<PAGE> 1
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the Registrant /X/
Filed by a Party other than the Registrant / /
Check the appropriate box:
/ / Preliminary Proxy Statement
/ / Confidential. For use of the Commission Only (as permitted by Rule 14a-6(e)
(2))
/X/ Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
Advanta Corp.
(Name of Registrant as Specified In Its Charter)
-------------------------------
(Name of Person(s) Filing Proxy Statement, if Other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
/X/ No fee required.
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and
0-11.
(1) Title of each class of securities to which transaction
applies:
(2) Aggregate number of securities to which transaction applies:
(3) Per unit price or other underlying value of transaction
computed pursuant to Exchange Act Rule 0-11 (Set forth the
amount on which the filing fee is calculated and state how it
was determined):
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
/ / Fee paid previously with preliminary materials:
/ / Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number, or
the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
(2) Form, Schedule or Registration Statement No.:
(3) Filing Party:
(4) Date Filed:
<PAGE> 2
[ADVANTA LOGO]
WELSH AND MCKEAN ROADS
P.O. BOX 844
SPRING HOUSE, PENNSYLVANIA 19477-0844
---------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
JUNE 7, 2000
---------------
NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders of Advanta
Corp. (the "Company") will be held at the Company's headquarters, Welsh and
McKean Roads, Spring House, Pennsylvania, on Wednesday, June 7, 2000 at 1:00
p.m. (the "Meeting") for the following purposes:
1. To elect three directors to hold office until the expiration of
their term of office and until their successors are duly elected and
qualified.
2. To consider and act upon a proposal to approve the Advanta Corp.
2000 Omnibus Stock Incentive Plan.
3. To transact such other business as may properly come before the
Meeting or any adjournment or postponement thereof.
The Board of Directors has fixed the close of business on Friday, April 14,
2000 as the record date for the Meeting. Only holders of record of the Company's
Class A Common Stock and Class A Preferred Stock at that time are entitled to
notice of, and to vote at, the Meeting and any adjournment or postponement
thereof.
The enclosed proxy is solicited by the Board of Directors of the Company.
Reference is made to the attached proxy statement for further information with
respect to the business to be transacted at the Meeting. The Board of Directors
urges you to date, sign and return the enclosed proxy promptly. A reply envelope
is enclosed for your convenience. You are cordially invited to attend the
Meeting in person. The return of the enclosed proxy will not affect your right
to vote if you attend the Meeting in person.
ELIZABETH H. MAI
Secretary
Dated: April 28, 2000
<PAGE> 3
[ADVANTA LOGO]
WELSH AND MCKEAN ROADS
P.O. BOX 844
SPRING HOUSE, PENNSYLVANIA 19477-0844
---------------
PROXY STATEMENT
---------------
ANNUAL MEETING OF STOCKHOLDERS TO
BE HELD ON WEDNESDAY, JUNE 7, 2000
---------------
This proxy statement is furnished in connection with the solicitation of
proxies by the Board of Directors of Advanta Corp., a Delaware corporation (the
"Company"), to be used at the Annual Meeting of Stockholders, to be held at the
Company's headquarters, Welsh and McKean Roads, Spring House, Pennsylvania, on
Wednesday, June 7, 2000 at 1:00 p.m., and any adjournment or postponement
thereof (the "Meeting"). This proxy statement, the foregoing notice and the
enclosed proxy are first being mailed to holders of the Company's Class A Common
Stock and Class A Preferred Stock on or about May 3, 2000.
The Board of Directors does not intend to bring any matter before the
Meeting except as specifically indicated in the notice, nor does the Board of
Directors know of any matters which anyone else proposes to present for action
at the Meeting. If any other matters properly come before the Meeting, however,
the persons named in the enclosed proxy, or their duly constituted substitutes
acting at the Meeting, will be authorized to vote or otherwise act thereon in
accordance with their judgment on such matters.
Shares represented by proxies received by the Company, where the
stockholder has specified a choice with respect to the matters to be voted upon
at the Meeting, will be voted in accordance with the specification(s) so made.
IN THE ABSENCE OF SUCH SPECIFICATION(S), THE SHARES WILL BE VOTED "FOR" THE
ELECTION OF ALL THREE NOMINEES FOR THE BOARD OF DIRECTORS AND "FOR" THE PROPOSAL
TO APPROVE THE ADVANTA CORP. 2000 OMNIBUS STOCK INCENTIVE PLAN.
Any proxy may be revoked at any time prior to its exercise by notifying the
Secretary of the Company in writing, by delivering a duly executed proxy bearing
a later date or by attending the Meeting and voting in person.
The accompanying form of proxy is being solicited on behalf of the Board of
Directors of the Company. The expenses of solicitation of proxies for the
Meeting will be paid by the Company. In addition to the mailing of the proxy
material, such solicitation may be made in person or by telephone by directors,
officers and employees of the Company, who will receive no additional
compensation therefor. In addition, the Company has retained D.F. King & Co.
Inc. to assist in the search for, and distribution of proxies to, beneficial
owners of the Company's Class A Common Stock held in street name or by other
nominees, and will pay such firm a fee of $1,500, plus reimbursement of direct
out-of-pocket expenses incurred by such firm in such activity. Upon request, the
Company will reimburse brokers, dealers, banks and trustees, or their nominees,
for reasonable expenses incurred by them in forwarding material to beneficial
owners of shares of Class A Common Stock of the Company. Beneficial owners of
shares of Class B Common Stock, who are not entitled to vote at the Meeting,
also will receive all proxy material (other than the proxy card itself),
together with the Company's Annual Report for the fiscal year ended December 31,
1999. The expenses of such additional mailing will be borne by the Company.
1
<PAGE> 4
VOTING SECURITIES AND PRINCIPAL HOLDERS THEREOF
OUTSTANDING SHARES AND VOTING RIGHTS
Only holders of record of the Company's Class A Common Stock and Class A
Preferred Stock at the close of business on April 14, 2000 are entitled to
notice of, and to vote at, the Meeting. On that date the Company had outstanding
10,060,888 shares of Class A Common Stock, par value $.01 per share, and 1,010
shares of Class A Preferred Stock, par value $1,000 per share. On all matters
voted upon at the Meeting and any adjournment or postponement thereof, the
holders of the Class A Common Stock and the Class A Preferred Stock vote
together as a single class, with each record holder of Class A Common Stock
entitled to one vote per share, and each record holder of Class A Preferred
Stock entitled to one-half vote per share.
The presence, in person or by proxy, of stockholders entitled to cast a
majority of the votes which all stockholders are entitled to cast will
constitute a quorum for the conduct of business at the Meeting. With regard to
the election of directors, votes may be cast in favor of or withheld from each
nominee. Under applicable Delaware law, votes that are withheld and broker
non-votes will be excluded entirely from the vote and will not affect the
outcome of the election of directors, as directors are elected by a plurality of
votes cast. In the election of directors, stockholders do not have cumulative
voting rights. The proposal to approve the Advanta Corp. 2000 Omnibus Stock
Incentive Plan (the "Stock Incentive Plan Proposal") requires the approval of a
majority of the shares present in person or by proxy and entitled to vote at the
meeting. Under applicable Delaware law, abstentions with respect to the Stock
Incentive Plan Proposal will have the same effect as votes against the proposal,
and broker non-votes will have no effect on the outcome of the vote on the Stock
Incentive Plan Proposal.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
The information set forth in the following table is furnished as of April
1, 2000 (unless otherwise specified), with respect to any person (including any
"group" as that term is used in Section 13(d)(3) of the Securities Exchange Act
of 1934, as amended (the "1934 Act")) who is known to the Company to be the
beneficial owner of more than 5% of any class of the Company's voting
securities.
<TABLE>
<CAPTION>
AMOUNT AND
NATURE OF
BENEFICIAL PERCENT
TITLE OF CLASS NAME AND ADDRESS OF BENEFICIAL OWNER OWNERSHIP OF CLASS
- -------------- ------------------------------------ ---------- --------
<S> <C> <C> <C>
Class A
Preferred Gisela Alter(1).......................... 1,010 100.00%
Class A Common Dennis Alter(1).......................... 3,046,067(2)(3)(4)(5) 30.28%
Advanta Corp. Employee Stock Ownership
Plan(6)................................ 1,000,000 9.94%
Kestrel Investment Management
Corporation(7)......................... 874,646 8.69%
Brandywine Asset Management, Inc.(8)..... 612,519 6.09%
PNC Advisors, N.A.(9).................... 551,995 5.49%
Dimensional Fund Advisors Inc.(10)....... 776,246 7.72%
</TABLE>
- ---------------
(1) The address for Gisela Alter and Dennis Alter is c/o Advanta Corp., Welsh
and McKean Roads, P.O. Box 844, Spring House, Pennsylvania, 19477-0844.
(2) Includes 551,695 shares owned by a trust, the beneficiary of which is Linda
Alter, the sister of Dennis Alter, and pursuant to which Dennis Alter is
sole trustee. Mr. Alter disclaims beneficial ownership of these shares.
2
<PAGE> 5
(3) Includes 82,798 shares held by a charitable foundation established by Mr.
Alter, as to which Mr. Alter shares voting and dispositive powers, and
41,399 shares held by a trust established by Mr. Alter, through which he
has made certain charitable gifts of shares and as to which Mr. Alter has
sole voting and dispositive powers. Also includes 571,905 shares held by a
charitable foundation established by Mr. Alter, as to which Mr. Alter and
his wife share voting and dispositive powers. Mr. Alter disclaims
beneficial ownership of all such shares.
(4) Does not include 1,010 shares of Class A Preferred Stock owned by Gisela
Alter, the wife of Dennis Alter.
(5) Does not include shares held in trust for the benefit of employees of the
Company participating in the Advanta Corp. Employee Stock Ownership Plan
(the "ESOP") as to which Mr. Alter is a trustee. As of December 31, 1999,
the ESOP held 1,000,000 shares as follows: 34,771 shares allocated to ESOP
participants who direct the vote of such shares and as to which the ESOP
trustees have no beneficial ownership; and 965,229 shares which, as of
December 31, 1999, had not been allocated to ESOP participants as to which
the ESOP trustees may be deemed beneficial owners under Rule 13d of the
1934 Act ("Rule 13d"). Shares of Class A Common Stock held by the ESOP, but
not yet allocated or as to which ESOP participants have not made timely
voting direction, are voted by the ESOP trustees in the same proportions as
shares for which directions are received (subject to each trustee's
fiduciary responsibilities under Section 404 of the Employee Retirement
Income Security Act of 1974, as amended ("ERISA")). Mr. Alter disclaims
beneficial ownership of the 965,229 unallocated shares held by the ESOP.
(6) The ESOP has sole voting power as to 965,229 unallocated shares and shared
voting power as to 34,771 shares that have been allocated to ESOP
participants. The allocated shares are voted by the ESOP trustees as
directed by ESOP participants. Shares of Class A Common Stock held by the
ESOP, but not yet allocated or as to which ESOP participants have not made
timely voting direction, are voted by the ESOP trustees in the same
proportions as shares for which directions are received (subject to each
trustee's fiduciary responsibilities under Section 404 of ERISA). The
address of the ESOP is P.O. Box 844, Welsh and McKean Roads, Spring House,
PA 19477.
(7) Information as to shares held by Kestrel Investment Management Corporation
("Kestrel"), David J. Steirman ("Mr. Steirman") and Abbott J. Keller ("Mr.
Keller") is based solely on a Schedule 13G filed with the Securities and
Exchange Commission (the "Commission") on February 14, 2000. According to
the Schedule 13G, Messrs. Steirman and Keller are the only shareholders of
Kestrel, an investment advisor; Kestrell is deemed to be the beneficial
owner for purposes of Rule 13d of 874,646 shares, or 8.69% of the class,
having sole voting power of 740,951 shares and sole dispositive power of
874,646 shares; each of Messrs. Steirman and Keller also is deemed to be
the beneficial owner for purposes of Rule 13d of the 874,646 shares, having
sole voting power of 740,951 shares and sole dispositive power of 874,646
shares pursuant to their ownership interests in Kestrel. The address of
Kestrel and Messrs. Steirman and Abbott is 411 Borel Avenue, Suite 403, San
Mateo, CA 94402.
(8) Information as to shares held by Brandywine Asset Management Inc.
("Brandywine") is based solely on a Schedule 13G filed with the Commission
on February 14, 2000 by Brandywine's parent holding company, Legg Mason,
Inc. According to its Schedule 13G, Brandywine is deemed to be the
beneficial owner of the above-reported shares for purposes of Rule 13d
because it has the power to vote or direct the vote of and/or shares
dispositive power with respect to these shares. Brandywine is deemed to be
the beneficial owner of 612,519 shares, or 6.09% of the class, and has
shared voting and dispositive power with respect to these shares. The
address of Brandywine is 100 Light Street, Baltimore, Maryland 21202.
(9) Information as to shares held by PNC Advisors, N.A. ("PNC") is based solely
on a Form 13F filed with the Commission on February 11, 2000 by PNC.
According to its Form 13F, PNC is deemed to be the beneficial owner of the
above-reported shares for purposes of Rule 13d
3
<PAGE> 6
because it has the power to vote or direct the vote of and/or shares
dispositive power with respect to these shares. PNC is deemed to be the
beneficial owner of 551,995 shares, or 5.49% of the class, and has shared
voting and dispositive power with respect to these shares. The address of
PNC is 125 High Street, Oliver Street Tower, 16th Floor, Boston,
Massachusetts 02110.
(10) Information as to shares held by Dimensional Fund Advisors Inc.
("Dimensional") is based solely on a Schedule 13G filed with the Commission
on February 4, 2000. According to its Schedule 13G, Dimensional is deemed
to be the beneficial owner of the above-reported shares for purposes of
Rule 13d because it has the power to vote or direct the vote of and/or
shares dispositive power with respect to these shares. Dimensional is
deemed to be the beneficial owner of 776,246 shares, or 7.72% of the class,
and has sole voting and dispositive power with respect to these shares. The
address of Dimensional is 1299 Ocean Avenue, 11th Floor, Santa Monica, CA
90401.
4
<PAGE> 7
SECURITY OWNERSHIP OF MANAGEMENT
The following table sets forth certain information regarding the Class A
Common Stock and Class B Common Stock as of April 1, 2000 beneficially owned by:
(i) each director and nominee for director of the Company; (ii) each person who
served as the Company's Chief Executive Officer and each of the Company's four
other most highly compensated executive officers whose compensation exceeded
$100,000 during 1999 and one additional person who would have been included
among the four referred to above had he been serving as an executive officer of
the Company at December 31, 1999; and (iii) all directors and executive officers
as a group. Shares issuable pursuant to the exercise of stock options are
included in the table below if such options are currently exercisable or will
become exercisable by May 31, 2000. None of the Company's executive officers or
directors beneficially owns any shares of the Class A Preferred Stock.
<TABLE>
<CAPTION>
CLASS A COMMON CLASS B COMMON
---------------------- ----------------------
AMOUNT AND AMOUNT AND
NATURE OF NATURE OF
BENEFICIAL PERCENT BENEFICIAL PERCENT
NAME OWNERSHIP OF CLASS OWNERSHIP OF CLASS
- ---- ---------- -------- ---------- --------
<S> <C> <C> <C> <C>
EXECUTIVE OFFICERS/DIRECTORS
Dennis Alter(1)(2)(3)(4)(5)................ 3,046,067 30.28% 1,498,971 8.61%
William A. Rosoff(4)(6)(7)................. 82,798 * 397,562 2.29%
EXECUTIVE OFFICERS
Philip M. Browne(8)........................ 37,500 * 87,655 *
George Deehan(9)........................... 0 * 60,733 *
James L. Shreero(10)....................... 0 * 31,485 *
DIRECTORS
Arthur P. Bellis(4)(11).................... 26,058 * 71,768 *
Max Botel (12)............................. 3,030 * 32,257 *
William C. Dunkelberg(13).................. 1,656 * 43,795 *
Dana Becker Dunn(14)....................... 0 * 28,184 *
Robert C. Hall(15)......................... 0 * 17,982 *
James E. Ksansnak(16)...................... 0 * 17,361 *
Ronald Lubner(17).......................... 0 * 22,125 *
Olaf Olafsson(4)........................... 27,800 * 92,000 *
Michael Stolper(4)(18)..................... 0 * 9,750 *
All officers and directors as a group (14
persons)(1)(2)(3)(4)(6)(19).............. 3,142,111 31.22% 2,370,860 13.33%
</TABLE>
- ---------------
* Represents less than 1% of the indicated class of the Company's Common
Stock outstanding as of April 1, 2000.
(1) Includes 551,695 shares of Class A Common Stock owned by a trust, the
beneficiary of which is Linda Alter, the sister of Dennis Alter, and
pursuant to which Mr. Alter is sole trustee. Mr. Alter disclaims beneficial
ownership of these shares.
(2) Includes 82,798 shares of Class A Common Stock and 40,768 shares of Class B
Common Stock held by a charitable foundation established by Mr. Alter, as
to which Mr. Alter shares voting and dispositive powers, and 41,399 shares
of Class A Common Stock and 12,285 shares of Class B Common Stock, held by
a trust established by Mr. Alter, through which he has made certain
charitable gifts of shares and as to which Mr. Alter has sole voting and
dispositive powers. Also includes 571,905 shares of Class A Common Stock
and 36,400 shares of Class B Common Stock held by a charitable foundation
established by Mr. Alter, as to which Mr. Alter and his wife share voting
and dispositive powers. Mr. Alter disclaims beneficial ownership of all
such shares.
5
<PAGE> 8
(3) Does not include 1,010 shares of Class A Preferred Stock owned by the wife
of Dennis Alter.
(4) Does not include shares held in trust for the benefit of employees of the
Company participating in the ESOP as to which Messrs. Alter, Rosoff,
Olafsson, Bellis and Stolper are trustees. As of December 31, 1999, the
ESOP held 1,000,000 shares of Class A Common Stock as follows: 34,771
shares allocated to ESOP participants who direct the vote of such shares
and as to which the ESOP trustees have no beneficial ownership; and 965,229
shares which, as of December 31, 1999, had not been allocated to ESOP
participants as to which the ESOP trustees may be deemed beneficial owners
under Rule 13d. Shares of Class A Common Stock held by the ESOP, but not
yet allocated or as to which ESOP participants have not made timely voting
direction, are voted by the ESOP trustees in the same proportions as shares
for which directions are received (subject to each trustee's fiduciary
responsibilities under Section 404 of ERISA). Each of Messrs. Alter,
Rosoff, Olafsson, Bellis and Stolper disclaims beneficial ownership of the
965,229 unallocated shares held by the ESOP.
(5) Includes options to purchase 183,459 shares of Class B Common Stock
pursuant to the Company's stock option plans.
(6) Includes 82,798 shares of Class A Common Stock and 40,768 shares of Class B
Common Stock owned by a charitable foundation established by Mr. Alter as
to which Mr. Rosoff has shared voting and dispositive power. These shares
are also reflected in the ownership table under Mr. Alter's name.
(7) Includes options to purchase 153,006 shares of Class B Common Stock
pursuant to the Company's stock option plans.
(8) Includes options to purchase 25,000 shares of Class B Common Stock pursuant
to the Company's stock option plans.
(9) Includes options to purchase 14,500 shares of Class B Common Stock pursuant
to the Company's stock option plans.
(10) Includes options to purchase 13,956 shares of Class B Common Stock pursuant
to the Company's stock option plans.
(11) Includes options to purchase 11,715 shares of Class B Common Stock pursuant
to the Company's stock option plans.
(12) Includes options to purchase 1,530 shares of Class A Common Stock and
25,183 shares of Class B Common Stock pursuant to the Company's stock
option plans.
(13) Includes options to purchase 1,656 shares of Class A Common Stock and
41,795 shares of Class B Common Stock pursuant to the Company's stock
option plans.
(14) Includes options to purchase 28,184 shares of Class B Common Stock pursuant
to the Company's stock option plans.
(15) Includes options to purchase 17,438 shares of Class B Common Stock pursuant
to the Company's stock option plans.
(16) Includes options to purchase 15,598 shares of Class B Common Stock pursuant
to the Company's stock option plans.
(17) Includes options to purchase 22,125 shares of Class B Common Stock pursuant
to the Company's stock option plans.
(18) Includes options to purchase 9,750 shares of Class B Common Stock pursuant
to the Company's stock option plans.
(19) Includes options to purchase 3,186 shares of Class A Common Stock and
561,709 shares of Class B Common Stock pursuant to the Company's stock
option plans.
6
<PAGE> 9
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the 1934 Act requires the Company's officers and directors
and persons who own more than ten percent of a registered class of the Company's
equity securities (collectively, the "Reporting Persons") to file reports of
ownership and changes in ownership with the Commission and to furnish the
Company with copies of these reports. Based on the Company's review of the
copies of those reports which it has received, and written representations from
the Company's officers and directors who are Reporting Persons, the Company
believes that all filings required to be made by the Reporting Persons from
January 1, 1999 through December 31, 1999 were made on a timely basis except as
noted below. With respect to one transaction, William A. Rosoff failed to timely
file a Form 4; however, this transaction was subsequently reported on an
amendment to his Form 5. With respect to one newly appointed executive officer,
James L. Shreero, a Form 3 was not timely filed; however, this Form 3 was
subsequently filed.
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The following table sets forth, for the Company's last three fiscal years,
the cash compensation paid by the Company, as well as certain other compensation
paid or accrued for those years, to the individuals named below (the "Named
Executive Officers").
<TABLE>
<CAPTION>
LONG TERM
COMPENSATION AWARDS
ANNUAL COMPENSATION --------------------------
--------------------------------------------- RESTRICTED SECURITIES
OTHER ANNUAL STOCK UNDERLYING ALL OTHER
NAME AND BONUS COMPENSATION AWARD(S) OPTIONS/ SARS COMPENSATION($)
PRINCIPAL POSITION YEAR SALARY($) ($)(1)(2) ($)(3) ($)(4) (#)(5) (6)(7)(8)(9)
- ------------------ ---- --------- ---------- ------------ ---------- ------------- ---------------
<S> <C> <C> <C> <C> <C> <C> <C>
Dennis Alter..................... 1999 $595,000 $ 223,150 $ 47,126 $ 291,263 100,000 $443,625
Chairman of the Board and 1998 $595,000 $5,045,848 $ 41,805 $ 537,954 120,000 $297,636
Chief Executive Officer 1997 $595,000 $ 334,730 $ 24,634 $ 0 0 $315,914
William A. Rosoff................ 1999 $595,000 $ 378,125 $ 0 $ 325,805 100,000 $108,829
President and Vice Chairman 1998 $595,000 $5,448,868 $1,869,611 $ 700,209 228,666 $128,106
of the Board 1997 $475,000 $ 542,223 $ 0 $ 0 75,000 $168,490
Olaf Olafsson(10)................ 1999 $480,564 $ 0 $ 0 $ 553,125 115,000 $ 14,192
1998 $535,752 $ 200,000 $ 0 $6,710,419 100,000 $ 11,303
1997 $289,197 $ 0 $ 0 $ 0 0 $ 0
Philip M. Browne(11)............. 1999 $370,000 $ 87,523 $ 0 $ 508,928 25,000 $ 8,782
Senior Vice President 1998 $195,185 $ 51,053 $ 0 $1,713,466 75,000 $ 297
and Chief Financial Officer
George Deehan(12)................ 1999 $353,049 $ 58,285(13) $ 0 $ 72,473 18,000 $ 12,162
President and Chief Executive 1998 $139,612 $ 16,888(13) $ 0 $ 593,913 40,000 $ 0
Officer, Advanta Leasing
Services
James L. Shreero................. 1999 $200,000 $ 14,070 $ 391 $ 61,774 5,000 $ 9,198
Vice President and 1998 $199,231 $ 0 $ 255 $ 55,601 18,062 $ 8,935
Chief Accounting Officer 1997 $124,808 $ 35,042 $ 137 $ 0 2,500 $ 7,253
</TABLE>
- ---------------
(1) Includes amounts paid pursuant to programs to compensate for any shortfall
in the value of restricted stock awards that vested in 1997 and 1998
pursuant to the AMIP Plans described in footnote (4) below. Messrs. Alter,
Rosoff and Shreero received $45,848, $293,868 and $5,971, respectively.
Messrs. Olafsson, Browne and Deehan did not enter the AMIP Plans until 1998
and therefore received no payments pursuant to these programs.
(2) 1998 figures include payments to Messrs. Alter and Rosoff, in the amount of
$5,000,000 each, under the Office of the Chairman Supplemental Compensation
Program in connection with the Company's strategic alternatives process and
the resulting Consumer Credit Card Transaction (as defined herein). 1998
figures also include a one-time signing bonus, in the amount of
7
<PAGE> 10
$200,000, paid to Mr. Olafsson in connection with the execution of his
employment agreement. 1999 and 1998 figures include a one-time signing
bonus, in the amount of $70,000, paid to Mr. Deehan in connection with the
execution of his employment agreement, of which $40,833 was paid in 1999
and $29,167 was paid in 1998.
(3) Includes above-market interest earned on deferred compensation pursuant to
the Company's Executive Deferral Plan, in the amounts listed with respect
to each year as follows: Mr. Alter received $47,126, $41,805 and $24,634
for 1999, 1998 and 1997, respectively; and Mr. Shreero received $391, $255
and $137 for 1999, 1998 and 1997, respectively. With respect to Mr. Rosoff,
1998 amount includes $1,869,611 for amounts paid, consistent with the terms
of his employment agreement, in connection with the Tender Offer (as
defined herein) related to the purchase of restricted shares of Class B
Common Stock and the reimbursement for taxes arising therefrom, as
described in this Proxy Statement under "Other Matters".
(4) The Advanta Management Incentive Plan With Stock Election III ("AMIP III")
was instituted in 1993 for performance years 1996 through 1998. The Advanta
Management Incentive Plan With Stock Election IV ("AMIP IV") was instituted
in 1995 for performance years 1999 through 2001 (AMIP III and AMIP IV are
collectively referred to as the "AMIP Plans"). Pursuant to each of the AMIP
Plans, shares of restricted Class B Common Stock were issued to
participants in each AMIP Plan upon the plan's commencement or such
participant's later employment with the Company (with a prorated share
issuance awarded for any partial year participation). The number of
restricted shares issued to each Named Executive Officer pursuant to the
AMIP Plans is an amount equal to the participant's "target bonus" for each
performance year covered by the applicable AMIP Plan divided by the
applicable grant date price per share. Non-preferential dividends are paid
on these restricted shares.
Shares vest under each of the AMIP Plans ten years after the date of
grant, but are subject to accelerated vesting on the basis of individual
and corporate (or applicable business unit) performance for each applicable
performance year. To the extent that individual and corporate (or
applicable business unit) performance for a given performance year achieves
targeted levels in that year, up to a maximum of one-third of the total
shares granted under the applicable AMIP Plan (or appropriate proration for
participants entering such AMIP Plan after the beginning of the first
performance year thereunder) will become vested.
Messrs. Olafsson, Browne and Deehan joined the Company in 1998 and
consequently their 1998 figures include shares granted in 1998 pursuant to
the AMIP Plans in respect of their "target bonuses" for performance years
1998 through 2001 in the following amounts: Mr. Olafsson, 13,590 AMIP III
shares and 48,924 AMIP IV shares; Mr. Browne, 4,441 AMIP III shares and
22,839 AMIP IV shares; and Mr. Deehan 3,628 AMIP III shares and 26,121 AMIP
IV shares.
In addition to his AMIP III and AMIP IV shares, pursuant to his
employment agreement, Mr. Olafsson was granted 200,000 shares of restricted
Class B Common Stock in March 1998. In addition to his AMIP III and AMIP IV
shares, pursuant to his employment agreement which is described under
"Other Matters" in this Proxy Statement, Mr. Browne was granted 50,000
shares of restricted Class B Common Stock in June 1998. The shares of
restricted Class B Common Stock granted pursuant to these employment
agreements are included in the 1998 figures for Messrs. Olafsson and Browne
and, for purposes of this table, are valued at their market value on the
date of grant. On March 17, 1999, the employment agreements for Messrs.
Olafsson and Browne were modified, as more fully described under "Report on
Executive Compensation" in this Proxy Statement. In connection with the
modifications: Mr. Olafsson was granted 50,000 shares of restricted Class A
Common Stock in exchange for the surrender and cancellation of 50,000
shares of restricted Class B Common Stock that had previously been granted
to him under his original employment agreement; and Mr. Browne was granted
37,500 shares of restricted Class A Common Stock in exchange for the
surrender and cancellation of 37,500 shares of restricted Class B Common
Stock that had previously been
8
<PAGE> 11
granted to him under his original employment agreement. The shares of
restricted Class A Common Stock granted pursuant to the modified employment
agreements are included in the 1999 figures for Messrs. Olafsson and Browne
and, for purposes of this table, are valued at their market value on the
date of grant. The 1998 figures for Messrs. Olafsson and Browne have not
been restated to reflect the surrender and cancellation of 50,000 shares of
restricted Class B Common Stock and 37,500 shares of Class B Common Stock,
respectively.
1998 figures reflect an adjustment to the number of shares of
restricted Class B Common Stock that previously had been granted pursuant
to AMIP III for performance year 1998 and AMIP IV for performance year
1999. As more fully described under "Report on Executive Compensation" in
this Proxy Statement, 1999 figures reflect an adjustment to the number of
shares of restricted Class B Common Stock that previously had been granted
pursuant to AMIP IV for performance year 2000. The aggregate number of
additional shares granted to each Named Executive Officer (other than Mr.
Alter, as discussed below) pursuant to these adjustments and issued under
the AMIP Plans was: Mr. Rosoff, 32,951 AMIP III shares and 65,902 AMIP IV
shares; Mr. Olafsson, 28,410 AMIP III shares and 25,691 AMIP IV shares; Mr.
Browne, 5,165 AMIP III shares and 17,710 AMIP IV shares; Mr. Deehan 2,842
AMIP III shares and 13,642 AMIP IV shares; and Mr. Shreero, 5,815 AMIP III
shares and 11,628 AMIP IV shares. In lieu of granting Mr. Alter additional
shares of restricted Class B Common Stock pursuant to the adjustments
described above, Mr. Alter was granted rights to receive the same economic
benefits that he would have received had he been issued 23,219 additional
AMIP III shares and 54,825 additional AMIP IV shares. The rights granted to
Mr. Alter are subject to the same terms and conditions as AMIP III and AMIP
IV, including accelerated vesting.
In March 1998, a full one-third of the shares issued under AMIP III
vested, for performance year 1997, for Messrs. Alter, Rosoff and Shreero.
In addition, each of Messrs. Alter and Rosoff had restricted shares that
had been eligible for accelerated vesting for performance year 1996 but did
not vest (the "frozen shares"). Under the AMIP Plans, frozen shares are
available for accelerated vesting in future years in the event of an award
made in future years that exceeds the executive's target bonus for that
year. In March 1998, all of the frozen shares from performance year 1996
were also vested for performance year 1997 for Messrs. Alter and Rosoff.
In March 1999, ninety percent (90%) of one-third of the shares issued
under AMIP III vested with respect to Mr. Shreero, and a full one-third of
the shares issued under AMIP III vested with respect to each of the other
Named Executive Officers for performance year 1998. Mr. Alter also received
the economic benefits of the rights that were issued in lieu of additional
restricted shares under AMIP III. The remaining ten percent (10%) of
one-third of the shares issued under AMIP III that did not vest for Mr.
Shreero became frozen shares available for accelerated vesting in future
years in the event of an award in future years that exceeds his target
bonus.
In March 2000, eighty percent (80%) of one-third the shares issued
under AMIP IV vested with respect to Mr. Deehan and a full one-third of the
shares issued under AMIP IV vested for each of the other Named Executive
Officers (other than Mr. Olafsson, as described below) for performance year
1999. Mr. Alter also received the economic benefits of the rights that were
issued in lieu of additional restricted shares under AMIP IV. In March
2000, twenty percent (20%) of Mr. Shreero's frozen shares from performance
year 1998 also vested. The remaining twenty percent (20%) of one-third of
the shares issued under AMIP IV that did not vest for Mr. Deehan became
frozen shares available for accelerated vesting in future years in the
event of an award that exceeds his target bonus. Due to his resignation as
President prior to completion of the 1999 performance year, Mr. Olafsson
was not eligible to receive accelerated vesting of any AMIP shares.
The number of unvested restricted shares of Class B Common Stock held
by each Named Executive Officer (other than Mr. Olafsson, as discussed
below) under AMIP IV and the
9
<PAGE> 12
number of unvested restricted shares of Class A Common Stock held by Mr.
Browne under his employment agreement as described above, and the market
value (rounded to the nearest dollar) of such restricted shares at December
31, 1999, were as follows: Mr. Alter, 43,761 Class B shares, $615,389; Mr.
Rosoff, 93,049 Class B shares, $1,308,502; Mr. Browne, 40,549 Class B
shares, $570,220 and 37,500 Class A shares, $684,375; Mr. Deehan, 39,763
Class B shares, $559,167; and Mr. Shreero, 17,529 Class B shares, $246,502.
The number and value of shares of unvested restricted stock owned by each
Named Executive Officer at December 31, 1999 have not been adjusted to
reflect the number of shares that vested in March 2000, as described in the
preceding paragraph of this footnote (4). As described more fully under
"Other Matters" in this Proxy Statement, in connection with his resignation
as President, Mr. Olafsson forfeited all of his unvested restricted shares
that had been granted under the AMIP Plans and all but 27,800 restricted
shares of Class A Common Stock under his employment agreement.
(5) In accordance with the terms of the Company's stock option plan, 100,000 of
the options reflected for Mr. Olafsson in 1999 were terminated on October
25, 1999 in connection with his resignation as President, and the remaining
15,000 options reflected for Mr. Olafsson in 1999 were granted to him upon
becoming a non-employee Director of the Company following his resignation
as President. 1998 figures include an aggregate of 154,880 shares
underlying options granted in connection with option repricing.
(6) Includes matching contributions of $8,000 paid by the Company to the
accounts of each of Messrs. Alter, Rosoff, Browne and Shreero, and $2,861
paid by the Company to the account of Mr. Olafsson, under the Employee
Savings Plan (a 401(k) Plan), in respect of their 1999 participation in
such plan.
(7) Includes the value of (i) Company paid term life insurance provided to all
salaried employees in an amount equal to two times annual salary (capped at
$750,000), (ii) Company paid term life insurance provided to Mr. Alter in
the amount of $5,000,000, and (iii) whole life insurance policies on the
lives of each of the Named Executive Officers other than Mr. Browne and Mr.
Shreero, which policies are paid for by the Company and as to which the
Named Executive Officer has the right to designate the beneficiary (the
"Split Dollar Life Insurance Policies"). If an insured executive terminates
his employment with the Company, he may keep the Split Dollar Life
Insurance Policy, but must pay the Company the amount of the premiums paid
by or on behalf of the Company but not more than the cash value of the
policy. Consequently, the value of the Split Dollar Life Insurance Policy
to the employee is the term life insurance benefit. The aggregate value of
these benefits to the named individuals is included in the figures for 1999
in the following amounts: Mr. Alter, $46,364; Mr. Rosoff, $13,502; Mr.
Olafsson, $2,772; Mr. Browne, $782; Mr. Deehan, $7,771; and Mr. Shreero
$417.
(8) Includes interest paid in 1999 by the Company on behalf of Messrs. Rosoff
and Shreero pursuant to an executive loan program adopted by the Company's
Board of Directors, which interest accrued on the Named Executive Officers'
respective stock margin accounts in connection with margin loans against
shares vested under the AMIP Plans and a predecessor stock bonus plan, in
the following amounts: Mr. Rosoff, $5,942; and Mr. Shreero, $781.
(9) Includes the value of Split Dollar Life Insurance Policies described above
in footnote (7) insuring the lives of each of the Named Executive Officers
other than Mr. Browne and Mr. Shreero, the proceeds of which policies are
payable to beneficiaries designated by the respective executives. The value
of the term life insurance premiums paid by or on behalf of the Company
under such policies for the named individuals is included in the figures
set forth in footnote (7) above in the following amounts for 1999: Mr.
Alter, $19,063; Mr. Rosoff, $8,650; Mr. Olafsson, $2,084; and Mr. Deehan,
$3,507. Premiums paid by the Company will be refunded to the Company on
termination of the respective policies, and any cash surrender value in
excess of such premiums may be paid to the executive's beneficiary. The
value of the benefits to the executives of the remainder of the premiums
paid by the Company are included with
10
<PAGE> 13
respect to 1999 in the following amounts: Mr. Alter, $389,261; Mr. Rosoff,
$81,385; Mr. Olafsson, $8,559; and Mr. Deehan, $4,391.
(10) During 1999, Mr. Olafsson served as President of the Company until his
resignation on October 24, 1999.
(11) 1998 information represents compensation to Mr. Browne from June 1998, when
he joined the Company.
(12) 1998 information represents compensation to Mr. Deehan from August 1998,
when he joined the Company.
(13) Represents the value of housing benefits provided to Mr. Deehan pursuant to
the terms of his employment agreement which is described under "Other
Matters" in this Proxy Statement.
STOCK OPTION/SAR GRANTS
The following table contains information concerning the stock options and
stock appreciation rights ("SARs") granted under the Company's 1992 Stock Option
Plan to the Named Executive Officers during 1999. All options granted in 1999
are options to purchase shares of Class B Common Stock. All SARs reported in the
table below are based on shares of Class B Common Stock.
OPTION/SAR GRANTS IN LAST FISCAL YEAR(1)
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
--------------------------
NUMBER OF % OF TOTAL
SECURITIES OPTIONS/SARS
UNDERLYING GRANTED TO EXERCISE OR GRANT DATE
OPTIONS/SARS EMPLOYEES IN BASE PRICE EXPIRATION PRESENT
NAME GRANTED FISCAL YEAR ($/SH) DATE VALUE($)
- ---- ------------ ------------ ----------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Dennis Alter................... 100,000 7.89% $ 8.500 02/28/09 $365,000(2)
William A. Rosoff.............. 100,000 7.89% $ 8.500 02/28/09 $365,000(2)
Olaf Olafsson.................. 100,000 7.89% $ 8.500 02/28/09 $365,000(3)
15,000 1.18% $13.0625 10/25/09 $105,150(4)
Philip M. Browne............... 25,000 1.97% $ 8.500 02/28/09 $ 91,250(2)
George Deehan.................. 18,000 1.42% $ 8.500 02/28/09 $ 65,700(2)
James L. Shreero............... 5,000 .39% $ 8.500 02/28/09 $ 18,250(2)
</TABLE>
- ---------------
(1) Options and SARs generally become exercisable in equal installments on the
first four anniversaries of the date of grant. The options and SARs expire
10 years from the date of grant.
(2) Fair value is estimated on the date of grant using the Black-Scholes option
pricing model with the following assumptions: risk-free interest rate of
5.39%; expected dividend yield of 3.56%; expected life of ten years; and
volatility of 50.32%.
(3) Fair value is estimated on the date of grant using the Black-Scholes option
pricing model with the following assumptions: risk-free interest rate of
5.39%; expected dividend yield of 3.56%; expected life of ten years; and
volatility of 50.32%. In accordance with the Company's stock option plan,
these options were terminated on October 25, 1999 in connection with Mr.
Olafsson's resignation as President of the Company.
(4) Fair value is estimated on the date of grant using the Black-Scholes option
pricing model with the following assumptions: risk-free interest rate of
6.21%; expected dividend yield of 2.32%; expected life of ten years; and
volatility of 53.45%. Following his resignation as President, these options
were granted to Mr. Olafsson, in accordance with the Company's stock option
plan, upon becoming a non-employee Director of the Company.
11
<PAGE> 14
STOCK OPTION/SAR EXERCISES AND HOLDINGS
The following table sets forth information relating to options exercised
during 1999 by the Named Executive Officers, and the number and value of options
and SARs held on December 31, 1999 by such individuals. No options or SARs were
exercised by the Named Executive Officers during 1999.
AGGREGATE OPTION/SAR EXERCISES IN LAST YEAR
AND FISCAL YEAR-END OPTION/SAR VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
SHARES UNDERLYING UNEXERCISED IN-THE-MONEY
ACQUIRED OPTIONS/SARS AT FY-END OPTIONS/SARS AT FY-END
ON VALUE --------------------------- ---------------------------
NAME EXERCISE(#) REALIZED($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ---- ----------- ----------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Dennis Alter................ 0 $0 213,459 190,000 $281,873 $556,250
William A. Rosoff........... 0 $0 110,241 218,425 $ 0 $556,250
Olaf Olafsson............... 0 $0 0 15,000 $ 0 $ 15,000
Philip M. Browne............ 0 $0 18,750 81,250 $ 0 $139,063
George Deehan............... 0 $0 10,000 48,000 $ 0 $100,125
James L. Shreero............ 0 $0 9,851 13,211 $ 0 $ 27,813
</TABLE>
12
<PAGE> 15
REPORT ON EXECUTIVE COMPENSATION
INTRODUCTION
Compensation programs for the Company's leaders are intended to further the
earnings of the Company by securing, retaining and motivating management
employees of high caliber and potential. The programs described herein cover
those employees whose decision-making and leadership drives the achievement of
the Company's business strategies.
The Compensation Committee of the Board of Directors (the "Committee") is
responsible for establishing the Company's overall compensation philosophy and
strategy and monitoring the implementation thereof, except with respect to the
administration of the Company's stock option plan and AMIP plans. However, the
Committee's determinations regarding compensation of members of the Office of
the Chairman are reviewed and approved by the full Board of Directors (excluding
the employee directors). The Office of the Chairman presently consists of Mr.
Alter, Chairman and Chief Executive Officer ("CEO"), and Mr. Rosoff, President
and Vice Chairman of the Board. Prior to his resignation on October 24, 1999,
Mr. Olafsson, who was then serving as President of the Company, was also a
member of the Office of the Chairman.
The Board of Directors has established a subcommittee of the Committee,
currently composed of Mr. Botel, Ms. Becker Dunn and Mr. Lubner (each of whom is
a "non-employee director" under applicable Commission rules and an "outside
director" under applicable IRS rules), that administers the Company's Stock
Option Plan with respect to the Company's "officers" as that term is defined for
purposes of Section 16 of the 1934 Act, as amended ("Section 16 Officers")
(including the Named Executive Officers). In addition, the Board of Directors
has established the Plan Administrative Committee, currently composed of the
same individuals who serve on the Committee, to administer the AMIP Plans with
respect to the Company's Section 16 Officers (including the Named Executive
Officers).
The executive compensation program includes base salary, performance-based
annual and long-term incentives and stock options. Target levels of overall
compensation are intended to be consistent with the pay practices of a selected
peer group of companies (the "peer group"). The applicable peer group for 1999
consists of nonconforming mortgage banking companies.
BASE SALARIES
The Company establishes base salaries based upon periodic comparison to the
salaries paid by companies in the peer group. The Company's philosophy is to
limit fixed costs in its executives' compensation by emphasizing the variable
components of total compensation, i.e., annual and long-term incentives.
Base salaries are intended to approximate the median base salaries of the
peer group companies. The members of the Office of the Chairman are all paid the
same base salary, which is intended to provide a level of compensation that is
competitive with the Company's peer group. For 1999, as for 1998, the base
salary rate for Messrs. Alter, Rosoff and Olafsson was $595,000. Messrs. Browne
and Deehan each received salary increases during 1999 to maintain the
competitiveness of their compensation relative to that paid by peer Companies to
executives in comparable positions. Mr. Shreero's base salary did not change
during 1999.
LONG-TERM INCENTIVES
The Company offers its senior management employees two forms of long-term
incentives: restricted stock (primarily delivered through the AMIP Plans); and
stock options. The Committee believes that share ownership aligns the interests
of the Named Executive Officers and other senior management employees with the
interests of the Company's stockholders by tying a significant portion of senior
executive compensation to stockholder returns.
13
<PAGE> 16
AMIP PLANS
The Company offers senior management employees long-term incentives through
its AMIP Plans. Each participant in the AMIP Plans, including the Named
Executive Officers, has an annual "target bonus," specified as a percentage
(determined by the executive's position in the Company) of his or her base
salary. Shares of restricted Class B Common Stock are issued to participants
upon the plan's commencement or a participant's later employment with the
Company in an amount equal to the participant's "target bonus" for each
performance year covered by the AMIP Plan divided by the grant date price of the
shares (determined in accordance with the Plan). The restricted AMIP shares will
ultimately vest ten years after they have been issued (as long as the executive
remains employed by the Company). However, each executive may "earn" accelerated
vesting of the shares if the Company achieves its performance goals for the
performance years covered by the plan. The performance goals for the 1999
performance year are discussed below under "Annual Incentives." If, upon
accelerated vesting of shares based on performance for a given year, the share
price exceeds the price at which the shares were originally issued, the
executive receives the benefit of a long-term incentive. The long-term incentive
is realized in the form of the stock's appreciation in value.
Mr. Alter and Mr. Shreero entered the AMIP IV Plan upon its introduction in
1995. At that time, shares of restricted Class B Common Stock with a value equal
to their future target bonuses for the years 1999, 2000 and 2001 were issued
based on the then-market price of $25.00 per share. Upon joining the Company,
Messrs. Rosoff, Olafsson, Deehan and Browne entered the AMIP IV Plan, and they
each received shares of restricted Class B Common Stock with a value equal to
their future target bonuses for 1999, 2000 and 2001 based on varying share
prices determined in accordance with the plan provisions.
On February 20, 1998, the Company closed the transaction pursuant to which
the Company contributed its consumer credit card business to a limited liability
company controlled by Fleet Financial Group, Inc. (the "Consumer Credit Card
Transaction") and effected a pro rata tender offer for a portion of the
Company's outstanding capital stock (the "Tender Offer"). In October 1999, the
Plan Administrative Committee (acting with respect to the Section 16 Officers,
including the Named Executive Officers) and Messrs. Alter, Rosoff and Olafsson
(acting with respect to all other AMIP participants) approved an adjustment to
the number of shares of restricted Class B Common Stock that previously had been
granted to Company employees who participate in the AMIP IV program, with regard
to the 2000 performance year. This adjustment was intended to preserve the
economic value of the original grants of restricted AMIP shares in light of the
Company's restructuring undertaken after the Consumer Credit Card Transaction.
The adjustment resulted in the issuance of additional restricted shares of Class
B Common Stock to AMIP participants, including all other Named Executive
Officers that were employed by the Company at the time (except Mr. Alter). This
adjustment was authorized and approved in order to continue the incentives
intended by giving the Company's executive officers the opportunity to earn the
early vesting of their AMIP shares in payment of their target bonuses. In
approving the adjustment, the applicable committees also took into consideration
the fact that while Company stockholders were afforded the opportunity to sell a
significant portion of their shares at $40.00 per share in the Tender Offer,
AMIP participants were not afforded a comparable opportunity to tender their
nonvested AMIP restricted shares. In lieu of granting Mr. Alter additional
shares of restricted Class B Common Stock under the AMIP plans pursuant to the
adjustment described above, Mr. Alter received rights to receive the same
economic benefits that he would have received had he been issued additional AMIP
IV shares. These rights are subject to the same terms and conditions as AMIP IV,
including accelerated vesting. Due to his resignation from the position of
President, Mr. Olafsson was not granted any additional AMIP shares during 1999.
In addition to the restricted shares granted under the AMIP Plans, shares
of restricted Class B Common Stock were granted outside of the AMIP Plans to Mr.
Olafsson (who received 200,000 on the date he became President) and Mr. Browne
(who received 50,000 on his date of hire) pursuant
14
<PAGE> 17
to the terms of their employment agreements. These restricted shares vest in
equal increments on the first four anniversaries of the date of grant as long as
the executive continues to be employed by the Company on such dates. In March
1999, the Committee and the Board of Directors approved a modification to the
terms of the employment agreements for each of Messrs. Olafsson and Browne.
Pursuant to the modified terms of the agreements, Messrs. Olafsson and Browne
each surrendered a portion of their shares of restricted Class B Common Stock
and in exchange each was granted an equal number of shares of restricted Class A
Common Stock. Mr. Olafsson received 50,000 restricted shares of Class A Common
Stock and Mr. Browne received 37,500 restricted shares of Class A Common Stock
in exchange for an equal number of restricted shares of Class B Common Stock
that were surrendered. The shares of restricted Class A Common Stock that were
granted are subject to the same vesting schedule as the shares of restricted
Class B Common Stock that were surrendered. Effective October 25, 1999, in
conjunction with Mr. Olafsson's resignation as President, Mr. Olafsson
surrendered all of his shares of restricted Class B Common Stock and all but
27,800 restricted shares of Class A Common Stock.
STOCK OPTIONS
The Company's 1992 Stock Option Plan, as amended (the "Stock Option Plan")
rewards long-term accomplishment through increases in stockholder value. The
Stock Option Plan is administered by the subcommittee with respect to Section 16
Officers (including the Named Executive Officers) and by Messrs. Alter and
Rosoff with respect to all other eligible employees. Options are generally
granted annually. The exercise price of an option is 100% of fair market value
on the date of grant, based on the closing price. Options generally vest in
equal portions over a four-year period and expire 10 years after the grant date.
In March 1999, the subcommittee approved the annual grant of stock options
for Messrs. Rosoff, Olafsson, Browne, Deehan and Shreero. The subcommittee
approved a grant of stock appreciation rights under the Stock Option Plan in
lieu of stock options for Mr. Alter.
ANNUAL INCENTIVES
The Company offers senior management employees annual incentives through
its AMIP Plans. As described above, each Named Executive Officer has an annual
"target" bonus, specified as a percentage of his base salary. For 1999, the
Named Executive Officers' target bonuses ranged from 40% (Mr. Shreero) to 75%
(Messrs. Alter and Rosoff, and Mr. Olafsson before his resignation from the
President position) of base salary. Messrs. Browne and Deehan were assigned
target bonuses of 50% of base salary. The actual award for each Named Executive
Officer, if any, for a given year's performance is determined by the Plan
Administrative Committee. In the case of compensation for members of the Office
of the Chairman, a recommendation is made by the Plan Administrative Committee
and then must be approved by the full Board of Directors.
Performance goals are set for each year by senior management of the
Company, subject to review by the Committee. The criteria for 1999 annual
incentives were tied most heavily to the Company achieving the financial goals
set forth in the Company's 1999 financial plan (the "1999 Plan"). The Plan
Administrative Committee also considered progress in building stronger
cooperation and integration among the Company's business units, effective
leadership and development of strong management, progress in support of greater
efficiency, and preparing for the long-term future of the business. The Plan
Administrative Committee therefore considered overall Company performance, based
on the financial and other criteria described above, as well as specific
business unit performance in determining the awards for the Named Executive
Officers. The Plan Administrative Committee recommended the awards for Messrs.
Alter and Rosoff be at 150% of target. Messrs. Browne and Shreero received
awards of 150% and 120% of target, respectively, in recognition of their
continued contributions to the Company's financial strategies and initiatives.
Mr. Deehan received an award of 80% of target, reflecting both the overall
performance of the Company and the relative performance of Advanta Leasing, the
business unit that he managed during 1999.
15
<PAGE> 18
Instead of receiving their annual incentives for 1999 performance in cash,
the Named Executive Officers (other than Mr. Olafsson who did not receive an
AMIP bonus, as discussed below) generally received the amounts that were at or
below their applicable "target bonuses" in the form of shares of restricted
stock granted pursuant to AMIP IV for performance year 1999; the restricted
shares were accelerated in vesting according to the terms of AMIP IV. Due to his
resignation as President, Mr. Olafsson did not receive an AMIP bonus for 1999.
IMPACT OF IRS PAY CAP REGULATION
Section 162(m) of the Code limits the types of annual compensation in
excess of $1,000,000 that may be deducted for federal income tax purposes for
payments to a company's Chief Executive Officer and its four other most highly
compensated Executive Officers. The Committee believes that payment of
compensation that is not deductible under Section 162(m) is sometimes in the
best interests of the Company, and the Committee and the Board of Directors have
accordingly approved such arrangements in certain circumstances.
THE CHIEF EXECUTIVE OFFICER'S 1999 COMPENSATION
Chairman Dennis Alter resumed the role of Chief Executive Officer in
October of 1997, when the Company announced its intention to exit the consumer
credit card business. Mr. Alter held the role of CEO previously from August 1972
through mid-1995. The Committee believes that Mr. Alter's compensation is
appropriate for his role as Chairman and CEO of the Company, and will continue
to evaluate his compensation levels on an ongoing basis.
The Committee and the Board of Directors applied the same criteria
described above under "Annual Incentives" in evaluating the annual incentives to
be awarded to the Chief Executive Officer for the 1999 performance year. The
Committee recommended awarding Mr. Alter a bonus equal to 150% of the targeted
amount. The Board of Directors (excluding the employee directors) approved this
recommendation.
As described above, Mr. Alter received rights to receive the same benefits
that he would have received if he had been granted restricted shares under AMIP
IV, including a right to dividend equivalents.
As CEO, Mr. Alter was eligible to receive a grant under the stock option
program, as were the other Named Executive Officers and, as described above, he
was granted stock appreciation rights under the Stock Option Plan.
<TABLE>
<CAPTION>
COMPENSATION COMMITTEE PLAN ADMINISTRATIVE
AND ITS SUBCOMMITTEE COMMITTEE
<S> <C>
Max Botel, Chairman Max Botel
Dana Becker Dunn Dana Becker Dunn
Arthur P. Bellis* Arthur P. Bellis*
Ronald Lubner Ronald Lubner
</TABLE>
- ---------------
* Mr. Bellis is involved in designing the compensation plans but generally does
not vote on stock-based incentive compensation for the Named Executive
Officers and is not a member of the subcommittee. See "Election of
Directors -- Compensation Committee Interlocks and Insider Participation".
16
<PAGE> 19
STOCK PERFORMANCE GRAPH
The following graph compares the yearly percentage change in the cumulative
total stockholder return on the Company's Class A Common Stock during the five
years ended December 31, 1999 with the cumulative total return on the Standard &
Poor's 500 index and the Dow Jones-Diversified Financial Services Companies
index. The comparison assumes that $100 was invested on January 1, 1995 in the
Class A Common Stock and the comparison indices with reinvestment of dividends.
[Stock Performance Graph]
(A) With respect to the investment in the Class A Common Stock, the solid line
has been adjusted (for the year ended 1998 and 1999) to reflect
participation in the Company's Tender Offer on February 20, 1998 and
includes as stockholder returns the proceeds received in the Tender Offer,
assuming no reinvestment of the proceeds.
<TABLE>
<CAPTION>
ADVANTA WITH DIVERSIFIED S&P 500
ADVANTA WITHOUT PARTICIPATION IN FINANCIAL SERVICES -------
PARTICIPATION IN THE TENDER OFFER ------------------
THE TENDER OFFER (A)
---------------- ----------------
<S> <C> <C> <C> <C>
1/1/95 100.00 100.00 100.00 100.00
12/95 146.80 146.80 161.70 137.60
12/96 165.40 165.40 219.60 169.20
12/97 103.10 103.10 352.80 225.60
12/98 52.90 99.70 416.60 290.10
12/99 74.10 139.50 512.10 351.10
</TABLE>
17
<PAGE> 20
ELECTION OF DIRECTORS
The Board of Directors has nominated three candidates to be elected at the
Meeting for a three-year term ending in 2003. Each nominee is currently serving
as a director of the Company. Eight other directors are currently serving terms
which will expire in 2001 or 2002.
Each nominee has consented to being named in the proxy statement and to
serve if elected. Candidates for director will be elected by a plurality of the
votes of the shares present in person or represented by proxy at the Meeting and
entitled to vote on the election of directors, assuming a quorum is present at
the Meeting. If prior to the Meeting any nominee should become unavailable to
serve, the shares represented by a properly executed and returned proxy will be
voted for such additional person as shall be designated by the Board of
Directors, unless the Board should determine to reduce the number of directors
pursuant to the By-Laws.
Certain information regarding each nominee and each director continuing in
office following the meeting is set forth below, including such individual's age
and principal occupation, a brief account of his or her business experience
during at least the last five years and other directorships currently held at
other companies, including publicly held companies.
NOMINEES FOR ELECTION FOR A TERM EXPIRING IN 2003
Olaf Olafsson William A. Rosoff Michael Stolper
Mr. Olafsson, age 37, has been a director of the Company since December
1997. He joined the Company in September 1996 as Vice Chairman of Advanta
Information Services, Inc. ("AIS") and was elected as a Director of AIS in
October 1996. Mr. Olafsson was elected President of the Company in March 1998.
In October, 1999 he resigned as President. Since November 1999, Mr. Olafsson has
been Vice Chairman of Time Warner Digital Media, a division of Time Warner Inc.
Prior to joining the Company, he was president and chief executive officer of
Sony Interactive Entertainment, Inc., a business unit of Sony Corporation, which
he founded in 1991. Mr. Olafsson is also a director of Mastec, Inc., a publicly
traded telecommunications and energy infrastructure service provider.
Mr. Rosoff, age 56, joined the Company in January 1996 as a director and
Vice Chairman. In October 1999, Mr. Rosoff became President as well as Vice
Chairman of the Board of the Company. Prior to joining the Company, Mr. Rosoff
was a long time partner of the law firm of Wolf, Block, Schorr and Solis-Cohen
LLP, the Company's outside counsel, where he advised the Company for over 20
years. While at Wolf, Block, Schorr and Solis-Cohen LLP he served as Chairman of
its Executive Committee and, immediately before joining the Company, as a member
of its Executive Committee and Chairman of its Tax Department. Mr. Rosoff is a
Trustee of Atlantic Realty Trust, a publicly held real estate investment trust.
Mr. Stolper, age 44, has been a director of the Company since June 1998. He
is Co-managing Director at Hawthorn, a PNC company. Prior to that he served as
President of Stolper & Co., Inc. from 1986 through 1997. In 1997, Stolper & Co.,
Inc. merged with PNC Bank's Family Wealth Management Group to form Hawthorn. Mr.
Stolper has twenty years experience as an investment advisor and financial
consultant.
THE BOARD OF DIRECTORS RECOMMENDS VOTING "FOR" THE ELECTION OF ALL THREE
NOMINEES FOR ELECTION.
INCUMBENT DIRECTORS CONTINUING IN OFFICE FOR A TERM EXPIRING IN 2001
<TABLE>
<S> <C>
Dennis Alter Dana Becker Dunn
Arthur P. Bellis Robert C. Hall
William C. Dunkelberg
</TABLE>
Mr. Alter, age 57, became Executive Vice President and a director of the
Company's predecessor organization in 1967. He was elected President and Chief
Executive Officer in 1972, and Chairman of
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the Board in August 1985. Mr. Alter has remained as Chairman of the Board since
August 1985. In February 1986, he relinquished the title of President, and in
August 1995 he relinquished the title of Chief Executive Officer. In October
1997, Mr. Alter resumed the title of Chief Executive Officer. Mr. Alter is a
director of Next Left, Inc., a privately held internet company.
Mr. Bellis, age 56, has been a director of the Company since its inception
in 1974. He has been a private investor since January 1993. Prior to that time,
from March 1986 he was Chairman and, until June 1991, Chief Executive Officer of
Boca Bank, Boca Raton, Florida. He was also Chairman and Chief Executive Officer
of Boca Bancorp, Inc., the bank's holding company, from its formation in
December 1986. Mr. Bellis has served on the Board of United Way International
since December 1993 and is currently Chairman of that Board.
Dr. Dunkelberg, age 57, has been a director of the Company since June 1990.
He is Professor of Economics at the School of Business and Management at Temple
University. He served as Dean of the School of Business and Management at Temple
from 1987 through 1994. Prior to that, Dr. Dunkelberg was a professor of
economics and management at Purdue and Stanford Universities. As an authority on
consumer credit and small business, he serves on the Board of the National
Bureau of Economic Research and is Chief Economist of the National Federation of
Independent Business.
Mr. Hall, age 68, has been a director of the Company since September 1994.
He is retired. Until January 1999 he was Vice President of The Thomson
Corporation, with responsibilities for technology and global expansion. Until
January 1995, Mr. Hall was Chief Executive Officer of the Thomson
Information/Publishing Group, a worldwide operation with $3.0 billion in sales,
140 companies, and 22,000 employees, and a member of The Thomson Corporation
Board of Directors. From 1984 to 1992 Mr. Hall was Vice Chairman, then Chairman,
of WICAT Systems, a developing education system company. He currently serves on
the Board of The Corporate Executive Board, a publicly held company.
Ms. Becker Dunn, age 49, has been a director of the Company since March
1996. She is Vice President, Growing and Emerging Markets, of Lucent
Technologies Business Communications Services ("BCS"), formerly AT&T Global
Business Communications, which she joined in December 1994. BCS develops,
manufactures, markets and services advanced communications and multimedia
systems for business and government customers in more than 90 countries
worldwide. In 1992 she became Vice President and Chief Technical Officer for
AT&T's Call Servicing (Long Distance) Organization, after which she was Vice
President of Strategic Planning and New Business Development for Consumer
Communications Services. From 1984 to 1992, Ms. Dunn served AT&T in a variety of
capacities, including Product Marketing Director in 1984, Director of
Information Systems in 1986 and Operator Services-Eastern Region Vice President
in 1988.
INCUMBENT DIRECTORS CONTINUING IN OFFICE FOR A TERM EXPIRING IN 2002
Max Botel James E. Ksansnak Ronald Lubner
Mr. Botel, age 60, has been a director of the Company since its inception
in 1974. He retired from the law firm of Botel, Binder & Weiss in July 1996,
where he had been a partner for more than five years. From February 1985 he also
served as Vice President of Penn Center Investments, Inc., a securities
brokerage firm, of which firm he became President in January 1995.
Mr. Ksansnak, age 60, has been a director of the Company since August 1995.
He is Vice Chairman of the Board of ARAMARK Corporation and is a member of its
Board of Directors. He has been with ARAMARK since May 1986 and before becoming
Vice Chairman in May 1997, he was Executive Vice President and Chief Financial
Officer, responsible for financial matters, planning and development, tax,
internal audit and information technology across all business units. Mr.
Ksansnak sits on the board of directors of CSS Industries, Inc.
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Mr. Lubner, age 66, has been a director of the Company since December 1996.
He is Chairman of Belron International Ltd., a Luxembourg company, and Plate
Glass Holdings Ltd., a Johannesburg company. Mr. Lubner is a 40-year veteran of
the Plate Glass Group, which has annual sales of $1.5 billion. Headquartered in
Luxembourg and Johannesburg, the company manufactures and distributes the
complete range of building, automotive and glass products. Belron is a world
leader in the field of automotive glass repair and replacement. Mr. Lubner is
also a director of: Next Left, Inc., a privately held internet company;
E-Mediate, a privately held company; and Commerce One South Africa, a privately
held company.
COMMITTEES, MEETINGS AND COMPENSATION OF THE BOARD OF DIRECTORS
The Board of Directors held six meetings during the last fiscal year. All
directors attended at least 75% of the aggregate number of meetings of the Board
and committees of the Board on which they served.
The Board of Directors has an Audit Committee currently composed of Messrs.
Dunkelberg, Ksansnak and Stolper. The Audit Committee reviews and evaluates the
Company's internal accounting and auditing procedures; recommends to the Board
of Directors the firm to be appointed as independent accountants to audit the
Company's financial statements; reviews with management and the independent
accountants the Company's year-end operating results; reviews the scope and
results of the audit with the independent accountants; reviews with management
the Company's interim operating results; and reviews the non-audit services to
be performed by the firm of independent accountants and considers the effect of
such performance on the accountants' independence. The Audit Committee met four
times in 1999.
The Board of Directors has appointed a Compensation Committee currently
composed of Messrs. Bellis, Botel and Lubner and Ms. Becker Dunn. The
Compensation Committee reviews and approves Company-wide benefit programs and
executive compensation programs, and, where appropriate, reviews and approves
individual arrangements for persons designated as Section 16 Officers. The
Compensation Committee also recommends and approves compensation arrangements
for outside Directors and serves in an advisory capacity to the full Board
regarding compensation matters. The Compensation Committee met two times and
acted by consent once in 1999.
The Board of Directors has established a subcommittee of the Compensation
Committee to administer the Company's Stock Option Plan with respect to Section
16 Officers. The subcommittee is currently composed of Mr. Botel, Ms. Becker
Dunn and Mr. Lubner (each of whom is a "non-employee director" under applicable
Commission rules and an "outside director" under applicable IRS rules). The
subcommittee also has authority to designate whether options granted are
intended to qualify as incentive stock options or are to be non-qualified stock
options. In addition, the Board of Directors has established the Plan
Administrative Committee to administer the AMIP Plans with respect to Section 16
Officers. The current members of the Plan Administrative Committee are the same
as the members of the Compensation Committee. The Board of Directors, as a
whole, administers the Stock Option Plan and AMIP Plans with respect to
non-employee Directors. The subcommittee and the Plan Administrative Committee
each met one time as part of the Compensation Committee's meetings. In addition,
the subcommittee and the Plan Administrative Committee each acted by consent
once during 1999.
The Board of Directors has a Nominating Committee to identify and recommend
to the Board of Directors individuals to serve on the Board, which individuals
are to be selected, according to the Board resolution establishing the
Nominating Committee, on the basis of their integrity, leadership ability,
financial sophistication and capacity to help guide the Company successfully
into the 21st century. The current members of the Nominating Committee are
Messrs. Alter, Bellis and Lubner. The Nominating Committee did not meet during
1999. The Nominating Committee will consider nominees recommended by
stockholders; any such nominations must comply with the requirements of the
Company's By-Laws, including timely delivery to the Company of a written request
from a
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<PAGE> 23
stockholder of record that an individual's name be placed in nomination. Such
written notice must set forth certain information with respect to the
nomination, including: the name and address of the nominating stockholder; the
name and address of the beneficial owner, if different than the nominating
stockholder, of the shares owned of record by the nominating stockholder; the
number and class of shares owned by such nominating stockholder and beneficial
owner; a description of all arrangements and understandings between the
nominating stockholder, any beneficial owner and any persons nominated; the name
and address of any persons nominated; a representation that the nominating
stockholder is a holder of record of the Company's shares entitled to vote at
the meeting and intends to appear in person or by proxy at the meeting to
nominate such persons; such other information regarding each nominee as would
have been required to be included in a proxy statement filed pursuant to the
proxy disclosure rules of the Commission had the nominee been nominated by the
Board of Directors of the Company; and the written consent of each nominee to
serve as a director. To be timely, such notice must, in the case of an annual
meeting that is called for a date that is within 30 days before or after the
anniversary date of the immediately preceding annual meeting, be delivered not
less than 60 nor more than 90 days prior to such anniversary date, or, in the
case of any other annual meeting or any special meeting, not later than the
close of business on the fifth day following the earlier of the day on which
notice of the date of meeting was mailed or publicly disclosed.
The Board of Directors has a Corporate Governance Committee. The current
members of the Corporate Governance Committee are Messrs. Alter, Bellis, Hall
and Lubner. The function of the Corporate Governance Committee is to identify,
analyze and propose approaches and solutions to issues of importance relating to
the long-term effectiveness of the Board of Directors and senior management of
the Company, including for example, issues relating to succession planning,
retirement policies and performance measurement.
Members of the Board of Directors who are not officers or employees of the
Company receive an annual retainer of $25,000 for service on the Board, $10,000
as an annual retainer for service on a Board Committee (other than as a Board
Committee chairperson, for whom the annual retainer is $15,000), and are paid
$1,000 per day for each Board or Board Committee meeting attended (chairmen are
paid $1,500 per day for each Board Committee meeting they chair). However,
Messrs. Bellis, Botel and Lubner and Ms. Becker Dunn are not compensated
separately for serving on the subcommittee or the Plan Administrative Committee,
as applicable, as such service is considered ancillary to their service on the
Compensation Committee. The chairmen of the Audit Committee, the Compensation
Committee, the Nominating Committee and the Corporate Governance Committee are
Messrs. Ksansnak, Botel, Bellis and Hall, respectively. In addition, for each
non-employee Director, the Company pays the premiums on a $500,000 term life
insurance policy on which there is no build-up in cash value, but as to which
the non-employee Director has the right to designate the beneficiary under the
applicable policy. The Company's 1992 Stock Option Plan, as amended provides
that each non-employee Director is currently entitled to receive a grant of an
option to purchase 15,000 shares of Class B Common Stock upon appointment to the
Board of Directors and, for each subsequent year, an annual grant, generally on
the fourth Wednesday in January, of an option to purchase 9,000 shares of Class
B Common Stock, in each case at an exercise price equal to the fair market value
of such stock on the grant date. Each such option granted becomes exercisable on
the anniversary of the grant date at the rate of 25% per year for four years,
and expires ten years from the grant date. Directors are reimbursed for expenses
incurred in attending meetings of the Board of Directors and committees thereof.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The only individuals who served as members of the Compensation Committee
during the fiscal year ended December 31, 1999 are the Compensation Committee's
current members, Messrs. Botel, Bellis and Lubner and Ms. Becker-Dunn, all of
whom served for all of fiscal 1999. None of the
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<PAGE> 24
aforementioned members of the Compensation Committee is an officer or other
employee, or former officer, of the Company or of any subsidiary of the Company.
The only individuals who served as members of the subcommittee of the
Compensation Committee during the fiscal year ended December 31, 1999 are the
subcommittee's current members, Messrs. Botel and Lubner and Ms. Becker-Dunn,
who served for all of fiscal 1999. None of the aforementioned members of the
subcommittee is an officer or other employee, or former officer, of the Company
or of any subsidiary of the Company.
In 1995, the Company engaged Mr. Bellis as a consultant to assist in the
evaluation of certain new business opportunities. During 1999, the Company paid
Mr. Bellis for his services at the rate of $14,000 per month plus reimbursement
of expenses. The consulting fees paid to Mr. Bellis in 1999 totaled $168,000.
CHANGE IN CONTROL AND SEVERANCE ARRANGEMENTS
The Management Severance Plan provides benefits to senior management
employees, including the Named Executive Officers, in the event of a Change of
Control of the Company (as defined therein) if, within one year of the date of
the Change of Control, there has been either an actual or constructive
termination of the senior management employee. The Management Severance Plan
provides severance ranging from 39 to 104 weeks of salary, depending on the
senior management employee's level within the Company.
The Advanta Employees Severance Pay Plan provides benefits to all
employees, including the Named Executive Officers, in the event of termination
of employment due to layoff, reduction in force, reorganization or other similar
business decision. With respect to the Named Executive Officers, this plan
provides benefits ranging from 12 to 32 weeks of salary, depending on the Named
Executive Officer's years of service with the Company.
In May 1997, the Board of Directors adopted the Supplemental Plan under
which members of the Office of the Chairman would be entitled to receive
benefits in the event of a Change of Control or other similar transaction. On
February 20, 1998, the Company completed the Consumer Credit Card Transaction
and the Tender Offer. Upon completion of the Consumer Credit Card Transaction,
Messrs. Alter and Rosoff each received $5.0 million under the terms of the
Supplemental Plan.
OTHER MATTERS
In January 1996, Mr. Rosoff and the Company entered into an agreement under
which Mr. Rosoff's annual base salary is a minimum of $475,000. Under the terms
of the agreement, he is entitled to receive a guaranteed cash bonus which,
together with his base salary, will bring his annual cash compensation to not
less than $750,000. He is also entitled to participate in the AMIP Plans (with a
target bonus of at least 75% of his base salary) and is guaranteed that his
total annual compensation from base salary, guaranteed cash bonus and AMIP award
will be at least $1 million. In anticipation of his execution of the agreement,
the Company paid Mr. Rosoff a one time signing bonus of $950,000 in December
1995. In addition, pursuant to this agreement he received 100,000 restricted
shares of Class B Common Stock and an option to purchase 50,000 shares of Class
B Common Stock at $34.00 per share, the fair market value of the shares on the
date of grant. The restricted shares, which as of the January 1996 date of grant
had a market value of $34.00 per share, originally were to vest at the rate of
25% per annum over four years, with the first two installments having vested on
January 15, 1997 and 1998, and the options become exercisable in the same
installments one day later. The Company has agreed that the 100,000 shares of
restricted Class B Common Stock will have a fair market value sufficient to
allow Mr. Rosoff to realize $40 per share net after applicable taxes resulting
from an assumed sale of such shares on January 15, 2000, and it will make
non-interest bearing loans to him in the interim sufficient to pay his taxes
arising from his receipt of the shares. At December 31, 1999, the aggregate
amount outstanding on these loans was $758,844.26, which was the largest
aggregate amount outstanding at any time since January 1, 1999.
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<PAGE> 25
If the net after tax proceeds of such assumed sale are less than $40, loans will
be canceled and a payment will be made in cash and/or Class B Common Stock to
Mr. Rosoff to make up the shortfall. In January 1998 the Company agreed to
accelerate certain provisions of the employment agreement with respect to
restricted shares purchased by the Company in the Tender Offer.
In connection with the Tender Offer, the Company purchased 49,359 of Mr.
Rosoff's restricted shares at a price of $40.00 per share (subject to the
agreements regarding the after-tax value of these shares to Mr. Rosoff described
above). Consistent with the terms of Mr. Rosoff's employment agreement, in 1998
the Company reimbursed Mr. Rosoff for the taxes arising from the sale of these
shares in the Tender Offer and on the reimbursement to Mr. Rosoff for any taxes.
Also, the Company removed the restrictions on the remaining 641 of his
restricted shares that were not purchased in the Tender Offer and such shares
were returned to Mr. Rosoff as fully vested shares.
In connection with his employment by the Company as Senior Vice President
and Chief Financial Officer, in May 1998 Mr. Browne entered into an employment
agreement with the Company. The agreement provides that Mr. Browne's starting
annual base compensation will be $350,000 and that he will be entitled to
participate in the AMIP Plans (with a target bonus of at least 50% of his base
salary and a maximum bonus of 200% of target). In the event of a "change in
control" (as defined in the Management Severance Plan), Mr. Browne will be
entitled to severance of two times his base salary. Pursuant to his employment
agreement, Mr. Browne received 50,000 shares of restricted Class B Common Stock
and options to purchase 75,000 shares of Class B Common Stock at an exercise
price of $20.00 per share (the fair market value of the shares on the date of
the grant), both of which vest in equal installments on each of the first four
anniversaries of the date of grant. The restricted stock and the options will
immediately vest in the event of a "change in control" (as defined in the Stock
Option Plan). As more fully described in the "Report on Executive Compensation"
in this proxy statement, in March 1999, the Committee and the Board of Directors
approved a modification to the terms of Mr. Browne's employment agreement in
order to enhance the retention value of the long-term incentives provided under
the terms of the employment agreement. Pursuant to the modified terms of the
agreement, Mr. Browne surrendered a portion of his shares of restricted Class B
Common Stock in exchange for a grant of an equal number of shares of restricted
Class A Common Stock. The 37,500 shares of restricted Class A Common Stock that
were granted are subject to the same vesting schedule as the shares of
restricted Class B Common Stock that were surrendered.
In connection with his employment by the Company as President and Chief
Executive Officer of Advanta Leasing, in July 1998 Mr. Deehan entered into an
employment agreement with the Company. The agreement provides that Mr. Deehan's
starting annual base compensation will be $330,000 and that he will be entitled
to participate in the AMIP Plans (with a target bonus of at least 50% of his
base salary and a maximum bonus of 200% of target). Subject to certain
conditions, the agreement provides that the Company, at its expense, will
provide reasonable housing accommodations for Mr. Deehan in Philadelphia as long
as he is employed by the Company. In the event of a "change in control" (as
defined in the Management Severance Plan), Mr. Deehan will be entitled to
severance of two times his base salary. Pursuant to his employment agreement,
Mr. Deehan received options to purchase 40,000 shares of Class B Common Stock at
an exercise price of $14.75 per share (the fair market value of the shares on
the date of the grant), which vest in equal installments on each of the first
four anniversaries of the date of grant. In addition, the employment agreement
provides that if Mr. Deehan shall be terminated from employment by the Company
without cause during the first two years of his employment, he shall be entitled
to severance equal to one year's base salary and, under such circumstances he
shall also have a period of two years to exercise any options vested as of the
date of his termination.
On October 24, 1999, Mr. Olafsson resigned as President of the Company. As
described above under "Report on Executive Compensation" in this Proxy
Statement, upon his resignation, Mr. Olafsson surrendered all of his shares of
restricted Class B Common Stock that had been granted under his employment
agreement and the AMIP Plans and he surrendered all but 27,800 shares of
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restricted Class A Common Stock that had been granted under the modified terms
of his employment agreement. The Board of Directors approved the vesting of
27,800 shares of Class A Common Stock. Following his resignation as President,
Mr. Olafsson remains a Director of the Company.
PROPOSAL TO APPROVE THE
COMPANY'S 2000 OMNIBUS STOCK INCENTIVE PLAN
On April 5, 2000 the Board of Directors of the Company (the "Board of
Directors") adopted, subject to stockholder approval, the Advanta Corp. 2000
Omnibus Stock Incentive Plan, (the "Plan"), which is intended to function as an
amendment and restatement of all other stock option and award plans of the
Company.
The Plan is intended to recognize the contributions made to the Company by
employees (including employees who are members of the Board of Directors) of the
Company and its Affiliates (collectively, "Employees"), to provide Employees
with additional incentive to devote themselves to the future success of the
Company and its Affiliates, and to improve the ability of the Company and its
Affiliates to attract, retain, and motivate individuals upon whom the Company's
sustained growth and financial success depend by awarding them grants under the
Plan consisting of options ("Options") for the purchase of shares of the
Company's Class B Common Stock (the "Common Stock"), awards of Common Stock
("Awards") and/or awards of stock appreciation rights ("SARs", and grants of
Options, Awards and SARs are each referred to individually as a "Grant" and
collectively as "Grants"). "Affiliate" means a corporation which is a parent
corporation or a subsidiary corporation with respect to the Company within the
meaning of Section 424(e) or (f) of the Code, or any successor provision, and,
for purposes of Grants other than ISOs (as defined below), any corporation,
partnership, joint venture or other entity in which the Company, directly or
indirectly, has an equity interest of at least 20% or a significant financial
interest, as determined by the Plan Administration Committee (as defined below).
The Plan also is intended to provide an incentive to directors of the Company
who are not Employees to serve on the Board of Directors or the board(s) of
directors (or similar governing bodies) of an Affiliate and to devote themselves
to the future success of the Company through grants of Options. In addition, the
Plan may be used to encourage consultants and advisors of the Company to further
the success of the Company. The Plan also is intended to permit Awards that
constitute "performance-based compensation" as that term is used for purposes of
Section 162(m) of the Code, at the discretion of the Non-Employee Director
Committee (as defined below). Section 162 (m) of the Code denies a tax deduction
to a publicly held corporation for compensation in excess of $1,000,000 paid to
the Chief Executive Officer and to any of the four most highly compensated
officers (in addition to the Chief Executive Officer) whose compensation is
required to be disclosed to stockholders under the 1934 Act, unless the
compensation is "performance-based."
KEY PROVISIONS OF THE PLAN
The key provisions of the Plan are as follows:
ADMINISTRATION
The Board of Directors may administer the Plan and/or it may designate a
committee or committees composed of two or more of directors to operate and
administer the Plan with respect to all or a designated portion of the
participants. To the extent that the Plan Administration Committee (as defined
below) is empowered to grant Options to Section 16 Officers (as defined below)
or persons whose compensation might have limits on deductibility under Section
162(m) of the Code, the Board of Directors may, at its discretion, appoint a
separate committee, consisting of non-employee directors only (a "Non-Employee
Director Committee"), to administer the Plan with respect to those persons. Any
committee designated by the Board of Directors to administer the Plan, and the
Board of Directors itself in its administrative capacity with respect to the
Plan, is
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referred to as the "Plan Administration Committee." "Section 16 Officer" means
any person who is an "officer" within the meaning of Rule 16a-1(f) promulgated
under the 1934 Act or any successor rule, and who is subject to the reporting
requirements under Section 16 of the 1934 Act with respect to the Common Stock.
The Plan Administration Committee has the power and authority to: (a)
interpret the Plan; (b) adopt, amend and revoke policies, rules and/or
regulations for administration of the Plan that are not inconsistent with its
express terms; and (c) waive requirements relating to formalities or other
matters that do not either modify the substance of the rights intended to be
granted by Grants or constitute a material amendment for any purpose under the
Code. In addition, the Plan Administration Committee has the authority, subject
to any specific provisions or limitations applicable under the Plan, to make
such adjustments to the terms and conditions of any Grants in order to take into
account any facts and circumstances that influence the effectiveness of the Plan
as a method of providing appropriate current performance incentives for
recipients of Grants, including, but not limited to, any facts and circumstances
related to levels of compensation and bonuses paid by other similarly situated
employers, and current needs of the Company to encourage the retention of valued
Employees and to reward high levels of performance by such Employees.
The Plan provides that no member of the Board of Directors will be
personally liable for monetary damages for any action taken or any failure to
take any action in connection with the administration of the Plan or the making
of any Grants under the Plan, except in the case of (a) any breach of such
member's duty of loyalty to the Company or its stockholders, (b) acts or
omissions not in good faith or involving intentional misconduct or a knowing
violation of law, (c) acts or omissions that would result in liability under
Section 174 of the General Corporation Law of the State of Delaware, as amended,
concerning unlawful payment of dividends and unlawful stock purchases and
redemptions, and (d) any transaction from which the member derived an improper
personal benefit. In addition, the Plan provides that service on the Plan
Administration Committee constitutes service as a member of the Board of
Directors and that each member of the Plan Administration Committee is entitled,
without further act on the member's part, to indemnity from the Company and
limitation of liability to the fullest extent provided by applicable law and by
the Company's Articles of Incorporation and/or By-laws in connection with or
arising out of any action, suit or proceeding with respect to the administration
of the Plan or the making of any Grants under the Plan in which the member may
be involved by reason of the member being or having been a member of the Plan
Administration Committee, whether or not the member continues to be a member of
the Plan Administration Committee at the time of the action, suit or proceeding.
ELIGIBILITY
All Employees, members of the Board of Directors, members of the boards of
directors (or similar governing bodies) of the Company's Affiliates and
consultants and advisors to the Company or any Affiliate who render bona fide
services to the Company unrelated to the offer or sale of securities will be
eligible to receive Grants under the Plan. The Plan Administration Committee
will determine whether an individual qualifies as an Employee. As of April 26,
2000, approximately 670 Employees and 12 non-employee members of the Board of
Directors and the boards of directors (or similar governing bodies) of the
Company's Affiliates were eligible to participate in the Plan.
NUMBER OF SHARES OF COMMON STOCK SUBJECT TO THE PLAN
The aggregate maximum number of Shares of Common Stock for which Grants may
be issued under the Plan is 20,000,000 (subject to a permitted Capitalization
Adjustment, as described below), including 9,860,191 shares of Common Stock that
are available for issuance under the Company's existing AMIP and stock option
plans previously approved by the Company's stockholders (which are being amended
and restated by the Plan). "Shares" means the shares of Common Stock (including
hypothetical shares of Common Stock referenced under the terms of a Grant
Document applicable to an SAR) which are subject to any Grant made under the
Plan. "Grant Document"
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means the document provided to a grantee by the Company describing and
establishing the terms of any Grant made pursuant to the Plan. The Shares will
be issued from authorized and unissued Common Stock or Common Stock held in or
hereafter acquired for the treasury of the Company. If an Option or SAR
terminates or expires without having been fully exercised for any reason or if
Shares subject to an Award have been conveyed back to the Company pursuant to
the terms of a Grant Document, the Shares for which the Option or SAR was not
exercised or the Shares that were conveyed back to the Company will again be
available for issuance under the Plan. On April 26, 2000, the closing price of
the Common Stock as reported on the NASDAQ National Market System was $12 1/8
per share.
FISCAL YEAR GRANT LIMITATION
No grantee will be issued Grants during any one fiscal year for more than
900,000 Shares of Common Stock (the "Fiscal Year Grant Limitation"), subject to
a permitted Capitalization Adjustment, as described below.
TERM OF THE PLAN
The Plan became effective as of April 5, 2000, the date on which it was
adopted by the Board of Directors, subject to the approval of the Plan within
one year after that date by the stockholders. If the Plan is not so approved by
the stockholders, all Grants issued under the Plan will be null and void. No
Grants may be made under the Plan on or after April 5, 2010. No Grants have been
issued under the Plan as of the date of this Proxy Statement.
OPTIONS
The Plan authorizes grants of Options, including Options that are intended
to qualify as "incentive stock options," as defined under Section 422 of the
Code ("ISOs") and Options that are not intended to so qualify ("Non-qualified
Stock Options"). Each Option granted under the Plan will be a Non-qualified
Stock Option unless the Option is specifically designated at the time of grant
as an ISO. Options granted under the Plan will be evidenced by Grant Documents
in such form as the Plan Administration Committee shall approve from time to
time, consistent with the terms of the Plan.
Option Price. The price at which Shares may be purchased upon exercise of
an Option (the "Option Price") will be set forth in the applicable Grant
Document. The Option Price of each ISO will be at least 100% of the fair market
value of the Shares on the date the Option is granted. The Option Price of a
Non-qualified Stock Option will, unless otherwise specified in the Grant
Document, be the fair market value ("Fair Market Value") of the Shares on the
date the Option is granted. Under the Plan, Fair Market Value generally is the
closing price on the relevant date of a share of Common Stock if the Common
Stock is listed on a national securities exchange or included in the NASDAQ
National Market System. If the Common Stock is not so listed, Fair Market Value
will be the mean between the last reported "bid" and "asked" prices on the
relevant date, as reported on NASDAQ or, if not so reported, as reported by the
National Daily Quotation Bureau, Inc. or as otherwise reported in a customary
financial reporting service, as applicable and as the Plan Administration
Committee determines. If the Common Stock is not traded in a public market, Fair
Market Value will be determined in good faith by the Plan Administration
Committee.
Exercise. No Option will be deemed to have been exercised prior to the
receipt by the Company of written notice (that complies with the requirements
set forth in the Plan) of the exercise and payment in full of the Option Price,
unless arrangements satisfactory to the Company have been made for payment
through a broker. Subject to the terms of the Grant Document, and unless the
Plan Administration Committee approves otherwise, payment of the Option Price
may be made in cash, by certified check or by such other mode of payment as the
Plan Administration Committee may approve, including payment through a broker in
accordance with procedures
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permitted by rules or regulations of the Federal Reserve Board. In addition, the
Plan Administration Committee may provide in a Grant Document that payment may
be made in whole or in part in shares of Common Stock held by the grantee,
although the Plan Administration Committee may impose from time to time
limitations and prohibitions on the use of shares of Common Stock to exercise an
Option.
Expiration. In general, Options expire and are no longer exercisable after
ten years from the date of grant. In addition, under the Plan, each Option will
expire earlier upon the first to occur of the following: (a) immediately upon a
finding by the Plan Administration Committee that the grantee engaged in
disloyalty of any type to the Company or an Affiliate or has disclosed trade
secrets or confidential information of the Company or an Affiliate; (b) the
date, if any, set by the Plan Administration Committee as an accelerated
expiration date in the event of the liquidation or dissolution of the Company;
(c) the occurrence of any other event or events set forth in the Plan or the
Grant Document as causing an accelerated expiration of the Option; or (d) the
applicable date set forth below in connection with the grantee's termination of
employment or service with the Company or any Affiliate. For these purposes the
applicable date referred to above in subparagraph (d) of this paragraph is: (i)
where the grantee resigns from his or her employment or service with the Company
or any Affiliate without such resignation having been solicited by the Company
or the Affiliate, as the case may be, the date of resignation; (ii) where the
grantee's termination of employment or service with the Company or any Affiliate
is due to the grantee's death or disability, the date that is 180 days following
termination; (iii) where the grantee's termination of employment or service with
the Company or any Affiliate is due to the grantee's retirement, the second
anniversary of termination; (iv) where the grantee is a member of the Board of
Directors or of any board of directors (or similar governing body) of an
Affiliate and is not an Employee and such grantee's service is terminated for
any reason other than disability or death, 90 days following the date of
termination of service; and (v) in all other cases, 30 days after the grantee's
termination of employment or service with the Company or any Affiliate. The only
Options that may be exercised subsequent to the grantee's termination of
employment or service with the Company or an Affiliate are those Options that
were exercisable on the last date of employment or service and not Options
which, if the grantee were still employed or rendering service during the
post-termination period, would become exercisable, unless the Grant Document
specifically provides to the contrary or the Plan Administration Committee
otherwise approves.
Transferability. Except as described below, no Option granted under the
Plan may be transferred, except by will or by the laws of descent and
distribution, and, during the lifetime of the person to whom an Option is
granted, such Option may be exercised only by the grantee. An Option, other than
an ISO, also is transferable (a) pursuant to a domestic relations order as
defined in the Code or Title I of the Employee Retirement Income Security Act of
1974, as amended, or the rules thereunder; and (b) without payment of
consideration, to (i) immediate family members of the holder, (ii) trusts for
the benefit of immediate family members, (iii) partnerships whose only partners
are such family members, and (iv) any transferee permitted by a rule adopted by
the Plan Administration Committee or approved by the Plan Administration
Committee in an individual case. Any transferee will be subject to all of the
conditions set forth in the Option before its transfer.
Other Provisions. Subject to the provisions of the Plan, the Grant
Documents will contain such other provisions as the Plan Administration
Committee deems advisable, including, without limitation, provisions authorizing
the Plan Administration Committee to accelerate the exercisability of all or any
portion of an Option granted pursuant to the Plan, additional restrictions upon
the exercise of the Option or additional limitations upon the term of the
Option.
STOCK APPRECIATION RIGHTS (SARS)
The Plan Administration Committee may grant to optionees SARs, which may or
may not be granted in conjunction with an Option, each of which SAR will entitle
the Grantee to receive a payment upon exercise equal to the excess of the Fair
Market Value of a specified number of Shares,
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determined as of the date the SAR is exercised, over the "purchase price"
specified in the Grant Document applicable to the SAR. The SAR may be
exercisable in whole or in part, and at such times and under such circumstances
as are set forth in the Grant Document applicable to the SAR. In the event an
SAR is granted in conjunction with an Option, the exercise of the SAR will
result in a cancellation of the Option to the same extent as the SAR is
exercised, and the exercise of the Option will result in a cancellation of the
SAR to the same extent as the Option is exercised, and the terms and conditions,
including the number of Shares subject to the SAR, the "purchase price" (which
will be equal to the Option Price) and the times and circumstances in which the
SAR may be exercised, will be the same as are applicable to the Option. Except
as may otherwise be provided in a Grant Document, such payment may be made, as
determined by the Plan Administration Committee in accordance with the Plan and
set forth in the applicable Grant Document, either in Shares or in cash or in
any combination thereof. For purposes of the annual and aggregate limitations on
Shares that may be subject to Grants under the Plan, the grant of an SAR not in
conjunction with an Option will be treated as though such SAR constituted an
Option.
Each SAR will relate either to a specific Option granted under the Plan or
to a hypothetical Option that could have been granted under the Plan. Where an
SAR is granted in conjunction with an Option granted under the Plan, the Grant
Document applicable to the Option will include provisions indicating the SAR
rights. Where an SAR is granted independent of an Option granted under the Plan,
the Grant Document applicable to such SAR will indicate the relevant terms and
conditions applicable to the SAR, including, but not limited to, the number of
hypothetical Shares subject to the terms of the SAR, the "purchase price" to be
taken into account upon exercise of the SAR, and such other terms and conditions
as would be permitted or as are required with respect to the grant of an Option
under the Plan.
SARs will be exercisable at such times and under such terms and conditions
as the Plan Administration Committee, in its sole and absolute discretion,
determines; provided, however, that an SAR that is granted concurrent with an
Option will be exercisable only at such times and by such individuals as the
related Option may be exercised under the Plan and applicable Grant Document.
AWARDS
Awards granted pursuant to the Plan will be evidenced by written Grant
Documents in such form as the Plan Administration Committee from time to time
approves. Each Grant Document will specify the purchase price, if any, that
applies to the Award. If a purchase price is specified, the grantee will be
required to make payment on or before the payment date provided in the Grant
Document. Payment may be made in cash, by certified check payable to the order
of Company or by such other mode of payment as the Plan Administration Committee
may approve. In the case of an Award that provides for a grant of Shares without
any payment by the grantee, the grant will take place on the date specified in
the Grant Document. In the case of an Award that provides for payment of the
purchase price by the grantee, the grant will take place on the date the initial
payment is delivered to Company, unless the Plan Administration Committee or the
Grant Document specifies otherwise.
The Plan Administration Committee may specify in a Grant Document any
conditions under which the grantee will be required to convey to the Company the
Shares covered by the Award. In addition, the Plan Administration Committee, in
its discretion, may provide that certificates for Shares transferred pursuant to
an Award be held in escrow by the Company until all of the conditions have
lapsed. Unless otherwise provided in the Grant Document or determined by the
Plan Administration Committee, dividends and other distributions made on Shares
held in escrow will be deposited in escrow, and held in escrow until such time
as the Shares on which the distributions were made are released from escrow.
Stock certificates evidencing Shares subject to conditions will bear a legend to
the effect that the Shares are subject to repurchase by, or conveyance to, the
Company in accordance with the terms of the Grant Document and that the Shares
may not be sold or otherwise transferred.
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Upon payment of the purchase price, if any, for Shares covered by an Award,
the grantee will have all of the rights of a shareholder with respect to the
Shares covered by the Award, including the right to vote the Shares and (except
as described above with respect to escrowed Shares) receive all dividends and
other distributions paid or made with respect to the Shares, except to the
extent otherwise provided by the Plan Administration Committee or in the Grant
Document.
Performance-Based Awards. In addition to any other terms or conditions the
Plan Administration Committee may establish with respect to any Awards granted
under the Plan, the Non-Employee Director Committee will have the authority to
make Awards that constitute performance-based compensation for purposes of
Section 162(m) of the Code. In the event the Non-Employee Director Committee
determines to grant performance-based Awards, the Non-Employee Director
Committee will establish in writing one or more specific performance goals
during the first 90 days of the performance period established for that Award
(or within the first 25% of that performance period if that is less than 90
days) and an objective formula or method for computing the amount of bonus
compensation payable to each grantee if the specified performance goals are
attained. Performance goals will be based upon one or more of the following
business criteria for the Company as a whole or any of its subsidiaries,
operating divisions or other operating units: stock price, market share, gross
revenue, net revenue, pretax income, operating income, cash flow, earnings per
share, return on equity, return on invested capital or assets, cost reductions
and savings, return on revenues or productivity, or any variations of the
preceding business criteria, which may be modified at the discretion of the
Non-Employee Director Committee, to take into account extraordinary items or
which may be adjusted to reflect such costs or expense as the Non-Employee
Director Committee deems appropriate. In addition, to the extent consistent with
the goal of providing for deductibility under Section 162(m) of the Code,
performance goals may be based upon a grantee's attainment of personal
objectives with respect to any of the foregoing performance goals or
implementing policies and plans, negotiating transactions and sales, developing
long-term business goals or exercising managerial responsibility. Measurements
of the Company's or a grantee's performance against the performance goals will
be objectively determinable and will be determined according to generally
accepted accounting principles as in existence on the date on which the
performance goals are established.
Performance-based Awards must meet the requirements described above and
must either: (a) be granted only on the attainment by the close of the
performance period of the performance goals established with respect to the
Award; or (b) not become vested unless by the close of the performance period
the performance goals established with respect to the Award have been achieved.
ADJUSTMENTS ON CHANGES IN CAPITALIZATION
In the event that the outstanding shares of Common Stock are changed by
reason of a reorganization, merger, consolidation, recapitalization,
reclassification, stock split-up, combination or exchange of shares and the like
(not including the issuance of Common Stock on the conversion of other
securities of Company which are convertible into Common Stock) or dividends
payable in shares of Common Stock, a Capitalization Adjustment may be made by
the Plan Administration Committee as it deems appropriate in the aggregate
number and/or class of shares available under the Plan and in the number of
shares, class of shares and price per share subject to outstanding Grants.
Unless the Plan Administration Committee makes other provisions for the
equitable settlement of outstanding Grants, if the Company is reorganized,
consolidated, or merged with another corporation, or if all or substantially all
of the assets of Company are sold or exchanged, a grantee will at the time of
issuance of the stock under such corporate event be entitled to receive, with
respect to or upon the exercise of his or her Grant, as the case may be, the
same number and kind of shares of stock or the same amount of property, cash or
securities as the grantee would have been entitled to receive upon the
occurrence of any such corporate event if the grantee had been, immediately
prior to such event, the holder of the number of Shares covered by his or her
Grant;
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provided, however, that with respect to an SAR, the grantee will only be
entitled to receive payment in the form of property other than cash to the
extent such settlement of the SAR is provided for in the applicable Grant
Document. Any such adjustment under the provisions described in this paragraph
will apply proportionately to only the unexercised portion of any Options or
SARs. The Plan Administration Committee has authority to determine the
Capitalization Adjustments to be made under the Plan, which adjustments may
include both adjustments to the number of shares and class of Company stock to
be issued in connection with or on the exercise of Grants and that are available
generally for Grants under the Plan. Any such determination by the Plan
Administration Committee will be final, binding and conclusive. "Capitalization
Adjustment" means the adjustment to the number or class of shares subject to any
Grant and the Option Price, exercise price, purchase price or other payment or
deemed payment required in connection with any Grant, as permitted to be made
pursuant to the provisions described above in this paragraph.
CHANGE OF CONTROL
In the event of a Change of Control, Options and SARs granted pursuant to
the Plan will become immediately exercisable in full, and all Awards will become
fully vested. In addition, the Plan Administration Committee may take whatever
action it deems necessary or desirable with respect to outstanding Grants,
including, without limitation, with respect to Options and SARs, accelerating
the expiration or termination date in the applicable Grant Document to a date no
earlier than 30 days after notice of such acceleration is given to the grantees;
provided, however, that such accelerated expiration or termination date may not
be earlier than the date as of which the Grant has become fully vested and
exercisable.
Under the Plan, a "Change of Control" will be deemed to have occurred upon
the earliest to occur of the following dates: (a) the date a plan or other
arrangement pursuant to which the Company will be dissolved or liquidated or a
definitive agreement to sell or otherwise dispose of substantially all of the
assets of the Company is approved by the stockholders of the Company (or the
Board of Directors, if stockholder action is not required); (b) the date a
definitive agreement to merge or consolidate the Company with or into another
corporation is approved by the stockholders of the Company (or the Board of
Directors, if stockholder action is not required) and the stockholders of the
other constituent corporation (or its board of directors if stockholder action
is not required) other than, in either case, a merger or consolidation of the
Company in which holders of shares of the Company's Class A Common Stock
immediately before the merger or consolidation will have at least a majority of
the voting power of the surviving corporation's voting securities immediately
after the merger or consolidation, which voting securities are to be held in the
same proportion as such holders' ownership of Class A Common Stock of the
Company immediately before the merger or consolidation; (c) the date any entity,
person or group, within the meaning of Section 13(d)(3) or Section 14(d)(2) of
the 1934 Act shall have become the beneficial owner of, or shall have obtained
voting control over, more than 25% of the outstanding shares of the Company's
Class A Common Stock (other than (i) the Company or any of its subsidiaries or
any employee benefit plan (or related trust) sponsored or maintained by the
Company or any of its subsidiaries or (ii) any person who, on the date the Plan
is effective, was the beneficial owner of or had voting control over shares of
common stock of the Company possessing more than 25% of the aggregate voting
power of the Company's Class A Common Stock); or (d) the first day after the
date the Plan is effective when directors are elected such that a majority of
the Board of Directors shall have been members of the Board of Directors for
less than two years, unless the nomination for election of each new director who
was not a director at the beginning of the two-year period was approved by a
vote of at least two-thirds of the directors then still in office who were
directors at the beginning of such period.
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AMENDMENTS
The Board of Directors may amend the Plan as it deems advisable from time
to time. However, the Board of Directors may not change the class of persons
eligible to receive an ISO or increase the maximum number of Shares as to which
Grants may be granted under the Plan, or to any individual under the Plan in any
year, without obtaining stockholder approval within twelve months before or
after such action. No amendment to the Plan may adversely affect any outstanding
Grants without the consent of the affected grantee(s).
The Plan Administration Committee has the right to amend any Grant Document
issued to a grantee, subject to the grantee's consent if the amendment is not
favorable to the grantee or if such amendment has the effect of changing an ISO
to a Non-qualified Stock Option; provided, however, that the consent of the
grantee will not be required for any amendment made in connection with a Change
of Control (as discussed above) or any amendment to accelerate the expiration of
an Option or SAR in the event of liquidation or dissolution of the Company.
WITHHOLDING OF TAXES
In connection with any event relating to a Grant under the Plan, the
Company will have the right to (a) require the recipient to remit or otherwise
make available to the Company an amount sufficient to satisfy any federal, state
and/or local withholding tax requirements before the delivery or transfer of any
certificates for such Shares, or (b) take whatever other action it deems
necessary to protect its interests with respect to tax liabilities, including,
without limitation, withholding any Shares, funds or other property otherwise
due to the grantee(s). The Company's obligations under the Plan will be
conditioned on the grantee's or grantees' compliance with any withholding
requirement.
CERTAIN FEDERAL INCOME TAX ASPECTS OF THE PLAN
The following discussion summarizes, as of the date of this Proxy
Statement, general principles of federal income tax law applicable to the Plan
and the Shares acquired under the Plan. Participants should consult their own
tax advisors concerning the tax consequences of participation in the Plan and
the disposition of Shares acquired under the Plan, since federal tax laws are
subject to change, individual tax situations differ and the effect of state and
local taxation may be material.
ISOs. An ISO, or incentive stock option, is an Option that meets certain
requirements under the Code and which is subject to special tax treatment
provided the recipient complies with certain holding requirements applicable to
the Shares acquired on its exercise. In general, the grantee of an ISO will not
recognize regular taxable income upon either the grant or the exercise of the
Option. The grantee will recognize capital gain or loss on a disposition of the
Shares acquired upon exercise of an ISO, provided the grantee does not dispose
of those Shares within two years from the date the Option was granted or within
one year from the date the Shares were transferred to the grantee. For regular
federal income tax purposes, the maximum rate of tax applicable to capital gains
is dependent on the length of time the Shares have been held at the time of
sale. If the Shares have been held for more than one year, the maximum regular
federal tax rate applicable to the gain on the sale will be 20%. If the Shares
have been held for one year or less, the gain on the sale will be taxed at the
same maximum tax rate (39.6%) applicable to other taxable income generally. If
the Option holder satisfies both of the foregoing holding periods, then the
Company will not be allowed a deduction by reason of the grant or exercise of an
ISO.
As a general rule, if the grantee disposes of Shares acquired through
exercise of an ISO before satisfying both holding period requirements (a
"disqualifying disposition"), the gain recognized by the grantee on the
disposition will be taxed as ordinary income to the extent of the difference
between the fair market value of the Shares on the date of exercise and the
Option Price of the Shares, and the Company will be entitled to a deduction in
that amount. The income recognized will
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not, however exceed the difference between the amount actually realized on the
disposition and the Option Price of the Shares (which would limit the amount of
income recognized if, for example, the value of the Shares declined subsequent
to the date the option was exercised). The gain (if any) in excess of the amount
treated as ordinary income will be treated as a long or short term capital gain
(based on the length of time the grantee held the Shares as of the date of the
disposition).
The amount by which the fair market value of a Share at the time of
exercise exceeds the Option Price will be included in the computation of such
Option holder's "alternative minimum taxable income" in the year the Option
holder exercises the ISO. Currently, the maximum alternative minimum tax rate is
28%. If an Option holder pays alternative minimum tax with respect to the
exercise of an ISO, then the amount of such tax paid will be allowed as a credit
against regular tax liability in subsequent years. The Option holder's basis in
the Shares for purposes of the alternative minimum tax will be adjusted when
income from a disposition of the Shares is included in alternative minimum
taxable income.
Non-qualified Stock Options. A grantee of a Non-qualified Stock Option
will not recognize taxable income at the time of grant, and the Company will not
be allowed a deduction by reason of the grant. The grantee will generally
recognize ordinary income in the taxable year in which he or she exercises the
Options. The amount of income will be generally equal to the excess of the fair
market value of the Shares received upon exercise (determined at the time of
exercise) over the Option Price paid for the Shares. The Company will, subject
to various limitations, be allowed a deduction in the same amount. Upon
disposition of these Shares, the grantee will recognize a long or short term
capital gain or loss equal to the difference between the amount realized on
disposition and the grantee's basis in the Shares (which ordinarily would be the
Fair Market Value of the Shares on the date the Option was exercised).
Awards. The recipient of an Award will become vested as provided for by
the Committee when making the Award. Under applicable provisions of the Code,
the recipient will, for federal income tax purposes, be required to include in
his or her taxable income (as ordinary compensation income) the value of the
Shares subject to the Award as of the time they become vested (reduced by the
amount, if any, that was required to be paid for the Shares). The fair market
value of the Shares as of the vesting date establishes the basis for determining
capital gains or losses on a subsequent sale of the Shares, and the holding
period for purposes of determining the long or short-term character of a capital
gain starts on the vesting date (not on the date the Shares were granted).
If a recipient of an Award makes a special election under Section 83(b) of
the Code, however, he or she will recognize as ordinary compensation income the
fair market value of the stock subject to the Award as of the date the Shares
are granted, even though the Shares have not yet vested. An election under this
Code provision must be made within 30 days of the transfer of the Shares, and
the fair market value of the Shares must be determined without regard to the
vesting restrictions that otherwise could cause the Shares to be forfeited. In
addition, if the Shares are forfeited, the Award recipient will not be able to
claim a tax loss for the forfeiture except to the extent he or she was required
to pay a purchase price for the Shares. As a consequence of making a Section
83(b) election, however, the Award recipient will have no income as a result of
the later vesting of the Shares, and when the Shares are sold, the difference
between the amount realized from the sale and the fair market value on the date
of grant (i.e., the value used in reporting income as a result of the Section
83(b) election), will be a capital gain or loss, and will be either long or
short term by reference to the original grant date.
In order to make an election under Section 83(b) of the Code, the recipient
of an Award must file the election no later than 30 days after the grant date in
the form of a written statement sent to the IRS office where the individual
files his or her returns, and provide a copy to the Company. A copy of the
filing must also be included in the individual's tax return for the year in
which the grant occurs. The Section 83(b) election statement must contain the
following information: the name, address and social security number of the
taxpayer, a description of the Shares, the grant date of the
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Shares and the taxable year for which the election is made, the nature of the
restrictions on the Shares, the fair market value of the Shares as of the grant
date, the purchase price paid for the Shares, if any, and a statement indicating
that copies of the election have been furnished to other persons as required.
The statement must be signed and must indicate that it is made under Section
83(b) of the Code.
SARS. An SAR permits the grantee to exercise that right (either by
surrender of the Option associated with the SAR or, in the case of an SAR that
is independent of any Option, by surrender of the SAR) and receive a payment
equal to the excess of the Fair Market Value of the Shares underlying the Option
(or hypothetically underlying an independent SAR) as of the date the grantee
exercises the SAR over the Option Price of the underlying Option (or of the
hypothetical option in the case of an independent SAR). This payment may be
either in cash or in stock, or a combination of cash and stock, as determined by
the Plan Administrative Committee, unless there are specific provisions in the
Grant Document that address the form of payment. The amount of the payment made
to the grantee will constitute taxable compensation income to the grantee,
subject to ordinary income taxation in the year in which the payment with
respect to the SAR is made. The amount of income recognized by the grantee will
also constitute a compensation expense for federal income tax purposes,
deductible by the Company, subject to various limitations on the deductibility
of such compensation expense.
Deductibility of Executive Compensation Under Code Section 162(m). Section
162(m) of the Code sets limits on the deductibility of compensation in excess of
$1,000,000 paid by publicly held companies to certain employees (the "million
dollar cap"). The IRS has also issued Treasury Regulations which provide rules
for the application of the "million dollar cap" deduction limitations. Income
which is treated as "performance-based compensation" under these rules will not
be subject to the limitation on deductibility imposed by Code Section 162(m).
The Plan has been designed to permit grants of Options and SARs issued
under the Plan to qualify under the performance-based compensation rules so that
income attributable to the exercise of a Non-qualified Stock Option or an SAR
may be exempt from the million dollar cap limits on deduction. The Plan's
provisions are consistent in form with the performance-based compensation rules,
so that if the Committee that grants Options or SARs consists exclusively of
members of the Board of Directors who qualify as "outside directors," the
compensation income arising on exercise of those Options or SARs should qualify
as performance-based compensation which is deductible even if that income would
be in excess of the otherwise applicable limits on deductible compensation
income under Code Section 162(m). In addition, if the Committee determines to
make performance-based Awards, as described above, the income attributable to
those Awards should also be treated as performance-based compensation that is
exempt from the limitations of Code Section 162(m).
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE PROPOSAL TO APPROVE THE
COMPANY'S 2000 OMNIBUS STOCK INCENTIVE PLAN
RELATIONSHIP WITH INDEPENDENT PUBLIC ACCOUNTANTS
Arthur Andersen LLP has been selected by the Board of Directors as the
independent public accountants for the Company's current fiscal year. A
representative of Arthur Andersen LLP is expected to be present at the Meeting
and will have the opportunity to make a statement if he desires to do so and
will be available to respond to appropriate questions of stockholders.
STOCKHOLDER PROPOSALS
Proposals of stockholders intended to be presented at the 2001 Annual
Meeting of Stockholders must be received by December 31, 2000, in order to be
considered for inclusion in the Company's proxy materials relating to that
meeting. A proposal that does not comply with the applicable
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requirements of Rule 14a-8 under the 1934 Act will not be included in the
Company's proxy soliciting material for the 2001 Annual Meeting of Stockholders.
Stockholder proposals should be directed to Elizabeth H. Mai, Secretary, at the
address of the Company set forth on the first page of this proxy statement.
A stockholder of the Company may wish to have a proposal presented at the
2001 Annual Meeting of Stockholders, but not to have such proposal included in
the Company's proxy statement and form of proxy relating to that meeting. If
notice of any such proposal (addressed to the Company at the address of the
Company set forth on the first page of this proxy statement) is not received by
the Company by March 20, 2001, then such proposal shall be deemed "untimely" for
purposes of Rule 14a-4(c) promulgated under the 1934 Act and, therefore, the
individuals named in the proxies solicited on behalf of the Board of Directors
of the Company for use at the Company's 2001 Annual Meeting of Stockholders will
have the right to exercise discretionary voting authority as to such proposal.
ANNUAL REPORT ON FORM 10-K
THE COMPANY WILL PROVIDE WITHOUT CHARGE TO EACH PERSON SOLICITED BY THIS
PROXY STATEMENT, ON THE WRITTEN REQUEST OF SUCH PERSON, A COPY OF THE COMPANY'S
ANNUAL REPORT ON FORM 10-K, INCLUDING THE FINANCIAL STATEMENTS AND SCHEDULES
THERETO, AS FILED WITH THE COMMISSION FOR ITS MOST RECENT FISCAL YEAR. SUCH
WRITTEN REQUEST SHOULD BE DIRECTED TO INVESTOR RELATIONS, AT THE ADDRESS OF THE
COMPANY APPEARING ON THE FIRST PAGE OF THIS PROXY STATEMENT.
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<PAGE> 37
[Recycled Paper Logo]
This proxy statement has been printed entirely on recycled paper.
<PAGE> 38
PROXY
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
ADVANTA CORP.
The undersigned, a stockholder of Advanta Corp. (the "Company"), hereby
constitutes and appoints Dennis Alter, William A. Rosoff and Elizabeth H. Mai,
and each of them acting individually as the attorney and special proxy of the
undersigned, with full power of substitution, for and in the name and stead of
the undersigned to attend the Annual Meeting of Stockholders of Advanta Corp. to
be held on Wednesday, June 7, 2000, at 1:00 p.m. at the Company's headquarters,
Welsh and McKean Roads, Spring House, Pennsylvania, and any adjournment or
postponement thereof, and thereat to vote all shares which the undersigned would
be entitled to cast if personally present as follows:
(CONTINUED, AND TO BE SIGNED ON THE REVERSE SIDE)
- --------------------------------------------------------------------------------
- FOLD AND DETACH HERE -
<PAGE> 39
Please mark
your votes as
indicated in
this example. /X/
1. ELECTION OF DIRECTORS
FOR WITHHOLD AUTHORITY
all three nominees for to vote for all three nominees
director listed below for director listed below
/ / / /
INSTRUCTION: To withhold authority to vote for any individual nominee, strike a
line through the nominee's name in the list below.
NOMINEES: Olaf Olafsson, William A.Rosoff, and Michael Stolper
2. To consider and act upon a proposal to approve the Advanta Corp. 2000 Omnibus
Stock Incentive Plan.
FOR AGAINST ABSTAIN
/ / / / / /
3. To transact such other business as may properly come before the meeting.
IF NOT OTHERWISE SPECIFIED, THE SHARES WILL BE VOTED FOR THE ELECTION OF ALL
THREE NOMINEES FOR DIRECTOR AND FOR THE PROPOSAL TO APPROVE THE ADVANTA CORP.
2000 OMNIBUS STOCK INCENTIVE PLAN. This proxy delegates authority to vote with
respect to all other matters upon which the undersigned is entitled to vote and
which may come before the meeting or any adjournment or postponement thereof.
The undersigned hereby revokes all previous proxies for such meeting and hereby
acknowledges receipt of the notice of the meeting and the proxy statement of
Advanta Corp. furnished herewith.
PLEASE SIGN AND MAIL PROMPTLY.
Stockholder's Signature(s)_____________________________ Date________________2000
NOTE: If shares are registered in more than one name, all owners should sign. If
signing in a fiduciary or representative capacity, please give full title and
attach evidence of authority. If a corporation, please sign with full corporate
name by a duly authorized officer and affix the corporate seal.
- --------------------------------------------------------------------------------
- FOLD AND DETACH HERE -
<PAGE> 40
Appendix A
ADVANTA CORP. 2000 OMNIBUS
STOCK INCENTIVE PLAN
AS ADOPTED BY THE BOARD OF DIRECTORS
(EFFECTIVE AS OF APRIL 5, 2000)
1. Purpose. Advanta Corp., a Delaware corporation (the "Company"),
hereby adopts the Advanta Corp. 2000 Omnibus Stock Incentive Plan (the "Plan"),
which is intended to function as an amendment and restatement of all other stock
option and award plans of the Company. The Plan is intended to recognize the
contributions made to Company by employees (including employees who are members
of the Board of Directors) of Company or any Affiliate (as defined herein), to
provide such persons with additional incentive to devote themselves to the
future success of Company or an Affiliate, and to improve the ability of Company
or an Affiliate to attract, retain, and motivate individuals upon whom Company's
sustained growth and financial success depend. Through the Plan, Company will
provide such persons with an opportunity to acquire or increase their
proprietary interest in Company, and to align their interest with the interests
of shareholders, through receipt of rights to acquire the Company's Class B
Common Stock, par value $0.01 per share (the "Common Stock") and through the
transfer or issuance of Common Stock or other Awards (as defined herein). In
addition, the Plan is intended as an additional incentive to directors of
Company or of any Affiliate who are not employees of Company or an Affiliate to
serve on the Board of Directors of Company or on the boards of directors (or any
similar governing body) of an Affiliate and to devote themselves to the future
success of Company by providing them with an opportunity to acquire or increase
their proprietary interest in Company through the receipt of rights to acquire
Common Stock. Furthermore, the Plan may be used to encourage consultants and
advisors of Company to further the success of Company. The Plan is also intended
to permit grants of Awards that will constitute "performance-based compensation"
as that term is used for purposes of Section 162(m) of the Code, at the
discretion of the Committee.
2. Definitions. Unless the context clearly indicates otherwise, the
following capitalized terms when used in the Plan shall have the following
meanings:
(a) "Affiliate" means a corporation which is a parent
corporation or a subsidiary corporation with respect to Company within the
meaning of Section 424(e) or (f) of the Code, of any successor provision, and,
for purposes of Grants other than ISOs, any corporation, partnership, joint
venture or other entity in which the Company, directly or indirectly, has an
equity interest of at least twenty percent (20%) or a significant financial
interest, as determined by the Committee.
(b) "Award" shall mean a transfer of Common Stock made
pursuant to the terms of the Plan subject to such terms, benefits or
restrictions as the Committee shall specify in the Grant Document.
(c) "Board" or "Board of Directors" means the Board of
Directors of Company.
<PAGE> 41
(d) "Capitalization Adjustment" means the adjustment to the
number or class of shares subject to any Grant and the Option Price, exercise
price, purchase price or other payment or deemed payment required in connection
with any Grant, as permitted to be made pursuant to the provisions of Section
14 of the Plan.
(e) "Change of Control" shall be deemed to have occurred upon
the earliest to occur of the following dates:
(i) the date the stockholders of the Company (or the
Board of Directors, if stockholder action is not required) approve a plan or
other arrangement pursuant to which the Company will be dissolved or liquidated;
or
(ii) the date the stockholders of the Company (or the
Board of Directors, if stockholder action is not required) approve a definitive
agreement to sell or otherwise dispose of substantially all of the assets of the
Company; or
(iii) the date the stockholders of the Company (or
the Board of Directors, if stockholder action is not required) and the
stockholders of the other constituent corporation (or its board of directors if
stockholder action is not required) have approved a definitive agreement to
merge or consolidate the Company with or into such other corporation, other
than, in either case, a merger or consolidation of the Company in which holders
of shares of the Company's Class A Common Stock immediately prior to the merger
or consolidation will have at least a majority of the voting power of the
surviving corporation's voting securities immediately after the merger or
consolidation, which voting securities are to be held in the same proportion as
such holders' ownership of Class A Common Stock of the Company immediately
before the merger or consolidation; or
(iv) the date any entity, person or group, within the
meaning of Section 13(d)(3) or Section 14(d)(2) of the Exchange Act (other than
(A) the Company or any of its subsidiaries or any employee benefit plan (or
related trust) sponsored or maintained by the Company or any of its subsidiaries
or (B) any person who, on the date the Plan is effective, shall have been the
beneficial owner of or have voting control over shares of common stock of the
Company possessing more than twenty-five percent (25%) of the aggregate voting
power of the Company's Class A Common Stock) shall have become the beneficial
owner of, or shall have obtained voting control over, more than twenty five
percent (25%) of the outstanding shares of the Company's Class A Common Stock;
or
(v) the first day after the date this Plan is
effective when directors are elected such that a majority of the Board of
Directors shall have been members of the Board of Directors for less than two
(2) years, unless the nomination for election of each new director who was not a
director at the beginning of such two (2) year period was approved by a vote of
at least two-thirds of the directors then still in office who were directors at
the beginning of such period.
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<PAGE> 42
(f) "Code" means the Internal Revenue Code of 1986, as
amended, or any successor statute, and the rules and regulations issued pursuant
to that statute or any successor statute.
(g) "Committee" shall have the meaning set forth in Section 3
of the Plan.
(h) "Common Stock" shall mean the Company's Class B Common
Stock, par value $0.01 per Share.
(i) "Company" means Advanta Corp., a Delaware corporation.
(j) "Covered Employee" means any Employee who is treated as a
"covered employee" for purposes of Code Section 162(m).
(k) "Disability" means a condition of a Grantee that
constitutes a "disability" as that term is defined in Section 22(e)(3) of the
Code.
(l) "Employee" means an employee of Company or an Affiliate.
(m) "Fair Market Value" means, with respect to a share of the
Common Stock:
(i) if the Common Stock is listed on a national
securities exchange or included in the NASDAQ National Market System, the
closing price thereof on the relevant date; or
(ii) if the Common Stock is not so listed or
included, the mean between the last reported "bid" and "asked" prices thereof on
the relevant date, as reported on NASDAQ; or
(iii) if not so reported, as reported by the National
Daily Quotation Bureau, Inc. or as reported in a customary financial reporting
service, as applicable and as the Committee determines.
Provided, however, that if the Common Stock is not traded in a public market,
the Fair Market Value of a share shall be as determined in good faith by the
Committee, taking into account all relevant facts and circumstances.
(n) "Fiscal Year Grant Limitation" means the limitation on the
number of shares of Common Stock that may be subject to Grants made to any one
person during any one fiscal year of the Company, which limitation shall be
900,000 shares, subject to a permitted Capitalization Adjustment.
(o) "Grant" shall mean any Option, Award or SAR granted under
the Plan.
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<PAGE> 43
(p) "Grantee" shall mean a person to whom an Option, Award or
SAR has been granted pursuant to the Plan.
(q) "Grant Document" shall mean the document provided to a
Grantee by the Company describing and establishing the terms of any Grant made
pursuant to the Plan.
(r) "ISO" means an Option granted under the Plan which is
intended to qualify as an "incentive stock option" within the meaning of Section
422(b) of the Code.
(s) "Exchange Act" means the Securities Exchange Act of 1934,
as amended, or any successor statute, and the rules and regulations issued
pursuant to that statute or any successor statute.
(t) "Non-Employee Director" shall mean a member of the Board
who is a "non-employee director" as that term is defined in paragraph (b)(3) of
Rule 16b-3 (as defined herein) and an "outside director" as that term is defined
in Treasury Regulations Section 1.162-27 promulgated under the Code.
(u) "Non-Employee Director Committee" means a committee
designated by the Board to act as the Committee with respect to the Plan that
consists solely of two or more Non-Employee Directors.
(v) "Non-qualified Stock Option" means an Option granted under
the Plan which is not intended to qualify, or otherwise does not qualify, as an
ISO.
(w) "Option" means either an ISO or a Non-qualified Stock
Option granted under the Plan.
(x) "Option Price" means the price at which Shares may be
purchased upon exercise of an Option, as set forth in the Grant Document.
(y) "Performance-Based Award" means an Award granted pursuant
to the applicable provisions of the Plan that is intended to result in
recognition of income by the Grantee that qualifies as Performance-Based
Compensation.
(z) "Performance-Based Compensation" means remuneration
payable or recognized by an Employee solely on account of the attainment of one
or more Performance Goals that meets the requirements to be treated as
"performance-based compensation" under Code Section 162(m)(4)(C).
(aa) "Performance Goal" means, with respect to a Performance
Period, an objective performance goal or goals that have been established by the
Committee, consistent with the express terms of the Plan, which must be met in
order for any Performance-Based Award to become vested or transferred to a
Grantee with respect to such Performance Period.
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<PAGE> 44
(bb) "Performance Period" means the Company's fiscal year or
such other period as may be established as a Performance Period by the Committee
from time to time.
(cc) "Rule 16b-3" means Rule 16b-3 promulgated under the
Exchange Act, or any successor rule.
(dd) "SAR" means a stock appreciation right granted under the
Plan, as defined in Section 11 hereof.
(ee) "Section 16 Officers" means any person who is an
"officer" within the meaning of Rule 16a-1(f) promulgated under the Exchange Act
or any successor rule, and who is subject to the reporting requirements under
Section 16 of the Exchange Act with respect to Company's Common Stock.
(ff) "Securities Act" means the Securities Act of 1933, as
amended, or any successor statute, and the rules and regulations issued pursuant
to that statute or any successor statute.
(gg) "Shares" means the shares of Common Stock (including
hypothetical shares of Common Stock referenced under the terms of a Grant
Document applicable to an SAR) which are subject to any Grant made under the
Plan.
3. Administration of the Plan. The Board may administer the Plan and/or
it may, in its discretion, designate a committee or committees composed of two
or more of directors to operate and administer the Plan with respect to all or a
designated portion of the participants. To the extent that the Committee is
empowered to grant options to Section 16 Officers or persons whose compensation
might have limits on deductibility under Code Section 162(m), the Board may, at
its discretion, appoint a separate committee to administer the Plan with respect
to those persons, each member of such committee being a Non-Employee Director.
Any such committee designated by the Board, and the Board itself in its
administrative capacity with respect to the Plan, is referred to as the
"Committee."
(a) Meetings. The Committee shall hold meetings at such times
and places as it may determine. The Committee may take action only upon the
agreement of a majority of the whole Committee. Any action which the Committee
shall take through a written instrument signed by all its members shall be as
effective as though it had been taken at a meeting duly called and held.
(b) Exculpation. No member of the Board of Directors shall be
personally liable for monetary damages for any action taken or any failure to
take any action in connection with the administration of the Plan or making any
Grants under the Plan, provided that this Subsection 3(b) shall not apply to (i)
any breach of such member's duty of loyalty to the Company or its stockholders,
(ii) acts or omissions not in good faith or involving intentional misconduct or
a knowing violation of law, (iii) acts or omissions that would result in
liability
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<PAGE> 45
under Section 174 of the General Corporation Law of the State of Delaware, as
amended, and (iv) any transaction from which the member derived an improper
personal benefit.
(c) Indemnification. Service on the Committee shall constitute
service as a member of the Board. Each member of the Committee shall be
entitled, without further act on the member's part, to indemnity from Company
and limitation of liability to the fullest extent provided by applicable law and
by Company's Articles of Incorporation and/or Bylaws in connection with or
arising out of any action, suit or proceeding with respect to the administration
of the Plan or the issuance of any Grant thereunder in which the member may be
involved by reason of the member being or having been a member of the Committee,
whether or not the member continues to be such member of the Committee at the
time of the action, suit or proceeding.
(d) Interpretation and Authority of the Committee. The
Committee shall have the power and authority to (i) interpret the Plan, (ii)
adopt, amend and revoke policies, rules and/or regulations for its
administration that are not inconsistent with the express terms of the Plan, and
(iii) waive requirements relating to formalities or other matters that do not
either modify the substance of the rights intended to be granted by means of
Grants made under the Plan or constitute a material amendment for any purpose
under the Code. In addition, the Committee shall, subject to any specific
provisions or limitations applicable under the Plan, have the authority to make
such adjustments to the terms and conditions of any Grants made under the Plan
in order to take into account any facts and circumstances that influence the
effectiveness of the Plan as a method of providing appropriate current
performance incentives for recipients of Grants, including, but not limited to,
any facts and circumstances related to levels of compensation and bonuses paid
by other similarly situated employers, and current needs of the Company to
encourage the retention of valued Employees and to reward high levels of
performance by such Employees. Any such actions by the Committee shall be final,
binding and conclusive on all parties in interest.
4. Grants of Options under the Plan. Grants of Options under the Plan
may be in the form of a Non-qualified Stock Option, an ISO or a combination
thereof, at the discretion of the Committee.
5. Eligibility. All Employees, members of the Board, members of the
boards of directors (or any similar governing body) of any Affiliate and
consultants and advisors to the Company or any Affiliate shall be eligible to
receive Grants hereunder. Consultants and advisors shall be eligible only if
they render bona fide services to Company unrelated to the offer or sale of
securities. The Committee, in its sole discretion, shall determine whether an
individual qualifies as an Employee.
6. Shares Subject to Plan. The aggregate maximum number of Shares as to
which Grants may be issued pursuant to the Plan is 20,000,000 (subject to a
permitted Capitalization Adjustment). The Shares shall be issued from authorized
and unissued Common Stock or Common Stock held in or hereafter acquired for the
treasury of Company. If a Grant terminates or expires without having been fully
exercised for any reason or has been conveyed
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<PAGE> 46
back to Company pursuant to the terms of a Grant Document, the Shares as to
which the Grant was not exercised or the Shares that were conveyed back to
Company shall again be available for issuance pursuant to the terms of one or
more Grants pursuant to the Plan.
7. Fiscal Year Grant Limitation. Notwithstanding anything herein to the
contrary, no Grantee shall be issued Grants during any one fiscal year of the
Company for shares of Common Stock in excess of the Fiscal Year Grant
Limitation.
8. Term of the Plan. The Plan is effective as of April 5, 2000, the
date on which it was adopted by the Board, subject to the approval of the Plan
within one year after such date by the shareholders in the manner required by
state law. If the Plan is not so approved by the shareholders, all Grants issued
under the Plan shall be null and void. No Grants may be issued under the Plan on
or after April 5, 2010.
9. Options. Each Option granted under the Plan shall be a Non-qualified
Stock Option unless the Option shall be specifically designated at the time of
grant to be an ISO. If any Option designated an ISO is determined for any reason
not to qualify as an incentive stock option within the meaning of Section 422 of
the Code, such Option shall be treated as a Non-qualified Stock Option for all
purposes under the provisions of the Plan. Options granted pursuant to the Plan
shall be evidenced by the Grant Documents in such form as the Committee shall
approve from time to time, which Grant Documents shall comply with and be
subject to the following terms and conditions and such other terms and
conditions as the Committee shall require from time to time which are not
inconsistent with the terms of the Plan.
(a) Number of Option Shares. Each Grant Document shall state
the number of Shares to which it pertains. A Grantee may receive more than one
Option, which may include Options which are intended to be ISOs and Options
which are not intended to be ISOs, but only on the terms and subject to the
conditions and restrictions of the Plan. Notwithstanding anything herein to the
contrary, no Grantee shall be granted Options during any one fiscal year of
Company for more than the Fiscal Year Grant Limitation.
(b) Option Price. Each Grant Document shall state the Option
Price, which, for a Non-qualified Stock Option, shall, unless otherwise
specified in the Grant Document, be the Fair Market Value of the Shares on the
date the Option is granted and, for an ISO, shall in all cases be at least 100%
of the Fair Market Value of the Shares on the date the Option is granted as
determined by the Committee in accordance with this Subsection 9(b); and
provided, further, that if an ISO is granted to a Grantee who then owns,
directly or by attribution under Section 424(d) of the Code, shares possessing
more than ten percent of the total combined voting power of all classes of stock
of Company or an Affiliate, then, to the extent required by Section 424(d) of
the Code, the Option Price shall be at least 110% of the Fair Market Value of
the Shares on the date the Option is granted.
(c) Exercise. No Option shall be deemed to have been exercised
prior to the receipt by Company of written notice of such exercise and, unless
arrangements satisfactory to Company have been made for payment through a broker
in accordance with procedures
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<PAGE> 47
permitted by rules or regulations of the Federal Reserve Board, receipt of
payment in full of the Option Price for the Shares to be purchased. Each such
notice shall specify the number of Shares to be purchased and, unless the Shares
are covered by a then current registration statement or a Notification under
Regulation A under the Securities Act, shall contain the Grantee's
acknowledgment, in form and substance satisfactory to Company, that (i) such
Shares are being purchased for investment and not for distribution or resale
(other than a distribution or resale which, in the opinion of counsel
satisfactory to Company, may be made without violating the registration
provisions of the Securities Act), (ii) the Grantee has been advised and
understands that (A) the Shares have not been registered under the Securities
Act and are "restricted securities" within the meaning of Rule 144 under the
Securities Act and are subject to restrictions on transfer, and (B) Company is
under no obligation to register the Shares under the Securities Act or to take
any action which would make available to the Grantee any exemption from such
registration, (iii) such Shares may not be transferred without compliance with
all applicable federal and state securities laws, and (iv) an appropriate legend
referring to the foregoing restrictions on transfer and any other restrictions
imposed under the Grant Documents may be endorsed on the certificates.
Notwithstanding the foregoing, if Company determines that issuance of Shares
should be delayed pending registration under federal or state securities laws,
the receipt of an opinion of counsel satisfactory to Company that an appropriate
exemption from such registration is available, the listing or inclusion of the
Shares on any securities exchange or an automated quotation system, or the
consent or approval of any governmental regulatory body whose consent or
approval is necessary in connection with the issuance of such Shares, Company
may defer exercise of any Option granted hereunder until any of the events
described in this sentence has occurred.
(d) Medium of Payment. Subject to the terms of the applicable
Grant Document, a Grantee shall pay for Shares (i) in cash, (ii) by certified or
cashier's check payable to the order of Company, or (iii) by such other mode of
payment as the Committee may approve, including payment through a broker in
accordance with procedures permitted by rules or regulations of the Federal
Reserve Board. The Grantee may also exercise the Option in any other manner as
is approved by the Committee or as specifically provided for in the applicable
Grant Document. Furthermore, the Committee may provide in a Grant Document that
payment may be made in whole or in part in shares of Company's Common Stock held
by the Grantee. If payment is made in whole or in part in shares of Company's
Common Stock, then the Grantee shall deliver to Company certificates registered
in the name of such Grantee representing the shares owned by such Grantee, free
of all liens, claims and encumbrances of every kind and having an aggregate Fair
Market Value on the date of delivery that is at least as great as the Option
Price of the Shares (or relevant portion thereof) with respect to which such
Option is to be exercised by the payment in shares of Common Stock, endorsed in
blank or accompanied by stock powers duly endorsed in blank by the Grantee. In
the event that certificates for shares of Company's Common Stock delivered to
Company represent a number of shares in excess of the number of shares required
to make payment for the Option Price of the Shares (or relevant portion thereof)
with respect to which such Option is to be exercised by payment in shares of
Common Stock, the stock certificate or certificates issued to the Grantee shall
represent (i) the Shares in respect of which payment is made, and (ii) such
excess number of shares. Notwithstanding the foregoing, the Committee may impose
from time to time such limitations
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<PAGE> 48
and prohibitions on the use of shares of the Common Stock to exercise an Option
as it deems appropriate.
(e) Termination of Options.
(i) No Option shall be exercisable after the first to
occur of the following:
(A) Expiration of the Option term specified
in the Grant Document, which, in the case of an ISO, shall not occur after (i)
ten (10) years from the date of grant, or (ii) five (5) years from the date of
grant if the Grantee on the date of grant owns, directly or by attribution under
Section 424(d) of the Code, shares possessing more than ten percent of the total
combined voting power of all classes of stock of Company or of an Affiliate;
(B) Except to the extent otherwise provided
in a Grantee's Grant Document, a finding by the Committee, after full
consideration of the facts presented on behalf of both Company and the Grantee,
that the Grantee has been engaged in disloyalty to Company or an Affiliate,
including, without limitation, fraud, embezzlement, theft, commission of a
felony or proven dishonesty in the course of his employment or service, or has
disclosed trade secrets or confidential information of Company or an Affiliate.
In such event, in addition to immediate termination of the Option, the Grantee
shall automatically forfeit all Shares for which Company has not yet delivered
the share certificates upon refund by Company of the Option Price.
Notwithstanding anything herein to the contrary, Company may withhold delivery
of share certificates pending the resolution of any inquiry that could lead to a
finding resulting in a forfeiture;
(C) The date, if any, set by the Committee
as an accelerated expiration date in the event of the liquidation or dissolution
of Company;
(D) The occurrence of such other event or
events as may be set forth in this Plan or the Grant Document as causing an
accelerated expiration of the Option; or
(E) Except as otherwise set forth in the
Grant Document and subject to the foregoing provisions of this Subsection 9(e),
the applicable date set forth below in connection with the Grantee's termination
of employment or service with the Company or any Affiliate. For these purposes
the applicable date is: (1) where the Grantee resigns from his or her employment
or service with the Company or any Affiliate without such resignation having
been solicited by the Company or the Affiliate, as the case may be, the date of
such resignation; (2) where the Grantee's termination of employment or service
with the Company or any Affiliate is due to the Grantee's death or Disability,
the date that is one hundred eighty (180) days following such termination; (3)
where the Grantee's termination of employment or service with the Company or any
Affiliate is due to the Grantee's retirement, the second anniversary of such
termination; (4) where the Grantee is a member of the Board or of any board of
directors (or similar governing body) of an Affiliate and is not an Employee and
such Grantee's service is terminated for any reason other than Disability or
death, 90 days following the date of such
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<PAGE> 49
termination of service; and (5) in all other cases, 30 days after the Grantee's
termination of employment or service with the Company or any Affiliate. With
respect to this Subsection 9(e)(i)(E), the only Options that may be exercised
subsequent to the Grantee's termination of employment or service with the
Company or an Affiliate are those Options which were exercisable on the last
date of such employment or service and not Options which, if the Grantee were
still employed or rendering service during such post termination period, would
become exercisable, unless the Grant Document specifically provides to the
contrary or the Committee otherwise approves. The terms of an executive
severance agreement or other agreement between Company and a Grantee, approved
by the Committee or the Board, whether entered into prior or subsequent to the
grant of an Option, which provide for Option exercise dates later than those set
forth in Subsection 9(e)(i) shall be deemed to be Option terms approved by the
Committee and consented to by the Grantee.
(ii) Notwithstanding the foregoing, the Committee may
extend the period during which all or any portion of an Option may be exercised
to a date no later than the Option term specified in the Grant Document pursuant
to Subsection 9(e)(i)(A), provided that any change pursuant to this Subsection
9(e)(ii) which would cause an ISO to become a Non-qualified Stock Option may be
made only with the consent of the Grantee.
(iii) Notwithstanding anything to the contrary
contained in the Plan or a Grant Document, an ISO shall be treated as a
Non-qualified Stock Option to the extent such ISO is exercised at any time after
the expiration of the time period permitted under the Code for the exercise of
an ISO.
(f) Transfers. Except as otherwise provided in this Subsection
9(f), no Option granted under the Plan may be transferred, except by will or by
the laws of descent and distribution, and, during the lifetime of the person to
whom an Option is granted, such Option may be exercised only by the Grantee.
Notwithstanding the foregoing, an Option, other than an ISO, shall be
transferable pursuant to a "domestic relations order" as defined in the Code or
Title I of the Employee Retirement Income Security Act of 1974, as amended, or
the rules thereunder, and also shall be transferable, without payment of
consideration, to (a) immediate family members of the holder (i.e., spouse or
former spouse, parents, issue, including adopted and "step" issue, or siblings),
(b) trusts for the benefit of immediate family members, and (c) partnerships
whose only partners are such family members, and (d) to any transferee permitted
by a rule adopted by the Committee or approved by the Committee in an individual
case. Any transferee will be subject to all of the conditions set forth in the
Option prior to its transfer.
(g) Limitation on ISO Grants. To the extent that the aggregate
Fair Market Value of the shares of Common Stock (determined at the time the ISO
is granted) with respect to which ISOs under all incentive stock option plans of
Company or its Affiliates are exercisable for the first time by the Grantee
during any calendar year exceeds $100,000, such ISOs shall, to the extent of
such excess, be treated as Non-qualified Stock Options.
(h) Other Provisions. Subject to the provisions of the Plan,
the Grant Documents shall contain such other provisions, including, without
limitation, provisions
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authorizing the Committee to accelerate the exercisability of all or any portion
of an Option granted pursuant to the Plan, additional restrictions upon the
exercise of the Option or additional limitations upon the term of the Option, as
the Committee deems advisable.
10. Change of Control. In the event of a Change of Control, Options and
SARs granted pursuant to the Plan shall become immediately exercisable in full,
and all Awards shall become fully vested. In addition, the Committee may take
whatever action it deems necessary or desirable with respect to outstanding
Grants, including, without limitation, with respect to Options and SARs,
accelerating the expiration or termination date in the applicable Grant Document
to a date no earlier than thirty (30) days after notice of such acceleration is
given to the Grantees; provided, however, that such accelerated expiration date
may not be earlier than the date as of which the Grant has become fully vested
and exercisable.
11. Stock Appreciation Rights (SARs).
(a) In General. Subject to the terms and conditions of the
Plan, the Committee may, in its sole and absolute discretion, grant a right
(which right shall be referred to as an "SAR"), which may or may not be granted
in conjunction with an Option, which right shall entitle the Grantee to receive
a payment upon exercise equal to the excess of the Fair Market Value of a
specified number of Shares, determined as of the date the SAR is exercised, over
the "purchase price" specified in the Grant Document applicable to the SAR. The
SAR may be exercisable in whole or in part, and at such times and under such
circumstances as are set forth in the Grant Document applicable to the SAR. In
the event an SAR is granted in conjunction with an Option, the exercise of the
SAR shall result in a cancellation of the Option to the same extent as the SAR
is exercised, and the exercise of the Option shall result in a cancellation of
the SAR to the same extent as the Option is exercised, and the terms and
conditions, including the number of Shares subject to the SAR, the "purchase
price" and the times and circumstances in which the SAR may be exercised, shall
be the same as are applicable to the Option. Except as may otherwise be provided
in a Grant Document, such payment may be made, as determined by the Committee in
accordance with Subsection 12(c) below and set forth in the applicable Grant
Document, either in Shares or in cash or in any combination thereof. For
purposes of the annual and aggregate limitations on shares of Common Stock that
may be subject to Grants under the Plan, the grant of an SAR not in conjunction
with an Option shall be treated as though such SAR constituted an Option.
(b) Grant. Each SAR shall relate either to a specific Option
granted under the Plan or to a hypothetical Option that could have been granted
under the Plan. Where an SAR is granted in conjunction with an Option granted
under the Plan, the Grant Document applicable to the Option shall include
provisions indicating the SAR rights. Where an SAR is granted independent of an
Option granted under the Plan, the Grant Document applicable to such SAR shall
indicate the relevant terms and conditions applicable to the SAR, including, but
not limited to, the number of hypothetical Shares subject to the terms of the
SAR, the "purchase price" to be taken into account upon exercise of the SAR, and
such other terms and conditions as would be permitted or as are required with
respect to the grant of an Option under the Plan. SARs shall be exercisable at
such times and under such terms and conditions as the Committee, in its sole
and absolute discretion, shall determine; provided, however, that an SAR that
is granted concurrent with an Option shall be exercisable only at such times
and by such individuals as the related Option may be exercised under the Plan
and the Grant Document.
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(c) Payment. The Committee shall have sole discretion to
determine whether payment in respect of SARs exercised by any Grantee shall be
made in shares of Common Stock, or in cash, or in a combination thereof. If
payment is made in Common Stock, the number of shares which shall be issued
pursuant to the exercise of SARs shall be determined by dividing the amount of
the payment provided for in Section 11(a) above by the Fair Market Value of a
share of Common Stock on the exercise date of the SARs. No fractional share of
Common Stock shall be issued on exercise of an SAR; cash may be paid by Company
to the person exercising an SAR in lieu of any such fractional share, if the
Committee so determines. If payment on exercise of an SAR is to be made in cash,
the person exercising the SAR shall receive such cash payment as soon as
practicable following the date of exercise.
12. Terms and Conditions of Awards. Awards granted pursuant to the Plan
shall be evidenced by written Grant Documents in such form as the Committee
shall from time to time approve, which Grant Documents shall comply with and be
subject to the following terms and conditions and such other terms and
conditions which the Committee shall from time to time require which are not
inconsistent with the terms of the Plan.
(a) Number of Shares. Each Grant Document shall state the
number of Shares or other units or rights to which it pertains.
(b) Purchase Price. Each Grant Document shall specify the
purchase price, if any, which applies to the Award. If the Board specifies a
purchase price, the Grantee shall be required to make payment on or before the
payment date specified in the Grant Document. A Grantee shall make payment (i)
in cash, (ii) by certified check payable to the order of Company, or (iii) by
such other mode of payment as the Committee may approve.
(c) Grant. In the case of an Award which provides for a grant
of Shares without any payment by the Grantee, the grant shall take place on the
date specified in the Grant Document. In the case of an Award which provides for
a payment, the grant shall take place on the date the initial payment is
delivered to Company, unless the Committee or the Grant Document otherwise
specifies. Stock certificates evidencing Shares granted pursuant to an Award
shall be issued in the sole name of the Grantee. Notwithstanding the foregoing,
as a precondition to a grant, Company may require an acknowledgment by the
Grantee as required with respect to Options under Subsection 9(c).
(d) Conditions. The Committee may specify in a Grant Document
any conditions under which the Grantee of that Award shall be required to convey
to Company the Shares covered by the Award. Upon the occurrence of any such
specified condition, the Grantee shall forthwith surrender and deliver to
Company the certificates evidencing such Shares as well as completely executed
instruments of conveyance. The Committee, in its discretion, may provide that
certificates for Shares transferred pursuant to an Award be held in escrow by
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Company or its designee until such time as each and every condition has lapsed
and that the Grantee be required, as a condition of the Award, to deliver to
such escrow agent or Company officer stock transfer powers covering the Shares
subject to the Award duly endorsed by the Grantee. Unless otherwise provided in
the Grant Document or determined by the Committee, dividends and other
distributions made on Shares held in escrow shall be deposited in escrow, and
held in escrow until such time as the Shares on which the distributions were
made are released from escrow. Stock certificates evidencing Shares subject to
conditions shall bear a legend to the effect that the Shares evidenced thereby
are subject to repurchase by, or conveyance to, Company in accordance with the
terms applicable to such Shares under an Award made pursuant to the Plan, and
that the Shares may not be sold or otherwise transferred.
(e) Lapse of Conditions. Upon termination or lapse of all
forfeiture conditions, Company shall cause certificates without the legend
referring to Company's repurchase or acquisition right (but with any other
legends that may be appropriate) evidencing the Shares covered by the Award to
be issued to the Grantee upon the Grantee's surrender to Company of the legended
certificates held by the Grantee.
(f) Rights as Shareholder. Upon payment of the purchase price,
if any, for Shares covered by an Award and compliance with the acknowledgment
requirement of Subsection 9(c), the Grantee shall have all of the rights of a
shareholder with respect to the Shares covered thereby, including the right to
vote the Shares and (subject to the provisions of Subsection 12(d)) to receive
all dividends and other distributions paid or made with respect thereto, except
to the extent otherwise provided by the Committee or in the Grant Document.
13. Performance-Based Awards. In addition to any other terms or
conditions as may be established with respect to any Awards granted hereunder,
the Non-Employee Director Committee shall have the authority to make Awards
subject to such additional terms and conditions such that the remuneration
attributable to any such Award shall be recognized by a Covered Employee only
under circumstances such that such remuneration constitutes Performance-Based
Compensation.
(a) In the event the Committee determines to grant
Performance-Based Awards pursuant to this Section 13, the Committee shall, prior
to or within the first ninety (90) days of a Performance Period, establish in
writing with respect to such Performance Period, one or more specific
Performance Goals and an objective formula or method for computing the amount of
bonus compensation payable to each Grantee if the specified Performance Goals
are attained. Notwithstanding the foregoing sentence, the Performance Goals for
any Performance Period may not be established after 25 percent of the period of
service represented by the Performance Period has elapsed.
(b) Performance Goals shall be based upon one or more of the
following business criteria for the Company as a whole or any of its
subsidiaries, operating divisions or other operating units: Stock price; market
share; gross revenue; net revenue; pretax income; operating income; cash flow;
earnings per share; return on equity; return on invested capital or assets; cost
reductions and savings; return on revenues or productivity; or any variations of
the
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preceding business criteria, which may be modified at the discretion of the
Committee, to take into account extraordinary items or which may be adjusted to
reflect such costs or expense as the Committee deems appropriate. In addition,
to the extent consistent with the goal of providing for deductibility under
Section 162(m) of the Code, Performance Goals may be based upon a Grantee's
attainment of personal objectives with respect to any of the foregoing
Performance Goals or implementing policies and plans, negotiating transactions
and sales, developing long-term business goals or exercising managerial
responsibility. Measurements of the Company's or a Grantee's performance against
the Performance Goals established by the Committee shall be objectively
determinable and shall be determined according to generally accepted accounting
principles as in existence on the date on which the Performance Goals are
established and without regard to any changes in such principles after such
date.
(c) A Performance-Based Award shall consist of an Award that
meets the requirements of this Section 13, and which either is granted only on
the attainment by the close of the Performance Period of the Performance Goal or
Goals established with respect to such an Award, or may not become vested unless
by the close of the Performance Period applicable to such Award the Performance
Goal or Goals established with respect to such an Award have been achieved. The
Committee may establish any other terms or conditions with respect to a
Performance-Based Award as are consistent with the provisions of the Plan.
14. Adjustments on Changes in Capitalization.
(a) In the event that the outstanding Shares are changed by
reason of a reorganization, merger, consolidation, recapitalization,
reclassification, stock split-up, combination or exchange of shares and the like
(not including the issuance of Common Stock on the conversion of other
securities of Company which are convertible into Common Stock) or dividends
payable in shares of Common Stock, a Capitalization Adjustment may be made by
the Committee as it deems appropriate in the aggregate number and/or class of
shares available under the Plan and in the number of shares, class of shares and
price per share subject to outstanding Grants. Unless the Committee makes other
provisions for the equitable settlement of outstanding Grants, if Company shall
be reorganized, consolidated, or merged with another corporation, or if all or
substantially all of the assets of Company shall be sold or exchanged, a Grantee
shall at the time of issuance of the stock under such corporate event be
entitled to receive, with respect to or upon the exercise of his or her Grant,
as the case may be, the same number and kind of shares of stock or the same
amount of property, cash or securities as the Grantee would have been entitled
to receive upon the occurrence of any such corporate event as if the Grantee had
been, immediately prior to such event, the holder of the number of shares
covered by his or her Grant; provided, however, that with respect to an SAR, the
Grantee shall only be entitled to receive payment in the form of property other
than cash to the extent such settlement of the SAR is provided for in the
applicable Grant Document.
(b) Any adjustment under this Section 14 in the number of
Shares subject to Grants shall apply proportionately to only the unexercised
portion of any Option or SAR granted hereunder. If a fraction of a Share would
result from any such adjustment, the fraction shall be eliminated, unless the
Committee otherwise determines.
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(c) The Committee shall have authority to determine the
Capitalization Adjustments to be made under this Section, which may include both
adjustments to the number of shares and class of Company stock to be issued in
connection with or on the exercise of Grants and that are available generally
for Grants under the Plan, and any such determination by the Committee shall be
final, binding and conclusive.
15. Amendments.
(a) The Board may amend the Plan from time to time in such
manner as it may deem advisable. Nevertheless, the Board may not change the
class of persons eligible to receive an ISO or increase the maximum number of
Shares as to which Grants may be issued under the Plan, or to any individual
under the Plan in any year, without obtaining approval, within twelve months
before or after such action, by the shareholders in the manner required by state
law. No amendment to the Plan shall adversely affect any outstanding Grant,
however, without the consent of the Grantee.
(b) Subject to the provisions of the Plan, the Committee shall
have the right to amend any Grant Document issued to a Grantee, subject to the
Grantee's consent, if such amendment is not favorable to the Grantee or if such
amendment has the effect of changing an ISO to a Non-qualified Stock Option;
provided, however, that the consent of the Grantee shall not be required for any
amendment made pursuant to Subsection 9(e)(i)(C) or Section 10 of the Plan, as
applicable.
16. No Commitment to Retain. The making of a Grant pursuant to the Plan
shall not be construed to imply or to constitute evidence of any agreement,
express or implied, on the part of Company or any Affiliate to retain the
Grantee as an employee, director, consultant or advisor of Company or any
Affiliate, or in any other capacity.
17. Withholding of Taxes. In connection with any event relating to any
Grant under the Plan, Company shall have the right to (a) require the recipient
to remit or otherwise make available to Company an amount sufficient to satisfy
any federal, state and/or local withholding tax requirements prior to the
delivery or transfer of any certificates for such Shares, or (b) take whatever
other action it deems necessary to protect its interests with respect to tax
liabilities, including, without limitation, withholding any Shares, funds or
other property otherwise due to the Grantee. The Company's obligations under the
Plan shall be conditioned on the Grantee's compliance, to Company's
satisfaction, with any withholding requirement.
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