<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM S-8
REGISTRATION STATEMENT
Under
THE SECURITIES ACT OF 1933
CNB, INC.
(Exact name of Registrant as specified in its Charter)
Florida 59-2958616
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
201 North Marion Street
Lake City, Florida 32055
(Address of Principal Executive Offices)
CNB, INC.
1998 PERFORMANCE-BASED INCENTIVE PLAN
(Full title of the plan)
K.C. Trowell
Chairman and Chief Executive Officer
CNB, Inc.
201 North Marion Street
Lake City, Florida 32055
(904) 755-3240
(Name, address, telephone number of agent for service)
COPIES TO:
Halcyon E. Skinner, Esq.
McGuire, Woods, Battle & Boothe, LLP
50 North Laura Street, 34th Floor
Jacksonville, Florida 32202
<PAGE>
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
Title of Amount to Proposed Proposed Amount of
Securities To Be Registered (1) Maximum Maximum Registration
be Registered Offering Aggregate Fee (5)
Price Offering
Per Share Price
<S> <C> <C> <C> <C>
Common Stock 14,000 (2) $7.00 $98,000.00 $27.24
$0.01 par value
per share
Common Stock 526,000 (3) $6.29 (4) $3,308,540.00 $919.77
$0.01 par value
per share
</TABLE>
(1) The aggregate number of shares of Common Stock (as hereinafter defined)
authorized for issuance pursuant to grants or the exercise of options
and other rights under the 1998 Performance-Based Incentive Plan of
CNB, Inc. (the "Plan") is 540,000, as adjusted for the 2-for-1 stock
split of the Common Stock effective August 17, 1998. Shares registered
hereunder include 540,000 shares of Common Stock issuable upon the
grant and exercise of options under the Plan.
(2) Represents 14,000 shares of Common Stock which may be purchased at an
exercise price of $7.00 per share upon the exercise of certain options
granted under the Plan. 14,000 of such options have vested.
(3) Represents shares of Common Stock authorized for grants under the Plan
that have not been allocated to an individual Plan participant.
(4) Estimated solely for the purpose of determining the registration fee.
(5) Calculated in accordance with Rule 457(h) of the Securities Act of
1933, as amended.
All per share information contained herein has been adjusted to reflect
the 2-for-1 stock split effective August 17, 1998.
This Registration Statement also includes such indeterminate number of
additional shares of Common Stock as may be issuable as a result of stock
splits, stock dividends or similar transactions, as described in the Plan.
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<PAGE>
PART I
INFORMATION REQUIRED IN THE SECTION 10(a) PROSPECTUS
Items 1 and 2. Plan Information; Registrant Information
and Employee Plan Annual Information
The document(s) containing the information specified in the
instructions to Part I of Form S-8 will be sent or given to employees of the
Company as specified by Rule 428(b).
PART II
INFORMATION REQUIRED IN THE REGISTRATION STATEMENT
Item 3. Incorporation of Documents by Reference
CNB, Inc. (the "Company") hereby incorporates by reference
into this Registration Statement the following documents filed by the Company
with the Securities and Exchange Commission (the "Commission"):
(a) The Company's Annual Report on Form 10-KSB for the
fiscal year ended December 31, 1997;
(b) The Company's Quarterly Reports on Form 10-QSB for
the quarters ended March 31, 1998, June 30, 1998 and
September 30, 1998;
(c) The Company's Form 8-K filed August 10, 1998;
(d) The Company's Proxy Statement on Schedule 14A dated
April 14, 1998;
(e) All other reports filed pursuant to Section 13(a) or
15(d) of the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), since the end of the
fiscal year covered by the registrant document
referred to in (a) above; and
(f) The description of the Common Stock contained in the
Company's Registration Statement on Form 8-A filed
with the Commission under the Exchange Act.
All documents subsequently filed by the Company pursuant to
Sections 13(a), 13(c), 14 and 15(d) of the Exchange Act, prior to the filing of
a post-effective amendment which indicates that all securities offered have been
sold or which deregisters all securities then remaining unsold, shall be deemed
to be incorporated by reference herein and to be a part hereof from the date of
filing of such documents.
Any statement contained in a document 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 in any
other subsequently filed document which also is 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 required.
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Item 5. Interests of Named Experts and Counsel
Not applicable.
Item 6. Indemnification of Directors and Officers
The Articles of Incorporation, as amended, and the Second
Amended and Restated Bylaws of the Company require the indemnification of
directors and officers to the fullest extent permitted by law.
Subsection (1) of Section 607.0850 of the Florida Business
Corporation Act empowers a corporation to indemnify any person who was or is a
party to any proceeding (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 liability
incurred in connection with such proceeding (including any appeal thereof) 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.
Subsection (2) of Section 607.0850 empowers a corporation to
indemnify any person who was or is a party to any proceeding by or in the right
of the corporation to procure a judgment in its favor by reason of the fact that
such person acted in any of the capacities set forth in the preceding paragraph,
against expenses and amounts paid in settlement not exceeding, in the judgment
of the board of directors, the estimated expenses of litigating the proceeding
to conclusion, actually and reasonably incurred in connection with the defense
or settlement of such proceeding, including appeals, provided that the person
acted under the standards set forth in the preceding paragraph. However, no
indemnification should be made for any claim, issue or matter as to which such
person is adjudged to be liable unless, and only to the extent that, the court
in which such proceeding was brought, or any other court of competent
jurisdiction, 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
deems proper.
Subsection (3) provides that to the extent a director or
officer of a corporation has been successful on the merits or otherwise in
defense of any proceeding referred to in subsection (1) or (2) of Section
607.0850 or in the defense of any claim, issue or matter therein, he shall be
indemnified against expenses actually and reasonably incurred by him in
connection therewith.
Subsection (4) provides that any indemnification under
subsection (1) or (2) of Section 607.0850, unless determined by a court, shall
be made by the corporation only as authorized in the specific case upon a
determination that indemnification of the director or officer is proper in the
circumstances because he has met the applicable standard of conduct set forth in
subsection (1) or (2) of Section 607.0850. Such determination shall be made:
(a) by the board of directors by a majority vote of a quorum
consisting of directors who were not parties to such proceeding;
(b) if such a quorum is not obtainable, or, even if
obtainable, by majority vote of a committee duly designated by the board of
directors (in which directors who are parties may participate) consisting solely
of two or more directors not at the time parties to the proceeding;
(c) by independent legal counsel:
(1) selected by the board of directors as prescribed
in paragraph (a) or the committee selected as prescribed in paragraph (b); or
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(2) if no quorum of directors can be obtained under
paragraph (a) or no committee can be designated under paragraph (b), by a
majority vote of the full board of directors (in which directors who are parties
may participate); or
(d) by the shareholders by a majority vote of a quorum of
shareholders who were not parties to such proceedings or, if no quorum is
obtainable, by a majority vote of shareholders who were not parties to such
proceeding.
Under subsection (6), expenses incurred by a director or
officer in defending a civil or criminal proceeding may be paid by the
corporation in advance of the final disposition thereof upon receipt of an
undertaking by or on behalf of such director or officer to repay such amount if
it is ultimately determined that such director or officer is not entitled to
indemnification under Section 607.0850.
Subsection (7) states that indemnification and advancement of
expenses provided under Section 607.0850 are not exclusive and empowers the
corporation to make any other or further indemnification or advancement of
expenses under any bylaw, agreement, vote of shareholders or disinterested
directors or otherwise, for actions in an official capacity and in other
capacities while holding an office. However, a corporation cannot indemnify or
advance expenses if a judgment or other final adjudication establishes that the
actions or omissions to act of the director or officer were material to the
adjudicated cause of action and the director or officer (a) violated criminal
law, unless the director or officer had reasonable cause to believe his conduct
was lawful or had no reasonable cause to believe his conduct was unlawful, (b)
derived an improper personal benefit from a transaction, (c) was or is a
director in a circumstance where the liability under Section 607.0834 (relating
to unlawful distributions) applies, or (d) engaged in willful misconduct or
conscious disregard for the best interests of the corporation in a proceeding by
or in right of the corporation to procure a judgment in its favor or in a
proceeding by or in right of a shareholder.
Subsection (9) permits any director or officer who is or was a
party to a proceeding to apply for indemnification or advancement of expenses,
or both, to any court of competent jurisdiction and lists the determinations the
court should make before ordering indemnification or advancement of expenses.
Subsection (12) permits a corporation to purchase and maintain
insurance for a director or officer against any liability incurred in his
official capacity or arising out of his status as such regardless of the
corporation's power to indemnify him against such liability under Section
607.0850.
As allowed by Section 607.0850(12), the Company maintains
liability insurance covering directors and officers.
Item 7. Exemption from Registration Claimed
Not applicable.
Item 8. Exhibits
The exhibits listed on the Exhibit Index on page II-8 of the
Registration Statement have been previously filed, are filed herewith, will be
filed by amendment, or are incorporated herein by reference to other filings.
Item 9. Undertakings
(1) The Company hereby undertakes:
(a) To file, during any period in which offers or
sales of the securities registered hereunder are being made, a post-effective
amendment to this Registration Statement:
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(i) To include any prospectus required by
Section 10(a)(3) of the Securities Act of 1933, as amended (the "Securities
Act");
(ii) To reflect in the prospectus any facts
or events arising after the effective date of this 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 this
Registration Statement;
(iii) To include any material information
with respect to the plan of distribution not previously disclosed in this
Registration Statement or any material change to such information in this
Registration Statement;
provided, however, that the undertakings
included in (1)(a)(i) and (1)(a)(ii) of this Item 9 do not apply if the
information required to be included in a post-effective amendment by those
paragraphs is contained in periodic reports filed with or furnished to the
Commission by the Company pursuant to Section 13 or Section 15(d) of the
Exchange Act that are incorporated by reference in this 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.
(2) The Company 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 this 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.
(3) Insofar as indemnification for liabilities arising under
the Securities Act may be permitted to directors, officers and controlling
persons of the Company pursuant to the foregoing provisions, or otherwise, the
Company has been advised that in the opinion of the Commission such
indemnification is against public policy as expressed in the Securities Act and
is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the Company of expenses
incurred or paid by a director, officer or controlling person of the Company 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 Company 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 Securities Act and will be governed by the final
adjudication of such issue.
II-6
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act, the Company
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 Lake City, State of Florida, on the 4th day of
December, 1998.
CNB, INC.
By: /s/ K.C. Trowell
---------------------------------------
K.C. Trowell
Chairman and Chief Executive Officer
Pursuant to the requirements of the Securities Act, this Registration
Statement has been signed by the following persons in the capacities and on the
date indicated.
<TABLE>
<CAPTION>
Signature Title Date
- --------- ------ ----
<S> <C> <C>
/s/ Audrey S. Bullard Director December 4, 1998
- -----------------------------------------------
Audrey S. Bullard
Director December 4, 1998
- -----------------------------------------------
Raymon Land, Sr.
/s/ Marvin H. Pritchett Director December 4, 1998
- -----------------------------------------------
Marvin H. Pritchett
/s/ William J. Streicher Director December 4, 1998
- -----------------------------------------------
William J. Streicher
/s/ K.C. Trowell Director December 4, 1998
- -----------------------------------------------
K.C. Trowell
Director December 4, 1998
- -----------------------------------------------
Thomas R. Andrews
/s/ Martha S. Williams Senior Vice President and December 4, 1998
- ----------------------------------------------- Chief Accounting Officer
Martha S. Williams
/s/ G. Thomas Frankland Chief Financial Officer December 4, 1998
- -----------------------------------------------
G. Thomas Frankland
</TABLE>
II-7
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
Pagination by Exhibit
Exhibit Number Description Sequential Numbering System
- -------------- ----------- ---------------------------
<S> <C> <C>
4(a) Amended and Restated Articles of Incorporation of
CNB, Inc. (incorporated by reference to Exhibit 3.3
of the Company's Registration Statement No. 33-71082,
as amended on Form S-4 filed February 8, 1994).
4(b) Second Amended and Restated Bylaws of CNB, Inc.
(incorporated by reference to Exhibit 1(c) of the
Company's Form 8-A No. 33-29695-A filed April 26,
1995).
5 Opinion of McGuire, Woods, Battle & Boothe, LLP,
counsel for the Company, concerning the legality of
the securities being registered.
23(a) Consent of Arthur Andersen LLP, independent
certified public accountants.
23(b) Consent of McGuire, Woods, Battle & Boothe, LLP,
counsel for the Company (included in Exhibit 5).
23(c) Consent of Osburn, Henning & Company, independent
certified public accountants.
99 1998 Performance-Based Incentive Plan of CNB, Inc.
</TABLE>
II-8
<PAGE>
Exhibit 5
MCGUIRE WOODS
BATTLE & BOOTHE LLP
3300 Barnett Center
50 North Laura Street
Post Office Box 4099
Jacksonville, Florida 32201-4099
Telephone (904)354-1100 Fax (904)798-2698
December 4, 1998
CNB, Inc.
201 North Marion Street
Lake City, Florida 32055
Re: CNB, Inc.
Gentlemen:
We refer to the Registration Statement on Form S-8 ("the "Registration
Statement") under the Securities Act of 1933, as amended (the "Securities Act"),
filed by CNB, Inc., a Florida corporation (the "Company") with the Securities
and Exchange Commission (the "Commission") on December 2, 1998. The Registration
Statement covers an aggregate of 540,000 shares (the "Shares") of common stock,
par value $.01 per share ("Common Stock"), together with such indeterminate
number of additional shares of Common Stock as may be issuable as a result of
stock splits, stock dividends or similar transactions, authorized for issuance
pursuant to the exercise of rights under the 1998 Performance-Based Incentive
Plan of CNB, Inc. (the "Plan").
We have examined the originals, or photostatic or certified copies, of
such records of the Company, certificates of officers of the Company and of
public officials, and such other documents as we have deemed relevant and
necessary as the basis for the opinion set forth below. In such examination we
have assumed the genuineness of all signatures, the authenticity of all
documents submitted to us as originals, the conformity to original documents of
all documents submitted to us as photostatic or certified copies and the
authenticity of the originals of such copies.
Based upon the foregoing, we are of the opinion that the Shares, when
sold and delivered by the Company as contemplated by and in accordance with the
Plan, will be legally issued, fully paid and non-assessable.
We hereby consent to the use of our name in the Registration Statement
as counsel who will pass upon the legality of the Shares for the Company and as
having prepared this opinion, and to the use of this opinion as an exhibit to
the Registration Statement. We further consent to the use of our name as counsel
for the Company.
<PAGE>
Letter to CNB, Inc.
December 4, 1998
Page 2
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 or regulations of the Commission promulgated thereunder.
Very truly yours,
/s/ McGuire, Woods, Battle & Boothe LLP
---------------------------------------
McGuire, Woods, Battle & Boothe LLP
<PAGE>
Exhibit 23(a)
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
---------------------------------------------------
As independent certified public accountants, we hereby consent to the
incorporation by reference in this Form S-8 registration statement of our
report dated February 13, 1998, incorporated by reference in CNB, Inc.'s
Form 10-KSB for the year ended December 31, 1997, and to all references to
our Firm included in this registration statement.
/s/ Arthur Andersen LLP
Jacksonville, Florida
December 3, 1998
<PAGE>
Exhibit 23(c)
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
As independent certified public accountants, we hereby consent to the
incorporation by reference in this Form S-8 registration statement of our
report dated January 31, 1997, incorporated by reference in CNB, Inc.'s Form
10-KSB for the year ended December 31, 1997, and to all references to our
Firm included in this registration statement.
/s/ Osburn, Henning and Company
Orlando, Florida
December 3, 1998
<PAGE>
Exhibit 99
PERFORMANCE-BASED INCENTIVE PLAN
OF
CNB, INC.
I. GENERAL
1.1 Purpose of the Plan
The 1998 Performance-Based Incentive Plan (the "Plan") of CNB, Inc. (the
"Company") is intended to advance the best interests of the Company and its
subsidiary, CNB National Bank (the "Bank") by providing annual and long-term
incentives to officers, senior management and key employees who have substantial
responsibility for corporate management and growth. Specifically, the annual
incentive component of the Plan provides for performance-based cash incentive
awards to officers and senior management, and the long-term incentive component
of the Plan provides for performance-based incentive awards to key employees
through the grant of options to purchase shares of common stock, $.01 par value,
of the Company (the "Common Stock"), restricted stock, stock appreciation rights
and performance units, thereby increasing the personal stake of participants in
both the annual and long-term success and growth of the Company and encouraging
them to remain in the employ of the Company. In addition, the long-term
incentive component of the Plan provides for performance-based incentive awards
to non-employee members of the Board of Directors ("Directors") of the Company
through the grant of options to purchase Common Stock.
1.2 Administration of the Plan
The Plan shall be administered by the Compensation Committee or other designated
committee (the "Committee") of the Board of Directors of CNB, Inc. which shall
consist solely of two or more directors meeting the definition of outside
directors under Treas. Reg. Section 1.162-27(e)(3).
The Committee shall have full and final authority in its discretion to interpret
conclusively the provisions of the Plan as it may deem advisable, to adopt such
rules and regulations for carrying out the Plan as it may deem advisable; to
decide all questions of fact arising in the application of the Plan; and to make
all other determinations necessary or advisable for the administration of the
Plan.
The Committee shall meet once each fiscal year, and at such additional times as
it may determine or at the request of the chief executive officer of the
Company, to designate the eligible participants, if any, to be granted awards
under the Plan and the type and amount of such awards and the time when such
awards will be granted. No such designation by the Committee shall be effective
as a grant of an award under the Plan until approved by the Board of Directors
of the Company; provided, however, that the Board of Directors may empower the
Committee to grant such awards without approval by the Board of Directors. The
Committee exercises no discretion with respect to awards of stock options to
Directors under the long-term incentive component of the Plan, except as set
forth in Section 7.9 below. All awards granted under the Plan shall be on the
terms and subject to the conditions hereinafter provided.
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1.3 Eligible Participants
Officers and senior management of the Company and the Bank shall be eligible to
participate in the annual incentive component of the Plan. Key employees,
including officers and senior management of the Company and the Bank, shall be
eligible to participate in the long-term incentive component of the Plan. Any
recipient of an award under this Plan is hereinafter referred to as a
"Participant". Directors who are not employees of the Company are eligible to
participate in the Plan only to the extent and in the manner described in
Section 7.5 below.
1.4 Annual Incentive Component
The Committee establishes written, objective financial goals for the executive
officers named in the Summary Compensation Table of the Company's proxy
statement (the "Named Executive Officers") at the beginning of each year.
Financial goals for the Named Executive Officers may include Company
earnings-per-share ("EPS"), return on equity, overhead ratio, asset quality and
product sales. Goals include threshold, target and maximum performance levels
and corresponding award payouts. Goals are based on the Company's business plan
as approved by the Board of Directors of the Company. Before any payout can
occur, the Committee must certify that performance goals were satisfied.
Officers and senior management are also eligible to participate in the annual
incentive component of the Plan, but with accountability for various business
unit measures such as earnings, return on equity, overhead ratio, asset quality
and product sales and specific individual objectives, as well as Company
financial goals.
The maximum annual incentive is set at sixty-five percent of salary for each
position, in no event to exceed $200,000. Awards under the annual incentive
component are in the form of cash.
1.5 Awards under Long-Term Incentive Component
Awards under the long-term incentive component of the Plan may be in the form of
Incentive Stock Options (as described in Article II), Non-Qualified Stock
Options (as described in Article III), Restricted Stock (as described in Article
IV), Stock Appreciation Rights (as described in Article V), Performance Units
(as described in Article VI) or any combination thereof. Awards to Directors may
only be in the form of Non-Qualified Stock Options (as described in Article
III).
1.6 Limitation on Awards under Long-Term Incentive Component
The aggregate number of shares of Common Stock and restricted stock, including
but not limited to shares reserved for issuance pursuant to the exercise of
options, which may be granted or issued under the terms of the Plan may not
exceed 270,000 shares. Of this aggregate limit, the aggregate number of shares
of restricted stock which may be granted or issued under the terms of the Plan
may not exceed 70,000 shares. The maximum number of shares of Common Stock that
may be subject to grants under the long-term incentive component of the Plan to
a Participant may not exceed 30,000 shares of Common Stock over any period of
three (3) consecutive fiscal years of the Company. Whenever any outstanding
grant or portion thereof expires, is canceled or forfeited or is otherwise
terminated for any reason without having been exercised or vested, or without
payment having been made in respect of the entire grant, the Common Stock
allocable to the expired, forfeited, canceled or otherwise terminated portion of
the grant may again be the subject of further grants hereunder.
Notwithstanding the foregoing, the number of shares of Common Stock available
for grants at any time under the Plan shall be reduced to such lesser amount as
may be required pursuant to the methods of calculation necessary so that the
exemptions provided pursuant to Rule 16b-3 under the Exchange Act will continue
to be available for transactions involving all current and future grants. In
addition, during the period that any grants remain outstanding under the Plan,
the Committee may make good faith adjustments with respect to the number of
shares of Common Stock attributable to such grants for purposes of calculating
the maximum number of shares of Common Stock available for the granting of
future
A-2
<PAGE>
grants under the Plan, provided that following such adjustments the exemptions
provided pursuant to Rule 16b-3 under the Exchange Act will continue to be
available for transactions involving all current and future grants.
1.7 Other Compensation Programs
The adoption of the Plan contemplates the continuation of all existing incentive
compensation plans of the Company which were discontinued and in no way limits
or is limited by the operation, administration or amendment of any such plans.
The existence and terms of the Plan shall not limit the authority of the Board
of Directors in compensating employees of the Company in such other forms and
amounts as it may determine from time to time.
II. INCENTIVE STOCK OPTIONS
2.1 Terms and Conditions
Subject to the following provisions in this Article II, all Incentive Stock
Options shall be in such form and upon such terms and conditions as the
Committee, in its discretion, may from time to time determine and shall be
awarded under the long-term incentive component of the Plan.
2.2 Qualified Stock Options
Incentive Stock Options shall, at the time of grant, be in such form and upon
such terms and conditions as may be required in order that such options will
constitute Incentive Stock Options within the meaning of Section 422 of the
Internal Revenue Code of 1986, as amended (the "Code").
2.3 Option Price
The option price per share shall be at least the Fair Market Value (as defined
in section 8.13 of this Plan) of the Common Stock on the date the Incentive
Stock Option is granted.
2.4 Term of Option
The term of an Incentive Stock Option shall not exceed ten (10) years from the
date of grant.
2.5 Payment
Payment for shares for which an Incentive Stock Option is exercised shall be
made in such manner and at such time or times as shall be provided by the
Committee at the time of grant, in cash, in Common Stock, including restricted
stock, through the surrender of stock options or stock appreciation rights, or
any combination thereof.
2.6 Exercise of Option
Incentive Stock Options shall be exercisable in whole or in part after
completion of such periods of service as the Committee shall specify when
granting the options; provided, however, that in the absence of any Committee
specification to the contrary, and subject to Sections 2.7 and 2.8, (1) fifty
percent (50%) of the shares subject to the Incentive Stock Option shall become
exercisable with respect to such shares on the third anniversary of the date of
grant of the Incentive Stock Option and (2) on each of the next two
anniversaries of the date of the grant, an additional twenty five percent (25%)
of the shares subject to the Incentive Stock Option shall become exercisable
with respect to such shares. In no event, however, and notwithstanding Sections
2.7 and 2.8, shall an Incentive Stock Option be exercised after the expiration
of ten (10) years from the date of grant.
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2.7 Termination of Employment
A Participant's Incentive Stock Options shall expire three months after the
termination of the Participant's employment for any reason other than death,
disability (as determined by the Committee) or retirement (under the applicable
retirement program of the Company or as otherwise determined by the
Committee), and shall be limited to the shares of Common Stock which could
have been purchased by the Participant at the date of termination of
employment.
2.8 Termination of Employment by Reason of Death, Disability or Retirement
Upon the termination of a Participant's employment by reason of death,
disability (as determined by the Committee), or normal retirement (under the
applicable retirement program of the Company or as otherwise determined by the
Committee), Incentive Stock Options held at the termination date by such
Participant shall be exercisable, irrespective of whether the options were fully
exercisable in accordance with Section 2.6 on that date. The Participant's
Incentive Stock Options shall expire unless exercised within one year from the
date of such termination unless otherwise established by the Committee.
In the case of termination of a Participant's employment (1) with at least 20
years of employment or (2) by reason of early retirement within the meaning of
the applicable retirement plan, Incentive Stock Options which may be exercised
shall be limited to the shares which could have been purchased by the
Participant at the date of such early retirement, except that the Committee, in
its discretion, may waive the vesting requirements of Section 2.6. The
Participant's Incentive Stock Options shall expire unless exercised within one
year from the date of such termination.
Notwithstanding the foregoing, the tax treatment available pursuant to Section
422 of the Code upon the exercise of an Incentive Stock Option will not be
available to a Participant who exercises any Incentive Stock Option more than
three months after termination of employment due to retirement, or who, in the
event of waiver of the vesting requirements of Section 2.6, obtains the right to
exercise for the first time Incentive Stock Options having an aggregate fair
market value, determined at the date of issue, exceeding $100,000.
The Committee may, at any time on or before the termination of the exercise
period of the Participant's Incentive Stock Options, extend the exercise period
if the Participant's employment is terminated for a reason specified in this
section. If so extended, the term of the exercise period shall expire on the
date specified by the Committee, which date shall be no later than the date
which is 60 months following the date of the Participant's termination of
employment. If such extension could adversely affect the Participant's federal
income tax treatment of the Incentive Stock Option at the time of extension or
exercise, the extension shall only be made with the consent of the Participant.
In no event may the term of an Incentive Stock Option, including extensions,
exceed the term set forth in Section 2.4.
2.9 Special Rule for 10 Percent Shareholders
If, at the time an Incentive Stock Option is granted, a Participant owns stock
representing more than 10 percent of the total combined voting power of all
classes of stock of the Company, then the terms of the Incentive Stock Option
shall specify that the option price shall at the time of grant be at least 110
percent of the Fair Market Value of the stock subject to the option and such
option shall not be exercisable after the expiration of five (5) years from the
date such option is granted.
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2.10 Notice of Disposition
If a Participant makes a disposition, within the meaning of Section 424(c) of
the Code and regulations promulgated thereunder, of a share or shares of Common
Stock issued to such Participant pursuant to the exercise of an Incentive Stock
Option within the two year period commencing on the day after the date of the
grant or within the one year period commencing on the day after the date of
transfer of such share or shares to the Participant pursuant to such exercise,
the Participant shall, within ten (10) days of such disposition, notify the
Company thereof by delivery of written notice to the Company at its principal
executive office.
2.11 Acceleration Event
Notwithstanding anything herein to the contrary, if an Acceleration Event (as
defined in Section 8.14) has occurred, then all of the shares subject to the
Incentive Stock Option shall immediately become exercisable with respect to such
shares on the date such Acceleration Event occurred.
III. NON-QUALIFIED STOCK OPTIONS
3.1 Terms and Conditions of Options
Subject to the following provisions, all Non-Qualified Stock Options shall be in
such form and upon such terms and conditions as the Committee, in its
discretion, may from time to time determine. Non-Qualified Stock Options shall
be awarded under the long-term incentive component of the Plan.
3.2 Non-Qualified Stock Options
The terms of a Non-Qualified Stock Option shall, at the time of grant, provide
that it will not be treated as an incentive stock option within the meaning of
Section 422 of the Code.
3.3 Option Price
The option price per share shall be at least the Fair Market Value of the Common
Stock on the date the Non-Qualified Stock Option is granted.
3.4 Term of Option
The term of a Non-Qualified Stock Option shall not exceed ten (10) years from
the date of grant.
3.5 Payment
Payment for shares for which a Non-Qualified Stock Option is exercised shall be
made in such manner and at such time or times as shall be provided by the
Committee at the time of grant, in cash, in Common Stock, including restricted
stock, through the surrender of stock options or stock appreciation rights, or
any combination thereof, or other contingent grants which the Committee
determines is consistent with the Plan's purposes and applicable law.
3.6 Exercise of Option
Non-Qualified Stock Options shall be exercisable in whole or in part after
completion of such periods of service as the Committee shall specify when
granting the options; provided, however, that in the absence of any Committee
specification to the contrary, and subject to Sections 3.7 and 3.8, (1) fifty
percent (50%) of the shares subject to the Non-Qualified
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Stock Option shall become exercisable with respect to such shares on the third
anniversary of the date of grant of the Non-Qualified Stock Option and (2) on
each of the next two anniversaries of the date of the grant, an additional
twenty-five percent (25%) of the shares subject to the Non-Qualified Stock
Option shall become exercisable with respect to such shares. In no event,
however, and notwithstanding Sections 3.7 and 3.8, shall a Non-Qualified Stock
Option be exercised after the expiration of ten (10) years from the date of
grant.
3.7 Termination of Employment
A Participant's Non-Qualified Stock Options shall expire three months after the
termination of the Participant's employment for any reason other than death,
disability (as determined by the Committee) or retirement (under the applicable
retirement program of the Company or as otherwise determined by the Committee),
and shall be limited to the shares which could have been purchased by the
Participant at the date of termination of employment.
3.8 Termination of Employment by Reason of Death, Disability or Retirement
Upon the termination of a Participant's employment by reason of death,
disability (as determined by the Committee) or retirement (under the applicable
retirement program of the Company or as otherwise determined by the Committee),
Non-Qualified Stock Options held at the termination date by such Participant
shall be exercisable, irrespective of whether the options were fully exercisable
in accordance with Section 3.6 on that date. The Participant's Non-Qualified
Stock Options shall expire unless exercised within one year from the date of
such termination unless otherwise established by the Committee.
The Committee may, at any time on or before the termination of the exercise
period of the Participant's Non-Qualified Stock Options, extend the exercise
period if the Participant's employment is terminated for a reason specified in
this section. If so extended, the term of the exercise period shall expire on
the date specified by the Committee, which date shall be no later than the date
which is 60 months following the date of the Participant's termination of
employment. In no event may the term of a Non-Qualified Stock Option, including
extensions, exceed the term set forth in Section 3.4.
3.9 Acceleration Event
Notwithstanding anything herein to the contrary, if an Acceleration Event has
occurred, then all of the shares subject to the Non-Qualified Stock Option shall
immediately become earned and the Non-Qualified Stock Option shall become
exercisable with respect to such shares on the date such Acceleration Event
occurred.
IV. RESTRICTED STOCK AWARDS
4.1 Restrictions
Restricted Stock may be granted to a Participant by the Committee under a
Restricted Stock agreement. Such agreement shall specify the number of shares
granted and the conditions and terms of the restrictions. Such restrictions
shall lapse for all or part of the shares granted upon satisfaction of specified
Management Objectives (as defined below) within a specified Performance Period
(as defined below). Restricted Stock, with restrictions noted on the face of the
certificates, shall be issued in the name of the Participant and deposited with
the Company or its designee during the Performance Period. Restricted Stock
shall be awarded under the long-term incentive component of the Plan.
4.2 Management Objectives
Restricted Stock shall be deemed to have been earned by a Participant based upon
achievement of Management Objectives specified by the Committee at the time of
grant. Management Objectives may be the Participant's length of service and/or
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specified levels of earnings, return on assets, overhead ratio,
earnings-per-share, leverage ratio, loan loss ratio, or return on equity
achieved by the Company or any department or function of the Company in which
the Participant is employed, whether in relation to the Company's business plan
or as against an industry peer group. Management Objectives relating to any
particular grant of Restricted Stock need not be the same as those relating to
any other grant, whether made at the same or a different time.
4.3 Performance Period
The Performance Period with respect to Restricted Stock shall be the period of
time within which the Management Objectives relating to that grant are to be
achieved. The Committee shall determine the length of the Performance Period,
which shall commence on the date of grant of Restricted Stock and shall be at
least one year.
4.4 Earning of Restricted Stock
The Committee shall, promptly after the date on which the necessary financial or
other information for a particular Performance Period becomes available,
determine the extent to which the restrictions on Restricted Stock have lapsed
through Participant's achievement of the relevant Management Objectives other
than length of service. Upon determination by the Committee that relevant
Management Objectives other than length of service have been achieved, the
number of shares of Restricted Stock shall be fixed and accumulated dividends
shall be paid as set forth in Section 4.5. Restricted Stock shall not be
considered earned until such time as all restrictions lapse.
4.5 Rights as Shareholder
Except as otherwise provided in this Article IV, the Participant shall have all
rights as a shareholder, including dividend rights and voting rights with
respect to the Restricted Stock. During the Performance Period and subject to
the restrictions set forth in this Article IV, a Participant has the right to
receive the dividends paid on the Common Stock at the same time and in the same
amount as other shareholders of the Company; provided, however, that any
dividends payable on Restricted Stock subject to Management Objectives other
than length of service shall be accumulated and become payable when such
Management Objectives other than length of service have been met in accordance
with Section 4.4. If the Committee determines that the Management Objectives
other than the length of service have not been met within the Performance
Period, dividends on any such unearned Restricted Stock shall revert to the
Company. Restricted Stock subject to Management Objectives other than length of
service shall have no voting rights.
4.6 Termination of Employment
If any Participant's employment has terminated due to the Participant's death,
disability (as determined by the Committee) or retirement (under the applicable
retirement program of the Company or as otherwise determined by the Committee)
prior to the end of a Performance Period, and the Committee has determined that
applicable Management Objectives other than length of service have been
achieved, the extent to which Restricted Stock shall be deemed to have been
earned shall be determined by multiplying the amount of the Restricted Stock
which would have been earned had the Participant's employment not been
terminated by a fraction, the numerator of which is the number of full calendar
months such Participant was employed during the Performance Period and the
denominator of which is the total number of full calendar months in the
Performance Period. All length of service Management Objectives shall
immediately be satisfied upon the Participant's death or disability, or upon
retirement within the meaning of the applicable retirement plan.
4.7 Acceleration Event
Notwithstanding anything herein to the contrary, if an Acceleration Event has
occurred, then all restrictions on the Restricted Stock shall lapse on the date
such Acceleration Event occurred regardless of whether the Management Objectives
with respect to such Restricted Stock have yet been satisfied.
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V. STOCK APPRECIATION RIGHTS
5.1 In General
The Committee may, in its discretion, either alone or in connection with the
grant of an Incentive Stock Option or a Non-Qualified Stock Option (collectively
referred to in this Article V as an "Option"), grant to Participants Stock
Appreciation Rights, the terms and conditions of which shall be set forth in a
Stock Appreciation Rights agreement. If granted in connection with an Option,
Stock Appreciation Rights shall cover the same number of shares of Common Stock
covered by the Option (or such lesser number of shares of Common Stock as the
Committee may determine) and shall, except as provided in this Article V, be
subject to the same terms and conditions as the related Option. Awards of Stock
Appreciation Rights shall be made under the long-term incentive component of the
Plan.
5.2 Time of Award
A Stock Appreciation Right may be granted: (a) at any time if unrelated to an
Option, or (b) if related to an Option, either at the time of grant, or at any
time thereafter during the term of the Option.
5.3 Stock Appreciation Right Related to an Option
(a) Exercise. Subject to Section 5.7, a Stock Appreciation Right
granted in connection with an Option shall be exercisable at such time or times
and only to the extent that the related Option is exercisable, and will not be
transferable except to the extent the related Option may be transferable. A
Stock Appreciation Right granted in connection with an Incentive Stock Option
shall be exercisable only if the Fair Market Value of a share of the Common
Stock on the date of exercise exceeds the purchase price specified in the
related Incentive Stock Option Agreement.
(b) Amount Payable. Upon the exercise of a Stock Appreciation Right
related to an Option, the Participant shall be entitled to receive an amount
determined by multiplying: (i) the excess of the Fair Market Value of a share of
Common Stock on the day immediately preceding the date of exercise of such Stock
Appreciation Right over the per share purchase price under the related Option,
by (ii) the number of shares of Common Stock as to which such Stock Appreciation
Right is being exercised. Notwithstanding the foregoing, the Committee may limit
in any manner the amount payable with respect to any Stock Appreciation Right by
including such a limit in the Stock Appreciation Rights agreement evidencing the
Stock Appreciation Right at the time it is granted.
(c) Treatment of Related Options and Stock Appreciation Rights Upon
Exercise. Upon the exercise of a Stock Appreciation Right granted in connection
with an Option, the Option shall be canceled to the extent of the number of
shares of Common Stock as to which the Stock Appreciation Right is exercised,
and upon the exercise of an Option granted in connection with a Stock
Appreciation Right, the Stock Appreciation Right shall be canceled to the extent
of the number of shares of Common Stock as to which the Option is exercised or
surrendered.
5.4 Stock Appreciation Rights Unrelated to an Option
(a) Terms and Conditions. The Committee may grant to Participants
Stock Appreciation Rights unrelated to Options. Stock Appreciation Rights
unrelated to Options shall contain such terms and conditions as to
exercisability (subject to Section 5.7), vesting and duration as the Committee
shall determine, but in no event shall they have a term of greater than ten (10)
years. Upon the exercise of a Stock Appreciation Right unrelated to an Option,
the Participant shall be entitled to receive an amount determined by
multiplying: (i) the excess of the Fair Market Value of a share of Common Stock
on the day immediately preceding the date of exercise of such Stock Appreciation
Right over the Fair Market Value of a share of Common Stock on the date the
Stock Appreciation Right was granted, by (ii) the number of shares of Common
Stock as to which the Stock Appreciation Right is being exercised.
Notwithstanding the foregoing,
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the Committee may limit in any manner the amount payable with respect to any
Stock Appreciation Right by including such a limit in the Stock Appreciation
Rights agreement evidencing the Stock Appreciation Right at the time it is
granted.
(b) Termination of Employment. Stock Appreciation Rights unrelated to
Options shall expire three months after the termination of the Participant's
employment for any reason other than death, disability (as determined by the
Committee) or retirement (under the applicable retirement program of the Company
or as otherwise determined by the Committee), and shall be limited to the Stock
Appreciation Rights which could have been exercised by the Participant at the
date of termination of employment.
(c) Termination of Employment by Reason of Death, Disability or
Retirement. Upon the termination of a Participant's employment by reason of
death, disability (as determined by the Committee), or normal retirement (under
the applicable retirement program of the Company or as otherwise determined by
the Committee), Stock Appreciation Rights held at the termination date by such
Participant shall be fully exercisable, irrespective of whether some or all of
the Stock Appreciation Rights were fully exercisable in accordance with the
Stock Appreciation Rights agreement on that date. The Participant's Stock
Appreciation Rights shall expire unless exercised within one (1) year from the
date of such termination.
In the case of termination of a Participant's employment by reason of early
retirement within the meaning of the applicable retirement plan, Stock
Appreciation Rights which may be exercised shall be limited to the Stock
Appreciation Rights which could have been exercised by the Participant at the
date of such early retirement, except that the Committee, in its discretion, may
waive the vesting requirements of such Stock Appreciation Rights. The
Participant's Stock Appreciation Rights shall expire unless exercised within one
(1) year from the date of such termination.
The Committee may, at any time on or before the termination of the exercise
period of the Participant's Stock Appreciation Rights, extend the exercise
period if the Participant's employment is terminated for a reason specified in
this section. If so extended, the term of the exercise period shall expire on
the date specified by the Committee, which date shall be no later than the date
which is sixty (60) months following the date of the Participant's termination
of employment. In no event may the term of a Stock Appreciation Right, including
extensions, exceed the term of the Stock Appreciation Right established by the
Committee at the time of the grant.
5.5 Method of Exercise
Stock Appreciation Rights shall be exercised by a Participant only by a written
notice delivered to the Committee (in care of the Secretary of the Company) at
the Company's principal executive office, specifying the number of shares of
Common Stock with respect to which the Stock Appreciation Right is being
exercised. If requested by the Committee, the Participant shall deliver the
Stock Appreciation Rights Agreement evidencing any related Option to the
Secretary of the Company who shall endorse thereon a notation of such exercise
and return such Stock Appreciation Rights agreement to the Participant.
5.6 Form of Payment
Payment of the amount determined under Sections 5.3(b) or 5.4(a) may be made in
the discretion of the Committee solely in whole shares of Common Stock in a
number determined at their Fair Market Value on the day immediately preceding
the date of exercise of the Stock Appreciation Right, or solely in cash, or in a
combination of cash and Common Stock. If the Committee determines to make full
payment in Common Stock and the amount payable results in a fractional share of
Common Stock, payment for the fractional share of Common Stock will be made in
cash. Notwithstanding the foregoing, no payment in the form of cash may be made
upon the exercise of a Stock Appreciation Right to an officer of the Company who
is subject to liability under Section 16(b) of the Exchange Act, unless the
exercise of such Stock Appreciation Right is made either: (a) during the period
beginning on the third business day and ending on the twelfth business day
following the date of release for publication of the Company's quarterly or
annual statements of earnings; or
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(b) pursuant to an irrevocable election to receive cash made at least six months
prior to the exercise of such Stock Appreciation Right.
5.7 Restrictions
No Stock Appreciation Right may be exercised before the date six (6) months
after the date it is granted, except that this restriction shall not apply in
the event of death or disability (as determined by the Committee) of the
Participant occurring before the expiration of the six month period.
5.8 Acceleration Event
Notwithstanding anything contained in this Plan to the contrary, in the event of
an Acceleration Event, subject to Section 5.7, all Stock Appreciation Rights
shall become immediately and fully exercisable.
VI. PERFORMANCE UNITS
6.1 Terms and Conditions of Award
One Performance Unit shall have a cash value equal to the Fair Market Value of
one share of Common Stock. The number of Performance Units to which the
Participant is entitled is based upon achievement of certain Management
Objectives (as defined in Section 6.2) over a Performance Period (as defined in
Section 6.3) as determined by the Committee at the time of grant and as set
forth in a Performance Unit agreement. The Performance Unit agreement shall
specify the number of Performance Units granted and the Management Objectives
and applicable Performance Period. Awards of Performance Units shall be made
under the long-term incentive component of the Plan.
6.2 Management Objectives
Performance Units shall be deemed to have been earned by a Participant based
upon fulfillment of Management Objectives specified by the Committee at the time
of grant. The Management Objectives may be the Participant's length of service
and/or specified levels of earnings, return on assets, leverage ratio, loan loss
reserve ratio, earnings-per-share, overhead ratio or return on equity achieved
by the Company or any department or function of the Company in which the
Participant is employed. Management Objectives relating to any particular grant
of a Performance Unit need not be the same as those relating to any other grant,
whether made at the same or a different time.
6.3 Performance Period
The Performance Period with respect to any Performance Unit shall be the period
of time within which the Management Objectives relating to that grant are to be
achieved (which shall be no less than twelve (12) months). The Committee shall
determine the length of the Performance Period, which shall commence on the date
of grant of the Performance Units.
6.4 Earning of Award
The Committee shall, promptly after the date on which the necessary financial or
other information for a particular Performance Period becomes available,
determine the extent to which the Management Objectives have been achieved prior
to the expiration of the Performance Period and, if such Management Objectives
have been achieved, the restrictions on such Performance Units may, in the
discretion of the Committee, be deemed to have been satisfied prior to the
expiration of the Performance Period. Upon the expiration of the Performance
Period, if the Committee determines that the Management Objectives have not been
met, the Performance Units shall revert to the Company.
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6.5 Rights as Shareholder
During the Performance Period and subject to the restrictions set forth in
Article VI, a Participant may have the right, as determined by the Committee at
the time of the grant, to receive an amount equal to the dividends paid on the
Common Stock at the same time and in the same amount as other shareholders of
the Company (by assuming that, for purposes of such dividend, each Performance
Unit is equivalent to one share of Common Stock).
6.6 Termination of Employment
If any Participant's employment has terminated due to the Participant's death,
disability or retirement within the meaning of the applicable retirement plan
prior to the end of the Performance Period, and the Committee has determined
that applicable Management Objectives have been met, the extent to which
Performance Units shall be deemed to have been achieved shall be determined by
multiplying the amount of the Performance Units which would have been earned had
the Participant's employment not been terminated by a fraction, the numerator of
which is the number of full calendar months such Participant was employed during
the Performance Period and the denominator of which is the total number of full
calendar months in the Performance Period.
6.7 Form of Payment
In accordance with Section 6.4, upon the expiration of the Performance Period
and the determination by the Committee that the Management Objectives
established by the Committee at the time of grant of the Performance Units have
been met, the Company shall distribute cash to the Participant in an amount
equal to the number of Performance Units multiplied by the Fair Market Value of
the Common Stock as of the date of distribution.
6.8 Acceleration Event
Notwithstanding anything herein to the contrary, if an Acceleration Event has
occurred, then all restrictions on the Performance Units shall be deemed to have
been satisfied as of the date of the Acceleration Event, and such Performance
Units shall become fully payable on the date such Acceleration Event occurred.
VII. STOCK OPTION AWARDS TO NON-EMPLOYEE DIRECTORS
7.1 Terms and Conditions of Options
Subject to the following provisions, all stock option awards granted to
Directors of the Company ("Director Awards") under this Article VII shall be in
such form and upon such terms and conditions described herein.
7.2 Non-Qualified Stock Options
The terms of a Director Award shall, at the time of grant, provide that it will
not be treated as an incentive stock option within the meaning of Section 422 of
the Code.
7.3 Option Price
The option price per share shall be at least the Fair Market Value of the Common
Stock on the date the Director Award is granted.
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7.4 Term of Option
The term of a Director Award shall not exceed ten (10) years from the date of
grant.
7.5 Awards to Directors
Each active non-employee Director of the Company shall receive an initial option
to purchase 1,000 shares of Company stock upon the date of the first Board of
Directors meeting after his or her election as a new Director, or at the 1998
Annual Meeting of Shareholders for current Directors. At each subsequent Annual
Meeting of Shareholders, then active Directors will receive an option to
purchase of 1,000 shares of Company stock.
7.6 Payment
Payment for shares upon exercise of a Director Award shall be in such manner and
at such time or times as shall be determined by the Committee at the time of
grant, in cash, in Common Stock, including Restricted Stock, through the
surrender of Stock Options or Stock Appreciation Rights, or any combination
thereof, or by or through other contingent grants which the Committee determines
are consistent with the Plan's purposes and applicable law.
7.7 Exercise of Option
Director Awards shall be exercisable in whole or in part to the extent, and
subject to this section and Section 7.8, as follows: (i) fifty percent (50%) of
the shares subject to the Director Awards shall become exercisable on the third
anniversary of the date of grant of the Director Awards and (ii) an additional
twenty-five percent (25%) of the shares subject to the Director Awards shall
become exercisable on each of the next two anniversaries of the date of grant.
In no event, however, and notwithstanding anything in this section or Section
7.8 to the contrary, shall a Director Award be exercised after the expiration of
ten (10) years from the date of grant.
7.8 Termination of Service as Director
A Participant's Director Award shall expire three months after the termination
of the Director's service as a member of the Board of Directors of the Company
(or as may sooner occur under Section 7.4) for any reason other than death,
disability or retirement (defined as the termination of services as a Director
after at least five (5) years of service as a Director), and shall be limited to
the shares which could have been purchased by the Participant at the date of
termination.
7.9 Termination of Service as Director by Reason of Death, Disability or
Retirement
Upon the termination of a Director's services as a Director by reason of death,
disability, or retirement (as defined in Section 7.8 above), Director Awards
held at the termination date by such Director shall be exercisable by the
Director or his or her estate (in the case of death), irrespective of whether
the options were fully exercisable in accordance with Section 7.7 on that date.
Except as otherwise set forth in this section, the Director's Director Award
shall expire unless exercised within one year from the date of such termination.
The Committee may, at any time on or before the termination of the exercise
period of the Director Award, extend the exercise period if the Director's
services as a Director are terminated for a reason specified in this section. If
so extended, the term of the exercise period shall expire on the date specified
by the Committee, which date shall be no later than the date which is 60 months
following the date of the Director's termination of services. In no event may
the term of a Director Award, including extensions, exceed the term set forth in
Section 7.4.
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7.10 Acceleration Event
Notwithstanding anything herein to the contrary, if an Acceleration Event has
occurred, then all of the shares subject to the Director Award shall immediately
become earned and the Director Award shall become exercisable with respect to
such shares on the date of such Acceleration Event.
VIII. ADDITIONAL PROVISIONS
8.1 General Restrictions
Each grant under the long-term incentive component of the Plan shall be subject
to the requirement that if the Committee shall determine, at any time, that: (a)
the listing, registration or qualification of the shares of Common Stock subject
or related thereto upon any securities exchange or under any state or federal
law; or (b) the consent or approval of any government regulatory body, or (c) an
agreement by the Participant with respect to the disposition of shares of Common
Stock, is necessary or desirable as a condition of, or in connection with, the
granting or the issuance or purchase of shares of Common Stock thereunder, such
grant may not be consummated in whole or in part unless such listing,
registration, qualification, consent, approval or agreement shall have been
effected or obtained free of any conditions not acceptable to the Committee.
8.2 Adjustments for Changes in Capitalization
In the event of a reorganization, recapitalization, stock split, stock dividend,
combination of shares, rights offer, liquidation, dissolution, merger,
consolidation, spin-off or sale of assets, or any other change in or affecting
the corporate structure or capitalization of the Company, the Board of Directors
shall make such adjustments as the Committee may recommend, and as the Board of
Directors in its discretion may deem appropriate, in the number and kind of
shares authorized under the long-term incentive component of the Plan, in the
number, option price or kind of shares covered by the grants and in any
outstanding grants under the Plan in order to prevent substantial dilution or
enlargement thereof.
8.3 Amendments
The Board of Directors may discontinue the Plan at any time, and may amend it
from time to time, but no amendment, without approval by shareholders, may (a)
increase the total number of shares which may be issued under the long-term
incentive component of the Plan, except as provided in Section 8.2 hereof, (b)
change the class of employees of the Company to whom awards may be made, or (c)
cause awards under the Plan to no longer comply with Rule 16b-3 of the Exchange
Act or any other federal or state statutory or regulatory requirements.
8.4 Modification or Substitution
Subject to the terms of the Plan, the Committee may modify outstanding awards or
accept the surrender of outstanding awards and make new awards in substitution
for them under the long-term incentive component of the Plan, provided that the
modification does not adversely alter or impair any rights or obligations of the
Participant without the Participant's consent and does not constitute
"repricing" as such term is defined in 17 CFR 229.402(i)(1).
8.5 Cancellation of Awards
Any grant under the long-term incentive component of the Plan may be canceled at
any time with the consent of the Participant, and a new grant may be provided to
such Participant in lieu thereof, provided the cancellation and reissuance does
not constitute "repricing" as such term is defined in 17 CFR 229.402(i)(1).
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8.6 Shares Subject to the Plan
Shares distributed pursuant to the long-term incentive component of the Plan
shall be made available from authorized but unissued shares or from shares
purchased or otherwise acquired by the Company for use in the Plan, as shall be
determined from time to time by the Committee.
8.7 Rights of a Shareholder
Participants under the Plan, unless otherwise provided by the Plan, shall have
no rights as shareholders by reason thereof unless and until certificates for
shares of Common Stock are issued to them.
8.8 Withholding
(a) The Company shall have the right to deduct from any distribution
of cash or Common Stock to any Participant an amount equal to the federal, state
and local income taxes and other amounts as may be withheld (the "Withholding
Taxes") with respect to any grant under the Plan. If a Participant is to
experience a taxable event in connection with the receipt of cash or shares of
Common Stock pursuant to an Option exercise or payment of a grant (a "Taxable
Event"), the Participant shall pay the Withholding Taxes to the Company prior to
the issuance of such shares of Common Stock. In satisfaction of the obligation
to pay Withholding Taxes to the Company, the Participant may make a written
election (the "Tax Election"), which may be accepted or rejected in the
discretion of the Committee, to have withheld a portion of the cash or shares of
Common Stock then issuable to the Participant having an aggregate Fair Market
Value on the day immediately preceding the date of such issuance equal to the
Withholding Taxes, provided that in respect of a Participant who may be subject
to liability under section 16(b) of the Exchange Act either: (i) in the case of
a Taxable Event involving an Option, grant of Restricted Stock, or Stock
Appreciation Rights (A) the Tax Election is made at least six (6) months prior
to the date of the Taxable Event and (B) the Tax Election is irrevocable with
respect to all Taxable Events of a similar nature occurring prior to the
expiration of six (6) months following a revocation of the Tax Election; or (ii)
in the case of the exercise of an Option (A) the Participant makes the Tax
Election at least six (6) months after the date the Option was granted, (B) the
Option is exercised during the ten (10) day period beginning on the third
business day and ending on the twelfth business day following the release for
publication of the Company's quarterly or annual statement of sales and earnings
(the "Window Period") and (C) the Tax Election is made during the Window Period
in which the related Option is exercised or prior to such Window Period and
subsequent to the immediately preceding Window Period; or (iii) in the case of a
Taxable Event relating to the payment of any award (A) the Participant makes the
Tax Election at least six (6) months after the date the Restricted Stock or
Stock Appreciation Rights were granted and (B) the Tax Election is made (x) in
the case of a Taxable Event occurring within a Window Period, during the Window
Period in which the Taxable Event occurs, or (y) in the case of a Taxable Event
not occurring within a Window Period, during the Window Period immediately
preceding the Taxable Event relating to the Restricted Stock or Stock
Appreciation Rights. Notwithstanding the foregoing, the Committee may, by the
adoption of rules or otherwise, (1) modify the provisions of this section as may
be necessary to ensure that the Tax Elections will be exempt transactions under
section 16(b) of the Exchange Act, and (2) permit Tax Elections to be made at
such other times and subject to such other conditions as the Committee
determines will constitute exempt transactions under section 16(b) of the
Exchange Act.
(b) Except in the case of Non-Qualified Stock Option grants to
non-management Directors, the Committee shall have the authority, at the time of
grant of a Non-Qualified Stock Option, Restricted Stock, Stock Appreciation
Right or Performance Unit under the Plan or at any time thereafter, including
upon any event constituting an Acceleration Event (as hereinafter defined), to
grant tax bonuses to designated Participants to be paid upon their exercise of
Non-Qualified Stock Options or payment in respect of Restricted Stock, Stock
Appreciation Rights or Performance Units granted hereunder. The amount of any
such payments shall be determined by the Committee but shall not be greater than
the lesser of: (a) the difference between the option price (as established
pursuant to Section 3.3, subject to adjustment,
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if any, pursuant to Section 8.2) and the Fair Market Value, at the time of
exercise of the option, of the shares of Common Stock acquired (the "Spread");
or (b) the Spread times a fraction the numerator of which is the maximum federal
individual income tax rate payable by a Participant optionee on such Spread (at
the date of exercise) and the denominator of which is 50 percent (except that,
with respect to Restricted Stock, Stock Appreciation Rights or Performance
Units, the "Spread," for purposes of applying this section, shall be the
difference between the amount paid for the Restricted Stock, Stock Appreciation
Right or Performance Unit, as applicable, and the Fair Market Value of the
Common Stock (or cash) distributed). The Committee shall have full authority in
its absolute discretion to determine the amount of any such tax bonus (subject
to the limits of this section) and the terms and conditions affecting the
vesting and payment thereof. Such supplemental payment shall be made in cash.
8.9 Nonassignability
Except as expressly provided in the Plan, no grant shall be transferable except:
(i) by gift to the grantee's spouse or natural, adopted or step-children or
grandchildren ("Immediate Family Members") or to a trust for the benefit of one
or more of the grantee's Immediate Family Members or to a family charitable
trust established by the grantee or the grantee's family, but only with the
approval of the Committee; (ii) by will; (iii) by the laws of descent and
distribution; or (iv) by a qualified domestic relations order ("QDRO") as
defined by the Code or Title I of the Employee Retirement Income Security Act of
1974, as amended, or the rules thereunder. Any Stock Option award transferred by
the grantee under Section (i) above may not be subsequently transferred by the
transferee. During the lifetime of the Participant, except as expressly provided
in the Plan, grants under the Plan shall be exercisable only by such Participant
or by the guardian or legal representative of such Participant or pursuant to a
QDRO.
8.10 Nonuniform Determinations
Except as otherwise set forth in the Plan, determinations by the Committee under
the Plan (including, without limitation, determinations of the persons to
receive awards under either the annual or long-term incentive components of the
Plan, the form, amount and timing of such awards, and the terms and provisions
of such awards and the agreements evidencing the same) need not be uniform and
may be made by it selectively among persons who receive, or are eligible to
receive, awards under the Plan, whether or not such persons are similarly
situated.
8.11 No Guarantee of Employment
Awards under the Plan shall not constitute an assurance of continued employment
for any period.
8.12 Effective Date; Duration
The Plan shall become effective as of March 18, 1998, subject to approval by
shareholders at the Company's Annual Meeting of Shareholders. No awards may be
made under the Plan after March 17, 2003, but awards theretofore made may extend
beyond such date.
8.13 Fair Market Value
The phrase Fair Market Value on any date means the average of the high and low
sales prices of the shares of Common Stock on such date on the principal
national securities exchange on which such shares of Common Stock are listed or
admitted to trading. If the shares of Common Stock on such date are not listed
or admitted to trading, the Fair Market Value shall be the value established by
the Board in good faith and, in the case of an Incentive Stock Option, in
accordance with Section 422 of the Code.
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8.14 Acceleration Event
Notwithstanding anything herein to the contrary, if a Change in Control of the
Company occurs, or if the Committee determines in its sole discretion that an
Acceleration Event has occurred, then all Incentive Stock Options, Non-Qualified
Stock Options, and Stock Appreciation Rights shall become fully exercisable and
all restrictions on the Restricted Stock Award and Performance Units shall
expire as of the date such Change in Control occurred or the Committee
determines that an Acceleration Event has occurred.
For purposes of the Plan, an Acceleration Event includes, but is not limited to,
any Change in Control of the Company, which shall be deemed to have occurred if
the conditions set forth in any one of the following paragraphs shall have been
satisfied:
(i) any person, as defined in Section 3(a)(9) of the Exchange Act, as
such term is modified in Sections 13(d) and 14(d) of the Exchange Act
(other than (A) any employee plan established by the Company, which for
these purposes shall be deemed to be the Company and any corporation,
association, joint venture, proprietorship or partnership which is
connected with the Company either through stock ownership or through common
control, within the meaning of Sections 414(b) and (c) and 1563 of the
Internal Revenue Code of 1986 as amended, (B) the Company or any of its
affiliates (as defined in Rule 12b-2 promulgated under the Exchange Act),
(C) an underwriter temporarily holding securities pursuant to an offering
of such securities, or (D) a corporation owned, directly or indirectly, by
stockholders of the Company in substantially the same proportions as their
ownership of the Company) (a "Person"), is or becomes the beneficial owner
(as defined in Rule 13d-3 promulgated under the Exchange Act), directly or
indirectly, of securities of the Company (not including in the securities
beneficially owned by such Person any securities acquired directly from the
Company) representing 25% or more of the combined voting power of the
Company's then outstanding voting securities;
(ii) during any period of up to two consecutive years (not including
any period prior to the effective date of this Plan) individuals who, at
the beginning of such period, constitute the Board cease for any reason to
constitute at least a majority thereof, provided that any person who
becomes a director subsequent to the beginning of such period and whose
nomination for election is approved by at least two-thirds of the directors
then still in office who either were directors at the beginning of such
period or whose election or nomination for election was previously so
approved (other than a director (A) whose initial assumption of office is
in connection with an actual or threatened election contest relating to the
election of the directors of the Company, as such terms are used in Rule
14a-11 of Regulation 14A under the Exchange Act or (B) who was designated
by a Person who has entered into an agreement with the Company to effect a
transaction described in clause (i), (iii) or (iv) hereof) shall be deemed
a director as of the beginning of such period;
(iii) the stockholders of the Company approve a merger or
consolidation of the Company with any other corporation (other than (A) a
merger or consolidation that would result in the voting securities of the
Company outstanding immediately prior thereto continuing to represent,
either by remaining outstanding or by being converted into voting
securities of the surviving entity or any parent thereof, in combination
with the ownership of any trustee or other fiduciary holding securities
under an employee benefit plan of any corporation, at least 51% of the
combined voting power of the voting securities of the Company or such
surviving entity or any parent thereof outstanding immediately after such
merger or consolidation, or (B) a merger or consolidation effected to
implement a recapitalization of the Company (or similar transaction) in
which no Person is or becomes the beneficial owner (as defined in clause
(i) above), directly or indirectly, of securities of the Company (not
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including in the securities beneficially owned by such Person any
securities acquired directly from the Company representing 25% or more of
the combined voting power of the Company's then outstanding voting
securities); or
(iv) the stockholders of the Company approve a plan of complete
liquidation of the Company or an agreement for the sale or disposition by
the Company of all or substantially all of the Company's assets, other than
a sale or disposition by the Company of all or substantially all of the
Company's assets to an entity, at least 75% of the combined voting power of
the voting securities of which are owned by persons in substantially the
same proportions as their ownership of the Company immediately prior to
such sale.
8.15 Securities Laws
All references to provisions of the federal securities laws are to such
provisions as in effect on January 1, 1998, without regard to any subsequent
amendments of, changes to or revocation of such provisions.
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