the issuance of
Common Stock is generally not required. However, the rules of The NASDAQ Stock
Market SmallCap Market, the principal market where the Common Stock is traded,
requires that stockholder approval be obtained in certain circumstances,
including the sale or issuance by the Company of Common Stock equal to 20% or
more of the Common Stock outstanding in connection with a transaction other than
a public offering. Although the Company has no present intention to do so, if
another company sought to obtain control of the Company, the Board of Directors
could issue all or a portion of the shares of Common Stock to be authorized by
the proposed amendment in circumstances that could dilute the interest of such
other corporation, or otherwise render completion of a change of control more
difficult, under circumstances when some stockholders might consider such a
development to be favorable. The proposed amendment is not in response to any
specific takeover proposal received by the Company.
The Board of Directors recommends a vote FOR the amendment to the
Company's Certificate of Incorporation.
APPROVAL OF CENTURY BANCSHARES, INC.
2000 STOCK AWARDS PLAN
On February 18, 2000 the Board of Directors adopted, subject to
stockholder approval, the Century Bancshares, Inc. 2000 Stock Awards Plan (the
"2000 Plan"). A copy of the 2000 Plan is attached to this Proxy Statement as
Exhibit A, to which reference is made for a full statement of its terms.
Stockholders are encouraged to read the 2000 Plan in its entirety. The following
sections describe the background of the Board's decision to adopt the 2000 Plan
and its material terms.
Existing Plans
In 1986, the Company adopted an Incentive Stock Option Plan for Key
Employees, a Nonqualified Stock Option Plan for Key Employees, and a
Non-Qualified Stock Option Plan for Directors (collectively, the "1986 Plans")
in order to encourage ownership of Common Stock by key employees and directors
of the Company and its subsidiaries. The 1986 Plans expired during 1992 and 1993
and additional options may not be granted under such plans. No options granted
under the 1986 Plans remain outstanding.
In 1994, the Company reserved 150,000 shares of its Common Stock for
issuance of incentive stock options and nonqualified stock options to directors
and key employees under the Company's 1994 Stock Option Plan, which was approved
by the Board of Directors in April 1994 and by the Company's stockholders in May
1994 (the "1994 Plan"). The purpose of the 1994 Plan is to encourage ownership
of Common Stock by eligible key employees and directors of the Company and the
Bank, and to provide increased incentive for such employees to render services
and to exert maximum effort for the business success of the Company. The 1994
Plan utilizes vesting periods to encourage its executive officers and eligible
employees to continue in the employ of the Company. However, the 1994 Plan does
not provide for the use of equity-based incentives other than stock options,
such as restricted stock. The Company's stockholders approved an amendment to
the 1994 Plan at the Company's 1998 Annual Meeting whereby an additional 200,000
shares of Common Stock were allocated to the 1994 Plan. The Company currently
has outstanding options with respect to 335,694 shares of Common Stock under the
1994 Plan, and only 1,997 shares are currently available to for grant under the
1994 Plan.
<PAGE>
Reasons for Adopting the 2000 Plan
The Board of Directors believes that stock options and other methods of
equity-based incentive compensation are of increasing importance in attracting
and retaining employees and executives. The Company currently has only 1,997
shares available for the grant of options under the 1994 Plan, and no additional
options may be granted under the 1986 Plans. The Board of Directors believes
that this represents an insufficient number of shares for use in attracting and
retaining employees. In addition, the 1994 Plan does not provide for the grant
of equity-based incentive compensation other than stock options. For these
reasons, the Board of Directors has adopted the 2000 Plan. If the 2000 Plan is
approved by the stockholders, the Company will have an aggregate of 335,694
shares currently under option, an aggregate of 1,997 shares available for option
under the 1994 Plan and 500,000 shares available for option under the 2000 Plan,
which together would represent 32% of the Company's currently outstanding common
stock. However, it is not expected that option with respect to all available
shares would be granted immediately.
The 2000 Plan is intended to provide the Company with flexibility in
providing employees of the Company and its affiliates, directors of the Company
and its affiliates, and consultants to the Company and its affiliates (the
"Eligible Participants"), an opportunity to acquire a proprietary interest in
the Company and additional incentive and reward opportunities based on the
growth in the Common Stock price of the Company. The 2000 Plan will provide for
the granting of a variety of types of awards, including stock options,
restricted stock awards, stock appreciation rights, performance awards, and
phantom stock awards, or any combination thereof. The maximum number of shares
of Common Stock that may be subject to outstanding award, determined immediately
after the grant of any award, and the maximum number of shares which may be
issued under the 2000 Plan pursuant to all awards, may not exceed 500,000 shares
(subject to antidilutive adjustment). Shares of Common Stock which are
attributable to awards which have expired, terminated or been canceled or
forfeited, or which are settled in cash, are available for issuance or use in
connection with future awards. The different types of awards available under the
2000 Plan are intended to provide the Company with the means to keep its
compensation system competitive, but the inclusion of a type of award in the
2000 Plan does not require the Company to make grants utilizing it.
No grants may be made under the 2000 Plan until after it has been
approved by the Company's stockholders.
The significant provisions of the 2000 Plan are described in the
following sections.
Administration
The 2000 Plan will be administered by the Stock Option Committee of the
Board of Directors (the "Committee"). The 2000 Plan requires that the
Compensation Committee be (i) constituted so as to permit the plan to comply
with the applicable rules promulgated under the Securities Exchange Act of 1934,
as amended ("Exchange Act") and (ii) composed solely of outside directors within
the meaning of Section 162(m) of the Internal Revenue Code of 1986, as amended
(the "Code"). The Stock Option Committee will have the power to determine which
of the Eligible Participants will receive an award; the time or times when
awards will be made; the type of awards to be made; the number of shares of
Common Stock to be issued under the award or the value of the award; and the
other terms and conditions of the awards, including the terms of any vesting
provisions (whether based on the passage of time or the occurrence of an event,
such as achieving a certain performance standard) to be included therein.
The Committee is authorized to interpret the 2000 Plan and the
agreements executed pursuant to the plan, to prescribe such rules and
regulations relating to the 2000 Plan as it may consider advisable, and to
determine the terms, restrictions and provisions of each award, including such
terms, restriction and provisions as shall be requisite in the judgement of the
Committee to cause designated options to qualify as incentive stock options, and
to make all other determinations necessary or advisable for administering the
2000 Plan. The Committee may correct any defect, supply any omission or
reconcile any inconsistency in any agreement relating to an award. The decisions
of the Committee relating to the 2000 Plan will be conclusive.
<PAGE>
Shares Available
The aggregate number of shares of Common Stock that may be subject to
awards under the 2000 Plan is 500,000 shares. The number of shares is subject to
adjustment upon the occurrence of certain events, such as stock splits and stock
dividends, as provided in the 2000 Plan. Shares of Common Stock which are
attributable to awards under the 2000 Plan which expire, terminate or are
canceled or forfeited, or which are settled in cash, will become available for
issuance or use in connection with future awards.
Participation and Eligibility
Under the 2000 Plan, awards may be made only to persons who are
Eligible Participants on the date of the award. There are currently
approximately 60 employees of the Company and the Bank, 12 non-employee
directors of the Company and the Bank, and no consultants who will be eligible
to participate in the 2000 Plan.
Terms and Conditions of Awards
The 2000 Plan became effective as of February 18, 2000, the date of its
adoption by the Board of Directors, subject to approval of the 2000 Plan by the
stockholders of the Company within twelve months thereafter. No awards may be
granted under the 2000 Plan after the expiration of ten years from the date of
its adoption by the Board of Directors. The 2000 Plan remains in effect as to
awards made prior to the expiration of ten years until such awards have been
satisfied or have expired.
The 2000 Plan provides for the granting of incentive stock options,
nonqualified stock options, restricted stock awards, stock appreciation rights,
performance awards, and phantom stock awards. Awards of one type may be made
separately or in conjunction with awards of another type. Each type of award is
described below. Awards may be subject to restrictions on vesting and
exercisability imposed by the Committee, such as continued service to the
Company or satisfaction of performance standards. All awards under the Plan will
fully vest, however, upon the occurrence of a change of control of the Company,
as defined in the Plan. In general, a change in control of the Company means (i)
an event occurs that requires notice to the Federal Reserve Board or the Office
of the Comptroller of the Currency under the Change in Bank Contract Act of
1978, (ii) a person or group acquires more than 50% of the Company's voting
securities, (iii) a change in a majority of the members of the board of
directors of the Company shall occur (iv) a merger, consolidation or similar
transaction occurs in which the persons who were the owners of a majority of the
voting securities of the Company before such transaction cease to own a majority
of the voting securities of the Company after the transaction, or (v) a sale of
all or substantially all of the assets of the Company or the Bank.
Stock Options. A stock option grants the holder the right to purchase
Common Stock in the future at a price fixed at the time the option is granted.
The 2000 Plan will provide for two types of options: incentive stock options and
nonqualified stock options. The Committee will designate Eligible Participants
to receive the options, the number of shares subject to the options, and the
terms and conditions of each option granted under the 2000 Plan; provided,
however, that incentive stock options may only be granted to employees of the
Company or its subsidiaries. The term of any option granted under the 2000 Plan
shall be determined by the Committee; provided, however, that the term of any
incentive stock option cannot exceed ten years from the date of the grant and
any incentive stock option granted to an employee who possesses more than 10% of
the total combined voting power of all classes of shares of the Company or of
its subsidiary within the meaning of Section 422(b)(6) of the Code must not be
exercisable after the expiration of five years from the date of grant. The
exercise price per share of Common Stock covered by options granted under the
2000 Plan will be determined by the Committee; provided, however, that the
exercise price of an option cannot be less than the fair market value of a
Common Stock on the date such option is granted (subject to adjustments).
Further, the exercise price of any incentive stock option granted to an employee
who possesses more than 10% of the total combined voting power of all classes of
shares of the Company or of its subsidiaries within the meaning of Section
422(b)(6) of the Code must be at least 110% of the fair market value of the
share at the time such option is granted. The exercise price of options granted
under the 2000 Plan will be paid in full in a manner prescribed by the
Committee.
Stock Appreciation Rights. A stock appreciation right permits the
holder thereof to receive an amount (in cash, Common Stock, or a combination
thereof) equal to the number of stock appreciation rights exercised by the
holder multiplied by the excess of the fair market value of Common Stock on the
exercise date over the exercise price of the stock appreciation right. Stock
appreciation rights may or may not be granted in connection with the grant of a
stock option. A stock appreciation right may be exercised in whole or in such
installments and at such time as determined by the Committee.
<PAGE>
Restricted Stock Awards. A restricted stock award is the issuance or
delivery of Common Stock to the Eligible Participant without any cash payment to
the Company, except to the extent otherwise provided by the Committee or
required by law, subject to certain restrictions on the disposition thereof and
certain obligations to forfeit such shares to the Company as may be determined
in the discretion of the Committee. The restrictions on disposition may lapse
based upon (a) the Company's attainment of specific performance targets
established by the Compensation Committee that are based on (i) the price of a
share of Common Stock, (ii) the Company's earnings per share, (iii) the revenue
of the Company or an affiliate designated by the Committee, (iv) the revenue of
a business unit of the Company or an affiliate designated by the Committee, (v)
the return on stockholders' equity, or return on assets, achieved by the Company
or an affiliate designated by the Committee, or (vi) the pre-tax cash flow from
operations of the Company or an affiliate designated by the Committee, (b) the
grantee's continued service or employment with the Company or an affiliate for a
specified period of time, or (c) a combination of factors. The Company will
retain custody of the Common Stock issued pursuant to a restricted stock award
until the disposition restrictions lapse. An employee may not sell, transfer,
pledge, exchange, hypothecate, or otherwise dispose of such shares until the
expiration of the restriction period. However, upon the issuance to the Eligible
Participant of Common Stock pursuant to a restricted stock award, except for the
foregoing restrictions, such participant will have all the rights of a
stockholder of the Company with respect to such shares, including the right to
vote such shares and to receive all dividends and other distributions paid with
respect to such shares.
Performance Stock Awards. A performance award is an award of the right
to receive a payment in cash or in securities at a future date if certain
performance standards are satisfied over a measurement period. Performance
awards may be paid in cash, Common Stock, or a combination thereof as determined
by the Committee. Performance awards granted under the 2000 Plan will have a
maximum value established by the Committee at the time of the grant. A grantee's
receipt of such amount will be contingent upon satisfaction by the Company, or
any affiliate, division or department thereof, of future performance conditions
established by the Committee prior to the beginning of the performance period.
Such performance awards, however, are subject to later revisions as the
Committee deems appropriate to reflect significant unforeseen events or changes.
A performance award will terminate if the grantee's employment with the Company
terminates during the applicable performance period except as otherwise provided
by the Committee at the time of grant.
Phantom Stock Awards. A phantom stock award is an award of the right to
receive amounts equal to the appreciation of the Company's Common Stock over a
specific period of time. Such awards vest over a period of time or upon the
occurrence of a specific event established by the Committee, without payment of
any amounts by the holder thereof (except to the extent required by law) or
satisfaction of any performance criteria or objectives. A phantom stock award
will terminate if the grantee's employment with the Company terminates during
the applicable vesting period or, if applicable, the occurrence of a specific
event(s), except as otherwise provided by the Committee at the time of grant. In
determining the value of performance awards or phantom stock awards, the
Committee must take into account the grantee's responsibility level,
performance, potential, other awards under the 2000 Plan, and other such
considerations as it deems appropriate. Such payment may be made in a lump sum
or in installments as prescribed by the Committee. Any payment made in Common
Stock will based upon the fair market value of the Common Stock on the payment
date.
<PAGE>
Federal Income Tax Consequences
Nonqualified Stock Options. Under the Internal Revenue Code, a
participant receiving a nonqualified stock option ordinarily does not realize
taxable income upon the grant of the option. A participant does, however,
realize ordinary income upon the exercise of a nonqualified stock option to the
extent that the fair market value of the Common Stock on the date of exercise
exceeds the option price. The Company is entitled to a federal income tax
deduction for compensation in an amount equal to the ordinary income so realized
by the participant, provided that the Company withholds federal income tax with
respect to the amount of such compensation. Upon the subsequent sale of the
shares acquired pursuant to a nonqualified option, any gain or loss will be
capital gain or loss, assuming the shares represent a capital asset in the hands
of the participant, although there will be no tax consequences for the Company.
Incentive Stock Options. The grant of an incentive stock option does
not result in taxable income to a participant. The exercise of an incentive
stock option also does not result in taxable income, provided that the
employment requirements specified in the Internal Revenue Code are satisfied,
although such exercise may give rise to alternative minimum tax liability for
the participant. In addition, if the participant does not dispose of the Common
Stock acquired upon exercise of an incentive stock option during the statutory
holding period, then any gain or loss upon subsequent sale of the Common Stock
will be a long-term capital gain or loss, assuming the shares represent a
capital asset in the participant's hands.
Stock Appreciation Rights. Generally, a recipient does not realize
taxable income upon the grant of a stock appreciation right but realizes
ordinary income upon its exercise in an amount equal to the cash received and/or
the fair market value of any Common Stock received. The Company is entitled to a
federal income tax deduction in an amount equal to the ordinary income realized
by the participant, provided that the Company withholds federal income tax with
respect to the amount of such compensation. Upon the subsequent sale of shares
acquired pursuant to a stock appreciation right, any gain or loss will be
capital gain or loss, assuming the shares represent a capital asset in the hands
of the participant.
Performance Awards and Phantom Stock. A holder of a performance award
and phantom stock award will include in his or her ordinary taxable income the
fair market value of the shares of common stock related to such award when the
holder's rights in such award first become transferable or are no longer subject
to a substantial risk of forfeiture. The amount of ordinary taxable income
recognized by the holder of such an award is deductible by the Company.
Restricted Stock. In general, a participant receiving restricted stock
does not realize taxable income upon the grant of restricted stock. A
participant will, however, realize ordinary income when the restricted stock
becomes vested to the extent that the fair market value of the Common Stock on
that date exceeds the price, if any, paid for the restricted stock or, if no
price was paid, to the extent of the fair market value of the Common Stock on
that date. However, the participant may elect (within 30 days after the grant of
restricted stock) to realize ordinary income on the date of the grant to the
extent of the fair market value of the restricted stock (determined without
regard to restrictions on transferability and any substantial risk of
forfeiture). If such election is made, the participant will not realize ordinary
income when the restricted stock becomes vested. In addition, if such an
election is made and the restricted stock is subsequently forfeited, the
participant is not entitled to a deduction but will be allowed a capital loss
equal to the excess of the amount paid, if any, for such shares over the amount
realized if any, on such forfeiture. Upon a subsequent sale of vested restricted
stock, any gain or loss will be capital gain or loss, assuming the shares
represent a capital asset in the hands of the participant. The Company is
entitled to a federal income tax deduction in an amount equal to the ordinary
income realized by the recipient of the restricted stock, provided that the
Company withholds federal income tax with respect to the amount of such
compensation. Dividends paid to the participant on restricted stock during the
restricted period are ordinary compensation income to the participant and
deductible as such by the Company.
Section 162(m). Code Section 162(m) generally disallows a public
company's tax deduction for compensation to the chief executive officer and the
four other most highly compensated executive officers in excess of $1.0 million
in any calendar year. Compensation that qualifies as "performance-based
compensation" is excluded from the $1.0 million deductibility cap, and therefore
remains fully deductible by the company that pays it. Assuming the 2000 Plan is
approved by the stockholders of the Company, the Company believes that options
granted with an exercise price at least equal to 100% of the fair market value
of the underlying Common Stock at the date of grant, and other awards, the
settlement of which is conditioned upon achievement of performance goals (based
on criteria described above), will qualify as such "performance-based
compensation," although other awards under the awards plan may not so qualify.
<PAGE>
Termination; Amendment
The Board may terminate or amend the 2000 Plan at any time, but no such
termination or amendment may impair the rights of a holder of an award under the
2000 Plan without the consent of the holder. Without stockholder approval,
however, the Board may not amend the 2000 Plan to (i) increase the maximum
number of shares which may be issued under the 2000 Plan, on exercise or
surrender of an award, except as provided in Paragraph XII of the 2000 Plan,
(ii) change the option price, (iii) change the classes persons eligible to
receive awards or materially increase the benefits accruing Eligible
Participants under the 2000 Plan, (iv) extend the maximum period during which
awards may be granted under the 2000 Plan, or (v) modify materially the
requirements as to eligibility for participation in the 2000 Plan.
Required Vote
The affirmative vote of the stockholders holding a majority of the
outstanding shares of Common Stock present, in person or by proxy, and entitled
to vote at the Annual Meeting, is required to approve the adoption of the 2000
Plan.
The Board of Directors of the Company unanimously recommends a vote
"FOR" the adoption of the 2000 Plan.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of Exchange Act and the rules promulgated there under
require every person who is the beneficial owner of more than ten percent of any
class of any equity security (other than an exempted security) which is
registered pursuant to Section 12 of the Exchange Act, or who is a director or
executive officer of an issuer of such security, to file with the Securities and
Exchange Commission initial reports of ownership and reports of changes in
ownership of such securities. Officers, directors and greater than ten percent
stockholders are required by regulation to furnish the Company with copies of
all Section 16(a) forms they file.
Based solely on a review of the copies of such reports furnished to the
Company and certain written representations provided to the Company by such
persons, the Company believes that during the year ended December 31, 1999, all
Section 16(a) filing requirements applicable to the Company's officers,
directors and greater than ten percent stockholders were satisfied.
EXPENSES OF SOLICITATION
The cost of soliciting proxies on behalf of the Board of Directors will
be borne by the Company. Solicitations of proxies are being made by the Company
through the mail and may also be made in person or by telephone. Directors and
employees of the Company may be utilized in connection with such solicitations.
The Company also will request brokers and nominees to forward soliciting
materials to the beneficial owners of the Common Stock held of record by such
persons and will reimburse them for their reasonable forwarding expenses in
connection therewith.
DATE OF SUBMISSION OF STOCKHOLDER PROPOSALS
In order for proposals submitted by stockholders of the Company
pursuant to Rule 14a-8 of the General Rules and Regulations under the Exchange
Act to be included in the Company's proxy statement and form of proxy relating
to the 2001 Annual Meeting of Stockholders, such proposals must be received at
the Company's principal executive offices no later than December 2, 2000. A
stockholder choosing not to use the procedures established in Rule 14a-8 must
deliver the proposal at the Company's principal executive offices not later than
February 27, 2001.
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INDEPENDENT AUDITORS
The firm of KPMG LLP served as the Company's independent public
auditors for the year ended December 31, 1999. A member of the firm of KPMG LLP
is expected to be present at the Annual Meeting with the opportunity to make a
statement if so desired and will be available to respond to appropriate
questions.
OTHER MATTERS
The Company is not aware of any business to be acted on at the Annual
Meeting other than the proposals discussed in this Proxy Statement. In the event
that any other business calling for a vote of the stockholders is properly
presented at the meeting, the proxies will be voted in accordance with the
discretion of the persons named therein.
FORM 10-K AVAILABLE WITHOUT CHARGE
The Company's Annual Report on Form 10-K, including all exhibits, has
been filed with the Securities and Exchange Commission and a copy thereof,
excluding exhibits, accompanies this Proxy Statement. Upon payment of the
Company's reasonable expenses, the Company will furnish a copy of any exhibit to
the Form 10-K to any stockholder who makes a written request therefore to the
Corporate Secretary, Century Bancshares, Inc., 1275 Pennsylvania Avenue, N.W.,
Washington, D.C. 20004.
By Order of the Board of Directors
/s/ William C. Oldaker
William C. Oldaker
Secretary
April 26, 2000
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EXHIBIT A
CENTURY BANCSHARES, INC.
2000 STOCK AWARDS PLAN
I. PURPOSE
The purpose of the Century Bancshares, Inc. 2000 Stock Awards Plan (the
"Plan") is to provide a means through which Century Bancshares, Inc., a Delaware
corporation (the "Company"), and its subsidiaries may (i) attract and retain in
the service of the Company persons of training, experience and ability, (ii)
encourage a sense of proprietorship in such persons through stock ownership, and
(iii) stimulate such persons to exert their maximum efforts for the welfare of
the Company through the additional incentive and reward opportunities provided
by the Plan. Accordingly, the Plan provides for granting Incentive Stock
Options, options which do not constitute Incentive Stock Options, Stock
Appreciation Rights, Restricted Stock Awards, Performance Awards, Phantom Stock
Awards, or any combination of the foregoing, as is best suited to the
circumstances of the particular Eligible Participant, as provided herein.
II. DEFINITIONS
The following definitions shall be applicable throughout the Plan
unless specifically modified by any paragraph:
(a) "Affiliate" means any "parent corporation" of the Company and any
"subsidiary" of the Company within the meaning of Code Sections 424(e) and (f),
respectively, and any entity which directly or indirectly through one or more
intermediaries controls, is controlled by, or is under common control with, the
Company.
(b) "Award" means, individually or collectively, any Option, Restricted
Stock Award, Phantom Stock Award, Performance Award or Stock Appreciation Right.
(c) "Bank" means Century National Bank, a national banking association.
(d) "Board" means the Board of Directors of the Company.
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(e) "Change of Control" means the occurrence of any of the following
events: (i) a change in the Company's status requiring prior notice to the Board
of Governors of the Federal Reserve System and/or the Office of the Comptroller
of the Currency pursuant to the Change in Bank Control Act of 1978 and
regulations, 12 C.F.R. Section 5.50 and 225.41, promulgated thereunder; or (ii)
the acquisition by any person or group of persons (as such terms are defined and
used in Sections 3(a)(9) and 14(d)(2), respectively, of the 1934 Act) of
beneficial ownership (as defined in Rule 13d-3 issued under the 1934 Act),
directly or indirectly, of securities representing more than fifty percent (50%)
of the combined voting power of the then outstanding voting securities of the
Company or Bank entitled to vote generally in the election of directors ("Voting
Securities"); or (iii) individuals who constitute the Board of the Company on
the date of this Plan ("Incumbent Board") cease for any reason to constitute at
least a majority of that Board, provided that any person becoming a director
subsequent to the date of this Plan whose election or whose nomination for
election by the Company's stockholders was approved by a majority vote of the
directors comprising the Incumbent Board shall be, for purposes of this Plan,
considered as though he or she were a member of the Incumbent Board; or (iv) a
recapitalization, reorganization, merger, or consolidation with respect to which
those persons (as defined above) who were beneficial owners of the Voting
Securities of the Company or the Bank immediately prior to such
recapitalization, reorganization, merger, or consolidation do not, following
such recapitalization, reorganization, merger, or consolidation, beneficially
own, directly or indirectly, shares representing more than fifty percent (50%)
of the combined voting power of the Voting Securities of the Company resulting
from such recapitalization, reorganization, merger, or consolidation; or (v) a
sale of all or substantially all the assets of the Bank or the Company.
(f) "Change of Control Value" shall mean (i) the highest price per
share paid by any person or group of persons who acquires beneficial ownership
of securities representing more than fifty percent (50%) of the Voting
Securities, (ii) the per share price offered to stockholders of the Company in
any merger, consolidation, recapitalization, reorganization, sale of assets or
dissolution transaction resulting in a Change of Control, (iii) the price per
share offered to stockholders of the Company in any tender offer or exchange
offer resulting in a Change of Control, or (iv) if a Change of Control occurs
other than in (i) -(iii) above, the Fair Market Value per share of the shares
into which Awards are exercisable, as determined by the Committee, whichever is
applicable. In the event that the consideration offered to stockholders of the
Company consists of anything other than cash, the Committee shall determine the
equivalent fair value in cash of the portion of the consideration offered which
is other than cash.
(g) "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 any section and any regulations under such
section.
(h) "Committee" means the Stock Option Committee of the Board, or
another committee of the Board designated by the Board after the date of
adoption of the Plan, which in either case shall be constituted solely of (i)
"non-employee directors" within the meaning of Rule 16b-3 and and applicable
interpretive authority thereunder, and (ii) "outside directors" within the
meaning of Section 162(m) of the Code and applicable interpretive authority
thereunder.
(i) "Company" means Century Bancshares, Inc. and any of its Affiliates.
(j) A "consultant" means an individual who performs services for the
Company or its Affiliates as an independent contractor.
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(k) "Director" means an individual elected to the Board by the
stockholders of the Company or by the Board under applicable corporate law who
is serving on the Board on the date the Plan is adopted by the Board or is
elected to the Board after such date.
(l) An "employee" means any person (including an officer or a Director)
in an employment relationship with the Company or any parent or subsidiary
corporation (as defined in section 424 of the Code).
(m) An "Eligible Participant" means any (i) officer or employee of the
Company or any Affiliate of the Company, including a Director of the Company, or
a director of any Affiliate of the Company, who is also an employee, (ii)
non-employee Director of the Company, or any non-employee director of any
Affiliate of the Company, and (iii) consultant to the Company or any Affiliate
of the Company.
(n) "1934 Act" means the Securities Exchange Act of 1934, as amended.
(o) "Fair Market Value" means, as of any specified date, the closing
sale price of the Stock (i) reported by any interdealer quotation system on
which the Stock is quoted on that date, or (ii) if the Stock is listed on a
national securities exchange, reported on the national securities exchange
composite tape on that date; or, in either case, if no prices are reported on
that date, on the last preceding date on which such prices of the Stock are so
reported. If the Stock is traded in the over the counter market at the time a
determination of its fair market value is required to be made hereunder, its
fair market value shall be deemed to be equal to (i) the closing sale price of
the Stock on that date, if such price is available, or (ii) if such price is not
available, the average between the reported high and low bid prices of Stock on
the most recent date for which such information is available. In the event Stock
is not publicly traded at the time a determination of its value is required to
be made hereunder, the determination of its fair market value shall be made by
the Committee in such manner as it deems appropriate.
(p) "Forfeiture Restrictions" has the meaning ascribed to it in
Paragraph IX(b) hereof.
(q) "Holder" means an Eligible Participant who has been granted an
Award.
(r) "Incentive Stock Option" means an option that is designated as an
incentive stock option within the meaning of section 422(b) of the Code.
(s) "Incumbent Board" has the meaning ascribed to it in Paragraph II(e)
hereof.
(t) "Nonqualified Stock Option" means an option granted under Paragraph
VII of the Plan to purchase Stock which does not constitute an Incentive Stock
Option.
(u) "Option" means an Award granted under Paragraph VII of the Plan and
includes both Incentive Stock Options to purchase Stock and Nonqualified Stock
Options to purchase Stock.
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(v) "Option Agreement" means a written agreement between the Company
and a Holder with respect to an Option.
(w) "Performance Award" means an Award granted under Paragraph X of the
Plan.
(x) "Performance Award Agreement" means a written agreement between the
Company and a Holder with respect to a Performance Award.
(y) "Performance Measures" has the meaning ascribed to it in Paragraph
IX(b) of the Plan.
(z) "Phantom Stock Award" means an Award granted under Paragraph XI of
the Plan.
(aa) "Phantom Stock Award Agreement" means a written agreement between
the Company and a Holder with respect to a Phantom Stock Award.
(bb) "Plan" means the Century Bancshares, Inc. 2000 Stock Awards Plan,
as it may be amended from time to time.
(cc) "Restricted Stock Agreement" means a written agreement between the
Company and a Holder with respect to a Restricted Stock Award.
(dd) "Restricted Stock Award" means an Award granted under Paragraph IX
of the Plan.
(ee) "Rule 16b-3" means Rule 16b-3 promulgated by the Securities and
Exchange Commission under the 1934 Act as in effect on the date the Plan is
adopted by the Board, as such rule may thereafter be amended from time to time,
and any successor rule, regulation or statute fulfilling the same or a similar
function.
(ff) "Spread" means, in the case of a Stock Appreciation Right, an
amount equal to the excess, if any, of the Fair Market Value of a share of Stock
on the date such right is exercised over the exercise price of such Stock
Appreciation Right.
(gg) "Stock" means the common stock, $1.00 par value of the Company, as
constituted on the date of the adoption of the Plan and any capital stock into
which such common stock may thereafter be changed.
(hh) "Stock Appreciation Right" means an Award granted under Paragraph
VIII of the Plan.
(ii) "Stock Appreciation Rights Agreement" means a written agreement
between the Company and a Holder with respect to an Award of Stock Appreciation
Rights.
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(jj) "Voting Securities" has the meaning ascribed to it in Paragraph
II(e) hereof.
III. EFFECTIVE DATE AND DURATION OF THE PLAN
The Plan shall be effective upon the date of its adoption by the Board,
provided that the Plan is approved by the stockholders of the Company within
twelve months thereafter. No further Awards may be granted under the Plan after
the expiration of ten years from the date of its adoption by the Board. The Plan
shall remain in effect until all Awards granted under the Plan have been
satisfied or expired.
IV. ADMINISTRATION
(a) Committee. The Plan shall be administered by the Committee.
(b) Powers. Subject to the provisions of the Plan, the Committee shall
have sole authority, in its discretion, to determine which Eligible Participants
shall receive an Award; the time or times when such Award shall be made; whether
an Incentive Stock Option, Nonqualified Stock Option, Stock Appreciation Right,
Restricted Stock Award, Performance Award or Phantom Stock Award shall be
granted; the number of shares of Stock which may be issued under each Option,
Stock Appreciation Right or Restricted Stock Award; and the value of each
Performance Award and Phantom Stock Award. In making such determinations the
Committee may take into account the nature of the services rendered by the
respective Eligible Participants, their present and potential contributions to
the Company's success and such other factors as the Committee in its discretion
shall deem relevant.
(c) Additional Powers. The Committee shall have such additional powers
as are delegated to it by the other provisions of the Plan. Subject to the
express provisions of the Plan, the Committee is authorized to construe the Plan
and the respective agreements executed thereunder, to prescribe such rules and
regulations relating to the Plan as it may deem advisable to carry out the Plan,
and to determine the terms, restrictions and provisions of each Award, including
such terms, restrictions and provisions as shall be requisite in the judgment of
the Committee to cause designated Options to qualify as Incentive Stock Options,
and to make all other determinations necessary or advisable for administering
the Plan. The Committee may correct any defect or supply any omission or
reconcile any inconsistency in any agreement relating to an Award in the manner
and to the extent it shall deem expedient to carry it into effect. The
determinations of the Committee on the matters referred to in this Paragraph IV
shall be conclusive.
V. GRANT OF AWARDS; SHARES SUBJECT TO THE PLAN
(a) Grant of Awards. The Committee may from time to time grant Awards
to one or more Eligible Participants determined by it to be eligible for
participation in the Plan in accordance with the provisions of Paragraph VI.
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(b) Shares Subject to Plan. Subject to Paragraph XII, the aggregate
number of shares of Stock that may be issued under the Plan upon the exercise or
satisfaction of an Award shall not exceed 500,000 shares. The 500,000 shares of
Stock subject to the Plan may be apportioned by the Committee among the various
types of Awards as the Committee shall determine in its sole discretion. While
an Award of one type is outstanding, the number of shares of Stock subject to
such Award shall not be available for grant under another Award of the same or
any other type. Shares of Stock shall be deemed to have been issued under the
Plan only to the extent actually issued and delivered pursuant to an Award. To
the extent that an Award lapses or the rights of its Holder terminate or the
Award is paid in cash, any shares of Stock subject to such Award shall again be
available for the grant of an Award. Separate stock certificates shall be issued
by the Company for those shares acquired pursuant to the exercise of an
Incentive Stock Option and for those shares acquired pursuant to the exercise of
a Nonqualified Stock Option.
(c) Stock Offered. The shares of Stock to be offered pursuant to the
grant of an Award may be authorized and unissued shares of Stock, or Stock
previously issued which has been acquired by the Company.
VI. ELIGIBILITY
Awards may be granted only to persons who, at the time of grant, are
Eligible Participants. An Award may be granted on more than one occasion to the
same person, and, subject to the limitations set forth in the Plan, such Award
may include an Incentive Stock Option or a Nonqualified Stock Option, a Stock
Appreciation Right, a Restricted Stock Award, a Performance Award, a Phantom
Stock Award or any combination thereof.
VII. STOCK OPTIONS
(a) Option Period. Subject to the limitations contained in Paragraph
VII(c), the term of each Option shall be as specified by the Committee at the
date of grant.
(b) Limitations on Exercise of Option. An Option shall be exercisable
in whole or in such installments and at such times as may be determined by the
Committee.
(c) Special Limitations on Incentive Stock Options. No more than
500,000 shares of Stock may be subject to Incentive Stock Options. Incentive
Stock Options may only be granted to employees of the Company and its
Affiliates, and the term of an Incentive Stock Option cannot exceed ten years
from the date of grant. To the extent that the aggregate Fair Market Value
(determined at the time the respective Incentive Stock Option is granted) of
Stock with respect to which Incentive Stock Options are exercisable for the
first time by an individual during any calendar year under all incentive stock
option plans of the Company and its parent and subsidiary corporations exceeds
$100,000, such Incentive Stock Options shall be treated as Nonqualified Stock
Options as determined by the Committee. The Committee shall determine, in
accordance with applicable provisions of the Code, Treasury Regulations and
other administrative pronouncements, which of an optionee's Incentive Stock
Options will not constitute Incentive Stock Options because of such limitation
and shall notify the optionee of such determination as soon as practicable after
such determination. No Incentive Stock Option shall be granted to an individual
if, at the time the Option is granted, such individual owns stock possessing
more than ten percent (10%) of the total combined voting power of all classes of
stock of the Company or of its parent or subsidiary corporations, within the
meaning of section 422(b)(6) of the Code, unless (i) at the time such Option is
granted the option price is at least one hundred ten percent (110%) of the Fair
Market Value of the Stock subject to the Option and (ii) such Option by its
terms is not exercisable after the expiration of five years from the date of
grant.
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(d) Option Agreement. Each Option shall be evidenced by a written
Option Agreement in such form and containing such provisions not inconsistent
with the provisions of the Plan as the Committee from time to time shall
approve, including, without limitation, provisions to qualify an Incentive Stock
Option under section 422 of the Code. No individual may be granted in any
calendar year an Option to purchase more than 500,000 shares of Stock. An Option
Agreement may provide for the payment of the option price, in whole or in part,
by the delivery of a number of shares of Stock (plus cash if necessary) having a
Fair Market Value equal to such option price. Payment in full or in part may
also be made by a reduction in the number of shares of Stock issuable upon the
exercise of an Option, based on the Fair Market Value of the shares of Stock on
the date the Option is exercised. Each Option Agreement shall specify the effect
of termination of employment, the cessation of serving on the Board, cessation
of serving on the Board of an Affiliate or the cessation of performing services
as a consultant to the Company on the exercisability of the Option, as the case
may be. Moreover, an Option Agreement may provide for a "cashless exercise" of
the Option by establishing procedures whereby the Holder, by a properly executed
written notice, directs (i) an immediate market sale or margin loan respecting
all or a part of the shares of Stock to which he is entitled upon exercise
pursuant to an extension of credit by the Company to the Holder of the option
price, (ii) the delivery of the shares of Stock from the Company directly to a
brokerage firm and (iii) the delivery of the option price from the sale or
margin loan proceeds from the brokerage firm directly to the Company. Such
Option Agreement may also include, without limitation, provisions relating to
(i) vesting of Options, subject to the provisions hereof accelerating such
vesting on a Change of Control, (ii) tax matters (including provisions (y)
permitting the delivery of additional shares of Stock or the withholding of
shares of Stock from those acquired upon exercise to satisfy federal or state
income tax withholding requirements and (z) dealing with any other applicable
employee wage withholding requirements), and (iii) any other matters not
inconsistent with the terms and provisions of this Plan that the Committee shall
in its sole discretion determine. The terms and conditions of the respective
Option Agreements need not be identical.
(e) Option Price and Payment. The price at which a share of Stock may
be purchased upon exercise of an Option shall be determined by the Committee,
but (i) such purchase price shall not be less than the Fair Market Value of
Stock subject to an Option on the date the Option is granted and (ii) such
purchase price shall be subject to adjustment as provided herein. The Option or
portion thereof may be exercised by delivery of an irrevocable notice of
exercise to the Company. The purchase price of the Option or portion thereof
shall be paid in full in the manner prescribed by the Committee.
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(f) Stockholder Rights and Privileges. The Holder shall be entitled to
all the privileges and rights of a stockholder only with respect to such shares
of Stock as have been purchased under the Option and for which certificates of
stock have been registered in the Holder's name.
(g) Options and Rights in Substitution for Stock Options Granted by
Other Entities. Options and Stock Appreciation Rights may be granted under the
Plan from time to time in substitution for stock options held by individuals
employed by other entities who become employees as a result of a merger or
consolidation of the employing entity with the Company or any subsidiary, or the
acquisition by the Company or a subsidiary of the assets of the employing
entity, or the acquisition by the Company or a subsidiary of stock or other
equity interests of the employing entity with the result that such employing
entity becomes a subsidiary of the Company.
VIII. STOCK APPRECIATION RIGHTS
(a) Stock Appreciation Rights. A Stock Appreciation Right is the right
to receive an amount equal to the Spread with respect to a share of Stock upon
the exercise of such Stock Appreciation Right. Stock Appreciation Rights may be
granted in connection with the grant of an Option, in which case the Option
Agreement will provide that exercise of Stock Appreciation Rights will result in
the surrender of the right to purchase the shares under the Option as to which
the Stock Appreciation Rights were exercised. Alternatively, Stock Appreciation
Rights may be granted independently of Options, in which case each Award of
Stock Appreciation Rights shall be evidenced by a Stock Appreciation Rights
Agreement which shall contain such terms and conditions as may be approved by
the Committee. No individual may be granted in any calendar year Stock
Appreciation Rights with respect to more than 500,000 shares of Stock. The
Spread with respect to a Stock Appreciation Right may be payable either in cash,
shares of Stock with a Fair Market Value equal to the Spread or in a combination
of cash and shares of Stock. Each Stock Appreciation Rights Agreement shall
specify the effect of termination of employment, the cessation of serving on the
Board or the cessation of performing services as a consultant to the Company on
the exercisability of the Stock Appreciation Rights.
(b) Other Terms and Conditions. At the time of such Award, the
Committee may in its sole discretion prescribe additional terms, conditions or
restrictions relating to Stock Appreciation Rights, including, but not limited
to rules pertaining to termination of employment, the cessation of serving on
the Board, the cessation of serving on the board of an Affiliate or the
cessation of performing services as a consultant to the Company (by retirement,
disability, death or otherwise) of a Holder prior to the expiration of such
Stock Appreciation Rights. Such additional terms, conditions or restrictions
shall be set forth in the Stock Appreciation Rights Agreement made in
conjunction with the Award. Such Stock Appreciation Rights Agreements may also
include, without limitation, provisions relating to (i) vesting of Awards,
subject to the provisions hereof accelerating vesting on a Change of Control,
(ii) tax matters (including provisions covering applicable wage withholding
requirements), and (iii) any other matters not inconsistent with the terms and
provisions of this Plan that the Committee shall in its sole discretion
determine. The terms and conditions of the respective Stock Appreciation Rights
Agreements need not be identical.
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(c) Exercise Price. The exercise price of each Stock Appreciation Right
shall be determined by the Committee, but such exercise price (i) shall not be
less than the Fair Market Value of a share of Stock on the date the Stock
Appreciation Right is granted (or such greater exercise price as may be required
if such Stock Appreciation Right is granted in connection with an Incentive
Stock Option that must have an exercise price equal to one hundred ten percent
(110%) of the Fair Market Value of the Stock on the date of grant pursuant to
Paragraph VII(c)) and (ii) shall be subject to adjustment as provided in
Paragraph XII.
(d) Exercise Period. The term of each Stock Appreciation Right shall be
as specified by the Committee at the date of grant.
(e) Limitations on Exercise of Stock Appreciation Right. A Stock
Appreciation Right shall be exercisable in whole or in such installments and at
such times as determined by the Committee.
IX. RESTRICTED STOCK AWARDS
(a) Restricted Stock Awards. A Restricted Stock Award shall be
represented by a certificate of Stock registered in the name of the Holder of
such Restricted Stock Award and the related Restricted Stock Agreement. The
Holder shall have the right to receive dividends with respect to Stock subject
to a Restricted Stock Award, to vote the shares of Stock subject thereto and to
enjoy all other stockholder rights, except that (i) the Holder shall not be
entitled to delivery of the certificate representing the shares of Stock until
the Forfeiture Restrictions shall have expired, (ii) the Company shall retain
custody of the certificate representing the Stock until the Forfeiture
Restrictions shall have expired, (iii) the Holder may not sell, transfer,
pledge, exchange, hypothecate or otherwise dispose of the Stock until the
Forfeiture Restrictions have expired, and (iv) a breach of the terms and
conditions established by the Committee pursuant to the Restricted Stock
Agreement shall cause a forfeiture of the Restricted Stock Award.
(b) Forfeiture Restrictions to be Established by the Committee. Shares
of Stock that are the subject of a Restricted Stock Award shall be subject to
restrictions on disposition by the Holder and an obligation of the Holder to
forfeit and surrender the shares to the Company under certain circumstances (the
"Forfeiture Restrictions"). The Forfeiture Restrictions shall be determined by
the Committee in its sole discretion, and the Committee may provide that the
Forfeiture Restrictions shall lapse upon (i) the attainment of targets
established by the Committee that are based on (1) the price of a share of
Stock, (2) the Company's earnings per share, (3) the revenue of the Company or
an Affiliate designated by the Committee, (4) the revenue of a business unit of
the Company or an Affiliate designated by the Committee, (5) the return on
stockholders' equity, or return on assets, achieved by the Company or an
Affiliate designated by the Committee, or (6) the pre-tax cash flow from
operations of the Company or an Affiliate designated by the Committee (the
matters listed in the preceding items (1) through (6) shall hereinafter be
referred to as "Performance Measures"), (ii) the Holder's continued service or
employment with the Company or an Affiliate for a specified period of time, or
(iii) a combination of any two or more of the factors listed in clauses (i) and
(ii) of this sentence. Each Restricted Stock Award may have different Forfeiture
Restrictions, in the discretion of the Committee. The Forfeiture Restrictions
applicable to a particular Restricted Stock Award shall not be changed except as
permitted by Paragraph XII.
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(c) Other Terms and Conditions. No individual may be awarded more than
500,000 shares of Stock that are subject to a Restricted Stock Award in any
calendar year. Stock awarded pursuant to a Restricted Stock Award shall be
represented by a stock certificate registered in the name of the Holder of such
Restricted Stock Award. The Holder shall have the right to receive dividends
with respect to Stock subject to a Restricted Stock Award, to vote Stock subject
thereto and to enjoy all other stockholder rights, except that (i) the Holder
shall not be entitled to delivery of the stock certificate until the Forfeiture
Restrictions shall have expired, (ii) the Company shall retain custody of the
Stock until the Forfeiture Restrictions shall have expired, (iii) the Holder may
not sell, transfer, pledge, exchange, hypothecate or otherwise dispose of the
Stock until the Forfeiture Restrictions shall have expired, and (iv) a breach of
the terms and conditions established by the Committee pursuant to the Restricted
Stock Agreement shall cause a forfeiture of the Restricted Stock Award. At the
time of such Award, the Committee may, in its sole discretion, prescribe
additional terms, conditions or restrictions relating to Restricted Stock
Awards, including, but not limited to, rules pertaining to the termination of
employment, the cessation of serving on the Board or the cessation of performing
services as a consultant to the Company (by retirement, disability, death or
otherwise) of a Holder prior to expiration of the Forfeiture Restrictions. Such
additional terms, conditions or restrictions shall be set forth in a Restricted
Stock Agreement made in conjunction with the Award. Such Restricted Stock
Agreement may also include, without limitation, provisions relating to (i)
subject to the provisions hereof accelerating vesting on a Change of Control,
vesting of Awards, (ii) tax matters (including provisions (y) covering any
applicable employee wage withholding requirements and (z) prohibiting an
election by the Holder under section 83(b) of the Code), and (iii) any other
matters not inconsistent with the terms and provisions of this Plan that the
Committee shall in its sole discretion determine.
(d) Payment for Restricted Stock. The Committee shall determine the
amount and form of any payment for Stock received pursuant to a Restricted Stock
Award, provided that in the absence of such a determination, a Holder shall not
be required to make any payment for Stock received pursuant to a Restricted
Stock Award, except to the extent otherwise required by law.
(e) Agreements. At the time any Award is made under this Paragraph IX,
the Company and the Holder shall enter into a Restricted Stock Agreement setting
forth each of the matters as the Committee may determine to be appropriate. The
terms and provisions of the respective Restricted Stock Agreements need not be
identical.
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X. PERFORMANCE AWARDS
(a) Performance Period. The Committee shall establish, with respect to
and at the time of each Performance Award, a performance period over which the
performance of the Holder shall be measured.
(b) Performance Awards. Each Performance Award shall have a maximum
value established by the Committee at the time of such Award, provided that no
individual may be granted a Performance Award in any calendar year where the
value of such award exceeds the Fair Market Value of 500,000 shares of Stock.
(c) Performance Measures. A Performance Award shall be awarded to an
Eligible Participant contingent upon future performance of the Eligible
Participant, the Company, any Affiliate of the Company, or any subsidiary,
division, department or business unit thereof by or in which the Eligible
Participant is employed or for which the Eligible Participant performs services
during the performance period. The Committee shall establish the Performance
Measures applicable to such performance prior to the beginning of the
performance period but subject to such later revisions as the Committee shall
deem appropriate to reflect significant, unforeseen events or changes.
(d) Awards Criteria. In determining the value of Performance Awards,
the Committee shall take into account an Eligible Participant's responsibility
level, performance, potential, other Awards and such other considerations as it
deems appropriate.
(e) Payment. Following the end of the performance period, the Holder of
a Performance Award shall be entitled to receive payment of an amount, not
exceeding the maximum value of the Performance Award, based on the achievement
of the Performance Measures for such performance period, as determined by the
Committee. Payment of a Performance Award may be made in cash, Stock or a
combination thereof, as determined by the Committee. Payment shall be made in a
lump sum or in installments as prescribed by the Committee. Any payment to be
made in Stock shall be based on the Fair Market Value of the Stock on the
payment date. If a payment of cash is to be made on a deferred basis, the
Committee shall establish whether interest shall be credited, the rate thereof
and any other terms and conditions applicable thereto.
(f) Termination or Cessation of Employment or Other Service . A
Performance Award shall terminate if the Holder does not remain continuously in
the employ or other service of the Company at all times during the applicable
performance period, except as may be determined by the Committee or as may
otherwise be provided in the Award at the time granted.
(g) Agreements. At the time any Award is made under this Paragraph X,
the Company and the Holder shall enter into a Performance Award Agreement
setting forth each of the matters contemplated hereby and such Performance
Measures as the Committee may determine to be appropriate. The terms and
provisions of the respective agreements need not be identical.
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XI. PHANTOM STOCK AWARDS
(a) Phantom Stock Awards. Phantom Stock Awards are rights to receive
shares of Stock (or cash in an amount equal to the Fair Market Value thereof),
or rights to receive an amount equal to any appreciation in the Fair Market
Value of Stock (or portion thereof) over a specified period of time, which vest
over a period of time or upon the occurrence of an event as established by the
Committee, without payment of any amounts by the Holder thereof (except to the
extent otherwise required by law) or satisfaction of any Performance Measure.
Each Phantom Stock Award shall have a maximum value established by the Committee
at the time of such Award, provided that no individual may be granted a Phantom
Stock Award in any calendar year for more than 500,000 shares of Stock.
(b) Award Period. Subject to the provisions hereof accelerating vesting
on a Change of Control, the Committee shall establish, with respect to and at
the time of each Phantom Stock Award, a period over which or the event upon
which the Award shall vest with respect to the Holder.
(c) Awards Criteria. In determining the value of Phantom Stock Awards,
the Committee shall take into account an Eligible Participant's responsibility
level, performance, potential, other Awards and such other considerations as it
deems appropriate.
(d) Payment. Following the end of the vesting period for a Phantom
Stock Award, the Holder of a Phantom Stock Award shall be entitled to receive
payment of an amount, not exceeding the maximum value of the Phantom Stock
Award, based on the then vested value of the Award. Payment of a Phantom Stock
Award may be made in cash, Stock or a combination thereof as determine by the
Committee. Payment shall be made in a lump sum or in installments as prescribed
by the Committee in its sole discretion. Any payment to be made in Stock shall
be based on the Fair Market Value of the Stock on the payment date. Cash
dividend equivalents may be paid during or after the vesting period with respect
to a Phantom Stock Award, as determined by the Committee. If a payment of cash
is to be made on a deferred basis, the Committee shall establish whether
interest shall be credited, the rate thereof and any other terms and conditions
applicable thereto.
(e) Termination of Employment, Cessation of Serving on Board or
Termination of Service A Phantom Stock Award shall terminate if the Holder does
not remain continuously in the employ of the Company or fails to serve on the
Board or fails to perform services for the Company at all times during the
applicable vesting period, except as may be otherwise determined by the
Committee or as set forth in the Award at the time of grant.
(f) Agreements. At the time any Award is made under this Paragraph XI,
the Company and the Holder shall enter into a Phantom Stock Award Agreement
setting forth each of the matters contemplated hereby and, in addition such
Performance Measures as the Committee may determine to be appropriate. The terms
and provisions of the respective agreements need not be identical.
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XII. RECAPITALIZATION OR REORGANIZATION
(a) Subdivision or Combination of Shares. The shares with respect to
which Awards may be granted are shares of Stock as constituted on the effective
date of the Plan, but if, and whenever, prior to the expiration of an Award
theretofore granted, the Company shall effect a subdivision or combination of
its Stock, the number of shares of Stock with respect to which such Award may
thereafter be exercised or satisfied, as applicable, (i) in the event of an
increase in the number of outstanding shares shall be proportionately increased,
and the purchase price per share shall be proportionately reduced, and (ii) in
the event of a reduction in the number of outstanding shares shall be
proportionately reduced, and the purchase price per share shall be
proportionately increased.
(b) Recapitalization. If the Company recapitalizes or otherwise changes
its capital structure, thereafter upon any exercise or satisfaction, as
applicable, of an Award theretofore granted the Holder shall be entitled to (or
shall be entitled to receive, as applicable) under such Award, in lieu of the
number of shares of Stock then covered by such Award, the number and class of
shares of capital stock and securities to which the Holder would have been
entitled pursuant to the terms of the recapitalization if, immediately prior to
such recapitalization, the Holder had been the holder of record of the number of
shares of Stock then covered by such Award.
(c) Change of Control. Upon the occurrence of a Change of Control, all
outstanding Awards shall immediately vest and become exercisable or satisfiable,
as applicable. The Committee, in its discretion, may determine that upon the
occurrence of a Change of Control, each Award other than an Option outstanding
hereunder shall terminate within a specified number of days after notice to the
Holder, and such Holder shall receive, with respect to each share of Stock
subject to such Award, cash in an amount equal to the excess, if any, of the
Change of Control Value over the exercise price of the Award. Further, in the
event of a Change of Control, the Committee, in its discretion shall act to
effect one or more of the following alternatives with respect to outstanding
Options, which may vary among individual Holders and which may vary among
Options held by any individual Holder: (1) determine a limited period of time
for the exercise of such Options on or before a specified date (before or after
such Change of Control) after which specified date all unexercised Options and
all rights of Holders thereunder shall terminate, (2) require the mandatory
surrender to the Company by selected Holders of some or all of the outstanding
Options held by such Holders (irrespective of whether such Options are then
exercisable under the provisions of the Plan) as of a date, before or after such
Change of Control, specified by the Committee, in which event the Committee
shall thereupon cancel such Options and the Company shall pay to each Holder an
amount of cash per share equal to the excess, if any, of the Change of Control
Value of the shares subject to such Option over the exercise price(s) under such
Options for such shares, (3) make such adjustments to Options then outstanding
as the Committee deems appropriate to reflect such Change of Control (provided,
however, that the Committee may determine in its sole discretion that no
adjustment is necessary to Options then outstanding), or (4) provide that
thereafter upon any exercise of an Option theretofore granted the Holder shall
be entitled to purchase under such Option, in lieu of the number of shares of
Stock then covered by such Option, the number and class of shares of stock or
other securities or property (including, without limitation, cash) to which the
Holder would have been entitled pursuant to the terms of the agreement of
merger, consolidation, sale of assets or dissolution if, immediately prior to
such merger, consolidation, sale of assets or dissolution the Holder had been
the holder of record of the number of shares of Stock then covered by such
Option. The provisions contained in this paragraph shall not alter any rights or
terminate any rights of the Holder to further payments pursuant to any other
agreement with the Company following a Change of Control.
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(d) Other Events. In the event of changes in the outstanding Stock by
reason of recapitalizations, reorganizations, mergers, consolidations,
combinations, exchanges or other relevant changes in capitalization occurring
after the date of the grant of any Award and not otherwise provided for by this
Paragraph XII, any outstanding Awards and any agreements evidencing such Awards
shall be subject to adjustment by the Committee at its discretion as to the
number and price of shares of Stock or other consideration subject to such
Awards. In the event of any such change in the outstanding Stock, the aggregate
number of shares available under the Plan may be appropriately adjusted by the
Committee, whose determination shall be conclusive.
(e) Corporate Power. The existence of the Plan and the Awards granted
hereunder shall not affect in any way the right or power of the Board or the
stockholders of the Company to make or authorize any adjustment,
recapitalization, reorganization or other change in the Company's capital
structure or its business, any merger or consolidation of the Company, any issue
of debt or equity securities ranking prior to or affecting Stock or the rights
thereof, the dissolution or liquidation of the Company or any sale, lease,
exchange or other disposition of all or any part of its assets or business or
any other corporate act or proceeding.
(f) Stockholder Approval. Any adjustment provided for in Subparagraphs
(a), (b), (c) or (d) above shall be subject to any required stockholder action.
(g) Issuance of Securities. Except as hereinbefore expressly provided,
the issuance by the Company of shares of stock of any class, or securities
convertible into shares of stock of any class, for cash, property, labor or
services, upon direct sale, upon the exercise of rights or warrants to subscribe
therefor, or upon conversion of shares of obligations of the Company convertible
into such shares or other securities, and in any case whether or not for fair
value, shall not affect, and no adjustment by reason thereof shall be made with
respect to, the number of shares of Stock subject to Awards theretofore granted
or the purchase price per share, if applicable.
XIII. AMENDMENT AND TERMINATION OF THE PLAN
The Board in its discretion may terminate the Plan at any time with
respect to any shares for which Awards have not theretofore been granted. The
Board shall have the right to alter or amend the Plan or any part thereof from
time to time; provided that no change in any Award theretofore granted may be
made which would impair the rights of the Holder without the consent of the
Holder (unless such change is required in order to cause the benefits under the
Plan to qualify as performance-based compensation within the meaning of Section
162(m) of the Code and applicable interpretive authority thereunder), and
provided further, that the Board may not, without approval of the stockholders,
amend the Plan:
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(a) to increase the maximum number of shares which may be issued under
the Plan, or on exercise or surrender of an Award, except as provided in
Paragraph XII;
(b) to change the Option price;
(c) to change the class of Eligible Participants to whom Awards may be
made under the Plan, or to materially increase the benefits accruing to Eligible
Participants under the Plan;
(d) to extend the maximum period during which Awards may be granted
under the Plan; or
(e) to modify materially the requirements as to eligibility for
participation in the Plan.
XIV. MISCELLANEOUS
(a) No Right to An Award. Neither the adoption of the Plan by the
Company nor any action of the Board or the Committee shall be deemed to give an
Eligible Participant any right to be granted an Option, a Stock Appreciation
Right, a Restricted Stock Award, a Performance Award or a Phantom Stock Award or
any of the rights hereunder except as may be evidenced by an Option Agreement,
Stock Appreciation Rights Agreement, Restricted Stock Agreement, Performance
Award Agreement or Phantom Stock Award Agreement executed on behalf of the
Company by an authorized representative thereof, and then only to the extent and
on the terms and conditions expressly set forth therein. The Plan shall be
unfunded. The Company shall not be required to establish any special or separate
fund or to make any other segregation of funds or assets to assure the payment
of any Award.
(b) No Employment or Service Rights Conferred. Nothing contained in the
Plan shall (i) confer upon any employee any right with respect to continuation
of employment or service with the Company or any Affiliate or (ii) interfere in
any way with the right of the Company or any Affiliate to terminate his or her
employment or service at any time.
(c) Other Laws; Withholding. The Company shall not be obligated to
issue any Stock pursuant to any Award granted under the Plan at any time when
the shares covered by such Award have not been registered under the Securities
Act of 1933, as amended, and such other state and federal laws, rules or
regulations as the Company or the Committee deems applicable and, in the opinion
of legal counsel for the Company, there is no exemption from the registration
requirements of such laws, rules or regulations available for the issuance and
sale of such shares. No fractional shares of Stock shall be delivered, nor shall
any cash in lieu of fractional shares be paid. The Company shall have the right
to deduct in connection with all Awards any taxes required by law to be withheld
and to require any payments required to enable it to satisfy its withholding
obligations.
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(d) No Restriction on Corporate Action. Nothing contained in the Plan
shall be construed to prevent the Company or any Affiliate from taking any
corporate action which is deemed by the Company or such Affiliate to be
appropriate or in its best interest, whether or not such action would have an
adverse effect on the Plan or any Award made under the Plan. No employee,
beneficiary or other person shall have any claim against the Company or any
subsidiary as a result of any such action.
(e) Restrictions on Transfer. An Award shall not be transferable
otherwise than by will or the laws of descent and distribution or pursuant to a
"qualified domestic relations order" as defined by the Code or Title I of the
Employee Retirement Income Security Act of 1974, as amended, or the rules
thereunder, and shall be exercisable during the Holder's lifetime only by such
Holder or the Holder's guardian or legal representative.
(f) Section 162(m). If the Company is subject to Section 162(m) of the
Code, it is intended that the Plan comply fully with and meet all the
requirements of Section 162(m) of the Code so that Options and Stock
Appreciation Rights granted hereunder and, if determined by the Committee,
Restricted Stock Awards, Performance Awards and Phantom Stock Awards, shall
constitute "performance-based" compensation within the meaning of such section.
If any provision of the Plan would disqualify the Plan or would not otherwise
permit the Plan to comply with Section 162(m) of the Code as so intended, such
provision shall be construed or deemed amended to conform to the requirements or
provisions of Section 162(m) of the Code; provided that no such construction or
amendment shall have an adverse effect on the economic value to a Holder of any
Award previously granted hereunder. With respect to any Award granted to a
"covered employee" (as defined in Section 162(m)(3) of the Code), if the payment
of such Award is contingent on the satisfaction of performance goals, the
Committee shall certify in writing prior to payment of such Award that such
performance goals have been satisfied.
(g) Governing Law. This Plan shall be construed in accordance with the
laws of the State of Delaware.
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