<PAGE>
As filed with the Securities and Exchange Commission on October 7, 1997
Registration No. 333-_________
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
------------------
FORM S-8
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
CAPITAL RE CORPORATION
------------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 52-1567009
- --------------------------------- ------------------------------------
(State or other jurisdiction (I.R.S. employer identification no.)
of incorporation or organization)
1325 Avenue of the Americas
New York, New York 10019
----------------------------------------
(Address of principal executive offices)
------------------------------------------------------
Capital Re Corporation 1997 Employee Stock Option Plan
Capital Re Corporation Performance Share Plan
Capital Re Corporation Annual Incentive Plan for Covered Executive Officers
------------------------------------------------------
(Full title of the plan)
Alan S. Roseman
Capital Re Corporation
1325 Avenue of Americas
New York, New York 10019
(212) 974-0100
------------------------------------------------------
(Name, address and telephone number, including area code, of agent for service)
Copy to:
Michael J. Silver
Hogan & Hartson L.L.P.
111 South Calvert Street
Baltimore, Maryland 21202
(410) 659-2700
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
==================================================================================================================================
Proposed Proposed
Title of securities Amount to be maximum offering maximum aggregate Amount of
to be registered registered price per share (2) offering price (2) registration fee (2)
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stock, par 1,500,000 $60.625 $ 90,937,500 $27,556.82
value $.01(1)
==================================================================================================================================
</TABLE>
(1) An indeterminable number of plan interests in the Capital Re Corporation
Performance Share Plan and Capital Re Corporation Annual Incentive Plan for
Covered Executive Officers are also being registered.
(2) Estimated pursuant to Rule 457(c) and (h) solely for purposes of
calculating the amount of the registration fee, based on the average of the high
and low prices per share of Capital Re Corporation Common Stock, par value $.01
per share, on October 1, 1997, as reported on the New York Stock Exchange.
Exhibit Index Appears on page 7
<PAGE>
PART I
INFORMATION REQUIRED IN THE SECTION 10(a) PROSPECTUS
The documents containing the information specified in Part I will be
separately sent or given to employees participating in the Capital Re
Corporation 1997 Employee Stock Option Plan (the "Employee Plan"), Capital Re
Corporation Performance Share Plan (the "Share Plan") and the Capital Re
Corporation Annual Incentive Plan for Covered Executive Officers (collectively
the "Plans"), as specified by Rule 428(b)(1) of the Securities Act of 1933, as
amended (the "Securities Act"). In accordance with the instructions to Part I
of Form S-8, such documents will not be filed with the Securities and Exchange
Commission (the "Commission") either as part of this Registration Statement or
as prospectuses or prospectus supplements pursuant to Rule 424 of the Securities
Act.
PART II
INFORMATION REQUIRED IN THE REGISTRATION STATEMENT
Item 3. Incorporation of Documents by Reference.
Capital Re Corporation (the "Registrant") hereby incorporates by
reference into this Registration Statement the following documents filed by it
with the Commission:
(a) The Registrant's Form 10-K for the fiscal year ended December
31, 1996;
(b) The description of the Registrant's Common Stock, $.01 par
value per share (the "Common Stock"), contained in the
Registrant's Registration Statement on Form 8-A filed with the
Commission on January 27, 1992;
(c) The Registrant's Form 10-Q for the fiscal quarter ended March
31, 1997; and
(d) The Registrant's Form 10-Q for the fiscal quarter ended June
30, 1997
In addition, all documents and reports filed by the Registrant
subsequent to the date hereof pursuant to Sections 13(a), 13(c), 14, or 15(d) of
the Exchange Act, and prior to the filing of a post-effective amendment which
indicates that all securities offered have been sold or which deregisters all
securities remaining unsold, shall be deemed to be incorporated by reference in
this Registration Statement and to be part of hereof from the date of filing of
such documents or reports. Any statement contained in a document incorporated or
deemed to be incorporated by reference herein shall be deemed to be modified or
superseded for purposes of this Registration Statement to the extent that a
statement contained herein or in any other subsequent filed document which also
is or is deemed to be incorporated by reference herein modifies or supersedes
such statement. Any such statement so modified or superseded shall not be
deemed, except as so modified or superseded, to constitute a part of this
Registration Statement.
Item 4. Description of Securities.
Not applicable (the Common Stock is registered under Section 12(b) of
the Exchange Act).
Item 5. Interests of Named Experts and Counsel.
Not applicable.
<PAGE>
Item 6. Indemnification of Directors and Officers.
Item 15 of Part II of the Registration Statement of the Registrant on
Form S-3 (Registration No. 33-99896) is hereby incorporated by reference into
this Registration Statement.
* * *
Insofar as indemnification for liabilities arising under the
Securities Act may be permitted to directors, officers and controlling persons
of the Registrant pursuant to the foregoing provisions or otherwise, the
Registrant has been advised that, in the opinion of the Commission, such
indemnification is against public policy as expressed in the Securities Act and
therefore is unenforceable. In the event that a claim for indemnification
against such liabilities is asserted by such person in connection with the
offering of the Common Stock (other than for the payment by the Registrant of
expenses incurred or paid by a director, officer or controlling person of the
Registrant in the successful defense of any action, suit or proceeding) the
Registrant will, unless in the opinion of its counsel the matter has been
settled by controlling precedent, submit to a court of appropriate jurisdiction
the question of whether such indemnification by it is against public policy as
expressed in the Securities Act and will be governed by the final adjudication
of the issue.
Item 7. Exemption from Registration Claimed.
[Not applicable.]
Item 8. Exhibits.
<TABLE>
<CAPTION>
Exhibit
Number Description
------ -----------
<S> <C>
3.1* Certificate of Incorporation of Registrant (filed as
Exhibit 3.01 to the Registrant's Registration Statement on
Form S-1 (File No. 33-45286) and incorporated herein by
reference).
3.2* Bylaws of Registrant (filed as Exhibit 3.02 to the Form S-1
(File No. 33-45286) and incorporated herein by reference).
4.1* Specimen Common Stock Certificate (filed as Exhibit 4.01 to
the Registrant's Form S-1 and incorporated herein by
reference).
5.1 Opinion of Hogan & Hartson L.L.P. regarding the legality of
the securities being registered.
10.1 1997 Employee Stock Option Plan.
10.2 Capital Re Corporation Performance Share Plan.
10.3 Capital Re Corporation Annual Incentive Plan for Covered
Executive Officers.
23.1 Consent of Ernst & Young LLP Independent Auditors.
</TABLE>
- 2 -
<PAGE>
<TABLE>
<S> <C>
23.2 Consent of Hogan & Hartson L.L.P. (included in their
opinion filed as Exhibit 5.1 hereto).
24.1 Power of Attorney (included on signature page).
99.2 Section 145 of the Delaware General Corporation Law.
</TABLE>
*incorporated by reference
Item 9. Undertakings.
The undersigned Registrant hereby undertakes:
(a) To file, during any period in which offers or sales are being
made, a post-effective amendment to this registration statement:
(i) To include any prospectus required by Section
10(a)(3) of the Securities Act;
(ii) To reflect in the prospectus any facts or events
arising after the effective date of the Registration Statement
(or the most recent post-effective amendment thereof) which,
individually or in the aggregate, represent a fundamental
change in the information set forth in the Registration
Statement. Notwithstanding the foregoing, any increase or
decrease in volume of securities offered (if the total dollar
value of securities offered would not exceed that which was
registered) and any deviation from the low or high end of the
estimated maximum offering range may be reflected in the form
of prospectus filed with the Commission pursuant to Rule 424(b)
if, in the aggregate, the changes in volume and price represent
no more than a 20% change in the maximum aggregate offering
price set forth in the "Calculation of Registration Fee" table
in the effective registration statement;
(iii) To include any material information with respect to
the plan of distribution not previously disclosed in the
Registration Statement or any material change to such
information in the Registration Statement.
Provided, however, that paragraphs (a)(i) and (a)(ii) do not
-----------------
apply if the Registration Statement is on Form S-3 or Form S-8, and the
information required to be included in a post-effective amendment by those
paragraphs is contained in periodic reports filed by the Registrant
pursuant to Section 13 or Section 15(d) of the Exchange Act that are
incorporated by reference in the Registration Statement.
(b) That, for the purpose of determining any liability under the
Securities Act, each such post-effective amendment shall be deemed to be a
new registration statement relating to the securities offered therein, and
the offering of such securities at that time shall be deemed to be the
initial bona fide offering thereof.
---------
(c) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the
termination of the offering.
The undersigned Registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act, each filing of the
Registrant's annual report pursuant to Section 13(a) or Section 15(d) of the
Exchange Act (and, where applicable, each filing of an employee benefit plan's
annual report pursuant to Section 15(d) of the Exchange Act) that is
incorporated by reference in the Registration
- 3 -
<PAGE>
Statement shall be deemed to be a new registration statement relating to the
securities offered therein, and the offering of such securities at that time
shall be deemed to be the initial bona fide offering thereof.
The undertaking concerning indemnification is set forth under the
response to Item 6.
- 4 -
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act, the Registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-8 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of New York, State of New York, on October 7, 1997.
CAPITAL RE CORPORATION
By: /s/ Michael E. Satz
-----------------------------
Michael E. Satz
Chairman and Chief Executive Officer
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature
appears below constitutes and appoints Michael E. Satz, Alan S. Roseman and
Michael J. Silver jointly and severally, each in his own capacity, as true and
lawful attorneys-in-fact, with full power of substitution, for him and in his
name, place and stead, in any and all capacities, to sign any and all amendments
to this Registration Statement (including post-effective amendments), and to
file the same, with all exhibits thereto, and other documents in connection
therewith, with the Securities and Exchange Commission, granting unto said
attorneys-in-fact and agents, full power and authority to do and perform each
and every act and thing requisite and necessary to be done as fully to all
intents and purposes as he or she might or could do in person, hereby ratifying
and confirming all that said attorneys-in-fact and agents, or any of them, may
lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, as
amended, this Registration Statement has been signed by the following persons in
the capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
/s/ Michael E. Satz Chairman of the Board, Chief October 7, 1997
- ---------------------------------------------- Executive Officer and President
Michael E. Satz (Principal Executive Officer)
/s/ David A. Buzen Executive Vice President October 7, 1997
- ---------------------------------------------- and Chief Financial Officer
David A. Buzen (Principal Financial and
Accounting Officer)
/s/ Harrison W. Conrad Director October 7, 1997
- ----------------------------------------------
Harrison W. Conrad
</TABLE>
- 5 -
<PAGE>
<TABLE>
<S> <C> <C>
/s/ Richard L. Huber Director October 7, 1997
- ----------------------------------------------
Richard L. Huber
/s/ Steven D. Kesler Director October 7, 1997
- ----------------------------------------------
Steven D. Kesler
/s/ Steven H. Newman Director October 7, 1997
- ----------------------------------------------
Steven H. Newman
/s/ Philip H. Robinson Director October 7, 1997
- ----------------------------------------------
Philip H. Robinson
/s/ Edwin L. Russell Director October 7, 1997
- ----------------------------------------------
Edwin L. Russell
/s/ Dan R. Skowronski Director October 7, 1997
- ----------------------------------------------
Dan R. Skowronski
/s/ Barbara D. Stewart Director October 7, 1997
- ----------------------------------------------
Barbara D. Stewart
/s/ Jeffrey F. Stuermer Director October 7, 1997
- ----------------------------------------------
Jeffrey F. Stuermer
</TABLE>
- 6 -
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit
Number Description Page
- ------ ----------- ----
<C> <S> <C>
3.1* Certificate of Incorporation of Registrant (filed as Exhibit 3.01 to
the Registrant's Registration Statement on Form S-1 (File No. 33-
45286) and incorporated herein by reference). --
3.2* Bylaws of Registrant (filed as Exhibit 3.02 to the Form S-1 (File No.
33-45286) and incorporated herein by reference). --
4.1* Specimen Common Stock Certificate (filed as Exhibit 4.01 to the
Registrant's Form S-1 and incorporated herein by reference). --
5.1 Opinion of Hogan & Hartson L.L.P. regarding the legality of the
securities being registered. 10
10.1 Capital Re Corporation 1997 Employee Stock Option Plan. 12
10.2 Capital Re Corporation Performance Share Plan. 26
10.3 Capital Re Corporation Annual Incentive Plan for Covered Executive
Officers. 38
23.1 Consent of Ernst & Young LLP Independent Auditors. 41
23.2 Consent of Hogan & Hartson L.L.P. (included in their opinion filed as
Exhibit 5.1 hereto). --
24.1 Power of Attorney (included on signature page). 7
99.2 Section 145 of the Delaware General Corporation Law. 42
</TABLE>
*incorporated by reference
<PAGE>
Exhibit 5.1
-----------
October 7, 1997
Board of Directors
Capital Re Corporation
1325 Avenue of the Americas
New York, New York 10019
Ladies and Gentlemen:
This firm has acted as counsel to Capital Re Corporation (the
"Company"), a Delaware corporation, in connection with its registration,
pursuant to a registration statement on Form S-8 filed on or about the date
hereof (the "Registration Statement"), of 1,500,000 shares (the "Shares") of
Common Stock, par value $.01 per share, of the Company ("Common Stock"), issued
or issuable under the (i) Capital Re Corporation 1997 Employee Stock Option Plan
(the "Employee Plan"), (ii) Capital Re Corporation Performance Share Plan
Performance Share Plan"), and (iii) Capital Re Corporation Annual Incentive Plan
for Covered Executive Officers (the "Annual Incentive Plan") (collectively, the
"Plans"). This letter is furnished to you pursuant to the requirements of Item
601(b)(5) of Regulation S-K, 17 C.F.R. (S) 229.601(b)(5), in connection with
such registration.
For purposes of this opinion, we have examined copies of the following
documents:
1. An executed copy of the Registration Statement.
2. A copy of the Employee Plan, the Performance Share Plan and the
Annual Incentive Plan, each as certified by certain officers of
the Company on the date hereof as being complete, accurate and in
effect.
3. The Certificate of Incorporation of the Company, as amended, as
certified on September 23, 1997 by the Secretary of State of the
State of Delaware and as being complete, accurate and in effect.
4. The Amended and Restated Bylaws of the Company as certified by
an authorized officer of the Company on the date hereof as being
complete, accurate and in effect.
5. Resolutions of the Board of Directors of the Company adopted on
February 26, 1997 and September 25, 1997, as certified by an
authorized officer of the Company on the date hereof as being
complete, accurate and in effect, relating to, among other things,
approval of the Plans.
6. A certificate of an authorized officer of the Company, dated
October 7, 1997, as to certain facts relating to the Company.
For purposes of rendering this opinion, we have not, except as
specifically identified above, made any independent review or investigation of
factual or other matters, including the organization, existence, good standing,
assets, business or affairs of the Company. In our examination of
<PAGE>
the aforesaid certificates, records and documents, we have assumed the
genuineness of all signatures, the legal capacity of all natural persons, the
accuracy and completeness of all documents submitted to us, the authenticity of
all original documents and the conformity to authentic original documents of all
documents submitted to us as copies (including telecopies). We also have assumed
the accuracy, completeness and authenticity of the foregoing certifications (of
public officials, governmental agencies and departments and corporate officers)
and statements of fact, on which we are relying, and have made no independent
investigations thereof. In rendering this opinion we have relied as to factual
matters, without independent investigation, upon the representations, warranties
and certifications made by the Company and upon the officers' certificate
identified in Paragraph 6 above. This opinion is given in the context of the
foregoing.
This opinion is based as to matters of law solely on the General
Corporation Law of the State of Delaware, as amended, and we express no opinion
as to any other laws, statutes, regulations, or ordinances, including without
limitation any federal or state tax or securities laws or regulations.
Based upon, subject to, and limited by the foregoing, we are of the
opinion that the Shares, when issued and delivered in the manner and on the
terms contemplated in the Registration Statement and the Plans (with the Company
having received the consideration therefor, the form of which is in accordance
with applicable law), will be validly issued, fully paid and non-assessable.
We assume no obligation to advise you of any changes in the foregoing
subsequent to the delivery of this opinion. This opinion has been prepared
solely for your use in connection with the filing of the Registration Statement
on the date of this letter, and should not be quoted in whole or in part or
otherwise be referred to, nor be filed with or furnished to any governmental
agency or other person or entity, without the prior written consent of this
firm.
We hereby consent to the filing of this opinion as Exhibit 5.1 to the
Registration Statement. In giving this consent, we do not thereby admit that we
are an "expert" within the meaning of the Securities Act of 1933, as amended.
Very truly yours,
HOGAN & HARTSON L.L.P.
<PAGE>
Exhibit 10.1
CAPITAL RE CORPORATION
1997 EMPLOYEE STOCK OPTION PLAN
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
1. PURPOSE ..................................................................... 1
2. DEFINITIONS ................................................................. 1
3. ADMINISTRATION .............................................................. 3
3.1. Committee ............................................................ 3
3.2. No Liability ......................................................... 3
4. STOCK ....................................................................... 3
5. ELIGIBILITY ................................................................. 3
6. EFFECTIVE DATE AND TERM ..................................................... 3
6.1. Effective Date ....................................................... 3
6.2. Term ................................................................. 4
7. GRANT OF OPTIONS ............................................................ 4
8. LIMITATION ON INCENTIVE STOCK OPTIONS ....................................... 4
9. OPTION AGREEMENTS ........................................................... 4
10. OPTION PRICE ............................................................... 4
11. TERM AND EXERCISE OF OPTIONS ............................................... 5
11.1. Term ................................................................ 5
11.2. Exercise by Optionee ................................................ 5
11.3. Option Period and Limitations on Exercise ........................... 5
11.4. Method of Exercise .................................................. 5
11.5. Parachute Limitations ............................................... 6
12. TRANSFERABILITY OF OPTIONS ................................................. 7
12.1. Transferability of Options .......................................... 7
12.2. Family Transfers .................................................... 7
13. TERMINATION OF SERVICE RELATIONSHIP ........................................ 7
14. RIGHTS IN THE EVENT OF DEATH OR DISABILITY ................................. 8
14.1. Death ............................................................... 8
14.2. Disability .......................................................... 8
15. USE OF PROCEEDS ............................................................ 9
16. SECURITIES LAWS ............................................................ 9
17. EXCHANGE ACT: RULE 16b-3 ................................................... 9
17.1. General ............................................................. 9
17.2. Compensation Committee .............................................. 9
17.3. Restriction on Transfer of Stock .................................... 10
18. AMENDMENT AND TERMINATION .................................................. 10
19. EFFECT OF CHANGES IN CAPITALIZATION ........................................ 10
19.1. Changes in Stock .................................................... 10
19.2. Reorganization With Corporation Surviving ........................... 10
19.3. Other Reorganizations; Sale of Assets or Stock ...................... 11
19.4. Adjustments ......................................................... 11
19.5. No Limitations on Corporation ....................................... 11
20. WITHHOLDING ................................................................ 11
21. DISCLAIMER OF RIGHTS ....................................................... 12
22. NONEXCLUSIVITY ............................................................. 12
23. GOVERNING LAW .............................................................. 12
</TABLE>
-1-
<PAGE>
CAPITAL RE CORPORATION
1997 EMPLOYEE STOCK OPTION PLAN
CAPITAL RE CORPORATION, a Delaware corporation (the "Corporation"),
sets forth herein the terms of the 1997 Employee Stock Option Plan (the "Plan")
as follows:
1. PURPOSE
The Plan is intended to advance the interests of the Corporation by
providing eligible individuals (as designated pursuant to Section 5 hereof) an
opportunity to acquire or increase a proprietary interest in the Corporation,
which thereby will create a stronger incentive to expend maximum effort for the
growth and success of the Corporation and its subsidiaries and will encourage
such eligible individuals to continue to service the Corporation. Stock options
granted under the Plan will be Incentive Stock Options within the meaning of
Section 422 of the Code or non-incentive stock options as specifically
designated at the time of grant.
2. DEFINITIONS
For purposes of interpreting the Plan and related documents (including
Option Agreements), the following definitions shall apply:
2.1 "Affiliate" means any company or other trade or business
that is controlled by or under common control with the Corporation, (determined
in accordance with the principles of Section 414(b) and 414(c) of the Code and
the regulations thereunder) or is an affiliate of the Corporation within the
meaning of Rule 405 of Regulation C under the 1933 Act.
2.2 "Board" means the Board of Directors of the Corporation.
2.3 "Cause" means, unless otherwise defined in an Option
Agreement, (i) gross negligence or willful misconduct in connection with the
performance of duties; (ii) conviction of a criminal offense (other than minor
traffic offenses); or (iii) material breach of any term of any employment,
consulting or other services, confidentiality, intellectual property or non-
competition agreements, if any, between Optionee and the Corporation or any of
its Subsidiaries or Affiliates.
2.4 "Code" means the Internal Revenue Code of 1986, as now in
effect or as hereafter amended.
2.5 "Committee" means the Compensation Committee of the Board
which must consist of no fewer than two members of the Board and shall be
appointed by the Board.
2.6 "Corporation" means Capital Re Corporation.
2.7 "Effective Date" means the date of adoption of the Plan by
the Board.
2.8 "Employer" means Capital Re Corporation or other Affiliate
which employs the designated recipient of an Option.
2.9 "Exchange Act" means the Securities Exchange Act of 1934, as
now in effect or as hereafter amended.
<PAGE>
2.10 "Fair Market Value" means the value of each share of Stock
subject to the Plan determined as follows: if on the Grant Date or other
determination date the shares of Stock are listed on an established national or
regional stock exchange, are admitted to quotation on the National Association
of Securities Dealers Automated Quotation System, or are publicly traded on an
established securities market, the Fair Market Value of the shares of Stock
shall be the closing price of the shares of Stock on such exchange or in such
market (the highest such closing price if there is more than one such exchange
or market) on the trading day immediately preceding the Grant Date (or on the
Grant Date, if so specified by the Committee or the Board) or such other
determination date (or if there is no such reported closing price, the Fair
Market Value shall be the mean between the highest bid and lowest asked prices
or between the high and low sale prices on such trading day) or, if no sale of
the shares of Stock is reported for such trading day, on the next preceding day
on which any sale shall have been reported. If the shares of Stock are not
listed on such an exchange, quoted on such System or traded on such a market,
Fair Market Value shall be determined by the Board in good faith.
2.11 "Grant Date" means the later of (i) the date as of which the
Committee approves the grant and (ii) the date as of which the Optionee and the
Corporation, Subsidiary or Affiliate enter the relationship resulting in the
Optionee being eligible for grants.
2.12 "Immediate Family Members" means the spouse, children and
grandchildren of the Optionee.
2.13 "Incentive Stock Option" means an "incentive stock option"
within the meaning of section 422 of the Code.
2.14 "Option" means an option to purchase one or more shares of
Stock pursuant to the Plan.
2.15 "Option Agreement" means the written agreement evidencing
the grant of an Option hereunder.
2.16 "Optionee" means a person who holds an Option under the
Plan.
2.17 "Option Period" means the period during which Options may be
exercised as defined in Section 11.
2.18 "Option Price" means the purchase price for each share of
Stock subject to an Option.
2.19 "Plan" means the Capital Re Corporation 1997 Employee Stock
Option Plan.
2.20 "1933 Act" means the Securities Act of 1933, as now in
effect or as hereafter amended.
2.21 "Service Relationship" means the provision of bona fide
services to the Corporation, a Subsidiary or an Affiliate as an employee,
director, advisor or consultant.
2.22 "Stock" mean the shares of common stock, par value $.01 per
share, of the Corporation.
2.23 "Subsidiary" means any "subsidiary corporation" of the
Corporation within the meaning of Section 425(f) of the Code.
-2-
<PAGE>
3. ADMINISTRATION
3.1. Committee
The Plan shall be administered by the Committee appointed by the
Board, which shall have the full power and authority to take all actions and to
make all determinations required or provided for under the Plan or any Option
granted or Option Agreement entered into hereunder and all such other actions
and determinations not inconsistent with the specific terms and provisions of
the Plan deemed by the Committee to be necessary or appropriate to the
administration of the Plan or any Option granted or Option Agreement entered
into hereunder. The interpretation and construction by the Committee of any
provision of the Plan or of any Option granted or Option Agreement entered into
hereunder shall be final and conclusive.
3.2. No Liability
No member of the Board or of the Committee shall be liable for any
action or determination made, or any failure to take or make an action or
determination, in good faith with respect to the Plan or any Option granted or
Option Agreement entered into hereunder.
4. STOCK
The stock that may be issued pursuant to Options granted under the
Plan shall be Stock, which shares may be treasury shares or authorized but
unissued shares. The number of shares of Stock that may be issued pursuant to
Options granted under the Plan shall not exceed in the aggregate 1,000,000
shares of Stock, which number of shares is subject to adjustment as provided in
Section 19 hereof. If any Option expires, terminates or is terminated for any
reason prior to exercise in full, the shares of Stock that were subject to the
unexercised portion of such Option shall be available for future Options granted
under the Plan.
5. ELIGIBILITY
Options may be granted under the Plan to (i) any officer or key
employee of the Corporation, any Subsidiary or any Affiliate (including any such
officer or key employee who is also a director of the Corporation, any
Subsidiary or any Affiliate) (ii) to a trust for the benefit of any officer or
key employee or group of key employees of the Corporation, any Subsidiary or any
Affiliate or (iii) any other individual whose participation in the Plan is
determined to be in the best interests of the Corporation by the Committee. An
individual may hold more than one Option, subject to such restrictions as are
provided herein.
6. EFFECTIVE DATE AND TERM
6.1. Effective Date
The Plan shall become effective as of the date of adoption by the
Board, subject to stockholders' approval of the Plan within one year of such
effective date by a majority of the votes cast at a duly held meeting of the
stockholders of the Corporation at which a quorum representing a majority of all
outstanding stock is present, either in person or by proxy, and voting on the
matter, or by written consent in accordance with applicable state law and the
Certificate of Incorporation and By-Laws of the Corporation; provided, however,
-------- -------
that upon approval of the Plan by the stockholders
-3-
<PAGE>
of the Corporation, all Options granted under the Plan on or after the effective
date shall be fully effective as if the stockholders of the Corporation had
approved the Plan on the effective date. If the stockholders fail to approve
the Plan within one year of such effective date, any Options granted hereunder
shall be null, void and of no effect.
6.2. Term
The Plan shall terminate on the date 10 years after the effective
date.
7. GRANT OF OPTIONS
Subject to the terms and conditions of the Plan, the Committee may, at
any time and from time to time prior to the date of termination of the Plan,
grant to such eligible individuals as the Committee may determine Options to
purchase such number of shares of Stock on such terms and conditions as the
Committee may determine, including any terms or conditions which may be
necessary to qualify such Options as Incentive Stock Options. Without limiting
the foregoing, the Committee may at any time, with the consent of the Optionee,
amend the terms of outstanding Options or issue new Options in exchange for the
surrender and cancellation of outstanding Options. The date on which the
Committee approves the grant of an Option (or such later date as is specified by
the Committee) shall be considered the date on which such Option is granted.
The maximum number of shares of Stock subject to Options that can be awarded
under the Plan to any person is 500,000 shares.
8. LIMITATION ON INCENTIVE STOCK OPTIONS
An Option shall constitute an Incentive Stock Option only to the
extent that (i) it is designated an Incentive Stock Option and (ii) the
aggregate fair market value (determined at the time the Option is granted) of
the Stock with respect to which Incentive Stock Options are exercisable for the
first time by any Optionee during any calendar year (under the Plan and all
other plans of the Optionee's employer corporation and its parent and subsidiary
corporations within the meaning of Section 422(d) of the Code) does not exceed
$100,000. This limitation shall be applied by taking Options into account in
the order in which such Options were granted.
9. OPTION AGREEMENTS
All Options granted pursuant to the Plan shall be evidenced by written
agreements to be executed by the Corporation and the Optionee, in such form or
forms as the Committee shall from time to time determine. Option Agreements
covering Options granted from time to time or at the same time need not contain
similar provisions; provided, however, that all such Option Agreements shall
-------- -------
comply with all terms of the Plan.
10. OPTION PRICE
The purchase price of each share of Stock subject to an Option shall
be fixed by the Committee and stated in each Option Agreement. In the case of
an Option that is intended to constitute an Incentive Stock Option, the Option
Price shall be not less than the greater of par value or 100 percent of the fair
market value of a share of the Stock covered by the Option on the date the
Option is granted (as determined in good faith by the Committee); provided,
--------
however, that in the event the Optionee would otherwise be ineligible to receive
- -------
an Incentive Stock Option by reason of
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<PAGE>
the provisions of Sections 422(b)(6) and 424(d) of the Code (relating to stock
ownership of more than 10 percent), the Option Price of an Option which is
intended to be an Incentive Stock Option shall be not less than the greater of
par value or 110 percent of the fair market value of a share of the Stock
covered by the Option at the time such Option is granted. In the case of an
Option not intended to constitute an Incentive Stock Option, the Option Price
shall be not less than the par value of a share of the Stock covered by the
Option on the date the Option is granted.
11. TERM AND EXERCISE OF OPTIONS
11.1. Term
Each Option granted under the Plan shall terminate and all rights to
purchase shares thereunder shall cease upon the expiration of 10 years from the
date such Option is granted, or on such date prior thereto as may be fixed by
the Committee and stated in the Option Agreement relating to such Option;
provided, however, that in the event the Optionee would otherwise be ineligible
- -------- -------
to receive an Incentive Stock Option by reason of the provisions of Sections
422(b)(6) and 424(d) of the Code (relating to stock ownership of more than 10
percent), an Option granted to such Optionee which is intended to be an
Incentive Stock Option shall in no event be exercisable after the expiration of
five years from the date it is granted.
11.2. Exercise by Optionee
Only the Optionee receiving an Option or a transferee of an Option
pursuant to Section 12 (or, in the event of the Optionee's legal incapacity or
incompetency, the Optionee's guardian or legal representative, and in the case
of the Optionee's death, the Optionee's estate) may exercise the Option.
11.3. Option Period and Limitations on Exercise
Each Option granted under the Plan shall be exercisable in whole or in
part at any time and from time to time over a period commencing on or after the
date of grant of the Option and ending upon the expiration or termination of the
Option, as the Committee shall determine and set forth in the Option Agreement
relating to such Option. Without limitation of the foregoing, the Committee,
subject to the terms and conditions of the Plan, may in its sole discretion
provide that an Option may not be exercised in whole or in part for any period
or periods of time during which such Option is outstanding as the Committee
shall determine and set forth in the Option Agreement relating to such Option.
Any such limitation on the exercise of an Option contained in any Option
Agreement may be rescinded, modified or waived by the Committee, in its sole
discretion, at any time and from time to time after the date of grant of such
Option. Notwithstanding any other provisions of the Plan, no Option shall be
exercisable in whole or in part prior to the date the Plan is approved by the
stockholders of the Corporation as provided in Section 6.1 hereof.
11.4. Method of Exercise
An Option that is exercisable hereunder may be exercised by delivery
to the Corporation on any business day, at its principal office addressed to the
attention of the Committee, of written notice of exercise, which notice shall
specify the number of shares for which the Option is being exercised, and shall
be accompanied by payment in full of the Option Price of the shares for which
the Option is being exercised. Payment of the Option Price for the shares of
Stock purchased pursuant to the exercise of an Option shall be made, as
determined by the Committee and set forth in the Option Agreement pertaining to
an Option, (a) in cash or by certified check payable to the
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<PAGE>
order of the Corporation; (b) through the tender to the Corporation of shares of
Stock, which shares shall be valued, for purposes of determining the extent to
which the Option Price has been paid thereby, at their Fair Market Value on the
date of exercise; or (c) by a combination of the methods described in Sections
11.4(a) and 11.4(b) hereof; provided, however, that the Committee may in its
-------- -------
discretion impose and set forth in the Option Agreement pertaining to an Option
such limitations or prohibitions on the use of shares of Stock to exercise
Options as it deems appropriate. Payment in full of the Option Price need not
accompany the written notice of exercise provided the notice directs that the
Stock certificate or certificates for the shares for which the Option is
exercised be delivered to a licensed broker acceptable to the Corporation as the
agent for the individual exercising the Option and, at the time such Stock
certificate or certificates are delivered, the broker tenders to the Corporation
cash (or cash equivalents acceptable to the Corporation) equal to the Option
Price plus the amount (if any) of federal and/or other taxes which the
Corporation may, in its judgment, be required to withhold with respect to the
exercise of the Option. An attempt to exercise any Option granted hereunder
other than as set forth above shall be invalid and of no force and effect.
Promptly after the exercise of an Option and the payment in full of the Option
Price of the shares of Stock covered thereby, the individual exercising the
Option shall be entitled to the issuance of a Stock certificate or certificates
evidencing such individual's ownership of such shares. A separate Stock
certificate or certificates shall be issued for any shares purchased pursuant to
the exercise of an Option which is an Incentive Stock Option, which certificate
or certificates shall not include any shares which were purchased pursuant to
the exercise of an Option which is not an Incentive Stock Option. An individual
holding or exercising an Option shall have none of the rights of a stockholder
until the shares of Stock covered thereby are fully paid and issued to such
individual and, except as provided in Section 19 hereof, no adjustment shall be
made for dividends or other rights for which the record date is prior to the
date of such issuance.
11.5. Parachute Limitations
Notwithstanding any other provision of this Plan or of any other
agreement, contract, or understanding heretofore or hereafter entered into by
the Optionee with the Corporation or any Subsidiary, except an agreement,
contract, or understanding hereafter entered into that expressly modifies or
excludes application of this paragraph (an "Other Agreement"), and
notwithstanding any formal or informal plan or other arrangement heretofore or
hereafter adopted by the Corporation (or any such Subsidiary) for the direct or
indirect provision of compensation to the Optionee (including groups or classes
of participants or beneficiaries of which the Optionee is a member), whether or
not such compensation is deferred, is in cash, or is in the form of a benefit to
or for the Optionee (a "Benefit Arrangement"), if the Optionee is a
"disqualified individual," as defined in Section 280G(c) of the Code, any Option
held by that Optionee and any right to receive any payment or other benefit
under this Plan shall not become exercisable or vested (i) to the extent that
such right to exercise, vesting, payment, or benefit, taking into account all
other rights, payments, or benefits to or for the Optionee under this Plan, all
Other Agreements, and all Benefit Arrangements, would cause any payment or
benefit to the Optionee under this Plan to be considered a "parachute payment"
within the meaning of Section 280G(b)(2) of the Code as then in effect (a
"Parachute Payment") and (ii) if, as a result of receiving a Parachute Payment,
---
the aggregate after-tax amounts received by the Optionee from the Corporation
under this Plan, all Other Agreements, and all Benefit Arrangements would be
less than the maximum after-tax amount that could be received by Optionee
without causing any such payment or benefit to be considered a Parachute
Payment. In the event that the receipt of any such right to exercise, vesting,
payment, or benefit under this Plan, in conjunction with all other rights,
payments, or benefits to or for the Optionee under any Other Agreement or any
Benefit Arrangement would cause the Optionee to be considered to have received a
Parachute Payment under this Plan that would have the effect of decreasing the
after-tax amount received by the Optionee as described in clause (ii) of the
preceding sentence, then the Optionee shall have the right, in the Optionee's
sole discretion, to
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<PAGE>
designate those rights, payments, or benefits under this Plan, any Other
Agreements, and any Benefit Arrangements that should be reduced or eliminated so
as to avoid having the payment or benefit to the Optionee under this Plan be
deemed to be a Parachute Payment.
12. TRANSFERABILITY OF OPTIONS
12.1. Transferability of Options
Except as provided in Section 12.2, during the lifetime of an
Optionee, only the Optionee (or, in the event of legal incapacity or
incompetency, the Optionee's guardian or legal representative) may exercise an
Option. Except as provided in Section 12.2, no Option shall be assignable or
transferable by the Optionee to whom it is granted, other than by will or the
laws of descent and distribution.
12.2. Family Transfers.
Subject to the terms of the applicable Option Agreement, an Optionee
may transfer all or part of an Option which is not an Incentive Stock Option to
(i) any Immediate Family Member, (ii) a trust or trusts for the exclusive
benefit of any Immediate Family Member, or (iii) a partnership in which
Immediate Family Members are the only partners, provided that (x) there may be
no consideration for any such transfer, and (y) subsequent transfers of
transferred Options are prohibited except those in accordance with this Section
12.2 or by will or the laws of descent and distribution. Following transfer,
any such Option shall continue to be subject to the same terms and conditions as
were applicable immediately prior to transfer, provided that for purposes of
Section 12.2 hereof the term "Optionee" shall be deemed to refer the transferee.
The events of termination of the Service Relationship of Sections 13 and 14
hereof shall continue to be applied with respect to the original Optionee,
following which the Option shall be exercisable by the transferee only to the
extent, and for the periods specified in Section 11.3.
13. TERMINATION OF SERVICE RELATIONSHIP
Upon the termination of the Service Relationship of an Optionee with
the Corporation, a Subsidiary or an Affiliate, other than by reason of the death
or "permanent and total disability" (within the meaning of Section 22(e)(3) of
the Code) of such Optionee or for Cause, any Option granted to an Optionee
pursuant to the Plan shall continue to be exercisable only to the extent that it
was exercisable immediately before such termination; provided, however, such
-------- -------
Option shall terminate thirty (30) days after the date of such termination of
Service Relationship, unless earlier terminated pursuant to Section 11.1 hereof,
and such Optionee shall have no further right to purchase shares of Stock
pursuant to such Option; and provided further, that the Committee may provide,
-------- -------
by inclusion of appropriate language in any Option Agreement, that an Optionee
may (subject to the general limitations on exercise set forth in Section 11.3
hereof), in the event of termination of the Service Relationship of the Optionee
with the Corporation, a Subsidiary or an Affiliate, exercise an Option, in whole
or in part, at any time subsequent to such termination of Service Relationship
and prior to termination of the Option pursuant to Section 11.1 hereof, either
subject to or without regard to any installment limitation on exercise imposed
pursuant to Section 11.3 hereof, as the Committee, in its sole and absolute
discretion, shall determine and set forth in the Option Agreement. Upon the
termination of the Service Relationship of an Optionee with the Corporation, a
Subsidiary or an Affiliate for Cause, any Option granted to an Optionee pursuant
to the Plan shall terminate and such Optionee shall have no further right to
purchase shares of Stock pursuant to such Option; and provided however, that the
-------- -------
Committee may provide, by inclusion of appropriate language in any Option
Agreement, that an Optionee may (subject to the general limitations on exercise
set forth in Section 11.3 hereof), in the event of termination of the Service
Relationship of the Optionee with the Corporation, a Subsidiary or an Affiliate
for Cause, exercise an Option, in whole or in part, at any time subsequent to
such termination of Service Relationship and
-7-
<PAGE>
prior to termination of the Option pursuant to Section 11.1 hereof, either
subject to or without regard to any installment limitation on exercise imposed
pursuant to Section 11.3 hereof, as the Committee, in its sole and absolute
discretion, shall determine and set forth in the Option Agreement. Whether a
leave of absence or leave on military or government service shall constitute a
termination of Service Relationship for purposes of the Plan shall be determined
by the Committee, which determination shall be final and conclusive. For
purposes of the Plan, including without limitation this Section 13 and Section
14, unless otherwise provided in an Option Agreement, a termination of Service
Relationship with the Corporation, a Subsidiary or an Affiliate shall not be
deemed to occur if the Optionee immediately thereafter has a Service
Relationship with the Corporation, any other Subsidiary or any other Affiliate.
14. RIGHTS IN THE EVENT OF DEATH OR DISABILITY
14.1. Death
If an Optionee dies while in a Service Relationship with the
Corporation, a Subsidiary or an Affiliate or within the period following the
termination of such Service Relationship during which the Option is exercisable
under Section 13 or 14.2 hereof, the executors, administrators, legatees or
distributees of such Optionee's estate shall have the right (subject to the
general limitations on exercise set forth in Section 11.3 hereof), at any time
within one year after the date of such Optionee's death and prior to termination
of the Option pursuant to Section 11.1 hereof, to exercise, in whole or in part,
any Option held by such Optionee at the date of such Optionee's death, whether
or not such Option was exercisable immediately prior to such Optionee's death;
provided, however, that the Committee may provide by inclusion of appropriate
- -------- -------
language in any Option Agreement that, in the event of the death of an Optionee,
the executors, administrators, legatees or distributees of such Optionee's
estate may exercise an Option (subject to the general limitations on exercise
set forth in Section 11.3 hereof), in whole or in part, at any time subsequent
to such Optionee's death and prior to termination of the Option pursuant to
Section 11.1 hereof, either subject to or without regard to any installment
limitation on exercise imposed pursuant to Section 11.3 hereof, as the
Committee, in its sole and absolute discretion, shall determine and set forth in
the Option Agreement.
14.2. Disability
If an Optionee terminates a Service Relationship with the Corporation,
a Subsidiary or an Affiliate by reason of the "permanent and total disability"
(within the meaning of Section 22(e)(3) of the Code) of such Optionee, then such
Optionee shall have the right (subject to the general limitations on exercise
set forth in Section 11.3 hereof), at any time within one year after such
termination of Service Relationship and prior to termination of the Option
pursuant to Section 11.1 hereof, to exercise, in whole or in part, any Option
held by such Optionee at the date of such termination of Service Relationship,
whether or not such Option was exercisable immediately prior to such termination
of Service Relationship; provided, however, that the Committee may provide, by
-------- -------
inclusion of appropriate language in any Option Agreement, that an Optionee may
(subject to the general limitations on exercise set forth in Section 11.3
hereof), in the event of the termination of the Service Relationship of the
Optionee with the Corporation or a Subsidiary by reason of the "permanent and
total disability" (within the meaning of Section 22(e)(3) of the Code) of such
Optionee, exercise an Option, in whole or in part, at any time subsequent to
such termination of Service Relationship and prior to termination of the Option
pursuant to Section 11.1 hereof, either subject to or without regard to any
installment limitation on exercise imposed pursuant to Section 11.3 hereof, as
the Committee, in its sole and absolute discretion, shall determine and set
forth in the Option Agreement. Whether a termination of a Service Relationship
is to be considered by reason of
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<PAGE>
"permanent and total disability" for purposes of the Plan shall be determined by
the Committee, which determination shall be final and conclusive.
15. USE OF PROCEEDS
The proceeds received by the Corporation from the sale of Stock
pursuant to Options granted under the Plan shall constitute general funds of the
Corporation.
16. SECURITIES LAWS
The Corporation shall not be required to sell or issue any shares of
Stock under any Option if the sale or issuance of such shares would constitute a
violation by the individual exercising the Option or by the Corporation of any
provisions of any law or regulation of any governmental authority, including,
without limitation, any federal or state securities laws or regulations. If at
any time the Corporation shall determine, in its discretion, that the listing,
registration or qualification of any shares subject to the Option upon any
securities exchange or under any state or federal law, or the consent of any
government regulatory body, is necessary or desirable as a condition of, or in
connection with, the issuance or purchase of shares, the Option may not be
exercised in whole or in part unless such listing, registration, qualification,
consent or approval shall have been effected or obtained free of any conditions
not acceptable to the Corporation, and any delay caused thereby shall in no way
affect the date of termination of the Option. Specifically in connection with
the Securities Act, upon exercise of any Option, unless a registration statement
under the Securities Act is in effect with respect to the shares of Stock
covered by such Option, the Corporation shall not be required to sell or issue
such shares unless the Corporation has received evidence satisfactory to the
Corporation that the Optionee may acquire such shares pursuant to an exemption
from registration under the Securities Act. Any determination in this
connection by the Corporation shall be final and conclusive. The Corporation
may, but shall in no event be obligated to, register any securities covered
hereby pursuant to the Securities Act. The Corporation shall not be obligated
to take any affirmative action in order to cause the exercise of an Option or
the issuance of shares pursuant thereto to comply with any law or regulation of
any governmental authority. As to any jurisdiction that expressly imposes the
requirement that an Option shall not be exercisable unless and until the shares
of Stock covered by such Option are registered or are subject to an available
exemption from registration, the exercise of such Option (under circumstances in
which the laws of such jurisdiction apply) shall be deemed conditioned upon the
effectiveness of such registration or the availability of such an exemption.
17. EXCHANGE ACT: RULE 16B-3
17.1. General
The Plan is intended to comply with Rule 16b-3 ("Rule 16b-3") (and any
successor thereto) under the Exchange Act. Any provision inconsistent with Rule
16b-3 shall, to the extent permitted by law and determined to be advisable by
the Committee (constituted in accordance with Section 17.2 hereof), be
inoperative and void.
17.2. Compensation Committee
The Committee appointed in accordance with Section 3.1 hereof shall
consist of not fewer than two members of the Board each of whom shall qualify
(at the time of appointment to the
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<PAGE>
Committee and during all periods of service on the Committee) in all respects as
a "non-employee director" as defined in Rule 16b-3.
17.3. Restriction on Transfer of Stock
No director, officer or other "insider" of the Corporation subject to
Section 16 of the Exchange Act shall be permitted to sell Stock (which such
"insider" had received upon exercise of an Option) during the six months
immediately following the grant of such Option.
18. AMENDMENT AND TERMINATION
The Board may, at any time and from time to time, amend, suspend or
terminate the Plan as to any shares of Stock as to which Options have not been
granted. The Corporation also may retain the right in an Option Agreement to
cause a forfeiture of the shares or gain realized by an Optionee on account of
the Optionee taking actions in "competition with the Corporation," as defined in
the applicable Option Agreement. Furthermore, the Corporation may, in the
Option Agreement, retain the right to annul the grant of an Option if the holder
of such grant had a Service Relationship with the Corporation, a Subsidiary, or
an Affiliate and is terminated "for cause," as defined in the applicable Option
Agreement. Except as permitted under Section 19 hereof, no amendment,
suspension or termination of the Plan shall, without the consent of the
Optionee, alter or impair rights or obligations under any Option theretofore
granted under the Plan.
19. EFFECT OF CHANGES IN CAPITALIZATION
19.1. Changes in Stock
If the number of outstanding shares of Stock is increased or decreased
or changed into or exchanged for a different number or kind of shares or other
securities of the Corporation by reason of any recapitalization,
reclassification, stock split-up, combination of shares, exchange of shares,
stock dividend or other distribution payable in capital stock, or other increase
or decrease in such shares effected without receipt of consideration by the
Corporation, occurring after the effective date of the Plan, a proportionate and
appropriate adjustment shall be made by the Corporation in the number and kind
of shares for which Options are outstanding, so that the proportionate interest
of the Optionee immediately following such event shall, to the extent
practicable, be the same as immediately prior to such event. Any such
adjustment in outstanding Options shall not change the aggregate Option Price
payable with respect to shares subject to the unexercised portion of the Option
outstanding but shall include a corresponding proportionate adjustment in the
Option Price per share.
19.2. Reorganization With Corporation Surviving
Subject to Section 19.3 hereof, if the Corporation shall be the
surviving entity in any reorganization, merger or consolidation of the
Corporation with one or more other entities, any Option theretofore granted
pursuant to the Plan shall pertain to and apply to the securities to which a
holder of the number of shares of Stock subject to such Option would have been
entitled immediately following such reorganization, merger or consolidation,
with a corresponding proportionate adjustment of the Option Price per share so
that the aggregate Option Price thereafter shall be the same as the aggregate
Option Price of the shares remaining subject to the Option immediately prior to
such reorganization, merger or consolidation.
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<PAGE>
19.3. Other Reorganizations; Sale of Assets or Stock
Upon the dissolution or liquidation of the Corporation, or upon a
merger, consolidation or reorganization of the Corporation with one or more
other entities in which the Corporation is not the surviving entity, or upon a
sale of substantially all of the assets of the Corporation to another person or
entity, or upon any transaction (including, without limitation, a merger or
reorganization in which the Corporation is the surviving entity) approved by the
Board that results in any person or entity (other than persons who are holders
of stock of the Corporation at the time the Plan is approved by the Stockholders
and other than an Affiliate) owning 80 percent or more of the combined voting
power of all classes of stock of the Corporation, the Plan and all Options
outstanding hereunder shall terminate, except to the extent provision is made in
connection with such transaction for the continuation of the Plan and/or the
assumption of the Options theretofore granted, or for the substitution for such
Options of new options covering the stock of a successor entity, or a parent or
subsidiary thereof, with appropriate adjustments as to the number and kinds of
shares and exercise prices, in which event the Plan and Options theretofore
granted shall continue in the manner and under the terms so provided. In the
event of any such termination of the Plan, each Optionee shall have the right
(subject to the general limitations on exercise set forth in Section 11.3 hereof
and except as otherwise specifically provided in the Option Agreement relating
to such Option), immediately prior to the occurrence of such termination and
during such period occurring prior to such termination as the Committee in its
sole discretion shall designate, to exercise such Option in whole or in part, to
the extent such Option was otherwise exercisable at the time such termination
occurs, but subject to any additional provisions that the Committee may, in its
sole discretion, include in any Option Agreement. The Committee shall send
written notice of an event that will result in such a termination to all
Optionees not later than the time at which the Corporation gives notice thereof
to its stockholders.
19.4. Adjustments
Adjustments under this Section 19 relating to stock or securities of
the Corporation shall be made by the Committee, whose determination in that
respect shall be final and conclusive. No fractional shares of Stock or units
of other securities shall be issued pursuant to any such adjustment, and any
fractions resulting from any such adjustment shall be eliminated in each case by
rounding downward to the nearest whole share or unit.
19.5. No Limitations on Corporation
The grant of an Option pursuant to the Plan shall not affect or limit
in any way the right or power of the Corporation to make adjustments,
reclassifications, reorganizations or changes of its capital or business
structure or to merge, consolidate, dissolve or liquidate, or to sell or
transfer all or any part of its business or assets.
20. WITHHOLDING
The Corporation or a Subsidiary may be obligated to withhold federal
and local income taxes and Social Security taxes to the extent that an Optionee
realizes ordinary income in connection with the exercise of an Option. The
Corporation or a Subsidiary may withhold amounts needed to cover such taxes from
payments otherwise due and owing to an Optionee, and upon demand the Optionee
will promptly pay to the Corporation or a Subsidiary having such obligation any
additional amounts as may be necessary to satisfy such withholding tax
obligation. Such payment shall be made in cash or cash equivalents.
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<PAGE>
21. DISCLAIMER OF RIGHTS
No provision in the Plan or in any Option granted or Option Agreement
entered into pursuant to the Plan shall be construed to confer upon any
individual the right to remain in the employ of the Corporation, any Subsidiary
or any Affiliate, or to interfere in any way with the right and authority of the
Corporation, any Subsidiary or any Affiliate either to increase or decrease the
compensation of any individual at any time, or to terminate any employment or
other relationship between any individual and the Corporation, any Subsidiary or
any Affiliate. The obligation of the Corporation to pay any benefits pursuant
to the Plan shall be interpreted as a contractual obligation to pay only those
amounts described herein, in the manner and under the conditions prescribed
herein. The Plan shall in no way be interpreted to require the Corporation to
transfer any amounts to a third party trustee or otherwise hold any amounts in
trust or escrow for payment to any participant or beneficiary under the terms of
the Plan.
22. NONEXCLUSIVITY
Neither the adoption of the Plan nor the submission of the Plan to the
stockholders of the Corporation for approval shall be construed as creating any
limitations upon the right and authority of the Board to adopt such other
incentive compensation arrangements (which arrangements may be applicable either
generally to a class or classes of individuals or specifically to a particular
individual or individuals) as the Board in its discretion determines desirable,
including, without limitation, the granting of stock options otherwise than
under the Plan.
23. GOVERNING LAW.
This Plan and all Options to be granted hereunder shall be governed by
the laws of the State of Delaware (but not including the choice of law rules
thereof).
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Exhibit 10.2
CAPITAL RE CORPORATION
PERFORMANCE SHARE PLAN
(EFFECTIVE JULY 1, 1996)
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
I. GENERAL ..................................................................... 1
1.1. Purpose .............................................................. 1
1.2. Effective Date ....................................................... 1
II. DEFINITIONS ................................................................ 1
III. ELIGIBILITY AND PARTICIPATION ............................................. 3
3.1. Eligibility .......................................................... 3
3.2. Participation in Performance Share Awards ............................ 3
IV. PLAN DESIGN ................................................................ 3
4.1. Eligibility Period ................................................... 3
4.2. Performance Period ................................................... 4
4.3. Performance Share Awards ............................................. 4
4.4. Performance Goals .................................................... 4
4.5. Available Common Stock ............................................... 5
4.6. Adjustment to Shares ................................................. 5
4.7. Maximum Award ........................................................ 5
4.8. Committee Discretion to Adjust Awards ................................ 5
V. PAYMENT ..................................................................... 6
5.1. Committee Determination of Common Stock Payable ...................... 6
5.2. Timing and Form of Payment ........................................... 6
5.3. Distribution upon Termination of Employment .......................... 7
5.4. Beneficiary Designation .............................................. 8
VI. ADMINISTRATION ............................................................. 8
6.1. Committee ............................................................ 8
6.2. General Rights, Powers, and Duties of Committee ...................... 8
6.3. Information to be Furnished to Committee ............................. 9
6.4. Responsibility and Indemnification ................................... 9
VII. AMENDMENT AND TERMINATION ................................................. 9
7.1. Amendment ............................................................ 9
7.2. Company's Right to Terminate ......................................... 9
VIII. MISCELLANEOUS ............................................................ 9
8.1. No Implied Rights; Rights on Termination of Service .................. 9
8.2. No Right to Company Assets ........................................... 9
8.3. No Employment Rights ................................................. 9
8.4. Other Benefits ....................................................... 10
8.5. Offset ............................................................... 10
8.6. Non-assignability .................................................... 10
8.7. Notice ............................................................... 10
8.8. Governing Laws ....................................................... 10
8.9. Gender and Number .................................................... 10
8.10. Severability ........................................................ 10
</TABLE>
<PAGE>
I. GENERAL
1.1. Purpose. The purposes of the Plan are to retain officers and other
key employees, to support the achievement of the Company's strategic business
objectives, and to encourage increased ownership of Company stock by officers
and other key employees by providing to such persons competitive long-term
incentive opportunities that are linked to the profitability of the Company's
business and increases in stockholder value.
1.2. Effective Date. The Plan shall become effective as of July 1, 1996,
subject to its approval by the Company's stockholders.
II. DEFINITIONS
2.1. "Beneficiary" means the person or persons so designated by a
Participant pursuant to Section 5.4.
2.2. "Board of Directors" means the Board of Directors of the Company.
2.3 "Cause" means (i) the Participant has been found guilty by a court of
having committed fraud or theft against the Company or having committed a felony
and such conviction is affirmed on appeal or the time for appeal has expired;
(ii) the Participant has been found guilty by a court of having committed a
crime involving moral turpitude and such conviction is affirmed on appeal or the
time for appeal has expired; (iii) in the reasonable judgment of the Board of
Directors, the Participant has compromised trade secrets or other proprietary
information of the Company; (iv) in the reasonable judgment of the Board of
Directors, the Participant has willfully failed or refused to perform material
assigned duties; or (v) in the reasonable judgment of the Board of Directors,
the Participant has engaged in gross or willful misconduct that causes
substantial and material harm to the business and operations of the Company or a
subsidiary, the continuation of which will continue to substantially and
materially harm the business and operations of the Company or a subsidiary in
the future.
2.4. "Change in Control" means (i) any "person" (as such term is used in
Sections 13(d) and 14(d) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act")), has become, after the date hereof, the "beneficial owner" (as
defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of
securities of the Company representing forty percent (40%) or more of the
combined voting power of the Company's then outstanding securities; (ii) during
any two (2) year period, individuals who at the beginning of such period
constitute the Board of Directors, including for this purpose any new director
whose election (A) resulted from a vacancy on the Board of Directors caused by
the mandatory retirement, death, or disability of a director and was approved by
a vote of at least two-thirds (2/3rds) of the directors then still in office who
were directors at the beginning of the period, or (B) was approved by the
Participant affirmatively voting in his or her capacity as a stockholder, have
ceased for any reason to constitute a majority thereof; (iii) notwithstanding
clauses (i) or (v), the Company has consummated a merger or consolidation of the
Company with or into another corporation, the result of which is that the
stockholders of the Company at the time of the execution of the agreement to
merge or consolidate own less than eighty percent (80%) of the total equity of
the corporation surviving or resulting from the merger or consolidation or of a
corporation owning, directly or indirectly, one hundred percent (100%) of the
total equity of such surviving or resulting corporation; or (iv) there has been
a sale in one or a series of transactions of all or substantially all of the
assets of the Company; (v) any person has commenced a tender or exchange offer,
or entered into an agreement or received an option to acquire beneficial
ownership of forty percent (40%) or more of the total number of voting shares of
the Company, unless the Board of Directors has made a determination that such
action does not constitute and will not
<PAGE>
constitute a change in the persons in control of the Company or (vi) there has
been a change in control in the Company of a nature that would be required to be
reported in response to Item 6(e) of Schedule 14A of Regulation 14A promulgated
under the Exchange Act other than in circumstances specifically covered by
clauses (i) - (v) above.
2.5 "Code" means the Internal Revenue Code of 1986, as amended from time
to time, and any successor thereto.
2.6. "Committee" means the committee referred to in Section 6.1.
2.7. "Common Stock" means common stock, par value $.01 per share, of the
Company.
2.8. "Company" means Capital Re Corporation, a Delaware corporation.
2.9. "Covered Employee" means any Participant who is or may be a "covered
employee," within the meaning of Section 162(m)(3) of the Code, in the year in
which the payment of any shares of Common Stock in satisfaction of a Performance
Share award will be taxable to such Participant.
2.10. "Disability" shall have the same meaning as under the Company-
sponsored long-term disability plan under which the applicable Participant is
then eligible to participate.
2.11. "Eligibility Period" means a period, as determined by the Committee
pursuant to Section 4.1.
2.12. "Fair Market Value" means as of any given date the last reported
sales price on such date of Common Stock on the New York Stock Exchange
Composite Tape or, if not listed on such exchange, on any other national
securities exchange on which such Common Stock is listed or on NASDAQ. If there
is no regular public trading market for such Common Stock, the Fair Market Value
of such Common Stock shall be determined by the Committee in good faith.
2.13. "Good Reason" shall mean (i) any proposed reduction in the
Participant's base salary, provided that base salary may be reduced (and such
reduction would not constitute "Good Reason") by up to 10% due to a reduction in
compensation generally applicable to Participants; (ii) the Participant has his
responsibilities or areas of supervision within the Company substantially
reduced (in the Participant's reasonable judgment); or (iii) a Change of Control
has occurred within two years prior to the Participant's termination of
employment.
2.14. "Non-Employee Director" means a member of the Board of Directors who
qualifies as (i) a "non-employee director," as defined in Rule 16b-3, as
promulgated by the Securities Exchange Commission under the Securities Exchange
Act of 1934, or any successor definition adopted by the Securities Exchange
Commission, and as (ii) an "outside director," as defined in Section 1.162-
27(e)(3) of the Treasury Regulations issued under Section 162(m) of the Code, or
any successor definition adopted by the Department of the Treasury.
2.15. "Normal Retirement" means termination of employment after attainment
of age 65. However, the Committee, within its discretion, may determine that a
Participant who terminates employment prior to age 65 has terminated by virtue
of Normal Retirement.
2.16. "Participant" means a person who is designated, pursuant to Article
III, to be eligible to receive benefits under the Plan.
2.17. "Performance Goals" means the performance standards established by
the Committee pursuant to Section 4.4.
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2.18. "Performance Period" means a period of service, as determined
pursuant to Section 4.2, over which the extent of achievement of established
Performance Goals will be measured. For purposes of applying to Covered
Employees the various rules of the performance-based compensation exemption
under Section 162(m)(4)(C) of the Code and the Treasury Regulations issued
thereunder, the Performance Period shall be the "period of service to which the
Performance Goals relate" (as defined in Treasury Regulation Section 1.162-27(e)
(2)).
2.19. "Performance Share" means an award, designated in terms of a share
of Common Stock, granted pursuant to the Plan.
2.20. "Plan" means this Capital Re Corporation Performance Share Plan, as
amended from time to time.
2.21. "Pro-rated" or "Pro-rata" means, for purposes of determining the
amount of Common Stock payable to a Participant whose eligibility to participate
in the Plan with respect to an Eligibility Period ceases prior to the end of
such Eligibility Period for any of the reasons described in Section 3.2 or
subsection (a), (b), (c) or (d) of Section 5.3, the percentage to be applied to
the Common Stock that would have been payable at the end of the Performance
Period to such Participant if he had been eligible to participate for the entire
Eligibility Period. Such percentage shall equal the number of months (rounded to
the nearest whole month) of the Eligibility Period during which the Participant
was designated by the Committee as eligible to participate in the Plan divided
by the number of months (rounded to the nearest whole month) in such Eligibility
Period. A Participant who, pursuant to Section 3.2 but subject to the
limitations of Section 4.3, is designated as eligible to participate in the Plan
after the applicable Eligibility Period has commenced, shall, for purposes of
this Section 2.21, be deemed to have been eligible as of the beginning of such
Eligibility Period; provided, however, that the Committee shall, in accordance
with its authority under Section 4.8, have the discretion to reduce the Prorated
Common Stock award that is otherwise payable to such Participant to account for
such late commencement of participation.
III. ELIGIBILITY AND PARTICIPATION
3.1. Eligibility. Participation in the Plan shall be limited to officers
and other key employees of the Company or any of its subsidiaries or other
affiliates who are designated to be eligible by the Committee.
3.2. Participation in Performance Share Awards. The Committee will
determine the persons who will participate for each Eligibility Period under the
Plan. Subject to Section 4.3, after an Eligibility Period has commenced, persons
may be designated as eligible to participate in the Plan with respect to such
Eligibility Period. The award of Performance Shares with respect to a
Performance Period contained in any Eligibility Period does not guarantee
participation in subsequent Eligibility Periods.
IV. PLAN DESIGN
4.1. Eligibility Period. An Eligibility Period is a certain period of
time, as determined by the Committee, over which eligibility to receive benefits
under the Plan shall be measured. The initial Eligibility Period under the Plan
shall begin on July 1, 1996 and terminate on December 31, 1999. The second
Eligibility Period shall begin on January 1, 1998 and terminate on December 31,
2001. Subsequent Eligibility Periods under the Plans shall commence and
terminate as determined by the Committee in its sole discretion. The Committee
may establish a separate Eligibility Period for persons determined to be
eligible for participation after the commencement of any Eligibility Period.
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4.2. Performance Period. Each Eligibility Period under the Plan shall
include a Performance Period which shall be a specified period of service over
which the achievement of applicable Performance Goals will be measured. The
initial Performance Period under the Plan shall begin on July 1, 1996 and
terminate on December 31, 1999. The second Performance Period shall begin on
January 1, 1998 and terminate on December 31, 2001. Subsequent Performance
Periods shall commence and terminate as determined by the Committee; provided
that each such Performance Period shall commence coincident with or after the
commencement of the corresponding Eligibility Period and shall terminate
coincident with or prior to the termination of the corresponding Eligibility
Period. Nothwithstanding the foregoing, in the event of a Change of Control, the
Performance Period shall terminate. The Committee may also establish a separate
Performance Period for persons determined to be eligible for participation after
the commencement of any Performance Period.
4.3. Performance Share Awards. On or about the commencement of each
Eligibility Period under the Plan, the Committee shall establish the minimum and
maximum Performance Shares that may be awarded to each Participant in the Plan
for such Eligibility Period and the basis for such awards. The Committee may
also award Performance Shares to persons determined to be eligible for
participation after the commencement of any Eligibility Period. Notwithstanding
the foregoing, no Performance Shares shall be awarded to Covered Employees on or
after the 90th day of the Performance Period contained within the applicable
Eligibility Period or, if earlier, after 25% of such Performance Period has
elapsed. Performance Shares must be awarded to Covered Employees at a time when
the outcome of the Performance Goals established or to be established for the
applicable Performance Period is substantially uncertain. The Performance Shares
awarded to any Covered Employee and the terms and conditions applicable to such
Performance Shares must be finalized in writing by the Committee on or prior to
the applicable adjustment deadline described in the preceding sentences. Each
award of Performance Shares under the Plan shall be evidenced by a written
"Notice of Award," which shall be signed by an authorized officer of the Company
and by the Participant and shall contain such terms and conditions as are
approved by the Committee. Such terms and conditions need not be the same in all
cases.
4.4. Performance Goals.
(a) Performance Goals with respect to each Performance Period shall be
established by the Committee. The Committee may in its discretion adjust the
terms of such Performance Goals; provided that Performance Goals applied to
Covered Employees ("Covered Employees' Performance Goals") shall not be adjusted
on or after the 90th day of the applicable Performance Period or, if earlier,
after 25% of the applicable Performance Period has elapsed. No Covered
Employees' Performance Goals shall be adjusted at a time when the outcome of
such Performance Goals is no longer substantially uncertain. Covered Employees'
Performance Goals must be finalized in writing by the Committee on or prior to
the applicable adjustment deadline described in the preceding sentences.
(b) The Performance Goals set by the Committee shall be based on
specified criteria as determined by the Committee, which shall specify the
manner in which such Performance Goals shall be calculated. Covered Employees'
Performance Goals shall be based on objective business criteria, which shall
include one or more of the following: earnings per share, total shareholder
return, operating earnings, growth in assets, return on equity, return on
capital, market share, stock price, net income, cash flow, and retained
earnings. Performance Goals also may be based upon the attainment of specified
levels of performance of the Company under one or more of the measures described
above relative to the performance of other corporations.
(c) All of the provisions of this Section 4.4 are subject to the
requirement that all Covered Employees' Performance Goals shall be objective
performance goals satisfying the
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<PAGE>
requirement for "performance-based compensation" within the meaning of Section
162(m)(4) of the Code and the Treasury Regulations issued thereunder.
(d) In the event of a Change of Control, instead of the Performance Goals
established pursuant to Sections 4.4(a) and (b) above, the sole Performance Goal
for the Performance Period that ends with the Change of Control shall be stock
price. If the Change of Control occurs during the first two years of the
Performance Period and if the stock price of Company Common Stock has increased
by 100% as of the Change of Control, compared to the first day of the
Performance Period, the Participant shall be awarded for the Performance Period
the maximum Performance Shares that may be awarded to such Participant as
established by the Committee for such period. If the Change of Control occurs
after the end of the second year of the Performance Period and if the stock
price of Company Common Stock has increased by 150% as of the Change of Control,
compared to the first day of the Performance Period, the Participant shall be
awarded for the Performance Period the maximum Performance Shares that may be
awarded to such Participant as established by the Committee for such period. If
the stock price of Company Common Stock has increased by less than 100% (during
the first two years of the Performance Period) or 150% (after the end of the
second year of the Performance Period) as the case may be, the Participant shall
be awarded a pro-rated portion of the Performance Shares that would have
otherwise been payable to the Participant based on the ratio that the stock
price of Company Common Stock has increased as of the Change of Control from the
first day of such Performance Period compared to whichever of the foregoing
percentages is applicable.
4.5. Available Common Stock. The maximum number of shares of Common Stock
which shall be available for distribution in satisfaction of awards under the
Plan during its term shall not exceed 750,000, subject to adjustment as provided
in Section 4.6. The shares of Common Stock available for issuance under the Plan
may be authorized and unissued shares or treasury shares or may be purchased in
the open market .
4.6. Adjustment to Shares. In the event of any merger, reorganization,
consolidation, recapitalization, stock dividend, stock split, extraordinary
distribution with respect to Common Stock or other change in corporate structure
affecting such Common Stock, the Committee may make such substitution or
adjustments in the aggregate number and kind of shares reserved for issuance
under the Plan or in the number and kind of shares subject to outstanding
Performance Share awards under the Plan. The Committee shall make such
substitutions or adjustments as in its discretion it determines to be
appropriate and equitable to prevent dilution or enlargement of rights
hereunder; provided, however, that the number of shares of Common Stock subject
to any Performance Share award shall always be a whole number.
4.7. Maximum Award. The maximum number of shares of Common Stock that may
be issued to any Covered Employee with respect to any Eligibility Period
pursuant to any Performance Share award is 250,000 (subject to adjustment as
provided in Section 4.6). This limit includes any portion or amount of Common
Stock that is withheld for taxes (as described in Section 5.2).
4.8. Committee Discretion to Adjust Awards. At any time prior to the time
the Committee determines, pursuant to Section 5.1, the amount of shares of
Common Stock that are to be paid to any Participant in satisfaction of a
Performance Share award hereunder, the Committee shall have the authority to
modify, amend, or adjust the terms and conditions of such Performance Share
award, the terms and conditions of the corresponding Performance Goals, and/or
the amount of Common Stock payable, provided, however, such authority to modify,
-----------------
amend or adjust the terms and conditions of such Performance Share award shall
be exercised to reduce an award only in unusual circumstances not anticipated in
the original design of the Plan. However, the Committee shall have no authority
to increase directly or indirectly or to otherwise adjust upwards the amount of
Common Stock payable to a Covered Employee with respect to a particular
Performance Share award or to take any other action to the extent that such
action or the Committee's ability to take
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<PAGE>
such action would cause any payment under the Plan to any Covered Employee to
fail to qualify as "performance-based compensation" within the meaning of Code
Section 162(m)(4) and the Treasury Regulations issued thereunder.
V. PAYMENT
5.1. Committee Determination of Common Stock Payable. After a Performance
Period has ended, each Participant who has been awarded Performance Shares and
satisfied the Performance Goals with respect to such Performance Period shall be
entitled to receive a specified number of shares of Common Stock as determined
by the Committee. The Committee shall determine the extent to which the
Performance Goals set pursuant to Section 4.4 have been met, (as Pro-rated in
accordance with Sections 2.18, 3.2, and/or 5.3, if applicable). With respect to
Performance Shares awarded to Covered Employees, no payment of Common Stock
shall be made hereunder prior to written certification by the Committee that the
applicable Performance Goal or Goals have been satisfied to a particular extent
for the Performance Period, and no Common Stock shall be payable unless a
preestablished minimum level of achievement of the Performance Goals has been
met. The date on which the Committee determines the number of shares of Common
Stock payable to a Participant shall be the date on which such Participant will
become the owner of such shares, regardless of when the underlying stock
certificate or certificates are actually delivered to such Participant, and such
Participant will enjoy all rights of ownership of such shares of Common Stock as
of that date (the "Ownership Date").
5.2. Timing and Form of Payment. Shares of Common Stock payable to
Participants pursuant to Section 5.1 shall be distributed as follows:
(a) Fifty percent (50%) of the number of shares of Common Stock payable
to a Participant shall be converted to a dollar amount based on the Fair Market
Value of Common Stock on the last day of the Performance Period and, subject to
Section 5.2(b) and Section 5.2(d), be distributable in a single, lump sum cash
payment.
(b) The Company shall have the right to deduct first from cash
distributions hereunder any federal, state, or local taxes required by law to be
withheld with respect to such distributions, and such additional amounts of
withholding as are reasonably requested by the Participant. Accordingly, the
amount of federal, state, and/or local taxes required, or agreed, to be withheld
by the Company with respect to the dollar amount determined pursuant to
subsection (a) above shall, for purposes of satisfying these withholding
obligations, be deducted from the dollar amount of the cash payment and paid by
the Company to the appropriate taxing authorities. If the entire cash
distribution is insufficient to satisfy the withholding obligations, the Company
shall have the right to deduct amounts from the Common Stock distributable to
satisfy such withholding obligations.
(c) Fifty percent (50%) of the number of shares of Common Stock payable
to a Participant shall, subject to Section 5.2(b) and Section 5.2(d), be paid to
the Participant in shares of Common Stock as soon as practicable following the
end of the Performance Period.
(d) A Participant may elect by a written notice delivered to the Company,
prior to the last day of the Performance Period, to have greater than fifty
percent (50%) of the number of shares of Common Stock payable to a Participant
for such Performance Period distributed to the Participant in shares of Common
Stock, subject to the Participant's satisfaction of all withholding obligations
with respect to such distribution by the Company withholding from the cash
and/or shares of Common Stock distributable to the Participant or by the
Participant paying to the Company any amount that the Company may reasonably
determine to be necessary to satisfy such withholding obligations.
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<PAGE>
5.3. Distribution upon Termination of Employment.
(a) Death. If a Participant in the Plan dies before the end of an
Eligibility Period for which Performance Shares have been granted to him, such
Participant's Beneficiary will be eligible for a Pro-rated portion of the
Performance Shares that would have otherwise been payable to the Participant
after the end of the applicable Performance Period. This distribution, if any is
payable, will be made to the Beneficiary in the same form and at the same time
that all other Participants under the Plan receive their distributions with
respect to that Performance Period.
(b) Disability. If a Participant in the Plan, upon becoming Disabled,
terminates employment with the Company before the end of an Eligibility Period
for which Performance Shares have been granted to him, the Participant will be
eligible for a Pro-rated portion of the Performance Shares that would have
otherwise been payable to him after the end of the applicable Performance
Period. This distribution, if any is payable, will be made to the Participant in
the same form and at the same time that all other Participants under the Plan
receive their distributions with respect to that Performance Period.
(c) Normal Retirement. If a Participant in the Plan terminates employment
upon attaining Normal Retirement before the end of an Eligibility Period for
which Performance Shares have been granted to him, the Participant will be
eligible for a Pro-rated portion of the Performance Shares that would have
otherwise been payable to him after the end of the applicable Performance
Period. This distribution, if any is payable, will be made to the Participant in
the same form and at the same time that all other Participants under the Plan
receive their distributions with respect to that Performance Period.
(d) Termination of Employment Without Cause. If (i) the Company
terminates a Participant's employment other than for Cause or (ii) the
Participant terminates the Participant's employment at the request of the
Company, before the end of an Eligibility Period for which Performance Shares
have been granted to him, the Participant will be eligible for the Performance
Shares that would have otherwise been payable to him after the end of the
applicable Performance Period. This distribution, if any is payable, will be
made to the Participant in the same form and at the same time that all other
Participants under the Plan receive their distributions with respect to that
Performance Period.
(e) Termination of Employment for Good Reason. If the Participant
terminates the Participant's employment for Good Reason, before the end of an
Eligibility Period for which Performance Shares have been granted to him, the
Participant will be eligible for a Pro-rated portion of the Performance Shares
that would have otherwise been payable to him after the end of the applicable
Performance Period. This distribution, if any is payable, will be made to the
Participant in the same form and at the same time that all other Participants
under the Plan receive their distributions with respect to that Performance
Period.
(f) Other Termination of Employment. If, before the end of an Eligibility
Period for which Performance Shares have been granted to him, a Participant in
the Plan incurs a termination of employment for any reason other than those
specified in subsections (a)-(e) of this Section 5.3, whether voluntary or
involuntary and a Change of Control has not occurred, he shall forfeit all
rights to receive any payment of Performance Shares with respect to such
Eligibility Period.
5.4. Beneficiary Designation. A Participant may designate a Beneficiary
who is to receive, upon his death, the distributions that otherwise would have
been paid to him. All designations shall be in writing and shall be effective
only if and when delivered to the [Vice President--Human Resources] of the
Company during the lifetime of the Participant. If a Participant designates a
Beneficiary without providing in the designation that the Beneficiary must be
living at the time of each distribution, the designation shall vest in all of
the distribution whether payable
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before or after the Beneficiary's death, and any distributions remaining upon
the Beneficiary's death shall be made to the Beneficiary's estate.
A Participant may from time to time during his lifetime change his
Beneficiary by a written instrument delivered to the [Vice President--Human
Resources] of the Company. In the event a Participant shall not designate a
Beneficiary as aforesaid, or if for any reasons such designation shall be
ineffective, in whole or in part, the distribution that otherwise would have
been paid to such Participant shall be paid to his estate, and in such event the
term "Beneficiary" shall include his estate.
VI. ADMINISTRATION
6.1. Committee. The Plan shall be administered by the Compensation
Committee of the Board of Directors, or such other Committee of the Board of
Directors, composed exclusively of not less than two Non-Employee Directors,
each of whom shall be appointed by and serve at the pleasure of the Board of
Directors. The Committee may designate person(s) who are Company employees to
oversee the day to day administration of the Plan.
6.2. General Rights, Powers, and Duties of Committee. The Committee shall
be responsible for the management, operation, and administration of the Plan.
Subject to the limitations contained in Section 4.8 and to the remaining terms
of the Plan, the Committee shall, in addition to those provided elsewhere in the
Plan, have the following powers, rights, and duties:
(a) To maintain records concerning the Plan sufficient to prepare
reports, returns and other information required by the Plan or by law;
(b) To direct the payment of benefits under the Plan, and to give such
other directions and instructions as may be necessary for the proper
administration of the Plan; and
(c) To be responsible for the preparation, filing and disclosure on
behalf of the Plan of such documents and reports as are required by any
applicable federal or state law.
The Committee shall also have the authority to adopt, alter, and repeal
such administrative rules, guidelines, and practices governing the Plan as it
shall, from time to time, deem advisable, to interpret the terms and provisions
of the Plan and any award issued under the Plan (and any Notice of Award or
other agreement relating thereto), and to otherwise supervise the administration
of the Plan.
Any determination made by the Committee pursuant to the provisions of the
Plan with respect to any grants, payments, or other transactions under the Plan
shall be made in the sole discretion of the Committee at the time of the grant,
payment, or other transaction or, unless in contravention of any express term of
the Plan, at any time thereafter. All decisions made by the Committee pursuant
to the provisions of the Plan shall be final and binding on all persons,
including the Company and Plan Participants.
6.3. Information to be Furnished to Committee. Participants and their
Beneficiaries shall furnish to the Committee such evidence, data, or information
and execute such documents as the Committee requests.
6.4. Responsibility and Indemnification. No member of the Committee or of
the Board of Directors or any person who is designated to oversee the day to day
administration of the Plan (as provided in Section 6.1) shall be liable to any
person for any action taken or omitted in connection with the administration of
this Plan unless attributable to his own fraud or willful misconduct; nor shall
the Company be liable to any person for any such action unless attributable to
fraud or willful
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misconduct on the part of a director, officer, or employee of the Company within
the scope of his Company duties. Each member of the Committee shall be
indemnified and held harmless by the Company for any liability arising out of
the administration of the Plan, to the maximum extent permitted by law.
VII. AMENDMENT AND TERMINATION
7.1. Amendment. The Plan may be amended in whole or in part by the
Company, by action of the Board of Directors, at any time. The Committee
reserves the unilateral right to change any rule under the Plan if it deems such
a change necessary to avoid the application of the Employee Retirement Income
Security Act of 1974, as amended ("ERISA"), to the Plan. No amendment shall be
made without the approval of the Company's stockholders to the extent such
approval is required by law or by agreement.
7.2. Company's Right to Terminate. The Company reserves the sole right to
terminate the Plan, by action of the Board of Directors, at any time.
VIII. MISCELLANEOUS
8.1. No Implied Rights; Rights on Termination of Service. Neither the
establishment of the Plan nor any amendment thereof shall be construed as giving
any Participant, Beneficiary, or any other person any legal or equitable right
unless such right shall be specifically provided for in the Plan or conferred by
specific action of the Committee in accordance with the terms and provisions of
the Plan. Except as expressly provided in this Plan, the Company shall not be
required or be liable to make any payment under the Plan.
8.2. No Right to Company Assets. Neither the Participant nor any other
person shall acquire, by reason of the Plan, any right in or title to any
assets, funds or property of the Company whatsoever including, without limiting
the generality of the foregoing, any specific funds, assets, or other property
which the Company, in its sole discretion, may set aside in anticipation of a
liability hereunder. Any benefits which become payable hereunder shall be paid
from the general assets of the Company. The Participant shall have only a
contractual right to the amounts, if any, payable hereunder unsecured by any
asset of the Company. Nothing contained in the Plan constitutes a guarantee by
the Company that the assets of the Company shall be sufficient to pay any
benefit to any person.
8.3. No Employment Rights. Nothing herein shall constitute a contract of
employment or of continuing service or in any manner obligate the Company to
continue the services of the Participant, shall obligate the Participant to
continue in the service of the Company, or shall serve as a limitation of the
right of the Company to discharge any of its employees, with or without cause.
Nothing herein shall be construed as fixing or regulating the compensation
payable to the Participant.
8.4. Other Benefits. No Common Stock paid under the Plan shall be
considered compensation for purposes of computing benefits under any "employee
benefit plan" (as defined in Section 3(3) of ERISA) of the Company nor affect
any benefits or compensation under any other benefit or compensation plan of the
Company now or subsequently in effect (except as provided to the contrary in
such Company plan).
8.5. Offset. If, at the time payments are to be made hereunder, the
Participant or the Beneficiary or both are indebted or obligated to the Company,
then the payments under the Plan
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remaining to be made to the Participant or the Beneficiary or both may, at the
discretion of the Company, be reduced by the amount of such indebtedness or
obligation, provided, however, that an election by the Company not to reduce any
such payment or payments shall not constitute a waiver of its claim for such
indebtedness or obligation.
8.6. Non-assignability. Neither the Participant nor any other person shall
have any voluntary or involuntary right to commute, sell, assign, pledge,
anticipate, mortgage, or otherwise encumber, transfer, hypothecate, or convey in
advance of actual receipt the amounts, if any payable hereunder or any part
thereof, which are expressly declared to be unassignable and non-transferable.
No part of the amounts payable prior to actual payment shall be subject to
seizure or sequestration for the payment of any debts, judgments, alimony, or
separate maintenance owed by the Participant or any other person, or be
transferable by operation of law in the event of the Participant's or any other
person's bankruptcy or insolvency.
8.7. Notice. Any notice required or permitted to be given under the Plan
shall be sufficient if in writing and hand delivered, sent by registered or
certified mail, or sent by facsimile to the Company at its principal office,
directed to the attention of the Committee c/o the Chief Financial Officer of
the Company. Such notice shall be deemed given as of the date of delivery or, if
delivery is made by mail or facsimile, as of the date shown on the postmark,
facsimile, or the receipt for registration or certification.
8.8. Governing Laws. The Plan and all awards made and actions taken under
the Plan shall be governed and construed according to the laws of the State of
Delaware.
8.9. Gender and Number. Where appropriate, references in this Plan to the
masculine shall include the feminine, and references to the singular shall
include the plural.
8.10. Severability. In the event any provision of the Plan shall be held
legally invalid for any reasons, the illegality or invalidity shall not affect
the remaining parts of the Plan, and the Plan shall be construed and enforced as
if the illegal or invalid provision had not been included.
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<PAGE>
Exhibit 10.3
CAPITAL RE CORPORATION
ANNUAL INCENTIVE PLAN
FOR
COVERED EXECUTIVE OFFICERS
1. PURPOSE. The purpose of the "Capital Re Corporation Annual Incentive
Plan for Covered Executive Officers" (the "Plan") is to establish one or more
performance goals for payment of annual incentive compensation and the maximum
amount of such incentive compensation that may be paid to certain executive
officers. It is the intention of the Compensation Committee (the "Committee")
of the Board of Directors of the Corporation that annual incentive compensation
awarded to each Covered Executive Officer (as defined below) pursuant to the
Plan for the taxable year commencing January 1, 1997 and each taxable year
thereafter be deductible by the Corporation for federal income tax purposes in
accordance with Section 162(m) of the Internal Revenue Code of 1986, as amended
(the "Code"), and the Regulations relating thereto (the "Regulations").
2. COVERED EXECUTIVE OFFICERS. This Plan shall apply to any individual
(a "Covered Executive Officer") who, on the last day of a taxable year,
commencing with the taxable year beginning January 1, 1997, is (a) the chief
executive officer of the Corporation or is acting in such capacity, or (b) is
among the four highest compensated executive officers (other than the chief
executive officer) of the Corporation. Whether an individual is the chief
executive officer or among the four highest compensation executive officers
shall be determined pursuant to the executive compensation disclosure rules
under the Securities Exchange Act of 1934.
3. INCENTIVE COMPENSATION AWARD/ESTABLISHMENT OF PERFORMANCE GOALS. An
incentive compensation award to a Covered Executive Officer pursuant to this
Plan may be paid in the form of cash, stock options (in addition to stock
options granted under the Corporation's Stock Option Plan), stock or restricted
stock, or any combination thereof. Payment of an incentive compensation award
to a Covered Executive Officer under this Plan is provided herein. The
Committee shall retain the discretion to reduce the incentive compensation award
payable to a Covered Executive Officer, notwithstanding attainment of any
performance goal.
The Committee shall establish in writing one or more performance goals to
be attained for a Performance Period for each Covered Executive Officer on or
before the latest date permitted under Section 162(m) of the Code, the
Regulations or in any other regulations promulgated thereunder or in rulings or
advisory opinions published by the Internal Revenue Service (the "IRS").
Performance goals may be based on any one or more of the following business
criteria (as defined in paragraph 4 below) as the Committee may select:
Quality of Assumed Business
Earnings Per Share
Investment Portfolio
Net Income
Operating Ratios
Return on Average Equity
Written Premium
The maximum amount of an incentive compensation award for any Performance
Period to any Covered Executive Officer shall be a dollar amount not to exceed
175% of an individual's base salary at the commencement of the given Performance
Period.
4. DEFINITIONS. For purposes of this Plan and for determining whether a
particular performance goal is attained, the following terms shall have the
meanings given them below:
<PAGE>
(a) The term "Quality of Assumed Business" shall mean the expected
frequency and severity of loss associated with the business assumed by the
Corporation.
(b) The term "Earnings Per Share" shall mean the net income per share
of common stock which shall be computed by dividing net income (excluding
realized gains or losses and foreign exchange adjustments) by the weighted
average number of shares of common stock outstanding during the year.
(c) The term "Investment Portfolio" shall mean the total return on the
consolidated investment portfolio against total return of the benchmark
portfolio.
(d) The term "Net Income" shall mean the Corporation's net income for
the applicable Performance Period as reported in the Corporation's consolidated
financial statements, adjusted to eliminate the effect of (1) restatements of
prior periods' financial results relating to an acquisition accounted for as a
pooling of interests; (2) losses resulting from discontinued operations; (3)
extraordinary gains or losses; (4) the cumulative effect of changes in generally
accepted accounting principles; and (5) any other unusual, non-recurring gain or
loss which is separately identified and quantified in the Corporation's
financial statements.
(e) The term "Operating Ratios" shall mean the GAAP ratios which
reflect the performance of the Corporation relative to claims and expenses,
including but not limited to the loss ratio, the expense ratio and the combined
ratio.
(f) The term "Performance Period" shall mean the calendar year,
commencing January 1 and ending December 31.
(g) The term "Return on Average Equity" shall mean the Net Income
divided by the average common stockholders' equity for the Performance Period.
(h) The term "Written Premium" shall mean the amount of premiums
written during the Performance Period (before reinsurance) as stated in the GAAP
financial statements.
5. EFFECTIVE DATE; AMENDMENT AND TERMINATION. This Plan shall be
effective as of January 1, 1997; provided, however, that no incentive
compensation award shall be paid pursuant to this Plan unless this Plan has been
approved by the stockholders of the Corporation. The Committee may at any time
terminate, suspend, amend or modify this Plan except that stockholder approval
shall be required for any amendment or modification to this Plan that, in the
opinion of counsel, would be required by Section 162(m) of the Code, the
Regulations, or any other regulations promulgated under the Code, or rulings or
advisory opinions published by the IRS.
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<PAGE>
Exhibit 23.1
CONSENT OF INDEPENDENT AUDITORS
We consent to the incorporation by reference in the Registration Statement (Form
S-8) pertaining to the Capital Re Corporation 1997 Employee Stock Option Plan,
Capital Re Corporation Performance Share Plan, and Capital Re Corporation Annual
Incentive Plan for Covered Executive Officers of our reports dated January 21,
1997, with respect to the consolidated financial statements of Capital Re
Corporation incorporated by reference in its Annual Report (Form 10-K) for the
year ended December 31, 1996 and the related financial statement schedules
included therein, filed with the Securities and Exchange Commission.
New York, New York
October 3, 1997
<PAGE>
Exhibit 99.2
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Section 145 of the General Corporation Law of the State of Delaware
provides as follows:
(a) A corporation may indemnify any person who was or is a party or is
threatened to be made a party to any threatened, pending or completed action,
suit or proceeding, whether civil, criminal, administrative or investigative
(other than an action by or in the right of the corporation) by reason of the
fact that he is or was a director, officer, employee or agent of the
corporation, or is or was serving at the request of the corporation as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise, against expenses (including attorneys'
fees), judgments, fines and amounts paid in settlement actually and reasonably
incurred by him in connection with such action, suit or proceeding if he acted
in good faith and in a manner he reasonably believed to be in or not opposed to
the best interests of the corporation, and, with respect to any criminal action
or proceeding, had no reasonable cause to believe his conduct was unlawful. The
termination of any action, suit or proceeding by judgment, order, settlement,
conviction, or upon a plea of nolo contendere or its equivalent, shall not, of
itself, create a presumption that the person did not act in good faith and in a
manner which he reasonably believed to be in or not opposed to the best
interests of the corporation, and, with respect to any criminal action or
proceeding, had reasonable cause to believe that his conduct was unlawful.
(b) A corporation may indemnify any person who was or is a party or is
threatened to be made a party to any threatened, pending or completed action or
suit by or in the right of the corporation to procure a judgment in its favor by
reason of the fact that he is or was a director, officer, employee or agent of
the corporation, or is or was serving at the request of the corporation as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise against expenses (including attorneys' fees)
actually and reasonably incurred by him in connection with the defense or
settlement of such action or suit if he acted in good faith and in a manner he
reasonably believed to be in or not opposed to the best interests of the
corporation and except that no indemnification shall be made in respect of any
claim, issue or matter as to which such person shall have been adjudged to be
liable to the corporation unless and only to the extent that the Court of
Chancery or the court in which such action or suit was brought shall determine
upon application that, despite the adjudication of liability but in view of all
the circumstances of the case, such person is fairly and reasonably entitled to
indemnity for such expenses which the Court of Chancery or such other court
shall deem proper.
(c) To the extent that a director, officer, employee or agent of a
corporation has been successful on the merits or otherwise in defense of any
action, suit or proceeding referred to in subsections (a) and (b) of this
section, or defense of any claim, issue or matter therein, he shall be
indemnified against expenses (including attorneys' fees) actually and reasonably
incurred by him in connection therewith.
(d) Any indemnification under subsections (a) and (b) of this section
(unless ordered by a court) shall be made by the corporation only as authorized
in the specific case upon a determination that indemnification of the director,
officer, employee or agent is proper in the circumstances because he has met the
applicable standard of conduct set forth in subsections (a) and (b) of this
section. Such determination shall be made (1) by a majority vote of the
directors who are not parties to such action, suit or proceeding, even though
less than a quorum, or (2) if there are no such directors, or if such directors
so direct, by independent legal counsel in a written opinion, or (3) by the
stockholders.
(e) Expenses (including attorneys' fees) incurred by an officer or director
in defending any civil, criminal, administrative or investigative action, suit
or proceeding may be paid by the corporation in advance of the final disposition
of such action, suit or proceeding upon receipt of an undertaking by or on
behalf of such director or officer to repay such amount if it shall ultimately
be determined that he is not entitled to be indemnified by the corporation as
authorized in this section.
<PAGE>
Such expenses (including attorneys' fees) incurred by other employees and agents
may be so paid upon such terms and conditions, if any, as the board of directors
deems appropriate.
(f) The indemnification and advancement of expenses provided by, or granted
pursuant to, the other subsections of this section shall not be deemed exclusive
of any other rights to which those seeking indemnification or advancement of
expenses may be entitled under any bylaw, agreement, vote of stockholders or
disinterested directors or otherwise, both as to action in his official capacity
and as to action in another capacity while holding such office.
(g) A corporation shall have power to purchase and maintain insurance on
behalf of any person who is or was a director, officer, employee or agent of the
corporation, or is or was serving at the request of the corporation as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise against any liability asserted against him
and incurred by him in any such capacity, or arising out of his status as such,
whether or not the corporation would have the power to indemnify him against
such liability under this section.
(h) For purposes of this section, references to "the corporation" shall
include, in addition to the resulting corporation, any constituent corporation
(including any constituent of a constituent) absorbed in a consolidation or
merger which, if its separate existence had continued, would have had power and
authority to indemnify its directors, officers, and employee or agents, so that
any person who is or was a director, officer, employee or agent of such
constituent corporation, or is or was serving at the request of such constituent
corporation as a director, officer, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise, shall stand in the same
position under this section with respect to the resulting or surviving
corporation as he would have with respect to such constituent corporation if its
separate existence had continued.
(i) For purposes of this section, references to "other enterprises" shall
include employee benefit plans; references to "fines" shall include any excise
taxes assessed on a person with respect to any employee benefit plan; and
references to "serving at the request of the corporation" shall include any
service as a director, officer, employee or agent of the corporation which
imposes duties on, or involves services by, such director, officer, employee or
agent with respect to an employee benefit plan, its participants or
beneficiaries; and a person who acted in good faith and in a manner he
reasonably believed to be in the interest of the participants and beneficiaries
of an employee benefit plan shall be deemed to have acted in a manner "not
opposed to the best interests of the corporation" as referred to in this
section.
(j) The indemnification and advancement of expenses provided by, or granted
pursuant to, this section shall, unless otherwise provided when authorized or
ratified, continue as to a person who has ceased to be a director, officer,
employee or agent and shall inure to the benefit of the heirs, executors and
administrators of such a person.
<PAGE>
(k) The Court of Chancery is hereby vested with exclusive jurisdiction to
hear and determine all actions for advancement of expenses or indemnification
brought under this section or under any bylaw, agreement, vote of stockholders
or disinterested directors, or otherwise. The Court of Chancery may summarily
determine a corporation's obligation to advance expenses (including attorneys'
fees).
