As filed with the Securities and Exchange Commission on December 30, 1997
Registration No. 333-
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM S-8
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
Incorporated AMERICAN ANNUITY GROUP, INC. I.R.S. Employer
Under the Laws 250 EAST FIFTH STREET Identification No.
of Delaware CINCINNATI, OHIO 45202 06-1356481
(513) 333-5300
AMERICAN ANNUITY GROUP, INC.
1994 STOCK OPTION PLAN
Mark F. Muething, Esq.
Senior Vice President,
General Counsel and Secretary
American Annuity Group, Inc.
Cincinnati, Ohio 45202
(513) 333-5300
(Agent for Service)
CALCULATION OF REGISTRATION FEE
Proposed Proposed
Maximum Maximum
Title of Amount Offering Aggregate Amount of
Securities To Be Price Offering Registration
To Be Registered Registered(1) Per Share(2) Price(2) Fee(3)
Common Stock, 2,000,000 $22.00 $44,000,000 $12,980
par value Shares
$1.00 per share
(1) This Registration Statement is filed for up to 2,000,000 shares issuable
pursuant to the American Annuity Group, Inc. 1994 Stock Option Plan.
(2) Estimated solely for purposes of calculating registration fee.
(3) Registration fee has been calculated pursuant to Rule 457(h) based on the
average of the high and low prices of the Common Stock as reported on the
New York Stock Exchange on December 24, 1997 of $22.00 per share.
PART II
INFORMATION REQUIRED IN THE REGISTRATION STATEMENT
Item 3. Incorporation of Documents by Reference
The following documents filed by American Annuity Group, Inc. (the
"Company") with the Securities and Exchange Commission are incorporated herein
by reference and made a part hereof:
1. The Company's Annual Report on Form 10-K for the year ended December 31,
1996.
2. The Company's Quarterly Reports on Form 10-Q for the quarters ended March
31, 1997, June 30, 1997 and September 30, 1997.
3. The description of the Company's Common Stock contained in the
Registration Statement on Form 10 filed on May 22, 1987 under the
Securities Exchange Act of 1934.
All reports and other documents subsequently filed by the Company pursuant
to Sections 13(a), 13(c), 14 and 15(d) of the Securities Exchange Act of 1934,
prior to the filing of a post-effective amendment which indicates that all
Common Stock offered has been sold or which deregisters all Common Stock 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 such
documents.
Item 4. Description of Securities
Not applicable.
Item 5. Interests of Named Experts and Counsel
The legality of the Common Stock offered hereby will be passed upon for
the Company by Mark F. Muething, Esq., Senior Vice President, General Counsel
and Secretary of the Company. Mr. Muething beneficially owns 29,612 shares of
the Company's Common Stock.
Item 6. Indemnification of Directors and Officers
Section 145 of the Delaware General Corporation Law ("DGCL") provides
generally and in pertinent part that a Delaware corporation may indemnify its
directors and officers against expenses, judgments, fines, and settlements
actually and reasonably incurred by them in connection with any civil suit or
action, except actions by or in the right of the corporation, or any
administrative or investigative proceeding if, in connection with the matters
in issue, they acted in good faith and in a manner they reasonably believe to
be in, or not opposed to, the best interest of the corporation, and in
connection with any criminal suit or proceeding, if in connection with the
matters in issue, they had no reasonable cause to believe their conduct was
unlawful. Section 145 further provides that, in connection with the defense or
settlement of any action by or in the right of the corporation, a Delaware
corporation may indemnify its directors and officers against expenses actually
and reasonably incurred by them if, in connection with the matters in issue,
they acted in good faith, in a manner they reasonably believed to be in, or not
opposed to, the best interests of the corporation, and without negligence or
misconduct in the performance of their duties to the corporation. Section 145
further permits a Delaware corporation to grant its directors and officers
additional rights of indemnification through by-law provisions and otherwise.
Article VII of the Registrant's By-laws provides for indemnification of
directors and officers similar to that provided in Section 145 of DGCL.
Reference is made to Section 102(b)(7) of the DGCL, which enables a
corporation in its original certificate of incorporation or an amendment
thereto to eliminate or limit the personal liability of a director for
violations of the director's fiduciary duty, except (I) for any breach of the
director's duty of loyalty to the corporation or its stockholders, (ii) for
acts or omissions not in good faith or which involve intentional misconduct or
a knowing violation of law, (iii) pursuant to Section 174 of the DGCL
(providing for liability of directors for unlawful payment of dividends or
unlawful stock purchases or redemptions) or (iv) for any transaction from which
a director derived an improper personal benefit. Article Ninth of the
Registrant's Certificate of Incorporation eliminates the liability of directors
to the extent permitted by Section 102(b)(7) of the DGCL.
The Registrant also maintains directors' and officers' reimbursement and
liability insurance and has entered into agreements with its directors and
officers providing for indemnification in certain events.
Item 7. Exemption from Registration Claimed
Not applicable.
Item 8. Exhibits
5 Opinion of Mark F. Muething, Esq.
10 American Annuity Group, Inc. 1994 Stock Option Plan, as amended and
restated
23.1 Consent of Mark F. Muething, Esq. (contained on Exhibit 5).
23.2 Consent of Independent Auditors
24 Power of Attorney (contained on the signature page).
Item 9. Undertakings
9.1 The undersigned Registrant hereby undertakes to file, during any
period in which offers or sales are being made, a post-effective amendment to
this Registration Statement:
1. to include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933;
2. to reflect in the prospectus any facts or events arising after
the effective date of the Registration Statement (or the most
recent post-effective amendment thereof) which, individually or
in the aggregate, represent a fundamental change in the
information set forth in the Registration Statement.
Notwithstanding the foregoing, any increase or decrease in
volume of securities offered (if the total dollar value of
securities offered would not exceed that which was registered)
and any deviation from the low or high end of the estimated
maximum offering range may be reflected in the form of
prospectus filed with the Commission pursuant to Rule 424(b) if,
in the aggregate, the changes in volume and price represent no
more than a 20% change in the maximum aggregate offering price
set forth in the "Calculation of Registration Fee" table in the
effective registration statement.
3. to include any material information with respect to the plan of
distribution not previously disclosed in the Registration
Statement or any material change to such information in the
Registration Statement;
Provided, however, that paragraphs (1) and (2) 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
Registrant pursuant to Section 13 or Section 15(d) of the Securities Exchange
Act of 1934 that are incorporated by reference in the registration statement.
9.2 The undersigned Registrant hereby undertakes 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.
9.3 The undersigned Registrant hereby undertakes 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.
9.4 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 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.
9.5 Insofar as indemnification for 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
person 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, 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 Cincinnati, Ohio, on December 29, 1997.
AMERICAN ANNUITY GROUP, INC.
By:
Carl H. Lindner
Chairman of the Board and
Chief Executive Officer
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated. Persons whose names are marked with an
asterisk (*) below hereby designate Mark F. Muething or William J. Maney as
their attorney-in-fact to sign all amendments, including any post-effective
amendments, to this Registration Statement.
Signature Capacity Date
* Chairman of the Board December 29, 1997
Carl H. Lindner and Chief Executive
Officer (Principal
Executive Officer)
* Director December 29, 1997
S. Craig Lindner
* Director December 29, 1997
Robert A. Adams
* Director December 29, 1997
A. Leon Fergenson
* Director December 29, 1997
Ronald G. Joseph
* Director December 29, 1997
John T. Lawrence III
* Director December 29, 1997
William R. Martin
* Senior Vice Presi- December 29, 1997
William J. Maney dent, Treasurer and
Chief Financial Offi-
cer (Principal Ac-
counting Officer and
Principal Financial
Officer)
EXHIBIT 5
AMERICAN ANNUITY GROUP, INC.
250 EAST FIFTH STREET
CINCINNATI, OHIO 45202
December 29, 1997
American Annuity Group, Inc.
250 East Fifth Street
Cincinnati, Ohio 45202
Gentlemen:
RE: Registration Statement on Form S-8
Relating to 2,000,000 Shares of Common Stock
I have acted as counsel to American Annuity Group, Inc., a Delaware
corporation (the "Company") in connection with the preparation of a
Registration Statement on Form S-8 filed by the Company with the Securities
and Exchange Commission. The Registration Statement relates to the
issuance and sale of up to 2,000,000 shares of Common Stock, $1.00 par
value, of the Company pursuant to the American Annuity Group, Inc. 1994
Stock Option Plan (the "Plan").
In connection with this opinion, I have examined and am familiar with
originals or copies, certified or otherwise identified to my satisfaction,
of such documents as I have deemed necessary or appropriate as a basis for
the opinions set forth below including (I) the Registration Statement, (ii)
the Certificate of Incorporation and By-Laws of the Company, each as
amended to the date hereof, and (iii) resolutions of the Board of Directors
of the Company relating to the approval of the Plan, the issuance of shares
of Common Stock pursuant to the Plan and the filing of the Registration
Statement.
Based upon and subject to the foregoing, I am of the opinion that,
when (I) the Registration Statement has become effective under the Act and
(ii) the shares of Common Stock have been issued as contemplated by the
Plan, such shares of Common Stock will constitute duly issued, fully paid
and non-assessable shares of Common Stock of the Company.
I hereby consent to the reference to me under the heading "Legal
Matters" in the Prospectus and the filing of this opinion as Exhibit 5 to
the Registration Statement.
________________________________
Mark F. Muething
Senior Vice President,
General Counsel and Secretary
EXHIBIT 23.2
CONSENT OF INDEPENDENT AUDITORS
We consent to the incorporation by reference in the Registration
Statement (Form S-8) and related Prospectus pertaining to the
American Annuity Group, Inc. 1994 Stock Option Plan for the
registration of 2,000,000 shares of its Common Stock of our
report dated February 28, 1997, with respect to the consolidated
financial statements and schedules of American Annuity Group,
Inc. included in its Annual Report (Form 10-K) for the year ended
December 31, 1996, filed with the Securities and Exchange Commis-
sion.
ERNST & YOUNG LLP
Cincinnati, Ohio
December 29, 1997
AMERICAN ANNUITY GROUP, INC.
1994 STOCK OPTION PLAN
(as amended effective November 29, 1996)
Section 1. Purpose. The purpose of the Plan is to promote the
interests of the Company and its stockholders by providing a means for
selected Key Employees of the Company and its Subsidiaries to acquire a
proprietary interest in the Company, thereby strengthening the Company's
ability to attract capable management personnel and providing an inducement
for Key Employees to remain in the employ of the Company or its
Subsidiaries and to perform at their maximum levels. It is intended that
Options granted pursuant to this Plan may be Incentive Stock Options or
Nonqualified Stock Options, as hereinafter set forth.
Section 2. Definitions. Unless the context clearly indicates
otherwise, the following terms, when used in this Plan, shall have the
meanings set forth below:
(a) "Board" shall mean the Board of Directors of the Company.
(b) "Code" shall mean the Internal Revenue Code of 1986, as it
may be amended from time to time.
(c) "Committee" shall mean a committee of the Board which
consists solely of not less than two (2) "outside directors" (as
defined in Section 3 hereof) appointed by the Board to administer the
Plan and perform the functions set forth in Section 3 of this Plan.
(d) "Common Stock" shall mean the Common Stock, par value One
Dollar ($1.00) per share, of the Company, and any other stock or
securities resulting from the adjustment thereof or substitution
therefor as described in Section 12, 13 of this Plan.
(e) "Company" shall mean American Annuity Group, Inc., a
Delaware corporation.
(f) "Fair Market Value" with respect to the Common Stock as of
any date shall mean (i) in the event the Common Stock is listed on a
national securities exchange, the closing price as reported for
composite transactions on that date, or, if no sales occurred on that
date, then the closing price on the next preceding date on which such
sales of Common Stock occurred; (ii) in the event the Common Stock is
not listed on a national securities exchange, the mean between the
high bid and low asked prices reported for shares of Common Stock
traded over-the-counter on that date, or, if no bid and asked prices
were reported on that date, then the mean between the high bid and low
asked prices on the next preceding date on which such prices were
reported; or (iii) in the event there are no over-the-counter prices
for the Common Stock and it is not listed on a national securities
exchange, the fair market value as determined by the Committee in its
discretion.
(g) "Incentive Stock Option" shall mean an Option granted
under the Plan and designated as such by the Committee which meets the
requirements of Section 422 of the Code.
(h) "Key Employee" shall mean a regular employee, whether or
not a director of the Company or a Subsidiary, who is an officer or
holds a managerial or other key position as determined by the
Committee, and who, in the judgment of the Committee, has demonstrated
a capacity for making a substantial contribution to the success of the
business of the Company or a Subsidiary.
(i) "Nonqualified Stock Option" shall mean an Option granted
under the Plan other than an Incentive Stock Option.
(j) "Option" shall mean, unless otherwise specifically limited
under any provision of this Plan, both an Incentive Stock Option and a
Nonqualified Stock Option granted pursuant to this Plan.
(k) "Option Price" shall mean the price at which Common Stock
may be purchased under an Option, as provided in Section 7(e) of this
Plan.
(l) "Optionee" shall mean a Key Employee granted an Option
under the Plan.
(m) "Parent" shall mean any corporation which qualifies as a
parent corporation of the Company within the meaning of Section 424 of
the Code.
(n) "Plan" shall mean the American Annuity Group, Inc. 1994
Stock Option Plan.
(o) "Stock Option Agreement" shall mean the written agreement
between an Optionee and the Company evidencing the grant of an Option
and setting forth the terms and conditions of the grant.
(p) "Subsidiary" shall mean any corporation which qualifies as
a subsidiary corporation of the Company within the meaning of Section
424 of the Code.
-3-
Section 3. Administration of the Plan.
(a) Committee. The Plan shall be administered by the
Committee which shall consist solely of not less than two (2) "outside
directors," asto the extent required by Section 162(m) of the Code.
Each member shall also be a "Non-Employee Director" as defined in Rule
16b-3(b)(3)(i)promulgated under the Securities Exchange Act of 1934
(the "1934 Act"), as such Section and Rule may be amended, superceded
or interpreted hereafter. The members of the Committee shall serve at
the pleasure of the Board, which shall have the power, at any time and
from time to time, to remove members from the Committee or to add
members thereto. Vacancies on the Committee shall be filled by action
of the Board.
(b) Duties and Powers of the Committee. The Committee shall
have the full power and authority, but subject to and not inconsistent
with the express provisions of the Plan, to establish and administer
the Plan and to exercise all the powers and authorities either
specifically granted to it under the Plan or necessary or advisable in
the administration of the Plan, including, without limitation, the
authority (i) to grant Options which have received any requisite
approval of the Board and to determine which Options shall constitute
Incentive Stock Options and which Options shall constitute
Nonqualified Stock Options; (ii) to determine the employees to whom,
and the time or times at which, Options shall be granted; (iii) to
determine the number of shares of Common Stock to be covered by each
Option; (iv) to determine the Option Price of Common Stock subject to
an Option; (v) to determine the duration of the exercise period of
Options and the time or times at which Options may be exercised and
the extent of exercisability of Options; (vi) to determine the terms
and provisions of Stock Option Agreements (which need not be
identical) entered into in connection with Options granted under the
Plan, including such terms and provisions as shall in the judgment of
the Committee be necessary or advisable in order to conform to any
applicable laws or regulations, as the same may be amended from time
to time; (vii) to make all other determinations necessary or
advisable for the administration of the Plan; and (viii) to permit
particular holders of Options to exercise an Option to a greater
extent than provided in such Option. Subject to the express provisions
of the Plan, the Committee may correct any defect or supply any
omission or reconcile any inconsistency in the Plan or in any Stock
Option Agreement in such manner and to the extent it shall determine
in order to carry out the purposes of the Plan.
The Committee shall have full power and authority to construe and
interpret the Plan and the respective Stock Option Agreements and to
establish, amend or rescind such rules, regulations and procedures as the
Committee deems necessary or appropriate for the proper administration of
the Plan.
The determinations of the Committee on the foregoing matters and any
-4-
other matters arising in connection with the construction, administration,
interpretation and effect of the Plan and of the Committee's rules and
regulations thereunder shall (except as otherwise specifically provided in
the Plan) be final, binding and conclusive.
(c) Committee Meetings and Actions. The Committee may select
one of its members as Chairman. The Committee shall hold its meetings
at such times and places as it shall determine. All decisions and
determinations of the Committee shall be made by not less than the
affirmative vote of a majority of its members. Actions may be taken
by the Committee at a duly conveyed meeting (including a meeting by
telephone conference call) or by unanimous written consent.
Section 4. Eligibility. Options under the Plan may be granted only
to Key Employees of the Company and its Subsidiaries. More than one Option
may be granted to the same Optionee and be outstanding concurrently
hereunder.
Section 5. Shares Subject to the Plan.
(a) Aggregate Number of Shares Available. Subject to the
adjustments provided for in Section 12, 13 of this Plan, the aggregate
number of shares of Common Stock for which Options may be granted
under the Plan shall be Two Million (2,000,000) shares. Shares
delivered by the Company pursuant to exercises of Options may be
authorized but unissued shares of Common Stock, issued shares of
Common Stock which have been reacquired by the Company, or a
combination thereof, as the Board or the Committee shall from time to
time determine.
(b) Maximum Number of Options. The maximum number of Options
which may be granted under the Plan to any individual during any
calendar year is Four Hundred Fifty Thousand (450,000). If an Option
is canceled, it continues to be counted against the maximum number of
shares of Common Stock for which Options may be granted to an
individual. If an Option is repriced, the transaction is treated as a
cancellation of the Option and a grant of a new Option.
(c) Effect of Expiration of Options. In the event that any
outstanding Option under the Plan for any reason expires or is
terminated without having been exercised in full, the shares of Common
Stock subject to but not issued under such Option shall again be
available for the granting of Options under the Plan.
(d) Effect of Exercises. If all or any portion of an Option
is exercised, the shares with respect to which such Option is
exercised, shall not thereafter be available for the granting of other
Options under the Plan
Section 6. Stock Option Agreements. Each Option shall be evidenced
-5-
by a written Stock Option Agreement, which shall be executed by the Company
and the Optionee, containing such terms and conditions, not inconsistent
with the Plan, as shall be determined by the Committee. Stock Option
Agreements evidencing Incentive Stock Options shall contain such terms and
conditions, among others, as may be necessary in the opinion of the
Committee to qualify them as an incentive stock option under the Code.
Section 7. Terms and Conditions of Options. Each Option granted
under the Plan shall comply with and be subject to the following terms and
conditions, as well as such other terms and conditions as may be determined
by the Committee and specified in the related Stock Option Agreement:
(a) Number of Shares. The number of shares of Common Stock to
which an Option relates shall be determined by the Committee and
specified in the related Stock Option Agreement.
(b) Type of Option. Each Stock Option Agreement shall specify
the type of Option granted and evidenced thereby, i.e., whether the
Option is an Incentive Stock Option or a Nonqualified Stock Option.
(c) Date of Grant; Exercise Period. The date of grant of any
Option shall be the date on which the Committee shall award the Option
(or the earlier date, if applicable, that the Committee specifically
approves such grant) if an immediate grant of such Option is
contemplated, or the date contemplated as the date of grant if the
Committee imposes a condition on the granting of such Option. Options
granted under the Plan shall be for such periods as may be determined
by the Committee and set forth in the related Stock Option Agreements,
subject to the provisions of Section 9 hereof regarding early
termination upon the occurrence of certain events and subject to the
further provisions of this paragraph 7(c). The term of an Incentive
Stock Option shall not exceed Ten (10) years from the date of grant of
such Option.
(d) Vesting of Options. Unless otherwise established by the
Committee, all Options shall become exercisable upon the first
anniversary of the date of grant to the extent of Twenty Percent (20%)
of the total shares covered by the Option with an additional Twenty
Percent (20%) of the total shares covered by the Option becoming
exercisable on each succeeding anniversary. This right of exercise
shall be cumulative and shall be exercisable in whole or in part.
(e) Option Price. The Option Price per share of the Common
Stock subject to an Option granted under the Plan shall be determined
by the Committee at the time the Option is granted, and shall be
subject to the following conditions:
(i) Nonqualified Stock Options - The Option Price per
share of Common Stock subject to a Nonqualified Stock Option
may be less than the Fair Market Value per share of the
-6-
Common Stock on the date of grant, but shall not be less
than the par value per share of Common Stock.
(ii) Incentive Stock Options - The Option Price per share
of Common Stock subject to an Incentive Stock Option shall
not be less than the greater of (a) One Hundred Percent
(100%) of the Fair Market Value per share of the Common
Stock on the date of grant, or (b) the par value per share
of the Common Stock.
(f) Special Provisions Applicable to Incentive Stock Options.
At the time the Incentive Stock Option is granted, if the Optionee
owns, directly or indirectly, stock representing more than 10% of (i)
the total combined voting power of all classes of stock of the
Company, or (ii) a corporation that owns 50% or more of the total
combined voting power of all classes of stock of the Company, then:
(i) The Option Price must equal at least 110% of the
Fair Market Value on the date of grant; and
(ii) The term of the Option shall not be greater
than five years from the date of grant.
The aggregate Fair Market Value of Common Stock (determined at
the date of grant) with respect to which Incentive Stock Options are
exercisable by an Optionee for the first time during any calendar year
under this Plan or any other plan maintained by shall not exceed
$100,000.
If any Option is not granted, exercised, or held pursuant to the
provisions noted immediately above, it will be considered to be a
Nonqualified Stock Option to the extent that the grant is in conflict
with these restrictions.
(g) If any Option is not granted, exercised, or held pursuant to the
provisions noted immediately above, it will be considered to be a
Nonqualified Stock Option to the extent that the grant is in conflict with
these restrictions.
Section 8. Method of Exercise; Payment of Option Price
(a) Method of Exercise. An Option may be exercised as to any
or all full shares of Common Stock as to which the Option has become
exercisable in accordance with the terms of the related Stock Option
Agreement and the provisions of this Plan by delivering to the Company
written notice of such exercise in the manner hereinafter specified in
Section 18, provided, however, that an Option may not be exercised at
any one time as to less than One Thousand (1,000) shares (or such
number of shares as to which the Option is then exercisable if such
number of shares is less than One Thousand (1,000) shares). Such
-7-
written notice shall specify the number of shares of Common Stock with
respect to which the Option is being exercised and shall be
accompanied by payment in full of the Option Price for such shares.
The date of exercise of an Option or portion thereof shall be the date
of receipt by the Company of such written notice as determined in
accordance with the provisions of Section 18 of the Plan provided,
however, that for purposes of an issuance of shares upon exercise, the
date of issuance shall be as soon as practicable after exercise but
shall be no earlier than a date which is at least ten (10) business
days after receipt of notice of exercise. Until shares are actually
issued, those shares shall not be deemed outstanding for any purpose.
(b) Payment of Option Price. Payment for shares purchased
upon exercise of an Option may be made
(i) in cash (including a check, bank draft or money order), or
(ii) with the approval of the Committee, by delivering to the
Company shares of Common Stock already owned by the Optionee
("Previously Held Shares") having a Fair Market Value (determined
as of the day preceding the date on which the Option is
exercised) equal to the cash Option Price of the shares of Common
Stock as to which the Option is being exercised, or
(iii) with the approval of the Committee, by a combination of
the methods described in (i) and (ii) above, or
(iv) with the approval of the Committee, by any other method
or in any other form authorized by the Committee and reflected in
the related Stock Option Agreement or in any written notice
relative thereto as may be from time to time delivered by the
Committee to the Optionee. The Company, in its sole discretion,
may establish procedures whereby a Key Employee, subject to the
requirements of Rule 16b-3, Regulation T, federal income tax laws
and other federal, state and local tax and securities laws, can
exercise an Option or a portion thereof without making a direct
payment of the option price to the Company; provided, however,
that these cashless exercise procedures shall not apply to
Incentive Stock Options which are outstanding on the date the
Company establishes such procedures unless the application of
such procedures to such Options is permitted pursuant to the Code
and the regulations thereunder without affecting the Options'
qualification under Code Section 422 as Incentive Stock Options.
If the Committee so elects to establish a cashless exercise
program, the Committee shall determine, in its sole discretion,
and from time to time, such administrative procedures and
policies as it deems appropriate and such procedures and policies
shall be binding on any Employee wishing to utilize the cashless
exercise program.
-8-
Section 9. Death, Disability or Other Termination of Employment
(a) Death. In the event an Optionee dies (i) while in the
employ of the Company or a Subsidiary or (ii) within Three (3) months
of the termination of such employment (other than termination for
cause or voluntary termination without the consent of the Company or
the Subsidiary, as the case may be), his Option may be exercised,
solely to the extent that the Optionee was entitled to exercise the
Option at the date of his death or, if earlier, the date of his
termination, by the person or persons to whom such Optionee's rights
under the Option shall pass by will or the laws of descent and
distribution, at any time or from time to time within One (1) year
after the date of termination of employment or prior to the expiration
of the period for which the Option was granted, whichever is the
shorter period.
(b) Disability. In the event an Optionee's employment by the
Company or a Subsidiary is terminated because of the Optionee's
permanent disability, the Optionee may exercise his Option, solely to
the extent that he was entitled to do so at the date of termination of
his employment, at any time or from time to time within One (1) year
after the date of such termination of employment or prior to the
expiration of the period for which the Option was granted, whichever
is the shorter period.
(c) Other Termination of Employment. In the event the
Optionee's employment by the Company or a Subsidiary is terminated
other than by death or permanent disability as provided by paragraphs
(a) and (b), respectively, of this Section 9 and other than for cause
or by the voluntary action of the Optionee without the consent of the
Company or Subsidiary employing the Optionee, the Optionee may
exercise his Option, solely to the extent that he was entitled to do
so at the date of termination of his employment, at any time or from
time to time within Three (3) months after the date of such
termination of employment or prior to the expiration of the period for
which the Option was granted, whichever is the shorter period. In the
event the Optionee's employment by the Company or a Subsidiary is
terminated for cause or by the voluntary action of the Optionee
without the consent of the Company or Subsidiary employing the
Optionee, his Option shall terminate at the date of termination of his
employment.
(d) Failure to Exercise. To the extent an Option or any
portion thereof is not exercised within the limited period provided in
paragraphs (a), (b) or (c) of this Section 9, whichever is applicable,
all rights pursuant to such Option will cease and terminate at the
expiration of such period.
(e) Matters Relating to Termination of Employment. The
Committee in its absolute discretion shall determine the effect of all
-9-
matters and questions relating to the termination of employment of an
Optionee, including, but not limited to, questions as to whether a
termination of employment resulted from permanent disability or was
voluntary or involuntary on the part of the Optionee and questions of
whether particular leaves of absence constitute terminations
employment.
Section 10. Modification, Extension and Renewal of Options. Subject to
the terms and conditions and within the limitations of the Plan, the
Committee in its discretion may modify, extend or renew outstanding Options
granted under the Plan, or accept the surrender of outstanding Options (to
the extent not theretofore exercised) and authorize the granting of new
Options hereunder in substitution therefor. Notwithstanding the foregoing,
however, no modification (other than adjustments as provided by Section 12,
13 hereof) of an Option shall, without the consent of the Optionee, alter
or impair any rights or obligations under any Option theretofore granted to
such Optionee.
If the terms of an Incentive Stock Option are "modified, extended or
renewed" within the meaning of Section 424(h) of the Code and
interpretations thereunder, such modification, extension or renewal shall
be considered the granting of a new Incentive Stock Option.
Section 11. Withholding Taxes. The Company shall be entitled to
require, as a condition to its delivery of shares of Common Stock upon the
exercise of an Option, that the Optionee pay to the Company an amount
sufficient to satisfy all present or estimated future federal, state and
local withholding tax requirements related thereto.
Subject to the further provisions of this Section 11 and to the
approval of the Committee, an Optionee may elect to satisfy applicable
withholding tax liabilities by (i) having the Company withhold from the
shares of Common Stock otherwise issuable to the Optionee upon his exercise
of an Option that number of shares of Common Stock having a Fair Market
Value on the day preceding the date of such exercise sufficient to satisfy
the amount of such tax liabilities or (ii) delivering to the Company that
number of Previously Held Shares having a Fair Market Value on the day
preceding the date of such exercise sufficient to satisfy the amount of
such tax liabilities. Any such election will be irrevocable and must be
made prior to the date the Option exercise becomes taxable. In addition,
if the Optionee is a director or an officer of the Company within the
meaning of Section 16(b) of the 1934 Act, such election may not be made
within Six (6) months of the grant of the Option (except that this
limitation will not apply in the event of the death or disability of the
Optionee prior to the expiration of the Six (6) month period), and such
election shall be made either in the Ten (10) day "window period" following
the release of the Company's quarterly or annual summary earnings statement
as provided by Rule 16b-3(e)(iii) under the 1934 Act, or at least Six (6)
months prior to the date the Option exercise becomes taxable.
-10-
The Company intends that this Section 11 shall comply with the
requirements of Rule 16b-3 under the 1934 Act, as the same may be
interpreted or amended from time to time during the term of the Plan.
Should any provision of this Section 11 not be necessary to comply with the
requirements of the Rule or should any additional provisions be necessary
for this Section 11 to so comply, the Committee may amend the Plan to add
to or modify the provisions of the Plan accordingly.
Section 12. Cash Payments for Taxes. The Committee may, in its sole
discretion, provide in a Stock Option Agreement that the Company will make
a cash payment to the Key Employee covered thereby equal to the aggregate
of the amount of federal, state and local income taxes which such Key
Employee would be required to pay to each such taxing authority
attributable to the realization of taxable income, if any, as a result of
the receipt of Shares pursuant to the exercise of any Option (other than an
Incentive Stock Option) granted under the Plan. The Committee may, in its
discretion, require the Key Employee to make an election to be taxed
immediately under Section 83(b) of the Code as a condition to receiving
such payment. In computing the amount of such payment, it shall be assumed
that every Key Employee granted an Option under the Plan is subject to tax
by each taxing authority at the highest marginal tax rate in the respective
taxing jurisdiction of such Key Employee (provided that the highest
marginal tax rate for federal income tax purposes shall be determined under
Section 1 of the Code), taking into account the city and state in which
such Key Employee resides, but giving effect to the tax benefit, if any,
which such Key Employee may enjoy to the extent that any such tax is
deductible in determining the tax liability of any other taxing
jurisdiction (disregarding the effects of Code Section 68 in determining
deductibility for federal income tax purposes). Likewise, the Committee
may, in its sole discretion, provide in a Stock Option Agreement that the
Company will make a cash payment to the Key Employee covered thereby equal
to the amount of excise taxes (i.e., an "excise tax gross-up payment")
which such Key Employee would be required to pay pursuant to Section 4999
of the Code as a result of all or any part of such Key Employee's Option
being treated as an "excess parachute payment" within the meaning of
Section 280G(b) of the Code. In addition to the foregoing, the Committee
may, in its discretion, increase each cash payment due to a Key Employee
hereunder, such that each Key Employee who receives Shares and/or an excise
tax gross-up payment pursuant to any Option granted under this Plan shall
receive such Shares and/or excise tax gross-up payment net of all income
and/or excise taxes imposed on such Key Employee on account of the receipt
of such Shares and/or excise tax gross-up payment.
Section 13. Adjustments Upon Changes in Capitalization. The total
number and character of shares available for Options under the Plan, the
number and character of shares subject to outstanding Options and the
Option Price shall be appropriately adjusted by the Committee in the event
of any change in the number or character of outstanding shares of Common
Stock resulting from a stock dividend, subdivision or combination of shares
or reclassification. In the event of a merger or consolidation of the
-11-
Company or a tender offer for shares of Common Stock, the Committee may
make such adjustments with respect to Options under the Plan and take such
other actions as it deems necessary or appropriate to reflect, or in
anticipation of, such merger, consolidation or tender offer, including,
without limitation, the substitution of new Options, the termination or
adjustment of outstanding Options, the acceleration of Options, or the
removal of limitations or restrictions on outstanding Options.
Section 14. Nontransferability. No Option granted under the Plan
shall be transferable by an Optionee otherwise then by will or by the laws
of descent and distribution, and an Option may be exercised, during the
lifetime of the Optionee, only by the Optionee.
Section 15. No Right to Continued Employment. Nothing in this Plan or
in any Option granted hereunder shall confer upon an Optionee any right to
continue in the employ of the Company or a Subsidiary nor interfere or
affect in any way the right of the Company or a Subsidiary to terminate an
Optionee's employment at any time for any reason.
Section 16. Rights as a Shareholder. An Optionee shall have no rights
as a shareholder with respect to any shares of Common Stock subject to an
Option until the date of issuance to him of a stock certificate or
certificates for such shares. Upon exercise, the date of issuance shall be
as soon as practicable but shall be no earlier than a date which is at
least ten (10) business days after receipt of notice of issuance. No
adjustment shall be made for dividends (ordinary or extraordinary, whether
in cash, securities or other property) or distributions or other rights for
which the record date is prior to the date such stock certificate is
issued, except as provided in Section 12, 13 hereof.
Section 17. Compliance with Law and Other Conditions. The obligation
of the Company to issue or deliver shares of Common Stock upon the exercise
of Options shall be subject to all applicable laws, regulations, rules and
approvals of applicable governmental and regulatory authorities.
Notwithstanding any other provisions of this Plan or any Stock Option
Agreements, the Company shall not be required to issue or deliver any
certificate or certificates for shares of Common Stock purchased upon the
exercise of an Option prior to the fulfillment of the following conditions:
(i) The listing, or approval for listing upon notice of
issuance, of such shares on any securities exchange on which the
Common Stock is then listed;
(ii) The registration or other qualification of such shares
under any state or federal securities law or regulation which the
Committee shall, in its absolute discretion upon the advice of
counsel, deem necessary or advisable; and
(iii) The obtaining of any other consent, approval, permit or
other clearance from any state or federal governmental or regulatory
-12-
agency which the Committee shall, in its absolute discretion upon the
advice of counsel, determine to be necessary or advisable.
With respect to Options granted to any Optionee who is an officer of
the Company or is otherwise subject to Section 16 of the 1934 Act, the
Committee may, in its absolute discretion at the time of the granting of an
Option or the exercise thereof, make such provisions as may be necessary to
assure compliance with Rule 16b-3 under the 1934 Act.
Section 18. Notices. Whenever any notice is required or permitted to
be given under the Plan or any Stock Option Agreement, such notice must be
in writing and personally delivered or sent by courier or by mail. Any
such notice shall be deemed effectively given or delivered upon personal
deliver or Twenty-Four (24) hours after delivery to a courier service which
guarantees overnight delivery or Five (5) days after deposit with the U.S.
Post Office, by registered or certified mail, return receipt requested,
postage prepaid, addressed to the person who is to receive such notice at
the address which such person has theretofore specified by written notice
delivered in accordance herewith. The Company or an Optionee may change,
at any time and from time to time, by written notice to the other, the
address which it or he had theretofore specified for receiving notices.
Until changed in accordance herewith, the Company and each Optionee shall
specify as its or his address for receiving notices the address set forth
in the Stock Option Agreement pertaining to the shares of Common Stock to
which such notice relates.
Section 19. Amendment, Suspension or Termination of the Plan. The
Plan may be wholly or partially amended or otherwise modified, suspended or
terminated at any time or from time to time by the Board, unless the board
delegates such authority to the Committee; provided, however, that except
as expressly authorized by the Plan, neither the Board nor the Committee
shall, without the approval of the holders of a majority of the outstanding
shares of the Company's stock entitled to vote thereon, effect any change
to the Plan if such change would cause the Plan to cease to satisfy any
applicable conditions of Rule 16b-3.
Further, no such amendment, suspension or termination, other than
adjustments for changes in capitalization as provided in Section 12, 13
hereof, shall adversely affect or impair any outstanding Option without the
written consent of the Optionee affected thereby.
Finally, no amendment shall cause the Plan or any Option granted under
the Plan to fail to meet the conditions for exclusion of application of the
One Million Dollar ($1,000,000) deduction limitation imposed by Section
162(m) of the Code.
Section 20. Effective Date; Duration.
(a) Effective Date. The Plan shall become effective upon the date of
its adoption by the Board provided that, within Twelve (12) months after
-13-
the date the Plan is adopted by the Board, the Plan is approved and adopted
by the holders of a majority of the outstanding shares of stock of the
Company entitled to vote thereon. If the Plan shall not be subsequently
approved and adopted by the shareholders of the Company as specified
herein, the Plan and all Options granted hereunder shall be null and void
and any obligation pursuant to the subsequent exercise of any Option
previously granted shall not be binding upon the Company. To the extent an
Optionee has already purchased and paid for any shares received under the
Plan, the Optionee may retain the ownership of said shares; however, the
prior exercise of said Option shall not constitute the exercise of an
Incentive Stock Option.
(b) Duration. Unless earlier terminated by the Board or the
Committee pursuant to the provisions of the Plan, the Plan shall terminate
on the tenth anniversary of its effective date as hereinbefore specified.
No Options shall be granted under the Plan after such termination date.
