<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------------------
FORM S-8
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
----------------------
YANKEE ENERGY SYSTEM, INC.
(Exact name of registrant as specified in its charter)
Connecticut 06-1236430
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
----------------------
599 Research Parkway
Meriden, CT 06450-1030
(203) 639-4000
(Address, including zip code, and telephone number,
including area code, of registrant's principal executive offices)
----------------------
1996 Yankee Energy Long-Term Incentive Compensation Plan
(Full title of the plan)
----------------------
Mary J. Healey
Vice President, General Counsel and Secretary
Yankee Energy System, Inc.
599 Research Parkway
Meriden, CT 06450-1030
(203) 639-4405
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
----------------------
Copy to:
Scott L. Murphy, Esq.
Shipman & Goodwin LLP
One American Row
Hartford, CT 06103
(860) 251-5000
<TABLE>
<CAPTION>
CALCULATION OF REGISTRATION FEE
Title of
Each Proposed Proposed
Class of Maximum Maximum Amount
Securities Amount Offering Aggregate of
to be to be Price per Offering Registration
Registered(1) Registered Share(2) Price(2) Fee
- ------------- ---------- --------- --------- ----------
<S> <C> <C> <C> <C>
Common Stock,
par value $5.00 522,477 $22.50 $11,755,733 $3,562
</TABLE>
(1) The Registration Statement also pertains to Rights to
purchase one share of Common Stock of the Registrant. Until the
occurrence of certain prescribed events, the Rights are not
exercisable, are evidenced by the certificates for Yankee Energy
System, Inc. Common Stock and will be transferred only with such
securities.
(2) Estimated solely for the purpose of calculating the
registration fee. Pursuant to Rule 457(h), the proposed maximum
offering price per share is based on the average of the high and
low price per share of $22.50 on May 22, 1997, as reported by the
New York Stock Exchange.
<PAGE>
PART I
INFORMATION REQUIRED IN THE SECTION 10(a) PROSPECTUS
The information statement being delivered by Yankee Energy
System, Inc. (the "Company") to participants in the Company's
1996 Yankee Energy Long-Term Incentive Compensation Plan (the
"Plan"), as required by Rule 428 under the Securities Act of
1933, as amended (the "Securities Act"), has been prepared in
accordance with the requirements of Form S-8 and relates to
shares of common stock, par value $5.00 per share, issued or
reserved for issuance pursuant to awards under the Plan. The
information with respect to awards granted under the Plan
required in the Section 10(a) prospectus is included in documents
being maintained and delivered by the Company as required by Rule
428 under the Securities Act. The Company shall provide to
participants a written statement advising them of the
availability without charge, upon written or oral request, of
documents incorporated by reference herein, as is required by
Item 2 of Part I of Form S-8.
<PAGE>
PART II
INFORMATION REQUIRED IN THE REGISTRATION STATEMENT
Item 3. Incorporation of Documents by Reference.
- ------- ----------------------------------------
The following documents, previously filed with the
Commission, are hereby incorporated by reference in this
registration statement:
(a) Yankee Energy's Annual Report on Form 10-K for the year
ended September 30, 1996;
(b) The Company's Quarterly Report on Form 10-Q for the
fiscal quarters ended December 31, 1996 and March 31, 1997;
(c) All other reports filed pursuant to Section 13(a) or
15(d) of the Exchange Act since the end of the fiscal year
covered by the registrant document referred to in (a) above;
(d) The description of the Shares contained in the
Registration Statement on Form 10 dated April 14, 1989, filed
under the 1934 Exchange Act, including any amendment or report
filed for the purpose of updating such description; and
(e) The description of the Company's Rights contained in
the Company's 1934 Exchange Act Registration Statement on Form 8A
filed with the Commission on December 6, 1989, including any
amendment or report filed for the purpose of updating such
description.
In addition, all documents subsequently filed by Yankee
Energy pursuant to Section 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 hereby have
been sold or which deregisters all securities then remaining
unsold, shall be deemed to be incorporated by reference in this
registration statement and to be a part hereof from the date of
filing of such documents. Any statement contained in a document
incorporated or deemed to be incorporated by reference in this
registration statement 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
subsequently 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.
- ------- --------------------------
This item is not applicable.
Item 5. Interests of Named Experts and Counsel.
- ------- ---------------------------------------
This item is not applicable.
Item 6. Indemnification of Directors and Officers.
- ------- ------------------------------------------
Sections 33-770, 33-771 and 33-776 of the Connecticut
Business Corporations Act require or permit the Company, in
certain circumstances and subject to certain limitations therein
set forth, to indemnify each of its directors and officers, among
others, made a party to threatened, pending or completed legal
proceeding by reason of his or her being or having been a
director of officer, against expenses, including attorneys' fees,
incurred by him or her and, in addition in the case of any such
proceeding other than one by or in the right of the Company,
against judgments, settlements, fines, penalties or reasonable
expenses incurred by him or her in connection with such
proceeding. Article VI of the Bylaws of the Company provides for
indemnification of directors and officers, among others, to the
fullest extent now or hereafter permitted by law.
Section 33-377 authorizes the Company to procure insurance
providing greater indemnification against liability than that
authorized by sections 33-771 or 33-772. The Company has
purchased insurance policies which ensure directors and officers
of the Company and of its subsidiaries against certain
liabilities that might be incurred by them in such capacities and
that insures the Company for amounts that may be paid by it to
indemnify the directors and officers covered by the policies.
Item 7. Exemption from Registration Claimed.
- ------- -------------------------------------
This item is not applicable.
<PAGE>
Item 8. Exhibits.
- ------- ---------
The following exhibits are filed as part of this
Registration Statement or incorporated by reference herein:
<TABLE>
<CAPTION>
Exhibit Number Description of Exhibits
- -------------- -----------------------
<S> <C>
4.1 Restated Certificate of Incorporation of the
Company (filed as an Exhibit in the Company's
Registration Statement on Form 10 dated April
14, 1989 ("Form 10"))
4.2 Amended Bylaws of the Company (filed in Form
10)
4.3 Description of the Company's common stock and
specimen of the Company's common stock
contained in the Company's Registration
Statement in Form 10
4.4 Rights Agreement dated as of November 20,
1989, between the Company and Rights Agent
named therein, as amended (filed in the
Company's Registration Statement on Form 8-A,
dated December 7, 1989), as amended by
Amendment No. 1 dated as of May 10, 1990
(filed in the Company's Form 8, dated May 30,
1990), as further amended by Amendment No. 2
dated as of January 23, 1991 (filed in the
Company's Form 8, dated January 31, 1991)
5.1* Opinion of Shipman & Goodwin LLP
15.1* Awareness Letter of Independent Accountants,
Arthur Andersen LLP
23.1* Consent of Independent Accountants, Arthur
Andersen LLP
23.2* Consent of Shipman & Goodwin LLP (included in
Exhibit 5.1)
24.1* Power of Attorney (included in Page II-5 of
this Registration Statement, on signature
page of the Edgarized version)
99.1* 1996 Yankee Energy Long-Term Incentive
Compensation Plan
- -----------------
* Filed herewith
</TABLE>
<PAGE>
Item 9. Undertakings.
- ------- -------------
(a) The undersigned Registrant hereby undertakes:
(1) To file, during any period in which offers or
sales are being made, a post-effective amendment to this
registration statement 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.
(2) That, for the purpose of determining any liability
under the Securities Act of 1933, 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.
(3) 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.
(b) The undersigned registrant hereby undertakes that, for
purposes of determining any liability under the Securities Act of
1933, each filing of the Registrant's annual report pursuant to
Section 13(a) or 15(d) of the Securities Exchange Act of 1934
(and, where applicable, each filing of an employee benefit plan's
annual report pursuant to Section 15(d) of the Securities
Exchange Act of 1934) that is incorporated by reference in the
registration 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.
(c) Insofar as indemnification of liabilities arising under the
Securities Act of 1933 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 Securities and Exchange
Commission such indemnification is against public policy as
expressed in the Act and is, therefore, unenforceable. In the
event that a claim for indemnification against such liabilities
(other than the payment by the registrant of expenses incurred or
paid by a director, officer or controlling persons of the
registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling
person in connection with the securities being registered, 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 whether such
indemnification by it is against public policy as expressed in
the Act and will be governed by the final adjudication of such
issue.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933,
as amended, 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 Meriden and State of
Connecticut on the 22nd day of May, 1997.
YANKEE ENERGY SYSTEM, INC.
BY /s/ Branko Terzic
---------------------------
Branko Terzic,
Chairman, President
and Chief Executive Officer
POWER OF ATTORNEY
Each director and/or officer of the Registrant whose
signature appears below hereby appoints Charles E. Gooley and
Mary J. Healey, and each of them severally, as his or her
attorney-in-fact to sign in his or her name and behalf, in any
and all capacities stated below and to file with the Commission,
any and all amendments, including post-effective amendments, to
this Registration Statement.
----------------------------
Pursuant to the requirements of the Securities Act of 1933,
as amended, this Registration Statement has been signed below by
the following persons in the capacities and on the date
indicated.
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
/s/Branko Terzic Chairman, President May 22, 1997
and Chief Executive
Officer
(principal executive officer)
/s/Michael E. Bielonko Vice President and May 22, 1997
Chief Financial Officer
(principal financial officer)
/s/Nicholas A. Rinaldi Controller May 22, 1997
(principal accounting officer)
/s/Sanford Cloud, Jr. Director May 22,1997
/s/Eileen S. Kraus Director May 22,1997
/s/Frederick M. Lowther Director May 22,1997
/s/Patricia M. Worthy Director May 22,1997
/s/Emery G. Olcott Director May 22,1997
/s/Nicholas L. Trivisonno Director May 22,1997
</TABLE>
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit Sequentially
Number Description of Exhibits Numbered Page
- ------- ----------------------- -------------
<S> <C>
5.1 Opinion of Shipman & Goodwin LLP
15.1 Awareness Letter of Independent
Accountants, Arthur Andersen LLP
23.1 Consent of Independent Accountants,
Arthur Andersen LLP
23.2 Consent of Shipman & Goodwin LLP
(included in Exhibit 5.1)
24.1 Power of Attorney (included in Page II-5
of this Registration Statement).
99.1 1996 Yankee Energy Long-Term
Incentive Compensation Plan
</TABLE>
<PAGE>
EXHIBIT 5.1
May 23, 1997
Yankee Energy System, Inc.
599 Research Parkway
Meriden, CT 06450-1030
Ladies and Gentlemen:
In connection with the proposed issuance by Yankee Energy
System, Inc. (the "Company") of up to 522,477 shares of its
issued and outstanding Common Stock, par value $5.00 per share
(the "Shares"), pursuant to the Company's 1996 Long-Term
Incentive Compensation Plan, we have examined, as counsel to the
Company, the Registration Statement on Form S-8, as amended,
filed under the Securities Act of 1933 (the "Securities Act") and
such other documents as we have deemed necessary or appropriate
in order to express the opinion set forth below.
In connection with our opinion hereinafter given, we have
examined and relied upon originals, or copies, certified or
otherwise, identified to our satisfaction, of such agreements,
documents, certificates and other statements of government
officials, corporate officers and representatives and other
documents as we have deemed relevant and necessary as a basis for
such opinion. In such examination, we have assumed the
genuineness of all signatures and the authenticity of all
documents submitted to us as originals and the conformity with
the original documents of documents submitted to us as copies.
Based upon the foregoing, we are of the opinion that when
(i) the Registration Statement shall have become effective, and
(ii) the Shares shall have been issued and delivered against
payment therefor as contemplated in the Registration Statement,
the Shares will be legally and validly issued, fully paid and
non-assessable.
We hereby consent to the filing of this opinion as an
exhibit to the Registration Statement. In giving this consent,
we do not thereby admit that we come within the category of
persons whose consent is required under Section 7 of the
Securities Act or the rules and regulations of the Securities and
Exchange Commission.
Very truly yours,
Shipman & Goodwin LLP
<PAGE>
EXHIBIT 15.1
Yankee Energy System, Inc.
599 Research Parkway
Meriden, CT 06450-1030
We are aware that Yankee Energy System, Inc. has
incorporated by reference in its Form S-8 Registration Statement
its Form 10-Q for the quarters ended December 31, 1996 and March
31, 1997, which include our reports dated January 31, 1997, and
April 29, 1997, respectively, covering the unaudited interim
financial information contained therein. Pursuant to Regulation
C of the Securities Act of 1933 (the "Act"), these reports are
not considered a part of the registration statement prepared or
certified by our Firm within the meaning of Sections 7 and 11 of
the Act.
Very truly yours,
/S/ ARTHUR ANDERSEN LLP
Hartford, Connecticut
May 23, 1997
<PAGE>
EXHIBIT 23.1
CONSENT OF INDEPENDENT ACCOUNTANTS
----------------------------------
As independent public accountants, we hereby consent to the
incorporation by reference in this registration statement of our
report dated November 7, 1996 incorporated by reference in Yankee
Energy System, Inc.'s Form 10-K for the year ended September 30,
1996 and to all references to our Firm included in this
registration statement.
/S/ ARTHUR ANDERSEN LLP
Hartford, Connecticut
May 23, 1997
<PAGE>
EXHIBIT 99.1
YANKEE ENERGY SYSTEM, INC.
1996 LONG-TERM INCENTIVE COMPENSATION PLAN
Amended May 13, 1997
SECTION 1. Purpose.
- --------------------
The purposes of the 1996 Long-Term Incentive Compensation
Plan (the "Plan") are (i) to attract and retain outstanding
executives in key management portions of Yankee Energy System,
Inc. (the "Company"), its parent (if any) and any subsidiaries of
the Company (collectively the "Related Corporations"), (ii) to
promote the achievement of long-term corporate goals through the
use of performance-based incentives, (iii) to create parallel
interests between executives and shareholders by providing for
some portion of executive compensation in the form of common
stock, and (iv) to reward performance and to foster Company
identification on the part of key middle managers.
The Plan will provide a means whereby officers, executive
and managerial employees of the Company and any Related
Corporations may (a) purchase stock in the Company pursuant to
options which qualify as "incentive stock options" ("Incentive
Stock Options") under Section 422 of the Internal Revenue Code of
1986, as amended (the "Code"), (b) purchase stock in the Company
pursuant to options granted hereunder which do not qualify as
Incentive Stock Options ("Non-Qualified Options"); (c) may be
awarded stock in the Company ("Awards"); and (d) may receive
stock appreciation rights ("SARs"). Both Incentive Stock Options
and Non-Qualified Options are referred to hereafter individually
as an "Option" and collectively as "Options." As used herein,
the terms "parent" and "subsidiary" mean "parent corporation" and
"subsidiary corporation" as those terms are defined in Section
424 of the Code. Options, Awards and SARs are referred to
hereafter individually as a "Plan Benefit" and collectively as
"Plan Benefits." Officers, executive and managerial employees of
the Company and any Related Corporations are referred to herein
as "Participants."
SECTION 2. Administration.
- ---------------------------
2.1 Board of Directors and the Committee. The Plan will be
administered by the Board of Directors of the Company whose
construction and interpretation of the terms and provisions
hereof shall be final and conclusive. The Board of Directors may
in its sole discretion grant Options, issue shares upon exercise
of such Options, grant Awards and grant SARs all as provided in
the Plan. The Board of Directors shall have authority, subject
to the express provisions of the Plan, to construe the Plan and
its related agreements, to prescribe, amend and rescind rules and
regulations relating to the Plan, to determine the terms and
provisions of the respective Option, Award and SAR agreements,
which need not be identical, and to make all other determinations
in the judgment of the Board of Directors necessary or desirable
for the administration of the Plan. The Board of Directors may
correct any defect or supply any omission or reconcile any
inconsistency in the Plan or in any related agreement in the
manner and to the extent it shall deem expedient to carry the
Plan into effect and it shall be the sole and final judge of such
expediency. No director shall be liable for any action or
determination made in good faith. The Board of Directors may
delegate any or all of its powers under the Plan to the
Organization and Compensation Committee or other Committee (the
"Committee") appointed by the Board of Directors consisting of at
least two members of the Board of Directors, who shall serve at
the discretion of the Board of Directors. If Plan Benefits are
to be approved solely by a Committee, the members of the
Committee shall at all times be: (i) "outside directors" as that
term is defined in Treas. Reg. Section 1.162-27(e)(3) (or any
successor regulation); and (ii) "non-employee directors" within
the meaning of Rule 16b-3 (or any successor rule) under the
Securities Exchange Act of 1934, as amended (the "Exchange Act"),
as such terms are interpreted from time to time. If the
Committee is so appointed, all references to the Board of
Directors herein shall mean and relate to such Committee, unless
the context otherwise requires.
2.2 Compliance with Section 162(m) of the Code. Section
162(m) of the Code generally limits the tax deductibility to
publicly held companies of compensation in excess of $1,000,000
paid to certain "covered employees" ("Covered Employees"). It is
the Company's intention to preserve the deductibility of such
compensation to the extent it is reasonably practicable and to
the extent it is consistent with the Company's compensation
objectives. For purposes of this Plan, Covered Employees of the
Company shall be those employees of the Company described in
Section 162(m)(3) of the Code.
SECTION 3. Eligibility.
- ------------------------
3.1 Incentive Stock Options. Participants shall be
eligible to receive Incentive Stock Options pursuant to the Plan;
provided that no Participant shall be granted any Incentive Stock
Option under the Plan who, at the time such Option is granted,
owns, directly or indirectly, Common Stock of the Company
possessing more than 10% of the total combined voting power of
all classes of stock of the Company or of its Related
Corporations, unless the requirements of Section 6.6(b) hereof
are satisfied. In determining whether this 10% threshold has
been reached, the stock attribution rules of Section 424(d) of
the Code shall apply.
3.2 Non-Qualified Options, Awards and SARs. Non-Qualified
Options, Awards and SARs may be granted to any Participant.
3.3 Generally. The Board of Directors may take into
consideration a Participant's individual circumstances in
determining whether to grant Plan Benefits. Granting of Plan
Benefits for any individual shall neither entitle that individual
to, nor disqualify that individual from, participation in any
other grant of Plan Benefits.
SECTION 4. Stock Subject to Plan.
- ----------------------------------
Subject to adjustment as provided in Sections 9 and 10
hereof, the stock to be offered under the Plan shall consist of
shares of the Company's Common Stock, $5.00 par value, and the
maximum number of shares which will be reserved for issuance, and
in respect of which Plan Benefits may be granted pursuant to the
provisions of the Plan, shall not exceed in the aggregate five
hundred twenty-two thousand four hundred seventy seven (522,477)
shares. Such shares may be authorized and unissued shares,
treasury shares or shares purchased on the open market. If an
Option or SAR granted hereunder shall expire or terminate for any
reason without having been exercised in full, or if the Company
shall reacquire any unvested shares issued pursuant to Awards,
any such shares so reacquired shall again be available for
subsequent grants of Plan Benefits under the Plan. Stock issued
pursuant to the Plan may be subject to such restrictions on
transfer, repurchase rights or other restrictions as shall be
determined by the Board of Directors.
SECTION 5. Granting of Plan Benefits.
- --------------------------------------
Plan Benefits may be granted under the Plan at any time
after adoption of the Plan by the Board of Directors and prior to
October 22, 2006; provided, however, that nothing in the Plan
shall be construed to obligate the Company to grant Plan Benefits
to a Participant or anyone claiming under or through a
Participant. The date of grant of Plan Benefits under the Plan
will be the date specified by the Board of Directors at the time
the Board of Directors grants such Plan Benefits; provided,
however, that such date shall not be prior to the date on which
the Board of Directors takes such action. The Board of Directors
shall have the right, with the consent of a Participant, to
convert an Incentive Stock Option granted under the Plan to a
Non-Qualified Option pursuant to Section 6.7. Plan Benefits may
be granted alone or in addition to other grants under the Plan.
SECTION 6. Special Provisions Applicable to Options and SARs.
- --------------------------------------------------------------
6.1 Purchase Price and Shares Subject to Options and SARs.
(a) The purchase price per share of Common Stock
deliverable upon the exercise of an Option shall be
determined by the Board of Directors; provided, however,
that the exercise price shall not be less than 100% of the
fair market value of such Common Stock on the day the Option
is granted (except as modified in Section 6.6(b) hereof in
the case of an Incentive Stock Option).
(b) Options granted under the Plan may provide for the
payment of the exercise price by delivery of (i) cash or a
check payable to the order of the Company in an amount equal
to the exercise price of such Options, (ii) shares of Common
Stock of the Company owned by the Participant having a fair
market value equal in amount to the exercise price of the
Options being exercised, or (iii) any combination of (i) and
(ii). The fair market value of any shares of the Company's
Common Stock which may be delivered upon exercise of an
Option shall be determined by the Board of Directors. The
Board of Directors may also permit Participants, either on a
selective or aggregate basis, to simultaneously exercise
Options and sell the shares of Common Stock thereby
acquired, pursuant to a brokerage or similar arrangement,
approved in advance by the Board of Directors, and to use
the proceeds from such sale as payment of the purchase price
of such shares.
(c) If, at the time an Option is granted under the
Plan, the Company's Common Stock is publicly traded, "fair
market value" shall be determined as of the last business
day for which the prices or quotes discussed in this
sentence are available prior to the date such Option is
granted (the "Determination Date") and shall mean (i) the
average (on the Determination Date) of the high and low
prices of the Common Stock on the principal national
securities exchange on which the Common Stock is traded, if
such Common Stock is then traded on a national securities
exchange; (ii) the last reported sale price (on the
Determination Date) of the Common Stock on The Nasdaq Stock
Market if the Common Stock is not then traded on a national
securities exchange; or (iii) the closing bid price (or
average of bid prices) last quoted (on the Determination
Date) by an established quotation service for over-the-
counter securities, if the Common Stock is not reported on
The Nasdaq Stock Market. However, if the Common Stock is
not publicly traded at the time an Option is granted under
the Plan, "fair market value" shall be deemed to be the fair
value of the Common Stock as determined by the Board of
Directors after taking into consideration all factors which
it deems appropriate, including, without limitation, recent
sale and offer prices of the Common Stock in private
transactions negotiated at arm's length.
(d) The maximum number of shares with respect to which
Options or SARs may be granted to any employee, including
any cancellations or repricings which may occur, shall be
limited to 50,000 shares in any calendar year.
6.2 Duration of Options and SARs. Subject to Section
6.6(b) hereof, each Option and SAR and all rights thereunder
shall be expressed to expire on such date as the Board of
Directors may determine, but in no event later than ten years
from the day on which the Option or SAR is granted and shall be
subject to earlier termination as provided herein.
6.3 Exercise of Options and SARs.
(a) Subject to Section 6.6(b) hereof, each Option and
SAR granted under the Plan shall be exercisable at such time
or times and during such period as shall be set forth in the
instrument evidencing such Option or SAR. To the extent
that an Option or SAR is not exercised by a Participant when
it becomes initially exercisable, it shall not expire but
shall be carried forward and shall be exercisable, on a
cumulative basis, until the expiration of the exercise
period. No partial exercise may be for less than ten (10)
full shares of Common Stock (or its equivalent).
(b) The Board of Directors shall have the right to
accelerate the date of exercise of any installments of any
Option or SAR; provided that the Board of Directors shall
not accelerate the exercise date of any installment of any
Option granted to a Participant as an Incentive Stock Option
(and not previously converted into a Non-Qualified Option
pursuant to Section 6.7) if such acceleration would violate
the annual vesting limitation contained in Section 422(d)(1)
of the Code, which provides generally that the aggregate
fair market value (determined at the time the Option is
granted) of the stock with respect to which Incentive Stock
Options granted to any Participant are exercisable for the
first time by such Participant during any calendar year
(under all plans of the Company and any Related
Corporations) shall not exceed $100,000.
6.4 Nontransferability of Options and SARs.
No Option or SAR granted under the Plan shall be assignable
or transferable by the Participant, either voluntarily or by
operation of law, except by will or the laws of descent and
distribution or, with respect to Non-Qualified Options and SARs,
pursuant to a qualified domestic relations order as defined by
the Code or Title I of the Employee Retirement Income Security
Act ("ERISA") or the rules promulgated thereunder. During the
life of the Participant, the Option or SAR shall be exercisable
only by him or her. If any Participant should attempt to dispose
of or encumber his or her Options or SARs, other than in
accordance with the applicable terms of a Non-Qualified Stock
Option Agreement or SAR Agreement, his or her interest in such
Options or SARs shall terminate.
6.5 Effect of Termination of Employment or Death on Options
and SARs.
(a) If a Participant ceases to be employed by the
Company or a Related Corporation for any reason, including
retirement but other than death, any Option or SAR granted
to such Participant under the Plan shall immediately
terminate; provided, however, that in the case of a
Participant who terminates employment as the result of
permanent and total disability, normal retirement as defined
in the Company's pension plan or early retirement with
approval of the Board of Directors, any portion of such
Option or SAR which was otherwise exercisable on the date of
termination of the Participant's employment may be exercised
within a one-year period following the date on which the
Participant ceased to be so employed, or within the three-
month period following such date in the case of an Incentive
Stock Option, but in no event after the expiration of the
exercise period. Any such exercise may be made only to the
extent of the number of shares subject to the Option or SAR
which were purchasable or exercisable on the date of such
termination of employment. If the Participant dies during
the applicable one-year or three-month period, the Option or
SAR shall be exercisable by the Participant's personal
representatives, heirs or legatees to the same extent and
during the same period that the Participant could have
exercised the Option or SAR on the date of his or her death.
(b) If the Participant dies while an employee of the
Company or any Related Corporation, any Option or SAR
granted to such Participant under the Plan shall be
exercisable by the Participant's personal representatives,
heirs or legatees, for the purchase of or exercise relative
to that number of shares and to the same extent that the
Participant could have exercised the Option or SAR on the
date of his or her death. The Option or SAR or any
unexercised portion thereof shall terminate unless so
exercised prior to the earlier of the expiration of one year
from the date of such death or the expiration of the
exercise period.
6.6 Designation of Incentive Stock Options; Limitations.
Options granted under the Plan which are intended to be
Incentive Stock Options qualifying under Section 422 of the Code
shall be designated as Incentive Stock Options and shall be
subject to the following additional terms and conditions:
(a) Dollar Limitation. The aggregate fair market
value (determined at the time the option is granted) of the
Common Stock for which Incentive Stock Options are
exercisable for the first time during any calendar year by
any person under the Plan (and all other incentive stock
option plans of the Company and any Related Corporations)
shall not exceed $100,000. In the event that Section
422(d)(1) of the Code is amended to alter the limitation set
forth therein so that following such amendment such
limitation shall differ from the limitation set forth in
this Section 6.6(a), the limitation of this Section 6.6(a)
shall be automatically adjusted accordingly.
(b) 10% Shareholder. If any Participant to whom an
Incentive Stock Option is to granted pursuant to the
provisions of the Plan is on the date of grant the owner of
stock possessing more than 10% of the total combined voting
power of all classes of stock of the Company or any Related
Corporations, then the following special provisions shall be
applicable to the Incentive Stock Option granted to such
individual:
(i) The option price per share of the Common
Stock subject to such Incentive Stock Option shall not
be less than 110% of the fair market value of one share
of Common Stock on the date of grant; and
(ii) The option exercise period shall not exceed
five years from the date of grant.
In determining whether the 10% threshold has been reached,
the stock attribution rules of Section 424(d) of the Code
shall apply.
(c) Except as modified by the preceding provisions of
this Section 6.6, all of the provisions of the Plan shall be
applicable to Incentive Stock Options granted hereunder.
6.7 Conversion of Incentive Stock Options into Non-
Qualified Options; Termination of Incentive Stock Options.
The Board of Directors, at the written request of any
Participant, may in its discretion take such actions as may be
necessary to convert such Participant's Incentive Stock Options
(or any installments or portions of installments thereof) that
have not been exercised on the date of conversion into Non-
Qualified Options at any time prior to the expiration of such
Incentive Stock Options, regardless of whether the Participant is
an employee of the Company or a Related Corporation at the time
of such conversion. Such actions may include, but not be limited
to, extending the exercise period or reducing the exercise price
of the appropriate installments of such Options. At the time of
such conversion, the Board of Directors (with the consent of the
Participant) may impose such conditions on the exercise of the
resulting Non-Qualified Options as the Board of Directors in its
discretion may determine, provided that such conditions shall not
be inconsistent with the Plan. Nothing in the Plan shall be
deemed to give any Participant the right to have such
Participant's Incentive Stock Options converted into Non-
Qualified Options, and no such conversion shall occur until and
unless the Board of Directors takes appropriate action. The
Board of Directors, with the consent of the Participant, may also
terminate any portion of any Incentive Stock Option that has not
been exercised at the time of such termination.
6.8 Stock Appreciation Rights.
An SAR is the right to receive, without payment, an amount
equal to the excess, if any, of the fair market value of a share
of Common Stock on the date of exercise over the grant price,
which amount will be multiplied by the number of shares with
respect to which the SARs shall have been exercised. The grant
of SARs under the Plan shall be subject to the following terms
and conditions and shall contain such additional terms and
conditions, not inconsistent with the express terms of the Plan,
as the Board of Directors shall deem desirable:
(a) Grant. SARs may be granted in tandem with, in
addition to or completely independent of any Plan Benefit.
(b) Grant Price. The grant price of an SAR may be the
fair market value of a share of Common Stock on the date of
grant or such other price as the Board of Directors may
determine.
(c) Exercise. An SAR may be exercised by a
Participant in accordance with procedures established by the
Board of Directors or as otherwise provided in any agreement
evidencing any SARs. The Board of Directors may provide
that an SAR shall be automatically exercised on one or more
specified dates.
(d) Form of Payment. Payment upon exercise of an SAR
may be made in cash, in shares of Common Stock or any
combination thereof, as the Board of Directors shall
determine, provided, however, that any SAR exercised upon or
subsequent to the occurrence of a Change in Control (as
defined in Section 10(b) hereof) shall be paid in cash.
(e) Fair Market Value. Fair market value shall be
determined in accordance with Section 6.1(c) with the
"Determination Date" being determined by reference to the
date of grant or the date of exercise of an SAR, as
applicable.
6.9 Rights as a Shareholder.
The holder of an Option or SAR shall have no rights as a
shareholder with respect to any shares covered by the Option or
SAR until the date of issue of a stock certificate to him or her
for such shares. Except as otherwise expressly provided in the
Plan, no adjustment shall be made for dividends or other rights
for which the record date is prior to the date such stock
certificate is issued.
6.10 Special Provisions Applicable to Non-Qualified Options
and SARs Granted to Covered Employees.
In order for the full value of Non-Qualified Options or SARs
granted to Covered Employees to be deductible by the Company for
federal income tax purposes, the Company may intend for such Non-
Qualified Options or SARs to be treated as "qualified
performance-based compensation" as described in Treas. Reg.
Section 1.162-27(e) (or any successor regulation). In such case,
Non-Qualified Options or SARs granted to Covered Employees shall
be subject to the following additional requirements:
(a) such options and rights shall be granted only by
the Committee; and
(b) the exercise price of such Options and the grant
price of such SARs granted shall in no event be less than
the fair market value of the Common Stock as of the date of
grant of such Options or SARs.
SECTION 7. Special Provisions Applicable to Awards.
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7.1 Grants of Awards.
The Board of Directors may grant a Participant an Award
subject to such terms and conditions as the Board of Directors
deems appropriate, including, without limitation: restrictions on
the pledging, sale, assignment, transfer or other disposition of
such shares; the requirement that the Participant forfeit all or
a portion of such shares back to the Company upon voluntary or
other termination (for any reason other than death, permanent and
total disability, normal retirement as defined in the Company's
pension plan or early retirement with the approval of the Board);
and provisions disallowing a Participant receiving an Award from
making, in connection with such Award, the election permitted
under Section 83(b) of the Code.
7.2 Conditions. Approvals of Awards may be subject to the
following conditions:
(a) Each Participant receiving an Award shall enter
into an agreement (a "Stock Restriction Agreement") with the
Company, if required by the Board of Directors, in a form
specified by the Board of Directors agreeing to such terms
and conditions of the Award as the Board of Directors deems
appropriate.
(b) Shares issued and transferred to a Participant
pursuant to an Award may, if required by the Board of
Directors, be deposited with the Treasurer or other officer
of the Company designated by the Board of Directors to be
held until the lapse of the restrictions upon such shares,
and each Participant shall execute and deliver to the
Company stock powers enabling the Company to exercise its
rights hereunder.
(c) Certificates for shares issued pursuant to an
Award shall, if the Company shall deem it advisable, bear a
legend to the effect that they are issued subject to
specified restrictions.
(d) Certificates representing the shares issued
pursuant to an Award shall be registered in the name of the
Participant and shall be owned by such Participant. Such
Participant shall be the holder of record of such shares for
all purposes, including voting and receipt of dividends paid
with respect to such shares.
7.3 Nontransferability.
Shares issued pursuant to an Award may not be sold,
assigned, transferred, alienated, commuted, anticipated, or
otherwise disposed of (except by will or the laws of descent and
distribution or pursuant to a qualified domestic relations order
as defined by the Code or Title I of ERISA or the rules
promulgated thereunder), or pledged or hypothecated as collateral
for a loan or as security for the performance of any obligation,
or be otherwise encumbered, and are not subject to attachment,
garnishment, execution or other legal or equitable process, prior
to the lapse of restrictions on such shares, and any attempt at
action in contravention of this Section shall be null and void.
If any Participant should attempt to dispose of or encumber his
or her shares issued pursuant to an Award prior to the lapse of
the restrictions imposed on such shares, his or her interest in
such shares awarded to him or her shall terminate.
7.4 Effect of Termination of Employment or Death on Awards.
If, prior to the lapse of restrictions applicable to Awards,
the Participant ceases to be an employee of the Company or the
Related Corporations for any reason other than death, permanent
and total disability, normal retirement or early retirement with
the approval of the Board of Directors, Awards to such
Participant, as to which restrictions have not lapsed, shall be
forfeited to the Company, effective on the date of the
Participant's termination of employment. The Board of Directors
shall have the sole power to decide in each case whether leaves
of absence shall be deemed a termination of employment.
SECTION 8. Requirements of Law.
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8.1 Violations of Law. No shares shall be issued and
delivered upon exercise of any Option or the making of any Award
or the payment of any SAR unless and until, in the opinion of
counsel for the Company, any applicable registration requirements
of the Securities Act of 1933, any applicable listing
requirements of any national securities exchange on which stock
of the same class is then listed, and any other requirements of
law or of any regulatory bodies having jurisdiction over such
issuance and delivery, shall have been fully complied with. Each
Participant may, by accepting Plan Benefits, be required to
represent and agree in writing, for himself or herself and for
his or her transferees by will or the laws of descent and
distribution, that the stock acquired by him, her or them is
being acquired for investment. The requirement for any such
representation may be waived at any time by the Board of
Directors.
8.2 Compliance with Rule 16b-3. The intent of this Plan is
to qualify for the exemption provided by Rule 16b-3 under the
Exchange Act. To the extent any provision of the Plan does not
comply with the requirements of Rule 16b-3, it shall be deemed
inoperative to the extent permitted by law and deemed advisable
by the Board of Directors and shall not affect the validity of
the Plan. In the event Rule 16b-3 is revised or replaced, the
Board of Directors may exercise discretion to modify this Plan in
any respect necessary to satisfy the requirements of the revised
exemption or its replacement.
SECTION 9. Recapitalization.
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In the event that dividends are payable in Common Stock of
the Company or in the event there are splits, sub-divisions or
combinations of shares of Common Stock of the Company, the number
of shares available under the Plan shall be increased or
decreased proportionately, as the case may be, and the number of
shares deliverable upon the exercise thereafter of any Option
previously granted shall be increased or decreased
proportionately, as the case may be, without change in the
aggregate purchase price, the number of shares subject to Awards
as to which restrictions have not lapsed shall be increased or
decreased proportionately, as the case may be, and the number of
shares to which granted SARs relate shall be increased or
decreased proportionately, as the case may be, and the grant
price of such SARs shall be decreased or increased
proportionately, as the case may be.
SECTION 10. Change in Control and Reorganization.
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(a) For purposes of this Plan, a Change in Control
shall mean (i) the acquisition by a third person, including
a "person" as defined in Section 13(d)(3) of the Exchange
Act, of beneficial ownership (as defined in Rule 13d-3 under
the Exchange Act) directly or indirectly, of securities of
the Company representing twenty-five percent (25%) or more
of the total number of votes that may be cast for the
election of the directors of the Company; or (ii) as the
result of, or in connection with, any tender or exchange
offer, merger, consolidation or other business combination,
sale of assets or one or more contested elections, or any
combination of the foregoing transactions, the persons who
were directors of the Company shall cease to constitute a
majority of the Board of the Company. In the event of a
Change of Control of the Company, except as the Board of
Directors may expressly provide otherwise, all restrictions
and conditions applicable to Awards then outstanding shall
be deemed satisfied as of the date of the Change of Control
and all Options awarded at least six (6) months prior to the
Change of Control shall be exercisable as of such date. Any
SAR exercised upon or subsequent to the occurrence of a
Change in Control shall be paid in cash.
(b) In the case of any tender or exchange offer,
merger, consolidation or other business combination or sale
of all or substantially all of the assets of the Company,
which does not constitute a Change in Control, or in the
case of a reorganization or liquidation of the Company, the
Board of Directors of the Company, or the board of directors
of any corporation assuming the obligations of the Company
hereunder shall, as to outstanding Plan Benefits, (i) make
appropriate provision for the protection of any such
outstanding Plan Benefits by the substitution on an
equitable basis of appropriate stock of the Company or of
the merged, consolidated or otherwise reorganized
corporation which will be issuable in respect of the shares
of Common Stock of the Company; provided only that the
excess of the aggregate fair market value of the shares
subject to the Plan Benefits immediately after such
substitution over the purchase price thereof is not more
than the excess of the aggregate fair market value of the
shares subject to such Plan Benefits immediately before such
substitution over the purchase price thereof, (ii) upon
written notice to the Participants, provide that all
unexercised Plan Benefits must be exercised within a
specified number of days of the date of such notice or such
Plan Benefits will be terminated, or (iii) upon written
notice to the Participants, provide that the Company or the
merged, consolidated or otherwise reorganized corporation
shall have the right, upon the effective date of any such
merger, consolidation, sale of assets or reorganization, to
purchase all Plan Benefits held by each Participant and
unexercised as of that date at an amount equal to the
aggregate fair market value on such date of the shares
subject to the Plan Benefits held by such Participant over
the aggregate purchase or grant price therefor, such amount
to be paid in cash or, if stock of the merged, consolidated
or otherwise reorganized corporation is issuable in respect
of the shares of the Common Stock of the Company, then, in
the discretion of the Board of Directors, in stock of such
merged, consolidated or otherwise reorganized corporation
equal in fair market value to the aforesaid amount. In any
such case the Board of Directors shall, in good faith,
determine fair market value and may, in its discretion,
advance the lapse of any waiting or installment periods and
exercise dates.
SECTION 11. No Special Employment Rights.
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Nothing contained in the Plan or in any Plan Benefit
documentation shall confer upon any Participant receiving a grant
of any Plan Benefit any right with respect to the continuation of
his or her employment by the Company (or any Related Corporation)
or interfere in any way with the right of the Company (or any
Related Corporation), subject to the terms of any separate
employment agreement to the contrary, at any time to terminate
such employment or to increase or decrease the compensation of
the Participant from the rate in existence at the time of the
grant of any Plan Benefit. Whether an authorized leave of
absence or absence in military or government service shall
constitute termination of employment shall be determined by the
Board of Directors in accordance with applicable law.
SECTION 12. Amendment of the Plan.
- -----------------------------------
The Board of Directors may at any time and from time to time
suspend or terminate all or any portion of the Plan or modify or
amend the Plan in any respect. The termination or any
modification or amendment of the Plan shall not, without the
consent of an recipient of any Plan Benefit, affect his or her
rights under any Plan Benefit previously granted. With the
consent of the affected Participant, the Board of Directors may
amend outstanding agreements relating to any Plan Benefit in a
manner not inconsistent with the Plan. The Board of Directors
hereby reserves the right to amend or modify the terms and
provisions of the Plan and of any outstanding Options to the
extent necessary to qualify any or all Options under the Plan for
such favorable federal income tax treatment (including deferral
of taxation upon exercise) as may be afforded incentive stock
options under Section 422 of the Code, provided, however, that
the consent of a Participant is required if such amendment or
modification would cause unfavorable income tax treatment for
such Participant.
SECTION 13. Withholding.
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The Company's obligation to deliver shares of stock upon the
exercise of any Option or SAR or the granting of an Award and to
make payment upon exercise of any SAR shall be subject to the
satisfaction by the Participant of all applicable federal, state
and local income and employment tax withholding requirements.
SECTION 14. Effective Date and Duration of the Plan.
- -----------------------------------------------------
14.1 Effective Date. The Plan shall become effective when
adopted by the Board of Directors, but no Incentive Stock Option
granted under the Plan shall become exercisable unless and until
the Plan shall have been approved by the Company's shareholders.
If such shareholder approval is not obtained within 12 months
after the date of the Board's adoption of the Plan, then any
Incentive Stock Options previously granted under the Plan shall
terminate and no further Incentive Stock Options shall be
granted. Subject to such limitation, Options, SARs and Awards
may be granted under the Plan at any time after the effective
date and before the date fixed herein for termination of the
Plan.
14.2 Duration. Unless sooner terminated in accordance with
Section 10 hereof, the Plan shall terminate upon the earlier of
(i) the tenth anniversary of the date of its adoption by the
Board of Directors or (ii) the date on which all shares available
for issuance under the Plan shall have been issued pursuant to
any Awards or the exercise or cancellation of Options and SARs
granted hereunder. If the date of termination is determined
under (i) above, then Plan Benefits outstanding on such date
shall continue to have force and effect in accordance with the
provisions of the instruments evidencing such Plan Benefits.
SECTION 15. Governing Law.
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The Plan and all actions taken thereunder shall be governed
by the laws of the State of Connecticut.
